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Europe Route Chosen for Azerbaijan Gas

June 26, 2013 by Leave a Comment

LONDON — The developers of a major natural gas field in Azerbaijan have decided that the western end of their export pipeline to Europe should take a shorter, southern route ending in Italy rather than a northern one to Austria, one of the companies competing for the pipeline business said Wednesday.

The Austrian energy company OMV, the lead shareholder in the company vying for the northern route, said it had been informed it would not win the pipeline deal, which by some estimates was to cost $4 billion.

The formal announcement, which was expected to be announced in Azerbaijan on Friday, is likely to favor a project called the Trans Adriatic Pipeline, which would run about 900 kilometers, or 560 miles, through Greece and Albania, ending in southern Italy. The Austrian route would have been about 1,300 kilometers long.

The winning route will convey gas to Europe through a connection to a new pipeline planned to run through Turkey that links back to the Azeri field through Georgia.

A spokesman for the assumed winner, the Trans Adriatic Pipeline group, which is based in Baar, Switzerland, declined to comment Wednesday.

The reasons for the decision by the gas field’s developer — the Shah Deniz II group — were not disclosed on Wednesday. The group includes Socar, the Azerbaijani national oil company; BP of Britain; Statoil of Norway; and Total of France.

The decision to go with a South European route is a milestone in a long effort by Azerbaijan and its partners — particularly BP, the field operator — to bring gas from the huge reserves beneath the Caspian Sea directly to Europe in competition with Russia. Although Azerbaijan’s role as a supplier to Europe might start relatively small, it could grow as the country develops additional finds known to lurk beneath the Caspian’s floor.

BP and other members of the Shah Deniz II group are expected to take a 50 percent shareholding in the pipeline. Shah Deniz II is a gas project in the Caspian Sea, off eastern Azerbaijan, which along with its export pipelines is expected to cost more than $40 billion. The group has not made a final investment commitment to proceed with the project, although a decision is expected by the end of the year. A separate Azeri field, the Shah Deniz I, is already producing and exporting gas to Georgia and Turkey.

Andrew Neff, a Moscow-based analyst at the market research firm IHS in Moscow, said that Socar’s agreeing last week to take a majority stake in the Greek gas distributor Desfa may have tipped the balance toward the Trans Adriatic Pipeline. “This gives Azerbaijan a direct supply relationship with Greece,” he said.

Other factors may have included cost; gas demand in Europe has been severely weakened by the continued economic doldrums. The longer pipeline to Austria was expected to be somewhat costlier to build and operate than the route to Italy. In addition, the consortium leaders may believe that Italy and Greece are better markets for gas than countries like Bulgaria and Hungary.

But Italy, for one, is oversupplied with gas and has been trying to trim imports from countries like Algeria. The Greek economy also appears to be a long way from recovery.

The biggest loser in the deal is OMV, which did the major research and planning for the northern-route consortium, called Nabucco West, investing about 37 million euros, or $48 million, to date. The company considers its plan to transport Azeri gas dead, according to an OMV spokesman, Johannes Vetter. Mr. Vetter said the company was still hopeful, though, of using the work it had put into Nabucco to help build pipelines to bring gas from offshore fields being developed off Bulgaria.

But the decision is a bitter blow to OMV, as well as to countries along the Nabucco route like Bulgaria, Hungary and Romania that had hoped to tap into the line and profit from transit fees. They also hoped to reduce their energy dependence on Russia.

Although BP has said that it wants a solution that benefits customers along both routes, with both pipelines eventually being completed, some analysts say the Nabucco group might not be able to bounce back. “They are now competing with everyone else,” Mr. Neff said.

Whatever the route, the 10 billion cubic meters, or 353 billion cubic feet, of gas that is initially expected to come through the new pipeline each year would be small compared with the estimated 140 billion cubic meters of Russian gas exports to Europe.

The Russian gas giant Gazprom is also planning a pipeline, called Southstream, that would run from Russia under the Black Sea and pass through Bulgaria, Serbia and Croatia to wind up in northern Italy.

Winners from the decision Wednesday include Statoil and a Swiss company, Axpo, which are large shareholders in the Trans Adriatic Pipeline project. E.On, the big German utility, is also a shareholder.

Article source: http://www.nytimes.com/2013/06/27/business/global/europe-route-chosen-for-azerbaijan-gas.html?partner=rss&emc=rss

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DealBook: Enron’s Skilling Could Get Early Prison Release

April 4, 2013 by Leave a Comment

Jeffrey K. Skilling, left, the former Enron chief executive, and his lawyer, Daniel Petrocelli, after his 2006 trial in Houston.Pat Sullivan/Associated PressJeffrey K. Skilling, left, the former Enron chief executive, and his lawyer, Daniel Petrocelli, after his 2006 trial in Houston.

Jeffrey K. Skilling, the former Enron chief executive serving a 24-year sentence for his role in the energy company’s collapse, could be released from prison early under a possible agreement with the government, according to a notice on the Justice Department’s Web site.

Since his 2006 conviction on charges of securities fraud, conspiracy and insider trading, Mr. Skilling has served jail time in federal prisons in Minnesota and now Colorado. He and his legal team have waged an aggressive appeal, repeatedly seeking to overturn his conviction on various grounds.

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The notice, posted early Thursday, was made to notify victims of Mr. Skilling’s crimes — thousands of former Enron employees and shareholders — of any changes related to a defendant’s sentence.

“The Department of Justice is considering entering into a sentencing agreement with the defendant in this matter,” reads the notice, which was earlier reported on by CNBC. “Such a sentencing agreement could restrict the parties and the Court from recommending, arguing for, or imposing certain sentences or conditions of confinement.”

If the government decides to enter into an agreement to shorten Mr. Skilling’s sentence, it is unclear by how much it would be reduced. And any reduction would require the approval of Judge Sim Lake of Federal District Court in Houston, who presided over Mr. Skilling’s trial. (Kenneth Lay, the company’s chairman, was also found guilty but died just over a month after the trial.)

Mr. Skilling and Mr. Lay became public symbols of executive wrongdoing and financial malfeasance after the tech and telecom boom of the late 1990s turned to bust. Enron was at the center of a wave of corporate accounting scandals that emerged out of the stock market collapse. The executives, along with other prominent businessmen like Bernard Ebbers of WorldCom and John Rigas of Adelphia, were convicted by juries and received lengthy prison terms for, among other crimes, lying to their investors about the health of their companies.

After the Enron and WorldCom collapses in late 2001 punctuated the end of the historic bull market, the Bush White House took an aggressive stance on prosecuting white-collar crime. President Bush, who counted Mr. Lay as a friend and had considered him for a post in his administration, created the Corporate Fraud Task Force, which secured nearly 1,300 corporate fraud convictions, including cases against more than 200 chief executives, company presidents and chief financial officers, according to a 2008 report.

An Enron Task Force was also formed to prosecute crimes specifically connected to the energy company’s bankruptcy. The conviction of Mr. Skilling was one of about 16 that the Justice Department secured against former Enron executives, several of whom cooperated with the government and testified at Mr. Skillilng’s trial.

Mr. Skilling’s appeal gained traction with his argument that the government had relied on a dubious legal theory that Mr. Skilling deprived others of his “honest service.” In 2010, the Supreme Court called the use of the awkwardly written “honest services” law unconstitutionally vague and said his conviction was “flawed.”

But a federal appeals court subsequently ruled that the conviction was not tainted by the use of the theory and said there was “overwhelming evidence” that Mr. Skilling had conspired to commit fraud. Last year, the Supreme Court declined to hear Mr. Skilling’s appeal of the appeals court ruling.

But the federal appeals court also reiterated an earlier ruling that Mr. Skilling still needed to have his sentence re-calculated because Judge Lake had erred in his handling of another issue in the case. That re-sentencing was put on hold while the broader appeal wended its way through the courts.

Daniel M. Petrocelli, the lawyer for Mr. Skilling, did not immediately respond to a request for comment.

 

Article source: http://dealbook.nytimes.com/2013/04/04/enrons-skilling-could-get-early-prison-release/?partner=rss&emc=rss

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North Africa’s Prospects as Energy Goliath Are Fading

February 22, 2013 by Leave a Comment

LONDON — A deadly attack by militants on an Algerian natural gas plant last month has dealt a major setback to a group of North African countries whose prospects as oil and gas producers were already cloudy.

A few years ago, Algeria, Libya and Egypt looked like they would provide much of the solution to Europe’s declining natural gas production and its uneasy reliance on Russia for supplies of a fuel widely used in industry, power generation and home heating.

But well before the early morning assault by dozens of raiders on the In Amenas gas facility, deep in the Sahara, the difficult political realities of the region were creating doubts about how big a role North Africa could play in the world energy equation.

Both oil and natural gas production have been in decline in Algeria, the region’s biggest gas producer, since the mid-2000s. In Libya, the rebellion that ousted Col. Muammar el-Qaddafi, and its chaotic aftermath, have disrupted oil and gas exploration. In Egypt, rising domestic consumption, encouraged by government policies, has cut into exports.

“For the rest of this decade there has to be a big question of how far Europe can rely on North African gas,” said Jonathan P. Stern, chairman of the gas program at the Oxford Institute for Energy Studies, a research concern. “It certainly can’t rely on an expansion of North African gas supplies. Most likely there will be a contraction.”

During the militants’ attack on In Amenas, and the Algerian military’s action to retake the facility, 40 workers and 29 insurgents were killed. The plant — jointly owned by BP, Statoil of Norway, and Sonatrach, the Algerian national energy company — has yet to reopen. Its gas field and processing center accounted for about 10 percent of Algerian production, but so far the shutdown has had little impact on exports.

“Algeria still has the ability to swing production for short periods,” said Femi Oso, an analyst at Wood Mackenzie, an energy consulting firm in Edinburgh.

Algeria reinjects a substantial portion of its gas back into its oil and gas fields to maintain pressure. Mr. Oso said that Sonatrach is now diverting some of this gas into exports, but this is only a short-term fix.

Sonatrach is pressing to repair and reopen the plant, which suffered blast damage.

But if much of the plant remains closed for long, or if there is another attack on Algeria’s energy production infrastructure, exports will suffer, analysts say, forcing up prices in Europe. Most of the Algerian and Libyan gas exported to Europe flows under the Mediterranean through a handful of giant pipelines. While the undersea portion of these arteries seems secure, the pipelines cover long stretches of desert before they reach the sea. Some pass through troubled countries like Tunisia, where they could be hit.

“What we find in troubled geopolitical hotspots is that gas infrastructure and pipelines are the most vulnerable targets,” said Rob West, an analyst at Bernstein Research in London. “Pipelines are very hard to protect.”

He noted that in Yemen, Iraq and other countries, anti-government forces had succeeded in cutting pipelines on numerous occasions, disrupting oil and gas supplies.

The worry for Algeria and other North African countries is that the attack on In Amenas, coming after two years of political instability, will further discourage the foreign investment the countries need to maintain their positions as oil and gas exporters.

Western energy companies were already turning up their noses at Algeria’s tough contract terms, which give the government more than 90 percent of the proceeds from oil and natural gas production and require that Sonatrach get a majority stake in all projects. The country also has high costs and lengthy regulatory procedures.

In Algeria’s most recent auction of oil and gas leases, in 2011, only 2 of 10 exploration blocks found takers — and one of those went to Sonatrach.

“The fiscal terms are so tough that international oil companies don’t think they will be able to make any money,” said Mr. Oso, the Wood Mackenzie analyst.

Article source: http://www.nytimes.com/2013/02/23/business/global/23iht-natgas23.html?partner=rss&emc=rss

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ENI Makes a Push Toward the Top of Oil and Gas

January 25, 2013 by Leave a Comment

The mood around ENI has been nirvana-like lately as the company’s explorers have made some lucrative enlightened guesses. Beginning in 2010, ENI and a rival, the Houston-based Anadarko Petroleum, made a series of finds off Mozambique, a country in East Africa, that add up to the largest natural gas trove of recent years — the equivalent of about 16 billion barrels of oil.

ENI controls the largest share of the Mozambique findings, with 70 percent of an offshore block in the Indian Ocean called Area 4, in what is known as the Rovuma Basin.

ENI’s chief executive, Paolo Scaroni, said that the discoveries had come after ENI spent five years studying East Africa, where very little oil and natural gas had been found. When Mozambique made exploration blocks available in 2006, ENI bid and got the one it wanted.

These days, oil and natural gas exploration is an industry as fraught with geopolitical risks as it is with geological ones, of course, as the recent hostage-taking attack in Algeria has made clear. And ENI is as aware as any European energy company of the dangers of politically volatile North Africa, given its own extensive operations in Algeria and Libya.

But for now, at least, Mozambique is not one of Africa’s trouble spots. And in any case, energy companies tend to follow opportunities wherever they can find them.

“Although Mozambique was a new country, we thought the chances were reasonable, about 20 percent,” of finding something, Mr. Scaroni said during an interview in Milan. “Of course it was high-risk, high-reward.”

It was after Anadarko, a U.S. independent, announced a discovery in an adjacent tract that ENI, which had been preparing to drill in another part of its block, decided to put its first well near Anadarko’s tract.

Mr. Scaroni, a graduate of Columbia Business School in New York with a master’s degree in business administration, took the top job at ENI in 2005 after spending much of his career outside Italy and the oil business. He has been gradually reshaping the company into more of a machine for finding and producing oil and natural gas and less of the lumbering state conglomerate that had toiled in the second tier of global oil giants.

Mr. Scaroni, 66, also has the crucial task of maintaining ENI’s relationships with a group of fossil-fuel-rich but prickly host countries that include Iraq, Libya, Russia, Venezuela and, elsewhere in Africa, Angola and the Republic of Congo. He regularly turns up in places like Baghdad or Brazzaville that might give other chief executives pause.

During the interview, the Zubair field in Iraq was on his mind. “We have a company with 150 expatriates in Iraq, with a huge effort for security, and the economic result for us is very little, since we are paid $2 per barrel,” he said. “From time to time, we ask ourselves: Is it worth it?”

ENI is the largest foreign producer of oil and gas in both Algeria and Libya. ENI executives say they were surprised and shocked by what happened to BP and Statoil, which are partners in the Algerian plant that was seized, and are tightening up their own security measures. They note that ENI already has large numbers of Algerian troops inside the perimeters of its Algerian sites, while troops apparently were not posted inside the seized complex at In Amenas.

So far, Mr. Scaroni has smoothly sailed ENI through Libya’s chaotic transition from the regime of Col. Muammar el-Qaddafi to a new government that is still trying to find its balance. Unlike most other oil companies, ENI thrived under the Qaddafi regime, developing new fields and building a $9 billion facility at Mellitah, west of Tripoli, to pipe natural gas under the Mediterranean.

Mr. Scaroni was quick to go to Benghazi in April 2011 to meet the rebel leadership, even before Colonel Qaddafi’s fall. Since then, ENI has restored most of its Libyan production, which represents 14 percent of ENI’s oil and natural gas output.

Article source: http://www.nytimes.com/2013/01/26/business/energy-environment/eni-makes-a-push-toward-the-top.html?partner=rss&emc=rss

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F.D.A. May Tap Experts on Energy Drinks

November 28, 2012 by Leave a Comment

The Food and Drug Administration said in a letter released on Tuesday that it was likely to seek advice from outside experts to help determine whether energy drinks posed particular risks to teenagers or people with underlying health problems.

The letter appears to signal a change in the agency’s approach to the drinks, which contain high levels of caffeine.

Previously, F.D.A. officials have said that they were investigating possible risks posed by popular products like 5-Hour Energy, Monster Energy and Red Bull. But an agency spokeswoman, Shelly Burgess, said the new letter was the first time that the F.D.A. had said it might turn to outside experts.

The F.D.A. letter, which was released Tuesday by Senator Richard J. Durbin of Illinois and Senator Richard Blumenthal of Connecticut, follows disclosures that the agency received reports of 18 deaths and over 150 injuries that mentioned the possible involvement of energy drinks.

The filing of such reports with the F.D.A. does not prove that a product was responsible for a death or an injury. Energy drink makers have said their products are safe and were not responsible for the health problems.

The officials said a review of the drinks might be “greatly enhanced by also engaging specialized expertise” from an outside group, like the Institute of Medicine, which is part of the National Academy of Sciences.

Industry analysts said the letter indicated that the F.D.A. did not plan any immediate actions on energy drinks, an interpretation that set off a rally on Tuesday in the stock of Monster Beverage, the producer of Monster Energy. Company shares closed at $51.97, up over 13 percent. Any regulatory outcome is likely to be “benign,” Judy Hong, an analyst at Goldman Sachs, said in a note to investors, according to Bloomberg News.

In Canada, however, the use of an outside panel led to limits on caffeine levels in energy drinks.

In their letter, F.D.A. officials indicated that an outside review would focus on the possible risks posed by high levels of caffeine, a stimulant, to certain groups. They reiterated that daily consumption of significant levels of caffeine, which is found in products like coffee and tea, is safe.

“Areas of particular focus would include such matters as the vulnerability of certain populations to stimulants and the incidence and consequence of excessive consumption” of energy drinks, especially by young people, F.D.A. officials wrote.

In Canada, an expert panel made several recommendations, including arguing that such beverages be labeled “stimulant drug-containing drinks.”

Health Canada, that country’s counterpart to the F.D.A., did not adopt many of the group’s recommendations, but it has put in place new rules limiting caffeine levels in cans of energy drinks to 180 milligrams.

Some larger-size cans of energy drinks sold in the United States, like the 24-ounce can of Monster Energy and the 20-ounce can of Red Bull, have caffeine levels above that limit.

An eight-ounce cup of coffee, depending on how it is made, can contain from 100 to 150 milligrams of caffeine.

In the new letter, F.D.A. officials also said that studies that had examined other ingredients, like taurine, that are often used in energy drinks had determined those substances were safe. The agency also said that a survey suggested that energy drinks constitute a small portion of the caffeine consumed in this country, even by teenagers.

Article source: http://www.nytimes.com/2012/11/28/business/fda-may-tap-experts-on-energy-drinks.html?partner=rss&emc=rss

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BP to Look for Oil Outside Russia After Collapse of Rosneft Deal

June 8, 2011 by Leave a Comment

LONDON — BP said on Wednesday that it would focus on oil exploration outside Russia after a deal with Rosneft collapsed last month, but added that there were no plans to sell its stake in the Russian joint venture TNK-BP.

The BP chief executive Robert W. Dudley said “very quietly BP is getting on with its strategy of exploration” in Australia, Brazil, Azerbaijan and the United Kingdom.

“We’re moving on,” he said at a news conference to release the company’s annual review of energy markets.

Mikhail Loskutov, a spokesman for the AAR consortium, which is BP’s partner in TNK-BP, declined to comment, as did a Rosneft spokeswoman.

Mr. Dudley’s plan to explore in the Arctic through a share swap and cooperation agreement with Rosneft, Russia’s state-controlled energy company, failed when BP’s partners in TNK-BP took legal action to block the deal. BP said in May that it would continue to talk to both Rosneft and its partners in TNK-BP, but Mr. Dudley said on Wednesday that “it’s very quiet” and that “there was no news” on that front.

Instead, he said, BP would focus on exploration opportunities elsewhere, including in Angola and Trinidad, and on further rebuilding trust in the company in the United States, where it is still recovering from the Gulf of Mexico spill last year.

Mr. Dudley denied newspaper reports published on Tuesday that said BP was preparing to sell some of its stake in its lucrative TNK-BP joint venture to try and rescue its deal with Rosneft.

“BP is not planning to sell its shares in TNK-BP,” Mr. Dudley said. He also described BP’s relationship with Rosneft as “excellent,” despite the disappointment about the collapsed deal.

Mr. Dudley’s comments indicated that the only way to revive the deal with Rosneft, which also included a share swap component, was for its TNK-BP partners and Rosneft to come to an agreement. BP’s partners in the TNK-BP joint venture, a group of Russia billionaires, claimed the deal violated their shareholder agreement. TNK-BP is Russia’s third-largest oil producer and accounts for about a quarter of BP’s output.

Carl-Henric Svanberg, BP’s chairman, said reaching an agreement was difficult because it would involve “three individuals with their own agendas and time horizons.” He added that there were 40 other exploration blocs in the Arctic region and that he was optimistic that “some Rosneft deal would materialize in some form or another down the line.”

BP’s shares fell 1.3 percent in London on Wednesday. They have dropped 7 percent since BP announced the deal with Rosneft in February and more than 30 percent since the rig explosion in the Gulf of Mexico in April 2010.

Some analysts said previously that BP would have to wait until presidential elections in Russia that are scheduled for next year to try to revive the exploration pact with Rosneft. In the meantime, Rosneft is free to open talks with other international oil companies about cooperating on exploration. A possible short list includes Statoil, which is partly owned by the Norwegian government, Exxon Mobil and Royal Dutch Shell.

Some analysts were skeptical, however, that Rosneft would find another oil major like BP that would be willing to welcome Rosneft as a shareholder through a dilutive share swap.

Article source: http://feeds.nytimes.com/click.phdo?i=7bf36cdf244055ebbe2dbe4ea0c5a3ff

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