THERE MUST BE GAS. (Ci deve essere gas)

Poland’s hopes of hitting a shale gas bonanza have suffered a blow as ExxonMobil ended exploration for the unconventional fuel after tests failed to find gas in commercial quantities.

The US oil major said there had been “no demonstrated sustained commercial hydrocarbon flow rates” in two test wells in eastern Poland and added that it had “completed its exploration operations in Poland”.

ExxonMobil has six concessions in Poland and it remains unclear what plans the company has for them.

The decision by ExxonMobil is the latest in a series of disappointments over Poland’s possible gas reserves.

Energy companies and the government were enticed by an estimate last year from the US Energy Information Administration, which said Poland might hold 5.3tn cubic metres of shale gas – the largest reserves in Europe.

However, a newer estimate by Poland’s government geological institute cut about 90 per cent off that, suggesting reserves of 346-768bn cubic metres.

Although the lower number is unlikely to turn Poland into a gas exporter, it would make it much less dependent on gas imports from Russia, which currently supplies about two-thirds of the 14bn cubic metres of gas the country consumes annually.

Waldemar Pawlak, Poland’s economy minister, suggested that ExxonMobil became less interested in its Polish operations after agreeing last week to develop tight oil reserves in Siberia together with Rosneft, the Russian state oil group.

“With such prospects, shale gas in Poland did not have as much meaning for [ExxonMobil],” said Mr Pawlak.

In 2009, ExxonMobil abandoned shale gas exploration in Hungary after a disappointing result from a test well.

The Polish government has handed out 109 shale gas exploration concessions around the country, and the other companies still looking for the fuel – a process that involves pumping fluids at high pressure deep underground to fracture rock, releasing trapped oil and gas – are still optimistic about Poland’s possible deposits.

Companies active in Poland include Chevron, ConocoPhilips and Poland’s PGNiG, the former gas monopoly, as well as a host of smaller groups specialised in shale gas exploration.

“I’m a bit perplexed as to why anyone would drill just two wells and then leave,” said John Buggenhagen, exploration director for Aim-quoted San Leon Energy, which has concessions near the Baltic coast, as well as in the west and south of the country.

“We believe it will take dozens of wells to explore just a small area. San Leon believes Poland has huge potential.”

One of the earliest tests came from 3Legs Resources, the UK-based independent that was the first operator to drill and test two shale wells near the Baltic coast where it found “encouraging” quantities of gas, although the flow rates were less than expected.

Mikolaj Budzanowski, the treasury minister, estimates that the first commercial shale gas extraction should begin in 2014-2015, with about 0.5 to 1bn cubic metres coming to market initially, with production eventually ramping up to 5bn-10bn cubic metres a year.

Poland has been one of the most enthusiastic backers of shale gas in the European Union, while other countries such as France, Romania and Bulgaria have instituted moratoriums on shale exploration for environmental reasons.

(FinancialTimes)

BP RUSSIAN CONNECTION. (Il legame russo della BP)

Russia's top oil boss gave a cool nod of approval to BP Plc's new Chief Executive Bob Dudley on Wednesday, while praising his predecessor Tony Hayward, ousted over his handling of the Gulf of Mexico oil spill.

Russia is a key part of BP's global operation, providing the company with a quarter of its reserves before the U.S. oil spill, so it is vital for Dudley to establish a good working relationship with the world's largest oil exporting nation.

"We are ... counting on your experience, Mr Dudley, and on new projects in our partnership," Deputy Prime Minister Igor Sechin said, opening a meeting with both Dudley and Hayward, where he said Russia was "satisfied" with the new CEO.

"The field for cooperation is very broad."

It was the first visit to Russia for Dudley, once the CEO of BP's joint venture in Russia, since he was forced out of the country in a fierce dispute with a quartet of billionaires who accused him of running the 50-50 venture like a BP subsidiary.

"And now Mr Dudley is back!" Sechin exclaimed with a laugh.

At the headquarters of Russia's top oil producer, Rosneft, where Sechin is chairman, Hayward led the way into the meeting and greeted the deputy prime minister with an embrace and a formal kiss on the cheek.

Sechin, a close ally of Prime Minister Vladimir Putin, said Putin asked him to "say hello" to both Dudley and Hayward.
Hayward, who acceded to a peace deal with the Russian shareholders, which was chalked up as a loss for BP, will take a seat on the board of the Russia venture, TNK-BP.

"The fact that you will continue to work on the board of TNK-BP will be a help to Mr Dudley and to us," Sechin said.

"And who knows? Maybe there could be other offers in the future."

As the meeting opened in the presence of journalists, there was no mention of potential asset sales to pay for the damage from the Gulf of Mexico catastrophe, the world's largest accidental marine oil spill.

But analysts said they were likely on the agenda for Dudley's one-day trip to Russia as the company declared progress plugging the well.

Industry sources said he also met BP's Russian partners in TNK-BP and with Sergei Bogdanchikov, the CEO of top Russian oil producer Rosneft.

BP, which took a $32.2 billion charge related to the spill in its results last week, has said it will sell $25 billion to $30 billion of assets to pay for the disaster.

"What we can be sure of is that Russia has a specific agenda, i.e. a wish list, and will take full advantage of BP's weakened state to press that," Chris Weafer, chief strategist at Russian brokerage Uralsib, said in an e-mailed note.

BP owns 1.2 percent of Rosneft as well as its 50 percent stake in TNK-BP.

"I want to reassure you BP is continuing its commitment to Russia," Hayward told Russia's Deputy Prime Minister Igor Sechin, in a meeting with incoming CEO Bob Dudley. Dudley fled Russia in 2008 as BP battled its local partners for control of their 50-50 venture TNK-BP.

Hayward said he remained personally committed to working in Russia's oil and gas sector, but Dudley was well placed to continue the relationship as CEO.

TNK-BP has said it may buy BP's Venezuelan assets and media reports have suggested BP is more likely to sell assets to Russian companies than divest its holdings here.

Earlier this week a Rosneft official denied newspaper reports that the Russian producer was in talks to buy BP's stake in a German refinery Gelsenkirchen, a joint venture with Venezuela's PDVSA and a network of German petrol stations.

The sides must also decide the fate of the giant undeveloped Siberian Kovykta gas deposit that was slated for sale to Gazprom in a deal that was never finalized.

"If BP is going to be squeezed more and more in the U.S., as recent reports suggest "then its Russian assets will become an even more important part of its future," Weafer added.
(Abc News)

GO EAST(WARDS)!

Russia expanded its foothold on the Asian energy market with the click of a mouse Monday [28th December].

Prime Minister Vladimir Putin pressed a button to get Siberian oil flowing into the first tanker for delivery to an Asian customer, in Hong Kong, from Russia’s Pacific coast. In addition to China, supplies will also target Japan and South Korea.

The ceremony completed four years of work to construct the East Siberia-Pacific Ocean pipeline and the Kozmino port, worth a combined 420 billion rubles ($14 billion) to ease the industry’s reliance on the European market.

“It’s a strategic project because it allows us to enter the completely new, growing and promising markets of the Asian-Pacific region,” Putin said at the launch. “It’s a great present to Russia for the New Year.”

The foray into the Asian oil market follows Russia’s arrival as a major supplier of liquefied natural gas, or LNG, for its eastern neighbors earlier this year. The Gazprom-led Sakhalin-2 project — with Shell, Mitsui and Mitsubishi as partners — started shipping the gas, chilled to a liquid for loading into tankers, from Russia’s offshore fields in the Pacific in February.

As it expands into new markets, Russia is keeping abreast of the global trend of diversification among both energy buyers and sellers, which will make the business more competitive worldwide, said Elena Shadrina, a visiting energy researcher at the Norwegian Institute for Defense Studies.

“No supplier or consumer will have a dominant position,” she said by telephone from Oslo.

Europe is trying to offset its dependence on gas imports from Russia by looking to buy more from Africa, while Turkmenistan began exporting its gas to China earlier this month, ending Russia’s role as its only major buyer. Asia, in turn, has been seeking alternatives to supplies from the Middle East.

Russia’s progress in eastward expansion has been spectacular, defying doubts that the country has sufficient oil reserves and investment, Shadrina said.

“As little as five years ago, I heard skeptical attitudes from Japanese officials and analysts,” she said. “The tone has really changed now.”

The Kozmino port, near Vladivostok, cost $2 billion to build and has the capacity to handle 300,000 barrels of crude per day (15 million tons per year), with oil quality comparable to that of Middle Eastern blends now dominating the market.

Transneft, the state pipeline monopoly, spent another $12 billion to lay the 2,694-kilometer ESPO pipeline through east Siberian wilderness to connect the area’s greenfields, being developed by oil majors Rosneft, TNK-BP and Surgutneftegaz, to the railway station of Skovorodino. The link has the capacity to carry 30 million tons a year.

Arriving in Skovorodino, the crude is loaded onto trains to travel to the port by rail.

Transneft plans to start building the rest of the pipeline to Kozmino, which requires an estimated investment of $10 billion, next year and complete the work in 2014. The effort will bring the link’s total length to 4,794 kilometers, which is more than the distance from New York to Los Angeles.

When completed, the pipeline will carry eastward an annual 80 million tons of oil from Siberia, including 15 million tons to China through an additional spur. China has loaned $25 billion to Russia in exchange for oil deliveries over the next two decades. Kozmino will increase capacity to 600,000 barrels per day, or 30 million tons per year.

Seeking the huge investment for the remote east Siberian greenfields that are to feed the pipeline, Russia will likely ease access to these resources by foreign oil majors, said Shamil Yenikeyeff, a researcher at the Oxford Institute for Energy Studies. A law enacted last year allows the government to take away a field from a foreign company if it strikes large oil reserves there during exploration, a restriction that put off potential investors, such as Royal Dutch Shell.

Yenikeyeff said Russia’s emergence this year as an Asian energy power — while being a wise policy — displayed the country’s continuing reliance on oil and gas exports for economic prosperity.
“You may call this a new era,” he said, referring to the unlocking of new markets. “The question is: Does this mean that Russia will grow even more affected by the oil curse? If you look at the other industries, nothing is happening there.”

The first tanker’s crude that left Kozmino belongs to state-controlled Rosneft and represents a new oil blend named ESPO, after the pipeline. The low-sulphur, medium-heavy sweet blend ranks higher than Russia’s main export blend, Urals, but its quality is going to be unstable for a while as more producers pump their oil in the pipeline.

The price of the crude is tentatively based on the average monthly price of the Middle Eastern benchmark Dubai blend, with the option for traders to offer a discount or premium. Rosneft sold the first shipment to the Finnish trader IPP Oy at a premium of 50 cents.
(The Moscow Times)