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Last Updated: September 21, 2017
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Last week in World Oil:


  • Oil prices remain close to multi-month highs as the market assesses the impact of two recent major hurricanes, as well as indications that OPEC is considering extending the current supply freeze deal beyond March 2018. Brent is trading at about US$55/b, while WTI stands at about US$50/b.


  • Uganda has signed the first exploration deal from its 2015 licensing round. Australia’s Armour Energy will be allowed to explore the Kanywataba block in the Albertine rift valley near the Democratic Republic of Congo. The block had previously been licensed to Total, CNOOC and Tullow Oil, which surrendered the block in 2012. Deals for the remaining five blocks offered at auction have yet to be finalised.
  • After acquiring exploration rights in Mexico’s first-ever deepwater auction in 2016, CNOOC is now searching for partners in a ‘farmout’ proposition that will offer a stake in return with drilling and production assistance. CNOOC holds the rights to two Gulf of Mexico blocks in the Perdido Fold Belt, where Mexico estimates the bulk of its untapped oil lies. One of the deepest exploration areas in the world, CNOOC cannot afford to go it alone, and is soliciting potential partners for the projects.
  • US drillers shut down seven oil rigs last week – the steepest cut since January 2017 – the latest indication that drilling recovery has stalled.  

Downstream & Midstream

  • The series of earthquakes roiling Mexico over the past two weeks has Wrecked Pemex’s refining network, causing fuel shortages and driving up price, which are no longer state-controlled. Output from three of its six refineries has been affected, removing up to 50% of national capacity. With Mexico’s nearest source of fuel imports – the US – also recovering from Hurricane Harvey, the tight situation could continue for a while.

Natural Gas and LNG

  • Nexen is shelving its proposed Aurora LNG export terminal on Canada’s west coast, citing a poor market environment and low prices. Owned by CNOOC since 2012, Nexen has been conducting a feasibility study into the project for four years, finally pulling out as global LNG prices do not look likely to gain strength for the foreseeable future. The project, with a capacity of 24 mtpa of LNG, is the third Canadian project to be cancelled, after the Petronas and Shell projects. With the political situation in British Columbia currently unfavourable to LNG projects, it appears that Canada’s ambitions to be a major LNG supplier to Asia is diminished.
  • Nigeria’s Shoreline has signed a US$300 million agreement with Shell to develop commercial natural gas infrastructure around Lagos. In line with Shell’s objective to focus more on gas than oil in Nigeria, the deal will be the two companies work together on developing distributing and selling piped natural gas to the city’s Victoria Island, Ikoyi, Lekki and Epe district, which constitute Lagos’ business hub and upscale residential areas.
  • Premier Oil will be selling off half of its stake in the North Sea’s Babbage gas field, as well as a 25% stake in the Cobra field, as it attempts to pare down debt accrued over the past three years. Both assets were gained last year through its US$120 million acquisition of E.ON’s North Sea business.

Last week in Asian oil


  • Italy’s Eni has signed a cooperation agreement with China’s CNPC, a move that could give the firm a greater foothold in the Chinese market. The broad agreement covers joint activities in upstream E&P, as well as LNG, trading, refining and petrochemicals – both within China and abroad. For Eni, this boosts its financial firepower as it looks to expand activities globally, while CNPC will have the benefit of an established partner with a long global history to help expand its international ambitions. This isn’t the first time both companies have worked together; in 2013, CNPC bought a 20% stake in Eni’s gas field offshore Mozambique – planned to eventually produce LNG for export to Asia – while both firms are also shareholders in Kazakhstan’s giant Kashagan oil field.
  • After a century of producing oil in Iraq, Shell is forsaking oil in favour of gas, citing low-margin production contracts. Shell will relinquish operations at the Majnoon field, after being offered new ‘unfavourable fiscal terms’, as well as selling its 20% stake in the West Qurna 1 oil field, which is operated by ExxonMobil. Instead, it will focus on developing and expanding the Basra Gas Company – in which it has a 44% stake - which processes gas from the Rumaila, West Qurna and Zubair fields.

Downstream & Midstream

  • Chinese refining output increased by 6.5% in August, rebounding from a low of 10.71 mmbpd in July. The rise comes as a new series of crude quotas was issued to China’s independent teapot refineries – causing a stampede to increase production – as well as the startup of PetroChina’s new 260 kb/d refinery in Yunnan. However, YTD refining output remains down y-o-y – at a -4.6% - as last year’s teapot refining bonanza tapers down to a more controlled pace at the state’s instigation.
  • In India, heavy rainfall causing severe flooding across the country has caused oil demand to fall by 6.1% y-o-y in August, to 15.75 million tons from 16.78 million tons. Gasoline and diesel have been particularly hard hit, as heavy waters impeded transportation and industrial traffic. Kerosene usage also shrank severely, by 41%, though this was more to do with the ongoing drive to replace it with LPG as a cooking fuel.

Natural Gas & LNG

  • Bangladesh has signed its first long-term LNG agreement, agreeing to import fuel from Qatar’s RasGas over 15 years. Initial supply will be at 1.8 mtpa for the first five years, followed by 2.5 mtpa for the remaining ten, which is less than the 4 mtpa figure bandied about when the initial Petrobangla and RasGas MoU emerged in 2011. Bangladesh will be looking to fill in that gap with spot purchases, as it battles with dwindling domestic production and the departure of Chevron from its waters.
  • The quest to build The Philippines’ first LNG import terminal continues to hit choppy waters, with the government now asking for ‘unsolicited private sectors proposals’, after deeming plans submitted by international players from Singapore, Japan, South Korea, China, Indonesia and the UAE (among others) ‘unsatisfactory’. The stumbling block, it appears, is the estimated price tag of US$2 billion and that state oil company PNOC failed to convince the proposers to accept its share of banked gas from the Malampaya field as equity for the terminal project.  

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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.

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How To Maintain A Wood Pellet Mill

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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