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Thursday, 13 August 2015 17:33

Energy corridors and potential of Caspian

Issues concerning supply of Azerbaijani gas were discussed in Greece. The parties discussed possible scenarios of purchase of the Greek DESFA. ACG and Shah Deniz project partners also discussed volumes of production and export of energy resources. According to the report of OPEC, Azerbaijan is expected to supply oil on stable basis. Meanwhile, decline of oil from Kazakhstan is expected. In the meantime, Kazakhstan announced about increase of oil production. Turkmenistan also increased production of oil and gas condensate. Moreover, the country signed a memorandum on development of gas field Galkynysh. The project of the Turkish gas pipeline is estimated at 11.4 bln EUR in Russia. An order about planning of the offshore section of the Turkish Stream has been signed. Meanwhile, a nuclear deal provides a potential for an additional production of crude oil in Iran – the export of Iranian oil got a green light after the statement of the US government. Minister of Oil of Iran ordered to increase production.

 

 

Azerbaijan

Minister of Energy of Greece Panos Skurletis met with SOCAR Energy Greece CEO Anar Mammadov on Wednesday, the press service of the Ministry of Energy of Greece reports. The representative of SOCAR informed the management of the ministry about the situation on acquisition of DESFA after condition set by the European Commission Directorate for Competition.

“During the meeting the minister stressed government’s positive attitude in the sphere of energy cooperation with Azerbaijan”.

On the same day Minister Skourletis met with Managing Director of consortium TAP AG Ian Bradshaw, External Relations Director Michael Hoffman and TAP Director for Greece Rikard Skufias.

The sides debated technical issues and agreed to hold soon a meeting to cover and resolve the remaining matters to enhance subsequent steps that will allow the start of design work on the construction of gas pipeline TAR in Greece. The government is considering a possibility of selling 49% stake in DESFA to SOCAR.  In December 2013 SOCAR won the tender procedure for the sale of a 66% stake in DESFA for 400 million euro. The European Commission offers to distribute a 17% difference between other investors. Currently, this deal is being considered by the European Commission’s Directorate for Competition, and this procedure will last until the end of the year.

On the other hand, Iran said it is discussing joint exports of natural gas to international markets with Azerbaijan in a sign that Tehran may have already revived plans to pipe gas to Europe, ISNA noted.

Alireza Kameli, the managing director of the National Iranian Gas Company (NIGC), says his company has already started serious talks to the same effect with SOCAR.

“Tehran and Baku have conducted negotiations over joint investments in gas export projects,” Iran’s media quoted Alireza Kameli as saying.

“This is simultaneous with Iran’s plans to expedite natural gas production over the next three years,” he has been quoted as saying by the Persian-language newspaper Iran.

Iran’s huge natural gas reserves had for years made it a prime source for supplying future exports to Europe.

Accordingly, separate discussions were started with the country by a consortium named Nabucco as well as the Swiss EGL. However, the complications that later emerged – specifically the US-engineered sanctions – made both sideline Iran from their plans to pipe gas to Europe.

The prospects that sanctions could be eventually removed in light of the recent diplomatic progress over the Iranian nuclear energy program once again put Iran in focus.

Nevertheless, a more serious plan now appears to involve Azerbaijan.

The Azerbaijan side told that Iran can use Azerbaijan's infrastructure to export oil and gas to world markets.

Earlier in June, Azerbaijan’s Energy Minister Natig Aliyev had also said Iran can join TANAP to export its gas to Europe.

“Iran is a country with a great potential in the region. If the process continues, Iran could join TANAP and export its gas to Europe,” Natig Aliyev added.

Iranian officials had previously said exporting gas to Europe is not a priority at the current juncture.

“Given the gas price decline in Europe, the economic viability of the project has probably decreased. Besides, the market share of single shipments and LNG has grown,” said Rokneddin Javadi, the managing director of the National Iranian Oil Company (NIOC).

TANAP is projected to pump gas from Azerbaijan’s Shah Deniz 2 field in the Caspian Sea to Turkey and from there to Europe for a length of 1,850 kilometers. Construction over the pipeline began in March and is expected to finish in 2018.

In the meantime, expenditures, volumes of production and export from ACG and Shah Deniz have been announced this week. During the first half of 2015, approximately $359 million in operating expenditure and $949 million in capital expenditure was spend on the Azeri-Chirag-Gunashli activities in the Azerbaijan sector of the Caspian Sea, the report of AIOC says.

According to the report, during the first half of 2015, ACG continued to deliver stable production. So, total ACG production in the first six months was on average 641,000 barrels per day (b/d) (116million barrels or 16million tonnes in total) from the Chirag (55,000 b/d), Central Azeri (157,000 b/d), West Azeri (107,000 b/d), East Azeri (71,000 b/d), Deepwater Gunashli (145,000 b/d) and West Chirag (106,000 b/d) platforms.

At the end of the second quarter, 87 oil wells were producing, while 40 wells were used for gas or water injection.

The daily capacity of the terminal’s processing systems is currently 1.2 million barrels of oil and about 29.5 million standard cubic metres of Shah Deniz gas, while overall processing and export capacity for gas, including ACG associated gas is about 49.3 million standard cubic metres per.

In the first half of 2015, the Sangachal terminal exported about 154 million barrels of oil and condensate. This included about 135 million barrels through Baku-Tbilisi-Ceyhan (BTC), over 16.3 million barrels through the Western Route Export Pipeline (WREP), about 2.2 million barrels by rail and about 0.9 million barrels via a condensate export line.

On average, 28.8 million standard cubic metres (1,017 million standard cubic feet) of Shah Deniz gas was exported from the terminal daily during the first half of 2015.

10km of pipe has now been welded and a further 7km strung out along the pipeline route within the framework of expansion of the South-Caucasus gas pipeline (SCP) commenced since the end of June 2015. Acquisition of land for the first 200km right of way in Azerbaijan is complete. Land acquisition for the remaining part of the route is underway.

During the first half of 2015, BTC spent approximately $73 million in operating expenditure and $15 million in capital expenditure.

The 1,768km BTC pipeline became operational in June 2006. Since that time BTC has carried a total of 2.23 billion barrels (around 298 million tonnes) of crude oil loaded on 2,940 tankers and sent to world markets.

In the first half, BTC exported about 135 million barrels (18 million tonnes) of crude oil loaded on 188 tankers at Ceyhan. BTC’s throughput capacity is currently 1.2 million barrels per day.

In the meantime, it is noteworthy that Azerbaijan’s oil supply is anticipated to average 0.86 mb/d, remaining unchanged from the previous Monthly Oil Market Report of OPEC and indicating steady production in 2015. Azeri crude oil output in June increased by 21 tb/d to average 0.78 mb/d, following a decline of 57 tb/d in May, which was a result of maintenance at the West Chirag platform that began on 21 May and lasted through to 6 June, says the Monthly Oil Market Report of OPEC.

The total oil production (crude+NGLs) was pegged at 0.86 mb/d in May. On a quarterly basis, Azerbaijan’s oil output is estimated to average 0.85 mb/d, 0.87 mb/d, 0.86 and 0.79 mb/d, respectively.

Tags – Azerbaijan OPEC

 

Kazakhstan

According to the same report of OPEC, Kazakhstan’s oil supply is expected to decrease by 10 tb/d over the previous year to average 1.62 mb/d in 2015. Kazakhstan’s oil production declined m-o-m by 80 tb/d in June to settle at 1.56 mb/d, although it stayed higher y-o-y by 40 tb/d due to the intensified works at Tengiz in May and June of 2014.

The average oil production in Kazakhstan in 1H15 was 1.63 mb/d, indicating growth of  20 tb/d over same period in 2014; oil output from Tengiz could offset the other fields’ declines.

Meanwhile, Kazakhstan announced that it raised oil production during January-July. Thus, Kazakhstan produced 39.445 mln tonnes of oil during January-June 2015. It is 0.7% higher than similar period of 2014. Gas condensate production totaled 7.518 mln tonnes (+0.4%) over the period under review.

Apart from this, a total of 12.744 bcm of gas (+ 2.8%) and 13.976 bcm of associated petroleum gas (+11.7%) was produced in Kazakhstan over the period under review

KazTransOil JSC also announced H1 2015 results. Thus, consolidated revenues of KazTransOil JSC amounted to 106 billion 645.8 million tenge in the first half of 2015, which is 6.2% higher compared with the first half of 2014, the press service of KazTransOil notes.

Consolidated net profit of KazTransOil JSC comprised 39 billion 427.6 million tenge in the first half of 2015, which is 49.2% higher compared with the first half of 2014.

 

 

 

Turkmenistan

Turkmenistan has also increased its oil and gas condensate output. President of Turkmenistan Gurbanguly Berdymukhamedov held an enlarged meeting of the Cabinet of Ministers to discuss the results of work across the sectors of the national economy for the first seven months of this year, implementation of the Presidential program and other programs of the social and economic development of the country, TDH said.

Deputy Prime Minister Baymurat Hojamuhammedov reported on the implementation of the “Program for development of the oil and gas industry of Turkmenistan until 2030” and the results of work across the fuel and energy complex of the country for the past 7 months. It was noted this year, compared with the same period of the last year, the growth rate of oil and gas condensate production amounted to 107.8 per cent, drilling operations - 136.7 per cent and investments disbursement - 148.3 per cent.

The deputy prime minister talked about the results of the meeting with the heads of some large Japanese companies held in Ashgabat to discuss the possibility of implementing new joint projects in the fuel and energy sector, and the relevant Memorandum of Understanding was signed.

He submitted the report on the outcome of the 22nd meeting of the Steering Committee on the construction of Turkmenistan-Afghanistan-Pakistan-India gas pipeline held in the capital of Turkmenistan. During the meeting the participants discussed the wide range of issues concerning the practical implementation of this project. In particular, the state-run concern Turkmengaz was unanimously elected as a leader of the consortium TAPI Ltd.

Resuming the report, President Gurbanguly Berdimuhamedov expressed a discontent with the work of Vice Premier B.Hojamuhammedov and executives of the oil-gas complex.

“The decline of prices for energy resources is currently observed at the global market. In this regard, the major task is to seek ways to prevent a negative impact and infill the losses that the national economy faced”, the head of the Turkmen state said.

Demanding the activation of the work on diversification of flows of Turkmen gas to the foreign countries as well as on creation of modern facilities manufacturing new products, the head of state gave a Vice Premier a number of concrete errands regarding this.

Dwelling on the issue of construction of the TAPI gas pipeline, President of Turkmenistan emphasized the importance of practical implementation of this scalable energy project, which, in addition to the unconditional economic benefit for the countries-participants, shall become a bridge of friendship, good neighborhood and fruitful partnership meeting the goals of common welfare and prosperity. In the meantime, the significance of the TAPI gas pipeline is much bigger than the geographic route of the future trans-national gas main. Evidently, it can already be considered as an efficient consolidating and stabilizing factor capable of influencing positively on the situation in Central Asia and South Asia, and the region in general, as well as stabilizing the entire system of political and economic relations in the continent. Meanwhile, memorandum about development of Galkinish gas field has been signed.

Representations of large Japanese companies visited Turkmenistan and met with the representatives of the State Concern Turkmengaz from August 3 to 8. The purpose of the meetings is to invest and construct new gas processing plants by applying latest Japanese technologies.

At the end of the meeting State Concern Turkmnegaz and the Consortium of globally known Japanese companies Itochu, Мitsubishi, JGC Corporation signed Memorandum of Understanding on development of Galkinish gas field on turn-key basis including necessary financing. 

 

Russia

Russia's state-owned energy giant Gazprom estimates the cost of the construction of four pipelines of the Turkish pipeline project to be around 11.4 billion euro ($12.5 billion), according to Gazprom's deputy head of Gazprom's project management department Aleksei Serebryakov Monday, Anadolu Agency said.

Gazprom's first deputy head of Gazprom's project management department Aleksei Serebryakov said during a conference call with investors that the Turkish pipeline project will have four phases and will be constructed fractionally.

“The first phase will cost 4.3 billion euro before taxes and the total cost will be around 11.4 billion euro before taxes”, he said.

On August 10, 2015 First Deputy Minister of Energy of Russia Aleksey Teksler signed an order about preparation of the documents aimed at planning the offshore section of the South Stream (present Turkish Stream) in Russia, the order placed at the official website of the Ministry of Energy said.

As it is stated in the document, the facility shall consist of 4 strings of the underground main gas pipeline. The length of the pipeline within the area of the subject of RF will total 2.6km. The underground gas pipeline will consist of 4 strings 812.8mm in diameter. The operating pressure is 28.33 mPa.

It should be noted that on December 1, 2014 Gazprom and Botas signed a memorandum of understanding about construction of the Turkish Stream gas pipeline with the capacity of 63 bcm of gas per. The pipeline will be laid from Russia to Turkey along the Black Sea.

 

Iran

The nuclear accord creates a potential for additional crude oil production from Iran.

On July 14, the P5+1 (the five permanent members of the United Nations Security Council and Germany) and Iran announced an agreement that could result in relief from United States and European Union nuclear-related sanctions (which include some oil-related sanctions). If the agreement is implemented and sanctions relief occurs, it will put additional Iranian oil supplies on a global market that has already seen oil inventories rise significantly over the past year, U.S. EIA said.

These additional Iranian supplies, along with relatively higher global oil production and comparatively slower global oil consumption growth, will contribute to large inventory builds next year, resulting in lower oil prices than previously expected. The North Sea Brent crude oil price, which averaged $57 per barrel in July, is expected to rise to an average of $59/barrel (b) in 2016, according to EIA's August 2015 Short-Term Energy Outlook (STEO).

The Swiss Federal Council announced Wednesday that it has lifted its sanctions on Iran, Anadolu Agency said. The removed ban includes the removal of the previously imposed requirement to report the transportation of Iranian crude oil, petroleum products, and the trading of Iranian petrochemical products and precious metals.

In addition, in the financial sector, the Federal Council said it increased ten-fold the threshold values of money transfers from and to Iranian nationals.

It should be noted that a US government statement has lifted ban on Iran’s oil exports following the signing of JCPOA in Vienna, IRNA said. Iran reportedly will snatch the opportunity to immediately increase its oil exports about 500k barrels within a week, MNA reported.

The statement allows countries and oil companies to buy crude oil from Iran by the full implementation of the JCPOA. The statement, signed by the president of the United States, will annul a previous statement punishing companies and countries who had bought Iranian oil. Sanctions however left non-US companies untouched in their interactions with Iran.

Currently, Iran’s crude oil production is estimated to be 2.7 million barrels per day. With lifting of 3 major sanctions hitting Iranian oil sector, which affected cash transfer, oil tanker procurement, and insurance, Iran’s oil production will be up about 500k barrels per day.

Minister of Oil of Iran Bijan Zanganeh has given an order to increase production by 500,000 barrels per day in order to prepare the industry for the cancellation of sanctions imposed on the Islamic Republic. Meanwhile, it is not mentioned whether the order covers a certain probation period since the authorities have earlier spoken about an intention to increase oil export only after lifting of sanctions. IRNA agency has earlier quoted the statement of the Head of the National Iranian Oil Company (NIOC) Roknuddin Javadi saying that “oil production in Iran will not be changed until the sanctions are lifted”.

As Mehr agency noted, Zanganeh sent letters about increase of oil production to managers of oil fields and oil terminals as well as NIOC.

“Considering the agreement (about Iranian nuclear program) and cancellation of sanctions, as well as the readiness for expansion of the oil export, we are ready to increase production within 3 days up to the level mentioned by the Ministry of Oil”, managing director of the daughter company of NIOC Bijan Alipur said.

For the first time over the past 10 years NIOC tested its export terminals at Khark Island checking the possibility of reaching a record high rate of oil shipment (7 million barrels per day). Iranian terminals underwent modernization enabling to serve super tankers.

 

Jeyhun Bayramov

Editor

Caspian Energy journal

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