Easwaran Kanason

Co - founder of PetroEdge
Last Updated: November 29, 2016
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Business Trends

Last week in world oil:


-Traders appear to have cold feet over the prospect of an OPEC supply freeze, causing a choppy pattern in prices. Oil started the week at some US$47/b. An announcement by OPEC on 30 November will swing prices up or down depending on the context, with Saudi Arabia declined to appear at meeting between OPEC and non-OPEC producers this week.

Upstream & Midstream

-BP has snapped up two new oil interests in the North Sea, acquiring a 25% interest in two Statoil licences in Shetland (including the Jock Scott prospect) and 40% in Nexen’s prospect, which include Craster. Exploration wells are expected to be drilled mid 2017, seen as a sign of BP reaffirming its support for the North Sea. 

-And the US rig count is up again. Three new oil rigs and two new gas rigs were added last week, bringing the total up to 474 and 118, respectively, as US oil players continued to see improvement in the market. 


-The US Environmental Protection Agency has mandated a record amount of biofuel to be mixed into American gasoline and diesel in 2017. Benefitting farmers and placing presence on oil companies, the program will require refiners to mix some 19.28 billion gallons of renewable fuel into American fuel next year, with 15 billion coming from corn. It will be one of the last orders of the Obama administration, with question marks over Donald Trump’s future policies, which could either favour the oil lobby or Midwest farmers that helped deliver his presidency.  

-Uganda plans to select the partner for its first oil refinery in February 2017, with Sinopec among the leading contenders. Uganda had first partnered with Russia’s RT Global Resources, but then moved on the South Korea’s SK Engineering with talks falling through both times. The refinery, if it goes ahead, has also attracted the attention of neighbouring Tanzania and Kenya, while upstream operators Total, CNOOC and the UK’s Tullow Oil have all also expressed interest in the refinery.  

Natural Gas & LNG

-Israel’s Leviathan gas field has secured another customer. Paz Gas, the largest distributor of refined products in Israel has secured a deal to purchase 3.12 bcm of natural gas for 15 years, which will be channelled to the Paz Oil refinery in Ashdod. 

-France’s Total has established a consortium to build a LNG import terminal in the Ivory Coast. Meant to feed the country’s growing electricity consumption, the other partners are Azerbaijan’s SOCAR (26%), Royal Dutch Shell (13%), Ivorian state oil company Petroci (11%) with Golar and Endeavour Energy holding minority stakes. The Cote d'Ivoire-GNL terminal is expected to be completed in mid-2018, with Total supplying LNG from its global portfolio.


-Denmark’s state-owned Dong Energy and shipping giant Maersk are mulling a merger as they battle the persistent low oil price environment. Both companies have a larger presence in North Sea oil, with Maersk also highly affected by the parallel slump in shipping.  

Last week in Asian oil:

Upstream & Midstream

-With the downturn in Singapore’s upstream offshore and marine industry worsening, the city state’s government has stepped in to prop it up. Among the measures introduced will be boosting the government International Enterprise Singapore finance scheme and bringing back government-backed bridging loans. 

Downstream & Shipping

-India Oil is planning a US$5.5 billion plan to upgrade its Nagapattinam plant, owned by subsidiary Chennai Petroleum Crop and Iran’s Nafitran Intertrade. The refinery is currently the smallest in India Oil’s portfolio, with capacity rising to 300 kb/d if and when the upgrade plan goes ahead. 

-A second Vietnam refining project has been cancelled this year. After Thailand’s PTT scrapped its project in July, the Can Tho refinery led by Vien Dong Investment has been cancelled. The small US$538 million project had a capacity of 40 kb/d. PetroVietnam’s second refinery in Nghi Son is also facing delays, casting doubt on its completion by July 2017. 

-With Singapore having banned floating storage and ship-to-ship (STS) transfers, competition to the Asian hub for oil products is heating up. The Malaysian state of Malacca is planning to spend nearly US$3 billion to build a port that it hopes will siphon off tanker, refuelling, repair and storage traffic away from Singapore. The project is led by T.A.G Marine and Linggi Base, backed by Chinese investors, which is part of the larger US$12.5 billion Kuala Linggi International Port project. 

Natural Gas & LNG

-Energy policy makers in Thailand are aiming to increase its imports of LNG to meet rising power demand, after the construction of new coal-fired plants have hit repeated delays. The Energy Ministry upped its target for LNG imports to 17.4 million tons in 2022 and 34 million tons by 2036. The previous target for 2036 was 23 million tons. Declining natural gas production in the Gulf of Thailand means that Thailand will have to look overseas to procure the LNG it requires for electricity generation. 

-The Japan Fair Trade Commission is probing the sales destination clauses of the country’s numerous LNG contracts. The clauses, long-time features of LNG sales contracts, restrict buyers from re-selling cargoes to third parties, which Japanese buyers have long disliked. With LNG moving into a buyer’s market, Japan is taking advantage of the supply overhang to re-dictate terms for its LNG contracts. 

-Once rivals, Singapore and Japan now appear to be joining forces to create a benchmark for the LNG market in Asia. The Singapore Exchange (SGX) and Japan’s Tokyo Commodity Exchange (TOCOM) have signed a memorandum of understanding to ‘jointly develop Asia’s LNG market’, a sign that instead of being rivals, the two countries could be friends in creating the first Asian LNG hub. Singapore, which already has the Singapore Sling and North Asia Sling LNG assessments, is the established hub for oil in Asia but lacks significant volumes. Japan, on the other hand, has huge volumes but is seen as too domestic-focused. Meanwhile, China has launched its first gas derivatives exchange in Shanghai last week. 

Have a productive week ahead!

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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


  • 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


  • 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