Last week in world oil:
- Rising production in the US and Iraq have raised fears that OPEC’s attempt to raise prices might be prove to be insufficient. While the rise in the US is expected, additional output from Iraq over December based on loadings in Basra points to the difficulty in whipping OPEC members in line. Oil started this week at US$55/b for Brent and US$52/b for WTI.
Upstream & Midstream
- The rise is Iraqi exports of crude oil, responsible for the dip in crude oil prices as the week started, has been blamed on the country’s Kurdish region. The autonomous Kurdish region has been exporting more than its allocated share of oil, hampering Iraq’s attempt to comply with its OPEC quota, which is now 4.3 mmb/d. Kurdish authorities reportedly pumped more than twice its allocated crude amount under the national Iraqi budget, funnelling it through Turkey to avoid passing through Baghdad.
- The US rig count increased for the tenth consecutive week, gaining four oil and three gas sites to start the year with a total active rig count of 665.
- US refiner LyondellBasell has decided to retain its Houston refinery following a broad strategic review of options. The Houston site was reportedly up for sale last year, in the crosshairs of Saudi Aramco’s post-divorce Motiva as an acquisition target, but the company has now decided to keep the 264 kb/d site within its asset portfolio. Natural Gas & LNG.
- Mexican gasoline prices have risen, part of a broader price liberalisation strategy pursued by President Enrique Pena Nieto. While necessary to make the Mexican energy sector more competitive, the hikes have proven highly unpopular. Mexicans have been taking the streets to protest daily since last Friday, spilling over into wider violence and looting.
- Nigeria’s oil union is threatening to strike at fuel depots in the country owned by Chevron and ExxonMobil if talks with the government fail. The union is unhappy over a spat of recent sackings. If the strike goes ahead, as many as 10,000 union workers could down tools, potentially crippling distribution across Nigeria’s entire downstream sector.
Natural Gas & LNG
- ExxonMobil has taken over at the Mamba gas field in Mozambique. The American supermajor bought a 20% stake in the project from Italy’s Eni in August, fulfilling its goal of expanding its natural gas asset portfolio while assisting Eni in monetizing its Mozambique LNG ambitions. As part of the deal, ExxonMobil also takes over operatorship of Mamba from Eni.
- The Blackstone Group has abandoned its US$5 billion attempt to purchase assets owned by Energy Transfer Partners. Energy Transfer is one of the largest oil and gas infrastructure firms in the US, while the Blackstone Group is a major buyout firm globally. Instead, Energy Transfer Partners will pursue a private placement deal worth US$568 million with its parent entity Energy Transfer Equity, as it gears up to face challenges it’s the Dakota Access oil pipeline it is currently building.
Last week in Asian oil:
Upstream & Midstream
- Timor Leste has torn up its maritime treaty with Australia. The CMATS agreement – which created a temporary maritime border in the Timor Sea and its estimated US$40 billion of oil/gas deposits – will end in three months. The move follows Timor Leste’s attempt to negotiate the maritime border with Australia at the International Court of Arbitration, and is likely an acknowledgement by Australia that it can no longer bully its smaller neighbour. The next step is for both countries to agree on a permanent maritime border.
- China has revised its crude oil production target for 2017, down to 4 mmb/d as it acknowledges that a deficit of new production sites will be unable to offset the natural decline in the country’s largest fields in the northeast and Bohai Bay. Falling domestic production means increased imports, which will only strengthen China’s resolve to acquire overseas upstream assets to secure a steady supply of necessary crude.
Downstream & Shipping
- After years of promises, Indonesia has finally officially lowered the sulphur content in its subsidised diesel, from 3,500ppm to 2,500ppm. Indonesia is one of the main laggards in Asia in terms of fuel specifications, still tottering around Euro II levels while the rest of the continent is adopting Euro IV. The move won’t have a significant impact on trade flows; in fact, it will be welcomed by refiners, who have found it increasingly hard to supply high-sulphur gasoil to Indonesia, which is off-spec for Asia. Higher spec diesel – 500ppm and 350ppm – is also used in Indonesia, but is only a fraction of the volumes of subsidised diesel.
- China has announced ambitious plans to plough some US$362 billion through 2020 into renewable power generation, focusing on wind, solar, hydro and nuclear power over its existing reliance on dirty coal power. In this drive, other fossil fuels, mainly natural gas/LNG, will also gain as China seeks a multi-pronged approach to reduce its excessive pollution.
Natural Gas & LNG
- BP has signed a long-term agreement with Thailand’s PTT, which will see the UK supermajor supply the Thai energy conglomerate with 1 millions tons per annum of LNG over 20 years. Faced with declining domestic production, Thailand and its power utilities have been on the hunt for LNG contracts over last year, to ensure that its natural gas-fed power and petrochemicals infrastructure does not go hungry.
- Chevron’s massive Gorgon project is back online after being out for a month. Gorgon LNG Train 1 was taken offline in late November to ‘assess performance variations’, while Gorgon LNG Train 2 remained unaffected. The US$54 billion, with its masses of LNG destined for East Asia, has been plagued by a string of operational issues since its start up in March 2016.
- The first LNG from a US shale source has arrived in Japan, opening what American shale gas producers hope will be a floodgate to Asia. Japan’s JERA – a joint venture between Tokyo Electric and Chubu Electric – received the shipment from Cheniere’s Sabine Pass terminal in Louisiana, which is also the first American LNG to arrive in Japan from the lower 48 states of the USA. The parcel is the first of a contracted 700,000 tons through January 2018 in a short-term agreement between JERA and Cheniere.
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Headline crude prices for the week beginning 16 September 2019 – Brent: US$69/b; WTI: US$63/b
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