Week 50 Overview
The right time for infrastructure and relevant agreements for joint operations has finally arrived. Investments on new pipelines across Europe took the lions share, while the Memorandum of Understanding signed by PGNiG and Chevron for Polish shale gas created further enthusiasm. In the 50th week, the theatrical threesome between the European Union, Russia and Ukraine remained in the wings. All in all, the flurry of agreements across Europe supported some grounded optimism.
INFRASTRUCTURE: TAP, SOUTH STREAM AND SCOTTISH STORAGE SCHEME
On Wednesday, the Trans-Adriatic pipeline (TAP) project said it plans to send invitations to tender for engineering and pipeline contract packages. The next step of the project is expected in the first six months of 2014, while the first gas is planned to flow in 2019. There are no doubts on the fact that the TAP is moving forward.
Further steam could come on December 17, when the Azeri Shah Deniz gas field consortium is expected to publish its final investment decision for the second phase of the development.
It is a similar story for the main TAP competitor, South Stream, which is swimmingly proceeding despite some turbulence.
On Thursday, Gazprom and Hungary’s government signed a contract for design and survey activities as well as spatial planning and environmental impact assessment for the Hungarian section of the pipeline.
Additional attention on infrastructure came from Scotland on Friday.
Scottish Ministers gave the green light to a pumped storage scheme proposed by SSE, paving the way to the next step of the project. The 600 MW Coire Glas pumped storage hydro electric scheme at Loch Lochy in the Great Glen would be the first new large pumped storage scheme to be developed in Britain for over 30 years. As the UK needs additional energy storage, the final investment decision will be more than welcomed by the industry.
AGREEMENTS: NOT ONLY SHALE GAS IN POLAND
On Monday, OMV’s subsidiary EconGas reached an interim agreement for long-term gas supply contracts with Gazprom Export. A few hours later, Kiev and Slovakia agreed on conditions for flows of gas from the European Union through Slovak pipelines to Ukraine. The involved companies reached an agreement in principle.
On Tuesday, a group of 17 oil and gas companies agreed on jointly acquiring seismic 3D data in the South-Eastern Barents Sea. The new project reflects the increased interest in this marginal sea of the Arctic Ocean, due to recent discoveries in the Johan Castberg area. Norway’s 23rd licensing round, which will take place in 2014, has already attracted the attention of many investors.
It comes as not surprise that Statoil, Eni Norge and Petoro made an oil and gas discovery in the Skavi prospect. The companies announced on Monday the achievements from the well in the PL532 licence. As explained by Gro G. Haatvedt, Statoil's senior vice president, persistence in the Barents Sea pays.
The same stamina is equally necessary in Poland. Despite the problems of the last years, companies could reap the benefits of a growing gas industry in the medium term.
The recent success of FX Energy’s Lisewo gas facility and the plans of BNK Petroleum to drill in the Ordovician formation are positive signs for the local gas industry.
But the main step forward came on Thursday, when Polskie Górnictwo Naftowe i Gazownictwo (PGNiG) and Chevron Polska agreed on a partnership to tap Polish shale gas potentials.
The two companies signed a Memorandum of Understanding (MoU) for joint shale gas exploration projects in South-Eastern Poland. They planned to establish a joint company, in which each would hold a 50% interest, should exploration be successful. The joint company would obtain four licences in South-eastern Poland: Tomaszów Lubelski and Wiszniów-Tarnoszyn from PGNiG, Zwierzyniec and Grabowiec from Chevron. The decision is an example for the rest of the industry. Sharing exploration risks and costs is clearly a good strategy for Polish and foreign companies.
WHERE INVESTORS FOCUSED THEIR ATTENTION
Barclays Bank foresees a 6.1% increase of investments in exploration and production in 2014. Coherently, companies’ appetite remains strong. Investors have good reasons to be excited by Britain’s stability, Barents Sea’s promises and Poland’s recent successes.
At this point, the future of the Leviathan field remains to be seen. Further clarifications could soon arrive, as Woodside waits for Israel’s new tax policy. Australia’s largest oil and gas company will then take a final investment decision regarding this field. An announcement is expected in the first months of 2014.
To conclude, the 50th week showed that the oil and gas industry has a great potential despite European sluggish recovery and the confrontations in Kiev. Following the examples delivered this week, governments and companies should cooperate to increase energy security. Investments in infrastructure and joint ventures are trump cards.
Sergio Matalucci