February 2019, Vol. 246, No. 2

Global News

Global News

TAP Gas Pipeline Completes $4.5 Billion Project Financing

The Trans-Adriatic Pipeline (TAP) completed its $4.5 billion (3.9 billion euros) project financing, paving the way for construction to be completed for start-up in 2020, its managing director said in January.

photo source: TAP

TAP, the final leg of a $40 billion project called the Southern Gas Corridor to transport gas from Central Asia to Western Europe, is a cornerstone of the European Union’s energy security policy to wean the bloc off Russian gas supplies. With the first delivery of gas to Europe expected in 2020, TAP will be the first non-Russian gas pipeline to supply Europe since the Medgaz link, which started deliveries from Algeria to Spain in 2011.

“With project financing now concluded, TAP can progress to the final completion of the project and delivery of Shah Deniz II gas in 2020,” said Luca Schieppati, the TAP managing director.

TAP will transport up to 10 Bcm of natural gas per year from the Shah Deniz II field in Azerbaijan to Italy. The company said it completed the financial close in December, in what was the largest project finance agreed for a European infrastructure project last year.

The European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) approved loans for the project in 2018. The rest of the financing has come from export credit agencies and a group of 17 commercial banks, which include Bank of China, BNP Paribas, Societe Generale and UniCredit, according to Reuters.

Rail Shipments Soar as Permian Oil Production Outgains Pipeline Capacity

Crude oil shipments by rail grew dramatically in the Gulf Coast region as Permian Basin production reached record highs in 2018, according to a year-end report on rail transport by the U.S. Energy Information Administration (EIA).

In October 2018, the most recent full-month data available, producers shipped an average of 109,000 bpd of crude oil in the Gulf Coast region, compared with 6,000 bpd in October 2017.  The October EIA data captured a month-to-month surge in rail shipments to 3.4 MMbpd, nearly doubling September’s 58,000-bpd average.

The Gulf Coast region – defined by the U.S. Department of Energy as Petroleum Administration for Defense District 3, or PADD 3 – includes Texas, New Mexico, Louisiana, Arkansas, Mississippi and Alabama.  The EIA does not track specific details on the origin and destination of shipments, but production volumes and other trends offer clear indicators across PADD 3.

“I think it’s fair to say that this increased rail volume is mostly being driven by the increased production in the Permian region,” said EIA analyst Arup Mallik. 

Numerous pipeline projects are under construction or planned to add crude oil takeaway capacity from the Permian Basin.  Three major projects scheduled for completion this year will add 2.1 MMbpd of capacity from the Permian: Plains All American Pipeline’s Cactus II, Phillips 66 Partners’ Gray Oak Pipeline and the EPIC Crude Oil Pipeline. 

Israel, Greece, Cyprus to Ink Natural Gas Pipeline Deal

Israeli Prime Minister Benjamin Netanyahu reiterated plans to sign an agreement early this year with Greece and Cypress to build a natural gas pipeline from the eastern Mediterranean to Europe, while the United States pledged its support for the $7 billion project.

Speaking at a late-December summit with the Greek and Cypriot leaders in southern Israel, Netanyahu said the three nations reaffirmed their commitment to the pipeline and discussed “important aspects” of the project. Italy is also a partner in the pipeline’s planning. Cyprus President Nicos Anastasiades said the project is waiting for a green light from the European Union to move forward. 

Israel has been developing natural gas fields off its Mediterranean coast for the past decade. Its Tamar field already is operational, while the larger Leviathan field is expected to be operational next year. Israel uses most of its own gas production but has signed export deals with Egypt and Jordan and has its eyes on the larger European market.

The proposed pipeline would allow Israel and Cyprus to export their recently discovered offshore reserves to Italy and eventually to the rest of Europe. Greece, which would act as a conduit for the gas to the continent, could also use the pipeline to convey any hydrocarbons potentially found in its own waters.

Pipeline Shutdowns Lead to Import Bottlenecks at Mexican Ports

Bottlenecks for offloading imported fuel formed at some Mexican oil ports in January following government orders to shut pipelines to limit losses from widespread fuel theft, according to Reuters and Refinitiv Eikon data.

With storage limited in Mexico, the move by President Andres Manuel Lopez Obrador to shut pipelines and move fuel mostly by rail and truck has slowed transport, causing long lines for consumers and slowed deliveries at ports, where more than 7 million barrels of fuel – enough for several days of use in Mexico – languish.

The crackdown on fuel theft, a crime that has drained billions of dollars from state coffers and is blamed for rising violence in some regions, is the leftist president’s first major move against criminals and corruption since taking office in December, but risks angering consumers and hurting the economy.

State-run Petroleos Mexicanos (Pemex) started building an inventory Dec. 20 in preparation for pipeline closures, Energy minister Rocio Nahle said. She denied there was fuel scarcity in Mexico, which is among the world’s top four importers of gasoline.

U.S. Governors Agree to Study Sending Gas to Asia via Mexico

The governors of Arizona, New Mexico and Mexico’s Sonora state agreed to study a plan to export natural gas to Asia by connecting existing pipelines to move the fuel south through Mexico to the Gulf of California.

The non-binding agreement calls for the states to collaborate on promoting investment, research and innovation to eventually export natural gas from New Mexico’s abundant supply to Asian nations, which are leading importers of liquefied gas.

The memorandum signed by Republican Govs. Doug Ducey of Arizona and Susana Martinez of New Mexico, as well as Claudia Pavlovich of Sonora, does not call for the commitment of any funds.

“Asia’s burgeoning demand, New Mexico’s abundant supply, and Arizona and Sonora’s strategic location and transport networks all combine to present an opportunity for continued regional growth,” the agreement states.

The plan proposes that the three states study ways to connect existing pipeline networks in Arizona and Sonora to move the fuel from New Mexico to the U.S.-Mexico border, then south into Sonora state and west to the port of Guaymas on the Gulf of California, where tankers would pick up the fuel for the trip to Asia. Guaymas is far closer to Asia than Houston on the Gulf of Mexico, where most fuel leaves the U.S. for delivery to Asia via the Panama Canal.

Pakistan Fires Gas Utility Chiefs over Winter Energy Crisis

Pakistan’s Prime Minister Imran Khan fired the chiefs of Sui Natural Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company Limited (SSGC) in January over a severe winter energy crisis that has seen repeated supply outages.

Since the start of the winter, Pakistanis using natural gas for cooking and heating, as well as factories and power plants that rely on the fuel, have experienced significant inconvenience due to low gas pressure or no supply at all, Reuters reported. Factories and business in the port city of Karachi, Pakistan’s commercial hub, have been badly affected, threatening jobs and the livelihoods of workers.

“Recently, people have faced a severe gas supply crisis,” Chaudhry said in a statement. “The prime minister has announced the immediate sacking of the heads Sui Southern and Sui Northern.”

Pakistan has suffered from chronic energy supply problems for years, despite significant natural gas reserves that can fill almost half its energy requirements, but supply constraints have led to increasing demand for LNG imports.

Lawmakers Urge U.S. Agency to Bolster Pipeline Cybersecurity

Two Democratic lawmakers urged the Department of Homeland Security to better protect U.S. oil and gas pipelines from cyber-attacks, after a report they requested detailed a lack of federal oversight of the critical conduits.

The report said Homeland Security’s Transportation Security Administration (TSA) does not have a process to update its pipeline security guidelines to reflect revisions to standards considered by experts and regulators to be the industry bible on cybersecurity.

The standards on avoiding hacker attacks are the Cybersecurity Framework from the National Institute of Standards and Technology.

The report by the General Accountability Office (GA)O, the investigative arm of Congress, was requested by Sen. Maria Cantwell and Rep. Frank Pallone. “Protecting our pipelines, and the people who live and work near them, must be a top priority for our government, and I hope this report will prompt the Trump administration to start treating this challenge with the urgency it deserves,” Cantwell said in a release.

Energy infrastructure has long been a target of hackers. Recently, hackers using a variant of the notorious Shamoon virus crippled more than 300 computers owned by Italian oil services company Saipem and brought down servers in the Middle East and India. The company did not know who conducted the strike, but an official at cybersecurity company CrowdStrike said he believed Iran was responsible.

Colombia Pipeline Bombing Extends String of Attacks in Region

There were 89 attacks on Colombia’s 485-mile (780-km) Cano Limon pipeline in 2018 alone.  In Peru, there have been dozens of attacks on PetroPeru’s 683-mile (1,100-km) pipeline to its Pacific Coast refinery since it began operating four decades ago.

While some circumstances differ, the problems facing pipeline operators in the neighboring South American countries are similar in that they both remain under attack.

Colombian state-run oil company Ecopetrol said two January bomb attacks on the Cano Limon pipeline in western Antioquia province came just four days after a similar attack halted pumping.  The most recent bomb attacks, on Jan. 8, occurred in the rural areas of La Pesquera and Las Bancas. 

Although Ecopetrol did not name the group responsible, military officials say bombings are usually carried out by leftist rebels of the National Liberation Army (ELN), considered a terrorist organization by the United States and the European Union.

The regular bombings have not affected exports or production at the Cano Limon field, operated by Occidental Petroleum Corp., because crude has been moved through the nearby Bicentenario pipeline.

In December, Canadian oil company Frontera Energy said it stopped production at Peru’s largest oilfield after a state-owned PetroPeru pipeline was attacked by indigenous protesters.  PetroPeru said residents in an Amazon region inhabited by the indigenous Mayuriaga community severed the pipeline then prevented technicians from repairing it, causing estimated losses of around $200,000 per day.

Since 2016, nearly 20,000 barrels of oil have been spilled from the PetroPeru pipeline in at least 15 attacks, and another 5,600 barrels have leaked due to corrosion of mechanical failures, according to official estimates.

Canada Approves C$1.6 billion Aid Package for Oil and Gas Sector

The Canadian government said it will spend C$1.6 billion ($1.19 billion), mostly through loans, to assist the country’s oil and gas industry, which has struggled to move energy to U.S. markets due to full pipelines.

Canada is producing a record 4.9 million barrels of oil per day this month, according to National Energy Board estimates, but pipeline capacity has not expanded as quickly to move crude to U.S. refineries. The bottlenecks have resulted in steep price discounts.

Prime Minister Justin Trudeau’s Liberal government bought the Trans Mountain pipeline in the summer with plans to expand it, but a Canadian court quashed government approval of the project. 

Natural Resources Minister Amarjeet Sohi said the federal aid package includes C$500 million in commercial financing to help high-risk oil and gas companies weather current market conditions and C$1 billion for energy exporters to invest in new technologies, boost working capital or find new markets.

Another C$100 million will go toward energy projects through an innovation fund, and C$50 million will fund projects that involve reducing environmental damage from resource extraction. P&GJ


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