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Last Updated: October 6, 2017
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Last week in World oil:

Prices

  • With OPEC production rising in September as supplies from Nigeria and Libya recover, and US drilling numbers also show improvement, crude oil prices fell slightly from their recent highs – with Brent trading at about US$56/b and WTI at US$50/b.

Upstream

  • Chevron is committing some US$4 billion to ramp up crude production in the Permian Basin, aiming to grow its production there from 90,000 b/d in 2016 to over 400,000 b/d over the next five years. With a report calling the Permian a ‘super basin’ with some 60-70 billion barrels yet unpumped, Chevron expects production across all producers in the Permian to rise to 3.8 mmb/d in 2020, from a present 2.4 mmb/d.
  • Brazil’s latest round of oil block auctions revealed one very big winner – ExxonMobil – and one very big loser – the Santos basin. ExxonMobil bet big on the offshore pre-salt Campos basin, taking its first Brazilian blocks in five years. A total of eight blocks were handed to ExxonMobil, six in partnership with Petrobras, with changes in Brazilian regulations allowing private players to operate blocks on their own now. This could make ExxonMobil the pre-eminent pre-salt crude producer in Brazil. Meanwhile, of the 76 blocks offered in the prized offshore Santos basin, only one received a bid – by Australia’s Karoon Gas – a sign that in a persistent low oil price environment, upstream companies are still wary.
  • American drillers added oil rigs for the first time in seven weeks, as six new sites (mostly in Utah) brought the total oil rig count to 750 and the total rig count to 940.

Downstream & Midstream

  • Pemex’s largest Mexican refinery– the 330 kb/d Salina Cruz site – will remain offline until the third week of October, as a series of natural disasters including flooding, storms and two earthquakes devastated its refining production, causing product shortages across Mexico.

Natural Gas and LNG

  • The Ruby well in the Dutch North Sea cold hold more gas than previously anticipated, which would be a shot in the arm for waning gas production in the Netherlands. Flows from the well 20km offshore have been encouraging; with estimates suggesting it could contain some 2 trillion cubic feet of gas, more than the country’s current annual production. The partners on the Ruby well as Oranje-Nassau Energie, Energie Beheer Nederland, Hansa Hydrocarbons and Avista Capital Partners.
  • Trader Glencore has agreed to purchase Angola LNG in a multi-year deal that represents a new foray for the country. Angolan LNG has mainly been sold on the spot market – as the shale boom curtailed Angola’s initial plan of shipping LNG to the US – but the Glencore deal joins similar longer-term contracts signed by Angola with Vitol and Germany’s RWE, as jitters about Angola LNG’s reliability as a supplier fade. Russia major Gazprom has also signed a recent long-term deal, with Ghana National Petroleum Corp, to purchase LNG over a 12 year period beginning 2019. Details on volumes, however, were not released.

Last week in Asian oil

Downstream & Midstream

  • Petronas Chemicals has agreed to sell a 50% stake in its PRPC Polymers subsidiary to Saudi Aramco for some US$900 million. The sale will be completed by 15 March, 2018, when the new shareholding structure for the previously wholly-owned company takes effect. Devoted to developing, constructing and operating polymers and glycol plants in Malaysia, but having yet started operations, the tie-up with Saudi Aramco bring in a deep-pocketed partner for Petronas, while being part of Aamco’s diversification plan. Aramco and Petronas are already partners in the massive US$27 billion RAPID project in the southern state of Johor.

Natural Gas & LNG

  • Australia has let Shell, ConocoPhillips, Origin and Santos off the hook for the current gas shortage in the eastern states for now. The government had threatened to impose export curbs on the four producers if they did not redirect supplies meant for LNG export to the domestic market. There are three LNG export plants currently on Australia’s east coast, and the deal with the government will see the plants act on their promise to provide supplies to meet the government’s projected shortfall of up to 17% of domestic demand in 2018.
  • Woodside is partnering with Chevron to pick up three new exploration blocks off the north-west coast of Australia. With equal stakes in the permits, both companies are eyeing gas from the WA-528-P, WA-529-P and WA-530-P permits in the Carnarvon Basin to supply their respective – and competing – LNG plants in Western Australia. Operated by Chevron, the gas blocks are ideally placed some 250km north-west of the existing Pluto, Gorgon and Wheatstone plants, increasingly important as an LNG supply point to East Asia.
  • Thailand has decided to delay its auctions for the Erawan and Bongkot gas concessions for at least another month, expecting to only announce the winners in the middle of 2018. Chevron currently operates Erawan and state firm PTTEP operates Bongkot, with licenses set to expire in 2022 and 2023. Combined, both fields account for some 76% of Gulf of Thailand output, with the delay stemming from a government review of the new PSC terms to be used for the new licences. Chevron and PTTEP are bidding to keep the fields, while local firms Bangchak and Palang Sophon, along with Abu Dhabi’s Mubadala Petroleum and Japan’snMitsui Oil Exploration, are also in the running.
  • South Korea’s KOGAS is planning to build the country’s fifth LNG import terminal, targeting operational usage by 2025. The plant – which is planned to have ten 200,000 cbm storage tanks and associated infrastructure at the port of Dangjin near Incheon - will join the existing terminals at Incheon, Pyengtaek, Tongyeong and Samcheok.
  • India’s Reliance has outbid its rivals in a competitive auction for coal-bed methane produced from its own blocks in central India until at least March 2021. Reliance will purchase up to 3 million cbm/d of coal seam gas from its blocks in Sohagpur East and Sohagpur West in Madhya Pradesh, to be used as petrochemical feedstock.

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Your Weekly Update: 11 - 15 March 2019

Market Watch

Headline crude prices for the week beginning 11 March 2019 – Brent: US$66/b; WTI: US$56/b

  • Global crude oil prices continue to remain rangebound despite bearish factors emerging
  • News that Libya was restarting its 300,000 b/d Sharara field could weaken the ability of OPEC to control supply, while a report from the US EIA hints that the market was moving into a glut
  • The EIA report showed that commercial crude inventories in the US rose by 7.1 million barrels, far higher than the 1.6 million barrel increase predicted, with a 873,000 barrel increase at Cushing and a 12% y-o-y drop in crude imports
  • By the end of 2019, with American output surging and Saudi Arabia curtailing production, the US could export more oil and liquids than the world’s largest exporter
  • Meanwhile in OPEC, PDVSA has received some aid from Russia with Rosneft agreeing to send heavy naphtha to Venezuela – a product necessary to thin heavy Venezuela crude to move by pipeline to the coast that have been affected by the American sanctions
  • On the demand side, Morgan Stanley has predicted that China’s oil consumption will peak in 2025, some 5-8 years earlier than most expectations, driven by a shift in cars towards electric vehicles and high-speed rail
  • The US active rig count fell for a third consecutive week, following a 9 rig fall with an 11 rig drop last week, with nine oil sites and two gas sites scrapped
  • Despite the bearish factors, it looks like crude has found a new comfortable range with Brent at US$65-67/b and WTI at US$56-58/b for the week


Headlines of the week

Upstream

  • Despite security concerns, Libya has restarted its largest oil field, with output at 300,000 b/d Sharara expected to reach 80,000 b/d initially, throwing a new spanner in the OPEC goal of controlling supply
  • A one-year delay to Enbridge’s Line 3 conduit in Canada due to regulatory issues has thrown new troubles onto Alberta’s beleaguered crude industry
  • ExxonMobil is planning a major acceleration of its Permian assets, aiming to produce more than 1 mmboe/d by 2024, an increase of nearly 80%
  • China has announced plans to form a national oil and pipeline company, part of a natural energy industry overhaul that will give the new firm control over at least 112,000 km of oil, gas and fuel pipelines currently held by other state firms
  • Equinor, with Petoro, ConocoPhillips and Repsol, have announced a new oil discovery in the North Sea, with the Telesto well on the Visund A platform potentially yielding 12-28 million barrels of recoverable oil
  • Aker Energy has reported a new oil discovery at the Pecan South-1A well offshore Ghana, with the Pecan field expected to hold 450-550 mboe of oil
  • Production declines at Kazakhstan’s three main oil fields will see the country slash crude exports by 2% to 71 million tons this year, with cuts mostly to China

Midstream & Downstream

  • Canadian Natural Resources is looking to ease pressure on the Alberta crude complex by bringing its 80 kb/d North West Redwater refinery online this year
  • Work has begun on the upgrade and expansion of Egypt’s Middle East Oil Refinery near Alexandria, with the project expected to boost capacity to 160 kb/d and quality to Euro V through the installation of a new CDU and VDU
  • Bahrain’s BAPCO has announced plans to expand its Sitra oil refinery by early 2023, growing capacity from 267 kb/d to 360 kb/d

Natural Gas/LNG

  • India has started up its first LNG regasification facility on the east coast, with the Ennore terminal expected to service the major cities of Chennai and Madurai
  • Total has signed an agreement with Russia’s Novatek for the formal acquisition of a 10% stake in the Arctic LNG 2 project, bringing its total economic interest in the 19.8 mtpa project in the Yamal and Gydan peninsuals to 21.6%
  • Thailand’s PTTEP has announced a new offshore gas find in Australia’s portion of the Timor Sea, with the Orchid-1 well striking gas and expected to be incorporated into the Cash-Maple field with 3.5 tcf of resources
  • Crescent Petroleum and Dana Gas’s joint venture Pearl Petroleum Company is aiming to boost gas production at Khor Mor block in Iraq’s Kurdistan region by 63% with an additional 250 mmscf/d of output
  • Petronas’ 1.2 mtpa PFLNG Satu – the world’s first floating LNG vessel – has completed its stint at the Kanowit field and will now head to its second destination, the Kebabangan gas field offshore Sabah
  • Chevron is looking to revisit its Ubon wet gas project in Thailand after a period of hiatus as the supermajor recalibrated its development costs
  • Nigeria’s NLNG Train 7 LNG project is expected to reach FID in the third quarter of the year after multiple delays
  • ExxonMobil and BP have agreed to collaborate with the Alaska Gasline Development Corporation to advance the Alaska LNG project
  • Energean Oil and Gas has started its 2019 drilling programme in Israel, focusing on four wells, including one in Karish North near the Karish discovery
March, 15 2019
Latest issue of GEO ExPro magazine covers New Technologies and Training Geoscientists, with a geographical focus on Australasia and South East Asia

GEO ExPro Vol. 16, No. 1 was published on 4th March 2019 bringing light to the latest science and technology activity in the global geoscience community within the oil, gas and energy sector.

This issue focuses on new technologies available to the oil and gas industry and how they can be adapted to improve hydrocarbon exploration workflows and understanding around the world. The latest issue of GEO ExPro magazine also covers current training methods for educating geoscientists, with articles highlighting the essential pre-drill ‘toolbox’ and how we can harness virtual reality to bring world class geological locations to the classroom.

You can download the PDF of GEO ExPro magazine for FREE and sign up to GEO ExPro’s weekly updates and online exclusives to receive the latest articles direct to your inbox.

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March, 14 2019
Norway’s Retreat in Oil Investments – Politics or Economics?

In 2017, Norway’s Government Pension Fund Global – also known as the Oil Fund – proposed a complete divestment of oil and gas shares from its massive portfolio. Last week, the Norwegian government partially approved that request, allowing the Fund to exclude 134 upstream companies from the wealth fund. Players like Anadarko Petroleum, Chesapeake Energy, CNOOC, Premier Oil, Soco International and Tullow Oil will now no longer receive any investment from the Fund. That might seem like an inconsequential move, but it isn’t. With over US$1 trillion in assets – the Fund is the largest sovereign wealth fund in the world – it is a major market-shifting move.

Estimates suggest that the government directive will require the Oil Fund to sell some US$7.5 billion in stocks over an undefined period. Shares in the affected companies plunged after the announcement. The reaction is understandable. The Oil Fund holds over 1.3% of all global stocks and shares, including 2.3% of all European stocks. It holds stakes as large as of 2.4% of Royal Dutch Shell and 2.3% of BP, and has long been seen as a major investor and stabilising force in the energy sector.

It is this impression that the Fund is trying to change. Established in 1990 to invest surplus revenues of the booming Norwegian petroleum sector, prudent management has seen its value grow to some US$200,000 per Norwegian citizen today. Its value exceeds all other sovereign wealth funds, including those of China and Singapore. Energy shares – specifically oil and gas firms – have long been a major target for investment due to high returns and bumper dividends. But in 2017, the Fund recommended phasing out oil exploration from its ‘investment universe’. At the time, this was interpreted as yielding to pressure from environmental lobbies, but the Fund has made it clear that the move is for economic reasons.

Put simply, the Fund wants to move away from ‘putting all its eggs in one basket’. Income from Norway’s vast upstream industry – it is the largest producing country in Western Europe – funds the country’s welfare state and pays into the Fund. It has ethical standards – avoiding, for example, investment in tobacco firms – but has concluded that devoting a significant amount of its assets to oil and gas savings presents a double risk. During the good times, when crude prices are high and energy stocks booming, it is a boon. But during a downturn or a crash, it is a major risk. With typical Scandinavian restraint and prudence, the Fund has decided that it is best to minimise that risk by pouring its money into areas that run counter-cyclical to the energy industry.

However, the retreat is just partial. Exempt from the divestment will be oil and gas firms with significant renewable energy divisions – which include supermajors like Shell, BP and Total. This is touted as allowing the Fund to ride the crest of the renewable energy wave, but also manages to neatly fit into the image that Norway wants to project: balancing a major industry with being a responsible environmental steward. It’s the same reason why Equinor – in which the Fund holds a 67% stake – changed its name from Statoil, to project a broader spectrum of business away from oil into emerging energies like wind and solar. Because, as the Fund’s objective states, one day the oil will run out. But its value will carry on for future generations.

The Norway Oil Fund in a Nutshell

  • Valued at NOK8.866 trillion/US$1.024 trillion (February 2019)
  • Invested in 9,138 companies in over 73 countries
  • Holds 1.3% of all global stocks
  • Holds 2.3% of all European stocks
  • Holds 2.4% of Shell, 2.3% of BP
March, 13 2019