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Nuclear shutdown may boost Japanese demand

Japanese oil demand is expected to rise about 4.4 million bbl in August (140,000 bopd) after an earthquake forced the shutdown of a nuclear power station, Nippon Oil Corp. announced July 18. The magnitude 6.8 quake struck central Japan on July 16, knocking over 400 barrels containing low-level radioactive waste at the Tokyo Electric plant, and knocking the lids off 40 of them. Nippon said it may increase processing by 3-4% this month.

Bombed Mexican pipeline flows again

Mexico’s national oil company Pemex said that a key gas pipeline attacked by rebels is now functioning. The 36-in. pipeline from Mexico City to Guadalajara, which feeds industry in four western Mexican states, is delivering gas at the same rates that it did before the attacks, Pemex said in a news release. Service was suspended after several blasts damaged different sections of the pipeline. The pipeline began moving gas again on July 13. A left-wing guerrilla group called EPR claimed responsibility for the explosions and vowed to continue the attacks.

Thai round looks hopeful

Officials in Thailand’s Department of Mineral Fuel (DMF) are optimistic that they will garner good results from the country’s 20th bidding round, for which bids may be submitted until next May. As of mid-July, DMF had received 41 bid submissions from 28 companies, covering 21 onshore and offshore blocks. “We have received overwhelming interest from petroleum companies, thanks to supportive oil prices,” DMF Director-General Krairit Nilkuha told the Dow Jones Newswire. Tracts on offer include 56 blocks onshore and nine offshore, in the Gulf of Thailand.

Hercules acquires Todco 

Houston-based Hercules Offshore completed its acquisition of Todco, making it one of the largest shallow-water service providers in the world. Hercules now owns the world’s largest fleet of both barge drilling rigs (27) and liftboats (65), and the fourth largest jackup fleet (33). In addition, the firm has three submersible rigs, nine land rigs and one platform rig.

ExxonMobil, Chevron execs urge energy efficiency

Executives from two of the world’s largest oil companies called for cuts in US oil usage after the July 18 release of a report warning of an energy crunch by 2030. The report was issued by a committee of the National Petroleum Council chaired by former ExxonMobil Chairman Lee Raymond. Other study group leaders included Chevron CEO David O’Reilly and Schlumberger CEO Andrew Gould. The 476-page study predicts a jump of more than 50% in global energy demand in the next 25 years, just as “accumulating risks” tighten supplies, including rising geopolitical barriers to cheap oil reserves and increasing regulation of CO₂ emissions. Among the measures called for are higher fuel mileage requirements, improved energy efficiency in buildings and homes, opening of areas where drilling has been banned, and the promotion of “unconventional” resources, such as oil shale and tar sands. The NPC report also made the unusual recommendation that the US government regulate greenhouse gases, establishing high-enough costs for releasing CO₂ to encourage companies to sequester it.

Gazprom picks Total for Shtokman

For the past five years, Russia has pondered what to do with the world’s largest offshore gas field, Shtokman. The field has enough reserves (131 Tcf) to supply world gas demand for a year. Earlier, all of the major international oil companies were invited to bid, but they were subsequently denied consideration en masse in October 2006. Conventional wisdom held that Russia would need outside help to develop the challenging field. But the bets were on Norway, largely because of its expertise in developing similar Arctic projects. Unexpectedly, France’s Total got the nod from Russia’s state-controlled Gazprom for development of the giant field. Total will get a 25% stake in the corporation that will develop the field, and a share of the profit. Gazprom will keep at least 51% of the development company and, technically, all of the reserves. There has been speculation that the choice of Total is based, in part, on politics, to partner with European nationals to help promote Moscow’s interests. Gazprom has several joint ventures with companies in the UK, Germany and Italy. And President Vladimir Putin’s displeasure with the US decision to unilaterally place a missile defense system in Eastern Europe might be a factor, as well.

Black Sea pipeline planned to stem EU gas shortage

Russia will soon be linked to Europe by another pipeline system, South Stream, across the Black Sea. Gazprom and Eni recently signed a memorandum of understanding to build the new 900-km gas connection. The agreement sets out how the two entities will work together to make the pipeline a commercial success. The agreement is the first step in a process of economic and technical study to comply with the respective countries’ regulations. The European Union projects a significant gas shortage by 2015, and the new pipeline will help overcome the anticipated energy supply problem and enhance EU energy security. The pipeline will connect Beregovaya, Russia, across the Black Sea to Bulgaria. The Bulgarian landing site will depend on which of two overland routes is chosen.

Santos will turn CBM to LNG

The Gladstone LNG project in Australia’s Queensland state is being proposed by Santos to process up to 4 million metric tons/yr of Liquefied Natural Gas (LNG). The company will build the A$5-7 billion (US$5.7-7.9 billion) processing train and related equipment on Curtis Island in an agreement with the Port of Gladstone Authority. Gas will come from Santos’ coalbed methane, also known as Coal-Seam Gas (CSG), fields in three basins: Queensland, Bowen and Surat. “Constructing and operating major onshore gas installations is a core competency for Santos, and we are already involved in the LNG industry by virtue of our interests in Darwin LNG, the most recent greenfield LNG project constructed in Australia,” said John Ellice-Flint, Santos’ managing director. The new facility will have a single processing train that should be online to export LNG by early 2014.

China prefers Venezuela’s heavy oil to Alberta’s oil sands

Despite press reports to the contrary, China’s largest oil company is not very interested in Canada’s oil sands, said Yiwu Song, vice president of CNPC, who told a Calgary energy conference that his company is shifting its interests from Canada to Venezuela. “Media reports of our (growing) interest in Canadian oil sands is false,” he said. “In fact, it’s just the reverse.” Early this year, CNPC bought exploration rights for 11 oil sands properties, totaling 100 mi2. “The acquisition was a turning point for us, as we realized that oil sands is highly capital-intensive and integrated. You need large IOCs (international oil companies) to handle such projects,” Song said. He went on to outline CNPC’s Canadian exit strategy, saying that CNPC will also seek to exit from its involvement in the Gateway pipeline project, which was to stretch to the Pacific and allow export of up to 400,000 bpd of Alberta oil to China.

Indonesian parliament passes law to cut fossil fuel use

Indonesia’s parliament approved a law striving to cut dependency on fossil fuels and boost the country’s use of renewable energy. The law will establish a National Energy Board responsible for forming an energy policy and monitoring its implementation. A net importer since 2003, Indonesia has had falling crude oil production, due to aging oil fields, while oil-based fuels comprise 52% of the nation’s energy supply. Part of the board’s goal will be to reduce that number to less than 20% by 2025, with renewables accounting for 17% of the national energy mix.

Iraqi parliament will be slow to OK new law

As of press time, it appeared that parliamentary approval of Iraq’s controversial new hydrocarbon law will now be a matter of months, not weeks. This view was expressed by a key member of the Iraqi cabinet in Baghdad, Minister of State for Parliamentary Affairs Safaaeddine al-Safi. He also said that the cabinet of Prime Minister Nouri al-Maliki is still debating an oil revenue distribution law. “Because the parliament is expected to recess from the beginning of August, I wouldn’t expect lawmakers to approve the oil and gas law by the end of this month (July),” al-Safi told local media. In addition, al-Safi said parliament would wait for some of the legislators (the Sunni-led Iraqi Accordance Party and the Shiite Sadr bloc) to end their boycott of that body and re-join the proceedings. Another factor likely to delay parliamentary consideration is that the Kurds in the north of the country are disputing the draft bill.

China signs contract for Turkmen gas

CNPC announced a 30-year deal to buy 30 Bcm (1.06 Tcf) of gas per year from Turkmenistan. The gas will be imported through the planned Central Asia Gas Pipeline. The deal marks a substantial implementation of the general gas agreement signed between China and the resource-rich Central Asian country in April 2006. It is also a great economic boost for the former Soviet state, which has sought to realign itself away from Russia. As part of the two countries’ production agreements, Turkmenistan also agreed to allow CNPC to develop the gas-rich Bagtyyarlyk territory near the Uzbek border. It is the first time the country has allowed a foreign company to develop its gas fields. Turkmen officials estimate the region’s gas reserves at 60 Tcf (1.7 Tcm).

Chesapeake and Anadarko form joint venture

Chesapeake Energy and Anadarko Petroleum will form a joint venture to develop assets in the Deep Haley region of the Delaware basin in West Texas. The venture was dubbed “one of the country’s premier deep gas exploration projects” by Chesapeake CEO Aubrey K. McClendon. Together, the companies plan to explore more than 1 million acres in the area, sharing drilling, completion, production and midstream operations on a 50-50 basis. Chesapeake will pay $310 million and swap a 50% stake in non-producing properties in Loving County, Texas, in exchange for 25% of Anadarko’s existing Deep Haley production, 25% of Anadarko’s leasehold in the central and eastern portion of the area, and 50% of Anadarko’s leasehold in the western portion of the Deep Haley.

South Pars Phase 9 to go onstream

During a contract-signing ceremony with Iranian firm SAF to build two new drilling rigs, the managing director of Pars Oil and Gas Co., Akbar Torkan, said that his firm is working hard to inaugurate Phase 9 of South Pars gas field in the Persian Gulf by winter. In addition, he said that because Iran faces potential gas supply problems in the upcoming winter, local firm Offshore Industries Engineering and Construction has given assurances that it will finish the job on South Pars Phases 9 and 10. Torkan told reporters at the signing ceremony that Phases 6, 7 and 8 will also become operational before the end of the Iranian calendar year (March 20, 2008). Phases 9 and 10 are set to produce 25 MMcmd (more than 880 MMcfd) of gas, plus 1,000 bcpd and other by-products.

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