Scotland prepared for this week’s independence referendum with a win for the “yes” campaign spelling massive upheaval for the oil industry, but little sign a “no” result would bring much comfort either.
Ahead of Thursday’s vote the Scottish Nationalists have promised a new era of stability for offshore oil and gas — most UK resources would come under Scottish jurisdiction. “The wealth remaining under Scotland’s seas will continue to support our oil and gas industry and benefit the people of Scotland for many decades to come,” the SNP said on Monday in response to a routine update from one company working in the frontier west of Shetland area, Hurricane Energy
But a standoff between the Nationalists and business in general loomed over the referendum as numerous business leaders warned against voting “yes,” the tensions encapsulated in an outburst by an associate of Scottish Nationalist leader Alex Salmond, one-time deputy party leader Jim Sillars, who threatened to nationalize BP.
The Nationalists would use a “yes” vote “for a day of reckoning” with BP, Sillars said, in comments repudiated by the SNP leadership. Hyperbole aside, most analysts agreed that in the event of a “yes” vote Scotland faces a long period of uncertainty encompassing everything from its future currency to membership of the EU and the defense alliance NATO.
Shell and BP have spoken out against independence, citing such uncertainties, while France’s Total has adopted a neutral stance. BP chief executive Bob Dudley said in July there was evidence that uncertainties hanging over the UK were deterring deal-making in the North Sea sector.
“I know of some M&A [mergers and acquisitions] work where our assets were put up for sale where people in Asia held back... they didn’t understand it well, and they didn’t participate because of the uncertainty of the referendum,” he said.
A “no” to independence might boost confidence, with the North Sea seen as unaffected by security risks and as something of a test-bed for companies wanting offshore expertise. But even then it may take time for the industry’s mood to recover.
UK oil production last year was 62% lower than a decade earlier at 820,000 b/d and the industry is seeking urgent reforms to the tax and regulatory regimes governing upstream oil and gas to help boost production.
Promises by the political parties in London to give more powers to Scotland are not expected to touch on the corporation tax paid by the industry. But from an industry point of view, constitutional upheaval risks distracting from the reforms the government has promised on the North Sea tax and regulatory regime, with under nine months to go until the next general election in May.
The relatively swift recovery in Libyan oil production over the past few weeks has hit its first stumbling block as intense militant fighting close to Tripoli, the capital, has forced state-owned NOC to shut some key oil infrastructure in the west of the country.
A senior NOC official said Wednesday that both the oil export terminal and refinery at Zawiya were closed, as was the Sharara field further to the south that feeds both the port and the refinery.
NOC production manager Anwar Aghil said all the oil facilities at Zawiya had been shut and would not reopen until the fighting stops. “The Zawiya terminal and refinery have been closed until security is regained in the vicinity, hopefully very soon,” he said. “The Sharara field is shut down due to the failing security situation but we will resume production in the next couple of days,” he added.
The disruption has pushed total Libyan production down to around 700,000 b/d, an NOC spokesman said, from a most recent high of 870,000 b/d earlier in the week. “The production rate is little below 700,000 b/d as Sharara is completely shut down now. We should resume production again from Sharara hopefully tomorrow once security is back,” the spokesman said.
Sharara, which is operated by a joint venture between Spain’s Repsol and NOC, can produce up to 340,000 b/d. Repsol could not immediately be reached for comment.
The Zawiya export terminal is Libya’s second biggest, with a capacity of 230,000 b/d, while the nearby refinery has a capacity of 120,000 b/d. Libya has continued to descend into political chaos despite a recovery in oil production and exports in the past month.
Its parliament and the internationally recognized government relocated in August to Tobruk, 1,500 km east of Tripoli, as Islamist and nationalist militias battled for control of the capital.
Fighting has spilled over close to Zawiya in recent days, with rockets landing near key oil infrastructure. But despite the unrest, Libyan production had been steadily ramping up in the past month and a half from lows of just 150,000 b/d after exports finally resumed from the eastern ports of Es Sider and Ras Lanuf at the start of August after one year of rebel occupation.
The latest round of sanctions imposed by the EU and US against Moscow is likely to further complicate work by oil companies in Russia, increasing the risk of delay to some upstream projects and potentially triggering a drop in Russian crude production as early as next year, analysts believe.
While the first wave of sanctions against Russia was expected to have an impact on the oil industry only in the medium-term and beyond, mainly through the tightening of access to financial markets, the third wave of sanctions could have more near-term implications.
They target specific Russian oil companies and also extend to service companies, which will undoubtedly affect ongoing operations. The wording of the sanctions had led to some uncertainty over exactly how they will be implemented.
But, analysts from Barclays Research said in a report this week, they add to the “already heightened risk and will make it more complicated for European service companies and IOCs to provide technologies for ongoing operations in Russia.”
The fact that sanctions now encompass a wider range of Russian companies (Rosneft, Gazprom Neft, Transneft, Surgutneftegaz and Lukoil) will give pause to European and US service companies and will add further headwinds to Russian efforts to keep brownfield production elevated, Barclays said.
At the same time, the analysts noted that the impact on service companies and other foreign companies may be temporary “until they reassess their supply chain and determine what can still be provided within country.”
It seems certain, though, that US major ExxonMobil will have to wind down its drilling project with state-controlled Rosneft in the next ten days. The US Treasury Department said its sanctions, implemented in response to Russia’s continued involvement in the Ukraine crisis, are clear — all US companies involved in Arctic, deep sea and shale oil projects in Russia must cease them by September 26.
“Any joint project, any ongoing existing project or contract that involves this activity would fall under these sanctions,” a Treasury official, who spoke on condition of anonymity, said Tuesday.
Italy’s Eni announced Wednesday a new oil discovery in its deepwater block 15/06 off Angola which is estimated to contain 300 million barrels of oil in place. The find in the Ochigufu exploration prospect is the 10th commercial oil discovery made in the block, Eni said.
The discovery well, which lies some 10 km from the Ngoma floating storage production and offloading vessel, has an estimated production capacity of more than 5,000 b/d according to initial well data, Eni said.
“This important discovery, which will be brought into production in record time, adds even more value to Block 15/06,” CEO Claudio Descalzi said in a statement.
Eni said studies are underway for an early tie-in to the Ngoma FPSO, which is already in location in the West Hub and is designed to handle 100,000 b/d of production.
Eni operates Block 15/06 with a 35% stake. The other partners of the joint venture committed to the block are Sonangol (30% stake), SSI Fifteen (25%), Falcon Oil (5%) and Statoil (5%). In Block 15/06, two oil development projects — West Hub and East Hub — have already been sanctioned.
The production start-up of the West Hub project, through the Ngoma FPSO, is expected by the end of 2014.
By Mark Shenk
U.S. crude production climbed to the highest level in more than 28 years last week as the shale boom moved the country closer to energy independence.
Output rose 248,000 barrels a day to 8.838 million, the most since March 1986, according to Energy Information Administration data. The combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies from shale formations in the central U.S., including the Bakken in North Dakota and the Eagle Ford in Texas.
“The shale boom hasn’t run its course yet,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. “The U.S. is in a good and improving position as far as oil supply is concerned.”
Production gains helped bolster U.S. inventories by 3.67 million barrels to 362.3 million barrels in the week ended Sept. 12, according to the EIA report. It was the biggest one-week increase since April, according to the agency.
U.S. output will climb 14 percent to an average of 8.53 million barrels a day this year, the EIA said in its monthly Short-Term Energy Outlook on Sept. 9. Production will rise to 9.53 million barrels a day in 2015, the most since 1970, according to the agency.
Pipeline Shutdown
Three factors drove the big gain in this week’s production figure, Robert Merriam, an EIA analyst who compiles the Weekly Petroleum Status Report, said in an e-mail. This was the first full week that reflected the most recent Short-Term Energy Outlook, Alaskan production returned after a pipeline shutdown and the EIA revised Gulf of Mexico production higher because the models accounted for hurricanes that haven’t occurred this year.
Production gains helped bolster U.S. inventories by 3.67 million barrels to 362.3 million barrels in the week ended Sept. 12, according to the EIA report. It was the biggest increase since April, according to the agency.
West Texas Intermediate crude for October delivery slipped 46 cents, or 0.5 percent, to settle today at $94.42 a barrel on the New York Mercantile Exchange.
By Maher Chmaytelli and Grant Smith
Libya said it halted the Sharara field, its biggest oil producer, following a rocket attack at the connected Zawiya refinery, threatening almost 30 percent of the OPEC member’s production.
The Sharara field, producing about 250,000 barrels a day before the disruption, was shut as a precaution after an attack two days ago on the refinery, Mansur Abdallah, director of oil movement at the Zawiya plant, said by phone today. The North African nation, still restoring output after more than a year of political unrest and protests, was producing 870,000 barrels a day as of Sept. 14, National Oil Corp. spokesman Mohamed Elharari said that day.
The disruption “serves as a reminder that despite recovering export rates and the National Oil Corp.’s reassurances of stable supplies, the country remains in a state of civil war, where anything can happen,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said by e-mail.
Libya’s output has recovered after rebels lifted a yearlong blockade of eastern oil ports in July, which had diminished the North African nation to the smallest member of the Organization of Petroleum Exporting Countries. Still, Islamist militias have expanded their influence after seizing Tripoli, the capital, last month and the country’s government has had to relocate to the eastern city of al-Bayda.
Sharara is 720 kilometers (450 miles) south of Zawiya and the two sites are connected by a pipeline, Abdallah said. While Sharara has a similar capacity to the Waha field in central Libya, it was producing more prior to the shutdown, the Oil Ministry’s Director of Measurement Ibrahim Al-Awami said by phone.
Rocket Attack
A rocket exploded near a crude storage tank at the Zawiya plant on Sept. 15, National Oil’s Elharari said yesterday. Sharara was completely shut last night after the discovery of damage to a 300,000-barrel crude storage tank at the refinery complex, Abdallah said.
The refinery remains shut after intermittent clashes in the area, Abdallah said. Once security improves, Zawiya will reopen, followed by Sharara after safety checks are completed, he said.
“For Libya, I see the issue as two fold,” Miswin Mahesh, an analyst at Barclays Plc in London, said by e-mail. The fluid political situation can lead to unplanned supply disruptions, while sustaining higher production in the longer term might be difficult “given the absence of strong governance mechanisms,” he said.
Brent crude futures reversed earlier losses on the disruption at Sharara. The benchmark, used to price more than half the world’s oil, climbed as much as 56 cents to $99.61 a barrel on the London-based ICE Futures Europe exchange, erasing an earlier drop of 38 cents. It subsequently eased to $99.24 a barrel as of 1:06 p.m. local time.
By Elisha Bala-Gbogbo
Nigeria’s state-owned National Petroleum Corp. is in talks to avoid the disruption of oil exports as unions said terminals could halt as early as today.
“We’re optimistic that the terminals won’t be affected,” Ohi Alegbe, a spokesman for the state-owned NNPC, said by phone from Abuja, adding he expects a solution by the end of today. The strike began yesterday over pensions.
Crude output and domestic gasoline supply are already at risk after the nation’s four state-operated refineries stopped operating, according to Babatunde Oke, a Lagos-based spokesman for both a managers’ union and a blue-collar workers’ union. Nigeria is Africa’s biggest oil exporter.
“We have total compliance from our members on the strike,” Oke said by phone. “For the export terminals, by today they should shut down too.”
Nigeria is the continent’s largest oil producer and relies on the commodity for over 70 percent of government revenue and 95 percent of foreign-exchange income. The West African nation pumped 2.3 million barrels a day of oil in August, the most since 2006, according to data compiled by Bloomberg.
Workers operating flow stations that pump crude to export terminals and at the NNPC’s 23 gasoline depots have joined the action, according to Oke. Private gasoline depots are still open.
Supply Cushion
“Based on precedent there are a few days’ cushion from storage capacity,” before exports are curtailed, Philippe de Pontet, a director at New York-based political risk researcher Eurasia Group, said in an e-mailed note. President Goodluck Jonathan and the ruling party “have an overriding political interest in ending the strike as soon as possible to keep oil revenues flowing; it has the will and the means to do so.”
The NNPC runs joint ventures with Royal Dutch Shell Plc (RDSA), Chevron Corp. (CVX), Exxon Mobil Corp. (XOM), Total SA (FP) and Eni SpA (ENI) that pump about 80 percent of Nigeria’s crude.
Union leaders should “exercise restraint,” the state-owned company said in a statement yesterday. Measures have been taken to reduce the pensions’ deficit to 85 billion naira ($520 million) currently from 298 billion naira in 2010, it said.
Oke is a spokesman for both the Petroleum and Natural Gas Senior Staff Association of Nigeria, or Pengassan, and the National Union of Petroleum and Natural Gas Workers.
By Nidaa Bakhsh and Anna Edwards
Scottish independence risks curbing investment needed to maintain production from maturing North Sea oil resources, according to Ian Wood, author of a report into the industry cited by both the Scots and U.K. governments.
“I believe it will be more difficult to get the level of investment we require under the changed regime,” Wood, former head of Aberdeen-based oil-services company John Wood Group Plc, said in an interview with Bloomberg TV broadcast today.
Residents of Scotland will vote in a referendum tomorrow on whether to end a 307-year-old union with the U.K. The latest opinion polls show only a small lead for opponents of a split after earlier gains by Scots nationalist supporters. Arguments over the future oil income an independent Scotland would receive have been critical to both sides.
“I suspect the oil industry believes and is hoping that there won’t be a change,” Wood said in the interview in London.
Royal Dutch Shell Plc Chief Executive Officer Ben van Beurden and BP Plc chief Bob Dudley have both said preserving the union is good for the oil industry and the economy.
Wood has said that with the U.K. having already produced the equivalent of about 42 billion barrels of oil, a further 15 billion to 16.5 billion barrels can probably be recovered. Some supporters of independence have cited 24 billion barrels as a more probable figure for a newly created state.
By Bloomberg News
China’s largest oil and gas producers plan to increase shale-gas output by 40 percent a year to meet the nation’s production target.
China Petroleum & Chemical Corp. (386) plans to invest 21.5 billion yuan ($3.5 billion) in shale-gas drilling and expects to produce as much as 3.5 billion cubic meters by 2015, while PetroChina Co. targets output of more than 2.5 billion cubic meters in 2015 after investing 11.2 billion yuan, according to a press conference transcript posted today on the Ministry of Land and Resources website.
China wants to replicate the shale boom that has cut gas-production costs in the U.S. With almost twice as many deposits as in the U.S., China’s 2015 target depends on the nation’s second-largest producer, known as Sinopec, to produce shale gas at the Fuling project in the country’s southwest. Due to geological challenges and lack of economic incentives, the company has halved its target of producing 60 billion cubic meters by the end of the decade, Zhao Xianliang, a researcher with the ministry, said in July.
After drilling 400 shale gas wells as of July, China aims to produce 1.5 billion cubic meters of shale gas this year and about 6.5 billion cubic meters in 2015, according to today’s transcript. Output for 2017 is estimated at 15 billion cubic meters.
By Scott Deveau Sep 17, 2014 11:01 AM GMT+0700
Apache Corp. (APA), the oil producer under investor pressure to shed its international assets, is seeking to raise as much as $840 million from the sale of oil and gas projects in Alberta, two people with knowledge of the matter said.
Apache is working with Bank of Nova Scotia (BNS) to sell the assets in the Provost region, according to marketing materials posted on the investment bank’s website. The projects produce the equivalent of almost 10,000 barrels of oil and natural gas, and have an annualized net operating income of $119 million, the document shows.
Apache, with a market value of more than $37 billion, expects to raise $600 million to $840 million from the sale, the people said, asking not to be identified discussing private information. The sale is a small part of a broader restructuring under way at the Houston-based oil and gas producer, which is being pushed by activist investor Jana Partners LLC to focus on more lucrative U.S. oil projects.
Based on their production, Apache could expect the assets to fetch $400 million to $500 million before factoring in the additional value of pipelines, infrastructure and real estate attached to the projects, said Sameer Uplenchwar, a Calgary-based analyst with Global Hunter Securities LLC. With those additions, Apache may hit its target, he said.
“Apache is in this mode of trying to clean house and getting rid of anything where they don’t believe any capital will be spent over the next 24 months,” Uplenchwar said in a telephone interview.
October Deadline
Bids are expected by mid-October, the marketing material states.
The properties might attract bids from companies like Whitecap Resources Inc. (WCP) or Surge Energy Inc. (SGY) that may see more value in the yields they produce than Apache’s current shareholders, Uplenchwar said.
Representatives for the companies didn’t respond to requests for comment.
Apache has already agreed to sell two costly gas export projects, including one under construction in Australia and a proposed facility in Kitimat, British Columbia, according to a July statement.
In addition, Apache is evaluating its international holdings and exploring multiple opportunities, including potentially spinning off those assets.
By Tony Barrett
Scottish government estimates of the oil income an independent Scotland would receive are based on figures from an industry lobby whose projections in past years have proven optimistic.
The CHART OF THE DAY shows actual oil and gas production in the North Sea, marked in pink, has fallen more sharply than the annual projections by the Oil & Gas U.K. lobby, in shades of blue. The industry group provided figures for 2011 through 2014, while the years back to 2004 were read off charts published in its annual Activity Surveys and Economic Reports. The latest survey is on target with output so far this year, it said.
http://www.bloomberg.com/image/iqd_C88AI1wc.jpg
The pro-independence Scottish administration and pro-union U.K. government are trying to win over voters in tomorrow’s referendum with rival claims on how much oil will be produced and how much tax it will deliver. Scotland used the industry estimate of a 14 percent jump in output for 2013-18 in its Outlook for Scotland’s Public Finances and the Opportunities of Independence published in May. The U.K. Department of Energy says operators’ tendency to “over-predict” means it adjusted their numbers lower to show extraction will be almost flat.
The Scottish side, in its Oil and Gas Analytical Bulletin, says tax revenue has been temporarily depressed in recent years by high levels of investment and falling output that reflects unplanned stoppages as well as long-term declines. It has also accused the U.K. of creating an unstable tax regime. The Office of Budget Responsibility, set up by the U.K. as an independent body to report on public finances, assumes output in its main scenario will fall 5 percent a year from 2019. Oil and Gas U.K. and the Scottish government don’t have such long-term estimates.
“It’s fair to point out that U.K. tax policy has certainly not encouraged acceleration of drilling,” Raymond James energy analyst Pavel Molchanov said in a Sept. 15 note. Still, “it’s unreasonable to blame the U.K. government for the fact that the country’s oil production has peaked -- no one can argue with geology.” The 74 percent drop in output from a 1999 peak to 2014 estimates is the worst of any major producer, he said.
The Scottish administration used a range of sources to show potential scenarios for North Sea revenues consistent with other oil and gas expert opinions, a spokesperson for the government said in an e-mailed statement. The U.K. department of energy studies historical trends and industry projections to determine its forecasts, while acknowledging uncertainties by offering a span of estimates, a ministry spokesman said.
By Jim Snyder
(Corrects work status of Pemex director in seventh paragraph of story published Sept. 16.)
U.S. oil producers anxious to export booming supplies of domestic crude may have another way around a ban in place since 1975, this one via Mexico.
Mexico’s state oil company, Petroleos Mexicanos, or Pemex, has expressed interest in importing some of the lighter oil the U.S. has in abundance, swapping it for heavier Mexican oil that U.S. refineries are able to process.
If approved by the U.S. Commerce Department, it would be another exemption permitted by President Barack Obama’s administration, which this year let two oil producers sell a lightly processed form of crude overseas.
The drive to skirt the 40-year-old ban underscores a transformation as new drilling techniques have taken the U.S. from depending on oil imports to producing so much crude that Congress is debating an end to the prohibition. Legislation hasn’t advanced, though producers have found ways of circumventing the ban to reach overseas markets.
“There is no appetite for lifting the export restrictions wholesale, but perhaps greater willingness to allow incremental exports under the current rules,” Jacob Dweck, a lawyer at Sutherland, Asbill & Brennan LLP who represents companies seeking to end the ban, said in an interview.
Oil Embargo
The U.S. banned crude exports in response to the Arab oil embargo in 1973, though some exceptions, including sales to Canada, are allowed. Domestic producers are pushing to ease or end the prohibition, citing a mounting glut of crude from shale formations in North Dakota and Texas that will soon outstrip refining capacity.
Hector Moreira, who is leaving Pemex’s board on Sept. 18, said the company is contemplating importing oil, after decades of relying on its own production, in part as a consequence of Mexico’s move to reform its energy industry.
“Pemex’s refineries could benefit from an improved mix of crude, and to improve that mix we need to consider importing, that’s especially important amid the opening of the industry where Pemex will now face competition,” Moreira said in an interview.
The Obama administration could grant Pemex’s request under an exemption that permits so-called swaps or other exchanges. In such a deal, the U.S. could trade the light sweet crude oil for a heavier oil from Mexico that refineries in Texas and Louisiana are set up to process. No action is needed by Congress.
Hydraulic Fracturing
For four decades, the crude export ban was of little consequence. Domestic production was falling as producers such as Irving, Texas-based Exxon Mobil Corp. (XOM) explored overseas for easier to reach reserves.
The advent of horizontal drilling and hydraulic fracturing, or fracking, in which drillers shoot water, sand and chemicals underground to break up rock and free trapped oil and gas, has pushed U.S. production to its highest point since 1987.
This U.S. energy renaissance has prompted companies awash with crude to seek new markets. Producers are pressing Congress to ease the ban, while also chipping away at the prohibition with requests for Commerce Department licenses.
One of Dweck’s clients is Enterprise Products Partners LP (EPD), which along with Pioneer Natural Resources Co. (PXD) won approval from the department to export a type of ultra light oil known as condensate. Light oil is less viscous than heavier oil.
Refined Products
The Commerce Department said the fuel coming out of a stabilization tower -- used to remove gases to make the crude less volatile -- qualified as a product and therefore wasn’t subject to the export ban. Refined products aren’t covered by the ban.
Other companies are also seeking permission to export lightly processed condensate.
The volume Pemex may buy wouldn’t dent the oversupply of U.S. light oil. IHS Inc., an energy research and consultancy firm in Englewood, Colorado, said in a May report that the U.S. may be able to export as much as 1.7 million barrels of crude a day if production continues to rise.
Pemex’s interest is drawing new attention to existing loopholes to the export ban.
“We have lots of light sweet crude due to shale, and lots of refining capacity for heavy sour crude,” said Jeff Navin, a deputy chief of staff at the Energy Department when it began to receive applications from companies looking to export another fuel, liquefied natural gas. “Mexico has lots of heavy sour crude. On it’s face, there’s an easy solution, but you have to go through a regulatory process designed for a different time -- long before we had access to shale resources.”
Tough Standard
Companies could exchange batches of crude with Pemex, or they could trade light sweet crude for a refined product like gasoline under a more complex transaction called a swap, Dweck said.
Both trades require Commerce Department approval, he said. One advantage of a swap is that it would allow for participation with nations beyond Mexico. Under a swap, companies have to show that the oil produced domestically isn’t marketable in the U.S., which can be a tough bar to clear, said Christian Davis, an attorney at Akin Gump Strauss Hauer & Feld LLP in Washington who represents companies seeking export approvals.
“The application can’t state that, ‘There’s a glut of crude oil in the U.S. and therefore our crude oil isn’t marketable,’ by showing large macro-economic graphs and trends,” Davis said in an interview. “The application has to be product specific.”
National Interest
Obama could find that exports to Mexico are in the national interest, a determination President Ronald Reagan made for sales to Canada in 1985. That would let companies sell light sweet crude to Mexico without needing to swap any oil.
The Energy Information Administration said about 213,000 barrels a day were exported to Canada in May.
Pemex’s preference is likely an arrangement like Canada, given the complexity of swap deals, said Adrian Lajous, a former executive at the company and now a fellow at Columbia University’s Center on Global Energy Policy.
Jason Bordoff, the center’s founding director and a former Obama adviser on energy and climate issues as a member of the National Security Council, said sweeping policy changes may be unlikely given the political risks should gasoline prices increase.
That may leave condensate sales and swaps as the best options for companies for the time being, he said.
Spokesmen for the White House and Commerce Department spokesman declined to comment.
33 Percent
Last year, oil imports accounted for 33 percent of U.S. consumption, the lowest level since 1985, EIA said. The energy boom has companies including Exxon and groups including the American Petroleum Institute in Washington lobbying to lift the ban by arguing it won’t raise gasoline prices and will help the economy.
IHS’s study concluded that removing the ban would lead to a total of $746 million in additional investment from 2016 to 2030 and increase average daily production by 1.2 million barrels in the U.S.
It said exports could reach 1.5 million barrels a day by 2020. With the ban in place, the difference between the U.S. West Texas Intermediate benchmark and the global crude price could increase, discouraging domestic production.
Energy trades could offer a “very limited escape valve” for producers, according to a report prepared by staff to Senator Lisa Murkowski, the top Republican on the Energy and Natural Resources Committee who favors lifting the export ban.
“Exchanges cannot solve the mismatch between refineries geared to process heavy crudes and record production of lighter grades of petroleum, but they would be a partial measure that could help alleviate some of the glut,” the report said.
EDINBURGH, Scotland, Sept. 17 (UPI) -- Energy companies working in the North Sea need a sense of fiscal confidence no matter how the Scottish referendum turns out, Wood Mackenzie said Wednesday.
Scotland holds a one-sentence referendum Thursday for independence from the United Kingdom. The government in Edinburgh said it could support itself with oil and gas revenue while powering an independent Scotland with renewable resources.
Energy consultant group Wood Mackenzie said fiscal uncertainty is a primary concern for oil and gas companies working in the region.
"Regardless of which government is in charge of the industry, companies will seek stability and simplicity around existing fiscal terms as well as tax incentives for harder to produce reserves," it said. "Industry engagement will be paramount to maximizing value for both government and companies."
Wood Mackenzie, which has headquarters in the Scottish capital, said much of the oil and gas remaining in the region's waters would be in Scottish territory upon independence.
Mid-term production from regional waters should hold relatively steady with around 1.3 million barrels of oil equivalent expected per day in 2018. After that, production dips below 1 million by 2023, which is less than a quarter of the peak production reached in 1999.
The government of British Prime Minister David Cameron said the energy sector would be better off if Scotland stayed in the United Kingdom.
WASHINGTON, Sept. 17 (UPI) -- Analyses from GasBuddy and AAA show U.S. retail gasoline prices are plummeting and could reach $3 per gallon in some markets by the end of the year.
AAA reports a national retail average price for a gallon of regular unleaded of $3.37, down 6 cents from one week ago and 14 cents less than this date in 2013.
Gasoline prices typically slide after the Labor Day holiday in the United States as demand subsides with the summer vacation season ending. Prices drop even further after Sept. 15, when national refineries shift to a winter blend of gasoline, which is less expensive to make
Oil prices have stayed below $100 per barrel in recent trading, which AAA said suggests the global market is shrugging off geopolitical tensions in Eastern Europe and the Middle East.
AAA said Tuesday the recent rate of decline for prices at the pump is the steepest in more than four months and prices at the pump, relatively speaking, are the cheapest they've been since 2010.
Tom Kloza, chief oil analyst for pump watcher GasBuddy, said there are already some retail centers selling gas for less than $3 per gallon, but they're relatively few for the time being.
"You may not see $3 per gallon gas if you live in California, New York, Connecticut, or Chicago," he said in a statement. "But we believe that more than 30 states could see prices fall below that number during the Christmas shopping season."
By Daniel J. Graeber | Sept. 17, 2014 at 9:28 AM | 0 Comments (Leave a comment)
LONDON, Sept. 17 (UPI) -- 3Legs Resources, a company exploring the shale natural gas potential in Poland, said Wednesday it was giving up because of a lack of commercial prospects.
The company said in an operational update "it would be in the best interests of its shareholders to exercise its option to withdraw" from three concessions in the three western Baltic shale basin in Poland.
Poland is thought to be rich in shale natural gas reserves. The European Investment Bank in June loaned the country $132 million for the expansion of a pipeline that could bring gas, including domestically sourced liquefied natural gas, to the border of the Czech Republic, Slovakia and Ukraine.
3Legs said some of its wells, which were exploited using hydraulic fracturing, were yielding oil and gas, but not at a level necessary for commercial operations.
"The company is not currently conducting any other operations elsewhere and, moreover, has committed to its shareholders not to pursue other activities outside Poland," it said in a statement. "It is therefore actively considering its options to maximize cash returns to shareholders in the most efficient, timely and cost-effective manner."
The company said it has a drilling program agreement with ConocoPhillips that includes an option to end the contract once its net share of expenses reached $19 million.
"This limit has now been reached," it said.
ISTANBUL, Turkey, Sept. 17 (UPI) -- The Kurdish north of Iraq is secured and positioned to become a global leader in the energy sector, the top executive at Genel Energy said from Istanbul.
Genel in August said net working production for the second half of the year averaged 63,000 barrels of oil equivalent per day, an increase of around 50 percent from the second half of 2013. The majority of that comes from the Kurdish north of Iraq.
Genel Chief Executive Officer Tony Hayward told delegates gathered in Istanbul for a conference organized by the American Association of Petroleum Geologists the Kurdish region was open for business.
"Without the oil industry, Kurdistan doesn't exist," he said in his Tuesday remarks. "I am very confident in the capability of Kurdish security forces to insure that there is no sort of infiltration to the region."
Iraqi and Kurdish forces are working to contain the Islamic State, a Sunni-led terrorist group in charge of parts of northern Iraq and Syria. Some energy companies pulled non-essential staff from the region as a security precaution, though Hayward said operations were relatively normal.
Hayward's company has shipped oil from the Kurdish north to an export terminal in Turkey. The Iraqi and semiautonomous Kurdish governments are fighting in U.S. courts over a shipment of Kurdish oil parked off the coast of Texas.
Baghdad said unilateral Kurdish exports are illegal.
"The Kurds seem to be having a lot of success in placing their oil into the global market," Hayward said. "The U.S. is just one market and there are lots of other markets."
MOSCOW, Sept. 17 (UPI) -- The future relationship between Ukraine and natural gas company Gazprom depends on resolving lingering debt issues, the Russian company said.
Gazprom says it's owed $5.3 billion from Ukrainian energy company Naftogaz. Similar debt issues in 2006 and 2009 resulted in suspension of gas deliveries, and Gazprom said it's time to pay up.
"The future relationships between the companies are fully dependent on settling the debt payout issue," the company's board said in a statement Tuesday.
Political upheaval in November saddled an already struggling Ukrainian economy with significant debt. In August, the International Monetary Fund distributed $1.4 billion in assistance to Kiev, but said Naftogaz debt was one of the factors contributing to deeper recession in Ukraine.
Members of the Ukrainian parliament met Wednesday in Moscow with their Russian counterparts to discuss ongoing tensions between both sides. A former Soviet republic, Ukraine this week ratified an association agreement with the European Union.
Most of the Russian gas bound for Europe runs through Ukraine.
New York (Platts)--17Sep2014/523 pm EDT/2123 GMT
The oil complex turned lower Wednesday after data showed an unexpected rise in US commercial crude stocks for last week.
NYMEX October crude settled 46 cents lower at $94.42/barrel, while ICE November Brent closed 8 cents down at $98.97/b.
Data from the US Energy Information Administration showed stocks rose 3.67 million barrels, to 362.27 million barrels, for the reporting week ended September 12. That was counter to analysts' expectations of a 400,000-barrel draw.
In refined products, NYMEX October RBOB settled 1.04 cents higher at $2.5692/gal, while NYMEX October ULSD closed up 1.12 cents at $2.7451/gal.
"The EIA gave a big number on crude stock build which in and of itself is fairly bearish," Tony Headrick, energy analyst at CHS Hedging, said.
"We resisted moving sharply lower, due to a combination of support levels just under $92 and refiners operating at 93%, and these factors led to limited amount of weakness in today's session," he said.
US refineries are operating at 93% of total capacity, EIA data showed. Total crude runs are 7.1% above the five-year EIA average for the same reporting week.
Other factors supporting prices stemmed from supply issues related to fighting in Libya and OPEC production, Headrick said.
Libya's state-owned National Oil Company closed its second-largest export terminal Wednesday after rocket fire landed close to oil infrastructure in the western town of Zawiya (See story, 1543 GMT).
The Sharara oilfield, which supplies oil to the Zawiya export facility and a nearby refinery, will reopen once fighting stops, an NOC spokesman said.
Libyan crude production fell to 700,000 b/d, down from 870,000 b/d earlier in the week, reversing a trend since August of rising output despite an escalation of violence and political instability.
In August, rebels ended their occupation of the eastern ports of Ras Lanuf and Es Sider, allowing production to rebound from lows of 150,000 b/d.
The NOC had said earlier this week Libyan crude production was on pace to reach 1 million b/d by late September, a target that might be out of reach given the latest setback.
The recent drop in crude prices has prompted discussion whether OPEC would reduce its output ceiling at its next ministerial meeting November 27.
OPEC's Secretary-General Abdalla el-Badri on Tuesday said the group had expectations of lower demand next year. OPEC's latest monthly report, released last week, forecast demand for its crude in 2015 will drop 250,000 b/d on average below 2014 levels.
Traders, meanwhile, were watching the US Federal Reserve for clues regarding future interest rate movements after the conclusion of its latest policy meeting Wednesday.
A statement by the Federal Open Market Committee indicated it intends to keep its key overnight lending rate at a record low for a "considerable time."
"There were various aspects to the FOMC statement the market had to digest," Jim Ritterbusch, president of Ritterbusch & Associates, said.
"At the end of the day, it appears the Fed is likely to maintain a loose policy which is accommodating to lower interest rates, and that should keep speculators enticed toward oil as an alternative investment class," he said.
Singapore (Platts)
The Indonesian oil storage terminal at Karimun is expected to start-up by the third quarter of 2015, Douglas van der Wiel, vice president, commercial at Oiltanking Asia Pacific, said Wednesday, September 17.
The terminal will have an initial capacity of 760,000 cubic meters, but this could be expanded by 500,000 cu m in phase 1b of the project, Platts had previously reported.
Of the total tankage, 245,000 cu m will be dedicated to clean products across 19 tanks, including jet fuel, while the balance of 388,000 cu m would be for dirty products across 11 tanks.
In addition, the terminal has set aside around 127,000 cu m of storage tanks for either clean or dirty products, depending on demand.
The terminal will initially have four berths: one for vessels of up to 320,000 mt (including VLCCs); one up to 120,000 mt; one up to 75,000 mt; and one for coastal vessels of up to 15,000 mt.
Phase 1b could see a further two jetties added if it goes ahead, van der Wiel had said. Draft approaching the terminal is 18 meters, which can be quickly expanded to 21 meters if and when required, he added.
Oiltanking is the operator and majority owner of the new terminal, while Switzerland-based oil trader Gunvor holds a minority stake and will also rent part of the storage capacity at the terminal.
The remainder of the storage would be available to third parties, the partners have said previously.
The terminal is 25 nautical miles from Singapore, putting it at roughly equivalent distances as other new and upcoming terminals outside of Singapore.
Nigeria's oil revenue declined further to Naira 481.3 billion ($3 billion) in August from Naira 483.5 billion in July due to disruptions to crude production and a force majeure declared by Shell, the finance ministry said late Tuesday. "The decline in revenue in August... was attributed to the force majeure declared by Shell and a series of shutdowns of trunk lines and pipelines at various terminals," the ministry said in a statement
The July total was down 7% from the month before.
Shell on June 12 declared force majeure at its Nigerian EA field to repair damaged equipment, suspending about 40,000 b/d of production.
Oil accounts for more than 80% of Nigeria's state revenue, and the decline in oil export revenue saw the country's total revenue fall to Naira 601.6 billion in August from Naira 630.3 billion in July.
While Nigeria has struggled to produce at the 2.39 million b/d level forecast in the country's 2014 budget, oil ministry officials said production had been gradually picking up, averaging 2.1 million b/d to date in September compared with less than 2 million b/d in the first half of the year.
London (Platts)--17Sep2014/731 am EDT/1131 GMT
Differentials for Kazakhstan's naphtha-rich CPC Blend crude have climbed to their highest since late May as a tighter loading schedule for October and stronger demand for naphtha-rich crudes has added support to the market.
CPC Aframax cargoes, basis CIF Augusta, were assessed at a $0.25/barrel discount to the Mediterranean Dated Strip on Tuesday, their highest level relative to the the 13-28 day Dated Brent average since May 27, Platts data shows.
Traders said that the recent bounce in differentials is tied in part to the unexpectedly quick sale of the October loading program for Algeria's naphtha-rich Saharan crude.
Saharan, which trades further forward than other regional sweet crudes, cleared unexpectedly quickly in October and at substantially higher differentials after arbitrage buyers came in and cleared several million barrels, leaving less available to the European spot market.
"One or two [arbitrage cargoes] is enough to tighten the program," a crude trader said. "Two to 4 million barrels out of a 14-15 million barrel program is a lot out of the region."
Also on Tuesday, Saharan Blend cargoes, FOB basis Algeria, were assessed at Dated Brent plus $0.15/b against the Mediterranean Dated Strip, their highest since since June 18.
Market sources said that October-loading cargoes have been heard to trade as high as plus $0.30/b to Dated Brent.
Trading sources said that the quick sale of Saharan in October has prompted many end-users to look towards CPC Blend, the other regional, non-Libyan naphtha-rich crude.
"There is less Saharan Blend around the place," another crude trader said of the recent bounce in CPC Blend differentials. "With Libya, you can't always count on those cargoes, so with margins good enough, any end-user looking to secure runs would want to buy a secure flow and if you can get Libyan oil on top of that, you can store it."
The provisional October CPC Blend loading program -- the schedule is typically released in two stages -- showed a sharp drop in scheduled exports on the final September program.
Average daily loadings of CPC Blend are currently set to plunge by 182,648 b/d from the final September program to 719,500 b/d in the provisional October schedule
Traders said that while the program is expected to have a number of injection cargoes before it is finalized early next month, it is still tighter than September, adding to the bullish tone in the market.
Washington (Platts)--17Sep2014/334 pm EDT/1934 GMT
The US Senate Foreign Relations Committee is scheduled Thursday to vote on a package of sanctions that would penalize all companies that finance Russian unconventional crude oil projects.
If passed, the sanctions would hit ExxonMobil, BP, Shell and other majors that have joint ventures with Russian companies to explore and drill in Arctic, deepwater and shale plays.
The penalties would include prohibiting the companies from any US government contracts and freezing their US assets.
The measures would add to the sanctions already imposed by the Obama administration, the latest of which prohibit US companies from supplying technology, services and goods for Russian unconventional projects, but specifically exempt financing.
The bill appears likely to pass the committee, given the hawkish sentiments of many members over the Ukraine separatist uprising. It would also have to pass the full Senate and the House of Representatives before being sent to President Barack Obama.
"In the face of Russian aggression, Ukraine needs our steadfast and determined support, not an ambiguous response," said Democratic Senator Bob Menendez of New Jersey, who chairs the committee. "We are left with no choice but to apply tough sanctions against Russia."
The bill, released late Tuesday, would also impose sanctions on Russian gas giant Gazprom if it withholds "significant natural gas supplies from member countries of NATO or further withholds such supplies from countries such as Ukraine, Georgia or Moldova."
And it directs the Obama administration to help Ukraine with short-term emergency energy supplies, as well as develop medium- and long-term energy production plans, though it notably does not call for increased LNG exports to Ukraine, as some lawmakers have called for.
In addition, it authorizes US military assistance to Ukraine.
The committee's vote on the bill is scheduled for the afternoon, just after Ukrainian President Petro Poroshenko addresses a joint session of Congress.
WHITE HOUSE HAS ASKED CONGRESS TO HOLD OFF ON NEW SANCTIONS
The US Treasury Department declined to comment on the bill, while the State Department's top energy official, Amos Hochstein, said the sanctions already imposed by the Obama administration are stiff.
Administration officials, who have maintained that executive powers give President Barack Obama sufficient leeway to enact aggressive sanctions, have previously asked Congress to hold off on passing additional sanctions against Russia, to preserve more flexibility in escalating pressure on Moscow.
"If Congress decides to vote on sanctions, we'll be in discussions with them about what is useful and how to better shape them," Hochstein said in an interview on "Platts Energy Week" that is scheduled to air Sunday.
Sanctions enacted by the Obama administration on Friday would require US companies to wind down by September 26 any partnerships they have with Russian companies, in which they have provided expertise and supplies for Arctic, deepwater and shale oil projects.
ExxonMobil and Russian state-owned Rosneft began drilling their first exploration well in the Arctic Kara Sea on August 9, under a strategic cooperation agreement they signed in 2011.
Analysts with ClearView Energy Partners said Congress may face political pressure to pass aggressive sanctions against Russia, to shore up their foreign policy credentials ahead of the November 4 mid-term elections.
"For this reason, we would not rule out the possibility that the bill could go all the way to the president's desk, potentially backed by veto-proof majorities in both chambers," the analysts said in a note to clients.
By James Burgess | Wed, 17 September 2014 20:35 | 0
Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.
In the world of a constantly changing oil and gas environment, the Montney shale basin is the sleeping giant that holds the key to accelerating Canada’s shale oil and gas boom, but the real treasure within this giant is a tight liquids-rich zone (approximately 15-20 miles wide) that has big and small players alike narrowing their focus for the potential of a giant payout.
A pervasive hydrocarbon system in the Western Canada Sedimentary Basin (WCSB) in Alberta and British Columbia, the Montney is estimated to hold 2,200 trillion cubic feet of gas, almost 29 billion barrels of natural gas liquids and over 136 billion barrels of oil. But it is the tight liquids rich fairway (approximately 15-20 miles wide) that contains high concentrations of both free condensate and natural gas liquids that everyone is pursuing in what may very soon be one of the largest commercially viable plays in the world.
Investors aren’t exactly shying away from the challenge, and the overall trend within this large basin is a shift towards liquids-rich areas, which is what the Middle Montney (the middle portion of the Montney resource) is all about.
Initially, companies targeted the Upper Montney, and the entire formation was viewed more as a dry gas play with high productivity and immense gas in place. Through the technological advances that have begun to move up to Canada and a general de-risking of the play, the Middle Montney is proving that there is a very large liquids-rich fairway available with a potential for incredible returns and economics.
Canadian supermajor Encana (NYSE:ECA)—a Montney shale heavyweight—is focusing its drilling to the east of the formation. Last year, Encana announced it would spend over 25 percent of its capex for 2014 on the Montney, and the liquids-rich plays in the eastern area will get the lion’s share of this, with 80-85 new wells planned for this year alone.
There are also a number of growing mid-cap players and one micro-cap honing in on this liquids-rich scene and benefitting from supermajor drilling, including mid-cap NuVista (NVA.TO) and micro-cap Blackbird Energy (BBI.V).
Earlier this month, NuVista signed a deal to purchase another 12.5 gross sections of undeveloped land in the Montney’s liquids-rich zone, which puts its total at over 220 gross sections, while Blackbird has 117 sections of multi-zone Montney rights—again, with a focus on the liquids-rich zone.
It’s a very fast-paced game of follow the leader.
When Encana drilled a well in a previously unproven Middle Montney area and came up with two very economic middle Montney wells that both had condensate gas ratios of approximately 100 barrels of oil per million feet of gas, Navistar responded by immediately buying up land in the vicinity, driving prices up over $2.9 million per section. Blackbird followed suit, capturing a 36-section land position right between Shell and Encana and next to NuVista, which drilled a well with 2,195 boe/d.
And while there is still land available here, prices are rising fast, which makes the situation interesting for the small player like Blackbird Energy, which finds that its land value alone is higher than its current market cap.
Explorers and producers are surrounding the Middle Montney in a pincer movement, and liquids-rich sweet spots are shaping up to be the key to unlocking this next North American treasure chest. And the end of the day, the amount of shale gas under Montney’s surface would be enough to supply Canada’s needs for 145 years, making it one of the top basins in the world, outdone only by Qatar.
By James Burgess of Oilprice.com
By Nick Cunningham | Wed, 17 September 2014 20:04 | 0
Oil prices may have gone as low as OPEC is willing to tolerate.
After several months of price declines, the secretary-general of the Organization of Petroleum Exporting Countries (OPEC) says the group may cut its production target for 2015 because of an abundance of supply.
The oil cartel accounts for around 40 percent of the world’s oil supply, and although its influence has diminished in recent years as oil output has risen -- from the United States in particular -- the organization can still significantly impact the price of crude if it wants to.
With weak demand and a flood of American oil hitting the markets, prices have dropped to their lowest levels in over two years.
And it appears that the price slide has gone too far for OPEC. OPEC’s Secretary-General Abdalla El-Badri said the group could slash its production target – the collective output of the 12-member group – to 29.5 million barrels per day (bpd) in 2015, down 500,000 bpd from its previous target.
“Our production will be maybe 29.5 million barrels per day in 2015, not 30 million barrels,” at OPEC headquarters in Vienna on Sept. 16. But he added, “This is an outlook, not a decision.”
WTI and Brent prices have each dropped about 13 percent since June. Investors have been bearish on crude due to weak demand and a global supply that is expected to continue to climb. Saudi Arabia didn’t make much news when it cut back by 400,000 bpd in August.
But El-Badri’s statement hinting at an official revision in OPEC’s production target woke up oil traders. The two benchmarks clawed back immediately after his comments – WTI gained almost $2 to just below $95 per barrel in intraday trading, or a more than 2 percent increase. Brent jumped by 1.22 percent, closing in on the $100 per barrel mark.
That’s because the statement is the first indication in quite some time that OPEC would officially move to stop a continued slide in prices.
What is more intriguing is the exact price level that triggered concern on behalf of OPEC’s leaders. Once upon a time, oil trading around $100 per barrel was extremely expensive. But OPEC has become used to Brent crude trading well above those levels, which it has done almost constantly since early 2011.
Why have OPEC’s expectations changed? Part of the reason is that the marginal cost of producing a barrel of oil is rising. As easy-to-get oil depletes, oil companies are left with more expensive oil, so the cost of production rises.
But for OPEC, it has more to do with balancing their budgets. The biggest change since the era of lower prices was the Arab Spring, which led to substantial unrest. In response, oil producing countries in the Middle East decided to significantly increase social spending in order to keep their populaces happy. Now, need a much higher price to balance their books.
Before that point – throughout most of 2010, for example – Brent was only selling for between $70 and $85 per barrel. That is around 15 to 30 percent lower than today’s prices. But at the time, OPEC was entirely content with those levels. They repeatedly left the group’s production target steady, even during what seemed like a period of relatively cheap prices (by today’s standards).
And that is just it. Today, $100 per barrel is considered “cheap.” But four years ago, the group aimed for oil to stay between $70 and $80 per barrel. When Brent hit $82, Kuwait’s oil minister said that was “fantastic.”
That means there could be a permanent floor beneath oil prices at somewhere in the mid-$90 per barrel range. OPEC’s members cannot sustain prices any lower than that, so it will slash production in order to avoid ever going back to the days of oil selling between $70 and $80 per barrel.
By Nick Cunningham of Oilprice.com
By Claude Salhani | Wed, 17 September 2014 19:50 | 0
What exactly is at stake in the battle for control of the Middle East, other than the obvious -- the region’s abundant oil and natural gas? And why is it coming to a head now?
There are two aspects to what is currently transpiring in the Middle East: the battle for the region’s natural resources and the battle for the region’s human resources.
The region’s natural resource wealth has long been both a blessing and a curse. It has helped countries like the United Arab Emirates and Oman achieve amazing progress in a relatively short time and make the leap from societies that not long ago were comparable to medieval times into the 21st century.
But as one learns in the study of conflict resolution, change – any change – brings with it a certain amount of conflict. And the changes that oil and gas money brought to the Middle East were phenomenal. In turn, they upset more conservative elements of society who were unhappy to see the “natural order” of things – i.e., the old ways – disrupted and replaced with modern ways.
At the same time, the region’s resources have been a curse because it gave dictators like Iraq’s Saddam Hussein and Syria’s Bashar al-Assad the ability to squander billions of dollars on arms and weapons systems, to wage wars on its neighbors, and to threaten regional security. Syria, for example, with far less revenue from oil than Iraq, invested its modest revenues on increasing internal oppression rather than investing in the country’s future -- its people.
Just how rewarding is it for Assad to look at his country today, utterly destroyed, more than 190,000 killed according to the United Nations, many more maimed both physically and psychologically, the infrastructure totally devastated? Yet he remains at the reins. He is now president of parcels of territory eroded by war.
Oil wealth has also allowed tiny counties, like Qatar, to assume an outsized role in the region and meddle in its neighbor’s politics, certain that its money can buy it anything, including influence. But what money cannot buy is critical thinking, which is what appears to be lacking most in the region.
The second aspect of why the Middle East is going bonkers today is that the existing borders are based on Western colonial thinking. In many places, one country ends and another begins at a line in the sand drawn by a Frenchman and a Brit who divided up the spoils of the Ottoman Empire at the close of World War I.
This is why, for example, the Islamic State (IS) became so powerful in Syria and in Iraq -- for them and the fighters who join them, there are no borders, no demarcation lines and no frontiers.
Why is IS so powerful, yet so little is known about who they are? From the little we know about them is that that the core of the officers corps comes from the remnants of Saddam Hussein’s army that went underground when the U.S. invaded in 2003.
Professor Amazia Baram, chair of Arab studies at Haifa University and an expert on Iraq under Hussein, explains that when the late dictator was still a lower echelon thug working for his cousin -- who took power in a military coup – the family was overthrown but managed a comeback.
Once back in power, Saddam was given the task of setting up an underground system of operations from which the regime could recover in the event of a future coup. Saddam, according to Baram, excelled in securing back-up plans and in the process got rid of the top man and placed himself at the head of the state and party. Saddam never forgot the importance of maintaining the emergency fallback protocol and although he is now gone, his former generals have, by all appearances, taken over the network and placed it at the disposal of IS.
As the United States and its Western allies again get drawn into a Middle East war, this time it might be more constructive if they went in with something more than shock and awe.
Eliminating the IS threat militarily alone will not suffice. What is needed here is a viable “Marshall Plan” adapted for the Middle East where reforms are made in the education sector, where democratic principles are gradually introduced, and where the people are given voice in participating in the affairs of state and invited to join in governance, rather than being locked out of any decision making process.
As the map of the Middle East is being redrawn, so too must change be introduced into the very core of the region’s socio-political system.
By Claude Salhani for Oilprice.com
U.S. crude oil stocks increased 3.67 million barrels
James Bambino, Platts Oil Futures & Options Editor; Geoffrey Craig, Platts Oil Futures Editor
New York - September 17, 2014
U.S. commercial crude oil stocks grew 3.67 million barrels to 362.27 million barrels during the reporting week ended September 12, U.S. Energy Information Administration (EIA) data showed Wednesday.
Analysts surveyed Monday by Platts had expected a 400,000-barrel draw.
The U.S. West Coast (USWC) was the main driver of the weekly build, as stocks there rose 2.32 million barrels to 52.34 million barrels.
One factor helping push USWC stocks higher was a decrease in crude oil runs, which fell 82,000 barrels per day (b/d) to 2.37 million b/d. Imports were down 11,000 b/d to 1.18 million b/d, according to the EIA data.
U.S. Gulf Coast (USGC) stocks fell 667,000 barrels to 188.6 million barrels.
Stocks at Cushing, Oklahoma -- delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contract -- slid 357,000 barrels to 20 million barrels. Analysts had expected Cushing stocks to fall 1.25 million barrels. Cushing stocks are 41.7% lower than the five-year average for the same reporting week.
The shape of the NYMEX crude oil futures contract is currently backwardated*, which serves as a disincentive for storing crude oil at Cushing because prices for front-month delivery are higher than more distant delivery dates.
Total U.S. crude oil imports rose 493,000 b/d to 8.11 million b/d, EIA said. Imports from Canada were 57,000 b/d higher at 2.99 million b/d. Imports from Saudi Arabia increased 53,000 b/d to 1.31 million b/d.
Total U.S. crude oil runs declined 28,000 b/d to 16.30 million b/d, helping lower the refinery utilization rate 0.9 percentage point to 93% of total capacity. Analysts had expected a 0.6 percentage-point drop.
On the USGC, which is home to more than 50% of total U.S. operable capacity, the regional refinery utilization rate fell 1.6 percentage points to 93.4% of capacity, as crude oil runs decreased 23,000 b/d to 8.47 million b/d.
GASOLINE STOCKS FALL
EIA data showed U.S. gasoline stocks fell 1.64 million barrels to 210.74 million barrels the week ended September 12 amid lower production and higher demand. Analysts had been looking for a much smaller, 300,000-barrel decline.
Refiner and blender net production of gasoline fell 257,000 b/d to 9.24 million b/d, while implied demand** rose 96,000 b/d to 8.71 million b/d.
The four-week moving average of EIA data puts gasoline demand at 8.98 million b/d, slightly higher than in the same period a year ago.
Stocks on the U.S. Atlantic Coast (USAC) -- home to the New York Harbor-delivered NYMEX RBOB contract -- fell 2.54 million barrels to 54.6 million barrels.
The draw came amid a further reduction in imports, which fell to just 297,000 b/d the week ended September 12. This time last year, imports averaged 455,000 b/d. Blending and production also fell, sliding 100,000 b/d to 2.93 million b/d.
USAC imports were less than half the 700,000 b/d imported in the week ended August 29.
An uptick in exports could have also helped draw down stocks. Platts cFlow ship-tracking software shows one tanker -- the Cape Bellavista, chartered by Shell -- left Marcus Hook, Pennsylvania, the week ended September 12, headed to Gamba, Gabon. However, it is unclear what the tanker is carrying.
Lately, West African buyers have been importing summer-grade gasoline from European refiners as much of the northern hemisphere looks to unload off-specification product ahead of the switch to winter-grade material.
Weekly EIA data shows U.S. gasoline exports held steady at 362,000 b/d for the fourth straight week, consistent with the more accurate monthly data for June.
DISTILLATE STOCKS RISE
EIA data showed U.S. distillate stocks rose 279,000 barrels to 127.77 million barrels. Analyst had expected stocks to remain flat.
U.S. production dropped below 5 million b/d for the first time in three weeks, sliding 191,000 b/d to 4.91 million b/d. Implied demand rallied, however, to increase 427,000 b/d to 3.83 million b/d. But on a four-week moving average, implied demand was steadier at just above 3.7 million b/d for the second-straight week.
Combined low- and ultra-low-sulfur diesel stocks on the USAC rose 489,000 barrels to 34.75 million barrels, meaning inventories were almost 18.5% above the five-year average and amply supplied heading into the U.S. Northeast winter-heating-demand season.
Combined stocks on the USGC fell 532,000 barrels to 32.27 million barrels. This puts USGC stocks at a more than a 20.5% deficit to the five-year average.
Platts cFlow shows six clean tankers left the USGC the week ended September 12 headed for Northwest Europe, while one tanker was headed for the Mediterranean. Exports to Latin America were steady, with one tanker headed to Argentina and three headed to Brazil. Four clean tankers left for the west coast of South America.
* Backwardation is the industry vernacular for the condition whereby prices for nearby delivery are higher than prices for future-month delivery.
**Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
EBR Staff Writer Published 15 September 2014
Indian Oil (IOCL) is planning to commission its Paradip oil refinery in the state of Odisha, India, in early 2015.
In February 2004, the oil and gas firm had signed a memorandum of understanding (MoU) to build a refinery and a petrochemical complex at Paradip with an investment of INR600bn ($9.84bn).
Indian Minister for petroleum and natural gas Dharmendra Pradhan was quoted by Business Standard as saying: "The IOCL refinery at Paradip, the largest in the public sector, is nearing completion. The refinery would be commissioned by early 2015.
"The polypropylene unit of the petrochemical chemical complex would be inaugurated next month."
Odisha industries Minister Debi Prasad Mishra said: "At the review meeting, we reiterated our demand for starting the petrochemical complex.
"Unless the petrochemical complex comes up, investments to the PCPIR hub will suffer.
"We have also urged IOCL to pick up equity in the plastic park being developed by Odisha Industrial Infrastructure Development Corporation (Idco)."
By Zack Colman | September 17, 2014 | 4:52 pm
Photo - Currently, the Panama Canal can fit ships carrying between 400,000 and 550,000 barrels of light sweet crude through it. The remodel, slated to open in late 2015, would enable ships large enough to haul as much as 680,000 barrels of crude to enter the canal. Currently, the Panama Canal can fit ships carrying between 400,000 and 550,000 barrels of light...
The expansion of the Panama Canal would allow passage of larger ships carrying nearly a quarter more crude oil through the route, the U.S. Energy Information Administration said.
Currently, the Panama Canal can fit ships carrying between 400,000 and 550,000 barrels of light sweet crude through it. The remodel, slated to open in late 2015, would enable ships large enough to haul as much as 680,000 barrels of crude to enter the canal. About 80 percent of the world's liquefied natural gas tankers could pass through it as well, compared with just a small fraction today, the EIA said.
That could have broad implications for the U.S., should it decide to remove restrictions for exporting crude oil and liquefied natural gas, as it would lower the price for fuel shipped from the country and therefore make it more attractive to buyers.
Supporters of exporting natural gas have pushed the Obama administration to act faster to green-light exports to nations that lack a free-trade agreement with the U.S. So far, three projects have all the necessary federal permits to ship the fuel to such countries.
The debate over whether to end the 39-year-old near-ban on oil exports is heating up, though it's still fresh.
Many Republicans, virtually all of whom back exporting natural gas, are wary about loosening restrictions on oil exports. Part of that might be due to politics — a recent Morning Consult poll found 52 percent of Americans believe exporting oil would raise gasoline prices.
Source: Reuters - Wed, 17 Sep 2014 16:17 GMT
* Some lawmakers threaten to veto new cabinet picks
* Activist Farida Allaghi proposed as foreign minister
* Oil production cut after rockets hit refinery tank (Adds statement from Madrid conference in last paragraph)
By Feras Bosalum and Ahmed Elumami
BENGHAZI, Libya, Sept 17 (Reuters) - Libya's acting prime minister sought to reassert authority over his turbulent country by naming a new cabinet on Wednesday, but some lawmakers threatened to veto his choices and a rival assembly continued to hold sway in the capital.
In a sign of the government's inability to control the vast desert nation, which has been rocked by anarchy, Libya's biggest oilfield stopped working after rockets fired by an armed group hit a refinery storage tank.
Abdullah al-Thinni's administration has failed to control militia, and Islamists who backed the rebellion to oust strongman Muammar Gaddafi in 2011 have kept their weapons, staking claims on territory, oil and other resources.
Western powers and Libya's neighbours fear the North African country is heading for civil war, with an armed group from the western city of Misrata seizing the capital Tripoli in August and forcing the elected parliament to move to the far east.
Lawmakers said Thinni asked parliament to approve a new 16-strong cabinet, including prominent human rights activist Farida Allaghi as foreign minister -- his first new government since he was re-appointed as acting premier earlier this month.
The names were not announced publicly. But parliamentarians told Reuters that Thinni had decided to appoint himself defence minister as well as prime minister, and that the list included some figures from the previous government.
"There is a big possibility that the House of Representatives is going to reject the new government ... as it still includes ministers from the former government," Benghazi lawmaker Issam Al-Uraibi told Reuters.
Parliament spokesman Faraj Hashim said lawmakers, working out of Tobruk near the Egyptian border because of the Tripoli violence, were unhappy about Thinni also serving as defence minister and might ask him to submit a new list.
Thinni, a former career soldier, has been acting prime minister since March. He stood down after the June elections and the new parliament reappointed him at the start of this month.
The Misrata group has set up its own parliament and government, which are not internationally recognised.
OIL SLUMP
In a major blow to the government, the El Sharara oil field was closed after a rocket hit a storage tank at the Zawiya refinery, which it supplies, an oil ministry official said.
It was the first time that fighting between armed groups had hit Libya's oil industry since heavy clashes broke out in the capital Tripoli in July.
The field closure will bring down Libya's production to around 670,000 barrels a day based on a production of 870,000 bpd reported by state-run National Oil Corp (NOC) on Sunday.
"There is no production at El Sharara anymore," Ibrahim El-Awami, head of the inspection and measurement department at the oil ministry said.
The Zawiya refinery was still working but will have to shut once stocks were used up, he said. The 120,000 bpd-refinery supplies western Libya and Tripoli with fuel.
The Misrata alliance has been trying in recent weeks to take an area west of Tripoli held by the rival Warshefana group.
There was no let up in fighting and Mohamed al-Kilani, a hardline militia leader in the Misrata alliance, was killed, residents and state news agency LANA said.
Western powers and Arab countries called at a conference in Madrid for an immediate ceasefire. "There is a humanitarian drama unfolding which needs to be urgently addressed," said the conference's final communique. (Additional reporting by Ulf Laessing and Sarah White; Writing by Ulf Laessing; Editing by Andrew Heavens and Crispian Balmer)
