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Last Updated: June 28, 2017
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Last week in the world oil:

Prices

  • Crude prices have settled to a new level at the mid-US$40/s, as stubborn growth in US supplies continue to offset OPEC efforts to trim back supply. With production in Libya and Nigeria recovering as well, Brent and WTI crude started the week in the US$45/b and US$43/b range respectively.

Upstream & Midstream

  • While the US untangles its approach to Arctic drilling, Russia’s Rosneft announced the discovery of hydrocarbon deposits in the Eastern Arctic shelf. Drilling at the Tsentraino-Olginskaya-1 well indicated presence of oil offshore the Khara-Tumus Peninsula, on the Khatanga Bay shelf of the Laptev Sea. While Rosneft continues to evaluate this new find, Norway is offering 102 exploration blocks in its portion of the Arctic. Of the blocks, 93 are in the Barents and 9 in the Norwegian Sea, with the deadlines for application for this 24th Arctic licensing round being November 30.
  • Eleven new oil rigs entered service in the US last week, the 23rd rise in a row, as producers continue to boost spending, betting that crude prices will rise again and thereby undercutting global efforts to support prices. The total count of oil rigs stand at 758, the highest level since April 2015, and more than double the 330 active rigs exactly a year ago.

Downstream

  • Flooding and fire after Tropical Storm Calvin hit Pemex’s 330 kb/d Salina Cruz refinery in Mexico have delayed restart operations, with the Mexican state oil firm now expecting to restore production by July 30. Maintenance that was originally scheduled for April 2018 has been brought forward, but the outage of the country’s largest refinery for over a month has meant that Mexico has had to import more fuel.
  • Shrugging off its involvement in the Odebrecht graft scandal, Braskem will be building a sixth US-based polypropylene production plant. The US$675 million site in La Porte, Texas will enter service in early 2020, adding 450,000 tons of capacity to Latin America’s largest petrochemical firm. The aim is to take continued advantage of the cheap shale oil and gas, converting it into cheaper petrochemicals to sell in South America.
  • Indonesia’s PT Intim Perkasa announced plans to build a new refinery in Nigeria, a crude exporter that imports fuel to due its crumbling, aging refineries. The plan is to build a small, modular 10 kb/d refinery in the southern Niger Delta state of Akwa Ibom, in line with the government’s aim of converting the area’s illegal refineries into proper facilities.

Natural Gas and LNG

  • Falling demand for gas storage will see the UK lose its largest natural gas storage site, removing 70% of Britain’s natural gas storage capacity. After 30 years in service, Centrica – which owns British Gas – confirmed that it would be shuttering the aging Rough facility. This will leave the UK all the more reliant on natural gas piped from Norway and Europe, as well as from Qatar in LNG. It was also leave the market dangerously exposed to snap weather changes, particularly cold snaps in winter that would result in more volatile price spikes. Storage tanks at Rough were filled in the summer, when demand and prices are low, in preparation for winter, when demand and prices rise. And now, that security is gone.

Last week in Asian oil

Upstream

  • Eni and the National Iranian Oil Company (NIOC) has signed a memorandum of understanding that will see the two companies join forces on a feasibility study to develop two hydrocarbon fields. The sites in question are the third phase of the Darkhovin oil field and the offshore Kish gas field. It is part of a new European phase of investment into Iran after sanctions were lifted, with Eni already indicating interest in another Iranian project – the development of the Azadegan oil field.

Downstream

  • Originally dismissed as unfeasible, the US$3.4 billion refinery project by China’s private Hengyi Group in Brunei appears to actually be taking off. Building work has begun, with a projected completion date of 2019, with the 160 kb/d site at Pulau Muara Besar aimed at producing petrochemical feedstock for Hengyi’s plastics and polyester manufacturing operations. However, fuel will also be a substantial portion of the refinery’s output, adding to the glut of refined products in the region.

Natural Gas & LNG

  • The 20 year supply agreement between South Korea’s Kogas and American gas producer Cheniere has officially kicked off, with the first cargo under the contract setting off from the Sabine Pass liquefaction plant on June 2. The agreement was originally signed in 2012, before Sabine Pass was even operational, and will deliver 3.5 mtpa of LNG to Kogas, as South Korea seeks to diversify its natural gas sources. Cheniere gas from the US Gulf is also set to be delivered to Lithuania, adding to the firm’s growing list of European buyers seeking to wean themselves off the geographically easy but politically dangerous Russian gas.
  • After production began in mid-May, the first LNG cargo from the deepwater Jangkrik gas field in East Kalimantan, Indonesia, has been delivered. Heading to Bali under the country’s DMO (Domestic Market Obligation) system, the Jangrik gas was delivered to the Bontang LNG plant for processing.

Corporate

  • Rosneft is one step closer to completing its purchase of Essar Oil, the second largest private oil company in India. Essar’s creditors approved the proposed US$12.9 billion acquisition, which will see Russia acquire a foothold in Asia’s fastest growing fuel market, in an attempt to match Saudi Aramco’s investment strategy across Asia. The deal will give Rosneft a 49% stake in Essar, with another 49% split between trader Trafigura and Russian fund United Capital Partners, while Essar’s founders, the Ruia brothers, will retain 2%.
  • The Malaysian state of Sarawak, home to many of the country’s latest and largest deepwater oil, gas and LNG projects, has announced plans to establish its own state oil and gas firm. Aimed at ensuring that the state receives is proper share of oil wealth – a bone of contention, since petroleum revenues are parked under Malaysia’s federal government, not individual states – the new firm will work together with Petronas in PSCs, which has indicated agreement to the proposal.

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June, 24 2022
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.

- The equipment shell includes reinforced ribs and increased casting thickness, which significantly enhances the overall strength of those mills, preventing the breakage in the shell.

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- These mills adopt an appropriate wood-processing die-hole structure and die-hole compression ratio.

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How To Maintain A Wood Pellet Mill

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- The machine should take a seat on an excellent foundation. Regular maintenance of your machine will prolong the complete lifespan of the machinery.

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