Awl Bidness

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601207&sid=a0R3ExCKIajg


Saudi Aramco’s Yanbu Refinery to Start Output in 2014
By Wael Mahdi

Dec. 28 (Bloomberg) -- Saudi Aramco, the world’s largest state-owned oil company, said its planned refinery in the industrial city of Yanbu will start production in 2014.

The refinery will process 400,000 barrels of heavy crude a day to produce diesel and gasoline with byproducts of sulfur and petroleum coke, the company said on its website yesterday.

The start was delayed from 2013 after ConocoPhillips opted out of the project to reduce its presence in the crude- processing business. Saudi Aramco in July formed the subsidiary, Red Sea Refining Co., to run the plant and in the same month gave final approval to start construction.

The management board of the refinery held its first meeting on Dec. 25 in Dhahran. Saudi Aramco board member, Salim S. Al- Aydh, was named chairman and Fahad Al-Helal was appointed president and chief executive officer.

 

[trysail]

http://www.npr.org/blogs/thetwo-way...s-forecast-has-ex-shell-exec-making-headlines


$5 A Gallon Gas Forecast Has Ex-Shell Exec Making Headlines
by Mark Memmott

Predicting that gasoline will hit $5 a gallon by some time in 2012 has put former Shell Oil president John Hofmeister on the news media's radar today.

Why's he think the price will go there?

"The issues that gave rise to high priced gasoline in 2007 and 2008 are repeating themselves, except the world demands even more oil in the next several years than before," Hofmeister tells CNN (he's due on tonight's edition of Parker Spitzer). "Asian growth is continuing. ... U.S. economic recovery has brought demand back to where it was before. Economic growth means even more demand. But the U.S. Government is prohibiting expansion of U.S. domestic crude oil production which puts upward pressure on global crude oil prices."

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601110&sid=aUOtk8_y48z4

http://www.eia.gov/EMEU/cabs/Brazil/images/Map%20of%20Presalt%20Block.gif​

Brazil's page at EIA:
http://www.eia.doe.gov/emeu/cabs/Brazil/Oil.html


Petrobras’s Tupi, Iracema Oil Reserves Beat Estimates
By Peter Millard

Dec. 29 (Bloomberg) -- Petroleo Brasileiro SA, Brazil’s state-controlled oil producer, said that two oil fields in the Tupi and Iracema deepwater areas hold 8.3 billion barrels of recoverable crude, exceeding previous estimates.

The Lula field in the Tupi area has 6.5 billion barrels of recoverable oil and equivalents and the Cernambi field at Iracema holds 1.8 billion barrels, Rio de Janeiro-based Petrobras said in a regulatory filing today. That compares with a previous estimate of a combined 5 billion to 8 billion barrels. Petrobras declared the two areas off Brazil’s southeastern coast commercial after drilling 11 wells.

Petrobras, which currently has proven reserves of 14.9 billion barrels, aims to double that volume to as much as 35 billion barrels by 2014 as it develops discoveries in the deep waters of the Atlantic Ocean, where Tupi and Iracema lie. Tupi is the second-biggest find in the Americas since Mexico discovered Cantarell in 1976, trailing the Brazilian government’s estimated deposits of as much as 15 billion barrels at nearby Libra.

“This confirms growth potential at a mega field,” Marco Saravalle, an equity analyst at Coinvalores in Sao Paulo, said in a telephone interview today. “It also confirms the potential growth of the company.”

Petrobras rose for a fourth day, climbing 1.1 percent to 26.95 reais in Sao Paulo trading at 8:32 a.m. New York time.

President Luiz Inacio Lula da Silva said Dec. 9 that Brazil’s deepwater fields hold more oil than Petrobras Chief Executive Officer Jose Sergio Gabrielli says they contain. BG Group Plc, the U.K.’s third largest energy company and a partner with Petrobras at Tupi, said last month that the Tupi and Iracema area holds 9 billion barrels of oil.

Squid and Mollusk
Petrobras names all its exploration areas after sea life once it declares them commercial oil fields. Lula, the nickname that Brazil’s president adopted as part of his name, means squid and Cernambi means mollusk. The fields correspond to all the reserves in the Tupi and Iracema areas, an official at Petrobras’s press office said.

The company had 14.9 billion barrels of proven reserves at the end of 2009, according data on Petrobras’s website, using standards set by the Society of Petroleum Engineers.

Brazil’s oil regulator, known as the ANP, said yesterday it found more evidence of oil at Libra, the first field the government plans to auction next year. Petrobras will operate all new concessions in the so-called pre-salt area where Libra and Tupi were discovered.

Intensifying Exploration
Exploration at deepwater oil fields in Brazil will “intensify” next year as Petrobras and other oil companies add drilling rigs, Credit Suisse said in a research note Dec. 27.

Brazil’s production of oil rose to a record 2.089 million barrels a day last month. Petrobras’ total November oil and gas production was 2.6 million barrels a day, of which 2.03 million barrels was in Brazil.

Crude for February delivery dropped 21 cents, or 0.2 percent, to $91.28 a barrel on the New York Mercantile Exchange at 10 a.m. Futures have advanced 15 percent this year.

 

[trysail]

A little perspective never hurts:

Vicks NyQuil--------------------------$98.13/gallon
Gillette Right Guard----------------$57.22/gallon
Pert Plus--------------------------------$35.93/gallon
Shout (liquid cleaner)--------------$14.04/gallon
Budweiser------------------------------$13.03/gallon
Coca-Cola-------------------------------$8.00/gallon
Evian (water)--------------------------$7.45/gallon
Milk (2% Vitamin D)-----------------$3.99/gallon

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=32614&category_id=0&recession_bars=On&width=800&height=480&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=false&fo=ve&id=OILPRICE,CPIAUCSL&transformation=nbd,nbd&scale=Left,Left&range=Custom,Custom&cosd=1973-01-01,1973-01-01&coed=2010-11-01,2010-11-01&line_color=%230000FF,%23FF0000&link_values=,&mark_type=NONE,NONE&mw=4,4&line_style=Solid,Solid&lw=2,2&vintage_date=2010-12-29,2010-12-29&revision_date=2010-12-29,2010-12-29&mma=0,0&nd=1973-01-01,1973-01-01&ost=,&oet=,&fml=a,a&fq=Monthly,Monthly&fam=avg,avg&fgst=lin,lin

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=30416&category_id=0&recession_bars=On&width=800&height=480&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=false&fo=ve&id=OILPRICE&transformation=lin&scale=Left&range=Max&cosd=1946-01-01&coed=2010-11-01&line_color=%230000FF&link_values=&mark_type=NONE&mw=4&line_style=Solid&lw=2&vintage_date=2010-12-29&revision_date=2010-12-29&mma=0&nd=&ost=&oet=&fml=a&fq=Monthly&fam=avg&fgst=lin

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=34072&category_id=0&recession_bars=On&width=800&height=480&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&ts=8&preserve_ratio=false&fo=ve&id=OILPRICE,GASREGW&transformation=nbd,nbd&scale=Left,Left&range=Custom,Custom&cosd=1990-08-01,1990-08-20&coed=2010-11-01,2010-12-27&line_color=%230000FF,%23FF0000&link_values=,&mark_type=NONE,NONE&mw=4,4&line_style=Solid,Solid&lw=2,2&vintage_date=2010-12-29,2010-12-29&revision_date=2010-12-29,2010-12-29&mma=0,0&nd=1990-08-01,1990-08-20&ost=,&oet=,&fml=a,a&fq=Monthly,Weekly%2C%20End%20of%20Period&fam=avg,avg&fgst=lin,lin

​

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601095&sid=adYSnLQdaSsU

http://www.eia.doe.gov/emeu/cabs/Russia/images/RUS_oilmap2.gifhttp://www.eia.doe.gov/emeu/cabs/Russia/images/2010%20Proposed%20Pipelines%20to%20China.gif

​

Russia Starts Oil Pipeline to China as Putin Looks to Diversify
By Stephen Bierman

Dec. 31 (Bloomberg) -- Russia will start its first oil pipeline to China at midnight, increasing crude exports to the world’s largest energy consumer.

OAO Rosneft, Russia’s largest oil producer, and state-run pipeline operator OAO Transneft will sell China 15 million metric tons (110 million barrels) a year for 20 years through the East Siberia Pacific Ocean pipeline, known as ESPO, after China provided the companies $25 billion in oil-backed loans to finance construction and development of deposits.

Russia currently supplies crude to China by rail and shipped 1.06 million tons in November, making it the Asian country’s seventh-largest supplier, according to Chinese customs statistics on Bloomberg.

Prime Minister Vladimir Putin has said the $26 billion project will diversify the delivery of Russia’s natural resources beyond Europe. Russia also hopes the pipeline will unlock millions of barrels of resources trapped in remote deposits along its path.

“Asian oil buyers clearly gained,” Ed Chow, a senior fellow at the Center for Strategic & International Studies, said by e-mail. China won’t pay a premium for the crude, and the cost of the pipe will be distributed among Russian oil producers, he said.

The ESPO pipeline when completed in 2014 will span about 4,700 kilometers (2,900 miles), longer than the distance from London to Tehran. It will carry oil from Taishet, beyond the west Siberian basin where most of Russia’s oil is produced, to Russia’s Pacific port of Kozmino.

Daqing Spur
Transneft completed construction of about half the pipe’s length, to Skovorodino in eastern Siberia in 2009. From there a 1,024 kilometer spur extends to Daqing in northeast China.

The Moscow-based pipeline operator doesn’t now plan to accommodate a Chinese request to double delivery volumes, Transneft President Nikolai Tokarev said in September. Transneft has directed the Chinese to buy additional supplies at Kozmino, Transneft spokesman Igor Dyomin said by e-mail.

Kozmino, currently supplied by rail, loaded 15 million tons of ESPO blend oil this year as of Dec. 25, the port said in a Dec. 28 statement. Transneft plans for the port to carry the same amount next year, Dyomin said. The link’s capacity may be raised to 50 million tons in 2013 from the current 30 million tons, according to a Transneft development plan.

Russia will probably send less crude to Europe as a result of the Asia link, Transneft’s Dyomin said.

 

[overthebow]

A little perspective never hurts:

Vicks NyQuil--------------------------$98.13/gallon
Gillette Right Guard----------------$57.22/gallon
Pert Plus--------------------------------$35.93/gallon
Shout (liquid cleaner)--------------$14.04/gallon
Budweiser------------------------------$13.03/gallon
Coca-Cola-------------------------------$8.00/gallon
Evian (water)--------------------------$7.45/gallon
Milk (2% Vitamin D)-----------------$3.99/gallon





Yeah, but I tried to run my car on that stuff and it doesn't work very well.

Yeah, but I tried to run my car on that stuff and it doesn't work very well.

 

[trysail]

Yeah, but I tried to run my car on that stuff and it doesn't work very well.

Well, you could always drill for some. There is, after all, lots of the stuff sitting offshore California doing nothing except gathering dust.

 

[overthebow]

Well, you could always drill for some. There is, after all, lots of the stuff sitting offshore California doing nothing except gathering dust.

I agree.

And there are acres of paradise that have yet to be paved over and turned into a parking lot.

Yes, there is oil to be had, but it is getting harder to get and the getting poses significant risk to the environment. There is oil off the coast of Brazil. Where? 160 miles out. How deep? 1.25 miles of water, then 3+ miles below the surface. If there is a blow out on that well, it would be an order of magnitude more difficult to close than the one in the Gulf of Mexico.

 

[trysail]

I agree.

And there are acres of paradise that have yet to be paved over and turned into a parking lot.

Yes, there is oil to be had, but it is getting harder to get and the getting poses significant risk to the environment. There is oil off the coast of Brazil. Where? 160 miles out. How deep? 1.25 miles of water, then 3+ miles below the surface. If there is a blow out on that well, it would be an order of magnitude more difficult to close than the one in the Gulf of Mexico.

Well, ya know, this is what happens when innumeracy and emotion meet. In fifty years, two or three wells out of the 150,000 that have been drilled have a blowout ( mainly because of employees failing to react properly— read this: http://www.nytimes.com/2010/12/26/us/26spill.html?_r=1&pagewanted=all ) and all of a sudden people start to think it's inordinately risky ( let's see, three [ 3 ] divided by 150,000 over fifty years is ... )

It is, of course, a completely uninformed and irrational logic— the delusional type that only makes sense to patrons of casinos and lottery customers.





http://www.nytimes.com/2010/03/31/science/earth/31energy.html
Obama to Open Offshore Areas to Oil Drilling for First Time

 

[overthebow]

Well, ya know, this is what happens when innumeracy and emotion meet. In fifty years, two or three wells out of the 150,000 that have been drilled have a blowout ( mainly because of employees failing to react properly— read this: http://www.nytimes.com/2010/12/26/us/26spill.html?_r=1&pagewanted=all ) and all of a sudden people start to think it's inordinately risky ( let's see, three [ 3 ] divided by 150,000 over fifty years is ... )

It is, of course, a completely uninformed and irrational logic— the delusional type that only makes sense to patrons of casinos and lottery customers.

There have been 150,000 drills sunk 4 miles down 160 miles off the coast? I guess I missed that.

My point was that drilling that deeply off the coast increases risk. I don't think you got that, since you seem to think that drilling in Kilgore, Texas has an equivalent amount of risk.

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601110&sid=aVS0ZeBXfspQ


Russian Oil Output Hits Post-Soviet Record in 2010
By Stephen Bierman

Jan. 2 (Bloomberg) -- Russia, the world’s largest oil producer, set a post-Soviet record for yearly crude output in 2010, even as the country’s production in December slipped from the previous month.

Russian output last year rose 2.2 percent to 10.15 million barrels a day, the highest annual average since the collapse of the Soviet Union in 1991, the Energy Ministry’s CDU-TEK statistics unit said in a statement today. Russia produced 9.93 million barrels a day in 2009.

Output in December fell 0.6 percent to 10.18 million barrels a day compared with 10.24 million barrels a day in the previous month, according to the statistics. By comparison, Saudi Arabia produced 8.25 million barrels a day in December.

OAO Rosneft, Russia’s largest oil producer, began pumping in August from the Siberian Vankor deposit, the country’s largest new project. Rosneft’s Vankor unit produced over 255,000 barrels a day in December, the ministry’s statistics unit said. Prime Minister Vladimir Putin said on Oct. 28 in the central city of Samara that Russia can produce 10 million barrels a day for at least a decade.

The country’s annual production of natural gas grew by 12 percent to 650.3 billion cubic meters last year against 582 billion cubic meters in 2009, the statistics unit said. Russia holds the world’s biggest gas reserves and is a major supplier of the fuel to Europe.

Russian gas output increased in December to an average of 2.03 billion cubic meters a day from 2.02 billion cubic meters a day the same month a year ago, according to the statistics. Because gas output in Russia is seasonal and can vary widely throughout a year, 12-month comparisons are more meaningful than those made from one month to the next.

OAO Gazprom, Russia’s gas exporter, produced 1.60 billion cubic meters a day in December compared with 1.63 billion cubic meters a day a year ago, for a year-on-year decrease of 1.9 percent. Gazprom produced 508 billion cubic meters of the fuel in 2010, up 10 percent from the previous year, as demand picked up after the global financial crisis.

 

[busybody..]

world produces more oil daily

while teh US produces less and stops drilling

 

[eyer]

They're beginning to tap into the Eagle Ford Shale in south Texas...some believe it could prove to be the largest find of crude and natural gas ever discovered in the lower 48...

...ironically, at the same time, the EPA is bypassing Congress and dictating its own regulations to Texas and the atty gnrl [acting on rebel Gov Perry's instruction, no doubt] isn't submitting...he's going through the legal channels now, but it could get very interesting again down here in the 'ol Republic.

 

[trysail]

They're beginning to tap into the Eagle Ford Shale in south Texas...some believe it could prove to be the largest find of crude and natural gas ever discovered in the lower 48...

...ironically, at the same time, the EPA is bypassing Congress and dictating its own regulations to Texas and the atty gnrl [acting on rebel Gov Perry's instruction, no doubt] isn't submitting...he's going through the legal channels now, but it could get very interesting again down here in the 'ol Republic.

There's been tons of acquisition activity; the Eagle Ford is no secret. A lot depends on location; some areas are MUCH more petroliferous than others.

_____________________


Statoil, ASA acquisition of productive and prospective Eagle Ford acreage

$850 MM consideration for 550 MMBOE

_____________________
Producing Eagle Ford

• Reservoir located at 9,000 – 14,000 ft
• 4-8 horizontal wells from each multi- well pad
• 3,000 – 5,500 ft lateral sections
• Average drilling time per well currently 40 days
• Utilising horizontal drilling and hydraulic fracturing technology
• Decline from initial production rate but long tail production
• 55,000 acres of Enduring land already held by production (100%)


Talisman, Statoil to Buy, Operate Texas Oil Shale
By Dan Hart

Oct. 10 (Bloomberg) -- Talisman Energy Inc. and Norway’s Statoil ASA agreed to pay $1.33 billion for oil shale properties in the Eagle Ford formation in South Texas and form a joint venture to develop the fields.

Statoil also will pay $180 million a 50 percent stake in Talisman’s existing Eagle Ford holdings. For both transactions, Statoil will spend $843 million, according to a statement on the company’s website. Talisman’s net cost for the acquisition will be $485 million, a company statement said.

Shale development is driving a surge in U.S. gas output and has started to draw interest from companies including Exxon Mobil Corp. and Chevron Corp. Talisman said there are as many as 1,000 drilling sites and an estimated 800 million barrels of oil equivalent, about 50 percent of which will be condensate or natural gas liquids, on the acquired property.

Talisman, a Canadian oil and natural gas explorer, will initially operate the 97,000 acres (39,254 hectares) purchased from closely held, Denver-based Enduring Resources LLC. Eagle Ford is estimated to have reserves equaling more than 80 billion barrels of oil.

A message left by Bloomberg News seeking comment from David Mann, a Talisman spokesman, was not immediately returned.

More Oil Than Gas
Eagle Ford is about 50 miles wide and 400 miles long, extending from Texas’s southern border to the east, according to the Railroad Commission of Texas, which regulates the oil industry. The formation delivers natural gas and “appears to produce much more oil” than other shale fields, the agency wrote in a description on its website.

Talisman and Statoil have an option to buy as much as 22,000 additional Eagle Ford acres. Talisman also has stakes in the Marcellus shale in the northeastern U.S. and the Montney shale in British Columbia.

Statoil, Norway’s largest oil and gas company, said last week that it aims to raise 3.84 billion kroner to 4.92 billion kroner ($850 million) by selling shares in its gas station and transport fuel unit to raise funds to expand abroad amid its dwindling reserves in the North Sea. Oil output offshore Norway, where Statoil has operating rights on about 80 percent of the country’s oil and gas production, is forecast to drop 6 percent in 2010, declining for a 10th year, according to the Petroleum Directorate.

Raising Cash
A natural-gas price of less than $4 per thousand cubic feet will allow the companies to break even in the Eagle Ford formation, Talisman said. Gas for November delivery rose 3.4 cents, or 0.9 percent, to $3.651 per million British thermal units in the New York Mercantile Exchange trading Oct. 8. U.S. gas production in May was 1.92 trillion cubic feet, the highest level since 1974, according to the Energy Department.

In April, Talisman agreed to sell C$1.9 billion ($1.87 billion) worth of natural-gas fields in Alberta and Ontario to free cash for shale projects.

North American gas producers are increasing output from shale formations, where rocks hundreds of feet below the ground are fractured to unlock fuel deposits. Exxon agreed to buy shale-gas developer XTO Energy Inc. for $31 billion on December 14, 2009. On Jan. 4., Total SA agreed to buy a stake in Chesapeake Energy Corp.’s assets in the Barnett Shale in North Texas for as much as $2.25 billion.

Talisman rose 38 cents, or 2.1 percent, to $18.16 Canadian dollars ($17.96) and has fallen 7.8 percent this year. Statoil rose 0.9 krone, or 0.7 percent, to 127.8 kroner and declined 12 percent this year.

 

[eyer]

A story in the San Antonio Express-Herald a couple of weeks ago detailed the financial advice seminars the oil producers and local government agencies are holding for the hoard of landholding, brand new multi-millionaire from the Eagle Ford area...the support these endeavors rely on are booming businesses all around...so much so, that the current $20M budget shortfall the state has just may end up vanishing as soon as the oil/gas begins to flow (just my wo).

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601207&sid=aEDAH5S89Z5k


PetroChina’s Oldest Oilfield Meets Output Expectations
By Bloomberg News

Jan. 4 (Bloomberg) -- PetroChina Co.’s Daqing oilfield, the company’s oldest and largest, met the company’s production expectations last year, helped by new drill technology.

Crude output at the field in the northeastern province of Heilongjiang reached 40 million metric tons, or about 800,000 barrels a day, China National Petroleum Corp., PetroChina’s parent, said in its on-line newsletter. Natural gas production at Daqing stood at 3 billion cubic meters last year, CNPC said.

Output at Daqing, discovered in 1959, has declined from a peak of 1.1 million barrels a day in 1997. PetroChina is using advanced drilling technology to keep the field’s annual production at 800,000 barrels a day through 2020.

Changqing, PetroChina’s second-biggest field, produced 16 percent more crude last year compared with 2009, according to the official Xinhua News Agency on Jan. 2.

The field in northwestern China produced 18.25 million tons of crude and 21.1 billion cubic meters of gas in 2010, Xinhua reported. That compares with an oil output target of 18.5 million tons.

PetroChina plans to produce 40 million tons of oil and gas at Changqing this year, Xinhua said.

Changqing overtook rival China Petroleum & Chemical Corp.’s Shengli field as the nation’s second-largest after boosting oil and gas production to more than 30 million tons in 2009. PetroChina aims to increase output at Changqing to 50 million tons a year by 2015 as supplies from Daqing decline over time.

 

[trysail]

Anybody who states that petroleum refining technology isn't complex displays a profound ignorance and immediately loses all credibility. As the average barrel of petroleum has gotten heavier (i.e., more viscous) over time, refining complexity has grown. Extremely high temperatures and pressures are required to "crack" today's average barrel into the lighter components (i.e., gasoline and aviation fuel) which are in demand and to reduce sulphur and volatile organic compounds. Hydrocracking and catalytic cracking allow higher yields of premium fuels. Refineries also produce the aromatic and olefin feedstocks for the entire petrochemical manufacturing chain that underlies everything from plastics to lubricants. Adding to the nightmarish complexity of refinery operations and logistics are the multiple grades of gasoline required by various states and localities and seasonal environmental requirements that necessitate the blending of oxygenates (such as MTBE— which was mandated by the U.S. Congress several years ago). Seasonal factors affect refinery operations as heating oil inventories must be built each summer in anticipation of winter, while gasoline inventories are required to meet summer demand for gasoline. Catalysts must be periodically recharged requiring that refineries be taken offline.

Historically, refining has not been a very profitable undertaking. Margins are extremely volatile and a refining operation has little-to-no control over either imput costs (i.e., crude) or product revenues (i.e., wholesale prices for heating oil, gasoline, diesel fuel or aviation fuel).

A longer view of the 3-2-1 crack spread:
http://charts.quote.com/cis/fs2spon...=BAR&bardensity=MEDIUM&showextendednames=true
http://futuresource.quote.com/chart...14*HO)-CL&o=&a=M&z=800x550&d=medium&b=bar&st=

Motiva, for example, is in the midst of a multi-year project to add 325,000 barrels per day of new capacity (essentially, a doubling of capacity) to its existing Port Arthur (Texas) refinery. Port Arthur expansion cost: $17,000,000,000 (a/k/a SEVENTEEN BILLION dollars). Chevron is also expanding capacity at its Pascagoula (Mississippi) refinery by ten percent.

There's a simple reason there haven't been any "greenfield" refineries built in over twenty years; it is absolutely and utterly impossible to get permits. It is much easier and more efficient to expand existing refinery capacity. This is a business that requires enormous amounts of capital and there are undeniable economies of scale.

A rough approximation of the current "3-2-1 crack spread:"
$88.93 Nymex Crude Future ($/bbl.)
$2.12 Nymex Crude Future ($/gal.) = $3.35 Retail ($/gal.)
$2.49 Nymex Heating Oil ($/gal.)
$104.68 Nymex Heating Oil ($/bbl.)
$2.39 Nymex RBOB Gasoline Future ($/gal.) = $3.02 Retail ($/gal.)
$100.43 Nymex RBOB Gasoline Future ($/bbl.)

3-2-1 Crack Spread:
$12.91
(lest one jump to inaccurate conclusions, the crack spread is enormously volatile and one would be delusional to base gargantuan capital expenditures on an assumption of continuation of any particular level)

                                        4Q09  1Q10  2Q10  3Q10  4Q10
USA       
- West Coast                            1.68  3.32  8.18  7.24  5.86 
- Gulf Coast                            1.75  3.50  6.59  4.72  5.03 
- Mid West                              1.22  1.86  7.54  6.34  4.97 
North West Europe                       2.69  4.29  3.84  2.59  4.50 
Mediterranean                           0.79  3.11  3.92  2.70  3.44 
Singapore                              -1.47  0.97  0.85  2.34  2.32 
Refining Global Indicator Margin*       1.49  3.08  5.49  4.53  4.64

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601110&sid=asSHVH8RlctE


LNG Demand Increase in Asia Signals 2011 Rally
By Dinakar Sethuraman

Jan. 6 (Bloomberg) -- Liquefied natural gas demand in Asia is poised to rise for a second year in 2011, signaling a rebound in spot prices for the fuel after a 32 percent drop in November.

The region’s imports may increase by 5 percent this year, after jumping almost 12 percent in 2010 and falling 2.9 percent the previous year, according to Sook Ching Wong and Alexis Aik of FACTS Global Energy, a Singapore-based energy consultant. Japan, the world’s biggest LNG buyer, paid $9.40 per million British thermal units for deliveries in November, compared with about $14 a year earlier, according to Japanese customs data.

Asian nations are boosting imports to meet rising demand from consumers and manufacturers just as colder-than-normal weather in Europe and plant shutdowns from Nigeria to Norway curtail supplies. Japan’s purchases rose about 10 percent to 63 million metric tons in the first 11 months of 2010 from a year earlier. South Korea’s climbed 30 percent to 29.3 million tons.

“Demand for spot LNG in Asia this winter will remain healthy and prices will reflect this,” said Maria Bitri, a London-based analyst with Clarkson Plc, the world’s largest shipbroker. “We are seeing quite significant activity in the spot market.”

U.K. benchmark front-month gas, used to price shipments for immediate delivery, jumped 81 percent to 62.95 pence per therm last year at the National Balancing Point, equivalent to $9.8 per million Btu. That’s a premium of about 4 percent to what Japan paid in November, compared with a 123 percent discount in the November-to-February period of 2009.

Supplies ‘Tightening’
“The market’s tightening as buyers realize supply is getting tighter because of demand from the U.K. and Europe,” said Tony Regan, an LNG analyst at Trizen International Ltd. in Singapore. “A cold winter could result in deals in the $10-11 range before perhaps coming off again in spring.”

Rising demand for LNG, which is gas chilled to a liquid for transport by ship, may help ease a global glut of the fuel as import capacity is added in emerging economies in China, India, Brazil and Argentina, Bank of America Merrill Lynch said in an Oct. 25 report. Worldwide shipments increased by more than 20 percent in the first half of last year, the bank said.

South Korea may receive at least 11 spot cargoes of the fuel in December and January, including a shipment on BP Plc’s British Innovator, due to arrive on Jan. 7, according to vessel- tracking data. The country got 18 cargoes from the Atlantic Ocean area in the same period last year, according to customs data.

Stavanger-based Statoil ASA, Norway’s biggest oil and gas producer, aims to resume production at its Snohvit LNG plant in Hammerfest in the second half of January, Ola Anders Skaubya, a company spokesman, said on Jan. 3. Nigeria LNG Ltd., which has the capacity to meet about 12 percent of world demand, said Dec. 31 it had reopened its plant after idling it since Dec. 22 due to a power outage.

Winter Weather
Korea Gas Corp., the biggest individual buyer, and Tokyo Gas Co. are competing with European utilities for LNG amid colder-than-normal weather in both regions. Japanese temperatures dropped to 4 degrees Celsius (39 Fahrenheit) on Dec. 30, compared with an average 9.9 Celsius for December, according to CustomWeather Inc. Temperatures averaged 1.4 degrees Celsius in London last month, compared with a mean 5.7 Celsius in the previous five years.

Asian LNG imports may total 126.6 million tons in 2010, rising to 133.6 million this year, FACTS said in a Dec. 22 research note. Chinese shipments alone may climb 50 percent this year, after a 60 percent increase in 2010, it said.

“China’s where the upside comes from and the Middle East is another interesting one,” said Frank Harris, head of global LNG at Edinburgh-based Wood Mackenzie Consultants.

U.K. Shipments
Britain, an entry point for gas to nearby parts of continental Europe, imported about 659 billion cubic feet last year from 357 billion in 2009 and 29 billion in 2008, according to an e-mail note yesterday by Raleigh, North Carolina-based Pan EurAsian Enterprises Inc. The U.K. sent out a record 77.3 billion cubic feet of the fuel in December because of cold weather, the U.S. energy consultant said.

“There is quite a competition with Europe, where the colder weather is also boosting demand,” Clarkson’s Bitri said.

Sellers typically price spot LNG off U.K. benchmark futures, forcing utilities in Asia to pay a premium over National Balancing Point prices to attract cargoes, according to Regan, a former fuel trader at Royal Dutch Shell Plc.

 

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http://www.petrobras.com.br/userfiles/image/mapa_161110.jpg​

Petroleo do Brasilero press release:

11/17/2010

We discover of light oil to the south of Santos Basin. We confirm the presence of light oil in well located to the south of Santos Basin, in sandstone reservoirs, similar to those found in the accumulations of Tiro and Sidon. The discovery is located around 15 km of the Tiro and Sidon area.

The well is situated in block S-M-1352 of the BM-S-41 Concession, where we hold 100% interest. It is under ANP analysis the transfer of a 20% of the participation interest of the concession to the company Karoon Petroleum and Gas.

This well is located about 280 kilometers off the coast of the State of São Paulo, in a water depth of 400m. The reservoirs were found at a depth of 2,200 meters. The well continues to be drilled with the aim of researching other deeper objectives, still in the post-salt section.

This discovery confirms the success of the our exploratory strategy in the search for the formation of a new production hub in the southeastern part of Santos Basin which may be integrated by a series of already discovered fields, such as Caravela, Cavalo Marinho, Coral and Tiro-Sidon, as well as others to be discovered or in evaluation process, such as that of well in the Marujá prospect.

 

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http://money.cnn.com/2011/01/07/new...petition.fortune/index.htm?source=yahoo_quote


The newest big oil company: China?

By Shelley DuBois
January 7, 2011

FORTUNE -- You know the major players in big oil -- Shell, Exxon Mobil, BP, Chevron and a handful of other fuel goliaths. Soon though, it might be time to add China to that list. The country's national oil companies are starting to gain ground with the majors.

The tension between national oil companies gaining strength and big multinationals hasn't really come to a head yet. But there could be obstacles on the horizon for big companies such as Exxon Mobil that need to partner with the national companies tied to the last big oil reserves.

China is one of the countries that's stretching the traditional multinational vs. national oil company paradigm. Over the past ten years, national oil companies, or NOCs, have gained strength. China's NOCs have grown powerful, purchasing plays across the globe to gain a wide range of fuel assets, and also, for the experience of managing large projects.

They haven't caught up to the majors in terms of experience. China's NOCs are relative latecomers to the international oil business, according to a recent Brookings report, and they can't bring the same pedigree to a major exploration project as a company like Exxon.

But they can offer initial capital. The Chinese government wants to compete with international oil companies, partially because it wants to secure a fuel source for its huge and growing country and partially for the sake of encouraging development of strong Chinese fuel companies.

Many of the bids that Chinese NOC's are making don't threaten multinational turf yet, the Brookings report says. China has gone into Sudan and Ecuador-areas that multinationals largely backed out of because of political instability.

But the issue comes to a head in places such as West Africa, says Allen Good, an analyst with Morningstar. If anyone is poised to partner with governments, Exxon is, he says. But, "the biggest threat to Exxon-and even Chevron and Shell-is what you have coming out of China. '

Chinese NOCs such as CNOOC and Sinopec, he says, can float financing to the government. Whereas, "Exxon doesn't necessarily for the leeway to do that kind of thing."

ExxonMobil has to be more conservative while trolling for assets. "One of the most fundamental pieces of the puzzle is the stability of the laws and regulations and the respect for sanctity of contracts," says Alan Jeffers, a spokesman for ExxonMobil. He adds, "it's our shareholders money that we're investing."

Some Chinese NOCs are publicly traded also, but strong backing from the Chinese government can warrant a different investment strategy than those used by multinationals.

"The Chinese themselves do not have an abundance of hydrocarbon reserves," says Bob Orr, leader of consulting firm Oliver Wyman's oil and gas practice, and the country wants securing fuel sources for its development. "There's a pressure there that you would see less of than, say, in the Middle East or even in Brazil."

But China and other countries tied to NOCs that are making international acquisitions may offer smaller NOCs something that multinationals can't, Orr says. Small exploration and refining companies could be interested in the benefits that come with partnering with the governments of countries, he says, such as reciprocity in certain markets.

Still, it will be a while before Chinese NOCs have anything close to a multinational's resumé, which counts for a lot.

Just look at what Exxon did in Qatar. "They've gone from no liquid natural gas exports to the leading LNG exporter in the world in ten years," Jeffers says. Not only does Qatar lead the world in exports of liquid natural gas, but the has the infrastructure to transport and sell the fuel, mostly thanks to Exxon.

In this case, the multinational was a good fit, thankfully for the company, since these exploration and production agreements often last for decades. But China is edging onto the scene, with the agility to make riskier investments and some pressure to secure a national fuel source-a stressor that would be foreign to a multinational company.

China will probably only grow stronger as an energy player in the coming landgrab for the next big oil reserves. The question is whether the country's NOCs will catch up in skills and resources fast enough to threaten companies like Exxon that have always ruled the integrated oil market.

 

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http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aPMT8GMx6Rf4


Alaska Pipe Closure May Draw Oman, Russia Oil to U.S.
By Christian Schmollinger

Jan. 11 (Bloomberg) -- Alaska’s pipeline closure may force U.S. West Coast refiners to purchase crude supplies from Oman and Russia to make up a shortfall in supplies, pushing Middle East benchmark prices higher, Societe Generale SA said.

The main grades to replace the lost Alaska North Slope crude oil will probably come from the two areas, Michael Wittner, a London-based analyst with Societe Generale, said in a report yesterday.

“If refiners, after waiting a couple more days, feel that they need to obtain alternative crude supplies because the restart appears to be slipping, they would have to increase imports,” Wittner said. “For this to happen, the main market impact would not be on WTI or even Brent. Instead, Dubai would strengthen relative to both Brent and WTI, in order to make the arbitrage economically feasible.”

The West Coast is isolated from the main U.S. and Canadian crude supply sources. The cutoff in Alaskan North Slope crude will force processors to turn to Russia’s East Siberian Pipeline and Sokol oil and Oman as they seek similar quality grades for their plants.

Dubai crude’s discount to Brent shrank 5.3 percent to $3.59 a barrel yesterday, the biggest drop in a month. The so-called Brent-Dubai exchange for swaps for January, or EFS, was at $3.69 a barrel today, according to PVM Oil Associates, a London-based brokerage. It has averaged $1.64 over the past year.

West Texas Intermediate crude futures surged 1.4 percent to $89.25 a barrel yesterday following the leak. Prices have failed to maintain the rally today, slipping as much as 0.4 percent to $88.93 on the New York Mercantile Exchange.

West Coast
The West Coast area, known as Petroleum Administration Defense District, or PADD 5, imported 105,000 barrels a day of Russian oil in October and 96,000 barrels of Oman crude during October, according to data from the Energy Information Administration. The region includes California, Washington, Oregon, Alaska, Nevada, Arizona and Hawaii.

The 800-mile (1,287-kilometer) Trans-Alaska Pipeline system was shut on Jan. 8 after a leak was found in a pump house. BP Plc and its partners operate the pipeline that runs from fields on Alaska’s North Slope to the port of Valdez. BP and other producers ConocoPhillips and Exxon Mobil Corp. suspended 95 percent of their production after the leak.

Alaska North Slope crude is a medium-to-heavy type with an American Petroleum Institute gravity of 31 degrees and sulfur content of 1.02 percent, according to data from Energy Intelligence Group. Oman is a similar grade at 33.34 degrees and with 1.04 percent sulfur.

ESPO Quality
Russia’s East Siberian Pipeline Oil, or ESPO, is considered better quality with a sulfur content of 0.535 percent and an API gravity of 34.7 degrees.

In March, BP chartered the tanker Iblea to carry ESPO from Kozmino Bay near Vladivostok in the Russian Far East to the West Coast, according to shipbroker notices.

West Coast refiners including Tesoro Corp. and Valero Energy Corp. said yesterday they are experiencing little or no impact after the pipeline closure.

Tankers were being loaded with reserve supplies at Valdez yesterday, according to Michelle Egan, a spokeswoman for Alyeska Pipeline Service Co., the operator. Inventories in Alaska stood at about 2.57 million barrels of crude as of Jan. 9, down from 2.95 million Jan. 7, according to the state’s website.

“At present, exports have not been halted, but it is hard to make up this supply loss,” JPMorgan Chase & Co. analysts, led by Lawrence Eagles, said in a research note yesterday. “West Coast refiners are likely to be looking for alternatives, which will tend to benefit Oman and Russian ESPO crude.”

 

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http://noir.bloomberg.com/apps/news?pid=20601110&sid=a_Uj3FKoCMpc


Coal at 28-Month High to Beat Oil, Gas on Floods: Energy Markets
By Dinakar Sethuraman and Ben Sharples

Jan. 13 (Bloomberg) -- Coal for producing power may beat oil and natural gas this year as disruptions from Australia to South Africa drive prices for the fuel to a 28-month high.

Thermal coal may climb about 14 percent to $150 a metric ton in coming weeks, while increased stockpiles limit gains for oil and natural gas, Joachim Azria, a New York-based analyst at Credit Suisse Group AG, said in a Jan. 10 report. Helen Lau, a Hong Kong-based analyst at UOB Kay Hian Ltd., said on Jan. 4 coal may advance as much as 15 percent. Prices at the Australian port of Newcastle were at $131.80 a ton on Jan. 7, the highest since September 2008, according to IHS McCloskey data.

“There’s definitely more possible upside in the coal market at the moment than there is in the oil market,” Ben Westmore, an energy economist at National Australia Bank Ltd. in Melbourne, said in a Jan. 12 interview.

Spot prices at Newcastle, the world’s biggest coal-export facility, have jumped 20 percent in less than six weeks, according to Petersfield, England-based McCloskey. The worst floods in Queensland state in 50 years shut mines and closed transport lines, disrupting supplies. Coal shipped via South Africa’s Richards Bay, Africa’s largest terminal for the fuel, gained about 18 percent. Oil in New York rose 6.1 percent in the same period, while natural gas added 5.1 percent.

“Coal should continue to outperform oil and gas in 2011,” said Azria, who estimates as much as 2 million tons of thermal supplies have been disrupted by the Australian floods.

Asian Economies
Australia & New Zealand Banking Group Ltd. increased its spot thermal coal price forecast to $140 a ton, from $120 a ton, for the three months to March 31, Mark Pervan, head of commodity research in Melbourne, said in a note on Jan. 7.

Demand for coal is growing faster than oil and gas as China and India boost imports to feed economies that are outpacing the rest of the world. China, which relies on the fuel for 70 percent of its energy, may increase overseas purchases by 30 percent this year, according to Lau, while imports to India may double, India Coal Market Watch said. Coal will remain the world’s most-used fuel for power generation through 2035, the International Energy Agency said in November.

Prices at Newcastle jumped 43 percent last year, while oil futures in New York gained 15 percent. Natural gas dropped 21 percent.

While coal is rising, the fuel is still more than 30 percent below the record set more than two years ago. Newcastle coal traded at $192.50 a ton in July 2008 as floods hampered supplies, according to McCloskey data on Bloomberg.

Disaster Zone
An area bigger than Texas and California covering more than 75 percent of Australia’s Queensland state has been declared a disaster zone. Fifteen people are dead and 61 missing after a flash flood smashed through Toowoomba on Jan. 10, taking the total killed to 26 since the deluge started in November. Brisbane, Australia’s third-largest city, was inundated with muddy water, flooding 15,000 properties, smashing roads and shuttering the city center.

The flooding has cut coal output by about 4.5 million tons since the start of December, about 3 million tons of which is coking coal, used by steelmakers, and the rest thermal coal, according to Colin Hamilton, a London-based analyst at Macquarie Group Ltd. The state exports about 50 million tons of thermal coal a year, according to Macquarie.

“It was a perfect storm for coal, with cold weather in the northern hemisphere boosting demand and excessive rainfall first in Colombia, Indonesia and now in Australia creating vast shortfalls in supply,” Amrita Sen, a London-based analyst for Barclays Plc, said in an e-mail on Jan. 10.

World's Biggest Supplier
Indonesia, the world’s biggest supplier of thermal coal, increased the reference price for the fuel by 8.7 percent in January to $112.4 a ton, the Directorate General of Coal and Minerals said on its website. Prices have climbed 25 percent since September.

Coal shipped through Richards Bay was disrupted last month by derailments that depleted stockpiles at the terminal, threatening to curtail first-quarter exports, port Chief Executive Officer Raymond Chirwa said on Jan. 4. India bought almost a third of Richards Bay’s exports last year.

Prices at the port were at $126.39 a ton on Jan. 7, after rising 60 percent last year.

Asian Driver
“You have strong underlying fundamentals for coal,” said Emmanuel Fages, a Paris-based analyst at Societe Generale SA. “Bottlenecks remain on the supply side, so Asia is sucking up resources even more from traditional suppliers of the West, like Colombia or South Africa. You are bound see price increases over the medium term.”

China’s coal imports may rise to 210 million tons in 2011 from an estimated 166 million last year, according to Lau. The country, which became a net importer of the fuel for the first time in 2009, boosted overseas purchases by 35 percent through November 2010, according to government data.

While oil imports to China will continue to increase this year, they may not match last year’s 17 percent pace, as growth in refining capacity slows, Lawrence Eagles, a New York-based analyst with JPMorgan Chase & Co., said in a Jan. 10 note.

India may double imports of thermal coal to 104 million tons in the year ending March 2012, according to Coal Minister Sriprakash Jaiswal. That compares with 3 percent growth in oil consumption, according to the Paris-based IEA.

“Long-term fundamentals for coal are more robust than for oil or gas, because the price increases are really driven by speculative expectations at present for oil and gas,” Fages said. If growth slows in China, it would take only about a month for oil and gas “to come down to much lower levels,” he said.

 

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I'll be a sonofabitch. Very, very interesting. As a result of its 2003 contribution of assets to the formation of TNK-BP, BP already had a not insubstantial portion of its reserves and assets in Russia. This is a fascinating turn of events. Make no mistake about it; this is a big deal.




_____________________________

Release date: 14 January 2011
Major Arctic Projects and Share Swap
BP and Rosneft announced today that they have agreed a groundbreaking strategic global alliance.

Rosneft and BP have agreed to explore and develop three license blocks - EPNZ 1,2,3 – on the Russian Arctic continental shelf. These licences were awarded to Rosneft in 2010 and cover approximately 125,000 square kilometres in a highly prospective area of the South Kara Sea. This is an area roughly equivalent in size and prospectivity to the UK North Sea.

This historic agreement creates the first major equity-linked partnership between a national and international oil company. Following completion of this agreement, Rosneft will hold 5 per cent of BP’s ordinary voting shares in exchange for approximately 9.5 per cent of Rosneft’s shares. The share swap component of the alliance creates strategic alignment to pursue joint projects and demonstrates mutual confidence in the growth potential of both companies.

BP and Rosneft have also agreed to establish an Arctic technology centre in Russia which will work with leading Russian and international research institutes, design bureaus and universities to develop technologies and engineering practices for the safe extraction of hydrocarbon resources from the Arctic shelf. The technology centre will build on BP’s deep offshore experience and learnings with full emphasis on safety, environmental integrity and emergency spill response capability.

Rosneft and BP have agreed to continue their joint technical studies in the Russian Arctic to assess hydrocarbon prospectivity in areas beyond the Kara Sea. The parties will also seek additional opportunities for international collaboration beyond their 50/50 joint venture partnership in Ruhr Oel GmbH, a refining joint venture in Germany (subject to completion of Rosneft’s recent purchase of 50 per cent of Ruhr Oel from PDVSA).

Igor Sechin, Deputy Prime Minister of the Russian Federation, who participated in the signing ceremony, said: “Global capital and Russian companies are clearly ready to invest in world class projects in Russia; and Russian companies are quickly emerging at the forefront of the global energy industry.”

BP’s chief executive, Bob Dudley, said: “This unique agreement underlines our long-term, strategic and deepening links with the world’s largest hydrocarbon-producing nation. We are very pleased to be joining Russia’s leading oil company to jointly explore some of the most promising parts of the Russian Arctic, one of the world’s last remaining unexplored basins. Underpinning this alliance is a new type of relationship based on a significant cross-shareholding, and bringing together technology, exploration and safe and responsible field development skills. We are very pleased to welcome Rosneft as a strategic partner and major shareholder in the BP Group.”

Rosneft’s President, Eduard Khudainatov, said: “I am pleased that in just a few months we’ve significantly moved forward in implementing Russia’s offshore strategy. In its operations, our future joint venture will utilize the experience and expertise of BP, one of the leaders in the global oil and gas industry. This project is unique in its complexity and scale both for Russia and the global oil and gas industry. We see it as the next step in developing our relations with BP.”

BP Chairman, Carl-Henric Svanberg, said: “The world’s need for energy continues to increase. BP is working with national oil companies using its leading exploration skills and expertise to meet this demand. This is a trend which will increase as access to resource becomes scarcer.

This landmark deal creates a deep partnership which represents a new stage in these relationships. The exchange of shares demonstrates our mutual commitment. The BP board believes that the combination of assets and skills will unlock significant value and thus the issue of shares to Rosneft is in the interests of all shareholders.”

The aggregate value of the shares in BP to be issued to Rosneft is approximately $7.8bn (as at close of trading in London on 14 January 2011). The transaction is subject to certain listing approvals and the completion of certain administrative requirements and is expected to complete within a few weeks. BP and Rosneft view their cross-shareholdings as long term and strategic.

Rosneft is Russia’s leading oil producing company. It produces some 2.4 million barrels of oil equivalent (boe) per day, and has reserves of 15,146 billion boe. It produces oil in all key regions of Russia. Rosneft reported (pre tax) profits for the year end 31 December 2009 of $8,519m and gross assets (as at 30 September 2010) of $87,984m.
Notes to editors In October 2010, Rosneft announced that it had agreed to purchase from PdVSA 50 per cent of Ruhr Oel GmbH, a German refining joint venture with BP.

In January 2006, BP and Rosneft launched a scientific research study to evaluate the Russian Arctic.

In 1998, BP and Rosneft started an alliance that eventually led to the formation of three joint ventures to conduct exploration on the Russian continental shelf, offshore Sakhalin.

The reserve figures quoted above have been estimated by Rosneft on an SEC (life of field) basis.

The swap ratio is based upon the volume weighted average prices of the shares of the two companies across all exchanges in which significant numbers of shares of the companies, (and associated American Depositary Receipts and Global Depositary Receipts), are traded (Moscow, London, New York) over the fifteen trading days in which all three exchanges were open, beginning 9th December, 2010 and ending 12th January 2011.

BP has agreed to issue 988,694,683 ordinary shares to Rosneft; Rosneft has agreed to transfer 1,010,158,003 ordinary shares to BP.

The shareholdings being exchanged are subject to mutual lock-up restrictions for a period of two years (subject to limited exceptions). After the lock-up period, the exchanged shareholdings of BP and Rosneft will be subject to certain disposal restrictions.

Map: Location and scale of South Kara Sea licences
http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/images/press/Location_and_scale_of_South_Kara_Sea_licences_375xvar.gif​

Cautionary statement: This release contains forward-looking statements including with respect to the potential to develop new hydrocarbon resources and other statements which are generally, but not always, identified by the use of words such as ‘will’, ‘is expected to’, ‘plans’, and similar expressions. Forward-looking statements involve risks and uncertainties because they depend on circumstances that will or may occur in the future. Actual results may differ depending on a variety of factors, including developments in technology, regulatory actions, economic conditions, oil and gas prices and other factors discussed in this release and in our quarterly stock exchange announcements.


© 1999-2010 BP p.l.c.

 

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This is truly interesting. It's nice to see that V. Putin gave it his blessing. ( See above post for the press release )


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http://noir.bloomberg.com/apps/news?pid=20601110&sid=aQ0LrRizLOP4


BP Agrees Rosneft Share Swap to Form Arctic Drilling Alliance
By Brian Swint and Anna Shiryaevskaya

Jan. 15 (Bloomberg) -- BP Plc agreed to swap a $7.8 billion stake in the company for a 9.5 percent share of Russian state oil producer OAO Rosneft as part of a drive to extract billions of barrels of petroleum from above the Arctic Circle.

In the first major cross shareholding between an international oil company and a state-owned producer, the Russian company will hold 5 percent of BP, according to a statement released at a signing ceremony in London. The companies will develop three blocks in Russia’s Arctic Ocean, which may hold as much as 100 billion barrels of oil and gas.

The deal is Chief Executive Officer Bob Dudley’s biggest since he took the helm in October, charged with rebuilding the company after the worst U.S. offshore oil spill. The agreement with Rosneft strengthens BP’s position in Russia where it already owns 50 percent of the TNK-BP venture, the country’s second-largest.

“This is a deal we wanted to do for a long time,” BP Chairman Carl-Henric Svanberg said in an interview yesterday. “We get in a big partnership, which also gives us exploration rights in the Arctic.”

Svanberg said BP was comfortable with increasing its presence in Russia, where it’s operated for 20 years, even after previous setbacks for foreign investors. The government forced Royal Dutch Shell Plc to sell a share in the Sakhalin project to OAO Gazprom in 2006.

BP and Rosneft plan to drill in the Kara Sea in the Arctic Circle off Russia’s north coast. The companies will develop three blocks Rosneft received the rights to drill in October known as East Prinovozemelsk-1, 2 and 3, the statement said. The area is about the same size of the as the U.K. sector of the North Sea.

‘Unique Blocks’
The East-Prinovozemelsky blocks are “unique” and may hold 5 billion metric tons of oil and 10 trillion cubic meters of gas, Rosneft Chairman Igor Sechin, who is also deputy prime minister, told reporters in London. Together, that’s equal to about 100 billion barrels of oil. It will be 2020 before the blocks start producing, Svanberg said.

BP’s American Depository Receipts rose to the highest since May today, gaining 3.6 percent to close at $49.25 in New York.

BP already owned 1.3 percent of Rosneft after buying shares at the company’s 2008 initial public offering. After today’s deal its total holding in the Moscow-based company will be 10.8 percent.

BP and Rosneft’s partnership “may become large-scale and have a serious impact on the global oil and gas industry,” Russian Prime Minister Vladimir Putin said in a meeting with Dudley in Moscow today.

‘New Frontier’
“The Arctic is the new frontier of oil development and Rosneft obviously has faith in BP’s historic interest in offshore drilling,” said Brian Youngberg, an analyst at Edward Jones & Co. in St. Louis, who has a hold rating on BP shares and doesn’t own any. The U.S. oil spill “isn’t fazing Rosneft.”

Dudley was ousted as head of TNK-BP three years ago because of a dispute between BP and its Russian billionaire partners, who accused the British company of treating the Moscow-based company as a unit.

Rosneft became Russia’s largest oil producer, buying assets from Yukos Oil Co. at liquidation sales in 2007, while Putin was president. Sechin, at the time Putin’s chief of staff, has been Rosneft’s board chairman since 2006.

The two companies, which have explored deposits off Sakhalin Island, agreed to carry out technical studies in the Arctic in November 2006.

Rosneft and BP will be 50-50 partners in the Ruhr Oel refiner in Germany after the Russian producer agreed to buy out Petroleos de Venezuela SA’s stake last year for $1.6 billion to expand into Europe.

“We are very pleased to be joining Russia’s leading oil company to jointly explore some of the most promising parts of the Russian Arctic,” Dudley said. “This unique agreement underlines our long-term, strategic and deepening links with the world’s largest hydrocarbon-producing nation.”

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http://noir.bloomberg.com/apps/news?pid=20601085&sid=aF_W.nLf5._Q


BP May Proceed With Rosneft Share Swap If TNK-BP Takes Arctic
By Brian Swint

May 6 (Bloomberg) -- BP Plc won the right to carry out a $7.8 billion share swap with state-owned Russian oil producer OAO Rosneft in return for allowing its TNK-BP venture to take up an Arctic oil exploration deal.

An arbitration panel in London today issued a consent order for TNK-BP to explore the Kara Sea and for BP to swap shares with Rosneft, conditional upon Rosneft’s approval, BP said in a statement. The alliance, announced on Jan. 14, is Robert Dudley’s biggest deal since becoming chief executive officer following the Gulf of Mexico oil spill last year.

While a court injunction remains in place until Rosneft gives its approval, the ruling may end almost four months of wrangling after BP’s billionaire partners in TNK-BP challenged the deal in court. BP shares gained as much as 2.7 percent in London trading, while Rosneft rose 3 percent in Moscow.

BP and Rosneft last month moved back the deadline for the completion of the share swap deal to May 16. The Kara Sea exploration blocks in Russia’s Arctic contain as much as 100 billion barrels of oil, and the Russian partners in TNK-BP rejected buyout offers from BP and Rosneft to allow the partnership to go through, Dudley said April 14.

BP’s billionaire partners, represented by the AAR group, claimed that TNK-BP had exclusive rights on behalf of BP to pursue opportunities in Russia. BP offered the partners participation in Arctic projects, cash and international projects so that BP could proceed with the Rosneft deal, Dudley said.

TNK-BP, set up in 2003 and owned 50-50 by BP and AAR, made BP the biggest foreign producer in Russia, which now accounts for a quarter of BP’s production and a fifth of its reserves.

Dudley has said that Rosneft prefers BP, not TNK-BP, as a partner in the Arctic. Russian Prime Minister Vladimir Putin said in January that BP’s experience in the Gulf of Mexico had made it the preferred partner for Arctic exploration.

 

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See previous comments above.



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http://noir.bloomberg.com/apps/news?pid=20601207&sid=a_RORTWCdEuE


BP Deal Regains Reserves Lost in Post-Spill Sales at Half Price
By Brian Swint

Jan. 16 (Bloomberg) -- BP Plc’s $7.8 billion share swap with OAO Rosneft will replace almost all the reserves it sold to pay for the Gulf of Mexico spill at less than half price.

Rosneft’s market value prices its oil and gas reserves at $5.33 a barrel, the fourth-lowest among the world’s biggest oil producers, data compiled by Bloomberg show. That’s 60 percent below the $13.20 average price BP got for fields sold last year holding 1.7 billion barrels, according to bank DnB NOR ASA. After the deal, BP’s 10.8 percent Rosneft holding will represent about 1.6 billion barrels of proved reserves.

“They are buying at cheaper prices than the assets they’ve just been selling, and they are paying with a devalued currency” in their own shares, said Christine Tiscareno, an equity analyst at Standard & Poor’s in London. “It’s not for current production, it’s future resources.”

Chief Executive Officer Robert Dudley’s biggest deal since taking charge in October will lessen BP’s dependence on the Gulf of Mexico, where the company may be cut off from exploration after the worst U.S. oil spill. The agreement with Russia’s largest oil producer opens up Arctic fields in an area the size of the U.K. North Sea that may hold about 100 billion barrels.

“We’re thinking decades ahead,” Dudley said in an interview at BP’s London headquarters after the signing ceremony in London on Jan 14. “This is really building a long-term future for BP.”

Financial Reports
The share of Rosneft’s reserves and production will probably be noted in BP’s financial reports without being directly added to the company’s accounts, Dudley said. The Rosneft deal, which will leave the Russian company holding 5 percent of BP shares, isn’t intended to replace resources lost after the spill, he said.

One reason for state-owned Rosneft’s lower valuation may be the political risk of investing in Russia. Royal Dutch Shell Plc agreed to cede its majority stake in its Sakhalin project to OAO Gazprom in 2006 after months of government pressure. Dudley himself was ousted as head of BP’s Russian venture TNK-BP in 2008 during a dispute with the company’s billionaire partners.

Chairman Carl-Henric Svanberg, speaking in a Jan. 14 interview, said BP was comfortable with increasing its presence in the country, where it’s operated for two decades.

Rosneft is getting a good deal because BP shares are down about 20 percent since the April 20 accident, said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh. Russia’s state-run producer can take advantage of BP’s expertise and experience, including what it has learned from the Gulf spill, to ensure safety and environmental protection, Russia’s deputy prime minister and Rosneft chairman, Igor Sechin, said on Russia Today’s website yesterday.

‘Creates Alignment’
“Rosneft and BP management believe that both our companies are probably not fully valued,” Dudley said. “So it creates an alignment for both of us to take on massive exploration acreage in the Arctic for decades to come.”

BP and Rosneft plan to drill in the Kara Sea in the Arctic Circle off Russia’s north coast. The companies will develop three blocks for which Rosneft received the rights to drill in October known as East Prinovozemelsk-1, 2 and 3. They agreed to invest $1.4 billion to $2 billion in the project through a venture in which Rosneft will hold 67 percent and BP 33 percent.

BP will issue new shares for the deal, valued at $7.8 billion at last week’s closing, while Rosneft will use existing treasury shares. BP doesn’t need shareholder approval, and placing BP or Rosneft representatives on each other’s boards wasn’t discussed, BP spokesman Toby Odone said.

Runaway Well
BP has set aside $40 billion to pay for the damage caused by its runaway Macondo well, which killed 11 workers in a blowout and leaked crude into the Gulf for 87 days last year. To shore up its finances, it suspended the dividend for three quarters and pledged to sell up to $30 billion in assets, mostly mature oil and gas fields.

The divestitures achieved prices on reserves a third higher than the $8.25 a barrel implied by BP’s market capitalization as China and other emerging market countries bid up prices to secure resources. BP had total oil and gas reserves equivalent to 18 billion barrels of oil at the end of 2009, according to the company’s annual report.

Other international producers including ConocoPhillips and Exxon Mobil Corp. also increased disposals, leading to a record year for asset sales by international oil companies in 2010.

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