By Ari Altstedter
The Canadian dollar fell to the lowest level in five months as crude oil, the nation’s largest export, traded at almost its lowest point in more than a year.
The currency weakened against all its 16 major peers after a report showed home prices were unchanged in July, the second indicator this week to suggest the housing market is fading as a driver of economic growth. The Bank of Canada said last week it is waiting for strong-enough exports to take the burden of economic growth from over-indebted consumers, prompting speculation it would lag behind the U.S. Federal Reserve raising interest rates.
“The growth story still favors the U.S.,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce, by phone from London. “When you overlay that with negative commodity correlation, then that just provides you with some impetus to be a buyer of the U.S. dollar against Canada.”
The loonie, as the Canadian dollar is called for the image of the aquatic bird on the C$1 coin, fell 0.9 percent to C$1.1035 per U.S. dollar at 5 a.m. in Toronto. It reached C$1.1059, the weakest since April 1. One loonie buys 90.62 U.S. cents.
Crude oil fell as much as 1.4 percent to $90.43 per barrel in New York, the lowest since May 2013, before trading at $93.14, according to data compiled by Bloomberg.
Housing Update
Canada’s New Home Price Index was unchanged in July from the previous month, Statistics Canada said from Ottawa.
BNP Paribas SA advised clients to exit positions betting on the Canadian dollar to rise against the euro. The bank initiated the position at the end of August in anticipation the European Central Bank would lower interest rates to bolster its failing economy, Daniel Katzive, the bank’s head of North American currency strategy, wrote in a note to clients,
The ECB cut rates at its Sept 4 policy meeting and the Canadian dollar has gained 1.4 percent against the euro since, according to Bloomberg data. Today, the loonie declined 1 percent to C$1.4262 per euro.
“We continue to view the EUR/CAD cross as a good vehicle for expressing a bearish EUR view, and will watch for opportunities to re-enter shorts,” New York-based Katzive wrote. A short position is a best that an asset will decline in value.
By Chanyaporn Chanjaroen
Commodities fell to a five-year low on speculation abundant supplies and slowing economic growth outside of the U.S. will curb demand for raw materials.
The Bloomberg Commodity Index declined to the lowest since July 2009. Brent oil traded at the cheapest since 2012, wheat, corn and soybeans retreated to four-year lows, and gold slumped to a seven-month low.
Weak economic growth in Europe and Japan is leading to lower energy prices and interest rates in the U.S. at a time when the U.S. corn crop is a record high and U.S. oil production is poised to be the most in 45 years. The euro-area recovery stalled in the second quarter and Japan contracted by the most in more than five years. Food prices fell to the lowest in almost four years as costs of milk and and cooking oils tumbled, the Food & Agriculture Organization said today.
“We have had disappointing growth data,” Kevin Norrish, an analyst at Barclays Plc in London, said today by phone. “Growth now looks a bit less promising and supplies in many commodities are quite robust.”
Brent rose 4 cents to settle at $98.08, after falling as much as 1.4 percent to $96.72 a barrel, the lowest since July 2, 2012. Copper retreated 0.5 percent to $6,835 a metric ton and wheat fell to the lowest price since July 2010.
‘Buying Opportunity’
“It may be a buying opportunity for consumers,” said Jodie Gunzberg, global head of commodities at S&P Dow Jones Indices, part of McGraw Hill Financial Inc., in an interview in London yesterday. “The question going forward is have supplies been replaced for agriculture and energy enough to create a persistent excess?”
Prices have come down as stockpiles declined, leading to the buying opportunity, she said. Copper inventories in warehouses monitored by the London Metal Exchange dropped 57 percent this year. “Demand from companies for commodities should pick up,” she said.
Gold futures dropped as much as 0.8 percent to $1,235.30 an ounce on the Comex in New York, the lowest since Jan. 23. Prices have declined 11 percent from this year’s high as the U.S. economy gained traction. Demand for a haven declined after tensions in Ukraine and the Middle East eased. Global holdings in ETPs backed by gold declined in four of the past five months. Silver slumped as much as 1.9 percent to the lowest since June 2013.
Dollar Strength
“The strong wall of dollar strength and prospects of a rate hike are pushing gold lower,” Ira Epstein, the president of his namesake division at the Linn Group Inc. in Chicago, said in a telephone interview. “The outlook for gold is very weak in the absence of an escalation of violence” in Ukraine or the Gaza Strip, he said.
An index of 55 food items dropped 3.6 percent in August to 196.6 points, the lowest since September 2010, the United Nations’ Rome-based FAO said. The agency’s gauge of dairy prices slumped 11 percent and the vegetable-oil price index declined 8 percent to the lowest since November 2009, the FAO said.
Cotton, soybean, corn and wheat prices fell into bear markets this year as farmers in the U.S., the largest grain grower, prepare to collect what the government predicts will be record harvests. In the past three years, all agricultural values on the Bloomberg Commodity Index other than cattle and hogs have declined, led by corn, soybean oil and sugar.
Grains Outlook
“I don’t think we’ve seen the bottom yet,” Abdolreza Abbassian, a senior economist at the FAO, wrote in an e-mailed reply to questions. “Grains could fall further.”
The food index is down 3.9 percent from a year earlier, led by a 19 percent drop in dairy values and a 12 percent slide for the FAO’s grain-price index.
Domestic corn reserves before the 2015 Northern Hemisphere harvest will be 2.002 billion bushels, the U.S. Department of Agriculture said today, topping analyst forecasts for 1.995 billion bushels.
“The weather in most of the U.S. remains wonderfully grain productive,” economist Dennis Gartman wrote in his daily newsletter. “The trends still remain downward and relentlessly so.”
By Andrew Frye and Alessandra Migliaccio
Eni SpA (ENI) Chief Executive Officer Claudio Descalzi is under investigation for his role in the acquisition of an oil field in Nigeria for $1.1 billion. The shares fell.
Milan prosecutors have placed Descalzi and Eni’s chief development, operations and technology officer under “preliminary investigation,” the Rome-based company said today in a statement distributed by the Italian stock exchange. Eni, which didn’t specify the nature of the probe, “continues to deny any illegal conduct,” it said.
Descalzi is suspected by prosecutors of playing a role in the corruption of Nigerian politicians and bureaucrats, Italian newspaper Corriere Della Sera reported today. The oil-license deal, closed in 2011 when Descalzi was Eni’s head of exploration and production, previously came under scrutiny in the Nigerian Parliament.
Eni’s stock dropped 2.2 percent to 18.66 euros at 4:53 p.m. in Milan trading, the fourth-biggest decliner in the Stoxx Europe 50 Index.
“The market didn’t react violently because it doesn’t think that this can compromise the business,” Massimo Intropido, head of Milan-based financial research firm Ricerca Finanza, said in a phone interview today.
‘Highly Flawed’
Eni teamed with Royal Dutch Shell Plc (RDSA) in 2011 to buy Oil Prospecting License 245 for $1.1 billion. The deal was challenged last year by a Nigerian parliamentary committee, which recommended revoking the rights after finding the acquisition process “highly flawed.” Global Witness, a London-based corruption watchdog, has also criticized the deal and the involvement of Dan Etete, a former Nigerian oil minister.
“This is not the way oil deals should be conducted,” Barnaby Pace, a member of the oil team at Global Witness, said in an interview.
Shell acted in accordance with Nigerian law and the terms of the agreement with the Nigerian government, The Hague-based Shell said in an e-mailed statement.
Calls by Bloomberg News to the offices of Fabio De Pasquale and Sergio Spadaro, the two Milan prosecutors cited in the Corriere report, went unanswered. Shell didn’t immediately respond to a request for comment.
Descalzi was promoted to CEO in May in the biggest corporate appointment under the watch of Italian Prime Minister Matteo Renzi. Italy controls Eni through the Treasury and a 26 percent stake owned by state lender Cassa Depositi e Prestiti SpA.
By Elena Mazneva
OAO Gazprom (GAZP), the world’s largest natural gas exporter, may face the biggest decline in European gas revenue in five years as demand weakens and buyers negotiate discounts, according to two company officials.
Sales to the European Union, the source of 40 percent of revenue under Russian accounting, are forecast to fall more than 10 percent to about $55 billion this year, said the officials, asking not to be identified before the number is public.
The forecast doesn’t take into account the rift between the EU and Russia over its involvement in the crisis in Ukraine, the main transit route for gas to Europe. While flows so far remain unaffected, the EU is seeking to ease reliance on Russian gas. Demand is falling after the region pumped a record volume of the fuel into underground storage to guard against shortages.
“Anti-Russian rhetoric in Europe has no effect on Gazprom’s sales in the region so far,” said Alexander Donskoy, an energy analyst at VTB Capital in Moscow. “The forecast is absolutely feasible, if only the price dispute with Ukraine won’t disrupt European supplies in winter.”
Gazprom plans to sell 157 billion cubic meters of gas to European customers this year, under its base case, at an average price of about $350 per 1,000 cubic meters, Mikhail Malgin, a deputy department head at Gazprom’s export unit, said today on a conference call. That would amount to $55 billion. The pessimistic estimate is a marginal decline in volumes, he said.
Slumping Earnings
Russia cut flows to Ukraine in June, citing unpaid bills. Gazprom says it is owed $5.3 billion, including $1.45 billion for supplies in 2013. Ukraine rejects the sum, and the price used to calculate it. The EU wants three-way negotiations this month and proposes a temporary price to ensure stable supplies, at least for the coming heating season.
Gazprom said today first-quarter profit slumped 41 percent to 223 billion rubles ($6 billion) on a foreign-currency loss and provisions for Ukraine’s debt for natural gas supplies. The shares fell 1.6 percent to 136.96 rubles by 5:47 p.m. in Moscow, the biggest drop on a closing basis in a month.
The quarter marks the start of “a difficult year” for Gazprom, said Alex Fak, an oil and gas analyst at Sberbank Investment Research in Moscow. The provision for Ukraine’s unpaid bills was 51.8 billion rubles, or 2.18 rubles a share, Luis Saenz, head of equity sales and trading at BCS Financial Group in London, wrote in an e-mailed note.
Dividend Risk
“There is a certain risk to consensus expectation for Gazprom dividend on the back of these results,” Saenz said. Gazprom paid a dividend of 7.2 rubles a share on 2013 profit, a 20 percent increase from the previous year.
In August, Gazprom said its first-half profit under Russian accounting standards, which is used to calculate the dividend, fell 38 percent to 155 billion rubles, mainly because of Ukraine provisions. A loss in the second quarter won’t be repeated, Deputy Chief Accountant Mikhail Rosseev said today on the conference call.
The weakening ruble may mean 2014 gas revenue from Europe would remain almost unchanged at about 2 trillion rubles before tax in the local currency, according to Bloomberg calculations based on the Economy Ministry’s exchange-rate forecast.
Declining Demand
Still, a decline in the dividend may hurt efforts to court investors. Gazprom resumed meetings this week after a five-month, self-imposed embargo on marketing to U.S. and EU investors in the wake of the crisis over Russia’s annexation of Crimea.
Executives met major equity funds in London Sept. 8 and 9, one of the officials said. Gazprom also plans a Eurobond sale as soon as this month, a person with knowledge of the matter said this week.
Gazprom’s deliveries to Europe have decreased each month since June as the region has a record volume of gas in underground inventories after the mild winter and accelerated pumping earlier this year.
In June, the company said exports to Europe may decline 2 percent to 158.4 billion cubic meters. That’s “a conservative forecast which may be exceeded depending on the weather,” Deputy Chief Executive Officer Alexander Medvedev said June 3.
Year-to-date supplies to countries outside the Commonwealth of Independent States, a group of former Soviet republics, declined 2.7 percent as of Sept. 8, according to e-mailed data from the Energy Ministry’s CDU-TEK unit.
Price Pressure
Gazprom’s average price in Europe is seen dropping 10 percent to about $350 per 1,000 cubic meters this year, compared with a January forecast of $372 because of renegotiated supply contracts, the two Gazprom officials said.
The first-quarter price fell to $372 from $390 a year earlier, the company said today.
Customers including Germany’s EON SE (EOAN) and Italy’s Eni SpA (ENI), Gazprom’s two biggest EU buyers, have been able to negotiate better deals with suppliers after losing money selling fuel on domestic markets because their contract prices were higher than European Union spot rates.
Clients that renegotiated with Gazprom in the past 14 months got discounts of 10 to 20 percent, the International Center for Natural Gas Information said in June.
Gazprom’s price for European gas may decline further. Buyers from France’s GDF Suez SA to Poland’s Polskie Gornictwo Naftowe i Gazownictwo SA have already said they plan to renegotiate.
The average price outside the former Soviet Union is seen dropping to $316 per 1,000 cubic meters in 2015, decreasing to $302 in 2017, the Kommersant newspaper reported Aug. 27, citing Economy Ministry estimates.
By Wael Mahdi and Maher Chmaytelli
Saudi Arabia, the world’s biggest crude exporter, said OPEC doesn’t need to meet on possible measures to check falling oil prices, according to the kingdom’s oil minister Ali Al-Naimi.
Prices “always fluctuate and this is normal,” Naimi told reporters in Kuwait where he’s meeting counterparts from the Gulf Cooperation Council comprising six Arab oil-producing monarchies. Four of them -- Saudi Arabia, Kuwait, the United Arab Emirates and Qatar -- are members of the Organization of Petroleum Exporting Countries.
OPEC is coming under pressure to pump less crude as increased output from U.S. shale deposits is pushing prices to a 16-month low, according to a Citigroup report Sept. 8. Saudi Arabia cut its production by 408,000 barrels a day in August, to 9.6 million barrels, according to its submission to OPEC’s monthly oil market report published yesterday.
Brent, the benchmark for more than half the world’s crude, fell under $100 a barrel on Sept. 9 and was trading today at $97.56 a barrel at 9:44 a.m. in London.
“It’s too early now,” Naimi said in response to a question about whether OPEC would convene before its next scheduled meeting on Nov. 27. “We will discuss the prices and the production level when in our next group meeting.”
Saudi Arabia’s output reduction came as other OPEC members such as Nigeria and Kuwait said they increased output, according to the group’s oil market report. Total production by the organization’s 12 members climbed by 231,000 barrels a day to 30.347 million last month, based on secondary sources, the report showed.
OPEC, which supplies 40 percent of the world’s oil, reaffirmed its output target at 30 million barrels a day when it last met in June.
By Grant Smith
The International Energy Agency cut its global oil demand forecasts for 2015 and said Saudi Arabia exported the least in almost three years as purchases slowed from China and Europe.
Global demand will increase by 1.2 million barrels a day, or 1.3 percent, to 93.8 million barrels a day next year, the Paris-based adviser to 29 nations said in a report today. The expansion is 165,000 barrels a day less than it predicted a month ago. Second-quarter growth in consumption slid to a 2 1/2-year low, spurring Saudi Arabia’s shipments to the lowest since September 2011.
“The recent slowdown in demand growth is nothing short of remarkable,” the IEA said. “While demand growth is still expected to gain momentum, the expected pace of recovery is now looking somewhat more subdued.”
Brent crude futures slipped below $100 a barrel this week for the first time in 14 months amid booming U.S. shale output, constrained demand and speculation that crises in Iraq, Libya and Ukraine will spare oil supplies. U.S. production is poised to hit a 45-year high next year, according to the Energy Department.
The IEA said it curbed its 2015 estimates in anticipation of weaker economic growth forecasts from the International Monetary Fund in October. Next year’s demand projections for China, the world’s second-largest oil consumer after the U.S., were cut by about 100,000 barrels a day to 10.6 million a day.
Growth Revisions
Second-quarter demand growth fell to 480,000 barrels day, compared with a year earlier, the first time in about two years that it’s been below 500,000 barrels a day, the IEA said. The slowdown fed into forecasts for growth in the third quarter, curbed to 800,000 barrels day from the 1.1 million a day predicted last month. The IEA forecast as recently as June that third-quarter growth would be 1.4 million barrels day.
The IEA cut its projection for demand growth in 2014 by 150,000 barrels a day because of weaker performance in China and Europe, forecasting that worldwide consumption will expand by 900,000 barrels a day to average 92.6 million a day this year.
OPEC Reliance
The agency lowered estimates for the amount of crude that the Organization of Petroleum Exporting Countries will need to produce by 200,000 barrels a day for this year and 300,000 a day in 2015.
Output from OPEC’s 12 members slipped by 130,000 barrels a day in August to 30.3 million a day as lower production from Saudi Arabia and Iraq countered a recovery in Libya, according to the report. That leaves group output about 300,000 barrels a day below the average level needed in the fourth quarter, and 700,000 a day more than the amount required in 2015, the report showed.
Saudi Arabia, OPEC’s biggest member, cut production by 330,000 barrels a day to 9.68 million a day in August, according to the IEA. The nation exported 6.95 million barrels a day in June. Exports to the U.S. slipped to 1 million barrels a day in June, compared with an average of 1.4 million a day in the first five months of the year. Preliminary data indicates a “sharp drop” in shipments in August, according to the report.
The kingdom said in a submission to OPEC that it reduced production in August by 408,000 barrels a day to 9.6 million a day, the organization’s monthly report showed yesterday. That’s the biggest drop since December 2012, according to the organization.
Festering Conflicts
Iraq’s production fell last month to the lowest level since January as bad weather disrupted loadings from the south of the country, declining by 60,000 barrels a day to 3.1 million day, according to the IEA. Libyan output recovered by 110,000 barrels a day to 530,000 a day.
“While festering conflicts in Iraq and Libya show no sign of abating, their effect on global oil market balances and prices remains muted amid weakening oil demand growth and plentiful supply,” the IEA said.
OPEC doesn’t need to meet to discuss possible measures to check falling prices before its scheduled Nov. 27 conference, Saudi Arabian Oil Minister Ali Al-Naimi told reporters in Kuwait today. Prices “always fluctuate and this is normal,” Naimi said. Futures will probably rebound above $100 in the next few months as Chinese demand rises, Nawal al-Fezaia, Kuwait’s governor to OPEC, said yesterday.
The IEA boosted estimates for non-OPEC supply this year and next by 100,000 barrels a day. Supply from non-OPEC producers, led by the U.S., Canada and Brazil will increase by 1.3 million barrels a day next year to 57.6 million a day.
Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in North Dakota, Texas and other U.S. states, reducing the need for overseas imports.
By Elena Mazneva
OAO Gazprom, Russia’s biggest company, said its first-quarter profit slumped 41 percent on a foreign currency loss and Ukraine’s debt for natural gas supplies.
Net income dropped to 223 billion rubles ($6 billion) from 381 billion rubles a year earlier, the Moscow-based exporter said in a statement on its website.
Gazprom, which provides 30 percent of the European Union’s gas, halted supplies to Ukraine in June over unpaid bills, including $1.45 billion from 2013. The Russian producer now estimates it’s owed $5.3 billion after raising the price for Ukraine in April to a level higher than it charges Germany, which the government in Kiev has rejected as unfair.
The quarter marks the “start of not an easy year,” Gazprombank energy analysts wrote in an e-mailed note before the report. While a weaker ruble is compensating for a decrease in Gazprom’s export prices, the biggest negative factor is the dispute with Ukraine, the bank said.
Gazprom had a 172 billion-ruble loss on depreciation of the Russian currency as well as a 71.3 billion-ruble provision for “doubtful trade accounts” mainly related to Ukrainian gas debt, according to the statement.
In August, Gazprom said its first-half net under Russian accounting standards, which is used to calculate dividends, fell 38 percent to 155 billion rubles, mainly because of a provision for Ukraine’s unpaid dept.
Gazprom’s deliveries to Europe, its biggest market by earnings, have been falling compared with last year’s levels since June. The region has a record volume of gas in underground storage after a mild winter and accelerated pumping earlier this year.
First-quarter revenue rose 6.5 percent to 1.56 trillion rubles.
By Marek Strzelecki
Poland expects natural gas supply from Russia today to be similar to this month’s average after a drop yesterday, according to the country’s pipeline operator.
The country will get about 20 million cubic meters (706 million cubic feet) of gas from Russia today, up from about 15 million yesterday, Jan Chadam, the chief executive officer of Gaz-System SA, said on TVN24 BiS television. Consumption was expected to be about 28 million cubic meters, he said. He wasn’t immediately available for comment, Malgorzata Polkowska, a company spokeswoman in Warsaw, said today by telephone.
Ukraine, a linchpin in European gas transport that had its supply from Russia cut off on June 16 in a price and debt dispute, has sought to partly offset the losses with so-called reverse pipeline flows from Poland, Slovakia and Hungary. Flows from Poland halted yesterday and are expected to resume tomorrow, according to Ukraine’s UkrTransGaz.
Polskie Gornictwo Naftowe i Gazownictwo SA, Poland’s dominant gas company known as PGNiG, yesterday received 45 percent less fuel than it ordered from Russia’s OAO Gazprom, the company said today. Flows on Sept. 8 and 9 were 20 percent and 24 percent below the requested amount, which was in line with its contract, it said. The company has said it would seek price cuts during contract negotiations with Gazprom in November.
“Before, the contract was fulfilled in line with our requests,” PGNiG Chief Executive Mariusz Zawisza said on TVN24 BiS today. “Given that we’re getting less gas than ordered, it’s now only natural to refer to the contract.”
Physical Flows
Gas flows via Wysokoje, which pumps Russian gas from Belarus to Poland, fell 73 percent yesterday to 18.8 gigawatt-hours (1.7 million cubic meters) a day, according to Gaz-System data. The average this month through Sept. 9 is 66.9 gigawatt-hours. No flow data was available for Kondratki, the entry point for the Yamal-Europe pipeline from Belarus.
Supply via Drozdowicze, which carries gas via Ukraine into Poland, was at 74.5 gigawatt-hours, compared with an average through Sept. 9 of 76 gigawatt-hours.
PGNiG is balancing the system with alternative supply including reverse flow from Germany on the Yamal pipeline. The company wants to seek a steeper price cut than about 15 percent agreed two years ago when it starts talks with Gazprom in November on prices under the long-term contract, Zawisza said Sept. 3.
Gazprom has assured Poland that gas supplies will be in line with requested volumes tomorrow, Polish Deputy Prime Minister Janusz Piechocinski said today at a news briefing in Warsaw.
Slovakia’s Slovensky Plynarensky Priemysel AS, or SPP, received about 10 percent less gas than requested from Gazprom for a second day today, spokesman Peter Bednar said. Slovakia requested 13 million cubic meters and flows were kept at 12 million, Gazprom spokesman Sergei Kupriyanov said by e-mail.
Gazprom needs to fill Russian gas storage sites, which is limiting exports, the Moscow-based company said yesterday in a statement.
AFP | 11 September, 2014 07:25
Libya expects oil production to reach 1.5 million barrels per day by year-end, with output quadrupled since the beginning of the summer despite ongoing chaos in the country.
"We will continue advancing," National Oil Co spokesman Mohamed al-Hrari said.
Production had reached 810,000 bpd by Wednesday, compared with 550,000 at the end of August and 200,000 at the beginning of the summer, he said.
The next target is one million bpd by the end of September.
Prime Minister Abdullah al-Thani, speaking in Abu Dhabi, confirmed the trend, saying the one million barrel figure would be reached in October, without giving a precise date.
Libya's economy took a heavy hit after rebels blockaded export terminals in July 2013, forcing a reduction in output and slashing all-important oil revenues.
The seizure of four terminals in pursuit of a campaign for restored autonomy for the eastern Cyrenaica region slashed output from 1.5 million bpd to just 200,000.
Under a deal with the government, the rebels returned control of two terminals in April and the remaining two in July.
Since then, output and exports have soared, despite unrest rocking a country that never regained stability following the 2011 ouster of long-time dictator Moamer Kadhafi.
The internationally recognised government, now operating from the eastern city of Tobruk, has lost control of the capital Tripoli and second city Benghazi to militias. Among the latter are Islamists who reject the outcome of elections they lost in June and who have formed a rival government.
By Daniel J. Graeber |
MOSCOW, Sept. 11 (UPI) -- Russian energy company Gazprom Neft announced it signed a technology-sharing deal with oil services company Weatherford International.
"The signing of this agreement supports the expansion of our current relationship and will undoubtedly prove to be beneficial in achieving the long term strategic goals of both organizations," Lance Marklinger, regional vice president for Weatherford, said in a statement.
Both companies said they'd work together to find "the right technology solutions" for oil field development.
Weatherford, one of the largest companies of its kind, has a heavy footprint in the Middle East.
Gazprom Neft, the oil division of Russian energy giant Gazprom, has announced plans to explore parts of the arctic north and last week started sending oil from Iraq through a new pipeline system tied to the export terminal in Basra.
"Our company is in constant search for solutions that will enable us to implement increasingly complex projects, while improving our operating results through the use of the most environmentally-friendly technologies," Vadim Yakovlev, first deputy general director at Gazprom Neft, said Wednesday.
Gazprom Neft may be a target of new European sanctions imposed in response to ongoing crises in Ukraine.
Weatherford has headquarters in Switzerland.
By Daniel J. Graeber |
WASHINGTON, Sept. 11 (UPI) -- Refining company Flint Hills Resources agreed to settle a civil penalty for $80,000 for mishandling waste at a petroleum refinery in Alaska, the EPA said.
The Environmental Protection Agency said the company mishandled spent groundwater from its refinery in North Pole, Alaska. The material was disposed of in containers that later self-ignited.
"In this case, two completely avoidable dumpster fires occurred because the facility's hazardous waste was not properly identified and managed," Scott Downey, manager of the EPA's air and hazardous waste unit in Seattle, said in a statement Wednesday.
The EPA in the case alleged Flint Hills failed to manage the material in a way that minimized the possibility of a fire.
No injuries were reported in the case.
Flint Hills spokesman Jeff Cook said this company worked alongside the EPA during the investigation, which it reported to the agency.
"We have fully cooperated with EPA in reviewing the matter and reaching a settlement," he said in response.
The incident was reported June 2013.
Flint Hills said it made the decision to close the refinery because of the high costs of cleanup that resulted from contamination at the North Pole site from its previous owner, Williams Cos. Inc.
By Daniel J. Graeber |
WASHINGTON, Sept. 11 (UPI) -- Despite a nod for southern U.S. LNG exports, the application backlog needs clearing to strengthen U.S. leverage, the American Petroleum Institute said.
API Upstream Director Erik Milito welcomed a decision from the U.S. Energy Department to allow for exports of liquefied natural gas from projects in Cameron Parish, La., and Marion County, Fla.
"But dozens of other permits still face lengthy delays," he said in a statement Wednesday. "We urge the administration to accelerate this process and work with leaders in Congress who have shown they are ready to strengthen America's position as an energy superpower."
Bills that have passed through the U.S. House of Representatives tied LNG exports to overseas leverage in the foreign policy and economic arenas, a sentiment backed by API.
The Cameron LNG project and the Carib Energy project in Florida were cleared for LNG exports to countries like those in the European Union that don't have a free-trade agreement with the United States.
Combined, the two facilities can export the equivalent of nearly 1.8 billion cubic feet natural gas per day from domestic reserves.
The International Energy Agency expressed doubt over the claimed benefits of U.S. LNG. Critics in the United States argue exports would lead to more environmental problems associated with hydraulic fracturing.
By Daniel J. Graeber |
WASHINGTON, Sept. 11 (UPI) -- A U.S. peace advocacy group said cutting off weapons and oil funding streams for the Islamic State were better options than the use of military force.
President Barack Obama laid out his plans to contain the threat posed by the Islamic State, known variably as the Islamic State of Iraq and Syria (ISIS) or the Islamic State of Iraq and the Levant (ISIL), in an address to the nation Wednesday evening.
"We will degrade, and ultimately destroy, ISIL through a comprehensive and sustained counter-terrorism strategy," the president said.
His agenda called for airstrikes against terrorist targets in Iraq in a broad-based strategy that may include support from U.S. allies in Europe and in the Middle East.
Kevin Martin, executive director for U.S. advocacy group Peace Action, argued for a non-military solution to the problem.
"It's time to stop the bombing and escalation and use the other tools of U.S. foreign policy -- working with allies in cutting off weapons, oil and funding streams for starters -- which will be much more active in dealing with ISIS," he said in a statement.
The Iraqi Ministry of Oil called on U.N. member states to take action to prevent the export of smuggled crude oil. The ministry said it was troubled by reports that crude oil taken from territory controlled by the Sunni-led terrorist group was reaching the international market.
AFP Gulf News
Kuwait City: Saudi Oil Minister Ali Al Naimi on Thursday played down the drop in oil prices saying this is not the first time crude prices slumped.
“Prices of oil always go up and down so I really don’t know why the big fuss about it this time,” Al Naimi told reporters ahead of a regular meeting for oil ministers of the Gulf Cooperation Council (GCC) states in Kuwait City.
The Saudi minister, whose country pumps over 9.5 million barrels per day, said any measures the Organisation of Petroleum Exporting Countries (Opec) needs to take regarding the price slump “should be discussed when Opec meets” in November.
Oil prices rose in Asia on Thursday a day after hitting a 17-month law after US President Barack Obama vowed to destroy jihadist militants in crude producers Syria and Iraq, but analysts said weak global demand and a supply glut capped gains.
US benchmark West Texas Intermediate for October delivery rose 16 cents to $91.83 while Brent crude for October gained 14 cents to $98.18 in mid-morning trade.
The drop in Brent crude price below $99 a barrel came amid fears of increased production and lower-than-expected demand.
OPEC on Wednesday said in a report that demand would grow by 1.05 million barrels per day in 2014 to 91.2 million barrels, trimming 50,000 from the previous outlook.
Demand in 2015 is expected to grow 1.19 million barrels per day, 20,000 barrels a day fewer than before, the group said.
By Daniel J. Graeber |
ASHINGTON, Sept. 11 (UPI) -- The U.S. government is taking a wait-and-see approach to the "rumors" of an oil-for-goods deal between Russia and Iran, a State Department spokesperson said.
Iran and Russia have cooperated in the nuclear energy sector and more recently mulled the prospects of working on a deal for Iran to deliver oil to Russia.
"In the past [we] had said we saw nothing at that time to indicate any real progress had been made in terms of that kind of agreement," spokesperson Marie Harf said during a Wednesday briefing. "There are lots of rumors about what may actually transpire from this, so we will watch and see."
Iranian President Hassan Rouhani is scheduled to meet Friday in Tajikistan with Russian President Vladimir Putin.
This week, Iranian Energy Minister Hamid Chitchian hosted Russian Energy Minister Alexander Novak for a two-day summit concluding in Tehran. Russian officials during the summit said energy is an "instrumental" part of the bilateral relationship with Iran.
Iran and Russia are both targets of U.S. economic sanctions. Harf said if any formal deals emerge from bilateral meetings, "we will act."
The Kremlin said sanctions would have no impact on bilateral affairs with Tehran.
By Daniel J. Graeber |
MOSCOW, Sept. 11 (UPI) -- Russian energy company Gazprom said Thursday it attributed an increase in operating expenses to its account with Ukraine.
Gazprom issued its results for the first quarter of 2014, saying its net profit declined 41 percent year-on-year to $6 billion. Revenue for the gas company was up 7 percent, while operating expenses increased 15 percent.
The Russian natural gas company said the "major factor" leading to the increase in operating expenses was "mainly related to doubtful trade accounts receivable of Naftogaz Ukraine."
Gazprom in June cut natural gas supplies to Ukraine because of ongoing disputes over debt. Russia this year offered some concessions to their Ukrainian energy counterparts, though the government in Kiev said it was wary of Russian intentions in the aftermath of the November pivot in Ukraine toward the EU.
The European Union has tried to break the Russian grip on the regional energy sector while at the same time searching for a resolution to ongoing spats between Gazprom and its Ukrainian clients.
Gazprom sales of natural gas to Europe increased 3 percent to 1.6 trillion cubic feet. Sales to members of former Soviet Union, which includes Ukraine, declined 10 percent year-on-year to 575 billion cubic feet.
Total gas sales for Gazprom declined 4 percent.
By Daniel J. Graeber |
PARIS, Sept. 11 (UPI) -- The International Energy Agency said Thursday it cut its forecast for oil demand growth because of an economic slowdown in Europe and China.
IEA published its monthly oil market report for September, saying it trimmed oil demand growth for 2014 to 900,000 barrels of oil per day and 2015 to 1.2 million bpd.
IEA said in the report the assessment was made "because of a pronounced slowdown in demand growth in the second quarter of this year and a weaker outlook for Europe and China."
The World Bank in June said the Chinese economy was slowing down in part because of a "structural transformation." Data from the European Union show economies are barely growing, if at all.
The Organization of Petroleum Exporting Countries said in its oil market report it cut its demand expectations by the most in three years because North American markets need less foreign oil because of the shale boom.
In terms of supply, IEA said OPEC output was lower overall because of declines from Saudi Arabia and Iraq, though Libya was on the road to recovery. Non-OPEC supply, meanwhile, is set to increase by 1.6 million bpd this year, though that should decline by 300,000 bpd next year.
New York (Platts)--11Sep2014/643 pm EDT/2243 GMT
NYMEX October crude increased $1.16/barrel to $92.83/b Thursday, one day after the futures contract fell to a low not seen since January.
ICE October Brent was up 31 cents to $98.35/b.
NYMEX October RBOB was down 24 points to $2.5241/gal, and NYMEX October ULSD was up 28 points to $2.7561/gal.
The oil complex was down in early trading after the International Energy Agency, in its monthly oil outlook, slashed its forecast for oil demand growth in 2014 and 2015, compared with the agency's last report in August.
Citing a weak outlook in Europe and China, IEA reduced 2014 demand growth by 150,000 b/d to 900,00 b/d and its estimate for 2015 growth by 165,000 b/d to 1.2 million b/d.
NYMEX October crude hit an intraday low of $90.74/b, down 93 cents compared with Wednesday's close. ICE October Brent fell as low as $96.72/b, which represented a $1.32 drop over Wednesday's close.
A picture of slowing growth, combined with ample production, has pushed crude prices lower since the summer. Front-month ICE Brent closed $115.06/b on June 19 before beginning to slide.
However, current prices already reflect the supply-demand picture outlined in Thursday's IEA report, which explains why the dip was not sustainable over the course of the day, Tradition Energy analyst Gene McGillian said.
"When we step back and consider the economic outlook isn't as dire in the US as in Europe or China, WTI hitting a low was overdone, so it was due for some profit-taking," he said.
The October Brent-NYMEX crude spread narrowed as far as $4.94/b Thursday before settling at $5.25/b.
A narrowing spread likely reflects a still-strong pull for North American crudes by US Gulf Coast refiners, while imports continue to get backed out.
This demand has provided downside support to NYMEX crude, while ICE Brent has been plagued a glutted Atlantic Basin where spot grades compete for discounts amid sharply lower official selling prices for Saudi, Iraqi and Kuwaiti crudes.
The prompt spread was last below $5/b in late-July amid record US crude demand. Crude runs at US refineries hit a record 16.63 million b/d for the reporting week ended July 11, EIA data shows. This was especially true in the Midwest, where run rates exceeded 100%.
While US crude runs have since fallen to around 16.33 million b/d for the week ended September 5, that is still more 436,000 b/d higher than year-ago levels.
The most recent narrowing in the October Brent/NYMEX crude spread is likely a re-calibration from where fundamentals left off after the September-October roll. At that time, the NYMEX crude structure was sharply backwardated, causing the spread to widen.
With Brent futures below $100/b, attention is turning to the role of Saudi Arabia, and whether the Gulf producer will take action to try and support prices.
On Thursday, Saudi Oil Minister Ali Naimi seemed to downplay the recent drop in oil prices.
"Prices of oil always go up and down, so I really don't know why the big fuss about it this time," AFP quoted Naimi as saying. Naimi was speaking to reporters in Kuwait City ahead of a regular meeting of oil ministers of the six Gulf Cooperation Council states.
Nairobi (Platts)--11Sep2014/958 am EDT/1358 GMT
Kenya and Norway will sign an agreement on petroleum resources to help the east African country manage new oil discoveries, Norway's new ambassador to Kenya was quoted as saying.
"We are considering a long-term agreement with Kenya's ministry of energy and petroleum on effective and socially responsible management of petroleum resources," Victor Ronneberg said, according to a note issued by Kenya's Presidential Strategic Communications Unit.
Ronneberg presented his credentials to Kenya's President Uhuru Kenyatta on Tuesday.
Tullow Oil and Africa Oil Corp. have discovered 600 million barrels of crude in South Loikchar basin in north western Kenya.
Commercial oil production from block 10BB and 13T in South Loikchar basin was expected to start in 2018. Kenya plans to use oil revenue to set up a sovereign fund, with the provision of healthcare one of its intended uses.
London (Platts)--11Sep2014/815 am EDT/1215 GMT
The sharp fall in global crude prices over the last two months has pushed refinery margins in Europe to their highest in more than a year-and-a-half, according to market sources and Platts data.
On Wednesday, the cracking margin for sour Russian Urals crude in the Amsterdam-Rotterdam-Antwerp refining hub in Northwest Europe climbed to $6.27/barrel, its highest since February 2013.
The margin for North Sea's medium-sour Forties jumped to $5.48/b, the highest since October 2012.
Increased crude availability in the Atlantic Basin throughout much of the summer, coupled with the maintenance season in Europe, has put substantial pressure on crude differentials across the region in recent months, which has in turn supported cracking margins.
The sharp recovery in US production -- the EIA forecasts a total US crude oil production increase of over 1 million b/d this year to levels last seen in 1970 -- has forced crudes that used to move to the US to look for homes elsewhere, predominately in Europe and Asia.
However, as Asian economic growth has slowed and demand from many countries in the region has stuttered, more and more crude -- particularly Nigerian sweet crudes -- have been pushed into Europe, competing directly with North Sea and Mediterranean crudes and pushing down prices across the board.
"Our margins are very good in Northwest Europe, Asian refinery margins are not," a refinery source said.
Traders said that the return of Libyan production to the Mediterranean market in August has exacerbated the oversupply in Europe, which has added to the downward pressure on crude prices.
The front-month ICE Brent futures contract fell below $97/b in Thursday morning European trade, to levels not hit since April 2013.
Despite the fall in crude prices and the surge in refinery yields over the last several weeks, demand has failed to clear much of the overhang in the prompt market, trading sources said, which has helped to keep the differentials low.
"I don't know why demand is weak," a crude trader said. "Margins are okay, and I'm not sure about run rates, though there is maintenance and there is some more expected in October."
Singapore (Platts)--11Sep2014/346 am EDT/746 GMT
State-owned China National Offshore Oil Corporation has launched its 2014 tender for upstream blocks offshore China, the company announced Thursday, September 11.
It has put up 33 blocks for bidding this year, with a total area spanning 126,108 sq km (48,691 sq miles).
The blocks stretch from the north off Qingdao to the south surrounding Hainan island in the South China Sea and are situated up to 450 km off China's coast.
Seventeen blocks are located in the eastern Pearl River Mouth Basin, seven of which lie in water depths of more than 1,000 meters.
Two blocks are in the Beibu Gulf Basin, while another five are located in the frontier deepwater Qiongdongnan Basin. Four blocks are in the East China Sea Basin, and four others are in the South Yellow Sea Basin. There is existing 2-D seismic data for most of the acreage, and 3-D seismic data is available for nearly two-thirds of the blocks.
Data rooms in Shanghai, Guangzhou and Zhanjiang will be available to potential investors until the end of this year, with bids scheduled to close April 30, 2015. Response to CNOOC's annual tenders has typically been low, largely due to uncertain geological prospectivity.
CNOOC offered 25 blocks in its 2013 bidding round, 12 of which have been offered again this year.
Besides the yearly bid rounds, companies can also negotiate directly with CNOOC for offshore production sharing contracts.
The company is struggling to boost domestic production as its mature, aging fields face declining output.
In the first half of this year, CNOOC's output from the Bohai Bay, which accounts for nearly 60% of its domestic production, slipped 2.5% year on year to 411,000 b/d of oil equivalent.
The company has focused on enhanced oil recovery schemes and started drilling on its own in more frontier areas.
CNOOC last month announced its first independent deepwater gas discovery -- Lingshui 17-2 in the Qiongdongnan Basin -- as a major prospect that was tested to flow at a controlled rate of 56,500 Mcf/.
Brussels (Platts)--11Sep2014/824 am EDT/1224 GMT
The EU, Russia and Ukraine are to hold their next three-way talks to resolve the Russian-Ukrainian gas price dispute on September 20 in Berlin, European Commission energy spokeswoman Marlene Holzner said Thursday.
The three parties have already met five times since May to discuss the dispute, which centers on Ukraine's refusal to pay an estimated $5 billion Russian gas bill until Gazprom changes its decision to raise Ukraine's gas price to $485.50/1,000 cubic meters in the second quarter, up from $268.5/1,000 cu m in Q1.
The last meeting in early June failed to resolve matters and in mid-June Russia stopped gas deliveries to Ukraine over the dispute.
EU energy commissioner Guenther Oettinger, who is acting as facilitator on behalf of the EU, has since had bilateral meetings with Russian energy minister Alexander Novak and Ukrainian energy minister Yuriy Prodan to persuade them to come back to the three-way talks.
The EU is keen to see the dispute resolved to avoid any possible disruptions in Russian gas supplies through Ukraine to the EU this winter, as happened in previous disputes.
EC MONITORING GAS CUT REPORTS
Holzner also told reporters in Brussels Thursday that the EC had been informed by Poland that it has seen reductions in daily gas flows from Russia.
Poland's dominant gas producer and distributor PGNiG said Thursday that Russian gas flows to Poland via Ukraine and Belarus fell by 45% on Wednesday.
Holzner said the EC was talking to the Polish government and energy companies to find out more, and the next step would depend on the cause of the reduction.
PNGiG said it was looking to see if the cause was technical or commercial.
Holzner said the EC had not discussed this reduction with Russia and would not include it in the three-way talks if the cause turned out to be a technical or commercial issue.
Slovakia's dominant gas purchaser and retailer, SPP, also said Thursday that deliveries from Russia's Gazprom were 10% below the contracted amount for the second day running.
By Nick Cunningham | Thu, 11 September 2014 21:33 | 1
Global oil prices have slid in recent weeks, a trend that shows no signs of changing in the immediate future.
The two main benchmarks for oil prices, Brent and WTI, hit their highest levels so far this year in June amid the initial onslaught in Iraq of the Sunni jihadist group Islamic State of Iraq and Syria (ISIS). Fears that the militant group would seize Iraqi oil fields pushed up prices.
Brent crude has now dipped below $100 per barrel, for the first time in over a year. WTI is trading around $92 per barrel, a 16-month low.
Prices have dropped for a few reasons.
ISIS’s advance has come to a halt and fears that Iraq’s oil production would be affected have abated.
Libya has brought some of its oil back online, with August production averaging around 538,000 barrels per day (bpd) -- more than double its average daily production from June. Libya’s National Oil Corporation says that production is now topping 800,000 bpd and could exceed 1 million bpd in October.
U.S. oil production also continues to rise. In June, the U.S. produced 8.5 million bpd, an increase of 500,000 bpd since the beginning of the year. Higher production continues to cut into imports, leaving greater supplies on the global market.
Perhaps most importantly, global demand has been surprisingly lackluster. The latest data from the U.S. Energy Information Agency (EIA) shows that refined product (gasoline, for example) inventories are increasing – an indication that production is overwhelming consumption.
A slowing Chinese economy is also putting a damper on crude oil prices. Weak economic data published by the Chinese government showed that China’s import growth slowed for a second straight month, suggesting the economy continues to cool.
The glut of supplies and weak demand is causing problems for OPEC, according to the cartel’s monthly report. OPEC lowered its demand projection for 2015 by 200,000 and in August, Saudi Arabia cut production by 400,000 bpd in an effort to stem oversupply.
As noted by Steve LeVine in Quartz, cheaper oil could present problems for oil producing countries, which generally rely on high prices to keep their national budgets in the black.
Iran, for example, needs a price of $136 per barrel to pay for its current levels of public spending. Other countries – Nigeria, Ecuador, Venezuela, Iraq – are all facing looming budgetary problems as their required “breakeven” prices are higher than what oil is currently selling for on the market.
Russia needs between $110 and $117 per barrel to finance its spending, which means the Kremlin can’t be happy as it watches Brent prices continue to drop. Combined with an already weak economy, Russia could see its $19 billion surplus become a deficit by the end of the year.
Moscow also won’t like the new set of sanctions the European Union said it will slap on Russia on Sept. 12, which include a devastating prohibition on international oil majors from working on oil and gas projects in Russia’s Arctic. The ban could halt billions of dollars’ worth of investments in Russia and cut into future oil production. ExxonMobil has already begun drilling a $700 million well in Russia’s Kara Sea.
Oil suppliers could be dealing with the problem of low prices for a while.
The EIA predicts U.S. oil production could increase by another 1 million bpd in 2015 to 9.5 million bpd, which would be a 45-year high. That would keep WTI prices as low as $94 per barrel and Brent at just $103 per barrel.
Saudi Arabia’s willingness to curtail production could prop up oil prices by decreasing supply, but it might not be as effective as Riyadh hopes. That’s because holding back production will also allow the world’s only swing producer to build back greater spare capacity. Higher spare capacity would allow the oil kingdom to step in at some point in the future if demand rises or supplies drop. This would likely have a calming effect on the markets, potentially wiping out the effect of decreasing production.
Absent a major new flare up of violence in an oil producing country -- which has become disturbingly commonplace -- oil prices look set to remain weak for quite some time.
By Nick Cunningham of Oilprice.com
By Claude Salhani | Tue, 09 September 2014 22:01 | 5
For the terrorist group known as the Islamic State, Syria and Iraq were a good place to start their campaign, but in order to survive and prosper it knew from the outset that it had no choice but to set its sights on the ultimate prize: the oil fields of Saudi Arabia.
It is in that direction that the battle for control of the world’s largest oil fields is currently heading.
Islamic State -- which has its origins in al-Qaeda – knows fully well that in order to sustain itself as a viable and lasting religious, political, economic and military entity in the region, it has to follow the same objectives established by al-Qaeda when Osama bin Laden broke off his relations with the Saudi monarchy and vowed to bring down the House of Saud.
Bin Laden’s ire at the Saudi monarchy stemmed from the fact that Saudi King Fahd bin Abdulaziz Al Saud invited the American military to use Saudi Arabia as a staging area to build up forces to take on the then Iraqi leader Saddam Hussein after Iraqi troops occupied Kuwait in August of 1990. Bin Laden objected to the presence of “infidels” in the land of the two holy mosques, and asked the king to allow his outfit to tackle Saddam Hussein’s troops.
Similarly, IS knows that it will only feel secure once Saudi Arabia is part of the Caliphate, and its oil fields are under IS control -- which is why the group has two logical next steps.
First, to capture and secure the most important country in the Muslim world: Saudi Arabia.
If the battle for Syria and Iraq attracted tens of hundreds, (some say tens of thousands) of young Muslims, the battle for control of Islam’s two holiest sites, Mecca and Medina, are very likely to attract many more fighters into the ranks of the Islamic State.
And second, to take on the United States -- the one remaining superpower that could stop its march on the oilfields of Saudi Arabia, and ultimately the rest of the Gulf.
After much hesitation, it now appears that the Obama administration has come around to realizing the true danger posed by IS. Washington, along with some of its NATO allies, is now formulating a plan to defeat IS.
However, it may be wise to point out that Washington’s track record in dealing with Middle East problems has not been something to crow about. As a point of reference, one need only mention Iraq and Afghanistan -- both prime examples of how not to do things.
Even if the U.S. can defeat IS militarily, any victory would only be temporary since eventually, U.S. troops will pull out and the remnants of IS would emerge from their respective hiding places, as they did after Saddam Hussein’s capture and death. Indeed, a U.S. intervention -- through its massive air campaign -- will foment even greater animosity toward the West in general, and the United States, in particular. It’s all déjà vu.
The one power that can effectively move against IS in a manner that would appear legitimate to other Muslims is Saudi Arabia, as Nawaf Obaid, a fellow at Harvard University’s Belfer Center for Science and International Affairs, and Saud al-Sarhan, research director at the King Faisal Center for Research and Islamic Studies pointed out in a joint opinion piece published Sept. 9 in the New York Times.
The authors dispute the widely believed notion that Saudi Arabia created IS and is funding it. “Saudi Arabia is not the source of ISIS -- it’s the group’s primary target,” they write.
As Obaid and al-Sarhan put it, “The Saudi leadership has a unique form of religious credibility and legitimacy, which will make it far more effective than other governments at delegitimizing ISIS’s monstrous terrorist ideology.”
What makes IS powerful today is the fact that they laid out their military strategy based on where oil fields are located. The fact that they went after northeast Syria and northern Iraq is not coincidental by any means. Islamic State may be ruthless and brutal, but it is first and foremost a terrorist organization with an astute business plan.
The capture of oil wells in Syria and Iraq has made the group financially self-sufficient. Now it’s all or nothing.
By Claude Salhani of Oilprice.com
By Andy Tully | Wed, 10 September 2014 22:01 | 1
The American Midwest is enjoying a one-two punch of an economic boom thanks to hydraulic fracturing. The relatively new – and still controversial -- technique is not only generating more energy, it’s also sparking a revitalization of old industries and boosting economically depressed cities and regions.
In whole swaths of Ohio, for example -- from the state’s industrial northeast to its agricultural center – oil and gas fracking is helping to reawaken other sectors of the economy, including manufacturing, real estate and hotels.
Fracking – which involves injecting chemical-laced fluids into deep shale deposits to provide access to oil and gas deposits -- has plenty of opponents who raise legitimate environmental and health concerns. Yet in Ohio, concern is more muted. The state has become a symbol of the Rust Belt, where heavy industry was once the engine of local economies but which has been in a steep decline for decades.
Now the region is beginning to shine again. The French multinational Vallourec, which specializes in serving the energy and transportation industries, has just finished construction of a $1.1 billion plant in Youngstown, Ohio, to make steel pipes for the energy industry. The million-square-foot facility soon will be paired with an $80 million Vallourec plant that makes pipe connectors.
And all those facilities need workers. The unemployment rate in Ohio was just 5.7 percent in July, a nearly five point drop from four years ago, when its jobless rate was 10.6 percent. The current national unemployment rate is 6.1 percent.
The benefits aren’t just being felt in Ohio. Several recent economic indicators, such as hiring in the manufacturing industry, indicate a growing momentum.
This is “a real game-changer in terms of the U.S. economy,” manufacturing sector expert Katy George of McKinsey & Co. told The New York Times.
The Times Board of Economists, a group of industry leaders assembled by the Northwest Indiana Times, agree.
At a recent meeting of the group, Mark Ennes of Merrill Lynch, said foreign direct investment across the U.S. economy is being driven by growing U.S. energy independence. “For a long time, we were exporting jobs,” he said. “But now [foreign investors] are bringing jobs here.”
Of course, growing U.S. energy independence means U.S. energy imports are declining. That’s causing Saudi Arabia to rethink its export strategy. Riyadh has for years kept the price of crude oil low enough to maintain a healthy market share in the United States, but now American oil is supplanting it.
“The Saudis are not going to sell crude at a disadvantage to themselves,” Mike Wittner, an oil expert at Societe Generale’s office in New York, told Bloomberg News. “They’ll price crude to be competitive … and if that means their flows to the U.S. are down, so be it.”
By Andy Tully of Oilprice.com
By Nick Cunningham | Wed, 10 September 2014 22:13 | 0
The oil sands industry is developing new technologies to reduce pollution and the impact on the lands where they operate – an increasing concern as extraction operations ramp up.
The Economist recently published a glowing article on the various new technologies that companies are deploying in the Athabasca oil sands in Alberta, Canada.
To start, there is “in-situ” production. Traditional oil sands production is closer to strip mining than to conventional oil drilling and has myriad negative environmental effects. The land is cleared, often by removing large swathes of forests, and the oil sands are dug up from the ground. They are then heavily processed, since the oil sands by themselves are too heavy to flow through a pipeline until they are treated. Pools of toxic waste are left over after processing.
In-situ production leaves a smaller impact on the land. It injects steam underground, essentially heating the oil up until it becomes a liquid, allowing it to flow more easily through a pipeline. This process dramatically cuts down on the surface impact by both clearing less land, and producing less toxic waste in pools. The proportion of oil sands produced via the in-situ process has grown to 53 percent, and will continue to increase.
There is also an idea to use oil-based solvents like butane and propane to reduce the need for steam. By injecting these chemicals underground, oil sands producers could reduce the amount of water needed in the injection process. This, in turn, would reduce the amount of natural gas needed to heat water into steam, thereby reducing emissions. The Economist didn’t touch on the effects on groundwater by injecting higher volumes of solvents underground.
And there was one other process that sounds like a nightmare scenario for environmentalists – using small nuclear reactors to help power oil sands production. Needless to say, this one is still a ways off from becoming a reality.
Readers of the article can be forgiven for getting the impression that, despite the environmental problems associated with oil sands development, they are minor and are being solved through better technology.
That’s not necessarily the case.
Royal Dutch Shell has failed to achieve its target of cleaning up toxic waste at its oil sands sites. According to Alberta’s Energy Resources Conservation Board, despite Shell’s insistence that it would make progress at reducing toxic waste, the level of waste actually increased as a result of higher production.
And it’s not just Shell. Its competitors, Suncor Energy Inc. and Syncrude Canada, also fell short of their toxic waste cleanup targets.
Failing to adhere to the targets opens the companies up to penalties under Alberta’s environmental regulations. But instead of assessing penalties, Alberta has previously waived them, as The Wall Street Journal reported in August. The province’s environmental regulation agency said that it would not assess penalties because the industry is making progress, but cautioned that it would review progress in a report due out in 2015.
Despite breaching the toxic waste reduction targets, Shell has pressured the government to relax the standards. “Prescriptive regulation puts you in a box,” Lorraine Mitchelmore, president of Shell Canada, said.
In 2013, Alberta Premier Alison Redford promised that toxic waste ponds would “disappear from Alberta's landscape in the very near future,” but Shell says that is not likely.
In fact, there are plans to expand toxic waste pools. Syncrude is building a massive lake for toxic waste, known as Base Mine Lake. It describes the plan as a “world-class demonstration scale research facility” that will allow areas to be totally reclaimed.
The Pembina Institute says these “pit lakes” are a massive gamble. They involve pouring fresh water on top of toxic waste and hoping that the two don’t mix. The fresh water sits on top, and theoretically can support active fisheries and vegetation. Pembina notes that there are serious concerns involving “long-term monitoring liabilities, salinity concerns, and the chronic toxicity of water that is left over from the oil sands extraction process.”
It is not a pretty picture.
Oil sands companies are improving technology that may incrementally reduce the environmental impact of their operations, but meanwhile, there is a lot of damage left in the wake of the expanding industry.
By Nick Cunningham of Oilprice.com
Exports of Malaysia’s new Kimanis crude are expected to start in November while up to two cargoes are set to be lifted in October for domestic use, several market traders said Tuesday.
State-owned Petronas is expected to offer a cargo of the crude for loading in November later this month, they said. Up to two October-loading cargoes will be lifted by equity holders for use by domestic refineries, they said. Field operator Shell, which holds 33% interest in the development, and Petronas, which holds 20% interest, could not be contacted.
Petronas had previously indicated that the new Kimanis grade will eventually be part of the basket of crudes that make up the Malaysian Crude Oil Official Selling Price. Kimanis crude is produced in the Gumusut-Kakap field offshore Sabah, which is Malaysia’s second deepwater development after Kikeh.
Crude from the Gumusut-Kakap field is expected to be similar in quality to the neighboring Kikeh field, where crude has an API of 34.91 degrees and sulfur content of 0.105%. At Shell’s investor meeting held Friday in New York, CEO Ben van Beurdan said Gumusut-Kakap is on track for start-up in the second half of this year.
First oil from the floating production system at the Gumusut Field is expected at the end of the third quarter of 2014, ConocoPhillips and Murphy Oil had said in their preliminary second-quarter earnings reports on July 30. ConocoPhillips Sabah holds 33% interest in the field while Murphy Sabah Oil holds a 14% interest.
The start of production from the Gumusut field will mark the full commissioning of the larger Gumusut-Kakap development across blocks K and J, which is expected to peak at 135,000 b/d, the partners had previously said.
OPEC has cut its estimate of the call on crude produced by its 12 members by 160,000 b/d in both 2014 and 2015, citing higher supply from independent producers.
The group said Wednesday in its monthly report that it now saw demand for OPEC crude averaging 29.45 million b/d this year, 810,000 b/d lower than the 2013 call, and 29.2 million b/d next year.
These figures are well below the 30.347 million b/d OPEC said its and fourth quarters, although the 30.26 million b/d and 30.15 million b/d projections represent downward revisions of 340,000 b/d and 140,000 b/d from the previous forecasts a month ago.
But OPEC expects the call on its crude to dive by nearly 1.8 million b/d to 28.39 million b/d in the first quarter of 2015. OPEC calculates demand for its crude as the difference between world oil demand and non-OPEC supply plus OPEC natural gas liquids.
It now sees non-OPEC supply averaging 55.91 million b/d this year, representing a 220,000 b/d upward revision from the previous projection a month ago.
It expects non-OPEC supply to average 57.16 million b/d in 2015, a 200,000 b/d upward revision from the month-ago forecast. World oil demand has been upwardly revised by 80,000 b/d to 91.19 million b/d in 2014 and by 60,000 b/d to 92.38 million b/d in 2015.
As a massive expansion to the Panama Canal spurs potential shifts in global trading patterns, US ports are jockeying for position with tens of billions of dollars in upgrades of their own.
Deepened waterways, enlarged terminals and towering new cranes are among $46 billion in capital improvements that US ports are estimated to make during the five years ending in 2016, according to a survey by the American Association of Port Authorities.
Those costs underline what industry sources say is a deep uncertainty about how the widened Panama Canal will impact trade at US ports.
Atlantic and Gulf Coast importers hope to attract new cargo shipments from Asia, a move that could pull business away from the Pacific Coast ports that have long been the gateway for Asian products entering the US, industry sources say. Exactly how much business moves east could depend on a number of factors that affect shippers’ willingness to bypass the West Coast, including the type of cargo being hauled and the cost to cross a revamped canal, sources say.
“There are going to be winners and losers on the East Coast,” said Jock O’Connell, international trade adviser at Beacon Economics. “The ports may see additional traffic but it will be a question of, ‘Did they overspend?’”
Expected to be completed in early 2016 at an estimated cost of $5.25 billion, the Panama Canal expansion will double the size of the 48-mile system of locks connecting the Atlantic and Pacific Oceans. It will allow passage for ships with cargo capacities of up to 13,000 20-foot container units, twice the size of the largest ships that pass through the waterway today.
The wider canal opens a direct route for manufactures in Far East Asia to move large volumes of products cheaply and directly to markets in the Eastern US. Under the current system, Post-Panamax container ships from Asia typically sail to ports in California and the upper Northwest, where cargoes are then loaded onto truck or rail transports to journey cross-country to market.
The route would add several days to the journey but would cut out the costs of ground transportation, which is typically more expensive than shipping.
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.
Novak also confirmed that Russian companies plan to take part in construction and modernization of power generation plants in Iran.
South African oil junior SacOil has agreed to acquire a 100% interest in the Lagia onshore oil field on Egypt’s Sinai Peninsula, the company said Wednesday.
The 32 square km (12 square miles) Lagia concession in southern Sinai is the major asset of Mena International Petroleum, a wholly-owned unit of Canada’s financially troubled Mena Hydrocarbons.
SacOil said in a statement it had agreed to purchase Mena International for shares and the assumption of up to $4.1 million of debt, subject to a number of conditions, with closing expected by October 31.
Company CEO Thabo Kgogo said SacOil would target at least 1,000 b/d of oil output from Lagia by the fourth quarter of 2015. Development of the Lagia field, which contains shallow deposits of heavy crude as well as deeper light-crude reservoirs, is currently at the test production stage.
SacOil said it planned to implement a phased development program to bring the field into full production. Phase 1 would include hydraulic stimulation of four existing wells and a work-over of an additional well, starting as soon as practicable after closing the acquisition.
Lagia’s 6.174 million barrels of proven and probable reserves would be the first that SacOil has booked. The London and Johannesburg-listed company said the acquisition represented a strategic entry to Egypt, where it saw the potential to build a substantial exploration and production business.
Since taking power in July 2013, Egypt’s current government led by Abdel-Fattah el-Sisi has been seeking to attract new international investment to the oil and gas sector. However, some of the smaller companies operating in Egypt have run into financial difficulties due to delayed government payments for oil and gas output since the country’s 2011 revolution and/or to business exposure in other troubled parts of the Middle East and North Africa.
Toronto-listed Mena Hydrocarbons, which lost money in 2012 and 2013, said in July it was in talks with an international oil company over a “major transaction” centered on its Egyptian assets. The Lagia development lease is its principal asset in Egypt.
How likely is OPEC to take action on supply to curb the oil price slide below the $100/barrel level that its ministers have informally embraced? If we are talking about OPEC as a group, not very likely in the near term, it would appear.
On Thursday, Saudi oil minister Ali Naimi played down the sharp drop in oil prices, saying prices “always go up and down so I really don’t know why the big fuss about it this time.” Naimi, quoted by Agence France-Presse ahead of a regular meeting of oil ministers of the six Gulf Cooperation Council states in Kuwait City, also said any measures OPEC might need to take regarding the price drop “should be discussed when OPEC meets” in November.
Iranian oil minister Bijan Zanganeh, whose country is subject to international sanctions that have deprived it of crucial oil revenue by slashing its crude exports, also dismissed the need for OPEC to meet to discuss the price slide.
“Under current circumstances, holding an urgent meeting is not necessary,” Zanganeh said late Tuesday, quoted by semiofficial news agency Mehr.
The group has “no plans to hold an extraordinary meeting on the falling oil price” and it’s too early to say whether the group will discuss an output cut in November, he said.
Most OPEC countries are producing at or very close to their current limits, in particular those outside the high-reserves Gulf region. And even within the Gulf camp, only Saudi Arabia has the kind of crude output capacity that can feed or starve markets. It is largely Saudi Arabia that drives OPEC policy, adjusting supply informally in response to changing market conditions.
The Saudis, as Naimi’s comments show, are not exactly panicking, which is not surprising in view of the extent to which they can cope with lower oil prices. Saudi investment bank Jadwa said in December that the kingdom would likely need an average oil price of $81/b for Saudi export crude, or about $85/b for Brent, to balance state revenues with government spending.
The International Monetary Fund has estimated that Saudi Arabia’s breakeven oil price is around $86/b this year. That’s higher than the $74/b, $71/b and $52/b estimated by the IMF for the UAE, Qatar and Kuwait this year, but it’s a lot lower than the $130/b estimated for Iran and the $184/b for Libya.
These figures raise some questions: whether Saudi Arabia currently sees market share as a greater priority than outright prices and is prepared to see the price drift further down to maintain that share, and also whether political considerations are likely to influence its decisions on oil policy.
Analysts at Bank of America Merrill Lynch say the threat posed by the so-called Islamic State group to Middle East governments beyond Syria and Iraq could force Saudi Arabia to rethink its oil policy.
The sharp fall in global crude prices over the last two months has pushed refinery margins in Europe to their highest in more than a year-and-a-half, according to market sources and Platts data.
On Wednesday, the cracking margin for sour Russian Urals crude in the Amsterdam-Rotterdam-Antwerp refining hub in Northwest Europe climbed to $6.27/barrel, its highest since February 2013. The margin for North Sea’s medium-sour Forties jumped to $5.48/b, the highest since October 2012.
Increased crude availability in the Atlantic Basin throughout much of the summer, coupled with the maintenance season in Europe, has put substantial pressure on crude differentials across the region in recent months, which has in turn supported cracking margins.
The sharp recovery in US production — the EIA forecasts a total US crude oil production increase of over 1 million b/d this year to levels last seen in 1970 — has forced crudes that used to move to the US to look for homes elsewhere, predominately in Europe and Asia.
However, as Asian economic growth has slowed and demand from many countries in the region has stuttered, more and more crude — particularly Nigerian sweet crudes — have been pushed into Europe, competing directly with North Sea and Mediterranean crudes and pushing down prices across the board.
“Our margins are very good in Northwest Europe, Asian refinery margins are not,” a refinery source said. Traders said that the return of Libyan production to the Mediterranean market in August has exacerbated the oversupply in Europe, which has added to the downward pressure on crude prices.
The front-month ICE Brent futures contract fell below $97/b in Thursday morning European trade, to levels not hit since April 2013. Despite the fall in crude prices and the surge in refinery yields over the last several weeks, demand has failed to clear much of the overhang in the prompt market, trading sources said, which has helped to keep the differentials low.
“I don’t know why demand is weak,” a crude trader said. “Margins are okay, and I’m not sure about run rates, though there is maintenance and there is some more expected in October.”
The International Energy Agency said Thursday that current oil price economics do not support an increased use of floating storage, though the contango in the Brent futures market makes land-based storage a good option.
In its latest monthly oil market report, the IEA estimates the volume of crude and products currently in floating storage at around 45 million barrels, though it said this is likely led by countries storing crude on ships out of necessity — such as the recent Iraqi Kurdish cargoes that have failed to find buyers.
A recent decline in prompt month crude and product prices have moved a number of markets into prolonged contango for the first time in four years, raising the prospect of the return of floating storage as a trading “play”, the IEA said.
But, it said, the current spread between first and second month Brent futures of around $0.80/barrel is not wide enough to support floating storage. “It appears that the economics support land-based storage but not floating storage, which normally requires a sustained contango of at least $1/b to cover the higher costs involved such as freight, insurance and bunker fuel,” it said.
The IEA added that preliminary inventory data for August and tanker tracking data did not support the idea that floating storage had significantly increased. “Anecdotal reports suggest that market participants have put their extra cargoes into land-based storage,” it said.
Outside of Europe, the IEA said there had been reports of activity in Asian markets, with traders exploiting weak prompt-month fuel oil prices by buying consignments and storing them offshore Singapore.
The Kurdistan Regional Government has formally congratulated Iraq’s prime minister on the formation of a new federal government.
“Following the formation of the new Iraqi government, we congratulate the peoples of Iraq and Prime Minister (Haider al-Abadi) and we wish him success,” KRG Prime Minister Nechirvan Barzani said in a statement posted late Wednesday on the KRG website.
Barzani said he hoped the new Iraqi government would bring all Iraqis together and be capable of addressing outstanding issues, especially regarding security, prosperity and the provision of services.
“We hope that Iraq’s new government will learn from the mistakes of the previous cabinet and will take serious steps to resolve disputed issues between Erbil and Baghdad,” he added.
The government of Iraq’s semi-autonomous Kurdistan region has been locking horns for years with Baghdad in an acrimonious dispute over territory, resources jurisdiction and revenue-sharing, among other issues.
Most recently, the escalating discord has centered on KRG exports of Kurdish crude without central government authorization and Baghdad’s retaliatory withholding of Kurdistan’s share of the federal budget.
In a statement late Tuesday, the KRG Ministry of Natural Resources said the last-minute decision by Kurdish political leaders to participate in the formation of the new Iraqi government was conditional, among other things, on the oil and gas dispute being resolved within three months. Abadi was sworn in as Iraqi Prime Minister during a parliamentary session Monday evening.
The chief executive of Italian oil major Eni, Claudio Descalzi, is being investigated by prosecutors in Milan over the alleged payment of bribes to obtain a large oil field concession offshore Nigeria, the company said Thursday.
Descalzi, who took charge of the state-controlled company in May, is under investigation for international corruption for payments made jointly with Shell to acquire Nigeria’s Oil Prospecting License (OPL) 245 in 2011.
Shell and Eni paid $1.09 billion to acquire 50% stakes each in OPL 245, in a deal facilitated by the government to bring an end to a decade-long dispute over the block, estimated to hold around 1 billion barrels of oil.
The two companies agreed to pay the money to Nigerian company Malabu Oil and Gas, which was originally awarded the block. But local rights groups in Nigeria claim the money should have been paid into the Federation Account and not to Malabu, a company confirmed to be owned by a former Nigerian oil minister, Dan Etete, who in 2007 was convicted in France of money laundering.
In a statement, Eni denied any illegal conduct in the case, adding that the entire payment for OPL 245 was made “uniquely” to the Nigerian government. “Eni is cooperating with the Milan prosecutor’s office, and is confident that the correctness of its actions will emerge during the course of the investigation,” Eni said in a statement.
The company also said its Chief Development, Operations and Technology Officer, Roberto Casula, is under preliminary investigation by the Milan prosecutor’s office. Eni’s shares fell in early European trade after the news Thursday and were trading 1.5% lower at Eur18.78 ($24.27) in Milan by 1055 GMT.
