Sept 11,2014
In the oil industry, all eyes will be on the tanker BW Zambesi this morning when the ship arrives at Yeosu Port in South Jeolla for Korea’s second-largest refiner GS Caltex.
The vessel is carrying about 400,000 barrels of condensate from Texas, a volume that’s just over half of GS Caltex’s daily refining capacity of 775,000 barrels. It’s the first time in 40 years that GS Caltex has imported unrefined oil from the U.S. But industry insiders say that there is a bigger meaning behind the shipment, as Korean oil companies look to diversify their imports of crude away from the Middle East.
Condensate is a hydrocarbon liquid that is considered ultralight oil. From condensate, refiners can extract gasoline or diesel as well as paraxylene, which is used in plastics.
GS Caltex’s import of condensate from the United States comes after the government there eased export regulations in June. The U.S. Congress instated a crude oil export ban in 1975 but the U.S. Department of Commerce ruled in June that condensate is no longer considered crude oil. The department gave permission to two Texas energy companies to sell condensate. Japanese trader Mitsui & Co. bought some of the condensate and GS Caltex, a joint venture between Korean conglomerate GS Group and American oil giant Chevron, purchased the it from Mitsui.
“We can’t say how much we paid for it, but considering transportation fee and other costs, it is cheaper than [condensate from] the Middle East,” said a GS Caltex spokesman.
The local oil industry sees the import of American condensate as one way to minimize Korean refiners’ dependency on Middle East. From the 2012 oil embargo on Iran to recent violence from the jihadist group ISIS, oil supply from the Middle East has come with high risks.
Although SK Innovation’s dependency on crude oil from the Middle East is relatively low compared to other companies, the holding company of SK Group’s energy affiliates, is looking to Africa instead. In the first half of this year, the company imported 11 million barrels of oil from African nations. Now, 7 percent of its total crude imports come from the continent, more than triple last year’s imports.
Even expensive Brent Crude from the North Sea is seeing sales increase following the Korea-European Union Free Trade Agreement (FTA), which abolished the 3 percent tariff on the oil.
S-Oil, the nation’s third-largest refiner, bought 3 million barrels of crude from Europe, accounting for 2.8 percent of its first-half imports. The company imports 88.6 percent of crude from Saudi Arabia because its parent company is Saudi Aramco.
Hyundai Oilbank, a refiner under shipbuilding conglomerate Hyundai Heavy Industries, has benefitted from diversifying its import channels. The company was the only Korean refiner in the black in the second quarter after bringing in some of its crude oil from Southeast Asia and South America.
“Diversifying import channels is a part of the refiners’ effort to obtain crude oil for a cheap price,” said Park Jin-ho, a manager at Korea Petroleum Association. “More local refiners will be looking for new suppliers in order to reduce import and material costs.”
Copyright by JoongAng Ilbo
Saudi Arabia’s Mixed Signals May Show It’s Just Not That Into $100 Oil
By Money Beat
When Saudi Arabia lowered its oil prices last week, analysts declared that the No. 1 oil producer was more focused on maintaining its share of a well-supplied global market than on keeping prices at $100 a barrel or higher.
“It is fair to say that the kingdom is not in a rush to cut production soon,” said London consulting firm Energy Aspects in a note Monday.
Bank of America Merrill Lynch went further in a note Tuesday, positing: “Does Saudi want $85 oil?”
But then the Saudis scrambled their signals, saying Wednesday that the country cut its crude-oil production by about 400,000 barrels a day in August.
“This confirms that … the Saudis will cut to defend their soft target of $100 for Brent,” says Michael Wittner, an analyst at Société Générale. The production report is a “much stronger signal and a much clearer signal” than the country’s official selling prices, or OSPs, he says.
Not so fast, others say. “The OSPs are the clearest signal,” says Citigroup analyst Eric Lee. The drop in Saudi production doesn’t mean that exports fell, he says, noting Saudi Arabia uses a lot of oil domestically for power generation.
Amrita Sen at Energy Aspects echoed the call to wait for export numbers to be reported. If Saudi Arabia really took 400,000 barrels a day off the global market, “that’s going to be a big number, yes,” she says. But “anecdotally, what we’ve heard is, that’s not happened.”
Last month’s Saudi reduced output isn’t enough to counteract tepid global oil demand and growing production from other OPEC countries. Libyan production has surged to about 800,000 barrels a day, from 200,000 barrels a day several months ago, and Iran and Nigeria also produced more oil in August than in the prior month, according to OPEC.
Bank of America proposed Tuesday that the Saudis could raise production with the intent of lowering oil prices and giving an economic boost to the U.S. and Europe in their fight against Islamic militants in the Middle East.
Saudi Arabia’s announcement of reduced production on Wednesday “doesn’t really change my view,” says Francisco Blanch, the bank’s head of global commodities and derivatives research. “I don’t think the story changes all that much until we start to see the physical markets balancing out a little bit better.”
So far, the futures market isn’t impressed by the Saudi news. Brent settled Wednesday at $98.04 a barrel, its lowest price since April 2013.
Washington (Platts)--10Sep2014/336 pm EDT/1936 GMT
When a leading Washington think tank this week quantified a range of economic benefits to dropping restrictions on US crude oil crude exports and a former key Obama administration offered a robust argument in support a liberalized crude export regime, members of Congress collectively shrugged.
House and Senate aides said Wednesday that while there is growing support within Congress to end the 40-year-old restrictions on the export of US crude oil, the debate to do so is not one they are willing to wade into this year.
Meanwhile, several congressional leaders, who are largely seen as supporters of US producers, have declined to speak in favor of a crude export policy change over fears that a policy change may be linked to an increase in gasoline prices, even if economic studies claim that the opposite will occur if US crude exports ramp up.
Industry and congressional sources said Wednesday that many members of Congress, particularly Republicans, are trying to square their arguments in favor of increased domestic production with a push to ship US oil to foreign markets.
"It's not an argument that can be explained on a bumper sticker," said one industry lobbyist. "And if they don't have to make the argument, they're not going to."
On Tuesday, Brookings Institution's Energy Security Initiative released a study which claimed that dropping US export restrictions next year would cause gasoline prices to fall 9-12 cents/gal and US production to increase by 1.5-2 million b/d.
At the same time, Larry Summers, a former senior economic adviser to President Barack Obama, said allowing US crude exports will have a range of benefits, from lower gasoline prices to improved geopolitics. It was, arguably, the most forceful case yet for an end to crude export restrictions from a former administration official.
But members of Congress and their staffs largely offered no rejection to the developments, signifying the current state of inaction in the US House and Senate on crude export policy.
The Senate Energy and Natural Resources Committee may take up legislation on crude exports early next year, most likely if Republicans gain control of the Senate and Senator Lisa Murkowski, an Alaska Republican and a leading supporter of US oil exports, becomes committee chairman.
But senators on the committee are mainly waiting to see if the administration moves to change policy without Congress.
The Commerce Department recently ruled that it would allow Pioneer Natural Resources and Enterprise Products Partners to export certain processed condensate to foreign markets, a path other US producers are eyeing. But Commerce has stressed that this was not a change in existing policy and the administration has given no signal that it is doing anything more than studying the export issue, industry and congressional sources said.
In April, Representative Michael McCaul, a Texas Republican, introduced the Crude Oil Export Act (HR 4349) to end the restrictions on crude exports. The bill has eight co-sponsors, all Republicans, but is not expected to be brought to the House floor during this Congress.
Earlier this month, Representative Joe Barton, a Texas Republican and the former chairman of the House Energy and Commerce Committee, came out in support of ending restrictions on crude exports. But other House Republican energy leaders, including Michigan Representative Fred Upton, the energy committee's current chairman, and Kentucky Representative Ed Whitfield, chairman of the Energy and Power subcommittee, have remained silent on the issue.
"They're still studying the issue," a committee aide said Wednesday. "We're doing our due diligence in this area."
The committee is expected to hold public hearing and roundtables on the export issue and may consider legislation, but not until next year, the aide said.
At the same time, members of Congress are not being pushed yet by industry lobbyists to address the issue currently. That will likely change after November's mid-term elections, industry sources said.
"It's coming," one industry source said. "It's just not really prime territory for campaign season."
Houston (Platts)--10Sep2014/1226 pm EDT/1626 GMT
US residual fuel oil stocks rose by 1.158 million barrels to 37.699 million barrels, the fourth straight week stocks have seen a build, and their highest level since June 20, US Energy Information Administration data showed Wednesday.
US residual fuel oil implied demand rose 12,000 b/d for the week ended Friday, ending a three-week stretch of record-low implied demand, EIA data shows.
Implied demand for the week ended Friday totaled 137,000 b/d, in line with the four-week average of 136,000 b/d, though still well below the 342,000 b/d four-week average in 2013.
Fuel oil imports rose 80,000 b/d to 210,000 b/d, the fourth time in the last five weeks imports have been above 200,000 b/d. Imports on the US Gulf Coast doubled to 88,000 b/d.
Total number of fuel oil supply days fell from an all-time record high of 292 one week ago.
Fuel oil production moved up 1.1% to 471,000 b/d, its highest since the week ended May 30, and more than three times the weekly consumption figure.
US West Coast fuel oil stocks rose to 5.91 million barrels, their highest since September 2011.
London (Platts)--10Sep2014/826 am EDT/1226 GMT
European demand for Angolan crudes for October loading has been healthy amid slightly stronger refining margins and a robust gasoil market, trading sources said Wednesday.
The Angolan low sulfur crudes which are rich in heating oil and fuel oil have sold at a swift pace for October loading, with good demand from the East and the West.
Refiners in the Mediterranean and Northwest Europe especially have been encouraged by sturdy refining margins and higher product cracks to buy more Angolan crudes that produce a good amount of gasoil.
Sources said that despite the upcoming refinery maintenance season, demand had been decent, and refiners have shown keen interest especially for the heavy and medium grades.
"Europe is buying fairly steadily for October. I would assume some of the buying has to do with the upcoming winter season. The differentials are also much stronger than last month, and they are holding their levels," said a one trader.
Another trader said the robust demand from Europe was "interesting," adding: "I suspect there is some demand for converting it into heating oil given the yields."
Sources said there had been good activity for Angola's heavy grades like Pazflor, Clov, Saturno and Plutonio last week, and that now momentum was also being seen on other grades such as Girassol, Cabinda and Nemba.
In product markets, while outright prices have tracked falling crude markets, premium differentials have remained supported, in part because of the switch from summer to winter specification grades drawing out some buying interest in the market.
CIF Mediterranean 0.1% gasoil cargo premiums to front month 0.1% ICE gasoil futures closed at $8.50/mt Tuesday, rangebound over the first week of September.
Crack differentials for product sales against the Angolan crude purchases on the 30-60 day forward strip, as measured as a differential to the second month 0.1% ICE gasoil futures contract and November 0.1% CIF Med cargo swap, closed at $15.10/barrel Tuesday, supporting refinery margins for forward sales in the fourth quarter.
Moscow (Platts)--10Sep2014/825 am EDT/1225 GMT
Russian traders may "theoretically" take part in marketing Iranian crude but the two countries are not discussing any barter deal with oil changing hands for goods, according to Russia's energy minister Alexander Novak.
There have been persistent reports that Moscow and Tehran are close to finalizing a $20 billion deal for the supply of some 500,000 b/d of Iranian crude in return for Russian goods and services as part of a wider economic cooperation pact.
But Novak told state-run Russia 24 TV channel the two were not discussing any such barter deal.
"In respect of the barter, there are no talks. There is no such contract," he said in an interview broadcast Wednesday.
Russia and Iran signed in August a five-year memorandum to boost trade turnover and are now discussing supplies of various products to each other, including machinery technology, aircraft, new upstream technology and agricultural goods, Novak said following talks in Tehran Tuesday with Iranian oil minister Bijan Zanganeh.
"We're not talking about supplies of [Iranian] crude to Russia," Novak told Russia 24, adding that Iran markets its crude on its own.
"But there is a proposal for our traders to take part in it. So far, we are not discussing this but it is possible to say that theoretically there is such an opportunity," he added.
Meanwhile, Russia's Kommersant daily reported that a scheme was discussed under which a state-controlled Russian entity would buy 2.5-3 million mt of crude annually (50-60,000 b/d) at "a small discount to Brent," citing unnamed sources.
The figure is much less than the much-publicized potential 500,000 b/d deal and may be a part of it. But the report did not clarify this.
The crude could be marketed under swap deals in China as well as in African countries, in particular South Africa, the report said citing unnamed sources.
It said no concrete agreements had so far been reached.
POWER DEALS
Novak also confirmed that Russian companies plan to take part in construction and modernization of power generation plants in Iran.
During the summer there were reports that state-run Tekhnopromexport was discussing with Iran construction of seven thermal and hydro power plants with combined capacity of 5.65 GW and worth $12.2 billion.
Separately, Russian United Grain Company (UGC) is considering supplying up to 2-3 million mt of grain to Iran under the oil-for-goods deal, Russian Itar-Tass news agency reported citing the company's first deputy head, Andrei Gormakh, as saying in Tehran.
"We do hope that such a scheme will be approved, the UGC can supply up to 2-3 million mt/year of grain, while Iran's grain consumption is 5.7 million mt/year," Gormakh was quoted as saying.
Iran and Russia signed four letters of agreement Tuesday following the talks.
"What was agreed between Iran and Russia today is a general economic agreement and implementation of each part takes a long time...So far, the oil barter has not been discussed [under the new agreements] and Iran has the right to export oil to its customers through routes that it sees best," Novak said Tuesday, according to Iran's semi-official Fars news agency.
"Iranian-Russian cooperation will cover all the energy sectors: oil, gas, petrochemicals and refining," Ali Majedi, deputy oil minister for international and commercial affairs, was quoted as saying by student news agency ISNA.
"There are no discussions about a barter deal involving Iran's oil for [Russian] goods at all," he added.
Russian President Vladimir Putin and his Iranian counterpart are due to meet in the near future to continue cooperation discussion, Novak said Tuesday.
In early August, Novak and Zanganeh signed a five-year intergovernmental memorandum of understanding on development of power infrastructure and the oil and gas sector, as well as supplies of machinery, equipment and consumer and agricultural goods.
Washington (Platts)--10Sep2014/414 pm EDT/2014 GMT
US natural gas supplies, primarily from wet gas plays, will continue to outpace any increase in demand in 2015, Bernstein Research said Wednesday as it cut its 2015 price forecast 11% to $4/Mcf from $4.50/Mcf.
Bernstein said gas production associated with oil and liquids drilling will continue to stay at its frantic pace until oil prices move lower and meanwhile, the associated gas from oily and wet plays is outstripping any demand for the commodity.
Bernstein's model says gas production will increase a net 3 Bcf/d in 2015 while demand will only grow 1.2 Bcf/d, primarily from the retirement of coal power plants.
In the first half of 2014, gas production grew 4.1 Bcf/d over the same period last year, Bernstein said.
With the bulk of new gas coming from the wet Marcellus and Utica shales, the Eagle Ford shale, and the Permian Basin, "the proportion of gas coming from dry gas plays has dropped to a low of 57% of unconventional gas production, from a high of 86% in 2010. This indicates that if oil price stays strong, we could see growing gas production even as gas prices fall."
Bernstein offered a ray of hope for gas producers but it's at least three years away.
"There is a light at the end of the tunnel: LNG exports begin to grow in earnest beyond 2017 and reach 6 Bcf/d by 2020," Bernstein said in a note clients. "If the Environmental Protection Agency's proposed carbon dioxide regulations come into effect, an incremental 7 Bcf/d of gas demand would be required by 2020."
"The biggest risk to our outlook is a drop in oil price that would force E&Ps to reduce drilling and limit gas supply growth over the next 24 months," Bernstein said. Another "one sigma" winter could also create a temporary lift to pricing.
"Weather is ultimately transitory and less of a worry," Bernstein said, "but supply growth is persistent and was stronger than we forecast."
Analysts have been growing increasingly pessimistic about natural gas prices as the summer ends without providing significant cooling demand. Investment bank Raymond James Monday cut its 2015 price forecast 18% to $3.65/MMBtu.
Platts Oil Editors James Bambino & Geoffrey Craig
New York - September 10, 2014
U.S. distillate stocks rose 4.09 million barrels to 127.49 million barrels during the reporting week ended September 5, U.S. Energy Information Administration (EIA) data showed Wednesday.
Prompt New York Mercantile Exchange (NYMEX) ultra-low-sulfur diesel (ULSD) futures fell almost 4 cents to around $2.75 in the wake of the data's release, as analysts surveyed Monday by Platts had been looking for a smaller, 400,000-barrel build.
The aggregate build was concentrated in the low- and ULSD categories.
Combined low- and ULSD diesel stocks on the U.S. Atlantic Coast (USAC) rose 2.17 million barrels to 34.26 million barrels, putting them more than 18% above the EIA five-year average. Combined stocks in the U.S. Midwest rose 1.46 million barrels to 30.16 million barrels, putting inventories at about a 1% surplus to the EIA five-year average.
Despite the surge in inventories, total U.S. distillate stocks are still relatively tight, sitting more than 16% below the five-year average. Steady exporting out of the U.S. Gulf Coast (USGC) has meant that refiners are less likely to build inventories over the summer ahead of the U.S. winter heating-demand season.
In fact, despite total USGC distillate stocks rising 200,000 barrels to 38.34 million barrels, combined low- and ULSD stocks in the region fell 552,000 barrels to 32.8 million barrels. That puts USGC inventory almost 20% below the five-year average.
That said, Platts cFlow ship-tracking software shows exports likely slowed the week ended September 5, with only four clean tankers exiting the USGC headed for Europe -- the chief destination for U.S. distillate exports. Tanker rates for a USGC-Europe route, basis 38,000 metric tonnes, have been wallowing around Worldscale* 70-72.5 since the beginning of September, suggesting either a lack of cargoes or an abundance of tonnage.
EIA weekly estimates for U.S. distillate exports held around 1.2 million barrels per day (b/d) for the third straight week.
U.S. distillate production -- the bulk of which comes from the USGC -- rose 21,000 b/d to 5.1 million b/d the week ended September 5, marking the fourth consecutive increase.
Lower domestic demand for distillates likely helped U.S. stocks to build, EIA data shows. Implied demand** fell 554,000 b/d to 3.4 million b/d the week ended September 5, in line with seasonal norms as U.S. Midwest agricultural demand wanes.
GASOLINE STOCKS UP
U.S. gasoline stocks rose 2.38 million barrels to 212.37 million barrels, outpacing analysts' expectations that stocks would remain flat.
The build comes amid a 607,000 b/d decline in implied demand, which fell to 8.97 million b/d.
Stocks on the USAC -- home to the New York Harbor-delivered NYMEX RBOB contract -- rose 184,000 barrels to 47.15 million barrels, putting USAC inventories nearly 3% above the five-year average.
USAC imports tumbled 391,000 b/d to 309,000 b/d, the lowest since late February, EIA data showed. Platts cFlow showed just one tanker arrived in the USAC from Europe the week ended September 5, down from seven the week prior.
U.S. Midwest gasoline stocks rose 1.09 million barrels to 47.45 million barrels, and USGC stocks rose 558,000 barrels to 74.02 million barrels.
USGC RUNS DECLINE
U.S. refinery utilization rates rose 0.6 percentage point to 93.9% of capacity the week ended September 5; analysts expected a 0.33 percentage-point decline.
The rise in total refinery utilization rates occurred despite a decline in USGC crude oil runs, which fell 100,000 b/d to 8.495 million b/d. Regional refinery utilization rates were down 0.6 percentage point to 95% of capacity. The USGC accounts for more than 50% of total U.S. operable capacity.
Even with the cut in runs, USGC crude oil stocks fell 496,000 barrels to 189.258 million barrels. One factor helping to pull USGC crude oil stocks lower was a decline in imports, which fell 80,000 b/d to 3.428 million b/d.
Overall, U.S. commercial crude oil stocks were down 972,000 barrels to 358.598 million barrels, in line with analysts' expectations of a 1 million-barrel draw.
Total U.S. imports were down 54,000 b/d to 7.621 million b/d. Imports from Canada were essentially flat, down 24,000 b/d to 2.937 b/d. Imports from Saudi Arabia were up 417,000 b/d to 1.257 million b/d.
Stocks at Cushing, Oklahoma -- delivery point for the NYMEX crude oil futures contract -- were up 78,000 b/d to 20.356 million b/d.
The U.S. West Coast (USWC) saw the biggest drop, with stocks declining 1.781 million barrels to 50.017 million barrels, amid a 59,000 b/d drop in imports, which fell to 1.188 million b/d, EIA data showed.
Lower runs likely kept the draw in check. USWC crude oil runs were down 50,000 b/d to 2.451 million b/d. USWC operable refinery capacity fell 127,000 b/d to 2.91 million b/d. The drop in capacity pulled total U.S. refinery capacity down by the same amount to 17.804 million b/d.
*Worldscale freight rates are used to price the cost of shipping crude or refined products from one port to another by tanker.
**Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
U.S. Natural Gas Production in August Rose 0.6% from July: Platts’ Bentek Energy
Denver - September 09, 2014
Natural gas production in the lower 48 United States increased by 0.4 billion cubic feet per day (Bcf/d) during the month of August versus July, according to Bentek Energy®, an analytics and forecasting unit of Platts. Production averaged 68.9 billion Bcf/d, the highest monthly average on record and the eight consecutive month this year that average monthly production exceeded the prior month. On August 29th, production again set a one-day record high of 69.4 Bcf/d, following on a July 30 one-day record high of 69.3 Bcf/d.
Average August 2014 gas production was 3.9 Bcf/d, or 6%, higher than the average in August 2013.
The U.S. Energy Information Administration (EIA) will publish its domestic production estimates for August on or around October 31.
"The U.S. continues to break natural gas production records almost on a daily basis", said Jack Weixel, Bentek Energy director of energy analysis. "In August we had two days - the 29th and 31st -that bested production records set in July and 9 out of the highest 10 producing days on record occurred over the past month. What's even more notable is that all this occurred during a month where the market saw substantial pipeline maintenance in the Northeast and Southeast regions of the country. With this seasonal maintenance behind, a production boon is likely in September."
According to Bentek data analysis, 2014 production will average approximately 67.9 Bcf/d. This, on the back of a higher overall price environment for producers and continued growth in liquids-rich basins such as the Eagle Ford, Bakken, Permian and Greater Anadarko, in addition to continued increases in dry production in the Marcellus.
The Bentek data analysis was based on an extensive sample of near real-time production receipt data from the U.S. lower 48 interstate pipeline system. Platts' Bentek production models are highly correlated with and provide an advance glimpse of federal government statistics from the U.S. EIA.
This Bentek Energy U.S. natural gas production data estimate is published early each month, covering the previous month's output activity. Bentek's dry gas production estimates are not observed data and are based on pipeline receipt nominations and certain state production data.
Bentek Energy, which specializes in energy market analytics and is recognized as an industry leader in natural gas market fundamental analysis, was acquired by Platts in 2011. For more information about natural gas supply and demand fundamentals and Bentek Energy, visit www.bentekenergy.com.
By Dow Jones Business News, September 10, 2014, 07:39:00 AM EDT
By Benoît Faucon
VIENNA--OPEC said demand for its crude oil will be lower than expected next year, amid slowing demand and ample supply which have already pushed global oil prices lower.
In its monthly oil-market report, the Organization of the Petroleum Exporting Countries said it had revised estimated demand for its crude down by 200,000 barrels a day for 2015 and by the same amount for this year. As a result, markets will need 300,000 barrels a day less of OPEC crude next year, it said.
OPEC's statement comes after the Brent oil contract--the most widely traded international benchmark-- fell below $ 100 a barrel on Tuesday for the first time in 16 months.
The group attributed lackluster appetite for its oil to mounting competition from rival producers and sluggish demand in industrialized nations.
The U.S., which is undergoing a boom in nonconventional fields, is to boost its oil output by 780,000 barrels a day in 2015, OPEC said.
OPEC also downgraded its global oil demand forecast by 20,000 barrels a day for next year. Though the revision is tiny compared with OPEC's expectation that consumption will increase by 1.19 million barrels a day, the group said it reflected slower consumption growth in industrialized nations.
Despite lower demand for its crude, OPEC said its production rose by 231,000 barrels a day in August as Libyan oil ports and fields reopened.
(END) Dow Jones Newswires
Copyright (c) 2014 Dow Jones & Company, Inc.
By Reuters
Oil explorers Kuwait Energy and Dragon Oil have discovered oil in an exploration well in northern Basra in Iraq, the companies said on Wednesday.
They were able to flow around 2,000 barrels of oil per day from the Faihaa-1 well in the Mishrif formation, they said.
The two firms will continue drilling in the area and conduct further tests in Mishrif towards the end of the year.
"This is the first well drilled in our planned high-impact exploration campaign on Block 9, so we are delighted to have made a discovery so quickly," said Sara Akbar, chief executive of Kuwait Energy.
by Reuters
SAO PAULO, Sept 10 (Reuters) - Brazil will more than double oil and gas production to 5 million barrels per day (bpd) by 2023 from the current rate of nearly 2 million bpd, with the bulk of investments over the next 10 years going to exploration and production, the government said.
Brazil will receive investments of 1.26 trillion reais ($550 billion), of which 62 percent will go to upstream development in oil and gas, according to a new 10-year plan from the government's energy research company, EPE, released on Wednesday.
Oil and gas exports are expected to reach 1.5 million bpd by 2023 and domestic demand is projected at 3.5 million bpd, EPE said.
Additionally, EPE said Brazil would nearly double its cane-based ethanol output to 48 billion liters by 2023 from 28 billion today.
Although Brazil has made some progress in bringing on new oil production from its massive subsalt reserves discovered over the past decade and received nearly $50 billion in investments in new ethanol and sugar mills over the same period, it is unlikely to live up to these projections.
Investment in new ethanol mills has dried up since 2009, when 30 new mills came on line. Today, one or two new mills come on line in a year and many more than that have been going bankrupt every year.
State-run Petrobras, which accounts for most of Brazil's oil and gas output, has consistently missed its own and the government's production targets over the past decade.
Although renewable energy sources are expected to continue to account for 42 percent of Brazil's energy matrix 10 years from now, according to EPE, hydroelectric energy which makes up 67 percent of the power on the energy grid today will fall to 60 percent by that time.
Thermoelectric power is expected to play a greater role in the future but wind and solar energy will also grow as a percentage of total electricity generation 10 years from now.
$1 = 2.29 reais
By Marek Strzelecki and Maciej Martewicz Sep 10, 2014 11:20 PM GMT+0700
Russia’s OAO Gazprom limited natural gas flows to Poland, preventing the European Union member state from supplying Ukraine via so-called reverse flows.
Polskie Gornictwo Naftowe i Gazownictwo SA, or PGNiG, got 20 to 24 percent less fuel than it ordered from Gazprom Export over the past two days and is compensating flows with alternative supply, the company said today in an e-mailed statement. Poland halted gas supply to Ukraine at 3 p.m. Warsaw time today, according to Ukraine’s UkrTransGaz.
Ukraine is seeking to replace some of its Russian gas with fuel from Europe after Gazprom halted its supplies on June 16 in a dispute over debt and prices, echoing spats in 2006 and 2009 that left European customers short of fuel. Gazprom Chief Executive Officer Alexey Miller said in June the company might limit supplies to gas-metering stations where it observed reverse flows.
“It would appear from the outside that stopping reverse flow is something that’s in Gazprom’s interest,” Trevor Sikorski, an analyst at Energy Aspects Ltd. in London, said today by telephone. “Gazprom had said that they were studying any kind of reverse flow and that they would take steps to rectify.”
PGNiG fell 1.2 percent to 4.95 zloty in Warsaw today, the lowest since Sept. 1. Grupa Azoty SA, the biggest Polish chemicals maker, lost 1.5 percent to 69.15 zloty, erasing a gain of as much as 3.8 percent.
Gazprom is doing pre-winter maintenance on pipelines and filling Russian storage sites, which is limiting supply to Poland at the level of the end of last week, according to a company official who declined to be named, citing policy.
Slovak Supply
Russia is reducing flows to the European Union to restrict supply to Ukraine, according to Ihor Prokopiv, the chief executive officer of UkrTransGaz. Poland today halted supply to Ukraine of 4 million cubic meters (140 million cubic feet) a day and may resume them on Sept. 12, while reverse flows from Slovakia aren’t threatened, he said.
Poland increased its nominations for Russian gas via Belarus by 49 percent from last week’s levels in the past two days and asked for an extra 28 percent via Ukraine, according to data from Gaz-System SA, Poland’s gas pipeline operator.
Gazprom hasn’t decreased its supplies to Poland and volumes remain comparable to “previous days” at 23 million cubic meters a day, Gazprom said today in a statement. The company’s supplies to all destinations take into account available resources for exports and volumes needed for domestic storage.
Comparable Flows
Gas flows via Wysokoje, which pumps Russian gas from Belarus to Poland, averaged 74.3 gigawatt-hours (7 million cubic meters) a day in the past two days, the data show. Supply via Drozdowicze, which carries gas via Ukraine into Poland, averaged 77.5 gigawatt-hours, the data show.
Ukraine today received a request from Poland to ship 11 million cubic meters of Russian gas, Prokopiv said today. Gazprom said it was ready to supply just 7 million, he said.
Michael Murphy, a spokesman at RWE AG in Essen, Germany, declined to comment on reverse flows to Ukraine from Poland. RWE started supplies to Ukraine via Poland in April and is shipping fuel from Slovakia to Ukraine.
Poland is able to buy 2 billion cubic meters of gas per year via a link with the Czech Republic and via the Lasow link with Germany. It also can use the Yamal pipeline for reverse flows and import as much as 5.5 billion cubic meters from the West. PGNiG bought 600 million cubic meters of gas from Germany and the Czech Republic in the first half of 2014, compared with 4.5 billion cubic meters imported from Russia.
EON, RWE
“Transmission capacity on links from the Czech Republic and Germany is being used in full,” Gaz-System said today on its website.
Poland got 9.6 billion cubic meters of gas from Russia last year, or 64 percent of its total use, according to BP Plc’s Statistical Review. The country’s storage sites were more than 99 percent full at 2.5 billion cubic meters as of yesterday, according to data from Gas Infrastructure Europe.
Germany’s biggest utility EON SE saw minor supply limitations without any influence on the supply situation, spokesman Adrian Schaffranietz said today by e-mail. RWE’s Czech unit saw no reduction in deliveries to the country, spokesman Martin Chalupsky said by phone.
By Grant Smith and Mark Shenk Sep 11, 2014 4:32 AM GMT+0700
Saudi Arabia, the world’s biggest crude exporter, told OPEC that it cut production by 408,000 barrels a day in August, amid signs of a supply surplus that’s pushed prices to a 16-month low.
The Saudi reduction came as other members such as Nigeria and Kuwait said they increased output in submissions to the Organization of Petroleum Exporting Countries, according to the group’s monthly oil market report today. Total production by the 12-member group climbed 231,000 barrels to 30.347 million last month, based on secondary sources, the report showed.
“It does illustrate a desire not to oversupply the market, and it does illustrate they are actively defending $100 a barrel,” Mike Wittner, head of oil market research at Societe Generale SA, said by phone from New York. “A good chunk of that 400,000 cut was probably in crude exports, which is clearly supportive of prices.”
Brent crude, a benchmark for more than half the world’s oil, fell below $100 a barrel this week as supplies from Libya rebounded, and amid speculation of an oversupply. Banks including Citigroup Inc. and UBS AG said the price decline would increase the chances of Saudi Arabia curbing supplies.
“No switch gets flipped when the price goes from $100 to $99,” Societe Generale’s Wittner said. “It’s a soft floor. When they see a period of sustained weakness, and when there’s physical oversupply of light, sweet crude in the Atlantic basin, the Saudis are going to try and balance the market.”
Shale Boom
OPEC is contending with surging North American crude production, that has reduced the need for overseas imports. U.S. crude output is projected to climb 1 million barrels a day to 9.53 million next year, the most since 1970, Adam Sieminski, the administrator of the Energy Information Administration, said in a statement yesterday.
Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in North Dakota, Texas and other states. U.S. crude production jumped to 8.6 million barrels a day in August, the most since July 1986.
“Rising monthly crude oil production, which will approach 10 million barrels a day in late 2015, will help cut U.S. fuel imports to just 21 percent of domestic demand, the lowest since 1968,” Sieminski said.
Saudi Decline
The Saudi decline is the largest monthly drop in production since December 2012, according to Bloomberg data. Other estimates collated by OPEC, based on secondary sources, show that the kingdom cut output by 55,200 barrels to 9.86 million a day last month.
Saudi Arabia will reduce by about 500,000 barrels a day in the fourth quarter and will make further decreases if prices slip further, Bloomberg oil strategist Julian Lee said today.
Nigerian crude production surged 153,000 barrels a day to 1.801 million in August, according to the country’s submission to OPEC. Kuwait output climbed 30,000 barrels a day to 2.88 million. Ecuador, Iran, Iraq and the United Arab Emirates also reported that they pumped more crude last month than in July.
Crude prices should rebound above $100 in the next few months as Chinese demand rises, Nawal al-Fezaia, Kuwait’s governor to OPEC, told reporters in Kuwait today.
There’s no need for OPEC to cut output because prices will recover once demand for winter fuel increases, Thamir Al-Ghadhban, senior adviser to the Iraqi government and a former oil minister, said in a phone interview on Sept. 8.
Not all OPEC members have the monetary resources to withstand lower crude prices that Saudi Arabia and other Persian Gulf countries have.
Take Action
Libya is “negatively affected” by falling oil prices and OPEC should take action to stem the decline, National Oil Corp. spokesman Mohamed Elharari said by phone from Tripoli Sept. 8. “It is important that fellow OPEC states like Saudi Arabia take measures to preserve the price of the barrel,” he said.
OPEC ministers kept their output target unchanged at 30 million barrels a day on June 11 in Vienna. The group is scheduled to meet next on Nov. 27. Iranian Oil Minister Bijan Zanganeh said there’s no need for an emergency meeting, according to comments cited by state-run news agency Mehr today.
The group will probably refrain from making cuts unless crude falls below $90 a barrel, according to JBC Energy GmBH, a Vienna-based consultancy. Saudi Arabia may have “become a little more relaxed” about prices trading under $100 for a few months, JBC said in an e-mailed report today.
OPEC reduced the outlook for demand for its crude next year by about 200,000 barrels a day, citing expanding supplies from nations outside the group and a weaker outlook for demand.
“It reflects the demand scenario we saw in August,” Miswin Mahesh, an analyst at Barclays Plc in London, said by phone of the Saudi reduction, adding that the country’s direct submissions are normally reliable. “Saudi Arabia continues to supply what’s called of them.”
By Dan Murtaugh and Lynn Doan Sep 11, 2014 3:36 AM GMT+0700
Drivers across the U.S. enjoying the lowest pump prices for this time of year since 2010 will probably see further declines as refineries benefiting from the shale boom produce record amounts of fuel.
The average is $3.428 a gallon, down 6.2 percent since Memorial Day on May 26, AAA data show. That’s the largest decline from the start of the summer driving season since 2008. U.S. refineries operated at the highest-ever seasonal rates every week since July 4.
Processors are using domestic crude that costs less than foreign imports as horizontal drilling and hydraulic fracturing in shale formations increased output to the most since 1986. Gasoline will drop another 10 to 20 cents a gallon by the end of October as retailers switch to cheaper winter-blend fuel, said Michael Green, a Washington-based spokesman for AAA, the largest U.S. motoring group.
“Refineries this summer were running at record-high levels due to the increase in domestic oil production,” Green said Sept. 4 by phone. “That has helped cushion U.S. consumers from many concerns overseas and helped to alleviate any price spikes this summer.”
Crude oil, which makes up about two-thirds the cost of gasoline at the pump, has fallen 14 percent since June 20. U.S. benchmark West Texas Intermediate settled at $91.67 a barrel compared with $98.04 for European Brent, the benchmark for more than half of the world’s oil.
Record Production
U.S. crude futures have closed below Brent every day since Aug. 16, 2010. Shale drilling has boosted U.S. production 62 percent in the past five years and restrictions on the export of most unprocessed crude increased supply to a record earlier this year.
Oil output will reach a 45-year high in 2015, the Energy Information Administration reported yesterday in its Short-Term Energy Outlook. Gasoline pump prices will average $3.41 a gallon next year, the agency estimated, down from $3.46 forecast in August.
Refineries processed 16.63 million barrels of crude a day the week of July 11, the most in Energy Information Administration records dating back to 1989. Plants used 16.33 million barrels a day in the week ended Sept. 5, the 10th-straight week with inputs at a seasonal record. Refiners and blenders produced a record 9.89 million barrels a day of gasoline in June.
Domestic Crude
Domestic crude accounted for 54 percent of refinery demand in June, up from 37 percent in June 2011. Imports into the Gulf Coast region, home to more than half the nation’s refining capacity, fell 42 percent during that period to 3.02 million barrels a day, the least since 1990.
While refinery production is at an all-time high, four-week average demand was 9.07 million barrels a day in the period ended Aug. 29, the lowest seasonal level in 12 years. It fell to 8.99 million the week ended Sept. 5. U.S. gasoline supplies at the end of summer are 1.7 percent above the average of the past three years.
“Demand going into the Labor Day holiday was disappointing,” Phil Flynn, a senior market analyst at Price Futures Group in Chicago, said Sept. 8 by phone. “This was going to be the year. And then it really kind of fell short.”
Prices typically fall as retailers switch from summer-blend to winter-blend gasoline in September. Over the past three years, costs at the pump dropped by an average of 28 cents a gallon from Sept. 1 to Oct. 31.
Winter Blend
Gasoline is a complex blend of hydrocarbons and additives. The federal government requires a different mixture in the summer to reduce damage to ozone levels. Refiners and blenders can mix less-expensive components into gasoline sold after Sept. 15. September futures settled on Aug. 29 at a premium of 15.98 cents a gallon to October futures.
“Near term, retail prices could continue falling a few more cents because of the reduced cost of manufacturing,” said Trilby Lundberg, president of the Lundberg Survey Inc., which publishes retail gasoline prices.
Any price declines could be erased if crude prices spike or if an unplanned refinery outage reduces production more than expected. About 1 million barrels a day of U.S. refining capacity will go offline in September and 2 million in October for planned maintenance, according to London-based consulting firm Energy Aspects Ltd.
A major stimulus package from the Chinese government or continued strengthening in the U.S. economy could also slow the slide in prices, Carl Larry, president of Oil Outlooks & Opinions LLC, said from Houston by phone Sept. 8.
Greater Demand
“We could add a few hundred thousand jobs by the end of the year,” he said. “People drive on summer vacation, but more people drive when they go to work.”
The center of the country has benefited more from the shale boom than the East and West coasts, EIA data show. New York City prices this year have averaged 31 cents a gallon more than Houston, the largest gap in data going back to mid-2000. Los Angeles prices are a record 70 cents more than Houston.
Drivers have already been helped by the shale boom, even if they haven’t seen it, said Green of AAA. Under ordinary circumstances, oil and gasoline prices would have shot up this summer because of global supply concerns tied to violence in Iraq and political tumult in the Ukraine.
“Gas prices continued to fall for much of the summer despite fighting in the Middle East and Ukraine,” Green said. “Before the boom in petroleum production, it’s likely those international events would have resulted in significantly higher prices.”
By Lynn Doan Sep 11, 2014 3:20 AM GMT+0700
Diesel in the U.S. Pacific Northwest is trading at a seasonal record after the region sent supplies north to aid its neighbors in Canada only to be hit with its own refinery breakdowns.
Spot diesel in Portland, Oregon, a benchmark for the Northwest, has been assessed at 40 cents a gallon above futures traded in New York for the past week, its biggest premium since Aug. 20, 2012, and the highest seasonally since at least 2007. Tugs have more than doubled their weekly voyages to Canada from the Northwest after an August shutdown at a Royal Dutch Shell Plc (RDSA) plant cut supplies in Alberta, according to ClipperData LLC.
Diesel’s premium in Portland has quadrupled in the past month as the region, already drained by exports to Canada, grappled with shutdowns at refineries in Washington state. Phillips 66 (PSX) lost steam at the Ferndale refinery last month, and Shell’s 145,000-barrel-a-day Anacortes plant took a coker offline this week that makes diesel, said Genscape Inc., an energy data company based in Louisville, Kentucky.
“They were shipping gasoline and diesel up to Canada to help supply that market, and now they’re having to deal with their own shortage,” Bob Van der Valk, an independent energy analyst in Terry, Montana, said by telephone. “It’ll all ease up eventually when they start diverting cargoes from other places.”
At least nine tugs made voyages to ports in the British Columbia, Canada, area from the coasts of Oregon and Washington in the seven days ended Aug. 23, up from two a week earlier, said ClipperData, a New York-based commodities information provider that uses marine tracking devices to compile voyages. Tugs made six trips in the week ended Sept. 6.
Clear Trend
“We don’t know if every voyage means a full barge of petroleum was exported, but what is clear is the trend,” Abudi Zein, ClipperData’s chief operating officer, said by telephone from New York. “The number of trips by these tugs that push barges between Washington and Oregon and British Columbia ports has jumped from about two voyages a week.”
Canada has, at the same time, cut the volume of gasoline and diesel it sends to the western U.S., he said, citing Commerce Department data.
Spot gasoline in Portland slid 7.5 cents a gallon versus gasoline futures today to a 24.5-cent premium, data compiled by Bloomberg at 2:34 p.m. New York time show. Stockpiles of the motor fuel climbed 1.6 percent to 26.8 million barrels in the week ended Sept. 5.
Restarting Unit
Shell is restarting a unit at the 97,870-barrel-a-day Scotford refinery in Alberta, Canada, that was shut last month for repairs, David Williams, a Shell spokesman based in Calgary, said by e-mail yesterday. The work reduced the plant’s output and production is returning to normal, he said. Suncor Energy Inc. (SU)’s 142,000-barrel-a-day Edmonton refinery in Alberta has meanwhile begun scheduled repairs, the company said Sept. 8.
Shell’s refinery in Anacortes, Washington, started shutting a coker Sept. 7, Genscape said. The plant is performing maintenance, Ray Fisher, a company spokesman based in Houston, said by e-mail yesterday. He declined to identify the unit being repaired or how long the work will take.
Shell’s coker work follows a sulfur plant upset reported at the same refinery on Aug. 20 and a steam interruption at Phillips 66’s 101,000-barrel-a-day Ferndale plant, also in Washington, on Aug. 15 that caused it to flare gases for at least three days, filings with air regulators shows.
By Indira A.R. Lakshmanan and Joe Carroll Sep 11, 2014 1:09 AM GMT+0700
The U.S. and European Union are poised to halt billions of dollars in oil exploration in Russia by the world’s largest energy companies in sanctions that would cut deeper than previously disclosed.
The new sanctions over Ukraine would prohibit U.S. and European cooperation in searching Russia’s Arctic, deep seas or shale formations for crude, according to three U.S. officials who spoke on condition of anonymity because the measures haven’t been made public. If implemented, they would affect companies from Dallas to London, including Exxon Mobil Corp. (XOM) and BP Plc. (BP/)
EU ambassadors met today and will resume deliberations tomorrow in Brussels on whether to trigger added sanctions or wait longer to see if a cease-fire holds between Ukraine and pro-Russian separatists and if Russia backs moves toward a longer-term agreement.
Once the EU implemented the new ban on sharing energy technology and services, the U.S. would follow suit with a similar package, including barring the export of U.S. gear and expertise for the specialized exploration that the Russians are unequipped to pursue on their own, the U.S. officials said.
EU governments agreed on these oil-related sanctions on Sept. 8 as part of a wider package of measures intended to hobble Russia’s finance, defense and energy industries, pending evaluation of the cease-fire declared in Ukraine last week, according to two European officials who also spoke on condition that they not be named.
Future Impact
The added sanctions wouldn’t interfere with drilling and production from conventional land-based wells and those along the shallow edges of inland seas, some of which have been pumping crude for decades. The sanctions target reserves that wouldn’t begin providing crude to global energy markets for five to 10 years.
The move would go beyond previously reported proposals to widen curbs on technologies for the oil industry by banning such cooperation, levying a heavy toll on Russia’s $425 billion-a-year petroleum industry.
No companies outside the U.S. and Europe have the specialized techniques for extracting crude from deep-sea fields and shale formations.
‘Big Deal’
“If true that new sanctions were to ban technology and services for Arctic, deep-sea and shale exploration, that would be a very big deal,” Jason Bordoff, former energy adviser to President Barack Obama and founding director of the Center on Global Energy Policy at Columbia University in New York, said today in an e-mail. “It would significantly curtail Russia’s future oil production capacity, although it is important to note that it would require close collaboration between Europe and the United States to be effective.”
While the U.S. doesn’t intend to allow exemptions for existing contracts that would be affected, the American officials said they weren’t certain whether the EU would provide more leeway.
The stakes are high for Russian President Vladimir Putin because of his government’s dependence on the energy industry to drive economic growth, with a growing reliance on U.S. and European technology and services to exploit fields that pump one of every eight barrels of crude produced worldwide every day.
Since Russia’s annexation of Ukraine’s Crimea peninsula six months ago, the U.S. and EU have imposed steadily more painful sanctions on Putin’s inner circle of politicians and billionaires as well as on banks, energy and defense companies close to the Kremlin in an effort to force Putin to abandon efforts to divide and destabilize Ukraine.
Economic Hammer
The U.S. and EU wield a massive economic hammer: Combined, the allies account for 39 percent of the globe’s economic output, compared with Russia’s 3 percent. While the economic penalties taken before this week have been significant -- including limiting Russian banks’ and energy companies’ ability to raise debt financing -- a ban affecting key types of oil exploration would go a significant step further toward choking Russia’s future economic growth.
U.S. and EU explorers operating in Russia would be barred under the new decrees from bringing in experts and rig crews crucial to unlocking billions of barrels of crude locked in offshore Arctic or Siberian shale fields, according to the government officials.
In the Arctic, drill bits that can cost thousands of dollars apiece need to be replaced constantly and some of the world’s best-trained engineers, geophysicists and geologists must be flown in when needed to troubleshoot problems as they arise.
Exxon-Rosneft
The ban on cooperation would close gaps in previous rounds of sanctions that left room for a unit of Bermuda-based Seadrill Ltd. (SDRL) to sail the West Alpha floating rig into Russian waters in late July on behalf of Irving, Texas-based Exxon Mobil and Moscow’s state-controlled OAO Rosneft. (ROSN)
The arrival of the rig, as well as the signing of six new Seadrill contracts with Rosneft on July 29, just as the last round of sanctions was imposed, angered U.S. and European officials who said the moves flew in the face of the intention behind the economic restrictions: to freeze Arctic exploration by Russia.
Some of the costliest, most complex drilling forays ever attempted in Russia may be in limbo, including a $700 million well that Exxon and Rosneft began to drill last month in the Kara Sea.
Tillerson’s Stance
For Exxon, Russia represents its biggest exploration prospect outside its home country. Exxon owns drilling rights across 11.4 million acres of Russian land and seafloor, an area twice the size of Massachusetts. Exxon’s $411.3 billion market valuation makes it the world’s largest energy company; its annual sales exceed the economic output of all except 28 nations.
Exxon, which has partnered with Rosneft on Russian oilfields for more than a decade, expanded its relationship with the Moscow-based company in 2011 by signing a $3.2 billion exploration pact. Chairman and Chief Executive Officer Rex Tillerson expressed doubts in May that sanctions on Russia would prove effective. In June, he appeared on stage alongside Rosneft CEO Igor Sechin, a former Soviet spy who is under personal sanctions barring him from traveling to the U.S., at the World Petroleum Congress in Moscow.
‘Reliable Partner’
Putin called Exxon “an old and reliable partner” during a ceremony last month marking the start of drilling at an offshore Arctic prospect called Universitetskaya that may hold 9 billion barrels of crude. At current market prices, that would be a $894 billion bonanza.
“We are assessing the situation,” Alan Jeffers, an Exxon spokesman, said yesterday in a telephone interview when asked about the prospect of further sanctions. “We always follow the law.”
Other vulnerable international operators include Royal Dutch Shell Plc (RDSA), the world’s second-largest energy company by market value. Multiple investments by The Hague-based company in Russia include ventures to use advanced reservoir-management techniques to revive and increase crude output from Soviet-era fields and to explore some of the nation’s vast, untapped shale formations.
“We are continuing to review the latest sanctions to assess the potential impacts on our business, and engaging with the respective authorities to gain further clarity,” Kayla Macke, a Shell spokeswoman, said in an e-mail. “We are taking action to ensure we comply with all applicable sanctions or related measures. We’re keeping the situation under close review.”
Total, Statoil
BP’s 19.75 percent ownership stake in Rosneft is the biggest foreign direct investment in Russia.
“We will look at any new sanctions and we will of course comply with all applicable sanctions,” Toby Odone, a spokesman for BP, said by phone.
In addition to Shell and BP, Russia’s deals with marquee European oil companies includes Paris-based Total SA (FP) and Stavanger, Norway-based Statoil ASA. (STL) Total relies on Russian wells for almost 10 percent of its global output. A spokeswoman for Total declined to comment.
“This is something we’re monitoring closely,” Statoil Chief Financial Officer Torgrim Reitan said in an interview in Oslo today. “Our positions in Russia have a very long time horizon.”
Last month, Statoil CEO Helge Lund said at a conference in Stavanger, Norway, the existing sanctions regime would delay some of the company’s planned joint-venture projects with Rosneft. Statoil, which is 67 percent owned by the Norwegian government, was bracing for longer approval processes for exporting equipment and services to Russia, Lund said at the time.
By Grant Smith Sep 10, 2014 8:04 PM GMT+0700
OPEC reduced forecasts for the amount of crude it will need to supply by the most in at least three years as surging North American shale output reduces reliance on the group’s supplies.
The Organization of Petroleum Exporting Countries expects it will need to pump an average of 29.2 million barrels a day of crude next year, 200,000 a day less than it forecast a month ago. The group boosted estimates for supplies from countries outside OPEC by the same amount. The change implies that OPEC’s 12 members would need to cut output by about 1.1 million barrels a day from the 30.3 million they produced in August.
Brent crude futures declined below $100 a barrel on Sept. 8 for the first time in 14 months amid constrained global consumption, swelling U.S. output and speculation that threats to supply in Iraq, Libya and Russia are fading. U.S. crude production will surge to a 45-year high next year, lowering prices and reducing the need for imports, the nation’s Energy Information Administration said yesterday.
“Supply concerns appear to be receding, as geopolitical tension in Ukraine and the Middle East have not led to major supply disruptions,” OPEC’s Vienna-based secretariat said in its monthly oil market report.
Saudis Trim
OPEC’s 12 members boosted output by 230,900 barrels a day to 30.35 million a day in August as Libya restored disrupted supplies, while Angola and Nigeria boosted production, secondary sources cited by the report showed. Saudi Arabia, the group’s biggest producer and de facto leader, trimmed production by 55,200 barrels a day to 9.86 million a day.
The group made a “marginal downward revision” to its 2015 demand global outlook, projecting that fuel use will increase by 1.19 million barrels a day to an average 92.4 million a day.
“There will be a need to remove barrels in 2015, just as there has been a need to remove barrels in 2014,” Torbjoern Kjus, an analyst at DNB in Oslo, said by phone today. “We do see very large stock builds this year. Next year we need to have significant production cuts if we want to avoid further stock builds.”
Non-OPEC producers will increase output by 1.24 million barrels a day to 57.16 million a day in 2015, with the bulk of the growth concentrated in the Americas, according to the report.
OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The organization will next meet on Nov. 27 in Vienna.
The International Energy Agency, the Paris-based adviser to oil-consuming nations, will publish its monthly report tomorrow.
By Daryna Krasnolutska and Anna Shiryaevskaya Sep 10, 2014 10:47 PM GMT+0700
Ukraine will fail to increase domestic natural gas production this year to cut its dependence on Russia after its eastern neighbor annexed Crimea, the Black Sea peninsula that has boosted gas output.
Gas production in Ukraine, which is dependent on imports for most of its needs, remains at the same level as last year and no increases are expected after the country lost its Black Sea offshore deposits to Russia, Ukraine’s Energy Minister Yuri Prodan said today in Kiev.
Moscow-based OAO Gazprom, the main supplier of gas to Ukraine, halted supplies to Ukraine in June after raising prices by 81 percent after the Kremlin-backed president was toppled in winter protests. President Vladimir Putin annexed Crimea, a predominantly Russian-speaking region, in March, sparking a larger political crisis with Ukraine and its allies, the European Union and the U.S.
Crimea received gas from mainland Ukraine until it boosted its own output to about 1.7 billion cubic meters (60 billion cubic feet) last year from 1.2 billion cubic meters, Alexey Grivach, the deputy director of Russia’s National Energy Security Fund, said today by phone.
“That allowed Crimea to meet its own demand but didn’t mean much for the country as a whole,” he said. “Crimea has the potential for growth but it will be quite modest in the next few years. Increasing production substantially would require investments and infrastructure.”
Ukraine’s gas production increased 1.5 percent to 9.8 billion cubic meters in the first half of the year, while demand fell 13.5 percent to 24.6 billion cubic meters, according to Energy Ministry data. The country is sourcing fuel from the EU and is ready for gas talks with Russia on supplies at any time, Prodan said today.
Ukraine largely relies on the Black Sea and Azov Sea for future oil and gas production and has in the past decade sought to attract foreign investors to explore the offshore deposits. Forecast resources in the two areas are estimated at 1.9 billion tons of oil equivalent, according to the website of state-run energy company NAK Naftogaz Ukrainy.
Month-to-month growth more than 25 percent.
By Daniel J. Graeber | Sept. 10, 2014 at 10:27 AM | 0 Comments (Leave a comment)
A still-struggling Libya manages to bring more oil to international market, OPEC finds. UPI/Tariq al-Hun.
VIENNA, Sept. 10 (UPI) -- More barrels of oil on the global market in part because of Libya are keeping oil prices lower, the Organization of Petroleum Exporting Countries said.
OPEC said in its monthly market report for September crude oil production from the 12 members of the cartel increased by 231,000 barrels per day last month to average 30.35 million bpd.
Iraq and Saudi Arabia were the only two member states to post a decline in oil production since the last monthly market report. Libya, meanwhile, posted in the highest gains in terms of percent.
Libya in August produced an average 538,000 bpd, a 26.5 percent increase from July and more than twice what it produced in June.
"An agreement to open some Libyan ports and resume exports of crude made additional barrels available on the global market and applied downward pressure on light sweet crude oil prices," OPEC said in a report published Wednesday.
The Libyan government brokered a deal in April with eastern rebel leaders to re-open oil export terminals. An eight-month blockade from rebels seeking more autonomy for the region known as Cyrenaica had cut Libya's oil export potential dramatically.
Last week, Libya's National Oil Co. said production has topped the August level reported by OPEC to reach 700,000 bpd.
Markets so far are resilient, minister says.
By Daniel J. Graeber | Sept. 10, 2014 at 10:20 AM | 1 Comment
British government assessing gas issues in Ukraine. (UPI Photo/Sergey Starostenko)
LONDON, Sept. 10 (UPI) -- Few in the European community could find relief in the event of a winter crisis stemming from transit issues in Ukraine, the British energy minister said.
European consumers get about a quarter of their gas needs from Russia, though the bulk of that supply runs through the Soviet-era transit network in Ukraine.
"We have looked at our gas resilience to a range of very extreme scenarios, including things we hope do not happen in Ukraine," British Energy Secretary Ed Davey said.
Russian energy company Gazprom in 2006 and 2009 cut gas supplies to Ukraine because of contractual disputes. That left downstream consumers in Europe without gas, a situation that could be repeated because of ongoing conflict in eastern Ukraine.
Russian Energy Minister Alexander Novak committed last week to meeting contractual obligations to Europe.
Though the United Kingdom does not directly import gas from Russia, Davey said there would be regional implications should energy rows escalate.
"Clearly, there could be some price effects which no-one can escape," he said Tuesday.
Exports would be in the form of oil without a U.S. market.
By Daniel J. Graeber | Sept. 10, 2014 at 10:11 AM | 0 Comments (Leave a comment)
Study for U.S. policy center assesses impact of lifting ban on crude oil exports. UPI/Gary C. Caskey
WASHINGTON, Sept. 10 (UPI) -- If the United States lifts a ban on crude oil exports it can realize economic benefits, though it will still be a net importer, a report prepared by NERA Economic Consulting finds.
NERA prepared a 120-page report for The Brookings Institution that says lifting the ban on crude oil exports doesn't eliminate foreign dependency.
Legislation enacted in response to the oil embargo from Arab members of the Organization of Petroleum Exporting Countries limits crude oil exports from the United States.
"Even with the lifting of the crude oil export ban, the U.S. will remain a net importer of crude oil," the report, published Wednesday, finds.
Supporters of lifting the ban say it will increase U.S. leverage overseas and push the price of petroleum products like gasoline lower. Opponents question those claims and argue more exports would come with environmental consequences.
NERA finds more U.S. oil on the global market translates to lower crude oil prices across the board.
"The principal effect of lifting the ban is to allow the export of light tight crude oil and condensate produced in the U.S. that does not have an economic market in the United States," the reports said.
The report's authors state lifting the ban not only generates "paramount foreign policy benefits" but also increases the general economic welfare of the United States.
Discovery marks early success for companies.
By Daniel J. Graeber | Sept. 10, 2014 at 9:28 AM | 0 Comments (Leave a comment)
New oil discovery made near Iraqi port city of Basra. (UPI Photo/Wes Eplen/Navy)
KUWAIT CITY, Sept. 10 (UPI) -- Kuwait Energy and its Emirati counterpart Dragon Oil announced Wednesday they've made their first discovery of oil at a license area in southern Iraq.
"This is the first well drilled in our planned high-impact exploration campaign on Block 9, so we are delighted to have made a discovery so quickly," Kuwait Energy Chief Executive Officer Sara Akbar said in a statement.
Kuwait Energy holds a 70 percent stake in the Block 9 area in Basra. The company said it produced 2,000 barrels of oil per day during a production test and will continue to appraise the discovery through the end of the year.
Dragon Oil CEO Abdul Jaleel al-Khalifa said in a separate statement the discovery in Basra represent the "first significant success" in the company's portfolio.
Iraq is struggling to contain a threat from the Islamic State, a Sunni-led insurgent group in control of parts of northwest Iraq and eastern Syria. The threat prompted some companies to pull non-essential staff out of the country.
Kuwait Energy in August said its operations were unaffected by the violence.
Combined, 40 million barrels of oil equivalent on hand.
By Daniel J. Graeber | Sept. 10, 2014 at 9:18 AM | 0 Comments (Leave a comment)
Norwegian energy company Statoil says two new offshore development online because of fast-track development. UPI/A.J. Sisco..
STAVANGER, Norway, Sept. 10 (UPI) -- Norwegian energy company Statoil said Wednesday it started two development projects in the North Sea using fast-track technology.
The company, one of the largest in the world, said production from the Fram H-North and Svalin C in the Norwegian waters of the North Sea mark its eighth and ninth fast-track developments.
"These are good experiences we will benefit from in Statoil's efforts to increase competitiveness and a long-term sustainable development of the industry," Ivar Aasheim, director of Norwegian shelf development, said in a statement.
The energy company said combined, the two projects are expected to contain more than 40 million barrels of recoverable oil equivalent.
Norway is the largest oil and natural gas producer in Europe.
The National Petroleum Directorate, a government regulator, said preliminary production figures for July, the last full month for which data are available, show an average daily production of 1.93 million barrels of oil, natural gas liquids and condensate, about 8 percent more than was produced in June.
Energy sector accounts for 8 percent of U.S. economy.
By Daniel J. Graeber | Sept. 10, 2014 at 8:41 AM | 0 Comments (Leave a comment)
American Petroleum Institute says energy sector represents about 8 percent of the national economy. UPI/Maryam Rahmanian
WASHINGTON, Sept. 10 (UPI) -- A study conducted by the U.S. energy industry's American Petroleum Institute finds the sector is supporting around 8 percent of the nation's economy.
"Oil and natural gas companies are only one part of a much larger economic success story that is creating job growth up and down the supply chain," API Upstream Group Director Erik Milito said in a statement.
API published a vendor survey listing more than 30,000 segments across the country tied to U.S. energy sector.
As of 2011, API said the oil and gas industry has supported 9.8 million full- and part-time jobs and 8 percent of the U.S. economy. Its study found benefits across the board, with the No. 1 state, Texas, boasting 1.9 million energy jobs to the bottom, the District of Columbia, with 13,700 jobs.
API credited the growth to horizontal drilling and hydraulic fracturing in shale to the increased economic benefits. In terms of job growth, the industry's lobbying group said the number of jobs tied directly to shale should increase from 2.1 million to 3.9 million by 2025.
"Thanks to innovations in horizontal drilling and hydraulic fracturing, America's potential as an energy superpower is growing, and businesses of all types are growing with it," Milito said Tuesday.
National average 4 percent lower year-on-year.
By Daniel J. Graeber | Sept. 10, 2014 at 8:38 AM | 0 Comments (Leave a comment)
U.S. retail prices should continue their general decline for the rest of the year. UPI/Gary C. Caskey
WASHINGTON, Sept. 10 (UPI) -- There still may be some factors that could lead to elevated gas prices, but the upcoming season should bring further relief to U.S. motorists, AAA said.
AAA reported a national average price for a gallon of regular unleaded gasoline of $3.43, a price that's held relatively stable for the last few weeks. The average price is about 4 percent, or 14 cents, less than it was on this date in 2013.
AAA has attributed a general decline in retail gasoline prices to ample supply and a market that's shrugged off geopolitical concerns.
Seasonally, gasoline prices fall in the United States after the Labor Day holiday as demand wanes. By mid-September, refineries also switch to a winter blend of gasoline, which is cheaper to make because it doesn't have to be blended to meet emissions requirements in place during warmer months.
"Motorists usually enjoy cost savings during this period; however geopolitical instability, hurricanes or events that disrupt production could still cause temporary spikes in regional prices in the coming months," the motor club said Tuesday in a weekly report.
The U.S. Energy Information Administration said in its latest short-term market report gasoline prices should continue to fall along with global crude oil prices.
EIA expects the U.S. national average price for a gallon of regular unleaded gasoline to reach $3.18 by December.
Measure part of a series of steps in response to Lac-Megantic disaster.
By Daniel J. Graeber | Sept. 9, 2014 at 10:33 AM | 0 Comments (Leave a comment)
Department of Transportation proposes new measures to ensure safety of trains carrying hazardous materials like crude oil (Photo: Daniel J. Graeber)
WASHINGTON, Sept. 9 (UPI) -- The U.S. Department of Transportation said Tuesday it adopted new measures aimed at securing unattended freight trains in response to oil train accidents.
The Department of Transportation's Federal Railroad Administration issued a new proposal aimed at strengthening rules on unattended freight trains. The rules are part of a series of federal procedures outlined in the wake of the deadly 2013 derailment in Lac-Megantic, Quebec.
"This rulemaking will solidify our existing securement regulations and provide additional safeguards against the rolling of unattended freight trains, especially those carrying hazardous materials," Federal Railroad Administrator Joseph Szabo said in a statement.
At least 40 people were killed in Lac-Megantic, Quebec, in the derailment of a train carrying tankers of crude oil from North Dakota to Canadian refineries. Montreal, Maine and Atlantic Railway blamed the air brakes on the locomotive for the accident.
Canadian Transport Minister Lisa Raitt announced new regulations in April aimed at increasing safety on the Canadian rail system. The measure from regulator Transport Canada started with an order to remove around 5,000 tanker cars designated DOT-111 from service almost immediately.
A 200-page proposal from the Department of Transportation calls for the elimination of older rail cars designated DOT 111 for shipment of flammable liquid, "including most Bakken crude oil."
The new proposal would prevent trains carrying certain specified hazardous materials from being left unattended.
"Safety is our top priority," U.S. Transportation Secretary Anthony Foxx said in a statement. "Today's action is only the latest in more than two dozen steps we have taken in the last year to further safeguard communities along train routes that carry crude oil and other flammable liquids."
