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Last Updated: August 10, 2016
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Oil Prices

Rumblings among OPEC members of restricting output rallied prices lifted oil prices slightly, but weak fundamentals particularly in demand outpacing supply kept prices in the low US$40/b level.

 

After reporting a net loss in Q2, Chevron is accelerating its plan to raise as much as US$10 billion by 2017 through the sale of Asia assets. The US giant is aiming to sell its stake in its offshore venture with CNOOC, which could raise as much as US$1 billion, as well as geothermal assets in Indonesia and natural gas assets in Thailand, which will be eyed by PTT.

India has poured cold water on recent reports that the government was planning to merge the 13 state energy firms into one giant conglomerate. The Petroleum Ministry has clarified that instead of a concrete idea, the proposal is only one of many that India is considering to streamline the complicated energy network in the country.

China is planning a cull of its petrochemical industry. Excess capacity in the petrochemical industry is a looming issue in the country, and the government is addressing it by identifying out-dated plants to be shut down and ordering consolidation among the big players to boost efficiency.

In a sign of the growing relationship between international traders and Chinese teapots, Trafigura has extended the credit period for crude purchases for two independent Chinese refiners – Shouguang Luqing Petrochemical and Huifeng Petrochemical Group. Under a third party processing agreement, the Chinese teapots will then provideTrafigura with refined products, mainly gasoline, that then enter its trading portfolio.

Indonesia’s Pertamina has shut down its RFCC unit at Cilacap for repairs for two weeks, with full production resuming only in mid-August. Gasoline imports into Indonesia will spike over this period, given that Indonesia is a net importer of the fuel. Pertamina had recently received a 200,000-barrel cargo of gasoline from Rosneft, the Russia firm’s first gasoline delivery to South-East Asia, part of a larger 1.2 million barrel deal signed in June.

Tokyo Gas is in talks with European companies to engage in LNG cargo swaps, sending the cargos it owns from Cove Point on the US East Coast to Europe instead of Asia, saving on shipping time and cost as it aims to introduce more flexibility into its LNG supply system.

A civil war is brewing in the normally sedate Japanese energy industry. The planned marriage of Idemitsu and Showa Shell is opposed by the founding family of Idemitsu, who have bought a stake Showa Shell in a bid to block to takeover, arguing that the two companies’ cultures are too different to successfully merge. The founding family now own 0.1% of Showa Shell, forcing Idemitsu to consider purchases less than its initial planned 33.24% stake in Showa Shell; the combined Idemitsu shareholding in that case would have exceeded a third of Showa Shell, which is barred under Japanese law.

 

The Iranian government is expected to ratify a new model oil contract this week, aiming to encourage foreign investment as the country returns to the international community after years of sanctions and decades of a unfavourable petroleum contract system that drove investors away.

 

More International Oil and Gas updates

More US oil rigs are coming back online – up by 7 last week – bringing the total number of operational oil and gas rigs in the US to 464, as five gas rigs (mainly in Marcellus shale) shut down. This is the sixth week of rises in the rig count, pumping out more volumes that places downward pressure on prices.

Canada’s Irving Oil has agreed to buy the only refinery in Ireland from Phillips66. The Whitegate refinery exchanges hands for ‘less than US$90 million’ reportedly. The Whitegate refinery near Cork will remain operational with no cuts; Phillips66 has been attempting to sell the refinery since 2013, but poor refining margins had hampered the sale.

South African refineries remain operational despite a strike by the 15,000 workers across the petrochemicals industry over poor wages. The strike enters its second week today, and while the refineries continue to operate, fuel distribution in the country has been affected.

The long-standing LPG trade between the US Gulf and Asia looks shaky at the moment, as collapsing prices have led to Asian buyers cancelling at least three LPG cargoes in the last month, incurring cancellation fees that still make it more economical to buy spot cargoes in Asia.

Italy’s Eni has reportedly wrapped up talks to sell its multi-billion stake in the planned Mozambique LNG development to ExxonMobil. The deal concerns Eni’s offshore gas reserves in Mozambique’s Area 4, which is aims to pipe to an LNG export plant to serve Asia; the scale of the project may be beyond Eni’s expertise, hence ExxonMobil being a natural fit, given its existing presence in Mozambique

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Chicago Cubs Shirts: Wear Style with Ultimate Comfort!

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September, 16 2021
The New Wave of Renewable Fuels

In 2021, the makeup of renewables has also changed drastically. Technologies such as solar and wind are no longer novel, as is the idea of blending vegetable oils into road fuels or switching to electric-based vehicles. Such ideas are now entrenched and are not considered enough to shift the world into a carbon neutral future. The new wave of renewables focus on converting by-products from other carbon-intensive industries into usable fuels. Research into such technologies has been pioneered in universities and start-ups over the past two decades, but the impetus of global climate goals is now seeing an incredible amount of money being poured into them as oil & gas giants seek to rebalance their portfolios away from pure hydrocarbons with a goal of balancing their total carbon emissions in aggregate to zero.

Traditionally, the European players have led this drive. Which is unsurprising, since the EU has been the most driven in this acceleration. But even the US giants are following suit. In the past year, Chevron has poured an incredible amount of cash and effort in pioneering renewables. Its motives might be less than altruistic, shareholders across America have been particularly vocal about driving this transformation but the net results will be positive for all.

Chevron’s recent efforts have focused on biomethane, through a partnership with global waste solutions company Brightmark. The joint venture Brightmark RNG Holdings operations focused on convert cow manure to renewable natural gas, which are then converted into fuel for long-haul trucks, the very kind that criss-cross the vast highways of the US delivering goods from coast to coast. Launched in October 2020, the joint venture was extended and expanded in August, now encompassing 38 biomethane plants in seven US states, with first production set to begin later in 2021. The targeting of livestock waste is particularly crucial: methane emissions from farms is the second-largest contributor to climate change emissions globally. The technology to capture methane from manure (as well as landfills and other waste sites) has existed for years, but has only recently been commercialised to convert methane emissions from decomposition to useful products.

This is an arena that another supermajor – BP – has also made a recent significant investment in. BP signed a 15-year agreement with CleanBay Renewables to purchase the latter’s renewable natural gas (RNG) to be mixed and sold into select US state markets. Beginning with California, which has one of the strictest fuel standards in the US and provides incentives under the Low Carbon Fuel Standard to reduce carbon intensity – CleanBay’s RNG is derived not from cows, but from poultry. Chicken manure, feathers and bedding are all converted into RNG using anaerobic digesters, providing a carbon intensity that is said to be 95% less than the lifecycle greenhouse gas emissions of pure fossil fuels and non-conversion of poultry waste matter. BP also has an agreement with Gevo Inc in Iowa to purchase RNG produced from cow manure, also for sale in California.

But road fuels aren’t the only avenue for large-scale embracing of renewables. It could take to the air, literally. After all, the global commercial airline fleet currently stands at over 25,000 aircraft and is expected to grow to over 35,000 by 2030. All those planes will burn a lot of fuel. With the airline industry embracing the idea of AAF (or Alternative Aviation Fuels), developments into renewable jet fuels have been striking, from traditional bio-sources such as palm or soybean oil to advanced organic matter conversion from agricultural waste and manure. Chevron, again, has signed a landmark deal to advance the commercialisation. Together with Delta Airlines and Google, Chevron will be producing a batch of sustainable aviation fuel at its El Segundo refinery in California. Delta will then use the fuel, with Google providing a cloud-based framework to analyse the data. That data will then allow for a transparent analysis into carbon emissions from the use of sustainable aviation fuel, as benchmark for others to follow. The analysis should be able to confirm whether or not the International Air Transport Association (IATA)’s estimates that renewable jet fuel can reduce lifecycle carbon intensity by up to 80%. And to strengthen the measure, Delta has pledged to replace 10% of its jet fuel with sustainable aviation fuel by 2030.

In a parallel, but no less pioneering lane, France’s TotalEnergies has announced that it is developing a 100% renewable fuel for use in motorsports, using bioethanol sourced from residues produced by the French wine industry (among others) at its Feyzin refinery in Lyon. This, it believes, will reduce the racing sports’ carbon emissions by an immediate 65%. The fuel, named Excellium Racing 100, is set to debut at the next season of the FIA World Endurance Championship, which includes the iconic 24 Hours of Le Mans 2022 race.

But Chevron isn’t done yet. It is also falling back on the long-standing use of vegetable oils blended into US transport fuels by signing a wide-ranging agreement with commodity giant Bunge. Called a ‘farmer-to-fuelling station’ solution, Bunge’s soybean processing facilities in Louisiana and Illinois will be the source of meal and oil that will be converted by Chevron into diesel and jet fuel. With an investment of US$600 million, Chevron will assist Bunge in doubling the combined capacity of both plants by 2024, in line with anticipated increases in the US biofuels blending mandates.

Even ExxonMobil, one of the most reticent of the supermajors to embrace renewables wholesale, is getting in on the action. Its Imperial Oil subsidiary in Canada has announced plans to commercialise renewable diesel at a new facility near Edmonton using plant-based feedstock and hydrogen. The venture does only target the Canadian market – where political will to drive renewable adoption is far higher than in the US – but similar moves have already been adopted by other refiners for the US market, including major investments by Phillips 66 and Valero.

Ultimately, these recent moves are driven out of necessity. This is the way the industry is moving and anyone stubborn enough to ignore it will be left behind. Combined with other major investments driven by European supermajors over the past five years, this wider and wider adoption of renewable can only be better for the planet and, eventually, individual bottom lines. The renewables ball is rolling fast and is only gaining momentum.

End of Article

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Market Outlook:

  • Crude price trading range: Brent – US$71-73/b, WTI – US$68-70/b
  • Global crude benchmarks have stayed steady, even as OPEC+ sticks to its plans to ease supply quotas against the uncertainty of rising Covid-19 cases worldwide
  • However, the success of vaccination drives has kindled hope that the effect of lockdowns – if any – will be mild, with pockets of demand resurgence in Europe; in China, where there has been a zero-tolerance drive to stamp out Covid outbreaks, fuel consumption is strengthening again, possibly tightening fuel balances in Q4
  • Meanwhile, much of the US Gulf of Mexico crude production remains hampered by the effects of Hurricane Ida, providing a counter-balance on the supply side

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