Contents

Natural gas insight and analysisInterfax Information Services Group

interfaxenergy.com©2016 Interfax Ltd

Vol. 6 / No. 149 / 4 August 2016

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SOCAR counts casualties in post-coup Turkey 4

As one of the largest foreign investors in Turkey, SOCAR has been treading carefully following last month’s failed coup.

3 Renewables support cuts unsettle investors

7 In Brief / Breaking news from around the world

5 New York carbon goals give nuclear a boost

6 Infographic / North American rig counts rebound from May lows

Bahrain LNG enters the debt market

James Gavin / London

AFTER A SLOW gestation, Bahrain’s entry to the LNG market is finally taking shape. Bahrain LNG approached banks in late July with the aim of securing $600-700 million in project finance debt.

Lender appetite could be high because the project is heavily backed with Asian export credit cover and is a vital part of Bahrain’s plan to meet demand from its gas-hungry local market.

However, it is less clear whether Bahrain LNG – the project consortium formed last year by Teekay LNG, Samsung C&T and Gulf Investment Corp. – will be able to realise the country’s longer-standing ambition to transform itself into a regional gas hub.

Domestic demand is looking robust. Energy-intensive companies such as Aluminium Bahrain (Alba) are planning capacity expansions and the kingdom’s electricity consumption is already getting close to matching its 4 GW of installed gas-fired generation capacity.

Bahrain’s domestic gas output is relatively small, at 15.3 billion cubic metres in 2015, one-third of which is used for power generation. Alba is planning a sixth potline at its plant as well as its own 1.35 GW power plant, which will require an additional 3.3 bcm/y when it is commissioned in 2019. That means Bahrain’s LNG terminal, which is due to come onstream by 2018, will have

its work cut out – its initial capacity is only 4.1 bcm/y.

According to a senior Bahrain-based source, speaking on condition of anonymity, demand could still outstrip supply despite the influx of LNG. “Alba after its expansion will be using around one-third of Bahrain’s gas, and there is growing use of gas for injection into the Bahrain oil field,” he pointed out.

The Bahrain LNG project, which will ultimately cost $900 million, will operate under a 20-year build-own-operate-transfer structure. The project is the first of its kind in the Gulf Cooperation Council region to be structured in this way The financial adviser is Société Générale.

Based at the Hidd industrial area, it will comprise an FSU, an offshore receiving jetty and breakwater, a regasification platform, subsea gas pipelines from the platform to shore, and an onshore facility.

The terminal is primarily intended to meet domestic gas demand. But despite plans to eventually double its capacity to 8.2 bcm/y, talk of Bahrain serving as an LNG hub – as mooted by Russian officials during a visit to Bahrain in early May – appears premature.

Hub ambitionsHowever, Gazprom appears convinced Bahrain will eventually become a hub. The company is working on creating an LNG distribution hub in the kingdom that would be able to import LNG from a variety of countries, with the potential to process several billion cubic metres per year. With Saudi Arabia publicly

CONTINUED ON PAGE 2

An oil pump in Bahrain. The country is looking to secure financing for an LNG terminal. (PA)

Sinopec pipeline blast exposes China’s storage woes

Hinkley C: the merits of indecision

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Japanese company considers LNG plant on Sakhalin

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floating plans to import gas for the first time, Bahrain could be ideally positioned to service the region’s largest demand centre.

“In fact, in February of this year, Bahrain indicated to Russia that it would allow it to use the facility for re-exporting to other Gulf countries,” said Justin Dargin, a Middle East energy specialist at Oxford University.

The foremost priority is securing enough domestic gas for the future. “At current rates of consumption, Bahrain only has enough domestically produced gas to last for roughly a decade,” said Dargin. “Outside of a relatively small renewable energy programme, Bahrain almost completely relies upon gas for its power generation.”

If the primary demand driver is domestic, the financiers considering participating in the LNG terminal financing package will need to be reassured that Bahrain can service its debt. Bahrain is not a net oil revenue generator and has experienced substantial political turbulence over the past five years.

The project costs are high for a country of Bahrain’s means but its sponsor, state-owned Nogaholding, had little trouble raising a $570 million Islamic loan earlier this year, part of which will also be used to fund construction of the LNG terminal.

“There is no reason why the [Bahrain LNG] lending package won’t get a strong reception

from banks. Lenders will presumably want to look at projected demand for gas domestically and across the region, as well as the credit behind the capacity/hire payments and how strong the terminal and FSRU sponsor groups are,” said Richard Nelson, a partner at law firm King & Spalding who specialises in LNG financing. “There’s also the question of how risks such as delayed delivery and start-up, vessel performance, [and] TUA/TCP termination will be addressed and allocated between NOGA and the other project stakeholders.”

Poor planning and execution with much dithering and delay have been the downfall of many large energy schemes in Bahrain, which presents a risk for the LNG project.

But given that Bahrain LNG is a public-private partnership scheme, project sponsors will be focused strongly on its schedule. If there are delays, they will incur significant penalties. “Across the Gulf, delays are the norm not the exception with big projects of this kind,” said the Bahrain source.

Meanwhile, the government has time to devise a viable strategy that could eventually see it transformed into a gas distribution hub for the region. But the message from Manama this summer is that it is firmly focused on getting the LNG terminal financed and built, leaving the blue-sky thinking for later.

We welcome your comments. Email us at comments@interfax.co.uk.

CONTINUED FROM PAGE 1

MIDDLE EAST LNG

Closing date

Close High Low % change

Brent Crude, $/bbl 3 Aug 43.10 43.47 41.56 3.11

WTI Crude, $/bbl 3 Aug 40.83 41.20 39.19 3.34

Henry Hub, $/MMBtu 3 Aug 2.84 2.87 2.72 3.88

NBP, p/th 3 Aug 34.78 35.15 34.71 -1.61

TTF, €/MWh 3 Aug 13.70 13.78 13.61 -0.73

Gaspool, €/MWh 3 Aug 13.85 – – -4.74

NCG, €/MWh 3 Aug 13.90 – – -0.71

Central Appalachian Coal, $/t

3 Aug 39.50 – – 0.00

Newcastle Coal, $/t 3 Aug 67.30 – – -0.44

South China Coal, $/t 3 Aug 60.75 – – -0.49

Prices provided by GlobalView.GlobalView provides benchmark pricing, news and analytics for the commodities and energy sector. For more information, please contact sales.london@marketview.com.

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Natural Gas Daily | 4 August 2016 2

Renewables support cuts unsettle investors

Reductions in renewables subsidy schemes have caused a spate of legal disputes and have shaken the confidence of investors in the sector.

Andreas Walstad / Brussels

RETROACTIVE CHANGES TO renewables support schemes are blurring the outlook for investment in the sector, with wider implications for gas-to-power.

Spain is perhaps the most obvious example of how reductions in national subsidies for renewables can unsettle investor confidence. Since November 2011, 32 investment dispute settlement cases have been filed by foreign investors against the country under the Energy Charter Treaty, all relating to reductions in its renewables subsidy schemes. Domestically, there are hundreds of cases being heard by the Spanish Supreme Court.

Wind and solar power now account for around 29% of installed power generation capacity in Spain, but the growth in renewables has come at a cost.

The tariff deficit in the country’s electricity sector peaked at €30 billion ($33.5 billion) in 2014, largely as a result of uncapped subsidies for wind and solar power. The deficit has since been reduced, as the Spanish government stepped in to cut subsidies.

However, the retroactive changes to Spain’s subsidy regime have hit some investors hard and cast doubt over the future deployment of renewables in the country. The outcome of the pending disputes will be decisive to future renewables growth in Spain and elsewhere, the Brussels-based Centre for European Policy Studies (CEPS) said in a report in mid-July.

“Future cases will be all-determining. If the investors’ claims can be easily dismissed, it would send a signal that renewable energy investments are suddenly not ‘bankable’, because governments can change incentives such as feed-in-tariffs at their whim,” the report said.

The future of EU renewables policy is likely to be affected regardless, the report noted. The EU is targeting a 27% share of renewable energy in final energy consumption by 2030, but the target is not legally binding and member states will set their own targets at national level.

“If the courts rule in favour of the investors, member states will be even more cautious when designing support mechanisms,

ensuring a tight control of costs and avoiding commitments,” the report said. “As a result, they may lower their ambitions in setting their own targets for 2030 – an upcoming task planned for 2018, as part of the ’governance’ for the 2030 energy and climate framework.”

RED II, standing byAll eyes are on the European Commission’s upcoming proposal for a revised Renewable Energy Directive (RED II), which is expected before the end of the year together with a broader package for electricity market reform. MEPs in the European Parliament have urged the commission to include a “grandfathering principle” in the legislation to prevent retroactive changes to renewable energy support mechanisms.

However, investor protection falls under national competence and it is doubtful Brussels can do much to intervene.

“So far the commission has tried to ignore the problem, and with good reason. Investment protection falls under national law and today in reality the commission can do very little. Even if it proposes a grandfathering provision under upcoming legislation it is unlikely that this will be approved at EU level and become legally binding,” Christian Egenhofer, director of CEPS Energy Climate House, told Interfax Natural Gas Daily.

National renewables subsidies are allowed under the EU’s state aid rules and have been necessary for member states to meet the EU’s binding 2020 targets. However, the revised Energy and Environmental State aid Guidelines from April 2014 limited support

for new installations to feed-in premiums that provide generators with a ‘top-up’ on wholesale market prices instead of a fixed tariff. The guidelines also stipulate that from 2017 member states shall set up tenders for all new installations, an auctioning system where the most cost-effective project is selected for state support.

“In some countries, the speed of renewables deployment and the feed-in tariffs were too high. Some projects in Bulgaria and Romania received feed-in tariffs of around €180/MWh, which was absurdly high,” said Egenhofer. “Everybody knew it would be changed at some point. But it is a question of how you handle the changes – some common EU rules on how to handle this would be useful.”

The CEPS report said investments in the renewables sector will persist in member states with stable support policies and “unambiguous long-term commitments”. This includes Austria, Denmark, Germany, Ireland, the UK and Portugal, it said.

But several stakeholders in the energy industry are lobbying for subsidies for renewables to be phased out. They say the subsidies work against the EU’s climate and energy objectives. National support schemes for renewables have also blamed for driving down prices for wholesale electricity and carbon allowances under the EU’s Emission Trading System, thus contributing to the poor economic environment for gas-fired power plants.

We welcome your comments. Email us at comments@interfax.co.uk.

A wind farm in Spain. Retroactive changes to the country’s renewables subsidies have angered investors. (Iberdrola)

EUROPE POLICY & REGULATION

Natural Gas Daily | 4 August 2016 3

SOCAR counts casualties in post-coup Turkey

As one of the largest foreign investors in Turkey, SOCAR has been treading carefully following last month’s failed coup.

Paul Sampson / London

ON 16 JULY, the day after the botched coup in Turkey, the Turkish affiliate of State Oil Company of Azerbaijan Republic (SOCAR) released a statement condemning the plotters’ “anachronistic and anti-democratic actions aimed at creating economic instability”.

But this public show of support from one of the largest foreign investors in the country has not spared SOCAR Turkey Enerji from the ongoing purge of ‘Gulenists’ – supporters of Muslim cleric Fethullah Gülen, who is in exile in the United States – that has led to the dismissal and, in some cases arrest, of thousands of soldiers, university teachers and other Turkish state employees.

There are contradictory reports about the scale of the cull at SOCAR’s Turkish subsidiary; state-owned news agency Anatolia claims more than 200 of the company’s employees have been sacked and dozens have been arrested, although SOCAR has said the figure is much lower.

The most dramatic impact on SOCAR’s activities so far has been the dismissal and subsequent arrest last week of Saadetin Korkut, the head of the Petkim petrochemical plant in Izmir, which is publicly listed and majority-owned by SOCAR.

Korkut is reportedly still under house arrest, and police are searching his office in Izmir. His deputy and Pektim’s head of security were also detained this week, according to local media. It is far from clear if is the end of the crackdown.

Aware of the gravity of the situation, SOCAR reacted with alacrity by appointing Anar Mammedov, an Azerbaijani who last year was appointed to head up the company’s Greek operations, as Petkim’s new chief executive.

Vagif Aliyev, the chairman of SOCAR Energy, condemned the coup and reiterated the company’s support for the Turkish government. “All our partners agree with us,” he told Turkish state media.

But there is still unease in Baku about the repercussion of the clampdown on

its operations and how far the regime of President Recep Tayyip Erdogan will go to flush out its perceived opponents.

As Turkey’s largest petrochemicals producer and a major supplier to textile plants, Petkim plays a key role in supporting Turkish industry and its closure would cause major economic disruption. Petkim also controls Petlim, a major container port at Izmir, in which Goldman Sachs acquired a 30% interest two years ago. “So the Turks should tread a bit carefully,” said a Baku-based industry source with a close relationship to SOCAR.

Turkey’s energy minister, Berat Albayrak, stressed this week that the “inspections” at Pektim’s offices were not related to SOCAR’s activities in the country. As Erdogan’s son-in-law, his words carry serious weight.

Azerbaijani supportIn Baku, the government of President Ilham Aliyev has fallen in line by revoking the licence of a television station that ran an interview with Gulen, and shutting down a university linked to the cleric.

This is not the first time the Aliyev administration has targeted the Gulen network: Two years ago, several schools in Azerbaijan were shut down following a visit by Erdogan to Baku, in which he reportedly gave Aliyev a list of suspected list of Gulenists.

Azerbaijan’s vocal support for Erdogan underlines Turkey’s importance as an energy bridge linking the Caspian to Europe. Azerbaijan relies on the Baku-Tbilisi-Ceyhan

pipeline to import most of its oil, while Turkey buys 6-7 billion cubic metres of gas per year from the BP-operated Shah Deniz field.

The Azerbaijani government also owns a 58% stake in the Trans-Anatolian Gas Pipeline (TANAP) that, if all goes to plan, will pump 10 bcm/y of gas from Shah Deniz Phase 2 across Turkey to Greece by the end of the decade.

Costing more than $9 billion, TANAP will drain Azerbaijan’s resources, and SOCAR is continuing to look for funding from international lenders. The other partners in the consortium are Turkish state pipeline operator BOTAS, with 30%, and BP, with 12%. Under the TANAP charter, Azerbaijan must own a minimum 51% stake in the project.

However, the relationship between Baku and Ankara works both ways, and the Turks need TANAP almost as much as the Azerbaijanis do.

“It is a pivotal project for Turkey, because it will give them an extra source of gas and reduce their dependence on Russia,” said another industry source in Baku who did not want to be identified.

Under a long-term contract between the Shah Deniz shareholders and BOTAS, Turkey will receive 6 bcm/y of gas from Phase 2, in addition to the 6-7 bcm/y it already buys. As the government continues its campaign to diversify its sources of supply, these extra volumes will be crucial.

We welcome your comments. Email us at comments@interfax.co.uk.

A SOCAR processing plant in Azerbaijan. The company has condemned the attempted Turkish coup. (SOCAR)

MIDDLE EAST MARKETS

Natural Gas Daily | 4 August 2016 4

New York carbon goals give nuclear a boost

Regulatory support for nuclear power as a form of zero-carbon energy looks set to give the sector a much-needed stimulus.

Therese Robinson / Boston

THE NUCLEAR INDUSTRY in the United States is set for a muted renaissance after New York state officials approved a clean energy programme that will see three of the state’s four nuclear plants paid $950 million in subsidies to stay online and help meet carbon goals.

The subsidies form part of the Clean Energy Standard (CES), approved by the New York Public Service Commission on Monday.

The CES places nuclear on a par with wind, solar and other renewable sources as an emission-free means of meeting the state’s target of 50% clean power by 2030.

The nuclear subsidies will keep the plants operating for the first two years of the programme and through to 2029. Without the three nuclear plants, the state is not expected to be able to meet its 2030 emissions target, which also includes a 40% reduction in greenhouse gas emissions.

Exelon and Entergy, the operators of the three plants, said they would close in the next few years without support from the government. Low oil prices and the increasing use of cheaper, cleaner gas-fired power to replace nuclear generation has proved popular, but gas contributes significantly more to carbon dioxide emissions compared with zero-emission nuclear. Gas emits 53 kg of CO2 per MMBtu when burned.

Matt Crozat, the Nuclear Energy Institute’s (NEI’s) senior director of business policy, told Interfax Natural Gas Daily that New York’s decision was “fairly unique” and suggested other states “may also start looking at nuclear as part of their future plans to meet climate change targets”.

Carol Browner, a former Environmental Protection Agency (EPA) administrator and a member of Nuclear Matters, an organisation promoting nuclear energy, told reporters in New York that the decision was “an example to other states that existing nuclear deserves to be properly credited for its carbon-free energy”.

The US has 99 operational nuclear reactors in 30 states, which generate 20% of the country’s electricity. US nuclear plants are the country’s largest source of carbon-free

power, producing nearly 60% of its zero-emission electricity, the Energy Information Administration (EIA) reported earlier this year.

“America’s 99 reactors are a significant Clean Air Act compliance tool, preventing [the emission of] 960,000 tons of sulphur dioxide and 480,000 tons of nitrogen oxides in 2014 […] In addition, the [EPA’s] new Clean Power Plan [CPP] explicitly recognises that nuclear energy is essential to reduce CO2 emissions from the power sector,“ according to the NEI.

Illinois is one such state where nuclear generation could be used to meet climate targets, Crozat told Interfax Natural Gas Daily. Two of the six nuclear plants in Illinois are scheduled to close because of economic issues, but plant owners could be compensated and become part of the state’s energy policy. Nuclear supporters hope New York’s decision to include nuclear power will be noted when Illinois is reviewing its energy policy.

Nuclear is needed“To meet US emission targets, you need a significant amount of nuclear power to reach long-term goals,” Crozat said. “Between the CPP and state emission goals, nuclear could play a significant role.”

However, environmental groups such as the Sierra Club and the Friends of the Earth are opposed to nuclear power. “America’s energy future must be powered by 100% clean, renewable energy like wind and solar—and nuclear in no way meets this requirement,” a Sierra Club spokesperson said.

But when nuclear power was replaced with gas-fired generation in California after environmentalists forced the closure of the San Onofre nuclear plant in 2013, the state’s carbon emissions increased significantly. California plans to shut Diablo Canyon, its last operating nuclear plant, by 2025. PG&E, the plant’s operator, has proposed to replace the lost nuclear capacity with energy efficiency initiatives and renewables rather than gas, but has yet to confirm details.

Massachusetts is also ignoring nuclear. The state agreed on an energy bill this month to encourage utilities to generate 40% of its electricity from wind, hydro power and other renewable sources by 2030, but the bill did not mention nuclear power. The state has a single nuclear reactor at the Pilgrim plant, which is due to shut down in 2019.

The EIA estimates the share of energy generation from renewable and nuclear sources in North America will grow from 38% in 2015 to 45% in 2025, assuming the CPP is upheld and takes effect. A recent agreement between Canada, Mexico and the US established a goal to generate 50% of electricity from clean energy sources by 2025, with nuclear power included.

Although nuclear power’s share of the future generation mix in the region is expected to drop to 16% by 2025, from its 2015 level of 18%, nuclear will continue to play an important part of the future mix in helping North America achieve its 2030 climate change goals.

We welcome your comments. Email us at comments@interfax.co.uk.

Indian Point nuclear power plant, New York. The state will use nuclear to meet its emissions goals. (PA)

NORTH AMERICA ALTERNATIVE FUELS

Natural Gas Daily | 4 August 2016 5

The combined total of active oil and gas rigs in the United States and Canada rebounded in June and July from historic lows in May. The number of US rigs in operation rose from 404 at the end of May to 463 at the end of July. While the number of US rigs targeting gas remained relatively flat, the count for wells targeting oil rose from 316 at the end of May to 374 at the end of July.

In Canada, the number of rigs targeting gas more than doubled to 57 in the two months to the end of July and those targeting oil more than quadrupled to 60.

North American rig counts rebound from May lowsVerity Ratcliffe / London

NORTH AMERICA RIG COUNT

x3

x3x3 x11

x7

x4

x4 x3

x6x7x12

x5

#

Gas drilling rig

Multiple gas rigs

OPERATIONAL RIGS IN THE UNITED STATES TARGETING GAS, 29 JULY 2016

Baker Hughes/Interfax

United States

463 drilling rigs (86 gas)

0.2% week on week

10.0% month on month

98.9% year on year

UNITED STATES OIL AND GAS RIG COUNT

Week 30 2016

Week 29 2016

Week 30 2015

Week 30 2014

June to date average 2016

May 2016 June 2015 June 2014

Total 463 462 874 1,883 449 417 866 1,876

Directional 48 44 84 229 42 44 87 223

Horizontal 354 357 664 1,293 346 323 657 1,281

Other 0 0 0 0 0 0 0 0

Vertical 61 61 126 361 61 49 122 372

Source: Baker Hughes

Natural Gas Daily | 4 August 2016 6

DONG Energy reports 77% rise in H1 profitsDONG Energy has posted its first set of results since its IPO. The Danish company announced a 77% rise in net profit for H1 2016 on Wednesday compared with the same period in 2015. “We achieved very satisfactory results for H1 2016. The group’s operating profit increased by 19% compared with the same period last year, driven by strong growth in wind power,” said Henrik Poulsen, the company’s chief executive and president. However, market reaction was less favourable, with the company’s core earnings falling short of what was expected by analysts polled by Reuters. Shares in DONG were down by 2.8% at 1pm (12pm GMT) on Wednesday from their closing price on Tuesday.

Wood Group workers walk out for third timeWorkers at seven of Shell’s North Sea platforms went on strike on Wednesday in a dispute over pay cuts and conditions. This is the third time workers have taken industrial action in the past two weeks. The strike involves around 350 workers from Aberdeen-based oil services firm Wood Group, which has been forced by low oil prices to cut rates paid to approximately one-third of its workforce.

Gazprom’s net profits crash in Q2Gazprom’s net Q2 profit was RUB 7.2 billion ($108 million) – a massive drop in comparison with the RUB 137 billion the company recorded in Q2 2015, according to Interfax calculations based on Gazprom data. Profits for H1 2016 amounted to RUB 194.4 billion, 31% less than for the same period last year. Gazprom plans to publish separate figures for its Q2 results in mid-August. However, the SPARK-Interfax database has published a statement from Gazprom that its net assets amounted to RUB 9.33 trillion as of 30 June, down from RUB 9.51 trillion reported on 31 March. Gazprom’s net asset value declined by RUB 179 billion during Q2.

SOCAR looking to expand in TurkeyState Oil Company of Azerbaijan Republic (SOCAR) is implementing several large projects in Turkey and is considering expanding its business in the country, SOCAR’s press service said in a statement. SOCAR President Rovnag Abdullayev met Turkish Energy and Natural Resources CONTINUED ON PAGE 8

Minister Berat Albayrak on Tuesday to discuss SOCAR’s future investments in the country, and expressed satisfaction with the progress of construction work on the Trans-Anatolian Gas Pipeline and the STAR oil refinery. Abdullayev also met Turkish President Recep Tayyip Erdogan. SOCAR is estimated to have committed $18 billion of investment in Turkey until 2018. SOCAR owns a 56.3% stake in Turkey’s Petkim Petrokimya petrochemical complex via its subsidiary SOCAR Turkiye Enerji. SOCAR is building wind farms, the STAR refinery and the Petlim Limanchilik container terminal, and also supplies gas to the domestic market.

Ukraine has picked wrong time to buy storage gas – NasalykUkraine’s Energy Minister Ihor Nasalyk has said national joint-stock company Naftogaz Ukrainy has picked the wrong time to start buying gas for storage. He said European experts provided Naftogaz with predictions that turned out to be incorrect. “At one of the meetings I said that the necessary calculations were made by the Energy and Coal Industry Ministry for the start of gas purchases for underground inventories in May and early June […] Today’s price did not fall by $5 [per thousand cubic metres: Mcm] in July and August, it increased by $30[/Mcm],” he said on Thursday.

Russia dismisses Polish Nord Stream 2 objectionsThe Russian Foreign Ministry has described Polish anti-monopoly regulator UOKiK’s objection to the Nord Stream 2 pipeline expansion as politically motivated. “This

IN BRIEF

A DONG Energy rig. The company’s profits increased by 77% in H1 2016. (DONG Energy)

is not a decision dictated by economic reasons,” Andrei Kelin, director of the Russian Foreign Ministry’s Department for European Cooperation, told Interfax on Wednesday. UOKiK objected to the application to set up a consortium for the project. Consortium members are drafting a joint statement after receiving an additional two weeks to prepare their response. “The decision we are expecting must be pragmatic and economic. So we are hopeful that when the European Commission starts considering what decision must be taken its position will be balanced and not dictated by political factors,” Kelin said. The application to set up the joint venture was filed last December by the six consortium members – Gazprom, E.On, Engie, OMV, Shell and Wintershall.

Naftogaz expecting Gazprom dispute decision within 12 monthsNaftogaz Ukrainy expects the arbitration tribunal ruling on its dispute with Gazprom will be given by the end of the first half of 2017, Naftogaz Commercial Director Yuriy Vitrenko has written on his Facebook page. “We are on the home stretch, hearings will start next month […] The arbitration decision is expected by the end of the first half of next year. The decision on the gas purchase contract could be issued earlier – by the end of the first quarter,” he wrote.

Ukraine’s gas consumption drops by 11% in H1Ukraine’s gas consumption fell by 11.2% on an annual basis between January and June,

Natural Gas Daily | 4 August 2016 7

to 17.15 billion cubic metres, the country’s Energy and Coal Industry Ministry has reported. The industrial sector consumed 4.70 bcm (22.2% less year on year), while households and government organisations took 7.02 bcm (8.4% less), and heating companies used 3.89 bcm (6.9% less). Meanwhile, production and technological expenditure used 1.55 bcm, an increase of 7.4%. Ukraine increased its domestic gas production by 1.7%, to 10.01 bcm, during the period.

MENA leading global LNG demand – APICORPThe Middle East and North Africa (MENA) region is leading global LNG demand growth in 2016, according to research by Saudi Arabia-based APICORP. The trend is set to continue as the region’s domestic gas output falls short of its surging demand from the power and industrial sectors, the researchers said. The MENA area is on course to become the world’s second-largest gas-importing region. The low oil price is working in favour of LNG-importing countries in the region as they should be able to lock in preferential prices, said the report. “MENA countries will invest around $10.3 billion in LNG-importing facilities over the medium term to cater for growing demand, and will increasingly charter FSRUs as a temporary and lower-cost solution,” said APICORP.

Iran approves new contract framework draftIran’s cabinet approved the amended draft of Iran’s new framework for oil and gas contracts on Wednesday. More than 150 changes were made to the document, according to Iran’s state media. Iran’s supreme leader, Ali Khamenei, said last month that no new oil and gas contracts should be signed before the new framework is in place. The new Iran Petroleum Contract will replace the country’s buyback oil deals.

Third train at In Amenas repairedThe third train at the In Amenas gas plant in Algeria has been repaired and will soon be restarted, according to a Natural Gas Europe report citing a Statoil spokesperson. Train 3 was damaged during an attack on the facility by insurgents in 2013 that claimed 40 lives. News reports earlier this year claimed the train would come online in April, but Statoil, which is a partner in the

project, said that this would take several more months. Each of the three trains has a processing capacity of around 3 billion cubic metres per year.

Pakistan’s ISGS in talks on North-South pipelinePakistan’s state-owned company ISGS began talks on Wednesday with RT Global Resources (RTGR), a subsidiary of Russian state company Rostec, regarding the construction of the North-South gas pipeline. RTGR said it hoped the meetings would “achieve a consensus on the commercial aspects of the construction project for the North-South gas pipeline in Pakistan”. During the negotiations the parties will pay special attention to the tariff for pumping gas as well as other commercial operating conditions affecting the project’s economics. On the Pakistani side, the talks will be attended by ISGS and the Tariff Committee, which was specifically established by the Pakistani government for negotiations on the project, RTGR said. This new round of talks is intended to conclude the negotiation stage and enable the parties to sign a document enshrining the fundamental conditions of the project. This will allow the main commercial agreements on construction to be signed by 16 October, in accordance with the schedule specified in the intergovernmental agreement, RTGR said.

Nova Scotia approves Bear Head pipeline planThe Bear Paw Pipeline Corp. has received approval from the Nova Scotia Utility and Review Board to build the 62.5 km pipeline for the proposed Bear Head LNG plant. “Bear Paw would interconnect the Maritimes and Northeast Pipeline mainline, offshore gas and other supplies near Goldboro Nova Scotia to the Bear Head LNG export facility. The Goldboro to Point Tupper pipeline will connect Bear Head LNG to the North American gas pipeline network,” the company said. The 8 mtpa plant is owned by LNG Limited (LNGL). LNGL is hoping to take an FID next year, but this will depend on whether it can source gas in time. Darshi Jain, Bear Head’s project director, recently told Interfax Natural Gas Daily his company was “looking at several options” for gas supply, “including stranded resources in western Canadian reserves” and United States shale reserves.

CONTINUED FROM PAGE 7

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IN BRIEF

Natural Gas Daily | 4 August 2016 8