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Last Updated: November 16, 2017
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Last week in the world oil:

Prices

  • Crude prices are down slightly as American drillers predictably added rigs to capitalise on the recent high prices. Brent is trading at US$63/b and WTI at US$56/b, still in the upper range of recent price trends.

Upstream

  • Ghana has begun talks with ExxonMobil that could see the US supermajor begin exploring the offshore Deepwater Cape Three Point (DCTP) region. Ghana is bypassing traditional auctions for this, given its peculiar nature of the field, opting to negotiate directly with the experienced ExxonMobil.
  • Also in Ghana, Kosmos Energy will resume development drilling in the TEN deepwater oil and gas project in early 2018, delayed slightly from end-2017. The move comes as the International Tribunal for the Law of the Sea redrew ocean boundaries to favour Ghana over the Ivory Coast, paving the way for work to begin in the disputed area. TEN is led by Kosmos Energy, with Tullow Oil, Anadarko, PetroSA and GNPC.
  • Gambia is moving ahead with plans to market the two offshore oil blocks revoked from Norwegian-based African Petroleum earlier this year. The blocks A1 and A4 are estimated to contain up to 3 billion barrels.
  • Crude output in Venezuela is expected to sink to 1.84 mmb/d next year, the lowest in almost three decades as a cash crunch and mounting debts by PDVSA pile up. Venezuelan rig counts hit a 14-year low in October.
  • Shell shut down its offshore Enchilada platform in the US Gulf of Mexico after a fire broke out. Nearby infrastructure at the Salsa and Auger platforms, a gas export pipeline and associated fields were also shut. Impact should be minimal and output could restart within the month.
  • As Tullow Oil prepares to develop the Turkana oil fields, Kenya’s government is attempting to placate the tribesmen in the area, proposing to give 30% of the prospective oil avenue to the local community there in a bill. Full production of the 750 million barrel asset will begin in 2021.
  • American drillers added 9 new drilling rigs last week – all oil – responding to the recent strength in crude prices.

Downstream & Midstream

  • Egyptian Refining Co’s new US$3.7 billion refinery in Cairo is expecting completion by June 2018 with operations beginning in September. All product from the public-private 100 kb/d refinery will be sold to EGPC.

Natural Gas and LNG

  • Algeria’s Sonatrach is pumping in US$2 billion into the Hassi Rmel gas field to keep production there stable. The goal of the investment is to maintain output levels of 190 mcm/d over the next 10 years at the JGC-led field that represents 60% of Algeria’s gas production.
  • Egypt will be awarding its recent 12-cargo LNG tender to Spain’s Gas Natural Fenosa, Trafigura, Vitol and Glencore, as its goal of reducing LNG imports even further continues with growing domestic gas output.

Corporate

  • France’s Total has acquired the upstream LNG assets of French power and gas utility Engie for US$1.5 billion. This includes stakes in the Cameron LNG project in the US, a tanker fleet and existing sales contracts. Total will now be the second-largest LNG player in the world, behind Shell.

Last week in Asian oil

Upstream

  • A blast at Bahrain’s oil pipeline running through Buri has been blamed on Iran, with Iran vehemently denying involvement. The fire rattled Asian crude prices, already nervous after recent events in Saudi Arabia.
  • Production at the offshore Hail oilfield in the UAE has begun. Led by ADOC, Cepsa and Cosmo Oil, Hail is the fourth field to start production in the ADOC concession, joining the aging Mubarraz, Umm Al-Anbar and Neewat Al-Ghalan finds in the shallow waters off Abu Dhabi.

Downstream

  • Saudi Aramco will be pushing back planned maintenance at the Ras Tanura refinery’s condensate splitter to the end of November. The month-long shutdown at Saudi Arabia’s largest refinery will be shut until the end of December, with minimal impact on operations.
  • South Korea refiners are preparing to spend over US$5 billion to upgrade their plants in an attempt to benefit from tighter shipping emission standards entering force in 2020. The IMO’s decision will bring sulphur caps down from 35,000 ppm to 5,000 ppm, attempting to establish itself as a new bunkering force in Asia. SK Energy is adding a US$900 million desulphurisation unit, while Hyundai Oilbank will begin expanding its heavy oil upgrading capacity next year and S-Oil starts on its US$4.3 billion residue fuel oil upgrading unit/olefins complex in 1H18.
  • Rosneft and its new major investor, CEFC China Energy, are looking at the possibility of building a new petrochemical complex in Yangpu, Hainan. Capacity and timeline are unknown, with condensate and LPG feedstock presumably sourced from Rosneft.

Natural Gas & LNG

  • PetroChina will be expanding LNG storage capacity at the Caofeidian import facility in northern China to meet soaring domestic demand. Together with Beijing Enterprises Group, PetroChina will be adding two 160,000 cubic metre tanks at Caofeidian, doubling storage capacity to 1.28 million cubic metres, which will become PetroChina’s largest gas storage space, eclipsing two terminals in Dalian and Rudong in Jiangsu.
  • Japan’s Inpex announced that production at the offshore Ichthys LNG project in Australia will begin in March 2018, the fifth of Australia’s mega LNG export facilities to start up.

Corporate

  • Saudi Aramco will be boosting its capital expenditure budget by some 10% next year, as it prepares to restructure ahead of its planned IPO. This would take capital spending above US$100 billion, up from the US$93 billion allocated for 2017, to be primarily focused on domestic projects.
  • Petronas may be forced to exit Myanmar, as members of the Malaysian parliament have demanded that the state oil firm depart from upstream there in protest of the recent, ongoing violence against the Rohingya Muslim community. Its assets in Myanmar are predominantly gas-based, including a pipeline to ships gas to Thailand.

Saudi energy services company Arkad is forming a joint venture with Switzerland-s ABB to build a North Africa and Gulf-focused business. The focus of the new company will be on Algeria, Kuwait and the UAE.

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September, 16 2021
The New Wave of Renewable Fuels

In 2021, the makeup of renewables has also changed drastically. Technologies such as solar and wind are no longer novel, as is the idea of blending vegetable oils into road fuels or switching to electric-based vehicles. Such ideas are now entrenched and are not considered enough to shift the world into a carbon neutral future. The new wave of renewables focus on converting by-products from other carbon-intensive industries into usable fuels. Research into such technologies has been pioneered in universities and start-ups over the past two decades, but the impetus of global climate goals is now seeing an incredible amount of money being poured into them as oil & gas giants seek to rebalance their portfolios away from pure hydrocarbons with a goal of balancing their total carbon emissions in aggregate to zero.

Traditionally, the European players have led this drive. Which is unsurprising, since the EU has been the most driven in this acceleration. But even the US giants are following suit. In the past year, Chevron has poured an incredible amount of cash and effort in pioneering renewables. Its motives might be less than altruistic, shareholders across America have been particularly vocal about driving this transformation but the net results will be positive for all.

Chevron’s recent efforts have focused on biomethane, through a partnership with global waste solutions company Brightmark. The joint venture Brightmark RNG Holdings operations focused on convert cow manure to renewable natural gas, which are then converted into fuel for long-haul trucks, the very kind that criss-cross the vast highways of the US delivering goods from coast to coast. Launched in October 2020, the joint venture was extended and expanded in August, now encompassing 38 biomethane plants in seven US states, with first production set to begin later in 2021. The targeting of livestock waste is particularly crucial: methane emissions from farms is the second-largest contributor to climate change emissions globally. The technology to capture methane from manure (as well as landfills and other waste sites) has existed for years, but has only recently been commercialised to convert methane emissions from decomposition to useful products.

This is an arena that another supermajor – BP – has also made a recent significant investment in. BP signed a 15-year agreement with CleanBay Renewables to purchase the latter’s renewable natural gas (RNG) to be mixed and sold into select US state markets. Beginning with California, which has one of the strictest fuel standards in the US and provides incentives under the Low Carbon Fuel Standard to reduce carbon intensity – CleanBay’s RNG is derived not from cows, but from poultry. Chicken manure, feathers and bedding are all converted into RNG using anaerobic digesters, providing a carbon intensity that is said to be 95% less than the lifecycle greenhouse gas emissions of pure fossil fuels and non-conversion of poultry waste matter. BP also has an agreement with Gevo Inc in Iowa to purchase RNG produced from cow manure, also for sale in California.

But road fuels aren’t the only avenue for large-scale embracing of renewables. It could take to the air, literally. After all, the global commercial airline fleet currently stands at over 25,000 aircraft and is expected to grow to over 35,000 by 2030. All those planes will burn a lot of fuel. With the airline industry embracing the idea of AAF (or Alternative Aviation Fuels), developments into renewable jet fuels have been striking, from traditional bio-sources such as palm or soybean oil to advanced organic matter conversion from agricultural waste and manure. Chevron, again, has signed a landmark deal to advance the commercialisation. Together with Delta Airlines and Google, Chevron will be producing a batch of sustainable aviation fuel at its El Segundo refinery in California. Delta will then use the fuel, with Google providing a cloud-based framework to analyse the data. That data will then allow for a transparent analysis into carbon emissions from the use of sustainable aviation fuel, as benchmark for others to follow. The analysis should be able to confirm whether or not the International Air Transport Association (IATA)’s estimates that renewable jet fuel can reduce lifecycle carbon intensity by up to 80%. And to strengthen the measure, Delta has pledged to replace 10% of its jet fuel with sustainable aviation fuel by 2030.

In a parallel, but no less pioneering lane, France’s TotalEnergies has announced that it is developing a 100% renewable fuel for use in motorsports, using bioethanol sourced from residues produced by the French wine industry (among others) at its Feyzin refinery in Lyon. This, it believes, will reduce the racing sports’ carbon emissions by an immediate 65%. The fuel, named Excellium Racing 100, is set to debut at the next season of the FIA World Endurance Championship, which includes the iconic 24 Hours of Le Mans 2022 race.

But Chevron isn’t done yet. It is also falling back on the long-standing use of vegetable oils blended into US transport fuels by signing a wide-ranging agreement with commodity giant Bunge. Called a ‘farmer-to-fuelling station’ solution, Bunge’s soybean processing facilities in Louisiana and Illinois will be the source of meal and oil that will be converted by Chevron into diesel and jet fuel. With an investment of US$600 million, Chevron will assist Bunge in doubling the combined capacity of both plants by 2024, in line with anticipated increases in the US biofuels blending mandates.

Even ExxonMobil, one of the most reticent of the supermajors to embrace renewables wholesale, is getting in on the action. Its Imperial Oil subsidiary in Canada has announced plans to commercialise renewable diesel at a new facility near Edmonton using plant-based feedstock and hydrogen. The venture does only target the Canadian market – where political will to drive renewable adoption is far higher than in the US – but similar moves have already been adopted by other refiners for the US market, including major investments by Phillips 66 and Valero.

Ultimately, these recent moves are driven out of necessity. This is the way the industry is moving and anyone stubborn enough to ignore it will be left behind. Combined with other major investments driven by European supermajors over the past five years, this wider and wider adoption of renewable can only be better for the planet and, eventually, individual bottom lines. The renewables ball is rolling fast and is only gaining momentum.

End of Article

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Market Outlook:

  • Crude price trading range: Brent – US$71-73/b, WTI – US$68-70/b
  • Global crude benchmarks have stayed steady, even as OPEC+ sticks to its plans to ease supply quotas against the uncertainty of rising Covid-19 cases worldwide
  • However, the success of vaccination drives has kindled hope that the effect of lockdowns – if any – will be mild, with pockets of demand resurgence in Europe; in China, where there has been a zero-tolerance drive to stamp out Covid outbreaks, fuel consumption is strengthening again, possibly tightening fuel balances in Q4
  • Meanwhile, much of the US Gulf of Mexico crude production remains hampered by the effects of Hurricane Ida, providing a counter-balance on the supply side

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