The market for floating rigs, especially deepwater semisubmersibles and drillships is tight with very few of the deepwater vessels having any time that has not been booked well in advance. New construction will address some, but not all, of the ongoing demand shortfall, at least as long as oil prices remain high. In August, Pride International President and CEO Louis A. Raspino commented, "Access to the world's premium shipyards is highly constrained, with no known opportunities to provide customers with ultra-deepwater capacity before the end of 2011."

As a response to the strong demand for deepwater drilling rigs, rig owners have been ordering new drillships and semisubmersibles, and operators eagerly await the delivery and arrival of newbuilds. Essentially every deepwater floating rig under construction will be under a firm contract before delivery.

ENSCO International has taken delivery of ENSCO 8500, the first of seven ultra-deepwater semisubmersibles being constructed for the company by Keppel FELS in Singapore. The semi has commenced a 90-day mobilization to the U.S. Gulf of Mexico, where it will undergo deepwater sea trials and final outfitting prior to its four-year shared drilling contract with Anadarko and Eni, expected to begin in February 2009.

The ENSCO 8500 Series of deepwater semisubmersibles are based upon a proprietary design and feature an 8,500-foot (2,591-m) water depth capability, a two million pound quad derrick, offline pipe-handling capability, automatic station-keeping ability and living quarters for up to 150 crew members.

Pride International has placed an order for the construction of a fourth advanced-capability, ultra-deepwater drillship. The drillship, like three previously announced vessels, will be constructed at the Samsung Heavy Industries shipyard in Geoje, South Korea, on a fixed-price basis. The rig is expected to be delivered in the fourth quarter of 2011, following construction, commissioning and system-integrated testing. The construction cost is estimated at US$745 million.

Noble Drilling Corp. awarded South Korea's STX Heavy Industries Co. Ltd. and Dutch-based design and construction firm Huisman Equipment B.V. a contract for the construction of a newbuild Globetrotter class drillship. The drillship will be built on a fixed-price basis in two phases. STX's shipyard in Dalian, China, will undertake the hull construction and installation of the propulsion system.

Construction on the hull will begin in November 2009 after the engineering work is complete. The drillship will then sail on its own power in December 2010 to the Netherlands, where Huisman will complete the installation and commissioning of the topside equipment. The delivered cost of the drillship is around US$585 million, with delivery scheduled for the second half of 2011. Noble has secured options for three additional Globetrotter drillships that are due to be exercised over the next 90, 120 and 180 days from the date of contract execution.

The Globetrotter drillships will be equipped to work in up to 10,000 feet (3,048 m) of water. The drillships will measure 620 feet (189 m) long and 105 feet (32 m) wide. The Globetrotter will be capable of drilling to a vertical depth of 40,000 feet (12,192 m) and will feature DP-3 station-keeping ability, 18,000 tons (16,363 tonnes) of variable deck load, and quarters for 180 personnel.

Transocean's first drillship with Daewoo Shipbuilding & Marine Engineering (DSME), Discoverer Clear Leader, will be delivered later this year and undergo testing offshore South Korea, then head to the U.S. Gulf of Mexico to begin its first charter with Chevron in the second quarter of 2009.

Also built by DSME, Seadrill's newbuild semisubmersible West Aquarius is expected to start work on a three-year charter in Indonesia with ExxonMobil after undergoing sea trials offshore South Korea. West Aquarius is Seadrill's second semi built by DSME, and is the same design as semi West Hercules, both of which are equipped to drill in up to 10,000 feet (3,049 m) of water.

Day rates for semisubmersibles and drillships have shown small increases as old contracts roll into new ones, but the opportunities for day rates to move significantly are very few in the current market. Venture Drilling signed a 18-month contract with Maersk Oil Angola for drillship Ocean Venture, at a day rate of US$495,000. Dolphin Drilling semisubmersible Byford Dolphin was given a three-year, US$449 million contract with an unannounced operator for operations in the North Sea.

Saipem has been awarded three new offshore drilling contracts worth a total of US$830 million for the charter of semisubmersibles Scarabeo 7, Scarabeo 3 and Scarabeo 6 in West Africa and Egypt. Eni will use Saipem's Scarabeo 7 off the coasts of West Africa for 3 years, with work due to begin towards the end of 2011. Addax Petroleum will be extending its charter of Scarabeo 3 for a further two years for use off the coast of Nigeria. Burullus Gas Co. wants to extend its charter of Scarabeo 6 for use in Egyptian waters for one year, beginning at the start of 2010.

Record Rig Costs will Jeopardize Deepwater Oil Projects

Owners of offshore vessels and rigs will be put under pressure to reduce their prices to prevent delay or cancellation of deepwater oil projects, as developers see their profits fall this quarter.

Leading oil and gas producers are already shelving some high-cost onshore energy projects as oil prices have fallen 60% from $147 per barrel in mid-July to nearly $60 during the month of October, and next in line are most expensive offshore developments.

With oil at $60 per barrel, some deepwater projects in Brazil, the Gulf of Mexico and West Africa are looking uneconomic in a market when drilling rig and offshore vessel rates are at record levels, so something has to give, said Matthew Simmons, chairman of investment group Simmons & Co.

“Oil sands and gas shales in North America and deepwater projects do not work at $60 oil. The problems are oilfield service costs are too high and we need to change this for projects to go ahead,” Mr Simmons told Lloyd’s List at the Oil & Money Conference in London on October 28.

“Rig costs are so high and we cannot get enough spare capacity to lower costs. Even if more rigs are built, it is hard to recruit people, so crew costs are high.”

Deepwater-capable drilling rigs are being hired out at $600,000 per day and oil companies are willing to pay more than $130,000 per day for subsea support vessels and $300,000 day rates for rig towing anchor handlers.

The price of subsea equipment, such as the flowlines and wellheads needed for deepwater projects have also soared, but equipment and service prices will soon come under pressure.

“When oil prices increase everything goes higher including oil services and when oil prices fall service costs will decrease, so at $65 per barrel we expect costs will also go down as well,” said Paolo Scaroni, chief executive of Italian oil firm Eni.

The oil price fall and tight financial markets have prevented companies from finding credit to undertake their oil and gas field development plans.

Brazil has already acknowledged that the lower oil price is delaying its plans to develop the deepwater pre-salt discoveries, which would require new fleets of offshore vessels, drilling rigs and oil producing ships.

Qatar Energy Minister Abdulla Bin Hamad Al-Attiyah said no banks were offering finance for energy projects any more, whereas even four months ago they were jumping over one another to give out their cash.

“I see that a lot of projects will not be taken on and some in the downstream and upstream will be postponed,” Mr Al-Attiyah said.

INTERNATIONAL

AMEC Expands into Offshore Decommissioning with SeaMetric Agreement

AMEC, the international engineering and project management company, and the marine heavy lifting company SeaMetric International AS, have signed a cooperation agreement to provide a new international offshore decommissioning service for clients. The combination of skills from the two companies will provide a unique decommissioning service for maturing offshore oil and gas facilities.

AMEC and SeaMetric will cooperate to support each other with their respective skills and experience on existing and new projects. For example, AMEC will provide project management and technical support to SeaMetric’s Twin Marine Lifter (TML) projects in Asia and Latin America.

Lifting very heavy objects weighing up to 30,000 tonnes; such as offshore platforms at the end of their life, in a cost effective and safe manner, is a vital part of the decommissioning process. Adding project management and technical support to ensure the process is successfully completed for our clients across the globe gives this agreement a unique combination of skills.

“The market for the decommissioning of offshore oil facilities is huge and working with SeaMetric will enable us to enhance our portfolio of asset support services to provide an integrated ‘end-of-life’ solution“, said Neil Bruce, Chief Operating Officer of AMEC’s Natural Resources division. “In mature markets, with new independent operators and oil majors requiring new combinations of skills, we are well placed to deliver offshore decommissioning around the world. We have supported many of these offshore assets from their original concept through to design, commissioning and operations and maintenance, which puts us in a unique position to project manage and engineer the end of their life too.”

SeaMetric’s Managing Director, Johan F. Andresen added: “Cooperation with AMEC is a major step towards realizing the potential of TML, particularly in the North Sea platform decommissioning market. Support from AMEC will also be of major value as we complete the construction of our TML systems and will strengthen our joint TML operating companies”.

AMERICAS

U.S.

Enterprise's Offshore Pipelines Damaged by Storm

Enterprise Products Partners has been conducting detailed inspections of Enterprise-operated offshore assets, and in some cases has found more hurricane-caused damage than initially expected.

Enterprise discovered that a 42-inch diameter segment of the High Island Offshore System has been severed. The system transports natural gas from fields in the Western Gulf of Mexico. As a result of the damage, natural gas volumes into the system are limited to receipt points upstream of the break and require third party pipeline systems for delivery to the shore. Enterprise is investigating the full scope of the damage to the pipeline, which lies in 130 feet (40 m) of water, and developing a plan to repair and return the affected portion to service.

The company is continuing to assess platforms and pipelines using subsea remote operated vehicles. Platforms impacted by Hurricane Ike include Garden Banks 72, High Island A264 and South Marsh Island 205.

Pressure tests indicate no operational issues for the Poseidon and Cameron Highway Offshore Pipeline crude oil systems. Poseidon is transporting crude oil, and Cameron Highway will resume service some time on Oct. 1.

The natural gas transporting Independence Trail pipeline and Hub system are operating normally. The Viosca Knoll Gathering System and Falcon pipeline are operational, though throughput at the western portion of the Viosca Knoll system is restricted due to damage.

Deliveries of natural gas through Enterprise's Anaconda pipeline have been suspended following the loss of a third-party platform at Eugene Island 371. Enterprise is considering connecting Anaconda directly to the export pipelines previously served by the platform.

RTI, Eastman to Commercialize Syngas Cleanup Technology

RTI International and Eastman Chemical Co. have signed an agreement to develop and commercialize a jointly developed synthetic gas (syngas) clean-up technology.

The novel high-temperature technology package provides a modular approach to the removal of various contaminants contained in syngas derived from coal and petroleum coke, leading to significantly higher thermal efficiency and reduced capital and operating costs and hence reducing the cost of power produced in gasification-based power plants.

Gasification is a process through which carbon-based materials such as coal, petroleum coke, and biomass are converted into syngas that can be used to efficiently produce clean electricity, transportation fuels, and chemicals using domestic fuel resources. Cost-effective syngas clean-up technology is a key to achieving near-zero emissions from gasification-based power generation and chemical plants. Additionally, gasification-based systems provide the lowest cost option for capturing and sequestering CO2 from coal use.

Under terms of the agreement, the parties have combined the intellectual property resulting from the collaboration and are offering the technology package for further scale-up and commercialization.

Components of the technology package include a high-temperature desulphurization process that uses transport reactors, an attrition-resistant regenerable zinc oxide based sorbent, a fixed-bed catalytic process for converting sulfur dioxide produced during the sorbent regeneration into elemental sulfur, and fixed-bed reactor processes for removal of other syngas contaminants.

The technology was developed by RTI at laboratory and bench-scale over more than a decade with funding from the U.S. Department of Energy's Office of Fossil Energy/National Energy Technology Laboratory.

In 2004 the technology entered a pre-commercial pilot phase when Eastman Chemical Company joined the development. Development efforts eventually culminated in more than 3,000 hours of field testing with actual coal-derived syngas at Eastman's Kingsport, Tenn., gasification facility earlier this year. These tests further demonstrated the potential of the technology package to significantly reduce both capital and operating costs of an overall gasification-based power plant.

"We are delighted that RTI International and Eastman Chemical Company have reached an agreement to continue to develop and commercialize their high temperature synthesis gas cleaning technologies," said Gary Stiegel, gasification technology manager at DOE's Fossil Energy/National Energy Technology Laboratory. "Sought by many throughout the world for nearly three decades, these vitally important technologies have reached the stage of maturity where their expected benefits have been confirmed at an industrially-relevant scale of operation on coal-derived synthesis gas. Through substantial reductions in capital cost, enhanced process efficiency, and near-zero emissions, these technologies will facilitate the deployment of IGCC and other gasification-based plants in the years ahead."

The current technology package is fully developed for an integrated gasification combined cycle (IGCC) plant. Comprehensive techno-economic evaluation of the technology package with a reference IGCC plant showed about 3 to 4 point improvement in overall thermal efficiency, which increases the amount of electricity produced from the same amount of coal by about 10 percent. This technology package also reduces overall capital costs by 10 to 15 percent.

DOE's Fossil Energy/National Energy Technology Laboratory continues to support RTI research and development efforts to integrate the technology package for production of fuels and chemicals, where contaminant removal requirements are very stringent. RTI's current program includes development of a high-temperature process for removal of CO2 from syngas to produce a sequestration ready CO2 stream, with a goal of seamless integration of CO2 removal in the high-temperature syngas cleanup system.

Honeywell Fiber Gives a 'Lift' to Offshore Oil Rig Construction Slings

Honeywell has announced that its high-strength Spectra(R) fiber, commonly used in bullet-resistant armor, is a key component in industrial slings used to lift heavy equipment and materials for offshore oil and gas construction, as well as for deepwater recovery operations.

Honeywell Spectra fiber enables the slings, known as roundslings and sold by Holloway Houston as HHIPER LIFT(TM), to easily hoist materials weighing up to four million pounds. The slings have been used to recover equipment and materials from ocean depths of nearly two miles.

"Honeywell continues to work with our customers worldwide to identify and develop the right fiber solution for their high-performance needs," said Joe Gelo, global business director for Honeywell's Advanced Fibers and Composites business. "Our Spectra fiber is perfect for offshore construction and deepwater recovery at sea as it requires a tough yet lightweight solution."

Pound for pound, Spectra fiber is 15 times stronger than steel and is ideal for marine environments as it will not absorb moisture or deteriorate in water, and can withstand harsh environments such as cold ocean temperatures. It also is neutrally buoyant - meaning it floats. Compared to traditional steel slings at the same load rating, Holloway's HHIPER LIFT slings using Spectra fiber are more than 80 percent lighter.

Lifting slings with Spectra fiber also provide higher load protection and reduced risk of personal injury. They can be operated by a single person, eliminating the need for heavy machinery normally required to move steel slings on the job site. The slings also can be used with existing lifting equipment.

In addition to offshore oil and gas construction and deepwater recovery operations, the slings can assist with dry docking large vessels. Slings using Spectra fiber also have been used to redirect an iceberg from threatening an offshore oil platform in the North Atlantic.

Spectra fiber is made from ultra-high molecular weight polyethylene using a patented gel-spinning process. The fiber exhibits high resistance to chemicals, water, and ultraviolet light. It has excellent vibration damping, flex fatigue and internal fiber-friction characteristics. It also has up to 60 percent greater specific strength than aramid fiber.

Other industrial applications for Spectra fiber include security netting, rope and cordage and fishing line, as well as curtains that protect windows and doors during hurricanes.

Honeywell maintains an active Spectra fiber and ballistic material research and development program aimed to meet increased demand for its high performance materials.

Sempra Energy Acquires EnergySouth for $510 Million

Sempra Energy has acquired EnergySouth for $510 million in cash. The acquisition was accomplished via a merger of a Sempra Energy subsidiary and EnergySouth.

Sempra Energy's Sempra pipelines and storage unit will operate the EnergySouth business as part of Sempra pipelines and storage's existing operations.

The acquisition gives Sempra Energy a majority ownership in two large, high-cycle underground natural gas storage facilities that, when fully developed, will have capacity of 57 billion cubic feet of natural gas serving the fastest-growing natural gas markets in the US, said Sempra Energy.

As part of the transaction, Sempra Energy also acquired Mobile Gas Service, an Alabama natural gas distribution utility owned by EnergySouth. Mobile Gas serves approximately 93,000 customers in southwest Alabama. James Fine has been named president of Mobile Gas. He previously served as the company's vice president of operations.

Donald Felsinger, chairman and CEO of Sempra Energy, said: "We are pleased with the closing of this transaction and the positive support from shareholders and regulators. The Gulf Coast is of growing importance as a critical energy hub for North America and these new assets allow us to quickly expand our natural gas infrastructure business in the region."

ATP Oil & Gas Cuts 2008-09 Drilling Budget by $200 Million

ATP Oil & Gas Corp., Houston, said it plans to cut more than $200 million from its capital expenditure budget for the rest of 2008 and 2009.

T. Paul Bulmahn, ATP chairman and chief executive, said the reduction is "prudent" due to the current economic and financial climate. Because ATP operates 100% of its current developments it can accelerate or defer projects in accordance with market conditions.

"We completed our most recent financing in June, which provided us the strength and flexibility to withstand these volatile markets," said Bulmahn. ATP completed its development plans at High Island A-589 and South Marsh Island 190 and expects both projects to be in production this quarter. Its development plans for Morgus and Mirage in the Gulf of Mexico and Wenlock in the North Sea are progressing on schedule and should add new production in 2009.

"We expect to grow production and cash flow in 2009. The reduction to our capital expenditure budgets will impact production in the latter part of 2010 and beyond. Additional information about our revised developments will be provided as the details of our reduced capital program are finalized and implemented," Bulmahn said.

Athens Group Announces Post-Hurricane Remediation Service

Athens Group, an E&P and production consulting company that specializes in risk mitigation and problem remediation for drilling and rig control systems, has announced the availability of the company's Post-Hurricane Remediation service. The new offering, a combination of proven Drilling Technology Assurance(SM) Services, is specifically designed to help get Gulf of Mexico drilling rigs damaged by Ike and Gustav back to safe production status as quickly as possible.

According to the most recent Materials Management Service report, 47 drilling platforms and four drilling rigs sustained damage from the storms. Many rigs experienced damage to highly automated and integrated drilling and rig control systems located on the top sides.

"At today's oil prices a damaged rig that's not producing can be losing from one hundred thousand to almost two million dollars per day depending on the production rate," said Mike Haney, CEO at Athens Group. "In addition to the monetary impact, rapid return to production is critical to reducing imports of foreign oil. We're here to help drillers and operators ensure that all the software that operates the rig control systems is properly accessed, redesigned if necessary, refurbished or replaced, and tested thoroughly to ensure it is functioning properly and safely."

Drilling Technology Assurance (DTA) Services encompass repeatable processes, developed through Athens Group's extensive experience with multiple types of drilling control systems and documented in their Drilling Technology Assurance Knowledge Base. These processes were designed to help drilling and oil companies with risk mitigation and problem remediation throughout the entire lifecycle of their rigs.

Executed by third-party consultants with rig software, hardware, drilling, topology and network expertise, DTA is proven to minimize risk and improve problem remediation, reducing schedule delays and non-productive time. These services help ensure the drilling and rig control systems meet customer requirements, are drill ready when the rig is accepted and work with minimal downtime throughout the lifecycle of the rig.

GEFCO Announces Production of the SpeedStar SS-1100 Rig

The George E. Failing Company (GEFCO) has announced the production of a new drilling rig, the SpeedStar SS-1100 (SS-1100). Designed for the oil and gas industry, the rig will drill to 15,000 feet vertically. The first rig is scheduled to be completed in late December.

"For 75 years, GEFCO has manufactured the most durable drilling rigs in the industry," said Aaron Harmon, vice president of GEFCO. "Our 185K rig has been very successful. Developing the SS-1100 rig was a natural step for us to take. We have responded to the needs and requests of our customers to manufacture a rig that would drill faster and deeper."

The depth will vary for horizontal drilling. Horizontal drilling is the latest drilling trend in the oil and gas industry. Horizontal drilling allows you to follow the formation, therefore getting more production out of the zone you are wanting to produce. The SS-1100 rig will exceed a drilling depth of 15,000 feet vertically.

The rig also features state-of-the-art controls, allowing the drill to be monitored from a remote location. This allows the service department to diagnosis and prevent maintenance issues before they happen, saving time. The controls also keep the drilling crew away from the actual drilling, making the drilling process safer.

"Besides being able to drill to deeper depths, our goal was to produce a high-tech rig that is user-friendly," states Tim Lewis, vice president of domestic sales at GEFCO. "There has been a void in the industry for a rig that will not only drill deeper, but set-up in a smaller footprint and set-up quicker. There is not another rig on the market that compares to this."

A major advantage to the SS-1100 rig is its ability to set-up in mountainous areas due to its smaller size. In some cases areas will have to be cleared to allow a rig to get to the drill site. The SS-1100 rig was designed to reach these areas. The SS-1100 rig will also cut set-up time in half. Once on a site, the SS-1100 rig can begin drilling within a few hours. This allows the job to be completed quicker.

Fierce Fight over Tax on Colorado Oil, Gas Industry

A Colorado ballot issue that would increase tax revenues paid by the oil and gas industry in the state is being championed by Gov. Bill Ritter and conservation groups as fair play.

Critics claim the proposal flirts with disaster.

The ballot measure, Amendment 58, would eliminate a tax credit for oil and gas companies. Doing so would raise an extra $320 million in revenues for Colorado by 2010.

The new revenues would be channeled to four programs: 60 percent would go to college scholarships for Colorado residents; 15 percent would go to purchasing wildlife habitat; 15 percent would go to local communities for road and water infrastructure projects; and 10 percent would be invested in renewable energy projects.

The sides battling over the issues couch Amendment 58 in very different terms. Proponents go for sentiments against big oil companies. A Smarter Colorado, a group promoting passage, says the amendment will end a “subsidy” for an industry raking in record profits. In fact, it cuts the tax credit that the state has long awarded the industry.

Opponents are trying to feed on sentiments against taxes and fears about the weakened economy. Coloradans for a Stable Economy claims that eliminating the current credit would raise the cost of producing oil and gas in the state and get it passed on to consumers. They also contend that the higher tax will drive business from Colorado.

One claim by the opponents was debunked recently through a thorough study of oil and gas issues in the West by a respected nonpartisan, nonprofit organization called Headwaters Economics. It found no evidence to support the warning that the oil and gas industry would pull out of Colorado because of a higher tax rate. The industry goes where the resources are available.

George Merritt, spokesman for A Smarter Colorado, the group supporting passage, also noted that neighboring states already have higher tax rates on oil and gas than Colorado’s 6.2 percent. Wyoming is at 15.9 percent; New Mexico is at 15 percent and Utah is at 12.1 percent.

Merritt contends that Amendment 58 opponents are full of baloney with the claim that higher taxes will mean higher prices for consumers. It is preposterous to think that taxes in Colorado can influence “macro-economic” issues like prices at the gas pump or natural gas for homes, he claimed. Merritt charged that is a “scare tactic” being waged by a political action committee funded by the oil and gas industry.

In the Roaring Fork Valley, reaction to Amendment 58 is split among two organizations keenly following oil and gas issues. The Garfield County commissioners voted 2-1 to oppose Amendment 58. Wilderness Workshop, the valley’s oldest conservation group, supports it. Garfield County has been a hotbed of natural gas extraction this decade. Wilderness Workshop is battling to keep gas exploration out of roadless areas and other sensitive public lands.

Garfield County Commissioner John Martin said he and colleague Larry McCown opposed Amendment 58. Tresi Houpt supported it. Martin said part of the opposition stems from concerns that revenues for the county could drop. Garfield County gets tax revenues from three oil and gas sources — an existing severance tax paid to companies; local property taxes and a “head tax” based on workers employed in oil and gas firms in the country.

Garfield County staff researched how the proposed formula in Amendment 58 would have affected the county’s revenues over the last five years, then compared that to actual tax receipts. The result, Martin claimed, was a “significant” annual loss. (Merritt claimed that it is impossible; counties affected by oil and gas extraction would get increased, not decreased, revenues from passage of the amendment.)

Martin, a Republican, said he also opposes the measure because he believes higher taxes on the industry will be passed on to consumers.

Wilderness Workshop gave a strong and succinct endorsement of Amendment 58 in a recent e-mail blast to its members. “By voting YES on 58 you will make the common-sense decision to stop giving the wealthiest companies in the world huge tax breaks in Colorado,” the conservation group said.

Alabama State Oil and Gas Board Grants Falcon's MoBay Storage Hub Petition

MoBay Storage Hub LLC, an affiliate of Falcon Gas Storage Company, Inc., has announced that the State Oil and Gas Board of Alabama has entered an order granting MoBay's petition to establish the North Dauphin Island Gas Storage Facility. At the special hearing on October 14, 2008, the Board also approved the horizontal and vertical boundaries of the gas storage facility and appointed MoBay facility operator.

MoBay will convert the depleted North Dauphin Island unit into a high-deliverability, multi-cycle (HDMC) underground storage facility as part of Phase I of the MoBay Storage Hub project. Phase I will provide 50 Bcf of working gas storage capacity with direct interconnects to the Gulfstream pipeline, Southeast Supply Header (SESH), Transco Pipeline and Gulf South Pipeline systems. MoBay received a certificate of public convenience and necessity from the Federal Energy Regulatory Commission (FERC) in December 2006 authorizing MoBay to construct and operate the MoBay Storage Hub.

"The State Oil and Gas Board's approval is another important milestone in the MoBay Storage Hub's development," said Edmund Knolle, MoBay's chief operating officer. "We look forward to working closely with the Board, the Alabama Department of Conservation and Natural Resources, and other federal, state and local agencies as we move forward with developing the nation's easternmost natural gas trading hub. The MoBay project will provide important and long-lasting benefits to the State of Alabama, the greater Southeast and Gulf Coast gas markets, as well as communities in South Mobile County, Alabama."

In addition to the FERC and State Oil and Gas Board approvals, MoBay has received permits and approvals under sections 10 and 404 of the Clean Water Act, section 7 of the Endangered Species Act, section 401 Water Quality Certification, Coastal Zone Consistency, Air Permits from the Alabama Department of Environmental Management, and other federal, state, and local permits and approvals. MoBay also has been granted tax abatement by the Industrial Development Authorities of Bayou La Batre and Dauphin Island, Alabama. MoBay executed a long-term storage lease with the State of Alabama in February 2008 covering 25,000 acres over the North Dauphin Island, Northwest Dauphin Island and Northeast Petit Bois reservoirs. All three depleted naturally occurring reservoirs lie under the shallow waters of the Mississippi Sound in South Mobile County, Alabama.

MoBay began Phase I development in July 2008 with the plugging and abandonment of 10 production wells and the removal of the Northwest Dauphin Island platform. MoBay plans to complete facility engineering and refurbishment of the existing North Dauphin Island platform later this year. Project financing for the remainder of Phase I development is expected to close in early 2009. The anticipated in-service date for Phase I is the second quarter of 2010. To date, MoBay has contracted with 14 customers to provide more than 40 Bcf of HDMC storage service under multi-year contracts.

Alaska, Feds Investigate Rupture of Prudhoe Bay Gas Line

The state of Alaska has asked federal regulators to help investigate the rupture of a natural gas pipeline late last month in the Prudhoe Bay oil field.

The rupture was violent, causing the steel pipe to break apart and sending a piece flying across the tundra. No one was hurt in the Sept. 29 incident.

The state Petroleum Systems Integrity Office has begun an investigation and has asked a federal agency, the Pipeline and Hazardous Materials Safety Administration, to assist.

"The state's in charge of the investigation. We're supporting them," said Dennis Hinnah, an engineer who heads the pipeline administration's Anchorage office.

The federal assistance is significant, as the pipeline administration has taken an increasingly aggressive role in scrutinizing pipelines in the remote North Slope oil fields.

The agency began to ramp up its Alaska work following disastrous leaks from corroded, BP-operated pipelines in 2006. Those leaks ultimately led to BP's Alaska subsidiary to plead guilty to a federal misdemeanor pollution crime. A judge put the company on probation for three years and imposed $20 million in penalties.

BP executives acknowledged lapses in pipeline maintenance, but since have said it is investing hundreds of millions of dollars to replace miles of bad pipelines.

The 2006 spills led to creation of the state's Petroleum Systems Integrity Office and to a local expansion of the federal pipeline administration, an arm of the U.S. Department of Transportation.

Both agencies aim to keep a closer watch on the aging network of pipes and plants at Prudhoe, the nation's largest oil field, which has been producing since 1977. BP runs the field on behalf of itself and other major owners including Exxon Mobil and Conoco Phillips.

Since the spills, the federal agency has ordered BP to improve pipeline monitoring and upkeep. It requires BP to file monthly status reports.

The cause of the rupture in the high-pressure natural gas pipeline on Sept. 29 remains undisclosed.

BP representatives met recently with state officials including Natural Resources Commissioner Tom Irwin to give a preliminary report on the mishap.

But state and federal officials, as well as BP spokesman Steve Rinehart, declined to supply a copy of the report or reveal its contents, saying the findings are preliminary pending further investigation.

Kevin Banks, state oil and gas director, said the federal pipeline administration can lend engineering expertise to try to figure out why the gas line broke.

The pipe, about 8 inches in diameter, carried natural gas to a well pad for injection underground. The gas essentially adds fizz to the reservoir, helping lift more oil to the surface.

When the pipe ruptured, no workers were nearby and no fiery explosion occurred. Safety systems shut down the flow of gas automatically, Rinehart said.

The pipeline failure forced the shutdown of some Prudhoe wells producing about 5,000 barrels a day, less than 1 percent of total North Slope production.

The failed gas line, considered a localized pipe, in not among the major lines that federal inspectors normally oversee, but the pipeline administration is still willing to help with the state's investigation, Hinnah said.

Global Industries Wins $46 Million Pemex Pipeline Contract

Carlyss, Louisiana based offshore services company Global Industries has been awarded a US$46 million contract from Mexican state oil company Pemex for pipeline work in the Ku-Maloob-Zaap field in Mexico's Bay of Campeche.

The project will begin in March 2009 and be completed by the end of July. Global will utilize the construction vessel Shawnee as the main operating vessel on the project, with other support vessels assisting.

Global Industries will install two pipelines at a depth of around 300 feet (91.5 m). One 24-inch by 2.1-kilometer (1.3-mile) pipeline will run from the Maloob-C platform to the PP-Ku-H platform, while another 12-inch by 0.5-kilometer (0.3-mile) pipeline will run from a subsea connection to the PP-Maloob-C platform in the Bay of Campeche. The project also includes pipeline crossings, risers, and expansion curves.

Global Industries was awarded a US$75 million pipeline contract by Pemex for the Ixtal field, also in the Bay of Campeche, in September. This project, which also utilizes the Shawnee as the main operating vessel, is scheduled to be completed in January 2009.

HMD Kontro Reduces Delivery Times of Sealless Pumps by Streamlining Manufacturing and Production Systems

Due to the recent introduction of lean manufacturing techniques and new production systems, HMD Kontro, a Unit Of Sundyne Corp. can currently supply pumps, including API requirements in time for Christmas.

The current demands of the oil and gas industry in particular, have pushed delivery times from some manufacturers out to twelve months and beyond. However, HMD Kontro's recent investment in their manufacturing facility and new order processing systems has significantly reduced their delivery times.

The HMD Kontro portfolio of sealless pumps ranges from standard products suitable for many process applications through to highly specified and engineered pumps, some of which have been designed specifically to meet the requirements of API 685 for the petrochemical, heavy-duty chemical, oil and gas industry. Some of the pumps in the Company's range can now handle temperatures up to 450C and down to -100C, differential heads up to 350m and flow rates of up to 2000m3 per hour.

Alaska, Exxon Mobil Work to Settle Disputes over Gas Pipeline

Exxon Mobil Corp. and Alaska officials are trying to settle a complex lawsuit over a North Slope natural gas field deemed essential to a successful 1,170-mile pipeline project.

But in a recent court filing, the oil company has suggested a list of three possible mediators "should formal discussions fail to progress."

The disputed leases are at Point Thomson, which holds nearly one-fourth of the North Slope's 35 trillion cubic feet of known reserves.

Exxon Mobil and its 26 partners have long held that developing this field is critical to launching a pipeline that would help deliver up to four billion cubic feet of natural gas to Midwest homes and business.

But it hasn't developed the field in the 30 years it has held lease rights.

The state nearly two years ago decided the Irving, Texas-based Exxon Mobil was not meeting its development obligations and announced plans to yank leases from the company.

In December, Superior Court Judge Sharon Gleason said Exxon Mobil deserved a chance to tell the state why its leases on fields holding about 8 trillion cubic feet of natural gas reserves should not be revoked

In February, the company filed another development plan for the field, its 23rd in three decades. This plan is the basis of one of a series of lawsuits, trying to prove it meets lease provisions covering the 106,200-acre unit.

The two sides have held several meetings recently over the lawsuits, according to company and state officials and court documents filed Alaska Superior Court. The state still wants full revocation of the leases, and Exxon has sued to keep them.

Meanwhile, Exxon Mobil says it's ready to begin a six-year, $1.3 billion project in an effort to save the leases, potentially worth billions.

It announced late August that it is still progressing with its plan by barging equipment and supplies to its drill site more than 600 miles north of Anchorage.

"Exxon Mobil and the other Point Thomson working interest owners are proceeding with the project while they seek to resolve the dispute with the state over the Point Thomson Unit and leases," said the company's Houston-based spokeswoman Margaret Ross.

The plan calls for producing 200 million cubic feet of natural gas per day by late 2014, the company said.

Additionally it would produce 10,000 barrels of a liquid condensate that gets separated from the natural gas and is to be sold through new and existing pipelines.

Companies can receive permits to do surface work, but no drilling will be started until the lawsuits are resolved, said Nan Thompson, a petroleum manager with the state's natural resources department.

In the middle of October the state and Exxon Mobil had to file status updates with the court.

Exxon Mobil recommended mediation and suggested two retired judges and a private attorney to serve in those capacities.

The state, however, called mediation "premature."

"The parties efforts are better focused on the current process," the state wrote. "Devoting time to selecting and briefing a mediator would divert resources from the discussions already under way."

As this dispute continues, two competing plans to build multibillion dollar pipelines continue to move forward.

The Alaska Legislature awarded TransCanada Corp. an exclusive license to pursue building a pipeline that would take natural gas from Alaska's North Slope into Canada and then down to the Lower 48.

The license does not guarantee construction. It comes with $500 million in matching seed money and holds the company accountable for pursuing a federal permit.

Also, ConocoPhillips and BP have joined forces on a competing pipeline, called Denali -- The Alaska Gas Pipeline that is not seeking a state license or the accompanying $500 million in state incentives.

The two companies decided to move forward with its own project in April, and it does not have to honor any commitments to the state.

Exxon Mobil is not involved with either venture.

BLM Nets $19 Million in Oil and Gas Leases Sale

The Bureau of Land Management has brought in more than $19 million in revenues from the sale of 64 federal oil and gas leases in New Mexico, Texas and Oklahoma.

The quarterly lease sale was held October 22 in Santa Fe.

Bids for 30 parcels in New Mexico brought in more than $7 million, while 20 parcels in Oklahoma brought in more than $8.8 million. Bids for 14 parcels in Texas brought in just over $3 million.

The highest bid per acre was $4,100 by Marbob Energy Corp. of Artesia for 40 acres in Lea County. The highest overall bid was $3.78 million by Samson Resources Co. of Tulsa, Okla., for 1,240 acres in Oklahoma's Roger Mills County.

Nearly half of the revenue from the sale goes to the states where the mineral leases occur.

CB&I Gets EPC Contract for Portland Project

The Directors of Portland Gas, the independent gas storage company, on October 10 issued an update on the funding process for the Portland Project.

The Company's funding discussions are progressing and potential investment terms have been discussed with a range of parties. Terms are currently being standardized and presented to prospective Joint Venture partners, which include major utilities and integrated oil and gas companies.

The next stage of the process will be for the parties to agree on the terms of a non-binding Memorandum of Understanding ("MOU") containing the proposed commercial terms for the development of the Portland Project. It is anticipated that this process will be advanced significantly during the fourth quarter of 2008. Following the signing of the MOU's there will follow a period of multilateral negotiations to finalize the detailed legal documentation for the Joint Venture. Completion of the funding process will follow the conclusion of these negotiations.

Portland Gas announced that CB&I have been awarded the first phase of the EPC contract for the construction of the facilities. Portland Gas project manager, Jay Tanna, and his team are now based in the offices of CB&I in Paddington, London.

Commenting on the Portland Project, Andrew Hindle, the CEO of Portland Gas, said:

"We are pleased to be entering the next stage of the project funding process in which the Joint Venture partners are able to join the project under the same terms and collectively agree the legal framework. The Company is progressing with the engineering design and site preparation work under the management of Jay Tanna who joined Portland Gas in June. Jay is supported by a wide range of consultant engineers from organizations who have had a long association with the project. The start of the facilities engineering by CB&I is an exciting stage in the development of the Portland Project."

Portland Gas' business focuses on the development of gas storage projects and associated infrastructure in the United Kingdom and internationally. It currently has two projects in its portfolio, the first on Portland, for which planning permission was granted by Dorset County Council in May 2008 and Pipeline Construction Authorization was granted by the Department of Business Enterprise and Regulatory Reform in July 2008. The second project is at Larne Lough in Northern Ireland and the Company is progressing further new venture projects in Europe.

U.S. Coast Guard Helps Ratify New Marine Diesel Mandates

The U.S. Coast Guard and the contracting parties to the International Convention for the Prevention of Pollution from Ships, 1973 (MARPOL 73/78) adopted new international standards for marine diesel engines and their fuels during the International Maritime Organization's Marine Environment Protection Committee's 58th session, held in October in London.

On the same day, the United States deposited its instrument of ratification with the International Maritime Organization for Annex VI to MARPOL 73/78. These standards reportedly will help improve global air quality by significantly reducing sulfur oxides, nitrogen oxides and particulate matter emissions from ocean-going vessels operating in our coastal waters and ports. The ratification comes pursuant to President George Bush signing into law the Maritime Pollution Prevention Act of 2008 on July 21.

The new geographically based IMO regime means that ships operating in areas that can demonstrate an air quality need will be required to use the most advanced technology-forcing engines and lowest polluting fuels. In these Emission Control Areas, ships will be required to use engines that meet stringent Tier III emission control standards. Advanced after-treatment systems likely will be employed to reduce nitrogen oxides emissions by about 80 percent. Fuel containing no more than 1,000 ppm sulfur will be required in Emission Control Areas beginning in 2015.

Globally, emissions will be reduced through near-term engine and fuel standards that will apply beginning in 2010. Concerns about serious human health and environmental impacts prompted the International Maritime Organization to adopt a requirement requiring all vessels, no matter where they are operated, to use fuel with a sulfur content not to exceed 5,000 ppm. This standard represents a 90 percent reduction from today's global cap. This fuel standard is set to be implemented in 2020, pending a fuel availability review in 2018.

The Coast Guard and its federal partners worked diligently at IMO to develop these stringent international standards to address the contribution of ocean-going vessel emissions to U.S. air pollution. Emissions from ocean-going vessels are substantial and are expected to grow significantly over time. In 2001, ocean-going vessels contributed nearly six percent of mobile source nitrogen oxides, more than 10 percent of mobile source PM2.5 and about 40 percent of mobile source sulfur oxides nationwide. Without further controls, emissions from these engines could double or quadruple by 2030, the Coast Guard concluded.

LAI International Lands $1 Million in Contracts for Manufacturing Components Used for Oil Exploration

LAI International, Inc., strategic supplier of precision components and sub-assemblies for original equipment manufacturers has announced it has secured contract awards for manufacturing precision components used for oil and gas exploration.

LAI uses advanced processes to manufacture a series of flex couplings, which incorporate an interlocking design in four-feet-long alloy steel pipe, used to steer down-hole drilling operations for extraction of oil and gas. Under a multi-year agreement with a dominant U.S. oil and gas exploration company, the contracts are expected to be valued at more than $1 million.

"We have been successful in using proprietary manufacturing technologies to process a vertebrae-segment design in the components to facilitate greater flexibility in our customer's drilling operations," Thomas Sterner, Operations Support Manager for LAI, said. "These cutting-edge processing methods allow LAI to accommodate our customer's need for high-performance products in a highly competitive environment."

The components will be manufactured at LAI's facility in Westminster, Md.

LAI is the premier manufacturer of precision engineered components and assemblies for aerospace, power generation, defense and other advanced technology industries. The company is a major supplier of finished goodsLAI is the largest precision contract manufacturer in its class with the fastest growth as ranked by Inc. Magazine.

LAI has longstanding and strategic relationships with all leading global players in every area of their operations, including Boeing, Eaton, GE, Lockheed Martin, Northrop Grumman, Pratt & Whitney, Rolls-Royce, Siemens, and more than 70 percent of Fortune 500 global manufacturers.

LAI operates five manufacturing facilities, dispersed in key manufacturing regions across North America, with locations in Minneapolis, Phoenix, Tucson, Westminster, Md., and Scarborough, Maine -- all of which are ISO 9001:2000 and AS9100 certified. The company also offers NADCAP-certified non-conventional machining processes.

Jacobs Engineering Gets Construction Contract from Flint Hills Resources

Construction-services provider Jacobs Engineering Group Inc. said October 21 it received a contract to perform engineering and construction services for refining and petrochemical company Flint Hill Resources' new diesel desulfurization unit.

The unit is in Corpus Christi, Texas. Contract terms were not disclosed; the entire project is valued at $250 million.

Larger Engineering Firms Consider Greater Opportunities in Upcoming Year while many Contractors Face Challenges

Large engineering and construction firms have stockpiled record levels of cash and expect to buy smaller companies at better prices as the credit crisis sours the wider economy in the year ahead, mergermarket reports. But many contractors, who rely on credit to run their operations, face challenges, industry sources said.

Engineering firms serving the booming oil and gas, power and infrastructure sectors, such as Fluor Corporation, Jacobs Engineering and The Shaw Group, have enjoyed record earnings and backlogs in 2008 and are in strong positions to buy. “All say they’re going to be aggressive on acquisitions in 2009. They expect to do it in cash and get better multiples because of Wall Street’s meltdown and because private equity is not the force it once was in driving up the multiples,” one banker observed.

Irving, Texas-based Fluor, which has a record US$2.35bn in cash on its balance sheet, has called acquisitions its “number one priority” despite not doing a deal since 2004. “Given the change in valuations and change in people’s perception, we may see some opportunities going forward,” said chief financial officer Michael Steuert. Fluor has been cautious about reentering the acquisition arena after past deals in mining and equipment leasing did not work out, said the banker.

Executives at both Louisiana-based Shaw Group and California-based Jacobs Engineering say they expect to buy smaller companies that face capital constrains in today’s weak credit markets and do not have the stomach to go through another five-year business cycle. Shaw had record cash of US$690m, while Jacobs, with a history of successful acquisitions, had US$500m in cash.

Companies, such as Shaw, Foster Wheeler, Fluor and AZZ, remain bullish about power projects as the need to rebuild the country’s aging power plants and the prospect that the next administration will formulate a national energy program is expected to release pent up demand for their services.

Deal flow will be strong because most buyers use cash and keep mainly debt free, so they have little need to access the frozen credit markets, said the banker. As the business cycle gets shakier there will be more willing sellers too and because the number of private companies dwarfs the public ones most deals will be of privately-held companies, he added.

However, large sub-contractors who are dependent on credit to run their businesses are likely to be affected by the credit crisis, said a second banker. He pointed to EMCOR, Quanta Services, Comfort Systems, Sterling Construction and Integrated Electrical Services (IES) as companies that could be negatively affected by the worsening credit crisis because they have significant credit needs to pay for their workforce, said a second banker. “All face potential bonding constraints that could force some activity. It’s always a concern,” he said.

Shaw Group Wins $400 Million Engineering Contract

Construction company Shaw Group Inc. said that its Fossil/Nuclear segment of Power Group has been awarded an engineering, procurement and construction, or EPC, contract by NV Energy, a wholly-owned subsidiary of Sierra Pacific Resources. The contract is valued at about $400 million, and is for continuing the construction of a new 500-megawatt combined cycle, natural gas-fired power plant.

Shaw Group noted that the combined cycle plant will be built at the existing Harry Allen Generating Station north of Las Vegas, Nevada.

The contract is scheduled for completion in 2011, and will be added in Shaw's first quarter fiscal 2009 backlog of unfilled orders, the company said.

J.M. Bernhard, the chairman, president and chief executive officer of Shaw, stated, "We are seeing a renewed interest in gas-fired plants as electric utilities seek clean energy solutions that will help bridge the gap between existing generation and the start-up of the next wave of baseload power generation, including emissions-free nuclear power plants."

Questions Regarding Pit and Waste Rules Prove Tricky for Colorado Oil, Gas Panel

On October 26 Colorado state regulators began to deal with some of the proposed new rules for oil and gas development pits and waste and soon found themselves bogged down over the question of whether some of those rules should be applied retroactively.

Meeting in a rare weekend session, the Colorado Oil and Gas Conservation Commission provisionally approved a number of rules covering areas such as spill reporting, when pit liners must be used, and how they should be closed following use. However, it put off

some tough decisions, such as determining whether pit lining requirements would apply to existing pits.

“This is potentially an enormous cost,” said Commissioner Joshua Epel.

Among other provisions, the rules the commission tentatively approved on October 26 would require liners for production pits unless operators can show the pits pose no threat of harming underlying groundwater.

CANADA

Keyera to Acquire Alberta Midstream Facilities from Spectra Energy

Canada’s Spectra Energy announced October 8 that its wholly owned subsidiary Spectra Energy Midstream has entered into an agreement with Keyera Facilities Income Fund (Keyera) under which Spectra Energy Midstream has agreed to sell all of its interests in the Nevis and Brazeau River natural gas gathering and processing facilities to Keyera. Subject to receipt of required regulatory approvals and certain other conditions, the transaction is expected to close in the fourth quarter of 2008.

“Part of our plan when we took the Spectra Energy Income Fund private was to rationalize non core assets held by the fund. This sale represents the timely execution of that plan," said Doug Bloom, president Spectra Energy Transmission West.

The assets to be sold consist of 87 (net) million cubic feet per day (mmcf/d) of sour gas processing capacity, an acid gas injection facility and an extensive sour gas gathering pipeline network at Brazeau River in Alberta, as well as 150 mmcf/d of sour gas processing, a natural gas liquid fractionation and storage facility, and 354 kilometers of low pressure gas gathering pipelines associated with Nevis in Alberta.

Spectra Energy Midstream currently holds a 100 percent ownership interest in the Nevis facilities located 30 kilometers west of Stettler, Alberta. The company has a minority ownership interest in a processing facility and some related gathering facilities (currently operated by Keyera) located at Brazeau River, 170 kilometers southwest of Edmonton, Alberta, and a 100 percent ownership interest in compression and certain other gathering facilities connected to the Brazeau River plant.

Spectra Energy does not expect to record a material gain or loss associated with this transaction. The company operates in the United States and Canada approximately 18,000 miles of transmission pipeline, 265 billion cubic feet of storage, natural gas gathering and processing, natural gas liquids operations and local distribution assets. Spectra Energy Corp also has a 50 percent ownership in DCP Midstream, the largest natural gas gatherer and processor in the United States.

RCMP Investigate Bomb Blast along B.C. Encana Gas Pipeline

The RCMP is investigating after a bomb blast was discovered by pipeline workers at a site about 50 kilometers southeast of Dawson Creek, near the Alberta border, a remote and isolated area on October 16, the second in less than a week.

It follows an explosion at another section of the natural gas pipeline on October 11.

The pipeline, owned by Calgary energy company EnCana, was damaged by the blast but did not rupture. Technicians were able to quickly contain a leak.

"The RCMP is taking this incident very seriously and is dedicating investigators from a number of specialized units including INSET, the Integrated National Security Enforcement Team," said Sgt. Tim Shields. The first attack, about 30 kilometers away along the same pipeline, occurred after an anonymous letter had been sent to a newspaper in nearby Chetwynd and then forwarded to the RCMP. The letter demanded oil and gas companies stop production and leave the area.

Some landowners welcome oil and gas activities on their land, but others have not been as welcoming. It's only been recently, said Gwen Johannson, president of a landowner group, that the industry has met with landowners to discuss their concerns about sour gas.

Both blasts damaged the pipeline but didn't cause any ruptures. If the attack had caused gas to leak, the area might have been evacuated because sour gas, which contains hydrogen sulfide and smells like rotten eggs, can be toxic and even fatal.

B.C.'s Solicitor General John van Dongen said the provincial government hasn't received any warnings from individuals or groups. Pipelines haven't been targeted recently, but such attacks were frequent occurrences in the 1990s when there were more than 160 incidents of vandalism in Alberta, including shootings and bombings, aimed at disrupting the oil patch.

John Thompson, an expert with the Toronto-based Mackenzie Institute for the Study of Terrorism, Revolution and Propaganda, said the two B.C. explosions differ from the acts of vandalism on the Alberta side a decade ago.

"Those were penny-ante sabotage mostly done by a small group of people," he said.

"In this case, there was nothing and all of a sudden, you got a pipe bomb," an indication, he said, that the person responsible was highly motivated.

Jacobs Gets Contract from EPCOR for Coal-fired Gasification

Jacobs Engineering Group Inc. has received an engineering services contract from EPCOR for a project in Alberta, Canada.

The Genesee Integrated Gasification Combined Cycle project will see a facility built that will demonstrate, on a commercial scale, coal gasification-based combined cycle electrical power generation technology. The process is expected to offer better efficiency and emissions benefits over existing conventional coal-fired power generation.

The project is scheduled for completion in 2009.

Jacobs will provide pre-FEED, or front-end engineering and design, and FEED engineering services for the facility. Terms of the contract were not disclosed.

CUBA

Cuba Estimates Offshore Oil Reserves of 20 Billion Barrels

Cuban oil officials have said that the country may have over 20 million barrels of recoverable oil in its offshore fields in the Gulf of Mexico, more than twice the estimates of the U.S. Geological Survey. Rafael Tenreyro Perez, exploration manager for Cuban oil company Cupet, said that the country hopes to drill its first production wells in mid-2009.

Tenreyro Perez said that the Cuban estimate was higher than U.S. Geological Survey because Cuba has better information about its offshore geology.

The U.S. Geological Survey estimates that Cuba could have nine billion barrels of oil and 21 Tcf of natural gas. Tenreyro Perez said that Cupet did not have an estimate for the country's natural gas reserves.

Tenreyro Perez stated that Cuba's oil estimates are mainly based on comparisons with how much oil is produced from similar geological structures offshore Mexico and the U.S., such as Mexico's Cantarell oil field.

A consortium of international companies, led by Spain's Repsol YPF, is expected to drill the first production well. Drilling was scheduled for this year but postponed because of difficulties securing a rig. Brazilian state oil company Petrobras is also in talks with Cupet to drill offshore Cuba.

Canadian company Sherritt has canceled its oil-production contract for Cuban waters of the Gulf of Mexico, saying that it was not worth continuing with exploration in the area. Sherritt had contracts to develop four blocks off the northwest coast of Cuba. Repsol YPF, StatoilHydro, ONGS, Petronas, PDVSA and PetroVietnam continue to operate in the area.

ARGENTINA

Fluor to Expand its Argentina Operations

Fluor announced on October 30 the opening of its expanded office in Buenos Aires, Argentina, to support projects in the region. Fluor's total office staff of 50 is double the number of professionals since the beginning of 2008. They are part of Fluor's global workforce and perform engineering, procurement, construction and maintenance services for the oil and gas, mining, manufacturing and life sciences, petrochemicals and operations and maintenance sectors.

Fluor planned to host a grand opening at their new office in Buenos Aires on November 6.

Fluor's key clients in the oil and gas, manufacturing and mining industries have expressed interest in Fluor expanding its Argentina-based capabilities to support their increasing needs in the region. The Buenos Aires office will offer operations that not only will support many of Fluor's clients in Argentina, but also will serve the entire South America region and strategic global interests as a value-engineering center.

"Fluor has executed some of the most complex projects in the most challenging regions of the world," said David Seaton, Fluor's group president of energy and chemicals. "We will continue to serve the needs of our clients in Argentina and throughout South America, while expanding our resource base and work with the local community."

BRAZIL

T-3 Energy Services Receives $3 Million Order for Diamond Series Double Ram Subsea BOPS

T-3 Energy Services, Inc. has received a purchase order for two 18 3/4" - 10,000 psi T-3 Model 6012 Diamond Series(r) Double Ram Subsea Blowout Preventers (BOPs).

These subsea pressure control products will be fitted with standard operators for normal well control operations with the exception of the upper ram cavity which will be fitted with larger bore shear operators. These larger bore products close and shear the drill string, forming a positive seal off at the well bore to shut in the well during emergency situations. The total package order is in excess of $3 million. The destination for these products will be drilling operations offshore Brazil.

T-3's quoting activity continues to be robust in both the domestic and international market as we continue to distinguish ourselves as a major original equipment manufacturer of oil and gas pressure control products.

Gus D. Halas, T-3 Energy's Chairman, President and Chief Executive Officer, remarked, "This order for our proprietary subsea equipment continues our expansion into key drilling markets. This order not only represents further penetration into the subsea market, but provides additional sales into one of our targeted markets, which in this case is Brazil. Regardless of the region, T-3 continues to excel as a name-brand provider of customer-driven products and services while building and maintaining lasting relationships with our customers."

COLOMBIA / PERU

SoluChem Sells Two Oil Rigs in Colombia and Peru for $3.5 Million

SoluChem LLC, a leading provider of oilfield equipment worldwide, has announced the completion of US$3.5 million in sales involving two work-over rigs to customers in Colombia and Peru. The recently delivered rigs are U.S. manufactured 375 and 475 horsepower units designed for work-over applications with the ability to convert to drilling units.

The rig in Colombia was sold to a leasing company contracted to ECOPETROL, while the unit in Peru was sold to a large multinational drilling company.

"These sales demonstrate SoluChem's continued and deepening commitment to the Colombian and Peruvian markets," said Howard Cleaver, Vice President of SoluChem. "We are excited to contribute to the robust development in these markets and support our customers' efforts to deliver cost effective energy, just as we have all over South America."

SoluChem, headquartered in Austin, Texas, has operations throughout South America and the Caribbean, with a sales and operations office in Bogota, Colombia. They sell a wide range of oil and gas rigs, associated equipment and consumables worldwide.

EQUADOR

Ivanhoe Energy to Develop Ecuador's Pungarayacu Heavy-oil Field

Ivanhoe Energy Ecuador Inc. has signed a contract with Ecuador state oil companies Petroecuador and Petroproduccion to explore and develop Ecuador's Pungarayacu heavy-oil field, utilizing Ivanhoe's HTL upgrading technology.

Ivanhoe Energy Ecuador, a Canadian company, is a wholly-owned subsidiary of Ivanhoe Energy Latin America Inc., the parent company of Ivanhoe Energy Inc.'s Latin America corporate group.

The contract covers project appraisal and development of Block 20, including production and upgrading of the heavy oil. Block 20 is an area of approximately 426 square miles (1,100 square kilometers, or 272,000 acres), approximately 125 miles (200 kilometers) southeast of Quito, in the Amazon Basin.

Block 20 contains the 250-square-mile (647 sq. km) Pungarayacu heavy-oil field, which was discovered approximately 30 years ago. Ivanhoe plans to apply its patented field-located, HTL(TM) heavy-to-light upgrading technology to the development of the Pungarayacu field.

Petroproduccion drilled 26 wells in Block 20's Pungarayacu field during the 1980s. The field has been studied and evaluated by Petroproduccion, ARCO and other major oil companies. These third-party studies estimated that Pungarayacu contains between 4.5 billion barrels (Petroecuador-ARCO) and 7.0Â billion barrels (Petroecuador) of oil-in-place.

Confirmation of these resources would make the Pungarayacu field the largest accumulation of heavy oil in Ecuador and one of the largest in Latin America. Preliminary engineering estimates would support production from the field at rates in excess of 100,000 barrels per day.

Ivanhoe Energy Ecuador will lead the development of the project. The contract is guaranteed by corporate parent Ivanhoe Energy Latin America, which will obtain or provide all funding and financing for Ivanhoe Energy Ecuador's operations under the contract. This reflects the strategy of the corporate restructuring program that Ivanhoe Energy Inc. announced March 17, 2008.

TRINIDAD & TOBAGO

ShawCor Announces $60 Million Contract to Provide Pipe Coating Services for Trinidad North East

ShawCor Ltd. announced on October 16 its Bredero Shaw division has received a contract with a value in excess of $60 million to provide Concrete Weight Coatings and anode installation for the National Gas Company of Trinidad & Tobago Ltd’s North East Offshore (NEO) and Tobago Pipeline Projects. Bredero Shaw will mobilize two Compression Coat Technology (CCT) concrete weight coating plants to Trinidad and will commence coating for these projects in the second quarter of 2009.

The North East Offshore Pipeline Project will consist of approximately 84 km of 36” pipe to be installed offshore and approximately 10 km installed onshore that will transport natural gas from BHP Billiton´s Angostura Gas Export Platform to Mayaro Bay on the east coast of Trinidad. The Tobago Pipeline Project will consist of approximately 54 km of 12” pipe that will transport natural gas from the BHP Billiton Gas Export Platform to Cove Industrial Estate at Columbus Point, on the south coast of Tobago.

Bredero Shaw will provide Concrete Weight Coating using Compression Coat mobile coating technology. Compression Coat is the pipeline industry’s leading coating system for projects requiring rapid mobilization or coating near the right-of-way. This concrete coating system is designed to provide negative buoyancy and mechanical protection for pipelines in submarine and wet environments.

Compression Coat uses a side-wrap application process making it ideal for both small and large diameter pipelines.

ShawCor Ltd. is an energy services company specializing in products and services for the pipeline and pipe services and the petrochemical and industrial segments of the oil and gas industry.

Bredero Shaw, ShawCor’s largest division, is the global leader in pipe coating solutions. The division provides specialized coating systems and related services for corrosion protection, insulation and weight coating applications on land and marine pipelines including highly engineered corrosion and insulation systems for deepwater applications.

ASIA

AUSTRALIA

Baker Hughes Completes First Zero Discharge Well in Browse Basin’s Scott Reef

Baker Hughes Drilling Fluids has successfully finished a client's first zero discharge well in the Scott Reef prospect of the C. Key issues revolved around the environmentally challenging drilling location and a jackup rig standing over a pristine coral reef formation, the company says. BHDF Fluids Environmental Services (FES) provided a custom built slurrification system for water-based cuttings.

Cuttings were slurrified and pumped to a support boat for transport away from the coral reef to be discharged in deepwater. The critical issue was zero "spillage" to the sea in any shape or form on location. The top hole proved problematic in slurrifying the coral cuttings, but once the reef itself had been drilled, drilling began to TD without problems and slurrification was finished with zero discharge.

CHINA

PetroChina Begins Work on Baoji-Hanzhong Gas Pipeline

PetroChina has started building a 228-km pipeline from Baoji to Hanzhong, both in Shaanxi province of northwest China, in a bid to ease gas supply in southern Shaanxi and later northern Sichuan province.

Fed with gas from CNPC's Changqing gasfield, the pipeline is designed to transport 185.5 mcm each year and will come online by 2010.

The pipeline project is forecasted to cost 553.69 million yuan.

China to Build 150,000 Kilometers of Oil and Gas Pipelines in Coming Years

China will build a total of 150,000 kilometers of oil and gas pipelines in the coming 12 years.

This information comes from the fifth China International Pipeline Exhibition which concluded in Langfang, Hebei Province. More than 240 domestic and foreign enterprises from 20 countries participated in the exhibition.

The start on the construction of the second west to east gas pipeline and the Middle Asia oil pipeline has unfolded a prelude to a new round of oil and gas pipeline building upsurge in China.

Sevan Marine Seeks to Delay Delivery of Rigs Due to Financial Woes

Sevan Marine is trying to defer delivery of two floating drilling rigs it has ordered from Cosco’s Nantong Shipyard to give the Norwegian company more time to organize the financing.

Sevan has two cylindrical-shaped hulls for these rigs under construction in China, but has been forced to negotiate with equipment suppliers and the rig charterers to delay their delivery as it struggles to find the funds.

Tight credit conditions has meant finance arrangements are taking longer than expected, although Sevan chief executive Jan Erik Tveteraas is confident that this will be achieved.

His company has just signed an agreement with two financial institutions that will arrange up to $1bn of funding, covering 70% of the rig construction costs.

Mr Tveteraas said the delay on the Sevan Driller II and III projects will give the company time to bring in one or two investors into the Sevan Drilling subsidiary in 2009.

“We are having ongoing discussions with investors so we can substantially reduce our equity in Sevan Drilling by 2010. Once we have this equity in place for the two drilling units, then we can draw on a loan.

The securing of bank mandates for $1bn gives us confidence about the finance,” said Mr Tveteraas.

“In the market it is difficult to get finance, so we need cooperation with our vendors and clients because no one wants to see these projects fail.”

As the schedule stands, Sevan Driller II is due to be delivered at the end of 2010 and will go on a three-year charter with India’s Oil & Natural Gas Corp and Sevan Driller III is scheduled to start a six-year charter with Brazil’s Petrobras early in 2012 after its delivery. But these targets will slip and Sevan could be penalized up to $10m per rig from the oil companies.

Sevan is also in talks with its main suppliers Cosco, Aker Solutions and Siemens to slow down delivery of their equipment and payments.

These discussions will not delay delivery of Sevan Driller I from the China.

Mr Tveteraas said this rig should leave Cosco’s yard at the end of May or early June next year to start a six-year contract with Petrobras in Brazil in the third quarter 2009.

Sevan has also secured $300m of finance from a syndicate of European banks covering construction of its Sevan Voyageur FPSO, which is due to leave Rotterdam at the end of next month.

GE Commercial Finance, which is also working with Sevan on financing the three drilling rigs, syndicated the loan with ING Bank, Natixis, Fortis and Norway’s Eksportfinans, which funds Norwegian export credits.

The Sevan Voyageur hull was built in Yantai Raffles shipyard in China and the topsides were installed in Keppel Verolme. It is Sevan’s third FPSO and is scheduled to leave the Dutch yard later this quarter to be towed to Oilexco’s Shelley oil field in the North Sea. It is likely to start production in January 2009.

Sevan’s revenues have risen this quarter after its second FPSO - Sevan Hummingbird - started full production on Venture’s Chestnut field in the UK side of the North Sea.

United Arab Emirates Minister of Energy Mohamed Bin Dhaen Al Hamli said that if low oil prices persist, them “there will not be enough investment for the future”.

“It is very difficult to find finance to help invest in large projects, it’s especially true for gas projects,” he said at the London conference.

There is also concern that a cut back in project developments will in the long-term lead to less stability in energy markets, more volatile prices and potential for energy shortages.

Organisation of Petroleum Exporting Countries secretary-general Abdalla Salem El-Badriof said: “We want to invest, but at these oil prices we will not be able to invest and there will be shortages in supplies in the future.”

The fall in oil prices is good for consumers in the short term as energy costs are lower, but there may be problems in the long term.

“We need to get investment in energy now, otherwise we will have a tough mid-term situation and a supply crunch might come sooner and will be more acute. Supply may not catch up when demand is recovering,” said International Energy Agency executive director Nubuo Tanaka.

To prevent projects from being delayed, oil prices need to rise or service costs have to fall. Mr Al-Attiyah said oil prices of $70-$80 per barrel would be good for producers in Opec.

International oil companies would be able to undertake most of their existing projects at current prices as their budgets are set on average at $40-$50 per barrel, but they would like to see higher prices. Mr Scaroni said $70-$80 would ensure deepwater projects go ahead.

INDONESIA

Chevron, ConocoPhillips, Husky to Invest $91 Million in Indonesia Oil and Gas Blocks

Chevron Corp, ConocoPhillips and Husky Energy Inc have won new oil and gas exploration rights in Indonesia and have pledged a total investment of at least US$91.4 million during the next three years.

The three are among the winners of 22 new oil and gas blocks announced by the Energy and Mineral Resources Ministry October 17.

Chevron, through its subsidiary Chevron Indonesia Ventures Ltd, won the rights to explore two blocks in West Papua. For the first three years of exploration, it is committed to spend $24.5 million of investment in each field.

ConocoPhillips, meanwhile won exploration rights in the Arafura Sea block and will need to invest $30 million in the first three years.

The investment commitment from Canada-based Husky Energy Inc is expected to be $12.4 million, to be used to back three years of exploration activities in the North Sumbawa II block.

For the 22 blocks, the government expects to mobilize a total investment of $375.5 million, said director general for oil and gas, Evita H. Legowo.

Evita said the government offered the blocks through the direct offer mechanism, under which interested investors propose to the government to undertake a joint study to assess oil and gas reserves in one or more particular blocks.

Once the studies find positive indications of reserves, then the government opens a bidding process, although the first bidding rights will be given to the company that proposed, financed and undertook the study.

"The fact that Chevron and ConocoPhillips are still interested in these blocks shows that our production sharing contract (PSC) scheme is still attractive for investors," said R. Priyono, head of upstream oil and gas regulator BPMigas.

Under the PSC, the government and companies concerned share the output of the block. The government's share from the projected output from these 22 blocks would be between 65 and 85 percent for oil and between 60 and 70 percent for natural gas.

However the scheme also includes the much reported cost-recovery mechanism which requires the government to allow the companies to recover specific expenses spent by operators related to exploration activities.

Indonesia has adopted the PSC system for more than 40 years, but lately the system has drawn some criticisms over the large expenses paid to oil and gas operators under the cost recovery provisions.

On October 17, the government also opened a tender for 31 new oil and gas blocks, 16 of which were offered through regular tenders with the remaining blocks through the direct offer mechanism.

MALAYSIA

Malaysia’s Petronas Carigali Awards 15 Contracts to Five Local Fabricators

Petronas Carigali Sdn Bhd, the exploration and production arm of Petroliam Nasional Bhd (Petronas), has awarded 15 contracts for four upstream oil and gas projects worth a total of RM2.8bil to five local fabricators.

Petronas vice-president (corporate services) Ahmad Nizam Salleh said the five were Malaysia Marine and Heavy Engineering Sdn Bhd, Sime Darby Engineering Sdn Bhd, Kencana HL Sdn Bhd, Ramunia Fabricators Sdn Bhd and Oilfab Sdn Bhd.

The projects, all offshore, are expected to be completed by 2011.

“But we expect further funds (about RM2.2bil ) will be required to pay for additional equipment and services for the completion of the projects,” he said after the agreement signing between Petronas and the fabricators.

Ahmad Nizam said the five would procure and construct various components of the facilities for the development of the Kumang Cluster Fields (Sarawak), the Tangga Barat Cluster Fields (east coast), the Kinabalu Non-Associated Gas Fields (Sabah) and the enhancement of gas compression capacity at the Dulang Field (Terengganu).

Petronas vice-president Datuk Abdullah Karim said one of the projects involved the completion of facilities to help boost Malaysia’s gas production.

When the offshore facilities are fully operational, Petronas expects gas production to increase by 950 million standard cu ft per day from the current daily production of 6.6 billion standard cu ft.

Abdullah said this would ensure the availability of gas for both the domestic and export markets.

Aseambankers analyst Liaw Thong Jung said Petronas had the ability to dish out about RM10bil worth of contracts. “So it’s likely that more contracts could be awarded to these companies in future,” he told StarBiz.

Liaw said the selection process (to award contracts) was made easier as there were only seven major local fabricators for the oil and gas industry.

“It’s likely that the time was right for some of these companies to replenish their order book,” he said.

Another analyst said it was unprecedented for Petronas to award a slew of projects at one go. “Usually the projects are awarded on a staggered basis over a period of time,” he said, adding that Petronas could be on an aggressive expansion plan and required players that supported the oil and gas industry, including fabricators, to raise their competence and expertise level to support Petronas’ growth.

The only hint of an aggressive expansion plan came from Abdullah, who said: “One of Petronas’ objectives is to support local fabricators to develop higher skills to compete at the global level while Petronas is not slowing down on its oil and gas exploration.”

Aker Solutions Signs Subsea Supply Agreement with Shell Malaysia

Aker Solutions has been awarded a five-year supply agreement from Sarawak Shell Berhad (SSB) for supply of subsea production systems equipment and services.

SSB has several existing platforms offshore Sarawak, Malaysia, as PSC operator to PETRONAS and with partners PETRONAS Carigali and Nippon Oil Exploration (M) Ltd, where new subsea wells will be tied back to. The wells are found in water depths down to 200 meters.

"This supply agreement is a significant milestone for us as it is our first collaboration with Shell in this country. It is also an important recognition from one of the world's major oil and gas companies to our Malaysian operation and unique subsea manufacturing centre," says president of Aker Solutions in Malaysia, Egil Martinussen. "The potential in the Sarawak area is big, and we look forward to working with SSB to develop it further over the coming years."

The scope of work for the five-year supply agreement includes design, manufacturing, testing, installation, commissioning, follow-on support and maintenance of wellheads, subsea trees, subsea control systems, flow bases and tie-in equipment.

Manufacturing and testing of all equipment will take place at Aker Solutions' hi-tech subsea manufacturing center in the Port Klang Free Zone, Malaysia.

Contract party is Aker Solutions Malaysia Sdn. Bhd.

SOUTH KOREA

AMEC Signs MoU to Help South Korean Energy Industry Develop

AMEC plc, the international engineering and project management company, has signed a Memorandum of Understanding (MoU) with the Korea Electric Power Corporation (KEPCO) and Korea Gas Corporation (KOGAS) to develop energy-related business opportunities and projects both in South Korea and internationally.

The MoU is intended to help South Korea play a pivotal role in the energy economy in Asia and developing the country’s energy assets around the world including, for example, gas fields in the Middle East.

The three companies will work together, sharing their respective expertise to achieve mutual benefits across a potentially wide range of energy projects including thermal and nuclear power, gas, coal, renewable energy and carbon reduction. The agreement will also play a part in expanding and improving the country’s skill base in Project Management Consultancy, enabling the partners to pursue international opportunities in that field.

Japanese Firms Boost Vietnamese Oil Industry

Japanese firms are stepping up their involvement in Vietnam's oil industry, entering both upstream exploration and production and downstream refining and marketing.

State-owned Petrovietnam and Nippon Oil Corp. subsidiary Japan Vietnam Petroleum Co. have begun producing crude oil at offshore Phuong Dong oil field. JVPC holds a 64.5% stake in the venture, while Petrovietnam E&P holds the remaining 35.5%.

Production at the field, located on Block 15.2, about 120 km off Ba Ria-Vung Tau province in southern Vietnam, is expected to increase to 15,000 b/d in 2009 from the current 10,000 b/d.

The field has reserves estimated at 36.3 million bbl of crude, 5.3 million bbl of condensate, and 3.16 billion cu m of natural gas.

Meanwhile, VRJ Petroleum, a joint venture of Idemitsu Kosan subsidiary Idemitsu Cuu Long Petroleum Co. 15%, Petrovietnam 35%, and Zarubezneft 50%, plans to develop Block 09-3, which lies in water 50 m deep some 135 km off southern Vietnam.

In January, after drilling three exploration wells, VJR Petroleum announced a find at Block 09-3, saying one well had an oil flow of 4,150 b/d. Earlier, in 2006 the company estimated that Block 09-3 holds 50-70 million tonnes of oil.

The VJR Petroleum JV plans to invest ¥70 billion to build production facilities, with production of 20,000 b/d slated to start in the latter half of fiscal 2009.

In connection with downstream activities, Idemitsu Kosan and Mitsui Chemicals announced in April that they would take part in a 200,000-b/d, $5.8 billion oil refinery and petrochemical complex project in Vietnam.

Idemitsu intends to cater to sharply rising demand in Vietnam for oil products and ensure a steady supply of crude oil, while Mitsui is looking to expand the profits of its purified terephthalic acid and related operations through stable procurement of aromatics feedstock.

To implement the project in the Nghi Son economic zone in Thanh Hoa Province, 180 km south of Hanoi, a joint-venture company tentatively called Nghi Son Refinery & Petrochemical was established, with Idemitsu holding a 35.1% stake, Kuwait Petroleum International 35.1%, Petrovietnam 25.1%, and Mitsui 4.7%.

On September 19, Petrovietnam deputy director Truong Van Tuyen and Masayasu Kawasaki, a representative from Marubeni Corp, signed a contract at Vietnam's Dung Quat oil refinery plant.

Under the contract, Marubeni will buy 75,000-150,000 tonnes/year of propylene products from the refinery.

Petrovietnam has announced plans to import 52,500 tonnes of diesel to test-run the 140,000 b/d Dung Quat refinery, which is due to start operations in 2009.

In 2002, the Vietnamese government awarded the contract to build the Dung Quat refinery to a consortium comprised of Technip-Coflexip of France and JGC Corp.of Japan.

EUROPE / AFRICA / MIDDLE EAST

ALBANIA

Positive Results from Stream Oil & Gas Study of Albania’s Delvina Gas Field Power Plant

Stream Oil & Gas Ltd. announces positive results from the Poyry Energy Srl ""Delvina Gas Power Plant Project"" scoping study evaluating the installation of a 150MW gas fired power plant on the Delvina Gas Field in southern Albania. Poyry Energy is a global consulting and engineering company and a worldwide leader in the energy sector. Poyry's core areas of expertise are: management consulting, hydropower, renewable energy, power & heat, oil & gas. In addition, Poyry holds a strong position within engineering and project services for nuclear technology, transmission and distribution as well as industrial processes.

The Delvina Power Plant Project includes the conversion into electricity by a combined cycle plant located in close proximity to the Delvina gas field. Initially, the size of this plant would to be around 100 MW, with an extension to 150 MW at a later stage. The gas consumption of a 100 MW power plant at base load is around 480 MNcm3/d, which is in line with Company's gas production forecast from the Delvina gas field.

According to the study, overall investment cost for a 100MW station is approximately 90 M Euro ($126M USD) and with a life time of 20 years is economic even under the assumption of current local pricing for gas at around$15Nmcf which represents three fourths of the operating costs. The results of this scoping study suggest that an investment a gas fired power plant as planned the Company in Albania is viable because:

Albania needs to diversify its primary energy supply for electricity generation. The country currently depends on hydropower plants with varying generation capacity caused by fluctuating precipitation.

Albania needs additional domestic power generation capacity due to high demand growth Capacity shortages are likely to result in high electricity prices.

There is an attractive investment climate for foreign direct investment in the power sector Furthermore the study indicates: Attractive investment climate in Albania - Many investors in the power sector are targeting the country and recent developments show that the Albanian government is favoring foreign investment. The current state of the generation, transmission and distribution assets requires significant investment.

EUROPE

Nord Stream Consortium Says Project Development on Track

The Nord Stream Shareholders' Committee discussed the development of the pipeline through the Baltic Sea in a meeting on October 20, 2008. The Shareholders reviewed the project's progress and confirmed that it is on schedule.

The Shareholders' Committee approved further contracts for supply of materials and construction work to be signed before the end of this year. Nord Stream is the most advanced of all gas infrastructure projects designated as a "priority project" by the European Union.

The Espoo report is currently being finalized. The draft will be submitted for final feedback to the relevant authorities within a month.

Nord Stream and its Shareholders do not regard the financial crisis as an obstacle to financing the project. Shareholders will meet about 30% of the project costs with equity contributions, with 70% to be financed externally through limited recourse finance. The project remains attractive to lenders since it has strong backing from its Shareholders, a solid contractual framework and is an important infrastructure project in the energy market with long-term and stable returns.

Nord Stream cooperates with renowned companies throughout Europe, which underscores the pan-European character of the project. These include Snamprogetti (Italy) for detailed design engineering; independent safety certification by Det Norske Veritas (DNV) (Norway); route surveys by Marin Matteknik (Sweden), IfAO (Germany) and PeterGaz (Russia); Environmental Impact Studies by Ramboll (Denmark) and ERM (UK); pipe production by EUROPIPE (Germany) and OMK (Russia); concrete weight-coating and logistics by EUPEC (France).

After N.V. Nederlandse Gasunie officially joined the Nord Stream consortium as fourth shareholder in June 2008, the Shareholders’ Committee representing OAO Gazprom, E.ON Ruhrgas AG, Wintershall Holding AG and Gasunie was expanded from eight to ten seats reflecting the shares in the project. The new members of the Committee are Marcel P. Kramer, Chairman of the Executive Board and CEO of N.V. Nederlandse Gasunie, and Nikolai Dubik, Member of the Management Committee and Head of the Legal Department of OAO Gazprom.

EU Says OPEC-style Gas Cartel would Force Reconsideration of Energy Policy

Europe would have to rethink its energy policy if Russia, Iran and Qatar go ahead with an OPEC-style cartel on natural gas, the European Commission warned October 22.

EU spokesman Ferran Tarradellas Espuny said the European Union preferred to see gas traded on a free and transparent market.

He said the EU executive was not opposed to energy suppliers cooperating more closely on research but was opposed to price-fixing cartels in principle.

"If such a cartel was created, the Commission may review its energy policy," he said, refusing to give details of what that would mean in real terms.

He said the EU also expected the three countries to inform it if they do form a cartel.

EU nations are already investing in alternative and cleaner energy sources like wind and solar power to meet future energy needs as part of efforts to combat climate change. They are also considering building new nuclear power plants.

Russia, Iran and Qatar made the first serious move toward forming a cartel with a meeting October 21. Together, they account for 60 percent of the world's gas reserves.

This raised fears in Europe that the cartel would boost Moscow's use of energy as a political weapon shortly after it clashed with the West over its five-day war with Georgia in August. Russia has previously cut EU pipeline supplies temporarily in disputes with neighbor Ukraine.

Concerned about its growing dependence on imported oil and gas, the European Union is trying to widen its range of energy supplies and transport routes.

Iran, in its standoff with world powers over its nuclear program, has also threatened to choke off oil shipments through the Persian Gulf if it is attacked.

Less-polluting natural gas is becoming more widely used in Europe to generate power and heat as EU nations try to reduce their greenhouse gas emissions.

HUNGARY

Ascent Resources Begins 3D Seismic Survey in Hungary

Ascent Resources PLC has started shooting a 3D seismic survey over the Peneszlek area of the Nyirseg permits in Hungary.

The company, along with its partners, plan to use the survey data covering 100 sq km to delineate other gas reserves in the vicinity. The nearby PEN-104 well started producing 3.8 MMscfd of gas in August.

"Two wells in the survey area, PEN-9 and PEN-12 have previously tested gas but to date have not been put into production," Ascent said. "The partially depleted Peneszlek field also is within the survey area."

Leni Gas & Oil has a 7.27% interest in the project through its equity interest in PetroHungaria KFT. Other partners are DualEx 37.5%, Geomega 8%, Ascent Resources 45.23%, and Swede Resources 2%.

ITALY

Enel and F2i to Develop Natural Gas Storage Projects in Italy

• Enel, acting through its subsidiary Enel Trade, has sold Fondi Italiani per le Infrastrutture (F2i) 49% of Enel Stoccaggi S.r.l., a company established to build and operate a natural gas storage facility at Romanengo (Cremona).

• The facility will enter service in late 2012 and it will create 300 million cubic meters of storage capacity.

• It will contribute to improving the security and flexibility of the national gas system and to strengthening the role of Enel as a key player in this sector.

Enel Trade SpA has sold 49% of Enel Stoccaggi S.r.l. (“Enel Stoccaggi”), a company established by Enel Trade on 19 September 2008, to Fondi Italiani per le Infrastrutture - Società di Gestione del Risparmio (“F2i”), in the name and on behalf of the closed-end real estate investment fund for professional investors called “Fondo Italiano per le Infrastrutture”, for which F2i is the management company. The consideration for the sale of the 49% stake in the company was set at about 6.2 million euros.

Enel Trade was awarded the concession to convert the Romanengo field into a storage facility in a tender called on September 26, 2006 by the Ministry for Economic Development for the award of new natural gas storage concessions. Enel Stoccaggi will continue the technical and administrative activities initiated by Enel Trade.

The concession for the Romanengo field will be transferred to Enel Stoccaggi, following receipt of a positive environmental impact assessment from the Ministry of the Environment and the Protection of the Territory and the Seas. The storage concession will have a term of 20 years and may be extended for a total of two further 10-year periods.

The Final Investment Decision (“FID”), which is expected to the taken further to the issuance of the concession, will mark the start of the Engineering Procurement Construction (“EPC”) activities for the construction of all surface infrastructures serving the field.

The project of conversion of the Romanengo field involves, as of today, 300 million cubic meters of storage capacity, which is scheduled to enter service in 2012.

The availability of this new storage capacity represents an important contribution to the security and flexibility of the Italian gas system, offering more extensive supply modulation capacity for thermal generation as well as for industrial and residential uses. Furthermore, it will strengthen the role of Enel as a key player in each of those segments, as well as being added to a portfolio of supply contracts for more than 13 billion cubic meters per year and to other important initiatives in the development of the up/midstream gas supply chain.

The shareholder agreement between the parties prohibits the transfer of the holdings in Enel Stoccaggi S.r.l. for a period of 5 years. According to the same agreement, the board of directors will be composed of 5 members, of which 3 designated by Enel Trade.

Eni, Enel to Collaborate On CO2 Capture Pilot

Eni CEO Paolo Scaroni and Enel CEO Fulvio Conti on October 21 signed a strategic cooperation agreement to develop technologies for the capture, transport and geological sequestration of carbon dioxide (CO2) and for the joint construction of Italy's first project in this area.

The most reliable forecasts suggest that power generation will continue to require fossil fuels for many decades. Modern technologies allow the efficiency of thermal power stations to increase significantly and drastically lower emissions of particulates, sulfur dioxide and nitrogen oxides, but the problem of atmospheric emissions of gases that are believed to contribute to the "greenhouse" effect, like CO2, produced during combustion, still remains to be solved.

Eni and Enel have thus decided to join forces in order to develop an initial integrated pilot project to test the entire process, from CO2 capture and its injection underground up to the monitoring and checks of the stability and safety of the deposit.

At the same time as the signature of agreement, Eni, Enel and the Environment Ministry signed a Memorandum of Understanding aimed at the verification and diffusion of CO2 capture techniques and promotion of renewable sources.

Minister Stefania Prestigiacomo commented: "This agreement between Eni and Enel goes in the right direction: the characterization of environmental friendly technologies that can significantly reduce atmospheric emissions of greenhouse gases. The Government's commitment is to support and promote these experimentations that represent an important contribution towards the need to reduce greenhouse gases in the global energy scenario and especially for countries like Italy that will not be able to do without hydrocarbons in the medium to long term. Our project to define a program agreement with the main Italian industrial companies goes towards the same goal. Our project is aimed at spotting the lines of sustainable action towards the reduction and containment of greenhouse gases and at foreseeing investments for an increased use of renewable sources."

Fulvio Conti, Enel CEO, commented: "Today's agreement involves the two major Italian energy groups in the creation of the best solutions to fight climate change in a way that is effective and safe. These joint efforts offer Italy an opportunity to lead in the development of the most innovative technologies, which are attracting the attention of the major European and US energy companies and of international institutions. Those technologies can also be exported to large coal consuming countries such as China and India."

Paolo Scaroni, Eni CEO, remarked "Our commitment is to implement a technology that will revolution the world of energy: capture, transport and sequestration of CO2 from coal-fired power generation. As a final result, we will be able to freely use coal for power production while offering a significant contribution on three fields: the environment, through the segregation of carbon dioxide from the atmosphere; the safety of energy supply, through the utilization of a resource which is widespread in our planet; and, last but not least, the final consumer, who will benefit from low-cost electricity."

The pilot project results from the integration of two projects launched independently by both companies. Enel is completing Italy's first industrial CO2 capture plant, capable of removing 2.5 tonnes of gas per hour, at the Brindisi thermal power station. The pilot plant will be ready in the autumn of 2009. On the other hand, Eni started to implement a project which is aimed at injecting about 8,000 tonnes of CO2 per year at the Stogit exhausted field at Cortemaggiore (Piacenza).

The integration of the two projects entails the creation, in Brindisi, of a system for the capture and liquefaction of CO2 and for its transport to the Cortemaggiore site. The underground injection is set to start in the autumn of 2010. In order to gain experience in the pipeline transport of CO2 as well, Enel and Eni have also decided to lay a pilot dense-phase CO2 transport line at the Brindisi site.

The integrated project will also allow the development of skills over the whole CO2 capture, transport and sequestration process chain, to be applied subsequently to large-scale demo projects, whose implementation is strongly encouraged by the European Commission. In order to achieve this goal, the agreement also foresees that Enel and Eni will undertake a detailed feasibility study for the construction of a large-scale integrated demo plant for an Enel's clean-coal power station to be proposed as a candidate for the demonstrative European program.

Enel and Eni will also prepare a joint study of the Italian CO2 storage potential. During the implementation of these activities, Enel and Eni will also rely on the cooperation initiatives already in place with the main Italian research bodies and institutes which are already active in the field.

Along with research into high-efficiency solar power and nuclear power, CO2 capture, transport and sequestration is currently one of the most promising solutions for achieving a balance among diverse and equally crucial needs: having sufficient energy to meet the needs of human development (almost 2

NORWAY

StatoilHydro Signs $490 Million in Frame Agreements

Norwegian energy company StatoilHydro has signed frame agreements with a collective value of around US$490 million (NOK 3 billion) with suppliers of drilling equipment. Suppliers awarded frame agreements include Aker Solutions, National Oilwell Norway, Step Offshore, Weatherford, Scomi OIltools, Haliburton, M-I SWACO and Cameron.

StatoilHydro sent inquiries to suppliers in the spring, with drilling requirements for installations divided into packages. Frame agreements covering up to two suppliers have been concluded for each package, with price and quality as the criteria for selecting a supplier.

The frame agreement runs for three years with two options for StatoilHydro to secure two-year extensions. With service and spare part deals, the agreements run for five years with two five-year options.

Vice President for Project Management in the Drilling and Well Cluster Tore G. Teige said that the deals would boost efficiency in ordering and delivering drilling gear to fixed installations. He added that StatoilHydro's merger increased the need to coordinate drilling gear deliveries.

Only tested technology will be supplied in the agreements. Teige stressed that though the company would not install equipment that had not been properly tested; the company was still interested in new solutions.

Bergen Group Signs $81.37 Million Upgrade of Three Transocean Semis

Bergen Group Hanøytangen AS and Transocean Offshore (North Sea) Ltd. NUF signed a frame contract covering the upgrading of three rigs and included an option for modification work on another unit. The agreement is for upgrade and classification work on semisubmersibles Transocean Searcher, Polar Pioneer and Transocean Arctic, as well as an option for corresponding work on a fourth rig.

Bergen's scope of work includes detailed project planning, purchasing, as well as involvement in overall project management. Bergen estimates the frame contract will have an expected turnover of more than US$81.37 million (NOK 500 million). The work commenced last month and will continue until the end of 2009 at Bergen's facilities at Hanøytangen, Norway, outside Bergen.

IFE’s Team Work on Multiphase Technology Awarded StatoilHydro Research Prize

The multiphase team of the Institute for Energy Technology (IFE) was awarded StatoilHydro’s research prize October 22, for its work on multiphase flow and transport.

The winning team receives the prize for its development of critical expertise which has helped ensure that StatoilHydro is regarded as a world leader in developing subsea fields and long-distance multiphase pipeline transportation and for its long-term cooperation with the petroleum industry.

”Knowledge and methods to allow us to predict and understand how oil, gas and water behave during transportation in the same pipeline are essential to be able to develop a subsea field with long-distance transportation of well streams to shore or other production platforms,” says Per Gerhard Grini, chief researcher in StatoilHydro.

”The development of Troll A, Ormen Lange and Snøhvit had not been possible without this long and fundamental research effort performed by the IFE multiphase team,” he says.

Simulation and modeling of how multiphase compounds behave during transportation are difficult tasks. The possibility of predicting turbulence in liquid flows is still an unsolved problem in applied mathematics today.

Ever since 1980 the IFE research team has worked on projects to enhance the understanding of multiphase phenomena. Advanced mathematical models and simulation tools to solve the problems are under continuous development.

”We are proud and would like to express our gratitude,” says Jan Nossen, who is leading the IFE multiphase team. “The prize is a great inspiration to us in our further research effort.”

”When we nearly 30 years ago started developing the first simulator, which became the actual heart of the OLGA simulation tool, the team had three members,” he says. “Now we are a large international research team developing ever more advanced calculation tools in cooperation with the petroleum industry. OLGA has become an industrial standard for modeling and calculation of multiphase flows.”

Established in 1991 the prize is an acknowledgement of research results of high international standard. It is awarded annually to an external researcher or a research team in Norway who has performed work of significant importance to StatoilHydro.

Wintershall, Electricite de France Buy up North Sea Oil and Gas Assets

Wintershall Holding AG, BASF SE's oil and gas unit, and Electricite de France SA (EDF) announced purchases of North Sea oil and gas assets amid plunging crude prices and tumbling stocks.

Wintershall offered to buy Norway's Revus Energy ASA for $740 million (110 kroner a share, or 5 billion kroner), more than double its last closing price, the companies said October 27. EDF, the world's biggest utility, agreed to buy natural-gas fields in the U.K. North Sea from ATP Oil & Gas Corp. for $410 million (265 million pounds), gaining access to 3 billion cubic meters of gas, the Paris-based company said.

``Revus has perhaps been the best exploration and production company on the Oslo stock exchange, which is what this offer shows,'' said Arnstein Wigestrand, an analyst at SEB Enskilda who rates the stock a ``buy.'' ``This isn't necessarily the starting shot for such acquisitions, but there are people looking at some of these companies on the Oslo exchange.''

Energy companies are stepping up efforts to acquire drilling and production rights amid a slump in world equity markets, which left assets trading at their cheapest levels in more than five years. The Dow Jones Europe Stoxx Oil & Gas Index has fallen 45 percent since the start of this year. Oil is heading for a 41 percent drop this month, the steepest since New York futures started trading in 1988.

``Revus strongly improves Wintershall's asset base in the North Sea, especially in Norway,'' Wintershall Chairman Reinier Zwitserloot said in a statement today. ``The activities of Revus lie in a politically and economically stable environment and geographically balance Wintershall's portfolio.''

The offer is conditional upon the completion of due diligence on Revus and will be submitted to the Oslo stock exchange for approval before being presented to Revus' shareholders the week of Nov. 10, Wintershall said. It will need the approval of the Norwegian authorities, including the competition authorities, it said.

Revus, which operates on the Norwegian and UK continental shelves, cut its annual output guidance by 6 percent on Oct. 24 after third-quarter production didn't meet its expectations. The company sees total output for this year of 6,000 barrels of oil equivalent per day, down from a previous guidance of 6,400 barrels a day. Revus third-quarter production came to 6,039 barrels a day, 14 percent below its earlier forecast.

``This is an attractive offer for our shareholders,'' Revus Chief Executive Officer Harald Vaboe said in a statement. ``While I am extremely proud of the value we have created at Revus Energy, we are excited about our future as part of a larger company.''

EDF's purchase of 80 percent of Houston-based ATP's U.K. unit includes the right to buy the remainder next year and transfer the assets to its 49 percent-owned Italian subsidiary Edison SpA, the French utility said today in a statement.

The deal gives EDF a 68 percent share of the Tors zone, which includes two gas fields that came into production in March 2006 and February 2007, and an 80 percent stake in the Wenlock field, which came into production in December 2007, EDF said. EDF and ATP's boards have approved the purchase, which is subject to approval by ``relevant British authorities.''

Earlier this month, GDF Suez SA, the world's second-biggest utility, became the largest oil and gas operator in the Dutch North Sea after it paid 1.08 billion euros for offshore fields and pipelines held by Nederlandse Aardolie Maatschappij BV.

THE NETHERLANDS

New PE Resin for Pipe Coatings from Lyondell

LyondellBasell Industries has launched a new polyethylene adhesive resin that it contends addresses customer needs in the rapidly expanding pipe coatings industry. The new resin, Lucalen G3710E, is used as an adhesive layer in three-layer coating applications between fusion bonded epoxy resins and an HDPE top coat material.

The new adhesive resin features improved coating properties such as better adhesion and excellent peel strength. According to Piet Roose, LyondellBasell's Global Marketing Manager for Pipe Coatings, "with the introduction of this enhanced adhesive resin, we are strengthening our established position of a full-systems' supplier of polyolefins used in pipe coating. This significantly improved adhesive resin is part of our differentiated pipe coating portfolio which includes also Lupolen 4552D SW00413 HDPE top coat material and PP-based coating products typically used for anti-corrosion coating, mechanical protection and thermal insulation on oil, gas and water transportation pipelines."

The new adhesive material Lucalen G3710E meets the demanding requirements from leading customers in terms of pipe coating processing and performance. "We have seen in our commercial projects that the Lucalen G3710E resin demonstrates very good processability of stable film extrusion and good melt strength," explained Bernard Cavalie, Senior Coating Engineer at the French Pipeline coating company Eupec. In addition, Lucalen G3710E resins provide good adhesion at temperatures of 23 degrees C and 80 degrees C, with good cohesive peeling on rough surfaces during industrial coating production. "Given the good compatibility with approved epoxy resins, Lucalen G3710E resins perform very well in comparison to other competitive grafted adhesive PE resins and are therefore already applied in the commercial pipeline-project TAWEELLAH by Eupec," added Cavalie.

Further improvements to existing PE adhesives include a wider processing window characterized by an expanded temperature range, which enables customers to use the resin in applications that require performance beyond traditional PE coatings. According to Roose, "The potential of the resin has been fully exploited, as we know from our customers that it can be used both in induction coil as well as flame heating systems."

According to Hans Videler, LyondellBasell's Global Business Manager for Pipe Coatings, "The pipe industry has experienced significant growth rates over the recent past and we are demonstrating our strategic commitment to the industry by offering a complete pipe coating package. The early market acceptance of Lucalen G3710E resins in highly demanding applications proves that our total package approach meets the operational, handling and installation needs of pipe manufacturers."

UNITED KINGDOM

Technip Awarded Contract for the Babbage Development

Technip has been awarded by E.ON Ruhrgas UK North Sea Ltd. a lumpsum contract, worth approximately €32 million, for the development of the Babbage gas field located in the United Kingdom Southern North Sea. Under this contract, Technip will install a subsea pipeline system to export gas from the new Babbage platform to existing subsea infrastructure located within the “West Sole Bravo 500 meters zone” at a water depth of 25 meters.

The contract covers:

· project management, design, fabrication and installation of a 28 kilometer gas export rigid pipeline, a 40 ton manifold and three flexible tie-in jumpers⁽¹⁾,

· installation of pipeline protection materials,

· trenching⁽²⁾ and backfilling of the gas export pipeline,

· pre-commissioning, tie-ins and testing.

Technip’s operating center in Aberdeen, Scotland, will execute the contract. Welding of the gas export pipeline will be undertaken at the Group’s recently upgraded spoolbase in Evanton, Scotland. Offshore installation is scheduled to commence in the second quarter of 2009 using two vessels from Technip’s fleet, the Apache and the Orelia, and third party vessels.

(1) Jumper: a short pipe laid on the seabed to connect a rigid flowline to a subsea structure or to connect two subsea structures located close to one another.
(2) Trenching: burying of offshore or onshore pipelines in a trench in order to protect them.

ALGERIA

Foster Wheeler Awarded FEED by BP Exploration for Development Project in Algeria

Foster Wheeler Ltd. announced October 13 that its UK-headquartered subsidiary Foster Wheeler Energy Limited, part of its Global Engineering and Construction Group, has been awarded a front-end engineering design (FEED) contract by BP Exploration (El Djazair) Limited on behalf of the In Salah Gas Joint Venture for the Southern Fields Development Project in Algeria.

The Foster Wheeler contract value for this project was not disclosed, and will be included in the company’s fourth-quarter 2008 bookings.

In Salah Gas (ISG), the largest dry gas joint-venture development in the country, involves the development of seven proven gas fields in the southern Sahara, 1,200 km south of Algiers. On-stream since July 2004, ISG produces approximately nine billion cubic meters of gas per year from three northern fields. It is also the world’s first full-scale carbon dioxide capture project at an onshore gas field. The ISG venture is run as an Association between Sonatrach, BP and StatoilHydro.

The objective of the In Salah Southern Gas Fields Development Project, the second phase of the ISG development, is to maintain gas production at plateau levels when production from the three northern fields goes into decline. It involves the development of the four fields to the south of the current development, Garet el Befinat, Hassi Moumene, In Salah and Gour Mahmoud, located around the town of In Salah in the Walia of Tamanrasset.

Foster Wheeler will update the basis of design, develop the technical data, specifications and requisitions and provide a detailed cost estimate in order to define the engineering, procurement and construction (EPC) scope of work.

“One of our key strengths is the design and execution of large, technically complex projects in challenging environments, so we are delighted to have been selected by In Salah Gas for the second phase of this significant development,” said Michael J. Beaumont, chairman and chief executive officer, Foster Wheeler Energy Limited. “The Foster Wheeler team will bring together its specialist expertise in gas field development, pipelines, and the execution of major projects to deliver a high quality FEED which meets schedule and plant availability objectives, while also taking full account of the environmental and social sensitivities of development in proximity to the local In Salah community.”

ANGOLA

Chevron Places $16 Million in MARS Systems Orders for Offshore Angola

Chevron has ordered 14 Multiple Application Re-injection Systems (MARS) from Cameron for the Lobito Tomboco deepwater field offshore Angola. The order is valued at around US$16 million.

The MARS system is a Cameron technology, supplied by Aberdeen-based subsidiary DES Operations. The technology enables multiple processing technologies to be retrofitted onto subsea Christmas trees, and will be used by Chevron to perform chemical squeeze operations on existing wells off the coast of Angola.

Chevron and DES Operations have integrated the MARS system into an existing subsea infrastructure, enabling the company to support chemical squeeze operations from an ROV, rather than a MODU.

Cameron Vice President for DES Ian Donald said, "We are delighted at the adoption of the MARS system by Chevron. The MARS interface is adaptable to any subsea tree enabling the integration of a variety of processing equipment to an operator's asset."

A Chevron representative for the project added, "We have worked closely with DES to develop a cost effective well intervention system which allows us to significantly minimize the downtime and maximize the production associated with subsea chemical stimulation operations."

The MARS system has been used by BP for subsea multiphase pumping in the Gulf of Mexico, and will be used by Total in Angola and Shell in the North Sea for subsea multiphase metering and well stimulation.

CHAD

Exxon is Ordering more Equipment and Digging more Wells in Chad

The Exxon Mobil-headed oil consortium in Chad is digging new wells and ordering more extraction equipment, the group's country chief said October 10.

Exxon heads a consortium pumping around 130,000 barrels of oil per day from the landlocked central African state to the Atlantic coast through Cameroon.

"This year we are bringing on line 70 extra wells," said Stephane de Mahieu, Director General of Esso Exploration & Production Chad, Exxon's local subsidiary which operates oil installations in southern Chad.

The firm aims to boost its number of well-drilling rigs to six next year from four this year, de Mahieu told Reuters.

"We will be able to drill more than a hundred new oil wells per year," he said.

Chad is expected to earn around $1.4 billion in oil revenues this year, and a Chinese-backed refinery is due to open in 2011 despite delays due to a rebel raid on the capital N'Djamena earlier this year.

Exxon was continually reviewing its production base, de Mathieu said.

"Every year and every new well is the source of new data about the reserves," he said.

"We have produced less than a third of all the oil that is recoverable, therefore we have many years ahead of us to exploit it," he said.

NIGERIA

Nigeria’s Senate, Oil Firms Set for Gas Flaring Showdown

Indications have emerged that Nigeria’s Senate and multinational oil companies operating in the Nigeria are on a collision course over the actual date for gas flare-out.

While the Senate is insisting on December 2008 as deadline for gas flaring, the oil companies, arguing that the National Assembly should not make a law that cannot be obeyed, want it to end in 2013 – a date they claim is more feasible.

Nigeria is currently the world’s second worst culprit in gas flaring after Russia with 2.5 billion cubic feet – the equivalent of 2.2 million barrels of oil flared – per day. The country loses $2 billion annually to gas flaring.

Under the subsisting gas flaring policy, which took effect from January 1, 2008, companies are required to pay a fine of $3.5 for every 1000 standard cubic feet of gas flared. This is in addition to the shutting down of any oil field where associated gas is flared after December 31, 2008. The penalty for this waste is N10 for 1,000 standard cubic feet of gas flared.

Speaking in Port Harcourt, Rivers State, Chairman of the Senate Committee on Gas, Senator Osita Izunaso, warned that they would no longer tolerate the constant shifting of the flare-out date and disclosed that the new bill to outlaw the practice was at “advanced stage”.

Izunaso said the Senate would not be persuaded “to buy the idea of constantly shifting the date for the stoppage of gas flaring by oil companies” and warned that after the law is passed and assented to, any violator would be made to close operations on any flare site.

The Committee, on a tour of some power-related projects, visited the Afam VI power generation plant, expected to increase the power generation in the country by 650 megawatts, said the time was “now” to ensure the practice of gas flaring was totally stopped as in advanced countries.

“Gas flaring is a major problem that all hands must be on deck to tackle. I don’t believe that we will keep shifting the goal post. We are sticking by December 31 deadline; if anything happens thereafter we will know but certainly to the extent that the international oil companies are projecting for 2013, 2012 and all the rest of them, gas flaring is something that has to stop and we must stop it.

“We are saying that this is a definite time to stop and if you cannot comply, you can shut in the wells. If you shut in the wells we don’t lose, the revenue is deferred,” Izunaso insisted.

According to him, the bill on the flare-out and other objectionable practices in the sector was near passage. He said there would be a forum in the form of a public hearing where stakeholders would be allowed to enter their input into the law before it is passed.

In an apparent reaction to the hard stance of the Committee, Managing Director of Shell Petroleum Development Company, Mr. Mutiu Sumonu, asked that the Senate should ensure they pass laws that would be obeyed without negatively affecting the revenue of the country.

To this view, Izunaso replied: “We are going to make available a copy of the draft bill to Shell and we will allow their input into what we are doing but we are not going to extend gas flaring to a period of time that will be unnecessary.”

Sumonu told the Committee that Shell had already committed $3 billion to building gas gathering facilities which underlies its commitment to stopping gas flaring. He also drew the Committee’s attention to what is being done to enable the gathering of gas from the wells for positive utilization and pleaded with them to take a critical look at the working environment in the sector and have a change of mind on the flare-out period.

Last July, Nigeria’s Senate had debated the general principles of the bill geared towards stopping gas flaring. It was read for the second time and referred to committees for further legislative processing.

The Senate subsequently referred the Bill for an Act to Prohibit Flaring of Natural Gas in Nigeria to the Committee on Gas.

It provides that “No company engaged in the production of oil and gas shall after December, 2008 flare natural gas produced whether in association with oil or not.”

“Any person who flares gas after the 31st day of December, 2008 commits an offense and shall be liable on conviction to a fine which shall be equal to the cost of gas at the international market,” according to the Bill.

The Bill further provides: “The operator of the field from which gas is flared in contravention of the Act shall be liable to pay a fine equivalent to fifty per cent of the penalty prescribed against the person who flared the gas.”

The Bill also provides that the concessions granted in the particular field or group of fields from which gas is being flared in contravention of the provisions of this Act shall be forfeited.

Commission staff members said they envisioned the requirement being applied retroactively, but with a phased compliance schedule to reduce the upfront costs to companies.

The commission’s environmental manager, Debbie Baldwin, said there are 11,000 to 12,000 permitted pits in the state. She didn’t know how many aren’t lined. However, she said retroactive compliance is consistent with rules requiring protection of groundwater.

Checking the integrity of all unlined pits could cost $440 per site for a review of documents and $10,000 or more if a monitoring well must be drilled, Baldwin said.

Commissioners also debated but did not act on a proposed requirement to maintain records regarding the generation, transport and disposal of waste.

Over recent months, the oil and gas commission has given preliminary approval to a series of rules created in response to legislation passed last year requiring oil and gas development to be balanced against protection of public health, the environment and wildlife. It decided to meet in hopes of keeping a timetable under which it could give final approval to the new rules before the year’s end.

RUSSIA

Fluor Wins Russian Sibur Gas Processing Expansion Project

Fluor Corp. has been awarded an engineering, procurement and construction management (EPCM) contract by the Sibur Group, one of Russia's leading petrochemical companies, for a gas processing expansion project in Noyabrsk, Russia, located in the middle of West Siberian oil fields about 300 km north of Surgut. The undisclosed contract value was booked in the third quarter.

Fluor's project scope includes the EPCM services for the expansion and upgrade of the Vyngayakhinskaya compressor station, the compressor station 3 of the Nizhnevartovsk gas processing complex, and the Vyngapurovsky gas processing plant and associated pipelines, as well as a liquefied petroleum gas storage and loading facility in Noyabrsk.

"We are pleased to assist Sibur with their important expansion and upgrades for gas compression, processing and export," said David Seaton, president of Fluor's Energy & Chemicals Group. "Fluor has extensive gas processing experience in remote parts of the world and our international global execution centers are well situated for this challenging, multi-faceted EPCM program." The extreme climate changes, with temperatures as low as -55 (degrees) C to as high as +35 (degrees) C in the remote location of Western Siberia makes this a project particularly suited to Fluor's strengths.

The current project began in August 2008 with front-end design and engineering for one of the compressor stations as well as simultaneous detailed engineering. Fluor's Camberley and Manila, the Philippines execution centers, together with Russian design institutes will execute the project.

KAZAKSTAN

KazMunaiGas Interested in BP's Stake in Caspian Pipeline

Kazakh state oil and gas company KazMunaiGas is interested in buying BP PLC's 6.6% stake in the Caspian Pipeline Consortium, or CPC, its chief executive said October 7.

Kairgeldy Kabyldin, chief executive of KazMunaiGas, told reporters that his company has notified BP of its interest in the stake BP holds in CPC through its two joint ventures.

Russia and Kazakhstan own 24% and 19% stakes in the pipeline, respectively, that ships Kazakh crude oil from western Kazakhstan to the Russian city of Novorossiysk on the Black Sea.

A BP spokesman in Moscow said in September that selling the stake was one of the options the company was examining, but that a decision hadn't been made.

BP has cited its opposition to a financing proposal for the pipeline's expansion.

The government of Oman owns 7% of CPC and has said it wants to sell its stake. Both Russia and Kazakhstan are looking into buying Oman's stake.

Halliburton Signs Kazakh Cooperation Ddeal

Halliburton Co., the world’s second- largest oilfield-services provider, signed an accord on increasing cooperation with units of Kazakhstan’s state oil company in Central Asia’s biggest energy producer.

Halliburton Chief Executive Officer David Lesar met in Astana with Kazakh Prime Minister Karim Masimov to discuss planned projects, the prime minister’s press office said in a statement October 24.

State-run KazMunaiGaz National Co., offshore unit KazMunaiTeniz and service provider KMG Service signed a memorandum of understanding with Halliburton, according to the statement. Arzhan Takachakov, a spokesman for KazMunaiGaz National, declined to comment immediately.

UZBEKISTAN

Russian Drilling Rig Manufacturers Lose $203 Million in Uzbekistan from Lack of Government Support

Chinese corporation China Petroleum Technology & Development Corporation (CPTDC) has announced completion of drilling rig installation in North Shurtan field that is located in the Kashkadarya region, Uzbekistan. More drilling rigs will be installed in oil and gas fields of Andizhan, Kashkadarya and Surkhandarya regions. The main customer is the oilfield services company “Uzgeoburneftegaz” that is part of the national holding company “Uzbekneftegaz”.

Earlier, AK “Uzgeoburneftegaz” signed a contract with China Petroleum Technology & Development Corporation for delivery of 23 drilling rigs and special equipment in 2007-2008. The contract value was $203 million. The contract could have been awarded to Russian suppliers if they had government support. AK “Uzgeoburneftegaz” operates more than 100 drilling rigs manufactured by Uralmash, and since 1993 drilling equipment fleet has not been renovated. The government does not pay due attention to oil and gas equipment promotion to the republics of the former USSR that are doing business with American and Chinese suppliers. The large scale Chinese drilling rig supplies may mean that Uzbek oilfield services companies will replace Russian equipment with Chinese equipment, and there will be no stopping the process. Uzbekistan will continue to buy Chinese spare parts and employ Chinese personnel thus making it impossible for Russian suppliers to enter the market.

The expansion of Chinese drilling equipment suppliers in Uzbekistan, Turkmenistan and Kazakhstan is largely based on government support. Chinese suppliers are able to offer best oil and gas equipment delivery conditions and to grant delays in payments. China provides substantial subsidies to oil and gas equipment export development, which pays off, especially in Central Asia. Currently, two major manufacturing groups – Uralmash-VNIIBT and Kungur – have the opportunity to handle large-scale drilling equipment export transactions. These companies’ human resources, research and development capabilities allow them to maintain Russia’s position in the drilling equipment market of Central Asia, however they need state support to achieve the goal.

Establishment of the oil and gas equipment department in the Ministry of Industry and Trade gives some hopes. Post-Soviet ministries of industry never had such divisions in their organizational structure. The program of support of the Russian oil and gas equipment industry is now being developed that will provide, among other things, for compensation of interest rate on credits granted to equipment manufacturers for plant and equipment modernization. The oil and gas department in the Ministry is headed by deputy director of the Industry Bureau, Alexander Tarasov. The department is now working to urge the government to provide support to this extremely important segment of the Russian equipment industry.

IRAQ

Addax Petroleum Acquires Interest in Kurdistan Region of Iraq

Addax Petroleum Corporation has acquired a 33.33 per cent interest in the Sangaw North Production Sharing Contract. The Sangaw North license area is operated by Sterling Energy plc and is located approximately 80 kilometers southeast of the Corporation's Taq Taq field.

Addax Petroleum's President and Chief Executive Officer, Jean Claude Gandur, said: "We are pleased to expand our activities in the Kurdistan Region of Iraq to include the highly prospective Sangaw North license area. Given our successful drilling campaign at Taq Taq, we intend to assist our partner to expedite exploration drilling. We believe that exploration success at Sangaw North would offer attractive synergies with the development of Taq Taq for the benefit of all the people of Iraq and our shareholders."

The Sangaw North PSC covers a gross area of approximately 121,600 acres (492 km⁽²⁾). Petroleum exploration activity to date includes field studies and the acquisition of 310 km of 2D seismic which is expected to be completed in November of this year. The Sangaw North license area contains a large surface anticline, a number of surface oil seeps and the operator is targeting to spud an exploration well in mid-2009.

The Sangaw North PSC is subject to an assignment to the Korean National Oil Corporation which, when completed, will reduce the Corporation's interest to 26.67 per cent. In addition, the Kurdistan Regional Government has the right to require that at a future date a government nominated entity is assigned 25 per cent which, if exercised, will further reduce the Corporation's interest to 20 per cent.

Under the terms of the acquisition, the consideration from Addax Petroleum comprises the reimbursement of Sterling's past costs as well as funding the seismic campaign and the drilling of the first exploration well. This reimbursement is funded from the Corporation's existing financing facilities and the future costs will be included in the Corporation's 2009 capital budget which is expected to be funded entirely from the Corporation's funds flow from operations. The Corporation continues to have substantial funding capacity within its existing financing facilities.

Dana Gas and Crescent Petroleum Kick off $650 Million Kurdish Natural Gas Production Project

Dana Gas and equal partner Crescent Petroleum have started natural gas production in Iraq's northern Kurdistan region after commissioning the first stage of a $650 million project.

The two companies said they have started production of 75 MMcfd of gas from Khor Mor field. Output is expected to gradually reach 300 MMcfd in first half 2009.

Gas produced will feed an electric power plant in Erbil province, while in a later stage the project would feed another power plant under construction in Suleimaniya province. The total power generation of the two plants would be 1,250 Mw.

Gas from Khor Mor field will be transported by a 180-km pipeline to feed the two plants.

In April 2007 the Kurdistan regional government awarded the two companies a service contract to develop, process, and transport gas from Khor Mor field on a fast-track basis, and to appraise and develop the nearby Chemchamal gas field.

Khor Mor field has never been fully developed and has not operated since 1991. The field has estimated gas reserves of 1.4 tcf. Chemchamal, which has never been appraised or developed, has estimated reserves of 2.2 tcf.

Crescent and Dana also are developing a 'Gas City' business park in the area using gas as a feedstock for industries such as petrochemicals, steel, building materials, fertilizers and manufacturing.

Kurdistan Gas City, which will include industrial, residential, and commercial components in an integrated city, has a targeted initial basic infrastructure investment of $3 billion.

ONGC Videsh may Bid for 8 Iraqi Oil, Gas Blocks

ONGC Videsh (OVL), the overseas investment arm of Oil and Natural Gas Corporation (ONGC), is likely to bid for the eight oil and gas blocks that are being auctioned by Iraq, the country with the world's second largest proven oil reserves.

OVL, along with global oil majors such as Royal Dutch Shell, ExxonMobil, Chevron, ConocoPhillips, British Petroleum, Total and China National Petroleum Corporation (CNPC), is one of the 35 companies short-listed by the Iraqi government for the auction, which includes six oil-producing blocks with recoverable reserves of 40 billion barrels of oil, making it the largest such auction in the world.

The bidding is likely to take place in the next few months and the blocks may be offered by June next year.

Iraq’s oil minister Hussein al-Shahristani met officials of 35 short-listed companies in London on October 13. The government is expected to kick off the bidding process by giving companies access to data for the blocks on offer.

“Our team is in London meeting the Iraq officials. Once our team is back we will take a call on which blocks to bid for,” said an official with OVL.

The auction of the oil and gas blocks in Iraq has revived the debate over whether the real intention of the U.S. invasion of Iraq in 2003 was to secure the huge oil riches in the West Asian country rather than to flush out Saddam.

Iraq wants to ramp up output by 500,000 barrels per day in the next couple of years from the current average production of 2.5 million barrels per day, about equal to the amount being pumped before the March 2003 invasion.

Exports of 2.11 million barrels per day currently form the bulk of the country's revenues, and Iraq is keen to raise capacity over the next five years to 4.5 million barrels per day.

There are also security risks associated with operations in Iraq. “Companies can operate when the situation is conducive. The security situation has improved in Iraq,” said the OVL official. “Obviously Iraq is exciting,” he added.

Analysts said companies would be eager to enter Iraq in spite of the risks involved. “If there is oil available companies will go. They would not want to lose out in the race for oil,” a Delhi-based analyst said.

Oil prices have fallen over 45 per cent to around $80 per barrel from their peak of $147 per barrel on July 11 as demand slumps on a back of a financial crisis across the world. Prices are now almost equal to what they were a year ago.

KUWAIT

Symposium on Kuwait's Fourth Refinery

Several officials at the Kuwait National Petroleum Company (KNPC) held a symposium at the headquarters of Kuwait Journalists Association (KJA) to discuss the controversial Al-Zour refinery project. They said that the fourth oil refinery project is ridden with faults when compared to similar projects and is not cost-effective.

Hussein Ismael, Chairman of International Petroleum Company of Kuwait, Khalid Al-Awadhi, Manager of the fourth oil refinery project and Tariq Al-Huti, legal advisor of the project, said that the expected revenue would not exceed five percent, reported Al-Watan. Ismael said that the senior officials have discussed the project with MPs and supported the move to set up the project.

However, there were disagreements in the manner in which the project was floated. Officials said that the fall in oil prices can be attributed to the current global financial crisis which in turn has reduced the cost involved in building the refinery.

They went on to say that Kuwaiti crude oil is of a heavy consistency due to which it was poorly marketed in the 1980s. This is the reason Kuwait refines large quantities of crude oil. They added that the Shuaiba refinery will be shut down later because of safety concerns.

MIDDLE EAST / UAE

Electro-Flow Controls Announces $1 Million in Major Middle East Contracts

Aberdeen-based Electro-Flow Controls (EFC), a leading designer and manufacturer of Instrumentation, Monitoring and Control Systems for the global oil and gas industry, has completed contracts worth more than $1 million for choke control systems in the Middle East/UAE. The company has also recently appointed an agent in Abu Dhabi to support plans to develop business in the Emirates and will be exhibiting at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) which runs from November 3-6 this year.

EFC, which employs 50 people at its bases in Aberdeen, UK, and Houston, Texas, has designed and built eight customized choke control systems for rig upgrades in the region in the past 24 months. Work has included a recently-completed project on a Saipem jack-up for an Aramco contract.

The choke control systems incorporate some of EFC’s innovative well control features such as a separate hydraulics module, Finescale Pressure Gauge set, Liquid Seal Monitor and Overboard Valve controls.

John Wheeler, managing director, Electro-Flow Controls, said: “EFC has developed a sophisticated range of choke controls and well control systems by working with subsea experts in some of the most demanding locations the industry is faced with.

“Our products meet the highest safety standards and EFC has developed a sound reputation for providing tailored system solutions to the global oil and gas industry. International business is critical to our success and we aim to continue to develop the work we do in the Middle East.”

McIlvaine Company,

Northfield, IL 60093-2743

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

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