Wednesday, February 18, 2009

P40. Pick Points

Half-a-dozen or so stories of interest:

Just recently it has seemed that the Iran-Pakistan-India pipeline is in trouble again, which has energy supply problems for India and Pakistan (see P39) but it has some unfortunate consequences for Iran also. So Iran is increasing co-operation with Russia, It is also looking to sign a deal with Total for developing the second phase of the South Pars gas field, though the French are a little cagey about when this might happen. Statoil Hydro has been handling Phases 6, 7 & 8, and the drilling platforms are on their way, with 45 days to the start of operations. To date 10 wells have been drilled with the goal being 30, for a total production of 0.1 billion cu m (bcm)/day of natural gas. Plans are just getting started to do the design for phases 22-24. However, following an Iranian official remarking that Iran had sovereignty over Bahrein, the kingdom has stopped further discussions with Iran over the purchase of natural gas, and while the is an MOU in place for Bahrein to buy 1 billion cu ft per day, it is now talking to Qatar (who owns the other half of the South Pars field). Iran, on the other hand, having agreed to help Turkmenistan develop the Yoloten field could also act as a link for Turkmen natural gas, through Turkey to Europe (bypassing Russia). The new agreement calls for the export of 10 bcm to Iran, and there is infrastructure in place that could carry 40 bcm to Turkey. Though some of the gas may be used to supply areas of Iran that are difficult to reach from South Pars. This will be in addition to the 8 bcm that Turkmenistan already exports. How far Europe will move in accepting Iranian gas is still in question.

Unfortunately for President Ahmadinejad, the Iranian oil situation remains a mess and without increases in price, oil subsidies are expensive to the government. And oil is now below $35. Bloomberg also anticipates that tomorrows EIA report will show that gasoline dropped 0.5 mb , while distillate dropped 1.5 mb over the week. By the way the deal I mentioned yesterday for China to loan Rosneft and Transneft money carries with it that the oil that China will get will cost it $20 a barrel.

Indonesia is encouraging the planting of palm oil plantations with a new permitting initiative. Palm oil is also used for cooking and world prices have fallen some 44%, boosting purchases by countries like India who bought 856,690 tons last month (it bought 457,601 tons a year ago). It is hurting Malaysia, however, and Greenpeace is leading protests because of the clearing of rain forests. Yet there is still a significant tonnage available, and domestic prices in India have fallen below import prices. This is hurting domestic production of oil.

In a speech on Wednesday to the regional utility commissioners Energy Secretary Chu said that he will devote more of his time to scientific research and alternative energy, not global oil supply and demand. Because the stimulus authorization for wind is for the amount of loan guarantees, and these loans default at between 3 and 12%, the actual amount that might be supported by the $6 billion program is $60 billion, and if it all goes to wind, then it could underwrite the construction of 30,000 MW of wind power. (But a) where to put it and b) how to move the power to where it is needed). He hopes to cut his first checks in April or May. In regard to cleaning up the regulation to ease power grid construction, Congress is hoping to introduce legislation in April or May.

Bangladesh is still debating the relative benefits of increased coal mining.

The European Commission is also expecting that it can help boost their economies by investing in energy.

More stories can be found at The Energy Bulletin and Drumbeat at The Oil Drum.

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