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Petrobras, YPFB Gas
Price Agreement
BNamericas 8/4/2006
Brazil's federal energy company Petrobras (NYSE: PBR) and Bolivia's
state oil firm YPFB are expected to agree a price for Bolivian gas
exported to Brazil that will satisfy all parties involved, Pedro
Gumucio, the commercial attache at Bolivia's embassy in Brasilia said
during a seminar in Sao Paulo on Wednesday.
"The price that will be agreed will be good for Petrobras, Brazil and
Bolivia," Gumucio told reporters after the seminar.
Petrobras gas and power director Ildo Sauer partly agreed, saying talks
are going smoothly but the outcome will be halfway between what
Bolivia's government and Petrobras clients want.
"The result won't be all [the attache] wants nor will it be at the
level our industry representative wants," he said. "Dialogue and
understanding the reality of the companies involved will lead to a
resolution of the problem."
Both Gumucio and Sauer, however, stressed supply is guaranteed and
declined to talk specifically about the price being negotiated by a
special commission.
Carlos Lopes, a representative from the Brazilian chemicals industry
who was also present at the seminar, said investments by most chemicals
companies are on hold pending a gas price agreement.
"The chemicals industry accounts for half the industrial gas usage in
Brazil," he said. "We need to understand what will happen."
Sauer replied the price agreement would have to strike a balance
between what the Brazilian market can accept without turning to
competing fuels or raw materials and an adequate rate of return for
Petrobras.
"I have my hands tied by minority investors in the NYSE, in the
Brazilian bourse and the government that controls us," he said,
pointing out Petrobras has recently turned around multibillion losses
in the gas and power business and is seeking returns on investment of
8-12%.
Although Gumucio said supply contracts will not be broken, he stressed
Bolivia's decision to nationalize the oil and gas industries is aimed
at increasing government revenue to improve social conditions in the
country.
Bolivia currently exports some 24-26 million cubic meters a day (Mm3/d)
of natural gas to Brazil under a 20-year contract signed in 1999 that
has a maximum limit of 30Mm3/d.
President Evo Morales decreed the nationalization early May and said
the price of gas exported to Brazil would need to be renegotiated
because it is too low.
Petrobras and YPFB, however, will continue scheduled talks until the
final negotiating round in mid-August in Rio de Janeiro, Sauer said.
"If we don't come to an agreement, we could either extend talks or the
party that is not satisfied could ask for the creation of an
arbitration court in New York," he said.
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Chile North Codelco
to Lead regas LNG
SANTIAGO, Aug 04, 2006 (Dow Jones Commodities News via Comtex)
Chilean state copper giant Corporacion Nacional del Cobre de Chile, or
Codelco, will spearhead efforts to construct a liquefied natural gas
regasification terminal in the far north of the country, Mining and
Energy Minister Karen Poniachik said Friday.
"The government has decided to promote through Codelco the construction
of an LNG plant in the SING" electric power grid, Poniachik said in a
speech at a conference in Santiago.
The SING grid covers northern Chile, and some of its largest customers
are mines owned by Codelco and private-sector firms that together
contain almost a quarter of the world's copper. "Codelco and other
participants in the system are evaluating the construction of an LNG
plant in the SING and the government has decided to lead this effort,"
the minister said.
Securing adequate energy supplies has been top of the Chilean
government's agenda since Argentina, presently the sole supplier of
natural gas to Chile, began unilaterally reducing deliveries two years
ago to deal with supply problems of its own. Chile has a contract to
bring some 22 million cubic meters per day of natural gas from
Argentina, with two pipelines, Gasoducto Atacama and Norandino,
supplying 4.3 mcm/d and 2.6 mcm/d, respectively, to the SING.
As a result of the Argentine cuts, flows have at times dwindled over
the last few weeks, driving up energy costs for the mining companies,
although production, to date, has not been affected. Nevertheless, the
major mining companies are working on plans to replace replacing
natural gas with diesel, at least for an interim period.
Two private-sector groups, French-Belgian utility group Suez (SZE) and
local utility Gasatacama, are already mulling construction of LNG
plants, separately, to serve the SING. Gasatacama is owned by U.S. CMS
Energy Corp. (CMS) and Empresa Nacional de Electricidad SA (EOC), a
unit of Spain's Endesa SA (ELE).
But the government now wants to broker an agreement between all the
energy and mining companies in northern Chile, using Codelco to build a
pool of consumers with other top miners in the coming four weeks,
Poniachik said. The plan doesn't exclude Suez or Gasatacama: "We've
been talking to everyone," she said. The Codelco-backed plant would
likely be built at Mejillones, the industrial port north of the city of
Antofagasta, Poniachik said, declining to estimate scheduling and
investment size as many of the basic technical issues remain unclear.
Gasatacama previously said that its plan envisages using a
regasification plant mounted on a ship in the early stages, which would
allow the gas to start flowing within a year.
The government wants LNG to come from several source countries, similar
to the structure in the oil and coal import markets, Poniachik said in
her speech. Chile imports three-quarters of the fuels it needs,
including oil, coal, and natural gas.
The state energy company, Empresa Nacional del Petroleo, or Enap, is
already building an LNG terminal in central Chile to supply the central
grid, or SIC, with 5.5 mcm/day of gas, scheduled to go online in 2008.
A week ago, Enap said it was studying the possibility of using gas from
the LNG plant to fire a new thermoelectric power plant, which would be
built in partnership with local conglomerate Empresas Copec SA
(COPEC.SN) and the U.K.'s BG Group PLC (BRG).
Demand in the SIC for electric power is expected to grow at around 450
megawatts per year through 2009, topping the 340 megawatts currently
expected to come online each year, she added. Recent rainfall has
guaranteed supplies from hydroelectric power plants through the end of
next year, but through 2010, supply could be tight, she also said.
The government has approved 25 sites for the installation of diesel
turbines to secure supply until additional, recently announced power
plants, begin to go online from 2010, she added.
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Angola Reaches 100,000 Bpd
Xinhua News Agency 8/4/2006
Angola's National Oil Company, Sonangol, has reached a daily production
of 100,000 barrels this year, against its 7,000 barrels daily output in
1976 when it started activity.
The information was released Thursday by Sonangol press officer, Jose
Rosa Santos, who added this progress represents a leap forward and
reflects the evolution of the company over the years.
He said as well that the 100,000 barrels a day represents a special
goal as it is the result of a hard work by Angolan technicians over the
last 30 years.
In order to reach the figure above mentioned, the officer said, the
company invested in providing specialty training to its personnel.
Within the framework of the information technologies, he said,
Sonangol, through its subsidiary, Mstelcom, is investing in products of
the most modern generation, such as satellite voice, fax and data
telecommunication systems.
In addition to Mstelcom, the group comprises subsidiaries in the fields
of research and production, logistics, distribution and natural gas.
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Total Stake Inpex's
$6 Bln Australia LNG Project
Aug. 4 Bloomberg
Total SA, Europe's third-biggest oil producer, may buy a stake in Inpex
Holdings Inc.'s $6 billion liquefied natural gas project in Australia
as prices of the cleaner-burning fuel soar, officials at both companies
said. Total is in talks with Tokyo-based Inpex and may sign an
agreement this month to buy 25 percent of the so-called Ichthys
project, said the officials, who asked not to be identified because the
accord hasn't been signed.
Inpex plans to tap Total's expertise deployed at ventures such as Yemen
LNG and to share costs at Ichthys. Paris-based Total wants increased
LNG sales in Japan, Korea and China as they reduce reliance on crude
oil imports from the Middle East. Total Chief Executive Thierry
Desmarest in June said ``LNG is the best answer'' to global energy
needs.
"Scale of profit from the project is expected to be large, as the
proposed plant's size is world class," Shigeki Matsumoto, an analyst at
Nomura Securities Co. in Tokyo, said by phone. "Selection of a project
partner is one step to push ahead." Patricia Marie, a spokeswoman for
Total in Paris, and Inpex spokesman Kazuya Honda declined to comment.
Osaka Gas Co., Japan's second-biggest gas distributor, last month said
it's in talks with Inpex on joining the Ichthys project. Tokyo Electric
Power Co., Asia's biggest power producer, may buy LNG from Ichthys, it
said in June.
Total is in negotiations to buy the stake in the Ichthys field, 850
kilometers (528 miles) west of Darwin, and a proposed gas liquefaction
plant, the officials said. Ichthys holds an estimated 9.5 trillion
cubic feet of natural gas.
Japan, the world's biggest market for LNG, is competing with the U.S.
and China for supplies as global demand surges. The switch to gas has
been prompted by slowing discoveries of new oilfields demand from power
producers seeking a cleaner-burning fuel than coal or oil. Japan's
utilities are looking to gas projects in Australia and Russia to help
make up for declining shipments from Indonesia, the world's largest LNG
exporter.
French Connection
Ties between Total and Inpex date back four decades. Total has led
development of Indonesia's Mahakam offshore block since 1970, when it
acquired half of the rights from Inpex, according to Inpex's Web site.
Inpex, formerly a unit of disbanded, state-run Japan National Oil
Corp., two years ago became the vehicle for Japan's biggest overseas
oil and gas drilling assets.
Total and Inpex produce 2.6 billion cubic feet of gas a day from
Mahakam in East Kalimantan, to supply PT Badak NGL, the world's largest
LNG plant. Indonesia exported 14.3 million tons to Japan in the year
ended March 31, accounting for 25 percent of Japan's imports of 58
million tons, according to Japan's Ministry of Finance.
Indonesia has failed in the past three years to meet commitments to
supply customers in Japan, South Korea and Taiwan as falling reserves
cut natural gas supplies to its LNG plants.
Inpex also plans to build a plant to produce 100,000 barrels a year of
combined condensate and liquefied petroleum gas from Ichthys.
Commercial operations are due to start in the middle of 2012. In May,
the company began seeking environmental approval to develop the
offshore field in an area known as WA-285-P Block in the Browse Basin.
Investment Opportunities
Japanese Trade Minister Toshihiro Nikai and Australian Foreign Minister
Alexander Downer on Aug. 2 agreed the two countries should improve
investment opportunities including for energy projects, according to
Minemasa Suehiro, director of the trade ministry's Southwest Asia and
Oceania division.
"Australia will perhaps be a reliable gas supplier, as Indonesia is
losing its reputation," said Hidetoshi Shioda, a senior analyst at
Mizuho Securities Co. in Tokyo. "For Inpex, the Ichthys project will be
good for its track record and bring more opportunities its way to
invest in Australian LNG projects."
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British Energy Firms
Stake in India's 20tcf Gas Find
by Richard Orange, The Business, London Sunday Business, London
7/31/2006
UK oil and gas giants BP, BG Group and Royal Dutch Shell are now
leading the race to win a stake in India's largest ever gas discovery
after US oil giant ExxonMobil, France's Total and seven other
international oil companies were knocked out last week.
Gujarat State Petroleum Company (GSPC) announced last year that it had
found 20 trillion cubic feet of gas in a well in the Bay of Bengal, a
massive discovery worth $50bn (E39bn, £27bn) if the cost of development
and production is ignored. It has named the field Deen Dayal, or
"Saviour of the Poor".
UBS, which is managing the sale of a 20 percent stake in the field, has
cut the 14 original bidders down to a shortlist of just five. US oil
major Chevron and Italy's Eni are also still in the process. Other
companies that have been dropped are Norway's Statoil, Brazil's
Petrobras, Malaysia's Petronas, Spain's Repsol, US firm Anadarko, and
Canada's Husky Energy.
UBS plans to provide the remaining bidders with detailed data on the
discovery over the next few weeks ahead of taking final bids. The
winner will help GSPC develop the field and build some of the offshore
infrastructure.
A banker with one of the bidders told The Business: "They're looking
for technical support and the infrastructure to develop the reservoir
itself."
He said GSPC already had the technical expertise to build a 3000km
pipeline to ferry the gas across India to the booming cities of
Gujarat.
If BP, Shell or BG are successful, it would be by far the biggest
investment by a UK oil and gas company in India. Until Edinburgh-based
Cairn Energy made a massive discovery in Rajasthan two years ago,
western oil companies had shied away from India, put off by the
country's reputation for fearsome bureaucracy.
UK gas specialist BG Group has the most highly developed position. It
owns Gujarat Gas Company, a gas distributor, and has a 30 percent stake
in three offshore gas fields.
Since Cairn's discovery, the country's economic reform and a shortage
of opportunities elsewhere has increased interest in India from oil
explorers. BP bid last year for exploration licences, and Shell has
developed the Hazira LNG terminal.
Deen Dayal is one of many major oil and gas discoveries made in the
Krishna-Godivari basin in the Bay of Bengal. India's Reliance Petroleum
made a giant gas discovery in a next door exploration block in 2002 and
has made a large number of oil discoveries.
GSPC said in June it had made a new oil discovery in the block. Taking
a stake would allow the UK companies to examine this highly prospective
region.
Western oil companies have also been looking to build oil refining and
petrol station businesses in India, positioning themselves to benefit
from the growing wealth of the country's vast population. Chevron took
a 5 percent stake in Reliance Petroleum in April. BP's negotiations
over building a $3bn refinery with India's Hindustan Petroleum fell
apart earlier this year.
Cairn Energy is planning to launch an initial public offering of its
Indian business on the Bombay Stock Exchange in the last quarter of
this year or in the first quarter of 2007.
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Venezuela Drives a
Hard Bargain on Oil
by Jim Landers The Dallas Morning News 8/2/2006
President Hugo Chavez is spending more than $7 billion of oil revenue
this year to help Venezuela's poor, and they love him for it. But in
the downtown business district, over and over again you hear allusions
to one of Aesop's fables. "You don't want to kill the goose that lays
the golden eggs," said Elio Ohep, editor of Petroleumworld.com. "If you
scare away investment, what are you going to do?"
Venezuela's president is seeing how far he can push international oil
companies such as ExxonMobil Corp.
In the last several months, Venezuela's government has raised
royalties, taxes, and government equity in dozens of oil projects. In
April, a Venezuelan congressional report urged Chavez to take similar
steps with four heavy oil projects run by multinational companies in
the Orinoco River belt, possibly the world's largest oil province.
The measures would put the national oil company in charge, give
Venezuelan courts exclusive jurisdiction over disputes, and shift
billions of dollars from the companies to Chavez's regime.
Gersan Zurita, an oil analyst with credit evaluators Fitch Ratings in
New York, said the moves would essentially turn the private oil
companies into silent partners in an oil business that would be run by
Venezuela. The struggle will affect future company earnings,
Venezuela's economy, and future world oil supplies.
With oil prices soaring and new oil fields hard to come by, Chavez has
the upper hand. "Twenty-six companies decided to go to the new system,"
said Bernardo Alvarez, Venezuela's ambassador to the United States and
a former deputy energy minister. "It was 100 percent legal."
When French company Total SA and the Italian firm Eni SpA balked,
Chavez sent the national guard to seize their fields.
ExxonMobil sold its interest in one oil field, shut in another,
reserved its right to seek arbitration over government royalty hikes,
and was removed from a petrochemical venture by the Venezuelan
government.
The company says it's in Venezuela for the long haul, but it could
still come to blows with the government over an Exxon-managed $1.6
billion heavy oil project in the Orinoco belt. That possibility led
Fitch Ratings and Moody's to downgrade the project's debt, along with
the debt of three other Orinoco projects, in May.
A hard line
ExxonMobil chairman Rex Tillerson isn't backing off. In March, he said
the company would refrain from any major new investments in Venezuela.
Asked in May whether the Orinoco was too big to walk away from,
Tillerson told The Dallas Morning News: "Well, nothing's too big to
walk away from for us." ExxonMobil takes a hard line with any
government that tries to change contract terms, whether it's Chavez or
the U.S. Congress, which wants to roll back royalty relief for offshore
drilling that was enacted when prices were low.
But when companies weigh political risks against the geologic risks
inherent in looking for oil, many of them decide to ride out a rough
political climate. "There's a low risk in Venezuela for discovering
oil, and these companies know that," said Alejandra Leon, an oil
analyst in Mexico City with Cambridge Energy Research Associates. "They
are able to pay higher royalties in exchange for more access because
it's getting harder and harder to gain access to oil reserves."
Venezuela has the oil. Its proven reserves of 79.7 billion barrels rank
seventh in the world, and Venezuela could take the top spot from Saudi
Arabia if it can demonstrate that even 10 percent of the 3 trillion
barrels of thick, tarry oil in the Orinoco belt is economically
recoverable.
Cheap start
In the 1990s, Venezuela lured multinational companies to older fields
and the difficult Orinoco belt with generous terms. As part of a
strategy called the apetura, or opening, Orinoco projects faced
royalties of just 1 percent.
Petroleos de Venezuela, or PDVSA, Venezuela's national oil company,
took a minority stake in the projects (though its preferred shares gave
it the key voice in overall strategy). Income tax on the projects was
set at 34 percent, and the contracts called for disputes to go to
arbitration in New York.
ExxonMobil, ConocoPhillips Co., Chevron Corp., Total SA, BP PLC, and
Norway's Statoil ASA have more than $16 billion invested in the four
projects, which together produce more than 600,000 barrels a day of
crude oil upgraded from the thick, gunky deposits.
Higher taxes, fees
In May, the National Assembly, which is made up entirely of Chavez
loyalists, enacted a new 33.33-percent extraction tax. The government
raised the income tax rate to 50 percent. Royalties were raised to 16.7
percent.
The recent report by an assembly committee recommended nearly doubling
the new royalty rate while giving PDVSA a 60-percent share in each
project. Fitch Ratings' Zurita then wrote a special report on the
situation called "Venezuela's Heavy Oil Projects: The Beginning of the
End?" Venezuela, he warned, is scaring off foreign investors. "Some of
these companies have become less and less tolerant of fiscal
instability and changes in the rules in midstream," Zurita said. "So
it's not surprising to us that we see huge amounts of investment, sums
like $700 million a month, going to the [Persian] Gulf, where countries
like Qatar are moving very much in the opposite direction of Chavez."
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