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Last Updated: May 3, 2017
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Last week in world oil:

Prices

  • Rebounding Libyan production has caused crude oil prices to tumble over the past week. The new support level seems to be US$50/b with Brent and WTI trading at about US$2 either side of that level.

Upstream & Midstream

  • Mexican crude is finding new homes, as crude shipments to the US fall to the lowest level since 2010. Shipments have been falling consistently as the shale revolution and Canadian volumes reduce the US Gulf’s dependence on Mexico. Production in Mexico itself is declining and more of its crude is demanded by Pemex’s refineries; excess crude that used to be shipped to the US are now finding its way to Europe and Asia.
  • While international players are exiting Canadian oil sand due to high costs, domestic player Suncor is evaluating opportunities in the region. Hoping to pick up some assets that will provide good returns over the longer term when it sees crude prices recovering, Suncor is also in a unique position, being the main producer of Syncrude, the light crude oil that must be mixed with oil sands to allow flow through pipelines.
  • The active US rig count continues to march upwards, gaining another 13 sites last week to move up to 870, the pace of additions not slowing down.

Downstream

  • South Africa’s anti-trust body has ordered that LPG producers cap supply agreements with distributors at 10 years, ruling that existing deals were deterring competition, leading to four suppliers – Afrox, Easigas, Totalgas and Oryx Energies – cornering 90% of the market.

Natural Gas and LNG

  • Gazprom’s Nord Stream 2 pipeline took a big step last week, with the European partners of the €9.5 billion project agreeing to provide half of the financing. Uniper, Wintershall, Shell, OMV and Engie have each agreed to provide 10% of the venture, with Gazprom shouldering the remaining 50%. However, equity will not be exchanged; Gazprom will remain the sole shareholder of the 55 bcm pipeline, adding fodder to the political fire.
  • The dependence on Russia gas has unsettled many European countries, particularly in the Baltics and Scandinavia. While countries like Germany hunger for gas, Poland is looking further afield. With an LNG import terminal already in place and another planned, Poland is scheduled to receive a spot LNG cargo from Cheniere’s Sabine Pass. It won’t be the last either, as the glut of LNG swirling around globally opens up new markets.
  • Total will begin construction of its Cote d’Ivoire LNG terminal by mid-2017. The project aims to make the former French colony a natural gas regional hub for Western Africa, with initial capacity planned for 36 mmBtu, scaling up to 100 mmBtu. Completion is expected by end 2018.

Corporate

  • Earnings across the board have risen in the first quarter of 2017, with ExxonMobil, Total and Chevron beating analyst expectations and BP tripling its profit y-o-y to US$1.51 billion. ExxonMobil reported quarterly profit of US$4.1 billion, while Chevron bounced back from a loss to being US$2.68 billion in the black. Rising crude prices have underpinned the financial recovery, with sizable asset sales also contributing.

Last week in Asian oil:

Upstream & Midstream

  • China has set a deadline of May 5 for private oil refiners to submit permits to use (or continue using) imported crude oil. China’s decision to allow 22 independent refiners to import crude oil on their own since 2015 has been behind the country’s record imports last year, but concerns about overcapacity leading to high exports has caused the state to clamp down on such permits. After curbing quotas earlier this year to an outcry, the state planner has instead issued a short deadline to cap private imports at about 2 mmb/d, still almost 25% higher than last year’s figure.
  • Petronas is seeking help to develop the high carbon dioxide oil and gas fields identified offshore Sarawak. The Malaysian state player lacks sufficient expertise in the arena and has invited close partners to assist it in developing the resources. Petronas is already developing high CO2 fields offshore Peninsula Malaysia, launching the Terengganu Gas Terminal in Kertih last week, utilising the company’s carbon dioxide removal technology that it expects will boost it domestic production.

Downstream

  • BP’s profits for the first quarter of 2017 have been boosted by its decision to sell its 50% stake in the Shanghai SECCO Petrochemical Company to Sinopec for US$1.68 billion. The first major divestment of the year for BP will lead a charge to sell assets worth between US$4.5-5.5 billion this year, as it seeks to pare down debt accumulating from the Deepwater Horizon accident.
  • India has set an ambitious target to reduce its oil product imports to zero, hoping to replace them with alternative fuels. A specific timeline for the goal was not set out by Transport Minister Nitin Gadkari, leaving this a mere hope that the country would ‘no need to import any fuel from any country and that we will be self-sufficient’. Crude imports, of course, will still be a reality but India is directing state refiners to boost capacity to meet the goal, as well as move to alternative fuels like methanol and LNG to curb imports of LPG currently used by auto-rickshaws and cooking, as well as boost bio-ethanol refining from biomass, bamboo and cotton straw. A push by the government to introduce gas cylinders in rural areas has made India the second-largest LPG importer in the world, overtaking Japan, which has decreased coal usage but hiked up the import bill.  

Natural Gas & LNG

  • The Ichthys LNG export plant has been delayed. Again. Japan’s Inpex confirmed that it would delay the start of the project by several months from the previously projected start date of Q317, as delays in the offshore production facilities being manufactured in Korea hampered the timeline. The new timeline for production of LNG and LPG is end-March, 2018.
  • Australia’s Jemena, a joint venture between the State Grid Corp of China and Singapore Power, could boost the capacity of its planned eastern Australia pipeline to ease the growing natural gas shortage in the region. Jemena has stated that it is open to extend the pipeline, currently running from Tennat Creek in northern Australia to Mount Isa in Queensland, further east if the ban of fracking in the north is lifted. The pipeline is already under construction, but allowing fracking will unlock more supplies in central and northern Australia through which the pipeline flows, which will help ease the current gas crisis on the east coast.

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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