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Last Updated: February 25, 2019
Business Trends

Market Watch

Headline crude prices for the week beginning 18 February 2019 – Brent: US$66/b; WTI: US$56/b

  • Oil prices rose to their highest level since November, on optimism that the US and China could reach a trade deal as well as an outage at the world’s largest offshore oil field
  • Although reports suggest that China and the USA are still far from coming to a common consensus, analysts are confident that some form of a deal can be reached – or the timeline extended for more negotiations to proceed
  • The Safaniyah field in Saudi Arabia, the largest in the world, has been partially closed over a damaged power cable, affecting over a million barrels of crude production per day with no clear timeline on a return to full capacity
  • With new pledges to adhere to the OPEC+ supply cuts by Russia and Saudi Arabia, OPEC’s Secretary General has urged other countries in the group to follow through on their promises to keep the global markets balanced
  • Elsewhere in OPEC, the new American sanctions on Venezuelan crude is beginning to bite; global commodities firm Trafigura announced that it would stop trading oil with Venezuela, halting a long-standing trade arrangement between Trafigura and PDVSA
  • The US itself is looking to ratchet up its sanctions against Venezuela by expanding them to blocking foreign firms from dealing with PDVSA, as rumours suggest that PDVSA’s American subsidiary Citgo could be filing for bankruptcy
  • However, even as American refiners scramble to replace Venezuelan crude, sales of its heavy sour crudes in China have boomed, given their suitability to creating bitumen through the heavy yield of asphalt
  • In the US, three new oil rigs were added last week, offsetting the loss of one gas rig for a net gain of two rigs to 1,051, with the Permian dropping five sites as the pipeline bottleneck there continue
  • The continued outage at Safaniyah will keep prices edging up, especially as the deadline for US-Chinese trade talks looming with whispers of progress. Expect Brent to trade in the US$66-68/b region, with WTI further back at US$55-57/b

Headlines of the week


  • The game of tag at Libya’s largest crude asset – the 300,000 b/d Sharara field – continues, as forces loyal to eastern leader Khalifa Haftar seized control from armed protestors and stated that it is ‘secure’ and ‘ready to resume pumping’
  • India has announced its third round of oil and gas block options in a year, offering 23 blocks – including 10 onshore, 1 deepwater and 5 CBM areas
  • Nigeria has shipped its first cargo of crude from its new Total-led Egina field, with the country pushing to classify Egina crude as condensate to escape OPEC’s supply deal that obliges Nigeria to cut its output by some 53,000 b/d
  • Uganda has delayed the timeline for its first crude once again, pushing it to 2022 from 2021 as production at the Kingfisher and Tilenga blocks is delayed due to disagreements with operators over tax regimes and development strategy
  • PTTEP has acquired a 33.8% stake in Apico llc from Tatex Thailand, boosting its stakes in onshore natural gas Blocks EU1 and E5N of the Sinphuhorm project and bringing full ownership of Blocks L15/43 and L27/43 in Thailand
  • The Bureau of Ocean Energy Management in the USA is holding an oil and gas sale of all available unleased federal areas in the Gulf of Mexico, including 14,696 unleased blocks covering some 78 million acres
  • Eni has secured two new onshore exploration blocks in Egypt – with the company hoping to replicate its success with the Zohr gas field at South East Siwa (100% Eni) and West Sherbean (shared equally with BP)
  • Senegal’s National Assembly has approved a new petroleum code, aimed at balancing attractiveness for international investors while boosting local content requirements that include a 10% stake in all contracts for state oil firm Petrosen that can be increased to 40% in specific situations
  • Sentinel Midstream has unveiled plans to build a deepwater crude export terminal in Texas, which would be the second in the USA and the first in Texas

Midstream & Downstream

  • Vitol is looking to establish an LPG processing and export facility in Kazakhstan, leveraging the liquid propane-butane mix generated as a by-product at the Kashagan field into commercial liquids
  • In emulation of Saudi Aramco, Abu Dhabi’s Adnoc has announced initiatives to invest in more downstream assets – mainly refining and petrochemicals – with a specific target at India, considered its ‘most important market’
  • Citgo Petroleum may have to dismiss workings at its refinery in Aruba after new American sanctions on PDVSA, hampering Citgo’s plans to refurbish and re-open the 209 kb/d refinery under a plan signed in 2016

Natural Gas/LNG

  • Petronet LNG, India’s largest LNG importer, has raised the possibility of investing in Tellurian’s 27.6 mtpa Driftwood LNG export facility near Lake Charles, Louisiana that is expected to begin operations in 2023
  • The Kitimat project on Canada’s Pacific coast might not be the country’s first major LNG project, as Pieridae Energy’s 10 mtpa, US$7.5 billion Goldboro LNG project in Nova Scotia plans for FID this year, targeting buyers in Europe
  • South Korean refiner GS Caltex has signed a long-term LNG purchase agreement with Chevron; the deal is scheduled to begin in October 2019 sourced from Chevron’s global portfolio, with duration and volumes unconfirmed
  • BP announced first gas production from the second stage of its West Nile Delta project offshore Egypt, with output expected to ramp up to 700 mmscf/d from a current 400 mmscf/d from the Giza and Fayoum fields

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[Media Partner Content] Recognising innovation in transforming the world’s oil and gas industry

The 9th edition of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) Awards, hosted by the Abu Dhabi National Oil Company (ADNOC), is now open for submissions.

In this fourth industrial age it is technology, innovation, environmental leadership and talented workforces that are shaping the companies of the future.

Oil and gas is set to play a pivotal role in driving technology forward, and at this year’s ADIPEC Awards emphasis is placed on digitalisation, research, transformation, diversity, youth and social contribution, paving the way towards a brighter tomorrow for our industry.

Hosting the ADIPEC Awards is one of the world’s leading energy producers, ADNOC, a company exploring new, agile and flexible ways to build its people, technology, environmental leadership and partnerships, while enhancing the role of the United Arab Emirates as a global energy provider.

Factors which will have a prominent influence on the eventual decisions of the distinguished panel of jury members include industry impact, sustainability, innovation and value creation. Jury members have been carefully selected according to their expertise and knowledge, and include senior representatives from Baker Hughes, a GE Company, BP UAE, CEPSA Middle East, ENI Spa, Mubadala Petroleum, Shell, Total and Weatherford.

Chairperson of the awards is Fatema Al Nuaimi, Acting CEO of ADNOC LNG, who says: “At a time when the industry is looking towards an extremely exciting future and preparing for Oil &Gas 4.0, the awards will recognise excellence across all its sectors and reward those who are paving the way towards a successful and sustainable future.”

Ms Al Nuaimi, continues: “we call upon our partners across the globe to submit their achievements in projects and partnerships which are at the helm of technical and digital breakthroughs, as well as to nominate the next generation of oil and gas technical professionals, who will spearhead the ongoing transformation of the industry.

These awards are recognising the successes of those companies and individuals who are responding in the most innovative and creative manner to the global economic and technological trends. Their contribution is pivotal to the development of our industry and to addressing the continuous growth of the global energy demand. “

Christopher Hudson, President of the Energy Division, dmg events, organisers of ADIPEC, says: “With ADNOC as the host and ADIPEC as the platform for the programme, the awards are at the heart of the worldwide oil and gas community. With its audience of government ministers, international and national oil companies, CEOs and other top global industry influencers, the ADIPEC Awards provide the global oil and gas community the perfect opportunity to engage, inspire and influence the workforce of the future.”

Entries can be submitted until Monday 29th July for the following categories:

Breakthrough Technological Project of the Year

Breakthrough Research of the Year

Digital Transformation Project of the Year

Social Contribution and Local Content Project of the Year

Oil and Gas Inclusion and Diversity Company of the Year

Young ADIPEC Technical Professional of the Year

A shortlist of entries will be announced in October and winners will be revealed on the first day of ADIPEC 2019, Monday 11th November, St. Regis Saadiyat Island, Abu Dhabi.


Held under the patronage of the President of the United Arab Emirates, His Highness Sheikh Khalifa Bin Zayed Al Nahyan, and organised by the Global Energy Division of dmg events, the Abu Dhabi Petroleum International Petroleum Exhibition and Conference (ADIPEC) is the global meeting point for oil and gas professionals. Standing as one of the world’s leading oil and gas events.  ADIPEC is a knowledge-sharing platform that enables industry experts to exchange ideas and information that shape the future of the energy sector. The 22nd edition of ADIPEC will take place from 11th-14th November 2019, at the Abu Dhabi National Exhibition Centre (ADNEC). ADIPEC 2019 will be hosted by the Abu Dhabi National Oil Company (ADNOC) and supported by the UAE Ministry of Energy & Industry, Department of Transport in Abu Dhabi, the Abu Dhabi Chamber of Commerce and Industry, Masdar, the Abu Dhabi Future Energy Company, Department of Culture and Tourism - Abu Dhabi, the Abu Dhabi Department of Education and Knowledge (ADEK). dmg events is committed to helping the growing international energy community.

June, 24 2019
TODAY IN ENERGY: Energy products are key inputs to global chemicals industry

chemicals industry inputs

Source: U.S. Energy Information Administration, based on World Input-Output Database
Note: Dollar values are expressed in 2010 U.S. dollars, converted based on purchasing power parity.

The industrial sector of the worldwide economy consumed more than half (55%) of all delivered energy in 2018, according to the International Energy Agency. Within the industrial sector, the chemicals industry is one of the largest energy users, accounting for 12% of global industrial energy use. Energy—whether purchased or produced onsite at plants—is very important to the chemicals industry, and it links the chemical industry to many parts of the energy supply chain including utilities, mines, and other energy product manufacturers.

The chemicals industry is often divided into two major categories: basic chemicals and other chemicals. Basic chemicals are chemicals that are the essential building blocks for other products. These include raw material gases, pigments, fertilizers, plastics, and rubber. Basic chemicals are sometimes called bulk chemicals or commodity chemicals because they are produced in large amounts and have relatively low prices. Other chemicals—sometimes called fine or specialty chemicals—require less energy to produce and sell for much higher prices. The category of other chemicals includes medicines, soaps, and paints.

The chemicals industry uses energy products such as natural gas for both heat and feedstock. Basic chemicals are often made in large factories that use a variety of energy sources to produce heat, much of which is for steam, and for equipment, such as pumps. The largest feedstock use is for producing petrochemicals, which can use oil-based or natural-gas-based feedstocks.

In terms of value, households are the largest users of chemicals because they use higher value chemicals, which are often chemicals that help to improve standards of living, such as medicines or sanitation products. Chemicals are also often intermediate goods—materials used in the production of other products, such as rubber and plastic products manufacturing, agricultural production, construction, and textiles and apparel making.

basic chemicals industry energy intensity in select regions

Source: U.S. Energy Information Administration, WEPS+, August 2018
Note: Dollar values are expressed in 2010 U.S. dollars, converted based on purchasing power parity.

The energy intensity of the basic chemicals industry, or energy consumed per unit of output, is relatively high compared with other industries. However, the energy intensity of the basic chemicals industry varies widely by region, largely based on the chemicals a region produces. According to EIA’s International Energy Outlook 2018, Russia had the most energy-intensive basic chemicals industry in 2015, with an average energy intensity of approximately 98,000 British thermal units (Btu) per dollar, followed by Canada with an average intensity of 68,000 Btu/dollar.

The Russian and Canadian basic chemicals industries are led by fertilizers and petrochemicals. Petrochemicals and fertilizers are the most energy intensive basic chemicals, all of which rely on energy for breaking chemical bonds and affecting the recombination of molecules to create the intended chemical output. These countries produce these specific basic chemicals in part because they also produce the natural resources needed as inputs, such as potash, oil, and natural gas.

By comparison, the energy intensity of the U.S. basic chemical industry in 2015 was much lower, at 22,000 Btu/dollar, because the industry in the United States has a more diverse production mix of other basic chemicals, such as gases and synthetic fibers. However, EIA expects that increasing petrochemical development in the United States will increase the energy intensity of the U.S. basic chemicals industry.

The United States exports chemicals worldwide, with the largest flows to Mexico, Canada, and China. According to the World Input-Output Database, U.S. exports of all chemicals in 2014 were valued at $118 billion—about 6% of total U.S. exports—the highest level in decades.

June, 24 2019
The Winds of War and Oil Markets

The threat of military action in the Middle East has gotten more intense this week. After several attacks on tankers that could be plausibly denied, Iran has made its first direct attack on a US asset, shooting down an unmanned US drone. The Americans say the drone was in international waters, while Iran claims that it had entered Iranian air space. Reports emerging out of the White House state the US President Donald Trump had authorised a military strike in response, but pulled back at the last minute. The simmering tensions between the two countries are now reaching boiling point, with Iran declaring that it is ‘ready for war’.

Predictably, crude oil prices spiked on the news. Brent and WTI prices rose by almost US$4/b over worries that a full-blown war will threaten global supplies. That this is happening just ahead of the OPEC meeting in Vienna – which was delayed by a week over internal squabbling over dates – places a lot of volatile cards on the table. Far more than more than surging US production, this stand-off will colour the direction of the crude market for the rest of 2019.

It started with an economic war, as the Trump administration placed increasingly tight sanctions on Iran. Financial sanctions came first, then sanctions on crude oil exports from Iran. But the situation was diffused when the US introduced waivers for 8 major importers of Iranian crude in November 2018, calming the markets. Even when the waivers were not renewed in April, the oil markets were still relatively calm, banking on the fact that Iran’s fellow OPEC countries would step in to the fill the gap. Most of Iran’s main clients – like South Korea, Japan and China – had already begun winding down their purchases in March, reportedly causing Iran’s crude exports to fall from 2 mmb/d to 400 kb/d. And just recently, the US also begun targeting Iranian petrochemical exports. Between a rock and a hard place, Iran looks seems forced to make good on its threats to go to war in the strategic Straits of Hormuz.

As the waivers ended, four tankers were attacked off the coast of Fujairah in the UAE in May. The immediate assumption was that these attacks were backed by Iran. Then, just a week ago, another two tankers were attacked, with the Americans showing video evidence reportedly show Iranian agents removing mines. But still, there was no direct connection to Iran for the attacks, even as the US and Iran traded diplomatic barbs. But the downing of the drone is unequivocally the work of the Iranian military. With President Donald Trump reportedly ‘bored’ of attempting regime change in Venezuela and his ultra-hawkish staff Mike Pompeo and John Bolton in the driver’s seat, military confrontation now seems inevitable.

This, predictably, has the oil world very nervous. Not just because the extension of the current OPEC+ deal could be scuppered, but because war will impact more than just Iranian oil. The safety of the Straits of Hormuz is in jeopardy, a key node in global oil supply through which almost 20 mmb/d of oil from Iraq, Saudi Arabia, Kuwait and the UAE flows along with LNG exports from the current world’s largest producer, Qatar. At its narrowest, the chokepoint in the Straits is just 50km from Iranian land. Crude exports could be routed south to Red Sea and the Gulf of Aden, but there is risk there too; the mouth of the Red Sea is where Iranian-backed Yemeni rebels are active, who have already started attacking Saudi land facilities.

This will add a considerable war risk premium to global crude prices, just as it did during the 1990 Gulf War and the 2003 invasion of Iraq. But more than just prices, the destabilising effects of a war could consume more than just the price of a barrel. If things are heading the way the current war-like signs are heading, then the oil world is in for a very major change very soon.

Historical crude price responses to wars in the Middle East

  • 1973: Yim Kippur War – oil prices quadrupled from US$3/b to US$12/b
  • 1990: Iraq invasion of Kuwait/Gulf War – oil prices doubled from US$17/b to US$36/b
  • 2003: US invasion of Iraq – oil prices rose from US$30/b to US$40/b
June, 21 2019