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Last Updated: March 15, 2017
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Last Week in World Oil:

Prices

  • With US drilling rising and crude inventories soaring, WTI crude oil has slipped underneath the US$50/b psychological barrier, with Brent not far behind at US$51/b. Some OPEC producers already calling for an extension of the six-month output freeze, but all that will do is stabilise prices.

Upstream & Midstream

  • Shell will be withdrawing almost entirely from Canadian oil sands, an acknowledgement that expensive projects are non-starters in the current price environment. It will sell its existing and undeveloped oil sands interest to Canadian Natural for US$8.5 billion – going a long way to reducing its debt from acquiring BG – and will also reduce its share in the Athabasca Oil Sand Project from 60% to 10%. The net gain for Shell will be US$7.25 billion, as it has also purchased half of Marathon Oil Canada.
  • In other Shell news, the supermajor is reluctant to reopen the Trans Forcados pipeline in Nigeria, leaving the 400 kb/d Forcados export terminal idle, fearing new attacks by militants. Though attacks by the Niger Delta Avengers have lessened, Shell is demanding additional protection from a government desperate to bring nearly 500 kb/d of offline capacity back. The pipeline was bombed twice last year, the second time just 48 hours after seven months of repairs were completed.
  • Eight new oil rigs were activated last week, joining five new gas rigs to bring the US active rig count to 768, the eight consecutive weekly rise.

Downstream

  • The liberalisation of the Mexican fuel retail industry, breaking the Pemex monopoly and introducing price reforms, has downstream companies buzzing. The biggest of these is BP, which is planning to open up some 1,500 service stations over the next five years, another sign that the British supermajor may be warming back to the idea of downstream retailing after years of focusing on upstream. And it isn’t the only big player interested; trader Glencore is also mulling a move into Mexican retail, investing over US$200 million in a 15-year supply deal.
  • Austria’s OMV is selling its Turkish fuel supply and distribution unit Petro Ofisi to Vitol for US$1.45 billion, as it moves to shed non-core assets, particularly in the low-margin Turkish market. Current political tensions between Turkey and the EU may have also contributed to the sale.

Natural Gas and LNG

  • Russia’s Gazprom has announced a round of delays for its LNG projects, pushing the Sakhalin-2 project from 2021 to 2023/4, and the Baltic LNG plant in Leningrad from 2021 to 2022/3. The delays could leave Russia behind Canada, Australia and the US in the race to supply LNG-hungry Asia, and behind its target to triple its current market share by 2035.

Corporate

  • As Saudi Aramco tidies up its vast holdings – including its split with Shell over the Motiva Enterprises venture in the US – fund managers and institutional investors are expecting it to achieve a market capitalisation of up to US$1.5 trillion in its planned IPO, which would instantly make it the most valuable public company in the world.


Last Week in Asian Oil:

Upstream & Midstream

  • The sale of Chevron’s Bangladesh natural gas assets may be attracting  friction between the government and China. After a request to hike gas prices failed in 2015, the US supermajor put its assets – which account for roughly 60% of Bangladesh’s production from the onshore Bibiyana, Jalalabad and Moulavi Bazar fields – up for sale and cancelled a planned US$650 million investment. State-owned Petrobangla has first refusal, but China’s Zenhua Oil is also in the running, pricing the assets at about US$2 billion. Zhenhua is an arm of China’s NORINCO, a state-run defence industry player, and is one of the minor energy players stepping out of the Sinopec and PetroChina shadows to assert China’s influence globally.
  • Myanmar has given the go-ahead on the MD-7 project, which will see French major Total purchase a 50% interest in the offshore deepwater block from Thailand’s PTTEP. PTTEP has traditionally been the major upstream player in Myanmar, a holdover from the days when the country was considered a pariah nation, and has an on-going collaboration with Total that stretches back 30 years.  
  • Spain’s Repsol sold its 50% interest in the Indonesian Ogan Komering PSC (Production Sharing Contract) to local player Jadestone Energy. The tiny South Sumatran block, producing an average of 3 kb/d, is seen by Jadestone as key in expanding its Indonesia presence. Pertamina retains the other 50%, with Repsol seemingly more interested in the discovery it made in Alaska’s North Slope, the largest conventional onshore discovery in the US for over 30 years.

Downstream & Shipping

  • Two months after a setting a monthly crude import record, February 2017 crude imports reached China’s second-highest level, despite the shorter month. Volumes entering China rose to 8.286 mmb/d, with the demand from independent teapots driving the rise. Imports should ease over the next few months, as some major refineries enter maintenance periods, but the strong teapot demand may keep imports high.

Natural Gas & LNG

  • Malaysia’s Petronas has inked a new LNG deal, the third signed so far this year with the client once again being Japanese. The contract will send some 130,000 tons of LNG per year to the Hokkaido Electric Power Company over a 10 years, supplied from the Bintulu LNG complex.
  • BP’s Tangguh Train 2 in Indonesia’s West Papua will be shut down for nearly two months beginning early April. The routine maintenance should not affect the Tangguh LNG’s production plan for the year, which include 63 uncommitted cargoes. Tangguh Train 1 will remain operational.

Corporate

  • There might be a new name in China to watch. With ambitions of becoming the‘second Sinopec’, private Chinese conglomerate CEFC China Energy has already bought a 4% stake in an Abu Dhabi oilfield for US$900 million and has approached several large independent teapots in Shandong with an idea to acquire its first domestic refinery operation. It is the first example of a large private firm attempting to break into the ranks of Chinese energy majors, a motivation encouraged by Beijing as it seeks to foster competition in the domestic market. CEFC already owns a refinery in Romania, a network of service stations in Europe and an oilfield in Chad, all acquired on the quiet in just two years.

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The Advantages Of Owning A Wood Pellet Mill

The wood pellet mill, that goes by the name of a wood pellet machine, or wood pellet press, is popular in lots of countries around the world. With all the expansion of "biomass energy", there are now various production technologies utilized to convert biomass into useable electricity and heat. The wood pellet machines are one of the typical machines that complete this task.

Wood pellet mills turn raw materials such as sawdust, straw, or wood into highly efficient biomass fuel. Concurrently, the entire process of converting these materials in a more dense energy form facilitates storage, transport, and make use of on the remainder of any value chain. Later on, you will find plans for biomass fuel to replace traditional fuels. Moreover, wood pellet machines supply the chances to start many different types of businesses.

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Wood pellet machines are kinds of pellet machines to process raw materials including peanut shells, sawdust, leaves, straw, wood, plus more. Today the pellet mills can be purchased in different types. Both the main types include the ring die pellet mills as well as the flat die pellet mills. Wood pellet mills are designed for processing many different types of raw materials irrespective of size. The pellet size is very simple to customize with the use of a hammer mill.

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- The gearboxes are made of high-quality cast iron materials which provide excellent shock absorption and low noise. The wood pellet mills adopt a gear drive that makes a better efficiency in comparison with worm drive or belt drive. The gear drive setup really helps to prevent belt slippage while extending the lifespan in the belt drive.

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How To Maintain A Wood Pellet Mill

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June, 12 2022
OPEC And The Current State of Oil Fundamentals

It was shaping up to yet another dull OPEC+ meeting. Cut and dry. Copy and paste. Rubber-stamping yet another monthly increase in production quotas by 432,000 b/d. Month after month of resisting pressure from the largest economies in the world to accelerate supply easing had inured markets to expectations of swift action by OPEC and its wider brethren in OPEC+.

And then, just two days before the meeting, chatter began that suggested something big was brewing. Whispers that Russia could be suspended made the rounds, an about-face for a group that has steadfastly avoided reference to the war in Ukraine, calling it a matter of politics not markets. If Russia was indeed removed from the production quotas, that would allow other OPEC+ producers to fill in the gap in volumes constrained internationally due to sanctions.

That didn’t happen. In fact, OPEC+ Joint Technical Committee commented that suspension of Russia’s quota was not discussed at all and not on the table. Instead, the JTC reduced its global oil demand forecast for 2022 by 200,000 b/d, expecting global oil demand to grow by 3.4 mmb/d this year instead with the downside being volatility linked to ‘geopolitical situations and Covid developments.’ Ordinarily, that would be a sign for OPEC+ to hold to its usual supply easing schedule. After all, the group has been claiming that oil markets have ‘been in balance’ for much of the first five months of 2022. Instead, the group surprised traders by announcing an increase in its monthly oil supply hike for July and August, adding 648,000 b/d each month for a 50% rise from the previous baseline.

The increase will be divided proportionally across OPEC+, as has been since the landmark supply deal in spring 2020. Crucially this includes Russia, where the new quota will be a paper one, since Western sanctions means that any additional Russian crude is unlikely to make it to the market. And that too goes for other members that haven’t even met their previous lower quotas, including Iraq, Angola and Nigeria. The oil ministers know this and the market knows this. Which is why the surprise announcement didn’t budge crude prices by very much at all.

In fact, there are only two countries within OPEC+ that have enough spare capacity to be ramped up quickly. The United Arab Emirates, which was responsible for recent turmoil within the group by arguing for higher quotas should be happy. But it will be a measure of backtracking for the only other country in that position, Saudi Arabia. After publicly stating that it had ‘done all it can for the oil market’ and blaming a lack of refining capacity for high fuel prices, the Kingdom’s change of heart seems to be linked to some external pressure. But it could seemingly resist no more. But that spotlight on the UAE and Saudi Arabia will allow both to wrench some market share, as both countries have been long preparing to increase their production. Abu Dhabi recently made three sizable onshore oil discoveries at Bu Hasa, Onshore Block 3 and the Al Dhafra Petroleum Concession, that adds some 650 million barrels to its reserves, which would help lift the ceiling for oil production from 4 to 5 mmb/d by 2030. Meanwhile, Saudi Aramco is expected to contract over 30 offshore rigs in 2022 alone, targeting the Marjan and Zuluf fields to increase production from 12 to 13 mmb/d by 2027.

The UAE wants to ramp up, certainly. But does Saudi Arabia too? As the dominant power of OPEC, what Saudi Arabia wants it usually gets. The signals all along were that the Kingdom wanted to remain prudent. It is not that it cannot, there is about a million barrels per day of extra production capacity that Saudi Arabia can open up immediately but that it does not want to. Bringing those extra volume on means that spare capacity drops down to critical levels, eliminating options if extra crises emerge. One is already starting up again in Libya, where internal political discord for years has led to an on-off, stop-start rhythm in Libyan crude. If Saudi Arabia uses up all its spare capacity, oil prices could jump even higher if new emergencies emerge with no avenue to tackle them. That the Saudis have given in (slightly) must mean that political pressure is heating up. That the announcement was made at the OPEC+ meeting and not a summit between US and Saudi leaders must mean that a façade of independence must be maintained around the crucial decisions to raise supply quotas.

But that increase is not going to be enough, especially with Russia’s absence. Markets largely shrugged off the announcement, keeping Brent crude at US$120/b levels. Consumption is booming, as the world rushes to enjoy its first summer with a high degree of freedom since Covid-19 hit. Which is why global leaders are looking at other ways to tackle high energy prices and mitigate soaring inflation. In Germany, low-priced monthly public transport are intended to wean drivers off cars. In the UK, a windfall tax on energy companies should yield US$6 billion to be used for insulating consumers. And in the US, Joe Biden has been busy.

With the Permian Basin focusing on fiscal prudence instead of wanton drilling, US shale output has not responded to lucrative oil prices that way it used to. American rig counts are only inching up, with some shale basins even losing rigs. So the White House is trying more creative ways. Though the suggestion of an ‘oil consumer cartel’ as an analogue to OPEC by Italian Prime Minister Mario Draghi is likely dead on arrival, the US is looking to unlock supply and tame fuel prices through other ways. Regular releases from the US Strategic Petroleum Reserve has so far done little to bring prices down, but easing sanctions on Venezuelan crude that could be exported to the US and Europe, as well as working with the refining industry to restart recently idled refineries could. Inflation levels above 8% and gasoline prices at all-time highs could lead to a bloody outcome in this year’s midterm elections, and Joe Biden knows that.

But oil (and natural gas) supply/demand dynamics cannot truly start returning to normal as long as the war in Ukraine rages on. And the far-ranging sanctions impacting Russian energy exports will take even longer to be lifted depending on how the war goes. Yes, some Russian crude is making it to the market. China, for example, has been quietly refilling its petroleum reserves with Russian crude (at a discount, of course). India continues to buy from Moscow, as are smaller nations like Sri Lanka where an economic crisis limits options. Selling the crude is one thing, transporting it is another. With most international insurers blacklisting Russian shippers, Russian oil producers can still turn to local insurance and tankers from the once-derided state tanker firm Sovcomflot PJSC to deliver crude to the few customers they still have.

A 50% hike in OPEC’s monthly supply easing targets might seem like a lot. But it isn’t enough. Especially since actual production will fall short of that quota. The entire OPEC system, and the illusion of control it provides has broken down. Russian oil is still trickling out to global buyers but even if it returned in full, there is still not enough refining capacity to absorb those volumes. Doctors speak of long Covid symptoms in patients, and the world energy complex is experiencing long Covid, now with a touch with geopolitical germs as well. It’ll take a long time to recover, so brace yourselves.

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June, 12 2022