OGPSS - Iranian potential and the Caspian disputes

As we come to the end of the year, Leanan continues to point to the many stories that now fill the media reporting on the perception that the time to worry about peak oil is over. However, as Darwinian perceptively points out the global supply of oil (crude and condensate) is not going up with the celerity that most commentators are envisaging.

Figure 1. EIA reported global crude and condensate production through September 2012, (Darwinian at The Oil Drum)

The global balance between available supply and demand is in a balance, where the amount of oil remaining available to meet a surge in market demand is quite small. OPEC (and largely Saudi Arabia), by adjusting their production, ensures that the balance is maintained and prices remain at a level with which they are comfortable.

In the December 19th TWIP, the EIA has explained, without endorsing the statement that the US might surpass Saudi Arabia in global fuel production, why that is a less important statistic than folk are generally making it out to be.

The EIA note, in their review, that this balance is predicated on a sustained production from the Middle East. Yet, for several years now, reliance on maintaining current supplies, and guaranteeing adequate supplies in the future has assumed a steadily growing production from Iraq. The EIA notes that it is in the combined production from Iran, Iraq and Saudi Arabia that contains the additional oil needed for significantly greater production. (Venezuela is also mentioned, though there are more obstacles to overcome before their oil production can increase).

There is, unfortunately, a down-side to the glee which many commentators have greeted the news of potential US production gains. With the assumption that North America (and for this Mexico and Canada are included) can reach the higher targets projected, there is less concern with ensuring that alternate supplies remain available, as world demand continues to rise. This failure to ensure “insurance” may well cause some significant changes in the global market in the non-too-distant future, should the existing projections prove overly optimistic. (And Leanan referenced Kurt Cobb’s more realistic assessment, on Friday).

China, for example, is aware of the Iraqi potential to increase production and is moving to take over Exxon’s stake in the West Qurna oilfield, as part of their ongoing program to increase the reserves available to China in coming years. This comes as relations between the US and Iraq seem to be cooling, as Iraq becomes more friendly with Iran. Iranian exports are continuing to increase, despite the sanctions, although there are some problems arising with repatriating the payments to Tehran. The EIA note that Iran has some 137 billion barrels of proved reserves, some 9.3% of global reserves, and over 12% of total OPEC reserves. However, as with many countries, its internal consumption is keeping pace with or growing faster than overall production.

Figure 2. Iranian Production and Consumption (EIA )

In a recent post on Iraqi oil, Euan included a map showing the main distribution of fields in Iran.

Figure 3. Map showing the oil and gas fields of the Zagros fold belt. (Greg Croft via Euan Mearns)

Nevertheless Iran has significant potential reserves outside of this strip, as well as further discoveries within it. As the EIA notes:

There were a number of new discoveries in Iran over the past couple of years. In May 2011, NIOC announced a discovery of a deposit of light oil (35° API gravity) in the Khayyam field, offshore in the Hormuzgan province. The field had been discovered in 2010 but was originally classified as a gas field. According to the NIOC, the volume of in-place oil at this field is 758 million barrels, of which around 170 million barrels are recoverable. Also in May 2011, Iran announced the discovery of new onshore oil fields in its south and west with an estimated half a billion barrels of reserves. In late 2010, Iran claimed the discovery of new crude finds near gas reservoirs in the Persian Gulf, holding total in-place reserves of more than 40 billion barrels of oil, however recoverable reserves could be less than 10 billion barrels.

And just this year a significant discovery was announced in Iranian waters in the Caspian. The field promises a 10 billion barrel resource, which could add around 7% to the Iranian reserves.But there is a dispute over the location of the field, with Azerbaijan claiming that the region belongs to them.

Figure 4. Location of the discovery off Iran (Eurasia net)

Exploration in the southern end of the Caspian has been somewhat sporadic, given the territorial disputes as to who owns which part of the seabed, and this discovery is not likely to ease those tensions. Azerbaijan and Turkmenistan are both concerned over their individual territories, and are now in dispute over the Kyapaz (Serdar) field. And as the size of the field becomes more evident the dispute is continuing to raise tensions in the area.

Figure 5. Sunset over an Iranian drilling rig in the Caspian (rashidi4u on Google Earth).

And so, as we come to the end of 2012 disputes seem to be the order of the day in this part of the Middle East. Not forgetting the conflict in Syria, the disputes in Iraq over who gets to control what part of their oil future continues to evolve. Increasingly in the North the Turkish government is dealing with the regional government in Kurdish Iraq instead of the Government in Baghdad. These actions do not fill one with confidence that any of the predictions for future production are likely to come through in the time frame projected. Which will, unfortunately, tighten supplies in the non-too distant future.

Oh, and just in case you thought that Gazprom had changed its spots, it turns out that with the current cold spell in Kyrgyzstan, Gazprom has found the opportunity to take over the state gas company Kyrgyzgaz. The company has so many problems that the price will be nominal, given the amount of debt that comes with it. But it also gives Gazprom access to some of the Kyrgyz gas fields.

OGPSS - Iran and the possibility of natural gas exports

There has been much talk in the current Presidential debates about possible changes in US Energy Policy, with Governor Romney suggesting that more Federal land be opened for prospecting for oil. Historically one of the regions included in such lists has been up in the National Petroleum Reserve in Alaska. And, perhaps anticipating the debate, the current Administration has already and recently moved toward opening those territories up for development.** However those fields have now been determined to be more natural gas than oil, and so hopes for finding more oil reserves has shifted into moves offshore, where Shell continues to be optimistic as it begins to sink new wells in the Chukchi sea – although well completions have now moved into next year. However it should be noted that there have been suggestions in the past that more of the hydrocarbons under the Arctic are gas deposits than oil, and this argument has been strengthened by the recent discovery in the Barents Sea of more gas, when oil had been anticipated.

The current large volumes of natural gas that are being developed and marketed, whether in the United States or from Turkmenistan, are making considerable changes in the economies of many countries. Russia, who lost the sales battle to supply natural gas to China now can no longer justify the expense of opening the Shtockman field, as alternate supplies are coming to the market at lower costs, and this will, in turn, cascade on to prices in Europe, where the advent of more gas in the UK is making it more difficult to justify a switch into a greater reliance on renewable sources such as wind and solar.

This entire scenario means that it is not necessarily a good time to have a huge reserve of natural gas, and to go to the market with this as a resource to generate income. This is particularly true, if the country in question is Iran.

Iranian Oil Minister Rostam Qasemi has announced that Iran’s exploitation of the South Pars gas field will equal Qatar’s exploitation of the gas field by the end of Iranian calendar year 1392 (ends March 20, 2014) if $54 billion is invested in gas projects.

Iran and Qatar share the largest natural gas field in the world, a reserve that is known as the North Field in Qatar, and as South Pars in Iran.

Figure 1, The South Pars field which lies between Qatar and Iran in the Persian Gulf (PetroPars Annual Report )

Qatar has been exporting Liquefied Natural Gas for a number of years, and has been well able to manage a steady growth in market penetration, as noted in a previous post, and this quote from two years ago:

Ras Laffan 3 Train 7 is the fourth 7.8 million tons per year LNG plant brought online by Qatar Petroleum and ExxonMobil joint ventures within the past 12 months. It matches the capacity of Ras Laffan 3 Train 6, one of the largest operating LNG production facilities in the world, inaugurated in October 2009. These mega facilities have sufficient scale to competitively reach markets around the globe. Qatar's giant North Field, which is estimated to contain in excess of 900 trillion cubic feet of natural gas, will supply both trains.

For Iran to anticipate that they can generate the infrastructure to compete with Qatar in the short term, given the time taken to invest, not only in the surface plant, but also in the tankers that become dedicated to the customers and the routes that must be followed, is more than naïve. That they can expect to do this at a time when, more than in any time in the recent past, there is an adequacy of supply unseen in a generation, suggests a message that can be meant for local consumption only.

But Iran has other problems. At present, as noted last time, natural gas supplies are barely keeping pace with an acceleration in the volumes required to meet internal demand. Any move to increase production will face competition not only from Russia (with available natural gas supplies once anticipated to be sold to the USA, and, when that fell through, then to China) and Qatar but also potentially from the United States itself, since as The OGJ recently noted

“U.S. LNG export potential is a major issue in Asia, particularly in Seoul and Tokyo,” said Mikkal E. Herberg, research director at the National Bureau of Asian Research (NBR)’s Energy Security Program and the report’s editor, “That’s especially true for the next 5 years until major Australian and other export projects come on line.”

With China getting more of its supply through pipelines this may also weaken the LNG market, even as Iran moves to step into these waters.

So can Iran also move its natural gas by pipeline, it is, after all connected by land to potential customers. Well, apart from the relatively obvious problems of trying to do this at a time when the nations concerned with Iranian nuclear policy are tightening their sanctions on Iran, as they are being seen to have more effect, the question comes back to who might be a potential customer. At present Turkey buys the bulk of Iranian natural gas exports but the European Union is expected to include natural gas in the list of banned exports at the meeting on October 15th. (Armenia and Azerbaijan buy the remainder of the current export volumes). There was a recent explosion in a gas pipeline carrying natural gas from Iran into Turkey, stopping the flow. But while that initially imposed a supply problem for Turkey, this has been met through increased purchases from Russia which currently has plenty. Thus it would appear that while Iran has more than sufficient supplies to move into an increased export position, the current political situation will likely preclude this happening in the short term, and the global over supply may well restrict Iranian penetration into that market in the longer term.

** September Alaskan pipeline flows were at 517 kbdm against the average for this year of 537 kbd, however as winter gets established the latest volume reported for 10/09/12 was 580 kbd, moving the pipeline away for the critical numbers.

OGPSS - Some thoughts at the end of the year

For most of this past year these posts have reviewed, and then discussed data on the state of different reservoirs of oil and gas that ultimately provide the power that we need and use every day. However, as we come to the end of 2011, it seems as though there is a gloss, or spin, being applied to stories about the state of global energy supply, which implies that concerns about future energy supply are overstated. Instead the impression is left that there will be, in the immediately foreseeable future, no return to shortages. So this post will be a more general view of the topic, less concerned with absolute numbers and references but rather seeking to suggest that these perceived words of wisdom are, like the promises of a return to $30 oil that we heard only three or so years ago, likely to fade into oblivion once they have served their immediate purpose.

It should be noted up front that there are considerable differences between the supplies of natural gas that are becoming available, and those of crude oil. Natural gas reserves are still increasing, I wrote just recently of the realization that exists in Azerbaijan that the gas being produced from the Shah Deniz field will have a hard time competing in the global market-place in three years, because of the arrival of natural gas from the Levant Basin. The relatively low prices for natural gas in the United States brought about by the development of wells in the gas shales, such as the Barnett, Haynesville and Marcellus and their initial high productivity will continue to make it difficult to see much increase in price. Yet this is at a time when the price that the natural gas is being sold for in America is around $3.50 per thousand cubic feet (kcf) ($124 per thousand cubic meters (kcm)). That price is often insufficient to totally cover the costs of its production and return a profit to all the investors, with some indications that such a price would need to be closer to $6.00 per kcf. The low price of natural gas however, relative to world prices, means that it helps to keep American industry competitive, since fuel costs are usually significantly lower here than elsewhere.

China continues to show foresight in acquiring fuel, since their agreement with and the creation of the pipeline from Turkmenistan now gives them natural gas at a competitive price ($280 per kcm - $7.93 per kcf) relative to the $400+ per kcm that Russia is charging Western Europe, though that price too will be vulnerable to supplies made available as the Mediterranean fields come on line.

The bent of the stories that have recently appeared seem to imply that the United States is moving toward significantly greater crude oil production, and thus a greater independence from foreign suppliers than will actually be the case. Folks such as Dr Yergin are projecting production of oil from the shales around the country as rising to some 2.9 mbd by 2020 and being sustained through time – neither of which is likely since the Bakken in North Dakota may well start declining and be significantly below 600 kbd within four years, and the likelihood of new developments bringing in more than this on a sustained basis are not great.

The emphasis on such a possibility, however, removes some of the pressure and concern in the short term over the health of the global supply situation, and the concurrent dependence of the United States on foreign fields and suppliers. One need not be (as perhaps the argument goes) so worried about the time to bring Libyan production back to 1.6 mbd. Optimistic reports talk of Libya reaching 1 mbd, yet still leave a concern that without a stable government and infrastructure that it will be a little difficult to reach those earlier production levels. And the promises that Iraqi production will rise to levels far above 3 mbd may be more dependant on political stability in a country that at the moment isn’t showing much. Any thought that the Arab Spring would bring swift changes in the governance of the countries involved, and leave oil exports to the world sustained at previous levels appear also to be less than realistic as countries such as Egypt begin to head into the second cycle of that revolution. The Syrian government is currently blocked from exporting (and thus producing) a third of their normal levels, which has taken 100 kbd or so from the market, and the situation with Iran continues to fluctuate.

Now there are some political benefits to being able to project that the world is going to have more than sufficient oil for the next few years, among them it distracts from the less than totally healthy state of the alternate fuels and energy industry. Exxon noted in their recent annual report that they see little significant impact from solar and wind energy on the overall global supply of power over the next forty years. Were the nation still fixated on where we were going to get our power over the next decade, then the collapse of Solyndra due to poor market support, and the bankruptcy of Range Fuels, because they could not produce cellulosic ethanol at the scale needed to have any impact at all, would raise worrying questions as to how we are planning to cope with shortage. The current optimistic state of mind, of course, also makes it less of an imperative to approve the Keystone pipeline, which may now not be approved.

Because of this lack of concern we see the Administration moving ahead to restrict further the use of coal fired power stations, through EPA enforcement of tougher emissions standards, the corn ethanol subsidies appear to be very rapidly on the way out, which may impact the volumes of ethanol (now over 900 kbd) that comes to the market in the future. But if the United States has become a net exporter of fuel, though mainly diesel, why should we worry? Perhaps it might be because that is such a small fraction of the overall total that it is really insignificant, even though it makes a nice headline.

The overall picture of crude oil supply to the United States, in reality, has hardly changed at all. Yes, demand for gasoline is down as cars are being driven less these days, and fuel economy changes have some small effect, but the economy is not robust (nor is that of Western Europe) and sustained high fuel prices are not going to help with recovery. At the same time demand in Asia continues to increase, and more nations in the Middle East and elsewhere are shipping oil to China in agreements that will still be in place were the United States to continue to recover and suddenly need additional oil to sustain that recovery of growth.

Current complacency and spin will not make those agreements go away, nor – by magic –will additional oil appear to assuage American demand. The only question that I have is whether the current spin can be maintained through 2012. It is certainly unsustainable through to 2014, and what impact the realization of reality might have, were it to become obvious by say September of this year, as the election enters its final phase is an ongoing puzzle.

We live in interesting times indeed, and I hope that you all have a Prosperous and Happy Year, as we sail into that future, and I look forward to commenting on some of these issues as we move through those times.

OGPSS - Looking at Azerbaijan future fuel production

The President of SOCAR, the State Oil Company of Azerbaijan, is touring the United States at the moment. His goal is, in part, to gain support for the Baku Higher Petroleum School, a place to generate the indigenous engineers that his firm needs for future resource development. (About 75% of the labor force is currently Azeri, but at lower levels of management). The school is expected to open its doors next September. While this is, perhaps a little late to the game, it underscores the global need to find those individuals who can be technically trained and who are then willing to spend weeks of their lives, at a time, in increasingly remote parts of the world, often in inclement conditions, just so that the rest of us can have an easy commute to work in the mornings. (Folks were even talking about the opportunities in the wilds of North Dakota at our Rotary meeting this week).

The effort by SOCAR also underscores the point that there remains a future for the petroleum industry in Azerbaijan, despite the long history of oil recovery that the nation has already seen, with the depletion of many of the old reservoirs. There are new fields in which oil and natural gas are being developed, though as Darwinian pointed out, the rapid build-up in production to which I referred last time, has, more recently, begun tailing off. He referred to the Joint Organizations Data Initiative – Oil (JODI) which shows the decline from 1.05 mbd in July 2010 to 920 kbd this September. That peak was down from the peak of almost 1.1 mbd in early 2008. This year the decline has reached around 11% pa and while SOCAR explains that this is the result of introducing additional safety measures following the Deepwater Horizon event, and for scheduled maintenance, the number seems a little large for such a cause.


Further if one looks at the drilling record for the country, SOCAR reports that while drilling was down last month (and likely will also be this month) overall they anticipate exceeding the 2010 figures, with roughly 90% of the work going for development and about 10% for exploration. The development drilling is down from the 2010 figure, which was itself lower than that in 2009, which was below that of 2008. But some of this may have been market driven, one can certainly see that in the natural gas numbers that I discuss below.

I had missed, when I wrote the post last week, that Jerome had previously written on the topic in 2008, my apologies to him and you for that omission. His post gave more detail of the fields off the peninsula than I had provided, so I am reproducing a figure from the post here:

Oil and gas fields off Azerbaijan (Jerome at TOD)

The recent decline in overall oil production impacts flow through the pipeline from Baku to Ceyhan (the BTC pipeline) which had a targeted flow of over 1 mbd, and much of this comes from the Azeri-Chirag-Gunashi fields (there is some crude also from Turkmenistan, and condensate from Shah Deniz). IHS list it as currently the third largest oil field (behind Saudi Arabia’s Ghawar and Kuwait’s Burgan). Recent production from the complex can be obtained from the BP site:

During the first three quarters of 2011, ACG produced on average 757,500 barrels per day (b/d) (206.8 million barrels or 27.9 million tonnes in total) from the Chirag, Central Azeri, West Azeri, East Azeri and Deepwater Gunashli platforms.

At the end of the third quarter of 2011, a total of 57 oil wells were producing, while 27 wells were used for injection in the ACG field, as follows:

Chirag had 12 wells (8 oil producers and 4 water injectors), producing on average of 73,300 b/d.

Central Azeri (CA) had 19 wells (13 oil producers, 5 gas injectors and one water injector), producing on average 209,200 b/d.

West Azeri (WA) had 19 wells (13 oil producers and 6 water injectors), producing on average 213,800 b/d.

East Azeri (EA) had 14 wells (11 oil producers and 3 water injectors), producing on average 134,300 b/d.

Deep Water Gunashli (DWG) had 21 wells (12 oil producers and 9 water injectors), producing on average 126,900 b/d of oil.

Development of Chirag (EPC Engineer )

A new platform is in construction for Chirag, aimed at adding 185 kbd to current production in 2013, which with increased drilling at the other platforms (averaging about 20 wells a year) may, in the short term, bring the production back toward the 1 mbd target production. The total estimated recoverable reserve is estimated at 5.4 billion barrels of oil, of which around 1.8 billion is estimated to have been produced to date. The partnership is currently extended until 2024.

The natural gas picture is a little more complicated. Although the ACG complex produces more gas than Shah Deniz roughly 75% of it is re-injected to maintain reservoir pressure. Discounting the production from Shah Deniz, SOCAR is still producing natural gas for export to Europe, for which it is still being paid on average $191 per 1,000 cu m (kcm) ($5.40 per 1,000 cu.ft or million Btu approx) this year (though down to $151 in October). These prices are significantly higher than the $61 per kcm it received last year, and are also ahead of the $186 price in 2009, though just under the 2008 average.

They are undercutting the price of Russian gas, which they report as being some $446 per kcm this year, though it is anticipated to fall to $415 next year. (In perspective Ukraine is currently paying $400 per kcm, ($11.33 per kcf) for Russian gas, but hoping to get that price lowered).

SOCAR is anticipating that this market may dry up in three years when the gas fields off Cyprus are brought into production. This will be gas from the Aphrodite gas field, which holds some 3.3 Tcm of natural gas – about three times the reserves for Shah Deniz. That area of the Mediterranean is, however, quite politically sensitive.

Together with other fields (Leviathan and Tamar), this area of the Mediterranean is estimated to have 10 trillion cu m of gas. In connection with the worsening political and military situation fields Leviathan, Tamar and Block 12 have been patrolled by Israeli drones. Russia sends its only aircraft carrier to this area, while fleets of other countries claiming to develop these fields are drawing as well.

These new fields lie in the Levant Basin Province, and, given this location and the neighborhood, who will end up producing what is going to be an interesting development to watch. Given the size of the deposits, their development could also change the economics of natural gas distribution for some time.

Location of the Levant Basin Natural Gas Province (Fast Company )

SOCAR is hoping that, as this transpires, it may get additional supplies from Turkmenistan through a trans-Caspian pipeline that could be completed by 2015. Concurrently Shah Deniz II, slated to produce some 100 kbd of oil and 16 bcm of natural gas, is being prepared for production to start in 2017.

In short, in the short term production of oil from Azerbaijan will continue at roughly current levels, but the volumes of gas that will be available on the global market may exceed demand within the near future unless, as now, they significantly discount the price.

OGPSS - an initial look at Baku and Azerbaijan

“The Prize”, itself a prize-winning history of oil written by Daniel Yergin covers the growth of the oil industry around the world, and begins with the start of the industry in the United States. But right behind those early chapters comes the story of Russian oil. This is not surprising since between 1898 and 1901 Russia and America roughly split global production of around 500,000 bd between them, with Russia out-producing the United States on occasion (as it does again now). That Russian oil is Russian no longer, since the early oilfields were found on and off the Aspheron Peninsula in what is now Azerbaijan. (It was annexed by Russia initially in 1813 by Alexander 1). The first well was drilled in 1847, after decades of recovering the oil from hand-dug pits, and there has been ongoing activity there ever since. By 1904 the Baku region was producing 73 million barrels a year, although production began to decline after that. And with the loss of much of its male population with the revolution, it took a long time to recover. Yet it had rebounded to be strong enough that this oil from the Baku reservoirs was considered a critical factor in governing many battles of the Eastern Front in Second World War.

Azerbaijan sits in a region of states that run along the southern Russian border, and which hold the promise of holding some of the last large deposits of fossil fuel that have yet to be fully developed.

Location of Baku, and Azerbaijan (Google Earth)

The first fields to be developed were the onshore Balakhany, Sabunchi and Ramany in 1871 with the coastal field of Bibi-Eybat being developed in 1873. Such was the nature of prospecting at the time, and the multiplicity of oil-bearing layers in the ground that oil still remains to be found and recovered. It has been estimated that the fields initially held around 8 billion barrels of oil (John Grace) but that while a billion of this was within range of early technology, the rest waited for the more advanced western technologies to arrive, and sometimes it didn’t.

As a result, within the last year, new wells have been sunk in these old fields. One at Balakhany is aimed to be 3,200 ft deep, with a target production of 28 barrels a day, Most of the production was produced following the Russian Civil War and in the lead into World War 2. In 1913 production was at 206 kbd, but fell to 81 kbd by 1921, and then slowly built until the region was producing 622 kbd by the start of WW2.

Balakhany today (Alexander Zaitchik )

The older fields no longer have the reserves to justify the investment of the large capital equipment associated with modern technology, but their history describes the wealth that they produced before the first World War, first for the Nobel family, and then for the Rothschilds. Baku oil also underwrote the career of Mr “Five Percent” Calouste Gulbenkian. Daniel Yergin notes that it was the need to replace expensive British coal that led Russia to use oil first in ship bunkers on the Black Sea, and then to fuel the railway engines across Russia. However production continued to fall from the original wells at Baku, Royal Dutch/Shell had bought out the Rothschilds, yet in the period just before WW1 Russia’s export market share had dropped below 10% as the shallow fields ran out. Of course this was also the time that Stalin was learning his trade as an organizer/agitator in the Baku fields., though it was not until 1920 that the Bolsheviks took Baku and nationalized the oil industry.

Azerbaijan remains, however, with the fields off the peninsula, the source of a growing percentage of global production. Because of that it is where the Baku-Tiblisi-Ceyhan pipeline begins. The BTC pipeline carries up to 1.2 mbd of oil to the Turkish port of Ceyhan on the Mediterranean where it can be loaded into tankers.

Path of the BTC pipeline (Central Asia-Caucasus Institute)

To meet this, and other demands the re-growth of the oil industry in Azerbaijan has, within the last decade, raised production from 283 kbd to more than 1 million bd.


The most productive of these fields lies 62 miles east of Baku, in the Caspian, where the complex of fields known as the Azeri-Chirag-Gunashli (ACG) field lies. The complex is believed to hold 9 billion barrels of oil, though these are only a few of the fields found in the region. Yet there is a world of difference between how these fields are being developed with modern equipment and investment and the fate of the older fields.

The oilfields of Azerbaijan (Offshore Technology )

It is here also that the Shah Deniz field, with 22 Tcm of natural gas and 750 mb of oil can be found.

The region has thus not only had, but continues to have significant fossil fuel reserves. Production this year averaged 989 kbd to date, with $19 billion in exports of 715 kbd. This is up from last year, but down from the 2009 figures.

As the volume of oil available has increased, so the market for Azeri oil has also grown. Azerbaijan began exporting oil to India this year, and already sends some to China. It plans on sending oil to Czech and Ukrainian refineries and to Slovakia, to the tune of around 15 million barrels a year. The diversion of more to countries of the Former Soviet Union is something that has caught OPEC attention, and they note, in their November MOMR that the booming Russian economy is increasing internal demand, with a consequent cost to exports, to the tune of around 100 kbd growth in demand in the FSU to 4.2 mbd.

FSU oil demand change (y-o-y) in kbd for selected countries (OPEC November MOMR )

In terms of natural gas production the IEA projects that this will grow from a current 17 billion cubic meters (bcm) a year to 50 bcm by 2035, much of this to come from the second phase of the development of Shah Deniz.

In this regard it should be remembered that there are three main oil pipelines that carry oil out of Azerbaijan and while the BTC carries the majority, the Baku-Novorossiysk pipeline (B-N) carries 7% of the exports to the Black Sea Russian port of Novorossiysk , and the Baku-Supsa pipeline carries 14% of the total feeding oil to the Georgian port of Supsa, with a capacity of 145 kbd. The flows from Azerbaijan to Russia, via the B-N pipeline have been fluctuating all year, but on average have fallen over 12% from last year.

Average monthly flow in the pipe from Azerbaijan to Russia (News.AZ )

It may be that, in the same way that Russia used to play with demand for gas from Turkmenistan, they are now playing the same game of cutting back demand in order to force lower prices. However as with the Chinese pipeline to Turkmenistan, the BTC pipeline from Baku provides other customers so that prices may now be maintained – and with them support for the local governments. (The Azerbaijan government now has a strategic reserve of $41 billion).

OGPSS - Oil producing countries around 1 mbd, Kazakhstan, Qatar, Indonesia and Azerbaijan

In this series of posts I have been taking a quick look at the current oil and natural gas production from the world’s top oil producers, using initially the table that the EIA developed for 2008. In just four posts (the top tier at above 3.1 mbd; the upper second tier, the lower second tier and those at about 2 mbd ) I have now reached the final few that produce above 1 mbd. As it is I have slightly re-arranged the order since back in 2008 India was producing more that Azerbaijan, but while Indian production stayed the same, Azerbaijan production has now risen above 1 mbd, so I made the switch.

This limited number of countries includes those whose production is waning, as well as those to whom we might look for improved output to meet the rising demand. That, I would remind you, has been predicted to be about 1.4 mbd more this year than last, providing of course that the recession continues to recede from the global markets, a question that rising prices for oil might throw in doubt. With civil war in Libya appearing more likely, there is a significant possibility that the 1.6 mbd that the country produces might disappear from the scene for a while. So where can the make-up to a total of an additional 3 mbd come from? Well let’s take a look at what these four countries are doing and see whether they are going to be able to help.

First let’s look at Kazakhstan, which was producing 1.43 mbd back in 2008. And to begin with, where is it? South of Russia, and North of China it lies on the Eastern shore of the Caspian Sea.

Kazakhstan (EIA)

In 2005 Kazakhstan began sending oil to China through a pipeline and while some of the oil is locally produced it also provides a conduit for Russian oil flowing to China. The pipeline was originally planned to carry 10 million tons of Kazakh oil, and, by now, the same amount of Russian oil. However it was only at the end of last year that it reached the first target, (200,000bd) with the second now reset to 2013 but now dependant on Kazakh oil from Kashagan, rather than from Russia.

The country depends on pipelines to export its oil. The EIA notes that as production has increased, now at around 1.6 mbd, it will depend both on pipelines and barges across the Caspian to connect to that market.


There is still considerable potential for the slope of the production curve to continue upwards. Chevron has announced that the Tengiz field, which is now at 567 kbd will, in the next phase, ramp that up to 780 kbd. That oil flow to Russia through the Caspian Pipeline Consortium pipe At Kashagan, which will in time produce up to 1 mbd, development is slowed as it faces Government resistance to the high costs of the next phase of the program. Given that the field, located offshore in the Eastern Caspian is the main bulwark for the planned expansion of Kazakh production through 2020, postponing that development may reduce export capacities. There is other news that is also not positive, production from Karachaganak, currently the second largest field dropped 4% last year . Smaller production gains are anticipated from other fields in the country, such as the Tethys Petroleum development, which is going to use a radial drilling method that I might post on in some future time. But it is questionable whether any dramatic gains in production will be available to meet increased global demand in the short term. The target of a 3 mbd export level by 2020, set by the Prime Minister will depend on ironing out some of the current contract difficulties.

Kazakhstan has also participated in the natural gas pipeline that runs from Turkmenistan to China and which was opened in December 2009. That pipeline has increased the marketability of the products, and while all natural gas used to flow to Russia which thus had a considerable say on volumes and prices, the existence of alternatives is causing the Kazakhs to rethink the relationships and distribution of profits.

Qatar (Middle East Political and Economic Institute)

Qatar lies in those Middle Eastern countries whose long-term production might be threatened by domestic unrest. Within the past decade an increasing portion of the country's resource is being devoted to internal consumption:

Qatar is more widely written of in terms of its vast gas fields and potential, rather than for its oil, even though, in 2008, it averaged 1.2 mbd of production. In January of this year OPEC reported that Qatar produced 813 kbd of oil. However, with the large natural gas production the country also produced around 380 kbd of non-crude liquids to provide the overall 2008 volume. It is through an increase in the latter volume to 590 kbd that has raised overall 2010 production to 1.4 mbd.

Source Energy Export Databrowser

It had been viewed as one of the more stable countries of the region, back in 2006. That ranking puts it just ahead of Oman, and Oman has now seen some disturbance and death. (And receiving support from the UAE to meet those threats, suggesting that they are perceived as deeper than reported.) Qatar has the second highest per capita income (at $95k) but it should be remembered

The royal family, the Al-Thani, has a history of internal conflict and competition over political power. The last three leadership transitions—in 1949, 1960 and 1995—came about as a result of forced abdications, due to in-fighting within the ruling family. However, this ruling family has maintained social peace in Qatar for decades.

Qatari political stability is baffling.

The production of natural gas from the country is increasingly going into liquefied natural gas (LNG ) and the significance of the production can be seen from the EIA report

RasGas and Qatargas have 13 LNG trains currently online, with a total LNG liquefaction capacity of 3,400 Bcf/y (69.2 MMt/y). Five of these trains were added in 2009 and 2010. RasGas III, Train 7, with a liquefaction capacity of 380 Bcf/y (7.8 MMt) of LNG began operations in February of 2010. Qatargas III, Train 6, came online in November of 2010 with the same liquefaction capacity. The 7.8 MMt train is considered a mega-train, and is currently the largest operating size in the world.

In March of 2011, Qatar will complete its monumental cycle of LNG infrastructure expansion with the inauguration Qatargas IV, Train 7 (80 Bcf/y (7.8 MMt)), which will bring the total capacity to 3,750 Bcf/y (77MMt/y). Qatari government officials have noted that they do not anticipate building any more LNG facilities in the near-term future.

Qatar growth in LNG production (EIA )

Whether those decisions will affect the slope of the increasing levels of production will have to await the test of time, but with 70% of production going into the LNG market, that still leaves room for growth elsewhere.

Source Energy Export Databrowser )

Indonesia left OPEC in May 2008, since it had become an oil importing country. (This also saved them the $3 million annual membership) Recent production has been down around 1 mbd (similar to that of 2008) but a recent dispute over cabotage may cut this dramatically. Cabotage is the requirement that fuels be transported in domestically-owned vessels, and Indonesia proposes to ban the use of foreign-owned vessels next May. This will affect both oil and gas production with cuts that threaten to be about 157 kbd of oil, and 2.5 bcf of natural gas.

At present the country is third in LNG exports after Qatar and Malaysia. The world’s largest buyer of LNG is the Korea Gas Corp (KOGAS) and they have agreed, with Mitsubishi to build a new processing plant in Indonesia to help supply the Japanese and Korean markets. With an estimated reserve of 112 Tcf , the country has the potential to grow this export, though it is quite likely that this increased production may end up in China, which is looking at increasing imports to over 9 Tcf over the next 5 years.


Domestic demand for energy continues to grow, and Indonesia plans to build a second LNG receiving terminal on Java, using domestically produced gas to meet the demand.


And that brings us to Azerbaijan, on the other side of the Caspian from Kazakhstan. Baku, the capital, has hosted oil development since the late 19th Century . In 2008 the country produced 876 kbd of crude, at the time just below India. However ,with the increased development of the Chirag, Azeri and Guneshli oilfields the country is hoping to exceed (if only slightly) the 1 mbd mark this year. However it did fall a little short of predicted volumes in this past year. Current plans are for production to continue to increase, with a target of 1.25 mbd in 2014. The difference between those numbers and that of the EIA figure for the country comes from the inclusion of other non-crude liquids.


The majority of the oil is shipped through the Baku-Tbilisi-Ceyhan pipeline with smaller amounts being sent to Georgia.

Natural gas production is expected to continue to grow with the development of the Shah Deniz field., to the point that additional pipeline capacity is being planned. The plans call to treble capacity, but may require some $3 billion of additional investment. The pipeline carries a flow, at present, averaging 770 mcf/day. One of the issues as Shah Deniz increases total production (it is considered the 9th largest gas field in the world) concerns how the natural gas produced will get to its customers. One of the ongoing options is the Nabucco pipeline. The planned increase of 565 bcf by 2017 can be shipped by possibly three pipelines, but the Nabucco needs a volume of about twice this, and so is currently looking for an additional supplier to make up the numbers. That search has been going on for a while.

Looking at the numbers that I have just gone through, it is clear that the world is going to see an abundance of natural gas likely continuing through the decade. In the shorter term, however, there does not seem to be that much capacity for an increase in oil production. For while countries such as Kazakhstan and Azerbaijan can increase volumes over the present, the increases are not that great, when compared with the need. (The slopes look good, but the vertical scale less so).

But on the other hand the aggregation of a hundred thousand here, and a hundred thousand there can add up to a significant volume in the end. So I will continue this set of posts, looking next at those countries which just can’t quite make that 1 mbd.

Russia, Ukraine and the annual gas game

There is a developing tradition at the end of the year, in which Russia gets into a spat with Ukraine about the payment of the Ukrainian gas bill. Gas supplies are curtailed to Ukraine, which immediately passes on the cuts to the Western European nations on the other end of the pipeline, and there is a short-term, very public row, at the end of which gas supplies are re-started and the situation gets pushed under the rug for another year.

In trying to develop a longer term solution to the problem, Gazprom (the Russian gas company) and its partners have been developing two pipelines, one around the North, and one following a Southern route, to bring natural gas to Western Europe without going through Ukraine. Austria was asked to join the southern branch (South Stream) today. At the same time the West has been trying to line up enough gas supplies to run its own pipeline from Azerbaijan and Turkmenistan into Europe without going through Russia; the pipeline is called Nabucco.

None of these pipelines is yet in place, and so, as the winter season starts to arrive one would naturally begin to worry that the traditional drama would play out again this year. Thus Gazprom has hastened to proclaim, in an interview with Bloomberg that this year will be different. Ukraine is paying its bills each month, and as long as that continues then gas will continue to flow. Although, at the same time, there have been the usual heavy hints that if bills aren’t paid then taps will again close. And Ukraine is hinting that to meet those bills it will need money from the International Money Fund. However it is also seeking a loan from Europe. And the latest comments from Ukraine suggest that this years bargaining round is only just starting. The reassurances that Ukraine is providing, while superficially calming, also retain the caveat that could warn of future problems.

"Ukraine is ready to comply with its obligations on gas transit through its territory within the next half a year at least," he (Ukrainian presidential envoy for international energy security Bohdan Sokolovsky) said at a press conference in Kyiv on Nov. 9. . . . . Having 27 billion cubic meters of gas and repaired gas transportation system, Ukraine can guarantee the transit of the Russian gas provided it comes to Ukraine's GTS (Gas Transportation Services)," he said.

It’s that little catch phrase at the end that always seems to generate trouble.

UPDATE: Coincidentally Jerome has written an article that explains in much greater detail the background to this situation and yet comes to somewhat the same conclusion I draw. His article is well worth the read in understanding why, however.

And unfortunately it has been trouble in the pipelines supplying gas either to or from Russia that has caused earlier problems around the Russian perimeter, and there seems to be no indication that this year will be any different.

Unfortunately the situation is not that cut and dried. I have written about the concern that Turkmen gas, normally a significant supplier, through Russia into Ukraine, may not be available this year. Further the drop in prices and demand for Russian gas is giving Gazprom some financial problems, since they have not sold some 8.5 billion cubic meters of gas or so that they had anticipated, on top of the actual 142.5 billion cu m they actually have sold the west this year to date. (In context Gazprom would normally sell about 45 bcm to Europe in the fourth quarter, and that is about the amount of gas that they normally buy from Turkmenistan in a year). Because of the contract sales language Gazprom is thinking of fining its customers for not buying their full allocation.

And as Turkey and Azerbaijan negotiate on getting Azer natural gas for the pipelines through Turkey, the prices for transport that are being negotiated appear similar to those that Russia charges:

According to him,( Turkish Minister of Energy and Natural Resources Taner Yildiz) Turkey has offered Azerbaijan a fee of $2.36 per 100 km for transporting every 1,000 cubic meters of the South Caucasus republic’s gas.
“The proposed fees are completely competitive. Russia charges $2.6 for transporting the same volume,” the Turkish minister said.

We recall that during the “gas war” between Russia and Ukraine this January, Kyiv sought to raise transit fees for Russian gas giant Gazprom to $3 per 100 km in case prices for Russian gas increased.

The attempts by Ukraine to get that higher fee have not stopped.

Meanwhile Russian companies are coming under pressure to reduce gas flaring since Prime Minister Putin sees this as a loss in revenue. At the moment Russia is flaring about 20 bcm a year (apparently about a third of that which comes out as a byproduct of Russian oil production).

Incidentally, in regard to my earlier post on Saudi Arabian production, Platts ( has noted that it is not only Asia that saw the reduction in Saudi exports, but that the United States also got a reduced allocation, with imports falling to 745 kbd in August. Whether this is a simple monthly aberration or portends something more dramatic, only time will tell.

Turkmenistan, Nabucco, Azerbaijan and Russian natural gas

Robert Cutler has an interesting article in Gundogar this week in which he asks, concerning the recent articles questioning the size of Turkenistan’s gas reserves “Who stands to gain?” from the imbroglio. His conclusion is that it is likely the Russians, and certainly not the Turkmen.

The story, in brief, is that after a steadily rising projection of the size of the gas reserves in the country, the Turkmen President called in a Western auditing firm to look over the books and validate that the projections were real. The British firm, Gaffney Cline & Associates, came, looked at two fields, South Yolaton and Yashlar and certified, a year ago that they held probably 6 and 0.7 Tcm each. To put this in context, it would make South Yolaton the fourth or fifth largest gas field in the world, and would mean that Turkmenistan might have reserves as large as 80% of those reserves in the entire Russian nation. Turkmenistan is currently getting its gas from the Dovletabad field and it is this that was supplying natural gas to Russia and points west prior to April this year.

Two stories one Russian and one German recently suggested that the information on which the audit was based was bogus – a claim that the auditing firm disputes. They pointed out

”There is a very considerable volume of data to be assessed on a project of this nature. This data [comes] in a wide range of types and from a range of sources," Gillet (Jim Gillet of Gaffney Cline - ed) explained. "Therefore, in practical terms, it would be impossible to falsify it all [in a way] such that it could still appear to be coherent and could mislead an expert team. This is why companies like [Gaffney Cline] are used by organizations, such as stock exchanges and banks, to provide independent and expert opinion on such issues."

The current context is that Turkmenistan is moving away from the relatively expensive dependence on Russia to handle all its exports of natural gas. It is therefore seeking help in building a gas pipeline that would tie into Nabucco, the pipeline that would circumnavigate Russia and bring natural gas into Western Europe.

So far the Nabucco pipeline has not been able to generate enough natural gas supply to justify its existence.

Nabucco aims to diversify gas supplies by bringing Caspian and Middle East gas to Austria via Turkey. The pipeline venture, led by Vienna-based OMV, is vying with Asian and Russian projects for access to Azeri, Turkmen, Iranian and Iraqi gas.

Nabucco, set to start operating in 2014, will get its first gas from Iraq and Azerbaijan, Dolezal said. Reinhard Mitschek, the project’s managing director, said earlier this month that 8 billion cubic meters of gas would come from Iraq in 2015, more than a quarter of the pipe’s total volume, and that Shah Deniz would provide the same amount.

The link, which will send as much as 31 billion cubic meters of Caspian-region gas a year to Europe, has been delayed by a lack of commitments from customers, suppliers and transit nations. First deliveries were originally planned for 2013.

Russia badly wants to ensure that this regional natural gas continues to flow west through its gateway. Thus it has been bringing pressure to bear on both Turkmenistan and Azerbaijan to continue to direct all their deliveries to them. And so, to date, while the Turkmen has continued to speak favorably about Nabucco, for over a year, through July and to date Turkmenisan has yet made no firm commitment, even while claiming that it has the resource to supply Nabucco :

The Turkmen president pointed to the newly discovered gas fields, Yolatan and Othman, in the southern parts of his country, and said that huge gas reserves of the two fields have made it possible for Turkmenistan to join major international gas pipeline projects. 

Reminding that the Nabucco pipeline is at the center of the international community's attention, he added that development of gas and oil fields, construction of new facilities for refining oil and gas, construction of gas terminals, employment of modern technologies in his country's oil and gas sectors are among Ashgabat's priorities.

Ashgabad (the Turkmen capital) needs more Western support, and must convince investors that it has the long-term supplies to be able to do so.

Having made a commitment to China for up to 40 bcm per year, and having committed 20 bcm to Iran, and with commitments of up to 50 bcm to Russia, could Turkmenistan also be able to provide the gas for Nabucco? (As I noted production for the Chinese is coming from a different set of gas fields).

And here, as Robert Cutler points out, there is a benefit to Russia (or Gazprom) sowing some disinformation. If investors can be caused to doubt the credibility of the long-term supply to Nabucco, then it won’t get built, and Turkmen gas will continue to flow West through Russia.

Gasprom also has a secondary claim in that it cites a prior agreement that Russia be able to buy all of the Turkmen supply.

In fact, it complements what Russian media and officials have now insisted for many months, to wit, that Moscow has already contracted all future gas from Turkmenistan. There is a contract in principle signed under Niyazov (the former Turkmen President - ed) to provide Russia with 50 billion cubic meters per year (bcm/y), but that is subject to continual negotiations and re-negotiations over price.

Russia is also trying the same approach to the natural gas that will come to Nabucco from the Azerbaijan production from Shah Deniz - a field with about 1 Tcf of reserves). Robert Cutler notes:

For example, ever since the signature of the contract for Azerbaijan to send 0.5 bcm of gas from Shah-Deniz Phase 2 to Russia in 2010, Russian media and officials have stated at every opportunity that they will have what amounts to «first refusal» on subsequent Shah-Deniz Phase 2 production. However, no legal documents binding the Azeri side to such a bargain exist.

The Russian struggle to deny supplies to Nabucco sufficient to stall its construction, while more successful until now, appears to be fraying a bit at the edges. The very size of the natural gas deposits would indicate that Turkmenistan can meet all its current and anticipated commitments, and that the doubts raised about the reserves are meeting more questions than immediate acceptance. (Though firing the guys in charge didn’t help bolster the credibility of the Turkmen argument).

In the meanwhile Turkey has been negotiating with Iran, and it appears that some of the natural gas in the South Pars field (one of the three larger – at 14 Tcm - than South Yolaton) may come to Turkey (around 35 bcm) with Turkey sending forward what it does not use into the Nabucco line.

In short in this continuing saga the current week looks to have been better for the Nabucco pipeline and the West, and not so good for Gazprom – but don’t even think of counting them out yet!!

Nabucco, or is the Great Gas Game turning into a waltz?

It seems as though, whenever things are relatively quiet in the energy world, which they currently seem to be, then all one has to do is type Gazprom into Google search box, and there will be some interesting snippet.

And lo, it appears that Gazprom is looking into a take-over one of the Hungarian gas pipeline networks. Now that is not what the initial part of the post says, where it notes that the Hungarians are switching their gas purchases from a company (RosUkrEnergo) (RUE) that purchased Russian gas through Ukraine, to a company known as Rosgas AG. As part of the fallout from the January dispute between Russia and Ukraine RUE lost that business, and now Hungary has found a new middleman, Rosgas.

The immediate suspicion is that RosGas AG is yet another in a long line of shadowy intermediary companies created by Firtash and Gazprom. However, in the case of RosGas this may mask a possible attempt by Gazprom to cut gas supplies to Firtash's Emfesz, as a precursor to a company takeover - vastly increasing its share of the Hungarian domestic gas distribution network.

This becomes of some importance when one looks at the relative prospects of the two alternate paths for new gas to reach Western Europe – South Stream and Nabucco. South Stream is being increasingly pushed by Gazprom. The pipeline will bring gas under the Black Sea, and pass through Serbia and Slovenia before reaching Austria. However Eni, who is a 50% partner with Gazprom in this stage of its development, is upset that Gazprom is keeping it out of the negotiations with Serbia and Slovenia. Both countries are anticipated to sign agreements with Gazprom in the near future, without Eni, for gas supplies from South Stream.

And this may be where Hungary comes in, since the competing Nabucco pipeline goes through Hungary to get to the Austrian hub. So that if Gazprom controls the Hungarian pipelines, and can stop competitors’ gas flowing through them (a fact they used to get TNK-BP out of the rich Kovytka field after TNK-BP had developed it.) It is yet another couple of nails in the Nabucco coffin.

Earlier this week, with a fanfare celebrating the coming signature of the Nabucco agreement to run gas through the pipeline across Turkey it looked as though the pipeline was moving rather rapidly forward. However, buried within the story is the backing off of European funding

The European Commission is proposing to scale back its support for the Nabucco project to 200 million euros ($268 million) from 250 million euros, Tarradellas said in February. The aid would be channeled through the European Investment Bank.

At the same time, the last paragraph is interesting.

Friday's statement, signed by leaders of the EU, Azerbaijan, Georgia, Turkey and Egypt, also said the EU and Egypt should "agree on specific projects in developing Egypt's gas reserves and export potential for the EU." It said it was signed "in the presence of the representatives of Kazakhstan, Turkmenistan and Uzbekistan."The statement also called for a memorandum of understanding on energy between the EU and Iraq "as soon as possible." Barroso said a preliminary energy accord with Iraq was "imminent."

There are nuggets in that paragraph – first the pipeline cannot be effective without the gas from Kazakhstan, Turkmenistan and Uzbekistan. But none of them signed the document. Further Azerbaijan does not think that the project is feasible without Turkmenistan. The Turks will get paid for their trouble

The Turkish government has been driving a hard bargain, insisting on collecting a "tax" on the gas being pumped and demanding 15 percent of the transit gas at discounted prices. These requests have been rejected by the European Commission, the executive branch of the 27-nation bloc, delaying the 9 billion-euro project. More than half of the pipeline is to be located in Turkey.

But getting them on board helps negate the pressure that Russia (read Gazprom) is applying to discourage the “stans” from selling Nabucco their gas.

So as steps in the Great Game you could say that Europe took the first by planning Nabucco, then Russia took the second by stopping an adequate supply availability through pressure on Turkmenistan etc. Europe now gets the third, since with the pipeline running through Turkey they can (if politics allows) run connections into Iran, Egypt and Iraq. And before the step is completed Russia moves to step on their toes and gain control of the Hungarian section, thereby taking the fourth.

With Austria involved, maybe this part of the game is turning into a waltz – but with constantly changing partners - we shall see.

P41. Pickpoints

Half-a-dozen or so stories of interest:

The Washington Post has a lead story on the damage that the drop in oil prices has caused to the budgets of nations, and the delays that it is causing to energy projects. Interestingly at the bottom of the article is a note that, as well as Russia (which was a story in P40) Petrobras also got a loan, in this case $10 billion, from China in return for guarantees of supplies. China will get between 100,000 and 160,000 bd this year. The announcement was apparently not supposed to happen until May.


Energy Secretary Chu is having a bit of a rough week.

For the second day in a row he indicated that the activities of the OPEC oil cartel are not one of his — or his department's — priorities. . . . . He said he would look into it "to figure out what the U.S. position should be and what the president's position is." "I'm not the administration, quite frankly," he said.

This has now been followed by

US Energy Secretary Steven Chu said that remark reflected "more of my naivete than anything else" and he would encourage Opec members to promote "stability" in crude oil prices.

There is a podcast and, listening to it, his remarks were more directed toward the loan guarantee program. On being asked how the nation could double renewable output in 2 years, he said that wind is most mature, solar thermal then PV may also contribute. Numerous wind projects can go forward . He cited Bonneville Power as one who will put in lines to connect to turbines being installed within 2 years. There is Wind in Dakotas; solar thermal in 100’s of Megawatts but those are the areas. He anticipates going out into the market to find what the industry wants to bring forward, transmission isn’t there yet (maybe not until 2014). Haven’t reviewed the CCS projects yet, there is FutureGen, but it needs tech review before it can progress. Wants pre-combustion separation and post combustion separation. Oxyburn is also to be looked at. It is not a slam dunk which tech is best, so he wants to carry out a suite of potential solutions. 6 geological sites are going to be tested for CCS, Wants also to look at EOR but all this has to be tested. Money in capture and in sequestration. He sees power transmission as a national issue, combining renewable energy and being able to port it around the country.

Azerbaijan says it has enough natural gas to supply the Nabucco pipeline. One of the most promising of their deposits has been the Azeri-Chirag-Gyuneshi (ACG) deposit, but due to production problems this has not met target, and the country is projecting, after years of growing production, that this year it may only stabilize at last years levels. At the OPEC meeting in December Azerbaijan (who does not belong) offered to cut their production by 300,000 bd from 840,000 bd. Rigzone hears that there is not much enthusiasm for more OPEC cuts at their next meeting, though they think that the market is still oversupplied by about 1.6 mbd.

Exxon has returned 8 leases at Point Thomson to Alaska, just after they agreed to drill on two leases and start production before 2014. There has also been an oil spill up at Prudhoe Bay, but because the spill was under the snow its size is still being determined. Protestors who are arguing that directional drilling should not be used to tap into the oil in ANWAR after Senator Murkowski had suggested the idea will no doubt be rejuvenated.

Iceland thinks that there may be oil in the Dreki area, based on seismic information. The area is offshore and northeast of Iceland.

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