Norway brings foreign minister home amid Ukrainian crisis, scraps Houston appearance

The worsening political and military situation in Ukraine is having far-reaching effects. As Ukrainian and pro-Russian protestors clashed over the weekend in eastern Ukraine, Norway felt compelled to bring home Foreign Minister BØrge Brende for consultations with other Western European countries about potential natural gas supply ramifications. Brende’s abrupt return to Europe also forced postponement of a long-awaited appearance Monday at Rice University’s Baker Institute, where he had been scheduled to discuss global energy challenges and opportunities, particularly for oil and natural gas, from Norway’s perspective.

Norway’s ambassador to the U.S., Kåre R. Aas, confirmed to a media briefing at the Baker Institute Monday morning that the situation in Ukraine had forced Brende to forgo his Houston visit, to return to Europe. Ambassador Aas and other Norwegian officials emphasized that while the path that the Ukrainian crisis will take over the next week is very difficult to predict, they believe that the situation ultimately requires a political solution. They pointed to Sunday’s emergency meeting of the U.N. Security Council as an important starting point in resolving the conflict. In the meantime, Norway is meeting with its NATO allies to consider what further measures, if any, should be taken to force the Russians to back down from their meddling in eastern Ukraine.

There is great concern about the short- and medium-term stability of natural gas imports coming into Western Europe from Russia, said the Norwegian officials. About one-third of European gas imports come from Norway, while roughly another third is sourced from Russia. What concerns the European countries is that half of that Russian gas has to transit pipelines that run through Ukraine. This means that 15% of Europe’s overall gas supply is directly threatened by the instability in Ukraine, which is an improvement over what could have been the proportion a few years ago. New Gazprom pipelines built via Belarus and the Baltic Sea to Germany have cut the volume of European gas imports transiting Ukraine from about 30% to 15%. Nevertheless, any significant disruption in gas supplies could threaten the fragile Western European economy.

For its part, Norway is producing 1.7 million bpd of liquids and 105 Bcm/year of natural gas. While officials confirmed that up to 70% of discovered and projected natural gas reserves in Norway have yet to be developed and put into production, adding significant capacity to the country’s gas output and exports is not a short-term proposition. Therefore, the ability to offset any Russian gas export shortfall in the short term is very small.

Ambassador Aas confirmed that Foreign Minister Brende remains committed to maintaining the special relationship between Norway and Houston, and that he will reschedule an appearance at the Baker Institute later this year.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

China's natural gas output rises to highest level in 2 years

China’s natural gas production rose in March to the highest level in two years as the nation seeks to use more of the cleaner-burning fuel.

Natural gas output in the world’s largest energy consumer rose 7.6% to 11 Bcm last month, data from the National Bureau of Statistics in Beijing show. That’s the highest since March 2012. NBS didn’t release output figures for January 2013 because the data was distorted by the Lunar New Year holiday.

The Chinese government sees expanding gas supply as a way to curb air pollution that has frequently exceeded limits recommended by the World Health Organization. The National Energy Administration said in its work plan in January that gas output is forecast to rise 12% from a year earlier to 131 Bcm this year.

“Higher natural gas output was boosted by robust demand as end users continue to switch their boilers from coal-powered to gas-fed amid environmental requirements,” Wang Ruiqi, an analyst with ICIS-C1 Energy, a Shanghai-based consultancy, said by phone.

Chinese Premier Li Keqiang said at the National People’s Congress in March that pollution is a major problem and the government will "declare war" on smog by removing high-emission cars from the road and closing coal-fired furnaces.

Crude processing last month increased 2.6% from a year ago to 41.9 million metric tons, and crude output fell 0.1%  to 17.64 million tons, according to the data. Power output rose 6.2% to 452.8 billion kilowatt hours.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

Iran to maintain oil sales at 1 MMbpd into July

Iran anticipates maintaining crude exports at about 1 MMbpd until at least July when a deal with global powers over its nuclear program will be renewed or expire, the nation’s deputy oil minister said.

Iran is producing about 2.7 MMbpd, Ali Majedi said today in Dubai. Output may rise to as much as 3.7 MMbpd within six months of sanctions being lifted, he said, adding the move would also open the nation’s energy industry to investment.

The nation plans to outline a new oil development contract at a conference in London by November, offering overseas partners incentives. “We will introduce the new contract, plus some of the oil and gas fields for development,” Majedi said at the Middle East Petroleum and Gas Conference.

Iran, the fourth-largest oil producer in the Organization of Petroleum Exporting Countries, is discussing limits to its nuclear program in exchange for the removal of sanctions on its financial and energy industries. The U.S. and allies say Iran is seeking to develop atomic-weapons technology, a claim Iran denies. An interim deal between the parties expires on July 20.

The revised oil contract terms will allow for flexible payments to international companies based on crude prices and development risk, the minister said.

The country is also seeking international buyers for its gas next year when the expansion of offshore fields will boost production levels to more than domestic demand, Majedi said.

“Iran plans to increase gas exports once domestic demand is saturated,” he said. “Pipeline export is preferred to liquefied natural gas shipments” for sales to markets including Europe, Majedi said.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.

OMV to invest $550 million in Lower Austria

OMV is consolidating its commitment to oil and gas production in Lower Austria. The Weinviertel region is the third most important production site in the company’s global portfolio after the exploration and production areas in Romania and Norway.

In line with the corporate strategy, OMV has invested heavily in exploration and production in Lower Austria. Investment in Lower Austria is set to rise to around $550 million (EUR 400 million) in the next two years.
Until 2016 around 80% of OMV’s total investment of around EUR 3.9 bn worldwide will go on exploration and production.

OMV CEO Gerhard Roiss: "Anyone striving for international growth needs to have a strong foundation. For us this foundation is Lower Austria. This investment in exploration and production underlines the importance of this region in the OMV portfolio."

"We took the decision on these investments in Lower Austria last year. Resources are needed in order to counter the natural depletion and stabilize production in what are mostly mature fields. Without these investments it wouldn’t be possible for us to maintain production levels", said OMV CEO Gerhard Roiss.

Last year the region produced 35,000 boed. Despite the natural depletion of resources, this level should remain stable in 2014 as the investment is set to balance out the natural depletion of 10% per year.

Drilling additional wells in Lower Austria is the key to securing and increasing production. Up to 24 drillings will be realized in Weinviertel in 2014, with 20 more planned for 2015 and 2016, respectively. 14 projects involve exploration wells with additional production potential.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Tolfem Investments Limited, online.