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Business Trends

Last week in the world oil:


-Although trading is thin ahead of Christmas, oil prices have maintained their gains last week, opening the week at the US$52/b levels, as the market anticipate tighter supplies next year, which should end the year on a positive note after a prolonged weakness in prices. 

Upstream & Midstream

-The UAE, Kuwait and Oman have joined Saudi Arabia is implementing the planned OPEC cuts, warning some clients on long-term contracts that they would receive reduced supplies of crude from January. Saudi Aramco is also telling a few Asian clients that the cuts would impact them as well. 

-Libya’s Sharara and El Feel oil field pipelines have been re-opened, after protestors blocking the assets agreed to halt their action. The oil guards have restarted the long blockaded pipeline, which could restore up to 400 kb/d of output to Libya’s production. Libya’s crude output is one of the two (Nigeria is the other) exempt from the new OPEC supply quotas. 

-While other companies are restarted their oil sands projects, Norway’s Statoil is planning a complete exit. It has agreed to sell its Leismer and Corner sites, along with associated midstream assets, to Canada’s Athabasca Oil for C$832 million, which would leave Statoil with no oil sands assets, figuring that the segment will be remain too challenging.

-The US rig count jumped again last week, up by 13, with 12 of those being oil rigs as US producer dilute the OPEC deal by ramping up production.


-Shell will likely sell its 38.5% stake in the 220 kb/d Schwedt refinery in Germany to Varo Energy (a joint venture between Vitol and the private equity Carlyle Group). This deal is part of Shell’s drive to dispose of US$30 billion in assets to pay for its acquisition of the BG Group. 

-Petrobras will sell its minority 49% stake in sugar/ethanol company Nova Fronteira Bioenergia to its existing joint venture partner São Martinho for US$133 million in a shares-only payment. The move would hasten Petrobras’ exit from domestic biofuels, but it has indicated that it plans a re-entry once it completes its debt reduction plans. In other Petrobras news, the company has signed a US$5 billion, 10-year financing deal with China Development Bank Corp, as well as agreeing an oil supply accord with China National United Oil, China Zhenhua Oil and Chemchina Petrochemical as its seeks a secure stream of revenue and funding. 

Natural Gas & LNG

-Italy’s Eni has sold a 30% stake in its giant Egyptian offshore Zohr gas field to Russia’s Rosneft for US$1.575 billion, after selling a 10% to BP for the same price. Zohr is the largest natural gas find in the Mediterranean thus far, and while Eni is typically good at discovering fields, it lacks the financial clout to pursue its discoveries on its own. 


-With CEO Tex Tillerson heading into the US government as Donald Trump’s Secretary of State, ExxonMobil has named heir apparent Darren Woods as the company’s next chairman and CEO. The boss of ExxonMobil’s refining arm since 2012, Woods’ challenge will be to bring his ability to whip refineries into shape to the company’s larger portfolio, including its challenged upstream business.

Last week in Asian oil:

Upstream & Midstream

-Malaysia’s Petronas is finalising the next round of its PanMalaysia transportation and installation contract, which should provide a boon to offshore contractors hurting for business in Asia. The contracts awarded by Petronas cover domestic upstream oil and gas T&I activities for three years, with the previous round in 2014. The bulk of the contracts this time are said to be in the state of Sarawak, as Petronas aims to bulk up its deepwater activities in East Malaysia.   

Downstream & Shipping

-China has dealt a blow to its teapot refineries, refusing to renew their fuel export quotas for 2017. This means that any fuel produced by the independent refiners have to be sold within China. This would transform assumptions of the Chinese oil market in 2017, as the teapots were expected to import sizeable amounts of crude. But with outlets now limited to the domestic market and consumption slowing down, this move upends that and we very well see teapot production decline. On the plus side, it may remove the glut of refined products sloshing around Asia, allowing cracks and prices to rise. 

-CNOOC’s 200 kb/d Huizhou refinery will start up in May or June 2017, with Saudi Arabia named at the mainly supplier for the plant. CNOOC has traditionally been a more offshore upstream player, but has moved downstream as the traditional lines delineating China’s Big Three energy groups have blurred. 

-Indonesia has officially assigned Pertamina to build and operate a planned refinery at Bontang in East Kalimantan. The 300 kb/d project always had to involve Pertamina – it is the state energy company, after all – but this does not mean the project will see fruition; Pertamina does not have the means to undertake a refinery project this big on its own and has faced considerable problems in moving ahead with joint venture partners. Indonesia will also import 500,000 tons of LPG from Iran next year, aimed at plugging a domestic shortage. 

-Shell continues its withdrawal from what it considerable peripheral downstream markets, selling its aviation fuel business in Australia to Viva Energy for US$250 million. 

Gas & LNG

-Russia’s Novatek, its second biggest gas producer, has signed individual agreements with Japan’s Mitsui, Mitsubishi and Marubeni for co-operation in LNG and energy. The deals will see the companies co-operate in upstream natural gas projects in Russia, including the Arctic LNG-2 project, with Japan hungry to secure LNG supplies while Russia wants to boost its global LNG market share. 


-Qatar will merge its two state-owned LNG producers, consolidating Qatargas and RasGas under QatarGas. The move is a reaction to the prolonged slump in oil prices, which has affected LNG given its oil-linked pricing, cutting costs in the town state-run behemoths. Qatargas and RasGas were originally created as separate companies to focus on the Eastern and Western markets, as well as to encourage competition 

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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