NrgEdge Editor

Sharing content and articles for users
Last Updated: April 27, 2017
1 view
Business Trends

Last week in world oil:


  • After a flurry of support over supply disruptions in Libya and the extension of OPEC supply cuts, crude oil prices have returned to their previous levels, at US$52/b for Brent and US$49/b for WTI. While analysts and traders remain reasonably confident that OPEC will agree to extend the freeze, there are jitters over non-OPEC commitments to the move, with Russia indicating it could begin lifting output. 

Upstream & Midstream

  • ExxonMobil’s attempt to apply for a waiver that would allow it to override existing sanctions to drill for oil in Russia has been refused by the Trump administration. Perhaps an indication that the White House does not want to show overt favouritism, the decision comes during a time when the US government is probing Russian influence in US elections. 
  • Suncor’s Syncrude Canada oil sands project will resume production in May and June, but at reduced rates, after output was knocked out completely by a fire in March. The 350 kb/d plant produces light synthetic crude, necessary to be mixed with heavy oil sands to enable flow through pipeline. The unavailability of Syncrude has hampered oil sands production in Alberta over April, and will only pick up in late May. 
  • The active US oil and gas rig count continues to rise, hitting 857 sites last week. Ten new rigs – five apiece between oil and gas – entered production, though this was offset by a loss of 19 rigs in Canada.  


  • ExxonMobil and Saudi Arabia’s petrochemicals firm SABIC have selected a site in Corpus Christi, Texas as the site for their joint venture petrochemical complex. One of the 11 projects proposed by ExxonMobil as part of its US$20 billion US Gulf Coast investment drive, the ethylene-focused plant will have a capacity of 1.8 million tons per annum. 
  • Philadelphia Energy Solutions, the largest refiner on the US East Coast, will no longer receive rail deliveries of Bakken crude in June, a sign that the impending Dakota Access Pipeline is changing trade flows – diverting volumes from North Dakota down to the US Gulf Coast, and possibly ending the crude-by-rail boom that has sustained East Coast refiners. 
  • As negotiations between the UK and the EU over Brexit continue, British negotiators should aim to secure continue participation in the EU energy market, according to energy minister Greg Clark. The UK has deep connections in the energy sector, particularly in LNG and in Ireland, in the arena of electricity transmission and grid connections.
  • Chevron has sold its downstream assets in Canada’s British Columbia to Parkland Fuel Corp, for US$1.09 billion. The assets include 129 fuel stations, three terminals and the 52 kb/d Burnaby oil refinery, which will held boost Parkland’s extensive existing operations in Canada. 

Natural Gas and LNG

  • American natural gas transmission company William Partners is divesting its interest in the Nova Chemicals olefins plant, for US$2.1 billion, as it prepares to focus more on its core product. Williams Partners will continue to work with Nova, supplying natural gas in long-term supply deals to the ethylene-focused plant. 

Last week in Asian oil:

Upstream & Midstream

  • Iraq will build three new plants to capture natural gas at its southern oil fields. The gas is currently being flared, a chronic problem in the country as it lacks the necessary infrastructure to isolate and process gas hydrocarbons. Only one gas processing company exists – the Basrah Gas Company – and Iraq thinks three more are necessary to convert all gas (at the fields controlled by the government) into fuel for power generation. 
  • China is making a second attempt at launching a domestic crude oil futures contract after failing in 2014, as domestic stock volatility and the depression in commodity markets hit. The International Energy Exchange in Shanghai is now aiming to relaunch the contract in the third quarter of 2017, in what could eventually become the Asian crude oil benchmark. 
  • China’s CNOOC will be offering 22 open blocks covering an area of 47,270 square kilometres as the state upstream players attempts to attract foreign investments through relaxed terms and rules. All 22 blocks are offshore, concentrated southeast in the waters off Guangdong and Hainan. 
  • After rhetorical belligerence during his campaign period, Donald Trump’s administration admitted that Iran was complying with the nuclear deal struck by his predecessor. Some sanctions were reapplied in January, but the US is not yet ready to lift them, but placing them under ‘review’.

Natural Gas & LNG

  • Australia’s LNG boom has not benefitted its major population centres in the southeast, with most of the natural gas produced earmarked for exports. Now, the country’s competition regulator is ordering a review over the ability of LNG projects to export gas that should be earmarked for domestic consumption in Victoria and New South Wales. The recent purchase by Santos of 20% of natural gas available for consumption in the east coast to fuel LNG production for export at the Gladstone plant over internal gas shortages sparked the ordered review. This has caused a domestic dichotomy, with Australia’s internal spot LNG prices soaring while it exports record amounts of gas overseas. As an attempt to ease the problem, ConocoPhillips has said it is open to diverting gas from its northern Australian fields to the planned transcontinental Trans-Australia gas pipeline, linking production in the north to the major domestic markets in the southeast. 
  • ConocoPhillips and its partners are mulling over an expansion of the Darwin LNG plant in Australia’s Northern Territory. Supply from its current gas source, the Bayu-Undan field, is expected to run out in 2022 and ConocoPhillips is looking beyond developing its own fields for US$10 billion to incorporate output from other currently undeveloped gas resources in the area. There are currently five joint ventures with undeveloped resources in the Northern Territory backing ConocoPhillips’ study, including Shell, Petronas, Eni, Santos and Origin. 
  • Pakistan has approved construction of a new US$1 billion gas pipeline to transport LNG volumes from the port of Karachi inland to Lahore. The project by Sui Northern Gas Pipelines is part of the government’s plans to add 1.2 bcf per day of LNG volumes, and will be constructed in two phases – a 780km pipeline from Sawan to Lahore, and a 130km tie-in to the existing transmission  network. 

1 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

China adds incentives for domestic natural gas production as imports increase

Rapid growth in China’s natural gas consumption has outpaced growth in its domestic natural gas production in recent years. China’s natural gas imports, both by pipeline and as liquefied natural gas (LNG), accounted for nearly half (45%) of China’s natural gas supply in 2018, an increase from 15% in 2010. To increase the domestic production of natural gas, the Chinese government has introduced incentives for several forms of natural gas production.

Natural gas production has recently grown in China largely because of increased development in low-permeability formations in the form of tight gas, shale gas, and to a lesser extent, coalbed methane. In September 2018, the Chinese State Council set a target of 19.4 billion cubic feet per day (Bcf/d) for domestic natural gas production in 2020. In 2018, China’s domestic natural gas production averaged 15.0 Bcf/d.

In June 2019, the Chinese government introduced a subsidy program that established new incentives for the production of natural gas from tight formations and extended existing subsidies for production from shale and coalbed methane resources. This subsidy is scheduled to be in effect through 2023. In addition to the changes in the subsidy program, the government allowed foreign companies to operate independently in the country’s oil and natural gas upstream sector.

China domestic natural gas production by type

Source: U.S. Energy Information Administration, based on China National Bureau of Statistics and IHS Markit

Production of tight gas, shale gas, and coalbed methane collectively accounted for 41% of China’s total domestic natural gas production in 2018. China has been developing tight gas from low-permeability formations since the 1970s, especially in the Ordos and Sichuan Basins. Tight gas production was negligible until 2010 when companies initiated an active drilling program that helped lower the drilling cost per vertical well and improve well productivity.

Shale gas development in China has focused on the Sichuan Basin: China National Petroleum Corporation’s (CNPC) subsidiary PetroChina operates two fields in the southern part of the basin and the China Petroleum and Chemical Corporation (Sinopec) operates one field in the eastern part of the basin. PetroChina and Sinopec have respectively committed to producing 1.16 Bcf/d and 0.97 Bcf/d of shale gas by 2020, which, if realized, would collectively double the country’s 2018 shale gas production level.

China's tight gas, shale gas, coalbed methane, and synthetic gas producing areas

Source: U.S. Energy Information Administration

China’s coalbed methane development is concentrated in the Ordos and Qinshui Basins of Shanxi Province. These basins face significant challenges, including relatively low well productivity and relatively high production costs.

China also generates synthetic natural gas from coal, a source that accounted for 2% of China’s natural gas production in 2018. China’s synthetic gas projects involve gasifying coal into methane in coal-rich provinces, such as Inner Mongolia, Xinjiang, and Shanxi. In 2016, the Chinese government hoped to reach 1.64 Bcf/d of coal-to-gas production capacity by 2020. China’s coal-to-gas production was less than 0.3 Bcf/d in 2018 as stricter environmental mandates have slowed down plant construction and increased the cost of further developing coal-to-gas.

October, 24 2019
The United States now exports crude oil to more destinations than it imports from

As U.S. crude oil export volumes have increased to an average of 2.8 million barrels per day (b/d) in the first seven months of 2019, the number of destinations (which includes countries, territories, autonomous regions, and other administrative regions) that receive U.S. exports has also increased. Earlier this year, the number of U.S. crude oil export destinations surpassed the number of sources of U.S. crude oil imports that EIA tracks.

In 2009, the United States imported crude oil from as many as of 37 sources per month. In the first seven months of 2019, the largest number of sources in any month fell to 27. As the number of sources fell, the number of destinations for U.S. crude oil exports rose. In the first seven months of 2019, the United States exported crude oil to as many as 31 destinations per month.

This rise in U.S. export destinations coincides with the late 2015 lifting of restrictions on exporting domestic crude oil. Before the restrictions were lifted, U.S. crude oil exports almost exclusively went to Canada. Between January 2016 (the first full month of unrestricted U.S. crude oil exports) and July 2019, U.S. crude oil production increased by 2.6 million b/d, and export volumes increased by 2.2 million b/d.

monthly U.S. crude oil production and exports

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

The United States has also been importing crude oil from fewer of these sources largely because of the increase in domestic crude oil production. Most of this increase has been relatively light-sweet crude oil, but most U.S. refineries are configured to process medium- to heavy-sour crude oil. U.S. refineries have accommodated this increase in production by displacing imports of light and medium crude oils from countries other than Canada and by increasing refinery utilization rates.

Conversely, the United States has exported crude oil to more destinations because of growing demand for light-sweet crude oil abroad. Several infrastructure changes have allowed the United States to export this crude oil. New, expanded, or reversed pipelines have been delivering crude oil from production centers to export terminals. Export terminals have been expanded to accommodate greater crude oil tanker traffic, larger crude oil tankers, and larger cargo sizes.

More stringent national and international regulations limiting the sulfur content of transportation fuels are also affecting demand for light-sweet crude oil. Many of the less complex refineries outside of the United States cannot process and remove sulfur from heavy-sour crude oils and are better suited to process light-sweet crude oil into transportation fuels with lower sulfur content.

The U.S. Energy Information Administration’s monthly export data for crude oil and petroleum products come from the U.S. Census Bureau. For export values, Census trade data records the destinations of trade volumes, which may not be the ultimate destinations of the shipments.

October, 23 2019
Recalibrating Singapore’s Offshore Marine Industry

The state investment firm Temasek Holdings has made an offer to purchase control of Singaporean conglomerate Keppel Corp for S$4.1 billion. News of this has reverberated around the island, sparking speculation about what the new ownership structure could bring – particularly in the Singaporean rig-building sector.

Temasek already owns 20.5% of Keppel Corp. Its offer to increase its stake to 51% for S$4.1 billion would see it gain majority shareholding, allowing a huge amount of strategic flexibility. The deal would be through Temasek’s wholly-owned subsidiary Kyanite Investment Holdings, offering S$7.35 per share of Keppel Corp, a 26% premium of the traded price at that point. The financial analyst community have remarked that the bid is ‘fair’ and ‘reasonable’, and there appears to be no political headwinds against the deal being carried out with the exception of foreign and domestic regulatory approval.

The implications of the deal are far-ranging. Keppel Corp’s business ranges from property to infrastructure to telecommunications, including Keppel Land and a partial stake in major Singapore telco M1. Temasek has already said that it does not intend to delist and privatise Keppel Corp, and has a long-standing history of not interfering or getting involved in the operations or decisions of its portfolio companies.

This might be different. Speculation is that this move, if successful could lead to a restructuring of the Singapore offshore and marine industry. Since 2015, Singapore’s rig-building industry has been in the doldrums as global oil prices tumbled. Although prices have recovered, cost-cutting and investment reticence have provided a slower recovery for the industry. In Singapore, this has affected the two major rigbuilders – Keppel O&M and its rival Sembcorp Marine. In 2018, Keppel O&M reported a loss of over SS$100 million (although much improved from its previous loss of over SS$800 million); Sembcorp Marine, too, faces a challenging market, with a net loss of nearly 50 million. Temasek itself is already a majority shareholder in Sembcorp Marine.

Once Keppel Corp is under Temasek’s control, this could lead to consolidation in the industry. There are many pros to this, mainly the merging of rig-building operations and shipyards will put Singapore is a stronger position against giant shipyards of China and South Korea, which have been on an asset buying spree. With the overhang of the Sete Brasil scandal over as both Keppel O&M and Sembcorp Marine have settled corruption allegations over drillship and rig contracts, a merger is now increasingly likely. It would sort of backtrack from Temasek’s recent direction in steering away from fossil fuel investments (it had decided to not participate in the upcoming Saudi Aramco IPO for environmental concerns) but strengthening the Singaporeans O&M industry has national interest implications. As a representative of Temasek said of its portfolio – ‘(we are trying to) re-purpose some businesses to try and grasp the demands of tomorrow.’ So, if there is to be a tomorrow, then Singapore’s two largest offshore players need to start preparing for that now in the face of tremendous competition. And once again it will fall on the Singaporean government, through Temasek, to facilitate an arranged marriage for the greater good.

Keppel and Sembcorp O&M at a glance:

Keppel Offshore & Marine, 2018

  • Revenue: S$1.88 billion (up from S$1.80 billion)
  • Net Profit: -S$109 million (up from -S$826 million)
  • Contracts secured: S$1.7 billion

Sembcorp Marine, 2018

  • Turnover: S$4.88 billion (up from S$3.03 billion)
  • Net Profit: -S$48 million (down from S$157 million)
  • Contracts secured: S$1.2 billion
October, 22 2019