Daily Archives: November 2, 2011

NIMBY: Nobody wants the natural gas terminal near them

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Amiram Barkat

Minister of National Infrastructures Uzi Landau will not forget that day in July 2010 for a long time. The regional planning and building committee gathered for a decisive session to discuss “the northern entrance” plan at Dor Beach. The plan included building a pipeline to the offshore Tamar well, which was the Ministry of National Infrastructures’ top priority target. This was at the height of an aggressive and at times violent struggle with local residents, which included throwing of oranges and tomatoes at meeting participants. Landau, who was convinced that the plan would be approved, preferred to spend the day touring the north. However without him being there, the government suffered an embarrassing defeat. A coalition put together to reject the plan from local authority representatives, environmentalists and “renegade” government representatives won by a slight 11-9 majority. The local council instructed the government to examine other locations for the gas terminal, headed by a facility on a rig at sea.

Landau’s nightmare is probably going to repeat itself soon. The national master plan to build gas treatment facilities is back on the table for discussion at the regional planning and building committee’s meeting. Noble Energy Inc. (NYSE: NBL) promoted the previous plan and people critical of the plan were furious about the “privatization” of such a sensitive facility. In July 2010, it was decided that the Ministry of National Infrastructures would take over responsibility for planning. Almost 18 months later, the National Outline Plan #37 for natural gas has reached the end of the initial examination to find an alternative location for the facility. Over the next few months, the alternative sites will be subjected to a strict selection using an advanced environmental survey. The sites that pass will be considered for final approval by the council. Next Monday, alternatives will be presented to the public at a conference titled, “Energy and the Environment,” organized by the Society for the Protection of Nature in Israel (SPNI) at the International Convention Center (Binyanei Hauma) in Jerusalem.

1. Why is a gas facility necessary?

Electricity rates have risen over the past few months by 15% as a result of disruptions in natural gas deliveries from Egypt, which were caused by attacks on the main Sinai pipeline. In addition to Egyptian gas, the Israel Electric Corporation (IEC) (TASE: ELEC.B22) uses Israeli natural gas from the Mary B well in the offshore Yam Tethys gas field, which will be replaced in a year or two with the Noa and Tamar wells. Damage to the underwater pipeline which carries gas from Israeli wells deep in the sea would be much more harmful to Israel than the stoppage of gas deliveries from Egypt, and could even cause electricity prices to double. Egypt has been meeting only 15% of Israel’s needs to produce electricity. Israeli gas supply is expected to produce 70-80% of the state’s electricity. Building a gas treatment facility is intended first and foremost to lessen the probability that such a catastrophe could occur.

Until not long ago, all electricity in Israel was produced form coal, diesel and fuel oil. Natural gas is cheaper, and pollutes less, than the other fuels, but it is much more sensitive to breakdowns during delivery. As opposed to coal and liquid gasoline, there is no way to technically store gas near power stations and therefore it is channeled directly from the wells in the depths of the sea to the station through pipes underwater and above land. Before it can move from an underwater pipeline to the above land pipes, the gas must go through a process to remove water and other materials that mixed with the gas, as well as a reduction in pressure from 450 to 110 bar. Currently this process takes place in two locations: a sea rig that is 22 km from the Ashdod coast reduces the gas’s pressure and a small treatment facility near Ashdod port cleans the gas. This system works well, but is extremely vulnerable to enemy attack, technical mishaps or even earthquakes that could significantly damage it. Fixing problems at sea is also extremely expensive and can last for months, during which time Israel would be without gas. As a result, everyone involved in the energy industry agrees that Israel cannot increase the level of usage and how much it relies on gas without building another reception terminal in northern Israel. Israeli environmental organizations also support the idea in theory since gas is the only alternative currently available to the IEC, which needs to supply the power stations now being powered by coal, such as the one the IEC plans on building in Ashkelon.

2. The government prefers building a facility in Haifa Bay

A planning team headed by Gideon Lerman found 20 land-based sites that could be appropriate for building a gas treatment facility. The 20 potential land-based sites are along the coast from Rishon LeZion in the south, the Wingate Institute, Hadera and Caesarea (five locations), Dor Beach area (nine locations), Petroleum & Energy Infrastructures Ltd. (PEI) in Haifa Bay, Kfar Masaryk, and the area south of Acre where the Frutarom plant used to be. The team examined each area using technological criteria, including gas treatment on land as well as at sea on a rig. The team also checked six locations for building a sea facility and decided that due to the surface quality, it is possible to build the facility no more than 7.5 km from the beach. As a result, the facility will be visible from land, detracting significantly from the view of the sea. If the facility would be stationed off the Tel Aviv coast, the structure would be a visual hazard visible from the Herbert Samuel boardwalk in the south to Herzliya in the north.

At the end of the examination, the team recommended preparing two sites for the facility in the north, at least one of them being north of Hadera. The two sites that were found to be the most fitting were Frutarom and PEI. The team determined that these were the only sites that were fitting to house an entire land-based facility.

In the past that Delek Group Ltd. (TASE: DLEKG) was considered to be behind the deal to buy the Frutarom factory according to an assumption or information that this site would be the government’s preferred location. The team, however, was more impressed with the second option – PEI’s container farm. The 350 dunam (86 acre) complex is located between Kiryat Haim in the north and the industrial area in the south. In the past, there were plans to build a residential neighborhood on this land. The benefits of building the facility on the PEI farm are that it is not near a nature reserve, does not obstruct a view, is not near a water desalination plant, and is near a beach not used for bathing. The PEI site received the highest marks among the eight land-based locations for its environmental suitability, as well as for the usability of the land. The Frutarom site on the Acre coast came in second, and the Hadera power station in third.

3. The residents want a sea-based facility only.

At a recent energy conference organized by “Globes,” Ministry of National Infrastructure Natural Gas Authority Chairman Shuki Stern said, “At every National Outline Plan #37 meeting there are people outside of the building protesting against the government planners. The planning issues are complex and social and environmental organizations have a lot to say. Even I was personally attacked.” Despite this, Stern said, “There will be social and environmental ramifications to bringing natural gas to Israel. We cannot bring it in by air.

Tomer Rona, spokesman for the public protest against gas installation in the Acre area, said, “We do not accept any alternative that includes building a land-based facility – certainly not here at Frutarom or at other sites, such as PEI, which is slated to be a residential neighborhood.”

Globes: “Are you against all the options?

Rona: “We are in favor of building a sea-based facility. Even the smallest 20 dunam land-based facility would be dangerous, since very quickly it would grow to 105 dunam and there would be no way to stop it. The planners are already speaking about the option of expanding. Storage and recycling facilities will be established and the entire area will become an area for heavy industry.”

Globes: It is said that your struggle is a NIMBY (Not in my back yard) issue and that you are just protecting your real estate value.

“We are not a NIMBY protest, despite the fact that our backyard is already full of factories. We are talking about real life threatening dangers and there are plenty of examples of catastrophes and are tens of thousands of people in danger.”

Planner Gideon Lerman said in response that the option of only building a sea-based facility is technically possible, but extremely problematic with respect to reliability. “The biggest problem is long-term operations. The technology has not yet been proven successful, even though the world is moving in this direction. There is one such rig in Holland (out of 140), and a few in the Gulf of Mexico (out of thousands). They have full back-up if there is a technical problem.”

Master plan representatives told “Globes” that residents’ concerns that the site could become an industrial area is understandable, however, “the chance of this occurring depends to a large extent on the location that will be chosen.” They also said that security issues were also taken into consideration, but that a land-based facility has an important advantage since faulty equipment can be repaired easier and quicker. “When there is a problem at a land-based facility, it can be remedied in an extremely short period of time. It takes three years to build a new sea facility.”

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Who Dat

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The Ocean Victory semisub discovered the LLOG OCS-G-27277 well in December 2007. The discovery well found more than 380 feet (116 meters) of gas and oil pay zones in four separate reservoir packages. The field was further appraised by two wells testing additional targets in 2010. Once appraisal operations were completed, Who Dat was deemed commercially viable.
The operator stated Who Dat is primarily an oil field consisting of nine stacked, amplitude-supported reservoirs in a salt withdrawal mini-basin. The wells targeted reservoirs ranging in depth from 12,000 to 17,000 TVD. Collectively, the three wells penetrated more than 700 feet (213 meters) of net pay in nine distinct reservoirs.
Field Development
The development plan for Who Dat consists of completing three existing subsea wells, drilling an additional two wells and producing the wells through a subsea system capable of handling up to 12 wells. The wells should flow through three subsea manifolds to the OPTI-EX FPS through flexible risers.
The OPTI-EX FPS, delivered to LLOG in July 2011, is capable of producing up to 60,000 bopd, 150 MMcf/d and 40,000 bwpd.
Production from the Who Dat field is scheduled to commence in mid-2011.

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CHART: Where We Are In The Failure Of The Fiat Currency Structure

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Good honest charts never go out of fashion (although we have “moved” along the chart for the past year).

Probably still the best “one chart says it all”.

Click here to enlarge.

This post originally appeared at The Trader.

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UAE: Topaz Enters USD 380 Million Refinancing Deal

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UAE-based Topaz Energy and Marine, a leading oilfield services multinational and subsidiary of Renaissance Services, has announced a US$ 380 million financing initiative, led by Standard Chartered Bank and DVB Bank.

The initiative will involve both regional and international lenders in a refinancing deal that features Topaz’s offshore support vessel (OSV) division, Topaz Marine, which ranks among the top ten OSV operators world-wide.

In its half-year statement, the parent-company Renaissance Services, publicly listed in Oman’s Muscat Securities Market, stated its intention to refinance some existing borrowings and consolidate financing facilities with a syndicate of banks.

Vishal Goenka, Chief Financial Officer of Renaissance, said, “This deal will significantly improve Topaz’s liquidity, unlock trapped equity, and increase the availability of new funds to capitalize on future growth opportunities. The interest from our relationship banks and also from new banks in this deal is very encouraging and reaffirms the market’s appreciation of the company’s business model and governance. Out of US$ 380 million, approximately US$ 125 million is for vessels under construction and for investments in new vessels. ”

Goenka added that the company expects the financing initiative to be completed before the end of December 2011.

Strong Support

“This financing, including a hunting license for additional vessel growth, puts Topaz in a unique position to accelerate from an enhanced balance sheet platform,” said Geir Sjurseth, Managing Director & Global Head Offshore Support Group of DVB Bank.

DVB Bank, which specializes in global offshore finance, is an active player in the Middle East market. “We are delighted to expand our excellent relations with Topaz and its parent company Renaissance to support the company’s continued growth objectives. DVB has gained considerable expertise dealing with Topaz through its MENA, Caspian and non-Caspian vessel operations, and we will continue to support the leading OSV operator in its core markets,” added Sjurseth.

Commenting on the alliance, Nigel Anton, Managing Director and Head of Shipping Finance at Standard Chartered Bank, said, “Standard Chartered is delighted to be able to strengthen our relationship by supporting Topaz with their ambitious growth plans; our co-arrangement of this transaction together with DVB Bank underpins our belief in the future success of Topaz. Standard Chartered as a well-capitalized and liquid bank remains fully committed to the region and the shipping business.”

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Fugro Completes Zeus 3D Seismic Survey, Offshore Australia

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MEO Australia Limited  advises that Fugro Multi Client Services Pty Ltd completed acquisition of the Zeus 3D Marine Seismic Survey on 31 st October 2011.

MEO has committed to purchase 323 km 2 of the seismic survey covering 4 graticular blocks within exploration permit WA-361-P which fulfills its Permit Year 2 work commitment. MEO expects to receive the 3D pre-stack time migrated (PSTM) data sets by early May 2012.

WA-361-P participants

USA: BMT to Provide Simulation Services for Production Platforms Towing

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Hereema Marine Contractors Nederland B.V Inc. (“HMC”) has awarded a contract to BMT Fluid Mechanics in partnership with BMT ARGOSS, to provide Tow Simulation Services for the inshore tow of Chevron-operated Jack St. Malo and Big Foot Production Platforms to be installed in the Gulf of Mexico.

BMT will be engineering, procuring, installing and commissioning a purpose built simulation facility to be located in Houston, Texas, for the purpose of training tug captains and other marine personnel involved with the inshore towing of the platforms from the Ingleside integration yards. The inshore tows are particularly challenging because of the extremely small hull clearances within the shipping channels leading from the yards out to the gulf. Up to five independently controlled tug boats will be effectively, rigidly coupled to the hull to perform the 15 mile wet-tows.

BMT’s PC Rembrandt real time maneuvering training software will be the basis of the simulator. The simulator will provide a realistic hands-on facility for tug captains to develop safe operating strategies for the tow and develop rational weather and tide operating limits.

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The Untold Story Of How Banks Took Over The Oil Market

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Cullen Roche

Real resources are always a true constraint for any economy.  This has become an increasingly important point over the last 10 years as commodity prices have surged.  But the debate over the cause of this surge and the lack and real resources is still very much up in the air.  Some say it is due to an insatiable demand from China.  Some blame the decline of the dollar due to irresponsible government action.  Others say Wall Street is cornering the commodities markets and turning it into another profit making casino.   The truth, in all likelihood, lies somewhere inbetween.

One of the more important themes I’ve discussed over the years here has been the financialization of our economy.  Financialization has seeped into many facets of our economy in order to help the big banks maximize profits.  This has led to massive deregulation, increasing reliance on the FIRE industry, a concentration of power in this industry and an economy that is increasingly volatile and dependent on this industry which produces little, but takes much.   This financialization has been nowhere more apparent than it has been in the commodities markets.

A few weeks ago I wrote a piece about the continual imbalance in the commodities markets and a veteran of the energy market happened to be reading.  Dan Dicker reached out through the comments section and offered to send me a free copy of his book, Oil’s Endless Bid (see here to buy a copy).  I had heard of Dan’s book and had been meaning to read it for some time.   Now, I get a lot of free books from financial people.  A LOT.  They all want me to promote their books on the site.  95% of the books never get mentioned on the site.  As you’ve noticed, I don’t just crank out content for the sake of cranking out content and the “payment” of a free 300 page book is not really incentive enough for me to write about a book.  So, a lot of books end up in my fireplace (I’m an energy conservationist obviously).  This one is different because I think Dan is conquering an incredibly important subject and he does so from the position of an informed insider.

His perspective is very much in-line with the positions of Michael Masters who has been one of the more vocal proponents of this financialziation of the commodities markets.  Dan Dicker is a 20+ year veteran of the oil markets and a long-time seat holder at the NYMEX.  Dan’s book is a frighteningly eye opening perspective from someone who has been in the trenches and has witnessed the massive changes in real-time.   Dan highlights the massive changes that occurred over the years as the industry has morphed from one that was dominated by big oil into an industry that is dominated by big banks (from the book):

“In the mid-1990′s, the participants and performance of oil trading slowly started to change, and by 2003, the dominating forces in oil trader were no longer with the oil companies.  The list of NYMEX seat owners again shows just how deep the change was.  Right before going public in 2006, only 22 seats remained in the hands of the oil companies that had direct involvement in the buying and selling of oil and oil products.  But a much more significant percentage of seats were owned by companies that ostensibly had nothing to do with the buying and selling of physical oil.

That’s a total of 56 seats owned by investment banks!  (And yes, I include AIG, which was an enormous booker of bets on oil too, not just in famously bad mortgage swaps.)

Of course, the most important purpose for some of these firms to own seats was to execute orders for clients, some retail, but many commercial clients who were being sold on the importance of risk management of energy costs.  And during the years from the mid-1990′s though 2005, this made for a legitimate increase in the volume of crude.  But commercial growth of risk management programs was a happy appetizer for the quick rise of the investment banks in the trade of oil.  Oil companies that tried to maintain a presence and dominance in trading began to be overshadowed by the volume and influence of trading from these banks and their clients.”

These firms aren’t dominating the trading pits at these exchanges because they want to buy and sell commodities for real economic purposes.  They are dominating the exchanges because they know there is big money in financializing the asset class of commodities.  And they’re succeeding.  They’ve sold the asset class as an investment and the investing public has eaten it up hook, line and sinker.  Dan goes into much more detail about this destructive trend and its impact on the economy and ultimately concludes that massive change is needed.  We need to get control of our economy again and wrangle it back from these big banks who are looking out for the interest of their shareholders and not the US economy.  Dan Dicker’s book is one of the most important ones I have read in a long time.  It should be required reading for the US Congress.

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