OPEC/non-OPEC supply boost likely but keeps oil market on a knife-edge
A fortnight after an unexpected proposal to boost global oil supply by 1 million b/d emerged from a meeting of the Saudi and Russian energy ministers in St. Petersburg, the market has been left hanging in suspense as to whether or not it will be implemented.
The difference between a “yes” and a “no” has so far amounted to a spread of around $4/barrel for Brent futures, between a nervous market driving up prices towards the $80/bbl psychological mark and furiously selling off to pre-empt an increase in supply.
Should a production hike of 1 million b/d be agreed, we estimate a slump of another $4/barrel or so in Brent, cooling it to the low-$70s compared with the 42-month high close of $79.80 notched on May 23.
Between the two diametrically opposite options of raising output by 1 million b/d and keeping the current cuts intact, lies the possibility of agreeing a smaller boost, as we discussed in last weeks viewsletter. The increment would need to be at least more than 500,000 b/d. Anything less would be ineffective in countering the unintended losses from Venezuela and Iran, among others, likely leaving Brent in the mid-$70s, ready to spike again if the supply tightness worsens. As we have said before, even an increase of 1 million b/d is conservative.
Global oil production uncertainties are the highest since the Arab Spring took hold in 2011 and could swing the market into a supply shock that leaves OPEC struggling to plug the gap promptly, or worse, plugging it at all, given the group’s limited spare capacity.
These supply uncertainties arise from accelerating natural declines in conventional oil fields across the globe, amplified by sustained and severe cuts in upstream investment since 2015; delays and teething issues in the few greenfield oil projects coming online; and heightened geopolitical tensions haunting several major oil-producing countries.
Meanwhile, WTI has drifted off again, disconnecting from the global markets. August NYMEX WTI futures closed at a discount of $11.43/barrel to the corresponding ICE Brent contract on June 7, the widest since February 2015. WTI Midland, the price of tight oil in the prolific Permian basin, remains under pressure as surging production has bumped against pipeline takeaway capacity and the forward curve shows a dim view of wellhead prices until September 2019.
WTI Midland is also dragging down NYMEX WTI futures, which represent the value of barrels at the Cushing storage in Oklahoma. Such is the bearish outlook due to the Permian/Cushing bottleneck that not even a third consecutive weekly decline in Cushing stocks reported by the US Energy Information Administration on Wednesday provided any lift.
The drama around Venezuelan output and Iran sanctions has reached a crescendo. We bring you our perspective on the latest twists and what they mean for the ministers meeting in Vienna on June 22.
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Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2018; ClipperData
Note: Liquid fuels production includes crude oil, lease condensate, hydrocarbon gas liquids, biofuels, and refinery processing gain.
Iran's crude oil exports and production have declined since the May 2018 announcement by the United States that it would withdraw from the Joint Comprehensive Plan of Action (JCPOA) and reinstate sanctions against Iran.
The announcement included two wind-down periods to allow those doing business that involved Iran time to comply. On August 6, 2018, the first wind-down period ended and triggered the re-imposition of some sanctions. On November 4, 2018, the second wind-down period will end and trigger the re-imposition of full sanctions, including a number of measures that target Iran’s energy sector.
According to data from ClipperData, Iran's exports of crude oil and condensate peaked in June at about 2.7 million barrels per day (b/d), more than 300,000 b/d higher than the average during the first four months of the year (before the May announcement of sanctions). In September, Iran’s crude oil and condensate exports fell to 1.9 million b/d. Although some countries, such as France and South Korea, stopped importing crude oil and condensate from Iran in July, other countries continue to import from Iran. The United States has not imported crude oil and condensate from Iran in several decades.
Source: U.S. Energy Information Administration, based on ClipperData
ClipperData indicates that China and India collectively received nearly half of Iran's crude oil and condensate exports in the first half of 2018. During this period, China's imports from Iran averaged 644,000 b/d and India's imports from Iran averaged 554,000 b/d. In September, China's imports from Iran dropped to 441,000 b/d, the second lowest level since December 2015, while India's imports from Iran were 576,000 b/d.
Whether Iran's energy exports are declining entirely because of the sanctions or for other reasons is unclear. Trade press reports indicate a willingness on India's part to at least partially comply with the sanctions, but China had continued to import from Iran even when previous sanctions were in effect.
In response to the announcement of sanctions by the United States, the European Union passed a statute to protect European companies doing business in Iran from the effects of U.S. sanctions. Despite this effort, data from ClipperData indicate that France has not imported any crude oil or condensate from Iran since June. In addition, Italy’s and Spain’s imports from Iran in September were 27,000 b/d and 15,000 b/d lower than their averages for the first half of the year. Some countries could continue to import Iran's crude oil and condensate until the November 4 deadline, at which point they might stop importing from Iran.
Iran's exports have fallen at a faster rate than production. Shipping operators have decreased operations with Iran, but Iran has continued to export largely through the state-run National Iranian Tanker Company (NITC) and the Islamic Republic of Iran Shipping Lines. Trade press reports indicate that as countries continue to decrease imports from Iran, some of Iran’s shipping fleet is already being used as floating storage, where crude oil is placed onto ships and stored indefinitely.
Surplus crude oil production capacity in the Organization of the Petroleum Exporting Countries (OPEC) could be used to replace some of Iran's crude oil barrels that are coming off the market. Saudi Arabia’s Arab Light is similar in composition to Iran Light crude oil and may provide refiners with a possible crude oil that would not require refiners to make significant alterations to their crude slates.
In addition, trade press reports indicate that Saudi Arabia is offering sales of Khuff condensate. However, the extent to which Saudi Arabia and other OPEC members offer enough volumes of crude oil and condensate to replace exports from Iran is unclear. After full sanctions are implemented in November, the total volumes of crude oil and condensate coming off the market will become more apparent in the following months.
Rosenberg WorleyParsons has won an engineering, procurement and construction contract from Lundin Norway and partners of PL338 for handling the modification work on the Edvard Grieg platform in the North Sea.
Modifications will enable Edvard Grieg offshore platform to receive and process oil and gas from nearby fields. Work is expected to be complete in the first quarter of 2021.
Based in Australia, WorleyParsons is an engineering services company, while Lundin Norway is an oil and gas company based in Norway.
China National Petroleum Corporation (CNPC) has signed a memorandum of understanding (MoU) with Equinor for the development of sustainable energy projects.
The two companies will work to explore the unconventional gas resources or tight gas in China and will develop oil and gas ventures worldwide.
CNPC is an oil and gas company based in China, while Equinor is a Norway-based petroleum and wind energy company.
KBR’s UK-based subsidiary has secured a front-end engineering design (FEED) services contract from BP for the development of the Tortue field hub / terminal located off the coast of Senegal and Mauritania.
FEED work will assist in the final investment decision (FID) for the project.
The deal also includes a provision to transit the contract to an engineering, procurement and construction management (EPCM) agreement in future.
Based in the US, KBR is an engineering, procurement and construction company.
Saipem has received three offshore engineering and construction (E&C) contracts worth $400m in Azerbaijan, the North Sea and the Republic of Congo.
In Azerbaijan, the Saipem consortium comprising Saipem Contracting Netherlands, Boshelf and Star Gulf has received a subsea, umbilical, riser and flowline contract for Absheron field development.
On behalf of the Tolmount Development Partners, Humberside Gathering System provided a pipeline engineering, procurement, construction and installation contract to Saipem in Southern North Sea for development of the Tolmount Main gasfield.
Eni Congo provided a maintenance, modifications and improvements contract to Saipem for all Eni Congo offshore sites in the Republic of Congo.
Saipem is an oil and gas industry contractor company based in Italy.
Equinor has agreed to sell 77.8% stake in the King Lear gas discovery in the Norwegian Continental Shelf (NCS) for $250m to Aker BP.
The King Lear gas discovery lies in production licences PL 146 and PL 333 of the NCS and is estimated to contain recoverable resources of 77 million barrels of oil equivalent.
Equinor is an energy company, while Aker BP is an oil exploration and development organisation. Both companies are based in Norway.
If you’re looking for a new job in the oil and gas industry, you must ensure that you have the right application letter that opens a window of opportunity. A role in the oil and gas sector is highly specialized, so a regular application letter will not catch the attention of the recruiter. To grab eyeballs, your letter should have all the right ingredients to get you the interview call from the company you have been eyeing. If you are unsure about how to go about it, then here is a detailed guideline:
What is the purpose of the application letter?
An application letter is your first introduction to the company. It must answer the following questions and provide clarity on the same:
In the application letter, do not restate what you’ve covered in the resume. Although, you can give a sneak-peak into your resume by emphasizing your key skills.
How to begin?
Before you begin, remember: Be original. Do not copy and paste the template. Carefully list down the job requirements and note down your achievements and qualifications that match the expectations.
Components/format of a job application
Here is a list of components that you must include in your job application to the oil and gas sector.
The above components will give you a clear idea about the information that you will require to make your application stand out.
Detailed guideline to compose the letter for oil and gas industry
Use a technical CV format
In the oil and gas industry, technical expertise is in high demand. Exploration and production profiles in energy companies require electrical, chemical, mechanical engineering. Now with automation and digitization, IT skills are also in demand. The technical CV format is easily available online and it highlights the relevant technical expertise right at the beginning of the letter format. However, if you don’t find a ready-made format, always include your technical expertise in your cover letter, preferably in the first paragraph itself to highlight your credibility.
Highlight your willingness to travel
Numerous job roles in the oil and gas industry are available in remote locations. The head office is usually in a major city of the developed nation. However, the working centers are in developing nations. Oil and gas recruiters prefer candidates who are willing to work at remote locations and are flexible with traveling. So, highlight relevant experience where you have worked in remote locations. However, if you are a fresher, you may highlight evidence that proves your willingness to travel. You should mention it clearly, that you are internationally mobile and can relocate to any place based on the need.
Commitment to industry and relevant expertise
Oil and gas jobs need a highly qualified, skilled and dedicated workforce. Highlight your work experience that shows your dedication to the industry. Also, highlight your intention to work in this industry in future and your plans to upgrade your skills to stay relevant. Mention any training and development programs that you have been a part of.
Focus and optimize your application
The Oil and gas sector generally has openings in the roles of scientists, engineers, business people/managers, mathematicians, and analysts. Define clearly what job role you are targeting at and what relevant skills you have. Learn about the popular keywords pertaining to your job role and ensure the right usage of keywords in the application.
Show you are future-ready
The oil and gas industry is witnessing many changes due to digitization, automation, social media boost, millennial-workforce entry, big data management, virtual and augmented reality. These changes will impact future job responsibilities and roles. So, highlight your skills that show you are future-ready. Include all new-age skills, relevant experience, certification, training programs that you have undertaken that will boost your chances of selection.
Do not forget to follow-up
Following up after you have mailed your application letter is a must. Be aggressive in your follow-up by stating in your application that you will be following up within a week. However, if the employer has mentioned a process or a timeline for announcement of the shortlisted candidate, then mention ‘you look forward to their response.’ Please make sure you specify clearly how to reach you.
The oil and gas industry has numerous job opportunities if you have the right skills, attitude and talent to work and thrive in this dynamic industry. Just work on your application, customize it based on the specific need and you are good to go. If you are looking for any relevant job openings in the oil and gas sector, do check out the NrgEdge platform.