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Last Updated: March 8, 2019
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Market Watch

Headline crude prices for the week beginning 4 March 2019 – Brent: US$66/b; WTI: US$56/b

  • Crude oil prices stayed steady with an upward trend, as optimism climbed over an eventual US-China trade deal and signs that global crude supply was tightening
  • Chatter that the USA and China were slowly coming to an agreement boosted global markets, with President Trump putting off tariff hikes on Chinese imports ‘indefinitely’
  • While the macro situations stabilises, supply-side issues have kept crude oil prices steady, with OPEC+ demonstrating strong adherence to its supply deal and unplanned supply losses worrying the market
  • Data from OPEC showed that group output slipped by 560,000 b/d to 30.5 mmb/d, as the planned cutbacks were implemented in full; Saudi Arabia, Kuwait and the UAE have been the main adherents of the cuts, with Nigeria complying in February after boosting output in January
  • Libya’s inability to restart its Sharara field also continues a series of unplanned supply setbacks within OPEC, with Venezuela now also reeling from new American sanctions with up to 8.36 million barrels of Venezuelan crude sitting in floating storage off the country’s coast
  • OPEC’s solid response to controlling supply has triggered the ire of President Donald Trump again, resuming his Twitter attacks on the cartel stating that the world is ‘too fragile to handle a price hike’ and that OPEC should ‘relax and take it easy’; in response, Saudi Arabia is holding firm and is reportedly leaning towards extending the cut in the second half of 2019
  • In the US, the EIA confirms the US crude production averaged 12 mmb/d in January, up 90,000 b/d from December levels; the EIA also confirmed that US crude imports fell to their lowest level in 23 years by 1.61 mmb/d to 5.92 mmb/d
  • The US active rig count fell for a second consecutive week, with the loss of 9 oil rigs and one gas rig, following the drop of 4 sites last week
  • It looks like business as usual for crude oil prices this week, staying steady in their current ranges: Brent at US$65-67/b and WTI at US$54-56/b


Headlines of the week

Upstream

  • The Sharara field in Libya will remain closed, as the National Oil Corp has refused to restart the 300,000 b/d field while armed groups under the Libyan National Army continue to control the field
  • Marathon Oil is looking to exit the UK by putting both of its British subsidiary on sale, transferring its interests in the Greater Brae Area, Foinaven Field and Foinaven East to RockRose Energy Plc for US$140 million
  • Georgia-focused Block Energy has secured full working interest of the West Rustavi licence in the Republic of Georgia, which contains an estimated 38 million barrels of oil
  • After acquiring the Forties Pipeline System in the UK North Sea from BP in 2017, INEOS is now looking to invest some US$665 million to prolong the shelf life of the pipeline by at least another 20 years
  • Japan’s Inpex is entering the US shale area, partnering with GulfTex Energy to purchase assets in the Eagle Ford shale play in Texas
  • Pemex has been given approval to drill 4-8 test wells in the Tampico-Misantla basin in Veracruz, hoping to kick off a Mexican shale revolution

Midstream & Downstream

  • Saudi Aramco has struck a deal to deliver 500,000 barrels of crude oil per month to Egyptian refineries, running from January to June 2019
  • ADNOC has partnered with South Korea’s SK E&C in a plan to build the world’s largest crude oil storage facility in Fujairah with an estimated capacity of 42 million barrels at a cost of US$1.2 billion
  • In an effort to cut down on expensive oil imports, Pertamina has approached Malaysia’s Petronas for a toll crude processing deal where Pertamina’s share of Malaysian and Iraqi crude will be processed at Petronas’ refineries in Malaysia
  • Bayport Polymers – a joint venture between Total and Borealis-NOVA Chemicals – has broken ground on its 625,000 mtpa polyethylene unit in Pasadena, Texas with start-up expected in 2021
  • The US Environmental Protection Agency is looking to finalise its E15 ethanol-gasoline blending mandate by mid-2019, in time for summer driving season

Natural Gas/LNG

  • After an aggressive push to go downstream, Saudi Aramco is now turning its eye to LNG, aiming to become one of the world’s largest players by acquiring assets in Russia, Australia, the USA and Africa
  • BP Trinidad and Tobago has reported first gas production from its Angelin development in the El Diablo well, with peak capacity of 600 mmscf/d
  • Mexico-Pacific Limited has started on FEED design for its 2-4 mtpa mid-scale Pacific Coast LNG project in Puerto Libertad, Mexico
  • ExxonMobil and Qatar Petroleum have announced a ‘significant’ natural gas discovery in Cyprus, with the Glaucus-1 prospect holding some 5-8 tcf of gas; the discovery now makes LNG a possibility for Cyprus over piped gas to Egypt
  • Wheatstone LNG in Australia hits another milestone, beginning to supply gas to local markets through the domestic grid with capacity for 200 Tj/d
  • Philippine player Phoenix Petroleum has signed an MoU with PNOC and CNOOC to come onboard the 2.2 mtpa Tanglawan LNG import project
  • Operations at the Corpus Christi LNG Train 1 have been handed over to Cheniere Energy after engineering partner Bechtel reached ‘substantial completion’ at the unit

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TODAY IN ENERGY: Crude oil inputs to Mexico’s petroleum refineries continued to decline in 2018

Crude oil inputs to Mexico’s petroleum refineries declined for the fifth consecutive year in 2018, falling to nearly 600,000 barrels per day (b/d), a 50% drop from 2013 levels. This decline in crude oil processing has coincided with a decrease in domestic production of the light crude oil that the country’s refineries are better suited to process. Mexico has increasingly relied on imports of petroleum products from the United States to satisfy domestic demand.

Petróleos Mexicanos (Pemex), Mexico’s national oil company, owns and operates the country’s six petroleum refineries, which have a combined atmospheric crude oil distillation capacity of about 1.6 million b/d. On an aggregate basis, performance at Pemex refineries has declined over the past five years after maintaining an average refinery utilization rate near or above 75% between 1990 and 2013. By 2018, the utilization rate of Mexico’s refinery network fell to less than 40%.

Pemex’s refineries are mostly configured to process light crude oil. Of its six refineries, three (Minatitlan, Cadereyta, Madero) are equipped with coker units to produce lower-sulfur gasoline from heavy crude oil. The 35% decrease in Mexican light crude oil production between 2013 and 2018 has resulted in limitations on crude oil refinery inputs. Inputs of light crude oil to Pemex refineries fell below 400,000 b/d in 2018, about a 50% reduction from 2013 levels.

Refineries require periodic maintenance to ensure optimal operation of processing units that refine crude oil into petroleum products such as motor gasoline and diesel. Crude oil inputs at Pemex refineries since 2014 have been further constrained by operational issues associated with the company’s refineries.

Pemex maintains control over much of Mexico’s petroleum product imports and distribution. Declines in domestic production of liquid transportation fuels have increased Mexico’s reliance on foreign sources of refined petroleum products. Pemex imports of motor gasoline increased about 230,000 b/d between 2013 and 2018, offsetting similar declines in domestic production at Pemex refineries.

PEMEX domestic gasoline production and imports

Source: U.S. Energy Information Administration, based on data published by Petróleos Mexicanos

Mexican imports from the United States have helped to offset a large share of Pemex’s shortfall in motor gasoline production, supplying about 535,000 b/d in 2018, more than double the level of imports in 2013. Mexico receives the largest share of U.S. motor gasoline exports, with much of the remainder destined for Central and South American countries.

U.S. refineries along the Gulf Coast are able to process heavy Mexican crude oil blends with a high yield of finished, low-sulfur motor gasoline. Pemex currently obtains some of its motor gasoline from the United States through its joint venture with Shell at the 340,000 b/d refinery in Deer Park, Texas. The joint venture, which was recently extended through 2033, includes an agreement for Pemex to provide a share of heavy crude oil in exchange for finished petroleum products.

In September 2018, the Mexican government announced an initiative called the National Refining Plan to help Mexico achieve energy independence by 2022. The plan includes upgrades and reconfigurations at Pemex’s six refineries, as well as construction in Dos Bocas of a seventh refinery, which is designed to process 340,000 b/d of heavy crude oil. If achieved, Pemex refineries would be able to process 1.86 million b/d of crude oil to produce an estimated 781,000 b/d of motor gasoline and 560,000 b/d of diesel fuel.

Principal contributors: Steve Hanson, Neil Agarwal

June, 26 2019
[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.


ABOUT ADIPEC

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