General Interest - Quick Takes EU ministers agree on energy compromise

Strongly backed by France, which is president of the European Union through 2008, the unbundling compromise reached June 6 (OGJ, June 16, 2008, Newsletter) was adopted unanimously Oct. 10 at the Energy Ministers meeting in Luxembourg. Controversial legislation otherwise could have separated the network operation of electricity and gas from production and supply activities.

Described as "a major political agreement," the compromise confirms that ownership of both transportation and marketing networks will be retained by the producers, but the units will be operated independently from the parent company and supervised by an Independent Transmission Operator.

A European regulatory agency will be set up, which will "considerably bolster the coordination of the national regulators," according to the ministers' press release.

The European Parliament definitely will adopt these texts in a second reading. In its first reading, the Parliament had opted for full unbundling.

The ministers also reaffirmed the crucial importance of energy efficiency both to achieve climate objectives and to guarantee energy security.

The ministers also discussed the energy-climate package and especially the renewables directive under which these energies should account for 20% of the energy mix by 2020. It is one of the leading priorities of the French presidency, and an agreement at its first reading is targeted by yearend.

France leads EU Council's Kyoto extension push

France's National Assembly voted almost unanimously Oct. 21 on the draft law implementing the country's environment package, concluding a widespread debate with all relevant stakeholders over the past year.

The result "should considerably bolster France's credibility and voice within the European and international climate negotiations" said Jean-Louis Borloo, minister of ecology, energy, and sustainable development.

Borloo was alluding to the back-tracking of a number of European Union member states on the energy-climate package, which France wants to see adopted at the next EU Council meeting Dec. 11-12. It will coincide with the United Nations climate conference in Poznan, Poland, Dec. 1-12 to extend the Kyoto Protocol treaty beyond 2012.

The energy-climate targets to 2020 are "the three 20s," namely to reduce greenhouse gas emissions by 20%, increase the share of renewables in energy consumption to 20%, and improve energy efficiency by 20%. It is one of the priorities of France, which currently holds the rotating EU presidency until yearend, to have the package adopted in December.

President Nicolas Sarkozy, at the last 2 7 leaders summit meeting in Brussels Oct. 15-16, said solutions would be found for countries that have expressed concern over the cost of the package in the current unfavorable financial and economic environment.

Italy, Poland, and several new EU member states, including Bulgaria, Hungary, Latvia, Lithuania, Romania, and Slovakia, have threatened to veto the package, while a consensus is needed for its adoption. Many are coal-dependent countries that are also worried that the EU's Emission Trading Scheme would be too costly for them, as they would need to buy certificates allowing them to emit carbon dioxide as of 2013. They want the deadline extended to 2020. Their view is that the EU's policy should be "to reconcile environmental targets with the need for sustainable development."

The European Commission has already provided for some flexibility in the application of the package. But as its president Jose Manuel Barroso firmly said at the Oct. 15-16 meeting: "What the Commission is adamantly opposed to is anything that undermines the overall architecture of the package" [the three 20s].

Any major backtracking would jeopardize the EU's environmental leadership because it hopes to influence other countries worldwide to follow its suit.

Eni, Enel to develop Italy's first CCS project

Italy's Eni SPA and electric power utility ENEL will integrate their carbon capture and storage (CCS) projects to construct a pilot plant in Brindisi under a strategic cooperation agreement signed in Rome.

Eni, Enel, and the Italian Environment Ministry will also work on developing carbon dioxide capture technologies and renewable energy, according to separate memorandum of understanding.

At the Brindisi thermal power station, Enel is working on a pilot plant that will be able to remove 2.5 tonnes/hr of gas and transport it to the Cortemaggiore site in fall 2009. Eni has started an injection project that could offload 8,000 tonnes/year of CO2 into depleted, exhausted Stogit field at Cortemaggiore (Piacenza) in fall 2010. Both companies have committed to lay a pilot dense-phase CO2 transport line at the Brindisi site to bolster their experience in transporting CO2.

They will study Italy's CO2 storage potential in partnership with Italian research bodies as the European Commission has strongly urged that this technology be widely deployed across its member states to enhance security of energy supplies. Enel and Eni plan to carry out a detailed feasibility study on the construction of a large-scale integrated demo plant for Enel's clean-coal power station.

Exploration & Development - Quick Takes

CNX Gas pushes Chattanooga shale exploration

CNX Gas Corp., Pittsburgh, has expanded its position the Devonian Chattanooga shale gas play to 235,000 acres in northeastern Tennessee and plans a two-rig program to drill 10 wells in the rest of 2008.

The acreage in Scott, Campbell, Anderson, and Morgan counties, Term., is largely contiguous and is composed of only a small number of leases, a rarity in the Appalachian basin, the company noted. It expanded by buying out its 50% partner Knox Energy Inc. and acquiring several other leases.

Chattanooga is 50-80 ft thick at about 3,500 ft and rich in total organic carbon. The company has drilled eight horizontal wells in the play.

The most recent well cost $900,000 to drill and complete. The wells were drilled with a truck-mounted, top-drive rig with a 185,000-lb hookload capacity.

CNX Gas, which connected the fifth well in mid-October, said gas rates at the first four wells are 230, 160, 100, and 230 Mcfd. Daily rates for the better wells have been stable.

New drilling is occurring in areas that have shown better initial results, and the company plans microseismic work in late 2008 to better understand the variances in individual well production.

PetroChina to drill in Uzbekistan

China National Petroleum Corp. subsidiary PetroChina will form a joint venture with state-owned Uzbekneftegaz to develop Mingbulak oil field in Namangan province on the northern edge of the Fergana Valley in northeastern Uzbekistan.

The joint venture "will help meet Uzbekistan's demand for oil and boost the development of China's natural gas upstream business and the Central Asia-China natural gas pipeline project," CNPC said.

CNPC in January started building the CAC pipeline, which will transport gas from Turkmenistan, through Uzbekistan and southern Kazakhstan, to western China's Xinjiang region. The pipeline, scheduled to start operations in 2009, will have a transmission capacity of 1.1 tcf/year of gas.