July 2017, Vol. 244, No. 7

In The News

World News

U.S. Tops World Hydrocarbon Production in 2016 

The United States remained the world’s top producer of petroleum and natural gas hydrocarbons in 2016 for the fifth straight year, despite production declines for both petroleum and natural gas relative to their 2015 levels, the U.S. Energy Information Institute (EIA) reported in June. The United States has been the world’s top producer of natural gas since surpassing Russia in 2009 and the top producer of petroleum hydrocarbons since 2013, when its production exceeded Saudi Arabia’s.

Crude oil and lease condensate accounted for roughly 60% of total U.S. petroleum hydrocarbon production in 2016. The share was much greater in Saudi Arabia and Russia, as those countries produced smaller volumes of natural gas liquids and biofuels.

Russia reported record levels of petroleum production in the second half of 2016, and Russian natural gas production also rose in 2016, in part to meet growth in European demand. Saudi Arabia’s total petroleum and natural gas hydrocarbon production rose by 3% in 2016.

Eni Launches Coral South Project in Mozambique

Italy’s Eni signed an $8 billion agreement to start developing a massive gas field with the potential to transform Mozambique’s economy by turning it into a major LNG supplier to Asia.

Eni’s Coral South project is the first in its development of the 16 Tcf field discovered by Eni in Area 4 of the Rovuma Basin in 2012. The project includes construction of six subsea wells connected to a floating liquefied natural gas (FLNG) unit with a capacity of 3.4 million tons per year.  Eni expects exports to begin in 2022.

“Our ambition to become a global integrated gas and LNG player is based on working alongside key partners such as Mozambique,” Eni CEO Claudio Descalzi said during a ceremony with government leaders in the capital city of Maputo. “The Coral South Project will deliver a reliable source of energy while contributing to Mozambique’s economic development. This partnership approach with our hosting countries is the foundation on which our joint sustainable growth strategy is built.”

Turkmenistan Reports Natural Gas Discovery

Turkmenistan announced it has discovered natural gas reserves Uzun-Ada, an onshore field near the Caspian Sea in the country’s western Balkan province. State news agency TDH reported a test well yielded commercial gas flows at a depth of about 22,000 feet.

Turkmenistan has been in talks with the European Union to supply gas to Europe via the proposed Trans-Caspian Pipeline as it seeks to broaden its base of natural gas customers. Russia stopped purchasing natural gas from Turkmenistan last year, leaving China as its primary export market.

Canada’s Oil Sands Open Up To Chinese Investment

Canada is inviting Chinese companies to invest in its oil sands, Canadian Natural Resources Minister Jim Carr said last month after an exodus in the past few months saw international oil majors selling a total of US$23 billion worth of assets to domestic producers. Speaking at a conference call to reporters during his trip to China, Carr said “We think there are opportunities and we laid out, along with experts from industry, what we believe to be opportunities for them,” as quoted by Reuters.

“We would welcome investment from any nation that’s interested in the oil sands,” the minister noted, without giving details of what kind of Chinese investment Canada would see as welcome. The government is interested in discussing proposals case by case, he said. Chinese firms including PetroChina, CNOOC and Sinopec invested in the oil sands between 2005-12.

But now, with the price of oil at around US$50, which is half of what oil prices were in 2012, and Canada’s oil sands one of the most expensive projects to develop, not many international companies are seeing returns from investing in new projects there. According to GMP FirstEnergy analyst Michael Dunn, who spoke to Reuters:

“It’s probably a question not of investing, but whether or not they sell. Non-Canadian entities have been selling the oil sands, why would the Chinese be different?”

Earlier this year, Shell said it was selling oil sands interests to Canadian Natural Resources for around US$8.5 billion, as part of its strategy to focus on free cash flow and higher returns on capital, and prioritize businesses such as integrated gas and deepwater. ConocoPhillips announced the sale of oil sands assets in Canada to Cenovus in a US$13.3 billion deal while Norway’s Statoil has sold its entire oil sands operations in Alberta to Athabasca Oil Corp.

ROVs Survey for WWII Explosives in Pipeline Path

ROV provider M² Subsea has been subcontracted by Next Geosolutions to carry out unexploded ordinance identification (UXO) surveys in the Baltic Sea for the Nord Stream 2 project.

Nord Stream 2, an extension of the world’s longest pipeline, will be undertaken in an area noted for munitions discoveries following the end of World War II. Scotland-based M² is supplying its Go Electra vessel, ROVs and personnel to support the survey work on the world’s longest subsea pipeline system.

“Safety is a key factor on every project and in particular where it involves surveying the seabed to identify undiscovered explosive devices for removal,” said M² Subsea CEO Mike Arnold. A 15-person team will deploy from Finland to carry out the UXO identification work using two of the firm’s fleet of 28 ROVs.

Upsurge in Shale Oil, Gas Production in NA Foreseen 

Pipeline coatings production has grown significantly with increased shale production and an upsurge in pipeline construction, but the pace of growth is unlikely to sustain for long, according to Research and Markets, which has added the Global Pipe Coatings Market 2016-2021 report to its research offerings.

Fifty-nine oil and gas producers have filed for bankruptcy since January 2015, reducing pipeline traffic, revenues and growth prospects in parts of the United States, while demand for pipelines has grown in some Asia Pacific economies, according to the report. Trends in these regions signal moderate to high growth in demand for pipe coatings in residential, agricultural and industrial applications, including water transport pipelines in India and China.

BP, Rosneft to Cooperate on Europe Gas Projects

Rosneft and BP agreed to cooperate on European natural gas marketing and aim to jointly implement natural gas projects focused on gas exploration and production, LNG production, supply and marketing.

According to a memorandum of understanding signed by the two companies, Rosneft and BP’s wholly owned subsidiary, BP Gas Marketing Limited, will enter into a long-term sales and purchase agreement for the supply of natural gas produced by Rosneft in order to ensure delivery of additional Russian gas supplies to European markets starting from 2019.

Rosneft CEO Igor Sechin said cooperation with BP may provide his company with an efficient monetization channel for natural gas and support development of new resources, including hard-to-recover gas reserves. Noting a strategic shift toward natural gas, BP Russia President David Campbell predicted gas will grow to 60% of BP’s total production by the middle of the next decade, compared with 50% today.

China Eyes Completion of Russian Pipeline Sections

Vice Governor Li Haitao told reporters at the government-organized Belt and Road Forum that China plans to complete the remaining sections of two pipelines in its northeastern province of Heilongjiang by the end of next year: the second East Siberia Pacific Ocean Pipeline (ESPO) for Russian crude oil and the Power of Siberia natural gas pipeline. China National Petroleum Corp. (CNPC) is responsible for construction.

Reuters reported that China National Petroleum Corp. (CNPC) plans to complete remaining sections of two Russian pipelines in the northeastern province of Heilongjiang by the end of next year: the second East Siberia Pacific Ocean Pipeline (ESPO) for Russian crude oil and a Russia-China natural gas pipeline known as the Power of Siberia. CNPC has projected the gas pipeline will start delivery to China in 2019.

Li said China also is planning a joint venture refinery and petrochemical complex in Russia near the Chinese border with an estimated investment of $870 million.