CCGT - French multi utility Suez has joined forces with national gas incumbent GDF, through the former’s Belgian subsidiary Electrabel, to develop two 420 MW CCGT projects in the industrial zone of Fos-sur-Mer, southern France. A memorandum of understanding (MOU) detailing the industrial partnership has been signed by both parties, Suez and GDF announced this month.
Each company had initial plans to build a CCGT plant in this area but decided to seek synergies between the two developments “particularly in the areas of project engineering, operation and maintenance,” read a joint statement. Suez and GDF added that this MOU “provides for reciprocal shareholdings in the companies owning respective assets, as well as reciprocal contracts for capacity sharing”.
A spokesman from Suez said the two companies did not decide to build a single larger CCGT instead of two 420 MW plants, as respective projects had been given planning permission prior to the MOU. “Both CCGTs received the necessary authorisations before we agreed to work together,” he said. Suez declined to comment on when talks began between the two groups, noting: “let’s just say discussions did not begin recently”.
GDF has repeatedly communicated on its plans to build a CCGT at Montoir-de Bretagne in northwest France and one at Fos-sur-Mer, although specific details were kept under wraps. The Suez and GDF plants will be situated in the same zone near Fos-sur-Mer where GDF already operates an LNG terminal.
The GDF plant at Fos-sur-Mer is scheduled to start in 2008, while the Suez CCGT is scheduled to begin generating in 2009.
Pipelines - Repair work on the Georgian north Caucasus-Transcaucasus gas transit line has now been completed, reports Gazprom, and gas supply is being restored to Georgia, as well as gas transit to neighbouring Armenia. The pipeline was damaged on 22nd January by an explosion damaging a 133 km section of the 1220 mm pipeline, giving rise to severe gas shortages as the pipeline is the principle route for Russian gas going into Georgia.
Relations have been particularly tense between Georgia and Russia since Gazprom doubled the gas price for Georgia at the beginning of the year but there has been an undercurrent of political tension between the two since the 2003 “Rose Revolution” that brought the Georgian president Mikhail Saakashvili to power, together with a desire for greater independence from Russia. The Georgian government initially blamed the Russians for the explosion but no evidence has so far come to light that Russia had anything to do with it. The Russians have blamed seperatist terrorist movements in the area (of which there are several) but the perpetrators are still unknown.
The repair work on the line was carried out by Gazprom affiliate Kavkaztransgaz in difficult terrain and in temperatures dropping as low as –25 deg C. The Russian section of the North Caucasus-Transcaucasus pipeline is 137 km long with a working capacity of 16 million m3/day.
Exchanges - German energy exchange EEX will start trading financial coal futures as well as clearing for coal contracts from the OTC market this April, the company said. “This expansion of the product range opens up completely new risk management possibilities in Europe for the trading participants on EEX,” chairman of the managing board of the exchange, Hans-Bernd Menzel, said in a statement.
The exchange believed its future publication of coal futures prices would also contribute to further transparency on the coal market, adding that the new products were targeted both at coal producers and traders as well as energy suppliers, large-scale industrial consumers and banks.
As in the case of the electricity and the carbon dioxide emissions certificate markets, EEX said it would employ an integrated method comprising trading, clearing and OTC clearing for the coal market.
Wolfgang Ritschel, managing director of the Association of German coal importers (Verein der Kohlenimporteure e.V.), said the decision and in particular the clearing mechanism would resolve a growing problem in the industry, stating: “The coal traders’ bilateral credit lines are exhausted more and more in the face of the rapid growth of the trading volume. For this reason EEX will ensure that there is room to manoeuvre and flexibility in trading as well as security in the settlement of transactions”.
E&P - French gas incumbent GDF is bringing four more gas fields on stream in the Dutch North Sea through its subsidiary GDF Production Nederland BV (ProNed), the company announced in January. Total estimated reserves amount to 18 billion cubic metres (Gm3), including the North Sea field ProNed brought on stream last December (block K2, north-west of Den Helder). The new fields are located North of Terschelling in blocks G14, G16a and G17a.
“This operation enables GDF to double its production capacity in the Netherlands on a medium term…contributing to its [medium term] target of producing gas in quantities equivalent to 15% of its direct sales,” GDF said.
GDF said their share of the total capacity amounted to 8 Gm3 and that its distribution division had already purchased 12.8 Gm3 out of the total reserves in the form of long term contracts that will be “brought to the market”.
The gas fields in the K2, G16a and G17a blocks were jointly developed by ProNed and Energie Beheer Nederland BV, while fields situated in G14 block were developed through a partnership involving ProNed, DSM Energie BV, the Nederlandse Aardolie Maatschappij BV and Energie Beheer Nederland BV. GDF discovered and acquired the fields in 2004. “[The project] consisted of the relocation of two existing platforms and one sub-sea completion, the construction of two new platforms and the laying of 46 km of offshore pipeline.” Total project costs amounted to EUR 300 million, of which EUR 164 million is GDF investment.
In 2004, GDF posted a total production capacity of 5.2 Gm3 of natural gas.
Output - Kazakhstan’s gas output increased 25% year-on-year in 2005, figures released by the State Statistics Agency showed. Gas production amounted to 14.49 billion cubic metres last year (Gm3), an increase of 25% on total production in 2004. Natural gas production in December hit 1.2 Gm3, down roughly 7% from the same period last year.
A government source told Interfax that KazMunaiGaz, the state-owned oil and gas company, produced 1.54 Gm3 of gas last year, up 9.4% year-on-year. This included output from subsidiaries Ozenmunaigaz with 1.07 Gm3, down 4.8%; Embamunaigaz with 163.3 million cubic metres (Mm3), up 83.2% and Amangeldy Gas with 300.1 Mm3, up 59.9%.
Operations with KazMunaiGaz participation produced 7.73 Gm3 of gas last year, up 52.2%, including TengizChevroil with 7.15 Gm3, up 50% year-on-year.
Other companies produced 16.74 Gm3 of gas in 2005, up 19%, with Karachaganak Petroleum Operating producing 11.51 Gm3, up 26.1%, and CNPC-Aktobemunaigaz producing 2.63 Gm3, an increase of 17.7%.
The vast Karachaganak field in north west Kazakhstan, which holds estimated gas reserves of 453 Gm3, resumed production last week after experiencing “unexpected faults”. The field is a joint licence held by BG Group (32.5%), Eni (32.5%), ChevronTexaco (20%) and LUKoil (15%).
Imports - Moldova has finally agreed to pay US $110 (EUR 91) per thousand cubic metres of Russian natural gas in the first quarter of 2006, ending a dispute that has rumbled on since the beginning of January.
Russia has agreed to restore gas flows to Moldova — which have been suspended since 1st January — and price negotiations will resume on 1st April.
The deal also sees Gazprom increase its stake in the Moldovan pipeline company, Moldovagaz, from 50% (plus one share) to 63.4%, transferring the 13.4% of shares owned by the breakaway region of Trans-Dniester to the Russian gas monopoly. Individuals hold the remaining 1.2%. Initially, Gazprom had sought to double the rate Moldova paid for gas from the previous US $80 to US $160, but the real prize is the increased stake in the pipe network; Moldova is the main transit route for Russian gas entering Turkey and the Balkans, in particular Bulgaria, Macedonia and Greece.
According to Gazprom, Moldovan consumers received 2.45 billion cubic metres of gas in 2005. The Moldovan gas debt for previous years without interest, according to Ria Novosti, totals around US $780 million, including US $560 million for Trans-Dniester.
“We believe it is correct to buy gas from producers alone,” Moldovan president Vladimir Voronin said, in an apparent reference to RosUkrEnergo, the intermediary which now sells gas to Ukraine.
Restructuring - Takeover target Endesa is set to sell its 49% holding in Portuguese NFQ to EDP for EUR 57 million, stock market records showed this month. This would mean a complete exit from the Portuguese energy distribution for the Spanish utility. The deal is still awaiting approval, but could go through before the end of the first quarter of 2006.
Analysts suggest that the sale marks a shift in Endesa’s struggle against Gas Natural’s unsolicited takeover bid. As appeals to derail the takeover in courts have failed, Endesa is looking to thwart the deal on the stock market instead. Although the government can approve the takeover, ultimately only the shareholders can vote it through.
Having presented record annual results in mid-January, the company continues to divest non-core activities to boost share value.
The deal also shows that an international presence is now taking a back-seat to stock market performance in Endesa’s strategy. The NFQ sale, which is expected to generate revenues of EUR 53 million for Endesa shareholders, is the first of Endesa’s businesses outside of Spain to be divested. This indicates that Endesa is placing less of its hope in the European Court of Justice. It had previously called for the case to be reviewed by the EU, which is thought to take a tougher stance than the Spanish government, but the European appeals process is lengthy and Madrid might well have given the takeover its go-ahead before Luxembourg had started to assess it.
Endesa now calls for Gas Natural to double its takeover offer. Endesa chairman Manuel Pizarro said on Monday that Endesa shares ought to be trading at EUR 45 by applying a ratio that they are worth 15 times earnings. Caja Madrid, which holds a 9% stake in Endesa, agrees, pointing out that the company’s shares are currently EUR 2 above what Gas Natural is offering.
Reserves - Shtokman is located in the central part of the Russian sector of the Barents Sea shelf about 650 km from Murmansk. Last available reserves figures were 3.2 trillion Gm3 gas and 30.97 million t gas condensate, however Gazprom this month announced there had been an increase in the reserves figures on completion of a 3D seismic search – Gazprom did not give the actual new figures, saying they had not yet been made available. Gazprom’s plans for Shtokman include taking LNG from the field for export to the US and Europe.
Output - Novatek, Russia’s largest independent gas producer, said that gross output of gas increased 21% year-on-year over 2005. Production hit 25.2 billion cubic metres (Gm3) of gas, an increase of 4.3 Gm3, while gross liquids output fell 8%, primarily due to the disposal of assets.
Net production, which includes subsidiary companies and Novatek’s share of production from associated companies, leapt 63%, compared with the same period in 2004.
The company, whose activities are concentrated in the Yamal-Nenets region of Russia, attributed the increase in net production to completion of the first phase design capacity at both the Yurkharovskoye and Khancheyskoye fields, combined with the bolstering effect of asset consolidation at the end if 2004.
Since December 2005 Tarkosaleneftegaz and Khancheineftegaz are both 100%-owned by Novatek and produce 12 Gm3 and 2 Gm3 respectively.
In the fourth quarter of 2005, gross production for Novatek hit 6.3 Gm3 of natural gas, an increase of 360 million cubic metres, 6%. On a net basis, natural gas production rose by 38% year-on-year.
Competition - Gazprom’s deputy c.e.o. Aleksander Medvedev this month said that his company wanted to take 20% of the UK gas market by 2015. However British press reports that Gazprom was considering the takeover of Centrica (worth £9.5 billion) were somewhat exaggerated. Gazprom’s Denis Ignatiev told EGM that this was speculation, adding “The British press has been trying very hard for some time to get us to buy Centrica”.
Regarding press reports saying that Gazprom is in the final stages of negotiation with Norwegian Statoil and Norsk Hydro regarding a deal on Shtokman, Ignatiev said these were “premature”. The reports said that Statoil and Hydro were offering Gazprom up to 10% in the Ormen Lange and Snohvit fields respectively in return for a participation in the Shtokman gas and LNG project. Kai Nielsen of Statoil’s international E+P division said “the report was news to me”. The Russian company said that it was still talking to all the companies on its short-list – which included French Total and US companies Chevron and ConocoPhillips as well as the Norwegian companies - and expected to choose its partners for Shtokman at the end of the first quarter of this year.
Policy - The UK government launched the public consultation phase of its Energy Review this month , calling for views on what steps were necessary to meet the country’s energy needs, as well as its environmental commitments, against a backdrop of rising prices, increased gas imports and looming generation gap.
The energy review will be the UK’s second in three years, but the DTI noted that a number of key developments had taken place since the last report in 2003. Notably, fossil fuel prices have risen sharply; the UK has become a net gas importer sooner than expected; resulting in concern regarding security of supply issues from major energy exporter countries. This concern has contributed to higher price volatility.
Although the DTI has been swift to note there is no single solution to meeting all of the country’s energy policy imperatives, the energy review consultation process has been billed by some as something of a smokescreen. Some quarters believe the government has already decided in favour of more nuclear build. Keen to refute this theory, the government said all responses not subject to a confidentiality provision will be published on the DTI website.
The formal consultation period will run until 14th April 2006, with a programme of concurrent ‘stakeholder events’ to be announced later this month. The review team will report to the prime minister and the trade and industry in the early summer.
E&P - Canada’s Talisman Energy is to auction US $200 million (EUR 163 million) of its North Sea assets only months after buying out Paladin Resources. The move is thought to be a partial reaction to the UK Chancellor’s doubling of offshore supplementary corporation tax, although Talisman announced in December that it would sell some of its non-core assets early in 2006.
A spokeswoman for Talisman confirmed that assets would be auctioned and said the company would be issuing a press statement this month. According to the Scotland on Sunday newspaper, the company is believed to have hired the asset seller Harrison Lovegrove to find buyers for a host of fields in which it has only minority stakes. The paper reported that the package includes its Brae and Alba fields in the UK North Sea, along with stakes in Ivanhoe and Rob Roy. Talisman bought Paladin, a UK-based independent oil and gas producer, in October last year for £1.2 billion
CCGT - EDF Energy has formally applied for government consent for the construction of two new CCGTs on the sites of its existing West Burton and Sutton Bridge power plants. The application for Section 36 consent to the Department of Trade and Industry (DTI) follows the completion of its Environmental Impact Assessments (EIAs) on the sites. If consent is granted EDF Energy intends to commence construction of the planned 1,260 MW Sutton Bridge B CCGT in mid-2007, with a target date for full operation of January 2010. Sutton Bridge is located near Kings Lynn in Lincolnshire.
The 1,270 MW West Burton B plant will begin construction in late-2007, with a target operational date of October 2010. West Burton is sited near Retford in Nottinghamshire.
Investment in the two plants will be around £450 million each. Both plants will have a fuel burning efficiency of approximately 55%.
Supply - Russia and Uzbekistan signed agreements this month for future cooperation over the $1.5 billion (EUR 1.2 billion) development of natural gas and oil deposits in the Central Asian republic.
Gazprom and Uzbek officials signed a document setting out the basic principles of a bilateral production sharing agreement (PSA) that both sides are expected to be strike in the second half of 2006.
Speaking at a news conference after an economic summit in St. Petersburg, Uzbek president Islam Karimov said Gazprom, the Russian gas monopoly, had been authorised to conduct surveys over an area of 34,000 m2 on the Ustyurt plateau.
Alexei Miller, Gazprom’s c.e.o., said the gas to be produced in Uzbekistan would be exported only by Gazprom. Miller added that Russia and Uzbekistan were considering building new gas pipelines on Uzbek territory.
One of the agreements concerns the development of six recently-discovered gas and oil fields, including the Urga, Kuanysh and the Akchalakskoe fields.
Uzbekneftegaz, the Uzbek state oil and gas company, produces around 54 Gm3 of gas annually, although exports are limited by the Uzbek and Kazakh pipeline capacities.
Uzbekistan has proved natural gas reserves of a little less than 2 trillion cubic metres.
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