Petrobras Announces Third LNG Terminal

by OGJ editors, OGJ, Mar 2, 2011
Petroleo Brasileiro SA (Petrobras) reported it will install a third offshore LNG terminal.

The Bahia regasification terminal (TRBA), with capacity to regasify 14 million cu m/day (cmd), will supply natural gas to the state of Bahia, the heaviest consumer of gas among the northeastern Brazilian states.

TRBA will be installed in the Bay of All Saints and interconnect with a pipeline network at two sites: one in the Bahia network, at Candeias, and the other at kilometer 910 on the Cacimbas-Catu pipeline, a section of the Southeast-Northeast Gas Pipeline started up in March 2010.

As part of Brazil’s Growth Acceleration Program, Petrobras said, work will begin in March 2012 with completion scheduled for August 2013 under an investment of nearly $425 million.

Currently, Brazil has LNG terminals at Pecem (State of Ceara) with a regasification capacity of 7 million cmd, and in the Guanabara Bay (State of Rio de Janeiro) with capacity of 14 million cmd. When the TRBA terminal comes online in September 2013, Brazil’s total regasification capacity will reach 35 million cmd, overtaking the gas imports via pipeline from Bolivia (31 million cmd).

At the Pecem and Guanabara Bay terminals, tankers moor at a two-berth pier and LNG is transferred over cryogenic arms from supply vessel to regasification vessel. At the TRBA terminal, LNG will be transferred directly between vessels using side-by-side docking, which means that the regasification vessel will dock at a single-berth, island-type pier, said the company.

With direct connection to the supply vessel, LNG will be transferred over short hoses or loading arms to the regasification vessel, which will convert LNG back into a vapor [i.e., gaseous state].

Gas will then be injected into the pipeline network through a 28-in. pipeline that is 49 km long including a 15-km subsea section.

Petrobras noted that currently only two [sic] other LNG terminals in the world use this configuration [i.e., side-by-side -- D.R.]: Bahia Blanca in Argentina and the UAE’s Dubai terminal. [Full story]

(Brazil imported 298 Bcf of natural gas in 2009, a 24 percent drop from 2008. The decline in Brazilian overall natural gas demand, coupled with policy choices aimed at reducing imports, led to this decline. The country currently receives imports by pipeline from Bolivia and liquefied natural gas (LNG) imports from Trinidad and Tobago and Nigeria. Import growth in the future is expected to be met more with LNG than with conventional pipeline imports. Brazil imports natural gas from Bolivia via the Gasbol pipeline, which links Santa Cruz, Bolivia to Porto Alegre, Brazil, via Sao Paulo. The 2,000-mile Gasbol has a maximum capacity of 1.1 Bcf per day (Bcf/d). In early 2009, Brazil announced that it would reduce imports from Bolivia from 1.1 Bcf/d to 0.7 Bcf/d. According to ANP, Brazilian imports of Bolivian gas have since declined by 27 percent. However, Bolivia still accounted for 96 percent of Brazil’s total natural gas imports. The Pecem---please see image below---received its first LNG cargo from Trinidad and Tobago in July 2008, while the Guanabara Bay terminal came online in May 2009. According to ANP, Brazil received 15 Bcf of natural gas in the form of LNG in 2009, mostly from Trinidad and Tobago---please see U.S. EIA, Brazil Country Analysis Brief, Jan 2011, here. For the Petrobras's standing in the company rankings---PIW's and others---please see my blog stand-alone page "Companies" > Petrobras, here. -- D.R.)

Source: LNGpedia.com here Description: The Floating Storage and Regasification Unit---FSRU---vessel, the Golar Spirit, is reportedly the world's first methane vessel to have been converted to perform LNG regasification on board. The regasification capacity of the Golar Spirit is seven million cubic meters (cbm) per day, and its storage capacity is 129,000 cbm of LNG, equivalent to 77 million cbm of natural gas.

Azerbaijan to Double Gas Output to 54 Bcm/Year by 2020: Official

Platts, Feb 15, 2011
Azerbaijan plans to double its natural gas output to some 54 billion cubic meters/year by 2020, a senior energy ministry official said Tuesday, with Europe expected to benefit most from the increased volumes.

Azerbaijan's deputy [industry and] energy minister Natig Abbasov told the Azerbaijan Press Agency following a session of an Azerbaijan-EU working group the country has confirmed gas reserves of 2.2 trillion cubic meters, [mostly in Shah Deniz II and the Umid fields.]

"In 2006 Azerbaijan produced 9 Bcm of gas and already in 2010 produced 27 Bcm," Abbasov said.

"By 2020 the volume of gas produced in Azerbaijan will double," he said.

In January, Azerbaijan agreed to supply enough gas to the EU to open up the so-called "Southern Gas Corridor."

Securing supplies from Azerbaijan has been seen as key to Europe's plans to diversify its gas imports away from Russia and other traditional suppliers.

Competition for Azerbaijan's future gas has been fierce, with Russia and Iran also interested in increasing supplies.

The January declaration was the first time Azerbaijan had agreed in writing to export large volumes of gas to Europe, though it has said verbally in the past it was prepared to supply countries in Europe.

Abbasov said that as recently as 2006, Azerbaijan had to import gas, but it now exports gas to Russia, Iran, Turkey and Georgia [please see my remarks below -- D.R.].

Abbasov said Azerbaijan plans to supply 2 Bcm of gas to Russia in 2011.

The main sources of Baku's gas production growth will come from the second phase of the Shah Deniz gas field and the Umid field, Abbasov said.

Umid's recoverable reserves are estimated at 200 Bcm, and Azerbaijan also has a number of other high-profile gas fields in the exploration phase, including the Total-led Absheron project, where drilling has just started.

EU PIPELINE PROJECTS

Although Russia has publicly said it could buy all of Azerbaijan's export gas, the EU is expected to receive large volumes of Azeri gas in the future.

There are currently three gas pipeline projects competing for new gas from Azerbaijan, with a decision on which is to be favored by Baku due soon.

The projected 31 Bcm/year Nabucco and the planned 11 Bcm/year ITGI lines are competing with a third project, the proposed 20 Bcm/year Trans-Adriatic Pipeline between Greece, Albania and Italy, for the role of principal carrier of Azeri gas to Europe.

Azerbaijan has also pledged gas to the Azerbaijan-Georgia-Romania Interconnector (AGRI) venture.

The energy ministers of the three countries, plus Hungary, signed a declaration on the project in the Romanian capital Bucharest Monday.

The AGRI project, created last September, envisions 7 Bcm/year of Azeri gas transported from the Sangachal terminal via existing pipelines to the port of Kulevi, Georgia.

There it would be converted to LNG in a newly built terminal and shipped to the port of Constanta, Romania, across the Black Sea, and on to Hungary via pipeline.

Hungary, which already took part in last September's AGRI talks as an observer, will be represented in the project company by state-owned power holding MVM.

The four partner companies -- Romgaz (Romania), Socar (Azerbaijan), GOGC (Georgia) and MVM -- will each control 25% of the AGRI project company.

The four parties hope to complete a feasibility study of the project by April 1, 2012.

Hungary's participation in the project is made possible by a recently opened Hungary-Romania gas interconnector.

Hungary is heavily dependent on Russian gas imports transported via Ukraine, and is also part of the Nabucco project.

"AGRI, too, could be a realistic solution for easing Hungary's one-sided gas import dependence, both in terms of gas sources and supply routes," Hungary's energy minister [Minister of National Development] Tamas Fellegi was quoted as saying. "We believe AGRI is a feasible project." [Full story]

(Azerbaijan became a net exporter of natural gas in 2007 with the startup of the Shah Deniz natural gas and condensate field in late 2006; in prior years it had been importing natural gas from Russia. Prior to 2007, the Kazi Magomed-Mozdok pipeline used to transport natural gas from Russia to Azerbaijan, but the agreement allowed for the pipeline flow to be reversed, making Azerbaijan an exporter of natural gas to Russia. The Shah Deniz field was discovered in 1999. It is one of the world's largest gas-condensate fields, with over 30 trillion cubic feet---1 trillion cubic meters---of gas in place. It lies in water depths between 50 meters and 600 meters, i.e. 1969 ft, some 70 kilometers, i.e. 43 mi, southeast of Baku---please see map below. BP operates Shah Deniz on behalf of its parners in the Shah Deniz Production Sharing Agreement. The country is also a significant oil producer. Azerbaijan produced some 51 million tons of oil, i.e., about 1 million barrels of oil per day, in 2010. -- D.R.)

                        Source: Rigzone, here (Azerbaijan's northern land border with Russia is missing -- D.R.)

World Watch -- Comment & Interpretation on Today's News [Oil Prices]

by Peter Kemp, London, EI
The ebb and flow of protests across North Africa and the Middle East is being mirrored in oil markets, with WTI following Brent north of $100 per barrel this past week. A mix of geopolitical risks and technical explanations is driving price forecasts even higher as predictions of a bumpy ride towards $200/bbl gain credibility. Financial analysts are driving these frothy predictions, while market fundamentalists fret that the oil balances still show sluggish demand outside of Asia, ample supply and enough spare capacity for almost any eventuality. But with Libya offline and jumpiness about potential disruptions elsewhere, a period of higher prices is inevitable. This makes Saudi Arabia’s effort to calm the market with extra barrels for which there was no obvious demand all the more understandable. A runaway rise in oil prices is an immediate threat to the fragile global recovery from recession, and an even bigger threat to long-term demand for oil.

(Please see also my recent blog posts under the categories/labels "Libya," "Saudi Arabia" and "Oil Fundamentals." -- D.R.)

Fitch: Long Production Cut Biggest MENA Threat

By OGJ editors, OGJ, Mar 3, 2011
Long interruption of production represents the largest threat from political turmoil to the financial stability of oil and gas companies with operations in the Middle East and North Africa (MENA) but remains unlikely, an international credit-reporting agency says.

A secondary risk, nationalization of assets by successor regimes in countries now experiencing unrest, is a “remote scenario,” although contract renegotiations by successor regimes remains possible, according to Fitch Ratings, New York and London.

A recent Fitch report covering North American companies with operations in the MENA region said credit pressures from unrest in Egypt, Libya, and other countries of concern are manageable.

Credit ratings are most sensitive to “widespread and long-lasting production” upsets, which Fitch doesn’t expect “due to the importance of oil revenues to the region’s economies.”

Most North American producers in the MENA region are large, integrated companies for which production in countries experiencing unrest is small in relation to total. Oil price increases mitigate the elevated risks of production losses and contract renegotiation.

Company exposures

Apache Corp. has the highest exposure among North American producers to any single country experiencing turmoil, Fitch said. Apache’s 163,300 boe/d of output in Egypt is 24% of Fitch’s assessment of the company’s recent total production.

Exposure levels in Libya include Marathon, 12% of total production; Suncor Energy Inc., 8%; Hess Corp., 5%; ConocoPhillips, 3%, and Occidental Petroleum Corp., 1%.

Fitch called Algeria “the other North African country that could present the largest concerns for North American-based upstream companies.” There, sizable exposure levels include Anadarko Petroleum Corp., 7% of total production, and Hess, 3%. ConocoPhillips produced 14,000 boe/d in Algeria in the third quarter last year, less than 1% of total production, according to Fitch estimates.

North American companies with production in restive Yemen include Nexen Inc., 11% of estimated total production, and Oxy, 6%.

Among European oil and gas companies tracked by Fitch, four have production in Libya or Egypt, the firm said in a separate report.

Eni, OMV, and Repsol have production exposure of 9-14% in Libya, “with Eni as the most exposed,” Fitch said. About one fourth of BG Energy Holdings Ltd.’s total oil and gas output is in Egypt.

“There could be a more pronounced impact on European oil and gas companies’ operations and financials if the political unrest spreads across Africa and/or the Middle East,” Fitch said, adding it “does not currently view this scenario as very likely.” [Full story]

Saudi Arabia Pledges To Fill Oil Supply Gap amid Libyan Unrest

By Takeo Kumagai, Platts blog - The Barrel, Feb 24, 2011
Seeing is believing. That was the first that thought came to my mind when I visited the onshore Khurais oil field in Saudi Arabia's vast desert this week [please see map of oil and gas fields in Saudi Arabia, below -- D.R.].

Located some 150 km (100 miles) [sic] southeast of the capital Riyadh, the Khurais oil field began pumping 1.2 million b/d in 2009 [sic; Khurais reached its maximum sustainable capacity in 2010 -- D.R.], the largest single increment from any single oilfield in the kingdom's history.

As an energy correspondent visiting from Japan, which imports 1.1 million b/d of crude from Saudi Arabia, seeing a production facility that can alone meet 30% of my country's total imports is mind boggling. The Khurais field's production capacity alone is higher than the output capacities of several oil producing countries in Asia and elsewhere.

Saudi Aramco achieved production of 1.2 million b/d at Khurais a month after it was commissioned in May 2009 [sic] and was one of several mega projects designed to take the company's total production capacity to its current 12 million b/d.

The Khurais oil field currently produces around 1 million b/d of Arabian Light crude oil with a gravity of around 32 API, reflecting current demand patterns for lighter grades, Saudi Aramco officials said.

The Khurais field can sustain production at current levels for 30 years, they added.

Output capacity from Khurais could be taken up to between 1.4 million to 1.5 million b/d, should the need arise, by adding another production line to its existing 14 lines, they said, adding that water processing units and other infrastructure can accommodate this increase.

Saudi Arabia, which has total production capacity of 12.5 million b/d if output from the partitioned neutral zone with Kuwait is included, has some 4 million b/d of spare production capacity. Currently [i.e., Jan 2011 data -- please see my post here -- D.R.], Saudi Arabia's crude oil output is 8.4 million b/d. [Also, please see here -- D.R.]

The volume of spare capacity held by Saudi Arabia and a few other members of OPEC was the focus of discussions at an extraordinary meeting of the International Energy Forum held in Riyadh on February 22 amid fears that unrest in Libya might disrupt supply.

Saudi Arabian Oil Minister Ali Naimi told reporters after the oil producers and consumers forum ended that he did not expect the price spike of 2008 to be repeated and that recent market volatility was unlikely to last because current oil markets were well supplied, spare capacity was plentiful and there was no shortage of supply.

Naimi said that, in the event of a supply disruption, Saudi Arabia and OPEC would be ready to step in and use their spare capacity to balance markets. He put global spare capacity at 5 million to 6 million b/d.

"Let me emphasize that this is not 2008...it is an extremely different situation from 2008," Naimi said of the year that saw oil prices soar to a record above $147/barrel, some $38/barrel shy of the current value of Brent crude oil futures.

OPEC insisted at the time that there was no shortage of oil and that the rocketing prices were due less to high demand than to excessive speculative activity.

But it is Saudi Arabia's ability to ramp up production quickly to meet any supply disruption that holds the key to oil market stability [i.e., Saudi Arabia's role as world's unofficial swing producer -- D.R.] and this was reflected in remarks by several officials representing the interests of the world's major oil consuming nations.

The Executive Director of the consumer watchdog the International Energy Agency, Nobuo Tanaka, told Platts in an interview in Riyadh that he had been assured by both the OPEC secretary general and Naimi that any supply gap would be filled.

"There is ample spare capacity. We should not panic," Tanaka said, adding that OPEC members, particularly kingpin Saudi Arabia, were producing "more than they say."

With 260 billion barrels of crude oil reserves lying beneath the sands of this desert kingdom [please see figures here -- D.R.], Khurais is a vital component of the global oil supply chain. [Full story]
                [Click on map to enlarge]

                                                    Source: Saudi Aramco via EIA, here.

World Watch -- Comment & Interpretation on Today's News [Libyan Crisis -- Saudi Oil: European Refiners May Prefer Swap Arrangements]

by David Knapp, New York, EI
Saudi Arabia is working hard -- in its typically understated fashion -- to soothe market concerns about possible oil shortages. Last week, the Saudis took a group into the control room of the newly refurbished Khurais field northwest of the giant Ghawar deposit to suggest it could provide higher capacity and higher production than was commonly thought [for information on Khurais, please see my post here -- D.R.]. Riyadh has repeatedly said the kingdom will meet any demand for extra barrels from refiners to replace Libyan outages. Interestingly, however, there does not currently seem to be much demand for Saudi barrels from European refiners who are expected to bear the brunt of the Libyan shortfall. Quality is an issue: spare Saudi Arab "Light" is more of a medium, sour crude compared with Libya's predominantly light, sweet menu. Swaps for Libya-similar West African grades have been suggested, with Saudi barrels instead going to Asian customers. In general, however, the current lack of European interest likely reflects ample stock levels.

OPEC's Top Crude Oil Producers, 2010-Jan. 2011

by Aaron and David Rachovich

OPEC Crude Oil Production* 2010-Jan.2011 (thousand barrels per day)

Rank	Country	Full Year 2010	Nov 2010	Dec 2010	Jan 2011
1.	Saudi Arabia	8,208	8,266	8,361	8,433
2.	Iran	3,708	3,678	3,679	3,658
3.	Iraq	2,397	2,405	2,448	2,706
4.	Kuwait	2,307	2,314	2,336	2,354
5.	UAE	2,305	2,268	2,340	2,375
6.	Venezuela	2,281	2,228	2,243	2,256
7.	Nigeria	2,064	2,143	2,204	2,172
8.	Angola	1,787	1,665	1,576	1,618
9.	Libya	1,560	1,568	1,572	1,574
10.	Algeria	1,270	1,268	1,270	1,276
11.	Qatar	804	806	816	813
12.	Ecuador	473	472	476	481
Total OPEC**		29,163	29,081	29,320	29,717

*Based on secondary sources.

**Totals may not add up due to independent rounding.

Source: OPEC, Monthly Oil Market Report, February 2011, Table 5.4, here

(According to the U.S. Energy Information Administration, Saudi Arabia produced on average 8.4 million barrels per day of crude oil, including about one-half of the production in the Kuwait-Saudi Arabia Neutral Zone, in 2010---please see here and here. Also, please see our post "World's Top 20 Crude Oil Producers, Nov. 2010," here. Update: please see my post "OPEC's Top Crude Oil Producers, 2011-Jan. 2012." -- D.R.)