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Market Watch

Headline crude prices for the week beginning 29 April 2019 – Brent: US$72/b; WTI: US$63/b

  • After touching fresh peaks the previous week, as the USA confirmed its intention to hold firm to its decision to end waivers on Iranian crude, global crude oil prices have taken a bit of a breather, easing back as the Americans vowed to make up for the loss of Iranian crude volumes
  • Iran itself has threatened to close the Strait of Hormuz – a threat it has used in the past – stating that ‘if we are prevented from using it, we will close it’, a direct threat to the US’ return to aggressive sanctions designed to reduce Iranian oil export ‘to zero’
  • With Saudi Arabia and Russia appearing poised to make up for the Iranian loss, the market also noted that President Donald Trump was once again calling on OPEC to reduce oil prices, despite being responsible for causing it in the first place
  • Meanwhile in strife-set Venezuela, crude oil production fell to 840,000 b/d in March, the lowest level for the country since January 2003; renewed tensions between pro-Maduro and pro-Guaido forces in the country could lead to a possible civil war, further hampering output
  • The active US rig count fell by a huge 21 sites last week – 20 oil and 1 gas – bringing the total rig count below the 1000 level for the first time in 15 months to 991 sites with most of the losses in onshore shale basins
  • Crude oil is like to fall back to the US$70-72/b range for Brent and US$61-63/b for WTI, with reports of ample supplies in the market washing over concerns of the end of Iranian crude waivers and the continued implosion in Iran

Headlines of the week

Upstream

  • The Chevron-Anadarko deal is not yet set in stone, with rival Occidental Petroleum engaging in a bidding war with a new US$38 billion takeover proposal – or a 20% premium over Chevron’s offer
  • Shell claims that it has made a ‘blockbuster’ discovery at its Blacktip deepwater well in the Gulf of Mexico, with the Perdido Corridor asset shared with Chevron, Equinor and Respsol reporting ‘significant’ oil flows
  • Lukoil has achieved cumulative production of 100 million tons at Iraq’s West-Qurna-2 field over Phase 1 of the project, with current output of 400,000 b/d
  • CNOOC and PetroChina have signed a new Petroleum Contract, covering the Beibu Gulf 23/29 and Beibu Gulf 24/11 blocks in the South China Sea
  • ExxonMobil will be adding some 28,000 sq.km to its exploration acreage in Namibia through the addition of offshore Blocks 1710 and 1810 and farm-in agreements with state firm NAMCOR for Blocks 1711 and 1811A
  • The Trump administration will be delaying its plans to vastly open up federal coastal waters for oil and gas drilling until after 2020 Presidential election, following legal setbacks and opposition from coastal Republicans
  • ADNOC has launched a second licensing round in Abu Dhabi, covering the offshore Block 3, 4 and 5, and the onshore Blocks 2 and 5
  • Angola is reportedly planning to offer nine oil blocks in the prolific Namibe basin for auction this year to capitalise on a swell in crude prices

Midstream & Downstream

  • ExxonMobil will be expanding its 270 kb/d Fawley refinery in the UK to increase ultra-low sulfur diesel output by 38 kb/d, the latest in a string of clean fuel investments across the supermajor global refining network
  • Azerbaijan’s new STAR refinery in Turkey will be expanding its crude diet away from the current source of Russian Urals crude to include other Middle Eastern and African grades beginning this month
  • Indian Oil’s 160 kb/d Mathura refinery in northern state Uttar Pradesh will be shut down for over a month beginning November 2019 for full maintenance
  • Shell employees at the 400 kb/d Pernis refinery in the Netherlands have voted to end a union-backed strike after a new wage offer was made by Shell
  • As rumoured, Saudi Aramco has bought out Shell’s 50% stake in the Jubail Industrial City SASREF refining joint venture for US$631 million

Natural Gas/LNG

  • Saudi Aramco has sold its first shipment of LNG ever – despite not producing a single drop of the fuel – with the trade coming out of its Singapore trading arm to an unidentified Indian buyer
  • ExxonMobil and China’s Zhejiang Provincial Energy Group have signed a sales agreement for the 20-year supply of 1 mtpa of LNG beginning 2021
  • China’s CNOOC has reached an agreement with Russia’s Novatek to acquire a 10% interest in the Arctic LNG-2 project located on the Gydan Peninsula
  • President Donald Trump is reportedly considering waiving a requirement that only US-flagged ships can move natural gas between two US ports, to ease distribution and bottlenecks within the US natural gas system
  • Australia’s Santos has acquired all remaining equity in the Tern and Frigate gas discoveries in Australia, boosting its position in the growing LNG space there
  • China is reportedly looking into a plan to build a network of LNG plants along the Yangtze river to improve supplies to underdeveloped areas upstream

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Chicago Cubs Shirts: Wear Style with Ultimate Comfort!

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September, 16 2021
The New Wave of Renewable Fuels

In 2021, the makeup of renewables has also changed drastically. Technologies such as solar and wind are no longer novel, as is the idea of blending vegetable oils into road fuels or switching to electric-based vehicles. Such ideas are now entrenched and are not considered enough to shift the world into a carbon neutral future. The new wave of renewables focus on converting by-products from other carbon-intensive industries into usable fuels. Research into such technologies has been pioneered in universities and start-ups over the past two decades, but the impetus of global climate goals is now seeing an incredible amount of money being poured into them as oil & gas giants seek to rebalance their portfolios away from pure hydrocarbons with a goal of balancing their total carbon emissions in aggregate to zero.

Traditionally, the European players have led this drive. Which is unsurprising, since the EU has been the most driven in this acceleration. But even the US giants are following suit. In the past year, Chevron has poured an incredible amount of cash and effort in pioneering renewables. Its motives might be less than altruistic, shareholders across America have been particularly vocal about driving this transformation but the net results will be positive for all.

Chevron’s recent efforts have focused on biomethane, through a partnership with global waste solutions company Brightmark. The joint venture Brightmark RNG Holdings operations focused on convert cow manure to renewable natural gas, which are then converted into fuel for long-haul trucks, the very kind that criss-cross the vast highways of the US delivering goods from coast to coast. Launched in October 2020, the joint venture was extended and expanded in August, now encompassing 38 biomethane plants in seven US states, with first production set to begin later in 2021. The targeting of livestock waste is particularly crucial: methane emissions from farms is the second-largest contributor to climate change emissions globally. The technology to capture methane from manure (as well as landfills and other waste sites) has existed for years, but has only recently been commercialised to convert methane emissions from decomposition to useful products.

This is an arena that another supermajor – BP – has also made a recent significant investment in. BP signed a 15-year agreement with CleanBay Renewables to purchase the latter’s renewable natural gas (RNG) to be mixed and sold into select US state markets. Beginning with California, which has one of the strictest fuel standards in the US and provides incentives under the Low Carbon Fuel Standard to reduce carbon intensity – CleanBay’s RNG is derived not from cows, but from poultry. Chicken manure, feathers and bedding are all converted into RNG using anaerobic digesters, providing a carbon intensity that is said to be 95% less than the lifecycle greenhouse gas emissions of pure fossil fuels and non-conversion of poultry waste matter. BP also has an agreement with Gevo Inc in Iowa to purchase RNG produced from cow manure, also for sale in California.

But road fuels aren’t the only avenue for large-scale embracing of renewables. It could take to the air, literally. After all, the global commercial airline fleet currently stands at over 25,000 aircraft and is expected to grow to over 35,000 by 2030. All those planes will burn a lot of fuel. With the airline industry embracing the idea of AAF (or Alternative Aviation Fuels), developments into renewable jet fuels have been striking, from traditional bio-sources such as palm or soybean oil to advanced organic matter conversion from agricultural waste and manure. Chevron, again, has signed a landmark deal to advance the commercialisation. Together with Delta Airlines and Google, Chevron will be producing a batch of sustainable aviation fuel at its El Segundo refinery in California. Delta will then use the fuel, with Google providing a cloud-based framework to analyse the data. That data will then allow for a transparent analysis into carbon emissions from the use of sustainable aviation fuel, as benchmark for others to follow. The analysis should be able to confirm whether or not the International Air Transport Association (IATA)’s estimates that renewable jet fuel can reduce lifecycle carbon intensity by up to 80%. And to strengthen the measure, Delta has pledged to replace 10% of its jet fuel with sustainable aviation fuel by 2030.

In a parallel, but no less pioneering lane, France’s TotalEnergies has announced that it is developing a 100% renewable fuel for use in motorsports, using bioethanol sourced from residues produced by the French wine industry (among others) at its Feyzin refinery in Lyon. This, it believes, will reduce the racing sports’ carbon emissions by an immediate 65%. The fuel, named Excellium Racing 100, is set to debut at the next season of the FIA World Endurance Championship, which includes the iconic 24 Hours of Le Mans 2022 race.

But Chevron isn’t done yet. It is also falling back on the long-standing use of vegetable oils blended into US transport fuels by signing a wide-ranging agreement with commodity giant Bunge. Called a ‘farmer-to-fuelling station’ solution, Bunge’s soybean processing facilities in Louisiana and Illinois will be the source of meal and oil that will be converted by Chevron into diesel and jet fuel. With an investment of US$600 million, Chevron will assist Bunge in doubling the combined capacity of both plants by 2024, in line with anticipated increases in the US biofuels blending mandates.

Even ExxonMobil, one of the most reticent of the supermajors to embrace renewables wholesale, is getting in on the action. Its Imperial Oil subsidiary in Canada has announced plans to commercialise renewable diesel at a new facility near Edmonton using plant-based feedstock and hydrogen. The venture does only target the Canadian market – where political will to drive renewable adoption is far higher than in the US – but similar moves have already been adopted by other refiners for the US market, including major investments by Phillips 66 and Valero.

Ultimately, these recent moves are driven out of necessity. This is the way the industry is moving and anyone stubborn enough to ignore it will be left behind. Combined with other major investments driven by European supermajors over the past five years, this wider and wider adoption of renewable can only be better for the planet and, eventually, individual bottom lines. The renewables ball is rolling fast and is only gaining momentum.

End of Article

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Market Outlook:

  • Crude price trading range: Brent – US$71-73/b, WTI – US$68-70/b
  • Global crude benchmarks have stayed steady, even as OPEC+ sticks to its plans to ease supply quotas against the uncertainty of rising Covid-19 cases worldwide
  • However, the success of vaccination drives has kindled hope that the effect of lockdowns – if any – will be mild, with pockets of demand resurgence in Europe; in China, where there has been a zero-tolerance drive to stamp out Covid outbreaks, fuel consumption is strengthening again, possibly tightening fuel balances in Q4
  • Meanwhile, much of the US Gulf of Mexico crude production remains hampered by the effects of Hurricane Ida, providing a counter-balance on the supply side

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