Back to Home page
Salof  Web pages
      <>><<____________Volume 105:06-March 16--2005________________><<><><>><
           >><<<<_____Editor: Charlie Bartholomew, kryopak@qwest.net_____<>><<
                 >><<>>This issue distributes to 70 subscribers in 24 countries>><
Volume 105:06-March 16--2005
Bolivian Energy Reform Social Pressure Intensifies
Bolivia's Lower House Discusses Royalty Proposals
Egypt Petronas and Partners Export First LNG
Repsol Mum on Bolivian Demand Increased Royalties
S. Korea Finds New Gas Reserves Off East Coast
Volume 105:06-March 16--2005
Alaskan Hydrates Could Hold 100 TCF Gas
Chukchi Sea Potential Alaska nw coast -- 14 Tcf
Gulf Coast. ExxonMobil LNG, Pipe Project
Louisiana LNG Project Sempra LNG
Namibia Offshore EnerGulf Acquires Stake in Block

Social Pressure for Bolivian Energy Reform Intensifies
Efe 3/15/2005 URL:

Union pressure for approval of energy industry legislation obliging foreign oil and gas companies to pay much higher royalties to the state intensified Tuesday in central and southern Bolivia.
In addition to the highway blockades in the Chapare region which have halted the passage of some 1,500 vehicles along the country's main east-west road, protesters closed several routes to the southern provinces of Sucre and Potosi.

The increase in pressure tactics came just hours after Congress restarted its debate on the new Hydrocarbons Law, whose elements - particularly concerning the royalties to be imposed on transnational energy firms - have brought the administration and the legislature, on the one hand, into conflict with the leftist opposition and labor unions.

Bolivia's huge reserves of natural gas are the nation's main resource. Gas industry officials say the industry overhaul - including a proposed 50 percent royalty on energy exploitation - espoused by the leftists amounts to nationalization, and would scare foreign investment out of the country.
Bolivia's Lower House Discusses Royalty Article Proposals
Business News Americas ( 3/4/2005 URL:

Bolivia's lower house has begun the final round of discussions over a key article in the new hydrocarbons bill that would allow the state to receive up to 50% of oil revenues, the ABI government news service reported. The lower house is evaluating three different proposals for royalties and taxes that would give the state a 50% share of oil revenues.

The economic development commission led Santos Ramírez, who belongs to the opposition MAS party, proposes charging international oil companies a 50% royalty.
The government proposes charging an 18% royalty and a 32% tax, while the president of the lower house, Mario Cossío, has proposed a 50% tax.

The lower house has approved just over half of the 142 articles that make up the bill and is debating the most controversial articles such as regional royalties and the industrialization of gas.
Just last week the lower house approved article 90 of the bill, which would open up the country's hydrocarbons transportation sector and thereby eliminate the monopoly held by gas transport company Transredes.
Repsol Mum on Bolivian Demand for Increased Royalties
Efe 3/11/2005 URL:

The Spanish energy company Repsol YPF declined to comment Friday on a demand by a Bolivian leftist leader that it hand over to La Paz half of its profits in the Andean nation, which is home to vast deposits of natural gas.

Evo Morales, head of Bolivia's Movement Toward Socialism and leader of the powerful coca-leaf growers' federation, is engaged in a battle with moderates in his country over the revamping of legislation regulating gas and oil extraction. He said in an interview published Friday in the Spanish daily ABC that Prime Minister Jose Luis Rodriguez Zapatero "should oblige" Repsol to increase the royalties it pays Bolivia to 50 percent.

He said that, because of the 16th-century conquest and subsequent exploitation, Spain "has a historic debt" to Bolivia. He also acuses multinational energy companies operating there, including Repsol, of committing "contraband" because they pay royalties he deems insufficient.

Consulted by EFE, a Repsol YPF spokespeson said only: "We do not comment on press articles."

Repsol last year increased its natural gas production by more than 11 percent due mainly to a 51-percent hike in its Bolivia operation. The firm has said that further investment in the Andean nation depends on the final terms of the new hydrocarbons law there.
Namibia Offshore EnerGulf Acquires Stake in Block
EnerGulf Resources March 10, 2005

EnerGulf Resources has entered into a Memorandum of Cooperation with National Petroleum Corporation of Namibia (NAMCOR, the state petroleum company of Namibia) establishing a working relationship with regard to joint ventures in oil and gas exploration, development and production opportunities in Namibia, in particular Block 1711, and gas to liquids and related opportunities.

Under the terms of the MOC, NAMCOR has granted to EnerGulf an option for up to 25% of NAMCOR's interest in Block 1711,     Related Products    

Basic Well Log Analysis, 2nd Edition offshore Namibia (being a 25% working interest in the Exploration License that will be granted by the Minister of Mines and Energy). Block 1711 is situated in the Namibe Basin off the northern coast of Namibia along the international boundary with Angola.

Two separate exploration prospects have been identified by extensive seismic data on the 8,931 sq. km Block, being the Kunene and Hartmann prospects.

The Kunene Prospect, defined originally by 2D and recently confirmed by a 650 sq. km. 3D seismic program over the prospect, is a huge structure, probably Cretaceous in age and appears to be a carbonate buildup, sealed by a thick Tertiary shale sequence. The structure forms a four way dip closure covering 95 square km., with over 675 to 1,400 m. of vertical closure. Additionally, there are abundant direct hydrocarbon indicators associated with the Prospect. The resource potential has been assessed at up to 8 trillion cubic feet of gas (or 1.4 billion barrels of oil), with a mean value of 5 TCF/G (733 MMbbl/O).

Analogs to the Kunene Prospect are several giant oil and gas fields including El Abra/Tampico (Mexico) with reserves of approximately 3 Bbbl/O, Malampaya/Camago (Philippines) with approximately 4 TCF/G and 200 MMbbl/O and Tenghiz (Kazakhstan) with approximately 8 Bbbl/O.

The Hartmann Prospect, located in the southern part of the Block, has been identified by extensive 2D seismic and is interpreted as a large stratigraphic trap with an area of 343 sq. km and 1,600 m vertical relief. It appears to be a carbonate buildup with the same age of the Kunene carbonate buildup. Its assessed mean recoverable resource potential is estimated to be 2.2 Bbbl/O or 16.4 TCF/G.

Commenting for EnerGulf, Jeff Greenblum, Chairman of the Board, said: "We are looking forward to our new relationship with NAMCOR and the opportunity to develop this exciting Block in such a great country. We are pleased with the pace at which we are moving forward with our Pan-African business plan in building a strong portfolio of high impact exploration opportunities."

Also commenting, Dr. Bill St. John, EnerGulf's Senior Advisor for African Exploration, said: "Block 1711 contains the most attractive undrilled structure that I have seen in over 40 years of exploring for oil and gas internationally."
Egypt Petronas and Partners Export First LNG
Petronas 3/7/2005 URL:

PETRONAS, together with its partners BG International Limited (BG) and Egyptian General Petroleum Corporation (EGPC), have successfully delivered their first liquefied natural gas (LNG) cargo to Asean LNG Trading Company Ltd (ALTCO), a subsidiary of PETRONAS.

The delivery is the partners' first cargo commitment under a five-year sale and purchase agreement signed with ALTCO and BG Gas Marketing Ltd (BGGM). Under the agreement, ALTCO and BGGM will on a 50:50 basis lift 1.45 million tonnes of LNG annually from the Damietta LNG Complex in Egypt, owned by Spanish Egyptian Gas Company (SEGAS). The plant receives its feed gas from the West Delta Deep Marine (WDDM) Concession Area under a separate five-year processing agreement it reached with Egyptian Natural Gas Company Holding (EGAS). PETRONAS has a 50 per cent working interest in the WDDM Concession Area, about 140 kilometers away from the LNG Complex.

The LNG was loaded into an ALTCO's vessel at the Complex last Friday. The cargo is among the first batch of LNG shipments from Egypt and marks the product's first export by PETRONAS and its partners from the country.

PETRONAS, which first entered Egypt in 2001 through a joint venture with Shell in the North Mediterranean Deep Water (NEMED) block, is an active player in the country's upstream and downstream oil and gas activities. It has a strategic interest in the Egyptian LNG Project (ELNG) in partnership with BG, EGPC and EGAS. The ELNG project comprises the development and operation of LNG liquefaction plant and related infrastructure at Idku, approximately 50 kilometers east of Alexandria. The first of the plant's two trains is expected to come on stream middle of this year.
Louisiana LNG Project Sempra LNG
Sempra LNG Signs Heads of Agreement With Eni S.p.A for
 - 20-Year Capacity Agreement With Italian Firm Slated to Begin in 2008
 - Involves Approximately One-Third of Terminal's Total Capacity

SAN DIEGO and MILAN, March 8, 2005 (PRIMEZONE) -- Sempra LNG, a unit of Sempra Energy (NYSE:SRE), today announced it has signed a Heads of Agreement (HOA) that provides Eni S.p.A. (NYSE:E), one of the world's leading oil and natural gas exploration and production companies, with approximately one-third of the capacity of Sempra LNG's Cameron LNG receipt terminal under development near Lake Charles, La.

The non-binding HOA contemplates finalizing a definitive 20-year terminal services agreement by mid-2005.

Under the proposed agreement, Sempra LNG will provide Eni between 400 million cubic feet per day (MMcfd), or 4.1 billion cubic meters (Bcm) per year, and 600 MMcfd, or 6.2 Bcm per year, of capacity in the company's Cameron LNG receipt terminal. Upon its completion in 2008, Cameron LNG will have an initial sendout capacity of 1.5 billion cubic feet per day, or 15.5 Bcm per year, of natural gas.

"This new relationship with one of the world's leading oil and natural gas companies marks another significant step in our corporate LNG strategy," said Darcel L. Hulse, president of Sempra LNG. "We look forward to concluding the definitive terminal service and supply agreements involving Cameron LNG in the near future, so that we can begin delivering new gas supplies through the facility in 2008."

On Jan. 27, 2005, Sempra LNG announced it signed an HOA providing Tractebel LNG North America LLC (Tractebel LNG NA), one of the business divisions of SUEZ (NYSE:SZE), with between 325 MMcfd and 500 MMcfd of capacity of the Cameron LNG receipt terminal. That non-binding HOA contemplates finalizing a definitive 20-year capacity agreement by June 30, 2005.

Cameron LNG is located near the Gulf Coast along the Calcasieu Ship Channel, about 15 miles south of Lake Charles. The project has received the "authority to construct" from the Federal Energy Regulatory Commission and is slated to begin construction later this year.

Cameron LNG is expected to be interconnected with U.S. interstate and intrastate pipelines. These pipelines will have up to 10 billion cubic feet per day of downstream capacity to the Midwest, Southeast, Atlantic and Northeast markets.

Another Sempra LNG project, Energia Costa Azul, is designed to help Baja California, Mexico, meet its long-term energy needs, while, at the same time, providing significant supplies to the U.S. market. It will be the first major LNG receipt terminal built on North America's West Coast. Sempra LNG is the sole owner and operator of Energia Costa Azul. The company has signed a 20-year agreement with Shell International Gas Limited for half of the facility's capacity, or 500 MMcfd. The remaining capacity will be utilized to send out 500 MMcfd of regasified LNG, which Sempra LNG has procured from Indonesia's Tangguh LNG project. Construction at Energia Costa Azul has commenced and is scheduled to begin operation in early 2008.

LNG is natural gas that has been cooled below minus 260 degrees Fahrenheit and condensed into a liquid. LNG occupies 600 times less volume than in its gaseous state, which allows it to be shipped in cryogenic tankers from remote locations to markets where it is needed. At the receiving terminal, LNG is unloaded and stored until it is vaporized back into natural gas and moved via pipelines to customers.

Headquartered in Italy, Eni S.p.A. is an international company operating in the oil, natural gas, electricity generation, petrochemicals, engineering and construction and oilfield services sectors of the energy industry. The company is active in approximately 70 countries and has more than 76,000 employees. The company's 2004 consolidated net sales from operations of 58,346 million euros generated a net profit of 7,274 million euros.

Sempra LNG, a unit of Sempra Global, oversees LNG project development. Sempra Energy, based in San Diego, is a Fortune 500 energy-services holding company with 2004 revenues of $9.4 billion. The Sempra Energy companies' 13,000 employees serve more than 10 million customers in the United States, Europe, Canada, Mexico, South America and Asia.

Sempra LNG is not the same company as the utility, SDG&E or SoCalGas, and Sempra LNG is not regulated by the California Public Utilities Commission.

CONTACT: Sempra Energy Media Contact: Art Larson (877) 866-2066
Financial Contact: Karen Sedgwick (877) 736-7727
Gulf Coast. ExxonMobil LNG, Pipe Project Prelim Environmental Nod
Intelligence Press  March 04, 2005

The Federal Energy Regulatory Commission has given preliminary environmental approval to ExxonMobil Corp.'s proposed Golden Pass liquefied natural gas (LNG) terminal and associated pipeline facilities along the Gulf Coast.
"Approval of the proposed project with appropriate measures as recommended would have limited adverse environmental impact," according to the notice of availability of the draft environmental impact statement on the Golden Pass project [CP04-386, CP04-400]. Before Golden Pass can move forward with its LNG project, it must receive a final environmental impact statement and Section 3 approval.

The proposed facilities would consist of an LNG import terminal and interconnecting pipeline facilities near Sabine Pass, TX, 10 miles south of Port Arthur, with a 1 Bcf/d capacity, expandable to 2 Bcf/d, and targeted for in-service in late 2008.

The proposed marine terminal basin would be connected to the Port Arthur Channel, and would include a ship maneuvering area, two protected berths and unloading facilities capable of accommodating up to 200 LNG tankers each year. Other facilities would include five LNG storage tanks, with a total working volume of approximately 975,000 barrels; and a pipeline system comprised of 77.8 miles of 36-inch diameter mainline, 42.8 miles of 36-inch diameter loop, and 1.8 miles of 24-inch diameter lateral.

ExxonMobil and Qatar Petroleum have signed an agreement for delivery of 15.6 million tons of LNG (2 Bcf) to the United States from Qatar over a 25-year period. The Golden Pass project mirrors another ExxonMobil LNG proposal, the Vista del Sol project on the Texas coast near Corpus Christi.
S. Korea Finds New Gas Reserves Off East Coast
3/6/2005 12:36:00 PM Staff

SEOUL, March 3 Asia Pulse - State-run Korea National Oil  Corp. said Thursday it has discovered additional gas reserves  near the Donghae-1 gas field off South Korea's east coast. The reserves are estimated at 800,000 tons of liquid natural  gas worth US$280 million.

The new gas reverves, is located 5 kilometers southwest of  the Donghae-1 gas field, some 60 kilometers off the  southeastern industrial city of Ulsan. The state-run company plans to exploit the reserves from the  latter half of 2007. It has been exploring in two areas near  the Donghae-1 gas field, including the new gas field, since the  end of last year.

South Korea, which began commercial gas production at the  Donghae-1 field in November for the first time, expects to  produce 400,000 tons of liquefied natural gas annually for 15  years, or 2.2 per cent of the country's current gas  consumption.

South Korea is the world's second-largest importer of gas.
The Donghae-1 field, found in 1998, supplies Ulsan and its  surrounding regions, saving South Korea US$1.2 billion annually  in gas import payments. South Korea aims to meet 10 per cent of its total oil needs  by 2008 through increasing investment in exploration and  development.
Chukchi Sea Potential off Alaska's northwest coast -- 14 Tcf
Second Look at Alaskan Well May Show Big Find
by  Tim Bradner Alaska Journal of Commerce 3/15/2005 URL:

The U.S. Minerals Management Service has revised a geologic analysis of an offshore exploration well drilled in the Chukchi Sea off Alaska's northwest coast in 1989 and now concludes the well may have found a major natural gas discovery. The remote location of the find, about 100 miles west of Barrow, means that it is uneconomic - at least for now.

The analysis now shows the find may have about 14 trillion cubic feet of gas in place, as well as 724 million barrels of gas condensate, a liquid hydrocarbon.

MMS released the report by government geologists James Craig and Kirk Sherwood in February. The revised estimate was completed in December, according to the report.

The Burger prospect was drilled by Shell Western Exploration Co. in the winter seasons of 1989 and 1990. Drillers encountered a significant gas show in a 107-foot-thick section of sandstone rock at a depth of 5,560 feet, according to the MMS report. Shell and its partners were hoping to find oil instead of gas, however. After drilling Burger and two other Chukchi Sea prospects, the company shelved its program. The leases were ultimately turned back to the federal government.

The analysis by Craig and Sherwood indicates that the geologic formation covers 189,800 acres underlying 50 federal lease tracts, none of them now leased. Shell and its partners paid $170 million in a 1987 federal outer continental shelf lease sale for exploration rights on 37 of the tracts.

"Burger could represent the largest hydrocarbon discovery to date on the Alaska OCS," the report indicated. There was a cautionary note, however. "Volumetric estimates for the Burger pool are highly speculative because only one well was drilled on the very large structure," the report said.

An economic analysis showed that it might cost as much as $11 billion to develop the prospect.

Any development would require use of untested arctic technology such as sub-sea wells and yeararound operations in pack ice, the report said. A long-distance pipeline to shore would also be needed as well as a pipeline across the National Petroleum Reserve-Alaska to the Prudhoe Bay area.
Alaskan Hydrates Could Hold 100 TCF Gas
Alaska Journal of Commerce 3/15/2005 URL:

Huge volumes of natural gas are trapped in frozen hydrates on the North Slope, and if gas can be economically produced from the ice-like crystalline solids, some critical problems facing a $20 billion natural gas pipeline could be eased.

A gas hydrate is formed from a mixture of water and natural gas, usually methane. They occur in the pore spaces of sediments, and may form cements, nodes or layers. A research program led by BP Exploration (Alaska) Inc. and the U.S. Department of Energy has concluded that there are 100 trillion cubic feet of gas physically in hydrates that have been located above the now-producing Prudhoe Bay, Milne Point and Kuparuk River oil fields.
"There is now a high degree of confidence in this number," state oil and gas director Mark Myers told state legislators in briefings.

The work by BP, which involved reservoir simulation work and other studies, also concluded that it might be possible to produce gas from the hydrates with conventional wells.

Myers said the simulations indicate that the well could produce at initial rates of 50 million cubic feet per day and stabilize with a long-term production rate of around 5 million cubic feet per day. "That's a very good gas well," he said.

BP was cautious in its assessment of the study results, however.
"Natural gas hydrates represent a very interesting, very prospective area of unconventional energy supply. Our studies are at an early stage, however," said Dave MacDowell, a spokesman for BP. The company isn't counting on hydrates yet, however. "Given the highly uncertain, unproven potential of unconventional sources like gas hydrates, our focus is firmly directed on developing the best natural gas pipeline project possible," MacDowell said.

If a pipeline can be successfully planned based on the known gas reserves, it will set the stage for successfully developing unconventional gas, such as from hydrates, he said.

Still, the state Division of Oil and Gas is very bullish on hydrate prospects. Myers believes that as much as 60 percent, or 60 trillion cubic feet, of the gas physically in the Prudhoe-area hydrates can be economically produced. The state is asking Congress to fund a $70 million research program to do a test production program from the Prudhoearea hydrates.

If the gas can be produced it has big implications for the gas pipeline, Myers said. At present there are about 35 trillion cubic feet of proven gas reserves on the North Slope, most of it in the Prudhoe Bay oil field and the undeveloped Point Thomson gas field 60 miles to the east. That's enough gas to support a large-diameter gas pipeline carrying 4 billion cubic feet per day for about 20 years. While the industry and the state are confident more gas will be found to extend the life of the gas pipeline, the financial community will require the project's economics to be based on the gas that is proven. This essentially means the giant project must be paid off in 20 years.

The tariff, or transportation charge for moving gas, will be based on that 20-year capital recovery requirement.

If more gas is available sooner, such as that from hydrates, the financial community could be persuaded to accept a longer economic life for the project, Myers said.

If the pipeline could be paid off in 30 years instead of 20 years, as an example, the shipping charges would be lower, state revenues and production revenues to producers would be higher, and the huge risk for the project would be somewhat mitigated.

The financial concept is similar to that of a home mortgage with a 30-year loan compared with a 20-year loan. The monthly payments on the 30-year mortgage will be lower than that of the 20-year mortgage.

The work by BP is encouraging to the state because of the particular circumstances in which the hydrates seem to occur in the vicinity of the producing oil and gas fields, Myers said. The fields are laced with layers of shale that create impermeable fault blocks, which means that the hydrates would appear to be contained in many separate small segments. There appears to be layers of free natural gas below the hydrates in many locations.

The BP studies seem to indicate, Myers said, that it might be possible to produce gas from the hydrate by first producing the free gas in the trap just below the hydrate with a conventional production well.

When the reservoir pressure declines in the free gas trap, the pressure would also be drawn down in the overlying hydrate, which would result in gas coming out of the hydrate. The gas could then be produced through the well, Myers said.

"What are methane hydrates?
Hydrates are formed when a cagelike lattice of ice encases molecules of methane, the chief constituent of natural gas. When the hydrate forms, the trapped methane compresses. A cubic centimeter of methane hydrate, when it melts at room temperature, will release about 160 cubic centimeters of methane.

Methane hydrates form in generally two types of geologic environments: permafrost regions where cold temperatures dominate and beneath the sea in sediments of the outer continental margins where high pressure dominate. Hydrates can also form a seal that traps more conventional supplies of natural gas seeping toward the surface.