UPI Energy Watch

WASHINGTON, March 18 (UPI) -- China looks to increase production with a focus on boosting liquefied natural gas production. China's third-largest offshore oil and gas producer China National Offshore Oil Corp (CNOOC) intends to consolidate and expand its liquefied natural gas projects in 2005. CNOOC President Fu Chengyu announced on Mar. 7: "We will rev up efforts to put the Guangdong LNG program into operation in the middle of next year, and begin the preliminary stages of the LNG programs in Fujian and Zhejiang within the year." Chengyu said that with a development budget of $2.2 billion, which is a 33 percent increase year-on-year, the company is looking to increase offshore oil and gas production by 19 percent for 2005. A total of 16 exploitation projects are expected to become operational between 2005 and 2006, nine of which will be completed in 2005, which Chengyu said is a company record. CNOOC is specifically targeting increased LNG production; the company currently operates four LNG projects: Guangdong, Zhejiang, Fujian and Shanghai. CNOOC has signed an agreement in October with the provincial government of Liaoning to construct an LNG project in the province; the company is also currently holding talks with Shantou in Guangdong province and Tianjin municipality over for similar projects. CNOOC's domestic rivals, PetroChina and Sinopec, are currently lobbying the central government for an approval to construct similar LNG projects in coastal provinces. Chengyu stressed: "Demand for LNG is increasing in China and we expect significant growth in the coming two years." Chengyu also noted that 40 percent of China's natural gas consumption will be met by LNG imports by 2020. CNOOC and British petroleum will construct the Guangdong LNG project for imports from Australia. Indonesia will provide LNG supplies for the Fujian project.

According to Kazakh KazMunayGaz First Vice President Timur Kulibayev, Kazakhstan continues to wait on Gazprom's decision whether the company wants to establish a joint venture in Russia's Orenburg gas plant that would process gas from Kazakhstan's Karachaganak gas condensate field. Legal restrictions on KazMunayGaz's access to Gazprom's supply system and exports from Russia remain as a hindrance to the formation of the joint venture. Kazakhstan's Energy and Mineral Resources Minister Vladimir Shkolnik said that Kazakhstan's annual gas output is expected to total 20 billion cubic yards in the near future, adding, "taking into account the second stage of the Karachaganak field's development." Gazprom's Deputy Chief Executive Aleksandr Ryazanov said in June that the company was looking to sign a long-term agreement with the consortium developing the Karachaganak field on condensate supplies to the Orenburg gas processing plant. According to Shkolnik, Gazprom intended to sign a seven to ten year contract.

Burma has modified operation of its upstream oil and gas industry. The government of Burma decided that all future onshore oil and gas blocks will be operated by the Myanma Oil and Gas Enterprise under the Ministry of Energy. Ministry Energy Planning Department Director U Soe Aung wrote in a letter to foreign companies seeking exploration and production rights for onshore blocks that all onshore blocks will be reserved for the ministry's exploration and production activities as of Mar. 7. Burma has isolated 46 onshore blocks, of which nine are currently being developed by foreign companies. South Korean Daewoo International meanwhile has revised estimated reserves to be higher than expected at the company's offshore natural gas project in Burma's Rakhine state, after drilling another test well early in March. Daewoo has reported that estimated reserves are now 20 trillion cubic feet; an increase from the company's previous estimate of 12 trillion cubic feet.

According to a Bulgarian government spokesperson, the Bulgarian cabinet has recently extended a permit for another two years to Ireland's Balkan Explorers (Bulgaria) Ltd in bloc V-Golitsa, located in the districts of Varna, Turgovishte, and Shumen in the northeast of the country, and Sliven in the south. Balkan Explorers fulfilled the company's obligations for the first three years of the permit and undertook an $800,000 project. The company is expected to conduct prospecting activities, including comprehensive interpretation of geologic and physical data, risk analysis, and modeling and assessment of the potential of promising structures and sites. The company will also choose a location in the block where to make at least one drill.

Though under tight security, unknown gunmen attacked RAO UES Head Anatoly Chubais while in his car on his way from the Zhavoronki settlement near Moscow. Chubais escaped unharmed. Authorities were able to determine the license plate number of the vehicle used by attackers to flee the scene. Investigators presume that the husband of the car's owner committed the attack was a military retiree and a sabotage operations specialist born in 1948. Authorities also discovered the apartment of the car's owner. Authorities detained retired colonel Vladimir Kvachkov for 48 hours but Kvachkov denied any involvement in the incident. The Russian securities market remained affected by the attack.

Western Siberia witnessed an oil pipeline rupture. Following pipeline damage at the Ust-Balykskoye oil field in western Siberia on Mar. 5, 92 oil wells were placed in an emergency mode. A spokesperson from the Khanty-Mansi Autonomous Area directorate for emergencies said that metal corrosion was the cause for the pipeline rupture. The spokesperson added that the directorate's experts are currently determining the environmental damage. Three excavators, 3 bulldozers and 15 dump trucks took part in the clean-up. Environmentalists have expressed concerns over the number of incidents occurring at Yuganskneftegaz's pipelines as maintenance and wear-and-tear are some of the causes of ruptures. January alone witnessed 19 incidents.

Closing oil prices, Mar. 18, 3 p.m. London

Brent crude oil: $55.25

West Texas intermediate crude oil: $56.26