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Last Updated: July 14, 2017
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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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September, 16 2021
The New Wave of Renewable Fuels

In 2021, the makeup of renewables has also changed drastically. Technologies such as solar and wind are no longer novel, as is the idea of blending vegetable oils into road fuels or switching to electric-based vehicles. Such ideas are now entrenched and are not considered enough to shift the world into a carbon neutral future. The new wave of renewables focus on converting by-products from other carbon-intensive industries into usable fuels. Research into such technologies has been pioneered in universities and start-ups over the past two decades, but the impetus of global climate goals is now seeing an incredible amount of money being poured into them as oil & gas giants seek to rebalance their portfolios away from pure hydrocarbons with a goal of balancing their total carbon emissions in aggregate to zero.

Traditionally, the European players have led this drive. Which is unsurprising, since the EU has been the most driven in this acceleration. But even the US giants are following suit. In the past year, Chevron has poured an incredible amount of cash and effort in pioneering renewables. Its motives might be less than altruistic, shareholders across America have been particularly vocal about driving this transformation but the net results will be positive for all.

Chevron’s recent efforts have focused on biomethane, through a partnership with global waste solutions company Brightmark. The joint venture Brightmark RNG Holdings operations focused on convert cow manure to renewable natural gas, which are then converted into fuel for long-haul trucks, the very kind that criss-cross the vast highways of the US delivering goods from coast to coast. Launched in October 2020, the joint venture was extended and expanded in August, now encompassing 38 biomethane plants in seven US states, with first production set to begin later in 2021. The targeting of livestock waste is particularly crucial: methane emissions from farms is the second-largest contributor to climate change emissions globally. The technology to capture methane from manure (as well as landfills and other waste sites) has existed for years, but has only recently been commercialised to convert methane emissions from decomposition to useful products.

This is an arena that another supermajor – BP – has also made a recent significant investment in. BP signed a 15-year agreement with CleanBay Renewables to purchase the latter’s renewable natural gas (RNG) to be mixed and sold into select US state markets. Beginning with California, which has one of the strictest fuel standards in the US and provides incentives under the Low Carbon Fuel Standard to reduce carbon intensity – CleanBay’s RNG is derived not from cows, but from poultry. Chicken manure, feathers and bedding are all converted into RNG using anaerobic digesters, providing a carbon intensity that is said to be 95% less than the lifecycle greenhouse gas emissions of pure fossil fuels and non-conversion of poultry waste matter. BP also has an agreement with Gevo Inc in Iowa to purchase RNG produced from cow manure, also for sale in California.

But road fuels aren’t the only avenue for large-scale embracing of renewables. It could take to the air, literally. After all, the global commercial airline fleet currently stands at over 25,000 aircraft and is expected to grow to over 35,000 by 2030. All those planes will burn a lot of fuel. With the airline industry embracing the idea of AAF (or Alternative Aviation Fuels), developments into renewable jet fuels have been striking, from traditional bio-sources such as palm or soybean oil to advanced organic matter conversion from agricultural waste and manure. Chevron, again, has signed a landmark deal to advance the commercialisation. Together with Delta Airlines and Google, Chevron will be producing a batch of sustainable aviation fuel at its El Segundo refinery in California. Delta will then use the fuel, with Google providing a cloud-based framework to analyse the data. That data will then allow for a transparent analysis into carbon emissions from the use of sustainable aviation fuel, as benchmark for others to follow. The analysis should be able to confirm whether or not the International Air Transport Association (IATA)’s estimates that renewable jet fuel can reduce lifecycle carbon intensity by up to 80%. And to strengthen the measure, Delta has pledged to replace 10% of its jet fuel with sustainable aviation fuel by 2030.

In a parallel, but no less pioneering lane, France’s TotalEnergies has announced that it is developing a 100% renewable fuel for use in motorsports, using bioethanol sourced from residues produced by the French wine industry (among others) at its Feyzin refinery in Lyon. This, it believes, will reduce the racing sports’ carbon emissions by an immediate 65%. The fuel, named Excellium Racing 100, is set to debut at the next season of the FIA World Endurance Championship, which includes the iconic 24 Hours of Le Mans 2022 race.

But Chevron isn’t done yet. It is also falling back on the long-standing use of vegetable oils blended into US transport fuels by signing a wide-ranging agreement with commodity giant Bunge. Called a ‘farmer-to-fuelling station’ solution, Bunge’s soybean processing facilities in Louisiana and Illinois will be the source of meal and oil that will be converted by Chevron into diesel and jet fuel. With an investment of US$600 million, Chevron will assist Bunge in doubling the combined capacity of both plants by 2024, in line with anticipated increases in the US biofuels blending mandates.

Even ExxonMobil, one of the most reticent of the supermajors to embrace renewables wholesale, is getting in on the action. Its Imperial Oil subsidiary in Canada has announced plans to commercialise renewable diesel at a new facility near Edmonton using plant-based feedstock and hydrogen. The venture does only target the Canadian market – where political will to drive renewable adoption is far higher than in the US – but similar moves have already been adopted by other refiners for the US market, including major investments by Phillips 66 and Valero.

Ultimately, these recent moves are driven out of necessity. This is the way the industry is moving and anyone stubborn enough to ignore it will be left behind. Combined with other major investments driven by European supermajors over the past five years, this wider and wider adoption of renewable can only be better for the planet and, eventually, individual bottom lines. The renewables ball is rolling fast and is only gaining momentum.

End of Article

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Market Outlook:

  • Crude price trading range: Brent – US$71-73/b, WTI – US$68-70/b
  • Global crude benchmarks have stayed steady, even as OPEC+ sticks to its plans to ease supply quotas against the uncertainty of rising Covid-19 cases worldwide
  • However, the success of vaccination drives has kindled hope that the effect of lockdowns – if any – will be mild, with pockets of demand resurgence in Europe; in China, where there has been a zero-tolerance drive to stamp out Covid outbreaks, fuel consumption is strengthening again, possibly tightening fuel balances in Q4
  • Meanwhile, much of the US Gulf of Mexico crude production remains hampered by the effects of Hurricane Ida, providing a counter-balance on the supply side

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