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Last Updated: July 5, 2017
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Last week in the world oil:

Prices

  • After a week of gains, crude oil started the week on a weaker note ahead of America’s Independence Day. Crude prices have been gaining recently as signs that the relentless rise in US production might be slowing down, with Brent is trading at nearly US$50/b and WTI at the US$47/b level.

Upstream & Midstream

  • Investment in the North Sea appears to be paying off. First oil from EnQuest’s Kraken development has begun to flow, the first in a phased schedule that will bring together 13 wells comprising seven producers and six injectors. Under budget and on schedule, the achievement comes as EnQuest director Dr Philip Nolan stepped down to assume his new role as Chairman of Associated British Ports. Else in the North Sea, Repsol announced that first gas has been delivered from its Cayley field in the major Montrose Area redevelopment project. With an expected peak of 40,000 boe/d, this is the sixth major North Sea development to deliver first production in 2017, extending the life of the field to beyond 2030.
  • Nigeria’s state oil company NNPC has signed a tripartite deal with domestic firm First Exploration and Petroleum Development Company and US oil service firm Schlumberger to develop new oil fields in the southern Niger Delta. The deal targets the Anyala and Madu fields, falling under the Oil Mining Licence 83 and 85, with Schlumberger providing the financial investment necessary to begin work.
  • After 23 consecutive weeks of additions, the US oil rig complex finally snapped gains, cutting two rigs from service to bring the total American active oil rig count to 756. A single gas rig entered service, leaving the net loss in total rig count to one, down to 941. Don’t expect this trend to continue, but the pace of additions should slow down.

Natural Gas and LNG

  • ConocoPhillips is selling its assets in the Texan Barnett shale field to Miller Thomson & Partners for US$305 million, another in a series of natural gas-heavy assets to be sold by the US major. After selling assets in the San Juan basin to Hilcorp for US$3 billion and its Canadian natural gas assets to Cenovus for US$17.7 billion (along with oil sands acreage), ConocoPhillips is attempting to reduce its exposure to this sector of the business. This comes as BHP Billiton admitted that its US$20 billion investment during the height of the US fracking boom was ‘a mistake.’
  • As the European Commission attempts to deal directly with Russia over the Nord Stream 2 gas pipeline project, six European gas transmission operators have sounded alarm. Austria’s Gas Connect, Czech Republic NET4Gas and Germany’s Fluxys, ONTRAS, GAscade and Gasunie – representing the major demand centres– are alarmed by the move, aimed at representing the geopolitical concerns of the countries the pipeline flows through, arguing that it creates legal uncertainty for future projects.
  • While Rosneft and ExxonMobil’s LNG project in Sakhalin-1 LNG project continues, the Russian giant is also considering building its own LNG plant, independent of other partners involved in the vast Sakhalin development. Closer in proximity to the main LNG markets of East Asia, Sakhalin gas will be joining a hugely competitive Pacific rim LNG race.

Last week in Asian oil

Downstream

  • Abu Dhabi’s plans to restart its gasoline-focused RFCC unit at its Ruwais refinery has been delayed a year. Now expected only in early 2019, South Korea’s GS Engineering and Construction has been appointed to work on the secondary unit, which was hit by fire earlier this year. Repairs at the 800 kb/d Ruwais site were planned to be completed by 1Q2018, but the delay means that Abu Dhabi will remain short of gasoline and dependent on imports of the fuel, while producing excess amounts of fuel oil.
  • Construction of a crude pipeline in China’s eastern Shandong province has been completed, providing a boost to the country’s independent teapot refineries. Linking crude facilities operated by Mercuria in Qingdao port to the city of Weifang, where several teapots are located, the 608 kb/d pipeline will ease crude distribution bottlenecks for the increasingly important network of refiners. The pipeline will also be expanded into several other branches connecting the central and southern parts of the province, eventually increasing capacity to 1.2 mmb/d.

Natural Gas & LNG

  • South Korea’s Kogas has inked three separate agreements in participate in LNG projects across three states in the USA. In Alaska, Kogas will cooperate on the development of Alaska Gasline’s Alaska LNG project aimed at moving North Slope gas to LNG-hungry markets in Asia. In Port Arthur, Texas, Kogas is teaming up with Sempra LNG and Australia’s Woodside Energy on a new LNG terminal on the Houston Ship Channel, which is planned to house two LNG trains. In Lousiana, after receiving its first LNG cargo from Cheniere’s Sabine Pass, Kogas will be conducting feasibility studies at Energy Transfer’s Lake Charles LNG project. It marks the growing participation of Asian LNG buyers in American LNG projects.
  • As China’s appetite for LNG grows – Chinese demand could triple by 2030 – China is pouring resources into securing future supply. While supply from US, Canada, Australia and Qatar will remain plentiful, China is aiming to lock in its own captive supply by planning to invest almost US$7 billion into FLNG projects in Africa. There are several reasons for this – investment and exploration has unlocked great volumes of natural gas off both coasts of Africa; with little domestic demand, much of this will have to be exported – and by investing money, China secures supplies. FLNG is a nascent technology as well, and by investing en masse, it hopes it lower the cost of the complex floating plants in time for the energy markets to recover when the FLNGs enter production in the early 2020s.
  • Speaking of FLNG, the world’s first FLNG facility– Shell’s Prelude – has set sail from its shipyard in South Korea, heading on a month-long journey to the Browse basin in northwest Australia, where it will pioneer a new, more versatile future for LNG production. Roughly twice the size of the largest aircraft carrier, Prelude is a joint venture between Shell, Overseas Private Investment Corporation, Kogas and Taiwan’s CPC. Capable of producing, liquefying, storing and transferring LNG at sea, Prelude is versatile enough to travel around, with capacity for 5.3 mtpa of liquids and 3.6 mtpa of LNG. Production is expected to begin in early 2018.

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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