Oil and Gas News

Crude oil for August 2009 delivery up $0.50, or 0.8%, to $60.19 a barrel ;London Brent up $0.62, or 1%, to $61.31 ; EU member states and Turkey have signed a transit agreement

Posted on July 14, 2009 – 4:21 pm | by oilandgaspress.com

 Pemex (Petroleos Mexicanos) will invite contractors to take part in bidding for the Coridon natural gas project Burgos region in northern Mexico.

The company said that it could take four months from September to pick a successful bidder for the 15-year contract to expand the gas block.

In 2003 Pemex started to offer the Burgos gas blocks under long-term service agreements, attracting local and foreign oil companies.

In June 2009 Pemex exploration and production chief Carlos Morales Gil said that, under the service model, the company would open bids for three new blocks in Burgos.

Each block can pump 50 to 100 million cubic feet per day of natural gas, according to the company.

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A proposed law aimed at sweeping reforms of Nigeria’s oil sector is almost halfway through the legislative stages of approval but some of its provisions are sending jitters among giant oil operators. Multi-national oil companies, already buckling under incessant militant attacks which have cut production by about 30 percent in the past three years, back the bill regarding the streamlining of the industry’s governance and operational processes. But they are uncomfortable with the proposed taxation regime. The petroleum industry bill, which went through its second reading and debate in the senate last week, is intended to overhaul the regulatory and operational systems of the industry, the lifeline of the west African powerhouse. It plans to transform the existing joint ventures between the transnational oil firms and the state Nigeria’s National Petroleum Company (NNPC), and turn NNPC into an autonomous and internationally profitable entity.

It also wants to improve on tax collection — decoupling oil from gas taxes as well as develop a system responsive to fluctuations in oil prices so as to capture on any windfall profits. According to leader of the Senate Teslim Folarin, the bill is designed to “simplify the collection of oil revenue through shifting emphasis to easily collectible revenue as royalties and rents”. In a discussion document multinationals said they back the reforms, but fear that some of the provisions of the bill could thwart growth in the sector. They argue that many provisions in the bill “are unclear and open to multiple interpretations which would substantially increase investment risk, comparatively placing Nigeria at a disadvantage for inflow of foreign investment”. The international oil companies (IOCs) said in a document seen by that “the new tax will decrease by half the capital investment” in the sector in the next 10 years. “New oil and gas production will be reduced by nearly 50 percent, with a high proportion of new projects becoming uneconomic.

“Government economic rents will decline in the long-term and overall economic growth will be affected,” they warned. But Nigeria’s petroleum minister of state Odein Ajumogobia says while government is open to ideas, it will not be dictated to by oil firms, but work out a mutually beneficial law. “It’s in our country’s interest to ensure that we find a regime that works for both of us. We will not pass a law desiring to destroy our industry,” he said. But the oil firms “want business as usual. We are not going to pass a law that is dictated by IOCs. We have to strike a balance”. “The law we will pass is going to be a law based on what we consider to be in our best interest, taking into account their interest and concerns,” he added. He said that compared to rules in other oil producing countries, Nigeria’s fiscal regime was probably too lax. “We looked at other countries and we found that Nigeria in terms of fiscal regime is at the bottom pile. We don’t want to be at the top with the most stringent, most radical system.” “We need a fiscal regime that would allow us to get a significant part of the upside,” said Ajumugobia. NNPC managing director Mohammed Barkindo said if the law were passed, it would mark a turning point in the 50-year-old oil industry. “The state of this bill, when passed into law, is going to change the landscape of the oil and gas industry in this country,” said Barkindo. Nigeria the world’s eighth largest crude exporter, relies on more than 90 percent of its export revenue from oil.

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Italian energy group Eni SpA has declared force majeuere on some of its crude production in Nigeria, following an act of sabotage on a pipeline located north of Brass River field earlier in the week. The attack on the pipeline Tuesday resulted in oil production loss equivalent to 24,000 barrels a day, and the company confirmed about 4,800 barrels a day was Eni equity. The company declined to say how long the measure would be in place, or whether it applied to Brass River crude exports. Force majeure” is a term in a contract that can be invoked when conditions beyond the control of the company make it impossible to fulfill the terms it originally agreed to.

The way the measure is implemented varies according to the nature of the disruption to supply, for example depending on whether the crude can be bypassed through different pipelines to buyers at its orginal destination or an alternative, or how much can be diverted this way and for how long. Unrest in the Niger Delta costs Nigeria hundreds of thousands of barrels a day in lost crude oil production. The group that claims responsibility for the majority of the attacks on the country’s energy infrastrucure, the Movement for the Emancipation of the Niger Delta, or MEND, says it is fighting for a bigger share of the region’s oil wealth. The group has rejected an amnesty offer from the Nigerian government aimed at ending a three-and-a-half-year insurgency. MEND has laid down the release of its leader Henry Okah, who has been in detention for almost two years, as a crucial condition for peace in the region. In the past few weeks, the group has attacked more than eight strategic oil facilities operated by Royal Dutch Shell PLC, Agip SpA and Chevron Corp.

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India’s Oil & Natural Gas Corporation (ONGC) has joined other hopefuls to buy a 30% stake in the Jubilee oilfields offshore Ghana from US company Kosmos Energy.

The state-run oil company is expected to make a formal bid in July, according to India’s Economic Times.

According to the paper the ONGC is likely to team up with a foreign company to make a bid of between $3bn and $4bn for the fields.

The list of potential bidders includes Shell, ExxonMobil, Chevron and Eni. Ghana’s national oil company has also expressed interest, along with China’s state oil company CNOOC.

The Jubilee oilfields are estimated to have oil reserves of 1.2 billion barrels. Commercial production is expected to begin in June 2010.

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EU member states and Turkey have signed a transit agreement for the EU and US-backed Nabucco gas pipeline, which aims to reduce Europe’s energy dependence on Russia.

Transit countries Turkey, Bulgaria, Romania, Hungary and Austria signed the accord in the Turkish capital Ankara.

The €7.9bn ($10.99bn) project, which has been designed to supply Europe with gas from the Caspian and Middle East, has suffered years of delays.

“I believe this pipeline is inevitable, not impossible,” European Commission president Jose Manuel Barroso said.

The project had suffered delays due to objections from the US to Turkey’s wishes to enable Iranian gas to flow through the pipeline.

US special energy envoy Richard Morningstar has renewed US opposition to possible use of Iranian gas in Nabucco until Washington can agree the terms of Iran’s nuclear programme.

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Petroleo Brasileiro is to participate in the oil exploration tender in the Carabobo region offshore Venezuela, according to Agência Estado.

Brazil’s state oil company Petrobras has already gathered the geological information and is looking for the tender process to commence, Petrobras international director Jorge Zelada told the agency.

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Atlas Cove Jetty in Lagos was blown up on Sunday night with dynamites by…. some members of the Movement for the Emancipation of Niger Delta (MEND).
The major manifold of the jetty, which supplies 35 per cent of Nigeria’s petroleum products, was destroyed.

In the attack, some naval officers, including a Commander, were killed. The night raid has triggered fear of fuel crisis in the country.

Sources at the jetty, the largest fuel depot, which belongs to the Nigerian National Petroleum Corporation (NNPC), said the militant group stormed the facility with three speedboats at about 8.00pm on Sunday night and started shooting sporadically, which resulted in the death of several naval personnel guiding the depot.

When they gained access to the major manifold of the depot, in an operation that lasted about three hours, from 8.00pm to 11.00pm, according the sources, the militants planted the dynamites and used remote control to blow it off.

The damage of the manifold, known as System 2B where Lagos and some parts of the country get supply of petroleum products, might disrupt the supply of petroleum products.

One of the operators at the jetty said: “The Warri and Port Harcourt depots are not working now because of the situation in the Niger Delta. So, the other parts of the country depend on this System 2B and other coastal depots. But with this damage, there will be total cut off of supply.

“Marketers will be cut off from System 2B from the fuel supply. It is only coastal depots that can savage the eminent fuel shortage, which we are going to experience very soon. That is basically what will happen,” he stressed.

But the Group Managing Director of NNPC, Mr. Mohammed Barkindo, who visited the scene, assured that fuel supply would not be disrupted as the corporation would use the Apapa jetty and other facilities to ensure uninterrupted petroleum products in the country.

Barkindo said: “We want to assure Nigerians that in spite of the magnitude of the damage, which we have seen on this facility and not to talk of the lives lost, we have ample supply of petroleum products and this incident will not, in any way, affect the supply and distribution of petroleum products across the country.

“Also, this incident will not in any way make us to waver, let alone be disrupted to our commitment to the Nigerian people to continue to discharge our corporate responsibility to the best of our ability. “NNPC staff who are working there were evacuated to Army Officers Mess. None of the NNPC staff lost his life. The fire on the facility was finally put off at about 4.10 am this morning. As far as we are concerned, this is the first time this kind of thing has happened at Atlas Cove and its environ and we will ensure adequate security of the facility,” he stressed.

Tags: Agip SpA, Atlas Cove Jetty, Chevron Corp., CNOOC, crude exporter, crude exports, Eni SpA, gas block, gas taxes, Lagos, MEND, National Petroleum Company (NNPC), Natural Gas, oil facilities, oil firms, oil wealth, PEMEX, Petroleum, petroleum products, System 2B, windfall profits