Easwaran Kanason

Co - founder of NrgEdge
Last Updated: September 5, 2016
1 view
Business Trends
image

Last week in the world oil

Remarks from both Saudi Arabia and Russia on a possible output freeze from OPEC lifted the oil market last week, outweighing any jitters over a US Federal Reserve rate hike. Crude oil prices are now staying at the US$45/b levels, with OPEC member Indonesia stating that it is ‘comfortable’ with prices at this level.

After staying unchanged the previous week, the US oil rig count inched up by one last week as producers retreated to caution after increasing the rig count nine of the last ten weeks. Steady prices in the US$40-50/b range will encourage some rigs to come back online, but growth will be slow. 

After 20 years, Shell and Saudi Aramco have decided that their Motiva joint venture divorce will be final on April 1, 2017, several months earlier than expected. The US-focused joint venture will see is assets split between the two oil giants with Saudi Aramco assuming ownership of the Motiva name and its crown jewel, the 630 kb/d Port Arthur refinery, while Shell takes over two Louisiana refineries and Motiva’s retail network in Florida, Louisiana and the north-eastern US states.   

Australia’s Woodside has agreed to purchase half of BHP Billiton’s assets in the Scarborough area of Western Australia’s Carnarvon Basin. The acquisition includes a 25% stake in the WA-1-R and 50% in WA-62R, blocks that contain the Scarborough gas field. Woodside will also acquire stakes in the Jupiter and Thebe gas fields, expanding its portfolio by some 2.6 tcf for the price of US$400 million. 

Having ironed out the kinks in its natural gas development strategy, Israel is examining ways to exporting its natural gas to Western Europe. While pipeline exports to neighbouring Turkey, Egypt and Iran will be the immediate focus, regional tensions will mean Israel prefers to have a stable export line to Western Europe, with the options being building pipelines to Turkey or Greece via Cyprus, or using Egypt’s LNG facilities.

Cyprus has inked a deal with Egypt to send natural gas via pipeline once extraction begins on Noble Energy’s fields. The Mediterranean island nation has made several notable natural gas discoveries recently, with participants including Eni, KoGas and Total. 

As Brazil’s Petrobras battles to pare down its debt amidst financial troubles, the company announced that its employee base will be reduced by a fifth as nearly 12,000 employees accepted an employee redundancy plan. More acceptances of voluntary resignations are expected. 

Supermajor BP, Russia’s Rosneft and service giant Schlumberger has inked a pact to collaborate on seismic research and development, with Rosneft joining into the BP-Schlumberger WesternGeco joint venture focused on cableless onshore seismic acquisition technology. 

Indonesia will be offering ten new oil and gas blocks soon, focusing on the gas rich Natuna Islands. Three of the blocks on offer are in the Natuna region, home to the huge East Natuna fields with 46 tcf of proven reserves. Extraction is difficult in the region due to a high concentration of carbon dioxide, but also because the islands skirt the territory that China claims as its own as part of its ‘nine-dashed line’. Pertamina will be coordinated the administration of the blocks, with the state firm keen to work in particular with Malaysia’s Petronas. 

With Saudi Arabia aiming to re-assert itself as a vital crude supplier to China, Saudi Aramco announced that it was in ‘advanced negotiations’ with China’s CNPC to build a refinery in Yunnan, China. SABIC, Saudi Arabia’s petrochemicals arm, is also expected to finalise its agreement with China’s Shenhua Ningxia Coal Industry Group to build a US$3-4 billion coal-to-chemicals projects in Ningxia Hui by 2020. 

With Indonesia’s Pertamina continuing to grapple with insufficient refining capacity at home, the group is now looking for a toll-refining arrangement with a foreign refinery to process up to 1.2 mb/month of Algerian and Malaysian crude. With the crude already en route to Indonesia, a regional refinery would be preferable, with Pertamina having previously appointed Shell in Singapore to process 1 mb/month of Iraqi crude earlier this year. 

India’s BPCL plans to spend some US$ 8 billion over the next five years to improve refining margins at its sites across India. BPCL generally lags behind IOC and private refiner Reliance in terms of refining complexity, and with Indian oil demand moving up the quality ladder, investment in secondary units will help improve distillate yields and refining margins. 

First gas has begun to flow on Chevron’s Bangka field in East Kalimantan, Indonesia. Supported by a subsea well connection to the West Seno floating production unit, the Bangka project should boost Indonesia’s natural gas production at a time when the country is hurting for energy output. The Bangka project is led by Chevron, with Eni and Tip Top being minority partners. 

Petronas’ proposed C$11 billion LNG export plant in Canada got a boost as the Lax Kw’alaams Band aboriginal community signalled that it was open to the project on the condition that the location be changed. Other partners on the British Columbia project are China’s CNPC, Japan Petroleum Exploration, India’s IOC and Brunei National Petroleum, with LNG shipments earmarked for East Asia, as well as Malaysia’s own growing LNG appetite. 

Have a productive week ahead!

Read more:
oil market update market insight oil prices update oil market currents oil market news
3
1 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

The Cubs Phenom: A Look At Anthony Rizzo
A look at Anthony Rizzo

Anthony Rizzo Players Can't Sit On Bench  According to a report from the Chicago Sun-Times, the world-famous Anthony Rizzo Phrase "Zombie Rizzo" has been told to never be used again. Of course, this is not the first time that the Zombified Chicago Cubs' first baseman has made headlines this year. A year ago, "Rosebud" was the catchphrase that he coined for himself. Also, there is Anthony Rizzo Shirts that come in his name. Now that the Cubs are World Series Champions, Anthony Rizzo is on his way to superstardom. He is leading the World Series in several categories, including hits, runs, home runs, RBI's, OBP, and SLG. Also, he's on track for a staggering year in hits, RBI's, and total bases, all while being second in home runs.

 The Cubs Phenom

This season the Chicago Cubs are over 3.5 million in earnings from the local broadcasts alone. The Cubs could lose a good deal of local revenue if they fail to get back to the World Series.  But the local revenue is not the biggest factor in the Cub's success. A large part of their success comes from two of their most popular players, third baseman Kris Bryant and first baseman Anthony Rizzo.  These two players are now the favorites to win the MVP awards this year, especially if the Cubs are able to stay on top of the wild card standings.  A Look at Rizzo  Anthony Rizzo is often compared to his college teammate Andrew McCutchen. Both players have performed well at the plate.

June, 24 2022
The Advantages Of Owning A Wood Pellet Mill

The wood pellet mill, that goes by the name of a wood pellet machine, or wood pellet press, is popular in lots of countries around the world. With all the expansion of "biomass energy", there are now various production technologies utilized to convert biomass into useable electricity and heat. The wood pellet machines are one of the typical machines that complete this task.

Wood pellet mills turn raw materials such as sawdust, straw, or wood into highly efficient biomass fuel. Concurrently, the entire process of converting these materials in a more dense energy form facilitates storage, transport, and make use of on the remainder of any value chain. Later on, you will find plans for biomass fuel to replace traditional fuels. Moreover, wood pellet machines supply the chances to start many different types of businesses.

What Is A Wood Pellet Mill?

Wood pellet machines are kinds of pellet machines to process raw materials including peanut shells, sawdust, leaves, straw, wood, plus more. Today the pellet mills can be purchased in different types. Both the main types include the ring die pellet mills as well as the flat die pellet mills. Wood pellet mills are designed for processing many different types of raw materials irrespective of size. The pellet size is very simple to customize with the use of a hammer mill.

The Benefits Of A Wood Pellet Mill

- The gearboxes are made of high-quality cast iron materials which provide excellent shock absorption and low noise. The wood pellet mills adopt a gear drive that makes a better efficiency in comparison with worm drive or belt drive. The gear drive setup really helps to prevent belt slippage while extending the lifespan in the belt drive.

- The equipment shell includes reinforced ribs and increased casting thickness, which significantly enhances the overall strength of those mills, preventing the breakage in the shell.

- The rollers and die are made of premium-quality alloy steel with 55-60HRC hardness.

- These mills adopt an appropriate wood-processing die-hole structure and die-hole compression ratio.

- The electric-control product is completely compliant with CE standard-os.

- The Emergency Stop button quickly shuts along the mill if you are up against an unexpected emergency.

How To Maintain A Wood Pellet Mill

- The belt tightness ought to be checked regularly. If it is now slack, it needs to be tightened immediately.

- The equipment should be situated in a nicely-ventilated area to ensure the temperature created by the motor can emit safely, to extend the lifespan of your machine.

- Before restarting the appliance, any remaining debris has to be cleared from the machine room to reduce starting resistance.

- Oil must be filled regularly to every bearing to market inter-lubricating.

- To ensure the cutter remains sharp, check this part regularly to prevent unnecessary damages for any other part.

- Regularly inspect the cutter screws, to make sure the bond involving the knife and blade remains strong.

- The machine should take a seat on an excellent foundation. Regular maintenance of your machine will prolong the complete lifespan of the machinery.

June, 12 2022
OPEC And The Current State of Oil Fundamentals

It was shaping up to yet another dull OPEC+ meeting. Cut and dry. Copy and paste. Rubber-stamping yet another monthly increase in production quotas by 432,000 b/d. Month after month of resisting pressure from the largest economies in the world to accelerate supply easing had inured markets to expectations of swift action by OPEC and its wider brethren in OPEC+.

And then, just two days before the meeting, chatter began that suggested something big was brewing. Whispers that Russia could be suspended made the rounds, an about-face for a group that has steadfastly avoided reference to the war in Ukraine, calling it a matter of politics not markets. If Russia was indeed removed from the production quotas, that would allow other OPEC+ producers to fill in the gap in volumes constrained internationally due to sanctions.

That didn’t happen. In fact, OPEC+ Joint Technical Committee commented that suspension of Russia’s quota was not discussed at all and not on the table. Instead, the JTC reduced its global oil demand forecast for 2022 by 200,000 b/d, expecting global oil demand to grow by 3.4 mmb/d this year instead with the downside being volatility linked to ‘geopolitical situations and Covid developments.’ Ordinarily, that would be a sign for OPEC+ to hold to its usual supply easing schedule. After all, the group has been claiming that oil markets have ‘been in balance’ for much of the first five months of 2022. Instead, the group surprised traders by announcing an increase in its monthly oil supply hike for July and August, adding 648,000 b/d each month for a 50% rise from the previous baseline.

The increase will be divided proportionally across OPEC+, as has been since the landmark supply deal in spring 2020. Crucially this includes Russia, where the new quota will be a paper one, since Western sanctions means that any additional Russian crude is unlikely to make it to the market. And that too goes for other members that haven’t even met their previous lower quotas, including Iraq, Angola and Nigeria. The oil ministers know this and the market knows this. Which is why the surprise announcement didn’t budge crude prices by very much at all.

In fact, there are only two countries within OPEC+ that have enough spare capacity to be ramped up quickly. The United Arab Emirates, which was responsible for recent turmoil within the group by arguing for higher quotas should be happy. But it will be a measure of backtracking for the only other country in that position, Saudi Arabia. After publicly stating that it had ‘done all it can for the oil market’ and blaming a lack of refining capacity for high fuel prices, the Kingdom’s change of heart seems to be linked to some external pressure. But it could seemingly resist no more. But that spotlight on the UAE and Saudi Arabia will allow both to wrench some market share, as both countries have been long preparing to increase their production. Abu Dhabi recently made three sizable onshore oil discoveries at Bu Hasa, Onshore Block 3 and the Al Dhafra Petroleum Concession, that adds some 650 million barrels to its reserves, which would help lift the ceiling for oil production from 4 to 5 mmb/d by 2030. Meanwhile, Saudi Aramco is expected to contract over 30 offshore rigs in 2022 alone, targeting the Marjan and Zuluf fields to increase production from 12 to 13 mmb/d by 2027.

The UAE wants to ramp up, certainly. But does Saudi Arabia too? As the dominant power of OPEC, what Saudi Arabia wants it usually gets. The signals all along were that the Kingdom wanted to remain prudent. It is not that it cannot, there is about a million barrels per day of extra production capacity that Saudi Arabia can open up immediately but that it does not want to. Bringing those extra volume on means that spare capacity drops down to critical levels, eliminating options if extra crises emerge. One is already starting up again in Libya, where internal political discord for years has led to an on-off, stop-start rhythm in Libyan crude. If Saudi Arabia uses up all its spare capacity, oil prices could jump even higher if new emergencies emerge with no avenue to tackle them. That the Saudis have given in (slightly) must mean that political pressure is heating up. That the announcement was made at the OPEC+ meeting and not a summit between US and Saudi leaders must mean that a façade of independence must be maintained around the crucial decisions to raise supply quotas.

But that increase is not going to be enough, especially with Russia’s absence. Markets largely shrugged off the announcement, keeping Brent crude at US$120/b levels. Consumption is booming, as the world rushes to enjoy its first summer with a high degree of freedom since Covid-19 hit. Which is why global leaders are looking at other ways to tackle high energy prices and mitigate soaring inflation. In Germany, low-priced monthly public transport are intended to wean drivers off cars. In the UK, a windfall tax on energy companies should yield US$6 billion to be used for insulating consumers. And in the US, Joe Biden has been busy.

With the Permian Basin focusing on fiscal prudence instead of wanton drilling, US shale output has not responded to lucrative oil prices that way it used to. American rig counts are only inching up, with some shale basins even losing rigs. So the White House is trying more creative ways. Though the suggestion of an ‘oil consumer cartel’ as an analogue to OPEC by Italian Prime Minister Mario Draghi is likely dead on arrival, the US is looking to unlock supply and tame fuel prices through other ways. Regular releases from the US Strategic Petroleum Reserve has so far done little to bring prices down, but easing sanctions on Venezuelan crude that could be exported to the US and Europe, as well as working with the refining industry to restart recently idled refineries could. Inflation levels above 8% and gasoline prices at all-time highs could lead to a bloody outcome in this year’s midterm elections, and Joe Biden knows that.

But oil (and natural gas) supply/demand dynamics cannot truly start returning to normal as long as the war in Ukraine rages on. And the far-ranging sanctions impacting Russian energy exports will take even longer to be lifted depending on how the war goes. Yes, some Russian crude is making it to the market. China, for example, has been quietly refilling its petroleum reserves with Russian crude (at a discount, of course). India continues to buy from Moscow, as are smaller nations like Sri Lanka where an economic crisis limits options. Selling the crude is one thing, transporting it is another. With most international insurers blacklisting Russian shippers, Russian oil producers can still turn to local insurance and tankers from the once-derided state tanker firm Sovcomflot PJSC to deliver crude to the few customers they still have.

A 50% hike in OPEC’s monthly supply easing targets might seem like a lot. But it isn’t enough. Especially since actual production will fall short of that quota. The entire OPEC system, and the illusion of control it provides has broken down. Russian oil is still trickling out to global buyers but even if it returned in full, there is still not enough refining capacity to absorb those volumes. Doctors speak of long Covid symptoms in patients, and the world energy complex is experiencing long Covid, now with a touch with geopolitical germs as well. It’ll take a long time to recover, so brace yourselves.

End of Article

Get timely updates about latest developments in oil & gas delivered to your inbox. Join our email list and get your targeted content regularly for free or follow-us on LinkedIn.

No alt text provided for this image

Learn more about this training course

June, 12 2022