OIL AND GAS

UPDATE

January 2007

 

McIlvaine Company

 

TABLE OF CONTENTS

INDUSTRY ANALYSIS
1. AMERICAS
        U.S.

·         Turner Valley Oil and Gas' First Well in Mississippi Shows 24 Feet of Gas Pay

·         Exxon Mobil to Sell North Sea Oil, Gas Field Stakes

·         Bush considers Reopening Bristol Bay to Oil, Gas Drilling

·         Linn Energy to Acquire Oil and Gas Properties in Deals worth $454 Million

·         Congress Bans New Oil, Gas Drilling on Rocky Mountain Front

·         New Mexico Oil Conservation Division Key Oil and Gas Pit rules Discussed

·         Colorado may Limit Oil and Gas Emissions

·         Rig Shortage Slows Chevron Bid to Tap Offshore fields

·         Oil, Gas Lease Money Welcome in Western North Dakota

·         Linn Energy Buying Oil, Natural Gas Properties for $454 Million

·         Penn Virginia sets $334 Million, Oil, Gas Capital Expenses Budget

·         BG Group Buys a $685 Million Gas and Oil-Fired New England Power Station

·         Drilling Rig Contractor Nabors Industries Purchase of Moncla Called Off

·         Competitors Draining gulf of Deepwater Rigs

        BOLIVIA

·         Petrobras' San Alberto Field in Bolivia Has Record Gas Output

        BRAZIL

·         Venezuela Proposes Help to Brazil in Oil and Gas

        CANADA

·         TriStar Oil and Gas Ups Outlook and Buys Private Firm for $2 Million and 2.5 Million Shares

·         Royal Petroleum Inc. in Process of Developing New Technology for NC-02 Oil Extraction

        MEXICO

·         Fluor Lands Big $90 Million Mexican Contract

2. ASIA
AUSTRALIA

·         Technip Awarded Contract by Woodside Energy for Subsea Facilities off Western Australia

·         Australia's Santos to Divest US Oil and Gas Assets

    CHINA

·         Construction of China West-to-East Gas Pipeline under Study

·         India, China Sign MoU on Oil, Gas Exploration

    INDIA

·         Excellent Rating again for Gail India, Ranks top 3 Oil & Gas PSUs

·         RIL to Set up Gas Grid in Andhra Pradesh

·         Essar to Pump $400 Million in Oil Drilling Biz

·         ONGC to Start Gas production from KG Basin Find in 2007-08

·         ONGC to Take Strategic partner in its Dahej Gas-Processing Project

·         Iran Invites RIL to set up Refinery, Gas project

    INDONESIA

·         Indonesia Awards 18 New Oil and Gas Contracts via Direct Offer

    MALAYSIA

·         Power Tong Delivered to Murphy Oil for Offshore Malaysia Project

    MYANMAR

·         India-Singaporean Consortium Signs Oil, Gas Deal with Myanmar

·         Myanmar Oil, Gas Sector Attracts more Foreign Involvement in '06

    NEW ZEALAND

·         New Zealand Oil and Gas Bid Wins South Islanders Support

    PAKISTAN

·         Jadoon says Great Potential Exists for Investment in Gas, Oil Exploration in Pakistan

    THAILAND

·         GS Caltex Strike Oil and Gas in Thai Test Wells

·         Thailand Seeks New Bids for Oil, Gas Sites

·         Foster Wheeler to Construct Gas Separation Plant in Thailand

3. EUROPE / AFRICA / MIDDLE EAST
    AUSTRIA

·         Siemens Supplies Equipment for West Austria Gas Pipeline

    NORWAY

·         Honeywell to Help Norsk Hydro Maximize Productivity on Offshore Rigs

·         Statoil Drilling for Oil and Gas in Controversial Barents Sea $9.25 Billion Snoehvit Project

    NORWAY / UNITED KINGDOM

·         North Sea Oil, Gas Field Closures to Cost Billions

·         Statoil to Buy Norsk Hydro's Oil, Gas Division

    POLAND

·         Poland to Build $458.9 Million Gas Terminal

    ROMANIA

·         Linde to Build LPG Recovery Plant for Petrom S.A. in Romania

    EGYPT

·         Gazprom Talks Natural Gas Cooperation with Egyptian Officials

·         Russia, Egypt Agree on Joint Oil, Gas Exploration Projects

    EGYPT / CONGO

·         Saipem Awarded Egypt and Congo $380 Million Offshore Drilling Contracts

    LIBYA

·         Libya, Norway Review Oil, Gas Ties

    namibia

·         bhp billiton is Awarded Namibian Offshore Oil and Gas License

    NIGERIA

·         Nigeria Wants More Oil, Gas Investments

    AFGHANISTAN

·         U.S., Russia to Explore Oil and Gas in Afghanistan

    KAZAKHSTAN

·         China, Kazakhstan to Cooperate on Oil, Gas Projects

    RAJASTHAN

·         Cairn Plans $100 Million Tender for Three Onshore Oil Rigs

    RUSSIA

·         Lukoil to Sell Stake in Caspian Unit to Mittal Investments

·         Russia May impede Oil and Gas Production Growth in Ex-Soviet Neighbors

·         Gazprom Seeks 50 Percent of Shell Gas and Oil Project

·         Russia to Create Giant Company to Control Oil and Gas production at Sea Shelf

    TATARSTAN

·         Foster Wheeler Receives Delayed Coker Award for Tatarstan Integrated Refining and Petrochemical Complex

    TURKMENISTAN

·         Turkmenistan Wants to Construct Gas Pipeline to Europe

    uzbekistan

·         China's CNPC Unit Wins Oil and Gas Exploration License in Uzbekistan

    MIDDLE EAST

·         GE Oil & Gas Expands Product Portfolio in the Middle East to Boost Energy Efficiency

    IRAN

·         Iran in Talks with LUKoil over North Azadegan Field

    ISRAEL

·         Turkey, Eni, Calik Plan Oil Natural Gas Pipelines to Israel

    LEBANON

·         Norway to Assist Lebanon in Developing Oil and Gas Reserves

    OMAN

·         BP Wins Oman Gas Fields Concession

    QATAR

·         Dubai's Alderley FZE Awards Multiple Order to Poyam Valves for Qatar Gas Plant

    SAUDI ARABIA

·         Fluor Wins $2.2 Billion Saudi Petrochemical Contract

    UAE

·         Linde Engineering Awarded Contract foe Ethylene Cracker at Borouge's Abu Dhabi Petrochemical Complex

    YEMEN

·         Yemen to Invite Bids for Offshore Exploration

 

 

INDUSTRY ANALYSIS

   1. AMERICAS

            U.S.

Turner Valley Oil and Gas’ First Well in Mississippi Shows 24 Feet of Gas Pay

Turner Valley Oil and Gas Inc. holds a 10 percent gross working interest in a 50 well drilling program in Mississippi and Louisiana. The Company's Operator is Griffin and Griffin LLC of Jackson, Mississippi, a long-standing and respected oil and gas exploration Company in this region. Turner Valley Oil and Gas has announced that the first well (CMR-USA 39-14) has been successfully drilled to 3,200 feet, logged and is showing approximately 24 feet of gas pay. The Company's operator is awaiting a test rig to verify the reservoir expected by year-end. Anticipated production will be tied into the existing pipeline and compression infrastructure to be sold into the main Enbridge line to the Eastern Seaboard at premium Henry Hub Pricing

A drilling rig has been contracted for the next two wells. The rig will drill the first test well into the potentially high impact Wilcox formation mid December of 2006. Immediately following the Wilcox well, the second well will be drilled into the Tecumseh (TEC-1 Closure). This formation is expected to be a medium impact well.

The Company is awaiting further news from Murphy Oil regarding completion plans for the Strachan Well in Alberta. Completion is anticipated to occur in the first quarter of 2007 with tie in to the Strachan gas plant immediately thereafter assuming commercial quantities of marketable gas are achieved.

It is the intention of Management to remain focused on exploration and development drilling in Mississippi, Louisiana and Alberta, Canada. The Company is also reviewing a project in California.

Exxon Mobil to Sell North Sea Oil, Gas Field Stakes

ExxonMobil Corp. plans to launch a multi-million pound sale of several stakes in oil and gas fields in the southern North Sea, in line with similar moves from other oil majors, according to analysts and the chairman of ExxonMobil International.

Robert Olsen, the chairman of ExxonMobil International, confirmed that the company was selling its stakes in the Lancelot, Thames and Hewett area fields, as well as the Hewett Bacton Gas Terminal. The assets account for about 3% of Exxon's total output in the U.K. and Norwegian sectors of the North Sea.

Analysts say potential bidders for the assets could include Tullow Oil PLC, the independent exploration and production company, which is active in the southern North Sea, as well as European utilities keen to buy equity stakes in gas fields such, as E.ON AG and RWE AG.

A British newspaper said, without citing sources, that the sale could fetch more than GBP200 million.

Other oil majors such as ConocoPhillips (COP) and BP PLC (BP) are also selling assets after reviewing their North Sea asset portfolios in light of declining fossil fuel reserves there.

ConocoPhillips is selling its stakes in the North Sea's Alba, Everest and Armada fields, it was also reported without citing sources.

In the spring, BP sold its stake in the U.K. side of the Statfjord field as well as its stake in the Luva gas discovery in the Norwegian side of the North Sea.

ConocoPhillips wasn't immediately available to comment.

Bush Considers Reopening Bristol Bay to Oil, Gas Drilling

President Bush is deciding whether to lift a ban on oil and gas drilling in federal waters off Alaska's Bristol Bay, home to endangered whales and sea lions and the world's largest sockeye salmon run.

Leasing in a portion of area rich in oil and natural gas ended nearly two decades ago — while Bush's father was president — in the outcry after the Exxon Valdez oil spill in 1989.

But with natural gas prices higher, the Interior Department's Minerals Management Service proposed reopening the North Aleutian Basin. That includes Bristol Bay and part of the southeastern Bering Sea.

White House spokesman Scott Stanzel confirmed the president was considering taking that step.

Environmentalists oppose drilling there because of the potential for oil spills and harm to wildlife. They have speculated in recent days that Bush might allow such drilling before Democrats regain control of Congress in January.

Environmentalists worry about the large populations of migratory seabirds and crab, the imperiled Steller's sea lions and northern sea otters, or the North Pacific Right whales — a population so decimated, only about 100 are thought to exist.

"If the Bush administration decides to allow drilling in Bristol Bay, it will simply illustrate the level to which they will sink to satisfy Big Oil," Carl Pope, the Sierra Club's executive director, said. "They are willing to risk a valuable, renewable resource like Bristol Bay's salmon fisheries for ... shortsighted drilling plans."

The Minerals Management Service said in its August proposal that reopening energy development in the basin's federal waters, extending between three miles and 200 miles offshore, could produce $7.7 billion in oil and gas production and up to 11,500 jobs.

About 200 million barrels of crude oil, about what the U.S. imports every 16 days, are thought to be there. The agency estimates the region could yield 5 trillion cubic feet of natural gas — a quarter of all U.S. annual production.

Fourteen companies are said to be interested. The agency cited support among more than a dozen local and tribal governments nearby who think the drilling would boost their economy. Lease payments go to the government.

Despite its fame among fishermen for its rich stocks of salmon, king crab and other seafood, the Bristol Bay fishing region has lost hundreds of millions of dollars over the past decade because of competition from less-expensive farmed salmon.

Alaskan villages also depend on the annual sockeye and chinook salmon runs for protein in their diet.

The commercial fishing industry has plunged into a depression, giving more support to Royal Dutch Shell PLC and other oil companies that have lobbied the White House to lift the offshore drilling ban.

The Minerals Management Service said accidental spills could foul coastal water quality, and the noise and pollution from more ship traffic could disturb or kill seagoing creatures. It said even a large spill probably would harm only a small portion of the fish populations, but could pose a serious threat to marine mammals.

The Bering Sea Fishermen's Association raised alarms about protecting the region, as did the Yukon River Drainage Fisheries Association, which said drilling would threaten salmon runs.

The southwest segment of Bristol Bay was last open for lease sales in 1988 when the federal government collected more than $95 million.

The government bought back the leases after the Exxon Valdez coated Prince William Sound and the waters of south-central Alaska with 11 million gallons of crude.

Linn Energy to Acquire Oil and Gas Properties in Deals worth $454 Million

Linn Energy LLC said that it is acquiring oil and gas properties in three separate transactions for an aggregate purchase price of $454 million.

The deals involve the acquisition of a private oil and gas company with operations in the Texas Panhandle for $415 million and the acquisition of natural gas properties in the Appalachian Basin for $39 million.

Linn Energy said it also executed unit purchase agreements for a private placement of US$360 million of equity securities to third party investors, consisting of 14,116,090 units at a blended price per unit of $25.50, in order to help fund the acquisitions.

Congress Bans New Oil, Gas Drilling on Rocky Mountain Front

Congress' passage December 9 of a permanent ban on oil, gas and mineral drilling on public lands on the Rocky Mountain Front brought both cheers and groans from Teton County residents.

Sen. Max Baucus, D-Mont., the ranking member of the Senate Finance Committee, hammered out language on the drilling ban and tax-credits associated with the ban to insert into a major finance bill that both Houses passed. Baucus and outgoing Sen. Conrad Burns, R-Mont., both voted in favor of the bill, which passed the Senate, 79-9, on December 9. The House passed the bill, 367-45, on December 8. U.S. Rep. Denny Rehberg, R-Mont., voted for the tax and trade bill, but said he opposed the rider that bans future oil and gas drilling on the Front. The legislation now goes before President Bush for his signature.

Baucus' legislation, closely patterned on legislation introduced by Burns earlier this year, bans oil, gas and mineral exploration and development on U.S. Forest Service and Bureau of Reclamation lands on the Rocky Mountain Front. The law makes permanent Lewis and Clark National Forest ex-Supervisor Gloria Flora's 1997 prohibition on issuing new oil and gas leases and extends that protection to federal lands managed by the BLM.

The legislation offers companies which own 60 existing leases a federal tax credit if they sell or donate the leases to nonprofit groups. The provision provides a tax holiday - equal to 25 percent of the capital gain received by the seller - for sales of leases to nonprofit groups that agree to retire the leases and applies to the current leases on the Front.

The legislation does not prevent those lease holders from developing their leases under federal rules and regulations. But, one of the larger leaseholders, Startech Energy of Calgary, Alta., has previously announced that it would sell its leases to the Coalition to Protect the Rocky Mountain Front and the Wyss Foundation, which collaborated on a funding package to acquire and then retire those leases. Another leaseholder, Questar Corp., plans to donate its leases to Trout Unlimited.

"Obviously, I'm very pleased," Choteau attorney R.L. "Stoney" Burk said. "I think it's a great benefit to both the current residents of Teton County and future residents, and for the nation too."

Burk has made two trips to Washington, D.C., to lobby Montana's congressional delegation to support this ban.

The legislation languished after the elections, however, but Baucus was able to add the tax-credit measure and get the language attached as a rider to a $38 billion tax and trade bill.

Burk said action on the legislation was crucial to the efforts to protect the Front in part because the negotiations with Startech hinged on legislation being passed before Dec. 31.

He said he was not personally involved in the buy-out discussions, but believes that Startech has a good relationship with the Coalition and that the buy-out with Startech and perhaps other leaseholders will occur.

One lesson that can be learned from this 30-year effort, he said, is that citizens must work together to come up with consensus plans that balance needs and interests associated with natural resource issues.

Teton County Commissioner Sam Carlson of Fairfield was less enthusiastic, however. The Teton County commissioners, interested in development that will plump up tax coffers, opposed Burns' legislation and were not happy with Baucus' efforts.

The ban takes away the potential that the county will ever benefit from taxes on oil and gas development on public lands, Carlson said. Further, he said, the legislation offers no compensation to counties to make up for lost potential tax revenues.

Oil and gas exploration taxes provided significant revenue to Teton County in the 1970s, but in the past 30 years, the oil-and-gas-tax revenue pouring into the county's coffers has slowed to a trickle.

The county does support oil and gas exploration on private property, and Carlson said he has heard that there is some potential development in the works on private lands.

Seismic exploration in the 1970s spurred people's interests in protecting the Front, and many individuals and groups through the years have lobbied Congress for more wilderness designations and bans on oil, gas and minerals exploration and development.

In announcing the Senate passage of the legislation, Baucus, in a press release, said, "This is a major, major victory for Montana. We've been working to pass meaningful protections for the Rocky Mountain Front for 30 years.

Baucus was a lead negotiator on legislation to extend expiring tax credits, commonly known on Capitol Hill as tax "extenders." The bill was the last piece of legislation this Congress will pass this year and therefore the last opportunity to pass meaningful protections for the Front.

New Mexico Oil Conservation Division Key Oil and Gas Pit Rules Discussed

Three years after the New Mexico Oil Conservation Division (OCD) adopted the most recent changes, Rule 50, which regulates how the oil and gas industry deals with waste pits, is up for discussion. Mark Fesmire, division director for the OCD, said neither landowners nor industry representatives were entirely satisfied with the pit rule modifications. In turn, the OCD scheduled meetings around the state in December to gather feedback on Rule 50.

The OCD will use all comments taken at the meeting to draft a statement of purpose, which will be taken to a task force comprised of individuals appointed by the state secretary of energy, Fesmire said. The task force will hash out how to accomplish goals and bring its plans to the New Mexico Oil Conservation Commission, which can accept, modify or reject the changes.

Complaints from both sides of Rule 50 have filtered into the OCD, Fesmire said. Industry officials complain it costs too much to close the pits and meet the OCD standards while surface owners argue the land should be returned to its pre-drilling condition.

Clean-up ranges from several thousand dollars to several hundred-thousand dollars, and industry claims instances of contamination have not occurred lately, Fesmire said. He added more ground-water contamination tends to occur at oil and gas drilling sites farther south than Farmington, where the land carries more salt.

Mike Eisenfeld, a representative of the environmental organization the San Juan Citizens Alliance, said his organization worries about toxicity associated with the pits. The group would like to see more closed-loop systems, where open pits to contain liquids become unnecessary. But where closed-loop systems do not occur, any contaminated materials must be hauled away, he said.

Colorado may Limit Oil and Gas Emissions

Facing federal pressure over worsening air pollution, a state air quality commission on December17 approved its first-ever statewide emissions controls on the booming oil and gas industry.

The Colorado Air Quality Control Commission said new rules would reduce emissions by 68 percent from tanks that collect oil, liquefied natural gas and other byproducts. The rules would take effect in May 2008 if the Legislature approves them.

The commission would conduct yearly reviews of the emissions levels when the tanks are vented, and of the health impacts of the industry.

The new rules are not as stringent as emissions controls along the Front Range, a region from the Denver area north that is facing a greater rise in ozone levels than elsewhere in the state and is home to one of the state's largest and most established natural gas field.

The commission strengthened pollution rules already in place on the Front Range to meet federal ozone levels. Oil and gas companies will have to cut emissions by 75 percent, more than the existing 47.5 percent requirement and more than an industry-backed compromise of 73 percent.

"It's a bitter surprise," said Ken Wonstolen, general counsel for the Colorado Oil and Gas Association trade group. Wonstolen said companies will have only about 130 days to equip the tanks with devices to further cut emissions.

The emissions react with sunlight to form ozone, a primary component of smog. It is a colorless gas and is itself a threat to children and people with asthma.

Some environmental groups criticized the commission's decision.

"We do not understand why the industry is allowed to pollute the Western Slope but held to higher standards on the Front Range," said Duke Cox, a member of the Western Colorado Congress, an environmental group.

The industry says it is being unfairly singled out. Old cars on the road are a bigger problem, they say, and forcing any industry to spend millions more on questionable solutions doesn't make sense.

Decades of restrictions ranging from the banning of trash burning to pollution controls on cars had appeared to rid Denver of its notorious brown cloud, but state officials say the industry has brought it back, and also spread it to western Colorado.

The state had predicted emissions of 146 tons a day by next year, but revised that upward to 233 tons.

The Environmental Protection Agency had given the state until July to come up with a plan to reduce ozone along the populous Front Range. But the federal agency agreed to delay declaring the Front Range and other communities in violation of the Clean Air Act if they meet certain milestones.

Rig Shortage Slows Chevron Bid to Tap Offshore Fields

A global shortage of deep-sea drilling rigs is costing Chevron precious time as it taps the Gulf, and the equipment deficit may keep oil prices high. A prime example is the $3 billion field dubbed Jack. Chevron and partner Devon Energy Corp. announced the deepest-ever well test there on Sept. 5. Politicians backing energy independence exulted. Investors sent Devon shares up 12 percent and Chevron's up 2.3 percent.

They didn't know the drilling rig Cajun Express had already plugged the Jack well and moved to another urgent job. Drilling at Jack won't resume until at least July, Bill Thornburg, a senior drill-site manager for Chevron Corp., says.

``There's a lot of prospects out here we'd like to drill but can't yet because there aren't enough rigs,'' says Thornburg, 58, who's overseeing drilling at another site, called Tahiti, that needed the Cajun Express to meet a more pressing deadline.

The Cajun Express is one of just 18 rigs worldwide capable of tapping the deepest discoveries. For the test at Jack, the platform-shaped vessel, which motors from site to site, needed to drill 4 miles (6.4 kilometers) below the sea floor.

The rig shortage is forcing oil companies to postpone new offshore wells in the Gulf of Mexico and elsewhere, says Peter Jackson, an analyst at Cambridge Energy Research Associates in Cambridge, Massachusetts. As a result, crude prices will remain high and U.S. reliance on imports from Africa and the Middle East will increase over the next decade, says David Foley, who manages $600 million at Grove Creek Asset Management in New York.

Crude oil prices have tripled in the past five years. The year's low for benchmark oil futures on the New York Mercantile Exchange is about $55.

Jack will take about nine years to develop from discovery to first production, compared with six years for Tahiti, according to estimates by San Ramon, California-based Chevron, the second- biggest U.S. oil company. That's because rigs are harder to come by and it takes longer to drill deeper wells, Thornburg says.

The Cajun Express is owned by Houston-based Transocean Inc., the world's biggest offshore driller. While record lease rates of as much as $520,000 a day are funding expansions by Transocean and other rig operators, shipyards from South Korea to Singapore to Scandinavia are backlogged with orders. Growth of the offshore drilling fleet will be gradual, says Kenneth Sill, a Houston- based analyst at Credit Suisse Securities USA LLC.

Daily rental fees on the most sophisticated and rugged drilling vessels are double 18 months ago, Sill says.

``Day rates have climbed aggressively because demand for these rigs far outweighs the ready supply,'' says Clayton Ballard, the top-ranking Transocean employee aboard Discoverer Deep Seas, another rig at the Tahiti field.

Worldwide, there are 31 rigs on order that will be able to handle deepwater projects such as Jack, according to Houston- based Rigzone, which compiles data on the drilling industry. Two are scheduled to be finished next year and 13 are slated for delivery in 2008.

The time required to map and develop oil fields means any discoveries made by rigs from the Class of 2009 won't begin producing oil until 2015 or later, says Gene Pisasale, a former Exxon geologist who helps oversee $25 billion at Mercantile Bankshares Corp. in Baltimore.

Earlier this year, Chevron ordered two new rigs from Transocean at a cost of about $1.5 billion. They will be able to drill a mile deeper than the most sophisticated existing vessels. The first of the new vessels, which at a cost of $670 million will be the most expensive rig in history, won't be ready until 2010. Transocean will own the rigs and lease them to Chevron.

Even when available, the rigs are costly to operate. Chevron and its partners on the Tahiti field, Statoil ASA and Royal Dutch Shell Plc, are spending $1 million a day to rent, staff and supply the Cajun and Discoverer Deep Seas with fuel, food and hardware. The price tag will rise to $1.6 million a day by the end of this month as more cost-intensive phases of well preparation get under way, says Donald LeGros, Tahiti's drill site manager and Thornburg's No. 2.

``If people wonder where their money goes when they're paying $2.50 a gallon for gasoline, this is it,'' says LeGros.

Thornburg, who will also oversee drilling at Jack, says Chevron may borrow a rig being refurbished in Singapore for Oklahoma City-based Devon to resume work on Jack next year.

For now, the Cajun Express, built to drill almost 7 miles beneath the surface of the sea, is preparing to blast penny-sized holes in the sides of six wells at the northern end of Tahiti, a crucial step in preparing the field for startup, says LeGros.

The rig, which has a derrick tall enough to be seen from the Discoverer 3 miles away, houses engineers and workers (roughnecks), who pull 12-hour shifts for two weeks followed by two weeks of shore leave. The rig is equipped to sail out of harm's way when hurricanes threaten.

On the other end of the Tahiti field, the Discoverer uses satellite-positioning gear to remain stationary amid 20-foot (6- meter) swells. The floating work camp for 200 workers includes a movie theater, Internet cafe, exercise room and infirmary. When new employees board the rig, the mandatory safety video includes instructions for donning emergency wet suits.''

On a cloudy December day, Thornburg and LeGros are struggling with the unforeseen: The 34-degree Fahrenheit (1 degree Celsius) water temperature and massive pressure exerted at the sea floor are popping out bolts needed to secure equipment to the eight wells at the southern end of the field.

A team of engineers is experimenting with different types of insulation to overcome the cold and pressure and keep the bolts screwed down tight, Thornburg says.

Time is short because the Discoverer and Cajun Express must have all 14 wells at Tahiti ready by July, when a production platform is scheduled to arrive in two pieces from shipyards in Texas and Finland. Unlike the mobile floating rigs, production platforms are anchored to the sea floor.

Escalating rig costs are contributing to a slowdown in profit growth at the world's five biggest publicly traded oil companies -- Exxon Mobil Corp., Royal Dutch Shell, BP Plc, Chevron and ConocoPhillips. Net income for those companies probably will rise by an average of 12 percent this year, according to a Bloomberg survey of analysts. That's down from 35 percent growth in 2005.

Chevron says it plans to boost spending on exploration, refineries and chemical plants by 23 percent in 2007 to a record $19.6 billion as costs rise.

Houston-based ConocoPhillips, Devon and Reliance Industries Ltd., which owns India's biggest crude refinery, all say they plan to curb drilling next year because of rising costs and the scarcity of equipment.

``The rig situation is going to slow down the rate at which companies can appraise and develop these prospects,'' says Jackson of Cambridge Energy Research.

Investors and politicians may have lost that point in the excitement over the deep Jack test, which showed for the first time that energy companies could exploit a layer of rocks that may hold as much as 15 billion barrels of oil.

Oil prices dropped 7.8 percent in six trading sessions after the Chevron and Devon statements Sept. 5. Chevron shares have climbed 15 percent since then.

``America needs America's oil, and suddenly we've found a lot more of it,'' Representative Joe Barton, a Texas Republican who chaired the House Energy and Commerce Committee, said in a statement.

``But we have to bear in mind there's no chance we'll see any of that oil on-stream this side of 2010,'' he says.

Chevron says it expects Tahiti, which holds an estimated $33 billion of crude at current prices, to begin pumping oil by the second or third quarter of 2008.

The company needs Tahiti, discovered in 2002, to start generating income as costs soar and the search for petroleum pushes into ever deeper waters, says Mickey Driver, a Houston- based spokesman for Chevron's exploration and production business.

It costs about $120 million to drill a well in deep water, with no guarantee that oil or natural gas will be found. The diamond-crusted bits used to drill into the Earth's crust cost $50,000 apiece. One well may chew up a dozen, LeGros says.

The first six exploratory wells Chevron drilled with the Discoverer in the Gulf were so-called dry holes, or wells with too little oil to turn a profit, Thornburg says. About 80 percent of the exploratory wells in the Gulf are failures.

Oil, Gas Lease Money Welcome in Western North Dakota

The year has ended on a high note for North Dakota’s oil patch.

Federal oil and gas lease sales in the state commanded more interest than in Montana and South Dakota for the third straight year, the Bureau of Land Management said.

Oil and gas lease sales in the three states during fiscal 2006, which ended in September, totaled $14.3 million, with North Dakota accounting for $13.3 million, the BLM said. Montana had $952,597 in leases, while South Dakota tallied $44,348.

The total for the three-state region was second only to fiscal 2005, when slightly more than $36 million was bid. North Dakota accounted for $35 million of that total.

Oil activity in North Dakota is at its highest level in nearly two decades, said Lynn Helms, the director of the state Department of Mineral Resources. Oil production reached 113,000 barrels daily in December, the highest since July 1987, he said.

Most lease sales in the three-state region have been on U.S. Forest Service land in western North Dakota’s Williston Basin, said Karen Johnson, who heads BLM’s oil and gas leasing division in Billings, Mont.

McKenzie, Billings, Slope and Golden Valley Counties in North Dakota shared $11.1 million from federal oil and gas leases in fiscal 2005. The money was distributed earlier in 2006.

Figures for 2006 are not yet in.

The counties used the bulk of the money to repair roads torn up by trucks hauling equipment to the oil patch, auditors say. The rest was spent on schools.

Larry Melvin, mineral manager for the U.S. Forest Service, said some 942,000 acres of federal grasslands in western North Dakota became available for leasing after an environmental assessment was completed in 2003. About 84 percent of the acres are now leased, he said.

BLM offered 252,745 acres for lease in fiscal 2006, with 190,100 of the acres leased. The agency said 305 of the 385 parcels offered in the three-state region got bids. Only three of North Dakota’s 140 parcels offered did not receive bids.

BLM likely will offer a similar amount of parcels in fiscal 2007, Johnson said.

Revenue from the oil and gas leases is shared by the federal government and the state or county where the parcels are located, the BLM said.

“It’s a tremendous amount of money that most people in North Dakota do not realize is flowing back here,” Helms said.

He said the state will get $51 million in royalties in fiscal 2006 from the federal government oil and gas production taxes in western North Dakota, as well as about $10 million from state leases for the past fiscal year, and $166 million from production and extraction taxes.

Forty-two drill rigs were working the state’s oil patch in December, the highest number since 1985. Only 34 drill rigs were working at this time last year, Helms said.

North Dakota has 3,608 active oil wells, up from 3,385 in 2005, Lynn Helms said.

“We’ve added a pile of wells in the last year,” Helms said. “The only thing that could bring it to a screeching halt is a collapse in oil prices, but there is no indication of that in the next five to 10 years.

“I think we could ride this for a long time, at least through the end of the decade,” Helms said.

Linn Energy Buying Oil, Natural Gas Properties for $454 Million

Linn Energy, a Houston-based independent oil and gas company, will acquire oil and natural gas properties in Texas and West Virginia in three separate transactions for $454 million.

Linn Energy, which recently relocated from Pittsburgh, did not identify the Texas company or Appalachian Basin properties it is acquiring. The company said in a prepared statement it will acquire a privately owned Texas company with operations in the Texas Panhandle for $415 million.

The other deals involve acquiring natural gas properties in the Appalachian Basin for the remaining $39 million.

To help fund the deals, Linn Energy has issued a private placement of $360 million in equity to third-party investors. The acquisitions also will increase Linn Energy's borrowing capacity to $675 million to $700 million from $480 million.

The deals are expected to close Feb. 1.

The Texas acquisition will give Linn Energy 55 million barrels of oil equivalent proved reserves and a production mix of 55 percent natural gas liquids, 35 percent natural gas and 10 percent crude oil.

The West Virginia properties have more than 55 producing wells, 24 billion to 26 billion cubic feet per day of proved reserves and "significant additional drilling opportunities," Linn Energy said.

In August, Linn Energy acquired oil and gas fields in north-central Oklahoma and Southern California for $416 million.

Penn Virginia sets $334 Million Oil, Gas Capital Expenses Budget

Penn Virginia Corp. said oil and gas capital expenses for 2007 will be $334 million to further develop its portfolio in its four core areas of the Cotton Valley play in east Texas, Appalachia, Mississippi and the Mid-Continent.

The higher budget from estimated 2006 capital expenses is related exclusively to development drilling, the energy company said in a statement.

Penn Virginia also said it expects 2007 production will range between 36.5 billion and 38.5 billion cubic feet of natural gas equivalent.

BG Group Buys a $685 Million Gas and Oil-Fired New England Power Station

 

BG Group Plc, the U.K.'s third- biggest oil and gas producer, said it agreed to buy a power plant in the northeastern U.S. from a group of private investors for $685 million.

 

The Lake Road 805-megawatt gas- and oil-fired power plant in Dayville, Connecticut, is BG's second power plant purchase in New England. The company bought the Dighton power plant in the neighboring state of Massachusetts in October.

 

``Lake Road and Dighton have the potential to offer BG attractive returns and will be readily integrated into our growing U.S. gas business,'' Martin Houston, managing director of BG North America, Caribbean and Global LNG, said in a Regulatory News Service today. The Lake Road station transmits power into the ISO New England network, BG said.

 

BG expects to complete the purchase of the Lake Road plant in the first quarter of 2007, after receiving approval from the U.S. Federal Energy Regulatory Commission.

Drilling Rig Contractor Nabors Industries Purchase of Moncla Called Off

Bermuda-based drilling rig contractor Nabors Industries Ltd. on December 28 said it no longer plans to acquire Moncla Cos., which supplies drilling and well services to the oil industry.

Nabors Industries never disclosed terms of the deal announced in September, although the company stood to gain 56 workover and well-servicing rigs, 13 truck-mounted swabbing and testing units, rental equipment, various auxiliary equipment and real estate.

Nabors Industries said it left open future possibilities with Moncla, a privately held company based in Lafayette, La.

Competitors Draining Gulf of Deepwater Rigs

After hurricanes Katrina and Rita ravaged the Louisiana and Mississippi coasts in 2005, oil and gas drilling production was greatly disrupted despite just 113 of the more than 4,000 platforms being destroyed in the Gulf of Mexico.

But the harshest long-term threat to oil and gas production in Gulf waters now is the dwindling drilling equipment supply.

Many jack-up and deepwater rigs, the massive mobile platforms and ships that drill for oil and gas in deepwater, are leaving the Gulf of Mexico for more lucrative jobs elsewhere, said David Dismukes, associate director of Louisiana State University Center for Entergy Studies.

“Overall, production will remain the status quo (in 2007),” Dismukes said. “(But the) Gulf is now competing with everybody else.”

For example, Houston’s GlobalSantaFe Corp. agreed to a $233.6-million contract in November to send four jack-ups, which stand on stilts and are used in shallow waters, to the Persian Gulf to service Aramco, Saudi Arabia’s national oil company, at more than $160,000 a day to drill for four years.

Ensco International Inc. will send a jack-up rig from the Gulf of Mexico to Tunisia next year on a deal worth an estimated $146 million on day rates of more than $200,000 for up to two years of work.

Shorter contracts elsewhere for larger deepwater rigs are fetching day rates exceeding $500,000.

These lucrative price tags keep engineers and builders busy. Oil and Gas Journal, an online industry publication, said 40 jack-up rigs are being built worldwide as demand increases.

“That’s more rigs being built now than ever before, especially in the past 10 to 20 years,” said Joe Gordon, Gulf of Mexico field supervisor for the federal government’s Minerals Management Service.

Yet according to ODS-Petrodata; an offshore oil and gas market analysis firm, companies worldwide are building 91 major offshore rigs, up from fewer than 10 in 2003, at a cost of between $160 million and $190 million apiece. This wave, however, won’t ply Gulf or international waters until 2009, ODS said.

“One of the questions being asked is, ‘Will the rigs come out on time?’” said Tom Kellock, ODS-Petrodata head of consulting and research in Houston.

Kellock said the last rig building boom in the late 1980s and 1990s failed to meet completion dates.

The rig exodus is squeezing what was an already tight market for drilling equipment. In 2001, about 148 jack-up rigs were in the Gulf of Mexico and just 90 remain. More are expected to leave soon, according to Houston oilfield service company BakerHughes.

That migration could hurt U.S. natural gas production, said Jeff Tillery, an analyst with Pickering Energy Partners, a Houston energy investment and research firm. Jack-up rigs are typically used to find gas in shallower waters where gas reserves are quickly exhausted, forcing companies to move elsewhere to drill, he said.

While the price of natural gas hovering around $8 per 1,000 cubic feet, companies are searching hard for gas fields. The Energy Information Administration predicts natural gas will cost $10 per 1,000 cubic feet by the end of 2007, up from the December 13 close of $6.70 on the New York Mercantile Exchange. In 2001, the price hovered around $2.43 per 1,000 cubic feet.

Despite 2005 storm season ravages, more than 4,000 platforms remain in the Gulf, a 97 percent survival rate, according to the National Ocean Industries Association. Most damaged rigs were built before 1988 and more stringent construction specifications were mandated later.

Now, new clamps capable of withstanding 2 million pounds of pressure per square inch were added to some platforms to hold major components in place under Katrina-like wind conditions, according the NOIA.

Offshore facilities built since 1988 are also designed to withstand 100-year storm events, which includes storms up to Category 5.

Regulations stipulate platform decks must exceed average height of hurricane-produced swells, generally estimated to reach 80 feet during Category 3 storms and higher, according to NOIA.

More importantly, contracts to drill overseas in hotter prospects such as China, Africa and the Middle East look more profitable than many of the Gulf of Mexico’s richest fields, which have already been drilled, Tillery said.

Mike Conner, MMS chief of technical assessment and operations, said more than 50 percent of Gulf of Mexico platforms are devoted to drilling for oil in deepwater and 26 percent are drilling for gas.

“That trend is going to continue,” he said. “Companies are chasing the larger finds. Shelf production is tapering off.”

But if fewer rigs are available for the Gulf of Mexico, production will decline even faster for the region that produces about one-quarter of U.S. oil and gas.

Federal offshore oil production, predominantly in the Gulf, decreased 19 percent between 2003 and 2005, to 458 million barrels a year, according to the EIA. Offshore natural-gas production also fell, dropping to 4 trillion cubic feet a year in 2004 from 5.1 trillion cubic feet a year in 2001.

The rig departures also represent a sea change of sorts in the global energy market. Service companies in the Gulf of Mexico, the birthplace of offshore drilling in the mid-20th century, have for years dictated global contract terms for drilling equipment. That’s changing.

“There are much bigger fish to fry elsewhere in the world,” said Matt Conlan, an analyst with Weeden & Co., an equities-trading firm in Greenwich, CT.

            BOLIVIA

Petrobras' San Alberto Field in Bolivia Has Record Gas Output

Petroleo Brasileiro SA, Brazil's state-controlled oil company, said it produced a record amount of natural gas at its San Alberto gas field in Bolivia after completing repairs to a pipeline serving the area.

San Alberto produced 12.5 million cubic meters of natural gas, about a quarter of Brazil's daily use, and 10,209 barrels of oil on Dec. 5, the day after Rio de Janeiro-based Petrobras completed repairs to a pipeline linking the field to Bolivia's Sabalo oil and gas processing plant, according to a note on the company's Web site.

Brazil buys about 24 million cubic meters of gas, or about half of its needs, from Bolivia.

             BRAZIL

Venezuela Proposes Help to Brazil in Oil and Gas

The president of Venezuela, Hugo Chávez, stated that his country may help in the development of Brazil by increasing the supply of fuels through agreements in the area of oil and gas.

"We want to offer Brazil all facilities so that the country may have no concern about oil and may have all the energy necessary for the country's development and to become a world power," he said, after having dinner with Brazilian president Luiz Inácio Lula da Silva, at Alvorada Palace.

According to him, Venezuela has expressive reserves at depths of 200 meters. He said that in just one of the wells exported by Brazilian oil company Petrobras in his country, the organization found reserves of seven million barrels.

The Venezuelan president traveled to Buenos Aires (Argentina), where he was to meet with Argentine president Néstor Kirchner. Both presidents were going to discuss the installation of the gas pipeline of the south, which will benefit the countries of South America up to the Caribbean. According to Chávez, the project has been under development for eight years, and just one year ago, with the interest of President Lula, did it become possible in the technical-financial, environmental and energetic point of view.

            CANADA

TriStar Oil and Gas Ups Outlook and Buys Private Firm for $2 Million and 2.5M Shares

TriStar Oil and Gas Ltd. said December 7 it is acquiring a private southeast Saskatchewan oil and gas company for $2 million in cash and 2.5 million shares - a total of $16.5 million at the current stock price.

TriStar has also raised its 2007 average daily production forecast to 4,800 barrels of oil equivalent per day, 75 per cent oil, aiming for a 2007 exit production rate of more than 5,200 boe per day, up from a previous forecast of 4,950 boe per day.

In addition to its current production, the private company has 700,000 barrels of oil equivalent of proved and probable reserves, and 20 square kilometers of undeveloped land with 17 identified drilling sites. 

Royal Petroleum Inc. in Process of Developing New Technology for NC-02 Oil Extraction

Royal Petroleum Corp. announced that the Company has contracted a Research and Development firm to create new technology for the NC-02 oil extraction process. The developer of this unique technology was introduced and recommended by Royal Petroleum's Technology Consultant. The Company intends to commence field testing with this innovative process and then expects to follow up with a patent filing in few months.

Utilized by major oil companies for several years, NC-02 technology has proved successful by increasing oil production in various types of oil reservoirs by up to 400 percent. The process can typically restore a well back to its original flow rates while potentially dealing with greenhouse gas emissions. Blended with this newly developed technology, it is expected to restore reservoir pressure, increase oil production and lower operating costs. By using nitrogen and carbon dioxide gas injection unites to "pump up" and re-pressure oil wells, we are able to significantly increase oil output from these assets with this innovative process.

             MEXICO

Fluor Lands Big $90 Million Mexican Contract

Mexico`s state-run energy company is paying Fluor Corp. $90 million to build offshore living quarters to be used on an oil and gas production facility.

ICA Fluor, jointly owned by Fluor Corp. and Empresas ICA will fabricate the living quarters for Pemex Exploration and Production, Fluor said December 4 in a news release.

The quarters can house up to 150 people and will be built in Veracruz state, Mexico, at Industria del Hierro`s Mata Redonda yard. The facility will be located in the Gulf of Mexico to serve several offshore fields.

Construction is slated to begin in February. The contract is expected to be completed by June 2008. The work entails engineering, procurement, construction, load out and seabed fastening as well as dismantling and transportation of the existing offshore facilities.

   2. ASIA

            AUSTRALIA

Technip Awarded Contract by Woodside Energy for Subsea Facilities off Western Australia

Technip has been awarded a contract by Woodside Energy Ltd for the supply and installation of subsea facilities in connection with the development of the Vincent field. This field is located approximately 60km north of Exmouth, off the Western Australian coast, in water depths ranging from 350 to 420m. The contract includes the design, engineering, procurement, installation, construction and pre-commissioning of: rigid spools, flexible flowlines and risers (approximately 18km), production umbilicals (approximately 14km), riser holdback anchors, and installation and tie-in of high voltage electrical jumpers. Project execution will be supported by TS7AP, the joint venture company composed of Technip and Subsea 7 for subsea offshore operations in the Asia Pacific region. The project will be based in Perth (Australia). The flexible flowlines will be supplied by Flexi France, one of the Group's flexible pipe plants, located in Le Trait, France. The umbilicals will be supplied by Duco, Technip's subsidiary based in Newcastle, UK. The Venturer, a vessel from Technip's fleet, will support the offshore operations, which are scheduled to begin in the fourth quarter of 2007.

Australia's Santos to Divest US Oil and Gas Assets

Oil and gas producer Santos Ltd said it will divest all its assets in the US and refocus its exploration and production portfolio in Australia, Asia and the Middle East.

The company said continued high demand for energy in the US has resulted in a strong market for assets in Santos' US business areas, making it a good time to bring this portfolio to the market.

It said it will be better placed to meet its strategic objectives by re-deploying its US-based capital elsewhere in the world.

Santos' operations in the US produced 2.1 mln barrels of oil equivalent (boe) in 2005 and include ongoing exploration and development activities over more than 180,000 acres.

Since the beginning of this year, Santos has grown its focus areas in Asia by adding acreage in Vietnam, exploration in Kyrgyzstan and exploration, appraisal and production activities in Indonesia.

             CHINA

Construction of China West-to-East Gas Pipeline under Study

Construction of a second gas pipeline connecting China's oil-rich western regions with the more industrialized southern and eastern areas is under study, according to sources with China Business News.

An insider who declined to be named said on December 6 that the pipeline is likely to link Tarim Basin in the west and Guangdong Province in the south, traversing Qinghai and Sichuan provinces.

The exact route of the pipeline, its capacity and construction date were not revealed.

China finished building its first gas pipeline -- linking Xinjiang with Shanghai -- in 2004. Petro China, the country's largest oil producer, built the 4,000-kilometer pipeline with help from international oil firms such as Royal Dutch/Shell Group, Russia's Gazprom and Exxon Mobil.

China's gas consumption is expected to hit 100 billion to 120 billion cubic meters by 2010, and the figure is likely to double by 2020.

China has already set up oil and gas pipelines extending more than 450,000 kilometers across the nation.

Gas consumption in China currently accounts for 3 to 5 percent of overall energy consumption. The government is planning to raise the proportion to 8 to 10 percent.

India, China Sign MoU on Oil, Gas Exploration

India and China today further cemented their friendship and strategic ties by inking a major pact envisaging joint exploration, production and acquisition of oil assets in third countries, which could substantially reduce their energy costs. 

“It is an historic moment for India-China relations,” Minister for Petroleum and Natural Gas Murli Deora said while disclosing that the two major oil consumers had recently concluded a joint bid in Columbia and Syria. 

 “We have been working on this MoU and I am sure this agreement will go a long way to strengthen India-China friendship,” Deora said after meeting the Chairman of China's National Development and Reform Commission (NDRC), Ma Kai, here. 

Deora said the MoU between the two governments, signed at the end of the joint celebration of “India-China Friendship Year,” would allow oil and gas companies of the two countries to engage in mutually beneficial cooperation in acquiring hydrocarbon assets in third countries without undercutting each other. 

 The MoU is the second in the key petroleum sector in as many days between the two Asian giants; who have been fiercely competing with each other for access to hydrocarbons assets globally, only benefiting sellers. 

            INDIA

Excellent Rating again for Gail India, Ranks top 3 Oil & Gas PSUs

Gail India Ltd has announced that the Company's performance during the financial year 2005-06 has been rated 'Excellent' by the Department of Public Enterprises under the Ministry of Heavy Industries & Public Enterprises, Government of India. The Company has secured a provisional Composite MoU score of 1.28 for the fiscal 2005-06. The Company has emerged as the third best oil and gas sector PSU on the basis of performance during FY 2005-06. Gail India has been consistently securing 'Excellent' rating since it started signing MoUs with the Ministry.

During the year 2005-06, the Company maintained uninterrupted availability of natural gas on its pipeline systems for 8760 hours. As regards the LPG pipeline system, the uninterrupted availability of LPG was maintained for 8745 hours on the Jamnagar - Loni LPG pipeline system and for 8760 hours on the Vizag - Secunderabad pipeline system.

The Company produced 1.32 million tonnes of Liquid Hydrocarbons (LPG / Propane / SBP / Pentane) during the year 2005-06 against the MOU target of 1.29 million tonnes. The polymer production during the year was 3.11 million tonnes against the MoU target of 3.10 million tonnes. The petrochemical sales during the year were 3.16 million tones against the MoU target of 3.1 million tonnes.

RIL to Set up Gas Grid in Andhra Pradesh

Reliance Industries Ltd (RIL), which is expected to evacuate gas from the Krishna Godavari basin in Andhra Pradesh (AP) by June 2008, plans to set up a state-wide gas grid to meet the energy needs of the state. RIL assured the AP government that gas from the KG basin would be first used to fulfill the needs of the state before being supplied to other consumers across the country.

Essar to Pump $400 Million in Oil Drilling Biz

Essar Shipping and Logistics Ltd is pumping $400 million into oil drilling rig-hire business, marking a re-entry in the hydrocarbons exploration service sector for the Cyprus-registered arm of the Ruias-promoted group.

The investment will be routed through Essar Oilfields Services Ltd, a wholly-owned subsidiary of Essar Shipping and Logistics. The holding firm will chip in $100 million as equity and raise the remaining $300 million from the international institutional finance market, Essar Shipping and Logistics CEO Sunjay Mehta told TOI over phone from London.

The Essar group had exited the business in May 2003 when subsidiary Essar Oil sold its rigs division to Bin Jabr group of Abu Dhabi for $60 million.

Globally, high oil prices have prompted a rush by oil majors to find big pay-off deepwater fields, creating a surge in demand for rigs. The resulting shortage has pushed day lease rates to the highest levels in industry history. Average day-hire rates so far this year have risen 50% from 2005 levels, hovering around $101,000 a day.

Asked whether it was the right time to acquire rigs when lease rates are ruling high, Mehta said there was enough liquidity in the market and people are willing to sell. "This is the right time, given the healthy demand and buoyancy in the international and domestic exploration activity. Besides, the Essar group itself has an exploration portfolio which will result in in-house contracts that will cover the risk."

Essar will spend the money on acquiring rigs in use and will not go for new ones. It plans to acquire a mix of rigs for drilling on land as well as offshore.

ONGC to Start Gas Production from KG Basin Find in 2007-08 

State-run Oil and Natural Gas Corp will begin production from its recently discovered gas find in the Krishna Godavari Basin in 2007-08, Minister of State for Petroleum and Natural Gas Dinsha Patel said December 20.

"Exploratory efforts of ONGC have led to the discovery of the 'turputallu' gas find, in the Krishna Godavari basin, in the state of Andhra Pradesh. The estimated in-place gas reserve of the turputallu find is 72.1 million cubic meters," he said in a written reply to a question in Rajya Sabha here.

ONGC, he said, will begin commercial production from the well in the first part of 2007-08. "The estimated cost of the line connecting this well to Gail's pipeline grid is about Rs 92 lakhs," he said.

The government has awarded 50 exploration blocks to ONGC as operator under five rounds of new exploration licensing policy (NELP). Out of these, five blocks have been relinquished by ONGC. Besides, ONGC has acquired one more block in deep water from Cairn energy of UK, allocated under first round of NELP.

"Expenditure incurred by ONGC in NELP exploration blocks so far is about Rs 3,012.70 crore. The total plan expenditure of ONGC in 2005-06 on survey, drilling, capital expenditure, R&D and integration projects was Rs 11,421.04 crore," he said.

ONGC has notified discoveries in deep-water block, KG-dwn-98/2, the block it acquired from Cairn.

To another question, Patel said 12 new oil and gas discoveries have been made by ONGC, Oil India Ltd and private companies during 2006-07.

ONGC has made three gas discoveries - Deloli in Cambay Basin, Adichapuram in Cauvery on-shore and KG-Dw-S-1 in kg deep-water.

ONGC to Take Strategic Partner in its Dahej Gas-Processing Project

 

In the wake of strong equity interest being shown by global players, state-owned Oil and Natural Gas Corporation (ONGC) is likely to take a strategic partner in the second stage of its gas-processing project at Dahej in Gujarat, being implemented at an investment estimated at Rs 13,600 crore. ONGC is implementing the project through a special purpose vehicle- ONGC Petro-additions Ltd (OPaL) and the strategic partner could join as the technology provider or investor, for the project that will be commissioned around mid-2010. Discussions are at a preliminary stage, with ONGC’s equity investment in the project estimated to be limited to Rs 992 crore.

 

The company is weighing the option due to interest shown by global majors, technology providers and financial institutes. Japanese giants Mitsui Chemicals and Mitsubishi Chemical Corporation, Korean players and a Swedish technology provider, are among the companies which have shown interest in taking equity in the project.

 

ONGC is to construct a plant to extract C2-C3 (ethane, propane) from LNG imported by Petronet LNG Ltd from Qatar, which in turn will form the basic feedstock for the petrochemical complex to be built through an SPV. The turnkey contract for the C2-C3 extraction project has been awarded to Toyo Engineering and the plant will be completed by May 31, 2008. Project management Consultant for the project is the UK-based Foster Wheeler Energy Ltd.

 

The complex comprises of 1.1 million tpa ethylene capacity dual feed cracker, along with associated units and polymer plants, to manufacture HDPE, LLDPE, PP and Styrene Butadiene Rubber.

 

Iran Invites RIL to set up Refinery, Gas Project

 

Iran is planning a massive expansion of its refining infrastructure and has called on India’s No 1 private sector company Reliance Industries (RIL) to set up a greenfield refinery complex and a gas-to-liquid (GTL) plant in the country.

 

The move is aimed at increasing production of refined products, especially gasoline, because despite being the world’s No 4 oil producer, Iran is the second largest importer of gasoline (over 40% of its total consumption) due to refining capacity constraints.

 

A high level delegation from Iran led by the energy department head had visited India last month. Members of the delegation held meetings with Reliance officials to discuss the proposal. M Marvi, head of energy department, technology co-operation office, Iran said, “We have discussed the proposal to set up a refinery complex and a gas to liquid plant with RIL. Their response was encouraging.” He refused to divulge any details including the proposed investments in the ventures.

 

Sources confirmed the meeting of Iranian delegation with Reliance international operations president Atul Chandra. RIL, which operates a 33 mmtpa (metric million tonnes per annum) refinery in Jamnagar, is in process of setting up another 27 mmtpa refinery through its subsidiary Reliance Petroleum.

 

The new refinery, coming up as an SEZ project, is expected to commence production by the end of 2008. RIL officials declined to comment on the issue. When asked about the capacity of the proposed refinery, Mr Marvi said, “It would be capable of processing at least one lakh barrels of crude oil per day.”

 

Analysts believe RIL is the preferred choice for Iran because of its timely execution of mega projects like building complex refineries capable of processing various kinds of crude. Iran is looking on the gas to liquid technologies because it is the second largest gas producer in the world after Russia with 26 trillion cubic meters (TCM) of proven gas reserves.

 

Gas derived liquids being free from sulfur, aromatics and metals will help the refineries in meeting new guidelines for cleaner fuels and environmental standards.

 

   INDONESIA

Indonesia Awards 18 New Oil and Gas Contracts via Direct Offer

The Energy and Mineral Resources Ministry said it has awarded 18 new oil and gas contracts to eight consortia and 10 individual contractors, via direct offer.

The contractors include the CNOOC-PT Gregori Gas Perkasa consortium, Star Energy Holdings Ltd., the ConocoPhilips-Statoil ASA consortium, Pearl Oil, the Japex-Premier Oil-Kufpec consortium; and the Transworld Exploration Ltd, Indoreach Exploration Ltd, Mitra Energy Ltd consortium.

The ministry said in a statement that the contractors plan to invest a combined $235.79 mln on exploration activity. They must pay a total of $31.45 mln in signature bonuses, or advance payments, for the rights to develop their allocated exploration areas within 30 days of signing their contracts.

The government offered 21 blocks through the direct offer system. It drew 23 bidding documents but only 18 met the requirements.

Under direct offer arrangements, the interested parties propose the blocks they want to bid for, and are automatically awarded the site if no other investor expresses interest.

            MALAYSIA

Power Tong Delivered to Murphy Oil for Offshore Malaysia Project

Lafayette based Frank’s Casing Crews and Rental Tools, Inc. recently delivered the Genesis 7000H power tong to Murphy Oil for use on the Kikeh Project offshore of Malaysia.

The new tong was designed and purpose built for Murphy and will be used to make up the company’s threaded drilling risers. Working under a short timeline the tong had to go from concept to finished product in less than six months. Material shortages and a 300,000 ft. lb. Torque requirement added to the challenge.

The Genesis 7000H dubbed Hercules, is track mounted remotely operated and will accommodate pipe sizes through 25” O.D. The gripping system exceeds the size requirements for maximum die penetration and torque output specified by Murphy. The rail system was custom built to interface with the customer’s Spar mounted rig. Make up torque will be monitored and controlled by Frank’s Data Trek computer system.

            MYANMAR

India-Singaporean Consortium Signs Oil, Gas Deal with Myanmar

An Indian and Singaporean consortium has signed a deal with the military junta in Myanmar to jointly drill for oil and gas off the country's west coast, state-run media reported December 8.

The contract signed December 6 between the consortium of Gail India Ltd. and Silver Wave Energy of Singapore and the state-owned Myanma Oil and Gas Enterprise calls for the companies to jointly explore, drill and produce oil and gas in offshore Block A-7 off Myanmar's western Rakhine coast.

Financial details of the contract were unavailable.

The contract is the latest evidence that India is stepping up its activity in neighboring Myanmar to counter the influence of its rival China.

India views Myanmar as a likely source to meet its burgeoning energy needs and is exploring the possibilities of a pipeline to supply liquefied natural gas. In 2005-06, India invested around US$30.6 million (€24.4 million) in Myanmar's oil and gas sector.

The moves by India to engage Myanmar has been widely criticized by rights groups like Human Rights Watch who fear efforts to invest in the country is helping prop up the repressive regime.

Since Myanmar liberalized its investment code in late 1988, it has attracted its largest investments mostly in the energy and oil and gas sectors.

More than half of cumulative investment comes from fellow members of the Association of Southeast Asian Nations, which also includes Brunei, Cambodia, Laos, Vietnam, Indonesia, the Philippines, Singapore, Malaysia and Thailand.

Myanmar Oil, Gas Sector Attracts more Foreign Involvement in '06 

 With the development in oil and natural gas sector, Myanmar has attracted foreign involvement in oil and gas exploration in the country from as many as six countries' oil companies in a single year of 2006 which represent Thailand, Malaysia, Russia, Australia, India and Singapore.

The involvement of Thailand's PTTEP in two more blocks-M- 7 and M-9 in the Mottama offshore areas early this year under contract has brought the total number of blocks which the Thai company involved to five with other blocks known as M-3, M-4 and M- 11.

Meanwhile, the PTTEP announced in August the discovery of a new gas source at the Zatila-1 well in the Mottama offshore block M-9 with a significant amount being estimated.

Besides, the Malaysian company, Petronas, also planned oil and gas exploration at three more available blocks M-16, M-17 and M-18 off Myanmar's southern Tanintharyi coast in addition to M- 15.

This year was signified by the involvement for the first time of an oil company from Russia in cooperation with Myanmar and India to explore oil and natural gas at a block lying off the Mottama offshore area.

Under a production sharing contract initiated in September by the JSC Zarubezhneft Itera Oil and Gas Company of Russia, the Sun Group of India and the state-run Myanmar Oil and Gas Enterprise (MOGE), the three companies will carry out the undertaking at block M-8 in the offshore area.

Moreover, an Australian company also reached a contract in November with the MOGE to conduct oil and gas exploration and production in the country's Yetagun gas field (east block) off the southern Tanintharyi coast.

With gas reserve estimated at 3.946 trillion cubic feet (TCF) or 111.738 billion cubic-meters (BCM) and a sale reserve of 2.437 TCF, the Yetagun gas field project has already involved PTTEP (Thailand), Petronas (Malaysia), Nippon (Japan) and MOGE (Myanmar), of which the Petronas possesses the largest share with 56.66 per cent, while Myanmar's state-run Oil and Gas Enterprise 15 per cent, PTTEP of Thailand and Nippon of Japan 14.17 per cent each.

In the latest development, GAIL of India and Silver Wave Energy of Singapore signed a production sharing contract with Myanmar this month to explore oil and natural gas at Block A-7 in offshore area of Myanmar's western Rakhine state.

            NEW ZEALAND

New Zealand Oil and Gas Bid Wins South Islanders Support

New Zealand’s South Islanders may have caught the exploration bug with strong support for an A$20 million (NZ$23m) offer of shares in a small oil and gas explorer focusing on Southland.

L & M Petroleum's offer of 100 million shares at A20 cents each closed fully subscribed just before Christmas. The minimum parcel was 10,000 shares costing A$2000.

L & M Petroleum managing director John Bay said about 45 per cent of the shares - nearly $9 million - was bought by New Zealanders, a further $10 million by Australians and about $1 million by British investors.

"I was told there was very strong support from the South Island," Bay said December 26. The shares will be listed on the ASX and NZX.

L & M Petroleum did roadshows for brokers in Invercargill, Queenstown, Gore, Dunedin and Christchurch and for the public and Venture Southland in Invercargill.

Bay said if the company made a large oil and/or gas find it would bring substantial economic development and employment to the region.

L & M Petroleum is an offshoot of the L & M Group which has broader interests in gold, coal and coal-seam gas exploration. L & M Group's three main shareholders are Australian Geoff Loudon, who is well-known in the industry for the development of the Lihir goldmine in Papua New Guinea, and a Swiss and a Hong Kong investor.

The money raised will be used for drilling 11 exploration wells in two onshore permits in Southland in the next two years.

It was a big drilling program for one company given that about 20 wells a year were drilled in New Zealand, Mr Bay said.

Nine wells would be drilled in the Waiau Permit (Permit 38226) west of Invercargill and the other two wells in Permit 38230 in the Te Anau area.

The company has four onshore permits and one offshore permit in Southland. It estimates a potential resource of 400 million barrels of oil and 194 billion cubic feet of gas in the onshore permit areas. "Resource" meant how much a geological structure could hold, while "reserves" were how much of the resource was economically recoverable.

It was "frontier" oil and gas territory because only three wells had been drilled there - by government-owned Petrocorp in the 1980s, Bay said.

L & M petroleum was likely to drill its first well in April at Eastern Bush. The kit such as the wellhead and pipes had been ordered from China. That well was being funded by state power company Mighty River which has partnered with L & M Petroleum for the well drilling.

John Bay is a former employee of Mighty River and put together a portfolio of oil and gas interests for the state electricity generator which has one power plant running on gas and interests in several exploration permits in Taranaki.

Bay said some equipment and services were not available in New Zealand and some services for the oil and gas business would need to be sourced from New Plymouth, the center of the industry in New Zealand.

But the company had used a rig from Timaru and would use local construction and transport.

            PAKISTAN

Jadoon says Great Potential Exists for Investment in Gas, Oil Exploration in Pakistan

Pakistan’s Federal Minister for Petroleum and Natural Resources Amanullah Khan Jadoon on December 7 said that there existed a vast scope for investors in oil and gas exploration activities and services sector.

He said this in his meeting with the Chairman of Polish Rigs International Company, based in Dubai, Chris Czetwertynski who called on him and discussed investment potential in the oil and gas sector.

Welcoming the Polish investor, the Minister said that the government has geared up the oil and gas exploration activities in the onshore and offshore areas aimed to exploit the indigenous hydrocarbon resources for meeting the growing energy demand of the country.

The minister invited Polish investment in the oil and gas development projects particularly of rigs to boost the exploration activities in the country.

Chris Czetwertynski on the occasion briefed the Minister about his company's worldwide activities in the exploration sector.

He said that Rights International was involved in rigs, pipeline machinery, and the manufacturing services sectors.

He said that the desire of his company was to invest in oil and gas development activities for their mutual advantage.

Director General Muhammad Naeem Malik and Managing Director of the Union Group of Companies, Zulfiqar Alim, were also present during the meeting.

             THAILAND

GS Caltex Strike Oil and Gas in Thai Test Wells

GS Caltex found oil and natural gas in their first test wells in onshore oil blocks in Thailand. The Korean refiner said that it struck two oil bearing zones in the L10/43 and L11/43 blocks with an estimated capacity of 1,254 barrels of crude and 720,000 cubic feet of natural gas per day. It was likely that the exploration of the L10/43 and L11/43 blocks would be successful as they are located alongside Thailand’s biggest onshore oil field Sirikit and their geological characteristics are similar to Pattani Basin, where an established Thai offshore oil field is located.

GS Caltex predicted that a huge amount of oil and natural gas will be found if oil wells are drilled, since the block covers a total 7,651 and several oil bearing zones are assumed to lie within the area. The Thai oil block is owned 30 percent by the Korean refiner and 70 percent by Japan’s MOECO or Mitsui Oil Exploration Company.

Thailand Seeks New Bids for Oil, Gas Sites

Thailand plans to open a new round of bidding for oil and gas exploration rights next year with incentives to lure investors from other more attractive fields, a top energy ministry official said.

About 60 onshore and offshore blocks, including those shunned in previous tenders, would be offered in the 20th round, Krairit Nilkuha, chief of the Department of Mineral Fuels, said.

"We hope to get everything done and issue a tender by the middle of 2007," Krairit said. "Then we will take applications from interested parties every month for a year."

The last round, which put up 82 blocks for tender, ended in June and attracted only 19 bidders who vied for 25 blocks, the department said in a statement. The Energy Ministry awarded rights to explore and produce 10 onshore and offshore blocks to eight bidders earlier this year. It planned to sign concession pacts with the winners of four other blocks on January 8.

The government planned to charge a lower royalty fee to enable Thailand to better compete against other fossil-fuel-rich Southeast Asian nations like Malaysia or Indonesia.

"We realize that our fields are inferior to those in Vietnam, Malaysia or Indonesia, so we are trying to compete by offering other incentives to attract more oil firms," Krairit said. "Major oil companies are not too keen on Thailand's upstream potential, so we have to rely on small firms."

Under the amended royalty law, expected to be passed by parliament in the first half of 2007, the current five percent to 15 percent fee based on production size would be cut to one percent for very small blocks yielding less than 10 barrels a day, he said.

The revised law would apply to new and existing producers.

Firms that share exploration and production facilities in the same area would also get a tax break, he said.

"Such offer will help small explorers reduce their costs and make Thailand more attractive," Krairit said.

Chevron Corp, which has bought up blocks from smaller firms in Thailand, was the only oil major to win concessions in last round of bidding, he said.

Among the 10 blocks granted earlier this year, a Chevron subsidiary won one block in the Gulf of Thailand and its joint venture with PTTEP (Thailand) won another in the Gulf.

Thailand is a net crude oil importer but it has abundant natural gas. In 2005 it produced 113,890 barrels per day of crude (bpd) and imported 762,121 bpd.

For natural gas, it consumed 565,854 barrels of oil equivalent per day (boepd), of which 154,188 boepd were imported, official figures showed.

Foster Wheeler to Construct Gas Separation Plant in Thailand

 

Foster Wheeler Ltd. announced that its subsidiary Foster Wheeler International Corporation (Thailand Branch), part of its Global Engineering and Construction Group, has been awarded a front-end engineering design (FEED) and project management consultancy (PMC) contract by PTT Public Company Ltd. for its sixth gas separation plant, GSP6, which will be located at Rayong, Thailand.

 

The terms of the contract were not disclosed, and the project was included in the company's third-quarter 2006 bookings.

 

GSP6 will have a capacity of 800 million standard cubic feet of natural gas per day and will produce ethane, propane, butane, liquefied petroleum gases and natural gas liquids. The products will be supplied to downstream petrochemical plants and to supplement the local market for domestic consumption. Residue gas will be sent to the natural gas distribution network.

 

Foster Wheeler's scope of work includes preparation of the invitation to bid package for the engineering, procurement and construction (EPC) contract, and the prequalification, evaluation, selection and supervision of the EPC contractor.

 

   3. EUROPE / AFRICA / MIDDLE EAST

            AUSTRIA

Siemens Supplies Equipment for West Austria Gas Pipeline

The Siemens Industrial Solutions and Services (I&S) Group has received an order from OMV Gas GmbH, a subsidiary of OMV AG, Vienna, to supply and install electrical equipment for expansion of the West Austria gas pipeline. The order is valued at around six million euros and completion of the project is scheduled for October 2007. OMV AG is the largest industrial enterprise in Austria to be listed at the stock exchange. Established in 1956, OMV is now the leading integrated oil and natural-gas corporation in central Europe. Its subsidiary, OMV Gas GmbH, operates a natural-gas pipeline network in Austria with a total length of around 2000 kilometers.

The transport capacity of the entire pipeline network is 44.5 billion cubic meters per year at the present time and is to be increased to 58.5 billion cubic meters by 2011. This will require expansion of the West Austria gas pipeline (WAG), which runs between the Slovakian border - starting in Baumgarten near Vienna - and the German border near Oberkappel. Within the framework of the "WAG +600" project, existing compressor stations will be expanded, new ones will be erected and new pipeline sections will be built parallel to the existing pipeline.

Siemens is to be supply the electrical equipment and field instrumentation for the Rainbach, Kirchberg and Baumgarten compressor stations, for the Kirchberg-Lichtenau and March-Baumgarten loops and for the valve and pig stations along the pipeline.

            NORWAY

Honeywell to Help Norsk Hydro Maximize Productivity on Offshore Rigs

Honeywell on December 6 announced it has won a contract with leading oil and gas company Norsk Hydro to supply Honeywell's Production Control Center (PCC) to their central onshore support center that remotely monitors its production in the North Sea. The order also includes offshore installation on the Njord platform.

The Honeywell solution will enhance Norsk Hydro's ability to monitor production and operations, including well performance, enabling the company to reduce costs, improve reporting and increase safety.

"An initial trial on our Troll B offshore platform confirmed that we could increase operational efficiency and reduce downtime by combining vital rig management and production applications into an automated system," explained Sverre Høysæter discipline manager at Norsk Hydro. "Honeywell's solution allows us to monitor separate process functions simultaneously, alerting us to potential issues so they can be dealt with quickly and accurately."

Honeywell's Production Control Center is specifically designed for offshore oil & gas operations and was selected after a successful pilot implementation on Norsk Hydro's Troll B platform. The solution helps improve total efficiency on Troll B by standardizing and simplifying work processes. The application will also ensure safety and includes environmental monitoring and compliance monitoring emergency shutdown systems, as well as safety related valves.

"Honeywell Production Control Center integrates separate process applications into one integrated system to enhance operations and asset efficiency," said Geir Simensen, manager, advanced solutions center of excellence, Honeywell Process Solutions. "The solution can incorporate production overviews, reports and operation management, while monitoring and optimizng turbines, safety valves and shutdown systems. By monitoring vital machinery, and sending alerts to remote experts, Honeywell's solution can significantly reduce maintenance downtime and costs."

Norsk Hydro operates 15 oil and gas installations, and its own production in 2004 averaged 572,000 barrels of oil placing it among the largest offshore companies in the world. Although Norsk Hydro's operations are centered on the Norwegian continental shelf, the company also produced oil and gas in Angola, Canada, Russia, Libya, and has activities in the Gulf of Mexico, Iran and Denmark.

Statoil Drilling for Oil and Gas in Controversial Barents Sea $9.25 Billion Snoehvit Project

 

The massive gas plant outside Hammerfest, once a lonely Arctic outpost with a dubious claim of being the world's northernmost town, is now the base of oil-rich Norway's latest energy drive.

 

It's a pioneering venture to extract natural gas in the fragile Arctic waters of the Barents Sea, which the Nordic country uneasily shares with its powerful neighbor Russia – and may contain billions of barrels more of yet-to-be discovered oil and gas.

 

"We are opening a new oil province," said Sverre Kojedal, of Statoil ASA. The state-controlled oil company is developing Norway's first Barents natural gas field, Snoehvit, which lies about 145 kilometers off the coast and is expected to come on line a year from now.

 

With the world's known petroleum resources drying up, the inhospitable waters of the Barents Sea are a new frontier in the search for oil and gas. But exploration is controversial, as Norway and Russia weigh the odds of hitting pay dirt against the potential damage to fragile Arctic ecosystems already under assault by global warming.

 

The area is one of the world's cleanest and richest fishing grounds, and has fragile cold-weather ecology – both of which environmentalists fear the hunger for oil could put at risk.

 

The World Wildlife Fund calls the Barents "Europe's last wild sea" and has warned that increasing oil activity, fishing, shipping, climate change and toxins "pose serious threats to the marine ecosystem and biodiversity."

 

The Norwegian government has slowly and cautiously opened up the remote Barents Sea to oil companies since the first exploration license was issued in 1984. Now, with oil prices at near record levels, the option of drilling in the Arctic waters has become an almost irresistible lure for developers in an energy-hungry world.

 

Just the Norwegian sector of the 1.4-million-square-kilometre Barents could hide as much as seven billion barrels of oil equivalent, according to the Norwegian Petroleum Directorate. The Russian side may have even more, and in between is a vast area of disputed ocean the two sides have been bickering over for 30 years, since Soviet times.

 

Exploration has already started, with Snoehvit being developed in the Arctic in waters off the northern coast of Norway kept ice-free by the warmth of the Gulf Stream. Snoehvit, which means Snow White, is also a technological pioneer, with all production equipment out of view on the bottom of the ocean, and remotely controlled from land.

 

The sprawling export terminal being built near Hammerfest, which is to come on line a year from now, will liquefy natural gas from Snoehvit and nearby finds to ship to markets in the United States and Spain from the first offshore field being developed in the Barents Sea.

 

The Italian oil company Eni SpA discovered oil and natural gas at another field, called Goliat, off the Arctic coast. Russia is developing the world's largest offshore natural gas field, Shtokman, off its own Arctic coast.

 

Norway is the world's third-largest oil exporter, but with North Sea resources dwindling, Norway hopes the $9.25 billion (U.S.) Snoehvit project heralds a new era of energy wealth.

            NORWAY / UK

North Sea Oil, Gas Field Closures to Cost Billions

It will cost $42 billion (21 billion pounds), in 2007 terms, to decommission the remaining oil and gas assets in the North Sea, with most of that being spent in Norway and the UK, according to a report by consultants Wood Mackenzie.

Of the total cost of retiring and dismantling the North Sea's oil and gas rigs, 48 percent will have to be spent in Norway and 40 percent by UK North Sea operators, the consultancy said in a statement on December 14.

"Under our current modelling, we anticipate the majority of future decommissioning expenditure to be between 2015 and 2031, with a plateau of spend of around 1.5 billion dollars per annum," Wood Mackenzie upstream analyst Malcolm Ricketts said.

Taxation and regulation issues could also push up decommissioning costs, Wood Mackenzie's report says.

Ricketts said North Sea operators could delay paying the costs of decommissioning by extending the economic life of existing fields. This could be done by acting as processing and transportation hubs for nearby oil and gas fields or through enhanced oil recovery -- using new techniques to wring remaining deposits out of old fields.

While 40 have already been abandoned, another 66 North Sea fields are being decommissioned or awaiting closure.

Statoil to Buy Norsk Hydro's Oil, Gas Division

Statoil ASA, Norway's state-owned oil company, said December 18 it has agreed to buy the oil and natural-gas division of Norsk Hydro ASA for nearly $30 billion in a deal that gives the company control of over about 70% of the country's petroleum output.

The combined company's oil and gas production is on track to top the equivalent of 1.9 million barrels of crude a day next year, with proven reserves totaling 6.3 billion barrels and operations in 40 countries.

The deal moves Stavanger-based Statoil another rung up the ladder among the world's biggest oil producers, closing in on such publicly traded heavyweights as BP Plc, Chevron Corp. and ConocoPhillips, which all pump about 2.5 million barrels a day. But it still has a long way to go to catch the likes of Exxon Mobil Corp., which currently produces about 6.5 million barrels a day. The linkage, forged with the blessing of the Norwegian government, also gives Statoil more clout in the global oil market, where nationally owned oil companies are increasingly formidable competitors in the scramble for untapped reserves beyond their own borders.

Norway, the world's No. 3 oil exporter after Saudi Arabia and Russia, is aggressively pursuing new production outside the North Sea. Statoil, which is 71% state-owned, has been adding overseas oil fields to its portfolio, including offshore acreage in the Gulf of Mexico, to replace reserves on its North Sea fields, several of which are already in decline.

Oslo-based Norsk Hydro has been pursuing much the same strategy to boost flagging output at home, including outright acquisitions. In 2005, Norsk Hydro snapped up Spinnaker Exploration Co., which operated in the Gulf of Mexico, for $2.6 billion.

Norsk Hydro, 44% state-owned, and Statoil burst on the oil scene in the 1970s following the discovery of oil in the late 1960s on Norway's continental shelf, an area where the two companies quickly established their expertise in offshore development projects. The combined company puts Statoil in line to become the biggest operator of offshore oil rigs in the world.

Shares of Statoil rose 3% at 178.25 Norwegian kroner ($28.66), with Norsk Hydro jumping 23.5% to 193 kroner in Oslo trading. And on the New York Stock Exchange, Norsk Hydro rallied while Statoil traded lower.

Under the deal, Statoil shareholders will own 67.3% of the new company, swapping their shares on a one-for-one basis.

Norsk Hydro shareholders will receive 0.8622 share in the new company for each Norsk Hydro share, giving them a total of 32.7% of the new company.

Jens Stoltenberg, Norwegian prime minister said 'The government sees the recommended merger as industrially and strategically well founded.'

Assuming the deal is completed with Statoil, Norsk Hydro will return to its industrial roots, operating as an independent aluminum producer.

Analysts at Citigroup said the deal implies a valuation for Norsk Hydro's oil and energy business of around 189 billion kroner ($30.4 billion).

Analysts at Merrill Lynch said they estimated the deal represents a roughly 20% premium for Norsk Hydro shareholders, while it would dilute Statoil earnings per share by around 8% in 2007 and 10% in 2008.

This earnings dilution was balanced by the announcement of a dividend of 9 kroner for Statoil shareholders, which was around 32% above Merrill Lynch's forecast dividend.

"Overall, we think there is compelling strategic logic for this move given the business overlap and complimentary growth strategies being pursued by the separate businesses," Merrill Lynch analyst Alastair Syme said in a note to clients.

The companies said the deal, which is expected to close in the third quarter of 2007, is driven by an ambition to grow in Norway and internationally in what they said is "an increasingly challenging international landscape."

"By combining forces, the new company will be a highly competent and financially strong Norwegian-based energy champion, well positioned to ensure continued domestic excellence and pursue international business opportunities for long-term growth," the companies said in a joint statement.

The deal must be agreed by shareholders, including the Norwegian state.

"The new company will create huge values for Norway. And the merger is an excellent foundation for meeting the challenges facing the oil and gas industry," said Norwegian Prime Minister Jens Stoltenberg in a statement.

"The government sees the recommended merger as industrially and strategically well founded," he added.

Stoltenberg added the government intends to increase its stake in the merged group to around 67% from about 62.5%.

The companies said that Helge Lund, the 44-year-old president and CEO of Statoil, would be named as president and CEO of the new firm.

Eivind Reiten would remain president and CEO of Norsk Hydro and would also become chairman of the new company. See more global markets coverage. 

            POLAND

Poland to Build $458.9 Million Gas Terminal

Poland's oil and gas mining company has said it will build a gas terminal in Swinoujscie, in the northwestern part of the country by 2011.

The company, known by the initials PGNiG, said December 17 the cost of the investment was estimated at $458.9 million a news agency reported.

Polish Economy Minister Piotr Wozniak called the decision PGNiG's best.

The company chief executive officer, Tadeusz Zwierzynski, said Swinoujscie was picked because of the quick availability of land, shorter sea route and the fact that the country's northwest has a large demand for gas.

The terminal is expected to be ready by 2011, the PAP news agency said.

            ROMANIA

Linde to Build LPG Recovery Plant for Petrom S.A. in Romania

The technology company The Linde Group has received an order from Petrom S.A. for the lump sum turn-key installation of an LPG (Liquefied Petroleum Gas) recovery plant in Constanta, Romania. The contract is worth in excess of 70 million euro. Petrom S.A. is the largest corporation in Romania and the largest gas and oil producer in Southeastern Europe. In December 2004, Petrom was privatized becoming part of the OMV group, who is the majority shareholder.

 "This is an important step in the development of the Eastern European market for the Linde Engineering division", says Dr Aldo Belloni, member of the Executive Board of The Linde Group. "Especially in Romania, joining the European Union in 2007, we see great potential for further highly interesting projects. By applying the latest European codes and standards we are aiming to set a new benchmark in Romania's petrochemical industry."

 The new LPG recovery facility is scheduled for completion in the second half of 2008 and will replace the existing older-generation plant. Using state-of-the-art technology the new plant will allow for increased capacity, recovery rate and energy efficiency. Each year more than 100,000 t of LPG product will be separated from natural gas with a recovery rate of up to 99 %. The LPG is transported 300 km via rail to a Petrom-owned refinery and petrochemical complex for further processing. The treated light natural gas is supplied as sales gas to the national gas distribution system.

        EGYPT

 

Gazprom Talks Natural Gas Cooperation with Egyptian Officials

 

The head of Gazprom discussed with high-ranking Egyptian officials December 4 prospects for Russian-Egyptian cooperation in the natural gas sector within the framework of a joint memorandum, the energy giant said.

 

In March 2005, Gazprom, as part of its overseas expansion, signed a memorandum of understanding with the Egyptian Natural Gas Holding Company (EGAS) that provided for Gazprom's possible involvement in existing projects for hydrocarbon production, transportation, processing and marketing, including liquefied natural gas.

 

During his official visit to Egypt, Gazprom CEO Alexei Miller held meetings with Egyptian Petroleum Minister Sameh Fahmy, Foreign Trade and Industry Minister Rashid Mohamed Rashid and EGAS CEO Sherif Ismail.

 

Gazprom said in a statement that the officials discussed in particular the possible involvement of the Russian energy giant in projects for the exploration and production of oil and natural gas in Egypt, production and delivery of LNG within the country, construction of gas transportation and distribution systems and other issues.

 

"The organization of Egyptian [natural] gas exports on the markets of Middle East countries was pronounced to be one of the promising directions of [mutual] cooperation," the statement said.

 

Egypt, which has proven natural gas reserves of 1.89 trillion cubic meters and oil reserves of about 500 million metric tons (3.68 billion barrels), produced 41 billion cubic meters of natural gas in 2005, putting about 8 billion cubic meters of the total volume for export, and 33 billion cubic meters for domestic use.

 

The country began exporting gas via the Egypt-Jordan pipeline in 2003 and commissioned its first LNG plant in 2004. It is also ranked fifth in the world in terms of LNG exports.

Russia, Egypt Agree on Joint Oil, Gas Exploration Projects

Russia and Egypt have signed to explore natural gas and oil in Egypt, holder of Africa's third largest reserves.

RIA Novosti reports Russian state-owned gas monopoly Gazprom reached a deal with Rashid Petroleum Co. and the Egyptian Natural Gas Holding Co., during recent talks in Moscow.

The sides also discussed sales of Russian oil-and-gas equipment to Egypt, a Gazprom statement said. The three companies will work together to search for and explore Egypt's oil and gas reserves.

Egypt has about 1.89 trillion cubic meters of gas reserves, third in Africa behind Algeria and Nigeria.

Gazprom has been successful in cornering Russia's natural gas market, which is the largest set of reserves in the world.

It recently paid nearly $8 billion for a majority stake in Sakhalin Energy, which was completely controlled by Royal Dutch Shell and Japanese companies Mitsui and Mitsubishi.

This occurred after a drawn out battle with Russian complaints that8u the project was billions over budget and violated environmental regulations.

Now Gazprom is looking to increase its presence in both upstream and downstream operations outside Russia.

            EGYPT / CONGO

Saipem Awarded Egypt and Congo $380 Million Offshore Drilling Contracts

Saipem has been awarded three new offshore drilling contracts, one in Egypt and two in Congo, for a total value of USD 380 million. The Egyptian contract has been assigned to Saipem by the Burullus Gas Co. and its shareholders BG Group, Petronas and the Egyptian Natural Gas Holding Co. The contract will last two years and involves the charter of the semi-submersible, Scarabeo 6. Drilling operations will be executed off the coast of Egypt between the third quarter of 2007 and the third quarter of 2009. Scarabeo 6 is a third generation semi-submersible rig capable of operating in water depths of up to 780m and of drilling to depths of up to 7500m.

            LIBYA

Libya, Norway Review Oil, Gas Ties

Officials of Libya and Norway have met to review co-operation between the two countries in oil and gas prospecting and production.

Choukri Ghanem, secretary of the Libyan Oil Company (NOC) management committee and Norwegian Oil and Energy Minister Odd Roger Enoksen, on December 12 co-chaired the meeting, official sources said.

During the meeting, Enoksen highlighted the importance of joint investment and his country's desire to enhance ties with Libya as well as explore opportunities for Norwegian companies in oil technology transfer and domestication in Libya.

For his part, Ghanem stressed the need to enable competent nationals to work in Norwegian oil companies operating in Libya and to grant them the same privileges accorded other nationals in these firms.

The members of the NOC management committee, the delegation accompanying the Norwegian minister as well as the heads of Norwegian companies operating in Libya took part in the meeting.

            NAMIBIA

BHP Billiton Is Awarded Namibian Offshore Oil and Gas License

BHP Billiton Ltd., Australia's largest oil and gas producer, acquired a 75 percent interest in Namibia's Northern and Southern offshore blocks, according to PetroSA, which got a 10 percent stake.

Mitsui Atlantic Energy acquired a 15 percent share in the blocks, PetroSA, South Africa's state-owned oil and gas company, said in an e-mailed statement December 11. BHP Billiton is licensed to operate the blocks which cover 10,844 and 18,010 square kilometers respectively, PetroSA said.

While the blocks are located in the ``immature'' Orange Basin, ``significant'' gas discoveries on the shelf area of the basin prove that ``a working petroleum system exists,'' PetroSA said. The acquisition is PetroSA's second exploration venture in Namibian waters, it said.

          NIGERIA

Nigeria Wants more Oil, Gas Investments

Nigeria has called for more investments in the exploration and exploitation of its new oil and gas discoveries, which it described as “world-class potential”.

The Minister of State for Petroleum Resources, Dr Edmund Daukoru, made the call in a paper he sent to the African Oil and Gas forum, which ended the weekend of December 16 in Bethesda, MD.

“World class giant oil and gas fields have been found in the Niger Delta Basin and the Gulf of Guinea. So we have many open blocks available for interested investors to develop,” Daukoru said.

Represented by Dr Fabiya Amakiri, the Group General Manager of Liquified Natural Gas and Power Division in the Nigerian National Petroleum Corporation (NNPC), he said that the current estimated potential of the basin is put at 180 billion barrels.

He said that between 2005 and 2008 and said investment level in the country’s oil and gas industry, have been rising significantly, saying “$28 billion is envisaged for the offshore sub-sector and 6.4 billion dollars for the onshore sub-sector”.

On natural gas development, the minister noted that in the upstream operations about 12 billion dollars was projected in investments and $20.3 billion was expected to accrue from the downstream operations.

Daukoru also said that a lot of investment opportunities abound in the sector, citing millions of dollars earmarked for engineering designs and 2,000 job openings for skilled design engineers within 15 years as one of them.

Others, he stated, have more than eight billion dollars earmarked for the fabrication of materials in the upstream sub-sector and 10,000 new jobs in the next three years, as well as opportunities for expansion and fabrication of site yards and facilities.

He said that there were also opportunities worth billions of dollars for new assembling plants and local industry expansion and high yield businesses for banks and insurance companies to finance and insure in the sector, respectively.

According to him: “To achieve the desired investments; the government is providing the required conducive investment climate, including the appropriate fiscal and regulatory framework and the removal of identified barriers to bolster investments”.

          AFGHANISTAN

U.S., Russia to Explore Oil and Gas in Afghanistan

A Russian and an American firm have forged an alliance to jointly explore Afghanistan's oil and gas resources. The Professional Construction Services Network Nevada, a U.S.-based construction and engineering firm has teamed up with Russia's Public Joint Stock Company or RUMO.

Theresa Scopa, vice president of PCSN said RUMO is one of the leading builders of gas and oil field and transport equipment in the world.

A joint statement by the new partnership said the U.S. and Russian companies have identified two Afghan private companies, namely GDC Construction Company and Barakat Trading Group, would be their local partners for the new endeavor.

But the statement did not provide details on the joint venture as well as details of the production of gas and oil in northern Afghanistan. PCSN said it is proud of the partnership between the Afghan/American/Russian companies to lead Afghanistan to become self-sufficient in energy and bring better life to the Afghan people.

Surveys conducted by the former Soviet Union indicated that huge oil and gas reservoir are in Afghanistan's northern provinces.

            KAZAKHSTAN

China, Kazakhstan to Cooperate on Oil, Gas Projects

China and Kazakhstan will expand collaboration in the oil and gas sector, according to an agreement in Beijing signed by President Hu Jintao and his Kazakh counterpart Nursultan Nazarbayev, the official China Daily reported December 21.

A 13-page document on "China-Kazakhstan Co-operation Strategy for the 21st Century" agrees to support cross-border construction of oil and gas pipelines and work closely on oil and gas processing, building new power facilities, and providing electricity to third countries, said the daily.

It encourages mutual investment and pledges to create favorable conditions for enterprises that invest in industries such as machinery manufacturing, foodstuffs and textiles. The two sides will try to expand trade volume to USD 10 billion by 2010 and to USD 15 billion by 2015.

"The two sides will continue to have co-operation between law enforcement departments to fight against drug smuggling, weaponry, and explosives trafficking, money-laundering, and transnational organized crime," the document says. Both sides also agreed to boost the volume of rail freight and explore new railway routes between the two countries, and simplify formalities at customs and address any problems in import-export inspections.

The two countries also signed 12 documents on the economy, energy, finance, education, and culture, including one on the launch of a Confucius Institute in Kazakhstan.

China and Kazakhstan are members of the Shanghai Co-operation Organization, a regional body which also groups Kyrgyzstan, Russia, Tajikistan and Uzbekistan.

          RAJASTHAN

Cairn Plans $100 Million Tender for Three Onshore Oil Rigs

Cairn Energy plans to float a tender for three onshore drilling rigs for its oil fields in Rajasthan at $100 million, which is part of the $500-million investment that it has lined up for development and construction work for the next year at these fields. 

While construction work is expected to begin early next year, Cairn expects the rigs to arrive later in the year. 

The three rigs will initially be deployed for drilling 30 oil-producing wells at the Mangla field, the company’s spokesperson David Nisbet said. 

In 2009, when production begins, another 115 wells will be drilled at Mangla. The total number of wells will go up to 160. If need arises, 65 more wells will be drilled. 

Peak production from the Mangla field alone is estimated to be 1,00,000 barrels per day (bpd), while that from the entire Barmer area is 1,50,000 bpd. 

The company already has two rigs working at the Rajasthan oil fields. “The rigs will initially be deployed at the Mangla oil field. It will then be extended to the other three fields,” Nisbet said. 

  Drilling on the Rajasthan fields will begin once the rigs arrive during the later half of 2007. “All work on the fields will take off soon. We are on time to start producing crude oil from 2009 onwards,” Nisbet added. 

Cairn’s total investment in the Rajasthan oil fields will be $1.5 billion over a three-year period. This includes $850 million that 14 international banks, including the International Finance Corporation, has extended for the oil fields. Cairn will pump in another $600 million from its initial public offer proceeds. 

Earlier, there have been reports about Reliance Industries’ natural gas production from its fields in the Krishna-Godavari basin being delayed due to unavailability of rigs. 

When asked if Cairn too expects to face a similar shortage, Nisbet said that their rigs are going to be onshore ones and hence are easier to procure and set up compared with the offshore rigs that Reliance is seeking. “We are confident of having the rigs by next year,” he added. 

The company also added that it is actively considering entering the midstream sector. It is in talks with the Indian government on the possibility of laying a pipeline for evacuating the crude oil. 

“There are many refineries in the north-western region of India. Laying a pipeline is possible to any one of these. We are currently undertaking feasibility studies,” Nisbet said.

          RUSSIA

Lukoil to Sell Stake in Caspian Unit to Mittal Investments

Lukoil, Russia's biggest oil company, said on December 12 it had agreed to sell a half share in its Caspian Investment Resources subsidiary to Mittal Investments, part of the Mittal Group owned by steel tycoon Lakshmi Mittal. The unit produces oil at five fields in Kazakhstan and has recently won exploration rights in the Caspian Sea.

Lukoil said Mittal Investments would pay $980m for a 50 per cent share in Caspian Investments Resources and assume responsibility for $160m-worth of the subsidiary's debt.

The deal, to be closed in early 2007, brings Mittal, which already owns huge steel and coal interests in Kazakhstan, into the Central Asian republic's highly prospective oil business.

Caspian Investment Resources, formerly known as Nelson Resources, was acquired by Lukoil in 2005 for $2bn. The company has 260m barrels of oil reserves in west Kazakhstan.

Lukoil said Caspian Investment Resources had signed an agreement on November 2nd with KazMunaigas, the Kazakh state oil company, to acquire a 25 per cent interest in the South Zhambay block in the north Caspian Sea near the offshore boundary with Russia.

Lukoil said Repsol, the Spanish oil company, was party to the agreement, which requires various government approvals before coming into force.

Repsol has been negotiating for a 25 per cent share in a production sharing contract at South Zhambay for some time.

Repsol said, "It is progressing very fast. We think a deal may be completed by the end of the year."

KazMunaigas is entitled by law to a minimum 50 per cent stake in all new production sharing contracts in offshore Kazakhstan.

Lukoil is involved in thirteen oil projects in Kazakhstan, far more than any other foreign company. The Russian company has invested $4.5bn in the republic's oil industry.

Kazakhstan plans to triple oil production by 2015. The Kazakh sector of the Caspian Sea is one of the most promising oil producing regions in the world.

Mittal bought the Temirtau steel works and two coal mines in the Karaganda region of central Kazakhstan in 1995 and is one of the biggest foreign investors in the republic.

Mittal has been pursuing international oil opportunities in a partnership with India's Oil and Natural Gas Corporation (ONGC) since 2005.

Kazakh oil officials said ONGC was close to finalizing an agreement to explore on the Satpayev block in the Caspian Sea.

Russia May Impede Oil and Gas Production Growth in Ex-Soviet Neighbors

Russia’s attempts to increase its control over oil and gas assets may impede production growth in former Soviet Union countries including Kazakhstan and Azerbaijan, the International Energy Agency (IEA) said in its monthly report that was published on Wednesday, Dec. 13.

Geopolitical factors and slow access to infrastructure may limit former Soviet Union states’ contribution to growth in oil output, the IEA said. The report stated that “future access to Russian reserves and the legal operating framework remain uncertain.”

Former Soviet Union countries may increase output by 4 percent, or 490,000 barrels a day, next year, compared with a gain of 400,000 barrels a day, or 3.4 percent, this year, the IEA said.

Russia and Azerbaijan will lead growth in production, according to the Paris-based agency.

At the same time Russia’s threat to close an export terminal linked to the pipeline run by the Caspian Pipeline Consortium, alleging license irregularities, has raised concern that production growth may slow. Russia is blocking a plan to expand the 680000- barrel-a-day pipeline from Kazakhstan to Novorossiysk, seeking 40 percent rate increases and faster loan repayments.

Former Soviet Union countries, including Russia, pumped about 9.4-million barrels a day in November, the IEA said.

Gazprom Seeks 50 Percent of Shell Gas and Oil Project

Gazprom hopes to buy up to 50 percent of Royal Dutch Shell’s $20 billion Sakhalin Island development, Dmitri A. Medvedev, Russia’s deputy prime minister, said December 12, signaling a large future role for the company in the venture.

After months of pressure from Russian environmental regulators, Shell offered to sell a stake in its oil and gas development to Gazprom, which is controlled by the Russian government. Shell effectively agreed to renegotiate the terms of its 1990s investment in Russia under pressure from the government of Vladimir V. Putin.

Mr. Medvedev, who is also chairman of Gazprom’s board, told journalists at a briefing that company executives and Kremlin officials were meeting and suggested that the talks were focusing on a buyout price.

“The format of the final agreements has not taken shape,” Mr. Medvedev said. “It is very important to estimate, before entering the company, the money that has to be paid, the expenditures that Shell had in the course of the implementation of Sakhalin 2. All these issues are at the stage of active discussion.”

Mr. Medvedev offered no specifics and did not say how much of Gazprom’s future stake would come from Shell, which owns 55 percent of Sakhalin 2 and operates the venture, and how much from two Japanese trading companies, Mitsui and Mitsubishi, which own the remainder.

A report by a businessman affiliated with Gazprom, said that for Gazprom to own 50 percent, Shell would offer 30 percent and Mitsui and Mitsubishi would each sell 10 percent.

Shell has offered 25 percent plus some measure of operational control for Gazprom, said a political risk adviser representing one of the companies, who was not authorized to speak publicly. This was not immediately accepted, he said. Neither company would comment openly on the negotiations.

For a second day, a Shell spokesman characterized the talks with the phrase “positive and constructive.”

Russia to Create Giant Company to Control Oil and Gas Production at Sea Shelf

Russian daily Kommersant reported on Dec.11, that the meeting of the Russian Security Council chaired by President Putin on December 9 developed a new strategy to give the government control of oil and gas extraction on the Russian sea shelf. The strategy calls for an end to joint-venture projects with foreign companies and renewed focus on Russia’s homegrown strengths.

The paper reported that the Russian authorities may combine state-controlled giants Gazprom, Rosneft and Zarubezhneft into a single government monopoly that would take over the shelf production. This means new inspections and headaches for foreign operators already working at the Russian shelf off the coast of Sakhalin Island in the Far East. The two best-known projects in the area are led by Royal Dutch/Shell and ExxonMobil. The projects are developed within the framework of production-sharing agreements signed in 1990s.

Natural Resources Minister Yuri Trutnev and Industry and Energy Minister Viktor Khristenko say that the Russian shelf holds more than 100 billion tons of potential fuel. By 2020-2030 these reserves will be the country’s main source of oil and gas.

According to the paper’s information, the first item on the government agenda is a careful inspection of all licenses previously issued for the development of shelf fields. The authorities will also review the extent to which the operators of those projects are following the conditions of their licenses. The main operators in question are the foreign owners of licenses for projects on Sakhalin Island where extraction has already begun. Rosneft, for example, holds only a 20 percent stake in the Sakhalin-1 project: the rest of the shares are owned by ExxonMobil (USA), ONGC (India), and Sodeco (Japan). The operator of the Sakhalin-2 project is Shell (55 percent); no Russian companies are involved in that project at all. All of the operators of these projects are now being warned that their extraction of oil and gas from the shelf is not compatible with Russia’s national interests.

The second question on the agenda concerns the consolidation of shares and licenses by large Russian companies. Gazprom already owns the license for the Prirazlomnoe and Shtokman oil fields, while Rosneft, in partnership with the Finnish company VR and Chinese and Korean companies, is developing the Sakhalin-3, Sakhalin-4, and Sakhalin-5 projects.

It is likely that the Security Council will charge Gazprom, Rosneft, and Zarubezhneft with creating a single government-owned company for oil and gas extraction on the Russian shelf. The question of the creation of such a company was first mooted in 2005, and the Natural Resources and Industry and Energy Ministries have often said that developing the shelf would be impossible without foreign investment but that Russian holdings have a hard time competing with foreigners on the Russian shelf. The new giant company would solve the problem by absorbing and channeling foreign participation in the development of the shelf.

The third issue is the demarcation of boundaries with Norway in the North Sea, with Ukraine in the Sea of Azov, and in the Caspian Sea. In the opinion of specialists from the Norwegian companies Statoil and Hydro, the “grey zones” of the Barents Sea hold large reserves of oil and gas, but the lack of clear boundaries makes studying and developing them impossible for either side.

             TATARSTAN

Foster Wheeler Receives Delayed Coker Award for Tatarstan Integrated Refining and Petrochemical Complex

Foster Wheeler Ltd. announced that its subsidiary Foster Wheeler USA Corporation, which is part of its Global Engineering and Construction Group, has been awarded a contract by CJSC Nizhnekamsk Refinery to provide a process design package for Foster Wheeler's Selective Yield Delayed Coking (SYDEC(SM)) process. The coker will be part of a new integrated refining and petrochemical grassroots complex to be constructed at Nizhnekamsk, in the Republic of Tatarstan, which is part of the Russian Federation.

The terms of the award were not disclosed. The project was included in the company's third-quarter bookings for 2006.

In addition, Foster Wheeler has recently announced that, under a separate award from CJSC Nizhnekamsk Refinery, its Engineering and Construction subsidiary in France will lead the development of a complete front-end engineering design for the new integrated complex.

            TURKMENISTAN

Turkmenistan Wants to Construct Gas Pipeline to Europe

Turkmenistan's President Mr Saparmurat Niyazov has offered Russia and Germany the opportunity to construct a gas pipeline to Europe that will be able to ship up to 40 billion cubic meters of gas a year. Mr Niyazov is counting on the Lolotan field to double its gas output, as its reserves are estimated at 7tcm, twice as much as in Shtokman.

            UZBEKISTAN

China's CNPC Unit wins Oil and Gas Exploration License in Uzbekistan

 

China National Petroleum Corp, the country's largest oil and gas producer, said its wholly-owned unit China National Oil and Gas Exploration and Development Corp (CNODC), has secured a license from state-owned Uzbekneftegaz to undertake oil and gas exploration in Uzbekistan.

 

CNPC said in a statement posted on the website of Ministry of Commerce that CNODC will undertake wildcat oil and gas exploration on five blocks with the agreement running from Dec 22, 2006 to Dec 21, 2011. Operations will actually start on April 2007.

The five blocks are in the Ustyurt Bukhara-Khiva and Farg'ona basins, it said.

 

In June 2004, CNPC signed an agreement with Uzbekneftegaz to boost cooperation in the oil and gas sector.

 

Under the agreement, CNPC plans to invest over 200 mln usd to drill 15 wells in Uzbekistan within five years.

 

CNPC and Uzbekneftegaz will sign a new agreement to set up 50-50 joint venture after commercial viability is established, it added.

 

        MIDDLE  EAST

GE Oil & Gas Expands Product Portfolio in the Middle East to Boost Energy Efficiency

GE's Oil & Gas business is expanding its broad portfolio of products and services to help meet the pressing energy and environmental needs of customers in the Middle East.

The region represents a high-growth, emerging market for GE with orders in this market worth US$8 billion in 2005, up from US$1 billion in the late 1990s.

At the recent Gastech 2006 expo held in Abu Dhabi, GE Oil & Gas representatives highlighted the company's work in the region to help upgrade the area's energy efficiency and production capabilities, particularly in the liquefied natural gas, liquefied petroleum gas, natural gas and petrochemical sectors.

'We are honored to support the continued leading role that the Middle East plays in fulfilling much of the world's global energy requirements,' said Mohammad Ayoub, Middle East Regional General Manager for GE Oil & Gas. 'The oil and gas industry is expected to play a key role in a balanced global energy portfolio for decades to come, and it is our job to help the industry meet its evolving energy and environmental commitments.'

GE Oil & Gas has numerous projects in the Middle East - including the United Arab Emirates and Qatar - that are models of GE's work to support the region's energy infrastructure development. Both areas are undergoing rapid transformation as they strive to diversify their oil-based economies, driving their immediate demand for power and water.

In Abu Dhabi, GE Oil & Gas is upgrading gas turbines and compressors at the Asab Gas Development (AGD) gas re-injection plant to increase the processing and production capabilities of the facility, which is owned by Abu Dhabi National Oil Company (ADNOC). GE is also supplying eight compressors and a steam turbine power generation set for the expansion of the Emirates National Oil Company (ENOC) condensate refinery at Jebel Ali, near Dubai in the UAE.

In Qatar, GE Oil & Gas is building equipment for what will be the world's largest LNG facility. The facility is scheduled to begin commercial operation in 2007. In Oman, GE Oil & Gas was recently awarded two separate contracts to supply centrifugal compressors for two Petroleum Development Oman (PDO) projects, one in the Saih Rawl gas field of Central Oman, and the other in the Harweel oil field of South Oman.

In April 2006, GE Oil & Gas announced it would supply 12 fixed bed reactors for a new refinery project planned by the Kuwait National Petroleum Company (KNPC) in Al Zour, Kuwait. When completed in 2010, the new greenfield facility - designed for Kuwait Heavy Crude/Kuwait Export Crude oil processing - will be the largest refinery in the Middle East, with a capacity to process 615,000 barrels per day of Kuwait export crude oil.

In Saudi Arabia, GE Oil & Gas is supplying 12 mechanical drive packages to Saudi Aramco for the Southern Area Seawater Capacity Expansion Project in the Ghawar and Khurais oil fields.

With these and other projects, GE Oil & Gas is offering across-the -board improvements in the environmental performance of its oil and gas technology to address global climate change concerns. This includes the BCL series of centrifugal compressors developed for sour gas re-injection to enhance petroleum production, which has received GE's ecomagination certification. Ecomagination is GE's company wide commitment to address global challenges such as the need for cleaner, more efficient sources of energy and reduced emissions.

GE also has formed close business partnerships with local companies in the region to further extend its market presence, including through its Abu Dhabi-based Gulf Turbine Services (GTS) joint venture with GAMCO, which offers a broad range of compressor and turbine services, along with access to worldwide resources to meet regional customers' specific needs.

GE's joint-venture Middle East Engineering Ltd. Saudi Arabia (MEELSA) Service Center in Dammam, Saudi Arabia is one of GE's key turbine service workshops in the Middle East. In the future, the facility is expected to expand its services to non-GE equipment as well, further enhancing its role in the region's energy sector.

In Qatar, GE Oil & Gas recently established an authorized service center in Ras Laffan to support the maintenance of GE's gas turbines and compressors installed in Qatar. The new facility also serves as a 'center of excellence' for GE service activities across the Middle East.

            IRAN

Iran in Talks with LUKoil over North Azadegan Field 

National Iranian Oil Company (NIOC) is currently in talks with Russia’s LUKoil on the development of North Azadegan Oilfield, southern Iran, NIOC managing director said.

“Negotiations are at primary stage. We are exchanging data on the field, and we hope LUKoil will offer the Master Development Plan (MDP) in future,” Iranian Students News Agency (ISNA) quoted Gholam-Hossein Nozari as saying.

Elsewhere, the official said that gas injection into oilfields declines during cold season because of growing domestic consumption. “The decline in gas injection will hopefully be alleviated once phases 6-8 at the South Pars (SP) gas field come on stream,” he added.

Iranian Oil Minister Kazem Vaziri-Hamaneh already told ISNA that the gas produced from SP phases 6-8 would be used for injection into the oilfields.

According to the managing director of the Pars Oil and Gas Company (POGC), Akbar Torkan, phases 6-8 are to become operational by the end of the current Iranian year, falling on March 20, 2007.

              ISRAEL

Turkey, Eni, Calik Plan Oil Natural Gas Pipelines to Israel

Turkey is holding talks with Eni Spa of Italy and Turkey’s Calik Holding to begin construction of three pipelines carrying oil, natural gas and water to Israel from Turkey’s Mediterranean port of Ceyhan.

Eni and Calik are expected to start building the undersea route in the fourth quarter of 2007, a spokesman for Turkey’s energy minister said on December 15. A study accessing the price of the project will be completed in June, said the spokesman, who declined to be identified.

Turkey, which imports nearly all of the crude oil it consumes, is seeking to become a hub for petroleum and natural gas shipments via pipelines from the Middle East, the Caspian Sea and Russia to consumers in Europe, the U.S and Mediterranean region.

The Turkish government is in talks with Russia to transport Russian natural gas via the pipeline, the ministry said. Eni and Calik are currently building a $1.5 billion pipeline to carry the gas from Turkey’s Black Sea port of Samsun to Ceyhan.

The planned route to Israel would also carry crude oil from Ceyhan, the end point for a $3 billion pipeline built by BP PLc to ship Caspian Sea oil from Azerbaijan, the ministry said.

             LEBANON

Norway to Assist Lebanon in Developing Oil and Gas Reserves

Norway will contribute to oil and gas development in Lebanon," said Prime Minister Jens Stoltenberg after his meeting with Prime Minister Fouad Siniora on December 19.

Norway will assist in the development of effective institutions and regulations within the petroleum sector. We have experience in this field that may be of use to Lebanon, said the Prime Minister.

He pointed out that Norway has contributed $30 million USD in humanitarian aid to Lebanon this year. He also announced the decision to establish an embassy in Beirut.

This shows our long term commitment to support Lebanon, commented Stoltenberg.

          OMAN

BP Wins Oman Gas Fields Concession

British Petroleum has won a concession to develop two large natural gas fields in central Oman, an Omani energy ministry official said on December 17.

'The government will sign the concession agreement with BP soon,' said Khalifa Al Hinai, technical adviser at the Ministry of Oil and Gas.

Several international firms have bid to develop tight gas reserves in the Khazzan and Makarem fields, which cover 2,500 km and are near existing gas fields of majority state-owned Petroleum Development Oman (PDO).

'We expect a large quantity of gas from these fields,' Hinai said without specifying volumes. He was speaking on the sidelines of an event to open a regional office for British Gas.

Energy ministry undersecretary Nasser Al Jashmi has been quoted as saying gas initially in place in the two fields was estimated at more than 10 trillion cubic feet, located at depths of up to 4,650 meters.

 Earlier this year, British gas and oil firm BG Group signed an exploration and production sharing agreement with Oman for Block 60, which contains the Abu Butabul gas and condensate discovery.

Oman, an independent oil producer, has said it plans to triple its natural gas output to 70-80 million cubic meters per day in the next five years. The sultanate plans to spend $10 billion over that period to boost oil and gas output.

'We have to meet the increasing demand from industries when they go on stream. Some gas-based industries start commercial operation by 2008 and some others by 2009,' Hinai said.

        QATAR

 

Dubai’s Alderley FZE Awards Multiple Order to Poyam Valves for Qatar Gas Plant 

 

Dubai based Alderley FZE, a subsidiary of the worlwide Alderley company in UAE, awarded a multiple order to Poyam Valves to provide all the cryogenic valves for the metering systems they are succesfully building for Qatar Gas plant. Poyam Valves has been awarded both small and large cryogenic valves.

 

             SAUDI ARABIA

Fluor Wins $2.2 Billion Saudi Petrochemical Contract

Fluor Corp., with revenue of $13.2 billion in 2005, has already booked a new $2.2-billion contract for the third quarter of 2006. That move followed the locally based company’s selection to provide engineering, procurement services and construction management for the utilities and offsite facilities for Saudi Kayan’s petrochemical complex in Al-Jubail on the eastern coast of Saudi Arabia.

The Fluor announcement helped the company’s common stock on the New York Stock Exchange rise by 4%. The stock was trading in the $84 to $85 per-share range.

Saudi Kayan is a joint venture between the state-owned Saudi Basic Industries Corp., the biggest petrochemical producer in the Middle East, and Al-Kayan Petrochemical Co. “This project will utilize 17 licensed technologies and will produce both specialty amine derivatives and polycarbonates for the first time in Saudi Arabia,” Fluor president for energy and chemicals Jeff Faulk says in a prepared statement. “As the heart of the complex, the execution of the utilities and offsite facilities will be instrumental to the overall success of the project.”

Faulk says that up to 1,000 engineers and 12,000 laborers will be used at the project’s peak development period. Saudi Kayan president Abdulllah Al-Rabeeah says the petrochemical complex is vital to Saudi Arabia. Fluor “brings the best experience available to the program,” he adds. Engineering on the utilities and offsite facilities began in July 2006. Construction is scheduled to start in February 2007.

Al-Rabeeah says that once completed in December 2009, the petrochemical complex will include benzene extraction facilities; a 700,000-tons-per-year polyethylene plant; a polypropylene plant with capacity of at least 350,000 tons per year; and a 530,000-tons-per year glycol unit. An integrated phenolics plant, including cumene, phenol and Bisphenol-A units, will produce feedstock for a 260,000-tons-per year, high-value polycarbonates plant.

            UAE

Linde Engineering Awarded Contract for Ethylene Cracker at Borouge's Abu Dhabi Petrochemical Complex

Borouge has awarded the contract to build its new ethylene cracker to Linde Engineering. The cracker will have a capacity of 1.5 million tpa and is considered to be the largest gas cracker in the world. The value of the contract is USD 1.3 billion and is awarded on a lump sum EPC turn key basis. Work was expected to begin in the 1st week of December 2006, and is scheduled for completion in 41 months from the effective date. This award is the first step in Borouge 2, the major expansion project being undertaken by Borouge, which will triple production capacity. It is expected to come on stream by 2010. In addition to the ethylene cracker, the Borouge 2 project comprises an olefins conversion unit, producing 752 Kilotonnes (Kt) per annum and two Borstar polypropylene plants with a combined annual capacity of 800Kt along with a new Borstar Enhanced PE plant that will have an annual capacity of 540Kt to complement the existing 600Kt unit. The project will also include a general Utilities and Offsite package. The award of the above 3 remaining packages is expected during first and second quarter 2007. The new expansion will be located next to Borouge's existing petrochemical complex in Ruwais, Abu Dhabi in the UAE.

             YEMEN

Yemen to Invite Bids for Offshore Exploration

Yemen will early next year invite international companies to submit bids to explore for oil off its shores, the oil minister said.

Yemen, a non-Opec producer, has said it hopes high oil prices will encourage foreign energy firms to explore offshore blocks as it tries to reverse a decline in its crude production.

'International companies have expressed interest in entering the fourth bid tender that will be for offshore blocks and which will be held at the start of next year,' Oil Minister Khaled Mahfoudh Bahah was quoted as saying by state news agency Saba.

'Surveys and studies show that there is oil in offshore areas,' he said.

The minister did not say how many exploration blocks would be included in the bid round.

Yemen pumps around 380,000 barrels per day of crude oil, down from around 470,000 bpd in 2002 due to declining output at mature oilfields.

Sanaa has said it aims to boost production to 500,000 bpd in the next few years as new blocks come on line.

Yemen has signed production sharing agreements for several blocks, mostly onshore areas, and earlier this month announced some of the winners of a third bid tender for 14 blocks.

 

McIlvaine Company,

Northfield, IL 60093-2743

Tel:  847-784-0012; Fax:  847-784-0061;

E-mail:  editor@mcilvainecompany.com;

Web site:  www.mcilvainecompany.com