IN BRIEF NEW S NORTH AMERICA
Kitimat LNG partners Apache Canada (51%) and EOG Resources Canada (49%) have awarded KBR the front- end engineering and design (FEED) contract for the planned natural gas liquefaction and export facility on British Columbia’s west coast. Financial terms of the contract have not been disclosed. In February, the Kitimat LNG partners entered into an agreement to purchase the remaining 50% interest in Pacific Trails Pipeline Limited Partnership, thus securing full owner- ship in the infrastructure to transport natural gas from production areas to the Kitimat LNG facility. The Pacific Trails Pipeline is a planned 463-km (287-mile), 914-mm (36-inch) diameter underground line that will carry nat- ural gas from Summit Lake to Kitimat. The Kitimat LNG export facility is planned to be built on First Nations land under a unique partnership with the Haisla First Nation and will have an initial output capacity of 5mn t/y. Initial shipments of LNG are expected to begin in 2015.
ASIA-PACIFIC
A significant milestone for the Pluto LNG project was achieved on 6 March 2011 as gas from the Dampier to Bunbury natural gas pipeline was intro- duced to the Pluto onshore plant. ‘Gas in’, as the process is known, marks the change in status of the Pluto LNG Park from a construction site to a ‘live’ site. The pipeline gas allowed the plant’s four 40-MW gas turbine generators to be fired up for the first time. The gen- erators, which can generate enough energy to power about 8,000 house- holds, will provide electrical power to test the communications and produc- tion equipment in preparation for a safe start-up in August 2011. From April, the pipeline gas will also be used to pressurise some 240 km of offshore pipelines.
WORLD
Oil and gas companies representing 60% of global production are becoming more open about combat- ting corruption, industry watchdog Transparency International has said. In its 2011 report on oil and gas compa- nies survey only eight out of 44 compa- nies refused to say anything about their anti-corruption programmes – in a 2008 survey, 21 out of 42 companies said nothing, writes Keith Nuthall.
10
industry MENA unrest impacts futures market
According to thelatest (15 March) Oil Market Report from theInternational Energy Agency (IEA), political unrest in theMiddle East and North Africa (MENA), currently focused on Libya, has injected volatility into futures markets, with prices gyrating by an average $3/b daily. By mid-March benchmark crudes were trading $10 to $15/b above average February levels, with Brent last seen just shy of $114/b and WTI around $100/b. Meanwhile, forecast global oil
product demand growth remains largely unchanged at 2.9mn b/d in 2010 and 1.4mn b/d in 2011, although theIEA notes that high oil prices entail signifi- cant downsiderisks to this year’s out- look. Baseline changes in non-OECD Asia and stronger Middle East levels lift absolutedemand slightly to 87.9mn b/d and 89.4mn b/d, in 2010 and 2011 respectively. World oil supply roseto an all-time
high of 89mn b/d in February, up 0.2mn b/d from January. Non-OPEC oil supply rose0.3mn b/d to 53.2mn b/d on re- instated Alaskan output. The IEA’s 2010 non-OPEC estimates are left unchanged at 52.8mn b/d, whilethe2011 forecast has been raised by 0.1mn b/d, to
53.6mn b/d, on stronger-than-expected Canadian output. OPEC crudeoil output in February is
reported to have fallen by 95,000 b/d to 30.05mn b/d. A near 200,000 b/d average monthly loss of Libyan supply was partly offset by higher production from Gulf states, states the IEA. OPEC’s ‘effective’ spare capacity, excluding Libya, is now near 4.08mn b/d, its lowest sinceend-2008. The‘call on OPEC crude and stock change’, revised up for 1Q2011, is cut going forward, averaging 29.9mn b/d for 2011 overall. Global refinery runs are expected to
drop sharply through 1Q2011, to reach a seasonal low of 73.5mn b/d in March, when refinery maintenance peaks, before rebounding to 75.3mn b/d in June. 1Q2011 runs are forecast to average 74.6mn b/d (+2mn b/d year-on- year) rising to 74.8mn b/d (+1mn b/d year-on-year) in 2Q2011. January OECD industry inventories
rose by 32mn barrels to 2,695mn barrels and forward demand cover increased to 58.2 days. Preliminary February data point to a sharp 43.4mn barrel decline, whileoil in short-term floating storage grew by 8mn barrels.
Indonesia key to meeting Indian coal demand
At Coaltrans India 2011 in New Delhi in early March,Wood Mackenzie stated that emerging coal supply areas in Indonesia will be instrumental to meeting rapidly growing coal demand from India. Coal Research Analyst Rohan Kendall, said: ‘Indonesia will account for 40% of growth in seaborne thermal coal supply over the next 10 years, with the emerging coal areas of theSouth Sumatra basin andWahau coal field making an important contri- bution to this growth. There is $8bn of infrastructureprojects in thepipeline in these emerging areas that will support export growth.’ Emerging coal regions are a good fit
for developing economies, such as India, becausethebasins contain abun- dant reserves. These areas are experi- encing upstream investment as Indian power generators such as Reliance and Adani look to secure coal supplies for new power stations. There are currently several ultra-mega power plants being built in India with a capacity of over 4,000MWeach; and still more are planned. The projects currently in development are similar in capacity to those in China and are expected to be operational between 2H2011 and 2014. Kendall expanded: ‘Coal production
costs arelow in emerging basins in Indonesia, which is why they are attrac-
tive to Indian power generators. The costs of investing upstream to secure coal requirements are much lower than Indian power generators would other- wise pay if they were to purchase all of their coal on the seaborne market. Also, for power stations that are being built on the coast, it is more realistic to seek seaborne supplies which do not depend on India’s rail network for transport.’ Wood Mackenzie says in order for
emerging thermal coal supply areas to fulfil their potential, infrastructure chal- lenges need to be overcome. Kendall said: ‘There is currently insufficient infrastructurein theseareas to support large scale coal exports. There are numerous projects proposed which combined would add 140mn t/y of capacity.We believe that some of these are unlikely to progress given regula- tory challenges.’ In summary, coal supplies from
emerging basins in Indonesia are expected to increase strongly over the next 10 years. The large reserves in theseareas will beinstrumental to meeting India’s future thermal coal requirements. Coal from emerging areas is cost competitive with estab- lished basins, but the main question remaining is when and how the infra- structureissues can beovercome to bring thecoal to market.
PETROLEUMREVIEW APRIL 2011
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