Meog 2010 annual review


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Meog 2010 annual review

  1. 1. January 2011 MEOG News Analysis Intelligence Published by 2010 Annual Review NewsBase JANUARY 2 NEWS THIS WEEK… Qatar’s good times roll on 2 FEBRUARY 4 Iraq production hopes No going back 4 One of the most watched developments in 2010 MARCH 5 was the rehabilitation of Iraq’s oil infrastructure. Iraq seeking 2010 production hike 5 APRIL 7 Baghdad has set hugely ambitious output goals, but only time will tell if 12 million bpd is realistic.(Page 5) Yemen clings on to oil hopes 7 MAY 10 Finding a resolution to the Kurdistan oil blockade Iran sanctions drive undermined by will be high on the agenda this year. (Page 20) China’s growing energy links 10 JUNE 11 OPEC stalwarts Israel’s gas export hopes grow 11 Saudi Arabia and other major producers will be JULY 13 ready to respond if global demand quickens. Iraq targets natural gas, downstream investment 13 Gulf states have invested heavily to secure oil and AUGUST 14 gas production capacity for the world market.(Page 2, 4, 19) Lebanon oil law paves the way for offshore block awards 14 Emerging Middle East SEPTEMBER 16 Another area to watch will be the emergence of Saudi Arabia targets unconventional gas potential 16 smaller producers in and around the Levant region. OCTOBER 17 Lebanon and Syria are hoping to follow Israel’s Lebanon and Iran commit to joint energy lead in the offshore gas hunt. (Page 14, 11) future 17 NOVEMBER 19 Iran test Saudi Aramco maintains oil production potential 19 The isolation of Iran will further test the region’s DECEMBER 20 political and diplomatic skills. KRG demands Iraq government pass oil Despite sanctions, Tehran is still forging energy law, recognise contracts 20 ties with international and regional allies. (Page 10, 17) For analysis and commentary on these and other stories, plus the latest oil and gas developments, see inside… Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  2. 2. MEOG 2010 Annual Review page 2 JANUARY Qatar’s good times roll on It is shaping up to be a big year for Qatar, with the final completion of its massive LNG expansion project By Kevin Godier Annual LNG production capacity is expected to reach 77 million tonnes by September The rise in production is being targeted at high-growth markets such as China and India ExxonMobil and Qatar Petroleum have unveiled plans for US$6 billion petrochemicals scheme Ongoing additions to liquefied natural LNG milestone up the seventh and final train in its gas (LNG) production and other energy- When the remaining three trains come capacity expansion plan in 2010. In related infrastructure in Qatar are online later this year, Qatar’s LNG October 2009, Qatar inaugurated the underpinning the Gulf emirate’s exports will peak at 77 million tonnes of RasGas Train 6, another mega-train, maintenance of its phenomenal economic the fuel annually, outstripping other LNG coinciding with the tenth anniversary of growth, which has made it the world’s producing countries by a country mile. the company’s LNG production richest nation measured by per capita And there is no shortage of buyers commencing. income. either, as the US and in particular Asia’s This year will mark an especially emerging economies are lining up for the Export markets important milestone for Qatar’s gas- Qatari gas, which has enabled the tiny Although between 25% and 30% of driven economy, as all its LNG country to outperform Saudi Arabia and Qatargas’ LNG output is earmarked for production trains will be completed and other key players in the world’s top oil- shipment to the US, Suwaidi said: “China ready for operation, after over a decade producing region. and India are the main markets for the of planning and execution by the state- The QP-run Qatargas, which now next few years,” adding: “they have huge controlled Qatar Petroleum (QP) that has pumps 25.6 million tonnes of LNG needs.” positioned Qatar to capitalise on world annually, started up its Trains 4 and 5, Qatargas opened an office in China in demand for gas that is expected to double which together are called Qatargas2, in November after starting exports in over the coming decades. 2009. October, and already has contracts to After a massive 16.4% GDP expansion These are already producing at 100% supply 5 million tonnes a year to the in 2008, the world’s largest natural gas capacity, have shipped about 64 cargoes country, according to recent remarks by exporter officially grew by a further 11% since starting and are both being operated Energy Minister and Deputy Prime in 2009, when the production and sale of in partnership with ExxonMobil. Minister Abdullah bin Hamad al-Attiyah. LNG accounted for 30% of the country’s Qatargas has its Trains 6 and 7 primed Qatar is negotiating to supply an GDP. for start-up in June and September 2010, additional 7 million tonnes a year to Four new LNG trains came onstream, the company’s chief executive Faisal China, and has started talks on shipments doubling production capacity to some 54 Suwaidi told reporters at a news to India – where RasGas already supplies million tonnes a year. With three more conference on January 12. Train 6, also 7.5 million tonnes annually – under a huge trains due to be commissioned in known as Qatargas3, is a venture with new long-term contract, al-Attiyah noted. 2010, GDP growth this year is expected ConocoPhillips, while Train 7, or Pakistan is also seeking LNG supply to rise a further 12.5% in real terms, Qatargas4, is a collaboration with Shell. from Qatargas 4, al-Attiyah said. according to a recent Reuters poll. Oil “Hopefully, we’ll start commissioning Qatar has also cemented LNG-based Minister Abdullah Attiyah confirmed this Train 6 in June and, hopefully, we’ll start co-operation with other countries through week all of these new LNG units would commissioning Train 7 by September,” the building of a gas carrier fleet, and be onstream by September. Suwaidi said, adding: “probably we constructing the infrastructure for LNG Currently, 11 of Qatar’s 14 LNG trains won’t have any shutdowns this year.” gas receiving terminals. In 2009, two are in operation, including three of the Qatar’s other LNG producer, the Ras major overseas projects received first six planned mega-LNG trains with a Laffan Liquefied Natural Gas Company, Qatari gas – South Hook LNG capacity of 7.8 million tonnes a year, better known as RasGas, produces 28.5 regasification terminal in the UK and which are the world’s largest. million tonnes per year of the fuel. It said Adriatic LNG terminal in Italy. in December that it was also due to start Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  3. 3. MEOG 2010 Annual Review page 3 JANUARY A joint venture amongst QP, ExxonMobil and Total, the South Hook LNG terminal has a regasification capacity of 15.6 million tonnes a year, and will receive gas straight from the Qatargas 2 project. The Adriatic LNG Terminal is the first offshore gravity-based structure in the world for unloading, storage and regasification of LNG, and once at full operational capacity can deliver 6 million tonnes of LNG a year to meet about 10% of Italy’s current natural gas requirements. Non-LNG sectors Outside its LNG sector, Qatar’s goal is to maintain its recently attained capacity of 1 million bpd of oil production in the country’s Minister of State for Energy, steam cracker, two 650,000 tonne medium term. said in November. polyethylene plants and a 700,000 tonne Although production has grown To mirror rising natural gas and LPG ethylene glycol plant. steadily since 2002, Qatar’s fields are output, Qatar is also investing billions of “This is a world-scale project with a maturing, and enhanced oil recovery dollars in new petrochemical ventures cost, we assume, of almost US$6 (EOR) techniques are being considered through QP, Qapco and their joint billion,” al-Attiyah said. to offset anticipated declines for several ventures. The proposed plant represents the fields. By 2012, Qatar will produce some 16 biggest single energy investment in Qatar Through a production-sharing different types of petrochemical products since Shell announced plans to build its agreement with Maersk Oil, QP aims to such as polyethylene, polypropylene, Pearl gas-to-liquids (GTL) plant in July increase the capacity of its largest al- styrene, polystyrene, aromatics and vinyl 2006, a project expected to cost US$19 Shaheen offshore oilfield, located in products. By that time Qatar’s total billion when finished at the end of 2010. Block 5, to more than 500,000 bpd from annual petrochemical production will The GTL scheme at Ras Laffan will 340,000 bpd currently. exceed 28 million tonnes. produce about 140,000 bpd of GTL The expansion at the Qatargas and products as well as 120,000 bpd of RasGas LNG facilities will also help ExxonMobil again condensate, LPG and ethane from two Qatar become a major producer and A highlight in this respect is a huge trains. exporter of liquefied petroleum gas project recently agreed by ExxonMobil Qatar already operates Oryx GTL at (LPG). and QP, which will produce chemicals Ras Laffan, producing 34,000 bpd of Qatar’s annual LPG production is for export to Asia. specialty products, including clean expected to reach 12 million tonnes The plant is scheduled be completed in transportation fuels. within two years from the current 8 2015, the companies said on January 13, million tonnes, Mohammed al-Sada, the and will have a 1.6 million tonne per year Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  4. 4. MEOG 2010 Annual Review page 4 FEBRUARY No going back Kuwait wants to make up for lost time, a senior Kuwait Petroleum Corporation official has told MEOG, but potential investors may still take some convincing By Ashok Dutta Kuwait Oil Company is lining up an US$87 billion upstream investment plan Kuwait is still on course to raise oil production capacity to 4 million bpd by 2020 Shell has agreed a five-year technical service contract to exploit pure gas reservoirs After recent disappointments, Kuwait is “Politicisation of the energy sector by company (IOC) to have failed to sign an moving to boost its flagging oil and gas MPs [members of Parliament] has ETSA. The two others were the UK’s BP industry. negatively impacted the Oil Ministry for and Total of France. The National Assembly (Parliament) several years and they have not spared recently approved a US$107 billion four- any efforts to grill the [Oil] Minister even Moving forward year economic development strategy to on issues of little significance,” said But that is all in the past, Kuwaiti spearhead the rejuvenation of the sector. Shailesh Dash, a Kuwait City-based officials state publicly. Also under consideration is an independent financial analyst. “We are keen on moving ahead and investment plan drawn up by upstream “This resulted in the cancellation and need the necessary manpower and operator Kuwait Oil Company (KOC) to delays of a number of strategic projects technical expertise to put certain projects spend US$87 billion over the medium and did not do any good. In the past two back on track,” al-Attar said. term, up from an earlier planned outlay years, we have seen KPC being He added: “Our plans are ambitious of US$55 billion. entangled in semi-legal matters with and include reaching a production At the executive level, after several international contractors and oil capacity of 4 million bpd by 2020, months of delay, the Emir Sheikh Sabah companies.” expanding our refining and al-Ahmed al-Jaber al-Sabah has petrochemical capacity, upgrading the oil announced the constitution of a new export facilities and modernising the fleet Supreme Petroleum Council (SPC), the KOC’s highest increase in of tankers.” highest decision-making body in production will come from He said that in line with tighter product Kuwait’s energy sector. specifications being imposed by the US It appears that change could be in the the heavy oil sector and Europe, KPC will invest US$15 air and, and in late January, while billion by 2013 to improve and upgrade His allusion was to the cancellation of addressing a Houston industry its refineries. the 615,000 barrel per day (bpd) al-Zour conference, the local head of the Kuwait “We will be producing better quality refinery project and a mega Petroleum Corporation’s (KPC’s) US diesel and petrol. Also, we will produce petrochemicals joint venture planned to office, Abdulaziz al-Attar, said his 225,000 bpd of fuel oil with less than 1% be set up in partnership with Dow country was at a crossroads. sulphur for supplying to power stations. Chemical of the US. “We are not looking back any more,” This will considerably reduce harmful The end result was Kuwait awarding he said on the sidelines of the emissions.” compensation money to some conference. “We admit there were certain disappointed – and slightly miffed – issues to be dealt with, but our aim now Upstream growth contractors, mainly from Japan. The Dow is to continue to be a reliable source of He added that along with the refineries, saga still trundles on. energy and respond more proactively to work was also progressing on the Alas, the story does not end there. oil market dynamics, opportunities and upstream oil sector to add 200,000 bpd of Last July, Chevron wound up its challenges.” new capacity at the giant Burgan field by Kuwait office after failing to reach a deal mid-2010. with KPC on an enhanced technical Doubts persist “Our target is to reach a capacity of 1.7 services agreement (ETSA) – an Given the past history of the National million bpd from Burgan. Next, through upstream initiative to assist KOC with Assembly and its constant bickering with a series of gas-lift programmes, KOC new technology and field development the Oil Ministry, credibility has probably will hike output from Rawdhatain and methods. been at stake in Kuwait. Sabriyah by 100,000 bpd over the next Chevron was the third international oil two years,” al-Attar said. Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  5. 5. MEOG 2010 Annual Review page 5 FEBRUARY However, KOC’s highest increase in million cmpd. We aim to produce an globe, including sour and tight gas.” production will come from the heavy oil additional 28 million cmpd of non- sector, where it plans to produce 900,000 associated gas from the northern fields, Doubts remain bpd by 2020 compared to 75,000 bpd at but there will still be a huge deficit,” al- With proven natural gas reserves of present. Attar said. about 2 trillion cubic metres, Kuwait Nearly 90% of that will be sourced seems to have taken a step in the right from the Lower Fares structure, where in Shell deal direction. October 2007 KOC signed an agreement There are plans to step up gas exploration But analysts remain wary. “Some signs with the US’ ExxonMobil. The acreage is and production (E&P) activity. As part of of a change are probably in the offing,” located close to the border with Iraq. that initiative, in mid-February, Shell put said Kuwait-based analyst Dash. “We have certain outstanding issues in pen to paper with KPC on an ETSA to “The Shell agreement has opened the that deal [with ExxonMobil] and they are develop the Jurassic gas fields in the doors for others to follow. But, KOC has being worked out,” al-Attar added. north. to sign ETSAs for its oil sector. New gas “This project is both complicated and supplies will cater to growing domestic Gas strategy challenging, owing to unconventional industrial and consumer demand. Work is also underway in the natural gas geological formations, difficult reservoir However, the big story in Kuwait is oil.” sector, where KOC’s performance has conditions and complex gas At present, as the world’s fourth been dismal. In fact, last year Kuwait compositions,” said Malcolm Brinded, largest crude oil producer, Kuwait has a temporarily halted fertiliser production to Shell’s executive director of upstream production capacity of just over 3 million cope with power generation demand, all international. bpd and its year-on-year earnings at end- because of a lack of local gas supply. “The development of non-associated March are estimated to be US$58 billion. With a current gas output of 28 million gas is a key strategic project on which Keeping the oil flowing, and even cubic metres per day (cmpd) – most of KOC depends to meet a significant part growing capacity, remains the primary which is associated gas from crude oil of Kuwait’s need for clean energy. We challenge for Kuwait, though at the same production – it only meets 40% of the will bring to bear our experience which time it must keep a close on eye on its Gulf state’s total demand. we have gained developing the most gas supply. “By 2020 demand will reach 142 challenging gas resources around the MARCH Iraq seeking 2010 production hike Iraq hopes to see production rise by 250,000 bpd this year, as investors get their teeth into some of the country’s big field redevelopment projects By Kevin Godier Most of the contracts arising out of the first and second licensing rounds have now been finalised Rumaila will drive 2010 growth, with more oil also expected from West Qurna Phase 1, Zubair and Majnoon Iraq will develop the Nassiriyah field on its own after talks with a group of Japanese investors failed Iraq is set to take a small but crucial step 250,000 bpd by year-end, according to oilfields have been compounded by the this year on its so-far faltering path to the head of the South Oil Company effects of the widespread violence and exponentially increased oil production. (SOC), Iraq’s largest oil firm. sabotage to hydrocarbons infrastructure As oil deals recently signed with Although it sits on the world’s third in the wake of the 2003 US-led invasion, international oil companies (IOCS) to largest proven reserves of crude oil, Iraq which has seen Iraq unable to reach even develop giant Iraqi oilfields become only produces about 2.5 million bpd, of its pre-war output levels. effective throughout 2010, the country’s which some 1.9 million bpd are exported. crude output could rise by more than Untold years of neglect of its key Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  6. 6. MEOG 2010 Annual Review page 6 MARCH Oil deals However, the government has over the past nine months struck a series of 10 or so deals with foreign oil companies to develop its vast oilfields in a bid to boost production capacity to a massive 12 million bpd within six to seven years, rivalling top producer Saudi Arabia. Potential barriers still threaten these deals, including a looming March 7 parliamentary election that could usher in a new government inclined to try to renegotiate some of the contracts. But, politics notwithstanding, the signs are that five fields will push ahead this year, the biggest being the super-giant Rumaila oilfield, where BP and China National Petroleum Corporation (CNPC) intend to increase production in 2010 by between 10% and 15% from the current 1.06 million barrels a day, SOC’s Dhaa Jaafar told Dow Jones Newswires on February 25. The Rumaila deal, which emerged from Iraq’s June 2009 licensing round, West Qurna Phase One has reserves of became effective in December. Rumaila targets 8.7 billion barrels but found no bidders in Jaafar added that the contracts for three The BP/CNPC/SOC alliance was the first auction. other fields run by SOC within the Basra selected in November 2009 to However, a subsequent competition governorate that were also signed rehabilitate the Rumaila field under a behind closed doors led to a deal with recently with IOCs – West Qurna Phase US$15 billion, 20-year development ExxonMobil and Shell, which signed the 1, Zubair and Majnoon – could add a contract that marked the first major post- final contract on January 25. further 100,000 bpd of production at the US invasion oil deal. The development contract became end of the year. All became effective this It has committed to almost triple effective on February 12, under which month. output to 2.85 million bpd in six to seven the consortium aims to boost output to Moreover, SOC plans to go it alone and years, taking a fee of US$2 a barrel for 2.3 million bpd from 244,000 bpd, and drill 10 new oil wells at the Nassiriya each extra barrel produced. has accepted a fee of US$1.90 per barrel. oilfield this year, Jaafar said. BP has a 38% stake, CNPC has 37% ExxonMobil has a 60% interest in the “We are capable of boosting while SOC holds 25%. consortium, with Iraq holding 25% and production from Nassiriya from 10,000 In the second half of February, 10 oil Shell the remainder. bpd to 50,000 bpd by the end of 2010,” service companies were invited to take At the huge 12.6 billion barrel he told Reuters in a February 28 part in a tender to drill 56 new wells at Majnoon oilfield, which is currently interview. the giant field, which has an estimated 17 producing around 45,000 bpd, Shell If these targets are all met, Iraqi oil billion barrels of crude reserves. (45%) in partnership with Malaysia’s output should hit the 2.75 million bpd The tender is expected to be awarded Petronas (30%) has pledged to raise milestone by the end of this year. in March, paving the way for the new output to 1.8 million bpd for a payment Jaafar stressed that every incentive was drilling. of US$1.39 for extra barrels produced. there for the IOCs, which would start to On March 1, a separate tender to drill The contract will be effective on recover costs and get paid for their 45 wells was awarded to TPIC, the March 1, Jaafar said, and the firms can services once they were able to raise foreign exploration unit of state-run start recovering costs once output hits production from these fields by 10% Turkish Petroleum, an Iraqi official told 175,000 bpd. above the initially agreed baseline Reuters, in a deal worth US$318 million. production rate. Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  7. 7. MEOG 2010 Annual Review page 7 MARCH Initial baseline output at the 4 billion hopes in Iraq. Tokyo wants a presence in counting on untold billions of dollars barrel Zubair field has been set at Iraq to underpin future oil supplies from worth of new oil infrastructure and 182,000 bpd, under the final contract the Middle East, its primary supplier. operations enhancements from foreign signed on January 22. majors, in order to boost the output of a Eni (32.81%), leading a consortium Other fields resource crucial to Iraq’s postwar comprising Occidental Petroleum The other standout Iraqi oil development reconstruction efforts. (23.4%) Korea Gas Corporation is undoubtedly the 20-year contract (18.75%) and Iraq’s Missan Oil signed by Russian energy giant Lukoil Southern fields Company (25%), plans to invest over and Norwegian Statoil to develop the To date analysts have focused US$20 billion, and has pledged to boost supergiant West Qurna Phase Two predominantly on the security problems production from the field to 1.2 million oilfield, which became effective on that will be faced by foreign companies, bpd for payment of US$2 a barrel. February 18. but the reality is that the additional The partners have agreed a production envisaged this year will come Nassiriya field remuneration fee of US$1.15 per barrel from fields in the relatively calm and Meanwhile, Iraq plans to develop the once output reaches 120,000 bpd, and stable southern Shiite heartland. largely undeveloped Nassiriya oilfield on have pledged to take production at the If the lure of massive revenues is its own after months of talks with a 12.9 billion barrel field to a plateau of sufficient to persuade whoever forms the Japanese group led by Nippon Oil 1.8 million bpd. next Iraqi government to allow the new Corporation reached a dead end, Jaafar Lukoil has put the total investment oil contracts to stand unchallenged, Iraq said. requirement at more than US$30 billion. will be able to take its first significant Nippon had projected it could pump up Other major Iraqi fields where production steps on the long haul to 200,000 bpd within two years, contracts have been concluded as a result towards fulfilling its potential as a global according to Iraqi officials, but “talks of the country’s two oil auctions include oil giant. with the Nippon group have reached a Halfaya, al-Ahdab, Gharaf, Badrah and Of course, 250,000 bpd is still small dead end, and we will start developing Qayara & Najmah, while the Kirkuk and fry in comparison to Iraq’s potential, but the field through national efforts,” Jaafar Maysan fields remain under negotiation. it would illustrate tangible progress and said. All have equally ambitious production perhaps provide genuine encouragement The Nassiriya field is listed as having targets that should bolster oil exports, for future and larger production oil reserves of under 5 billion barrels. which are still responsible for virtually increases. If confirmed, it would mark a real all of Iraq’s state income. disappointment for Japanese upstream As the above details show, Baghdad is APRIL Yemen clings on to oil hopes The oil is out there but the outlook is not good for Yemen By Martin Clark An oil discovery last week, a liquefied Yemen has again stepped up security could be facing oil depletion within a natural gas export (LNG) project last at key oil sites across the land for fear of decade. year, and the promise of more investment retaliation by al-Qaeda after several A recent World Bank study – to come: it could be easy to gloss over strikes against the jihadist network. conducted at Yemen’s request to explore Yemen’s many problems. Saudi Arabia, meanwhile, is building a non-oil economic alternatives such as Notably, there is an awful security giant fence along its border to keep the tourism, fishing and minerals – renewed situation in pockets of the country that trouble out. its warning that this could happen within has pitched government troops, and their But the country’s Minister of Oil and 10-12 years if no new major discoveries Saudi allies, against gun-toting Minerals, Amir Salim al-Aidrous, last were made and brought online. separatists and Islamic extremists. week played down the notion that Yemen Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  8. 8. MEOG 2010 Annual Review page 8 APRIL “I don’t believe in such rumours, LNG export terminal at the port of which have surfaced many times but Balhaf. proved untrue,” al-Airdrous said, quoted There are, however, no Oil Search, which operates the block, in The Yemen Post. new investments on the and the adjacent Block 3, now plans a But the fact that it has not happened second follow-up test at the site, after the before should not be taken to mean that it scale of Yemen LNG encouraging early results. cannot happen at all. coming up, a project that Its partners include ARC Energy, a Despite the launch of the Yemen LNG subsidiary of fellow Australian group project in 2009 – and the start-up of a took many painstaking AWE, Kuwait Foreign Petroleum second production train this week – with years to put together Exploration Company, Yemen General a total capacity to ship 6.7 million tonnes Corporation for Oil and Gas and Japan’s of chilled Yemeni gas to overseas upstream laws could be updated and said Mitsui E&P. markets, oil production is on a perilous the government was seeking ways to slide. improve things. Modest fields According to the US Energy But, typically for Yemen, the findings Information Administration (EIA), Al-Meashar find are fairly small-scale, in contrast to the output totalled 281,000 barrels per day He will no doubt take heart in news last larger fields to be had elsewhere on the (bpd) last year, compared to 300,000 bpd week from Australia’s Oil Search, which Arabian Peninsula. in 2008, and down from a peak of reported a discovery from its al-Meashar- Any oil is significant, of course, 457,000 in 2002. This is expected to drop 1 well in Block 7. especially for a junior oil company to around 250,000 bpd by 2014. Oil and mud flowed at rates of about making its name such as Oil Search, but It is a major problem, given that oil 400 barrels per day (bpd) during a drill the volumes up for grabs, though sales account for up to 75% of public stem test targeting fractured basement possibly commercial, are not revenue and more than 90% of export rock identified by 3-D seismic acquired transformational at a national level. earnings. in 2008. Still, Oil Search and its international Whether the government can arrest this The seismic sweep covered 800 km in team are far from alone. fall, and to what extent the damage can an area close to the Habban field, which OMV is pushing on with its Habban be limited by the advent of LNG sales, is currently being developed by Austria’s field development, which will include a remains to be seen, though clearly there OMV. 60-km pipeline – put out to tender earlier is an issue to address. Block 7 is located in the central part of this year – with plans to raise capacity The quest for viable economic the country, fairly close to existing oil from about 11,000 bpd to 32,000 bpd of alternatives is one way the government in infrastructure, and to the north of the oil by around 2012. Sana’a is seeking to limit the damage, a sensible policy that will at least help ease its near total dependence on hydrocarbons. The success of any new economic policies, however, remains intricately linked with Yemen’s ongoing exposure to political upheaval and an uncertain security climate. This is no truer than in the tourism sector where, despite the country’s immense natural charm and ancient culture, few visitors will dare tread if they fear being blown up during their two-week holiday. More immediately, there are plans to tweak oil policy to entice greater foreign investment. The country’s oil minister acknowledged last week that Yemen’s Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  9. 9. MEOG 2010 Annual Review page 9 APRIL The Austria-based company bolstered trickle of production flowing. Pensions. its Yemeni position in 2003, following It expects to be able to raise output The French company also operates or the takeover of Preussag Energie GmbH. after receiving the green light to transit participates in half a dozen upstream Another established operator is DNO crude through the Masila pipeline concessions, including Block 10, which International of Norway, which has an system. has current production of around 62,000 interest in seven concessions, at varying bpd. stages of exploration and production. Total role There are, however, no new In its latest update, at the end of The biggest oil investor, of course, is investments on the scale of Yemen LNG March, it said its working interest Total of France, which masterminded the coming up, a project that took many production from Yemen during February US$4.5 billion Yemen LNG project. painstaking years to put piece together. amounted to 7,371 bpd. The largest single foreign investment Total remains active though, nearing And, as elsewhere, there is plenty of project ever in Yemen, one of the completion on a new project in Block 10 activity in the field, despite the security government’s big hopes is that this gas to cut flaring by feeding surplus gas backdrop. export scheme will offset at least some of through to a 25-megawatt power plant This includes the Bayhoot-7 basement the decline in oil production. owned by the Public Electricity development well, brought onstream in Announcing the start of Train Two on Corporation. February and now producing 160 bpd, April 2, Yves-Louis Darricarrere, The facility will provide vital and the current drilling of the Bayhoot-8 president of Total Exploration & electricity supply to the poor Wadi follow-up, both in Block 53. Production, said: “The commissioning of Hadramout region. In Block 43, the Nabrajah-10S/S2 the second Yemen LNG train ahead of Better news for Yemen is that new production well was completed in schedule represents another major step in investors are still willing to take a punt. January and brought onstream for test the history of our partnership in Yemen, Abu Dhabi’s Mubadala Development production, while an appraisal well, where we have been present for over Co, last month held talks with officials Yaalen-3, is expected on Block 47 twenty years.” on the possibility of partnering the local anytime. Total operates Yemen LNG in Safer E&P Co. to increase production Canada’s Calvalley Petroleum is also partnership with Yemen Gas Company, from Block 18 in Marib province, making headway on Block 9 in the Hunt Oil, SK Energy, Korea Gas, according to reports. Masila Basin, with development activity Hyundai Corp. and Yemen’s General Block 18 – formerly owned by the US’ on a number of fields ongoing and a Authority for Social Security and Hunt Oil – is Yemen LNG’s main gas supply source. Provided the country can continue to win over potential new investors then there is always hope that Yemen can reverse the fortunes of its ailing energy sector. But some better news on the security front would certainly not go amiss either. Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  10. 10. MEOG 2010 Annual Review page 10 MAY Iran sanctions drive undermined by China’s growing energy links China’s growing dependence on Iranian oil presents a serious obstacle to US efforts to seek tougher sanctions on the Islamic Republic’s nuclear programme By Kevin Godier CNPC is gearing up for more investment in Iran’s upstream oil and gas industry Beijing is reliant on Iranian oil, which accounts for over 10% of Chinese imports Despite the oil connection China is also a believer in nuclear non-proliferation Flagging up China’s continued started, we will continue to do so,” he tight that complying with sanctions independence from Western policy, the said, referring to CNPC’s work in would cut off 10-12% of its oil imports country’s biggest oil company, China developing three other fields in Iran. and jeopardise oil contracts worth National Petroleum Corporation (CNPC), These include developing Iran’s North hundreds of billions of dollars, according has said a draft UN Security Council Azadegan field to produce 120,000 bpd to estimates. resolution proposed by the US against at a cost of at least US$2 billion. In 2009, Iran supplied 23.1 million Iran will not hinder its energy projects in The depth of the involvement here was tonnes of oil to China. the Islamic Republic highlighted on May 10 by the US’ Illustrating that ties are, if anything, CNPC plans to bring online an oilfield Government Accountability Office growing, another CNPC subsidiary, in Iran later this year, and is pressing (GAO), which said that CNPC “is Chinaoil, sold two petrol cargoes of ahead with two other oil and gas projects reported to be financing 90% of the about 600,000 barrels worth around valued at billions of dollars, its top development of the North Azadegan US$55 million for April delivery to Iran, executive has emphasised. oilfield”. according to an April 14 Reuters report. “We will implement our projects in CNPC is also heavily involved in one This marked Chinaoil’s first direct Iran as usual, and we don’t have plans to of the world’s biggest natural gas fields, sales to Iran since at least January 2009, speed up,” Jiang Jiemin, CNPC’s having this year clinched a deal to said the report, adding that another president, said at an annual general develop Phase 11 of Iran’s South Pars Chinese major, Sinopec Corporation, was meeting of PetroChina Company, gas project. poised to resume petrol sales to Tehran CNPC’s Hong Kong- and New York- These initiatives by CNPC run in tandem following a hiatus of nearly six years, the listed subsidiary. with its US$60 billion global investment report said. plan over the next decade, aimed at Chinese independence increasing its overseas oil production to 4 Iran’s allure The statement came just two days after million bpd from its present 284,000 bpd. CNPC keeps assets in politically the US proposed a draft resolution, which Equally significantly, they will not sensitive countries like Iran and Sudan targets Iran’s military, financial, and violate the UN Security Council draft clear of PetroChina to avoid any shipping activities. resolution devised by the US to punish backlash from international shareholders. It highlights Beijing’s strong economic Iran for its nuclear programme. But China’s other big state-owned oil ties to Tehran, which was China’s third China, along with Russia, has only companies, including China National biggest supplier of oil last year after agreed to the draft after concessions from Offshore Oil Company (CNOOC) and Saudi Arabia and Angola. Washington that will protect their energy Sinopec, also have projects in Iran, as do Jiang said he expected production from and financial ties to Iran. oil companies from more than three the oilfield – the mature Masjed-i- These are growing because Beijing is dozen other countries, including the UK, Suleiman field – to hit around 20,000 faced with declining domestic oil France and Japan. bpd later this year. production and rising demand. “Regarding our projects that have been Indeed, China’s linkage with Iran is so Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  11. 11. MEOG 2010 Annual Review page 11 MAY US monitoring Concerned that the UN lacks A GAO report, entitled ‘Firms Reported China’s other big state- effectiveness, the US has drawn up fresh in Open Sources as Having Commercial owned oil companies, legislation for unilateral sanctions on fuel Activity in Iran's Oil, Gas, and suppliers to Iran. But this has drawn Petrochemical Sectors,’ cited 41 foreign including CNOOC and some opposition from US business companies that have helped Iran develop Sinopec, also have projects groups seeking to limit damage to US its energy sector since 2004. companies that do business with firms “According to the information, the in Iran connected with Iran’s oil sector. firms provide technical expertise, There is also ambivalence towards Iran equipment or funding that enable Iran to in China, where support for the Islamic increase the productive capacity and Sanctions situation Republic is not unreserved. profitability of its oil, gas, and Iran has made clear that it has no China has kept close ties with Iran, but petrochemical sectors,” the GAO said. intention of suspending the domestic has also backed past UN Security GAO said Iran had sought enrichment the West suspects is aimed at Council resolutions criticising Tehran’s technological assistance to increase the making bombs. stance on nuclear issues, and wants to level of oil production in declining fields. US Secretary of State Hillary Clinton cast itself as a supporter of nuclear non- “Iran requires increasingly modern and told the Senate Foreign Relations proliferation. advanced enhanced oil recovery (EOR) Committee on May 18 that major But trade between the two markets, technologies in order to stop natural Western powers had now convinced dominated by Iran’s energy exports, is declines of oil production, but has found China and Russia to impose new just as strong a policy driver. advanced technology difficult to import economic sanctions on Iran in an effort to In 2005, bilateral trade was worth owing to international sanctions and high deter Tehran’s alleged nuclear weapons US$10.1 billion. In 2009, it was worth costs,” the report noted. aspirations. US$21.2 billion, and has risen by a No American companies were listed in However, the new sanctions proposal massive 47.4% year-on-year in the first the report, but the document identified relies heavily on discretionary three months of 2010. seven foreign firms that not only were enforcement against Iran. China is an investor in Iranian oil and commercially active in Iran, but also had If adopted, this still leaves China with gas, and Chinese state-owned energy contracts with the US government, worth room to manoeuvre on how strictly it conglomerates have been exploring for a total US$879 million over five years. wants to enforce the new proposals. new fields there, with an eye to They are: Repsol (Spain), Total While China agreed to the new expanding their stake. (France), Eni (Italy), PTT Exploration sanctions draft, it also applauded a The bottom line is that while China and Production (Thailand) and South nuclear fuel exchange deal with Iran believes stability in the Middle East is Korea’s Daelim Industrial Company, brokered by Brazil and Turkey earlier in good for energy security, it does not want Hyundai Heavy Industries and GS the week, which could seriously pre- sanctions to cut off its hard-won supply Engineering and Construction. empt the UN Security Council action. of Iranian crude. JUNE Israel’s gas export hopes grow The potential scale of reserves sitting in the Levant Basin means Israeli energy planners are now starting to draw up export plans By Kevin Godier Israel may be on the path to exporting after Noble Energy and its partners said may hold twice as much natural gas as energy for the first time in its history their offshore discoveries in the country the UK. Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  12. 12. MEOG 2010 Annual Review page 12 JUNE Noble, the Houston-based operator of the offshore fields are encouraging, the Leviathan site, the results of a seismic Leviathan block, said in an early June discovery process remains of course at a survey also indicated signs of oil at statement that the area may have a relatively speculative stage, and the greater depth, Tshuva said. massive 16 trillion cubic feet (453 billion optimism comes when Israel’s standing The momentum building across cubic metres) of gas, and predicted “a in the international community has been Israel’s gas sector began in January 2009, geologic chance of success of 50%”, savaged by the diplomatic fallout when the discovery of the Tamar natural based on the preliminary results of a 3-D following the May 31 raid of a flotilla gas field was made 90 kilometres seismic survey. carrying aid to Gaza, which left nine offshore from Haifa. It has also raised its estimate for the dead. Marking the largest gas discovery nearby Tamar field by 33% to 8.4 trillion As well as necessitating buyers globally in 2009, and split between the cubic feet (238 billion cubic metres), as a prepared to do business with Israel, the Tamar-1 and Tamar-2 sites, the field was result of updated reservoir studies, and export process would also require many also the largest exploration discovery said all its areas in the eastern billions of dollars in investments. ever for Noble Energy, which has a 36% Mediterranean may hold a potential “in With pipeline options around the working interest and also discovered excess of 30 trillion cubic feet (850 region limited due to the continuing another natural gas field in Israel in billion cubic metres)”, more than twice political tensions, market observers have 2009, at Dalit, where gas reserves have the UK’s proven gas reserves. highlighted that liquefied natural gas been estimated at 500 billion cubic feet “In total, Noble Energy’s discoveries (LNG) might be the most feasible export (14.2 billion cubic metres). represent approximately 35 years of option for the Noble-led consortium, Noble’s partners at Tamar are Isramco Israel’s natural gas needs at projected albeit one that has generally taken LNG Negev (28.75%) and Delek Group 2012 demand rates,” the company said in producers at least half a decade to put (31%), the latter again through its Avner a statement. into place. Oil Exploration and Delek Drilling units. Noble Energy confirmed on June 3 that Export hopes the Tamar project remains on schedule Significantly, with the Tamar field Noble Energy’s discoveries for sanction in 2010 and Davidson said alone – which is due to begin production that Noble is “working hard” to enable at the end of 2012 – - expected to fulfil represent approximately 35 Tamar first gas sales late in 2012. Israel’s gas demand for the next two years of Israel’s natural The capital investment for Tamar is decades, the country may be eyeing a estimated at around US$2.8 billion. position where it is able to export the gas needs at projected 2012 Already, the state-run Israel Electric commodity to Asia and Europe. demand rates Corporation has said it planned to buy at “In addition to the increase in least 2.7 billion cubic metres of gas from estimated Tamar resources, we have Tamar over 15 years, in a deal that could identified significant additional drilling 2011 drilling plan be worth nearly US$10 billion. opportunities nearby which, if successful, Noble Energy, which owns 39.66% of could position Israel as a potential energy the Amit and Rachel licenses forming the Levant Basin strength exporter in future years,” Charles Leviathan gas find, announced on June 3 The rapidly growing prospects for Israeli Davidson, Noble’s chief executive, said. that the site would be its next exploration energy self-sufficiency and major new Israel has been dependent on oil and target in the region, and that it plans to export revenues was also mirrored coal imports from as far away as Mexico drill at Leviathan later this year. recently by an April 8 review by the US and Norway and has bought gas from “The preliminary results of the 3-D Geological Survey of the Levant Basin, Egypt in the past decade, but “the option seismic survey of the Leviathan structure where Tamar and Leviathan are located. for exporting natural gas has become published by Noble Energy Inc. are The basin, which stretches the length much more realistic”, according to Asaf exceeding all of our expectations,” said of Israel and Lebanon, may hold as much Bartfeld, chief executive officer of Delek billionaire Isaac Tshuva, who controls as 227 trillion cubic feet (6.43 trillion Group, one of Tamar find’s partners. the Delek Group. cubic metres) of gas, said the review. “We may be able to supply the Delek is a partner in the Leviathan That compares with Egypt’s 77 trillion European market and the Far East where natural gas find through its subsidiaries cubic feet (2.2 trillion cubic metres) of demand is highest. Though, of course, at Avner Oil and Gas and Delek Drilling, reserves in 2008 and the UK’s 12 trillion this point, we are waiting to drill and to each with 22.67%. cubic feet (340 billion cubic metres), try and confirm the gas,” he said on June Ratio Oil Exploration 1992 holds a according to BP’s statistical survey. 3, in an interview with Bloomberg. further 15% in Leviathan. While results to date from Israel’s In addition to the gas potential at the Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents
  13. 13. MEOG 2010 Annual Review page 13 JUNE The US Geological Survey numbers set to be “an energy independent ultimately make their way into the are so striking that some observers may country”. government’s coffers,” he said. even see Israel as an embryonic Qatar, Equally down to earth was Finance For the time being, however, the only which has exploited its approximately Minister Yuval Steinitz, who said in an certainty is that a new and potentially 890 trillion cubic feet (25.2 trillion cubic e-mail to Bloomberg that the government very significant energy basin is being metres) of gas reserves to stunning will be studying how to collect some of delineated in the eastern Mediterranean. economic effect to become the world’s the potential revenue. But if events progress at the level largest gas exporter, and the globe’s “These are discoveries of very which matches the optimism on display wealthiest per capita country. meaningful proportions. The discoveries in early June, the prospect of Israeli LNG But Tshuva made the more realistic only strengthen the need to establish a cargoes making their way to Asia and the point that Israel – which has been committee which will examine the Atlantic Basin market in 2020 may not importing gas from Egypt since 2005 – is royalties and taxing system which will seem so far-fetched. JULY Iraq targets natural gas, downstream investment Iraq is looking to meet its own domestic energy needs through the development of its gas fields and refineries By Martin Clark The Iraqi cabinet has approved Shell’s US$12 billion southern gas collection project An auction for three other gas projects is scheduled for September 1, 2010 There are plans for four new refineries at Karbala, Kirkuk, Nasiriyah and Maysan After the rush for oil blocks earlier in the sufficient for these companies to put This natural resource could be the cure year, Iraq is shifting its sights to other boots on the ground and commence for Iraq’s power drought, a fuel to feed parts of its energy sector, notably gas and work. the rejuvenation of the nation’s decrepit downstream industries. BP and China’s CNPC are leading the electricity system. Although post-war priorities to raise charge with an aggressive drilling Last month, power shortages cost crude oil production remain intact, most programme in the making at the super- Iraq’s former electricity minister his job, of the big oilfields auctioned under the giant Rumaila field outside the oil hub of a portfolio that has now been handed two bid rounds of 2009 have now been Basra. over to Oil Minister Hussain al- handed over to international investors. Raising oil production is vital if Iraq is Shahristani on a temporary basis. These companies – which include the to fund its development and The switch followed angry protests over world’s biggest oil corporations such as reconstruction effort. energy shortages in the Shi-ite south, ExxonMobil and Shell – are now tasked including in the city of Basra itself. with raising the country’s production as Beyond oil The decision to offer three gas projects quickly as possible, up to a target But it is other areas, possibly, that will to investors – effectively Iraq’s third perhaps as great as 12 million barrels per make the biggest difference to the Iraqi post-war licensing round – offers a day (bpd). people. glimpse of its longer-term ambitions, Not all of the jigsaw pieces are in place One of those areas is gas. With beyond merely raising oil output. – the country still has no ratified abundant, yet virtually untapped petroleum law, nor indeed a firm reserves, Iraq holds immense potential as government following the March a gas producer and, one day, as a gas elections – but conditions now appear exporter. Copyright © 2011 NewsBase Ltd. Edited by Martin Clark All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents