Lagniappe
Global
Insight : Gazprom,
Eni eye
upstream project co-operation in Libya
Middle East Energy Briefing
Gazprom,
Eni Eye Upstream Project Co-Operation in Libya
In talks yesterday between the chief executive officers (CEOs)
of Gazprom, Alexei Miller and Eni, Paolo Scaroni, the latter
company has been reported to have offered some of its Libyan
upstream projects to Gazprom for its participation, in exchange
for Gazprom offering Eni participation in Russian projects. The
two companies entered a strategic partnership agreement in November
2006, in which Eni was allowed to enter the Russian upstream
market in exchange for Gazprom being allowed to sell gas directly
in Italy. The companies also pledged to swap assets under the
partnership. Yesterday's talks are widely assumed to have been
centred on Libyan projects, according to Dow Jones, as Eni holds
a very strong position in Libya's upstream sector and Gazprom
has been eyeing North African growth to continue to build on
its strong role as Europe's chief gas supplier.
Significance: Gazprom secured exploration tracts in Libya's latest
gas-focused licensing round and would, through its partnership
agreement with Eni and by taking eventual stakes in some of the
Italian company's projects, potentially gain access to Eni's
export pipeline between Libya and Italy, the Greenstream pipeline.
The pipeline is due to be doubled in capacity in the coming years
and would provide Gazprom with exactly what its growth strategy
calls for—greater access to higher-paying users—while
gaining increased and broadened upstream expertise.
Dalian
Refinery Adds Diesel Unit, Eyeing Larger Chinese Imports of
Saudi Crude
PetroChina's refinery in Dalian, one of China's largest with
a 400,000-b/d crude treatment capacity, has completed the addition
of a 120,000-b/d hydrotreating facility, raising its production
of diesel and kerosene, Reuters reports. However, the start-up
of the Shell-supplied unit will have to wait on the completion
of a sulphur recovery unit and a hydrogen plant, which is scheduled
to take some months more.
The plant is also now hoping to have
its advanced hydrocracker unit installed by September, after
repeated delays due to the overheated global contracting market.
The hydrocracker has been supplied by U.S. company UOP. The upgrade
programme will allow the Dalian refinery to process large amounts
of Saudi Arabian crude, as part of a pact reached earlier this
year, in which China agreed to boost its Saudi crude imports
by almost 40% in 2008.
Significance: As Chinese oil imports are continuing to grow,
the decision to gear Chinese refineries increasingly towards
being able to process Saudi crudes is significant in representing
a potentially long-term shift in relations. Asia has for a long
time been a principal taker of Persian Gulf crudes, but with
Saudi Arabia taking a large future market share of the Chinese
supplies in a bilateral government-to-government deal, it will
have assured itself of a strong role in China's energy market
and an early role in supplying its future demand growth. China
on its side has used its size to tie a potentially strong and
beneficial knot with the world's largest supplier, which also
will bring the largest future incremental output capacity onstream
over the coming years. In doing so, it has necessitated a revamping
of several Chinese refineries, to be able to handle the heavier
and higher-sulphur crudes from Saudi Arabia. The project delays—caused
by an overheated contracting market—do, however, make valid
the question of whether China will be able to process all the
Saudi crude it intends to take at the beneficial pricing during
this year.
Deir
ez-Zour Refinery Construction Deal Signed by China and Syria
Syria and China yesterday signed an agreement to construct a
refinery in Deir ez-Zour, with a 100,000-b/d capacity, national
Syrian news agency SANA reported.
The deal to build the refinery,
with capacity to process fuels to European and Syrian environmental
standards was signed by Syrian Minister of Oil and Mineral Resources,
Sufian Allaw and a visiting Chinese head of a state-owned oil
company.
SANA did not name the company, nor the executive, although
it said the overall Chinese delegation was led by Li Chang-Shun,
Member of the Pemranent Committee of the Chinese Communist Party's
Political Bureau. China will carry 85% of the project investment
costs and possibly arrange a loan to Syria for the remaining
15% share.
Significance: The project is probably an upgraded version of
the previously discussed 70,000 b/d refinery, led by China's
CNPC. Syria's economical woes are illustrated by the difficulty
for it to get badly needed refinery projects underway, while
it has to spend around US$7 billion on fuel imports. Several
refinery projects have been floated for Deir ez-Zour, involving
a multilateral deal with Iran, Venezuela, and Malaysia, as well
as investment from Russian and Chinese companies before. Political
reasons—together with Syria's inability to fund shares
as low as 15% of this and other projects, as well as its diminishing
feedstock availability and the lack of sustainable Iraqi exports
in the foreseeable future—have, however, led to no projects
getting under way.
Plans
for Three New Large Kuwaiti Power Plants Announced
The Kuwaiti Ministry of Electricity and Water has announced
plans for three new large power plants, with a capacity to supply
6,700MW to the national grid, Bloomberg reports. The three plants
are the main part of the emirate's plan to catch up with several
years of peak demand electricity deficits and supply the expected
demand growth until 2025. Two of the power plants will be integrated
with desalination facilities, having a combined capacity of 225
million gallons of water, Khaled al-Wasmi, Assistant Undersecretary
for Coordination and Follow-Up at the Ministry of Electricity
and Water, told Bloomberg. All three of the plants will be able
to use both oil and gas as feedstock. The first power plant,
located in Subbiya, will have a 2,000-MW capacity and is expected
to be tendered in a few weeks. The second plant, the Zour North
station, will be tendered in the third quarter and have a capacity
of 3,000MW and 200 million gallons per day. It will be built
in two phases. The third plant is not expected to be tendered
until late 2009 and will also be located in Subbiya, with a capacity
of 1,700 MW and 25 million gallons of water per day. Kuwait is
currently implementing a US$1-billion programme to install five
new gas turbines at the Zour South plant, raising the emirate's
generating capacity to 10,600MW by August.
Significance: Kuwait's oil-boom-fuelled electricity consumption
has outpaced new capacity construction for years, leading to
widespread blackouts and brownouts during the last summer's peak
demand time. The lack of a decisive plan to construct new capacity
can partly be blamed on the lack of a strategic feedstock decision,
as Kuwait has not been able to raise its gas production significantly
before now, and even has had to start sourcing LNG from Qatar
to meet its demands. The government is now strongly encouraging
conservation, but is not following up with cuts in the highly
subsidised prices, or enforcing electricity bill payments.
Samuel
Ciszuk is
a Global Insight's
Middle East energy analyst.
Petroleumworld does not necessarily
share these views
Editor's Note: For more information on Global Insigth, contact:
Catarina
Feria-Walsh Global Insight, catarina.walsh@globalinsight.com.
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