Monday, January 31, 2011

World Watch: [Oil/Gas Markets and Egypt]

by Jim Washer, EI
Geopolitics is making a comeback in oil markets. WikiLeaks revelations in December about Arab support for a US nuclear strike against Iran gave a modest boost to crude oil futures, and now civil unrest in Egypt has provided the impetus to push prices above $100/bbl for the first time since September 2008. Egypt is a significant oil and gas producer, but is more important as an energy transit point -- together, the Suez Canal and the Sumed [Suez-Mediterranean] pipeline handle around 2.8 million b/d of crude and products as well as 7% of the world’s LNG trade. [See remarks below -- D.R.]. While Egypt is therefore an important chokepoint, energy markets are in unusually good shape to cope with any disruption. Oil prices may have revisited $100/bbl, but there is plenty of slack in global energy infrastructure -- Opec is sitting on some 6 million b/d of spare upstream capacity, and commercial and strategic inventories remain ample. [Full story]

(Closure of the Suez Canal and the Sumed Pipeline---see map, sorry for the blurriness and the proportion, and photo below---would divert tankers around the southern tip of Africa, the Cape of Good Hope, adding 6,000 miles---or 9,656 kilometers---to transit, according to the Energy Information Administration--EIA, increasing both costs and shipping time. According to a report released by the International Energy Agency (IEA), shipping around Africa would add 15 days of transit to Europe and 8-10 days to the United States. On the other hand, energy analysts believe the real risk is not a closure of the desert conduits---the Suez Canal and the Sumed Pipeline---but that the unrest gripping Cairo will spread to neighboring nations or other Arab countries. Barclays Capital Research report---accessed via Platts, here---noted that around 14% of the world's LNG trade transits the Suez Canal each day with the vast majority of cargoes originating in the Middle East and heading towards Atlantic Basin markets. Also, Egypt exported around 2 Bcf/d of gas in 2009, the majority [some 70%] in LNG form, accounting for around 3.2% of global LNG supply. "In the event of a disruption of LNG exports from Egypt, the greatest implications for gas markets would be for Spain," Barclays Capital said, adding that global LNG markets were well supplied with "ample" production capacity available to meet any potential Egyptian shortfall. The report also noted that Egypt exports gas via the Arab Gas Pipeline, or AGP, and its El Arish-Ashkelon branch, which has the capacity to carry about 1 Bcf/d to Israel, Lebanon, Jordan and Syria. "Most Egyptian [oil] drilling activity has been halted as a result of the political instability, as several international E&P companies have announced staff evacuations," Barclays said. "Gas production, however, has not been affected so far, and there have been no reports of force majeure on LNG deliveries. Egypt's sea ports are officially open, although staff shortages and an absence of customs officials at the Alexandria and Damietta ports are reported to cause traffic disruptions." Egypt has two LNG plants at Idku and Damietta and operations have so far not been affected despite the evacuation of foreign staff. Gas flow to Israel has also not been interrupted. Israel received an estimated 2.1 billion cubic meters, i.e. bcm, in pipeline gas from Egypt in 2010, up from 1.7 bcm a year earlier. -- D.R.)

                                             Source: Oil Capital Ltd. via EIA

                                    Photo: Suez Canal

Source: National Geographic. Description: A tanker carrying liquefied natural gas (LNG) passes through Egypt's Suez Canal in 2007.

Sunday, January 30, 2011

EIA: US Oil Imports Drop 1.5% from Year Ago in November

By David Bird of Dow Jones Newswires, WSJ, Jan 28, 2011
U.S. crude oil imports in November fell 1.5% or 132,000 barrels a day, from a year ago to 8.608 million barrels a day, government data released Friday show.

Figures from the Energy Information Administration show imports were up 119,000 barrels a day, or 1.4%, from October.

Canada maintained its role as the top crude source, a position it has held since March 2006, with imports at 1.975 million barrels a day. [See Table below]. Canada accounted for 22.9% of U.S. crude imports, the highest share since December 2009.

Mexico, the number two supplier, shipped the highest volume since May and its 14.3% share of imports was the highest since November 2007.

Imports from Iraq rebounded, pushing the Middle East supplier up to eighth place from 13th in October.

Crude supplies from ninth-place Angola hit the lowest level since July 2005.

With members of the Organization of Petroleum Exporting Countries, led by number-three supplier Saudi Arabia, holding seven of the top 10 spots, supplies from OPEC rose about 200,000 barrels a day in the month. OPEC [including supplies from Libya and Kuwait -- D.R.] accounted for 48.4% of U.S. crude imports, up from 46.8% in October and unchanged from a year earlier.

Imported crude cost $87.72 a barrel, the highest level since September 2008, and up from $74.40 a barrel a year ago. The average import price in November was the highest ever for the month on EIA data beginning in 1974. [Full story]

EIA Top 10 US Crude Oil Import Sources*

(figures in million barrels per day)
                       Nov      Oct     Nov   Jan-Nov    Jan-Nov
                      2010     2010    2009     2010       2009
Canada               1.975    1.840   2.018    1.963      1.928
Mexico               1.229    1.178   0.951    1.132      1.095
Saudi Arabia         1.119    1.114   0.847    1.081      0.991
Venezuela            0.884    0.887   0.793    0.920      0.968
Nigeria              0.806    0.812   0.948    0.982      0.753
Colombia             0.489    0.400   0.216    0.349      0.258
Algeria              0.379    0.259   0.219    0.331      0.276
Iraq                 0.340    0.143   0.461    0.421      0.461
Angola               0.263    0.311   0.408    0.387      0.465
Ecuador              0.188    0.203   0.150    0.196      0.190
*Prepared by David Bird
(Top 7 OPEC suppliers of crude to the U.S. are Saudi Arabia, Venezuela, Nigeria, Algeria, Iraq, Angola and Ecuador. The U.S. also imports crude from other OPEC members: Kuwait and Libya. See EIA data and November 2010 Import Highlights -- D.R.)

Saturday, January 29, 2011

'Top 100' Oil Rankings Heavy on Houston Firms

by Barrett Goldsmith, Houston Business Journal, Dec 3, 2010
The 2011 Energy Intelligence Top 100 rankings are heavy on Asian, Russian and Middle Eastern state-owned oil firms, but there is still no question about the nerve center of the global industry, as the Houston area is home to no fewer than 10 of the top 100 firms in the world.

The list, released ... by market research and news firm Energy Intelligence Group Inc., ranks companies in six categories including production and reserves of both oil and gas, as well as sales and refining capacity.

Houston companies on the list include No. 8 ConocoPhillips (NYSE: CPC); No. 32 Marathon Oil Corp. (NYSE: MRO); No. 41 Apache Corp. (NYSE: APA); No. 46 Anadarko Petroleum Corp. (NYSE: APC); No. 60 EOG Resources Inc. (NYSE: EOG); No. 74 Noble Energy Inc. (NYSE: NBL); No. 90 Southwestern Energy Co. (NYSE: SWN); No. 91 Newfield Exploration Co. (NYSE: NFX); No. 98 Ultra Petroleum Corp. (NYSE: UPL) and No. 100 El Paso Corp. (NYSE: EP).
Irving-based ExxonMobil Corp. (NYSE: XOM) was the only non-government oil major to crack the top five, ranked at No. 3. State-owned Saudi Arabian oil behemoth Saudi Aramco topped the list, followed by the National Iranian Oil Co. at No. 2; with Petroleos de Venezuela at No. 4 and the Chinese National Petroleum Corp. at No. 5. [U.K.'s BP retained its spot as the No. 6. Rounding out the Top 10 are, in order, Royal Dutch Shell of the Netherlands/UK, Chevron, ConocoPhillips and Total of France. -- According to the SPA. Actually, ConocoPhillips ties Chevron for No. 8 spot. Compare current--for 2009--Top 10 rankings to previous--for 2008--PIW's rankings here, including my remarks -- D.R.] Read full

(‘Energy Intelligence Top 100: Ranking the World’s Oil Companies,’ incorporates the Petroleum Intelligence Weekly (PIW) Top 50. Asia’s government-controlled national oil companies (NOCs) are increasingly dominant. ‘Energy Intelligence Top 100’ is the only oil company ranking that measures Asian and other government-controlled national oil companies (NOCs) side by side with privately controlled international oil companies (IOCs). This year 41 NOCs and 59 IOCs made the list. Malaysia’s Petronas (17), China’s CNOOC (38) and Thailand’s PTT (53) have been among the fastest rising companies in recent years. Korea’s National Oil Corp. (KNOC) made it back onto the list in this edition, landing at 77 following its acquisition of Canadian assets. Yet even more dramatic was the ascent of India’s Reliance Industries, which jumped a remarkable 26 spots to land at 40. Its success is the result of significant increases in both gas production and distillation capacity. The Top 100 control 87% of the world's oil reserves and 72% of its gas reserves. Rankings are based on operating metrics rather than more traditional measurements such as market capitalization or revenues. PIW's current ranking is based on operational data for 2009. Also, it is worth noting that an astonishing 48 companies appearing in the 1997 Top 100 have disappeared from the rankings due almost entirely to M&A. Read more >> Business Wire. On October 22, 2009, KNOC signed the contract to acquire Calgary-based Harvest Energy Corp. for US$3.95 billion, which has about 200 million barrels of oil and gas production fields, oil sands property, and concluded the deal on December 22, 2009. Petróleo Brasileiro/Petrobras retained its spot as the No. 15, in the 2011 PIW's ranking for 2009. Update: also, please see PIW's Dec 2011 company rankings for 2010, here.  -- D.R.) 

Friday, January 28, 2011

Russian Rosneft, US Exxon Ink Deal on Black Sea Block Work

Platts, Jan 27, 2011
Russia's state-run Rosneft and ExxonMobil Thursday [Jan 27] signed an agreement regarding joint development of oil and gas resources in the Russian sector of the Black Sea, with initial focus on oil exploration and production at the Tuapse Trough (or Tuapse Depression). [In waters off the Krasnodar region -- D.R.]

The exploration stage is estimated to cost $1 billion, with ExxonMobil to make initial investments.

The agreement, which was signed by Rosneft President Eduard Khudainatov and ExxonMobil Development Company President Neil Duffin within the framework of the World Economic Forum in Davos, envisages setting up a joint venture to explore and produce crude at the Tuapse Trough block, the two companies said in a joint statement.

"The agreement enables Rosneft and ExxonMobil to consider additional opportunities to expand Black Sea energy sector cooperation in areas such as additional exploration and production, crude oil sales to Rosneft's Tuapse refinery and other Black Sea markets, development of regional transportation infrastructure, and deepwater offshore technology research and development," the statements said.

Rosneft will own a 66.7% stake in the joint operating company, with ExxonMobil receiving the remaining 33.3%, a spokeswoman with ExxonMobil in Moscow said.

The final details of the arrangement will be confirmed by the end of the year, she said.

The promising Tuapse Trough block covers an area of 11,200 square kilometers [4,324-sq mi] and requires significant funds for exploration as it is located in deep waters, with a sea depth varying from 1,000 [3,281 feet] to 2,000 meters [6,562 feet], Rosneft has said previously.

The block's reserves are initially estimated at around 1 billion mt of oil equivalent, Russia's Itar-Tass news agency reported Sechin as saying.

"ExxonMobil technologies will effectively complement Rosneft's experience and resources," Igor Sechin, the chairman of Rosneft's board and Russia's deputy prime minister, was quoted by the statements as saying during the signing ceremony.

"Development of this area will become the springboard for full-scale Black Sea basin development, and this challenge will require coordinated efforts of many nations and companies in the region," Sechin said.

Rex Tillerson, chairman and chief executive of ExxonMobil, who attended the ceremony, said his company welcomed the opportunity to expand its activities with Rosneft for the benefit of Russian energy development.

"ExxonMobil will bring its technology, project execution capabilities and innovation to complement Rosneft's strengths and experience in the region," Tillerson was quoted as saying. "We will build on the successful relationship we have with Rosneft through the Sakhalin 1 project to help meet energy needs in Russia and the wider Black Sea area."

In turn, Khudainatov said: "Commencement of implementation of the second major contract with a leading international partner this year demonstrates Rosneft's capabilities and its management's focus on creating a global energy company capable of undertaking the most complex offshore projects."

On January 14, Rosneft and UK's BP announced a major strategic partnership that would include a share swap and the joint exploration of three blocks in the Russian Arctic. [See my post, including remarks, here -- D.R.] [...]

ExxonMobil and Rosneft are already partners in the offshore Sakhalin 1 production-sharing agreement in Russia's Far East. Exxon holds an operating 30% stake in the project, Japan's Sodeco holds 30%, with Rosneft and India's ONGC holding 20% each.

(ExxonMobil is Rosneft's second foreign partner on the Black Sea. In June 2010, Rosneft signed an agreement with Chevron Corp to jointly develop a West Black Sea license block, which includes the Val Shatskogo deposit near the port of Novorossiisk. Chevron assumed an obligation to raise $1 billion for geological exploration of the block. Rosneft bought the Val Shatskogo unit in 2007 after the government seized and auctioned off Yukos assets. Rosneft now is Russia's largest oil company -- D.R.)

Thursday, January 27, 2011

WoodMac: Strong Upstream M&A Activity Forecast in 2011

by Paula Dittrick, OGJ, Jan 26, 2011
Keen interest in shale plays is expected to propel strong upstream merger and acquisition activity this year, said Wood Mackenzie Ltd. analysts.

Restructuring among international oil companies and aggressive spending by Asian national oil companies (NOCs) also is expected to drive active M&A levels.

WoodMac’s report “2010 in Review and the Outlook for 2011” showed $183 billion was spent on upstream M&A deals last year. US shale gas transactions reached $39 billion, or 21% of global activity, said the independent research firm of Edinburgh.

“The M&A market returned to peak levels in 2010, and the healthy deal activity at the end of the year bodes well for 2011,” said Luke Parker, manager of WoodMac’s M&A research.

Unconventional oil and gas asset deals primarily drove 2010 M&A activity, Parker said.

Twenty transactions in the $1-5 billion range underpinned the M&A market during 2010, marking a contrast with 2009 when upstream transactions spiked on two corporate deals: the mergers of ExxonMobil Corp. with XTO Inc. and Suncor Energy with Petro-Canada.

Parker said weakness of US gas prices caused investors to increasingly shift their focus towards liquids-rich shale gas plays.

For instance, industry ended 2010 with a flurry of shale oil transactions involving the Bakken play in North Dakota, where transactions are expected this year.

“In the last 2 months of 2010, there were four $1 billion-plus Bakken deals announced, pushing cumulative M&A spend in North American tight oil beyond $15 billion,” Parker said.

He noted some 2010 M&A trends by peer group.

“At a global level, the NOCs were net buyers, and the IOCs were net sellers in 2010,” Parker said. “The NOCs were almost exclusively acquisitive.”

Chinese NOCs, together with the Korean National Oil Co. and PTTEP [the Thai NOC], invested $35 billion on overseas acquisitions.

“This pushed total NOC cross-border spend as a proportion of global M&A to 19%, marking the sixth successive year in which the NOCs have increased their share of the market,” WoodMac said.

Among the IOCs, Chevron Corp., Royal Dutch Shell PLC, and Total SA made a notable return to acquisitions in 2010, while Statoil and ConocoPhillips were notable sellers, Parker said. [Full story]

(US supermajor ExxonMobil completed its deal to buy US unconventional player XTO Energy in mid-2010---the deal was approved by XTO's shareholders on June 25, 2010 -- D.R. Wood Mackenzie's report---press release---is also available on its website here -- D.R.)

Wednesday, January 26, 2011

Halliburton's Profits Climb on Liquids-Rich Shale Plays

by Paula Dittrick, OGJ, Jan 25, 2011
Halliburton Co. said higher drilling activity in oil and natural gas shale plays boosted its fourth-quarter earnings, more than offsetting declines in revenue from restrained international markets and suspended deepwater activity in the Gulf of Mexico.

During a Jan. 24 conference call, Halliburton reported fourth-quarter net income of $605 million, or 66¢/share, compared with $243 million, or 27¢/share, for the same period the previous year.

“Our United States land operations experienced continued improved profitability,” said David Lesar, Halliburton chairman, president, and chief executive officer. “The increase in horizontal drilling and activity in liquids-rich plays continued to drive service intensity.”

Meanwhile, Halliburton reported a decline in its Gulf of Mexico revenue and income following the April 2010 blowout of BP PLC’s deepwater Macondo well off Louisiana and the subsequent oil spill in the gulf.

“We continue to believe that prospects for a recovery in the Gulf of Mexico will remain uncertain through the first half of 2011 and perhaps the full year,” Lesar said. “However, I believe it is prudent to maintain all of our infrastructure and most of our headcount in anticipation of a rebound in the gulf.”

Halliburton’s gulf strategy could resulting in continuing losses there until the rig count recovers, Lesar noted. For 2011, he expects US and Canadian operators will continue investing in unconventional oil and gas.

“Development of these resources requires expansive well programs resulting in longer-term contracting arrangements for some services,” he said. “We continue to expect that we can improve prices in select basins where the demand for our integrated services is robust.”

For instance, one customer plans to increase the length of its laterals in the south Texas Eagle Ford play to 10,000 ft compared with 6,000-ft laterals that it is currently drilling, Lesar said.

Halliburton reported improved results in Norway, West Africa, Iraq, and Algeria, Lesar said. He expects activity increases to continue in those markets despite a traditional first-quarter decline for international earnings.

“We continue to win significant additional awards in Iraq,” he said. Halliburton plans to double the number of workers it has in Iraq to 1,200 this year.

“The improving oil consumption demand levels combined with the industry’s declining spare capacity provides a more favorable outlook for oil services and technologies in 2011 and beyond,” he said. Halliburton plans to invest in technology and to expand its manufacturing capacities as a result. [Full story]

(Halliburton, once run by former US vice-president Dick Cheney, is the second largest oil services company following Schlumberger. Earlier this month the US presidential commission investigating the BP disaster slammed Halliburton, along with BP and rig owner Transocean. -- See my post here. Halliburton’s revenue was $18.0 billion for the full year 2010, an increase of 22% from the full year 2009. -- See the company’s website at http://www.halliburton.com/, press release Jan 24, 2011, here. In August 2010, e.g., Halliburton announced it had been awarded a contract by Italian oil company Eni to provide a range of integrated energy services to help redevelop the Zubair field in southern Iraq. For Zubair, please read my blog posts under the category/label "Iraq." -- D.R.)

Tuesday, January 25, 2011

US Rig Count Increases

by OGJ editors, OGJ, Jan 21, 2011
After sticking 2 consecutive weeks at 1,700 working rigs, US drilling activity increased by 13 units to 1,713, up dramatically from 1,282 rigs drilling in the comparable week last year, Baker Hughes Inc. reported.

Land operations were at the forefront as usual with a gain of 10 units to 1,671 active rigs this week. Inland waters activity increased by 1 to 15 units. Offshore drilling was up 2 to 27, all in the Gulf of Mexico.

Of the US rigs working, 906 were drilling for gas, 4 more than the previous week; and 798 were drilling for oil, an increase of 9. There were 9 rotary rigs unclassified. Horizontal drilling was down by 1 to 966 units. Directional drilling increased by 14 to 233 rigs.

Among major producing states, Texas had the biggest increase in its rotary rig count this week, up 10 to 741 drilling. Oklahoma had 168 rigs working, 4 more than the previous week. Louisiana increased by 3 to 169. There were 41 rigs drilling in California, an addition of 2. North Dakota, New Mexico, and Arkansas added 1 rig each for respective counts of 98, 73, and 38. Wyoming was unchanged with 46 units making hole. Colorado and West Virginia were down 1 rig each to 62 and 20, respectively. Alaska’s rig count dropped by 3 to 3, while Pennsylvania fell by 5 units to 98 still active.

Canada’s rotary rig count had a seasonal jump of 44 units to 621 drilling, compared with 495 working in the same period of 2010. [Full story]

(The Baker Hughes Rotary Rig Counts are counts of the number of drilling rigs actively exploring for or developing oil or natural gas in the United States, Canada and international markets. Baker Hughes has issued the rotary rig counts as a service to the petroleum industry since 1944, when Hughes Tool Company began weekly counts of U.S. and Canadian drilling activity. Hughes initiated the monthly international rig count in 1975. The North American rig count is released weekly at noon central time on the last day of the work week. The international rig count is released on the fifth working day of each month. The Baker Hughes Rig Counts are an important business barometer for the drilling industry and its suppliers. Since 1944 the highest weekly US rig count was 4,530 recorded on December 28, 1981, the height of the oil boom. The lowest rig count of 488 was recorded on April 23, 1999. In Canada the highest weekly rig count of 718 was recorded on February 17, 2006. The lowest weekly rotary rig count of 29 was recorded on April 24, 1992. See also the worldwide rig count (widget) on the right hand side of my blog -- D.R.)

Monday, January 24, 2011

EPA Approves E15 for MY2001-2006 Cars and Light Trucks

by David Rachovich
On January 21 the U.S. Environmental Protection Agency (EPA) approved an E15 waiver for model year (MY) 2001 through 2006 passenger vehicles, including cars, SUVs, and light pickup trucks.

The EPA on October 13, 2010, granted a waiver for E15 fuel---a blend of 15 percent ethanol and 85 percent gasoline---to be used only in MY2007 and newer light-duty motor vehicles (i.e., cars, light-duty trucks and medium-duty passenger vehicles). Previously, fuel blends were limited to a maximum of 10 percent ethanol, i.e., E10 -- Please read my remarks at the end of the related article here.
"These decisions were based on test results provided by the U.S. Department of Energy (DOE) and other information regarding the potential effect of E15 on vehicle emissions. Taken together, the two actions allow, but do not require, E15 to be introduced into commerce for use in MY2001 and newer light-duty motor vehicles if conditions for mitigating misfueling and ensuring fuel quality are met. EPA is in the process of completing work on regulations that would provide a more practical means of meeting the conditions," said EPA. (see EPA' website here)
EPA's decisions will give a major boost to the biofuels industry. Also, biofuels like ethanol and other blends would help reduce foreign oil demand and greenhouse gas emissions.  

Schlumberger Sees Slow Recovery in US Gulf

Energy Intelligence (EI) -- Oil Daily, Jan 24, 2011
Schlumberger, the world's largest oil services provider, anticipates a slow recovery for deepwater exploration in the Gulf of Mexico, but sees a "marked increase" in deepwater activity in the rest of the world this year. Read More 

Sunday, January 23, 2011

China Pips South Korea to the Post as Top Shipbuilder for Second Year

Platts, Jan 17, 2011
China has overtaken South Korea as the world's top shipbuilder for the second consecutive year, data released by shipbrokers and the Chinese government last week showed.

London-based Clarkson Research said in its latest report that Chinese shipbuilders have snapped up a total of 15.9 million compensated gross tons or CGT in new orders while South Korea was in the second spot with 11.77 million CGT.

Compensated gross tonnage is a unit of measurement that allows comparison of different shipyards' production regardless of the types of vessel produced.

"In terms of production, they [Chinese] are ahead. The problem is the accessibility of their ships in the international market," a source who is in charge of sales and purchase at a shipbroking company said.

"People who really want to wait to buy a ship will go to the South Koreans [while] someone who needs a ship [soon] will look to the Chinese," he added.

QUALITY VERSUS QUANTITY DEBATE GOES ON

While the jury is still out on who builds better ships, the source described the South Korean shipbuilders' work as more "refined." They "don't offer any discounts to get orders," he added. ...

(However, in terms of order value, South Korean shipbuilders outpaced Chinese rivals by winning contracts valued at a combined $30.61 billion in 2010, higher than the comparable figure of $28.29 billion for Chinese shipyards. Back in 2003 South Korea became the world’s top shipbuilding country by outstripping Japan in three key categories, i.e. shipbuilding volume, order backlogs and new orders. But Chinese rivals outpaced South Korean shipyards in the number of new orders received and order backlogs in 2009 as China grabbed new orders at cheap prices while their South Korean counterparts continued to focus on high-priced vessels and offshore facilities. -- D.R.)

Saturday, January 22, 2011

Emerging Economies to Lead Energy Growth to 2030 and Renewables to Out-Grow Oil, Says BP Analysis

BP website, Jan 19, 2011
World energy growth over the next twenty years is expected to be dominated by emerging economies such as China, India, Russia and Brazil while improvements in energy efficiency measures are set to accelerate, according to BP’s latest projection of energy trends, the BP Energy Outlook 2030.

BP's 'base case' - or most likely projection - points to primary energy use growing by nearly 40% over the next twenty years, with 93% of the growth coming from non-OECD (Organisation of Economic Co-operation and Development) countries. Non-OECD countries are seen to rapidly increase their share of overall energy demand from just over half currently to two-thirds.

Over the same period, energy intensity, a key measure of energy use per unit of economic output, is set to improve globally led by rapid efficiency gains in the same non-OECD economies, under these projections.


According to the BP Energy Outlook, diversification of energy sources increases and non-fossil fuels (nuclear, hydro and renewables) are together expected to be the biggest source of growth for the first time. Between 2010 to 2030 the contribution to energy growth of renewables (solar, wind, geothermal and biofuels) is seen to increase from 5% to 18%. [According to BP, the rate at which renewables penetrate the global energy market is similar to the emergence of nuclear power in the 1970s and 1980s. -- D.R.] 

Natural gas is projected to be the fastest growing fossil fuel, and coal and oil are likely to lose market share as all fossil fuels experience lower growth rates. Fossil fuels’ contribution to primary energy growth is projected to fall from 83% to 64%. [...] 

BP’s ‘base case’ projections are that world primary energy demand growth averages 1.7% per year from 2010 to 2030 although growth decelerates slightly beyond 2020. Non-OECD energy consumption will be 68% higher by 2030 averaging 2.6% per year growth, and accounts for 93% of global energy growth. In contrast, OECD growth averages 0.3% per year to 2030; and from 2020 OECD energy consumption per capita is on a declining trend of -0.2% per year.

Transport growth is seen to slow because of a decline in the OECD. The region’s total demand for oil and other liquids peaked in 2005 and will be back at roughly the level of 1990 by 2030. Toward the end of the period, coal demand in China will no longer be rising and China is projected to become the world’s largest oil consumer. [According to the BP Outlook, China is the largest source of oil consumption growth, with consumption forecast to grow by 8 million barrels a day to reach 17.5 million barrels a day by 2030, overtaking the United States to become the world's largest oil consumer -- D.R.] 

OPEC’s share of global oil production is set to increase to 46%, a position not seen since 1977. At the same time, oil - and gas - import dependency in the US is likely to fall to levels not seen since the 1990s, because of improved fuel efficiency and the increased share of biofuels. Global consumption growth is also impacted by higher oil prices in recent years and a gradual reduction of subsidies in oil-importing countries.

The fuel mix changes over time, reflecting long asset lifetimes. Oil, excluding bio-fuels, will grow relatively slowly at 0.6% per year; natural gas is the fastest growing fossil fuel with more than three times the projected growth rate of oil at 2.1% per year. Coal will increase by 1.2% per year and by 2030 it is likely to provide virtually as much energy as oil excluding biofuels. The strong carbon policy drive in OECD countries risks being more than offset by growth in emerging economies. [Among non-fossil fuels, renewables are expected to grow at 8.2% per year from 2010 to 2030.] 


Wind, solar, bio-fuels and other renewables continue to grow strongly, increasing their share in primary energy from less than 2% now to more than 6% projected by 2030. Biofuels will provide 9% of transport fuels and nuclear and hydropower will grow steadily and gain market share in total energy consumption.

“The slowing of growth in total energy in transport is related to higher oil prices and improving fuel economy, vehicle saturation in mature economies, and expected increases in taxation and subsidy reduction in developing economies,” said Rühl. “In percentage terms, oil demand is reduced the most in the power sector (-30%) because this is the easiest oil to displace with gas or renewables and is the sector most likely to employ carbon pricing.” [...]

Global liquids demand is forecast to reach 102.4 million barrels per day (mmbpd) in 2030. The net growth of 16.5 mmbpd over the next 20 years comes exclusively from the emerging economies of the non-OECD. “Non-OECD Asia will account for nearly two-thirds of non-OECD consumption growth over the next 20 years and more than three-quarters of the net global increase, rising by nearly 13 million barrels a day,” said Rühl.

The largest increments of new supply will come from OPEC – conventional crude in Saudi Arabia and Iraq, as well as OPEC natural gas liquids (NGLs) which are not subject to OPEC quotas.”

Non-OPEC liquids are likely to rise modestly, driven by a large increase in biofuels, along with smaller increments from Canadian oil sands, deepwater Brazil, and the FSU which offset continued declines in mature provinces. [...]


According to the Energy Outlook’s projections, oil continues to suffer a long run decline in market share, while gas steadily gains share. Coal’s recent gains in market share, on the back of rapid industrialisation in China and India in particular, are reversed by 2030, with all three fossil fuels converging on market shares around 27%. [...]

Biofuels production is expected to reach 6.7 mmbpd by 2030 from 1.8 mmbpd in 2010 and will contribute 125% of net non-OPEC supply growth over the next 20 years. Continued policy support, high oil prices, and continued technological innovations all contribute to the rapid expansion.

The US and Brazil will continue to dominate biofuel production with 76% of total output in 2010 but falling to 68% in 2030 as output from Asia-Pacific begins to rise. [Read More]

(The BP Energy Outlook 2030 is the first of BP’s forward-looking analyses to be published, after 60 years of producing definitive historical data in the BP Statistical Review of World Energy. The Energy Outlook has been used only internally so far. Prof. Christof Rühl is Chief Economist of BP plc. The BP Energy Outlook 2030 is available in pdf format here  -- D.R.)

Thursday, January 20, 2011

UK Upstream Investment Set to Nearly Double in 2011: Wood Mac

Platts, Jan 20, 2011
Investment in the UK's upstream oil and gas industry is set to nearly double in 2011, seen rising to GBP7.7 billion ($12.3 billion) from GBP4.4 billion the year before, according to analysts Wood Mackenzie.

The analysts said Wednesday that "improved economic confidence and the expectation of a stable, high oil price will lead to a rise in exploration and appraisal drilling activity in the UK."

The Brent crude oil price has recently approached $100/barrel levels, up from $75/b this time last year, while an annual UK gas contract is around 58 pence/therm ($9.33/MMBtu), up from 43 p/th this time last year, and compared with current US gas prices around $4.50/MMBtu.

The company said that in 2010 the upstream industry had continued a slow recovery that started in late 2009.

Lindsay Wexelstein, lead analyst for the UK upstream research team, said: "Looking at the last year, industry confidence was reflected by the success of the 26th Licensing Round, an increase in deal activity and a rise in the number of projects put forward for approval."

"The returning confidence was also evident in exploration, where drilling was up by 28% with 37 wells spudded, but it was still a long way short of the 56 wells spudded in 2008," she said.

"For 2011, we expect exploration and appraisal drilling to increase as companies' more positive economic outlooks become reflected in their drilling schedules. The UK remains an attractive province and material discoveries are still being made."

The volume of reserves discovered in 2010 was only 233 million barrels oil equivalent, however, down by 67 million boe from 2009.

There remained interest in acquiring growth assets in the North Sea, but there was a continued slowdown in mature asset trading, Wood Mac said.

Over $7.3 billion of assets were traded in the most active UK deal market since 2006, Wood Mac said. Korea National Oil Corp.'s takeover of Dana Petroleum accounted for almost half of the total value exchanged.

"We do not expect a significant shift in the asset market in 2011, meaning deal activity levels are likely to remain at similar volumes to 2010," Wexelstein said.

(Wood Mackenzie has been producing its annual review of the UK upstream service for over 30 years. -- D.R.)

IEA Raises 2011 Global Oil Demand Forecast; Revises Up Global Oil Demand Growth for 2010

by David Rachovich
In its latest monthly Oil Market Report (OMR), released on January 18, the International Energy Agency (IEA) claims that global oil product demand for 2010 and 2011 is revised up by an average of 320,000 barrels a day (b/d) on higher-than-expected submissions, reflecting buoyant global economic growth and cold northern hemisphere weather. Global oil demand, assessed at 87.7 million b/d in 2010 (+2.7 million b/d year-on-year or 3.2% growth), rises by 1.4 million b/d to 89.1 million b/d in 2011.

Highlights of the latest OMR are available at http://omrpublic.iea.org/

Wednesday, January 19, 2011

Israel Corp Seeks Guarantees from Tamar on Future Gas Supplies

Platts, Jan 17, 2011
Israel Corporation Ltd has given the Tamar consortium until February 1 to guarantee that it can meet the holding company's timetable for supplying natural gas to its subsidiaries, according to Israel Corporation Ltd officials Monday.

The request came in the form of a letter to the partners in the Tamar consortium.

The Israel Corp. letter stated that if the Tamar consortium was unable to meet the timetable then the company would be free to sign agreements with other suppliers.

Israel Corp is expected to be the largest industrial consumer of natural gas in Israel and second only to the state owned Israel Electric Corp.

Last month, the holding company signed an agreement with East Mediterranean Gas Supply Corp., or EMG, for the initial supply of 1.4 billion cubic meters of gas from Egypt beginning in the second quarter of 2011. [See my post here -- D.R.]

The 20-year EMG contract is for supplies to three companies controlled by Israel Corp -- Oil Refineries Ltd, Israel Chemicals and OPC Rotem.

A senior Israel Corp. official said that a contract for an additional 1.5 Bcm/year of supplies could eventually go to the Tamar consortium, which comprises Noble Energy Inc, Delek Drilling, Avner Oil and Gas, Isramco and Dor Gas.

Israel Corp. CEO Nir Gilad made it clear that the holding company would prefer to buy from local producers. But Israel Corp. said at the time of the signing of the EMG contract that it also had an option until March 31 for an additional 1.5 Bcm/year in supplies from Egypt.

The Tamar consortium is hoping to commence deliveries of gas in 2013 but the development of the huge offshore field has been held up over the debate in Israel over a change in the tax regime for oil and gas exploration companies.

The companies charge that the proposed changes by a finance ministry-appointed committee earlier this month would make it difficult to raise the necessary funds for developing the field.

The committee headed by Professor Eitan Sheshinski recommended increasing the government take on oil and gas profits [i.e. the share of the state in the net profits -- D.R.] from the current level of less than 30% to 50 to 62%. In addition, the committee recommended a tax on profits ranging from 20% to a maximum of 50%, accelerated depreciation, a lower level of taxation be imposed on oil and gas fields that begin production by 2014, retaining the 12.5% royalty tax and the cancellation of the depletion allowance. The Israeli government is expected to decide in the coming weeks on the tax issue.

The agreement between the Israel Corp. and EMG was seen as a setback for the Tamar consortium, which was hoping to clinch the entire deal. ...

(Prime Minister Binyamin Netanyahu on Tuesday (Jan 18) said that he fully accepts the recommendations of the Sheshinski Committee. -- D.R.)

Tuesday, January 18, 2011

Iraq’s Upstream Opening Beginning To Bear Fruit

by Editorial Team, MEES, Jan 17, 2011
Capacity at 3 Iraqi oilfields (Zubair, Rumaila, West Qurna-1) operated by IOCs has risen by 300,000 b/d, taking the country’s production level to 2.7mn b/d.

(Read also my blog posts under the category/label "Iraq" -- D.R.)

BP, CNPC Increase Production from Iraq's Rumaila Field


by Eric Watkins, OGJ, Jan 11, 2011
Output at Iraq’s giant Rumaila oil field has increased by more than 10% above the 1.066 million b/d ... [initial production rate -- D.R.] established in December 2009, ...

“This production increase is an important step for Iraq and demonstrates the success of the contracts awarded,” said Iraq’s oil minister Abdul Kareem Luaibi, referring to the contract awarded to the two firms, along with Iraq’s State Oil Marketing Co. (SOMO).

Management of the field’s development has been carried out by the Rumaila Operating Organization (ROO), which was originally staffed by 4,000 employees from Iraq’s state-owned South Oil Co. along with 100 technical experts and managers from BP and CNPC.

BP said that the pace of activity on Rumaila has built steadily over the past year, with 20 new rigs now mobilized in the field. Altogether over the past year, BP said 41 wells have been drilled, 103 workovers completed, and 122 km of flowlines laid. Employment has more than doubled to 10,000 workers.

On signing the TSC in 2009, BP and CNPC said they planned to invest $15 billion in cash over the 20 year lifetime of the contract with the intention of increasing plateau production to 2.85 million b/d ...

“Once production has been raised by 10% from its current level of about 1 million b/d, costs will start to be recovered, and fees of $2/bbl earned on the incremental oil production,” BP said at the time.

“Increasing production at Rumaila, the world’s fourth largest oilfield, has been a massive undertaking,” said BP Chief Executive Bob Dudley this week, adding that “We look forward to working with our partners to make Rumaila the world’s second largest oil field.”

In April 2010, BP let contracts worth about $500 million to three firms for drilling. Schlumberger, in partnership with Iraqi Drilling Co., received a contract for three rigs; Daqing Drilling a contract for three rigs; and Weatherford a contract for one rig (OGJ Online, Apr. 5, 2010).

The Rumaila consortium is comprised of BP, 38%, CNPC 37%, and SOMO, 25%.

(Meeting this production target, and the approval of the Rumaila rehabilitation plan last year, represents the achievement of two significant contractual requirements of the technical services contract--TSC--signed between BP, PetroChina, the SOMO and the South Oil Company in November 2009. The terms of the TSC awarded to foreign companies stipulate that the 10% production increase from each of the fields awarded for further development must come within three years of the contracts coming into effect though several foreign companies involved have said the planned increments are well ahead of schedule.--see e.g., Zubair development, too. View my posts under the category/label "Iraq" -- D.R.)

Sunday, January 16, 2011

China: The World's Largest Energy Consumer and Investor in Clean Energy

PR Newswire via EIN News: Oil & Gas Industry Today, Jan 12, 2011
New Wilson Center Publication Explores China's Energy and Climate Trends

In 2010 China achieved number one status in two infamous categories: energy consumption and carbon emissions. In the same year, however, it was also the world's number one investor in clean energy, nearly doubling the U.S. investment over the same period.

While counterintuitive, these are just some of the indicators of the intriguing trends in China's energy and environment sectors. This China Environment Forum publication takes a deep look into fast changing energy and climate trends within China and how they pose opportunities and challenges to U.S.-China relations.

"China and the United States are the two largest national emitters of the greenhouse gases that contribute to global climate change, and together comprise almost half of global emissions. Any global solution to climate change must therefore include participation by these two countries." –Joanna Lewis, Georgetown University.

Highlights of the report include:
  • An extensive overview of the history of U.S.-China climate and energy cooperation
  • The status and potential of carbon capture and sequestration in China
  • Spotlights on NGO activities in China
  • Extensive articles looking into green jobs, MRV issues, U.S.-China cooperation on renewables,  industrial energy efficiency, and water pollution and supply issues within China
Read the China Environment Forum's China Environment Series 11. [Full]

(The IEA data--World Energy Outlook 2010 - Executive Summary--suggests that China overtook the United States in 2009 to become the world's largest energy consumer. Srikingly, Chinese energy use was only half that of the United States in 2000 -- D.R.)

Saturday, January 15, 2011

Rosneft and BP Form Global and Arctic Strategic Alliance

BP website, Jan 14, 2011
BP and Rosneft announced today [Jan 14] that they have agreed a groundbreaking strategic global alliance.

Rosneft and BP have agreed to explore and develop three license blocks - EPNZ 1,2,3 – on the Russian Arctic continental shelf. [See map below -- D.R.] These licences were awarded to Rosneft in 2010 and cover approximately 125,000 square kilometres in a highly prospective area of the South Kara Sea. This is an area roughly equivalent in size and prospectivity to the UK North Sea.

                  Map: Location and Scale of South Kara Sea Licences

                                                                          Source: BP

This historic agreement creates the first major equity-linked partnership between a national and international oil company. Following completion of this agreement, Rosneft will hold 5 per cent of BP’s ordinary voting shares in exchange for approximately 9.5 per cent of Rosneft’s shares. The share swap component of the alliance creates strategic alignment to pursue joint [oil and gas] projects and demonstrates mutual confidence in the growth potential of both companies.

BP and Rosneft have also agreed to establish an Arctic technology centre in Russia which will work with leading Russian and international research institutes, design bureaus and universities to develop technologies and engineering practices for the safe extraction of hydrocarbon resources from the Arctic shelf. The technology centre will build on BP’s deep offshore experience and learnings with full emphasis on safety, environmental integrity and emergency spill response capability.

Rosneft and BP have agreed to continue their joint technical studies in the Russian Arctic to assess hydrocarbon prospectivity in areas beyond the Kara Sea. The parties will also seek additional opportunities for international collaboration beyond their 50/50 joint venture partnership in Ruhr Oel GmbH, a refining joint venture in Germany (subject to completion of Rosneft’s recent purchase of 50 per cent of Ruhr Oel from PDVSA).


Igor Sechin, Deputy Prime Minister of the Russian Federation, who participated in the signing ceremony, said: “Global capital and Russian companies are clearly ready to invest in world class projects in Russia; and Russian companies are quickly emerging at the forefront of the global energy industry.”

BP’s chief executive, Bob Dudley, said: “This unique agreement underlines our long-term, strategic and deepening links with the world’s largest hydrocarbon-producing nation. We are very pleased to be joining Russia’s leading oil company to jointly explore some of the most promising parts of the Russian Arctic, one of the world’s last remaining unexplored basins. Underpinning this alliance is a new type of relationship based on a significant cross-shareholding, and bringing together technology, exploration and safe and responsible field development skills. We are very pleased to welcome Rosneft as a strategic partner and major shareholder in the BP Group.”

Rosneft’s President, Eduard Khudainatov, said: “I am pleased that in just a few months we’ve significantly moved forward in implementing Russia’s offshore strategy. In its operations, our future joint venture will utilize the experience and expertise of BP, one of the leaders in the global oil and gas industry. This project is unique in its complexity and scale both for Russia and the global oil and gas industry. We see it as the next step in developing our relations with BP.”

BP Chairman, Carl-Henric Svanberg, said: “The world’s need for energy continues to increase. BP is working with national oil companies using its leading exploration skills and expertise to meet this demand. This is a trend which will increase as access to resource becomes scarcer.

This landmark deal creates a deep partnership which represents a new stage in these relationships. The exchange of shares demonstrates our mutual commitment. The BP board believes that the combination of assets and skills will unlock significant value and thus the issue of shares to Rosneft is in the interests of all shareholders.”

The aggregate value of the shares in BP to be issued to Rosneft is approximately $7.8bn (as at close of trading in London on 14 January 2011). The transaction is subject to certain listing approvals and the completion of certain administrative requirements and is expected to complete within a few weeks. BP and Rosneft view their cross-shareholdings as long term and strategic.

Rosneft is Russia’s leading oil producing company. Read More


(BP already has a 1.3% stake in Rosneft and as a result of the announced transaction, BP's stake in Rosneft will increase to 10.8% -- i.e. 9.5% + 1.3%. Also, Russia accounts for around one quarter of the British energy giant's total production -- before the U.S. oil spill. In 1998, BP and Rosneft started an alliance that eventually led to the formation of three joint ventures to conduct exploration on the Russian continental shelf, offshore Sakhalin. BP also owns 50% of Russia's third biggest oil producer, TNK-BP -- see my blog post here. Rosneft's major shareholder (75.16% of shares) is the company Rosneftegaz, 100% state-owned. For the Rosneft's profile, see Platts Top 250 Global Energy Company Rankings -- No. 14, in my blog here. Rosneft has proved reserves of approximately 18.1 billion barrels of oil and 816 billion cubic meters of gas. As of year-end 2009, Rosneft’s total proved oil and gas reserves under PRMS classification were 22.9 billion barrels of oil equivalent, among the highest for a publicly traded petroleum company worldwide, according to Rosneft's website. Also -- according to Platts data, the company operates 1,690 filling stations in 39 regions of the Russia Federation and 7 refineries. It has operations primarily in Western Siberia, Southern and Central Russia, Timan-Pechora, Eastern Siberia, and the Far East, as well as in Kazakhstan and Algeria. -- D.R.)  
                  

Friday, January 14, 2011

World Watch: [Russian Oil Production Hits Post-Soviet Record in 2010]

by Nelli Sharushkina, Energy Intelligence (EI) 
Russia had a good year in 2010, with ... oil production rising by 2.2% to a record 10.145 million b/d, according to preliminary data issued this week. But the outlook for 2011 is uncertain. The energy ministry expects output to remain at 2010 levels, while oil companies are more vague, with one or two hinting that much will depend on Moscow's taxation policies. The increase in 2010 was driven largely by greenfield projects. The 255,000 b/d Vankor field was the main contributor to a 6.2% rise at state-controlled Rosneft, Russia's largest oil company, which produced an average of 2.26 million b/d. TNK-BP, the third largest, increased output by 2.5% to 1.45 million b/d, mainly because of new fields. Lukoil, the second biggest producer, which saw its Russian output drop 2.3% to 1.81 million b/d, has not ruled out a further decline, as it may redirect spending to strategic projects overseas and away from its traditional production base in Western Siberia. Surgutneftegas, whose output fell 0.1% to 1.196 million b/d, is targeting growth of 1.9% this year but has warned that drilling is not effective under the current tax regime.

(Thus, the forecast regarding the Russia's record oil production in 2010, has come true. -- See the related post, here. Energy Ministry’s CDU-TEK statistics unit data showed Russia pumped a total of 10.145 million b/d last year, a record since the collapse of the Soviet Union, up from 9.93 million b/d in 2009 and 9.78 million b/d in 2008 (total output including crude plus lease condensate; natural gas plant liquids; other liquids; etc). In the Soviet-era, Russian production peaked in 1987 at 11.48 million b/d. It is also worth noting that Russia is the world's largest crude oil producer, followed by Saudi Arabia---please see my post here. -- D.R.)

Thursday, January 13, 2011

TAPS to Be Shut Down Again 36 Hours for Repairs This Weekend

Platts, Jan 13, 2011
The Trans Alaska Pipeline system, restarted on Tuesday after a four-day [3½-day] stoppage due to a small leak, will be shut down again for 36 hours this weekend to install bypass piping at Pump Station 1, according to the Joint Information Center, a task force comprised of Alyeska and state and federal government agencies.

Other repairs will be made at the pump station, where the discovery of a leak on Saturday [Jan 8] resulted in the shutdown.

Regulators approved a temporary restart on Tuesday because of worries about technical risks associated with a prolonged cold-weather shutdown. ...

Since the restart Tuesday about 55 barrels of crude oil have been recovered from a 800-gallon containment vault from the still leaking pipeline. Vacuum trucks are removing oil from the vault as it accumulates.

"The current startup of TAPS is a temporary startup and one part of a multi-part plan to return to normal operations," the JIC said in a release issued Wednesday in Alaska.

After the interim startup, throughput reached 400,000 b/d on Wednesday. The pipeline had been flowing at about 630,000 b/d before it was shut.

Crude inventories at the Valdez terminal, from where ANS is shipped out, were down by 789,575 barrels to 2.158 million barrels on Wednesday, compared with 2.948 million barrels on Friday.

A Platts survey of refiners in California and Washington said they have not been affected by the closure of the TAPS.

(See the related post on this topic, as well as my remarks and map, here. The 84-hour shutdown turned out to be the longest since Aug 15, 1977, when the TAPS was shut down for four days, 14 hours and 11 minutes, a few months after it went into operation. Or the second longest since the pipeline began operating in 1977. -- D.R.)

Wednesday, January 12, 2011

National Commission Releases Final Report on Deepwater Horizon Oil Spill and the Future of Offshore Drilling

by David Rachovich
The Presidentially-appointed Oil Spill Commission yesterday (Jan 11) released its landmark, definitive report, Deep Water: The Gulf Oil Disaster and the Future of Offshore Drilling, on the causes and consequences of the BP Deepwater Horizon disaster, and proposed comprehensive reforms of both government and industry practices to overhaul the U.S. approach to drilling safety and greatly reduce the chances of a similar, large scale disaster in the future.

“Our investigation shows that a series of specific and preventable human and engineering failures were the immediate causes of the disaster,” said Commission Co-Chair William K. Reilly. “But, in fact, this disaster was almost the inevitable result of years of industry and government complacency and lack of attention to safety. This was indisputably the case with BP, Transocean, and Halliburton, as well as the government agency charged with regulating offshore drilling—the former Minerals Management Service [now BOEMRE]. As drilling pushes into ever deeper and riskier waters where more of America’s oil lies, only systemic reforms of both government and industry will prevent a similar, future disaster.”

“The reforms needed to prevent future disasters are spelled out today in black and white,” said Commission Co-Chair Bob Graham. “Specific actions must be taken by Congress, by the Administration, and by industry to reduce the likelihood of a similar tragedy. If they are not taken, the probability of another failure will be dramatically greater. The people of the Gulf who have suffered so much deserve to know what their government and the industry are going to do.”

The Commission’s full 398-page report is available for download on the Commission's website at http://www.oilspillcommission.gov/.

Multi-media presentations of the Commission’s recommendations and findings are also available at http://www.oilspillcommission.gov./

Last week, the Commission released an advance chapter of its report. -- See blog post here.

Monday, January 10, 2011

BP Hit by Oil Leak in Alaska

by Fiona Bond, Interactive Investor, Jan 10, 2011
Oil giant BP (BP.) was left cursing more bad luck on Monday, as its shares slipped into the red after an oil leak forced the company to shut a major Alaskan pipeline.

The [800-mile or 1,287-kilometer] Trans-Alaska Pipeline [System or TAPS], responsible for transporting oil from the Prudhoe Bay field [on the North Slope, south to the Port of Valdez -- see map below], was closed on Saturday after oil was discovered in the boost pump basement at Alaska's North Slope pumping station. [Pump Station 1 at the beginning of the pipeline at the Prudhoe Bay field.]

This has resulted in 95% of [North Slope] production to be cut off.

Alyeska Pipeline Service, the company responsible for running the pipeline, in which BP owns a [nearly] 47% stake, said the process of recovering oil from the site got underway on Sunday afternoon.

In a statement, Alyeska said contractors, as well as state and federal agencies, were working together to return the pipeline to service, although no date was given.

"Engineers are evaluating options, including developing a plan to bypass the affected piping in order to safely restart the pipeline," the company said. ...

Oil prices were driven higher as a result of the shutdown and ensuing supply fears, with a barrel fetching $88.66 by midday, up 0.7%.

The news will come as a further blow to BP, which has struggled to restore its reputation in the wake of last year's catastrophic Gulf of Mexico oil spill. [Read also my blog post, including remarks, here  -- D.R.]

However, analyst Tony Shepard at Charles Stanley, said he believes this will not pose a major step-back for the company, as Aleyska was careful to point out that there was no injuries or "apparent impacts to the environment" as a result of the incident.

He added: "Obviously it's not good news for the company but it is just one of many BP assets and won't pose a big issue providing there are no environmental repercussions."

Referring to the downturn in shares, Shepard said: "The share price had a tremendous run of late so it's natural that it will drop back slightly." More

(The TAPS normally carries between 630,000 and 650,000 barrels a day from the North Slope. Oil flow through the TAPS (corresponding to the North Slope oil production) peaked in 1988 at over 2 million barrels a day, but output from Prudhoe Bay and other maturing North Slope fields has dwindled significantly since then. Namely, the volume of oil flowing through the TAPS has decreased to c. 650,000 barrels a day in 2010. Alaska supplied 12 percent of the U.S. domestic crude oil production as of 2009. In 1988 it was c. 25% of total U.S. crude oil production. Prudhoe Bay field (discovered in 1968) came on stream in 1977, rapidly increasing output until the field's maximum rate was reached in 1979 at 1.5 million barrels a day. This rate was maintained until early 1989. Field's production declined to 1.1 million barrels a day in December 1993 and further to 1 million barrels a day at the beginning of 1995. Prudhoe Bay produced an average of 855,000 barrels a day during the 1996. Production totaled approximately 475,000 barrels a day on January 1, 2004. Nevertheless, the North Slope’s Prudhoe Bay field today is still the largest oil field in United States, producing 331,408 barrels a day on January 7, i.e. a day before the shut-down. Alyeska is a consortium owned by five oil companies: BP Pipelines (Alaska) Inc. 46.93%; ConocoPhillips Transportation Alaska, Inc. 28.29%; ExxonMobil Pipeline Company, 20.34%; Unocal (which merged into Chevron in 2005), 1.36%; and Koch Alaska Pipeline Company, L.L.C., 3.08%. -- D.R.)

                                                Source: U.S. EIA, here 

BP Still the Biggest Seller of Bunker Fuel in Singapore in 2010

Platts, Jan 10, 2011
Oil major BP held on to the top spot of Singapore's list of bunker suppliers by volume for the eighth consecutive year in 2010, data posted on the republic's Maritime and Port Authority website Monday shows, despite losing its team of bunker and fuel oil cargo traders earlier in the year.

ExxonMobil and South Korea's SK Energy had also maintained their 2009 position, coming in after BP with the second and third largest volume sold in 2010. Aegean Bunkering took the fourth spot in 2010, while independent bunker supplier Global Energy slipped to the fifth from the fourth spot last year.

Meanwhile, global bunker supplier Chemoil was the sixth biggest seller of bunker fuel in Singapore in 2010, improving from its ninth position in 2009.

European trader Glencore, which has a 51.54% stake in Chemoil through Singfuel Investment, maintained its position as the 15th biggest seller of bunker fuel.

MPA does not reveal the actual volume sold by each company but Singapore, the biggest bunkering port in the world in terms of sales, sold a record 40.9 million mt of bunker fuel in 2010. This is 12.3% higher compared with the 36.4 million mt of bunker fuel it sold in 2009. Read more

Enoc Opens Middle East's First Green Service Station

AMEinfo.com Jan 5, 2011
[Dubai's] Emirates National Oil Company (Enoc) has launched the first 'green service station' in the Middle East at the Emirates Hills neighbourhood in Dubai. [See image below -- D.R.] Underscoring the commitment of the company to the sustainable development initiatives of the UAE, the new eco-friendly service station has a range of unique features all aimed at reducing the ecological footprint of the users.

Among the innovative green initiatives at the station are advanced technological devices to contain petrol fumes released at the pump, and a variety of other state-of-the-art systems, including solar-powered lighting [i.e. solar panels], a 'waterless' car-washing system, new waste segregation systems, and design upgrades to reduce noise pollution. ...

The station generates half of its energy requirements from renewable sources. The site uses Solar Powered Pole and LED lights, with a long life span of up to 50,000 hours and low voltage safe against electrical fire hazards. These lamps do not need to be replaced for up to 12 years. ...

Sustainable water features have also been installed to cut water consumption by a quarter. The new service station recycles car-wash water and also provides customers the option to use a waterless car wash system, which cleans car without using a single drop of water.

The waterless car wash concept saves water and prevents detergents from polluting the environment with its new 'No-Wet' technique, an all-in-one eco-friendly car wash liquid. Made from all natural ingredients, the product does not contain petroleum distillates, silicone, abrasives, harmful chemicals or detergents that pollute water. ...

Enoc's environmentally-friendly engine oils PROTEC Green for gasoline engines and VULCAN Green for diesel engines will be available. Both are designed to ensure longer life span for vehicles and lower levels of greenhouse gas emissions.

The green Very Low Sulfur Diesel (VLSD) will also be available at the service station. This innovative diesel contains 10 times less sulfur than the standard one, which means a cleaner engine for cars and a cleaner environment.

Other key environmentally-friendly products include Hiclone fuel-saving devices. When installed on the vehicle, Hiclone improves fuel economy and engine efficiency while helping decrease air and noise pollution. Hiclone can decrease carbon footprint by 60%, as it reduces incomplete combustion and harmful emissions. It can also enhance the towing efficiency, reduce fuel consumption by 20%, and add 10% to the car's power. Moreover, the uniform movement of the pistons minimizes engine noise and prevents abnormal abrasion. Read Full

(See a related video at http://www.ameinfo.com/252979.html -- D.R.)

Credit: Megan Hirons Mahon/Gulf News, here. Description: The brand new Enoc green service station in the Meadows. It recovers released vapour from petrol pumps and storage tanks and condenses it back to fuel.

Saturday, January 8, 2011

S Korea to Make Biodiesel Use Mandatory from 2012; Ahead of Schedule

Platts, Jan 7, 2011
South Korea has decided to make the use of biodiesel mandatory starting 2012, one year earlier than originally scheduled, in an effort to reduce the consumption of fossil fuel, the energy ministry said Thursday.

The Ministry of Knowledge Economy, responsible for energy, industry and commerce, has set the required biodiesel mix rate at 2% from 2012 under a Renewable Portfolio Standard aimed at boosting supplies of renewable energy.

"We will introduce a mandatory biodiesel mix rate system from 2012 as tax benefits on biodiesel will expire by the end of 2011," the ministry said in a statement. "This is expected to help in the recycling of waste resources and raise the country's energy independence," it said.

Biodiesel, a mixture of diesel fuel and biofuel made from grains such as soybean, palm and rapeseed, voluntarily makes up 2% of all diesel consumed in the country. The government has waived taxes for clean-burning biodiesel to boost consumption of the clean-burning fuel.

South Korea, the world's fifth-largest crude importer, became the first Asian country to mix biodiesel with conventional diesel in 2007 when refiners began selling diesel blended with 0.5% rape seed oil to local consumers. The blend has risen by 0.5% every year to 1% in 2008 and 1.5% this year.

In an effort to boost biodiesel consumption, South Korea would commercialize animal biodiesel and actively develop overseas farms, while investing in research and development for the next generation of biodiesel under its long-term plan, the statement said.

South Korean eventually aims to increase the portion of biofuel to 20% in diesel fuel after technology and safety problems are resolved. The engines on some vehicles running on the blend of 20%, or BD20, abruptly cut out during test runs. Biodiesel has a lower freezing temperature than regular diesel.
"More use of biodiesel would help cut South Korea's import of crude and reduce greenhouse gas emissions," the ministry official said. [Full story]

(With no domestic oil reserves, South Korea must import all of its crude oil. Compare South Korea's drive to reduce foreign oil dependency and greenhouse gas emissions with similar U.S. efforts, here.
It is worth adding that South Korea relies also on imports to satisfy nearly all of its natural gas consumption. It does not have any international gas pipeline connections, and must therefore import all gas via liquefied natural gas (LNG) tankers. Consequently, although South Korea is not among the group of top gas-consuming nations, it is the world's second largest importer of LNG after Japan. -- D.R.)

Friday, January 7, 2011

White House Probe Blames BP, Industry in Gulf Blast

By Stephen Power and Ben Casselman, The Wall Street Journal (WSJ), Jan 6, 2011
The explosion that triggered last year's Gulf of Mexico oil spill was an avoidable disaster that resulted from management failures by BP PLC and its contractors, a presidential commission has concluded. But the accident also reflected systemic failures by oil companies and regulators to deal with the risks of deep-water exploration, the panel said.

A report by the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling castigates BP and two of the British oil giant's contractors—[Vernier, Switzerland-based] Transocean Ltd. and [Houston-based] Halliburton Co.—for missteps that contributed to the worst offshore oil spill in U.S. history and the deaths of 11 rig workers.

The problems go far beyond BP, however, the report concludes—disputing oil-industry arguments that the April 20 explosion on the Deepwater Horizon rig was a one-time event caused by unusual and risky decisions by the oil company.

The panel said all three companies did a poor job of assessing the risks associated with their decisions and failed to adequately communicate, either with one another or with their own employees. Federal regulators lacked training and manpower to properly police the industry, the report finds.

The blowout "was not the product of a series of aberrational decisions made by rogue industry or government officials that could not have been anticipated or expected to occur again," according to a chapter of the report released Wednesday. "Rather, the root causes are systemic and, absent significant reform in both industry practices and government policies, might well recur."

The commission plans to issue the full report next week. ...

BP said the excerpt released Wednesday, like the company's own internal investigation, concluded the accident "was the result of multiple causes, involving multiple companies."

BP added that it was working to ensure that lessons learned led to improvements in deep-water drilling, and that it had already made changes to strengthen safety and risk management.

A Transocean spokesman said procedures at the well in the final hours were directed by BP and approved by regulators. "Based on the limited information made available to them, the Transocean crew took appropriate actions to gain control of the well," he said.

Halliburton, which handled a cement seal on the well, said cement jobs "can go wrong even under optimal conditions." The company added that its cement mixture was designed to BP's specifications and passed its final laboratory test.

President Barack Obama, in setting up the seven-member panel last summer, said he wanted it to recommend safety and environmental precautions the government should take to prevent mishaps. Several other government entities, including the Justice Department, are conducting their own investigations.

A U.S. Department of Interior spokeswoman said the Obama administration had announced a slew of new safety regulations since the accident, including requirements that drilling projects meet new standards for well design, casing and cementing, and be independently certified by a professional engineer.

But the economic and political environment has changed since the summer, when images of oil fouling Gulf beaches provoked outrage toward BP and rekindled worries about the safety of offshore oil drilling.

Since then, U.S. gasoline prices have risen to an average of more than $3 a gallon, unusually high for winter. [Compare this with the UK or Israel's gasoline prices, here -- D.R.] Republicans, who are generally more supportive of the oil industry and domestic exploration, have regained control of one chamber of Congress. Read More

(Read related blog posts here and here -- D.R.)