 Natural Gas Future Use
www.economist.com/business-finance/ 3/13/10
SOME time in 2014 natural gas will be condensed into liquid and loaded
onto a tanker docked in Kitimat, on Canada’s Pacific coast, about 650
km (400 miles) north-west of Vancouver. The ship will probably take its
cargo to Asia. This proposed liquefied natural gas (LNG) plant, to be
built by Apache Corporation, an American energy company, will not be
North America’s first. Gas has been shipped from Alaska to Japan since
1969. But if it makes it past the planning stages, Kitimat LNG will be
one of the continent’s most significant energy developments in decades.
Five years ago Kitimat was intended to be a point of import, not
export, one of many terminals that would dot the coast of North
America. There was good economic sense behind the rush. Local
production of natural gas was waning, prices were surging and an
energy-hungry America was worried about the lights going out.
Now North America has an unforeseen surfeit of natural gas. The United
States’ purchases of LNG have dwindled. It has enough gas under its
soil to inspire dreams of self-sufficiency. Other parts of the world
may also be sitting on lots of gas. Those in the vanguard of this
global gas revolution say it will transform the battle against carbon,
threaten coal’s domination of electricity generation and, by
dramatically reducing the power of exporters of oil and conventional
gas, turn the geopolitics of energy on its head.
Deep in the heart of Texas
The source of America’s transformation lies in the Barnett Shale, an
underground geological structure near Fort Worth, Texas. It was there
that a small firm of wildcat drillers, Mitchell Energy, pioneered the
application of two oilfield techniques, hydraulic fracturing and
horizontal drilling, to release natural gas trapped in hardy shale-rock
formations. Fracing involves blasting a cocktail of chemicals and other
materials into the rock to shatter it into thousands of pieces,
creating cracks that allow the gas to seep to the well for extraction.
A “proppant”, such as sand, stops the gas from escaping. Horizontal
drilling allows the drill bit to penetrate the earth vertically before
moving sideways for hundreds or thousands of metres.
These techniques have unlocked vast tracts of gas-bearing shale in
America (see map). Geologists had always known of it, and Mitchell had
been working on exploiting it since the early 1990s. But only as prices
surged in recent years did such drilling become commercially viable.
Since then, economies of scale and improvements in techniques have
halved the production costs of shale gas, making it cheaper even than
some conventional sources.
The Barnett Shale alone accounts for 7% of American gas supplies. Shale
and other reservoirs once considered unexploitable (coal-bed methane
and “tight gas”) now meet half the country’s demand. New shale
prospects are sprinkled across North America, from Texas to British
Columbia. One authority says supplies will last 100 years; many think
that is conservative. In 2008 Russia was the world’s biggest gas
producer (see chart 1); last year, with output of more than 600 billion
cubic metres, America probably overhauled it. North American gas prices
have slumped from more than $13 per million British thermal units in
mid-2008 to less than $5. The “unconventional”—tricky and expensive, in
the language of the oil industry—has become conventional.
The availability of abundant reserves in North America contrasts with
the narrowing of Western firms’ oil opportunities elsewhere in recent
years. Politics was largely to blame, as surging commodity prices
emboldened resource-rich countries such as Russia and Venezuela to
restrict foreign access to their hydrocarbons. “Everyone would like to
find more oil,” says Richard Herbert, an executive at Talisman Energy,
a Canadian firm using a conventional North Sea oil business to finance
heavy investment in North American shale. “The problem is, where do you
go? It’s either in deep water or in countries that aren’t accessible.”
This is forcing big oil companies to get gassier.
The oil majors watched from the sidelines as more entrepreneurial
drillers proved shale’s viability. Now they want to join in. In
December Exxon Mobil paid $41 billion for XTO, a “pure-play” gas firm
with a large shale business. BP, Statoil, Total and others are sniffing
around the North American gas patch, signing joint ventures with
producers such as Chesapeake Energy. A wave of consolidation is likely
in the coming months, as gas prices remain low, the drillers seek
capital and the majors hunt for the choicest acreage.
Shale is almost ubiquitous, so in theory North America’s success can be
repeated elsewhere. How plentiful unconventional resources might be in
other regions, however, is far from established. The International
Energy Agency (IEA) estimates the global total to be 921 trillion cubic
metres (see chart 2), more than five times proven conventional
reserves. Some think there is far more. No one will really know until
companies explore and drill.
The drillers are already arriving in Europe and China, which are both
expected to import increasing amounts of gas—and are therefore keen to
produce their own. China has set its companies a target of producing 30
billion cubic metres a year from shale, equivalent to almost half the
country’s demand in 2008. Several foreign firms, including Shell, are
already scouring Chinese shales. After a meeting between the American
and Chinese presidents last November, the White House announced a
“US-China shale gas initiative”: American knowledge in exchange for
investment opportunities. The IEA says China and India could have
“large” reserves, far greater than the conventional resource.
Exploration is also under way in Austria, Germany, Hungary, Poland and
other European countries. The oil industry’s minnows led this scramble,
but now the big firms are arriving too. Austria’s OMV is working on a
promising basin near Vienna. Exxon Mobil is drilling in Germany.
Talisman recently signed a deal to explore for shale in Poland.
ConocoPhillips is already there. The first results from wells being
drilled in Poland, in what some analysts believe is a shale formation
similar to Barnett, should be released this year.
No one expects production of shale gas in Europe to make a material
difference to the continent’s supply for at least a decade. But the
explorers in China and Europe present a long-term worry for those who
have bet on exporting to these markets. Gazprom, Russia’s gas giant, is
the company most exposed to this threat, because its strategy relies on
developing large—and costly—gas fields in inhospitable places. But
Australia, Qatar and other exporters also face a shift in the basics of
their business.
Choked
These producers are already getting a taste of the global gas glut.
Almost in tandem with the surge in American production, recession
brought a slump in world demand. The IEA says consumption in 2009 fell
by 3%. In Europe, the drop was 7%. Consumption in the European Union
will grow marginally if at all this year and will not be sufficient to
clear an overhang of supplies, contracted through take-or-pay
agreements signed in the dash for gas of the past decade. IHS Global
Insight, a consultancy, reckons that the excess could amount to 110
billion cubic metres this year, almost a quarter of the EU’s demand in
2008.
The glut has been exacerbated by the suddenly greater availability of
LNG. Importers with the infrastructure to receive and regasify LNG can
now easily tap the global market for spot cargoes. This is partly a
product of the recession, which dampened demand from Japan and South
Korea, the leading LNG buyers. But another cause is that many
exporters, not least Qatar, the world’s LNG powerhouse, spent the past
decade ramping up supplies aimed at the American market. That now looks
like a blunder.
America is still taking some of this LNG, but the exporters’ bonanza is
over before it ever really began. “You’ll always find a buyer in North
America,” says Frank Harris, an analyst at Wood Mackenzie, a
consultancy, “but you might not like the price.” And LNG will grow
increasingly abundant as new projects due to come on stream this year
add another 80m tonnes to annual supply, almost 50% more than in 2008.
Gas out, money in Qatar’s low production costs mean it can still make
money, even in North America. Others cannot. In February, for example,
Gazprom postponed its Shtokman gas field project by three years because
of the change in the market. Some of the gas from that field, in the
Barents Sea, was to be exported to America. But Shtokman’s gas will be
costly, because the field is complex and its location makes it one of
the world’s most difficult energy projects to execute. Some analysts
now wonder whether gas will ever flow from Shtokman.
China offers some hope for ambitious exporters, but even there the
outlook has become cloudier. The Chinese authorities want natural gas
to account for at least 10% of the country’s energy mix by 2020 and are
building LNG import terminals. With that target in mind, Australia,
which has its own burgeoning conventional and unconventional gas
supplies, has been busily building an LNG export business. But warning
lights are coming on. In January, PetroChina let a deal to buy gas from
Australia’s Browse LNG project expire. The original agreement was made
in 2007, when LNG prices were soaring in Asia, but China can afford to
be picky now. “Too many Australian LNG plants are chasing too little
demand,” says Mr Harris.
The shift in the global market has left China well-placed to dictate
prices. This will be another blow to Gazprom, which has long talked of
exporting gas to the country. Indeed, while the Chinese and the
Russians have squabbled over the terms, Turkmenistan has quietly built
its own export route to China. Even if Beijing’s shale-gas plans come
to nothing, supplies from Central Asia and new regasification terminals
along its coast may allow China to reach its natural-gas consumption
targets without pricey Siberian supplies.
The glut has weakened Gazprom’s position in Europe, too. It has been
losing market share to cheaper Norwegian and spot-market supplies. In
2007 Gazprom talked of increasing its annual exports to the EU to 250
billion cubic metres. Now, says Jonathan Stern, of the Oxford Institute
for Energy Studies, Gazprom will probably only ever supply the EU with
200 billion cubic metres a year (it shipped about 130 billion in 2008).
The company forecast in 2008 that its gas prices in Europe would
triple, to around $1,500 per 1,000 cubic metres, on the back of rising
oil prices, which help set prices in long-term contracts. But the price
dropped to about $350 last year and is expected to fall again in 2010.
The weak market could last for another five years, believes Wood
Mackenzie. Gazprom has been renegotiating with leading customers,
injecting elements of spot pricing into contracts to make them more
attractive.
Shtokman stymied
Moreover, Europe’s need for new pipelines to guarantee supplies
suddenly looks less pressing. Construction of Nord Stream, Gazprom’s
flagship project to export gas directly to Germany through the Baltic
Sea, will begin next month. It is due to come on stream in 2011. The
scheduled doubling of its capacity to 55 billion cubic metres a year is
in doubt, says Mr Stern, because Shtokman was to have supplied the gas
for it.
Demand is a bigger problem. Even without recession or European shale,
the assumption that Europe’s consumption will keep growing is looking
shaky, because the EU’s efforts to boost efficiency and reduce carbon
emissions are making gradual headway. Edward Christie, an economist at
the Vienna Institute for International Economic Studies, says the EU
could be importing a third less natural gas in 2030 than the European
Commission forecast in 2005. That makes the case for additional supply
lines much less compelling. The IEA expects rich European countries’
demand to grow by only 0.8% a year in the next two decades, against
1.5% for the world as a whole.
An age of plenty for gas consumers and of worry for conventional-gas
producers thus seems to be dawning. But two factors could reverse the
picture again. The first surrounds the uncertainty about how fruitful
shale exploration will be outside North America. A clearer
understanding of the geology will emerge from pilot wells in the coming
months. Second, there are reasons for caution above ground, too.
Despite natural gas’s greener credentials than oil’s or coal’s, shale
drilling has critics among environmentalists, who worry that water
sources will be poisoned and landscapes despoiled.
The industry says cement casing of wells and the depth to which they
are drilled make the practice safe and relatively unobtrusive. But so
far it has been drilling mainly in North America, where land is
plentiful and people are accustomed to the sight of oilmen’s detritus.
In densely populated Europe, the rapacious rate at which shale plays
must be drilled to sustain production is less likely to be tolerated.
Even in America, opposition to shale gas is rising. New York state has
imposed a moratorium on drilling in its portion of the Marcellus Shale,
which it shares with Pennsylvania. Lawmakers in Congress want to study
the ecological impact of fracing. The Environmental Protection Agency,
a federal body, also raised concerns about “potential risks” to the
watershed.
The path of demand in gas’s new age is hard to predict, but abundant
new sources could bring about profound change in patterns of energy
consumption. Some of the downward pressure on price will ease: despite
sedate growth, the LNG glut should dissipate, probably by 2014, says Mr
Harris; and low prices will kill more projects, clearing the inventory.
France’s Total thinks global demand will recover strongly enough to
require another 100m tonnes a year of LNG by 2020, on top of plants
already planned. However, the Energy Information Administration, the
statistical arm of America’s Department of Energy, predicts decades of
relatively weak prices.
If this is correct, it makes sense, for both environmental and economic
reasons, for the country to gasify its power generation, half of which
comes from coal-fired plants. This could be done cheaply and quickly,
because America’s total gas-fired capacity (as opposed to production)
already exceeds that for coal. Put a price of only $30 a tonne on
carbon, say supporters, and natural gas would quickly displace coal,
because gas-fired power stations emit about half as much carbon as the
cleanest coal plants. The IEA agrees that penalizing carbon emissions
would benefit natural gas at the expense of dirtier fuels.
There would be political obstacles. The coal lobby remains strong in
Washington, DC. Climate legislation struggling through Congress even
includes provisions to protect “clean coal”, a term covering an array
of measures, so far uncommercial, to reduce emissions from burning the
black stuff. Ironically, oil companies that were once suspicious of
proposals to control carbon now regard a carbon price or even a carbon
tax as a potential boon to their new gas businesses.
A more radical idea, and one that would have ramifications for the
global oil sector, is to gasify transport. T. Boone Pickens, a
corporate raider turned energy speculator, has launched a campaign to
promote this, and has support from the gas industry. By converting
North America’s fleet of 18-wheeled trucks to natural gas, says Randy
Eresman, boss of EnCana, a Canadian gas company, America could halve
its imports of Middle Eastern oil. EnCana is promoting “natural gas
transportation corridors”: highways served by filling stations offering
natural gas.
All this is some way off. The coal industry will not surrender the
power sector without a fight. The gasification of transport, if it
happens, could also take a less direct form, with cars fuelled by
electricity generated from gas.
A gasified American economy would have profound effects on both
international politics and the battle against climate change.
Displacement of oil by natural gas would strengthen a trend away from
crude in rich countries, where the IEA believes demand has already
peaked as a result of the recent spike in oil prices. Another
consequence of the energy market’s bull run, the unearthing of vast new
supplies of gas, could bring further upheaval. If the past decade was
characterised by the energy-security concerns of consumers, the coming
years could give even the world’s powerful oil producers reason to
worry, as a subterranean revolution shifts the geopolitics of global
energy supply again.
|
 SANBAG struggles to find fleet willing to shift to LNG
trucks
March 9, 2010 By DUG BEGLEY The Press-Enterprise
San Bernardino transportation officials are pessimistic they will find
a company to fulfill a federally-funded alternative fuel program, after
the initial company pulled the plug on natural gas semi-trucks.
"We have been in discussions with several fleets, but we don't have any
fleets that have been inked," said Michelle Kirkhoff, director of air
quality programs for San Bernardino Associated Governments, last week.
< Silvia Flores / The Press-Enterprise
The deal between SANBAG and JB Hunt fell apart last month, when the
company opted to back out of a federal-funded alternative fuels program
to retrofit 262 of the company's trucks serving the Santa Fe Depot in
San Bernardino. >
The deal between SANBAG and JB Hunt fell apart last month, when the
company opted to back out of the program to retrofit 262 of the
company's trucks serving the Santa Fe Depot in San Bernardino. The
trucks would have been replaced with semis equipped with liquid natural
gas engines, thus lessening diesel use and the ensuing air pollution.
JB Hunt's decision to cancel the program, which included $19.2 million
in state and federal grants, frustrated local officials. JB Hunt is the
largest trucking company serving the depot, a major rail-to-truck
transfer point for BNSF Railway.
"It is indeed unfortunate that no matter who we bring in as partners,
it will have a diminished effect," said San Bernardino Mayor Pat
Morris. The grant would have paid for some of the cost of
replacing the trucks and building a natural gas fueling station. JB
Hunt would have contributed about $23 million.
The company would not comment on the decision, wrote Greg Smith, JB
Hunt's marketing director, in an e-mail.
Companies are interested in participating, Kirkhoff said, but none have
fleets the size of JB Hunt's. Officials could choose more than one
company, but it would double the oversight SANBAG must provide for the
grant program.
"That changes things," Kirkhoff said of having two companies share the
grant. "It doubles our oversight and really changes the scope of the
project."
Part of the allure for local officials was showing that natural gas
trucks can work, in hopes of changing the trucking industry, Kirkhoff
said. "I was hoping after five years it could demonstrate success
...," she said. "Until somebody does it and can claim success,
(trucking companies) are all skeptical."
Reach Dug Begley at 951-368-9475 or dbegley@PE.com
|
Algeria sees global
LNG recovery in 2-3 years
Mar 9, 2010 ALGIERS Reuters
The global slump in demand for liquefied natural gas (LNG) is temporary
and demand will recover within the next two to three years, Algerian
Energy Minister Chakib Khelil said in an interview on Monday. "If
we look at the long term, definitely from the environmental point of
view and from the point of view of satisfying global demand, there is
going to be a big need for natural gas," Khelil told Reuters. "So
we think that this is just a transitory problem and it is going to pass
away within two or three years and things will come back again,
especially as, because of this crisis, lots of investments that had
been planned have been postponed," he said. He said though he did
not expect a recovery any time soon in LNG exports to the United
States, but added Algeria had little exposure to this market. "We
know that the U.S. market is probably gone for some time to come
because of the huge unconventional gas that has been developed all over
the United States."
The Algerian city of Oran will host a major international LNG
conference in April.
Khelil said Algeria, which is building two new LNG plants to be
completed within the next four years, was pursuing further LNG sales in
Asian markets. "Basically our traditional market is Japan and
then Korea and of course China is a very interesting market," he said
in the interview. "With India we are already discussing (LNG
exports)," he said, adding that any exports destined for India would
come from the LNG plants under construction. "So these are going
to be the very interesting markets of the future ... We are already
looking at the possibility of getting to those markets," Khelil said.
(Reporting by Christian Lowe and Hamid Ould Ahmed; Writing by Christian
Lowe; Editing by James Jukwey)
|
Calfornia Board
discusses plans for LNG refueling stop
Marcel Honoré The Desert Sun • March 9, 2010
The Palm Springs Architectural Advisory Committee reviewed plans Monday
for what eventually could become a crucial liquefied natural gas
refueling stop for truck fleets hauling goods across state lines.
Liquefied natural gas, or LNG, is an alternative fuel low in emissions,
considerably cleaner than diesel and better for the environment,
according to federal energy officials.
The station, still in its early stage, is proposed by Brawley- based
animal feed-exporter Border Valley Trading and would be built in the
industrial zone of north Palm Springs, near the Indian Canyon exit at
Interstate 10.
BVT trucks used to stop at a SunLine Transit Agency LNG station in
Thousand Palms, but that facility closed in 2008, a city staff report
stated. The proposed new station would replace that necessary refueling
stop for BVT trucks hauling animal feed from Blythe and Brawley to the
Port of Long Beach — and it eventually could be made accessible to
other trucking companies, said Marvin Roos, a consultant on the project.
Building the new station could help encourage companies that are
considering converting their trucks to the cleaner-burning,
lower-emission LNG fuel but are worried there aren't enough stations
carrying the alternative fuel along their interstate routes,
Architectural Advisory Committee member Will Kleindienst said after the
meeting.
The nearest LNG stations for public use are in Redlands to the west,
and Blythe to the east, said Kleindienst, who added that he owns a
compressed natural gas vehicle — a similar alternative fuel to LNG but
not compatible.
The proposed BVT station calls for at least one 40-foot tall, 15-foot
diameter tank, visible from Interstate 10, Roos said. The committee was
not scheduled to take action on the proposal, but its response was
generally favorable. The proposal next goes before the Palm Springs
Planning Commission to get its preliminary take. The project
still would have to go through a formal approvals process, which could
take several months, Roos said. If approved it would take as long as 15
months to complete, the staff report stated.
|
China Jingbian
Liquefied Natural Gas Project 1/2mmcmpd
NEW YORK, March 4 /PRNewswire-Asia/
China Natural Gas, Inc. (Nasdaq: CHNG), a leading provider of
compressed natural gas for vehicular fuel and pipeline natural gas for
industrial, commercial and residential use in Xi'an, China, announced
today that the Company has signed an installation contract with China
Nuclear Industry Fifth Construction Co., Ltd. for its liquefied natural
gas (LNG) project to ensure the project be completed by June 30, 2010,
which also signifies the commencement of the test run.
According to the contract, China Nuclear Industry Fifth Construction
Company will ensure the installation of core processing equipment in
the plant as well as related engineering be completed before June 30,
2010 with labor, material, quality, duration, and safety specified in
the contract. This will mark the commencement of the test run of Phase
I of the LNG project and the prelude of commercial production.
China Natural Gas Chairman and CEO, Qinan Ji said: "We are very pleased
to announce this news to investors. The Jingbian LNG project is the
first liquefied natural gas plant in Shaanxi approved by the NDRC and
Shaanxi Provincial Government. We believe adding the LNG plant into our
operations will greatly augment our sustained long-term growth. China
Nuclear Industry Fifth Construction Company is recommended by Chemtex,
our design and technology contractor. It has very strong and relevant
experience as well as qualifications, and previously served customers
include DuPont China, Shell China, Sinopec Shanghai Oil and Chemical
Ltd., CNOOC, etc."
Upon completion, the LNG project will have production capacity of
500,000 cubic meters per day, or 150 million cubic meters on an annual
basis. Liquefied natural gas is widely used in power generation,
transportation, metallurgy, ceramics, glassworks and other aspects of
the social economy.
|
Kitimat LNG to be
majority owned and operated by Apache unit
Source: http://www.ogj.com 15-01-10
Kitimat LNG Inc., which plans to export natural gas via an LNG plant in
British Columbia, has sold a majority interest in the export project to
Apache Canada Ltd., a unit of Apache Corp. Apache also reserved 51 % of
planned export capacity.
The planned Kitimat project, at Bish Cove near the Port of Kitimat
about 405 miles north of Vancouver, has planned capacity of about 700
mm cfpd, or 5 mm tpy of LNG. First LNG shipments are projected for
2014. Apache will become operator of the project.
Americas' LNG
If built, Kitimat will become the fourth liquefaction plant in the
Americas:
-- The 1.3-mm tpy Kenai, Alaska, plant, operated by ConocoPhillips,
started up in 1969. All of Kenai's production since its start up has
gone to Japan, the world largest importer of LNG. Kitimat is similarly
targeting Asian markets.
-- The combined 15.1-mm tpy plants at Point Fortin, Trinidad and
Tobago. All trains started up 1999-2005. Atlantic LNG is a major
supplier to the US.
-- The 4.4-mm tpy plant at Melchorita, Peru, is undergoing
commissioning and will start up by spring.
Kitimat will link pipelines serving Western Canada's gas production via
the proposed Pacific Trail Pipelines, a C$ 1.1-bn, 300-mile project
originating at Summit Lake, BC. Through acquisition of a 51 % interest
in Kitimat, Apache will acquire a 25.5 % interest in the pipeline,
currently a 50-50 partnership between Galveston LNG and Pacific
Northern Gas.
The proposed pipeline has received both the federal and provincial
governments' environmental assessment approvals and has an arrangement
to work with First Nations along the pipeline route, said Apache.
Kitimat LNG has signed memorandums of understanding for LNG sales with
Gas Natural and Korea Gas Corp., as well as MoUs with other producers
for natural gas supply.
FID 2011
The Apache announcement said preliminary construction cost estimates of
C$ 3 bn "will be refined" after front-end engineering and design.
Kitimat LNG received its provincial environmental certificate for the
liquefaction plant in December 2008 and federal environmental
certificate in January 2009.
Apache Chairman and Chief Executive Officer G. Steven Farris said in
the announcement that development of Kitimat LNG can "open new markets
in the Asia-Pacific region for gas from Apache's Canadian operations,
including the Horn River basin in northeast British Columbia," where
its net estimated resource potential "exceeds" 10 tcf.
Under the agreement, Apache will make an initial payment to current
owners of Kitimat LNG with "additional consideration due upon
achievement of certain commercial and regulatory milestones," the
company said.
Apache will fund the project's FEED, set to begin shortly, with final
investment decision expected in 2011.
|
US asks Pakistan
to pull out of Iran gas pipeline project
Source: http://www.tehrantimes.com 14-01-10
The United States has asked Pakistan to dump its plan of receiving
natural gas from Iran through a pipeline.
According to sources, US Special Envoy to Afghanistan and Pakistan
Richard Holbrooke, during his meeting with Petroleum Minister Syed
Naveed Qamar, said Islamabad would have to abandon its pipeline accord
with Tehran in order to qualify for extensive American energy
assistance especially for importing Liquefied Natural Gas (LNG) and
electricity.
Insiders said that in case Pakistan cancels its plan of importing gas
from Iran through pipeline, the US would help Islamabad import
electricity from Tajikistan through Afghanistan's Wakhan corridor.
It is pertinent to mention here that India has already walked out of
the proposed Iran-Pakistan-India (IPI) gas pipeline.
Pakistan had proposed to China to join the $ 7.4-bn IPI pipeline after
India pulled out of the project.
The Chinese government had submitted a preliminary report to the
Pakistan government seeking more information onthe pipeline project.
|
Iraq seeks to cash
in on its gas Akkaz vulnerable to terrorists
Source: http://www.upi.com 21-01-10
Iraq is seeking to exploit its vast natural gas reserves, a resource
that has had to play second fiddle to the country's oil wealth, and has
signed a strategic energy agreement with the European Union to develop
the gas fields.
But just as Iraq's drive to develop its major oil fields and quadruple
production through a chain of multibillion-dollar contracts with
international oil companies could be set back by an upsurge of violence
surrounding national elections slated for March 7, so too could
Baghdad's ambitions for its gas reserves.
Having Iraqi gas flow through the planned 2,000-mile Nabucco pipeline
that would funnel gas westward from Central Asia and the Middle East
through Turkey, Iraq's northern neighbour, to Austria, would forge a
strong energy link between Europe and Iraq. "Iraq represents a
vital link for the EU's security of supply," EU Energy Commissioner
Andris Piebalgs declared during the signing ceremony in Baghdad.
Iraq has an estimated 111 tcf of natural gas, with much, much more yet
to be tapped, according to industry analysts. But as with the country's
oil fields, these have never been fully explored or exploited. Only 20
% of Iraq's oil fields, which contain the equivalent of 115 bn barrels
of oil, have been developed. An even smaller percentage of Iraq's gas
reserves have been developed. But the infrastructure is so neglected
that large amounts of gas produced in the oil fields are flared off
rather than being stored or utilized through domestic consumption.
The Baghdad government has yet to disclose its plans for developing
Iraq's gas reserves. But it would presumably entail securing agreements
with international energy companies to do that, as has been done with a
dozen or so of the country's major oil fields over recent months.
Last summer Prime Minister Nouri al-Maliki offered to supply Nabucco,
the EU's flagship project for the development of the so-called Southern
Corridor energy route bypassing Russia, with 15 bn cm of gas a year
from 2015. That would have the support of US President Barack Obama's
administration as Nabucco would cut out Russia and Iran from the energy
contest. It would also boost US efforts to isolate Iran's economy and
force it to curb its controversial nuclear program.
The agreement with the EU also envisions an Energy Action Program for
2010-15 -- which jibes with the timeframe mentioned by Maliki --
covering energy efficiency, energy demand management and renewables.
The EU said it was also ready to help Iraq produce a national gas
development plan, develop its electricity grid and "identify sources
and supply routes for gas from Iraq to the European Union."
Turkey, which has long had ambitions to become the regional energy hub
linking Europe to the huge energy reserves of the Caspian Basin and
Central Asia, already takes oil from Iraq's northern Kirkuk fields
through twin pipelines terminating at the Mediterranean port of Ceyhan.
Northern Iraq is believed to contain sizeable gas reserves, which could
be transported togas terminals in Turkey and then pumped to Europe.
Iraq has for some time also been examining the possibility of
developing the Western Akkaz gas field, which could feed European
customers through neighbouring Syria.
Oil Minister Hussain al-Shahristani said in 2008 that Akkaz "has five
wells that are ready to be interconnected and provide the Syrian market
with approximately 50 mm cf per day of Iraq gas."
Akkaz could also feed 450 mm cf of natural gas per day to the planned
Nabucco system.
There is a catch, though: Akkaz is located in western Anbar province, a
flashpoint in the insurgency led by al-Qaida, and is thus extremely
vulnerable to terrorist attack.
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