MARKETS: Frost & Sullivan on opportunities for coal-fired power in emerging economies

(EnergyAsia, July 31 2012, Tuesday) — Over the next 25 years, the world will become significantly more dependent on electricity produced from various sources including coal to meet its energy needs.

In a new report, consultant Frost & Sullivan has forecast global electricity generation to grow from 21,224 terawatt hours (TWh) in 2010 to 33,370 TWh in 2030.

Coal’s share in the energy mix of emerging countries will increase as it is one of the most affordable sources of energy with abundant reserves across the world, particularly in the US, Russia, China, Australia and India.

According to its report, “Global Prospects for Coal-Fired Power Generation”, China’s coal-fired capacity will rise from about 945 GW in 2020 to 1,040 GW in 2030, while India’s will increase from 201 GW to 267 GW over the same period. Domestic power demand and capacity shortages will be the key market drivers for both countries.

At the same time, North America and the European Union will remain as key consumers of coal due to large units of capacity decommissioning, which means large MW capacity orders as replacements, said Frost & Sullivan Industry Director Harald Thaler.

“However, the prospects for coal-fired power generation in Europe and North America are looking bleak due to the threat of tougher regulations, uncertainties over future carbon prices and the development of carbon capture and storage (CCS), rising engineering procurement and construction (EPC) costs, and low gas prices,” he said.

These factors deter investors from investing in new plants across North America and the EU.

In Asia, the opposite trend can be observed, with massive investments continuing in new plants with substantial potential for major upgrades to existing plants, some of which are less than a decade old. The coal boom in Asia could continue through the next decade.

Mr Thaler said: “China, India and the rest of Asia are the key focus areas for coal-fired investment in the coming decade. Strong projected electricity demand growth and low production costs make the region attractive for both domestic and global participants.”

Indonesia and Vietnam will also emerge as major countries fuelling demand for coal-fired generation.

Japan and Korea will offer limited prospects while Australia, which is rich in fossil fuel, will experience strong growth. Increasing domestic demand and need to replace ageing capacity will accelerate demand in Russia as well.

However, reliance on gas and oil in the Middle East, on hydroelectric power in South America and poor infrastructure and political stability in Africa will limit the prospects for coal-fired power generation in these regions.

In Europe and North America, activity will predominantly be focused on investment in the existing base. New coal investment will be minimal until the investment climate becomes more certain.

“In general, financing issues for large coal-fired plants are likely to recede as electricity demand across emerging geographies recovers,” said Mr Thaler.

“Order levels for steam plants in Europe will pick up in a few years as capacity needs to be replaced in some countries that are affected by closures mandated by the Large Combustion Plants Directive. Order levels will increase again as the technical and commercial viability of CCS is proved.”

The development of green technologies such as ultra-supercritical technology, CCS, and coal upgrades will contribute to the global demand for coal-fired generation.

MARKETS: Oil prices headed higher on ‘stimulus’ talk, renewed MidEast tensions

(EnergyAsia, July 31 2012, Tuesday) — US WTI crude prices could again exceed US$100 a barrel while Brent looks to reclaim US$110 in the coming weeks as pressure grows on the US and Eurozone governments to inject another round of stimulus into their flagging economies, and military tensions resume in the Middle East.

After slumping to eight-month lows in late June with WTI skidding to around US$77 and Brent to US$90, crude prices have staged a steady recovery. WTI has risen above US$90 and Brent has surged to over US$106 a barrel, with both looking to hold onto recent gains.

With the Western economies sinking into recession again, traders speculate that the US Federal Reserve and the European Central Bank along with the Chinese government are considering new stimulus measures.

Both OPEC and the International Energy Agency continue to forecast global oil demand to register growth of more than 1% this year despite the constant drumbeat of bearish economic news. The forecast for growth is in itself a bullish factor for the oil markets that has kept prices from falling too fast and by any significant amount.

The continuing civil war in Syria with the possibility of hostilities spreading to the rest of the region pitting Iran against the West are providing a firm and powerful support for oil prices.

Oil’s recovery began early in July when Norwegian oil workers went on strike to demand better compensation. Brent surged back above US$100 a barrel during the course of the strike action, and gained strength over the course of July.

RUSSIA: Focus on developing Arctic reserves to arrest decline in nation’s oil and gas reserves

(EnergyAsia, July 31 2012, Tuesday) — Russia will undertake an expensive and challenging venture into its Arctic region to counter the declining production from several of its major oil and gas fields, according to a report by UK-based business intelligence providers GlobalData.

The Russian government has deemed it necessary to tap the Arctic as part of a long-term strategy to boost the country’s hydrocarbon reserves.

Production at Surgutneftegas, one of Russia’s largest oil fields, fell by about 8% to 433 million barrels of oil equivalent (mmboe) last year from 472 mmboe in 2006. The Urals has seen its natural gas output fall by six percent from more than 18.5 billion cubic feet (mmcf) in 2006 to 17.363 billion cubic feet last year.

According to GlobalData, Russia’s 142 oil fields and 35 gas fields produced 7.2 billion barrels of oil equivalent (bboe) in 2009, down from 7.64 bboe in 2006.

Speaking at a media forum of the United Russia Party in September 2011, Natural Resources Minister, Iury Trutnev, said Russia’s Arctic Shelf held enough hydrocarbon resources to meet 100 to 150 years of domestic consumption.

But to exploit these massive reserves, oil and gas firms will have to invest heavily to operate in hazardous conditions and freezing temperatures.

As a strategy to meet the Arctic projects’ high cost and demand for cutting-edge technology, Russia’s state oil companies have partnered with foreign firms that could help liberalise the country’s offshore oil and gas sector. A proposal submitted to Parliament last October calls for the abolition of export duties on offshore oil projects for between five and 15 years. There are also plans to lower related taxes, such as the mineral extraction tax.

In May, Rosneft signed up to work with Norway’s Statoil and Russia’s Lukoil, following through on its April announcement to team up with Italy’s ENI to develop exploration licences in the Black Sea and the Barents Sea.

Rosneft has also made deals with India’s ONGC Videsh Ltd, and China’s CNPC, CNOOC, and Sinopec to begin exploration in Russia’s hydrocarbon rich Arctic region.

MARKETS: EIA slashed forecast for 2012 world oil demand growth to 675,000 b/d

(EnergyAsia, July 31 2012, Tuesday) — Citing the weaker outlook for the world economy, the US Energy Information Administration (EIA) has slashed its forecast for global oil demand growth over the next two years. The agency expects 2012’s growth to come in at 675,000 b/d, down from more than 800,000 b/d in its previous forecast,…

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CHINA: June oil demand down 1.9% for first fall in three years, says Platts

(EnergyAsia, July 30 2012, Monday) — China’s apparent oil demand fell for the first time in three years in June, dropping 1.9% year-on-year to 36.84 million metric tons (mt), or an average 9 million b/d, said US energy media Platts. In an analysis of latest Chinese government data, Platts said the 178,400-b/d fall from June…

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CHINA: Oil companies looking abroad for downstream opportunities

(EnergyAsia, July 30 2012, Monday) — PetroChina’s pursuit of a stake in a proposed refinery in Ecuador shows that Chinese oil companies are looking to expand their downstream as well as upstream presence abroad, said UK consulting firm GlobalData.

While discussions with the Ecuadoran government, PetroEcuador and Petroleos de Venezuela have just started, PetroChina is reported to be a stakeholder in the proposed 300,000 b/d refinery worth some US$12.5 billion.

According to GlobalData, Ecuador is interested to develop the Pacifico refinery at El Aromo, south of Guayaquil, to supply both its domestic needs as well as neighbouring countries and even Asia. This capability is likely what attracted PetroChina to make a play for the potential investment.

“The Chinese oil companies have looked abroad for assets in which to invest over the last decade for many reasons, chief among them as hedges against price controls at home. Chinese oil companies have built, and are continuing to build, sophisticated refining capacity in a bid to cover increasing demand for gasoline, diesel and jet fuel from a rising middle class as the country grows richer,” said GlobalData.

In 2000, China’s total refining capacity was 4.5 million b/d and the country was a net importer of refined products from many of its neighbours. By the end of this year, with new-build refinery construction and capacity additions in place, China’s total refining capacity is expected to be reach just under 10 million b/d.

By 2017, the country could boost its refinery capacity rise to 13.5 million b/d, provided all planned capacity additions are built. By contrast, the US will have 19.1 million b/d of refining capacity by 2017.

PetroChina, and parent Chinese National Petroleum Corporation, have been especially active over the last decade, purchasing a 49% stake in Japan’s Osaka refinery from Nippon Oil in 2009; a 50% stake in Ineos Refining that included plants in Grangemouth (UK) and Lavera (France); a 67% interest in PetroKazakhstan, including its Shymkent refinery; and a 22.76% stake in Singapore Refining Company.
PetroChina is also the majority partner in the Adrar refinery in Algeria.

The company is rumoured to be interested to acquire Valero’s Aruba refinery that was was shut down last April owing to dismal margins.
PetroChina can effectively hedge its results in these markets outside of China as it will be allowed to pass along crude oil price increases to customer through higher refiner product prices.

Sinopec and South Africa’s PetroSA are in preliminary discussions to jointly build a 380,000 b/d refinery in Coega Bay, South Africa. Tentatively scheduled to be complete by 2020, this refinery would process Atlantic Basin crude oils to not only meet South Africa’s fuel needs, but supply into markets in the Atlantic and Indian Oceans.

Sinopec has a 37.5% interest in Saudi Aramco’s 400,000 b/d refinery at Yanbu, which is under construction and slated to start up by 2015. Sinopec became the minority partner in this project after ConocoPhillips pulled out in 2009.

Sinopec is also in talks to buy a 10% stake in Spanish integrated oil company Repsol, although that deal has not closed yet.

Chinese oil product demand has grown steadily since 2004, with gasoline demand peaking in February of this year at 1.9 million b/d, according to International Energy Agency data. In contrast, China’s February 2004 gasoline demand was 1.1 million b/d.

Chinese diesel/gas oil demand likewise peaked at 3.6 million b/d in November 2011, from 1.8 million b/d in January 2004. The country’s kerosene demand hit its peak demand at 357,000 b/d in January 2011, from January 2004’s level of 223,000 b/d.

Most Chinese oil companies have set up trading arms in the major commerce centres of London, New York, Switzerland, Singapore, Dubai and Houston and are actively engaged in trading cargoes, barges and pipeline positions of crude oil and refined products.

By having physical assets in place in key locations around the world along with trading acumen, the Chinese companies are in a much better position to supply the needs of their country’s increasingly energy-hungry population, said GlobalData.

AUSTRALIA: Caltex to convert Sydney refinery to fuel terminal in 2014

(EnergyAsia, July 30 2012, Monday) — Australia will lose a fifth of its 660,000 b/d oil refining capacity when Caltex shuts down its 135,000 b/d plant in Kurnell in Sydney city in the second half of 2014.

Following a review of its domestic refining operations, Caltex said it will invest A$250 million to convert the 57-year-old plant to a fuel import and storage terminal with the loss of 330 jobs but will continue to operate the smaller 109,000 b/d refinery in Lytton in Brisbane. (US$1=A$0.97).

Shell will close its 79,000 b/d Clyde refinery in Sydney by September, leaving Australia with five refineries as the industry is increasingly unable to compete against Asia’s large modern refineries.

Australia’s other remaining four refineries include the ExxonMobil plant at Altona and Shell’s Geelong plant, both in Melbourne, and BP’s plants in Kwinana in Perth and Bulmer Island in Brisbane.

“Caltex’s refineries are relatively small and, in their current configuration, are disadvantaged when compared to the modern, larger scale, more efficient refineries in the Asian region against which we compete,” Caltex CEO and managing director Julian Segal said in a statement.

“This, combined with the challenging business environment including the strength of the Australian dollar, increased operating costs and a lower refiner margin has meant that Caltex’s refineries have been generating significant losses which are expected to continue into the future.”

To make up from the loss of domestic production, the ASX-listed company said it has entered into a long-term agreement to procure gasoline, diesel and jet fuel from 50% shareholder US major Chevron.

In February, Caltex Australia reported a A$714 million net loss for the year to December 31 due largely to losses from its refinery operations.

In response to Caltex’s latest announcement, Energy and Resources Minister Martin Ferguson said Kurnell’s closure will not jeopardise the nation’s energy security as Australia “already imports large amounts of crude oil and finished petroleum products. This decision will see imported supplies of crude oil being replaced by imported refined products.”

Ferguson said Australian plants are small compared to the “mega refineries” in Asia, with the Jamnagar refinery in India having a larger total capacity than Australia’s current six combined.

CHINA: Soft-landing achieved, IMF expects economy to grow by 8% in 2012, 8.5% in 2013

(EnergyAsia, July 30 2012, Monday) — China has successfully engineered a “soft landing” for its red-hot economy to expand by 8% this year and 8.5% next year, said the International Monetary Fund (IMF).

In proclaiming its confidence that the Chinese economy will be able to sustain annual growth of seven to eight percent, the fund said the government must shift its economic model from investment to consumption-led growth.

According to the head of the IMF China team, Markus Rodlauer, the Chinese economy has been slowing for six consecutive quarters due partly to the global environment, and partly to Beijing’s policies to deliberately cool its housing sector and investment-led spending.

The slow-down has resulted in a soft-landing for the Chinese economy, with GDP expanding by a better-than-expected 7.6% in the second quarter of 2012.

China’s influence and impact on other countries have has grown alongside with the size of its economy, now the second largest in the world after the US.

The IMF notes that whatever happens in Chinese today affects both commodity exporters and manufactured goods producers like Germany.

“We find that a very sharp slowdown in investment in China would have a fairly significant impact on growth and exports of goods from countries like Japan, Germany, Chile, and other countries in Asia,” said Mr Rodlauer.

Proclaiming himself an optimist on the Chinese economy, he added that Chinese economic growth at around 7% to 8% a year is sustainable.

“It is also what the government set itself as a goal in its own five-year plan, which was put in place last year. That being said, in order to achieve that pace of growth over the medium term for many more years, China will have to change its growth model,” he said.

“Over the past few years, growth in China has relied very much on high and rising rates of investment. So, investment has been very strong, capacity has been built, infrastructure has been added, but it cannot continue at this rapid pace forever.

“Instead, over the next few years, there needs to be a smooth handover from investment to domestic consumption as the main source of growth in China.”

Noting that savings in China are extremely high compared to international levels, he said its people and companies have room to consume.

While most developing and developed countries tend to spend between 70% and 80% of their incomes, China consumes just half.

“Savings should come down, and people need to spend more on goods for everyday life: consumer goods, furnishing their homes, but also maybe on better health care and other services like travel and insurance. It’s domestic consumption that really will need to provide more of an engine of demand in China going forward,” said Mr Rodlauer.

CHINA: Sinopec to acquire North Sea assets for US$1.5 billion, while CNOOC, CNPC sign deals with Shell

(EnergyAsia, July 30 2012, Monday) — A Sinopec subsidiary has agreed to partner Talisman Energy to develop the Canadian firm’s North Sea assets while two other Chinese state-owned companies, CNOOC and CNPC, have signed upstream agreements with Royal Dutch Shell.

Sinopec International Petroleum Exploration and Production Corp will pay US$1.5 billion to acquire a 49% stake in Aberdeen-based Talisman Energy UK Limited (TEUK) which holds interests in 46 fields, and operates 11 offshore installations and an onshore terminal.

The joint venture plans to invest to improve ongoing operations as well as undertake drilling, exploration opportunities and major projects including extending field life and deferring decommissioning.

TEUK will operate the assets while Sinopec will appoint personnel into key positions within the organisation.

John A. Manzoni, Talisman Energy’s President and CEO, said the deal will enable it to undertake the next phase of development of its UK North Sea assets.

“This will provide additional resources and energy on the ground. Collectively, we will invest more in the UK than Talisman would have on its own, leading to a stronger, more sustainable business.

“Talisman has delivered on two key promises for the year. We are reducing our working interest and capital spend in the UK business by approximately half, allowing us to focus on and fund growth areas within our portfolio. This brings our total divestment proceeds to approximately US$2.5 billion so far this year. We plan to utilise approximately US$500 million of the proceeds from this sale to repurchase shares.”

Separately, Shell said it has signed two offshore production sharing contracts (PSCs) with CNOOC, and an amended PSC with CNPC to develop a new phase of the Changbei gas field in China. Shell has also agreed to admit CNOOC as a partner in two of its exploration blocks off the coast of Gabon in West Africa.

The two offshore oil and gas PSCs with CNOOC are for blocks 62/02 and 62/17 in the Yinggehai Basin.  Shell, as operator, will apply advanced seismic acquisition and processing technologies to conduct 3D seismic data surveys in the Yinggehai blocks.

Shell said it will cover the costs for the acquisition of seismic data and will use advanced drilling technologies to drill exploration wells during the exploration phase. Shell will hold a 100% working interest during the exploration phase that will be reduced to 49% in any eventual development phase, with CNOOC as majority partner.

For Shell, the onshore tight gas PSC amendment with CNPC represents a new phase to develop the existing Changbei block with 1,692.5 sq km in the Ordos Basin and scope for additional tight gas sands reserves.

Subject to government approval and pending the outcome of the appraisal campaign, this additional project could boost Changbei’s current production plateau of 320 mmscf/d.

CNOOC will acquire from Shell a 25% participating interest in the exploration blocks BC9 and BCD10 off the coast of Gabon.

CNOOC will reimburse Shell for 25% of certain past exploration costs and carry part of the future exploration costs. Shell will remain operator with 75% interest. The agreement is subject to government approval.

SHIPS: Wartsila to supply engines for China’s first LNG-powered tugs and Kuwait oil tankers

(EnergyAsia, July 27 2012, Friday) — Wartsila, the Finland-based marine industry’s leading solutions and services provider, said it will be supplying engines for vessels built for the subsidiaries of state-owned China National Offshore Oil Corp (CNOOC) and Kuwait Petroleum Corp (KPC).

Wartsila will supply the main engines for the first liquefied natural gas-fuelled (LNG) two tugs being built for CNOOC Energy Technology & Services Limited (CETS). When delivered in June 2013, the tugs will be the first globally to take advantage of the dual-fuel benefits offered by the Wartsila DF engine technology.

Operating along China’s coastline, the 6,500 bhp tugs will be fuelled from the company’s bunkering terminals.

“The low emission levels made possible by this technology is particularly beneficial for vessels operating close to population centres, as tugs frequently are, while the high fuel efficiency enables lower operating costs,” said Wartsila.

Aaron Bresnahan, Vice President for Wartsila Ship Power Specials, said:

“We are delighted to be co-operating with CNOOC in supplying the main engines for these gas fuelled tugs. It is a landmark project that is very much in line with the marine sector’s key targets of achieving greater sustainability with better fuel efficiency. We endorse CNOOC’s strategic move towards cleaner energy and the use of LNG as a marine fuel, which is in line with Wartsila’s own strategy.”

The company launched its advanced dual-fuel technology in the early 1990s meet demand for land-based power plant applications that led to the first marine installation a decade later.

Engines incorporating this technology can seamlessly switch between using natural gas, light fuel oil (LFO) or heavy fuel oil (HFO) during operation without loss of power or speed.

Wartsila said its dual-fuel engines were first fitted onboard LNG carriers in 2006, setting a trend that has led to 65% of all new LNG vessels using its engines today.

The company said it recently supplied its dual-fuel engine to the 100th LNG carrier.

Separately, Wartsila announced that it has secured a contract to supply main engines for nine ships for Kuwait Oil Tanker Company (KOTC). The fleet includes four Very Large Crude Oil Carriers (VLCCs), one Aframax tanker and four medium-range tankers being built at the Daewoo Shipbuilding & Marine Engineering (DSME) shipyard in South Korea.

The VLCCs will be fitted with 7-cylinder Wartsila RT-flex 82T engines and a waste heat recovery system that will allow for exhaust gas to be used for generating steam. This steam is used to operate a turbo generator that produces electricity for the ship.

Wartsila said the Aframax vessel will be powered by its six-cylinder RT-flex 58T main engine, while the medium-range tankers will be powered by its 7RT-flex50D main engine. The engines will be built by a Hyundai Heavy Industries Co Ltd division, which has been licensed by Wartsila since 1975.

IRAQ: Alstom Grid wins contracts to reinforce Kurdistan’s electricity network

(EnergyAsia, July 27 2012, Friday) — Alstom Grid said it has secured contracts worth €34 million to supply and instal four 132/33/11 kV air-insulated switchgear (AIS) substations and one 132/33/11 kV gas-insulated switchgear (GIS) substation by September 2013 for the Kurdistan Regional Government Ministry of Electricity in Iraq.

The scope of work includes engineering, equipment supply (including substation automation systems) and commissioning supervision for four AIS substations at North Dohuk (9 bays), Zakho 2 (9 bays), Bardarash (10 bays) and Kalakchi (10 bays), one GIS substation at West Dohuk (10 bays), as well as extensions and modifications at Sarsang, Akre Centre and Zakho 1 substations within the Dohuk governorate in Kurdistan.

The contract was awarded by Kar Construction & Engineering Company, a unit of Kar Group, a local and privately owned Iraqi company having diverse interests in turnkey projects, private power plants, oil refineries, oil pipelines and vehicle insurance.

The Kurdistan Ministry of Electricity floated several tenders under “Stage 6” for substations in Erbil, Sulaymania and Dohuk Governorates. These substations are part of the region’s ongoing efforts to keep pace with the rising demand for electricity to facilitate economic development.

The expansion of the transmission and distribution networks in the main city of Dohuk and surrounding suburbs will help increase the availability and the reliability of the region’s electricity networks.

Alstom said this is its first substation project since it successfully implemented similar 132/33/11 KV substations in Erbil and Dohuk for contracts awarded in 2002 under the UN Development Plan for the rebuilding of northern Iraq.

Alstom Grid’s President, Grégoire Poux-Guillaume, said:

“This project represents an important milestone for Alstom Grid as we re-enter Kurdistan’s market with a complete range of products covering both air-insulated and gas-insulated switchgear solutions, critical to the infrastructure of the region’s electricity network. This project underlines our continuing efforts in Iraq, including Mosul 400/132/33kV GIS substation and Khairat & Nainawa GTPP 400/132kV exit substations won last year.”

CHINA: Zhenrong Energy offers to take control of liquidation-threatened oil storage and shipping firm Titan

(EnergyAsia, July 27 2012, Friday) — Chinese state oil firm Guangdong Zhenrong Energy Co has emerged as a white knight for financially-stricken shipping and oil storage firm Titan Petrochemicals Group Ltd which is facing a liquidation suit filed by partner and US private equity firm Warburg Pincus. The subsidiary of Zhuhai Zhenrong Co, one of…

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ASIA: Canada must act quickly to secure energy future with region’s fast-growing economies, says study

(EnergyAsia, July 27 2012, Friday) — Through its guarantee of demand, Asia offers the best opportunity for Canada to overcome its biggest challenge as an energy exporting country, according to a joint report by the Asia Pacific Foundation of Canada and the Canada West Foundation.But Canada must act quickly to develop the political will and…

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SINGAPORE: Afton Chemical to build new manufacturing plant on Jurong Island

(EnergyAsia, July 26 2012, Thursday) — US petroleum additives manufacturer Afton Chemical Corporation said it will invest “in excess of US$100 million” to build a new chemical additive plant on Singapore’s Jurong Island.

Afton Chemical, a member of NYSE-listed NewMarket Corp, said it expects to begin construction in the third quarter of 2013 with the plant ready to start up by mid-2015.

The NewMarket board, which approved the project on July 17, chose Singapore after an extensive analysis which focused on facility readiness and flexibility, market access, economics, safety and logistics.

Afton President Warren Huang said: “This represents an investment that is likely to be in excess of US$100 million. We have established a significant presence through acquisitions and investments.

“The initial capacity will represent a modest increase in our overall global production. The plant will be scalable to allow Afton to grow as demand warrants.

“This strong combination of R&D and manufacturing in the region, will not only improve security of supply and reduce lead-times, but also help us to develop cost-effective, customized solutions for the region. In turn, that will help our customers improve the profitability of their businesses.”

Damian Barnes, the company’s Vice President for Supply, said:

“We’ve intensified our focus on this important region. The new Jurong Island facility will enhance our ability to provide quick and effective service to our Asia-Pacific customers as well as those in India and the Middle East.”

The new plant will add to Afton’s existing regional manufacturing in Suzhou, China and Jurong Island through Chemical Specialties Singapore Pte Ltd. Through its Singapore regional head quarters, the company also manages technical centres in Tsukuba, Japan and Suzhou, China and sales offices in other major cities around Asia.

UAE: New oil terminal exports first cargo amid fears of Strait of Hormuz closure

(EnergyAsia, July 26 2012, Thursday) — The UAE has exported its first crude oil cargo from a new offshore terminal in Fujairah on the Gulf of Oman amid growing fears that Iran might shut down the crucial Strait of Hormuz through which about a third of the world’s oil flows. The cargo was exported to…

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MARKETS: OPEC forecasts world oil demand to reach 88.7 million b/d in 2012 and 89.5 million b/d in 2013

(EnergyAsia, July 26 2012, Thursday) — The Organization of Petroleum Exporting Countries (OPEC) has forecast global oil demand to rise by 900,000 b/d to reach 88.7 million b/d in 2012, and by 800,000 b/d to 89.5 million b/d next year.In its July report, the oil-exporting cartel kept its 2012 world oil demand forecast unchanged from…

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IRAN: NIOC to boost Kharg Island oil storage capacity

(EnergyAsia, July 26 2012, Thursday) — The National Iranian Oil Company (NIOC) will boost its oil storage capacity on Kharg Island by four million barrels over the next few months, according to Fars News.The Iranian news service reported NIOC managing director Ahmad Qalebani urging the project’s contractor to speed up construction of the additional tanks…

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IRAQ: Chevron acquired Kurdistan oil and gas blocks from India’s Reliance

(EnergyAsia, July 25 2012, Wednesday) — US major Chevron Corp said its subsidiaries have acquired interests in two highly prospective blocks in Iraq’s Kurdistan region from Reliance Exploration & Production DMCC, the upstream subsidiary of India’s Reliance Industries Ltd.

The San Ramon, California company said its subsidiaries acquired 80% interest and operatorship of the production sharing contracts (PSCs) covering a combined 1,124-sq km area of the Rovi and Sarta blocks located north of Erbil.

The subsidiaries will partner with the blocks’ existing 20% shareholders, Austria’s OMV Rovi GmbH and OMV Sarta GmbH, in aiming to drill two wells by November 2013.

Chevron becomes the second Western major to secure an upstream deal in Kurdistan after ExxonMobil which signed six exploration licences last November.

Reliance said the sale aligns with its strategy to rationalise its portfolio as it continues to look for opportunities globally.

AZERBAIJAN: Wartsila secures largest order to date to supply 384 MW gas power plant

(EnergyAsia, July 25 2012, Wednesday) — Wartsila, the Finland-based supplier of flexible and efficient power plant solutions, said it has secured its largest order to date with the award of a contract for a 384 MW gas-fired power plant from Azerbaijan.

Azerenerji JSC, the state-owned utility, will own and operate the Boyuk Shor power plant located close to the capital Baku city.

Wartsila said it will deliver and install 21 of its 50SG engines along with related auxiliaries and process equipment for the plant which supply electricity to the Baku regional grid when it starts up in late 2013.

Vesa Riihimäki, Group Vice President for Wartsila Power Plants, said:

“Wartsila’s already strong presence and unmatched track record in Azerbaijan is further enhanced with this important order. Over the years we have developed a good relationship with Azerenerji and have worked closely with the company to develop its electricity supply capacity. We have, at the same time, proven our ability to deliver on a fast-track basis, which was a major reason for us being awarded this contract.”

Present in Azerbaijan since the mid-1990s, Wartsila has supplied seven power plants with a total of 860 MW of power generating capacity to the fast-growing Central Asian country.

Wartsila said its 50SG model is a four-stroke, spark-ignited gas engine operating on the Otto cycle and incorporating the lean-burn principle. It has been designed to use the proven gas technology used in the smaller 34SG engine. An important feature of this engine is its exceptionally high power plant net electrical efficiency rating, measured at more than 50% in combined-cycle mode.

ASIA: LNG pricing competition heats up as ICIS claims first cleared swaps trade, Platts launched new service

(EnergyAsia, July 25 2012, Wednesday) — Asia is making progress in developing a liquefied natural gas (LNG) market with competing energy media ICIS of the UK and McGraw-Hill’s Platts of the US recently achieving pricing landmarks.

According to ICIS, the world’s first cleared LNG swap traded on July 16, with the September contract price at US$13.90 per million BTU (mmBTU) settled against its East Asia Index (EAX) for physical cargoes.

The deal between Germany’s RWE Supply & Trading and an unidentified trader was brokered by Tradition Financial Services through the CME Direct trading platform and was cleared by CME Europe. A swap is generally used to hedge against the price of a commodity by exchanging cash flows that are dependent on a reference-price for the underlying commodity.

Up to this point, there has been a very small over-the-counter swaps market for LNG, with a limited pool of counterparties and no clearing services, said ICIS.

The EAX is an index for ex-ship cargoes delivered into Japan, South Korea, China and Taiwan, with the prices for the four countries assessed separately. The price series, including relevant bids, offers and deals, has been published daily since June 2010.

The deal marked the successful launch of the East Asia Index (ICIS Heren) swap futures contract for open outcry trading by CME’s NYMEX. The Commodity Futures Trading Commission (CFTC)-approved product is to be cleared through CME ClearPort.

Four ICIS Heren LNG swaps, including the East Asia Index swap, were already available for clearing through CME Clear Europe, from April 16.

“ICIS has been supporting trade in natural gas markets for over 18 years, since the first Heren Energy reports were launched. In 2007, we launched the first LNG spot market assessments. Since then, the growing volume of spot trade and market confidence in the ICIS prices have helped lay the foundation for this new era in LNG trade,” said Christopher Flook, ICIS’s managing director.

“Clearing services and more active broking should accelerate liquidity growth in this market,” said Louise Boddy, ICIS’s Head of Gas, Power, Emissions and Coal.

“The entrance of CME and Tradition promises to bring new counterparties and liquidity, helping the swaps to become more effective hedging tools. The ICIS EAX also provides the market with its first really accurate, transparent and reliable price benchmark.”

ICIS, a world leader in providing transparency for physical LNG trade, publishes five regional indices and 21 country-specific assessments for spot LNG delivered into the world’s major LNG import terminals. It also publishes FOB assessments for all major producing regions and FOB reload assessments.

Last month, Platts launched its forward assessments of swaps for Asia-Pacific-delivered LNG, expanding its coverage and suite of price references for the product.

The forward assessments, also known as forward curves, reflect swaps based on Platts’ Japan/Korea Marker (JKM) physical spot price assessment with a standard contract-size of 10,000 MMBtu.

One month, two months and three months forward assessments are now available. The Platts JKM spot price and swaps assessments represent cargoes that are delivered ex-ship to ports in Japan and Korea.

Platts also has launched an additional half-month price assessment for physical spot market LNG delivered to Japan and Korea, thereby extending the forward curve by about 15 days.

“The launch of forward LNG price assessments reflects Platts’ commitment to bringing greater transparency and efficiency to markets by establishing a comprehensive offering of key price references,” said Larry Foster, Platts global editorial director, power.

“The expansion of our price data offerings for both physical LNG cargoes and LNG derivatives in Asia further augments our portfolio of price references for a key price benchmark as the global gas marketplace develops.”

Platts said it launched the world’s first independent daily price assessments of Asia-bound LNG in February 2009 and price assessments for India- and Middle East-delivered LNG and spot charter assessments for LNG vessels in 2010.

Platts said the first LNG swap deal based off of its JKM price assessment for delivered spot cargoes was executed in January 2011 by a prominent global investment bank.

IRAQ: PetroChina-led consortium starts producing oil at Halfaya field

(EnergyAsia, July 25 2012, Wednesday) — An international consortium led by PetroChina has begun producing 100,000 b/d of crude oil at the 16-billion-barrel Halfaya oil field in southern Iraq, said Deputy Prime Minister Hussein al-Shahristani.The subsidiary of China National Petroleum Corp, the country’s largest energy producer, holds a 37.5% stake in the consortium while France’s…

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MARKETS: IEA expects 2013 world demand to rise by one million b/d to reach 90.9 million b/d

(EnergyAsia, July 24 2012, Tuesday) — The International Energy Agency (IEA) has turned bullish on global oil demand in its latest monthly report, forecasting it to rise by one million b/d to 90.9 million b/d in 2013.Significantly, the Paris-based agency expects oil demand from emerging economies to exceed demand in the world’s most industrialised nations…

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SINGAPORE: SKF, Holcim launched sustainable initiatives to help Asian companies reduce environmental footprint and energy savings

(EnergyAsia, July 24 2012, Tuesday) — Two European companies recently launched initiatives in Singapore to help Asian companies reduce their environmental footprints.

Sweden’s SKF, a leading global manufacturer of engineering solutions in bearings, seals, mechatronics, lubrication systems and services, introduced its BeyondZero portfolio while Switzerland’s Holcim unveiled its centre of excellence (CoE) to promote and showcase sustainable and energy-saving solutions for the construction industry.

SKF will share its insights on how businesses can better align with environmental regulations and trends as well as improve productivity and profitability through the launch of a Solution Factory over the next 12 months.

According to SKF, the BeyondZero portfolio is able to help customers measure and work towards energy savings in specific applications. Through the portfolio, the company derived SEK 2.5 billion or US$345 million of sales last year, with plans to raise that to SEK 10 billion by 2016.

Tom Johnstone, SKF President and CEO, said:

“Reducing carbon emissions has become a major priority for governments and industries in Southeast Asia, with increased regulatory requirements, greater awareness of climate change and increasing demand for green growth in the region.”

“As the first industrial engineering company participating in the WWF Climate Savers programme, we see it as our duty to offer our customers in Singapore and the region more innovative, efficient products and services that will help them reduce their carbon footprint.

Doing so will not only support our customers’ sustainability efforts but also the collective efforts of the region in going green,”

David Bishop, Area Director of SKF South East Asia Pacific, said:

“Southeast Asia is a key growth region where a large variety of industries are already using products, solutions and services from our five technology platforms to enhance their efficiency, productivity and competitive edge. With Singapore and Malaysia pledging to reduce their carbon emissions by 2020 and urging businesses to support the cause, we are confident that industries in the region will welcome our BeyondZero portfolio.”

Celebrating its 100th anniversary, Switzerland’s Holcim last month launched its Singapore Centre of Excellence to showcase and promote sustainable solutions for the construction sector in Asia.

The S$500,000 centre, the first in Asia, was launched by Lam Siew Wah, Deputy CEO of Singapore Building and Construction Authority, and attended by Jorg Al. Reding, Switzerland’s Ambassador to Singapore, Goh Chee Kiong, Director of Building & Infrastructure Solutions, and Cleantech at the Singapore Economic Development Board, and business partners. (US$1=S$1.25).

Holcim said the centre will showcase and promote productivity enhancing green solutions and materials technology to contribute to the region’s built environment.

Sujit Ghosh, CEO of Holcim (Singapore), said:

“The importance of sustainable construction in Singapore due to the lack of natural resources affirms our strategy. With the new state-of-the-art development capabilities and the highly innovative workforce therein, we now have the infrastructure to accommodate our existing operations as well as meet the demands for on-going growth. We are firmly committed to Singapore as the ideal platform to efficiently reach our customers and supply chain. With the new office, we are also committed to providing a conducive working environment for our employees.”

Established in 1912, in the village of Holderbank in the Swiss Canton of Aargau, Holderbank and then later as Holcim, the company has grown to become one of the world’s leading construction materials companies with a staff size of 80,000. It now holds majority and minority interests in around 70 countries, supplying cements, aggregates, ready-mix concrete, asphalt and services.

MALAYSIA: Italy’s Versalis SpA signs up to invest in chemical plants in Johor state

(EnergyAsia, July 24 2012, Tuesday) — Malaysian state oil and gas firm Petronas said it has signed a heads of agreement (HOA) with Italy’s Versalis SpA to jointly own, develop, construct and operate elastomer plants in Johor state. The plants will be part of the world-scale facilities to be developed within Petronas’s planned RM60-billion Refinery and Petrochemical Integrated Development (RAPID) complex in Pengerang town.

The proposed joint venture will produce and market synthetic rubbers using Versalis’ technology licence and technical know-how. The agreement was signed by Petronas’s chief operating officer and executive vice president (downstream) Wan Zulkiflee Wan Ariffin, and Versalis’s CEO, Daniele Ferrari.

Versalis will bring into the partnership excellent proven elastomer operation records and wealth of experience and expertise to contribute towards strengthening Petroas and Malaysia’s position as a key downstream petrochemical player in the region.

Milan-based Versalis, formerly known as Polimeri Europa, is a petrochemical company wholly owned and controlled by Italian oil and gas major Eni SpA.

The HOA signed with Versalis is the fourth secured by Petronas for

RAPID after Germany’s BASF, Japan’s Itochu Corp and Thailand’s PTT Global

Chemical Public Company Limited of Thailand agreed to build various high value-added downstream chemicals.

CHINA: CNOOC Ltd to acquire Nexen Inc for US$15.1-billion

(EnergyAsia, July 24 2012, Tuesday) — China’s largest offshore oil company has agreed to purchase Canada’s Nexen Inc for US$15.1-billion in the biggest takeover of a Canadian firm by an Asian company. (US$1=C$1.02).

In an all-cash deal, CNOOC Ltd will pay US$27.50 per share for a 66% premium to Nexen’s 20-day volume-weighted average on the NYSE. The share price of Canada’s 12th largest oil and gas company, which has struggled to grow its recent 213,000 b/d production, closed at US$17.06 last Friday.

The cash pay-out will cover Nexen’s common and preferred shares, as well as its current debt of approximately US$4.3 billion.

Having secured the unanimous approval of the Nexen and CNOOC Limited boards, the proposed deal must clear the approval of regulators and shareholders of both companies if it is achieve completion in the fourth quarter.

CNOOC Ltd said the addition of Nexen will enhances its presence in Canada, Nigeria and the Gulf of Mexico, in particular the UK North Sea where the Canadian firm has built up a significant upstream presence which now faces rising cost as a result of a new tax scheme.

“The acquisition of Nexen expands CNOOC Limited’s overseas businesses and resource base in order to deliver long-term, sustainable growth,” said CNOOC Ltd.

“Nexen will complement CNOOC Limited’s large offshore production footprint in China and extends CNOOC Limited’s global presence with a high-quality asset base in many of the world’s most significant producing regions – including Western Canada, the UK North Sea, the Gulf of Mexico and offshore Nigeria – focused on conventional oil and gas, oil sands and shale gas.

“In addition, Nexen management’s current mandate will be expanded to include all of CNOOC Limited’s North American and Caribbean assets.”

The Chinese firm said it plans to establish Calgary as its North and Central American headquarters to oversee its existing operations in the region including US$8 billion worth of assets. The Calgary office will also retain Nexen’s existing management team and employees.

This will be CNOOC Ltd’s third acquisition in Canada after last November’s C$2.1 billion takeover of OPTI Canada Inc, and an earlier stake in MEG Energy.