September 2017, Vol. 244, No. 9

In The News

World News

Russia May Break Gazprom Monopoly to Stimulate LNG

A Russian Security Council commission has recommended breaking down Gazprom’s gas export monopoly in a bid to boost the competitiveness of Russia’s gas, Russian daily Vedomosti reported after seeing the protocol from a recent meeting of the commission.

The global rise in LNG as a replacement for natural gas and oil is a threat to Russia’s energy security, the commission concluded, and Moscow needs to take urgent action to turn Russia into a major exporter of LNG.

The global structure of fuel demand is changing, the protocol said, and new LNG projects are spurring more intense competition in Europe and Asia – key markets for Russian natural gas. To tackle the problem, the commission proposed prioritizing the development of the local LNG industry, devising a “coordinated strategy” for gas deliveries to key markets, and liberalizing gas exports.

Gazprom is the sole pipeline exporter of natural gas. There is one LNG plant in Russia, with an annual capacity of 9.6 million tons, operated by Sakhalin Energy, a company that’s majority-owned by Gazprom. Companies other than Gazprom can export LNG as long as they were licensed by 2013 to develop gas deposits with the option of building liquefaction trains there.

Novatek, Russia’s largest gas independent, staked a claim in LNG when it started building the Yamal LNG plant, which should start operating by the end of the year. When it reaches full capacity, in two years, the Yamal facility would process 16.5 million tons of LNG. Novatek also has plans for another LNG plant, Arctic LNG-2, with an annual capacity of 18 million tons.

Gazprom is pursuing its own LNG projects: the state company has two LNG plants in the works with a combined capacity of 20 million tons annually. Rosneft, the other state mammoth, holds the majority stake in Pechora LNG, but the capacity and timeline for this project have not yet been established. –

By Irina Slav, Oilprice.com

Argentina Gains Financing To Expand Gas Pipelines

Argentina has secured $150 million in financing from CAF, a multilateral development bank in Latin America, to expand its natural gas transport capacity and connect more homes to the country’s gas grid in hopes of reducing consumption of more expensive alternatives, such as liquid petroleum gas.

With the financing, the country will proceed with expanding the backbone pipelines in the north and south of the country, and increasing the delivery potential of a line that brings in supplies from Bolivia.

Argentina will need more pipeline capacity as production recovers from a 10-year low of 4 MMcf/d in 2014 and a series of new projects to develop Vaca Muerta, the country’s biggest shale play, brings greater amounts of gas supplies to market. According to the country’s government, gas production, which currently meets 50% of national energy needs, should reach 6.5 MMcf/d in 2025.

In May, the government called a tender for projects to expand three pipelines, with spending estimated at $168 million.

Norway’s Lofoten Islands Likely to Remain Off-Limits 

For years the oil and gas industry has eyed Norway’s Arctic Lofoten Islands, which could hold billions of barrels of crude oil worth an estimated $65 billion. An upcoming general election is unlikely to lift a deadlock that’s keeping a ban on drilling off the environmentally sensitive islands as more Norwegians are rejecting the industry that helped make the country rich. “It’s a dead issue,” Frank Aarebrot, a political science professor at the University of Bergen, told Bloomberg.

Backed by unions and business, Norway’s two biggest parties, Labor and the Conservatives, have long favored opening the area for exploration. But so far, they have had to compromise with smaller parties determined to keep Lofoten oil-free. The waters off the rugged archipelago are home to the world’s biggest cold-water coral reef and a breeding area for 70% of all fish caught in the Norwegian and Barents seas.

The islands also host mainland Europe’s biggest seabird colony. Opponents argue a spill could cause catastrophic harm. Oil companies led by state-controlled Statoil say gaining access is key if the country wants to maintain its oil and gas output, which is forecast to fall again from 2025 after already dropping 12% since a 2004 peak. While the government estimates Lofoten could hold about 1.3 Bboe, an industry group has said resources could top 3 Bbls.

In a sign that drilling opponents are gaining traction, Labor in a “compromise” earlier this year said it would only seek to start an impact study in one area designated for potential oil blocks. But even such as small move is opposed by the Center Party and Socialist Left Party, which look to be Labor’s potential ruling partners after the Sept. 11 vote.

China’s Crude Imports Drop To 7-Month Low

Chinese crude oil imports in July dropped to their lowest level in seven months, although they rose 12% on an annual basis, according to calculations made by Reuters on the basis of China’s customs data. In July, China imported 34.66 million tons of crude oil, or about 8.16 MMbpd, which was the lowest level since January.

Crude oil imports in the first seven months of this year increased by 13.6% at 247 million tons. In the first half of the year, Chinese crude oil imports averaged 8.55 MMbpd, or 212 million tons in total – a 13.8% annual increase.

The total trade data for July had analysts worried that China’s economy may have started to show signs of slowdown. Both exports and imports increased less than expected, making analysts wonder if global demand growth has started to slow down, or if China’s July trade figures should be attributed solely to one-off or seasonal factors. In total imports, China’s imports increased by 11% in July, missing forecasts for a 16.6% rise, and slowing down from June’s 17.2%, to the slowest growth since December.

A senior manager at Sinopec said that lower domestic production and continued low oil prices will lead to China’s demand for crude oil imports rising by 400,000 bpd in 2017. Chinese crude oil imports are expected to exceed 400 million tons this year and to further rise next year, Zhang Haichao, vice president of Sinopec Group, told Reuters.

The estimate means that Chinese demand for foreign crude would rise by 400,000 bpd, and for the first time ever, rising imports could make China the world’s top crude oil importer on an annual basis, according to Reuters.

Transneft Diascan Busy Checking Russian Storage Tanks 

Diagnostics Directorate of Transneft Diascan performed examination of 328 tanks for oil and petroleum products storage in the first seven months of 2017. The work was performed as part of the integrated program of diagnostic examination of pipelines and OPS (oil pump stations) facilities of Transneft for 2017.

Full technical diagnostics with decommissioning was performed at 35 tanks; partial technical diagnostics without decommissioning was performed at 66 facilities. A further examination of 227 tanks was performed: tanks monitoring (56 units), control for the condition of anti-corrosion coating (78 units), additional flaw-detection inspection (X-ray) of welded joints between the third and the fourth tank well rings (43 units). Methods of ultrasonic, acoustic emission and radiographic inspection were used during the examination.

The bulk of the work was performed at the facilities of Transneft Urals (55 tanks), Transneft Western Siberia (48 tanks), Transneft Siberia (45 tanks), Chernomortransneft (31 tanks) and Transneft Kama Region (28 tanks).

Transneft Diascan diagnosed over 1,100 additional equipment units of the linear portion of oil and petroleum products trunk pipelines (repair collars, air escape valves, fittings, annunciators, sockolets, plugs, pressure tapoff units, pig traps, spill collection tanks of pig traps).

Diagnostics of over 1,400 mechanic and technological equipment units, 105 automation and pipeline telemetry systems were performed. Over 50 km of industrial pipelines of OPS were examined, full technical diagnostics of 0.3 km of pipeline sections of the linear portion of oil trunk pipelines (OTP) and OPS (crossover lines between oil pipelines, pipelines of the linear portion of OTP not subject to inline inspection and not examined using non-destructive testing methods) was conducted.