Posts from ‘August, 2007’

Fri Aug 31, 2007 11:53AM IST 
By Hiral Vora

MUMBAI (Reuters) – Global oil majors such as Exxon Mobil, Royal Dutch Shell and Chevron Corp are ready to pour billions of dollars into India’s energy sector — but only if the government stops meddling and allows private firms to sell gas at market prices.

New Delhi is set to approve a price formula for Reliance Industries Ltd’s natural gas, according to local media, but any move to raise prices faces opposition from the politically influential power and fertiliser sectors, which consume three-quarters of the gas produced in India.

If Reliance wins this battle, the oil majors would be more willing to invest their money and know-how in oil and gas exploration in India, where politics and aggressive local players have previously kept them away.

Reliance, India’s biggest private company, is spending $5.2 billion to develop two deep-sea gas fields in a block in the Krishna Godavari basin off the east coast, eyeing production of up to 80 million cubic metres per day by this time next year.

The Economic Times newspaper has said Reliance has set a base sale price for its gas of $4.33 per million British thermal units (mmBtu), excluding transmission and marketing charges — almost double current levels that are controlled by government.

Gas demand in India, Asia’s fast-growing, third-largest economy, runs at around 179 million cubic metres a day, but domestic gas availability is only around 95 million.

Firms say the right to sell oil and gas at market prices is in government contracts with exploration companies, and the government should not be interfering.

“Production sharing contracts in India are quite clear. If you find gas it’s up to you to market it, and I don’t think there’s any piece of legislation that countervenes that,” said Marc den Hartog, a director at Shell Gas & Power in India.

BG Group, which operates oil and gas fields in India, says rows over gas pricing could deter foreign investment.

“If you are looking to revisit production sharing contract clauses in the middle of this gas pricing controversy, it will dampen the interest of foreign companies,” said Rajeev Khanna, a director at BG India.

MUCH AT STAKE

The decision on gas pricing will influence talks between Gujarat State Petroleum Corp and firms such as Exxon, BP Plc, BG and Total for the sale of a 20-30 percent stake in the state-run firm’s gas field in the prolific Krishna Godavari basin.

“Our interest in Indian exploration has certainly been driven by the successes in the Krishna Godavari basin and the possible potential along other offshore areas, including the western margin,” said Sanjeev Lowe, vice-president for BP India.

Royal Dutch Shell, which has explored in India in the past, also sees better prospects for drilling in India.

“The successes off the east coast changes the geologists’ view and that’s probably why you’re seeing an increase in bidding for some of the acreage,” said Shell’s den Hartog.

In bidding for exploration blocks, foreign firms have long been outpriced by aggressive local groups such as Reliance and state-run Oil and Natural Gas Corp.

ONGC, which has not struck a big field for more than 20 years, has found three deep-water gas fields, one of which has proven reserves of 2.4 trillion cubic feet. But it needs help to make the most of these assets.

“We have the discoveries and know the volumes. These now have to be put into production optimally,” ONGC’s exploration director D.K. Pande said. “The only thing we don’t have is technology.”

And that’s where the foreign companies smell an opportunity.

“Opting to partner in developing a proven resource rather than participating in highly competitive licensing rounds might also be a strategy employed by some of the majors,” said Praveen Martis at global energy consultancy firm Wood Mackenzie.

ONGC is in talks with Chevron, Shell and Total about sharing ownership in its deep-water blocks and has already signed deals giving stakes to Brazil’s Petrobras, Italy’s ENI and Norway’s Norsk Hydro. In return, it has stakes in blocks in Congo and Brazil.

Partly because of its poor exploration record, ONGC’s shares have fallen 7 percent this year and trade at 9 times forecast earnings. Shares in Reliance, which also has operations in other industries, are up nearly 50 percent and trade at 22 times forecast earnings, according to Reuters data.

Reliance, which is developing its deep-sea fields itself, is also open to partnerships.

Chevron owns 5 percent of Reliance Petroleum, which is building a 580,000 barrels-per-day oil refinery next to parent Reliance Industries’ unit in western India.

“As we move into ultra-deep waters we may look for such alliances to shares their experience and knowledge and also their technology, which we don’t have,” said P.M.S. Prasad, president and CEO of petroleum business at Reliance Industries.

© Reuters 2007. All rights reserved.

Kazakhstan is piling pressure on the consortium led by Italy’s Eni developing the 11.3bn bl Kashagan field in the Caspian, threatening to suspend the project completely.

The move appears designed to back up government demands for compensation, following revisions to the timetable and budget for development of the world’s biggest oil find in 30 years. Kazakhstan’s environment ministry has warned that work at Kashagan could be suspended. “We already have grounds to believe that the operator is not observing the requirements of Kazakhstan’s environmental legislation,” says environment minister Nurlan Iskakov.

The ministry has sent documents to the energy minister recommending withdrawal of the project’s environmental permits. Prime minister Karim Masimov backs the ministry’s decision. A consortium representative says the Kashagan project’s vast scale would make shutting down operations extremely difficult.

The comments from government officials coincide with the start of talks about a revised Kashagan development plan between the consortium and the Kazakh government. The government wants Kazakhstan’s share of profit oil under the project’s production-sharing agreement (PSA) to rise to 40pc from 10pc to cover losses to the state budget and the national fund — set up to accumulate profits from energy exports — from expected delays and cost overruns.

Threatening to shut the project down on environmental grounds — a tactic recently used by Russia to secure control of the Sakhalin 2 project for Gazprom — looks like the easiest way of securing a swift deal on increasing Kazakhstan’s share of profit oil from Kashagan. In the longer term, the government is expected to push for scrapping PSAs for future energy projects. And Kazakhstan’s resource nationalism drive is expected to intensify. President Nursultan Nazarbayev’s Nur Otan party won complete control of Kazakhstan’s parliament in recent elections, giving it plenty of leverage over the government on energy policy.

The Kashagan consortium has proposed a new development, which envisages formal postponement of the start of commercial production to 2010 from 2008 and an increase in the total project cost to $136bn from $57bn over 40 years. Eni indicated earlier this year that it expects production to start in 2010, but some sources suggest that start-up could be delayed until as late as 2015.

Negotiating position

The new cost figure includes $70bn of capital expenditure for development of the field, $24bn of operational expenditure, $20bn for services and $22bn in administrative expenditure until 2041. But the revised plan envisages peak output of 1.5mn b/d, up from an earlier target of 1.2mn b/d.

If the negotiations are unsuccessful, Eni could end up selling its 18.52pc stake in Kashagan to a foreign company or to state-owned Kazmunaigaz (KMG). But KMG sources do not expect Eni to lose its operator role. Eni will have to explain the new budget and project delays at a forthcoming steering committee meeting — originally due on 8 August.

http://www.argusmediagroup.com/pages/StaticPage.aspx?tname=Services&pname=Argus+Update#a

09:33 PM MST on Thursday, August 30, 2007
By Delane Cleveland, Fox 11 News

Delane Cleveland’s report Millions of Americans plan to travel this Labor Day weekend, but high gas prices may have a say in how far some people go.

Today, the president of the nation’s largest energy companies tells us why gas prices are so high.

Oil companies have earned record profits over recent years while Americans had to pay more at the pump. Nevertheless, Shell Oil Company President John Hofmeister says that is all due to supply and demand.

This makes alternative energy sources that much more important.

The price at the pump in Tucson averages about $2.57 a gallon, lower than it has been for most of the summer, but still too high in the minds of many drivers.

“It costs me about 100 bucks a month to fill up, so that’s about $400 a month for fuel,” Kris Miller calculates.

It is frustrations like these that bring Hofmeister on a nation-wide tour to talk about issues of energy supply and the need for alternative fuels.

He explains, “By the end of today, we will have used a billion gallons of oil in this country. Think about it, a billion gallons of oil.”

Hofmeister says there is a misconception that energy companies reap the benefits while consumers take a hit.

“All of the profits are going back into the business. We’re not sitting on a mountain of cash somewhere just counting our money,” he reveals.

Hofmeister says that money goes back into developing more energy sources and technology, yet those filling up today say that still does not explain why they have to pays so much to fill up.

Emilie Leder, a University of Arizona student, admits, “I think they’re being greatly benefited off jacking these prices up.”

Hofmeister says prices are based on the supply that is available and the willingness of drivers to pay for it rather than exploring other methods of transportation.

This is something many drivers say they simply cannot consider.

Miller explains, “I’m a contractor and I drive a truck, so I don’t have a lot of choice.”

“I mean, it doesn’t stop me because I just love driving, but when it is $50 to fill up a tank, then I’m done,” Leder reveals.

Today, the Federal Trade Commission released a study saying it found no evidence of market manipulation by refineries and other sellers for $3 a gallon gas prices last summer.

The FTC blames the price hike on increased demand, increases in the price of crude oil and refinery outages caused by hurricanes.
 
http://www.fox11az.com/news/topstories/stories/KMSB_20070830_dc_shelloil.87deea39.html

On Kashagan Oil Project
By GREGORY L. WHITE
August 31, 2007 9:23 a.m.

MOSCOW — The government of Kazakhstan expects compensation for what it sees as “tens of billions of dollars” of economic harm due to massive cost overruns and delays at the Kashagan oil project, led by Italy’s Eni SpA, a government official said Friday.

In a telephone interview, Deputy Finance Minister Daulet Ergozhin said Kazakh authorities are looking for more than just financial compensation from Eni and its partners, however. Mr. Ergozhin said Kazakh authorities want to see changes to the structure of the deal that would ensure smooth implementation in the future.

He declined to specify what the Kazakh side is seeking, but said, “the question of changing the operator remains on the agenda” because the government is “not fully satisfied” with the current operator.

Kazakhstan isn’t insisting that state oil company KazMunaiGaz become the operator of Kashagan, he noted, but said the government would “look positively” on a proposal to put a Kazakh company in control or jointly operate the project.

Kashagan, one of the world’s largest oil projects, has been plagued by delays and cost overruns. Earlier this year, Eni and its partners announced production would be delayed to 2010 from 2008; Kazakh officials say costs have risen to $136 billion from $57 billion. Last week, Kazakh officials suspended work at the project, citing a range of environmental and regulatory violations, and gave Eni and its partners until Sept. 5 to come back with detailed proposals on how to proceed.

Mr. Ergozhin denied that the Kazakh government was trying to pressure the investors. “Any government in our position would behave the same way.” He noted that the Kashagan contract sets a 60-day period to resolve differences.

“The question of money is only one of the questions,” Mr. Ergozhin said. “We need to see clarity that this project will work in the future” and won’t be delayed further, he said.

Among the concerns that need to be resolved, he said, are environmental and safety issues, regulatory and tax problems, and the need to use more Kazakh labor and reduce pay inequality with foreign workers.

Mr. Ergozhin noted that the government had been expecting about $1.2 billion-$1.3 billion a year in revenue from the project starting in 2008 and would have to cut spending or find other revenue sources to make up for the delay.

“We’ll have to tighten our belts,” he said.

He declined to discuss any details of possible changes to the terms of the Kashagan deal, which is structured to allow Eni and its partners to recoup most of their costs before sharing oil production with the Kazakh government.

Earlier this summer, a senior Kazakh official suggested the government was seeking to increase its share of that oil, known as “profit oil,” to 40% from the 10% in the current contract. But Mr. Ergozhin noted that official had been replaced and indicated that his proposal no longer reflects the official Kazakh position.

“We created the best possible conditions for them,” he said of the consortium. “But we don’t see any payback.”

The Eni-led consortium includes Total SA, Exxon Mobil Corp., Royal Dutch Shell PLC, ConocoPhillips, Inpex, and state-owned KazMunaiGaz of Kazakhstan.

Write to Gregory L. White at greg.white@wsj.com

By Sonja Franklin

Aug. 30 (Bloomberg) — Royal Dutch Shell Plc, Europe’s largest oil company, will be fined $48,825 for workplace safety violations at a refinery in Wilmington, California after a fire, said the U.S. Occupational Safety and Health Administration.

The fines are for five violations that occurred during a fire six months ago. Shell violated an injury and illness prevention program, procedures for safe machinery and equipment maintenance as well as for the safe management of acutely hazardous materials, said Kate McGuire, a spokeswoman for the Administration’s branch in California, also known as Cal/OSHA.

Four workers were injured in a “flash fire” Feb. 8 at an electrical substation at the Wilmington plant. Shell in May sold the refinery and 250 filling stations to Tesoro Corp., the second-largest refinery in the U.S., for $1.63 billion.

Shell “disagrees” with the agency’s allegations and plans to contest the fines, said Alison Chassin, spokeswoman for Shell Oil Products U.S. in Los Angeles.

She declined to give details.

To contact the reporter on this story: Sonja Franklin in Calgary at sfranklin6@bloomberg.net

Last Updated: August 30, 2007 18:15 EDT

In mid September a small group of Sakhalin Energy Investment Company employees will set off from Okha, the most northern town on Sakhalin Island, to cycle to Yuzhno, approximately 1200 kilometres to the south. Big deal, you might say, but wait a minute: they plan to do it in 10 days, on small tracks and on every condition of non-metalled road surface known to man.

The route will take the team down from Okha to Nogliki, to the Sakhalin Energy Onshore Processing Facility (OPF), and then across to the west of the island, through some pretty hairy country, back onto the main road (dirt track), and then out again to the west down almost as far as Kholmsk, and then finally home to Yuzhno, where they will be showered with Champagne and promised a life of fame and fortune. To the best of their knowledge, this has never been attempted before.

The cycling team is made up of Charlie Mitchell (Booster Station 2 project – the man with this daft idea), Willie Lindsay (Pipelines project – the man who believed in the daft idea), Dirk Nevelsteen (Economist – the most famous Belgian on Sakhalin Island), John Fraeijhoven (LNG Operations – all round good egg, road lover AND team treasurer), Julian Waldemar-Brown (Security – Marathon Des Sables veteran and army nutter), Mark De Bello (Pipelines project – Bear hunter, fisherman, man of the forest, cook, medic and long time Sakhalin inhabitant) and Julian Johnson (HR – round the world sailing veteran and regular faller). The team is ably managed by Vlad Bogomolov (Logistics – been there, done that, and general fixer).

Whilst this is a challenge of mind over matter, brains over boredom, rain, mud, wind, mosquitoes, other road users, dust, bears, poachers, snow, blisters, crotch rot, food poisoning, dehydration, disease and 10 days of Charlie’s jokes, each member of the team will be savouring the journey for their own personal gratification. However, the team also see this as a great opportunity to rasie money to help schools and other institutions for young people in remote areas of the island. Given the importance of outdoor activities to Russians, and in line with the nature of the “Tour de Sakhalin”, the team is therefore raising money to buy outdoor/sporting equipment for a number of young person’s institutions/schools which will include:

• Region State Institution Social Rehabilitation Centre for Under-aged – Alexandrovsk-Sakhalinskiy (Aboltina 19)

• Children Sport School (ДЮСШ) of winter sports in Alexandrovsk- Sakhalinsky

• Municipal Educational Institution, Secondary school – Roschino, Smirnykh district

• Municipal Children Educational Institution, Kindergarten “Skazka” – Kholmsk (Vostochny pereulok, 1)

To make this possible we need your help.

So please sponsor the “Tour de Sakhalin” team on this noble quest and we in turn promise that we will complete our task and ensure ALL the money that you give will be converted into useful equipment for these children. How much is given depends on your generosity but be assured that feedback will be given on what the money is spent on.

“Le Tour de Sakhalin” is sponsored by Sakhalin Energy, Kentech, Sakhalin NefteGas Services, Fluor, KentzDalektromontazh, Compressor Controls Corporation, Eaststroy, KCA Deutag, Cape, Rolls Royce, Starstroi, CTSD.

Click on this link to view map and photographs

By BRETT CLANTON
Copyright 2007 Houston Chronicle

Soaring gasoline prices this spring and summer may have pinched drivers, but they helped U.S. oil refiners rack up huge quarterly profits and extend a hot earnings run that began several years ago.

Refining profits for 22 of the largest energy companies jumped more than 20 percent to $11.8 billion in the April-to-June period this year compared with 2006, according to the U.S. Energy Department’s Energy Information Administration.

That’s nearly double their second-quarter profits three years ago, and a record since at least the first quarter of 2000, when the Energy Information Administration began regularly compiling the profit figures.

Recently, however, a drop in a closely watched indicator of refiner profitability has spurred questions about how much longer the industry’s winning streak will last.

The difference between what refiners pay for a barrel of oil and the selling price of gasoline and other fuels made from it is known as the gross refining margin. That spread, calculated before taxes and expenses are subtracted, has narrowed sharply in recent weeks.

After averaging a record $27.65 per barrel in the second quarter, the margin is about half that level today, said Eitan Bernstein, industry analyst with Friedman, Billings, Ramsey & Co. in Arlington, Va.

“The second quarter was great for refining margins,” he said. “Third quarter? Not so much.”

Refining margins tightened partly because higher crude prices have made gasoline more expensive to make. Also, many refineries that were down this spring for unplanned outages have returned to production. That put more gasoline on the market, reduced the need for imports and weakened the price that refiners —and ultimately gas stations —can charge for it.

The average price for gasoline was $2.75 a gallon Monday, down 3.6 cents from a year ago and the lowest since April, the Energy Department said in a weekly report.

But a separate Energy Department report showing a sharper-than-expected drop in the nation’s gasoline supplies last week sent crude and wholesale gas prices up, and may put renewed pressure on pump prices, the department said.

It’s common for margins to fall this time of year as gasoline demand cools at the end of the busy summer vacation season.

Yet the suddenness of the collapse this year has caught industry observers by surprise, prompting speculation about what else may be going on.

Some blame a pullback by financial players in the gasoline futures market, who were drawn to the industry’s strong run in recent years but were spooked when margins began to soften. Others suggest the market is anxious about proposed increases to auto fuel economy rules and biofuel mandates, both of which could cut into gasoline demand and make refineries less profitable.

“There’s plenty of room for those who are optimistic and for those who are pessimistic to have their say,” said Fadel Gheit, energy analyst with Oppenheimer & Co. in New York.

Yet he believes the short-term outlook is strong for refining profits, noting that despite the recent drop, margins remain more than 20 percent higher than their five-year average.

The earnings and stock prices of refiners have skyrocketed in the last few years as demand for gasoline and other petroleum products has grown faster than the industry’s capacity to produce them. This era of record profits, which follows many lean years for the industry, has been called the golden age of refining.

In the second quarter, the run continued as refinery outages and higher-than-usual demand pushed pump prices above $3 a gallon nationwide.

Chevron earned $1.3 billion in profit from its refining and marketing operations in the second quarter, a 30 percent improvement from $998 million last year. Exxon Mobil, Royal Dutch Shell and ConocoPhillips also saw gains in U.S. refining operations.

Independent refiners — companies that make gasoline and other products but do not pump oil and natural gas from the ground — fared well, too.

San Antonio-based Valero Corp., the nation’s largest refiner, earned a record $2.2 billion in the second quarter, up from $1.9 billion a year ago. Tesoro Corp, also of San Antonio, posted record quarterly earnings as well. So did Dallas-based Holly Corp. and Houston’s Frontier Oil Corp.

“It’s our view that the golden age of refining is not over,” said Doug Aron, Frontier’s vice president of corporate finance.

But the big profits prompted backlash from consumers and politicians who charged the industry with manipulating the market for its own gain.

“These increases have happened quarter after quarter since Hurricane Katrina, giving U.S. drivers higher-than-hurricane prices without a natural disaster,” said Judy Dugan, research director of Santa Monica, Calif.-based consumer group Oilwatch.org, in a report last month.

Dugan and other industry critics have called for investigations of this year’s refinery outages and for stronger government oversight of refinery maintenance and production.

Charlie Drevna, executive director of the National Petrochemical and Refiners Association in Washington, said that is unnecessary. The refining industry already is shelling out billions to comply with federal regulations, and is experiencing more outages this year in part because those rules are so onerous, he said.

He also dismisses the idea that refiners would deliberately shut down facilities at a time when refining profits are near record levels. That “just doesn’t make economic sense,” he said.

Refining margins have rebounded a bit in recent days, but still are unlikely to be as high in the second half of the year as the first, said Peter Beutel, analyst with Cameron Hanover.

However, an active Gulf Coast hurricane season or a sudden change in the national economy could change that, he said.

brett.clanton@chron.com

http://www.chron.com/disp/story.mpl/business/energy/5097291.html

Martyn Wingrove, Lloyds List
Published: Aug 31, 2007

KAZAKHSTAN’s government has halted offshore operations at the world’s largest oilfield development to put pressure on a consortium of Western companies, writes Martyn Wingrove.

Work on the giant Kashagan project in the northern Caspian has stopped as Kazakh officials accuse operator Agip KCO of breaking environmental and safety rules.

Analysts believe Kazakhstan has suspended the work permit for three months to force the Agip KCO partners to renegotiate fiscal sections on the production sharing agreements.

International oil groups Italy’s Eni, France’s Total, Royal Dutch Shell, US majors ExxonMobil and ConocoPhillips are involved in the project, which could potentially produce 1m barrels per day by the end of the next decade.

‘Kashagan is one of the world’s supergiant fields with 13bn barrels of reserves. It will be an important producer so delays will affect the medium-term market,’ said Manouchehr Takin, of the Centre of Global Energy Studies.

‘With high oil prices, countries want higher revenues from projects, especially where cost increases means there is less cash from oil revenues, so Kazakhstan will renegotiate to get better terms.’

The country’s President Nursultan Nazarbayev fired the energy minister this week and appointed Sauat Mynbayev to oversee discussions on this key project.

Agip KCO has built four offshore islands at Kashagan as part of the first development phase. Several contractors are working on the project, including Saipem and KCA Deutag, which is drilling the wells.

KCA Deutag has shut down its T47 drilling rig on Island A to undertake ‘rig modifications and island well extension work in preparation for further drilling’ said a spokeswoman for the British company.

THE WALL STREET JOURNAL: Turkmenistan’s Energy Rush

Vast Natural-Gas Stores
Spur Scramble for Access
By U.S., Russia, Europe

By GUY CHAZAN
August 31, 2007; Page A5

With a new leader flinging open the doors to the outside world, the Central Asian nation of Turkmenistan is emerging as a crucible of regional rivalries as Russia, China, the U.S. and Europe compete for access to its vast energy reserves.

Since the death in December of Saparmurat Niyazov, an eccentric and reclusive dictator who charted a fiercely isolationist course for Turkmenistan, the country has begun to open up, unleashing a stampede of Western and Russian oil-and-gas men.

Executives from Chevron Corp., Royal Dutch Shell PLC, Total SA, BP PLC and its Russian venture TNK-BP have flocked to the capital of Ashgabad to meet Kurbanguly Berdymukhamedov, the new president, who has reached out to the West in ways his predecessor never did.

They have been joined by a steady stream of U.S. officials keen to revive a plan to build a pipeline across the Caspian Sea that would ship Turkmen gas westward, bypassing Russia and loosening Moscow’s grip on Central Asia’s energy riches.
 
“There’s been a sea change,” says Atul Gupta, chief executive of Burren Energy PLC, a U.K. independent that has been producing oil in Turkmenistan since 1997. “We’ve got a bit of a Great Game being played out in Turkmenistan now,” he added, referring to the 19th-century struggle for regional influence between the U.K. and Russia.

The rush comes amid a global hunt for fresh energy supplies. Most of the world’s proven energy reserves are in the Middle East — mostly off limits to foreign investors. Europe is eager to diversify its supply of natural gas to rely less on Russia, which has shown its willingness to withhold supply to advance its political agenda.

So far, the race to open up Turkmenistan’s hydrocarbon reserves — the country is thought to hold one of the world’s most abundant stores of natural gas — is being won by Russia and China.

In May, President Vladimir Putin became the first world leader to visit Mr. Berdymukhamedov. In a coup for Moscow, the two parties agreed to build a new gas pipeline around the Caspian Sea and northward to Russia, and to upgrade Soviet-era infrastructure in Central Asia. That would increase deliveries of Turkmen gas to Russia to 90 billion cubic meters a year, from 50 billion cubic meters a year now, Russian officials said.

The deal was a blow to the European Union, which has long sought to free Turkmenistan from Moscow’s grasp. There were fears in Brussels that the Russian deal could undermine the viability of the EU’s grandiose Nabucco pipeline project to bring gas from Central Asia and Iran to Turkey and Eastern Europe.

Yet Russia, too, has suffered setbacks. In July, Mr. Berdymukhamedov went to Beijing and endorsed a plan to build a pipeline from Turkmenistan delivering 30 billion cubic meters of gas a year to China. He also signed a landmark deal allowing China National Petroleum Corp. to drill for gas in one of Turkmenistan’s most promising fields, Bagtyyarlyk. Beijing hopes gas from there will fill the new pipeline.

The deal was bad news for Russia’s OAO Gazprom, which relies heavily on imports of Turkmen gas to offset declines at its own big fields in western Siberia and ensure it can meet its long-term export commitments to Europe.
 
Despite Russian and Chinese advances, Europe and the U.S. haven’t given up hope of getting a slice of Turkmen gas. Encouraged by President Berdymukhamedov, who has said his country has a long-term interest in diversifying its export routes, U.S. officials have been visiting Ashgabad to talk up the Trans-Caspian gas-pipeline idea. This month, the U.S. gave Azerbaijan a $1.7 million grant for a feasibility study to build oil and gas pipelines across the Caspian.

Most observers think the Western plan stands little chance against Gazprom and the Chinese. “The Trans-Caspian pipeline needs three things: gas, markets and finance,” says Prof. Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies. “At the moment, it doesn’t have any of them.”

Some analysts wonder whether Mr. Berdymukhamedov has promised too much to too many countries. Christof van Agt, an expert on Central Asia at the International Energy Agency in Paris, says Turkmenistan would need $5 billion in investment every year for the next 25 years to boost output to 130 billion cubic meters by 2016 — the amount it needs to meet all its export commitments. It is forecast to produce 65 billion cubic meters this year.

“If it’s going to be able to supply China, Russia, Europe, India and Pakistan as it says it wants to, it needs to start moving fast to get this investment in place,” he says.

Turkmenistan’s new leader, who was Niyazov’s dentist and went on to serve for several years as his health minister, is already drawing parallels with his predecessor, who had a reputation for selling more gas than he could produce.

Still, the foreign energy companies keep coming. In July, Mr. Berdymukhamedov invited Chevron executives to discuss developing a big oil field, Serdar, in the Turkmen section of the Caspian Sea. Geologists have long known about the deposit, but Big Oil shied away from it because it was also claimed by Azerbaijan. With Niyazov’s death, observers say, there is hope the two countries will work out how to share Serdar, known as Kyapaz in Azerbaijan.

Hanging over the future of such projects is uncertainty about the precise size of the oil and gas reserves. Mr. Niyazov decreed such information a state secret.

Write to Guy Chazan at guy.chazan@wsj.com

31 August 2007

It has been one of the few disappointments among the Tempus Ten tips for 2007, but after a 25 per cent share price fall in the first three months of the year, Venture Production, the North Sea oil and gas explorer, has begun to claw its way back.

The announcement yesterday that it had raised £585 million of new debt, £350 million of it with Barclays Bank, should add to the momentum. At the start of the year, Venture was a seen as a potential takeover target, but now it is more of a predator. The new debt facility – coupled with a recent £200 million cash injection from the private equity groups 3i and ArcLight – means that Venture has about £1 billion at its disposal for acquisitions.

This could prove crucial in the coming weeks as bankers assert that the eagerly awaited round of consolidation in the North Sea is about to begin. At least 20 deals are on the table, including assets held by Shell, Amerada Hess and Newfield. Experts believe that Tullow Oil may consider offers for some of its North Sea infrastructure, given its success in Africa.

Venture bought Wham Energy, the British minnow, for £14 million last week and that was likely to be only a taster for other deals to come. Crucially, despite disappointing results from a number of appraisal wells this year, Venture also believes that it can double in size by 2009 through organic growth alone.

The shares closed up 2 per cent, or 15p at 727.5p, yesterday, still far below the 898p opening price in January but 15 per cent above the low point in March. With net asset value judged at about 814p a share, there is more upside. Buy.

http://business.timesonline.co.uk/tol/business/markets/article2358129.ece