UPI Energy Watch

WASHINGTON, Dec. 18 (UPI) -- Since the collapse of Communism in 1991, Moscow has played hardball with Latvia over the former Soviet Union's sole Baltic export terminal, Ventspils, pressuring Riga by reducing its shipments through the port. Latvia in turn has increased its terminal fees, prompting Russia to build a new terminal at Primorsk near St. Petersburg and threatening to bypass Ventspils entirely. But the Latvians have other suitors; U.S. investment firm BroadStreet Group has made a $65 million offer to the Latvian government for its Baltic Ventspils oil terminal. Latvia's Economy Minister Juris Lujans said Riga has yet to consider the offer, as BroadStreet is demanding the Latvian government annul its privatization agreement Ventspils' majority shareholder, Latvijas Naftas Tranzits. BroadStreet is offering to buy the government's entire 38.6 percent stock interest in Ventspils for $1.60 per share. BroadStreet is prepared to offer immediate payment and has promised to set up a special corporate body to oversee and manage the oil terminal. Lujans commented that Latvia has not yet familiarized itself BroadStreet's terms, but said the Economy Ministry would complete its evaluation of BroadStreet's offer by the end of the year. In a nod to Ventspils' private shareholders Lujans said, "Only private shareholders can realistically determine its activities now."

The International Maritime Organization has adopted an accelerated phase-out scheme for single-hull tankers. The IMO has passed additional measures, including expanding the terms of its tanker Condition Assessment Scheme. Under a revised regulation 13G of Annex I of the 1973 International Convention for the Prevention of Pollution from Ships, the final phasing-out date for Category 1 tankers (pre-MARPOL tankers) has been shortened to 2005 from 2007. The final phasing-out date for category two and three tankers (MARPOL tankers and smaller tankers) has been shortened by five years to 2010. Revised IMO regulations now legislate that CAS will apply to all single-hull tankers 15 years or older. The revised regulation allows the administration (flag state) to permit continued operation of category two or three tankers beyond 2010 subject to passing a CAS examination, but continued operation of the vessel cannot extend beyond the anniversary of the date of delivery of the ship in 2015 or the date on which the ship reaches 25 years of age after the date of its delivery, whichever date is earlier.

Norway's CanArgo Energy Corporation is purchasing oil and gas interests in Kazakhstan that were previously owned by Britain's Atlantic Caspian Resources PLC. CanArgo acquired the assets via its newly established associated company, Tethys Petroleum Investments Ltd., which purchased ACR's 70 percent interest in BN Munai LLP, a Kazakh limited liability partnership. BNM's holdings are in the Akkulkovsky exploration zone and the Kyzyloy gas field, located west of the Aral Sea in western Kazakhstan. Kyzuloy is shallow gas field 22 miles from the main Bukhara-Urals gas pipeline system, close to the Bazoy gas storage and compression facility. David Robson, CanArgo chairman and chief executive officer, said, "This acquisition gives CanArgo a ready made position in Kazakhstan in one of the potentially most prolific hydrocarbon provinces in the Former Soviet Union."

Ali bin Ibrahim al-Nuaimi, the Saudi Petroleum and Mineral Resources minister, attending the International Energy Industry: Challenges and Prospects ministerial summit in Washington said the world can depend on Saudi Arabia to continue being a reliable and moderate energy supplier. Spencer Abraham, the U.S. Energy secretary, is hosting the two-day conference. Al-Nuaimi said, "Saudi Arabia is convinced that consumers, producers, the industry and the world economy all benefit from stable and predictable oil markets. That is why we are committed to maintaining spare production capacity -- at a great cost to ourselves -- that can be called upon when additional supplies are needed. Over the years, this spare capacity has been instrumental in maintaining global energy supply in times of disruption. It has also provided a necessary cushion, allowing markets to smoothly accommodate growth in demand. In effect, spare capacity allows us to help smooth out the inevitable 'bumps' in the road.

While Saudi Arabia's spare production capacity is a necessary component for maintaining stability in oil markets, it alone is not sufficient to achieving that goal. We believe that to achieve better stability, we must cooperate closely with other OPEC and non-OPEC producers, not only to insure that we do not oversupply markets, but to also make additional supplies available in times of shortage...we believe that achieving stability in oil markets requires close cooperation with the international oil industry. We therefore work closely with many oil companies at different levels. We have trading relationships with over 50 companies. We have entered into seven major joint ventures with international oil companies and we are looking to conclude additional ventures in the future."

Venezuela has announced that the signing of a joint venture with Royal Dutch/Shell and Mitsubishi to develop the Mariscal Sucre liquefied natural gas project will likely be delayed until early next year. Luis Vierma, vice minister of Hydrocarbons, said March is the likely signing date contradicting Shell's recent assertion that the deal would be signed by year-end. Vierman said, "You have to remember that the decisions we're taking today are going to have a 35-year impact on the industry. We need to study very thoroughly what we're going to do, and how we're going to do it." Vierma is also a director at state oil company Petroleos de Venezuela. The $2.7 billion Mariscal Sucre project will develop natural gas fields off the Paria peninsula in eastern Venezuela. The project is schedule to come on-line by 2008, with a proposed annual LNG capacity of 4.7 million tons. Shell and Mitsubishi signed a preliminary development agreement in December 2002. Under the agreement, PDV has 60 percent ownership of the project, Shell 30 percent and Mitsubishi 8 percent. The remaining 2 percent is reserved for national investors. Vierma said that Venezuela intends to sell 9 percent of its share to Qatar, which it wants as a strategic partner for the project.

Turkmenistan is going to sign an agreement with a group of Russian oil companies for the development of oil and gas fields in its zone of the Caspian. The deal will be signed with the Zarit consortium (consisting of the state-run companies Rosneft and Zarubezhneft) and Russian gas company ITERA. The agreement will cover four fields in southern Caspian Sea along the Iranian border. Turkmen officials have not ruled out the future possibility that the consortium will eventually include Iran. Turkmenistan estimates that its share of the Caspian seabed contains 11 billion tons of oil and 5.5 trillion cubic meters of gas. Ashkabat estimates that between 2003 and 2020 the country will attract up to $25.6 billion in foreign investment to develop its Caspian oil and gas resources, an amount double current foreign investment in Kazakhstan. The only foreign company currently working in the Turkmen sector of the Caspian Sea is the United Arab Emirates Dragon Oil Company. Turkmenistan has also signed on offshore exploration contracts with Denmark's Maersk Oil and Malaysia's Petronas.