World of Oil and Gas

Vol. 233 No. 12

Lukoil proposes financing Arctic geological surveys

Russia’s Lukoil has proposed investing $2.7 billion in geological survey work on Russia’s Arctic shelf. The company sent applications to the government at the start of October, expressing readiness to carry out surveys at four license sectors in the Laptev, East Siberian and Chukchi Seas, Intefax reported. Under current legislation, only two state-controlled companies, Rosneft and Gazprom, are allowed to own offshore licenses, although other companies can enter projects as partners with them. Lukoil and other non-state companies have petitioned the government for access to offshore deposits as the government is reworking its shelf development program.

CNPC, Ecopetrol sign three-year joint exploration contract

China National Petroleum Corp., China’s largest energy producer, has signed a three-year contract with Colombian state oil company Ecopetrol for joint exploration and development. The contract enables the two state oil giants to cooperate in the exploration, storage and transportation of conventional and heavy oil in Colombia, onshore and offshore, or a third country. Colombia is the fourth-largest oil producer in South America, after Venezuela, Mexico and Brazil. The country’s final average for oil production during 2012 is expected to be close to 985,000 bpd. Ecopetrol produces over 60% of the country’s crude, and has oil and gas projects in Brazil, Peru and the Gulf of Mexico, CNPC said in the newsletter.

Brazil oil auction piques interest despite hurdles

Brazil’s planned 11th auction of oil and natural gas concessions will likely generate intense interest from across the industry, but the bidding still faces hurdles ahead of the government’s May 2013 deadline. The September announcement by the Mines and Energy Ministry and the National Petroleum Agency, or ANP, that the 11th round would be held in May and followed by the country’s much-anticipated first auction of government-held areas in the subsalt region in November was “very positive,” said Ruaraidh Montgomery, senior analyst at consulting group Wood Mackenzie, in an interview. Oil companies, large and small, will likely jump at the chance to get into Brazil, which has become one of the world’s hottest oil frontiers after the first subsalt discovery was announced in 2007. The auctions, however, still depend on the passage of a bill by Brazil’s Congress over how to share the country’s oil royalties. The bidding round has been held up, as oil-producing states that currently receive the most royalties resist a movement by other states to claim a slice of the royalties pie.

Exxon PNG Gas project balloons to $19 billion

Exxon Mobil said the cost of building a natural gas export facility in Papua New Guinea had ballooned to $19 billion, as the project was impacted by exchange rate movements, local landowner disputes and torrential rain. The project cost would be $3.3 billion higher than the last estimate, Exxon said in a statement. The facility was 70% completed and on track to ship the first cargoes to China, Japan and Taiwan in 2014, it added. Exxon said that the cost overrun would be offset by a higher output capacity of 6.9 MMtpa, up from 6.6 MMtpa, along with a 30% jump in LNG prices since construction began in 2009. In a related development, Chevron said it was reviewing costs at its $44.7-billion Gorgon LNG project in Western Australia state after a 20% gain in the Australian dollar’s value since construction started in 2009. Exxon and Shell are also large investors in Gorgon.

The Indonesian government has approved a plan to expand the Tangguh LNG project, operated by BP. The plan calls for building a third liquefaction train at Tangguh, located in far-eastern West Papua province, at an estimated cost of $12 billion. Approval of the plan is an important step in preparing for the final investment decision for this expansion, which is expected to be taken in 2014. This would potentially enable commissioning operations for the new train to begin in late 2018. “The third train would add liquefaction capacity of 3.8 MMtpa to Tangguh, bringing its total capacity to 11.4 MMtpa,” BP said in a statement. BP and its partners will sell 40% of the LNG produced with the third train to Indonesian buyers, such as state-owned electricity company PT Perusahaan Negara, and the rest to buyers in the Asian Pacific region.

Shell plans to invest more than $20 billion by 2015 to develop LNG and gas-to-liquids production, Chief Executive Peter Voser said. “Strong growth in gas markets is a major opportunity for Shell and our shareholders,” Voser said at an investor meeting. “Integrated gas earnings reached $9 billion over the last year, driven by LNG and gas-to-liquids,” he added. Shell has 22 MMtpa of LNG onstream, and is building 7 MMtpa of new LNG Capacity in Australia. The company is developing plans to add more than 20 MMtpa of further LNG options in Australia, Indonesia and North America.

Five state-controlled Polish companies said that they have extended the deadline to February on a decision about the structure of a potential joint venture for shale gas exploration in Poland. Natural gas utility PGNiG SA; power utilities Polska Grupa Energetyczna, Enea and Tauron Polska Energia; and copper miner KGHM Polska Miedz agreed in July to invest up to $526 million in cooperative work on the Wejherowo concession in northern Poland. They originally expected to decide the details of their cooperation by Dec. 30, 2012. They decided that if they fail to come up with decisions on the JV by Feb. 4, each of them will have the right to pull out. Exploration for shale gas is one of the Polish government’s to priorities. Poland’s shale and conventional gas reserves, combined, could cover 35-65 years of the country’s demand for natural gas, according to the Polish Geological Institute. The country hopes shale gas will reduce its dependence on what it says is expensive natural gas from Russia.

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