Breaking News: Europe Affected by Gazprom Natural Gas Reductions

Via:  KyivPost

Budapest, January 7 (Interfax Central Europe) – Hungary has imposed restrictions on natural gas consumption by large industrial, agricultural and commercial consumers, following a complete halt of Russian gas imports via Ukraine on Tuesday afternoon, Hungary’s gas pipeline operator Foldgazszallito said in a Wednesday morning statement.

Six European countries affected.

Head of BP’s American Operations: Retires

Houston Chronicle
January 6, 2009

Robert Malone to retire as head of BP’s American operations

By KRISTEN HAYS Houston Chronicle Copyright 2009
Jan. 6, 2009, 11:06AM

The chief of BP’s Houston-based U.S. arm is retiring after leading the division through the cleanup of a string of serious blunders that savaged the company’s reputation.

The company said today that Robert Malone, 56, a 34-year veteran of the oil and gas industry, is retiring Feb. 1 as chairman and president of BP America.

Lamar McKay, 50, who served as executive vice president and chief operating officer for BP America until spending the last year crafting a new governance model for BP’s Russian venture, TNK-BP, will succeed Malone in the top U.S. spot.

Malone took the helm of BP America in June 2006 when the company was grappling with operational mishaps that had sapped BP’s competitive edge as well as public and investor confidence in the London-based company.

Those included the March 2005 explosion at BP’s Texas City refinery that killed 15 people, two leaks from a critical Alaskan oil pipeline system, a propane trading scandal and design flaws that delayed the startup of its Thunder Horse oil and gas platform, the biggest in the Gulf of Mexico.

Less than two months after taking the helm, Malone acknowledged to a congressional committee that the repeated problems had generated questions about BP’s credentials and accusations that the company had profited at the expense of employee safety. He insisted he was committed to restoring confidence and operational integrity and that he had been “given the authority, the resources and the people” to make it happen.

However, tangible results weren’t immediately forthcoming. Three more deaths occurred at the Texas City plant while it was undergoing a $1 billion overhaulone each year since the blast.

John Browne, the chief executive who led BP’s transformation from a sleepy British company into a global oil and gas giant with significant U.S. operations, abruptly quit in May 2007 not because of the mishaps, but upon the disclosure that during a court battle with a London tabloid, he had lied to a judge about how he met his former companion.

Tony Hayward, then head of global exploration and production for BP, succeeded Browne and pledged to improve performance, remove unnecessary layers of management left over from BP’s 1999 merger with Amoco and restore confidence.

A few months later in October 2007, BP struck plea deals to resolve its criminal liability in cases involving the blast, trading and the pipeline leaks. The trading and pipeline issues were resolved quickly, but a Houston federal judge has yet to accept or reject the deal stemming from the blast after explosion victims challenged it.

Hayward said in a statement that Malone has “made an extraordinary difference during his tenure at BP America” and praised his “unflagging commitment to safe operations.”

The announcement of Malone’s retirement comes just days after the Texas City plant regained ability to operate at full capacity of 475,000 barrels a day. Also, Thunder Horse started pumping in 2008, three years after its initial startup date.

Malone started his career in 1974 as a metallurgical engineer for Kennecott Cooper Corp., holding environmental engineering and health and safety roles before moving up to assistant to Kennecott’s chairman and president.

In 1981 Standard Oil of Ohio acquired Kennecott, and six years later, BP bought SOHIO. Malone moved on to several roles within BP, including vice president of Carborundum Co. of Niagara Falls, president of BP Pipelines Alaska, then president and chief operating officer of Alyeska Pipeline Service Co., which operates the Trans-Alaska Oil Pipeline at Prudhoe Bay.

Malone later serves as western regional president and then headed BP Shipping Ltd. before taking the helm of BP America.

McKay joined Amoco as a petroleum engineer in 1980 and led production businesses in the Arkoma Basin, the Gulf and the North Sea. After the BP-Amoco merger, he led BP’s global exploration and production strategy. He also served as group vice president for Russia and Kazakhstan before joining BP America.

Russia Breaks out the Gloves; OPEC Cuts: Oil Closes Above $50

With Russia threatening the European gas supply and Kuwait and Qatar reducing Asian oil shipments oil closed at a five-week high above $50 a barrel.

Citgo and Flint Hills: Decisions to Impact Alaska

Two important develops in the Alaska:  the North Pole Flint Hills refinery shutdown could have large impacts statewide and Citgo has pulled out of the low-income heating oil program.

First up, the Citgo low-income heating oil program.  Citizens in rural villages in Alaska have benefited from this program.  It was announced today that Citgo, the Hugo Chavez-driven oil company, has pulled out of the low-income heating oil program.

Citgo pulls out of low-income heating oil program

By RUSSELL CONTRERAS / Associated Press Writer

Published: January 5th, 2009 08:03 AM
Last Modified: January 5th, 2009 08:03 AM

BOSTON – Citizens Energy Chairman Joseph Kennedy says Citgo has suspended its free heating oil program for low-income residents.

Kennedy said Monday the Venezuelan government’s Texas-based oil subsidiary cited falling oil prices and the world economic crisis for forcing the company to reevaluated all of its social programs.

The oil program has provided hundreds of thousands of low-income U.S. households with fuel assistance.

Kennedy urged those who have been helped by the program to write Venezuelan President Hugo Chavez to share their stories.

Citgo began the national program in 2005 with Boston-based Citizens Energy, a nonprofit run by Kennedy.

Next up, the Flint Hills Refinery Shutdown.  This is not the recent shutdown of the refinery in Valdez following the fire of last week, but the potential shutdown of a North Pole refinery due to budgetary concerns.

Refinery’s struggles cause for concern

A shutdown of the Flint Hills Resources refinery at North Pole has potential to rattle the Anchorage economy, and state officials are working with the company to find a way to keep the plant going.

If the refinery were to cease production, the Alaska Railroad couldn’t run as many trains, would have to cut its payroll dramatically, and would need to raise rates for moving passengers and other freight such as coal and gravel, said railroad board chairman John Binkley.

At the airport, fuel sellers likely would have to ship in more fuel from Outside suppliers, which could push up prices and make Anchorage less attractive as a stop for international air cargo carriers, state officials said.

“Flint Hill is one of our star assets,” said Bill Popp, president of the Anchorage Economic Development Corp. He’s hoping the state will work in earnest to find ways to keep the refinery making fuels.

Alaska Facts

The Press Association provided an article on the celebration of Alaska’a 50th year of statehood.  A couple of interesting facts about Alaska:

Alaska has provided 15 billion barrels of oil – as well as the most costly oil spill in US history that led to a protracted legal battle. Oil has also provided Alaska with nearly 90% of its state treasury annually.

Gazprom is Russia

Courtesy NPR: Gregory Feifer

NPR is presenting a series on Gazprom.

Here’s an excerpt:

Pillar Of Kremlin Inc.

Gazprom used to be the world’s third-biggest company — before the global financial crisis cut its share value by about 75 percent. A predicted drop in gas prices next year will deal another blow to the company’s finances.

Putin, Politics And Gazprom

Gazprom was originally created from the old Soviet Gas Ministry by former Prime Minister Victor Chernomyrdin, who became a billionaire almost overnight. The new company was a bloated dinosaur, run like an independent ministate.

After Vladimir Putin came to power, he put the company under Kremlin control by appointing loyalists from his hometown of St. Petersburg to key positions. One of them, Dmitry Medvedev, was chairman. He is now the president of Russia.

Putin based his doctoral thesis on the argument that Russia should use its energy industry to promote the state’s interests. But energy expert Konstantin Simonov says that in Russia, political leaders treat state assets like their personal property.

“Putin thinks about Gazprom like it’s his company,” he says. “And that’s why we can say that of course Putin is No. 1 in Gazprom.”

Read more here:  Gas Monopoly Fuels, Finances, Moscow’s Might

Official Statement of Naftogaz Concerning Relations with Gazprom

Via Naftogaz:

STATEMENT of the Chairman of NJSC «Naftogaz Ukraine» Oleg Dubyna

03.01.2009, 18:14:42

The statement of the Russian party as for the price for natural gas for Ukraine, starting from January of 2009, in amount of $418US per 1000 cubic meters – violates all agreements set out in the Memorandum made between the Government of Russian Federation and Ukrainian Cabinet on Cooperation in the gas sphere as of October 02, 2008 as well as the Agreement between NJSC «Naftogaz of Ukraine» and «Gazprom» JSC on the principles for the long-term cooperation in the gas sphere signed in October, 2008.
Such a price for natural gas as for Ukrainian consumers is an unprecedented economic pressure, it blocks the work of not only industrial and communal enterprises but also the operation of the gas transport system and in the end of the day can lead to ecological and humanitarian catastrophe.

The joint statement of the president of Ukraine V.Yuschenko and the prime Minister of Ukraine Yu.Timoshenko made on 31th December 2008 provides the results of calculation, made on the basis of the terms and conditions of the Memorandum as of 02.10.08, showing that at the beginning of 2009 the price for the Russian natural gas on Russian-Ukrainian border shall be $201US /1000 c.m, at the transit fee not less than $2US for 1000 c.m per 100 km. The Government of Ukraine offers, until relevant agreements achieved and proper contracts signed, to temporally adhere to the existing between NJSC «Naftogaz of Ukraine» and «Gazprom» JSC technological and pricing parameters with subsequent adjustment thereof for a period starting from 01.01.09 in compliance with the contracts that will be signed for the year 2009.

Considering the tendencies of the European energy market, in the process of negotiations the Ukrainian party considering the fall of oil prices, had offered to maintain the terms and conditions for gas supplies as well as the payments for transit services at the level of 2008, i. e: the gas price for Ukraine – $179.5US per 1000 c.m and the rate for transit services – $1.7US for 1000 c.m per 100 km; however, such offer has not been accepted by the Russian partners. Nevertheless NJSC «Naftogaz Ukraine» is ready to carry out the transit and buy gas subject to recalculation provided in aforesaid joint statement.

At the same time, to date, the valid documents regulating the gas sphere ratified by Ukrainian Parliament (Ukraine’s Laws as of 15.11.01 #2796-111 and #2797-111), are the Agreements between the Cabinet of Ministers of Ukraine and the Government of Russian Federation as of 1994, 2000 and 2001. In order to fulfill the Agreement as of 2001, the Intergovernmental annual protocols were signed. These protocols included the transit volumes of Russian natural gas through Ukraine, fees for the transit services, transit services payment procedure stipulating the settlements by cash and with relevant volumes of gas.

Taking into account that for the last few years there were no Protocols signed, based on the international legal practice, the terms and conditions of the Protocol dated 2005 are to be considered legitimate, providing for delivery of 23 bcm in payment for transit services and reimbursement of advance payment amounting to $250 million, received by NJSC «Naftogaz of Ukraine» earlier (equivalent of 5 bcm of natural gas). In 2009 the Company believes it is possible to keep on working on the basis such parameters, and starting from 2010 to switch over to supplies of 28 – 29 bcm of natural gas yearly in payment for transit services.

The company believes it is necessary, legally justified and possible to presently go back to such working procedure and considers that «Gazprom» JSC is under an obligation to include into the daily gas volumes pumped into Ukrainian gas transport system intended for European countries (296,2 million c.m per day) another 63 million c.m of natural gas per day for Ukrainian consumers. The company is ready to carry out transit subject to obligations for provision of services on account of the advance payment.

In order to maintain Ukraine’s natural gas balance, NJSC «Naftogaz of Ukraine» is ready to purchase from «Gazprom» JSC the volumes currently being in short, i.e. 13 – 23 bcm of natural gas.

The Ukrainian-Russian negotiations are constantly going on and Ukrainian delegation is ready at any time to come to Moscow to sign mutually beneficial contracts.

Official Gazprom Statement Concerning Ukraine Gas Situation

Gazprom

January 4 2009 17:40
Moscow

Statement by Alexey Miller about gas price for Ukraine

“Naftogaz Ukrainy is taking an irresponsible stance in relation to Ukrainian consumers. The contract for gas supply to Ukraine in 2009 hasn’t been concluded yet. Naftogaz Ukrainy has rejected the favorable offer by Gazprom to supply Russian gas at USD 250 per 1,000 cubic meters and has withdrawn unilaterally from the negotiating process. Neither the offer to supply Central Asian gas at USD 370, nor the offer to supply gas at the average European price of USD 418 have helped bring our Ukrainian counterparts back to the negotiating table.

Let’s hope that the offer to deliver gas to Ukraine in January at USD 450 per 1,000 cubic meters, which is a gas price for the Eastern European countries bordering Ukraine minus costs of gas transit across Ukraine, will return Naftogaz Ukrainy to the negotiating table in the shortest possible time,” OAO Gazprom Management Committee Chairman Alexey Miller told reporters.

Gazprom Threatens Europe’s Gas Supply

By Miriam Elder in Moscow
Last Updated: 8:27PM GMT 04 Jan 2009

Via Telegraph.co.uk

Gazprom, Russia’s state energy giant, announced that it would take legal action against Naftogaz, its Ukrainian counterpart, at the international arbitration court in Stockholm. The Russian company accuses Naftogaz of diverting supplies of natural gas intended for other European countries for use in Ukraine.

“I have notified President Dmitry Medvedev about the planned legal action and he has approved this decision,” said Alexey Miller, the chairman of Gazprom.

Russia cut gas supplies to Ukraine on Jan 1, accusing the country of failing to pay its bills. Pipelines carrying gas to the rest of Europe run through Ukraine.

Since the cut-off, Romania, Bulgaria and Poland have registered dips in their gas supply ranging from 10 to 30 per cent.

In all, about 80 per cent of Russia’s gas exports to Europe pass through Ukraine. Bogdan Sokolovsky, the chief energy adviser to President Viktor Yushchenko of Ukraine, said that other European countries would experience serious disruptions in 10 to 15 days if the dispute was not resolved.

Gazprom has boosted shipments to Europe through three pipelines that bypass Ukraine. But this will not be enough to fulfil Russia’s obligations to Europe.

Petroleo Empire’s Company Profile: Eni S.p.A.

Courtesy State of Alaska

Eni is the premier oil producer in Spain.  Their global operations include a variety of exploration and production projects in what seems to be any area known to hold oil.   With the latest acquirement of the Nikaitchuq field on the North Slope, Petreleo Empire is greatly interested to see how the development of the field proceeds.  The location of the Nikaitchuq development will have a keen interaction with polar bears.  Given the latest ice regime, polar bears are adjusting their movements.  This may make for a more intimate mingling of habitat and development then was seen in the past.

According to Eni S.p.A:

San Donato Milanese (Milan), 25 January 2008 – Eni has started the development of the Nikaitchuq oil field, located offshore the North Slope of Alaska at an average water depth of 3 meters.
Eni owns the 100% working interest in the field, having obtained a 30% stake in the field through the acquisition of Armstrong Oil & Gas’ Alaskan assets and the remaining 70%, together with operatorship, from Anadarko in the 1st quarter of 2007.

Nikaitchuq, which will be the first development project operated by Eni in Alaska, has recoverable reserves estimated at approximately 180 million barrels of oil. Total investment will amount to about US$1.45 billion and first oil is expected at the end of 2009.
The field will be developed through some 70 wells (approximately half of the wells will be producing wells and half will be injection wells), about one third of which will be drilled from onshore and the remainder drilled from an offshore artificial island built 4.5 km from the coast. Production will be sent to a newly built processing facility (treatment capacity of 40,000 b/d), located in an onshore area close to the field, and then transported to the Kuparuk network (at a distance of some 22 km) that is linked to the Trans-Alaska Pipeline System.

With this project, Eni will build a significant position in Alaska, leveraging its technological know-how and its large international experience as an operator of development projects in challenging environmental conditions involving artic temperatures and extremely shallow waters prone to seasonal icing.

Eni has been present in Alaska since August 2005, following the acquisition of 103 leases from Armstrong Oil & Gas in the North Slope area. Since then Eni’s portfolio in the region has grown to 158 leases. In first half of 2008, Eni expects to achieve first production in Alaska from the Oooguruk field (Pioneer 70% and operator, Eni 30%), which is also located in the North Slope, some 25 km west of Nikaitchuq.
In the United States, Eni also owns lease interests in 401 Gulf of Mexico (GoM) blocks, 70% of which are in deepwater. Eni is among the leading GoM producers with a current daily net production in excess of 110,000 barrels of oil equivalent, of which 60% is operated.