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Last Updated: May 17, 2017
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Last week in the world oil: 


Prices 

* With an extension of the OPEC supply cuts seemingly imminent, as Saudi Arabia and Russia agreed that the freeze must last until early 2018, crude oil prices have gained ground. Brent topped US$52/b for the first time in three weeks, while WTI is inching up towards US$50/b again. 


Upstream & Midstream 

* France’s Total has signed a deal with Mauritanian state oil firm SMHPM to explore for offshore oil and gas, as the action in West Africa swings north to the new deepwater basins off Mauritania and Senegal. Total will take a 90% operating stake in the 7,300 sq.km 7,300 Block C7, just a week after it bought a 90% stake in the Rufisque Offshore Profond Block in Senegal. 

* First oil has begun to flow at the Repsol Sinopec Resources’ Shaw field, part of the major redevelopment of the Montrose Area in the Central North Sea. Aiming to integrate new and existing infrastructure in the UK’s North Sea, the Shaw, Godwin and Cayley fields will add some 100 million boe to the reserves in Montrose. 

* The recent razor-thin victory of Canada’s Liberal Party in British Columbia puts the Kinder Morgan Trans Mountain oil pipeline expansion and the US$27 billion Petronas LNG export projects at risk. Reduced to a minority government, the Liberals will require support from the Green Party to govern, and the Greens are vehemently opposed to both projects, despite the BC and Federals governments already approving them. 

* American oilrigs added another nine to their number, reaching 712. It has been 17 consecutive weeks of rises in the US overall rig count, marching towards 900 as raising doubts about the effectiveness of more OPEC cuts. 


Downstream 

* Italy’s Eni will be building a new 150 kb/d refinery in Nigeria. Part of the country’s drive to boost downstream investment to reduce reliance on imported oil products – despite being a crude exporter – the refinery will be built by Eni’s downstream subsidiary Agip, replacing the chronic aging existing refineries of NNPC. 

* Venezuela’s refining woes continue, as aging units and manpower shortages reduce utilisation at the Paraguna Refining Center to 43%, with multiple units at the Cardon and Amuay refineries out of service. 


Natural Gas and LNG 

* As East Europe looks to assert a measure of energy independence away from Russia, Romania’s state gas producer Romgaz announced that production at the domestic Caragele field will start in 2019. With an estimated 25-27 bcm of gas, the field in Buzau could supply the entire country for three years. Romgaz is hoping to up that figure, sanctioning more tests and drilling in the area, with an eye toward becoming a net gas exporter through the impending Bulgarian-Romanian gas pipeline. 

* From being desperate for oil and gas, Egypt is now talking to its LNG suppliers to defer shipments as its domestic gas production surges. Long seen as a reliable sink for LNG shipments, Cairo reportedly aims to scale back LNG purchases in 2018 from 70 to 30 cargoes, as production surges from BP’s Tauros and Libra fields in West Nile Delta, as well as Eni’s Zohr and giant Nooros field, which has hit 900 million cubic feet/d of output.


Upstream & Midstream 

* Saudi Aramco will ship some 7 million barrels of crude oil less to Asia in June. Part of its commitment to the OPEC pact, the reduction also comes as the country hoards crude for domestic power demand during the searing summer, especially with the festive Ramadhan period beginning in late May. The nomination plans for June indicate a million barrel cut to Southeast Asia, China and South Korea each, slightly less than a million barrels for Japan and a whopping 3 million barrels for India. Expect the countries to turn to America and Africa to make up the shortage. 

* Total and Japan’s Inpex are proposing to the Indonesian government take a 39% stake in the new Production Sharing Contract (PSC) at the Mahakam block. Under the current contract that began in 2015, the two companies – which operate the oil and gas block – have a smaller stake of 30%, with Pertamina taking the rest. Pertamina will be the operator of Mahakam under the new PSC, with Total and Inpex asking for new clauses in compensation, including 17% investment credit for developing the block and selling gas to domestic buyers at market prices. 


Downstream 

* IndianOil has opened up talks with Saudi Aramco to build a mega refinery on India’s west coast. The project would be one of mutual benefit. India is aspiring to be self-sufficient in oil product demand, which would require that it vastly expand refining capacity. The project, which has a mammoth planned capacity of 1.2 mmbpd will also have a petrochemicals portion, to feed the country’s growing manufacturing sector. For Saudi Arabia, it locks in India as a top customer amid a growing oil supply glut. It also represents a strategic downstream move, with Aramco also involved in the RAPID project in Malaysia and pushing ahead with its American Motiva subsidiary after a divorce from joint venture partner Shell. 

* ExxonMobil has agreed to buy the Jurong Aromatics refinery and petrochemical plant, outbidding South Korea’s Lotte Chemical by offering a price of US$1.7 billion. The JAC plant will now be integrated with ExxonMobil’s existing complex on Jurong, expanding the firm’s largest refining complex even further. 


Natural Gas & LNG 

* Malaysia’s Petronas is looking to expand its status as the third-largest LNG exporter by tapping new market in South and Southeast Asia. India, Pakistan, Bangladesh and Myanmar have been identified as avenues of growth for the Malaysian state oil firm, while new sectors such as LNG fuel for commercial ships are also being tested. 

* Without changing existing rules for American LNG exports, Donald Trump’s administration has clarified that current trade rules allow American shale gas producers to target China directly to sell LNG. Currently, American LNG heads to China under spot contracts, with Cheniere already shipping nine cargoes from its Sabine Pass facility. The clarification is expected to trigger a wave of long-term contracts with Chinese buyers, rather than prompt spot purchases.


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BP & The Expansion of the Caspian

The vast Shah Deniz field in Azerbaijan’s portion of the South Caspian Sea marked several milestones in 2018. It has now produced a cumulative total of 100 billion cubic metres of natural gas since the field started up in 2006, with daily output reaching a new peak, growing by 12.5% y-o-y. At a cost of US$28 billion, Shah Deniz – with its estimated 1.2 trillion cubic metres of gas resources – has proven to be an unparalleled success, being a founding link of Europe’s Southern Gas Corridor and coming in relatively on budget and on time. And now BP, along with its partners, is hoping to replicate that success with an ambitious exploration schedule over the next two years.

Four new exploration wells in three blocks, along with a seismic survey of a fourth, are planned for 2019 and an additional three wells in 2020. The aggressive programme is aimed at confirming a long-held belief by BP and SOCAR there are more significant pockets of gas swirling around the area. The first exploratory well is targeting the Shafag-Asiman block, where initial seismic surveys suggest natural gas reserves of some 500 billion cubic metres; if confirmed, that would make it the second-largest gas field ever discovered in the Caspian, behind only Shah Deniz. BP also suspects that Shah Deniz itself could be bigger than expected – the company has long predicted the existence of a second, deeper reservoir below the existing field, and a ‘further assessment’ is planned for 2020 to get to the bottom of the case, so to speak.

Two wells are planned to be drilled in the Shallow Water Absheron Peninsula (SWAP) block, some 30km southeast of Baku, where BP operates in equal partnership with SOCAR, with an additional well planned for 2020. The goal at SWAP is light crude oil, as is a seismic survey in the deepwater Caspian Sea Block D230 where a ‘significant amount’ of oil is expected. Exploration in the onshore Gobustan block, an inland field 50km north of Baku, rounds up BP’s upstream programme and the company expects that at least one seven wells of these will yield a bonanza that will take Azerbaijan’s reserves well into the middle of the century.

Developments in the Caspian are key, as it is the starting node of the Southern Gas Corridor – meant to deliver gas to Europe. Shah Deniz gas currently makes its way to Turkey via the South Caucasus Gas pipeline and exports onwards to Europe should begin when the US$8.5 billion, 32 bcm/y Trans-Anatolian Pipeline (TANAP) starts service in 2020. Planned output from Azerbaijan currently only fills half of the TANAP capacity, meaning there is room for plenty more gas, if BP can find it. From Turkey, Azeri gas will link up to the Trans-Adriatic Pipeline in Greece and connect into Turkey, potentially joined by other pipelines projects that are planned to link up with gas production in Israel. This alternate source of natural gas for Europe is crucial, particularly since political will to push through the Nordstream-2 pipeline connecting Russian gas to Germany is slackening. The demand is there and so is the infrastructure. And now BP will be spending the next two years trying to prove that the supply exists underneath Azerbaijan.

BP’s upcoming planned exploration in the Caspian:

  • Shafag-Asiman, late 2019, targeting natural gas
  • SWAP, 3 sites, late 2019/2020, targeting oil
  • ‘Onshore gas project’, end 2019, targeting natural gas’
  • Block D230, 2019 (seismic assessment)/2020 (drilling), targeting oil
  • Shah Deniz ‘further assessment’, 2020, targeting natural gas
January, 22 2019
RAPID Rises

When it was first announced in 2012, there was scepticism about whether or not Petronas’ RAPID refinery in Johor was destined for reality or cancellation. It came at a time when the refining industry saw multiple ambitious, sometimes unpractical, projects announced. At that point, Petronas – though one of the most respected state oil firms – was still seen as more of an upstream player internationally. Its downstream forays were largely confined to its home base Malaysia and specialty chemicals, as well as a surprising venture into South African through Engen. Its refineries, too, were relatively small. So the announcement that Petronas was planning essentially, its own Jamnagar, promoted some pessimism. Could it succeed?

It has. The RAPID refinery – part of a larger plan to turn the Pengerang district in southern Johor into an oil refining and storage hub capitalising on linkages with Singapore – received its first cargo of crude oil for testing in September 2018. Mechanical completion was achieved on November 29 and all critical units have begun commissioning ahead of the expected firing up of RAPID’s 300 kb/d CDU later this month. A second cargo of 2 million barrels of Saudi crude arrived at RAPID last week. It seems like it’s all systems go for RAPID. But it wasn’t always so clear cut. Financing difficulties – and the 2015 crude oil price crash – put the US$27 billion project on shaky ground for a while, and it was only when Saudi Aramco swooped in to purchase a US$7 billion stake in the project that it started coalescing. Petronas had been courting Aramco since the start of the project, mainly as a crude provider, but having the Saudi giant on board was the final step towards FID. It guaranteed a stable supply of crude for Petronas; and for Aramco, RAPID gave it a foothold in a major global refining hub area as part of its strategy to expand downstream.

But RAPID will be entering into a market quite different than when it was first announced. In 2012, demand for fuel products was concentrated on light distillates; in 2019, that focus has changed. Impending new International Maritime Organisation (IMO) regulations are requiring shippers to switch from burning cheap (and dirty) fuel oil to using cleaner middle distillate gasoils. This plays well into complex refineries like RAPID, specialising in cracking heavy and medium Arabian crude into valuable products. But the issue is that Asia and the rest of the world is currently swamped with gasoline. A whole host of new Asian refineries – the latest being the 200 kb/d Nghi Son in Vietnam – have contributed to growing volumes of gasoline with no home in Asia. Gasoline refining margins in Singapore have taken a hit, falling into negative territory for the first time in seven years. Adding RAPID to the equation places more pressure on gasoline margins, even though margins for middle distillates are still very healthy. And with three other large Asian refinery projects scheduled to come online in 2019 – one in Brunei and two in China – that glut will only grow.

The safety valve for RAPID (and indeed the other refineries due this year) is that they have been planned with deep petrochemicals integration, using naphtha produced from the refinery portion. RAPID itself is planned to have capacity of 3 million tpa of ethylene, propylene and other olefins – still a lucrative market that justifies the mega-investment. But it will be at least two years before RAPID’s petrochemicals portion will be ready to start up, and when it does, it’ll face the same set of challenging circumstances as refineries like Hengli’s 400 kb/d Dalian Changxing plant also bring online their petchem operations. But that is a problem for the future and for now, RAPID is first out of the gate into reality. It won’t be entering in a bonanza fuels market as predicted in 2012, but there is still space in the market for RAPID – and a few other like in – at least for now.

 

RAPID Refinery Factsheet:

  • Ownership: Petronas (50%), Saudi Aramco (50%)
  • Capacity: 300 kb/d CDU/3 mtpa olefins plant
  • Other facilities: 1.22 Gigawatt congeneration plant, 3.5 mtpa regasification terminal
  • Expected commissioning: March 2019
January, 21 2019
Forecasting Bangladesh Tyre Market | Zulker Naeen

Tyre market in Bangladesh is forecasted to grow at over 9% until 2020 on the back of growth in automobile sales, advancements in public infrastructure, and development-seeking government policies.

The government has emphasized on the road infrastructure of the country, which has been instrumental in driving vehicle sales in the country.

The tyre market reached Tk 4,750 crore last year, up from about Tk 4,000 crore in 2017, according to market insiders.

The commercial vehicle tyre segment dominates this industry with around 80% of the market share. At least 1.5 lakh pieces of tyres in the segment were sold in 2018.

In the commercial vehicle tyre segment, the MRF's market share is 30%. Apollo controls 5% of the segment, Birla 10%, CEAT 3%, and Hankook 1%. The rest 51% is controlled by non-branded Chinese tyres.

However, Bangladesh mostly lacks in tyre manufacturing setups, which leads to tyre imports from other countries as the only feasible option to meet the demand. The company largely imports tyre from China, India, Indonesia, Thailand and Japan.

Automobile and tyre sales in Bangladesh are expected to grow with the rising in purchasing power of people as well as growing investments and joint ventures of foreign market players. The country might become the exporting destination for global tyre manufacturers.

Several global tyre giants have also expressed interest in making significant investments by setting up their manufacturing units in the country.

This reflects an opportunity for local companies to set up an indigenous manufacturing base in Bangladesh and also enables foreign players to set up their localized production facilities to capture a significant market.

It can be said that, the rise in automobile sales, improvement in public infrastructure, and growth in purchasing power to drive the tyre market over the next five years.

January, 18 2019