__GAS MATTERS TODAY___Wednesday 08 September 2010______Text Version
UK’s BG gas, the appointed gas distributor for the planned Singapore LNG import terminal on Jurong Island, is seeking to secure sales contracts with refineries and petrochemical plants in the country.
Local refineries and petrochemical plants feed natural gas into their cogeneration units and these markets would be a natural target for Singapore’s LNG imports, said Singapore’s energy regulator, the Energy Market Authority (EMA). Having already secured 1.5 mtpa in LNG sales to power plants in Singapore, BG is still seeking buyers for another 1.5-2 mtpa of LNG.
BG was appointed to handle the terminal’s domestic gas sales after the company won the LNG term supply contract for Singapore in April 2008. Under the 20-year supply contract, BG will deliver up to 3 mtpa of LNG to Singapore from as early as 2012. But the 3.5 mtpa LNG import terminal is only slated to commence operations in the first half of 2013, with an initial capacity of 1 mtpa. The LNG cargoes supplied by BG will be sourced from the company’s portfolio of LNG plants that include Australia, Egypt and Trinidad & Tobago.
The EMA is also in early talks with other LNG producers for additional term supplies, but increased imports are still subject to LNG demand growth in the country. While Singapore is supplied by gas pipeline imports of 6 mtpa from neighbouring Malaysia and Indonesia, the LNG terminal would offer supply security by diversifying gas sources, says the government.
Piling work for the first 188,000 cm storage tank of two is already completed and work on the second storage tank is expected to commence soon, said EMA. Besides taping the domestic market for gas sales, the EMA had said last year that it would also consider using the terminal as a base for LNG spot trading. - SH
“It is not correct to regard our agreements with Azerbaijan as a confrontation with Nabucco,” a Gazprom spokesperson told Gas Matters Today in response to claims that a recent deal to increase gas imports from Baku is intended to undermine gas supplies for the EU-backed pipeline project.
“According to our agreements with [Azerbaijan state oil company] SOCAR in 2011, the volume of purchases will increase to 2 Bcm/year. These volumes are not large enough to change the situation with a resource base of Nabucco fundamentally.”
The aim of the agreement, which was signed last Friday between the Russian energy major and Azerbaijan’s state-owned SOCAR, is only to “to improve the reliability and efficiency of Gazprom’s gas supply for both domestic consumption and for export,” the company said (see Gas Matters Today, September 6).
“Natural Gas of Central [Asia] and Caucasus, including Azerbaijan, which meets the needs of the domestic market in Russia, CIS and far abroad, is an important element in building a common resource base of Gazprom,” the spokesperson added.
Gazprom has previously stated its intention to strengthen its presence in Central Asia and Caucasus, in order to “maintain and increase the share of Russian gas to the traditional European market and to respond to a possible increase in demand adequately.”
Gazprom intends to increase imports still further in 2012. However this agreement, in itself, appears to make little financial sense for the Russian major. It is more expensive for Gazprom to import gas than to produce it domestically, and with energy demand in Europe still flagging there is no need for the company to procure additional supplies immediately.
Azerbaijan is one of the key gas producers in the Caspian region and holds estimated gas reserves of about 30 Tcf. - LE
Gazprom may sell its 51% stake in SeverEnergia to a joint venture (JV) of its oil arm Gazprom Neft and independent Russian gas producer Novatek, a Gazprom Neft spokesperson said on Tuesday.
SeverEnergia is JV between Gazprom,Eni and Enel. Gazprom bought the 51% stake in the JV in 2009 from Eni and Enel for $1.6 billion, leaving the two Italian companies with a total of 49%. SeverEnergia owns gas assets with estimated oil and gas reserves of 5 billion boe in the Yamal Nenets region. It got hold of these assets in 2007 through the acquisition of 100% of Yukos's gas former upstream companies Arcticgas, Urengoil and Neftegaztekhnologiya.
Novatak is eager to snap up some of SeverEnergia’s gas assets as they are located in close proximity to its own assets. A Novatek spokesman confirmed buying interest but declined to reveal details on pricing or timing of a possible deal. However, any divestment of SeverEnergia’s gas assets to Novatek needs to be approved by Gazprom’s management board.
The strategic goal of Novatek is to play an important role in developing the hydrocarbon resources in the Yamal region. Novatek recently spent $10 million to acquire a 100% equity stake in Tambeyneftegas, the holder of the exploration and production license to the Malo-Yamalskoye field. The field is located in the southern part of the Yamal peninsula and contains estimated reserves of 161 Bcm of natural gas and 14.2 Bcm of gas condensate (see Gas Matters Today, July 2).
In 2009, Novatek acquired a 51% equity stake in Yamal LNG, the entity holding the license for exploration and development of the South Tambeyskoye field. Novatek estimates the field’s natural gas reserves stand at around 1.256 Tcm.
Gazprom and Novatek are set to join forces to build a 15-16 mtpa LNG plant on the Yamal Peninsula by 2018, based on the resources of the South Tambeyskoye field. Yamal LNG could enable Novatek to start exporting gas, but the company still needs to be granted permission to export gas, which is currently reserved for Gazprom. – AK
China’s Jiangsu province on the country’s eastern coast plans to increase gas prices to residential users by the end of this year following nation wide price hikes in June.
The provincial government increased the price of gas for automobiles from RMB 3.9/cm (57¢/cm) to RMB 4.3/cm this week and has indicated that residential gas prices will follow soon. Provinces or regions such as Anhui, Chongqing, Hubei, Jiangxi, Sichuan, Shanghai and Zhejiang have already put in place gas price hikes prior to the move by the Jiangsu authorities.
China increased wholesale natural gas prices by 25% on 1 June this year. A decision driven by the need to bring gas prices in line with fuel prices in the country and to encourage domestic production, said the country’s main economic planning body the NDRC. China oil and gas companies have not been able to meet domestic demand with their upstream projects due to rising costs and comparatively low domestic fuel prices.
The price increase brought the average onshore ex-factory price or wellhead price with tax, up by RMB 0.23/cm to RMB 1.155/cm. This hike was expected to have implications on the entire gas supply value chain. Industry expectations were for the higher prices to be eventually passed on by city gas suppliers to consumers. Under Beijing’s gas price reform, producers will be allowed to offer gas at no more or less than 10% of the new base price. In addition, the two-tier gas pricing system based on the status of the gas produced from the category one or two fields was eliminated. But low-income households and taxis will still receive subsidies for compressed natural gas consumption.
Gas demand in Jiangsu has increased significantly in recent years on the back of economic growth driven by government reforms. Chinese state-owned company PetroChina is building an LNG import terminal at Jiangsu to boost pipeline gas supplies. The 3.5mtpa terminal is expected to be completed as early as 2011, said PetroChina. - SH
Oil & gas explorer Ascom announced on Wednesday that it has submitted a request for arbitration to the Arbitration Institute of the Stockholm Chamber of Commerce against the Government of Kazakhstan for the illegal expropriation of Ascom’s investments in Kazakhstan.
Moldova’s Ascom accuses the Kazakh state of conducting a systematic campaign of harassment since 2008, which culminated with the abrupt cancellation of the Subsoil Use Contracts held by Ascom’s local operating companies, KPM and TNG, and the illegal seizure of its Kazakh assets in July 2010. These assets are now being operated by state-owned KazMunaiGas.
“Ascom and our associated companies have worked openly and transparently with the Government of Kazakhstan for over 10 years, investing nearly US$1 billion into our businesses,” Artur Lungu, commercial vice president of Ascom said. “During that time, we have not only provided investment and employment, but have paid more than $500 million in fees and taxes to the Kazakh State. This illegal campaign of harassment followed the coming on stream of peak production in our fields and conveniently after a significant hydrocarbon find.”
“We are determined that we secure appropriate compensation for these illegal actions,” he added. “We also believe that it is appropriate that other stakeholders and major international oil companies, such as ExxonMobil, Royal Dutch Shell, BP, Chevron Corporation, ConocoPhillips and Total, all of which have made significant levels of investment in Kazakhstan, are aware of the illegal treatment and expropriation we have suffered.”
The Karachaganak Petroleum Operating Group - made up of Eni (32.5%), BG Group (32.5%), Chevron (20%) and Russia's LUKOIL (15%) – that operates the Karachaganak oil and gas field in Kazakhstan has already been put under pressure by the Kazakh government to relinquish a stake in its project – the only major operation in which the state does not already own an interest (see Gas Matters Today, August 26).
Kazakhstan has accused the consortium of violating immigration laws and overstating project costs by around $1.3 billion but the consortium denies all wrongdoing (see Gas Matters Today, April 7).
In February 2009 the Kazakh government announced that it would cease to use production sharing agreements (PSAs) although it promised to fulfil its obligations under all existing PSAs which would be exempt from a new oil export duty (see Gas Matters Today, February 21, 2009). That should include the Karachaganak consortium which signed a PSA in 1997 giving it the rights to the field until 2038. But the government has since backtracked and wants more entities currently operating under PSAs to be liable for the oil export duty.
Karachaganak holds an estimated 1.35 Tcm of natural gas and 1.2 billion tonnes of oil and gas condensate. – LE
Suncor Energy announced on Wednesday that it has reached an agreement to sell 12 offshore production and exploration licenses in the UK’s North Sea for £240 million ($371 million) to an affiliate of Dana Petroleum.
Production from the assets to date this year has averaged around16, 000 boe/d. The sale also includes Suncor’s share in the Triton floating production, storage and offloading vessel (FPSO) related to the Guillemot West/North West and Bittern fields. The sale is expected to close in Q4-2010.
As part of its strategic business alignment, Suncor is continuing with plans to divest of a number of non-core assets in order to focus on developing Canada’s Athabasca oil sands. Last month the company sold $358 million worth of natural gas assets from the Wildcat Hills region of Alberta, Canada to Direct Energy, a subsidiary of UK-based Centrica (see Gas Matters Today, August 12). Other announced sales to date include all oil and gas producing assets in the US Rockies, all Trinidad and Tobago assets and all shares in Petro-Canada Netherlands. The North Sea asset sale to Dana brings the total value of the divestures up to $3.3 billion. - LE
China United Coal Bed Methane (CUCBM) has entered into a Gas Sales Agreement (GSA) on behalf of the Liulin gas project - in which Australia-based coal-bed methane player Dart Energy is a stakeholder - with Shaanxi CUCBM, which markets and sells gas for power generation in Shaanxi province, China.
Under the agreement 1.3 Bcf/year of gas will be supplied from the initial Liulin pilot wells over a 15-year period from July 1, 2011 with take-or-pay obligations kicking in exactly one year later.
The agreed gas price is 1.58 RMB per cubic metre (1.38 RMB per cubic metre base price subject to annual escalation and review, plus 0.20 RMB per cubic metre government subsidy), which equates to approximately $6/MMBtu.
Dart currently holds an underlying 17.5% stake in the Liulin gas project after acquiring a 35% interest in Fortune Liulin Gas (FLG) which has a 50% participating interest in the project. The remaining 50% is held by CUCBM. Dart has options to increase its share in FLG to 50% and ultimately to 75%, which would give Dart an underlying interest of up to 37.5% in the project.
The Liulin gas project covers 183 square kilometres and is located 500 km south-west of Beijing within the south-east Ordos Basin. The project currently has certified 3P reserves of 86 Bcf and is designated a State Special Pilot Project, enabling the acceleration of the exploration and development program.
Dart Energy was formed when the international assets of Australian coal-bed methane player Arrow Energy were spun off following the company’s takeover by Shell and PetroChina’s earlier this year. The company still holds some resources in Australia as well as in India, China, Indonesia and Vietnam. – JO’C
Pennsylvania’s department of environmental protection suspects that methane detected in the Susquehanna River and at six private water wells in the area probably came from wells drilled in the Marcellus Shale by Chesapeake Energy.
The agency has issued a notice of violation to Chesapeake and is working with the company to determine the source of the gas.
“Chesapeake Energy has been working at the direction of DEP to determine the source or sources of the stray gas,” John Hanger, secretary of the state environmental department, said in a statement. “Gas migration is a serious, potentially dangerous problem.”
Chesapeake drilled six wells about 3 miles (5km) northwest of the river between December 2009 and March 2010. Company and state regulators are comparing water samples taken from the gas and drinking wells to determine its source. The results are expected within two weeks.
Gas companies drilling the Marcellus Shale in Pennsylvania that consistently violate environmental regulations will no longer be allowed to operate in the state, Hanger said last month (see Gas Matters Today, August 19).
The Pennsylvania Land Trust Association has recorded almost 1,500 violations by drillers in the Marcellus Shale region since 2008, citing 952 of the violations as “most likely to harm the environment” in its latest report.
Chesapeake Appalachia, East Resources and Chief Oil & Gas were the top three offenders, amassing a total of 365 violations between them.
The Marcellus Shale formation is one of several large US shale plays and covers parts of New York, Pennsylvania, West Virginia and Ohio.
New York State has banned new drilling portions of the Marcellus Shale pending a study into the potential impact on water supplies of the hydraulic fracturing process used to produce shale gas. – JO’C
Poland’s PGNiG has asked the country’s regulator URE for permission to increase gas tariffs by 10%, PGNiG’s chief executive Michal Szubski said on Tuesday.
Szubski said there would be “reasons for the tariff to be raised by 10 to 15 percent”, outlining that PGNiG filed an official request to the energy watchdog in July.
State-owned PGNiG this year already received permission to increase tariffs for domestic gas prices by 4.8% and it will charge the increased price starting from October, while yet another price hike is planned for December.
PGNiG claims it needs to raise gas prices for Polish retail customers to align domestic gas prices with what it needs to pay for importing gas from Russia. PGNiG covers more than two-thirds of its gas sale volume by imports from Gazprom under a long-term contract, making prices subject to rising oil prices and a weakening zloty.
PGNiG is close to finalising the long-awaited accord for Gazprom to extend and increase Russian gas supplies to 10.2 Bcm/y until 2037, up from the 8 Bcm/y it currently imports. The contract is currently being examined by the European Commission, which criticizes the lack of third party access to the Polish section of the Yamal pipeline that runs from Russia through Belarus and Poland to Germany. – AK