Easwaran Kanason

Co - founder of PetroEdge
Last Updated: November 1, 2016
1 view
Business Trends
image

Last week in world oil

After oil prices rose from optimistic news that OPEC could at last focus on the bigger picture and agree to a supply cut, the latest measure now appears dead in the water as Iran and Iraq are now refusing to participate, citing erroneous data. A failure of OPEC to agree internally will kill an attempt to negotiate a freeze with non-OPEC members, which left oil falling below the psychological US$50/b barrel. 

ExxonMobil may have to write down almost 20% of its proven oil and gas reserves as part of an assessment of major long-lived assets, owing to the persistent low prices of crude. The amount that could be de-booked could be as much as a billion oil equivalent barrels. 

For the first time in 17 weeks, the US oil rig count has fallen. The US shed 2 oil rigs, bringing the total operating number down to 441, as uncertainty over OPEC’s ability to implement a freeze dominated. However, six more gas rigs were added, bringing the total count to 557. 

The main three contenders for Chevron’s South African downstream assets are Total, Glencore and Gunvor. With an estimated price tag of US$1 billion, the assets include Chevron’s fuel retail network in South Africa and Botswana, as well as a75% stake in the 110 kb/d Cape Town refinery. The leading contenders do indicate the possible evolution of the global downstream industry: France’s Total would like to strengthen its portfolio to rank among the Big Four, while Gunvor and Glencore represent the willingness of energy traders to move into areas like refining and storage, to complement their trading activities. 

Croatia is faced with the decision of shutting down, or modifying, one of the country’s two oil refineries as it faces the same problem most European economies are facing – declining oil demand leading to poor utilisation of overcapacity. There are two oil refineries currently operating in the country, both owned by state energy firm INA and Hungary’s MOL, one in Sisak and one in the port city of Rijeka.

General Electric, together with Endeavor Energy and Sage Petroleum, has received approval from the Ghanaian government to proceed with the construction of the world’s largest LPG powered-electricity plant in Tema. 

Israel’s natural gas ambitions are now taking shape. With the option of either LNG or a physical pipeline, either Egypt, Turkey or Cyprus, Israel appears to have chosen the more politically-benign option, aiming to send the gas by pipeline first to Cyprus, then to Greece, before moving to Western Europe through Italy. The estimated cost of the pipeline project is €5 billion, allowing Israel to finally monetise its two giant natural gas discoveries after legal and regulatory issues have been settled.

ExxonMobil is reportedly considering building a full-scale trading division to buy, sell and trade oil products, including its own.  The move would allow some diversification of ExxonMobil’s operations, to counter prolonged depressed oil prices.

China imported more crude from Angola than any other country in September. Typically, China’s main supplier is Russia, but imports from Angola have jumped by 45.8% y-o-y, reaching 1 mb/d, just under the record 1.11 mb/d in August. This is the second consecutive month that Angola has been China’s top exporter, and volumes are expected to increase with the end of refinery maintenance season in October.

Indonesia is expected to harmonise the gasoline and diesel prices across the far-flung archipelago next year. The move is part of the government’s efforts to overhaul the downstream retail industry, which started in 2014 with an overhaul of the fuel subsidy scheme. Currently, there is a reference price for subsided gasoline and diesel across Indonesia – which accounts for over 90% of demand – but the price varies by region, with surcharges on remote regions to account for transportation. The new rules will eliminate this, requiring the single price to be valid across the country, with any distribution costs by incurred by the fuel retailers.

Aiming to become the Asian trading hub for LNG to complement its status as the oil trading hub, Singapore has picked Shell and Pavilion Gas to be its next suppliers of LNG. The two companies will be granted exclusive rights to sell up to 1 million mtpa of LNG annually for three years beginning 2017, as well as the option for spot trading. Singapore has encouraged firms to open LNG trading desks in bid to become Asia’s LNG hub – an ambition also shared by Japan and South Korea – and in 2013, named the BG Group as its first supplier, for 3 mtpa of LNG over 10 million. That contract is considered separate from the new agreement with Shell, which took over the BG Group last year. 

Chevron announced a huge US$5 billion cost overrun at its Wheatstone LNG project, blamed on cost underestimation and tardiness of third-party module contractors. The giant Wheatstone project, developed with Woodside Petroleum, will now cost a total of US$34 billion.

Japan’s Inpex has struck gas in offshore wells not explored since the 1980s. Test drills revealed natural gas indications offshore the Shimane and Yamaguchi prefectures, but early signs are that the discoveries will not be significant enough to make a dent in Japan’s huge gas appetite. 

All three Chinese state oil firms have dramatically scaled back their capital expenditure for this year, grappling with uncertainty over oil prices and growth in the domestic market. Sinopec reported capex for the first ninth months of 2016 that was 75% below projected levels, while PetroChina’s is down 23% and CNOOC’s down 50% from their respective projected 2016 budgets. The slashing of spending shows the great change in Chinese optimism for oil and gas, preferring to hoard cash instead of continue on freewheeling investing.

Following Keppel’s recent report of weak financials and job-cutting, rig builder Sembcorp Marine has followed suit, reporting a 53% fall in Q3 profits, necessitating a further 8000 job cuts. 

GE and Baker Hughes merge their respective oil & gas business to create a "new" Baker Hughes, a GE company. With a combined revenue of $32 billion, the new company will have operations in over 120 countries in oil field equipment, technology and services.  As always this transaction will be subject to approval by the sharholders and regulators.  

ConocoPhillips reported a smaller loss in Q3, amounting to USD1 billion, compared to USD1.1 billion loss in the same quarter in the previous year. However, Statoil reported a wider loss of USD431 million quarterly loss, at increase of 41% from a year ago.  Better news from Total, it posted USD2.1 billion profit due to its aggressive reduction in operating costs. 

ExxonMobil makes a big discovery in Nigeria, with an estimated recoverable resources of 500 million to 1 billion barrels of oil offshore Nigeria. ExxonMobil holds a 27% stake in this venture with other local and international partners.

Read more:
oil and gas report. weekly oil report nrgedge nrgbuzz oil and gas commentary oil and gas oil markets
3
2 0

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

Latest NrgBuzz

Permian’s Pipeline Lifeline

The Permian is in desperate need of pipelines. That much is true. There is so much shale liquids sloshing underneath the Permian formation in Texas and New Mexico, that even though it has already upended global crude market and turned the USA into the world’s largest crude producer, there is still so much of it trapped inland, unable to make the 800km journey to the Gulf Coast that would take them to the big wider world.

The stakes are high. Even though the US is poised to reach some 12 mmb/d of crude oil production next year – more than half of that coming from shale oil formations – it could be producing a lot more. This has already caused the Brent-WTI spread to widen to a constant US$10/b since mid-2018 – when the Permian’s pipeline bottlenecks first became critical – from an average of US$4/b prior to that. It is even more dramatic in the Permian itself, where crude is selling at a US$10-16/b discount to Houston WTI, with trends pointing to the spread going as wide as US$20/b soon. Estimates suggest that a record 3,722 wells were drilled in the Permian this year but never opened because the oil could not be brought to market. This is part of the reason why the US active rig count hasn’t increased as much as would have been expected when crude prices were trending towards US$80/b – there’s no point in drilling if you can’t sell.

Assistance is on the way. Between now and 2020, estimates suggest that some 2.6 mmb/d of pipeline capacity across several projects will come onstream, with an additional 1 mmb/d in the planning stages. Add this to the existing 3.1 mmb/d of takeaway capacity (and 300,000 b/d of local refining) and Permian shale oil output currently dammed away by a wall of fixed capacity could double in size when freed to make it to market.

And more pipelines keep getting announced. In the last two weeks, Jupiter Energy Group announced a 90-day open season seeking binding commitments for a planned 1 mmb/d, 1050km long Jupiter Pipeline – which could connect the Permian to all three of Texas’ deepwater ports, Houston, Corpus Christi and Brownsville. Plains All American is launching its 500,000 b/d Sunrise Pipeline, connecting the Permian to Cushing, Oklahoma. Wolf Midstream has also launched an open season, seeking interest for its 120,000 b/d Red Wolf Crude Connector branch, connecting to its existing terminal and infrastructure in Colorado City.

Current estimates suggest that Permian output numbered around 3.5 mmb/d in October. At maximum capacity, that’s still about 100,000 b/d of shale oil trapped inland. As planned pipelines come online over the next two years, that trickle could turn into a flood. Consider this. Even at the current maxing out of Permian infrastructure, the US is already on the cusp on 12 mmb/d crude production. By 2021, it could go as high as 15 mmb/d – crude prices, permitting, of course.

As recently reported in the WSJ; “For years, the companies behind the U.S. oil-and-gas boom, including Noble Energy Inc. and Whiting Petroleum Corp. have promised shareholders they have thousands of prospective wells they can drill profitably even at $40 a barrel. Some have even said they can generate returns on investment of 30%. But most shale drillers haven’t made much, if any, money at those prices. From 2012 to 2017, the 30 biggest shale producers lost more than $50 billion. Last year, when oil prices averaged about $50 a barrel, the group as a whole was barely in the black, with profits of about $1.7 billion, or roughly 1.3% of revenue, according to FactSet.”

The immense growth experienced in the Permian has consequences for the entire oil supply chain, from refining balances – shale oil is more suitable for lighter ends like gasoline, but the world is heading for a gasoline glut and is more interested in cracking gasoil for the IMO’s strict marine fuels sulphur levels coming up in 2020 – to geopolitics, by diminishing OPEC’s power and particularly Saudi Arabia’s role as a swing producer. For now, the walls keeping a Permian flood in are still standing. In two years, they won’t, with new pipeline infrastructure in place. And so the oil world has two years to prepare for the coming tsunami, but only if crude prices stay on course.

Recent Announced Permian Pipeline Projects

  • September 2018 – EPIC Midstream Holdings – 675,000 b/d, 1125km, 24-30’ diameter, 4Q19 target opening
  • November 2018, Wolf Midstream Partners – 500,000 b/d, 65km, 16’ diameter, 2H2019 target opening
  • November 2018, Jupiter Energy – 1 mmb/d, 1050km, 36’ diameter, 2020 target opening
  • December 2018, Plains All American Pipeline – 575,000 b/d, 830km, 26’ diameter, 3Q19 target opening
December, 04 2018
Your Weekly Update: 3 - 7 December 2018

Market Watch

Headline crude prices for the week beginning 3 December 2018 – Brent: US$61/b; WTI: US$52/b

  • After falling down to fresh lows last week – with WTI prices dipping below US$50/b at one point – crude oil prices improved after the G20 meeting in Buenos Aires, where the US and China agreed to a temporary truce over their trade war
  • While no concrete agreements over energy were announced at the G20 summit, the slightly thawing in trade tensions allowed crude benchmarks to rise slightly, assisted by an announcement by Canadian producers in Alberta that output would be cut by 325,000 b/d beginning January
  • Russia and Saudi Arabia agreed at the G20 summit to extend the OPEC+ deal into 2019, suggesting that a coordinated oil output cut was in the works, also supported prices ahead of OPEC’s meeting in Vienna this week
  • Not present at the OPEC meeting, however, will be Qatar, which quit the oil cartel in a surprise move; the tiny sultanate said it was quitting due to its small oil production, choosing instead to focus on its LNG industry, but the move can be seen as a response to the Saudi-led boycott of Qatar, calling into question Saudi Arabia’s ability to hold the fragile OPEC coalition together
  • Consensus among analysts point to OPEC+ agreeing to remove some 800,000 b/d of crude oil from the market beginning January, aimed at establishing a floor for oil prices at some US$65/b
  • The downward spiral of crude prices has put the brakes on US drilling activity, with 2 new oil rigs offset by the loss of 5 gas rigs last week; analysts are expecting shale explorers to cut spending budgets in 2019 in response to weak prices, raising spectres of the 2015 price slump
  • Crude price outlook: Ahead of the OPEC meeting on December 6, crude should be kept up by expectations of a renewed supply cut, with Brent likely to trade rangebound around US$61-63/b and WTI at US$52-53/b

Headlines of the week

Upstream

  • Buoyed by the prolific nature of the Permian Basin, Shell has announced plans to nearly double its production in the shale patch with AI-powered technology
  • China and the Philippines have set aside sovereignty issues, signing an agreement for joint exploration and development in the South China Sea
  • Facing severe pipeline bottlenecks, Canada’s Alberta province is looking to purchase rail cars to ship more crude oil by train out of the province towards the US, as a temporary measure while new pipeline are proposed and built
  • Shell has completed the sale of Shell E&P Ireland to Nephin Energy Holdings, which includes a 45% in the Corrib gas venture, for US$1.3 billion
  • In Norway, Shell also sold its interests in the Draugen and Gjøa fields for US$526 million to OKEA AS, but retains its interests in the Ormen Lange and Knarr fields, as well as the Troll, Valemon and Kvitebjørn projects
  • Petrobras has sold its stake in 34 onshore production fields to Brazilian firm 3R Petroleum for US$453.1 million, as well as stakes in three shallow-water offshore fields off Rio de Janeiro to Perenco for US$370 million
  • Pemex tripled its estimated reserves in the Ixachi field to 1.3 billion barrels of oil, calling it the ‘most important onshore field in 25 years’ and expecting peak production of 80,000 b/d of condensate and 720 mscf/d of gas by 2022

Downstream

  • Uganda has pushed back the opening of its first oil refinery to 2023, in line with estimates by Total, CNOOC and Tullow Oil, as crude oil production is now only expected to begin in 2021
  • Malaysia will be introducing a B10 biodiesel mandate in December over a phased rollout, with complete implementation expected by February 2018
  • Pertamina expects to begin works on upgrading its Balikpapan refinery in early 2019, aimed to increasing fuel standards to Euro V and upgrading capacity to process sour crude together with its current medium heavies
  • ExxonMobil plans to upgrade its Rotterdam refinery to expand Group II base stock production, following the installation of a new hydrocracker
  • The US EPA has increased its annual blending mandate for advanced biofuels by 15% and kept conventional biofuels blending requirement steady for 2019, while maintaining waivers for selected refineries

Natural Gas/LNG

  • Petronas and Vitol Asia have signed a long-term LNG supply agreement, with Petronas providing LNG from the LNG Canada project in Kitimat, providing up to 800,000 tons per annum for 15 years beginning 2024
  • Eni and Anadarko have been giving a 2023 deadline to submit key development plans for the Area 1 and 4 LNG complex in Mozambique
  • Tullow Oil is backing the attempt by three former Cove Energy executives in the Comoros Islands by taking stakes in Discover Exploration’s blocks, hoping to repeat the trio’s success in discovering the Rovuma block
  • South Korea’s Posco Daewoo has signed a deal with Brunei National Petroleum Company to jointly explore LNG opportunities in Brunei, with specific focus on the development of the Dehwa area operated by Posco Daewoo
  • Rosnedt and the Beijing Gas Group have set up a joint venture focusing on building and operating a network of up to 170 CNG fuel stations in Russia, using LNG as motor fuel
December, 06 2018
Overall Lubricants Market Is Growing In Bangladesh

The engine oil market has grown up around 10 to 12% in the last three years because of various reasons, mostly because of the rise of automobiles. 

According to the Bangladesh Road Transport Authority (BRTA), the number of registered petrol and diesel-powered vehicles is 3,663,189 units.

The number of automotive vehicles has increased by 2.5 times in the last eight years.

The demand for engine oils will rise keeping pace with the increasing automotive vehicles, with an expected 3% yearly growths.

Mostly, for this reason, the annual lubricant consumption raised over 14% growth for the last four years. Now its current demand is around 160 million tonnes.

The overall lubricants demand has increased also for the growth of the power sector, which has created a special market for industrial lubricants oil.

The lubricants oil market size for industries has doubled in the last five years due to the establishment of a number of power plants across the country.

The demand for industrial oil will continue to rise at least for the next 15 years, as the quick rental power plants need a huge quantity of lube oil to run.

The industries account for 30% of the total lubricant consumption; however, it is expected to take over 35% of the overall demand in the next 10 years.

Mobil is the market leader with 27% market share; however, market insiders say that around 70% market shares belong to various brands altogether, which is still undefined.

 It is already flooded with many global and local brands.

December, 01 2018