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Last week in the world oil:

Prices

  • Brent crude surged to US$64/b and WTI to US$57/b as instability in Saudi Arabia – ranging from royal arrests of 11 princes, missiles launched from Yemen and a Saudi prince killed as his helicopter crashed – rattled the market. Also supporting stronger prices is Nigeria’s pledge to limit its output, despite being exempt from OPEC’s freeze due to insurgent attacks.

Upstream

  • The hits keep coming in Mexico. State oil firm Pemex announced the country’s largest onshore oil discovery in 15 years, with the Ixachi well in Veracruz estimated to have some 350 million barrels of proven, probable and possible reserves. Exploiting the light crude resource should prove straightforward, given that it is located near existing onshore drilling infrastructure.
  • Papua New Guinea’s Oil Search is expanding into (very) different territory that the equatorial island. The company has bought stakes in Alaska’s North Slope for some US$400 million, acquiring Nanushuk and surrounding fields that are estimated to contain up to 500 million barrels.
  • The acquisition of the Forties Pipeline System (FPS) by INEOS from BP has been completed, with INEOS now having complete ownership and operation of the FPS, Kinneil gas processing plant, Kinneil oil terminal, Dalmeny storage and export facility, infrastructure sites in Aberdeen and the Forties Unity Platform - a key part of the British North Sea industry.
  • Greenland will hold an oil and gas concession auction in offshore west coast areas in Davis Strait and Baffin Bay next year in a bit to get its moribund upstream exploration programme back on track. Estimates have suggested Greenland holds some 17 billion barrels of oil equivalent off its west coast, and 32 billion boe off its east coast, but accessing those reserves has been hampered by weak crude prices over the past 3 years.
  • Insurgent sabotage could be returning to Nigeria as the Niger Delta Avengers issued a ‘bloody and brutal’ warning to energy firms operating in the region, with a specific mention of Total’s Engina FPSO system.
  • The US lost another eight oil rigs last week, the largest drop since May 2016, causing the overall active American oil and gas rig count to slip below 900. Languishing in the face of recent crude price stagnation, the recent rally in WTI prices may tempt some drillers to restart sites soon.

Downstream & Midstream

  • Much like US LNG, American crude is starting to pop up in new places. PKN Orlen – Poland’s largest refiner – received its first American crude shipment last week. It adds another dimension to eastern Europe’s desire to wean itself off Russian oil and gas, as a vast majority of crude oil refined in Poland currently comes from Russia.

Natural Gas and LNG

  • Greece’s Energean has signed three new deals to sell natural gas from Israel’s offshore Karish and Tanin fields to Israeli energy firms Dorad Energy, Ashdod Energy and Ramat Negev Energy. Expected to start production in 2020, gas from the Karish and Tanin fields will be piped onshore to the customers – amounting to 6.75 bcm over 14 years for Dorad, and 2.65 bcm for Ashdod and Ramat Negev over the same period.

Last week in Asian oil

Upstream

  • As pipeline shipments from Iraq’s Kurdish region resume to Turkey, Baghdad is moving to impose federal will on Kurdistan’s oil assets. Iraq state-oil marketer SOMO is attempting to convince Turkey to see SOMO as the sole seller of Kurdish crude that arrives at Ceyhan. Currently, Turkey recognises independent exports by the Kurdish Regional Government (KRG) as well as SOMO volumes that piggyback on the pipeline.
  • As Pertamina takes over the Mahakam block from Total and Inpex on January 1, 2018, the Indonesian state oil firm announced plans to spend US$700 million to maintain production levels at the block. Production at Mahakam has been dipping recently, projected to fall to 53,000 bpd of oil and 1.43 bcf/d of gas in 2017, and even maintaining current output levels will require significant investment on Pertamina’s part.
  • SOCO International has picked up two new offshore blocks in Vietnam. The PSCs for the blocks, located in moderate-to-deepwater in the Phu Khanh Basin, north of the prodigious Cuu Long Basin, are with PetroVietnam and SOVICO Holdings, with SOCO holding 70%.

Downstream

  • South Korea’s SK Energy will be building a new US$900 million 40 kb/d desulfurisation unit at its 840 kb/d Ulsan refinery, in an attempt to boost its production of low-sulphur fuels. International sanctions on sulphur emissions in the marine section are scheduled to take effect in 2020, pushing refiners to invest in upgrade units. The new unit at Ulsan will also boost production of gasoil and naphtha through reprocessing of fuel oil.
  • It appears that Saudi Aramco’s involvement in Petronas’ RAPID refinery project is not yet set in stone. Some technical issues are holding up final agreements, which will see Aramco pump in US$7 billion into the refinery in Johor, but the Malaysian government expects things to be smoothed over soon. It is likely to, given that Aramco just bought a US$900 million stake in RAPID-associated petrochemical projects last month.
  • India’s BPCL has completed the expansion of its Kochi refinery, bringing its capacity up from 190 kb/d to 310 kb/d. A new CDU and coking unit was installed as part of the expansion, delayed from its original projected date of late-2016, with BPCL now ramping up production. The Kochi refinery is currently running at some 84% utilisation, and BPCL intends to move to full capacity over the next two years.

Natural Gas & LNG

  • As Petronas announced that it will no longer include resale destination clauses in its new Japanese LNG contracts as required by the Japan Fair Trade Commission, Osaka Gas announced plans to raise its LNG resale volumes significantly by 2020. One of the few buyers with some looser clauses, Osaka Gas has been reselling LNG since 2006 – hitting 1.1 mtpa in resales last year – and is pushing to increase that. It targets annual trading volumes of 10 mtpa, of which 3 mtpa would be from resales.

Chevron has exported its first LNG cargo from its Wheatstone project in Australia. Production at the mega-LNG facility started up in early October, with shipments targeted at markets in northeast Asia. The inaugural cargo goes to Japan’s JERA, the world’s largest buyer of LNG.

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RAPID Rises

When it was first announced in 2012, there was scepticism about whether or not Petronas’ RAPID refinery in Johor was destined for reality or cancellation. It came at a time when the refining industry saw multiple ambitious, sometimes unpractical, projects announced. At that point, Petronas – though one of the most respected state oil firms – was still seen as more of an upstream player internationally. Its downstream forays were largely confined to its home base Malaysia and specialty chemicals, as well as a surprising venture into South African through Engen. Its refineries, too, were relatively small. So the announcement that Petronas was planning essentially, its own Jamnagar, promoted some pessimism. Could it succeed?

It has. The RAPID refinery – part of a larger plan to turn the Pengerang district in southern Johor into an oil refining and storage hub capitalising on linkages with Singapore – received its first cargo of crude oil for testing in September 2018. Mechanical completion was achieved on November 29 and all critical units have begun commissioning ahead of the expected firing up of RAPID’s 300 kb/d CDU later this month. A second cargo of 2 million barrels of Saudi crude arrived at RAPID last week. It seems like it’s all systems go for RAPID. But it wasn’t always so clear cut. Financing difficulties – and the 2015 crude oil price crash – put the US$27 billion project on shaky ground for a while, and it was only when Saudi Aramco swooped in to purchase a US$7 billion stake in the project that it started coalescing. Petronas had been courting Aramco since the start of the project, mainly as a crude provider, but having the Saudi giant on board was the final step towards FID. It guaranteed a stable supply of crude for Petronas; and for Aramco, RAPID gave it a foothold in a major global refining hub area as part of its strategy to expand downstream.

But RAPID will be entering into a market quite different than when it was first announced. In 2012, demand for fuel products was concentrated on light distillates; in 2019, that focus has changed. Impending new International Maritime Organisation (IMO) regulations are requiring shippers to switch from burning cheap (and dirty) fuel oil to using cleaner middle distillate gasoils. This plays well into complex refineries like RAPID, specialising in cracking heavy and medium Arabian crude into valuable products. But the issue is that Asia and the rest of the world is currently swamped with gasoline. A whole host of new Asian refineries – the latest being the 200 kb/d Nghi Son in Vietnam – have contributed to growing volumes of gasoline with no home in Asia. Gasoline refining margins in Singapore have taken a hit, falling into negative territory for the first time in seven years. Adding RAPID to the equation places more pressure on gasoline margins, even though margins for middle distillates are still very healthy. And with three other large Asian refinery projects scheduled to come online in 2019 – one in Brunei and two in China – that glut will only grow.

The safety valve for RAPID (and indeed the other refineries due this year) is that they have been planned with deep petrochemicals integration, using naphtha produced from the refinery portion. RAPID itself is planned to have capacity of 3 million tpa of ethylene, propylene and other olefins – still a lucrative market that justifies the mega-investment. But it will be at least two years before RAPID’s petrochemicals portion will be ready to start up, and when it does, it’ll face the same set of challenging circumstances as refineries like Hengli’s 400 kb/d Dalian Changxing plant also bring online their petchem operations. But that is a problem for the future and for now, RAPID is first out of the gate into reality. It won’t be entering in a bonanza fuels market as predicted in 2012, but there is still space in the market for RAPID – and a few other like in – at least for now.

 

RAPID Refinery Factsheet:

  • Ownership: Petronas (50%), Saudi Aramco (50%)
  • Capacity: 300 kb/d CDU/3 mtpa olefins plant
  • Other facilities: 1.22 Gigawatt congeneration plant, 3.5 mtpa regasification terminal
  • Expected commissioning: March 2019
January, 21 2019
Forecasting Bangladesh Tyre Market | Zulker Naeen

Tyre market in Bangladesh is forecasted to grow at over 9% until 2020 on the back of growth in automobile sales, advancements in public infrastructure, and development-seeking government policies.

The government has emphasized on the road infrastructure of the country, which has been instrumental in driving vehicle sales in the country.

The tyre market reached Tk 4,750 crore last year, up from about Tk 4,000 crore in 2017, according to market insiders.

The commercial vehicle tyre segment dominates this industry with around 80% of the market share. At least 1.5 lakh pieces of tyres in the segment were sold in 2018.

In the commercial vehicle tyre segment, the MRF's market share is 30%. Apollo controls 5% of the segment, Birla 10%, CEAT 3%, and Hankook 1%. The rest 51% is controlled by non-branded Chinese tyres.

However, Bangladesh mostly lacks in tyre manufacturing setups, which leads to tyre imports from other countries as the only feasible option to meet the demand. The company largely imports tyre from China, India, Indonesia, Thailand and Japan.

Automobile and tyre sales in Bangladesh are expected to grow with the rising in purchasing power of people as well as growing investments and joint ventures of foreign market players. The country might become the exporting destination for global tyre manufacturers.

Several global tyre giants have also expressed interest in making significant investments by setting up their manufacturing units in the country.

This reflects an opportunity for local companies to set up an indigenous manufacturing base in Bangladesh and also enables foreign players to set up their localized production facilities to capture a significant market.

It can be said that, the rise in automobile sales, improvement in public infrastructure, and growth in purchasing power to drive the tyre market over the next five years.

January, 18 2019
Your Weekly Update: 14 - 18 January 2019

Market Watch

Headline crude prices for the week beginning 14 January 2019 – Brent: US$61/b; WTI: US$51/b

  • After a rally, crude oil prices took a breather at the start of this week, as the market moved from a bullish mood to a cautious one as slowing Chinese trade data spooked the market
  • The US government shutdown – now the longest ever in history – continues with no end in sight, with Republicans and President Donald Trump at a stalemate with energised Democrats
  • That ended a week-long rally that allowed crude oil to bounce back from sub-US$50/b levels in December over OPEC+’s implementation of a new deal to shrink supplies and Saudi Arabia’s promise to ‘do more if needed’
  • Even Russia, which showed some reluctance in implementing a speedy cut, has made strides in reducing output, releasing data that showed that production fell by 30,000 b/d in December and is on track for a decrease of 50,000 b/d in January relative to October levels
  • However, the OPEC+ group is now reportedly struggling to set a date for their next meeting, where the supply deal will be reviewed; the review is set for April, ahead of OPEC’s usual Vienna meeting in June/July, but an April review is necessary to assess the expiration of American waivers on Iranian crude
  • Some downside to price trends is that the waivers on Iranian crude exports have nullified the impact of American sanctions; both Turkey and India have recently resumed imports of Iranian crude after a brief hiatus, with India electing to pay for all its crude in rupees
  • Although WTI prices have improved, American drillers are still reticent to add sites, wary of changing market conditions; Baker Hughes indicates that the active American drill count was flat last week, with the loss of 4 oil rigs offset by a gain of 4 gas ones
  • Crude price outlook: Upward momentum should continue with crude price this week, but at a more gradual pace, as fears of a slowing global economy weigh on the market. Brent should stay in the US$61-63/b range and WTI in the US$52-54/b range


Headlines of the week

Upstream

  • BP is proceeding with a major US$1.3 billion expansion of the Atlantis Phase 3 in the Gulf of Mexico, aimed at adding 38,000 b/d of additional output
  • Venezuela has announced plans to remap its Caribbean oil and gas prospects, a move that potentially puts it on collision course with ExxonMobil over the country’s long-disputed borders with the now oil-rich Guyana
  • New seismic studies at BP have identified a billion more barrels of oil in place at the deepwater Thunder Horse platform in the Gulf of Mexico
  • Saudi Arabia has published an updated figure of its oil reserves – its first in 40 years – pegging total volumes at 268.5 billion barrels
  • Norway has cut its crude production forecast, predicting the output will be 1.42 mmb/d in 2019, the lowest level since 1988
  • BP is reportedly looking to sell its 28% stake in the North Sea Shearwater assets to offset its recent US$10.6 billion acquisition of US shale fields
  • The Unity fields in South Sudan have resumed production, after being halted for five years over a civil war, with initial production targeted at 20,000 b/d
  • Eni and Thailand’s PTTEP have secured exploration rights to an oil and gas concession in Abu Dhabi, with Adnoc participating at 60% if oil is struck
  • TransCanada Corp – ahead of name change to TC Energy – is planning to start construction on the controversial Keystone XL oil pipeline in June, even in the face of continued social and legal setbacks
  • Spirit Energy’s Oda field in the Norwegian North Sea has received permission from the Norwegian Petroleum Directorate to start up
  • Aker Energy has completed successful appraisal of the offshore Pecan field in Ghana, estimating some 450-550 mmboe of resources in place
  • Shell and BP have submitted plans to begin exploratory drilling in Brazil’s Pau Brasil and Saturno pre-salt areas in early 2020

Downstream

  • Saudi Arabia has reiterated plans to build a US$10 billion oil refinery in Pakistan’s deepwater port of Gwadar, part of the larger China-Pakistan Economic Corridor plan that is part of the Belt and Road initiative
  • Shell Chemicals has started up its fourth alpha olefins unit at in Geismar, Louisiana, adding 425,000 tpa of capacity to a new total of 1.3 mtpa
  • After being idled over the paralysis between PDVSA and ConocoPhillips, the 335,000 b/d Isla refinery in Curacao has restarted, with operations likely to shift from PDVSA to Saudi Aramco’s Motiva US refining subsidiary

Natural Gas/LNG

  • After seemingly receiving official go-ahead from all levels of government and even indigenous groups, Shell’s US$31 billion Kitimat LNG project in Canada has now been blockaded by a group of protesting First Nation holdouts
  • Completion of major LNG projects in Australia’s west coast have allowed its LNG exports to increase by 23% in 2018, with greater growth expected in 2019
  • The NordStream 2, long championed by German Chancellor Angela Merkel, now faces new opposition in Germany over Russian global political interference – which could result in the controversial pipeline being delayed or cancelled
  • Shell has completed its acquisition of a 26% stake in the Hazira LNG and port venture in India from Total, bringing its equity interest to full ownership
  • BP has announced plans to drill six new exploration wells in Azerbaijan by 2020, hoping to strike a new natural gas play to rival its giant Shah Deniz field
January, 18 2019