Analysis: Potential Exists for Small Scale LNG Production in Southeast Asia

Analysis: Potential Exists for Small Scale LNG Production in Southeast Asia

Thursday, March 24, 2011

Rigzone Staff

by  Karen Boman

Investments in infrastructure for small scale liquefied natural gas (LNG) power production might be justified when the total demand for electric power exceeds 500 MW within a 120,000 square kilometers island region with no pipeline connection, according to a joint industry project (JIP) on the future small scale LNG value-chain in Southeast Asia.

Classification society Det Norske Veritas (DNV) reported that the study, which examined two areas of future LNG use in Southeast Asia, also identified noteworthy potential for LNG as a fuel for ships in regional trade, and predicts a future market for LNG bunkering in Singapore.

"Substantial market opportunities will evolve throughout the small scale LNG value-chain in Southeast Asia in the next decade," said managing director Bjorn Tore Markussen of DNV's Clean Technology Centre in Singapore, who has also headed up the JIP. "The companies who seize the opportunities early in these evolving markets will be well positioned for interesting growth if entry risks are managed properly."

The study identified multiple island regions in Southeast Asia outside any pipeline grid where total demand for electrical power exceeds 500 MW. Based on a number of underlying parameters and assumptions, various financially feasible scenarios were modeled. For example, Eastern Indonesia might have a demand for up to 70 small scale 50 MW power plants by 2020. Equally, Southern Philippines could require up to 45 plants, while the estimated demand for Northern Vietnam might be seven small power plants.

The distribution of LNG to these power plants would require close to 60 small scale LNG carriers by 2020 if this number of plants is built. As the price of crude oil is rising faster than the price of natural gas, the financial incentives for using LNG for power generation are equally increasing with considerable environmental benefits to be gained from such a fuel switch.

Shipping is a vital part of the future LNG supply chains in Southeast Asia, DNV noted. The study forecasts that container feeders might be the first ship segment to adopt LNG for propulsion regionally. About 20 % of the regional container feeders are up for renewal by 2020. Local and regional ferries are also well suited to use LNG for propulsion in the longer term.
Singapore is identified as the regionally preferred site for future LNG bunkering, due to large shipping volumes, calm seas for bunkering operations and the fact that infrastructure for LNG bunkering is already under construction. With stricter requirements for environmental performance, and an increasingly competitive expected price for LNG as fuel for ships, a shift to LNG propulsion may have an exciting impact on Singapore as a bunkering hub.

Lam Yi Young, chief executive of the Maritime and Port Authority of Singapore (MPA), said, "With the push towards cleaner fuel for ships, the results of this Joint Industry Project are timely in evaluating the potential for LNG bunkering services in Singapore. LNG's lower carbon dioxide emissions, minimal sulfur and nitrogen content as well as the abundant availability, allows it to be a viable alternative fuel source for ships, which is also in line with MPA's commitment to promoting environmentally-friendly shipping."
"The consortium is eager to use the findings from the LNG study to build business for the participants and to inform regional stakeholders about the opportunities that lie ahead," said Markussen, "DNV as a company has already decided to invest into a next phase of the JIP. We are now inviting old and new members to join the consortium and one or more of the many project streams that will be kicked off in April and May."

The JIP, which was initiated by DNV during Singapore Maritime Week in 2010, included a consortium of 16 participants from all parts of the LNG value chain, including Gazprom, Rolls-Royce, Wartsila, Hanjin Shipping, I.M. Skaugen, Keppel, The Linde Group, Trans LNG, DNV, BW group, BBG, the Maritime and Port Authority of Singapore, and the two Singapore universities NUS and NTU. The JIP is also supported by Innovation Norway and The Norwegian Embassy in Singapore.

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Halliburton Lands First Ultra-HP/HT Project in Asia

Halliburton Lands First Ultra-HP/HT Project in Asia

Thursday, March 24, 2011
Halliburton

Halliburton has been awarded several contracts for the provision of equipment and services on two offshore blocks in the South China Sea. This is the first ultra-high-pressure/high-temperature (HP/HT) oil and gas drilling project in Asia.

The exploration campaign calls for two firm wells and one potential well. Halliburton will provide directional drilling, measurement-while-drilling and logging-while-drilling (M/LWD) services; well completion equipment and services; surface well testing and downhole drillstem testing (DST) equipment and services; and cementing equipment, fluids and pumping services. Drilling is scheduled to start in the third quarter of 2011.

This project will push existing technology limits, with required equipment specifications at 250°C and 15,000 psi. Under these contracts, Halliburton will provide several ultra-HP/HT technologies for drilling,

completions, cementing and testing, including the industry's first M/LWD sensors rated to 230°C (446°F) and 25,000 psi (172.37 Mpa), as well as the industry's first multi-cycle DST tools rated to 260°C (500° F).

"We believe Halliburton's leading position in developing solutions for extreme environments, and our HP/HT experience track record, were factors in securing these contracts," said Mark Richard, Halliburton's senior vice president for the Asia Pacific Region. "We're pleased to be recognized for the innovations Halliburton provides to its customers in addressing their most complex wells in extremely challenging environments."

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China Warns Against South China Sea Oil Exploration

China Warns Against South China Sea Oil Exploration

Thursday, March 24, 2011 Dow Jones Newswires

China warned against any oil exploration without its consent in waters it claims in the South China Sea, after the Philippines announced plans for possible drilling.

Manila's Department of Energy said Wednesday that U.K.-based Forum Energy had completed a seismic survey for the Reed Bank, near the disputed Spratly Islands.

The Spratlys are called the Nansha Islands in Chinese and claimed by Beijing.

"China holds indisputable sovereignty over the Nansha Islands and the adjacent sea waters," foreign ministry spokeswoman Jiang Yu told reporters when asked for comment on the plan.

"Any activities by countries or companies to explore for oil or gas in the sea waters in China's jurisdiction without the permission of the Chinese government will constitute a violation of China's sovereignty and...will be illegal and invalid."

Jiang didn't make any direct reference to the Philippines or Forum Energy, nor did she say the survey area was actually in waters under Chinese jurisdiction.

Chinese embassy officials in the Philippines earlier requested a copy of the Forum Energy announcement, but didn't return subsequent calls.

On Wednesday, Forum Energy said it used the survey data to evaluate the commercial potential of the block and to "help identify the best location for possible appraisal wells to be drilled."

The Reed Bank lies about 150 kilometers east of the reputedly oil-rich Spratlys, which are claimed in whole or in part by Brunei, Malaysia, Taiwan, Vietnam, the Philippines and China.

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Premier Oil Sees Tax Allowance Offsetting UK North Sea Tax Hike

Premier Oil Sees Tax Allowance Offsetting UK North Sea Tax Hike

Thursday, March 24, 2011
by  Alexis Flynn

U.K. government plans to raise taxation on North Sea oil and gas production are unlikely to have a significant impact on Premier's earnings for at least the next four years, as its effects will be mitigated by $1.1 billion in tax allowances from a 2009 acquisition, Premier Oil Chief Executive Simon Lockett said Thursday.

"We're not immune, but we are mitigated from the effects of this kind of situation," said Lockett.

The Chancellor of the Exchequer of the U.K. Wednesday announced plans to raise the supplementary charge levied on profits from oil and gas produced in the U.K. to 32% from the previous 20% level. Premier said it is insulated against the effects of the levee because of a tax allowance the company received when it bought explorer Oilexco's North Sea operations in 2009,

Shares in several small-and mid-cap producers with significant assets in the North Sea were sharply lower in the wake of yesterday's news. U.K. continental shelf-focused EnQuest's stock fell 12% Wednesday, while peer Nautical lost 9%. Although Premier Oil shares fell 4.6% on the news, they have since recovered much of the lost ground. At 1248 GMT, Premier Oil shares were up 0.6 pence, or 3.2%, at 1973p amid a broadly higher London market and after reporting earnings Thursday that beat forecasts.

Premier Oil's 2009 deal to buy Oilexco's North Sea assets included it assuming $1 billion of losses that can be written off against the tax, of which it can use about 25% -- around $250 million -- a year.

Deutsche Bank said in a note that these allowances could shelter Premier from the U.K. cash tax until at least 2014, adding that it sees "these tax increases as presenting Premier with growth opportunities, not just value risk." It recommends the stock as 'buy' with a 2275 pence price target.

The oil and gas producer, which also has significant interests in Vietnam and the Middle East, Thursday reported record net profits of $130 million, 15% higher than consensus analyst estimates. The company also said it was on track to reach production of 75,000 barrels of oil equivalent per day and expects to spend $500 million a day on acquisitions this year.

Lockett said a positive consequence of yesterday's budget announcement was that it could provide buying opportunities as peers come under further cost pressure as a result of the tax rise.

"If I can take one minor positive out of it, it means that if we were looking for acquisitions in the North Sea then they are now slightly cheaper than yesterday," said Lockett.

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