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Last Updated: December 14, 2017
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Market Watch

Headline crude prices for the week beginning 11 December 2017 – Brent: US$63/b; WTI: US$57/b

  • The shutdown of the Forties pipeline system in the UK North Sea has been a shock to the market, pulling Brent and WTI prices up. Repairs to the important oil conduit will take at least two weeks to complete.
  • The hairline crack at Forties – connecting North Sea oilfields to the Hound Point export terminal in Scotland – is less severe than expected, cutting off a rally that was beginning to gain steam.
  • The UAE announced that OPEC and NOPEC will outline an exit strategy for the extended supply freeze deal at the next meeting in June; Kuwait suggested that if oil market tightens by then, the deal could be ended before the current planned 31 December 2018 deadline.
  • Threats of a strike by one of Nigeria’s two main oil unions over a mass sacking of workers could disrupt production in Africa’s largest oil producer, but tensions seem on the lid for now.
  • US crude oil stockpiles fell more than expected by 2.89 million barrels as refineries hiked output, supporting prices, but gasoline and distillate inventories also posted surprisingly large stockpile gains.
  • JP Morgan believes that the new tipping point for American shale is US$60/b, with the investment bank believing that only a sustained run above that level will lead to shale drillers rethinking their spending plans for 2018, which were based on a US$45-55/b WTI range.
  • Active US rig count gains slowed down; only 2 new sites entering operation last week – both oil – but the small net gain masks a flurry of activity within the main shale basins.
  • Crude price outlook: With threats of a prolonged Forties shutdown subsiding and the strike risk in Nigeria abating, there does not appear to be much driving crude prices up this week. Prices should drift down to US$62/b for Brent and US$56/b for WTI.


Headlines of the week

Upstream

  • A leak at the Forties Pipeline System in the North Sea has triggered a shutdown at the UK’s most important site, causing jumps in global prices.
  • After slashing costs by almost half to KR49 billion, Statoil has sanctioned the Castberg offshore Arctic oil project, with production due in 2022.
  • Hungary’s MOL is reportedly seeking to exit the UK North Sea, as the prolonged slump in oil prices placed its margins under pressure.
  • Enterprise will be converting one its Permian-Texas Gulf Gas pipelines from NGLs to crude oil, upping its oil pipeline capacity to 650 kb/d.
  • Total and Sonangol have signed several agreements covering upstream and downstream in Angola, paving the way for a spat of new projects.
  • PetroChina has conducted a major internal transfer of 16 E&P blocks between its subsidiaries that will allow those with mature fields in the east to explore for new discoveries in the west and central regions.
  • Eni has restarted production at the Goliat oil field in Norway’s Barents Sea, after problems at the platform caused a 2-month shutdown.
  • China is offering five oil and gas blocks in the remote Tarim basin in Xinjian to domestic investors in an auction that excludes the state oil giants to promote private sector participation in its upstream industry.

Downstream

  • ExxonMobil has sent its first fuel cargo – 120,000 barrels of diesel and gasoline – to Mexico as the drive to supply the country turns into a race.  
  • MMEX Resources had doubled the capacity of its planned refinery in West Texas, from 50 kb/d to 100 kb/d, capitalising on the Permian Basin boom.
  • Nigeria plans to break ground on Petrolex Oil & Gas’ new 250 kb/d refinery in Ibefun, Ogun state this month.
  • BP is building a third lubricants blending plant – which will be its largest ever - in China; the 200 mtpa plant serving as a strategic hub for BP and Castrol when complete in 2021.
  • Petronas’ South African unit Engen and retail specialist Vivo Energy have struck a US$256 million deal to combine their African fuel network assets.
  • Vietnam’s PVOil and Binh Son Refining, which runs Dung Quat, has struck two large crude purchase deals with Azerbaijan’s Socar and Glencore.

Natural Gas/LNG

  • Production at Novatek’s Yamal LNG 5.5 mtpa Train 1 has officially began, with the first cargo leaving the port of Sabetta last week to China.
  • Cheniere has chartered 7 additional LNG tankers bringing its total fleet up to 22 as it attempts to supply Northeast Asia’s furious winter demand.
  • Italy, Greece, Cyprus and Israel have collectively agreed to building the €3 billion East Med gas pipeline to link new discoveries in the Levantine Basin to western Europe via Greece and Italy.
  • Steelhead LNG has pulled the plug on its proposed FLNG project in Canada’s Malahat over land squabbles with the Malahat First Nation.
  • Arrow Energy has signed a deal to supply some 5 tcf of coalbed methane gas from the Surat Basin over a contract life of 27 yeas to Shell’s Queensland Curtis LNG project starting in 2021.
  • The Asian Development Bank has stepped in to provide some US$583 billion in financing to development the Reliance Bangladesh LNG project.

Corporate

  • Pertamina will be taking over state gas utility PGN by 1Q18 as Indonesia forms a new national energy holding company and prevent ‘asset duplication’, with PGN absorbing Pertagas to act as the state gas arm.
  • Thailand’s Gulf Energy Development made its debut on the Stock Exchange of Thailand, with the natural gas-power producer trading at 27.8% higher than the IPO price.
  • Adnoc has set a target of raising US$902 million by floating its fuel-retail unit, reducing the stake on sale from 20% to 10%.

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EIA expects U.S. energy-related CO2 emissions to decrease annually through 2021

In its latest Short-Term Energy Outlook (STEO), released on January 14, the U.S. Energy Information Administration (EIA) forecasts year-over-year decreases in energy-related carbon dioxide (CO2) emissions through 2021. After decreasing by 2.1% in 2019, energy-related CO2 emissions will decrease by 2.0% in 2020 and again by 1.5% in 2021 for a third consecutive year of declines.

These declines come after an increase in 2018 when weather-related factors caused energy-related CO2 emissions to rise by 2.9%. If this forecast holds, energy-related CO2 emissions will have declined in 7 of the 10 years from 2012 to 2021. With the forecast declines, the 2021 level of fewer than 5 billion metric tons would be the first time emissions have been at that level since 1991.

After a slight decline in 2019, EIA expects petroleum-related CO2 emissions to be flat in 2020 and decline slightly in 2021. The transportation sector uses more than two-thirds of total U.S. petroleum consumption. Vehicle miles traveled (VMT) grow nearly 1% annually during the forecast period. In the short term, increases in VMT are largely offset by increases in vehicle efficiency.

Winter temperatures in New England, which were colder than normal in 2019, led to increased petroleum consumption for heating. New England uses more petroleum as a heating fuel than other parts of the United States. EIA expects winter temperatures will revert to normal, contributing to a flattening in overall petroleum demand.

Natural gas-related CO2 increased by 4.2% in 2019, and EIA expects that it will rise by 1.4% in 2020. However, EIA expects a 1.7% decline in natural gas-related CO2 in 2021 because of warmer winter weather and less demand for natural gas for heating.

Changes in the relative prices of coal and natural gas can cause fuel switching in the electric power sector. Small price changes can yield relatively large shifts in generation shares between coal and natural gas. EIA expects coal-related CO2 will decline by 10.8% in 2020 after declining by 12.7% in 2019 because of low natural gas prices. EIA expects the rate of coal-related CO2 to decline to be less in 2021 at 2.7%.

The declines in CO2 emissions are driven by two factors that continue from recent historical trends. EIA expects that less carbon-intensive and more efficient natural gas-fired generation will replace coal-fired generation and that generation from renewable energy—especially wind and solar—will increase.

As total generation declines during the forecast period, increases in renewable generation decrease the share of fossil-fueled generation. EIA estimates that coal and natural gas electric generation combined, which had a 63% share of generation in 2018, fell to 62% in 2019 and will drop to 59% in 2020 and 58% in 2021.

Coal-fired generation alone has fallen from 28% in 2018 to 24% in 2019 and will fall further to 21% in 2020 and 2021. The natural gas-fired generation share rises from 37% in 2019 to 38% in 2020, but it declines to 37% in 2021. In general, when the share of natural gas increases relative to coal, the carbon intensity of the electricity supply decreases. Increasing the share of renewable generation further decreases the carbon intensity.

U.S. annual carbon emissions by source

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2020
Note: CO2 is carbon dioxide.

January, 21 2020
Latest issue of GEO ExPro magazine covers Europe and Frontier Exploration, Modelling and Mapping, and Geochemistry.

GEO ExPro Vol. 16, No. 6 was published on 9th December 2019 bringing light to the latest science and technology activity in the global geoscience community within the oil, gas and energy sector.

This issue focusses on oil and gas exploration in frontier regions within Europe, with stories and articles discussing new modelling and mapping technologies available to the industry. This issue also presents several articles discussing the discipline of geochemistry and how it can be used to further enhance hydrocarbon exploration.

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.

Download GEO ExPro Vol. 16, No. 6

January, 20 2020
Your Weekly Update: 13 - 17 January 2020

Market Watch   

Headline crude prices for the week beginning 13 January 2020 – Brent: US$64/b; WTI: US$59/b

  • Tensions in the Persian Gulf have abated, but not disappeared, as both the US and Iran stepped back from going to war; the buck, so far, has stopped with Tehran’s retaliation to the US assassination of its top general with a barrage of missile strikes at US bases in Iraq
  • The underlying situation is still fragile, with the Iranian population swinging from supporting the government to protesting its accidental downing of a commercial Ukraine Airlines plane; with the risk of war easing, crude prices have fallen back to their pre-crisis levels
  • However, American and foreign oil companies have pulled their staff from crude fields in northern Iraq and Kurdistan, including Chevron, as the oil industry in Iraq monitors the risk – and consequences – of military action
  • In precaution, oil tankers have begun boosting their rates once again to haul crude through the Persian Gulf, with quoted rates now at their highest level since the 2019 attacks on ships passing through the narrow straight
  • Although political tensions remain fresh, Saudi Arabia said that OPEC and the OPEC+ club were instead focused on using their window of production cuts to reduce excess oil stockpiles to levels ‘within the contours of 2010-2014’
  • In the US, not only is shale output staying strong, but production in the US Gulf of Mexico also made history, exceeding 2 mmb/d for the first time ever in 2019, beating the previous high recorded in 2018
  • Worries about the health of global oil demand persist… although the US and China signed a Phase 1 trade deal, the agreement is more about halting escalation of the trade war than repairing inflicted damage; a slowdown in Chinese economic growth could lead to oil demand growth halving in 2020 in China according to CNPC
  • The US active rig count fell for a second consecutive week, losing 15 rigs – 11 oil and 4 gas – for the 17th weekly decline of the past 20 weeks; losses in the Permian were once again high, shedding a total of 6 rigs
  • Crude oil prices should remain rangebound with Brent at US$63-65/b and WTI at US$57-59/b, as the market retreats back to its ever-present worries about demand while geopolitical risk premiums scale back


Headlines of the week

Upstream

  • Guyana’s success is now extending to its neighbours, with Total and Apache announcing a ‘significant’ oil discovery at their Maka Central-1 well in Suriname’s Block 58, which lies adjacent to the prolific Stabroek Block
  • BP has agreed to sell its operating interest in the UK North Sea’s Andrew assets – including the Andrew platform as well as the Andrew, Arundel, Cyrus, Farragon, and Kinnoull fields – along with its 27.5% non-operating interest in the Shearwater field to Premier Oil for some US$625 million
  • Liberia will kick start its next offshore licensing round in April 2020, offering nine blocks in the Harper basin, one of the few offshore regions in West Africa that remains unexplored and undrilled
  • Equinor has extended the life of its Statfjord assets beyond 2030, with plans to commission up to 100 new wells over the next decade, deferring decommissioning with a goal of maintaining current output levels beyond 2025
  • After Murphy Oil, Petrofac and ExxonMobil, Repsol is the latest major considering an upstream exit from Malaysia, covering assets that include six development blocks and the major Kinabalu oilfield in Sabah
  • Senegal’s government has approved Woodside’s offshore Sangomar Field Development, which will involve the drilling of 23 subsea wells and a FPSO with the capacity to process up to 100,000 b/d of crude
  • Equinor has announced plans to reduce greenhouse gas emissions from its offshore fields and onshore plants in Norway by 40% by 2030, 70% by 2040 and to near zero by 2050 from 2019 levels

Midstream/Downstream

  • Shell is reportedly seeking buyers for its 144 kb/d Anacortes refinery in Washington state, which would be its third North American sale in two years after divesting its Martinez refinery in California and Sarnia refinery in Ontario
  • Shell has announced plans to increase its share of the Mexican fuel market to 15%, which would require considerable growth in its network of 200 fuel stations in 12 states that currently represent 1% of the market
  • Occidental Petroleum plans to reduce its holdings in Western Midstream Partners – acquired as part of its controversial takeover of Anadarko – to less than 50%, potentially removing up to US$7.8 billion of debt

Natural Gas/LNG

  • Sempra Energy and Saudi Aramco have signed an agreement that will see the Saudi giant play a bigger part in the planned 22 million tpa Port Arthurt LNG project, following an existing agreement to purchase 5 mtpa signed in May 2019
  • Kuwait Petroleum Corp has agreed to purchase 3 million tpa of LNG from Qatar Petroleum for 15 years beginning 2022, with Kuwait remaining one of the few countries in the Middle East that remain neutral to the Saudi-Qatar standoff
  • ExxonMobil has signed an agreement with midstream company Outrigger Energy II to build a 250 mmscf/d cryogenic gas processing, gathering and pipeline system in the Bakken’s Williston Basin in North Dakota
  • The Larak gas field in Sarawak has achieved first gas, operated by SapuraOMV Upstream as part of the SK408 PSC that includes the Gorek and Bakong fields, with output planned to be processed into LNG at Petronas’ Bintulu complex
  • Russia’s TurkStream natural gas pipeline – connecting Russia, Turkey, Bulgaria and eventually Serbia and Hungary - has officially begun operations, delivering up to 13 bcm of Russian gas that can be rerouted from the Ukraine route
January, 17 2020