July 2023, Vol. 250, No. 7

Global News

Global News July 2023

As Trans Mountain Expansion Startup Nears, Shippers Balk   

The long-awaited completion of Canada’s Trans Mountain Pipeline expansion is on track for the first quarter of 2024, but the project now faces new hurdles as oil shippers challenge its proposed tolls filed with regulators in May.

Construction of the Trans Mountain Pipeline expansion east of Vancouver at Bridal Falls, British Columbia, in January 2023. (Source: Trans Mountain Pipeline)

The Trans Mountain expansion, which will nearly triple the flow of crude from Alberta to Canada’s Pacific Coast to 890,000 bpd, has been dogged by years of regulatory delays and cost increases. It is currently expected to cost $23.5 billion (C$30.9 billion), nearly quadruple the original estimate. The Canadian government bought the pipeline from Kinder Morgan in 2018 to ensure the expansion got built. 

In June, companies including Suncor Energy, Cenovus Energy and BP Plc registered to intervene in Trans Mountain Corp’s toll application, which proposed a base toll of C$11-C$12 a barrel, depending on the type of crude shipped and its destination. 

Trans Mountain said the pipeline toll was based on the latest project cost estimate and could rise by around C$0.07 a barrel for every extra C$100 million spent on uncapped costs, which are currently estimated at C$9.1 billion. Uncapped costs include two specific segments of the pipeline and other factors, including Indigenous and community consultation. 

A number of shippers said they were concerned the uncapped cost component of the toll had increased from C$1.36 a barrel in a 2017 cost estimate to C$6.48 a barrel. Shippers also argued against Trans Mountain’s request that the regulator approve the tolls by Sept. 14. 

“With billions of dollars at stake, we expect this dispute process to drag out for at least several months,” Stifel FirstEnergy analyst Michael Dunn said in a research note, adding the outcome shouldn’t impact the price of Canadian heavy crude but will impact shipper margins. 

LNG Exporters Texas, Louisiana Drove US Demand Growth 

Texas and Louisiana, two states on the U.S. Gulf Coast that produce and export LNG, accounted for nearly half the domestic demand growth for natural gas in the last decade, the Energy Information Administration (EIA) reported. 

Overall demand for natural gas grew by 43%, or 34.5 Bcf/d, from 2012 to 2022. Texas and Louisiana were responsible for 16 Bcf/d of that growth, outpacing demand growth for electric power generation. 

Demand for feed gas for LNG exports in the two states has more than doubled since the inception of the first U.S. LNG export terminal in Sabine Pass, Louisiana in 2016. 

Within the first six months of 2023, North American export facilities have added LNG sales contracts of around 22 mtpa, with four facilities accruing individual totals of more than 4 mtpa each, TPH&Co analyst Colton Bean said in a note. 

“Seven individual export facilities have added commercial support over the first half of 2023 with incremental contracts pushing greenfield and expansion projects closer to FID (final investment decision),” Bean added. 

Greek Gas Grid Says 27 Companies Interested in New Capacity 

Greece has received interest from 27 U.S. and European companies in booking future capacity at its gas grid, which would allow them to import and export gas to Europe via the country in the coming decades, grid operator DESFA said. 

Greece has become a key transit route for gas in Europe thanks to an LNG facility off Athens, which saw increased traffic from around the world after the war in Ukraine cut flows of Russian gas to the continent. It also has gas interconnections with Bulgaria and Turkey, while several floating storage and gas regasification units are either being built or in the planning stages. 

DESFA launched a non-binding open season in March to sound out interest from companies in booking future capacity at the grid’s entry and exit points, citing a rising number of requests. The binding phase is expected to start in 2024 and conclude with capacity allocation to bidders which meet specific criteria, DESFA said in a statement. 

Companies from Greece, Bulgaria, Romania, Austria, Hungary, Slovakia, Germany, Cyprus, North Macedonia and the U.S. have requested capacity allocation to import and export gas from 2024 up to 2050, both through existing and new entry points, DESFA said. 

NewMed: Aphrodite Gas Field off Cyprus Linking to Egypt 

The offshore Aphrodite natural gas field being developed in Cypriot waters will be connected to an existing processing and production facility in Egypt via a subsea pipeline, project partner NewMed Energy said. 

NewMed said it had submitted a development plan for Cypriot government approval with partners Chevron and Shell and then met the country’s energy minister to discuss progress. 

“The updated plan is expected to accelerate and reduce the cost of development,” NewMed said. 

Aphrodite, discovered more than a decade ago about 105 miles (170 km) from Limassol, Cyprus, holds an estimated 124 Bcm of gas. NewMed has a 30% stake in the field, while Chevron and Shell each hold 35%. 

Chevron said in a statement it is working to progress the Aphrodite project but “beyond this, it is not our policy to comment on commercial matters.” 

Romania Could Become Net Gas Exporter with Neptun Project 

Romania could become a net exporter of gas in the coming years as the Neptun Deep gas project comes online, leaders of the companies running the project said. 

The head of state-owned gas producer Romgaz, Razvan Popescu, told reporters Romania could export to Moldova and other neighboring countries in the future. Speaking alongside him, OMV Petrom’s CEO Christina Verchere also said domestic gas demand will rise by the end of the decade while onshore gas fields decrease.  

In June, the two companies greenlit the development of the long-awaited project off the Black Sea coast. Neptun Deep is expected to hold recoverable volumes of around 100 billion cubic meters (Bcm) of gas. Production is slated to begin by 2027. 

One of the European Union’s most significant natural gas deposits, OMV Petrom, majority-controlled by Austria’s OMV, estimated the deepwater project would cost $4.36 billion (4 billion euros) to be split evenly between the two companies, with most of that to be spent in 2024-2026. 

Russia’s Yamal LNG Resuming Deliveries to India’s GAIL 

Russia’s Yamal LNG plant is set to resume LNG supplies to India’s GAIL under a long-term contract involving a Gazprom unit, Kommersant daily reported, citing Russian government sources. 

Kommersant said that supplies under the deal were suspended in 2022, when Germany seized assets of Russian energy giant Gazprom. 

GAIL agreed to a 20-year deal with Gazprom Marketing and Trading Singapore (GMTS) in 2012 for annual purchases of an average of 2.5 million tonnes of LNG on a  

At the time, GMTS was a unit of Gazprom Germania, now called SEFE, but the Russian parent gave up ownership of SEFE after Western sanctions. 

Canadian Wildfires Force Shutdown of Pipeline Compressor Stations 

TC Energy said last month that it was forced to shut down two compressor stations on the NOVA Gas Transmission Ltd. (NGTL) System and a gas storage facility that were near wildfires in Edson, Alberta. 

“Other sections of the NGTL system and other pipeline systems continue to operate safely and we continue to monitor the situation closely,” the company said in a news release. 

The 15,534-mile (25,000-km) NGTL system ships gas across Canada and to U.S. markets. 

US Warns China Could Hack Infrastructure, Including Pipelines 

The U.S. State Department warned that China was capable of launching cyberattacks against critical infrastructure, including oil and gas pipelines and rail systems, after researchers discovered a Chinese hacking group had been spying on such networks. 

The Chinese government has rejected assertions that its spies are going after Western targets, calling a joint warning issued by the United States and its allies a “collective disinformation campaign.” 

“The US intelligence community assesses that China almost certainly is capable of launching cyberattacks that could disrupt critical infrastructure services within the United States, including against oil and gas pipelines and rail systems,” State Department spokesperson Matthew Miller said in a press briefing. 

“It’s vital for government and network defenders in the public to stay vigilant.” 

The espionage group - dubbed “Volt Typhoon” by Microsoft - was the subject of an alert issued by cybersecurity and intelligence agencies in the United States, Britain and their close allies. 

U.S. agencies have been pushing for improved cybersecurity practices in its majority-privately held critical infrastructure industry, after the 2021 hack of the key Colonial Pipeline disrupted nearly half of the U.S. East Coast’s fuel supply. 

Russian Hackers Pose Threat to Canadian Energy, Spy Agency Says 

Russia-aligned hackers could seek to disrupt Canada’s oil and natural gas sector, especially since Ottawa is a strong backer of Ukraine, a Canadian spy agency said. 

The Communications Security Establishment (CSE) intelligence agency said Russia had repeatedly deployed destructive cyber-attacks against its adversaries as geopolitical crises escalate. 

“We assess there is an even chance of a disruptive incident in the oil and gas sector in Canada caused by Russia-aligned actors, due to their higher tolerance for risk, the increase in their numbers and activity, as well as the number of vulnerable targets in the sector overall,” it said in a threat assessment. 

Canada is the world’s fourth-largest oil producer.  

Pipeline Operator TC Energy Announces Staff Layoffs 

Canadian pipeline operator TC Energy became the third Calgary-based energy company to downsize this year, announcing that it is eliminating some jobs to “optimize value” of the company. 

While confirming the layoffs last month, a TC Energy spokesperson did not provide details of how many jobs have been impacted. 

News of the cutbacks at TC Energy came just a week after nearby Suncor Energy told employees it would eliminate 1,500 jobs. An industry source told Reuters that TC Energy is believed to be cutting fewer jobs than Suncor, where new CEO Rich Kruger has vowed to reduce costs, improve efficiency and simplify operations. 

TC Energy said the company continually reviews its operations and as the business evolves some positions are reduced. “These decisions are difficult but necessary to optimize the value for our business,” a spokesperson said via email. 

Earlier this year, Calgary’s Imperial Oil cut the number of contractors working at its Kearl oil sands project. 

Lukoil Raises Oil Output at West Qurna 2 During Pipeline Halt 

Russia’s Lukoil has increased oil production at Iraq’s southern West Qurna 2 oilfield by 80,000 bpd to a total of 480,000 bpd, an oil official told Reuters. 

Production rose after connecting 47 new oil wells, an Iraqi oilfield official said, adding that output could quickly reach 500,000 bpd if needed. 

The increase in Iraq’s production comes as Turkey continues to halt Iraq’s 450,000 bpd of northern exports through the Iraq-Turkey pipeline. They have been halted since March 25 after an arbitration ruling by the International Chamber of Commerce. 

Iraq has been waiting for a final answer from Turkey regarding the resumption of the northern oil exports, which run from the semi-autonomous Kurdistan region to the Turkish port of Ceyhan. 

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