Petroleum : February , 2013 :
INFORMATION AND UPDATES
Alaya Legal introduces its Petroleum: Information and Updates, with a view to present in a systematic, organized and comprehensive manner, the developments in the petroleum or crude oil segment across the globe and the Republic of India, which is intended to serve as a canvas for understanding various legal developments in this segment. Various countries across the globe have been grouped into the following three categories depending on the quantum of petroleum reserves present in such countries. High Concentration of Crude Oil Reserves Medium Concentration of Crude Oil Reserve Low Concentration of Crude Oil Reserves In this issue we have covered only those countries which fall under ‘High Concentration of Crude Oil Reserves’.
The map represents the global
scenario of the proven Oil Reserves. According to the Map, reserves in the world have been divided into the following three categories: ▪ High Concentration (110 bn
bbl- 267 bn bbl)
▪ Medium Concentration (30
bn bbl- 110 bn bbl)
▪ Low Concentration (0 bn bbl-
30bn bbl) According to the UN Classification of the World, Canada, Venezuela, Russia, Saudi Arabia, Iraq, Iran and Qatar have High Concentration of Oil Reserves.
Canada. Canada, endowed with rich and varied natural resources is one of the world’s five largest energy producers and is the principal source of U.S. energy imports. It produced an estimated 18.2 quadrillion British thermal units (Btu) of primary energy in 2009, relative to 13.0 quadrillion Btu of primary energy consumed.
Venezuela. Venezuela’s oil revenues account for roughly 94 per cent of export earnings, more than 50 per cent of federal budget revenues, and around 30 per cent of gross domestic product. Oil represents the bulk of total energy consumption in Venezuela. Hydroelectricity and natural gas each account for over 20 percent, while coal accounts for the remainder of energy use. Over the last decade the share of oil consumption in the country’s total energy mix has risen from 36 percent to 47 percent, largely because the Venezuelan government subsidizes liquid fuels. However, Venezuela’s petroleum exports have dropped by almost 50 percent,
since peaking at 3.06 million bbl/d in 1997.
Russia. Russia was the second-largest producer of total petroleum liquids in 2011, second only to Saudi Arabia. During the year, production averaged more than 10 million bbl/d. Russia’s proven oil reserves were 60 billion barrels as of January 2012. In 2011 Russia produced an estimated 10.2 million bbl/d of total liquids (of which 9.8 million bbl/d was crude oil), and consumed roughly 3.1 million bbl/d. Russia exported around 7 million bbl/d in 2011 including roughly 4.9 million bbl/d of crude oil and the remainder in products. Around 16 percent of Russia’s oil exports go to Asia, while 6 percent are exported to North and South America.
Saudi Arabia. Saudi Arabia is the world’s largest producer and exporter of total petroleum liquids in, and the world’s second largest crude oil producer behind Russia. Saudi Arabia’s economy remains heavily dependent on crude oil. Oil export revenues have accounted for 80-90 percent of total Saudi revenues and above 40 percent of the country’s gross
domestic product (GDP). Saudi Arabia has been shifting its focus beyond increasing its upstream oil production since Saudi Aramco said that it had reached its target production capacity of 12 million barrels per day. In addition, its spare oil production capacity is well above Saudi Arabia’s stated target of 1.5-2 million barrels per day.
Iraq. Iraq was the world’s 12th largest oil producer in 2009, and has the world’s fourth largest proven petroleum reserves after Saudi Arabia, Canada, and Iran. Just a fraction of Iraq’s known fields are in development, and Iraq may be one of the few places left where vast reserves, proven and unknown, have barely been exploited.
Qatar. Qatar is a member of the Organization of Petroleum Exporting Countries (OPEC) and is a significant oil producer. Qatar has 25.4 billion barrels of proven oil reserves. Qatar was the sixteenth largest crude oil exporter in the world in 2009, and of the 12 OPEC members, ranked eleventh in crude oil exports.
Iran, a member of OPEC, ranks amongst the world’s top four holders of both proven oil and natural gas reserves. However, falling production and increases in domestic consumption continue to squeeze the volumes of oil available for export in recent years. Iran has an estimated 137 billion barrels of proven oil reserves, 9.3 percent of the world’s total reserves and over 12 percent of OPEC reserves.
Canada is in the hunt for entrance to Asia
Canada is trying to expand its oil pipelines to reach Asian Countries i.e. India, China and the Middle East. Canada possesses the world’s third largest oil reserves. Ninety eight percent of Canada’s Oil exports and hundred percent of Canada’s natural gas exports is exported to U.S. Canada had decided to construct the Keystone XL pipeline which would carry 830,000 barrels of oil per day from Alberta to the US Gulf Coast but the project was denied by the concerned authority. Two new pipelines connecting the oil sands to the Pacific coast for eventual shipping to Asia are under assessment. Another proposed pipeline, Enbridge’s Northern Gateway pipeline has been criticized from the environmental activists, officials and the people from British Columbia region. The another step towards expansion is conversion of an underutilized natural gas pipeline and reversing the flow of another existing oil pipeline to carry from western Canada to refineries in eastern Quebec and New Brunswick provinces. The country would ship oil through Arctic ports such as Churchill and Manitoba if all above proposals disappoint.
Venezuela Oil Imports from US Increase
According to a report by the U.S Energy Information Administration (EIA), Venezuela imported 196,000 barrels of crude oil per day in September 2012, more than nine times of 20,000 barrels in the previous year. Venezuela has one of the largest oil reserves in the world and also imported 68,000 barrels of finished motor gasoline from the US said the report. Venezuela is doing so because of a series of stoppages at its refineries. Petroleos de Venezuela SA (PDVSA), the state oil company, has been operating its Amuay refinery, the country’s largest, at reduced capacity since August 25, 2012 when the gas explosion that killed more than 40 people occurred. PDVSA is producing 400,000 barrels per day after the explosion while its full capacity is about 645,000 barrels per day.
Russia Running Out of Cheap Oil
A study by Thane Gustafson (a professor of government at Georgetown University) reveals that Russia’ s Oil production could be reduced during the period 2015 to 2020. The Western Siberia, which produces most of Russia’s Oil, peaked in 2007. The study states that “Russia is not running out of oil but cheap oil.” A decline in oil revenues could lead to a disaster resulting in restraint of major spending programs such as pensions and subsidies. The decline could also result into a power struggle between interest groups over shrinking oil rents.
Saudi Arabia Exports to Asia to Rise
According to Hongkong and Shanghai Banking Corporation’s (HSBC) latest country Trade Forecast Report, Asia will be the growing export market for UAE, Saudi Arabia and Egypt until 2030. A shift in import market is also expected from North America and Europe to China, India, Vietnam, Malaysia and Turkey. Rise in Saudi Arabia’s export trade by 45 percent in 2011 and by an estimated 8 percent in 2012 has attracted world’s major economic powers, China and the US, followed by India. The report stated that the Asian Exports (excluding Japan) will grow rapidly with an estimated figure of almost 9 percent a year during 2021-2030. Imports from India, China, Vietnam and Malaysia will also increase in subsequent years. The fastest growth in exports is predicted from Asia (excluding Japan), with an estimated figure of 11 percent on average during 2021-30. The high world energy prices are also a
contributory factor in rising of trade performance in the UAE by 30 percent in 2011 and by an estimated 14 percent in 2012. Japan, India, Korea and China are contributing as chief trading partners.
US continues waivers on Iran Oil Exports
US has extended waivers of US Sanctions which was earlier granted to its consumers country which includes China, India, South Korea, Malaysia, Singapore, South Africa, Sri Lanka, Turkey and Taiwan for reducing their imports of Iranian oil. These countries were granted six-month renewable exemptions from the sanctions in June 2012. By virtue of this exemption, banks and other financial institutions based in those places will not be hit with penalties under U.S. law enacted as a way of pressurising Iran to come clean about its nuclear program. The U.S. sanctions target foreign financial institutions that do business with Iran’s central bank by barring them from opening or
maintaining correspondent operations in the United States. It is applicable on foreign central banks only for transactions that involve the sale or purchase of petroleum or petroleum products considering that enough non-Iranian oil is available to countries to make up the difference without disrupting oil markets.
Qatar Petroleum and Total has renewed its Heads of Agreement for twenty five years.
Ministry of Energy and Industry of Qatar and Total’s President, Upstream has renewed Heads of Agreement for further twenty five years on Al Khalij field, offshore Qatar which is located about 130 kilometers east of the Qatari coast. The agreement expires in 2014. An Exploration and Production Sharing Agreement was signed between parties in 1989 and the field was discovered in 1991 and finally the production had commenced in 1997. The operating interest is in proportion of 60:40.
REPUBLIC OF INDIA
India boasts a growing economy, and is increasingly a significant consumer of oil and natural gas. India had approximately 8.935 billion barrels of proven oil reserves as of January 2012, the second-largest amount in the Asia-Pacific region after China. India produced roughly 950 thousand barrels per day (bbl/d) of total liquids in 2010, of which 750 bbl/d was crude oil. The country consumed 3.2 million barrels per day (bbl/d) in 2010.
Reliance India Limited grabbed Egypt Crude Oil
Reliance India Limited (RIL) and British Petroleum (BP) have grabbed the Egyptian Crude oil supply tenders for 2013. RIL and BP will receive around 18 and 15 cargoes respectively in 2013. The companies are going to invest around $ 7.2 billion in India. The Cabinet Committee on Economic Affairs has also verified buying of 30% participating interest in the 21
oil and gas blocks (including KGD6) of RIL by BP.
HPCL has asked Oil Ministry to give allocation of Rajasthan crude oil blocks.
Hindustan Petroleum Corporation Limited (HPCL) has asked the Oil Ministry for allocation of Rajasthan crude oil for at least 10 years for its proposed INR 24,000 crore refineries at Barmer in Rajasthan. HPCL projects an output of 15 million tonne a year refinery. Presently, Cairn produces about 175,000 barrels a day or 8.75 million tonne a year of crude oil from its Mangala and other fields in the Rajasthan block. As per the projection, this allocation to the proposed refinery may lead to transportation of imported crude oil from Gujarat coast in coming years. India to assess Iranian Crude Oil Dependence issue in 2013
India will evaluate its dependence on Iranian crude oil. Crude oil imports from Iran have gradually declined from over 16 per cent in 2008-09 to almost 10 per cent in 2011-12.
Oil Ministry allows RIL to assess Cauvery basin discovery
The Oil Ministry has permitted RIL to look for discovery in the Cauvery basin, which allowed the company along with its partner BP to set up a field development plan and enlarge its deep-water portfolio beyond the D6 block.
New Gas Findings
In December 2012, Petroeleo Brazilio SA (Petrobras), a Brazilian company has announced discovery of oil in Muriu well in Sergipe- Alagaos Basin offshore Brazil and is planning to submit a discovery assessment plan to Brazil’s National Petroleum Agency. In mid of 2012 the Company had made three more discoveries i.e. Moita Bonita, Barra, and Farfan.
In December 2012, Drillsearch Energy Limited in joint venture with Beach Energy Limited announced discovery of multiple oil zones in the Eromanga basin of South Australian permit. The expected accessibility of oil in the well is more than 2 million bbl.
In November 2012, Pemex, a Mexican State Oil Company announced a recent discovery of light crude oil at a depth of 6 kilometers in the “Navegante 1” well in the state of Tabasco in Southern Mexico. The estimated reserves are up to 500 million barrels.
India In August 2012, Oil and natural Gas Corporation Limited (ONGC) announced an oil discovery in the D1 oilfield off the West Coast which is situated about 200 km West of Mumbai city in Deep Continental Shelf. The total oil reserves are more than 1 billion barrels.
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