Easwaran Kanason

Co - founder of NrgEdge
Last Updated: March 8, 2017
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Business Trends
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It’s been a busy few days  at CERAWeek in Houston, where The Wall Street Journal has a team of editors and reporters covering the most influential annual oil conference in the U.S. Saudi Arabia’s oil minister spoke, OPEC’s secretary general broke bread with rival American producers and U.S. shale-oil companies are finally getting some recognition as a permanent fixture in the global industry.

Here’s a rundown of the major news from Houston.

SAUDI OIL MINISTER: OPEC REMAINS A STABILIZING FORCE

Saudi Arabia delivered a message at CERAWeek: Don’t expect the Saudi’s to save the oil market alone.The kingdom has shouldered the brunt of production cuts agreed to last year among the 13 nation OPEC cartel and 11 other producers, designed associated with a deal by OPEC and external oil producers to eliminate about 2% of global supply. The output deal helped send crude prices up 20%. Saudi energy minister Khalid al-Falih said OPEC will look at inventory levels in May as it evaluates whether to extend the production cut into the second half of the year. In reference to recent shale oil developments, Mr. Falih He warned an audience full of American producers who have benefited from the production cuts to not fall prey to “wishful thinking that OPEC or the kingdom will underwrite the investments of others.”

“Saudi Arabia will not allow itself to be used by others,” said Mr. Falih.

PRODUCTION CUTTERS DEFEND THEIR COMMITMENTS

Ministers from countries including Russia, Iraq and Saudi Arabia said they were following through on production-cut commitments amid signs the coalition is fraying at the edges, writes Sarah Kent. For instance, Russia has only fulfilled about a third of its pledge to reduce supply, but the country’s energy minister said Tuesday that Moscow is “fully committed” to slashing all 300,000 barrels a day it promised.

OPEC: U.S. SHALE IS HERE TO STAY

OPEC’s chief said the global economy could have been worse off without shale-oil output in the U.S., report Lynn Cook and Miguel Bustillo.

The flood of supplies from American producers over the past sent the oil market into a tailspin, but it also provided new production that was needed to meet demand, said Mohammad Barkindo, the secretary-general of OPEC at CeraWeek. “We only wish it was done in an orderly fashion that did not trigger this severe cycle that we’re still battling to come out of,” said Mr. Barkindo.

OPEC RECONCILING WITH AMERICA

OPEC’S message in Houston has been conciliatory toward U.S producers that it once counted as upstart rivals. Energy scholar Daniel Yergin, who is vice chairman of energy research at IHS Markit, told the Journal that OPEC is accepting shale producers as a major source of oil now much like it came around to the discovery of new supplies from the North Sea in the 1970s. “It’s not so much ‘us-versus-them’ any more, but a watchful but peaceful coexistence,” he said. For OPEC’s part, Mr. Barkindo said: “For the record, we didn’t have any war” with shale producers.

OPEC BREAKS BREAD WITH SHALE PRODUCERS

Mr. Barkindo took his rapprochement with shale producers to the next level, bonding with them over dinners on Sunday and Monday nights in Houston.

“Mr. Barkindo held forth about the Organization of the Petroleum Exporting Countries’ sometimes tense negotiations to hammer out an agreement to cut oil production, according to people at the meeting,” the Journal reported. “Mr. Barkindo assured shale executives that OPEC didn’t want to put them out of business. And OPEC’s top official had an admission for his audience.” “We did confess that we do not have sufficient understanding of how they operate and their impact on us,” he said later.

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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

Upstream

  • 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

Midstream/Downstream

  • 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