Energy Watchblog: Nat Gas

Banamex Analysts: Cheaper natural gas to aid Mexico's petrochemical sector

<div class="separator" style="clear: both; text-align: center;"></div><span style="clear: left; float: left; font-family: Times, Times New Roman, serif; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiO0_KPFM-c6UvomN5-SWBFh1F-45opeJcoD4aJx6LdnQJXL7bB_CQoNUIRP3k1YfjDTKDuT_XjTueuHXacw3rlg5zl4oqUrkuhRWxWOv5hfjY4PoE7CLeFUlCjX5YZ9StqzUB44-dWMV8G/s1600/mexichem_250313.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiO0_KPFM-c6UvomN5-SWBFh1F-45opeJcoD4aJx6LdnQJXL7bB_CQoNUIRP3k1YfjDTKDuT_XjTueuHXacw3rlg5zl4oqUrkuhRWxWOv5hfjY4PoE7CLeFUlCjX5YZ9StqzUB44-dWMV8G/s320/mexichem_250313.jpg" width="320" /></a>The opening of Mexico's natural gas sector to private investment will lower prices and allow local firms to increase their production capacity for petrochemical-based products, according to analysts. <span style="background-color: white; line-height: 18px;">Mexican firms such as Mexichem and Alpek will be benefited by the lower prices and be able to grow their presence in the sector, according to a report analyzing Mexico's energy reforms by Banamex Accival Casa de Bolsa. Both companies are currently investing to expand their production capacity to take advantage of the price differential between ethylene and natural gas. </span></span><span style="clear: left; float: left; font-family: Times, Times New Roman, serif; margin-bottom: 1em; margin-right: 1em;"><span style="background-color: white; font-family: Times, Times New Roman, serif; line-height: 18px;">"Mexichem is investing in the production of 550,000t of vinyl chloride monomer (VCM) in the US, while Alpek plans similar investment with a plant supplied by natural gas in Mexico," the report states. </span><span style="background-color: white; line-height: 18px;">VCM is a chemical used to produce polymer and polyvinyl chloride (PVC). </span><span style="background-color: white; line-height: 18px;">The expectation is that the energy reforms will contribute to an increase in the supply of ethane/propane, which have a high concentration of natural gas, and to a deregulation of the downstream sector, which will in turn lead to a drop in prices, the report states.</span></span><br /><div class="text-contenido" style="background-color: white; margin: 0px 10px 0px 0px;"><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">Alpek is expected to invest in the construction of plants producing monoethylene glycol (MEG) in Mexico and an ethylene plant in the short term in order to take advantage of the lower gas prices.</span></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">"The confirmed availability of gas will probably lead Alpek to build an MEG plant in Mexico, instead of in the US," the report states.</span></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">Mexichem is also likely to expand its VCM production in Mexico, after having begun to build a cracker plant in Texas in partnership with US firm Oxychem. </span><span style="font-family: Times, 'Times New Roman', serif;">Mexichem is currently building a 200MW cogeneration plant powered by natural gas in Altamira, in the northeastern state of Tamaulipas, and could approve the construction of another one in Salamanca, in the central state of Guanajuato. </span></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">"Mexico is the only country in the world where an artificial barrier was created in the petrochemical sector, and the reality is that the lack of investment in the sector by Pemex has created huge bottlenecks in the production chain, leading to more imports, which in 2013 surpassed US$23bn," according to an analysis of the reform by Mexican energy consultancy GMEC. </span></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">Mexico's petrochemical imports increased by 7.7% in 2013, while the petrochemical sector's contribution to GDP dropped by 0.4% to 1.2%, according to the national association of the chemical industry (ANIQ). </span></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">A lack of natural gas transportation infrastructure has meant that Mexican firms have suffered a supply deficit from the US, GMEC added, with Pemex importing more natural gas at a higher price to satisfy local demand.</span></div></div>

Banamex Analysts: Cheaper natural gas to aid Mexico's petrochemical sector

The opening of Mexico's natural gas sector to private investment will lower prices and allow local firms to increase their production ca...

Baltics: Update from Romas Svedas

<h1 style="background-color: white; border: 0px; color: #636466; font-family: Arial, Helvetica, sans-serif; font-size: 24px; font-weight: normal; line-height: 1.125em; margin: 0.375em 0px 0.75em; padding: 0px;"></h1><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiGy7KPeG37tD7ltzn8qa8HHs3VpWHEZxGnxoXEFO4FvaAsxVrvBhe8JV_TtHr9vm-3WGoLUI48C6NMGf71HPZ9WXuGwZFhRzf4CJu0-OYGkiaiZQOORyeugsWI4-FPj_Kiqz_DvkG5qc1a/s1600/Romas+Svedas_550x300.jpeg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiGy7KPeG37tD7ltzn8qa8HHs3VpWHEZxGnxoXEFO4FvaAsxVrvBhe8JV_TtHr9vm-3WGoLUI48C6NMGf71HPZ9WXuGwZFhRzf4CJu0-OYGkiaiZQOORyeugsWI4-FPj_Kiqz_DvkG5qc1a/s1600/Romas+Svedas_550x300.jpeg" /></a></div>With over 20 years of experience in international relations and over half of the time devoted to energy issues, Lithuania's Romas Švedas is one of the most renowned Baltic energy experts.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">His expertise in the field of international economic relations spans negotiator’s skills in the signing Lithuania’s Free Trade Agreements with Nordic, Baltic and Central European countries, negotiating the Lithuanian membership in the World Trade Organization (WTO), sitting as a member of bilateral intergovernmental commissions with <span style="color: #0854d1;">Russia</span>, <span style="color: #0854d1;">Ukraine</span>, <span style="color: #0854d1;">Belarus</span> and being head of Lithuanian delegation in bilateral intergovernmental economic relations commission with China.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">In the field of energy policy, being vice-minister of the Lithuanian Energy Ministry (2009-2011) he was responsible for electricity interconnections with <span style="color: #0854d1;">Poland</span> (LitPolLink) and Sweden (NordBalt), LNG terminal, exploration of UGS, decommissioning of the Ignalina Nuclear Power Plant and development of a new Nuclear Power Plant project (Visaginas NPP).</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Švedas was a member of the Baltic Energy Market Interconnection Plan (BEMIP) drafting team and representative of Lithuania in BEMIP High Level Working Group (2008-2011). During the period of 2009-2011 Romas Švedas was chairman of the Boards of State Enterprise “Ignalina Nuclear Power Plant”, AB “Klaipedos nafta”, AB “Litgrid” and member of the Board of AB “Lietuvos dujos”.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Švedas kindly agreed to answer <i style="border: 0px; margin: 0px; padding: 0px;">Natural Gas Europe's</i> questions on a broad range of energy issues in the Baltic region.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"><i style="border: 0px; margin: 0px; padding: 0px;"><b style="border: 0px; margin: 0px; padding: 0px;">What are the specifics of the Baltic nations’ energy market? And how do they pertain to the challenges they face?</b></i></div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">The bottom line is this: the countries - Lithuania, <span style="color: #0854d1;">Latvia</span> and <span style="color: #0854d1;">Estonia</span> -are the members of the European Union, and therefore are bound to the EU policies, including those in energy market.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Though all the three countries have their own peculiarities of market economy, their underlying common problem is what the EU refers to as the Union’s energy island.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">It means that the countries’ energy infrastructure is historically linked with the former Soviet Union. Effectively, there are no any significant power connectors between them and the Western Europe, except a tiny power link connecting Finland and Estonia.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">The Baltic States’ biggest challenge is the dependency on the single external gas supplier, Russia’s G<span style="color: #0854d1;">azprom</span>. In that sense, Lithuania looks the worst as its reliance on external energy supplies in satisfying its energy needs hovers at a whopping 80 percent, the EU record. And when it comes to gas sector, Lithuania’s dependency on Russian Gazprom gas is at 100 percent, while electric power import amounts to the EU record-high 70 percent, according to the Eurostat.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">The shutdown of the Ignalina Nuclear Power Plant in 2009, a prerequisite for the EU accession in 2004, has significantly exacerbated power supply. In fact, Lithuania has gone from power exporter to the biggest importer in entire Europe.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"><i style="border: 0px; margin: 0px; padding: 0px;"><b style="border: 0px; margin: 0px; padding: 0px;">What are the biggest challenges in decreasing the energy supply dependency?</b></i></div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Without doubt, they are in diversifying energy supply, in other words, creating alternative energy sources. Lithuania has been pursuing that along with Latvia and Estonia in the framework of BEMIP- Baltic Energy Market Interconnection Plan tasked with interconnecting Lithuania, Latvia and Estonia internally -very determinedly and consistently.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">What I often see happening in the Baltic region separate energy projects sometimes are prioritized as the key objectives of whole energy market.  In particular, when it comes to Lithuania, it often boils down to a few things: to build a nuclear power plant, or not?  Explore and extract shale gas, or not?</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">In the reality, these two I see as the only ways in achieving the ultimate goal of energy security and independency.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">No doubt, the main priority in Lithuania should be diversification of energy supplies- guaranteeing that market conditions function in energy sector. That can be possible only with more than a single energy supplier.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"><i style="border: 0px; margin: 0px; padding: 0px;"><b style="border: 0px; margin: 0px; padding: 0px;">How can this be achieved?</b></i></div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">I believe that could be done in two ways.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">First, on the legislative level, Lithuania has to pass and enact necessary energy security- oriented legislature. Other two Baltic counties need to do the same.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Second, implementation of EU-supported interstate energy projects in the region in quintessential.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Speaking of the legislation, what the three Baltic States have to do effectively boils down to one key thing:  transpose the EU energy legislature into theirs and, importantly, make sure it is implemented.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">The core piece of the EU legislation is the EU Third Energy Package.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Namely it, encompassing gas and electricity supply development directions, is the integral part of BEMIP.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Today the situation is the states in electricity sector development need to step up, as the implementation of the Third Energy Package-and BEMIP- is lagging behind.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Having said that, I have to note the countries have all the necessary projects to make the breakthrough in the pursuit of energy security and independence. EstLinkII, NordBalt, LitPol are among the most important, and they have to be launched until the end of 2015.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">When kicked off they will ensure the EU-bound transmission capacity on the same scope we have now it with the East.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Without any doubt, the implementation of the afore-mentioned power projects would significantly enhance energy security and supply in the Baltics and secure the countries’ full and equivalent operations on the Nord Pool Spot (NPS) Exchange.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">The power projects are being implemented on time, and their completion promise a lot brighter energy future for each of the Baltic States.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">What should matter to foreign investors in regard to the latter is the countries’ power trading on the NPS is transparent and promising good prospects as with the completion of the projects by 2016 the systemic problems in Baltic power market will have been solved.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"><i style="border: 0px; margin: 0px; padding: 0px;"><b style="border: 0px; margin: 0px; padding: 0px;">What’s your take on construction of nuclear power plant in the Lithuanian town of Visaginas?</b></i></div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Regardless whether it will be pursued or not (the governments of Estonia, Latvia and Lithuania are set to make up their minds on the project yet this month -<i style="border: 0px; margin: 0px; padding: 0px;">Natural Gas Europe</i>), the atomic power project, like other energy project in the region, would be regional.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">This is what matters most.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Sometimes I get the sense that foreign countries believe that each of the Baltic States pursue their energy projects separately.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">It’s not true- all the projects are regional, with the fact in mind that starting 2016 the countries will be an integral part of the EU single energy system.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Speaking of the nuclear project, I’d not dare to predict its fate, but- again- it will be a regional decision of governments of Latvia, Lithuania and Estonia.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"><i style="border: 0px; margin: 0px; padding: 0px;"><b style="border: 0px; margin: 0px; padding: 0px;">What are the other specifics of Lithuania’s gas sector besides the 100 percent dependency on Gazprom gas?</b></i></div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">I call gas sector more interesting than the power sector in terms of predictability, implementation of projects and etc.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Power sector will definitely be the first one to fully reach the goal of energy independence and become the leverage to the single supplier.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Speaking of gas-fired generators, what sets Lithuania apart from Latvia and Estonia is that a very significant part of power in Lithuania is being generated by traditional generators, i.e using gas.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Meanwhile, Estonia has successfully employed oil shale and Latvia has been successfully taking advantage of its hydro resources.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Unlike in power sector, the situation in Lithuania’s gas sector is a whole lot more complicated.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Again, I’d like to look at it from the standpoint of legal basis and the development of infrastructure.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">When it comes to gas legislature, having passed the law of gas supply and started ownership unbundling, which means separating gas supply from gas mains management, Lithuania has moved considerably forward in the recent years.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"> Sure, within the framework of the EU Third Energy Package.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">But unlike the Baltics’ power market, Lithuania, Latvia and Estonia still do not have a single internal gas policy despite the Third Energy Package obligations.  The 100 percent dependence on the single external gas supplier, certainly, exacerbates the situation.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">In tackling it, Lithuania is advancing a Liquefied Natural Gas Terminal that is due at the end of 2015. Along with the EU-supported gas Lithuanian and Polish gas interconnector due by 2019 the two are an important stride in diminishing the dependency.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"><i style="border: 0px; margin: 0px; padding: 0px;"><b style="border: 0px; margin: 0px; padding: 0px;">What about Lithuania’s shale gas? Could it be a third alternative?</b></i></div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Sure. It could be also an alternative in the energy security pursuit.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Lithuania had the investor, Chevron, but, unfortunately for us, we could not provide it a stable legislative basis, and it left.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">That is disappointing as shale gas can significantly boost out energy security. It has been proven by Kaunas Vytautas Magnus University scientists.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Unfortunately for us, we do not yet possess the good experience Poland has in taking advantage of shale gas and dealing with the local communities that now often are adverse to the shale gas exploration.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">I agree with some international observers that Lithuania seems to be artificially escalating the issue of shale gas exploration-related environmental issues.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">I’m not saying they do not matter, not at all, but sometimes I strongly suspect some pro-Russian interests are underneath the clamor against shale gas exploration in Lithuania.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Interestingly, some of the billboards on Lithuanian highways urging to resist the American company and the shale gas bid appeared to be build- and paid for- by some unclear subjects.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">This is what a journalistic investigation revealed.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">And we’re talking here only of large billboards all see when driving by.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">I sometimes wondered who stood behind the negative, anti-shale gas coverage in traditional media outlets.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">There is really a lot to think of but I really would not like to delve into the details, and why the tender failed. But when speaking of the Chevron bid it was obvious that we lacked a political will in making in happen. As a result, the vociferous protests in the provinces and not only it. The attitude of the people needs to be addressed in the future.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"><i style="border: 0px; margin: 0px; padding: 0px;"><b style="border: 0px; margin: 0px; padding: 0px;">Do you believe the dispute between Lithuania and Gazprom over gas price will be settled any time soon? And how?</b></i></div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Perhaps not as much is important the outcome of the dispute as is important the pending ruling at the Stockholm Arbitration Tribunal. If it ruled in favor of Lithuania, which is pretty likely, it would establish an unseen yet precedent, meaning a crucial breakthrough in the Gazprom relations with the Central and Eastern Europe. Practically, it would lead to huge civil lawsuits against Gazprom, coming from Latvia, Estonia, Moldova, Ukraine, Belarus and some other countries.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">I am convinced Gazprom is really anxious about that.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">I believe it is not now as much preoccupied with the gas price for Lithuania and a new contract with it, as with the fallout from the Tribunal ruling.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">I am certain Gazprom will go to big lengths to shun the judicial precedent, but it cannot get away from the EU Third Energy Package ownership unbundling requirements. This is what Gazprom fears a lot, too.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">We might be witnessing some historical shifts in the field of energy, without an exaggeration.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"><i style="border: 0px; margin: 0px; padding: 0px;"><b style="border: 0px; margin: 0px; padding: 0px;">How can Lithuania take advantage of the European Commission (EC) resolve to sue Gazprom for EU Anti-Trust law breaches?</b></i></div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">No doubt, it is also a headache for Gazprom as it could set a very far-reaching precedent for the company that in the course can effectively change the relations between it and entire countries, the gas buyers.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;"><i style="border: 0px; margin: 0px; padding: 0px;"><b style="border: 0px; margin: 0px; padding: 0px;">How much serious do you believe is Russia’s intention to build a LNG terminal in the enclave of Kaliningrad? Would it be pursued to bypass gas transit through Lithuania?</b></i></div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">There has been news Russia has already built an underground gas repository in Kaliningrad.  Russia has certainly a big potential in gas sector, so I’d not be surprised if it pursues the LNG project in the exclave. Sure, it is not a thing of the nearest future.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">But what matters to Lithuania is a liquefied natural gas terminal in Kaliningrad would enable Russia to stronger manipulate the card of gas supply to Lithuania.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Having built the underground gas storage facility and mulling construction of a LNG terminal, Russia sends a signal to Lithuania that Kaliningrad will be the first one to secure gas supply from alternative sources. In other words, under certain Lithuania-adverse circumstances, and with the Kaliningrad gas facilities in place, Russia could cut gas supply to Lithuania without giving much thought.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">I see it as Russia’s clear message that it will keep using energy issues as a tool of its politics.</div><div style="background-color: white; border: 0px; font-family: Arial, Helvetica, sans-serif; font-size: 12px; line-height: 18px; margin-bottom: 1.5em; padding: 0px;">Hence, the importance of the Baltic energy projects.</div>

Baltics: Update from Romas Svedas

With over 20 years of experience in international relations and over half of the time devoted to energy issues, Lithuania's Romas Švedas...

Ukraine Russia Gas Dispute Infographic

Kiev and Moscow have been locked in a bitter dispute over gas supplies that has prompted fears of a return to the winters of 2006 and 2009, when Russia temporarily halted gas deliveries to Ukraine and some European countries. Last week Ukraine said it was suspending the purchase of gas from Russia, and relying on supplies from its own storage facilities. But it backtracked on the announcement within days. Russia has said that Naftogaz, Ukraine’s state-owned oil and gas company, owes over $1 billion in unpaid gas bills. Ukraine maintains that Russia charges it more for gas than other European nations.<br /><br />Click the image below for larger version infographic<br /><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj34ur8Z8pGkk6YXye20sRnOzqI86_R2EPmabsTqaMKHRT8tljsZ_8shPDZHiAABR-jClfzQ7nQ18f9UCicETBA2O3DeRycUxvFmfsznNsaC_bUHkWjNVm_ONly5vE31qjwjqaUrkppXe68/s1600/infographicUkraingasdispute.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj34ur8Z8pGkk6YXye20sRnOzqI86_R2EPmabsTqaMKHRT8tljsZ_8shPDZHiAABR-jClfzQ7nQ18f9UCicETBA2O3DeRycUxvFmfsznNsaC_bUHkWjNVm_ONly5vE31qjwjqaUrkppXe68/s640/infographicUkraingasdispute.jpg" width="349" /></a></div><br />

Ukraine Russia Gas Dispute Infographic

Kiev and Moscow have been locked in a bitter dispute over gas supplies that has prompted fears of a return to the winters of 2006 and 2009, ...

Ecopetrol details US$10.6bn 2014 investment plan

<br /><br /><header class="clearfix" style="background-color: white; color: #222222; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 12px; line-height: 16px; position: relative;"><h3 class="top-sector" style="color: #58595b; font-size: 16px; margin: 7px 0px 0.5em;"><div class="separator" style="clear: both; text-align: center;"></div><br /><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRYsq49ylRQy2irYKSpoka3LkN9VNUDnjXbxpLYanqvk0A07hdLAOxM0GAbooPObfl53spbgpX8giAQK3Tmu6TO6KhIxImROdqx5YtWf1FomXsR6_sBEYgdbQLBOu5JiNYioQXzF-L4Hya/s1600/earth_lights-bw.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="161" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRYsq49ylRQy2irYKSpoka3LkN9VNUDnjXbxpLYanqvk0A07hdLAOxM0GAbooPObfl53spbgpX8giAQK3Tmu6TO6KhIxImROdqx5YtWf1FomXsR6_sBEYgdbQLBOu5JiNYioQXzF-L4Hya/s320/earth_lights-bw.jpg" width="320" /></a></div>Oil & Gas - <a href="http://web6.bnamericas.com/country-profile/colombia" style="color: #58595b; text-decoration: none;">Colombia</a></h3><span itemprop="image"></span><b><span style="color: #414042; font-size: 13px; line-height: 16px;">Colombia state oil firm </span>Ecopetrol<span style="color: #414042; font-size: 13px; line-height: 16px;"> </span><span style="color: #414042; font-size: 13px; line-height: 16px;">(NYSE: EC) approved US$10.6bn of investment for next year, with 61% (US$6.46bn) to be directly invested by Ecopetrol and 39% (US$4.13bn) through its affiliates and subsidiaries, the company said in a press release.</span></b><br /> </header><br /><div class="content" itemprop="articleBody" style="background-color: white; color: #222222; font-family: Arial, Helvetica, 'Helvetica Neue'; font-size: 12px; line-height: 16px;"><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"><strong>DIRECT INVESTMENT</strong></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;">The majority (US$4.65bn) of Ecopetrol's direct investment next year is marked for crude and natural gas production development. The firm's East Llanos project is slated to receive 64% of direct production development investment, with 17% going to the Middle Magdalena project and 11% to the Orinoquía project.</div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;">Ecopetrol also expects to invest US$928mn in exploration next year. In Colombia the firm plans to drill 20 exploration wells, six delineation wells and eight stratigraphic wells. The East Llanos project is marked for 13 exploration wells, with another two planned in offshore Colombia, two in southern Huila province and three in northern departments Cesar, Antioquia and Norte de Santander.</div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;">The firm also plans to spend US$240mn on developing nonconventional resources. Activity will include nine stratigraphic wells, three exploration wells and three pilot production tests - mainly on blocks in the Catatumbo and Middle Magdalena projects, Ecopetrol said.</div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;">Next year's direct investment plan includes US$339mn for refining and petrochemical spending, with 26% slated for modernizing the Barrancabermeja-PMRB refinery.</div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"><strong>AFFILIATE AND SUBSIDIARY INVESTMENT</strong></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;">Through its affiliates and subsidiaries Ecopetrol plans to invest US$1.76bn in refining and petrochemical projects, including US$1.63bn to modernize the Cartagena refinery, Ecopetrol said.</div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;">Next year's subunit spending includes US$1.34bn in transport investment. Ecopetrol expects crude oil pipeline capacity to increase by an additional 40,000b/d in 2014 and total crude and natural gas pipeline capacity to grow by another 70,000boe/d.</div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;">Affiliate and subsidiary 2014 exploration investment is set at US$632mn and includes five exploration wells on the US-side of the Gulf of Mexico and six in Colombia, Ecopetrol said.</div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;">The firm also plans to spend US$392mn on developing affiliate and subsidiary oil and gas production in 2014.</div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;"></div><div style="color: #414042; font-size: 13px; margin-bottom: 13px; margin-top: 0.5em;">Ecopetrol forecasts total group oil and gas production at 819,000boe/d next year.</div></div>

Ecopetrol details US$10.6bn 2014 investment plan

Oil & Gas - Colombia Colombia state oil firm Ecopetrol (NYSE: EC) approved US$10.6bn of investment for next year, with 61% (US$6.46b...

FRACK! local policy : new role.

<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6SCdSZzAEWAJ_7VXZNC5as-WkZgaxeKE9moy9BDkEYYzTd4CcGjgU9We5uega4rHyrutVDjf_gD3tkAIxLGZWUCNxRkoyP9pqdR6XfWx2F4SaSsthB9s_TurrlnSViizO1gp7P4D2Ez30/s1600/3323f60.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6SCdSZzAEWAJ_7VXZNC5as-WkZgaxeKE9moy9BDkEYYzTd4CcGjgU9We5uega4rHyrutVDjf_gD3tkAIxLGZWUCNxRkoyP9pqdR6XfWx2F4SaSsthB9s_TurrlnSViizO1gp7P4D2Ez30/s1600/3323f60.jpg" /></a></div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="underline" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;"><strong style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;"><br /></strong></span></div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;"><span class="underline" style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; font-weight: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; text-decoration: underline; vertical-align: baseline;"><strong style="border: 0px; font-family: inherit; font-size: 15.555556297302246px; font-style: inherit; font-variant: inherit; line-height: inherit; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">A new role for local policy</strong></span></div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Our industry is fond of distinguishing “above ground” from “below ground” factors when debating resource access. Below ground is geology, circumstances inherited from nature; above ground lure man-made conditions, such as the political, legal or economic framework.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">The role of “above ground” political discussions is likely to reach new heights in determining whether, where and when shale resources will be accessed. These debates will evolve around local, as opposed to big geopolitical, concerns - simply as a corollary of the widespread geographic distribution of shale resources.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">The flukes of nature that distributed sizeable ‘conventional’ oil resources millions of years ago have distributed them in a highly concentrated fashion. Traditional politics of oil and gas are consequently, more often than not, reduced to the simple issue of who effectively controls these sweet spots, few and far between as they are.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">In the matter of tight oil and shale gas, in contrast, local debates will come to the fore, dominated by local attitudes toward energy, competition and environmental policies – all this in turn reflecting the interplay between the relatively even spatial distribution of shale resources and the role of free entry, competition and – and not least - environmental concerns in accessing them.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">The signs are everywhere already.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">In Europe, Poland and the Ukraine are aggressively competing for investment whereas France and Bulgaria have put moratoria on fracking in place, removing shale prospects for the time being. Germany and the UK are debating.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">China’s lack of success to date in accessing shale gas as planned is largely due to the preferential allocation of prospective areas to national monopolists, with high barriers to entry for everyone else - including companies with better technologies or less risk aversion, be they domestic or foreign. Russia faces an interesting trade-off between pursuing entirely new and high cost technologies to shift production into the concentrated resources of the Arctic, or of allowing a little more of the trial and error necessary to explore technology to access it’s well known shale plays. Albeit hesitantly, it is reforming its tax sector in pursuit of the second option.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Even in the US, production from shale formations so far has remained concentrated in the middle of the country, leaving large known fields in the coastal areas of California and New York State untapped, in this case because of environmental concerns.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">All these examples reflect above ground, political discussions. They mirror local attitudes towards free access, competitive energy markets, and the environment. We should expect more of the same.</div><div style="background-color: white; border: 0px; color: #333333; font-family: Helvetica, Arial, sans-serif; font-size: 15.555556297302246px; line-height: 20px; margin-bottom: 1em; margin-top: 1em; outline: 0px; padding: 0px; vertical-align: baseline;">Increasingly, decisions determining whether and how these resources are brought to market will be made in consumer’s own town halls and parliaments - not by ‘big’ geopolitics mirroring the capricious design of nature in allocating conventional oil endowments in faraway places.</div>

FRACK! local policy : new role.

A new role for local policy Our industry is fond of distinguishing “above ground” from “below ground” factors when debating resource access....

“Might As Well Jump”—Will Alaska Jump-Start Gas Exports?

<h1 class="title" id="page-title" style="background-color: white; line-height: 1.2em; margin: 0px auto; padding: 0px;"><span style="line-height: 20.149999618530273px;"><span style="font-family: inherit; font-size: x-small; font-weight: normal;">Housley Carr (RBN Energy)</span></span></h1><h1 class="title" id="page-title" style="background-color: white; line-height: 1.2em; margin: 0px auto; padding: 0px;"><span style="font-weight: normal; line-height: 20.149999618530273px;"><span style="font-family: inherit; font-size: small;"><br /></span></span></h1><h1 class="title" id="page-title" style="background-color: white; line-height: 1.2em; margin: 0px auto; padding: 0px;"><span style="font-family: inherit; font-size: small; font-weight: normal;"><span style="line-height: 20.149999618530273px;">Alaska officials, concerned the state’s once-dominant role in U.S. energy production will continue slipping, are taking a fresh look at helping to jump-start a combined natural gas treatment plant, gas pipeline and LNG export project that would free vast volumes of natural gas now stranded at the state’s North Slope. A new study commissioned by the state found that it could make sense for Alaska to take a 20% or higher equity stake in the project, but that there are significant risks the state would need to mitigate. Today we look at whether the 49</span><sup style="line-height: 20.149999618530273px;">th</sup><span style="line-height: 20.149999618530273px;"> state can make a long-stalled plan by producers to move North Slope gas to market a reality by the mid-2020s.</span></span></h1><div class="content-middle" style="background-color: white; line-height: 20.149999618530273px;"><div class="region region-content"><div class="block block-system" id="block-system-main" style="margin: 0px;"><div class="content"><div about="/might-as-well-jump-will-alaska-jump-start-gas-exports" class="node node-article clearfix" id="node-714" style="border-bottom-color: rgb(187, 187, 187); border-bottom-style: solid; border-bottom-width: 1px; margin: 20px 0px; padding-bottom: 15px;" typeof="sioc:Item foaf:Document"><div class="content clearfix" style="margin: 0.5em 0px;"><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"><div></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">Ask any American about Alaska and one of the first things that will come to mind is oil, and the oil pipeline that was built in the 1970s to move crude south from the North Slope’s Prudhoe Bay. “Alaskan natural gas” doesn’t roll off most tongues. But as we explored a few months ago in “’Some Plans Are Bigger than Others’—Alaska LNG Exports” the North Slope has some of the world’s biggest gas reserves. The Alaska Department of Natural Resources (ADNR) estimates there are 200 Tcf of unproven and 35 Tcf of proven conventional gas reserves onshore and offshore on the North Slope’s Prudhoe Bay and Point Thomson areas and in waters off the north coast of Alaska. Still, despite years of talk about possible gas pipelines, there is still no outlet—no way out--for all that gas. Instead, Prudhoe Bay producers continue to re-inject 8 Bcf/d of gas into oil wells.</span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">Since the 1970s there has been hope of piping North Slope gas south to the Lower 48, but the last of those plans dried up by 2011-12 after the shale revolution led to the development of major new gas resources in the Barnett, Marcellus, Haynesville and other shale plays much closer to U.S. gas users. That shifted the discussion among Alaska energy giants like ExxonMobil, ConocoPhillips and BP—and TransCanada, which has been working with the state under the Alaska Gas line Inducement Act--to the idea of building about 800 miles of south-bound gas pipeline, a gas treatment plant, and an LNG export terminal in south-central Alaska (see Figure 1).</span></div><div><span style="font-family: inherit;"><br /></span></div><div style="text-align: center;"></div><div style="text-align: center;"><span style="font-family: inherit;">Figure 1</span></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioHf3lrQTp5_vd860Y8TqaMbH14R3JPCMA27uJb1zA4pIkOxKDpF1ON12d_v2IhMHASE0vsyppcfL2D7hhwkNfNkS6oM54tvBCfaAJJfpOJskyfygznmpVc1WLnYrQrN_Ep3Z02X12Enae/s1600/Figure1_0.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="color: black; font-family: inherit;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEioHf3lrQTp5_vd860Y8TqaMbH14R3JPCMA27uJb1zA4pIkOxKDpF1ON12d_v2IhMHASE0vsyppcfL2D7hhwkNfNkS6oM54tvBCfaAJJfpOJskyfygznmpVc1WLnYrQrN_Ep3Z02X12Enae/s200/Figure1_0.png" width="190" /></span></a></div><div style="text-align: center;"><span style="font-family: inherit;"><br /></span></div><div style="text-align: center;"><span style="font-family: inherit;">Source: Alaska Gas Pipeline Project Office (<a href="http://gasline.alaska.gov/" style="text-decoration: none;">http://gasline.alaska.gov/</a>) </span><br /><span style="font-family: inherit;">Click to Enlarge</span></div><div><span style="font-family: inherit;">The primary market for the resulting LNG would be Asia, which buys about 70% of the LNG produced worldwide and whose LNG demand curve has been rising 8%/year the past five years. The catch is, the capital costs associated with all the required infrastructure are high—even by energy industry standards—and gas/LNG producers from Qatar, Australia, western Canada and the Lower 48 already are racing to reach long-term supply deals with Asia’s largest gas consumers. Time’s a-wasting, as they say, and in recent months there has been a new push to assemble the complex financial package needed to make Alaska’s gas export dreams finally happen.</span></div><div><span style="font-family: inherit;">Just last week (week of November 17), a top executive at ExxonMobil laid out the project’s challenges at the Alaska Resource Development Council Conference, and ADNR released a Black & Veatch study it commissioned on how the state might change its gas royalties or taxes—or even take an equity stake in the treat-pipe-and-export project—to help make the project a “go.” Two primary challenges the project faces, ExxonMobil said, are:</span></div><ul style="list-style-image: url(http://www.rbnenergy.com/sites/all/themes/rbntheme/images/menu-leaf.gif); margin: 0.5em 0px 1em; padding: 0px 0px 0px 1.5em;"><li style="margin: 0.15em 0px 0.15em 0.5em; padding-bottom: 0.1em;"><span style="font-family: inherit;">LNG projects with a capacity equivalent to more than 50 Bcf/d are being planned around the world, but less than 40 Bcf/d of additional LNG capacity is likely to be needed by 2030 to keep pace with expected LNG demand growth.</span></li><li style="margin: 0.15em 0px 0.15em 0.5em; padding-bottom: 0.1em;"><span style="font-family: inherit;">Big LNG customers prefer to enter into supply deals with LNG exporters whose terminals and other infrastructure can be built quickly, because that reduces the risk of entering into a long-term LNG supply deal based on too-high prices. The Alaska project would likely take five years or more to come online from the time of final investment decision (FID). The target FID for the Alaska project is 2017-18, with a commercial operation date of 2023-24, or several years behind the first group of LNG exports terminals planned for the U.S. Gulf Coast, West Coast and western Canada.</span></li></ul><div><span style="font-family: inherit;">Black & Veatch said in its study that the Prudhoe Bay and Thomson Point areas have the gas reserves to supply the project’s total needs, at least into the early 2040s, and by then those reserves could almost certainly be supplemented with new, “yet-to-find” fields nearby (see Figure 2). It also said the international LNG market is “illiquid” and “opaque,” with few participants and based primarily on long-term, 20-year-plus contracts. And, it said, the Alaska project would be costly: $10 billion for the gas treatment plant; $12 billion for a 42-inch diameter pipeline with eight compressor stations; and $23 billion for a three-train, 17.4 Mtpa liquefaction plant and export facility.</span></div><div style="text-align: center;"><a class="colorbox colorbox-insert-image init-colorbox-processed cboxElement" href="http://www.rbnenergy.com/sites/default/files/styles/extra_large/public/field/image/Figure2.png?itok=bW_16s1n" style="text-decoration: none;"><span style="color: black; font-family: inherit;"><img alt="" class="image-large" src="http://www.rbnenergy.com/sites/default/files/styles/large/public/field/image/Figure2.png?itok=eNcaQWrJ" style="border: 0px;" typeof="foaf:Image" /></span></a></div><div style="text-align: center;"><span style="font-family: inherit;">Figure 2</span></div><div style="text-align: center;"><span style="font-family: inherit;">Source: Black & Veatch/ADNR Study (PBU = Prudhoe Bay, YTF = Yet to Find - Click to Enlarge)</span></div><div><span style="font-family: inherit;">A real challenge, the Black and Veatch study said, is that with Alaska’s existing royalty and tax set-up, the $45 billion that producers would owe the State puts the project “out of the money” compared with other worldwide LNG projects under development that would provide sufficient volumes of LNG to meet 2025 demand. Some lower-cost projects may not get built, of course, for a variety of reasons. But even if the Alaska project inched toward being in the money, several other projects would be nipping at its heels, working to undercut it. The bottom line, Black & Veatch told the state, is that the Alaska project has the potential to compete for Asian business, but only if the state of Alaska adjusts its fiscal terms to improve the project’s economics. Like governments elsewhere, Alaska could reduce or even eliminate its royalties to help make the project work. But state officials are concerned that would undermine the Alaska Permanent Fund, whose support comes almost entirely from oil and gas royalties. The study concluded that instead of collecting existing taxes and royalties, a 20 to 30% equity investment in the project by the state could provide the same or better revenue.</span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">One other thing is worth noting. The study found the state would better protect its interest by taking its royalties “in value”—that is, in cash—rather than taking them “in kind”—that is, by being paid by receiving a portion of the gas being piped south. If the state had to market LNG itself, the reasoning goes, it would need to enter into complex commercial agreements, and would be disadvantaged by its inexperience in LNG negotiation and its lack of an LNG supply portfolio to optimize. Producers, after all, are better than state governments at managing exposure to market risk.</span></div><div><span style="font-family: inherit;"><br /></span></div><div><span style="font-family: inherit;">A full-day hearing at the Alaska House of Representatives’ Natural Resources Committee last Friday (November 22) laid out the range of options the state should consider. What seems likely is that over the next few months, the Alaska DNR, state legislators, and the three North Slope gas producers will try to work out a series of interrelated tweaks to the state’s royalty and tax set-up that would help advance the project—with its treatment plant, pipeline and LNG export terminal--probably resulting in a direct investment in the project by the state. Whether that compromise will be enough remains to be seen. Because with significant amounts of new LNG capacity already under construction elsewhere in the world, and with several other LNG projects poised for construction starts in the U.S. and western Canada, Alaska may need to jump soon or find itself with a lot of still-stranded gas.</span></div></div></div></div></div></div></div></div></div></div>

“Might As Well Jump”—Will Alaska Jump-Start Gas Exports?

Housley Carr (RBN Energy) Alaska officials, concerned the state’s once-dominant role in U.S. energy production will continue slipping, are t...

Playing the Natural Gas Revolution with MLPs

<h2 style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 34px; line-height: 36px; margin: 20px 40px; text-rendering: optimizelegibility;"><span style="font-size: 16px; line-height: 21px;">Investors have different strategies and time horizons: While some are seeking stable dividend paying stocks, others enjoy the excitement of growth companies -- or perhaps something in between.</span></h2><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">If you fall in the latter category and are looking for a home-run hitter with a dependable batting average, <strong>Boardwalk Pipeline Partners</strong> (NYSE: BWP) could be a perfect fit. Here is a solid company that offers an outsized, stable distribution with the potential for stock appreciation as well. </div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">As the natural gas production boom continues, Boardwalk, with enough natural gas pipelines to span the United States more than 5 times, is primed to take advantage of transporting the fuel.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">In addition to owning natural gas pipelines in some of the top gas plays in North America, the company also controls underground storage caverns with approximately 201 billion cubic feet of working gas capacity and approximately 18 million barrels of liquids capacity.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;"></div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">The real win for investors is the fact that over 80% of revenues are backed by long-term, fixed-fee contracts with creditworthy customers. This "tollbooth" style of contract (where customers pay regardless of use) protects Boardwalk's cash flows, while sheltering the company from fluctuations in commodity prices.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">Which means investors can sleep soundly and count on receiving regular distributions every quarter. In fact, Boardwalk Pipeline Partners has consistently increased its dividend every year since its IPO.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;"><strong>Why buy into an MLP?</strong></div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">Boardwalk Pipeline Partners is a master limited partnership (MLP) which means the company avoids paying taxes on its profits like a corporation, and instead distributes profits to unitholders who are then taxed on an individual basis. By skipping double taxation, MLPs offer a tax-advantaged income stream and are thus able to lower the cost of capital.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">MLPs are strong investments, especially in low-interest-rate environments, due to the sturdy distribution yields they offer. However, expanding the business either organically or through acquisition is virtually the only way to increase yields. Having a lower cost of capital makes financing expansions possible without cutting distributions. With a suitable 5.5% cost of capital, Boardwalk has never decreased a quarterly distribution and most recently maintained a healthy distribution coverage ratio of 1.2 times.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">Boardwalk's high yield is also insulated by a fortress-like competitive moat since constructing new pipelines is incredibly capital intensive and requires regulatory approval contingent on demand. Equally important, natural gas storage is located in underground caverns and naturally occurring salt domes which limit storage capacity.</div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;"><strong>Industry tailwinds</strong></div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">Natural gas is a cleaner burning fuel than coal, emitting less than half as much carbon dioxide during combustion per unit of electricity output.  In addition, after natural gas prices reached record lows last spring, natural gas has been rapidly replacing coal-fired power generation. Since 2005, power generation from natural gas has increased more than 60%, supplying over 30% of all power generation in the United States in 2012.</div><div class="separator" style="clear: both; text-align: center;"><span style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px;"><br />In addition to power generation, natural gas usage could further benefit from LNG exportation. With an estimated 6.8 billion cubic feet per day of LNG exports expected in the next decade, Boardwalk, which controls 11% of the nation’s natural gas, stands to benefit. With natural gas expected to be the fastest growing fuel through 2040, investors interested in safe yields should benefit from Boardwalk gaining the upper hand when negotiating long-term, fixed-fee contracts. </span><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIjPTpJWUHfuAQII5VhKHXISawKmVm8lvrFy3_dKBGMhIm0xy6Htdstn3K7s_dBJ8E9g9hlACE9ZTXGd-JuN7AYZdubSSyvc_yiCdDVc6JqABslOB0wP20f3bo6PZNo7G_R5-c9zAJhS6c/s1600/us-electricitybyfuel-graph-sfr-3.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="169" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgIjPTpJWUHfuAQII5VhKHXISawKmVm8lvrFy3_dKBGMhIm0xy6Htdstn3K7s_dBJ8E9g9hlACE9ZTXGd-JuN7AYZdubSSyvc_yiCdDVc6JqABslOB0wP20f3bo6PZNo7G_R5-c9zAJhS6c/s320/us-electricitybyfuel-graph-sfr-3.png" width="320" /></a></div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;"><strong>bottom line</strong></div><div style="background-color: #fcfcfc; color: #333333; font-family: 'Open Sans', Arial, Helvetica, sans-serif; font-size: 16px; line-height: 21px; margin: 20px 40px;">A rare gem in the investing universe, Boardwalk Pipeline Partners offers quality natural gas assets at an incredible price. With the United States gearing up to be a net natural gas exporter, Boardwalk Pipeline Partners is prepared for growth through continued asset add-ons organically as well as through value-adding acquisitions. Also, in an unusually low interest rate environment, investors should be able to collect a steady stream from this 7% yielding natural gas juggernaut.</div>

Playing the Natural Gas Revolution with MLPs

Investors have different strategies and time horizons: While some are seeking stable dividend paying stocks, others enjoy the excitement of ...

Chevron: Rosebank Oil Project Is Uneconomic

<div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUprlaFQrV4H6E3HKgZkxNvEiwB_G9mp7NOyj_WyFpyb-gWO7aGIVA5_X8a40GA0pg_Nb0pueQYx9rQbj2b-LZOXDa3aiG3sS4Ky2RcGV4a4kZ0fTGaoYb_WRDYPZcQ-LFefmAYczNjtns/s1600/Chevron_Rosebank_Map.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUprlaFQrV4H6E3HKgZkxNvEiwB_G9mp7NOyj_WyFpyb-gWO7aGIVA5_X8a40GA0pg_Nb0pueQYx9rQbj2b-LZOXDa3aiG3sS4Ky2RcGV4a4kZ0fTGaoYb_WRDYPZcQ-LFefmAYczNjtns/s320/Chevron_Rosebank_Map.jpg" width="320" /></a>Chevron Corp., the world’s second- largest non-state energy company by market value, said its Rosebank oil discovery off the coast of Scotland would be unprofitable to bring into production at this time.</div><div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;"><br /></div><div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;">Chevron plans to continue evaluating the 240 MMbbl field along with partners OMV AG and Dong Energy A/S for ways to improve the project’s potential returns, the San Ramon, California-based company said in an e-mailed statement Nov. 22. A final decision on whether to proceed will be made next year, according to the statement.</div><div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;"><br /></div><div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;">Rosebank’s unprofitability is a blow to UK and Norwegian efforts to halt the slide in North Sea oil output as fields first drilled in the 1970s and 1980s near the end of their productive lifespans. Dropping North Sea supplies are expected to drive a 15% decline in European crude and gas liquids production by 2018, the Organization of Petroleum Exporting Countries said in its annual world outlook on Nov. 7.</div><div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;">Rosebank “does not currently offer an economic value proposition that justifies proceeding with an investment of this magnitude,” Chevron said in the statement.</div><div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;">Chevron and its partners hired South Korea’s Hyundai Heavy Industries Co. Ltd. in April to construct a US $1.9 billion platform that could offload crude directly to tankers, Hyundai said in a Nov. 15 slide presentation. The vessel would have capacity to draw 100,000 bbl of oil and 190 MMscd/d of gas from the seafloor.</div><div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;">Chevron hasn’t disclosed any cost estimates for the total development. Rosebank is located 130 km (80 miles) northwest of the Shetland Islands and 1,130 m (3,700 ft) beneath the sea surface.</div><div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;">Chevron discovered Rosebank in 2004 and owns a 40% stake. OMV owns 50% and Dong holds a 10% interest.<br />ExxonMobil Corp. is the largest oil company by market value, according to data compiled by Bloomberg.</div><div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;"><br /></div><div style="background-color: white; color: #333333; font-family: Arial, Helvetica, sans-serif; font-size: 14px; line-height: 22px;"><br /></div>

Chevron: Rosebank Oil Project Is Uneconomic

Chevron Corp., the world’s second- largest non-state energy company by market value, said its Rosebank oil discovery off the coast of Scotla...