Daily Archives: April 22, 2011
Published 4:26 PM, 21 Apr 2011
Oil giant Sinopec on has signed China’s second-largest gas purchase agreement, worth around $US85 billion ($A80.7 billion) over 20 years by one estimate, in a deal that also gives it 15 per cent of the Australia Pacific liquefied natural gas (LNG) project.
ConocoPhillips and Origin announced the deal at a joint news conference overseen by Resources Minister Martin Ferguson.
“Australia very shortly become the second-largest exporter of LNG in the world and we have effectively now got a very important new industry in Queensland,” Mr Ferguson said, referring to the northern state where the project is to be built.
“Deals like this one put Australia on track to be one of the world’s largest suppliers of LNG in coming years.”
“The APLNG project has the potential to significantly expand the burgeoning coal seam gas to LNG industry on Australia’s east coast and cement Gladstone’s place as a key LNG hub.”
Australia has around $US200 billion in LNG projects on the drawing board. Much of their exports are destined for China, which is looking to lock in supplies to feed its rapid growth and cut its reliance on polluting coal energy.
Australia Pacific LNG will have initial capacity of 4.5 million tonnes per annum (mtpa) of LNG, eventually ramping up to 18 mtpa, and is expected to come online at the end of 2015.
Sinopec’s deal to take at least 4.3 million mtpa could be worth around $85 billion if pricing is similar to that of recent coal seam gas supply deals done by Australian gas firm Santos, said CLSA analyst Mark Samter.
The price of $US1.5 billion for the 15 per cent stake is also well above similar deals made recently – state-run Korea Gas Corp (KOGAS) paid just over $US600 million in cash to buy a 15 per cent stake from Santos Ltf and Malaysia’s Petronas .
“That price reflects their view of the value of the project…APLNG is dramatically stronger I think than other projects, and that’s what reflects in that price,” Origin managing director Grant King said.
“It’s a full price… they’ve extracted a decent amount of value for the equity,” Mr Samter said.
The project holdings of Conoco and Origin are now 42.5 per cent each following Sinopec’s equity investment, and the joint venture partners are still aiming to make a final investment decision by mid-2011.
Origin Energy shares were placed on a trading halt on Thursday. Sinopec shares were up 0.9 per cent in Hong Kong.
Mr King in February said the company may sell down more of its stake in the project to future LNG buyers.
He said the joint venture would not give a running commentary on current gas marketing efforts.
But ConocoPhillips senior vice president exploration and production Ryan Lance said APLNG was largely targeting the Asian region.
“The large buyers in Japan and Korea down through China to India as well,” Mr Lance said.
Mr Ferguson said China was Australia’s second-largest LNG customer and the Sinopec deal brought new and existing LNG contracts with the Asian superpower to more than 15 million tonnes per annum.
The APLNG project will involve the progressive development of coal seam gas fields in south central Queensland over a 30-year period and a 450 kilomtre transmission pipeline from the gas fields to Curtis Island near Gladstone, where an LNG facility will be built.
Federal Environment Minister Tony Burke gave the project the green light on February 22.
Welcoming the project, Queensland’s Finance Minister Rachel Nolan said Australia Pacific LNG estimates the annual contribution to the economy of the Darling Downs and Southwest region at up to $900 million during operation.
Ms Nolan said the economy of the Mackay-Fitzroy-Central West region could see an increase of up to $770 million a year during construction.
“On a state level, Australia Pacific LNG estimates the project could stimulate an increase in Queensland’s Gross State Product of approximately $2 billion per annum,” Ms Nolan said.
Chinese demand ramps up
China aims to boost gas consumption to 10 per cent of its total energy use by 2020 as it tries to reduce greenhouse gas emissions by cutting the use of dirtier burning coal. It has spent tens of billions of dollars buying into energy resources from Africa to Latin America.
Energy consultancy Wood Mackenzie has forecast China’s LNG imports to rise five fold to 46 million tonnes by 2020.
Sinopec’s deal will be second only to China’s first LNG import deal sealed in 2002 when China National Offshore Oil Corp (CNOOC) secured 3.7 mtpa of gas from Australia’s Northwest Shelf project for 25 years.
CNOOC, parent of CNOOC Ltd , is the leading Chinese LNG developer with three receiving terminals in operation and another two under construction.
PetroChina‘s two terminals were scheduled to begin operation from April.
The deal will also be Sinopec’s first venture into foreign unconventional gas assets and moves Australia Pacific LNG one step closer to meeting its target of making a final investment decision this year.
Sinopec is building its first terminal in eastern Shandong, which will be fed from ExxonMobil‘s Papua New Guinea LNG project.
The latest deal will enable Sinopec to accelerate work at the proposed 17 billion yuan ($A2.46 billion) terminal in the southern coastal city of Beihai in the Guangxi region, which is expected to open in 2014.
The Beihai terminal will have an initial capacity of three million tonnes per year, expandable to five mtpa by around 2015 when Australia Pacific LNG comes online.
The deal has environmentalists fearing for the future of the Great Artesian Basin.
Friends of the Earth spokesman Drew Hutton said the agreement was bad news for the environment, the Great Artesian Basin and for landowners.
“The federal government water group and Geoscience Australia believe there are going to be dramatic draw-downs (of the water table) in sections of the Great Artesian Basin and the damage could last for hundreds of years,” Mr Hutton told AAP.
The basin is a major source of water for farmers and communities in inland Queensland.
Origin Energy managing director Grant King says he’s confident the project would not harm the basin.
“Our project has done an enormous amount of work in understanding the impact the project will have on water, acquifers and the Great Artesian Basin,” Mr King said.
“The technical work, the engineering and scientific work done by our teams gives us the confidence there won’t be any adverse impacts.”
Mr King said trials were underway to understand issues surrounding water management.
He also said they were treating the unwanted water that comes up during the gas extraction.
“That water is treated and applied for a number of beneficial uses and one of the uses could be reinjection (into acquifers),” Mr King said.
Mr Hutton said CSG companies don’t know what to do with the unwanted water.
“They don’t know how to treat it to an acceptable level at an acceptable cost,” he said.
“They don’t know what to do with the one million tonnes of salt a year that comes to the surface except to wack it into landfill.
“Is it worth disrupting and sometimes destroying the farms that provide our food and fibre?
“The cost of this industry is far too great.”
According to Australia Pacific LNG, at its peak this project will create about 6000 direct jobs in construction, and about 1000 direct jobs in the operational phase of the project.
Friday, April 22, 2011
Green groups worry about the effects of the technique, which could worsen air and water quality.
A government statement, announcing the moratorium, said the mineral resources department along with the trade and industry and science and technology departments, would lead research into the technique.
“Cabinet has made it very clear that (a) clean environment together with all the ecological aspects will not be compromised,” government spokesman Jimmy Manyi was quoted by the SAPA news agency as saying.
Overview: The Department of State (DOS) launched the Global Shale Gas Initiative (GSGI) in April 2010 in order to help countries seeking to utilize their unconventional natural gas resources to identify and develop them safely and economically. Shale gas is one of the most rapidly expanding trends in onshore U.S. oil and gas exploration and production. According to the U.S. Energy Information Administration (EIA), during the last decade, U.S. shale gas production has increased fourteen-fold; it now accounts for 22% of U.S. gas production and 32% of total remaining recoverable gas resources in the United States. By 2030, EIA projects that shale gas will represent 14% of total global gas supplies, providing the reserve base necessary for expanded consumption in a business as usual scenario. Future climate policies could increase demand for shale gas since it is a lower-carbon “bridge fuel” to reduce CO2 emissions. Although the U.S. shale gas experience cannot be precisely duplicated, its application through GSGI can be instrumental in helping governments understand the complexities of shale gas development. Governments often have limited capability to assess their own country’s shale resource potential or are unclear about how to develop shale gas in a safe and environmentally sustainable manner through establishing the right regulatory policy and fiscal structures. The ultimate goals of GSGI are to achieve greater energy security, meet environmental objectives and further U.S. economic and commercial interests.
Country Participation: Countries have been selected to participate in GSGI based in part on the known presence of natural gas-bearing shale within their borders, market potential, business climates, geopolitical synergies, and host government interest. Within GSGI, priority countries have the greatest potential for benefiting from GSGI opportunities. Other, non-priority, GSGI participants include those countries that have expressed interest and meet GSGI criteria. To date, partnerships under GSGI have been announced with China, India, Jordan and Poland, with bilateral agreements possible with several other additional countries.
Government-to-Government: The GSGI uses government-to-government policy engagement to bring the U.S. federal and state governments’ technical expertise, regulatory experience and diplomatic capabilities to help selected countries understand their shale gas potential. U.S. government agencies that partner with the Department of State under GSGI include: the U.S. Agency for International Development (USAID); the Department of Interior’s U.S. Geological Survey (USGS); Department of Interior’s Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE); the Department of Commerce’s Commercial Law Development Program (CLDP); the Environmental Protection Agency (EPA), and the Department of Energy’s Office of Fossil Energy (DOE/FE). A benefit of this government-to-government cooperation is the potential for establishing and strengthening long-term working relationships at the technical and ministerial levels.
Sample Activities: GSGI activities are tailored to each country’s specific needs and availability of funding. Examples of GSGI activities in priority countries include: shale gas resource assessments; technical guidance to evaluate the production capability, economics and investment potential of shale gas resources; and workshops and seminars on technical, environmental, business and regulatory challenges related to shale gas development. Engagement with non-priority countries focuses on regulatory policies and fiscal structures challenges. At the request of these countries, DOS organizes conferences, meetings, training and public-private sector events in the United States. They are also invited to participate in select multilateral GSGI events.
The bill, filed by Sens. Bob Rucho, R-Mecklenburg, Harry Brown, R-Onslow, and Tommy Tucker, R-Union, would direct Perdue, a New Bern Democrat, to enter into a pact with the governors of Virginia and South Carolina to urge President Obama to open the East Coast for energy exploration.
Sponsors of the bill say that they’re hoping to explore natural gas off the coast of North Carolina and step up efforts to provide for wind energy.
“North Carolina’s coast has been identified as probably the best source for wind energy,” Brown said during a Wednesday press conference at the Legislative Building.
“We have a great opportunity to explore and determine if there are natural gas deposits off our coast,” Rucho said. He said if such deposits exist, it could create thousands of jobs for the state.
Rucho said that one of the goals of the bill is helping the ease the nation’s energy problem. He called the high gasoline prices in the nation an “economy buster.”
Molly Diggins, state director, of the North Carolina chapter of the Sierra Club, said the effort to explore wind energy sounded good to her.
“We certainly agree that there’s a tremendous energy bonanza off the coast in off-shore wind,” Diggins said.
But she wasn’t as enthusiastic about the possibility of opening up areas off the state’s coast for offshore drilling.
“Offshore drilling remains high risk and low benefit,” Diggins said.
Bill sponsors hope that by forming a pact with Virginia and South Carolina, they can encourage President Obama and Congress to not only open the federal waters for offshore exploration but provide the state royalties if gas is found. Those royalties could come to about $500 million a year, Rucho said.
Money would go to the state’s general fund, the Highway Trust Fund, the community college system, the UNC system and to the state’s conservation programs. Some money would go to the state ports for expansion and to the recruitment of energy-related industries.
The senators rolled out their bill on the one-year anniversary of the BP oil disaster in the Gulf of Mexico. Rucho acknowledged the coincidence and said that companies drilling for energy offshore had learned from past mistakes.
Assuming the semi-submersible leaves July 1 and an anticipated 60- to 80-day transit, it should arrive in Cuban waters by September. Scarabeo 9 could then begin drilling for a consortium led by Repsol YPF “sometime in October, worst-case and no weather- or other related delays,” said Jorge Piñón, a Miami-based oil industry expert.
Scarabeo 9 is currently under construction at the Keppel Fels Shipyard in Singapore. Arrival had originally been expected for early this year. Saipem cited “modifications requested by clients and a delay in the construction schedule” in its quarterly report. Construction of Scarabeo 9 is complicated by U.S. content restrictions.
“Everybody is anxious,” Basic Industries Ministry official Rafael Tenreyro told reporters during a recent oil conference in Havana. “Ninety-nine percent of the platforms are late. It’s normal, it’s not extraordinary.”
Once the Repsol assignment is done, the Scarabeo 9 is scheduled to perform at least four more exploratory drills through 2013 for other oil companies in Cuban waters. The drills will be in water depths between 400 meters (0.25 miles) and 1,500 meters (1.6 miles). Six companies and consortia have contracted offshore 22 blocks in Cuba.
Cuban officials are hopeful to tap big oil and gas reserves in the Gulf, saying that foreign oil companies have identified more than 20 prospects for commercially viable finds.