Thursday, July 13, 2006

Geopolitics: From Russia with love and a game of chess

Sempra & Shell to Develop Mexican LNG Terminal

Monday, December 22, 2003

Shell International Gas Limited and Sempra Energy LNG Corp. intend to form a 50/50 joint venture to build, own and operate a $600 million liquefied natural gas (LNG) receiving terminal in Baja California, Mexico.

Shell Buys Sakhalin LNG for Baja

The Sakhalin-2 consortium, led by Royal Dutch/Shell, has sealed a landmark deal to supply Russian natural gas to North America.

Shell will import 37 million tons of liquefied natural gas (LNG) over 20 years through the Costa Azul terminal in Baja California, Mexico, operated by Sempra Energy of California.

Sempra and Shell have also finalized ownership terms for the 1 billion cubic foot per day regasification terminal. Sempra will fully own, construct and operate the $600 million terminal. Shell has rights to 500 million cubic feet per day of capacity, including half of any future expansions, the companies ...


His words may be local rhetoric, but the question is how high a price will Shell have to pay for its cost runup. Russia, like other oil countries, knows it has much more leverage than it did when it first inked its deal with Sakhalin Energy.

Shell executives acknowledge some mistakes. "We were overoptimistic on budget and underestimated a number of things," says Malcolm Brinded, Shell's executive director for Exploration & Production. "If you are working in a frontier environment it is prudent to put more of a factor of uncertainty into your estimates," he adds. Sakhalin Energy's Craig maintains the costs of finding the oil and gas will be acceptable even after the cost overruns.

To smooth relations with the Kremlin and gain a strong local partner, Shell last year agreed to swap 25% of its controlling stake in Sakhalin Energy to the powerful state-owned gas giant, Gazprom.

In exchange, Shell receives a 50% stake in a Gazprom field in western Siberia. Teaming with Gazprom should give Shell some political protection for now, but how much the government might want to up the ante later is a big question. Some seasoned observers, such as BP's Miller, are cautious about Gazprom. "You have to be nervous as a Shell executive. They are stepping into an unknown," he says.

Shell executives are mum about the Gazprom talks. But to Shell, teaming up with a strong Russian partner could be key to locking in its role on Sakhalin Island and ensuring long-term gains. The real money will come, says Shell's Brinded, when other players begin to use Shell's expensive LNG plants and terminals. "The goal is to create first-mover advantage and then expand," he says. A big investment, a big bet. That's the future for global oil companies.!

SEMPRA EXPLORING MULTIPLE DEALS WITH GAZPROM Noting it has "three teams" of negotiators talking to Russia's Gazprom, Sempra Energy divulged during a first-quarter earnings conference call Wednesday that it is exploring power generation and energy marketing deals with the gas producer in addition to processing some of its liquefied natural gas (LNG) through one or more North American receiving terminals.

Natural gas pipeline to cross Butler, Warren Co.


HAMILTON - The largest natural gas pipeline built in the nation in 20 years could snake through Butler and Warren counties by the end of 2008.

Several Butler and Warren landowners in the proposed path of the Rockies Express Pipeline received letters last week from the project's developer, Rockies Express LLC, a joint venture of Kinder Morgan Energy Partners L.P. and Sempra Pipelines & Storage.

The letters said surveyors may soon be contacting them.

The 42-inch wide, 1,663-mile long pipeline will take natural gas from the Rocky Mountain region to the upper Midwest and eastern United States.

If the project is approved, construction on the $4 billion pipeline's eastern portion - spanning 662 miles - is expected to begin in March 2008.

The pipeline is to run from Rio Blanco County, Colo., to Ohio's eastern border in Monroe County, said Rick Rainey, spokesman for Kinder Morgan.

Kinder Morgan-Sempra Energy Announce That ConocoPhillips Has Acquired an Interest in Rockies Express Pipeline

By CJ - Webbolt Newsroom
July 06, 2006, 14:11

HOUSTON, - Kinder Morgan Energy Partners, L.P. (NYSE:KMP) and Sempra Pipelines & Storage, a unit of Sempra Energy (NYSE:SRE) , announced that ConocoPhillips has exercised its option to acquire a 25 percent interest in the Rockies Express Pipeline project.

Thursday, May 25, 2006. Page 6.
BG, Sempra Eyed for Shtokman

Combined Reports

Gazprom signaled on Wednesday it could snub U.S. oil giants and choose other partners to help it market gas in the United States amid increasingly chilly ties between Moscow and Washington.

The world's largest gas producer said it had intensified talks with Britain's BG and U.S. Sempra on marketing in the United States of liquefied gas, or LNG, from its giant Shtokman Arctic gas field.

May 24, 2006

On meeting of Steering Committee for Cooperation between Gazprom and Sempra Energy
Moscow today has hosted a meeting of the Steering Committee for Cooperation between Gazprom and Sempra Energy, as stipulated by the Memorandum of Understanding signed earlier.

The parties agreed to further cooperate in the marketing of Russian LNG, within the Shtokman project inclusive, to the US market.

Sempra Energy is the second-largest gas marketer in North America.
Sempra Energy’s main business is natural gas transmission and sales, electricity generation (including generating capacities), metal trading. The company is actively involved in energy projects in Mexico, Argentina, Chile, Peru, and is involved in gas sales in Europe.

Sempra Energy is a leading player in the US energy market. Currently, Sempra Energy is active in designing and constructing its LNG receiving terminals in North America.

On April 25, 2005, Gazprom and Sempra Energy signed a Memorandum of Understanding, which contemplates investigating the possibility of using Sempra Energy owned terminals as regasification capacities for the marketing of Russian gas in the USA.

U.S. energy firms pull for Russian WTO deal

Posted 7/13/2006 8:50 PM ET
By David J. Lynch, USA TODAY

Negotiators are scrambling to hammer out a deal before this weekend's G8 summit in St. Petersburg that would fulfill Russia's long-standing ambition to join the World Trade Organization.

If they succeed, the celebrations in Texas and California may rival any party at the Kremlin.

That's because Russia apparently will not select a Western energy company for a giant natural gas project in the Barents Sea until it concludes this trade deal with the United States, the last major hurdle it must clear before entering the global club. Two U.S. energy giants, Chevron and ConocoPhillips, are among five Western companies waiting to hear if Russia's state-owned Gazprom wants them as minority partners.

At stake is development of the Shtokman field, one of the largest offshore natural gas deposits in the world and worth an estimated $10 billion to $20 billion. About 300 miles from the northern Russian coastline in the unforgiving Barents Sea, the sprawling field contains enough natural gas to meet U.S. needs for more than five years. In 2010, Gazprom hopes to begin shipping the fuel as a supercooled liquid to the USA and Europe.

Russia boasts the world's largest natural gas reserves, nearly twice those of No. 2 Iran. Coupled with similarly massive oil fields, that has Moscow touting itself as an "energy superpower."
But with natural gas output essentially flat for the past decade, Russia badly needs Western management and technology to convert its underground assets into cash. The Shtokman field, located beneath more than 1,000 feet of subzero seawater, presents special challenges. The gas first must be brought ashore through 300 miles of pipelines before being chilled to 260 degrees below zero and shipped as liquefied natural gas (LNG) in tankers.

Stacy Nieuwoudt of Pickering Energy Partners in Houston is skeptical that Gazprom can meet its ambitious schedule. "That's clearly not possible," she says.

Numerous technical, financial and political hurdles remain to be cleared before the USA gets its first shipment, analysts say. The immediate issue appears to be resolving Russia's WTO application, although neither Moscow nor Washington has explicitly linked the two issues.
President Bush earlier this week said he was optimistic agreement could be reached before the summit. Of the 149 nations in the WTO, the U.S. — citing concerns over intellectual property and the rights of foreign banks — remains the lone holdout on Russia's bid.

Western energy companies see Shtokman as a lucrative first step in a relationship that could expand to other Russian projects. Along with the U.S. firms, Statoil and Norsk Hydro of Norway and France's Total are on Gazprom's short list.

Still, Russia isn't the only country developing new LNG projects. "The capital and technology that could go to this project could go to a lot of other places as well. The Russians need to be careful they don't drag this (decision) out," says David Victor, an energy expert at Stanford University.

The potential U.S. partners are staying mum. "We're not prepared to comment on any market rumors," ConocoPhillips spokesman Bill Tanner says.

MOSCOW, July 14 (UPI) -- Russia's World Trade Organization bid hinges on a gas trade pact with the United States that both sides want to reach before this weekend's Group of 8 summit.

The deal would also have ramifications for at least two U.S. oil companies as Russia won't allow Western oil companies to team up with Gazprom until a deal is reached, USA Today reports.

The United States and Russia haven't finalized terms on gas shipments from the Shtokman oil field, located 300 miles from Russia's northern coast in the Barents Sea.

The United States has said that deal must be made before it allows Russia into the WTO.
Meanwhile Chevron and ConocoPhillips hope the deal happens soon -- both are on a short list for a minority stake in Gazprom.

Russian gas and oil reserves have put them in a world power position. It has the largest gas reserves and is second to Saudi Arabia in oil.

Although Gazprom had said it wants to start gas shipments from the Shtokman field by 2010, Stacy Nieuwoudt of Houston-based Pickering Energy Partners said it won't happen without Western technology and production management.

Russia WTO bid hinges on U.S. gas

MOSCOW, July 14 (UPI) -- Russia's World Trade Organization bid hinges on a gas trade pact with the United States that both sides want to reach before this weekend's Group of 8 summit.

The deal would also have ramifications for at least two U.S. oil companies as Russia won't allow Western oil companies to team up with Gazprom until a deal is reached, USA Today reports.
The United States and Russia haven't finalized terms on gas shipments from the Shtokman oil field, located 300 miles from Russia's northern coast in the Barents Sea.

The United States has said that deal must be made before it allows Russia into the WTO.
Meanwhile Chevron and ConocoPhillips hope the deal happens soon -- both are on a short list for a minority stake in Gazprom.

Russian gas and oil reserves have put them in a world power position. It has the largest gas reserves and is second to Saudi Arabia in oil.

Although Gazprom had said it wants to start gas shipments from the Shtokman field by 2010, Stacy Nieuwoudt of Houston-based Pickering Energy Partners said it won't happen without Western technology and production management.

US oil firms get little play at Bush-Putin meeting

By Tom DoggettReutersSaturday, July 15, 2006; 12:46 PM

ST PETERSBURG, Russia (Reuters) - President George W. Bush did not press the case during almost two hours of private talks on Saturday with Russian President Vladimir that a U.S. company should be selected to help develop a giant Russian natural gas field, Bush's national security adviser said.

Putin has made energy security a major theme at this weekend's meeting of the Group of Eight (G8) rich nations in St Petersburg, and U.S. companies are hoping Bush will push Putin to open more of Russia's oil and gas sector to investment.


Putin says Russia-Canada relations develop well

15.07.2006, 18.43

ST. PETERSBURG, July 15 (Itar-Tass) -- Russian President Vladimir Putin said relations between Moscow and Ottawa are developing well, particularly in the economic field.

“Very good relations have been developing between our countries lately, particularly in the economic field as well as in the field of solving important international issues,” Putin said in a meeting with Canadian Prime Minister Stephen Harper at the Konstantinovskii Palace in Strelna, outside St. Petersburg, on Saturday.

The president thanked the Canadian government for “the constructive work on Russia’s accession to the WTO.”

Putin assured Harper that Russia appreciates the continuity of Canada’ s foreign policy. “Russia will adhere to the same approach with regard to Canada,” he said.

The president spoke specifically about economic relations between Russia and Canada. He noted that trade turnover between the two countries is growing by 20-25 percent annually. “Although this is not very much in absolute figures, but there are good prospects, including in the economic field that will be one of the topics during our discussions,” he said.

Putin supported the agreements on broad cooperation between Russia’s Gazprom and Canada’s Petro Canada.

“I want to express support to the agreements that have been reached between our leading company Gazprom and one of the Canadian companies,” he said.

“Petro Canada and Gazprom are about to start implementing ambitious projects, but this is not the only area of cooperation,” the president said.

The memorandum signed by the two companies also calls for exploring the possibilities of liquefied gas supplies from Russia to the North American market by 2009.

“We would also like to enhance cooperation in the fields of communications and high technology,” the president added.

Putin also noted cultural cooperation. The Hermitage is hosting an exhibition of works of a Canadian painter these days, and the Mariinsky Theatre will travel to Canada on a tour in a couple of weeks.

“In addition, we will host an ice hockey championship in Moscow next year,” Putin said. “I know that you are a real expert. So we will have a chance to talk about this, too.”

For Harper, who took office in February, this is his first G8 summit. And this is his first meeting with Putin. They have only exchanged messages before. In February, Putin congratulated Harper on his inauguration and invited him to the summit. In July he congratulated him on a national holiday.

In both messages the president said Canada is a reliable partner of Russia. “In the year of Russia’s chairmanship in the G8 I would like to specifically note the successful cooperation between our countries within the framework of this influential organisation, and it is quite symbolic that the decision on the Russian chairmanship in the G8 was made at the summit in Kananaskis, Canada,” Putin said.

Harper plans to build working contacts with his G8 colleagues at the summit as he has not met any of the summiteers in person except U.S. President George W. Bush.

The prime minister said he would discuss a wide range of issues with them and, as a newcomer, would probably listen more than speak.

Harper believes energy security is one of the most important items on the summit agenda.

Gazprom, Petro-Canada Near Gas Agreement, Putin Says (Update1)

July 15 (Bloomberg) -- OAO Gazprom, the world's largest gas producer, and Petro-Canada are on the ``edge'' of an agreement to build a $1.5 billion liquefied natural gas plant in Russia, President Vladimir Putin said.

Petro-Canada, based in Calgary, has been negotiating with Gazprom for more than two years to build a plant near St. Petersburg, Putin's hometown to supply fuel to a regasification terminal at Gros-Cacouna, Quebec. The Quebec terminal is expected to cost an additional $500 million.
``Petro-Canada and Gazprom are really on the edge of undertaking a really major project,'' Putin told Canadian Prime Minister Stephen Harper during talks between the two leaders ahead of the G-8 summit of leading nations in St. Petersburg. ``I would like to express my support.''
Russia, which holds a third of the world's natural-gas reserves, wants to start exporting the fuel in liquid form to the U.S., the world's biggest energy consumer.

Canada hopes to turn itself into a key transit point for liquefied natural gas shipped to North America, in part by allowing gas companies to bypass more stringent regulatory requirements along the U.S.'s heavily populated eastern seaboard. At least eight Canadian gas projects are slated for construction by the end of this decade.

Arctic Gas Field

Putin in February said that Russia could become the third- biggest energy supplier to the U.S. by the end of the decade, from No. 8 now, once Moscow-based Gazprom develops Shtokman, an Arctic offshore field the Russian company hopes will produce liquefied natural gas for shipment to the U.S.

Moscow-based Gazprom plans by 2011 to produce 22.5 billion cubic meters a year of liquefied natural gas, or LNG, which can be shipped in tankers, allowing greater flexibility of delivery than through pipelines.

Chevron Corp., based in San Ramon, California, and Houston- based ConocoPhillips are among the five companies being considered by Gazprom for a role in the $20 billion project.

The Quebec terminal will process about 500 million cubic feet a day of LNG, and the Russian plant could produce as much as 700 million cubic feet to supply additional customers, Petro- Canada Chief Executive Officer Ron Brenneman said in March, when the two companies agreed to begin initial engineering studies on building a gas-liquefaction plant.

The two leaders will coordinate efforts to reach an agreement to build the plant.

``We believe that such growth and development of the LNG market will play an important role in enhancing global energy security,'' Putin and Harper said in a joint statement after the talks.
``It looks as though it will go forward,'' Christopher Westdal, Canada's Ambassador to Russia, told reporters after the meeting between Putin and Harper.
`Market Principles'

Harper and Putin also said in the joint statement that they will ``fully respect market principles and ensure that open, clear and predictable policy and regulatory frameworks are in place.''
Harper, in his first appearance at a Group of Eight summit, is leading efforts by the world's biggest economies to gain greater access to Russian natural gas.

In his discussion with Putin, Harper outlined how Canada has benefited from private investment into its own energy industry, a senior Canadian official in St. Petersburg said after the meeting.
Canada sits on the largest pool of oil reserves outside of the Middle East, including crude contained in the nation's tar sands, according to the Canadian Association of Petroleum Producers.

Cacouna Energy (Planned) -- Gros Cacouna, Quebec, about nine miles northeast of Riviere-du-Loup; TransCanada/Petro-Canada;
Cost C$660 million;
Sendout 0.5 Bcf/d.

Project was announced in late August 2004. Petro-Canada has signed a memorandum of understanding with Russia's Gazprom that could involve operations in all areas of the LNG value chain, from exploration, production and liquefaction, to shipping, regasification and marketing in North America. The agreement covers options for joint development of a US$1.2-1.5 billion liquefaction plant near St. Petersburg, Russia in the Baltic port of Ust Luga, and to investigate options for gas supplies to that LNG plant and then to regasification terminals in North America by 2009.

Putin proposes Russia, Norway join efforts in Barents Sea

17/ 07/ 2006

STRELNA (near St. Petersburg), July 17 (RIA Novosti)-

Russian President Vladimir Putin has proposed that his country and Norway unite efforts in developing the Barents Sea deposits.

The Barents Sea has substantial mineral resources, including major oil fields, but the status of the Arctic shelf remains to be settled.

Putin said Norwegian companies worked thoroughly and had a developed infrastructural network in the area, though oil production was falling.

The president said a natural solution for both sides was "to unite efforts without wasting [time] on the creation of additional infrastructure."

Statoil quadruples LNG capacity in USA

This will be achieved by expanding the Cove Point LNG terminal in Maryland and associated pipeline transportation capacity on the American east coast.

"These agreements give us unique market access to the north-eastern USA, where gas demand is high and the market robust and liquid," says Peter Mellbye, executive vice president for Natural Gas in Statoil.

"Realising them represents an important building block in our long-term LNG strategy."
The deals give Statoil access to terminal, storage and pipeline transportation totalling about 10 billion cubic metres of gas per year (1.05 billion cubic feet per day).

Running for 20 years from 2008-09, this compares with its present annual capacity at Cove Point of 2.4 billion cubic metres (0.25 billion cubic feet per day).

Cove Point LNG (Planned Expansion) -- Lusby, Maryland; Dominion; Sendout 1 Bcf/d; Planned expansion would add 0.8 Bcf/d of sendout capacity in 2008; Storage capacity rose from 5 Bcf to 7.8 Bcf in December 2004 through the addition of a new 2.8 Bcf LNG storage tank. Storage is expected to increase to 14.6 Bcf in 2008. The 2008 expansion project also would include 47 miles of looping along the Cove Point Pipeline in Maryland, a new 81-mile pipeline in Pennsylvania between Perulack, PA, and Leidy, PA, and various smaller new pipelines and looping projects in Pennsylvania designed to increase transportation of gas between the import terminal and Dominion's many gas storage fields that serve the Northeast and Mid Atlantic regions. Dominion received FERC authorization Aug. 17, 2004 to begin the NEPA prefiling process on the 2008 project. The company held an open season in fall 2004 and said the project was fully subscribed. Statoil has signed a contract for 1.05 Bcf/d of the total 1.8 Bcf/d of planned send-out capacity in the 2008 expansion project. The remaining 750 MMcf/d of capacity will be owned by Shell, BP and peaking customers. In 2003, the company completed its Cove Point East pipeline expansion, which included two new compressor stations with 19,340 of horsepower in Loudoun and Fairfax counties, VA. The $43.5 million project added 445,000 Dth/d in additional firm transportation capacity for Washington Gas Light and Virginia Power Service Energy Corp. FERC approved the resumption of LNG imports at Cove Point in October 2001. The terminal received its first commercial delivery in 23 years in August 2003 from Trinidad and Tobago. Cove Point was originally constructed in the mid 1970s at a cost of $400 million.

Gazprom Concludes First Pipeline Gas for LNG Swap Deal
Gazprom OAO.

Gazprom said it and Gaz de France have agreed to a deal which will see Gazprom deliver Gaz de France with pipeline gas in exchange for liquefied natural gas (LNG), which Gazprom will sell in the US.

Under the agreement, Gazprom will supply Gaz de France with extra pipeline gas in exchange for a shipment of LNG from MED LNG & GAS, a joint venture of Gaz de France and Algeria' Sonatrach, according to a statement on Gazprom's website.

The deal was also signed by Shell Western LNG, which agreed to buy the LNG from Gazprom upon delivery next month to Cove Point regasification terminal in Maryland, which is part-owned by Shell.

Gazprom Vice President Alexandre Medvedev said at a news conference that Gazprom will deliver 80 mln cubic metres of gas under the deal, in exchange for an equal volume of LNG. He declined to give precise financial details, but said the deal was 'economically beneficial' to both sides.

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