Argentina Mandates Annual Oil-Investment Plans

BUENOS AIRES—Argentina will require oil companies operating in the country to submit an annual investment plan for official approval as the government strives to boost production after years of declining output and investment.

Companies will have to submit a plan to President Cristina Kirchner's top economic adviser, Deputy Economy Minister Axel Kicillof, by Sept. 30 of each year.

If the government isn't satisfied, it will send the plan back to the company for revision, according to new rules published Friday in the Official Bulletin. Failure to have the plan approved will result in expulsion from a registry required to operate in the company's oil-and-gas sector.

The move seems set to affect companies such as Apache Corp., Chevron Corp., Petrobras Argentina, the local unit of Brazil's Petroleo Brasileiro and Pan American Energy LLC.

BP PLC owns a 60% stake in Pan American. The remaining 40% is equally split between Argentina's Bridas Energy Holdings Ltd. and China's Cnooc Ltd..

In addition, Mr. Kicillof's office will set reference prices for every cost and sales price for oil and gas sales, "which will allow [companies] to cover production costs and obtain a reasonable margin," according to the resolution.

Companies affected by the new policy couldn't be reached or declined to comment on the record for this article. It appeared the government hadn't spoken with any of them before announcing the policy changes.

The recently nationalized oil-and-gas producer YPF SA also declined to comment.

"We can't comment on this. We didn't know anything about it. We'll have to study the rules and analyze their impact," said an official at an oil-and-gas company who declined to be named.

Carlos Pierro, an energy analyst and former YPF president, said the rules could negatively affect the sector.

"Every time they move ahead with policies like this, the only thing they achieve is to discourage investment," Mr. Pierro said.

The move is the latest in a series of steps by the government to exert more control on the energy industry.

In May, the government nationalized a 51% stake in the country's top oil producer, YPF, from Spain's Repsol YPF SA in a dispute over investment and lower production. The government also declared oil production to be in the national interest, setting the stage for much broader intervention in the energy industry.

Ms. Kirchner accused Repsol of under-investing in exploration and production, which she said has forced the government to import billions of dollars worth of fuel every year.

Indeed, last year, Argentina became a net energy importer for the first time in 17 years, and it is on track to import even more in coming years as demand outstrips production.

Companies say price caps and constantly shifting policies have stifled investment instead of encouraging it.
—Taos Turner contributed to this article.

Hong Kong Tycoon to Pay $1 Billion for British Gas Firm

HONG KONG — A consortium of companies owned by Li Ka-shing, the richest person in Asia, agreed on Wednesday to buy MGN Gas Networks of Britain for £645 million ($1 billion), as Mr. Li’s corporate empire continued to broaden its already large global footprint in the energy sector.

Three Hong Kong-listed companies controlled by Mr. Li and his family — Cheung Kong Holdings, Cheung Kong Infrastructure and Power Assets Holdings — each have a 30 percent stake in the bidding consortium, while the charitable Li Ka-shing Foundation will hold the remaining 10 percent stake, according to a joint stock exchange announcement on Wednesday.

Mr. Li, 84, is ranked by Forbes as the world’s ninth-wealthiest person, with a net worth of $25.5 billion.

His companies, Cheung Kong Infrastructure and Power Assets, already have substantial investments in Britain’s natural gas, water and electricity sectors. That includes a combined 88.4 percent stake in Northern Gas Networks, a regulated distributor that supplies natural gas to around 6.7 million people and has almost 23,000 miles of pipeline stretching from the Scottish border to South Yorkshire.

The Li firms appear to be betting the complementary nature of MGN’s British gas business will enable them to engineer a turnaround at its unprofitable operations.

MGN Gas Networks, through its wholly owned Wales & West Utilities, distributes natural gas throughout Wales and southwest England. Its network supplies 7.4 million customers, and it has 21,750 miles of pipeline.

The company reported a net pretax loss of £63.4 million in the fiscal year ended March 31, slightly worse than the £62.8 million net loss it booked in the previous fiscal year. It had net liabilities of £250.4 million at the end of March.

The Li firms are buying MGN from a group of shareholders that includes several infrastructure funds managed by Macquarie; the Toronto-based Canada Pension Plan; the trustee of a fund run by the portfolio manager Industry Funds Management; and the real estate and investment house AMP Capital. The deal will be settled in cash.

Completion of the MGN deal is subject to approval by the European Commission. The deal is also contingent on the Li companies being able to retain majority control of the equity and assets of Northern Gas in the event they are required by European regulators to sell part of their combined 88.4 percent stake in that firm.

Shares in Cheung Kong Infrastructure were suspended from trading on Wednesday, while shares in Cheung Kong Holdings closed down 0.9 percent and shares in Power Assets finished 1.6 percent lower after the deal was announced.

Petronas to Buy Progress Energy for $5.35 Billion

Petronas, the Malaysian state-owned oil and gas company, agreed on Thursday to buy Progress Energy Resources of Canada, the latest in a wave of energy deals.

Under the terms of the deal, Petronas will pay nearly $20 a share for Progress Energy. The bid represents an 83 percent premium to the company’s average share price over the past 30 days.

It is the latest deal in the natural resources sector, as companies seek to take advantage of the boom in North American natural gas. Analysts and investment bankers have said Asian countries may become more significant buyers as they hope to harness the latest technology used to plumb oil- and gas-rich rock formations.

The two companies have a history. Last year, Progress Energy sold a stake in its British Columbia venture to Petronas for about $1.1 billion.

With the acquisition, Petronas will build on its position in liquefied natural gas. The Malaysian company will combine its Canadian operations with those of Progress Energy, keeping all of that company’s employees on board.

Should Progress Energy withdraw from the deal, Petronas is entitled to a breakup fee of about 150 million Canadian dollars ($146 million).

Petronas was advised by Bank of America Merrill Lynch and the law firm Norton Rose Canada. Progress Energy was advised by BMO Capital Markets, Scotia Waterous and the law firm Burnet, Duckworth & Palmer.

SEC Accuses Billionaire's Firm Of Insider Trading In CNOOC-Nexen Deal

A trading firm controlled by Hong Kong billionaire Zhang Zhirong reaped more millions in illegal profits by trading on inside information about the biggest energy deal in recent memory, U.S. regulators say.

In a complaint released Friday, the SEC alleges Well Advantage Limited and other unknown traders in Hong Kong and Singapore stockpiled shares of Canadian energy concern Nexen in the days before Chinese firm CNOOC announced a $15.1 billion acquisition of the company July 23.
The SEC froze the assets’ of the traders in question after Well Advantage moved to liquidate its entire position in Nexen after shares leaped on news of the CNOOC takeover. Zhang Zhi Rhong, the SEC’s Enforcement Division says controls another company that has a strategic agreement with CNOOC.

“Well Advantage and these other traders engaged in an all-too-familiar pattern of misusing inside information to place extremely timely trades and profit handsomely from their illegal acts,” said the SEC’s Sanjay Wadhwa. “Despite the challenges of investigating misconduct in the U.S. by trading accounts located overseas, we have moved swiftly to freeze the assets of these suspicious traders and will hold them accountable for their actions.”
The complaint claims that Well Advantage and the other traders had nonpublic information about the CNOOC takeover when they loaded up on Nexen shares. “Well Advantage purchased more than 830,000 shares of Nexen on July 19 and had an unrealized trading profit of more than $7 million based on Nexen’s closing price on the day of the announcement,” the SEC says. The other unknown traders made $6 million by immediately selling nearly all their shares upon the deal announcement.

The SEC obtained an emergency court order freezing $38 million in assets.

SEC Accuses Billionaire's Firm Of Insider Trading In CNOOC-Nexen Deal

A trading firm controlled by Hong Kong billionaire Zhang Zhirong reaped more millions in illegal profits by trading on inside information about the biggest energy deal in recent memory, U.S. regulators say.

In a complaint released Friday, the SEC alleges Well Advantage Limited and other unknown traders in Hong Kong and Singapore stockpiled shares of Canadian energy concern Nexen in the days before Chinese firm CNOOC announced a $15.1 billion acquisition of the company July 23.
The SEC froze the assets’ of the traders in question after Well Advantage moved to liquidate its entire position in Nexen after shares leaped on news of the CNOOC takeover. Zhang Zhi Rhong, the SEC’s Enforcement Division says controls another company that has a strategic agreement with CNOOC.

“Well Advantage and these other traders engaged in an all-too-familiar pattern of misusing inside information to place extremely timely trades and profit handsomely from their illegal acts,” said the SEC’s Sanjay Wadhwa. “Despite the challenges of investigating misconduct in the U.S. by trading accounts located overseas, we have moved swiftly to freeze the assets of these suspicious traders and will hold them accountable for their actions.”
The complaint claims that Well Advantage and the other traders had nonpublic information about the CNOOC takeover when they loaded up on Nexen shares. “Well Advantage purchased more than 830,000 shares of Nexen on July 19 and had an unrealized trading profit of more than $7 million based on Nexen’s closing price on the day of the announcement,” the SEC says. The other unknown traders made $6 million by immediately selling nearly all their shares upon the deal announcement.

The SEC obtained an emergency court order freezing $38 million in assets.

LNG Infrastructure Investment to Be USD 35.8 Billion in 2012

Global Information Inc. published the new market research report: The Liquefied Natural Gas (LNG) Market 2012-2022.

New research puts the value of global investment in infrastructure for LNG on track to reach $35.8 billion in 2012, including all capital investment in the infrastructure required for the production, transportation and regasification of LNG.

By the early 1960s the world had not yet seen any significant commercial trade in liquefied natural gas, but by the end of that decade commercial trade in LNG began to enable Japan to import gas through LNG. The world currently has substantial capacity to export LNG. The construction projects and plans for further capacity increase for LNG terminals across the globe imply that worldwide capacity for LNG production and trade will be increasing throughout the forecast period.

Capacity additions to all major national LNG import and export markets will drive growth in the LNG market. Over the forecast period of this report, many countries will see numerous new LNG production plants come on-stream, allowing those countries to exploit their natural gas reservoirs for export earnings. On the other hand, LNG regasification and storage terminals will enable countries or regions with limited access to natural gas resources to supplement their gas supplies as gas is currently the most efficient and effective form of electric power production and it is widely used for heating. Naturally, an increasing number of LNG carriers will be required in order to allow LNG trade to grow.

Anadarko Discovers Gas Offshore Ghana


Posted on Jul 20th, 2012 with tags Anadarko, Discovers, gas, Ghana, News, Offshore .

Anadarko Discovers Gas Offshore Ghana

Anadarko Petroleum Corporation today announced the Wawa-1 exploration well, located in the Deepwater Tano Block offshore the Republic of Ghana, discovered approximately 43 net feet (13 meters) of oil pay and 65 net feet (20 meters) of gas-condensate pay in Turonian-aged reservoirs.

Samples from the well show the oil is of good quality, between 38 and 44 degrees API, and pressure data indicate the Wawa discovery is a separate and distinct accumulation from the adjacent TEN (Tweneboa, Enyenra and Ntomme) complex.

“The Wawa discovery extends the presence of hydrocarbon-bearing formations more than 6 miles (10 kilometers) to the north of the Enyenra-3A well,” said Anadarko Sr. Vice President, International and Deepwater Exploration, Bob Daniels. “The discovery enhances the value of the TEN complex, which is advancing toward submission of a plan of development. The partnership plans further exploration of the Deepwater Tano Block with additional wells scheduled at our Okure and Sapele prospects later this year.”

The Wawa-1 exploration well is located in approximately 1,926 feet (587 meters) of water. The well was drilled to a total depth of approximately 10,899 feet (3,322 meters). Once operations are complete, the well will be suspended for possible future use in appraisal and development operations.

Anadarko has an 18-percent working interest in the Deepwater Tano Block. Partners in the block include Tullow Oil plc (49.95-percent working interest and operator), Kosmos Energy (18-percent working interest), Sabre Oil & Gas Holdings Ltd (4.05-percent working interest) and the Ghana National Petroleum Corporation (10-percent carried interest).

Good point

The Shaw Group agrees to CB&I's $3 billion takeover bid

Chicago Bridge & Iron Co. (NYSE: CBI) agreed to buy The Shaw Group Inc. (NYSE: SHAW) for about $3 billion, expanding its portfolio of engineering and construction projects across the energy industry and adding nuclear building services, reports CNBC.

The combined company will be one of the largest energy construction and engineering contracting firms globally with a work backlog of more than $28 billion, CB&I said in a statement. CB&I is based in The Netherlands, and keeps its administrative headquarters in The Woodlands.

Baton Rouge, La.-based The Shaw Group is building the first new nuclear reactors permitted since 1978 in the U.S.

CB&I, whose clients include energy companies like Chevron Corp. (NYSE: CVX) and Exxon Mobil Corp. (NYSE: XOM) said it would use cash on the balance sheets of both companies, along with about $1.9 billion in debt, to finance the acquisition.

CB&I will pay $46 a share in cash and stock, according to statements by the companies. The deal is expected to close during the first quarter of 2013.

Shaw will continue as a business segment branded as CB&I Shaw. Shaw CEO J.M. Bernhard Jr. will leave after the deal closes and CB&I CEO Philip Asherman will lead the combined company.

Halliburton opens internal probe on Iraq, Angola operations

Halliburton Co. (NYSE: HAL) has begun internal investigations into its operations in Angola and Iraq, according to a July 27 federal filing and reported by Bloomberg.

The probes are looking at payments made to third-party agents related to customs matters in Angola and Iraq, as well as visa issues in Iraq, Bloomberg reports.

Houston-based Halliburton alerted U.S. Justice Department and Securities and Exchange officials during the second quarter that it had begun the inquiry after meeting with them about another internal investigation the company has under way about possible violations of the Foreign Corrupt Practices Act, Bloomberg reports.

Halliburton has previously said it received an anonymous email in December 2010 alleging that current and former employees violated Halliburton’s own business-conduct codes and the FCPA, mainly through its dealings with an Angolan vendor, reports Bloomberg.

Halliburton reported second quarter-earnings of $737 million, or 80 cents per share, down less than 1 percent from the second quarter last year.

Good contributions. Keep them coming.

CAMAC Energy divests China interests

CAMAC Energy Inc. (NYSE Amex: CAK), a Houston company that makes deals to develop energy projects outside the U.S., said Tuesday it is divesting its interest in the Zijinshan Gas Block in China and will sell its shares to a natural resources mining company in Beijing.

CAMAC is divesting its wholly owned subsidiary, Hong Kong-based Pacific Asia Petroleum Ltd., for $2.5 million in cash and 10 million shares to Beijing-based Leyshon Resources Ltd.

The Houston company, advised by Hong Kong-based Somerley Ltd., said the deal is expected to close in two weeks. The proceeds and savings from the deal will go toward reinvestments in its exploration ventures in Africa.

The company’s employees in China will join Leyshon Resources at the deal close.

Kase Lawal, chairman and CEO of CAMAC, said the company “is pleased to execute this definitive share sale and purchase agreement with Leyshon Resources for the sale of our Chinese assets.”

“In addition to providing a cash infusion and a shareholder interest in Leyshon, this transaction also eliminates the Company’s future financial obligations for overhead and exploration expense in China,” Lawal said.

Oneok to put $1bn into Mont Belvieu, Bakken gas, NGLs

Houston, 26 July (Argus) — US midstream operator Oneok Partners will invest another $1bn to build a new natural gas liquids (NGLs) fractionator and a new ethane:propane splitter at the Mont Belvieu, Texas, hub, as well as a new natural gas processing plant in the Williston basin and an expansion of its Bakken NGL pipeline.

At Mont Belvieu the company said it would construct a third 75,000 b/d fractionation train at a cost of between $375mn-$415mn. That fractionator is expected to go into operation by the end of 2014. Oneok currently has an 80pc interest in a 160,000 b/d train and 100pc ownership of another 75,000 b/d train, which is currently under construction at Mont Belvieu.

Oneok is in the process of building the Sterling III pipeline, which is expected to be completed in late 2013, and which will initially transport 193,000 b/d of either unfractionated NGLs or purity NGL products from the US midcontinent down to the Gulf coast. That pipeline could be expanded to carry as much as 250,000 b/d.

In the Williston basin of North Dakota, the partnership announced today that it plans to invest $310mn -$345mn in the construction of a second Garden Creek gas plant adjacent to its existing facility. Once all of Oneok's announced gas plants are operational in the Bakken shale formation, the company will be able to process a total of 490mn ft3/d of natural gas.

But in order to provide takeaway capacity for the additional NGL volumes, Oneok said it will expand its Bakken NGL pipeline to carry 135,000 b/d, up from the current 60,000 b/d capacity. The pipeline – which will carry unfractionated NGLs out of the Bakken to Conway, Kansas, via its 50pc-owned Overland Pass pipeline – will cost $100mn.

The fast-expanding US Gulf coast petrochemical industry is prompting Oneok to invest $45mn in a “splitter” at Mont Belvieu to separate purity ethane out of ethane:propane mix.

And the company also plans to put $150mn-$160mn in additional NGL storage facilities at Mont Belvieu, as well as in gathering systems in the midcontinent and in ongoing pipeline projects.

“These projects reflect our continuing commitment to provide natural gas processing, and NGL fractionation and transportation capacity to producers actively developing shale plays within our operating footprint,” Pierce Norton, executive vice-president and chief operating officer of Oneok Partners, said.

Today's announcement brings Onoek's anticipated capital investment in natural gas gathering and processing and NGLs and crude infrastructure to between $5.7bn-$6.6bn between now and 2015.

UK government unveils gas field tax break scheme

London, 25 July (Argus) — The UK government today launched a £20mn/yr ($31mn/yr) tax break scheme to encourage the development of shallow-water gas fields in the UK's offshore.

The £500mn “field allowance” aims to secure future investment in North Sea gas. The government said the tax break signals its long-term commitment to the role of gas in the energy mix up to and beyond 2030. “We do not expect the role of gas to be restricted to providing back up to renewables,” it said.

To qualify for the tax break, a field will need to be in a water depth of less than 30m, with gas accounting for at least 95pc of the field's total reserves. Fields with reserves estimates of between 10bn m³ and 20bn m³ will be entitled to the full allowance, while fields with reserves above 25bn m³ will not receive the tax break.

The allowance will exempt £500mn of the field's income from the UK's 32pc supplementary charge tax rate, although a 30pc ring-fenced corporation tax will still be payable. The tax break is expected to cost the government around £20mn/yr.

Drilling in UK waters has declined in recent years, with just 14 exploration wells drilled in 2011, down from 44 in 2008. And just 28 appraisal wells were drilled in the whole of last year, compared with 34 in 2010 and 77 in 2007. The trend appears to have continued in 2012, with just 13 wells drilled in the first six months of the year.

The news of the tax break comes ahead of the unveiling of the government's gas strategy later in the year, which it says will provide investors with certainty about the UK's long-term commitment to gas.

UK gas production has been falling since 2000, with total production in 2011 dropping to 47.8bn m³ from 59.7bn m³ in 2010. The current best government estimate is that production will drop to 42.6bn m³ in 2012, and to 42.2bn m³ in 2013. By 2017 production is forecast to drop to just 37.7bn m³/yr.

Gazprom to buy Brunei gas

London, 24 July (Argus) — With talks between Gazprom and its Shtokman partners at an impasse, the Russian exporter is in talks to buy non-contracted gas from Brunei LNG after 2013, a Gazprom official has told Argus.

The official did not specify quantities, or for how long Gazprom plans to buy. The LNG would be secured by the firm's UK gas trading arm for further resale.

The deal would be a logical outcome of long-term negotiations between Gazprom, Brunei LNG shareholders and the government of Brunei.

Brunei LNG currently sells 85pc and 10pc of its 7.3mn t/yr output to Japan and South Korea, respectively, under long-term contracts. The remaining 5pc is sold via the spot market. The long-term contracts expire in April 2013.

Japanese buyers Tepco, Osaka Gas and Tokyo Gas earlier this year extended their contracts for a further 10 years from April 2013. But their purchases of 3.4mn t/yr are 43pc lower than the currently contracted 6.28mn t/yr. This means that Gazprom can buy at least 2.88mn t/yr until 2023. South Korean buyer Kogas extended its 700,000 t/yr supply deal until 2023.

Gazprom, which can sell just 1mn t/yr of Sakhalin 2 gas, is interested in expanding its LNG portfolio ahead of an expected shortfall in 2013-15. But the company aims to begin operations at its own LNG plant at some point in 2016-18. Gazprom is working on a feasibility study for a 10mn t/yr LNG plant in Vladivostok and a pre-feasibility study for a 5mn t/yr third train at Gazprom-led Sakhalin 2.

The price that Brunei LNG will offer to Gazprom is as yet unclear. The Russian group could be well placed to secure favourable terms, given that Brunei LNG shareholders Shell and Mitsubishi partner with Gazprom in Sakhalin 2. Shell and Mitsubishi hold stakes of 27.5pc and 10pc in Sakhalin 2, respectively.

Foreign firms involved in the project depend on Gazprom building the third 5mn t/yr LNG train at Sakhalin 2, as this requires gas from Gazprom's fields outside of Sakhalin 2. The decision on the expansion of Sakhalin 2 is expected to be taken in early 2013, once the pre-feasibility study is completed later this year.

Meanwhile, Osaka Gas, which reduced its contracted volumes with Brunei LNG from 740,000 t/yr to 370,000 t/yr, has requested from Sakhalin Energy at least 200,000 t/yr of LNG starting from 2013. Tepco, which lowered its Brunei LNG purchases from 4.3mn t/yr to 2.03mn t/yr, is also in discussions with Sakhalin Energy and Gazprom over the purchase of more gas from Sakhalin 2.

The price of LNG from Sakhalin 2 is the lowest on the market, and the sailing distance from Sakhalin to Japan is the shortest in comparison to other export destinations.

Sakhalin 2 could now sell an additional 1mn t/yr on top of the contracted 9.6mn t/yr, after the operator de-bottlenecked its transportation system. Gazprom is able to sell another 1mn t/yr of Sakhalin 2 gas outside of Sakhalin Energy.

France reiterates hydraulic fracturing ban

London, 20 July (Argus) — France's new government has no plans to revisit a ban on the use of hydraulic fracturing that has effectively halted the development of the country's potentially significant shale gas reserves.

The government's position on the prohibition of shale gas developments is “clear and distinct”, environment minister Delphine Batho said. “Nowhere in the world has it been shown that [shale gas] can be developed without doing considerable damage to the environment or running significant public health risks.”

France banned the use of hydraulic fracturing in May last year, and in October it rescinded three shale permits it had awarded in March 2010, two licenced to US firm Schuepbach Energy and the other to Total.

A study commissioned by the US EIA last year pegged France's technically recoverable shale gas reserves at just over 5 trillion m³, which would give the country larger gas reserves than even Norway. The same study estimated Norway's combined conventional and shale reserves at 4.4 trillion m³.

At the time the ban was passed French oil industry association Ufip said it “regretted” the decision. “No one today knows with certainty if the potential of shale hydrocarbons beneath France is sufficiently promising to envisage industrial exploitation. The companies simply ask to be able to complete their research and draw up a balance sheet of the situation,” it said.

US ethanol output drops to two-year low – EIA

Houston, 11 July (Argus) — US ethanol production dropped to a nearly two-year low during the week that ended 6 July and inventories also fell sharply, falling to their lowest level since early January as drought in the midcontinent has lifted corn prices and mangled ethanol producer margins.

Stockpiles of US ethanol were down by nearly 4pc last week as they fell to 19.53mn bl, or lower by 761,000 bl from the previous week. Inventories have not stood this low since the first week of the year, according to the latest weekly figures from the Energy Information Administration (EIA).

The decline came despite a slight uptick in inventories in the midcontinent and Rocky Mountain regions as the east coast shed 377,000 bl to 7.4mn bl, the Gulf coast lost 320,000 bl to 2.8mn bl and the west coast region dropped 158,000 bl to 2.3mn bl on a week-over-week basis. Midcontinent inventories were up 25,000 bl to 6.8mn bl, and Rocky Mountain stocks edged higher by 1,000 bl to 267,000 bl.

Overall ethanol production fell by 36,000 b/d last week to average 821,000 b/d. US production hasn't been this low since the week that ended 23 July 2010, when production stood at 816,000 b/d. The cuts to output last week were led by a 24,000 b/d drop in the key midcontinent producing region to 760,000 b/d. Data broken out for other regions is not yet available, according to the EIA.

Blended inputs of ethanol dropped by 6,000 b/d to 854,000 b/d. The largest drops were seen in the midcontinent and west coast, where inputs dropped by 6,000 b/d to 237,000 b/d and by 3,000 b/d to 145,000 b/d, respectively.

Total production of finished motor gasoline dropped 70,000 b/d to average 9.32mn b/d while ethanol-blended gasoline output was down 100,000 b/d to 8.53mn b/d. Ethanol-blended gasoline made up 91.6pc of the total gasoline pool, down 0.38pt from the previous week.

Venezuela’s Ramirez in China to extend cash-for-oil loans

Caracas, 11 July (Argus) — Venezuela's energy minister, Rafael Ramirez, is leading a group of senior government energy and finance officials in talks with Chinese officials this week aimed at securing new credit agreements structured as cash-for-oil loans and conventional project financing deals.

The negotiations, led by Ramirez, were sought by President Hugo Chavez in written communications to Prime Minister Wen Jiabao and China Development Bank president Chen Yuan, Venezuelan energy ministry officials said.

Chavez requested that Ramirez be granted personal audiences with China's prime minister, CDB's chief and other senior Chinese government officials to “review and expand” the energy-driven strategic partnership between Venezuela and China, the officials confirmed.

The Chavez government and state-owned oil firm PdV have signed more than 350 co-operation, joint venture and loan agreements since 2005 that, if carried out in full, are worth more than $100bn of joint capital expenditures in upstream and downstream crude production and upgrading JVs in Venezuela. PdV and CNPC also have JVs to build three refineries in China, with a combined crude processing capacity of 800,000 b/d.

In addition, the Chavez government has borrowed $40bn from CDB since 2007, structured as cash-for-oil loans deals which PdV is repaying with oil and refined product shipments. PdV already has repaid more than $8bn, leaving some $32bn still outstanding.

Chavez wants to secure another $10bn-$20bn in credit commitments from CDB during the second half of the, according to energy ministry officials.

Ramirez's talks with senior Chinese officials come at a time when PdV has increased its oil and products exports to China from an average 430,000 b/d at the end of 2011 to 600,000 b/d as of 30 June 2012, according to PdV.

But PdV's exports to China will reach 1mn b/d “within two years,” President Chavez said late last week. PdV and CNPC now jointly operate six very large crude carriers (VLCCs) that transport oil to China.

Chavez also said on 6 July that Venezuela's defense ministry has signed a contract worth more than $500mn to purchase Chinese-made amphibious armored vehicles and self-propelled howitzers. The arms purchase will be financed through existing cash-for-oil agreements, and will be repaid in crude and petroleum products.

Ecuador Court Increases Chevron Damages Bill to $19.02B

QUITO - An Ecuadorian judge has ruled that Chevron Corp. must pay $19.02 billion in environmental damages stemming from its operations in Ecuador.

The amount is higher than an original damage ruling issued last February and ratified in January, which ordered the U.S. company to pay about $18.2 billion, holding it responsible for environmental and punitive damages related to oil operations in the Andean country's Amazon region.

In an official court document issued Monday and reviewed late Thursday by Dow Jones Newswires, Judge Lilia Ortiz said the $19.02 billion includes about $1.7 billion for the Amazon Defense Front, a coalition formed by the plaintiffs, and $8.6 billion because Chevron didn't apologize .

Chevron representatives were not immediately available for comment. It has previously denied responsibility for the claims.

Representatives of Ecuadorian indigenous groups are seeking compensation from Chevron for contamination of their land as a result of Texaco's operations in the country. Chevron inherited the lawsuit in 2001 when it acquired Texaco, which had operations in Ecuador from 1964 to 1992

AGT: Australia Firmly On Track to Become Top Global LNG Exporter


Australia is on course to overtake Qatar as the world's top liquefied natural gas (LNG) exporter by the end of the decade, supplying one-fifth of global LNG supply by 2020, Western Australia's Minister for Finance; Commerce; Small Business Simon O'Brien said Thursday.

O'Brien was speaking at the inaugural Australian Gas Technology Conference & Exhibition at the Perth Convention Exhibition Centre.

Australia is currently the world's fourth largest exporter of LNG and the country accounts for 9-percent of global LNG output.

In his speech, O'Brien disclosed that there are at present $98 billion worth of LNG projects under construction or planning in Western Australia and a further $77 billion worth of LNG projects under construction.

O'Brien also touched on specific project developments during his speech.

"In recent months, we have welcomed Chevron's decision to proceed with the Wheatstone Project. We are awaiting investment outcomes for Woodside's Browse development and the expansion to a fourth train of the Gorgon operation," O'Brien said.

The Chevron-operated Wheatstone Project is sited 7.5 miles (12 kilometers) west of Onslow in Western Australia. The foundation phase of the project consists of two LNG trains with a combined capacity of 8.9 million tonnes per annum (mtpa) and a domestic gas plant. The project's scheduled start date is 2016.

The Browse LNG Development, operated by Woodside, is a project conceived to commercialize the Browse joint venture's three gas and condensate fields - Brecknock (discovered 1979), Calliance (discovered 2000) and Torosa (discovered 1971) - located 264 miles (425 kilometers) north of Broome, off the remote Kimberley coast. Gas and liquids from these offshore fields will be brought to an onshore LNG plant at the Western Australian government's Browse LNG Precinct, near James Price Point, 37 miles (60 kilometers) north of Broome. The three fields contain contingent resources of 15.5 trillion cubic feet of dry gas and 417 million barrels of oil. The Browse LNG Development is awaiting the green light from Western Australia's state government and the federal government.

The Chevron-operated Gorgon project is the face of the wider Greater Gorgon Gas Fields - a lucrative area made up of the Carnarvon Basin’s Gorgon, Chandon, Geryon, Orthrus, Maenad, Eurytion, Urania, Chrysaor, Dionysus, Jansz-lo, and West Tryal Rocks gas fields. The project is slated for start-up in 2014 with three 5 million mtpa LNG compression trains.

Commenting on gas technology and innovation developments, O'Brien expressed his excitement about Western Australia's role in being home to the world's first floating LNG project.

"Shell Development Australia will use a specifically designed ship – the largest floating structure ever built – with LNG production facilities to develop its Prelude gas field off the north coast of Western Australia," O'Brien said.

Shell's Prelude Floating LNG (FLNG) project - scheduled for start-up in 2017 - will produce at least 5.3 million tons per annum of liquids (3.6 mtpa of LNG, 1.3 mtpa of condensate and 0.4 mtpa of LPG). It will also be the largest floating offshore facility in the world, displacing some 600,000 tons and measuring more than 1,600 feet long and 240 feet wide.

The growth of Australia's LNG industry also means an increase in opportunities for innovative and market-oriented businesses in Western Australia, O'Brien said.

O'Brien used three local businesses, EPM, AME Offshore Solutions and Green Monster Offshore, as examples to illustrate his point.

EPM, a local engineering company manufacturing spare and replacement parts for the chemical, gas supply, mining, subsea industrial and agricultural sectors, invested $6 million in an expansion to keep up with demand for its products and services.

In the case of AEM Offshore Solutions and Green Monster Offshore, the two companies jointly opened a $3 million purpose-built facility to enhance their service offerings. AEM Offshore Solutions is a services and engineering company specializing in the offshore industry, while Green Monster Offshore is a rental equipment company providing specialized equipment to the offshore, resources and construction industries.

"There are also many other success stories of local businesses winning major resources contracts, performing beyond expectations and growing their operations. These are not just successes for the local industry. The State and the Western Australian community are also benefiting," O'Brien said.

O'Brien concluded his speech by reaffirming to the audience that the future is looking bright for Western Australia and that the LNG industry is playing a key role in its success.

"I look forward with great anticipation to see Western Australia put its stamp as one of the global powerhouses of LNG," O'Brien said.

African Petroleum enters investment deal with PetroChina

African Petroleum Corporation has clinched an agreement with PetroChina International Investment Company, a subsidiary of China National Petroleum Corporation, for a strategic investment in certain of its oil and gas exploration activities in West Africa.


The agreement offers PetroChina an exclusive period to agree to invest in about 20% of Block LB-09 in Liberia.

The deal also gives PetroChina a right to invest up to 20% in one or more exploration Blocks in Cote d'Ivoire, The Gambia, Liberia, Senegal and Sierra Leone.

The period will expire by the end of August 2012.

African Petroleum said the investment made by PetroChina is yet to be agreed and remains subject to governmental, regulatory and other third party approvals

Kenya will auction additional oil blocks

Kenya will auction new oil and gas exploration blocks, spurred by avid interest from recent auctions related to its previous discoveries earlier this year.


The Energy Ministry consultant geologist Alfred Odawa told Reuters as saying that Tullow Oil and Anadarko Petroleum would surrender acreage in a total seven blocks in coming weeks as required in their production-sharing contracts with the government.

"They are surrendering their portion (of the blocks), and we'll use that to make blocks again," Odawa added.

"The companies are going to give up the part of the blocks that are the least valuable to them. Then we will survey and figure out what to do with (the acreage)."

Tullow Oil is expected to shed a portion of acreage in onshore block 10BB and block 13T and Anadarko will give up 25% of each of its five offshore blocks.

Both the companies are likely to finalize by September the quarter of their blocks they want to offload after which the government will open a licensing round, though interest in the surrendered licenses has increased.

Under the existing contract, explorers must surrender a quarter of their blocks after two years in case of onshore blocks and offshore blocks after three years.

Currently, 45 of Kenya's existing 46 blocks have been taken up while discussions for the last, L26 in deepwater offshore, are in final stages and a lease with Statoil for the unlicensed block is close to settlement.

Majority of the international exploration companies holding the licenses in the country are US based including Anadarko, Pacific Seaboard Investment and Rift Energy.

Companies are interested in Kenyan exploration blocks and even the Energy ministry intends to lease it to interested companies, with more money coming to the country from fresh licensing for exploration, the report said.

Chevron Sanctions The Lianzi Project Offshore Angola And The Republic Of Congo


Chevron Corporation (NYSE: CVX) announced that its subsidiary will proceed with the development of the Lianzi field located in a unitized offshore zone between the Republic of Congo and the Republic of Angola.

Located 65 miles (105 km) offshore in approximately 3,000 feet (900 meters) of water, the Lianzi field will be developed via a tieback to the existing Benguela Belize Lobito Tomboco (BBLT) platform located in Angola Block 14.

"Lianzi is Chevron's first operated asset in the Republic of Congo and builds on Chevron's strong position in West Africa, one of the world's key hydrocarbon basins," said George Kirkland, vice chairman, Chevron Corporation.

"As the first cross-border development in the region, Lianzi represents a unique cooperative approach to shared offshore resources and may serve as a model for the development of similar cross-border fields between the two countries," said Ali Moshiri, president of Chevron Africa and Latin America Exploration and Production Company.

The $2.0 billion development will include a subsea production system and a 27 mile (43 km) electrically heated flowline - the first of its kind at this water depth - to transport the oil from the field to the BBLT platform. First oil is expected in 2015. Once completed, the project is expected to produce a maximum of 46,000 barrels of oil equivalent per day.

Chevron Overseas Congo Limited is operator of the Lianzi field and has a 31.25 percent interest, along with Total (36.75 percent), ENI (10 percent), Sonangol (10 percent), SNPC (the Republic of Congo National Oil Company - 7.5 percent), and GALP (4.5 percent).

Total invests N160b in Nigeria, targets additional 350,000bpd capacity

TOTAL Upstream Companies in Nigeria has invested about $10 billion (N160 billion) in various oil and gas projects in Nigeria in the past five years.

The oil multinational is also planning to add about 350,000 barrels per day capacity to the nation’s oil production within the next three years through its Usan and Akpo oil fields.

The Managing Director/Chief Executive Officer, Total Upstream Companies in Nigeria, Guy Maurice, while examining the company’s operation in Nigeria, in its “Focus Nigeria”, said Total has a bright future in Nigeria and would continue to invest in the country.

“There is a future. After 50 years, there is probably another 50 years to celebrate,” he said.

Maurice said the company has completed the full re-organisation, in order to be ready for the next phases which include the development of new projects like Egina; completion of development of new projects such as OML58 upgrade, Ofon phase II.

Commenting on the impact of Total’s investment in Nigeria, he said: “In the last five years, Total has invested about $10 billion (N160 billion) and we have plans to continue to do so in the years ahead. Of course, this has a huge impact in two ways: First, we are bringing new production. What I mean is that with Akpo and Usan, within three years, we would have added 350,000 barrels a day capacity to Nigeria’s oil production. This is an addition of 15 per cent to the country’s production which is very important,”

“By this production, we are contributing significantly to the development of Nigeria’s national capacity, and this is not too difficult to see because when you add $10 billion to the economy, it has a lot of impact in terms of national employment, development of capacity and capacity building in general. I think this is real value added to Nigerian economy,” he said.

The Total boss said the company has faced several challenges operating in Nigeria, which it is well positioned to overcome.

“It will not be correct to say there are no challenges. Nigeria is a vibrant and challenging environment. We know that there are challenges in terms of security and all our employees know that we are from time to time facing cases of abduction. For example, we have to ensure maximum security for staff and it is a real challenge.

“The second is the transition that has been the consequence of the Nigerian Content Act. We have to be active in the development of the national capacity. Before it was voluntary, now law guides it. We now have to adapt our capacity, our professionalism and manage our projects in other to comply with the law.

“So, there are lots of challenges, but as I have said, it is this capacity to manage challenges that makes one of the big differences between us and our competitors,” he said.

OPEC oil output drops, highest in four years

THE Organisation of the Petroleum Exporting Countries (OPEC) oil output fell further from its highest in four years in July as United State and European sanctions cut supply from Iran to the lowest in more than two decades, a Reuters survey has shown.
Supply from the 12-member OPEC has averaged 31.18 million barrels per day in July, down from 31.63 million barrels per day in June, the survey of sources at oil companies, OPEC officials and analysts found.
OPEC’s production has declined for three months since it pumped 31.75 million bpd in April, the highest since September 2008. The group is still pumping almost 1.2 million bpd more than its target of 30 million bpd.
The biggest drop this month came from Iran, whose crude is subject to a European Union embargo that started on July 1. The embargo also bars EU insurance firms from covering Iran’s exports, hindering imports by some non-EU buyers.
Oil prices declined below $100 (U.S.) a barrel in June, a level favoured by Saudi Arabia and other OPEC members, prompting speculation they might trim supply to prop up prices. There is little evidence to suggest this has happened in July, although the drop in output is larger than some expected to see.
“The decline by 450,000 barrels per day to 31.2 million bpd is more than expected and almost evaporates the supply surplus,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt.
“In July, a lot of buyers didn’t take crude as they were trying to get the insurance sorted out,” said an industry source. “We will never know by exactly how much as the Iranians won’t tell us.”
According to the survey, Iran’s supply slipped by 150,000 bpd to 2.80 million bpd in July. That would be its lowest output since 1988, when it pumped 2.24 million bpd, according to figures from the U.S. Energy Information Administration.
The U.S. and European sanctions have pushed Iran from its traditional position as OPEC’s second-largest producer to rank third behind Iraq, which this year is benefiting from a long-awaited expansion in export capacity.
Iraq, after sharply boosting exports earlier this year as new export outlets in the south of the country came into operation, has seen a drop in shipments of Kirkuk crude from its northern fields in July.
Output this month has fallen by 30,000 bpd, partly a result of Iraq’s Kurdistan region announcing in April it was halting its exports because firms operating there were not getting paid by the central government.
Rising Iraqi supplies earlier this year had helped to keep a lid on oil prices as Western sanctions targeted Iran’s exports.
As well as Iran and Iraq, Angolan output has fallen as oil-field maintenance curbed exports from Africa’s second-largest producer. Still, export schedules indicate output will rebound to above 1.8 million bpd in August.
Libyan production, which had recovered close to the level it attained before the 2011 civil war, was hit early in the month when protests by groups demanding greater autonomy for eastern Libya disrupted exports.
Saudi Arabia trimmed supply slightly because of lower demand from some customers, such as in the United States, sources in the survey said. It still kept output at 10 million bpd, near the highest rate in decades.

Nigeria: Coalition Launches Power Sector Procurement Monitoring

The Nigerian Contract Monitoring Coalition on Friday launched a project to monitor procurement processes in the power sector with the conclusion of a three-day training programme for procurement observers.

The coalition, which is a division of the West African Contract Monitoring Coalition regionally coordinated by the Ghana Anti-Corruption Coalition (GACC), is implementing a World Bank-IDA supported project titled "Multi-stakeholder Engagement for Effective Public Procurement Process in Nigeria."

Under the project, the coalition is deploying observers, comprising engineering professionals and representatives of civil society organizations, to monitor procurement processes for power projects in Lagos, Ibadan and Abuja.

Current members of the coalition include the Bureau of Public Procurement (BPP), the Nigerian Society of Engineers, a media representative and civil society organizations such as Public and Private Development Centre, which is the national convener; Media Rights Agenda, Centre for Organizational and Professional Ethics, and Initiative for Food, Environment and Health Society.

Kuwait presses on with Gulf's biggest oil refinery

Kuwait National Petroleum Company (KNPC) says it is going ahead with its long-delayed plan to build the Middle East's largest oil refinery despite political tensions that have stalled many economic development plans.

The government expects to announce next month the winner of the Al-Zour refinery's project management and consultancy (PMC) contract, a senior executive at KNPC told Reuters.

"The bids have been submitted and now we are in the evaluation phase... I expect the result to be out in August," the executive, who declined to be named under briefing rules, told Reuters.

Five international engineering firms submitted bids for the PMC contract, industry sources told Reuters - US-based Foster Wheeler and Fluor Corp, Australia's WorleyParsons, France's Technip and British-based Amec.
A spokesman for KNPC declined to comment on the names of the bidders or the size of the contract.

Other contractors are due to prequalify by August 7 in order to bid for the project's engineering, procurement and construction (EPC) contracts, the industry sources said.

If it goes ahead, the Al-Zour project could have an impact well beyond its monetary value, helping to restore confidence in Kuwait's economic management and the government's ability to get things done.

Originally planned a decade ago, the project, which aims to provide fuel for power generation and water desalination facilities and export any excess, is estimated to cost around $14.5bn.

The refinery would process 615,000 barrels per day, coming online in 2018; it would exceed the capacity of the Middle East's largest refinery, Saudi Arabia's 550,000 bpd Ras Tanura plant.

But Al-Zour and many other plans have been held up by years of conflict between the cabinet, which is chosen by a prime minister who is appointed by the emir, and the National Assembly over allegations of corruption and mismanagement.

Kuwait has seen eight governments come and go in just six years, blocking or delaying the passage of economic legislation and disrupting decision-making.

The Al-Zour refinery project was originally awarded in 2008 to companies including South Korea's GS Engineering & Construction and Japan's JGC Corp. But in 2009 the cabinet decided to halt the project on the grounds that oil prices were then too low to finance oil projects, industry sources said; the government is now retendering for it.

Announcing a surprise 42 percent drop in second-quarter profit last week, Ibrahim Dabdoub, chief executive of National Bank of Kuwait, the country's biggest bank, blamed the political turmoil for restricting state spending and delaying tenders for infrastructure projects.

In June this year a court annulled the results of a parliamentary election in February which gave opposition, mainly Islamist lawmakers a majority; fresh elections are widely expected to be held after the holy month of Ramadan ends around August 19.

Independent Kuwaiti oil analyst Kamel Al Harami said the Al-Zour refinery plan no longer needed to be approved by parliament because it had been designated a top infrastructure project; it is being supervised by the state audit bureau, meaning it can theoretically go ahead without political interference, he said.

He added that the project would help relieve Kuwait of the need to import cargoes of liquefied natural gas to meet excess demand for power generation during the hot summer months.

But Harami said he still doubted the project would be completed on time.

"I'm not optimistic - no one including the current oil minister has laid out a plan and milestones for this project, and without that it'll never be complete," he said.

"The current oil minister is worried he won't be in the new cabinet and there is no one to plan this project now."

Hani Hussein, a former chief executive officer of Kuwait Petroleum Corp, was reappointed as oil minister this month. But under the constitution, the cabinet will have to resign after the parliamentary elections and a new cabinet will be formed.

One plan that appears stalled by political frictions is the Al Zour independent water and power project (IWPP), which is separate from the refinery project. Its fate may not become clear at least until after the elections.

The public-private partnership, funded and operated jointly by the government and private companies, is to build a 1,500 megawatt power plant and a desalination plant with a capacity of between 102 million and 107 million gallons per day. It would start commercial operations in May 2015.

Earlier this year, Japanese trading house Sumitomo and Europe's International Power Plc said they had together been named preferred bidders for the project.

"But last month the National Assembly said they wanted to halt the project because the bidding process wasn't fair, as not all companies were present to submit the bids," said an industry source close to the project.

"Now with a new cabinet formed and which might be dissolved, this project is in a controversial state, as many economic projects are in Kuwait."

Iran launches first home built oil tanker

Iran launched its first domestically-produced aframax oil tanker, Iranian media reported on Tuesday, sidestepping growing Western sanctions which have targeted oil exports and battered its maritime trade.

The oil tanker was ordered by Venezuela, Iran's Fars news agency reported.

"The production of the aframax ship is the first export shipbuilding activity of Iran, and we must continue by attracting more customers," said Mehdi Etesam, managing director of Iran Maritime Industrial Company SADRA, according to Fars.

It was not clear if further Iranian-made aframaxes were under order. Aframaxes can carry up to 700,000 barrels of oil.
The US Treasury Department imposed additional sanctions in March on SADRA, saying the firm had offices in Iran and Venezuela and was owned by Khatam al-Anbiya, an engineering company used by the elite Islamic Revolutionary Guard Corps to fund its operations.

The Revolutionary Guard is a primary focus of US and international sanctions against Iran because of the central role it plays in Iran's missile and nuclear programmes, its support for terrorism and its involvement in serious human rights abuses, the US Treasury said.

Venezuelan President Hugo Chavez, whose stridently anti-Washington politics are popular at home, has expanded ties with Iran as pressure on Tehran has grown over the Islamic Republic's disputed nuclear programme. Iran denies Western charges that it is seeking to build nuclear weapons.

Despite the closer ties between Caracaas and Tehran, an EU ban on Iranian oil and insurance has hurt the OPEC producer's ability to sell its crude, while a prohibition on EU ship insurance provision has targeted the transport of oil.

Iran's top commercial tanker operator NITC has delayed the expansion of its oil fleet, company and industry sources said last month, as Western sanctions and a weak freight market hurt its ability to turn a profit.

Growing pressure by an influential US lobby group has also led to top ship classifiers no longer verifying safety and environmental standards for Iran's biggest shipping firms. Without verification from such bodies, ships are unable to call at international ports in another blow that Tehran has to deal with.

Costs rising at Gorgon LNG project – Chevron

PERTH (miningweekly.com) - Energy major Chevron has initiated a cost review of its $37-billion Gorgon liquefied natural gas project, executive VP for upstream and gas, George Kirkland, said.

Speaking on a conference call, Kirkland noted that Australian labour costs were tending higher, which could impact both the construction and management services at the Gorgon project, some 130 km off the north-west coast of Western Australia.

“We are evaluating our performance to date and incorporating new information to update our expectations for the remainder of the project. Over the next few months, our assessment will help us gauge movements in cost, which we expect to provide towards the end of the year.”

To date, Chevron has awarded more than $28-billion in contracts for Gorgon, with more than half going to local contractors.

Kirkland noted that while the company was seeing increasing cost pressures, largely associated with a 20% strengthening of the Australian dollar, it was also important to note that the price of oil, which determined Gorgon’s revenue stream, was also around 60% higher than when the project was sanctioned in 2009.

“I would like to emphasise that our view of the Gorgon project has only been enhanced since the final investment decision. I remain very confident in the economics and the value created by this project,” Kirkland said.

He noted that it was with this in mind that the company had increased the capacity of the Gorgon project by 4%, upgrading the nameplate capacity of the individual trains to 5.2-million tons a year, for a total of 15.6-million tons a year.

Kirkland said that despite the challenges facing the project, Gorgon was still slated for a 2014 start-up.

Praise, criticism for Pennsylvania shale law

Responsible development of natural gas reserves requires sound environmental protection to proceed, an environmental group in Pennsylvania said.

A Pennsylvania court last week said local governments are permitted to regulate where natural gas is allowed in shale plays in the state. Lawyers who represented local townships in the dispute told CNN last week they expected the case to be appealed to the state Supreme Court.

Industry groups favored state control over natural gas drilling, saying the rule would provide a level of uniformity in the state's vast natural gas reserves.

Marcellus Shale Coalition President Kathryn Klaber said the lack of such uniformity was the "Achilles' heel" of the Pennsylvania shale gas sector.

The Pennsylvania Environmental Council, however, said the rights and responsibilities of local governments need protection.

"Responsible development of natural gas in Pennsylvania requires thorough consideration of our unique community and natural resources, with appropriate site-specific and regional protections in place as a result of that analysis," the group said in a statement.

Pennsylvania hosts a portion of the Marcellus shale play, one of the largest sources of natural gas in the United States.

CB&I announces agreement to acquire the Shaw Group

CB&I (NYSE: CBI) announced today that it has entered into a definitive agreement to acquire Shaw Group (NYSE: SHAW), a Fortune 500 company primarily focused on serving clients in the power generation and government services sector. The acquisition is expected to close in early 2013.

“This is a highly compelling transaction that we believe will create significant value for our shareholders”

Combining CB&I and Shaw will create one of the most complete energy focused technology, engineering, procurement, fabrication, construction, maintenance, and associated services companies in the world. With a global workforce of nearly 50,000 employees, backlog of over $28 billion, and engineering and fabrication facilities strategically located on all continents, the company will have the critical mass necessary to execute the largest energy infrastructure projects now and into the future.

"This is a highly compelling transaction that we believe will create significant value for our shareholders,” said Philip K. Asherman, President and CEO of CB&I. “Shaw is a great company with tremendously talented employees. By adding them into the CB&I family, we will become fully diversified across the entire energy sector, from Power Generation to LNG, from Refining to Gas Processing, from Offshore to Oil Sands, and beyond. We will have the capabilities and the expertise to provide our clients with the full range of solutions, wherever they are in the world.

Most important, we will have the experience and relationships necessary to successfully meet and exceed our clients’ expectations.”

CB&I will acquire Shaw for $46.00 per share in cash and stock.

Shareholders will receive $41.00 in cash and $5.00 in CB&I equity (0.12883 shares based on an agreed upon recent average stock price of $38.81 per share) for each share of Shaw stock at closing. CB&I will use cash on the balance sheets of both companies, along with approximately $1.9 billion in debt to finance the acquisition. Based on the estimated cash position of Shaw at the end of its August 31, 2012 fiscal year, this equates to an enterprise value of approximately $2.0 billion. Using consensus estimates, the implied transaction multiple is 7.0x Shaw’s fiscal 2012 adjusted EBITDA. First year earnings per share are anticipated to be double-digit accretive before transaction related costs.

“I am extremely proud of the company we have built and operated for the last 25 years. Shaw’s leadership position in the power, environmental and infrastructure industries will complement CB&I’s current business, and I am confident that, together, these two companies will continue to excel,” said J.M. Bernhard Jr., Chairman, President and Chief Executive Officer of Shaw. “While Shaw has been growing in our business and has many opportunities ahead of us, we believe this transaction is in the best interest of and creates significant value for our shareholders, our employees and our customers.”

The acquisition of Shaw Group by CB&I has been unanimously approved by the Directors of the respective company’s boards. The transaction is subject to approval by each company’s shareholders, along with the receipt of certain regulatory approvals and the satisfaction of other customary closing conditions. Philip K. Asherman will continue as President and CEO of the combined company.