Nexen has topped a difficult year by securing two significant deals related to Canadian shale gas and the U.S. deepwater Gulf of Mexico. The shale gas deal could boost prospects for a further expansion of the proposed Kitimat LNG project.

Canada's Nexen announced on November 29, 2011 that it had struck a deal to form a joint venture focused on its British Columbia shale gas business. Japanese firms Inpex and JGC have agreed to pay US$680mn (CA$700mn) for a 40% stake in Nexen's properties in the Horn River, Cordova and Liard Basins.

Nexen will retain a 60% operating interest in the assets, and the transaction is expected to close in Q112. The company added that once the JV agreement is closed, the partnership intends to proceed with appraising and developing the assets - 'depending on economic conditions'. The JV properties contain 113-424bn cubic meters (bcm) of recoverable contingent gas resources in Horn River and Cordova, with an additional 141-651bcm of prospective resources in Liard. The properties cover 1,216sq km and current shale gas output of 1.4mn cubic meters per day (Mcm/d) is expected to rise to 34Mcm/d by an unspecified future date, Inpex said.

Nexen highlighted that it would, in conjunction with its new Japanese partners, investigate the feasibility of liquefied natural gas exports. This is undoubtedly the core objective of the JV. One option is for the JV to liquefy its gas at the proposed Kitimat LNG terminal on BC's Pacific coast. The consortium behind Kitimat (led by Apache) won an LNG export license from Canada's National Energy Board (NEB) in October 2011 - to ship up to 10mn tonnes per annum (tpa). Preliminary LNG sales agreements are in place with state-run Korea Gas (2mn tpa) and Spain's Gas Natural (1.6mn tpa).

The Nexen-Inpex JV could choose to take advantage of Kitimat to monetize its own shale gas. Given that Kitimat's backers are already pushing for two 5mn tpa trains, gas from the Nexen-Inpex JV's properties could support a third train at the project, unless the JV chooses to proceed with its own rival LNG export project - a more expensive and time-consuming endeavor.

Nexen has had a difficult year. The company's Buzzard platform in the UK North Sea suffered technical problems, and subsequent repairs in the summer months led to reduced flow rates of around 80,000 barrels of oil equivalent per day (boe/d), compared with full capacity of over 200,000boe/d. Furthermore, labor unrest and broader political violence in Yemen forced Nexen to abandon its Masila (Block 14) contract. The field produced around 225,000b/d at its peak, with output net to Nexen of 24,000-28,000b/d in 2011. Nexen said on November 22 that it was 'evaluating alternatives' for its other Yemeni asset, Block 51, which produces 6,000-8,000b/d net to Nexen.

Other good news from the shale gas JV: Nexen's Toronto shares rose nearly 4.5% on November 29. This was likely to be repeated when trading commenced on November 30, the day Nexen announced a partnership with state-run China National Offshore Oil Corporation (CNOOC) for deepwater exploration in the U.S. Gulf of Mexico (GoM). This latter region is a key growth area for Nexen, which received a GoM drilling permit (Kakuna) in June 2011, signaling its return to GoM drilling after the Macondo oil spill. Further upside to volumes will come from the Usan project in Nigeria, which is expected to add 14,000-28,000 net boe/d upon start-up in 2012.

Cheniere Developing LNG Project at Existing Corpus Christi Site

Cheniere Energy, Inc. announced December 16 that its wholly owned subsidiary, Corpus Christi Liquefaction, LLC ("Corpus Christi Liquefaction") is developing a liquefied natural gas export terminal at one of Cheniere's existing sites that was previously permitted for a regasification terminal. The LNG export terminal site is located in San Patricio County, Texas, and it is anticipated that the terminal would be primarily supplied by reserves from the Eagle Ford Shale, located approximately sixty miles northwest of Corpus Christi. The proposed liquefaction project ("Corpus Christi Project") is being designed for up to three trains capable of producing in aggregate up to 13.5 million tonnes per annum ("mtpa").

Cheniere is launching the development of its second LNG export terminal, building upon its export capabilities in the Gulf of Mexico. Cheniere is currently developing an LNG export project at the Sabine Pass LNG terminal (the "Sabine Pass Project") through its subsidiary, Cheniere Energy Partners, L.P. The Sabine Pass Project, located in Cameron Parish, Louisiana, is anticipated to include four liquefaction trains capable of producing in the aggregate up to 18 mtpa of LNG. Cheniere has recently announced that is has entered into three long-term LNG Sale and Purchase Agreements ("SPAs") for the targeted contract quantity for three of the four trains under development and is currently in discussions with counterparties interested in entering into SPAs for the remaining capacity.

In connection with the development of the Corpus Christi Project, Cheniere has initiated the Federal Energy Regulatory Commission's ("FERC") National Environmental Policy Act ("NEPA") pre-filing review for the proposed natural gas liquefaction terminal through Corpus Christi Liquefaction. The Corpus Christi Project would be underpinned by the significant resources under development in the Eagle Ford Shale, which covers nearly 12,000 square miles in South Texas and ranks among the largest shale discoveries in the U.S. Geologic studies commissioned by Cheniere estimate recoverable oil and gas resources in the Eagle Ford Shale at over 180 trillion cubic feet equivalent, or 30 billion barrels of oil equivalent. There are approximately 200 rigs currently drilling in the Eagle Ford Shale, with increasing emphasis placed on development of the play's oil and condensate reservoir window, where significant quantities of associated natural gas rich in NGL content can be produced.

"Given the strong customer interest for capacity at the Sabine Pass Project, we have decided to initiate the development of our next liquefaction project. With our newly proposed project, we will be able to provide up to an additional 13.5 mtpa of liquefaction capacity in the Gulf of Mexico," said Charif Souki, Chairman and CEO. "We believe this is a very attractive project for global LNG buyers given its proximity to the Eagle Ford Shale, one of the most prolific shale discoveries in recent history, and look forward to discussions with interested parties."

The Corpus Christi site consists of approximately 664 acres, including 212 acres owned, 52 acres under a lease option and 400 acres of permanent easement. The site is located on the La Quinta Channel on the northeast side of Corpus Christi Bay in San Patricio County, Texas, and is approximately 15 nautical miles from the coast. Depending on feasibility and market interest, the Corpus Christi Project is expected to be constructed in phases, with each LNG train commencing operations approximately six to nine months after the previous train.

Cheniere owns and operates the Sabine Pass LNG terminal and Creole Trail pipeline in Louisiana and is pursuing related business opportunities both upstream and downstream of the Sabine Pass LNG terminal. Through its subsidiary, Cheniere Partners, Cheniere has initiated a project to add liquefaction services that would transform the Sabine Pass LNG terminal into a bi-directional facility capable of liquefying natural gas and exporting LNG in addition to importing and regasifying foreign-sourced LNG. As currently contemplated, the Sabine Pass liquefaction project would be designed and permitted for up to four LNG trains, each with a nominal production capacity of approximately 4.5 million metric tons per annum. Cheniere is also initiating the development of another liquefaction project, located in San Patricio County, Texas, that would be designed and permitted for up to three LNG trains, each with a nominal production capacity of approximately 4.5 million metric tons per annum.

PUERTO RICO

Excelerate Signs for Puerto Rico’s Aguirre GasPort Floating Regas Project

Excelerate Energy has executed an agreement with the Puerto Rico Electric Power Authority (PREPA) to undertake the development and permitting of a floating offshore LNG regasification facility off the southern coast of Puerto Rico. The facility, named Aguirre GasPort, will provide fuel to the Central Aguirre Power Plant and is a step forward in the island's strategy to convert power generation from high-cost, high-emissions imported oil to cost-effective, cleaner-burning natural gas.

PREPA recognizes the urgent need to reduce the dependence on oil and increase the use of natural gas to stimulate economic development, attract industries, improve the quality of life and create more jobs on the island. "If we want to be competitive at the global level, we must substantially reduce dependence on oil. The construction of the Aguirre GasPort facility will allow us to reduce that dependency," a PREPA representative stated.

The Aguirre GasPort will be located approximately four miles offshore the southern coast of Puerto Rico, near the towns of Salinas and Guayama and will utilize one of Excelerate Energy's 150,900 m3 floating storage and regasification vessels. The facility will operate year-round, delivering natural gas to PREPA's Aguirre Power Plant as its primary fuel source, eliminating the use of heavy fuel oil and diesel. Construction of the Aguirre GasPort will be Excelerate Energy's seventh floating LNG import facility -- the most of any company in the industry.

"We are extremely pleased to partner with PREPA in providing Puerto Rico with a reliable, clean fuel source for power generation that will greatly reduce air emissions for the Island. Our experience and expertise in delivering floating regasification solutions in a cost-effective and timely manner ensure that we will provide an efficient and reliable project for PREPA," said Rob Bryngelson, President and CEO of Excelerate Energy.

The Aguirre GasPort will require authorization from the Federal Energy Regulatory Commission (FERC) and be subject to a full public environmental review and analysis under the National Environmental Policy Act (NEPA). The facility is expected to be in-service in 2014.

The Aguirre GasPort utilizes proven technology that has been utilized in Argentina, Kuwait, Brazil, the United States and England. The company's fleet of eight purpose-built LNG regasification vessels is capable of transporting, storing, and delivering approximately 3.0 to 3.2 billion cubic feet (bcf) of natural gas into various markets worldwide. Excelerate Energy is currently constructing the world's largest FSRU for Petrobras in Brazil, which will have a storage capacity of 173,400 m3. This vessel is expected to enter into service in May of 2014.

BRAZIL

Petrobras Says Final Decision on Presalt FLNG in March, 2012

A decision on whether to build floating natural gas liquefaction plants at recently discovered oil fields far from Brazil's Atlantic coast will come early next year, a Petroleo Brasileiro S/A executive said December 20.

"A decision will be made in March," said Graca Foster, director of gas and energy at the Brazilian state oil company. But it's possible that the natural gas will need to be reinjected into the ultra-deepwater reservoirs buried more than four miles under the sea floor to facilitate production.

"The decision will depend on the availability of natural gas," Foster said.

Floating LNG plants are seen as an alternative to building a deepwater pipeline that would stretch about 300 kilometers from the coast to the offshore oil fields known as the presalt.

Oil field services company Technip SA presented the most economic proposal to Petrobras, as Petroleo Brasileiro is also known, and its presalt partners BG Group PLC, Galp Energia SGPS S/A and Repsol YPF SA, Foster said.

COLUMBIA

Colombia will Need LNG Import Facilities by 2015

LNG import facilities in Colombia need to be developed within the next four years, according to the president of Colombian power investment group Colinversiones, Juan Guillermo Londoño.

"Import plants would give security in moments of peak electricity demand. I think that before 2014-15 Colombia needs to have import facilities either constructed or expected," Londoño told BNamericas on the sidelines of the FISE power conference in Medelíin.

The possibility of gas imports has long been advocated in Colombia as an important backup to the country's hydro-dependant power matrix. Colombia's power and gas regulator Creg is currently designing regulation for the development of future import facilities.

Londoño confirmed that Colinversiones is part of a group of generators currently involved in studies.

"At the moment there is a group of generators looking at sites on the coast, around Cartagena and others in Buenaventura. We are working with international companies that are present here as well, [though] these plans are only in a pre-feasibility stage," Londoño said.

In May, Canadian oil firm Pacific Rubiales announced plans to develop the country's first LNG export plant, in order to ship excess output from its La Creciente field to markets in the Caribbean where it could fetch better prices.

Exports have only recently been enabled by the Colombian government, under pressure from companies which operate in the country. Under the new regulations, gas exports will be permitted as long as potential production capacity exceeds total current demand. The country has a gas reserve horizon of at least eight years.

Londoño says that Colinversiones and generators in general back the plans on the basis that they will encourage greater investment in gas production and thus increase supplies in the long run.

"It's a good policy by the government, and we support it. The size of the Colombian market is small, and the investments that need to be made to extract that gas are quite large. When you open the market to exports, that is going to stimulate investments that release more gas for the country," he said.

ASIA

AUSTRALIA

Inpex Sells all of Ichthys Offtake

About 70% of all gas produced from the Inpex-operated Ichthys project will go to Japan after the company finalized liquefied natural gas sales agreements for all gas production from the project.

The company announced on December 6 it had signed 15-year agreements with five Japanese utilities for gas sales from the 8.4 million tonne per annum project, to start in 2017.

The utilities would buy a total of 4 million tonnes of LNG per year – with Tokyo Electric Power (Tepco) and Tokyo Gas taking 1.05 million tonnes each, Osaka Gas and Kyushu Electric taking 800,000 tonnes and Kansai Electric taking the remaining 300,000 tonnes.

The company had already secured LNG offtake agreements for 4.3 million tonnes per year with customers in Japan and Taiwan — including 1.8 million tonnes from Inpex and Total themselves.

In an announcement, Tepco said the deal would increase the security of its LNG supply, as it is a purchase from a robust and promising greenfield project.

“The conclusion of the sale and purchase agreement marks a further step in the implementation of TEPCO's policy of pursuing stable and economical procurement of fuels in order to maintain secure supplies of energy,” the company said.

Osaka Gas would also buy 1.2% of the Ichthys LNG project itself, with Inpex committing to continuing equity sale talks with other customers.

The purchase would see Inpex’s stake fall to 74.8% while Total’s remained steady at 24%, though the French major has hopes to increase its stake in the near future, according to reports.

The final investment decision for the project was targeted for the final quarter of 2011 but Inpex has delayed that decision until early 2012, blaming administrative delays during the Christmas season.

But a massive series of contract awards is being concluded for the plant, with South Korea’s three big shipyards each competing hard for a share, Upstream reported recently.

Japan Signs Off on Massive $70 Bln Australia Ichthys LNG Project

The Ichthys LNG project is set to become Japan's single biggest investment in Australia, with the final sign-off expected in weeks, after off-take contracts -- worth about $70 billion -- were signed with Japanese utilities.

The Ichthys project, which is a joint venture between Japan's Inpex and France's Total, has now accounted for the entire 8.4 million tonnes a year of gas to be produced from the project, with about 70 per cent of the output to be exported to Japan.

A list of significant liquefied natural gas contracts has been signed with Australia's new developments but the Ichthys agreements represent one of the largest in terms of the dollar figure announced. There are more than $140bn worth of LNG projects under construction in Australia which, when combined with the Ichthys project, have the potential to quadruple Australia's existing export capacity. In 2010-11, Australia exported 20 million tonnes of LNG, worth $10.5bn.

Resources Minister Martin Ferguson said the signing of the $70bn contracts took Australia a significant step towards rivaling Qatar, the world's largest LNG exporter.

"With expected LNG output of 8.4 million tonnes per annum, the Ichthys project has the potential to significantly boost Australia's standing as a major energy supplier; create jobs, particularly in the Northern Territory; significantly boost export revenues; and help meet the energy needs of one our oldest, largest and most valuable LNG trading partners, Japan," Ferguson said.

"Japan is the world's largest importer of LNG, accounting for one-third of the world's LNG imports in 2010. And Japan's demand for gas has substantially increased since the tragic events of March this year.

"Australia is a proven, reliable LNG supplier and this year became the largest supplier of LNG to Japan."

The joint venture partners on December 6 signed sales agreements with a consortium of five Japanese utilities, which will see four million tonnes a year sold for 15 years, starting from 2017.

The parties are Tokyo Electric Power Company, Tokyo Gas Co, The Kansai Electric Power Co, Osaka Gas Co and Kyushu Electric Power Company.

Japanese utilities Chubu Electric and Toho Gas had previously agreed to take some of the 8.6 million tonnes a year of LNG to flow from Ichthys from 2016.

Inpex, whose largest shareholder is the Japanese government, announced that Osaka Gas will also take a 1.2 per cent equity interest in the project, and Inpex said it was willing to sell equity stakes to consumers up to a total of 10 per cent.

The allocation of all the gas to be produced means a final investment decision on the project, which has seen its cost blow out from about $US20bn ($19.6bn) to $US30bn, could be made in the coming weeks.

Ichthys will be the first Japanese-controlled energy project in Australia and will supply about 10 per cent of Japan's gas needs.

It will be of huge significance to Darwin, to where the gas from the West Australian field will be piped and then processed.

Sinopec to Spend $1 Bln to Increase Australian LNG Stake

China Petrochemical Corp. (Sinopec) Asia’s biggest refiner, agreed to invest an estimated $1 billion to increase its stake in an Australian liquefied natural gas project led by ConocoPhillips and Origin Energy Ltd.

Sinopec Group, has signed an initial accord to buy a further 10 percent of the venture, Sydney-based Origin said in a statement December 12. Sinopec Group, which agreed to pay $1.5 billion for 15 percent of the project in April, will also purchase an extra 3.3 million metric tons of LNG a year through 2035, clearing the way for an investment decision on the second phase of the $20 billion Queensland state venture.

China, the world’s largest energy consumer, plans to more than double natural gas consumption to cut its reliance on coal and oil. The country needs to increase LNG imports as it develops unconventional sources such as shale gas, said Ivor Ries, an analyst at E.L. & C. Baillieu Stockbroking Ltd.

“There’s a lot of talk about China seeking its own unconventional gas,” Ries said December 12. “What this tells you is that Sinopec thinks developing domestic supplies will take a lot longer” than expected.

Origin gained 3 percent to A$14.72 at the 4:10 p.m. close in Sydney, while the S&P/ASX 200 Index rose 1.2 percent.

The accord comes a month after Sinopec agreed to invest $5.2 billion in Galp Energia SGPS SA’s Brazilian unit. Chinese energy companies have bid at least $16 billion for overseas oil and gas assets this year to expand reserves.

Arrow Energy Ltd., the Australian coal-seam gas producer owned by PetroChina Co. and Royal Dutch Shell Plc, is planning a rival LNG venture on Queensland’s Curtis Island. BG Group Plc and Santos Ltd. are also building Queensland LNG projects.

Origin and Conoco, the third-largest U.S. oil company, are among energy companies in Australia planning or already building $203 billion (A$200 billion) of LNG projects to tap Asian demand for the cleaner-burning alternative to coal. Their venture last month agreed to supply Japan’s Kansai Electric Power Co. with 1 million tons of LNG a year.

While Australia is set to surpass Qatar as the biggest LNG exporter by the end of the decade, projects in the country face delays and cost overruns that threaten to undermine their credit quality, Standard & Poor’s said in November.

Conoco and Origin earlier this year agreed to supply 4.3 million tons of LNG a year to Sinopec. Annual capacity from the first two stages of the LNG project will be 9 million tons.

The terms of the agreement announced December 12 are “consistent” with the previous Sinopec transaction, Origin Managing Director Grant King said. Conoco and Origin may receive at least $1 billion by selling 10 percent to Sinopec Group, Ries said.

Conoco and Origin will each own 37.5 percent of the Australia Pacific LNG project, while Sinopec will have 25 percent when the transaction is completed. The majority shareholders reiterated today they plan to make an investment decision on the second phase of the development in early 2012 after committing to the first processing unit in July.

“There is certainly potential” to proceed with a third LNG unit, King said on a call December 12.

Origin doesn’t expect delays amid concerns that coal-seam gas projects will harm the state’s water supplies, King said. Origin, which followed BG and Santos in approving its LNG development, expects exports from the first stage to begin in mid-2015 and shipments from the second unit in 2016.

Norway’s Kvaerner Seeks to Expand Engineering Presence in Australia’s LNG Sector

Norwegian oil and gas engineering specialist Kvaerner has set its sights on a cluster of WA offshore developments by expanding its presence in Perth.

Kvaerner is one of two multinationals (with MODEC) vying to deliver multibillion dollar drilling platform facilities for Woodside's Browse liquefied natural gas project. Kvaerner chief executive Jan Arve Haugan says there are other opportunities on other developments off the north-west coast.

The sequencing of the projects and the parallel execution will give us bold opportunities, Mr Haugan said during a visit to open Kvaerner's new Perth office.

But we also come into a situation where we have to choose the project where we believe that we can contribute the best.

Mr Haugan said Kvaerner had a technological design edge over competitors in its ability to build and deliver robust designs to withstand a harsh environment far from shore.

We believe we have something that is somewhat more outstanding than what you have today, he said.

We're talking about somewhat advanced systems, in particular to be able to pack advanced systems into a very confined space.

The Kvaerner name, now associated with engineering, procurement and construction, reappeared following the de-merger of Aker Solutions in Norway.

Kvaerner's personnel will reach 30 in the short term with plans to increase numbers to 80 to 100 depending on the company's success rate.

Mr Haugan said Perth would become one of Oslo-based Kvaerner's three international hubs alongside Houston and London.

Western Australia is one of our prioritized regions for our company mainly because we do believe that we have a delivery model and a product that is suited for needs that are identified in the region, he said. That's why we believe that we will be a supplier of choice and an employer of choice.

Woodside, Partners Seek $35 Bln Browse LNG Decision Delay

The Browse joint venture wants to delay a final investment decision on a massive Australian gas-export project estimated to cost US$35 billion until 2013, the project's operator, Woodside Petroleum Ltd., said December 19.

A delay will have implications for close to a dozen rival Australian gas export projects scrambling for funding and materials in a tight labor market to meet an expected surge in demand for cleaner-burning fuels from Asia.

It is the second delay to a major Woodside project announced by new chief executive Peter Coleman since he took over from Don Voelte in May.

The Browse resource, located in deep water offshore northwestern Australia, contains an estimated 13.3 trillion cubic feet of recoverable gas and 360 million barrels of condensate. But it also has lots of carbon dioxide and the gas will be technically challenging to extract.

Last month, Woodside said it was targeting first shipments of liquefied natural gas, or LNG, in 2017. The project will be designed to produce 12 million metric tons of LNG a year from three processing units, known as trains.

But the Browse development, to be built in a place marked with dinosaur footprints, is facing stiff opposition from environmental groups and has angered some traditional land owners. It has also faced disunity between its joint venture partners over the best way to process the gas for export.

Australia's federal government and the Western Australian state government in late 2009 threatened to strip the joint venture of its retention leases over the gas resource if they didn't agree to develop it as quickly as possible.

Woodside pushed for the gas to be developed at a new LNG facility at James Price Point on the Western Australian coast. Some partners, however, including BHP Billiton Ltd. and Chevron Corp. wanted to consider piping the gas to the existing North West Shelf LNG project when it starts to run out of gas in about a decade.

The governments' decisions in 2009 forced the venture to consider Woodside's preferred LNG project option. They agreed to make a final investment decision on the project by mid-2102.

Since then, Coleman has announced a six-month delay and cost overrun at its A$14.9 billion Pluto LNG project in Western Australia. It was the project's third delay and construction has been affected by a shortage of skilled labor and industrial disputes.

"Woodside believes an extension into the first half of 2013 may be required," the company said in a statement about Browse. Woodside has applied to lawmakers for a variation of the retention leases to allow for the delay.

The delay "would allow time to better evaluate the outcomes of front-end engineering and design work and the results of the tender process for the development's major contracts," Woodside said.

A new LNG plant at James Price Point is "still the main game" and there is full alignment between the joint venture partners, Coleman told reporters.

Royal Dutch Shell PLC and BP PLC also have interests in Browse.

Under previous CEO Voelte, Woodside set an aggressive timetable for an expansion of Pluto to two LNG production units. But the company still hasn't discovered enough gas and Coleman delayed a decision to order some parts for the expansion.

INDIA

India's Petronet to Complete Dahej LNG Terminal Expansion for $565 Mln to 15 mil mt/year by 2015

India's Petronet LNG has received approval from its board to raise the capacity of its LNG import and regasification terminal at Dahej to15 million mt/year and expects to complete the expansion by December 2015, R.K. Garg, the company's finance director said December 13.

Work on the expansion had begun, though formal approval from the board came through on December 12.

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 $565 million (Rupees 30 billion) 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.

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 U.S., 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%.

Indian State May Intervene in Gujarat LNG Terminal Impasse

Indian state government is likely to intervene in the impasse surrounding the crucial LNG terminal project at Mundra, Gujarat. This comes in the wake of GSPC's indecision regarding the proposed 50:50 partnership with Adani Energy for the Rs2,500 crore project.

"The indecision with regards to Mundra LNG terminal project is only causing further delay. It is a crucial one (the project) to meet future natural gas requirements of the state, and is in best interest of the state that work on it starts at the earliest," said DJ Pandian, principal secretary, energy & petrochemicals department.

Pandian said that the state government could intervene in the matter if a decision regarding the proposed partnership and the project was not taken soon.

The GSPC board has held four meetings since it was authorized by the state government to decide on the partnership, the latest one on November 17, but it is yet to take a call on the partnership with Adani. GSPC MD Tapan Ray could not be reached for a comment.

GSPC and Adani Energy, in March last year, had signed a shareholder agreement for setting up a 5 million metric tonne per annum (MMTPA) LNG terminal project at Mundra. The agreement was then forwarded to the state government for its approval. The state government studied the agreement for many months, but sent it back to GSPC in August without approving or rejecting it. The government also authorized GSPC to take the final decision.

However, GSPC, like the state government, seems to be shying away from a decision. GSPC's indecision stems from the fact that the proposed partnership has already generated a lot of political heat, with opposition Congress questioning reasons for selecting Adani as partner and for moving the project from Pipavav to Mundra.

"Any dealings between state government entities and the Adani Group are bound to raise questions. The GSPC has already borne the brunt of it, and is being extra cautious this time," said a source in the state government-owned company.

INDONESIA

ENI Wins Two Inshore and Offshore Exploration Contracts in Indonesia

ENI Indonesia has won two new inshore and offshore production-sharing exploration contracts in eastern Indonesia.

In Papua West Province (Eastern Indonesia), Eni won the complete contract for Arguni (5386 square km), in the onshore and offshore Bintuni basin. The block is located 10 km east of the Tangguh LNG plant. The work program includes 2D and 3D seismic surveys and the drilling of two wells in the first three years of exploration.

In the eastern offshore of Kalimantan province, in the Kutei Basin, ENI, as part of a consortium with Niko Resources (North Ganal) Ltd, North Ganal Energy Ltd (a wholly owned subsidiary of Black Platinum Energy Ltd), Statoil Indonesia North Ganal AS and GDF SUEZ, has won the North Ganal contract block (2432 square kilometers), of which Eni will be the operator. The North Ganal Block is adjacent to the discoveries at Jangkrik and Jangkrik North East.

The North Ganal agreement involves drilling a well and the performance of 200 km of 2D seismic surveys in the first three years of exploration. The Bontang LNG plant is located about 80 km west of the North Ganal area. As operator of the Muara Bakau contract, ENI presented a development plan for the Jangkrik field to the Indonesian authorities. This should be operational in 2015, thanks to a rapid development plan. GDF SUEZ is ENI's partner in the joint venture.

Japan’s Toyota Tsusho is Supplier of World’s First Coal-Methane-based LNG Project in Australia

Toyota Tsusho Corp., the trading company of Japan's biggest automaker, Toyota, announced recently it has entered an arrangement to supply coal-bed methane to BG Group Plc's liquefied natural gas project.

BG Group's Queensland Curtis plant is the world's first LNG project to use coal-bed methane for liquefaction. It is expected to be operational in 2014.

Australia is seen as becoming the world leader in the development of LNG projects, with LNG becoming its third leading commodity export, next to iron ore and coal.

As of end October, business investments in Australia soared 14 percent in the third quarter, primarily boosted by movements in the LNG sector.

According to Canberra-based research company Deloitte Access Economics, projects worth $434 billion have been committed or are already in progress as of September 30. Most are LNG projects in Western Australia and Queensland.

In a statement, Toyota Tsusho Corp., said it will supply the Queensland LNG Curtis plant with coal-bed methane for 20 years, which is sourced from a coal bed also located in Queensland, Australia, where it is owned 15 per cent by the trader.

PAPUA NEW GUINEA

InterOil Extends PNG LNG Project Deals

InterOil Corporation announced December 22 that it has extended the dates by which certain conditions are to be met and Final Investment Decisions (FID) made in LNG project agreements with Mitsui and Energy World Corp, until March 31, 2012.

The terms of the Project Funding and Construction Agreement (PFCA) and Shareholder Agreement entered into in February 2011 with Energy World Corporation Ltd. governing the parameters in respect of the development, construction, financing and operation of a planned three million tonne per annum (mtpa) land-based LNG plant in the Gulf Province of Papua New Guinea (PNG) have been amended so that the date by which conditions are to be met and FID reached has been extended until March 31, 2012.

The Joint Venture Operating Agreement ("JVOA") for the Company's proposed Condensate Stripping Plant ("CSP") with Mitsui & Co., Ltd., and associated agreements, have also been amended so that the time allowed for FID has been extended until March 31, 2012. The JVOA sets out the rights and obligations of the participants of the joint venture to develop a CSP at InterOil's Elk and Antelope field site in Gulf Province, Papua New Guinea.

The agreement with Samsung Heavy Industries and FLEX LNG Ltd. (Oslo:FLNG) related to the construction and operation of a 2 million tonne per annum (mtpa) floating liquefied natural gas (LNG) processing vessel (FLNG) which contemplated achieving FID by year end has lapsed. InterOil and FLEX are continuing negotiation with a view towards updating the agreement and working toward FID during the first quarter of 2012. Since entering the original agreement in April 2011, project specific FEED for the FLNG vessel has been completed, and both Samsung Heavy Industries (SHI) and FLEX LNG are ready to proceed to enter the execution phase of the LNG project. The Framework Agreement has expired, but the Parties will continue to work together with the aim of achieving a successful outcome for all stakeholders in the project, including the State of Papua New Guinea and the Gulf Province.

The Board of Directors of InterOil is ready to make a Final Investment Decision to proceed with its LNG project in the Gulf Province, and is committed to working together with the PNG Government to move the project forward. Management believes that the resource estimates certified by GLJ Petroleum Consultants Ltd. provide sufficient natural gas volume to underpin the project.

Design concepts, including alternatives arising from a successful asset sale, have matured to the point where we have received bids for major components and narrowed the range of estimated capital costs of the project. The financing requirements of the project are expected to be underpinned by the strong demand for LNG offtake, evidenced by the heads of agreement executed to date. Stress tests against key downside sensitivities such as projected commodity pricing, cost overruns and start-up delays continue to support development of the project.

EUROPE / AFRICA / MIDDLE EAST

BALTIC REGION

European Commission to Do Study for Best Baltic LNG Terminal Site

The European Commission will be doing the initial study of the best site for the location of a liquefied natural gas terminal in the Baltic region, Press Secretary to the Latvian Economy Ministry Daiga Grube told the Baltic News Service.

She said representatives of the three Baltic country governments had a meeting in Brussels with European Union transport, telecommunications, and energy ministers recently, at which no agreement was reached on the building of the LNG terminal.

Latvian Economy Minister Daniels Pavluts proposed the signing of two declarations of cooperation in the implementation of the energy projects most important to the region - the building of a gas terminal, perhaps in Latvia, and moving forward the Visaginas nuclear power plant project in Lithuania (Poland is also to be a signatory), but the Lithuanian and Estonian ministers disagreed with these proposals, Grube said.

Now the most advantageous site for the LNG terminal will be determined by the EC, and negotiations on the construction between the Baltic countries will continue at the ministerial and prime ministerial level, she said.

Pavluts, whom Grube cited, said at the meeting, "In the interests of the entire region's energy security it is important to secure an agreement on the possibly more rapid implementation of the terminal project in Latvia, so that in line with intentions expressed earlier the isolation of the energy markets of Baltic counties is eliminated, with the diversification of deliveries and suppliers. This would make it possible to strengthen the countries' energy security and create a unified gas market."

He also said that the EC had announced its readiness to co-finance the building of a regional LNG terminal in the event all parties back the Latvian project.

At the directive of the Latvian government, the initial project studies were down by a British consortium of GL Noble Denton and Energy Contract Company, which concluded that the best location was the Latvian coast.

Last summer, the Lithuanian authorities decided to build a LNG terminal near Klaipeda. Projected capacity would be 3 billion cubic meters, the country's entire annual requirement. Government-run oil-product terminal operator Klaipedos Nafta is implementing the project.

Estonia also has not abandoned its own LNG terminal plans.

AFRICA

India’s IOC, GAIL Looking to Join African LNG Projects

India’s government said that the state-owned Indian Oil Corp and GAIL Ltd in a bid to meet the growing demands of energy in the country are looking at picking up an equity stake in LNG projects in Africa.

"Our companies such as GAIL, Petronet LNG and IOC are interested in sourcing LNG on a long-term basis from Africa; explore possibilities of equity participation in existing/proposed LNG liquefaction projects," said the Oil Minister S Jaipal Reddy on the sidelines of the 3rd India Africa Hydrocarbon Conference.

Currently, Africa is supplying 35.31 million tonne of crude oil, which accounts for 21.5 per cent of India's need. However, noticing that Africa has a lot more potential yet to be tapped, India is keen to participate in exploration and production opportunities in Angola, Ghana, Sudan, Algeria, Congo, Nigeria, Uganda, Cote D'Ivoire, Mozambique, Chad, Gabon and Tanzania, added the minister.

Meanwhile, the demand for gas is simultaneously increasing in the country. Additionally, India has estimated the gas demand to grow to double in next five years, therefore, in a bid to fulfill the expected growth in the demand, the country is also planning to tie-up long-term supplies of liquefied natural gas from Africa.

"Indian companies are also interested in farm-in opportunities in gas-producing blocks, especially Libya, Algeria, Egypt and Nigeria. The country is looking business opportunities in gas processing and gas-based petrochemical projects in Africa; and farm-in opportunities in producing gas blocks for conversion to LNG and dispatch to India," added Reddy.

Meanwhile, India's oil refining capacity is expected to increase to 238 million tonnes by 2013 from the current capacity of 194 million tonnes, whereas the LNG re-gasification capacity is projected to grow to 30 million tonnes by 2015 from current 13 million tonnes.

"During 2010-11, India exported 50 million tonne of refined petroleum products. With our refining capacity increasing further, this figure is likely to touch 70 million tonne by 2014, making India one of the world's major exporters of petroleum products," he said.

NIGERIA

Nigeria Seeks to Become World's Largest LNG Producer

Nigeria, on December 6 said it wants to become the world's largest producer of liquefied natural gas by increasing production capacity from the current levels by five times.

The government's intention, according to the Group General Manager, Group Public Affairs Division of the Nigerian National Petroleum Corporation (NNPC), Dr. Levi Ajuonuma, is to take advantage of the recent 20th World Petroleum Congress (WPC) in Doha, Qatar, to seek partnerships.

Ajuonuma, who also revealed to journalists in Qatar that Nigria seeks to secure partnerships in the proposed LNG plants, particularly the Brass LNG and Ok LNG, explained that top government officials arrived in Doha to unveil opportunities for investors in the nation's gas sector with the intention of fulfilling President Goodluck Jonathan's desires for the sector.

He said Nigeria's intention is to surpass Qatar, currently the world's largest LNG producer. "We have abundant proven natural gas deposit capable of increasing Nigeria's LNG production capacity from the current levels per annum by five times which would make Nigeria to surpass the capacity of Qatar, the world's largest LNG producer.”

He added; Nigeria has the best natural gas and incentives for investors. "There is improvement in security just as the government is willing to receive all investors."

The NNPC spokesman noted that various incentives have been packaged for prospective investors willing to take advantage of the gas revolution unveiled by the Federal Government.

He also expressed optimism that the unveiling of the Nigerian stand in Qatar, scheduled to take place December 6 by the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, would attract the CEOs of multinational oil companies willing to acquire a stake in the proposed LNG plants.

RUSSIA

Gazprom Plans Attracting Japanese Capital for Primorye LNG Plant Project

Gazprom is holding talks with Japan about attracting Japanese capital to a project for constructing a liquefied natural gas plant in the Primorye territory, said the territory's governor, Sergei Darkin, who participated in the Asia-Pacific Economic Cooperation (APEC) summit in Honolulu.

"Active negotiations were going on in the Far East with regard to Japan's entry into Gazprom's project. First and foremost, it is the plant that Gazprom is going to build in Primorye," he said.

"The conversation was at the presidential and prime ministerial level. This conversation probably for the first time set off the political problem of a peace treaty [between Japan and Russia]. Japan is going to fully abandon nuclear power plants and replace them with plants that work on gas. This is why Vladivostok will become a serious area for investment. Above all, they are talking about the south of Primorye - the Khasan district. There [in the framework of project preparations] very serious research from the ecological standpoint is being carried out," Darkin said.

As reported, Gazprom is conducting a feasibility study for creating LNG capacity in Primorye. Such fields as Kovykta and Chayanda could be used as resource bases for the plant. In January 2011, Gazprom, the Federal Natural Resource Agency and the Japanese Economy, Trade and Industry Ministry signed a cooperation agreement to prepare joint technical-economic research for potential uses of natural gas in the Vladivostok area, the transport and sale of natural gas, and the production of gas chemicals from the Vladivostok area for potential buyers in Asia-Pacific countries.

The general scheme of development of the gas industry until 2030 foresees the construction of an LNG plant in the Primorye territory with a capacity of up to 9.6 million tonnes. The stage-by-stage commissioning of the enterprise, to be constructed by Gazprom, will be performed in the period 2015-2022.

There were plans to sign an agreement on gasification between Gazprom and the Primorye territory by the end of November 2011, Darkin said. At the moment, only Vladivostok is gasified - it receives gas from Sakhalin through the Sakhalin-Khabarovsk-Vladivostok pipeline.

"We must coordinate the region's and Gazprom's investments. It is very important, and we are ready to sign a contract. In the next two to three years, we are going to gasify first and foremost Primorye's cities and villages. In 2014-2015, Gazprom intends to gasify Nakhodka. A gas outlet to that city is badly needed," Darkin said.

The Primorye authorities have developed a gasification program of the region for 2012-2017, which envisions the construction of gas pipeline branches from the main Sakhalin-Khabarovsk-Vladivostok pipeline.

Gazprom Signs $394.5 Mln Contract with Sovcomflot for LNG Carriers

Gazprom Global LNG will pay $394.5 million to OJSC Sovcomflot for constructing two ice class LNG tankers, Sovcomflot said in a statement.

The two companies also signed contracts for renting carriers for a period of no less than 15 years during the St. Petersburg International Economic Forum in June. At the same time, Sovcomflot signed shipbuilding contracts with South Korean shipyard STX Offshore & Shipbuilding - a partner of OJSC United Shipbuilding Corporation in the joint venture Arctech. "The choice in shipyard was determined by the results of a tender. The first vessel is scheduled to be received in Q4 2013, and the second - Q2 2014," the company said. However, it did not disclose the size of the contract.

Sovcomflot has one other option for constructing two LNG carriers, it said.

Before signing the agreement with Gazprom Global LNG, the company assessed commercial offers from 11 leading global shipping companies specializing in LNG transport by sea.

Commenting on the signing of the agreement, Sovcomflot's General Director Sergei Frank said that the contract was a logical continuation of the partnership between Sovcomflot and Gazprom, as well as "the result of a cooperation agreement on matters related to LNG sea transport for the Shtokman gas condensate field, signed in June 2010."

Sovcomflot is the world leader in the product tanker, Arctic tanker and ice class LNG tanker segments. It takes second place overall in the Aframax tanker segment. The company not only ships hydrocarbons, but also renders offshore storage services and technical vessel management for third companies. The Russian government is Sovcomflot's only shareholder.

Gazprom to Build Urals LNG Plant by 2013 and Modernize Existing Plants

Gazprom Gazenergoset, a unit of Russian natural gas export monopoly Gazprom, plans to build a small liquefied natural gas production plant in the Urals before the cold season approaches in 2013, Anatoly Kim, director of the unit's department of specific programs, said December 5.

Investments are estimated at around 800 million rubles, Kim said. He added that the project was expected to be co-financed by the Perm Region authorities, who are responsible for the allocation of funds for the construction of necessary infrastructure.

Kim said that Gazprom Gazenergoset was working on several similar projects but the Perm project and the one in the Khabarovsk Region in Russia's Far East were among the first to be built. He said company plans included the construction of small LNG production facilities in the Altai Region in Siberia on the border with Kazakhstan, and in the Yamalo-Nenets Autonomous District in the north of the country.

Kim reiterated that Prime Minister Vladimir Putin earlier instructed the Energy Ministry to consider the possibility of meeting the demand for gas in Russia's distant areas by providing LNG supplies. The Energy Ministry plans to finalize these preparations in January-June 2012, Kim said, adding that Gazprom Gazenergoset also took part in the preparation of the document.

There are only five small LNG production facilities in Russia, Kim said, adding that four of them - three in the Leningrad Region and one in the city of Yekaterinburg - are owned by Gazprom. The combined production capacity of the four plants is 20,000 tonnes of LNG per year. Kim said that Gazprom Gazenergoset plans to modernize the four small LNG production plants to increase the annual capacity of each facility to 7,000 tonnes of LNG.

Gazprom Gazenergoset is also known as Gazprom Gas & Energy Net and focuses on the sale of oil products, liquefied hydrocarbon gases, and sulfur.

UKRAINE

Lack of Funding Causes Ukraine to Postpone LNG Terminal

Ukraine has postponed the construction of a liquefied natural gas terminal due to a lack of funding, Ukrainian newspaper Kommersant Ukraine has reported.

The project, undertaken by national gas company Naftogaz Ukrainy, is planned to be constructed on the Black Sea. However, due to a lack of investor interest, the project has been delayed; the paper reports a source from Naftogaz Ukrainy as saying. The country will now concentrate on a cheaper low-power floating regasification plant, the paper says.

The country is now considering the possibility of renting a floating terminal for regasification of the LNG until funding can be secured to build a terminal of its own.

"Today we see the mechanisms to use the offshore LNG-terminal," chairman of the Ukrainian National Project LNG body, Vitaliy Demianiuk said. "The term of preparation of this project is about 2 years. It will be used until a ground terminal is built."

Ukraine has turned to alternative sources of gas as part of an effort to diversify supply from Russian supplier Gazprom. Spanish Socoin, a gas engineering company, has recently been tasked with completing a feasibility study on the LNG terminal.

IRAN

Iran Says Lavan Island will Become Petrochem Hub

Iranian Oil Minister Rostam Ghasemi says Lavan Island in south Iran would turn into the country's third major petrochemical hub once the contract for the development of the giant Lavan gas field is concluded.

Rostami said that the development project of the massive natural gas reserve should be completed within the next 54 months. The Iranian oil minister expressed optimism that Lavan Island -- situated 18 kilometers (11 kilometers) from the Iranian coastline in the Persian Gulf -- would become a major Iranian petrochemical center when the entire project reaches completion.

Rostami made the remarks as National Iranian Offshore Oil Company (NIOOC) inked a $6 billion deal on December 27 with a domestic corporation, Sepehr Energy, to develop the Lavan gas field and build a petrochemical complex in the island as well.

Rostami noted that the development project of Lavan gas field will mark a major breakthrough in Iran's petrochemical sector.

He added that Iran would sign an agreement with interested parties each week on the development of its oil and gas fields, and the Islamic Republic gives top priority to the development of its joint fields with neighboring countries.

Rostami also emphasized that new conditions in the buyback contracts have provided a suitable climate for investors, reiterating that financial institutions and the private sector would receive guaranteed profits should they invest in Iran's upstream oil and gas industries.

Lavan field has 9.5 trillion cubic feet of in-place natural gas, 6.2 trillion cubic meters of extractable gas reserves, and 62 million barrels of condensate. It is expected to produce 750 million cubic feet of natural gas and 11,000 barrels of condensate per day, according to oil ministry's official news agency, Shana.

The field was first to be developed by Poland's PGNiG gas company. However, after nearly four years of negotiations, the Polish company was dropped from the project due to repeated delays in its delivery of services.

Iran holds the world's third-largest proven oil reserves and the second-largest natural gas reserves.

ISRAEL

Hoegh to Carry out Tamar FLNG FEED

Hoegh LNG Holdings Ltd. (Hoegh LNG) has entered into an agreement with Daewoo Shipbuilding & Marine Engineering Co. (DSME) to initiate a project specific front-end engineering design (FEED) of an LNG FPSO solution for the Tamar gas field offshore Israel. This agreement follows the recent announcement of the agreement between DSME consortium, DSME and its Norwegian joint venture D&H Solutions AS and Tamar field owners, Noble Energy, Delek and Isramco to exploit part of the Tamar field by use of an LNG FPSO.

The agreement states that Hoegh LNG with selected partners shall be the owner and operator of the LNG FPSO and that DSME shall be the EPCIC contractor, subject to further engineering work and a final investment decision. President and CEO, Sveinung Stohle, says: "We are excited about initiating the engineering work for an LNG FPSO to monetize the gas reserves in the Tamar field in Israel based on Hoegh LNG's already developed design.

McIlvaine Company,

Northfield, IL 60093-2743

Tel: 847-784-0012; Fax: 847-784-0061;

E-mail: editor@mcilvainecompany.com