KazMunaiGas expects output shortfall due to a strike

Kazakhstan's State oil and gas company, KazMunaiGas, expects its production and planned output to fall by 4 per cent as a strike in one of the country's major oil fields enters its second month. The strike in Uzen field in western Kazakhstan, which commenced on 26th May, has already caused oil production losses of 150,000 tonnes.

The group's London-traded arm KMG EP released a statement, saying: "The company now believes that annual production from the Uzen field will not reach the target level and will be lower by at least 600,000 tonnes." It added that the other “small offsets” would also contribute to the 4 per cent shortfall in the earlier output forecast.

At the peak of the protests, in the field in the Mangistau region, the numbers of people involved were estimated at 2,500 but have now reportedly fallen to 650. KMG EP said that KazMunaiGas will start negotiations upon "complete cessation of illegal protests".

The strike, over labour a dispute, is the second one to affect KazMunaiGas' operations in the Mangistau region in the past two months.

KMG EP, Kazakhstan's second-largest oil producer, had earlier forecast crude oil production of 13.5 million tonnes in 2011. Last year, the company produced 13.3 million tonnes, equal to 270,000 b/d.

Sources: Reuters, Bloomberg, Upstream Online

For more news and expert analysis about the Caspian region, please see Caspian Focus.

Libyan oil sector in a state of disrepair

In the key oil sector the Libyan regime has pursued a policy of destruction rather than preservation of the oil installations along the Gulf of Sirte. ENI announced on 14th April that it planned to transfer much of its oil stored in Libya to a safe Italian base as soon as possible. Their intention is to rescue some of their assets, not an easy matter, because the continuation of oil exports cannot be relied upon. Indeed, the revolutionary authorities have stated that further oil exports will be held back until repairs are effected at two oilfields – Mesala and Sarir.

Doubtless, legal wrangling will be acute between the two sides in determining which of the governments in Libya should be in receipt of revenues and taxes arising from oil exports. A strong lobby including the French, whose government has already recognised the Interim Transitional National Council (ITNC) as the legitimate administration, UK and Qatar favours retaining all payments frozen until such time as there is arbitration on the ownership of the oil shipped.

Throughout the country security is poor and few establishments are functioning at other than low capacity. For the moment, foreign concerns are sheltered while Libyan nationals are heavily engrossed in the political turmoil but almost inevitably life will become difficult depending on their support for or against Colonel Mu'ammar Qadhafi's regime.

The local staff in Tripolitania could turn antagonistic to foreign employers should NATO help to usher in new victories for the eastern Libyans.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2011 Menas Associates

Statoil signs Abai exploration deal

Norway's Statoil has signed a heads of agreement with Kazmunaigas (KMG) to explore for oil and gas at the Abai block in the north Caspian. Under the terms of the deal, the two companies will evaluate the potential of the acreage, which lies in water depths of 8–10 metres, and set up an operating company to oversee the project.

During the exploration phase, Statoil and KMG will conduct seismic surveys and data acquisition and drill one exploration well. On top of this, Statoil will help train local personnel and provide “financial and technical assistance” to KMG's plan to build, own and operate a jack-up drilling rig in the Caspian.

This is Statoil's second stab at Abai: in 2005, the company signed a memorandum of understanding with KMG to develop Abai and the adjacent Isatai block, with the eventual aim of concluding a production-sharing agreement.

But the agreement did not lead anywhere, much to Statoil's frustration. Since then, the Kazakhs have imposed a moratorium on the signing of new offshore PSAs, which is unlikely to be lifted any time soon. Statoil has not been active in Kazakhstan since selling its stake in the Kashagan project more than 10 years ago — in hindsight, a very shrewd move given the mounting problems at Kashagan.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2011 Menas Associates

Caspian: Kulevi volumes double

The Georgian Black Sea port of Kulevi, which is majority-owned by Socar, transhipped 333,000 tons of crude oil and products in January, more than double the volume lifted in January 2010. The terminal, which came on stream in June 2008, is steadily increasing throughput as more shippers, including Tengizchevroil, use its facilities.

Among the two main users are Ocean Energy, the trading arm of Dubai-based Middle East, and Sumato Energy, which last year began exporting gas oil produced by Socar from its two Baku refineries. Rival port Batumi, which is 100 per cent owned by Kazmunaigas, is suffering a further drop in throughput as Kulevi prospers; in January, the terminal transhipped 453,000 tons of crude and products, which represents a year-on-year drop of more than 20 per cent, with exports in February dropping even lower to just 360,000 tons.

Batumi is fast losing its status as an oil products outlet, handling mostly crude oil from Kazakhstan – mostly from TCO and Geneva based trader Euro Asian – plus Azeri Light brought in by rail from ExxonMobil. Most of the transportation to Batumi is handled by the terminal's marketing arm Petrotrans.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2011 Menas Associates

Oil-hosting communities get payout

The presidential adviser on petroleum matters, Emmanuel Egbogah, has revealed that the fed­eral government has worked out a new dividend payment formula for oil-hosting communities that will see them receive $1.1 billion in annual dividends. That is much higher than the $600 million annual dividend payment that Minister of Petroleum Resources Diezani Allison-Madueke had previously announced.

According to Egbogah, the onset of the amnesty programme has brought about an increase in Nigeria's production levels and thus it is perti­nent that the federal government seek a lasting solution to issues of militancy in the Niger Delta by coming through with its promise to pay divi­dends to oil-hosting communities. He also noted that the previous figure was 'not quite correct.'

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.

© 2011 Menas Associates

New gas to reduce consumer power prices

Consumers will pay lower electricity rates from March onwards as power-generation costs decline with availability of natural gas from the West African Gas Pipeline (WAGP) which transports natural gas from the Niger Delta to Ghana via neighbouring Benin and Togo.

The Public Utilities Regulatory Commission (PURC) chairman, Emmanuel Annan, told reporters in Accra on 15 th February that residential electricity users will see their rates fall as much as 6.2 per cent depending on consumption and industrial consumers will see a drop of between 11.8 and 15.9 per cent.

Annan said that water costs for residential consumers will fall between 1.2 per cent and 1.3 per cent from March to May, while industrial users will have their tariffs reduced by as much as 6.4 per cent.

Reacting to the latest development, Deputy Information Minister Samuel Okudzeto Ablakwa told Citi News that the government had no part in the PURC's latest decision.

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2011 Menas Associates

Ghana buys land near Cote d'Ivoire border for gas-processing plant

The Ghanaian government has purchased a 27.2km sq plot of land near the border with Cote d'Ivoire to build a US$1.2 billion (GH¢1.76 billion) gas-processing plant, part of the Bonyere gas project.

Deputy Information Minister Samuel Okudzeto Ablakwa has been reported as saying the land was acquired after the government resolved a dispute with the residents of Bonyere, Western Nzema, where the plant will be constructed.

Under the government's gas industrialisation project, a 150km gas pipeline will be laid from Bonyere to the Anoadze Thermal plant in order to increase the country's capacity to generate more energy, and ensure a stable electricity supply.

There are also plans to establish a multi-million dollar fertiliser processing plant in the Western Region, which, once completed, would be able to process 300 million cubic feet of gas daily from the Jubilee field.

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2010 Menas Associates

Desire Petroleum discovery contains mostly water, not oil

Desire Petroleum has said that the key drilling prospect off the Falkland Islands contained mostly water, not oil. Last week, the company said that it was optimistic that the well contained hydrocarbons, but further tests of the Rachel North well in the North Falkland basin contained mostly water.

Upon first inspection, Desire Petroleum believed it had made the only second ever oil discovery of the North Falkland basin. The first was made by Rockhopper at its Sea Lion prospect in May.

Desire Petroleum released a statement last week saying, "Preliminary data collected indicate that this well is an oil discovery.” But on Monday 6th December, the company said that “sampling of the main sand has shown that the hydrocarbons are residual and that the mobile fluid is water,” further adding that the well will "be plugged and abandoned".

Source: BBC News

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Desire Petroleum finds oil off the Falkland Islands

Desire Petroleum has discovered oil off the Falkland Islands in the South Atlantic. The company said it would have to carry out further tests in order to determine the significance of the new discovery, a second such find this year. The first, by another British exploration company, Rockhopper, was made in the same area in May.

Chairman of Desire Stephen Phipps said the find in the North Falkland basin was "highly encouraging." It is yet unclear whether or not the find will prove commercially viable, but Desire Petroleum says it expects to find further oil fields in the area.

Resumption of oil exploration around the Falklands has revived a long running dispute between Britain and Argentina about the sovereignty over the islands. In February, Argentina announced new controls on shipping to the Falklands. It has also raised the issue at the UN and called for support for its sovereignty claim among Latin American countries.

Britain says there is no doubt over its sovereignty over the Falkland's territory, as most of the population residing there is of British descent.

Source: BBC News

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Brazil changes oil sector law for offshore fields

Brazilian Congress has made certain amendments to its oil sector law, which could potentially increase the country's development of its offshore oil fields. The bill stipulates that state-owned company Petrobras will have a 30 per cent stake in all new offshore exploration ventures within Brazil.

President-elect Dilma Rousseff championed the new legislation while working as the energy minister in the outgoing government. The oil fields off the coast of Rio de Janeiro are estimate to contain more than 50 billion barrels of oil, buried approximately 7km beneath a layer of salt.

Petrobras has years of expertise in deep-water drilling as most of its ventures are located in the south Atlantic Ocean. Brazil's offshore oil fields might prove a lucrative venture for IOCs and foreign investors.

Source: BBC News

For more news and expert analysis about Brazil, please see Brazil Focus.

Algeria to intensify oil and gas exploration efforts

Algeria's Energy Minister Youcef Yousfi has said that the country will intensify its oil and gas exploration efforts in order to increase its hydrocarbon reserves and "guarantee the country's energy security in the very long term”.

"The Permanent Mission of our industry is to ensure the country's energy security in the very long term and ensure sufficient revenue for its development," said Yousfi in an interview. The minister added that Algeria, whose economy derives around 98 per cent of its revenue from oil, will also increase "its national capacity of oil and oilfield services."

Yousfi said that despite the current downturn in oil and gas markets, Sonatrach maintains its long-term investments plans. The state-owned company intends to invest around $63 billion to expand its capacity for gas exports.

Presently, Algeria supplies the EU with 12 per cent of its natural gas via two pipelines in Italy and Spain. A third pipeline is to be commissioned shortly and will be expected to deliver around 8 billion cubic metres of gas to various European destinations. Yousfi concluded by saying that Algerian gas exports are expected to reach approximately 100 billion cubic metres by 2015.

Source: Ennahar Online

For more news and expert analysis about Algeria please see Algeria Focus and Algeria Politics & Security.

Iran inaugurates 500km pipeline for Turkmen imports

Iran has inaugurated a 500km pipeline to facilitate greater volume of imports from Turkmenistan. The pipeline will also allow a better distribution of gas to domestic consumers across the Islamic Republic.

The pipeline, built at a cost of $550 million, is in the second phase of development and is expected to raise the volume of gas imports from Turkmenistan from 25 million to 40 million cubic metres per day.

Iran's Deputy Oil Minister Javad Oji said that the pipeline will also deliver gas from Iran's South Pars field, in the gulf to northern provinces traditionally served by Turkmen gas, to the northern parts of the country.

Oji noted that northern Iran's reliance on imported gas will dwindle as the country becomes more self sufficient and reliant on domestic supplies. He also added that Iran will continue co-operation with Turkmenistan to raise Iran's share in the world gas trade.

Source: Reuters

For more news and expert analysis about Iran, please see Iran Strategic Focus.

Jordan keen to sign gas agreement with Egypt

The Jordanian government is keen to sign an agreement with Egypt to increase natural gas supplies into the country. Jordan's Minister of Energy and Mineral Resources Khalid Irani has said that government officials are working closely with their Egyptian counterparts on an agreement to boost natural gas imports.

At the moment, Jordan receives 240 million cubic metres of gas from Egypt per year as stipulated in a 2004 agreement under which Cairo supplies Amman with natural gas at preferential prices. Under the new agreement, Jordan would receive and addition one billion cubic metres of gas. Sixty per cent of Jordan's electricity is produced from natural gas with the remained derived from oil and diesel.

Irani said that the new agreement was prompted by the fact that shortages in natural gas supplies over the summer forced Jordan to rely on diesel and heavy oil for 80 per cent of the country's electricity generation. He said this was due to the fact that Egypt faced availability shortages related to the expansion and maintenance of its natural gas wells. Irani stressed that Jordan will continue to seek alternative sources of gas and hoped that the demand can be met by Egypt.

Source: Jordan Times

For more news and expert analysis about Egypt, please see Egypt Politics & Security.

Yemen estimates reserves of around 11.9 billion barrels

Chairman of Yemen's Petroleum Exploration and Production Authority Nasr Ali Al-Humaidi has said that studies by the organisation have estimated that the total oil reserves in the 35 blocks tested contain around 11.9 billion barrels of oil.

Al-Humaidi said that the area in which work of exploration and production implemented at present are 25 per cent of the total area of the blocks. He said that the results so far were 'promising' and that Yemen is still in the first stages as a petroleum country.

“Exploration and production of oil and gas still need a lot of efforts and large investments and require teamwork and shared responsibility to provide different conditions appropriate to encourage the flow of domestic and foreign investments in oil and gas field. Oil and gas are one of the most important areas of investment in Yemen, if not the most important of all currently,” said al-Humaidi.

He also pointed out that the organisation has general oversight of all the operating processes in the blocks and that it, “represents the state as an essential partner in the areas to create a large infrastructure in the oil-producing blocks including production facilities to handle oil, gas, water, and exportation of crude oil units”.

Source: Yemen Observer

For more news and expert analysis about Yemen, please see Yemen Focus.

Security for companies working in Libya of interest to local authorities

The level of security for companies working in Libya remains a matter of acute interest to the local authorities. The likely withdrawal of a number of IOCs at the end of unsuccessful exploration programmes is recognised by Libya's senior planning agencies as an unwelcome setback to the economic development programme.

This will negatively affect Libya's principal economic sector, and considerably more exploration will need to be undertaken to ensure that reserve-to-production ratios do not fall significantly. The past six months - including the news of IOC withdrawals and soft world oil demand - have reinforced the pessimism for a strong surge in oil income for the immediate future.

It is interesting that NOC head, Dr Shukri Ghanem, was very sharp in making clear that the departure of IOCs was nothing unusual and that Occidental would remain for the time being. He was also at pains to assert that the long-term hydrocarbon development programmes are still on course. As noted last week, Shell's and BP's current exploration operations will be crucial. So far, BP remains convinced that its vitally important offshore drilling programme will begin before the end of the year. According to Ghanem, care has been taken to ensure that a repeat of the Gulf of Mexico oil spill will not occur.

The negative impact of the withdrawal of some IOCs should not be over emphasised. Indeed, the simultaneous presence of 47 IOCs in Libya was – because of many reasons, including its inadequate infrastructure and NOC's insufficient numbers of senior personnel who are able to negotiate with the IOCs – placing a severe strain on the country to cope with the influx. The income flows from oil ought, however, to be adequate to sustain the present level of activity both in oil and other key areas.

It must be expected that the security for the oil industry will continue to be enforced. Libya is well aware that its oil reserves position is fair but not good and that it needs to protect those overseas companies which remain inside the country.

For more news and expert analysis about Libya, please see Libya Focus and Libya Politics & Security.

© 2010 Menas Associates

Algeria launches third oil and gas licensing round

Algeria has launched its third oil and gas licensing round in hope of new investment for the country's energy industry. Previous bidding rounds in 2008 and 2009 were largely unsuccessful as international oil companies complained that the terms stipulated by Algeria's state oil company, Sonatrach, were too inflexible to be worth the risks.

According to energy industry insiders Sonatrach is unlikely to make major changes in its terms, but a lot will depend on which 10 blocks are put on offer. The contractual conditions will not be disclosed before 30th September and further "clarification meetings" will take place between October and December, with opening of the bids scheduled for 3rd March.

Sonatrach has a 51 per cent stake in all upstream operations and there's a tax on every barrel of oil sold at more than $30. It is estimated that Algeria has 12.27 billion barrels of oil reserves and 4.51 trillion cubic metres of natural gas reserves. Oil and gas account for 97.5 per cent of the country's export, making it the world's third largest exporter of liquefied petroleum gas, the fourth largest exporter of liquefied natural gas and ninth largest oil exporter.

According to online sources 70 international companies were qualified to bid in the forthcoming licensing round, including Exxon Mobil, Royal Dutch Shell, Total, Gazprom, BP, Repsol and Eni.

Source: UPI

For more news and expert analysis about Algeria please see Algeria Focus and Algeria Politics & Security.