Archive for 'December 2010'

    Lula to veto oil royalty law change

    December 27, 2010 4:54 PM by Eric Watkins
    As expected Brazil’s President Luiz Inacio Lula da Silva announced his intention of vetoing a change in the distribution of the country's oil-exploration royalties.

    In a speech in Rio de Janeiro, Lula expressed his agreement with the governors of oil-producing states Sao Paulo, Rio de Janeiro and Espirito Santo to veto the law change.

    The proposed change in the distribution of royalties was part of a broader change proposed by legislators aiming to give all states and municipalities an equal share of revenues.

    Under the current system, which Lula supports in a qualified version, the oil-producing areas receive a greater share of the revenues.

    Lula said he would submit another bill to Brazil’s Congress to ensure a more equitable change in the distribution of oil revenues in the country.

    Under the bill, the oil royalties would be divided among all states in the country, while the oil-producing states would not suffer a loss of income.

    Lula said that the country has enough resources to ensure its oil-producing states do not suffer losses, even as other states get a larger share.

    While Lula has expressed concern over the royalty issue, he has given whole-hearted approval to the remainder of the oil-related legislation recently approved by Congress.

    Congress passed three other measures that Lula already signed into law – all aimed at giving Brazil greater control over the revenues expected from the reserves of the pre-salt region.

    The deepwater region is estimated to hold between 50-100 billion bbl of oil, considered more than enough to turn Brazil into one of the world's top five producers of oil.

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    Cartels again? Pipeline blast in Mexico kills 28 people

    December 20, 2010 12:38 PM by Eric Watkins
    During the past year, oil and gas pipelines have often been the target of terrorists and thieves in Mexico – often with ill effects for people and property around them.

    That certainly was the case in Mexico over the weekend when thieves tampering with an oil pipeline may have sparked a deadly explosion that turned streets of a Mexican town into an inferno that killed 28 people.

    "Several streets were flooded with fuel,” said Valentin Meneses, interior minister of the state of Puebla. “With a spark, there was a river of fire," Menses added.

    Among the dead there were 13 children, while 52 people were injured, officials said, adding that the explosion destroyed 32 houses and damaged more than 80 more.

    Officials at Petróleos Mexicanos acknowledged that it may bear responsibility for the blast, citing mechanical problems. But the state-owned firm felt that oil thieves were the more likely cause of the incident.

    "We are not discounting mechanical problems but, on the other hand, we have had problems with illegal taps this year including along that stretch" of pipe, said Pemex chief Juan Jose Suarez.

    That view was supported by Laura Gurza, chief of the federal Civil Protection emergency response agency, who said that investigators found a hole in the pipeline and equipment for extracting crude.

    According to Meneses, the thieves lost control “because of the high pressure with which the fuel exits the pipeline.”

    This is the latest incident in a year when Pemex has struggled with chronic theft, losing as much as 10% of of its product due to criminals who tap remote pipelines.

    According to Pemex, there have been 100 such illegal taps this year all along the disrupted pipeline which the state firm has now closed pending further investigations as ordered by Mexico’s President Felipe Calderon.

    In 2009, the US Department of Justice said US refineries bought millions of dollars' worth of oil stolen from Pemex pipelines and smuggled across the border in illegal operations led by Mexico’s drug cartels.

    Earlier this year, Mexico's oil and gas industry, as if it did not already have enough problems, was also reported to be suffering from worries about abductions of workers carried out by members of the country's drug cartels (OGJ, June 21, 2010).

    Repsol YPF SA claims 4.5 tcf unconventional gas discovery in Argentina

    December 15, 2010 11:32 AM by Eric Watkins
    Repsol YPF SA said it has discovered 4.5 trillion cubic feet of shale gas reserves after drilling four exploratory wells in its Loma La Lata field, located in the Neuguen province of southern Argentina.

    “Just with this discovery, YPF went from having 6 years expected reserves of gas to 16 years,” said Repsol YPF SA vice president Sebastian Eskenazi, who added that the discovery “presents conditions similar to productive basins in the United States.”

    Eskenazi’s claims could not be independently verified, and he provided no details of the types of wells drilled or the tests conducted to determine the extent of the reserves.

    “In an initial stage, we estimate we will deliver 2 million cubic meters per day and in that field we estimate reaching a stable production of 4-5 million cubic meters per day," Eskenazi said, without explanation.

    Eskenazi even suggested that the eventual find could be considerably larger as the initial exploration had been limited to a small section of the prospective area. He did not state the size of the prospective area or the section that had been explored.

    Still, Eskenazi insisted that “huge volumes” of shale and tight gas had been identified that would guarantee the country's gas supplies for years.

    If verified, the new Repsol discovery could eventually increase the country’s proven gas reserves by 34% from the current 13.3 tcf, according to data of Argentina’s Energy Secretariat.

    Based on Eskenazi’s figures, Argentina’s President Cristina Fernandez said the discovery will save the country from having to import $500 million in fuel oil each year, and that it will “will sustain the growth of the country.”

    Analyst BMI was likewise upbeat on the claimed Repsol discovery, saying that, “Just as the so-called shale boom has transformed the US energy market, so too could this discovery herald a step change in Argentina.”

    Even so, the analyst cautioned that “as the US shale story has taught us, this will be a lengthy process that will require a host of regulatory, market and corporate factors to fall in to place.”

    Argentine daily El Cronista, echoing Eskenazi, meanwhile reported that Brazilian mining giant Vale has agreed to partner with YPF to develop the tight gas deposit, with investment estimated at $150 million.

    Vale has not issued a statement to confirm the El Cronista report, and the mining firm did not immediately return telephone enquiries.

    The paper also said that the deposit is expected to be producing around 1.5 million cubic meters of gas a day by 2016, but it did not cite sources. It further reported that Vale will be entitled to 50% of the output which will be used to fuel its Rio Colorado potash project in Mendoza province.

    Contact Eric Watkins at

    Iran's smog belies its nuclear ambitions

    December 7, 2010 3:21 PM by Eric Watkins
    Arab leaders of the Gulf region have appealed to Iran to "respond positively" to talks with world powers on the Islamic republic's contentious nuclear program.

    They stressed the "right of all countries in the region to develop civilian nuclear energy within the standards and under the supervision of the International Atomic Energy Agency."

    But it looks like Iran is set to continue its defiance – and at a considerable cost to its own citizens’ health. That view emerged this week with reports about Iran’s efforts to produce its own gasoline.

    Indeed, the head of Iranian National Oil Company has said that Iran intends to increase its gasoline production by 10 million liters within the next 3 months in an effort to show that sanctions imposed by the West are worthless.

    “with the inauguration of the development projects for Iran's oil refineries next month, before the end of Iranian calendar year we can increase our gasoline production capacity by at least 10 million liters," said Masoud Mirkazemi.

    The gasoline produced at Iranian refineries has a 98-100% octane rating, which proves that its quality is higher than imported gasoline, said Mirkazemi, adding that the West has lost regarding gasoline sanctions.

    That may be, but the Sahamnews website, which is affiliated with the opposition E'temad-melli Party claims that substandard gasoline produced inside Iran is responsible for the heavy smog and pollution in Tehran.

    The site claimed that the smog is cancerous and that the substandard gasoline has been produced inside Iran after the West levied its gasoline embargo on Iran following the deadlock in its nuclear talks.

    Iran did not have the capacity to produce gasoline before the sanctions even though it has vast oil reserves, and the result shows. The smog has been so heavy that the government has had to reportedly call for public holidays in the past two weeks.

    The website did not discuss why Tehran was particularly affected even though this domestically produced gasoline has been used throughout Iran. It said only that "Tehran and big cities" have been affected.

    It quoted two lawmakers attesting to the smog being caused by this home produced gasoline.

    "The pollution in Tehran is rising in an abnormal way. The substandard gasoline that is being used in Tehran has caused the rise in pollution... The source for much of this pollution is the government," said Mohsen Nariman, a legislator for the northern city of Babol.

    "Unfortunately, the Oil Ministry has been unable to deliver standard grade gasoline and the Oil Minister has said that standard grade gasoline will not be delivered before 2012," said Anushiravan Mohseni-Bandi'i, a legislator for Chalus.

    On Iran's nuclear ambitions, Mohseni-Bandi'i asked with a note of sarcasm, “How can a country that is pursuing nuclear technology not be able to guarantee the health of its own people?"

    Contact Eric Watkins at
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