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Last Updated: November 8, 2019
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Headline crude prices for the week beginning 4 November 2019 – Brent: US$62/b; WTI: US$56/b

  • Good broader economic data helped push crude prices up, as better-than-expected US job numbers and a big uptick in Chinese manufacturing orders allayed some fears over the health of the global economy
  • Those worries still persist, but the upbeat data does show that the slowdown might not be prolonged, especially if the US and China manage to hammer out a comprehensive trade deal that White House officials have hinted is in the works
  • The USA, under Trump, has formally withdrawn from the Paris climate accord, placing the USA as one of only 3 countries not to be a party to the comprehensive collection of emission reductions by country
  • OPEC production rebounded to 29.7 mmb/d in October, recovering from the 1.23 mmb/d drop in September caused by the attacks on Saudi crude facilities
  • Having recently lost Qatar and Ecuador, OPEC – via Saudi Arabia – has reportedly informally reached out to Brazil to join the oil club, highlighting the growing importance of Brazilian output; President Jair Bolsonaro has indicated that he would be ‘eager to accept’ the offer
  • Ahead of the OPEC meeting in Vienna on 5-7 December, Saudi Aramco is now scheduled for public listing on the Saudi stock exchange on December 11; this might lead to a push for a deeper or longer tenure for the current supply deal at the Vienna meeting, as Aramco seeks to bolster its valuation
  • The massacre in onshore drilling countries in the US, as the Baker Hughes index indicates that five oil and three gas rigs were dropped last week for a net loss of 8 and a total of 822, as bankruptcies increase in major shale areas
  • There isn’t much room for crude prices to grow in the current environment; indeed, prices are likely to trade with a downward bias at US$58-60/b for Brent and US$53-55/bd for WTI

Headlines of the week

Upstream

  • Total has chosen to sell off its 86.95% stake in Brunei’s offshore Block CA1 to Shell for some US$300 million in line with its global non-core asset divestment
  • Myanmar’s delayed upstream licensing round has now been set for early 2020, with the government aiming to pass a draft oil and gas bill before moving ahead
  • Apache expects to bring two ‘high volume’ wells in the North Sea online over the next two months, with Storr operating by November and Garten by the end of the year, which could double its current 54,000 b/d North Sea output
  • A new offshore oil discovery has been announced in Equatorial Guinea by Kosmos Energy, with the S-5 well in the Rio Muni Basin yielding crude flows

Midstream/Downstream

  • ExxonMobil has put its refinery in Billings, Montana up for sale once again, looking to fetch US$500 million for the 60 kb/d plant, with interested buyers including Valero and Marathon
  • Russia is moving ahead with settling the cases of contaminated crude oil transported via its Druzhba pipeline; Lukoil and Hungary’s MOL have signed a settlement deal, while Total has opted to sell its 720,000-barrel cargo on the open market at a discount of over US$25/b
  • Saudi Aramco may be gaining a bigger foothold in Africa, as NNPC announced plans to collaborate with the Saudi oil firm to revamp Nigeria’s four ailing state refineries that are buckling from age
  • Marathon has folded under pressure from activist investors, announcing that it will be spinning off its fuel retail business while also reviewing a future possibility to spin off its pipeline business as well
  • ALFA Mexico’s petchems subsidiary Alpek has agreed to acquire PET manufacturer Lotte Chemical UK from South Korea’s Lotte Chemical
  • Kuwait Petroleum has started up the 2,264 b/d LPG processing plant at its Mina al-Ahmedi refinery, focusing on delivering LPG for petchems usage

Natural Gas/LNG

  • Kosmos Energy has announced a ‘major’ gas discovery in Mauritania at its Orca-1 well; combined with the Marsouin-1 discovery in the BirAllah, Orca-1 is the largest deepwater oil and gas discovery so far in 2019 and could underpin standalone LNG development in the West African nation
  • BP has announced it is on track to start production from the deepwater Raven field in Egypt by end-2019 – the third stage of its West Nile Delta project that also encompasses the producing Giza and Fayoum developments
  • Denmark’s state energy regulator has given permission for the controversial Nord Stream 2 pipeline to be built in its waters to connect Russia to Germany
  • Plans to expand the Sakhalin-2 LNG plant in Russia’s far east have been put on hold, reportedly due to a lack of gas resources and international sanctions in place, with Gazprom also looking to pipe gas to China instead of liquefying
  • Cheniere expects its Corpus Christi LNG Train 3 in Texas to start-up ahead of its previous timeline of 2H2021, while also expecting to begin operations at the Sabine Pass LNG Train 6 in Louisiana by 1H2023
  • Turkey’s state energy firm Botas is accepting tenders for up to 70 cargoes of LNG for delivery over 2020-2023, as it aims to diversify its gas sources
  • Sempra Energy and Japan’s Mitsui & Co have signed a new MoU to collaborate on more LNG projects, including the Cameron LNG Phase 2 and the future expansion of the Energia Costa Azul project in Baja California

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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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