REPOST: Drilling in the dark

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

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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.

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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.

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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.

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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.

REPOST: Despite Shale, Middle East Remains Key to Oil Demand

Oil production in Middle East is still vital in meeting the demands in Asia. Know more about this news from this Rigzone.com article.

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The U.S. shale revolution has helped reshape the global energy market, but Middle Eastern oil will remain vital for meeting future Asian energy demand, Fatih Birol, chief economist for the International Energy Agency (IEA), told attendees Feb. 21 at an event at Rice University in Houston.

The significant growth that has occurred in recent years in U.S. unconventional oil production surpassed initial estimates by the IEA, which initially forecast that the United States would overtake Saudi Arabia as the world’s largest oil producer in 2017. This shift is now expected to occur next year, according IEA’s 2013 World Energy Outlook.

Despite this growth, Middle East oil will still be needed to meet global oil demand in Asia, said Birol, adding that the IEA’s findings have been misinterpreted.

“This message could have unintended consequences for global oil markets if it continues,” Birol commented.

These consequences include waning investment in Middle East oil development, which will be needed to meet future demand.

The surge in unconventional oil could enable the United States to wean itself off Middle East oil imports or imports altogether while meeting U.S. oil demand.

However, “there is a whole world outside the United States in terms of consumption needs,” Birol commented. “We need to understand that the world beyond the United States will need reasonably priced oil. If we keep sending the wrong signal, we may not have as much oil as we’ll need.”

U.S. shale oil production is expected to keep rising until the 2020s, but will then plateau. A slowdown in production is expected to occur in the following decade. In order to meet global oil demand growth, oil from the Middle East as well as new sources such as Brazil, Canada and Russia, will be needed to satisfy Asia oil demand, Birol said.

Image Source: rigzone.com

SHALE, NUCLEAR POLICIES REWRITING ENERGY PLAY

The shale revolution, changes in nuclear energy policies in a number of countries following Japan’s Fukushima disaster, and specific pricing policies that give advantages or disadvantages to renewables and fossil fuels, are reshaping long-held tenets of the energy sector.

The roles and identities of actors in the global energy sector theater are also changing, with countries such as the United States and Brazil emerging as potential energy exporters. At the same time, some countries that have historically acted as energy exporters are seeing domestic energy demand rising at home, to the point that they are impacting the global energy market as well consumers as well as exporters. Over the past four to five years, consumption of not only oil but other fuels in the Middle East ranked only second behind China, Birol noted.

Trade patterns also are changing for countries such as Canada. In the past, Canadian oil and gas was imported to the United States, but the U.S. shale gas and oil boom has cut into Canadian imports. The Canadian government, in its search for a new market for its resources, has made a huge turn towards Asian countries. Over the past 24 months, Canadian government officials have made a number of visits to Asia.

Russia is also eying Asia as it seeks a new destination for its oil and gas as its previously loyal client Europe looks for new energy resources.

“Countries that can read the changes in trade patterns will be able to position themselves at an advantage,” said Birol.

China, India and the Middle East will also create much of the new demand for oil compared with Organisation of Economic and Cooperative Development (OECD) countries. Oil demand growth will primarily occur in transportation, including personal cars and freight, and the petrochemical industries of these nations, Birol said. IEA forecasts Asian trucks will comprise one-third of global oil demand, due to the anticipated growth in diesel and gasoline demand in Asian countries.

“This is an important signal for the oil companies and refineries,” Birol noted.

Asia and non-OECD countries will play the main actors driving future energy demand growth, while OECD member countries such as the United States, Canada, Europe and Japan will have a negligible role in future demand growth.

IEA successfully forecast the role that China would play in new energy demand growth. However, India may overtake China in this role in the 2020s. Birol attributes this future shift to China’s major focuses on energy efficiency and rebalancing its economy from heavy to light industry, as well the significant slowdown in China’s population growth.

Middle Eastern countries’ consumption of oil will growth in less than 20 years’ time from 6.6 million barrels of oil per day (MMbopd) to 10 MMbopd, or the same level as current Chinese oil consumption. Electric power demand in the region also will grow, with the amount of electric power capacity and transmission and distribution lines on par with capacity in Japan and Korea, Birol noted.

US SHALE REDEFINES ECONOMIC COMPETITIVENESS

The U.S. shale revolution has defined the economic competitiveness of the United States, Europe and other countries in terms of energy-intensive industries. Prior to the shale revolution, global gas prices were more or less on par with each. Today, European gas prices are three times higher than the United States, and Asian gas prices are five times higher than that of the United States.

“We believe the price differential may narrow a bit, but it will remain with us for some years to go,” Birol said.

IEA also forecasts a wide differential to remain between gas and electricity prices for some time.

Lower gas prices mean that energy-intensive industries that are sensitive to higher prices such as petrochemical and iron in the United States have a competitive advantage over countries with higher gas prices. The U.S. and emerging countries will emerge as winners in the new market, while Europe and Japan will be among the losers.

This cost difference between the United States and its economic competitors will remain for some time, and Birol believes this difference could give a strong boost to the United States economy in 2015 through a renaissance of manufacturing and balance of trade.

The United States and other countries should use this time wisely to see how much they can make out of this opportunity.

“Competitiveness is a life and death” problem in Europe, said Birol, noting that not one speech in recent time by a European leader has not touched on competitiveness.

While Europe’s competitiveness has been hurt by the price differential between U.S. and European gas prices, Birol said liquefaction, transportation and regasification costs to bring U.S. gas to other markets makes it impossible that the world will see one gas price anytime soon.

“We may see some increase in U.S. gas prices and some decline in Europe, but the difference will remain for years to come,” Birol noted.

Oil prices will likely continue to trade at the $100 benchmark, barring a major economic downturn in certain parts of world.

Changes that Birol would like to see include a reduction in CO2 emissions, the continued rise of which has put the world on an unsustainable path. With more than two-thirds of emissions that lead to climate change coming from the energy sector, Birol noted that this a trend that needs to change. In many countries – particularly emerging economies in the Middle East and Asia – the consumption of fossil fuels is heavily subsidized.

Birol also would like to see the 1.3 billion people that currently have no access to electricity – mainly in sub-Saharan Africa – to be connected to the world’s electric grid. No electricity means no refrigerators or other electrical appliances commonly found in the homes of developed countries. Given current policies, however, over 1 billion people will still not have access to electric power over the next two decades. 

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Dr. Ali Ghalambor has more than three (3) decades of experience in the oil and gas industry. Know more about him by following this Twitter page.

REPOST: UPDATE 7-Brent oil rises, U.S. jobs, gasoline futures support

"Brent's premium to the U.S. benchmark widened back near $10 a barrel after narrowing to $7.94 on Wednesday, the tightest since Oct. 10." Read more about this news from this CNBC.com article:

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NEW YORK, Feb 7 (Reuters) - Brent crude oil rose by more than $1 to a one-week high on Friday on tighter North Sea supplies and rising heating oil and gasoline prices, which were supported by continued cold and a decline in the U.S. jobless rate.

U.S. oil also rose, but by less, pressured by the onset of U.S. refinery maintenance season that will curb demand for crude oil.

Persistently cold weather across the United States continued to fuel demand for heating oil while a declining U.S. jobless rate supported gasoline futures prices, said Oliver Sloup, director of managed futures with iitrader.com in Chicago.

"At the end of the day this has been an extraordinary winter. The cold weather is going to continue to support heating oil demand," he said.

Analysts said Brent was also supported by evidence that North Sea crude supply could be lower than expected in the next few months.

Brent crude oil futures were last trading $1.16 higher at $108.35 at 11:47 a.m. EST (1647 GMT). The contract breached the 200-day moving average of $107.89 for the first time in five sessions.

U.S. crude was up 43 cents at $98.27, after trading at a low of $97.11. The contract made a solid run above the 100-day moving average of $97.69.

Brent's premium to the U.S. benchmark <CL-LCO1=R> widened back near $10 a barrel after narrowing to $7.94 on Wednesday, the tightest since Oct. 10.

U.S. heating oil futures were trading 1.4 percent higher at $3.0362 per gallon. U.S. gasoline futures were up 1.5 percent at $2.7237.

The U.S. unemployment rate hit a new five-year low of 6.6 percent in January, down from 6.7 percent in December, the Labor Department said. U.S. nonfarm payrolls rose only 113,000, a lower-than-expected gain that initially forced oil prices lower.

Gains in U.S. crude on the jobs report were capped as refiners entered maintenance season, which will cut demand for oil.

Citgo Petroleum Corp began a shutdown of both plants at its refinery in Corpus Christi, Texas on Wednesday and Motiva Enterprises LLC said it began maintenance at its 235,000 barrel-per-day refinery in Convent, Louisiana, on Thursday.

The market was keeping a wary eye on Saturday's talks between Iran and the United Nations' International Atomic Energy Agency in Tehran.

The U.N. nuclear watchdog hopes to persuade the Islamic state to start addressing long-held suspicions it has worked on designing a nuclear bomb.

Tough international sanctions over the past two years have cut Iran's oil exports in half.

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REPOST: U.S. Oil Production Keeps Rising Beyond the Forecasts

 Oil production in the U.S. continues to rise. New York Times has the report:

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OIL production in the United States rose by a record 992,000 barrels a day in 2013, the International Energy Agency estimated this week.

“We keep raising our forecasts, and we keep underestimating production,” said Lejla Alic, a Paris-based analyst with the agency.

The increase left United States production at 7.5 million barrels a day, with both November and December production estimated to have been over eight million barrels a day.

American consumption of oil also rose last year, by 390,000 barrels a day, or 2.1 percent, to 18.9 million barrels a day. The agency increased its estimate of American oil use in the final quarter of the year, although it lowered its estimate of the increase in some other countries, including China. Over all, world consumption rose 1.4 percent, making 2013 the first year since 1999 that the use of oil in the United States rose more rapidly than in the rest of the world.

The agency said that demand was strong in the petrochemical industry in the United States, which has benefited from the fact that rising supply has left American crude oil prices lower than those in many other countries. The agency estimated that demand for gasoline in the United States rose as a result of increasing consumer confidence and more sales of sport utility vehicles.

Despite the 2013 increases, oil use in most developed countries remains well below the levels of 2007, the last pre-recession year. The United States is estimated to have used 8.5 percent less oil in 2013 than it did in 2007, while demand is down by about 25 percent in Italy and Spain, European countries that were hard hit by the euro area’s problems. Germany stands out, with 2013 usage equal to that of 2007.

In the developing world, oil use has been rising steadily. Demand in China and Brazil is up more than 30 percent since 2007, and India’s consumption is 17 percent higher.

The agency estimates that in 2014, the 34 mostly rich countries in the Organization for Economic Cooperation and Development will consume less than half the oil used in the world. That would be a first: As recently as 2004, their share was over 60 percent, and in 2013, it was estimated to be 50.5 percent.

Over the same period, the United States’ share of the market fell to 21 percent from 25 percent, while China’s share rose to 11 percent from less than 8 percent. But the American share was estimated to have risen slightly in 2013, the first annual increase since 1999.

The increase in United States production in 2013 exceeded the increase of 836,000 barrels a day in 2012. The largest increase before that, of 751,000 barrels, was in 1951, according to the United States Energy Information Administration.

In percentage terms, the 15.3 percent increase in 2013 was the largest since an 18.9 percent gain in 1940.

American oil production fell steadily from the early 1990s through 2008, but has since risen for five consecutive years, largely because of increased production of shale oil. Not since the late 1960s, when production in Texas was peaking and Alaska oil was beginning to come on stream, has there been such a string of annual increases.

As a result, United States oil production climbed to the highest level since 1989, although it remains well below the record production of 9.6 million barrels a day, set in 1970.

The agency forecast that American production would continue to rise in 2014, adding 782,000 barrels, to 8.3 million barrels a day.

If that forecast proves to be accurate, United States oil production will have increased 46 percent over the three years from 2011 to 2014. There has not been a three-year increase that large since the years 1921-24, exactly nine decades earlier.

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EIA posts optimistic outlook for the US energy industry in 2014

Image Source: sonoraninstitute.org

The Energy Information Administration previously released an early version of its Annual Energy Outlook 2014, which contains its analysts’ predictions on the future of the nation’s energy production and consumption until 2040. Given the uncertainties inherent in any projection of the energy market, however, data in the reference should not be viewed in isolation and should instead be compared to alternative projections.

Nonetheless, the projections for growth in the energy industry are nothing short of reassuring. The EIA traces how domestic oil production, strengthened by new shale developments in key areas like North Dakota and Texas, will continue to grow at roughly 0.8 million barrels per day until 2016. By then, EIA researchers predict that domestic production will reach 9.6 MM bbl/d, a historical high that was achieved only in 1970.

Image Source: nebb.com

However, nearly all of the growth in the oil sector is expected to come from shale oil. As for other conventional sources in the lower 48 states and Alaska, things are expected to remain static or in decline. Meanwhile, U.S. oil imports patter due to lowered consumption brought about by improvements in fuel efficiency and less driving.

The EIA projects natural gas production to increase by 56 percent between 2012 and 2040 to 37.6 trillion cu. ft. a year thanks to fracking. By mid 2030s, natural gas is expected to finally replace coal as the biggest source of U.S. electricity.

Image Source: imsa-search.com

Dr. Ali Ghalambor is the former director of the Energy Institute of the University of Louisiana and Head of the Department of Petroleum Engineering. Find more updates on the energy industry through this Twitter page.

A look back at the work of George Mitchell and the development of fracking

Image Source: insential.com

George Mitchell is not the inventor of hydraulic fracturing but earned the fond title “father of fracking” after pioneering the economic extraction of shale gas. The method was first used in the late 1940s and it was further developed in the 1970s in cooperation with the Department of Energy. Before Mitchell’s innovation, however, no other company used the method to free natural gas from shale.

It was in 1981 when Mitchell, already one of the most influential businessmen in Texas, decided to explore for gas in an unlikely area. He had set his sights on the Barnett Shale, which was located deep under a thick layer of rock around Fort Worth. Previously, other oil and gas companies had already brought up fuel from above and below the shale. That time, Mitchell drilled into the shale and fractured it with highly pressurized fluids to free natural gas and draw it to the surface.

Image Source: sonoraninstitute.org

Many of his peers thought that the decision to use fracking was a mistake. For Mitchell, however, it was a necessary risk because his wells in North Texas were drying up. Mitchell Energy struggled for 15 years to prove that producing reliable and economical gas was possible with fracking.

Image Source: nebb.com

It was only in 1997 that one of the company’s shale gas wells, which drilled in water, sand, and chemical mixture, finally established that fracking can be financially viable over the long term. That time, fracking was building momentum in resurrecting the nation’s oil and gas industry.

Today, credit is given to Mitchell, his perseverance amid 15 years of failure and his courage to look beyond common knowledge for the widespread commercial use of hydraulic fracturing.

Dr. Ali Ghalambor is the author, co-author, and editor of several books and more than 160 technical articles and manuals on hydraulic fracturing and related topics. For more articles about the development of the natural gas industry, visit this Facebook page.

REPOST: How Real Is Greece's Oil And Gas Future?

Greece could potentially be home to 4.7 trillion cubic meters of gas according to the American-Hellenic Chamber of Commerce. Read more in this Forbes.com article.

If you’ve been watching Greece’s recent energy push lately, it’s been difficult not to get too excited about the country’s potential. From political commentators to Prime Minister Antonis Samaras himself, the message has been enthusiastic and clear – Greece is home to billions of barrels of oil, trillions of cubic meters of gas and most importantly for a country saddled with the longest recession in modern history, billions in potential revenue.

Over a dinner organized by the American-Hellenic Chamber of Commerce in Athens last week, Samaras told a gathering of political and business leaders that Greece could be home to 4.7 trillion cubic meters of gas could one day provide up to 25 percent of European demand. If they could manage to combine this with already active efforts by Cyprus and Israel, this amount could climb to 50 percent and not just for the short term, but for the next 30 years.

The speech came almost a month after Samaras had presented new findings to a collection of international energy firms, including Chevron CVX -0.36%, Eni, ExxonMobil and OMV, that “revealed geological analogies between the underwater area of the North Ionian and Italian and Albanian regions of the sea where oil and natural gas have already been found”. It also reflected earlier comments Samaras had made to President Barack Obama during a visit in October. Speaking for the national government, the prime minister’s message was undeniable – Greece has real potential to be an energy force in the region.

However, as Athens current leadership presents a lucrative path towards energy independence and export options, some of the country’s energy sector leaders are rolling their eyes at the rhetoric, while taking a more cautious approach to what Greece is actually capable of doing. There is potential for domestic potential is there, they say, but even meeting domestic demand is a dream that is incredibly far away.

“I think its interesting when politicians run ahead and say things like we’re going to be major producers and solve all the energy problems of the country, create huge funds for future generations,” said Hellenic Petroleum CEO, John Costopoulos. “All of this needs to be tempered with logic and data.”

Energy leaders have also taken issue with the evidence most commonly cited as proof of Greek potential and those promoting it, especially in the broader media reports.

“If you turn on the TV, you’ll hear some pretty interesting reporters – not mainstream usually – people bring them onto their shows to discuss these things, which are ex-professors or frustrated scientists or fired managers from companies like ours who are looking for jobs for themselves,” Costopoulos said. “They usually begin to bring out these amazing stories like Crete, the island, sits on a planet sized reserve of hydrocarbons.”

Although he said he was in attendance during the Prime Minister’s speech, Costopoulos said he had not heard his comments about meeting Europe’s broader gas needs so he could not comment on this speech.

In Search Of Good News

Samaras’s comments in Athens last week are certainly understandable. After all, he was addressing business leaders and potential investors in dire need of some good news about an economy in its sixth consecutive year of recession. The promise of not just meeting domestic demand, but moving towards a thriving export market is the kind of thing that makes it easier to cope with a recent OECD report released promising another year of economic contraction.

Still, energy sector leaders have grown frustrated with the government’s enthusiasm, suggesting that it not only does not help attract needed investment, but may actually make it harder.

“They should stop misguiding the public with announcements and promises that they cannot deliver,” said Mathios Rigas, Chairman and CEO Energean Oil and Gas earlier that day. “The previous prime minister said that by December 2012, we would see first oil. Another minister said we would have drilling by 2012, but we haven’t even finished the licensing process. Then there are others that say that there will be billions of oil found in Greece – billions in value. It creates a public expectation about the huge impact oil and gas will have on Greece. They even created a fund that manage the income that will come from oil and gas revenue”.

Rigas went on to say that the focus should be on creating a long term energy plan for the country and focusing on the three licenses the country offered in early 2012, which have remained incomplete due to delays related to environmental approval and contract details.

“We should congratulate the government and the minister for starting the process, but we have to be realistic about the expectation and the timing,” Rigas said. We need a long term plan, a national strategy, not just a political party strategy – a national strategy that everyone can agree on.”

In the short term, Rigas and others said the government should focus on simplifying the approval process and in the case of new exploration and production efforts, address appeals to include a clause in new contracts that would ensure that “tax and fiscal regimes” stay in place, no matter what happens in the coming years. While an extra clause pledging that a contract remain intact and honored may seem redundant, the appeal is understandable considering recent events in Euro-crisis economies. In an attempt to chip away at a sizable energy sector deficit, Spain moved to reduce support schemes for solar energy, including retroactive cuts, earning the government legal challenges from a number of investment firms. Similar government moves in Italy and Greece has led to a reasonable suspicion of any new government contract.

“Greece has a habit of changing policies – changing tax rates – not just with oil and gas – everywhere,” Rigas said. “There is no way any company is going to sign contracts without knowing what the tax regime is going to be. These are investments that can last for 25 years – they won’t take the risk if next year they say, No more 25 percent tax – now it’s a 40 percent tax.”

Concerns over the clause also stem from the fact that Greece has had three governments in the last four years and with it, three different policies on oil and gas exploration. While the country’s current Minister of Environment, Energy and Climate Change Yannis Maniatis endorsed the country’s hydrocarbon potential on a panel earlier that day, there is no certainty that he or Samaras will be around next year.

The country’s current opposition leader Alexis Tsipras’s Syriza party has gained ground on Samaras’s center-right New Democracy in recent months, twice falling just shy of becoming the largest presence in the Greek parliament, according to a Financial Times report. In addition to promising to cancel the country’s current bailout agreement with international lenders, Tsipras’s Syriza has included the drawing back on memorandum of understanding reforms that relate to natural resource concessions. Representatives from Syriza did not respond to inquires about whether they would include the nationalization of oil and gas reserves in their plans, but have publicly said they would use energy revenues to “create a fund that would guarantee the viability of Greece’s social security system.”

Internationally renowned for his expertise and remarkable contributions, Dr. Ali Ghalambor has worked with the finest universities and organizations. To know more about him and his expertise, visit this Facebook page.

REPOST: Mexican Oil And Gas: Christmas Arrives Early

A historic legislative initiative that reforms the country's energy sector have been approved by the Mexican Senate and Chamber of Deputies. This Forbes.com article has the details. 

Image Source: forbes.com

On the morning of December 12th, Mexico woke up to the sound of fireworks as the country celebrated the festival of the Virgin of Guadalupe. A national holiday, the 12th marks the beginning of the Christmas festivities in Mexico, which will end on the 6th of January with the Dia de los Reyes (Three kings day or Epiphany). But for many in the energy industry, the fireworks and celebrations had a double meaning. The day before, the Mexican Senate and Chamber of Deputies approved a legislative initiative that reforms the country’s energy sector. As expected, the law includes measures to open the oil and gas industry to private and foreign investment, through cash, profit-sharing and production contracts. What is new, however, and is the result of the hard political bargaining that has taken place between the governing PRI and the PAN in recent weeks, is the legal entity of the “license”. Although the legislation still explicitly prohibits the use of concessions in the hydrocarbons sector, the license will act in a very similar way, with the idea that it will be applied to unconventional projects (primarily shale). This item made its way into the legislation thanks to the PAN insisting that the government adopt a more liberal approach to oil reform to secure PAN support in the aftermath of the deeply divisive fiscal reform process.

But this raises a rather serious problem. If a license is in fact almost identical to a concession, we should expect that there will be legal challenges to the contracts, arguing that they are equivalent to concessions and therefore explicitly prohibited. This creates a certain degree of legal uncertainty, something that the private sector will worry about, and which will act as a deterrent to investment.

As expected, the left-wing PRD party, abandoned the energy reform negotiations and the Pacto por Mexico (the highly effective bargaining mechanism between the three major parties), leaving the PRI and PAN to work out their differences. Protesters have formed a barrier around the Senate to keep legislators from getting to work, in fact Senators and their staff have been camped in the Senate building for the past week, leaving only briefly to get supplies. Though the wall that they built is quite impressive, the protest itself is rather sparsely populated, reflecting the mood of acceptance or resignation that prevails in the capital with regards to the energy reform.

At the last minute on Monday, it seemed as though the PRD might manage to delay the process by taking control of the Senate and preventing voting from taking place. Though PRD Senators held the chamber for four hours, it was a symbolic measure taken to placate the protesters outside rather than a serious attempt to derail the legislation. When they retreated, the Senate commissions voted and approved the bill, allowing it to be approved by the plenary session on Wednesday despite another vociferous protest by the left.

Before this happened, however, a further twist in the tail emerged. The PAN and the PRI agreed to a clause in the reform that removes the Pemex union, the STPRM, from the board of the company, drastically reducing organized labor’s control over the company. Ironically, this idea had been part of the PRD’s reform proposal, but made its way into the final bill via the PAN. The union has traditionally been seen as a strong ally of the PRI, and it is thought that its removal from the board reduces the PRI’s long-term influence over Pemex.

The legislation then passed to the Chamber of Deputies, in which a rapid vote took place, approving the law in the general form it was sent by the Senate. Minor negotiations still need to take place to approve the details of the law, but the final version will be completed by the end of this week. The speed of the legislative process was extraordinary, once a deal had been agreed between the PAN and the PRI.

Much still needs to be decided, in the way of secondary laws, implementation and institutional strengthening (in Pemex and the regulatory organisms), and the first half of next year will be dedicated to that. Nonetheless, it seems that 2014 will begin with the three kings bringing a gift for the energy industry in the form of a radically different oil and gas sector in Mexico, one that is ripe with opportunity.

Dr. Ali Ghalambor is an associate at Innovative Petrotech Solutions, Inc. For more updates, visit this Facebook page. 

REPOST: MARKET WATCH: Oil futures prices drop before US inventory gain

"The New York Mercantile Exchange January crude contract declined 41¢ on Nov. 26, closing at $93.68/bbl. The February contract fell 40¢ to settle at $94/bbl." Read more about the price drop of crude oil from OGJ.com news article:

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Oil futures prices dropped on the New York market Nov. 26 amid slow trading volumes as market participants awaited the Nov. 27 release of a weekly US government report on crude oil and product inventories that traders correctly anticipated showed a 10th consecutive climb.

The Energy Information Administration said US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, reached 391.4 million bbl for the week ended Nov. 22, a 3 million bbl increase from the week ended Nov. 15.

Separately, the American Petroleum Institute reported US crude inventories of 390.2 million bbl for the week ended Nov. 22.

EIA said crude oil inventories remain well above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.8 million bbl, staying above the upper limit of the average range.

Both finished gasoline inventories and blending components inventories increased. Distillate fuel inventories decreased by 1.7 million bbl. Propane-propylene inventories fell 1.4 million bbl.

Image Source: USNews.com

US refinery inputs averaged 15.6 million b/d for the week ended Nov. 22, which EIA said was 104,000 b/d higher than the previous week’s average. Refineries operated at 89.4% of capacity last week.

Gasoline production increased last week, averaging over 9.4 million b/d. Distillate fuel production increased last week, averaging 5 million b/d.

US crude oil imports averaged over 7.7 million b/d, down by 145,000 b/d from the previous week. Over the last 4 weeks, crude oil imports averaged 7.7 million b/d, 3.5% below the same 4-week period last year.

Total motor gasoline imports, including both finished gasoline and gasoline blending components, last week averaged 710,000 b/d, EIA said. Distillate fuel imports averaged 158,000 b/d.

Energy prices

The New York Mercantile Exchange January crude contract declined 41¢ on Nov. 26, closing at $93.68/bbl. The February contract fell 40¢ to settle at $94/bbl.

Heating oil for December delivery climbed by 1.23¢ to settle at a rounded $3.04/gal on NYMEX. Reformulated gasoline stock for oxygenate blending for December delivery gained 0.62¢ to a rounded $2.69/gal.

The December natural gas contract on NYMEX gained 2.9¢, settling at a rounded $3.82/MMbtu. On the US spot market, the gas price at Henry Hub, La., closed at $3.845/MMbtu on Nov. 26, marking a decrease of 1.5¢.

In London, the January ICE contract for Brent crude oil dropped 12¢, settling at $110.88/bbl. The ICE gas oil contract for December rose by $9.75 to $944.50/tonne.

The Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes climbed $1.29 on Nov. 26 to settle at $107.36/bbl.

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