NrgEdge Editor

Sharing content and articles for users
Last Updated: March 29, 2019
15 views
Business Trends
image

Market Watch

Headline crude prices for the week beginning 25 March 2019 – Brent: US$67/b; WTI: US$59/b

  • Global crude oil prices saw a mixed start to the week, trading in a narrow range, as fears of a global recession subdued the market, offsetting continued concerns over tensions in Venezuela and Iran
  • Slowing manufacturing and bond indicators in the USA, France and Germany have hinted that a recession might be in the offing, spooking markets; but of greater concern is the tangible slowdown in Chinese economic growth, raising fears over global oil demand
  • Traders are also disappointed in a lack of progress in US-China trade war, as well as apparent fissures appearing between Saudi Arabia and Russia that postponed the OPEC+ meeting due in April to review the supply deal
  • The situation with US sanctions on Venezuelan crude continues to bite, as Nicolas Maduro clings on to power and attempts to isolate opposition leader Juan Guaidó; although a reprieve was given to Citgo, American refiners took no Venezuelan crude for the first time since 2010 last week
  • As US waivers on Iranian crude exports ticks down to expiry in May, the Petroleum Association of Japan is looking to avoid any imports of Iranian oil in April unless it gets clarity on a waiver extension
  • Despite WTI prices inching up towards US$60/b, US drillers continue to drop rigs; the Baker Hughes active rig count fell by 10 rigs – 9 oil, 1 gas – for a fifth consecutive week, to an overall 1,106
  • We expect crude prices to remain in their tight ranges, buffeted between OPEC’s attempts to stabilise supply and global unease over economic growth. Brent should be at US$66-68/b and WTI at US$58-60/b 

Headlines of the week

Upstream

  • Upstream independent Murphy Oil is exiting Malaysia after 20 years, selling its two primary Malaysian subsidiaries – Murphy Sabah Oil and Murphy Sarawak Oil – to Thailand’s PTTEP for some US$2.127 billion
  • Adnoc has awarded 35-year exploration rights for the Abu Dhabi onshore Block 4 to Japan’s Inpex, with Adnoc holding an option for a 60% stake if the project reaches commercial production phase
  • Spirit Energy has started production at its North Sea Oda field five months earlier than planned, with peak production estimated at 35,000 b/d
  • Canada’s state government of Alberta gas will increase crude production limits by 25,000 b/d per month over May and June to match distribution capacity
  • Nigerian President Muhammadu Buhari has ordered Shell to hand over operatorship of the prized OML 11 concession in Ogoniland to state firm NPDC

Midstream & Downstream

  • Refurbishment works on Aruba’s 209 kb/d refinery will continue after the US Treasury gave PDVSA’s American subsidiary Citgo a reprieve from sanctions
  • Ecuador has started plans to build a new 300 kb/d refinery with bidding on construction beginning in May 2019, which will also include a concession to upgrade the under-performing 110 kb/d Esmeraldas refinery
  • Despite some denials from Oman, it appears that Sri Lanka will be getting a new US$3.85 billion, 200 kb/d refinery near the Hambantota port through the combination of India’s Accord Group and Oman’s Ministry of Oil and Gas
  • Peru will be halting operations at its 65 kb/d Talara refinery for a year beginning November 2019 to complete a 5-year, US$5 billion expansion plan that will expand capacity to some 95 kb/d
  • Nigeria’s NNPC has recommitted to its plan to upgrade its four refineries, with the initial focus on revamping the ageing 210 kb/d Port Harcourt refinery
  • Mechanical completion of Sasol’s Westlake petrochemical complex in Louisiana – including a 1.5 mtpa ethane cracker – has been completed by Fluor

Natural Gas/LNG

  • Yet another US Gulf LNG project has received environmental approval to go ahead, with the 4 mtpa Texas LNG Brownsville LNG export terminal now looking to commence production by 2024
  • Gazprom has launched full-scale development of the Karasaveyskoye field in Russia’s Yamal Peninsula, which is expected to start production in 2023 as the second most important node in Yamal gas production after Bovanenkovskoye
  • Vietnam is looking to up its consumption of LNG through a US$7.8 billion investment in four gas-fired power plants, as the country hastens its transition away from coal through the US$ Ca Na LNG complex planned in Ninh Thuan
  • Egypt will now only begin to receive gas from Israel under a US$15 billion deal by late 2019 at the earliest, as ‘unexpected issues’ with the pipeline connecting the two countries forced a delay from the initial timeline of mid-2019
  • Tanzania is looking to finalise details and partners for its US$30 billion LNG project by September 2019, with Equinor, Shell and Ophir Energy involved
  • The Canada Pension Plan Investment Board (CPPIB) agreed to form a US$3.8 billion joint venture with pipeline infrastructure firm Williams, that will include the Ohio Valley Midstream and Utica East Ohio Midstream gas systems
  • Shell and Energy Transfer are moving forward with their 16.45 mtpa Lake Charles LNG project in Louisiana, kickstarting bids for EPC contracts

Oil Oil and Gas News Oil and Gas Industry LNG Oil and Gas Companies News Weekly Update Market Watch Market Trends Latest Oil and Gas Trends
3
1 0

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

Latest NrgBuzz

The United States now exports crude oil to more destinations than it imports from

As U.S. crude oil export volumes have increased to an average of 2.8 million barrels per day (b/d) in the first seven months of 2019, the number of destinations (which includes countries, territories, autonomous regions, and other administrative regions) that receive U.S. exports has also increased. Earlier this year, the number of U.S. crude oil export destinations surpassed the number of sources of U.S. crude oil imports that EIA tracks.

In 2009, the United States imported crude oil from as many as of 37 sources per month. In the first seven months of 2019, the largest number of sources in any month fell to 27. As the number of sources fell, the number of destinations for U.S. crude oil exports rose. In the first seven months of 2019, the United States exported crude oil to as many as 31 destinations per month.

This rise in U.S. export destinations coincides with the late 2015 lifting of restrictions on exporting domestic crude oil. Before the restrictions were lifted, U.S. crude oil exports almost exclusively went to Canada. Between January 2016 (the first full month of unrestricted U.S. crude oil exports) and July 2019, U.S. crude oil production increased by 2.6 million b/d, and export volumes increased by 2.2 million b/d.

monthly U.S. crude oil production and exports

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

The United States has also been importing crude oil from fewer of these sources largely because of the increase in domestic crude oil production. Most of this increase has been relatively light-sweet crude oil, but most U.S. refineries are configured to process medium- to heavy-sour crude oil. U.S. refineries have accommodated this increase in production by displacing imports of light and medium crude oils from countries other than Canada and by increasing refinery utilization rates.

Conversely, the United States has exported crude oil to more destinations because of growing demand for light-sweet crude oil abroad. Several infrastructure changes have allowed the United States to export this crude oil. New, expanded, or reversed pipelines have been delivering crude oil from production centers to export terminals. Export terminals have been expanded to accommodate greater crude oil tanker traffic, larger crude oil tankers, and larger cargo sizes.

More stringent national and international regulations limiting the sulfur content of transportation fuels are also affecting demand for light-sweet crude oil. Many of the less complex refineries outside of the United States cannot process and remove sulfur from heavy-sour crude oils and are better suited to process light-sweet crude oil into transportation fuels with lower sulfur content.

The U.S. Energy Information Administration’s monthly export data for crude oil and petroleum products come from the U.S. Census Bureau. For export values, Census trade data records the destinations of trade volumes, which may not be the ultimate destinations of the shipments.

October, 23 2019
Recalibrating Singapore’s Offshore Marine Industry

The state investment firm Temasek Holdings has made an offer to purchase control of Singaporean conglomerate Keppel Corp for S$4.1 billion. News of this has reverberated around the island, sparking speculation about what the new ownership structure could bring – particularly in the Singaporean rig-building sector.

Temasek already owns 20.5% of Keppel Corp. Its offer to increase its stake to 51% for S$4.1 billion would see it gain majority shareholding, allowing a huge amount of strategic flexibility. The deal would be through Temasek’s wholly-owned subsidiary Kyanite Investment Holdings, offering S$7.35 per share of Keppel Corp, a 26% premium of the traded price at that point. The financial analyst community have remarked that the bid is ‘fair’ and ‘reasonable’, and there appears to be no political headwinds against the deal being carried out with the exception of foreign and domestic regulatory approval.

The implications of the deal are far-ranging. Keppel Corp’s business ranges from property to infrastructure to telecommunications, including Keppel Land and a partial stake in major Singapore telco M1. Temasek has already said that it does not intend to delist and privatise Keppel Corp, and has a long-standing history of not interfering or getting involved in the operations or decisions of its portfolio companies.

This might be different. Speculation is that this move, if successful could lead to a restructuring of the Singapore offshore and marine industry. Since 2015, Singapore’s rig-building industry has been in the doldrums as global oil prices tumbled. Although prices have recovered, cost-cutting and investment reticence have provided a slower recovery for the industry. In Singapore, this has affected the two major rigbuilders – Keppel O&M and its rival Sembcorp Marine. In 2018, Keppel O&M reported a loss of over SS$100 million (although much improved from its previous loss of over SS$800 million); Sembcorp Marine, too, faces a challenging market, with a net loss of nearly 50 million. Temasek itself is already a majority shareholder in Sembcorp Marine.

Once Keppel Corp is under Temasek’s control, this could lead to consolidation in the industry. There are many pros to this, mainly the merging of rig-building operations and shipyards will put Singapore is a stronger position against giant shipyards of China and South Korea, which have been on an asset buying spree. With the overhang of the Sete Brasil scandal over as both Keppel O&M and Sembcorp Marine have settled corruption allegations over drillship and rig contracts, a merger is now increasingly likely. It would sort of backtrack from Temasek’s recent direction in steering away from fossil fuel investments (it had decided to not participate in the upcoming Saudi Aramco IPO for environmental concerns) but strengthening the Singaporeans O&M industry has national interest implications. As a representative of Temasek said of its portfolio – ‘(we are trying to) re-purpose some businesses to try and grasp the demands of tomorrow.’ So, if there is to be a tomorrow, then Singapore’s two largest offshore players need to start preparing for that now in the face of tremendous competition. And once again it will fall on the Singaporean government, through Temasek, to facilitate an arranged marriage for the greater good.

Keppel and Sembcorp O&M at a glance:

Keppel Offshore & Marine, 2018

  • Revenue: S$1.88 billion (up from S$1.80 billion)
  • Net Profit: -S$109 million (up from -S$826 million)
  • Contracts secured: S$1.7 billion

Sembcorp Marine, 2018

  • Turnover: S$4.88 billion (up from S$3.03 billion)
  • Net Profit: -S$48 million (down from S$157 million)
  • Contracts secured: S$1.2 billion
October, 22 2019
Global energy consumption driven by more electricity in residential, commercial buildings

Energy used in the buildings sector—which includes residential and commercial structures—accounted for 20% of global delivered energy consumption in 2018. In its International Energy Outlook 2019 (IEO2019) Reference case, the U.S. Energy Information Administration (EIA) projects that global energy consumption in buildings will grow by 1.3% per year on average from 2018 to 2050. In countries that are not part of the Organization for Economic Cooperation and Development (non-OECD countries), EIA projects that energy consumed in buildings will grow by more than 2% per year, or about five times the rate of OECD countries.

building sector energy consumption

Source: U.S. Energy Information Administration, International Energy Outlook 2019 Reference case

Electricity—the main energy source for lighting, space cooling, appliances, and equipment—is the fastest-growing energy source in residential and commercial buildings. EIA expects that rising population and standards of living in non-OECD countries will lead to an increase in the demand for electricity-consuming appliances and personal equipment.

EIA expects that in the early 2020s, total electricity use in buildings in non-OECD countries will surpass electricity use in OECD countries. By 2050, buildings in non-OECD countries will collectively use about twice as much electricity as buildings in OECD countries.

average annual change in buildings sector electricity consumption

Source: U.S. Energy Information Administration, International Energy Outlook 2019 Reference case
Note: OECD is the Organization for Economic Cooperation and Development.

In the IEO2019 Reference case, electricity use by buildings in China is projected to increase more than any other country in absolute terms, but India will experience the fastest growth rate in buildings electricity use from 2018 to 2050. EIA expects that use of electricity by buildings in China will surpass that of the United States by 2030. By 2050, EIA expects China’s buildings will account for more than one-fifth of the electricity consumption in buildings worldwide.

As the quality of life in emerging economies improves with urbanization, rising income, and access to electricity, EIA projects that electricity’s share of the total use of energy in buildings will nearly double in non-OECD countries, from 21% in 2018 to 38% in 2050. By contrast, electricity’s share of delivered energy consumption in OECD countries’ buildings will decrease from 24% to 21%.

building sector electricity consumption per capita by region

Source: U.S. Energy Information Administration, International Energy Outlook 2019 Reference case
Note: OECD is the Organization for Economic Cooperation and Development.

The per capita use of electricity in buildings in OECD countries will increase 0.6% per year between 2018 and 2050. The relatively slow growth is affected by improvements in building codes and improvements in the efficiency of appliances and equipment. Despite a slower rate of growth than non-OECD countries, OECD per capita electricity use in buildings will remain higher than in non-OECD countries because of more demand for energy-intensive services such as space cooling.

In non-OECD countries, the IEO2019 Reference case projects that per capita electricity use in buildings will grow by 2.5% per year, as access to energy expands and living standards rise, leading to increased use of electric-intensive appliances and equipment. This trend is particularly evident in India and China, where EIA projects that per capita electricity use in buildings will increase by 5.3% per year in India and 3.6% per year in China from 2018 to 2050.

October, 22 2019