Tag Archives: gas

Italian Offshore Back on Track but Progress Has Been Limited

ImageAlmost a year after Rome reversed a ban on offshore drilling, Italy’s energy sector is showing signs of life with new efforts and interest on the part of foreign firms.

This month has seen progress reported by   Petroceltic, Northern Petroleum and Mediterranean Oil and Gas regarding offshore efforts in Italian waters. However, despite such advancements, progress has been limited in improving the country’s overall energy standing – a situation made worse by a toxic political and economic environment and local opposition.

The Mario Monti government announced an end to a ban on drilling within five nautical miles of Italian shores that had been put into place following the Deepwater Horizon oil spill in the Gulf of Mexico in 2010.

The purpose of the government’s reversal on offshore drilling last year was two-fold. First, an increase in domestic production would help ease the country’s current, heavy dependence on foreign producers. Italy brings in about 90 percent of its oil and gas needs from outside the country and has seen alternative energy options evaporate over the last three years, making those imports all the more important. While renewable development has suffered amid a wave of government cuts and a loss of investor confidence brought on by the country’s economic crisis, Italy’s push to reintroduce nuclear power disappeared almost as soon as news of Japan’s Fukushima disaster reached Rome.

Second, the financial benefits of a boost in domestic production could help jumpstart Italy’s ailing economy, offering little in the way of investment options to outside investors. When the Monti government announced the plan to ditch the offshore ban, the country’s Economic Development Minister Corrado Passera predicted that expected increases in output allowed by the revision could bring in as much as 15 billion euros, while reducing the country’s energy bill by about 6 billion euros, according to Bloomberg.

Nearly a year on from the ban reversal, Italy’s energy options have offered little relief due to a precarious economic and political environment as well as instability in Algeria and Libya, two of the country’s largest providers of oil and gas.

Complicating the offshore situation still further has been the actions of local environmental and political advocacy groups. Even before the 2010 ban had been into place, groups in Sicily and along the Adriatic coast had pushed for drilling bans in the name of environmental and tourism protection. Although the ban has been reversed on a national level, local groups have still challenged exploration efforts in individual cases leading to production delays.

Offshore may have returned to Italy, but it is still far from clear whether it can provide the diversification and revenues

Image: Rigzone.com

Originally Posted: Newsbase Euroil Monitor

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Northern Mali Threat Continues to Cast Shadow Over Algerian Energy

ImageDespite the apparent success of a French-led military force in ridding Northern Mali from an armed separatist movement, recent violence has suggested that significant challenges remain to both that country and the energy sectors of its neighbors.

As recently as this past weekend, a car bomb and violence were reported in Timbuktu, once again highlighting the uncertainty of the region and the challenges of those in the region in need of a more stable business environment.

As much of North Africa has struggled with wide-ranging political opposition movements, resulting in the collapse of long-standing governments, Algeria has remained unchallenged by protest efforts. Rather, threats to the country’s stability have come from outside, with substantial pressure coming from a stretch of Mali along the country’s southern border. The country has struggled with an armed separatist movement for months, which seized authority from national troops late last year.

This pressure boiled over into Algeria in January with a coordinated raid on a BP gas site, spurring a messy government response and ending with the death of 38 foreign workers. The impact was immediate, with foreign firms suggesting delays to protect their personnel and neighboring Libya promising swift action against any similar events.  

More than just an unfortunate turn of events for a country that relies heavily on energy revenues for just about every aspect of government spending, the event presented a real threat to vital foreign investment needed to strengthen and expand the country’s infrastructure.  Algeria currently boasts access to about 12.2 billion barrels in oil reserves and 159 tcf of natural gas, with the U.S. as one of their largest trading partners.

However, a recent decline in local production and a push to tap into the country’s sizable shale potential have highlighted the role of foreign investment in the country’s immediate energy growth plans. To reach new output goals, Algeria will contribute billions from their own coffers towards boosting downstream capacity, but they will also need to partner with foreign partners who can offer the investment support and technical know-how needed to boost production exploit shale reserves in the near future.

Algeria has promoted substantial shale potential, attracting a number of necessary foreign firms to their shores, each providing the equipment and experience needed for the introduction of shale to the region. Keeping them in place may prove a little more difficult unless Algeria can provide a more stable working environment, making the kind of flare-ups seen this week all the more damaging.  

Originally Posted: Newsbase’s MEA Downstream Monitor

Photo: Mem.algeria.com

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Moroccan Downstream Offers Unclear Picture Ahead of Large Cap Entries

Recent entries by large cap actors into Morocco’s oil and gas sector over the last three months have signaled a new confidence regarding the country’s largely dormant hydrocarbon potential. With Chevron and Portugal’s Galp taking on controlling stakes in areas previously claimed by only modest, independent operators, Morocco’s push to expand their traditional energy potential appears to be gaining traction. However, with the North African nation’s domestic demand at the heart of this push, it remains unclear whether its weakened downstream potential will be able to meet expected growth.

Despite a virtually non-existent oil and gas sector, Morocco has recently made a subtle push towards appealing to foreign firms in order to explore the country’s offshore and non-traditional options. So far, efforts to broaden the country’s energy potential have included only renewable campaigns, including a 2009, $9 billion solar scheme, and attracting smaller firms to potential oil and gas fields. However, over the last two months, both Chevron and Galp have bought into controlling stakes of offshore projects. For Galp, an early December purchase from Australia’s Tangiers was driven by a 450 million barrel potential reserve, which was revised to an estimated 750 million barrels following further studies.

Making a more sizable statement as one of the world’s largest actors, Chevron inked an offshore deal with Morocco’s Offices National Des Hydrocarbures Et Des Mines to take on seismic studies of the Cap Rhir Deep, Cap Cantin Deep, and Cap Walidia Deep efforts.

However, as the country explores their domestic potential as a way of easing dependence on expensive and increasingly volatile imports, Morocco’s downstream potential does not appear to be keeping pace. As of 2011, the country boasts only a single refinery at Mohammedia following the conversion of their Sidi Kacem facility to a distribution plant. Despite a long-running modernization push as a part of an agreement between Rabat and state operator, Samir, the plant has seen partial slowdowns in output over the last year. These pauses have been the result of scheduled maintenance and expansion plans that have included upgrades to a new crude distillation unit and a jet fuel facility, which can produce 600,000 metric tons a year. This effort is a part of a broader strategy to add 4m tonnes of refined oil per year, according to Reuters.

While these efforts appear to address current domestic demand, it is far less clear whether a single plant will be able to meet an increase in local production should Galp or Chevron gain traction over the coming year or two.

Origionally Posted: Newsbase’s MEA Downstream Monitor

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North African Energy Targeted by Labor Concerns

746884-aus-bus-pix-libya-refineryAfter nearly two years of widespread political and social transitions across North Africa, protest and labor movements have continued to expand in hopes of making the most of the new political environment. While motivations may vary, these groups are increasingly targeting the region’s energy sector in Libya, Tunisia and Algeria, commonly aiming their ire at foreign firms and their local subsidiaries.

Against a backdrop of regional unrest, these energy-aimed efforts are to continuing to increase and beginning to threaten what many feel is North Africa’s quickest and surest route to recovery and post-Arab Spring stability.

In many cases, protests and labor strikes have taken issue with what is felt to be a lack of common benefit from the region’s rich oil and gas production. From Tunis to Benghazi, this has centered on the complaint that far too little of the region’s oil and gas wealth and revenue is reaching local communities.

A Post Arab Spring Analysis

In Tunisia, critics have taken issue with what they feel is a lack of work opportunities for local workers offered by the country’s most prominent energy outfit, BG and their local subsidiary BG Tunisia. Facing a 17.6 percent post-revolution unemployment rate, Tunisia has been unable to keep up with and absorb the growth in increasingly skilled young workers, according to a World Bank report.

Facing a similar demand for more work opportunities, but without the spike in skilled labor, Libya has seen protest movements target oil and gas facilities across the country, including a December strike at one of the country’s busiest oil and gas ports, Ras Lanuf. Protestors began the New Year with a strike at the Zueitina oil terminal, situated just east of Tripoli. According to the country’s Oil and Gas Minister, Abdul Bari Laroussi, the shutdown has come with a demand to employ 1,500 local residents and cost the country an estimated $1 million a day in lost revenue.

Additionally, Libya has seen protest groups use energy facilities to voice concerns about a variety of issues, most notably political representation. Shortly before the country’s first post-revolution election, armed militias occupied refineries in El-Sider, Ras Lanuf and Brega, shutting down half of the country’s export capacity. Their actions were aimed at increasing the number of seats reserved for the country’s oil-rich eastern provinces and shifting more authority over energy issues to the city of Benghazi.

Despite having largely escaped the kind of public protests that led to political transitions across the region, Algeria has faced its own share of protests aimed at the incredibly valuable oil and gas sector. Even before the Arab Spring protests began, Algeria faced a pushback from the country’s large number of unemployed for what they felt to be a lack of opportunities for local workers. Undoubtedly the country’s largest economic force, Algeria’s oil and gas production accounts for 98 percent of their export revenue and a large percentage of government funding. State efforts to curb these protests through increasing government incentives spending and a tighter security environment have worked in the short term. However, protests have continued to flare up as resentment builds around a lack of benefits seen across the country as well as wider uncertainty about what will follow the expected retirement of President Abdelaziz Bouteflika before scheduled elections in 2014.

According to a Bloomberg report, dwindling oil reserves and uncertainty have made the country’s relative calm difficult to sustain.

“Pacification through finance can’t go on forever,” Azzedine Layachi, a professor of international and Middle East affairs at St. John’s University in New York and Rome, told Bloomberg. “Everything is in shutdown mode until 2014 and that’s when we’ll see what direction Algeria takes.”

An Uncertain Landscape for Foreign Investors

In all three national cases, further labor unrest and protests aimed at energy sector actors could have a significant effect on the ability to attract much-needed investment and interest from foreign firms. In Libya, this means the ability to promote the full return of companies that halted operations in the midst of the civil violence that brought down the government of Muammar Gadaffi and move beyond pre-conflict levels to ensure future growth. While Tunisia is putting less emphasis on energy reserves as a means of economic recovery, continuing unrest does threaten to put off further investment from companies like BG, which provides over half of the country’s natural gas demand.

Last year, sit-ins at processing plants spurred talks between the company and local leaders, concluding in pledges for greater attention to local hires, including training options. Recently the company has said that while they would not consider leaving the county as a result of the sit-ins, they did not see themselves in a wider labor role.

“We continue to work in Tunisia and to explore new opportunities. Although the phenomenon of sit-ins and strikes is annoying, the group will not leave the country for all that,” Sami Iskander, Executive Vice-President and Managing Director of BG, Africa, Middle East and Asia told the Tunisian News Agency, but added, “the main purpose of the group is the production and supply of gas in the country and not creating jobs.”

Currently BG provides about 60 percent of Tunisia’s natural gas demand and employs about 1,000 employees.

Finally, further unrest in Algeria could prove troubling to the government’s recent push towards introducing unconventional shale exploration efforts to the country. Boasting significant domestic potential, Algeria will have to first deal with significant foundational investments associated with the shale excavation process in terms of both machinery and technical expertise. To help cope with these early expenses, the national government and the state-backed Sonatrach have unveiled new revenue sharing agreements and taxing schemes aimed at appealing to foreign investors with shale experience. Already known as a risky investment in the region, Algeria could prove even more uninviting if protests and strikes continue to expand.

So far, these protests have elicited little more from state officials than targeted actions according to each, specific case. However, according to the Agence France-Presse, Libya’s Prime Minister Ali Zeidan has threatened to impose “order by force” in to address those actions that threaten the country’s energy sector.

“Oil is our only source of revenue,” he said, according to the AFP report. “We will not allow any (armed) force to confront the people and threaten national security. I warn families, tribes and regions that we will take decisive measures.”

While Tripoli’s hard line may prove effective in garnering local support, it is far less clear whether it will provide the sense of stability needed for foreign firms to return to the region.

Image: The Australian

Originally Posted in Newsbase’s AfrOil Monitor


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Eastern Med Transport Options Have to Overcome Region’s Political Tension



Transport options for the Eastern Mediterranean’s gas discoveries are taking on a familiar political tone as Turkey, Cyprus and Greece stake out European market options.

The current debate centers around how those firms active in the Tamar, Leviathan and Block 12 gas fields, situated in the waters between Israel, Cyprus and Lebanon, will be able to export gas to the European market. Any solution would help Europe reach resource diversification goals by opening up access to some of the largest gas finds in the last decade. However, just as political tension between regional actors have led to overlapping claims to the reserves, transmission solutions have run up against long-standing animosity.

For their part, Israel has pressed for downstream and transmission infrastructure to be built outside their own borders for both security and environmental reasons. This approach has made their partnership with Cyprus all the more important to export options. This has also made the possibility of an export line through Turkey all the more complicated.

Turkey has recently expressed their interest in expanding their regional energy role, with Ambassador Mithat Rende, Director General for Multilateral Economic Affairs at Turkey’s Ministry of Foreign Affairs telling the recent Energy and Economic Summit, “Construction of a pipeline to Turkey is the best way to export Israeli gas, both in terms of economics and in terms of energy.” However, this spirit of outreach does not extend to any collaboration with Cyprus. Turkey recently stated that they would boycott those companies that partnered with Cyprus for similar regional exploration efforts.

What Turkey may be pushing for is a re-purposing of the dormant ITGI (Interconnector Turkey-Greece-Italy) pipeline. After bidding to take on Caspian gas to the European market, the ITGI was shelved amid fears that Greece stakeholders would not be able to financially support it. However, the project’s director of international activities, Dimitris Manolis, told Reuters that he could see the project re-purposed for the Eastern Mediterranean gas finds, offering a link through Greece and Italy by 2018 or 2019. The ITGI would be an upgrade and extension of existing pipelines, estimated to cost $1.6 billion.

A Liquefied Natural Gas solution to the export question received a boost this week with the announcement that Australia’s Woodside had taken on a 30 percent interest in Leviathan gas field, taking on any LNG efforts on the project. Texas-based Noble Gas will be the upstream operator for the effort.

Image: Edison.com

Originally Posted: Newsbase’s Euroil Monitor

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Tunisia and an Undefined Shale Future

As the rush to exploit shale reserves continues across the globe, Tunisia’s potential has come into the spotlight due to a number of conflicting reports from interested foreign firms and the country’s new government.

Facing expected increases in local demand and a weakened post-Arab Spring economy, which contracted 1.8 percent last year, a Tunisian shale boom would be a helpful step forward in terms of energy security and growth. While modest in comparison to larger shale markets, most notably the United States and China and to a lesser degree, Poland, Tunisia’s shale estimates suggest enough potential to change the energy landscape of this country of 10.5 million. According to a U.S. Energy Intelligence Agency report, as of 2009, Tunisia offered approximately 18 trillion cubic feet of technically recoverable shale gas.

However, despite clearly stated interest on the part of several foreign firms and a lack of viable hydrocarbon alternatives, Tunisia’s current transitional government has avoided a clear embrace of the often-controversial extraction process.

A Growing Caution

As countries across the globe rush to replicate the progress seen in the United States over the last decade, many have rushed to partner with foreign partners with more direct experience with the costly and very technical shale extraction process, known as hydraulic fracturing, or “fracking”. The extraction, according to the UPI, “involves drilling into the rocks horizontally and then cracking them with a high-pressure missile of water mixed with sand and chemicals, to unlock the gas from the impermeable shale rock.”

The complexities of this process and the environmental risks involved have made introducing shale projects difficult into new markets increasingly difficult. Bolstered by reporting and advocacy groups in the United States, opposition has grown due to concern about possible harmful waste, water supplies and the potential impact irresponsible development could have on the local environment and aquifers.  This has resulted in partial or outright bans on shale efforts across Europe and delays in government approval in several more countries.

Early reports suggest that these concerns may have had a hand in the delay or outright denial of licensing rights for shale projects in Tunisia. In late September, Tunisia’s Industry Ministry were pushed to respond to reports that they were preparing to grant an unconventional license to Shell in the Kairouan region of the country. Denying the completed agreement, the Ministry announced that while they had received a related application, they had responded with an appeal for an environmental and water impact analysis, according to an Al Bawaba report.

The water usage issue related to “fracking”, which can require millions of gallons for each well, is especially important for the arid North African region. The Ministry release did allow that government was considering shale options, stating, “Tunisia is mulling over producing shale gas to meet its growing domestic demand and the expected drop in traditional oil stock”.

However, just a few days later, the African Manager website reported that a source close to the case stated that shale efforts would likely be abandoned completely by the current government thanks to concerns about the potential environmental impact. While unconfirmed outside of that source, the report does reflect the lack of a clear narrative about the country’s current position on introducing shale efforts.

Ready and Waiting

However the country decides, they will have a number of potential partners to held lay a shale foundation. Earlier this year, Shell announced plans to pursue unconventional efforts in both Tunisia and neighboring Algeria, which has been much more assertive in their support for shale development. So far, Algiers has signed production agreements with Italy’s Eni and Shell, among others. Going so far as to introduce new hydrocarbon legislation to entice foreign investment in unconventional energy projects, Algeria has set a course for energy diversification, addressing a steady increase in domestic demand and allowing an increase in export revenue.

For Tunisia, the addition of shale to the country’s energy options would address more modest goals of just easing dependence on costly refined oil imports and the burden of steadily declining local oil reserves.

In addition to Shell, Winstar Resources have also expressed a strong interest in pursing what they feel is Tunisia’s vas energy potential. Despite reports of a possible sale of their Tunisian interests earlier this year, the Canadian company included a positive outlook of their access to the country’s shale potential in their August, second quarter corporate report. Earlier this year, representatives from Italy’s Eni suggested they might extend their shale reach beyond Algeria and were “thinking of entering the Tunisian shale gas market,” according to a Dow Jones report.

In late September, the country’s shale reserves also took center stage at the second annual Tunisia Oil and Gas Summit, where the keynote session explored Tunisia’s unconventional, including input from a number of foreign E&P firms and sponsor Halliburton. The US company has been at the forefront of shale excavation technology for decades.

It should be noted that even if the country’s transitional government side against introducing shale to the Tunisian landscape, presidential and parliamentary elections have now been scheduled for June of next year. With new leadership in sight, any opposition could face a limited lifespan. For their part, Shell has not included any information about unconventional projects in their online literature related to Tunisia, but did recently announce a $150 million oil exploration deal in the country.

Image: Agency Tunis African Press

Originally Posted: Newsbase’s AfrOil Monitor

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Hoping to Leave Challenges Behind, BP Eyes Libya Return

Following a year and a half of political and military delays, BP is poised to pick up where they left off in Libya, joining the roster of international firms hoping to make the most of Africa’s largest proven oil reserves. Despite the presence of many of the same obstacles that put a halt to their efforts in the North African country in the summer of 2010, BP officials remain confident that they will soon be able to achieve the production goals they set out almost five years ago.

The result of a $900 million deal made in 2007, the BP’s Libyan projects were expected to receive more than a billion dollars worth of company investments over the next seven years. The original agreement outlined an exploration project that would cover 54,000 square kilometers of the onshore Ghadames and offshore frontier Sirt basins, allowing for 20 appraisal wells if initial efforts were deemed successful, according to company literature. The company’s Libyan presence would include both on and offshore efforts, allowing for the company’s first projects in the country since 1971 when the new government nationalized all of BP’s assets.

However, those efforts soon came under fire, initially due to allegations that the company had pushed UK political figures to support the release of the convicted Lockerbie bomber, Abdelbaset Al Megrahi in exchange for the new contracts. Facing calls for project delays from both the US and UK, the company worked to calm political waters, but soon found themselves at the center of the year’s largest environmental disaster.  Confidence in the company’s safety record took a hit during the summer of 2010 after the company’s connection to the Deepwater Horizon spill in the Gulf of Mexico spurred a sharp backlash among EU environmental and political groups. The backlash forced a delay in activity, just as BP was concluding a sprawling seismic survey of their offshore licenses. EU political figures began demanding for greater oversight of BP activities in the Mediterranean as well as proof of the company’s capabilities to financially address a possible spill.

However, Lockerbie and environmental concerns took a backseat during the summer of 2011 when Libya’s political environment became too unstable for BP to keep their expatriate staff in place. As anti-Gadaffi forces moved west from Benghazi, followed by the arrival of supporting NATO forces, violence forced a complete halt in production and export efforts, resulting in an evacuation of all international staff by foreign firms.

Now nearly four months after Gadaffi’s death and the recognition of the country’s transitional government as the Libya’s legitimate political leaders by even ardent critics of the anti-government movement, BP is focusing on building their earlier efforts. However, obstacles to a full return remain.

“We are making preparations (we still have just under 100 local staff) to resume our activities but the security situation is still too uncertain,” remarked BP media representative Robert Wine last week. Although members of the transitional government have worked to calm worries about lingering violence, some foreign firms have not reached a level of confidence in the country’s ability to ensure the safety of their workers. Other international firms have been quicker to return to their Libyan efforts, including Spain’s Repsol, France’s Total and notably Italy’s Eni who have come close to reaching pre-conflict production levels.

“We do intend to pick up where we left off, but the circumstances on the ground have to be safe first,” Wine wrote, adding, “Security means safety for anyone working there. Until then, we won’t ask people – not just international staff – to work where it’s dangerous.”

Responding to whether BP foresaw any obstacles to working alongside the country’s transitional government, who have previously offered strong warnings against countries and companies that had previously worked with the Gadaffi government, Wine wrote that he was confident they would be able to work for and with them to fulfill their contracts.

A quick and stable return to Libya may help BP restore some of the investor confidence lost in light of their involvement in the Deepwater Horizon spill and its subsequent lawsuits. Currently facing 600 civil lawsuits from plaintiffs across United States Gulf Region, BP has announced its intention to vigorously fight the cases, though they have allowed that the ongoing legal issues have curtailed interest from investors.

“We have many people who do say, we are interested in investing in BP but not until all this is behind you,” CEO Bob Dudley told a press conference last week, according to the Financial Times.

For now, BP will be able to build upon a return to higher profits with the announcement of $23.9 billion last week, as lower production levels and delayed projects were offset by higher oil prices throughout last year. According to the AFP, the earnings report was accompanied by a higher company dividend, suggesting confidence among company management that any challenges BP faced in the new year were manageable. However, facing a lengthy challenge in US courts, the UK company could likely use all the support it can get.

Image: Arab Money Matters








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Eni’s Gas Grid Split May Not Be Enough for the EU

A pressured push to decrease Eni’s stake in continental Europe’s largest regulated gas business has won the support of Italian government leaders and shareholders. However, if the Italian energy giant succeeds in retaining partial ownership of the company, the split could potentially run afoul of European Union rules.

Originally majority shareholders in Snam Rete Gas SpA, the country and continent’s largest regulated gas business, Eni was pushed to reduce their stake in 2009 as a part of a European Union energy liberalization accord. The move was meant to free up Italy’s gas transporting network for greater competition with regional partners.

For proponents of the ownership unbundling, which includes both anti-trust officials and shareholders, the move would benefit Eni by allowing for the deconsolidation of Snam’s 12.2 billion euro in debt, reducing Eni’s debt to 7 billion euro, allowing for increased funding of new exploration and production efforts. For regulators, the move would reduce the chance that Eni could distort natural gas flows into the European market by blocking fuel pipelines from the region’s high priced markets, which it has been accused of doing, according to Bloomberg. Further, the move would allow for the delayed implementation of a law meant to put distance between oil and gas production entities and transportation operators.

For Snam, the split would free the transportation operators to increase investment in European projects, according to the Financial Times.

While the exact details of the government-forced break-up remain uncertain, analysts have predicted that it will require Eni to reduce their stake in the company from 50 to 20 percent, garnering the firm approximately 3.5 billion. Company CEO Paolo Scaroni has signaled that the amount would help Eni increase funding towards projects in Mozambique and the Barrents Sea, according to the Financial Times.

Seemingly cleared from all sides, the deal garnered negative attention last week when the head of Italy’s gas authority remarked that Eni’s 20 percent retention of Snam would violate EU rules on the matter. While reports on the comments did not expand on how exactly they would run afoul of official regulations, given the context of EU pressure towards a reduced Eni role, the warning suggests that more divestment may be needed before moving forward.

Image: Trek Earth

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Shale, Energy and North Africa’s Future

As countries across North Africa work towards rebuilding both customer confidence and hydrocarbon operations following the political and financial instability of 2011, some are looking past traditional options to test the limits of the region’s shale potential.

First initiated in Tunisia in the Spring of 2010, North Africa’s shale efforts have slowly spread across the region, adopted by both established oil and gas producers and those who see little potential for traditional measures. The push towards exploring the area’s deep-set shale reserves came as the success of such efforts in the United States and studies showing widespread potential across the globe began to spur investor excitement. As time allowed closer inspection of the geological variances of the Maghreb states and their true shale potential, a clearer picture of what shale deposits could mean for the region has emerged.

These efforts come just as similar efforts in more mature shale markets are running into often debilitating challenges. Building on environmental worries related to the practice of fracking, public and political movements have successfully stalled efforts in the United Kingdom, France and parts of Germany as the uncertainty about the effects of the practice have added to concerns about project costs. This environment led European Union Energy Chief Gunther Ottenger to suggest the possibility of a community–wide regulatory system on shale efforts, inviting a pledge to veto any such legislation from Poland’s government, who has led the way towards introducing shale projects to the European marketplace. Meanwhile, in the birthplace of the fracking process, US President Barack Obama accompanied his support for further shale projects with an appeal for energy companies to disclose the ingredients of fracturing fluids, which have been protected information until now. However, these worries and protest movements have done little to damper enthusiasm among North African actors, as they continue to move shale projects forward.

Building on the region’s first shale effort in March 2010, Tunisia are continuing to work with early partners France’s Perenco and Canada’s Cygam in their exploration efforts, though last year’s political transition slowed the effort’s momentum. While both firms have worked to assure their Tunisian partners of their intent to stay put, lingering questions of instability, including the recent kidnapping of a mayor near the vital Ghadames Basin do little to help calm project partners.

Hailed as the country with the most shale potential thanks to the accessibility and quantity of reserves in the Ghadames Basin it shares with Tunisia and the Illizi Basin, Algeria has moved to attract foreign partners for shale efforts. According to Reuters, estimates suggest up to 1,000 trillion cubic feet of natural gas, trapped in shale rock about 1000 meters beneath the ground.  Facing a steady decline in the production levels of more mature oil and gas options, Algeria’s actions suggest a long-term approach to energy alternatives that included a heavy dependence on non-traditional resources such as shale.

Algeria and their state-backed firm Sonatrach have worked to secure working partnerships to help move their shale efforts forward, beginning with the signing of a MOU with Italy’s Eni last year. The Spanish giant has also looked to expand their resource base after Libya’s production all but halted amid political violence last year. Eni’s MOU with Sonatrach is meant to both lend the company’s shale extraction expertise to Algeria and help the company ensure a more dependable natural gas source for export-heavy Italy. After investing billions in hopes of solidifying Libya as a consistent source of oil and gas for the domestically barren Italy, the country lost nearly a third of their energy imports as political protests turned into violent conflict earlier this year. While Eni stands as Algeria’s largest shale partner, Sonatrach have announced that they will continue seeking shale partnerships with other international firms.

Even in Morocco, where domestic energy resources have remained elusive to the leadership of King Mohammad VI, one company has bet that the company’s true potential lies far deeper. Following four years of testing and coming in the latter half of a 3 year Memorandum of Understanding with the government of Morocco, London-based San Leon announced this month that they were ready to begin production at a site in the southern part of the country. Hoping to replicate their efforts in Poland, San Leon entered the northwest African nation five years ago to begin initial testing in the Tarfaya Oil Shale Field Pilot Project. San Leon recently announced that they had achieved “connectivity” between two wells in their Tarfaya oil shale project, suggesting progress in the country, though the Irish firm’s pace has worried some as their share price shrunk 59 percent over the last year. Despite overlapping basins deemed positive, Libya is the only country in the region to receive little attention by shale actors, as alternative efforts have been overshadowed by the substantial promise of traditional energy projects.

The Obstacles that Remain

For all the interest in the region’s predicted shale potential, a number of obstacles towards profitable operations remain, which have undoubtedly increased with the political instability of the last year. In addition to countries now faced with re-building confidence among foreign investors following the ousting of long-standing governments in 2011, many face significant funding deficits needed to support the high infrastructure costs associated with shale efforts. Largely lacking the access to the equipment, technology and personnel needed to reach and exploit shale projects, North African states will need the support of international partners to move these projects forward. In addition to signing cooperation agreements with firms from across Europe, some states are looking to the US State Department’s Global Shale Gas Initiative for guidance and aid, though political divisions and uncertainty about regional stability have kept that support

Image: Arabian Oil and Gas

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New Med Landscape Spurs Pipeline Reevaluation

A new political and economic landscape across the Mediterranean region has led to a revaluation of existing and upcoming pipeline projects with some receiving a fresh look from political leaders and investors.

Economic shifts across Southern Europe and long-awaited political transitions across North Africa over the last year have forced many in the Mediterranean region to rethink their dependence on transport lines and where oil and gas deliveries will come from in the coming years. Political strife turned violent in Libya, Tunisia and Egypt resulted in complete pipeline shutdowns at several points during 2011 leaving customers to the north uncertain about the future of their energy needs. Heavily dependent on Libyan products and exports from Algeria, shipped through a Tunisian hosted pipeline, Italy in particular faced potential reserve deficits over the last year. Further east, attacks on pipelines in the Sinai Peninsula left heavily dependent Israel and Jordon to explore alternative options for their natural gas needs. This new environment has allowed for consideration of other projects in the region as energy customers seek stability for the years ahead.

“Widespread instability across the Middle East and Africa region has raised important questions about the long-term impact on upstream investments, oil and gas production and hydrocarbon exports in the region,” wrote Abdalla Salem El-Badri, Secretary General of the Organization of Petroleum Exporting Countries (OPEC) in an October opinion piece for The New York Times. A recent report in The Wall Street Journal suggested that the instability in the region, as well as the uncertainty about the viability of Iranian oil, had sent large consumers like China in search of new sources of oil and natural gas.

“China is making good progress toward diversifying its oil supply,” Gordon Kwan, a Hong Kong-based energy analyst at Mirae Asset Securities told the WSJ. “If they were to concentrate on just one or two countries that just accidentally went out of production, [global] oil prices could easily double.”

A Fresh Look

A long delayed direct connection between Algeria and Italy has received new attention since political instability in Tunisia and Libya led Italian leaders to rethink the reliability of their existing transport lines. The result of an MOU signed in 2007, bringing to together the interests of Algeria’s state-backed Sonatrach, Euro energy firms Edison, Enel and Hera, the 900km Galsi pipeline would mark the second such project linking the North African nation with Italy, via a landing in Sardinia. However, unlike the Trans Mediterranean pipeline, the Galsi would carry an estimated 8 billion cubic meters of gas northwards upon completion directly from country to country, skipping a passage through Tunisia. Held up due to issues of funding and government support, the Galsi has earned the support of Italian industry and political leaders eager to reduce their dependence on transport lines through the potentially volatile Tunisian territory.

The new pipeline would become the country’s fourth connection to the European marketplace, joining the Transmed, Maghreb-Europe Gas and MedGaz pipelines, the last of which came on line in mid-2011 though Spanish dips in demand have kept it from running at full capacity. Following delays and outright production stoppages resulting from political strife in Libya, the end of 2011 saw a return to service for the country’s Greenstream pipeline. According to the UPI, Italy imported 1.5 billion cubic feet of natural gas in November despite a reduction in the country’s demand.

Both the Galsi and MedGaz pipelines will play a large part in Algeria’s efforts to greatly increase production and exports over the coming year. Having spent the last year addressing corruption at the country’s state-backed energy firm Sonatrach, a shift in sector leadership and finding ways to quell the sort of public protests that led to political changes in neighboring Libya and Tunisia, Algeria are now focused on expanding their energy industry through infrastructure investment and greater use of new transport lines.

Eastern Promise

Driven by the potential of new natural gas efforts in the eastern Mediterranean, Greek natural-gas supplier Depa have conducted a preliminary study into the feasibility of a pipeline linking Cyprus and Greece. While the report found that the pipeline was possible, it may run into opposition from regional leaders as claims to Eastern Mediterranean natural gas reserves have become the focal point of political infighting between Cyprus, Turkey, Israel and Lebanon. Depa have also begun exploring the possibility of a liquefied natural-gas terminal as an alternative, according to a report in Business Week.

The focus on the Eastern Mediterranean centers on the Leviathan Basin, inviting both conflicting claims to the area’s natural gas potential and a host of new transport and production project proposals from all sides. With the potential to allow for greater energy independence for countries like Israel, the Basin could serve to further reduce demand for products transported through volatile North African pipelines, including the Egyptian lines that have suffered from continued attacks since the ousting of President Hosni Mubarak.

Image: Iraq Business News

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