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A monthly round up of the best of the best commentaries from NewsBase energy Monitors covering global issues in the energy markets.

A monthly round up of the best of the best commentaries from NewsBase energy Monitors covering global issues in the energy markets.

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  • 1. NRG NRG November 2011 Issue 20 ! News NEWSBASE ROUND-UP ! Analysis ! Intelligence –– GLOBAL –– ! NewsBase Published byAFROIL 2 NEWSBASE ROUND-UP GLOBAL! IEA warns of under-investment in MENA 2 NRGASIAELEC 4! CCS in the balance 4ASIANOIL 5! Opportunity knocks for Beach Energy 5CHINAOIL 7 This is the twentieth issue of the NewsBase Round-! Chinese shale leads to stalemate with up of Global energy issues. Russia 7ENERGO 9 NRG comes to you entirely at our expense, which we! Pot calling the kettle black? 9EUROIL 11 hope will further increase the value you derive from! Italy’s energy future uncertain under subscribing to NewsBase. new leadership 11FSU OGM 12 NRG covers developments from all global energy! Botas, SOCAR plan gas pipeline regions and sectors, and brings you the “best of the across Turkey 12GCEM 13 best” (as selected by our editors) from each of the! China’s emissions conflict 13 previous month’s weekly Monitors.GLNG 15! Offshore Australian project nears The global nature of the energy industry means that FID moment 15 no episode happens in isolation and we hope thatLATAMOIL 17 NRG will help to tie up events around the world in! US dilemma over Cuba’s oil 17DOWNSTREAM MENA 18 one single issue.! Sadara financing gains momentum 18MEOG 20 This month, AfrOil assesses an IEA warning about! IMF report flags up GCC revenue under-investment in MENA, while EurOil assesses bonanza in 2011 20NORTHAMOIL 22 Italy’s energy landscape with Berlusconi out of the! Alberta, Europe and the oil sands fight 22 picture.REM 24! North African solar can create an Please note, it is NOT possible to subscribe to Arab summer 24 NRG. It is, however, an additional service weUNCONVENTIONAL OGM 26 provide to our existing subscribers.! Australian CBM sector faces growing opposition 26For analysis and commentary on these and other stories, plus the latest oil and gas developments, see inside… Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 2 AfrOilIEA warns of under-investment in MENAThere are a host of reasons why investments in the MENA region may fall below thenecessary levels, which poses serious risks to the world’s economyBy Ed Reed# Reduced investment in MENA’s upstream would increase price volatility# An oil price of US$150 per barrel in 2016-17 would put the world’s economy in the danger zone# MENA countries’ revenue and total global investment would be around the same under either outlookMuch of the world’s additional energy In order to meet this objective, spending a possibility that production growth fromrequirements up to 2035 will come from in the area needs to average US$100 the MENA region may not come as muchthe Middle East and North Africa, but it billion per year from 2011 to 2020 and as consumers would like.”may not be plain sailing and investments climb to US$115 billion per year from Such a slowing of investment, Birolare at risk of being sidetracked. In 2021 to 2035. All figures are in 2010 US continued, would be a “pity for theparticular, the International Energy dollars. global economy, a pity for the oil sectorAgency (IEA) has said efforts to preserve The IEA report, though, launched in and, in the long term, a pity for thosestability by diverting cash from energy London last week, said it was “far from [MENA] countries. There is a likelihoodspending into social projects could store certain that all of this investment will be that this could happen but we hope itup trouble further out. forthcoming, for many different reasons does not.” affecting some or all of the countries in Under the slower spending case, theBig bucks the region.” The WEO’s Deferred IEA suggested investments in oil and gasInvestment in global upstream spending Investment Case did not focus on any would be one third below that set outwill rise in 2011 to US$550 billion, specific countries in the region. under the New Policies Scenario in 2011-according to predictions set out in the A country may choose to slow 15. Then, from 2015-20, spending wouldIEA’s World Energy Outlook (WEO). development in its energy industry for a get back on track, matching up with theHowever, the report went on to warn that number of reasons, the OECD’s energy baseline projection by 2020.changes in the MENA region could fall watchdog said. (See text box.)below expectations in the medium term, The IEA’s head economist, Fatih Birol, Shaking it upjeopardising the region’s future. said the agency had been “very careful The shortfall in oil production by 2020 The MENA region is to provide 90% not to put in probabilities on such would be around 6 million barrels perof the world’s growth in oil production alternative scenarios but the fact that we day, which would have a “significantuntil 2035, under the IEA’s baseline have made this Deferred Investment impact” on global oil balances andplan, called the New Policies Scenario. Scenario, in itself, is a signal that we see therefore prices." Potential causes of reduced investment: !" Deliberate government policies to develop production capacity more slowly in order to hold back resources for future generations or to support the oil price in the near term !" Constraints on capital flows to upstream development because priority is given to spending on other public programmes !" Restricted, or higher-cost, access to loans or other forms of capital !" Delays owing to legal changes or renegotiation of existing agreements !" Increased political instability and conflicts !" Economic sanctions imposed by the international community !" Higher perceived investment risks, whether political or stemming from uncertainties in demand !" Constraints on inward investment as a result of stronger resource nationalism, particularly in regimes seeking to pre-empt popular uprisings !" Delays because of physical damage to infrastructure during conflicts Source: IEA WEO 2011 Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 3 AfrOil There would be liquids (CTL) productionan impact on gas, would increase.but the major Importers of energyshortfall would would be hit by higherbe a reduction in prices in both theavailable oil for medium and long term,the world’s with the total passingconsumers. US$46 trillion – around Higher-priced 10% higher – but supplyoil would spur would be morethe development diversified.of resources in China and the US – theother countries two top oil-dependentbut would not countries – would playcover the the greatest part inshortfall. In changes. In the US, fueladdition, demand would fall. crisis. They were not the main driver but is only lightly taxed, making pump prices Producers in the MENA region would they did play a role in weakening the extremely sensitive to changes in oilsee greater returns from their output in trade balance of the consuming supply. China, meanwhile, would focusthe short term, though they would not be countries,” Birol said. This year, he on large-scale production of electricfar off gains made under the New continued, the average oil price has been vehicles and greater efficiency.Policies Scenario. However, looking over US$102 per barrel, “which means that Overall, though, oil still accounts forthe entire period revenues would be global economic recovery is at risk, we 86% of total transport fuel in 2035, closemarginally down, at US$16.7 trillion are in the danger zone at present levels.” to the level under the New Policiesrather than US$17 trillion. Should prices rise to US$150 per Scenario. The greatest winner would be Total upstream investment would be barrel, “this is definitely a very risky biofuels, which would expand from 1.3around the same under either scenario, at scenario” for the world’s economy and million bpd in 2010 to 5.5 million bpd byaround US$15.3 trillion. While will have “major consequences.” the end of the period.production would be lower under the Compensating for the shortfall indeferred case, the price of extracting the Demand destruction MENA production would be Russia,energy would be “significantly higher” As a result of the reduced investment, Canada and Brazil. However, increasingthan output from MENA. primary oil demand would reach only 88 the pace of exploitation in non-MENA The deferred case would spark a short- million bpd in 2015, the WEO said, only states runs down these resources fasterterm surge in the oil price, peaking at marginally higher than 2010 and about and their share of output would be lowerUS$150 per barrel in 2016-17, when the 3.2 million bpd lower than the New in 2035.shortfall starts to bite owing to the long Policies Scenario. The peak of the The deferred case set out by the IEA islead times of energy projects. Prices demand reduction would be in 2017 – a concern, given the part that high energywould then fall back into line with the when the price would also peak – at 3.9 prices can play in spurring economicNew Policies Scenario by around 2020, million bpd lower than the figure in the woes.at around US$120 per barrel. New Policies Scenario. Investment decisions must be taken byImportantly, though, the Deferred However, the reduction would have a the countries holding resources – andInvestment Case would be “accompanied long-term impact and demand would be they have a duty to meet the needs ofby significantly increased price 1.5 million bpd below the New Policies their citizens. However, contributing to avolatility.” Scenario number in 2035. global slowdown, such as that which Birol said the IEA had not calculated The most significant impact would be emerged from the surge in energy pricesthe expected impact on the global seen in the near term, as prices rise and in 2008, will not benefit any partyeconomy should prices rise as high as it the market reacts to the shortfall through involved, including rulers throughout thehas been suggested they will go. energy conservation, mostly through region.However, as a benchmark, he noted that reduced driving. In the longer term, the However, countries – especially thoseoil prices in 2008 had averaged US$100 higher price would encourage switching with autocratic rulers – are likely toper barrel, which was 5% of global GDP. to alternatives for transportation – such choose between meeting actual short- “We believe the high prices played a as biofuels – and increasing efficiency. term difficulties over nebulous long-termcrucial role in the run-up to the financial Coal would also benefit, as coal-to- global economic woes." Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 4 AsiaElecCCS in the balanceAs Australia’s first commercially viable CCS project goes bankrupt the technology is stillprovoking serious argument about the future of energy in the countryBy Graham Lees# The federal- and state-backed Zerogen CCS project failed to find enough private funding# The project lost US$150 million of public funding as it cost and technical problems# Green supporters say that commercial energy is moving away from coal towards renewablesWith the Australian coal and electricity found its coal gasification plans too an A$10 billion (US$10.18 billion) fundindustries still smarting from a new costly and also suffered from CO2 to finance renewable energy and lowcarbon trading law, a taxpayer-backed storage problems. Meanwhile, political emissions power plant technologies.project to develop the country’s first opponents to the federal and Queensland “The collapse of the Zerogen coalcommercially viable carbon capture and governments, both Labor Party emissions storage project in Queenslandstorage (CCS) thermal power plant (TPP) controlled, are calling for an inquiry into shows the commercial world is startinghas gone bankrupt. the loss of taxpayers’ money, while the the transition away from fossil fuels and The Zerogen project, funded by the Green Party and other environmental towards a clean energy economy,” thefederal and Queensland governments, groups said this should spell the end of Australian Conservation Foundationwas seen as a possible salvation for a fossil-fuelled power in Australia. “There (ACF) said.power industry still largely dependent on should be an immediate independent “Despite [Zerogen] receivingcoal and facing a swinging tax under a inquiry as to how this [Zerogen] money government subsidies of almost A$160carbon law going into force next July. has been lost and where it has gone,” said million [US$164 million], we still have Now Zerogen has ended amid federal parliamentary opposition climate no commercial-scale proof that carbonrecriminations of misspent taxpayers’ change spokesman Greg Hunt. capture and storage actually works,”money, while the country’s growing anti- Zerogen was a speculative project like ACF economic adviser Simon O’Connorfossil fuel lobby is calling for the the government’s planned Clean Energy said in a statement last week."abandonment of further CCS research, at Finance Corporation, Hunt said.least with taxpayers’ money. The federal government is in the CCS projects in Australia process of setting up the corporation with Source: CO2CRCToo costlyZerogen was established by theQueensland government in 2006 andinvested over US$100 million. Thefederal government added aboutUS$50 million. The coal industryhad also contributed over US$50million. The objective had been to buildand operate a 530-MW coal-firedcommercial TPP by 2015 using CCStechnology, which would remove90% of CO2. The operators of theZerogen project had earlier this yearsought but failed to secure financialbacking from the Japanese giantMitsubishi Corporation, although ina separate area Australia and Japanare co-operating in CCS technology. It appears that Zerogen, locatednear Rockhampton on the centralQueensland coast north of Brisbane, Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 5 AsiaElec The foundation is an independent Europe, the United States and Japan. But ACF president and universityagency made up of academics and The institute has declined to comment science professor Ian Lowe argues thatscientists concerned about climate on the collapse of Zerogen. CCS is not the future.change and global warming. It calls for “It’s long overdue that we had angreater government support for Opposing views overall look at the issue of fundingrenewable energy projects via the Peter Cook, the chief executive of the research and development into carbonestablishment of a Clean Energy Finance Australian Co-operative Research Centre capture and storage, given that it’s aCorporation. for Greenhouse Gases, also known as speculative technology that can’t Some proponents believe the Zerogen CO2CRC, was less reticent. He told the possibly extend to all coal-fired powercollapse is a mere technical setback and Australian broadcaster ABC recently that and that, even if it worked, wouldwork on CCS should continue elsewhere. he believed work on a viable commercial probably be at least as expensive asIn fact, the federal government continues CCS system would continue because the renewable energy,” Lowe told the ABC.to fund to the tune of about US$100 world was not about to stop using coal. “I think it’s entirely reasonable for themillion per year the public Global CCS “As long as society chooses to use coal coal industry to do research in this area,Institute in Canberra. The Zerogen and other fossil fuels there’s no but I think probably too much publicoperators say they will hand over all their alternative other than to use carbon money has been spent in this area, givenresearch to the institute, with which the capture and storage as the way of that it’s likely at best only ever to be afirm had loose links. mitigating the consequences of that use,” niche application.” The institute, financed by the federal said Cook, whose centre also studies The battle between Australia’s coal-government until the end of 2013, CCS technologies and receives funding fuelled power industry and renewablecollates research on CCS technology and from both the state and the Australian energy advocates looks set to continue."has links with other CCS developers in coal industry. AsianOilOpportunity knocksfor Beach EnergyThe problems facing coal-bed methane (CBM) projects in Australia could provide anopportunity for Adelaide-based Beach Energy to exploitBy Andrew Kemp# Beach is sitting on 8.5 trillion cubic metres of gas-in-place within a portion of unconventional acreage# The company’s unconventional potential lies within the Nappamerri Trough in the Cooper Basin# Growing environmental criticism of CBM projects could be a boon to BeachWith an abundance of natural gas and a produced 19.8 million tonnes of LNG in Energy, which is sitting on an estimatedstring of liquefied natural gas (LNG) 2010. 300 trillion cubic feet (8.5 trillion cubicprojects in the works, Australia is rapidly Yet Australia’s current crop of coal- metres) of gas-in-place within a portionbecoming one of the world’s most bed methane (CBM)-to-LNG projects of unconventional acreage, the CBMimportant natural gas export players. has drawn stinging criticism from sector’s problems could be to its According to a recent note by environmental groups. This has led to advantage.investment bank Jefferies, an estimated increased environmental oversight that Speaking to AsianOil, Beach’sUS$180 billion will have been invested could well slow development of the manager for investor relations, Chrisin the current crop of Australian LNG sector, raising questions of feedstock Jamieson, explained how the company’sprojects by 2017, the end result of which supply for several world-class CBM- shale and basin-centred gas play couldshould see national output rise by 250%, LNG projects that are currently in the prove to be a game-changer in 2012."with the country tipped to become the pipeline in Queensland.largest producer of LNG by 2020. It However, for Adelaide-based Beach Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 6 AsianOilDigging deep unconventional play can be economic, out there and, unfortunately for the CBMThe company’s unconventional potential and we still have some work to do over players, they were caught off guard andrests within the Nappamerri Trough in the course of the next calendar year to do could have been more pro-active inthe Cooper Basin, sitting at a depth of that, it will be Beach’s biggest asset and educating the communities in which theyaround 3,500 metres. biggest cash generator by a long shot,” operate.” It was by targeting the deeper areas of he said, adding: “The shale and basin- The opposition to CBM has gainedthe basin, Jamieson noted, that the centred gas will dwarf the rest of the enough momentum to prompt LNGcompany had been able to unearth such a portfolio.” Beach is expecting to extract project developers to seek out newlarge find, with Beach looking at a target around 10-20% of the estimated gas-in- supplies of gas in case they are unable tosection that significantly exceeded initial place in PEL218, with Jamieson pointing secure enough from coal tenements.expectations. out that in its 40-year lifespan the Cooper Jamieson said: “Initially the Gladstone Jamieson described the size of the Basin had only produced 6 tcf (169.92 LNG facilities were planned on gas beingtarget as “quite extraordinary,” adding: bcm) of gas. supplied from CBM acreage. There are,“Initially we were chasing gas within the “If we can pull 30 tcf [850 bcm] of however, a lot of new challenges beingshale only; however, after coring and sales gas, then that would be more gas faced from both an environmental andfracture stimulation of the Holdfast-1 than all of the CBM reserves in social perspective.”well we discovered that we had a gas Queensland.” He pointed to BG Group teaming upsaturated section of around 700 metres This should prove good news for with Drillsearch to explore for andthat could extend to 1,300 metres, Queensland’s raft of CBM-LNG projects, develop the Cooper Basin’sassuming the deeper Patchawarra section which are facing increased difficulties in unconventional resources, while Santosis also gas saturated. Even in the best tapping into enough raw gas to keep their has approached Beach in relation toshale acreages in the US, the target areas projects at full capacity. supplying conventional gas to thecan be around 200 metres.” Only last week, the federal Gladstone facility. He said the sheer size of the target area government, in a bid to secure support “What we’re seeing is certain LNGhad transformed the potential of the for its Minerals Resource Rent Tax Bill, firms are likely [to be] short [of] gas,acreage. Yet while upbeat about the bowed to pressure from two independent which could be primarily driven by thediscovery, the executive said next year parliamentary representatives over challenges faced by CBM,” Jamiesonwould prove tremendously important for introducing greater environmental added.the company as it sought to prove the oversight of CBM and large coalcommercial viability of its resources. projects. Open markets To that end Beach plans to invest A$46 The regulations have drawn complaints Beyond the LNG market, however,million (US$46.06 million) in the 2012 from the extractive sector, however, Beach is also upbeat about Australia’sfinancial year in exploring Cooper’s which fears they could dampen rising domestic demand, with Jamiesonunconventional potential. development of the country’s fledgling noting that around 80% of gas from the It has already booked 2 tcf (56.64 CBM industry. It is under this scenario Queensland CBM projects is linked tobillion cubic metres) of contingent that Beach finds itself well placed to the offshore LNG market even asresources from the PEL218 acreage, in capitalise on the CBM industry’s demand on Australia’s eastern seaboardwhich it holds a 90% stake and Adelaide difficulties. grows.Energy holds the remaining 10%. Beach “We see ourselves as possibly being anis in the final stages of a takeover of CBM woes integral part of future gas supply both forAdelaide Energy, in which it currently Speaking to AsianOil recently, partner LNG and the domestic market driven byholds a stake of around 87.3%. and co-head of King & Spalding’s LNG our Cooper Basin reserves and “After fracture stimulating Holdfast-1 practice, Dan Rogers, noted that the resources,” he said. “The stars arewe had gas flowing at a rate of up to 2 Australian CBM sector had struggled to aligning for us because there’s nowmillion cubic feet [56,640 cubic metres] counter effectively the opposition’s upward pressure on pricing – a lot ofper day [of gas] and we were expecting message. commentators are talking about A$6-9100,000-500,000 cubic feet [2,830- “The [CBM] industry has just not done [US$6.08-9.01] per gigajoule for gas. If14,160 cubic metres],” Jamieson said. a good job of responding; either through prices reach that point it makes all putting industry-based facts into projects more viable from a commercialAll hail shale circulation or pushing people within the standpoint.”The size of the resources, if the government to hire independent scientists Beach’s gas resources couldcompany’s efforts in 2012 prove fruitful, to rebut the misinformation being used completely transform the company’swill likely transform it into a major gas by opposition groups,” he said. fortunes, potentially turning it into asupplier. It is a sentiment Jamieson echoed, major supplier to both the domestic and “If we can prove that the saying: “There’s a lot of misinformation international gas markets." Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 7 AsianOil Despite its enthusiasm for shale, some time to come.” shale gas deposits.however, the company is not prepared to Aside from the Cooper shale, the Jamieson described the company’sput all of its “eggs into one basket.” company has a range of shale gas global footprint as “areas which don’t According to Jamieson, while the interests across Australia, in the cost a lot and don’t take a lot ofCooper Basin’s unconventional reserves Bonaparte, Otway and Gippsland Basins, management time,” but add a good dealare set to dominate the company’s focus where it is hoping to enjoy similar of upside for the company.going forward, Beach has also spread its success to that seen in the Cooper Basin.risk. Beach’s international presence, Opportunity knocks meanwhile, also gives the company Beach’s exposure to conventional andDiverse portfolio access to some promising upstream oil unconventional, foreign and domesticThe company will continue to focus on assets. In Egypt, Beach has a spread of energy plays gives the company aconventional gas production from its operations ranging from wildcat balanced portfolio to continue thejoint venture with Santos in the Cooper exploration to near-term production. In development of the Cooper Basin’s shaleBasin, as well as its oil production from Tanzania, it holds a 100% stake in the and basin-centred gas potential.the basin’s Western Flank. Tanganyika South Block, which lies If the recent upsets in the CBM Jamieson described these operations as along the promising East African Rift, industry are any indication, then tappingfantastic cash generators and the “engine sharing characteristics with Lake Albert into coal seam gas could prove to be aroom” of the company and said its shale acreage in Uganda that has seen major oil tricky prospect going forward, openinggas efforts in the Cooper would not discoveries. In the US, the firm’s the door to rich rewards if Beach cancompletely replace conventional operations in North Dakota produce harness the Cooper Basin’s hugeoperations and the company would minimal net production but have paid potential."“remain in conventional oil and gas for dividends in terms of learning to tap ChinaOilChinese shale leads tostalemate with RussiaSino-Russian gas talks have stalled in part because of pricing issues but also becauseBeijing wants to determine the full potential of domestic shale gas reservesBy Sam Wright# The IEA predicts that global gas demand will hit 4.75 tcm by 2035, while China’s will top 500 bcm# Gas supply talks with Russia have been prolonged and far from fruitful# Gazprom has set its sights on supplying Asian LNG demand, but that future is also looking murkyThe International Energy Agency (IEA) rely on the success, or lack thereof, of On the surface, the sticking point issaid recently that it expected global efforts to develop China’s enormous simple. Most of the Russian gas giantnatural gas demand to grow by 1.7% per shale gas reserves. Gazprom’s supply contracts are linked toyear until 2035, when it will reach 4.75 crude oil prices, which have soared ontrillion cubic metres. By this point, it is Talked to death the back of increased demand and unrestestimated that China will be consuming In 2006, Moscow and Beijing entered in the Middle East. For this quarter, somemore than 500 billion cubic metres per discussions over a long-term supply deal. of the company’s European gas contractsyear of gas, up from 110 bcm in 2010. The two sides have been discussing a are being carried out at a price of That prospect should have Russia plan that would see Russia send 68 bcm US$500 per 1,000 cubic metres – aroundrubbing its hands, but all signs seem to per year of gas to China by pipeline over US$100 more than current forwardindicate that country’s gas empire may a period of 30 years. For five years, prices."be losing its grip. Indeed, much of however, the talks have made littleRussia’s future in the Asian market could progress. Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 8 ChinaOil Despite protests from its customers,the company has refused to budge.“Gazprom should not cover the mistakesin marketing and trading of ourcounterparties,” has been theunambiguous official line. Unsurprisingly, Gazprom’s stance hasprovoked rebellion. Poland, which has afamously turbulent relationship with itsneighbour and chief gas supplier, hasfiled an arbitration suit in a bid to forcethe company to cut prices under itsimport contract. There are whispers thatothers may follow. Wisely, China has outright rejectedGazprom’s insistence on using the oil-linked mechanism. In the face of theseobjections, the Russian firm, despite a vastly more than the 2.8 tcm of Yet despite this seemingly strongstring of comments to the contrary, has conventional gas reserves that BP’s position, Beijing has been reluctant toyet to suggest a viable alternative. Statistical Review of World Energy dismiss the Russian pipeline project out estimates the country had at the end of of hand. Just two weeks ago, ChineseFacing the figures 2010. Vice Foreign Minister Cheng GuopingIt is unlikely that this is for a lack of The US trails significantly behind described the negotiations as “in theireffort. After all, Gazprom is in a near China with 24 tcm of shale gas. final stages,” adding that they wereimpossible position. However, it has seen its energy market proceeding well. Recently, the state-owned China Daily, transformed in recent years as a result ofwhich is widely regarded as a unconventional development projects, Building the futuremouthpiece for the central government with gas output soaring and investment Part of this may be down to theon policy issues, speculated that even if piling in. challenges that China faces in bringingthe price of gas was set at US$350 per As China’s leaders view it, domestic its shale gas to market. The first –1,000 cubic metres, the deal with Russia shale gas could be enough to protect the unsurprisingly, given the country’s vastwould cost the country US$714 billion country from Russia’s penchant for using scale – is infrastructure.over 30 years. its pipelines as a political tool. This In the US, a large number of shale “If you use [this] as a guide [to] the practice has in the past led Gazprom to plays were discovered near conventionallong-term agreed purchase price that cut supplies to both Ukraine and Belarus. gas fields, providing a ready-madeChina gets in the current international “If the strategic goal is energy security pipeline network that drastically cut costsliquefied natural gas (LNG) market and and you’re now 55% dependent on and sped up development. China’sthe cost of China’s unconventional foreign crude, that undermines the goal reserves, on the other hand, are located innatural gas exploration, buying gas from of domestic energy security,” Eurasia areas ranging from Sichuan Province toRussia even at just US$250 per 1,000 Group analyst Damien Ma told the New Inner Mongolia and the Xinjiangcubic metres makes no sense,” it added. York Times. “A lot of companies want to autonomous region, none of which have“If Russia gives China a lower price, do more gas.” the level of established infrastructurehow can it face consumers in Europe?” Unluckily for Russia, the proposed needed to facilitate the rapid It is a fair point, and one that seems to alternative of LNG could well fall by the development of shale gas reserves.have hit home. On November 13, wayside, too. Earlier this year, For a country of China’s vastGazprom chief Alexei Miller, seemed to consultants McKinsey and Company resources, this might not usually be aacknowledge that the deal had finally hit warned Australian firms – a major source problem. Huge development projectsa dead end. Instead of the pipeline, he of LNG shipments to Asia – that local have come to be the norm, made fastersaid during a visit to Honolulu, LNG projects worth US$200 billion could be by cheap labour and the smoothing ofshipments are to be the new focus. at risk if shale gas production in China regulations by state-owned firms. took off as it has in the US. In total, it Yet shale gas is different from a high-An unconventional future said, domestic shale production could speed rail or bridge-building project. TheChina is estimated to have 36 tcm of provide as much as a quarter of the country’s level of expertise in hydraulicshale gas, which would give it the country’s total gas demand within four fracturing, or fracking, is well below thatworld’s largest reserves. This is also years. of the US." Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 9 ChinaOil In March, PetroChina, which operates prices reach US$350 per 1,000 cubic simply too long, and the expected 30-the majority of domestic shale licences, metres. The company’s focus, for the year contract unrealistic. China, withcompleted its first horizontal shale gas time being at least, is thought to firmly nothing to lose, appears to be holding outwell after 11 months of drilling. Outside be on finding more conventional oil. to see what it can get. A ridiculously lowChina, this has been achieved in less than offer from Russia – say, US$250 per20 days. Looking forward 1,000 cubic metres – may be tempting, This comparison may be slightly Oil and coal still reign supreme in China. but is extremely unlikely.unfair. The well, drilled in Sichuan, was Natural gas currently accounts for just Instead, the next decade could mark amuch deeper than those typically found 4% of energy demand, and while the reversal in Russia’s fortunes. Alongsidein the US. Joint ventures, both domestic government is aiming to increase this to China’s plays, huge reserves could beginand foreign, are likely to provide know- 10-12% by 2020, it is a long way from a production in Poland and France, whilehow and technology that can reduce complete transformation of the country’s exploration is rife in other key Gazpromdrilling times drastically in the future. A energy mix. markets such as Ukraine. Poland innumber of major names are already on Despite this, China still needs to particular has repeatedly said that shaleboard, including ExxonMobil and US import large quantities of gas in the short will free it from Russian influence, anshale giant Chesapeake Energy. term. But the short term is precisely that. idea that has been seized on by the Polish Meanwhile, much responsibility rests Most estimates place the time needed for public.with PetroChina. Yet the company seems China to begin producing from its shale On November 13, the ever-optimisticstrangely divided. reserves at 10 years, despite all the Russian president, Dmitry Medvedev, On one hand, it has pledged to drill technical challenges. Once the ball is told journalists that his country expected220 shale wells in Sichuan over the next rolling, the timeline may well be much to supply as much gas to China in thefour years. On the other, it has quicker. future as it currently supplies to Europe.complained that domestic gas prices are China may be coy on the subject, but He could well be right, but there is atoo low and that it will only push forward for this reason the Russian pipeline looks good chance that delivery volumes maywith unconventional gas exploration if dead in the water. The turnaround is be nothing to brag about." EnergoPot calling the kettle black?Belarusian criticism of Lithuania’s Visaginas NPP mirrors almost exactly the concernsvoiced by Vilnius over plans for the Astravets plantBy Jennifer Delay# Minsk’s complaints appear to be largely political in nature# EU support for the Lithuanian project is likely to remain strong# If Belarus steps up its campaign, work on the Visaginas station may face more delaysThe Belarusian government has environmental impact assessment (EIA) has voiced similar complaints.expressed serious reservations about for the Visaginas project, despite A ministry representative told Itar-TassLithuania’s plans for building a 3,400- Belarus’ efforts to respond fully and in mid-October that he believedMW nuclear power plant (NPP) at transparently to questions about its own Lithuania’s critical remarks about theVisaginas to replace the Soviet-built EIA for a planned 2,400-MW NPP near Astravets project were motivated moreIgnalina facility. Astravets. by politics than by substantive concerns Mikhail Mikhadyuk, the deputy energy “Lithuania still has not given answers about safety and security.minister of Belarus, said to reporters in to Belarus about results of the He complained that Lithuania’s effortsthe middle of October that Vilnius had environmental impact assessment of its to drum up support for its project in thethus far failed to address Minsk’s future NPP,” Mikhadyuk was quoted as European Union and to highlightconcerns about the projects. saying by the Itar-Tass news agency. concerns about the Belarusian scheme He claimed that Lithuania had not An official in the Belarusian Ministry were evidence of “double standards.”"answered questions about the of Nature and Environmental Protection Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 10 Energo The official, who was not named, said Lithuanian government’s main foreign Indeed, European energythat Vilnius’ hypocrisy was evident in its policy concerns is to safeguard the commissioner Guenther Oettingerexpressions of concern about the country’s independence against the offered words of support for theAstravets plant’s proximity to the border. possibility of Russian recidivism, and Visaginas NPP at a recent energy“Lithuania protests against the site [in the Belarus has on occasion acted zealously conference in Krakow.Astravets district], which is only 30 km to promote the interests of Russia, which After receiving information onfrom the Belarusian-Lithuanian border. has often (though not always) served as Vilnius’ plan for the construction of theHowever, Vilnius plans to build its NPP its main patron. Visaginas NPP from Lithuanian Energyat the distance of 2.3 km from the border The Kremlin, in turn, has its own Minister Arvydas Sekmokas, Oettingerwith Belarus and believes that it’s OK,” reasons for keeping a close eye on the congratulated Lithuania and the threeItar-Tass quoted him as saying. Baltic States. On one hand, Estonia, neighbouring states that had signed on to Latvia and Lithuania are home to the project – Estonia, Latvia and Poland.Mirror image substantial minority populations of ethnic The partners have “[achieved] aNot surprisingly, the complaints aired by Russians. On the other hand, they also significant milestone in the projectMikhadyuk and the unnamed ministry have turned decisively away from implementation and selection of aofficial mirror almost exactly concerns Moscow, having gained membership in strategic investor,” he said, according tovoiced earlier by Lithuanian officials. both the North Atlantic Treaty a statement issued by the Ministry of As noted above, Lithuania was the first Organisation (NATO) and the European Energy.to express anxiety about the Belarusian Union, and they have generally been cool Now that the plan has been submittedplant’s proximity to the border between to suggestions for expanding co- to Oettinger according to Article 41 ofthe two states. operation with Russia. the European Atomic Energy Officials in Vilnius have also gone on Lithuania was the first to express Community (Euratom) treaty, Lithuaniarecord as saying that Minsk has been anxiety about the Belarusian plant’s is in a position to begin co-ordinatingslow to answer their questions about the proximity to the border between the two implementation of the project with EUEIA for the Astravets plant – and that states institutions, the ministry added.their own efforts have been designed to The EU, meanwhile, also has political Even so, it may take time for Vilnius toensure full disclosure and transparency. interests at stake. It is bound to be more respond to the Belarusian complaints, Moreover, they have speculated about sympathetic to Lithuania, as a member particularly if they gain in intensity. If so,the political component of Belarus’ state, than to Belarus, which is the target it runs the risk of seeing work on thedecision to build the NPP in co-operation of sanctions imposed by Brussels. Visaginas station fall behind schedule yetwith Russia. Atomstroyexport, a Its regulations also call for Lithuania to again. Lithuania had said initially that itsubsidiary of Russia’s state atomic cut its carbon emissions and to reduce its hoped to bring the NPP on line in 2015energy concern Rosatom, has been reliance on fossil fuels, and the Visaginas but pushed its target date back to 2020awarded a contract for the construction project is in line with these aims. after encountering difficulties in findingof the Belarusian station. This raises the question of whether funding and a strategic investor. these political considerations will have Rokas Zilinskas, the chairman of thePolitics any practical impact on the Visaginas Lithuanian parliament’s nuclear energyMinsk’s decision to follow virtually the project. commission, alleged in late 2010 thatsame line of argument against the Russian interference been a factor inVisaginas NPP that Vilnius has already Support from Brussels these delays.employed against the Astravets station In all likelihood, they will not affect the He claimed that pressure from Moscowindicates that the Belarusian position is level of EU support for the project. had led South Korea’s KEPCO tobeing driven more by politics withdraw from the first tender forthan by substantive concerns. the Visaginas constructionIndeed, given the symmetry contract, even though it wasbetween other points, the viewed as the most likely winnerunnamed ministry official’s of the contest. Japan’s Hitachimention of Vilnius’ political won the second tender earlier thisconsiderations is probably year."evidence of this. That politics would be a Location of Lithuania’sfactor is hardly surprising. Visaginas NPPAfter all, one of the Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 11 EurOilItaly’s energy future uncertainunder new leadershipA shift in focus could come with the exit of Silvio Berlusconi and the arrival of a newgovernment but right now a great deal of uncertainty surrounds Italy’s energy futureBy Christopher Coats# Events over the past 18 months have left Italy with a variety of energy challenges at home and abroad# The dynamics of Italy’s foreign relations stand to change in the absence of Berlusconi# Italy is looking to expand its energy presence in North Africa and elsewhere overseasFollowing weeks of political upheaval saw its long-standing government from EU and local political leaders. Afterand roller-coaster market instability, Italy collapse as pro-democracy movements being set aside until political pressurenow finds itself with new national led to an armed conflict lasting months, had subsided, the campaign has now lostleadership. With it comes the promise of resulting in a complete halt in its strongest proponent in Berlusconi,a technical approach to governance and production. causing further uncertainty about athe introduction of new financial Despite international pressure, Italy nuclear future in Italy.measures aimed at calming global had spent the last decade cultivatingworries about the country’s ability to trade and diplomatic relations with Foreign relationsdeal with its overwhelming debt. Libya’s former leader, Muammar These events have left Italy and the The exit of controversial Prime Ghadaffi, through heavy investment in country’s largest energy firmsMinister Silvio Berslusconi and the aid and development, establishing Libya increasingly isolated when it comes toappointment of Mario Monti to lead the as one of its three main providers of oil their immediate opportunities not onlygovernment to implement a host of new and natural gas alongside Algeria and for growth but also for the country’sregulations promoted by the European Russia. The armed conflict saw Italy’s immediate oil and gas needs. ThisUnion (EU) and the International energy imports under threat, as situation may be further exacerbated byMonetary Fund (IMF) were welcomed by companies such as Eni were forced to the absence of Bersluconi, whopolitical and market leaders across the remove expatriate staff from the North demonstrated a willingness to seek outglobe. But it is far from clear how this African country. energy partnerships beyond andnew technocratic leadership will work in Meanwhile at home, Italy has seen two sometimes against wider regionalpractice, including how it will shape domestic efforts to step up energy sentiment.Italy’s precarious energy standing. independence curtailed by local protest This approach – leading to close Although the news of Bersluconi’s exit movements. Offshore drilling projects working and diplomatic relationshipswas enough to drive up oil and gas prices were restricted after the Deepwater with Ghadaffi and Russia’s Primeacross the globe – further allowing local Horizon spill in the Gulf of Mexico Minister Vladimir Putin, will not likelycompanies such as Eni the spike in inspired calls for new project rules in the be continued under the stewardship ofprofits necessary to weather current Mediterranean, leading to a ban on Monti, a much stronger proponent of EUchallenges – it is far less clear how his efforts within 5 nautical miles (9.3 km) market integration and member statedeparture will affect the country’s of the Italian coastline. While the new partnerships. Having announced hisbroader energy future. regulations have mostly hindered smaller campaign to return to Russia’s highest operators, such as Mediterranean Oil and office, Putin echoed this sentiment in aChallenges Gas, new proposals from the EU on speech last week where he derided EUThe last 18 months have left Italy with a offshore drilling could have a further energy policies while praising thecollection of energy challenges, impact on projects in the region. Finally, outgoing Berlusconi as a friend and “oneincluding issues pertaining to its the government’s push to revive Italy’s of the last of the Mohicans of Europeandomestic operations and production as long-dormant nuclear power programme politics”, according to the Wall Streetwell as overseas exploration and after the events surrounding the tsunami Journal."production. The country’s most in Japan this year and its impact onprominent energy trading partner, Libya, nuclear plants sparked a wave of protest Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 12 EurOil Although Putin is favoured to return to have slowed a return to pre-conflict willing or able to pursue such costlyoffice, the change in leadership in Libya production levels. infrastructure projects in the comingmay offer Italy some relief, as Eni has Elsewhere in North Africa, Italy has year.returned to production efforts in the sought more exposure to the region’s For now, the country’s energy futurecountry after embracing the Libyan energy potential, recently moving remains vague, with little allotted forTransitional National Government forward on a long-delayed pipeline traditional or novel approaches to(TNG) despite earlier reservations. Eni project linking Algeria, one of its largest meeting domestic energy needs orhas revived production efforts in Libya, energy providers, with the island of expanding its hydrocarbon presenceincluding its work in the Elephant field Sicily. abroad.south of Tripoli, but levels remain The move would increase imports into Having announced that it has little tomodest. Fully supported by the EU, the Italy, as well as side-step potentially contribute to Europe’s expanding shaleTNG will provide a greater opportunity unstable transport systems in the extraction marketplace and that it hasfor Italy to expand its presence in North transitional political environments of done little to build a government supportAfrica in the months ahead, though Tunisia and Libya. However, faced with system for renewables, the country againinfrastructure deficiencies and lingering likely spending cuts and a significant is looking to its traditional providers forworries concerning regional stability tightening of the belt, Italy may not be an energy answer." FSU OGMBotas, SOCAR plan gaspipeline across TurkeyThe unveiling of a new scheme to move Shah Deniz Stage 2 production to Europe appearsto have made a situation that was already complicated even more soBy Charles Coe# SOCAR is already considering delivery proposals from Nabucco, ITGI and TAP# However, it appears to have doubts about all three pipelines# The proposed link across Turkey could feed gas into BP’s proposed South-East Europe pipelineElshad Nasirov, the vice president of the bcm per year Nabucco gas pipeline, the mooted the SEEP pipeline plan becauseState Oil Company of Azerbaijan 10 bcm per year Interconnector-Turkey- it views the Nabucco, ITGI and TAP(SOCAR), stated last week that his firm Greece-Italy (ITGI) pipeline or the 10-20 consortia as unreliable partners for awould team up with Botas, Turkey’s state bcm per year Trans Adriatic Pipeline variety of reasons. The plan cannotpipeline operator, to form a consortium (TAP). succeed, though, without help.to build a new pipeline to pump As such, the move by SOCAR andAzerbaijani natural gas across Turkey to Complications Botas is seen as a necessary preliminary,Europe. Nasirov’s announcement appears to have in that it is designed to establish The pipeline is to have a capacity of no made a situation that was already infrastructure that can reliably move 10less than 16 billion cubic metres per year, complicated even more so. bcm per year of gas through Turkey.Nasirov said. That is the volume of gas This is partly because it follows a This cannot be done with Turkey’sthat Shah Deniz Stage 2 (SD2) is move by BP, the operator of the Shah existing gas pipeline network, which isexpected to produce when it comes on Deniz field, to unveil a proposal for considered to be too disjointed to providestream in 2017. putting a consortium together to carry 10 a clear transit route across the country. Some 6 bcm per year of the total has bcm per year of SD2 gas from Turkey’s It is not clear whether BP willalready been promised to Turkey, while western border into Central Europe. BP participate in the construction of this newthe remaining 10 bcm per year will be calls its plan the South-East Europe pipeline across Turkey."contracted to shippers using one of Pipeline (SEEP).several proposed pipeline projects: the 31 The multinational is believed to have Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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. NRG November 2011, Issue 20 page 13 FSU OGM According to press reports, though, the Turkmenistan, with which the European on how to transit SD2 gas throughconsortium that SOCAR and Botas Union is discussing the construction of a Turkey would be taken in mid-2012.intend to put together is expected to gas pipeline across the Caspian Sea.) “The gas transportation system frominclude other Shah Deniz partners. In an attempt to make itself more Baku to European markets consists not attractive to Caspian gas producers, only of one pipeline, but of the wholeGas deal Nabucco has proposed extending its combination of several pipelines,”SOCAR’s move also coincides with a pipeline from eastern Turkey to Baku, Nasirov was quoted by Azerbaijannew gas deal between Turkey and where it could theoretically connect with Business Centre as saying. These, heAzerbaijan. the long-discussed Trans-Caspian Gas said, include routes “from Baku to the After years of haggling, Ankara and Pipeline (TCGP). Turkish border, from eastern Turkey toBaku inked several agreements in late Speaking in Baku on November 5, western Turkey and further to theOctober. The documents not only set the SOCAR’s president, Rovnag European markets or in the southwest orprice for delivery of SD2 gas to Turkey Abdullayev, said the Shah Deniz northwards direction.”for domestic consumption and for consortium would decide within a year He added: “The transit agreementshipment to Europe but also provided for on which route to choose for the export [between Baku and Ankara] was signedthe upgrade of Botas’ existing network or of gas to Europe. He also asserted that for the option of [expanding] the existingfor the construction of a new pipeline. the unveiling of a different pipeline infrastructure in Turkey. In this This may have far-reaching project would not prevent the connection, a consortium will be set upconsequences, as it appears to pave the implementation of the Southern Corridor to consider a new pipeline constructionway for SOCAR and Botas to cut the pipeline projects, those being Nabucco, option.”Nabucco project out of the picture. ITGI and TAP. Nasirov further remarked that the Like ITGI and TAP, Nabucco Abdullayev was quoted by Trend news decision on how to award the contract forsubmitted to Shah Deniz shareholders its agency as saying that Turkey’s existing deliveries of SD2 gas was a complexbid to transport the gas to Europe by the pipeline infrastructure was complex. For one.October 1 deadline. While the contracts that reason, he said, SOCAR has decided “The route from the western border ofare probably months away from being to explore the prospects for constructing Turkey and sales of gas to Europe is oneawarded, the Nabucco group hopes to a new gas pipeline across the country. part of the project; passage throughwin, despite the fact that the 10 bcm per Turkey is another project, and delivery ofyear of SD2 gas would account for less Complex decision gas from Baku to Turkey is one morethan half of its full capacity. (The The SOCAR chief’s words were echoed project,” he said."consortium is looking to also transport by Nasirov, who said during a conferencegas from northern Iraq and from in Baku on November 5 that a decision GCEMChina’s emissions conflictWhile the Chinese government hails falling carbon intensity levels, new research predictsrising coal consumption as economic growth continuesBy Graham Lees# Research from Tsinghua University says annual coal consumption will reach 4.6 billion tonnes by 2015# Beijing wants provincial authorities to take the lead in promoting low-carbon energy and cutting emissions# Beijing has announced tentative plans for voluntary emissions cuts and a carbon trading system# Provincial governments’ desire to expand their economies limits their ability to cut emissionsRising coal consumption in China published as the central government also made a number of confusingthreatens to undermine central trumpeted that the country’s carbon announcements about plans to tacklegovernment targets for reducing CO2 intensity levels – emissions per unit of greenhouse gas (GHG) emissionsemissions by 2015. That is the verdict of economic growth – had fallen in 2010. nationally."a study by a leading Chinese university The study was published as Beijing Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 14. NRG November 2011, Issue 20 page 14 GCEM They appeared to underline the differing thoughts on tackling climate Tianjin, Shanghai and Chongqing, plusuniversity study’s misgivings of a clear change-linked pollution. Some seem to the provinces of Guangdong and Hubei,line of progress to CO2 cuts by 2015. be in favour of voluntary emissions said China Daily, quoting “sources with Carbon intensity levels dropped in controls at a provincial level, while knowledge of the matter”2010 because of Beijing’s push to close others talk of a nationally led coercive “These regions have submitted detaileddown inefficient coal-burning power programme, including a compulsory plans that cover emissions caps, quotaplants, the use of more gas in place of carbon trading regime. allocations, third-party verifiers ofcoal and an expansion of renewable “China should actively develop and emissions cuts, enforcement of tradingenergy systems. However, the overall promote low-carbon energy, while emissions consumption quotas andelectricity generating capacity produced accelerating the establishment of a excess emissions penalties,” said thefrom coal has actually gone up in the last calculation system for greenhouse gas state newspaper.five years from 68% to 70%, said the emissions,” a State Council statement on China will begin with voluntarystudy by the Climate Policy initiative of November 9 said. emissions cuts but also “explore market-Tsinghua University. It called on local governments to take oriented measures to realise reduction “[The] central authorities’ goal of steps to reduce CO2 emissions, but gave targets,” the director-general of thecontrolling coal use in the next five years no indication that there would be any NDRC’s climate change department Suwill be unattainable so long as local clampdown on expanded coal use. Wei told the official news agency Xinhuagovernments remain reluctant to use less “Positively coping with climate change last week.energy while they pursue economic should be regarded as an importantgrowth,” the official China Daily strategy for China’s economic and social Coal demandnewspaper quoted the study as saying. development, as well as a great China will need to balance continuing “Local authorities still have a strong opportunity for economic restructuring strong economic growth with controlleddesire for economic expansion,” the and promoting a new industrial energy consumption, the president of thestudy’s chief editor Qi Ye told the revolution,” said the State Council. China Beijing Environment Exchange,newspaper last week. Mei Dewen, said. Voluntary schemes “China can adopt both an absoluteReducing carbon intensity These are laudable words but the carbon cap and voluntary carbon tradingBased on the targeted growth plans Tsinghua study makes clear that many in the beginning to test the waters, thenpublished by provincial governments provincial authorities are not heeding gradually consolidate the two measures,”across the country, China will be burning directives from the centre, especially Mei told the China Daily.4.6 billion tonnes of coal per year by those provinces in central and western The Tsinghua study’s findings are2015, said Qi. That is 500 million tonnes regions which are still economically far backed up by a senior nationala year more than Beijing would like. below the wealth and standard of living policymaking figure, Zhang Guobao, the The gloomy predictions by Tsinghua now being enjoyed in coastal provinces. former chief of the National EnergyUniversity coincide with an Perhaps in an attempt to coax Administration (NEA).announcement by Beijing of plans to recalcitrant provincial governments into “The growing demand for coal will putcurb GHG emissions to achieve a 17% a cleaner future, the National China under pressure in terms of coaldrop in CO2 emissions per unit of GDP Development and Reform Commission mining, transportation and controllingby 2015. But state media in the past week (NDRC) on November 11 named four carbon emissions,” Zhang told Chinahave quoted national officials giving large cities under the central Daily. government’s China is importing more coal than direct control ever, the NDRC has conceded. A record which had 19.1 million tonnes were shipped in “volunteered” during September, 25% more than the to join a test same month one year ago. programme on It looks like China’s central CO2 government faces an uphill task in emissions. bringing first the provinces, and then The test, their CO2 output, under control. which will not The one thing that may help them more begin until than anything else, however, is the global 2013, will slump, which has reduced demand for involve Chinese products, and therefore energy." Beijing, Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 15. NRG November 2011, Issue 20 page 15 GLNGOffshore Australian projectnears FID momentThe Ichthys LNG will cost more than the expected US$30 billion, although a finalinvestment decision is expected to be taken by the end of 2011 as plannedBy Kevin Godier# Total blames the Australian government’s strict environmental conditions for soaring costs# Inpex and Total have awarded engineering contracts to the Clough DORIS Joint Venture JV# Offtake contracts with Japanese buyers are already in place.# Inpex is looking to offload some equity to share the financial burden more broadlyA final investment decision (FID) on the have previously prompted many analysts figure of US$30 billion at road shows.huge Ichthys LNG project in northwest to ponder whether Inpex and Total would The strict environmental conditionsAustralia is due by the end of the year, be able to mount a viable business case imposed by the Australian government tobut the project will cost more than for the venture. develop the project explain the upwardexpected, according to the scheme’s two While the news of the cost increase revision in the project’s cost, de Margerieshareholders, Japan’s Inpex Corporation bodes poorly for the sponsors of other said, noting that environmental approvalsand France’s Total. key LNG projects in Australia, the for the scheme were already in place. Adding to the raft of Australian LNG imminence of the FID, after which work Recent green lights for several rivalprojects on the drawing board, Inpex and on the project will commence energy developments in Australia haveits 24% partner Total have been targeting immediately, will be welcomed as a significantly increased the demand fora late-2011 sign-off for construction of massive financial boost in Darwin, where labour, sparking analysts’ warnings ofan export terminal in Darwin capable of a gas liquefaction plant will be built on potential delays and cost overruns, but deproducing 8.4 million tonnes a year of the Blaydin Point industrial site. Margerie did not cite this factor.LNG, with the first cargo scheduled to be This would take feedstock from the De Margerie also indicated that Totalshipped from late 2016. Ichthys gas field in the Browse Basin off wished to raise its 24% stake in the “We are working to make the decision the Western Australian coast, via an 885- Ichthys scheme, which is also slated towithin this quarter as planned, and the km undersea pipeline from the offshore produce 1.6 million tonnes of liquefiedwork is proceeding without any big natural gas and condensate processing petroleum gas per annum. “We wouldproblem,” said Masahiro Murayama, facility. like to have more than that,” he said, butManaging Executive Officer of Inpex’s The project has been described as a provided no details on whether InpexFinance & Accounting Division, quoted “game-changer” for Darwin by federal would agree to let Total up its stake.by Dow Jones on November 4. Resources Minister Martin Ferguson, and Reuters said that he did not comment The project will now cost more than will require thousands of construction on the outcome of reported meetings byUS$30 billion, according to Total. “It personnel, some of whom will be housed bankers in Tokyo and Sydney that werewill cost a little more than expected for in a 2,700-bed workers’ village in aimed at putting together the financingenvironmental reasons ... We had Howard Springs. needed for the development.originally said US$30 billion,” Total Inpex, Japan’s top oil and gas explorer, “In Ichthys, like for every big projectChief Executive Christophe de Margerie is expected to pump hundreds of millions we have been in, the FID will be madetold Reuters on the sidelines of a G20 of dollars into the Northern Territory before the financing is in place,” demeeting of business leaders in southern economy during the four-year building Margerie was quoted as saying.France. programme. Inpex has said previously that much of the scheme’s massive costs will be metProject details Soaring costs by project financing, in which Japan’sThe technical complexities and scale of Inpex estimated in 2008 that the Ichthys biggest development and commercialthe project, led by the massive size of a project would cost US$20 billion, but de banks are expected to play a majorsemi-submersible central processing Margerie said that the Japanese company role."facility to be based 200 km offshore, had in recent months been citing the Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 16. NRG November 2011, Issue 20 page 16 GLNGContract awarded output from the development. country’s LNG imports.Inpex’s determination to push ahead with Osaka Gas Co. is Japan’s second TEPCO and another key Japanese gasthe project was seen in mid-September, biggest gas utility after Tokyo Gas purchaser, Chubu Electric Power, havewhen the Japanese company said Company, and has said it intends to raise become more aggressive in takingconstruction of its Naoetsu LNG its total LNG imports, both via contracts upstream stakes in LNG projects, as theyreceiving terminal, in the Niigata region, and stake holdings, to 10 million tonnes look to gain first-hand knowledge ofwas on schedule to be completed by per year by 2020, compared with around projects and to secure stable supplies.2014, with the facility’s two LNG tanks 6.8 million tonnes per year in fiscal 2009. In a separate deal with South Korea’sboth 70% complete. Inpex said in June that sales KOGAS, the largest single buyer of LNG The terminal is a key strategic plank agreements that would cover the entire in the world, Total is to sell 2 millionfor Inpex, and will boost the company’s 8.4 million tonnes per year of LNG to be tonnes per year of LNG from Ichthys andability to feed its sizeable gas distribution produced at Ichthys were nearing other fields in Nigeria, Norway andnetwork in Japan. completion. Egypt from 2014 to 2031. In August, a joint venture between Inpex and Total will each lift 900,000 While all of these contracts dependAustralia’s Clough and France’s DORIS tonnes per year from the project, upon the approaching FID, there is nowEngineering received a letter of intent although Total has agreed to provide sufficient evidence in place to suggest(LoI) to provide offshore integrated 200,000 tonnes per year of its volume to that the Ichthys development is poised toproject management support services for its Japanese partner. add itself to the cluster of Australianthe Ichthys project. Inpex has also reached a heads of LNG schemes that are poised to propel The contract to be awarded to the agreement (HoA) with Taiwan’s CPC the country into the very top tier of LNGClough DORIS Joint Venture (CDJV), Corporation for the sale of 1.75 million exporters.which is equally owned by the two firms, tonnes per year, and with Japanese As the end of the year approaches,is valued at more than A$250 million utilities Chubu Electric and Toho Gas for market observers will be looking for(US$253.3 million). 490,000 million tonnes per year and further news of equity acquisitions that Under the contract, CDJV is to oversee 280,000 million tonnes per year will downsize Inpex’s huge financialthe detailed engineering design, respectively, according to Platts. commitment to the scheme and share theprocurement, fabrication, at-shore Another potential buyer of the Ichthys fiscal burden more broadly."commissioning, tow to site and offshore gas, according to media reports, ishook-up of the central processing facility TEPCO, Japan’s largest LNG buyer, Ichthys field locationand the floating production, storage and which accounts for about 30% of the Source: Inpexoffloading (FPSO) vessel for the project,Clough said.More Japanese equity?Another major Japanese gas player, theOsaka Gas Company, has been indiscussions with Inpex on the acquisitionof a stake in the Ichthys LNG project. Kenji Kawamoto, Osaka Gas’executive officer in charge of overseasbusiness development, said in earlySeptember that his company would alsobuy LNG from the project as part of anydeal. Such a move would fit well withcomments by Inpex in July and Augustthat it plans to sell an equity stake ofaround 10% in the Ichthys LNG projectto the customers it has lined up to lift Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 17. NRG November 2011, Issue 20 page 17 LatAmOilUS dilemma over Cuba’s oilCuba’s offshore resources may turn the country into an oil exporter, but they could alsolead to a major environmental accidentBy Jon Stibbs# Cuba could hold as much as 20 billion barrels of reserves# Repsol is start exploration in January with a Chinese-built rig# The US is exposed to environmental risk by its blockade of CubaAfter half a century of being ostracised mobile drilling platform – owned by relationship.and subjected to swingeing sanctions, Italian-outfit Saipem – should arrive As such, Havana has sought to buildCuba is rich – at least in terms of from Singapore next month, when it will close ties with China, seeking to tap intoresources. While the citizens of the be operated by Spanish energy major the Asian giant’s deep pockets. However,pariah state may be impoverished Repsol. China’s investments, while oftenmonetarily, they appear to have been Repsol is to begin exploratory drilling carrying some geopolitical motive, tendsitting on impressive oil reserves all in January and is backed by a wave of to be more business orientated thatalong. local optimism. ideology driven. China and Cuba may Cuba already has an oil industry in On November 15, the BBC quoted the share socialist ideals on paper, butplace which produces about 53,000 head of exploration for Cuban state oil whether China can be counted on couldbarrels per day, meeting approximately company Cupet, Rafael Tenreiro, as well depend on the level of financialone-third of the socialist island’s saying: “It is not a matter of if we have return Beijing sees in the relationship.domestic needs. The majority of Cuba’s oil, it is a matter of when we are going to Without Chavez, Cuba would beoil demand is supplied by Venezuela, at start producing.” exposed and, as such, might feel that itan estimated cost of US$3.5 billion per This will not be Repsol’s first needed to derive income from itsyear to its ideological bedfellow and exploratory drilling in Cuba, as it found offshore depths.benefactor. oil in 2004 but said it was not Involvement in socialist Cuba, However, Cuba’s current production is economically viable to exploit. The test however, is a dangerous occupation forjust a taste of what could lie untouched, is whether exploration can now be made all but the most powerful. With the USwith the Cubans claiming that 20 billion to pay when faced with the expense of mortgaged to the hilt to China, Beijingbarrels lie beneath their territorial waters, drilling at more than 1,600 metres amid can act with impunity. Spain’s Repsol,a figure the US Geologically Survey the constraints of the US’ decades-old however, has no such leverage and, withmore conservatively puts at 4.6 billion sanctions. interests in the US Gulf of Mexico, itbarrels. needs to tread carefully. Downstream limitationsResource rich Refining capacity could also be a Big stickShould the Cubans be correct, it would problem. If the oil found offshore is Ileana Ros-Lehtinen and 33 fellowmean their reserves would be the 14th particularly heavy there may be few members of the US Congress havelargest in the world, knocking the US downstream options open for island state; written to Repsol to warn the firm that itsinto 15th place, according to a report by even Venezuela’s PDVSA and Mexico’s operations in Cuba could incur “criminalGlobal Research. Pemex refine a substantial amount of and civil liability in US courts.” Whatever the reality, Cuba could well their heavy crude in the US – not an Anxious not to make enemies acrossbecome a net exporter of oil, and option for blockade-bound Cuba. the Florida Straits, Repsol emphasisedpotentially wealthy in its own right. The Venezuela is engaged in updating the that it had complied with all US safetypromise of Cuba’s untapped riches has island’s long neglected refineries with and embargo legislation. Additionally, itbrought interest from all over the world the expansion of the Cienfuegos and offered to allow US officials to check theto the socialist state, with North America Santiago de Cuba facilities, as well as the safety standards of the Scarabeo rig.represented in the form of Canada. creation of a new refinery in Matanzas. There is considerable US anxiety about The new international reality is At present, Cuba leans heavily on the risks of Cuban exploration, whichrepresented by the US$750 million, Venezuela for support but Venezuelan would take place in waters even deeper53,000 tonne Scarabeo 9 oilrig heading President Hugo Chavez’s ill health, or than BP’s disastrous Macondoto Cuba: the Chinese-built advanced the ballot box, could end the close prospect." Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 18. NRG November 2011, Issue 20 page 18 LatAmOil If there were a spill, models suggest Writing in the Huffington Post, from deeply entrenched – albeit largelythe slick would be borne along the Mauricio Claver Carobe, director of failed – policies and would incur theFlorida Keys’s coral reef and mangroves. Cuba Democracy Advocates in wrath of the US-Cuban lobby. At present, however, the US’ own Washington, called for “withholding US High prices and developing technologydraconian laws threaten its coastline in executive visas for the Castro regime’s mean the international oil industry isthe event of a spill because US citizens foreign partners; stripping those partners likely to make a success of Cuba’sneed a licence to enter Cuban waters and of drilling rights and concessions in the reserves. The US’ antiquated policies toa special export licence to send clean-up [US] and our off-shore waters; protect it from communism mean it willequipment there. Therefore, the US multiplying their legal liabilities, and be isolated from a natural supplier whilewould have to wait for the oil to sweep legally disqualifying use of the drilling also being exposed environmentally.towards its shores before it could rig Scarabeo 9.” While Cuba is slowly liberalising, theintercede. glacial speed of ongoing Cold War This fear has led Cuban-American Operational options politics in the Caribbean mean thegroups to renew the mantra of ever- If sanctions fail, however, and Repsol prospect of the US buying Cuban crudestronger sanctions to prevent any drilling pushes ahead in Cuba, calls will grow for seems an impossibly long way off, butgoing ahead. By strengthening the co-operation with the Castro regime after limited co-operation may be withinpresent Cold War blockade policies, they around half a century of bellicose reach."want to push up the costs and risks of oil diplomatic silence.production to uneconomic levels. This would require a brave move away Downstream MENASadara financing gains momentumWith Saudi Arabia being largely untouched by the political instability that has surgedthroughout the region, the market is optimistic about funding for the behemoth complexBy Kevin Godier# Costs for the project are expected to total around US$20 billion# Sadara will represent the largest chemicals production complex ever built in a single phase# It will help make Saudi Arabia a major petrochemical production hub, with much of the output bound for AsiaThe financing process for the major stake in the venture. among the ECA group, said the firstSadara Chemical Company project in “The nine ECAs backing Sadara had source, citing “very low Korean bids forJubail Industrial City, Saudi Arabia, is their second meeting in early November contracts.”beginning to unfold, presaging what may – they have all committed to backbe the biggest ever financing for a project exports to the project from their own Healthy competitionin the MENA region. countries,” said the source. Sadara awarded a US$920.3 million Sadara, originally known as the Ras One of the ECAs, UK Export Finance engineering, procurement andTanura Integrated Project (RTIP) – and – until recently known as ECGD, is set to construction (EPC) contract for theonce termed ‘The Beast’ by bankers insure project finance worth US$2 billion project’s main mixed feed cracker toawed by the scheme’s sheer size and at the massive petrochemicals project, Daelim of South Korea in July 2011.expense – was moved to Jubail because according to the agency’s head of The flexible cracker will break theof escalating costs. Its financing brunt business development, Ali Sherwani. naphtha and ethane feedstock to producewill be borne by insurance and Speaking to Downstream MENA on the around 3 million tonnes per year ofguarantees from export credit agencies sidelines of a recent seminar held in chemical products and plastics – part of(ECAs) from across the world, confirmed London, Sherwani said that the project the overall 8 million tonnes per year ofa source close to the development, which would involve input from “multiple UK specialised chemicals production fromis being undertaken by affiliates of The suppliers, including Jacobs Engineering’s the scheme, which will represent theDow Chemical Company and Saudi UK subsidiary.” Two Korean agencies, largest plastics and chemicals productionAramco. The two firms each hold a 50% Korea EximBank and K-Sure, will be complex ever built in a single phase." Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 19. NRG November 2011, Issue 20 page 19 Downstream MENA It is also indicative of Saudi Arabia’s “Saudi is the regional leader in this This marked the first Shariah-moves to diversify its petrochemicals area – and the Arab Spring has not compliant project sukuk instrument inindustry. affected that,” said a lawyer specialising Saudi Arabia. Significantly, it received Daelim is also reported to be the in Middle East projects. “There has been significant demand from a wide range oflowest bidder, against Samsung no mention of any potential popular investors, resulting in anEngineering, for building parts of the discontent in the Kingdom during the oversubscription of around 3.5 fold,other production units at the Sadara discussions with financiers for the Sadara demonstrating that Islamic bonds willcomplex, which will consist of 26 Chemical scheme or for the Saudi almost certainly have a greater role tochemical manufacturing units and be one International Petrochemical Company play for Saudi project sponsors goingof the largest fully integrated complexes [Sipchem] financing, which is continuing forward.of its kind in the world. to raise money,” he added. The other units include facilities to He continued: “You need three main Contract awardsmanufacture analine, methylene di-para factors in place for a project financing Construction work on Sadara has alreadyphenylene isocyanate (MDI), deal to go ahead – political stability, started and is scheduled to be completedmononitrobenzene (MNB), toluene finance market liquidity and robust prices by early 2015.diisocyanate (TDI) and dinitrotoluene to prevail for the commodity in Production from the first units is(DNT). question.” expected to begin in the second half of “The Koreans have done really well, Elsewhere in the MENA region, “there 2015, and all units should be up andgaining some quite juicy contracts by has been some stepping back in Egypt, running in 2016, after which annualundercutting everything else by as much particularly for the Egyptian Refinery revenues of roughly US$10 billion areas 30-40%,” said the source. Company deal – but by and large, there anticipated within a few years of has not been very much effect, even in operation, with around 45% of exportsCovering costs Bahrain,” he added. targeted at Asia.He pointed additionally to ECAs from With regard to liquidity, “ECAs are Progress with the financing isJapan, North America, France and now playing a major role, given that dependent to some extent on the steadyGermany – as well as Saudi Arabia’s every country in the world currently progress that continues to be made withPublic Investment Fund – that would be wants to boost its exports,” said a Dubai- contract awards.backing a financing package likely to based banking source. “The Japanese On November 10, Jacobs Engineeringcover between 60% and 70% of Sadara’s banks are also very liquid, as are the was announced as the winner of ancapital costs. [Gulf Co-operation Council’s (GCC)] engineering, procurement and “The capital costs of the project are regional banks. Saudi banks are a construction management (EPCM)continuing to come down, which has mainstay, because they are somewhat contract for the Chemicals 1 Envelope.been helped by the competitiveness of obliged to finance Saudi projects, but Under the terms of the contact, Jacobs isthe contract award process, and will add they are being supported by liquidity providing front-end engineering designto the cost savings made via the move from other players such as Islamic (FEED) and detailed engineeringfrom the project’s originally planned financiers,” he added. services, in addition to procurement,location at Ras Tanura. All of this will He pointed to the Saudi Aramco Total inspection and delivery of equipment andhelp with the financing process,” said the Refining and Petrochemical Company bulk materials, as well as the overallsource. (SATORP) refinery complex in Jubail, construction management. He stipulated that there was still no which will supply ethane and naphtha Officials did not disclose the terms offinal capital figure for the Sadara derived from oil and natural gas liquids the agreement, but noted that the workscheme, for which estimates of US$20 as feedstock for Sadara, and for which was being performed by Jacobs’ officesbillion are still being bandied around. the sponsors issued a 3.75 billion riyal in Manchester, UK; Mumbai, India; andDow and Aramco will fund around US$7 (US$1 billion) Islamic bond – or sukuk – Al Khobar, Saudi Arabia.billion between them. An initial public in October. Mid-October saw the award of anotheroffering (IPO) to raise this equity is key contract, when ABB was awardedplanned to be held during 2013-14.8 the main automation contract for the COMMENTARY complex. As part of the contract, ABB Market confidence will have to build process automation The events of the Arab Spring appear and safety systems for the factory andnot to have dented the ability of major also provide project management, projectSaudi downstream projects to push ahead engineering and commissioningand raise financing. assistance services." Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 20. NRG November 2011, Issue 20 page 20 Downstream MENA Post-delivery site support, training the venture (JV) shareholders’ agreement for success,” said Saudi Aramco Presidenttechnicians for maintenance and Sadara, was signed by Aramco and Dow and CEO, Khalid Al-Falih, at the JVoperation are also part of the contract. In in early October, bringing nearer to signing ceremony.August, Fluor was awarded a US$2 fruition a scheme that will be With financing for the projectbillion EPCM contract for developing all instrumental in Saudi Arabia’s strategy to beginning to assume an embryonicthe offsite work and utilities (O&Us) at become not only a strategic chemicals shape, Aramco and Dow will be hopingthe site. The scope of work will include and plastics producer but also a hub for for the smoothest possible progress ondevelopment of associated infrastructure future downstream manufacturing. every front over the next five years toand pipework arrangements to allow the “Sadara will be a game-changer in the ensure that the scheme finally leaves theconstruction of the complex. Kingdom’s petrochemical industry, as it launch pad." Another major milestone, the joint has all the needed ingredients for MEOGIMF report flags up GCCrevenue bonanza in 2011Higher oil prices this year have supported strong growth across the broad GCC region,though the economic outlook for 2012 looks less certainBy Kevin Godier# Regional economic growth is forecast at more than 7% by the year-end, the IMF says# Qatar is the star performer as always, with 2011 growth projected to come in at 18.7%# Broader social and economic concerns could bring a halt to progress in the year aheadUnderpinned by high oil prices, the Department. and a more prosperous future for theexternal current account surplus of the people in the region,” he stressed.Gulf Co-operation Council (GCC) is Oil rulesexpected to surge by a massive 71% this The region’s economies are dominated Higher oil pricesyear, from US$163 billion to US$279 by the highly capital-intensive oil and Economic activity in the region’s oil-billion, with the region’s economy gas sector and will continue to be so for exporting countries has clearly improved,anticipated to record more than 7% the foreseeable future. bolstered by continued high energygrowth by year-end, according to the “The GCC has been largely shielded prices, and the temporary stepping up byInternational Monetary Fund (IMF). from the negative impact of social unrest several countries – Saudi Arabia in An IMF report released on October 26 in the region,” the IMF said, adding that particular – of oil output in response to(Regional Economic Outlook for the it instead benefited from oil prices that higher prices and shortfalls in productionMiddle East and Central Asia) said at were 31% higher than in 2010, and from Libya.current projected oil prices and output greater export volumes. “The decision to increase oillevels, revenue gains would more than “Since the beginning of this year, the production in the wake of disruptions inoffset the high levels of public spending region has witnessed unparalleled Libya was an essential contributionacross the region. uncertainty and economic pressures,” toward global energy market stability and “For the GCC, who have stepped up Ahmed told a press conference in Dubai. enhanced activity,” Ahmed noted.production temporarily in response to The recent worsening of the global The IMF said Kuwait’s economy washigher oil prices and shortfalls in economy, he added, would likely add to expected to expand by 5.7% in 2011,production from Libya, growth continues these pressures. compared with 3.4% last year, whileto be projected at more than 7%,” said “But we should not lose sight [of] the growth would be at 3.3% in the UAEMasood Ahmed, Director of the IMF’s ongoing historical transformation holding compared with 3.2% in 2010."Middle East and Central Asia the promise of improved living standards Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 21. NRG November 2011, Issue 20 page 21 MEOG The Saudi economy will expand by For Iraq and Bahrain, this is now a outlook globally, and in the European6.5% in 2011, after growing 4.1% in worrying US$100 per barrel or higher, Union, the region is seeing a sharp drop2010, and Qatar’s economy will continue and stands at between US$80 to US$90 in investment and tourism activity.to make major strides, expanding by per barrel for Iran, UAE and Saudi “The recovery in 2012 is expected to18.7%, even better than the massive Arabia, according to IMF data. be weaker than earlier anticipated, with16.6% rise recorded last year, thanks to Oman’s break-even price is over growth projected at just over 3%,” theits growing gas industry. US$70 a barrel, while the figure for IMF said. Oman, which appears to have put Kuwait stands at around US$50 and at Moreover, in response to mountingbehind it limited social unrest in the below US$40 for Qatar, the report social unrest, the economic downturn andspring that resulted in the death of two indicated. higher commodity prices, oil-importingprotesters, is forecast to register a 4.4% Qatar’s optimisation of its oil and gas countries in the region have significantlygrowth in GDP, compared with 4.1% in revenues has long been the standout expanded subsidies and transfers, the2010, the IMF said. feature of the tiny emirate’s soaring Fund emphasised. Although Bahrain is a member of the growth path in the past two decades, and The cost of this social spending isoil-rich GCC, its economic growth is its break-even figure is helped hugely by high, exceeding 10% of GDP in Egyptexpected to slow sharply following a its very small population, which provides and more than 5% of GDP in most otherheavy-handed crackdown on a a negligible demand on the yearly budget countries.nationwide protest earlier this year. in comparison to other countries within As a result, the fiscal deficits of oil The economy is expected to grow by the region. importers’ across the Middle East are1.5% in 2011, compared with 4.1% last widening, the IMF said.year. 2012 challenges “In the near term, such spending Ahmed pointed out that increased oil While 2011 has been fiscally favourable measures are appropriate to lessen therevenues had created additional room for for most Middle East countries, the impact of the downturn. But from angovernment spending in the GCC. prospects for 2012 are less benign, the efficiency and equity standpoint, it is Several countries announced spending IMF believes. better for governments gradually toprogrammes early in the year covering a The Fund’s assessment foresees a replace universal subsidies with targetedwide spectrum of measures such as significant moderation in growth for the social safety nets,” the IMF report stated.subsidies, wages and capital expenditure. region’s oil exporters to 3.9% in 2012, Above all, it said, the conflict across While hydrocarbon exporters will and notes that these countries also face the wider Middle East region –experience a pick up in growth in 2011 some downside risks, with several factors particularly in Libya, Syria, and Yemen –on the back of higher oil prices, the IMF holding the ability to trigger a less has taken a massive human toll incut its economic growth forecast for the positive growth scenario for the region’s addition to its enormous economic costs.wider Middle East’s oil importing oil exporters. “The immediate priority for thesecountries – which include Djibouti, The most immediate risk is a sharp countries is to avoid further humanitarianJordan, Lebanon and Syria – to just slowdown in Europe and the United crises and, once the conflict is over, to1.9%, down from an earlier forecast of States. pursue an agenda of reconstruction and2.3%. Global oil demand would contract reform,” it recommended. The Fund anticipates that the Syrian substantially, possibly leading to aeconomy will shrink by 2% after years of sustained drop in oil prices, the Fund Job concernsrobust growth, following months of said. Evidence that this threat is being Another challenge for the region’s oildeadly protests against President Bashar taken seriously has been observed in exporting governments is employment,al-Assad. Qatar, which has rarely hedged crude oil said a different IMF report, released on Yemen’s economy is also expected to for the past 20 years. October 14 and entitled; Gulfcontract by 2.5% this year – after an 8% As part of its oil strategy for 2012, Cooperation Council Countries (GCC):expansion in 2010 – following nine Qatar has begun hedging oil prices, Enhancing Economic Outcomes in anmonths of nationwide protests according to the Financial Times, which Uncertain Global Economy.demanding the ouster of President Ali reported that brokers estimated Doha had This highlighted that the strong growthAbdullah Saleh. already hedged almost 200,000 bpd of in the GCC countries over the past Even for major oil exporters, fiscal oil, almost 25% of its annual output. decade had not delivered all the expectedvulnerability has increased, however, as For oil importers, the prospects look results, particularly with respect tobreak-even oil prices – the prices at more difficult, with political and generating jobs for the region’s nationalswhich the fiscal balance is zero given the economic transformations occurring in and reducing dependence on oil and gaslevel of expenditure and non-oil revenues several of these markets expected to revenues."– have risen steadily and are now extend well into 2012.approaching observed oil prices. Together with a worsening economic Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 22. NRG November 2011, Issue 20 page 22 MEOG Despite accounting for almost half of problem could worsen, the Fund concern, and the IMF reports haveGDP, the oil sector employs less than 3% predicted. flagged up several other areas worthy ofof the region’s labour force. However events in the region pan out scrutiny, but the reality remains that As a result, a large part of the region’s in the coming months and years, the GCC governments, in particular, aregrowth has had a limited impact on Middle East’s oil and gas resources will better positioned than most other regionsemployment, the study observed. continue to provide governments with globally to withstand new global With more than 4 million new some huge advantages in terms of traumas."nationals expected to enter the GCC job revenue generation.market over the next five years, the Oil price worries remain a valid NorthAmOilAlberta, Europe andthe oil sands fightAlberta has come out fighting against EU plans to impose carbon tariffs on its oil sands,based on worries that the world will follow the European leadBy Ed Reed# The FQD will effectively close the EU to Alberta’s oil sands, although this will have little immediate impact# The EU’s life-cycle emissions figure have been criticised by IHS# Canada’s oil sands make up a large part of the world’s resources that are open to investmentThe European Union’s Fuel Quality Alberta’s UK office, Jeffrey Sundquist, could, technically, do so by offsetting theDirective (FQD) is intended to cut the told NorthAmOil. carbon-intensive fuels with less-pollutinguse of Alberta’s oil sands by imposing a Passing the FQD, the Co-operative products, such as biofuel. However, thiscarbon surcharge. One of the oddest Group’s toxic fuels campaigns manager, is likely to be impractical because of thethings about this plan – and one that Colin Baines, told NorthAmOil would be resulting higher prices.those both for and against agree on – is a “huge signal” that the oil sands had “no Sundquist stated Alberta’s support forthat it will have little impact on current place in a low-carbon economy – and it’s the reduction of carbon emissions butsupply and demand patterns. The bigger important industry takes that onboard.” disagreed that targeting oil sands via thequestion is one of how the world will FQD was the most effective means toview this resource. Carbon emissions accomplish such a goal. Alberta is well established as an up- The EU’s plans to impose additional Under the plan, emissions from oiland-coming energy supplier with tariffs on the oil sands are part of its sands are classified as being 23% greatersubstantial resources, a situation reflected focus on reducing carbon dioxide than those from conventional crude. Theby international interest in the oil sands. emissions by 6% by 2020 from EU’s efforts to penalise oil sands areHowever, most production from the transportation fuels. In order to meet this based on an assessment that have beenprovince flows south, securing Canada target, the European Commission agreed criticised as being overly simplistic.the top spot in terms of US oil imports. in October of this year to back the FQD. This state of affairs belies the fact that The European member states are to vote Numbers gamethe fight has become increasingly heated on it on December 2 and it will then be Emissions from the oil sands are likely toand is being played out across the sent to the European Parliament. be higher than some others, butcapitals of Europe. Neither side appears confident of how Sundquist made the case that, in fact, Despite the lack of an immediate the vote will go, with Baines saying production from all over the world wouldimpact, Canada is concerned that countries appeared to be evenly split. carry different amounts of emissionsregulations from the EU will have a Should the FQD be passed, those based on a number of factors, including“global reputational impact,” the head of wishing to import from the oil sands the extraction process." Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 23. NRG November 2011, Issue 20 page 23 NorthAmOil A study provided by Albertafrom IHS CERA picked out a Greenhouse gas values under the FQDnumber of issues with the EU’semissions figures, based on a Ordinary crude: 87.5 grams per megajoulepaper from a Stanford University Oil sands production: 107 grams per megajouleby Adam Brandt. IHS noted thatblending diluent with the bitumen Oil shale, such as from Estonia: 131.3 grams per megajoulecut life-cycle emissions to only Coal-to-liquids (CTL): 172 grams per megajoule11% over the EU average. The EU’s methods are Producers (CAPP), showing Canada’s oil one of the sole resources available to“discriminatory” on differentiating oil sands are less bad than Middle East companies for development. Only 20%sands from conventional crudes, IHS heavy and part-upgraded Venezuelan of the world’s oil is not controlled bycontinued, and warned that there was a crudes. Oil sands, according to the CAPP states, Sundquist said, and 53% of thatdanger of “serious errors in graph, are on a par with Angola and 20% comes from Alberta’s oil sands.policymaking.” A number of studies Nigerian light crudes. Baines, though, disputed whether thehave come to varying conclusions on world would need the additionallife-cycle emission question and Brandt Immoral part resources from the oil sands, predictingwas quoted by Friends of the Earth as The EU’s efforts to tackle oil sands, if that global demand would peak bysaying the IHS study did “not include approved, will have little impact on around 2020. As such, he said, thoseenough information to evaluate the global energy flows initially. However, it companies investing in the oil sands riskapproach used to model refining of oil would have an impact on the longer-term stranding funds in a resource that will notsands-derived products.” outlook for oil sands – both from Alberta be needed. The Co-op official went on to Baines also came out against studies and Venezuela’s Orinoco resource – say that conventional lower-carbonbacked by the Alberta government. “We another issue on which both those for and crudes would be sufficient to meet thisabsolutely take issue with those against the FQD agree. demand.numbers,” he said, flagging concerns Sundquist commented that the EU The International Energy Agency’sabout a lack of peer review. Steam- tended to lead the world in terms of (IEA) recent projections in the Worldassisted gravity drainage (SAGD), environmental legislation, although he Energy Outlook put Canada as one of theanother means of extracting the resource, disputed the suggestion that it had played only non-OPEC sources of increasedwas even more carbon-intensive, the Co- a role in the US’ decision to delay the crude, putting growth fromop official said. Keystone XL pipeline plan. Increasing unconventional output from the country Sundquist, though, echoed IHS’ the throughput of oil from Canada to the at 3 million barrels per day from 2010 toconcerns of discrimination. The FQD, he US Gulf Coast raises the possibility of 2035.said, fails to tackle the key aspect of more exports to the EU, particularly in Despite the hits Alberta’s resourcescurbing emissions and unduly penalises terms of diesel supplies. have taken in recent weeks – thethe oil sands industry. Alberta remains confident that the Keystone XL decision and the EU’s By focusing on effectively one Keystone XL will be approved, but moves on the FQD – Sundquist wasfeedstock – oil sands – the EU neglects Sundquist did say the province was upbeat on the region’s potential. “Therethe complexity of the situation, he said. looking at alternative export markets, may be delays,” he said, “but ultimately Efforts to regulate the carbon impact of such as Asia, via Enbridge’s Northern the reserves will be developed” given thefeedstocks, he maintained, should either Gateway link. world’s increasing need for oil.examine each blend separately or treat all “Many jurisdictions look to the EU for The development of the oil sands willcrudes the same. The oil sands are “not a global leadership” in terms of depend on how the world meets futureseparate category” of feedstock, environmental legislation, the official energy demand and whether this willSundquist said. said. continue to be through oil. In the shorter The Alberta official cited a “wells-to- With the world’s oil reserves virtually term, though, the fight over the FQD iswheels” comparison graph from the monopolised by states that restrict set to be increasingly acrimonious."Canadian Association of Petroleum foreign access, Canada’s oil sands are Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 24. NRG November 2011, Issue 20 page 24 REMNorth African solar cancreate an Arab summerThe Desertec initiative has had its fair share of detractors, but the prospect of major NorthAfrican solar projects is closer than ever to becoming a realityBy James Ellingworth# Desertec, launched in January 2009, aims to cover the desert in solar power generating capacity# Nur Energie is building a US$14 billion, 2,000-MW scheme in Tunisia independently of Desertec# Greece’s 10,000-MW Project Helios plan could pose a challenge to North African solarWhen launched in January 2009, the member of the Desertec Industrial and see what happens. Once that is inDesertec project seemed like science Initiative (DII) consortium which has place, what we are doing from our side isfiction – covering the desert in solar also agreed a joint venture with Tunisia’s engaging with the new energy minister inplants to power an entire continent. Even Top Oilfield Services to build a US$14 Tunisia regarding our project andnow, the sheer size of the installations billion, 2,000-MW solar plant obtaining authorisations to go forward.and investments being talked about dwarf independently of DII. We’ve been active in discussing thisany solar site in existence. Asked about the impact of the Arab already with the previous transition But now, as a 150-MW Desertec Spring on Nur’s project, Stenzel said: government in Tunisia and so there’s areference project moves into “It’s been a major positive influence for dossier on the desk there regarding ourdevelopment in Morocco, with a 2,000- us in Tunisia. We’ve certainly seen a project, which is in active discussion.”MW scheme from independent Nur much more open approach by the new While the region has changedEnergie in the works in Tunisia, the administration, a much more transparent substantially since the Desertecfantasy seems a viable possibility. The approach in terms of what is required and Foundation was established, so has theconcept has already survived a wave of what are the questions from their side. Desertec organisation itself.revolutions in the Arab world, and its We didn’t own any physical assets in The DII consortium, based in Munich,promise of jobs is a tempting pitch to Tunisia beforehand; only one measuring contains a host of Europe’s biggestmany of the region’s rulers. Plans for station for capturing solar radiation and energy companies, including E.ON,other grand solar undertakings, such as measuring solar radiation at our target RWE and Abengoa, with several majorGreece’s Project Helios and the Blythe site, but that was untouched and it’s banks signed up as partners. Nur EnergieSolar Power Project in California, now continued to work well, so really overall is a partner of DII rather than a membermean that a solar network stretching we’ve seen this very positively.” of the consortium, but Stenzel said thisacross the Sahara no longer seems quite While stable government contacts are brought several advantages: “Weso outlandish. always useful for major infrastructure exchange information regularly. The DII projects, Stenzel played down the impact has its focus, priority projects, which areSteady as she goes of changing faces, saying: “There wasn’t primarily in Morocco now, so we areThe promising political atmosphere a terrible rate of attrition in the kept informed broadly about what they’recould evaporate if the region’s politics [transitional] administration.” doing in Morocco, [and] we keep themfail to stabilise broadly informed about what we’re doing Still, many challenges remain. The Changing times in Tunisia.”promising political atmosphere could Elections on October 24 produced a He added: “There’s lots of scope toevaporate if the region’s politics fail to victory for the moderate Islamist [affiliate] with other shareholders andstabilise, and any solar power exports to Ennahda party, although the composition partners in the DII for our project.”Europe will have to compete with a wave of a new government remains uncertain. Factors in the North African solarof emerging energy sources such as Stenzel said: “The new Tunisian projects target market of Europe haveoffshore wind, domestic shale gas and government is in formation as we speak also influenced the venture’sliquefied natural gas (LNG) imports. and no major decisions will be taken in development." REM spoke to Till Stenzel, chief Tunisia before a new government isoperating officer of Nur Energie, a properly installed, so … we have to wait Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 25. NRG November 2011, Issue 20 page 25 REMNuclear fallout threat is from other large-scale solar the areas being talked about, is notGermany’s nuclear withdrawal, which projects. particularly great. The export of solarwill see all nuclear power plants (NPPs) Nur Energie’s Tunisian venture, being electricity from such a location wouldswitched off by 2022, has raised interest developed outside the DII, hints that not really be as economic as it would bein Desertec there, according to Stenzel. North African solar could become a from the high solar radiation areas in “I think the German nuclear competitive marketplace, with North Africa. Of course, it’s one of thesewithdrawal was a real impulse to say independents seeking to undercut DII things that’s being talked about now with‘this is a real opportunity.’ German projects. the Greek crisis, but I don’t think this iscompanies have always been interested The most direct competitor comes in really the answer.”in these sorts of projects in general. But I the shape of Greece’s 10,000-MW While Helios remains in its infancy,think by now DII is pretty international. Project Helios plan, which has attracted North African solar projects areCertainly, its offices are in Munich and considerable attention from European becoming ever more concrete. Schedulesso on, but if you look at the list of partner governments during the Greek debt have been set and work practices agreed,companies and shareholders now, it’s crisis. but DII and other developers still havebecoming less and less German. I don’t Leading European politicians such as some way to go before they install thethink it’s such an exclusive German club German Finance Minister Wolfgang first modules.as it might have been at the outset.” Schaeuble have suggested that Helios is Assuming the projects come to Since 2009, there have also been wide- the sort of indicator of potential Greek fruition, it is difficult to say whether theyranging changes in the development of economic growth that could ease the will be competitive or what their rivalsother renewables projects and emerging burden of a bailout by making European will be.energy sources that could challenge taxpayers more confident about the Various factors could still derail theDesertec. The Polish government future. projects, such as further instability inpredicts that commercial shale gas Asked whether Helios could shift North Africa and the politics of layingdevelopment could begin in 2014, while Europe’s focus away from Desertec-style the required power cables across thecheap LNG has spawned a rash of projects, Stenzel said: “No. The main Mediterranean.infrastructure projects across the reason for this is that I don’t think Regardless of the challenges, Northcontinent. Project Helios will really become a big African solar has made more progress Meanwhile, offshore wind farms in the project. First of all, there are a lot of open than many commentators predicted inNorth and Baltic Seas are now much questions. It’s not clear who’s in charge. January 2009, and it remains alarger than Desertec’s 150-MW reference Simply, the solar resource in Greece, in challenger."project in Morocco. Renewables may also soon be able toplay a much larger role in Europe’senergy development, if power-to-gasprojects such as a 5 million euro (US$6.8billion) pilot scheme from E.ON becomecommercially viable. Stenzel has claimed in the past thatNur Energie’s Tunisian project will beable to compete on price with offshorewind owing to the level of technologyinvolved, especially as the site reachesfull capacity of 2,000 MW in 2020.Solar competitionWhile any of the above trends certainlyseem to have the potential to competewith Desertec and other North Africansolar for investment or customers in thefuture, the most directly comparable Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 26. NRG November 2011, Issue 20 page 26 Unconventional OGMAustralian CBM sectorfaces growing oppositionMounting opposition to Australia’s multi-billion dollar coal-bed methane (CBM) industryis slowing developmentBy Andrew Kemp# The Australian government’s fragile hold on power bodes ill for the CBM industry# Few financial incentives for landowners mean there is little reason to embrace CBM projects# CBM developers have failed to maintain a unified front in presenting their caseAustralia’s wealth of coal and coal-bed growing pressure over the expansion of will hamper the development of themethane (CBM) resources is creating gas projects in the areas they represent. country’s nascent CBM sector.friction at both a state and a federal level While the deal ensured a majorover development methods and practices. political victory for embattled Australian Politics not economics The country has a string of CBM Prime Minister Julia Gillard, with the The move highlights existing concernsprojects either under way or in the Minerals Resource Rent Tax Bill passing that a major impediment to Australia’spipeline, with output destined for the through the Lower House with a thin CBM-LNG sector is not projectdomestic gas-fired power generation and margin of two votes, it will lead to economics but an uncertain politicalthe international liquefied natural gas creation of a US$150 million landscape created by a government(LNG) market. independent scientific committee that lacking popular support. The sheer abundance of Australian will evaluate all future coal and CBM In an interview with UnconventionalCBM has opened the door for a clutch of projects prior to approval. The body will OGM, partner and co-head of King &world-class LNG projects to take shape be tasked with ensuring such Spalding’s LNG practice, Dan Rogers,in Queensland, with a raft of smaller developments do not pose a risk to said the hurdle for new LNG projects inprojects following in their wake. underground water sources. Australia was the political environment The country’s US$50 billion CBM In addition, states will be forced to and growing opposition movement.sector has drawn a growing crowd of confront concerns about damage from “The likelihood of success in the nextopposition, however, with grassroots drilling to underground water supplies wave of projects may actually turn moreopposition movements springing up and, if they refuse to do so, legislation on the political landscape than projectacross investment hotspots. This new will be introduced giving the federal economics,” he said.groundswell of public protest over CBM government the power to block new Opposition to CBM projects hasprojects has pushed the sector on to the CBM projects not subject to proper gained traction in Queensland, whereback foot and, while unlikely to halt its environmental scrutiny, The Australian four multi-billion dollar Gladstonegrowth, has clearly hampered reported. projects are well under way, as well as indevelopment. In a statement, Gillard said: “Coal New South Wales. seam gas and coal can bring huge Landowners and environmentalistsEnvironmental oversight opportunities, but to do so [we] must have mounted increasingly effectiveThe government announced this week maintain community confidence, campaigns against the development ofthat, under a deal to secure support for its especially in regard to the impact on CBM, with the New South Walesmining tax bill, all future CBM and large water.” (CBM is called coal seam gas in government having recently bannedcoal projects would come under Australia) fracture stimulation (fracking) while itincreased environmental scrutiny. “This can only be achieved by considers new industry regulations. The ruling Labor party made the ensuring all environmental approvals and Rogers said: “The opposition hasconcession to two independent MPs licensing decisions are made on the basis achieved really good traction thus far andessential to the formation of the of transparent, objective scientific part of that is because, once again, thecountry’s coalition government. evidence,” Gillard added. industry has not done a very good job ofIndependent parliamentary However, the announcement has getting correct information into publicrepresentatives Robert Oakeshott and elicited protest from the extractive sector, circulation.”"Tony Windsor have reportedly faced with complaints that the new regulations Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 27. NRG November 2011, Issue 20 page 27 Unconventional OGM He added that while there were risks success of the CBM-LNG projects in might have otherwise.involved in CBM development, as in any Queensland in navigating the issue. “Surface owners are trying to figureextractive operation, the level of However, he added: “It’s a harder job to out a way to get a better deal foropposition found in Australia was get that done in an environment where themselves,” said Rogers, adding: “If the“shocking.” the landowners don’t have any interest or landowners had more of a stake in the He said: “When you look at [the right in the subsurface.” project, and saw more benefit toevidence used by the opposition] and try While the task of negotiating land themselves, then you might find thereto match it up with reality, then the dots access is a tricky one, for larger projects were more of them willing to play ball.”just do not connect. And the industry has the task has been less arduous given the However, while noting that a change ofjust not done a good job of responding; amount manpower available to hold system could take much of the steam outeither through putting industry-based numerous negotiations. For smaller of the opposition movement, Rogers wasfacts into circulation or pushing people projects, however, their capacity to sceptical that such a change would, orwithin the government to hire negotiate with hundreds of landowners could, take place.independent scientists to rebut the and farmers is much smaller. “It’s not likely to happen because it’smisinformation being used by opposition “It may be more of challenge for some just such a fundamental part of thegroups.” of the new projects because they may not Australian mineral resources system,” he According to Rogers, however, there have the large staff [levels]. They don’t said, adding: “It would be such aare other challenges at play that are also have the resources to send hundreds of fundamental change that it’s more thaninterfering with the sector’s people out to negotiate with landowners the Australian government would bedevelopment. simultaneously the way an oil major willing to take on at this point. I suspect would be able to do,” Rogers said. that [the government] feels like itsSurface deep Moreover, he pointed out that all future system works, and has worked for a longAustralian law stipulates that resources projects were likely to have to pay more time, and it may not be of the view thatbelow the surface are the property of the because of the recent rise in opposition. there is a need for a change.”state, which means there is little “Projects may have to pay more to the The government may not feel the needincentive for landowners to grant surface landowners ultimately to get access and for change, but a lack of incentives foraccess to CBM projects. to me that’s probably what is driving the landowners has created fertile ground for Rogers said: “Someone is paid a fee, opposition,” he added. those opposed to CBM development toalmost like a parking space, but it’s not spread their message. Coupled with anthe type of royalty structure that really Rocky road industry that seems unable to present aincentivises landowners to co-operate With Australia’s mineral resources united front on the issue, Australia’swith those trying to extract the ownership system denying landowners CBM industry looks set to endure furtherresources.” the benefits of subsurface resources the bumps on its path towards maturity." He added that these issues created protest over CBM development mayfriction and problems, but pointed to the have grown more quickly than it perhaps Copyright © 2011 NewsBase Ltd. www.newsbase.com Edited by Ian GM Simm 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
  • 28. NRG November 2011, Issue 20 Back Page NEWSBASE INFORMATION HEADLINES FROM A SELECTION OF NEWSBASE MONITORS THIS WEEK CUSTOMERS INCLUDEOil and Gas SectorAfrOilChariot has pushed back drilling plans offshore Namibiaafter failing to secure a rig.AsianOilSeveral South Korean firms have teamed up to buy oilassets in the US valued at US$973 million.EurOilCairn Energy is still positive about its Greenland drillingprogramme, despite disappointing recent results.FSU OGMThe head of the White Stream project says Azerbaijan hasenough gas to support two export pipelines.LatAmOilBrazilian regulators have fined Petrobras US$47 millionfor misreporting production at the P-50 offshore platform.MEOGThe EU has blacklisted three Syrian oil companies as partof its sanctions regime.NorthAmOilBP is selling its Canadian NGL assets to Plains MidstreamCanada for US$1.67 billion.Unconventional OGMLithuania is to launch a tender for shale gas concessionsin early 2012.Downstream MENAKuwait Petroleum Corp. has completed a feasibility studyfor a mix-feed cracker to be located near al-Zour. For further details on the stories above and NewsBase’s entire product range: tel: +44 (0) 131 478 7000 e-mail: news@newsbase.com Copyright © 2010 NewsBase Ltd. www.newsbase.com

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