May 2018, Vo. 245, No. 5

Global News

Global News

Nord Stream 2 May Cut Ukraine Transit Nearly 90%

Completion of the Nord Stream 2 pipeline could drastically reduce the volume of natural gas that Russia ships to Europe via Ukraine to 10-15 Bcm per year – a drop of nearly 90%, compared with 2017 volume of more than 93 Bcf, which produced $3 billion in transit fees for Ukraine.

Gazprom leader Alexei Miller issued his projection after German Chancellor Angela Merkel said the Nord Stream 2 project could not proceed without clarity on Ukraine’s role as a transit route for gas. Gazprom did not provide a timeframe for the reduction in volume.

“We have never raised an issue about abandoning the Ukrainian transit,” Miller said in a statement, adding that Ukraine would have to “explain the viability of the new transit contract” for the lesser volume to continue.

Ukraine has been a key route for carrying Russian gas to Europe, where it supplies around a third of gas needs, but Moscow and Kiev have clashed frequently over energy.  Gazprom’s total exports to Europe and Turkey reached an all-time high of 194 Bcm last year. It plans to bypass Ukraine with shipments to Europe via the TurkStream pipeline to Turkey, now under construction, and Nord Stream 2 to Germany.

Nigeria Sets Groundbreaking for AKK Pipeline 

The Nigerian National Petroleum Corporation (NNPC) said it will start building the largest natural gas pipeline in its nation’s history, following agreements that include financing for two of three sections of the Ajaokuta-Kaduna-Kano (AKK) pipeline.

The 614 km (381-mile), 40-inch pipeline is designed to provide connectivity between eastern and western sections of Nigeria to supply natural gas for power generation and industrial development in key commercial centers in its central and northern regions.

NNPC said it awarded an $855 million contract to OilServe/Oando Consortium for Lot 1, a 200 km (124-mile) section that will connect Abuja Terminal Gas Station (TGS) in central Nigeria with the southern city of Ajaokuta, home of a massive, idle steel production complex that the government hopes to revive.

Brentex/China Petroleum Pipeline Bureau (CPP) Consortium was awarded a $1.2 billion contract for Lot 3 of AKK, according to NNPC. The 221-km (137-mile) section will connect the Kaduna TGS to Kano, the nation’s second-largest city and a major commercial center of northern Nigeria.  

NNPC said the estimated $835 million contract for Lot 2 is still pending. That 193-km (120-mile) stretch of AKK would connect Abuja and Kaduna. The company said AKK is scheduled for completion in the first half of 2020.

U.S. Agencies to Cut Project Review Time

Fourteen U.S. government agencies have signed a memorandum of understanding to reduce the amount of time needed to conduct environmental reviews and reach permitting decisions – a centerpiece of President Donald Trump’s infrastructure plan.

The agreement – signed by agencies ranging from the Council on Historic Preservation and Environmental Protection Agency to the departments of Energy, Interior, Commerce and Transportation – specifies project reviews “should be reduced to not more than an average of approximately two years, measured from the date of the publication of a notice of intent to prepare an environmental impact statement or other benchmark” deemed appropriate.

The agreement seeks to streamline reviews by requiring they be conducted concurrently, rather than sequentially.  It also requires that one agency manage the entire review process and establish timetables for all of the agencies involved.

“We appreciate the guidance given to all permitting agencies to work cooperatively on reviewing infrastructure projects,” Interstate Natural Gas Association of America (INGAA) spokesperson Cathy Landry said in response to the agreement.  “By law, the Federal Energy Regulatory Commission is already designated as the lead agency for interstate natural gas projects.  We view better cooperation and concurrent review by participating agencies as important to the timely review of proposed pipeline projects.”

Permian Prices Fall as Pipelines Fill Up

The Permian basin in Texas is leading the way as U.S. oil production has reached an all-time high, but the prolific output is causing bottlenecks as pipelines transporting the crude have filled up more quickly than expected. The situation has depressed prices there and raised concerns that producers may be forced to slow drilling or even shut in active production before new pipeline capacity can be added.

Most analysts estimated pipelines out of the Permian would fill completely by mid-2018, but this may already be happening. According to market intelligence firm Genscape, pipeline utilization from the Permian to the Gulf Coast averaged 89% this year and 96% in recent weeks.  

By early April, Midland light sweet crude was trading for $8 less per barrel than West Texas Intermediate at East Houston – the biggest discount on record.  “What the spreads are telling you,” said Kendrick Rhea of energy consultancy East Daley Capital, “is that these pipelines are full going to the Gulf Coast.”

2017 Keystone Spill Bigger than Estimated

A crude oil spill from the Keystone Pipeline in South Dakota last November has turned out to be nearly twice as big as first reported. About 407,000 gallons spilled onto farmland when the pipeline broke, a spokesperson for pipeline owner TransCanada Corp., told the Aberdeen American News. TransCanada had originally put the spill at 210,000 gallons.

The new number would make the spill the seventh-largest onshore oil or petroleum product spill since 2010, as reported to the U.S. Department of Transportation. The pipeline was repaired and resumed operations less than two weeks after the leak, and TransCanada spokesperson Robynn Tysver said remediation work at the site is complete.  

Vermont PUC Orders Review of 2017 Pipeline Construction

Vermont utility regulators asked for an investigation into the construction of a 41-mile natural gas pipeline completed last year after a project opponent claimed state and company records raise safety concerns.

The state’s utility commission acknowledged in its order that Vermont Gas Systems had already agreed to an outside review of its construction practices, and Vermont spokesperson Beth Parent said the company is confident its pipeline is safe and welcomes the review.  The pipeline runs from the Burlington area to Middlebury. P&GJ

Sinopec to Boost LNG Capacity, Shale Output

China’s Sinopec group, parent of Sinopec Corp, said it will more than double its LNG receiving capacity over the next six years and lift domestic shale gas production by two thirds by 2020. The plan are part of its goal for clean fuel to account for half of its total energy supply in five years.

Sinopec said it produced 27 Bcm of gas in 2017 and plans to increase natural gas supply by 2023 to 60 Bcm/year, including imports. The group plans to add new facilities for imported LNG along China’s east coast to receive up to 26 mtpa by 2023 from its current 9 mtpa capacity, which includes a new terminal in Tianjin.  It also announced plans to build 1,000 natural gas filling stations within five years.

Sinopec, which operates China’s largest commercial shale gas field, noted a recent discovery in the Weirong block in southwestern Sichuan province as an indication of its progress in shale gas production.  The company produced about 6 Bcm of shale gas last year.

AltaGas, WGL Gain State Approval for Merger

The $4.5 billion proposed merger of AltaGas and Washington Gas’ parent company, WGL Holdings, was approved by the Maryland Public Service Commission in a 4-1 vote and needs the approval of only one more agency to proceed: the District of Columbia Public Service Commission.

“We appreciate the Commission’s careful consideration of the many positive benefits this merger brings to the state as they thoroughly evaluated our application,” said WGL’s chairman and CEO, Terry McCallister.  

The 170-year-old Washington Gas has called the District of Columbia home since its founding. The D.C. commission gave the companies until April 16 to respond to the conditions it required for approval of the merger.

North Dakota Seeks More Fed Money for Protest Costs

North Dakota Attorney General Wayne Stenehjem said the state still plans to go after the federal government to recoup costs associated with policing the Dakota Access oil pipeline protests.  Stenehjem told The Bismarck Tribune he plans to file a claim with the Army Corps of Engineers, and possibly other federal agencies, and will consider suing the federal government if claims are rejected.

Protests in 2016 and 2017 brought thousands of pipeline opponents to North Dakota, resulting in 761 arrests in a six-month span and protest related costs of nearly $38 million for the state.  North Dakota has already received a $15 million contribution from pipeline developer Energy Transfer Partners and a $10 million grant from the U.S. Department of Justice to help cover its costs.

PTTGC, Daelim Evaluating Ohio Ethane Project

The American subsidiary of Thailand’s PTT Global Chemical Company (PTTGC) and South Korea-based Daelim Industrial Co. said it expects a final investment decision before the end of the year on a proposed joint petrochemical project in the Marcellus-Utica region of southeastern Ohio.  

The estimated $5 billion complex would include a 1 mtpa cracker and derivative units ethane cracker at a site in Belmont County, Ohio, where PTTGC has already invested $150 million in engineering and design work and last month closed on the purchase of 500 acres of land. The location, Daelim Energy CEO Sean Sung Woo Kim said at an Ohio Statehouse news conference, “lends a very strategic advantage that is close to market.”

PTTGC said Daelim, which has built petrochemical projects in Saudi Arabia, is one of multiple international investors who have expressed interest in the project, and that it is continuing discussions with potential strategic partners. The Ohio project has been in development since 2015, and an FID has been delayed twice – most recently from late 2017 – for further evaluation of engineering designs and economic feasibility. The site is within 100 miles of a $6 billion Shell Chemical petrochemical project that started construction last year in Western Pennsylvania.

Subsea 7 Awarded BP, ExxonMobil Contracts

BP announced it will proceed with two new developments it expects will add up to 30,000 boe/d to its North Sea production and awarded a contract for one of them to Subsea 7.  The BP Alligin project is one of two recent offshore pipeline construction contracts awarded to Subsea 7 by major oil companies.

At BP’s Alligin project, located approximately 140 km (87 miles) west of the Shetland Islands, Subsea 7 will provide project management, engineering, procurement, construction and installation services for a subsea tieback to the existing Schiehallion-area infrastructure.  

Subsea 7 also said it was awarded a contract for ExxonMobil’s Production Uplift Pipeline Projects offshore Nigeria. That project includes the construction of 20 km of 24-inch corrosion resistant alloy (CRA) pipeline between the Idoho platform and the onshore terminal, 2 km of 24-inch CRA pipeline between the Edop and Idoho platforms, and associated topside modifications and tie-ins at both ends. 

Engineering and procurement started immediately for both projects. Offshore activity is planned to start by early next year for the ExxonMobil project and during 2019 at Alligin.

TechnipFMC Awarded Malaysian Pipeline Contract

TechnipFMC said it was awarded an engineering, procurement, construction and installation contract for subsea equipment for Shell’s Gumusut-Kakap Phase 2 project offshore Malaysia. The contract by Sabah Shell Petroleum Company includes delivery and installation of umbilicals, flowlines and subsea production system for the project.

Shell has reported annual peak oil production of around 148,000 bpd from Gumusut-Kakap, its first deepwater project in Malaysia, contributing up to 25% of the nation’s total oil output. The field, which began production in late 2012, includes 19 subsea wells and delivers oil to a terminal in Kimanis, Sabah, via a 200-km (124-mile) pipeline.

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