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7 oil and gas projects to watch in 2015

Low crude prices and geopolitics have dominated headlines this year, but what will 2015 bring for the oil and gas industry? From East Africa to Myanmar, here are seven developments to watch in the coming year:

 

Another new Russia – China pipeline

In the wake of the $400bn deal Russia signed this May to sell its gas to China through the under-construction Power of Siberia pipeline, a second November agreement between the two countries may have not made quite as many headlines as it should.

The new contract will see Gazprom supply 30 bcm of gas a year to the Chinese state oil company CNPC, and it will involve more major pipeline work in Russia. China will receive its gas through a new 2,600km pipeline network called Altai, named after one of the regions of western Siberia it will run through on its way to China’s northwestern border with Russia.

Plans for the Altai pipeline have been on the table since 2010, but now Gazprom has indicated it will waste no time in getting the pipeline built. The company’s president Alexei Miller recently indicated that it could even be finished before Power of Siberia (which was started this September and is expected to be ready by 2019) – showing that, despite the effect on Russia’s oil industry from sanctions and falling crude prices, pipeline construction is one area where things are definitely looking up.

 

TAPI – getting Turkmen gas to India

Another big project that will meet Asia’s hunger for gas is TAPI – a $10bn, 1,700 km pipeline bringing Turkmen gas to Afghanistan, Pakistan and finally massive net importer India. The four countries involved have set up a company to own and build the pipeline, and ‘potential partners and a leader’ for the project will be chosen when the countries next meet in February 2015.

Getting the pipeline built quickly is a priority for many parties. Turkmenistan wants new customers for its gas to reduce an unhealthy dependence on its main customer Iran (which has previously threatened to stop buying Turkmen gas), India wants a more cost-effective way of meeting its needs than LNG shipments, and the USA sees reliable energy supplies as a key part of ensuring a peaceful and stable future for Afghanistan.

With TAPI so important geopolitically, construction is sure to start sooner rather than later.

 

A new pipeline for Ugandan oil

New oil and gas finds have been coming thick and fast in East Africa this year, but development of infrastructure is not keeping pace – according to the Commissioner for Petroleum at Kenya's Ministry of Energy and Petroleum, Martin Heya, there is a ‘significant mismatch’ between the pace of discovery and the implementation of infrastructure projects.

To help address this, $4bn is being spent on a pipeline to get landlocked Uganda’s 6.5 billion barrels to the coast for export. Toyota Tsusho Engineering Corporation has just been chosen as consultant for the pipeline, which will stretch 1,300 km to the Kenyan coast. As well as a new 60,000 bpd refinery in Uganda currently out for tender, the pipeline means it is not just upstream players that will see contracts from East Africa’s oil and gas boom.

 

New LNG terminals on the Baltic Sea

Russia and Ukraine have finally come to an agreement on unpaid gas bills and the pipeline between the two countries is flowing again, but Europe knows how important it is to diversify supply. The EU, and Ukraine in particular, is thinking long-term by improving energy efficiency to reduce imports as a whole, but shipments of liquefied natural gas (LNG) could offer a more immediate solution.

Central and Eastern Europe have gone down this road with enthusiasm – new LNG terminals were finished this year in Poland and Lithuania, while after months of negotiations Finland and Estonia (both currently 100% reliant on Russia for their gas) have finally agreed to build two interconnected LNG terminals across the Baltic by 2019, at a cost of €500m. With the LNG spot market offering alternatives to total reliance on Russia, and Poland already considering expanding its Swinoujscie facility, could there be more European terminals on the way?

 

Shale gas exploration in Western Ukraine and Poland – a way out of Russian dependence?

Ukraine’s gas woes are well documented, but its position on the eastern edge of Poland’s Lublin shale basin means it could meet some of its demand through its own resources. Italy’s Eni has signed service deals to begin shale gas exploration next year at its holdings in the Lviv and Volyn areas of western Ukraine, after the political situation forced it to delay drilling in the blocks, which it bought operating rights for in 2012.

Meanwhile, Poland will bring in new regulation friendlier to shale drillers in January, after coming in for criticism for scaring away producers with short license periods and strict joint venture terms. If Polish shale production can recover, and if Eni succeeds in its Ukrainian plays, the region’s shale could offer an escape route from Russian dependence.

 

Progress on South Stream at last?

Many of 2014’s energy developments have been in some way connected to Europe reducing imports from Russia. However, EU demand for gas is only going one way, and 2015 could see progress finally made on the $40bn South Stream pipeline, which would bring Russian gas to Austria via Bulgaria, Serbia, Hungary and Slovenia.

The project has been at a standstill due to opposition from the EU related to problems with ownership and competition laws, but Hungary has recently announced plans to start building its section of the pipeline, citing a need to ensure gas supplies and complaining of Croatia’s failure to supply its needs through interconnectors. Russia has also said that construction of the pipeline’s underwater part, running to the north of Turkey, will begin on 15 December this year.

There are still major hurdles for the project to overcome – not least a bilateral agreement on the pipeline between Bulgaria and Russia that the EU is opposing, again because it breaks its competition laws. Italy’s minister of industry Federica Guidi has also been quoted recently as saying South Stream is ‘not a priority’. However, if Hungary succeeds in making actual, physical progress on the pipeline next year, other countries may well follow suit.

UPDATE - South Stream was abruptly cancelled by Gazprom in December 2014 in favour of a new pipeline and an energy partnership with Turkey.

 

More exploration blocks on offer in Myanmar

Although it is one of the world’s oldest oil and gas producers (it exported its first barrel in 1853), Myanmar’s huge oil and gas potential – estimated to be on a par with Brazil’s – is still largely unexplored.

Total, Shell and Chevron are among those to have snapped up the 40 exploration blocks awarded so far, and Myanmar’s government has announced that it expects 15 more blocks to be offered in 2015, starting with nine in the New Year. Offering a combination of massive potential resources and closeness to Asian markets, Myanmar’s oil and gas sector looks set to attract a lot more than the $15bn in foreign investments it has received up to now.


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