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Last week in the world oil:

Prices

  • Lingering concerns over the wealth of supply coming out of America, as well as recovering Libya and Nigeria, have kept crude oil prices on a weaker note. While pessimism is not yet at levels seen three weeks ago, crude prices remain in the mid-US$40/b levels – high enough to encourage US drilling, and low enough to send jitters among producers.

Upstream & Midstream

  • Petrobras and Chevron are both attempting to sell off their 70% and 30% stakes in the Maromba field in the Campos basin, as the shallow water heavy oil site proves to be unattractive to develop in the current climate.
  • Italy’s Eni has struck oil in the PL532 Licence, southwest of the Johan Castberg field in Norway’s Barents Sea. Preliminary estimates indicate that the discovery holds on 100-180 million barrels of oil, of which 25-50 million barrels are recoverable. While minor in size, it is an indication that increased drilling activity in the area is beginning to pay off.
  • Total announced a delay to the start of production at its Martin Linge field in the North Sea due to an accident in the shipyard building the rig platform in South Korea. The new start date is now in 1H2019. Total (51%), Petoro (30%) and Statoil (19%) are the stakeholders in the field.
  • As expected, the mild dip the week before gave way to a jump in drilling activity, as seven new oil and five gas rigs started up, bringing the total active number to 952. And, predictably, causing crude oil prices to slump.

Natural Gas and LNG

  • Freeport LNG has submitted a formal application with the US Federal Energy Regulator Commission to build a fourth liquefaction train at its Texas facility. If approved – and this is likely – the new train will add some 5.1 mtpa of capacity to the site, expected to enter service in 2022.
  • BP will be exiting Block 24 in Angola’s Kwanza basin, relinquishing its 50% stake where the Katambi-1 wildcat discovery was made to Sonangol and taking a US$750 million write-off in the process. Non-associated gas is of little value to upstream players in Angola as it is owned by the state.
  • Statoil will be pushing ahead with the development of the Snefrid Nord gas discovery near the Aasta Hansteen field in the country’s Norwegian Sea. Recoverable reserves of some five bcm of natural gas will be tied back to facilities in Aasta Hansteen, producing some 4 mcm/d of gas.
  • Central Europe seems to remain in two minds on relying on Russian gas. Just as Hungary signed a deal with Gazprom to link to the Turkish Stream pipeline by end-2019, Poland is looking West towards the US for Gulf Coast LNG to feed its growing gas requirements. Bulgaria and Serbia already have agreements to tap into Gazprom’s Turkish Stream pipeline system – after the South Stream project was cancelled in 2014 over Russia’s involvement in the Ukrainian conflict – while international connectors through Romania and Croatia are also being planned.

Corporate

  • Baker Hughes and GE Oil & Gas have completed their merger, creating BHGE, touted as the industry’s ‘first and only fullstream player’, covering all areas of the energy business from upstream, midstream and downstream. It trades under the name Baker Hughes, a GE company.

Last week in Asian oil

Downstream

  • Total and Iran have inked a preliminary US$2 billion deal to build three petrochemical plants, as Iran moves to realise its downstream ambitions. Total - which has extensive presence in Iran, most recently in South Pars Phase 11 – aims to build 2.2 million tons of petrochemical and polymer capacity with Iran’s National Petrochemical Company.
  • While Saudi Arabia’s promises to participate in Indonesia’s ambitious refining expansions may have proved hollow in the past, it’s latest commitment to assist Pertamina in upgraded the Cilacap refinery has weight, in light of the company’s move to establish key downstream sites across major Asian markets ahead of its IPO. The US$5 billion upgrade is aimed to expanding Cilacap’s capcity from 348 kb/d to 400 kb/d, while also expanding its secondary units to produce more transport fuels.

Natural Gas & LNG

  • Japan’s Fair Trade Commission has made a landmark ruling. All new contracts for LNG imports signed by Japanese buyers can no longer have restrictions on the resale of cargoes going forward, a decision that was pushed for by all Japanese LNG importers to allow them freedom to redirect suppliers and establish a trading network. For existing contracts that have not expired, the FTC directed buyers to communicate with major sellers – Qatar and Malaysia in this case – to review the ‘competition-restraining business practices’. This would be important in putting Japan’s existing LNG suppliers on equal footing with the new LNG volumes coming from North America, which deliver clause-less cargoes.
  • Remaining defiant in the face of sustained diplomatic pressure from Saudi Arabia, the UAE and its allies, Qatar has announced that it plans to boost natural gas production at its giant North Field by 20%. This raise was already in the cards, after a self-imposed moratorium was lifted in April, but has taken new significance as the tiny Gulf state finds itself isolated geographically and diplomatically. If the crisis drags on, then the 30% boost in LNG production capacity will go a long way to ensure sufficiency.
  • Gazprom’s Power of Siberia natural gas pipeline will start service in December 2019, moving the valuable fuel to China as the race to supply the fastest-growing natural gas consumer in the world heats up.

Corporate

  • Weak demand has lead Malaysia’s Lotte Chemical Titan Holding to cut the size of its IPO from the original range of RM7.60-8 to a lower range of RM6.40-8 per share, raising worries about the health of the country’s markets on a weak currency and government corruption scandals. Despite this, the IPO has been the largest since 2012, when plantations group Felda Global Ventures listed.
  • In an attempt to dilute the power held of its founding family, Japanese refiner Idemitsu Kosan plans to issue new shares to raise US$1.2 billion. The family has already announced it will file a court injunction to block the share issue, hoping to preserve a powerful stake that allowed the family to prevent Idemitsu’s merger with Showa Shell Sekiyu last year.

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Your Weekly Update: 15 -19 April 2019

Market Watch

Headline crude prices for the week beginning 15 April 2019 – Brent: US$71/b; WTI: US$63/b

  • Crude oil futures could be on the verge of snapping its longest weekly rally since 2016, as the market continues to balance managed crude supply from the OPEC+ nations with accelerating American output
  • Analysts are predicting that things could be coming to a head, which might see OPEC+ abandon its plans to stabilise supply and prices for an intense battle for market share with American shale producers instead
  • This seems to be echoed by comments from Saudi Arabia, hinting at a U-turn in OPEC+’s dedication to extending the current supply quota agreement
  • Russian Premier Vladimir Putin also chimed in, saying that he was ‘keeping his options open’ on the cuts and that he does not support an ‘uncontrollable’ increase in oil prices
  • Ongoing concerns in Libya, Venezuela and Iran are giving other OPEC nations some room to breathe in their supply deal, with the organisation reporting that its output plunged in March to 758,000 b/d below the expected Q2 average
  • After Japan reported it would hold back on resuming Iranian crude imports, India is now doing the same until clarification of American waivers on the sanctions is received
  • The International Energy Agency reports that it sees global oil markets tightening, warning that this could lower actual demand and forecasts
  • After a large 19 rig gain last week, the US reversed gear to lose 3 rigs, adding two oil sites while dropping five gas rigs, bringing the total active count to 1022
  • Rumbles of a shale slowdown in the US could keep crude prices on a gentle upward curve, with Brent likely to trade at US$71-72/b and WTI and US$63-64/b


Headlines of the week

Upstream

  • Shell has sold its 22.45% non-operating interest in the US Gulf of Mexico Caeser-Tonga asset to the Delek Group for some US$965 million in cash
  • US President Donald Trump is aiming to limit state powers over cross-border pipeline to promote projects stalled by state regulators over permit and environmental concerns through the issuance of Executive Orders
  • CNOOC has signed a new PSC with Smart Oil Investment for the Bohai 09/17 block in the shallow-water Qikou area of the Bohai Bay Basin in China
  • Also in the Bohai Bay, CNOOC and ConocoPhillips are planning to double production from the Penglai 19-3 field over the next few years
  • Shell has partnered with Sinopec in a maiden exploration of China’s shale oil potential, targeting the Dongying trough in Shengli in eastern China
  • Shell has also announced an ambitious drilling programme in Brazil, targeting the Argonauta pre-salt areas in the Santos Basin
  • Petrobras and the Brazilian government have settled a deepwater contract dispute for US$9.06 billion, paving the way for Petrobras and its partners to begin development of the crude deposits under the 2010 Transfer of Rights

Midstream & Downstream

  • Continuing on its diversification strategy, Saudi Aramco is now looking to double its global refining network to some 10 mmb/d by 2030 as a means of locking in buyers for its crude amidst intense competition, which would see Aramco to continue investing in key global refining centres
  • Shell is aiming to complete the overhaul of its RCCU at the 218 kb/d Norco refinery in Louisiana by May, ahead the US summer driving gasoline demand
  • Sinopec reports that its Jinling refinery in Jiangsu has sold its first 4,200-ton cargo of low-sulfur marine fuel ahdad of the new IMO standards kicking in
  • Saudi Aramco has signed an agreement with Poland’s PKN Orlen to trade Arabian-grade crude to the refiner in exchanges for high-sulfur fuel oil

Natural Gas/LNG

  • Total has been awarded an exploration licence for Block 12 in Oman, with the onshore 10,000 sq.km asset near the gas-rich Greater Barik area that is expected to hold ‘significant prospective gas resources’
  • Saudi Aramco is planning to move into LNG for first time ever, offering to supply Pakistan with cargos on a spot or short-term basis, even though it does not produce LNG and has only just begun developing an LNG trading desk
  • First feed gas has begun to flow at Sempra Energy’s Cameron LNG Train 1 in Louisiana, the final commissioning phase for the project
  • Keppel Gas in Singapore has imported its first 160,000 cbm cargo of US LNG under the country’s Spot Import Policy, its first from outside Southeast Asia and the first trickle in an exported flood of American LNG into the region

Corporate

  • Saudi Aramco has issued its first global bond, raising US$100 billion from the sale, above and beyond the initial expectations of US$10-15 billion
  • Abu Dhabi’s Mubadala Investment Company has sold a ‘significant minority interest’ of 30-40% in Spanish energy firm Cepsa to investment group The Carlyle Group, but will retain majority shareholder
  • Canadian player Africa Oil has acquired 18.8% of fellow Canadian upstream firm Eco (Atlantic) Oil and Gas, but stressed that the acquisition was for investment purposes with no intention of exercising control
April, 23 2019
In 2018, the United States consumed more energy than ever before

U.S. total energy consumption

Source: U.S. Energy Information Administration, Monthly Energy Review

Primary energy consumption in the United States reached a record high of 101.3 quadrillion British thermal units (Btu) in 2018, up 4% from 2017 and 0.3% above the previous record set in 2007. The increase in 2018 was the largest increase in energy consumption, in both absolute and percentage terms, since 2010.

Consumption of fossil fuels—petroleum, natural gas, and coal—grew by 4% in 2018 and accounted for 80% of U.S. total energy consumption. Natural gas consumption reached a record high, rising by 10% from 2017. This increase in natural gas, along with relatively smaller increases in the consumption of petroleum fuels, renewable energy, and nuclear electric power, more than offset a 4% decline in coal consumption.

U.S. total energy consumption

Source: U.S. Energy Information Administration, Monthly Energy Review

Petroleum consumption in the United States increased to 20.5 million barrels per day (b/d), or 37 quadrillion Btu in 2018, up nearly 500,000 b/d from 2017 and the highest level since 2007. Growth was driven primarily by increased use in the industrial sector, which grew by about 200,000 b/d in 2018. The transportation sector grew by about 140,000 b/d in 2018 as a result of increased demand for fuels such as petroleum diesel and jet fuel.

Natural gas consumption in the United States reached a record high 83.1 billion cubic feet/day (Bcf/d), the equivalent of 31 quadrillion Btu, in 2018. Natural gas use rose across all sectors in 2018, primarily driven by weather-related factors that increased demand for space heating during the winter and for air conditioning during the summer. As more natural gas-fired power plants came online and existing natural gas-fired power plants were used more often, natural gas consumption in the electric power sector increased 15% from 2017 levels to 29.1 Bcf/d. Natural gas consumption also grew in the residential, commercial, and industrial sectors in 2018, increasing 13%, 10%, and 4% compared with 2017 levels, respectively.

Coal consumption in the United States fell to 688 million short tons (13 quadrillion Btu) in 2018, the fifth consecutive year of decline. Almost all of the reduction came from the electric power sector, which fell 4% from 2017 levels. Coal-fired power plants continued to be displaced by newer, more efficient natural gas and renewable power generation sources. In 2018, 12.9 gigawatts (GW) of coal-fired capacity were retired, while 14.6 GW of net natural gas-fired capacity were added.

U.S. fossil fuel energy consumption by sector

Source: U.S. Energy Information Administration, Monthly Energy Review

Renewable energy consumption in the United States reached a record high 11.5 quadrillion Btu in 2018, rising 3% from 2017, largely driven by the addition of new wind and solar power plants. Wind electricity consumption increased by 8% while solar consumption rose 22%. Biomass consumption, primarily in the form of transportation fuels such as fuel ethanol and biodiesel, accounted for 45% of all renewable consumption in 2018, up 1% from 2017 levels. Increases in wind, solar, and biomass consumption were partially offset by a 3% decrease in hydroelectricity consumption.

U.S. energy consumption of selected fuels

Source: U.S. Energy Information Administration, Monthly Energy Review

Nuclear consumption in the United States increased less than 1% compared with 2017 levels but still set a record for electricity generation in 2018. The number of total operable nuclear generating units decreased to 98 in September 2018 when the Oyster Creek Nuclear Generating Station in New Jersey was retired. Annual average nuclear capacity factors, which reflect the use of power plants, were slightly higher at 92.6% in 2018 compared with 92.2% in 2017.

More information about total energy consumption, production, trade, and emissions is available in EIA’s Monthly Energy Review.

April, 17 2019
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April, 17 2019