AUSTRALIA: Coal association chief addresses challenges from green groups, rising costs and upcoming carbon tax

(EnergyAsia, June 21 2012, Thursday) — The Australian coal industry has identified “extremist” environmental groups, the rising cost of operations, the shortage of skilled labour and the imposition of a new national carbon tax on July 1 as its biggest foreseeable challenges.
 
Nikki Williams, chief executive of the Australian Coal Association, presented this list at the recent Coaltrans Asia conference as she recounted how the industry has risen to become a world player, the country’s second largest export earner and a vital supporter of Asia’s fast-growing economies.

“Coal is projected to remain Australia’s most important energy export and second largest export industry,” she told delegates at the Coaltrans Asia conference in Bali in Indonesia.

Citing official research, she presented a picture of coal’s increasingly vital importance to the health of the Australian economy, including its contribution to export earnings, employment, government revenues, and development of infrastructure.

According to the Bureau of Resources and Energy Economics (BREE), Australia’s exports of metallurgical coal are expected to increase at an average annual rate of eight per cent to reach 218 million tonnes in 2017 and contribute A$40 billion in earnings. (US$1=A$0.99).

The country’s thermal coal exports are expected to surge by 10% to 162 million tonnes in 2012 after growing by four per cent last year to reach 148 million tonnes. From 2013 to 2017, it will grow by an annual average 11% to reach 271 million tonnes.

Dr Williams said the coal industry has been a growing source of government revenues as strong prices have enabled royalties to nearly triple from A$1.5 billion to A$4.4 billion between 2006 and last year.

“Direct employment has almost doubled, from 27,000 in 2006, to 48,000 in 2010. The real story though is the increase in indirect employment to some 250,000 jobs,” she said.

Today, Australia has invested a total of A$73.1 billion in various coal mining projects and infrastructure that will boost annual production capacity by more than 74 million tonnes by 2014, said Dr Williams.
 
But she warned the golden goose is losing its competitiveness and badly needs protection now from a combination of mostly domestic threats and the emergence of new suppliers in other countries.
 
She said that in March this year, the Australian media exposed a proposal by Greenpeace and a coalition of environmental and political activist groups to fund a campaign to stop coal exports.

The campaign, “Stopping the Australian Coal Export Boom”, aimed to inflict maximum damage on the coal industry by manipulating community groups, distorting legal processes and undermining public policy development, said Dr Williams.

As the campaign could harm not only the industry, but also the economy, she said the Australian government led by the Prime Minister together with the Treasurer, and the Ministers for Energy and Resources, Trade as well as the Environment publicly condemned the plan.

“We saw the campaign as a threat that reaches well beyond the coal industry and well beyond Australian shores. We were particularly disturbed by the apparent role of overseas groups as it represents a strategy to materially impact the Australian economy,” she said.

Responding to environmental critics targeting the industry, she said there simply is no way for the world to avoid using coal.

Citing the International Energy Agency (IEA), she said global coal consumption will rise by a third between 2009 and 2035, and that coal will remain the main fuel for electricity generation.

“Faster rates of growth in the population and output of emerging economies will continue to drive world coal demand upwards. The IEA has demonstrated that irrespective of any future decisions by governments around the world to alter their domestic energy mixes, the share of world coal demand from non-OECD economies will rise from 70% in 2009 to approximately 80% by 2035,” she said.

“No matter what the policy scenario, China, India and Indonesia account for over 80% of this projected increase in coal demand – with China and India accounting for one-third each.”

BREE has forecast that the world trade in metallurgical coal will rise by an average annual rate of five per cent, from 271 million tonnes in 2011 to 345 million tonnes in 2017. Over the same period, the seaborne thermal coal trade will grow by four percent a year to reach 1.04 billion tonnes.

Dr Williams said Australia’s coal industry has taken the responsible position of becoming a world leader in researching and developing low emissions coal technologies such as carbon capture and storage (CCS) to help reduce greenhouse gas emissions. Last year, the ACA established a new company, ACA Low Emissions Technologies (ACALET) under Dr Williams to develop and deploy CCS technologies.

Last November, the Australian Parliament passed legislation to introduce a A$23 per tonne carbon tax from July 1. In formulating this climate policy after a protracted five-year debate, the Australian government set a strong example by leading the world in reducing greenhouse gas emissions.

Dr Williams said that while the industry strongly supports the objective of emissions reduction, it is also needs to stay competitive especially with the recent strong emergence of new competitors in Mongolia, Indonesia and Mozambique whose coal companies do not face the same tough environmental and regulatory restrictions.

The ACA said that Australia is losing market share in the world thermal coal trade although it is has maintained its position in the metallurgical coal trade.

The ACA wants Canberra to make two “straightforward changes” to the carbon tax by phasing in the auctioning of emissions permits for trade-exposed industries. This will be followed by the inclusion of “coal mine fugitives” in step with Australia’s competitors over a timeframe that will allow the development of fugitive abatement technologies from their current experimental stages to safe, reliable, deployable equipment and processes at commercial scale.

By so doing, the ACA said the Australian coal industry would be able to meet the government’s aims while maintaining its cost competitiveness at the same time.

While affirming Australia’s strong position to meeting Asia’s economic rise, she said there is an “urgent need “to restore the country’s reputation as a low sovereign risk investment destination with a predictable and sensible policy making regime.”

JAPAN: IMF pronounces economy showing “solid recovery” despite Europe’s pall

(EnergyAsia, June 21 2012, Thursday) — The Japanese economy is experiencing a solid recovery from the effects of the March 2011 earthquake-tsunami tragedy, but the European debt crisis is likely to dampen demand for the country’s exports, and weigh on business sentiment, said the International Monetary Fund (IMF).

The fund’s First Deputy Managing Director, David Lipton, said reconstruction spending and stronger private consumption will enable the world’s third largest economy to grow by 2% this year and 1.75% in 2013.

Mr Lipton and an IMF team gave this assessment after visiting Japan for its annual economic health check.
 
Japan’s headline inflation remains near zero percent, but the exchange rate has appreciated over the last year, partly because of inflows of capital seeking a safe haven. IMF economists believe the Japanese yen is moderately overvalued from a medium-term perspective.
  
For the long term, the team said Japan faces “many longstanding challenges” including tackling its high public debt, low growth and deflation.

To make “meaningful” progress in tackling these issues, Mr Lipton said Japan needed to “move forcefully on many fronts to take advantage of synergies between policies. This includes a combination of fiscal, structural, and monetary policies.”

The Japanese government must immediately focus on its “deep-rooted fiscal problems.”

Over the last 20 years, the country’s net public debt has increased tenfold, fuelled by a rapid rise in social security spending. The IMF believes that tax and social security reforms are crucial to demonstrate a commitment to fiscal reform and sustain investor confidence.

Mr Lipton said: “Our estimates suggest that Japan will need to achieve an overall fiscal consolidation of about 10% of GDP over the next decade.” This will require a “bold and comprehensive” package of structural reform to help reduce the public debt-to-GDP ratio, as well as raise potential growth.

The IMF said reforms should focus on the most important constraints to growth including the aging labor force, low female labor force participation, domestic sector regulations and the limited availability of risk capital.

It has called for additional easing to increase the likelihood of achieving the 1% inflation goal by 2014 under the IMF staff’s baseline scenario that could help reduce lending rates further, and raise inflation expectations.

CLIMATE: Degrading marine habitats threatening fish supplies and ocean life, says, UNDP report

(EnergyAsia, June 21 2012, Thursday) — The world’s marine life and ocean fish supplies are being threatened by climate change, said a new report by the UN Development Programme (UNDP).

According to “Frontline Observations on Climate Change and the Sustainability of Large Marine Ecosystems”, climate change is already impacting the livelihoods of billions of people dependent on the US$12 trillion generated annually by these ecosystems.

Warming ocean waters are causing major shifts in fish distribution and severe degradation of coastal habitats, said the report citing the following examples:

– In West Africa, large populations of sardines are moving away from traditional fishing grounds, causing a major loss in protein supplies for the region.

– In northwest Africa, stocks of sardines and mackerel in the Canary’s marine ecosystems are moving from traditional fishing areas in Senegal northward towards cooler waters off the coast of Mauritania.

– In southwest Africa, sardines and mackerel populations are moving southward from Namibia, towards the cooler waters of the Benguela marine ecosystems and onto the Agulhas banks area of South Africa.

– In Asia, the increased intensity of monsoon rains in the Bay of Bengal marine ecosystems is lowering the salinity of surface waters. Lower salinity is inhibiting nutrient replenishment of surface waters, thereby lowering natural productivity, and fish populations.

In all instances, the change has put at risk the food security for millions of people in coastal communities.

The report said that climate change is raising sea levels, causing coastal erosion, and acidifying the world’s oceans through increase carbon dioxide emissions.

Yannick Glemarec, executive coordinator of UNDP-Global Environment Facility (GEF), said:

“The growing risks and impacts of climate change on oceans require the world to urgently invest in a green economy whereby countries achieve development targets in an environmentally sustainable way while at the same time meeting the needs of their citizens.”

To combat the deleterious effects of climate change, the GEF, its agencies and the World Bank have mobilised over US$4 billion to recover and sustain the goods and services of marine ecosystems in over 100 countries in Africa, Europe, Asia, and Latin America.

The report cited the following projects:

– In the Yellow Sea, China and South Korea have committed to reduce fishing effort by 33%, buy back retired vessels, retrain fisherman for alternative livelihoods, and reduce nutrient discharges by 10% every five years.

– In the Humboldt Current ecosystem, Chile and Peru are protecting 18-20% of the world’s annual marine fish catch through ecosystem based management and specific catch levels for fish species such as sardines, anchovies, and mackerel.

MARKETS: OPEC keeps forecast for 2012 world demand to grow by 900,000 b/d to 88.7 million b/d

(EnergyAsia, June 20 2012, Wednesday) — The world’s main petroleum cartel has kept its forecast for this year’s global demand to grow by 900,000 b/d to reach 88.7 million b/d.

The Organisation of Petroleum Exporting Countries (OPEC) said despite the negative headlines concerning Europe and the US, the global economic outlook is stabilising and oil demand in the emerging economies remains strong while Japan is using more oil to offset the loss of its nuclear power capacity.

“US and European oil demand will contribute a large share of this uncertainty. While these two regions are squeezing oil demand, other Non-OECD regions are pushing for more oil consumption,” said OPEC’s latest monthly report.

“Furthermore, the Japanese shutdown of their nuclear plants is leading to more fuel and crude oil-usage in the power sector.”

Nevertheless, OPEC holds out the possibility that it might have to reduce its forecasts by between 200,000 b/d and 300,000 b/d later in the year given the uncertain outlook in the Western economies, doubts over the sustainability of Japanese demand and high retail pump prices in the major economies.

It noted that the OPEC reference basket price fell for the second straight month in May to US$108.07 a barrel, representing a decline of US$10.11 or 9.4%, the largest month-to-month loss since December 2008. Futures prices have fallen sharply in recent weeks on account of a massive liquidation of net-long speculative positions, heightened Euro-zone concerns, a weakening economic outlook, and a steady rise in global crude stockpiles.

OPEC held its forecast for the world economy to grow by 3.3% for 2012. It clipped its US growth forecast by 0.1 percentage point to 2.2%, maintained that the Euro-zone economy would shrink by 0.4% and raised its forecast for Japan’s to grow by 2%, up from 1.8% previously.

“China is showing signs of being affected by the global slow-down, but remains unchanged at 8.2% due to expected stimulus measures. India experienced a significant slow-down in the first quarter and 2012 has been revised down to 6.4% from 6.9%,” said OPEC.

The cartel expects world demand for its crude in 2012 to average 29.9 million b/d compared with 30.1 million b/d last year.

PEOPLE: World Coal Association elected Shenhua Group’s Zhang Xiwu as chairman

people world coal association elected shenhua groups zhang xiwu as chairman  200612
(EnergyAsia, June 20 2012, Wednesday) — The World Coal Association, the leading global coal industry body recently appointed Zhang Xiwu, chairman of China’s coal mining giant Shenhua Group, as its new chairman from November 2012.

Dr Zhang, who will replace Fredrick D. Palmer of US coal producer and trade Peabody Energy, will be the first Chinese national to head the association since its founding in 1985. Shenhua Group is both China’s largest coal company and the world’s largest coal supplier.

The association also elected a new executive committee at its recent annual general meeting in Johannesburg in South Africa.

The new team comprises senior executives from Anglo American, BHP Billiton, Caterpillar Global Mining, China Coal, Consol Energy, Joy Global, Peabody Energy, Rio Tinto, Solid Energy and Xstrata as well as Milton Catelin, the association’s chief executive.

Dr Zhang said: “The World Coal Association is the global body representing the world’s leading coal producers. It is a great honour to be asked to chair the WCA at one of the most exciting times in the history of the industry and also of the organisation.

“My wish is to serve my international colleagues in the sector, to broaden the understanding of coal’s strategic role in economic and social development, and to contribute constructively to accelerating environmental and other improvements in the industry. ”

Mr Palmer said: “This is a transformational day for the WCA. Under Dr Zhang’s leadership, the WCA will establish an industry research body in Beijing and develop a new global magazine aimed at providing a platform for the global coal industry. I have no doubt that under Dr Zhang’s leadership, the WCA will continue to serve as the global voice for coal.

“It has been an honour to chair the WCA for the past two years. During this time the coal industry has become stronger and more united, with the WCA engaging in major energy policy debates and advancing the case for coal in sustainable development and combating energy poverty.

“Under the leadership of Dr Zhang and the newly elected executive committee, I believe the WCA has a strong team for the future that reflects the diversity of the global coal industry.”

Milton Catelin, WCA’s chief executive, said:

“Dr Zhang’s election as Chair is highly significant, and comes at an exciting time for WCA. His appointment reflects the growing importance of Asia and China to the coal industry, both in terms of production and consumption.”

Mr Catelin also paid tribute to the outgoing chairman:

“Fred Palmer has demonstrated great leadership and vision during his two years as chairman of WCA, guiding the WCA work programme and interacting with global issues facing the coal industry.

“Fred has been instrumental in engaging with the coal industry in China to strengthen WCA’s international reach and China’s commitment to coal on the global stage.

“Our new leadership team brings the right mix of vision and experience to guide WCA’s new strategic direction and its growth via the WCA Strategic Research Institute.”

The new executive committee includes Norman Mbazima (Anglo American), An Wang (China Coal) and Peter Freyberg (Xstrata) as vice-chairpersons, and regular members Manie Dreyer (BHP Billiton), John Disharoon (Caterpillar), Steve Winberg (Consol), Mike Sutherlin (Joy Global), Fred Palmer (Peabody), Doug Ritchie (Rio Tinto), and Don Elder (Solid Energy).

CHINA: PetroChina plans for storage, refining assets in Americas to expand trading network

(EnergyAsia, June 20 2012, Wednesday) — PetroChina Co Ltd, the country’s largest refiner and crude oil producer, is aiming to make this a “breakthrough” year in the Americas with new fuel storage and refining assets to advance its plan for a global trading network, said chairman Jiang Jiemin.The company is already active in Asia and…

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AUSTRALIA: Minister warns against restricting energy exports to keep domestic prices low

(EnergyAsia, June 20 2012, Wednesday) —Australia’s Resources and Energy Minister Martin Ferguson has flatly rejected calls to restrict energy exports to shield domestic consumers from high oil, gas and coal prices.At a Committee for the Economic Development of Australia (Ceda) forum, he said government intervention would not only fail to ultimately protect domestic consumers but…

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MARKETS: Eurasia on how global LNG supplies will grow after 2015 and regional prices will converge

(EnergyAsia, June 19 2012, Tuesday) — The world will likely obtain additional liquefied natural gas (LNG) supplies from four regional sources after 2015 as well as experience a convergence of regional prices in 2020, predicts consulting group Eurasia. The sources of incremental LNG growth will include new projects in Australia, the US and Canada, East Africa…

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MARKETS: BP notes 2011 as “year of disruption and growth” with world demand up 0.7% despite Brent at record average US$111 a barrel

(EnergyAsia, June 19 2012, Tuesday) — For the energy sector, 2011 was a year of many firsts with supply disruptions, record-high world consumption and oil prices as the main themes, according to the latest edition of the BP Statistical Review of World Energy for 2012.

For the first time in memory, Saudi Arabia with 265.4 billion barrels in the ground lost its top spot as holder of the world’s largest oil reserves as BP finally accepted Venezuela’s claim that it has 296.5 billion barrels.

2011 was anything but a boring year, said Christof Rühl, BP’s chief economist, who presented the data, with a background of its long-term event-shaping events:

“Political unrest and violence caused outages in oil and gas production in parts of the Arab world; the shut-down of Fukushima and earthquake-related reductions in Japanese coal -fired power generation, plus the subsequent closure of additional reactors in Japan and Europe; the first annual average oil price above $100; the first release of strategic petroleum reserves since 2005; the largest increase in OPEC production since 2008; an exceptional swing in European weather; and huge floods in Australia impairing coal production.”

These shocks pushed energy prices higher in much of the world, with oil prices reaching a record average of over US$100 per barrel for the first time in history.

Meanwhile, the long-term trends continue, with global energy consumption growth of 2.5%, near the historical average, and the emerging economies continuing to expand their share of the total. OECD countries’ energy demand actually shrank by around 0.8% last year, while growth of 5.3% was seen in emerging economies.

Dr Rühl said the world coped with last year’s events as a result of “fuel substitution, supply and demand responses, and trading patterns … three major adjustments took place.

“An increase in oil supplies, most notably from Saudi Arabia, together with flexibility in trading and the global refining system, allowed heavier Saudi crudes to replace lighter Libyan oil in Europe; a diversion of natural gas from Europe to Asia allowed the substitution of lost nuclear energy in Japan without harming the energy needs of other economies in the region; and the release of coal from the US, facilitated by the availability of unconventional gas, helped to replace gas in Europe.

“2011 saw big price increases: average annual Brent prices increased by 40%; a simple average of the international coal marker prices increased by 24%, with the biggest increase in Europe and with average annual US coal prices approaching US gas prices. While US gas prices continued their decline following the shale gas revolution, oil indexed gas prices outside the US increased, pulled up by the rising price of crude.”

Global energy consumption grew by 2.5% in 2011, broadly in line with the historical average but well below the 5.1% seen in 2010. Emerging economies accounted for all of the net growth, with OECD demand falling for the third time in the last four years, led by a sharp decline in Japan. China alone accounted for 71% of energy consumption growth.

The averages hide a mixed picture by fuel, however. Oil demand grew by less than 1% – the slowest rate amongst fossil fuels – while gas grew by 2.2%, and coal was the only fossil fuel with above average annual consumption growth at 5.4% globally, and 8.4% in the emerging economies.

Fossil fuels still dominate energy consumption with 87% market share, while renewables rose fastest but are still only 2% of the global total. The fossil fuel mix continues to change with oil, the world’s leading fuel at 33.1% of global energy use, losing share for 12 consecutive years.

Oil consumption reached 88 million b/d after a below average rise of 600,000 b/d or 0.7%.

Brent crude oil prices were on average 40% higher than 2010 and exceeded US$100 a barrel for the first time ever. At $111.26, they were the second highest in inflation adjusted terms, behind only 1864.

Natural gas prices increased broadly in line with oil prices except in North America where prices reached record discounts both to crude oil and to international gas markets.

Natural gas has produced some of the biggest changes in global energy markets over the last few years, said BP.

Firstly, LNG trade has increased rapidly, connecting hitherto segmented regions in an increasingly flexible manner. Secondly, the US has been developing gas from unconventional resources into a relatively abundant resource, said Dr Rühl.

World natural gas consumption grew by 2.2%, below average in all regions except North America where low prices due to the shale gas “revolution” drove robust growth. There was a record decline in EU gas consumption (-9.9%) driven by the weak economy, high prices, warm weather and continued growth in renewable power generation.

Gas production globally grew by 3.1%, with the US, the world’s largest producer, recording 7.7% growth. Output grew rapidly in Qatar (+25.8%), Russia (+3.1%) and Turkmenistan (+40.6%), more than offsetting declines in Libya (-75.6%) and the UK (-20.8%). The EU’s decline in gas production was the highest on record (-11.4%).

Natural gas trades grew modestly by 4%, driven by liquefied natural gas (LNG) growth of 10.1%, with Qatar (+34.8%) taking 87.7% of the LNG increase.

Coal was again the fastest growing fossil fuel with predictable consequences for carbon emissions. It now accounts for 30.3% of global energy consumption, the highest share since 1969. OECD coal consumption declined by 1.1%, although the EU used 3.6% more as natural gas was diverted to Asia. Prices increased in all regions.

“The coal story is one of production and trade patterns able to adjust to market conditions. In this way, coal was buttressing the global supply security,” said Dr Rühl.

Nuclear output fell 4.3%, the largest decline on record driven by Japan (-44.3%) and Germany (-23.2%). Hydro-electric output grew just 1.6%, the weakest growth since 2003.

He said: “Beyond the closure of Japanese and German nuclear plants, the global impact of the Fukushima incident on energy markets has actually been relatively mild.”

Renewable energy sources saw mixed results with global biofuels production stagnating (+0.7% or 10,000 bpd equivalent), the lowest rise seen since 2000. Growth in the US slowed as the share of ethanol in gasoline approaches the ‘blendwall’. Brazilian output was hit (-15.3%) by a poor sugar harvest.

Renewable energy used in power generation rose by an above average 17.7% driven by wind energy (+25.8%) which accounted for more than half of renewable power generation for the first time, with the US and China showing the largest increments. Solar powergen rose 86.3%, though from a low base.

The data suggests that growth in global carbon dioxide emissions from energy use continued in 2011, but at a slower rate than in 2010.

“As we seek to manage short-term disruptions and meet long-term demand, we should remember that open markets can be a powerful ally,” said Bob Dudley, BP group chief executive.

“The good news is we’re seeing a whole range of areas where this process of competition, innovation and growth is generating results. These include shale gas; deepwater oil and gas; heavy oil; and, potentially, advanced biofuels.”

He highlighted the example of the US where the shale gas revolution has meant that natural gas prices declined and reached record discounts to oil. In addition, the production of shale liquids gave the US the largest increase in oil production outside OPEC for the third year in a row.

“The US experience shows how an open and competitive environment drives technological innovation and unlocks resources. I think the message for policy makers is to follow this model and to encourage competition wherever possible,” he said.

JAPAN: TEPCO increases LNG purchase, stake in Chevron’s Australia LNG project

(EnergyAsia, June 19 2012, Tuesday) — Japan’s largest electric utility has agreed to increase its purchase of liquefied natural gas (LNG) and equity stake from the Chevron-led Wheatstone gas project in Western Australia state for an undisclosed amount.

According to the US major, Tokyo Electric Power Company (TEPCO) has signed to purchase an additional 400,000 tons per year (t/y) of LNG, and through a related company, will acquire from Chevron a 10% participating interest in the Wheatstone field licences and an eight percent interest in its natural gas processing facilities.

Building on previous agreements including its share of production from equity holding, the latest deals will increase TEPCO’s total Wheatstone LNG offtake to 4.2 million tons/year. TEPCO had earlier agreed to purchase a total of 3.1 million t/y from Wheatstone’s owners, Chevron, Apache Corp and Kuwait’s Kufpec.

Roy Krzywosinski, managing director of Chevron Australia, said:

“More than 80% of Chevron’s equity LNG from Wheatstone is covered under long-term off-take agreements with customers in Asia. These agreements continue to demonstrate Wheatstone is well-placed geographically to meet the Asia Pacific region’s demand for a safe, reliable and cleaner-burning source of energy.”

With its foundation phase comprising two LNG trains with a combined capacity of 8.9 million t/y and a domestic plant, the US$29-billion Wheatstone project at Ashburton North 12 km west of Onslow is one of Australia’s largest resource projects.

TEPCO and other Japanese utilities and energy companies are stepping up their plans to invest in oil and gas projects abroad to compensate for the loss of the country’s nuclear energy capacity following the earthquake-tsunami tragedy of March 11 2011. Nuclear power used to supply 30% of Japan’s electricity.

 

MARKETS: Platts report OPEC crude oil output rose to 31.75 million b/d in May, highest since Oct 2008

(EnergyAsia, June 19 2012, Tuesday) — Crude oil production from the Organisation of the Petroleum Exporting Countries (OPEC) rose 40,000 b/d to 31.75 million b/d in May, according to a Platts survey of OPEC and oil industry officials and analysts.The May production marks a rise from April’s output level of 31.71 million b/d and is…

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RUSSIA: Rosneft and ExxonMobil to develop tight oil reserves in Western Siberia

(EnergyAsia, June 18 2012, Monday) — Russia’s Rosneft and US major ExxonMobil last week announced they had signed agreements to jointly develop tight oil reserves in Western Siberia and establish a joint Arctic Research Center for Offshore Developments.

The agreements, which support implementation of the companies’ August 2011 long-term strategic cooperation agreement, were signed by Rosneft President Igor Sechin and Stephen M. Greenlee, president of ExxonMobil Exploration Company.

Vladimir Putin, President of the Russian Federation, Rex W. Tillerson, chairman and CEO of Exxon Mobil Corporation, and other top managers of the companies were present at the signing ceremony.

The two companies agreed to expand and expedite joint efforts to develop oil reserves in tight low-permeability formations in Western Siberia using advanced technologies that ExxonMobil has successfully employed in North America.

The agreement establishes a pilot programme to determine the technical feasibility of developing the reserves and is an extension of a technical research programme, which Rosneft and ExxonMobil signed in April 2012.

The two companies will soon approve a work programme for selected Rosneft licence blocks which will include geological studies and drilling of Bazhenov and Achimov reservoirs. Drilling is scheduled to begin in 2013.

ExxonMobil will finance the geological studies and exploratory drilling, and will take up a one-third stake in a potential development phase, with Rosneft the majority two-thirds.

“We are not only looking at new geographical regions of operation but are also studying the potential of difficult to produce reserves in traditional oil producing regions,” said Rosneft President Sechin.

“In Western Siberia, an extremely promising area in this respect is the Yuganskneftegaz Region. Development of these reservoirs will require a combination of state-of-the-art technologies, expertise in developing tight reservoirs, and appropriate fiscal terms, which the government of Russia started preparing this year. This will both help meet the growing need for energy in Russia itself and maintain stability in global markets.”

Mr Tillerson said the Western Siberia area presents a good opportunity for ExxonMobil and Rosneft.

He said: “This agreement combines the strengths of our two companies. ExxonMobil has technology leadership in tight oil and unconventional resource development and Rosneft brings direct knowledge and experience of Western Siberia’s geology and conventional production.”

The other agreement signed will enable ExxonMobil to join the new Arctic Research Center, which will provide a full range of services to support all stages of oil and gas development on the Arctic shelf, including ice monitoring and management, design of ice resistant offshore vessels, structures and Arctic pipelines, logistics and safety.

Safety standards will be a priority for the center, which will have its own special marine incident warning and prevention department focused on preventing and immediately responding to emergencies.

QATAR: QatarGas 1 signs long-term agreement to supply LNG to Tokyo Electric Power Company (TEPCO)

(EnergyAsia, June 18 2012, Monday) — Qatargas Operating Company Limited (Qatargas) said subsidiary Qatar Liquefied Gas Company Limited (Qatargas 1) has secured a new long-term liquefied natural gas (LNG) sales agreement (SPA) with Japan’s largest LNG buyer, Tokyo Electric Power Company Incorporated (TEPCO).

Under the first long-term bilateral agreement between the two companies, Qatargas 1 will deliver one million tonnes per annum (MTA) of LNG starting this year.

Combined with existing contracts, Qatargas will supply a total of approximately two million tonnes of LNG to TEPCO in 2012. This is equivalent to about 5% of Qatargas’ total production capacity).

The latest agreement was signed by Mohammed Bin Saleh Al-Sada, Qatar’s Minister of Energy and Industry and Qatargas chairman, and Takao Arai, TEPCO’s managing director, in Doha.
 
TEPCO is among eight Japanese companies which signed a multi-party contract with the Qatargas 1 venture in 1994.

Qatargas began delivering LNG to Japan and TEPCO in 1997 when its Qatargas 1 plant came onstream.

Qatargas was established in 1984, with shareholders of Qatargas 1 joint venture as Qatar Petroleum, ExxonMobil, Total, Mitsui and Marubeni.

MALAYSIA: Petronas signs long-term agreement to purchase LNG from Norway’s Statoil

(EnergyAsia, June 18 2012, Monday) — Norway’s oil and gas company Statoil said it has secured an agreement to deliver liquefied natural gas (LNG) to Malaysia, making this its first to the Asian market.

Statoil said it will deliver about one billion cubic meters gas under the flexible supply agreement that runs for three-and-half years. The volume will be the equivalent of the consumption of two 400MW gas-fired power plants for nearly one year.
 
The agreement was signed in Kuala Lumpur, Malaysia by Eldar Saetre, Statoil’s executive vice president for manufacturing, marketing and renewable energy, and M Sabarudin M Amin, CEO of Petronas LNG, earlier this month.
 
Statoil will deliver the first cargo in August to the LNG import in Melaka on the Malaysian west coast which is expected to start up next month.
 
Mr Saetre said: “We have had a very good cooperation with Petronas for many years and are very excited to land our first Asian LNG supply agreement with them.”
 
Rune Bjørnson, senior vice president for natural gas, said:

“There is an increased demand for LNG in Asia and we want to position Statoil to take part in that growth.”

Despite being the world’s third most largest LNG exporter, Malaysia expects to become a net importer in coming years as it has been struggling to fully replenish its natural gas reserves in the face of rising domestic demand.

Earlier, Statoil announced its decision to open a LNG trading desk at its office in Singapore on June 1.

 

AUSTRALIA: Shell confirms closure of 79,000 b/d Clyde refinery on Sept 30

(EnergyAsia, June 18 2012, Monday) — Shell Australia has confirmed that it will cease operations at its 79,000 b/d Clyde oil refinery in New South Wales on September 30. This follows an earlier announcement last July that the refinery would be converted into a dedicated fuel terminal.

Shell Australia Downstream Vice President Andrew Smith said:

“The initial decision to close and convert Clyde, taken in July last year, was consistent with Shell’s strategy to focus its refining portfolio on larger assets and to build a profitable downstream business here in Australia. Since the decision was taken, the refinery has continued to struggle against sustained poor industry margins and intense competition from mega-refineries in Asia.

“The announcement of a firm closure date marks a sad day for Clyde and Gore Bay employees. I want to acknowledge their valuable contribution and thank them for the professional way in which they have conducted themselves since the initial announcement last year.

“We will continue to support our staff and help them make the right choices for their future career, whether it’s within the new terminal operation, elsewhere within Shell or outside the company.

“Shell employees are skilled professionals and many will be sought-after in the job market. Already around 30 employees impacted by this decision have found other jobs, including a number who have been redeployed to Shell’s Prelude floating liquefied natural gas project.”

“We have previously operated in terminal mode for an extended period in 2009, demonstrating our ability to ensure the safe and reliable supply of quality fuels to the New South Wales market will continue when refining ceases. Our customers can expect a seamless transition from an operating refinery to an import terminal.”

Built in the early 1920s, Clyde is the longest operating oil refinery in Australia and one of the most complex of the country’s seven refineries.

 

SINGAPORE: Chevron Oronite breaks ground on Jurong Island plant expansion

(EnergyAsia, June 15 2012, Friday) — Chevron Oronite has begun expansion work on its Jurong Island manufacturing plant in Singapore to meet Asia’s fast-growing demand for lubricant additives.
 
At a groundbreaking ceremony last week, the US company said the new investment will increase the plant’s manufacturing, blending and shipping capacities when completed during the first half of 2014.

It declined to reveal the size of the investment and the added capacity to what is already the largest lubricant additives manufacturing plant in Asia. Engineering and design work on the expansion has been underway for over a year.

The 23-hectare site is served by a private jetty to accommodate vessels of up to 40,000 dead-weight tonnage for bulk imports of raw materials as well as export shipments of finished products.

Oronite said its additives help improve the performance of lubricants used in engines, hydraulic systems and drivelines in a variety of applications in cars, heavy-duty trucks, marine vessels, locomotives, tractors, construction equipment and natural gas engines.

Chevron Oronite’s President Ron Kiskis said:
 
“Through the support of the Economic Development Board, the Jurong Town Corporation, and the determined work of our colleagues at the Jurong Island facility, the Oronite leadership team is pleased to begin this expansion as a further sign of our long-term commitment to Singapore and the Asia-Pacific region.

“This is especially important because we have every expectation that the region will continue to experience strong growth for years to come, and we are very committed to supporting our customers’ growth throughout Asia.”

Tan Choon Shian, Deputy Managing Director at the Singapore Economic Development Board (EDB), said:

“Rapid growth in Asia and the automobile sector has led to an increasing demand for chemicals in higher value specialties products, like Oronite’s lubricant additives. A trusted location like Singapore with its strong intellectual property (IP) protection, Jurong Island’s integration model and multiple logistics options, provides a vantage point in Asia from which companies like Oronite can continue to invest and capture opportunities in the region.”

Walt Szopiak, Chevron Oronite’s General Manager (Asia-Pacific Manufacturing & Supply), said:

“The active partnership between Chevron Oronite, Foster Wheeler, and other contractors has prepared us well for the construction phase of the project, with an overarching emphasis on safety and ensuring that the plant continues operating without disruption.”

Apart from the Jurong Island facility, the company also supplies additives to the region through a joint venture manufacturing plant in Chennai, India and a large blending and shipping plant in Omaezaki, Japan, and maintains sales offices in Singapore, Beijing, Tokyo, Seoul and Mumbai.

Headquartered in San Ramon in California, Chevron Oronite Company LLC is an indirect, wholly owned subsidiary of Chevron Corporation.

CHINA: Government to invest 2.5 trillion yuan to upgrade coal industry over current five-year plan

(EnergyAsia, June 15 2012, Friday) — The Chinese government has committed to invest a total of 2.5 trillion yuan to reform and upgrade the coal industry over the course of the current 12th Five-Year Plan from 2011 to 2015. (US$1=6.35 yuan).According to the National Energy Administration, the investment is needed to provide China with a…

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CHINA: Coal output and import continue to surge as Shenhua expands port capacity

(EnergyAsia, June 15 2012, Friday) —  Despite announcing policies and targets to limit the growth of  the coal sector, China can’t seem to shake off its addiction for the world’s most polluting fuel.According to the China Federation of Logistics & Purchasing, the country boosted its coal production by 5.6% to 860 million tons in the…

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INDONESIA: Trade minister criticised energy minister for mooting coal export tax

(EnergyAsia, June 15 2012, Friday) — Indonesia’s trade minister, Gita Wirjawan, has criticised the energy ministry for considering imposing a tax on coal exports. Describing it as an “irrational” idea, he said the tax would deter foreign investments, damage trust in the country’s business environment and would be difficult to implement.Many companies had invested billions of…

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INDONESIA: Confusion reigns over plans to restrict coal export

(EnergyAsia, June 14 2012, Thursday) —  Indonesia has written a Balinese wayang kulit plot for its coal industry, leaving both investors and domestic consumers in deep confusion over export plans and supply availability.After months of well-founded rumours that the government was planning to impose a punitive tax on coal exports, Energy and Mineral Resources Minister…

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MARKETS: Fitch said low coal prices could persist into 2013 and impact supply dynamics

(EnergyAsia, June 14 2012, Thursday) — Fitch Ratings said the recent weakness in thermal coal prices could persist into 2013, noting that the 5,500 kcal FOB Newcastle Australia benchmark grade fell to a two-year low of US$87 per metric ton last week, down from US$142 at the start of the year.It attributed the decline to…

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SINGAPORE: China Aviation Oil reports an increase in its syndicated loan facility to US$145 million

(EnergyAsia, June 14 2012, Thursday) —
China Aviation Oil Singapore Corporation Ltd (CAO) said it has increased its syndicated loan facility to US$145 million with the addition of China Construction Bank Corporation as a mandated lead arranger earlier this week.

Asia’s largest trader and supplier of jet fuel had concluded a US$125 million revolving credit facility with a syndicate of international banks on April 20.

The syndicate’s original mandated lead arrangers include ABN AMRO Bank NV, ANZ Banking Group Limited, Bank of Communications Co Ltd, Crédit Agricole Corporate and Investment Bank and UOB Limited.

CAO said it and its subsidiaries will use the facility for their working capital.

Meng Fanqiu, CAO’s CEO, said:

“We are very pleased that CCB has joined as a mandated lead Arranger of this internationally syndicated loan facility. The increase in the syndicated loan facility will further enhance the operational flexibility of CAO.”

The Singapore-listed company is the largest physical jet fuel trader in the Asia Pacific region and the sole supplier of imported jet fuel to China.

ASIA: WWF says “big investments” needed to preserve region’s dwindling natural capital

(EnergyAsia, June 14 2012, Thursday) — The Asia Pacific region must invest heavily to preserve and defend its natural-resource base and the environment as it becomes more affluent and consume more resources, said the WWF.

In its “Ecological Footprint and Investment in Natural Capital in Asia and the Pacific” report, the non-governmental organisation said the region’s growing affluence is placing enormous pressure on its already heavily taxed forests, rivers and oceans.

The report, which provides a more detailed regional perspective to the recently released Living Planet Report, focuses on attainable methods of preserving key regional ecosystems including the unique forests of Borneo, the marine wealth of the Coral Triangle, the Mekong region’s diverse habitats, as well as the mountainous Eastern Himalayas.

Produced in partnership with the Asian Development Bank (ADB), the regional report uses the Living Planet Index (LPI) to measure changes in the health of ecosystems across the Asia-Pacific region.

WWF said the global index fell by 28% from 1970 and 2008, while the Indo-Pacific region saw a shocking 64% decline in key populations of species over the same period.

“Across the Asia-Pacific region, the gap between human demand for natural resources and the environment’s ability to replenish those resources is widening,” said WWF’s Director General Jim Leape.

“In 2008, the natural resources available per person, in places as diverse as the Eastern Himalayas and Mekong river basin, shrunk by about two thirds compared to 1970. Tragically, the rate of species loss was about twice the global average over this period.”

Jonathan Loh from the Zoological Society of London (ZSL), the organisation that keeps track of the index, said:

“The Indo-Pacific realm has undergone the most rapid economic and demographic transition of any region in the world since 1970.

“Across most of tropical Asia and the Pacific, the population grew from about 1.2 billion to 2.6 billion, which is alone enough to double the pressures placed on the area’s natural resources. Coupled with the dramatic increase in per capita consumption across the entire Asia-Pacific region, it becomes clear that reversing this downward trend needs systemic changes to our economies and the way we produce and consume natural resources.”

Australia, Singapore, Mongolia, South Korea, New Zealand, Japan, Malaysia, Papua New Guinea, Thailand and China round out the top 10 Ecological Footprints per capita in the region.  

Asia-Pacific residents still consume on average close to 60% less than the global average of over one and half planets per person, but major disparities exist. Australia’s per-capita ecological footprint is the highest in the region, about 14 times larger than Timor-Leste.

From a national level, China has the region’s largest footprint on account of its large population. China and India are likely to experience the greatest increase in overall ecological footprint by 2015, representing 37% of the projected global footprint.

The report outlines four solutions to reverse the declining Living Planet Index in four major areas — the Heart of Borneo, the Coral Triangle, the Greater Mekong sub-region and the Eastern Himalayas — that provide millions of people with food, water and energy while hosting a large number of plant and animal species.

Policies that recognise the importance of the environment early on in the planning process is one of the solutions as are well-funded and monitored marine and terrestrial protected areas.

Payment for ecosystem services under programmes such as REDD also play an important role, as do private-sector sustainability initiatives. The report found that many businesses in the region are already showing how sustainably produced commodities including cotton, soy, palm oil, fish and timber bring big gains for people and the environment.

ADB President Haruhiko Kuroda said: “The green economy itself can become an engine of growth and the driver for a new generation of green jobs—bringing a higher quality of life.”

US: EIA expects coal prices to recover in 2013 on improved demand for power generation

(EnergyAsia, June 13 2012, Wednesday) — US coal prices and demand for power generation are expected to recover next year after declining sharply in 2012 on account of its growing substitution by natural gas, said the US Energy Information Administration (EIA).

In its latest monthly forecast, the agency expects US coal demand for power generation to plunge by 12.9% to 808.4 million short tons in 2012, causing its price to fall next year.

But the projected lower price of US$2.25 per million BTU will entice power companies to switch back to using coal in 2013, boosting the fuel’s demand to 812.7 mmst, said the EIA.

US coal use has been in decline in recent years, falling from 975.1 mmst in 2010 to 928.6 mmst last year.

The EIA said low natural gas prices have contributed to a significant increase in the fuel’s use for power generation.

In response to lower demand, domestic coal production will fall by 9% in 2012, said the agency.

Production for the first four months of 2012 was down by 8% to 28 mmst, and is expected to fall further next year, albeit by a slower rate of four percent.

As a result, there will be less to export over the next two years. The EIA is forecasting US coal exports to slip from last year’s 107 mmst to 106 mmst in 2012 and 97 MMst in 2013.  Still, these levels are significantly higher than the average annual exports of 56 mmst in the decade preceding 2011.

Despite the production decline, the EIA is projecting secondary inventories to rise in 2012, with power companies to hold more than 200 mmst in stock.

EIA forecasts for US coal prices, production and demand
                                                                  2010       2011         2012      2013
Prices (US$ per million Btu)
Coal for Power Use                               2.27        2.40          2.34        2.25

Supply in million short tons (mmst)
Production                                              1084.4     1094.3     996.7     960.5
Imports                                                    19.4          13.1         12.9        15.7
Exports                                                    81.7          107.3       106.2      97.4

Consumption in mmst
Power Sector                                         975.1        928.6       808.4      812.7
Other Sectors                                        76.3           74.5         79.1         82.9
Total Consumption                              1051.3      1003.1     887.1      895.6

Inventories in mmst
Power Sector                                         174.9         175.1      201.8      200.9
Total Inventories                                   233.6         226.2       247.5     243.6

CONFERENCE: Global Pacific & Partners to hold 17th Asia Oil Week in Singapore on June 25-27

(EnergyAsia, June 13 2012, Wednesday) — Global Pacific & Partners will hold its landmark 17th Asia Oil Week at the Goodwood Park Hotel in Singapore on June 25 to 27.

This year’s event will focus on new bid rounds in Sri Lanka and Indonesia, opportunities in several countries, shale gas exploration in China and Australia and the outlook for Oil Search’s LNG project in Papua New Guinea, and prospects for the growing number of independent players and state oil companies.

The landmark event for Asia’s oil and gas exploration industry will feature keynote speakers from all over the world and senior executives from the majors, independents, government and state oil companies. There will also be plenty of opportunities for delegates to interface, network and negotiate deals.

The conference starts with the 21st Asia Petroleum Strategy Briefing, the longest running strategy oil briefing in Asia, on June 25. The session will be presented by Duncan Clarke, chairman and CEO of Global Pacific & Partners, and a leading global strategist, speaker and author in the oil and gas industry.

Dr Clarke said: “Asia’s oil and gas game is moving into new territories, with established producer countries and corporate players eyeing new strategies, and re-discovered frontiers across this vast region, from Pakistan to New Zealand.

“Independents have opened new plays and state oil companies have shaped global strategies, while licensing agencies and Ministries seek more exploration dollars.”

The conference will also feature presentations and speeches by senior executives from international companies like Talisman Energy, Premier Oil, Roc Oil, Mubadala Oil & Gas, Japex, Cairn India, KrisEnergy, Oil Search and Petromin PNG Holdings as well as senior officials representing the governments of the Philippines, New Zealand, Timor Leste, Sri Lanka, Indonesia and Bangladesh.