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Israel’s prime minister has played down Egypt’s termination of a gas supply deal after the Israeli finance minister said the move cast a shadow over the peace agreement between the two countries.

Prime Minister Benjamin Netanyahu said the cancellation of the contract supplying Israel with 40 percent of its gas needs, announced on Sunday, resulted from a business rather than a diplomatic dispute.

Egyptian officials also said it was a trade issue, although there have been growing public calls for Egypt to review ties with Israel since the overthrow of Hosni Mubarak, for whom a peace treaty with Israel was a cornerstone of regional policy.

Minister of International Cooperation Faiza Abu el-Naga said the Israeli side was welcome to negotiate a new contract.     
Questions over Cairo’s attitude to Israel after the dramatic political changes in Egypt appeared anew in the Israeli media, with one headline, in the popular Yedioth Ahronoth daily, reading: “They don’t want us”.

Egyptian politicians welcomed the move to end a deal  heavily criticised even under Mubarak. Opposition media and the public accused his government of giving Israel preferential pricing and using the deal to benefit his allies.

Israeli officials say gas has not flowed from Egypt to Israel for most of this year due to a series of attacks on the pipeline running through Egypt’s volatile Sinai peninsula.

Israel has turned to more expensive fuel supplies and has warned residents to expect electricity outages this summer.
 

“We don’t see this cut-off of the gas as something that is born out of political developments,” Netanyahu told reporters.
“It’s actually a business dispute between the Israeli company and the Egyptian company.”     

Two Israeli officials made a brief trip to Cairo on Monday for talks on the gas deal, Cairo airport sources said, and   Egypt’s ambassador met Israeli Deputy Foreign Minister Danny Ayalon to “provide clarifications”, Israeli media reported.

Israeli Foreign Minister Avigdor Lieberman said in a radio interview that Israel was interested in maintaining its peace treaty with Cairo and he believed “this is also a supreme interest of Egypt”.

Egypt was the first of two Arab countries to sign a peace treaty with Israel, in 1979, followed by Jordan in 1994 and the gas deal was the most significant economic agreement to follow.  – Reuters

Offshore Solutions BV (OSBV), a leader in heave-compensated marine access systems, has achieved more than 40,000 safe personnel transfers from a vessel to offshore platforms on its Offshore Access System (OAS) in the Gulf.

The company, a joint venture between AMEC and Cofely Nederland NV, has also recently secured two new contracts with major operators in Qatar for the safe transfer of personnel to and from offshore platforms, bringing the total of OAS units in the Middle East to three.

This underlines the benefits of the OAS in maintaining operational efficiency, particularly in the adverse weather conditions Qatar experiences over the winter months, during which time the ability to transfer personnel to an offshore installation by helicopter or boat landing is severely restricted, a statement said.

It is the only heave-compensated gangway on the market that can remain permanently connected to an offshore installation in sea states of up to three metres significant wave height, the statement added.

With six years global experience, the company’s OAS has made in excess of 7,700 operational connections and transferred more than 123,000 personnel.

Lindsay Young, managing director of OSBV, said: “We continue to build on our impressive track record offshore Qatar, with three units now in the country. These latest successes for the OAS highlight the effectiveness of the system in The Gulf and its ability to ensure continued operations in challenging conditions.”

“The operational and safety benefits of the OAS are widely recognised. It can dramatically improve efficiency and optimise the workforce, which will ultimately lead to considerable cost reductions,” he added.

Offshore Solutions has been operating in Qatar since 2010, and as a result of growing demand for the OAS in The Gulf, the company has underlined its commitment to the region by registering a branch office in Qatar.

“We have been continually developing our business in Qatar since our first contract with Shell”, Young continued.

“The three units, and potential of more before the end of this year, have secured our position in the Middle East and our base in Qatar will allow us to capitalise on these opportunities and grow the business further.” – TradeArabia News Service

Virtually every day there is news on how Iran’s oil exports to Asia are being squeezed by Western sanctions, but the question that still remains unresolved is just how much pain is Tehran feeling.

The latest sign that Iran may be starting to feel the pinch is that half of the Islamic Republic’s tanker fleet is being used for floating storage, presumably because buyers for cargoes can’t be found, says Clyde Russell, a Reuters market analyst in an article.

As much as 33 million barrels of oil are being held on tankers and shore-based storage at Iran’s main Kharg Island terminal is also said to be full at 23 million barrels.

Add to this reports of declining purchases by major buyers China, Japan, South Korea and India, the threat of a total European ban on imports from July and the difficulty of insuring cargoes even for countries still willing to buy and you would think Iran’s rulers might start getting concerned.

The National Iranian Oil Company, like most state-controlled producers, isn’t exactly forthcoming in what it says publicly, but what it has acknowledged is that its exports have dropped to 2.1 million barrels a day, down from 2.3 million in the year ended March 19.

A decline of only 200,000 barrels a day sounds too small, based upon what buyers of Iranian crude are stating. Based on latest figures, it would appear that China, South Korea and Japan, the major Asian buyers of Iranian crude, have cut imports by a combined 600,000 barrels a day.

This includes a 54 percent cut by China in March to 253,000 barrels a day, an almost 40 percent drop in March by South Korea to 154,000 barrels a day and reports that Japan is cutting its April imports to 75,000 barrels a day, a cut of as much as 77 percent from the first two months of 2012.

Add to this smaller reductions by India and other nations, such as South Africa, and it would appear that Iran should be able to sell not much more than 1.5 million barrels a day from this month onwards, and potentially much less if Europe does push ahead with its ban.

Of course, the above numbers assume everybody is being 100 percent honest, and that Iranian crude isn’t being transshipped, blended in offshore storage or any other myriad of ways to circumvent Western sanctions.

Certainly, if you talk to oil traders, everybody denies they are doing anything dodgy, as you would expect, but some will acknowledge that it’s possible to get around sanctions if you are determined enough.

But even if Iran is still managing to shift its oil, the costs of doing so must be rising, and the revenue is also likely to be falling as Tehran is forced to offer bigger discounts.

If it’s accurate that Iran is losing about 600,000 barrels a day in exports to Asia, that amounts to $660 million a day in lost revenue, assuming a price of $110 a barrel. This equates to more than $24 billion a year, and this doesn’t include the impact if Europe does go ahead and ban the import of the 700,000 barrels a day of Iranian oil it had been purchasing.

Some of this lost revenue will have been offset by higher crude prices, with Brent having gained 10.2 percent so far this year, although the current price of around $118 a barrel is down from the peak this year above $126 in early March.

If you further assume that the dispute over Iran’s nuclear program had never happened, then a reasonable scenario would be Iranian exports of about 2.3 million barrels a day and an oil price of about $100. This yields annual revenue around $84 billion, so if Iranian export losses are 600,000 barrels a day at a cost $24 billion a year, it means Tehran is foregoing more than a quarter of its potential oil revenue.

Is this enough to hurt the government badly enough for it to seek ways of compromising on its nuclear activities, which Iran claims is entirely for civilian power generation, while Western nations fear it is aimed at developing weapons. The answer to that question may come at the next round of talks between Iran and world powers, scheduled to be held next month in Baghdad. -Reuters. (Clyde Russell is a Reuters market analyst. The views expressed are his own.)

The Iranian oil ministry said on Tuesday its IT systems had suffered no lasting damage from a suspected cyber attack, but its experts would require two or three days to investigate and address the impact of the virus.

The virus hit the internet and communications systems of the oil ministry and national oil company late on Sunday, forcing Iran to disconnect the control systems of Kharg Island, which  handles the vast majority of Iran's crude exports, and a number of other oil facilities.

'Fortunately, because of the rapid measures taken by our experts, this ministry has sustained no damage to its computer data,' the head of the ministry's civil defence team, Hamdullah Mohammadnejad, said.

Iranian state news agency Irna quoted him as saying the cause of the problem was being identified and it would take two to three days for the issue to be resolved.

'All units with the oil industry back up their data on a daily and long-term basis. But in cases where information has been impaired to any extent, the backup data is being replaced,' he added.

The oil ministry set up a crisis unit and disconnected IT systems at its headquarters, the national oil company and at its oil terminals but said all operations units continued to function normally. An industry source said oil was being loaded at Kharg island on Tuesday.

'Fortunately our international oil selling division has not been affected,' Irna quoted a senior ministry official as saying in an earlier report. 'There is no panic, but this shows we have shortcomings in our security systems.'     

The virus is likely to draw comparisons with the Stuxnet computer worm which affected Iranian nuclear facilities in 2009-10.      Iranian officials have accused the US and Israel of trying to sabotage its nuclear programme through viruses like Stuxnet.

Security specialists say the latest problems in Iran's IT systems could be an attempt to impair Iran's ability to trade in oil, or might even have been a technical failure.

The US and its allies have imposed increasingly tough sanctions against Iran's oil industry over its nuclear programme, which they believe is geared towards producing nuclear bombs. Iran says the nuclear programme is for peaceful purposes only.

EU member states have significantly reduced any orders of Iranian oil in anticipation of a total ban set to be implemented across the European Union in July. – Reuters

Iraq exported its first cargo of crude oil of two million barrels from its second new floating terminal in the Gulf on Tuesday, shipping data tracked by Reuters showed.     

Data showed the A Whale vessel left the second new floating Single Point Mooring (SPM) terminal to deliver the crude to India’s state-run Indian Oil Corp. – Reuters

Iran is experiencing “huge problems” exporting oil but there is unlikely to be a sharp drop in volumes after the European Union oil embargo comes into effect from July 1, the chief executive of oil trader Gunvor said.

Western financial sanctions have already cut into Iranian oil exports but there is considerable uncertainty over how the EU restrictions, due to take full effect in July, will impact the Islamic Republic’s global sales.

As well as making Europe’s around 740,000 barrels per day of imports illegal, it will also prohibit EU insurers from covering Iranian oil exports anywhere in the world.

Asked about Iranian oil exports, Torbjorn Tornqvist said on the sidelines of an FT commodities conference: “They have huge problems. The Iranians are suffering…It’s going to be a gradual thing though. There won’t be anything major in July.”     

He added that Iran will be the single most important factor determining oil prices in 2012. Geneva-based Gunvor does not trade Iranian oil, he said.

Tornqvist said that global oil supplies are now more comfortable than at the start of year but said he does not expect futures prices to move into contango, a market structure typically associated with ample supplies.

“Oil stocks are much more comfortable now. Maybe there will be a mini contango at the front but along the curve, I doubt there will be a contango,” he said.

Swiss-based Gunvor, co-owned by a Russian tycoon, said it had no plans to purchase further refining assets in Europe after agreeing to buy the Belgian plant of insolvent refiner Petroplus in early March. He said the plant will continue to process oil under Gunvor ownership and will not be converted to a storage terminal.

“We will run it as a refinery. It fits perfectly into our trading business at the moment,” he said. “But refining is not an easy business and we still see structural overcapacity in Europe.” - Reuters  

International Power and Saudi Oger have announced the signing of Energy Conversion Agreements (ECAs) for an expansion of their joint venture Tihama's power plants in Saudi Arabia.

The expansion follows an award from Saudi Aramco. International Power is owned 70 per cent by GDF Suez.
 
The expansion of 532 MW and 868 tons/hr of steam at three of Tihama’s four sites – Ju’aymah, Shedgum and Uthmaniyah – located at Saudi Aramco’s gas and oil refineries will be backed by long-term ECAs through to 2026.
 
Engineering, procurement and construction will be carried out by Hyundai Heavy Industries of South Korea and General Electric will supply the gas turbines.

Importantly, the technology to be used for the expansion will ensure additional power output with lower carbon footprint. Construction at all three sites is expected to start in May 2012 with a phased commencement of commercial operations between late 2014 and mid 2015.
 
Shankar Krishnamoorthy, president and CEO of IPR-GDF Suez Middle East, Turkey & Africa, said: “We are delighted with the continued trust that Saudi Aramco has placed in Tihama Power. This expansion of Tihama Power further consolidates International Power’s leadership position in the Middle East market. It also further enhances the contracted portion of our global asset portfolio and demonstrates our commitment and flexibility to meet the exacting standards of performance that valued customers like Saudi Aramco expect from International Power.”
 
Joseph Aboudiwan, head of Saudi Oger Utilities Division, said: “Saudi Oger’s active role in the development of this expansion underscores our deep commitment to the realization of private utility schemes in the Kingdom of Saudi Arabia and regionally. We would like to take this opportunity to thank our valued client Saudi Aramco for their trust in Tihama Power, and thank Tihama Power's management and staff for building this trust over the years.

'As a major shareholder in Tihama Power, Saudi Oger is committed to ensuring that this expansion is successfully completed to the full satisfaction of Saudi Aramco.”

The joint venture of International Power and Saudi Oger was originally awarded four 20-year ECAs by Saudi Aramco in 2003 to develop, own and operate four cogeneration plants in Saudi Arabia. The existing four cogeneration plants have a total generating capacity of 1,063 MW and 2,000 tons of steam per hour.
 
The plants were commissioned in 2006 under a special purpose vehicle company, Tihama Power Generation Company, owned 60 per cent by International Power and 40 per cent by Saudi Oger. – TradeArabia News Service

The global energy industry must invest a whopping $38 trillion to build the energy supply infrastructure by 2035 to keep up with an added 40 per cent rising energy consumption in the same time span, said a report by World Economic Forum (WEF).

The energy systems of 124 countries are currently not ready for a transition to a sustainable and secure energy architecture required to harness economic growth, the WEF stated in its report 'New Energy Architecture: Enabling an Effective Transition,' released today.

WEF pointed out that the existing energy architecture was inadequate for balancing economic, environmental and energy security needs and added that country-specific approach was needed to enable effective transformation.

The way energy is produced, distributed and consumed is currently undergoing fundamental change of almost unprecedented proportion, it added.

The report, produced in collaboration with Accenture, revealed that countries which are managing the transition to a new energy architecture will have to deal with trade-offs and difficult choices, ranging from Germany’s nuclear shutdown following the Fukushima disaster and Nigeria’s removal of energy subsidies, to France’s ban on hydraulic fracturing.

According to the report, petro-states continue to struggle to maximize the value of their assets in a sustainable manner that supports economic diversification.

The countries in the developing world, meanwhile, are focusing on economic growth and development, often at the expense of environmental sustainability, while a number of nations continue to struggle to supply citizens with basic energy needs; estimates show that 1.3 billion people worldwide are still without access to electricity at all, it added.

“Never before have we experienced such pressure for change in the way we source, supply and consume energy,” explained Roberto Bocca, senior director, head of energy industries, WEF.

“Decision-makers must understand how they are being impacted by the changing dynamics and how they can effectively create desired change, especially as the choices they make will determine the speed, direction and cost of the transition,” he remarked.

Two in-depth country studies on India and Japan highlight practical applications that can lead to a new energy architecture.

The study on India underlines the challenges posed by supply bottlenecks, which present a considerable risk to the nation’s growth story, and suggests that India considers creating a unified energy regulator to support the expansion of its renewables sector, promote the development of decentralized distribution and generation to expand energy access, and rationalize energy prices through the gradual phase-out of subsidies.

The study on Japan underlines the “crisis of confidence” currently faced in its energy sector and suggests that the country considers establishing a fully independent regulatory agency, complete a full cost benefit analysis of market liberalization in the electricity sector and support the development of pan-Asian energy infrastructure.

“The scale and complexity of the energy industry demands a patient and incremental approach to managing change,” remarked Arthur Hanna, the managing director, Energy Industry, Accenture, United Kingdom, and member of the WEF’s Global Agenda Council on New Energy Architecture.

“Our approach helps nations take stock of their energy architecture challenges and identify practical and cost-effective solutions,” he noted.

The New Energy Architecture report outlines a methodology designed to assist decision-makers in driving an effective transition.

While there is no one-size-fits-all solution, the report highlights different archetypes of change for nations to: rationalize and re-organize their mature energy systems; capitalize on significant hydrocarbon reserves; grow their energy supply to support economic expansion; and access basic energy services at affordable prices.

To achieve long-term objectives countries within each of the archetypes, enabling environments need to be created through policy initiatives, technology, infrastructure, market structures and human capacity, all connected by the flow of information., said the report.-TradeArabia News Service

Egyptian energy companies, citing a trade dispute, have terminated a deal to supply Israel with natural gas in a step that may further erode bilateral ties strained by a popular revolt that toppled president Hosni Mubarak last year.

An Israeli partner in the business made the step public on Sunday but an Egyptian firm said the decision to cancel the deal had been made on Thursday.

Israel, which relies on Egypt for 40 percent of its natural gas supply, worried about facing further energy cuts after a series of sabotage attacks on the pipeline running through the volatile Sinai peninsula contributed to shortages.

Israeli Finance Minister Yuval Steinitz expressed “great concern” about the suspension, saying it had set “a dangerous precedent which casts a shadow on the peace agreements and the peaceful atmosphere between Egypt and Israel”.

Egypt was the first of two Arab countries to sign a peace treaty with Israel, in 1979, followed by Jordan in 1994.

The Egyptian decision was announced in Israel by Ampal-American Israel Corporation, partner in the East Mediterranean Gas Company (EMG), which operates a cross-border pipeline supplying gas to Israel.

Ampal said the Egyptian General Petroleum Corporation and Egyptian Natural Gas Holding Company had told EMG they were “terminating the gas and purchase agreement”.

The company gave no reasons for the Egyptian decision but said legal redress was under consideration. “EMG considers the termination attempt unlawful and in bad faith, and consequently demanded its withdrawal,” Ampal said in a written statement.

Mohamed Shoeib, chairman of the Egyptian company EGAS, confirmed the decision, saying the 20-year-old deal with Israel had been terminated on Thursday. Shoeib told Egypt’s Hayat TV that “EGAS ended the deal because the other party didn’t fulfil its commitments”.     

The Egyptian decision followed a dispute over damages caused by a series of blasts on the pipeline supplying Israel, via the Sinai desert region on its border where lawlessness has risen since President Hosni Mubarak’s overthrow in 2011.

Explosions have caused extensive disruptions in service in the past year, and Israel has warned residents to expect electricity outages in high demand summer months, and that it needed to speed up efforts to seek alternative supply lines.

Ampal and two other companies have been seeking $8 billion in damages from Egypt for not safeguarding their investment against the pipeline blasts.

It said EMG “initiated arbitration” against EGPC and EGAS last October, accusing the Egyptian firms of a “longstanding failure to supply the gas quantities owed”.

Ampal said in its statement on Sunday that in light of the cancellation, EMG, Ampal and EMG’s other international shareholders were “considering their options and legal remedies as well as approaching the various governments” concerned.

Shoeib denied the decision bore any diplomatic significance. “It is a trade dispute not a political issue,” he said. – Reuters

Dubai Electricity and Water Authority (Dewa) said it has deferred plans to build the $1.3 billion Hassyan independent power and water project, citing increased efficiency at existing power plants.

“The Hassyan power plant project can be deferred until a later date,” the state company said, adding that it had raised power production capacity elsewhere while demand growth had slowed.

Demand for cooling and fresh water have driven rapidly rising use of electricity in Dubai. But the government has been forced to reassess many of its projects following its standstill debt announcement in 2009.

Located 60 km south-west of Dubai in the United Arab Emirates, the Hassyan power and water complex was expected to have a total production capacity of 900 megawatts of power and 720 million gallons per day of desalinated water.

The government of Dubai owns DEWA, while the Dubai Supreme Council of Energy is responsible for ensuring energy supplies in the emirate.

Abu Dhabi National Energy Company in December identified itself and its consortium partners Marubeni of Japan and South Korea’s SK E&S Co Ltd as the lowest bidders for the project.

“We are still waiting to hear the consequences of this decision from them,” said Taqa spokesman said on Thursday, without elaborating.

Some bidders said the decision may even damage the government’s future project plans. “It’s disappointing. In the future bidders may think twice,” said an executive from one of the international companies that had bid for the project.

The Hassyan project had attracted a lot of interest from banks and was the government’s first use of the public-private partnership (PPP) model to fund construction of a project.

Dubai has also launched plans to build a solar park with a potential capacity of 1,000 MW to help reduce its energy imports. The first solar plant in the park will have a capacity of 10 MW and is planned to commence operations by end-2013. – Reuters