Myanmar Pipelines To Benefit China

NEAR HSIPAW, Myanmar - Two pipelines in the highlands of northeast Myanmar will soon begin pumping oil and gas into China, representing a major step in Beijing's quest for energy security.

At the end of a bumpy road here, a 45-minute ride from the nearest town, Cheng Chong Zhen, a 40-year-old Chinese electrician working for state-owned energy giant China National Petroleum Corp., or CNPC, points with his cigarette toward a wide trail of red dirt that disappears over a hilltop. The pipelines lie underneath, stretching 500 miles from the Indian Ocean in the south -- where the oil and gas will be loaded -- to the Chinese border in the north, where they will help fuel China's growing energy needs.

The $2.5 billion pipeline project, scheduled for completion this month, is part of China's land-based network of import routes that includes completed pipelines from Kazakhstan, Turkmenistan and Russia. In a region increasingly defined by its quest for energy, the new pipelines could help China tip the geopolitical landscape in its favor. But in the process, its thirst for energy has fueled some local anti-China sentiment.

Energy security has been a priority for the Chinese government since the early 1990s, when it began an economic gallop and became a net oil importer. China overtook the U.S. as the world's largest overall energy consumer in 2009, with coal accounting for the biggest share.

However, the share of oil and natural gas in the country's energy mix continues to grow because of rising demand for refined oil products, such as petrochemicals that serve as the building blocks of industry as well as gasoline for vehicles -- about 55,000 new cars roll onto China's roads every day. In December, net oil imports exceeded those of the U.S. for the first time.

While the country's import dependency has prompted its state-owned energy firms to search for oil in Africa, South America and the Middle East, it still faces a challenge in getting that oil to its shores. Last year, the lion's share of China's total oil imports -- about 4 million barrels a day out of 5.43 million barrels -- was shipped through the narrow Strait of Malacca, near Singapore, where the U.S. Navy has a strong presence, and through the South China Sea, where territorial disputes with Southeast Asian neighbors have intensified as China has grown increasingly assertive. The two pipelines through these dusty highlands in Myanmar are crucial to Beijing's efforts to diversify its energy-supply routes.

"The way the Chinese have been able to develop their energy oil import infrastructure in recent years has been hugely impressive," said Richard Gorry, an analyst at consultancy JBC Energy.

But resentment is growing in Myanmar. Locals say the pipelines -- built under agreements made with Myanmar's former ruling military junta -- bring little benefit to communities and threaten the environment.

In the wake of similar local protests, Myanmar President Thein Sein in 2011 stopped a Chinese-backed $3.7 billion hydropower dam at Myitsone in the northern part of the country.

Since five decades of military rule came to an end in 2011, Myanmar has opened to the West at a rapid pace, in part to distance itself from China. Its reform process was backed during a visit by President Barack Obama in November, intensifying speculation Myanmar is trying to get out from under the shadow of its closest ally and trading partner of decades.

China National Petroleum isn't taking chances, donating millions of dollars for new schools and health clinics in communities along the pipelines.

"When the project started, Myanmar was seen as Beijing's close ally, but there are now greater risks for the Chinese in this project," said Michal Meidan, an analyst at Eurasia Group. "They could get caught up in political strife."

The pipelines through Myanmar will mark the third leg of major overland import routes, and will be capable of supplying 440,000 barrels of oil a day and 12 billion cubic meters of natural gas a year to China's southern Yunnan province.

The gas will come from a new development off the coast of Myanmar, while the oil will be shipped from the Middle East and Africa on tankers. Today, the tankers transport the oil through the Strait of Malacca to China's coast. But as early as September, they will sail around the southern tip of India and head north into the Bay of Bengal to Myanmar's coastal town of Kyaukpyu, where the oil will be loaded into the new pipeline. The shortcut will reduce China's reliance on the Strait of Malacca route.

Myanmar's Energy Minister Than Htay said natural gas will start flowing in June, followed by oil in September, though the Chinese have said oil may not start before year-end.

Exports of natural gas have been a cause for controversy in Myanmar, as it struggles to meet its own growing energy needs. Mr. Than Htay said that in addition to China's regular payments of land rental and transit fees, Myanmar will be able to draw 40,000 barrels of crude oil a day from the new pipeline.

"We will have very good access to those pipelines," he said. "This is a very big advantage for our country."

At a pumping station at the site of the pipelines, Min Neing, a Myanmar native, sits not far from his Chinese co-workers. He was hired as an unskilled worker for $136 a month -- less than one-tenth what the Chinese electrician Mr. Cheng earns.

CNPC says that more than half of all workers involved in the pipeline project were recruited locally, but some locals say the project is unlikely to result in many lasting jobs. Mr. Min Neing says his job will end when the gas begins flowing.

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Myanmar Pipelines To Benefit China

NEAR HSIPAW, Myanmar - Two pipelines in the highlands of northeast Myanmar will soon begin pumping oil and gas into China, representing a major step in Beijing's quest for energy security.

At the end of a bumpy road here, a 45-minute ride from the nearest town, Cheng Chong Zhen, a 40-year-old Chinese electrician working for state-owned energy giant China National Petroleum Corp., or CNPC, points with his cigarette toward a wide trail of red dirt that disappears over a hilltop. The pipelines lie underneath, stretching 500 miles from the Indian Ocean in the south -- where the oil and gas will be loaded -- to the Chinese border in the north, where they will help fuel China's growing energy needs.

The $2.5 billion pipeline project, scheduled for completion this month, is part of China's land-based network of import routes that includes completed pipelines from Kazakhstan, Turkmenistan and Russia. In a region increasingly defined by its quest for energy, the new pipelines could help China tip the geopolitical landscape in its favor. But in the process, its thirst for energy has fueled some local anti-China sentiment.

Energy security has been a priority for the Chinese government since the early 1990s, when it began an economic gallop and became a net oil importer. China overtook the U.S. as the world's largest overall energy consumer in 2009, with coal accounting for the biggest share.

However, the share of oil and natural gas in the country's energy mix continues to grow because of rising demand for refined oil products, such as petrochemicals that serve as the building blocks of industry as well as gasoline for vehicles -- about 55,000 new cars roll onto China's roads every day. In December, net oil imports exceeded those of the U.S. for the first time.

While the country's import dependency has prompted its state-owned energy firms to search for oil in Africa, South America and the Middle East, it still faces a challenge in getting that oil to its shores. Last year, the lion's share of China's total oil imports -- about 4 million barrels a day out of 5.43 million barrels -- was shipped through the narrow Strait of Malacca, near Singapore, where the U.S. Navy has a strong presence, and through the South China Sea, where territorial disputes with Southeast Asian neighbors have intensified as China has grown increasingly assertive. The two pipelines through these dusty highlands in Myanmar are crucial to Beijing's efforts to diversify its energy-supply routes.

"The way the Chinese have been able to develop their energy oil import infrastructure in recent years has been hugely impressive," said Richard Gorry, an analyst at consultancy JBC Energy.

But resentment is growing in Myanmar. Locals say the pipelines -- built under agreements made with Myanmar's former ruling military junta -- bring little benefit to communities and threaten the environment.

In the wake of similar local protests, Myanmar President Thein Sein in 2011 stopped a Chinese-backed $3.7 billion hydropower dam at Myitsone in the northern part of the country.

Since five decades of military rule came to an end in 2011, Myanmar has opened to the West at a rapid pace, in part to distance itself from China. Its reform process was backed during a visit by President Barack Obama in November, intensifying speculation Myanmar is trying to get out from under the shadow of its closest ally and trading partner of decades.

China National Petroleum isn't taking chances, donating millions of dollars for new schools and health clinics in communities along the pipelines.

"When the project started, Myanmar was seen as Beijing's close ally, but there are now greater risks for the Chinese in this project," said Michal Meidan, an analyst at Eurasia Group. "They could get caught up in political strife."

The pipelines through Myanmar will mark the third leg of major overland import routes, and will be capable of supplying 440,000 barrels of oil a day and 12 billion cubic meters of natural gas a year to China's southern Yunnan province.

The gas will come from a new development off the coast of Myanmar, while the oil will be shipped from the Middle East and Africa on tankers. Today, the tankers transport the oil through the Strait of Malacca to China's coast. But as early as September, they will sail around the southern tip of India and head north into the Bay of Bengal to Myanmar's coastal town of Kyaukpyu, where the oil will be loaded into the new pipeline. The shortcut will reduce China's reliance on the Strait of Malacca route.

Myanmar's Energy Minister Than Htay said natural gas will start flowing in June, followed by oil in September, though the Chinese have said oil may not start before year-end.

Exports of natural gas have been a cause for controversy in Myanmar, as it struggles to meet its own growing energy needs. Mr. Than Htay said that in addition to China's regular payments of land rental and transit fees, Myanmar will be able to draw 40,000 barrels of crude oil a day from the new pipeline.

"We will have very good access to those pipelines," he said. "This is a very big advantage for our country."

At a pumping station at the site of the pipelines, Min Neing, a Myanmar native, sits not far from his Chinese co-workers. He was hired as an unskilled worker for $136 a month -- less than one-tenth what the Chinese electrician Mr. Cheng earns.

CNPC says that more than half of all workers involved in the pipeline project were recruited locally, but some locals say the project is unlikely to result in many lasting jobs. Mr. Min Neing says his job will end when the gas begins flowing.

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Shale Boom Could Happen in Russia, China but Not Europe

LAUSANNE, Switzerland - Russia and China will lead the way in the production of resources from shale after the U.S., according to executives, but Europe will likely lag behind.

Torbjorn Tornqvist, chief executive of trading house Gunvor, said Wednesday it was clear that shale production on a scale similar to that in the U.S. is possible in several of the world's biggest current energy producers and consumers -- but that Europe is unlikely to be transformed by it.

Surging production of oil and gas from unconventional sources has seen the U.S. outstrip predictions to become one of the world's most energy-secure regions.

"Is it possible to adapt that elsewhere? And the answer is yes, but not everywhere," Mr. Tornqvist said. "I think in Russia, you will see the first major change. You have the political climate there to drive through large-scale shale operations both in gas and oil."

He also said that China, Australia and South America were promising as a shale-exploiting countries.

Mr. Tornqvist sounded a much less positive note for Europe, which has so far been divided on its approach to the relatively new technology of hydraulic fracturing, the method of extracting shale resources known as fracking. France has voiced strong opposition to the idea, while the U.K. government has insisted that shale gas production "will happen."

Mr. Tornqvist said: "Europe? You all know the problems there: political problems, no-one really wants to see rigs on the landscape -- and problems and fears about groundwater and so forth will prevent Europe from exploiting its resources, which aren't that big anyway," Mr. Tornqvist said.

The Gunvor CEO was addressing the Financial Times Global Commodities Summit in Lausanne, Switzerland.

Bob H. Takai, general manager in energy for Sumitomo Corp., speaking in a panel discussion that followed Tornqvist's talk, said that China could rival Russia as the biggest shale producer.

"As far as the reserve is concerned I think China has got the largest potential reserves of shale oil and shale gas, even bigger than the U.S.," Mr. Takai said. He added that before those reserves could be accessed China would struggle with problems ranging from infrastructure to the availability of water.

The discussion led Tornqvist to reiterate: "It will take a long time. And if I was to put the first nation to do that in the scale, I would guess today Russia.

"Because they, through their political system, they have decided to do it," he said. "They have the infrastructure, they have the tradition of drilling gas, it isn't so densely populated, they have the water, they have the ingredients.

"And they're already doing it," he said. "I know from my talks with Gazprom … they have advanced plans to get into shale gas and shale oil."

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Musings: China And The Importance Of The South China Sea

The world has been riveted with the drama unfolding in the northern Pacific region as North Korea rattles its rockets and threatens war. One of the key players in this drama is China, a long-time supporter of North Korea. China has many conflicting geopolitical objectives, some of which are driven by the nation's need for increased energy supplies and raw minerals to power its economy in order to support its 1.2 billion in population.

China realizes it has emerged as a super power, and with that status it must demonstrate its power meaning it must establish dominance in the Pacific region.

Economically, militarily and politically, China has power throughout Asia from Vietnam to North Korea. What it hasn't had until recently is a significant naval presence. That situation is changing as China has built it first aircraft carrier and other sophisticated naval vessels including submarines. At the same time, China has reiterated its long-standing claim over the South China Sea, and with it the country's claim over whatever mineral and energy resources might be present.

China's claim over most of the South China Sea is based on its 1946 undefined claim – the nine dashes on a map.

The South China Sea is a large and strategic body of water. Exhibit 3 shows the numerous agreed boundaries negotiated between South China Sea neighboring countries since the late 1950s. It also shows the declared limits claimed by countries beginning with the 1946 Chinese claim. While there are many geopolitical implications due to these conflicting declarations, our purpose is to examine the significance of the South China Sea to China from an energy perspective.

The initial consideration is the location of possible oil and gas deposits. The Energy Information Administration (EIA), coupled with the resources of other research firms, has put together a map of the possible oil and gas deposits in the South China Sea. A number of these areas have been explored and continue to be explored and developed. Those include deposits offshore Vietnam, China, Brunei and Malaysia. If one re-examines the nine dashes encompassing the area of the South China Sea claimed by China (Exhibit 3, page 5), some resources claimed by Vietnam, Brunei and Malaysia could be claimed by China setting up tension amongst the countries. (See Exhibit 4.)

However, as the EIA shows, these resources are not truly significant in the global scheme of resource deposits. According to the EIA, the undiscovered oil resources of the South China Sea, excluding the Gulf of Thailand, Indonesia's Java, Borneo and Sumatra basins, and the Solu Sea, are slightly greater than those of Europe at roughly 10 billion barrels of oil. The South China Sea ranks seventh in all geographic regions and along with Europe represents a minor increment of the world's undiscovered oil resources.

The South China Sea ranks in the same position relative to Europe and the other regions of the world with respect to undiscovered natural gas resources.

The South China Sea has about a quarter of the estimated undiscovered natural gas of North America, a mature conventional gas resource region, but with a rapidly growing unconventional shale gas potential. At the end of the day, all the proved oil and gas reserves plus all the possible undiscovered ones still leaves the region as a bit player in the world's energy business.

If the oil and gas resource potential of the South China Sea is so limited, why does China find it must demonstrate power in the region? The need to show that as an emerging super-power and with the second largest economy on the planet, China must show strength. At the same time, China is also a significant importer of energy and raw materials, all of which are extremely important for the health of the country, its people and its government. China is targeted to surpass six million barrels per day (mmb/d) of crude oil imports during the second half of 2013. At the same time, the United States, the globe's largest oil importer, will be bringing in less than 6 mmb/d of crude sometime early in 2014, dropping the country into second place behind China on the list of the world's largest oil importers.

For China that is rapidly becoming the world's largest oil importer, protecting that flow of oil becomes a prime consideration of the government. Note in Exhibit 7 (page 8) that nearly 13 mmb/d of oil, almost 15% of total world oil consumption, flows into the Strait of Malacca near Singapore, one of the world's well-established shipping chokepoints. About 11 mmb/d of that oil flow goes beyond Singapore and Thailand and toward Hong Kong, China, South Korea and Japan, making protecting these shipping lanes imperative for the health of those economies.

An equally important energy trade is the flow of liquefied natural gas (LNG), much of which comes from Australia and Southeast Asia, but with a growing volume coming from the Middle East. LNG is likely to become an important fuel for China who has relied upon coal-fired electricity to power its economy with the attendant problem of serious pollution problems in its major cities. In 2011, China imported 12 million metric tons (mts) of LNG, equivalent to 1.5 billion cubic feet per day (Bcf/d). China was projected to import 16 million mts in 2012, or roughly 2.0 Bcf/d, and to reach Japan's 56.6 million mts of LNG consumed in 2012 by 2020. To handle that increased volume, China is planning to construct 15 new LNG receiving terminals to go along with the five already in operation. Given the North American shale revolution, the potential for LNG exports from Canada and the United States has become a real possibility. The opening of a widened Panama Canal by 2015 means LNG carriers coming out of the Gulf of Mexico will have a shorter shipping route to Asia then if they were forced to circle South America in order to reach the Pacific market. Two other developing natural gas industry trends will also impact the global flow of LNG. One is the development of the recent huge gas discoveries in East Africa. The Asian region is the target market for the natural gas recently found offshore Mozambique and Tanzania, but the energy industry is also excited about exploration opportunities in Madagascar, Kenya and Uganda, any and all of which would likely flow to Asia.

Longer term there is also the wildcard of China's gas shale potential. Estimates are that China has the world's largest shale gas resources. If it successfully develops these resources, China could rapidly shift from being an LNG importer to becoming an LNG exporter. Both situations put a premium on China being able to insure the safe passage of LNG tankers, either to terminals in China to offload cargos or to load cargos destined for world markets.

As President Barack Obama has indicated his foreign policy initiatives have pivoted toward Asia, the geopolitical tensions in the region will be elevated, not just because of what North Korea is doing. The United States has entered into upgraded trading relationships with our Asian friends, so we must demonstrate our willingness to stand by them when and if they have to confront China over its South China Sea territorial claims. At the same time, the U.S. Navy must demonstrate our strength in the region to prevent the appearance of the U.S. being perceived as a "paper tiger" by other nations in the world. Defense Department budget cuts coupled with a shrinking and aging fleet of naval vessels is hurting our ability to fulfill the many and varied missions assigned to the Navy. Any change in that course will take considerable time.

While oil and gas developments in the South China Sea will be of interest to the petroleum industry and investment community, the real story of this region is its strategic placement within the flow of energy globally and its importance in the geopolitical struggle between the two leading super-powers – the U.S. and China. With a better understanding of the true importance of the South China Sea to China's economic and political stature, one should be better able to understand the significance of actions and events likely to unfold over the next few years.

G. Allen Brooks works as the Managing Director at PPHB LP. Reprinted with permission of PPHB.

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Shale Boom Could Happen in Russia, China but Not Europe

LAUSANNE, Switzerland - Russia and China will lead the way in the production of resources from shale after the U.S., according to executives, but Europe will likely lag behind.

Torbjorn Tornqvist, chief executive of trading house Gunvor, said Wednesday it was clear that shale production on a scale similar to that in the U.S. is possible in several of the world's biggest current energy producers and consumers -- but that Europe is unlikely to be transformed by it.

Surging production of oil and gas from unconventional sources has seen the U.S. outstrip predictions to become one of the world's most energy-secure regions.

"Is it possible to adapt that elsewhere? And the answer is yes, but not everywhere," Mr. Tornqvist said. "I think in Russia, you will see the first major change. You have the political climate there to drive through large-scale shale operations both in gas and oil."

He also said that China, Australia and South America were promising as a shale-exploiting countries.

Mr. Tornqvist sounded a much less positive note for Europe, which has so far been divided on its approach to the relatively new technology of hydraulic fracturing, the method of extracting shale resources known as fracking. France has voiced strong opposition to the idea, while the U.K. government has insisted that shale gas production "will happen."

Mr. Tornqvist said: "Europe? You all know the problems there: political problems, no-one really wants to see rigs on the landscape -- and problems and fears about groundwater and so forth will prevent Europe from exploiting its resources, which aren't that big anyway," Mr. Tornqvist said.

The Gunvor CEO was addressing the Financial Times Global Commodities Summit in Lausanne, Switzerland.

Bob H. Takai, general manager in energy for Sumitomo Corp., speaking in a panel discussion that followed Tornqvist's talk, said that China could rival Russia as the biggest shale producer.

"As far as the reserve is concerned I think China has got the largest potential reserves of shale oil and shale gas, even bigger than the U.S.," Mr. Takai said. He added that before those reserves could be accessed China would struggle with problems ranging from infrastructure to the availability of water.

The discussion led Tornqvist to reiterate: "It will take a long time. And if I was to put the first nation to do that in the scale, I would guess today Russia.

"Because they, through their political system, they have decided to do it," he said. "They have the infrastructure, they have the tradition of drilling gas, it isn't so densely populated, they have the water, they have the ingredients.

"And they're already doing it," he said. "I know from my talks with Gazprom … they have advanced plans to get into shale gas and shale oil."

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Vietnam to Push Ahead With Offshore Field Exploration Despite China Claims

HANOI - State-owned Vietnam Oil and Gas Group, or Petrovietnam, plans to keep buying foreign oil-and-gas assets and hopes to be producing close to 100,000 barrels a day of oil overseas by 2020, four times the volume expected this year, the company's chief executive said.

Increased overseas oil production, which Petrovietnam says could be sold internationally or brought home for refining, will help Vietnam cope with rising energy demand, as a territorial dispute with China casts a shadow over its own promising offshore prospects.

Vietnam and its international partners will keep working to develop offshore oil-and-gas reserves within its maritime border, Petrovietnam President and CEO Do Van Hau told The Wall Street Journal.

"Recently, although there have been some Chinese claims about the sovereignty of Vietnam's territorial waters in the West Sea, there have still been many investors--domestic and foreign petroleum companies--continuing their research and cooperation and signing contracts to conduct petroleum activities in Vietnam's waters," he said.

The country's oil output has been largely stagnant around 300,000 barrels a day in recent years, and the government is eager to increase output of hydrocarbons to help fuel an economy that has grown by an average of 7% over the past decade. Natural gas output in 2013 is forecast at 9.2 billion cubic meters, down from 9.3 billion in 2012.

Petrovietnam's earnings and taxes account for between 20% and 30% of the national budget.

"So far we have not made commercial discoveries [in disputed areas], but if there are commercial discoveries--and I am optimistic that we will have them--then we will start developing them if they are within our continental shelf," he said, referring to the maritime territory within 200 nautical miles of Vietnam's coast.

Nine months ago, the government in Hanoi protested strongly after China National Offshore Oil Corp. invited bids for a new batch of oil exploration blocks, including some that are within the 200-mile limit that Vietnam claims as its exclusive economic zone, basing its case on the United Nations' Law of the Sea.

At the time, Petrovietnam urged China to cancel bidding for the areas it identified as being in Vietnamese waters, calling on foreign firms not to participate and noting that Oil & Natural Gas Corp., Gazprom OAO and Exxon Mobil Corp. have been operating under licenses issued by Vietnam in some of those areas for many years.

China's increasingly assertive claims of sovereignty over most of the South China Sea have pitted it against Vietnam, the Philippines, Malaysia and Brunei, with this resulting in military standoffs and claims that Chinese vessels have cut the cables of ships conducting seismic surveys for hydrocarbons.

Any perception that foreign companies with exploration blocks offshore Vietnam are withdrawing or not meeting their commitments due to disputes with China is incorrect, Mr. Hau said, adding that Exxon Mobil, Gazprom and Talisman Energy Inc. are among companies that are active in prospecting offshore.

Gazprom has 49% stakes in two offshore gas blocks, where commercial production is due to start in June, he said.

In March, Petrovietnam said it would continue to invite foreign partners to join its exploration projects, including those in the Red River Delta in northern Vietnam and deep-sea areas.

Large amounts of gas lie under the seabed offshore Vietnam, Mr. Hau said, noting that Exxon Mobil had made Vietnam's biggest gas find to date off the country's central coast.

In October 2011 Exxon Mobil announced it had discovered oil and gas offshore Da Nang in central Vietnam, in an area known as Block 119, which isn't in disputed waters, but it didn't say whether commercial quantities had been found.

Mr. Hau said Wednesday that the U.S. oil major is still evaluating the find, and production could potentially start in five to seven years.

To help meet its rising energy needs, Vietnam will in coming months invite bids for its first liquefied natural gas import terminal, which will have a capacity of 1.0 million tons a year, and it is also trying to finalize an agreement with Chevron. Corp for a project that will cost more than $4.3 billion--to develop gas fields offshore southern Vietnam.

Petrovietnam and Chevron didn't meet an end-2012 target to agree on gas prices for the offshore Block B project, and talks on this continue, Mr. Hau said. That project involves building offshore pipelines and floating storage facilities, then piping up to 490 million cubic feet of gas daily ashore for use mostly in electricity generation at power stations that are yet to be constructed.

"Chevron continues to work with Petrovietnam to resolve commercial issues to enable a final investment decision," a Chevron spokesman said.

Vietnam's foreign energy investments are focused mostly on Russia, Latin America and Africa. Initial production from a 50-50 joint venture offshore Peru is due to start by the end of the year, with an eventual target of 60,000 barrels a day, Mr. Hau said.

In Cuba, Petrovietnam is assessing results of seismic surveys it has done at an offshore block after having drilled two dry wells at an onshore concession, which it subsequently abandoned, he said.

Progress in developing heavy-oil reserves in Venezuela is proceeding slowly, he said, adding that the project won't meet a target of reaching output of 50,000 barrels a day by next year, although oil has flowed from some of its pilot wells.

Petrovietnam has spent more than $1 billion on overseas investments, "and we will keep on spending," he said.

Combined output from domestic and international fields this year will be around 16 million tons, or 321,000 barrels a day, with most of the expected foreign output--totaling between 25,000 and 28,000 barrels a day--coming from a joint venture in Russia, Mr. Hau said.

Plans to expand Vietnam's still-small refining sector could advance as soon as May, when a final investment decision on the country's second refinery is expected, he said.

Japanese refiner Idemitsu Kosan Co. and Kuwait Petroleum International each hold a 35.1% stake in the planned $9 billion 200,000-barrel-a-day refinery to be built 180 kilometers south of Hanoi. Petrovietnam and Mitsui Chemicals Inc. own 25.1% and 4.7%, respectively. KPI is a unit of state-owned Kuwait Petroleum Corp.

Vietnam has started work to assess shale-gas opportunities in the country after surveys showed that its reserves of coal bed methane aren't commercial, he said. It is too early to provide any forecast on shale gas, he added.

Petrovietnam has an exploration and production contract with Mitra Energy for shale oil and gas in the Red River Delta region and has signed a joint research agreement with ENI SpA to evaluate the overall potential of shale oil and gas onshore Vietnam, Mr. Hau said.

Vu Trong Khanh and Nguyen Anh Thu contributed to this article.

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Indonesia Protested to China Over Passports Last Year

Indonesia's foreign minister has said that the Southeast Asian nation protested to China about a controversial map printed in Chinese passports last year which claimed almost all of the South China Sea, the Financial Times reported Friday on its website.

Beijing has become increasingly assertive in its claims over large swathes of the South China Sea, including islands and shoals which are also claimed by several Asean members and Taiwan. The controversial "nine-dash line" printed in its passports represents the extent of China's claim over South China Sea in a map it submitted to the U.N.

Indonesia hadn't issued a public statement that time, even though the nine-dash line cuts through its so-called Exclusive Economic Zone in the gas-rich Natuna Sea, where companies including ExxonMobil Corp. and Total SA operate, the FT report said.

However, Indonesia's foreign minister Marty Natalegawa said they did in fact protest to Beijing "several weeks" after the new passports were issued, and had sent a diplomatic note to the Chinese embassy in Jakarta, according to the FT.

"We exercised nice low key diplomacy but getting our point across," Mr. Natalegawa said in the report.

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FT: Indonesia Protested to China Over Passports Last Year

Indonesia's foreign minister has said that the Southeast Asian nation protested to China about a controversial map printed in Chinese passports last year which claimed almost all of the South China Sea, the Financial Times reported Friday on its website.

Beijing has become increasingly assertive in its claims over large swathes of the South China Sea, including islands and shoals which are also claimed by several Asean members and Taiwan. The controversial "nine-dash line" printed in its passports represents the extent of China's claim over South China Sea in a map it submitted to the U.N.

Indonesia hadn't issued a public statement that time, even though the nine-dash line cuts through its so-called Exclusive Economic Zone in the gas-rich Natuna Sea, where companies including ExxonMobil Corp. and Total SA operate, the FT report said.

However, Indonesia's foreign minister Marty Natalegawa said they did in fact protest to Beijing "several weeks" after the new passports were issued, and had sent a diplomatic note to the Chinese embassy in Jakarta, according to the FT.

"We exercised nice low key diplomacy but getting our point across," Mr. Natalegawa said in the report.

Click here to view the full report

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Expro Bags Subsea Services Gig in China

Expro has been awarded a $4.5 million (GBP 2.9 million) one year contract for the supply of 7 3/8" completion landing string services in China. This contract will enable Expro to capitalise on an emerging and highly lucrative deepwater market, which is set for major growth over the next five years.

Work will commence this month and as part of the contract, Expro will supply a 7 3/8" 10k direct hydraulic (DH) completion landing string system and a set of topside and DH controls. This will be the latest DH operation in China following previous successful campaigns on other horizontal tree developments.

Subsea Sales Director Graham Cheyne said, "The South China Sea deepwater market is crucial for our growth strategy going forward and the contract win further enhances our presence in China. The opening of our new base in the Shekou industrial zone positions us perfectly to provide our customers in China with high quality service offshore and onshore.

"Our investment in technology innovation and infrastructure in China, coupled with the dedication to ongoing training and personal development, means we are well positioned to provide bespoke engineering solutions to our China customer base."

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Expro Bags Subsea Services Gig in China

Expro has been awarded a $4.5 million (GBP 2.9 million) one year contract for the supply of 7 3/8" completion landing string services in China. This contract will enable Expro to capitalise on an emerging and highly lucrative deepwater market, which is set for major growth over the next five years.

Work will commence this month and as part of the contract, Expro will supply a 7 3/8" 10k direct hydraulic (DH) completion landing string system and a set of topside and DH controls. This will be the latest DH operation in China following previous successful campaigns on other horizontal tree developments.

Subsea Sales Director Graham Cheyne said, "The South China Sea deepwater market is crucial for our growth strategy going forward and the contract win further enhances our presence in China. The opening of our new base in the Shekou industrial zone positions us perfectly to provide our customers in China with high quality service offshore and onshore.

"Our investment in technology innovation and infrastructure in China, coupled with the dedication to ongoing training and personal development, means we are well positioned to provide bespoke engineering solutions to our China customer base."

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China to Develop Uzbek Oil Field

China National Petroleum Corporation (CNPC) plans to develop Minbulak oil field in Uzbek region of Namangan, investing $212 million in geological exploration of hydrocarbons next year, CA-News reported with reference to Uzbek government.

As the source noted, "the company has announced a tender for drilling, during the exploration in the license area promising horizons for the development were identified. By the end of 2014 the construction and pilot operation may begin."

In October 2011, CNPC and National oil and gas company Uzbekneftegaz signed an agreement on the basic principles of cooperation on joint development of Minbulak.Under the agreement, the Chinese company will invest $212 million with access to the full capacity of 200 thousand tons of oil per year. The operator of the project is Chinese-Uzbek joint venture Minbulakneft, established in 2008, the source added. Deposit Minbulak was opened in 1992. According to Uzbekneftegaz' data, the recoverable reserves totaled 2 million tons.

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Norway Oil Fund Expects To Boost China Stock Holdings

OSLO - Norway's $712 billion oil fund expects to significantly increase its Chinese equity holdings this year, Chief Executive Yngve Slyngstad said on Friday, while confirming the fund has applied to increase its $1 billion quota of Chinese A-shares.

"We have a quota of Chinese shares listed in Shanghai or Shenzhen of $1 billion, which has so far been their upper limit," said Mr. Slyngstad in an interview with Dow Jones Newswires. "Now they [the Chinese authorities] have changed this, and removed the upper limit for state-owned funds such as ours."

The oil fund, officially titled the Government Pension Fund Global, is the world's largest sovereign wealth fund and is derived from Norway's oil profits. In 2012, the fund became the first international investor in China to be awarded the maximum quota of $1 billion A-shares.

According to Mr. Slyngstad, Chinese authorities last year increased the total equity investment quota for all foreign investors to $80 billion from $30 billion. He added that as far as he was aware, China hasn't started awarding individual new quotas yet.

"We expect that when they start assigning quotas, we will get a significant share of those, and in that respect we can expect our investments in Chinese equities to be significantly higher at the end of 2013," Mr. Slyngstad said, adding that "we have already applied."

He wouldn't elaborate on how much extra the fund would invest in China. The fund's Chinese equity investment stands at 1.6% of its total NOK2.335 trillion ($410 billion) equity portfolio, representing its biggest holding in an emerging market. At the end of 2012, the fund owned shares in 303 companies in China.

The oil fund said Friday that its equity investments in China, the world's second-largest economy, returned 13% in 2012.

In a major strategic change last year, Norway decided to shift a larger share of the oil fund's assets into emerging markets to reduce long-term risk by tapping into the world's fastest-growing regions. The change of direction was requested by the country's central bank, which manages the oil fund on behalf of the government.

"Norges Bank has clearly expressed an ambition to spread investments and become stronger in emerging markets," Norway's central bank Governor Oystein Olsen told Dow Jones Newswires Friday.

"China is an economic giant globally, which suggests a substantially bigger weight in the portfolio in the future," he added.

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Shell May Be Less Than 2 Years Away from Major China Shale Advancements

Royal Dutch Shell says it may be less than two years away from a major advance in shale gas production in China, bringing the Asian country closer to being the first outside of North America to cash in on technology that's transformed the U.S. energy industry.

Unlocking the gas trapped inside China's shale rock reserves, the world's biggest, would provide much needed energy supplies to the energy-hungry economy and help cut down on expensive imports of gas. It would also provide a windfall for western energy giants who provide the complex hydraulic fracturing technology.

Shell is on track to have spent $2 billion by the end of this year exploring the central province of Sichuan, and has drilled nearly 30 wells in joint-venture projects with China National Petroleum Corp.

"Mid-decade we will be able to decide" on the so-called final investment decision that will determine whether to go into full commercial production, said Maarten Wetselaar, who heads Shell's integrated gas operations worldwide excluding North America, and was speaking in an interview.

The multinational energy company is already producing tiny amounts of shale gas as part of its exploration work that it pumps into Sichuan's natural gas network. How quickly output can be ramped up after further investment isn't clear.

Beijing has set an ambitious target of producing 6.5 billion cubic meters of shale gas annually by 2015, and as much as 100 billion cubic meters by 2020, from nearly zero now. Getting the Shell project into operation will be critical in meeting those goals.

In the U.S., which pioneered the technology to extract gas and oil trapped in shale rock formations, gas production has soared, bringing down prices of fuel for manufacturing and chemical production. It has also raised the prospect of liquefied natural gas exports from North America of as much as 70 million tons a year within a decade, equivalent to deliveries from current world leader Qatar, Mr. Wetselaar said.

The U.S. Energy Information Administration has a preliminary estimate of some 36 trillion cubic meters of recoverable shale-gas resources in China, more than the U.S. and Canada combined, which if extracted could transform China's energy profile.

Those estimates have also sent rival Chevron Corp. into China searching for shale, while ConocoPhillips and Total SA are also planning exploration projects. Foreign companies are obliged to have local partners when exploring for shale in China.

China's government has not yet given a formal go-ahead to Shell's draft production-sharing pact with partner CNPC, but Mr. Wetselaar said he isn't worried.

"We will get the correct regime in place," he said. "I don't think it is lack of intent."

Other obstacles in China to successful exploitation include scarce supplies of water required to get the gas out of shale rock, and more complicated geology than in Canada and the U.S.

Still, "outside of North America, China is the most mature in terms of wells, in terms of activity on the ground," said Mr. Wetselaar.

But after China, next ready to produce commercial quantities for shale gas is likely to be Ukraine, where Shell is in the early stages of a drilling program, said Mr. Wetselaar.

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Petrobras Confirms Plans to Start Platform Work in China

RIO DE JANEIRO - Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, confirmed late Monday that it will start building four oil platforms in China instead of Brazil, but denied that the shift means the company will not meet strict requirements to use local goods and services.

Petrobras said that work to convert oil tankers into the P-67, P-75, P-76 and P-77 platforms would start in China, but that the work represented less than 3% of the value of the contracts to build the floating production, storage and offloading vessels, or FPSOs. The conversion, however, will be completed in Brazil, Petrobras said. The P-67 platform is part of an order for eight replicated FPSOs, while the other three platforms will be used to produce oil from areas transferred to the company from the government.

Earlier Monday, the local O Estado de S. Paulo newspaper had reported that Petrobras shifted construction of the FPSOs overseas amid concerns that local shipyards would not meet deadlines to complete construction and cause production delays. Petrobras is currently struggling with stagnant oil production because of maintenance shutdowns at aging offshore platforms and declining output at mature fields.

Concession contracts in Brazil require companies to use a certain percentage of local goods and services, part of a government strategy aimed at creating a robust oilfield-services sector to accompany development of recently discovered offshore oilfields. Petrobras plans to spend $237 billion through 2016 to develop the fields, where oil was discovered under a thick layer of salt miles under the seabed off Brazil's southeast coast.

"The index of contracted local content is immutable, and Petrobras is not trying to alter it," the company said.

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ConocoPhillips, PetroChina Sign Deals in Australia, China

ConocoPhillips said PetroChina Co. will acquire an interest in two Western Australia exploration assets and the companies will jointly identify unconventional resource reserves in China.

As part of three deals that are pending government and partner approvals, PetroChina will acquire a 20% working interest in the Poseidon offshore discovery in the Browse Basin and 29% in the Goldwyer Shale in the onshore Canning Basin in Australia.

The companies will also jointly study the potential for unconventional resource development in the roughly 500,000-acre Neijiang-Dazu Shale Block in the Sichuan Basin in China. If technically and commercially viable, they will advance development under a production-sharing contract, which would be agreed upon during the study period.

"ConocoPhillips recognizes the Sichuan Basin as having some of the most prospective marine shales in China and looks forward to working with one of the world's leading energy companies," said Don Wallette, ConocoPhillip's executive vice president, commercial, business development and corporate planning.

The U.S. energy company was cleared last week to resume full operations at the Penglai 19-3 oilfield in China's northern Bohai Bay after being sanctioned by Beijing over oil spills in 2011. Its recent fourth-quarter earnings fell 58% as commodity prices fell and as the exploration-and-production company was hurt by lower average realized prices for oil and natural gas.

Meanwhile, in December, PetroChina said it agreed to buy BHP Billiton Ltd.'s stake in the planned Browse gas-export project in Western Australia for $1.63 billion in cash, leading Nomura analysts to say the state-backed oil company needs to take a "more disciplined approach" in its overseas acquisition strategy.

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China Clears ConocoPhillips to Resume Operations at Offshore Oilfield

BEIJING - ConocoPhillips was cleared to resume full operations at an offshore Chinese oilfield after being sanctioned by Beijing over 2011 oil spills.

China's State Oceanic Administration said on Saturday that the Penglai 19-3 oilfield in China's northern Bohai Bay could resume operations after making a number of unspecified changes. The move came after China's National Energy Administration approved in December a revised overall development plan for the field.

ConocoPhillips' China unit owns 49% of the field and operates it, while China's CNOOC Ltd. owns 51%.

The Penglai 19-3 field was ordered by China's State Oceanic Administration to halt production in September 2011 after it spilled 3,345 barrels of oil and oil-based drilling mud into the ocean. The leaks brought harsh criticism by Chinese media and authorities, largely directed at ConocoPhillips. The company has said it regrets the accidents.

Last year, ConocoPhillips and CNOOC agreed to pay $161 million to settle compensation claims resulting from the oil spills. ConocoPhillips, as operator of the field, would provide the money, while CNOOC would allocate part of an ecology fund it had set up to help restore and preserve fishing resources in the Bohai area.

ConocoPhillips' share of oil production from the Penglai 19-3 field was 62,000 barrels a day before the spills. The Houston-based company gradually resumed output last year, but its share of production was only 45,000 barrels a day at the end of the third quarter, it said.

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Private Sector Plays Bigger Role In China Energy Sector

BEIJING - Privately-held enterprises are playing a bigger role in China's energy sector, which has been long dominated by state-owned businesses, a report Sunday from state-run Xinhua news agency said.

Data from the China Petroleum and Chemical Federation showed 32 private enterprises had entered China's oil mining industry by August 2012, as well as nine in the natural-gas sector and 64 in commercial activities related to oil and gas exploitation, it said.

The higher profile of the private sector came after the State Council issued new guidelines in May 2010 to encourage private investment in the industry, a report this weekend by China National Petroleum Corp. said.

Some 877 private enterprises are involved in processing of crude oil and oil-related products, including 50 privately-owned refineries, with a combined capacity accounting for 7.1% of the country's total, the Xinhua report said.

Six private enterprises were included in the national strategic oil reserve storage system for the first time in 2011, it added.

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Private Sector Plays Bigger Role In China Energy Sector

BEIJING - Privately-held enterprises are playing a bigger role in China's energy sector, which has been long dominated by state-owned businesses, a report Sunday from state-run Xinhua news agency said.

Data from the China Petroleum and Chemical Federation showed 32 private enterprises had entered China's oil mining industry by August 2012, as well as nine in the natural-gas sector and 64 in commercial activities related to oil and gas exploitation, it said.

The higher profile of the private sector came after the State Council issued new guidelines in May 2010 to encourage private investment in the industry, a report this weekend by China National Petroleum Corp. said.

Some 877 private enterprises are involved in processing of crude oil and oil-related products, including 50 privately-owned refineries, with a combined capacity accounting for 7.1% of the country's total, the Xinhua report said.

Six private enterprises were included in the national strategic oil reserve storage system for the first time in 2011, it added.

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CNPC: China 2013 Oil Demand Expected to Rise 4.8%

China's oil demand in 2013 is expected to rise to 514 million metric tonnes, up 4.8 percent, a research institute affiliated with China National Petroleum Corp., the country's biggest energy producer, said Wednesday.

In an annual report, the CNPC Research Institute of Economics & Technology said oil demand is expected to "bounce back slightly" in line with a nationwide "economic rebound" this year.

China's economy slowed in the first three quarters of 2012 before recovering in the fourth quarter.

The CNPC affiliate didn't say how it calculated domestic oil demand or whether it included crude oil or refined oil products in the calculation.

Net imports of crude are expected to rise 7.3 percent to 289 million tonnes, or 5.8 million barrels a day, in 2013, it said. Dependence on foreign crude is expected to rise to 58 percent, it added.

Dependence on foreign crude was 57 percent in 2012, customs data showed.

The country's demand for refined oil products will rise 5.8 percent to 293 million tonnes, growing at a slightly faster rate than in 2012, CNPC said.

Output of oil products will rise 6.2 percent to 299 million tonnes.

China's apparent consumption of natural gas will rise 11.9 percent to 165 billion cubic meters, CNPC said, but didn't say how it calculated it.

Natural gas will account for 5.8 percent of the country's total energy mix in 2013, it added.

Natural gas imports will rise 23.8 percent to 53 billion cubic meters, mostly due to a rise in supplies from Myanmar.

Liquefied natural gas imports will rise 14.6 percent to 16.5 million tons, while natural gas imported via pipeline will reach 30 billion cubic meters, up 31.6 percent.

The combined domestic production of natural gas and coal-bed methane gas will reach 115 billion cubic meters in 2013, up 6.8 percent.

CNPC also said China's crude-oil refining capacity will grow 6.9 percent to 614 million tons in 2013. The country will process 489 million tons of crude in 2013, up 5.4 percent.

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