Petroscan December

PETROSCAN (Monthly e-newsletter) December 2011

CONTENTS: FOREWORD OIL, GAS & ENERGY NEWS GENERAL INTEREST 1. OIL DATA: China November Crude-Oil Imports Rise To 22.69 Million Tons 2. Iran Threatens to Block Oil Shipments, as U.S. Prepares Sanctions 3. Oil hovers below $98 amid Europe economy concerns 4. Oil companies invested a record $558 billion last year 5. OPEC Holds Output Firm at 160th Meeting 6. World Refinery Capacity to Grow Despite Recession - Hart Energy Study 7. Canada’s Petroleum Refining Sector: An Important Contributor Facing Global Challenges 8. Energy Demand to Grow by More Than 30% from 2010 and 2040 – ExxonMobil 9. Slavneft Switching to Euro-4, Euro-5 Fuels 10. First ‘Megafloat’ Oil Storage in the Works in Singapore 11. Saudi Kayan becomes the first producer of polycarbonates in the Middle East, and the pioneering effort opens 12. Offshore’s Top 5 Projects of 2011 13. Saudi Arabia's Diamond Era 14. Kuwait Petroleum Corporation - Playing A Crucial Role In Economy 15. Iran threatens to stop Gulf oil if sanctions widened 16. Prime The Pump And Bailout The Brent 17. Sept-qtr GDP growth seen slowest in over 2 years

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NEWS LOCAL 1. Indian Oil Corp tops Fortune India 500 list; RIL at second spot 2. Vedanta completes Cairn India deal 3. ONGC to support in doubling Cairn's capacity: Anil Agarwal 4. India's Petronet to complete Dahej LNG terminal expansion to 15 mil mt/year by Dec 2015 5. India’s Top Economic Adviser: Diesel Decontrol Would Curb Inflation 6. Home grown Indigenous Innovations 7. Vedanta appoints 3 directors on Cairn India board 8. Raiding PSU reserves unsustainable way of plugging budget deficits 9. Crude, rupee double whammy hits oil companies NEWS GLOBAL 1. High-tech drilling rig arrives in the Gulf of Mexico 2. Marathon Oil grows capital spending 24 percent 3. Chevron might inject steam into Arabian oil field 4. Chevron To Spend Record $32.7 Billion In Capital Projects In 2012 5. Sasol Plans Ethane Cracker in Louisiana 6. Anadarko: Mozambique Gas Find One Of The Most Significant In 10 Years 7. Libya's Waha Oil begins output at two fields 8. High-tech drilling rig arrives in the Gulf of Mexico 9. Iran discovers natural-gas field in Caspian Sea, Shana says 10. Shell, ENI buy Nigeria offshore oil field rights 11. Repsol, Shell, Conoco offer high bids for Alaska oil leases 12. Norway sees record oil spending in 2012 13. PetroPeru Plans Equity Sell-Off, Share Listing to Expand Refinery 14. SOCAR Agrees to Buy ExxonMobil’s Swiss Subsidiary 15. Bahrain oil refinery output hits record 16. Nord Stream completes world's longest subsea pipeline NEW & RENEWABLE ENERGY 1. National bio energy mission soon: Farooq Abdullah 2. After quakes, shale fracking faces opposition in U.K 3. GM and BMW in fuel cell talks; Amazon selling GE Wattstation 4. Oil sands operators turn to electric currents 5. For taller wind turbines, generating power is a breeze : NREL 6. API blasts EPA report on hydraulic fracturing 7. Solar power gains foothold in country's energy mix 8. In solar power, India begins living up to its own ambitions 9. China's Shale Gas Development Takes First Steps 10. NZ Co LanzaTech to help IOC, JSPL set up bio jet fuel plant 11. Update: Exxon says natural gas will support energy demand growth 12. Peregrino producing heavy oil for Statoil offshore Brazil 13. Marathon Wants Ohio Refinery to Run 15% Utica Shale Crude

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Brazil may fine Chevron $84 million for spill HSE, climate change and sustainability BP products fined us$50 million for emissions release at Texas city refinery Health and nutrition Revend Launches Light Bulb Recycling Vending Machine

SUSTAINABILITY & CLIMATE CHANGE 1. Australian Government introduces price on Carbon 2. The climate may not be as sensitive to carbon dioxide as previously believed 3. Large differences in the climate impact of biofuels, Swedish research finds 4. Carbon capture and sequestration: off to slow start RELIABILITY & ASSET MANAGEMENT 1. Nine leadership principles for a successful reliability & maintenance program GENERAL READING · Bosses, stop caring if your employees are at their desks · Sodium-saturated diet is a threat for all · Nutrition: 4 vitamins that strengthen older brains REPORTS: · EIA: Refiners Should Expect Triple-Digit Crude Through 2012 · EIA: Short-Term Energy Outlook (http://205.254.135.7/forecasts/steo/pdf/steo_full.pdf) DEADLIEST NATURAL DISASTERS OF 2011 CARTOON OF THE MONTH FOR NEW YEAR RESOLUTION LESSER USE OF CELL PHONE

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FOREWARD Dear Patrons of Petrotech, Change is eternal, non stoppable and so the year. 2011 started with turmoil abroad and ended with at ho,e turf, with small cyclone on the south eastern coast, which made almost entire county wet on the day we stepped into 2012. In 2011 the natural and geopolitical upheavals kept the oil and gas prices on the burner, and it is likely, with the Iranian impasse, to remain on the boil.

Whereas, the high prices of energy affect growth and put lot of hardship on the people all over globe, it also has some good effect, in form of less use of oil and force conserve this scarce natural resources, which also pollutes adding to the process of climate change.

The cost and consequence of climate change on our planet will define the 21st century. With the business as usual, it will have serious implication on the sustainability of our coastal ecosystem, erratic climatic conditions affecting agriculture and food production etc. It will put great stress on the rising population leading to migration and conflict around the world.

It also, however, provides great opportunity and induces research and development for better recovery of oil, less harmful methods of production, improved efficiencies and lifecycle of plants and equipments, newer skills and knowledge etc.

Good or bad, let us thank 2011 for whatever it offered and welcome 2012 , with hope for better. Change is good, and looking at the history of civilizations, it has most of the times proved to have been for good. So here we are in the times of change, and The team Petrotech sends you it's Heartiest Greetings of the Season of Change !!!

To CHANGE is the only way to SURVIVE the CHANGE, and in order, to SURVIVE the Change, we must INNOVATE ahead of CHANGE, Let us go GREEN, Right Away, Right NOW, Our shadow walks away with us, but our action leaves behind its imprint, for ever, Wishing you & your family Greener NEW YEAR, ......Filled with Everlasting HAPPINESS & Eternal BLISS, (Anand Kumar) Director

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OIL, GAS & ENERGY NEWS GENERAL INTEREST

OIL DATA: CHINA NOVEMBER CRUDE-OIL IMPORTS RISE TO 22.69 MILLION TONS BEIJING -(Dow Jones)- China imported 22.69 million metric tons of crude oil in November, equivalent to 5.54 million barrels a day, preliminary data from the General Administration of Customs showed Saturday.

Imports were 8.5% higher than the 20.91 million tons of crude shipped in during the corresponding month last year, and up 9.1% from 20.8 million tons in October, according to Dow Jones Newswires calculations.

In the first 11 months of the year, crude imports rose 6.1% to 231.86 million tons.

Refined oil product imports in November totaled 3.35 million tons, down 4.8% from year-earlier levels, the data showed.

-By Wayne Ma, Dow Jones Newswires; +86 10 8400 7714; wayne.ma@dowjones.com

IRAN THREATENS TO BLOCK OIL SHIPMENTS, AS U.S. PREPARES SANCTIONS

By DAVID E. SANGER and ANNIE LOWREY, Dec 27, 2011 WASHINGTON — A senior Iranian official on Tuesday delivered a sharp threat in response to economic sanctions being readied by the United States, saying his country would retaliate against any crackdown by blocking all oil shipments through the Strait of Hormuz, a vital artery for transporting about one-fifth of the world’s oil supply.

The declaration by Iran’s first vice president, Mohammad-Reza Rahimi, came as President Obama prepares to sign legislation that, if fully implemented, could substantially reduce Iran’s oil revenue in a bid to deter it from pursuing a nuclear weapons program.

Prior to the latest move, the administration had been laying the groundwork to attempt to cut off Iran from global energy markets without raising the price of gasoline or alienating some of Washington’s closest allies.

Apparently fearful of the expanded sanctions’ possible impact on the already-stressed economy of Iran, the world’s third-largest energy exporter, Mr. Rahimi said, “If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” according to Iran’s official news agency. Iran just began a 10-day naval exercise in the area.

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In recent interviews, Obama administration officials have said that the United States has developed a plan to keep the strait open in the event of a crisis. In Hawaii, where President Obama is vacationing, a White House spokesman said there would be no comment on the Iranian threat to close the strait. That seemed in keeping with what administration officials say has been an effort to lower the level of angry exchanges, partly to avoid giving the Iranian government the satisfaction of a response and partly to avoid spooking financial markets.

But the energy sanctions carry the risk of confrontation, as well as economic disruption, given the unpredictability of the Iranian response. Some administration officials believe that a plot to assassinate the Saudi ambassador to the United States — which Washington alleges received funding from the Quds Force, part of the Iranian Revolutionary Guards Corps — was in response to American and other international sanctions.

Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.

Oil prices rose above $100 a barrel in trading after the threat was issued, though it was unclear how much that could be attributed to investors’ concern that confrontation in the Persian Gulf could disrupt oil flows.

The new punitive measures, part of a bill financing the military, would significantly escalate American sanctions against Iran. They come just a month and a half after the International Atomic Energy Agency published a report that for the first time laid out its evidence that Iran may be secretly working to design a nuclear warhead, despite the country’s repeated denials.

In the wake of the I.A.E.A. report and a November attack on the British Embassy in Tehran, the European Union is also contemplating strict new sanctions, such as an embargo on Iranian oil.

For five years, the United States has implemented increasingly severe sanctions in an attempt to force Iran’s leaders to reconsider the suspected nuclear weapons program, and answer a growing list of questions from the I.A.E.A. But it has deliberately stopped short of targeting oil exports, which finance as much as half of Iran’s budget.

Now, with its hand forced by Congress, the administration is preparing to take that final step, penalizing foreign corporations that do business with Iran’s central bank, which collects payment for most of the country’s energy exports.

The sanction would effectively make it difficult for those who do business with Iran’s central bank to also conduct financial transactions with the United States. The step was so severe that one of President Obama’s top national security aides said two months ago that it was “a last resort.” The administration raced to put some loopholes in the final legislation so that it could reduce the impact on close allies who have signed on to pressuring Iran.

The legislation allows President Obama to waive sanctions if they cause the price of oil to rise or threaten national security.

Still, the new sanctions raise crucial economic, diplomatic, and security questions. Mr. Obama, his aides acknowledge, has no interest in seeing energy prices rise significantly at a moment of national economic weakness or as he intensifies his bid for re-election — a vulnerability the Iranians fully understand. So the administration has to defy, or at least carefully calibrate, the laws of supply and demand, bringing to market new sources of oil to ensure that global prices do not rise sharply.

“I don’t think anybody thinks we can contravene the laws of supply and demand any more than we can contravene the laws of gravity,” said David S. Cohen, who, as treasury under secretary for terrorism and financial intelligence, oversees the administration of the sanctions. But, he said, “We PetroScan-December 2011

have flexibility here, and I think we have a pretty good opportunity to dial this in just the right way that it does end up putting significant pressure on Iran.”

The American effort, as described by Mr. Cohen and others, is more subtle than simply cutting off Iran’s ability to export oil, a step that would immediately send the price of gasoline, heating fuel, and other petroleum products skyward. That would “mean that Iran would, in fact, have more money to fuel its nuclear ambitions, not less,” Wendy R. Sherman, the newly installed under secretary of state for political affairs, warned the Senate Foreign Relations Committee earlier this month.

Instead, the administration’s aim is to reduce Iran’s oil revenue by diminishing the volume of sales and forcing Iran to give its customers a discount on the price of crude.

Some economists question whether reducing Iran’s oil exports without moving the price of oil is feasible, even if the market is given signals about alternative supplies. Already, analysts at investment banks are warning of the possibility of rising gasoline prices in 2012, due to the new sanctions by the United States as well as complementary sanctions under consideration by the European Union.

Since President Obama’s first months in office, his aides have been talking to Saudi Arabia and other oil suppliers about increasing their production, and about guaranteeing sales to countries like China, which is among Iran’s biggest customers. But it is unclear that the Saudis can fill in the gap left by Iran, even with the help of Libyan oil that is coming back on the market. The United States is also looking to countries like Iraq and Angola to increase production.

Daniel Yergin, whose new book, “The Quest,” describes the oil politics of dealing with states like Iran, noted in an interview that “given the relative tightness of the market, it will require careful construction of the sanctions combined with vigorous efforts to bring alternative supplies into the market.” He said that it would “add a whole new dimension to the debate over the Keystone XL pipeline,” the oil pipeline from Canada to the United States that the administration has sought to delay.

“The only strategy that is going to work here is one where you get the cooperation of oil buyers,” said Michael Singh, managing director of the Washington Institute for Near East Policy. “You could imagine the Europeans, the Japanese, and the South Koreans cooperating, and then China would suck up all of the oil that was initially going to everyone else.”

A broader question is whether the sanctions — even if successful at lowering Iran’s oil revenue — would force the government to give up its nuclear ambitions.

One measure of the effects, however, is that the Iranian leadership is clearly concerned. Already the Iranian currency is plummeting in value against the dollar, and there are rumors of bank runs.

“Iran’s economic problems seem to be mounting and the whole economy is in a state of suspended expectation,” said Abbas Milani, director of Iranian studies at Stanford University. “The regime keeps repeating that they’re not going to be impacted by the sanctions. That they have more money than they know what to do with. The lady doth protest too much.”

OIL HOVERS BELOW $98 AMID EUROPE ECONOMY CONCERNS

By ALEX KENNEDY, Associated Press Oil prices hovered below $98 a barrel Tuesday in Asia amid expectations Europe's debt crisis will hurt the continent's economic growth and demand for crude.

Benchmark crude for January delivery was up 4 cents to $97.81 a barrel at midafternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell $1.64 to settle at $97.77 on Monday.

In London, Brent crude was down 2 cents at $107.24 on the ICE futures exchange.

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Crude has slumped from $103 last month amid growing investor concern European leaders may be unable to prevent contagion from spreading from debt-ridden countries such as Greece and Italy.

Europe has proposed a new treaty to bind members to spending and borrowing controls, but Britain has refused to consider it, raising doubts that the plan will be instituted.

Credit ratings agency Moody's said Monday that its ratings for European countries could be cut in coming months, echoing an earlier warning by Standard and Poor's.

Citigroup said slowing global crude demand growth and supplies boosted by the gradual return of Libya's output will likely keep oil trading next year within 10 percent of current prices, or between $100 and $120 for Brent.

"We are not very optimistic on oil demand growth," Citigroup said in a report. "We are, however, optimistic on supply."

A possible supply disruption from Iran and Saudi Arabia's shrinking spare capacity should support crude prices next year, Citi said.

In other energy trading on the Nymex, natural gas rose 1.0 cent to $3.26 per 1,000 cubic feet.

Heating oil fell 0.4 cent to $2.89 a gallon and gasoline futures rose 0.9 cent to $2.57 a gallon.

OIL COMPANIES INVESTED A RECORD $558 BILLION LAST YEAR Posted on December 5, 2011 at 10:41 am by Dan X. McGraw in Commodity Prices, Commodity Trading, Deepwater drilling, Oil and gas companies spent a record $558 billion last year on finding and developing new supplies because of acquisitions in the U.S. and Latin America, according to an IHS Herold report.

Expenditure rose by 47 percent from the previous year, the unit of Englewood, Colorado-based IHS Inc. said today in a statement. Spending on acquisitions rose seven-fold to $125 billion, it said.

Exxon Mobil Corp. invested the most, spending $72 billion in 2010, including the purchase of XTO Energy, according to IHS. Petroleo Brasileiro SA spent $62 billion, mostly on securing rights to produce from so-called pre-salt deposits that hold Brazil’s largest oil fields.

“These companies were able to aggressively pursue these investments because they had significant cash flow to invest,” Nicholas D. Cacchione, director of energy equity research at IHS, said in the statement. “Spending and cash flow were closely tied last year, and we expect the same for 2011.”

OPEC HOLDS OUTPUT FIRM AT 160TH MEETING The 160th Meeting of the Conference of the Organization of the Petroleum Exporting Countries (OPEC) convened in Vienna, Austria, on December 14 and resulted in a decision to maintain its current production level of 30 million barrels per day – including production from Libya – now in the future.

In taking this decision, OPEC member countries confirmed their preparedness to swiftly respond to developments that might have a detrimental impact on orderly market developments.

Given the ongoing worrying economic downside risks, the Conference directed the Secretariat to continue its close monitoring of developments in supply and demand, as well as non-fundamental factors, such as macro-economic sentiment and speculative activity, keeping Member Countries abreast at all times.

The conference decided that its next ordinary meeting will convene in Vienna, Austria, June 14, 2012, immediately following the OPEC International Seminar on “Petroleum: Fuelling Prosperity, Supporting Sustainability” that is to take place at the Hofburg Palace, Vienna, Austria, on 13 and 14 June 2012.

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The organization’s release also noted that the “Conference exchanged views on, inter alia, recent developments in multilateral environment matters and the outcome of the recent UN Climate Change Conference held in Durban, South Africa, as well as the status of the Organization’s ongoing energy dialogue with the European Union.

“The conference applauded efforts being made by member countries’ climate change negotiators to safeguard the interests of developing countries, in general, and oil-producing nations, in particular, and recorded its appreciation of the crucial work carried out by the secretariat in relation to this very important topic.”

For more color on the climate-change topic, we direct readers to the related report on comments by Saudi Arabia’s delegation at Durban in the Compliance Section of this issue of Refinery Tracker. – Greg Haas

WORLD REFINERY CAPACITY TO GROW DESPITE RECESSION - HART ENERGY STUDY Major global refining capacity expansion projects scheduled for completion within three-to-five years, totaling 9 million barrels per day, will add to refining industry distillation capacity surplus, according to a new World Refining and Fuels Study (WRFS) 2011 report by Hart Energy, released December 12.

“This growth will occur despite recession-related drops in demand for finished fuels and closure of some existing capacity,” according to the study.

“The capacity surplus narrows when it is defined by refined product finishing capacity, such as diesel production and desulfurization capacity for 10-ppm [parts per million] sulfur for gasoline and distillate fuels. This narrow balance of refining finishing capacity is what is keeping global refining margins high.

“Within India, for example, where export capacity soared in recent years, there will be continued capacity growth (to nearly 5 million barrels per day) prior to 2015. Even in low-growth regions of Europe and North America, major projects initiated prior to the more recent retraction in demand will soon come on-line (by 2012-13),” according to the study.

The analysis, which quantifies both gasoline and diesel demand and trade flow by sulfur category, concludes that expanding demand for low sulfur diesel “will challenge refining capability – and be the primary driver behind future refined product markets and margins,” according to Hart.

Terry Higgins, Hart Energy’s executive director, refining and special projects, added that “growth in demand, led by developing regions in Asia, will outstrip these short-term capacity expansions by 2015-2017.

“Also, strong growth in Latin American markets, coupled with limited near term refinery projects, will offer market opportunity for surplus U.S. refined products. New Brazilian refineries scheduled for later in the decade (2016-2017) will supply a much larger portion of the region’s needs.”

The study also found that: oDeclining Atlantic Basin gasoline demand will lead to “severe competitive pressures in the U.S. East Coast market and rationalization in East Coast and European refining centers;” oShale-oil development and increasing global condensate production “will provide for near-term improvement in average crude oil quality;” oVery heavy crude production, particularly crude from Canadian oil sands, will also expand by as much as 4 million barrels per day, “requiring continued expansion of bottoms processing capacity.”

For more information on the study findings, methodology and geographical coverage, Terrence Higgins is available for comment at 1-703-891-4815 orthiggins@hartenergy.com PetroScan-December 2011

CANADA’S PETROLEUM REFINING SECTOR: AN IMPORTANT CONTRIBUTOR FACING GLOBAL CHALLENGES The Conference Board of Canada, 52 pages, October 2011 Report by Todd A. Crawford This study researches and presents the economic contribution that Canada’s refining industry currently makes and the challenges it faces. Our findings suggest that even if oil production continues to grow strongly in Canada, the future economic benefits, job creation, and profits from oil refining and processing are much less assured.

Document Highlights Canada’s refining industry has undergone a massive restructuring over the past 30 years. Since the 1970s, the number of operating refineries has dropped from 40 to just 18 today. While global demand for petroleum products continues to rise and the outlook for Canada’s upstream energy sector is bright, Canadian refiners face a very particular set of challenges, since North American and other OECD markets will likely be characterized by declining demand.

The Conference Board of Canada has published a new report titled, Canada’s Petroleum Refining Sector: An Important Contributor Facing Global Challenges that researches and presents the economic contribution that Canada’s refining industry currently makes and the challenges it faces.

The report findings suggest that even if oil production continues to grow strongly in Canada, the future economic benefits, job creation and profits from oil refining and processing are much less assured.

Written by Todd A. Crawford, the 52-page paper describes that Canada’s refining industry has undergone a massive restructuring over the past 30 years. Since the 1970s, the number of operating refineries has dropped from 40 to just 18 today.

While global demand for petroleum products continues to rise and the outlook for Canada’s upstream energy sector is bright, Canadian refiners face a very particular set of challenges, since North American and other Organization for Economic Cooperation and Development markets will likely be characterized by declining demand.

According to report, “Given the competitive pressures that Canadian refiners face, we build a hypothetical scenario under the assumption that, going forward, Canada permanently loses 10 per cent of its refining capacity as domestic production is replaced by imports. Under that scenario, real GDP is reduced by a cumulative total of [U.S.]$4 billion, while 38,300 person-years of employment are lost over the 2011 to 2015 period.

ENERGY DEMAND TO GROW BY MORE THAN 30% FROM 2010 AND 2040 – EXXONMOBIL CEO Rex W. Tillerson, chairman and CEO, ExxonMobil Corp. Photo: 20th World Petroleum Conference Future growth in world energy demand is a cause for optimism because it will signal economic recovery and progress, Rex W. Tillerson, chairman and CEO of Exxon Mobil Corp., said December 6 in Doha, Qatar, where he was addressing the 20th World Petroleum Congress.

ExxonMobil is forecasting the global economy to more than double in size between 2010 and 2040, and during that time energy demand will grow by more than 30%. In order to meet that demand, the world needs to invest in and develop all economically competitive sources of energy.

Projections of significant population growth combined with expanding trade, new technologies and transformative economic opportunities will drive economic expansion and rising standards of living – particularly in the developing world.

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“The energy and economic challenges the world will face in the decades to come require a business and policy climate that enables investment, innovation and international cooperation.

Sound policies and government leadership are critical. When governments perform their roles effectively, the results are extraordinary – bringing enormous benefits in terms of investment, enterprise, economic growth and job creation.”

Tillerson said that the key to unlocking new economic growth was for industry, governments and society at large to focus on their respective roles and responsibilities.

“By understanding our strengths and proper roles in economic expansion, we can clarify our policy choices, fulfill our core responsibilities and open up economic opportunities for decades to come,” he said.

Government has a responsibility to provide a stable and fair legal, tax and regulatory framework; industry needs to invest with discipline to develop energy in a safe and environmentally responsible way; and the public also has a role to play, Tillerson said.

“Citizens and consumers need to understand the importance of energy, the vital role it plays in economic and social development, and how sound policy supports responsible energy development and use,” he continued. “The debates and discussions in society at large need to be informed by the facts and fundamental realities of the challenges before us.”

According to Tillerson, the state of Qatar is a prime example of what can be done when policies are in place to enable investment and innovation.

“In just over a decade, Qatar has risen to become the world’s leading supplier of liquefied natural gas. In the process, the nation has unleashed its own economic growth, supported innovation, spurred job creation and strengthened the energy diversity that allows free markets to maximize the value of national resources for producers and consumers. Qatar is a beacon of energy prosperity.”

Tillerson also noted that the current economic challenges will not last forever.

“There is reason for optimism but it is more important than ever that we swiftly take on these challenges with a sound and principled response,” he said. “History proves that energy policies that are efficient and market-based are the best path to economic growth and technological progress.”

SLAVNEFT SWITCHING TO EURO-4, EURO-5 FUELS Slavneft-Yanos announced November 3 that it plans to drop all production of fuels below Euro-4 (50 parts-per-million [ppm] sulfur) starting January 2102.

According to a report from Prime-Tass news service quoting Slavneft, “starting from January, 2012, all fuels produced by Slavneft-Yanos are to correspond to Euro-4 or Euro-5 [10-ppm sulfur] standards.”

In 2012, Slavneft-Yanos is expected to produce 2.44 million tonnes of gasoline under the Euro-4 standard, plus more than 4 million tonnes of diesel fuel, 2.8 million tonnes of which are expected to correspond to Euro-5 standards, according to the report.

“Slavneft plans to invest over US$1.2 billion into the modernization of Slavneft-Yanos in 2011– 2014, Slavneft said, adding that of the total, $310 million is expected to be invested in 2011, with over $910 million to be invested in 2012–2014.”

Slavneft, in which Russian oil company Gazprom Neft and oil major TNK-BP each hold a 49.48% stake, invested more than $1.5 billion into the modernization of Slavneft- Yanos in 2002–2010, according to the report.

FIRST ‘MEGAFLOAT’ OIL STORAGE IN THE WORKS IN SINGAPORE PetroScan-December 2011

The first “megafloat” at Pulau Sebarok – a pilot project to store oil on very large floating structures (VLFS) in Singapore – will be government-led but private sector-run, as part of ongoing efforts to develop alternative facilities for oil traders in the land-scarce southeast Asian city-state.

According to an October 31 Business Times (Singapore) report, the megafloat will be built and owned initially by the JTC Corp. but operated by Netherlands-based Royal Vopak, one of the largest terminal operators in the region. Under the plan, Vopak will have the option to take over ownership of the floating storage at a later date.

Vopak has apparently indicated its intent to do so, although company officials were not available to confirm this, according to the Times.

Typically, the megafloat is a floating structure having at least one length dimension greater than 60 meters. Horizontally large floating structures can be from 500 to 5,000 meters in length and 100 to 1000 meters in width, and their thickness can be around 2-10 meters.

Royal Vopak is reportedly the logical choice to run the Sebarok megafloat since the VLFS site is located adjacent to an existing surface tank farm.

It’s among four oil and chemical tank farms which Vopak operates on Jurong Island. Others are located at the Banyan, Penjuru and Sakra sectors, according to the report.

JTC’s lead in the project will help promote floating oil storage which has no proven track record yet, as far as its commercial viability is concerned, sources told the Times.

It is not unlike the Jurong Rock Cavern (JRC) project to store oil underground, with the US$850million, first phase already being built by JTC. The project is expected to be completed in the first half of 2013, according to the report.

JRC has already found its first customer in Jurong Aromatics Corp., which is building a $2.4-billion petrochemicals complex on the island. According to the Times, JTC is expected to call a tender for an operator to run the underground storage facility in coming weeks.

The shortage of storage capacity in Singapore – with little land available for building more surface tank farms – has led many international oil traders to resort to using tank farms sprouting up in neighboring Johor.

These include farms at Tanjung Langsat, Pasir Gudang, Tanjung Bin and Pengerang – and a $1billion tank farm that Vopak is building with Malaysia’s at Pengerang, according to the report.

JTC studies on the project started back in 2007, with the first phase covering a preliminary conceptual design of an attached-to-land VLFS. This progressed to phase two covering areas such as environmental impact, marine soil investigation and sea-current monitoring – completed in 2010, according to the report.

SAUDI KAYAN BECOMES THE FIRST PRODUCER OF POLYCARBONATES IN THE MIDDLE EAST, AND THE PIONEERING EFFORT OPENS NEW INDUSTRIAL DEVELOPMENT POSSIBILITIES IN THE REGION Sabic recently marked a historic milestone in the region’s industrial development when its worldclass manufacturing affiliate Saudi Kayan Petrochemical Company (Saudi Kayan) began production trials of polycarbonate (PC) at its plant in Jubail Industrial City.

This is the first time that the material is being produced in the Middle East. Mohamed Al Mady, Sabic vice chairman and CEO, ceremonially received the first sample of PC produced in Saudi Kayan at the corporate headquarters in Riyadh.

A Saudi Kayan delegation of senior executives presented the sample to celebrate the startup of PC in the region, and to express the affiliate’s gratitude to Sabic’s leadership for its unlimited support in executing the project.

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Al Mady congratulated Saudi Kayan’s management and staff, and handed over the first-run PC sample to The Sabic Experience, the permanent exhibit at the headquarters.

Al Mady and other senior Sabic executives have since visited the plant and inspected the production process. With Saudi Kayan becoming the first and only PC pellet producer in the Middle East, Sabic has become the largest PC producer in the global market. Saudi Kayan’s 260,000 tonnes per year production capacity makes it the fifth largest PC manufacturer in the world.

Sabic’s Innovative Plastics SBU – which recently announced the addition of new production lines of its world-renowned Lexan polycarbonate (PC) resins and films in Shanghai and Nansha, China – has long established its leadership position in the global PC market.

Al Mady says the pioneering effort of Sabic to initiate PC production in the region will contribute to industrial diversification in Saudi Arabia and the Middle East, especially in the field of engineering plastics.

“Our PC grades are extremely versatile and our Innovative Plastics SBU and Technology and Innovation have been very successful in coming up with innovative new applications for the product. Sabic will continue to explore product innovation and material substitution opportunities to ensure continued growth for this important portfolio,” he says.

The Saudi Kayan plant is using the most advanced PC manufacturing technology from renowned Japanese technology licensor, Asahi Kasei Company. The ‘green technology’ has won international praise for effectively recycling and using the greenhouse gas (CO2) produced during the manufacturing process.

The Saudi Kayan PC production is also cost effective, offering a vast array of competitive customercentric PC products for various applications and adding value to other intermediate chemicals produced at the complex, such as phenol, bisphenol-A, CO2 and ethylene oxide.

According to general estimates, PC demand is expected to grow at the rate of five percent per annum. However, several new plants are scheduled to come on stream over the coming years in different parts of the world, which raises the possibility of supply growing faster than demand, resulting in tougher competition among producers.

Sabic Innovative Plastics ...leading the way PC has diverse applications around the world across multiple industries. The long list of PC applications includes everything from CDs and DVDs to mobile phones, medical devices and automobiles. Globally, the biggest market segments for PC today include CDs and DVDs (estimated to consume 25 per cent of production), blends (15 per cent), sheet extrusion products (15 percent), electrical and electronics (10 per cent) and automotive (8 per cent). It is also finding new applications in aeronautics, military, safety equipment and food storage sectors. PC is known for its unique properties such as durability, strength, high transparency, lightness and high heat resistance.

Mahdi Habab Al Bogami, president of Saudi Kayan, says the Saudi plant has started producing various grades of high quality PCs for diverse applications to meet the increasing global demand.

“We have started producing polycarbonates of general purpose (GP), extrusion, resin and optical film (OQ) grades.

“Initially, Saudi Kayan PC production will focus on meeting the demand in two key segments: CDs and DVDs and blends,” he says.

“The uniqueness of our PC pellets production is that it is free of phosgene and solvent, and is the ‘greenest’ PC production technology available,” he adds.

Al Bogami says that Saudi Kayan is extremely proud that its PC plant marks the beginning of an engineering thermoplastics industry in Saudi Arabia and the region. The PC plant has already PetroScan-December 2011

initiated and implemented measures across process, quality, production, logistics and marketing fields to ensure product consistency and highest product standards.

“Our product mix boasts flexible grades and are cost-competitive, innovative and customer application-friendly,” he says.

In Europe, Sabic’s PC manufacturing plants have traditionally exported a significant part of their output to the Asia Pacific (APAC) region. Saudi Kayan’s PC startup is likely to change that pattern with the affiliate exporting much of its production to the region.

Sabic’s European manufacturing plants are located at Bergen op Zoom in The Netherlands and Cartagena in Spain. During the Chinaplas exhibition in May, Sabic’s Innovative Plastics SBU announced plans to add new production lines to the company’s worldrenowned Lexan* PC resins and films in Shanghai and Nansha, China.

These additions are part of the company’s strategy to support the dynamic growth of key plastics sectors in this region, particularly the consumer electronics, electrical, solar, security and automotive industries.

Announcing the expansion, Sabic stressed that it was building on a powerful legacy in the plastics industry with Innovative Plastics’ flagship PC material. It is continually developing distinctive new Lexan material solutions to meet evolving technological, environmental, performance and regulatory challenges.

“Our nearly 60-year-old commitment to polycarbonate remains unmatched – from a relentless focus on innovation, to continued investments in global capacity, to a team of polycarbonate experts including a highly trained sales force, application development specialists, and process development engineers around the globe,” William Russell, polycarbonate business leader, Innovative Plastics, said at the time. “The size and diversity of our performancerich Lexan polycarbonate material portfolio is an excellent case in point, illustrating how we deliver tailored materials solutions to meet our customers’ specific needs. These expansions will enable Innovative Plastics to provide a stronger, localised supply of Lexan resin and film to meet Asia’s accelerating demand of these tough, high-performance and versatile material technologies.”

Sabic is adding dedicated compounding production lines to the Innovative Plastics Lexan PC resin Shanghai facility in early 2012. This capacity increase will ensure ample, reliable supplies of Lexan resins and Lexan speciality copolymers to help drive Asian customer growth. This addition comes on the heels of a similar Lexan compounding expansion in Nansha in late 2010.

Lexan resin is known for its broad, global portfolio and is produced to meet increasing capacity demand for key industries including consumer electronics, electrical, solar and automotive. Lexan speciality copolymers provide extreme high heat resistance, excellent flow/ductility and virtually unbreakable impact strength.

OFFSHORE’S TOP 5 PROJECTS OF 2011 Published: Dec 21, 2011 The editors of Offshore have made their choices for the winners of the Five Star Award, the top five offshore field development projects for 2011. The projects were selected on the basis of best use of innovation in production method, application of technology, and resolution of challenges, along with safety, environmental protection, and project execution. Selecting the winners was no easy task.

The geographic distribution of candidates stretched from the Americas to Europe, Africa, Asia, and Australia. Technological innovation was widespread as well. After careful consideration, a consensus has been reached.

In no particular order, the top five offshore field development projects of 2011 are: PetroScan-December 2011

Nord Stream With the completion of Line 1, developers of the EU 7.4-billion ($10-billion) Nord Stream project have realized the ambitious goal of moving Russian gas to European markets directly through the Baltic Sea. First announced in 2001, the project calls for the construction of two parallel 759-mi, 48in. pipelines that will move natural gas from Vyborg, Russia, to Lubmin near Greifswald, Germany.

The Nord Stream consortium includes Gazprom, Wintershall, E.ON Ruhrgas, Gasunie, and GDF SUEZ. Bruce Beaubouef, managing editor, gives the full details in his report Nord Stream completes world’s longest subsea pipeline.

Pazflor The Pazflor field offshore Angola boasts a number of firsts. Foremost among them is that it is the first-ever project to deploy a development plan based on gas/liquid separation at the mudline spanning several reservoirs. This technological innovation is what will make it possible to produce the heavy, viscous oil contained in three of the four reservoirs in this gigantic development in the Angolan deep offshore. Pazflor, operated by French oil company Total, lies 150 km (93 mi) off Luanda in water depths ranging from 600 to 1,200 m (1,968 – 3,937 ft) and has estimated proved and probable reserves of 590 MMbbl.

Eldon Ball, senior editor, technology & economics, further details the project in Pazflor development relies on subsea separation system handling four reservoirs.

Karan Saudi Aramco’s $8-billion Karan gas field project offshore Saudi Arabia is the first-ever nonassociated gas development in the country. Currently, five wells are flowing 120 MMcf/d on the way to a design capacity of 1.8 bcf/d by 2013. The field produces gas via a 110-km (68-mi) long subsea pipeline to the onshore Khursaniyah process facility. Plans call for approximately 20 total wells spread over four production platforms that tie in to a main platform with associated electrical power, communications, and remote monitoring and controls.

Gene Kliewer, technology editor, subsea & seismic, provides additional project information inKaran marks first-ever non-associated gas project offshore Saudi Arabia.

Peregrino The achievement of first oil from the Statoil-operated Peregrino heavy oil field in Brazil in April marked a major milestone for the operator. It is the first field to be brought onstream by the company in Brazil and its largest operated field outside of Norway. And by bringing Peregrino’s 14°API crude to the surface, Statoil provided convincing testimony of its heavy oil expertise.

Nick Terdre, contributing editor, gives the full details in his report Peregrino producing heavy oil for Statoil offshore Brazil.

Who Dat Discovered in December 2007, the LLOG Exploration-operated Who Dat field lies in an average water depth of 3,200 ft (975 m) in Mississippi Canyon blocks 503, 504, and 547, in the Gulf of Mexico. Three wells – two in MC 503 and one in MC 547 – have been completed, with 10 more infill wells to be drilled and completed in the coming months using the semisubmersible rig Noble Amos Runner. Notable achievements for the field development include the first use of the OPTI-EX design; the first use of an FPU built “on spec;” and the first use of a privately owned FPU. Jessica Tippee, assistant editor, provides further information in her report Who Dat initiates production in GoM in post-Macondo era.

SAUDI ARABIA'S DIAMOND ERA Saudi Arabia hits oil bonanza in momentous year PetroScan-December 2011

SaudiAramco marks the 75th year of oil exploration with a fresh initiative to tap more oil and expand its refineries http://www.oilandgasnewsworldwide.com/pages/article.aspx?aid=24652 SAUDI Arabia celebrates the 75th anniversary of the May 29, 1933, concession agreement with American company, Socal seeing a record oil bonanza of $260 billion and an ambitious five-year master-plan by its flaghip oil company Saudi Aramco to increase its fresh drilling activity by a third and hike investments levels by 40 per cent.

Oil revenues were at an average of $43 billion per year throughout the 1990s and amount to nearly $700 million per day. The lower oil prices in 2009 and 2010 mean that some of the headline numbers will not look as good, but the underlying picture will remain very healthy and in real terms economic growth will be stronger.

Rising oil prices are expected to have a positive impact on the Saudi economy. The current account surplus may touch an all-time high this year and economic growth and the budget surplus will also be exceptionally strong. Total exports are now projected at $290 billion, compared with just $39 billion in 1998.

Aramco will bolster the number of wells drilled around Saudi Arabia to 248, compared with an original target of 187. Investment on projects will be increased to $13.7 billion from $10.7 billion under the plan. Much of the increase in drilling activity will be aimed at sustaining the kingdom’s production target of 12.5 million barrels per day, which it expects to reach by the end of 2009.

However, given Saudi Arabia’s success in both discovering fresh finds and redeveloping previously mothballed fields, such as Manifa, it appears the company may seek to boost capacity beyond 12.5 million bpd. Saudi Oil Minister Ali Al Naimi says that as long-term oil demand forecasts fell and alternative fuel supplies increased, there was no need to go beyond next year’s production capacity level. Saudi Arabia has previously said it could take its production capacity up to 15 million bpd.

Naimi says the world has plenty of oil – enough reserves today to satisfy demand over the next 50 years – and said insufficient investment posed the biggest threat to meet the world’s rising energy needs.

The Saudi Aramco plan also includes a $4.1 billion commitment to upgrade existing facilities at the kingdom’s landmark Ras Tanura refinery, compared with an initial investment of $2.39 billion.

Aramco recently cancelled a planned 125,000-bpd refinery upgrade at Ras Tanura, increasing speculation it is considering a partnership with Saudi Basic Industries Corporation (Sabic) to integrate the refinery with a petrochemicals plant.

However, the budget for some plans has been cut. The oil giant has committed $1.45 billion to the Karan gas facility to hit prod-uction of 1.5 billion cubic feet a day (cf/d) by 2012. This marks a $50 million drop from its previous budget and comes despite rapidly rising demand for gas across the region, which has provoked concerns over a potential shortage of supply for industrial users and power plants.

In Saudi Arabia alone, natural gas demand is expected to reach 14.5 billion cf/d by 2030, compared with the current 5.5 billion cf/d.

The national oil company will spend $2.58 billion on offshore maintenance and new drilling, compared with $2.25 billion previously, marking a new emphasis on the kingdom’s offshore fields.

Much of Aramco’s offshore development has focused on the Safaniyah, Marjan, Berri and Zuluf fields, but further devel-opment is needed, mostly to provide relief to the ageing Ghawar field, the world’s largest onshore field.

Aramco has devoted $1.15 billion for maintenance of Safaniyah, the largest offshore oil field in the world, which boasts production of about 1.7 million bpd. It includes the installation of 67 kilometres of crude transmission lines, along with a substation and an offshore sub-sea cable.

PetroScan-December 2011

Other parts of the five-year programme include a $3 billion investment to cover maintenance work and drilling on Aramco’s onshore fields, compared with a previous estimate of $2.2 billion.

KUWAIT PETROLEUM CORPORATION - PLAYING A CRUCIAL ROLE IN ECONOMY Sheikh Ahmad Al Fahad Al Sabah, Minister of Energy and Chairman of KPC's board of directors, highlights the key initiatives of Kuwait's oil sector. Sheikh Ahmad Al Fahad Al Sabah, Minister of Energy and Chairman of Kuwait Petroleum Corporation's (KPC) board of directors, broadly surveys the strategic directions of the oil sector in an interview. He optimistically enthused that the corporation is going through one of its best phases, which promises overall prosperity and development.

He believes that the corporation forms the backbone of Kuwait's economy, thus it has an immense responsibility to enhance its performance in all realms so as to become an effective contributor to Kuwait's prosperity. Q. In your opinion, what role does the corporation play in enhancing the national economy?

The corporation plays a crucial role in supporting and stimulating the national economy. One of the most important ways it does this is to endeavour to provide good investment opportunities for the private sector in the oil industry by the following means: 1 Privatising some of the corporation's activities: Recently, the corporation conducted several studies on the privatisation of its activities and 'the possibility of involving the private sector with the Corporation's subsidiary companies in whole or in part'. Currently, we are waiting for the required approvals of the outcomes and recommendations of these studies, so that we may proceed with their implementation. Meanwhile, the corporation is taking the required executive steps to privatise the oil blending and local marketing activities. The oil blending activity has peen sold to a private sector company while the first Local Fuel Marketing Company has been established and has offered 76 per cent of its shares for public subscription. In addition, steps have been taken to transfer the whole of the calciner coke project to the private sector. The project tender has been awarded to the Al Mal Group for production of calciner coke.

2 Promoting the participation of the private sector in the corporation's operations: The private sector now participates in the Kuwaiti Petrochemicals Compound, and many steps have been taken to give the private sector a certain share in future petrochemical projects (such as Olefins and Aromatics), and in construction of the proposed new refinery.

3 Relying on the private sector in the contracting and engineering works and in the support services.

4 Encouraging the private sector to exploit the output of the corporation's activities for the creation of a subsequent transformational industry.

Q. How do you forecast the corporation's future in light of the increasing world demand for oil?

The increasing world demand for crude oil creates several challenges for the corporation; the major one facing us today being to increase production to meet this demand. This will be achieved by developing exploration, development and production work in Kuwait so as to increase reserves and raise extraction rates, by finalising capital projects such as the crude exportation facilities construction project and by increasing exploration, development and production of nonaccompanying gas, so that this gas can be substituted for oil in energy production.

Q. What future plans and projects would you like to carry out?

The corporation and its subsidiaries have defined the strategic goals, which the Kuwaiti oil sector aims to realise in the future. The capital costs for the realisation of such goals have been estimated at KD16.2 billion over the coming 20 years.

PetroScan-December 2011

Reaching a production level of three million barrels of crude oil per day by the year 2005, and four million barrels per day (bpd) by 2020 is one of the major objectives. To achieve this, several projects will be implemented, some of which have already been identified and will be implemented during the coming five years as follows: 1 Construction of new crude exportation facilities in the Northern and Southern tank farms and at Mina Al Ahmadi and tanker fuel

IRAN THREATENS TO STOP GULF OIL IF SANCTIONS WIDENED TEHRAN: Iran threatened to stop the flow of oil through the Strait of Hormuz if foreign sanctions were imposed on its crude exports over its nuclear ambitions, a move that could trigger military conflict with economies dependent on Gulf oil.

Western tensions with Iran have increased since a November 8 report by the UN nuclear watchdog saying Tehran appears to have worked on designing an atomic 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 defiantly expanded nuclear activity despite four rounds of UN sanctions meted out since 2006 over its refusal to suspend sensitive uranium enrichment and open up to UN nuclear inspectors and investigators. Many diplomats and analysts believe only sanctions targeting Iran’s oil sector might be painful enough to make it change course, but Russia and China – big trade partners of Tehran – have blocked such a move at the UN. Iran’s warning came three weeks after EU foreign ministers decided to tighten sanctions over the UN watchdog report and laid out plans for a possible embargo of oil from the world’s No 5 crude exporter.

“If they (the West) impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” the official Iranian news agency Irna quoted Iran’s First Vice President Mohammad Reza Rahimi as saying. The US State Department said it saw “an element of bluster” in the threat but underscored that the US would support the free flow of oil. “It’s another attempt to distract attention away from the real issue, which is their continued non-compliance with their international nuclear obligations,” spokesman Mark Toner said.

PRIME THE PUMP AND BAILOUT THE BRENT Phil Flynn Oh sure, now you go and bail out Europe and drive the Brent Crude versus West Texas Intermediate spread back above $25 wide! Brent crude gets pumped up as global central bank pumps dollar liquidity in to European banks. The reduced risk of bank default and kicking the Greece default can further down the road had the Brent crude supply demand fundamentals tightened in a minute. The decision of the five largest central banks to dump dollars into European banks added to the support for oil but created fears of a tightness of supply in the Brent. Weak production from the North Sea and conflicting reports on the return of Libyan crude seems to be adding to the Brent woes. There is some short term confidence coming out of the Euro zone and this will increase demand or at least expectations of demand almost instantly.

The spread between Brent crude and West Texas had previously come in, especially after U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum reserve) fell by 6.7 million barrels which put US supply at 346.4 million barrels which is still well above the five year average.

Robert Campbell of Reuters News says writes, "Looking back at the impact of the Libyan civil war on the oil market the most remarkable fact is that the situation did not lead to an oil super-spike.

After all, a scramble for sweet crude in 2007 is widely seen as the trigger for the spiral in oil prices until they hit nearly $150 a barrel. Although the data are still coming in, it would appear that the PetroScan-December 2011

Atlantic basin refining sector is now more flexible, in part due to weaker demand and in part due to investments in new capacity. Sweet refiners may be suffering because of high crude costs, but the system as a whole is not breaking down."

He goes on to say, "The resilience of the market is all the more impressive once the other supply disruptions to the European short-haul sweet crude market are considered. Normal decline of the aging fields in the North Sea is well known, as is the extraordinary sequence of problems at several important production facilities in the area. Less discussed is the reduction in crude oil production in Azerbaijan, an important supplier of very-low sulfur crude. Combined with the conflict in Libya a huge amount of sweet crude oil production was lost to European refiners, many of which rely on short-haul cargoes. In the first half of the year sweet crude output from Azerbaijan, Britain, Libya and Norway was 215 million barrels less than in 2010. With this number in mind, the response of the International Energy Agency to the crisis --a release of 60 million barrels of strategic stocks-seems almost timid. Doubtless, the IEA would argue that the problems in Azerbaijan, Britain and Norway were not the classic supply disruptions the agency is meant to guard against."

Mr. Campbell makes some great points and also provides justification for this year's earlier release of oil from the International Energy Agencies strategic reserves. That was a move that was criticized by many but now looks lke it was important to stop a super spike! We still feel the low for WTI oil is in for the year! Time to call me and open your account and get a trial to my daily trade levels. What are you waiting for? Just call me - Phil Flynn - at 800-935-6487 or email me at pflynn@pfgbest.com. Get the "Power to Prosper" by tuning into the Fox Business Network where you can see me every day!

SEPT-QTR GDP GROWTH SEEN SLOWEST IN OVER 2 YEARS Mon, Nov 28 2011 REUTERS FORECAST - The Indian economy probably grew an annual 6.9 percent in the quarter through September, at its weakest pace in more than two years, the median forecast from a poll of 22 economists showed. Gross domestic product (GDP) growth in Asia's third-largest economy slipped from 7.7 percent clocked in the previous quarter, dragged down by the central bank's 13 interest rate increases in the past 18 months to contain near double-digit inflation and faltering global growth.

The forecasts ranged from 5.6 percent to 7.5 percent. The last time the economy grew at sub-7 percent was in the quarter through June 2009, when western economies were stepping out of the global financial crisis of 2008.

FACTORS TO WATCH * India's industrial output grew by a meagre 1.9 percent in September from a year earlier, the slowest pace in two years. * The Indian services sector contracted at its fastest pace in over two years during October, knocked by a slump in global demand and tight monetary policy. * The partially convertible rupee hit a record low of 52.73 against the U.S. dollar on Nov. 22, as investors fled risky assets and its recent weakness is expected to spike India's import bill and in turn, push up prices. * The Reserve Bank of India may hold rates in its December policy review as growth risks from a slowing economy and a fragile global economic environment take centre stage. It had said in the October review that further rate increases may not be needed, if inflation starts to ease from December.

PetroScan-December 2011

* Indian exports in October probably slowed to just over 10 percent from a high of 82 percent in July, reflecting risks to growth coming from the euro zone beset with sovereign debt woes.

MARKET IMPACT * Government bond yields are likely to ease if GDP growth slips below 7 percent, traders said, adding the new benchmark 10-year bond yield could trade in a 8.70-8.75 percent range. * The short-term overnight indexed swaps (OIS) rates are also likely to fall, and the one-year rate is seen trading around 8 percent, traders said. * If the number comes around 7 percent or a tad higher, the markets are likely to shrug it off, traders said.

(Reporting by Deepti Govind; polling by Bangalore polling unit; editing by Malini Menon)

PetroScan-December 2011

NEWS LOCAL

INDIAN OIL CORP TOPS FORTUNE INDIA 500 LIST; RIL AT SECOND SPOT Published: Monday, Dec 12, 2011, 19:37 IST :: Place: New Delhi | Agency: PTI : State-run Indian Oil Corp has emerged as the country's biggest company in terms of annual revenue, followed by Mukesh Ambani-led private sector giant Reliance Industries at the second place, as per an annual list of Fortune 500 companies in India. This year's list of the country's 500 largest corporations, compiled by the global business magazine Fortune's Indian edition, features as many as 57 new entities.

All the 500 firms together recorded a collective turnover of Rs45,79,911.38 crore in the latest financial year. Indian Oil Corp (IOC) was the biggest with annual revenue of Rs3,23,113.12 crore, followed by Reliance Industries (RIL) with a full-year revenue of Rs2,72,923.36 crore. Both IOC and RIL have retained their top-two ranks from the previous year, Fortune India said. In this year's list, the two are followed by Bharat Petroleum (Rs1,56,580.12 crore) at the third and State Bank of India (Rs1,47,843.92 crore) at the fourth place.

Other entities in the list are Hindustan Petroleum (5th rank), Tata Motors (6), Oil & Natural Gas Corp (7), Tata Steel (8), Hindalco Industries (9) and Coal India (10).There are as many as six staterun companies in the top-ten positions, as against four from the private sector. The magazine said that the total sales of the country's 500 top corporations have grown by 21.5% from the last year, while their median growth has been even higher at about 25%.

"The good news, however, is that many of the Fortune India 500 companies are now beginning to shape the world's opinion of India for the better. And they may just be doing a better job than their Chinese counterparts," it added. However, Fortune India said, some hint of impending trouble can be seen in profit growth, which has fallen from 27.1% last year to 21.6% this year."For most of the Fortune India 500 companies, erosion in profitability has been severe. This is evident from a low 6.4%profit growth for a median-sized Fortune India 500 company.

"These could be early signals of a deterioration in financial ratios, with all sizes of companies reporting a slower growth in their networth and asset creation," Fortune India said about the list.

Companies have been ranked by their latest annual audited total income for the financial year ending on or before June 30, 2011.For the ranking, audited results declared before October 31, 2011, have been used. Other companies in the list include ICICI Bank (12th spot), Bharti Airtel (13), Essar Oil (15), Bharat Heavy Electricals Ltd (17), Infosys (27), Reliance Communications (35) and Tata Power (40).

VEDANTA COMPLETES CAIRN INDIA DEAL Published on Thu, Dec 08, 2011 at 15:56 | Source : Reuters Vedanta Resources Plc completed its long-delayed USD 8.7 billion purchase of a majority stake in Cairn Energy Plc's Indian unit, more than a year after the deal was first announced, in a move that turns India-focused Vedanta into a diversified resources group.

London-listed Vedanta now holds 58.5% of Cairn India , it said on Thursday, of which 20% is held through its Sesa Goa unit.

Cairn Energy, which will retain a 22% stake in Cairn India, confirmed it would return around USD 3.5 billion to shareholders.

Cairn Energy agreed in August last year to sell a majority stake in Cairn India to Vedanta. But the sale, one of the largest in India's energy sector, was delayed for months due to a disagreement over royalty payments.

PetroScan-December 2011

"Today marks a key milestone for Vedanta as it puts to bed a deal drawn out for well over a year that has contributed to underperformance on fears of deal terms uncertainty and balance sheet stress," analysts at Liberum said in a note.

"Oil has been a solid performer over the course of 2011 ... we see the Cairn India inclusion as the key factor in repairing Vedanta's balance sheet and boosting bottom-line performance."

ONGC TO SUPPORT IN DOUBLING CAIRN'S CAPACITY: ANIL AGARWAL Published on Thu, Dec 08, 2011 Moneycontrol.com Anil Agarwal, Chairman of Vedanta Group is breathing a sigh of relief after16 months labour.

Vedanta today finally acquired a controlling stake inCairn India , 16 months after announcing this proposed transaction.

In an interview to CNBC-TV18, Agarwal said that the group is going gung ho on Cairn and has all infrastructure to double its production. He, however, points out the group has to complete certain government formalities before ramp-up. On a very confident note, Agarwal says, " ONGC is going to fully support us in doubling capacity."

Cairn energy, which had in July sold a 10% stake in Cairn India to Vedanta for about USD 1.4 billion, got another USD 4.1 billion from the sale of the remaining 30%.

Vedanta group now holds nearly 60% in Cairn India and Cairn Energy has retained 22%. The Vedanta group funded 50% of this USD 8.67 bn deal via debt and remaining 50% from its own resources.

Here is an edited transcript of his interview with CNBC-TV18’s Shereen Bhan. Also watch the accompanying video.

Q: Its been over a year that you have been labouring to get this deal done. You finally got this done. How relieved are you feeling today?

A: I am feeling great. I was always confident that this is going to go through. This is a question of energy security of our country. We only produce 14% of our oil. Even China produces 50%. I am looking forward to double Cairn’s capacity and making it a very important for the oil and gas area to make more discoveries.

Q: You talked about doubling the capacity at Cairn India and this has been a long-standing issue. It was held back on account of differences with your partner ONGC, all sorts of other clearance issue and regulatory approvals. Now that everything seems to really have been put behind you, how soon do you believe you are going to be able to hike production at Cairn?

A: Very soon. We have the entire infrastructure. We have certain formalities to complete. Of course we have to take the permission of the government and which we are working on it. ONGC is going to fully support and we will start as soon as all the clearances.

Q: So, what is the initial estimate? By when do you actually believe you are going to be physically hike the production and by how much?

A: We believe that we can go up to 240 thousand barrel probably in 2012-2013.

Q: Now going to be a net debt company and atleast you will be net debt company for the next two to three years. So far that hasn’t been the case. Is there any plan to raise equity at the Vedanta level?

A: Not at all, we are gearing below 40% which is very comfortable. We have enough dividends down the line in the company to throw the dividend to service all our debt. Out of the total, we have put 50% of our own money to acquire Cairn and the rest is funded through debt. W are very comfortable about it and have no plan to raise equity.

PetroScan-December 2011

Q: You have no plans to raise equity, but you also talked about dividend. Cairn India has not had a history of paying any dividend. Is that going to change now with you being the new owner. Are we actually going to see a dividend policy by Cairn?

A: Absolutely, you said it. There will be a dividend policy, which the Cairn India management will put through the board because there was no production.. They have very good cash flow and surplus and they will be proposing for the dividend in coming year.

Petronet LNG Output FY 12 at 11m tonne; may rise in FY13: Published on Fri, Dec 09, 2011 Moneycontrol.com RK Garg, director of finance at Petronet LNG tells CNBC-TV18 that he is happy with the deal that LNG has got with GDF (GAZ de France) at 13-14% of crude price. “Supply is likely to start in 2012,” he says. Garg sees spot prices softening for crude.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: There are some rumors in the market that the Petroleum and Natural Gas Regulatory Board (PNGRB) has actually initiated discussions to put a control on marketing margins.

Have you heard anything in this regard?

A: No, I don’t think so. As per the adjusting regulation of PNGRB, they have the right to register the RLNG terminal, but as far as the regulation of that part is not there, it is not happening. We had neither received any communication nor has there been any information with us that there is anything happening on that account.

Q: What would your marketing margin be?

A: Basically, we are doing the regasification for long-term cargo, and the regasification charge is a likely charge as per the contract. In addition to that, when we bring away spot cargos, those spot cargos depend on a particular market situation, and accordingly, small marketing margins are added. Since we take a call at that particular time based on risk at that time, these are not very big margins. However, since there is a spot deal, and depending upon where we are buying and where we sell, we have small margin on that.

Q: What’s your sense on pricing? You recently signed a deal with GAZ de France (GDF) at 13-14% of crude. The recent deal at Taiwan and Qatargas happened at 15%. You have had a lot of spot cargos selling at 17 per mmbtu. What do you think is the pricing trajectory for LNG? A: There are different markets for different kind of cargo. If you are buying spot cargo, the spot prices are applicable at that particular point of time, and when we deal for a short-term cargo, like you have mentioned for GDF, yes, of course we had a good deal. Supply will be coming in 2012; it’s a very good deal in this current market.

Yes, of course, these LNG suppliers are looking for prices linked with crude, and those are ranging between 14-15%. So there are different prices, but we have seen over the last few days that the spot market is softening up. We are hopeful that maybe we will be able to get some better deal in future.

Q: What kind of volumes are you expecting to do in second half of FY12, but more importantly FY13?

A: We are operating currently in more than 100% of capacity. In fact, last November, we even touched 105-108%. There is a limitation up to which we can stretch ourselves and we can’t go beyond this. Yes, we are bringing our second LNG jetty, which is likely to be commissioned sometime in October 2013, then there is a possibility that we will increase our output from our existing terminal probably by 12-12.5 million tonne. Currently, we can’t go beyond 11 million tonne.

Q: What’s your expectation on total volumes in the 3rd quarter? How may spot cargos have you already done and would you be looking at a capacity utilization of somewhere around 110% this time?

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A: We will be definitely doing the capacity at the same level as we have done in the first half. I think we will operate at this level, maybe a little bit better. The market is good and we have already tied up the cargos for the next half year. As far as capacity is concerned, if our input and the output remain quite constant, then we can do better, but the market conditions actually work differently.

We are hopeful that we will be able to manage our output very close to what we have done in the first half and better hopefully.

Q: You are sitting on a decent amount of cash. Will you want to lower debt or for that matter plan more expansions?

A: Actually, we have lowered the debt. We have done early repayment of Rs 500 crore to our inland lender last month. Yes, of course there is a possibility.

Q: So what’s the debt now?

A: Our debts are quite low. The Debt-equity ratio is more or less 1:1. So we are very comfortable.

Q: Any word on the possibly the Gaz-prom deal? Any deals in the works that you would be signing soon?

A: Yes, we are discussing. Actually, a long-term deal generally takes a longer time, and the Gazprom in any case, they are going to supply from their new facility which they are creating. So supply would commence sometime in 2016-2017, so we have plenty of time. This Memorandum of Understanding (MOU) was signed nearly six months ago and now we are in discussion with them with respect to specific terms and conditions, so matter is moving positively. And of course, we will continue to raise certain rates as the market would need more gas and we are ready with our capacity.

INDIA'S PETRONET TO COMPLETE DAHEJ LNG TERMINAL EXPANSION TO 15 MIL MT/YEAR BY DEC 2015 Mumbai (Platts)--14Dec2011/150 am EST/650 GMT India's Petronet LNG has received approval from its board to raise the capacity of its LNG import and regasification terminal at Dahej to 15 million mt/year and expects to complete the expansion by December 2015, R.K. Garg, the company's finance director said Tuesday.

Work on the expansion has begun, though formal approval from the board came through just on Monday.

The Dahej terminal in the state of Gujarat, west coast of India, has been consistently operating above its nameplate capacity of 10 million mt/year with the utilization rate averaging 105-108% over the last two quarters.

Global demand for LNG continues to be strong and two buyers -- utilities GAIL and Gujarat State Petroleum Corp. -- have committed to take part of the increased supply from the Dahej terminal following the expansion, Garg said, without providing further details.

The terminal's nameplate capacity is likely to increase to 12.5 million mt/year by October 2013, when it commissions its second jetty, Garg said. Petronet will also add two storage tanks at the terminal with completion expected by December 2015, he added.

The cost of expansion is estimated at Rupees 30 billion ($565 million) and the company plans to raise around Rupees 21 billion through domestic or overseas debt just before it awards the engineering, procurement and construction contracts, Garg said.

PetroScan-December 2011

Petronet LNG is also working on setting up a 5 million mt/year LNG terminal on the east coast and is likely to finalize a location by the end of January 2012, he said.

Meanwhile, it is in the process of setting up a 5 million mt/year greenfield LNG terminal at Kochi, on the west coast, likely to be commissioned by the fourth quarter of 2012.

The company is also looking for a minority stake in LNG and natural gas companies overseas, including the US, mainly to ensure LNG supply, Garg added.

"Our main objective is to get committed LNG supplies. But these plans are not at a stage right now to be discussed," he said. The major shareholders in Petronet are state-owned GAIL, Oil and Natural Gas Corp., Indian Oil Corp. and Bharat Petroleum Corp., each with 12.5% equity. France's GDF holds a 10% stake and the Asian Development Bank 5.25%, with the public holding the remaining 34.8%.

--M.C. Vaijayanthi, newsdesk@platts.com Similar stories appear in Oilgram athttp://www.platts.com/Products/oilgramnews

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INDIA’S TOP ECONOMIC ADVISER: DIESEL DECONTROL WOULD CURB INFLATION India’s chief economic advisor Kaushi Basu announced November 4 that the government ought to decontrol diesel prices in order to cut government fiscal deficits and (as a consequence) suppress inflationary pressures.

“I personally believe that we should decontrol diesel prices, which will take some pressure off the fiscal burden. And in the long run, it will cause inflation to go down,” Basu said in an interview with Express India.

The government needs to explain to voters that “if we subsidize diesel artificially, by running up a large fiscal deficit, that would also exert an upward pressure on prices,” he added.

In September, India’s inflation was measured at 9.72%, according to the report.

India’s oil companies raised gasoline prices last week, as allowed by government policy, but the government still doesn’t allow price freedom on diesel, kerosene on liquefied petroleum gas (LPG).

Earlier this month, “Petroleum Minister S Jaipal Reddy has sought a meeting of the Empowered Group of Ministers (EGOM) to devise ways to cut the mounting losses to oil [refining and marketing] companies due to the pricing of diesel, domestic LPG and kerosene as oil companies. Prices of the cooking fuel and diesel were last revised in June,” according to the report.

“Basu, who also heads a Prime Minister-appointed panel on inflation, said deregulating diesel prices will make India a more responsible country environmentally, because then ‘we will not encourage over-consumption of diesel vis-à-vis other more environment-friendly energy substitutes,’” according to the report.

HOME GROWN INDIGENOUS INNOVATIONS Sujit John, Times of India| Nov 29, 2011 He learnt from his father early on that many challenging intellectual tasks could be accomplished by people who do not have major academic degrees. So in 1990, after an MA in economics from JNU in New Delhi and an MBA from Wharton, when Aroon Raman wanted to start an R&D unit in PetroScan-December 2011

Mysore, he turned to very ordinary people. Youngsters from the villages around Mysore who had only completed standard 10 or 12, or had a diploma.

Today, Raman runs a Rs 25-crore business that does materials and composites research, and manufactures materials for companies like ABB, Rane, Exide, Amco, and for institutions like the Defence Research & Development Organization (DRDO). "They have become masters in the manipulation of materials," Raman says of the youngsters he hired. "They may not be masters in theoretical chemistry. But they do experiments that run into hundreds. A smart youngster doing experimental work for years and years picks up a fantastic feel of the interrelationships between compounds. So, he has an instinctive feel of what is required to solve a problem. People always think of an R&D unit as white-coated folks with PhDs, but that doesn't have to be."

Today, his head of R&D, G K Natesh, is someone from Udipi with a polytechnic diploma in plastics and rubber. Krishnachari, who joined Raman early, was a carpenter in Nanjangud near Mysore. His used to make crates. Raman saw that the way he sawed, he used the minimum amount of wood.

"That was application of thought. His ability to envisage how a crate would look was high." So Raman picked him and trained him. He started with drawings, later did tooling, and over the years Krishnachari has been key to the development of many value added products.

"Among my other top people are Girish and Krishna, both of who have passed no more than class 12. They are in their mid-30s now and they have filed four patents between them this year." Raman looks for locals with a sense of curiosity, high IQ and native intelligence. Some youngsters grasp very quickly, others take time. Raman picks the exceptionally bright ones. And this strategy keeps costs and attrition low. "If we hired PhDs, we wouldn't be able to retain them. A GE or Akzo Nobel or Dupont could come and take them. Or they would go for post-doctorals. Since my boys are from local villages, their parents are around, and they have no incentive to move. But I send them to events in places like Mumbai to open their eyes to bigger things."

Raman's firm Raman FibreScience has multiple capabilities in the area called wet-laid composites.

Normal papers, tissue paper, cardboard are all made by a wet-laid process. In wet lay, you take a fibre, mix it with water and additives, and run it through a mesh-like conveyor belt. When the slurry moves along the mesh, the water runs off, and you are left with a wet mass on the belt, which is then dried, and made into the final product. You can also wet-lay glass, carbon fibre and organic fibres. When you do that and combine them with performance additives, you can get very special products, such as high-end filtration solutions. These can give you very pure air or be used for blood filtration, or in a nuclear power station that requires air filters that must trap very fine particles, including bacterial content.

Raman's firm grew out of his conviction that there is scope for a full-service independent R&D unit, a rarity in India. Most Indian companies do their R&D in-house, occasionally approaching universities for help. Indian research institutions like CSIR typically do not have the ability to commercialize their research. "I can make a material in a lab, but how do I start making it in tonnes, at a cost that the market will accept? For that, you need to build special purpose machines, you need a host of skills, engineering skills, plant development skills, process skills, costing ability."

Raman FibreScience combines these skills. The company has had particular success with a unique separator (filter) developed for backup power batteries. "We developed the separator in 2-3 years; a global company like Nippon Sheet Glass still does not have such a product. For us it is innovate PetroScan-December 2011

or die. We don't have deep pockets, so we have to be on our toes. For Nippon, they are so big, even if they do not innovate, they think they will survive," Raman says.

VEDANTA APPOINTS 3 DIRECTORS ON CAIRN INDIA BOARD Close on the heels of completing acquisition of Cairn India, London-based mining group Vedanta has appointed three nominees, including its vice chairman Navin Agarwal and Priya Agarwal, on the company board.

Billionaire Anil Agarwal, Chairman of Vedanta Group, has decided to stay away from Cairn India and has in stead put his brother Navin as the head of the company.

His close confidant Tarun Jain and daughter Priya Agarwal will be the other nominees on the company board, Cairn India informed the stock exchanges today.

"This is to inform you that post the sale of majority shareholding by Cairn UK Holdings Limited to the Vedanta Group, the Vedanta Group Companies, i.e. Twin Star Mauritius Holdings Limited, Sesa Goa Limited and Sesa Resources Limited are the new Promoters of the Company," Cairn India said in a regulatory filing to the stock exchanges.

"Consequent to this change, the Board of Directors has today appointed Navin Agarwal, Tarun Jain and Priya Agarwal, as Additional Directors on the Board of Cairn India Limited.

Navin Agarwal has also been appointed as the Chairman of the Board," it said.

Bill Gammell, Chairman of Cairn Energy plc, which sold 40% of its stake to Vedanta Group, has resigned as Chairman of Cairn India. Jann Brown, the other nominee Director of Cairn UK Holdings Limited, too has quit.

Cairn Energy, which still holds 22% stake in Cairn India, will not have any representative on the company board.

"All the existing independent Directors and Rahul Dhir, Managing Director & CEO will continue to be Directors of the Company," Cairn India said.

The four independent directors on Cairn India board -- Omkar Goswami, Ed Story, Aman Mehta and Naresh Chandra -- will continue on Cairn India board.

RAIDING PSU RESERVES UNSUSTAINABLE WAY OF PLUGGING BUDGET DEFICITS The fiscal deficit looks like widening by at least one percentage point above the budgeted 4.6% of GDP. Economic growth could slow down next year. Meanwhile the government has ambitious but expensive new schemes in mind, for food security and universal health. So, many analysts want the government to take advantage of tens of thousands of crores lying in the reserves of public sector undertakings (PSUs).

When a private sector owner is in trouble, without a second thought he transfers sums from profitable companies to meet his current spending. Many analysts think the government should do the same. However, such transfers are one-off affairs and cannot be sustained over time. They can be justified in difficult times, but should not become a habit. Spectrum sales have in the past been taken to be current revenue, whereas they should actually be shown in the capital account as a reduction of assets. In the case of manufacturing PSUs, their cash surpluses are not large in relation to their investment plans, and these should not be commandeered by the government.

But many PSUs in mineral extraction have large, rising surpluses well in excess of investment needs. It makes sense to save part of this for future generations by investing abroad (as ONGC, Coal India and OIL have been doing) and spending part of it for current social purposes via the PetroScan-December 2011

budget. We need a policy on how to apportion that bonanza. There are three ways in which PSU reserves can be transferred to the government. One is the declaration of huge special dividends.

The second is a buy-back of shares by the PSU. The third is for PSU to use their surpluses to buy out minor stakes of the government in other PSUs. A special dividend will benefit all shareholders. A buy-back could in theory be restricted to buying back government stakes and not publicly-held stakes, but that would be unethical and Sebi should say no. The third route also cuts out private shareholders and should be avoided altogether. Better than all these will be quick enactment of a goods and services tax, which can bring in additional revenue and plug the fiscal deficit sustainably.

CRUDE, RUPEE DOUBLE WHAMMY HITS OIL COMPANIES Murali Gopalan ...from the pages of HINUD BUSINESS LINE newspaper.

The fear within oil industry circles is that if the status quo persists over the next six months, there will be serious liquidity issues which could affect daily operations.

Mumbai, Dec. 14: Oil companies are wilting under the double whammy of the weakening rupee and high crude prices. It is just not the losses on sale of subsidised fuels which are an area of concern. Combined borrowings of IndianOil, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are rapidly inching towards Rs 140,000 crore. At this rate, they could even touch Rs 160,000 crore by the end of this fiscal.

“What is especially worrying is the complete sense of inaction by the Government. With Parliament in a permanent state of disarray, we are expected to fend for ourselves in these difficult times,” an oil sector official told Business Line. Things have come to such a head that the companies are believed to be in no mood to comply with advance tax payments or the mandatory interim dividend to the Government, their owner and majority shareholder. “How can we possibly be expected to cough up money when there are no profits to show?” the official asked.

The fear within oil industry circles is that if the status quo persists over the next six months, there will be serious liquidity issues which could affect daily operations. In the process, bigger and more critical investments relating to infrastructure will be put on hold. This is happening at a time when the estimated spend of IOC, BPCL and HPCL over the next four years is nearly Rs 200,000 crore.

The other concern for the refining trio relates to policymaking, which has literally screeched to a complete halt. Nobody within the Government has a clue on what to do at a time when the oil companies are facing their worst-ever crisis in recent times. “All we can do is to borrow more and more because we have no idea if we will get any compensation for losses incurred. The interest burden is gradually killing us in the process,” an executive said. In contrast, 2008-09 almost seems sedate though this period is better remembered as the worst year for the oil industry when crude touched $147 a barrel. The rupee was not in the best of health either except that this state of affairs did not last too long. During the latter part of the year, crude prices started falling and the rupee settled to a more comfortable mid-40s (to the dollar) level.

Crude prices However, this time around, crude prices have been constantly over the $100/bbl-mark and there is nothing to suggest that they will fall in the coming months. “Unless the Government comes with a cohesive pricing policy for diesel and cooking gas, our goose is cooked,” the executive said. And while it is the refiners who are taking the heat, observers believe it will not be too long before this malaise spreads to the upstream oil companies too. “If the Government does not do its bit in making good the losses of the refiners, ONGC will be soaked dry instead. It happened last year and will be repeated this time too,” they say. Should this happen, ONGC's Rs 12,000 crore FPO (followon public offer) will end up being in cold storage.

PetroScan-December 2011

NEWS GLOBAL

HIGH-TECH DRILLING RIG ARRIVES IN THE GULF OF MEXICO Posted on December 7, 2011 , Noble Bully I arrived in the Gulf of Mexico to begin work at Shell's Olympus Field. The new drill ship is touted by Shell as being state-of-the-art and uses new technology to improve safety. (Photo: Royal Dutch Shell)An offshore drilling rig capable of working in water up to 10,000 feet will soon begin work in the Gulf of Mexico, Shell officials said today.

The Noble Bully I, which was jointly designed by Royal Dutch Shell and Noble Drilling, arrived in the Gulf from Singapore and will begin drilling in Shell’s Mars B, “Olympus,” development soon, company officials said.

The state-of-the-art drilling rig is more fuel efficient and lighter than comparable drill ships, the company said.

It also features ice-class hulls and uses automation to increase personnel safety. Shell did not disclose how much the new rigs costs, but the company said rigs of similar size cost more than $600 million.

A similar drill ship, Noble Bully II, is expected to begin drilling next year in Brazil.

MARATHON OIL GROWS CAPITAL SPENDING 24 PERCENT Marathon Oil has announced a $4.8 billion capital spending budget for 2012, a 24 percent increase from its 2011 budget.

About one-third of the planned spending will target operations in the Eagle Ford shale, the Houstonbased company said Wednesday. Marathon Oil plans to build up its presence in the south Texas shale play, operating 17 rigs and doubling its number of hydraulic fracturing crews to four by midyear.

Another third of the capital budget will funnel into other U.S. shale operations, including the Bakken in North Dakota, the Woodford in Oklahoma and the Niobrara in Wyoming and Colorado. The company’s 2011 capital budget also emphasized shale formations heavy in oil and natural gas liquids, which currently command higher prices than dry natural gas.

In total, 70 percent of total capital spending — or $3.3 billion — will pay for finding and producing oil and natural gas in the United States, the company said.

The company has also slated $430 million for exploration activities in the deepwater Gulf of Mexico, Indonesia, the Kurdistan region of northern Iraq, and Poland.

Marathon’s refining operations spun off into an independent Ohio-based company called Marathon Petroleum this summer. The company had devoted about 23 percent of its original $5.3 billion 2011 capital spending budget to the refining, marketing and transportation segment before the split.

After the spin off, Marathon Oil announced that it had reduced the company’s 2011 budget to $3.9 billion, reflecting that it no longer funded refining operations.

CHEVRON MIGHT INJECT STEAM INTO ARABIAN OIL FIELD Wael Mahdi, Bloomberg News Wednesday, December 7, 2011 Chevron Corp. might invest as much as $40 billion to produce an extra 5 billion barrels from an oilfield along the border of Saudi Arabia and Kuwait, by injecting steam underground to make it liquid enough to pump.

PetroScan-December 2011

The San Ramon company is pressing ahead with a pilot project at the Wafra field after "very promising" results, said Ahmed al-Omer, managing director of Saudi Arabian Chevron.

The venture expects to make a final decision by 2013, al-Omer said. The project would be the largest so-called steam-flood development in the world, according to Chevron.

The technique involves injecting steam to heat heavy crude at the field to make it flow more easily to wells for extraction. Chevron could spend $30 billion to $40 billion over the next quarter of a century if it gives the go-ahead for the whole field, al-Omer said.

"We are going to apply the steam in phases, and we will take it area by area, and this may continue beyond 2038," al-Omer said.

Saudi Arabia, the largest producer in OPEC, pumped 9.55 million barrels a day of crude in November. Kuwait produced 2.6 million barrels a day last month.

Chevron expects to apply steam to the full field by 2017, said Bill Higgs, senior vice president for operations at Saudi Arabian Chevron. Wafra has reserves of about 30 billion barrels of heavy crude oil, he said.

Chevron is still considering options for water supply and fuel needed to generate the steam for the entire field, Higgs said.

The Wafra field is in decline and produces about 240,000 barrels a day of light and heavy crude, according to the company. With steam injection, the venture expects production to rise by an additional 500,000 to 600,000 barrels a day, al-Omer said. The new oil from Wafra will be heavy crude, he said.

CHEVRON TO SPEND RECORD $32.7 BILLION IN CAPITAL PROJECTS IN 2012

By Isabel Ordonez, Of DOW JONES NEWSWIRES HOUSTON -(Dow Jones)- Chevron Corp. (CVX) said Wednesday it expects to spend a record $32.7 billion on capital projects in 2012 as it continues to invest in massive oil and gas projects worldwide.

Chevron's 2012 capital expenditure budget is 17% higher than the $28 billion the oil giant said it spent this year, its highest level of spending ever. Rivals ConocoPhillips (COP) and Marathon Oil Corp. (MRO) recently announced double-digit capital budget increases for next year, showing major oil companies are confident about the sustainability of high oil prices.

Chevron, the second-largest U.S. oil company by market value after Exxon Mobil Corp. (XOM), is planning to spend about 87%, or $28.5 billion, of its budget next year on exploration and production projects in Australia, the deep waters of the U.S. Gulf of Mexico, Nigeria, Angola and China, the company said in a press release. Planned capital spending is also directed toward improving crude oil and natural gas recovery and reducing declines in production that take place in existing fields over time, the company added.

Chevron's 2012 capital program includes spending of nearly $9 billion in the U.S., with major new investments in the Gulf of Mexico, the Marcellus Shale fields in Pennsylvania and at the company's Pascagoula, Miss. refinery, the company said.

Chevron expects to spend $3 billion next year in exploration projects, including the appraisal of new acreage acquired in the past two years in Liberia, China and various international shale gas possibilities. The planned spending also includes more exploration and appraisal activity in western Australia, the Gulf of Mexico and western Africa.

The company budgeted $3.6 billion in 2012 for its refining and marketing operations and about $600 million for technology, power generation and other activities.

SASOL PLANS ETHANE CRACKER IN LOUISIANA PetroScan-December 2011

8:30 AM MST | November 30, 2011 | Robert Westervelt Sasol says it is studying a worldscale ethane-based cracker and downstream derivative units at its Lake Charles, LA site. Sasol estimates project investment will total $3.5 billion-$4.5 billion, with a cracker that can produce 1 million-1.4 million m.t./year tons of ethylene. The cracker would be Sasol’s second major project under consideration at Lake Charles. Sasol has also announced plans for an integrated U.S. gas-to-liquids (GTL) and chemicals complex at Lake Charles, its first GTL investment in the U.S. “The rapid development of the shale gas industry in North America and the resulting decoupling of the crude oil and natural gas prices have created several opportunities for growth for Sasol in both fuels and chemicals,” says Christine Ramon, Sasol CFO. “In particular, the availability of significant volumes of natural gas liquids, and specifically ethane, has opened up opportunities in the ethane feedstock area for cracker-based chemicals.” The cracker feasibility study should be completed in first-half 2013, Sasol says. A pre-feasibility study confirmed that the project “offers an attractive investment opportunity," Ramon says. "It also supports our growth aspirations, delivering on the targets to expand our chemical businesses.”

Sasol also reported today that is in discussions on possible divestment of its stake in Arya Sasol, a polyethylene joint venture in Iran. “Further announcements will be made at a later date once sufficient progress has been made on these discussions,” Ramon says. The Obama administration announced additional sanctions against Iran last week, targeting the country’s petrochemical sector for the first time. The U.S. is “prohibiting the provision of goods, services, and technology to this sector and authorizing penalties against any person or entity that engages in such activity.” Sasol said last month that it is reviewing operations in Iran because of U.S. and European sanctions and that it had no plans to expand there.

Capital investment for the Lake Charles GTL project is estimated at $8 billion-$10 billion. The study will evaluate a 2-million m.t./year and a 4 million m.t./year GTL facility. Sasol’s board has approved the study for the U.S. plant after successful completion of a pre-feasibility study earlier this year.

The plant would use Sasol’s low-temperature slurry phase Fischer-Tropsch technology to convert natural gas into GTL diesel, GTL naphtha, and some liquefied petroleum gas (LPG).

--

ANADARKO: MOZAMBIQUE GAS FIND ONE OF THE MOST SIGNIFICANT IN 10 YEARS

By Simon Hall, DOW JONES NEWSWIRES Anadarko Petroleum Corp. (APC) further upgraded its estimates Monday for gas reserves offshore Mozambique that could exceed 30 trillion cubic feet.

The results of the company's most recent appraisal are further proof of huge gas deposits lying off southeast Africa, an area well positioned to serve the world's top two liquefied natural gas markets-Japan and South Korea--as well as other rapidly emerging gas markets like China and India.

Its Barquentine-3 appraisal well "encountered more than 662 net feet (202 meters) of natural gas pay, expanding the estimated recoverable resource range from 15 to more than 30 trillion cubic feet," Houston based Anadarko said in a statement.

"The positive results of each appraisal well we have drilled and analyzed have continued to increase our estimate of recoverable resources and natural gas in place on our block, and add to PetroScan-December 2011

our confidence that this could be one of the most important natural gas fields discovered in the last 10 years," Anadarko Chairman and CEO Jim Hackett said.

Anadarko president Al Walker said resources of this size and quality are suited for large-scale LNG development, which is being designed to comprise at least two trains with the flexibility to expand to six.

The news came the same day that Japan confirmed it is in talks with South Korea on possible cooperation to obtain lower prices from LNG suppliers.

"Japan and South Korea together represent more than half of global demand for LNG...it is natural these two countries seek cooperation" to leverage their bargaining power, said Hirohide Hirai, the director of Japan'sMinistry of Economy, Trade and Industry's Petroleum and Natural Gas Division.

Two weeks ago, Italian oil and gas company Eni SpA (E), which has also discovered large amounts of gas off Mozambique, said it plans to invest $50 billion developing it with a view to exporting the 22.5 trillion cubic feet of gas reserves in its

World Bank Economist Sees China Growing 8% For 20 Yrs 路 World Bank Economist: China can achieve another 20 years of 8% growth, but needs to remove imbalances from economy, society 路 Lin: China's "backwardness" in terms of economic development still leaves it far behind developed countries 路 Lin says it is "imperative" that China remove distortions in the finance, natural-resources and services sectors SAN FRANCISCO -- China can continue its dynamic economic growth for at least another 20 years, although it needs to embark on an overhaul that removes internal imbalances in its economy and society, World Bank Chief Economist Justin Yifu Lin said in a speech here Tuesday.

China's "backwardness" in terms of economic development still leaves it far behind developed countries, Lin said, noting that in relative terms to the U.S., the country is at the level of Japan in 1951, Korea in 1977, and Taiwan in 1975. He said that in the 20 subsequent years after each of those dates, the economies of those three Asian countries expanded at rates of 9.2%, 7.6% and 8.3%, respectively.

"China has the potential to achieve another 20 years of 8% growth," Lin said, addressing an audience at a conference on the Asia-Pacific economy sponsored by the Federal Reserve Bank of San Francisco. "By that time, China's per capita income measured in purchasing power parity may reach about 50% of U.S. per capita income." He added that China's economy would then be twice the size of the U.S.'s when measured in purchasing power parity and the same size as the U.S. when measured in market exchange rates.

Answering questions from the audience, Lin said he believes his estimate for continued 8% growth may still be "too conservative." He said Japan, Korea and Taiwan all had structural problems akin to those in China and yet over time became increasingly competitive.

PetroScan-December 2011

Nonetheless, China does face challenges, Lin said in his speech, highlighting what he described as the "triple imbalances." First, it needs to give consumption a bigger role in

LIBYA'S WAHA OIL BEGINS OUTPUT AT TWO FIELDS Mon Nov 28, 2011 1:03pm TRIPOLI Nov 28 (Reuters) - Libya's Waha Oil, a joint venture with U.S. firms ConocoPhillips, Marathon and Amerada Hess, has begun crude oil prodution at the Dahra and Samah fields at a rate of 16,000 barrels per day, the National Oil Corporation (NOC) said on Monday.

It said the production started on Sunday. "This production represents five percent of the total production capacity of the company, which seeks to reach maximum production rates as soon as possible," the NOC said in a statement on its website.

Waha Oil accounted for around a quarter of Libya's prewar oil output of 1.6 million bpd. A strike at Waha Oil ended earlier this month after workers' demands for a new chairman were met. Waha Oil workers have said the Dahra and Samah fields escaped the worst of the war damage.

HIGH-TECH DRILLING RIG ARRIVES IN THE GULF OF MEXICO Posted on December 7, 2011 at 11:18 am by Dan X. McGraw in Deepwater drilling, Drilling, General, Offshore, Oil Noble Bully I arrived in the Gulf of Mexico to begin work at Shell's Olympus Field. The new drill ship is touted by Shell as being state-of-the-art and uses new technology to improve safety. (Photo: Royal Dutch Shell) An offshore drilling rig capable of working in water up to 10,000 feet will soon begin work in the Gulf of Mexico, Shell officials said today.

The Noble Bully I, which was jointly designed by Royal Dutch Shell and Noble Drilling, arrived in the Gulf from Singapore and will begin drilling in Shell’s Mars B, “Olympus,” development soon, company officials said.

The state-of-the-art drilling rig is more fuel efficient and lighter than comparable drill ships, the company said.

It also features ice-class hulls and uses automation to increase personnel safety. Shell did not disclose how much the new rigs costs, but the company said rigs of similar size cost more than $600 million.

A similar drill ship, Noble Bully II, is expected to begin drilling next year in Brazil.

IRAN DISCOVERS NATURAL-GAS FIELD IN CASPIAN SEA, SHANA SAYS Posted on December 12, 2011 at 4:54 am by Bloomberg in Deepwater drilling, Drilling, Natural Gas Iran has discovered a natural-gas field in the Caspian Sea, the Ministry of Petroleum’s news website Shana reported, citing Oil Minister Rostam Qasemi.

The field, in waters 2,300 feet deep, lies wholly within Iranian territory, Qasemi said, without specifying the location or estimating the amount of gas contained there, according to Shana. Iran has 11 trillion cubic meters of proven gas reserves in the Caspian Sea, excluding this latest discovery, the minister said.

Iran holds the world’s second-largest gas reserves, with 29.6 trillion cubic meters, according to the BP Statistical Review of World Energy in June. Russia has the biggest reserves of the fuel, BP data show.

PetroScan-December 2011

Iran’s government is struggling to attract foreign investment to help develop its gas and oil resources amid international economic sanctions. The U.S., United Nations and European Union have imposed sanctions to try to deter Iran from developing technology for nuclear weapons. The government says it want nuclear power for civilian purposes.

SHELL, ENI BUY NIGERIA OFFSHORE OIL FIELD RIGHTS Posted on December 8, 2011 at 5:37 am by Associated Press in Africa, Deals, Deepwater drilling, Drilling, Offshore LAGOS, Nigeria — Royal Dutch Shell PLC and Italian oil firm Eni SpA have purchased rights to an offshore oil field near Nigeria’s coast that could hold as much as 9 billion barrels of oil, the companies said today.

The purchase ends a long dispute over who would run the field held by a company with ties to a former oil minister during the military rule of Sani Abacha, whose kleptocratic rule saw billions stolen from Nigeria. It also signals oil firms remain willing to expand in Nigeria, despite unease over a long-running debate about changing the laws that govern crude production in a nation vital to U.S. energy supplies.

The oil field sits near French oil firm Total SA’s Akpo offshore field, more than 100 miles (150 kilometers) off the coast of Nigeria’s Rivers state. Experts believe the field holds oil reserves that would put it among some of the top fields in the world.

In separate statements, Shell and Eni confirmed the purchase of the fields, first reported by Reuters. Shell said the field’s production would be split 50-50 among the two companies, with Eni running the operations of the deep-water oil drilling and production.

Neither company disclosed the price it paid for the field. A spokesman for the state-run Nigerian National Petroleum Corp., which partners with foreign firms working in the country’s oil fields, did not respond to a request for comment Thursday.

The sale ends an ongoing dispute between Shell and local company Malabu Oil and Gas, which has links to former Nigerian oil minister Dan Etete who served in Abacha’s regime in the 1990s.

Shell had earlier been signed to produce oil there under Malabu, but the deal fell apart and the two firms became entangled in lawsuits.

It remains unclear how the deal was brokered, but both Eni and Shell said they did not enter into any deals with Malabu Oil and Gas to close the deal. Shell also said it paid its portion of the sales price to the federal government.

The deal comes as Nigeria still considers whether to overhaul laws surrounding oil production.

Debate over the Petroleum Industry Bill had caused foreign companies to hold off on new investments in Nigeria. Analysts say the petroleum bill would sharply reduce the profits of foreign oil companies like Chevron Corp., ExxonMobil Corp., Eni, Shell and Total.

Government officials say the bill would allow more oil money to return to Nigeria’s people.

However, the bill has apparently stalled after years of discussion and it remains unclear whether Nigeria’s National Assembly will be able to pass any change to the laws soon.

Nigeria, an OPEC member nation producing about 2.4 million barrels of crude oil a day, is a top supplier to the U.S. Production in the country picked up in recent years after a government-sponsored amnesty deal brought many militants in the region out of its winding creeks. However, thefts from oil pipelines have grown drastically and some ex-fighters have become disenchanted with the amnesty program.

University of Houston gets $1.25 million for subsea engineering, petroleum technology Posted on December 8, 2011 at 9:07 am by Dan X. McGraw in Deepwater drilling, Drilling PetroScan-December 2011

University of Houston engineering students will get a boost from a $1.25 million gift to support subsea engineering and petroleum technology initiatives.

The university received the gift from the American Society of Mechanical Engineers. UH plans to use $1 million to create an endowed chair in subsea engineering in UH’s Cullen College of Engineering. The remaining $250,000 will be used to fund adjunct faculty hires, scholarships and other operating expenses, the university said.

“The ongoing development of a subsea engineering curriculum demonstrates UH’s recognition of the critical role of offshore and deep-water engineering for the energy industry,” said ASME Petroleum Division Chair Gary Harrison.

Earlier this year, UH launched a subsea engineering program to fill a need for skilled workers to design and maintain equipment on offshore oil and gas platforms. The program teaches students the necessary skills for designing subsea equipment, tools or infrastructure for offshore rigs.

The donation will allow the university to hire a world-class leader in subsea engineering who can expand the current course offerings in the subject, lead new research and broaden community outreach.

Matthew Franchek, chairman of the UH department of mechanical engineering and director of the subsea program, said the donation will help the university become a leader in energy programs.

“This endowment will enable UH to seek a rainmaker in subsea engineering who will educate students and make discoveries that promote safe and reliable subsea oil and gas production,” Franchek said.

REPSOL, SHELL, CONOCO OFFER HIGH BIDS FOR ALASKA OIL LEASES Posted on December 8, 2011 drilling, Drilling, Natural Gas, Offshore

at

6:22

am by Bloomberg

in Alaska, Deepwater

Repsol YPF SA, Royal Dutch Shell Plc and ConocoPhillips are among the high bidders for oil leases offered by the State of Alaska.

The state Department of Natural Resources sold leases today for 281,095 acres in the Beaufort Sea and 335,289 acres on the North Slope, to boost oil exploration and production and push more crude through the Trans Alaska Pipeline.

Repsol of Madrid, Spain’s largest oil company, bid $2.6 million for North Slope tracts and $376,256 for Beaufort leases. Shell of The Hague offered $2.6 million for access to the Beaufort Sea, where it has holdings purchased from the federal government in 2005. Conoco, based in Houston, will pay $2.7 million for access to North Slope lands, according to an interim sale report from the state.

“Shell’s participation in today’s lease sale underscores our ambition to be a long-term partner with the State of Alaska,” Pete Slaiby, Shell Alaska vice president, said in an e-mailed statement.

The U.S. Bureau of Land Management, which auctioned 3 million acres in the National Petroleum Reserve, will release results later today.

NORWAY SEES RECORD OIL SPENDING IN 2012 Posted on December 1, 2011 at 6:46 am by Bloomberg Norway expects the petroleum industry to invest a record amount next year amid new field developments, shielding the economy from the fallout of Europe’s debt crisis.

Oil and gas companies expect to invest 184.6 billion kroner ($32 billion) next year, a quarterly survey from Norway’s statistics agency showed today. That’s up from a September estimate of 172 billion kroner. Spending will be 152.6 billion kroner this year, little changed from the September estimate.

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Norway, the world’s seventh-largest oil exporter and second-biggest natural gas exporter, has so far been shielded from the worst of the debt crisis and boasts surpluses and unemployment below 3 percent. Increased oil investments will underpin economic growth next year, even as global prospects worsen, Stein Bruun, chief economist in Oslo at SEB AB. “We will have a booming investment in the oil sector in Norway both this year and next,” Bruun said.

“It will add important demand impulses to the Norwegian economy and damp the blow from the weaker cycle in Europe.”

Norway’s overall economy will accelerate to 3 percent next year from 1.5 percent this year, the central bank forecasts. Petroleum accounted for about a fifth of gross domestic product and 26 percent of total investments in 2010, according to the Energy Ministry. The industry accounted for 47 percent of total exports last year.

Gas Sales “Gas is sold on long-term contracts and the volume of such exports is little affected by relatively short-term swings in activity,” Bruun said. “Oil exports are constrained by production at the Norwegian shelf.”

Norway’s central bank shelved planned interest rate increases in October because of a deepening debt crisis in Europe. Policy makers signaled they will keep the benchmark unchanged until the second half of next year even as house prices rise and credit growth accelerates.

Increased petroleum investments in 2012 are mainly due to a high crude oil price, new discoveries, and maturing fields, Statistics Norway said in its report. “The oil companies have extensive drilling plans, both within production and exploration,” the office said. “Production in many fields is falling, and many platforms are old. These facts necessitate upgrading on a large scale.”

Prices for Brent crude, a Benchmark in Europe, have increased 15 percent this year, and traded at $109.23 a barrel by 12:43 p.m. in Oslo.

Investments in exploration are estimated at 32.4 billion kroner in 2012, which is unchanged from the previous estimates, the statistics agency said.

Celebrated Discoveries “The celebrated discoveries earlier this year contribute to a greater will to invest in exploration,” SSB said. “A shortage of rigs and a strong demand to use the same rigs for production drilling restrict the exploration plans.”

Statoil ASA (STL), country’s biggest oil and gas producer, and Lundin Petroleum AB, made two major offshore finds in Norway this year that are linked into a single deposit. Aldous Major South and Avaldsnes in the North Sea are part of one “giant” oil field, and among Norway’s top 10 discoveries, the country’s biggest oil and gas producer said in August.

PETROPERU PLANS EQUITY SELL-OFF, SHARE LISTING TO EXPAND REFINERY To generate capital to invest in a refinery expansion project, Petroleos del Peru SA (PetroPlus) will sell a stake and list its shares in an initial public offering, according to a November 15 Bloomberg report.

The report noted that the 20% stake could go on sale by April 2012, was inspired by a similar earlier move by Colombia’s state oil company, Ecopetrol SA. “We want to sell the same amount of shares as Ecopetrol, which was very successful in Colombia. … We’re not as profitable as other companies, but we’ll enter the market whatever happens,” the company’s chief executive officer, Humberto Campocinico, reportedly said at a November 15 press conference in Lima.

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The equity sale may also be augmented by a separate float of debt instruments at a later time, with the combined proceeds dedicated to fund the 50% expansion of the Talara oil refiner to 90,000 barrels per day by 2016, according to the report.

SOCAR AGREES TO BUY EXXONMOBIL’S SWISS SUBSIDIARY Azerbaijan’s state-owned oil company SOCAR has agreed to buy ExxonMobil Corp.’s Swiss subsidiary, Esso Switzerland, for an undisclosed sum, according to a November 16 Argus report.

The deal will give SOCAR a retail network comprising more than 170 service stations; a fuels marketing division that includes heating oil sales to independent distributors across Switzerland; and an aviation fuel supply business at Geneva and Zurich airports.

ExxonMobil’s lubricants and chemicals businesses in Switzerland are excluded from the transaction, according to the report.

SOCAR reportedly plans to expand further into other European downstream markets over the next few years. To-date, the firm’s downstream experience outside Azerbaijan has been limited to Georgia, Ukraine and Turkey.

BAHRAIN OIL REFINERY OUTPUT HITS RECORD MANAMA: Bahrain’s production of crude oil during November averaged 271,300 barrels per day as against a capacity of 262,000 barrels, marking the highest production ever for the month, said a senior government official.

“This was the best-ever crude run in Bahrain,” said Energy Minister Dr Abdul-Hussain bin Ali Mirza.

“If we continue at this rate till the end of the year, we will have exceeded our target by 50,000 barrels,” he said.

The minister dismissed reports that Bapco had suffered huge losses during the unrest in February and March.

“There is talk of a $90 million loss but that is not true,” he said. “There was no loss and, if at all, there was a shortfall in production. This has been more than covered with work after the unrest,” he added.

He also said the company’s profitability had improved in 2011 than in previous years.

Dr Mirza credited Bapco’s performance to the dedication and hard work of its management and employees.

He was speaking on the sidelines of the opening of the Process Control and Instrumentation (PCI) exhibition at the Bapco Club, Awali. It was organised to mark the 20th anniversary of the company’s PCI department. It showcased the functionalities of various control systems and measurements engineered, installed and supported by PCI. Bapco chief executive Faisal Al Mahroos said the exhibition reflected the company’s contribution to serving the oil and gas sector and supporting the national economy.

“It features PCI capabilities in the automation area and state-of-the art and cutting edge technologies in Bapco,” said Al Mahroos. “We aim to elevate awareness of control automation systems in Bapco.”

Bapco has pledged extra efforts to improve its operations, enhance its contributions to the national economy and continue its outstanding performance for sustainable growth, said Dr Mirza who chaired Bapco’s board meeting at Al Dar in Awali. The board reviewed a number of key issues related to Bapco’s operational performance. It noted that the production target for 2011 was fully achieved safely and efficiently.

It reviewed and approved operating expenses and investment budgets for 2012.

PetroScan-December 2011

The meeting highlighted the productivity improvement programme which resulted in cost savings.

The board also reviewed a number of operational and human resource issues.

It thanked outgoing chief executive Faisal Al Mahroos for his valuable contribution to the company’s success.

NORD STREAM COMPLETES WORLD'S LONGEST SUBSEA PIPELINE Published: Dec 1, 2011 Bruce Beaubouef Managing EditorWith the completion of Line 1, developers of the €7.4-billion ($10-billion) Nord Stream pipeline project have realized the ambitious goal of moving Russian gas to European markets directly through the Baltic Sea. First announced in 2001, the project called for construction of two parallel 759-mi, 48-in. pipelines to move natural gas from Vyborg, Russia, to Lubmin, near Greifswald, Germany. The Nord Stream consortium includes Gazprom, Wintershall, E.ON Ruhrgas, Gasunie, and GDF SUEZ. Saipem's Castoro Diecipipelay vessel worked in the Bay of Greifswald, Germany, from June to October 2010. Designed to operate in shallow waters, it installed 28 km (17 mi) of each of the twin pipelines in that area. Photo courtesy Nord Stream.

In early November, the developers announced that Line 1 had become operational, and that gas is now flowing to Lubmin, Germany, where Nord Stream is connected to the European gas grid. Line 1 is expected to be able to move up to 27.5 bcm (971 bcf) of gas on an annual basis.

Pipelay activities were completed on Line 1 in June, making Nord Stream the longest subsea pipeline in the world, surpassing the recently completed Ormen Lange gas pipeline (which runs about 725 mi, or 1,167 km, in the North Sea).

Construction of Nord Stream Line 2 is also progressing on schedule, and some 600 km (373 mi) of this line have been installed to date. Pipelay on this line is expected to be completed in 3Q 2012, and the line is scheduled to become operational before the end of next year.

Building the first Nord Stream pipeline was a major engineering and construction accomplishment.

Because it passes through the waters of five countries and could affect others, an extensive permitting and consultation process had to be followed. The twin pipeline system runs through the exclusive economic zones and territorial waters of Russia, Finland, Sweden, Denmark, and Germany. The nations of Poland, Latvia, Lithuania, and Estonia were designated as affected parties.

An important part of the process focused on preserving safety and reducing environmental impact.

The consortium invested €100 million ($135.5 million) and engaged in extensive dialogue and consultations with governments, authorities, experts, and stakeholders in all Baltic Sea states to ensure that the design, routing, construction, and operation of the pipeline will be safe and environmentally sound. The terrain along the route was carefully researched and cleared in preparation for the pipe laying, and Nord Stream was routed to keep clear of munitions dump sites.

Construction was scheduled to avoid environmental impact and not interfere with critical seal breeding and fish spawning seasons. With these concerns addressed, the required permits were received in February 2010, and construction of Line 1 began the following April.

Preliminary engineering design was performed by INTEC Engineering (now INTECSEA); with the detailed design engineering conducted by Snamprogetti. Saipem and its subcontractor Allseas carried out the offshore pipelaying activities. A joint venture of Royal Boskalis Westminster, and Tideway did the pre-lay seabed dredging work.

The line pipe was manufactured by EUROPIPE, OMK, and Sumitomo Heavy Industries, with the concrete weight coating and logistics services provided by EUPEC PipeCoatings S.A. For the PetroScan-December 2011

concrete weight coating, new plants were constructed in Mukran (Germany) and Kotka (Finland).

Each pipeline will be comprised of 100,000 12-m (39-ft) long concrete-weight coated steel pipe joints, each weighing around 23 metric tons (25 tons). For the construction period, Nord Stream created a logistics center in Gotland (Sweden); and other interim stock yards were located in Mukran, Kotka, Hanko (Finland), and Karlshamn (Sweden) to continuously supply the concretecoated pipe joints to the lay barges.

Since plans called for the pipeline to be laid in three sections, Saipem organized three laybarge vessels, two with special requirements. Its pipelay vessel Castoro Dieci, designed to operate in shallow waters, worked in the Bay of Greifswald, Germany. It installed 28 km (17 mi) of each of the twin pipelines, working from June to October 2010.

The Allseas Solitaire – the biggest pipelay vessel in the world – installed a 342.5-km (212.8-mi) segment of each of the twin pipelines offshore Finland, starting in September 2010 and completing in August 2011. With its dynamic positioning system, the Solitaire was ideally suited for working in the congested Gulf of Finland.

Saipem's Castoro Sei installed about 70% of Line 1, some 853.5 km (530.4 mi). It started work on Line 1 in April 2010, and finished in May 2011. It began work on Line 2 this past June, and is expected to complete pipelay activities on Line 2 in 3Q 2012.

The final weld connecting the offshore and onshore parts of Line 1 was completed in August, and all three sections were joined using underwater hyperbaric tie-ins. These tie-ins were conducted at two locations. The connection of the Gulf of Finland and central sections took place offshore Finland in a water depth of 80 m (262 ft). Linking of the central and southwestern sections was performed in 110 m (361 ft) of water off the Swedish island of Gotland. Each tie-in was conducted in an underwater welding habitat and remotely controlled from the Technip DSV Skandi Arctic.

A key design element for Line 1 is that the system will operate without an intermediate compressor station, which will lower operational costs and reduce CO2 emissions. Gas travels the full 759 mi distance thanks to the 220 bar pressure generated at the Portovaya compressor station near Vyborg. The pipeline has a constant internal diameter of 1,153 mm (approx. 45 in.), but the system was designed to have three different design pressure sections (220, 200, and 177.5 bar) and pipe wall thicknesses (34.4, 30.9 and 26.8 mm; or 1.35, 1.21 and 1.055 in., respectively) corresponding to the gas pressure drop over the long journey from Russia to Germany. By designing each section according to the changing pressures, Nord Stream was able to save on the amount of steel used, and thus the cost of the pipe.

When the second line is completed in 2012, Nord Stream will have the capacity to move 55 bcm/yr (1,942 bcf/yr) to the European gas network.

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NEW & RENEWABLE ENERGY

NATIONAL BIO ENERGY MISSION SOON: FAROOQ ABDULLAH New Delhi, Nov. 29: from the pages of THE HINDU BUSINESS LINE newspaper.

A National Bio Energy Mission is being developed to push sustainable development of the renewable energy sector, Mr Farooq Abdullah, Union Minister for New and Renewable Energy (MNRE), said here on Tuesday. He was addressing the Bio Energy summit organised by Confederation of Indian Industries (CII). “Grid parity among States is not equal and connectivity to remote locations is a major issue. The Ministry wants industry to bring innovative new technologies that would empower rural areas,� he said.

Mr G.B. Pradhan, Secretary, MNRE, said the most critical aspect in promoting bio energy projects was the associated business model, which should be sustainable. Mr K Krishnan, Chairman, CII Task Force on Bio-Energy, pointed to hybrid solutions that combine bio energy with solar, wind and hydro as promising sustainable solutions. The CII recommended rationalising the pricing of fuels and tariffs to reflect the economic cost of supply, reduce cross subsidies and flexibility to capture changing fuel prices in a competitive market. heena.k@thehindu.co.in

AFTER QUAKES, SHALE FRACKING FACES OPPOSITION IN U.K

By KARI LUNDGREN | BLOOMBERG NEWS, Published: December 5, 2011 LONDON -- The sound that woke Caroline Murphy after midnight April 1 was so loud that she thought a car had crashed into her house. She felt no better when she learned it was the sound of Britain's first recorded earthquake attributed to the exploration of natural gas. ''It sounded like something had hit the house and literally jolted us out of bed,'' Ms. Murphy said in her home in Singleton, a village of about 900 people in Lancashire, northwest England. ''It was like a car or crashing metal. It was such a loud sound.''

Ms. Murphy's home is less than three miles, or five kilometers, from a drill site belonging to Cuadrilla Resources, an energy company that says it has found more natural gas in the area's shale rock than Iraq has in its entire reserves.

The 2.3-magnitude tremor that shook the region in April, and a weaker quake May 27, forced Cuadrilla to suspend hydraulic fracturing, the process of blasting sand, water and chemicals into shale that has turned the United States into the largest producer of natural gas in the world.

Cuadrilla plans to start fracturing again next year, but it will do so amid an intensifying debate on the potential of shale exploration in Britain. The recent earthquakes provide an argument for critics who say that fracking, as the technique has become known, blights the landscape and risks polluting water supplies. ''They say they've been fracking for years and years and it hasn't caused any problems,'' said Ms. Murphy, an artist and designer. ''I say: 'You caused an earthquake. To me, that's a big issue.'''

Supporters of shale gas exploration say that Britain can not afford to overlook its potential. The North Sea oil and natural gas fields discovered in the 1970s, which made Britain largely selfsufficient for energy, are running dry, and the country is expected to import more than half its natural gas supplies this year. The prospect of inexpensive gas -- prices have fallen about 75 percent since shale drilling really took off in the United States -- could help the British economy, said Tim Yeo, the chairman of the energy and climate change committee of the British Parliament. ''It is likely the U.K. has quite substantial shale gas reserves and there may be sufficient resources to replace a significant amount of reserves,'' Mr. Yeo, a member of the governing Conservative PetroScan-December 2011

Party, said by telephone. ''Shale is good from a security point of view. It gives us some degree of protection from international gas prices.''

Poland, Europe's biggest holder of unconventional natural gas, has granted more than 100 licenses to companies including Exxon Mobil and Chevron. ''The real opportunity for this area is the Aberdeen effect,'' said Rob Green, head of enterprise and investment for Blackpool Bay Area Co., an agency that promotes economic development in the Blackpool region. Aberdeen is the hub of the British offshore oil and natural gas industry. ''The U.K. certainly has that potential to take an early lead,'' Mr. Green said.

Eric Vaughan fractured his first well, in Ohio, more than 20 years ago. Now Cuadrilla's chief operating officer, Mr. Vaughan said that the earthquakes in Britain were exceptional events.

The fault ''has to be stressed just right, brittle and ready to go already, and we drilled that well into a spot,'' Mr. Vaughan said as he toured one of three Cuadrilla drilling sites in England. The amount of water and energy used was ''nowhere near enough to actually create an earthquake. You couldn't pull anything about the shale from that.''

Nonetheless, there have been other earthquakes associated with shale gas production. A geographical survey showed the possibility that fracking of a well near Elmore City, Oklahoma, on Jan. 17 had caused a series of 43 minor tremors over a period of 24 hours.

The first tremor set off by Cuadrilla's fracking in England, the one in April, was strong enough to be felt but unlikely to have done damage. The weaker quake in May had a magnitude of 1.5. Cuadrilla quickly halted fracking operations and is not expected to resume them until the British Department of Energy and Climate Change has reviewed the situation, Mr. Vaughan said.

A spokesman for the department said the assessment was still under way.

Cuadrilla, backed by Riverstone Holdings, a private equity investor that includes the former BP chief executive John Browne among its directors, wants to start fracking again. The company says that its first wells have shown that the shale rock it is exploring may hold 200 trillion cubic feet, or 5.7 trillion cubic meters, of gas. While only a small fraction of that is expected to be drilled, 10 percent of the amount would be enough to supply Britain for about six years. ''The shale is very thick throughout this area,'' Mr. Vaughan said in an interview. ''The rock itself is a similar shale to some of the plays in the U.S. One of the differences here is there's just a lot more of it.''

Cuadrilla plans to fracture three wells next year, Mr. Vaughan said. If the wells prove to be potentially profitable, the driller would need to apply for a separate production license, requiring further environmental and planning assessments. Production could start as early as 2013, the economic development advisers Regeneris Consulting said in a report commissioned by Cuadrilla.

The biggest debate over shale drilling is whether it risks polluting water supply. Although France has banned fracking because of the risk of contamination, a British parliamentary committee report in May found no evidence that shale drilling threatened water supplies. The U.S. Environmental Protection Agency expects to complete a report on shale and the effects on drinking water in 2014.

In England, Cuadrilla drilled through a local aquifer to reach the shale layer, which starts 6,000 feet, or more than 1,800 meters, below the surface. While the resource is not used for drinking water, it is pumped for irrigation. The company has taken extra measures to seal the drill pipe from waterbearing rock, Mr. Vaughan said.

But the process has raised concern about the effects for local farms. ''We don't want to see the same mistakes being made as in the U.S.,'' said Graham Bentley, a member of the local opposition group Ribble Estuary Against Fracking. ''There's the increase in traffic, the issue of contamination, air pollution -- and this area is a strong growing area that supplies many of the large supermarkets,'' Mr. Bentley said.

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For Doreen Stopforth, who can see a Cuadrilla drilling rig from the window of the house she has lived in for 39 years, the issue is more simple. What works in the plains of Texas is not suitable for her corner of Lancashire, she says. ''One morning we got up and it looked like we had NASA outside, in the middle of a cabbage field,'' Ms. Stopforth said. ''It's not like America,'' she said. ''Here, it's heavily populated.''

GM AND BMW IN FUEL CELL TALKS; AMAZON SELLING GE WATTSTATION General Motors and BMW are discussing a possible collaboration related to fuel cell vehicles, news outlets have reported.

The companies told the New York Times that they are holding talks, though they would not confirm the details of a recent report in the German business magazine WirtschaftsWoche. That story said that BMW would pay money towards researching hydrogen fuel cell passenger cars, and receive GM technology in return.

The two companies previously collaborated with Daimler to develop a hybrid system used in GM SUVs. Daimler, Honda, Toyota and Hyundai have all said that they would launch commercial hydrogen cars in the U.S. around 2015, but the Times said this could be held back until the country develops an adequate network of fueling stations. In Germany hydrogen fueling infrastructure is more advanced.

Recent months have seen a slew of environmental technology partnerships announced between automotive companies, as well as between car-makers and other types of manufacturers. Last week GM and Teijin Limited said they would co-develop carbon fiber products for potential worldwide, high-volume use in GM cars, trucks and crossovers. GM and electronics manufacturer LG plan to design and engineer electric vehicles together.

Ford and Toyota have said they will collaborate to develop advanced hybrid systems for light trucks and SUVs, while GE and Nissan are launching a two-year collaboration to develop smart charging infrastructure for electric vehicles.

In other green fleet news, GE’s wall-mounted electric vehicle charging point, the WattStation, is now available from Amazon.com, the two companies have announced.

The Level 2 station is available for use in the U.S. and Canada. It delivers a full-cycle charge to a 24 kWh battery in four to eight hours, whereas plugging an EV into a standard electrical outlet would require 12-18 hours for the same level of charge, GE says. The WattStation also comes equipped with built-in fuses to provide overload protection in the event of a fault occurrence.

The charger, which is 24 inches tall, 16 inches wide and six inches deep, is NEMA 3R rated to resist rain, sleet ice. It is priced at $1,099.

Last month GE finalized a sale and distribution agreement with EV manufacturer CODA Automotive, which will give buyers a chance to bundle the WattStation with their car purchase. In July GE announced that it would offer the station at 50 U.S. Lowes stores, and on Lowes.com, by September.

OIL SANDS OPERATORS TURN TO ELECTRIC CURRENTS 'It will be like moving from the cart and horse to the automobile if we get it right.'

BY STEVE MACLEOD, September 01, 2011, Illustration by Kelly Sutherland Too deep to mine and too shallow for steam” is how Bruce McGee describes the middle child of bitumen reserves in Alberta’s oil sands. Sitting between 50 and 150 meters below the earth’s surface, the range has mostly gone untapped by producers in the Athabasca region, but it’s the PetroScan-December 2011

“sweet spot” for McGee and E-T Energy Ltd. Estimates put Alberta’s recoverable reserves of bitumen close to 170 billion barrels. “Mining accounts for just eight billion of it,” says McGee, E-T Energy’s president and chief executive. “It doesn’t have a long life left, relative to in situ.”

High oil prices and new technology have allowed producers to dig deeper, using steam-assisted gravity drainage techniques to pull oil from thousands of feet underground. A typical SAGD well uses natural gas to turn water into steam in an effort to heat and thin the bitumen enough for it to flow up through a well. McGee turned to electrothermal dynamic stripping process (ET-DSP) technology in 2004 in the hopes of accessing what the underground extraction technique and strip mining leave behind.

His technology uses electricity to heat and thin oil reserves, as opposed to burning natural gas and using water resources. After completing trials of the technology, E-T has received a $6.86-million endorsement from Alberta’s Climate Change Emissions Management Corporation (CCEMC) and teamed up with Total E&P Canada Ltd. to help advance a 10,000-barrel-per-day development at Poplar Creek.

Although it’s only been in the past few years that SAGD projects have started to populate the oil sands landscape, in situ technology has been around much longer, going back to experiments conducted by Roger Butler at a Calgary research center run by Imperial Oil Ltd. in the 1970s. The work behind McGee’s ET-DSP has likewise evolved over time. McGee worked at Shell Canada Ltd. before pursuing a PhD in electrical engineering. His thesis, reflecting his professional experience, explored electric heating of heavy oil deposits. “I was going to work on lasers and their ability to burn out cancer cells,” he recalls. “But I was in the oil industry and it seemed like an amazing approach to extracting large amounts of bitumen.”

He drew on research conducted by professors at the University of Alberta, as well as the work of researchers at the University of California Berkeley in the Golden State’s heavy oil fields. At the time, commercial applications for the novel technology were few and far between, so McGee started a consulting firm working on environmental remediation of contaminated sites.

Not surprisingly, McMillan-McGee Corp. harnesses electric currents to get the job done. The Calgary firm has applied its specialty services to clean up spoiled industrial sites around the world.

The technique passes electricity underground to safely remove chemicals from contaminated soil by burning them off or recovering them for treatment. The firm’s first consulting job, at a project in Livermore, California, attracted an unusual level of interest. “The project was written up in Scientific American and then we started getting calls from around the world,” McGee recalls.

As the firm graduated from consulting to conducting environmental cleanups at contaminated sites, McGee couldn’t shake the feeling that he needed to get back into the oil and gas industry. Soaring commodity prices provided a powerful incentive to make the move, but doubts about the salability of using electric currents to recover bitumen remained. “I didn’t think we’d get far selling the technology to mining or SAGD companies. They don’t understand it and it’s not a commercial technology,” McGee says. “We figured the best way to develop it was to bid on land and it was probably the smartest thing we’ve done.” Between 2004 and 2007, E-T Energy snapped up 10,560 acres in the southwest corner of the Athabasca oil sands region. The Calgary-based firm, still privately held, now holds a 100 per cent working interest in the land and estimates it has the potential to produce 1.2 billion barrels of bitumen.

Using electric currents to unlock reserves of bitumen only sounds like a far-fetched bit of science fiction. At E-T’s Poplar Creek property, a series of electrode wells will be drilled approximately 16 meters apart. Electricity drawn from a nearby substation passes between the wells, heating the bitumen. Water from the formation helps move the electrical current between the wells. This water is separated from the oil and treated at the surface before being recycled through the well system, kind of like radiator fluid, to help control the direction and conductivity of the electrical currents.

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Once a grid of wells has reached the end of its production cycle – expected to last about a year – the entire setup is moved to another square section on site, and remediation work gets underway.

The rotating process is not much different from a farmer rotating crops, McGee says. He thinks the pattern of development could accelerate reclamation of disturbed land, one of several environmental advantages proponents of electric production say give the technology a leg up on its conventional rivals.

McGee says the operation is cheaper to run than SAGD because surface facilities involved in the process are smaller. Nor does the E-T apparatus require giant trucks or shovels associated with surface mining, froth treatment equipment, boilers, high-pressure steam lines, massive separation “vessels” or tailings ponds. McGee expects the technique, which also cuts water use and shaves requirements for natural gas, will be further refined through use at Poplar Creek. “We’ll have to do multiple tests to understand the reservoir response, test different cables and connections,” he says.

The trials will be aided by Total E&P Canada. The two firms struck a “technology co-operation agreement” in April that commits the Canadian arm of the French oil major to providing financial and technical support to the project’s next two phases. The testing with Total is expected to last one year and commercial production of 10,000 barrels per day could start as early as 2013.

Interest in using electric currents to draw out hard-to-reach reserves of bitumen is growing. “The emerging use of electricity has lots of history behind it, so there are probably more companies using it than admitted,” notes Mauro Cimolai, technology advisor for Laricina Energy Ltd. “But while they’re all using electricity, they fall into slightly different camps.”

His Calgary firm, although a fairly new kid on the energy block, is working hard to crack the dense Grosmont formation, where estimated reserves top 300 billion barrels. (The total is not counted in Alberta’s official reserve estimates because there is no production in the formation). Launched in 2005, Laricina has five core project developments comprising an estimated 4.6 billion barrels of recoverable bitumen. All the projects use traditional in situ production methods – except one, which uses electricity as its main energy source.

The technology, long overlooked by cost conscious companies hesitant to sink millions of dollars into field testing an uncertain bet, is getting a second look thanks mainly to high oil prices. Cimolai recalls, “With the price of oil and the price of equipment, the cost of electricity was just high enough to put this out of arm’s reach. With $100 oil or better, all of a sudden using electricity becomes more intriguing.”

Laricina has partnered with Suncor Energy Inc., Nexen Inc., and Harris Corp. to advance commercial applications of the technology through a partnership known as the Enhanced Solvent Extraction Incorporating Electromagnetic Heating (ESEIEH and pronounced “easy”) consortium.

Unlike McGee’s system, the Laricina-led venture, backed by $16.5 million from Alberta’s CCEMC, is not creating a new process. Instead the companies are just tweaking current SAGD extraction methods.

The drilling will still result in two horizontal well pairs, only the ESEIEH process will see the addition of an antenna. Instead of using natural gas to heat water and force steam into the reservoir, an electromagnetic field from the antenna is sent through the bitumen and a solvent is injected to increase heating and dilution. Cimolai says electricity has been used as a power source for so long and is so well understood that it is easier to control. The same can’t be said for steam. “With steam you pump it in and it goes where it goes by brute force, but there’s not a lot of control to where steam goes,” Cimolai says.

The ESEIEH project is being touted for its environmental, as well as its operational, benefits. “If you can go to a process that eliminates steam and water to heat the reservoir, you can eliminate greenhouse gas emissions,” says Bill MacFarlane, senior research and development advisor with Nexen. He says the project will also test the economics of the process. “How much infrastructure do PetroScan-December 2011

you need? How much are energy costs? How fast does the temperature rise? What’s the distance from the well bore? We need metrics to go into a full-scale demonstration to show it is cost [effective].”

Harris Corp. brings more than 50 years of electromagnetic experience to the partnership, including contracts designing networks and radar systems for the U.S. Department of Defense. “What I’m excited about is it’s a good model for seeing technology rapidly evolve,” MacFarlane adds. “The future of the industry in research and development will rapidly develop, not through academia, but through partnerships like this.”

With the ESEIEH project launching just last year, it’s not expected to wrap up until 2014.

Commercial use could still be 10 years away, but Cimolai is eager for that day to arrive. “The benefits are strong enough where people will drop the old techniques and will pick up this technology,” he says. “It will be like moving from the cart and horse to the automobile if we get it right.”

FOR TALLER WIND TURBINES, GENERATING POWER IS A BREEZE : NREL POSTED: 12/25/2011 01:00:00 AM MST

By Mark Jaffe, The Denver Post The breezes are blowing stronger for the wind-power industry these days — so much so that the National Renewable Energy Laboratory in Golden had to redo its wind maps in Colorado and in states across the country.

The reason isn't meteorological, it's technological as wind-turbine towers get taller and blades get longer.

"The original maps were for 50-meter towers, but the industry standard is now 80 meters," said Dennis Elliot, a principal scientist at NREL. And as the towers have grown from 164 feet to 262 feet, they have edged into the reaches where the winds are stronger and more sustained.

Under the old map, the strongest winds in Colorado — clocked at 7.4 meters to 8.4 meters a second — were in the northeast and southeast corners of the state.

At 80 meters above ground level, the wind speeds across a large portion of the Eastern Plains and Front Range vary between 8.5 meters and 10 meters a second.

"What that has done is make Colorado's good wind resource even better," Elliot said.

"In places like Indiana, the 80-meter towers and technology has meant the difference between not having an economical wind source and having one," Elliot said.

The difference in a few meters per second of wind power adds up.

The new technology combined with the steadier winds are driving down the costs of wind generation, according to economic analyses.

ACalifornia Energy Commissionanalysis estimated that a 0.5 meter increase in wind speed — raising the resource from "good" to "excellent" — would cut 1.2 cents off the cost of electricity from a new wind farm to 10.8 cents a kilowatt-hour.

That study was based on 50-meter winds and the costs of developing a wind farm in California.

In a U.S. Energy Information Administration study, the difference between a top wind resource and a poor one is more than 3 cents a kilowatt-hour, with the best resource producing wind at 8.1 cents a kilowatt-hour.

It isn't just that the taller towers and bigger blades capture more wind at 80 meters, it is that they can also turn more of the time.

Electricity from coal and gas is cheaper because the sources can run 70 percent to 90 percent of the time — this is called the capacity factor.

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The capacity factor for wind farms has been around 30 percent, according to the American Wind Energy Industry Association, a trade group.

In Colorado, for example, the wind tends to blow at night.

"We are now getting some capacity factors to 50 percent," said Matthew Kaplan, associate director of IHS Emerging Energy, a Boston- based consulting firm.

The result is that wind power has become more marketable, said Ron Lehr, Western representative for the wind energy association.

"You look at the new maps and there are opportunities for wind across the country," Lehr said.

Mark Jaffe: 303-954-1912 ormjaffe@denverpost.com Read more: For taller wind turbines, generating power is a breeze - The Denver Posthttp://www.denverpost.com/business/ci_19612999#ixzz1hoI24pMW

API BLASTS EPA REPORT ON HYDRAULIC FRACTURING Posted on December 13, 2011 at 8:48 am by Jennifer A. Dlouhy in Fracking, Natural Gas, Newsletter, Shale The oil and gas industry’s biggest trade group is blasting a government report that linked hydraulic fracturing with possible groundwater contamination in Wyoming.

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Too many questions already have been raised about the data underpinning the Environmental Protection Agency’s draft report, said the American Petroleum Institute.

Wyoming Gov. Matt Mead and state regulators have raised questions about some of the water samples drawn at EPA’s deep test wells in Pavillion, Wyo., after some of the results could not be replicated. Industry and Wyoming officials also have questioned whether the EPA may have introduced contaminants when it drilled those test wells.

“The oil and natural gas industry, Gov. Matt Mead and state agencies in Wyoming have raised numerous questions on the sampling process and lack of peer review for the EPA’s draft Pavillion groundwater report,” said Erik Milito, API’s group director for upstream and industry operations, in a statement. “The opportunity that shale energy production provides for American job creation and economic support is too important to delay with the distraction of flawed data.”

The draft report, released last week, represented the first time a federal agency had linked drinking water pollution with the hydraulic fracturing process that is key to extracting natural gas and oil from dense shale rock formations across the U.S. The technique involves blasting mixtures of water, sand and chemicals at high pressures deep underground to break up that rock and unlock the trapped hydrocarbons.

Environmentalists said the report underscored concerns they have been raising for years, by concluding that poorly constructed and cemented wells, channels in underground rock and other conditions may have allowed chemicals to enter Pavillion’s groundwater supplies.

But industry representatives have countered that the report is fundamentally flawed and only makes a hypothetical case that contamination can be pinned on fracturing, rather than a causal one. And they have stressed that the kind of drilling done at the gas field in west central Wyoming — shallow and close to the aquifer — is far different than work happening elsewhere in the U.S. The public is invited to comment on the EPA’s draft report, and the agency has pledged to subject it to a thorough peer review process. API’s Milito made clear the industry would be watching.

“The protocols being followed by the agency should ensure credible and scientifically defensible results,” he said.

SOLAR ENERGY

SOLAR POWER GAINS FOOTHOLD IN COUNTRY'S ENERGY MIX New Delhi, Dec. 13: Almost 180 megawatts of electricity you buy is now coming from solar energy sources. Of this, almost 148 megawatts were added to the country's energy mix in the last one year alone, with no additional burden on the consumer's pocket. Though power produced from solar energy sources is more expensive than conventional thermal sources, consumers need not worry.

“The impact on the end price of electricity will be minimal, may be a paise or so,” a senior official from the Ministry of New & Renewable Energy said.

The average cost of electricity at the consumer end today is in the range Rs 4.5/ unit. On how the pricing works, the official said, according to the prescribed guidelines every megawatt of solar power is bundled with four units of power produced from conventional sources. For example, the tariff fixed by the regulatory commission for solar photovoltaic is Rs 15.31/ unit. The developer sells to NTPC Vidyut Vyapar Nigam (NVVN) at a discounted rate of about Rs 8/ unit. The distribution companies then will source power at this subsidised rate as they are compensated by the Government in the form of equal amount of conventional power, the official added.

Of the total 180,000 megawatt (excluding captive power) capacity from all sources of energy, solar accounted for 183.5 megawatt in just one year. These 183.5 megawatts of solar projects commissioned have been from various programmes — from States (102 megawatts) and Central (81.5 megawatts). Gujarat is leading with 91-megawatt capacity, followed by Rajasthan 43.5 PetroScan-December 2011

megawatt. The Ministry had set a target of 200-megawatt capacity for 2012, which seems to be easily attainable, the official said.

Bundled power Meanwhile, NVVN, the trading arm of NTPC, has commenced bundled power supply — combining energy produced from solar photovoltaic with those produced from conventional thermal sources.

NVVN has been the nodal agency to source power for the projects under the Jawaharlal Nehru National Solar Mission. Dr Farooq Abdullah, Minister of New and Renewable Energy, elaborating upon the achievements under the National Solar Mission, had said that the project selection of 800megawatt through tariff discounting bidding has substantially helped in reducing the tariff.

He added that his Ministry has also initiated the process of selection of another 350 megawatt in Batch-II during 2011-12. The results of bidding of this batch have just come and further reduction in average tariff of solar power to Rs 8.77/ unit has been offered. The Minister said by March, about 400 megawatt capacity projects will be commissioned in the country.

Discoms to meet in Delhi on Dec 20 to aid policy formulation The Ministry of New and Renewable Energy is working on a special policy for roof-top solar units, Mr Tarun Kapoor, Joint Secretary, MNRE, said today.Speaking at Intersolar India, a conference of the solar industry here, and also at a press conference later, Mr Kapoor said that the government is “working on several options”. To aid policy formulation, a “brainstorming meeting” of all the electricity distribution companies (discoms) will take place in New Delhi on the 20th of this month.The discussion would revolve around why, even with a 30 per cent capital subsidy, the ‘rooftop solar' has not taken off in India.“We will come up with something very special for roof-tops,” Mr Kapoor said. Today, the economics works out very well. With 30 per cent subsidy (on the cost of equipment), the cost of generation would work out to Rs 7, he said.

Net metering He observed that ‘Net metering', where a household could both receive power from and feed into the grid and be billed only for the Net consumption, is very important for the development of rooftop solar units.Today, legally the discoms can do it, Mr Kapoor said, observing that they are perhaps not sensitised to the issue.He said that the industry is also not attuned to roof-top solar. “I have been telling them ‘please look at roof-tops',” he said, adding that the industry itself is not much aware of the potential.

Solar resource assessment Mr Kapoor said that the Government was confident that the country would have the targeted 1,100 MW of installed solar power capacity by 2013. Stressing on the need for gathering of data of solar irradiance, Mr Kapoor said that the Government has installed “51 solar stations” across the country till now. A massive programme is under way to do solar resource assessment all across India.Answering a question, he said that one of the key learnings from the phase-I of the National Solar Mission was that it was advisable to have ‘solar parks' where several developers could put up their projects. Solar parks makes the job of putting in place the transmission infrastructure easy, he noted. Another learning was the importance of scale Ford Introduces Gas-Free Focus Electric with 100+ MPGe Expected; Nearly a Third of Lineup Now Offers 40-mpg Model Posted on December 13, 2011 at 11:01 pm by PR Newswire: Energy in WAYNE, Mich., Dec. 14, 2011 /PRNewswire/ – Ford introduces gasoline-free 2012 Focus Electric, expected to be the first five-passenger electric vehicle with a 100 miles per gallon equivalent (MPGe) Nearly one-third of Ford’s vehicle lines will feature a model with 40 mpg.

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Gasoline Fuel Cell Would Boost Electric Car Range The advanced fuel cell could eliminate range anxiety and make electric cars more practical, while keeping carbon-dioxide emissions low.

By Kevin Bullis If you want to take an electric car on a long drive, you need a gas-powered generator, like the one in the Chevrolet Volt, to extend its range. The problem is that when it's running on the generator, it's no more efficient than a conventional car. In fact, it's even less efficient, because it has a heavy battery pack to lug around.

Now researchers at the University of Maryland have made a fuel cell that could provide a far more efficient alternative to a gasoline generator. Like all fuel cells, it generates electricity through a chemical reaction, rather than by burning fuel, and can be twice as efficient at generating electricity as a generator that uses combustion.

The researchers' fuel cell is a greatly improved version of a type that has a solid ceramic electrolyte, and is known as a solid-oxide fuel cell. Unlike the hydrogen fuel cells typically used in cars, solid-oxide fuel cells can run on a variety of readily available fuels, including diesel, gasoline, and natural gas. They've been used for generating power for buildings, but they've been considered impractical for use in cars because they're far too big and because they operate at very high temperatures—typically at about 900 ⁰C. By developing new electrolyte materials and changing the cell's design, the researchers made a fuel cell that is much more compact. It can produce 10 times as much power, for its size, as a conventional one, and could be smaller than a gasoline engine while producing as much power.

The researchers have also lowered the temperature at which the fuel cell operates by hundreds of degrees, which will allow them to use cheaper materials. "It's a huge difference in cost," says Eric Wachsman, director of the University of Maryland Energy Research Center, who led the research.

He says the researchers have identified simple ways to improve the power output and reduce the temperature further still, using methods that are already showing promising results it the lab. These advances could bring costs to a point that they are competitive with gasoline engines. Wachsman says he's in the early stages of starting a company to commercialize the technology.

Wachsman's fuel cells currently operate at 650 ⁰C, and his goal is to bring that down to 350 ⁰C for use in cars. Insulating the fuel cells isn't difficult since they're small—a fuel cell stack big enough to power a car would only need to be 10 centimeters on a side. High temperatures are a bigger problem because they make it necessary to use expensive, heat-resistant materials within the device, and because heating the cell to operating temperatures takes a long time. By bringing the temperatures down, Wachsman can use cheaper materials and decrease the amount of time it takes the cell to start.

Even with these advances, the fuel cell wouldn't come on instantly, and turning it on and off with every short trip in the car would cause a lot of wear and tear, reducing its lifetime. Instead, it would be paired with a battery pack, as a combustion engine is in the Volt, Wachsman says. The fuel cell could then run more steadily, serving to keep the battery topped without providing bursts of acceleration.

The researchers achieved their result largely by modifying the solid electrolyte material at the core of a solid-oxide fuel cell. In fuel cells on the market, such as one made by Bloom Energy, the electrolyte has to be made thick enough to provide structural support. But the thickness of the electrolyte limits power generation. Over the last several years, researchers have been developing designs that don't require the electrolyte to support the cell so they can make the electrolyte thinner and achieve high power output at lower temperatures. The University of Maryland researchers took this a step further by developing new multilayered electrolytes that increase the power output still more.

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The work is part of a larger U.S. Department of Energy effort, over the past decade, to make solidoxide fuel cells practical. The first fruits of that effort likely won't be fuel cells in cars—so far, Wachsman has only made relatively small fuel cells, and significant engineering work remains to be done. The first applications of solid oxide fuels in vehicles may be on long-haul trucks with sleeper cabs.

Equipment suppliers such as Delphi and Cummins are developing fuel cells that can power the air conditioners, TVs, and microwaves inside the cabs, potentially cutting fuel consumption by 85 percent compared to idling the truck's engine. The Delphi system also uses a design that allows for a thinner electrolyte, but it operates at higher temperatures than Wachsman's fuel cell. The fuel cell could be turned on Monday, and left to run at low rates all week and still get the 85 percent reduction. Delphi has built a prototype and plans to demonstrate its system on a truck next year.

Copyright Technology Review 2011.

PetroScan-December 2011

UPDATE: BP WARNS OF VALVE SNAG AT TEXAS CITY REFINERY (Adds comment on plant operations in third paragraph.)

HOUSTON -(Dow Jones)- BP PLC (BP, BP.LN) reported emissions at its 406,570- barrel-per-day Texas City, Texas, refinery, due to problems with a valve, the company said in a report to the National Response Center.

The filing said hydrogen sulfide was released because of a snag early Wednesday and that "the valve was closed."

A person familiar with operations at the plant said the incident resulted in a small leak of emissions that didn't affect operations and that the problem was fixed.

R&D SPENDING CAN'T STAGNATE AT LOW LEVELS, SAYS MANMOHAN PTI. Prime Minister Manmohan Singh at the inaugural function of 99th Indian Science Congress at KIIT University in Bhubaneswar on Tuesday. He said the aim should be to increase the total R&D spending as a percentage of the GDP to two per cent by the end of the 12th Plan period. Photo: PTI Research should find ‘frugal' solutions to food, energy and water security problems Expressing concern that the expenditure on research and development in India has been “too low and stagnant,” Prime Minister Manmohan Singh on Tuesday called upon industry to increase its contribution and stressed the need for enhanced public-private partnership (PPP) in science and technology. “It is in some way ironic that GE [General Electric] and Motorola have created worldclass technology hubs in India, while our own industry has not done so, except perhaps in the pharmaceutical sector. We need to look at ways and means of incentivising private R&D investment.”

As publicly funded R&D was now “skewed” in favour of fundamental research, it would be easier to attract industrial funds to applied research. “A set of principles should be formulated to push such funding and to drive PPPs in R&D,” Dr. Singh said inaugurating the 99th annual session of the Indian Science Congress here. “We must aim to increase the total R&D spending as a percentage of GDP to 2 per cent by the end of XII Plan [period] from the current level of 0.9 per cent. This can be achieved only if industry, which contributes about one-third of the total R&D expenditure today, increases its contribution significantly. I believe that public sector undertakings, especially in the energy sector, should play a major role in this expansion.'' Over the past few decades, India's relative position in the world of science had been “declining” and it had been overtaken by countries like China. “Things are changing [for the better], but we cannot be satisfied with what has been achieved.”

“Preoccupied with rich” The Prime Minister urged that scientific output be made more relevant to the needs of the country and that traditional systems of knowledge be explored and rejuvenated. “It is said that science is often pre-occupied with problems of the rich, ignoring the enormous and in many ways more challenging problems of the poor,” he said. “Research should be directed towards providing `frugal' solutions to our problems of providing food, energy and water security. Science should help us understand how to give practical meaning to the concept of sustainable development and green growth. Science should help us shift our mindsets from the allocation of resources to their efficient use. Technology and process engineering should help us reach the benefits of development to those who most need it.”

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Referring to a recent study which undertook a survey of about 2,000 women scientists with a PhD degree and showed that 60 per cent of them were unemployed, mainly for lack of job opportunities, he called for transparency in selection procedures in scientific institutions, with proper gender audits. The government, he said, was examining a proposal to build national capacity and capability in supercomputing by the Bangalore-based Indian Institute of Science at a cost of Rs. 5,000 crore and considering establishing a neutrino observatory in Tamil Nadu's Theni district on an investment of Rs. 1,350 crore.

For women scientists In addition, the Department of Science and Technology was formulating a scheme, “Disha,” which would help women scientists relocate themselves to other cities. The department would create 1,000 contractual positions tenable in publicly funded institutions. A fellowship matching the total emoluments of an in-service S&T professional would be provided to a woman scientist when she moved from one place to another. Union Science and Technology Minister Vilasrao Deshmukh said the government would soon come out with a new policy for S&T and innovation. It would cover both a policy for science and a science policy for the people, and address the problem of the R&D sector functioning in separate compartments.

EIA: REFINERS SHOULD EXPECT TRIPLE-DIGIT CRUDE THROUGH 2012 November 17, 2011, Volume: 3, Issue: 22 The U.S. Energy Information Administration released its November edition of the Short-Term Energy Outlook (STEO) report with expectations for refinery crude-acquisition costs to remain pegged in the triple-digit range through 2012 because of demand growth and supply uncertainties.

“EIA expects the U.S. average refiner acquisition cost of crude oil to remain relatively flat, averaging about $100 per barrel in 2011 and 2012,” wrote the EIA in its report released November 8.

On the demand side, the STEO noted expectations that world crude oil and liquid fuels consumption will grow over 2012. The current STEO expectation for 2012 global demand stands at 89.6 million barrels per day (b/d). This rate of consumption outpaces the already record-high level of 88.2 million b/d in 2011 and the 87.1 million b/d mark reached the year earlier in 2010.

Restrictions and risk on the supply side are also affecting oil prices. Upward price pressure is still in the market “because of supply uncertainty resulting from ongoing unrest in the oil-producing regions of the Middle East and North Africa,” according to theSTEO. However, the STEO relayed that there may be downward price pressure if Libya is able to ramp up oil production and exports sooner than anticipated.

At the same time, downside demand risks continue as fears persist about weakening global economic growth, contagion effects of the debt crisis in the European Union, and other fiscal issues facing national governments.

“Given expected rates of global oil consumption growth, the engine for which will be emerging markets outside of the Organization for Economic Cooperation and Development (OECD), a combination of increased oil output from members of the Organization of the Petroleum Exporting Countries (OPEC) and inventory withdrawals will need to supplement non-OPEC supply growth in order for the oil market to balance at the prices projected,” the authors of the STEO synthesized.

Furthermore, the STEO projected that “The forecasted West Texas Intermediate (WTI) benchmark crude oil should narrow from its third-quarter 2011 value of about $11 per barrel [/bbl] below the U.S. refiner acquisition cost of crude oil to $8/bbl by the fourth quarter of 2012.

The spread will narrow, according to the STEO, “as rail and truck capacity is added to the region.” – Greg Haas PetroScan-December 2011

CHINA’S VENEZUELAN HEAVY CRUDE DEMAND COULD SOON INCREASE 20FOLD Oil exports from Venezuela to China are expected to have risen 20-fold since 1999, according to a November 23 Platts report citing a key Chinese official.

Zhang Xioqiang, vice minister of China’s National Development and Reform Commission, reportedly said that China imported 1.2 million tonnes per year (mtpy) of Venezuelan crude in 1999 – which had grown to 20 mtpy by the end of 2010 – and is expected to reach 24 mtpy in the near future. That’s a flow rate of 480,000 barrels per day (b/d).

Zhang was reportedly attending the 10th Venezuela-China Joint Commission held in the offices of Venezuela’s state company, PdVSA. According to Platts, Zhang asked Venezuela to speed up projects to ramp oil production.

“Energy cooperation is a priority,” he was quoted as saying. “A long-term alliance is indispensable for [China] … I think it is necessary to continue increasing the oil business and accelerating joint development of upstream oil blocks and it is urgent to continue working to formalize the inauguration of a refinery in our country.”

During the discussions, Venezuelan energy minister Rafael Ramirez reportedly said that China “is the second-largest economy in the world and Venezuela possesses [one of the] largest crude reserves. We will give them all the oil that they need for their development and we will obtain all their experience through technology transfer.”

That is not just diplomacy talking. The countries are in numerous joint ventures covering financing and trade related to both upstream and downstream operations.

The report further noted that PdVSA and the CNPC (Chinese National Petroleum Corp.) inked a 2007 energy agreement covering the production and upgrade of 800,000 b/d of heavy- and extraheavy Venezuelan crude and its subsequent processing in three grassroots refineries in China.

In August, PetroChina agreed with PdVSA to build a grassroots heavy crude refinery in Guangdong province, according to the report.

During the last four years, Zhang said that China has extended US$30 billion in loans to Venezuela – augmented recently by a US$4-billion line of credit with China which will be repaid in oil supplies, according to Platts.

The U.S. remains highly leveraged to heavy oil production from Venezuela as well. In July 2011 – the last month in which fully analyzed data was available – the U.S. imported more than 936,000 b/d of heavy crude oil from Venezuela.

China’s appetite and strategic arrangements may soon displace the U.S. as Venezuela’s largest heavy crude oil market place.

Should any supply interruption arise in Venezuela because of political or regime stability, drilling declines or waterborne supply difficulties, the U.S. may be in for a rude heavy oil price shock as a result of the rise of contractual Chinese demand for Venezuelan crudes.

The U.S. has not one drop of heavy oil in storage at the U.S. Strategic Petroleum Reserve, which is comprised solely of more than 700 million barrels of light, sweet crude.

The U.S. also relies on declining Mexican heavy oil production (877,000 b/d in July 2011) also delivered waterborne, and on Canadian heavy crude (1,363 thousand b/d) delivered primarily by more-secure pipeline routes from Alberta’s oil sands-producing region.

And U.S. refineries that are equipped to run heavy oil could not operate optimally and produce at normal rates in the event of any heavy oil shortage – and that would mean higher prices at the pump for U.S. consumers.

Increased pipeline flows of Canadian heavy oil were blocked by the Obama administration on November 10 when the President decided to delay any politically-charged permit decision for or PetroScan-December 2011

against TransCanada’s proposed Keystone XL pipeline expansion project past his 2012 re-election bid.

TransCanada is working to reroute a portion of the pipeline through less-sensitive area in Nebraska with the hopes that this may win state and federal approval at an undetermined future date.

But Canadian officials are now talking openly about the need to arrange for alternative West Coast send-out facilities to export Alberta’s oil riches to nations beyond the U.S., including certainly China.

Chinese oil companies have already taken stakes in not only production and upgrading projects in Canada, but also early stakes in westward pipeline projects such as that being developed by Enbridge.

The U.S. State Department has been on record saying that the review of TransCanada’s new Keystone XL reroute would take from 12 to 18 months.

But then again, that same State Department said the permit for the originally-approved Keystone XL would be issued by yearend 2011. That has not happened.

With or without any heavy oil supply interruption in the coming years, it remains to be seen how well Canada and Venezuela may balance both America and China’s appetite for heavy oil given the constraints of politics, finances and infrastructure. – Greg Haas

PETROPLUS REPORTS LOSSES FOR 3Q 2011 Switzerland-based Petroplus Holdings AG November 2 reported an estimated clean net loss of US$95 million for the three months ended September 30, compared with an estimated clean net loss of $70 million for the comparable year-ago period.

Commenting on the results, Jean-Paul Vettier, Petroplus’ CEO, said: “The third quarter was very difficult. Although European refining margins initially showed some improvement over the weak second quarter conditions, there was a severe deterioration resulting in negative margins in September as commodity prices plunged amid increasing concerns about the European debt crisis.

“Crude differentials also worsened due to the negative impact of the lost Libyan crude supply, seasonal maintenance in the North Sea and tight supply of sour barrels, especially Urals.

Operationally, throughputs increased compared to the previous quarter but were capped by economics due to the extremely low margin environment in September.

“We continue to make good progress on our Three- Year Improvement Plan, with notable improvements in operational reliability, gross margin capture and energy efficiency,” Vettier said.

“As evidence of the benefits that the program is producing, we have already generated, in the first nine months of 2011, [cleaner] EBITDA [earnings before interest taxes, depreciation and amortization] than in all of 2009, despite weaker market conditions.

“We remain focused on continuing to improve the competitiveness of our portfolio through the 3YIP and other changes such as the recently proposed reconfiguration of the Petit Couronne refinery,” he added.

“Margins have remained weak during the fourth quarter to date, but have recovered from the extreme lows in September. As Libyan crude barrels have begun to return to the market, premiums for light-sweet crudes are starting to become more favorable for us, and we have also seen supportive signs from the middle distillate market,” Vettier continued. “The current low margin environment has also increased the pace of the industry’s capacity rationalization process, with several new announcements in the past months totaling nearly one million barrels per day on the U.S. East Coast and in Europe. This should be supportive to margins going forward.”

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UNITED STATES SHALE Bakken / Three Forks Shale Play The Bakken/Three Forks Shale play system is located in the Williston Basin in the northeastern part of Montana and northwestern North Dakota.

During 2010, rig activity increased almost linearly, with the monthly rig count growing from 70 to 150 units. This trend continued during the first half of 2011 as well. In the short run, we expect the rig count to steadily increase until 2013, reaching averages of 170, 200 and 210 rigs in 2011, 2012 and 2013, respectively, followed by an 8% decline beginning in 2014. While activity in the northern part of Mountrail County will continue steadily, Bakken’s incremental growth will be driven by activity in the western area of North Dakota (Figure 1). Besides being less developed, this western area suits long lateral (30+ stages) and smart drilling. In this scenario, NASQ estimates 2,950 million barrels of oil equivalent (boe) best estimate reserves, plus 1,800 million boe of additional reserves.

Barnett Shale Play The Barnett Shale play, the largest onshore gas field in the United States, covering 3.2 million acres and at least 18 counties, accounted for 28% of Texas’s 2010 production. As of Nov. 29, 2010, a total of 241 operators in the field were working on 3,000 permitted locations with more than 15,000 historic and active wells.

Eagle Ford Shale Play In the U.S., the Eagle Ford Shale play extends across 400 miles, from the Mexican border to eastern Texas. The formation deepens, moving from northwest (4,000 ft) to southeast (14,000 ft).

The source rock has different maturity levels, with three distinct windows for oil, condensate and dry gas, corresponding to the shallow, intermediate and deep part of the play, respectively. Since the first well was drilled by Petrohawk in 2008, activity has increased exponentially. By 2009, there were already 40 producing oil leases and 67 producing gas wells. In 2010, producing oil leases rose to 72, and producing gas wells to 152.

Fayetteville Shale Play The Fayetteville Shale play is of Mississippian age and lies in the eastern part of the Arkoma Basin, primarily in Arkansas, covering around 3.2 million acres. After Barnett, Fayetteville is the oldest

UNITED STATES SHALE major shale play and is also a geological equivalent of the former. According to the Arkansas Oil and Gas Commission (AOGC), the following nine counties saw Fayetteville production in 2010, in descending production order: Van Buren, White, Conway, Cleburne, Faulkner, Independence, Pope, Jackson and Franklin. The latter four counties accounted for less than 2% of total 2010 production. Fayetteville is targeted at depths between 1,500 and 6,500 feet with thickness varying from 50 to 500 feet. The U.S. Department of Energy stated in 2009 that Fayetteville had 41.6 Tcfe of recoverable gas resources.

Granite Wash Tight Sand Play The Granite Wash Tight Sand play represents a set of stacked formations of mainly Pennsylvanian age geology spanning across the Texas Panhandle into western Oklahoma in the Anadarko Basin.

The name comes from the reservoir rocks that were eroded from granites and then re-deposited.

Depending on the definition, the play covers between 2 million to 3.5 million acres, with production PetroScan-December 2011

historically from more than 10 counties. Generally tight with low permeability, the play requires hydraulic fracturing to achieve economically viable wells. Exploration and development efforts target pay zones at vertical depths between 8,000 and 15,000 feet. The gross pay can be between 1,500 and 3,000 feet, with net pay per formation usually around 50 to 150 feet. By its nature, Granite Wash is a multi-stacked play with the different target formations having varying properties, making it more heterogeneous than other unconventional plays.

Haynesville Shale Play The Haynesville Shale play, of Upper Jurassic age, straddles the border between northwestern Louisiana and eastern Texas, covering around 5.8 million acres in at least 18 parishes/counties.

Haynesville is the deepest play among the major shale plays, with prospective zones occurring between 10,000 and 14,000 feet. Compared with other plays, it also appears to have higher porosity, on average. Together with Marcellus, Haynesville is deemed by the U.S. Department of Energy to be the largest shale play, with recoverable gas resources of around 250 Tcf. Marcellus Shale Play The Marcellus Shale play is a large formation of Devonian age that spans several states in the northeastern United States. It is by far the country’s largest natural gas shale play – both geographically and from a resource perspective. The play covers roughly 60 million acres within the Appalachian Basin. Although some companies size the play at about 15 million acres, not every part is likely to see rigorous gas development. The main part of the play lies in Pennsylvania and West Virginia, with some areas in Ohio and New York, in addition to minor extensions into other states. The formation appears to be targeted between 2,000 and 8,000 feet. Recoverable gas resource estimates vary between 260 Tcf and 490 Tcf. Parts of Marcellus are sandwiched between the Utica Shale below and the Upper Devonian Shale above, potentially creating a triple stacked play formation. In this report, Marcellus is treated as a separate play.

Niobrara Shale Play The Niobrara Shale formation is part of the seaway that covered the Rocky Mountains during the Cretaceous period. It is present in Colorado, Nebraska and Wyoming in the Denver-Julesburg (DJ) Basin and Powder River (PR) Basin. The Niobrara designation is used as an umbrella which also includes the Niobrara-Mowry Shale (PR), Niobrara formation (DJ and North Park basin), Hillard Baxter Mancos-Niobrara Shale (Green River Basin), Mancos Shale (Uinta Basin), Lewis Shale (San Juan) and Pierre-Niobrara (Ranton Basin). The formation is interesting because it has several key characteristics in common with other successful shale oil plays such as Eagle Ford and Bakken/Three Forks. The Niobrara is the source rock for the formation under which it lies. It is also organic rich and organized in alternating layers of shale and chalk. For the rest of the report the focus will be on activity in the DJ Basin, PR Basin and, briefly, southwestern Wyoming. Although the region has a long production history, especially for the gassy parts such as the Wattenberg field and other areas where shallow biogenic gas exists, only recent Niobrara developments using unconventional techniques will be covered.

Permian Tight Oil Play The Permian Basin represents one of the oldest oil provinces in the world, with more than 30 billion barrels of oil produced from the region since commercial exploration commenced back in the 1920s. Multiple sub-basins and formations have been targeted in the Permian, with renewed company activity in recent years focusing on deeper and/or tighter formations. In this report, the goal is to identify the “newer” and more unconventional plays. For this quarter, two unconventional PetroScan-December 2011

areas have been studied: the Wolfberry play in the Midland sub-basin and the Avalon/Bone Spring plays in the Delaware sub-basin.

Utica Shale Play The Utica Shale play is a geological system of Ordovician age underlying multiple states in the northeast. In the Appalachian Basin, it is present in Pennsylvania, Ohio, West Virginia and New York, always a few thousand feet below the more well-known Marcellus Shale. Partially, it also underlies Kentucky, Maryland, Tennessee, Virginia, Michigan and Indiana (the last two in the Michigan Basin) in the United States, and Ontario and Quebec in Canada. The Utica Formation corresponds to a black shale source rock rich in organic content. In western Ohio, the Utica system corresponds with the group of Utica and Point Pleasant formations, while moving from Ohio to West Virginia and extending all the way to eastern Pennsylvania; it’s also sometimes referred to as Antes shale.

Woodford Shale Play The Woodford shale play consists of a combination of three main areas in Oklahoma: Anadarko, Arkoma and Ardmore (Southern Oklahoma), the names corresponding to basins covering the Devonian Woodford shale formation. In general, the formation is quite thin (50-100 feet), with some exceptional sweet spots of 200 feet. The play is a typical horizontal play, with more than 1,200 horizontal wells drilled as of April 2011.

CANADA SHALE Cardium Shale Play The Cardium Formation of late Cretaceous age is comprised of a complex sequence of conglomerates, sandstones and shale. These are marine clastic sediments molded by wave, tidal and deep-ocean currents. The play is comprised of a clastic wedge deposited eastward of two lobes: Nordegg in the north and Highwood in the south of the play. The Cardium Formation extends from the northwest of Edson down to the northwest of Calgary in Alberta.

Horn River Shale Play The Horn River Basin, located in northeastern British Columbia between Fort Nelson and the province borders of the Northwest Territories and Alberta, covers 3 million acres. Horn River shale, of Middle-Devonian age, contains multi-stacked quartz and shale intervals, starting with Muskwa, Otter Park, Horn River and Evie in increasing depth order.

Montney Tight Sand Play The Montney Tight Sand play covers 30 million acres and consists of multi-stacked conventional, tight sands and black shale. The play extends across British Columbia and Alberta provinces; the acreage is split almost equally between provinces. The distal shelf area comprises 5 million acres of multi-stacked zones (submarine fans, shelf siltstones and fine-grained sandstone) under British Columbia. As of May 2011, the 10 largest landholders in British Columbia took positions covering 3.6 million acres along Montney distal shelf, extending from the province border to the northwest of Fort St. John. This report concentrates on industry activity on the unconventional deposits located in the British Columbia part of the play.

ALTERNATIVE & RENEWABLE ENERGY NEWS: Texas will require companies to disclose fracking fluids starting Feb. 1 PetroScan-December 2011

Posted on December 13, 2011 at 12:49 pm by Vicki Vaughan in Fracking, Natural Gas, Shale

Dust permeates the air at a Chesapeake Energy Co. hydraulic fracturing operation at a well site near Carrizo Springs, Texas. (John Davenport/San Antonio Express News) The Texas Railroad Commission approved a rule Tuesday requiring oil and natural gas drillers to disclose most of the chemicals they use in hydraulic fracturing.

The rules also will require companies to disclose the amount of water used in hydraulic fracturing, or fracking, a process in which chemicals, water and sand are pumped at high pressure into underground rock formations to aid the flow of oil and gas to the surface.

Drillers will be required to disclose fracking chemicals and water volumes on a website, www.FracFocus.org.

Drilling companies, however, don’t have to list chemicals deemed trade secrets unless the Texas attorney general or a court determines otherwise, the commission said in a statement.

Landowners also can seek to have “trade secret” chemicals disclosed, the new rule says.

The new rule will be required for wells permitted on or after Feb. 1.

“Texans can be assured they will know more about what is going into the ground for fracturing than what goes into a can of soda,” Railroad Commission Chairwoman Elizabeth Ames Jones said.

Environmental groups praised the measure.

“We’re especially pleased with how quickly the commission has moved to adopt these rules,” said Scott Anderson, senior policy adviser in the energy program at the Environmental Defense Fund.

“The legislation didn’t require the Railroad Commission to be this far along until 2013. They moved much more quickly than they were required to by the legislation.”

In hearings on the pending rule, one environmental group recommended that the website www.FracFocus.org be searchable.

The commission agreed, and said it will work to improve the site.

“We commended them for that,” Anderson said.

David Weinberg, executive director of the Texas League of Conservation Voters, called the new rule “a critical step.”

“We still need to do a better job of drilling safety and making sure that we’re capturing as much emissions coming out of wellheads and other places in the transmission system. But this is a very important step that will allow scientists and public health officials to know what’s going into wells.”

The new rule drew industry support, perhaps to ease Texans’ concerns. As drilling has expanded, including in the Eagle Ford Shale of South Texas, landowners have voiced concerns about the effect of fracking chemicals on drinking water and the quantity of water used in fracking.

Also Tuesday, Colorado approved fracking disclosure rules Tuesday that are more stringent than Texas’ rule.

Colorado will require energy companies to disclose the concentrations of all chemicals in hydraulic fracturing.

In Texas, drillers have to disclose concentrations only for chemicals that the federal government judges to be hazardous in the workplace.

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Also, if Colorado drillers claim a trade secret, they still must disclose the ingredient’s chemical family. In emergencies, companies would have to tell health care workers what those secret ingredients were.

Colorado’s rules take effect in April.

The Associated Press

IN SOLAR POWER, INDIA BEGINS LIVING UP TO ITS OWN AMBITIONS

By VIKAS BAJAJ KHADODA, India — Solar power is a clean energy source. But in this arid part of northwest India it can also be a dusty one.

Every five days or so, in a marriage of low and high tech, field hands with long-handled dust mops wipe down each of the 36,000 solar panels at a 63-acre installation operated by Azure Power. The site is one of the biggest examples of India’s ambitious plan to use solar energy to help modernize its notoriously underpowered national electricity grid, and reduce its dependence on coal-fired power plants.

Azure Power has a contract to provide solar-generated electricity to a state-government electric utility. Inderpreet Wadhwa, Azure’s chief executive, predicted that within a few years solar power would be competitive in price with India’s conventionally generated electricity.

“The efficiency of solar technology will continue to increase, and with the increasing demand in solar energy, cost will continue to decrease,” Mr. Wadhwa said.

Two years ago, Indian policy makers said that by the year 2020 they would drastically increase the nation’s use of solar power from virtually nothing to 20,000 megawatts — enough electricity to power the equivalent of up to 3.3 million modern American homes during daylight hours when the panels are at their most productive. Many analysts said it could not be done. But, now the doubters are taking back their words.

Dozens of developers like Azure, because of aggressive government subsidies and a large drop in the global price of solar panels, are covering India’s northwestern plains — including this village of 2,000 people — with gleaming solar panels. So far, India uses only about 140 megawatts, including 10 megawatts used by the Azure installation, which can provide enough power to serve a town of 50,000 people, according to the company Every five days or so, workers wipe down each of the 36,000 solar panels at the Azure Solar Plant in Khadoda, India . But analysts say that the national 20,000 megawatt goal is achievable and that India could reach those numbers even a few years before 2020.

“Prices came down and suddenly things were possible that didn’t seem possible,” said Tobias Engelmeier, managing director of Bridge to India, a research and consulting firm based in New Delhi. Chinese manufacturers like Suntech Power and Yingli Green Energy helped drive the drop in solar panel costs. The firms increased production of the panels and cut costs this year by about 30 percent to 40 percent, to less than $1 a watt.

Developers of solar farms in India, however, have shown a preference for the more advanced, socalled thin-film solar cells offered by suppliers in the United States, Taiwan and Europe. The leading American provider to India is First Solar, based in Tempe, Ariz.

India does not have a large solar manufacturing industry, but is trying to develop one and China is showing a new interest in India’s growing demand. China’s Suntech Power sold the panels used at the Azure installation, which opened in June.

Subsidies have helped installations like the Azure Solar Plant thrive in north-western India.

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Industry executives credit government policies with India’s solar boom, unusual praise because businesses usually deride Indian regulations as Kafkaesque.

Over the last decade, India has opened the state-dominated power-generating industry to private players, while leaving distribution and rate-setting largely in government hands. European countries heavily subsidize solar power by agreeing to buy it for decades at a time, but the subsidies in India are lower and solar operators are forced into to greater competition, helping push down costs.

This month, the government held its second auction to determine the price at which its state-owned power trading company — NTPC Vidyut Vyapar Nigam — would buy solar-generated electricity for the national grid. The average winning bid was 8.77 rupees (16.5 cents) per kilowatt hour.

That is about twice the price of coal-generated power, but it was about 27 percent lower than the winning bids at the auction held a year ago. Germany, the world’s biggest solar-power user, pays about 17.94 euro cents (23 American cents) per kilowatt hour.

India still significantly lags behind European countries in the use of solar. Germany, for example, had 17,000 megawatts of solar power capacity at the end of 2010. But India, which gets more than 300 days of sunlight a year, is a more suitable place to generate solar power. And being behind is now benefiting India, as panel prices plummet, enabling it to spend far less to set up solar farms than countries that pioneered the technology.

In its solar power auctions, moreover, NTPC is not creating open-ended contracts. The last auction, for example, was for a total of only 350 megawatts, which will cap the government’s costs. The assumption is that the price of solar power will continue to decline, eventually approaching the cost of electricity generated through conventional methods.

Most Indian power plants are fueled by coal and generate electricity at about 4 rupees (7.5 cents) per kilowatt hour — less than half of solar’s cost now. In this month’s auction, the recent winning bids were comparable to what India’s industrial and commercial users pay for electricity — from 8 to 10 rupees. And solar’s costs are competitive with power plants and back-up generators that burn petroleum-based fuels, whose electricity costs about 10 rupees per kilowatt hour.

“At least during daytime, photovoltaic panels will compete with oil-generated electricity more than anything else” in India, said Cédric Philibert, a senior analyst at the International Energy Agency in Paris. “This comparison is becoming better and better every month.”

In addition to the federal government, several of India’s states like Gujarat, where Khadoda is located, are also buying power at subsidized rates from solar companies like Azure Power.

Analysts do not expect India’s solar rollout to be problem free. They say some developers have probably bid too aggressively in the federal auctions and may not be able to build their plants fast or cheap enough to survive. Consequently, or because their bids were speculative, some developers are trying to sell their government power agreements to third parties, analysts say, even though such flipping is against the auction rules.

Mr. Wadhwa, of Azure Power, said a solar industry shakeout in India was almost inevitable.

“Initially, a lot of new players enter the sector,” he said, “and then the market settles with a few players who have a long-term” commitment to the industry.

Neha Thirani contributed research.

This article has been revised to reflect the following correction: Correction: December 31, 2011 An article on Thursday about the growth of solar power in India overstated the number of American homes that could have their needs met by 20,000 megawatts of solar panels, the amount that India is planning to install by 2020. Those panels would produce an amount of energy equal to the consumption of about 3.3 million homes, not 20 million.

PetroScan-December 2011

CHINA'S SHALE GAS DEVELOPMENT TAKES FIRST STEPS

by Allen Good | 09 Dec 11 http://torontostar.morningstar.ca/globalhome/industry/news.asp?articleid=449633 Earlier this week, PetroChina PTR reported it had drilled about 20 shale gas wells in the southern Sichuan province. According to a PetroChina official, the wells produced about 10,000 cubic meters of gas per day (353 mcf/d), which would be relatively small compared with shale gas wells found in the U.S. However, given the small number of wells, different geology, and the lack of technological expertise among Chinese firms, we hesitate to draw too many conclusions from these early results.

Separately, CNPC (PetroChina's state-owned parent company) announced it had drilled two natural gas shale wells with good results. It is unclear whether these wells were drilled within the partnership the company has with Royal Dutch Shell RDS.A to explore shale gas in China, though other reports have Shell completing two vertical shale gas wells. Shell has yet to comment on any activity or results from its operations in China. We expect similar announcements and news items to surface more frequently in the future as development ramps up in China.

Given the anticipated domestic energy needs and potentially vast resources within the country (the largest in the world at 1.275 Tcf by EIA estimates, compared with 862 Tcf in the U.S.), the government will likely continue to encourage aggressive exploration and development by its stateowned firms and more experienced international peers. However, given the technical deficit among domestic firms, restricted access for international E&Ps, and the absence of pipeline infrastructure within the country, initial development may be slow-going. That being said, China is currently counting on high-cost LNG imports to meet much of its future gas demand. As a result, we think any initial success in shale gas drilling will likely be met with much greater government investment to quickly ramp up production.

NZ CO LANZATECH TO HELP IOC, JSPL SET UP BIO JET FUEL PLANT MUMBAI: The New Zealand-based renewable energy company LanzaTech is in talks with its partners here - IndianOil and Jindal Steel & Power - to help them set up plant to produce commercial bio jet fuel from ethanol, a top company official has said. As a first step, LanzaTech will open an office in the country in the first half of 2012 as part of its plan to expand its operations here, LanzaTech vice-president for business development for Asia Pacific Prabhakar Nair said.

IndianOil and Jindal Steel & Power (JSPL) are already in discussions for collaborating to accelerate deployment of LanzaTech's technology to produce fuel ethanol from industrial off-gases , he said.

"We have done our best to bring these partners (Jindal and IOC) together . While Jindal Steel & Power has the off-gases , IndianOil has facilities to make, store and supply aviation fuel. We expect them to take a decision in a year and a half to set up a demonstration scale plant," Nair said.

However, he said, the proposed plan only includes technology sharing and not any investment in the plant and machinery . Nair also noted that British airline Virgin Atlantic has already committed that it will begin trials using renewable bio jet fuel on its Shanghai- New Delhi-London Heathrow route within two to three years. It may be recalled that Virgin Atlantic had announced a partnership with LanzaTech to conduct such trials last October and its chairman Richard Branson had even visited the New Zealand facilities, where the technology was demonstrated to him.

Besides, the European Union will begin allocating carbon emission quotas to airlines operating flights to and from the Union from today and Virgin Atlantic believes this development will take it well beyond its pledge of a 30 percent carbon cut per passenger km by 2020. "Globally , the PetroScan-December 2011

aviation industry's current daily demand is around 5 million barrels of aviation fuel. Even if 10% of this is substituted with LanzaTech's aviation bio jet fuel, it will be a big market for us," Nair said.

LanzaTech has the technology to convert carbon monoxide, syngas as well as steel mill off-gases into ethanol and is in talks with all major steel producers in India, including JSPL, Posco and SAIL, he said. "China's demo scale plant at Bao Steel Shanghai is scheduled for the first quarter of 2012, which will produce 1 lakh gallons of ethanol annually. We expect JSPL and most likely IOC to begin working on a similar plant here. We hope Virgin's commitment to use bio jet fuel for trials is likely to encourage our partners," he said.

As recently as last December 5, the US awarded $7.7 million in Federal Aviation Administration contracts to eight biofuel-related companies to develop 'dropin' jet fuels that can be used without changing engine systems or airport fueling infrastructure, out of which deals worth $3 million were bagged by Lanza-Tech alone. This amount is over-and-above the funds allotted last June by the US Defence Advanced Research Projects Agency for research on eco-friendly and low cost jet fuel from sources like rich carbon monoxide, Nair said.

UPDATE: EXXON SAYS NATURAL GAS WILL SUPPORT ENERGY DEMAND GROWTH Posted on December 8, 2011 at 9:19 am by Simone Sebastian in Energy dem1,795 Exxon natural gas wells sit off the coast of Dauphin Island, Ala., on Wednesday, Dec. 20, 2000.

Exxon operates 13 wells off the Alabama coast. (AP Photo/Dave MartThe world’s energy demand will grow 30 percent by 2040, but coal’s reign in electricity generation will decline in favor of cleaner-burning natural gas, Exxon Mobil said in its annual energy outlook.Developing economies in Latin America, China, India and Africa, will largely drive the surging global demand, said Bill Colton, ExxonMobil vice present of Corporate Strategic Planning. More energy will be needed to power their growing commercial and industrial sectors and their citizen’s improved standards of living.Electricity remains the largest draw on energy and rapid improvements in the energy efficiency of buildings and appliances won’t be enough to curb demand, Colton said in a press conference Thursday morning.

“In the near-term, prospects for the global economy might look uncertain, but over the next 30 years, the world will continue to experience economic growth,” he said. “As the world population expands and living standards improve, the world will need more energy, even as we learn to use energy more efficiently.”

In 2040, coal, oil and natural gas will supply nearly 80 percent of the world’s energy, the report noted. Renewable fuels, primarily wind, will be the fastest growing energy sources, but they will remain a minor slice of the global energy supply, increasing from 1 percent today to 4 percent in 2040, the report projects.

Most of the world’s growing energy demands will be for electricity, according to the report, which will gradually replace coal-based generation with natural gas, a result of a global push to reduce carbon emissions.

“After 2030, we see global coal demand declining for the first time in modern history,” Colton said.

The report also expects hybrid vehicles to have a significant impact on energy use. By 2040, hybrids will account for 40 percent of all light-duty vehicles on the road, the report projects.

Among this year’s other findings: PetroScan-December 2011

Demand for oil and other liquid fuels will rise by nearly 30 percent, and most of that jump will be spurred by transportation needs. A growing share of the supplies used to meet liquid-fuel demand will come from deepwater, oil sands, tight oil, natural gas liquids and biofuels.

Natural gas will continue to be the fastest-growing major fuel, and demand will increase by about 60 percent from 2010 to 2040.

Gas from shale and other unconventional rock formations will account for 30 percent of global gas production by 2040.

Demand in the United States and other fully developed economies will remain relatively constant, while global demand growth will be led by China and other countries not part of the Organization for Economic Cooperation and Development (OECD).

Global energy demand is expected to rise by about 30 percent from 2010 to 2040. Without projected gains in energy efficiency, demand growth would be about four time that amount.

Advanced hybrid vehicles will account for 50 percent of the cars people will drive in 2040, compared to about 1 percent today.

Demand for energy for commercial transportation — trucks, airplanes, ships and trains — will rise by more than 70 percent.

Demand growth would be more than four times the projected 30 percent without expected gains in efficiency.

PEREGRINO PRODUCING HEAVY OIL FOR STATOIL OFFSHORE BRAZIL Published: Dec 1, 2011, Nick Terdre Contributing EditorThe achievement of first oil from the Peregrino heavy-oil field in Brazil in April marked a major milestone for Statoil, the operator. It is the first field to be brought onstream by the company in Brazil and its largest operated field outside Norway. And by bringing Peregrino's 14ºAPI crude to the surface, Statoil provided convincing testimony of its heavy oil expertise.

The Peregrino layout: Two wellhead platforms tied back to an FPSO. (Image courtesy of Statoil) Lying in a water depth of 100-120 m (330 to 390 ft) in the Campos basin, some 85 km (53 mi) from shore, Peregrino was developed with two wellhead/drilling platforms which deliver production to an FPSO for processing and storage. First oil was achieved through a single well, but within a year production is due to ramp up to a peak of some 100,000 b/d.

The FPSO, Maersk Peregrino, is supplied and operated under a 15-year lease, with options for a further 15 years, by Maersk FPSOs. Converted from a newbuild VLCC tanker at the Keppel FELS yard in Singapore, it has 1.6 MMbbl storage capacity, production capacity of 100,000 b/d of oil and 7.3 MMcf/d of gas, and liquids-handling capacity of 350,000 b/d. The 15 modules which constitute the topsides weigh 12,500 metric tonnes (13,779 tons) and there is accommodation for 100 personnel. The topside process modules were delivered by J. Ray McDermott.

The vessel is moored to a submerged turret production system provided by APL, which is held in place by 10 chain-and-wire mooring lines attached to 90-metric tonne (99 ton) piles. The mooring was performed by Aker Marine Contractors.

The two wellhead platforms were constructed at Kiewit's Corpus Christi, Texas, yard. Each has a topsides of about 8,200 metric tonnes (9,039 tons) dry weight supported by a 6,700-metric tonne (7,385-ton) jacket. The platforms were installed by Heerema Marine Contractors' crane-barge Hermod. Operations, maintenance, and modification services are provided by Wood Group.

Each wellhead platform connects to the FPSO by two oil production pipelines and an injection water pipeline, while two power and signal cables also run from the FPSO to each platform. Pipelay and cable-lay was performed by Subsea 7.

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In the first phase, 37 wells are planned, consisting of 30 horizontal producers and seven water injectors. With its rather unconsolidated sands and thin oil-bearing sections, the reservoir represents a challenge to drill, which is being done by Archer. But the achievements are already being recorded, including the longest horizontal open-hole gravel-packed section ever drilled in Brazil – 1,300 m (approx. 4,200 ft) – and future plans call for even longer sections Electric submersible pumps are installed downhole in each production well to boost the wellstream flow to the surface. On arrival on the FPSO, the crude is heated to 130-150ºC to facilitate processing, and the stabilized oil is stored at 65-70ºC. Next year, Statoil plans to start implementing IOR (increased oil recovery). The first of these is multi-lateral wells, which the company is familiar with due to its extensive use of them on the Norwegian continental shelf. However, the Peregrino multi-laterals will be the first such wells in Brazil.

Polymer flooding of the reservoir will also be implemented, to improve the effect of water sweep.

This is a proven technique on onshore fields, and in 2010 Statoil ran a successful pilot on the Heidrun field in Norway. The third IOR measure is a smart tool known as the autonomous inflow control device (AICD), a version of which Statoil has patented. Installed as part of the well completion, the AICD is able to distinguish between high-viscosity heavy oil, which is allowed to pass into the well-bore, and low-viscosity water and gas, which is kept out.

Hydro bought into Peregrino in 2005; and then StatoilHydro, as the company came to be known, bought Anardarko's stake in 2008, becoming the sole licensee and operator.

By applying its heavy oil expertise, Statoil reckons it will achieve base-case recovery of 20% of the estimated 2.3MMbbl of in-place reserves, more or less double what previous owners were envisaging. Recoverable reserves are estimated at 300-600MMbbl. There are several reasons why it has not yet been possible to establish more exact estimates. The main reservoir which is being developed in the current phase extends over an area of 535 sq km. In the reservoir itself, the thickness and distribution of the sand bodies is uncertain, and some parts are below seismic resolution, so that reliable data will only become available when they are drilled.

Further development looks likely following the discovery of additional reserves. To a 2007 find on the Peregrino South-West prospect, Statoil in April added a promising strike with the Peregrino South exploration well, which discovered a gross 130-m (427-ft) oil column. Appraisal drilling will show if these are commercial.

Further potential has also been identified in the carbonate Macae formation of the main field, which does not form part of the present development. Statoil plans to carry out a long-term production test in the Macae to establish whether it should be brought into permanent production.

In 2010, Statoil took on a partner, Sinochem, to which it agreed to sell a 40% interest in the field for $3.1 billion. The deal was completed just after start-up.

MARATHON WANTS OHIO REFINERY TO RUN 15% UTICA SHALE CRUDE U.S. independent refiner Marathon Petroleum Corp. plans to build a permanent truck terminal to take advantage of unconventional oil drilling near its 78,000 barrel-per-day (b/d) refinery in Canton, Ohio, according to a November 1 Argus report citing company officials.

The company plans to bring in 12,000 b/d of Utica shale crude to the Ohio facility, up from the current 1,000 b/d that is being delivered from the Utica to a temporary truck terminal, according to the report. That reportedly would make Canton’s crude slate 15% Utica-derived oil.

“We want to position ourselves so that we’re the customer of choice for that Utica oil,” Mike Palmer, senior vice-president of supply, distribution and planning, stated in the report.

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Marathon has no plans to boost output at the Canton refinery; only to change the facility’s crude slate to take advantage of the nearby Utica prospect as drilling there ramps up, according to Argus.

U.S. Mid-Continent refining assets helped provide huge margins for the new downstream company that was recently split off from Marathon Oil. The refiner is able to tap Canadian heavy crude as well as lighter, sweeter West Texas Intermediate at a discount to what players in other regions have to pay, the report noted.

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HSE

BRAZIL MAY FINE CHEVRON $84 MILLION FOR SPILL Posted on December 6, 2011 at 9:24 am by Bloomberg in Accidents, Offshore, Oil, Oil spill, Politics and Policy Chevron Corp. (CVX), the second-largest U.S. crude producer after Exxon Mobil Corp. (XOM), may be fined $84 million by Rio de Janeiro state for environmental damage from an offshore oil spill.

The San Ramon, California-based company’s operations in the Campos Basin off Rio’s coast will be monitored for two years through satellites, helicopters and vessels, the state’s environmental agency said in a statement on its website. Chevron will also have to pay for an environmental audit to assesses its ability to respond to accidents, the agency said.

Chevron has come under increased scrutiny in Brazil after 2,400 barrels of oil leaked from its Frade project in deep waters off the coast of Rio last month. Brazil’s federal environmental agency, known as IBAMA, fined Chevron 50 million reais last month. The country’s oil regulator prohibited Chevron from drilling any new wells for at least three months while it probes the spill.

The oil regulator, known as ANP, said last month it may fine Chevron as much as 50 million reais for each violation related to the incident. The company only provided partial video clips of the leak, didn’t report the presence of hydrogen sulfide in a well and didn’t meet requirements in a plan to cement and abandon the well that caused the leak, ANP Director Magda Chambriard said Dec. 1.

Chevron was only able to provide segments of the video at a time due to the size of the data coming from a remote area and is conducting tests to make sure it meets the regulator’s requirements for cementing the well that leaked, spokesman Scott Walker said in an e-mailed response to questions yesterday.

‘Energy Superpower’ The company reacted responsibly and will continue to cooperate with the Brazilian authorities to determine the cause of the incident, it said in an e-mailed statement today.

“We value our relationship with Brazil and look forward to being a partner with the country in developing its potential as an energy superpower,” Chevron said.

The total volume of oil on the surface of the ocean has been reduced to less than one barrel following cleanup efforts, Chevron said.

BP PRODUCTS FINED US$50 MILLION FOR EMISSIONS RELEASE AT TEXAS CITY REFINERY Texas Attorney General Greg Abbott (R) on November 3 issued a statement saying he has resolved the state’s enforcement actions against BP Products North America, Inc. In June 2009, the attorney general’s office charged BP with violating state environmental protection laws when a deadly explosion erupted at BP’s Texas City refinery.

Under a proposed agreement, BP must pay the state of Texas US$50 million for unlawfully emitting pollutants during and after the March 2005 explosion. The amount includes $500,000 in costs that the attorney general’s office incurred while pursuing the state’s enforcement actions. The remainder of the $50 million reflects civil penalties that will be deposited in the state treasury.

BP issued a statement saying, “BP has maintained a steady focus on improving safety and compliance at Texas City, and this agreement is an important milestone in the progress of operations at the facility,” the company said.

According to the settlement, BP does not acknowledge liability and agreed to settle to avoid the uncertainty of future litigation.

“The proposed agreement resolves the state’s enforcement actions against BP Products for unlawful pollutant emissions at its Texas City refinery,” Texas Attorney General Greg Abbott said.

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“The Texas Attorney General’s Office is committed to protecting our state’s precious natural resources by enforcing environmental pollution laws. The proposed agreement reflects the state’s commitment to protecting air quality and holding polluters accountable for illegal emissions.”

According to the attorney general’s 2009 enforcement action, BP was responsible for 72 separate – and unlawfu – pollutant emissions that have been occurring every few months since March 2005.

An explosion and related fires erupted at BP’s Texas City refinery in March 2005 that claimed 15 lives and injured more than 170 workers.

The state’s 2009 legal action against BP stemmed from a referral from the Texas Commission on Environmental Quality (TCEQ), which regulates and permits emissions at Texas refineries. After the attorney general’s office filed its original legal action against BP, the TCEQ submitted a second, related referral against BP Products.

According to TCEQ investigators, multiple Texas Clean Air Act violations occurred at the Texas City refinery between April 6 and May 16 of 2010. As a result, the Attorney General’s Office filed a second enforcement action and charged BP with illegally emitting about 500,000 pounds of harmful air pollutants in Texas City.

SUSTAINABILITY & CLIMATE CHANGE

AUSTRALIAN GOVERNMENT INTRODUCES PRICE ON CARBON On November 8, the Australian government passed laws in its effort to combat climate change and limit greenhouse-gas emissions that would impose a price on carbon emissions.

This legislation sets a fixed carbon tax of Aus$23 (US$23.52) per tonne on the country’s top 500 polluters effective July 2012, according to a November 8 Reuters report. After that, the system will shift to an emissions trading scheme, effective July 2015. The plan will also require that companies to have a permit for every ton of carbon their operations emit.

“Tuesday’s vote in the upper house Senate made Australia the second major economy behind the European Union to pass carbon-limiting legislation. Tiny New Zealand has a similar scheme,” according to Reuters. “Its impact will be felt right across the economy, from miners and liquefied natural gas (LNG) producers to airlines and steel makers, and is aimed at making firms more energy efficient and push power generation toward gas and renewables.”

Forecasts are putting the value of Australia’s carbon market at as much as Aus$15 billion (US$15.34 billion) by 2015, Reuters noted. Permit sales are also expected to generate Aus$25 billion (US$25.57 billion) in the first four years, the report said.

“Passage of the carbon price laws is expected to ensure the global market continues to expand over the next few years,” the article stated. “The World Bank estimated the global carbon market was worth about [US]$142 billion in 2010, with the European Union Emissions Trading Scheme accounting for 97% of trade.”

Algae.Tec Ltd. released a statement November 8 in which the company pointed out that the introduction of a price on carbon by the Australian government is set to boost demand for technology like Algae.Tec’s enclosed modular algae growth system by carbon dioxide-emitting industries.

Algae.Tec Executive Chairman Roger Stroud said the Clean Energy Future (CEF) package – the carbon price, the $3.2-billion Australian Renewable Energy Agency and the $10-billion Clean Energy Finance Corp. – will deliver unprecedented interest in clean energy and proven carboncapture solutions.

“The CEF package will encourage carbon emitting companies and industries to seek out carbondioxide-reduction technologies,” Stroud was quoted as saying.

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THE CLIMATE MAY NOT BE AS SENSITIVE TO CARBON DIOXIDE AS PREVIOUSLY BELIEVED Nov 26th 2011 | from the print editionCLIMATE science is famously complicated, but one useful number to keep in mind is “climate sensitivity”. This measures the amount of warming that can eventually be expected to follow a doubling in the atmospheric concentration of carbon dioxide. The Intergovernmental Panel on Climate Change, in its most recent summary of the science behind its predictions, published in 2007, estimated that, in present conditions, a doubling of CO2 would cause warming of about 3°C, with uncertainty of about a degree and a half in either direction. But it also says there is a small probability that the true number is much higher. Some recent studies have suggested that it could be as high as 10°C. If that were true, disaster beckons. But a paper published in this week’s Science, by Andreas Schmittner of Oregon State University, suggests it is not. In Dr Schmittner’s analysis, the climate is less sensitive to carbon dioxide than was feared.

Existing studies of climate sensitivity mostly rely on data gathered from weather stations, which go back to roughly 1850. Dr Schmittner takes a different approach. His data come from the peak of the most recent ice age, between 19,000 and 23,000 years ago. His group is not the first to use such data (ice cores, fossils, marine sediments and the like) to probe the climate’s sensitivity to carbon dioxide. But their paper is the most thorough. Previous attempts had considered only small regions of the globe. He has compiled enough information to make a credible stab at recreating the climate of the entire planet.

The result offers that rarest of things in climate science—a bit of good news. The group’s most likely figure for climate sensitivity is 2.3°C, which is more than half a degree lower than the consensus figure, with a 66% probability that it lies between 1.7° and 2.6°C. More importantly, these results suggest an upper limit for climate sensitivity of around 3.2°C. Before you take the SUV out for a celebratory spin, though, it is worth bearing in mind that this is only one study, and, like all such, it has its flaws. The computer model used is of only middling sophistication, Dr Schmittner admits. That may be one reason for the narrow range of his team’s results. And although the study’s geographical coverage is the most comprehensive so far for work of this type, there are still blank areas—notably in Australia, Central Asia, South America and the northern Pacific Ocean. Moreover, some sceptics complain about the way ancient data of this type were used to construct a different but related piece of climate science: the so-called hockey-stick model, which suggests that temperatures have risen suddenly since the beginning of the industrial revolution. It will be interesting to see if such sceptics are willing to be equally sceptical about ancient data when they support their point of view.

LARGE DIFFERENCES IN THE CLIMATE IMPACT OF BIOFUELS, SWEDISH RESEARCH FINDS "Using a tree as biofuel creates a carbon dioxide debt that must be "paid back" before the fuel can be considered to be carbon dioxide neutral. Energy forest is fully neutralized after 3-5 years, while other trees grow so slowly that it can take up to 100 years before they achieve carbon dioxide neutrality" says Lars Zetterberg of the Department of Earth Sciences at the University of Gothenburg. The use of bioenergy affects ecosystem carbon stocks over time in either a positive or negative way. Biofuels where the combustion related emissions are compensated rapidly have a lower climate impact than fuels for which it takes a long time for the emissions to be compensated.

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in political contexts. Emissions from bioenergy are, for example, not included in countries' commitments under the Kyoto Protocol.

In his PhD thesis, Lars Zetterberg analyses how different types of biofuels affects the ecosystem carbon stock over time, and the consequent climate impact. The results show that biofuels where the combustion related emissions are compensated rapidly have a lower climate impact than fuels for which it takes a long time for the emissions to be compensated. Results from this study can help decision makers to understand the climate impacts from different bioenergy types in order to prioritize between different bioenergy alternatives. "The time perspective over which the analysis is done is crucial for the result. Over a 100 year perspective the use of stumps for energy has a significantly lower climate impact than coal, but over a 20 year time perspective, stumps have a higher climate impact than natural gas. Using logging residues in the form of branches and tops for energy reduces carbon dioxide emissions in both the short term and the long term."

If environmental legislation, for instance the EU renewables directive, requires that climate benefits of biofuels are calculated over a 20 year period, biofuels that need longer time to reach carbon neutrality may be regarded as not renewable. "If we want to do reduce global carbon emissions quickly, we should prioritize fuels that are beneficial on a short time scale, for instance 20 years In addition, over a longer time scale it will be beneficial to replace coal with stumps, even if we will not see a result until after 20 years." In the thesis, Lars Zetterberg also addresses how the EU Emissions Trading System should be designed in order to incentivize the use of carbon dioxide efficient fuels. The thesis "Instruments for Reaching Climate Objectives -- Focusing on the Time Aspects of Bioenergy and Allocation Rules in the European Union's Emissions Trading System" was successfully defended at a disputation held in the Department of Earth Sciences at the University of Gothenburg.

CARBON CAPTURE AND SEQUESTRATION: OFF TO SLOW START

By Jeff Ryser December 8 - Mitigating the impact of carbon dioxide emissions by capturing CO2 and burying it has always been an audacious concept. In practice it is also proving to be expensive and therefore slow in adoption.

CCS, as the idea is broadly known in the power industry to describe carbon capture and sequestration or storage, has taken some hits.

When American Electric Power announced in mid-2009 that it would try its hand at CCS, many within the power industry and government believed it was the right company stepping forward at the right time The Columbus, Ohio-based AEP is not only one of the US’ largest utilities with a total of 5.3 million electricity customers, but 25,000 MW of its total 38,000 MW of capacity is coal-fired, giving it one of the largest coal fleets in the US. The approximately 130 million metric tons of carbon dioxide emitted each year from AEP’s plants makes it one of the country’s single largest CO2 emitters

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The big utility made its decision to pursue CCS at about the time the US House of Representatives approved cap-and-trade legislation that some thought presaged mandatory CCS for big emitters.

That legislation died on the vine, but AEP pursued CCS anyway.

In the past two years AEP worked with the French engineering firm Alstom in isolating a 20-MW slip stream of flue gas at its 1,300-MW coal-fired Mountaineer facility in West Virginia.

It spent almost $120 million capturing just 50,000 metric tons of CO2 and burying a mere 37,000 metric tons of the greenhouse gas.

When the company looked at the prospects of spending an additional $670 million — albeit with a $334 million pledge from the US government — to capture and bury 1.5 million tons a year of CO2 from a 235-MW slip stream of flue gas, it balked.

On July 14, Michael Morris, AEP’s chairman and CEO, said the company would take a pass on the government’s funding and put on hold the commercial-scale phase of its high-profile CCS project at the Mountaineer facility "until the economic and policy conditions create a viable path forward.”

AEP was mostly satisfied with the amount of power Alstom’s chilled ammonia process consumed during the pilot phase. This so-called parasitic loss that is associated with the capture of CO2 has been a concern to many who have worked on the design side of the technology.

AEP’s primary concerns were part economic and part political. The company concluded that state regulators had not allowed the company to pass on its costs to ratepayers because Congress never declared CCS mandatory. The company also was not able to find any partners from the private sector to join it in taking on the higher cost of the larger project.

Capturing and burying how much carbon?

For AEP the two-year test of CCS proved to be a technical success, but it did not provide a revenue stream the company could borrow money against. Testing a process that could act as a retrofit on a large number of existing coal-fired facilities was a key part of the AEP trial, as Alstom saw it.

In June, AEP said it anticipated spending between $6 billion and $8 billion complying with new Environmental Protection Agency regulations. It expected to retire nearly 6,000 MW of coal-fired capacity and upgrade or install new emission reduction equipment on 10,100 MW. AEP said it has spent $7.2 billion on emission controls and retrofits on its plants since 1990.

According to the Energy Information Administration, the US has about 1,400 coal-fired units at 600 facilities with a net summer capacity of almost 315,000 MW. A typical 500-MW coal plant burns 1.4 million tons of coal each year.

EIA says 73% of all coal-fired capacity was at least 30 years old at the end of 2010. EIA also calculates that there are about 400 coal-fired generators, representing about 140,000 MW, that have scrubbers already installed. Most carbon capture processes require a scrubber.

Meanwhile, the EPA on August 4 said it was proposing new rules to exclude from EPA’s hazardous waste regulations CO2 streams that are injected for geologic sequestration in wells designated for PetroScan-December 2011

this purpose under the Safe Drinking Water Act. The agency said it was proposing the exclusion “as part of the agency’s effort to reduce barriers to the use of CCS technologies.”

But AEP’s brief experience with CCS generated a key conclusion: at substantial cost and effort the company managed to bury a pittance of all the CO2 that the company, along with a vast number of others, produce in the US and around the globe.

While AEP considered expanding its CCS project from 37,000 metric tons to capture 1.5 million metric tons of CO2 per year, starting in 2014, the EIA reported in July that in 2010 the US power sector emitted about 2.27 billion metric tons of CO2, with 1.99 billion metric tons coming from the burning of coal.

Total US annual emissions of CO2 in 2010 was 5.63 billion metric tons, while worldwide the total was just under 31 billion metric tons.

RELIABILITY & ASSET MANAGEMENT

NINE LEADERSHIP PRINCIPLES FOR A SUCCESSFUL RELIABILITY & MAINTENANCE PROGRAM

by Paul Casto, VP Value Implementation, Meridium Introduction to the Reliability & Maintenance leadership series Today's manufacturing companies face unparalleled business challenges in their struggle to create value for owners and stakeholders. While a world marketplace has resulted in lower cost and more options for consumers, global competition has placed unrelenting pressure on manufacturers to lower cost and eliminate inefficiencies. In recent decades the search for competitive advantage has resulted in large investments in manufacturing technology and infrastructure. While these investments have been considerable, many facilities have not achieved their anticipated return on investment (ROI). Project start-ups are often extended, O&M costs are higher than expected and plant reliability is lower than needed to meet production targets. In short, many of these investments did not meet the level of performance needed to meet the ROI hurdle rates.

One critical aspect of high performing assets is an effective reliability and maintenance (R&M) program. R&M programs vary in size and complexity but a distinguishing characteristic of successful programs is effective leadership. Today's R&M leaders must deal with the loss of their critical knowledge base to retirement, a constant drive to reduce costs and capital expense, and regulations to reduce risk to workers and the environment while at the same time manage their corporate image. The tool box of today's R&M leaders needs to include skills for change management, organizational integration, improving work processes, stakeholder management, building stronger interdepartmental relationships and instilling sustainability into the fabric of the organization. This isn't the maintenance organization my dad worked in.

When asked to write a series of articles focusing on the role of leadership in successful R&M organizations, I was reminded that it's not unlike the role leadership plays in our personal lives.

There too, leadership is a distinguishing element of our success and the principles work in both environments. As we consider this subject, we should reflect on the numerous people we've worked for in the past. Imagine if these people called us tomorrow and said they needed us. It's the people we would immediately want to go to that were the best leaders. These are the people who took the time to develop us, discipline us, serve us and teach us.

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Over the next few months we will look at a few aspects of leadership that are central to successful asset performance management programs including leadership principles, developing a sense of urgency and leading change. We will also be facilitating discussion on these subjects here.

Leading your Reliability & Maintenance organization Learning about leadership in asset management started early in life for me. My dad and older brother both had distinguished careers in the maintenance of process plants. I remember the stories told at the dinner table about the plant, managers, jobs, peers, injuries, frustrations and the delight of a job well done. Over the years I have unexpectedly met people who worked with my dad. They remember him as one of the finest craftsman they ever worked with, a man who knew equipment, could fit pipe and weld anything. But the stories they tell about him aren't about his skill as a craftsman but rather they are about a tireless worker who seemed to know more about the plant equipment than the maintenance managers, who was always teaching the other guys, who would go the extra mile to help on a job and who was concerned about his peers both inside and outside of work. It is these stories that led me to think about the leadership principles that my dad had taught me at the dinner table. The people who master these nine principles are well on their way to being strong leaders within their R&M organizations.

1. Watch their feet This principle has stuck with me over time because it makes so much sense. What it means is to watch and see if leaders do what they say. We've heard many versions of this principle but it's important to remember because people will do what they "see" their leaders doing. If craftspeople see their leaders cutting corners, taking shortcuts and allowing procedures to be ignored, they will too.

People are watching what we do.

2. Even managers should do some real work once in a while People want to work for leaders who they know will do the work required to earn the respect of the team they are leading. As a leader, never let it be said that we ask our team to do things that we won't do, to develop skills that we won't develop, to get certifications that we won't work to get, to spend endless hours in the plant while we're at home, or to work with broken processes and systems that we'd never put up with. It's good practice for leaders to spend time on the floor, at times run a crew and experience firsthand what it is like to perform maintenance work.

People will follow leaders who work to earn their respect.

3. Look at who's working for him/her That is, the quality of a leader can be seen in those people he/she surrounds themselves with. This is one of my favorite principles as it has proven true more than once over my career. Effective leaders are always on the lookout for good people. The best leaders want the brightest people on their team. They aren't challenged by smart, talented people. They want people on their team that push him/her to work hard to stay ahead of them. An interesting result of following this principle is that our potential is often determined by the team we surround ourselves with.

You are who you surround yourself with.

4. Let them do their job How many times have you heard employees say, "I just do what they tell me." This is a learned trait that almost always comes from poor leadership. Typically what these employees are really thinking but not saying is, "If they'd just get out of the way and let me do my job, I could make them a lot of money." It is our job as leaders to prepare, train, teach and mentor our teams to do the job that's asked of them. And when they are ready, we need to let them, and expect them, to do their jobs.

A leader has to know when to give up control.

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This is an interesting principle that I've come to see as a combination of things. First, have you ever noticed that the best leaders often work for other really good leaders? Maxwell says that strong leaders naturally follow stronger leaders and I think that's true. But perhaps more importantly, I've noticed that it's often not the project people want to work on but rather the person, the project leader, which people want to work for. The leader often has a vision for what he/she wants to accomplish. The team wants to work for the leader first, then the vision.

People follow the leader first, then the vision.

6. If you want them to follow you, you've got to show up every day When I heard my dad say this it was often followed closely by other sayings like "Rome wasn't built in a day" and "hard work covers up a lot of mistakes". My family didn't have super smart genes, but we did have plenty of hardworking genes, so I got the point of this one pretty quickly. Our credibility as leaders doesn't come with a diploma. It comes through hard work and that hard work builds up credibility over time, one situation at a time. So when we make a mistake (and we'll make plenty of them) the ability to say "I was wrong" or "I'm sorry" can leverage the hard work we've done over time.

Leading people is really hard work.

7. Give the credit where credit is due I feel most passionate about this principle. I can hear my dad saying, "Don't take credit for what's not yours." It is a sign of insecurity and greed when a person in a position of authority takes credit for the work of his/her subordinates. Nothing creates more animosity or undermines the critical relationships leaders need than this behavior. I've never understood people who conduct themselves this way because there is no greater pleasure than seeing a person that you've been mentoring be successful.

Don't ever take credit for other peoples work; no matter what, don't do it - ever 8. He/she cares about the crew This is my personal favorite and one of the most important of all the leadership principles. It was also one of the hardest for me to understand and learn. It simply means that the leader cares about his/her people beyond the workplace. For many years this was one of the weakest aspects of my leadership style. We can get so busy, so overwhelmed with things to be done, so focused on work that we lose sight of the needs that people working for us can have. It is our responsibility as leaders to develop relationships within our team and to care about our team members as individuals. I learned the value of this principle in reverse when a few years ago some young leaders on my staff cared about me when I needed it most. It is an important lesson that I will never forget and will be eternally grateful for.

Lead with your heart.

9. I'd walk over hot coals for that person I saved the best one for last. It took me a lot of years to understand this one. We've all worked for someone that we've said this sort of thing about, but in my case, I didn't really understand why I felt that way. In the case of this principle, I learned the saying from my dad but my dog taught me the meaning. If you've ever had a pet that you've grown close to you realize that they'd do just about anything for you and it's because they trust you to look out for their best interest. It's the same with leaders. The reason that we'd "walk across hot coals" for some of them is that we know our mentors want the best for us and that they'd take of their shoes and walk over the hot coals with us if we needed them to. To build trust, leaders must display competence, develop a connection with their team and above all, have character.

Trust is the most important part of leadership.

Continuing the discussion PetroScan-December 2011

What characteristics do you appreciate in a leader? What are some of the leadership challenges facing your organization? Click here to share and discuss your ideas and observations on R&M leadership with your peers and me.

Coming up next month...

Join us next month in the APM Advisor where we'll talk about one of the most critical challenges facing many of our organizations - developing a true sense of urgency.

About the author Paul Casto, CRE, CQE, CSSBB, CMRP, VP Value Implementation, Meridium, is a leading practitioner in reliability and maintenance improvement methodologies. He has hands-on experience in reliability, maintenance, operations and engineering in the chemical, steel, aluminum, automotive, aerospace, consumer goods and construction industries. Paul holds a Bachelors degree in Electrical Engineering from West Virginia University, a Masters degree in Engineering Management from Marshall University Graduate College, an MBA from Clemson University, and a Masters in Maintenance Management and Reliability Engineering from the UT/Monash University program. Paul is an ASQ certified Six Sigma Black Belt, holds ASQ certification in Reliability Engineering and Quality Engineering and is a SMRP Certified Maintenance and Reliability Professional. He is currently studying R&M improvement methodologies in the UT graduate engineering program.

GENERAL READING

BOSSES, STOP CARING IF YOUR EMPLOYEES ARE AT THEIR DESKS Have you ever suspected that you’d be healthier, happier, and perhaps even more productive, if you could just get your work done on your own schedule instead of your boss’s? New research suggests you’re probably right.

11 1,042 102 In 2005, the Best Buy headquarters in Richfield, Minnesota, started shifting over to a “results only work environment,” or ROWE. Employees could decide when and where they worked as long as they met certain measurable goals. No more Monday-through-Friday or 9-to-5. Want to come in at 2 p.m. on a Tuesday? Great. You don’t even need to notify your manager, as long as you get that report done by the end of the week.

Two University of Minnesota sociology professors, Erin Kelly and Phyllis Moen, recently gathered data from 659 Best Buy employees, both before and after the shift to ROWE. About half of the employees they studied from didn’t switch to ROWE during the study period, providing a control group.

Participants described both a sense of freedom and greater responsibility for actually accomplishing results.

Kelly and Moen—who published their work this week in The Journal of Health and Social Behavior—found that employees who switched to ROWE took better care of themselves. Not only did they get an extra 52 minutes of sleep before workdays on average, they were also less likely to feel obligated to work when sick and more likely to see a doctor when they needed to. And the turnover rate among employees that switched to ROWE was only 6%, compared to 11% with the control group. In addition, their increased sense of schedule control and reduced work-family conflict led to increased self-reported energy levels and decreased psychological distress.

They were healthier and they were also, it seems, more invested. As Moen has described it, “participants reported going to their child’s school play, taking their ailing mother to a doctor, or seeing a doctor themselves—without guilt. Participants described both a sense of freedom and greater responsibility for actually accomplishing results.”

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The ROWE program was developed at Best Buy by Cali Ressler and Jodi Thompson. They have since gone on to found a consulting shop, CultureRx, that helps other companies switch to ROWE. In 2009, Gap became the second major brand to get on board and several smaller companies have been following suit.

Is it easy to switch? According to Moen, “the hardest part of this for most firms and for managers as well as employees is to clarify what exactly are the results to be achieved.” That’s certainly something a smart manager should be doing regardless.

SODIUM-SATURATED DIET IS A THREAT FOR ALL

By JANE E. BRODY Maybe you think you don’t have to worry about salt. After all, you don’t have high blood pressure, you’re not overweight and you exercise regularly.

Well, think again. A major study, based on data from more than 12,000 American adults, took into account all those risk factors for death from heart disease. The researchers found that while a diet high in sodium — salt is the main source — increases your risk, evenmore important is the ratio of sodium (harmful) to potassium (protective) in one’s diet.

When people whose meals contained little sodium relative to potassium were compared with those whose diets had a high sodium-to-potassium ratio, the latter were nearly 50 percent more likely to die from any cause and more than twice as likely to die from ischemic heart disease during a followup period averaging 14.8 years.

Although there has been on-and-off controversy about the value of limiting dietary salt, there is no question that a high level of sodium in the diet raises blood pressure and the risk of chronic hypertension by stiffening arteries and blocking nitric oxide, which relaxes arteries. Hypertension, in turn, contributes to heart disease and stroke, leading causes of death.

Potassium, on the other hand, activates nitric oxide and thus reduces pressure in the arteries, lowering the risk of hypertension.

“We controlled for all the major cardiovascular risk factors and still found an association between the sodium-potassium ratio and deaths from heart disease,” said Dr. Elena V. Kuklina, a nutritional epidemiologist at the Centers for Disease Control and Prevention and an author of the study, published earlier this year in Archives of Internal Medicine. “With age, the risk of high blood pressure increases. The lifetime risk in this country is 90 percent. If you live long enough, you’re at risk.”

According to an Institute of Medicine report on sodium released last year, “No one is immune to the adverse health effects of excessive sodium intake.”

Our High-Salt Diet Ninety percent of the sodium in the American diet comes from salt, three-fourths of which is consumed in processed and restaurant foods. Salt added in home cooking and at the table accounts for only a minor proportion of sodium intake.

The body’s requirement for sodium is very low — only 220 milligrams a day — but the average American consumes more than 3,400 milligrams daily. The current Dietary Guidelines for Americans recommend a maximum of 2,300 milligrams (about a teaspoon of salt) for people over age 2, but only 1,500 milligrams for the 70 percent of adults at high risk of sodium-induced illness: people older than 50, all African-Americans, and everyone with high blood pressure, diabetes or chronic kidney disease.

Despite widespread efforts to get people to consume less sodium, intake of this nutrient has increased significantly since the early 1970s as consumption has risen of processed and restaurant foods, which rely heavily on salt as a cheap way to enhance flavor and texture and preserve food.

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Because salt is categorized by the Food and Drug Administration as G.R.A.S., or “generally recognized as safe,” there is no limit to the amount food producers can use in a product.

To make matters worse, not only does the amount of sodium rise precipitously when foods like tomatoes and potatoes are processed, but the natural potassium in these foods declines significantly, worsening the sodium-potassium ratio.

The profligate use of salt in foods prepared outside the home has created an American preference for a salty taste, a preference that can be reversed with no loss of consumer pleasure if done slowly, said Dr. Thomas A. Farley, commissioner of New York City’s Department of Health and Mental Hygiene.

His department is leading a national effort started in 2008 to get food producers and restaurants to gradually reduce the salt in their products. Thus far, 28 national food companies, retailers and supermarket chains, including Kraft, Subway, Target and Delhaize America, have made a commitment to the National Salt Reduction Initiative to cut sodium in their products by an average of 25 percent by 2014.

But Dr. Jane E. Henney, chairwoman of the committee that produced the Institute of Medicine report, said this is still just a voluntary effort, and to make a lasting nationwide difference in sodium intake, the government needs to push harder for change. The report said, “What is needed is a coordinated effort to reduce sodium in foods across the board by manufacturers and restaurants — that is, create a level playing field for the food industry.”

Dr. Henney, a public health specialist at the University of Cincinnati College of Medicine, said it is time to modify the G.R.A.S. status of salt because it can no longer be considered safe under current conditions of use. This would allow the Food and Drug Administration to place limits on the amounts of salt that can be used commercially in preparing various types of foods.

The report stated that “population-wide reductions in sodium could prevent more than 100,000 deaths annually.”

It can be done, if there is a will. Through decades of voluntary efforts and regulation, Finland managed to cut sodium intake by one-third, which has resulted in a decrease in hypertension and premature deaths from stroke and coronary heart disease.

What You Can Do Dr. Kuklina recommends eating fewer processed foods, especially processed meats, and more fresh fruits and vegetables and dairy products that are low in sodium, like yogurt and milk. Increase your potassium intake not by taking supplements, but by eating more cantaloupe, bananas, oranges, grapes, grapefruit, blackberries, yogurt, dried beans, leafy greens, potatoes and sweet potatoes.

When ordering in a restaurant, she suggests, ask that your food be prepared without added salt and your vegetables steamed, and always request that salad dressings and sauces be served on the side, enabling you to use far less than the chef might. Consider splitting an order between two people, which would cut the salt intake in half. And if a dish arrives that is too salty, send it back to the kitchen.

Avoid fast-food restaurants, where a single meal can contain a day’s worth of sodium.

When shopping, Dr. Farley said, “read labels and compare products, then choose those with lower sodium.” He acknowledged that products labeled “low sodium” or “no added salt” can turn off consumers, who think they’ll be tasteless. But you can always add a modest amount of salt at the table.

He also suggested asking food companies to use less salt in your favorite products and supporting the government’s efforts to reduce sodium consumption by commenting on a proposal published on Sept. 15 in the Federal Register (Docket No. FDA-2011-N-0400 and Docket No. FSIS-2011-0014).

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The easiest way to comment is through the American Heart site: www.heart.org/sodium, then click on “Send your comment letter today.”

Association’s

Web

NUTRITION: 4 VITAMINS THAT STRENGTHEN OLDER BRAINS

By NICHOLAS BAKALAR http://www.nytimes.com/2012/01/03/health/research/vitamins-b-c-d-and-e-and-omega-3strengthen-older-brains.html?src=me&ref=health Higher blood levels of omega-3 fatty acids, vitamin B, vitamin C, vitamin D and vitamin E are associated with better mental functioning in the elderly, a new study has found.

Researchers measured blood levels of these nutrients in 104 men and women, whose average age was 87. The scientists also performed brain scans to determine brain volume and administered six commonly used tests of mental functioning. The study is in the Jan. 24 issue of Neurology.

After controlling for age, sex, blood pressure, body mass index and other factors, the researchers found that people with the highest blood levels of the four vitamins scored higher on the cognitive tests and had larger brain volume than those with the lowest levels.

Omega-3 levels were linked to better cognitive functioning and to healthier blood vessels in the brain, but not to higher brain volume, which suggests that these beneficial fats may improve cognition by a different means.

Higher blood levels of trans fats, on the other hand, were significantly associated with impaired mental ability and smaller brain volume.

The lead author, Gene L. Bowman, a neurologist at Oregon Health and Science University, said that the study could not determine whether taking supplements of these nutrients would decrease the risk for dementia. But he added: “What’s the harm in eating healthier? Fish, fruits, vegetables all have these nutrients, and staying away from trans fats is one key thing you can do.”

REPORTS

EIA: REFINERS SHOULD EXPECT TRIPLE-DIGIT CRUDE THROUGH 2012 17, 2011, Volume: 3, Issue: 22 The U.S. Energy Information Administration released its November edition of the Short-Term Energy Outlook (STEO) report with expectations for refinery crude-acquisition costs to remain pegged in the triple-digit range through 2012 because of demand growth and supply uncertainties.

EIA expects the U.S. average refiner acquisition cost of crude oil to remain relatively flat, averaging about $100 per barrel in 2011 and 2012, wrote the EIA in its report released November 8.

On the demand side, the STEO noted expectations that world crude oil and liquid fuels consumption will grow over 2012.

The current STEO expectation for 2012 global demand stands at 89.6 million barrels per day (b/d).

This rate of consumption outpaces the already record-high level of 88.2 million b/d in 2011 and the 87.1 million b/d mark reached the year earlier in 2010.

Restrictions and risk on the supply side are also affecting oil prices. Upward price pressure is still in the market because of supply uncertainty resulting from ongoing unrest in the oil-producing regions of the Middle East and North Africa,󲐀 according to the STEO. However, the STEO relayed that there may be downward price pressure if Libya is able to ramp up oil production and exports sooner than anticipated. At the same time, downside demand risks continue as fears persist about weakening global economic growth, contagion effects of the debt crisis in the European Union, and other fiscal issues facing national governments.

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Given expected rates of global oil consumption growth, the engine for which will be emerging markets outside of the Organization for Economic Cooperation and Development (OECD), a combination of increased oil output from members of the Organization of the Petroleum Exporting Countries (OPEC) and inventory withdrawals will need to supplement non-OPEC supply growth in order for the oil market to balance at the prices projected, the authors of the STEO synthesized.

Furthermore, the STEO projected that The forecasted West Texas Intermediate (WTI) benchmark crude oil should narrow from its third-quarter 2011 value of about $11 per barrel [/bbl] below the U.S. refiner acquisition cost of crude oil to $8/bbl by the fourth quarter of 2012.

The spread will narrow, according to the STEO, as rail and truck capacity is added to the region.� – Greg Haas

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DEADLIEST NATURAL DISASTERS OF 2011

PetroScan-December 2011

CARTOON OF THE MONTH FOR NEW YEAR RESOLUTION LESSER USE OF CELL PHONE Cellphone cancer risk?

POSTED: 06/02/2011 01:00:00 AM MDT

Read more:Cellphone cancer risk? - The Denver Posthttp://www.denverpost.com/recommended/ci_18184731#ixzz1hoLHxCr9

PetroScan-December 2011