US crude stocks plunged a larger-than-expected 7.5 million barrels last week to 375 million barrels as refinery run rates climbed, data from the Energy Information Administration showed Wednesday.
Analysts polled by Platts had estimated a 3 million-barrel draw in crude stocks. Stocks fell even as domestic production continued to rise, reaching 8.59 million b/d for the July 11 reporting week.
Crude stocks in the Gulf Coast dipped below the 200 million-barrel level for the first time in 15 weeks, at 197.8 million barrels last week, down 2.7 million barrels from the week prior.
Midwest US crude stocks fell 7.5 million barrels last week on run rate surge: EIAUS crude stocks plunged a larger-than-expected 7.5 million barrels last week to 375 million barrels as refinery run rates climbed, data from the Energy Information Administration showed Wednesday.
Analysts polled by Platts had estimated a 3 million-barrel draw in crude stocks. Stocks fell even as domestic production continued to rise, reaching 8.59 million b/d for the July 11 reporting week.
Crude stocks in the Gulf Coast dipped below the 200 million-barrel level for the first time in 15 weeks, at 197.8 million barrels last week, down 2.7 million barrels from the week prior.
Midwest utilization rates rose to 93.8% of capacity, a jump of 2.2 percentage points from the week prior.
Last week, Alon USA hiked rates at its 70,000 b/d Big Spring, Texas, refinery after work on a vacuum tower was completed, and Tesoro restarted a major unit at its 166,000 b/d Golden Eagle refinery in Martinez, California.
Also in California, Chevron completed turnaround work at its 290,000 b/d El Segundo refinery. In the Midwest, utilization rates surged to 100.3% of capacity, from 95.1% the week prior.
Rob Merriam, manager of EIA’s Weekly Petroleum Status report, said refiners can exceed normal operating levels for short periods of time. “Refiners can run at an excess of the normal operating conditions because [the utilization rate] is not the physical maximum of the refinery,” he said.
USGC utilization rates rose 0.4 percentage points to 94.9% of capacity. However, that is still below a year-earlier rate of 95.4% of capacity.
Crude imports to the US rose 142,000 b/d to 7.43 million b/d, led by a 228,000-barrel increase from Colombia to 264,000 b/d. Imports from Brazil rose 133,000 b/d to 252,000 b/d, but the increases were partially offset by a 246,000-barrel decline in Canadian imports. Imports of crude from Nigeria were at zero for the second week in a row; they had been at 242,000 b/d in late April.
US Midwest refinery utilization jumped 5.1 percentage points to a record 100.3% in the week ending July 11, Energy Information Administration data showed Wednesday. The rate was the highest since EIA started publishing regional utilization data in 2010, with changes in production processes allowing for refinery runs to top 100%.
“Refiners can run at an excess of the normal operating conditions because [the utilization rate] is not the physical maximum of the refinery,” said Rob Merriam, manager of EIA’s Weekly Petroleum Status report.
“It can’t get much better than that,” said Carl Larry, president of Oil Outlooks and Opinion. “Refineries add more than just crude to their blendstocks. The end result for a refinery may be more yield than it can produce.”
Utilization rates typically are higher in the summer because “refiners are not concerned about excess production because of the summer driving season,” says Tim Evans, an energy futures specialist at Citi.
The refinery rate topped the 2014 year-to-date average in the Midwest, 92.6%, EIA data showed. Midwest gasoline stocks rose 1.298 million barrels to 49.357 million barrels in the week ending July 11. Builds in RBOB and CBOB stocks contributed to the increase. Crude runs rose by 196,000 b/d to 3.818 million b/d. Regional finished gasoline production fell by 231,000 b/d to 2.647 million b/d.
Following a marathon meeting, the city council of Denton, Texas, agreed early Wednesday to allow voters to decide on a proposal to ban hydraulic fracturing in the city. If the voters approve the ban in November’s election, Denton would become the first municipality in Texas to prohibit the drilling completion practice credited with starting a renaissance of natural gas and oil production in Texas and producing basins across North America.
Denton Mayor Chris Watts said Wednesday that the meeting where the fracking ban was discussed attracted 500 or 600 people, “the largest I’ve ever seen in all my time at city council.” The meeting in the city of 120,000 residents started shortly after 7 pm CDT Tuesday and lasted until about 2:30 am CDT Wednesday, Watts said.
About 70 people spoke on the issue of the proposed ordinance. “Most of the speakers were in favor of the ban on hydraulic fracturing. Many who were opposed to the ban were representatives of oil and gas associations or oil and gas company lobbyists,” although some private citizens also spoke against the ban, he said.
Pursuant to the Denton city charter, the council had few options after being presented with a petition that had the required number of signatures and called for the passage of an anti-fracking ordinance, Watts said. “Council cannot amend the ordinance,” he said.
The council faced two choices: immediately approve the ordinance to ban fracking within the city limits or deny the ordinance as presented, in which case the matter would go to the voters.
The council opted for the latter, Watts said. “There wasn’t a true denial,” he said. Watts said the fracking ban seems to have widespread support, at least among “the people pushing for the petition,” with collected some 2,000 signatures.
Chevron said Wednesday it planned 225 job cuts at its UK upstream base in Aberdeen, but remained focused on its operations and major capital projects such as Rosebank, west of the Shetland Islands.
The cuts include both contractors and employees, it said. “Chevron’s organizational design will be more asset-based, with a continuing focus on its operations and progressing its major capital projects, such as Rosebank, Alder, Captain Enhanced Oil Recovery, Enochdu etc,” the company said.
“We are hoping to reduce the number of redundancies through other global opportunities for employees, repatriating expatriates etc, so the exact number of redundancies is unknown,” it added.
Chevron’s UK liquids production last year was 40,000 b/d, a 45% fall from 2009, compared with an overall fall in UK liquids output of 40% over the period. Chevron’s gas output fell 58% from 2009 to 94 million cubic feet last year, while the overall fall in UK gas output was 38%.
The company has interests in nine UK producing fields, including operatorship of the Alba, Captain and Erskine fields and joint operatorship of the Britannia field. It has delayed a final investment decision on the 240 million barrel Rosebank project west of the Shetland islands, in which it has a 40% stake, citing cost issues, prompting criticism from project partner OMV.
By Glenys Sim Jul 16, 2014 7:02 PM GMT+0700
Commodities from iron ore to copper and Brent crude will drop over the next five years as global supplies climb, according to Goldman Sachs Group Inc., which highlighted oil’s recent losses as a sign of increased output.
There will be substantial declines in some metals, energy and bulk commodities, analysts including Chief Currency Strategist Robin Brooks wrote in a report. The period of continued year-on-year price rises for most commodities is over, they said in the report, which was dated yesterday.
Banks from Citigroup Inc. to Deutsche Bank AG have called an end to the commodities super-cycle, when China’s surging demand combined with supply constraints to more than double prices in the 12 years through 2010. Raw materials rallied this year from three annual losses as a lack of rain in Brazil lifted coffee and a ban of ore exports from Indonesia spurred a rally in nickel. The drop in energy prices since last month showed the impact of higher global output, Goldman said in the report.
“A prolonged period of elevated commodity prices has catalysed a supply response,” the analysts wrote. “We do not expect a collapse in global commodity prices. But we do anticipate substantial declines.”
Copper was forecast to drop to $6,600 a metric ton over five years, while iron ore was seen at $80 a ton and Brent may be $100 a barrel, according to Goldman. The steel-making raw material was at $98 a dry ton in Tianjin, China, today, and copper traded at $7,123 on the London Metal Exchange today. Brent was 33 cents higher at $106.35 on the ICE Futures Europe.
‘Looser Supply’
The Bloomberg Commodity Index of 22 raw materials climbed 3.4 percent this year. That compares with a 0.9 percent drop in the Bloomberg Dollar Spot Index and 5.3 percent advance in the MSCI All-Country World Index of equities.
“Against a looser supply backdrop, commodity prices should be much less sensitive to fluctuations in global growth than they were,” Goldman said in the report, entitled “Emerging Market Forex and the End of the Commodity Market Super-Cycle.”
Goldman said in a January report the cycle that spurred higher commodities prices is reversing as increased U.S. shale oil output keeps energy prices low, and that would eventually drive raw materials into a bear market. The new cycle would be the opposite of the super-cycle, it said then.
U.S. production of crude, along with liquids separated from natural gas, surpassed all other countries this year with daily output exceeding 11 million barrels in the first quarter, Bank of America Corp. said in a report July 4. Output climbed as hydraulic fracturing and horizontal drilling help producers to pull record volumes of crude out of shale formations.
Oil Supplies
Brent rallied to as much as $115.71 a barrel last month as military gains in Iraq by an al-Qaeda breakaway group stoked concern that oil supplies from the region may be disrupted. Prices posted a third weekly loss in the period to July 11, with Iraqi shipments unaffected and Libya moving to boost exports.
“Less than a month has passed since geopolitical risks in Iraq pushed up oil prices on concerns over a potential oil supply shock, and the market seems to have absorbed the related risks reasonably well,” Goldman’s analysts wrote. “The expansion in oil supply over the past few years -- primarily from the expansion of U.S. shale production -- has minimized the consequences from past disruptions in Libya and Iraq.”
Iron ore entered a bear market in March on prospects for a glut as supplies surged. Rio Tinto Group (RIO), the world’s second-largest mining company, said today iron ore production in the three months to June gained 11 percent, while Fortescue Metals Group Ltd. said its shipments were 57 percent higher on year.
Surplus Market
“We remain bearish on iron ore, and expect a surplus market to drive the longer-term price down,” the Goldman analysts wrote in yesterday’s report. “We see limited upside for agricultural commodities over the longer run.”
Deutsche Bank said last month commodity prices will remain subdued for years as many of the factors and fears that drove the super-cycle have dissipated. Citigroup said in April 2013 that death bells would ring for the commodity super-cycle.
“Our long-term commodity forecasts suggest that fundamentals for commodity currencies will deteriorate,” the Goldman analysts wrote. “Relative shifts in terms of trade between commodity importers and exporters will be a key input to currency determination over the coming years.”
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net Jake Lloyd-Smith, Jarrett Banks
By Maher Chmaytelli Jul 16, 2014 9:24 PM GMT+0700
Two ports in eastern Libya that reopened this month after a yearlong protest may still be weeks from exporting crude because the terminals need maintenance work first, according to a ministry official.
The nation’s government gave the go-ahead on July 6 for operations to resume at Es Sider and Ras Lanuf, the largest and third-largest terminals. Work on the two facilities may take until the beginning of August, Oil Ministry Measurement Director Ibrahim Al Awami said today.
Brent crude is trading near the lowest in three months in London amid expectations that Libyan supply will rebound as export terminals reopen. The nation is producing about 550,000 barrels a day currently, according to the state-run National Oil Corp. Libya produced at a daily rate of about 300,000 barrels in June, according to Bloomberg estimates.
“There is a preventative maintenance operation underway so that loadings can resume,” Al Awami said by phone from the capital, Tripoli.
The holder of Africa’s largest oil reserves, Libya’s output had dwindled in the past year to make it the smallest producer in the Organization of Petroleum Exporting Countries. The two ports have about 7.5 million barrels in storage, according to the Oil Ministry.
“If inspections prove the material to be in better than expected shape, prices are likely to retrace,” said Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark. “Damages or sub-par state of the terminals could spell higher oil prices.”
Loading Capacity
Es Sider has a daily loading capacity of 340,000 barrels and Ras Lanuf 220,000 barrels, according to the oil ministry. The last loading from Es Sider goes back to March, when the rebel Executive Office for the Barqa region attempted to sell a cargo without government agreement. The U.S. Navy seized the tanker that had loaded crude under rebel supervision and handed it over to the government.
The government said yesterday it may ask for support from international forces after three days of fighting between rival militias left several people dead.
The Executive Office for Barqa relinquished the oil ports in return for a government promise to pay the salaries of Petroleum Facilities Guard members who defected to join the rebels. The group hopes that members of the new national legislature will support its demand for an oil-revenue-sharing agreement for the Barqa region to help compensate for the neglect the area experienced under Muammar Qaddafi.
To contact the reporter on this story: Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Rachel Graham, Dan Weeks
By Lynn Doan Jul 17, 2014 12:26 AM GMT+0700
U.S. refineries processed a record volume of oil last week as plants in the Midwest raised operating rates to take advantage of widening discounts for domestic crudes.
Refinery runs climbed to 16.6 million barrels a day, the most in weekly Energy Information Administration data going back to 1989, and plants operated at 93.8 percent of capacity, the highest level since August 2005. Crude demand surged 5.4 percent in the Midwest, where fuel producers are enjoying record seasonal discounts for Canadian and domestic crudes versus U.S. benchmark West Texas Intermediate.
Hydraulic fracturing and horizontal drilling are helping to draw record volumes of crude out of shale formations across the middle of the country, giving U.S. fuel producers an edge over their peers abroad. The tight-oil boom has boosted domestic production to the highest level in more than a quarter-century.
“Refiners in the Midcontinent are benefiting from very inexpensive, cheaper crude, which of course is translating into higher runs,” Andy Lipow, an oil industry consultant with Lipow Oil Associates LLC, said by telephone from Houston today. “Margins have been good, and we’re finally at a rare period where all refineries are operating well.”
Western Canada Select, a heavy, sour blended crude, was unchanged versus WTI at a $23 a barrel discount as of 1:10 p.m., its lowest level for this time of year since at least 2008, data compiled by Bloomberg show. Oil from North Dakota’s booming Bakken shale formation weakened by 55 cents to $7.75 a barrel.
Plant Capacities
Crude rates at refineries in the western U.S. jumped 8.4 percent last week after plants including ones operated by Tesoro Corp. (TSO) and Exxon Mobil Corp. (XOM) finished unit repairs.
“Whatever the incentives were in each region, the refiners really increased their capacity,” Robert Merriam, manager of petroleum supply statistics at EIA, the Energy Department’s statistical arm, said by telephone from Washington. “If it all hits in one week, it’s going to push us to record levels. And that’s what we’ve got.”
Midwest refineries ran at a record 100.3 percent of operable capacity, EIA data show. The agency’s capacity total accounts for anticipated shutdowns and normal operating conditions, so rates can actually rise above 100 percent when plants are running optimally, Merriam said.
“You’ve got to look at the cracks and crude differentials, and that’s how you end up at 100.3 percent,” he said. “In a short period of time, if they’re not taking a refinery down, they can easily exceed that calendar-day capacity, and that’s what many of them decided to do in that region for this particular week.”
To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Charlotte Porter
By Sabrina Valle Jul 17, 2014 2:29 AM GMT+0700
Petroleo Brasileiro SA (PETR4), the biggest producer in ultra-deep waters, is seeking to extend contracts in its main production region to guarantee control of the deposits past 2025 when they are set to expire, said two people familiar with the negotiations.
Petrobras, based in Rio de Janeiro, has requested extensions for dozens of fields in the Campos Basin from Brazil’s oil regulator, known as ANP, to guarantee it will reap the benefits from additional regional investments required by the regulator, said the people, who declined to give their names because the information is confidential.
The ANP, responding to Petrobras’s original request this week, said it wants the state-controlled oil producer to expand license investments, including exploration to test potential inside concessions where the company isn’t currently producing, the people said.
“The possibility of extending the production phase of concession contracts is included in the contracts with the National Petroleum Agency,” Petrobras’s press office said in an e-mailed response.
Negotiations to extend concession contracts are a regular part of the company’s routine management of and investments in these projects, Petrobras said.
ANP didn’t immediately respond to e-mails and phone calls seeking comment. Brazil’s Energy Ministry declined to comment in an e-mailed response.
Biggest Fields
The licenses include the three biggest producing fields in Brazil - Roncador, Marlim Sul and Marlim - which pumped 27 percent of Brazil’s total oil and natural gas output in May.
Petrobras started in 2012 a program to modernize infrastructure, increase efficiency and reduce operating costs at platforms in the basin to arrest faster-than-expected decline rates in recent years. The company’s overall output has remained stable since 2010 even amid a rapid expansion in the so-called pre-salt region in deeper waters of the South Atlantic.
Petrobras has been producing in Campos Basin since 1977 and its concessions include large areas where it hasn’t done exploration drilling. Petrobras acquired the licenses where it is seeking extensions in 1998 and has full ownership. Campos Basin provides about 70 percent of Brazil’s oil output.
Fields in the Santos Basin pre-salt area hold larger volumes of reserves and are set to surpass the Campos fields in production in the coming years as Petrobras adds platforms.
To contact the reporter on this story: Sabrina Valle in Rio de Janeiro at svalle@bloomberg.net
To contact the editors responsible for this story: Peter Millard at pmillard1@bloomberg.net Robin Saponar
By Margaret Talev and Indira A.R. Lakshmanan Jul 17, 2014 6:41 AM GMT+0700
The Obama administration, acting in concert with the European Union, imposed sanctions on Russian banks, energy companies and defense firms in the latest attempt to punish the country over Ukraine.
The U.S. and EU, which say Russia is supporting the rebels in Ukraine, sought to squeeze the country’s $2 trillion economy by limiting access to financing.
Among the companies hit by the U.S. penalties were OAO Rosneft (ROSN), Russia’s largest oil company, natural gas producer OAO Novatek (NVTK), OAO Gazprombank, the country’s third-largest lender, and state economic development lender Vnesheconombank, the U.S. Treasury Department said today.
The EU said it would halt lending for new public-sector projects in Russia by the European Investment Bank, the bloc’s in-house lender, and will use its influence to stop new lending by the European Bank for Reconstruction and Development.
“These sanctions are significant,” U.S. President Barack Obama said today at the White House. “But they are also targeted, designed to have maximum impact on Russia while limiting any spillover effects on American companies or those who are allies.”
At a news conference in Brasilia, Russian President Vladimir Putin called the U.S. sanctions “aggressive policy” and will only end up hurting American companies. The sanctions will lead U.S.-Russia relations to a dead end, he said.
The penalties go further than earlier rounds of sanctions that targeted individuals who are part ofPutin’s inner circle, while stopping short of hitting entire sectors of the Russian economy. The U.S. and its allies warned that sanctions can be expanded if the situation warrants.
Debt Markets
The sanctions will prevent the Russian companies from accessing U.S. equity or debt markets for new financing with a maturity beyond 90 days. That will raise borrowing costs and effectively cut off medium- and long-term U.S. financing. They don’t otherwise prohibit U.S. companies or individuals from doing business with the Russian firms.
The moves were the latest response to what U.S. and European leaders say is Putin’s refusal to end support for Ukrainian rebels who have been battling government forces in the east. Russian forces again were massing at the Ukraine border, according to the Pentagon, with about 10,000 to 12,000 Russian combat troops in place, up from a low of about 1,000.
Russia has denied previous allegations that it’s responsible for fomenting turmoil in Ukraine.
“The situation in the Ukraine is unacceptable,” British Prime Minister David Cameron said. “The territorial integrity of that country is not being properly respected by Russia.”
Russia’s Economy
The U.S. and EU are seeking to raise the price for Russia’s actions. The Russian economy just skirted a recession last quarter, as capital markets seized up while the U.S. and EU clamped down on individuals and companies tied to Putin’s inner circle. The Finance Ministry warned last week that growth will slow to a crawl if stiffer sanctions are imposed. The ruble fell the most in two weeks in the offshore market after the U.S. and EU announcements.
“These sanctions get the Russians’ attention,” Steven Pifer, a former U.S. ambassador to Ukraine and senior fellow at the Brookings Institution’s Center for 21st Century Security and Intelligence in Washington, said in a phone interview. “You’re now targeting major companies -- Rosneft, Novatek and now the Gazprombank.”
OAO Gazprom (OGZD), the Russian gas giant, wasn’t included in the sanctions. ‘
‘What they’re trying to do is find a way to ratchet up the sanctions while holding something in reserve,’’ Pifer said of the U.S. actions. “They’re trying to do this in a graduated way.”
Exxon Deal
Exxon Mobil Corp. (XOM) and Rosneft had been set to start their first Arctic well this year, targeting a deposit that may hold more oil than Norway’s North Sea. In return, Rosneft has the option of buying into Exxon’s portfolio of exploratory projects in the U.S. Gulf of Mexico, west Texas and the Canadian province of Alberta.
Alan Jeffers, an Exxon spokesman, declined to comment on whether the new round of sanctions will disrupt the Texas-based oil producer’s exploration partnership with Moscow-based Rosneft, which produces 5 percent of the world’s oil.
Loans Unnecessary
Rosneft Chief Executive Officer Igor Sechin called the U.S. measures illegal and said they would hurt American banks that do business with his company. Speaking to reporters in Brasilia tonight, Sechin said that Rosneft can fund its long-term projects without loans and that the penalties wouldn’t affect its current projects with Exxon.
Morgan Stanley (MS) agreed in December to sell its oil-merchanting business to Rosneft. The sale received U.S. antitrust approval last month and Morgan Stanley Chief Executive Officer James Gorman said a week earlier that he expected the deal to be completed by the end of September.
Mark Lake, a spokesman for the New York-based bank, declined to comment today on the sanctions and how they might affect the deal.
Debt Squeeze
There will be a longer-term impact on Rosneft as it looks to roll over debt, said Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington. Rosneft has $13.7 billion in loans coming due this year out of a total debt load of nearly $74 billion, Bloomberg data show.
“Rosneft is really on the limit with how much debt it has,” Aslund said. “I think they will be seriously squeezed in their development.”
The U.S. Chamber of Commerce and National Association of Manufacturers held a strategy session yesterday with representatives from about 20 U.S. companies. The Business Roundtable, an association of chief executive officers, will discuss the impact with its members tomorrow, according to people familiar with the sessions, who asked for anonymity because the discussions are private.
The U.S. action also blocks the assets of eight state-owned defense firms, including weapons-maker Kalashnikov Concern, which manufactures its namesake assault rifle. They also targeted four Russian officials, including a top aide to Putin and a commander in the security service.
Even with the threat of additional sanctions, Russia hasn’t backed down in Ukraine. U.S. Army Colonel Steve Warren, a Pentagon spokesman, said the Russian troop presence on the Ukraine border is “intimidating.”
“It’s been building steadily over the last several weeks,” he said. The Russian military “certainly has the capability to conduct operations on either side of the border.”
To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Indira A.R. Lakshmanan in Washington at ilakshmanan@bloomberg.net
To contact the editors responsible for this story: Steven Komarow at skomarow1@bloomberg.net Joe Sobczyk, Justin Blum
By Isis Almeida and Anna Shiryaevskaya Jul 17, 2014 6:01 AM GMT+0700
Faced with slumping demand for liquefied natural gas in Asian markets, Qatar is shipping cargoes to Britain, deepening the biggest seasonal price drop for the fuel there in five years.
Qatar, the biggest producer, will send at least eight cargoes to the U.K. this month, taking the total since April to 35, six more than last year, data compiled by Bloomberg show. Prices on the U.K.’s National Balancing Point, the largest trading hub outside the U.S., have fallen 28 percent since the summer started on April 1.
The cargoes, typically big enough to meet about 75 percent of Britain’s daily gas use, are entering a market where the mildest European winter in seven years damped prices and demand, reducing the need to replenish inventories. Buyers in Asia, the largest LNG market, have covered their summer needs and spare deliveries are heading to Europe, where enough gas is traded to absorb the fuel not required elsewhere, according to Laurent Maurel, a vice president for strategy at Total SA in Paris.
“Producers have got surplus volumes in the summer that they now have to dispose of,” Niall Trimble, managing director at The Energy Contract Co., a London-based consultant whose clients include GDF Suez SA and Korea Gas Corp., said by phone on July 10. “There aren’t that many open markets around the world which have LNG import terminals.”
Gas Prices
U.K. gas for next-month delivery, a European benchmark, rose 0.7 percent to 36.98 pence a therm ($6.33 a million British thermal units) on London’s ICE Futures Europe exchange yesterday, down from 51.27 pence at the close on March 31 and 65.32 pence a year ago.
Asian prices have averaged 75 percent more than those in the U.K. this year as buyers in the region sought to offset halted nuclear power generation. LNG cargoes for northeast Asia dropped 42 percent to $10.65 a million Btu in the period, according to assessments by World Gas Intelligence of prices for delivery in four to eight weeks.
“You had headwinds for prices in both regions,” Michael Widmer, a commodities analyst at Bank of America Corp. in London, said by telephone July 4. “Some of the volumes that could have gone theoretically to the Asian market instead are being moved over to Europe.”
Asian Decline
Asian LNG declined as the first shipments from Exxon Mobil Corp.’s Papua New Guinea liquefaction plant boosted supply to the region and demand slowed from utilities in Japan, the biggest buyer of the fuel. Japanese imports from Qatar fell 26 percent from a year earlier to 188,485 tons in May, according to Finance Ministry data. The nation used about 6 percent less LNG than it bought for power generation last month, according to the Federation of Electric Power Companies of Japan.
South Korea’s LNG imports from Qatar fell 31 percent in June from a year earlier as total deliveries dropped 20 percent on below-normal temperatures, Energy Aspects Ltd. said yesterday in an e-mailed report. The outlook for summer imports remains bearish as cooler-than-usual weather is forecast for the next two weeks, it said.
Asian gas demand, which is typically higher in the northern hemisphere winter, may be bolstered as “very limited numbers” of Japanese nuclear power plants resume operations by the end of the year, Chikako Ishiguro, a senior analyst at Osaka Gas Co., said by e-mail on July 3.
Japan is preparing to restart at least two of 48 nuclear reactors shut in the wake of an earthquake and tsunami that hit the country in March 2011. Kyushu Electric Power Co.’s No. 1 and No. 2 reactors at the Sendai facility in southern Japan passed initial safety checks, the Nuclear Regulation Authority said in a draft report yesterday.
Qatari Plants
“We believe that northeast Asia and South America will continue to outbid Europe for LNG cargoes for the balance of 2014,” Pan EurAsian Enterprises, a Raleigh, North Carolina-based tracker of LNG shipments, said in a report on July 9.
Qatar has 14 liquefaction plants, known as trains, at least three of which were intended to supply the U.S., where demand for the fuel waned as booming shale gas output outstripped domestic demand. The Persian Gulf state hasn’t supplied any gas to the U.S. since Feb. 2013, according to Energy Information Administration data through April this year.
In the U.K., daily flows from the Qatari-controlled South Hook import terminal, one of four such facilities in the nation, have averaged 41.4 million cubic meters (1.5 billion cubic feet) from April through yesterday, compared with 36.7 million a year earlier, according to National Grid Plc.Forecasts Cut
With milder weather forecast in northeast Asia in the third quarter, more cargoes might be heading to Europe, Energy Aspects said in a report July 15.
Citigroup Inc. cut its forecast for NBP gas this year by 14 percent to 48.2 pence a therm “as lower prices are needed to absorb the excess gas supply while imports of LNG into the U.K. remain robust,” according to the bank’s July 2014 Commodities Strategy report.
In Asia, winter prices may fall below last year’s levels for the season, based on Rim Intelligence Co.’s six-month rolling assessment through March, Pan EurAsian said on July 15.
Changes in shipping destination to Europe from Asia would have a negligible effect on freight rates because the distances from Qatar to east Asia or Europe are similar, according to Keith Bainbridge, managing director of consultant CS LNG in London.
“Qatar produces, nobody else wants it so it comes to Europe,” he said by phone on July 10.
More than 90 percent of the cargoes arrive at the Qatar Petroleum-controlled South Hook terminal. The ability of U.K. facilities to receive the largest Qatari tankers, known as Q-Flexes and Q-Maxes, also makes Britain an attractive market, Trimble said.
Q-Max Tankers
The Shagra, one of 14 Q-maxes in a global LNG fleet of almost 400 tankers, is due to arrive at South Hook on July 19, according to the Milford Haven Port Authority. The 345-meter (1,133-foot) vessel can carry 261,988 cubic meters of LNG, or about 157 million cubic meters of natural gas. That compares with average U.K. demand of 195 million so far this summer.
The Al Khattiya tanker was scheduled to arrive yesterday, making its first voyage to the U.K. since February 2012, ship-tracking data on Bloomberg show.
“You’ve got NBP liquidity, which is probably the primary reason, plus easy or easier access to that market because you have three major terminals,” Richard Sarsfield-Hall, a senior principal at Oxford, England-based Poeyry Consulting, said by phone on June 30. “NBP access makes it an attractive option for where that gas can be sold when it’s not required in the Far East.”
To contact the reporters on this story: Isis Almeida in London at ialmeida3@bloomberg.net; Anna Shiryaevskaya in London at ashiryaevska@bloomberg.net
To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Rob Verdonck, Philip Revzin
By Rakteem Katakey Jul 17, 2014 1:30 AM GMT+0700
India is seeking bids from banks to help sell a stake valued at 178 billion rupees ($3 billion) in Oil & Natural Gas Corp. (ONGC), the nation’s biggest energy explorer.
The government asked banks to submit documents by Aug. 6, according to a notice on the disinvestment department’s website in New Delhi yesterday. Companies are required to quote the fee they will charge to manage the sale. As many as five banks will be hired, the department said.
The first asset sale by Prime Minister Narendra Modi’s government, which swept into office in May with the biggest election victory margin in 30 years, is part of a plan to narrow the nation’s budget deficit to the lowest in seven years. India owns 69 percent of ONGC, the nation’s second-largest company by market value.
To fund the budget shortfall, Finance Minister Arun Jaitley plans to raise 634 billion rupees from selling government stakes in companies in the fiscal year ending March 31, 2015. He projects the government’s total revenue will rise to 11.9 trillion rupees in the current year, up from the previous government’s 11.7 trillion rupee estimate.
ONGC’s shares have gained 44 percent this year compared with a 39 percent increase in the S&P BSE India Public Sector Undertakings Index and the 21 percent rise in the benchmark S&P BSE Sensex. The shares added 0.8 percent to 416.1 rupees in Mumbai yesterday.
The government plans to sell 428 million ONGC shares, valued at 178 billion rupees at yesterday’s closing price.
The government has prepared cabinet notes for approval regarding 10 percent stake sales in Container Corp. of India and NHPC Ltd., and a note is ready on divesting stake in Coal India Ltd., government officials said June 25. Other sales are planned in Hindustan Zinc Ltd. (HZ) and Bharat Aluminium Co. The government will also sell a 5 percent stake in Rural Electrification Corp. and may list Hindustan Aeronautics Ltd.
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Arijit Ghosh, Dick Schumacher
By Tsuyoshi Inajima and Yuji Okada Jul 16, 2014 12:03 PM GMT+0700
A regulatory finding that two of Japan’s nuclear reactors could be safely restarted may not be enough to lower prices for liquefied natural gas because the country’s 46 other units are unlikely to resume this year.
North Asia LNG prices have rallied 54 percent since Japan shut nuclear plants and boosted gas purchases for power generation in the wake of the 2011 Fukushima atomic disaster. Several plants need to be reopened for prices to slump significantly, according to SMBC Nikko Securities Inc., a Tokyo-based brokerage.
Kyushu Electric Power Co.’s reactors at the Sendai facility in southern Japan passed initial safety checks, the Nuclear Regulation Authority said in a draft report, setting in motion the possible return of atomic power. It is the first safety assessment of a Japanese nuclear plant from the regulator set up to replace a predecessor that ignored warnings before the disaster in Fukushima.
“While the restart could have a psychological impact, the effect on the market would be marginal,” Hidetoshi Shioda, a Tokyo-based analyst at SMBC Nikko Securities, said by phone today. “It will change only when Japan restarts more reactors one after another.”
LNG delivered to northeast Asia dropped to $10.65 per million British thermal units in the week ended July 14, down from $10.85 a week earlier, the Energy Intelligence Group said today on the website of its World Gas Intelligence publication. The price jumped to a record $19.70 in February.
Reactor Restart
Kyushu Electric Power Co. (9508) may restart two 890-megawatt reactors at its Sendai nuclear plant in southern Japan as early as October, according to Yuji Nishiyama, a Tokyo-based analyst at JPMorgan Securities Japan Co. The NRA’s commissioners approved the draft safety report at a meeting today and agreed to move to the next step of seeking public comment.
“It is just the start of a very long process,” said Leigh Bolton, managing director of Holmwood Consulting Ltd., a Surrey, England-based energy consultant. “The NRA approval and report is only stage 1, as there is still local approval to achieve, and this is still strongly against nuclear. It could still be years before any restart.”
Japan, with the world’s biggest nuclear power generation capacity after the U.S. and France, has been without output from atomic power since September. Kyushu Electric’s Sendai reactors would be the first to resume operations among 19 atomic units applying for the NRA’s safety review.
Kyushu Electric’s LNG purchases from October through December may drop by 500,000 metric tons, equivalent to about 10 cargoes, from a year earlier if the two reactors at the Sendai plant resume operations in October, Junzo Tamamizu, the managing partner of Clavis Energy Partners LLC, a Tokyo-based consulting and advisory firm, said by phone today. Given Japan buys about 100 cargoes a month, the impact on the LNG market is “very limited,” Tamamizu said.
To contact the reporters on this story: Tsuyoshi Inajima in Tokyo at tinajima@bloomberg.net; Yuji Okada in Tokyo at yokada6@bloomberg.net
To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Mike Anderson
MARGARET TALEV and INDIRA A. R. Lakshmanan
WASHINGTON D.C. (Bloomberg) -- The Obama administration imposed sanctions on large Russian banks, energy companies and defense firms, the latest escalation in the confrontation over Ukraine and one aimed at squeezing Russia’s $2 trillion economy. Among the companies hit were OAO Rosneft, Russia’s largest oil company and natural gas producer OAO Novatek.
“These sanctions are significant,” U.S. President Barack Obama said at the White House. “But they are also targeted, designed to have maximum impact on Russia while limiting any spillover effects on American companies or those who are allies.”
The sanctions will prevent the Russian companies from accessing U.S. equity or debt markets for new financing with a maturity beyond 90 days. That will raise borrowing costs and effectively cut off medium- and long-term U.S. financing. They don’t otherwise prohibit U.S. companies or individuals from doing business with the Russian firms.
Russia also faces possible risks that include disruptions of gas transit through Ukraine and trade sanctions by EU member states, the ministry said. Russia’s OAO Gazprom, which wasn’t on the U.S. sanction list, is the main supplier of gas to Europe through Ukrainian pipelines.
Moscow-based Rosneft produces 5 percent of the world’s oil, with more than 30 Bbbl of proven reserves. Exxon Mobil Corp. and Rosneft had been set to start their first Arctic well this year, targeting a deposit that may hold more oil than Norway’s North Sea. In return, Rosneft has the option of buying into Exxon’s portfolio of exploratory projects in the U.S. Gulf of Mexico, west Texas and the Canadian province of Alberta.
Alan Jeffers, an Exxon spokesman, said he couldn’t immediately comment on whether the new round of sanctions will disrupt the Texas-based oil producer’s exploration partnership with Rosneft.
For Exxon, Russia represents its largest exploration prospect outside its home country. Exxon and Rosneft are scheduled to begin drilling an offshore oil well as soon as next month in the Arctic that could cost as much as $700 million to complete.
Alison Ciaccio, Platts Markets Editorr
New York - July 16, 2014
U.S. crude oil stocks plunged a larger-than-expected 7.5 million barrels the week ended July 11 to 375 million barrels as refinery run rates climbed, data from the Energy Information Administration (EIA) showed Wednesday.
Analysts polled by Platts had estimated a 3 million-barrel draw in crude oil stocks.
Stocks fell even as domestic production continued to rise, reaching 8.59 million barrels per day (b/d) during the July 11 reporting week.
U.S. Gulf Coast crude oil stocks at 197.8 million barrels the week ended July 11 dipped below the 200 million-barrel level for the first time in 15 weeks, and were down 2.7 million barrels from the week prior.
U.S. Midwest crude oil stocks, down 2.6 million barrels to 88 million barrels, also contributed to the majority of the stock decline. That includes a 600,000-barrel draw to 20.3 million barrels at the New York Mercantile Exchange (NYMEX) delivery hub at Cushing, Oklahoma.
U.S. crude oil stocks fell as total refinery utilization rates rose to 93.8% of capacity, a jump of 2.2 percentage points from the week prior.
The week ended July 11, Alon USA hiked rates at its 70,000 b/d Big Spring, Texas, refinery after work on a vacuum tower was completed, and Tesoro restarted a major unit at its 166,000 b/d Golden Eagle refinery in Martinez, California.
Also in California, Chevron completed turnaround work at its 290,000 b/d El Segundo refinery.
In the U.S. Midwest, utilization rates surged to 100.3% of capacity, from 95.1% the week prior.
Rob Merriam, manager of EIA's Weekly Petroleum Status report, said refiners can exceed normal operating levels for short periods of time.
"Refiners can run at an excess of the normal operating conditions because [the utilization rate] is not the physical maximum of the refinery," he said.
USGC utilization rates rose 0.4 percentage point to 94.9% of capacity. However, that is still below a year-earlier rate of 95.4% of capacity.
Crude oil imports to the U.S. rose 142,000 b/d to 7.43 million b/d, led by a 228,000-barrel increase from Colombia to 264,000 b/d. Imports from Brazil rose 133,000 b/d to 252,000 b/d, but the increases were partially offset by a 246,000-barrel decline in Canadian imports.
Imports of crude oil from Nigeria were at zero for the second week in a row; they had been at 242,000 b/d in late April.
PRODUCT STOCKS ROSE, DISTILLATE DEMAND DIPPED
U.S. distillate stocks rose 2.5 million barrels to 124.3 million barrels the week ended July 11, near analysts’ expectations of a 2 million-barrel build. Stocks rose as demand for the fuel fell 233,000 b/d to 3.73 million b/d.
U.S. gasoline stocks rose a moderate 200,000 barrels to 214.5 million barrels -- far below the expected, 1.2 million-barrel build. Demand grew 122,000 b/d to 9.06 million b/d.
Gasoline stocks on the U.S. Atlantic Coast -- home to the New York Harbor-delivered NYMEX RBOB contract -- fell 1.4 million barrels the week ended July 11 to 60.6 million barrels. That was offset by a 1.3 million-barrel build to 49.4 million barrels in the U.S. Midwest.
In ultra-low-sulfur diesel (ULSD), stocks on the U.S. West Coast (USWC) continued to expand their deficit to the EIA five-year average. USWC ULSD stocks fell 178,000 barrels to 10.3 million barrels the week ended July 11 -- 14.14% below the five-year average. ULSD stocks on the USGC were at 34.1 million barrels, down nearly 900,000 barrels the week ended July 11, widening their deficit to the five-year average to 10.2%.
Lima (Platts)--16Jul2014/216 pm EDT/1816 GMT
Peru increased crude oil output in May as Perenco and Cepsa started production at their jungle fields, while natural gas and gas liquids output fell, the government said Wednesday.
Crude oil production rose to 69,369 b/d from 63,833 b/d in May 2013, the Energy and Mines Ministry said in a statement posted on its website.
Perenco's Block 67 oil field in the northern Maranon Basin and Cepsa's Block 131 in the Ucayali Basin -- which both started production over the past six months -- together with output gains at
Ecopetrol's offshore Block Z-2B, offset lower production at fields operated by CNPC and Argentina's Pluspetrol, the ministry said.
Natural gas output dropped to 1.17 Bcf/d from 1.22 Bcf/d a year earlier, while gas condensate fell to 104,177 b/d from 106,697 b/d, the ministry said. Declining production at the Camisea and Aguaytia fields countered the start-up of Repsol's Block 57 in the Ucayali Basin, according to the ministry.
Perenco, which brought Block 67 online in December, produced 5,287 b/d of crude in May, while Repsol, which started operations at Block 57 in March, produced 82,864 Mcf/d of natural gas and 5,849 b/d of condensate, the ministry said.
--Alex Emery, newsdesk@platts.com --Edited by Kevin Saville, kevin.saville@platts.com
London (Platts)--16Jul2014/941 am EDT/1341 GMT
The front-month mogas/naphtha spread -- the premium of front-month Eurobob gasoline swaps to the equivalent CIF NWE naphtha swap -- has fallen to a four-month low, Platts data showed, after the gasoline market weakened while the naphtha paper market strengthened, boosted by a steady Asian market.
The spread was assessed Tuesday at $46.75/mt, down $13/mt day on day to the lowest level since February 28 when it was $45/mt.
The Northwest European gasoline market weakened Tuesday as more supply arrived. "Refineries that have turned down runs are pushing up again to make up for the refineries that have had problems," said a trading source.
FOB Rotterdam Eurobob barges fell to be assessed at $989.75/mt with the premium to the front-month swap down $12.25/mt to $13.50/mt.
The gasoline swaps market reflected the weakness in the market, with balance-month Ebob crack swaps assessed at $12.90/barrel, down $1/b, and the front-month Ebob crack swap assessed at $11/b, down $0.50/b.
The market's backwardation also softened, with the balance- month/front-month gasoline swap spread assessed $12.50/mt backwardated Tuesday, from $17.50/mt Monday.
"Cracks are off...[there is] less backwardation," a northwest European trading source said.
Meanwhile, the front-month CIF Northwest Europe naphtha crack hit a three-year high of minus $1.75/barrel, up from minus $2.85/b Monday as crude futures continued to fall and with sentiment boosted by strength in the Asian naphtha market that led to a wider east/west spread.
"The east has had some lower Indian exports and demand is very good over there, while overall crude is trading lower," a London-based trader said.
"A very strong Asian [Platts] window and a wider east/west spread are providing support for Europe...where the market may be long but no one seems keen to sell," another European trader said.
--Virgini Malicier, virginie.malicier@platts.com
--Francesco Di Salvo, francesco.disalvo@platts.com
--Edited by Dan Lalor, daniel.lalor@platts.com
Similar stories appear in European Marketscan See more information at http://www.platts.com/Products/europeanmarketscan
Seoul (Platts)--16Jul2014/610 am EDT/1010 GMT
South Korea's renewed efforts to reduce the country's heavy reliance on Middle East crude imports are unlikely to succeed due to low incentives and limited alternative supply sources, refiners said Thursday.
"The government's new plans for incentives for non-Middle East crudes still fall short of our expectation," an official at the Korea Petroleum Association told Platts.
"There could be problems and additional costs for refiners to use more non-Middle East crudes in their facilities more suitable for Middle Eastern crude," the official said, noting differences in crude quality.
"We can import more from South America and Europe's North Sea, but a problem is bigger transportation costs," the official added.
Even though these costs are fully compensated, it is not enough for refiners to take risks in importing crude far away from the Middle East, he said.
The official said some 70% of South Korean refiners' crude imports are on contract and just 30% are spot purchases. Refiners could look to more non-Middle East cargoes on the spot market, but the volume would be limited, the official added -- a view echoed by local refiners including SK Innovation and GS Caltex.
The Ministry of Trade, Industry and Energy said last week it would extend bigger financial incentives to local refiners that import crude oil from sources other than the Middle East as part of efforts to diversify supplies.
Under the measures that take effect in September, the government would offer to fully compensate refiners for increased transportation costs incurred for importing crude from regions outside the Middle East.
South Korea has been partially subsidizing refiners' crude transportation costs for non-Middle East crude imports since 2004. Under the existing formula, the government imposes lower tariffs on non-Middle Middle crudes, which does not fully cover the difference in refiners' transport costs.
But the new measure calls for the refiners to pay tariffs on crude imports at normal rates with rebates later that fully compensate freight differentials. Given the freight for South Korea from the Middle East is currently $12.56/mt for a 270,000 mt VLCC and it is just above $20/ton, basis 260,000 mt from West Africa, South Korean refiners would get rebates that compensate the cost difference.
A MOTIE official told Platts the new measure would not necessarily "fully" compensate for freight differentials between the Persian Gulf and other regions.
"Due to technical problems in exactly calculating port-to-port transport costs, refiners that import far away from the Middle East would be compensated for about 90% of additional costs," the MOTIE official said.
"In the past, the benefit was available only when refiners imported more than 7 million barrels/year of non-Middle East crude, but it was almost impossible because they come from the spot market," the official said. "The regulation will be eased to 2 million barrels so that refiners can enjoy the benefit more easily."
"Furthermore, importers of non-Middle East crude can continue to enjoy the tax refund as well, which means that refiners importing crude from regions other than the Middle East could enjoy double benefits -- subsidies for transportation costs and tax rebates," the official said.
Currently, South Korea's refiners pay a tariff of Won 1,600/100 liters ($1.60/100 liters) of imported crude oil and get a similar rebate on oil product exports.
"It is fair to say that that crude from the Middle East has helped South Korea ensure stable supplies. But South Korea's dependence on the Middle East crude over 85% is considered too high," the MOTIE official said. "We just hope the rate to become lower than 80%."
South Korea relies on imports to meet all of its crude oil demand of around 2.5 million b/d. Supplies from the Middle East have been on the rise to 86.5% in 2013, from 81.9% in 2010 and just less than 80% in the 2000s.
Asia accounted for 10.7% in 2013, with Europe 5% and Africa 0.8%, according to state-owned Korea National Oil Corp. --Charles Lee, newsdesk@platts.com
--Edited by Jeremy Lovell, jeremy.lovell@platts.com
Similar stories appear in Oilgram News See more information at http://www.platts.com/Products/oilgramnews
Washington (Platts)--15Jul2014/507 pm EDT/2107 GMT
US and European regulators must quickly come together to harmonize international derivatives trading rules before market fragmentation and low liquidity become lasting fixtures of the swaps and futures markets, Commissioner Scott O'Malia of the US Commodity Futures Trading Commission said Tuesday.
In a keynote address before a quadrilateral meeting of financial lawyers groups at the Federal Reserve Bank of New York, O'Malia renewed calls for the European Commission and the CFTC to declare that the US regulatory regime is equivalent under the European Market Infrastructure Regulation.
"It is critically important that international regulators continue to work together to harmonize swap data reporting, exchange trading and [central counterparties] clearing before market fragmentation and contraction of liquidity hardens and becomes permanent," O'Malia said.
As a consequence of the slow-moving negotiations, a decision by the EC to consider all contracts executed on non-EU equivalent exchanges -- such as US futures products -- over-the-counter derivatives has impacted energy market liquidity, recent media reports have indicated.
For instance, Kim Taylor, head of clearing at CME Group, recently told Risk.net that energy futures volume has fallen as a result of European companies avoiding US-executed futures products which would be counted towards the so-called non-financial corporate calculation, or NFC+.
If US rules were considered equivalent to EU rules, US-executed futures would not be counted toward Europe's NFC+ designation. Companies like to avoid transactions that count against the NFC+, because reaching a certain threshold would trigger more onerous reporting requirements, among other issues.
"We're seeing some customers shift from exchange-traded products to alternatives that won't count toward their NFC+ threshold," said Taylor.
CME, which reported June volumes earlier in the month, said NYMEX natural gas futures volume was down 13.5% from June 2013, while year-to-date volume was down 16.8%. Likewise, volume in the NYMEX light sweet crude contract was down 13% in June compared with a year earlier, and year-to-date volume is off 11.4%.
While many products have seen decreased volumes and liquidity amid historically low volatility, CME on Monday said there was record trading volume and open interest for its NYMEX Brent crude oil contract on July 11.
So while derivatives rules could have a large impact on overall market liquidity, it might potentially be a mixed bag when looking at individual product offerings.
In March, CME received regulatory approval from the UK's Financial Conduct Authority for its London-based derivatives exchange CME Europe, a clear signal that exchanges are maneuvering to continue offering risk management products internationally and curtail regulatory uncertainty over cross-border rules.
While not offering any significant energy products, yet, the exchange was created in an effort to help Europe-based customers "access liquidity in a location jurisdiction" and to "better serve our customers in the region as we expand our business with relevant products," according to Terry Duffy, CME executive chairman and president.
O'Malia, meanwhile, said the importance of well-functioning markets "cannot be overstated" and that he was "deeply concerned by continuing reports of market fragmentation and fracturing of liquidity between US and non-US markets as a result of diverging regulatory approaches to implementation of the G20 principles."
G20 members committed to coordinating regulatory approaches at a summit in Pittsburgh, Pennsylvania, in 2009.
O'Malia added that he hoped the CFTC and EC could come to an agreement on accepting US rules as comparable before a December 15 deadline when higher capital standards would be imposed on third-country CCPs that are not recognized under EMIR equivalency.
"As I have stated before, it is my firm belief that the key to effective and efficient cross-border regulation of the swaps market is through an outcomes-based approach where regulators would defer to the other jurisdiction when it is justified by the quality of their respective regulation and enforcement regimes," O'Malia said.
The CFTC said it could not comment on the ongoing negotiations with the EC.
--Christopher Tremulis, christopher.tremulis@platts.com
--Edited by Lisa Miller, lisa.miller@platts.com
Written by OilOnline Press — July 16th, 2014 | 56 Views
The Russian Government has granted exclusive rights to four companies to export liquefied natural gas (LNG).Russia_Dmitry-Medvedev.jpg
This exclusive right has been granted to OJSC Gazprom, its subsidiary Gazprom Export, OJSC Rosneft and OJSC Yamal LNG. Export licenses will be issued by the Russian Energy Ministry.
”You know that liquefied natural gas is a very promising area of energy production globally. All countries are working on this issue, and Russia is no exception in this sense."
Although Russia has huge reserves of natural gas and is one of the largest exporters of gas via pipelines, so called pipeline gas, it should not overlook other development opportunities in gas-fueled power generation, such as gas liquefaction and LNG export under contracts,” said Russian Prime Minister Dmitry Medvedev.
“It’s the Government’s responsibility to approve a list of companies with the exclusive right to export LNG,” he added.
By Benoît Faucon
LONDON--Two recently reopened Libyan ports are unlikely to resume oil exports before August as buyers press for discounts due to uncertainty over the shipments, a Libyan official and oil professionals said Wednesday.
An expected ramp up of Libyan oil exports has prompted a sharp fall in prices, yet none of the extra barrels have made their way to global markets.
The state-run National Oil Co., or NOC, is locked in talks with potential buyers, who were forced to find alternatives when Libyan supplies all but dried up earlier this year, Libyan oil officials and managers at refiners in Europe said Wednesday. "Buyers want a big discount after all these delays," one manager at a refiner said.
In July, Libya cut prices for its high-quality oil by 5 cents to 10 cents a barrel but competing grades dropped by more than a dollar, one manager at a different refiner said, calling Tripoli's crude "uncompetitively priced." Both refiners, which have bought oil from the north African country in the past, said they were staying away from it for now.
Earlier this month, armed rebels agreed to reopen the ports of Es Sider and Ras Lanuf, which account for nearly half of Libya's oil-export capacity, after occupying them for nearly a year.
Production also resumed at the Sharara oil field, the country's largest. This pushed up Libyan oil production to levels not seen since February. As a result, storage tanks at the ports of Es Sider, Ras Lanuf and Zawiya have altogether between 8 million and 11 million barrels ready to be loaded on tankers, local oil officials say.
The prospect of a return of large flows of Libyan oil pushed Brent prices at one point to a three-month low. But potential buyers say they are wary of buying Libyan oil, particularly after a recent outbreak of violence in Tripoli. It was the worst in six months and prompted fears of new disruption. At least six people were killed and 25 injured on Sunday in a battle between rival militias over Tripoli's airport. So far, production at oil fields, which are located far from the Libyan capital, has been unaffected but an official at the Sharara field said Monday that one militia may retaliate by closing the field's pipeline.
Previous progress in Libya's oil industry has been frequently followed by setbacks with ports and fields reopening only to be shut again within days. "We know how much of a smoke screen those headlines have been so far this year," a manager at a refiner said.
Write to Benoît Faucon benoit.faucon@wsj.com
16 July 2014 21:50 (Last updated 16 July 2014 21:51)
Kurdish Regional Government's new plan to increase oil exports by 280,000 barrels per day may imply the selling of disputed Kirkuk oil, say experts.
By Selen Tonkus
ANKARA
Kurdish Regional Government in Iraq's north claims it will increase oil exports to Turkey from 120,000 barrels per day to 400,000 by the year's end, however experts believe this hints at their bid to export disputed Kirkuk oil, which is in violation of Iraq's constitution.
Northern Iraqi oil began shipment from Turkey's southern Ceyhan Port to international markets on May 22, without the agreement of the Iraqi government. Since then, the Kurdish Regional Government (KRG) have been sending 120,000 barrels per day to Ceyhan.
On Tuesday, KRG spokesperson said they told Turkey to get prepared for a 280,000 barrels per day increase of Kurdish oil.
Northern Iraq extracts oil from two fields; Tawqe and Taq Taq, which produce 120,000 and 113,000 barrels of oil per day respectively. Part of this total daily production of 233,000 barrels of oil is already used for domestic purposes within the Kurdish region. It appears difficult for KRG to increase production to 400,000 barrels of oil for exports in such a short period of time.
Experts told Anadolu Agency that the KRG's new calculation of exports might include oil from Kirkuk - the disputed territory between Erbil and Baghdad.
KRG's July 11 announcement of seizing two oil fields in Kirkuk - Bai Hassan and Makhmour further strengthened doubts.
KRG President Barzani rushed to hold a referendum in Kirkuk, claming Article 140 of the Iraqi constitution is already implemented on the grounds that peshmerga forces seized most of the disputed territories, including the Kirkuk oil fields, when they were deployed to fight Sunni insurgents, Islamic State of Iraq and Levant (ISIL) at the beginning of June.
Article 140 is related to the normalization of the situation in Kirkuk and other disputed areas through the repatriation of its inhabitants prior to the arabization which took place during the Saddam era.
The article also calls for holding a census to be followed by a referendum to allow the inhabitants to decide whether to be part of the KRG or the Baghdad government.
On the other hand, the Patriotic Union of Kurdistan (PUK) led by former Iraqi President Jalal Talabani, who governs the major part of Kirkuk, and Kirkuk Governor Najmaddin Kareem, a possible candidate for Iraqi presidency, opposes de facto implementation of Article 140 claiming the move would be unconstitutional.
- Kirkuk oil sale by KRG possible
Head of Carduchi Consulting and Energy Expert, Shwan Zulal said the dispute is a power struggle between the Kurdish government and the main opposition party PUK, and he believes differences will be ironed out in time as the dissenting voices in PUK are few.
Zulal said, the goal of 400,000 barrels of oil may now become a real possibility depending on who will be the next Iraqi prime minister and how the political process will progress in Iraq.
Ali Semin, an expert from Istanbul-based think tank BILGESAM said this new plan absolutely includes Kirkuk oil.
He added, "If Kurds sell Kirkuk's oil, they will completely violate the constitution. Arabs and Turkmen of the city will not stay calm after that, and Turkey will be dragged into a difficult position."
There is no oil flow from central Iraq to Turkey since March due to ISIL threats en route to the Kirkuk-Ceyhan pipeline.
Last month, KRG announced that they linked Kirkuk oil distribution infrastructure to their own pipeline which sends Kurdish oil from Tawqe and Taq Taq oil to Ceyhan.
The new link binds Kirkuk's oil formation, Avana dome to the Khurmala oil field, where the Kurdish pipeline begins.
On July 11 KRG announced Kurdish forces moved to secure the oil fields of Bai Hassan and the Makhmour area, after allegedly learning of orders from Baghdad officials in the federal Ministry of Oil to sabotage the recent mutually-agreed pipeline infrastructure linking the Avana dome with the Khurmala field.
The announcement says the Avana and Makhmour fields were producing about 110,000 barrels of oil per day.
www.aa.com.tr/en
Source: Reuters -
* Large eastern ports restart not seen before August
* East handles over half of Libyan oil export capacity
* More fighting may put ports deal in doubt
By Ulf Laessing and Julia Payne
TRIPOLI/LONDON, July 16 (Reuters) - Libya will not be able to export oil through its two largest eastern ports before August, due to safety checks after a near year-long closure, a senior oil official said on Wednesday.
The latest twist in a spiral of violence also casts a shadow over the vital deal two weeks ago to end the eastern blockade by federalist protesters of the last two facilities they held.
Until April, the rebels were holding four out of five eastern ports, cutting off over half of Libya's export capacity.
But an oil export return is proving slow and a full ramp up is already facing new obstacles with a fresh protest by oil guards at the port of Brega.
At least 15 people have been killed in the capital and the eastern city of Benghazi since Sunday. Fighting between rival militias has transformed Tripoli's airport into a battlefield, cutting the Libyan capital off from the outside world.
A senior Libyan oil official said technical teams at the two main eastern oil ports - Ras Lanuf and Es Sider - were still carrying out assessments.
"They have to check the pumps, lines, fields...carry out preventative maintenance," Ibrahim al-Awami, general manager of inspections and measurement at the Libyan oil ministry, said.
"It probably won't start until August."
The two ports together can export 500,000 barrels per day, accounting for over a third of Libya's export capacity of 1.25 million barrels per day.
With the return of some eastern output and the restart of a major western oilfield, the OPEC member's production has recovered to nearly 600,000 bpd, compared with its pre-oil crisis level of 1.4 million bpd, its acting oil minister said on Tuesday.
WARY OIL TRADERS
Oil traders had remained cautious about any quick return of full Libyan exports.
"There were expectations of further problems and protests emerging, but the Libyans announcing the two main eastern ports will not reopen until next month cuts the return of Libyan supplies compared to market expectations," Richard Mallinson at Energy Aspects in London said.
"The current deal may hold, at least until a new government forms and the federalist rebels see if their demands can be met, but the increased level of violence in the country is a worry."
Brent crude oil prices have fallen from more than $115 a barrel in late June to a 3-month low of $104.39 a barrel on Tuesday, partly on the expectation of more Libyan exports, but recovered to above $106 a barrel on Wednesday.
Trading and shipping sources said no tankers have yet been booked to sail to Ras Lanuf or Es Sider for loading, despite the government announcing that the force majeure on the ports had been lifted last week.
Two Aframax tankers have loaded at the small western port of Mellitah in the last two weeks, trading and shipping sources said, while a third - the Olib - has docked at the easternmost port of Hariga, according to Reuters AIS Live tanker tracking.
The eastern port of Zueitina, which along with Hariga reopened through an earlier deal with the rebels in April, is not exporting as oilfields have yet to restart and storage tanks are empty.
High official selling prices, which are set by the National Oil Corp. (NOC), have also dissuaded international buyers, trading sources said, with many saying they have been priced at least $1 a barrel above other comparable quality crudes.
"They will have to offer discounts to sell it," one trader said.
The quality of the oil is also a concern for traders, as much of the readily available crude has been sitting in storage tanks for nearly a year.
Estimates for where Libya's oil exports may be in the next two months vary wildly.
If the port deal holds, average shipments could vary between less than 500,000 barrels per day to as much as 1 million bpd depending on technical difficulties, according to industry estimates and Reuters calculations. (Writing by David Sheppard, editing by William Hardy)
Source: Reuters
LONDON, July 16 (Reuters) - Libya's eastern Brega oil port remained closed on Wednesday because of protesting oil guards who blocked the port at the weekend, a spokesman for Libya's National Oil Corp (NOC) said.
NOC subsidiary Sirte Oil Co, which runs the port, will have to stop production at the connecting oilfields if the protest lasts for 10 more days, spokesman Mohamed El Harari added. Oil output was about 43,000 barrels per day when the protest started.
A shutdown would also lead to reduced power generation locally because gas output would also be reduced.
(Reporting by Feras Bosalum; Editing by David Goodman)
