BP News - 2009
News summaries from
press releases and from unaffiliated news agencies are provided below. The summaries are sorted by month and are further categorized as upstream news, downstream news, and business/finance news.
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• Upstream news:
• Downstream news:
- Alcohol, confectionery and non food sales led the way as BP's UK convenience stores reported a successful Christmas trading period. Like for like sales were up 5% for the three week period across Christmas and New Year for the 250-strong estate of BP Connect and Express stores. The BP Connect sites including the Marks and Spencer Simply Food insert also performed strongly.
• Business/Finance news:
- Lamar McKay has been appointed Chairman and President of BP America, Inc. and will serve as BP's chief representative in the United States. He will succeed Robert A. (Bob) Malone who has elected to retire after 34 years with the company. Mr. McKay, a member of the BP p.l.c. Executive Management Team, has led the company's Special Projects Team since early 2008. In that capacity, he played a major role in establishing a new governance model for TNK-BP, BP's Russian joint venture. Prior to that assignment, he served as executive vice president and chief operating officer for BP America and brings deep knowledge of BP's US operations to his new position. Mr. McKay joined Amoco Production Company as a petroleum engineer in 1980 and later served in a variety of operating and commercial roles. During his career he has led upstream production businesses in the Arkoma Basin, the Gulf of Mexico and the North Sea. After working on the BP-Amoco merger, he led BP's worldwide exploration and production strategy efforts followed by a posting as chief of staff for the company's global exploration and production business. Prior to his first assignment with BP America, he served as group vice president for Russia and Kazakhstan. Mr. McKay holds a Bachelor of Science degree in petroleum engineering from Mississippi State University. He and his wife Nancy will be based in Houston, where BP business units are involved in oil and gas exploration and production, refining, chemicals, supply and trading, pipeline operations, shipping, and alternative energy. Houston is home to nearly 7,000 BP employees.
- BP announced that the deal agreed in principle last September to revise the shareholder agreement with its Russian partners in TNK-BP has now been finalized, paving the way for the next phase in the development of Russia's third largest oil and gas company and, in recent years, one of its most successful. The revised agreement is aimed at improving the balance of interests between the company's 50:50 owners, BP and Alfa Access-Renova (AAR), and focusing the business more explicitly on value growth.
- BP announced that the shareholders in TNK-BP have agreed to appoint three independent directors, including former chancellor of the Federal Republic of Germany, Gerhard Schroeder, to the restructured main board of TNK-BP. His fellow independents will be James Leng, the chairman designate of Rio Tinto, and Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs. BP and Alfa-Access Renova (AAR) have agreed to appoint the three directors to avoid the risk of deadlock between the 50:50 owners of the joint venture, which are represented on the 11-strong board by four directors from each side.
- About 24,000 unionized refinery and pipeline workers across the United States are prepared to walk off the job if negotiations with major oil companies don't result in a new contract. A strike by members of the United Steelworkers union would affect more than half of the nation's refining capacity. Strike jitters helped drive wholesale gasoline prices up by more than 4 cents a gallon Thursday on the New York Mercantile Exchange. A nasty labor dispute is likely to spook oil markets and sock consumers at the pump, where the average national price of $1.843 a gallon tracked by AAA's Daily Fuel Gauge Report is already up more than 20 cents over the last month.
However, the union is in a much weaker position than it was just six months ago, when crude prices were riding high and major oil companies were posting record earnings. Now the economy is slumping. So are refining profits. And the U.S. is swimming in gasoline, thanks to weak demand. Union representatives and company officials expressed hope that a new deal or contract extension could be reached before the deadline. USW spokeswoman Lynn Baker said the biggest sticking points were healthcare and health and safety issues. The USW represents about 30,000 petroleum industry workers in refineries, petrochemical plants, oil terminals, fields and pipelines. The expiring three-year contract covers 26,000 of them -- employees of dozens of companies. Some of the best-known companies include Chevron Corp, BP America Inc., Shell Oil Co., ConocoPhillips and Valero Energy Corp. Shell is the lead negotiator on a national agreement that will serve as a pattern for the others. Carson-based USW Local 675 has more than 2,500 members working at refineries and other oil facilities around Southern California. The union has organized the two Golden State refineries owned by Chevron of San Ramon, Calif. Located in El Segundo and Richmond, these facilities have a combined capacity of more than 500,000 barrels a day. But only the Richmond facility would be affected by any labor impasse resulting from the current contract talks. Unionized El Segundo workers are covered by a different contract that doesn't expire until mid-March. Chevron spokesman Sean Comey said talks were progressing well enough that the firm "is looking forward to being able to reach a mutually acceptable agreement with our employees." He would not elaborate on the firm's strike preparations but said the refinery would not be shut by a labor stoppage. BP said Thursday that it would shut its Carson refinery and three other U.S. plants if workers strike. Oil analyst Phil Flynn said the employers appeared to have the upper hand. Refining profits have plunged along with the U.S. economy -- a startling turnaround from last year, when crude oil and gasoline set price records. Dave Campbell, secretary-treasurer of USW Local 675, said the oil giants who made huge profits last year "are now poor-mouthing us" in contract talks. "These oil companies are big, major companies," he said, "with lots of wealth that could be shared."
• Upstream news:
• Downstream news:
- BP and Verenium Corporation (NASDAQ: VRNM) announced the formation of a 50-50 joint venture to develop and commercialize cellulosic ethanol from non-food feedstocks. The joint venture company will act as the commercial entity for the deployment of cellulosic ethanol technology being developed and proven under the first phase of the BP-Verenium partnership, announced last August. Together the companies have agreed to commit $45 million in funding and assets to the joint venture company. This collaboration is intended to progress the development of one of the nation's first commercial-scale cellulosic ethanol facilities, located in Highlands County, Florida and to create future opportunities for leveraging cellulosic ethanol technologies.
• Business/Finance news:
- BP announced record full-year replacement cost profits of $25.6 billion for 2008, a jump of 39 per cent compared with 2007. Dividends per share paid for the year were up by 30 per cent in dollars and 40 per cent in sterling. Overall distributions to shareholders in 2008 were $13.3 billion, including $3 billion of share buybacks. Total investment for the year totalled $30.7 billion, including acquisitions and asset exchanges. Replacement cost profit for the fourth quarter was $2.6 billion, down 24 per cent on the corresponding quarter of 2007. BP chief executive Tony Hayward said the depressed fourth quarter result mainly reflected the recent dramatic fall in the world price of crude oil. There was also a net adverse effect of $900 million from items not expected to recur in future quarters. These items, which arose from the unprecedented volatility of oil prices and exchange rates during the fourth quarter, included a TNK-BP loss of $700 million arising from excise duty lags and impairments, foreign exchange losses in the downstream business, and a one-off increase in the tax rate for the quarter.
- BP's fourth-quarter replacement cost profit was $2,587 million, compared with $3,395 million a year ago, a decrease of 24% due largely to the significantly lower oil prices. For the full year, replacement cost profit was $25,593 million compared with $18,370 million a year ago, up 39%. Non-operating items and fair value accounting effects for the fourth quarter had a net $18 million unfavourable impact compared to a net $1,132 million unfavourable impact for the fourth quarter of 2007. For the full years of 2008 and 2007, the respective amounts were $650 million unfavourable and $571 million unfavourable - see further details on page 3. The most significant non-operating items for the fourth quarter were, on a pre-tax basis, fair value gains on embedded derivatives, which amounted to $1,562 million, and a net charge of $1,460 million for impairments and gains and losses on the sale of businesses and fixed assets. Net cash provided by operating activities for the quarter and year was $5.6 billion and $38.1 billion compared with $4.3 billion and $24.7 billion respectively a year ago.
- The British energy giant BP became the latest oil company to report a fourth-quarter loss and warned that demand would probably continue to drop as the global recession deepened. BP, Europe’s second-biggest oil company behind Royal Dutch Shell, had a loss of $3.3 billion, or 18 cents a share — its first quarterly deficit in seven years. BP had a profit of $4.4 billion, or 23 cents a share, in the period a year earlier. The chief executive, Anthony B. Hayward, warned that record earnings might not return for some time. Oil giants like Shell, ConocoPhillips and Total reported declining revenue or losses in the fourth quarter as the price of oil dropped to the lowest level in four years. BP said an oil price of about $60 a barrel was “appropriate” because it would allow the company to invest in projects to guarantee supplies once demand recovers. Oil was trading at about $40 a barrel. BP also cited adverse exchange rates, booking a $700 million loss at its Russian joint venture TNK-BP, which is still without a chief executive after an earlier dispute between BP and its Russian billionaire partners. BP shares fell 2.22 percent in London on Tuesday and are down 13 percent in the last 12 months. Shares in other oil companies also declined in the last year as the global recession continued to weigh on oil prices. Shell posted its first quarterly loss in 10 years last week while Total of France reported a 25 percent drop in revenue. BP said it would pay a dividend of 14 cents for the quarter, 3.7 percent more than a year ago. Mr. Hayward said he planned to continue with the cost-cutting program he started when he took over almost two years ago and to improve earnings by adding production, a difficult task given the high costs of new projects.
- The board of BP p.l.c. announced that it has appointed Robert Dudley as a director with effect from April 6, 2009. As a managing director of the BP Group he will assume responsibility for broad oversight of the company's activities in the Americas and Asia. Mr. Dudley was most recently president and chief executive officer of TNK-BP, Russia's third largest oil and gas company. Prior to taking up the post in 2003, he had worked extensively in commercial, operating and corporate roles across the international oil and gas industry for BP and, previously, Amoco.
• Upstream news:
- BP last year added 1.7 billion barrels of new oil and gas to its reserves base, a replacement ratio of 121 per cent, excluding acquisitions and divestments - the 15th successive year in which it has reported the replenishment of reserves by more than annual output. The company said that it expected to be able to grow production through to 2013 from existing projects. With year-end 2008 reserves of 18.2 billion barrels and a resource base of 43.4 billion barrels, this growth could be maintained until 2020 without any further discoveries. At a total of 61.6 billion barrels of oil equivalent, BP's combined reserves and non-proved resources were sufficient for 43 years of production at the same rates as last year. Previewing BP's annual strategy presentation by the executive management team to the financial community in London, chief executive Tony Hayward said the turnaround the company had achieved in the last 18 months gave it strong financial and operational momentum to face what will be a tough year in 2009.
- Sonangol, Sociedade Nacional de Combustíveis de Angola and BP Exploration (Angola) Limited announced the Leda oil discovery in ultra-deepwater Block 31, offshore Angola. This is the seventeenth discovery made by BP in Block 31 and is located in the central northern portion of Block 31, some 415 kilometres north west of Luanda and about 12 kilometres to the south-west of the Marte field. Leda was drilled in a water depth of 2070 metres and reached a total depth of 5907 metres below sea level. This is the fifth discovery in Block 31 where the exploration well has been drilled through salt to access the oil bearing sandstone reservoir beneath. The well was tested at a rate of 5,040 barrels of oil a day (b/d) through a 36/64ths inch choke.
• Downstream news:
- Focus on sales growth through lower cost supplies and manufacturing will lead to plant closures in Spain and phase out of module assembly activity at Frederick, Maryland, USA. BP Solar announced plans to refocus its manufacturing activities in order to reduce unit costs and improve its competitiveness. It will achieve this through access to lower cost supplies, and by continuing to grow only its most competitive manufacturing worldwide. As a result, module assembly will be phased out at its Frederick, Maryland, facility, and its cell manufacture and module assembly facilities in Madrid, Spain, will close. Silicon casting, wafering, sizing and solar cell production will continue at Frederick. The phase out of module assembly at Frederick will result in the elimination of approximately 140 jobs out of about 600. In Spain the losses will be approximately 480 positions out of 575, of which around 280 are at the Tres Cantos site and around 200 at San Sebastian de Los Reyes.
• Business/Finance news:
- Amid allegations of conflict of interest, the five members of the California Energy Commission voted unanimously to tell lawmakers there was no benefit to fixing service station pumps to end an inequity that may be costing Californians millions of dollars a year. The commission's report on the so-called hot-fuel phenomenon concludes that the "societal" cost of forcing all gas stations to upgrade their pumps outweighs the benefits to drivers of compensating for fuel expansion as temperatures rise. Consumer advocates and attorneys argue that motorists are being shortchanged every time they buy gas or diesel that's hotter than 60 degrees and expands in volume when purchased. They want pumps to be equipped with automatic temperature controls that would provide buyers with the same amount of fuel whether the gasoline or diesel in the underground tank is hot or cold. Activists also charge that the vote was tainted because the lead commissioner on the case, James Boyd, is married to an executive vice president of the Western States Petroleum Assn., an oil industry group in Sacramento. Santa Monica-based Consumer Watchdog says documents it recently obtained under the California Public Records Act suggest that Boyd used his influence to manipulate findings in a staff draft report so they might favor some oil companies. Three prominent Western States members -- Chevron Corp., BP America Inc. and Valero Energy Corp. -- operate stations, but the overwhelming bulk of retail gasoline sales are made by convenience stores or independent owners. A spokesman for Western States declined to comment on the hot-fuel issue or the vote. "The conflict is plain," said Judy Dugan, research director for Consumer Watchdog. The group is asking the Legislature and the office of Gov. Arnold Schwarzenegger to look into the circumstances surrounding the vote. Boyd and his fellow commissioners rejected the accusations. Boyd, who has been on the commission for seven years and spent 15 years as chief executive of the California Air Resources Board, "has been a dogged advocate of reducing our use of oil in the state of California," said commission Chairwoman Linda Douglas, a leading California environmentalist. Additionally, an energy commission lawyer cited a letter from the state ethics monitor, the Fair Political Practices Commission, concluding that Boyd didn't have a conflict and didn't need to recuse himself from voting on the hot-fuel report. The commission's study is the first comprehensive look at the hot-fuel controversy in the country. Currently, only Hawaii requires service stations to install automatic temperature compensation devices on pumps, while Canadian retailers voluntarily use the equipment to make sure they don't provide extra energy to customers when the fuel contracts in the 90% of the country that has long and frigid winters. Allowing purchasers to get a temperature-adjusted gallon of fuel could bring them a financial windfall, at least in theory, commission staff reported. The extra gasoline and diesel could be worth an estimated $437 million a year, Project Manager Gordon Schremp said. But motorists are unlikely to pocket the money because nearly all retailers would be expected to protect their profit by raising prices, he cautioned. Others dispute that contention.
Nevertheless, installing the temperature compensation devices could create a small benefit to motorists, about $258,000 a year, by creating more price transparency that would allow consumers to better compare prices among competing retailers, Schremp said. That would be more than offset by up to $127 million to upgrade pumps as well as continuing maintenance costs. "The cost-benefit analysis concludes that the results are negative or a net cost to society under all the options examined," Schremp's report said. Consumers might pay less than a quarter of a cent more per gallon if the costs of the pump retrofits are passed through by retailers. Any action to require new pumps would fall to the Legislature and Schwarzenegger.
• Upstream news:
• Downstream news:
- BP Wind Energy and Dominion announced full commercial operation of phase one of the Fowler Ridge Wind Farm in Benton County, Indiana. The first 400 megawatts of the project will generate enough carbon-free electricity to power about 120,000 homes. Of the 400 megawatt facility, BP and Dominion are partners on approximately 300 megawatts. The two companies could expand the facility to a total of 750 megawatts in the future. Construction of phase one of the wind farm 90 miles northwest of Indianapolis began in early 2008. Built by RMT, Inc., phase one utilizes 182 Vestas 1.65-megawatt turbines with a hub height of 262 feet and a rotor diameter of 269 feet, and 40 Clipper 2.5-megawatt turbines with a hub height of approximately 262 feet and a rotor diameter of 314 feet.
- BP Solar confirmed that it has been selected to provide photovoltaic solar power systems for Wal-Mart stores in California. This agreement builds on an established relationship between the major retailer and BP Solar. Under a power purchase agreement (PPA) negotiated for the projects, BP will finance, install and maintain the systems and Wal-Mart will have immediate access to clean electricity with no up front capital cost to the retailer. BP said it will initially focus on building 10 to 20 rooftop systems at Wal-Mart locations in California, and would work with the retailer to evaluate the potential for additional projects. BP expects to complete the first set of projects, totalling up to 10 megawatts of installed solar power, within about 18 months.
- Amscreen, Sir Alan Sugar's new digital signage company, has been appointed by BP's UK retail business as its exclusive digital signage partner following an extensive procurement process for the contract. The selection of Amscreen for the five year contract follows comprehensive trials in BP forecourts over the last two years, incorporating both technical and consumer research testing. Initially, Amscreen's close proximity-signage units will be installed in BP's 335 company-owned sites from spring 2009, with the concept being offered to BP's 800 dealer partners towards the end of the year. The screens will carry customer information such as live traffic updates, which proved a huge success during the customer trials, as well as advertising for BP products and services. In addition, the network will carry messages from national and regional advertisers eager to reach the 7 million motorists who use BP forecourts in the UK each week.
• Business/Finance news:
- BP p.l.c. said it had been informed by Sir Tom McKillop that he wishes to retire as a non-executive director. Accordingly, he will not go forward for election at the company’s annual general meeting.
- A webcast presentation discussed BP’s first quarter results. The webcast was hosted by Byron Grote, Chief Financial Officer, and Fergus MacLeod, Head of Investor Relations.
- The year the oil companies seriously began exploring the icy waters off the Arctic National Wildlife Refuge -- where Nuiqsut whalers have hunted for as long as men have wandered on dark waters -- the villagers lost two bowhead. The big whales had veered 30 miles from their usual migration path, and the men had no choice but to follow them through ice and mounting swells in their 20-foot boats. Hunters usually can kill the creatures with a fair amount of efficiency after they are harpooned. But this time was different. The bowhead, longtime whaling captain Eli Nukapigak said, were "spooked." One of the whales flipped and dove, with the harpoon line twisted around the propeller, dragging the boat toward the sea floor. The crew managed to leap to safety. Another boat had been towing the second whale back to camp when it was overcome in the fierce seas. The hunters had to cut the whale loose. "That kind of disaster we don't want to see again," Nukapigak -- dressed in a parka on a recent 10-below-zero spring morning -- said of the 1985 hunt. For the captain and others in this Inupiat Eskimo village on Alaska's North Slope, that may depend on whether the oil industry is allowed to open more of the iceberg-strewn Arctic waters to drilling. A federal appeals court this month put the brakes on a plan to lease more than 78 million acres of the Beaufort, Chukchi and Bering seas to oil and gas developers, ordering a full environmental review before the program can proceed. But that could be little more than a speed bump in the rush to commercialize the Arctic, which global warming (and the resulting shrinking sea ice) has made accessible as never before. Though the conservation community has fought successfully over the last decade to protect the Arctic National Wildlife Refuge, the remaining pristine areas of the North Slope have been going fast. In September, the Bureau of Land Management put 1.5 million acres of the National Petroleum Reserve-Alaska, with its shimmering lakes and verdant tundra, up for lease to developers. Now the battle is moving offshore. The coast around Prudhoe Bay is already dotted with drilling operations such as British Petroleum's Liberty project, which, when completed, will have the world's longest diagonal wells -- reaching eight miles out from facilities near shore. In contrast, the proposed Chukchi Sea leases would start 25 miles offshore and reach 200 miles out. Obama administration officials have said they will weigh the nation's energy needs against the desire to protect crucial resources. But with active North Slope fields reaching the end of their production life, the allure of an estimated 27 billion barrels of oil and 132 trillion cubic feet of natural gas off Alaska's shores is strong. Gov. Sarah Palin has warned that without new drilling, the 800-mile-long trans-Alaska oil pipeline could be forced to shut down in as little as 10 years -- crippling America's hopes for energy independence, not to mention her state. "The Alaska offshore is home to some of the most prolific, undeveloped hydrocarbon basins in the world -- reserves that would not only fuel Alaska's economy for decades to come, but oil and gas reserves that would also provide the nation with much-needed energy security," said Pete Slaiby, general manager of Shell Exploration Alaska. The company, which had been planning the first major offshore lease development in the Beaufort Sea before it was blocked, argued its case to Interior Secretary Ken Salazar during a recent hearing in Anchorage. The Interior Department is evaluating not only the 2007-12 offshore drilling plan struck down by the court, but also an even more ambitious program rolled out in the waning hours of the Bush administration to expand leases in the Arctic Ocean, from the 74.5 million acres now being offered to 127.5 million by 2015. Conservationists worry that a major oil spill could knock down the region's delicate house of cards: The ice pack in 2007 was at its lowest level since satellite monitoring began in 1979, putting tremendous stress on animals such as walruses, seals and polar bears that depend on the ice to hunt, rest and avoid the oil industrial zones onshore. More than 500 spills of varying sizes occur on the North Slope each year, on average. The federal government recently estimated there was a 40% chance of a large crude spill from development in the Chukchi Sea. And though spills in open water are notoriously hard to clean up -- Prince William Sound still has oil on some of its beaches from the 1989 Exxon Valdez disaster -- one occurring amid tight chunks of broken ice would present even more problems. "It is beyond the pale of stupidity that, in the face of everything that's happening in the Arctic, that we would launch a drilling program," said Jim Ayers, a vice president of the marine conservation group Oceana. The Minerals Management Service, which oversees federal leases on the Outer Continental Shelf, has spent $300 million on environmental studies in the Beaufort and Chuckchi seas, officials said. And the chances of a serious spill are low, said regional director John Goll. "We are absolutely not talking about an Exxon Valdez," he said. "For us, a major spill is 1,000 barrels or more. When folks talk about 50% of [drilling operations] are going to have a spill, remember that anything that puts a sheen in the water is considered a spill. I always say, look back at the record. And it's a pretty strong record right now." Goll also said that the government had moved to lessen the effects of offshore drilling on the bowhead whale hunt by removing some areas from leasing and limiting oil operations during certain times of the year. In its opinion, the Washington, D.C., appellate court found that the government had failed to thoroughly weigh the environmental impact of offshore Arctic leasing, and it sent the Minerals Management Service back to the drawing board. The panel also found merit in claims that native Eskimos have a right to seek protection of animals that have been an economic and cultural resource for a millennium. Endangered bowhead whales -- of which Eskimos may kill a varying quota of usually up to 40 a year -- form one of the backbones of native culture and diet. The hunts, elders say, teach young people a skill that encourages respect and keeps them from fleeing the barren villages that dot the Arctic coast. There are about 10,500 bowheads, which can grow up to 60 feet long, plying the waters off Alaska's coast. A 2007 survey found nearly half that population living inside the proposed drilling area. "It would only be a matter of time before something like Exxon Valdez would occur in our subsistence area," said Thomas Napageak Jr., 25, a whaling captain and Nuiqsut's vice mayor. Some here also worry that the caribou that once could be hunted just outside the village now most often stay miles away. And some of them seem sick. "This past summer, I saw a caribou that had a tumor on its right hind quarter, and it was the size of a baseball," Napageak said. "A couple months ago, I got one that had green pus on its neck and shoulders." Even so, Nuiqsut -- like other villages across the North Slope -- has been lured by oil's promise of jobs and stock dividends. A ConocoPhillips development seven miles away, on the edge of the National Petroleum Reserve-Alaska, has been a godsend for this village of run-down prefab houses, roaring snowmobiles and old whaling boats near the Colville River Delta. While other Native Alaskans were struggling last year with soaring fuel prices and had trouble affording food, about 170 Nuiqsut families collected dividends of nearly $30,000 each from the native Kuukpik Corp., which owns land on which the project was built. Nearly everyone in the village of 400 also collected $1,523 last month from Arctic Slope Regional Corp., which represents Native Alaskans across the North Slope. (That is on top of the $2,069 Permanent Fund dividend check distributed to all Alaskans last year as their share of the state's invested oil wealth. The government also sweetened the deal with a $1,200 bonus to help compensate for high fuel prices.) In exchange for the village's blessing to expand its Alpine project, ConocoPhillips has promised to build a road connecting Nuiqsut to the oil site and nearby hunting grounds. The company also is extending a natural gas pipeline to Nuiqsut -- one of the few villages in Alaska that will have gas heat -- and is paying $250,000 in compensation for any impacts to hunting and fishing. "We recognized that development is occurring and that there are benefits to be had," Kuukpik Chief Executive Lanston Chinn said. "The reality was . . . if oil and gas development is going to proceed, what do we want out of it?"
- These are the 10 largest claims pending for the California Underground Storage Tank Cleanup Fund by big corporations: Union Oil Co.: $262.9 million; BP: $190.9 million; Equilon Enterprises (Shell and Texaco Partnership): $175.1 million; Chevron Corp.: $156.4 million; Exxon Mobil Corp.: $48.5 million; 7-Eleven: $36.6 million; ConocoPhillips: $31.3 million; Ultramar: $20.8 million; Circle K: $13 million; Yosemite Concessions: $8.1 million
• Upstream news:
- BP announced it has begun production from the Dorado and King South projects in the Gulf of Mexico. Both projects are subsea tiebacks to the existing BP Marlin Tension Leg Platform (TLP) infrastructure. Dorado comprises three new subsea wells located about two miles from the Marlin TLP and are operated by BP with a 75 percent working Interest. Shell has a 25 percent working interest. King South comprises a single subsea well located about 18 miles from the Marlin TLP and is 100 percent owned and operated by BP. Both projects leverage existing subsea and topsides infrastructure and the latest subsea and drilling technology to enable the efficient development of the Dorado and King South fields. Dorado utilizes dual completion technology enabling production from five Miocene zones and King South is produced through the existing King subsea pump.
- BP has announced that the Egyptian Natural Gas Holding Company (EGAS) has awarded the company two blocks in the 2008 International bid round on the Egyptian Offshore Nile Delta. Block 2 - North Tineh Offshore is in a deepwater offshore area of the Nile Delta. The North Tineh block is located about 60 kilometres north of Port Said City and covers an area of approximately 2400 square kilometres in water reaching a depth of 1000 metres. BP is committed to drilling three exploration wells over two phases totalling six years. BP will operate North Tineh block with 100 per cent working interest. Block 3 - North Damietta Offshore, which is adjacent to Block 2, covers an area of around 1600 square kilometres and carries a commitment of drilling four exploration wells over six years. BP will operate North Damietta Offshore block with Shell and Petronas with one third working interest each.
- Sociedade Nacional de Combustíveis de Angola (Sonangol) and BP Exploration (Angola) Limited announced the 'Oberon' oil discovery in ultra-deepwater Block 31, offshore Angola. This is the eighteenth discovery made by BP in Block 31 and is located in the southern portion of Block 31 about 335 kilometres northwest of Luanda and 4.3 kilometres to the north-east of the Dione discovery. Oberon-1 was drilled in a water depth of 1624 metres and reached a total depth of 3622 metres TVD below sea level. The well test results confirmed the capacity of the reservoir to flow in excess of 5000 barrels/day under production conditions.
• Downstream news:
- BP Solar and SolarEdge announced a joint agreement to explore commercialization of a PV module-integrated power harvesting system embedded directly into BP Solar modules. The combined solution will maximize energy generation throughout the life of the solar power system while dramatically reducing complexities and costs. Standard power system architectures and designs may lead to losses of up to 20 percent or more per solar field in some installations due to module and array mismatch and partial shading. Some system architectures also lack full monitoring, have suboptimal roof utilization and generally are weak in fire and maintenance safety, and ineffective in module theft prevention measures. To achieve optimal energy yield while reducing these installation and maintenance challenges and costs, BP Solar is working to integrate SolarEdge’s and other active electronics directly into their modules. The combined technologies are currently undergoing rigorous thermal cycle testing to emulate 25 years of volatile solar field conditions.
- RGE Energy AG is partnering with BP Solar in planning one of the world's largest solar projects. The large-scale PV installation with over 46 megawatt peak (MWp) will be built in Koethen, Saxony-Anhalt. Around 210,000 crystalline photovoltaic modules with an output of 220 watt peak each will be supplied by BP Solar and installed by RGE Energy AG.
- Reyad Fezzani, CEO of BP Solar, and Elias Issa, CEO of RGE Energy AG, announced the news in Munich at 'Intersolar', the world's largest solar exhibition. The project launch is planned for the third quarter of 2009, the approval procedure is being processed currently, and by the end of the year, all BP Solar modules are set to be installed. The planned solar system will deliver around 43,000 megawatt hours per year of green electricity. This is enough to yearly supply about 11,500 four-people-households with electricity and to save around 25,600 tons of CO2 emissions. The project in Koethen is part of a cooperation agreement between the two companies that covers the installation of solar projects totalling 66 megawatts (MW) output. In addition to Koethen, other projects planned include a 15 MW solar system at Eberswalde airport and an option for another 15 MW. Due to the high quality project development standards that RGE Energy AG has demonstrated, BP Solar is offering a guarantee on yield for the solar modules it supplies. Until now this has been reserved for turn-key projects developed by BP Solar. If the system does not deliver the overall energy yields guaranteed by BP Solar, BP Solar will cover the difference on the basis of the currently valid feed-in tariff.
• Business/Finance news:
- BP and the Alfa-Access-Renova (AAR) consortium announced that they have agreed a succession plan to appoint a new independent chief executive officer (CEO) of TNK-BP by the end of the year. The TNK-BP board of directors unanimously supported the appointment of two experienced executives to senior positions in TNK-BP. Each has the credentials to become the new CEO. The first is Pavel Skitovich, formerly a member of the executive board of Russian private investment firm, Interros and former general director of Polyus Gold Mining Group. The second, Maxim Barsky, will join TNK-BP from West Siberia Resources where until 2008 he served as a managing director and is currently a board member. At the request of BP, and to observe the requirement of the revised shareholder agreement signed in January that the CEO be a Russian speaker with extensive Russian business experience, Mikhail Fridman, Chairman of the TNK-BP Board of Directors has agreed to serve as the interim CEO and executive chairman of the board during this period. Tim Summers, who has been acting CEO since January, will resume his role as chief operating officer (COO) responsible for the day-to-day operations of the company. Both sets of shareholders acknowledged TNK-BP's strong performance in the six months Tim Summers has been interim CEO.
- Unable to agree on a chief executive, shareholders in TNK-BP appointed one of the Russian co-owners as interim chief, The New York Times’s Andrew E. Kramer reported from Moscow. The company, a joint venture of BP, the British oil company, and a group of four Russian billionaires, are in the midst of an internal dispute over governance issues and dividend payments. While the two sides say they have resolved their differences, agreement on a chief executive has proved elusive. Instead, BP and the Russian billionaires have appointed two new executives and suggested in a joint statement that both men would be groomed for the top job. A decision on who will get the post will be deferred until the end of the year. In the meantime, Mikhail M. Fridman, the principal partner in the Alfa Group and one of BP’s antagonists in the dispute that extended through much of 2008, will hold the job. BP nominated Pavel Skitovich, a former director of the Polyus Gold Mining Group, to become chief executive. But instead Mr. Skitovich has been appointed to a subordinate position and is a candidate for the post of permanent chief executive. The board also appointed Maxim Barsky, a former managing director of West Siberia Resources, a smaller Russian oil company, to a management role that could lead to the chief executive’s post. Until a decision is made, the statement said, Mr. Fridman will serve as executive chairman and acting chief executive. Maintaining control over the company is critical for BP, as the venture, created in 2003, accounts for about a quarter of its total oil output. Yet the Russian shareholders, with apparent backing from the Russian government, extracted concessions from BP that diluted its governance of the company. The dispute came at the peak of oil prices and after a series of de facto nationalizations of oil assets in Russia, including half of a Royal Dutch Shell project on Sakhalin Island. One condition of the truce that ended the dispute was that the chief executive would be an independent director, not representing either side.
- The oil company BP said that it had nominated Pavel Skitovich for the post of chief executive at TNK-BP in a move that it hoped would bring an end to a shareholder conflict at the Russian oil producer. Mr. Skitovich, a former Soviet vice consul in Uganda, served as chief executive of the gold mining company Polyus for five months in 2007 and had worked for the Interros group of a Russian billionaire investor, Vladimir Potanin. BP and the four Russia-connected billionaires who share control of TNK-BP were involved in a dispute last year that spooked foreign investors and led to the departure of many expatriate staff, including the former chief executive, Robert Dudley. Both sides now say they have resolved their differences, but a permanent chief executive has yet to be appointed.
• Upstream news:
- BP announced that it has agreed the sale of its wholly-owned subsidiary, BP West Java Limited (BPWJ), to Indonesian state-owned oil and gas company PT Pertamina (Persero). BPWJ holds a 46 per cent interest in and is the operator of the Offshore North West Java production sharing contract (ONWJ PSC) in Indonesia. Pertamina will purchase 100 per cent of BPWJ from BP for a consideration of US$280 million, subject to final adjustments prior to closing. The two companies anticipate completing the transaction by 30 June, 2009 and Pertamina will take over operatorship of the ONWJ assets. In addition, BP and Pertamina have agreed to co-operate on developing coalbed methane in Indonesia.
• Downstream news:
- BP has agreed to sell its ground fuels marketing business in Greece to Hellenic Petroleum for €359m ($500m) subject to various adjustments at closing. The deal is subject to certain conditions, including regulatory approvals, and is expected to be completed towards the end of the year with the sale of BP Hellas shares. The sale covers the 1200 BP branded sites in the country, and the distribution network of fuel deliveries to the sites and wholesale customers. BP will still have a significant presence in Greece as the automotive, industrial and marine lubricants businesses, BP Solar and Air BP will continue to operate as part of the BP Group.
• Business/Finance news:
- Docked in Long Beach with a fresh load of oil from Valdez, the Alaskan Navigator sat silently, with a few thin cables draping down to some gray metal boxes. Missing was the incessant rumble of diesel engines, which on an average cargo ship would be running constantly to keep electrical systems going, burning quite a bit of diesel fuel and generating a significant amount of pollution. But the 941-foot Navigator, anchored at the BP Oil Terminal’s Pier T on the Long Beach port’s main channel, isn’t average. The vessel, owned by Alaska Tanker Co. of Portland, Ore., was plugged into what is billed as the world’s first shore-side electrical grid. Only the Navigator’s sister ship, the Frontier, is similarly equipped. Oil tankers are special fuel guzzlers and air polluters because of the power needed to pump vast amounts of crude out of a ship. It’s the rough energy equivalent of a day’s worth of driving by 187,000 cars, according to the Port of Long Beach. At a ceremony formally unveiling the port’s new dockside power system, port Executive Director Dick Steinke described it as “another giant step” toward cleaning up the air. Long Beach Mayor Bob Foster, who also attended the event, called it “part of an ongoing and continuous effort to make our port the cleanest in the world.” The system required 1 million pounds of steel and concrete, including a series of steel pylons weighing 145,000 pounds each that had to be moved into position without disrupting the normal flow of cargo to and from the port, said Roger Brown, regional vice president for BP. The project cost $23.7 million to build and took three years to complete, port officials said. About $17.5 million came from the port and the rest from BP. Brown said that the emissions reductions amounted to 50% even when factoring in pollution created by the power plants that generate the electricity. By 2014, California will require that each of the Port of Long Beach’s seven cargo container terminals be equipped with shore-side power systems. Liquid bulk terminals such as BP’s aren’t part of the state mandate, but port officials said that they planned to electrify them anyway.
- In a climate of unprecedented turbulence, global energy markets followed the same extreme pattern as the world economy in general during 2008. Prices first rose to record highs as economic growth boomed in the first half of the year. Then they collapsed as the global economy abruptly reversed and plunged into recession in the wake of the financial crisis. But the year was also remarkable for another reason - less dramatic but, arguably, just as profound in its implications for the long term. For the first time ever, according to the 2009 BP Statistical Review of World Energy, the developing world led by China leapfrogged OECD nations in the consumption of primary energy.
- BP announced that it has appointed Carl-Henric Svanberg, currently chief executive officer of the Swedish telecommunications company, Ericsson, to replace Peter Sutherland as chairman of BP. Mr Svanberg, who is also chairman of Sony Ericsson and a non-executive director of Melker Schörling AB, will join the BP board as chairman-designate and a non-executive director on September 1, 2009. He will step down at year-end after a seven-year tenure as Ericsson chief executive and Sony Ericsson chairman and succeed Mr Sutherland as chairman of BP on January 1, 2010. He will be based in London and devote the majority of his time to BP business.
- As the world’s second-largest and fastest-growing consumer of oil, China is showing increasing interest in oil fields in a country that has until very recently seemed to be firmly in the American sphere of influence for natural resources: Iraq. Chinese oil companies are expected to bid for the rights to develop Iraq’s oil fields in auctions that are set to start Tuesday, although Sinopec, the China National Petroleum Corporation and the China National Offshore Oil Corporation all declined to comment Monday about their bidding strategies, The New York Times’s Keith Bradsher reported. In another sign of China’s interest in Iraqi oil fields, Sinopec, China’s refining giant, offered $7.22 billion to buy Addax Petroleum, a Swiss-Canadian company with operations in the Kurdistan region of Iraq and in West Africa. If Addax’s shareholders and Canadian regulators approve the deal, which Addax’s board is recommending, it would be China’s largest overseas energy acquisition. And Sinopec’s archrival, the China National Petroleum Corporation, or C.N.P.C., started drilling in spring in the Ahdab oil field in southeastern Iraq. After six years of war, few Americans or Iraqis may have expected China to emerge as one of the winners in Iraqi oil. But signs of stability in Iraq this year, and a planned American military pullout from Iraqi cities, just happen to coincide with an aggressive Chinese push to buy or develop overseas oil fields. China’s leaders were surprised by the steep rise in commodity prices early last year, which exposed the vulnerability of their country’s huge manufacturing sector to high raw material prices. When oil prices plunged in autumn, China began buying, importing and storing oil in huge quantities, helping to drive a partial rebound in world oil prices in spring. And China stepped up its hunt to acquire foreign oil. Chinese officials, economists and advisers have been almost unanimous in recent weeks in saying that their country needed to invest more in natural resources, while also voicing concerns about the long-term creditworthiness of the United States and the buying power of the dollar. China has $2 trillion in foreign exchange reserves, mostly invested in dollar-denominated bonds, and has been looking for ways to diversify gradually into other assets like commodities, said a Chinese government adviser who spoke on the condition of anonymity because of the secrecy of Chinese reserve policies. China’s central bank, the People’s Bank of China, called Friday for the development of an international currency other than the dollar that would be a safe repository of value, in the latest sign of China’s search for other ways to invest its international reserves. Philip Andrews-Speed, a specialist in China’s oil industry at the University of Dundee in Scotland, told The Times that Iraq was clearly attractive for China and its oil industry. Chinese oil companies have been particularly interested in buying oil fields ever since crude oil prices plunged late last summer, because that dragged down the cost of oil fields as well, Mr. Andrews-Speed wrote. And with their experience in some of the most turbulent countries in Africa, Chinese oil companies may have the ability to cope with the unpredictability of Iraq. Driving China’s interest is the country’s voracious thirst for oil. As recently as the early 1990s, China was a net exporter of oil because of production mainly from aging oil fields in the northeastern corner of the country. But China’s oil consumption has soared since then, thanks to an economic boom and climbing car sales that have produced traffic jams in big cities. China surpassed the United States this year as the world’s largest car market, partly because China has weathered the global economic downturn better than the United States; China’s oil consumption reached 8 million barrels per day last year, up from 4.9 million in 2001, according to a statistical review from BP, the British oil company. Oil production has grown much more slowly, as older oil fields have run dry. New fields, either offshore or in western China, have barely replaced them. China produced 3.8 million barrels per day of oil last year, up from 3.3 million barrels per day in 2001, which still left the country dependent on imports for more than half its oil. Iraq has the world’s third-largest proven reserves, after Saudi Arabia and Iran. Many geologists say that the true oil resources of Iraq are even greater than official statistics suggest, because Iraq’s oil industry has suffered from decades of disruption and underinvestment. Many oil fields have not been fully explored as a result. Addax has oil licenses in two oil fields in northern Iraq, the Taqtaq and Sangaw North fields, both near Kirkuk, and its drilling has repeatedly struck large quantities of oil in the Taqtaq field.
- In a surprising about-face, Exxon Mobil said that it would work with a Canadian pipeline operator, TransCanada, to build an ambitious natural gas pipeline from Alaska, the latest twist in long and protracted efforts to bring Alaska’s vast gas supplies to the United States mainland. The participation of Exxon, which holds the largest natural gas reserves on Alaska’s North Slope, lends credibility to a plan by TransCanada that last year won Alaska’s competition to build a 1,700-mile pipeline. It also deals a blow to a rival project from BP and ConocoPhillips and introduces more uncertainty into one of Alaska’s biggest political and economic debates. The competition to build a gas pipeline was set up by Gov. Sarah Palin, who had been critical of the slow pace at which oil companies, including Exxon, were moving. Financial details of Exxon’s participation were sketchy, but TransCanada said it would retain the majority interest in the project. Both companies essentially invited BP and Conoco to abandon their rival effort, saying they would be welcome to join the TransCanada plan. Rumors of Exxon’s entry to the project had been swirling for several days in Alaska. With production from the Prudhoe Bay oil field declining, Alaskans have been hoping for years that natural gas would take over as the state’s financial mainstay. Alaska’s estimated 35 trillion cubic feet of gas reserves are now being reinjected into oil fields or left in the ground because there is no way to get the fuel to consumers. With Exxon and TransCanada on one side, and BP and Conoco on the other, there are two contenders for what would be the biggest civil engineering project in North America, and one of the most challenging. It would dwarf the 800-mile trans-Alaska oil pipeline, a momentous project that was completed in 1977. BP and Conoco said their joint pipeline project, called Denali, was going forward. But both said they would be open to alternative plans. TransCanada has estimated that the project would cost $30 billion. It would stretch roughly 1,700 miles from the North Slope of Alaska through Yukon and northeastern British Columbia to the Alberta border near Boundary Lake. From there, it would connect to Alberta’s existing gas infrastructure, which is linked to the United States. The pipe would have a daily capacity of six billion cubic feet of natural gas, or about 10 percent of current domestic consumption. It would begin operations in 2018. Building an Alaska gas pipeline has been sought for decades as a crucial element of the nation’s energy security. But new drilling methods in places like Texas and Oklahoma have unlocked substantially more domestic gas reserves in recent years than most experts ever anticipated. Instead of a facing a potential gas shortage, the nation is looking at the possibility of a surplus. When Governor Palin took office in late 2006, she interrupted the negotiations that her predecessor, Frank H. Murkowski, had been pursuing with the North Slope oil operators, BP, Conoco and Exxon Mobil, to build a pipeline. After saying the talks were too secretive and not competitive, the governor sought to bring in new operators to secure better terms for Alaska. Late last year, Alaska picked TransCanada as its preferred operator after a competition that was shunned by the major companies, including Exxon. Tony Palmer, vice president of Alaska development for TransCanada, said the project would make economic sense as worldwide gas supplies tighten and prices rise, and he welcomed Exxon’s decision to participate.
- George W. Bush fought global warming policy all the way to the Supreme Court. And he lost. Despite this judicial rebuke, he opposed climate-change legislation to the end. Now, with President Obama, White House views on global warming finally are in line with scientific data. But this doesn't mean that politics can't still trump science. Congressional response to the climate crisis has taken shape in the Waxman-Markey American Clean Energy and Security Act. The bill has a lot to like. It sets efficiency standards, encourages alternative energy and establishes emissions ceilings on vehicles, industries and power companies by 2020. However, key provisions of Waxman-Markey resemble earlier European efforts, and Europe's experience raises serious questions about the ability of this legislation to adequately cut emissions or fund green solutions. The Waxman-Markey bill proposes a market-based "carbon trading" plan that mirrors a European system initiated in 2005. This plan requires polluters to obtain government-issued "carbon credits," which then allow them to pollute above the agreed-on limit. Think of these pollution credits like a golf handicap. You'd like to shoot 72 on 18 holes, but you rack up 108 on your score card. So just as the hapless golfer would use his handicap to cover the 36-stroke deficit, polluters would use pollution credits to cover their extra emissions. What if a polluter doesn't have 36 credits? Then it must buy them on the open market or pay a penalty. The penalties are expensive, and so the polluter is motivated to find either a solution or more credits. In theory, money generated by this "carbon market" will jump-start investment in clean technology. In a recent conference call to climate activists, Rep. Henry Waxman (D- Beverly Hills) stated that his bill's carbon-trading plan "is based on work by the USCAP." USCAP, or the United States Climate Action Partnership, is a coalition of environmental groups, including the Natural Resources Defense Council, the Nature Conservancy and a couple dozen A-list corporations, including General Electric; Duke Energy; oil companies Shell, ConocoPhillips and BP America; chemical companies DuPont and Dow; as well as numerous utilities. USCAP's carbon-trading plan, which became part of the Waxman-Markey plan, shares key details of the European system -- most importantly, it gives 85% of the pollution credits to the biggest polluters for free. The European experience shows the critical weakness of this plan. In Europe, the distribution of free pollution credits to industries failed to establish a strong carbon market. In turn, the weak market in carbon credits failed to generate the money needed to fund new technology. And because there was a glut of free credits, polluters that went over the emissions limit could buy the necessary credits cheaply. So important states, such as Britain, continue to exceed the pollution limits. Faced with disappointing results, Europe began auctioning off more of the credits in 2006. But the damage was done. The arrival of the recession caused the "carbon price" to plummet further. Critics point at companies that cut back their production 20% -- and therefore pollute 20% less because of the recession -- and now sell their unused pollution credits to prop up their bottom line. Money that was supposed to be generated from pollution credits to fund clean technology goes elsewhere. The complex European trading scheme, started with free pollution credits, has not produced dramatic cuts in pollution or dramatic developments in technology or a robust market in carbon credits. The Financial Times of London was blunt: "Carbon markets leave much room for unverifiable manipulation. [Carbon] taxes are better, partly because they are less vulnerable to such improprieties." Unfortunately, global warming and its solutions are complicated, but we have very little time for mistakes. A recent scientific report from the Intergovernmental Panel on Climate Change warns that a 2-degree Celsius warming of our atmosphere has a 90% chance of undoing the conditions on Earth that allowed and supported the development of human civilization. Scientists from Oxford University, using this report, calculate that we can avoid this potentially catastrophic 2-degree warming if we limit our emissions between 2000 and 2050 to 1 trillion metric tons of carbon. They note that we've already burned 25% of that limit since 2000. In response to criticism of the Waxman-Markey bill, the NRDC's Dan Lashof told National Public Radio's Warren Olney: "This is the best bill that can actually get through committee." Other supporters of the bill frequently cite Bismarck's line: "Politics is the art of the possible." But which "possible" do they see? The 2007 corporate gauge of the best possible deal? Or the 2009 update of broad populist sentiment that favors coherent action over special interests? Controlling pollution will require incentives. But does that mean giving away 85% of the credits for free, possibly setting up yet another questionable Wall Street "market"? We need this bill to pass, but in a strengthened form: Put the emissions cap in line with the trillion-ton limit, cut back the freebies to fund innovation and green jobs and protect poor families from utility rate spikes. In the face of clear scientific warnings, we have broad popular support for climate legislation. Don't let Congress waste this crisis on a historic miscalculation of what is possible.
• Upstream news:
- BP and SOCAR (the State Oil Company of the Republic of Azerbaijan) announced they have signed a memorandum of understanding (MOU) to jointly explore and develop the Shafag and Asiman structures in the Azerbaijan sector of the Caspian Sea. As part of the government's plan to ensure that all of Azerbaijan's offshore waters are fully exploited this MOU gives BP the exclusive right to negotiate a production sharing agreement to explore and develop the block, which lies some 125 kilometres (78 miles) to the south east of Baku. The MOU was signed in London, in the presence of HE Ilham Aliyev, President of the Republic of Azerbaijan, and UK Prime Minister Gordon Brown, by Rovnag Abdullayev, President of SOCAR, and Andy Inglis, BP's Chief Executive of Exploration and Production.
- BP announced the drilling of a successful appraisal well in a previously untested southern segment of the Mad Dog field. The 826-5 well is located on Gulf of Mexico Green Canyon block 826 approximately 100 miles (160 kilometers) south of Grand Isle, LA., in about 5,100 feet (1,554 meters) of water. The well encountered about 280 net feet (85 meters) of hydrocarbons in the objective Miocene hydrocarbon-bearing sands and discovered an oil column of more than 2,200 feet (670 meters). The results from this well continue the successful phased development of the Mad Dog field and build upon the success from 2008 where the A-7 well in the western part of the field encountered a hydrocarbon column of more than 2,500-feet (762 meters), and 275 feet of net pay (84 meters).
• Downstream news:
- BP, as operator on behalf of the Tangguh project partners, announced that the first cargo of liquefied natural gas (LNG) has been lifted from the Tangguh LNG project in Papua Barat, Indonesia. The departure of the first cargo marks the start-up of the Tangguh project, just over four years after its final sanction by the Government of Indonesia in March 2005. The first cargo, on board the Tangguh Foja, is bound for POSCO’s LNG regasification terminal in Gwangyang in South Korea.
- BP Wind Energy announced that it has moved into full construction of a second phase of the Fowler Ridge Wind Farm in Benton County, Indiana. Phase two of the project will have a capacity of 200 megawatts (MW) and is expected to be online in the first quarter of 2010. When complete, the second phase of the wind farm will generate enough carbon-free electricity to power approximately 60,000 average American homes. Located some 90 miles northwest of Indianapolis, the Fowler Ridge II Wind Farm will utilize 133 GE SLE wind turbine generators, each with a rated capacity of 1.5 MW. The balance of plant contract for the 17,000-acre site has been awarded to Mortenson Construction of Minneapolis. The project is expected to employ some 400 people on-site during peak construction.
- BP and Irving Oil announced they will not be moving forward at this time with the proposed second refinery in Saint John, New Brunswick, as a result of global economic and industry conditions. The joint technical and commercial feasibility study that the two companies have been conducting over the last 18 months concluded that the project was not viable at a time of global economic recession and dampening forecasts for petroleum product demand in North America.
• Business/Finance news:
- The Iraqi government stumbled once again in its frequently delayed effort to award development rights to its most valuable oil fields. In a public auction it largely failed to attract the lucrative offers it sought from dozens of international oil companies invited to the bidding. After the daylong event, which was broadcast live on national television, the government came away with just a single deal struck from among the six giant oil fields and two gas fields it had put up for bid. The single successful contract went to a joint venture of BP and the China National Petroleum Corporation for the largest field offered: Rumaila, near the southern city of Basra, which has proven reserves of more than 17 billion barrels. The auction, celebrated by the Iraqi government as a milestone for the fledgling democracy, came on the same day as the deadline for American combat troops to pull out of Iraqi cities. It is the most significant attempt to open up the country’s oil industry since it was nationalized by Saddam Hussein in 1972, and the centerpiece of a plan to raise oil production to 6 million barrels a day by 2015, from the current level of 2.4 million. Instead of garnering an infusion of foreign cash to rebuild and to prop up its limping economy, however, the auction of fields that contain about 80 percent of Iraq’s oil output appeared to further polarize the country. Four of the eight oil and gas fields offered received only a single bid from oil corporations, and an undeveloped gas field in violence-plagued Diyala Province in northwest Iraq received none. But observers said the event could be deemed a success only if viewed strictly in populist political terms, because foreign presence in Iraq’s oil industry is a contentious issue. Many believe the 2003 American-led invasion was carried out to wrest away Iraq’s enormous oil reserves, the third largest in the world after Saudi Arabia’s and Iran’s. Ruba Husari, editor of the Iraq Oil Forum Web site, which covers the country’s oil industry, said what remained unresolved was how Iraq was to modernize its oil industry without giving in to the desires of oil companies, which prefer owning a share of the oil they pump. Iraq has so far rejected such arrangements, which are known as production sharing agreements. Iraq has an estimated 9 percent of the world’s crude oil, but its pipelines and other infrastructure are aging. Many of its most productive fields, laced with water because of mismanagement, are no longer able to produce as much oil as they once did. The country lacks the money to rebuild the industry, which accounts for almost all of its foreign earnings. The auction, held in a heavily secured ballroom at the Rashid Hotel in Baghdad’s Green Zone, was reminiscent of a professional sports draft lottery. Bids were placed inside a large plastic box that had been set up on a stage. The oil companies were given 20 minutes to mull over each oil and gas field, with the time shown counting down on a giant video screen. The sight of executives walking onstage to drop sealed bids in the plastic box brought cheers of delight from Oil Ministry employees in the audience. The executives themselves, representing Exxon Mobil, Lukoil, Japex, Royal Dutch Shell, Total and the Korea Gas Corporation, among others, then stood aside as their offers were displayed on a screen before the bids were compared to those of rival companies seeking the same contract. The Oil Ministry said it chose to conduct its business on television and in front of an audience of reporters and others to combat allegations of widespread corruption in the ministry, which led it to cancel a group of no-bid oil contracts last year. Major oil companies had little interest in the terms of those contracts, either. Because the financial risk of a 20-year investment in Iraq was considered to be too great for even the largest oil corporations, the companies for the most part formed joint ventures. Throughout the day, clusters of men in dark suits spoke to each other in their common language: broken English, with Dutch, Chinese, Russian and Thai accents. A member of a Korean delegation wore a flak vest inside the hotel ballroom. The only successful bidders, BP and the China National Petroleum Corporation, will negotiate with the Oil Ministry through the summer to complete a contract to revive the Rumaila oil field. Iraq says only about a million barrels of oil a day are pumped from Rumaila — far less than the 1.75 million barrels the government believes that the field should be producing, and little more than one-third of the 2.85 million barrels that BP and the Chinese company say they can extract. The companies had originally requested a premium of $3.99 for every barrel of oil they produced over an Iraqi government-established baseline, but the government offered only $2. While the companies finally agreed to the government’s price, it was the only time all day that the usually wide gaps between what the government was willing to pay and what the companies said they needed to be paid were bridged.
- Compared to the same period last year, BP’s reported daily production jumped 4 per cent to more than 4 million barrels of oil equivalent in the three months to end-June. Also, the $2 billion reduction in cash costs targeted for 2009 as a whole has already been exceeded and a further $1 billion saving is expected over the remainder of the year, the company said. Announcing second quarter replacement cost profits of $3,140 million – up over 30 per cent on the first quarter, chief executive Tony Hayward said BP was delivering good performance in a very tough environment. Hayward said progress was underpinned by a simplified organization, deepening expertise at the operational level and unrelenting focus on operational safety and integrity. Cash costs had been reduced by more than $2 billion in the first half of the year, versus the same period last year.
- BP, the British oil giant, set the tone for a string of lower second-quarter earnings expected from major energy companies in the coming days because of a drop in oil prices. BP said that profit fell 53 percent to $4.39 billion, or 23.16 cents a share, in the second quarter of this year from $9.36 billion, or 49.23 cents, in the same period last year, when the price of oil was close to a record. Earnings at large oil companies, like BP, are heavily linked to the price of oil, and the recent drop prompted companies to seek ways to increase revenues while lowering costs. BP is the first of the large European oil companies to report earnings for the quarter, and some analysts expect figures being released by Royal Dutch Shell and Total of France to also be lower because of falling oil prices. Exxon Mobil is also set to release figures. Jane Coffey, head of global equities at Royal London Asset Management, said BP was “weathering the storm better than most because it has better production growth and cost control is good.” Tony Hayward, BP’s chief executive, reduced costs mainly by cutting about 5,000 jobs, reducing investments in new products and increasing output to close the gap in profitability with its rivals. Production growth and a smaller exposure to Europe’s natural gas market could mean BP coped better with a decline in prices than rivals Shell and Total, which are more exposed to fluctuations in gas prices, some analysts said. BP’s shares fell 3.1 percent in London. Mr. Hayward said that there was evidence that energy demand was “stabilizing” even though there was “little evidence of any growth.” BP said it expected to reduce costs by $1 billion more than initially planned because it already reached its target for this year of a $2 billion reduction in cash costs. Mr. Hayward also said he expected to increase production this year because of projects in Indonesia and the Gulf of Mexico. BP also recently bought access to new resources in Iraq, Egypt and Azerbaijan. Mr. Hayward said that BP evaluates the profitability of new projects on the basis of an oil price of between $60 and $90 per barrel, although he added that he expected the oil price to be closer to the bottom of that range in the near term. He added that BP would continue to invest in alternative energy but only in projects that would bring financial returns to the company and work well with other more traditional parts of the firm. Aymeric de Villaret, an analyst at Société Générale in Paris, predicted that Exxon Mobil’s underlying profit would shrink about 64 percent from the second quarter a year ago. Shell’s would likely decline by 72 percent, he said. Oil company results in the coming quarters will depend on the state of the global economy. The International Monetary Fund estimates that global output will shrink this year by 1.4 percent, returning to growth in 2010 with a 2.5 percent expansion. For all the talk of “green shoots,” Mr. Jakob noted, the U.S. market remains “well supplied” with inventories near historic highs, suggesting that it could be a long time before demand begins to grow again.
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• Downstream news:
- BP and Martek Biosciences Corporation (Nasdaq: MATK), announced the signing of a Joint Development Agreement (JDA) to work on the production of microbial oils for biofuels applications. The partnership combines a broad technology platform and operational capabilities to advance the development of a step-change technology for the conversion of sugars into biodiesel. Under the terms of the multi-year agreement, Martek and BP will work together to establish proof of concept for large-scale, cost effective microbial biodiesel production through fermentation.
• Business/Finance news:
- Britain rejected any suggestion it had struck a deal with Libya to free the Lockerbie bomber -- questions that arose when Moammar Gadhafi publicly thanked British officials as he embraced the man convicted of killing 270 people in the 1988 airline bombing. Gadhafi praised Prime Minister Gordon Brown and members of the royal family by name for what he described as influencing the decision to let the terminally ill Abdel Basset Ali Megrahi return home to die. Thousands greeted Megrahi at the airport as he arrived in Tripoli after being freed from a Scottish prison. But British officials insisted they did not tell Scottish justice officials what to do -- and in any case, they could not, because the decision was not theirs to make. Britain has walked a fine line on the issue, as the government in London must distance itself from local affairs in Scotland. While outraged at the jubilant reception Megrahi received in Libya, British leaders have refrained from criticizing the decision to free the man convicted in the bombing of Pan Am Flight 103, a decision made in Edinburgh under Scotland's separate judicial system. Scottish Justice Secretary Kenny MacAskill decided to release Megrahi on compassionate grounds because the Libyan has prostate cancer and was given only months to live, when assessed by four doctors. Compassionate leave for dying inmates is a regular feature of Scottish justice. In Washington, FBI Director Robert Mueller blasted MacAskill for allowing the Lockerbie bomber to return home, saying the decision gave comfort to terrorists around the world. President Barack Obama earlier called the decision "highly objectionable." The Scottish government reacted sharply to Mueller's comments. Most of those killed were Americans, and their families have been scathing in their criticism of the Libyan's release. As the cameras rolled in Tripoli, Gadhafi hugged Megrahi in a meeting and Megrahi kissed the Libyan leader's hand. Libyan television showed pictures of Gadhafi singling out Brown, as well as "the Queen of Britain, Elizabeth, and Prince Andrew, who all contributed to encouraging the Scottish government to take this historic and courageous decision, despite the obstacles." A Buckingham Palace spokesman said the release was "entirely a matter for the Scottish government." The official spoke on condition of anonymity in keeping with palace policy. Gadhafi's embrace fueled outrage that has simmered at Megrahi's reception in Libya, where joyful celebrants threw flower petals as the 57-year-old former Libyan intelligence agent stepped down from the jet late. British Foreign Secretary David Miliband on Friday condemned the scenes as "deeply distressing." The constant videos of the Gadhafi hug and the kiss have only added to the woes of Britain's leaders. Mandelson left the hospital today after a prostate operation only to find a scrum of reporters demanding answers about an alleged deal. He insisted that London and Tripoli did not negotiate. To further drive home the point, Brown released the text of a letter he sent to Gadhafi urging that Megrahi's return be treated as "a purely private family occasion." "A high-profile return would cause further unnecessary pain for the families of the Lockerbie victims. It would also undermine Libya's growing international reputation," Brown wrote. While Britain does have oil interests in Libya -- notably a $900 million exploration deal between BP PLC and Libya's National Oil Co. -- they are small compared to investments by Italy's Eni SpA. Even so, Gadhafi's son, Seif al-Islam Gadhafi, said Megrahi's release was a constant point of discussion during trade talks. In comments aired on the Libyan television station he owns, he said those discussions stretched back to former Prime Minister Tony Blair's government. Blair, who resigned in 2007, told CNN that the Libyans did raise the issue of Megrahi but he told them he did not have the power to release the bomber. Mandelson agreed with Blair. In a statement, Gadhafi's son also insisted that Megrahi was innocent. Megrahi was convicted in the bombing of Pan Am Flight 103 over Lockerbie, Scotland. The explosion of a bomb hidden in the cargo hold killed all 259 people on the plane and 11 on the ground in Britain's worst terrorist attack. His trial at a special Scottish court set up in The Netherlands, which came after years of diplomatic maneuvering, was a step toward normalizing relations between the West and Libya, which spent years under U.N. and U.S. sanctions because of the Lockerbie bombing. Although Libya has accepted formal responsibility for the attack over Scotland, many in his homeland see Megrahi as an innocent victim scapegoated by the West. Megrahi has maintained his innocence even as he dropped his appeal so that he could be released from prison. His lawyers have argued the attack was the result of an Iranian-financed Palestinian plot, and a 2007 Scottish judicial review of Megrahi's case found grounds for an appeal of his conviction. During an interview published in the Times of London, Megrahi said he had abandoned the appeal to spend what time he had left with his family. He promised to release what he described as evidence that would exonerate him -- but offered no details. In the interview, Megrahi told the Times of London he understood that the families of many Lockerbie victims were furious, but he appealed for understanding.
- As the energy sector saw a strong recovery from losses, rumors emerged that BP or Royal Dutch Shell was lining up a bid of 3 billion Australian dollars for a coal-seam gas producer, Arrow Energy, The Daily Telegraph reported. Shell was thought to be the most likely bidder because it already has a joint venture with Arrow. In 2008, Shell paid 776 million Australian dollars for a stake in some of Arrow’s coal-seam gas assets. According to the newspaper, British traders said that the Arrow bid talk was coming out of Citigroup and Credit Suisse. Australian brokers from Credit Suisse were said to have been in London this week to push the idea that Arrow could soon be on the receiving end of a bid.
• Upstream news:
- BP announced a giant oil discovery at its Tiber Prospect in the deepwater US Gulf of Mexico. The well, located in Keathley Canyon block 102, approximately 250 miles (400 kilometres) south east of Houston, is in 4,132 feet (1,259 metres) of water. The Tiber well was drilled to a total depth of approximately 35,055 feet (10,685 metres) making it one of the deepest wells ever drilled by the oil and gas industry. The well found oil in multiple Lower Tertiary reservoirs. Appraisal will be required to determine the size and commerciality of the discovery. Tiber is operated by BP (NYSE: BP), with a 62 per cent working interest with co-owners Petrobras (NYSE: PBR/PBRA, 20 per cent) and ConocoPhillips (NYSE: COP, 18 per cent).
- BP announced the discovery of what it characterized as a giant oil field several miles under the Gulf of Mexico, but it may take years to assess how much crude can actually be recovered. The discovery should have no immediate effect on world oil or gasoline prices because it could take three years or more to begin extracting oil. Because the oil is so deep underwater and difficult to extract, the price of oil will need to be above $70 a barrel to make drilling profitable, energy analysts said. Nevertheless, the discovery was another indication that the deep waters of the Gulf of Mexico are probably the most promising area in United States-controlled territory to bolster domestic oil production. The rise in gulf production in recent years, in large part because of BP’s deep-water giant Thunder Horse field, has stabilized domestic production after almost two decades of yearly declines. The discovery, called the Tiber well, is about 250 miles southeast of Houston at a depth of more than 35,000 feet — greater than the height of Mount Everest — and well below the gulf floor. It is part of a new frontier of exploration where oil companies are spending billions of dollars to find oil on the bottom of seas off the shores of Brazil and West Africa and boring through miles of rock, salt and packed sands. The discoveries have been made possible by leaps in development of offshore drilling technology, computers and three-dimensional imaging that can pinpoint where the best reserves lie, and advanced mooring equipment to stabilize platforms in deep waters. BP officials say the oil and gas in the field is extremely hot and under intense pressure, requiring advanced well heads with thick steel and heavy insulation. BP declined to estimate the size of the new reserve, but a company executive said that it could be bigger than the three billion barrels of oil equivalent, combining oil and gas stocks, thought to be in the recently discovered Kaskida field nearby. As the largest oil and gas producer in the gulf, BP produces 400,000 barrels a day. It has reserves of 18 billion barrels of oil equivalent in reserves globally. Energy analysts say recovery rates can range widely, but that at least one billion barrels could be recoverable. Fadel Gheit, a senior oil and gas analyst at Oppenheimer & Company, said the new find means BP is “gaining momentum over the rest of the guys” in the gulf, and would reduce production costs in the adjacent Kaskida field since equipment could be shared in the two fields. He added, “The gulf is where the action is and will remain the oil future for the United States.” BP said the well would be one of the deepest ever drilled by an oil company. The company will operate the well with a 62 percent interest. Petrobras and ConocoPhillips have also invested in the project. The Tiber well, along with the Kaskida discovery in 2006, “support the continuing growth of our deep-water Gulf of Mexico business into the second half of the next decade,” Andy Inglis, BP’s chief executive for exploration and production, said in a statement. The Gulf of Mexico accounts for about a quarter of the nation’s oil production, and that percentage could rise even though many shallow-water wells are tapping out. But the gulf is also a treacherous place to rely on oil because of hurricanes, which have been particularly fierce in recent years. Last year, the hurricanes Gustav and Ike shut down wells, damaged pipelines and forced companies to evacuate workers from production platforms for weeks, for an estimated loss of 63 million barrels of production. Deep-water drilling in the gulf has produced some major challenges and delays. BP’s Thunder Horse platform, the biggest in the gulf, which produces 300,000 barrels a day, was first drilled in 1999 but did not begin to produce for a decade because of a series of engineering problems.
• Downstream news:
- Green Infra Limited has purchased BP's subsidiary, BP Energy India Private Limited (BPEIPL), which owns and operates three wind farms in India with a total generating capacity of approximately 100 megawatts (MW), for a total cash-free, debt-free enterprise value of 4.622 billion Rupees (approximately $95 million), comprising a cash consideration received by BP of 1.779 billion Rupees (approx. $37 million) and net debt assumed by the purchaser of 2.843 billion rupees (approx. $58 million). Green Infra Limited is an independent power producer owned by funds managed by India's leading infrastructure-focused private equity company, IDFC Private Equity. BP already has major business activities in India, with a total of over 1,500 staff in the country, and the group continues to actively explore new opportunities and long-term material growth options for all its Indian businesses. Castrol India is the market-leading supplier of automotive and industrial lubricants in the country; BP is evaluating a coalbed methane project in West Bengal and was awarded operatorship of a deepwater exploration block in the Krishna-Godavari basin off the east coast of India in late 2008; and the Tata BP Solar joint venture is a leading manufacturer and supplier of photovoltaic power systems. Today's sale has no impact on these businesses. Following a strategic review in 2008, BP decided to concentrate its global wind development activities on the portfolio of onshore wind development projects and opportunities that it had built up across the US. Over the past three years, BP has built a wind business in the US with interests in over 1,000MW of installed gross generating capacity and more than 1,000MW gross capacity at an advanced stage of development. In total, BP's US wind energy portfolio contains almost 100 projects, with a total potential generating capacity of up to 20,000MW. BPEIPL's assets comprise three wind farms in India: a 40MW capacity farm at Dhule, Maharashtra, which began operations in the third quarter of 2007; a 36.3MW farm at Bharmasagara and a 23.1MW farm at Telagi, both in Karnataka, commissioned in the fourth quarter of 2008 and the first quarter of 2009, respectively.
• Business/Finance news:
- Amid continued allegations of political deal-making, Scottish officials said that the early release of the only man convicted in the 1988 bombing of a Pan Am jet over Scotland was motivated solely by humanitarian and judicial concerns, not commercial ones. British interests in Libya's large oil and gas reserves were irrelevant to the decision to release Abdel Basset Ali Megrahi, a suspected Libyan spy found guilty in 2001, said Nicola Sturgeon, Scotland's deputy first minister. Megrahi, 57, is in the advanced stages of terminal prostate cancer and was set free Aug. 20 from a Scottish prison on "compassionate grounds" to spend the remainder of his life with his family in his homeland. Libyan officials also rejected suggestions that a contract won by British oil company BP in 2007 to explore for oil in their country influenced the decision to release Megrahi. The release of someone convicted of mass slaughter, followed by footage of his being greeted by crowds of well-wishers upon returning to Libya, has whipped up a storm of protest in the U.S., home to the majority of the passengers on Pan Am Flight 103, and in Britain. The bombing, the deadliest terrorist attack on or over British soil, killed all 259 people on board and 11 on the ground in Lockerbie, Scotland. Libya turned Megrahi over to British authorities in 1999 in exchange for an easing of United Nations sanctions. He was found guilty and sentenced to life imprisonment after a trial that critics say was based on tainted evidence. Megrahi has steadfastly maintained his innocence, and supporters, including some of the victims' families, believe he was wrongly convicted. The decision to release him was made by Scotland's devolved government, which has independence from London in judicial matters. But that has not insulated British Prime Minister Gordon Brown and his Cabinet from scrutiny. Over the weekend, a British newspaper reported that the central government had originally sought to exclude Megrahi from a prisoner-transfer agreement that was under discussion between London and Tripoli as part of their improving relations. In late 2007, London reversed course and dropped the exclusion "in the view of the overwhelming interests for the United Kingdom," said a letter written at the time by Justice Minister Jack Straw, according to the Sunday Times. Shortly after, BP sealed the $24-billion contract to conduct oil and gas exploration in Libya. Straw denied any quid pro quo. In 2003, Libya agreed to allow in nuclear inspectors to dismantle its weapons program, an important milestone in Tripoli's coming in from the diplomatic cold. In any case, Straw noted, Megrahi was not released under the prisoner-transfer agreement but on compassionate grounds.
• Upstream news:
- Sociedade Nacional de Combustíveis de Angola (Sonangol) and BP Exploration (Angola) Limited announced the 'Tebe' oil discovery in ultra-deepwater Block 31, offshore Angola. This is the nineteenth discovery made by BP in Block 31 and is located in the southern portion of Block 31 some 350 kilometres northwest of Luanda and about 12 kilometres to the south east of the Hebe discovery. Tebe was drilled in a water depth of 1752 metres and reached a total depth of 3325 metres below sea level. The well results confirmed the capacity of the reservoir to flow in excess of 5,000 barrels a day under production conditions. Sonangol is the concessionaire of Block 31. BP Exploration (Angola) Limited as operator holds 26.67 per cent. The other interest owners in Block 31 are Esso Exploration and Production Angola (Block 31) Limited (25 per cent), Sonangol P&P (20 per cent), Statoil Angola A.S. (a subsidiary of StatoilHydro ASA) (13.33 per cent), Marathon International Petroleum Angola Block 31 Limited (10 per cent) and TEPA (BLOCK 31) Limited, (a subsidiary of the Total Group) (5 per cent).
- The march of offshore oil development into the Arctic has been given a boost by the federal Minerals Management Service, which approved Shell Offshore Inc.'s plan to drill exploratory wells in the Beaufort Sea off the coast of Alaska. Conservationists have been fighting in the courts to delay further offshore oil development until studies of the Arctic's fragile and interconnected ecosystem can be done. But the minerals agency said it will work with the company to make sure the development can be conducted "in a safe and environmentally responsible manner." The company has agreed to take a mid-season break in its drilling program, scheduled to begin in July 2010, to accommodate the fall hunting season on bowhead whales undertaken by Native Alaskan villagers, who had feared that noisy drilling activities could injure or scare off the whales. The Beaufort Sea contains an estimated 8.22 billion barrels of oil and 27.65 million cubic feet of natural gas. Oil operations on the North Slope at Prudhoe Bay have already begun to move into the near-coastal waters, but Shell's drilling plan would take place in two leases located 16 and 23 miles offshore. The plan calls for an ice-breaking drilling rig as part of a fleet of 14 ships, boats, tankers, barges, tow vessels and specialized ice and water containment equipment. In its official comments on the Minerals Management Service's 2010-15 leasing plan for the entire outer continental shelf, the National Oceanic and Atmospheric Administration in September also urged the agency to "more directly address the challenges of Arctic and subarctic spill response...before proposing further oil and gas development in Alaska." The agency said "no leasing should occur in the Arctic Sea under this proposed plan until additional information is gathered and additional research is conducted and evaluated regarding oil spill risk...and possible human dimension impacts on Alaska Native cultures from oil and gas exploration activities and potential oil spills." The two Shell leases were sold under a previous five-year leasing program for the 2002-07 period. Alaskan officials have long sought to expand both onshore and offshore oil development in the Arctic, and U.S. Sen. Mark Begich (D-Alaska) applauded the agency's approval, saying it will allow the state to help meet the nation's shortfall in domestic energy production.
- BP announced that it is to join Jordan’s state-owned National Petroleum Company (NPC) to exploit the onshore Risha concession in the north east of the country. Subject to government and Parliamentary approval, BP is to farm in to the Risha concession as a partner with NPC. The Risha concession, awarded by the Government to NPC, covers an area of about 7,000 square kilometers and includes the Risha gas field.
- BP Trinidad and Tobago (bpTT) today announced the start of natural gas production from the Savonette field, offshore Trinidad. Savonette is located in 290 feet (88 metres) of water approximately 50 miles off Trinidad's south east coast. BPTT holds a 100 per cent interest in the field. Production from the platform is tied into bpTT's Mahogany B platform, via a 26-inch diameter 5.3 mile subsea pipeline, where the gas is processed and then exported into bpTT's existing infrastructure. Gas from Savonette will supply Atlantic LNG's liquefaction plant for export as LNG to international markets, as well as the domestic market. With Savonette, bpTT now has production from 12 offshore platforms. Production from Savonette is expected to average 600 million standard cubic feet per day of gas, plus associated condensate, from four wells. Savonette production will contribute to maintaining bpTT's total production level at more than 450,000 barrels of oil equivalent a day. The Savonette platform, installed in February 2009, is the fourth in a series of normally unmanned installations designed and constructed locally in Trinidad using a standardized 'clone' concept. The 1,898 tonne jacket and the 871 tonne topsides were built at the Trinidad Offshore Fabricators (TOFCO) yard in La Brea, south Trinidad.
- BP has had talks with Ghana’s national oil company about a possible joint bid for Kosmos Energy’s stake in the huge Jubilee oilfield off the coast of the country, Bloomberg News said, citing two people familiar with the matter. BP has hired Goldman Sachs to advise on the deal, the report said. Exxon Mobil agreed to buy the Jubilee stake from Kosmos in early October, Reuters reported, according to three sources close to the matter. Kosmos is backed by private equity groups Blackstone Group and Warburg Pincus. But state-run Ghana National Petroleum has said the sale is illegal. A company source told Reuters earlier this month that that the firm is interested in buying Kosmos Energy’s stake itself, perhaps selling all or part of that stake later. Moreover, a leading member of Ghana’s ruling party said last week that the government does not approve of the Exxon deal.
• Downstream news:
- BP Products North America Inc. (“BP Products”) formally contested all of the citations, including alleged violations and proposed penalties, abatement actions and abatement dates disclosed to the company by the Region 6 Office of the U.S. Occupational Safety and Health Administration The majority of citations relate to a previously announced disagreement between OSHA and BP as to whether BP is in compliance with a 2005 OSHA Settlement Agreement reached after the March 2005 accident at the Texas City refinery. That matter is presently before the Occupational Health & Safety Review Commission, a body that is independent of OSHA. Today’s filing will expedite the process of referring the contested case to an Administrative Law Judge. From the outset, BP Products has cooperated with OSHA in the agency’s review of the company’s Texas City operations and has considered the process a key input to the refinery’s compliance and safety programs.
- The growth of the biofuels industry in Britain may have the potential to turn the country into a net importer of wheat for the first time in its history, according to the British National Farmers’ Union. The farm lobby estimates that 13.9 million tonnes of wheat (about 14.9 million United States tons) will be produced in 2009 — 3.4 million tonnes lower than 2008, because of decreased yields and lower plantings. Meanwhile, two new biofuel projects are set to consume 2.3 million tonnes of British wheat next year. If these trends continue, the lobby noted, it could bring to an end to Britain’s self sufficiency in wheat. The farming lobby has generally welcomed the news, which should help support grain prices and see improvements in Britain’s farming sector. But not everyone viewed the development as a positive sign. Commenting at his blog, Madsen Pirie, the president of the Adam Smith Institute, Britain’s leading free-market economic and social think tank, said: Of all the insanities committed in the name of green politics, one of the most insane is the production of biofuels from food crops. In pursuit of increased proportion of energy from renewable sources, governments have realized that wind and solar power cannot make sufficiently large contributions. They have therefore turned to biofuels, a move that hugely delights their farming lobbies. One $400 million dollar biofuel plant — set to become largest wheat refinery in Europe — owned by Ensus, a bioethanol company backed by American private equity companies Carlyle Group and Riverstone Holdings — will source 1.2 million tonnes of feed wheat to produce over 400 million litres of bioethanol a year. All the biofuel will be purchased by the Dutch energy giant, Shell. A second $400 million refinery constructed by the energy company BP, the international food and retail group Associated British Foods, and DuPont, the American chemicals company, will require 1.1 million tonnes of wheat to produce 110 million gallons of bioethanol. It is scheduled for completion in 2010. Both refineries are angling to capitalize on British and European Union targets to reduce carbon emissions from road transport though biofuels. And both refineries say they plan to use low-quality wheat sources, which are normally used for animal feed, rather than using the high-grade wheat that normally goes toward making bread.
• Business/Finance news:
- Tony Hayward, the chief executive of the oil giant BP, said at the Oil & Money conference in London that his company’s forecasts suggest that fossil fuels will still satisfy about 80 percent of global energy needs in 2030. Mr. Hayward said that power plants were built to operate for more than 30 years and automobiles for 15 years and that such long “lead times” impeded any changeover to greener technologies. A meeting in Copenhagen in December to negotiate a new global deal to reduce emissions was “just one step on what will be a long journey to a lower carbon world – and that journey will be hard and long.” Mr. Hayward said his industry was focused on finding and bringing new oil and gas supplies onto the market in order to meet energy demand that is expected to rise 45 percent over the next 20 years. But he also called for more efficient engine technologies and for more use of next-generation biofuels, which could become almost 10 percent of global transport fuel by 2030. The potential of biofuels “was more significant than electric cars,” he said. Turning to power generation, Mr. Hayward called for far greater use of natural gas because it was substantially cleaner than coal and readily available. He also warned that the technologies to capture and store emissions from coal-fired electric utilities were costly and still a decade away from large-scale commercialization. Mr. Hayward said he was in favor of cap-and-trade systems that put a price on each ton of emissions with a “very gradual phase-in.” But he also pushed governments to impose additional limits on emissions that would apply to automobile manufacturers and the construction industry.
- BP, the British oil giant, reported third-quarter earnings that beat analyst expectations and said it expects to cut more costs this year than it had initially planned. Profit excluding non-operating items and inventory changes fell 47 percent to $4.67 billion, a smaller drop than some analysts expected. Declining oil and gas prices weighed on earnings in the quarter, but the faster rate of cuts in production costs and growth in output surprised some investors. The shares jumped about 4 percent in London, reaching their highest level in 18 months. Royal Dutch Shell, whose shares also rose, and Exxon Mobil are to report their quarterly earnings. BP said it expects to reduce cash costs for the full year by about $4 billion compared to last year, a bigger cut than the $3 billion previously predicted. Costs for the first nine months of this year are $3 billion lower than the same period a year ago, it said. The chief executive, Tony Hayward, is continuing with a cost-cutting plan to streamline operations because the global downturn has hurt demand. Oil prices remain lower than last year’s record levels, but have started to rise again recently, unlike natural gas prices. Mr. Hayward also increased production, but shrinking refining margins are weighing on earnings. They fell about 57 percent in the third quarter from a year earlier, and BP said they “look set to remain weak.” The refining margin is the difference in value between the products produced by a refinery and the value of the crude oil used to produce them. BP is planning to increase output after expanding its operations in the Gulf of Mexico and announcing a deep “giant oil discovery” at the Tiber Prospect in the area in September, which the company expects to amount to more than three billion barrels. Earlier this month, BP announced another discovery off the coast of Angola. Production for the quarter rose 7 percent to 3.917 million barrels of oil equivalent a day, from 3.664 million barrels last year, when hurricanes had slowed production. Net income fell to $5.34 billion from $8.05 billion in the third quarter of last year and revenue fell 35 percent to $67.9 billion from $104.8 billion. Unit production costs were 18 percent lower than in the same quarter last year. BP reiterated its target for capital expenditure, to be around $20 billion for next year. That compares with investments of $5 billion in the third quarter. Net debt at the end of the quarter was $26.3 billion, down from $27.1 billion three months earlier. BP kept the dividend for the quarter at 14 cents a share.
- The Occupational Safety and Health Administration announced the largest fine in its history, $87 million in penalties against the oil giant BP for failing to correct safety problems identified after a 2005 explosion that killed 15 workers at its Texas City, Tex. refinery. The fine is more than four times the size of any previous OSHA sanction. Federal officials said the penalty was the result of BP’s failure to comply in hundreds of instances with a 2005 agreement to fix safety hazards at the refinery, the nation’s third-largest. According to documents obtained by The New York Times, OSHA issued 271 notifications to BP for failing to correct hazards at the Texas City refinery over the four-year period since the explosion. As a result, OSHA, which is part of the Labor Department, is issuing fines of $56.7 million. In addition, OSHA also identified 439 “willful and egregious” violations of industry-accepted safety controls at the refinery. Those violations will lead to $30.7 million in additional fines. Contacted after federal officials disclosed the OSHA citations to The New York Times, BP said it was disappointed. BP said the penalties related to a previously announced disagreement with OSHA as to whether BP was complying with the 2005 settlement agreement. BP says that since the explosion it has spent more than $1 billion to upgrade production and improve safety at the refinery. A series of investigations attributed the March 23, 2005, explosion to overzealous cost-cutting on safety, undue production pressures, antiquated equipment and fatigued employees — some who worked 12 hours a day for 29 straight days. The explosion was caused by a broken gauge and flammable hydrocarbons that were overflowing from an octane processing tower, which lacked a flare system to burn off volatile vapors. Those escaping vapors were ignited by the backfire of a nearby truck. In addition to killing 15 people, the explosion injured 170 workers and obliterated 13 employee trailers and damaged 13 others, some as far as 300 yards away. The Texas City facility is capable of refining 475,000 barrels of crude a day and is located on a 1,200-acre site some 35 miles southeast of Houston. Labor Secretary Hilda Solis has repeatedly said that “there’s a new sheriff in town,” signaling that she would take a more aggressive approach in enforcing wage and labor laws, after what she said was lax enforcement under President George W. Bush. But one department official said that the record penalties assessed against BP were not an effort to send a signal to industry, but a straightforward move that punished a company with a long record of moving slowly to address safety problems. In the 30 years before the 2005 explosion, there were 23 deaths at the Texas City refinery. One Labor Department official said BP was likely to seek to have the fines reduced by appealing them, first to the Occupational Safety and Health Review Commission and then perhaps in federal court. Federal officials say they expect BP to dispute that the company was required to do all that OSHA said and that it had failed to meet the deadline to remedy problems. Six months after the explosion, BP entered into a settlement with OSHA in which it agreed to pay a $21.3 million fine, then the largest in OSHA history. The previously highest fine was an $11.5 million penalty ordered in 1991 against the Angus Chemical Company and IMC Fertilizer Group, operators of a Louisiana fertilizer plant where an explosion killed eight workers and injured 120. As part of the settlement, BP also promised to commission an independent audit and to take actions to eliminate potential hazards found in the audit, which was conducted by the AcuTech Consulting Group. One Labor Department official voiced dismay that BP had four years to correct the problems identified after the settlement, yet OSHA still found hundreds of violations. BP has already pleaded guilty to federal charges related to the explosion and agreed to pay $50 million, the largest criminal fine ever assessed against a company for Clean Air Act violations. Those violations included failing to maintain the safe startup of processing units and the mechanical integrity of the refinery. Since the explosion, BP has settled more than 4,000 civil claims, paid from a $2.1 billion fund it set aside to resolve claims.
- The oil giant BP said that it would challenge a record $87.4 million fine imposed for what regulators said was the company’s failure to correct problems after a 2005 explosion killed 15 workers at a refinery in Texas City, Tex. BP executives said that they were surprised by the penalty — four times greater than any previous Occupational Safety and Health Administration fine — because the company and agency officials had long seemed to be in agreement about BP’s steps to improve safety at the refinery, the nation’s third largest. The company plans to challenge all 709 “alleged violations and proposed penalties” announced by OSHA, which said BP had seriously failed to eliminate potential hazards similar to those that caused the 2005 explosion. The challenge will be heard by the Occupational Safety and Health Review Commission, an appeal panel with the power to alter the fines. Company executives said BP had spent more than $1 billion since the explosion to modernize the refinery and upgrade its safety features. Officials at OSHA, which is part of the Labor Department, said the 709 violations included a failure to perform a promised study of pressure relief devices, which help prevent a buildup of undue pressure of hydrocarbons, and a failure to meet industry standards for safety instrument systems to shut down hazardous processes automatically. Labor Secretary Hilda L. Solis said that BP had allowed hundreds of potential hazards to continue even though it had signed a settlement in 2005 agreeing to take broad action to protect employees. BP executives argued that they had complied with every obligation and deadline in the 2005 settlement it had reached with OSHA. At the time, BP agreed to pay a fine of $21.3 million, then the largest in OSHA history. The company said that it had completed more than 550 corrective actions related to the agreement and that it was committed to performing work related to other recommendations. The executives voiced surprise that OSHA had, in their view, changed direction and insisted that corrections be finished by Sept. 23. On Oct. 5, a lawyer for BP sent OSHA a letter saying that the company had pursued the action plans “as outlined” in its agreements with OSHA. But OSHA officials said there was across-the-board foot-dragging by BP. They noted that there had been three other fatalities at the plant since the 2005 explosion. BP said correcting the safety hazards was complicated and sometimes took longer than intended. They said the repairs sometimes involved more than 5,000 contractors at the Texas City refinery, who were often difficult to coordinate. John S. Bresland, chairman of the United States Chemical Safety Board, which issued a highly critical report on the explosion in 2007, said, “While these OSHA citations are not yet final, they are of great concern to me because they strongly suggest that BP has yet to achieve an effective safety culture with regard to process safety management.” Mr. Bresland noted that on Jan. 14, 2008, there was another fatal accident at the refinery, and a BP supervisor died when the top of a large steel filter housing blew off.
• Upstream news:
- BP, and China National Petroleum Corporation (CNPC), announced that they have signed a technical service contract with Iraq's state-owned South Oil Company (SOC) to expand production from the Rumaila oilfield, near Basra in southern Iraq. The signing follows BP's successful bid for the contract with CNPC in Baghdad in June. The consortium led by BP (38 per cent) with partners CNPC (37 per cent) and the Iraq government's representative State Oil Marketing Organisation (SOMO - 25 per cent), has agreed to nearly triple the Rumaila field's output to almost 3 million barrels of oil a day (b/d), which would make it the world's second largest producing oilfield. BP and CNPC plan to invest approximately $15 billion in cash over the 20 year lifetime of the contract with the intention of increasing plateau production to 2.85 million b/d in the second half of the next decade. Once production has been raised by 10 per cent from its current level of about 1 million b/d, costs will start to be recovered, and fees of $2 a barrel earned on the incremental oil production.
- The Iraqi government signed a deal with a consortium led by U.S. oil giant Exxon Mobil Corp. to develop a major oil field in southern Iraq, marking the first entry by an American-dominated group into Iraq's oil industry since it was nationalized in 1972. The deal coincides with a flurry of activity this week that suggests major oil companies are finally poised to return to Iraq, more than six years after the U.S.-led military invasion raised firms' hopes of gaining access to some of the world's largest and most underdeveloped oil reserves. This week, a group led by Italy's Eni that includes the U.S. company Occidental Petroleum Corp. initialed a preliminary agreement, and China National Petroleum Corp. and Britain's BP finalized an accord to develop oil fields in the south. The deals are service contracts. That means the consortia will invest money to improve the yields of the fields and receive in return a fixed fee. The agreements came after the oil companies dramatically lowered their fees to match those offered by the Iraqi government at a public auction in June.
- BP confirmed that an appraisal well to test a western extension of the Kaskida field has confirmed oil in Lower Tertiary reservoirs five miles to the west of the Kaskida discovery well. The well, drilled to a total depth of 32,500 feet, is located in Keathley Canyon block 291 in 5,675 feet of water and 250 miles southwest of New Orleans. Appraisal activities will continue with a WATS (wide azimuth towed streamer) seismic acquisition survey in early 2010 and a well test in 2011.
- BP announced that a consortium led by its joint venture VICO - owned jointly by BP and ENI - has signed a production sharing contract (PSC) with the Government of Indonesia for the exploration and development of coalbed methane (CBM) resources on the Sanga-Sanga block in East Kalimantan, Indonesia. VICO has been producing conventional gas resources from the Sanga-Sanga block for over 40 years, and the signature of this PSC is expected to mark the first significant development of CBM in Indonesia. Indonesia has extensive coal reserves which have been estimated to hold up to 450 trillion cubic feet of coalbed methane. As yet there is no commercial CBM production in the country. The PSC covers an area of around 1,700 km2 in the Kutai Basin, East Kalimantan. Preliminary studies on the block suggest it has a CBM resource potential of at least 4 trillion cubic feet of gas – further appraisal will closer define this potential. The PSC overlays the same acreage as the existing Sanga-Sanga conventional PSC, which has extensive gas production infrastructure already in place with access to markets internationally through the Bontang LNG plant as well as to local customers. This existing infrastructure is expected to allow rapid and efficient development of CBM to production.
• Downstream news:
- A cutting-edge technology development centre planned for Hull will help to grow the UK’s economy and enhance its reputation as a world-class centre for innovation and research, Lord Mandelson said during a visit to the region. Energy industry giant BP and sustainable science solutions company DuPont have joined forces to form Kingston Research Ltd, which will focus on the commercialization of advanced biofuel technology, at a £25m purpose-built development and demonstration facility at BP’s Saltend site, near Hull. Working closely with Yorkshire Forward, the Regional Development Agency for Yorkshire and Humber and UK Trade & Investment, this new joint venture emphasises the region’s and the UK’s ability to attract crucial research and development operations. Twenty-seven jobs will be created in the region.
• Business/Finance news:
- BP and AAR announced the appointment of Maxim Barsky as TNK-BP's next CEO. The TNK-BP board of directors unanimously agreed to appoint Maxim Barsky, TNK-BP executive vice president for strategy and business development, as the TNK-BP Group's future CEO, effective 1 January 2011. Until that time, Mikhail Fridman has agreed to continue to act as interim CEO, in addition to his role as executive chairman of the Board of Directors of TNK-BP Limited. To deepen his international and industry knowledge, Maxim Barsky will spend the first five months of 2010 working in various upstream businesses at BP and BP's head office in London. As of 1 June 2010, he will return to TNK-BP in a senior executive role, joining the management team that has recently been strengthened by the appointment of Bill Schrader, former president of BP Azerbaijan, as TNK-BP's chief operating officer.
• Upstream news:
- BP announced that it has divested its interest in Kazakhstan's Tengiz oil field and the Caspian Pipeline Consortium (CPC) pipeline, carrying oil between Kazakhstan and Russia, by selling its 46 per cent stake in LUKARCO to Russia’s LUKOIL. LUKOIL, which already owns 54 per cent of LUKARCO, will pay $1.6 billion in cash in three installments over the next two years. A $43 million BP loan will also be repaid to BP by LUKARCO. LUKARCO owns a 5 per cent share in TengizChevroil (TCO), which produces oil from the Tengiz field, and a 12.5 per cent interest in CPC. The sale has been approved by the Government of the Republic of Kazakhstan, CPC shareholders and TCO partners. The sale to LUKOIL means that BP has no remaining share in CPC or Tengiz. In April 2009 BP sold its 49.9 per cent stake in Kazakhstan Pipeline Ventures (KPV), which held a 1.75 per cent share in CPC, to state-owned KazMunaiGaz for $250 million.
• Downstream news:
- The Baku-Tbilisi-Ceyhan (BTC) oil export pipeline, operated by BP, has started loading the 1000th cargo of oil transported from the Sangachal terminal near Baku across Azerbaijan, Georgia and Turkey to Ceyhan. The 1000th tanker - the British Kestrel, arrived at the Ceyhan Marine Terminal on December 17 and will depart for Rotterdam as soon as the loading is completed. The 1000th tanker, which is being loaded simultaneously with the 999th cargo, will take on board approximately 600,000 barrels of crude oil. The oil transported via BTC to world markets mainly comes from the Azeri-Chirag-Gunashli (ACG) and Shah Deniz fields in the Azerbaijan sector of the Caspian Sea. The next - 1001st tanker, "Baku", is expected to sail during this weekend, carrying crude oil belonging to SOCAR (Azerbaijan's State Oil Company). The total volume of oil exported via BTC to date is about 791 million barrels (about 106 million tonnes). The current export rate via BTC is about 850,000 barrels per day with the highest daily flow-rate to date being 1,006,505 million barrels.
• Business/Finance news:
- A federal jury awarded more than $100 million to 10 workers who claimed they were injured in 2007 when a toxic substance was released at BP’s Texas City plant. The jurors in Galveston, about 50 miles southeast of Houston, gave each contract worker $10 million in punitive damages. Nine of the workers also were awarded $5,000 to $10,000 for pain and suffering and medical expenses, while the 10th got more than $240,000. The verdict came after a day and a half of deliberations after a three-week trial. In a statement, BP denied it had harmed any of the workers. Tony Buzbee, the lawyer for the workers, said his clients were pleased with the jury’s decision, adding he had approached BP before the trial and had offered to settle for $10,000 for each worker. BP rejected the proposal, he said. The refinery, about 30 miles southeast of Houston, was the site of a 2005 explosion that killed 15 people and injured 170 — the worst industrial accident in the United States since 1990. The refinery has a history of fires, chemical releases and worker deaths. The United States Chemical Safety and Hazard Investigation Board, a group that investigated the 2005 blast, found BP fostered bad management at the plant and that cost-cutting moves by BP were factors in the explosion. The jury’s award also comes after the Occupational Safety and Health Administration in October imposed a record $87 million fine against BP for failing to correct safety hazards after the 2005 blast. The lawsuit by the workers claimed that in April 2007, more than 100 contract employees at the plant were sent to hospitals after contending they were exposed to a toxic substance released at the refinery. The workers said their injuries included dizziness and sore throats, with one employee passing out, after inhaling the substance. Mr. Buzbee said the workers did not have any long-term damage to their lungs. During the trial, BP claimed no toxic substance was released at the refinery on the date in question. Mr. Buzbee said he tested one of the worker’s gas masks and it revealed they had been exposed to carbon disulfide, a toxic colorless liquid. The 10 workers are part of a group of 143 that Mr. Buzbee represents in this lawsuit. Mr. Buzbee said he plans on taking the claims of the other workers to trial as well.