World of Oil

First Russian LNG cargo heads to Japan

The first Russian LNG cargo for delivery to Japan has been successfully loaded from the Sakhalin II LNG plant into the Energy Frontier LNG carrier. The Energy Frontier left the Prigorodnoye port in late March for the Sodegaura terminal in Tokyo Bay, with a cargo of some 500 Mcf equivalent of LNG. The LNG was loaded through a 2,600-ft jetty built for year-round export of LNG and oil. Almost all of the 125 million bbl of annual LNG production has already been committed in long-term contracts to supply customers in Japan, Korea and other markets.

BP becomes largest GOM producer

BP America announced on its website that its deepwater Thunder Horse platform was producing about 300,000 boepd in March—up from 200,000 boepd in February. The increase makes BP the largest producer in the Gulf of Mexico, with 400,000 boepd. BP owns 75% of Thunder Horse and ExxonMobil owns the remaining 25%.

Gazprom buys Eni’s Gazprom Neft stake

Gazprom has signed a $4.2 billion agreement to buy back 20% of Gazprom Neft from Italy’s Eni. The price tag corresponds to the price originally paid for the stake by Eni plus interest. The deal was signed by company bosses Paolo Scaroni and Alexei Miller. Following the bankruptcy of Yukos, Eni and Italian utility Enel won an auction for the 20% stake in Gazprom Neft in 2007. Together the companies paid $4.5 billion for the assets.

Shenzi pipeline finished

Enterprise completed work on the Shenzi pipeline in the Gulf of Mexico in early April. “The Shenzi crude oil pipeline adds an important component to our integrated network of offshore assets that will provide our customers with enhanced flexibility to reach the premier oil markets in Texas and Louisiana,” said Michael A. Creel, Enterprise president and CEO. The 83-mi, 20-in. diameter pipeline, with a capacity of 230,000 bopd, connects BHP Billiton-operated Shenzi Field to the Cameron Highway Oil Pipeline and Poseidon Oil Pipeline systems. Shenzi Field is located about 120 mi offshore Louisiana in 4,300 ft of water.

Norway sets limit on offshore territory 

Norway became the first Arctic country to set limits on its northern seabed today, stopping short of the North Pole. Norway’s newly defined continental shelf covers 90,700 sq mi, Foreign Minister Jonas Gahr Stoere said. To the north, the shelf ends 342 mi from the Pole, which is claimed by both Russia and Denmark. “Norway is the first polar nation to complete this work,” Stoere said. Agreement on shelf limits gives states the right to exploit oil and gas on and beneath the seabed. Norway accepted adjustments by the UN Commission on the limits of the Continental Shelf to a submission Oslo made in 2006 and will write the new limits into national law, Stoere said. The Norwegian shelf still has undefined areas in the east and uncertainties over how to define the area around the Arctic archipelago of Svalbard, open to all signatories of a 1920 treaty.

Uganda, Congo increase cooperation agreements 

Uganda and Congo have increased efforts to improve diplomatic ties in a step to better exploit cross-border mineral resources. Yav Juvenile, Congo’s diplomatic attaché to Uganda, said Congo is in the process of upgrading its mission to ambassadorial level and is working closely with the Ugandan Ministry of Energy and Minerals on ways to improve oil exploration and exploitation on its side of the Albertine rift. In March, the presidents of Uganda and Congo agreed to implement the 2007 Ngorduto agreement, which calls for improved political and economic cooperation between the two countries. The agreement was reached after a wave of military conflicts between the countries over border disputes. Congo is close to granting an oil exploration production license to UK-based Tullow Oil, which already operates on the Ugandan side of the border.

US files civil suit against BP over Prudhoe Bay oil spills

The US government filed a civil complaint against BP Alaska alleging that the company violated US clean air and water laws. The suit, filed in US district court in Anchorage by the US Department of Justice on behalf of the Environmental Protection Agency and the Department of Transportation, accuses the company of illegally discharging more than 200,000 gallons of crude from its pipelines in Prudhoe Bay onto the North Slope of Alaska during two major oil spills in the spring and summer of 2006. The complaint also alleges that BP Alaska failed to prepare and implement adequate spill prevention measures required under the Clean Water Act. The government is seeking the highest amount of civil penalties possible by law. The US Justice Department settled criminal charges against BP in late 2007 that stemmed from the Prudhoe Bay pipeline spill. This was part of a wider settlement that also included charges related to a fatal fire in 2005 at the company’s refinery in Texas City, Texas, and propane-market manipulations by BP futures traders in 2004. Under the 2007 settlement, BP paid $20 million in fines and restitution for the Prudhoe Bay spill after pleading guilty to a sole violation of the Clean Water Act. The state of Alaska also filed a lawsuit against BP relating to the 2006 oil spill, but did not specify a proposed fine.

Uruguay modifies offshore license terms

Uruguay’s government modified the bidding terms for its offshore oil and gas licenses. ANCAP, the government oil company acting as adviser in the leasing process, recommended modifications to the process for the 2009 Uruguay leasing round. The changes remove the mandatory requirement for drilling an exploration well during the basic exploratory period for A-classified blocks. Contract guarantee percentages for the first exploration periods have also been modified, and now both A-classified blocks and B-classified blocks have the same guarantee and minimum exploration program requirements. Uruguayan officials believe modifications of the license terms give the country some of the best conditions for investment in oil exploration and exploitation. Uruguay also announced its intention of extending its continental platform from 200 to 350 mi as allowed under the United Nations Convention on the Law of the Sea.

Brazil investigates royalty payments

Brazil’s federal police are investigating alleged irregularities in the payment of royalties from state-run Petrobras to city halls in Rio de Janeiro state. Suspicion is focused in the state’s northern region, which receives royalties from production in the Campos Basin, the biggest oil-producing zone in the country. The investigation began in 2007 after the police discovered royalty payments that appeared to exceed the amounts some cities were intended to receive. According to the investigation, Victor Martins, one of the directors of oil and gas regulator ANP, allegedly used privileged information to acquire contracts with city halls to increase, approve or include oil royalties. According to Brazilian news outlets, Martins is under investigation for taking part in a scheme to arrange the payment of $590 million in royalties to local governments. The deal yielded a $118,000 commission to Martins’ consulting company Analise Consultoria e Desenvolvimento. Martins has denied that  the company has any contracts with any city hall and said he has not managed the company since May 19, 2005, one day before taking his post at ANP. Last year, 87 cities in Rio de Janeiro received a total of $1.5 billion in royalties and special participation payments.

Sibir takes ex-boss and shareholder to court

London-listed Sibir Energy has begun proceedings in the High Court in London against one of its largest shareholders and a former chief executive officer in connection with “unauthorized payments” and share price manipulation that could lead to claims of up to $400 million. The court documents were filed against Shalva Chigirinski, who owns 46.7% of the company, and Henry Cameron, the suspended chief executive. The company, which has an oil production venture with Shell in Siberia, halted trading in its shares on Feb. 19 and launched the internal investigation after claiming Chigirinski’s interests owed the company $325 million. Sibir said the claims will probably reach about $400 million. “The launch of legal proceedings announced today underlines our determination to recover on behalf of our shareholders the funds that were taken from the company,” acting chief executive Stuard Detmer said in the statement. The Financial Services Authority is also involved because AIM-listed Sibir believes the money may have been used to influence the group’s stock price in the two weeks at the end of last October. “A significant number of the transactions in shares between those dates was conducted using money that had been taken from the company,” according to a statement on Sibir’s website.

Australia hands out new offshore permits 

The federal Ministry for Resources and Energy in Australia announced that 13 new offshore petroleum exploration permits were awarded. “The enthusiasm the industry has shown for these petroleum exploration permits highlights the industry’s confidence in Australia’s prospectivity—a total of 43 bids were received for 17 areas included in the first closing round of the 2008 release. This is a spectacular result,” Resources and Energy Minister Martin Ferguson said. The new permits, which lie in commonwealth waters off Western Australia and the territory of the Ashmore and Cartier Islands, will generate $113 million in offshore exploration investment.

Peru signs 13 exploration deals with foreign firms

State-owned Perupetro signed 13 contracts worth $650 million with foreign companies for the exploration and exploitation of hydrocarbons in Peru. “With these 13 contracts we now have in effect a total of 92 oil contracts,” President Alan Garcia said. A consortium made up of Argentine Pluspetrol, India’s Reliance, China’s CNPC and Petroperu will work Block 155 in southern Peru. Block 160 will be handled by Peru’s Consultora de Petroleo S.A. and South Korean Kedcom Co., while Canadian firm Talisman and Colombia’s Ecopetrol were awarded Block 158; both blocks are located in the central jungle area. Spanish firm Cepsa obtained Block 130 in the northern jungle, while Colombia’s Grupo Petrolero Suramericano won Block 156 in the southern mountains. According to the contracts, the companies will execute the perforation of 35 oil wells during the exploration phase. If the companies find hydrocarbons, the average royalties they will pay to the Peruvian government are more than 30% of the value of the oil and gas extracted.

Zambia to offer oil exploration licenses

Zambia will offer exploration licenses later this year after concluding the framework under which foreign companies will be invited, Mines Minister Maxwell Mwale said. Mwale said the government had completed terms after samples taken to European laboratories 2 years ago showed good traces of oil deposits in several parts of the country. “We are going to move this year in terms of oil exploration in Northwestern, Western and Eastern provinces,” Mwale said. Last year, the government said that there were good prospects for oil in areas nearer to Angola and then set up a petroleum committee to demarcate oil blocks under its plans to offer licenses to foreign oil companies following on its earlier enactment of a petroleum law.

Iraqi parliament looks to revoke Shell deal

Iraq’s parliamentary oil and gas committee is seeking to revoke a gas deal signed by the oil ministry and Shell last year. Both the Shell deal and another contract between Iraq and China National Petroleum Corporation (CNPC) were illegal because they had not been approved by Parliament as required under Iraqi law, said Jabir Khalifa Jabir, Iraqi member of Parliament and secretary for the oil and gas committee. “We are going to do everything we can to revoke this deal and to push Shell out,” Jabir said. “Both these deals are illegal because they didn’t go through Parliament. The companies and their lawyers knew the old Iraqi oil law very well.” Any new deals signed in present bidding rounds would also be subject to revocation, Jabir said. The Iraqi oil ministry has said it does not need Parliament’s approval to sign new deals. Jabir said Iraqi law 97 clearly states that new deals must be passed by Parliament. The committee studied the preliminary Shell deal for the past 6 months and all members agreed it was illegal. Shell signed the agreement last September to capture gas that Iraq wastes through burning.

Kazakhstan accuses Eni, Parker of tax evasion

In early April, Kazakhstan accused Italian giant Eni and US oil services player Parker Drilling of tax evasion. Kazakhstan’s financial crimes police said they were investigating Eni and Parker Drilling on suspicion of tax offenses. “A criminal case is being investigated ... against the Netherlands’ Agip Kazakhstan North Caspian BV (an Eni subsidiary) and the US Parker Drilling Company International,” said Murat Zhumanbayev, a spokesman for Kazakhstan’s financial crimes police. He said the companies had evaded taxes for more than $66 million. Parker Drilling has been involved in a tax dispute with Kazakhstan for several years and has denied any wrongdoing.

China and Burma sign pipe deal

According to a brief statement published on the Chinese central government website, China signed a contract with Burma to build an oil and gas pipeline from Kyaukpyu Port on the Bay of Bengal through Burma to southwest China. The 1,242-mi gas and oil pipeline will run through Ruili, Yunnan Province, and Kunming, Guizhou Province, to Chongqing municipality in southwestern China. The line would help China cut out oil cargoes’ long detour through the congested Malacca Strait. Chinese state media have reported that the Yunnan Provincial Development and Reform Commission will begin construction on the pipelines in the first half of 2009 as part of its $10.55 billion worth of energy projects planned for this year.

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