The United Arab Emirates (UAE) has the seventh largest proven oil reserves in the world at 97.8 billion barrels, according to the Oil and Gas Journal in January 2009. The UAE also has the sixth largest proven natural gas reserves in the world at 214 trillion cubic feet. It is an important oil and natural gas producer and is a member of the Organization of the Petroleum Exporting Countries (OPEC).

The UAE is a federation of 7 emirates with the second largest economy in the Arab Middle East after Saudi Arabia. The emirate of Abu Dhabi is the focal point of the UAE's oil and gas industry, followed by Dubai, Sharjah, and Ras al Khaimah.

While Abu Dhabi is the hydrocarbon and industrial center, Dubai is the trading, financial, and tourist center of the emirates. As a result of a successful effort at economic diversification, the finance and service sectors in Dubai are making the city a favored base for multinational corporations in the Gulf.

The UAE is in the middle of a major expansion program of its hydrocarbon sector mainly through the use of enhanced oil recovery techniques at existing fields. Projects to develop natural gas from associated and non-associated fields are also underway. The UAE has suffered from a shortage of natural gas in recent years as domestic demand for electricity generated in gas-fired plants has continued to rise, fuelled by generous subsidies, as well as the rapid development of the UAE as a regional commercial hub, and the increased delivery of industrialization projects using gas as a feedstock. However, despite the UAE's large natural gas reserves, high extraction costs and sulfur content are major issues in their development.

In late November 2009, Dubai World, a Dubai state-owned holding company, announced that the company would seek a standstill agreement with its creditors and an extension of loan maturities. This announcement caused a drop, at least temporarily, in financial markets worldwide. By the end of November 2009, it was still unclear what impact the announcement would ultimately have on Dubai and world financial markets.

Oil

According to Oil & Gas Journal (OGJ), the UAE’s proven oil reserves were 97.8 billion barrels as of January 1, 2009. Abu Dhabi leads the other emirates with 92.2 billion barrels followed by Dubai with 4 billion barrels, Sharjah with 1.5 billion barrels, and Ras al Khaimah with 100 million barrels. UAE crude streams are a light and sweet composite. The API gravity ranges from 34 to 36.8 degrees in the Zakum field, to 40.4 degrees in the Murban field.

Sector Organization

The largest state-owned company is the Abu Dhabi National Oil Company (ADNOC), which operates 17 subsidiary companies in the oil and natural gas sectors. Hydrocarbon production is handled on a production-sharing basis between state-owned companies and a few key major foreign investors. However, ADNOC holds a majority share in the leading oil-producing consortia, including the Abu Dhabi Company for Onshore Operations (ADCO), as well as the Abu Dhabi Marine Operating Company (ADMA-OPCO), and the Zakum Development Company (ZADCO). Major foreign investors include: British Petroleum (BP), Petrofac, ExxonMobil, and Total.

Exploration and Production

In 2008, the UAE produced 3 million barrels per day (bbl/d) of total oil liquids, of which 2.57 million bbl/d was crude oil and 356,000 bbl/d was natural gas liquids (NGLs). The UAE's domestic oil consumption averaged only 525,000 bbl/d in 2008, and the majority of oil production was exported to Asian countries. In the first 3 quarters of 2009, the UAE produced an average of 2.2 million bbl/d of crude following a decision by OPEC to cut production targets in late 2008.

The UAE is a mature oil market, with limited recent exploration success. Most new near-term projects are focused on the further development of known fields through enhanced oil recovery techniques and the upgrading of infrastructure.

There are several important projects currently underway:

• The Upper Zakum expansion project is at the center of the government's program to maintain and expand output. The project is a partnership between ADNOC, ExxonMobil, and Japan Oil Development Company (Jodco) that would increase production capacity from its current 550,000 bbl/d to 750,000 by 2015 and eventually increase it to 1.2 million bbl/d. Abu Dhabi's onshore Zakum oil field is the largest in the country and the third largest in the Middle East, with an estimated 66 billion proven barrels.

• The offshore Umm Shaif project aims to maintain and increase current production capacity. It has been underway since 2007. In June 2009, Hyundai Industries announced that the third of its 3 offshore oil platforms had been completed for the Umm Shaif oil field. Current oil production is estimated at between 220,000 and 280,000 bbl/d, and will expand to 300,000 bbl/d of oil plus 990 million cubic feet of gas per day by 2010.

• Abu Dhabi's Asab-3 project is aimed at increasing oil production from the Asab, Shah, and Sahil oil fields by 400,000 bbl/d from their current average of 1.4 million bbl/d, which is roughly half of the UAE's current production. In November 2009, 3 contracts worth a total of $3.5 billion were awarded, including a $408 million engineering, procurement, and construction (EPC) contract for natural gas facilities at the fields. The project is expected to produce about 150 million cubic feet per day of additional associated gas when it is completed in the third quarter of 2012.

• Development of the offshore Nasr oil field project is part of the UAE's long-term plan to increase offshore oil production capacity from its current 1.1 million to 1.75 million bbl/d by 2019. In August 2009, Technip won a front-end engineering and design contract for the first phase of development. Offshore operator Adma-Opco, which owns the field, hopes to produce 25,000 bbl/d from the field by 2015 and 65,000 bbl/d by 2018. This is the first new field for commercial use to be developed since the Lower Zakum field came onstream in 1966. Oil Pipelines

The Emirates have a network of domestic pipelines linking fields with processing plants and exit ports for trade. There are also inter-emirate pipelines primarily for natural gas injection to increase oil recovery levels in existing Dubai oil fields. The Abu Dhabi Crude Oil Pipeline (ADCOP) is currently under construction by China National Petroleum Corporation (CNPC).

In December 2008, CNPC was awarded a contract to build the ADCOP pipeline, which will have a total length of about 250 miles and a capacity of 1.5 million bbl/d, linking the Habshan oil field in Abu Dhabi with Fujairah port. The pipeline is scheduled to start trial operation at the end of 2010 and begin operating in August 2011. The pipeline will allow the UAE to pump about 60 percent of its crude exports to Fujairah port on the Gulf of Oman, thus avoiding the strategic shipping chokepoint at the Strait of Hormuz.

Exports

In 2008, the UAE exported 2.52 million bbl/d, mostly to Asian countries, with over 40 percent going to Japan. ADNOC has 2 subsidiaries that are responsible for handling crude oil, product and LNG exports. The Abu Dhabi National Tanker Company handles crude and product exports, operating 9 vessels. The National Gas Shipping Company handles shipments from the ADGAS LNG plant, operating 8 LNG carriers. Due to its location on the coast of the Arabian Gulf, the UAE has a number of ports for shipping its oil and gas exports: crude oil is shipped from Jebel Dhana and Zirku Island; LNG exports from Das Island; products from Ruwais, Umm al-Nar, and Jebel Ali. The port of Fujairah is one of the world's 3 biggest bunkering ports, and it is currently being upgraded to become the terminus for the ADCOP pipeline from the Habshan oil field. The port will be adding 16 new offshore oil berths to prepare for the increased volumes starting in 2010.

Downstream/Refining

According to Oil and Gas Journal, the UAE had 781,250 bbl/d of refining capacity at 5 facilities as of January 1, 2009. The largest two are ADNOC’s Ruwais, with a 350,000 bbl/d capacity, and Umm Al-Nar, with a 150,000 bbl/d capacity. A previously planned petrochemicals refinery at Fujairah is reportedly still under consideration by Abu Dhabi's International Petroleum Investment Company (IPIC), although it may be downgraded from 500,000 bbl/d to 200,000 bbl/d. However, ADNOC announced in September 2009 its plans to double the capacity of the Ruwais complex in the next 4 years.

Natural Gas

According to Oil and Gas Journal, the UAE’s proven natural gas reserves were 214.4 trillion cubic feet (Tcf) as of January 1, 2009. The UAE holds the sixth largest proven natural gas reserves in the world after Russia, Iran, Qatar, Saudi Arabia, and the United States. The largest reserves of 198.5 Tcf are located in Abu Dhabi. Sharjah, Dubai, and Ras al-Khaimah contain smaller reserves of 10.7 Tcf, 4.0 Tcf, and 1.2 Tcf, respectively.

Exploration and Production

In 2008, the UAE produced 1.77 Tcf and consumed 2.1 Tcf of dry gas. The UAE became a net natural gas importer in 2007, as consumption has grown much faster than production. Increased domestic demand for electricity, the desalinization of water, growing demand from the petrochemical industry, and the need for an enhanced oil recovery (EOR) system based on natural gas injections in mature oil fields have caused the UAE's domestic demand for natural gas to rise.

Rising domestic demand has put a new focus on developing the UAE’s large natural gas reserves despite high extraction costs and sulfur content. GASCO has awarded contracts for a number of large-scale gas projects in the past few months, following the push to develop several large-scale oil projects earlier in 2009, which opened up the development of associated gas production.

According to Global Insight, the largest new natural gas project is at onshore Habshan gas field, where phase 3 of the gas development project includes increasing production by 1 to 1.3 billion cubic feet per day (Bcf/d) of gas, along with new natural gas liquid (NGL) and condensate production facilities, and a 68-mile NGL pipeline to Ruwais, where new processing facilities will be added.

Abu Dhabi's Asab-3 project aims to increase oil and gas production from the Asab, Shah, and Sahil oil fields. France's Technip won an engineering, procurement, and construction (EPC) contract in November 2009. The company aims to produce about 150 million cubic feet per day MMcf/d) of additional associated gas from the project when it is completed in the third quarter of 2012.

The Shah Project joint venture contract between ADNOC and ConocoPhillips was signed in July 2009. This large-scale project involves the development of sour natural gas and condensate reservoirs within the Shah gas field located southwest of the city of Abu Dhabi, including the construction of gas gathering systems, gas processing trains and product pipelines designed to produce, process and transport 1 Bcf/d of gas, plus associated liquids and sulfur, by 2013. The Shah Project will reportedly include one of the largest sulfur removal plants in the world and an exporting facility to be located in Ruwais Industrial City.

Exports and Imports

According to EIA estimates, the UAE had gross imports of 592 Bcf and gross exports of 267 Bcf of natural gas in 2008. Net natural gas imports amounted to about 280 Bcf, imported mainly from Qatar. Exports, in the form of LNG, were shipped to Asian countries, primarily to Japan.

The UAE set up its first LNG plant in 1977 on Das Island operated by ADGAS. The plant is run on associated natural gas from the Um Shaif, Lower Zakum, and Bunduq oil fields. UAE natural gas exports are managed by ADNOC subsidiary, Abu Dhabi Gas Liquefaction Co. (ADGAS). The National Gas Shipping Company (NGSCO), which operates 8 LNG carriers, handles the shipments from the LNG plant.

The Dolphin Pipeline Project

The Dolphin natural gas pipeline project linking Qatar, the UAE, and Oman is the first cross border natural gas pipeline in the Gulf Arab region. Natural gas is imported from Qatar’s North Field to Abu Dhabi, Dubai, and Fujairah in the UAE, and then on to Oman. The managing company, UAE's Mubadala Development Company, holds a 51-percent stake in Dolphin Energy, with France's Total and U.S. Occidental Petroleum at 24.5 percent each. The project will carry about 2 Bcf/d of natural gas from Qatar to the UAE and Oman.

The project consists of a 48-inch subsea export pipeline running 226 miles from Qatar to Dolphin's facilities at Taweelah, Abu Dhabi, where the first natural gas imports were received in July 2007. From Taweelah, a 152-mile pipeline runs to the Qidfa Water and Electricity Station in Fujairah. Construction on this line will be completed by third-quarter 2010. From Fujairah, natural gas is piped to Oman by an existing pipeline.

Since January 2004, Oman had been supplying Dolphin Energy with pipeline gas for use at the Qidfa plant as a stopgap measure until Dolphin was ready to take over supplying the plant. The pipeline linking the UAE and Oman was reversed in October 2008, with Dolphin reportedly supplying Oman with 200,000 cubic feet per day to help cover shortages in the sultanate.

Source: EIA

By Peter Buxbaum

One of the biggest international trade gripes the US has with China is its undervalued currency. A low-value renminbi, or RMB, artificially pegged to the US dollar by the People’s Bank of China, facilitates cheap Chinese exports to the US while inflating the price of US imports.

But China has its own bone to pick with the US over currency. With the US as China's chief export destination, China has accumulated $2 trillion in dollar reserves, much of it held in the form of US Treasury securities. The global financial crisis, which the Chinese blame on the US, has led to a falling dollar, leading to the prospect that the US will be repaying its debt to China with cheaper dollars.

The Chinese have been vocal in their desire to reform the international monetary system, making changes which would increase its currency's role in the global economy. The RMB could become more of an international trade transaction and settlement currency. Some Chinese banking officials have even proposed the RMB as an alternative international reserve currency to the US dollar.

China has already taken steps to internationalize the RMB. The central bank has allowed limited use of the RMB since 2003 in border trade with Vietnam, Laos, Mongolia and Russia. The Chinese have also entered into currency swaps deals with six countries, allowing bilateral trade to bypass the dollar in those cases.

The People’s Bank of China has also moved to diversify its reserve holdings. The Chinese have been investing their dollars in commodities, stockpiling oil, iron, copper and other metals as well as agricultural products, since the end of last year.

China's reserves diversification is motivated by multiple factors, according to Melissa Murphy, a China expert at the Center for Strategic and International Studies, a Washington think tank.

"The Chinese are seeking a more stable hedge against inflation," she told ISN Security Watch. "The move also plays well to the domestic audience, encouraging them to blame the US for the global economic crisis." That said, she added, "the recent purchases have spent only a fraction of China's dollar reserves." (CSIS recently issued a report on RMB internationalization.)

The Chinese leadership has also expressed criticism of the reserve currency status of the dollar, recommending a greater role for the International Monetary Fund’s accounting unit, special drawing rights (SDRs), which are based on daily London exchange trades of the dollar, euro, yen and pounds sterling.

Some propose that China’s RMB become the fifth currency in the SDR basket, providing China with more influence within the IMF, as well as geopolitically, at the expense of the US.

Ironically, each time Chinese officials rail against the dollar, the US currency falls, noted Murphy, further depressing the value of China's dollar reserves.

Easier said than done

China's plans for the RMB, especially its promotion as an international reserve currency, are easier said than done. For the RMB to become a reserve currency, foreigners must be able to invest freely in onshore RMB financial assets such as stocks, bonds and bank deposits and freely repatriate their earnings and their capital.

"For foreign investors to hold RMB assets on a large scale, they must be convinced that China’s financial markets are trustworthy and not rigged," Arthur Kroeber, managing director of Dragonomics Research & Advisory, a Beijing-based independent research firm, told ISN Security Watch.

The emergence of a new reserve currency could take 20 to 30 years, noted Carolyn Bartholomew, chair of the US-China Economic and Security Review Commission, a US government entity.

"One thing about the Chinese government is that is has a long-term view," she told ISN Security Watch. "We have to expect some movement in this direction, but it will take place over the course of decades." (The commission recently released its annual report to the US Congress, which included a discussion of currency issues.)

Such a move would be good for the US economy and the world monetary system, according to Pieter Bottelier, a senior adjunct professor of China studies at the Johns Hopkins School of Advanced International Studies.

"My concern is that China will promote the RMB as a settlement and transaction currency but will stop short of promoting its use as a reserve currency," he told ISN Security Watch.

Why? "Because the implications for China are very grave if its currency is to act as a reserve currency," Bottelier said. "The state will have to retreat from controlling the economy very significantly. It would have to give up currency control. Is the Communist Party ready to retreat to a back-room roll?"

Bottelier argued the internationalization of the RMB is already proceeding apace and that the US should support a move which would create an alternative reserve currency to take pressure off the dollar.

No big threat to dollar

In the meantime, Bottelier does not see any of China's monetary machinations as a big threat to the dollar.

"If there is that much distrust of the dollar one would expect the world to turn its back on it," he said, "but China and others continue to invest in dollars." If the dollar were in distress, the market for inflation-adjusted US treasury instruments "would boom," he added, "but that has not been the case."

Murphy agreed that the interdependence of the US and Chinese economies means that the Chinese "will continue to accumulate dollars as fast they can spend them."

In addition, the Chinese "must invest in US debt instruments. The Japanese and European bond markets are not big enough" to accommodate China's requirements.

"At the same time, China is pursuing a longer term strategy to reduce exposure to the dollar," she added. "It's not having a big impact on the dollar, but it is clear that the geopolitical sands are shifting."

Peter Buxbaum, a Washington-based independent journalist, has been writing about defense, security, business and technology for 15 years. His work has appeared in publications such as Fortune, Forbes, Chief Executive, Information Week, Defense Technology International, Homeland Security and Computerworld. His website is www.buxbaum1.com. This article was published by International Relations and Security Network (ISN)

Creative Commons "Attribution-Noncommercial-No Derivative Works 3.0 Unported"

Former owners of the defunct Russian oil company Yukos have won a crucial ruling in The Hague allowing them to seek $100 billion in damages from the Russian government, The Financial Times reported.

An international tribunal ruled on Monday that the Russian government is bound by the terms of the Energy Charter Treaty, even though the Russian parliament has yet to ratify it. The ruling opens the way for Menatep Group, the Yukos holding company, to sue the government in the tribunal over the state takeover of the company, the paper said.

Yukos was declared bankrupt August 1, 2006, after three years of litigation with tax authorities over the company's tax arrears and formally ceased to exist in November 2007, after its assets had been sold off through a series of liquidation auctions to meet vast creditor claims.

State oil company Rosneft bought up the lion's share of the production assets, becoming Russia's largest oil producer.

Yukos founder Mikhail Khodorkovsky was sentenced to eight years in prison for fraud and tax evasion. He has consistently denied all charges against him, saying he was punished for supporting the tiny pro-Western opposition, and that the liquidation of Yukos was engineered by corrupt government officials aiming to seize lucrative oil assets.

"This is a huge step forward. The tribunal has decided without any caveat that the Russian Federation is bound by the treaty and we are entitled to the treaty's protection . . . We now have to prove that Russia confiscated our assets without any compensation," the paper quoted Tim Osborne, director of Menatep, as saying.

Menatep is suing under article 45 of the Energy Charter, which protects investors against expropriations of assets by a state. Russia has sought to put forward its own version of an energy charter and has refused to ratify the existing document.

Menatep argues that Yukos paid its taxes in full, and that the back tax claims were retroactively and selectively applied to seize its property. Russia insists the tax charges and bankruptcy proceedings were fair.

According to the paper, a Russian government spokesman said that the ruling required "careful study" but questioned how the charter could be applied to Russia when "it is not legally in force."

Source: RIA Novosti

India Monday proposed to invest $ 6.5 billion to develop gas fields in Iran and sought more Liquefied Natural Gas (LNG) from that country, according to the Islamic Republic News Agency.

At the same time, according to ILNA, India asked Iranto participate in the 2005 LNG import deal and ensure secured supplies of gas through the Iran-Pakistan-India pipeline.

In the first high-level contact in two years, India told the visiting Iranian Deputy Oil Minister and National Iranian Oil Co (NIOC) Managing Director, Seifollah Jashnsaz, that it was keen to buy 5 million tonnes of LNG a year besides the ones signed in 2005, PTI reported quoting sources.

India also asked Iran to give the ONGC Videsh-led group rights to develop the gas field it discovered in the offshore Farsi block. It sought 20-25 per cent stake for the overseas investment arm of Oil and Natural Gas Corp (ONGC) in the Phase-12 of the gigantic South Pars gas field in the Persian Gulf.

Sources - quoted by ILNA - said Jashnsaz was told to honour the 2005 LNG agreement which NIOC had previously blocked, saying the gas price in the signed deal was too low.
On the $ 7.4 billion Iran-Pakistan-India gas pipeline, India said it was willing to be part of the project provided Iran guarantees safety of the pipeline in Pakistan.

India said it would take delivery of the gas on the Pakistan-India border rather than the proposed sale point at Iran-Pakistan border, sources said, adding this way Iran would be responsible for passage of gas in Pakistan and will have to bear losses if the pipeline is disrupted.

Kuwait's crude oil exports to Japan fell 19.2 percent in October from a year earlier to 7.79 million barrels, or 251,000 barrels per day (bpd), for the first decline in two months, the government said Monday.

Kuwait supplied 7.0 percent of nation's crude oil in October, compared with 8.1 percent in the same month of last year and 10.5 percent in September, the Japanese Natural Resources and Energy Agency, a unit of the Ministry of Economy, Trade and Industry, said in a preliminary report. Japan is Kuwait's largest oil buyer with accounting for 20 percent of its total crude exports.

In 2008, Japan purchased 95.0 percent of its Kuwaiti crude shipments through long-term contracts, the highest ratio among its deals with oil producing nations.

Japan's overall imports of crude oil in the reporting month fell 6.1 percent year-on-year to 111.70 million barrels (3.60 million bpd) for the 13 consecutive month of drop.

Shipments from the Middle East went down 3.2 percent to 100.36 million barrels, but accounted for 89.8 percent of the total, up 2.6 percentage points from a year before.

Saudi Arabia remained Japan's biggest oil supplier, with imports from the kingdom plunging 22.6 percent from a year earlier to 29.42 million barrels, followed by the United Arab Emirates with 27.69 million barrels, up 4.1 percent. Qatar ranked third, with shipments jumping 36.7 percent to 13.77 million barrels. Iran became fourth with 12.81 million barrels, down 21.5 percent.

Resources-poor Japan is the world's third-largest oil consumer after the US and China, and it relies on crude oil imports for about 50 percent of its energy needs. Shipments of direct-deal, which prices are based on the average spot price of Dubai crude, the benchmark for Asia, account for about 80 percent of Japan's crude imports.

Source: KUNA

The UAE Central Bank said Sunday it stands behind UAE banks and branches of foreign banks operating in the country. The Central Bank's statement is in regards to last week's news that the state-run Dubai World, which holds more than $50 billion in liabilities, may have problems paying creditors. The conglomerate that runs flagship Dubai companies such as DP World, asked banks for a “standstill” agreement as it negotiates to extend maturities of debt, including the $3.52 billion in Islamic bonds due next month from Nakheel, the famed palm tree island developer.

Sunday the UAE Central Bank informed UAE banks and branches of foreign banks operating in the UAE that they can access a special additional liquidity facility linked to their current accounts at the Central Bank, at the rate of 50 basis points above the three months EIBOR. The Central Bank stated that the UAE Banking System is more sound and liquid than a year ago.

Relatedly, HSBC's Chief Executive Officer said the bank is "confident" Dubai and the UAE "will overcome any short-term issues they face".

"Operating in the Middle East for over a century, and present in 15 countries, we''re proud to have witnessed the remarkable development and dynamism of the region first hand," said Michael Geoghegan, HSBC Group CEO. "Although our business on the ground in the Middle East represents only two per cent of the group''s balance sheet, it's an important and high-potential part of HSBC's international business mix and a region we are completely committed to. I am confident that the leadership of Dubai and the UAE will overcome any short-term issues they face, which appear to have been somewhat sensationalized, and continue to lay the foundations for sustainable growth," he added in statement

According to the Qatar News Agency, HSBC, Europe's biggest bank, has the "largest absolute exposure" in the UAE with $17 billion (Dh62 billion) of loans in 2008, according to  JPMorgan, citing the Emirates Banks Association.

According to HSBC's Simon Cooper, CEO, Middle East region, "HSBC, as the longest-established bank in Dubai, has a unique relationship with the Government of Dubai and its Government-related entities. The bank has been at the forefront of the emergence of Dubai as a global economy, and continues to maintain deep and solid relationships with all parts of the Emirate. HSBC continues to be supportive of Dubai, continues to believe in Dubai''s long-term future prosperity, and continues to offer its support to the Government of Dubai in coming to a workable resolution of its short-term problems," according to Qatar News Agency.

Sources: Various Middle East news agencies, including WAM and KUNA.

Abu Dhabi is putting together a rescue package for its cash-strapped neighbour Dubai, according to press reports.

Abu Dhabi yesterday hosted a meeting of senior Gulf officials over plans to tackle the crisis which erupted after Dubai World, the emirate's state-backed flagship in global investments, asked to delay payments of its USD 60 billion (36.8 billion) debts, the Sunday Times newspaper said.

"Fears of a default sent shockwaves around global markets - hitting shares in UK banks amid worries over their exposure to the region", it added. But Abu Dhabi will not be writing a "blank cheque for its neighbour," The Sunday Times said.

Officials told the newspaper Dubai's commitments would be dealt with on a "case-by-case" basis - which could mean a fire-sale of several major assets owned by the Dubai World's own investments range from Scotland's historic Turnberry to Nakheel, the developer behind Dubai's luxurious Palm manmade islands. But other assets swept up by Dubai's network of sovereign wealth and investment firms in the boom years included the QE2 cruise liner, the Emirates airline and the Travelodge budget hotel chain.

Deloitte, the leading accountancy group, has been appointed as an adviser to Dubai World to help it restructure the company's huge debts.

The firm had a USD 3.5 billion (2.1 billion pounds) bond payment due in December and wants breathing space on all debt repayments falling due by the end of next May.

UK banks are meanwhile said to have turned to the KPMG group- unavailable for comment - to represent their interests in the region.

According to the latest figures from the Bank for International Settlements, UK banks had a USD 50.2 billion exposure (30.5 billion pounds) to the United Arab Emirates at the end of June, although individual figures for Dubai are not available.

London shares tumbled 3 percent last Thursday, wiping almost 44 billion pounds off the FTSE 100 Index in its worst session since last March, although shares clawed back some of the losses on Friday.

Source: KUNA

Britain will start piping in gas directly from Russia in late 2012, the chief executive of Nord Stream has said.

Matthias Warnig told The Times that Britain already reserved 4 billion cubic meters of gas a year, the equivalent of over 4% of the country's total gas requirements.

The UK is switching from a gas exporter to an importer," he was quoted as saying by the paper. "By 2025 there will be a substantial import need ... Several billion cubic meters per year are already contracted for the U.K. through Nord Stream."

The executive told the paper that the gas would be piped through the Netherlands and Belgium, across the North Sea through pipelines to Norfolk.

The $12 billion pipeline is designed to bypass Ukraine, Poland and Belarus, traditional transit countries fro Russian gas. Construction is scheduled to start in the first quarter of 2010.

Source: RIA Novosti

The International Arbitration Court decided Friday that the Algerian national oil company Sonatrach will be able to developing alone the integrated LNG  Gassi Touil project without having to pay compensation to the Spanish consortium Repsol and Gas Natural.

The decision ends a trade dispute that arose between the two parties when Sonatrach terminated a contract signed in 2004 with the Spanish companies, claiming that they breached their contractual obligations.

"The arbitration tribunal has declared the contract ended in accordance with its terms, without requiring either party to indemnify the other as a result of the termination of this contract," Gas Natural and Repsol said in a statement after having informed the National Commission on Securities Market (CNMV).

In its verdict, the International Arbitration Court also decided that Sonatrach will buy the Spanish companies that were formed to participate in the joint company responsible for the process of liquefaction in the Gassi Touil project.

(EIA) -- When hurricanes disrupt power and refinery production on the Gulf Coast, shortages of gasoline and other petroleum products can develop more than a thousand miles away. Most refinery capacity in the United States is concentrated in just a few areas, with pipelines, tankers, and barges moving the product from those refineries to terminals near the final customers. The majority of that movement is through pipelines. The Nation's four major concentrations of refining capacity, located on the Gulf Coast, in the eastern Midwest (mainly in Illinois, Indiana, and Ohio), on the East Coast around Pennsylvania, New Jersey, and Delaware, and on the West Coast, mainly in California. These refining centers account for about 80 percent of all U.S. refining capacity.

The largest refining center is along the Texas and Louisiana coasts - the refinery concentration most affected by hurricanes. At 7.4 million barrels per day, these coastal refineries represent 42 percent of the nation's refining capacity and almost 90 percent of the refining capacity in Petroleum Administration for Defense District (PADD) 3. (California and Washington refineries represent about 15 percent of national capacity, while the eastern-Midwest refining center accounts for about 13 percent, and East Coast refineries about 9 percent.)

Refineries in PADD 3 provide significant product supply to both the East Coast and Midwest. For example, about 60 percent of all gasoline produced in PADD 3 refineries is moved to other regions for consumption. In 2008, nearly half of the gasoline consumed in the East Coast region (PADD 1) - about 1.6 million barrels per day - was supplied from PADD 3. And PADD 3 refineries supplied about 18 percent - approximately 0.5 million barrels per day - of gasoline consumed in the Midwest (PADD 2). PADD 3 also supplies a small amount of gasoline to the West Coast region (PADD 5), mainly Arizona. Most of the gasoline volume moved from PADD 3 to those regions travels by pipeline (80 percent by pipeline into PADD 1, 90 percent into PADD 2, and virtually all into PADD 5.)

The major pipelines that move product from PADD 3 into other regions of the country include the Colonial and Plantation pipelines that carry product from the Gulf Coast up the East Coast. Spurs from these pipelines also bring product to some inland States such as Tennessee. The TEPPCO, Centennial, and Explorer pipelines move significant product from the Gulf Coast into the Midwest. A series of pipelines moves product from PADD 3 into Arizona, which is in PADD 5. While the volumes moving from PADD 3 into PADD 5 are much smaller than those moving into the Midwest and East Coast, they are, nonetheless, critical to States like Arizona.

Products moving through these major pipelines travel in batches, with one type of product abutted against the next in the same pipeline. A given product batch is generally made up of volumes from a number of refineries. These batches do not move quickly. For example, it takes an average of 18.5 days for product to move on the Colonial Pipeline from Houston, Texas to New York Harbor. Volumes from a given batch are scheduled for delivery to different areas along the pipeline.

Although pipelines in the path of a hurricane, as well as refineries, shut down temporarily as the hurricane approaches and passes through, pipelines can continue to experience reduced or total loss of flow for two major reasons. The first is a loss of electricity to their pumping stations. This was a major problem during Hurricanes Rita and Katrina in 2005. While product storage tanks at terminals near to consumers provide some cushion, shortages can develop fairly quickly under these conditions.

The second is pipeline flow loss which occurs if a hurricane has disrupted a large share of the refineries feeding the pipelines for more than a week or two. The volume of product leaving a refinery and going to one of these major pipelines is delivered via smaller pipelines, generally to storage tanks fed by multiple refineries and connected to the major pipeline. A single refinery outage is not usually a problem, but when a number of refineries serving a particular pipeline are shut down for any length of time, such as occurred during several of our recent hurricane seasons, there is no easy or quick way to replace the product lost to that pipeline.

Consumers receiving supplies from a pipeline with reduced inputs generally would not see immediate losses. Pipeline flows would be slowed, and product that is already in storage tanks would begin to be drawn down. If supplies are not restored to the pipeline quickly, scheduled deliveries are reduced, if not altogether skipped. In such cases, an area along the pipeline may temporarily run out of product before the next available volumes to serve the area arrive. During such times, much rescheduling occurs to help prevent any one area from suffering severe shortages Ultimately, if input losses to the pipeline are large enough, the pipeline may have to shut down, which has rarely occurred.

Refinery supply losses to pipelines were a major factor behind product shortages that occurred during the Hurricanes Gustav and Ike in 2008. Refinery supply was disrupted - not from wind or water damage particularly - but from power outages. Refining supply to the Colonial and Plantation pipelines was reduced for some time, and shortages began to emerge, particularly in the Southeast coastal areas up through North Carolina. These are areas that have little harbor or river access for alternative supply delivery from imports or other refineries. Truck delivery from hundreds of miles away can help to some extent, but not enough to prevent local shortages in such circumstances due to the magnitude and wide-spread nature of large hurricane losses. In some areas, Federal and State fuel waivers allowing regions to use whatever fuel might be available helped to spread available fuel to areas running short, but in other areas, no fuel was available. Shortages could have been much worse without the industry and government coordination that occurs during such circumstances.

Because of the highly connected network between the large refining center on the Gulf Coast and other areas of the United States, especially the East Coast and Midwest, hurricane damage to electricity supplies or to multiple Gulf Coast refineries can give rise to tight product supplies, price increases, and even shortages far away from the hurricane damage.

U.S. Average Gasoline and Diesel Prices Climb Again

For the second consecutive week, the U.S. average price for regular gasoline increased, this week by five cents. At $2.56 per gallon, the national average is $1.32 below the year-ago price. On the East Coast and in the Midwest, the average price moved up a nickel to $2.53 and $2.51 per gallon, respectively. Although the Gulf Coast registered the largest increase of any region, jumping nearly seven cents to $2.43 per gallon, the price there remained the lowest of any region. The Rocky Mountains had the smallest increase of any region, moving up just under a penny to $2.51 per gallon. On the West Coast, the price rose six cents to $2.83 per gallon, while the price in California climbed seven cents to reach $2.90 per gallon.

The national average price for diesel advanced two cents to $2.55 per gallon. The average was $1.95 below last year. With the exception of the Rocky Mountains, prices rose throughout the Nation. On the East Coast, the average increased three cents to $2.58 per gallon. In the Midwest and on the Gulf Coast, the averages rose two cents to $2.52 and $2.51 per gallon, respectively. The average in the Rocky Mountains was essentially unchanged at $2.54 per gallon. On the West Coast, the average price increased three cents to $2.64, while the average in California moved up four cents to $2.76 per gallon.

Propane Posts Modest Build

Inventories of propane added 0.6 million barrels this week, bringing total stocks to approximately 69.0 million barrels. For the month of July, the build in primary inventories of propane totaled 8.2 million barrels, 1.2 million barrels above the most recent 5-year average of 7.0 million barrels for this month. The largest weekly gain was in the Midwest region where 1.0 million barrels were added to inventories. The East Coast region fell by 0.1 million barrels while the combined Rocky Mountain/West Coast region rose a small amount. The Gulf Coast region shed 0.4 million barrels of stocks. Propylene non-fuel use inventories fell slightly last week, with its share of total propane/propylene inventories remaining at 3.3 percent. Propane production fell to its lowest level since early May at 1.0 million barrels per day.