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Last Updated: August 29, 2019
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Market Watch 

Headline crude prices for the week beginning 26 August 2019 – Brent: US$59/b; WTI: US$54/b

  • Having traded mixed for most of last week as the trade tit-for-tat table tennis match between the US and China continued, crude prices started on a higher note this week as President Trump signals a move to restart trade talks
  • Of course, this has happened before, so Trump’s comments at the G7 Summit in Biarritz might not amount to anything but were still taken by the market to be a positive step
  • This comes as China placed tariffs on US crude oil for the first time since the trade war began, embroiling a key growing export market for American producers in the turmoil
  • Chinese tariffs on US crude oil were imposed up until last year when they were removed, but the re-imposition of a 5% tariff could choke off a burgeoning business and further damage global oil demand
  • The news comes as the American Petroleum Institute (API) stated that it believes the escalating US-China trade dispute ‘hurts’ American energy leadership, directly impacting jobs within the sector
  • US crude stockpiles fell more than expected, which managed to prop up prices somewhat, capping off a stronger summer for fuel demand, particularly gasoline, and refineries ran at near full capacity
  • On the supply side, reports suggest that almost half of all active rigs in Venezuela will shut down by end October 2019 if the Trump administration does not extend a 90-day waiver on sanctions for American producers
  • After a gain last week broke a streak of losses, the US active rig count fell once again by a significant 19 sites, led by the loss of 7 rigs in the Permian; the total active rig count is now at its lowest in almost 18 months at 916 sites
  • Rangebound trading is the best the crude market can hope for now; the ebb and flow between the US and China on trade issues shows no end – depending on who you talk to – and crude prices will remain firmly in the US$58-60/b range for Brent and the US$54-56/b range for WTI


Headlines of the week

Upstream

  • Equinor and YPF have signed a joint exploration agreement for the CAN 100 offshore block in the North Argentinian Basin, with Equinor taking a 50% share
  • Husky Energy will resume production at the North Amethyst and South White Rose drill centres after operations were halted following the November 2018 oil spill off Canada’s Newfoundland and Labrador province
  • Equinor has struck oil at the Sputnik exploration well in Norway’s Barents Sea, with recoverable assets estimated at an initial 20-65 million barrels
  • Alberta will be extending its province output cuts to the end of 2020 to allow more time for the current oversupply to be eased by delayed pipeline projects
  • After being restarted just earlier this month, the Hibernia platform in Canada’s Newfoundland and Labrador has been halted once again after another incident
  • South Sudan has made a new crude discovery in the northern Adar oilfields, with ambitious plans to start production by the end of 2019
  • Pembina Pipeline Corp will be purchasing Kinder Morgan’s Canadian unit for US$3.3 billion, aiming to capitalise on Western Canadian oil sands
  • Lundin Petroleum AB has made a new oil discovery in Norway, with oil struck at Well 16/5-8s in the Goddo prospect under the PL81 license

Midstream/Downstream

  • Petrobras has received three binding offers for its LPG unit Liquigas Distribuidora, with the sale expected to be concluded by November
  • Petronas will be restarting the shut CDU at the Pengerang Refining and Petrochemical (PrefChem) Complex, after the plant was shut down in April following a fire that damaged the AR desulfurisation unit
  • The fire-damaged Philadelphia Energy Solutions refinery may have found a buyer in SG Preston, a biofuels producer that intends to convert the 350 kb/d complex into a renewable diesel production complex
  • Saudi Aramco’s US refining arm Motiva Enterprises has acquired full ownership of the Flint Hills Resource Port Arthur petrochemicals plant
  • Despite stating earlier that it would not be able to meet the new IMO rules of sulfur levels, Indonesia has now said that it will be able to meet the 2020 deadline for Indonesian-flagged vessels operating internationally and locally
  • Nigeria’s NNPC has awarded a tranche of crude-for-product swap deals to firms such as Vitol, Trafigura, and BP in an attempt to alleviate a domestic fuels deficit stemming from underperformance of NNPC’s refineries

Natural Gas/LNG

  • After a bombshell attempt by the government of Papua New Guinea to renegotiate the Papua LNG gas deal, Total is now looking to finalise terms by the end of August, sticking with the original deal signed in April
  • Natural gas production at the giant Zohr field in Egypt has now reached 2.7 bcf/d, up from a production level of 2 bcf/d in September 2018
  • Commercial LNG production has begun at the Cameron LNG Train 1 in Louisiana, with two additional trains planned for a total capacity of 12 mtpa
  • Total has re-confirmed its commitment to develop the US$23 billion Mozambique LNG project after it takes over Anadarko’s African assets following the acquisition of the latter by Occidental Petroleum
  • First liquids output has been produced at the Freeport LNG Train 1 project in Texas, with Trains 2 and 3 on course for completion by Q1 2020

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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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