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Last Updated: September 29, 2017
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Last week in World oil:

Prices

  • Oil prices got a boost, within striking distance of US$60/b, as major producers say that the global supply glut is shrinking as strong demand creates a rebalancing, as well as threats by Turkey to cut off Kurdistan’s only pipeline outlet for its crude oil over its independence referendum.

Upstream

  • As Lebanon seeks to join Cyprus, Egypt and Israel in exploiting potential offshore oil and gas resources, its Parliament has approved a law outlining tax revenue structure for oil companies, as Lebanon prepares for its first offshore auction. Five offshore areas will be offered on October 12, to be taxed at 20% income tax under the new law; 46 companies have signed up for the auctions, including ExxonMobil, Shell, Eni and Total.
  • A third consecutive week of decline for US drillers, as the loss of five oil rigs was only partially offset by the gain of four gas rigs. Losses were mainly in Eagle Ford, while restarts begin in the Permian.

Downstream & Midstream

  • Phillips 66 Partners LP – the master limited partnership that operates pipelines in the Bakken basin – will buy midstream assets from its parent Phillips 66 in a US$2.4 billion deal. Under the deal, Phillips 66 Partners will acquire a 25% interest in the Dakota Access and Energy Transfer Crude Oil Company LLCs – totalling 530 kb/d of crude oil pipeline capacity. With both companies listed separately, this leaves Phillips 66 free to concentrate on refining operations, and the MLP on distribution.
  • After Harvey and Irma – and with Maria on its way – the resulting gap in Gulf refining production is proving to be a boon for European diesel exports to Latin America. Trade sources indicate that some 600,000 tons of diesel and heating oil will be heading to Brazil and Argentina from Europe, as the fuel hungry region finds volumes from its traditional sources in the US Gulf and Caribbean withdrawn. This is some three times the usual trade, and is expected to continue until end October.

Natural Gas and LNG

  • Cheniere has officially requested permission from the US Federal Energy Regulatory Commission to place the fourth train at its Sabine Pass LNG export facility in Louisiana into service. First LNG was achieved at Train 4 in July, checking off all environmental and safety requirements. Cargo commissioning has already begun, bringing Cheniere close to its ambition of six trains at Sabine Pass, each with 4.5 mtpa capacity.
  • Algeria’s Sonatrach is aiming to boost gas output at its Hassi Messaoud field by 10 mcm/d and at its Rhourde el Baguel oil field by 6 mcm/d. This attempt to up output comes as Sonatrach seeks buffer against fluctuating oil prices to stabilise government revenues. The additional volumes will come on by next year, targeted as exports to Europe.
  • Canada’s Veresen is trying once again to gain US federal approval for its Jordan Cove LNG export plant in Oregon. The project has been rejected twice under the Obama administration, but the Trump presidency might be friendlier to the US$10 billion, 7.8 mtpa project targeting Asia. Meanwhile, the Eagle LNG Maxvillesmall-scale LNG facility in Florida has been approved, with capacity for some 21 mtpa of exports.

Last week in Asian oil

Upstream

  • Saudi Aramco is moving ahead with the development of its Safaniyah, Marjan, Zuluf and Berri oilfields, handing out more than US$1.5 billion in three major offshore contracts as it continues on a US$300 billion investment plan through 2027. The technical contracts precede major development plans for the fields, which include the sixth phase of the giant Safaniyah field (with 37 billion barrels of heavy oil), a US$3 billion expansion of Marjan and a boost in production at Berri by 200 kb/d.
  • India’s ONGC has announced a ‘good’ offshore find near its Mumbai High offshore fields that could hold some 20 million tons of oil equivalent. Though small by international standards, it is a large discovery in India terms, with the WO 24-3 well in a different play than neighbouring Mumbai High fields, potentially opening up a new area of exploration.

Downstream & Midstream

  • Sri Lanka is in talks with the two Chinese companies to build a US$3 billion oil refinery in the new Chinese-build port of Hambantota. The proposed 115 kb/d is the second of two planned refineries in Sri Lanka, to ease pressure on the aging CPC refinery. The first, a 100 kb/d site planned with Indian Oil in Trincomalee is export-oriented, while the new Chinese site will serve both domestic needs and produce some exports.
  • A jet fuel crisis continues to brew in New Zealand, as over 200 flights have been cancelled from Auckland – the country’s largest city – as the sole, private-owned pipeline delivering jet fuel to the airport from NZ’s sole refinery was damaged for months without being fixed.

Natural Gas & LNG

  • The government of Papua New Guinea will be selling off its stake in Oil Search, as it seeks to pay off some US$1 billion in debt. With stakes in PNG’s massive Elk and Antelope gas fields, Australia’s Oil Search has a major presence in PNG, though it was beaten out by ExxonMobil to acquire InterOil earlier this year. The PNG government holds a 9.8% stake in the company, which will be sold by UBS and JP Morgan at a floor price of A$6.55 per share.
  • Bangladesh signed its fourth and fifth natural gas import deals last week, with Indonesia and Gunvor. Under the preliminary long-term agreement with Indonesia’s Pertamina, Petrobangla will take in at least 1 million mtpa of LNG from Indonesia, while the contract with Gunvor is for a mixture of spot, short-term and medium-term volumes, beginning in 2018. Bangladesh has also signed a contract with Qatar to import some 2.5 mtpa of LNG from RasGas over a 15 year period for cooking fuel.
  • China’s CNOOC is reviving a plan to build an LNG import terminal in Binhai, Jiangsu. Initially proposed in 2010, the US$1.7 billion project has been endorsed by CNOOC’s investment committee as China’s appetite for LNG continues to grow. The project has an initial capacity of 3 mtpa of LNG, with a potential phase doubling capacity to 6 mtpa. Associated power generation facility will be included in the project as well.
  • Japan’s Mitsui OSK Lines is aiming to buy a stake of at least 26% in the Swan Energy FSRU off the coast of Jafrabad in Gujarat, Insia. With capacity for 5 mtpa and startup expected in 2020, the FSRU is being built by Hyundai Heavy Industries and chartered to Swan Energy by Mitsui OSK. The Japanese company will also be taking an 11% stake in Swan LNG, the Swan Energy subsidiary that will manage terminal and port facilities.

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September, 21 2019
Your Weekly Update: 16 - 20 September 2019

Market Watch  

Headline crude prices for the week beginning 16 September 2019 – Brent: US$69/b; WTI: US$63/b

  • Global crude oil prices surged at the start of the week as news that a successful drone strike on the Abqaiq processing plant and the Khurais oil field in Saudi Arabia took out over half of the Kingdom’s crude production capacity
  • Brent prices jumped above US$70/b at one point on fears on global supply disruption, but abated as President Donald Trump authorises the release of US strategic petroleum reserves to cover the market
  • Initial fears that the Saudi Arabian crude output would be crippled for months proved to be extreme, with Saudi Aramco announcing that some 70% of capacity at Abqaiq had been restored within days
  • But more worryingly is that this incident escalates the risk of a full-blown military confrontation with Iran; the US was quick to accuse Iran of the attack, citing data on the attack, which was denied by Iran
  • Yemen’s Iran-backed Houthi rebels claimed responsibility for the attack, although initial results of a Saudi investigation pointed to the weapons originating from Iran
  • For now, crude oil prices have retreated as the risk of widespread supply disruption abated, but tensions are still high in the region
  • This comes after President Trump signals that he was considering easing sanctions in an apparent thaw in the US-Iran relationship; this opportunity now appears to have evaporated
  • Saudi Arabia’s new oil energy minister, Prince Abdulaziz bin Salman, made a positive impression at the recent OPEC+ meeting, with errant members of the group signalling that they were now ready to adhere to the supply deal
  • In Venezuela, the oil crisis continues as ongoing US sanctions now mean that the country cannot find enough vessels to transport its crude, as shippers fear losing insurance coverage if they transport Venezuelan oil
  • Iran has released the UK-flagged Stena Impero vessel that it had impounded, a lone bright spot in a region now clouded by geopolitical tensions
  • Against this backdrop, the US active rig count recorded yet another fall, losing five oil and seven gas rigs for a net drop of 12 to a new total of 886 rigs
  • With the shock of the Saudi drone attacks abating, crude oil prices are retreating back to their previous range – US$60-63 for Brent and US$56-59/b for WTI – as the impact of global supply was minimised; another attack, however, might cause a more permanent shift in prices


Headlines of the week

Upstream

  • Equinor has received consent from the Norwegian Petroleum Directorate to continue operations at the Tordis and Vigdis fields through 2036 and 2040, respectively, extending the life of the North Sea fields by 34 years
  • BP has announced that it will deploy continuous measurement of methane emissions for all future oil and gas projects in a bid to reduce emissions
  • CNOPC and Niger have agreed to collaborate on a 1,892km pipeline to carry oil from Niger’s Agadem rift basin to port facilities in Benin
  • The South African government is tabling a new law that will allow the state to take a free stake of up to 10% in all new oil and gas ventures, hoping to capitalise on a surge in upstream interest after Total’s Brulpadda discovery

Midstream/Downstream

  • As the IMO deadline for low-sulfur marine fuels approaches, refiners have begun stockpiling supplies of very low-sulfur fuel oil to ensure adequate supply; this includes Japan’s Cosmo Oil that aims to begin supplying VLSFO to the domestic marine market by October 2019
  • IndianOil’s Gujarat refinery stated it ready to produce 12,900 b/d of VLSFO by October while its Haldia refinery will start producing 5,500 b/d of VLSFO by December; this should be adequate to cover the India’s marine fuel demand
  • India is considering selling a stake in BPCL, the country’s second largest refiner, to an international firm to boost competition in downstream fuel retailing that has historically been dominated by state firms
  • Valero Energy and Darling Ingredients are launching the first renewable gasoil plant in Texas, focusing on producing renewable diesel and naphtha
  • In the UK, Essar Oil’s Stanlow refinery aims to increase its diet of US crude from a current 35% to 40%, leveraging on cheaper American oil
  • The after-effects of Russia’s contaminated crude through the Druzhba pipeline continues as Total issues a tender to sell 1.3 million barrels of tainted Ural crude through Rotterdam after failing to process it

Natural Gas/LNG

  • Poland has won a ruling from the EU courts to reduce Russian control over the key EU Opal pipeline that carries Russian gas from the Nord Stream link to Germany, preventing Gazprom from using most of Opal capacity in a bit to increase energy security for Eastern European countries
  • Vitol and Mozambique’s state player ENH have set up a new joint venture in Singapore to capitalise on trading opportunities for LNG, LPG, and condensate
  • Australia’s Liquefied Natural Gas Ltd and Delta Offshore Energy will supply gas from the Magnolia fields to an LNG-to-power project in Bac Lieu, Vietnam
  • Eni’s Baltim South West gas field offshore Egypt has started up production, only 3 years after discovery, producing an initial 100 mscf/d of gas
  • US gas player Sempra is looking to take FID on its Energia Costa Azul LNG project in Mexico’s Baja California region by the end of 2019
  • Egypt has announced that it expects to receive first natural gas from Israel by end-2019 through the East Mediterranean Gas pipeline, with initial supplies of 200 mscf/d that will rise to 500 mscf/d by 2020
  • The Independence floating LNG terminal in Lithuania – built to reduce the Baltic region’s dependence on Russian gas – is set to receive its first-ever cargo from Siberia, likely from Novatek’s LNG projects in Yamal
September, 20 2019
Financial Review: Second-Quarter 2019
Key findings
  • Brent crude oil daily average prices were 9% lower in second-quarter 2019 than in second-quarter 2018 and averaged $68 per barrel
  • The 117 companies in this study increased their combined liquids production 4.6% in second-quarter 2019 from second-quarter 2018, and their natural gas production increased 5.0% during the same period
  • Nearly half of the companies were free cash flow positive—that is, they generated more cash from operations than their capital expenditures
  • Dividends plus share repurchases were nearly one-third of cash from operations, slightly lower than the six-year high set in first-quarter 2019

Distributions to shareholders via dividends and share repurchases amounted to nearly 33% of cash from operations


See entire second-quarter review

September, 20 2019