MALAYSIA: Petronas to acquire Canada’s Progress Energy for US$5.5 billion, build LNG terminal in Prince Rupert?

(EnergyAsia, June 29 2012, Friday) — Malaysia’s state-owned energy company Petronas has agreed to purchase Canadian gas producer Progress Energy Resources Corp for C$5.5-billion, and to build a liquefied natural gas export terminal in the coastal town of Prince Rupert. (US$1=C$1.03).

The proposed acquisition will build on the companies’ previous announcement to develop a portion of Progress’s shale assets and the LNG terminal along the British Columbia coastline. Progress produces about 50,000 b/d of oil equivalent through its assets in Deep Basin in northwestern Alberta and the Foothills zone in northeastern British Columbia.
 
Petronas, which will pay C$20.45 for each Progress Energy share for a 77% premium over Wednesday’s closing price, has promised to keep all its Canadian staff and will open a commercial office in Vancouver.
 
The proposed deal will require Ottawa’s approval after it was unanimously supported by the Progress Energy board.

The agreement was signed in Calgary in Alberta province yesterday by Petronas Executive Vice President of Gas & Power Business, Anuar Ahmad, while Progress was represented by its President and CEO, Michael Culbert.

Mr Anuar said: “The proposed transaction will combine Petronas’s significant global expertise and leadership in developing LNG infrastructure with Progress’s extensive experience in unconventional resource development to build a strong and growing world class energy business based in Canada.

“This development will generate substantial economic benefits for the provinces and local communities, as Petronas’s access to capital will help to bring Canada’s abundant and clean-burning natural gas resources to global markets, leveraging our well-established and extensive network of customers worldwide.”

“The joint venture has selected a site in Prince Rupert for our planned LNG export facility on the west coast of British Columbia. A feasibility assessment agreement has been signed with the Prince Rupert Port Authority (PRPA) giving our project the exclusive right to conduct further feasibility and investigative studies on Lelu Island.

“We have begun engagement with relevant authorities and First Nations, as well as community groups, and we look forward to working closely with them in the course of our site investigation. A key consideration in our investigation will be understanding the environmental and social impacts as well as ascertaining technical feasibility.”

Mr Culbert said: “Our asset base requires extensive capital to develop its large potential and ultimately access international LNG markets. Petronas offers the size and scale that will enable our company to continue to grow and not be limited by the same cash flow challenges faced by many producers in the North American natural gas market today.”

Petronas President and CEO Shamsul Azhar Abbas said:

“This acquisition will provide Petronas with significant long term strategic gas resources in a geopolitically stable region. It will also strengthen our unconventional strategy whilst cementing Petronas’s position as a major global LNG player.

“This acquisition will combine our global LNG expertise and market reach with Progress’ extensive experience in unconventional resource development.

ASIA: Shah Deniz consortium selects second gas export route option to Europe, says BP

(EnergyAsia, June 29 2012, Friday) — The Shah Deniz consortium, led by UK’s BP and Norway’s Statoil, has concluded its evaluation of potential gas export routes towards Southeastern and Central Europe.

In a statement, the consortium operator BP said the Nabucco West project with a route running from the Turkish-Bulgarian border to Baumgarten has been selected as the single pipeline option for the potential export of Shah Deniz Stage 2 gas to Central Europe.

Development of the South East Europe Pipeline (SEEP) project, which had been assembled by Shah Deniz partners in collaboration with Bulgaria, Romania and Hungary, will cease. This decision was made on the basis of the publicly communicated selection criteria announced last year.

In particular, BP said the greater maturity of Nabucco West gave the consortium confidence that this project could be developed and delivered on the same timeline as Stage 2.

The Shah Deniz Stage 2 project aims to deliver gas from the Caspian Sea to markets in Turkey and Europe, opening up the “Southern Gas Corridor”. The progress made to date allows the consortium to maintain its target for first gas exports from Stage 2 project around the end of 2017.

BP said the consortium will cooperate with the Nabucco West project to optimise its scope, its technical studies and its commercial offer.

Based on the same criteria, in February this year the consortium selected the Trans-Adriatic Pipeline (TAP) as the potential route for export of Stage 2 gas to Italy. Since that decision, the Shah Deniz consortium has closely worked with TAP, recently concluding a co-operation agreement with this project.

BP and Statoil each have a 25.5% stake in the consortium developing the Shah Deniz II gas field, which is thought to hold 1.2 trillion cubic metres of gas. Their partners include Azerbaijan state oil company SOCAR, Russia’s LukOil, NICO, Total SA and TPAO.

BP said the consortium will continue to work with the owners of the two selected pipeline options. It will make a final decision between these projects, and will conclude related gas sales agreements ahead of the final investment decision due in mid-2013.

Shah Deniz II is expected to add 16 billion cubic meters per year (bcm/year) of gas production to the approximately 9 bcm/year from Shah Deniz Stage 1.

The latest development, located 70 km offshore in the Azerbaijan sector of the Caspian Sea, is expected to include two new bridge-linked production platforms, 26 subsea wells to be drilled with 2 semi-submersible rigs, 500 km of subsea pipelines built at up to 550m of water depth, a 16 bcm/year upgrade for the South Caucasus Pipeline (SCP), and expansion of the Sangachal Terminal.

Rashid Javanshir, President of the BP Azerbaijan, Georgia and Turkey Region, said:

“We are delighted to announce the selection of the Nabucco West option, alongside our earlier selection of TAP.

This represents another important milestone in the development of Shah Deniz Stage 2 and the transportation of gas resources from the Caspian to Europe.

“We are grateful to the governments and companies who have supported the development of both the Nabucco West and SEEP pipeline projects.”

Rovnag Abdullayev, President of SOCAR, said:

“This decision constitutes a significant step towards implementation of the Southern Gas Corridor Strategy which would serve the strategic interest for sustained energy security of European countries as well as Azerbaijan, Georgia and Turkey.

“This indicates the growing role of Azerbaijan as an enabler to provide diversified energy resources to European market.”

BP said the consortium will consider building more pipeline capacity to deliver Shah Deniz gas through Turkey and Europe. Any export route selected for export of Shah Deniz Stage 2 gas would need to have the ability to meet all relevant environmental, safety, social, legal and regulatory standards.

CHINA: MIE to acquire 51% stake in Sino Gas & Energy, secures exploration contract extension in Kazakhstan

(EnergyAsia, June 29 2012, Friday) — Hong Kong-listed upstream firm MIE Holdings Corporation said it has agreed to acquire a 51% stake in Sino Gas & Energy Limited (SGE) as part of a strategic partnership with its Australia-listed parent firm, Sino Gas & Energy Holdings Limited, which is undertaking exploration work in China’s Shanxi province.
 
MIE said it will acquire US$10 million of SGE shares and invest another US$90 million to develop the Sanjiaobei and Linxing production sharing contracts (PSCs) in Shanxi over the next few years.
 
SGE, which will become a MIE subsidiary, is focused on exploring unconventional gas reserves in China through the two PSCs in eastern Ordos Basin.
 
MIE said the transaction will combine its financial strength, on-ground operational capability and experience in the Chinese oil and gas industry with Sino Gas’s gas projects and technical expertise.
 
The Sanjiaobei and Linxing blocks, which together could hold as much as 3.7 trillion cubic feet of natural gas, are located in the resource-rich Ordos Basin near the Changqing oil field, China’s second largest on-shore oil and gas field. The two blocks are also located in a gas pipeline hub in central China with three existing major trunk lines transporting gas from the west regions to the country’s main consuming centres in the east.

Natural gas at the wellhead in Changqing is priced at between US$4.26 and US$6.35 per million standard cubic feet/day.

To date, SGE has drilled and found gas in 13 vertical wells, and the potential to improve production by applying horizontal drilling and multi-zone completion techniques.

MIE, which is involved in the exploration, development and production of oil and gas in China, Kazakhstan and the US, said it has successfully drilled horizontal wells and performed multi-zone completion in its US and China projects.

MIE said China, which overtook Japan to become Asia’s largest gas consumer in 2009, is expected to consumer over 10 trillion cubic feet a year by 2030.

In a separate earlier statement, the company said its subsidiary, Emir-Oil, has been granted a two-year extension by Kazakhstan’s Ministry of Oil and Gas to continue exploring in the 808-sq km Aksaz-Dolinnoe-Emir (ADE) area.

The extension from January 9, 2013 to January 9, 2015 will enable Emir Oil to continue appraising area as well as evaluate several prospects and leads.

KAZAKHSTAN: Government to pay US$2 billion for 10% stake in Karachaganak oil and gas project

(EnergyAsia, June 29 2012, Friday) — The Kazakhstan government has agreed to pay a Western consortium US$2 billion for an immediate 10% stake in the development of the country’s Karachaganak condensate and gas fields that is shaping up to be one of the largest upstream projects in the world.

In a statement, key shareholder UK’s BG Group, which holds a 29.25% stake after the June 28 deal, said the Kazakhstan government has paid US$2 billion in cash and will be liable for another $1 billion non-cash payment.

State energy firm KazMunaiGas (KMG), which participated in the two-year negotiation for Kazakhstan’s stake, will represent the government in the re-constituted project whose other stakeholders include Italy’s Eni (29.25%), US major Chevron (18%) and Russia’s LukOil (13.5%).

As part of the deal concluded in Almaty, the Kazakh capital, the partners agreed to allocate an additional annual two million tons of capacity through the Caspian Pipeline Consortium oil pipeline through 2038.

Located in the country’s northerwestern region near the Russian border, Karachaganak is thought to hold around 1.2 billion tons in oil reserves and 1.35 trillion cubic metres of natural gas.

Ashley Almanza, BG Group’s executive vice president, said: “With this agreement in place the partnership can now move forward with new field development plans which are expected to unlock enormous value for both the country and the contracting companies.”

Frank Chapman, BG Group’s CEO, said: “We welcome the Republic of Kazakhstan and KMG into the Karachaganak contracting companies group and look forward to working with all of our partners to capture the significant remaining potential of the giant Karachaganak field

With KMG’s involvement, the consortium will look to smoother implementation of the project that had long been troubled by government investigations into alleged environmental violations and tax disputes. The consortium is confident of eventually doubling the field’s annual gas production to 38 billion cubic metres.

MARKETS: IEA slice forecast for 2012 world oil demand to 89.9 million b/d

(EnergyAsia, June 28 2012, Thursday) — The International Energy Agency (IEA) has reduced its June forecast for world oil demand to slightly under 89.9 million b/d for 2012, down from 90 million b/d in its previous forecast last month. In its latest oil market report, the Paris-based agency cited the “muted economic backdrop” for its…

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THAILAND: Oil stockpile to be raised from 60 days to 90 days of consumption

(EnergyAsia, June 28 2012, Thursday) — The Thai government has approved a plan to invest around 200-billion baht to raise the country’s emergency oil stockpile to meet 90 days of consumption, up from the current level of 60 days, said Energy Minister Arak Chonlathanont. (US$1=32 baht). While details including the location and type of storage…

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PAPUA NEW GUINEA: NGOs outline challenges facing ExxonMobil’s US$16 billion LNG project

(EnergyAsia, June 28 2012, Thursday) — A coalition of non-governmental organisations (NGOs) has issued a report outlining the challenges and negative impacts arising from an increasingly troubled US$16 billion dollar liquefied natural gas (LNG) project in Papua New Guinea’s Hela province.

ExxonMobil is leading a consortium to extract natural gas from the onshore Hela region for delivery to the coast for liquefaction and export as LNG to Asian markets. Work began in 2010, with completion targeted in 2014.

Local tribesmen and villagers have rioted and protested against the project in recent months causing work stoppages.

The report is a joint research project conducted by Oxfam, National Centre for Peace and Conflict Studies at the University of Otago, PNG Church Partnership Program, ChildFund Australia, Jubilee Australia, UnitingWorld and the Melanesian Institute.

The report, “The Community Good – Examining the Influence of the PNG LNG Project in the Hela Region of Papua New Guinea”, said the project is fuelling community tensions because of inadequate community awareness-raising, belief that the process of landowner identification is flawed and community concern about how project benefits will be shared.

While the project’s early investments have boosted the local economy through employment, the companies developing it must step up their work on “constructive stakeholder dialogue,” said the report.

Its key findings include:

• Inadequate awareness raising about the project and dissatisfaction with the information conveyed.

• Lack of comprehensive social mapping and landowner identification, meaning some legitimate landowners have not been identified and therefore will miss out on project benefits.

• Whilst there have been efforts to maximise opportunities for business and employment, a poor process for assigning business development grants has resulted in accusations of misappropriation and litigation in the courts.

• Cash ‘windfalls’ received by families are quickly spent. Some argue this is leading to increased family breakdowns and social problems, while others recognise the positive impact they were having on many people’s lives.

• Teachers and healthcare workers are leaving to work for the project, stretching resources in the local community.

• While the increased police presence has led to a reduction in serious crime, there is concern about increases in petty crime and other forms of criminality, with more people feeling unsafe since the start of the project.

• Issues regarding resettlement of people include unhappiness with their new locality, and problems with the distribution and management of large payments in the absence of proper financial guidance and banking facilities.

• While the project has brought optimism to the area, there is fear the situation will deteriorate into conflict, especially if landowner issues are not resolved satisfactorily

Oxfam New Zealand’s executive director, Barry Coates, said this report was an important reminder that while large-scale resource-extraction projects could deliver economic development benefits, it was vital that they also resulted in enduring improvements to human well-being.

He said: “Throughout this research, the voices of the people of Hela Province can be heard loud and clear. We hope that decision makers give proper consideration to this important study to ensure that benefits from the LNG project are maximised for all citizens of Papua New Guinea, particularly women and children in those communities where the impact of the project will be the greatest.”

“All stakeholders must take responsibility to ensure that the project does not cause harm to local people. The New Zealand government has an opportunity to help resolve some of the challenges fuelled by the LNG project by engaging in constructive dialogue with the Papua New Guinea government, and other agencies, including the Australian government that has supported the project to the tune of $350 million.“

Otago University National Centre for Peace and Conflict Studies Director, Kevin Clements, said the Hela region presented especially challenging circumstances, with the potential to increase social tensions.

He said: “While the company and government have made a considerable contribution, there are widespread concerns about transferable skills and the sustainability of business and employment in the absence of the heightened needs of the LNGP construction period.

“The billions of dollars of revenue from the PNG LNG project should guarantee that all Papua New Guineans can enjoy access to essential health services, decent education, sustainable livelihoods and safe communities. Sadly the history of resource development in PNG provides no such guarantee.”

MARKETS: Harvard study forecasts sharp increase in world oil production capacity, and risk of price collapse

(EnergyAsia, June 28 2012, Thursday) — Oil production capacity is surging in the US and several other countries at such a fast pace that global oil output capacity is likely to grow by nearly 20% by 2020, which could prompt a plunge or even a collapse in oil prices, according to a new study by a researcher at the Harvard Kennedy School.

The findings by Leonardo Maugeri, a former oil industry executive who is now a fellow in the Geopolitics of Energy Project in the Kennedy School’s Belfer Center for Science and International Affairs, are based on an original field-by-field analysis of the world’s major oil formations and exploration projects.

Contrary to some predictions that world oil production has peaked or will soon do so, Mr Maugeri projects that output should grow from the current 93 million b/d to 110 million b/d by 2020, the biggest jump in any decade since the 1980s.

What’s more, this increase represents less than 40% of the new oil production under development globally: more than 60% of the new production will likely reach the market after 2020.

Mr Maugeri’s analysis finds that the gross additional production from current exploration and development projects in the world could produce an additional 49 million b/d by 2020, an increase equivalent to more than half the world’s current 93 million b/d.

After adjusting that gross output increase for political and technical risk factors as well as the offsetting depletion rates of current fields, the analysis projects the net increase by 2020 to be about 17.5 b/d.

His study attributes the expected growth in oil output largely to a combination of high oil prices and new technologies such as hydraulic fracturing that are opening up vast new areas and allowing extraction of “unconventional” oil such as tight oil, oil shale, tar sands and ultra-heavy oil. These increases are projected to be greatest in the US, Canada, Venezuela and Brazil.

The study also predicts a major increase in Iraq’s oil output as it regains stability, which will add new production in the Persian Gulf region — potentially destabilising OPEC’s ability to manage output and prices.

The combination of new production in the Western Hemisphere and the still growing production in other parts of the world could lead to a sharp drop in oil prices, Mr Maugeri finds, which if steep enough could lead oil companies to cut back on investment and ultimately slow down oil supplies.

But if oil prices remain above about US$70 per barrel, sufficient investment will occur to sustain continued growth in production, possibly leading to a stable phenomenon of oil overproduction after 2015.

“Leonardo’s conclusions are not only startling, but his paper provides a transparent explanation for how he reaches them – something lacking in many studies,” said Meghan L. O’Sullivan, the Jeane Kirkpatrick Professor of the Practice of International Affairs at the Kennedy School and director of the Geopolitics of Energy Project.

“His findings have major implications for geopolitics, suggesting important shifts in how countries interact and wield influence.”

Mr Maugeri was senior executive vice president of the Eni oil company in his native Italy, and has authored books and articles suggesting that oil will remain more plentiful than many predict. His new research tests that hypothesis with in-depth analysis of reserves and production levels of all the major oil fields across the globe. He also assesses the impact of evolving technologies that open up new fields and allow more efficient extraction in existing fields.

The most dramatic increases involve the exploitation of unconventional oils in the US, Mr Maugeri said.

For example, the Bakken and Three Forks fields in North Dakota and Montana could become the equivalent of a Persian Gulf-producing country within the US. The Bakken formation’s output has grown from a few barrels in 2006 to 530,000 a day in December 2011.

While the surge in production in the Western Hemisphere in coming years will in effect leave the region self-sufficient in oil, the global nature of the market makes that all but meaningless except in psychological terms, Mr Maugeri argues.

He adds that the industry will need to make major investments to keep oil production environmentally safe to avoid threatening the new bonanza.

MYANMAR: Thai upstream firm PTTEP eyes expansion after securing another two exploration deals

(EnergyAsia, June 27 2012, Wednesday) — Thai state upstream firm PTT Exploration and Production Public Company Limited (PTTEP) is targeting Myanmar for expansion after securing its another two production sharing contracts with state Myanma Oil and Gas Enterprise (MGOE).

PTTEP, which will partner with Myanmar’s Win Precious Resources Pte Ltd (WPR), signed the agreement early this month for the right to explore and produce in the onshore 13,333-sq km PSC-G and 1,344-sq km EP-2 blocks. Located in central Myanmar, the two blocks were among 18 tendered in a recent onshore bidding round.

The contracts were signed by PTTEP CEO Tevin Vongvanich and WPR managing director U Htun Lynn Shein with U Aung Htoo, MOGE’s managing director at a ceremony in Myanmar’s capital city of Nay Pyi Taw. Arak Chonlathanont, Thailand’s Energy Minister, and U Than Htay, his Myanmar counterpart, witnessed the signing.

PTTEP, which will hold a 90% stake in the joint venture with WPR the remaining 10%, said the partners will commit at least US$24 million to conduct 2-D seismic survey and drill four wells in the two blocks over the next three years.

The Thai company has already invested in four upstream projects in Myanmar: Yadana, Yetagun, Zawtika and the M3 & M11 blocks.

Mr Tevin said PTTEP has identified Thailand’s western resource-rich neighbour as a key area for his company to grow its oil and gas assets.

The Thai firm has allocated US$2.4 billion or 20% of its 2012-2016 budget to developing upstream projects in Myanmar which recently emerged from decades of self-imposed isolation.

As a follow-through on its recent political reforms, the Myanmar government is expected to liberalise foreign investment flows into the country when Parliament meets on July 4.

In a separate announcment, PTTEP said its Greater Bongkot South (GBS) field, which has been under development since 2008, started producing 320 million standard cubic feet/day (mmscfd) of natural gas and 9,000 b/d of condensate on June 16.

Mr Tevin said production from Greater Bongkot South, the main field in the offshore Bongkot project, meets about 20% of the country’s natural gas demand. Bongkot is located in the Navamindra Petroleum Area, about 203 km off the coast of Songkhla province.

PTTEP is the operator and main shareholder with a 44.4445% interest. Its partners include Total E&P Thailand Company Limited (33.3333%) and BG Asia Pacific Pte Limited (22.2222%).

CHINA: Shell JV building products storage terminal in Tianjin

(EnergyAsia, June 27 2012, Wednesday) —  Shell North China Oil Group, a joint venture between the major and China’s Tianjin State Farms Agribusiness Group, is investing 550-million yuan to build a 200,000-cubic metre (cbm) storage terminal in the northern Chinese city port of Tianjin. (US$1=6.36 yuan). The company is aiming to complete and start up…

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CHINA: Oil demand up only 0.5% in May on further evidence of slowing economy, says Platts

(EnergyAsia, June 27 2012, Wednesday) — In a clear sign of a slowing economy, China’s apparent oil demand rose just 0.5% year-on-year in May to 39.72 million metric tons (mt), or 9.39 million b/d, said US energy media Platts.According to an analysis of Chinese government data, Platts said the country’s May oil demand was the…

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CHINA: CNOOC building 60,000 b/d refining unit to produce lubricants, petrochemical feedstocks

(EnergyAsia, June 27 2012, Wednesday) — CNOOC, China’s third-largest oil refiner, is building a 60,000-b/d plant in eastern Jiangsu province to process crude for its production of lubricants and petrochemicals.The 10.2-billion-yuan plant to be built alongside an existing refining unit in Taizhou city is expected to start up in 2015.CNOOC, parent of offshore oil and…

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INDONESIA: State Pertamina takes risky route by acquiring Venezuelan assets

(EnergyAsia, June 26 2012, Tuesday) — In its search for energy security, Indonesia is looking half way across the globe to another oil-producing country that shares its reputation for making unpredictable policies based on a mix of populism and resource nationalism.Last week, Pertamina, the Indonesian state oil and gas monopoly, announced that it has agreed…

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CHINA: Wison Offshore & Marine awarded contract for construction of floating LNG unit

(EnergyAsia, June 26 2012, Tuesday) — Wison Offshore & Marine Ltd, a subsidiary of China’s Wison Group, said it has secured a contract from the Exmar group to undertake the engineering, procurement, construction, installation and commissioning (EPCIC) of the world’s first floating LNG liquefaction, regasification and storage unit (FLRSU).

The unit will be deployed off the Caribbean coast of Colombia and used by Exmar under a “build, own, and operate” contract with Pacific Rubiales Energy Corporation from the fourth quarter of 2014.

The FLRSU consists of a non-propelled barge equipped to convert 69.5 million standard cubic feet/day of natural gas into about 500,000 tons of LNG a year. The LNG will be stored in the FLRSU’s 14,000-cubic metre tanks before being offloaded either to a permanently moored floating storage unit or shuttle tankers.

The facility will be moored to a jetty, and supplied with gas by pipeline from the onshore La Creciente field located in the Lower Magdalena Valley Basin.

Wison Offshore & Marine will be responsible for the design and engineering of the unit from its Shanghai operational centre while construction will be undertaken at its wholly-owned fabrication facility in Nantong, China. The company will receive further support from a subsidiary in Houston in the US state of Texas.

US engineering firm Black & Veatch said it has been contracted to execute the engineering and procurement of the topside liquefaction equipment and packages using its patented PRICO® LNG technology, and providing on-site commissioning and startup services.

The complete FLRSU, including process systems will be designed and constructed in compliance with the relevant rules and regulations of an internationally recognised classification society.

Nicolas Saverys, CEO of Exmar, an Antwerp-based diversified and independent shipping group serving the oil and gas industry, said:

“The EPCIC contract with Wison is a historic event not only for Exmar and WISON, but also for the LNG industry as the world’s first floating liquefaction unit moves from concept development into a firm turnkey contract. The proven track record of Wison Offshore & Marine in delivering offshore structures in time and on budget was a key driver.”

Wison Offshore & Marine Executive Vice President L. Dwayne Breaux said:

“We are honoured that Exmar, one of the world’s pioneering LNG players, chose Wison to provide the world’s first floating facility to produce LNG from an onshore field.

“Wison has been actively looking for the chance to be involved in the burgeoning LNG market for some time, and to be able to provide a project of this significance cements our role as a premier EPCIC provider for that market and the offshore industry as a whole.”

Earlier this year, Wison said it and Shell Global Solutions International BV agreed to jointly develop a new, low-cost hybrid gasification technology demonstration plant in China.

The two companies have begun work on collaborating in the technology’s design and marketing, and will seek to extend future cooperation to other coal gasification technologies.

“Hybrid gasification offers an environmentally sound solution at moderate costs for our customers to efficiently upgrade low-cost feedstock, such as coal, to more valuable products,” said Michiel Mak, Shell’s vice president for gasification.

The hybrid gasifiers promise to further expand the market for syngas – the main product of the gasification process – into the chemicals, hydrogen and fertiliser industries.

Liu Haijun, Wison’s chief operations officer, said:

“As a fast emerging, one-stop engineering service provider, Wison owns both practical experiences and R&D facilities for coal chemical production and operations. The joint R&D and marketing cooperation with Shell is in line with our development strategy. This cooperation will lead to greater success in the future and make further contributions to clean and efficient utilization of China’s vast coal resources.”

MARKETS: Doubts over data and supply outlook cloud BP’s report that world oil reserves grew by 1.9%

(EnergyAsia, June 26 2012, Tuesday) — The world still has serious energy worries ahead despite a near 1.9% rise in its oil reserves to a record 1,653 billion barrels at the end of 2011 to keep well ahead of consumption growth of only 0.7%, according to BP’s latest annual Statistical Review of World Energy.

Exploration activities and finds rose as record crude prices, with Brent averaging US$111.26 a barrel over the course of 2011, and improved technology made marginal projects commercially viable.

On paper, BP said these reserves would help cover the world’s production at current rates for 54 years. In addition, the world’s recoverable natural gas reserves rose by 6.3% to 208.4 trillion cubic metres.

Despite these improvements, the world will face mounting concerns over the political stability of the main producing countries, environmental and safety issues in relation to upstream activities in frontier areas, and the quality of published data on which most countries base their long-term energy and economic policies.

According to BP, almost all the world’s oil reserves growth of 30.5 billion barrels came from one war-torn country, Iraq, which raised its estimates by 28.1 billion barrels to 143 billion barrels at the end of 2011. Russian reserves rose by 1.6 billion barrels to 88.2 billion barrels while Saudi Arabia added 0.9 billion barrels to its 2011 reserves of 265.4 billion barrels.

That is, if these numbers are to be believed at all.

The issue of the validity of the published oil reserves data was again highlighted when BP decided to recognise Venezuela’s reserves claim of 296.5 billion barrels in the 2011 edition, enabling it to take spot from long-time leader Saudi Arabia’s 265.4 billion barrels. In the 2010 edition, Venezuela only had 211 billion barrels; thus, its reserves were sharply revised up by more than 40% in a year.

As with the case of the Middle Eastern oil producers, BP is unable to accurately and independently verify the claims submitted by the Venezuelan government.

Another source of concern is that the poorer quality of Venezuela’s Orinoco heavy oil reserves means it will not have the same energy output as the lighter oil from Saudi Arabia’s rapidly declining fields.

While new technology will facilitate the exploitation of difficult sources such as the heavy oilfields of Venezuela and Canada, and deep waters off the coasts of Latin America and West Africa, the cost of exploring and producing those barrels will be substantially higher compared with on-going work on established onshore acreages.

Oil and gas from shale and other unconventional sources, touted as the long-term solution to meeting the world’s new demand, will also take time and cost to develop, said BP.

The popular hydraulic fracturing or fracking method to produce hydrocarbons from shale has run into environmental opposition as it employs toxic chemicals that have found their way into underground water aquifers. Fracking has also been linked to earthquakes in parts of the US and UK.

SRI LANKA: Trincomalee port to get US$4 billion investment

(EnergyAsia, June 26 2012, Tuesday) — A private company is set to become Sri Lanka’s largest private investor if and when it completes its US$4 billion programme to develop a heavy industry zone and infrastructure in Sri Lanka’s north-eastern Trincomalee harbour.

According to the state Board of Investment (BOI), Sri Lanka Gateway Industries Pvt Ltd has signed an agreement to build a deep water jetty, bulk commodities terminal with stockpiling and blending capabilities, a power generation plant and road system.

In a statement, the BOI said the project will qualify for tax concessions and will be implemented in three phases, but did not specify when it is expected to start and end.

Prabath Nanayakkara, chairman of Sri Lanka Gateway Industries, said the project venture will “change the economic landscape of the island” while BOI chief M.M.C. Ferdinando described said the deal as a sign of “growing international investor confidence in Sri Lanka.”

Mr Nanayakkara said the industrial zone will attract foreign investors from Japan, China, India, the US, Brazil and Australia, and will create 5,000 direct jobs and over 20,000 indirect ones.

The port recently secured a US$35 million investment from Lanka IOC (LIOC), a local joint-venture oil company between Sri Lanka and the Indian Oil Corp, to expand oil storage terminal.

With its growing role as an international transhipment centre and port, Trincomalee has seen rising demand for fuel storage and blending.

LIOC has begun work on expanding and upgrading an ageing oil tank farm in the port that was built in the 1940s. The facility has been left in disrepair from the 1970s when Sri Lanka was plunged into a devastating civil war that ended in 2009.

AUSTRALIA: Carbon tax to fall on 294 large polluters from July 1

(EnergyAsia, June 25 2012, Monday) — After years of heated domestic debate over how best to combat its high output of greenhouse gases, Australia will impose a groundbreaking carbon tax on 294 of its biggest polluters from July 1.Companies and local governments that produce more than 25,000 metric tons (28,000 tons) of carbon dioxide a…

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AUSTRALIA: Coal production, emissions to soar despite July 1 carbon tax, says research firm RepuTex

(EnergyAsia, June 25 2012, Monday) — Australian’s coal production and greenhouse gas emissions will rise to record levels as it continues to attract investments despite increased cost from the imposition of a new carbon tax from July 1 as part of the government’s long-term clean energy plan, said carbon analytics firm RepuTex.
australia coal production emissions to soar despite july 1 carbon tax says research firm reputex 250612
According to the company’s modelling analysis, investments in several major new mines are viable even though they will be built after July 1 2012 and will not be eligible for industry assistance through the government’s Coal Sector Jobs Package (CSJP).

The nation’s two largest coal mines yet built – Xstrata’s Wandoan coal mine and Hancock’s Alpha project, both in Queensland, are set to start up from 2015. The scale of these operations will contribute to a steady rise in both coal sector production and greenhouse emissions.

“Australia is facing a significantly lower carbon price beyond 2015 when companies will be able to start purchasing offsets from the international market, and the price will be partially permitted to float”, said RepuTex’s Executive Director Hugh Grossman.

“When you couple this lower medium term carbon cost with the government’s industry compensation, RepuTex is not forecasting long-term net liabilities for most coal producers high enough to seriously impact production.

“Demand from Asia is going to be a far more significant factor in impacting production levels, and we perceive that outlook as positive.”

The sector’s greenhouse gas emissions will decline from 2018 as a result of the scheduled closure of aging Rio Tinto’s Blair Athol mine, New Hope’s Jeebropilly and the Isaac Plains joint venture followed by another five significant closures at Foxleigh, Mount Owen, Moorvale, Gregory Crinum and Mount Thorley by 2020.

“Technological advancements at new operations ensure such projects generally present lower carbon emissions profiles, and therefore lower liabilities relative to older assets. This is despite those newer mines not receiving Government carbon compensation”, said Mr Grossman.

RepuTex’s analysis shows that older mines exhibit very high average emissions intensity, while new projects are setting the standard for emissions levels, with the new Wandoan and Alpha projects projected to operate at significantly lower emissions intensity.

“This high operating emissions intensity for aging coal assets will equate to a high gross carbon cost from commencement of the Carbon Price Mechanism in July 2012”, said Mr Grossman.

“However, the high level of government compensation via the CSJP ensures their total liability will be relatively low, allowing them to continue producing.”

With offices in Hong Kong and Melbourne, RepuTex is a leading source of carbon market intelligence and pricing of firm-level carbon liabilities. It supplies corporate, trading and capital markets firms with carbon market benchmarks and price information to assist customers make sound trading, reporting and business decisions.

 

CHINA: Natural gas consumption to rise from 130 bcm in 2011 to 550 bcm by 2030, says CNPC chief

(EnergyAsia, June 25 2012, Monday) — China’s natural gas consumption will rise from 130.7 billion cubic metres last year to 200 bcm by 2020 and 550 bcm by 2030, said the president of China National Petroleum Corp (CNPC).

Since 2000, it has risen by 5.3 times to make China the world’s fourth largest natural gas consumer behind the US, Russia and Iran, said Zhou Jiping at a recent international gas conference in Kuala Lumpur in Malaysia.

CNPC, which accounts for 75% of China’s natural gas production, is projecting domestic consumption to rise by 8% a year between 2011 and 2030.

Mr Zhou said the share of natural gas in China’s primary energy mix will rise to 10% by 2020 from 5% in 2011 and 2.4% in 2000.

“With proper incentives, our gas demands are going to grow by about 8% annually, which is to increase our consumption to 350 bcm and 550 bcm in 2020 and 2030 respectively, accounting for 10% to 12% of China’s primary energy consumption,” he said.

To ensure natural gas’s expanded role, CNPC is investing heavily in the country’s pipeline system and infrastructure.

By the end of 2011, China had completed over 50,000 km of gas trunk pipelines to boost its transmission capacity to over 160 bcm per year, said Mr Zhou.

Through its five liquefied natural gas (LNG) receiving terminals with a total annual capacity of 15.8 million tons, China imported 31.4 bcm natural gas last year to account for 24% of its domestic consumption.

Mr Zhou predicts China’s domestic gas production will reach 120 bcm in 2015 and 160 bcm in 2020 after rising 3.9-fold to102.5 bcm between 2000 and last year. It will climb to 200 bcm by 2020 and 300 bcm by 2030.

According to the latest resources assessment by the Ministry of Land and Resources, China has 32 trillion cubic metres of technically recoverable conventional gas reserves. The country’s rate of proven resources stood at just 16%, indicating a high potential for reserves and production growth.

Mr Zhou touted China’s potentially vast holding of shale gas resources of about 25 tcm including 10.9 tcm of coalbed methane gas reserves.

“Our CBM is still in the development stage of industrialisation and we have built a production capacity of nearly 10 bcm. For China’s shale gas, the technically recoverable resources are 25.1 tcm according to our initial estimate. We are now conducting the development pilot tests.

“By integrating technologies and expertise of foreign companies with our own research results, CNPC drilled a horizontal well in the marine facies shale gas reservoir in southwestern Sichuan Basin, and we obtained an initial daily output of 200,000 cbm at a stable wellhead pressure of 20MPa.

“For the next 20 years, China’s gas production is going to remain in the peak period of growth. Our country’s gas production capacity is expected to surpass 200 bcm and 300 bcm in 2020 and 2030 respectively.

“In addition, such remote areas with rich coal resources as Xinjiang and Inner Mongolia Autonomous Regions have been formulating coal-to-gas (CTG) development plans, and they have started to build demonstration projects.

“CTG has the cost advantage compared with imported gas, so it has a quite good future as well. China’s domestic gas output will be able to meet the bulk of our demand growth, and it will be the main body to satisfy our needs over the coming decades.”

According to the International Energy Agency (IEA), global gas demand will rise 17% to 3,937 bcm in 2017, with China more than doubling its consumption to 273 billion cbm.

 

INDIA: ONGC and China’s CNPC to collaborate in oil and gas projects

(EnergyAsia, June 25 2012, Monday) — Two leading state oil and gas companies of India and China have signed a landmark memorandum of understanding (MoU) to cooperate in upstream and downstream projects around the world.

India’s ONGC said its chairman and managing director, Sudhir Vasudeva, and China National Petroleum Corporation’s (CNPC) chairman, Jiang Jiemin, signed the MOU in New Delhi last week.

ONGC said: “With this MoU, the companies have agreed to foster their cooperation either directly or through their subsidiaries by expanding cooperation in upstream E&P areas, refining or processing of crude oil and natural gas in midstream or downstream projects, marketing and distribution of petroleum products and construction and operation of oil and gas pipelines.

“The areas of cooperation between ONGC and CNPC will also extend to joint participation in suitable hydrocarbon projects in other countries of interest by exchanging information and working for mutual growth and benefit by extending cooperation in hydrocarbon sectors globally.”

The companies have already established cooperation in Syria, Sudan and Myanmar where ONGC’s subsidiary OVL and CNPC are active investors in its oil and gas development.

AUSTRALIA: Coal sector hit by rising cost, slowing demand, environmental concerns

(EnergyAsia, June 22 2012, Friday) — Australia’s coal industry is taking a well-deserved break after years of rapid expansion as it surveys a host of uncertainties brought on by the global economic outlook, rising construction and production costs, and environmental opposition.Analysts at Bank of America Merrill Lynch (BofAML) recently issued a report citing weak demand…

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SAUDI ARABIA: Oil production seen below 10 million b/d in June

(EnergyAsia, June 22 2012, Friday) — Saudi Arabia is expected to keep its crude oil production well below 10 million b/d after averaging around 9.8 million b/d in May.The world’s leading crude oil exporter has more than achieved its earlier threat to bring down oil prices when it raised production to a 30-year high of…

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MARKETS: Further weakness ahead with oil at 18-month low as Brent falls below US$90, WTI under US$80

(EnergyAsia, June 22 2012, Friday) — The oil markets hit an 18-month low with Brent crude futures sinking below US$90 a barrel and US benchmark WTI crashing through US$80 on further evidence of slowing economic activities in the US, Europe and Asia.

Both benchmarks lost more than 3% of their overnight value with Brent touching US$89.27 a barrel, below its previous low of US$90.02 set in December 2010. Once it went below US$80, WTI fell right through to US$78.39 with little resistance along the way.

Despite forecasts by leading agencies IEA, OPEC and EIA for global oil demand to continue growing and spare capacity to shrink further, the oil markets are focused squarely on the immediate picture of prolonged economic weakness in Europe and the US. China, which continues to account for the bulk of oil demand growth, is doing more stockpiling than consumption these days.

Oil’s war premium is also rapidly evaporating. The threat of war between the West and Iran appears to have receded as the US and Israel are meeting strong resistance from within as well as from Russia and China to refrain from launching a military strike on the Islamic regime.

Even with Saudi Arabia cutting back production from a recent 30-year high of over 10 million b/d, traders deem there is too much supply on the world markets.

Some traders are forecasting crude futures could fall as low as US$40 to US$50 a barrel, implying another 40% drop, possibly to levels last seen in December 2008. At their high points in February, WTI traded at over US$115 a barrel while Brent soared to US$128.

Credit Suisse analysts last week issued a bearish call for Brent to test US$50 a barrel in a worst-case scenario as the Eurozone economies continue to collapse.

 

SAUDI ARABIA: IMF forecasts economy to grow by 6% after expanding 7.1% in 2011

(EnergyAsia, June 22 2012, Friday) — As a result of weaker oil prices, Saudi Arabia’s economy is expected to grow by 6% this year after expanding 7.1% last year, said the International Monetary Fund (IMF).
 
In a report issued after an IMF team met with Saudi officials last month, the fund praised the government for providing “important support to the global economy during a period of high global uncertainty, including through its actions in stabilising the global oil market.”
 
It said increased Saudi production helped “ease pressures on global oil prices” that earlier in the year had threatened to re-test the record high level of US$147 a barrel of July 2008.
 
The IMF said the outlook for the Saudi economy remains buoyant with “prudent management” enabling its non-oil sector to grow at a 30-year high rate of 8% in 2011.

The team, led by Masood Ahmed, its Director of the Middle East and Central Asia Department, stated:

“Higher imports and increased workers’ remittances linked to the strong growth of the Saudi economy, together with expanded financial assistance have exerted a positive spillover and helped support other economies in the region and beyond.

“Real GDP is projected to grow by 6% in 2012. The private sector is again expected to lead the way, reflecting the increased role of the private sector in the economy, a clear break from the past.

“Inflation is likely to remain modest at about 5% in 2012, but should be monitored carefully for signs that the economy is overheating.

“Fiscal and external surpluses are expected to remain very strong at almost 17% and 27% of GDP, respectively.

However, given the current external environment and possible spillovers to global oil markets, the outlook is subject to some uncertainty.”

It urged the government to take advantage of the kingdom’s strong economy by pressing ahead with reforms to reduce dependence on oil exports.

SINGAPORE: IEV completes fabrication and load-out of refurbished platform within six months of award

(EnergyAsia, June 21 2012, Thursday) — Singapore-listed IEV Holdings Limited said it has completed on schedule the RM262-million engineering, fabrication and load-out work on a four-legged jacket and refurbished topside of a wellhead platform that is part of a bigger project that started last December. (US$1=RM3.2).
 
The project involved the supply, delivery, installation and commissioning of a refurbished wellhead platform, pipeline, and host tie-ins to existing offshore production facilities.

The six-slot wellhead platform has left the fabrication yard in New Orleans in the US and is expected to arrive at the work site located off the shore of Sarawak, Malaysia by the end of August.

The company said it expects platform and pipeline installation, hook-up, commissioning and host tie-in activities to be completed by early October 2012, with oil production to begin in December.
 
The turnkey contract was awarded to IEV’s 30%-owned associate, IEV (Malaysia) Sdn Bhd by Petronas Carigali Sdn Bhd, an established oil and gas operator in Malaysia. The project was executed under a strategic alliance partnership with a US-based engineering company which specialises in platform re-use in the Gulf of Mexico
 
IEV’s President and CEO, Christopher Do, said:

“The completion of the fabrication and load-out of the reuse platform marks a very important milestone for the project. It could take 12 to 18 months to design and build a brand new four-legged jacket and topside.

“In this project, the design, refurbishment, fabrication and load-out of the platform was completed within six months from receipt of the letter of award.

“This proves that the concept of platform refurbishment or reuse is commercially viable as it can offer significant reduction in capital expenditure, fast-track a new field development and shorten the time-to-market of an oil and gas field by as much as 50%.”