Energy Security

[Dayuhan]

I would certainly classify the Venezuelan peak as driven by investment and political issues: poor Hugo has not been good for the Venezuelan oil industry.

Kuwait is just beginning an $87 billion investment program aimed at raising production capacity to 3.6mbpd from the current (roughly, from memory) 2.5. They seem to think investment has been the constraint.

Libya is a classic question mark. Most of Libya's production for the last 50 years has come from a single area, the Sirte basin. There may be other significant reserves, or there may not be: we don't know, because for much of the last 40 years Libya has been effectively a pariah state. Nobody wanted to explore there, and the Libyans didn't have the capacity to explore effectively. They also didn't need to, because they had the Sirte basin fields. It's only very recently that methodical exploration has begun to resume. Certainly the Sirte basin fields have reached a geological peak, but that doesn't necessarily mean that Libya has. We won't know until somebody looks. Even now there's a real reluctance among foreign companies to put major resources into Libya... the government is capricious, to put it mildly.

Again, this all comes back to the impact of the glut. During a glut it's natural to sit back and pump from existing fields, it's much cheaper than going out and looking for new ones. Of course that means that those known, developed fields get run down, but that doesn't mean there's nothing else. Even in Saudi Arabia much of the Rub al Khali remains unexplored... until very recently there's been no incentive to look there.

[Rick M]

Hi, Steve

Thanks for your observations.

My understanding is that Venezuela peaked in conventional oil around the same time as Canada and USA, in early 70s.
Regardless of the conventional/unconventional breakdown, this EIA posting indicates that VZ peaked in 1997 at around 3.5 mbpd, about 1 mbpd more than it produces now:
http://www.eia.doe.gov/cabs/Venezuela/Oil.html

Whether a change in regime and a more favourable investment climate can get VZ over 3.5 remains to be seen.
My understanding is that their future production must come increasingly from unconventional sources (same here in Canada), which will not be cheap or easy.

No comment on Kuwait... you know more than I do.

As for Libya... I did think that the international situation re Libya had shifted considerably... it's no longer the pariah state which it once was.
My understanding also is that Libyan oil is among the highest quality in the world, so I don't see why investment should be a major problem.
But you may have other info... I'm no expert.

Returning to the issue of cartels, this may be of interest:
http://economictimes.indiatimes.com/...ow/5857847.cms

[Dayuhan]

Charts need context. Venezuela peaked in 97, but we have to remember that in 98 OPEC made a last ditch effort to impose production cuts as a response to plummeting prices. Production then increased again until 2000, when Chavez's policies began taking their toll, driving a decrease that became terminal with the PDVSA strike in 2002. I don't think there's any geological reason why Venezuela couldn't produce far more, but it won't happen any time soon: between the extreme neglect of physical infrastructure and the gutting of PDVSA's professional staff it will be a huge project to bring production back up, and it's not likely to happen while Chavez is in power.

Libya is no longer an outright pariah, but it's still a one-man government and that one man lost the plot a long time ago. Have you been following Qaddafi's spat with the Swiss? Would you want to put billions of dollars into a long-term project that was subject to that sort of whim?

[davidbfpo]

This morning the BBC Radio breakfast programme had one item on energy security that I heard near the end, possibly another earlier on. A former Labour energy minister and a Green party spokesman talked sensibly for a few minutes; mainly around the UK soon to have an energy gap as power stations of all types are closed down. Maybe on the podcast via link:http://news.bbc.co.uk/today/hi/default.stm

The BBC reporter indicated energy security had been virtually absent from the election campaign, although climate change gets a mention.

[Rick M]

Thanks for your comments, Steve and David

Steve,
re. stalling production and its various causes, I would only say that our world is full of "could haves."
By that I mean, perhaps you or I could have been an Olympic athlete or the world's greatest pianist.
We may have had the potential, but a multitude of factors failed to fall into place, so you and I were neither, despite perhaps having the unrealized potential (though in my case both careers were clearly impossible).

My point here is that in the end, it may matter little what causes the peak for a country, a region, or globally.
The geological limit (the resource itself and the physics of EROEI) form an outer limit (and even that could change).

But within that, there are many interacting forces which could conspire to prevent us from extracting oil which we could have (and should have) extracted.
So we can point to geopolitics and under-investment, etc, and explain to how those factors and not geological constraints caused the production peak, but I'm not sure that much has been achieved (other than to highlight what could have been achieved, but wasn't).
When we have a situation where global oil production stalls, coupled with an ever-increasing population which is becoming increasingly dependent on oil, we will have a very serious problem.

The cause of the stalling production really may not matter, and we may find that the non-geological variables are just as insurmountable as the geological ones.
What will matter then is that what we have may be considerably less than what we wish we had, and that pricing may then play havoc with certain essential services like our food supply chain.
To farmers it will matter little what causes the price spike.
If fuel is unaffordable to us, we cannot conduct the primary production activities upon which the rest of the food supply chain depends.

David,
I agree... the issue of energy security seems to be absent from the UK election issues.
This omission is rather stunning: you have the issue of declining domestic production, reduced royalties from the oil and gas wells, declining taxes from the companies and their workers, combined with the longer-term threat of where that energy short-fall will come from and how it will be paid for.
Surely energy security issues should be at the forefront... I guess it shows how much we take cheap energy for granted.

[Dayuhan]

My point here is that in the end, it may matter little what causes the peak for a country, a region, or globally.
The geological limit (the resource itself and the physics of EROEI) form an outer limit (and even that could change).

But within that, there are many interacting forces which could conspire to prevent us from extracting oil which we could have (and should have) extracted.
So we can point to geopolitics and under-investment, etc, and explain to how those factors and not geological constraints caused the production peak, but I'm not sure that much has been achieved (other than to highlight what could have been achieved, but wasn't).

Understanding what caused any given peak and distinguishing between a geological peak (irreversible) and a "peak" driven by political or investment problems (reversible) is very important. It's not about what could have been done but wasn't, it's about what can be done, now and in the future. The distinction makes an enormous difference in developing proactive responses to the problem. If the primary constraint is geological, all we can do is brace for the inevitable impact. If the primary constraints are related to political and investment issues, we can get off our over-larded (in the collective sense) backsides and start identifying and addressing those issues.

Too much of the "peak oil" discourse seems to me to be based around two assumptions:

1. A "peak" is by definition absolute and irreversible.

2. Neither supply nor demand for oil is elastic relative to price.

I don't think either assumption is valid. I also think that these assumptions, and much of the discourse derived from them, are deliberately manipulated to produce an unnecessarily apocalyptic scenario. This is by no means unique: we see the same thing in the climate change discourse, and elsewhere.

There are reasons for this. Fear is a powerful political motivator, and can be easily manipulated in support of a political agenda. Beyond this, though, Western societies seem to have developed a curious addiction to fear. I'm not sure what the emotional payoff is, but it seems that the less we have to fear the more fearful we become, and that many of us seem to actively look for something to be afraid of. A great deal can be (and has been) said about this, suffice it to say that I think it's something we need to be aware of when approaching these issues.

A problem to be solved, yes. The inevitable end of the world as we know it, I don't buy it, not from peak oil, climate change, or any other horreur du jour.

[Rick M]

Hi, Steve

I agree with your final three paragraphs, and believe that I (and the more reputable analysts like Hirsch, Simmons, Strahan, Hughes, Homer-Dixon, etc) have made every effort not to engage in the sort of fear-mongering that you describe.

As for the two assumptions, I certainly agree with the second, but would qualify the first.
I'm not sure what you mean by "absolute," but "permanent" should perhaps be re-worded as "historic."

What I'm getting is that the peak refers to point at which we achieve the greatest flow-rate... maximum production.
But we won't know that until the 'rear-view mirror' gives us that perspective.
That would require several years to be reasonably sure, and perhaps several decades (or even more) to be 99% certain.
At that point, if there are clear geological constraints (along with the many other factors which would be operating), then I guess someone could declare that the (long-ago) peak was indeed permanent.

The US peak in Dec. 1970 is now widely accepted as permanent, since 40 years have passed and there seems to be little hope of the USA ever returning to 10 mbpd.
But miracles can happen, so I certainly would not argue that we can be 100% sure (though I’d place the odds at about 99:1).

It appears that you are assuming that the only variable which would make the peak absolute and permanent is geology (and I presume, “net energy”). As I have said before, this is the prevailing perception of the peak oil theory… that geological constraints will eventually lead to a peak/plateau in production.

But my point is that other factors come into play, and you have stressed this fact as well (on both sides of the argument… these factors can both improve and hinder flow rates). But I can think of non-geological factors which could conspire to stall global oil production, possibly on a permanent/historic basis.

The unhappy interplay of these factors is explored in this recent study from Ireland:
http://www.feasta.org/documents/risk...ping_Point.pdf

The Feasta prognosis is rather bleak, and I prefer to be more optimistic.
But I do think that their scenario is entirely plausible and something to beware of, and that it may take some proactive & creative work to prevent the domino effect which they describe from actually occurring.

My main point is that the heart of the peak oil theory is this: that we will have difficulties (ironically) as we approach the point of maximum, not minimum production, and the effects of stalling flow-rates will matter much more than what caused it, which may or may not be due to geological limitations.

My bet is that in the end, it won’t be geological limitations alone, but a convergence of above-ground and below-ground factors.

But the result will be the same… mankind will never again have the excess of cheap liquid fuels which we have enjoyed/squandered for many decades.
And that will change a great many things....

[Rick M]

The prognosis regarding that BP oil spill just keeps getting worse.

What was initially described as 1,000 bpd was then revised to 5,000 by Wednesday, and today there are several reports that the flow may be more like 25,000 bpd.
This from WSJ:
http://online.wsj.com/article/SB1000...160623498.html

and this from UK Telegraph:
http://www.telegraph.co.uk/news/worl...y-thought.html

But even 25,000 bpd could be the tip of a very long & destructive iceberg.
The chance of stemming the flow at such pressure (and at such depth & with so little visibility) appears to be increasingly remote.

In this press conference (below), it’s stated that they do not think that the flow has increased, but rather than their initial estimate was too low.
But when the question about 25,000 bpd was put to this press conference panel earlier today, no-one said that he/she believed that this figure is incorrect (there is no timer on this video, but this exchange occurs when the time-slider is 3/4 of the way across):
http://cgvi.uscg.mil/media/main.php?...avId=x2354a6fb

Transocean’s massive Development Driller 3 rig may already be in place to drill a relief well:
http://www.flickr.com/photos/uscgd8/4551849561/

But completing this second well is expected to take 60-90 days.
Should this spill continue unabated for two more months, the destruction will surely be catastrophic.
CBC-Radio cited one report that a spill of such magnitude & duration could migrate eastward around the tip of Florida and up the east coast.

Should the wellhead completely separate from the sea-bed, the flow could increase beyond 25,000 bpd.

Here is some additional info including an interesting sea-bed illustration of the problem:
http://oceanswavesbeaches.blogspot.com/

It's difficult to assess the probability of such horrific scenarios, but there is little reason to discount such possibilities....

[Dayuhan]

Adding to that you have the Atlantic hurricane season coming up soon, with forecasts of above average activity. Storms could have a serious impact on efforts to close off and contain the spill.

Longer term, there will be some inevitable impact on the politics of drilling... hard to predict, we can only wait and see how that goes. There's always been a conflict between environmental issues and the desire to increase domestic production, hard to say how this will affect that balance in the medium to long term.

[Rick M]

I agree, Steve

It is inconceivable that the costs of this mess will be less than astronomical (sorry for the hyperbolic language, but this situation surely warrants it) and they will eventually be reflected in the price of oil.
Insurance costs for BP and other oil companies, Transocean and other rig companies, and Halliburton and other subcontractors, will surely increase considerably.
What this will do to off-shore exploration in major prospect areas such as the Santos Basin and the high Arctic remains to be seen, but it is hard to imagine that there will be zero effect.

[Dayuhan]

Astronomical is relative... compare the cost to, say, the cost of a month of maintenance for US forces in Afghanistan!

There will be substantial costs to BP, both for the cleanup and in liabilities, both from administrative fines and inevitable legal action. For other producers there will be stricter regulations with greater compliance costs, and higher insurance costs. When all is said and done, though, I'd expect the incremental cost per barrel of offshore oil produced to be manageable. What's harder to quantify or predict is the extent of and the response to political efforts to close areas to exploration or development.

[Rick M]

As far as I am aware, there are three main options underway to stem the oil spill.

1. Relief wells
Transocean already has one rig in place to start drilling a relief well. Operations were due to start today but were delayed by the weather.

A second Transocean rig is also on its way to drill a second relief well… I don’t know if this is intended to further reduce the pressure or just in case something should go wrong with the first relief well.

2. Installing a new BOP
One idea is to cut off the broken riser and insert a second blow-out protector (BOP) above the first BOP.
This appears to be risky because if it fails, the flow would probably increase thorough the then nicely-sheared riser.

3. Containment domes/cofferdams
Three containment domes/cofferdams are being constructed and could be ready to install in a week or so.

All three of these options are outlined in this recent Upstream Online posting:
http://www.upstreamonline.com/live/article213922.ece

Further analysis of the ongoing predicament and a photo of the cofferdam is available here:
http://www.theoildrum.com/node/6421#more

(The photo is near the bottom of the discussion postings.)

If someone can figure out how to stop this thing, they deserve a medal....

[Rick M]

I am by no means an expert on oil well technology, and am offering these bits of info because I track oil & gas issues fairly closely, and am hoping to save you folks a bit of research time on this extremely serious problem.

Although I will only pass along information from credible sources, even their information is somewhat speculative as this is an unprecedented problem and there are many uncertainties.

I already need to issue a correction of sorts, and it's not good news.

On that first option, the drilling of relief wells, I said (in the previous posting) that the outcome "appears fairly certain."
My understanding was that a relief well would be drilled close to the original well, and that this would reduce the flow from the damaged casing. But I was puzzled as to how this could stop the flow altogether (I figured that perhaps the reduction in pressure would allow the capping of the casing).
I was also puzzled by reports that the relief well would be near the bottom of the existing well (I would have thought that it would be near the top).
The Upstream Online article says that the relief well "will try to intercept the Macondo well bore near its total depth of about 18,000 feet."

But an article in this morning's NYT explains that the technique involves drilling into the existing casing, which is described as "like finding a needle in a haystack." The article recounts the Australian struggle to stop the Montara oil spill last year.
In that case, it took five attempts at a depth of 1.6 miles (below the sea-bed) to finally penetrate a 10 inch casing.

In the Macondo case, they will be drilling twice as deep, trying to hit a casing "reportedly measuring seven inches in diameter" (NYT).
So although people seem confident that this approach will work eventually, the actual technique may prove to be more challenging and tedious than is currently being presented.

Here is the NYT link:
http://www.nytimes.com/2010/05/03/us...html?th&emc=th

I will offer more info as I find it, but please forgive me if it's not perfectly correct.

[Rick M]

1. Relief wells
Today's update from Rigzone (link below, #3) indicates that the first relief well is already 2,000 ft below the sea floor (16,000 more to go...).
A second rig is also about to start drilling.
The time-line for both remains in the 60-90 day range.

2. Containment dome/cofferdam
The first cofferdam should already be in place is expected be operational by Monday.
Cold water temperature and extreme pressure are both significant challenges, and this article describes how BP plans to overcome them:
http://www.rigzone.com/news/article.asp?a_id=92865

3. "Top Kill"
This strategy was announced today and involves reconfiguring the existing damaged blowout preventer.
If successful, it would stop the flow permanently within two weeks.
This Rigzone article does not mention what the risks of this strategy may be: it sounds like a battle of competing (and very considerable) pressures, which should have some inherent risks.
http://www.rigzone.com/news/article....f=1&a_id=92872

4. Concerns about dispersants
This sensible caution from Lawrence Berkeley National Laboratory was issued two days ago:
http://www.sciencedaily.com/releases...0504142110.htm

This Upstream Online article provides some details on the dispersants which are being used (as well as other good info):
http://www.upstreamonline.com/live/article214121.ece

-- Rick M

[Rick M]

Today's methane hydrate setback is serious but not unexpected.

However, if crystals can, within hours, plug up the top vent and render the entire 90-ton cofferdam buoyant, then the problem is clearly more formidable than was expected.

My understanding is that the BP plan is for the oil to flow through a riser which is less than 7” in diameter.
This pipe will itself be enclosed by a second, 21” riser.
Since hydrate crystals are correlated with low temperatures, warm Gulf water from above will be forced into the gap between the two pipes, warm the inner pipe and hopefully prevent crystals from forming.

Today’s news is very discouraging: if crystals form so rapidly, and we all know how rapidly water cools in metal pipes (eg. how 30’ of hot water line delays our morning shower), then what hope is there of water being warm enough one mile down to prevent a 7” pipe from getting clogged?
(And if it should clog up, where happens as pressure suddenly builds?)

The real message here is to consider the implications for Arctic drilling, where there is no warm water which could be forced down, and where the time-frame for operations is measured in weeks, not year-round.

As Tony Hayward pointed out yesterday, "This has been a transforming moment for the deepwater oil industry.... Things will be different and they clear need to be."
Regarding the recent initiative, he said, "We've been very clear from the start that the likelihood of success is not that high."

It looks like we need a miracle....

[Rick M]

An update on 7 aspects was posted this morning at Energy Bulletin:
http://www.energybulletin.net/node/52770

[Rick M]

1. Relief wells
Drilling the first relief well has been stalled for a few days in order to perform routine testing on the new rig’s blow-out preventer (BOP).
Drilling is around the 9,000 ft mark (ie. 4,000 ft into the sea-bed) and should resume by the weekend.

2. Flow diversion: “top hat” and pipe insertion
The smaller “top hat” dome is ready, lying on the sea-bed near the damaged riser.
A new proposal is to insert a 6 “ (smaller) diameter pipe inside the damaged riser.
Both attempts to direct the flow of oil may be deployed later this week.

3. Top kill/junk shot
A manifold which is needed for the attempt to deliberately clog the damaged BOP has been lowered to the sea-bed.
This Upstream Online report says that the actual “top kill/junk shot” attempt is still about a week away:
http://www.upstreamonline.com/live/article214782.ece

4. New BOP
[There appear to be no new developments on the proposal to install a new BOP on top of the damaged one.]

5. Congressional hearing reveals “significant problems”
Internal corporate documents which were provided to the House subcommittee revealed numerous problems:
a. Hydraulic leak: a loose fitting on the BOP permitted “a large leak” of hydraulic fluid to occur.
b. Modifications to the BOP: apparently the BOP was modified in 2005 to allow for routine testing but may have rendered it ineffective during an actual emergency.
c. Shearing capability: the BOP lacked the capacity to cut through joints in the drill-pipe.
d. Emergency controls: the explosion may have disabled communications to the BOP.
e. Bad wiring and a dead battery were also cited as problems.
This MSNBC article provides further details:
http://www.msnbc.msn.com/id/37107033...gulf_oil_spill

6. Cementing
Testimony during the Congressional hearing on Wednesday indicated that the cement job failed a key pressure test which should have alerted the crew that something was amiss.
This Rigzone article provides further details:
http://www.rigzone.com/news/article....f=1&a_id=93183

[Rick M]

Oil Spill Update

1. What caused the disaster?
Veteran analyst Art Berman consulted engineering experts before posting his interpretation of what occurred.

Art’s central conclusion is, “The blowout and oil spill… was caused by a flawed well plan that did not include enough cement between the 7-inch production casing and the 9 7/8-inch protection casing. The presumed blowout preventer (BOP) failure is an important but secondary issue.”

He further points out that “a flawed, risky well plan… was approved by the MMS, and BP, Anadarko and Mitsui management…. A plan that does not include enough cement to overlap the final and previous casing strings, and that does not require running a cement-bond log to ensure the integrity of a seal is a defective plan.”
If Art’s interpretation is correct, there was an inherent deficiency which originated at the planning stage, making this blow-out seem less like a tragic fluke and more like an accident waiting to happen.

Art’s insightful analysis (and subsequent discussion) is available here:
http://www.theoildrum.com/node/6493#more

Meanwhile, President Obama has begun assembling his bipartisan national commission to examine what happened and to revamp federal offshore regulations.
http://www.nytimes.com/2010/05/23/us/23address.html

2. EPA weighs sanctions against BP
Negotiations between the Environmental Protection Agency and BP (regarding previous violations) were suspended recently.
This article describes the range of sanctions which could be applied to the corporations’ US operations, including debarment:
http://www.propublica.org/feature/ep...-us-operations

3. Dispersants
Some pointed coverage of the dispersants issue has come from CNN, which on Friday explored why BP (which intended to use SeaBrat 4) has continued to use Corexit despite its higher toxicity.
Curiously, BP America President Lamar McKay could (would?) not say who decided which dispersant to use.
Here is the link to the CNN report:
http://www.cnn.com/video/#/video/us/...iref=allsearch

This NYT article provides other useful details:
http://www.nytimes.com/2010/05/13/bu...pil-81183.html

4. MMS deficiencies in Alaska
In March 2010 the US Government Accountability Office (GAO) released a report which identified significant deficiencies in the ability of the Alaska OCS Region (of the Minerals Management Service) to properly conduct assessments of environmental impacts regarding offshore development.
This NYT article provides a link to this thorough and timely GAO study:
http://www.nytimes.com/2010/05/20/sc...a%20mms&st=cse

An earlier NYT analysis is available here:
http://www.nytimes.com/gwire/2010/04...ta-h-3483.html

5. Increasing insurance costs
There are many uncertainties about the gulf oil spill and its effects on the future of offshore operations. But one thing appears to be fairly certain: insurers of such operations must now factor in the extraordinary scale of liability which can result from a severe oil spill.
As this Rigzone analyst observed, “The potential alone may push offshore insurance rates higher.”
http://www.rigzone.com/news/article....d=93614&hmpn=1

Meanwhile, legislation is being proposed in the USA which would increase the liability limit from $75 million to $10 billion. Such increased liability would be particularly burdensome to smaller companies.
This article provides additional information:
http://journalrecord.com/2010/05/21/...pollution-act/


- Rick M

[Rick M]

Shale Gas: a review of PBS coverage of “Gasland” and fracking problems

Two months ago the PBS show, “NOW,” examined the issue of hydraulic fracturing and its apparent environmental and health impacts.
PBS built its story around the exceptional efforts of Josh Fox, the maker of the recent award-winning documentary, “Gasland.”

Fox decided to make his powerful documentary after the gas industry began knocking on doors in his rural Pennsylvania neighbourhood, offering landowners about $5,000 an acre for drilling leases.

He had already heard of “distress signals” in Dimock, PA, so Fox traveled there to interview local residents. He quickly recognized a pattern of potentially lethal problems: livestock and pets were losing their fur, residents could light their taps on fire, a water-well had dangerously exploded, and heavy metals and other contaminants were suddenly showing up in the local water table.

After visiting Dimock, Fox was shocked at the absence of public and political awareness and felt some responsibility “to get out the information to people who needed to know it.”

Fox pointed out one important detail which may help explain the surge in shale gas production during the past half-decade: the 2005 energy bill suddenly exempted the natural gas industry from the Safe Water Drinking Act.
According to Fox, “The EPA was totally 100% taken off the job” and state inspectors are overwhelmed.

Here is the link to the PBS interview with David Brancaccio (23 mins):
http://www.pbs.org/now/shows/613/index.html

A recent “FRAC Act” initiative is underway to repeal the exemption for hydraulic fracturing:
http://www.govtrack.us/congress/bill.xpd?bill=s111-1215

This 2009 ProPublica article provides an excellent analysis of the fracking issue and contains many supporting links:
http://www.propublica.org/feature/of...s-drilling-426

[Surferbeetle]

Steve LeVine, Pipeline Politics Redux at FP posted Thursday, June 10, 2010 - 6:38 PM

Generals are consigned to fight the last war, as we know from the 118 million hits that Google turns up on the phrase. But must politicians? Such has been the spectacle this week in Istanbul, where the West and Russia did their best imitation of the uber-dramatic pipeline wars of the 1990s that established the United States as a key player on the Caspian Sea. Meanwhile, 2,000 miles to the east, an unchallenged China advanced another rook by signing a preliminary deal to pipe Uzbek natural gas into Xinjiang, and supported a fourth round of United Nations sanctions against Iran on the condition that it could continue its gasoline trade with Tehran.

The fight is over Europe's natural gas supply, and the perceived economic and political muscle that goes with it. Russia's natural gas giant, Gazprom, supplies some 25 percent of Europe's gas -- the figure rises to 100 percent in Finland and the Baltic states -- and Washington and many former Warsaw Bloc nations see this as a potent Russian economic and political weapon. Three times in the last four years, Russia has cut off the natural gas flow in rows with neighboring Ukraine, and Washington and the Europeans both want to lessen Russia's market dominance by finding a competing supply.

From one of the many excellent links in the article above:

Robert Tuttle on Bloomberg, June 10, 2010, 8:05 AM EDT: Qatar, Russia Shutter Gas Supply: Energy Markets (Update1)

Qatar, the world’s largest producer of liquefied natural gas, will idle 66 percent of its export plants this year, reversing earlier plans and joining Russia in curtailing supply amid a global glut.

Qatar’s two LNG producers, Ras Laffan Liquefied Natural Gas Co. and Qatar Liquefied Gas Co., had an “unusually heavy” maintenance program during the past two months that shut six of 12 production units for several weeks, New York-based consultant Poten & Partners said in a report. Another two units will undergo repairs this summer.

Russian gas-export monopoly OAO Gazprom, which supplies about a quarter of Europe’s gas, cut its 2010 production goal yesterday because of reduced demand. Qatar has changed tack from a January comment by Faisal al-Suwaidi, then chief executive officer of QatarGas, that his company probably wouldn’t idle any LNG units for maintenance in 2010. Qatar and Russia rejected a proposal by Algeria in April that exporting nations trim shipments to support prices.