Saudi Aramco produced an average of 9.41 million b/d of crude oil in 2013, down from 9.51 million b/d in 2012, the company said Thursday.
But its natural gas output rose to 11 Bcf/d last year from 10.72 Bcf/d in 2012, meaning Aramco’s total oil and gas output combined last year set a new annual record, it said in its latest annual review published Thursday It also produced 86.8 million barrels (238,000 b/d) of condensate and 455.9 million barrels (1.249 million b/d) of other natural gas liquids, the Saudi national petroleum company said.
In the report, Aramco put Saudi proven oil reserves at 260.1 billion barrels and gas reserves at 288.4 Tcf. Aramco also said it had made considerable progress with two new major offshore developments in 2013: Manifa, the world’s fifth largest oil field, and Karan, the kingdom’s first non-associated offshore gas field.
It said Manifa, which started up in April 2013, reached production capacity of 500,000 b/d by July. “By the time it reaches its full potential at the end of 2014, the Manifa field will have the capacity to produce 900,000 b/d of Arabian Heavy crude oil, 90,000 Mcf/d of gas and 65,000 b/d of condensate,” Aramco said.
It will also deliver feedstock to the Jubail and Yanbu refineries. Aramco said it also advanced projects to increase production capacity at the Khurais and Shaybah fields. Shaybah is set to have a production capacity of 1 million b/d by the end of 2015, double its original capacity.
The company also made five new finds in 2013. “We added three oil and two gas discoveries to our portfolio, bringing our total number of discovered fields to 121,” Aramco said. “This included exploration and drilling operations in the deep waters of the Red Sea, where we made a new oil field discovery at Al-Haryd, in addition to our previous gas find at Shaur within this frontier region.”
It added that in its core operational areas, it found oil in Duhul and Salsal and discovered new conventional gas fields at Turayqa in the Rub’ al-Khali and at Mihwaz in central Saudi Arabia. “These discoveries are integral to supporting our critical gas business, which is geared toward meeting the kingdom’s domestic energy needs and powering industrial development,” Aramco said.
DOWNSTEAM GROWTH
In its downstream portfolio, Aramco and its subsidiaries own or have equity interest in domestic and international refineries with a gross worldwide refining capacity totaling 4.9 million b/d, the company said. Aramco calculated its equity share of that figure at 2.6 million b/d, making it the world’s sixth largest refiner.
The first ever tender by Taiwanese refiner Formosa Petrochemical Corp. seeking Latin American crudes is the latest in a growing list of Asian refiners looking further afield to widen their crude slate, traders said Thursday.
The movement of Latin American crudes to Asian refineries were becoming a regular pattern, especially with modern Indian refineries that can take a wide range of crudes. Formosa’s tender seeking Colombia’s Vasconia crude or Equador’s Oriente crude in cargoes of 500,000 barrels to 1 million barrels, on a delivered basis into Mailiao between July 20-August 20, may be a sign that the Taiwanese refiner was starting to diversify its crude slate, sources noted.
“I think [Latin American crude] was economical for the Indian [refiners] for a long time,” a trader of Persian Gulf crudes said. “Getting a 500,000-barrel cargo of Vasconia could be a test, it might be them [Formosa] just trying it out, it’s not a thumbs down to the Persian Gulf [crudes],” he added.
In addition, rising crude production from Canada and the US has been displacing imports of Latin American crudes that traditionally found homes in the US. Formosa’s tender marks the first import of Latin American crudes into Taiwan, which has traditionally relied on legacy Middle Eastern suppliers Saudi Arabia, Kuwait and Oman for the bulk of its needs. Imports of Iraqi crude have also ramped up in the last year.
The largest Asian consumers of Latin American crude to date are China and India. China increased its imports of Latin American crude grades by 20.7% in the first quarter versus a year earlier to 8.18 million mt (666,200 b/d), while India imported 68.57 million barrels (761,900 b/d) from the region in Q1, up 5.9% year on year.
Colombian crudes into China, in particular, nearly doubled to 2.2 million mt (179,200 b/d), while India imported 14.37 million barrels (159,666 b/d) of Colombian crude oil in Q1 -- more than a three-fold jump from Q1 2013, according to shipping data obtained by Platts.
Chinese traders have said that Vasconia, with API gravity of 25-27 degrees and sulfur content of 0.9%, is suited to China’s refineries. While India has typically purchased Colombia’s Castilla Blend, Reliance Industries Ltd. imported a cargo of Vasconia in January this year, shipping data showed. The US has been Colombia’s dominant export market for crude but state-owned Ecopetrol has been marketing more volumes to Asia as the shale revolution has cut US Gulf Coast refiners’ appetite for imports.
Highlighting the dramatic and ongoing increase in US crude oil production, the US Federal Energy Regulatory Commission on Thursday granted requested rate treatment for a new pipeline project in the Bakken Shale. North Dakota Pipeline’s $2.7 billion Sandpiper project would expand the capacity of the company’s existing system and extend the system from Clearbrook, Minnesota, to a new interconnection in Superior, Wisconsin, increasing its total length to roughly 610 miles.
The company said in a February 12 petition for declaratory order (OR14-21) that the project “will substantially increase the pipeline capacity available for crude oil produced in western North Dakota and eastern Montana (generally referred to as ‘Bakken crude’) to access downstream markets.”
The project’s initial capacity will be 225,000 b/d to Clearbrook and 375,000 b/d to Superior. The current capacity from Berthold, North Dakota, to Clearbrook is 210,000 b/d. The commission approved the company’s February request to implement a tariff rate structure for the project with separate rates for committed priority volumes, committed non-priority volumes, and uncommitted volumes.
FERC staff said at the commission’s monthly meeting Thursday that committed shippers signed transportation service agreements during an open season and 10% of the project’s capacity would be reserved for uncommitted volumes, consistent with commission policy.
Precedent was in North Dakota Pipeline’s favor as, staff said, the commission “has allowed oil pipelines to use the declaratory order process to seek approval of contract rates as a way of obtaining the financial commitments necessary to increase transportation infrastructure.”
Staffers and commissioners noted the importance of rate certainty to pipeline project developers as they scramble to keep up with the need for new pipeline capacity to move oil out of burgeoning shale production plays. “US production of crude from shale has increased dramatically in the past few years, from less than 1 million b/d in 2010 to more than 3 million b/d in 2013,” staff said.
NYMEX June crude settled 87 cents lower at $101.50/ barrel Thursday, pulled lower by bearish economic data and oil production restarts in Libya.
ICE June Brent settled 25 cents higher at $110.44/b on the contract’s day of expiration. July Brent settled 22 cents lower at $109.09/b.
n products, NYMEX June ULSD settled 1.2 cents lower at $2.9506/gal and June RBOB ended 51 points lower at $2.9642/gal.
First-quarter 2014 eurozone GDP was weaker than expected, with Germany continuing to post robust growth but the rest of the continent struggling, said Tim Evans, a Citi Futures Perspective commodity analyst.
US data was mixed, with a drop in weekly unemployment claims countered by softer April industrial production. Initial claims dell 24,000 to 297,000 for the week ending May 10, Labor Department data showed. This is the lowest level for initial claims since May 12, 2007, when they were 297,000.
The US Federal Reserve said Thursday industrial production fell 0.6% in April, from a month earlier, more than expectations of a 0.1% decline. The gain in March’s output was revised upward to 0.9% from 0.7%.
Phil Flynn, commodity analyst at Price Futures Group, said crude futures pulled back along with US equities as a lower stock market would lower demand expectations for oil.
The Dow Jones Industrial Average was down more than 160 points and the S&P 500 Index was about 16.8 points lower by the NYMEX settle.
In Libya, the Elephant oil field in the country’s southwest has restarted production after protesters ended their blockade of the field, though output is only running at around 30,000 b/d.
Tim Evans, commodity analyst at Citi Futures Perspective, noted that the International Energy Agency’s monthly oil market report was mixed, “with a minor upward revision to demand and a supportive observation that the second-half call on OPEC crude oil will be stronger, but with a larger-than-expected 400,000 b/d increase in OPEC crude oil production for April.”
Libyan production at 220,000 b/d for April sets a low bar, Evans said, with current output at 300,000 b/d and possibly still rising.
Low-sulfur crude grades in the North Sea are at their highest premiums to Dated Brent in months because of field maintenance slashing supply from several key installations. Statfjord was assessed at $2.20/b above Dated Brent Wednesday, its highest since September 25 last year.
The grade is in shorter supply due to maintenance in June. The three Statfjord cargoes for June total 2.565 million barrels, down from the five cargoes scheduled for May totaling 4.275 million barrels. Gullfaks was assessed up $0.10/b at $3.90/b over Dated Brent Wednesday, its highest since September 23, 2013. Gullfaks output more than halved in June.
The total volume loading in June is down 3.42 million barrels from the previous month at 2.565 million barrels. This comprises three 855,000-barrel cargoes, compared to seven in May, with traders attributing the drop to planned field maintenance. Maintenance is planned on the Gullfaks field from mid-May to the first half of June.
“Sweets are being pushed up quite a bit, June being in tight supply, various grades on maintenance,” said one trader earlier this week.
The Oseberg formation is undergoing maintenance in May and has only two cargoes loading (at the end of) this month, compared to seven loading in June which have already started trading well. However Oseberg is finding support from the reduced supply in other grades, and was assessed at $1.95/b over Dated Brent Wednesday, its highest since February 17.
Ekofisk has no current maintenance but was at a $1.70/b premium based on a recent trade, its highest since February 19. Troll was assessed at a $4.07/b premium, its highest since February 11 when it was a cent higher.
By Eliot Caroom May 15, 2014 8:44 PM GMT+0700 1 Comment Email Print
A Plains All-American Pipeline Co. (PAA) line leaked about 10,000 gallons of crude oil in Glendale, California, damaging a gentlemen’s club and forcing customers to leave their cars in a parking lot.
The 20-inch (51-centimeter) line to a Long Beach storage site was shut down after a valve malfunction caused the knee-high oil spill shortly after midnight, said Los Angeles Fire Captain Jaime Moore, who responded and posted updates to Twitter. Spill size estimates were revised downward from original projections of 1 million gallons and 50,000 gallons.
Ten patrons of the club, called the Gentlemen’s Club, had to leave their vehicles behind, Moore said by phone.
“We have five commercial structures, one being the Gentlemen’s Club, being affected,” he said. “The Gentlemen’s Club actually has significant damage on the side of the building because of oil spraying on it.”
Two people were sent to a hospital after four were evaluated on complaints of strong vapors, including some employees of nearby Baxter Healthcare Corp., he said. The spill was mostly cleaned up by 9 a.m. New York time by an environmental company that responded.
“It was a valve malfunction,” Moore said. “The clean-up will take about 24 hours, but they should be able to get it back up and running soon.”
Brad Leone, a spokesman for Plains, didn’t immediately respond to a phone message asking for comment.
To contact the reporter on this story: Eliot Caroom in New York at ecaroom@bloomberg.net
To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Charlotte Porter, David Marino
By Wael Mahdi May 15, 2014 10:45 PM GMT+0700 0 Comments Email Print
Saudi Arabia’s natural gas reserves rose last year as it explored for the fuel in the Red Sea and tapped shale gas to free more crude oil for export, according to the kingdom’s state-run oil company.
Saudi reserves increased to 288 trillion cubic feet of gas last year from 285 trillion in 2012, Saudi Arabian Oil Co. said today in its annual review. The company is ready to use shale gas to fuel a 1,000-megawatt plant that will feed electricity to a large phosphate mining project, the company known as Saudi Aramco said.
“Saudi Arabia will be among the first countries outside North America to use shale gas for domestic power generation,” the company said. “We are actively exploring for unconventional gas resources,” which may be large in scale, it said.
The shale gas drive will help the kingdom free more diesel and crude oil for export, the company said. Gas is needed because domestic demand for energy has increased to the point where oil volumes intended for export “may decline to unacceptably low levels in the coming two decades,” it said.
Aramco said it is looking for unconventional gas in the Northwest, the Empty Quarter desert, and near Ghawar, the world’s largest oil field. A “significant” gas field discovered in the Red Sea, called Shaur, is also “a potential game-changer in the future of the Kingdom’s energy mix,” the company said.
Saudi Aramco increased gas production last year to 11 billion cubic feet a day, compared with 10.72 billion in 2012, it said in the review.
To contact the reporter on this story: Wael Mahdi in Manama at wmahdi@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron, Randall Hackley
By Grant Smith May 15, 2014 3:00 PM GMT+0700 21 Comments Email Print
Demand for OPEC’s crude will be higher in the second half of the year than previously estimated as inventories in developed economies remain depleted, according to the International Energy Agency.
The Organization of Petroleum Exporting Countries will need to provide an average of 30.7 million barrels a day in the second half, or 800,000 a day more than it pumped last month, the IEA said today. This calls for 140,000 more barrels of OPEC crude than the IEA forecast in April as stronger-than-expected demand has kept stockpile levels “tight” in advanced nations, the agency said. OPEC controls about 40 percent of global supplies.
“Forecast balances call for a significant rise in OPEC production from current levels for the second half of the year,” the Paris-based adviser to oil-consuming nations said in its monthly report. “While OPEC has more than enough capacity to deliver, it remains to be seen whether it will manage to overcome the above-ground hurdles that have plagued some of its member countries lately.”
Brent crude futures have been steady this year, trading near $110 a barrel in London today, as concern that the crisis in Ukraine may lead to a disruption in Russian energy supplies, and the protracted disruption to Libyan exports, are countered by slowing economic growth in emerging nations such as China.
OPEC Rebound
Production among OPEC’s 12 members rebounded from a five-month low in April, by 405,000 daily barrels to 29.9 million, largely because of a recovery in Iraqi output and increases by Saudi Arabia, according to the report. Members are expected to keep their formal target of 30 million barrels unchanged at their next meeting on June 11 in Vienna, according to the IEA.
Iraq’s production rose by 140,000 barrels a day to 3.34 million as the start of new projects in the south of the country compensated for the prolonged curtailment of exports from the north due to pipeline sabotage, the IEA said. Saudi Arabia, the group’s biggest member and de facto leader, bolstered supplies by almost 100,000 barrels a day to 9.66 million.
The agency raised forecasts for global oil demand in 2014 “marginally,” by 65,000 barrels a day, following stronger-than-expected growth in the first quarter in Japan, the U.S., Germany and the U.K. World fuel consumption will increase by 1.3 million barrels a day, or 1.4 percent, this year to average a record 92.8 million barrels day.
Tight Inventories
Inventories of crude and refined oils remained “tight” at the end of March in developed nations, at a “wide” deficit of 110 million barrels to their five-year seasonal average, according to the report. Stockpiles in the 34 nations that make up the Organization for Economic Cooperation and Development were at 2.57 billion barrels in March, down 2.5 million from the previous month.
Still, preliminary data indicate that stockpiles surged in April by 52.1 million barrels, narrowing their deficit to the five-year average to 79 million barrels, according to the report.
The agency trimmed estimates for production growth outside OPEC in 2014 because of lower-than-expected output from Azerbaijan, China, Colombia, Kazakhstan, Mexico and South Sudan. Non-OPEC producers, led by the U.S., Canada and Brazil, will increase output this year by 1.5 million barrels a day to an average of 56.1 million. The level of growth is about 100,000 barrels a day lower than last month’s projection.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Bruce Stanley
Plains Crude Pipe Leak Maroons L.A. Gentlemen’s Club Patrons
By Eliot Caroom May 15, 2014 8:44 PM GMT+0700 1 Comment Email Print
A Plains All-American Pipeline Co. (PAA) line leaked about 10,000 gallons of crude oil in Glendale, California, damaging a gentlemen’s club and forcing customers to leave their cars in a parking lot.
The 20-inch (51-centimeter) line to a Long Beach storage site was shut down after a valve malfunction caused the knee-high oil spill shortly after midnight, said Los Angeles Fire Captain Jaime Moore, who responded and posted updates to Twitter. Spill size estimates were revised downward from original projections of 1 million gallons and 50,000 gallons.
Ten patrons of the club, called the Gentlemen’s Club, had to leave their vehicles behind, Moore said by phone.
“We have five commercial structures, one being the Gentlemen’s Club, being affected,” he said. “The Gentlemen’s Club actually has significant damage on the side of the building because of oil spraying on it.”
Two people were sent to a hospital after four were evaluated on complaints of strong vapors, including some employees of nearby Baxter Healthcare Corp., he said. The spill was mostly cleaned up by 9 a.m. New York time by an environmental company that responded.
“It was a valve malfunction,” Moore said. “The clean-up will take about 24 hours, but they should be able to get it back up and running soon.”
Brad Leone, a spokesman for Plains, didn’t immediately respond to a phone message asking for comment.
To contact the reporter on this story: Eliot Caroom in New York at ecaroom@bloomberg.net
To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Charlotte Porter, David Marino
Saudi Gas Reserves Up as Aramco Taps New Shale Deposits
By Wael Mahdi May 15, 2014 10:45 PM GMT+0700 0 Comments Email Print
Saudi Arabia’s natural gas reserves rose last year as it explored for the fuel in the Red Sea and tapped shale gas to free more crude oil for export, according to the kingdom’s state-run oil company.
Saudi reserves increased to 288 trillion cubic feet of gas last year from 285 trillion in 2012, Saudi Arabian Oil Co. said today in its annual review. The company is ready to use shale gas to fuel a 1,000-megawatt plant that will feed electricity to a large phosphate mining project, the company known as Saudi Aramco said.
“Saudi Arabia will be among the first countries outside North America to use shale gas for domestic power generation,” the company said. “We are actively exploring for unconventional gas resources,” which may be large in scale, it said.
The shale gas drive will help the kingdom free more diesel and crude oil for export, the company said. Gas is needed because domestic demand for energy has increased to the point where oil volumes intended for export “may decline to unacceptably low levels in the coming two decades,” it said.
Aramco said it is looking for unconventional gas in the Northwest, the Empty Quarter desert, and near Ghawar, the world’s largest oil field. A “significant” gas field discovered in the Red Sea, called Shaur, is also “a potential game-changer in the future of the Kingdom’s energy mix,” the company said.
Saudi Aramco increased gas production last year to 11 billion cubic feet a day, compared with 10.72 billion in 2012, it said in the review.
To contact the reporter on this story: Wael Mahdi in Manama at wmahdi@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron, Randall Hackley
IEA Sees Higher Demand for OPEC Crude This Year
By Grant Smith May 15, 2014 3:00 PM GMT+0700 21 Comments Email Print
Demand for OPEC’s crude will be higher in the second half of the year than previously estimated as inventories in developed economies remain depleted, according to the International Energy Agency.
The Organization of Petroleum Exporting Countries will need to provide an average of 30.7 million barrels a day in the second half, or 800,000 a day more than it pumped last month, the IEA said today. This calls for 140,000 more barrels of OPEC crude than the IEA forecast in April as stronger-than-expected demand has kept stockpile levels “tight” in advanced nations, the agency said. OPEC controls about 40 percent of global supplies.
“Forecast balances call for a significant rise in OPEC production from current levels for the second half of the year,” the Paris-based adviser to oil-consuming nations said in its monthly report. “While OPEC has more than enough capacity to deliver, it remains to be seen whether it will manage to overcome the above-ground hurdles that have plagued some of its member countries lately.”
Brent crude futures have been steady this year, trading near $110 a barrel in London today, as concern that the crisis in Ukraine may lead to a disruption in Russian energy supplies, and the protracted disruption to Libyan exports, are countered by slowing economic growth in emerging nations such as China.
OPEC Rebound
Production among OPEC’s 12 members rebounded from a five-month low in April, by 405,000 daily barrels to 29.9 million, largely because of a recovery in Iraqi output and increases by Saudi Arabia, according to the report. Members are expected to keep their formal target of 30 million barrels unchanged at their next meeting on June 11 in Vienna, according to the IEA.
Iraq’s production rose by 140,000 barrels a day to 3.34 million as the start of new projects in the south of the country compensated for the prolonged curtailment of exports from the north due to pipeline sabotage, the IEA said. Saudi Arabia, the group’s biggest member and de facto leader, bolstered supplies by almost 100,000 barrels a day to 9.66 million.
The agency raised forecasts for global oil demand in 2014 “marginally,” by 65,000 barrels a day, following stronger-than-expected growth in the first quarter in Japan, the U.S., Germany and the U.K. World fuel consumption will increase by 1.3 million barrels a day, or 1.4 percent, this year to average a record 92.8 million barrels day.
Tight Inventories
Inventoties of crude and refined oils remained “tight” at the end of March in developed nations, at a “wide” deficit of 110 million barrels to their five-year seasonal average, according to the report. Stockpiles in the 34 nations that make up the Organization for Economic Cooperation and Development were at 2.57 billion barrels in March, down 2.5 million from the previous month.
Still, peliminary data indicate that stockpiles surged in April by 52.1 million barrels, narrowing their deficit to the five-year average to 79 million barrels, according to the report.
The agency trimmed estimates for production growth outside OPEC in 2014 because of lower-than-expected output from Azerbaijan, China, Colombia, Kazakhstan, Mexico and South Sudan. Non-OPEC producers, led by the U.S., Canada and Brazil, will increase output this year by 1.5 million barrels a day to an average of 56.1 million. The level of growth is about 100,000 barrels a day lower than last month’s projection.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Bruce Stanley
IEA looks to OPEC to boost oil production as output growth elsewhere slows
By Stuart Elliott | May 15, 2014 01:49 PM COMMENTS (0)
The International Energy Agency believes OPEC will need to raise its production by nearly 1 million b/d in the third quarter to meet rising global demand and to make up for slowing supply growth from non-OPEC producers.
That would mean the group would be producing nearly 31 million b/d within a few months.
Can it be done?
Disruptions caused by varied geopolitical circumstances suggest not. Libya is still struggling to recover production to anything near the levels seen before anti-government protesters started disrupting operations last May. Iraq continues to be hit by major instability in the northwest and Iran remains under international sanctions.
Iraq hopes to be able to boost production to 4.5 million b/d by the end of 2014 from around 3.3 million b/d now as new fields come on stream, though it is thought 3.8 million b/d might be a more realistic target. And that’s not even taking into account the continued shut-in of the northern Kirkuk fields due to the closure of the Iraq-Turkey export pipeline.
What about Saudi Arabia? Well, its current output is 9.66 million b/d, according to the IEA. If it were to shoulder the required total OPEC production increase on its own, Riyadh would have to boost output to 10.5 million b/d.
This may not be out of the question. The kingdom has ample additional production capacity and as recently as August was estimated to have produced 10.2 million b/d.
It has become increasingly clear that the world market cannot rely on non-OPEC supply growth given geopolitical events outside OPEC.
Overall non-OPEC production is now expected to grow by about 1.5 million b/d this year, roughly 100,000 b/d below last month’s forecast, IEA said in its latest monthly report. Total non-OPEC supplies are expected to average 56.1 million b/d in 2014.
The IEA said the downward revision was due to lower forecasts for Azerbaijan, China, Colombia, Kazakhstan, Mexico and South Sudan.
The agency singled out Colombia and South Sudan as particular areas of concern, saying new “politically-driven disruptions have intensified” in both countries.
And while IEA had not forecast production in South Sudan this year would return to capacity levels, it said resurgent turmoil, including the outbreak of a civil conflict in December, have “significantly reduced supply expectations.”
South Sudan was producing 210,000 b/d in November; last month output slipped to just 140,000 b/d.
Pipeline attacks and issues with indigenous peoples have also curtailed Colombia’s production in the first four months of the year and “significant supply risk remains,” IEA said.
Something else that is driving some tightness in the market is the fact that oil is being shipped to China in ever great volumes.
IEA estimated that China added an average 1.4 million b/d to its crude stocks in April as its imports surged to a record of 6.81 million b/d.
The IEA said the data showed a “sharp rise” in Chinese crude oil imports that was not matched by commensurate rises in demand or crude runs.
“If confirmed, the data imply an unprecedented crude stock build of 1.4 million b/d for April alone. This has fueled reports that China might have begun filling a recently completed expansion of its strategic petroleum reserve facilities,” IEA said.
It said that while that would benefit Chinese and global energy security, crude imports of that scale “might also support oil markets and keep commercial stocks from rising further elsewhere.”
It said that reports of Chinese budget allocations to expand strategic reserves suggest the oil is going into storage, a view backed by the fact that some of the Chinese ports where imports rose the most border the new strategic facilities in Tianjin and Huangdao.
The higher imports, however, also could mean that China is just preparing to increase refining runs.
“Having become net exporters of key products in March, refiners may simply be planning to make more use of their plants, setting the stage for even higher product exports. In that case too, consumers will enjoy more supply, but the effect on international markets will play out differently,” IEA said.
LONDON: Israeli and US oil refineries have joined the growing list of customers for crude from Iraqi Kurdistan, a region locked in a bitter struggle with the central government in Baghdad that says the sales are illegal.
The United States imported its first crude cargo from the region two weeks ago while at least four have gone to Israel since January, ship tracking and industry sources said, after two were shipped there last summer.
The Iraqi government has repeatedly said oil sales by-passing Baghdad are illegal and has threatened to sue any company involved in the trade, yet Kurdish crude and light condensate oil has been sold to several European buyers.
Baghdad refuses to sell oil to Israel, echoing other Arab states.
Israel’s Energy Ministry declined to comment, saying that it does not discuss the country’s sources of oil. A senior Iraqi oil ministry official said Baghdad had no information on the sales but was investigating.
“If these reports are correct, then dire consequences will be inevitable,” the Iraqi oil official said.
“This is a seriously dangerous development. We have always warned the region to stop smuggling Iraqi crude by trucks to Turkey...and now if this is proved true then they are going too far.”
An official of Kurdistan’s Ministry of Natural Resources said from the region’s capital Arbil: “The Kurdish Regional Government (KRG) has not sold crude directly or indirectly to such destinations.”
The stakes are high as Kurdistan’s independent oil sales allow it to receive income outside Baghdad’s budget, pushing it towards even greater autonomy. Tensions reached a new pitch this week after Kurdistan’s president said Iraq had been led in an authoritarian direction by Prime Minister Nouri Al Maliki and threatened to end the region’s participation in the federal government.
The deals involve major international commodity traders, including Trafigura, one of the top three oil traders in the world, trading and shipping sources said. A spokeswoman for Trafigura declined to comment.
The sales come as the KRG and Baghdad aim to complete long-running negotiations over a pipeline Arbil built to Turkey to circumvent the central government monopoly.
Arbil began pumping crude through to the Turkish port of Ceyhan on the Mediterranean in January but stopped short of selling it, under the threat of budget cuts from Baghdad.
Reuters
Iran's oil exports dropped for a second month in April, the International Energy Agency said, moving closer to levels allowed by November's interim deal on curbing Tehran's nuclear programme, Reuters reported.
Global imports of Iranian crude in April averaged 1.11 million barrels per day (bpd), the Paris-based IEA said in its monthly Oil Market Report released on Thursday, down 180,000 bpd from March.
"Imports of Iranian crude reached a 20-month high of 1.58 million barrels per day in February but have since edged lower," the IEA, adviser to 29 industrialized countries, said in the report.
Under an interim deal signed in November between Iran and six world powers that came into effect on Jan. 20, known as the Joint Plan of Action (JPOA), Iran's exports are supposed to be held to an average 1 million bpd through July 20.
Signs of higher Iranian sales in late 2013 and early 2014 have led to concerns in Washington that a softening of sanctions has given Tehran's economy a boost.
But officials in the Obama administration have said they expect Iran's oil sales to fall in coming months and average 1 million bpd over the entire six-month period.
In April, China, South Korea, Turkey and Syria increased imports of Iranian oil, although this was more than offset by reduced volumes to India and Japan, the IEA said, citing preliminary data.
The biggest increases were by China, which boosted imports by 60,000 bpd to 615,000 bpd, and South Korea, which imported 130,000 bpd, up 70,000 bpd, the IEA said.
India cut imports by 185,000 bpd to 200,000 bpd and Japan by 105,000 bpd to 35,000 bpd, it said.
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By Andy Tully | Thu, 15 May 2014 21:18 | 0
The United States is considering sanctions against Russia’s energy industry in its effort to rein in Moscow’s evident designs on Ukraine.
But analysts say simply persuading Western countries to boycott Russian oil and gas altogether wouldn’t necessarily work because of Europe’s reliance on Russian gas.
According to Robin West of the Center for International and Strategic Studies, a Washington-based policy-research center, “This situation calls for a scalpel, not a meat ax,” West told the Financial Times. “We need targeted asymmetric sanctions that hurt them more than they hurt us.”
Instead, Washington is considering banning exports of consulting services and equipment for new projects to Russian energy companies, who see their future in liquified gas, shale oil and drilling in the Arctic.
Russian President Vladimir Putin, once reluctant to accept Western involvement in his country’s most lucrative resource, recently has become increasingly open to importing foreign technologies, including hydraulic fracturing and other modern techniques, to recover more oil and gas from the ground.
As a result, there are now several projects involving such energy companies as Royal Dutch Shell and Exxon Mobil to help Russian companies, including government-controlled Gazprom and Rosneft, develop resources. Without Western help, these projects would falter, if not fail.
The strategy, importantly, would include exempting privately held companies from such sanctions. This would make the private energy companies more competitive with their government-controlled counterparts and thereby put increased pressure on the Putin government itself.
Such withholding of Western equipment and services has worked in the past, according to the U.S. Energy Information Administration. It estimates that stricter imposed on Iran cut its oil production capacity by about 10 per cent from 2009 through 2013. The threat of such a strategy with Russian energy companies could also lead Putin to be less aggressive about Ukraine.
In the meantime, Russia already appears to be feeling the negative effects of Putin’s Ukraine policy. For example, last week the price of gas in Britain, the largest consumer of gas in Europe, dropped to its lowest point in nearly four years on the ICE Futures Europe exchange in London.
And IHS, the international business consulting company, says that if Moscow becomes more aggressive in Ukraine, its economy could lose $115 billion in revenues in 2015 – fully 3 percent of its gross domestic product. Meantime, the United States and the EU are gradually expanding their sanctions, which could further stall Russia’s economy, which the International Monetary Fund says already is in recession.
In the midst of all this, Russia is having trouble attracting investment in its energy industry because of its worsening ties with the West. This has led existing investors to withdraw their funds from Russia and depressed the value of the ruble.
Europe now imports about one-third of its gas from Russia, half of it flowing through Ukraine. The question is whether Europe can get by with less Russian gas if the Ukraine crisis worsens. Analysts say it probably can.
Because this past winter was milder than normal, EU countries now have fairly high inventories of gas. Their storage facilities are now 55 percent full, according to Gas Infrastructure Europe in Brussels, and analysts say a 90-day disruption of the Ukrainian link to Russian gas probably would not be disruptive.
“The European gas market is currently in a comfortable position, with ample stocks and little heating-related demand," says Lysu Paez-Cortez, a Paris-based energy analyst for Natixis, a global asset management company.
Paez-Cortez pointed to the Nord Stream pipeline that ships gas from Russia to Germany under the Baltic Sea, which opened in 2011, sidestepping Ukraine as a conduit.
By Andy Tully of Oilprice.com
OPEC Questions Sustainability Of North American Oil Boom
By Daniel J. Graeber | Thu, 15 May 2014 21:52 | 0
OPEC Secretary-General Abdalla el-Badri said oil supplies from North America “will play an important role in the coming few years,” but he cast doubt on their sustainability over the long term.
Speaking May 15 in Moscow, el-Badri acknowledged that oil supply from producers outside of OPEC are expected to increase by more than 4 million barrels per day (bpd) between 2013 and 2018, with much of that coming from North America. But he cautioned that the addition of non-OPEC oil supplies to the global market “should be viewed as a periodic shift."
"Tight oil adds depth and diversity to the market," he said. "But questions remain over its sustainability in the long-term."
Much of the North American oil production will come from shale, known as “tight oil.”
The U.S. Energy Information Administration (EIA) said in its monthly market report for May that total U.S. crude oil production, which averaged 7.4 million barrels per day (bpd) in 2013, is expected to increase to 8.5 million bpd in 2014 and 9.2 million bpd in 2015 -- the highest annual average level of production since 1972.
Despite talk of a North American shale revolution, el-Badri said, the global marketplace should be careful about what that really means. "It is essential that we put things into some context, and examine the market over all timeframes," he said.
Although North American production is expected to increase through 2018, a decline is expected after that.
El-Badri said that drop off in production is already being felt. “Many tight oil wells are experiencing sharp decline rates, which means that operators need to drill, drill, drill just to maintain production.”
The EIA has also raised its expectations for global oil demand growth, predicting that world consumption should grow by 1.2 million bpd for both 2014 and 2015. Global consumption averaged 90.4 million bpd last year.
El-Badri said there are adequate oil stocks and spare capacity to meet the expected growth in demand. Production from the 12-member cartel, he said, is close to 30 million bpd.
"This is what is required by the market," he said. "OPEC is making sure its consumers’ needs are being met."
Canada counts the United States as its top destination for crude oil. The United States, for its part, has placed limits on how much crude oil it can export because of legislation enacted in response to the Arab oil embargo in the 1970s. That means much of the North American energy market is isolated from OPEC, which is reflected in the cartel’s 900,000 bpd crude oil production decline in 2013.
By Daniel J. Graeber of Oilprice.com
By Nick Cunningham | Thu, 15 May 2014 21:46 | 0
Oil prices briefly hit a three week high this week as geopolitical tension and strong demand tighten oil markets.
Saudi Arabia’s Oil Minister Ali al-Naimi said on May 12 that his country would make up for any shortfall that may result from the conflict in Ukraine. After pro-Russian eastern separatists held a referendum last weekend and voted to secede from Ukraine, many in the West worried that another round of annexation by Russia was imminent. Russia has thus far showed restraint, but Naimi sought to reassure the markets that a disruption from Russia would not endanger global supplies, as Saudi Arabia would step in. “We are willing to supply any shortage which may arise,” he said at a conference in Seoul.
Naimi also said that there is no reason to change OPEC’s current output quota of about 30 million barrels per day (bpd). “Supply is highly sufficient, demand is great and the market is fairly stable,” he said. “There is no reason for a change. Absolutely no reason.”
Given current market conditions, Naimi said that OPEC is targeting $100 per barrel. “One-hundred dollars is a fair price for everybody -- consumers, producers, oil companies,” he said. “It's a fair price. It's a good price.”
But on May 15, the International Energy Agency said that OPEC would have to pump more oil in order to meet demand for the rest of the year, which the agency revised upwards by 1.4 percent to a record 92.8 million bpd. IEA projects that OPEC will need to pump 30.7 million bpd for the second half of this year – a production rate that is about 800,000 bpd higher than the cartel produced in April.
Saudi Arabia insists it has more than enough spare capacity to meet global demand – it is pumping 9.6 million bpd and has a total capacity of 12.5 million bpd, so its production can be ramped up depending on market conditions. The IEA is a little less certain that OPEC will be able to react quickly. “While OPEC has more than enough capacity to deliver, it remains to be seen whether it will manage to overcome the above-ground hurdles that have plagued some of its member countries lately,” the agency said.
Meanwhile, despite the fact that Russia did not move swiftly to annex eastern Ukrainian provinces after the referendum as many had feared, Russia’s Foreign Minister Sergei Lavrov offered a dire assessment of the situation in eastern Ukraine. “When Ukrainians kill Ukrainians, I believe it’s as close to civil war as you can get,” he said.
While the geopolitical tension from the Ukraine crisis is pushing up oil prices, there are several trends pulling them down.
It is looking more likely that Libya will be able to restore some of its lost production. According to Libyan officials, protesters have agreed to reopen critical pipelines carrying crude from fields in the country’s western region. The standoff between the official government in Tripoli and eastern rebels has slowed Libyan oil output to a trickle. However, after pushing the political crisis to the brink, the two sides have reached a diplomatic resolution. This paves the way for more Libyan oil to come back online, and government officials have stated that production could quickly rise to 500,000 bpd, double current levels.
Furthermore, the U.S. Energy Information Administration released new data that showed that U.S. oil production has hit a 28-year high. Also, crude oil stockpiles are close to record levels on higher output.
Higher oil production from Libya and the U.S. are offsetting tight market conditions elsewhere.
The impressive growth in production has the U.S. considering relaxing its ban on crude oil exports, as Secretary of Energy Ernest Moniz hinted at on May 13.
And in an interesting response, Saudi Arabia’s Ali al-Naimi said on May 15 he isn’t worried about competition from U.S. oil exports. “We will be very happy to see different producers increasing their production and going into the international market,” he said at an energy meeting in Moscow. “Remember, the world consumes every year over 30 billion barrels of oil and somebody has to replace that so the more oil produced the more is replaced.”
By Nick Cunningham of Oilprice.com
by Suzie Neuwirth/ The City A.M
THE UK’S demand for oil rose to a near two-year high earlier this year, while UK North Sea production continues to fall, according to the IEA’s monthly oil report published yesterday.
The surge in UK oil demand, which rose to a high of around 1.6m barrels per day in February, helped lift the estimate of global demand for the first quarter, the report said.
But production from the North Sea is expected to fall by around 30,000 barrels per day this quarter to 770,000 barrels per day, declining from an average of 850,000 barrels per day in January.
The UK’s largest oil field, the Buzzard field, was shut down for maintenance unexpectedly last month, which took its toll on production, the IEA said.
The IEA has raised its forecast for global demand growth for 2014 to 1.32m barrels per day and warned that there may be a supply shortage from the Organisation of the Petroleum Exporting Countries (Opec) later this year. “While Opec production gains of around 400,000 barrels of oil per day went some ways towards easing markets last month, that gain will be insufficient to meet market needs in the second half of the year, when consumption bounces back seasonally,” the report said.
The IEA predicts that Opec countries would need to raise third-quarter production by another 900,000 barrels of oil per day from April levels, with possible threats to supply coming from Libya and Iraq. Outside of Opec, politically-driven disruptions have intensified in Colombia and South Sudan.
Written by OilOnline Press — May 15th, 2014 | 47 Views
The US Energy Information Administration’s new “Today in Energy” brief looks at the big jump in new horizontal oil drilling rigs in the Permian Basin over the last five months.
The Permian Basin, a long time oil- and natural gas-producing region in West Texas and southeastern New Mexico, has seen a significant increase in horizontal oil-directed drilling activity over the past five months. This trend began at the start of 2013, and accelerated from the week ending on December 27, 2013, to the week ending on May 9, 2014. During this time, the number of horizontal, oil-directed rigs in the Permian Basin rose by 63 rigs, 50% of the total increase in the United States. This growth was heavily concentrated in counties in the Permian Basin containing formations with high production potential.
Horizontal oil-directed drilling rigs are primarily used to drill wells that produce oil from tight, low-permeability formations. The change in the number of oil-directed horizontal rigs in the Permian Basin does not necessarily mean that it will have a commensurate change in overall oil production. However, it does demonstrate that producers have been drawn to the potential for new production from its tight oil formations, which are stacked in multiple layers.
During the first quarter of 2014, almost 80% of all new horizontal, oil-directed drilling in the Permian Basin took place in just five counties that contained such formations. These counties were Reeves County, Texas (14 rig increase); Ward County, Texas (9 rig increase); Martin and Midland County, Texas (8 rigs each); and Eddy County, New Mexico (6 rig increase). The high-growth formations in these counties include the Spraberry, Wolfcamp, and Bone Spring formations.
