Last week in the world oil:
- As confidence grows that the world’s top oil exporters will agree to extend the OPEC supply cuts, crude oil prices have hit their highest point in a month. Brent started the week at nearly US$54/b, while WTI managed to break past the US$50/b level to settled at almost US$51/b.
Upstream & Midstream
- First oil has begun to flow at Quad 204’s, BP’s new upstream project in the west of Shetland region in the UK. The Schiehallion and Loyal fields in the area were originally developed in the mid-1990s and are now part of the Quad 204 redevelopment project led by BP with co-venturers Shell and Siccar Point Energy. Some additional 450 million barrels of resources are expected to be unlocked, with production lasting to 2035, and highlights the potential of the UK to develop its Atlantic energy resources.
- Even as crude prices see-saw, US oil production as proxied by rig activity shows no sign of stopping. Sixteen new oil and gas rigs started up last week – 8 apiece – including 2 offshore rigs to bring the US active rig count above 900 for the first time in almost two years.
- In the footsteps of BP and Glencore, ExxonMobil is now the latest firm to target Mexico’s downstream market. The US supermajor announced that it would be investing US$300 million to established a network of Mobil fuel station in the recently opened Mexican sector. BP was the first to stake a claim in Mexico, and has reported that its plan to open some 1,500 service stations has been more promising than expected, leading to an increase in investment. Trader Glencore has established a deal with Mexico’s Corporacion G500 SAPI to establish some 1,400 G500 Network-branded sites, creating even more competition.
Natural Gas and LNG
- As upstream action in the eastern Mediterranean heats up, Greece is making another attempt to strike gas. With Israel’s Leviathan and Egypt’s Zohar giant gas discoveries establishing the Levant Basin as a natural gas powerhouse, Greece has invited ExxonMobil and Total to test for natural gas in areas south of Crete island and western Greece. Previous attempts to elicit interest in the blocks failed, but the recent gas discoveries have changed the upstream outlook for the area.
- South Africa will be looking to issue its first shale gas exploration licences this September, with Shell, Falcon Oil and Gas and Bundu Gas & Oil likely to receive permission to drill for shale in the onshore Karoo basin. South Africa has historically dependent on offshore production for its gas, but is now turning to onshore opportunities as production dwindles and the country attempts to wean itself off coal as a power plant fuel.
- Saudi Aramco will be setting up a petrochemicals subsidiary, putting it in direct competition with Saudi chemicals giant SABIC. The potential change comes as Saudi Aramco attempts to diversify and strengthen its downstream operations ahead of its planned IPO, to create more broad-based operations to be palatable to investors. Aramco has plans to triple its current chemicals production to 34 million tons by 2030.
Last week in Asian oil
- Fresh off its tie-ups in Malaysia and India, Saudi Aramco has announced another mega refining project, this time in China. The joint venture between Aramco and state-owned China North Industries Group (Norinco) will see the world’s largest crude seller and world’s largest crude importer build a 300 kb/d oil refinery with a 1 million ton/year ethylene cracker in Liaoning. The move will deepen the ties between the two nations, as Saudi Aramco looks to lock up long-term supply for its crude through strategic downstream investments. The project is unusual, as Norinco is primarily a defence manufacturer, and could be a signal that China is serious about opening up competition in its energy industry.
- To the surprise of no one, Vietnam’s second refinery has been delayed. The US$7.5 billion Nghi Son site has been delayed to 2018 from 3Q17, as the refinery faced some mechanical troubles in test runs. The delay means that Vietnam will remain heavily dependent on oil product imports, which Nghi Son was expected to ease.
- China’s section of the East Siberia Pacific Ocean (ESPO) pipeline will be completed by 2018. As China expands its crude import options, the pipeline connecting the city of Mohe at the Russian border to the city of Daqing will pump some 15 million tons/year of Russian crude to China.
Natural Gas & LNG
- Italy’s Eni has started gas production at Indonesia’s Jangkrik ahead of schedule. Ten offshore deepwater subsea wells have been connected to the new Jangkrik Floating Production Unit (FPU), with production expected to scale up to 450 million cubic feet per day. Processed gas will be delivered onshore via a 79km pipeline, connecting to the Kalimantan Transportation System to the Bontang LNG plant.
- Malaysia’s Petronas has signed a MoU with Gas4Sea to collaborate and promote LNG as a cleaner maritime fuel. The move is in line with Petronas’ aim of diversifying its LNG business, with the deal signed through its shipping affiliate MISC. Gas4Sea comprises French natural gas company Engie, and Japanese shippers Mitsubishi and Nippon Yusen Kabushiki Kaisha. Bunker fuels have traditionally been heavy fuel oil, but efforts to promote cleaner fuels have led the shipping industry to consider gasoil and LNG as alternate fuels.
- Another month and another shutdown at Chevron’s Gorgon LNG plant. The eighth outage since the project began in early 2016, Train 1 has been shut down for at least a month to replace to a faulty flow-measurement device. Outages have plagued the project but Gorgon is slowly finding its footing, starting up Train 3 in March 2017. Chevron will also be boosting capacity on Train 2 of its other Australian project, Wheatstone, as partner Woodside targets production growth of 15% per year through 2020.
- China has successfully extracted natural gas from methane hydrate deposits mined deepwater. Trapped in ice-like chunks, gas is extracted and processed in a floating platform unit platform in the Shenhu area of the South China Sea. The successful extraction paves the way for a new revolution in energy that would help boost Chinese domestic gas production over the long run. Commercial development of the resource is still far away, with 2030 named as a target date.
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