Natural Gas-Powered Trucks Expected to Boost Fuels’ Popularity

Liquefied natural gas will gain a “significant” market share in the transport sector by 2035, led by demand from trucking, the International Center for Natural Gas Information said.

Demand from road transport, such as trucks, will lead the expansion, followed by the use of LNG in ships and trains, Cedigaz said in a report. The Rueil Malmaison, France-based association has 100 members in 40 countries.

The price gap between diesel and LNG will drive the use of the super-chilled fuel in trucks, while environmental legislation may help make LNG more attractive for the marine sector.

“The cost advantage of LNG relative to diesel currently provides a strong economic incentive in the trucking industry,” the report said.


Global demand for LNG in road transport is estimated at 45 million metric tons a year in 2025 and 96 million tons in 2035 from almost zero in 2010.

Demand for LNG as a marine bunker fuel will rise to 35.7 million tons in 2025 and 77 million in 2035. Use of the fuel in rail may expand from 0.9 million tons in 2025 to 6.2 million in 2035, primarily in the United States, China and India, the report said.

China, which has infrastructure in place, will represent almost half of the market for the use of LNG in trucks, according to the report.

“With at least 100,000 LNG vehicles and 1,100 refueling stations at the end of 2013, China already has a head start over the rest of the world in this nascent market,” the report said. “However, gas price reform in China may slow LNG growth there. LNG should also carve out a significant market share in the U.S., Europe and the rest of Asia.”

The use of LNG as a marine bunker fuel will be driven by emissions regulations, which mean ship operators have to switch to more expensive oil-based fuels, implement costly flue-gas treatment technologies or switch to LNG, the report said.

Starting Jan. 1, all vessels operating in the Baltic Sea and North Sea, including the English Channel, will have to use fuels with a maximum sulfur content of 0.1%, according to the European Maritime Safety Agency.

“However, the development of LNG as a transport fuel faces a number of challenges and will have to go hand in hand with the development of fueling infrastructure,” Cedigaz said.

Source: Bloomberg

Forget Electric Cars. Natural Gas Is Powering Vehicles in Texas

At Mike Scully's Apple Towing in Houston, just one of their big Ford F650 tow trucks saves more gasoline each year than 20 Nissan Leaf electric cars. When it comes to reducing carbon dioxide, nitrogen oxides and other pollutants, Mike's F650s are equally impressive, and his fuel cost per mile is about the same as that of a four-seat Jeep Wrangler. What is Apple Towing's secret? The F650 tow trucks run on natural gas, which they refuel for less than $1.70 per gasoline-gallon equivalent, or gge.

PIRA Energy Group estimates that natural gas in transportation will approach 800 million gges this year. Do some simple math and it quickly becomes apparent that natural-gas vehicles (NGVs) will displace 10-12 times more gasoline and diesel than the 250,000 electric cars currently on the road. When complete, Apple Towing's small fleet of 24 natural-gas tow trucks will displace more gasoline than around 700 Chevy Volts. And here is a nice side benefit: Those Volts would cost federal taxpayers a whopping $5.3 million in subsidies while Mr. Scully's F650 Fords cost them nothing.

For more than a decade, policy makers and the automotive press have been enamored of electric vehicles, lavishing them with attention and incentives. All this even though when it comes to reducing oil dependence, pollution and fuel cost, the transition of America's truck fleet to natural gas is the hands-down winner.

Mention NGVs to a Washington policy wonk, however, and he will immediately start chattering about chickens and eggs. Received wisdom tells us that natural-gas vehicles won't sell until a huge national refueling infrastructure is built (and refueling infrastructure cannot get built without vehicles). Apple Towing's Mr. Scully, not being a poultry farmer and thus unaware of this seemingly insoluble dilemma, asked our company, Nat G Solutions, to upgrade his F650s and at the same time install a natural-gas fueling compressor in his parking lot and hook it up to his city gas line. The great infrastructure crisis disappeared.

The other solution to the infrastructure challenge lies in the new generation of multi-fuel systems found on most modern NGVs. For trucks with gasoline engines, most natural-gas upgrades allow them to run on either natural gas or gasoline. These bi-fuel vehicles are user-switchable and they automatically revert to gasoline if the compressed natural gas runs out or the system has a fault.

For diesel trucks, a new generation of retrofit systems—from companies like NGV Motori USA and Landi Renzo  —allow us to upgrade the big diesel engines to run on a 60/40 blend of natural gas and diesel, which is combined in real-time inside the engine. If the compressed natural gas runs dry, the truck switches back to 100% diesel and keeps on driving. This dual-fuel approach is now opening the door for long-haul natural-gas trucking without the need for multibillion-dollar infrastructure incentives or even the need to go out and buy new tractor-trailers.

The multi-fuel approach adopted by the NGV industry means that a driver never gets stuck if he runs out of natural gas. This, combined with the more than 1,500 commercial natural gas stations expected by the end of next year and the hundreds of private fueling solutions being installed, means the chicken-and-egg question is headed back to freshmen biology where it belongs.

Ford has been leading the way in building "gas prepped" trucks—typically a $350 option—which enables any Ford-certified "qualified vehicle modifier" to install an approved natural-gas system without affecting the original power-train warranty. Nearly the entire F-series line, from F150s to F650s, is now available in a natural-gas-ready version as are the Transit and E-series work vans. GM  has taken a more incremental approach, with fewer models available so far, but the industry has responded by creating aftermarket EPA-certified upgrades for nearly every GM truck and SUV on the market.

Most of this new technology remains aimed squarely at the work-truck market, exactly where it ought to be focused. This segment drives the most miles, drives the biggest vehicles, and burns the most fuel. Perhaps it is where alternative vehicle policy ought to have been focused all along. Consumer-oriented models available today (the Chevy Equinox, half-ton pickups, SUVs, and a few small sedans) will become more numerous over time. For now, however, the most sensible policy approach is to encourage companies like Apple Towing to move their big-truck fleets to natural gas and to unlock the economic and environmental benefits of America's gas boom.

Source:online.wsj.com

European Union Prepares for Iran Sanctions Lift with Natural Gas Import Plan

The European Union is working on a plan to import natural gas from Iran in the event that sanctions on Tehran are lifted, according to Reuters news agency.The EU is involved in a standoff with Russia, a significant natural gas supplier, over its role in the Ukraine crisis.

Europe relies on Russia for around a third of its gas needs. Half of the supply is imported via Ukrainian pipelines.

Along with the United States, the EU imposed economic sanctions on Russia after it annexed Crimea in March 2014. The allies have accused Moscow of fuelling the ongoing conflict in eastern Ukraine by supplying weapons and fighters, a charge that Russia has denied. Moscow has responded to sanctions by banning imports of Western food, raising fears in Europe that Russian retaliation could extend to its natural gas.

While the bloc has sought to decrease its reliance on Russian natural gas, it could be vulnerable to supply shortages if Russia shuts off gas deliveries in the coming months.

"Iran is far towards the top of our priorities for mid-term measures that will help reduce our reliance on Russian gas supplies," an EU Commission source said, as quoted by Reuters.

"Iran's gas could come to Europe quite easily and politically there is a clear rapprochement between Tehran and the West," the source added.

The EU tightened sanctions on Iran in 2012 over Tehran's nuclear programme, imposing an oil embargo and restricting access to financial services and energy technologies.

However, under the leadership of President Hassan Rouhani, Iran has sought to improve relations with the West and has launched talks with key Western powers over its disputed nuclear programme.

Iran is thought to have the world's second largest gas reserves behind Russia, while the thaw in diplomatic relations between Tehran the West could open the way for increased economic ties."High potential for gas production, domestic energy sector reforms that are underway, and ongoing normalisation of its relationship with the West make Iran a credible alternative to Russia," said a paper prepared for the EU parliament, as cited By Reuters.

Yet, the same paper relayed the short-term difficulties involved with importing Iranian natural gas, including the sanctions and a lack of infrastructure in place.

Source: ibtimes.co.uk/

Russia Uses Its Natural Gas to Play the China Card, Again

Ahead of a key meeting of global leaders in Beijing, Russian officials say that negotiations are heating up with China for a possible second major energy deal this year. If signed, the pact would authorize a new pipeline that could double the amount of natural gas Russia is scheduled to export to China and elevate Russia into a major supplier there.

It would also expand the market for exports from Russia, which has been hit hard by American and European Union sanctions over its interventions in Ukraine. About 80 percent of Russia’s piped natural gas now goes to Europe.

Last week, Alexei Miller, chief executive of the Russian state-owned gas company Gazprom, told President Vladimir V. Putin that the company “plans to sign a contract to supply China with 30 billion cubic meters of natural gas” over 30 years, according to a transcript released by Mr. Putin’s office. During the meeting, Mr. Miller also raised the possibility of Russia supplying “up to 100 billion cubic meters of gas to China.”

A report from Xinhua, the Chinese state news agency, on Mr. Miller’s meeting with Mr. Putin on Sept. 17 said that an agreement with the state-owned China National Petroleum Corporation would be signed in November. President Xi Jinping of China is set to welcome world leaders, including Mr. Putin and President Obama, to Beijing for the Asia-Pacific Economic Cooperation meeting on Nov. 10-11.

PetroChina, the listed arm of C.N.P.C., which manages most of the parent company’s pipeline business, said on Wednesday that it could not comment because the matter concerns C.N.P.C. C.N.P.C. could not be reached for comment on Thursday, but a company news release said that Mr. Miller and Wang Dongjin, C.N.P.C.’s vice president and PetroChina’s president, had discussed “the initiation of the western route project” on Sept. 1.

That was the day construction started on the China-Russia East Route Gas Project, the product of an agreement China and Russia signed in May for a pipeline connecting natural gas fields in eastern Siberia to China’s energy-hungry, industrialized east. Under that agreement, the pipeline will supply China with Russian gas for 30 years starting in 2018, with the flow expected to reach 38 billion cubic meters of gas a year by the sixth year of operation.

Last year, China consumed about 161.6 billion cubic meters of natural gas, of which 51.9 billion cubic meters was imported. In April, Beijing announced that it wants to increase natural gas consumption to 420 billion cubic meters annually by 2020. The government hopes by then to raise natural gas use to 10 percent of its energy mix, up from 6 percent, and reduce the country’s overwhelming dependence on highly polluting coal.

Despite China’s growing demand for energy, the western route, or Altai, pipeline would have fewer benefits for China. Based on the existing draft from Gazprom, the pipeline would funnel gas from western Siberia to China’s sparsely populated west. And it would draw on the same gas reserves that Russia exports to Europe, allowing Gazprom to serve as a swing supplier between Europe and Asia. It is unclear how comfortable Chinese leaders would be at that prospect.

But it is clear why Russia has been vocal about such an arrangement. It would have important advantages for Russia, which has been looking for new markets outside Europe. A second major deal with China, the only member of the United Nations Security Council to not censure Russia over its annexation of Crimea from Ukraine, would reduce its vulnerability to punitive actions from the West.

“This is 21 century’s invisible but genuine economic war between Russia and the U.S./E.U.,” said Keun-Wook Paik, an expert on Chinese-Russian energy relations at Chatham House, the London-based think tank. “If the Altai export is implemented, it will have a much more powerful impact against international oil companies than that of U.S./E.U.’s sanctions against Russia.”

“President Putin is fully aware of the fact that China has secured enough gas from Central Asian republics, but looks determined to show Russia has a very powerful vehicle that can respond to Washington’s and Brussels’ sanctions policy against Russia in the wake of the Ukraine crisis,” Mr. Paik said.

A commentary published last week by the Russian news agency RIA Novosti warned: “In several years, Europe will have to outbid China and avoid angering the Kremlin in order to keep the cheap Russian gas flowing.” It said the new contract “is expected to be signed in November.”

Russia’s eagerness for a deal gives China greater leverage, Mr. Paik said.

“The Altai gas deal is not Gazprom-C.N.P.C.-level deal, but a Putin-Xi Jinping-level deal,” he said, and the final terms and timing will “depend on President Xi’s stance.”

This means that Russia must be prepared to offer China major incentives, Mr. Paik added. One possibility might be to give China a stake in the western Siberia gas fields that are likely to supply the route’s gas. “The equity gas will be a very attractive bait for China,” he said.

Missing from official announcements has been any discussion of the environmental and cultural consequences of the new pipeline’s construction. The current plan for an Altai pipeline plan would stretch over 1,600 miles and pass through the Golden Mountains of Altai, a Unesco World Heritage Site. Last year, the United Nations body threatened to place it on the List of World Heritage in Danger if the pipeline construction went ahead, The Moscow Times reported.

According to the paper, the pipeline route would cross the Ukok Plateau, which is considered sacred by the indigenous population and may contain important archeological sites. The region also contains wildlife reserves that are the habitat of several endangered species, including the snow leopard, the black stork and the argali, or mountain sheep.


The area is “absolutely unique from the point of view of its natural beauty, and historical and cultural values,” Andrey Petrov, World Heritage campaign coordinator for Greenpeace Russia, said by email. “Any construction means the presence of heavy machinery that will definitely destroy the very thin layer of soil which could be naturally restored only after hundreds of years.”

Source: blog.nytimes.com

RIL gas output from KG-D6 likely to improve: UBS

Reliance Industries' eastern offshore KG-D6 gas output is likely to improve to 15 million standard cubic meters per day by second half of current fiscal as it completes work-overs on the main fields, UBS said.

Gas production from Krishna Godavari basin block has dropped to just over 12 mmscmd and RIL is carrying out workover on main Dhirubhai-1 and 3 gas fields.

In a research note, UBS said it expects RIL's "core petrochemical, refining and domestic exploration and production businesses to improve over the next two years".

"We think an increase in gas price hike is likely soon, and the government focus to encourage domestic production and problems with KG-D6 should be resolved shortly and gas production visibility should improve," it said.

RIL's USD 13 billion capex including USD 8.5 billion in expansion of petrochemical units, was on track. Also refinery cost advantages will increase with pet-coke gasifer becoming operational by 2016, enabling steady USD 8-plus refining margin.

"KG-D6 gas production to improve further to 15 mmscmd with work-over at D1-D3 complete by 2HFY15," it said, adding that a gas price increase to USD 6.5-7.0 per million British thermal unit by next month from current USD 4.2 will drive investments for developing R-series, MJ1 and commerciality approvals for satellite fields in KG-D6 and discoveries in block NEC-25.

RIL has two refineries in Jamnagar, Gujarat, with a capacity of 1.2 million barrels per day. It also has an integrated petrochemical facility and a 60 per cent interest in KG-D6.

It has a presence in shale gas in the US, as well as retail and telecom services, where it is in the process of scaling up operations over the next two to three years.

"We expect refining margins to hold into 2014 and 2015 with some closures and better demand. Petchem spreads are likely to be under pressure, but we believe capex-led volume growth will be a key driver for profitability along with its cost advantages," it said.

On E&P, UBS expected most issues to be resolved, positive reforms to continue, and implementation to pick up with the new government focusing on increasing domestic production. An appreciating currency would, however, be a dampener.

"We expect RIL's core petrochemical, refining and domestic E&P businesses to improve over the next two years. We think an increase in gas price hike is likely soon, and the government focus to encourage domestic production and problems with KG-D6 should be resolved shortly and gas production visibility should improve," it said.

Source: ET

Russia Seeking Alternatives to Boost Oil and Gas Production

EIA data shows that Russia was the world’s largest producer of crude oil (including lease condensate) and the world’s second-largest producer of dry natural gas in 2013. In 2013, production of crude oil and lease condensate grew by 1.3%, and production of dry natural gas grew by 2.1%.
Most of Russia’s crude oil and natural gas production occurs in West Siberia, a part of central Russia that stretches from the northern border of Kazakhstan to the Arctic Ocean.
In 2013, production of oil and natural gas in West Siberia totaled 6.2 million barrels per day of crude oil and 21.1 trillion cubic feet (Tcf) of natural gas, respectively, down from peak production levels in the 1980s.

Russian energy companies Rosneft and Gazprom Neft have increased the efficiency of older fields in West Siberia by implementing technologies like multiple leg horizontal drilling and multistage hydrofracking; however, further increasing West Siberian production will require substantial investment. Consequently, Russia is considering developing its significant but less-accessible reserves in previously undeveloped regions.

Russia recently began offshore oil production in the Arctic for the first time. Gazprom Neft began commercial operations at its Prirazlomnoye rig in the Pechora Sea in December 2013, and ExxonMobil-Rosneft began exploratory drilling at the Universitetskaya-1 well in the Kara Sea in August 2014. According to Gazprom Neft and ExxonMobil-Rosneft, the two formations are estimated to hold 600 million and 9 billion barrels of technically recoverable oil, respectively.

Along with increasing production, Russia seeks to diversify its export market by meeting growing energy demand in China. Russian energy exports have historically been consumed by developed markets in Europe, but high economic growth has led to increased demand from developing markets in Asia, particularly China. Gazprom earlier this year finalized a deal to supply China with up to 1.3 Tcf per year of natural gas starting in 2018. The natural gas will mainly come from fields in East Siberia.

The Russian government has offered tax holidays and lower export tariffs to Russian companies that have expanded operations in East Siberia and the Northwest and Arctic region. The startup of the East Siberian Vankor oil and natural gas field in 2009—the largest oil discovery in Russia in nearly three decades—contributed to Russia’s increase in oil production since 2010. Offshore reserves in the Far East could also play a larger role in offsetting declining production in older fields.
U.S. and European Union (EU) sanctions (implemented prior to September following Russia’s involvement in the separation of Crimea from the control of Ukraine, and its subsequent involvement in support of separatist activities in parts of Eastern Ukraine) restrict Russia’s access to foreign technology and capital, and prevent Russian energy companies from entering into joint projects with foreign energy companies.

“These sanctions are likely to have a noticeable impact on Russia’s longer-term development of its significant shale and Arctic resources, as well as on existing projects that need substantial investment, such as the Vankor field. More recently, additional U.S. and EU sanctions have been applied, raising the possibility of larger and earlier impacts on development and production in Russia’s energy sector,” EIA said.

Source: http://worldmaritimenews.com/

EIA: Russia looks beyond West Siberia for future oil and gas growth

Russia was the world's largest producer of crude oil (including lease condensate) and the world's second-largest producer of dry natural gas in 2013. In 2013, production of crude oil and lease condensate grew by 1.3%, and production of dry natural gas grew by 2.1%. Most of Russia's crude oil and natural gas production occurs in West Siberia, a part of central Russia that stretches from the northern border of Kazakhstan to the Arctic Ocean. However, new technologies, growing Asian markets, and Western sanctions have the potential to shift the regional balance of Russian oil and natural gas production in the long term.

In 2013, production of oil and natural gas in West Siberia totaled 6.2 million barrels per day of crude oil and 21.1 trillion cubic feet (Tcf) of natural gas, respectively, down from peak production levels in the 1980s. Russian energy companies Rosneft and Gazprom Neft have increased the efficiency of older fields in West Siberia by implementing technologies like multiple leg horizontal drilling and multistage hydrofracking; however, further increasing West Siberian production will require substantial investment. Consequently, Russia is considering developing its significant but less-accessible reserves in previously undeveloped regions.

Offshore production. Russia recently began offshore oil production in the Arctic for the first time. Gazprom Neft began commerical operations at its Prirazlomnoye rig in the Pechora Sea in December 2013, and ExxonMobil-Rosneft began exploratory drilling at the Universitetskaya-1 well in the Kara Sea in August 2014. According to Gazprom Neft and ExxonMobil-Rosneft, the two formations are estimated to hold 600 million and 9 billion barrels of technically recoverable oil, respectively.
New export markets. Along with increasing production, Russia seeks to diversify its export market by meeting growing energy demand in China. Russian energy exports have historically been consumed by developed markets in Europe, but high economic growth has led to increased demand from developing markets in Asia, particularly China. Gazprom earlier this year finalized a deal to supply China with up to 1.3 Tcf per year of natural gas starting in 2018. The natural gas will mainly come from fields in East Siberia.

Incentives. The Russian government has offered tax holidays and lower export tariffs to Russian companies that have expanded operations in East Siberia and the Northwest and Arctic region. The startup of the East Siberian Vankor oil and natural gas field in 2009—the largest oil discovery in Russia in nearly three decades—contributed to Russia's increase in oil production since 2010. Offshore reserves in the Far East could also play a larger role in offsetting declining production in older fields.

Sanctions. U.S. and European Union (EU) sanctions (implemented prior to September following Russia's involvement in the separation of Crimea from the control of Ukraine, and its subsequent involvement in support of separatist activities in parts of Eastern Ukraine) restrict Russia's access to foreign technology and capital, and prevent Russian energy companies from entering into joint projects with foreign energy companies. These sanctions are likely to have a noticeable impact on Russia's longer-term development of its significant shale and Arctic resources, as well as on existing projects that need substantial investment, such as the Vankor field. More recently, additional U.S. and EU sanctions have been applied, raising the possibility of larger and earlier impacts on development and production in Russia's energy sector.

Source: pennenergy.com

Clarify stand on gas pricing policy, SC tells govt

The Supreme Court on Thursday asked the government to spell out its policy on the pricing of gas as it was told that a committee on gas pricing policy has been set up and will take a call by Sep 30.

A bench of Justice T.S.Thakur, Justice J. Chelameswar and Justice Kurian Joseph sought the government's response as it was told that government was having a relook on the policy pursued by the earlier UPA government and had set up a committee of secretaries to suggest a policy on gas pricing.

Asking the government to file an affidavit stating clearly its policy on gas pricing, the court asked the petitioner, Left leader Gurudas Dasgupta to have faith in the government. It fixed Nov 14 as next date of hearing.

"You don't have faith in the new government. The government is accountable to parliament. New government is in power. You have to repose confidence on something. Should court sit on judgment on revision of gas price," the court said as Dasgupta's counsel urged the court to ask the government if it was going to continue with the policy of the earlier UPA government or have a new policy.

The court said this as it took up for hearing two petitions by the former communist lawmaker and NGO Common Cause who had challenged the previous government's decision to double price of the gas $ 4.2A per million British thermal unit to $ 8.4 mmbtu. The last hearing of the matter took place April 29.

The petitioners had moved the court in July 2013 seeking the quashing of the government decision to double the gas prices alleging that it was aimed to benefit Reliance Industry Ltd. for its gas from D6 block of KG basin. NGO Common Cause had sought the cancellation of the Production Sharing Contract between the government and RIL.

The petitioner had contended that the previous government's decision that was come into effect from April 2014 was "arbitrary, malafide, unreasonable, and based on extraneous considerations" that would give windfall gains to RIL.

However, the hike in gas prices had to be shelved as Election Commission stepped in view of then on going elections to Lok Sabha.

Source: First Post

A Kelkar Committee model could be the best option for oil and gas pricing

Media analyses of the Kelkar Committee on reducing import dependency in oil and gas have focused on the committee's suggestions on gas pricing. But it has also proposed new models for exploration and production contracts to reduce disputes and corruption, while improving bidders' interest in new exploration blocks.

For decades, India has signed production-sharing contracts (PSCs), which are common globally. If successful bidders find any oil or gas, they first get enough 'cost oil' to recover their costs, then they get 'profit oil' that is a multiple of costs, and then 'residual oil'.

Contracts are won by bidders offering the government the highest shares in these three phases: cost oil, profit oil and residual oil.

Waiting for Windfall 

But controversies over Reliance's Krishna-Godavari (KG) field have led to accusations that PSCs have been manipulated to artificially inflate costs, increasing the operator's share of cost oil and profit oil.

Critics pooh-pooh Reliance's claim that technical problems have caused a catastrophic fall in gas production from the KG basin, alleging that the company is simply slashing production at today's low process in order to jack up production once the government decrees an overdue price increase.

Reliance has also submitted plans to invest billions to raise production again. Critics suspect this is another way of inflating costs and, thus, Reliance's share of gas. The petroleum ministry has been paralysed by the swirl of accusations.

Meanwhile, foreigners have lost interest in bidding for Indian fields — the political risks and uncertainties are unacceptable.

Simple vs Complex Model 

The Narendra Modi government has invited public comments on a new model contract. This is quite complex, based on revenue-sharing linked to production. Companies will have to specify the amounts to be shared with the government at different stages and different prices, with different rules for different drilling conditions.

This is a complex variation of the revenue-sharing model proposed by the Rangarajan Committee. That provided bidding for a flat share of production, without getting into calculations about true costs and true multiples for calculating profit oil. This aimed to eliminate complex calculations and disputes.

However, very few countries go for flat revenue-sharing contracts, because if fields turn out to be smaller than expected, or costs higher than expected, production will become uneconomic. Flat revenue-sharing contracts might attract decent bids in blocks with excellent geological prospects (as in Saudi Arabia), but Indian geological conditions are poor by global standards.

The one field that promised a lot, the KG basin, has proved a disappointment. So, revenue-sharing contracts may discourage all but very low-share bids. These may provoke accusations that fields have been given away too cheaply, so an approach aimed at ending controversies could create fresh ones. The Kelkar Committee proposes two alternatives.

The first model just tweaks the existing PSC. In this model the managing committee and directorate general of hydrocarbons focus only on standards and best practices, without assessing costs. Oversight will be left to the tax authorities, who already oversee other forms of government share such as royalties and taxes.

Kelkar's second model is a supernormal tax model. This gives the government no share of oil or gas at all. Instead, the government gets just royalties and taxes when profits are limited. When profitability crosses a certain threshold, a supernormal tax kicks in, providing a much higher government take.

Supernormally Simple 

This model eliminates the need for detailed calculations and disputes on true costs and profit oil shares. It is by far the simplest and cleanest model. The committee says the threshold for levying a supernormal tax could be two to three times the yield on 10-year gilts.

The threshold rate could also be a biddable item, with the highest bidder winning. I favour simplicity and speed. The government's new proposal looks a bit complex, inviting disputes and litigation. Kelkar's first model will not do either: it is too close to the existing one.


The Rangarajan model of revenue-sharing is better, but could inhibit bids for areas with small fields. Kelkar's supernormal profits model looks best. It promises to be simple, fast and dispute-free. It will encourage bids for blocks with modest prospects, combined with a big government share if an unexpected bonanza turns up.

Some politicians will feel comfortable only if they have a physical share of oil or gas, to be allotted according to political priorities. Very well, let's modify the supernormal tax model to mandate a flat 10 per cent government share of all oil and gas found. That will not inhibit bids for small fields, and still remain simple and dispute free.

The Kelkar Committee strongly opposes retrospective changes after a contract has been signed. It also wants contracts to be extended to the full lifetime of fields where hydrocarbons are found. This will incentivise explorers to follow judicious techniques that maximise total oil recovery.

Limited contract timelines (as proposed by the government) will encourage flogging a field for quick gains, even if this seriously damages total recovery. Contracts should stand automatically cancelled if there is no production for five years.

Source: ET

China's sputtering economy crimps gas demand, cuts spot LNG buys

China's gas demand growth is expected to ease to its slowest in three years in 2014 and dip again next year, as a slowing economy and an ill-timed hike in prices keep gas demand at levels well below bullish forecasts.

The slowdown indicates demand will struggle to meet levels forecast by the International Energy Agency, which said in June that China is entering a golden age of gas, and could make life hard for new gas projects hoping for spot sales to China.

PetroChina, one of the country's two top gas importers, has cut shipments of spot liquefied natural gas (LNG), an industry source said, and sees demand growth under pressure for at least three years.

China accounted for half of the world's additional gas usage last year and the scaling back of spot LNG purchases comes as at least four Australian LNG projects are due to start operations in 2014 and 2015.

"If we don't need to import, we won't. As long as our LNG terminals have enough feedstock, we won't need much spot supply," said a source with direct knowledge of PetroChina's gas operations.

The IEA expects China's gas consumption to rise 90 per cent within the next five years to reach 315 billion cubic metres (bcm) by 2019, offsetting slower growth in Europe and elsewhere. That would imply an annual growth rate of 17.5 per cent.

However, China's top oil and natural gas producer, China National Petroleum Corp, sees apparent natural gas consumption climbing just 9.5 per cent, down 4.7 per centage points from 2013.

PetroChina's spokesman Mao Zefeng declined to comment on the firm's spot LNG business but he said at a conference last week that China's gas consumption growth would ease further in 2015.

"In the short term, the gas price reform and slowing economy will affect demand ... but we believe demand growth will be restored three to five years later," Mao said.

As demand in China slows, PetroChina has ample supplies due to additional cargoes that have started to arrive since late 2013 under a term supply deal with Qatargas, company sources said.

The firm has already shut two loss-making gas liquefaction plants and is also reviewing its multi-billion-dollar push to produce LNG to fuel trucks and ships in China.

Traditional energy sources, crude oil and coal, have already fallen victims to China's slowing economy, with diesel set to post its first fall in more than a decade this year and steam coal prices tumbling to a six-year low. Although gas demand has been bolstered by China's pledge to clean up its smoggy skies, higher local production, long-term LNG purchases and more pipeline imports means supply growth has outpaced consumption at a faster rate than last year.

Total gas supplies to China, including imports and domestic production, rose 9.6 per cent in the first half of this year to reach 91.5 bcm. That compares with an apparent consumption growth of 8.9 per cent, data from top planning agency National Development and Reform Commission ( NDRC) shows.

Based on that annualised growth rate of 8.9 per cent, total demand would reach 184.2 bcm at the end of 2014.

A series of gas price hikes, totalling 33 per cent since mid-2013 as part of Beijing's long-term market reform, have also posed as a double whammy for industrial users.

"Ultimately higher prices are going to impact demand," said Neil Beveridge, an analyst with Sanford C. Bernstein & Co.

"They can't have high demand growth with international energy prices."

Source: ET

Nigeria to Triple Natural-Gas Output for Power Supply

Nigeria aims to almost triple its natural gas production capacity by 2020 to help meet the West African nation’s power and industrial development needs, Oil Minister Diezani Alison-Madueke said.

Africa’s biggest oil producer wants to increase gas capacity to 11 billion cubic feet per day, from about 4 billion cubic feet now, Alison-Madueke said in an interview yesterday in Abuja, the capital.

“We are moving very aggressively into gas for industrialization purposes,” she said. “At the same time we have to work very, very critically on our gas-to-power needs.”

Nigeria generates less electricity than is needed by its population of about 170 million, the continent’s largest, and has regular blackouts that the government says are a bottleneck for economic growth. A shortage of gas for delivery to power plants is one reason why generation is below capacity.

Royal Dutch Shell Plc and Nigeria LNG Ltd. are among companies with interests in gas production in Nigeria.

“Gas infrastructure is incredibly capital intensive,” Alison-Madueke said. She declined to say how much money Nigeria needs to build the pipelines, water-treatment plants and other resources needed to deliver gas to electricity generators.

“All intending investors are fully aware of the scope of funding that will be required,” Alison-Madueke said in an interview to be broadcast on Bloomberg Television Africa. “We are seeing from both the East and the West interest in our gas investments.” She didn’t identify any countries or companies.

Petroleum Bill

Central to plans to develop Nigeria’s hydrocarbons industry is the Petroleum Industry Bill, proposed legislation that aims to increase the country’s share of profit from oil pumped off its shores. The bill, first sent to parliament five years ago, would also pave the way for the privatization of the state-owned Nigerian National Petroleum Corp., inside one of whose twin towers in Abuja the minister’s office is located.

“Whilst it is a most critical bill in terms of transformation, accountability in the sector, at this point in time all we can do is work as closely as possible with our counterparts in the National Assembly, the legislators, to try to ensure we support the bill,” Alison-Madueke said.

Source: Bloomberg

Sell gas at top prices like coal blocks, spectrum

The Kelkar Committee has produced a road map for a market-determined price for natural gas. Inter-generational equity, it says, requires non-renewable resources like gas to be sold to the highest bidder. A lower price deprives future generations of their full entitlement to national resources. This novel argument strengthens the simple logic of auctioning resources to promote efficiency and governance. Selling below auction price is favouritism. The CAG estimated huge losses implicit in the failure to auction spectrum and coal blocks. Similar huge losses flow from failure to auction gas, eroding royalties, taxes and the government’s gas share.

India imports 30% of its gas needs, and this may soon become 70%. Kelkar emphasizes a top price for efficient use and to incentivize all-out exploration. The government must honour exploration contracts saying that any gas found can be sold at the market price. Only then will India get more bids, at higher rates, for new fields. Many critics who want auctions for spectrum and coal oppose auctions for gas. What hypocrisy! This often reflects a desire to hit the Ambanis. Now, the Ambanis and crooked politicians may have committed a thousand sins. But good governance means finding hard evidence and prosecuting Mukesh Ambani. It does not mean violating his contracts. Contract violation makes India’s name mud in the global oil business. That’s why few bids have come in recent exploration rounds under NELP (New Exploration Licensing Policy), whereas over a hundred companies bid at earlier auctions.

All contracts say the government should certify that gas sales were at an “arm’s length” price (a competitive price, not a concessional one for friends). This clause has been twisted into an excuse for price control. The history of this is very smelly.

When the NTPC sought global bids for gas for new plants in Gujarat, Reliance won with a bid of $ 2.38/unit. That was a market-driven price, and should have been the model for the future. But Reliance had blundered. Exploration costs quadrupled by 2008. Anil Ambani claimed Mukesh inflated drilling costs, something being investigated. Rising costs meant Reliance would lose heavily in supplying the NTPC at $2.34/unit. Then, Mukesh and Anil quarrelled and split. Anil said the partition agreement entitled his plants to get gas at the cheap NTPC price. Mukesh was in deep trouble. Then petroleum minister Murali Deora intervened. The NTPC price had not yet been ratified as an arm’s length price by the government, an oversight that became an excuse to upend the whole auction. A cabinet committee was set up to decide the “market price”. Only in India is a “market price” decided by the cabinet or official committees, not the marketplace! The government fixed the price at $4.20/unit for five years. In no true market are prices fixed for five years — they fluctuate every minute.

This price fix benefited Mukesh, at the expense of Anil and the NTPC. But the benefit was temporary. Soon after, the global price of gas skyrocketed, up to $15/unit in Asia. The Rangarajan Committee in 2012 suggested a new price formula based on prices in various international hubs. This came to around $8/unit. But India is currently importing gas at up to $14/unit. Scarce goods are priced on par with imports in a free market. Yet critics have denounced $8/unit as a scam benefiting Mukesh, besmirching honourable experts like Rangarajan and Kelkar.

Mukesh produces just 10% of India’s gas today — most comes from the public sector. The ONGC has long demanded at least $7/unit to make its offshore fields viable. But the critics are obsessed with somehow nailing Mukesh. For this they will happily destroy contracts, ruin India’s reputation globally, reduce the number and price of bids for future exploration contracts, leave India short of gas, jeopardize the trade gap, make fresh exploration and production uneconomic, and deprive the government and its oil companies of massive revenues.

Some analysts say gas prices vary hugely from the US to Japan, so there’s no such thing as a market price in India. Really? The price of cement, sand and other items varies hugely from country to country, but does that mean markets for these don’t exist in India? Willing buyers and sellers set prices in each market, and these vary across regions. Newspaper prices vary as much as gas prices from country to country, but that’s no reason for government committees to set the market price of Indian newspapers. The Kelkar Committee sends a clear message — for morality, efficiency and good governance, sell to the highest bidder. The government will reap enormous profits, and can subsidise any sector it deems deserving.

Source: TOI

RIL gas field investments depend on acceptable pricing: Niko

Reliance Industries' USD 10 billion investment in new fields off the east coast depends on the government approving acceptable gas price, its junior partner Niko Resources said.

RIL has an array of natural gas discoveries in the Krishna Godavari basin KG-D6 block as well as NEC-25 area off the Odisha coast and it along with its partners BP plc of UK and Niko has detailed plans to bring them to production in the next few years.

Canadian Niko Resources in its annual general meeting (AGM) presentation yesterday stated that "planned development projects in India (are) dependent on acceptable gas pricing."

While the previous UPA government had approved a formula that would have doubled natural gas rates to USD 8.4 per million British thermal unit, the present dispensation is reviewing it and is likely to take a decision by month-end.

Niko said final investment decisions to develop R-Series gas fields as well as satellite discoveries in KG-D6 block is "waiting on favourable resolution of gas price."

The partners say new field developments are economically unviable at the current price of USD 4.2.

The Canadian firm said final investment decisions on developing gas finds in NEC-25 block is "waiting on favourable resolution of gas price."

With a decision on gas price hike, which was due on April 1, being delayed, Niko said it along with RIL and BP had in May field an "arbitration seeking market pricing as per terms of D6 Block PSC."

Yesterday, BP India head Sashi Mukundan said the delay in gas price hike implementation was frustrating and was holding back investments.

"We are ready to go ahead with our first project which is probably a USD 4 billion project. We are getting ready to potentially move that forward (but) are waiting for the gas price decision. So is that frustration, yes because it was decided last June 2013," he had stated.

The UPA government had in June 2013 approved a new gas pricing formula, which would have doubled the rate on its implementation from April 1, 2014.

The formula was notified in January 2014 but the Oil Ministry delayed announcement of a new rate, during which time general elections were announced and Election Commission asked the government to postpone implementation of the decision till the completion of polls.

The price hike, which was postponed to June 30, was again put off by another three months by the new government pending a comprehensive review.

The government has formed a four-member panel of secretaries to suggest a new gas pricing mechanism. The report of the committee is expected in next few days.

Source: ET

ONGC plans to yield 20 mn cubic metres gas daily from it KG-D5 fields by 2021

State-run explorer Oil and Natural Gas Corp (ONGC) is poised to finalise the field development plan of its Krishna Godavari basin KG-D5 fields at a time of declining gas output from the KG-D6 block in the eastern offshore operated by a Reliance Industries-led consortium.

ONGC chairman D K Sarraf told reporters here that the organisation was quite bullish that the KG-DWN-98/2 block should start production by mid-2018.

"The whole of the executive committee of ONGC went to Kakinada and reviewed the project. Many actions have been taken. It is a very challenging project. By 2021, we will get gas of 20 mmscmd (million metric standard cubic metres a day)," Sarraf said.

Apart from gas reserves, the field has large reserves of crude oil and is estimated to yield 70,000-90,000 barrels of oil per day.

"Our team says 90,000 barrels per day is some times being conservative," he added.

The project is, however, yet to get the requisite approvals.

"It is yet to get the board approval, yet to get government approval, yet to get the Directorate-General of Hydrocarbons` approval. But, technically, there is a proof concept that it can produce so much, it can produce that fast," Sarraf said.

"Investment will be huge. This is cluster development. There are opportunities of putting other small, small blocks. If there is a shortfall in estimates, we can make up for that," Sarraf said, speaking of the output possibilities of cluster development.

Presenting ONGC`s annual report for 2013-14 late last month, the chairman said that with the buoyancy in international crude prices and the strengthening of the company`s US Dollar-denominated revenues expected to continue, there is substantive near-term growth potential in earnings.

In 2013-14, ONGC registered its highest-ever revenue at Rs 842.01 billion, a growth of 1.1 percent from Rs 832.90 billion in the previous fiscal.

The company also posted a higher profit after tax of Rs 220.95 billion, up 5.6 percent from fiscal 2013, after sharing the highest ever under-recovery, or losses on selling below cost, of Rs.563.84 billion.

"With more remunerative pricing of our natural gas and with subsidy rationalization, significant value remains to be unlocked for your trusted shareholdings," Sarraf said in the annual report

The company has proposed a dividend payment of 190 percent with payout ratio of 43.04 percent.

Source: First Post

The Next Chinese Energy Boom

In an effort to reduce pollution, the country is slowing its crude oil consumption and switching to natural gas instead.

But if the current trend holds, China will be forced to pay a heavy price for its newfound environmental conscience.

Why? Simple supply and demand…

China’s natural gas production has fallen well short of its projections. And consumption is far exceeding its production rate.

Needless to say, that’s a recipe for energy disaster… for China, at least.

It means the country will need to import more natural gas.

But this huge new energy boom from one of the world’s largest energy consumers will create a whole new environment for the natural gas industry.

And suppliers are clamoring for a slice of this very lucrative pie…

China’s Natural Gas Drive Hits a Speed Bump

I may have stretched the truth a bit when I said that China has grown a more-environmentally friendly conscience.

China actually has very little choice but to switch over to natural gas as a major fuel source.

Pollution from fossil fuels (mostly from its primary energy source, coal) is out of control. Each time I visit the country, it seems the air quality has degraded even more.

For example, the recent Shanghai Marathon took place just one day before the air quality level was described as life-threatening!

China has its public image to worry about – and statistics like that are highly damaging.

In addition, quality of life concerns and rising costs from pollution-related illnesses are forcing the government to make the shift to natural gas.

This transition won’t occur overnight, but China’s ability to provide its own natural gas isn’t panning out the way the country expected.

China’s Supply-Demand Gap is Swelling

China’s natural gas reserves aren’t the problem here. The country boasts vast amounts of the stuff underground.

However, it still doesn’t have the ability to fully extract these reserves, due to inadequate technology and the location of the reserves. Plus, China’s pipeline infrastructure is weak.

On top of that, the supply-demand gap continues to grow.

Last year, Chinese natural gas consumption hit five trillion cubic feet (Tcf). But the country only produced 3.3 Tcf to replenish supplies.

What’s more, an Exxon Mobil (XOM) study says China’s natural gas consumption will almost triple this decade, to 14 Tcf.

By 2020, it’s estimated that natural gas will provide 10% of all the energy used in China. But there’s a massive shortfall on the horizon.

Some of that will be made up from more internal and offshore production. But the majority of it will have to come from imports.

And that’s where the opportunity lies…

Russia and Australia in the Box Seat

China’s vast quantities of natural gas imports will come through both pipelines and in the form of liquefied natural gas (LNG).

There’s a beneficiary in each area here…

Pipeline: The major winner will be Russia’s Gazprom (OGZPY). The company recently inked a $400-billion, 30-year deal to supply China with 1.3 Tcf of natural gas per year, beginning in 2019. Initially, the gas will come from Gazprom’s prolific fields in Siberia. Construction of the Power of Siberia pipeline began on September 1, and the pipeline is expected to cover some 2,500 miles, including a distribution point on China’s northern border.

LNG Supplier: On this side of supply, the logical choices are companies close to China that have LNG operations already up and running. That means the Chinese will likely deal with the Australians. The top play will be Woodside Petroleum (WOPEY), which has significant operations on Australia’s West Coast. In addition, after investing over $200 billion in LNG operations over the past few years, Australia is expected to unseat the current LNG leader, Qatar, in the next three years.

Source: wallstreetdaily.com

RIL, ONGC, BPCL bag top honours at PetroFed Oil & Gas awards

Reliance Industries, ONGC and Bharat Petroleum Corp (BPCL) walked away with the top honours at the annual PetroFed Oil & Gas Industry Awards here today.

BPCL bagged the 'Leading Oil & Gas Corporate of the Year' award as also 'Oil & Gas Marketing Company of the Year' award.

Oil and Natural Gas Corp (ONGC) walked away with the 'Exploration & Production Company of the Year' award while RIL won the 'Refinery of the Year' award.

Hindustan Petroleum Corp Ltd (HPCL) won the 'Oil & Gas Pipeline Transportation Company of the Year' award and Indian Oil Corp (IOC) won 'Human Resources Management Company of the Year' award.

Oil Secretary Saurabh Chandra presented the PetroFed Oil & Gas Industry Awards for 2013 for excellence in performance in various categories.

Petroleum Minister Dharmendra Pradhan was to give away the awards but he could not attend because he was travelling.

Congratulating the award winners, Chandra emphasised on the need to enhance domestic production of oil and gas to reduce imports.

In his welcome address, PetroFed chairman and IOC head B Ashok highlighted the need for keeping the spirit of healthy competition alive through such awards.

BPCL also got two special commendations for 'Innovator of the Year (Team)' award for a system to predict refining characteristics of a crude oil sample and a GPS-based pipeline surveillance personnel movement monitoring system.

The 'Innovator of the Year - Team' award was bagged by the 10-member team of IOC and Chennai Petroleum Corp Ltd (CPCL) led by R K Malhotra, then Director (R&D), Indian Oil.

They developed and commercialised technology for co-processing of non-edible oils in diesel hydro-processing operations of an existing refinery.

The 'Innovator of the Year - Individual' award was won by Dr Shashikant of IOC for developing catalyst for Olefin Polymerisation and a process for manufacture of Tarpaulin Grade Polyethylene.

The individual award also carries a cash component of Rs 2 lakh while the team award in innovation carried a cash award of Rs 50,000 for each member of the team. There were also two special commendations in the 'Innovator of the Year - Individual' award - one each for Indian Oil's Guwahati Refinery and Hindustan Petroleum Corporation Limited.

Oil India Ltd was chosen for the 'Environmental Sustainability - Company of the Year' award while Essar Oil and GAIL won awards for project management.

The 'Woman Executive of the Year' award was given to Ritu Mathur - Team Leader, Aviation HR of BPCL. This award also carries a Rs 1 lakh cash prize. A special commendation in this category was conferred on Sita Baruah, Senior Maintenance Manager of IOC's Guwahati Refinery.

The award winners were selected through a process of collation by knowledge partner PricewaterhouseCoopers and evaluation by the Awards Committee led by Prodipto Ghosh, Distinguished Fellow, TERI and former Secretary to the Government of India.

Source: ET

ONGC to produce 20 mmscmd of gas from KG basin by 2018

ONGC, India’s largest public sector oil and gas explorer, plans to produce around 20 million metric standard cubic metres (mmscmd) of gas per day by 2018 and 90,000 barrels of oil per day by 2021 from its Krishna Godavari Basin block KG DWN 98/2 in Kakinada, Andhra Pradesh. Drilling activities are expected to start in a couple of months, a senior company official told Financial Chronicle.

The declaration of commerciality (DoC) for drilling in around 18 wells in the KG DWN 98/2 offshore field has not come in yet from the directorate of hydrcarbons (DGH), the official said. The company was supposed to start drilling in the first half of 2014. Although, the timeline to start production stays the same, plans to start drilling have got delayed slightly, the official said.

“The cost of drilling each deepwater well would be around Rs 150 crore to Rs 200 crore and all put together, it would cost something between Rs 18,500 crore to Rs 20,000 crore,” the official said.

The company had earlier told this paper that it has plans to initiate production with around 30 mmscmd from the 18 wells. ONGC has identified some 87 billion cubic metres of resources in the block.

Recently, the company got into a legal tangle over the misappropriation of gas from the same block by Reliance Industries (RIL), India’s largest private oil explorer. RIL’s KG D6 block shares the boundary with ONGC’s KG DWN 98/2. The matter is sub judice, as ONGC has sought legal help from the Delhi high court.

The two firms have also signed an agreement to share infrastructure for the development of ONGC’s block. TK Sengupta, director offshore of ONGC, said after the development of the first phase, which would be in the water depth of 600 meters to 2,400 meters, the second phase would start in ultra-deep water depths of 2,400 meters to 3,200 meters.

“We would require floating production systems (FPS) to carry out these developments starting with drilling to production. There are only two such producing blocks in the world in the Gulf of Mexico, operated by Shell and Chinook,” said Sengupta.

“The activity is going to be very challenging, but once complete, it will add around 20 mmscmd of gas capacity and around 90,000 barrels of oil to India’s production capacity.

Source: FC

Key Challenges for Australia’s Coming LNG Boom

Australia, the third-largest LNG exporter in the world after Qatar and Malaysia, is expected to overtake Qatar and become the world’s largest LNG exporter by 2020. There are several LNG projects under construction which are thought to become operational in 2017. However, Australia’s road to its LNG “revolution” is presenting numerous challenges that have caused delays on LNG projects. Have a look at the infographic to find out what the key challenges are
…

Source: oilgaspost.com

China May Become A Shareholder In One Of Russia's Biggest New Oil And Gas Fields

Russian President Vladimir Putin said his government may offer China an opportunity to hold a share in one of the biggest energy projects in Siberia, the Vankor oil and gas field.
Putin made the tentative offer on Sept. 1 as he and China's vice premier, Zhang Gaoli, presided over the launch of construction of the oil pipeline that will carry nearly 40 trillion cubic meters of gas to China over 30 years, earning Russia $400 billion during the period.

"The new gas branch will significantly strengthen the economic cooperation with countries in the Asia-Pacific region and, above all, our key partner China," Putin said at the ceremony outside Yakutsk, the capital of Russia's Republic of Yakutia.

In fact, China is so important a partner that Putin said it was likely that the Kremlin would permit Beijing to become a shareholder in the Vankor field in the eastern Siberian region of Krasnoyarsk. Vankor, owned by Rosneft, the state-run Russian oil giant that owns the field, has oil reserves estimated at 520 million metric tons and gas reserves of 95 billion cubic meters.

"Vankor is one of the biggest production operations today and very promising," Putin told Zhang, according to a transcript of the event published on the Kremlin website. "Overall, we take a cautious approach to letting in our foreign partners, but we of course set no restrictions for our Chinese friends."

Putin added, "The state authorities support this idea and we would welcome your participation."

Since Putin first became Russia's president in 1999, the Russian government has increased its hold on the country's enormous energy resources. In the process, it has kept Western oil and gas companies and even private Russian firms from developing them.

Still, Russia needs the money and expertise available only from the West, especially at a time when the country's oil companies are impeded by sanctions imposed by the European Union and the United States because of Moscow's suspected support of pro-Russian separatists in eastern Ukraine.
As a result, Rosneft is seen as being eager to offer partnerships in Vankor to foreign companies, including Britain's BP, the state-run Oil and Natural Gas Corp. of India and ExxonMobil of the United States. The offer of a share to China indicates that Moscow is eager to show that it can get what it wants from partners in the East as well.

Meanwhile, at the ceremony outside Yakutsk, both Putin and Zhang autographed the newly welded pipeline, a tradition in Russia on such occasions. The structure has been dubbed the "Power of Siberia." Also present was Alexei Miller, the CEO of Gazprom, which will provide the gas to China.

"Gazprom is always a reliable supplier of gas to its customers," Miller said, "which also applies to the "Power of Siberia."

Source: Fool.com

U.S. Now World's Leading Natural Gas Producer

According to the BP 2014 statistical world energy review, the U.S. has achieved world-leading natural gas production, by reaching a new all-time high of 328 billion cubic feet per day (BCPD). World usage of natural gas is about 24% of all primary energy consumed, behind oil's 33% and coal's 30%. Over the past five years, U.S. natural gas production has grown over 20%.

This is obviously due to the capturing of natural gas as a by-product to the massive shale expansion, as the shale "fracking" revolution seems to continue its unprecedented growth. No other global energy-producing nation has come close to matching U.S. production gains, while leap-frogging Russia in 2009, along with Qatar and Iran, previous global natural gas leadership aspirants.

In 2013, U.S. production accelerated in earnest by achieving 20.5% of the global natural gas supply. Russia is the lagging runnerup. Iran, in third place has trailed far behind, while Canada has attained fifth place position by closing in on Qatar.

While the U.S. and Iran consumed approximately as much as they produced, Russia produced 50% more than its internal consumption. While Russia had become Europe's number one gas supplier, it also recently signed a $40 billion, 30-year deal, that will tap into Russia's yet-to-be developed Siberian oil/gas reserves, buried deep under that region's tundra.

While the U.S. natural gas production leadership position is undisputed, America trails in fifth place in proven natural gas reserves. This may be remedied if, and when, the U.S. is able to export the 90% of "shale potential," that awaits states' and federal approval. The latter is mostly located in government-owned areas that cover almost two-thirds of the vast acreage of the fifty states and U.S. territories.

Iran holds the top spot for proved reserves of 18.2% of the world total, with Russia just behind with 16.8% of global proved reserves. These are followed by Qatar, and

Turkmenistan, with the U.S. trailing behind. At 2013 production rates, the U.S. has 13.6 years of proved reserves, while Russia's potential reserves are generally unknown, due to the as yet undetermined amounts that will become available as the Russo/Chinese 30-year agreement begins its long-term development with Siberia.

America's greatest problem in becoming an active global "player" depends on how fast and voluminously the U.S. can complete its export terminals and convert to liquid natural gas for global export shipments.

Source: desertsun.com

China to import 5 billion cu m/year of Russian gas when pipeline starts

China will initially import 5 billion cubic meters of natural gas annually from Russia once the Power of Siberia pipeline is completed, state-owned China National Petroleum Corp. said Tuesday, September 2.

The update comes after Russian gas giant Gazprom on Monday launched construction of the pipeline within its borders.

CNPC said the Russian segment of the pipeline, which will span 2,680 km (1,665 miles), will connect to China at Heihe in northeastern Heilongjiang province.

Once the pipeline is completed, gas supplies to China will start at 5 billion cu m/year and gradually rise to 30 billion cu m/year over the first five years of deliveries. Volumes will reach 38 billion cu m annually from the sixth year onward, CNPC said.

The gas will primarily be sent to China's northern coastal areas, including Beijing, Tianjin, the Yangtze River Delta and other areas with existing pipeline infrastructure.

During the launch ceremony in the East Siberian Republic of Sakha (Yakutia), China's Vice Premier Zhang Gaoli said work on the section of the pipeline in China will start during the first half of next year.

Both CNPC and Gazprom inked a historic deal in May to send up to 38 billion cu m/year of Russian gas to China over a 30-year period starting after 2018.

CNPC said deliveries are still targeted for 2018, although Gazprom said Monday that direct gas supplies to China will start in 2019, adding that the launch of the East Siberian Chayanda field, a key source for the supplies, is scheduled to start by end-2018.

Source: Platts

Gazprom to Start Gas Supplies to China in 2019

Gazprom has set the start of gas supplies to China for 2019, the Russian company said after a meeting between its CEO Alexei Miller and China's First Deputy Prime Minister Zhang Gaoli. The 30-year contract for the supply of up to 38 billion cubic meters of natural gas per year was signed with China's CNPC in May 2014. Under the contract, deliveries are due to begin in four to six year's time.

"The beginning of natural gas production at the Chayanda field has been scheduled for the end of 2018, by which time we should have seen the launch of the first-line section of the Sila Sibiri (Force of Siberia) gas transportation system between the Chayanda field and the city of Blagoveshchensk, and the of first-line gas-processing facilities. This will enable us to start direct gas supplies to China in 2019 in line with the obligations stipulated in the signed contract," Gazprom wrote in a press release on Saturday.

Miller and Zhang also discussed progress in the construction of the Sila Sibiri gas transportation system which will ensure, among other things, gas deliveries to China on the "eastern" route, the company said. They also discussed prospects for organizing Russian gas supplies to China on the "western" route (from gas fields in Western Siberia).

Source: oilandgaseurasia.com