News Briefs
Belarus
Pipeline operator - Gazprom and Beltransgaz, the Belarusian gas transporter, have signed the agreement handing a 50% stake in Beltransgaz to the Russian gas monopoly and establishing a joint venture.
Gazprom will purchase a 50% stake in Beltransgaz over four stages, taking 12.5% at each stage and completing the transaction in 2010. Gazprom is to make the first payment of $625 million (EUR465 million) for 12.5% of Beltransgaz within 20 days from the moment of signing of the agreement and its registration, Belarusian newswire Belta reported. Within 10 days from the date of payment, Beltransgaz is to transfer the shares to Gazprom.
Belarus said it would not use revenues from the sale to pay off its gas debt to Russia, nor would it say how big its debt to Gazprom now was. The revenue will be used to boost investment in the country’s economy, Vladimir Semashko, the first vice-premier of Belarus, told reporters in Minsk.
Alexander Lukashenko, president of Belarus, who is often derided as “Europe’s last dictator”, said that Belarus would soon begin extracting oil and gas in Iran.
“We will soon be able to extract, refine and market hydrocarbons, including natural gas, in any part of the world,” he said, following talks with Iran’s president, as reported by Russian newswire Ria Novosti. The two countries also intend to cooperate in oil and gas exploration and in the construction of underground gas storage facilities in Iran.
Belarus is the transit route for roughly 20% of Russian gas shipped to Europe, and Gazprom had long hoped to gain control of the transmission network. Earlier this year Gazprom lifted the gas price for Minsk from $46 per thousand cubic metres (Km3) to $100/Km3 in 2007 — rising steadily over the next five years to achieve parity with western European levels in 2011.
Europe
Storage - New storage capacity now planned across Europe would add another 30 billion cubic metres of working capacity by 2015 if all plans went ahead, according to European infrastructure owners association GSE. This would be a 40% increase on current working capacity. The group estimates more than EUR 9 billion will be invested in the new capacity, of which about 40% is for cushion gas.
GSE highlighted the highest growth rates would be in Spain, the UK, Bulgaria and Austria. Spain’s gas demand has increased rapidly and it has very limited underground storage; there is a decline in indigenous production in the UK as well as trading opportunities to make money from storage; Bulgaria has an increasing role as a Russian transit route; and in Austria there are more commercial opportunities for transiting stored gas to Germany and Italy.
GSE has gathered all publicly available data on new projects and plans to publish a projects development database on its website in the near future.
Regulation - European regulators’ association ERGEG launched it final Guidelines for Good Practice on Open Season Procedures (GGPOS) and an evaluation of the comments received following the ERGEG Public consultation on the draft guidelines.
The guidelines highlighted that: “market tests allowing the project sponsor to gauge how much demand exists in the market and what terms for the sale of capacity would best fit the market are essential. But to be truly effective, these tests must be followed by a non-discriminatory allocation of capacity.” The document set general principles to this end, saying that short-term bookings should be taken into account when allocating capacity. “Short-term capacity may raise tariffs, but the benefits from increased competition may outweigh these costs,” the guidelines read.
ERGEG published its draft GGPOS on 6 December 2006, for public consultation until 19th January 2007. ERGEG received 15 non-confidential responses and 2 confidential responses. All non-confidential responses have been published on ERGEG’s website, at www.ergeg.org.
Italy
Demand - Total gas consumption in Italy fell 4.9% year-on-year in April to 5.57 billion cubic metres (Gm3), according to the Italian Ministry of Economic Development. Demand was also down sharply from 8.02 Gm3 in March. Gas consumption has been dwindling over recent months due to above seasonal normal temperatures, as April emerged as a very warm end to a mild winter and signalled the beginning of what some have forecast to be a hot summer.
National production dropped 10.1% year-on-year to 816 million cubic metres (Mm3) in April, while exports were down 88.7% to 4 Mm3 during the same month.
Total imports amounted to 5.3 Gm3, down 24.7% year-on-year.
At Tarvisio, where gas through the TAG pipeline enters Italy, imports slumped 35.1% to 1.46 Gm3 in April. At Mazara del Vallo (Algerian Transmed – TTPC), imports fell 14.5% to 1.93 Gm3 last month. The import route re-emerged as the strongest in Italy last month.
Imports into Gela increased 30.9% to 811 Mm3, and was the only import route to raise its volumes year-on-year last month. At Gorizia, imports from Russia amounted to 22 Mm3, marking a 6.1% year-on-year fall.
Gas imports through the TENP and Transitgas pipelines to Passo Gries once again recorded the sharpest year-on-year decline, of 48.5% to 777 Mm3.
Elsewhere, Italy’s only LNG regasification terminal, Panigaglia, recorded a 19.3% drop in imports to 233 Mm3. Other smaller sources of gas imports fell 31% to 64 Mm3 in April.
E&P - Po Valley Energy, an independent Australian gas explorer, announced the discovery of eight new gas prospects for drilling in Italy from late next year.
The company, which is targeting new onshore gas prospects in a bid to expand its European division, said the eight fields were expected to contain estimated resources ranging in size from 10 to 80 billion cubic feet of gas each (approximately 283 million cubic metres to 2.27 billion cubic metres each).
All eight licences are located within the five new licence areas in the vicinity of the northern Italian towns of Milan and Bologna. Po Valley Energy has already established a near-term production portfolio in the three gas fields in these areas.
“All of these prospects …. are expected to benefit from high quality gas, close proximity to pipeline grids and high Italian gas prices, said company c.e.o. Michael Masterman.
Po Valley Energy is expected to conduct detailed geological and geophysical studies until the end of this year, while drilling of the first of these new projects should begin towards the end of 2008, read a company statement.
The company has existing Proven and Probable (2P) reserves of 105 billion cubic feet of gas. More than half of this figure is in the Proven reserve category.
Masterman said he expected to receive the formal grant of the production concession for its largest gas reserve — Sillaro — to be approved in the second half of 2007. In the same timeline, Masterman expects to receive full grant of the production concession for Castello (previously Vitalba). The company is expected to shortly lodge its production concession application for a 2008 start to its third planned commercial field, Sant’ Alberto, north of Bologna.
Russia
E&P - Norwegian companies could still play a major role in the development of the Shtokman project, according to Norwegian minister for petroleum and energy Odd Roger Enoksen. Enoksen told Norwegian daily Nordlys that high-level officials from Gazprom told the Norwegian government there is a hope that a Norwegian company could join Gazprom in the development of the giant Shtokman field in the Barents Sea.
During a one-on-one meeting with Gazprom’s c.e.o. Aleksey Miller, Enoksen also discussed the delimitation of the disputed Russian-Norwegian zone in the Barents Sea.
Norwegian prime minister Jens Stoltenberg is also due to visit Russia in early June to discuss energy issues; including the Shtokman project.
Last year, Gazprom announced it would development the Shtokman project single-handedly, but observers have questioned whether the Russians have the technical expertise to go it alone. The company made a partial u-turn in March with the announcement it would be offering a technical role — rather than an equity stake — to foreign companies.
Spain
Pipeline - The Spanish government has given Algerian oil and gas supplier Sonatrach voting rights corresponding to a further 16% in the planned Medgaz pipeline between Spain and Algeria, it said. Medgaz raised its stake in the pipeline by 16% to 36% following the departure of stakeholders BP and Total last year and is already counting on getting the green light from regulator CNE.
The authorisation was granted on the condition that Sonatrach finished the project in time and used its capacity in the pipeline to a maximum. Sonatrach also committed itself to a potential future expansion of the 8 billion cubic metre pipeline.
Algeria is Spain’s single largest gas supplier, though Spain has diversified its supply sources through a host of new LNG terminals in the past decade. Currently, Sonatrach flows gas into the country via the Mahgreb pipeline, with contracts reportedly at a considerably lower price than the LNG border price at Barcelona.
Competition - Union Fenosa Gas has taken the second spot in the Spanish gas market, the company said. Sales of 10,908 GWh (just over 1 billion cubic metres, Gm3) gave the Union Fenosa and Eni joint venture a market share of 12.4% in the first quarter of 2007, overtaking rival power supplier Iberdrola. Gas incumbent Gas Natural remains at the top spot.
Most of the gas delivered to Union Fenosa during the quarter came from Egypt, where Union Fenosa Gas holds a stake in the Damietta liquefaction plant, and from Oman. Currently, Union Fenosa sources 35,000 GWh (3 Gm3) per year from the Damietta plant.
Sales to industrial and domestic customers rose to 5,049 GWh, while sales to the power sector declined to 5,859 GWh. Overall gas demand in Spain fell year-on-year in the first quarter of 2007, according to TSO Enagas, with milder temperatures and more hydro power availability stifling demand from the power sector.
Competition - EDF Trading, a subsidiary of the French power incumbent, has been granted a license to sell gas in Spain, according to the Spanish government bulletin BOE. EDF Trading said it was still in the process of outlining its Spanish strategy and did not want to comment further. Spanish gas shipper licences expire if the company has not started selling gas within two years of securing one.
“EDF is looking to secure more gas supply for a dual offering – both power and gas – before the [French] market becomes fully liberalised,” an EDF spokeswoman said. The gas sourced in Spain would mainly be used for customers in the French market, she said, but could not give details on how the gas would be transported between the two countries. The interconnections between Spain and France are notoriously congested, with different capacity allocation procedures on either side of the border. The Euskadour pipeline running from the LNG terminal in Bilbao, northern Spain, to TIGF’s balancing zone in southern France, appears to have capacity available, however, according to data published by Spanish TSO Enagas. EDF said it had not made any decisions to strike contracts for capacity through the pipeline.
United Kingdom
E&P - A Coal Bed Methane (CBM) prospect in Port Talbot, South Wales, is being developed by Australian green energy company Eden Energy. Drilling started this month in an unexplored 430 m3 Petroleum and Development Licence 100 area between Cardiff and Swansea. Commercial viability of the project will be more certain once Eden completes its initial drilling of at least three fields by October 2007.
This is the first overseas venture of its kind by Eden Energy and if the Port Talbot acreage is successful the Perth-based E&P company hopes to exploit the regional pipeline infrastructure and gain access to heavy industry.
Competition - South Hook Gas Company has applied for a UK gas shipper licence, regulator Ofgem said. The ExxonMobil and Qatar Petroleum joint venture has responsibility for selling the gas imported into the planned South Hook LNG terminal at Milford Haven. The sole buyer of the gas is to be ExxonMobil Gas Marketing Europe.
Qatargas confirmed this month that the first cargo from the Qatargas 2 liquefaction project, which is to supply the UK terminal, was likely to leave towards the end of the first half 2008; around six months behind the original end-2007 target.
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