June 2017, Vol. 244, No. 6

In The News

World News

Myanmar Oil Pipeline Starts Operations

A crude pipeline completed three years ago through Myanmar to southwestern China has begun operations, allowing the world’s second-biggest oil user to receive supplies faster from the Middle East and Africa, Bloomberg reported.

The link allows China to import crude from the Middle East and Africa without having to ship through the Straits of Malacca and into the South China Sea. Trial operations began in 2015 on the 771-kilometer (479-mile) pipeline, which is designed to carry 22 million tons of crude a year (about 442,000 barrels a day). Myanmar can take 2 million tons of crude annually from the line.

Denmark Proposes Law Change to Block Gazprom Pipeline

Denmark’s government is considering a change to its laws that could potentially block Gazprom’s proposed Nord Stream 2 pipeline.  Denmark’s energy minister, Lars Christian Lilleholt, told the Financial Times that the government was proposing a bill to allow foreign and security policy considerations to be taken into account in assessing whether projects such as Nord Stream 2 should be allowed.

Denmark and Sweden have a say over the project as it goes through their territorial waters, but current Danish law only allows it to consider the environmental impact of such projects.  This would be unlikely to affect Nord Stream 2, which follows the same route as the first Nord Stream pipeline from Russia to Germany.

GlobalData: 30 North Sea Projects to Start by 2020

Despite the low cycle that the market is facing, a total of 30 crude and natural gas projects are expected to start operations in the North Sea by 2020. The UK will lead with a total of 20 projects, followed by Norway with nine and Denmark with a single project, according to research and consulting firm GlobalData.  The projects represent total recoverable reserves of 5.2 billion BOE.

The company’s latest report states that the North Sea has seen improvements during the downturn cycle witnessed over the last three to four years. Projects being sanctioned now have costs around half of those sanctioned in 2013, showing the companies have made clear improvements in cost efficiency. Operating costs have also halved from nearly US$30 per barrel to just over US$15 per barrel, while the production forecast has seen an increase from 2016 – a trend that is set to continue as new fields are brought on stream.

Growing Global Trade May Support Asian LNG Hub

Asia is the world’s largest consumer of liquefied natural gas (LNG), accounting for three-quarters of global LNG trade and a third of global natural gas trade, but the region lacks a pricing benchmark to reliably reflect supply and demand changes in Asia’s natural gas markets.

While no location in Asia yet has sufficient infrastructure or regulatory frameworks to accommodate the creation of a natural gas trading hub, Japan, China and Singapore are each exploring the possibility of establishing an LNG market hub. Given the United States’ emergence as a major LNG supplier, the U.S. Energy Information Agency (EIA) commissioned a study that examines efforts to establish regional LNG trading hubs and price benchmarks in Asia and the challenges they face.

EIA’s study concluded that it will take time to develop functional natural gas market hubs in Asia due to considerable regulatory and infrastructure challenges, including limited pipeline connectivity within and between countries. Market liberalization also will be necessary, including equal third-party access to infrastructure and transparent pricing. The full report, Perspectives on the Development of LNG Market Hubs in the Asia Pacific Region, is available at eia.gov.

Qatar Plans to Increase Gas Production Capacity by 2 Bcf/d

Qatar Petroleum plans to develop a new gas project in the southern sector of the North Field and said it will begin work on the project’s details over the next few months. The development ends the company’s 12-year ban on new projects to assess the impact of its current extraction rate on the reservoir it shares with Iran.

Qatar Petroleum’s President & CEO Saad Sherida Al-Kaabi said technical studies and assessment of the North Field confirmed the potential for developing a new gas project that can be targeted for export with a capacity of about 2 Bcf/d. “It is worth noting that a project of this size will increase the current production of the North Field by about 10%, which will add about 400,000 bpd of oil equivalent to the State of Qatar’s production,” Al-Kaabi said.

Russia to Begin Operations on 29 Projects by 2025

Russia has the highest number of key planned oil and gas projects in the Former Soviet Union (FSU), with 29 expected to start operations in the country by 2025, according to research and consulting firm GlobalData.

“Even with the recent production cuts, Russia remains the leader in the region with healthy pipeline of planned assets,” said Anna Belova, GlobalData’s senior oil and gas analyst for the FSU region.

Russian key planned projects are expected to add 800,000 bpd to global crude production in 2025, and 11.9 Bcf/d to global gas production. Russia is expected to spend about $41 billion on key planned projects, of which $10.4 billion will be spent alone on the Sakhalin 3 project. Gazprom, which leads operators with six planned projects in the period, is expected to spend $31.8 billion.

Putin Says Russia Will Become Top LNG Producer

President Vladimir Putin said Russia will become the world’s biggest LNG producer, but he did not specify a time frame for reaching this goal. Russia has just one operating LNG export facility, Sakhalin, but Novatek plans to begin LNG shipments by December from the new Yamal facility to compete with Asian LNG imports from Qatar and Australia.

Despite the ambitious plans to expand its LNG markets, Russia will have to contend with the market realities of capped LNG prices, as a wave of new LNG supply is expected to keep prices subdued at least until 2020, according to Moody’s.