NrgEdge Editor

Sharing content and articles for users
Last Updated: May 17, 2018
21 views
Business Trends
image

Market Watch

Headline crude prices for the week beginning 14 May 2017 – Brent: US$77/b; WTI: US$71/b

  • US President Donald Trump’s decision to withdraw from the nuclear deal with Iran continues to rattle the markets, with a six-month deadline issued for companies to wind down purchases of Iranian crude.
  • Unlike previous sanctions, this is the US acting as a lone wolf, with the EU already considering moves to nullify the effects of the sanctions on its firms, and both China and India apparently committed to Iranian volumes.
  • Iran appears to be blithely ignoring the new sanctions, readying first commercial exports of a new crude grades – West Karoun.
  • The risk of the row escalating has pushed prices up, with Brent looking like it could challenge US$80/b if it continues. The Brent-WTI spread is also widening, given that Brent is the global benchmark and widely used East of Suez as a pricing basis.
  • With prices approaching US$80/b, some analysts have warned of the higher prices causing some demand destruction. Strong demand, particularly from Asia, has underpinned crude price recoveries this year.
  • OPEC’s internal data shows that the global oil glut has been virtually eliminated, but will continue the supply freeze. This points to divergence in OPEC, with some members like Saudi Arabia gunning for higher prices while others believing US$60/b is a more stable equilibrium.
  • With the potential loss of Iranian volumes from the global market, some suppliers are jostling for position. Even Saudi Arabia, so committed to its OPEC production freeze, has raised the prospect of raising its output.
  • Adherence to the OPEC-NOPEC production freeze deal also appears to be slipping, as some members take advantage of the Iranian (and Venezuelan) distraction.
  • In the US, WTI prices exceeding US$70/b should trigger a new slew of shale output, but Centennial Resource Development CEO Mark Papa says US shale producers are unlikely to boost output, having been burnt from previous experiences.
  • However, oil and gas drilling permits in Texas were issued at rates 34% higher in April year-on-year, while 10 new oil rigs entered service last week, bringing the active oil rig total to 844 and the total rig count to 1,045.
  • Crude price outlook: Turmoil over the Iranian nuclear deal situation – and now new belligerence from North Korea – should keep prices high. Expect Brent to trade at US$78-80/b and WTI/Shanghai to US$70-72/b.

Headlines of the week

Upstream

  • Shell will be selling its stake in oil sands producer Canadian Natural Resources for US$3.3 billion, as it refocuses from dirty oil to clean energy.
  • Eni has completed its ramp-up project at Angola’s Ochigufu field, bringing output of Block 15/06 above 150,000 b/d and in line with its plan to add some 54,000 b/d to the block’s output by 2019.
  • Lukoil and Iraq’s Basra Oil Company will collaborate to lift output at the West-Qurna 2 field to 480,000 b/d by 2020 and to 800,000 b/d by 2025.
  • Completion of a new oil processing facility has lifted production at Eni’s Zubair field in south Iraq by 50,000 b/d to 475,000 b/d. Three additional facilities are planned, which will bring output up to 625,000 b/d.
  • Shell is aiming to begin offshore drilling in Mexico in late 2019 or 2020, after it was awarded nine blocks in the recent deepwater auction.
  • American independent Apache is aiming to fast-track its Garten oil discovery in the North Sea, linking it to the Beryl Alpha platform.
  • The shortlist is out for Thailand’s upcoming upstream auction, with PTTEP, Chevron, Total, Mubadala and OMV among those vying for the prodigious Bongkot and Erawan offshore gas fields.

Downstream

  • ExxonMobil has sold its 190 kb/d Augusta refinery in Italy, three fuel terminals in Augusta, Palermo and Naples, and associated pipelines to Algeria’s Sonatrach, but will retain its Italian based oils operations.
  • Total and Sonatrach will build a US$1.5 bn polypropylene plant in Arzew, Algeria, designed for 550kt of polypropylene and 650kt of propane.
  • SABIC is aiming to purchase a 50% stake in the US$4.6 billion petrochemical plant planned by ONGC in Western Gujarat.
  • Sinopec has begun construction of a 4.2 mtpa catalytic cracking unit at its Sino-Kuwait Guangdong refinery, expected to be completed in September.
  • South Korean firms Lotte Chemical and Hyundai Oilbank are planning a US$2.5 billion, 1.15 mtpa petchems plant fed by heavy fuel oil in Daesan.
  • Saudi Arabia and Sudan are discussing a five-year oil deal, where Saudi Arabia will supply some 1.8 million tons of oil products to Sudan per year.
  • Total will be selling its fuel retail business in Haiti to Bandari Corporation, consisting of 92 service stations and fuel trading operations.
  • In an attempt to appease both Big Oil and Big Corn, the Trump administration is considering allowing exported ethanol volumes to count towards America’s national biofuels mandate.

Natural Gas/LNG

  • Eni has started up its third production unit at its Zohr project in Egypt, increasing installed capacity to 1.2 bcf/d. This follows the successful startup of the second unit last month, with output now at 1.1 bcf/d.
  • After multiple delays, Inpex is finally set to launch its Ichthys LNG project in Australia, with a target start date of end May 2018.
  • SDX Energy has announced a conventional natural gas discovery at the LMS-1 exploration wells in Morocco’s Lalla Mimouna, which has ‘significantly exceeded’ pre-drill estimates.
  • Total and Oman have agreed to jointly develop an integrated gas project in Oman aimed to developing and establishing an LNG bunkering service.

oilandgas oilandgasnews news weeklyupdate marketwatch
3
1 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

Permian’s Pipeline Lifeline

The Permian is in desperate need of pipelines. That much is true. There is so much shale liquids sloshing underneath the Permian formation in Texas and New Mexico, that even though it has already upended global crude market and turned the USA into the world’s largest crude producer, there is still so much of it trapped inland, unable to make the 800km journey to the Gulf Coast that would take them to the big wider world.

The stakes are high. Even though the US is poised to reach some 12 mmb/d of crude oil production next year – more than half of that coming from shale oil formations – it could be producing a lot more. This has already caused the Brent-WTI spread to widen to a constant US$10/b since mid-2018 – when the Permian’s pipeline bottlenecks first became critical – from an average of US$4/b prior to that. It is even more dramatic in the Permian itself, where crude is selling at a US$10-16/b discount to Houston WTI, with trends pointing to the spread going as wide as US$20/b soon. Estimates suggest that a record 3,722 wells were drilled in the Permian this year but never opened because the oil could not be brought to market. This is part of the reason why the US active rig count hasn’t increased as much as would have been expected when crude prices were trending towards US$80/b – there’s no point in drilling if you can’t sell.

Assistance is on the way. Between now and 2020, estimates suggest that some 2.6 mmb/d of pipeline capacity across several projects will come onstream, with an additional 1 mmb/d in the planning stages. Add this to the existing 3.1 mmb/d of takeaway capacity (and 300,000 b/d of local refining) and Permian shale oil output currently dammed away by a wall of fixed capacity could double in size when freed to make it to market.

And more pipelines keep getting announced. In the last two weeks, Jupiter Energy Group announced a 90-day open season seeking binding commitments for a planned 1 mmb/d, 1050km long Jupiter Pipeline – which could connect the Permian to all three of Texas’ deepwater ports, Houston, Corpus Christi and Brownsville. Plains All American is launching its 500,000 b/d Sunrise Pipeline, connecting the Permian to Cushing, Oklahoma. Wolf Midstream has also launched an open season, seeking interest for its 120,000 b/d Red Wolf Crude Connector branch, connecting to its existing terminal and infrastructure in Colorado City.

Current estimates suggest that Permian output numbered around 3.5 mmb/d in October. At maximum capacity, that’s still about 100,000 b/d of shale oil trapped inland. As planned pipelines come online over the next two years, that trickle could turn into a flood. Consider this. Even at the current maxing out of Permian infrastructure, the US is already on the cusp on 12 mmb/d crude production. By 2021, it could go as high as 15 mmb/d – crude prices, permitting, of course.

As recently reported in the WSJ; “For years, the companies behind the U.S. oil-and-gas boom, including Noble Energy Inc. and Whiting Petroleum Corp. have promised shareholders they have thousands of prospective wells they can drill profitably even at $40 a barrel. Some have even said they can generate returns on investment of 30%. But most shale drillers haven’t made much, if any, money at those prices. From 2012 to 2017, the 30 biggest shale producers lost more than $50 billion. Last year, when oil prices averaged about $50 a barrel, the group as a whole was barely in the black, with profits of about $1.7 billion, or roughly 1.3% of revenue, according to FactSet.”

The immense growth experienced in the Permian has consequences for the entire oil supply chain, from refining balances – shale oil is more suitable for lighter ends like gasoline, but the world is heading for a gasoline glut and is more interested in cracking gasoil for the IMO’s strict marine fuels sulphur levels coming up in 2020 – to geopolitics, by diminishing OPEC’s power and particularly Saudi Arabia’s role as a swing producer. For now, the walls keeping a Permian flood in are still standing. In two years, they won’t, with new pipeline infrastructure in place. And so the oil world has two years to prepare for the coming tsunami, but only if crude prices stay on course.

Recent Announced Permian Pipeline Projects

  • September 2018 – EPIC Midstream Holdings – 675,000 b/d, 1125km, 24-30’ diameter, 4Q19 target opening
  • November 2018, Wolf Midstream Partners – 500,000 b/d, 65km, 16’ diameter, 2H2019 target opening
  • November 2018, Jupiter Energy – 1 mmb/d, 1050km, 36’ diameter, 2020 target opening
  • December 2018, Plains All American Pipeline – 575,000 b/d, 830km, 26’ diameter, 3Q19 target opening
December, 04 2018
Your Weekly Update: 3 - 7 December 2018

Market Watch

Headline crude prices for the week beginning 3 December 2018 – Brent: US$61/b; WTI: US$52/b

  • After falling down to fresh lows last week – with WTI prices dipping below US$50/b at one point – crude oil prices improved after the G20 meeting in Buenos Aires, where the US and China agreed to a temporary truce over their trade war
  • While no concrete agreements over energy were announced at the G20 summit, the slightly thawing in trade tensions allowed crude benchmarks to rise slightly, assisted by an announcement by Canadian producers in Alberta that output would be cut by 325,000 b/d beginning January
  • Russia and Saudi Arabia agreed at the G20 summit to extend the OPEC+ deal into 2019, suggesting that a coordinated oil output cut was in the works, also supported prices ahead of OPEC’s meeting in Vienna this week
  • Not present at the OPEC meeting, however, will be Qatar, which quit the oil cartel in a surprise move; the tiny sultanate said it was quitting due to its small oil production, choosing instead to focus on its LNG industry, but the move can be seen as a response to the Saudi-led boycott of Qatar, calling into question Saudi Arabia’s ability to hold the fragile OPEC coalition together
  • Consensus among analysts point to OPEC+ agreeing to remove some 800,000 b/d of crude oil from the market beginning January, aimed at establishing a floor for oil prices at some US$65/b
  • The downward spiral of crude prices has put the brakes on US drilling activity, with 2 new oil rigs offset by the loss of 5 gas rigs last week; analysts are expecting shale explorers to cut spending budgets in 2019 in response to weak prices, raising spectres of the 2015 price slump
  • Crude price outlook: Ahead of the OPEC meeting on December 6, crude should be kept up by expectations of a renewed supply cut, with Brent likely to trade rangebound around US$61-63/b and WTI at US$52-53/b

Headlines of the week

Upstream

  • Buoyed by the prolific nature of the Permian Basin, Shell has announced plans to nearly double its production in the shale patch with AI-powered technology
  • China and the Philippines have set aside sovereignty issues, signing an agreement for joint exploration and development in the South China Sea
  • Facing severe pipeline bottlenecks, Canada’s Alberta province is looking to purchase rail cars to ship more crude oil by train out of the province towards the US, as a temporary measure while new pipeline are proposed and built
  • Shell has completed the sale of Shell E&P Ireland to Nephin Energy Holdings, which includes a 45% in the Corrib gas venture, for US$1.3 billion
  • In Norway, Shell also sold its interests in the Draugen and Gjøa fields for US$526 million to OKEA AS, but retains its interests in the Ormen Lange and Knarr fields, as well as the Troll, Valemon and Kvitebjørn projects
  • Petrobras has sold its stake in 34 onshore production fields to Brazilian firm 3R Petroleum for US$453.1 million, as well as stakes in three shallow-water offshore fields off Rio de Janeiro to Perenco for US$370 million
  • Pemex tripled its estimated reserves in the Ixachi field to 1.3 billion barrels of oil, calling it the ‘most important onshore field in 25 years’ and expecting peak production of 80,000 b/d of condensate and 720 mscf/d of gas by 2022

Downstream

  • Uganda has pushed back the opening of its first oil refinery to 2023, in line with estimates by Total, CNOOC and Tullow Oil, as crude oil production is now only expected to begin in 2021
  • Malaysia will be introducing a B10 biodiesel mandate in December over a phased rollout, with complete implementation expected by February 2018
  • Pertamina expects to begin works on upgrading its Balikpapan refinery in early 2019, aimed to increasing fuel standards to Euro V and upgrading capacity to process sour crude together with its current medium heavies
  • ExxonMobil plans to upgrade its Rotterdam refinery to expand Group II base stock production, following the installation of a new hydrocracker
  • The US EPA has increased its annual blending mandate for advanced biofuels by 15% and kept conventional biofuels blending requirement steady for 2019, while maintaining waivers for selected refineries

Natural Gas/LNG

  • Petronas and Vitol Asia have signed a long-term LNG supply agreement, with Petronas providing LNG from the LNG Canada project in Kitimat, providing up to 800,000 tons per annum for 15 years beginning 2024
  • Eni and Anadarko have been giving a 2023 deadline to submit key development plans for the Area 1 and 4 LNG complex in Mozambique
  • Tullow Oil is backing the attempt by three former Cove Energy executives in the Comoros Islands by taking stakes in Discover Exploration’s blocks, hoping to repeat the trio’s success in discovering the Rovuma block
  • South Korea’s Posco Daewoo has signed a deal with Brunei National Petroleum Company to jointly explore LNG opportunities in Brunei, with specific focus on the development of the Dehwa area operated by Posco Daewoo
  • Rosnedt and the Beijing Gas Group have set up a joint venture focusing on building and operating a network of up to 170 CNG fuel stations in Russia, using LNG as motor fuel
December, 06 2018
Overall Lubricants Market Is Growing In Bangladesh

The engine oil market has grown up around 10 to 12% in the last three years because of various reasons, mostly because of the rise of automobiles. 

According to the Bangladesh Road Transport Authority (BRTA), the number of registered petrol and diesel-powered vehicles is 3,663,189 units.

The number of automotive vehicles has increased by 2.5 times in the last eight years.

The demand for engine oils will rise keeping pace with the increasing automotive vehicles, with an expected 3% yearly growths.

Mostly, for this reason, the annual lubricant consumption raised over 14% growth for the last four years. Now its current demand is around 160 million tonnes.

The overall lubricants demand has increased also for the growth of the power sector, which has created a special market for industrial lubricants oil.

The lubricants oil market size for industries has doubled in the last five years due to the establishment of a number of power plants across the country.

The demand for industrial oil will continue to rise at least for the next 15 years, as the quick rental power plants need a huge quantity of lube oil to run.

The industries account for 30% of the total lubricant consumption; however, it is expected to take over 35% of the overall demand in the next 10 years.

Mobil is the market leader with 27% market share; however, market insiders say that around 70% market shares belong to various brands altogether, which is still undefined.

 It is already flooded with many global and local brands.

December, 01 2018