Daily Archives: November 28, 2011

Seaway pipeline creates contango with oil glut

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Enbridge Inc. and Enterprise Products Partners LP haven’t just reversed the way benchmark oil flows in the U.S. They also changed the price relationship in the futures market by creating a temporary glut in the main delivery point for crude contracts.

The reversal of the 500-mile (805-kilometer) Seaway pipeline from the trading hub at Cushing, Oklahoma, to refineries on the Gulf Coast is intended to clear a supply build-up that depressed prices of West Texas Intermediate oil traded on the New York Mercantile Exchange. The shift is attracting more oil to Cushing to meet demand once crude flows change direction. Inventories grew 6.4 percent to 32 million barrels in the past seven weeks, according to U.S. Energy Department data.

Increased stockpiles depressed crude for next-month delivery, making it less expensive than later futures so that investors have to pay more for each successive contract. January oil traded in contango, or at a discount to August crude, on Nov. 22 for the first time in a month, following the action by Enbridge and Enterprise six days earlier.

“We expect the WTI contango to increase in coming months as Cushing inventories rise in anticipation of the reversal,” David Greely, head of energy research at Goldman Sachs Group Inc. in New York, said Nov. 23 in a phone interview. “After the reversal of the Seaway, these barrels would move down to the U.S. Gulf Coast, drawing Cushing inventories back down and reducing the contango.”

Oil for January delivery gained 0.8 percent to $97.53 at 12:46 p.m. on the Nymex. That compares with $97.68 for the February contract, a premium of 15 cents, down from 20 cents on Nov. 23.

Backwardation, Contango

Over the past five years, oil for front-month delivery was in contango versus the contract for the next month 82 percent of the time. The front month was in backwardation, or more expensive than the next month, on 18 percent of trading days.

U.S. crude rose relative to Brent for January settlement last week on the London-based ICE Futures Europe exchange as Brent prices dropped $1.38, or 1.3 percent, to $106.40 a barrel on Nov 25. Between 2001 and 2010, WTI traded at a premium of 87 cents a barrel to Brent, according to data compiled by Bloomberg. With an influx of oil at Cushing, that flipped to a record discount of $27.88 on Oct. 14. The gap has since narrowed 63 percent to $10.38 today.

Refiners on the Gulf Coast have been forced to pay higher prices for imported oil because of a lack of transport from Cushing. Oil used on the Gulf has been linked to Brent, which is the benchmark for more than half of the world’s oil.

The Seaway line will operate with a capacity of 150,000 barrels a day by the second quarter of 2012, according to Enterprise and Enbridge. Pump modifications expected by early 2013 will boost that to 400,000 barrels.

Pipeline Capacity

Currently, there is 1.64 million barrels a day of pipeline capacity into Cushing and only 995,000 out, according to Martin Tallett, founder of EnSys Energy & Systems Inc., a Lexington, Massachusetts, consulting company.

Additional lines may be needed to handle increased production. Canadian output will jump 37 percent to 2.16 million barrels a day in 2015 from 1.58 million this year, the Canadian Association of Petroleum Producers said in June.

North Dakota, which produces oil from the Bakken field, almost doubled output in the past two years and pumped a record 464,129 barrels a day in September, according to the state government. Production may grow to between 1.5 million and 2 million barrels a day within five years, Katherine Spector, a New York-based analyst with CIBC World Markets Corp., said Nov. 22 at The Energy Forum in New York.

Canceled Projects

The Seaway reversal is replacing Enbridge and Enterprise’s Wrangler pipeline proposal, which would have carried as much as 800,000 barrels a day from Cushing to the coast by mid-2013, Rick Rainey, a company spokesman, said Nov. 16.

Enterprise and Energy Transfer Partners LP said Aug. 19 they wouldn’t move forward with plans to construct a separate 584-mile line from Cushing to Houston.

The State Department announced Nov. 10 it was delaying a decision on TransCanada Corp.’s proposed Keystone XL oil pipeline to study an alternative route for the $7 billion project that avoids environmentally sensitive areas in Nebraska.

Further study “could be completed as early as the first quarter of 2013,” said the department, which has jurisdiction over the line because it crosses an international border.

“Because of all the euphoria around Seaway, we’ve lost a lot of other news in the background,” said Amrita Sen, a London-based analyst with Barclays Plc. “A lot of key pipelines have actually been canceled.”

Lower Prices

For now, January futures on the Nymex are cheaper than every contract through June, when prices turn lower than previous months. Oil for delivery in December 2012 trades at $97.58 a barrel, falling to $93.50 the following December and $91.08 in the same month of 2014.

The months closest to delivery will remain in contango until next year because of ample stockpiles at Cushing and a slowing economy, Harry Tchilinguirian, the London-based, head of commodity markets strategy at BNP Paribas SA, said Nov. 25 in a phone interview.

Oil for sale at a later date is lower, reflecting the concern of hedge funds about bullish bets when there is “uncertainty in the global economic outlook,” he said.

by Bloomberg

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Angola LNG Looks to Sell Liquefied Natural Gas to Non-U.S. Buyers

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Angola LNG is on track to deliver its first liquefied natural gas exports in early 2012 and is looking to sell its LNG to non-U.S. buyers after prices there plummeted due to an increase in domestic gas production, a company executive said on Monday.

Our project was based, four years ago, on U.S. sales, but since the LNG market is not very good, we are looking for other opportunities,” Antonio Orfao, chairman of Angola LNG, told Reuters on the sidelines of an industry conference in Perth, Australia.

The 5.2 million tonnes per annum (mtpa) Angola LNG project is led by Angola’s state-owned oil company, Sonangol, which has a 22.8 percent interest and Chevron, which holds 36.4 percent. Eni, Total and BP each hold a stake of 13.6 percent.

Angola LNG’s plans to turn its focus away from U.S. buyers occurs in the wake of a rapid increase in shale gas production brought about by new drilling and extraction technologies which will bring U.S. gas production to a record high this year.

U.S. LNG imports have halved since 2007 with some import terminals re-exporting cargoes as the country’s demand is increasingly met by domestic gas production.

To market its gas, Angola LNG is creating new LNG marketing entity that will look to sell its gas to the most competitive markets, Orfao said, but would not specify which markets Angola LNG was targeting.

We look for the best markets, it can be any place– our team is looking at different options,” Orfao said, adding that although there were no signed sale contracts yet, he expected sale agreements to be made in the next several months.

Rapidly increasing Asian LNG demand and higher prices for the fuel in the region have pulled supplies of the gas from the Atlantic region in the last few months.

Asian spot prices are around $17 per million British thermal units (mmBtu) LNG-AS, compared to the U.S. where prices are around $3.50 per mmBtu.

(reuters)

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Confirmed: Scientists Colluded With Government Officials to Misrepresent Real Climate Data

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How will democrats explain this?
The Daily Mail reported:

More than 5,000 documents have been leaked online purporting to be the correspondence of climate scientists at the University of East Anglia who were previously accused of ‘massaging’ evidence of man-made climate change.

Following on from the original ‘climategate’ emails of 2009, the new package appears to show systematic suppression of evidence, and even publication of reports that scientists knew to to be based on flawed approaches.

And not only do the emails paint a picture of scientists manipulating data, government employees at the Department for the Environment, Food and Rural Affairs (Defra) are also implicated.

One message appeared to show a member of Defra staff telling colleagues working on climate science to give the government a ‘strong message’.

The emails paint a clear picture of scientists selectively using data, and colluding with politicians to misuse scientific information.

‘Humphrey’, said to work at Defra, writes: ‘I cannot overstate the HUGE amount of political interest in the project as a message that the government can give on climate change to help them tell their story.

‘They want their story to be a very strong one and don’t want to be made to look foolish.’

Read the whole thing.

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Saudi Arabia stops Oil Expansion Plan, Switches to Natural Gas

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Saudi Arabia has stopped $100bn expansion of its oil production capacity after reaching a target of 12m barrels a day and now plans to shift its spending priorities to natural gas, refining and the chemicals business, media reports said.

Expectation that new oil resources like Libya and Irqa will meet rising demand has been cited as the reason behind this decision.

Libya has resumed oil production and Iraq is coming out as the biggest contributor to the global oil supply growth between 2010 and 2035, adding more than 5 million barrels a day.

The kingdom is, therefore, not pushing ahead with an assumed expansion plan to produce 15 million barrels a day by the end of 2020.

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Australia: UBS Says Woodside Faces LNG Delays

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Woodside Petroleum Ltd., Australia’s second-biggest oil producer, faces delays at its liquefied natural gas projects because of challenges in obtaining funding, customers and regulatory approvals, UBS AG said.

The company may defer a decision on its proposed Browse LNG venture “materially beyond” the third quarter of 2012, Gordon Ramsay and Cameron Hardie, UBS analysts in Melbourne, wrote in a report dated Nov. 25. They cut their rating on the shares to “neutral” from “buy” after Woodside’s 2012 output forecast, which was less than estimated by UBS.

Chief Executive Officer Peter Coleman, who took control of Woodside in May, aims to develop an estimated A$75 billion ($74 billion) in LNG projects with partners including Chevron Corp. The company may sell stakes in its Browse and Pluto ventures in Australia to help fund the developments, he said Aug. 18.

Talks on how to develop the Sunrise LNG venture are at an impasse, and the delays may prompt partner Royal Dutch Shell Plc to focus on other opportunities, the analysts wrote.

Woodside fell the most in more than a year in Sydney Nov. 25 after saying production may range from 73 million barrels of oil equivalent to 81 million barrels next year, compared with a UBS forecast of 91 million barrels.

Shares of the Perth-based oil and gas producer extended their losses today, falling 2.3 percent to A$32.60 at the 4:10 p.m. close in Sydney. The benchmark index rose 1.9 percent.

(bloomberg)

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The Netherlands: Norwind Installer and Ulstein Join Forces on New Offshore Wind Foundation Installation Vessel

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Norwegian based NorWind Installer contracted the ULSTEIN Dutch design offices Ulstein Sea of Solutions and Ulstein IDEA Equipment Solutions as their design partners for a new foundation installation vessel for the offshore wind industry. The vessel is a customized version of the Deepwater Enabler design from ULSTEIN.

The DP vessel is designed for world-wide operations with a focus on pre-piling and jacket/tripod/transition piece installation for the offshore wind industry in North Europe. Different deck layouts, based upon NorWind Installer’s installation experience from Alpha Ventus, have been developed for the various installation modes on top of the generic vessel platform provided by ULSTEIN.

The approach for this design has been unique in the sense that NorWind Installer and ULSTEIN started this project by going through the ULSTEIN Accelerated Business Development process. Technical and operational options from both NorWind Installer and ULSTEIN were discussed in a transparent process resulting in the most viable option, which met NorWind Installer’s business model and requirements.

”We are pleased with the concept as it is definitely in line with our vision of combining state-of-the-art technical solutions with the speed and seakeeping capacity of DP vessels. It gives us the opportunity to provide our installation services all-year around in up to 2.5m Hs, as well as meeting our client’s cost targets”, states Thorbjørn Hansen, VP Product Development at NorWind Installer.

The Netherlands: Norwind Installer and Ulstein Join Forces on New Offshore Wind Foundation Installation Vessel

The vessel is designed aiming for maximum efficiency and cost effectiveness and features an 800t heave compensated offshore crane on starboard side, while a pre-piling template can be located on a support structure at the stern. The vessel can carry four jackets, alternatively at least 24 piles or up to 12 transition pieces on the large open aft deck.

To enhance vessel operability, the anti-heeling system has been designed in such a way that the main crane can revolve over 180o with a full load in its main hook within 5 minutes, which is very favorable having a large jacket in the crane hook.

When operating in the pre-piling mode, the pre-piling template is positioned on the seabed by the main crane, in parallell a pile is picked up by a gantry crane, put in the upending frame on starboard side and upended. The main crane has been modified by ULSTEIN in such a way that it can first pick-up the piling hammer with its main hook and then connect to the upended pile with its auxiliary hook. When the hammer is working on driving the pile into the seabed, the next pile is upended by the upending frame and made ready for crane lift out.

The large aft deck and AHC crane provide flexibility for serving alternative subsea and offshore markets in the future, which is further increased by the two large holds suitable for carroussels located below main deck. A deck layout version of the vessel has also been developed for tidal turbine installations.

Voith Schneider propellers of 3,900 kW each will allow for a cruising speed of 13 knots and enhance the DP capabilities of the vessel. To minimize the environmental footprint an NOx reduction system is installed in the exhaust lines.

“After working closely with NorWind Installer in the ABD process, ULSTEIN started developing the integrated concept for mission equipment and vessel. This project shows the combined strength we can offer to support our clients in realizing their visions”, says Edwin van Leeuwen, project manager at ULSTEIN.

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Bulgaria: Socialist Political Opponents Seek to Revoke Chevron Shale Deal

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Political opponents to the government of Prime Ministers Boyko Borisov’s Citizens for European Development of Bulgaria (GERB) party are seizing upon the issue of shale gas development.

Earlier this week, a proposal to implement a moratorium on shale gas development by the by the far-right nationalist Ataka party was voted down by the Bulgarian Parliament.

Ataka leader Volen Shopov derided Borisov in Parliament calling on him to: “Give Chevron back their bribe, if you took one.”

Chevron Corp. won a tender for a shale gas deposit in northeastern Bulgaria, offering the government 30-million-euros to explore a concession in a large section of Dobrudzha, in the north east of the country.

Now, the Bulgarian Socialist Party has tabled a draft bill envisaging a ban on shale gas exploration and production and revoking award to Chevron.

The left-wing party said that it is following the path of its French socialist brethren and their experience with successfully imposing a ban on hydraulic fracturing.

Under the draft bill, the government is required to table annual reports on the exploration and production of hydrocarbon liquids and gases, the methods used in the process and their impact on the environment by March 30.

Companies that have already conducted shale gas exploration and production activities with or without a permit must submit detailed reports with the Ministry of Economy, Energy and Tourism within one month of the law’s entry into force.

The Socialists had made reconsideration of shale gas activities a key party of their platform in the October 23rd presidential election, which saw their candidate, former Minister of Foreign Affairs and Deputy Prime Minister Ivaylo Kalfin go down to defeat.  Kalfin has pledged to initiate a national referendum on shale gas drilling and production in Bulgaria.

The small, conservative party Order, Law and Justice (RZS) has also proposed legislation banning shale gas drilling.

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Anadarko Makes Substantial Gas Discovery Offshore Mozambique

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Anadarko Petroleum Corporation today announced the successful Barquentine-3 appraisal well encountered more than 662 net feet (202 meters) of natural gas pay in two high-quality Oligocene-aged fan systems, significantly expanding the estimated recoverable resource range to 15 to 30+ trillion cubic feet (Tcf) of natural gas, with an estimated 30 to 50+ Tcf of natural gas in place.

Barquentine-3 marks the sixth successful penetration in the complex that includes the Windjammer, Lagosta, Barquentine and Camarao discoveries.

“The positive results of each appraisal well that we have drilled and analyzed have continued to increase our estimate of recoverable resources and natural gas in place on our block, and to add to our confidence that this could be one of the most important natural gas fields discovered in the last 10 years, with significant long-term benefits for Mozambique,” said Anadarko Chairman and CEO Jim Hackett. “In parallel, we’ve continued to advance an expandable LNG (liquefied natural gas) development that will support this world-class field. This is great news for Mozambique, as our ongoing activities will continue to spur meaningful investment in the region, generate significant revenue for the government and offer a multitude of opportunities for the people of Mozambique.”

Anadarko President and Chief Operating Officer, Al Walker, added, “The results of Barquentine-3 indicate that we continue to encounter very thick sands with high-quality rock throughout these massive, connected reservoirs. Recoverable resources of this size and quality are perfectly suited for a large-scale LNG development, which is currently being designed to consist of at least two trains with the flexibility to expand to six trains. We also plan to leverage our experience with Independence Hub by constructing an offshore hub facility that will be tied back to the LNG plant onshore. We are already nearing the completion of the pre-FEED (front-end engineering and design) activity and expect to begin FEED work in the near future. Simultaneously, we have analyzed our two new 3D seismic datasets and are excited to have the rig commitments in place to continue our appraisal work while accelerating our exploration activities, including testing a growing number of high-potential prospects in other areas of the Offshore Area 1.”

Anadarko is in the process of mobilizing the Deepwater Millennium drillship to accelerate its activity in the Offshore Area 1. The company also recently signed a four-year contract extension that will keep the Belford Dolphin drillship working in the basin as part of its ongoing program.

The Barquentine-3 appraisal well was drilled to a total depth of approximately 13,400 feet (4,084 meters) in water depths of approximately 5,170 feet (1,575 meters). The well is located approximately 2.75 miles (4.4 kilometers) southeast of the Barquentine discovery well and approximately 1.8 miles (2.9 kilometers) south of the Barquentine-2 appraisal well. The partnership will preserve Barquentine-3 for use as a monitor well during its upcoming testing program. The drillship will next move to top set the Barquentine-4 appraisal well.

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