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Market Watch

Headline crude prices for the week beginning 6 May 2019 – Brent: US$70/b; WTI: US$61/b

  • With trouble brewing for the US on the Iranian crude and Chinese trade front, worries over the state of the global economy has seen crude oil benchmarks fall back from recent highs
  • With President Donald Trump ratcheting up the trade rhetoric against China and an impending imposition of tariffs, a comprehensive trade deal between the two global economic supermajors appears to be very far from being achieved; this has sent a ripple throughout the global financial and commodity markets
  • These trade tensions have subdued crude oil prices globally, with impending weakness expected as the impact of the tariff imposition affects global trade
  • Iran and the USA have also traded threats, with Iran saying that the non-extension of the crude export waivers might lead it to close the vital Straits of Hormuz; in response, the US has dispatch an aircraft carrier strike groups and bomber force to the Middle East, with could spill into military escalation
  • Tensions within OPEC are also bubbling up; there are signs that global supply is not as tight as feared, but Iran is warning that OPEC is danger of collapse, accusing other producers in the cartel of undermining it, setting the stage for a confrontational atmosphere at the upcoming OPEC meeting in Vienna
  • Internal strife in Venezuela is also boiling over, impacting crude production there, and major oil buyers have been asking producers like Saudi Arabia, the UAE and Russia to increase production, muting the effect of the supply deal
  • In the US, drilling activity has remained muted, as sentiment has shifted from aggressive expansion to caution; after a huge 21 rig drop the previous week, the total active US rig count saw the net loss of one rig, with two oil rig gains offset by the dropping of three gas rigs
  • Jitters over the escalation of the US-China trade war will keep in lid on crude oil prices over the week. Along with abating supply worries, global crude prices should be trading in a narrow range, with Brent at US$70-71/b and WTI at US$61-62/b


Headlines of the week

Upstream

  • Warren Buffet has waded into the Chevron and Occidental Petroleum war to acquire Anadarko Petroleum, announcing plans to inject US$10 billion into Occidental that is conditional on its takeover of Anadarko
  • Occidental Petroleum has also agreed to a sale of Anadarko’s assets in Algeria, Ghana, Mozambique and South Africa to Total for US$8.8 billion, which itself is contingent on Occidental’s successful acquisition of Anadarko
  • ExxonMobil and Hess have taken FID on the Liza Phase 2 project in Guyana, planning to use an FPSO with a capacity for 220,000 b/d in the Stabroek Block
  • Ukraine has completed its second upstream licensing round through online bidding, with six of the seven blocks on offer snapped up by state oil firm UGV; a third licensing round covering 9 blocks across 3 regions is scheduled for June

Midstream & Downstream

  • Petrobras is planning to sell up to 8 refineries in Brazil – including the new Abreu e Lima unit – as part of a corporate  refocus on its upstream business; as part of the plan, Petrobras is also looking to sell its fuel retail network in Uruguay and its stake in fuel distributor BR Distribuidora
  • ExxonMobil will be proceeding with its US$2 billion expansion of its Baytown petrochemicals plant in Texas, with expected start-up in 2022
  • Ahead of the ambitious new 175 kb/d Hengyi refinery starting up in Brunei, Chinese operators Hengyi Industries has been purchasing Zafiro crude from Equatorial Guinea to begin trial runs
  • Russian billionaire Mikhail Gutseriyev is taking control over the 120 kb/d Afipsky refinery in southern Russia, aiming to bring the site back to profitability by combining it with Forteinvest’s 280 kb/d refining system
  • IndianOil will be shutting down its Bongaigaon and Guwahati refineries in India’s northeast to upgrade them for Euro VI fuels production
  • Curacao’s Isla refinery has been exempted from US sanctions on Venezuela, which should allow PDVSA or a new operator to continue activities
  • Chevron has completed its acquisition of the 110 kb/d Pasadena Refining System refinery from Petrobras, gaining its second US Gulf Coast refinery

Natural Gas/LNG

  • Despite Cyclone Kenneth devastating the area in Mozambique where the Rovuma LNG plant is being developed, ExxonMobil announced that it still expects to sanction the US$30 billion project on schedule by late 2019
  • Venture Global LNG has received US Federal approval for its 20 mtpa Plaquemines LNG facility in Louisiana, with operations planned for 2023
  • Abu Dhabi is looking to raise up to US$5 billion by selling stakes in its domestic gas pipeline network to international players
  • Thailand’s PTTEP is reportedly looking at the Cash-Maple gas field offshore Western Australia after encouraging recent finds at the Orchid field
  • US independent player Kosmos Energy is looking to develop two new LNG facilities in the eastern Atlantic to tap into identified deepwater gas resources located offshore Mauritania and Senegal
  • The Summit LNG FSRU in Bangladesh has begun commercial operation, doubling the LNG import capacity of the country at a time when Bangladesh’s gas reserves and output is dwindling

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EIA expects U.S. energy-related CO2 emissions to decrease annually through 2021

In its latest Short-Term Energy Outlook (STEO), released on January 14, the U.S. Energy Information Administration (EIA) forecasts year-over-year decreases in energy-related carbon dioxide (CO2) emissions through 2021. After decreasing by 2.1% in 2019, energy-related CO2 emissions will decrease by 2.0% in 2020 and again by 1.5% in 2021 for a third consecutive year of declines.

These declines come after an increase in 2018 when weather-related factors caused energy-related CO2 emissions to rise by 2.9%. If this forecast holds, energy-related CO2 emissions will have declined in 7 of the 10 years from 2012 to 2021. With the forecast declines, the 2021 level of fewer than 5 billion metric tons would be the first time emissions have been at that level since 1991.

After a slight decline in 2019, EIA expects petroleum-related CO2 emissions to be flat in 2020 and decline slightly in 2021. The transportation sector uses more than two-thirds of total U.S. petroleum consumption. Vehicle miles traveled (VMT) grow nearly 1% annually during the forecast period. In the short term, increases in VMT are largely offset by increases in vehicle efficiency.

Winter temperatures in New England, which were colder than normal in 2019, led to increased petroleum consumption for heating. New England uses more petroleum as a heating fuel than other parts of the United States. EIA expects winter temperatures will revert to normal, contributing to a flattening in overall petroleum demand.

Natural gas-related CO2 increased by 4.2% in 2019, and EIA expects that it will rise by 1.4% in 2020. However, EIA expects a 1.7% decline in natural gas-related CO2 in 2021 because of warmer winter weather and less demand for natural gas for heating.

Changes in the relative prices of coal and natural gas can cause fuel switching in the electric power sector. Small price changes can yield relatively large shifts in generation shares between coal and natural gas. EIA expects coal-related CO2 will decline by 10.8% in 2020 after declining by 12.7% in 2019 because of low natural gas prices. EIA expects the rate of coal-related CO2 to decline to be less in 2021 at 2.7%.

The declines in CO2 emissions are driven by two factors that continue from recent historical trends. EIA expects that less carbon-intensive and more efficient natural gas-fired generation will replace coal-fired generation and that generation from renewable energy—especially wind and solar—will increase.

As total generation declines during the forecast period, increases in renewable generation decrease the share of fossil-fueled generation. EIA estimates that coal and natural gas electric generation combined, which had a 63% share of generation in 2018, fell to 62% in 2019 and will drop to 59% in 2020 and 58% in 2021.

Coal-fired generation alone has fallen from 28% in 2018 to 24% in 2019 and will fall further to 21% in 2020 and 2021. The natural gas-fired generation share rises from 37% in 2019 to 38% in 2020, but it declines to 37% in 2021. In general, when the share of natural gas increases relative to coal, the carbon intensity of the electricity supply decreases. Increasing the share of renewable generation further decreases the carbon intensity.

U.S. annual carbon emissions by source

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, January 2020
Note: CO2 is carbon dioxide.

January, 21 2020
Latest issue of GEO ExPro magazine covers Europe and Frontier Exploration, Modelling and Mapping, and Geochemistry.

GEO ExPro Vol. 16, No. 6 was published on 9th December 2019 bringing light to the latest science and technology activity in the global geoscience community within the oil, gas and energy sector.

This issue focusses on oil and gas exploration in frontier regions within Europe, with stories and articles discussing new modelling and mapping technologies available to the industry. This issue also presents several articles discussing the discipline of geochemistry and how it can be used to further enhance hydrocarbon exploration.

You can download the PDF of GEO ExPro magazine for FREE and sign up to GEO ExPro’s weekly updates and online exclusives to receive the latest articles direct to your inbox.

Download GEO ExPro Vol. 16, No. 6

January, 20 2020
Your Weekly Update: 13 - 17 January 2020

Market Watch   

Headline crude prices for the week beginning 13 January 2020 – Brent: US$64/b; WTI: US$59/b

  • Tensions in the Persian Gulf have abated, but not disappeared, as both the US and Iran stepped back from going to war; the buck, so far, has stopped with Tehran’s retaliation to the US assassination of its top general with a barrage of missile strikes at US bases in Iraq
  • The underlying situation is still fragile, with the Iranian population swinging from supporting the government to protesting its accidental downing of a commercial Ukraine Airlines plane; with the risk of war easing, crude prices have fallen back to their pre-crisis levels
  • However, American and foreign oil companies have pulled their staff from crude fields in northern Iraq and Kurdistan, including Chevron, as the oil industry in Iraq monitors the risk – and consequences – of military action
  • In precaution, oil tankers have begun boosting their rates once again to haul crude through the Persian Gulf, with quoted rates now at their highest level since the 2019 attacks on ships passing through the narrow straight
  • Although political tensions remain fresh, Saudi Arabia said that OPEC and the OPEC+ club were instead focused on using their window of production cuts to reduce excess oil stockpiles to levels ‘within the contours of 2010-2014’
  • In the US, not only is shale output staying strong, but production in the US Gulf of Mexico also made history, exceeding 2 mmb/d for the first time ever in 2019, beating the previous high recorded in 2018
  • Worries about the health of global oil demand persist… although the US and China signed a Phase 1 trade deal, the agreement is more about halting escalation of the trade war than repairing inflicted damage; a slowdown in Chinese economic growth could lead to oil demand growth halving in 2020 in China according to CNPC
  • The US active rig count fell for a second consecutive week, losing 15 rigs – 11 oil and 4 gas – for the 17th weekly decline of the past 20 weeks; losses in the Permian were once again high, shedding a total of 6 rigs
  • Crude oil prices should remain rangebound with Brent at US$63-65/b and WTI at US$57-59/b, as the market retreats back to its ever-present worries about demand while geopolitical risk premiums scale back


Headlines of the week

Upstream

  • Guyana’s success is now extending to its neighbours, with Total and Apache announcing a ‘significant’ oil discovery at their Maka Central-1 well in Suriname’s Block 58, which lies adjacent to the prolific Stabroek Block
  • BP has agreed to sell its operating interest in the UK North Sea’s Andrew assets – including the Andrew platform as well as the Andrew, Arundel, Cyrus, Farragon, and Kinnoull fields – along with its 27.5% non-operating interest in the Shearwater field to Premier Oil for some US$625 million
  • Liberia will kick start its next offshore licensing round in April 2020, offering nine blocks in the Harper basin, one of the few offshore regions in West Africa that remains unexplored and undrilled
  • Equinor has extended the life of its Statfjord assets beyond 2030, with plans to commission up to 100 new wells over the next decade, deferring decommissioning with a goal of maintaining current output levels beyond 2025
  • After Murphy Oil, Petrofac and ExxonMobil, Repsol is the latest major considering an upstream exit from Malaysia, covering assets that include six development blocks and the major Kinabalu oilfield in Sabah
  • Senegal’s government has approved Woodside’s offshore Sangomar Field Development, which will involve the drilling of 23 subsea wells and a FPSO with the capacity to process up to 100,000 b/d of crude
  • Equinor has announced plans to reduce greenhouse gas emissions from its offshore fields and onshore plants in Norway by 40% by 2030, 70% by 2040 and to near zero by 2050 from 2019 levels

Midstream/Downstream

  • Shell is reportedly seeking buyers for its 144 kb/d Anacortes refinery in Washington state, which would be its third North American sale in two years after divesting its Martinez refinery in California and Sarnia refinery in Ontario
  • Shell has announced plans to increase its share of the Mexican fuel market to 15%, which would require considerable growth in its network of 200 fuel stations in 12 states that currently represent 1% of the market
  • Occidental Petroleum plans to reduce its holdings in Western Midstream Partners – acquired as part of its controversial takeover of Anadarko – to less than 50%, potentially removing up to US$7.8 billion of debt

Natural Gas/LNG

  • Sempra Energy and Saudi Aramco have signed an agreement that will see the Saudi giant play a bigger part in the planned 22 million tpa Port Arthurt LNG project, following an existing agreement to purchase 5 mtpa signed in May 2019
  • Kuwait Petroleum Corp has agreed to purchase 3 million tpa of LNG from Qatar Petroleum for 15 years beginning 2022, with Kuwait remaining one of the few countries in the Middle East that remain neutral to the Saudi-Qatar standoff
  • ExxonMobil has signed an agreement with midstream company Outrigger Energy II to build a 250 mmscf/d cryogenic gas processing, gathering and pipeline system in the Bakken’s Williston Basin in North Dakota
  • The Larak gas field in Sarawak has achieved first gas, operated by SapuraOMV Upstream as part of the SK408 PSC that includes the Gorek and Bakong fields, with output planned to be processed into LNG at Petronas’ Bintulu complex
  • Russia’s TurkStream natural gas pipeline – connecting Russia, Turkey, Bulgaria and eventually Serbia and Hungary - has officially begun operations, delivering up to 13 bcm of Russian gas that can be rerouted from the Ukraine route
January, 17 2020