Nurliza Ibrahim

Marketing Specialist at NrgEdge
Last Updated: September 1, 2017
1 view
Business Trends
image

Last week in world oil:

Prices

  • Crude oil prices dipped – to US$46/b for WTI and US$51/b for Brent – as Hurricane Harvey reduced demand for crude by shutting down major refineries in Texas. At a premium of US$5/b, the Brent-WTI spread is the widest in two years, reflecting the impact of the hurricane. Gasoline prices jumped, as supplies are affected by Texan refinery and pipeline closures.

Upstream

  • France’s Total is now the largest upstream producer in the North Sea, overtaking Shell through its acquisition of Maersk Oil for US$7.45 billion. The sale came as part of Danish firm’s attempt to divest all its energy business to focus on its core business of shipping. Maersk Oil’s assets were confined to Norway and the UK North Sea, and it is now looking to sell off its drilling, tanker and supply service units separately. 
  • Petrobras expects oil production to begin at Brazil’s offshore Libra field in late September, delayed from July. Initial production will be 30,000 b/d, from an estimated recoverable volume of between 8 to 12 billion barrels. 
  • Despite recording healthy profits, BHP Billiton will be exiting the US shale oil and gas sector, which has been underperforming with shareholders calling for an exit. BHP Billiton bought into US shale in 2011 for US$20 billion during its ascendance, conceding now that they had paid too much and that it no longer fit ‘strategically’ to the company’s direction. 
  • Malaysia’s Petronas will be exiting the upstream business in Algeria, part of a portfolio rebalancing that has already seen it give up a pair of offshore blocks in Vietnam earlier this year. 
  • There was a net loss of six oil and gas rigs in the US last week, as the rebalancing of active drilling sites was exacerbated by the landing of Hurricane Harvey, which shut down onshore production activity.

Downstream & Midstream

  • PDVSA maintains that its lease to operate the Isla refinery in Curacao is still under negotiation, but has conceded that it is open to partnering with China’s Guangdong Zhenrong Energy to operate the complex. Curacao has signed an agreement with Zhenrong to operate the refinery, which requires substantial investment, with PDVSA’s lease ending in 2019.

Natural Gas and LNG

  • After scrapping its Canadian LNG terminal plans, Petronas is now reportedly mulling investing in a pipeline to monetise its Canadian assets. This would require in shift in focus from sending gas to Asia as LNG, to selling the gas by connecting to pipelines delivering gas to the US Gulf. 
  • As Equatorial Guinea prepares for the anticipated sanctioning of Fortuna floating LNG project off Bioko Island, the government has named Gunvor as preferred offtaker, in a deal covering 2.2 mtpa of LNG. Meanwhile, Ghana has signed an agreement to import LNG from Equatorial Guinea, as it struggles with adequate supplies for power production despite its own Jubilee oil-and-gas field being in production since 2010. 
  • Lithuania has received its first spot LNG cargo from Cheniere, joining a growing list of European nations embracing US LNG to reduce dependence on Russia piped natural gas. 


Last week in Asian oil

Upstream

  • Singapore’s KrisEnergy has inked an agreement to develop Cambodia’s first oil field. Oil was first discovered in Cambodia at Block A in 2004, but then-operator Chevron failed to reach a development agreement with the government. KrisEnergy bought over Chevron’s interest in 2014, and is aiming to produce oil from the Apsara field in 2019. The area is estimated to produce 30 million barrels over a nine-year period, and will be the culmination of a long, arduous and delayed process to produce Cambodia’s first oil. KrisEnergy owns a 95% stake in the Apsara field, with the remainder held by the Cambodian government.

Downstream & Midstream

  • Rosneft’s purchase of Indian refiner Essar Oil has been completed, giving the Russian major a foothold in Asia’s fastest-growing oil market after repeated attempts to invest in Asian downstream – notably in China and Indonesia – failed. The US$12.9 billion deal will see Rosneft and partners Trafigura and Russian fund UCP take a 98.26% stake in Essar Oil, with the remainder held by retail investors. Rosneft will now operate Essar’s 400 b/d refinery in Vadinar, as well as a port, a power plant and a network of 3,500 fuel stations. Rosneft expects to almost double the retail network size to some 6,000 sites, as well as significantly increase refining and petrochemical production capacity at Vadinar. 
  • The Saudi Aramco-PetroChina plan to see the Saudi Arabia state company invest in the latter’s 260 kb/d Anning refinery in Yunnan is expected to be completed by the end of 2017. This is part of a vanguard of Saudi Arabian investments in key downstream markets to ensure continued outlets for its crude, as well as diversify its business as it prepares for the world’s largest IPO. Aramco will be spending some US$1-1.5 billion on the refinery, which will also include access to PetroChina’s retail assets.

Natural Gas & LNG

  • South Korea’s S-Oil, the third largest Korean refinery, has signed a long-term LNG supply contract with Petronas. The 15-year contract will see Petronas deliver 700,000 tons of LNG from March 2018, with S-Oil electing to use the LNG as refinery fuel and petrochemical feedstock. This is part of a wider plan by S-Oil to upgrade the fuel oil that used to power its 669 kb/d refinery in Ulsan to more valuable middle distillates as the market for fuel oil shrinks, particularly in the bunker arena, along with an upgrade to increase polypropylene capacity by 405,000 tons. Long-term supply contracts like this are likely to be less common in the LNG arena as the rise of competition promotes shorter deals, meaning this is a decent coup by Petronas. 
  • PTT Global Chemical will be teaming up by Japan’s Sanyo Chemical Industries and Toyota Tshusho Corporation to build a US$900 million polyols facility. To be located in Thailand’s petrochemicals hub of Rayong, the plant will have an initial capacity of 130,000 tons of polyether polyols and 20,000 tons of polyurethane per year. Completion and operations are expected to begin in 2020. PTTGC will own 82.1% of the venture, with Sanyo Chemical and Toyota Tsusho holding 14.9% and 3%, respectively. 

3
6 1

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

The Cubs Phenom: A Look At Anthony Rizzo
A look at Anthony Rizzo

Anthony Rizzo Players Can't Sit On Bench  According to a report from the Chicago Sun-Times, the world-famous Anthony Rizzo Phrase "Zombie Rizzo" has been told to never be used again. Of course, this is not the first time that the Zombified Chicago Cubs' first baseman has made headlines this year. A year ago, "Rosebud" was the catchphrase that he coined for himself. Also, there is Anthony Rizzo Shirts that come in his name. Now that the Cubs are World Series Champions, Anthony Rizzo is on his way to superstardom. He is leading the World Series in several categories, including hits, runs, home runs, RBI's, OBP, and SLG. Also, he's on track for a staggering year in hits, RBI's, and total bases, all while being second in home runs.

 The Cubs Phenom

This season the Chicago Cubs are over 3.5 million in earnings from the local broadcasts alone. The Cubs could lose a good deal of local revenue if they fail to get back to the World Series.  But the local revenue is not the biggest factor in the Cub's success. A large part of their success comes from two of their most popular players, third baseman Kris Bryant and first baseman Anthony Rizzo.  These two players are now the favorites to win the MVP awards this year, especially if the Cubs are able to stay on top of the wild card standings.  A Look at Rizzo  Anthony Rizzo is often compared to his college teammate Andrew McCutchen. Both players have performed well at the plate.

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.

What Is A Wood Pellet Mill?

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.

The Benefits Of A Wood Pellet Mill

- 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.

- The rollers and die are made of premium-quality alloy steel with 55-60HRC hardness.

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

- The electric-control product is completely compliant with CE standard-os.

- The Emergency Stop button quickly shuts along the mill if you are up against an unexpected emergency.

How To Maintain A Wood Pellet Mill

- The belt tightness ought to be checked regularly. If it is now slack, it needs to be tightened immediately.

- The equipment should be situated in a nicely-ventilated area to ensure the temperature created by the motor can emit safely, to extend the lifespan of your machine.

- Before restarting the appliance, any remaining debris has to be cleared from the machine room to reduce starting resistance.

- Oil must be filled regularly to every bearing to market inter-lubricating.

- To ensure the cutter remains sharp, check this part regularly to prevent unnecessary damages for any other part.

- Regularly inspect the cutter screws, to make sure the bond involving the knife and blade remains strong.

- 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.

End of Article

Get timely updates about latest developments in oil & gas delivered to your inbox. Join our email list and get your targeted content regularly for free or follow-us on LinkedIn.

No alt text provided for this image

Learn more about this training course

June, 12 2022