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Last Updated: February 15, 2017
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Business Trends

Last Week in World Oil:


  • Oil traders appear to have moved on from the OPEC production cut, despite its reported effectiveness, to focus on a strengthening US dollar, rising US crude output and Asian buyers sourcing crude from non-OPEC sources. This has sent oil prices back to their previous levels, a holding pattern that hovers around US$53/b for WTI and US$55/b for Brent.

Upstream & Midstream

  • OPEC compliance with its output cut has been reported at 92%, an optimistic figure given the organisation’s history of breaking quotas. More encouragingly, the 11 non-OPEC producers that elected to join the global deal have also lived up to their promise, with a constructive 40% compliance rate of the overall reduction in January as Russia implements the cuts in phases. 
  • Long seen as comfortable within its own borders, state giant Qatar Petroleum (QP) is now exploring overseas options. The largest LNG producer in the world will also be trimming domestic costs by merging Qatargas and RasGas, while pursuing upstream assets in Morocco and Cyprus, where it recently won a bid for 40% of an exploration plot.
  • The active US oil and gas rig count is now 80% higher than its recent lowest point in May 2016, with eight new oil rigs joining four gas rigs to bring the total count to 591 for oil rigs and 741 for the overall count.


  • London-listed Irish conglomerate DCC has agreed to purchase ExxonMobil’s fuel retail network in Norway for a reported NKR2.43 billion (US$294 million). It is the latest pullout by a supermajor from the mature European fuel retail market, with the 142 company-operated Norwegian sites now joining DCC’s European fuel retail network.

Natural Gas and LNG

  • Petrobras’ attempt sale of a natural gas distribution unit to Brookfield Asset Managament for US$5.2 billion has hit a snag, the latest legal snafu to set back the Brazilian oil giant’s attempt to restore financial health through asset sales. A federal judge in Brazil has blocked the sale of Nova Transportadora do Sudesteon on the grounds that the sale was not sufficiently publicised, raising concerns that the asset sales was being rushed through without fostering competitive bids. A separate regional court has also suspended Petrobras’ planned divestment of two offshore gas fields to Karoon Gas Australia.


  • France’s Total has outperformed most other supermajors in 2016, announcing adjusted net profit of US$8.2 billion, above Shell (US$7.2 billion), BP (US$2.6 billion) and Chevron (US$1.8 billion), behind only ExxonMobil (US$8.9 billion). Its 4Q16 net profit beat analyst expectations at US$2.4 billion, and Total is planning to buck the supermajor trend by hunting for upstream and downstream assets put on sale by its rivals.

Last Week in Asian Oil:

Upstream & Midstream

  • Crude is coming into Asia and into China from all over the world now, from places that do not normally send crude here. Husky Energy just recorded the first sale of its Atlantic Canada crude to China last week, sending a million barrels from the White Rose field to China, instead of its usual destinations in the US and Europe. The trade became possible because of the OPEC supply cut, that led to cuts in deliveries to Asian buyers, but also because of the unusually low shipping rates that are now opening up uncommon trades and shipping routes as beleaguered shippers clamour for business.

Downstream & Shipping

  • Saudi Aramco has inked an agreement with Chinese oil refiner North Huajin Chemical Industries Group to supply crude to its 150 kb/d refinery. Primarily aimed at producing naphtha for petrochemical production, the steady flow of Arab Extra Light is Saudi Aramco’s attempt to regain its status as the top crude supplier to China, after coming in second to Russia in 2016. Huajin is a unit of China’s military group NORINCO and while it is not an independent Chinese teapot, it is a new customer for Saudi Aramco as the latter makes its push to seek new Chinese buyers by offering spot cargoes and competitive credit terms.

Natural Gas & LNG

  • The Singapore Exchange (SGX) and broker Tullett Prebon are developing a new LNG spot pricing index, joining its existing Singapore and Northeast LNG Sling indexes. The new Sling Index focuses on west Asia, known as the Dubai-Kuwait-India (DKI) Sling that will be published every Monday and Thursday covering spot prices between the Middle East and India. The new index should launch in the second quarter of 2017, standardising LNG pricing in Asia and positioning Singapore as the region’s trading hub.
  • Indonesia is facing a glut of LNG this year, with a reported 63 uncommitted cargoes of the fuel between the Tangguh and Bontang projects, according to the Director General of Oil and Gas. At current bookings, Bontang will have 32 uncommitted LNG cargoes and Tangguh 31, and there may be more in 2018 with the expansion of Tangguh being sanctioned. LNG cargoes are generally locked up in long-term contracts, with uncommitted cargoes sold on the prompt market at spot prices.
  • South Korea’s Kogas has expressed interest in buying into US shale gas projects, aiming for supply security, as US-South Korean trade relations head for rockier times under the Trump administration. Kogas is the world’s second largest buyer of LNG, receiving its first US LNG cargo from Cheniere this year. But rather than be a mere buyer, Kogas is following the example of Japanese gas companies by becoming asset owners as well, hedging against rockier political times.


  • A surprise shakeup has happened at Pertamina. CEO Dwi Soetjipto and Deputy CEO Ahmad Bambang have been removed from their positions by the Pertamina Board of Commissioners and the Ministry of State-owned entreprises. With Yenni Andayani (the former new and renewable energy director) as acting CEO, the changes are reportedly to ‘refresh’ the company structure as the ‘complex recruitment and management structure has obstructed cooperation.’ Pertamina chairman Tanri Abeng denied that the removals were linked a corruption case. The company aims to introduce a new streamlined corporate structure and new CEO by the beginning of March.

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September, 16 2021
The New Wave of Renewable Fuels

In 2021, the makeup of renewables has also changed drastically. Technologies such as solar and wind are no longer novel, as is the idea of blending vegetable oils into road fuels or switching to electric-based vehicles. Such ideas are now entrenched and are not considered enough to shift the world into a carbon neutral future. The new wave of renewables focus on converting by-products from other carbon-intensive industries into usable fuels. Research into such technologies has been pioneered in universities and start-ups over the past two decades, but the impetus of global climate goals is now seeing an incredible amount of money being poured into them as oil & gas giants seek to rebalance their portfolios away from pure hydrocarbons with a goal of balancing their total carbon emissions in aggregate to zero.

Traditionally, the European players have led this drive. Which is unsurprising, since the EU has been the most driven in this acceleration. But even the US giants are following suit. In the past year, Chevron has poured an incredible amount of cash and effort in pioneering renewables. Its motives might be less than altruistic, shareholders across America have been particularly vocal about driving this transformation but the net results will be positive for all.

Chevron’s recent efforts have focused on biomethane, through a partnership with global waste solutions company Brightmark. The joint venture Brightmark RNG Holdings operations focused on convert cow manure to renewable natural gas, which are then converted into fuel for long-haul trucks, the very kind that criss-cross the vast highways of the US delivering goods from coast to coast. Launched in October 2020, the joint venture was extended and expanded in August, now encompassing 38 biomethane plants in seven US states, with first production set to begin later in 2021. The targeting of livestock waste is particularly crucial: methane emissions from farms is the second-largest contributor to climate change emissions globally. The technology to capture methane from manure (as well as landfills and other waste sites) has existed for years, but has only recently been commercialised to convert methane emissions from decomposition to useful products.

This is an arena that another supermajor – BP – has also made a recent significant investment in. BP signed a 15-year agreement with CleanBay Renewables to purchase the latter’s renewable natural gas (RNG) to be mixed and sold into select US state markets. Beginning with California, which has one of the strictest fuel standards in the US and provides incentives under the Low Carbon Fuel Standard to reduce carbon intensity – CleanBay’s RNG is derived not from cows, but from poultry. Chicken manure, feathers and bedding are all converted into RNG using anaerobic digesters, providing a carbon intensity that is said to be 95% less than the lifecycle greenhouse gas emissions of pure fossil fuels and non-conversion of poultry waste matter. BP also has an agreement with Gevo Inc in Iowa to purchase RNG produced from cow manure, also for sale in California.

But road fuels aren’t the only avenue for large-scale embracing of renewables. It could take to the air, literally. After all, the global commercial airline fleet currently stands at over 25,000 aircraft and is expected to grow to over 35,000 by 2030. All those planes will burn a lot of fuel. With the airline industry embracing the idea of AAF (or Alternative Aviation Fuels), developments into renewable jet fuels have been striking, from traditional bio-sources such as palm or soybean oil to advanced organic matter conversion from agricultural waste and manure. Chevron, again, has signed a landmark deal to advance the commercialisation. Together with Delta Airlines and Google, Chevron will be producing a batch of sustainable aviation fuel at its El Segundo refinery in California. Delta will then use the fuel, with Google providing a cloud-based framework to analyse the data. That data will then allow for a transparent analysis into carbon emissions from the use of sustainable aviation fuel, as benchmark for others to follow. The analysis should be able to confirm whether or not the International Air Transport Association (IATA)’s estimates that renewable jet fuel can reduce lifecycle carbon intensity by up to 80%. And to strengthen the measure, Delta has pledged to replace 10% of its jet fuel with sustainable aviation fuel by 2030.

In a parallel, but no less pioneering lane, France’s TotalEnergies has announced that it is developing a 100% renewable fuel for use in motorsports, using bioethanol sourced from residues produced by the French wine industry (among others) at its Feyzin refinery in Lyon. This, it believes, will reduce the racing sports’ carbon emissions by an immediate 65%. The fuel, named Excellium Racing 100, is set to debut at the next season of the FIA World Endurance Championship, which includes the iconic 24 Hours of Le Mans 2022 race.

But Chevron isn’t done yet. It is also falling back on the long-standing use of vegetable oils blended into US transport fuels by signing a wide-ranging agreement with commodity giant Bunge. Called a ‘farmer-to-fuelling station’ solution, Bunge’s soybean processing facilities in Louisiana and Illinois will be the source of meal and oil that will be converted by Chevron into diesel and jet fuel. With an investment of US$600 million, Chevron will assist Bunge in doubling the combined capacity of both plants by 2024, in line with anticipated increases in the US biofuels blending mandates.

Even ExxonMobil, one of the most reticent of the supermajors to embrace renewables wholesale, is getting in on the action. Its Imperial Oil subsidiary in Canada has announced plans to commercialise renewable diesel at a new facility near Edmonton using plant-based feedstock and hydrogen. The venture does only target the Canadian market – where political will to drive renewable adoption is far higher than in the US – but similar moves have already been adopted by other refiners for the US market, including major investments by Phillips 66 and Valero.

Ultimately, these recent moves are driven out of necessity. This is the way the industry is moving and anyone stubborn enough to ignore it will be left behind. Combined with other major investments driven by European supermajors over the past five years, this wider and wider adoption of renewable can only be better for the planet and, eventually, individual bottom lines. The renewables ball is rolling fast and is only gaining momentum.

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Market Outlook:

  • Crude price trading range: Brent – US$71-73/b, WTI – US$68-70/b
  • Global crude benchmarks have stayed steady, even as OPEC+ sticks to its plans to ease supply quotas against the uncertainty of rising Covid-19 cases worldwide
  • However, the success of vaccination drives has kindled hope that the effect of lockdowns – if any – will be mild, with pockets of demand resurgence in Europe; in China, where there has been a zero-tolerance drive to stamp out Covid outbreaks, fuel consumption is strengthening again, possibly tightening fuel balances in Q4
  • Meanwhile, much of the US Gulf of Mexico crude production remains hampered by the effects of Hurricane Ida, providing a counter-balance on the supply side

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