Qatar, the world's largest exporter of liquefied natural gas, is having to rethink its sales strategy because of a recent surge in U.S. natural gas production and focus on the Far East, where demand is growing.

This should pick up the slack from declining demand in the United States, a key customer, and be a major factor in building gas exports by the Arab producers in the Persian Gulf.

The U.S. Energy Information Administration reported recently that Qatar, Iran, Saudi Arabia and the United Arab Emirates account for 85 percent of the Middle East's gas production.

With more than 40 percent of the world's proven reserves, the Middle East is expected to account for a production increase of 15 tcf a year by 2035, the EIA noted.

This will be due largely to the growing demand in energy-hungry Asia, particularly China and India.

The boost in U.S. gas production stems largely from once inaccessible reserves of shale gas that can now be reached by advanced drilling technology.

In 2008, U.S. shale production soared by more than 70 percent to 2 trillion cubic feet a year. Five years ago the gulf supplied about 20 percent of U.S. gas. Today that's fallen to 9 percent and will likely slide further.

Qatar's export strategy had been built around the premise that the global demand for gas, particularly in the United States, would continue to grow.

"Something that was not factored into the equation was a sharp increase in U.S. gas output," observed the Middle East Economic Digest.

The EIA recently more than doubled its estimate of proven U.S. gas reserves to 827 trillion cubic feet in 2010.

Qatar's reserves are estimated at 899 tcf, most of it in the offshore North Field in the Persian Gulf, which extends northward to Iran's South Pars field.

That contains 900 tcf, making it the world's largest gas field.

The tiny emirate, lying between Saudi Arabia and the United Arab Emirates, currently has a production capacity of 77 million tons of LNG a year.

"Since taking the decision to develop its giant offshore North Field in the early 1990s, Qatar has banked on the global gas market to provide it with its hydrocarbon wealth," MEED reported.

"To deliver its gas to markets around the world it has built infrastructure, including a total of seven LNG trains, among them the world's four largest mega-trains with a capacity of 7.8 million tons a year."

"Qatar was forced to change its whole LNG strategy" because of the growth of U.S. gas production, said Giles Farrar of Edinburgh-based energy consultants Wood Mackenzie.

"Its mega-trains were sanctioned on the basis that it was going to ship large quantities to the North American and Northern European markets, at prices that are not that dissimilar to today's.

"The shale gas revolution changed that picture. The U.S. did not require any imports, so Qatar diverted its LNG to either Europe or to high-grade Asian markets."

In recent years, global demand for gas has grown steadily, from 84.72 tcf in 2000 to 112.9 tcf in 2010, according to the BP Statistical Review.

This is particularly true of Asia, and has been complicated by the absence of new sources of natural gas.

The Fukushima nuclear plant disaster in March, when Japan was hit by an earthquake and tsunami, has pushed Tokyo to switch to gas-fired power plants, boosting Asian demand for gas.

"We expect the market to tighten between 2013 and 2015, as there will be little new LNG supply coming to market," Farrar told MEED.

"As a result we believe some buyers will be forced to turn to Qatar in this time period as there will be no alternative supplier."

Meanwhile, Qatar's main rival, Iran, across the gulf, is having problems because of international sanctions imposed in June 2010 over its contentious nuclear program.

On October 17, the state-owned Iranian Offshore Oil Co. announced it has abandoned plans to build an LNG plant on Lavan Island in the south of the gulf because Western companies have pulled out of the project.

However, the EIA recently forecast the Islamic Republic's gas production would hit 9.4 trillion cubic feet a year by 2035, which could challenge Qatar.

Iran has reserves of 1,045.7 tcf, 15.8 percent of the world total and second only to Russia's

AMERICAS

U.S.

DOE Grants First Part of LNG Export License to Dominion Cove

Dominion Cove Point LNG LP landed its first authorization on the way to equipping its Cove Point LNG import terminal with liquefaction facilities that will let terminal customers move domestic natural gas to overseas ports.

"DCP is authorized to export domestically produced LNG by vessel from the Cove Point LNG Terminal up to the equivalent of approximately 1 Bcf/d for a 25-year term, beginning the earlier of the date of first export or six years from the date the authorization is issued, pursuant to one or more long-term contracts that do not exceed the term of this authorization," John Anderson, manager of natural gas regulatory activities in the U.S. Department of Energy's Office of Fossil Energy, said in an October 7 order recently made public.

The multi-contract authorization, which Dominion applied for September 1, covers exports to countries with a free trade agreement with the U.S.: Australia, Bahrain, Canada, Chile, the Dominican Republic, El Salvador, Guatemala, Honduras, Jordan, Mexico, Morocco, Nicaragua, Oman, Peru and Singapore. A second level of DOE authorization, which Dominion announced that it applied for October 3, would cover exports to trading partners that do not have a free trade agreement.

After securing DOE permissions, the Dominion Resources Inc. subsidiary must also apply for a certificate from FERC to build the liquefaction facilities.

Zach Allen, president of Raleigh, N.C.-based LNG consulting firm Pan EurAsian Enterprises Inc., said the Cove Point Terminal was in a favorable position for gas exports, close to the Marcellus Shale supply region.

In its application with the DOE, Dominion said it could begin construction of the facilities in 2014 and place them in service at the close of 2016. The company told the DOE that exports would be in the public interest. According to economic studies filed with the application, the combined effect of exports from the Cove Point Terminal and connected upstream gas production would provide about 14,600 permanent jobs and $22 billion in additional government royalties and revenues to federal, state and local governments over the 23-year post-construction operating period of the liquefaction facilities. Dominion estimated that the operating period would run from 2018 to 2040. (DOE FE Docket No. 11-115-LNG)

CANADA

Shell JV Buys Potential Kitimat, BC LNG Export Site from Cenovus

Royal Dutch Shell PLC (RDSA) said October 20 it acquired a site for a potential liquefied natural gas export terminal in Kitimat, B.C. from Cenovus Energy Inc. (CVE).

Terms of the deal weren't disclosed. Shell acquired the site on behalf of a joint venture, with Japan's Mitsubishi Corp., China National Petroleum Corp. and Korea Gas Corp., that's exploring shipping super-cooled LNG from Canada to customers in Asia.

Shell's move follows news the previous week that Canada had granted the first natural gas export license to a C$5.6 billion terminal, also in Kitimat, planned by natural gas producers Apache Corp. (APA), Encana Inc. (ECA) and EOG Resources Inc. (EOG), that could begin shipping natural gas to markets in Asia by late 2015, eventually ramping up to shipments as large as 1.4 billion cubic feet a day.

Shell spokesman Stephen Doolan said its Kitimat project is still in "very early stages of planning" and he didn't have an estimate of how much gas the project would ship or how much it would cost to build.

The move by Shell and others to ship natural gas out of North America reflects a big shift in the continent's natural gas markets since horizontal fracturing techniques unlocked vast new supplies starting in the middle of the last decade, causing natural gas prices to plummet. Plans to build terminals to import natural gas were scrapped as producers are eager for new markets abroad to sell their abundant gas supplies.

Cenovus, a heavy oil producer, acquired the marine facility for C$38 million in November 2010 from Vancouver's Methanex Corp. (MEOH) and uses it to import some of the light petroleum condensates it uses in its oil-sands production. A Cenovus spokeswoman said it will continue to import condensates from the site until Shell converts it to an LNG export terminal.

Shell has also considered building an LNG export terminal that would ship 1 billion cubic feet a day at the port on Prince Rupert Island, B.C., about 80 kilometers west of Kitimat. Doolan said Shell is now focusing on the Kitimat location.

In addition to hosting Shell and the Apache LNG sites, Kitimat is also the potential site for oil export tankers targeting Asian markets. Plans by Canadian pipeline company Enbridge Inc. (ENB) to build the Northern Gateway pipeline from oil production in Alberta to the British Columbia coast are being considered by Canadian regulators, and opposed by some environmental and native groups.

CANADA / JAPAN

Maersk Reaches Deal on Sale of LNG Business for $1.4 Bln to Teekay LNG and Marubeni Corp

Danish industrial conglomerate A.P. Moller-Maersk A/S said on October 12 it has reached a deal to divest its liquefied natural gas transport unit Maersk LNG, further pursuing its strategy to focus primarily on its shipping, container and oil business.

The LNG unit, which owns and operates a fleet of six LNG carriers and owns 26% stakes in a further two vessels, has been purchased jointly by Teekay LNG Operating LLC and Japan's Marubeni Corporation for $1.4 billion on a cash and debt free basis, Maersk said in a statement.

Maersk has sought a buyer for Maersk LNG since it announced its intention of divesting the unit in May.

"Maersk LNG does not in itself have the necessary scale to significantly influence the overall development of the industry. And as Maersk LNG is not within those core business areas, where the Group intends to invest, the conclusion is that Maersk LNG would benefit from a different ownership," the company said.

Maersk said the sale's agreement comprises all of Maersk's LNG vessels and the stakes it owns in carriers as it completely pulls out of the LNG business.

The transaction remains subject to customer consent and regulatory approval and is expected to be completed during the fourth quarter of 2011, Maersk said.

ASIA

Shell Says Asia will Drive Energy Growth

Energy-hungry Asia will remain the major growth driver for Shell, though the region’s appetite may diminish slightly next year owing to global uncertainties, the Dutch oil and gas major’s chief executive officer, Peter Voser, said on October 31.

“I think Asia-Pacific for us is the key growth region. We see a lot of growth, and, hopefully, enough growth, that can actually drive the worldwide economy coming out of Asia-Pacific,” Voser said on the sidelines of the Singapore International Energy Week.

“That’s where huge parts of our investment actually go; into Asia or into upstream projects, for example, (from) where the gas finally will go to Asia,” he said.

Shell’s major projects in the region include the deep-water Gumusut field in Malaysia and the Shell Eastern Petrochemicals project in Singapore, the company’s largest petrochemicals investment globally. The company also has a presence in Brunei, China, Indonesia, the Philippines, Thailand, Vietnam and Australia.

And, while Shell will look to scale up operations within Asia to meet growing demand here, it will also invest elsewhere, including in state-of-the-art equipment, to ensure the supply-side is well bolstered.

“We have recently taken a final investment decision on new technology called ‘Floating LNG’, which will actually allow us to develop smaller gas fields off-shore, have a smaller footprint, and then deliver the LNG to the hungry Asian markets,” Voser said.

Earlier this year, Shell announced it would build the world’s first floating liquefied natural gas facility that can produce gas from offshore fields and liquefy it onboard by cooling, at an estimated cost of $11.5 billion. It is likely to be moored 200 km off the Australian coast on completion.

“That’s a ship which we are building. It is 485 meters long, 70 meters wide and 600,000 tonnes heavy with a lot of technology from Shell in it. We are the first, and only one, to drive this. We look at this as one of the drivers for our growth aspiration in Asia-Pacific,” he said.

At the same time, Shell will continue to grow its LNG business in India, while also expanding its retail operations in the country. “I think India with its economy and population will be key in the growth of energy demand in the future... For Shell, India is a very important country. We are quite clearly focused on bringing gas into India,” he said.

Shell, in partnership with France’s Total, operates the 3.6-million tonnes per annum LNG terminal at Hazira, which consists of a storage and re-gasification terminal along with port facilities. “We are very pleased with the Hazira terminal that we have, which is our main entry into India and that capacity is used a lot,” he said, adding that the company would push for long-term LNG contracts.

The oil and gas major, which acquired a marketing license in 2004 to set-up 2,000 fuel retail stations, also expects its retail arms to grow.

“As far as I know, we are still the only IOC (international oil company) with a marketing license and, therefore, we are growing our consumer business in India. The pace of that (growth) will depend on how fast we can acquire land, plots, etc. but also on how the overall energy policy of the Indian government will work. I think I have seen very positive signs in that direction,” he said.

ASIA / PACIFIC

GDF Suez Makes Development Strategy Deals with CIC, CNOOC in Asia-Pacific Region

On the occasion of his visit to China, Gérard Mestrallet, Chairman and CEO of GDF Suez signed two agreements October 31 with China Investment Corporation (CIC) and China National Offshore Oil Corporation (CNOOC) illustrating the development strategy of GDF Suez in China and in the Asia-Pacific region.

Last August, GDF Suez and CIC announced an agreement for cooperation across multiple businesses and regions that will provide additional development opportunities for the Group, in particular in the Asia-Pacific region. A first steering committee co-chaired by Lou Jiwei, Chairman and CEO of China Investment Corporation and Gérard Mestrallet took place October 31 in Beijing.

As the first milestone of this cooperation, GDF Suez and CIC officially signed an agreement covering a €2.3 billion minority investment in the Exploration & Production Division of GDF Suez and the acquisition by CIC of a 10% stake in train 1 of the Atlantic LNG liquefaction plant in Trinidad and Tobago.

As part as the development of its activities in the region, GDF Suez also signed with CNOOC a cooperation agreement in the liquefied natural gas sector. Through this agreement, GDF Suez will provide CNOOC with a shuttle and regasification vessel to be used as a floating storage and regasification unit in China. This follows the recent signing of a cooperation framework agreement with Beijin Gas Group which covers several fields of cooperation such as natural gas, LNG or energy services.

AUSTRALIA

Santos, GDF Suez FLNG Plan now Projected to Late 2018

Plans by Santos and its French partner GDF Suez to develop a floating LNG project off WA's northern coast appear to be slipping, with the Bonaparte venture not expected to be operational until the end of 2018 at the earliest.

But the partners have also flagged that output from Bonaparte, based in the Joseph Bonaparte Basin 250km west of Darwin, may be increased from an initially planned two million tonnes of LNG a year to between two and three million tonnes.

The partners are yet to put a price tag on Bonaparte, which would become the second floating LNG project off WA's coast after Royal Dutch Shell's world-first Prelude development.

Submitting documents to the Federal Government's Department of Sustainability, Environment, Water, Population and Communities, Santos and GDF Suez said they expected to make a final investment decision in late 2014, followed by a four-year construction period.

The FID target date is at the tail-end of previous guidance from Santos of a sign-off in 2014, while only last year Santos was still aiming for an approval in 2013.

Bonaparte LNG will involve a floating LNG processing vessel moored over the Petrel, Tern and Frigate gasfields, which combined contain more than two trillion cubic feet of gas.

The gasfields have a carbon dioxide content of up to 5.2 percent, considerably lower, Santos and GDF Suez say, than that in the nearby fields being developed by Inpex Corp and PTTEP.

The CO2 content level is important because, unlike land-based LNG plants, floating ventures are yet to demonstrate they can reinject the greenhouse gas. The CO2 needs to be removed, and therefore disposed of, from the reservoir gas before it can be converted to LNG.

Santos and GDF Suez said they were committed to zero routine flaring and minimal routine venting of gas but would formulate a proper greenhouse gas abatement strategy at least a year before Bonaparte became operational.

GDF Suez, which is the world's third-biggest LNG buyer, has already paid Santos $US200 million as part of a 2009 farm-in deal and has to pay a further $US170 million upon FID. The French group will emerge with a 60 per cent of the development.

The documents reveal Santos and GDF Suez expect to begin front end engineering and design studies in 2013, followed by FID in the fourth quarter of 2014. Development drilling would begin in 2016 ahead of first gas in 2018.

Ichthys $19.4 Bln LNG Project FID Scheduled for End of Year

The US$19.4 billion (A$20 billion) liquefied natural gas project in Australia's far northwest will be a "game changer" for Darwin, federal resources minister Martin Ferguson says.

Inpex general manager for Darwin, Sean Kildare, said there were "no roadblocks" to the joint venture making a final decision to proceed with the project by the end of the year, with territory and federal environmental approvals already in place.

Mr Kildare said "The FID for the Ichthys project is scheduled for the end of this year, with first gas exports scheduled for the fourth quarter of 2016."

The Ichthys LNG project, a joint venture between Japan's Inpex and France's Total, will draw gas from the Browse Basin offshore from Western Australia's Kimberley region and process it in Darwin.

The plan has dismayed WA Premier Colin Barnett, who wanted the processing to be done in his state, but Northern Territory chief minister Paul Henderson is celebrating the financial boost it will bring to the Top End's capital.

Mr Ferguson says Darwin and the Northern Territory are positioned to be at the center of much of the LNG industry's future growth.

"A joint venture decision to proceed with Ichthys would be a game changer for Darwin," the minister told the South East Asia Australia Offshore Conference in Darwin on October 6.

"There are no show stoppers or bottlenecks that would cause a substantial delay to delivering Ichthys' FID (final investment decision)," Mr Kildare told the conference.

Mr Kildare said Inpex had concluded its onshore front end engineering design (FEED) program and was in the final stages of completing its offshore FEED.

Mr Barnett has long bemoaned Inpex's decision not to build the plant on the Maret Islands, about 200km north of Broome, and instead pipe the gas over 850km to Darwin.

Inpex made the decision after becoming frustrated with efforts to obtain agreements for a processing site in WA's pristine Kimberley region.

Mr Barnett has blamed the federal Labor government, former state Labor government and indigenous association Kimberley Land Council (KLC) for delays over choosing a site.

Woodside Petroleum has encountered fierce opposition to its planned Browse LNG project in the Kimberley, where the KLC, on behalf of traditional landowners, has accepted $1.5 billion in benefits for the region's Aboriginal communities in exchange for rights to the land.

On October 6 Mr Ferguson condemned protesters who have distributed newsletters containing racial slurs about Aboriginal leaders who support the project.

Mr Ferguson also said Australian LNG projects including Woodside's Pluto and Chevron's Gorgon would take the nation from being a regional LNG hub to a global leader, with export volumes in coming years expected to propel it into second place behind Qatar.

Total committed capital expenditure in the domestic LNG sector is over $140 billion, the minister said.

WorleyParsons Wins Contract for Wheatstone Construction Management

WorleyParsons on October 6 announced the award of a contract for construction management services as an integral part of the owner's team on the Chevron Wheatstone Downstream Project.

The onshore facility is located at Ashburton North, 12km west of Onslow in Western Australia's Pilbara region. The foundation project will include two LNG trains with a combined capacity of 8.9 million tonnes per year and a domestic gas plant.

To execute this project, construction-driven project teams will be located in Perth, Houston, onsite in Ashburton North and in selected fabrication yards in Asia.

The estimated revenue to be received by WorleyParsons under this contract is AUD235 million.

Chief Executive Officer of WorleyParsons, John Grill commented: "Chevron is a key WorleyParsons client around the world. We are delighted to be working closely with them to develop Wheatstone and are proud to be part of this world class project."

Sembcorp Marine Wins $100 Mln Contract to Assemble Pipe-Rack Modules for APLNG

Sembcorp Marine's wholly owned subsidiary SMOE has been awarded a contract valued at approximately US$100 million and may potentially increase to be in excess of approximately US$150 million for the module assembly for Australia Pacific LNG's liquefied natural gas facility on Curtis Island, Queensland, Australia.

The contract, awarded by Bechtel Overseas, entails the assembly of process and cryogenic pipe-rack modules for the LNG facility. Bechtel and SMOE will form an integrated management team to manage the module assembly program for the Australia Pacific LNG facility, scheduled to be completed in three years.

Mr Ho Nee Sin, Managing Director of SMOE said “This project will be executed in our Indonesian Batam Yard, located within the Kabil Industrial Estate with capacity for lay down, warehousing, quarantine, assembly, workshops and yard facilities as well as dedicated jetty for load out of the completed modules. During the peak period, it is estimated that a workforce of about 3,000, comprising direct and indirect will be engaged.”

“In addition, this contract will add on to our business line of SMOE, capitalizing on our Batam yard facilities and capabilities in serving the growing LNG industry especially in Australia and the region.”

The contract is not expected to have any material impact on the earnings per share and net tangible assets of Sembcorp Marine for the year ending December 31, 2011.

LNG Projects will Put Pressure on Australian Pipeline Capacity

The range of LNG projects in Queensland and New South Wales will potentially raise the pressure on Australia's pipeline operators to increase capacity.

According to the chairman of the Australian Pipeline Industry Association, Peter Cox, in order to ensure that sufficient pipeline capacity is in place when the first LNG projects in these two states begin production (from 2015), an unprecedented level of investment in the national pipeline sector is required.

A number of pipelines are being planned in Queensland to transport gas from coal seams to export gas projects along the coast, mainly around the port of Gladstone and Curtis Island just offshore. Cox also emphasised that it is not only pipelines running to ports that are required, but also pipelines that will transport gas to local electricity plants.

Most of the planned gas pipelines in Australia are located either in Queensland or New South Wales. Some of the most prominent gas pipelines under construction are the 800-km Queensland Hunter Gas Pipeline, which will connect the Wallumbilla Gas Hub in Queensland with Newcastle in New South Wales, where the gas will be used to feed electricity plants as well as being connected to households.

Several coalbed methane (CBM) projects are planned in eastern Australia, and CBM from Queensland, and in future from New South Wales, will be aimed at the export market by way of LNG projects. The number of gas projects in these states requires significant investment in the pipeline network, which will greatly increase the states' ability to meet growing gas demand.

Australia's gas pipeline network covers 20,000 kilometers and is rapidly expanding thanks to an estimated US$4.16 billion (AU$4 billion) in investment in new pipelines or expansions since 2000. The government's decision to not subject gas pipelines to regulation has facilitated both access to pipelines and competition between operators, which in turn has greatly contributed to private investment.

INDIA

India's Petronet in Talks to Purchase Overseas LNG Liquefaction Plants

India's Petronet LNG is reportedly in talks to purchase stakes in LNG liquefaction plants overseas, according to Managing Director A.K. Balyan. The company is reportedly talking to some LNG liquefaction developers in Australia who have not yet closed their financial commitments although Balyan declined to mention them by name.

Balyan also stated that five projects in the United States had applied to the authorities for approvals to export LNG and that Petronet was talking to some of them with the aim of tying up long-term LNG volumes.

In India, Balyan highlighted that Petronet would complete the 5-million-t/y Kochi LNG terminal and expand its Dahej LNG terminal by 5 million t/y to a 15-million-t/y capacity. The company also plans to establish another 5-million-t/y-capacity terminal on the east coast of India, for which two sites in Andhra Pradesh state and one in Orissa state are shortlisted.

Petronet's aim of acquiring stakes in LNG liquefaction projects is designed to support India's gas supply security by giving the company equity LNG volumes, which it has the freedom to market to its own terminals. Purchasing equity in liquefaction plants can increase Petronet's importance as a buyer to project developers, strengthening its ability to secure large LNG contracts, which can reduce risks related to importing cargoes from the more volatile LNG spot market.

Petronet is targeting politically stable states with large gas production growth potential for LNG stake acquisitions and might be looking to source supplies from Chevron's 8.9-million-t/y Wheatstone LNG project in Australia, which reached a final investment decision in September and which has significant spare capacity available.

State gas transmission company GAIL is also looking to acquire stakes in LNG liquefaction plants on the east coast of the U.S., pointing to positive perceptions of India's gas demand growth, which has led Petronet to target a 25-million-t/y import capacity by 2015/16.

India Clears Petronet Plan to Triple Capacity of Kochi LNG Terminal

India’s Ministry of Environment has given clearance to Petronet LNG Ltd to enhance the installed capacity of its LNG terminal in Kochi to 15 million metric tonne per annum (MMTPA) from the existing 5 MMTPA.

The Kerala Government had done intense lobbying with the Union Government for increasing the installed capacity of the terminal.

The decision was taken at a meeting of the Expert Appraisal Committee (EAC) for Building/ Construction Projects/ Township and Area Development Projects, Coastal Regulation Zone, Infrastructure Development and Miscellaneous Projects held on October 17.

According to the minutes, augmentation of the capacity will not induct additional environmental issues and that the planned system will take care of the overall requirements of the facility.

With the completion of the project, an economic boom is expected in the state with more industries shifting to LNG-based energy and even the power-starved state too shifting the of power generation to LNG. The Ministry of Environment had already given the nod for laying the sub-sea LNG line from Kochi to NTPC Kayamkulam. The work of the sub-sea line has not started, as the NTPC is yet to sign an agreement with GAIL for the purchase of LNG.

When the pipelines are laid to Kayamkulam, NTPC Kayamkulam will be upgraded to a 1,200 MW gas-based power plant. Industries in the state will be attracted only if domestic LNG is available at a cheaper rate than imported LNG. Gas allocation agreement has to be signed with the Union Government for the availability of domestic LNG. It has been agreed in principle to extend the pipes from Kayamkulam to Thiruvananthapuram as part of the city gas project.

Electricity Minister Aryadan Mohammed said that the conversion of naphtha to LNG at NTPC has been discussed with Prime Minister Manmohan Singh.

As soon as the LNG terminal is completed, pipe-laying works from Kochi to Kayamkulam would be started.

With the proposed projects, Kerala is expected to produce 5,000 MW of power in five years, he said.

PAKISTAN

Pakistan’s OGRA Prepares to Award Port Qasim LNG Import Contract

The Oil and Gas Regulatory Authority (OGRA) will award the contract of setting up a terminal at Port Qasim in November, which will be used for the import of liquefied natural gas in the country, sources said on October 11.

Eighteen companies had shown interest to setup the terminal, out of which one will be selected early next month under third party access rules.

"The delay in rules was the only snag in awarding the contract," a source told media. "The draft has already been sent to stakeholders for vetting purposes, and now it should be approved in two weeks time."

The Sui Southern Gas Company (SSGC) will allow the distribution of LNG through its system. Azim Siddiqui, Managing Director SSGC, said that OGRA would give the third party access to utilize SSGC infrastructure to only one party, while three other companies already given licenses, including Gasport, Engro Vopak and Global Energy Holdings (GEH), have consented to setup their own infrastructure and terminal diluting the exclusivity of SSGC.

However, the sources said that these three companies are still in the race for SSGC capacity allocation. The selected party would develop their own LNG FSRU, arranging their own supply of LNG and having their own buyers of re-gasified LNG (RLNG).

Besides other requirements, OGRA had linked the award of contract to the company that could commence gas supply by the second quarter of 2012, he said. SSGC expects to have available initially, an entry and exit capacity of 500mmcfd RLNG. The development of an interconnection from the entry point at the LNG terminal to the nearest specified entry point in the SSGC transmission system would also be laid and developed by the investor, Siddiqui said.

The transmission commitment and the infrastructure should have the capacity of additional supply up to 2-BCF-D subject to the need and demand, he said.

Meanwhile, local companies, which have been waiting for years to enter into the LNG business, allege that a Turkish competitor is being given preference because of the government pressure.

"Every government department is going out of its way to help little-known Global Energy Holding (GEH)," an official close to the development said.

"It has been issued relevant licenses in a matter of months, while other companies have waited for years."

PAPUA NEW GUINEA

InterOil Seeks Partner for Liquid Niugini Gas Led LNG Project in Papua New Guinea

InterOil Corporation has retained Morgan Stanley & Co. LLC, Macquarie Capital (USA) Inc. and UBS AG as joint financial advisors to assist InterOil with its soliciting and evaluating proposals from potential strategic partners in the liquefied natural gas project currently being led by InterOil's joint venture entity, Liquid Niugini Gas Limited. The Company anticipates that these proposals will relate to obtaining an internationally recognized LNG operating and equity partner for development of the Project's gas liquefaction and associated facilities in the Gulf Province of Papua New Guinea, together with a sale of an interest in the Elk and Antelope fields and in InterOil's exploration tenements in Papua New Guinea.

InterOil has determined, in response to inquiry from potential LNG partners and in consultation with the Papua New Guinea Government, to engage in a formal partnering process. The considerable strengthening of the Asian LNG market, the increased interest in exploration and investment in Papua New Guinea, as well as the Company's reservoir analysis and project design fundamentals lead the Company to believe that now is an attractive time to seek a partner.

The Company expects that successful completion of such a transaction will satisfy the objectives of complementing the Company's planned LNG development capabilities with an internationally recognized LNG partner and generating a third party valuation for InterOil's resources.

"We look forward to working closely with Morgan Stanley, Macquarie and UBS as they support us in this evaluation process and in reaching what will surely be a milestone for InterOil, its shareholders and Papua New Guinea," said Phil Mulacek, Chief Executive Officer of InterOil.

$15 Bln PNG LNG Project On-Track and On-Budget for 2014 Start-Up

Papua New Guinean exploration company Oil Search has announced that the 6.6-million-t/y PNG LNG project operated by Esso Highlands Ltd is on track for a 2014 start-up.

During this year's third quarter, Oil Search reported that all line-pipe for the onshore pipeline has been delivered, with 30 km of the 292-km pipeline now complete and buried, while fabrication of the LNG processing trains, tanks and jetties at Port Moresby continued. Oil Search continued construction activities for the Associated Gas Project at PNG LNG which aims to modify facilities at associated gas fields to allow them to provide pipeline specification gas and tie them into the onshore gas pipeline.

Oil Search also wants to install a new gas-commissioning skid at the Kutubu field for the initial filling of the LNG gas pipeline and commissioning of the LNG liquefaction plant. Oil Search clarified that production shutdowns at the Kutubu field were undertaken to allow tie-ins to gas facilities and crude oil storage tank modifications. Oil Search has announced that the entire PNG LNG is approximately 50% complete and remains within its US$15 billion budget.

After a slow start caused by land-acquisition issues and the need to construct extensive supporting infrastructure to build a major gas development project in such a remote location, execution of the PNG LNG project now appears to be speeding up. Oil Search reports that the first onshore pipe weld for the project was undertaken in the second quarter this year, suggesting that over the last quarter steady progress has been made on the onshore gas pipe, which will run from the Hides gas-conditioning plant to Kopi.

The production shut-downs undertaken for the Associated Gas Project caused Oil Search to announce a 16% decrease in oil-equivalent production from the second quarter at 1.49 million boe, although as the shut-in facilities have now restarted production and revenue impacts are short term. Going forward, Oil Search plans to undertake upgrade work at an oil terminal at Kumul to facilitate liquids export from PNG LNG, while the mobilization of Saipem during the third quarter suggests work on the offshore pipeline section, which will run from Kopi across the Gulf of Papua to the LNG plant at Port Moresby, could commence during the coming quarter. Going into the fourth quarter, Oil Search also plans to undertake a major exploratory drilling program on its acreage in the Highlands, which could be aimed at securing incremental reserves for the PNG LNG project going forward.

EUROPE / AFRICA / MIDDLE EAST

ALGERIA

Sonatrach Expects to Start Production at New Algeria LNG Unit Next Year

Production from a new liquefied natural gas unit in Algeria will start next year ay 5.4 million tonnes per year and a second unit is expected to start production in 2013 at 7.4 million tonnes per year, the head of Sonatrach said.

“Sonatrach has launched two trains to produce LNG: A unit in Skikda with an estimated output of 5.4 million tonnes per year. It will be ready in 2012,” Nourredine Cherouati, the state energy company’s chief executive, was quoted by El Khabar newspaper on October 25.

“We have a second unit in Arzew with 7.4 million tonnes per year. It will be ready in 2013,” he said.

Cherouati said Sonatrach’s revenues from oil and gas exports reached $53 billion in the January-September period this year. He gave no figures for the same period last year.

ANGOLA

Angola’s $8 Bln Soyo LNG Project Scheduled to Start Up Before Year-End

The construction of the Angola LNG project in Soyo is nearing completion and preparing to start up before the end of the year. This is according to Angola LNG chairman Antonio Orfao, who also said in Sonangol's Universomagazine that the LNG plant will have an initial capacity of 5.2 million t/y.

Simultaneously, Angola LNG director Daniel Rocha has said that LNG exports to the U.S. market will commence in the first quarter of 2012, with LNG sales to the European and Asian markets also being considered. Sonagas, a subsidiary of the Angolan NOC, holds a 22.8% interest in the project, alongside Chevron's 36.4% while Eni, Total, and BP own 13.6% each.

The Angola LNG project (sometimes referred to as the Soyo project) is a key part of the government's strategy to monetize offshore gas reserves, estimated at 9.5 tcf. The plant will initially be fed by associated gas from oilfields, which in return will reduce gas flaring, but ultimately, as existing oilfields mature and associated gas levels drop, the plant will be fed from previously discovered deepwater gas fields, particularly from offshore blocks 1 and 2.

Project costs have nearly doubled to the current US$8 billion thanks to rising construction costs amid a growing Angolan economy. Ballooning costs are a common reason for delays to downstream projects, particularly in sub-Saharan Africa: for instance the Escravos gas-to-liquids project in Nigeria.

KENYA

Kenya Expects Mombasa LNG Terminal to Cost $500 Mln

Kenya expects a planned liquefied natural gas terminal to cost $500 million and take 3-5 years to build once it floats a tender in February 2012 as it seeks to diversify sources of electricity to meet rising demand, an energy official said on October 5.

The LNG terminal at the port city of Mombasa will have two storage tanks, each holding some 35,000 tonnes of gas, the energy ministry’s permanent secretary, Patrick Nyoike, told Reuters on the sidelines of an energy conference.

East Africa’s largest economy is struggling with ageing infrastructure in its energy sector and the country is plagued with chronic power cuts and higher electricity bills, which critics say have discouraged investments.

“We are going to tender, may be in three months we will deliberate and award the contract,” Nyoike told Reuters on the sidelines of a national energy conference.

“After that the developer will take between three and five years. It is expensive, it is about half a billion dollars,” adding that he expected financing to come from private sector participants.

“We are making it a private sector initiative. All what we are doing is to provide land for the facility at Dongo Kundu (Mombasa),” he said.

Regional trade bloc, East African Community, is pushing its five member states to link up energy resources in an effort to bolster the region’s energy security.

A recent EAC study shows that a pipeline to move natural gas from Dares Salaam to the Kenyan port city of Mombasa would cost up to $630 million.

Due to major gas discoveries in Tanzania’s deep-water offshore region, Kenya’s southern neighbor has managed to raise its natural gas reserves to more than 10 trillion cubic feet (tcf) from a previous estimate of 7.5 tcf.

Kenya’s government says it has installed power supply capacity of 1,460 MW, against a consumption of about 1,300 MW, leading to shortfalls when factors such as reserve margins are accounted for.

Kenya aims to raise capacity to over 21,000 MW by 2030 by developing a mix of plants powered by hydro, wind, geothermal, coal and nuclear.

MOZAMBIQUE

Offshore Mozambique Gas Find to Boost BPCL LNG Market

The domestic gas distribution business of Bharat Petroleum Corporation Ltd (BPCL), India's second-largest oil marketing company, is set to get a boost following a major natural gas discovery in the African nation of Mozambique by a consortium in which BPCL has a 10% stake.

According to a press statement issued by BPCL, Anadarko Petroleum Corp, a U.S.-based oil explorer, which is the biggest partner in a six-company consortium, has discovered natural gas reserves at Rovuma basin, area 1 in offshore Mozambique.

A BPCL official said preliminary studies showed recoverable reserves of close to 10 trillion cubic feet of natural gas and the consortium planned to set up two 5 million tonne per annum (mtpa) LNG trains in the region to market the gas.

The consortium consists of Anadarko Mozambique with 36.5% participating interest along with Videocon Mozambique, Mozambique's national oil company, Bharat Petro Resources Ltd's Mozambique subsidiary and two smaller firms.

Bharat Petro Resources is the exploration arm of BPCL.

RUSSIA

Total Becomes Main International Partner for Yamal LNG

On October 6 Total signed with Novatek the final agreements to jointly develop the Yamal LNG project, becoming the main international partner on this gas liquefaction project with a 20% share. Novatek intends to keep at least a 51% interest in the project.

"Total is very pleased to be given this opportunity to be pioneers in an untapped region. We will work with Novatek to unlock the Yamal peninsula gas potential using world-class technology and combining the expertise of both companies as we build a liquefied natural gas plant in the area," said Yves-Louis Darricarrere, President Total Exploration & Production. "The decision to participate in this LNG project comes as an addition to the acquisition of a significant share of Novatek's capital and confirms Total's long term commitment to Russia."

The relevant Russian authorities authorized this acquisition on August 22, 2011.

The Yamal LNG project will develop the South Tambey field located in the arctic area of the Yamal peninsula. The resources of this condensate and gas field will allow production of more than 15 million tons of LNG per year. With this project, Total will have access to proven and probable (2P) reserves of approximately 800 million barrels of oil equivalent (boe) within the license duration and to a plateau production of about 90,000 boe per day. The project has been declared of national interest by the Russian authorities.

Novatek, the largest independent gas producer in Russia with whom Total created a strategic alliance earlier in 2011, supplies approximately 13% of the domestic market. Its production reached 25.3 billion cubic meters of gas for the first semester of 2011. Novatek's portfolio of resources is made of several giant fields that underlie Novatek's strong potential for growth. Since 2009, Total and Novatek are also jointly developing the Termokarstovoye field.

Kogas Proposes Mini LNG Plants, DME Plant in Russia's Far East

South Korea's Kogas has made a proposal to Russia to build three mini LNG plants in Primorye, Khabarovsk Territory and Sakhalin Island, the general director of LLC Kogas Vostok, a Kogas subsidiary based in Khabarovsk, Chang Seon Lee told Interfax.

Lee is in Sakhalin as part of a business mission that is holding presentations of South Korean companies in three regions of the Far East Federal District from October 17 to 21.

"We are proposing a project to build small LNG plants in three regions of the Far East for gasification of automobile transport and to supply gas throughout the Far East region. The main consumers of gas in the Far East Federal District are dispersed in a large area, and construction of gas pipelines to many consumers does not make economic sense. Mini LNG plants would completely cover the whole region's demand for this fuel," Lee said.

The cost of building one mini plant with capacity of 200,000 tonnes of LNG per year would be $87 million. The fuel would be delivered to consumers by tanker trucks.

The proposal for gasification of motor vehicle transport calls for the construction of 100 gas filling stations in each region where such a mini plant is built.

Such filling stations and mini plants would enable these regions to switch their public transit to gas, which would result in major financial savings and improve the environmental situation, Lee said.

Another proposal from the company is to build a plant to produce dimethyl ether (DME), an alternative fuel.

"We have so far proposed the construction of such a plant to the government of Khabarovsk Territory. It is now studying this project. We, in turn, have sent our proposals to Gazprom and Exxon Neftegas Limited, as we will need gas supplies for this project," Lee said.

There are two options being proposed for such a plant. The first calls for building a plant to produce 300,000 tonnes of DME per year at a cost of $354 million. The second calls for a plant with capacity of 1 million tonnes and investment of about $700 million. "Capacity of 300,000 tonnes would probably be optimal," Lee said.

A similar plant could be built on Sakhalin Island. DME can be used for electricity generation, heating homes and as a fuel for automobiles. It can substitute for natural gas, Lee said.

This type of fuel minimizes emissions, and is economical in terms of the cost of transportation, because it is shipped by special trucks and does not require construction of pipelines or other expensive infrastructure.

Demand for this fuel in South Korea will total about 1 million tonnes in five years, Lee forecast.

"If such a plant is built in the Far East, there would be no need to worry about markets. There will be demand for this product," he said.

Lee also said Kogas is interested in participating in all new oil and gas projects in Sakhalin Region. "We are also interested in the possibility of participation in development of hydrocarbon deposits in Yakutia, and on the shelf of Magadan and Kamchatka," he said.

UKRAINE

Azerbaijan Interested in Participating in Ukraine LNG Terminal Project

Azerbaijan is interested in participating in a project for construction of a terminal for re-gasification of liquefied natural gas in Ukraine, Azerbaijan’s Ambassador, Eynulla Madatli said.

“You know, a Spanish company (Socoin) won the tender [for performance of feasibility studies for the project], but there is more than one factory there and there are also auxiliary infrastructural structures, in the construction of which we can actively participate,” said the diplomat.

In addition, the ambassador expressed confidence that supply of the Azeri Light blend of crude oil from the Caspian region to Ukraine will increase in the future. Asked by Ukrainian News to predict the volume of Azeri oil supplies in 2012, he said that Azerbaijan was ready to fulfill all its obligations involving energy supplies, as stipulated in bilateral agreements.

Madatli added that the volume of deliveries would depend on the readiness of the transport infrastructure. “The Odesa-Brody oil pipeline has come alive and begun operating thanks to this transportation. But we are waiting, and we are not only waiting but also willing to actively assist in building the necessary infrastructure for reception and transportation of petroleum products,” said Madatli.

At present, Azerbaijani crude oil delivered to Ukraine goes to the Kremenchuk petroleum refinery and two western Ukrainian refineries (the Naftokhimik Prykarpattia petroleum refinery and the Halychyna petroleum refinery). In addition, Caspian crude oil is transported through the territory of Ukraine via the Odesa-Brody and Druzhba oil pipelines to the Mozyr petroleum refinery (Belarus).

National LNG Terminal Project, which is a state enterprise, declared the Socoin Company (Spain) as the winner of a tender for performance of feasibility studies for the national project involving construction of a terminal for re-gasification of liquefied natural gas in Ukraine in September.

IRAN

Iran Says LNG Projects Still Active but Delayed

Iran's major liquefied natural gas projects have not been abandoned and foreign partners are not willing to cancel their contracts, an Iranian energy official says.

Managing director of the National Iranian Gas Export Company Hossein Bidarmaghz speaking to reporters on October18 that the NIGEC, as the main stockholder of Pars and Persian LNG projects, considers them still active, IRNA reported.

Bidarmaghz said both projects have been temporarily halted as cancelling the projects would be costlier than a temporary halt.

The Iranian official said LNG can be used as fuel by power plants to generate electricity.

Asked about LNG use in small vehicles, he noted, “This project has not been implemented anywhere in the world and few countries, including Russia and China, use it as fuel for heavy vehicles.”

The Persian LNG project aims to build a gas liquefaction plant in Tombak region, 50 km northwest of Asalouyeh and 15 km southeast of the city of Kangan in the southern Bushehr Province. It is meant to produce a total of 2.16 million tons of LNG.

Pars LNG project also aims to yield an annual amount of 10 million tons of liquefied natural gas.

Iran ranks the second in the world in natural gas reserves after Russia with available gas reserves estimated at over 33 trillion cubic meters.

In addition to exporting gas to Turkey, Armenia, and Pakistan, the country is currently negotiating gas exports to Iraq.

Iran to Focus on Widening Development of LNG Projects

Iranian Oil Minister Rostam Qassemi underlined the necessity to widen and boost the country's liquefied natural gas production capacity, reminding that the product can elevate Iran's key position in the international market.

"LNG is a product that can make us stronger in the global market and provide us more options for activity in the world markets, therefore it is a strategically important issue," Qassemi said in a message to the LNG conference on October 24.

"We hope to launch Iran's first LNG project followed by the launch of our other planned projects in a bid to have an efficient tool along all the other instruments that we have in the world markets and build a more capable and more influential Iran in the world energy sector," the minister said, adding that Iran plans to inaugurate five new LNG projects.

In September, Iran LNG president, Ali Khayrandish, said that the country is likely to start exports of liquefied natural gas supplies in less than two years.

Iranian officials say that sanctions preventing western liquefaction technology from being supplied to Iran are having no impact on its plans and that it can manage without external project funding.

"The project is now 53-54 per cent complete and we expect to send a first cargo in Q1 2013," Khayrandish said at a conference in London at the time.

"Our country has enough revenue for this project, but if a new recession comes and we lose some money from petroleum exports, then it could lead to delays." Iran LNG is the most advanced project and Indonesia said it was in talks to buy output from Iran LNG from 2013.

Iran, which sits on the world's second largest reserves of both oil and gas, is facing U.S. sanctions over its civilian nuclear program.

Iranian officials have dismissed U.S. sanctions as inefficient, saying that they are finding Asian partners instead. A large number of Chinese, Indian and other Asian firms have negotiated or signed up to oil and gas deals with Iran.

IRAN / IRAQ

Iran, Iraq to Sign First Natural Gas Contract

National Iranian Gas Exporting Company announced in September that the first contract for exporting Iran's natural gas to Iraq would be signed within the next two months.

The caretaker of the National Iranian Gas Exporting Company, Hossein Bidarmaghz, said September 11 that according to the initial contract Iran's gas will be transited through Ilam border to feed three Iraqi power plants but the final agreement will be inked within two months, the official website of Iran's Oil Ministry Shana reported.

The official stated that based on the agreement with the Iraqi energy ministry, the Islamic Republic of Iran would export 25 million cubic meters of natural gas per day to Iraq in the next year and a half.

Bidarmaghz went on to say that the Iraqi Ministry of Electricity has signed a contract with an Iranian company for the construction of the required gas pipeline in its territory.

Iran sits on the world's second largest natural gas reserves after Russia, and holds almost 16 percent of the world's total reserves.

The Islamic Republic is the second largest oil producer of the Organization of the Petroleum Exporting Countries (OPEC).

IRAQ

Iraqi Cabinet Expected to Approve $17.2 Bln Shell JV Gas Deal

The Iraqi cabinet is expected to approve soon a multi-billion deal with Royal Dutch Shell PLC (RDSA) to capture and process gas from three giant southern oil fields--Rumaila, West Qurna phase 1, and Zubair, the country's oil minister said October 10.

The Iraqi Oil Ministry initialed the Iraq South Gas agreements last July with Shell and Japan's Mitsubishi Corp. and the project is now awaiting the approval by the country's Council of Ministers, or COM.

"There is not any problem concerning the agreement and I think the Council of Ministers will approve it in the next weeks," Abdul Kareem Luaiby told Dow Jones Newswires in an interview.

Last month, the deal was agreed by the High Energy Committee, chaired by Deputy Prime Minister for Energy Affairs Hussein al-Shahristani, and then sent it to the COM for final approval.

The 25-year venture calls for an investment of $17.2 billion to create the Basra Gas Company. Baghdad would have a 51% stake, Shell 44% and Mitsubishi 5%.

Some $12.8 billion would be spent on infrastructure and $4.4 billion on construction of a liquefied natural gas facility, according to a document distributed by the Iraqi parliament.

Under the agreement, the company must first meet local demand but can export any gas not used by Iraq's fuel-starved power plants. The planned LNG terminal would handle the export of 600 million cubic feet a day.

The venture would process associated gas produced from three supergiant Iraqi fields--Rumaila, West Qurna phase 1 and Zubair--all in Basra governorate.

"We are committed to supply the venture with 1.6 billion cubic feet a day from these fields," Luaiby had previously said.

The joint venture would sell processed gas to Iraq's state-owned South Gas Company.

An Iraqi oil expert, who asked not to be named, said Iraq would make nearly $100 billion from the venture because the gas would substitute for the oil currently used to fuel Iraq's power stations.

Iraq would tax Shell and Mitsubishi profits at 35%, he said. The expert said Shell and Mitsubishi will make a 7% profit on the whole venture.

Iraq has natural-gas reserves totaling 112.6 trillion cubic feet, the 10th largest in the world. But it produces only around 1 billion cubic feet a day, but some 700 million cubic feet out of which are being flared because of a lack of infrastructure.

ISRAEL

Israel Signs $140 Mln Deal for Off-shore LNG Terminal

State-owned Israel Natural Gas Lines said on October 30 it signed a deal with Italian marine contractor Micoperi to build an off-shore liquefied natural gas terminal costing about $140 million.

The company said in a statement that the terminal, to be built some 10 kilometers out from the Mediterranean coastal city of Hadera, will have the capacity to receive about 2.5 billion cubic meters of gas each year.

Construction is due to begin in the second half of 2012 and be completed by the end of the year, the statement said.

Though natural gas production in Israel is set to soar in coming decades after the discovery of huge off-shore deposits, the country faces a short-term gas shortage between the time production goes online and its current reserves run dry.

Infrastructure Minister Uzi Landau said Israel could face a shortage as early as the third quarter of 2012, and that the terminal is a quick solution.

"The terminal is of the utmost strategic importance for the country's ability to ensure a continuous energy supply to its power stations and to safeguard its energy security," he said.

Underscoring Israel's increasing dependence on natural gas, the company also announced a 15-year contract, valued at $125 million, to supply 1 billion cubic meters of gas annually to Dalia Power Energies, which is building Israel's biggest privately-owned power station.

The Tamar field, the world's largest off-shore find of 2009, is being developed some 90 km from Israel's coast, but production there is not expected to begin until 2013, officials say. The even larger Leviathan field discovered a year later is not due to be on line until about 2017.

In the meantime, Israel's sole working gas field is nearly depleted and gas supplies from Egypt have been continuously disrupted due to chaos and sabotage in the Sinai Peninsula.

Customers have already faced sharp increases in electricity rates as Israel Electric Corp has had to turn to alternative and more expensive fuels.

The off-shore LNG terminal is just one of Israel's stop-gap solutions. The government has also instructed a number of energy companies exploring its territorial waters to speed up operations and threatened to let their licenses expire if they do not meet their commitments.

Shmuel Turgeman, CEO of Israel Natural Gas Lines, said the terminal will meet "all planning and safety requirements in accordance with stringent international standards."

The company said the terminal will be the unloading point for ships carrying the natural gas, which will then be fed directly into Israel's underwater gas pipeline.

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