The Oil Drum | Foreign deals and domestic refineries

Foreign deals and domestic refineries

Posted by Heading Out on November 2, 2005 - 12:56am

Well there are a number of interesting snippets of news that are worth noting, and which might, collectively provide more parts to fit into the puzzle. Consider today's news that Russia is investing in Nigerian oil.

State oil firm Zarubezhneft has recently struck Russia's first oil deal with OPEC-member Nigeria to explore two offshore blocks in the Gulf of Guinea, the Energy Ministry said on Tuesday.
Russian oil majors are expanding abroad from Iran and Saudi Arabia to Venezuela and Colombia as record revenues from high oil prices allow them to invest in reserves outside Russia

The Russian company also is in partnership in Vietnam, where it produces about 230,000 bd. I suspect that it is more credible than yesterday's Guardian story of a Chinese company bidding for Exxon Mobil. On the other hand, with the Chinese President in Vietnam, they also have signed an agreement for joint exploration.

In a related development, China National Offshore Oil Corp (CNOOC), the country's biggest offshore oil and gas producer, on Monday signed a framework agreement with a Vietnamese oil firm to jointly explore oil and gas in the Beibu Bay.

Incidentally as Russia plans to double rail shipments of oil to China next year, we need to remember that not all transport is by pipeline or tanker.

In looking to see how restoration was progressing around New Orleans (where I had hoped to meet the inside contact, that Prof G just mentioned, but she could not get to Venice that day) it is important to note that not all the wells that were damaged were in relatively deep water. As Platts noted

The Louisiana Dept of Natural Resources on Oct 31 said operators of onshore and shallow-water wells in a 38-parish region hit by Hurricanes Katrina and Rita had restored 88,769 b/d of oil production, or about 43.7% of the pre-storm output of 203,189 b/d. The agency put restored natural gas production at 929,300 Mcf/d, 41.6% of the region's pre-hurricane output of 2.235 Bcf/d.

More to the point, perhaps, it noted that Wilma caused significant damage to an oil transfer terminal in the Grand Bahama, that will take a couple of months to repair.

The report also swops around some of the refinery repair schedules from the dates for the different facilities that I had heard earlier.

The following refineries are still closed in the wake of Katrina; ConocoPhillips: Alliance plant in Belle Chasse, Louisiana, (247,000 b/d), partial restart in December, full rates in early 2006; ExxonMobil/PDVSA: Chalmette, Louisiana, (187,000 b/d), Murphy Oil: Meraux, Louisiana, (125,000 b/d), said repairs would keep refinery idled through first quarter of 2006.

The Alliance plant was not going to be ready until April, in earlier information, but this may have been moved up.

The report is worth a read since it also puts some light on the flow of oil in and out of the SPR. Apparently the loan part of the outlay has now been made (and was discussed in comments) but the sales part is still continuing through the end of this month.

Foreign deals and domestic refineries

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8 comments

JN2 on November 2, 2005 - 5:00am Permalink | Comments top

Let's say the deal goes ahead with Nigeria. Does that give the Russians the rights to buy that oil? (at market costs or some fixed contract price). Or are the Russians merely contractors? Or do they take a cut of the profits and then have to buy any oil they need on the world market? I guess I'm asking: is oil really fungible? Or is x% of global production tied up in long term contracts?

TIA, John

TI on November 2, 2005 - 5:23am Permalink | Comments top

The Russians being active abroad seems to confirm the suspicion that they have supply problems home. Russia may be again in decline or at least flat for the present. And nothing much to invest in at home.

Heading Out on November 2, 2005 - 11:09am Permalink | Parent | Comments top

Looking at project lead times, and the suggestion that Russia will go into decline by 2010, one might assume that this is ensuring some future supply for them. On the other hand it buys them more influence in Africa and right now one might argue that oil is one of the best investments. Given that they are profiting from their own sales, this gives them the opportunity to get back on the world stage.

Dave Cohen on November 2, 2005 - 12:49pm Permalink | Comments top

I don't believe it was noted here that there is a bit of a scramble on to exploit the West African deepwater. In Global oil majors vie for Africa's Gulf of Guinea from last August, we learn that South Korea made a similar move

The conflict of interests over the oil-rich Gulf of Guinea among global oil majors emerged this week soon after a South Korean consortium exercised a special right to acquire two deepwater blocks in Nigeria, Africa's top oil producer,at the just-concluded licensing round at the weekend....

The Center for Strategic and International Studies (CSIS), a Washington-based think tank, in its July report, said: "The Gulf of Guinea is a nexus of vital US foreign policy priorities."

Asian oil majors, however, also pin their strategies on sourcing oil from the gulf, which undoubtedly runs contrary to the interests of the United States and Europe as well, and Western oilgiants are reluctant to accept the latecomers, according to local observers.

Nigeria's news daily This Day reported Tuesday that oil companies, including Shell, ExxonMobil Chevron and Total, had accused the Nigerian government of negating the principle of transparency by awarding the two blocks to the Koreans.

The US companies were upset, as this Rigzone article Nigerian Oil Block Winners Get Deadline to Pay Signature Bonus makes clear

Nigeria has granted oil block winners in the 2005 bidding round two months grace period ending December 15 to get the signature bonus, local media reported Wednesday.

So far, only SU $1.2 billion has been paid by winners of the 44 oil blocks awarded, representing 50 percent of the expected revenue of 2.6 billion dollars....

Major US oil companies had boycotted the 2005 bidding round in August in protest of the government's decision to give certain companies [the Koreans] preferential rights over prospective deepwater blocks.

But there's more. From the Asia Tribune this month Sino-U.S. Energy Competition in Africa

China currently derives a quarter of its oil imports from Africa, with oil interests in Algeria, Angola, Chad and Sudan and increasing stakes in Equatorial Guinea, Gabon, and Nigeria. China's energy interests in Chad are of particular interest given that Chad still maintains diplomatic relations with Taiwan.

For more information about the August lease round, see Korea, India oil firms win Nigeria sites.

howleyj on November 2, 2005 - 4:16pm Permalink | Comments top

The Reuters report included this little nugget about the Russian firm: Mid-sized Zarubezhneft has most of its operations offshore Vietnam where it produces around 230,000 barrels per day together with its partner, Vietnam's state oil firm Petrovietnam. But as the joint venture's fields are maturing fast, output is set to decline sharply in the next decade and Zarubezhneft is forced to look for new assets around the world.

joule on November 2, 2005 - 4:59pm Permalink | Comments top

Notice how the major oil-consuming nations are beginning to increasingly step on each others' toes in the quest to secure future oil supplies.

Perhaps a mild prelude to the major oil-related conflicts that are yet to come?

Twilight on November 2, 2005 - 6:30pm Permalink | Comments top

These are the surest signs of the reality of pending oil depletion. When one sees the world's major governments and their oil companies jockying for position, it's rather hard to believe that it's just business as usual. Maybe they're all just a bunch of fanatical peak oilers!

As time goes on it seems inevitable that these conflicts will become more and more serious, and likely to escalate.

BalticMan on November 3, 2005 - 3:55pm Permalink | Parent | Comments top

In response to Twilight: "As time goes on it seems inevitable that these conflicts will become more and more serious, and likely to escalate."

Yes, I would expect more conflict, or at least for it to be less disguised than it has been to date.

On the other hand, perhaps we'll also see the occasional case of heart-warming cooperation. Lithuania's oil refinery, Mazeikiu Nafta, is in the process of (once again) changing hands. After Williams bought into it, and then Yukos scooped up the Williams stake, and then Yukos disintegrated, well, now what? Leading contenders: 1) TNK-BP (Russian / British); 2) Lukoil and ConocoPhillips (Russian / American). Oleg Deripaska, the RosAl (aluminum) guy, just stuck his nose in, too, perhaps as a front-man for Rosneft (Russian state-owned). Dunno who's gonna win, but if (1) or (2) wins, hey, chalk one up for cooperation.