June 2018, Vol. 245, No. 6

Global News

Global News

Cyprus, Israel, Greece Target 2018 Agreement on East Med Pipeline

The East Med natural gas pipeline took center stage at a meeting between the leaders of Cyprus, Israel and Greece, who said they’re determined to move forward with plans for the project this year. 

Proposed Israel-Cyprus-Greece-Italy pipeline

Israeli Prime Minister Benjamin Netanyahu called the pipeline a “very serious endeavor” of importance to Europe, and Cyprus President Nicos Anastasiades said the three countries aim to sign an agreement this year to nudge the pipeline project forward.  Greece’s Prime Minister Alexis Tsipras called the project “emblematic” of the cooperation between the three countries. 

“This project creates an unrivalled network of common interests and clear strategic benefit for our countries and beyond since its implementation will tangibly contribute to the security of the European Union’s energy supply,” Anastasiades said.

The emphatic support for East Med by all three heads of state both elevates and reinforces those of Israeli Energy Minister Yuval Steinitz, who told Reuters in March that Israel expects a decision to move ahead with construction of the 1,243-mile (2,000-km) pipeline by early 2019.

East Med would cross from Israel and Cyprus into Greece and Italy in deep waters, would mark a major milestone for the rapidly developing gas industry in the Levantine Basin in the east corner of the Mediterranean, offering access to a large market. The estimated $7 billion pipeline would have an expected capacity between 9 to 12 Bcm annually.  Project owners are IGI Poseidon, a joint venture between Greece’s natural gas firm DEPA, and Italian energy group Edison.

Among the pipeline’s advantages, officials say, is that it won’t have to cross many national borders, making it less vulnerable to sabotage.

Exxon, Rosneft Plan Russia LNG project

ExxonMobil is pushing ahead to develop a $15 billion Far East LNG project with Rosneft despite being forced to exit some ventures due to sanctions against Russia. Exxon has invited companies including China National Petroleum Corp. (CNPC) to bid for construction work by October, and a final investment decision is due next year, sources told Reuters.

As an alternative to building a new plant in the Russian Far East, Exxon-Rosneft has also considered feeding gas from their Sakhalin-1 fields into a possible third production unit at the 9-year-old Sakhalin LNG plant run by Gazprom, a Rosneft rival.

CNPC’s engineering subsidiary reportedly is preparing to bid for engineering, procurement and construction contracts for the supporting facilities, including pipelines and storage tanks.

SoCalGas Warns Supply Could Fall Short

SoCalGas has cautioned that pipeline outages and restrictions on the Aliso Canyon gas storage facility could reduce its ability to deliver natural gas this year to a level even lower than California state regulators and others have predicted.

Regulators, power companies and grid operators issued a technical report warning of a “moderate threat” to gas and electric reliability this summer.

“We remain concerned that some of the assumptions made in the technical assessment are overly optimistic,” SoCalGas spokesman Chris Gilbride said.

The SoCalGas system has been operating at less than full capacity because of the pipeline outages and restrictions on the use of Aliso Canyon, the utility’s biggest storage field, which suffered a devastating leak between October 2015 and February 2016.

Enbridge to Sell U.S. Midstream Business for $1.1 Billion

Enbridge is selling a U.S. gas pipelines business for $1.12 billion, the Canadian pipeline operator announced, as it seeks to shed secondary assets and reduce debt

The Calgary-based firm will sell Midcoast Operating, its U.S. gas pipelines unit, to an affiliate of private equity firm ArcLight Capital Partners. Midcoast, based in Houston, operates pipelines and facilities to process and treat natural gas and natural gas liquids.  The transaction is expected to close in the third quarter.

The deal advances Enbridge’s goal of selling $2.33 billion in assets this year. The company has faced pressure from investors to sell assets that are not integral to its main oil and natural gas pipelines business since its $28 billion purchase last year of U.S.-based Spectra Energy.  Enbridge currently has about $61 billion in long-term debt

“The sale of Midcoast is an important step in our shift towards a pure regulated pipeline and utility model,” Enbridge Chief Executive Officer Al Monaco said.

Global LNG Trade Set Growth Record in 2017

Global trade in liquefied natural gas increased by 3.5 Bcf/d to 38.2 Bcf/d in 2017 (about 290 mtpa of LNG).  The 10% increase over 2016 marks the largest annual increase in history, according to the 2018 Annual Report on LNG trade by the International Group of Liquefied Natural Gas Importers. In 2017, there were 19 LNG-exporting countries and 40 importing countries. Malta became the newest country to begin LNG imports in 2017.

LNG exports from Australia and the United States accounted for more than 75% of the increase in global LNG exports last year. Asia led the growth in imports, accounting for 74% of the annual increase,  China led in growth with a 46% increase (1.5Bcf), overtaking South Korea to become the world’s second-largest LNG importer with the support of government policies promoting coal-to-gas switching.

Strong growth in LNG trade was supported by new liquefaction capacity commissioned in Australia, the United States and Russia, which collectively added five liquefaction trains with a combined capacity of 3.4 Bcf/d. The world’s first floating liquefaction plant, Malaysia’s 0.2 Bcf/d PFLNG Satu was also commissioned in 2017.

Sterling to Expand Centennial System

Sterling Energy Investments will expand the processing capacity and associated natural gas gathering pipeline infrastructure of its Centennial System in the northeastern DJ Basin to 220 MMcf/d to accommodate growing producer demand.

The company also plans to expand capacity at its existing Centennial Gas Processing Plant by up to 120 MMcf/d with completion expected in the second half of 2019. It recently completed the first phase of its Jackson Lake Processing Plant expansion and expects to complete the entire project during the fourth quarter.

Sterling’s Centennial System consists of over 450 miles of low-pressure gathering pipeline, spanning Weld, Morgan, and Logan counties in Colorado and Cheyenne County in Nebraska. It includes three interconnected natural gas processing plants, with each plant connected to a different downstream residue gas market. Residue gas takeaway is provided by Cheyenne Plains, Tallgrass Interstate Gas Transmission, and Southern Star pipelines. NGL takeaway is provided by Overland Pass Pipeline.

Study: Canadian Pipeline Constraints Draining Billions from Producers

A shortage of pipeline capacity is driving down the price of Canadian oil and will cost the country’s energy sector C$15.8 billion in lost revenues this year, according to a new study by the Fraser Institute. “The Cost of Pipeline Constraints in Canada” study showed pipeline construction has not kept pace with growing Canadian oil production in recent years. In addition, despite approvals from regulators, the status of several major pipeline projects remains uncertain.

This lack of adequate pipeline capacity has created an overdependence on the U.S. market and an increased reliance on oil-by-rail – a more costly, (and less safe, mode of transportation.

“Without adequate pipelines to tidewater ports, Canadian oil producers are forced to sell their product in the U.S. at dramatically discounted prices, which results in substantial losses for the energy sector and the economy more broadly,” said Kenneth Green, senior director of natural resource studies at the Fraser Institute.

Johan Sverdrup Pipeline Installation Begins in Norway

Saipem’s pipe laying vessel, Castorone, has begun installing Norway’s longest and largest pipeline to the Johan Sverdrup oil field, Statoil said

The 176-mile (283-km), 36-inch pipeline is being pulled through a pre-drilled hole at the bottom of the Fensfjorden. Once completed, it will be the longest oil pipeline on the Norwegian continental shelf, capable of transporting up to 660,000 bpd from the North Sea field to Statoil’s Mongstad terminal. At its deepest point, the pipeline will be 1,762 feet (537 meters) below the sea.

The Johan Sverdrup oil field, located 87 miles (140 km) west of Stavanger, is one of the largest on the Norwegian continental shelf with expected recoverable resources of 2.1-3.1 Bboe,  Statoil is developing the Johan Sverdrup field in two phases. Phase 1 is projected to be completed in late 2019 with production capacity estimated at 440,000 bpd.  Phase 2 is projected to be completed in 2022, expanding the field’s production capacity to 660,000 bpd.

Chevron Staying in Venezuela Despite Arrests

Chevron evacuated executives from Venezuela after two of its workers were imprisoned over a contract dispute with state-owned oil company PDVSA, but Reuters reported the U.S. oil major has no intention of exiting the country

Chevron has not pulled out of other tough environments in the past and doesn’t plan to do so in Venezuela , a person familiar with the thinking of its board of directors told Reuters. The source cited the jailing of employees in Indonesia in 2013 and the company believes Venezuela will eventually stabilize.

The arrests, in a raid by national intelligence officers, were the first at a foreign oil firm since Venezuela’s government launched a purge last fall that has resulted in detentions of more than 80 executives at PDVSA and business partners accused of corruption. The workers may face charges of treason for refusing to sign a supply contract with PDVA for furnace parts. The workers balked at the high costs of the parts and lack of competitive bids.

Cost of Cyprus-Egypt Gas Pipeline Could Reach $1 Billion

A planned pipeline connecting Cyprus’ Aphrodite gas field to Egypt’s LNG facilities will cost between $800 million and $1 billion, Egyptian Petroleum Minister Tarek El Molla said.

Molla, speaking at a joint news conference with Cyprus Energy Minister Yiorgos Lakkotrypis, said Cypriot gas would be used in part for domestic consumption and in part for export.

Lakkotrypis said a final agreement on the pipeline would be signed as quickly as possible but did not specify when. Egypt hopes to halt gas imports by 2019 and achieve self-sufficiency. The country has rapidly increased natural gas production, developed an extensive pipeline network and has two idle gas liquefaction plants available.

Egypt believes its strategic location straddling the Suez Canal and the land bridge between Asia and Africa and its well-developed infrastructure will help turn it a trading and distribution center for countries in the region and beyond.

Keystone Restrictions Lifted as XL Construction Nears

Regulators have lifted pressure restrictions on TransCanada’s 590,000 bpd Keystone Pipeline. A return to full capacity is expected to relieve a bottleneck in the oil-producing province of Alberta, where increased output has run up against a shortage of pipeline and rail capacity.

In November, TransCanada shut down the pipeline linking Alberta’s oil sands to U.S. refineries after a spill in South Dakota and was ordered later that month to operate at reduced pressure. 

In a related development, a U.S. State Department letter to Native American tribes made public in May indicates TransCanada plans to start preliminary work in Montana this fall on its proposed Keystone XL Pipeline.

When asked about the letter, TransCanada responded: “We are progressing toward a final investment decision.  We expect construction to begin in 2019 and we are doing the necessary work to prepare for those activities.”

Keystone XL is designed to enhance the base Keystone Pipeline System, which started service in 2010.  Keystone XL would be a 36-inch, 1,180-mile (1,899 km) crude oil pipeline beginning in Hardisty, Alberta, Canada, and extending south to Steele City, Neb.

Enterprise Starts Orla 1 Gas Plant, Pipelines

Enterprise Products Partners started commercial operation last month of the first natural gas processing train at its new Orla cryogenic natural gas processing facility in Reeves County, Texas. The Orla 1 plant provides natural gas processing capacity of 300 MMcf/d and is capable of extracting more than 40,000 bpd of NGLs.

Enterprise said it also placed about 70 miles of high-pressure residue natural gas pipeline into service, connecting Orla to the partnership’s existing intrastate natural gas pipeline system and a 30-mile extension of its NGL system.

“The start of operations at our Orla natural gas processing complex will facilitate continued growth of natural gas and NGL production in the Permian Basin, which is expected to double over the next four years,” said A.J. “Jim” Teague, chief executive officer of Enterprise’s general partner. P&GJ

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