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Last Updated: November 8, 2019
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Overview

South Sudan was officially recognized as an independent nation state in July 2011 following a referendum held in January 2011. The South Sudanese voted overwhelmingly in favor of secession, which led to Sudan losing 75% of its oil reserves to South Sudan. Although South Sudan now controls a substantial number of the oil–producing fields, it is dependent on Sudan for transporting oil through its pipelines for processing and export. The transit and processing fees South Sudan must pay to Sudan to transport its crude oil are an important revenue stream for Sudan.[1]

After an agreement was reached on the transit dispute that led to a temporary shutdown of crude oil production, the governments of Sudan and South Sudan shifted their focus from border conflicts to the mitigation of their respective domestic opposition factions. The domestic political dynamics and the security situations in both countries will continue to be a potential risk for disrupting the countries’ oil supplies and exports.

In Sudan, the economic shock of the secession has had a significant effect on the economy, which has been hurt by economic mismanagement, corruption, and unsustainably high levels of spending on the military. The partial lifting of U.S. sanctions on Sudan in October 2017 has allowed for increased foreign investment, but Sudan has made little progress toward developing the upstream sector.[2] In August 2019, Sudan’s military and civilian leaders signed a power-sharing deal that paved the way for a transitional government led by Abdalla Hamdok, an economist, to take power in the hope this government would address the country’s problems. However, Sudan remains on the U.S. government’s list of state sponsors of terrorism, which prevents the country from receiving debt relief through the World Bank-International Monetary Fund’s Heavily Indebted Poor Countries Initiative (HIPC).[3]

In South Sudan, President Salva Kiir and the leader of the main opposition faction, Riek Machar, reached a peace agreement in September 2018, which led to reduced violence from the civil war in South Sudan. Although the peace agreement indicates progress, whether the agreement will bring prolonged stability and an inclusive and stable form of governance is unclear. The current agreement is similar to the previous one, which was signed in 2016 and collapsed after two months, and the current iteration does not address crucial elements such as power sharing between the factions and security arrangements that would allow Machar to safely return from exile.[4] Without significant progress in improving the security and political environment, South Sudan’s ability to attract investors and restart production at its fields to increase production will be limited.

Sector organization

  • Asian national oil companies (NOCs) dominate the oil sectors in both countries. The China National Petroleum Corporation (CNPC), India’s Oil and Natural Gas Corporation (ONGC), and Malaysia’s Petronas hold large stakes in the leading consortia operating in both countries: the Greater Nile Petroleum Operating Company, the Dar Petroleum Operating Company, and the Sudd Petroleum Operating Company.
  • The state–owned Sudanese Petroleum Corporation (SPC) was dissolved in March 2019, by order of Prime Minister Mohamed Tahir Ayala, and all assets and employees were transferred to the Ministry of Petroleum. The SPC was responsible for the exploration, production, and distribution of crude oil and petroleum products. The reason for the dissolution of the SPC has not yet been released.[5]


Petroleum and other liquids

Exploration and production

  • The lifting of U.S. sanctions imposed on Sudan has led to a renewed push by the Sudanese government to attract foreign investment in the upstream sector during the past few years, but Sudan has not made any substantial progress toward developing new fields that would lead to increased production.
  • In March 2019, an offer of 10 oil and natural gas exploration blocks in the Red Sea’s Halayeb triangle sparked a dispute between Egypt and Sudan. Egypt controls the territory, but Sudan has claimed the territory as Sudanese since the 1950s.[6]
  • South Sudan has restarted production at some of its previously shut-in fields in the Toma South and Unity fields in September 2018 and January 2019, providing a marginal increase to its total production. South Sudan seeks to increase total production to more than 200,000 b/d by the end of 2019. However, uncertainty remains on whether Sudan can do so under the export licensing restrictions the U.S. Department of State imposed on South Sudan’s Ministry of Energy, Nilepet (the National Oil and Gas Corporation of South Sudan), and the three major oil field operators in the country: DPOC, GPOC, and SPOC.[7] The licensing restrictions hinder the operators’ ability to secure the equipment and services required to develop or re-start production at its fields.[8]
  • In 2018, the government withdrew from negotiations to explore and develop blocks B1 and B2, and it is reportedly in talks with CNPC to acquire the blocks.[9]

Midstream infrastructure

  • Plans for the construction of a separate pipeline have been reported that would allow South Sudan to export crude oil through neighboring Kenya or Djibouti through Ethiopia to avoid transit fees.[10] However, the pipeline is not likely to be built in the near future because of the overall weak security environment and resulting supply disruptions to crude oil production in South Sudan.

Refining and refined oil products

  • Discussions between Sudanese and Chinese officials on a proposed second expansion to the refinery in Khartoum that could double the refinery’s capacity have been reported, but no significant progress has been made.[11]
  • Petronas signed a contract with the Ministry of Energy and Mining to expand the inactive Port Sudan refinery through a 50/50 joint venture and to add 100,000 b/d to its capacity, but development has been postponed as a result of rising costs.[12]
  • In South Sudan, two refineries were under construction: a 3,000-b/d refinery at Bentiu in the Unity State and a 10,000–b/d refinery at Thiangrial in the Upper Nile region. Plans to expand the Bentiu refinery to increase its capacity to 5,000 b/d have been reported. However, security issues have delayed completion, and unclear when or if the refineries will be operational is unclear.[13]

Petroleum and other liquids exports

  • According to ClipperData, Sudan and South Sudan exported about 114,000 b/d of crude oil in 2018. Although this level is higher than the 65,000 b/d exported in 2012 during the production shutdown, it is lower than the 182,000 b/d exported in 2014.
  • China is the largest export destination for Sudan’s and South Sudan’s crude oil. China received almost 60% of both countries’ total exports in 2018, although the total volume of exports has declined during the past few years. India and the United Arab Emirates have also imported relatively small volumes of Sudan and South Sudan’s crude oil.



Natural gas

  • Natural gas associated with oil fields is mostly flared or reinjected. Despite proved reserves of 3 trillion cubic feet, natural gas development has been limited. According to the latest estimates provided by the National Oceanic and Atmospheric Administration (NOAA), Sudan flared about 13.5 billion cubic feet of natural gas in 2017.[14]



Energy consumption

  • Petroleum consumption in Sudan and South Sudan peaked at 140,000 b/d in 2016 and has remained steady since then.[15]
  • In 2016, total primary energy consumption in Sudan was 0.357 quadrillion British thermal units (Btu) and in South Sudan was 0.017 quadrillion Btu, according to latest estimates. About 80% of total primary energy consumption in Sudan is derived from petroleum and other liquid fuels, and the remainder comes from renewables such as biomass. In South Sudan, nearly all of the primary energy consumption was from petroleum and other liquid fuels.[16]


Electricity

Sudan

  • Total electricity generation in Sudan was 14 billion kilowatthours (kWh) in 2016, of which 57% was generated by hydropower.[17]
  • Although power generation has continued to grow in the post-independence era, only 39% of the population had access to electricity in 2016, according to latest estimates from the World Bank.[18] Urban populations benefit from a substantially higher level of access than rural populations, according to the most recent estimates from the African Development Bank (AfDB). People who are not connected to a grid rely on biomass or diesel-fired generators for electricity.[19]
  • Given its heavy reliance on hydropower to meet its electricity needs, the government of Sudan has sought to diversify its power portfolio mix with thermal and even nuclear power sources. However, it is uncertain whether there will be significant progress towards constructing power plants utilizing these fuel types.[20]

South Sudan

  • Total electricity generation in South Sudan was 0.4 billion kWh in 2016, nearly all of which was generated by crude oil.[21]
  • South Sudan has one of the lowest electrification rates in the world; only 9% of its population had access to electricity in 2016, according to the latest estimates from the World Bank.[22]
  • In 2018, the government of South Sudan commissioned a 100 megawatt (MW) thermal power plant in Juba, which could potentially meet a substantial portion of the country’s electricity needs. The plant is expected to reduce consumption of heavy fuel, upon which generators, the primary source of electricity in the country, rely.[23]
  • The government of South Sudan signed an agreement with the government of Uganda in October 2017 to construct an interconnection line between the two countries. The line will connect the electricity grid in Kampala, the Ugandan capital, and supply electricity to Kaya and Nimule, two of South Sudan’s border towns. The agreement is reportedly in line with the East African Power Pool agreement and should address the serious lack of access to electricity in the remote and rural areas of South Sudan.[24]


Renewable Energy Sources

Hydroelectricity

  • Development of the Kajbar dam, located further north in the Nile Valley, has stalled. The dam was strongly opposed by local communities because of its potentially significant environmental impact, and there has been no sign of progress on its construction. The Kajbar dam, along with two other proposed hydropower projects, the Dal and El-Shireig dams, are heavily financed by the Saudi government.[25]
  • According to BMI Research, five hydropower projects have been identified as potential opportunities for development: Fula Rapids (42 MW), Grand Fula (890 MW), Shukkoli (230 MW), Lakki (410 MW), and Bedden (570 MW). However, construction has been delayed because of a lack of funding.[26]


Sudan South Sudan petroleum production supply oil products natural gas electricity renewable energy
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Your Weekly Update: 23 - 27 March 2020

Market Watch   

Headline crude prices for the week beginning 23 March 2020 – Brent: US$27/b; WTI: US$23/b

  • After falling to an 18-year low last week, crude oil prices have managed to recover from their lowest level since 2003… but just barely
  • A huge swathe of economic stimulus packages announced by governments worldwide, including a US$2 trillion bipartisan injection in the US economy, soothed financial markets, which in turn supported commodity prices
  • More stimulus, however, may be needed as confirmed Covid-19 cases in Italy and the USA overtake China’s total, with the pandemic increasingly containing in the latter but accelerating at a dangerous pace in Europe and North America
  • While the Covid-19 saga plays out, former allies Saudi Arabia and Russia remain at odds over crude oil prices; Russian President Vladimir Putin has accused Saudi Arabia of ‘oil price blackmail’, vowing not to cave in
  • However, various reports from Russia suggest the low crude prices are beginning to bite economically, with Russia still ‘open to cooperation’ but committed to a war of attrition
  • With Saudi Arabia unlikely to want to cave either, the USA is exercising its muscle in an attempt to intervene in the price war; the Department of Energy will be purchasing some 77 million barrels of (US) crude to bring its Strategic Petroleum Reserve to maximum capacity
  • Meanwhile, the US is reportedly also open to a joint US-Saudi Arabia alliance in a bid to stabilise prices, a scenario that was previously unthinkable but may be necessary if the US shale patch is to be saved; such an alliance, however, is likely to invite reprisals from Russia
  • The record low crude oil prices has led some traders to build up positions, hiring tankers and supertankers to store crude and fuel products at sea while betting that prices will eventually rise; the world’s largest oil trader Glencore has chartered one of the world’s two Ultra Large Crude Carriers for six months to serve as floating storage, while other traders are beginning to store jet fuel
  • As expected, the low prices have begun to bite on the US active rig count, which fell by a net 20 to 772 sites; the situation is worse in Canada, where the industry lost 77 sites over the week to fall to 98 active sites
  • While prices have managed to recover from their lows, the outlook for crude remains weak as long as the oil price war persists and the Covid-19 pandemic shows no sign of containment; expect prices to remain rangebound at US$28-30/b range for Brent and US$23-25 for WTI

Headlines of the week

Upstream

  • CNOOC has announced a new ‘large-sized’ oil discovery in the Bohai Bay, with the Kenli 6-1 structure being the first major discovery in the Laibei Lower Uplift
  • Husky has halted work on the West White Rose project offshore Newfoundland and Labrador in Canada until the Covid-19 pandemic blows over
  • MOL and its partners in the PL820S in the Norwegian North Sea have struck oil, with the Evra and Iving exploratory wells fielding oil (and gas) in multiple formations in the Balder and Ringhorne fields; the discoveries are expected to be developed as a tie-back to nearby existing installations
  • Malaysia is preparing for its 2020 licensing round – with bids due in late May – offering stakes in eight fields, which include discovered assets with more than 12 million boe of proven undeveloped resources

Midstream/Downstream

  • Brazil’s Petrobras has extended the deadline to submit binding offers for eight of its refineries in Brazil, hampered by the volatility in global oil prices
  • Shell has paused construction of its massive ethane cracker in Beaver Country, Pennsylvania to help contain the rapid spread of Covid-19 in the USA
  • A second fire in less than a year has broken out at the Petronas-Saudi Aramco 300 kb/d PRefChem refinery in Malaysia, with output likely to be further curbed by a strict lockdown on private operations instituted by the government
  • Work on upgrading the Abadan oil refinery in Iran has been halted until at least mid-April, until the Covid-19 situation in the country is under control
  • Gazprom has started up a new CDU at its Moscow refinery, adding some 140 kb/d of processing capacity to the key processing site

Natural Gas/LNG

  • After almost two decades of attempted development, the Abadi LNG project in Indonesia may be in jeopardy as Japan’s Inpex is ‘reviewing investment plans’ in light of the Covid-19 virus; a delay is very likely, although Inpex has recently secured key land permits for the project’s planned onshore LNG plant
  • Australia is planning legislation to lift the country’s current moratorium on onshore gas exploration and production in 2021, following a cautious green-light by the Victorian Gas Program task force
  • US regulators have given Cameron LNG an additional four years to complete a two-train expansion at its LNG export project in Louisiana
  • Sempra expects to delay FID on its Port Arthur LNG export project, but remains on course to sanction its Energia Costa Azul project by Q2 2020
  • The Woodfibre LNG project in Canada’s British Columbia has delayed construction until 2021, as a key contractor filed for bankruptcy
  • Total has announced a new gas/condensate discovery in the UK North Sea – with the Isabella 30/12d-11 well in license P1820 yielding ‘encouraging flows’
  • INOX India and an Indian subsidiary of Shell have signed an MoU to partner and develop LNG demand and distribution, to be sourced from Shell Energy India’s 5 million tpa LNG receiving terminal in Hazira, Gujarat
March, 27 2020
This Week in Petroleum: Oil market volatility is at an all-time high

Crude oil prices have fallen significantly since the beginning of 2020, largely driven by the economic contraction caused by the 2019 novel coronavirus disease (COVID19) and a sudden increase in crude oil supply following the suspension of agreed production cuts among the Organization of the Petroleum Exporting Countries (OPEC) and partner countries. With falling demand and increasing supply, the front-month price of the U.S. benchmark crude oil West Texas Intermediate (WTI) fell from a year-to-date high closing price of $63.27 per barrel (b) on January 6 to a year-to-date low of $20.37/b on March 18 (Figure 1), the lowest nominal crude oil price since February 2002.

Figure 1. West Texas Intermediate crude oil futures prices

WTI crude oil prices have also fallen significantly along the futures curve, which charts monthly price settlements for WTI crude oil delivery over the next several years. For example, the WTI price for December 2020 delivery declined from $56.90/b on January 2, 2020, to $32.21/b as of March 24. In addition to the sharp price decline, the shape of the futures curve has shifted from backwardation—when near-term futures prices are higher than longer-dated ones—to contango, when near-term futures prices are lower than longer-dated ones. The WTI 1st-13th spread (the difference between the WTI price in the nearest month and the price for WTI 13 months away) settled at -$10.34/b on March 18, the lowest since February 2016, exhibiting high contango. The shift from backwardation to contango reflects the significant increase in petroleum inventories. In its March 2020 Short-Term Energy Outlook (STEO), released on March 11, 2020, the U.S. Energy Information Administration (EIA) forecast that Organization for Economic Cooperation and Development (OECD) commercial petroleum inventories will rise to 2.9 billion barrels in March, an increase of 20 million barrels over the previous month and 68 million barrels over March 2019 (Figure 2). Since the release of the March STEO, changes in various oil market and macroeconomic indicators suggest that inventory builds are likely to be even greater than EIA’s March forecast.

Figure 2. Crude oil futures price spreads and inventories

Significant price volatility has accompanied both price declines and price increases. Since 1999, 69% of the time, daily WTI crude oil prices increased or decreased by less than 2% relative to the previous trading day. Daily oil price changes during March 2020 have exceeded 2% 13 times (76% of the month’s traded days) as of March 24. For example, the 10.1% decline on March 6 after the OPEC meeting was larger than 99.8% of the daily percentage price decreases since 1999. The 24.6% decline on March 9 and the 24.4% decline on March 18 were the largest and second largest percent declines, respectively, since at least 1999 (Figure 3).

Figure 3. Frequency of West Texas Intermediate (WTI) futures daily price percentage changes (January 1999 - March 2020)

On March 10, a series of government announcements indicated that emergency fiscal and monetary policy were likely to be forthcoming in various countries, which contributed to a 10.4% increase in the WTI price, the 12th-largest daily increase since 1999. During other highly volatile time periods, such as the 2008 financial crisis, both large price increases and decreases occurred in quick succession. During the 2008 financial crisis, the largest single-day increase—a 17.8% rise on September 22, 2008—was followed the next day by the largest single-day decrease, a 12.0% fall on September 23, 2008.

Market price volatility during the first quarter of 2020 has not been limited to oil markets (Figure 4). The recent volatility in oil markets has also coincided with increased volatility in equity markets because the products refined from crude oil are used in many parts of the economy and because the COVID-19-related economic slowdown affects a broad array of economic activities. This can be measured through implied volatility—an estimate of a security’s expected range of near-term price changes—which can be calculated using price movements of financial options and measured by the VIX index for the Standard and Poor’s (S&P) 500 index and the OVX index for WTI prices. Implied volatility for both the S&P 500 index and WTI are higher than the levels seen during the 2008 financial crisis, which peaked on November 20, 2008, at 80.9 and on December 11, 2008, at 100.4, respectively, compared with 61.7 for the VIX and 170.9 for the OVX as of March 24.

Figure 4. Changes in implied and historical volatility measures

Comparing implied volatility for the S&P 500 index with WTI’s suggests that although recent volatility is not limited to oil markets, oil markets are likely more volatile than equity markets at this point. The oil market’s relative volatility is not, however, in and of itself unusual. Oil markets are almost always more volatile than equity markets because crude oil demand is price inelastic—whereby price changes have relatively little effect on the quantity of crude oil demanded—and because of the relative diversity of the companies constituting the S&P 500 index. But recent oil market volatility is still historically high, even in comparison to the volatility of the larger equity market. As denoted by the red line in the bottom of Figure 4, the difference between the OVX and VIX reached an all-time high of 124.1 on March 23, compared with an average difference of 16.8 between May 2007 (the date the OVX was launched) and March 24, 2020.

Markets currently appear to expect continued and increasing market volatility, and, by extension, increasing uncertainty in the pricing of crude oil. Oil’s current level of implied volatility—a forward-looking measure for the next 30 days—is also high relative to its historical, or realized, volatility. Historical volatility can influence the market’s expectations for future price uncertainty, which contributes to higher implied volatility. Some of this difference is a structural part of the market, and implied volatility typically exceeds historical volatility as sellers of options demand a volatility risk premium to compensate them for the risk of holding a volatile security. But as the yellow line in Figure 4 shows, the current implied volatility of WTI prices is still higher than normal. The difference between implied and historical volatility reached an all-time high of 44.7 on March 20, compared with an average difference of 2.3 between 2007 and March 2020. This trend could suggest that options (prices for which increase with volatility) are relatively expensive and, by extension, that demand for financial instruments to limit oil price exposure are relatively elevated.

Increased price correlation among several asset classes also suggests that similar economic factors are driving prices in a variety of markets. For example, both the correlation between changes in the price of WTI and changes in the S&P 500 and the correlation between WTI and other non-energy commodities (as measured by the S&P Commodity Index (GSCI)) increased significantly in March. Typically, when correlations between WTI and other asset classes increase, it suggests that expectations of future economic growth—rather than issues specific to crude oil markets— tend to be the primary drivers of price formation. In this case, price declines for oil, equities, and non-energy commodities all indicate that concerns over global economic growth are likely the primary force driving price formation (Figure 5).

Figure 5. Rolling 60-day correlation between daily price changes in West Texas Intermediate (WTI) crude oil prices and other indicators

U.S. average regular gasoline and diesel prices fall

The U.S. average regular gasoline retail price fell nearly 13 cents from the previous week to $2.12 per gallon on March 23, 50 cents lower than a year ago. The Midwest price fell more than 16 cents to $1.87 per gallon, the West Coast price fell nearly 15 cents to $2.88 per gallon, the East Coast and Gulf Coast prices each fell nearly 11 cents to $2.08 per gallon and $1.86 per gallon, respectively, and the Rocky Mountain price declined more than 8 cents to $2.24 per gallon.

The U.S. average diesel fuel price fell more than 7 cents from the previous week to $2.66 per gallon on March 23, 42 cents lower than a year ago. The Midwest price fell more than 9 cents to $2.50 per gallon, the West Coast price fell more than 7 cents to $3.25 per gallon, the East Coast and Gulf Coast prices each fell nearly 7 cents to $2.72 per gallon and $2.44 per gallon, respectively, and the Rocky Mountain price fell more than 6 cents to $2.68 per gallon.

Propane/propylene inventories decline

U.S. propane/propylene stocks decreased by 1.8 million barrels last week to 64.9 million barrels as of March 20, 2020, 15.5 million barrels (31.3%) greater than the five-year (2015-19) average inventory levels for this same time of year. Gulf Coast inventories decreased by 1.3 million barrels, East Coast inventories decreased by 0.3 million barrels, and Rocky Mountain/West Coast inventories decrease by 0.2 million barrels. Midwest inventories increased by 0.1 million barrels. Propylene non-fuel-use inventories represented 8.5% of total propane/propylene inventories.

Residential heating fuel prices decrease

As of March 23, 2020, residential heating oil prices averaged $2.45 per gallon, almost 15 cents per gallon below last week’s price and nearly 77 cents per gallon lower than last year’s price at this time. Wholesale heating oil prices averaged more than $1.11 per gallon, almost 14 cents per gallon below last week’s price and 98 cents per gallon lower than a year ago.

Residential propane prices averaged more than $1.91 per gallon, nearly 2 cents per gallon below last week’s price and almost 49 cents per gallon below last year’s price. Wholesale propane prices averaged more than $0.42 per gallon, more than 7 cents per gallon lower than last week’s price and almost 36 cents per gallon below last year’s price.

March, 27 2020
Your Weekly Update: 16 - 20 March 2020

Market Watch   

Headline crude prices for the week beginning 16 March 2020 – Brent: US$30/b; WTI: US$28/b

  • The dark days continue, with global crude oil prices at their weakest point since 2015 as the Covid-19 pandemic deepens worldwide and the Saudi Arabia-Russia oil war heats up
  • With infections and deaths piling up in Europe and the US – and a second wave of infections threatening Asia – the number of global cases has topped 240,000 and 10,000 respectively
  • Travel lockdown are taking place worldwide; Europe has largely shut its borders, as well as the US and other major countries, resulting in airlines slashing international travel and cratering jet fuel demand
  • But of more concern for oil prices, is the standoff between Saudi Arabia and Russia, as both countries dig in their heels to engage in a protracted price war
  • Saudi Arabia is on the hunt for more supertankers, with the intention of flooding the market with oil; Saudi Aramco will supply a record 12.3 million barrels in April and is looking to raise capacity by another 1 mmb/d after
  • Russian producers are also ready to raise production, with Rosneft announcing it would lift production as soon as the current supply deal ends on March 31
  • Abu Dhabi, a close ally of Saudi Arabia, is fanning the flames as well; ADNOC is discounting its flagship Murban crude and pledging a rise of output to 4 mmb/d in April, and possibly 5 mmb/d in May, to join the race for market share
  • There is a glimmer of hope that a joint resolution could halt the price war, with OPEC+ still holding meetings – albeit virtually – to assess the situation
  • In light of the meltdown in oil prices, the US has suspended its planned sale of inventories from its Strategic Petroleum Reserve, but instead will add to it by purchasing large volumes in an attempt to prop up US shale oil producers
  • With weak oil prices, the active US rig count according to Baker Hughes is holding steady so far, down by a net one site with the loss of two gas rigs offset by a single gain in the oil rig count; however, do expect sharp drops in the near future if there is no resolution to the oil price imbroglio
  • With sentiment over the global macroeconomic situation and oil prices at near worst-case scenario levels, crude oil prices will remain depressed – Brent in the US$29-33/b range and WTI in the US$25-28/b range

 

Headlines of the week

Upstream

  • Beset by a blockade of its oilfields and ports by strongman Khalifa Haftar, Libya’s oil production fell to a new low of 97,508 b/d in early March
  • Petronas and ExxonMobil are looking to sell their stakes in the Chad-Cameroon Petroleum Development and Pipeline Project – connecting three fields in Chad to a floating facility offshore Cameroon; Petronas holds a 35% stake in the project, with ExxonMobil holding a 40% stake
  • Petronas has halted production at the Garraf area in Iraq’s Thi Qar province, evacuating all its employees as Iraq grapples with a major Covid-19 outbreak
  • Murphy Oil has announced some delays to its projects in the Gulf of Mexico as the global oil industry is hit by the Covid-19 pandemic and the price war, reducing its 2020 budget by US$500 million to US$950 million
  • As the Covid-19 pandemic rolls across the globe, licensing rounds are either being suspended or postponed: South Sudan deferring its debut round, Liberia taking its offshore round online and Bangladesh postponing indefinitely
  • Equinor has halted all work on the Martin Linge field offshore Norway, adding to the project’s delay woes as uncertainty over Covid-19 boils over
  • WPX Energy has acquired Felix Energy, expanding its footprint in the eastern part of the Permian Delaware Basin, adding 60 mboe/d of production and bringing WPX Energy’s total output to some 150,000 b/d of shale oil

Midstream/Downstream

  • Asian refiners are looking to cash in on cheap crude being offered as a result of the price war – with Chinese teapots planning to ramp out output – but are planning to curb jet fuel output by redirecting processing to gasoil, as a result of travel bans worldwide that will severely distress international travel
  • Marathon Petroleum – the largest American independent refinery – is looking to sell off its pipeline subsidiary MPLX LP for some US$15 billion
  • ExxonMobil has restarted the fourth and final CDU at its 502,500 b/d Baton Rouge refinery, after the entire plant was taken out by a fire in February 2020
  • Calumet is planning to sell its 30 kb/d refinery in Great Falls, Montana, retaining a bank to begin sales proceedings; Great Falls is the second refinery in Montana to go under the block, after ExxonMobil’s 61.5 kb/d Billings site
  • Production of very low sulfur fuel oil (VLSFO) in China is ramping up, with Jinxi Petrochemical being the latest refiner to begin exports of the marine fuel
  • Austria’s OMV will be purchasing an additional 39% in petrochemicals processor Borealis from Abu Dhabi’s Mubadala for some US$4.7 billion
  • The GTI Statia crude and refined storage terminal in the Caribbean island of St. Eustatius will undergo a US$100 million upgrade to meet growing demand

Natural Gas/LNG

  • The Alaska LNG project – which is designed to produced 3.5 bcf/d of gas in Nikiski on the Kenai Peninsula, sourced from a 1,300km pipeline from the North Slope – has been granted EIS (Environment Impact Statement) by the US FERC, the first step towards authorisation of project to go ahead
  • BP and Azerbaijan’s SOCAR are in discussion over a new Caspian Sea project that goes beyond the current deep gas scheme, called Future Gas
  • Norway’s Golar Power has announced plans to develop an LNG import terminal with the Brazilian northeastern state of Pernambuco
  • Lithuania’s Kaipedos Nafta is moving to fully acquire the Hoegh floating storage and regasification unit that is it currently leasing
March, 20 2020