Oil sanctions will close Hormuz, warns Iran

Iran's first vice-president warned in late December that the flow of crude will be stopped from the crucial Strait of Hormuz in the Gulf if foreign sanctions are imposed on its oil exports, the country's official news agency reported. "If they (the West) impose sanctions on Iran's oil exports, then even one drop of oil cannot flow from the Strait of Hormuz," Irna quoted Mohammad Reza Rahimi as saying. About a third of all sea-borne oil was shipped through the Strait in 2009, according to the US Energy Information Administration (EIA), and US warships patrol the area to ensure safe passage. Tensions over Iran's nuclear program have increased since the International Atomic Energy Agency (IAEA) reported on November 8 that Tehran appears to have worked on designing a nuclear bomb and may still be pursuing research to that end. Iran strongly denies this and says it is developing nuclear energy for peaceful purposes. Iran has warned it will respond to any attack by hitting Israel and US interests in the Gulf, and analysts say one way to retaliate would be to close the Strait of Hormuz. Most of the crude exported from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq - together with nearly all the liquefied natural gas from lead exporter Qatar - must slip through a 4-mile (6.4 kilometer) wide shipping channel between Oman and Iran. Source: Reuters

Exxon mulls $10bn takeover of Gulf Keystone

US oil major Exxon Mobil is mulling a 7 billion pound ($10.9 billion) takeover of Kurdistan-focused explorer Gulf Keystone Petroleum, the Independent reported. The newspaper said that Exxon is considering making an estimated 800 pence per share bid for Britain's Gulf Keystone, which has made huge oil finds in the semi-autonomous Kurdistan region of Iraq. Exxon has "sounded out" Gulf Keystone about the possible deal, said the report without citing its sources, adding that it is thought that the company would not accept an offer at the 800 pence per share level. Exxon became the first major to move into the northern Kurdish region in mid-October when it signed with the Kurdistan Regional Government (KRG) for six exploration blocks, a move which has angered the Baghdad government. Baghdad has said any oil deals signed with the KRG are illegal. Source: Reuters

South Korean firm wins $233m Qatar power deal

Qatar has awarded South Korea's Hyosung Power and Industrial Systems Performance Group a $233 million contract to build eight electricity substations in the Gulf country. According to the deal, the Korean electrical equipment and industrial machinery provider will build six 220-kilovolt and two 66-kilovolt electrical transformer substations by the end of 2013. Hyosung added the affiliate will be responsible not only for the construction but also for engineering and procurement for the Qatar project. In the previous Qatar deal, Hyosung Power and Industrial Systems clinched a 130 billion won order to build three 132-KV and two 66-KV substations in the Middle Eastern country, which are scheduled to be completed next year, according to the company. Source: AMEInfo

KHC invests $50m into Nigerian energy firm

Kingdom Holding Company, the investment firm chaired by Saudi Prince Alwaleed Bin Talal Bin Abdulaziz Alsaud, has announced a $50 million investment into First Hydrocarbon Nigeria (FHN), a leading upstream oil and gas company in Nigeria. FHN transaction was through the second Kingdom Zephyr fund, PAIP II, said a statement from KHC. Besides KHC, the PAIP II's investor base includes African Development Bank, International Finance Corporation, European Investment Bank, and Netherlands Development Finance Company. Fernvale Investments (Mauritius) Private Limited, a wholly owned indirect subsidiary of Temasek Holdings. FHN was established in 2009 to capitalize on the exceptional opportunities for indigenous Nigerian involvement in the upstream sector of the oil and gas industry. Commenting on the move, Prince Alwaleed said, “We invest in the gas and oil sector based on a strategic investment approach.” Prince Alwaleed’s investments in Nigeria through Kingdom Holding Company are mainly in the banking sector via Citigroup. Since its inception in 2008, PAIP II fund has invested $100 million in three investments, the KHC statement said. Source: TradeArabia News Service

Baker Hughes gets $640m Iraqi drilling deal

Iraq awarded a $640 million deal to US oil service company Baker Hughes to drill 60 wells in the southern Zubair oilfield, a government spokesman said in late December. The Iraqi cabinet approved the Oil Ministry's request to award the three-year contract to the US company, Ali Al-Dabbagh said in a statement. Italy's ENI, US-based Occidental Petroleum Corp and South Korea's Kogas have signed a 20-year deal with Iraq to develop Zubair. They set an eventual output target of 1.2 million barrels per day. Iraq has struck a series of development contracts with global oil companies in a bid to more than quadruple its oil output potential to 12 million bpd, which could also signal a bonanza for oil service companies. In August, Russian oil company Lukoil awarded Baker Hughes a two-year contract to provide full drilling and completion services for 23 wells in the West Qurna Phase Two field in southeast Iraq. Baker Hughes opened an operations base in Iraq's southern oil hub city of Basra last year. Source: Reuters

Abu Dhabi: Making concessions

The face of Abu Dhabi’s oil industry could be set for a major makeover, with long established international operators facing increased competition for existing concessions and new contracts due to be agreed in coming years. In particular, energy-hungry Asian states are queuing up to gain access to the emirate’s oil fields. From 2014 onwards, most of the concessions to operate Abu Dhabi’s on and offshore oil fields will come up for renewal, and all the indications are that the relatively small pool of concessionaires will be expanded, while almost all existing operators have signaled their interest in continuing to operate in the emirate. Among those keen to retain their stake in Abu Dhabi’s existing fields is Japan, which is also looking into the possibly of expanding its share by adding new reserves. Japan may have to increase its oil and gas usage, having committed to winding back its nuclear energy program following the Fukushima disaster in March. On October 9, Yukio Edano, Japan’s minister of energy, trade and industry, held talks with senior officials from Abu Dhabi regarding the renewal of the oil concessions held by Japanese firms in the emirate’s oil fields. One of these is the Japan Oil Development Company, which currently has a 12% stake in four fields in Abu Dhabi’s largest offshore concession, and a further 40% share in another field. All of these concessions are due to expire within the coming seven years. According to Edano, Japan was very keen to see the term of the existing concessions extended and for new ones to be granted. “We would like to continue these concessions,” he told reporters. “Oil from Abu Dhabi is important and will continue to be important going forward. We discussed concession extensions and new investments, including oilfields which have not been developed, as well as onshore blocks.” Source: Oxford Business Group

Turkey, Azerbaijan to sign gas pipeline deal

Azerbaijan and Turkey will sign a memorandum of understanding tomorrow (Dec. 26) to build a Trans-Anatolian gas pipeline project, which will carry Azeri gas across Turkey to Europe, Turkish energy ministry said in a statement in late December. Azeri state energy company Socar, Turkey's state pipeline company Botas and Turkey's state energy company TPAO will be the initial partners in the project and other international oil and gas companies may join the consortium during the process, it said. Last month the president of Azeri state energy company Socar Rovnag Abdullayev said Azerbaijan and Turkey have started work on a trans-Anatolian pipeline project to carry Azeri gas across Turkey. Source: Reuters

Libya awards oil supply to major traders

Libya has agreed to supply four major European trading houses with crude oil in 2012, a senior National Oil Corporation (NOC) source told Reuters, appearing to break from a policy of restricting sales to end-users. Glencore was awarded the largest share among Europe's trading majors, and will lift three cargoes of Libya's prized sweet oil per month. Swiss-based trading giants Vitol, Gunvor and Trafigura each won contracts worth approximately 18 cargoes, 12 cargoes and four cargoes per year respectively, the NOC source said. Libya's powerful state oil company has typically limited sales of crude oil to refiners in the region and has said it plans to continue to prioritize its usual customers in 2012. But in an apparent break from tradition, the NOC will expand its pool of customers in 2012 to include Europe's major trading houses, along with the country's own trader Oil Libya. Source: Reuters

Taqa to sell some Canadian oil and gas assets

Abu Dhabi National Energy Company (Taqa) has reached an agreement to sell some of its oil and gas assets in Canada for an undisclosed amount, the company said. Taqa North, a unit of the company, expects to close the sale in March 2012, Taqa said in a statement to the Dubai bourse. The assets in southeastern Saskatchewan have current production of about 4,000 barrels of oil equivalent per day. Taqa, which is 75% owned by the government of Abu Dhabi, has invested in a handful of Canadian companies in recent years. In October, it unveiled plans to invest C$46.6 million ($44.9) in Western Zagros Resources, giving the Canadian-based oil explorer much-needed financial breathing room as drilling draws near for its next big well in Kurdistan in northern Iraq. Source: TradeArabia News Service

Turkey: Energy-sector maneuvers

At the high-profile Black Sea Energy and Economy Forum, Turkey’s top leadership expressed strong rhetorical support for the Nabucco gas pipeline project, while reminding Europe that the country plays the key role in Nabucco’s success and implying that more serious consideration needs to be given to its EU membership bid. The paired messages of EU-Turkey gas cooperation and the importance of Nabucco were emphasized in a series of speeches given by Prime Minister Tayyip Erdogan; Deputy Prime Minister Ali Babacan; the minister of energy and natural resources, Taner Yildiz; and Egemen Bagis, minister for EU affairs and chief negotiator of Turkey in accession talks with the EU. That strong rhetoric is backed by a series of recent maneuvers on the part of the government to secure Turkey’s role as a future transporter and supplier of natural gas to Europe. The government took aggressive action in September to assert itself with an Eastern Mediterranean drilling expedition, while simultaneously opting not to renew a gas importation agreement with Russia – instead favoring Azerbaijan for its state contract. For years, the Nabucco and Southern Stream pipeline projects – the former of which will transport natural gas via Turkey to Eastern Europe and Austria, and the latter of which will provide Russian natural gas to the same region – have been competing for financing and the approval of governments throughout the region. The EU’s interest in achieving energy security through diversified sources has collided with the efforts of Russia’s Gazprom to secure a long-term revenue stream and greater regional influence, in a struggle that has become a textbook example of the importance of energy policy in international affairs over the past decade. While he did not consider the ministers’ statements about Nabucco as an exclusive endorsement of the pipeline project, the international president of the Turkish Petroleum Pipeline Corporation (BOTAS), Ibrahim Palaz, clarified Turkey’s role in the pipeline competition. “Turkey is foremost a transit country for gas – for instance, it is only buying 6 billion cubic meters of the 16 billion cubic meters available from Azerbaijan’s Shah Deniz field,” he told OBG. “Europe needs to vastly diversify its sources of natural gas, and currently the sources with the greatest combined potential are those to the south and east of Turkey.” Source: Oxford Business Group

China bid to force Iran to sell cheaper crude

China has made an audacious move to force Iran to sell it cheaper crude, disrupting the flow of over 10% of the Islamic Republic's exports by cutting January imports in half. In contrast to other top Asian buyers worried about what sanctions mean for crude flows from the world's fifth-largest exporter, China has shown no public qualms about the risk that a disruption will drive up the cost of oil. The world's second-largest crude importer has chosen its moment for hard bargaining. Iran is facing the threat of fresh sanctions from the US and European Union over its nuclear program that could prevent Asian refiners from paying for Iran's oil, and European refiners from buying it. With fewer buyers Iran will face a stark choice: either sell more to top buyer China, or cut the exports that provide Tehran's economic lifeline. Source: Reuters

Opec has ‘gentleman's’ deal on Libyan output

There was a "gentleman's agreement" in Opec to accommodate Libya as it lifts oil production back to levels before a civil war this year hit output, said a senior Libyan government official in late December. "There is a gentleman's agreement to accommodate Libyan production," Libyan Oil Minister Abdulrahman Ben Yazza told reporters on the sidelines of an Arab oil ministers meeting in Cairo. Libyan National Oil Corp (NOC) Chairman Nouri Berrouin earlier told reporters at meeting that production levels in Libya were now "a bit more than a million" barrels per day (bpd). He said output would reach pre-war levels by mid-next year. The country produced about 1.6 million bpd before the civil war, which led to a virtual shutdown in supplies, according to industry estimates. Source: Reuters

Oman: Shoring up supply

The Omani government is moving forward with plans to raise prices for natural gas in an effort to recalibrate the supply-and-demand equation, with local demand for the feedstock rising rapidly on the back of industrial expansion and domestic supplies limited. While some producers will doubtless be affected by the move, it is designed to balance the needs of industry with those of the broader economy, keeping local industries running while the government continues to search for additional domestic reserves. With global market conditions prompting increasing use of the feedstock and the Sultanate’s reserves relatively smaller than those of some of its neighbors, a rebalancing is necessary, and the rise will bring Omani natural gas prices more in line with the market, local media has reported. However, the increase could temporarily impact the expansion plans of several foreign and domestic industrial players, which include iron and steel producer Jindal Shadeed, aluminum producer Sohar Aluminium and global mining firm Vale. Downstream processing activities, especially in the Sultanate’s burgeoning aluminum sector, could also be affected. Oman Aluminium Processing Industries (OAPIL), which is aiming to more than double its processing capacity, is dependent on low-cost gas from the government, according to Hussain Salman Al Lawati, the vice-chairman and managing director of Oman Cables, one of OAPIL’s parent companies. “Our expansion will depend on commitment from Sohar Aluminium for liquid aluminum and the government for natural gas,” he told The Times of Oman on November 16. Oman India Fertiliser Company (Omfico), which ships most of the urea it produces to India, has reported the price of gas purchased from the government could increase fourfold. Changes to its contract could increase prices from $0.77 per million British thermal units (mBtu) to $3 per mBtu, thereby increasing imported urea prices by around $60 per ton. Source: Oxford Business Group

Iran 'will export gasoline by 2013'

Iran's President Mahmoud Ahmadinejad said his country would become a major gasoline exporter by 2013, despite the West's toughest ever sanctions on the state. Following a subsidy reform plan under which the government phased out hefty subsidies on essentials like food and fuel, Ahmadinejad said billions were saved by not importing gasoline. 'We have started to export gasoline and hopefully by the next year we will become a major gasoline exporter,' Ahmadinejad said in a speech during his provincial visit to eastern Varamin province, broadcast live by state television. Iran has previously announced that it became self-sufficient in gasoline production. In April, trade sources said Iran had struck a deal to sell gasoline to Iraq but that the rare cargo did not mean the Islamic Republic had became a net exporter and free from its dependence on gasoline imports. Shipping data obtained by Reuters in November showed Iran's October gasoline imports rose over 21% to 63,279 barrels per day from 51,986 bpd in September. Source: Reuters

China crude imports from Saudi up 32%

China's crude oil imports from Saudi Arabia rose to 1.17 million barrels per day (bpd) in November, the second highest rate on record. November imports into China, the world's second-largest crude buyer, were 32.3% higher than a year earlier and 100,000 bpd above the 1.07 million bpd in October, General Administration of Customs data showed. The 100,000 bpd increase accounted for around 17pc of the additional Saudi oil production. China imported 995,033 bpd of crude oil from Saudi Arabia in the first 11 months of this year, up 13% year on year, the data showed. The increased Saudi supply came as China raised its refinery production to an all-time high and as it started pumping oil into new reserve tanks, while crude oil production at home fell due to an offshore oil spill. 'China's imports picked up sharply on the month as we expected, in line with higher demand from refiners that were ramping up after a very heavy turnaround period,' said Soozhana Choi, head of commodities research in Asia for Deutsche Bank. Source: Reuters