NrgEdge Editor

Sharing content and articles for users
Last Updated: April 23, 2019
1 view
Business Trends
image

Market Watch

Headline crude prices for the week beginning 15 April 2019 – Brent: US$71/b; WTI: US$63/b

  • Crude oil futures could be on the verge of snapping its longest weekly rally since 2016, as the market continues to balance managed crude supply from the OPEC+ nations with accelerating American output
  • Analysts are predicting that things could be coming to a head, which might see OPEC+ abandon its plans to stabilise supply and prices for an intense battle for market share with American shale producers instead
  • This seems to be echoed by comments from Saudi Arabia, hinting at a U-turn in OPEC+’s dedication to extending the current supply quota agreement
  • Russian Premier Vladimir Putin also chimed in, saying that he was ‘keeping his options open’ on the cuts and that he does not support an ‘uncontrollable’ increase in oil prices
  • Ongoing concerns in Libya, Venezuela and Iran are giving other OPEC nations some room to breathe in their supply deal, with the organisation reporting that its output plunged in March to 758,000 b/d below the expected Q2 average
  • After Japan reported it would hold back on resuming Iranian crude imports, India is now doing the same until clarification of American waivers on the sanctions is received
  • The International Energy Agency reports that it sees global oil markets tightening, warning that this could lower actual demand and forecasts
  • After a large 19 rig gain last week, the US reversed gear to lose 3 rigs, adding two oil sites while dropping five gas rigs, bringing the total active count to 1022
  • Rumbles of a shale slowdown in the US could keep crude prices on a gentle upward curve, with Brent likely to trade at US$71-72/b and WTI and US$63-64/b


Headlines of the week

Upstream

  • Shell has sold its 22.45% non-operating interest in the US Gulf of Mexico Caeser-Tonga asset to the Delek Group for some US$965 million in cash
  • US President Donald Trump is aiming to limit state powers over cross-border pipeline to promote projects stalled by state regulators over permit and environmental concerns through the issuance of Executive Orders
  • CNOOC has signed a new PSC with Smart Oil Investment for the Bohai 09/17 block in the shallow-water Qikou area of the Bohai Bay Basin in China
  • Also in the Bohai Bay, CNOOC and ConocoPhillips are planning to double production from the Penglai 19-3 field over the next few years
  • Shell has partnered with Sinopec in a maiden exploration of China’s shale oil potential, targeting the Dongying trough in Shengli in eastern China
  • Shell has also announced an ambitious drilling programme in Brazil, targeting the Argonauta pre-salt areas in the Santos Basin
  • Petrobras and the Brazilian government have settled a deepwater contract dispute for US$9.06 billion, paving the way for Petrobras and its partners to begin development of the crude deposits under the 2010 Transfer of Rights

Midstream & Downstream

  • Continuing on its diversification strategy, Saudi Aramco is now looking to double its global refining network to some 10 mmb/d by 2030 as a means of locking in buyers for its crude amidst intense competition, which would see Aramco to continue investing in key global refining centres
  • Shell is aiming to complete the overhaul of its RCCU at the 218 kb/d Norco refinery in Louisiana by May, ahead the US summer driving gasoline demand
  • Sinopec reports that its Jinling refinery in Jiangsu has sold its first 4,200-ton cargo of low-sulfur marine fuel ahdad of the new IMO standards kicking in
  • Saudi Aramco has signed an agreement with Poland’s PKN Orlen to trade Arabian-grade crude to the refiner in exchanges for high-sulfur fuel oil

Natural Gas/LNG

  • Total has been awarded an exploration licence for Block 12 in Oman, with the onshore 10,000 sq.km asset near the gas-rich Greater Barik area that is expected to hold ‘significant prospective gas resources’
  • Saudi Aramco is planning to move into LNG for first time ever, offering to supply Pakistan with cargos on a spot or short-term basis, even though it does not produce LNG and has only just begun developing an LNG trading desk
  • First feed gas has begun to flow at Sempra Energy’s Cameron LNG Train 1 in Louisiana, the final commissioning phase for the project
  • Keppel Gas in Singapore has imported its first 160,000 cbm cargo of US LNG under the country’s Spot Import Policy, its first from outside Southeast Asia and the first trickle in an exported flood of American LNG into the region

Corporate

  • Saudi Aramco has issued its first global bond, raising US$100 billion from the sale, above and beyond the initial expectations of US$10-15 billion
  • Abu Dhabi’s Mubadala Investment Company has sold a ‘significant minority interest’ of 30-40% in Spanish energy firm Cepsa to investment group The Carlyle Group, but will retain majority shareholder
  • Canadian player Africa Oil has acquired 18.8% of fellow Canadian upstream firm Eco (Atlantic) Oil and Gas, but stressed that the acquisition was for investment purposes with no intention of exercising control

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
0 0

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

Latest NrgBuzz

Utility-scale battery storage capacity continued its upward trend in 2018

Utility-scale battery storage systems are increasingly being installed in the United States. In 2010, the United States had seven operational battery storage systems, which accounted for 59 megawatts (MW) of power capacity (the maximum amount of power output a battery can provide in any instant) and 21 megawatthours (MWh) of energy capacity (the total amount of energy that can be stored or discharged by a battery). By the end of 2018, the United States had 125 operational battery storage systems, providing a total of 869 MW of installed power capacity and 1,236 MWh of energy capacity.

Battery storage systems store electricity produced by generators or pulled directly from the electrical grid, and they redistribute the power later as needed. These systems have a wide variety of applications, including integrating renewables into the grid, peak shaving, frequency regulation, and providing backup power.

annual utility-scale battery storage capacity additions by region

Source: U.S. Energy Information Administration, Preliminary Monthly Electric Generator Inventory and Annual Electric Generator Report

Most utility-scale battery storage capacity is installed in regions covered by independent system operators (ISOs) or regional transmission organizations (RTOs). Historically, most battery systems are in the PJM Interconnection (PJM), which manages the power grid in 13 eastern and Midwestern states as well as the District of Columbia, and in the California Independent System Operator (CAISO). Together, PJM and CAISO accounted for 55% of the total battery storage power capacity built between 2010 and 2018. However, in 2018, more than 58% (130 MW) of new storage power capacity additions, representing 69% (337 MWh) of energy capacity additions, were installed in states outside of those areas.

In 2018, many regions outside of CAISO and PJM began adding greater amounts of battery storage capacity to their power grids, including Alaska and Hawaii, the Electric Reliability Council of Texas (ERCOT), and the Midcontinent Independent System Operator (MISO). Many of the additions were the result of procurement requirements, financial incentives, and long-term planning mechanisms that promote the use of energy storage in the respective states. Alaska and Hawaii, which have isolated power grids, are expanding battery storage capacity to increase grid reliability and reduce dependence on expensive fossil fuel imports.

total installed cost of utility-scale battery systems by year

Source: U.S. Energy Information Administration, Form EIA-860, Annual Electric Generator Report
Note: The cost range represents cost data elements from the 25th to 75th percentiles for each year of reported cost data.

Average costs per unit of energy capacity decreased 61% between 2015 and 2017, dropping from $2,153 per kilowatthour (kWh) to $834 per kWh. The large decrease in cost makes battery storage more economical, helping accelerate capacity growth. Affordable battery storage also plays an important role in the continued integration of storage with intermittent renewable electricity sources such as wind and solar.

Additional information on these topics is available in the U.S. Energy Information Administration’s (EIA) recently updated Battery Storage in the United States: An Update on Market Trends. This report explores trends in battery storage capacity additions and describes the current state of the market, including information on applications, cost, market and policy drivers, and future project developments.

August, 11 2020
The State of the Industry: Q2 2020 Financial Performance

It is, obviously, unsurprising that the recently released Q2 financials for the oil & gas supermajors contained distressed numbers as the first full quarter of Covid-19 impact washed over the entire industry. It is, however, surprising how the various behemoths of the energy world are choosing to respond to the new normal, and how past strategies have exposed either inherent strengths or weakness in their operational strategy.

Let’s begin with BP. With roots that stretch back to 1908 with the discovery of commercial oil in Persia, now Iran – BP arguably coined the phrase supermajor in the late 1990s, when acquisition of Amoco, Arco and Burmah Castrol married BP’s own substantial holdings in Europe and the Middle East to create a transatlantic oil and gas giant. It was a trend mirrored across the industry, with the Seven Sisters of the 1970s becoming ExxonMobil (Esso and Mobil), Chevron (Gulf Oil, Socal and Texaco) and modern day Royal Dutch Shell. Joining them were ConocoPhillips (Conoco and Phillips) and Total (Petrofina and Elf Aquitaine). As the world’s appetite for oil and gas increased at an accelerating pace, the supermajors became among the world’s largest and highest valued companies across the next two decades.

That is now poised for a major change. With fossil fuels waning in demand and renewables becoming more investable, BP is now declaring that it will no longer be a supermajor. CEO Bernard Looney made the announcement ahead of the release of the company’s Q2 financials, seeking to reinvent the firm as ‘integrated energy company’ rather than an ‘integrated oil company’. To make this change, Looney is looking to shrink BP’s oil and gas output by 40% through 2030 and invest heavily to become the world’s largest renewable energy businesses, putting climate change firmly on the agenda and getting ahead of the curve in meeting European directives for a low-carbon future. This was, perhaps, already on the cards. But the Covid-19 effect has hastened it. With a second quarter loss of US$6.7 billion, BP is choosing this time to rebrand itself for long-term transformation rather than maximise current shareholder value; indeed, it will slash dividends in half in order to invest cash for the future.

On the European side of the Atlantic, that trend is accelerating. Shell and Total are also aiming to be carbon neutral by 2050, alongside other European majors such as Eni and Equinor. That isn’t to say that oil or gas will no longer play a huge role in their operations – indeed Total and Eni in particular have made many recent and potentially lucrative finds in Egypt, South Africa and Suriname – just that oil and gas will become a smaller percentage of a diversified business. Both Shell and Total have also displayed how past strategic decisions have paid dividends in uncertain times. Both supermajors declared profits for the quarter, escaping the trend of underlying losses with net profits of US$638 million and US$126 million respectively when a deep red colour to the numbers was expected. The saving grace in a dramatic quarter was their trading activities, where the trading divisions of Shell and Total (as well as BP) took advantage of chaos in the market to deliver strong results. But even with this silver lining, Shell and Total are scaling back on dividends, as they join BP in a drive to diversify in the age of climate change, which has strong political backing in Europe where they are based.

On the other side of the pond, the mood surrounding climate change is decidedly different. ExxonMobil and Chevron aren’t exactly ignoring a low-carbon future but they aren’t exactly embracing it wholeheartedly either. Instead, both supermajors look to be focusing on maximising shareholder value by focusing on producing oil as profitably as possible. It explains why Chevron moved to acquire Noble Energy recently after failing to buy Anadarko last year, and why ExxonMobil is still gung-ho over American shale and its new found black gold assets in Guyana. The Permian remains on their focus; with economic pressure on, there are rich pickings in the shale patch that could turn American shale from a patchwork of ragtag independent drillers to big boy-dominated. In the short-term, that promises quick returns after the panic – especially with ExxonMobil and Chevron declaring net losses of US$1.08 billion and US$8.3 billion for Q2, respectively – but the underlying assumption to that is that the energy industry will recover and continue as it is for the foreseeable future, rather than the major upheaval predicted by their European counterparts.

For shareholders, and the companies themselves, the expectation is what the future will hold once the worse is over. That Q2 2020 financials dismal performance was never in doubt. What is more revealing is where the supermajors will go from here. Will BP’s attempt to end the supermajor era pay off? Or will American optimism return us back to business as usual? It’s two different visions of the future that will either way spell a sea change for the industry.

Market Outlook:

  • Crude price trading range: Brent – US$43-45/b, WTI – US$40-42/b
  • Global crude oil price benchmarks moved higher after a devastating blast in Lebanon that levelled a significant amount of Beirut’s port facilities
  • However, the market is also cautious as OPEC+ begins to wind its supply cuts down to a new level of 7.7 mmb/d with concerns that demand recovery is slower-than expected
  • OPEC’s Gulf nations – Saudi Arabia, Kuwait and the UAE – also ended voluntary cuts made in June, but are looking to force Iraq to 100% compliance in August and September as the latest data continues to show it lagging behind commitments

End of Article 

Get timely updates about latest developments in oil & gas delivered to your inbox. Join our email list and get your targeted content regularly for free. Click here to join.

In this time of COVID-19, we have had to relook at the way we approach workplace learning. We understand that businesses can’t afford to push the pause button on capability building, as employee safety comes in first and mistakes can be very costly. That’s why we have put together a series of Virtual Instructor Led Training or VILT to ensure that there is no disruption to your workplace learning and progression.

Find courses available for Virtual Instructor Led Training through latest video conferencing technology.

August, 07 2020
Suriname’s Mega Discovery

It was just over five years ago that ExxonMobil discovered first oil in Guyana, transforming the sleepy South American country into the world’s upstream hotspot in just half a decade. The strike rate there has been amazing – 18 discoveries out of 20 well campaigns, and more seem to coming as new discovery efforts get underway. This made Guyana the envy of its neighbours. And why not? The Guyanese economy is projected to grow at 86% y-o-y in 2020, despite the Covid-19 pandemic, as first commercial oil from the Liza field hit the market.

Just over the Guyana border, Suriname, a former Dutch colony had all the more reason to be envious. Unlike Guyana, Suriname has an established upstream industry. Managed by the state oil firm Staastsolie, the volumes are paltry: the onshore Calcutta and Tamabredjo field collectively produce at a current rate of 17,000 b/d. Guyana’s Liza field alone is 15 times larger than Suriname’s total crude output. But the Guyanese miracle always did herald some hope that some of that golden dust could blow Suriname’s way, not least because the giant offshore discoveries in the Staebroek block were just across the maritime border.

In January 2020, this bet proved right. US independent Apache announced it had made a ‘significant oil discovery’ at the Maka-Central 1 well, the first suggestion that the Cretaceous oil formation in Guyana extended southeast to Suriname. Two more discoveries were announced by Apache in quick succession, Sapakara West and, just this week, Kwaskwasi. All three are located in the 1.4 million acre offshore Block 58, which was originally held entirely by Apache before French supermajor Total bought into a 50% stake just before the Maka Central discovery was announced. Three discoveries in six month is quite a payoff, especially with the Kwaskwasi-1 well delivering the highest net pay and confirming a ‘world-class hydrocarbon resource’. More importantly, initial findings suggest that Kwaskwasi holds oil with API gravities in the 34-43 degree range, the sort of light oil that is perfect for petrochemicals and higher-grade fuels.

With Total scheduled to take over operatorship of the block after a fourth drilling campaign, the partners are eager to extend their streak. The Sam Croft drillship is scheduled to head to Keskesi, the fourth scheduled prospect in Block 58, after operations at Kwaskwasi-1 have concluded, and an additional exploration campaign is already in the plans for 2021.

Total and Apache aren’t the only ones playing in Surinamese waters, though they are the first to hit the payday. Most of the country’s offshore blocks have been apportioned, snapped up by ExxonMobil, Kosmos, Petronas, Tullow and Equinor, and all are hoping to be the next to announce a find. ExxonMobil, with Equinor and Hess Energy, have a good position in Block 59, just next to the Caieteur block in Guyana, while Kosmos is hunting in Block 42, right next to the Canje block in Guyana. However, it is Malaysia’s Petronas that is the next likely candidate. Present in Suriname since 2016, when it drilled the exploratory Roselle-1 well in Block 52, Petronas also has interests in Block 48 and Block 53, and recently completed a farm-out sale with ExxonMobil for 50% of Block 52. Its drilling campaign for the Sloanea-1 well is scheduled to begin in Q4 2020, and will be keenly watched by all in Suriname.

Unlike Guyana that had no state oil company, Suriname has existing national oil infrastructure. Staatsolie currently controls onshore and shallow water areas in the country. However, all wells drill in offshore Block A, B, C and D have turned out dry so far. That leaves Staatsolie in a situation: its own areas are not prolific as discoveries by Total, Apache, Petronas et al. For now, Staatsolie is looking to gain rights to 10-20% of any oil discovery within Suriname, but the framework for this is weak and it must navigate carefully to not antagonise the oil majors that are powering the discoveries in its waters. It will do well to avoid the confrontational attitude that is jeopardising LNG development in Papua New Guinea with ExxonMobil and Total, but Staatsolie does have a claim to Suriname’s oil riches for itself.

For now, it is exhilarating to observe the progress in this previously quiet corner of South America. It is the closest thing to frontier oil exploration in the 21st century, with each new discovery generating more and more excitement. Who would have thought there was so much oil left undiscovered? Guyana has shot into the spotlight, Suriname is starting its own ascent and… who knows… could French Guiana be next?

End of Article 

Get timely updates about latest developments in oil & gas delivered to your inbox. Join our email list and get your targeted content regularly for free. Click here to join.

In this time of COVID-19, we have had to relook at the way we approach workplace learning. We understand that businesses can’t afford to push the pause button on capability building, as employee safety comes in first and mistakes can be very costly. That’s why we have put together a series of Virtual Instructor Led Training or VILT to ensure that there is no disruption to your workplace learning and progression.

Find courses available for Virtual Instructor Led Training through latest video conferencing technology.

August, 01 2020