Easwaran Kanason

Co - founder of NrgEdge
Last Updated: October 3, 2016
1 view
Business Trends

Last week in the world oil

Oil Prices. After a burst of optimism following last weeks informal OPEC agreement to cut output, cynicism and doubt over the organisations power and will to enforce the new quotas have shaved prices somewhat, with crude prices starting this week near US$50/b for Brent and US$48 for WTI. (Read about this - https://www.nrgedge.net/article/1475125708-opec-shows-its-fangs-finally)

With rising oil prices comes more US oil rigs. The number of operating US oil rigs rose by seven to 425, with gas rigs also rising, by four to 96. Two of the additions were offshore rigs, which could be taken as a sign of optimism for prices, which touched US$50/b after the OPEC meeting.

BPs head of refining economics has warned that the downstream industry is evolving in a way to slash the need for oil products produced in refinery. Richard de Caux expects a significant portion of the worlds expanding energy demand to be for petrochemicals, which will progressively be supplied directly by natural gas liquids (NGLs) production from US shale gas, with ethane, propane and butane replacing naphtha as petrochemicals feed. Last week, the first US ethane cargo arrived in Europe, at Scotland, with BP calls a harbinger of supply to come that will further depress margins of refineries worldwide.

Finland has proposed that the five Nordic countries including Sweden, Norway, Iceland and Denmark set a joint target on biofuelds. All five countries have a similar strategic outlook for the adoption of biofuels, in line with Finlands target of 20% of all transport fuel by 2020 and 40% by 2030, though without a legally binding target. The Nordic target is far higher than the broader EU target, which is a minimum of 10% by 2020.

Theres movement in the Caribbean. After news that Curacao might be handing operation of its Isla refinery away from PDVSA to China, Aruba has now moved to restart its 235 kb/d refinery, previously operated by Citgo, PDVSAs US arm. The refinery was shut in 2012 over low margins, but the new development suggest that there is interest in reviving operations at a site previously aimed at supplying American demand.

The consortium behind Israels massive Leviathan natural gas field has secured its first customer, signing a US$10 billion deal to supply 1.6 tcf of gas to Jordans National Electric Power Company over 15 years beginning 2019 or 2020. Israels neighbours are natural outlets for its natural gas, but geopolitical tensions prevents many deal, leading Israel to look further to Turkey and Western Europe, so the Jordan deal is a major step forward for economic cooperation in the Levant.

The future of Russian LNG production in Sakhalin is taking shape. Shell has agreed on the marketing strategy for the additional five million tons coming from the planned Sakhalin-2 third train with its partners Gazprom, Mitsui and Mitsubishi, while Rosneft will take a final investment decision on its Far East LNG project in 2017 or 2018, with production at the joint project with ExxonMobil, Sodeco and ONGC starting in 2023

The territorial dispute between minnow Timor-Leste and Australia will move to the permanent court of arbitration in The Hague, after Australia failed to have the case dismissed over non-jurisdiction. The dispute centres on the Sunrise and Greater Sunrise fields in the Timor Sea. Timor Leste argues that the Australia-Timor Leste maritime boundary should be equidistant between the two countries, supported by international law precedent, which would put most of the exploitable territory in its territory. Australias counter-argument hinges on the 2006 treaty that divides the revenues from the joint development era, but places most of the Sunrise fields under its control that is a parallel to Chinas claims in the South China Sea. Australia will appear at the court under compulsary conciliation after it was revealed that Australian intelligence officers placed bugs in the Timor Leste government cabinet room to spy on internal discussions and negotiations.

Chinas Wison Offshore & Marine has successfully completed tested of the worlds first natural gas floating liquefaction unit (FLNG). The Caribbean FLNG vessel is meant for Exmar, which will moored it at the Creciente gas field offshore Colombia, and successful completion heralds a promising new future for offshore LNG projects, as they moves into deeper, more challenging offshore territory.

Shell has declared force majeure on base chemicals supplied from its Bukom plant in Singapore. The disruption to supply comes as Shell had to shut down the Pulau Bukom ethylene cracker to repair a compressor. Repairs are underway, with no set date for operations to resume. Pulau Bukom has significant ethylene capacity, producing more than 900,000 tons of product each year.

Taiwans Formosa Chemicals will shut down its Changhua petrochemical plastics plant indefinitely as it negotiates with the country-level government over operating permits. The Changhua local government has declined to renew permits for the plants cogeneration equipment, insisting that new permits be applied for over changes in the plants power mix. Formosa claims that its permit renewal applications were rejected 37 times, with the government playing hardball over a closure that will affect over a thousand workers and 3% of the groups revenues.

After receiving approval by the Canadian government last week, Petronas may now exit the US$27 billion Canadian LNG export plant in British Columbia. In the intervening years between 2014 and now, the slide in crude and LNG prices have called into question the logic of the project, particularly for Petronas, which is still struggling to adapt to the new price environment. A sale may be difficult in the current market conditions, given that other BC projects have also faced delays over the same concerns, including Chevrons Kitimat project. An exit from the project, which has not received its FID, would highlight the financial situation of Petronas and be a blow to its ambitions of becoming a global power in natural gas.

Have a productive week ahead!

Read more:
oil and gas report. weekly oil report nrgedge nrgbuzz oil and gas commentary oil and gas oil markets
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