By James Burgess | Thu, 24 April 2014 20:42 | 0
North Dakota is considering measures to slow down the oil rush in the Bakken to cut down on the state’s higher-than-average rate of flaring natural gas, which many people feel has gotten out of control.
The Associated Press reported that on April 22, the North Dakota Industrial Commission, which oversees oil and gas production in the state, took testimony from supporters and detractors of a proposed slowdown in oil production.
At the hearing, landowners decried the negative consequences of gas flaring, citing a threat to public health and lost revenue from burning natural gas instead of capturing it.
Industry officials pushed back, arguing that the companies are already taking voluntary steps to capture more natural gas than can be sold. Currently, oil and gas companies operating in North Dakota flare 36 percent of natural gas that is extracted, for lack of pipeline and processing infrastructure to capture it. That compares to a nationwide average of only 1 percent, and a worldwide average of only 3 percent, according to the Energy Information Agency (EIA).
But oil and gas industry representatives warned that less flaring would hurt business, and therefore, the state.
“If production curtailment is the chosen regulatory path, then wells will be shut in or not even drilled. Revenues will be reduced, taxes will not be generated and those jobs will be lost. And the gas will not be captured and used productively,” said Roger Kelley, director of regulatory affairs for Oklahoma City-based Continental Resources Inc., a prominent driller in the Bakken.
This isn’t the first time North Dakota has felt pressure to rein in its exploding oil and gas industry. Back in January, Robert Harms, the chairman of North Dakota’s Republican Party called for a more “moderated approach.” On April 22, one of the state’s two U.S. senators, John Hoeven (R), although stopping short of calling for slower production, said reducing flaring would help the economy and also improve energy security.
The North Dakota Industrial Commission is comprised of three officials: Republican Gov. Jack Dalrymple, state Attorney General Wayne Stenehjem, and state Agriculture Commissioner Doug Goehring.
By James Burgess of Oilprice.com
By Daniel J. Graeber | Thu, 24 April 2014 22:10 | 0
The price for the U.S. crude oil benchmark has moved closer to $102 per barrel in trading in part because of renewed concerns over Libya, once one of North Africa's top exporters.
On concerns Libya has not yet broken rebels’ grip on oil export terminals, West Texas Intermediate was trading at $101.40 per barrel, while the price for Brent moved at $109.10.
Though U.S. crude oil levels may provide some relief to market worries, the protracted stalemate over Libyan crude, coupled with continued unrest in Ukraine, could push oil prices higher through this summer.
In early April, the government in Tripoli brokered a deal with rebel authorities in the eastern region of Cyrenaica that was expected to end a long blockade at key oil export terminals.
U.S. Navy SEALs responded earlier this year when a North Korean-flagged vessel, Morning Glory, left an eastern Libyan port with an illicit cargo of crude oil.
When Tripoli announced the rebel agreement, the U.S. government issued a statement alongside its European partners describing it as a "significant" step toward ending a stalemate that has handicapped Libya's oil sector since at least last summer.
Visiting U.S. Deputy Secretary of State William Burns said April 24 that a weak central government and pressure from rebel groups was presenting "enormous" challenges to a country still struggling to regain its footing after the fall of Moammar Gadhafi's government in 2011.
That year, unrest in Libya prompted the International Energy Agency to call for a release of strategic petroleum reserves. Nearly three years on, Libyan output has yet to hold at its pre-war level of around 1.4 million barrels of oil per day. It is currently only producing about 220,000 barrels per day because of internal conflicts.
Russian energy company Tatneft said it's been working on getting staff into Tripoli and resume supplier negotiations with the aim of restarting work in Libya later this year. Last month, Italian energy company Eni said it was operating at about 80 percent capacity. Its chief executive, Paolo Scaroni, said his company was managing a difficult situation in Libya "reasonably well."
Libyan Justice Minister Salah al-Merghani, however, said there were technical delays in opening the eastern Zueitina oil terminal. The key terminals at Ras Lanuf and Es Sider, he added, can't open until damage at Zueitina has been fixed.
By Daniel J. Graeber of Oilprice.com
PetroChina posts 5 pct fall in Q1 profit, beats forecast
HONG KONG, April 24 (Reuters) - PetroChina, China's biggest oil and gas producer, reported a 5 percent fall in first-quarter profit but beat forecasts as a decline in international crude prices was offset by a strong recovery in refining and fuel retailing business.
Net profit reached 34.2 billion yuan ($5.48 billion) in the January-to-March quarter versus 36.0 billion yuan a year earlier, the Beijing-based company said on Thursday. The figures were calculated using international accounting standards.
The earnings compared with an average forecast of 30.3 billion yuan by three analysts surveyed by Thomson Reuters.
PetroChina said last month it would cut capital spending for the second consecutive year in 2014 as it sought to boost shareholder returns in the midst of a massive corruption probe.
($1 = 6.2376 Chinese yuan) (Reporting by Charlie Zhu; Editing by Miral Fahmy and Muralikumar Anantharaman)
2014-04-24 12:14:08
By Anna Shiryaevskaya, Elena Mazneva and Radoslav Tomek Apr 25, 2014 12:17 AM Ukraine is seeking to import more natural gas from Europe via Slovakia as Russia demands an extra $11.4 billion for contracted fuel and clashes with pro-Russian forces in the country’s east escalate.
The European Union, Slovakia and Ukraine failed today to agree on flows from the west, aimed at reducing Kiev’s dependence on Russian gas, as officials met in Bratislava, Slovakia. EU Energy Commissioner Guenther Oettinger said an accord to supply substantial volumes to Ukraine would require Russian consent. With current proposals, European supplies could replace less than half the imports from Moscow-based OAO Gazprom (GAZP) this year, according to data compiled by Bloomberg.
“Slovakia is going to want some sort of guarantee that it will get paid,” Julian Lee, a senior energy analyst at the Centre for Global Energy Studies in London, said today. “The problem is in part because Ukraine is unable to pay for its gas delivered from Gazprom, and any other supplier is going to want to make sure they don’t end up in the same position.”
Ukraine and Slovakia have so far been unable to agree on terms and volumes of flows from Europe. The EU and the U.S. are jointly seeking alternative supply sources to Ukraine, including reversing pipelines amid the worst standoff between Moscow and the West since the Cold War, spurred by the new Kiev government’s plans for closer ties with the EU.
Slovakia, a transit country for the fuel, pumped more than 50 billion cubic meters from Gazprom through its pipelines to European nations last year, or about a third of the world’s biggest gas exporter’s sales to the region, according to data from Eustream AS, the Slovakian pipeline operator, and Gazprom’s export unit. That compares with 5.4 billion cubic meters Slovakia imported for its own needs, according to Gazprom.
Commercial Problem
“There is a commercial problem in the sense that Gazprom is obviously a very large client for Eustream, and obviously it is not in Gazprom’s commercial interests for reverse flows deliveries to start,” Simon Pirani, a senior research fellow at the Oxford Institute for Energy Studies, said yesterday.
Slovakia can’t commit to supplying Ukraine more than 10 billion cubic meters a year via an existing idle pipeline, Slovak Economy Minister Tomas Malatinsky told reporters. Ukraine is proposing “more audacious solutions,” which Slovakia can’t accept because they may harm contractual relations with Gazprom, he said.
Russian Shipments
A Snapshot of Ukraine's Past and Future
Russia shipped 25.8 billion cubic meters of gas to Ukraine last year, including supplies to state-owned NAK Naftogaz Ukrainy, or about 71 million cubic meters per day, meeting half of the nation’s demand, according to data from Gazprom.
Eustream last week offered to start reversing supplies to Ukraine in October. The flows would begin at 3.2 billion cubic meters a year, or 8.8 million cubic meters a day, increasing to as much as 10 billion cubic meters a year from March 2015, Vahram Chuguryan, a spokesman for the company in Bratislava, said yesterday. That’s enough to replace 39 percent of Ukraine’s Russian imports, according to data compiled by Bloomberg.
Ukraine needs 30 billion cubic meters of gas from Europe via Slovakia, Naftogaz Ukrainy Chief Executive Officer Andriy Kobolev said on April 18, and wants to use one of four existing operational pipelines on the Slovakia-Ukraine border for reverse supplies. Eustream’s “best solution” is to invest in restarting Slovakia’s idle Vojany pipeline, Chuguryan said.
“The talks today resulted in great progress, I’m optimistic that further steps will lead to the signing of a memorandum of understanding,” Oettinger said.
Talks Continuing
The trilateral talks will continue tomorrow, Oettinger said. Ukraine is seeking a deal by April 28, Ukrainian Energy Minister Yuri Prodan said after the meeting.
The new fuel bill from Moscow is for contracted gas that Ukraine failed to buy last year, Sergei Kupriyanov, a spokesman for the Russian state-controlled exporter, said today by phone. Naftogaz was obliged to pay for 41.6 billion cubic meters of gas in 2013 under a take-or-pay contract, whether or not the volumes were imported, he said. The charge follows a separate bill for $2.2 billion for unpaid supplies.
Russia is ready for talks with the EU and Ukraine on April 28, Olga Golant, a Russian Energy Ministry spokeswoman, said today by phone. No date or venue for negotiations with Russia has been set yet, Sabine Berger, a spokeswoman for the EU’s Oettinger, said today.
Gazprom doubts that shipping gas from Europe to Ukraine’s central or eastern regions is possible, Chief Executive Officer Alexey Miller said April 5, according to Interfax. Kupriyanov declined to comment on reverse flows when reached today by phone.
Polish Imports
Ukraine can also import about 4 million cubic meters a day, or 1.5 billion cubic meters of gas a year, from Poland, according to Naftogaz and Polish state-run pipeline operator Gaz-System SA.
Supplies from Poland began this month under a deal with RWE AG, Germany’s second-biggest utility.
Hungary may supply fuel to Ukraine through a separate pipeline with annual interruptible capacity of about 6.1 billion cubic meters, or 16.8 million cubic meters a day, according to the national pipeline operator FGSZ.
Ukraine is seeking a total of 37 billion cubic meters a year via reverse flows, according to an e-mailed slides from Naftogaz.
“It is not a long-term solution in terms of diversifying away from Russian gas,” Pirani at the Oxford Institute for Energy Studies said. “In any case, the vast majority of gas volumes in that part of Europe are going to originate in Russia.”
To contact the reporters on this story: Anna Shiryaevskaya in London at ashiryaevska@bloomberg.net; Elena Mazneva in Moscow at emazneva@bloomberg.net; Radoslav Tomek in Bratislava, Slovakia at rtomek@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; Lars Paulsson at lpaulsson@bloomberg.net Lars Paulsson
By Bloomberg News Apr 25, 2014 7:16 AM GMT+0700 1 Comment Email Print
Honghua Group, a Chinese drilling-equipment maker that gets most of its business from overseas, is seeking to expand at home as the nation works to spark its own shale gas revolution.
The Chengdu, Sichuan-based company, which has sold rigs for use in U.S. gas fields since 2005, sees an opportunity in China as the country looks to boost production from shale formations to meet growing energy demand and move away from dirtier sources of fuel like coal, Chairman Zhang Mi said in an interview.
“It’s highly likely for China to develop shale on a large scale like the U.S.,” Zhang said in Beijing on April 23. “China needs natural gas very badly.”
China, the world’s biggest holder of natural gas reserves trapped in shale rocks, has set a national output goal of 6.5 billion cubic meters by 2015 and as much as 100 billion cubic meters by 2020.
While China’s reserves are almost double that of the U.S., its target is smaller than U.S. production, which reached about 290 billion cubic meters in 2012.
China Petroleum & Chemical Corp., Asia’s largest refiner, known as Sinopec, last month marked shale gas development as its 2014 priority after doubling its output forecast from a key field in the Sichuan region in the country’s southwest.
The Fuling project will yield at least 10 billion cubic meters in 2017, Sinopec Chairman Fu Chengyu said March 24. The output will come from an area of about 200 square kilometers (77 square miles). The company’s parcel around Fuling extends for 4,000 square kilometers and has 2.1 trillion cubic meters of shale gas reserves, Fu said.
“That is merely a tiny portion of the shale potential in the Sichuan basin,” where about 40,000 to 50,000 square kilometers may yield the resource, Honghua’s Zhang said.
Shale production is more expensive in China than in the U.S. because of challenges including mountainous terrain, higher population density and deeper formations, Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. said in a March 28 report.
“China’s shale revolution is still likely to be a long drawn out affair compared with the U.S.,” Beveridge said. Sinopec’s Fuling “is structurally different from the rest of Sichuan, which means that it may not be reflective of the wider Sichuan basin as a whole,” he said.
China holds 1,115 trillion cubic feet (31.2 trillion cubic meters) of technically recoverable shale gas reserves, the U.S. Energy Information Administration estimated last year. The U.S. has about 665 trillion cubic feet (18.6 trillion cubic meters), according to EIA, the Energy Department’s statistical arm.
Honghua, which gets about 20 percent of its sales from China, has a contract to provide drilling rigs for PetroChina Co. (857)’s shale gas project in Sichuan, Zhang said. The company is also looking to expand its partnership with Baker Hughes Inc., Zhang said, without giving further details.
Shares (196) of Honghua have dropped 23 percent to HK$2.01 in Hong Kong this year. The company had net income of 537.6 million yuan ($86 million) on sales of 8.05 billion yuan in the year ended Dec. 31.
The company is seeking to participate in future shale gas developments in the nation by becoming a minority shareholder in projects with state energy producers, foreign companies and local governments, he said.
At the National People’s Congress in Beijing last month, both Sinopec’s Fu and Zhou Jiping, the chairman of PetroChina and China National Petroleum Corp., its parent company, said they would open shale development to private investment, as part of government-driven reforms.
“Once resources are open to markets, shale gas development in China will be thriving,” Zhang said.
To contact Bloomberg News staff for this story: Sarah Chen in Beijing at schen514@bloomberg.net
To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Ramsey Al-Rikabi
By Ladka Bauerova Apr 24, 2014 11:08 PM GMT+0700 4 Comments Email Print
Polish Prime Minister Donald Tusk says the country’s giant coal fields should become a cornerstone in Europe’s defense against a newly aggressive Russia.
Because the fossil fuel supplies 90 percent of Poland’s power it has less need of Russian natural gas than other Eastern European nations, burning half as much per capita as the neighboring Czech Republic, for example. As politicians wrestle with how to respond to the crisis in Ukraine, Tusk argues Europe needs to “rehabilitate” coal’s dirty image and use it to break Russia’s grip on energy supply.
“In the context of the Russian-Ukrainian conflict, the overriding objective is to lessen the dependence on Russia,” said Mujtaba Rahman, an analyst at Eurasia Group in London. “Climate objectives will be absolutely secondary to that.”
Coal, a cheaper source of power than gas, nuclear, wind or solar at today’s prices, is already a key part of Poland’s economy, keeping factories competitive and guaranteeing hundreds of thousands of manufacturing jobs. It’s even a tourist attraction.
At Belchatow in central Poland, where Europe’s largest mine produces more than twice as much coal as the whole of the U.K., visitors stand on an observation platform looking into a 310 meter-deep pit that supplies the giant power station visible on the horizon. On a recent April afternoon, the entire junior Polish national soccer team arrived for a look.
Poland burns over 50 million tons of coal a year, more than any European nation other than Germany, while having the lowest reliance on natural gas among the EU’s 10 largest economies, according to International Energy Agency data. That’s a popular position in a nation where Soviet troops were stationed for four decades until the early 1990s.
“Poland should definitely continue using its coal to benefit from its own resources rather than increase the country’s dependency on external energy supplies,” said Lukasz Chodkowski, 33, a Warsaw resident who works as a project co-ordinator in the capital city.
That doesn’t mean Poland is completely independent of Russia. While less vulnerable than some of its neighbors, it remains a gas importer and any disruption in supply would raise energy costs by forcing it to seek more expensive imports from elsewhere.
President Vladimir Putin said last week that unless Ukraine pays for gas it’s already bought, Russia may have to stop shipments, threatening supplies across Europe. OAO Gazprom, Russia’s gas export monopoly, said today Ukraine owes an additional $11.4 billion for shipments already received.
“We want the whole of Europe to acknowledge coal as a legitimate energy source,” Prime Minister Tusk said on TV on March 29. “Poland has been consistently proving that it can guarantee energy security.”
Tusk’s office didn’t respond to an e-mail comment seeking further comments.
In boosting coal, Poland has the backing of other post-Communist EU members such as the Czech Republic and Slovakia, which also have large deposits and a high concentration of heavy industry that depends on the fuel.
“Poland’s industry relies on lower energy costs to remain competitive,” said Pawel Swieboda, president of the Warsaw-based Center for European Strategy. “It’s our main strength.”
Polish industry paid 23 percent less for power than competitors in Germany in 2012 and 21 percent less than in the Czech Republic, according to data compiled by the U.K. government.
Unified Strategy
Government support for coal in eastern Europe has prevented the EU from coming up with a unified strategy to meet its climate goals. The 28-nation bloc failed to reach a consensus on climate and energy strategy for 2030 in March and postponed the decision on emissions targets until the end of the year.
Even Germany, which is driving the continent’s switch to clean energy, has found it hard to give up on coal. Utilities like RWE AG (RWE) are turning back to the fuel as the most economical commodity for power production. The combination of record-low electricity prices, generation overcapacity and low prices of carbon credits have made coal more profitable than gas.
In Poland, the coal industry is a sensitive topic for the government because it provides jobs for over 100,000 people. About a fifth of Belchatow’s wage-earning population works in the mine, according to Iwona Paziak, a spokeswoman for Poland’s largest utility, state-controlled PGE SA, which operates the Belchatow mine and power plant.
Wind Capacity
Poland has made an effort to diversify its energy industry: the country’s wind-power capacity almost doubled in the last two years. But the government is preparing a new law on renewables that will cut subsidies for new projects in order to protect the economy and taxpayers, Prime Minister Tusk said.
To limit carbon-dioxide emissions, Polish government plans instead to build at least 1,000 megawatts of nuclear capacity in the next 10 years and have as much as 6,000 megawatts by 2035, it said in January. That, again, is pitting it against Germany, which decided to shutter all 17 of its nuclear power stations by 2022.
The trouble is nuclear construction presents a huge expense the government can hardly afford, especially as the power prices hover near record low. Coal therefore remains the country’s most affordable source of energy that also provides relative independence from Russia.
To contact the reporter on this story: Ladka Bauerova in Prague at lbauerova@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Todd White
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