SOMA BANERJEE <ahref=economictimes.indiatimes.com>TIMES NEWS NETWORK [ SATURDAY, MARCH 29, 2003 01:32:27 AM ]

NEW DELHI: With the ongoing war against Iraq threatening to be a prolonged one, India is taking no chances on its crude supplies. It has already initiated the process of tying up with oil-producing countries like Sudan and Angola and has also signed contracts for additional shipments from Kuwait.

On the shipping front, the country has sent delegations to Saudi Arabia and Kuwait to ensure stability of shipping lines and routes.

At a high-level meeting held to day by the cabinet secretary to review the impact of the ongoing war on India, the petroleum ministry is learned to have laid out a detailed strategy on the measures being adopted to ensure regular supplies of oil. The strategy has focused on two main aspects — availability and price.

On the price front, all oil companies have been directed to cut back on their margins for the time being to spare consumers from a steep price hike.

According to the strategy, although the petroleum ministry is still holding discussions for a fiscal break to cushion the impact of volatility in global crude prices, domestic oil prices have now been told to hold on to retail prices and maintain stability.

As India meets 70% of its energy requirements through imports, the government has to make all efforts to maintain regular supplies. Apart from contracting additional supplies from conventional suppliers, oil companies have signed up advance oil contracts for three months.

This is over and above the strategic reserve of 60 days which is being maintained by all oil companies at domestic depots. 

As far as new oil-sourcing countries are concerned, India has contracted an additional monthly cargo of 2.5 million tonnes from Sudan which would be imported from May onwards. Discussions have also been on with Angola.

India (which imports significant quantities from Kuwait) has also asked for additional shipments following disruption of supplies from Iraq and Nigeria.

IOC, the largest importer, has placed orders for two additional shipments from Kuwait for the month of April. The Indian government has also sent two delegations to Saudi Arabia and Kuwait to ensure stability of shipping routes during this period.

Industry sources said that sourcing crude from countries like Kuwait is both economical and safe but this could change if the Persian Gulf comes under attack.

Routing the crude from the Red Sea could be an expensive proposition. In fact, the domestic unrest in Nigeria and Venezuela has also impacted prices as supplies from both these countries have been stopped.

<a href=cowra.yourguide.com.au>Please Read Wednesday, 26 March 2003 Local petrol station operators are crossing their fingers that this week's drop in crude oil prices will filter through in the next two weeks. Cowra BP manager Matthew Porter said "he would very much like to see it happen" but could not promise that prices would fall under the magic $1 a litre mark. After rising more than 45 per cent since November, the price of oil eased to $US 33.80 a barrel earlier this week - after spending months in the high thirties. High seasonal demand in the United States and fewer imports from Venezuela, whose oil industry was crippled for months by a nationwide strike, had affected world supplies. The price fall this week appears to be based on hopes that the war between the United States and Iraq will have a limited and beneficial effect on the world's oil supply. However, prices are still volatile, with the biggest fear in the market that oil facilities in Middle Eastern countries such as Kuwait or Saudi Arabia, could be attacked. "As long as such as a price fall is sustained, it could see prices fall for us," Mr Porter said about the trickle down to local levels. Prices at BP Cowra are 108.9 cents per litre for unleaded, 111.9 cents per litre lead replacement, premium, 112.9 cents per litre and diesel 108.9 cents. Mr Porter said price drops do take time to filter through - between ten days to two weeks. Farmers in particular, he said, have been caught by the high prices. Good falls of rain have brought the need to start working the ground, requiring high amounts of fuel for farm machinery and equipment needs. He doesn't like paying the prices either. "I don't like it one little bit - we are backed into a corner," he said. He explained that prices at the bowsers are directly linked to what suppliers pay and that Cowra, despite the extra distance is extremely competitive, with prices comparable to regional centres such as Bathurst and Orange.

More Reuters, 03.24.03, 4:24 AM ET

SINGAPORE, March 24 (Reuters) - Chinese state oil trader Sinochem is close to finalising its first overseas oil and gas acquisition worth up to $105 million with key gas assets in the United Arab Emirates, a senior Sinochem official said on Monday. Beijing-based Sinochem has agreed to take over Atlantis, a subsidiary of Norwegian oilfield services group Petroleum Geo-Services. "We've completed the first-phase closure of the deal earlier this month -- the legal procedures and the joint account books," said the official from Beijing. Sinochem was waiting for Atlantis' existing partners, including state interests in the UAE and Oman, to decide on their pre-emptive rights before finalising the transfer of the assets, the official said. The deal is Sinochem's first major overseas oil and gas investment although it is one of the smallest among a flurry of acquisitions by state oil companies as China seeks to reduce its dependence on Middle East crude. State firms CNPC, Sinopec, CNOOC Ltd and PetroChina have ploughed more than $4 billion in oil and gas reserves in Indonesia, Australia, Sudan, Kazakhstan, Venezuela and Azerbaijian. The Sinochem official said the centerpiece of the Atlantis deal would be gas assets in the UAE with estimated recoverable reserves of 310 billion cubic feet (bcf). The deal also includes gas exploration contracts in Oman and oil exploration and production contracts in Tunisia. "The final value of the deal, if it's $105 million or some other figure, will depend on what is left after the execution of pre-emptive rights by existing partners," said the official, without giving details. PGS said in late January that it had sold Atlantis to Sinochem for up to $105 million, a sharply lower value than an earlier estimate of over $200 million. PGS did not give the reason for the almost halving of the price. Once China's monopoly oil trader which has since seen its domestic market increasingly squeezed by competition, Sinochem wants to become an independent exploration and production company with a focus on assets outside of China. In early 2002 Sinochem set up a separate arm for exploration and production looking for small and medium-sized oil and gas fields valued at $100-200 million.

They're finally becoming serious global players

Ever since they emerged on the global scene a decade or so ago itching to invest, China's energy companies have acquired a reputation as the greenhorns of the oil patch. They struck seemingly promising exploration and pipeline deals in Venezuela, Russia, and Kazakhstan -- only to see them unravel or find they had grossly overpaid. They gained notoriety by going it alone in rogue states shunned by most established Western players, such as the Sudan, Iraq, and Burma. And all too often, the Chinese drove negotiators nuts with ever-shifting terms and maddening delays.

China Inc. is growing up fast. In mid-December, London's BG Group PLC (BRG ) decided to shop an 8.3% stake in oil and gas fields in the North Caspian Sea that could be as important as Alaska's Prudhoe Bay. ExxonMobil Corp. (XOM ) and Royal Dutch/Shell Group (RD ) also own stakes. So CNOOC Ltd., a unit of Beijing's China National Offshore Oil Corp. (CEO ), leaped at the chance. Executives hastily arranged visas and jetted to London. The deal, for $615 million, was struck in a few weeks and closed in mid-March. "I was blown away by the quickness of their response," says Cai Jinyong, managing director of Goldman Sachs (Asia) LLC, which advised BG. "Chinese companies have come of age." The fields require hefty investments, but analysts say CNOOC paid a fair price. The deal is part of an increasingly aggressive Chinese global oil investment blitz that is likely to accelerate from Central Asia to North Africa. The mission: to lock in oil and gas supplies to meet China's voracious energy demands in the coming decades, and to ease what Beijing regards as a dangerous reliance on the Persian Gulf. The Iraq crisis has heightened China's sense of urgency: The doubling of oil prices in the past year has hammered China's burgeoning, energy-guzzling industrial sector. China imports 60% of its oil from the Mideast. Any big disruption of shipments, Chinese leaders fear, could threaten national security. What's more, the gap between China's domestic output and its needs has been widening far beyond projections. By 2015, predicts the U.S. Energy Dept., China may have to import 8.6 million barrels a day, up from 2 million now. "They are desperate to secure all the supplies they can get," says Paik Keun-Wook, a China oil expert at London's Royal Institute of International Affairs. In recent months, however, China's long-term anxieties have eased considerably thanks to a string of offshore breakthroughs. Beijing's China Petrochemical Corp., parent of the listed Sinopec Group, also bought a stake in the Caspian reserves in March. Around the same time, Chinese companies snared rights to other important fields in Indonesia's East Kalimantan province. That came soon after CNOOC bought huge Indonesian offshore reserves from Spain's Repsol YPF for $585 million. Another coup could come in early May, when new Premier Wen Jiabao travels to Moscow. Wen is expected to close a deal to build a $2.5 billion pipeline that would bring millions of tons of Siberian crude annually to China's Northeast. The 1,500-mile pipeline venture with private Russian oil giant Yukos had been snarled in red tape and infighting for four years, as rival Russian oil companies pushed their own plan to build a pipeline to Japan. Moscow is still weighing both projects, but Prime Minister Mikhail Kasyanov has said the government is leaning toward approving the Chinese pipeline first. There are political implications to the deal as well. "Selling oil to China is a good thing for Russia," says Stephen O'Sullivan, research director for Moscow-based United Financial Group. "It increases trade and dependency and helps align the two countries' interests." That's better than angering a huge neighbor by not sharing Russia's mineral wealth. The Chinese also are making big strides in securing liquefied natural gas, which Beijing is pushing hard as cleaner fuel than coal, which now provides 60% of electricity output. In August, CNOOC bought a stake in Australia's huge North West Shelf that will bring 3.5 million tons of LNG annually to South China for the next 25 years. Using its big market as leverage, China secured the gas at about 15% less than rival offers from South Korea and Japan. Why the sudden successes? The biggest factor is the growing savvy of China's three biggest oil companies since they listed shares overseas. CNOOC, which made its first overseas acquisition a decade ago, is by far the most experienced and has recruited young, Western-trained talent. China National Petroleum Corp. (CNPC ), the largest oil and gas producer, has drastically downsized its bloated workforce and injected key exploration and development assets into PetroChina, listed in both New York and Hong Kong. Sinopec, China's biggest refiner, has begun looking offshore for its own crude. "These companies no longer are acting as agents of the state," says Scott C. Roberts, Cambridge Energy Research Associates' China representative. "They have to go abroad and act commercially, and are under pressure to deliver returns quickly." The North Caspian Sea deals illustrate China Inc.'s rising clout. The Kashagan field has estimated recoverable reserves of 13 billion barrels of oil equivalent. CNOOC paid more than Shell and ConocoPhillips did for similar stakes last year. CNOOC figures the premium is justified because productive wells have been dug, reducing risk. "This is a fabulous acquisition," boasts CNOOC Chief Financial Officer Mark Qiu. "This gives us a firm foothold in probably the most prolific oil and gas basin outside the Middle East." The deal also helps amend earlier Chinese fiascos in Kazakhstan. In 1997, Beijing announced with great fanfare a $3.5 billion deal by CNPC to buy a stake in a Kazakh oil company and build a 1,875-mile pipeline to western China. It then learned the fields wouldn't put out enough crude to justify the project's huge expense. CNPC shelved another pipeline that would have carried oil from Kazakhstan to the Persian Gulf, where it would have been loaded onto Chinese tankers. Getting the oil economically from the Caspian to China remains a challenge. But CNOOC hopes to use pipelines already built or planned by international consortiums. CNOOC also suggests it could do a swap, giving its Caspian output to European partners and in return getting oil from their refineries in Asia. Still, China's business practices have a ways to go. Its oil companies continue to have a reputation for negotiating far-reaching pacts and then changing their position. Many analysts also question China's obsession with owning equity stakes in foreign reserves -- rather than saving money by striking long-term procurement contracts with existing players. Even so, it's encouraging that China's oil companies seem increasingly intent on joining the global club rather than remaining an outsider. As it joins the mainstream, China may lose the urge to chase dubious deals.

By Pete Engardio in New York and Dexter Roberts in Beijing, with Catherine Belton in Moscow

Learn Monday 24 March 2003, 12:30 PM

Australia would find itself with severe oil and gas shortages in the next decade if billions of dollars were not invested in exploration, a key industry body said.

The Australian Petroleum Production and Exploration Association (APPEA) said $14.5 billion was needed to discover and develop oil and gas fields in Australia to replace depleting supplies in Bass Strait.

Another $20 billion was needed if Australia wanted to find enough oil and gas to be self-sufficient, said APPEA executive director Barry Jones.

"We have to either make it more attractive to invest, or make it safer to import from overseas," Mr Jones said.

"The Australian government will have to help to do both.

"The idea that somehow we might be able to attract $35 billion of new capital in Australia in the next 12 years to take us from the lowest supply curve to the demand curve is pretty close to impossible, so we are going to have to import.

"To import you have to make it safer, with less political risk."

Mr Jones said increased investment and safe trade links required the government to stop "tinkering" with ethanol and renewable energy issues and focus on ways to improve exploration, tax and foreign policy.

The government needed to simplify the exploration approval process, cutting down on environmental and native title bureaucracy, he said.

It had to realise the tax regime was not set in stone and make changes to ensure exploration, development and production of Australian reserves were competitive with areas such as the Gulf of Mexico and the Caribbean.

And it had to review its foreign policy, to secure increased trade with the Middle East.

Mr Jones said capital in the oil and gas industry would be spread thin in the years ahead as oil companies injected money into clearing up trouble spots such as Venezuela and Iraq after the war.

While Australia was 40 per cent self sufficient in oil, it imported 40 per cent of its supply from Asia and 20 per cent from the Middle East.

More attention would have to be paid to the Middle East region if Australia wanted to ensure long-term secure supply, Mr Jones said.

"Our foreign policy needs to take into account our long-term liquid energy needs," he said.