Easwaran Kanason

Co - founder of NrgEdge
Last Updated: October 17, 2016
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Business Trends

Last week in world oil

Oil prices remain around the US$50/b level, as a stronger dollar and record supply from OPEC countries dragged WTI and Brent benchmarks down, though prices remain at levels higher than the previous two months. It is likely that prices will remain in this region, unable to push towards the US$60/b level unless concrete evidence emerges that OPEC (and Russia) will implement the much talked-about supply freeze. 

As expected, the number of operational oil rigs in the US rose again last week, in response to higher prices. Four oil rigs joined the count, bringing the total number of oil rigs to 432 and total number of rigs by 15 to 539, with the additional of 11 new gas rigs. 

Brazil’s Petrobras has cut the price of its gasoline and diesel, by 3.2% and 2.7%, respectively, in a bid to protect its market share while avoiding subsidies. Petrobras has not adjusted its ex-refinery fuel prices for a year, selling them at a premium to counterbalance the estimated US$35 billion it lost in subsidies over the 2011-2014 period. The price cut will help it retain fuel market share within Brazil, but remain above cost, which will be its policy going forward with prices reviewed monthly. 

Shell has signed an MoU with Iran’s National Petrochemicals Company that will see the two companies co-operating on petchem projects. The agreement is in line with Shell’s desire to boost its chemicals business, as well as Iran wanting to diversify its petroleum economy away from upstream and refining. The CEO of Iran’s National Petrochemical Company has stated that he wishes to boost Iranian petchems output from 60 million tons to 160 million tons by 2025. 

Cheniere has been cleared by the US Federal Energy Regulatory Commission to double exports from its LNG terminal in Louisiana. The approval of a second liquefaction plane at Sabine Pass will double the site’s capacity to 1.3 bcf, which will join the race to satisfy Asian demand, passing through the recently-widened Panama canal. Cheniere has plans to complete a third plant, and commission a fourth, in 2017, which will double capacity again to 2.6 bcf in total. 

Kazakhstan’s Kashagan field has made its first commercial shipments, with the first batches of oil shipped through the CPC and KazTransOil pipelines this month. It signals sunnier times ahead for the US$55 billion project, which began production in 2013 but was suspended shortly after due to technical issues. Output is expected to rise to 230 kb/d by 2018 and 370 kb/d beyond, and additional phases are required to get the project to break even.

Gorgon condensate could appear on the market as early as this month, with traders expecting that Chevron will make a 600-650 kb/d cargo for loading in December. Operations at Australia’s giant Gorgon field began, with a brief shutdown in July, producing natural gas and condensate. Much of the condensate produced at Gorgon will be aimed at petrochemicals production, with the new condensate splitters in South Korea and Qatar being likely targets for consumption. 

Rosneft has purchased 49% of India’s Essar Oil, the second-largest private refiner in India that owns the second-largest refinery in India. The Rosneft deal, which includes its partners Trafigura and Russian fund consortium UCP, is valued at US$13 billion, which includes the Vadinar refinery and Essar’s network of 2,700 service stations across India. Rosneft purchased the stake from the founding Ruia brothers, beating off five other international companies. The deal marks the on-going opening of India’s petroleum sector, long confined to state firms and a select few domestic private companies. Shell and BP have made inroads into the downstream retail sector this year, and international interest in the Essar Oil stake shows how much interest there is in penetrating India.

The Anning refinery in Yunnan, near China’s border with Myanmar is facing a delayed start-up over crude logistics and economics. The 260 kb/d PetroChina site was meant to receive crude through a 2,400km pipeline running through Myanmar from a deep sea port, a project that was meant to ease China’s reliance of oil flowing through the Malacca Straits. But Myanmar wants to impose an additional 5% tax, on top of the already agreed-upon transit fee and pipeline toll tariff, which could wreck the viability the of the refinery. Once highly reliant on China for foreign investment, Myanmar is now growing bolder in its demands, having come in from the cold in international politics with the election of an Aung San Suu Kyi-led government in April of this year.

Shell is reportedly considering selling its 15% stake in Malaysia’s MLNG Tiga export plant in Sarawak. Malaysia’s Petronas, which already owns 60% of the plant, has first refusal rights on the stake, but may pass given its own financial situation. The stake could fetch up to US$1 billion, and is part of Shell’s plan to raise US$30 billion in asset sales to pare down debt incurred after its purchase of the BG Group. 

Chevron is planning to exit Bangladesh, putting its natural gas assets in the South Asian country up for sale with an expected price tag of US$2 billion, part of an ongoing trend of supermajors divesting assets to pare down debt. Predictably, the most interest in the sale comes from Chinese and Indian state-linked companies.

China’s state-owned chemical firms Sinochem and ChemChina are in talks to merge their operations. If it goes through, the deal will create a chemicals, fertilizer and oil giant with almost US$100 billion in revenue that will cement China’s position as the chemicals centre of the world.

Have a productive week ahead!

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September, 21 2019
Your Weekly Update: 16 - 20 September 2019

Market Watch  

Headline crude prices for the week beginning 16 September 2019 – Brent: US$69/b; WTI: US$63/b

  • Global crude oil prices surged at the start of the week as news that a successful drone strike on the Abqaiq processing plant and the Khurais oil field in Saudi Arabia took out over half of the Kingdom’s crude production capacity
  • Brent prices jumped above US$70/b at one point on fears on global supply disruption, but abated as President Donald Trump authorises the release of US strategic petroleum reserves to cover the market
  • Initial fears that the Saudi Arabian crude output would be crippled for months proved to be extreme, with Saudi Aramco announcing that some 70% of capacity at Abqaiq had been restored within days
  • But more worryingly is that this incident escalates the risk of a full-blown military confrontation with Iran; the US was quick to accuse Iran of the attack, citing data on the attack, which was denied by Iran
  • Yemen’s Iran-backed Houthi rebels claimed responsibility for the attack, although initial results of a Saudi investigation pointed to the weapons originating from Iran
  • For now, crude oil prices have retreated as the risk of widespread supply disruption abated, but tensions are still high in the region
  • This comes after President Trump signals that he was considering easing sanctions in an apparent thaw in the US-Iran relationship; this opportunity now appears to have evaporated
  • Saudi Arabia’s new oil energy minister, Prince Abdulaziz bin Salman, made a positive impression at the recent OPEC+ meeting, with errant members of the group signalling that they were now ready to adhere to the supply deal
  • In Venezuela, the oil crisis continues as ongoing US sanctions now mean that the country cannot find enough vessels to transport its crude, as shippers fear losing insurance coverage if they transport Venezuelan oil
  • Iran has released the UK-flagged Stena Impero vessel that it had impounded, a lone bright spot in a region now clouded by geopolitical tensions
  • Against this backdrop, the US active rig count recorded yet another fall, losing five oil and seven gas rigs for a net drop of 12 to a new total of 886 rigs
  • With the shock of the Saudi drone attacks abating, crude oil prices are retreating back to their previous range – US$60-63 for Brent and US$56-59/b for WTI – as the impact of global supply was minimised; another attack, however, might cause a more permanent shift in prices

Headlines of the week


  • Equinor has received consent from the Norwegian Petroleum Directorate to continue operations at the Tordis and Vigdis fields through 2036 and 2040, respectively, extending the life of the North Sea fields by 34 years
  • BP has announced that it will deploy continuous measurement of methane emissions for all future oil and gas projects in a bid to reduce emissions
  • CNOPC and Niger have agreed to collaborate on a 1,892km pipeline to carry oil from Niger’s Agadem rift basin to port facilities in Benin
  • The South African government is tabling a new law that will allow the state to take a free stake of up to 10% in all new oil and gas ventures, hoping to capitalise on a surge in upstream interest after Total’s Brulpadda discovery


  • As the IMO deadline for low-sulfur marine fuels approaches, refiners have begun stockpiling supplies of very low-sulfur fuel oil to ensure adequate supply; this includes Japan’s Cosmo Oil that aims to begin supplying VLSFO to the domestic marine market by October 2019
  • IndianOil’s Gujarat refinery stated it ready to produce 12,900 b/d of VLSFO by October while its Haldia refinery will start producing 5,500 b/d of VLSFO by December; this should be adequate to cover the India’s marine fuel demand
  • India is considering selling a stake in BPCL, the country’s second largest refiner, to an international firm to boost competition in downstream fuel retailing that has historically been dominated by state firms
  • Valero Energy and Darling Ingredients are launching the first renewable gasoil plant in Texas, focusing on producing renewable diesel and naphtha
  • In the UK, Essar Oil’s Stanlow refinery aims to increase its diet of US crude from a current 35% to 40%, leveraging on cheaper American oil
  • The after-effects of Russia’s contaminated crude through the Druzhba pipeline continues as Total issues a tender to sell 1.3 million barrels of tainted Ural crude through Rotterdam after failing to process it

Natural Gas/LNG

  • Poland has won a ruling from the EU courts to reduce Russian control over the key EU Opal pipeline that carries Russian gas from the Nord Stream link to Germany, preventing Gazprom from using most of Opal capacity in a bit to increase energy security for Eastern European countries
  • Vitol and Mozambique’s state player ENH have set up a new joint venture in Singapore to capitalise on trading opportunities for LNG, LPG, and condensate
  • Australia’s Liquefied Natural Gas Ltd and Delta Offshore Energy will supply gas from the Magnolia fields to an LNG-to-power project in Bac Lieu, Vietnam
  • Eni’s Baltim South West gas field offshore Egypt has started up production, only 3 years after discovery, producing an initial 100 mscf/d of gas
  • US gas player Sempra is looking to take FID on its Energia Costa Azul LNG project in Mexico’s Baja California region by the end of 2019
  • Egypt has announced that it expects to receive first natural gas from Israel by end-2019 through the East Mediterranean Gas pipeline, with initial supplies of 200 mscf/d that will rise to 500 mscf/d by 2020
  • The Independence floating LNG terminal in Lithuania – built to reduce the Baltic region’s dependence on Russian gas – is set to receive its first-ever cargo from Siberia, likely from Novatek’s LNG projects in Yamal
September, 20 2019
Financial Review: Second-Quarter 2019
Key findings
  • Brent crude oil daily average prices were 9% lower in second-quarter 2019 than in second-quarter 2018 and averaged $68 per barrel
  • The 117 companies in this study increased their combined liquids production 4.6% in second-quarter 2019 from second-quarter 2018, and their natural gas production increased 5.0% during the same period
  • Nearly half of the companies were free cash flow positive—that is, they generated more cash from operations than their capital expenditures
  • Dividends plus share repurchases were nearly one-third of cash from operations, slightly lower than the six-year high set in first-quarter 2019

Distributions to shareholders via dividends and share repurchases amounted to nearly 33% of cash from operations

See entire second-quarter review

September, 20 2019