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Last Updated: December 6, 2018
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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

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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
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
Your Weekly Update: 26- 30 November 2018

Market Watch

Headline crude prices for the week beginning 26 November 2018 – Brent: US$60/b; WTI: US$51/b

  • Crude oil prices remain weak as traders doubt OPEC’s ability to agree on crude output cuts to a level that could offset surging American shale oil production
  • OPEC meets on December 6 in Vienna; Saudi Arabia is expected to push for a coordinated production cut, but US President Trump is continuing to apply pressure for the cartel not to cut production, while the US Department of Justice is reportedly considering antitrust legislation designed to curb OPEC’s power
  • But even if Saudi Arabia choose not to capitulate to American pressure, there is dissent in the ranks of OPEC+; aside from Russia, there does not seem to be much appetite among the NOPEC members to sign up for new cuts
  • Libya, a member of OPEC, has also called to be exempted from any new production cut deal agreement; Libya (and Nigeria) were exempted from the previous supply freeze due to domestic conflict, and Libya is pointing to its continued fragile situation as reasons to continue to be exempted
  • Saudi Arabia is also seemingly not curbing its production yet, with Energy Minister Khalid al-Falih suggesting that the Kingdom’s October output exceeded the 10.72 mmb/d record set in November 2016
  • Saudi Arabia and Russia will also be meeting at the G20 summit in Argentina this weekend, providing an opportunity for Saudi Crown Prince Mohammad bin Salman and Russian Vladimir Putin to coordinate ahead of the OPEC Vienna meeting in December
  • Crude oil prices also remain weak as the impact of American sanctions on Iran were countered by waivers to key importers; after Japan and South Korea moved to resume imports last week, China is also reportedly taking Iranian crude again after halting purchases in October
  • After two weeks of gains, US drillers assessing weaker WTI prices (and also the long Thanksgiving weekend) cut down on active rigs, shedding a net 3 oil rigs to bring the total rig count to 1079
  • Crude price outlook: Without any concrete news from OPEC+ on a supply freeze, crude oil prices will stay within their current range of US$59-61/b for Brent and US$49-51/b for WTI


Headlines of the week

Upstream

  • BP has started up oil production at its Clair Ridge project in the UK’s West Shetlands region, with peak output expected at some 120,000 b/d
  • Chevron reports that production has begun at its Big Foot deepwater project in the US Gulf of Mexico, with output of 75,000 b/d and 25 mmscf/d of natural gas over a forecasted project life of 35 years
  • Western Canada oil producers have slammed the recent Canada federal budget update, criticising it for the lack of measures to tackle the supply glut and subsequent price crash of crude oil in Alberta
  • Brazilian President-elect Jair Bolsonaro is looking to put the country’s deepsea oil blocks on sale, aiming to raise some US$30 billion to help plug Brazil’s large fiscal deficits

Downstream

  • Equinor is making further inroads in the Southeast Asian LPG market, partnering with Global Petro Storage on an LPG terminal and storage in Port Klang, Malaysia, with volumes aimed at the region and South Asia
  • Following major strikes in France over proposed fuel taxes, workers at four of the country’s seven refineries have gone on strike, with unions encouraging blockades, over a salary increase dispute with UFIP
  • The St. Croix refinery in the US Virgin Islands may be restarted after six years of being idled, with BP agreeing to enter into a tolling agreement with Limetime Bay Refining, the new owner of the 200 kb/d Hovensa refinery
  • LyondellBasell is reported on the verge of acquiring a controlling stake in Brazilian petrochemical producer Braskem, while also pursuing a long-term naphtha supply contract with the firm
  • Faced with a crude oil glut, Canada’s Alberta province is doubling incentives for downstream projects, aiming to diversify its economy into refining and petrochemicals, offering royalty credits worth US$1.6 billion
  • BP’s Southern Africa arm will be investing some US$1 billion to upgrade the 180 kb/d SAPREF refinery in Durban, South Africa to produce lower-sulphur diesel to meet regional demand for low-sulphur fuels

Natural Gas/LNG

  • Novatek reports that initial production from the Yamal LNG Train 3 in West Siberia has begun production, a year ahead of schedule
  • Woodside has agreed to a long-term, 20-year deal to provide Australian conglomerate Perdaman Chemicals & Fertilisers with some 125 Tj of piped natural gas (around 1 million tons per annum) for use in a new urea plant
  • Petronas is aiming to ramp-up production at the Kebabangan gas field in Sabah to full capacity by August 2019 following a gas leak that will require repairs along a 500-km pipeline that is scheduled to be completed by July 2019
  • Shell has decided to exit the Greater Sunrise project in Timor-Leste, selling its 26.56% share back to the government for some US$300 million
  • Dana Gas and Crescent Petroleum, partners on the Khor Mor field in Iraq’s Kurdistan region, have reported a 30% increase in production, with output rising to 400 mmscf/d of natural gas and 15,000 b/d of condensate

Corporate

  • Oman is merging its state Oman Oil and Oman Oil Refineries & Petroleum Industries firm into a single integrated refining-to-trading business
November, 29 2018