Saturday, March 29, 2014

REPOST: Drilling in the dark

Who will have the permit to explore the bulk of Myanmar's offshore oil and gas reserves? This article has the details.

AFTER a long wait, and several delays, Myanmar’s government will soon announce which companies have won the right to explore the bulk of its offshore oil and gas reserves. The outcome of the bidding for the 19 deep- and 11 shallow-water blocks is one of the most eagerly awaited events in the hydrocarbons industry. The competition attracted almost all the global giants, including Total, Shell, Statoil and Chevron. The winners expect to explore some of the most promising waters left in Asia, and possibly the world.
Just how promising, however, is a subject of intense speculation, and not a little guesswork. Because of the long-running economic sanctions against Myanmar, introduced in the mid-1990s and only relaxed two years ago, almost no work has been done to determine the capacity of the country’s oil and gas fields, so estimates vary widely. The proven energy reserves are modest: 50m barrels of oil and 283 billion cubic metres of natural gas, the latter worth about $75 billion at today’s prices.

It is the unofficial estimates that have lured the Shells and Chevrons. Myanmar Oil and Gas Enterprise, which is state-owned, has put the reserves at 226m barrels of oil and 457 billion cubic metres of gas. Foreign oilmen agree that this could well be true. Those figures would put the Myanmar fields on a par with Britain’s North Sea before it was exploited, or Brazil’s reserves now. They might even underestimate the bounty.
Even by the uncertain standards of the oil industry, therefore, the winners of the bidding process will be drilling in the dark. The way that the contracts are being structured reflects that. Companies awarded deepwater blocks will initially have two years to study and survey them, after which they can walk away if they find nothing worth exploiting. If they think they have found oil or gas, they then have a further three-year exploration period, followed by another three years to start production. The timescale is slightly shorter for the more-manageable shallow-water blocks. Either way, Myanmar is unlikely to see any oil or gas from the offshore fields for at least seven or eight years.
The exact terms of the production-sharing contracts between the government and the winning companies will only be thrashed out after the blocks are awarded, another source of uncertainty. The impecunious and previously reclusive government, anxious to make the most of a possible windfall, is likely to drive a hard bargain. It will probably try to secure 80-85% of total revenues for itself, which is high by international standards. Since only about one-third of Myanmar’s citizens have access to electricity from the mains, the government is also demanding that the country’s domestic needs be met first. Its top priority is to provide fuel for new gas-fired power stations.
All this is not unreasonable. However, there are grounds for worry about the integrity of people involved in the bidding process who are in the government and close to it. The bidding—and its outcome—is being viewed as a test of the quasi-military regime’s commitment to political and economic reform. Is it really turning its back on the crony capitalism of the past, from which the generals profited so handsomely? Outside experts oversaw last year’s auction of mobile-telecoms licences, which was hailed as a model of openness and fairness. The bidding process for the oil and gas licenses, by contrast, is not facing such scrutiny. The risk is that decision-making will be as murky as the depths where Myanmar’s reserves lie.

More news about the oil and gas industry can be accessed on this Dr. Ali Ghalambor blog site.

Saturday, March 22, 2014

REPOST: US surprises market with sale from SPR

Oil prices hit their lowest levels after the news of the test sale of Strategic Petroleum Reserve (SPR) broke out. Is this why the government's holding off the test sale? Read about it from this article.


The US will hold the first test sale of crude from its emergency oil stockpile - Strategic Petroleum Reserve (SPR) – since 1990, offering a modest 5 million barrels in what some observers saw as a subtle message to Russia from the Obama administration.

The Energy Department said the test sale had been planned for months, timed to meet demand from refiners coming out of annual maintenance cycles. But oil traders noted that Russia’s effort to take over the Crimea region from Ukraine has prompted calls for use of booming US energy resources to relieve dependence on Russian natural gas by Europe and Ukraine.
Oil prices dipped to their lowest levels in a month after news of the test sale.

Officials said the release would ensure that oil stored in vast salt caverns could still reach local refiners affected by recent changes in pipeline infrastructure.

“Due to the recent dramatic increase in domestic crude oil production, significant changes in the system have occurred,” department spokesman Bill Gibbons said. The test sale was needed to “appropriately assess the system’s capabilities in the event of a disruption,” he added.

Surging US shale oil production has upended the logistics of US crude markets. Major pipelines that traditionally moved oil from the Gulf to the Midwest have reversed course, moving a glut of shale oil from places like North Dakota to points south.

Analysts say President Barack Obama has been more willing than his predecessors to tap the strategic reserve, noting that he did so in 2011 as part of an international response to civil war in Libya. While that 2011 sale was an emergency release, the Energy Department has said the latest sale is a test of the reserve’s operations. Many questioned whether the US SPR was large enough to send a meaningful political message to Russia, especially since US law still bans most exports of US crude oil. The SPR holds enough oil to cover US crude oil imports for about 80 days.

“It could be a message from Obama that says, ‘Russia, we can impact the price of oil if we want to.’ But I think that’s giving the administration too much credit at this stage,” said Dominick Chirichella, senior partner at Energy Management Institute in New York. Republican lawmakers concerned about Crimea have stepped up calls for the administration to approve natural gas exports more quickly to pressure Moscow. But a dearth of US terminals to export liquefied natural gas (LNG) means significant exports are years away, limiting the immediate use of gas as a geopolitical tool.

Dr. Ali Ghalambor has more than 30 years of experience in the oil and gas industry. For more about him, and to read more news about the industry, visit this blog site.

Wednesday, March 12, 2014

REPOST: Ukraine crisis is about Great Power oil, gas pipeline rivalry

Is it about oil and gas? This article from discusses the link between the crisis in Ukraine and Russia's and US' intention on controlling energy pipelines in Eurasia.

Russia's armed intervention in the Crimea undoubtedly illustrates President Putin's ruthless determination to get his way in Ukraine. But less attention has been paid to the role of the United States in interfering in Ukrainian politics and civil society. Both powers are motivated by the desire to ensure that a geostrategically pivotal country with respect to control of critical energy pipeline routes remains in their own sphere of influence.
Much has been made of the reported leak of the recording of an alleged private telephone conversation between US assistant secretary of state Victoria Nuland and US ambassador to Kiev Geoffrey Pyatt. While the focus has been on Nuland's rude language, which has already elicited US apologies, the more important context of this language concerns the US role in liaising with Ukrainian opposition parties with a view, it seems, to manipulate the orientation of the Ukrainian government in accordance with US interests.
Rather than leaving the future of Ukrainian politics "up to the Ukrainian people" as claimed in official announcements, the conversation suggests active US government interference to favour certain opposition leaders:
Nuland: Good. I don't think [opposition leader] Klitsch should go into the government. I don't think it's necessary, I don't think it's a good idea.
Pyatt: Yeah. I guess... in terms of him not going into the government, just let him stay out and do his political homework and stuff. I'm just thinking in terms of sort of the process moving ahead we want to keep the moderate democrats together. The problem is going to be Tyahnybok [Oleh Tyahnybok, the other opposition leader] and his guys and I'm sure that's part of what [President Viktor] Yanukovych is calculating on all this.
Nuland: [Breaks in] I think Yats is the guy who's got the economic experience, the governing experience. He's the... what he needs is Klitsch and Tyahnybok on the outside. He needs to be talking to them four times a week, you know. I just think Klitsch going in... he's going to be at that level working for Yatseniuk, it's just not going to work.
Nuland: OK. He's [Jeff Feltman, United Nations Under-Secretary-General for Political Affairs] now gotten both [UN official Robert] Serry and [UN Secretary General] Ban Ki-moon to agree that Serry could come in Monday or Tuesday. So that would be great, I think, to help glue this thing and to have the UN help glue it and, you know, Fuck the EU.
Pyatt: No, exactly. And I think we've got to do something to make it stick together because you can be pretty sure that if it does start to gain altitude, that the Russians will be working behind the scenes to try to torpedo it.
As BBC diplomatic correspondent Jonathan Marcus rightly observes, the alleged conversation:
"... suggests that the US has very clear ideas about what the outcome should be and is striving to achieve these goals... Washington clearly has its own game-plan.... [with] various officials attempting to marshal the Ukrainian opposition [and] efforts to get the UN to play an active role in bolstering a deal."
But US efforts to turn the political tide in Ukraine away from Russian influence began much earlier. In 2004, the Bush administration had given$65 million to provide 'democracy training' to opposition leaders and political activists aligned with them, including paying to bring opposition leader Viktor Yushchenko to meet US leaders and help underwrite exit polls indicating he won disputed elections.
This programme has accelerated under Obama. In a speech at the National Press Club in Washington DC last December as Ukraine's Maidan Square clashes escalated, Nuland confirmed that the US had invested in total "over $5 billion" to "ensure a secure and prosperous and democratic Ukraine" - she specifically congratulated the "Euromaidan" movement.
So it would be naive to assume that this magnitude of US support to organisations politically aligned with the Ukrainian opposition played no role in fostering the pro-Euro-Atlantic movement that has ultimately culminated in Russian-backed President Yanukovych's departure.
Indeed, at her 2013 speech, Nuland added:
"Today, there are senior officials in the Ukrainian government, in the business community, as well as in the opposition, civil society, and religious community, who believe in this democratic and European future for their country. And they've been working hard to move their country and their president in the right direction."
What direction might that be? A glimpse of an answer was provided over a decade ago by Professor R. Craig Nation, Director of Russian and Eurasian Studies at the US Army War College's Strategic Studies Institute, in a NATO publication:
"Ukraine is increasingly perceived to be critically situated in the emerging battle to dominate energy transport corridors linking the oil and natural gas reserves of the Caspian basin to European markets... Considerable competition has already emerged over the construction of pipelines. Whether Ukraine will provide alternative routes helping to diversify access, as the West would prefer, or 'find itself forced to play the role of a Russian subsidiary,' remains to be seen."
A more recent US State Department-sponsored report notes that "Ukraine's strategic location between the main energy producers (Russia and the Caspian Sea area) and consumers in the Eurasian region, its large transit network, and its available underground gas storage capacities", make the country "a potentially crucial player in European energy transit" - a position that will "grow as Western European demands for Russian and Caspian gas and oil continue to increase."
Ukraine's overwhelming dependence on Russian energy imports, however, has had "negative implications for US strategy in the region," in particular the strategy of:

"... supporting multiple pipeline routes on the East–West axis as a way of helping promote a more pluralistic system in the region as an alternative to continued Russian hegemony."
But Russia's Gazprom, controlling almost a fifth of the world's gas reserves, supplies more than half of Ukraine's, and about 30% of Europe's gas annually. Just one month before Nuland's speech at the National Press Club, Ukraine signed a $10 billion shale gas deal with US energy giant Chevron "that the ex-Soviet nation hopes could end its energy dependence on Russia by 2020." The agreement would allow "Chevron to explore the Olesky deposit in western Ukraine that Kiev estimates can hold 2.98 trillion cubic meters of gas." Similar deals had been struck already with Shell and ExxonMobil.
The move coincided with Ukraine's efforts to "cement closer relations with the European Union at Russia's expense", through a prospective trade deal that would be a step closer to Ukraine's ambitions to achieve EU integration. But Yanukovych's decision to abandon the EU agreement in favour of Putin's sudden offer of a 30% cheaper gas bill and a $15 billion aid package provoked the protests.
To be sure, the violent rioting was triggered by frustration with Yanukovych's rejection of the EU deal, along with rocketing energy, food and other consumer bills, linked to Ukraine's domestic gas woes and abject dependence on Russia. Police brutality to suppress what began as peaceful demonstrations was the last straw.
But while Russia's imperial aggression is clearly a central factor, the US effort to rollback Russia's sphere of influence in Ukraine by other means in pursuit of its own geopolitical and strategic interests raises awkward questions. As the pipeline map demonstrates, US oil and gas majors like Chevron and Exxon are increasingly encroaching on Gazprom's regional monopoly, undermining Russia's energy hegemony over Europe.
Ukraine is caught hapless in the midst of this accelerating struggle to dominate Eurasia's energy corridors in the last decades of the age offossil fuels.
For those who are pondering whether we face the prospect of a New Cold War, a better question might be - did the Cold War ever really end?


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Wednesday, March 5, 2014

Scientists examine aerogel technology’s potential for oil and chemical clean-up

Aerogel technology holds great potential to clean up comprehensively oil and chemical spills. If further developed, this advanced technology may even offer a cheaper and a more environment-friendly method to absorb oil and heavy metals from water and other surfaces.

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These are the conclusions of a group of researchers at the University of Wisconsin-Madison, who recently examined alternative modifiable materials that have the ability to absorb oil and chemicals in water.

Known for their extreme low densities, aerogels are open-celled, mesoporous, solid foam composed of a network of interconnected nanostructures. They are commonly used in a variety of applications such as aerospace construction, paint thickeners, and material insulation.

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Through their study, the researchers have created a relatively environment-friendly form of aerogel that possesses impressive properties, which include the ability to absorb oil and chemicals without absorbing water. In addition, the new aerogel can absorb up to 100 times its own weight in organic solvents and is reusable in few cycles.

In their report, the researchers stated that the new aerogel technology has one unique property that has superior absorbing ability for organic solvents and metal ions.

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Due to its positive societal impact, the researchers—Shaoqin Sarah Gong, researcher at the Wisconsin Institute for Discovery (WID); Qifeng Zheng, associate professor of biomedical engineering; and Zhiyong Cai, a project leader at the USDA Forest Products Laboratory in Madison—revealed that they are now eager to share their findings to the scientific community and are working on its possible mass-production.

Dr. Ali Ghalambor is renowned in the energy industry for his remarkable contributions in the oil and gas sector. Learn more about his insights by visiting this blog.