LatAmOil 7th Dec 2010 - Legal changes in Brazil

For analysis and commentary on these and other stories, plus the latest oil and gas developments, see inside…

Copyright © 2010 NewsBase Ltd.

www.newsbase.com Edited by Andrew Kemp All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All

reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

07 December 2010

Week 48

Issue 342

� News � Analysis

� Intelligence Published by

� NewsBase

COMMENTARY 2

� Brazil’s Congress finally approves legal

overhaul of oil industry 2

� Venezuela’s oil and China’s billions 3

� Belarus’ search for new suppliers 5

INVESTMENT 6

� Brazil bid rounds to restart in H1 2011 6

� Petrobras mulls Hong Kong listing 7

PERFORMANCE 7

� Desire faces Falklands flop 7

� Shell optimistic about restart of

Venezuelan oilfield 8

POLICY 8

� Guatemala to boost oil exploration with

2011 bid round 8

� Peru LNG considers Asian market 9

PROJECTS & COMPANIES 9

� Pampa looks to tight gas for plants 9

� Ecopetrol verifies heavy oil find 10

� Petrominerales announces new Llanos

Basin discovery 10

� BPZ Resources kicks off production at

Peruvian field 11

NEWS IN BRIEF 11

TENDERS & CONTRACTS 16

NEWS THIS WEEK…

Overdue overhaul Brazil’s Congress has approved a legal overhaul of the oil sector with the creation of a production-sharing contract system for future offshore subsalt projects.

� It is hoped that the new system will enable Brazil to attract the major levels of investment that are required to develop its ultra-deepwater subsalt properties. (Page 2)

� The country is to auction key new areas in 2011 as it seeks investment from international oil companies. (Pages 2,6)

� But some analysts remain concerned that Petrobras could be overstretched by its subsalt commitments. (Pages 2)

Chavez charms China China is entrenching itself in Venezuela’s oil sector with the announcement of a package of deals worth US$40 billion over the next five years.

� Venezuela currently sends around 362,000 bpd of oil to China, although that figure is expected to rise significantly. (Pages 3)

� Venezuelan President Hugo Chavez also seems willing to run the risk of complicating his relatio ns with Russia by courting Belarus. (Pages 3)

LatAmOil

LATIN AMERICA OIL & GAS MONITOR

LatAmOil 07 December 2010, Week 48 page 2




Brazil’s Congress has at last approved a legal overhaul of the country’s oil sector with the creation of a production-sharing contract (PSC) system for future offshore subsalt projects. The news suggests that the country may now be in a better position to attract the levels of investment required to develop its high-cost ultra-deepwater properties.

In theory at least, the move, which represents a victory for Brazilian President-elect Dilma Rousseff, has removed a significant political logjam and has cleared the way for Brazil to expand development of the offshore oilfields.

Brazil can now resume auctions of deepwater reserves after halting them nearly three years ago. Subsalt areas are believed to hold more than 50 billion barrels of oil at depths of up to 7 km under the ocean floor and Brazilian oil officials expect these new areas to be tendered by the middle of 2011. (See: Brazil bid rounds to restart in H1 2011, page 6)

PSC system The PSC system created by the new law was first proposed by the outgoing Brazilian President Luiz Inacio Lula da Silva last year as part of a broader package of oil laws meant to ensure Brazil’s government got a bigger share of the revenues from the offshore discoveries.

Under the new rules, state-run oil company Petrobras would have a minimum 30% stake in the new subsalt

projects and would become their operator. Petrobras already had 5 billion barrels of oil in the subsalt region set aside for it by the government, which bought the rights to produce those reserves in a US$70 billion oil-for-shares swap.

But while international oil companies will be relieved that Brazil has sought to boost its state presence in the subsalt sector without violating existing contracts or riding roughshod over future investment plans (as was the case in Venezuela and Ecuador) questions nonetheless remain about the process, its terms and whether there will be any political fallout that could jeopardise implementation of the overhaul.

Major hurdle

The one major hurdle that appears not to have been satisfactorily cleared by this bill is that of royalties and the provision to allow non-producing Brazilian states and cities to receive more royalties from the sale of oil. This has been a bone of contention for years, with Brazil’s large oil-producing states wanting to keep a majority of the royalty payments, while

other states have sought a more equitable distribution.

Jose Sergio Gabrielli, the current chief executive of Petrobras (who is expected to leave his post on December 31 when Lula stands down) predicted that Brazil’s Congress could have to revisit the topic of royalty payments for offshore oil production in 2011.

There is a possibility that Lula may veto this part of the bill, in which case, said Gabrielli, the debate will begin anew next year under Rousseff’s incoming administration. The delay in approving the oil legislation would be caused by the fact that Congress would not have enough time to go through the process again this year.

Overstretched A number of analysts question whether guaranteeing Petrobras operatorship plus a minimum 30% stake in the new offshore projects is the most cost-effective way for Brazil to develop its ultra-deepwater fields.

A consensus view is developing that Petrobras will be overstretched, at the very least, once it becomes the sole lead operator in all future consortia that work in the subsalt fields.

Christopher Garman, an analyst at the Eurasia Group, told the Financial Times that the government “is embarking on a route that will clearly lead to a slower pace of development. There’s a big question as to whether they will be able to attract serious junior partners.”�

COMMENTARY

Brazil’s Congress finally approves legal overhaul of oil industry Brazil’s Congress has approved a legal overhaul of the oil sector with the creation of a production-sharing contract system for future offshore subsalt projects By Nnamdi Anyadike � Brazil aims to attract the huge investment that is required to develop its ultra-deepwater subsalt pro perties � The country will auction new areas in 2011 � Some analysts fear that Petrobras could be overstre tched by its subsalt commitments

Questions remain about the process, its terms and whether there will be any political fallout that could jeopardise implementation

of the overhaul





Petrobras, which in September successfully raised US$70 billion in equity as part of an ambitious US$224 billion investment programme for 2010-14, said it was preparing to train up to 250,000 workers. But it is open to question whether even these mammoth spending commitments will be enough, and there is a suggestion that Petrobras could run out of funds “within two or three years” and be forced to return to capital markets for more equity.

Investors are also concerned that the interests of minority shareholders, who still provide the bulk of Petrobras’s capital, are becoming diluted. The government previously owned about 40% of the company’s total capital. It now owns about 48%.

Foreign shareholders, with some concern, point to the way in which Lula has ordered Petrobras to build refineries that analysts say make no commercial sense as a harbinger of what could happen in the future.

Unique challenge However, the Brazilian government has dismissed such talk and said its subsalt properties represent a unique challenge in the global oil industry and there is a need to move as swiftly as possible towards

the development of the fields, via the PSC system rather than the current concession-based scheme.

It has also defended Petrobras’ plan to build up to five new refineries to meet the country’s growing demand for fuels. Gabrielli said that Brazil would be likely to consume 3.3 million bpd of oil derivatives by 2020, while crude oil production is expected to be about 4 million bpd. Petrobras’ current refining capacity of about 2 million bpd would clearly be unable to meet demand from domestic refined production, he said.

However, analysts argue that work on at least one of the refineries, the US$12 billion Abreu e Lima joint venture with Venezuela’s PDVSA, is advancing despite the latter’s failure to pay for its share of the project, thus leaving Petrobras to foot the whole bill.

Gabrielli conceded that Petrobras had yet to receive any payments from its Venezuelan counterpart. The refinery will have installed capacity to process 230,000 bpd of crude oil, with Petrobras and PDVSA initially expected to supply half of the crude each. Petrobras will own 60% of the project, with PDVSA holding 40%.

Mortgaging the future The extent to which some fear Petrobras has mortgaged its future can be seen by the sheer breadth of its activities. In addition to investing in and operating its subsalt fields and expanding its oil refining capacity, Petrobras is also committed to the production of biofuels, and to cap it all it is committed to an expensive “social-funding” programme.

As well as allowing non-producing Brazilian states and cities to receive more royalties from the sale of oil the bill creates a fund to finance social programmes through future oil revenue. Lula has often said he is determined that Brazil’s oil wealth be used to help lift the South American nation’s 192 million residents out of poverty. But in a note to clients this week, Banco Santander analysts Christian Audi and Vincente Falanga Neto said Petrobras faced the risk of being “overwhelmed” with projects, given its extensive capital expenditure programme.

Should Petrobras indeed become “overwhelmed” then Brazil’s citizens could be condemned to an even longer wait than the three years they have already endured before the riches from the offshore subsalt region can finally be realised.�

China’s strong bonds with Venezuela have been bolstered further with the agreement of a US$40 billion investment plan. The package will see the Asian country’s three largest state-owned oil companies sign up to six agreements with Venezuela.

The move is indicative of a shift in the trading balance of power in Latin

America. Asia has now elbowed past Europe to become Latin America’s second largest trading partner. Only the US now does more business than Asia with Latin American states.

Left-leaning Venezuela is particularly keen to find new markets away from its Western

ideological adversaries. In China, Venezuela has found a leftist partner with a seemingly insatiable appetite for its energy and the cash to help unlock its vast oil and gas riches.

Trade between the two countries has soared from US$85.5 million in 1999 to US$8.9 billion in 2008, reported Bancoex, the state bank of Venezuela.�

COMMENTARY

Venezuela’s oil and China’s billions China is entrenching itself in Venezuela’s oil sector with the announcement of a package of deals worth US$40 billion over the next five years By John Stibbs � China’s three biggest NOCs have committed to spendi ng US$40 billion in Venezuela by 2016 � Venezuela currently sends around 362,000 bpd of oil to China, with that figure expected to rise signif icantly � The partnership demonstrates a desire from both gov ernments for greater co-operation





The OPEC member currently sends approximately 362,000 barrels per day of oil to China – the world’s second largest consumer of crude after the US.

Commenting on the growing ties between Beijing and Caracas, Venezuelan Energy Minister Rafael Ramirez said his country was now China’s “third largest oil supplier.”

Ramirez said the recent agreements signed with Chinese national oil companies (NOCs) were worth US$40 billion over the next five years.

Joint approach Speaking at the Gas Exporting Countries Forum ministers’ meeting in Qatar on December 2, he said Sinopec, China National Offshore Oil Corp. (CNOOC) and China National Petroleum Corp. (CNPC) would all operate in the cash-strapped South American country in joint ventures with Venezuela’s state-run PDVSA.

Sinopec is to work in the Junin 1 and Junin 8 blocks. CNOOC’s gas production expertise will be used in the Mariscal Sucre fields, whilst CNPC will continue its operations on the Junin 4 block. Collectively, the three Junin Orinoco blocks have a potential production yield of 600,000 bpd of oil.

The investment will help Venezuela to reach its goal of producing 7 million bpd of crude by 2021, up from its current output of around 3 million bpd. Ramirez said investment of US$120 billion was required in eastern Venezuela’s Orinoco Belt before 2017 in order to achieve those production goals.

Greater co-operation The partnership between the heavy-hitting NOCs demonstrates a desire from both governments for greater co-operation.

Chinese Vice Premier Li Keqiang said the investment

represented more than sound business sense. Li characterised the agreements as “good for co-operation and the overall strength of developing countries,” as quoted by Xinhau on December 3.

It is not the first US billion dollar agreement to be forged by the two countries in 2010. In April, China, with its vast trade surplus, agreed to lend US$20 billion to Venezuela. It is the largest loan the China Development Bank has ever made to a country.

In exchange for the huge amount of cash, Venezuelan President Hugo Chavez promised to meet the Asian giant’s energy needs. “We agreed on a huge, long-term financing plan. This is a larger scope, a super-heavy fund. China needs energy security and we’re here to provide them with all the oil they need,” he said at the time.

The Chinese have also provided a US$12 billion bilateral investment fund, US$8 billion of which has paid for infrastructure projects, reported Business Week. This debt is also being repaid in oil, Venezuela’s primary source of capital.

Differing fortunes While China is the world’s fastest growing major economy, Venezuela remains in the economic doldrums. It is

the only South America economy still languishing in recession, despite being the largest oil producer in the Latin America.

Poor financial management and an emphasis on investing in social programmes have left state-owned PDVSA with eye-watering debts and little room for movement. As a result, the country is looking for allies to tap the massive oil reserves of the Orinoco basin.

Meanwhile, China, with its bulging pockets, has been casting an eye around the world looking for savvy investment opportunities. In 2009 alone it spent US$32 billion on the acquisition of global assets to meet its soaring mineral and energy needs. Elsewhere in Latin America, Beijing has issued a US$10 billion loan to Brazil’s state-run Petrobras in return for a long-term oil supply contract.

And in Venezuela, China is providing more than just money. Referring to a China-built satellite that Venezuela sent into space in 2008, Chavez said: “The relations between China and Venezuela extend from below the surface of the earth to outer space. We’re producing oil together and our satellite is out there in space. This is a mutating world in transition.”

The Chinese economic juggernaut is not powered by rhetoric alone, however. Reflecting on the recent US$40 billion investment, vice premier Li made this unashamedly realistic assessment: “China will conduct relations with Venezuela [from] a strategic point of view and promote pragmatic co-operation in all areas.”

His drab appraisal lacks Chavez’s dramatic delivery and allows little room for romantic idealism. There is little doubt, however, that the two countries look set to embark on a long and fruitful relationship.�

COMMENTARY





Belarus may have been the only republic of the former USSR that truly wanted to preserve the union. It was quite Russified, and this was apparently one of the major reasons why Belarusian strongman Alexander Lukashenko was, even during the Boris Yeltsin era, prone to voicing his desire for union with Russia.

Still, pragmatic interests lay underneath these expressions of Slavophilic emotion and pro-Soviet nostalgia. During the 1990s, Lukashenko watched Yeltsin grow increasingly unpopular and believed that he could well succeed him if a new election were held in a new union state.

Even more important, however, were economic considerations. Specifically, Russia was Belarus’ major source of natural gas and crude oil, and the latter country’s economy was in constant need of these commodities. As such, Moscow’s willingness to provide fuel and energy at relatively low prices appears to have been the major reason why Lukashenko accepted Yeltsin’s proposal to work toward the creation of a new state to unite Russia and Belarus.

At the beginning of his tenure in the late 1990s, Yeltsin’s successor, Vladimir Putin, seemed to be ready to strengthen this alliance and to continue providing Lukashenko with cheap gas and oil. Yet as time passed, the relationship between Moscow and Minsk became increasingly tense. By the end of Putin’s tenure, the Kremlin had come to view Lukashenko as a problem, especially in light of its own growing unwillingness to subsidise anyone.

Deteriorating relationship Consequently, by 2006, the Kremlin had drastically increased the price of Russian gas. After this, the relationship between Minsk and Moscow steadily deteriorated. This was certainly evident in the summer of 2010, when Moscow and Minsk once again disagreed on gas prices. After Russia decided to halt gas deliveries to Belarus, Minsk retaliated by blocking Russian gas shipments to Europe.

Later, Moscow intensified the propaganda war with Minsk. Russia’s NTV television channel released a nasty movie on Lukashenko, presenting him as a mafia boss engaged in corruption and contract killing. Consequently, the Belarusian side retaliated by publishing a report, narrated by members of the Russian opposition, that presented the Russia run by Putin and his successor as president, Dmitry Medvedev, as a disintegrating country, declining on all fronts.

Alternative suppliers It became clear to Lukashenko that continued reliance on Russia as a source of gas and oil would be quite risky. As a result, his government began looking for alternative suppliers all over the world.

Earlier this year, Minsk began courting Caracas, and its efforts appear to have borne fruit.

Indeed, Venezuela has emerged as the

country that may become Belarus’ main alternative to Russia.

Hugo Chavez, the South American country’s flamboyant president, said during a recent visit to Belarus that Lukashenko should not be worried, since Venezuela could provide Belarus with oil for 100 years.

Inspired by these assurances, Lukashenko said recently that Belarus would drastically reduce its purchases of Russian oil. Thus, Moscow’s attempt to impose its will upon Minsk seems to have failed.

While the reasons for Lukashenko’s interest in Venezuelan oil are clear, one might question the rationale for Venezuela’s action. How could Chavez benefit from forging ties with Lukashenko?

Changes The Venezuelan leader surely understands that close ties with Belarus would irritate Russia. This should be a concern for Chavez, since his regime has maintained strong ties with the Kremlin for a long time.

The relationship between Moscow and Caracas was especially firm during the Putin era, before Medvedev’s ascension to the presidency in 2008. Before that time, Venezuela had no trouble acquiring thousands of Kalashnikov submachine guns from Russia, despite US opposition to such deals.

Russia and Venezuela also engaged in joint naval exercises while Putin served as president. These exercises were meant to prove certain points.�

COMMENTARY

Belarus’ search for new suppliers As relations with Russia grow ever more strained, Venezuela is becoming Belarus’ main alternative source of oil By Dmitry Shlapentokh � Moscow has been increasingly unwilling to subsidise Minsk’s fuel and energy bills � As a result, the two sides have sparred over oil an d gas transits and prices � Chavez seems willing to run the risk of complicatin g relations with Russia by courting Belarus

The Venezuelan leader surely understands that close ties with Belarus would irritate Russia





First, they were designed to show the US that Russia was still a global power that could project its naval power far outside its own borders. Secondly, they served as a message to Chavez that Moscow still regarded Washington as a major enemy and was ready to support Caracas in its confrontation with the latter.

On the surface, relations between the Kremlin and the Venezuelan regime are still close. During a recent trip, Chavez visited not only Minsk but also Moscow, where he had an amicable conversation with Medvedev and signed several contracts.

US-Russian “reset”

Still, the Venezuelan leader undoubtedly understands the changes that have taken place both in Washington and Moscow. The US and Russia no

longer regard each other as enemies, and the deep freeze in the relationship that marked the end of the Putin era has been replaced by a thaw.

The reasons for this change are many. One of them is the fact that Russia and the US are both concerned by the spreading of Islamic extremism in Afghanistan and Central Asia.

The shift in Russian attitudes is evidenced by Moscow’s decision to take a different – and less friendly – approach towards Iran, which was long regarded by many observers as one of Russia’s most important allies. For example, while finishing the Bushehr nuclear plant in Iran, after many years of delay, Moscow cancelled contracts for the delivery of S-300 missiles and joined in the toughest sanctions imposed by Washington.

Chavez understands that at any given

moment, he could well be sacrificed in the same way as Iranian President Mahmoud Ahmadinejad has been, and here Lukashenko has emerged as a useful back-up.

Russia and Europe have a generally condescending view of Belarus. However, the former Soviet republic has a viable industrial and scientific base that is, in some respects, more developed than those of Russia. Consequently, Minsk is in a good position to provide Venezuela with much-needed industrial goods, know-how and even weapons in exchange for crude oil supplies.

All of these factors indicate that a Belarusian-Venezuelan marriage might be a viable enterprise, even though this would displease both Russia and the US.�

Brazil could hold a new auction round of exploratory blocks in the first half of next year, the head of the country’s energy regulatory agency said.

Brazil’s National Energy Policy Commission could meet early in the new year to approve the restart of auctions, suspended following a tenth round with the discovery of the giant Tupi subsalt field in 2008, said chief regulator Haroldo Lima.

The commission could also approve the start of auctions for subsalt fields, including the giant Libra find, though these are unlikely to be held before the second half of the year. “An 11th round is already ready to go. All the mechanisms are practically concluded. We just need the authorisation of the commission,” said Lima in an interview with the Estado de S. Paulo newspaper.

Previously Lima had said that an eleventh round would not include subsalt

regions but instead other promising exploratory frontiers both on and offshore. He said the commission could also decide to authorise the start of auctions of subsalt blocks “but the practical processes [an actual auction round] will only occur in the second half of the year, because the first half will be consumed with the 11th round.”

Lima said that before a subsalt auction could be held new oil legislation would have to be signed by Brazilian President Luiz Inacio Lula da Silva.

The regulator said that any subsalt auction would likely include the mammoth Libra field, which consultants hired by the regulator estimate could hold up to 15 billion barrels of oil alone.

Brazil started holding auction rounds for exploratory blocks under a concessionary regime in the 1990s. But the government suspended the process following the five to eight billion barrel

Tupi discovery, which alerted the world to the potential of Brazil’s subsalt region.

The government has since redesigned the country’s oil legislation, moving to a production-sharing agreement (PSA) regime and reserving the lion’s share of the subsalt for Petrobras, which will be the sole operator in all future subsalt blocks to be auctioned off as well as the holder of a minimum 30% stake in all future consortia.

Critics claim the new legislation will diminish the appetite of international oil companies (IOCs) in future subsalt auctions. But the government said it had already fielded interest from national oil companies (NOCs) from China and elsewhere and expected many international oil companies to participate, given that the subsalt’s potential size is estimated at between 50-150 billion barrels of oil.�

COMMENTARY

INVESTMENT

Brazil bid rounds to restart in H1 2011





Petrobras is considering listing on the Hong Kong stock exchange, according to the head of the São Paulo stock exchange, location of the company’s primary listing.

“We’ve had conversations with Petrobras along those lines. Asia is where there’s the largest number of individual investors,” the CEO of the São Paulo bourse, Edemir Pinto, told reporters at a conference last week. As well as being traded on the São Paulo exchange, Petrobras American Depositary Receipts (ADRs) are traded in New York.

In an email commenting on Pinto’s declaration, Petrobras said: “There is no movement within the company in this sense toward a share listing in Hong Kong.” The company failed to confirm or deny Pinto’s claim that conversations had

taken place. Fellow Brazilian mining giant and

Petrobras partner, Vale, will start trading in Hong Kong this week through a Hong Kong Depository Receipt issue. The company said it would not raise any new capital via the exercise.

Both Vale and Petrobras have strong and deepening links with China. Vale is the biggest iron ore exporter to the Asian giant, which is its biggest customer. Meanwhile, Petrobras signed a massive oil-for-loans deal with China last year, with Chinese state banks lending it US$10 billion in return for guaranteed oil imports over a 20-year period.

Since that deal was signed there have been consistent rumours that further deals are being discussed and that Chinese oil companies could partner with

Petrobras to develop the offshore subsalt fields.

A Petrobras listing in Hong Kong could open up a new source of capital for a company that is seeking funds for its US$224 billion five-year investment plan. The plan only includes budgets to develop existing blocks and not the estimated 70% of the subsalt region still to be auctioned off by the Brazilian government under new laws by which Petrobras will the sole operator of all future blocks.

In September Petrobras raised almost US$70 billion in a share issue in Brazil, though more than half came from the Brazilian government and state-controlled institutions as opposed to private investors.�

Less than a week after announcing an oil discovery at its Rachel North well in waters around the Falklands, UK explorer Desire Petroleum turned full circle December 6 and announced that further analysis showed the well was dry.

“Having seen the highly encouraging results from the first two logs … on this well, plus accompanying oil shows, it is extremely disappointing that the subsequent wireline logs and fluids sampling have dashed all the earlier promise of this being Desire’s first oil discovery in the North Falkland Basin,” the company’s chairman, Stephen Phipps, said in a statement on December 6, four days after announcing the discovery. The news caused Desire’s shares in London to drop by 50%.

Desire said the sampling of the main sand in the well “has shown that the hydrocarbons are residual and that the

mobile fluid is water.” It said it still believed a deeper target

was oil-bearing “but the interval is thin and reservoir quality is poor.”

“Despite this setback, the presence of hydrocarbons and good reservoir development have been identified in a number of the Rachel fan sands and we therefore continue to believe in the

prospectivity of the East Plank fairway for future oil discoveries,” Phipps said in the statement.

Desire said some of the sands were similar to those in Rockhopper Exploration’s Sea Lion discovery, the only oil find to date in the Falklands. Desire said it would re-map them all to identify where better reservoir quality could be found.

After Rachel North is plugged and completed, the drill rig will move to Desire’s Dawn/Jacinta prospect, after which it expects to drill another well at another location yet to be decided.

Desire has a kitty of around GBP75 million (US$118.3 million), which it said would be enough to drill the Dawn/Jacinta prospect and another well, whilst also covering the cost of 3-D seismic studies.�

INVESTMENT

Petrobras mulls Hong Kong listing

PERFORMANCE

Desire faces Falklands flop

“It is extremely disappointing that the

subsequent wireline logs and fluids sampling have

dashed all the earlier promise of this being

Desire’s first oil discovery in the North Falkland

Basin”





Shell was optimistic that its Petroregional del Lago oilfield in Venezuela would restart soon, possibly even in the week commencing December 5. The joint venture with state-run PDVSA should be producing 31,000 barrels per day of crude but it has been out of operation since around October 20.

The joint venture is 60%-owned by PDVSA and came into being following the country’s nationalisation programme. The field, which is located in Lake Maracaibo’s West Urdaneta area in the state of Zulia, has been out of production for 45 days of scheduled maintenance.

In contrast to PDVSA’s caginess surrounding the exact circumstances of the suspension of activity – it chose not to disclose either when the work had begun or when it would end – Shell Venezuela’s president, Luis Prado, told journalists on December 1: “We should

be starting up production … between Monday [December 6] and Tuesday [December 7].”

Prado was also positive about how the work had been managed despite the adverse circumstances, saying: “We’ve been able to meet the plan despite the rain.” Heavy rains have beset parts of Venezuela and neighbouring Colombia for several weeks, leading to severe flooding.

While the Petroregional del Lago maintenance work appears to have proceeded without a hitch, other oil installations have not escaped the weather without problems. The unusually heavy rain has claimed at least 31 lives and made tens of thousands homeless.

Venezuela’s largest refinery, the giant Centro de Refinación Paragianá, as well the production of heavy crude from the Orinoco Belt, has also been affected.

On November 26, two of Venezuela’ s upgraders were out of operation and two others were performing at under capacity as a result of the severely inclement weather, Reuters reported. A PDVSA source said Venezuela’s four upgraders were producing 300,000 bpd, less than half their capacity of 620,000 bpd.

The 180,000 bpd Petropiar upgrader was due to begin operating again on November 25 but its relaunch was held back. “It was supposed to restart today, but it has not been possible. We are waiting for the storm to end to restart the loading of tankers and to re-programme it,” a source told Reuters.

Venezuelan President Hugo Chavez has taken control of the country’s response to the emergency, even putting up people in the presidential palace. He has placed responsibility for the flooding on the effects of capitalism.�

Guatemala’s Energy Ministry expects to receive bids from international oil companies to explore six oilfields in the country in the second quarter of 2011. The ministry said IOCs were expected to submit bids on April 8, 2011. It will be the country’s first bid round since 2002.

In a statement the ministry said that the areas to be tendered were in the regions of Petén, Huehuetenango, Quiché and Alta Verapaz.

“The first contract will include three areas located in the central zone of Petén, the northernmost region of Guatemala. PTN 1 comprises the Yalcanix and Paso

Caballo wells, the latter of which is believed to contain gas. PTN 3 equates to the San Francisco well, while PTN 4 contains four sections to be explored,” it said.

Guatemala currently produces between 35,000-40,000 barrels per day of heavy oil, up from 16,000 bpd in January. The lion’s share of production comes from wells in the northernmost Peten department.

Last year, Guatemala delayed the auction of 16 blocks, which the government estimated would draw as much as US$235 million in investment.

The blocks are located offshore the country’s Pacific coast and are believed to contain natural gas.

The details of the tender rules have now been published in the official gazette but there are no details about what kind of reserves might be found in the areas that are up for auction.

According to Guatemalan President Alvaro Colom, the aim is to triple the country’s hydrocarbon output, with plans to ramp up oil production to 60,000 bpd by 2011.�

PERFORMANCE

Shell optimistic about restart of Venezuelan oilfield

POLICY

Guatemala to boost oil exploration with 2011 bid round





Peru LNG is set to ship 57-58 cargoes of liquefied natural gas (LNG) in 2011, some of which could be sent to Asia.

The US$3.8 billion Peru LNG terminal, South America’s first LNG plant, began exporting in June and is expected to have exported 24 cargoes by the end of this year, Barbara Bruce, Peru LNG’s general manager, told delegates at a recent event in Barcelona.

Twenty cargoes have been shipped so far, she said. Of those, the first went to Canaport LNG terminal in New Brunswick, eastern Canada. Others were sent to northwestern Europe.

Regarding next year’s production, officials have also said Asia is a possible destination, although the bulk of

production will go to a receiving terminal in Manzanillo, Mexico, when it comes onstream in the last quarter of 2011.

“We are not ruling out the possibility of sending Peru LNG to Asia, but only the limited volume we would have after our commitments to Manzanillo,” said Benjamin Palomo, managing director of

LNG at Repsol, which holds a 20% stake in the Peru LNG consortium.

Reuters reported that Peru LNG was currently in talks with Asian buyers. Meanwhile, Bloomberg quoted Bruce as saying that more production units might come online in four to five years, depending on gas discoveries in the area. “The expectation is more gas, and most probably a second and if possible a third train for the excess gas that we’re sure we’re going to find,” she said.

The plant has capacity to produce 4.45 million tonnes per year of LNG, said Graham Lawton, general manager of Compania Operadora de LNG del Peru, the plant’s operating company. It is currently running at full capacity.�

Argentina’s Pampa Energia is taking steps to ensure natural gas for its thermal power plants (TPPs) by teaming up with a leading producer on an unconventional gas project.

Last week, Pampa Energia said in a statement it would invest US$20 million in a US$130 million project to develop reserves of tight gas over three years in Neuquen, a southwestern basin gaining attention for its potential for unconventional gas.

Companies like France’s Total and Repsol-controlled YPF are betting on tight and shale gas to offset declines in traditional gas production because of maturing fields.

Through its oil unit Pampa Petroleo, Pampa will work with Houston-based Apache Corp. on the project, expecting to produce 700,000 cubic metres per day of tight gas at the Anticlinal

Campamento and Estacion Fernandez Oro fields.

Pampa will get 15% of the output as part of the three-year project investment, and it will buy the rest of fields’ output to supply its Loma de la Lata power plant in the province of Neuquen.

It wants to make sure it gets sufficient supplies of gas for its power plants by striking purchase deals directly with producers. This is one of its first direct investments as part of a deal for securing gas supplies. In August 2009, it agreed to purchase 800,000 cmd of gas also from Apache.

Pampa said that the total of 1.5 mcmd would go to Loma de la Lata to meet more than half of its demand for 2.6 mcmd.

It wants to avoid getting cut off from supplies in winter, when gas shortages have led the government to restrict deliveries to factories and power plants to ensure steady supplies for homes. In response, power plants have had to burn costlier diesel and fuel oil, hitting their profits.

The shortages are expected to continue until there is a turnaround in the gas decline. National gas production – 95% is traditional gas – has dropped more than 7% in 2010 to 132 mcmd from a record 143.1 mcmd 2009.

With the economy growing strongly, demand is rising for an energy source that supplies more than 50% of national energy needs.�

POLICY

Peru LNG considers Asian market

“We are not ruling out the possibility of sending Peru LNG to Asia, but only the limited volume we would

have after our commitments to Mexico”

PROJECTS & COMPANIES

Pampa looks to tight gas for plants

Pampa Energia said it would invest US$20 million in a US$130

million project to develop reserves of tight gas over three years in Neuquen





Ecopetrol has claimed to have proved the presence of heavy oil in the Acacias-1 exploratory well, in the company’s CPO-9 block in central Colombia.

In a statement on December 1, Ecopetrol said that the discovery was made near the town of Acacias, in the central province of Meta, adding that it was the “sixth find with Ecopetrol participation since the beginning of [2010], and the third in the Eastern Llanos region.”

Ecopetrol, which is 89.9%-owned by the Colombian government, said the drilling fell under an exploration and production contract signed with the National Hydrocarbons Agency (ANH). Ecopetrol operates the CPO-9 block and

owns a 55% stake, while Canadian-owned Talisman Oil and Gas Ltd holds the remaining 45% interest.

“The results of initial production tests, made available just recently, show crude oil production of 9.3 degrees API, with average flow of 1,280 barrels per day,” said Ecopetrol in the statement. It said drilling began on August 31 and reached a depth of 11,780 feet (3,590 metres).

“This new hydrocarbons discovery in the Eastern Llanos substantiates the important potential of this region, which produces 40% of the country’s oil, joining other recent discoveries by Ecopetrol and other companies and encompassed in our heavy crude strategy,” Ecopetrol CEO Javier

Gutierrez said. He added that the company was

focused on increasing its reserves and boosting production by more than 12% annually “until we reach one million barrels equivalent [per day] by 2015.” The discovery was the fifth in Colombia in 2010 for Ecopetrol, which is the Andean nation’s largest firm and one of the world’s 40 largest oil companies.

On the same day, Ecopetrol reported a local public bond issuance and placement amounting to US$800 billion. The company noted that the objective of the placing would be to finance its 2010 Investment Plan. Ecopetrol accounts for more than 60% of Colombia’s oil output.�

Petrominerales announced that one of its Llanos Basin discovery wells in Colombia has tested at a flow rate of 10,000 barrels per day of oil.

Following a seven-hour production test, the company believes the Caruto-1 well will produce 12,000 bpd of light oil. The company recently reported that its average oil production in November was 30,938 bpd.

The company, in which Petrobank Energy and Resources has a 65% stake, announced the result of the discovery on November 29, a few weeks after drilling work was completed.

The well is in the north-east of the Corcel block. The company said it had a total measured depth of 13,024 feet (3,970 metres), while well logs showed a total of 47 feet (14.32 metres) of potential net pay of 32 degree API oil at a 0% water cut in the Lower Sand formation.

Without the aid of an electric pump,

the well has a natural flow of 5,600 bpd. The exploration and production company is setting up additional facility capacities to meet the planned 12,000 bpd.

The Latin America-orientated operator has ambitious plans for further exploration. Inspired by Caruto-1, it is looking into the opportunities offered by other drilling locations. “Based upon the log and test results, we are currently evaluating the possibility for follow-up drilling locations on the discovery,” said the company. “The Caruto-1 well results demonstrate the high-impact exploration opportunities present on our Llanos Basin blocks.”

In total, Petrominerales has 17 exploration blocks across 2.1 million acres (8.500 square km) of the Llanos and Putamayo Basins. Additionally, it holds 9.4 million acres (38,000 square km) of Peru’s Ucayali and Titicaca Basins, where it has five exploration blocks.

In December, the company expects to post production results from drilling work at the Corcel-E2 well. On November 27, it measured depth to 13,180 feet (4,000 metres) and the resulting well logs are being studied. Petrominerales also expects to have the results of its Yatay-1 exploration well in the Guatiquia block before the end of the year.

Looking forward to 2011, the company said it would “incorporate the Caruto-1 well results into our geological model and adjust our drilling order as required.”

Petrominerales also plans to release news from the promising Central Llanos blocks, where the first of a four interval-testing programme has begun in the Mirador formation. The programme should be completed and results are expected to be available this year. Log results from Mantis-1 are similarly anticipated before the end of the year.�


Ecopetrol verifies heavy oil find

Petrominerales announces new Llanos Basin discovery





US-based BPZ Resources announced it had launched commercial production at the Corvina oilfield in offshore Block Z-1 in north-west Peru.

BPZ has contracts for approximately 2.2 million acres (8,903 square km) in four properties in northwestern Peru. It also owns a minority interest in a field in Ecuador.

The company has started operating the gas compressor at the CX-11 Corvina platform to re-inject the associated gas and thus avoid gas flaring. It is now in the process of re-opening the Corvina oil wells that were shut-in because of gas-flaring restrictions.

“This is a great achievement for our operations team and the company in general, as it proves that with proper

planning and execution our team can meet key milestones,” said Richard Spies, COO of BPZ.

The company’s CEO, Manolo Zuniga, added: “The Corvina oilfield is our first field in commercial production. Our investors have been watching for us to execute on this milestone, and I am pleased with our team’s commitment to meeting the announced schedule. We are currently working on the future development of Corvina, and committed to installing the required gas re-injection equipment at Albacora so we may bring our second oilfield into commercial production by year-end 2011.”

BPZ is currently executing the development in Block Z-1 of the Corvina oil discovery, as well as the

redevelopment of the Albacora oilfield, and the exploration of Blocks XIX, XXII and XXIII, in parallel with the execution of an integrated gas-to-power strategy. The latter programme includes generation and sale of electricity in Peru and the development of a regional gas marketing strategy.

Zuniga recently said the company expected capital expenditure in 2011 to reach US$80 million, which would largely be invested in seismic work and rehabilitation activity at Albarcora.

Bloomberg reported last month that the company had hired Credit Suisse Securities as a financial advisor to help pursue joint ventures and options for financing operations in Peru.�

OIL

Argentina’s Bulgheroni admits eyeing Esso assets Argentina’s Bulgheroni brothers are not content with having acquired half of Argentina’s second biggest oil producer, Pan American Energy. Alejandro Bulgheroni, Pan American’s president, admitted he could be interested in Esso assets which ExxonMobil is believed to be seeking to sell in Argentina. “We have never been interested in service stations, but the majority of Esso’s oil is provided by us. There are synergies between us. I can’t say anything but there are synergies between our oil and that which Esso refines,” Bulgheroni said. He also said discussions were ongoing about whether Pan American would now merge with Bridas, the Bulgheroni’s private company which in partnership

with the China National Offshore Oil Corporation bought BP’s stake in Pan American Energy. But Bulgheroni said he was not interested in taking a stake in YPF, Argentina’s biggest energy company.

LA NACION, December 3, 2010

ANP indicates oil production at the same level as in 2009 Oil production in Brazil was at 1.998 million barrels per day in October, a stable figure compared to September this year and an increase of only 0.36% compared to October 2009, according to data by the National Petroleum Agency (ANP). The volume of oil produced in October places the country at the same level as a year ago, when Petrobras produced 1.990 million barrels of oil per day and private companies had a production smaller than

the current 166,000 barrels. According to a communication disclosed on Monday by ANP, the subsalt region showed a decrease of 13.7% in production compared to the previous month, reaching 43,978 barrels of oil per day and 1.607 million cubic metres of natural gas per day. Petrobras could not inform Reuters on the reason for the downfall on production in the subsalt fields. ANP considers only the production volume in the fields operated by the company and not the participation on blocks. Rio de Janeiro continues to be the largest oil-producing state, with 1.555 million barrels per day, or 77.9% of the total, followed by Espirito Santo and Bahia, with 233,200 barrels of oil per day and 45,900 barrels of oil per day, respectively. Amazonas, Rio Grande do Norte, Sergipe, Sao Paulo, Alagoas and Ceara are also producing states, totalling a production of 163,300 barrels per day.�


BPZ Resources kicks off production at Peruvian field

NEWS IN BRIEF



www.newsbase.com Edited by Andrew Kemp

All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All


Petrobras is the absolute production leader in the country, with 1.824 million barrels of oil per day in October. In second place, comes Shell, with 93,200 barrels per day and Chevron Frade, with 50,800 barrels per day. Devon registered a production of 26,600 barrels per day in October. According to ANP, the Roncador field was the largest oil producer and the Manati field the largest natural gas producer, both controlled by Petrobras.

O GLOBO, December 1, 2010

Brazil to need US$550bn in energy investment by 2019 Brazil will need 952 billion reais (US$550 billion) of energy investment through 2019 to cover rising demand primarily for ethanol, biofuels and natural gas, the Energy Ministry said. Brazil will invest about 672 billion reais to explore, produce and supply oil and natural gas, another 214 billion reais to generate and transmit electricity and 66 billion reais to supply biofuels, the ministry said in an expansion plan approved on Nov. 26 and published today on its website. New international environmental accords and the world economic rebound may help the South American country to almost triple exports of ethanol to 9.9 billion liters in 2019, the report said. Brazil will have to build 103 new ethanol mills during this period, of which 30 are under construction. Sugar cane output may rise 66% to 1.14 million tons by 2019. Demand for ethanol will jump 90% to 64 billion liters in 2019 with the expansion of so-called flex-fuel vehicles, which can solely run on ethanol or a mix of the biofuel with gasoline, the Energy Ministry said. Petroleum demand in the South American country will rise 3.8% while gasoline consumption declines 2.1%, the ministry said. Demand for natural gas and electricity will rise 8.5% and 5.3%, respectively, it said. Brazil’s gas production may climb 187%

by 2019 to 100 million cubic meters a day, boosted by rising consumption as it replaces oil fuels because it is cheaper, the ministry said. Brazil will add 1,707 kilometers (1,060 miles) of gas pipelines during this period, it said. Petroleum output is expected to rise 161% by 2019, the ministry said.

BLOOMBERG, November 29, 2010

Santos at 130,000 bpd by next year Petrobras, expects to double crude oil production in the Santos Basin by the end of 2011, a company official told the local Estado news agency Wednesday. In an interview with Estado, Petrobras general manager for the Santos Basin’s exploration and production, Jose Luiz Marcusso, said that crude oil output in the Santos Basin was expected to reach 130,000 barrels a day by the end of 2011, up from about 61,000 barrels a day currently. Natural gas output could potentially reach 17 million cubic meters per day, but that would depend on demand for the clean-burning fuel, Marcusso said. Quick development of the Santos Basin, home to Brazil’s so-called subsalt oil fields, is part of Petrobras’s ambitious US$224 billion investment plan over the next five years. Petrobras wants to double oil production to nearly 3.9 million barrels a day, making Brazil one of the world’s top five oil producers. The ultra-deepwater fields are buried below more than 4 miles of sea, sand, rocks and a shifting layer of salt. A pilot production project at the Tupi field, estimated to hold recoverable reserves of between 5 billion and 8 billion barrels of oil equivalent, or BOE, started in late October. Marcusso said that the Tupi pilot, the first to test output at the deepwater fields, should reach its production capacity of 100,000 barrels a day in 2012.

DOW JONES, December 01, 2010

Petrobras finds more oil in the Sergipe-Alagoas basin Petrobras informed the National Petroleum Agency (ANP) about an oil find in 1BRSA875SES well, block Seal-495, in the Sergipe-Alagoas basin. According to ANP, the finding took place with a water layer of 1,393 metres. Petrobras acquired the block on its own, during the sixth round of bids on oil areas by the Brazilian government, in 2004, having paid 33% on the minimum price of 30 million Brazilian reais (US$17.92 million) set up by ANP, totalling around 40 million Brazilian reais (US$23.9 million). This year, Petrobras had already announced other findings in the same basin, considered to be a new frontier and where oil has a better quality than the Brazilian average, around 24.6 degrees API (average density), according to ANP. In October, the company informed its first finding in the ultra-deep waters of the region, at the 1-RSA-851-SES well, known as Barra.

ALAGOAS EM TEMPO REAL, December 7, 2010

Guatemala lists Brazil among interest parties in oil bid Guatemala invited international companies interested on the exploration and production of four oil areas in four regions north of the capital, despite not providing any information on the volume of oil reserves in the areas. The President of Guatemala, Alvaro Colom, published in Guatemala’s official newspaper a governmental deal in which he set up the rules for the receival of offers and the oil extraction contract in the areas present in the auction. Offers will be received until April 8, 2011. Three of the blocks are located in the province of Peten, and the other block between the departments of Alta Verapaz and Quiche, all of them north of the City of Guatemala.�

NEWS IN BRIEF






The Minister of Energy and Mining, Romeo Rodrigues, stated on a press release that he has already received manifestations of interest by oil companies from Russia, Canada, US, Colombia, Mexico and Brazil, among others, without citing names. OGX informed Reuters that it did not apply for Guatemala's auction. Petrobras did not say whether or not it would participate. This is the first auction for the exploration of new oil regions in Guatemala since 2002. Guatemala currently produces between 35,000 and 40,000 barrels of heavy oil per day. Brazil has not organised auctions for oil regions since it had 10 successive rounds in 1999.

EXPRESSO MT, December 1, 2010

Mexican court backs private oil contract rules Mexico’s top court threw out a legal challenge to regulations allowing private companies to operate oilfields in the country, moving state oil monopoly Pemex one step closer to signing contracts with the private sector, newswire Reuters reported. Even so, another legal hurdle remains before the path is cleared for Pemex to hold auctions that could help boost flagging production at its aging oil installations, court sources said. Mexico’s lower house of congress voted in October last year to challenge in court a 2008 oil reform allowing more private involvement in the state-run oil sector. The lower house said the government had overstepped its authority in passing the reform and that regulations created after the law passed gave too much control over the industry to the private sector. The court rejected almost all of the lawmakers’ claims, supporting them in only one section of the rules related to board decision-making. A legal question remains about the article of the constitution regulating the oil sector. Pemex hopes private companies will help

it modernise production and boost crude output from older fields by up to 150,000 barrels per day.

REUTERS, December 6, 2010

Pemex secures US$3.25bn in credit Mexico’s state oil company Pemex said it has secured a US$3.25 billion credit line through two loans for three and five years from 25 banks, newswire Market News International reported. The loans are not new but part of a continually renewing credit line, said a source with knowledge of the transaction who was not authorized to speak on the record. The company obtained a three-year loan for US$1.25 billion from 18 banks including Bank of America, Barclays and JPMorgan Chase. A US$2 billion five-year loan was underwritten by 20 banks, many of them the same as those extending the three-year credit. The company is raising funds to increase capital investment and refinance debt as it struggles to update technology and improve outdated infrastructure.

MARKET NEWS INTERNATIONAL, December 3, 2010

Pemex controls pipeline leak in Chiapas Mexico’s state oil company gained control of an oil leak of almost 10 barrels on a pipeline in Laguna El Carmen, Chiapas, newspaper El Universal reported. The company said it is working to clean up the spill. The cleanup effort will take a week. No injuries were reported from the spill.

EL UNIVERSAL, December 2, 2010

Wikileaks reveals interest in oil in Paraguay’s Chaco One of the secret diplomatic cables revealed by Wikileaks in recent days referred to a request in March 2008 from

Washington to its embassy in Paraguay to analyse the potential impact of a large-scale oil and gas discovery in the Chaco region. The cable highlights long standing interest in the hydrocarbons potential of the vast region in Paraguay. Washington’s interest is not without basis – indeed in the Argentine Chaco province, officials have been taking steps to promote exploration of the province’s potential for hydrocarbons production.

DIARIOCHACO.COM, December 2, 2010

GAS

Will Argentina buy LNG from Iran? Iran says it is plans to sell liquefied natural gas to Argentina – Ali Kheyrandish, director of Iran’s LNG company, described South America as a priority export market for Iran and said a plant being built in Venezuela will help supply Argentina under a long-term contract Venezulea has with that country. But diplomatically it is delicate. The government has so far failed to get Iran to hand over officials wanted in connection with an attack on a Jewish centre in Buenos Aires in 1994 in which 85 people died. According to Wikileaks revelations, Argentina also abstained in a vote to elect the head of the International Atomic Energy Agency in order to favour Washington’s candidate, who opposes Iran’s nuclear programme. Argentina and Iran have had no commercial relations since 2008.

URGENTE 24, December 4, 2010

US criticised Argentine gas cuts to Chile The US embassy in Buenos Aires on 2006 criticised the polities of Argentina’s then president Nestor Kirchner and its cuts in gas supply to neighbouring Chile, according to a secret diplomatic cable revealed by Wikileaks.�

NEWS IN BRIEF






The cable said Kirchner’s foreign policy was always subordinated to domestic political concerns and his cuts in gas supply to Chile, defying contracts between Chile and local gas providers, were destined to cover shortages in the domestic Argentine market. It said Kirchner was no expert in diplomacy and often overlooked basic protocol. Argentina’s cuts in gas supply pushed Chile to the brink of energy rationing.

LA TERCERA, December 3, 2010

Argentina’s YPF to announce major unconventional gas discovery Argentina’s President Cristina Fernandez will attend the Buenos Aires headquarters of YPF, the country’s biggest oil company, on Tuesday for the announcement of a discovery of a gas deposit that could triple current reserves of the hydrocarbon. The discovery is a shale gas deposit below the Loma La Lata field which people in the industry say could revolutionise the outlook for the gas sector. The president will use the occasion to announce an increase in prices for unconventional gas, which will triple the current market average. According to Hector Mendiberri, hydrocarbons subsecretary for the province of Neuquen, unconventional gas resources could amount to 257 trillion cubic feet, of which 12-15% – some 40 TCF – could be proven reserves. That is three times the current reserves of some 12 TCF.

LT10 DIGITAL, December 12, 2010

YPF halts production in southern Argentine fields after union action YPF, the Argentine wing of Spanish-led major Repsol-YPF, has halted production in its fields in the provinces of Chubut and Santa Cruz in southern Argentina in response to the attitude of a union representing company officials which

took over a plant. “YPF has resolved to suspend production of hydrocarbons … as a result of the violent incidents during the weekend,” the company said in a statement. It said it would continue the suspension until conditions improved. YPF sources say this is the first time such action has been taken.

LA NACION, December 6, 2010

Argentine governor sees initial gas pipe tender early 2011 Maurice Closs, governor of the Argentine province of Misiones, said the central government was still working to realise a planned major gas pipeline in north eastern Arentina and said the tender for the first four sections of construction would take place in January, despite the government’s failure to get its 2011 budget through Congress. Speaking after a meeting with federal Planning Minister, Julio De Vido, Closs said the four remaining sections of the pipeline would be tendered in June. The pipeline is designed to carry gas from Bolivia to northeastern provinces of Argentina.

MISIONES ONLINE, December 2, 2010

BG Group to decide on floating LNG terminal next year BG Group will make a decision on investing in a liquefied natural gas (LNG) plant off the shore of Brazil by the end of 2011, Betsy Spomer, vice president of regional development said on Tuesday. “We will come to a decision in March 2011 as to whether we go forward and solicit firm binding bids, with an ultimate final investment decision timing of Q4 2011,” Spomer said at the CWC World LNG Summit in Barcelona. Spomer said BG Group planned to take some of the associated gas from oil production in offshore Brazil and cool it into LNG at a floating production plant for export. This would be a turnaround for Brazil,

which has emerged as a major LNG importer over the last two years. BG will be developing the project – which could be the world’s first floating liquefaction plant – with Brazil’s state-owned energy producer Petrobras. An industry source close to the project said the partners would decide whether to build the plant or to simply send the gas ashore via pipeline by March 2011. Only then will they look to find contractors to build it. If built, it would be online by 2015. Spomer added that the United States could also become a major exporter of LNG in the coming years. The United States, which has two proposed LNG production plants on its Gulf Coast, could become the “next Qatar,” Spomer said, as shale gas production there increases and demand elsewhere, especially in Asia, rises.

REUTERS, November 30, 2010

Petrobras sees 40 LNG import shipments next year Petrobras may import as many as 40 cargoes of liquefied natural gas by the end of the year. Irregular rainfall affected hydropower production in Brazil this year and the country turned to gas to produce electricity, Marcio Demori, LNG trading manager for the company known as Petrobras,. said today at the World LNG Summit in Barcelona. LNG cargoes were mostly bought from Trinidad & Tobago and also came from Nigeria, Qatar, Peru, Norway, Abu Dhabi and Equatorial Guinea, he said. There were 15 different counterparties to the deals. One cargo was reloaded from storage tanks in Belgium and sent to Brazil, Demori said. Brazil will probably receive another cargo reloaded from tanks in the U.S. Petrobras has 33 master sales agreements in place and is negotiating another 40 to 50, according to the manager.�

NEWS IN BRIEF






The country began importing liquefied gas in 2009, when it bought seven cargoes. Demori said he didn’t know how much LNG the country will import next year. Brazil is importing liquefied natural gas to reduce its dependence on Bolivia, the source of about half its daily demand of about 60 million cubic meters. Petrobras has two LNG carriers on 10-year charters from Golar LNG Ltd. Both have been adapted to regasify LNG on board and pump the gas into Brazil’s pipeline network.

BLOOMBERG, December 01, 2010

Chile’s Enap says 352 workers left under first phase of layoff plan Chile’s state energy company, Enap, says 352 workers have left the company in the first phase of a layoff plan which aims to reduce the workforce by 15%. The company is aiming to slash costs and save US$530 million through the layoff plan and other efficiency measures by 2012. Enap had 3.380 workers at the end of 2009. Exiting workers have been offered a higher than originally planned bonus as well as an extension in health insurance. A further 129 officials have come forward to join the plan. Enap has not given details of the departments or areas the exiting workers had been based.

EL MERCURIO, December 1, 2010

GeoPark issues US$133m in debt to finance future growth GeoPark, a private energy company which made a string of discoveries in the Fell Block in southern Chile’s Magallanes region, has issued US$133 million in debt on international markets with strong participation from Chilean investors. The debt, due in 2015, will pay an annual coupon of 7.75%. The company has a programme to issue up to

US$27 million in debt. Money raised will be used to boost growth and improve financial flexibility; indeed, US$29.5 million will be used to pay down debt and the rest will be invested in strategic growth plans including exploration and acquisitions.

LA TERCERA, December 3, 2010

BP not to sell Trinidad assets BP chief executive Robert Dudley said the company doesn’t plan to sell its assets in Trinidad and Tobago, even after selling assets in South America and elsewhere to come up with funds to cover losses from a massive oil spill earlier this year. Dudley met with Prime Minister Kamla Persad-Bissessar to discuss BP’s role in the local energy sector. “Selling BP’s Trinidad assets was never an option. The Trinidad operations have had consistently strong safety and business performance and remain of strategic importance to the BP Group,” Dudley said. BP’s Trinidad and Tobago operations produce approximately 450,000 barrels of oil equivalent a day, which accounts for about 10% of BP’s worldwide hydrocarbon production.

TRINIDAD EXPRESS, December 1, 2010

SERVICES

Lupatech signs US$67 million deal with Petrobras Lupatech signed last Tuesday a service provision contract with Petrobras, worth 112.2 million Brazilian reais (US$67 million), for five years, renewable for five years. According to market information, the contract includes service provision for the connection and disconnection of drilling pipes, production and coating, including the use of equipment such as hydraulic wrenches, hand washers, spiders, pneumatic lifts, scrapers and crossovers. Execution will start in April 2011, and full operation in October 2011.

The contract will be executed by the company’s integral subsidiary, Lupatech Equipamentos e Servicos para Petroleo Ltda, with headquarters in Macae, Rio de Janeiro.

ESTADAO, November 30, 2010

REFINERIES

Pemex wraps up refinery maintenance work Mexico’s state oil company Pemex is wrapping up maintenance work at its Salina Cruz refinery in the southern state of Oaxaca, newswire Bloomberg reported. Pemex would first resumed operations on one of its catalytic units. A hydrodesulfurization unit is now operating at 50% capacity and should reach full capacity within days. Output from the Salina Cruz refinery, Mexico’s second largest last year, fell in October to the lowest in 16 months to 244,841 barrels a day. The company had said that the plant output wasn’t expected to be affected because it was increasing production at other units to offset any reduced fuel output stemming from the maintenance.

BLOOMBERG, December 1, 2010

PETROCHEMICALS

Pemex steps up petrochemical output Mexico’s state oil company Pemex increased petrochemical production by 17% in October from the year-earlier period, newspaper El Universal reported. It produced a total of 1.3 million metric tons in October. In the first 10 months of 2010, Pemex produced 11.7 million tons of petrochemicals, up 9% from the year-earlier period. The increase in the January-October period was led by output of vinyl chloride, which is used for making PVC, resins and paints.

EL UNIVERSAL, December 1, 2010

NEWS IN BRIEF





TENDERS & CONTRACTS

LatAmOil 07 December 2010, Week 48 Back Page

For further details on the stories above and NewsBa se’s entire product range:

tel: +44 (0) 131 478 7000 e-mail: [email protected] Copyright © 2010 NewsBase Ltd.

www.newsbase.com

HEADLINES FROM A SELECTION OF NEWSBASE MONITORS THIS WEEK

Oil and Gas Sector

AfrOil Two more gas finds have been made offshore East Afr ica, advancing the case for an LNG development.

AsianOil Santos has been given the green light for a second gas production project in Indonesia’s Sampang field.

ChinaOil CNPC is to oversee a US$6 billion expansion of Cuba ’s Cienfuegos refinery.

EurOil GDF Suez has been granted seven new licences in the UK’s 26th Seaward Licensing Round.

FSU OGM Shell and Gazprom have agreed to pursue joint investment projects in Russia and other countries.

GLNG Golar LNG has moved into the black as earnings from its LNG shipping operations improved.

NorthAmOil EXCO has increased its capex budget 50% beyond expectations for 2011.

Unconventional OGM Goldnev Resources has further increased its propert y interest in oil shale permits in Saskatchewan.

CUSTOMERS INCLUDE

NEWSBASE INFORMATION

LatAmOil 7th Dec 2010 - Legal changes in Brazil

Documents

Transcript of LatAmOil 7th Dec 2010 - Legal changes in Brazil