MEOG - Middle East Oil & Gas Monitor

05 February 2013

MEOG 
Issue 411
 News
Analysis
Week 05

MIDDLE EAST 
Intelligence
Published by
OIL & GAS MONITOR 
NewsBase
COMMENTARY 2 NEWS THIS WEEK…

 oil officials await Exxon’s big
Iraqi


decision

Jordan’s natural gas woes return with
2
ExxonMobil in Iraq
unrest in Egypt 4

MARKET COMMENTARY 5
Iraq is waiting for ExxonMobil to decide whether it
will quit the country, and the West Qurna 1 project,

North African risks 5
or relinquish its Kurdistan blocks.
PIPELINES & TRANSPORT 7


Israel contemplates gas pipeline option to  has been suggested that Baghdad may be
It
Turkey 7
willing to ease its terms in order to pry the US
Bidders line up for new Badra gas pipeline
 super-major away from the Kurdish region. (Page 2)
in Iraq 8

Jordan’s gas woes
INVESTMENT 9

Lebanon opens pre-qualification for

offshore gas bidding round 9
A fresh wave of unrest in Egypt has further put the
Cyprus to sign offshore PSCs with

France’s Total 10 boot into Jordan, undermining gas supplies to the
PERFORMANCE 10
energy-dependent kingdom.
 ‘December exports up’
Iran 10
 the same time, Jordan has also faced
At
 calls for foreign help after gas rig
Iran
difficulties in receiving imports of Iraqi oil because
sinks in Gulf 11
of border problems. (Page 4)

Saudi Aramco gears up to drill with new
offshore jack-up 11

PROJECTS & COMPANIES 12 Lebanon gas round

Sterling Energy looks for the Kurdistan
exit door 12 Lebanon is now pre-qualifying companies for its
 Dhabi moves on next phase of North
Abu first offshore gas auction later this year.
East Bab oil project 12

NEWS IN BRIEF 13  Lebanese government hopes to mirror the
The
recent success of Israel and Cyprus by unearthing
STATISTICS 21
new offshore gas deposits. (Page 9)

For analysis and commentary on these and other stories, plus the latest oil and gas developments, see inside…
Copyright © 2013 NewsBase Ltd.
www.newsbase.com Edited by Martin Clark
All rights reserved. No part of this publication may be reproduced, redistributed, or otherwise copied without the written permission of the authors. This includes internal distribution. All
reasonable endeavours have been used to ensure the accuracy of the information contained in this publication. However, no warranty is given to the accuracy of its contents

MEOG 05 February 2013, Week 05 page 2

COMMENTARY

Iraqi oil officials await
Exxon’s big decision
Iraq's federal government in Baghdad is pushing US super-major ExxonMobil for a
decision on whether it plans to quit the country for good, or shelve its involvement in the
northern Kurdistan region
By Kevin Godier
 super-major ExxonMobil being pressed to decide between Iraq and Kurdistan
US
 American company is ready to relinquish control of its West Qurna 1 project
The

Baghdad may be willing to offer greater incentives to persuade it to stay in Iraq

Senior executives at ExxonMobil are forfeited its assets in the autonomous venture into KRG territory, ExxonMobil
poised to make a decision that could Kurdish region. has quite palpably cut a swathe for
prove monumentally divisive for Iraq: ExxonMobil had given a series of others to follow, including France’s
the company must choose between a indications that it was set on pulling out Total SA, Russia’s Gazprom Neft and
services contract at the US$50 billion of West Qurna 1, in favour of the the US’ Chevron Corporation, which
West Qurna 1 oilfield in the south, and a contracts signed with the KRG in 2011, recently added a third block at Qara
six-block agreement awarded by the but has declined to comment on the Dagh to its Kurdish portfolio and is
Kurdistan regional government (KRG). impending decision. considering further acquisitions.
ExxonMobil’s choice of options sits at Baghdad undoubtedly expects These metaphorical flag plantings
the very centre of the growing ExxonMobil to take its side, not least have afforded the government in Erbil a
disagreement between Baghdad and major PR victory in its turf war with the
Kurdistan that threatens to fracture central government over how Iraq’s oil
Iraq’s uneasy federal union a year after
ExxonMobil had given and gas assets will be exploited.
US troops left the country. indications it was set on The Kurds have run their own
A decision one way or the other is due administration and armed forces since
imminently, Iraqi Oil Minister Abdul
pulling out of West Qurna 1991, and have resolved to push ahead
Kareem Luaibi said on January 27. 1, in favour of the with development of their oil resources
Given that Baghdad continues to insist independently of the Baghdad-based
that it is the sole repository of authority
contracts signed with the central government.
to grant oil contacts in and control crude KRG The KRG contends that the right to
exports from Iraq, ExxonMobil’s final dictate its own oil policy is enshrined in
choice seems set to bring to a head the because the output from West Qurna 1 the country's federal constitution, but the
growing friction between the central alone exceeds total current Kurdish central Iraqi government rejects
government and the northern enclave, production capacity. contracts signed by the region as illegal
which has upped the ante with recent On the other hand, KRG’s Natural and has blacklisted some firms operating
comments that it hopes to sign contracts Resources Minister Ashti Hawrami has there.
with up to three significant oil recently stated that ExxonMobil’s
companies within the next month. contentious deal to operate in the Export options
autonomous region is on track, after the The real challenge now being addressed
North and south US major restated its commitment to by the KRG is to find new ways to sell
According to a Reuters report on what is seen widely as one of the final Kurdish oil, after it stopped contributing
January 30, Iraqi Prime Minister Nuri frontiers for onshore oil exploration. crude exports to the Baghdad-controlled
al-Maliki hastily convened a meeting Whichever way the situation swings, pipeline from Kirkuk in the north to the
with ExxonMobil’s chief executive Rex the loss of face for the losing side will Turkish port of Ceyhan in December
Tillerson in the second half of January, be considerable, at the very least. 2012, in retaliation for huge oil payment
and offered Tillerson substantial delays. 
incentives to stay in Iraq’s southern Turf war
oilfields as long as the company As the first international major to



COMMENTARY
Fed up with waiting, Erbil has opted
for the alternative of condensate exports
by truck to Turkey.
These began last summer, without
Baghdad’s consent, and hit a high in
January 2013 as a result of exports of
crude oil from Kurdistan’s Taq Taq
oilfield, which started at the beginning
of this year.
Baghdad has repeatedly stated that it
considers independent exports from the
KRG as smuggling.
Nevertheless, international oil
companies have been increasingly
prepared to go against central
government policy in return for
Kurdistan’s better contract terms and
more secure working environment, as
opposed to the bureaucracy and
infrastructure bottlenecks that hamper
oil projects in central and southern Iraq.

Disputed territory Whether or not ExxonMobil backs Kurdish oil blocks and an alternative
Adding to the political complexity, three away from Kurdistan, oil market pipeline that might export 1 million bpd
of ExxonMobil’s blocks are located in observers now believe that the KRG has of crude or more.
the so-called “disputed areas”, a set its sights upon a new and ‘game- Baghdad has already accused Ankara
hydrocarbon-rich band of territory over changing’ paradigm of financial of complicity in “smuggling” Iraqi oil,
which both Baghdad and the Kurds autonomy whereby it will be paid and late last year prevented Turkey's
claim jurisdiction and where Iraqi Arab directly and in full for its exports, as energy minister from attending an oil
and Kurdish troops have reinforced opposed to the existing arrangement conference sponsored by ExxonMobil in
positions in a tense standoff since last whereby Baghdad receives the proceeds Kurdistan by denying his plane
year. and then passes on 17% of the revenues. permission to land.
Intriguingly, ExxonMobil and Iraqi Given that Kurdish officials have long Of course, the logistics – not to
Kurdistan officials were recently complained what they end up getting is mention the political ramifications – of
reported to have visited one of the three in fact closer to 10%, the target of an building a pipeline to Turkey, mean that
blocks, the Qara Hansher block, and to independent revenue stream has become such a project will not become manifest
have discussed building a camp there, increasingly attractive to senior KRG anytime soon.
according to comments from local politicians. But the intensifying struggle between
officials. Iraq’s Sunni, Shi’ite and Kurdish
Furthermore, in another move likely Turkish options factions over how to share both power
to heighten tensions further with Although the precise details of any deal and the world’s fourth largest oil
Baghdad, the KRG is reportedly have yet to be sculpted, the essence of reserves, which visibly intensified in
negotiating with two or three major Erbil’s strategy would appear to be a 2012, is now at the stage where a new
international companies to operate major collaboration with Turkey to direction seems likely to burst out from
oilfields and expects to announce the transfer Kurdish oil and gas to world the stalemate.
outcome in about a month. markets, via the construction of an The extent to which ExxonMobil
Hawrami told reporters on the energy corridor that would reduce influences this process remains to be
sidelines of a late January conference in Ankara’s dependence on Russia and Iran seen, but market observers will be
London that “we are negotiating with for oil and gas. expecting major clues within the coming
two to three other significant companies. Analysts envisage that, as a central days or weeks. 
They will hopefully be announced in a component of this scenario, a Turkish
month or so”. entity could take a stake in several



COMMENTARY

Jordan’s natural gas woes
return with unrest in Egypt
Civil unrest in Egypt has created havoc with Jordan's energy supplies, undermining an
already frail domestic economy
By Charles Coe

Disruptions to gas supplies from Egypt have brought more misery for Jordan

Erratic energy supplies and a struggling economy make Jordan ripe for rebellion
 country is building new storage capacity and contemplating an LNG import project
The

The return of civil unrest to the streets of Furthermore, Cairo was having supplies would return to the 240 mmcf
Egypt has led to further energy problems trouble paying the foreign companies in (6.79 MMcm) per day rate, the official
in Jordan, which has seen natural gas Egypt producing the gas. said, adding that he expected Amman to
imports through the Arab Gas Pipeline demand compensation from the
(AGP) decline to around 80 million Jordan protests Egyptians.
cubic feet (2.3 MMcm) per day. Jordan (and Israel) was forced to turn to
This new supply disruption followed importing petroleum products at Iraq issues
an agreement made just weeks earlier international prices in order to generate Jordan’s energy problems were further
between the two countries in which electricity. complicated during January with the
Egypt agreed to restore pre-revolution The country’s total energy bill for closure of the border with Iraq, which
shipments of natural gas to Jordan. 2012 is likely to amount to more than prevented some 10,000 bpd of crude oil
Jordan once depended on Egyptian US$6 billion. from being trucked to Jordan’s refinery
gas to generate 80% of its electricity. The cost to the government for energy at Zarqa.
In 2012, that slipped to about 18%. subsidies for last year is put at around Despite any good intentions that
Gas deliveries from Egypt once might exist between Iraq and Jordan,
amounted to some 240 mmcf per day , political unrest in a neighbouring
(6.79 MMcm).
Jordan once depended on country – this time Iraq – again created
That changed in February 2011 after Egyptian gas to generate problems for Amman.
the Mubarak regime was overthrown In December, Amman and Baghdad
and Egypt’s security system broke
80% of its electricity signed an agreement for the construction
down. of a 1 million bpd crude pipeline
US$1.7 billion.
Criminal elements in the Sinai, running from Haditha in Iraq to Jordan’s
The crisis has brought demonstrators
whether Islamic militants or Bedouin Red Sea port city of Aqaba, but when
out onto the streets of Jordan’s cities,
gangsters, began to attack the pipeline the project will get started remains a
where despite the turmoil that other
infrastructure in the peninsula without guess.
Arab countries are enduring, people
knowing which pipes led to Israel and The Minister of Planning and
have so far maintained their restraint.
which to the AGP and Jordan, Syria and International Co-operation, Jaafar
The recent agreement with Cairo to
Lebanon. Hassan, told a recent gathering at the
resume supplies suggested that Jordan
The attacks continued throughout University of Jordan that 2012 had been
would see some relief from high fuel
2012 until Egypt’s pipeline shipments one of the most difficult years that
costs this year, but that appears now not
stopped altogether. Jordan had faced since the early 1990s,
to be the case.
The situation was complicated by the and warned that there would be no quick
“There is a feeling that whenever
fact that revolutionary Egypt was fix for the country’s energy dilemma –
anything goes wrong in Egypt, the first
experiencing its own energy shortage, although efforts were under way. 
thing that goes is Jordan’s gas supplies,”
resulting in gas meant for export through
the news agency al-Bawaba quoted a
the AGP or the two LNG plants on the
Jordanian government official as saying
Mediterranean coast being redirected to
last week.
domestic use.
Egypt had not indicated when gas


COMMENTARY
He said that Arab and international terminal will be financed with money LNG delivery system at the Red Sea
donors had come to realise the from a US$5 billion grant provided by port of Aqaba is also under
seriousness of Jordan’s energy situation Gulf Co-operation Council (GCC) consideration.
and had agreed to extend assistance to members Saudi Arabia, Kuwait, Qatar The money from the GCC is meant to
Amman as it implemented a reform and the UAE. help Jordan and King Abdullah II cope
programme. Each country is contributing US$1.25 with mounting problems while it is still
billion. possible.
Energy investments The Jordanian government will Jordan’s dire economic circumstances
Hassan drew attention to plans to build a allocate US$150 million from the grant makes the country ripe for civil unrest,
7 million barrel capacity crude storage to develop renewable energy sources, but its close proximity to the GCC and
facility in Aqaba – part of the pipeline particularly solar, and it is examining its border with Saudi Arabia makes the
project with Iraq, which also includes a the possibility of exploring for and prospect of an uprising in Jordan even
spur line and 3 million barrel storage developing unconventional sources of more unattractive to Riyadh than all the
facility at Zarqa. fuel. revolutions in other Arab countries. 
The Aqaba tank farm and a loading The prospect of building an offshore

MARKET COMMENTARY

North African risks
Higher political risk suggests crude oil prices will keep rising
By David Flanagan

Oman crude oil futures prices moved But these are usually characterised by With low coal, gas and power prices
higher again in Week 5, driven by a pipeline damage and interruption, or oil is the only energy commodity which
further intensificaton of market agitation sabotage of machinery or transport links. is clearly rising in price.
regarding political risk. The Algerian situation tended to So what comes next?
There are other factors at play, but the suggest something aimed more at With a steeply rising crude oil market
chief concern among traders lies in the discouraging Western participation or (and we can now see Brent futures
escalating tension in Africa, especially involvement of any kind in Middle leading the pack in terms of
Mali, and whether this could spread east Eastern and North African (MENA) oil benchmarks), various effects are now
into Middle Eastern states. and gas activity. likely to emerge.
Clearly, Maghreb and Central African They therefore represented to traders a China is notorious for seeing danger
nations have a certain, albeit modest, somewhat more worrying angle in terms in rapidly escalating oil prices, since it is
degree of importance in terms of oil and of trading risk with the MENA energy so dependent on imported crude oil.
gas production, for example Sudan. area. Hence it will be no surprise at all if it
But the real fear in the oil trading Hence the magnified effect of the now starts buying crude oil in response
market is that localised unrest turns into event in terms of impact of current to the escalating market to stoke up its
a wider and more threatening trend political risk evaluations on global oil reserves.
across the Middle East. prices. China's strategic reserve policy is not
A further concern on the political side entirely clear to outsiders, but one thing
is the fallout from the hostage crisis at Stock markets which is certain is that it uses current
the gas production installation in The current price rally in the oil market purchases for its strategic reserve as a
Algeria. is also mirrored in many ways by rallies means of hedging against further rapid
Energy sector installations have of in various stock markets in recent days. rises in oil prices.
course been targets of politically The level of speculative capital inflow Traders may well expect that Chinese
motivated action in such locations as to the oil market is obviously now crude oil imports in February begin to
Yemen, Iraq and other energy moving higher. rise, if they did not already start to do so
production areas. This is not entirely surprising. in late January. 



MARKET COMMENTARY
China's monthly import data are not quick and meaningful increases in
released until a week or so after the OPEC output are realistic. On the markets
month-end. The Dubai Mercantile Exchange (DME)
So we will not know for sure how Not all bad news Oman futures contract for March 2013
China will react. It is not all bad news. Saudi Arabian and delivery began the week on January 28
But if its previous behaviour is United Arab Emirates production levels at a settlement price of US$108.71 per
anything to go by, China may emerge as are viewed optimistically in the market, barrel.
a big buyer of crude oil in February. based on offshore rig development and The March contract expired soon
output trends. after, and the April delivery future took
OPEC reaction But this optimism is of course based over as 'front month' contract.
Another consequence lies in the reaction partly on predictions, and therefore The April contract then escalated
of the Organisation of Petroleum traders are wary of being too reliant on gradually, first to a settlement price of
Exporting Countries (OPEC). such optimism. US$110.61 per barrel on February 1.
High prices are great news for A further question mark for the oil Then after the weekend the contract
producers, up to a point. trading market is now emerging from climbed again on February 4 to a
This is especially true for smaller the corporate sector. settlement price of US$111.53 per
OPEC members, whose reliance on With weaker performance in certain barrel.
revenues from crude oil production is areas from such operators as Shell, This latest trading session has seen
greater. ExxonMobil, Chevron, and indeed from DME Oman crude oil futures prices
But OPEC does not like volatility, and the upstream engineering sector such as climbing above the US$110 per barrel
its smaller members lose out most if Italian operator Saipem, global oil mark for the first time in a number of
prices fall back as quickly as they have majors and service providers may also weeks, and reflects the agitation now
risen. reign in activity. pervasive in the Middle Eastern oil
So will this mean an upturn in OPEC This will send shivers down many trading sector.
output? spines in the oil trading market, if they DME's oil trade volumes, in terms of
The key question here is whether think that future output growth prospects average daily trades, have been
OPEC can expand output rapidly if oil are no longer looking quite as rosy as extremely healthy in December and
prices continue to rise. they were. January, with trades of around 5,000 lots
Back in December 2012, OPEC And the old-fashioned problem of or higher each day.
elected not to change output quotas, and how to calm the nerves of oil traders, February has started slowly, although
may now, with hindsight, be thinking and quell their 'herding' mentality will with only a couple of days to take into
that it should have been more also now arise. consideration, few conclusions can be
perspicacious. Many of these features are bullish for drawn.
But with oil output already running at oil prices, so we should be prepared for However, it seems virtually certain
historically quite high levels (and for a some further hikes in oil prices in the that volumes will escalate as market
long time), many will be wondering if coming days. activity intensifies. 

Settlement price - DME Oman Futures, Monday February 4, 2013

Product Price ($) Change* ($)

Oman crude
111.53 0.92
Apr 2013 (bbl)

Source: Dubai Mercantile Exchange (*Change on previous trading day’s settlement price)



MARKET COMMENTARY

Market Projections for Week 07
Various features now point to a bull market for oil in the days ahead. Higher political risk, oil majors seeing more volatile returns,
and the possible output volatility, which we may see as a result of these features, all look like bullish price signals for the oil
market. Added to that is the likely influx of speculative cash flows into oil trading, as well as hedging behaviour (on the 'buy'
side) by such players as China. All in all, Week 7 is likely to show a further bullish mood in the oil trading market. Accordingly,
we should expect the price of the DME Oman crude oil future for April delivery to rise.
Price Projection for Week 7, 2013: DME Oman crude oil futures (April delivery): US$110-US$115 per barrel

PIPELINES & TRANSPORT

Israel contemplates gas
pipeline option to Turkey
There is one country in the East economical way for Israel to export its The largest foreign operator in Israel –
Mediterranean that could serve as an gas discoveries, which are currently in fact, the company that has made all
anchor to receive Israeli gas by pipeline, estimated at some 28 trillion cubic feet the gas discoveries in Israel – is Noble
Shaul Zemach, Director-General of the (792 billion cubic metres). Energy of the US, and it is also operator
Ministry of Energy and Water, stated at The Israeli government has yet to of Block 12 in Cyprus.
a conference in Israel on January 29. determine its export policy. Noble and the government of Cyprus
According to a report in Globes Last year, Zemach headed a are discussing the development of Block
Online, Zemach did not openly mention committee that delivered a report on 12, where 5-8 trillion cubic feet (142-
Turkey by name, but said it was clear export policy and made 223 bcm) of natural gas was discovered
which country the Israeli official was recommendations. in December 2011, and the creation on
referring to. With annual demand expected to an LNG plant on the island’s southern
Zemach suggested that despite the reach 50 bcm in the coming years, coast.
political tensions between Israel and Turkey is keen to secure new sources of Noble would like to use the planned
[Turkey], the idea of gas exports to natural gas supply. Cypriot facility to export natural gas
[Turkey] via a subsea pipeline through It has been negotiating with Iraqi from the Leviathan field, which is in
the East Mediterranean was practical, Kurdistan for gas supplies, even though Israeli territory and which it discovered
Globes said. the Turkish army continues to be in December 2010.
“This isn’t out of the question,” engaged in a war with Turkish Kurds. During the recent Eurasian Economic
Globes quoted Zemach as saying. While there are indeed a number of Summit in Istanbul, Turkey’s Deputy
“There are quite a few geopolitical geopolitical barriers hindering an Minister for Energy and Natural
barriers, but if we know how to create Israel/Turkey gas pipeline project, the Resources Murat Mercan told Israeli
the right conditions, it is possible. Gas big stumbling block for Ankara is envoy Michael Lotem that any co-
should be used as a stabilising factor Cyprus. operative venture between Turkey and
which leads to co-operation between Turkey has made it clear that any deal Israel would be hindered by Israel’s
countries and includes multinationals it makes with Israel would mean that natural gas development co-operation
and international parties with an interest Israel would have to stop its energy with Cyprus.
in regional stability.” association with Cyprus. But it remains to be seen if a subsea
Recently, a top ranking Turkish gas pipeline from Israel to Turkey really
official sent a message to Israel saying Complications is possible. 
that a pipeline might be the most That wouldn’t be easy.



PIPELINES & TRANSPORT
If it is legal for one country to lay a A pipeline stretching from Israel to But how could it do that if Israel
pipeline through the EEZ of another Turkey would have to pass through the ended energy co-operation with Cyprus
country then it might work, but that offshore territories of Lebanon and to do business with Turkey?
doesn’t mean that the offended country Syria, Israel’s staunch enemies. As Zemach said: “The gas should be
would not resent having an enemy’s If it were unable to pass through those used as a stabilising factor which would
pipeline running through its territorial waters, then the pipeline would have to help bring about co-operation between
waters. pass through Cypriot waters. the countries.” 

Bidders line up for new
Badra gas pipeline in Iraq
Six international and regional companies in three main packages: pipeline; tank International oil companies operating
are preparing to submit technical and farm and central processing facility in Iraq are planning mega investments to
commercial bids by 19 February for an (CPF). utilise associated gas for power
engineering, procurement and While the UK’s Petrofac has already generation, rather than flaring it.
construction (EPC) contract to fabricate been awarded a US$2 billion contract At present, Iraq flares 23 mcm per
and install a natural gas pipeline in Iraq. for the CPF, construction bids are due to day.
The companies are: Larsen and be submitted by mid-February for the Ali Khudhier, director-general of the
Toubro and Dodsal, both of India; storage tank contract, and to assist in state-owned South Gas Company (SGC)
Athens-based Consolidated Contractors evaluating EPC contracts for the said last year at an industry event in
International Company; Saipem of Italy; pipeline tender. Dubai that Iraq was keen on purchasing
Paris-based Technip and CAT of The tank farm will consist of two new equipment for investment in
Lebanon. reducing gas flaring in both old and new
Estimated to be worth US$250 fields.
million, the scope of works for the The pipeline will transport “We need US$12 billion over a six-
contract includes a 105-km pipeline of year period,” he said then, adding a
18 inches (457 mm) in diameter that will
associated gas produced major part of this would be invested by
be laid between the Badra oilfield and from the oilfield to be used those companies now operating within
the 150-MW Zubeida power plant. the licensing rounds.
Both places are located in the southern
as feedstock for power According to him, SGC has already
Wasit province. generation prepared a plan to tap the gas and use it
The pipeline will transport associated for power generation and petrochemical
gas produced from the oilfield to be storage units, each of 35,000 cubic production domestically.
used as feedstock for power generation. metres, and will also entail the “The vast bulk of gas flared in Iraq
It will have a nameplate capacity of 4 installation of booster pumps and slug comes from the Rumaila, West Qurna 1
million cubic metres per day, which will catchers. and Zubair oilfields in Basra Province.
be increased at a later date. The contract is estimated to be worth These fields, on the basis of
The UK’s Mott MacDonald has US$450 million. development deals signed with consortia
prepared the front-end engineering and Gazprom plans to complete all onsite led respectively by BP, ExxonMobil and
design (FEED) package for the planned facilities by the third quarter of 2015. Eni, are set to more than triple output
facility and will also act as project The Russian energy company leads over the next seven years. There will be
management consultant to the client, the development of the 3 billion barrel a need to invest in infrastructure to
Russia’s Gazprom. Badra oilfield, along with Turkey’s harness the gas. Our current capacity is
The Badra oilfield is being developed TPAO, Malaysia’s Petronas and South just about 12 mcm per day,” Khudhier
at an estimated cost of US$2.75 billion Korea’s KOGAS. said. 



INVESTMENT

Lebanon opens pre-qualification
for offshore gas bidding round
Lebanon is this week to begin accepting
pre-qualification applications from
international oil companies that want to
place bids in the country’s first licensing
round, which is scheduled to open in
May.
The pre-qualification round was due
to open on February 4.
Criteria for pre-qualification must be
approved by the Lebanese cabinet before
bidding opens.
According to the Ministry of Energy
and Water website, only qualified
companies will be invited to apply for
an “Exploration and Production
Agreement” in the first licensing round.
Bids will be accepted from approved
companies that have formed themselves
into consortia of at least three members. companies. square kilometre area.
The website states that the purpose of The Petroleum Administration is not In December Rowlands said the data
pre-qualification is to establish the fact authorised to communicate with the suggested that reserves in the area could
that the company is a legal entity, the press or with the companies placing amount to 25 trillion cubic feet (708
company’s financial strength and its bids. billion cubic metres).
capacity to finance ongoing and Pre-qualified companies or consortia
prospective oil and gas activities, to Interest high will be announced on March 31.
demonstrate the company’s technical Meanwhile, interest among international The licensing round is to open on May
competence, and to determine the oil firms in the Lebanon offshore is 2 and last for six months.
company’s quality, health, safety and reported to be growing. The ministry is looking to sign its first
environment standards. An energy conference in Beirut last offshore exploration agreements by
Companies may pre-qualify as December was attended by more than March 2014.
operator or non-operator/rights holder. 150 international and Lebanese A map of designated blocks has yet to
Once pre-qualification status is companies. appear on the ministry’s website.
granted, the ministry website says, it David Rowlands, CEO of Spectrum, According to the US Geological
shall remain valid for three years. which conducted a large seismic survey Survey, the Levant Basin, in which
All pre-qualified companies are of Lebanon’s southern waters last Lebanon’s East Mediterranean offshore
required to notify the Petroleum autumn, was quoted by Beirut’s Daily acreage lies, has estimated natural gas
Authority whenever there is an adverse Star on January 31 as saying a reserves of 122 trillion cubic feet (3,455
material change in their status. reassessment of the 3-D data showed bcm) and crude oil deposits of some 1.7
The six-member Petroleum that Lebanon’s offshore hydrocarbon billion barrels.
Administration, formed late last year, reserves could be larger than originally Some 35 trillion cubic feet (991 bcm)
will prepare all the technical and legal anticipated. of natural gas has been discovered by
work prior to negotiating with the He said there was a growing list of US company Noble Energy in Israeli
companies and to review applications, companies that had expressed an interest and Cypriot waters. 
but the Ministry of Energy and Water in the Lebanon offshore.
will carry out negotiations with the Spectrum’s survey covered a 3,000-



INVESTMENT

Cyprus to sign offshore
PSCs with France’s Total
Cyprus expects to sign two production- The contracts are expected to be plans to see the start of construction of
sharing contracts (PSCs) with France’s similar to three PSCs signed with a joint an LNG export facility by 2015.
Total for two offshore blocks this week, venture between Italy’s Eni and South Sylikiotis said the country’s objective
the head of the Cyprus Energy Service Korea’s KOGAS in late January. was for a Cyprus LNG facility to export
told MEOG during a recent interview. Those agreements call for more 2-D not only Cypriot natural gas, but also
Solon Kassinis, Director of the Energy and 3-D seismic to be acquired and for that produced by Israel and Lebanon.
Service, an arm of the Ministry of one well to be drilled during the initial The Cyprus National Hydrocarbon
Commerce, Industry and Tourism, said three-year exploration period. Company, known by its Greek acronym
the contracts would first be approved by If the well is successful, Eni/KOGAS KRETYK, is negotiating with Noble
the Council of Ministers and then they will be obliged to drill another. Energy about the development of Block
would be signed with representatives The PSCs can be extended twice for 12, where the gas resource in the
from Total, who are arriving in Cyprus two years, and with each extension 25% Aphrodite field has been estimated at 5-
this week. of the block must be relinquished. 8 trillion cubic feet (142-227 bcm).
Total will be awarded PSCs for Once Cyprus awards the PSCs to Noble will build an underwater gas
Blocks 10 and 11, which lie at the Total it will have six offshore blocks pipeline to the island’s southern coast,
southern edge of Cyprus’s exclusive under contract counting Block 12, which where the planned LNG plant will be
economic zone (EEZ) along the was awarded to Noble in 2008. located at Vassilikos. Noble will also be
maritime border with Egypt and west of Meanwhile, Minister of Commerce involved in creating the LNG facility,
Block 12, where natural gas was Neoklis Sylikiotis told a press which is due to come on stream in 2019.
discovered in December 2011 by Noble conference in Nicosia on February 1 that 
Energy. the government was proceeding with

PERFORMANCE

Iran ‘December exports up’
Following reports that Iran’s December 1.45 million bpd following several that is far from pushing Iran in a
crude exports hit 1.4 million barrels per interviews with analysts and shipping corner."
day – their highest level since fresh sources. According Reuters, higher December
sanctions were introduced by the Prior to the introduction of the exports were driven by demand from
European Union (EU) in July – a sanctions, Iran was exporting around 2.2 Asia, with countries such as China, India
leading analyst has said that in million bpd. and Japan continuing to purchase large
combination with high oil prices, this is In a report on January 30 Olivier volumes, as well as the expansion of
likely to mean that the sanctions are Jakob, managing director of consultants Iran’s tanker fleet.
currently ineffective. Petromatrix in Switzerland, said that The latter has helped the Islamic
On January 18, the International "with exports close to 1.5 million bpd republic bypass restrictions that have
Energy Agency (IEA) said in its and Brent crude above US$110 a barrel made insuring its cargoes difficult, while
monthly release that Iran’s crude Iran does not really care anymore about gaining accurate export figures has
shipments were 1.2 million bpd during the sanctions". become harder as the country has turned
the month. He added: "The export revenues from off satellite tracking signals on the
However, on January 31, Reuters Iran are now equivalent to exporting at majority of its vessels. 
claimed that this figure actually stood at full capacity in a market at US$81 and



PERFORMANCE
Although fresh sanctions are due to be step up pressure on China to lower its relationship,” she said.
imposed by the US next month Elena Iranian purchases in the near future. “I would be very surprised if Obama
McGovern, oil and gas analyst at “The implications of preventing were to take China to task on Iranian
Business Monitor International, told Chinese imports from Iran would be too imports.” 
Reuters that Washington was unlikely to damaging to the (US-China) bilateral

Iran calls for foreign help
after gas rig sinks in Gulf
An Iranian rig has sunk to the Gulf sea- international assistance to help recover near the site and in Tehran to plot steps
bed after an accident during installation. the gas platform, the Mehr news agency to recover the giant structure.
According to reports, the US$40 reported last week. The official told Mehr that calls for
million platform’s huge metal support Iran’s energy sector is currently help had been put out to several
jacket plunged 80 metres below the subject to a wide range of international international firms that might have the
surface after a crane broke during sanctions, which means the country is expert equipment needed to recover the
installation. typically used to going it alone. rig to the surface.
Workers rushed to get off the rig – “Without the help of foreign The structure was one of four planned
which belongs to a company linked to companies ... it is forecast that it won’t for a project in the giant South Pars gas
Iran’s Revolutionary Guard – as it be possible to retrieve the jacket for field, led by a NIOC subsidiary and
disappeared into Iran’s South Pars gas several months,” an unidentified services company Sadra, and weighs
field in about 10 seconds. National Iranian Oil Company (NIOC) more than 1,000 tonnes. 
And, following the incident, Tehran official told Mehr.
has taken the unusual step of asking for Crisis groups have also been set up

Saudi Aramco gears up to drill
with new offshore jack-up
Saudi Arabia’s state-owned oil giant rig ahead of schedule in October compared with the traditional air-
Saudi Aramco is gearing up to start following its construction at the Keppel cooling of other facilities.
drilling with its latest and recently FELS shipyard in Singapore. Aramco is expected to use a record
acquired rig, underscoring the group’s The new offshore jack-up will be the number of rigs this year, both onshore
intentions of exploring in ever deeper second to be owned and fully operated and offshore, for all aspects of work.
waters. by Aramco. Local industry analysts anticipate the
The new rig is capable of It is also the first offshore jack-up rig company might use as many as 170 rigs
accommodating 114 personnel and is that the company ordered to be built this year, up from 133 at the end of
equipped with jack-up legs more than from scratch to fit the Gulf’s unique 2012.
400 feet (124 metres) long, which will offshore fields. Schlumberger has said it too expects
allow it to operate in the Gulf’s deepest The new rig is equipped with six the rig count to grow, but from 134 to
fields of Marjan, Karan, Arabiya and engine/generator sets, plus a 54-motor 160, driven by “continued shallow-water
Hasbah. jacking system that will allow it to carry exploration, along with Saudi Aramco
The state-of-the-art rig has the ability a greater load than the normal 36-motor starting a deepwater rig in the Red
to drill as deep as 30,000 feet (9,300 rigs. Sea”.
metres). The rig’s water-cooling system will
Saudi Aramco took possession of the also enable quicker heat removal



PROJECTS & COMPANIES

Sterling Energy looks for
the Kurdistan exit door
Not all companies have struck it lucky and adding to, our remaining high sector.
in Iraq’s northern Kurdistan region. potential exploration interests in UK-listed Afren plc may also be
A succession of disappointing results Africa,” said Sterling’s chief executive looking for a buyer for its Kurdish
in the field mean the UK’s Sterling officer Angus MacAskill. assets.
Energy is looking to quit. The London-listed company The company has hired a corporate
The company has now told the commenced seismic work on the block finance firm, Steen Associates, to look
Kurdish Regional Government that in 2012. into selling its projects in Kurdistan and
seismic data from the Sangaw North Test rates from five early wells found eastern Africa, to focus on its main
block provided little justification to natural gas but not in commercial assets in Nigeria, The Sunday Times
continue with drilling operations there. quantities. reported at the weekend.
The Sangaw North block sits about 80 The semi-autonomous Kurdish China’s Sinopec and US oil company
miles (128km) south of the Kurdish government placed restrictions on oil ExxonMobil could be interested in
capital Erbil. exports in response to ongoing political buying the assets, which could fetch up
“While we are naturally very battles with the central government in to US1.6 billion, the newspaper
disappointed to have been unsuccessful Baghdad over the oil sector. Ongoing reported. 
in our exploration efforts in Kurdistan, political turmoil is in part to blame for
we now look forward to focusing on, restrictions on Iraq's post-war energy

Abu Dhabi moves on next phase
of North East Bab oil project
Abu Dhabi Company for Onshore Oil and export, gas compression, gas at 2.5 million bpd and which is sourced
Operations (Adco) is moving ahead with dehydration and a utilities system. from Adco, Abu Dhabi Marine
the next phase development of its North The additional water and gas injection Operating Company (Adma-Opco) and
East Bab (NEB) oilfield, with the facilities will be required to sustain Zakum Development Company.
appointment of the UK’s Mott reservoir pressure and allow carbon Overall, Abu Dhabi has set a target of
MacDonald as the project management dioxide-based enhanced oil recovery attaining total production capacity of 3.5
consultant. (EOR) techniques. million bpd by 2017.
Called NEB phase 3, the project will The development is estimated to cost A large chunk of Adco’s new output
aim at further development of the three US$1.5-2 billion and the next stage in will come from the Qusahwira, Bida al-
onshore fields of al-Dabbiya, Rumaitha the project implementation will be the Qemzam and the NEB fields.
and Shanyel to produce an additional selection of a front-end engineering and Called a 1.8 million bpd project,
110,000 barrels per day of crude oil by design (FEED) contractor. engineering, procurement and
2016. The NEB project is part of Adco’s construction (EPC) tenders worth a total
Scope of works for phase 3 of NEB plans to increase a production capacity of about US$1.5-2 billion have already
will include the installation of oil of 1.8 million bpd over the next five been awarded.
gathering, water injection, gas injection years. The project aims to develop the three
and water supply systems, as well as Adco accounts for 65% of the UAE’s onshore acreages, increasing to 1.8
facilities for oil processing, oil storage total oil production, currently estimated million bpd. 



NEWS IN BRIEF
The following news items are sourced benefited from Iran's reduced exports. In Iraq’s January crude shipments from the
from local and international news addition to Saudi Arabia and Iraq, also southern oilfields were higher by around
sources. Angola, Venezuela and Russia are seen 75,000 bpd compared to previous
NewsBase is not responsible for the as countries which have ramped up monthlevels of 2.02 million bpd.
contents of the stories and gives no shipments to plug the shortfall from Iraq has set a target to export around 2.2
warranty for their factual accuracy. Iran. million bpd from the south, but bad
Saudi production cuts at the end of the weather and maintenance work at Iraq’s
OIL year (700,000 bpd) have been largely giant Rumaila oilfield have disrupted
caused due to weak global demand. exports, oil officials said.
Iran to face 12% OPEC’s latest report indicated world OPEC member Iraq has the world’s
decline in Asian oil supply will comfortably outstrip demand
in the first half of 2013.
fourth-largest oil reserves and is
targeting exports of 6 million bpd by
imports Iranian exports to China have been 2017.
Asian crude oil imports from Iran have reduced by 21% to 438,448 barrels per REUTERS, January 3, 2013
fallen around 25% in 2012. Analysts day (bpd) in 2012, while the deepest
expect that overall Iranian crude oil reduction was made by Japan, which cut Kurds warn BP not
shipments to Asia will decrease by 40% of imports to 189,076 bpd. to drill for Baghdad
another 12% in 2013, largely due to U.S. South Korea cut imports by 36% to
The escalating dispute between Iraq's
sanctions pressure. 153,400 bpd and India reduced
central government and the Kurds over
Asian customers will however be able to purchases by 1.7% to 315,200 bpd.
oil and land went up a notch after the
source their refineries due to alternative Some analysts expect that China’s
Kurdistan Regional Government warned
supply options. Iranian crude imports will be cut by
oil giant BP not to help Baghdad
News agency Reuters stated that Asia's another 5-10% in 2013.
upgrade an oil field in disputed territory.
main oil buyers cut imports from Iran to REUTERS, February 1, 2013
BP, which appears to be committed to
an average of 1.09 million barrels per
day in 2012, Available government and Iraq oil exports rise Iraq, secured a major production-sharing

to 2.359 million bpd
contract from Baghdad in 2009 to
industry data shows that there are also
develop the Rumaila superfield in the
planned cuts in term contracts for 2013 in January south.
which point to further reductions of at
Iraq’s oil exports climbed to 2.359 Now it's reported to be close to an
least 135,000 bpd.
million barrels per day (bpd) in January agreement with Baghdad to upgrade the
Some analysts warn that overall cuts
from 2.340 million bpd the previous declining Kirkuk oil fields in the north.
would have to be deeper to secure
month, oil ministry officials said. These straddle the border between
further waivers from the U.S. sanctions
Iraq shipped 2.095 million bpd from the Kurdistan and territory controlled by
that are aimed at forcing Iran to halt its
southern oil hub of Basra and 264,000 Baghdad.
nuclear programme and which have
bpd from the northern fields around The semiautonomous Kurds claim the
made shipping and paying for Iranian oil
Kirkuk, including 11,000 barrels trucked Kirkuk region is historically part of their
difficult, cutting overall exports by more
to Jordan, they said. turf and want to get their hands on its oil
than half in 2012.
Slowing exports from the Kurdish reserves, which constitute about one-
Total costs for Iran are becoming
region and repeated attacks on the major third of Iraq's proven reserves of 143.1
staggering. Reuters reports that Asian
export line to Ceyhan port in Turkey billion barrels.
cuts have already cost Iran US$14
have significantly reduced Iraq’s So the last thing they want is for BP --
billion worth of oil exports for the year.
shipments from the north. or anyone else -- to arrest the fields'
The implications for Asian refiners are
The Kurdish Regional Government decline to strengthen Iraq's claim.
expected to be minimal, as there is an
(KRG) and the central government in "Iraq's citizens are simply tired of
abundance of alternative supplies,
Baghdad have been locked in a lengthy Baghdad's ... language of threat and
mainly from the Middle East. Almost all
dispute over oil payments to producers intimidation, which in the cynical
of Iran's exports flow to Asia.
in the Kurdish area. pursuit of narrow political agendas only
REUTERS, January 31, 2013 serves to create division and strife," said
The dispute was further aggravated at
Iranian crude cuts the start of January with the beginning KRG President Massoud Barzani. 

support Arabian of independent crude oil exports by the
KRG via truck to Turkey, a blow to
exports Baghdad’s claim to full control over
In 2012, Arab crude oil producers have Iraqi oil.


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