World of Oil

Yttergryta gets go-ahead

StatoilHydro received a green light from Norway for the $240 million Yttergryta development, with first gas set to flow next year. Yttergryta, which lies in the Norwegian Sea, will pump about 61.8 billion cubic feet of gas. “Yttergryta will take advantage of existing infrastructure and increase production in the tail-end phase at Aasgard B” platform, the Energy Ministry said in a statement.

Kazakhstan regains MangistauMunaiGaz

Kazakhstan’s government will regain control of producer MangistauMunaiGaz, which was sold to Indonesian company Medco nine years ago. “I am issuing instructions to complete the purchase of no less than 51% of shares in MangistauMunaiGaz by the state,” Kazakh Prime Minister Karim Masimov said.

Algeria and Libya sign PSA

A group led by Sonatrach, Algeria’s state energy giant, signed a production-sharing agreement with Libya’s National Oil Corporation. The deal provides for exploration and production sharing at Block 95/96 in the Ghadames Basin near the Algerian-Libyan border.

Coastal gets Songkhla green light

Thailand has given Coastal Energy permission to develop the offshore Songkhla Field, with first oil set to flow later this year; drilling is expected to begin in August. The Department of Mineral Fuels approved the project, which covers an area of 30 sq mi, including Songkhla Field and surrounding satellite sites. The area is thought to hold proved, probable and possible reserves of about 6.4 million bbl of oil.

NNPC to replace Shell in Ogoni

Nigerian President Umaru Yar’Adua said Nigerian National Petroleum Corporation is taking over Shell’s operations in the southern Ogoni district. Shell has been unable to operate in the district since the mid-1990s, when villagers blamed the oil company for failing to prevent the hanging death of a political leader and barred its workers from the region.

Russia calls for oil exploration halt in Black Sea

Russia demanded that Ukraine halt oil exploration in areas of the Black Sea. Russia’s foreign ministry said in a statement that the activities of Ukrainian energy companies in areas of the sea “are of an illegal nature and must be halted. The areas in question are the subject of a negotiations process between the Russian Federation and Ukraine on the demarcation of the continental shelf and exclusive economic zones in the Black Sea.” The foreign ministry did not say if Russia’s objections applied to US firm Vanco Energy, which was granted a contract by Ukraine to develop an area of about 11,600 sq mi at the northern end of the Black Sea. The area of dispute covers territorial waters around the Kerch Strait, a waterway at the northern end of the Black Sea that separates Ukraine’s Crimea Peninsula from the coast of southern Russia.

Offshore bidding opens in Canada

The Canada-Newfoundland and Labrador Offshore Petroleum Board (CNLOPB) has called for bids on blocks in offshore Atlantic regions known as the Central Ridge/Flemish Pass, Jeanne d’Arc Basin, Sydney Basin and the Western Newfoundland and Labrador offshore region. Bidders for the total of 10 areas, comprising 4.2 million acres, will win exploration rights based on how much work they commit to and how much they commit to spend during the nine-year license period. The minimum a company can bid for a parcel is $980,000, except for the western region, where offers must be more than $250,000. Bidding will close in November, the CNLOPB said.

Gazprom to spend $500 million in Tajikistan

Gazprom announced it will spend $500 million over the next five years in exploration work at four gas fields in Tajikistan. According to a deal signed by Gazprom and the Tajik government, the company will also build a distribution network in the country. “We are interested in making Tajikistan self-sufficient in terms of fuel and energy because it will ease the economic tensions in the country,” Gazprom deputy chief executive Valery Golubev said. The four fields-Rengan, Sargazon, Sarykamysh and West Shaambary-should produce about 70.6 billion cubic feet of gas by 2012; this would meet all the needs of Tajikistan’s domestic market. Golubev added that Gazprom would also engage in the development of Tajikistan’s gas transportation and distribution system.

Egypt to sign no new gas export contracts

Shamil Hamdi, first undersecretary at Egypt’s oil ministry, said the government will sign no new contracts to export natural gas until the end of 2010 or until it thinks that world prices have stabilized. Hamdi told a parliamentary committee that the ban would not affect the share of Egyptian gas due to foreign companies working in the country. The government has already renegotiated the price that France and Spain pay and was in talks on the price of gas to be sold to Israel. “We are suspending new contracts until world prices stabilize and we have a clear picture of the future of the markets,” Hamdi said.

Anadarko restarts production at Independence Hub

Production at Independence Hub in the deepwater Gulf of Mexico has been restarted and is back up to a gross rate of about 900 million cubic feet of gas a day. “The repairs to the Independence Trail export pipeline system and subsequent testing were successful. As a result, we’ve been able to return production to pre-shut-in levels,” Anadarko Chairman and CEO Jim Hackett said. “This is good news for Anadarko, our partners and US consumers as nearly a billion cu ft per day of gas (more than 10% of natural gas production from the Gulf of Mexico) is returning to the market.” On April 8, production was shut in after a leak was discovered on the flex-joint assembly of the Independence Trail pipeline.

Nabucco cost estimate almost doubles

The consortium behind the proposed Nabucco pipeline has revealed that the cost estimate has increased to €7.9 billion from €4.6 billion. The Austria-based consortium-made up of Austria’s OMV, Germany’s RWE, Hungary’s MOL, Turkey’s Botas, Bulgaria’s Bulgargaz and Romania’s Transgaz-said the increased forecast reflected accelerating material and service costs. Reinhard Mitschek, managing director of the consortium, said the previous estimate had been done after a feasibility study in 2005. “Since then, crude oil prices have more than doubled, which consequently has also led to higher prices for all primary energy sources, also prices for steel,” he said. He added that steel companies are capitalizing on increased demand for a large number of big infrastructure projects. The 2,050-mi pipeline will carry 1.1 trillion cu ft of gas per year and is meant to diversify Europe’s gas supply and lessen the region’s dependence on Russian gas. Mitschek said he expects a decision about the pipeline’s construction at the beginning of next year, with construction beginning in 2010.

Petrobras to set up oil services fund

Almir Barbassa, financial director of Brazil’s state-run Petrobras, announced that the company will create a fund to invest in the local oil services industry. Petrobras will partner up with the nation’s largest state-run bank, Banco do Brasil, and the Brazilian Development Bank (BNDES) to create the fund. The fund, which will finance projects to develop Brazil’s massive subsalt oil fields, will start with an initial investment of $61 million, with Petrobras putting up 10% of the total and the two banks the rest, Barbassa said. He added that Petrobras will spend $8 billion to commission the construction of 12 deepwater drillships and platforms to develop the country’s technically difficult subsalt oil fields deep under the ocean floor off Brazil’s coast.

Kazakh prime minister outlines new tax laws

Last month, Kazakhstan introduced an oil export duty, but most large foreign companies working under production-sharing agreements are exempt. The nation also intends to change its tax code later this year. “If the new tax code is approved, starting from Jan. 1, 2009, every subsoil user working in Kazakhstan will have to pay a mineral extraction tax and an export duty unless its contract is ratified by parliament,” Kazakh Prime Minister Karim Masimov said. “According to the new tax code, the taxation of subsoil users will be regulated by the tax code itself in the first place and not by the contracts signed earlier,” Masimov said. He added that the government seeks to make more companies pay the newly introduced oil export duty, but did not elaborate on what companies the government is targeting.

Exxon, Shell hit with $1.91 billion claim from Nigeria

Nigeria is seeking $646.3 million from ExxonMobil and $850 million from Shell under production-sharing contracts for Erha and Bonga Fields, operated by ExxonMobil and Shell, respectively. A federal committee conducted an investigation of the production-sharing contracts for the two fields and discovered shortfalls in payments to the government. The Nigerian National Petroleum Corporation and the government are also seeking $414.6 million from Bonga gas sales and taxes. The two fields account for 20% of the country’s oil production. The government also announced that all future government gas sale agreements should account for natural gas liquids to ensure that the government derives maximum economic benefit from them.

Saudi Aramco to invest $129 billion

Khalid al-Falih, executive vice president of operations of Saudi Aramco, said the company plans to invest $129 billion, with $70 billion to be spent by international and domestic joint ventures while the remaining $59 billion will be spent on projects solely undertaken by Saudi Aramco. The $129 billion expansion is almost $40 billion higher than previous estimates. The new figure includes refinery projects in the US and China, a giant petrochemical plant at Ras Tanura to be built by Dow Chemical, and the second phase of the Saudi-based PetroRabigh petrochemical complex.

BP to back Panama pipeline restart 

BP announced it will back a project by NIC Holding Group to reverse and reactivate a crude oil pipeline in Panama. Under the agreement, NIC unit Petroterminales de Panama (PTP) intends to reverse the 81-mi-long pipeline by 2010. The reversal would allow crude oil from the Atlantic to be pumped to the Pacific side and could shave 30 days off the time it takes to move a crude oil cargo from West Africa to a refinery on the US West Coast, BP said. BP agreed to acquire 5 million bbl of storage from PTP and to ship 65,000 bbl of oil a day on the pipeline for seven years once the reversal is completed.

MMS to receive $1.9 billion from RIK sale

The US Department of the Interior’s Minerals Management Service (MMS) announced that over 16.1 million bbl of Royalty In Kind (RIK) crude oil from federal leases in the Gulf of Mexico have been sold to four companies. The sale is expected to gross a total of $1.9 billion, based on a rate of about $127 per bbl. The winning bidders include ExxonMobil, Chevron Products Company, Sempra Energy Trading and Shell Trading. The contracts involve an aggregation of crude oil royalties taken “in kind,” in the form of oil, rather than cash payments.

Shell to invest $3.1 billion in Malaysia 

Shell plans to invest $3.1 billion in oil and gas operations in Malaysia over the next 10 years, much of it in upstream activities. At a briefing in Kuala Lumpur, Shell Malaysia chairman Datuk Saw Choo Boon said that most of the cash would be used for oil and gas exploration. The investment in Malaysia is part of Shell’s expansion in the Far East. Shell chief executive Jeroen van der Veer said the company plans to invest $27 billion in capital projects worldwide in 2008. Van der Veer said the company is increasing its focusing on operations in the Far East, where it expects growth in Malaysia, China, Indonesia and India. Key projects in the region include the Gemusut-Kakap project in Malaysia, where production is expected to start in 2010.

Nigeria, Total sign $1 billion deal

Total signed a $1 billion deal with Nigeria to help solve the funding shortfalls that have plagued several of their joint venture projects. Under the agreement, Total will loan the money to the Nigerian National Petroleum Corporation (NNPC) to fund its portion of the 2008 upstream operations with Total’s local unit, Elf Petroleum Nigeria Ltd. (EPNL). The funding agreement is the first between Nigeria and any of its joint venture partners. “The funding will be judiciously used to finance major oil and gas upstream development projects in the NNPC/EPNL JV projects,” NNPC group managing director Abubakar Yar’Adua said.

Indonesia awards five exploration contracts

On May 23, Indonesia awarded five oil and gas contracts worth $201.5 million. A consortium between CNOOC and Petronas won the offshore Palung Aru Block in the Arafura Sea. Eni was awarded the West Timor Block in the Timor Sea. Murphy Overseas Ventures Inc. was awarded the contract for South Barito Field on Kalimantan Island. The government plans to put up 46 more oil and gas blocks later this year.

Dana Gas, Emarat complete pipeline

Emirates General Petroleum Corporation (Emarat) and Dana Gas completed the Middle East’s first common-user gas pipeline, located in the emirate of Sharjah. Dana Gas and Emarat, along with the Sharjah Electricity and Water Authority (SEWA), the Federal Electricity and Water Authority of the UAE, and Crescent Natural Gas Company Limited, signed a Memorandum of Understanding in January 2006 for the implementation and use of the pipeline. Dana Gas and Emarat each have a 50% stake in the construction, ownership and operation of the pipeline. In May 2006, phase 1 of the project was completed and began delivering gas to the SEWA power station at Hamriyah. The main pipeline of the Hamriyah joint project is a 48-in. gas pipeline connecting the Sharjah gas hub at Sajaa to the fast-growing industrial area at Hamriyah, and covers a distance of 20 mi, with a capacity of 1 billion cu ft a day. The completion of the pipeline is a milestone in Dana Gas’s UAE projects. The new 48-in. pipeline is ready to receive gas supplies from Sajaa and deliver them to the premises of the three end users at Hamriyah.

Iran considers cross-country pipeline plan

Hossein Noghrehkar Shirazi, an Iranian deputy oil minister, said the nation intends to build a pipeline across its entire territory, connecting its crude oil supply to global markets. The oil pipeline, planned to run from the Caspian Sea to the Persian Gulf, is expected to pump 1 million bbl of oil a day. “The pipeline will link the port of Neka in the country’s north with the port of Jask in southern Iran,” Shirazi said. Seyyed Reza Kasaeizadeh, another Iranian deputy oil minister, said the nation plans to farm into the Nabucco project. “The feasibility study of Iran’s possibilities in this project has almost been concluded,” Kasaeizadeh said. “The Iranian gas pipeline will become a part of the Nabucco project, to supply natural gas to Europe from Iran’s largest Southern Pars gas field” in the Persian Gulf.

Niko receives first PSC in Iraq

A Canadian consortium led by Niko Resources is ready to begin an exploration drive in the Gara Dagh Block in Iraq after signing its first production-sharing contract with the Kurdistan Regional Government. The 327-sq-mi block covers a large portion of an unexplored area with existing oil seeps. Operator Niko and Vast Exploration each have a 27% stake in the consortium, with Groundstar Resources holding 6%. The consortium has a 60% interest in the block, the government has a 20% stake and the remaining 20% will be assigned by the government to a third party within eight months. The consortium is contracted to shoot, process and interpret a minimum of 186 mi of 2D seismic data and to drill one well during the first exploration period.

Eni to invest $3 billion in Congo tar sands

From 2008 to 2011, Eni will invest $3 billion in the Republic of Congo through traditional exploration and production along with initiatives involving unconventional and renewable sources. Eni reached an agreement for the exploration and exploitation of non-conventional oil in tar sands in Tchikatanga and Tchikatanga-Makola. The two areas cover 691 sq mi. Recoverable reserves are estimated at between 2.5 billion bbl unrisked and 500 million bbl risked.

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