U.S. gas prices will not rise on lifting crude export ban - study
Oct 23 (Reuters) - A highly anticipated study by the U.S. Energy Information Administration will show that domestic oil prices will not rise if the U.S. ban on oil exports is lifted, the agency's top administrator said Thursday.
Domestic gasoline prices are set in the global market, and the price of U.S. gasoline is tied more closely to the global benchmark price than WTI, the U.S. benchmark, EIA administrator Adam Sieminski said.
"If you allowed the ban to be lifted, WTI prices could indeed go up, but it probably wouldn't do a great deal one way or the other with gasoline prices,' Sieminski said.
Sieminski, a former chief energy economist for Deutsche Bank, made the comments while taking questions about the issue during an energy forum in New York City on Thursday. He said the agency embarked on the study to help provide policy makers with independent data they can use to evaluate whether the 1970s-era ban should be lifted.
He said he hopes to release the study before the mid-term elections on Nov 4.
The report by EIA, the statistics arm of the Department of Energy, is highly anticipated by analysts and politicians because it will be the first major report not funded directly or indirectly by energy companies and others that have a stake in the debate on reversing the trade restriction.
Sieminski said the agency is also doing other research on the issue, including how much of the new light-sweet crude oil that is being produced can be absorbed by domestic refiners and how much it will cost to reconfigure U.S. refineries that are wired to process heavier crudes. (Reporting By Jarrett Renshaw; Editing by Bernard Orr)
UPDATE 1-U.S. warns of sanctions on buyers of Islamic State oil
* Islamic State generates $1 million a day from oil -Treasury
* One of best-funded targets U.S. has seen
* No 'silver bullet' to sap IS financing (Adds further comments about oil, background)
By Anna Yukhananov
WASHINGTON, Oct 23 (Reuters) - The Obama administration on Thursday threatened to slap sanctions on anyone buying oil from Islamic State militants in an effort to disrupt what it said was a $1-million-a-day funding source.
Islamic State has seized large swaths of Iraq and Syria in a brutal campaign, and could pose a threat to the United States and its allies if it is not stopped, U.S. Treasury Undersecretary David Cohen said.
"With the important exception of some state-sponsored terrorist organizations, ISIL is probably the best-funded terrorist organization we have confronted," Cohen said, referring to another name for Islamic State. He spoke at the Carnegie Endowment for International Peace.
Islamic State, or IS, is generating tens of millions of dollars a month through a combination of oil sales, ransom, extortion and other criminal activities, and support from wealthy donors, said Cohen in laying out the most comprehensive outline yet of the U.S. financial strategy against the group.
IS's fundraising mostly avoids the formal financial system, and relies less on donor support compared with militant groups like al-Qaeda, making it less susceptible to Treasury's traditional tools of designating wealthy financiers and blacklisting banks.
"We have no silver bullet, no secret weapon to empty ISIL's coffers overnight," Cohen said.
But, the U.S. government and its allies are working on finding new ways to disrupt Islamic State's activities, including its key oil revenues, Cohen said. IS has tapped into the black market in oil in Syria and Iraq, refining some and selling it to smugglers who transport it to Turkey and the Kurdish region of Iraq.
The research firm IHS estimated this week that Islamic State militants were producing about $2 million worth of crude oil a day before recent U.S.-led air strikes.
The United States and its allies, including Saudi Arabia and the United Arab Emirates, began launching air strikes against IS in Iraq in August and Syria in September, including targeted strikes against IS-controlled oilfields and refineries. The strikes have succeeded in bringing crude production down to 20,000 barrels a day, less than a third of what it was last summer, the International Energy Agency said.
While the air strikes have disrupted some of Islamic State's oil revenue, Cohen said it was still important to find other ways to target the group's funding sources and prevent access to the formal financial sector by targeting middlemen, traders, refiners and transport companies.
U.S. sanctions block people and firms from accessing the U.S. financial system, and are usually followed by banks around the world who are wary of dealing with U.S. enemies.
Cohen said Turkey and the Kurdistan regional government in Iraq were starting to crack down on oil smuggling networks that existed long before Islamic State started taking advantage of them.
The United States will also seek to disrupt other funding including an estimated $20 million from kidnapping this year by urging countries not to pay ransoms. (Reporting by Anna Yukhananov; Editing by Tim Ahmann and Gunna Dickson)
Russian Oil Giant Rosneft Says It Needs $48 Billion Amid Western Sanctions
International Business Times
Reeling from the impact of Western sanctions, Russia's top oil producer Rosneft has asked for more than 2 trillion roubles ($48.5bn) from the country's National Wealth Find, Finance Minister Anton Siluanov has said.
The fund is one of two that manage Russia's oil revenues and it currently has around $83bn.
The fund's main use is to support Russia's pension system, although its reserves have been deployed to help other firms suffering from Western sanctions this year.
Western powers imposed wide-ranging economic penalties on Russian individuals and companies in the wake of the annexation of Crimea in March. The severity of the sanctions has increased as the conflict in eastern Ukraine has escalated, reflecting Western anger over Russia's role in the ongoing crisis.
The state-run oil producer has had its access to foreign capital markets in the European Union and the United States restricted, leaving the company scrambling to repay 440 billion roubles worth of debt before the end of the year.
The company has a further debt of 626 billion roubles due by the end of next year, according to its latest presentation.
Russia's finance minister did not elaborate on whether the request had been approved by the government. Siluanov has previously said the government planned to maintain a 60 percent cap on the amount of the fund's revenues that can be invested domestically.
EIA: US crude oil exports, re-exports climb
By OGJ editors
According to the latest data from the US Census Bureau, US exports of crude oil reached 401,000 b/d in July—the highest level in 57 years and the second-highest monthly export volume for the US Energy Information Administration’s records dating back to 1920.
“Recent crude oil exports are also noteworthy for both their origins and destinations,” EIA emphasized in its latest This Wee in Petroleum update.
US crude exports are typically sourced domestically and are sent only to Canada. However, since April, crude exports have included modest amounts of Canadian-produced crude that was moved through US and re-exported to Switzerland, Spain, Italy, and Singapore.
To export crude oil from the US, a license from the Bureau of Industry and Security (BIS) of the US Department of Commerce is required. As set forth in Section 754.2 of the BIS Export Administration Regulations (EAR), which codifies the export licensing requirements, the following kinds of transactions will generally be approved: exports from Alaska's Cook Inlet; exports to Canada for consumption or use therein; exports in connection with the refining or exchange of strategic petroleum reserve oil; exports that are consistent with international energy supply agreements; exports of foreign-origin crude; exports of California Heavy crude up to an average of 25,000 b/d; and temporary exports or exchanges.
Exports of oil not meeting these criteria will be considered on a case-by-case basis, and will generally be approved if BIS determines that the proposed export is consistent with the national security interests and the purpose of the Energy Policy and Conservation Act (EPCA).
Separate legislation passed in 1996 permits the export of Alaska North Slope crude oil. The recent shipments to Switzerland, Spain, Singapore, and Italy were small volumes of permitted re-exports of Canadian crude that were not commingled with US-produced barrels.
“As is the case in the US, some of the growth in Canada’s crude oil production is taking place in areas with limited infrastructure to bring the crude to refineries for processing. With limited pipeline and rail takeaway capacity, some Canadian producers are testing the economic viability of moving crude oil to the Gulf Coast for re-export to other markets,” EIA said.
However, as noted by the agency, “it is unclear if this recent trend of Canadian re-exports from the Gulf Coast will continue, and if so, for how long. Several proposed Canadian pipeline projects may provide producers with alternative routes for delivering crude to markets beyond North America, but the timing of each of them is uncertain.”
Proposed pipeline projects
Enbridge Inc.’s Line 9 reversal project is in its second phase, which is expected to be in service next month. The first phase, which began eastward flows earlier this year, currently enables shipment of crude from Sarnia, Ont., to North Westover, Ont. When completed, the second phase will expand capacity to 300,000 b/d and continue on from North Westover to Montreal, Que., where the crude could access refineries in Montreal or global markets via the St. Lawrence Seaway.
Energy East, a separate project proposed by TransCanada, would move 1.1 million b/d from Alberta and Saskatchewan to refineries in eastern Canada. This plan includes conversion of an existing natural gas line to crude service and construction of new pipe on both the gathering and terminal ends. The company submitted a project description to Canada’s National Energy Board in March but has yet to file an official application, meaning this project is several years away from being operational.
Additionally, both TransCanada and Kinder Morgan are seeking approval for projects that would carry crude from Alberta west to the Pacific Coast in British Columbia. But the outcome of these options remains to be seen, as both of those projects face resistance along the pipeline siting routes.
Other developments
Another development in US crude oil exports is the recent shipment of ANS crude to South Korea, the first export of ANS in more than a decade.
“Although Alaskan crude production has recently been declining, the recent retirement of the remaining 79,000 b/cd of crude distillation unit capacity at the Flint Hills refinery in North Pole, Alas., which had been running ANS crude, means that ANS producers may consider sending additional volumes to export markets,” EIA said.
ANS barrels were loaded for export in late September and delivered earlier this month. ANS shipments abroad must use US coastwise-compliant ships for transport, and market analysts estimate that ANS would need to trade at a discount of $5/bbl to Brent to make such a movement economical.
Saudi produces more, supplies less oil in Sept
oilDUBAI: Saudi Arabia supplied less oil in September even as its output edged up, an industry source familiar with the matter said yesterday. Supply to the market – both domestically and for exports – may differ from production depending on the movement of barrels in and out of storage. The dip in supply comes when some in OPEC have called on its biggest producer to cut back output to support oil prices, but the kingdom has been quietly telling market participants it is comfortable with oil prices below $90. It produced 9.70 million barrels of crude oil per day in September, up from 9.597 million bpd in August, the source said But the amount of crude supplied to the market from the top oil exporter fell to 9.36 million bpd in September, from 9.688 million bpd in August, according to the source. The source did not give a reason for the drop in crude supply.
The kingdom typically burns less crude for power generation when the weather starts to cool off, which may free up more crude for exports in the coming months, analysts say. Saudi oil use for power generation was 769,000 bpd in August, down from 899,000 in July, according to official figures released earlier this week. Saudi crude exports fell in August to 6.663 million bpd for the fourth month in a row to their lowest levels in three years, as the world’s largest oil exporter fights for market share amid weak demand and ample supplies from rival producers. September exports figures were not available yet on the website of the Joint Organizations Data Initiative (JODI). Saudi crude exports have been sliding in the past few months as shale oil squeezes its oil out of US markets and as demand in Asia, particularly in China, has been slower than expected. Saudi Arabia is likely to keep its oil production steady throughout the rest of the year, an industry source told Reuters last month. OPEC meets to review policy on Nov. 27. So far Gulf members of the Organization of the Petroleum Exporting Countries have indicated their reluctance to cut output to lift prices. Brent crude LCOc1 traded below $85 a barrel yesterday. Libya’s OPEC governor told Reuters on Wednesday that OPEC should cut its oil output by at least 500,000 bpd. — Reuters
U.S. to achieve energy independence by 2025, Wood Mackenzie says
EDINBURGH/HOUSTON/SINGAPORE -- The U.S. will achieve energy independence by 2025, which will mark the first time since 1952 that the U.S. will export more energy than it imports, according to an integrated outlook by Wood Mackenzie’s Global Trends Service.
Wood Mackenzie’s outlook underscores that higher production and lower demand are the forces driving U.S. energy independence. “A country can achieve energy independence through two channels, it can either produce more or consume less, and the U.S. is doing both,” explains James Brick, a senior analyst at Wood Mackenzie.
“Over the last seven years, the U.S. has added 3 MMbpd of tight oil and 27.5 Bcfd of shale gas to the global energy mix, a spectacular 42% increase in U.S. oil and gas production.” Meanwhile, oil demand is decreasing primarily due to efficiency gains in the transport sector.
Wood Mackenzie indicates that the uncertainties facing the U.S. energy market fall into two broad categories. Those that make it more likely the U.S. will achieve energy independence before 2025, and those that will delay it. The key uncertainties that can speed up U.S. energy independence include a lifting of the U.S. crude oil export ban, higher tight oil production and lower demand in the transport sector.
By lifting the crude oil export ban, Wood Mackenzie says the price realized by U.S. upstream producers would increase as they would be able to access higher priced international markets. If crude oil exports resulted in U.S. producers receiving an additional $5/bbl, production could increase by 350-450,000 bpd. In order to produce this additional oil, an investment of around $5 billion would be needed.
“Not all companies would actually benefit from lifting the crude oil export ban,” says Brick. “It’s likely that upstream producers would generally benefit the most via increased volumes and higher prices. Oil field service companies and rig manufactures would also benefit from the additional investment.”
Even if the crude oil export ban is not lifted, the U.S. could produce more tight oil than is currently anticipated. Brick explains, “Tight oil and shale gas plays are still evolving and there are many opportunities for the application of new production techniques. Production could be up to 3.0 MMbopd higher than our view of 10.3 MMbopd by 2030 as a result of the application of technologies such as enhanced oil recovery (EOR) and refracturing. EOR techniques currently being tested are especially promising and early indicators suggest recovery rates could double.”
While Wood Mackenzie forecasts the U.S. vehicle fleet to become over 40% more efficient by 2030, there is still potential for efficiency to improve faster, or for a more pronounced shift to cars away from less efficient light trucks and SUVs. Any improvement in vehicle efficiency or lower vehicle miles travelled per capita would reduce U.S. oil demand and, consequently, net oil imports.
Furthermore, the three key uncertainties that would stall U.S. energy independence include delays in developing critical export facilities, environmental regulations and energy policies that would encourage more gas to be used in the power sector.
“If local or national regulation that discourages fracing is passed, oil and gas production will be lower,” says Brick. “Also, if U.S. energy policy is enacted to reduce carbon dioxide emissions, it is likely gas used by the power sector will increase.
Wood Mackenzie concludes that the investments driving the U.S. towards energy independence will have substantial direct and indirect benefits for the U.S. economy, whereas any direct benefits from energy independence in itself are more muted. Furthermore, U.S. energy independence will not isolate the U.S. energy markets from international risk but it will change how these risks are considered.
“Irrespective of the timing of independence, the U.S. has started its transformation from energy consuming giant to prominent exporter,” concludes Brick, “With this role shift comes obvious economic benefits but also shifting risks and new responsibilities.”
Russia says oil at $90 to $110 is ‘fair price’
The 'fair' and most comfortable oil price for world economies would range between $90 and $110 per barrel, with any fluctuations from that involving certain risks for the industry, Russia's Energy Minister Aleksandr Novak said.
Most analysts believe the falling oil price won’t last long, as cheaper oil would make most of the current projects in the industry unprofitable, according to Novak speaking at the National oil and gas forum in Moscow on Wednesday.
“My assessment is that the fair oil price is within the range of $90 and $110,” Novak said.
“Everything that comes lower means high risks for projects in the oil sector. Higher is also not good - this will lead to an increasing number of projects in the profitability zone, they increase supply, and it’s not reasonable. In this case everyone will be at risk because of the price,” the Energy Minister explained.
So far it’s too early to give any concrete assessments on current oil prices and that conclusions should be made in the long-term period he warned.
“It’s been a week since oil prices began rising,” Novak said. “We don’t know how long this trend is going to last. We need a longer period to analyze the situation. Let’s have a look at how it’s going to change through the end of this year and in 2015.”
An economic slowdown across the world has a major impact on oil prices. That’s why the performance of Europe, the Asia-Pacific Region, and the USA will be given special consideration in 2015. “We need to sift the forecasts of a lot of countries’ economic growth to get the full image,” Novak said.
In recent months oil has lost more than 20 percent and touched a 4-year low last week, with Brent December futures being traded at $84.99 per barrel on Thursday. Officials in Russia have repeated that there will be no sharp rise in Russia’s budget deficit, as currently the falling ruble helps to offset losses from cheapening oil. The country’s budget is based on oil prices of $96 per barrel, but Herman Gref the head of Russia’s biggest lender Sberbank said that $80 per barrel would also be sustainable.
Oman exports slump 9.6% to $25.9bn in H1
By Andy Sambidge
The total value of exports from Oman for the first half of 2014 including oil and gas, non-oil products and re-exports, recorded a decline of 9.6 percent, totalling OR10 billion ($25.9 billion), according to official figures.
New trade and export statistics issued by the National Centre for Statistics and Information (NCSI) revealed that the fall was due to a decrease in the value of oil and gas exports by 9.7 percent, declining from OR7.3 billion exported by the end of H1 2013.
During the same period, the total value of re-exports also declined by 20.8 percent, a statement said.
The drop comes as Sohar Port and Freezone, an ambitious facility on Oman's northern coast, is starting to compete for traffic with Jebel Ali and other top ports inside the Gulf, as part of a far-reaching plan by Oman to diversify its economy beyond oil.
Within the export categories, the only increase recorded during the first half of 2014 was in the non-oil exports which grew by 3.3 percent, totalling OR1.85 billion.
The growth in non-oil exports was due to the increase in the value of mineral product exports by 4.6 percent, rising from OR510 million at the end of June 2013 to OR534 million by the end of June.
Exports of plastic and rubber products also made a major contribution in the growth, increasing by 34.3 percent to OR175 million.
According to the NCSI report, the total value of merchandise imports through sea, land and air outlets declined by 13.6 percent by the end of H1 compared to the same period in 2013.
The total volume of merchandise imports by weight also registered a drop of 17.2 percent.
The total value of merchandise imports through sea outlets also declined by 21.6 percent to OR3.58 billion while by volume, imports by sea declined by 17.6 percent to 6.78 million tons.
However, the value of merchandise imports arriving via land outlets grew by 19.7 percent to OR1.57 billion while the volume by weight declined by 16.2 percent to 4.4 million tons.
During the same period, the total value of merchandise imports arriving via airports declined by 25.8 percent to OR426 million while volume dropped by 51.1 percent.
US Group 3 suboctane gasoline differential jumps 10.5 cents on spot shortage
Houston (Platts)--23Oct2014/516 pm EDT/2116 GMT
The US Midwest Group 3 suboctane cash differential jumped 10.5 cents Thursday to be assessed at NYMEX November RBOB plus 28 cents/gal.
This is the highest cash differential since Monday, when it was assessed at NYMEX November RBOB plus 27.25 cents/gal. The outright is up 15.6 cents at $2.4874/gal, the highest since September 30, when it was $2.5065/gal.
Refinery maintenance left some market participants short on supply, traders said.
"There are no physical barrels to cover short positions," a market source said.
US Midwest refinery utilization fell 5.3 percentage points to 84.6% for the reporting week ending October 17, Energy Information Administration data showed Wednesday, reflecting a period when some refinery maintenance was ongoing. That compared to a year-to-date average of refinery utilization rate of 92.9%.
During the Platts Market on Close assessment process on Thursday, Koch bought 10,000 barrels of suboctane from Apex at plus 24 cents/gal. After that trade, Apex sold 20,000 barrels to US Oil at plus 27 cents/gal. Lastly, Valero sold 10,000 barrels to US Oil at plus 27.50 cents/gal.
At the end of the MOC process, US Oil was still bid at plus 27.75 cents/gal, Koch at plus 25 cents/gal, and Musket at plus 18 cents/gal.
"It doesn't take much to send prices to the moon when there is no extra supply. Look at the window [MOC process], 40,000 barrels traded and the bids started at plus 18 and finished at plus 27.75," a second source said.
Occidental could eventually divest its Bakken Shale operation: CEO
Houston (Platts)--23Oct2014/345 pm EDT/1945 GMT
US-based Occidental Petroleum could eventually divest its Bakken Shale asset in North Dakota, which "can't compete" for capital with its growing Permian Basin asset in West Texas and New Mexico, the company's CEO said Thursday.
Meanwhile, the spinoff of the company's California assets into a new company, California Resources, is on track for the end of next month, CEO Stephen Chazen said during the company's third-quarter earnings conference call.
The Bakken Shale asset's main issue is that it is "just not competitive in our portfolio" with the Permian Basin, Chazen said, adding he didn't "see any real way" to change" that.
"Ultimately we'll have to deal with that," he said.
Every Monday, Capitol Hill newshounds Brian Scheid and Herman Wang analyze, dissect and debate the key US oil policy issues affecting the industry.
One obvious problem in the Bakken is that while a slew of new pipeline capacity has been proposed for the area, much of current takeaway is by rail. Chazen noted that is less efficient by than by pipeline.
Any sale will likely have to wait, however. Chazen said that since oil prices have dropped to around $80/barrel currently from as high as $95/b in early September, now is not the time to think about selling assets.
"Right now it's a little noisy [i.e., uncertain], so it's probably not the perfect time" to divest the asset, he added.
SPINOFF BOOKED 100,000 B/D OF Q3 OIL OUTPUT
As for California Resources, Oxy expects to distribute about 310 million shares of the new company to its own shareholders at the time of the spinoff at the end of November, Chazen said. California Resources completed debt financing earlier this month and distributed about $5 billion in cash to its parent. Oxy will also receive from the new company $1.2 billion of proceeds from a term loan credit facility at the time of spinoff.
Oxy will retain about 75 million shares of the new company for a period up to 18 months, said the CEO.
Even ahead of the spinoff, the new company released its premiere earnings report late Wednesday, posting 100,000 b/d of oil production, up from 89,000 b/d pro forma in Q3 2013, and total production of 160,000 b/d of oil equivalent, up from 153,000 boe/d in the same year-ago period.
FOCUS ON PERMIAN DRILLING
Apart from the Bakken, Oxy also has natural gas assets in Colorado's Piceance Basin, but in light of low commodity prices it will focus on drilling in the Permian Basin, which Chazen called a higher-growth and higher-return operation.
He said Oxy will have a lower 2015 capital budget than the roughly $10.2 billion forecast earlier this year, but added this is mainly due to the absence of the California assets thanks to the spinoff, and the completion of multiple long-term projects such as the Al-Hosn gas operation in the United Arab Emirates and the startup of the BridgeTex pipeline in the Permian, shipping oil to lucrative Gulf Coast refining centers.
First Al-Hosn production is anticipated later this year. Oxy's net share of output is expected to ramp toward 60,000 boe/d during first-half 2015.
In addition, Oxy also expects eventually to monetize its remaining investment in the general partner of Plains All-American Pipeline, Chazen said, which he added is currently valued at more than $4 billion.
Finland's Neste Oil sees better outlook for Europe refining margins
London (Platts)--23Oct2014/1018 am EDT/1418 GMT
Finland's Neste Oil said Thursday the outlook for European refining had improved in the third quarter and its reference margin had improved by 29% year-on-year during the period.
"While the general outlook for European refining remains challenging, the short term market situation has clearly improved," CEO Matti Lievonen said in a statement.
The company said oil products' reference refining margin increased in Q3 as a result of a stronger-than-expected gasoline season and the wide price differential between Brent and Russian crude oil.
Neste said its reference margin averaged $5.8/b in Q3, compared with $4.5/b in the third quarter of 2013.
Neste has two conventional refineries in Finland.
Porvoo, which is east of the capital Helsinki, has an overall processing capacity of 12.5 million mt/year, or around 250,000 b/d. Of that, 206,000 b/d is crude distillation capacity and rest is feedstock processing.
Neste's second refinery in Finland, Naantali, has an annual capacity of 2.5-3 million mt, or around 56,000 b/d.
The company said Thursday the Porvoo refinery produced 2.822 million mt of refined products in Q3, down 13% from 3.242 million mt for the same period last year.
Production was hit by an unscheduled outage in August due to a damaged hydrogen unit.
Neste said repairs to the damaged unit were expected to be completed by the end of October.
It said production at Naantali during the quarter was 588,000 mt, slightly up from 583,000 mt a year ago.
Neste has major renewable diesel refineries in Singapore and Rotterdam as well as smaller capacity in Finland.
It said renewable diesel output in Q3 was 522,000 mt compared with 556,000 mt for the same period last year.
Neste said a major scheduled turnaround was currently underway at its renewable diesel refinery in Singapore, which was expected to be completed by the end of October.
The company reported Q3 comparable operating profit of Eur190 million ($240.2 million), down from Eur217 million for Q3 last year, but better than analysts had expected due to declining pressure on European refining margins.
It said developments in the global economy had been reflected in the oil, renewable fuel, and renewable feedstock markets in Q3; and volatility in these markets was expected to continue.
Global oil demand was expected to continue increasing, but growth estimates had generally been reduced to below 1 million b/d for 2014, it added.
"This demand growth is expected to be exceeded by new refining capacity in Asia and the Middle East," Neste said. "This is expected to lead to continued high middle distillate imports into Europe from the Middle East and the US."
Neste said gasoline margins had been reasonably strong in Q3, but were expected to follow normal seasonality, which usually led to lower margins in the winter.
China September crude stockbuild rises to 665,000 b/d
Singapore (Platts)--23Oct2014/946 am EDT/1346 GMT
China's total crude supply exceeded refinery throughput in September, implying 665,000 b/d of crude was added to domestic storage, according to Platts calculations Wednesday based on government data.
The stockbuild last month was more than double the August addition to stocks of 279,000 b/d, although it was 35.5% lower than in September 2013.
The level of stocks held by refiners in China is not disclosed.
Platts calculates China's net crude stock draw or build by subtracting refinery throughput from the country's crude oil supply in a given month. The latter volume takes into account net imports and domestic production of crude.
Net crude imports in September rose 7.4% year on year to 6.74 million b/d, according to General Administration of Customs data on October 13.
Refinery throughput, meanwhile, rose 9.1% to 10.27 million b/d last month, data from the National Bureau of Statistics showed Tuesday. Domestic crude production was stable year on year earlier at 4.19 million b/d.
That resulted in 665,000 b/d of surplus crude outside the refining system, which likely went into refiners' stocks.
Over January to September, the amount of crude that likely went into storage averaged 391,000 b/d, up from 289,000 b/d in the 2013 period, according to Platts calculations.
There have only been two months this year -- May and July -- when there was an implied drawdown in crude stocks because refining throughput exceeded overall crude supply.
China's crude imports this year have grown faster than last year -- 8.3% over the first nine months, of the year versus 5.3% in January-September 2013.
Analysts have attributed the higher imports, in part, to the filling of China's strategic petroleum reserves.
US Gulf Coast CBOB spot price dips below $2/gal for first time in four years
Houston (Platts)--22Oct2014/507 pm EDT/2107 GMT
The assessed spot price of Gulf Coast CBOB dipped below $2/gal Wednesday for the first time in four years with the transition to winter-grade gasoline in the market and under pressure from worldwide crude values.
Platts assessed CBOB at 13.5 RVP at NYMEX November RBOB futures minus 17 cents/gal and at an outright of $1.9863/gal.
The blendstock last was below $2/gal on October 29, 2010, at $1.9922/gal and last was lower than Wednesday's assessment at $1.9848/gal on October 21, 2010.
CBOB fell on ATMI's sale of 25,000 barrels each to Murphy Oil and Northville in the Platts Market on Close assessment process.
Wednesday marked the first day of assessments of CBOB at 13.5 RVP. Winter-grade gasolines use more butane, ignite at higher temperatures and are cheaper to produce.
The spot assessment dipped 9.48 cents Wednesday and was 43.15 cents below the spot assessment on October 22, 2013.
"I have to think that $80 crude is a good chunk of the reason," a US products trader said about the drop. "Also refiners are slowly coming back from maintenance. What I don't get is that there are bearish markets, with flat prices, yet [the market keeps] the structure in backwardation."
Gulf Coast cash markets reflected backwardation of 17 to 20 points/day on Wednesday.
"I thought a week ago when the world said $80 was the bottom, it ain't the bottom. Tops and bottoms are not that simple. They tend to inflict measured pain first," the trader said.
US natural gas storage volume rises 94 Bcf to 3.393 Tcf: EIA
Knoxville, Tennessee (Platts)--23Oct2014/429 pm EDT/2029 GMT
US natural gas storage inventories rose by 94 Bcf to a total of 3.393 Tcf for the week that ended Friday, the US Energy Information Administration reported Thursday.
The injection came in at the low end of a range from 94 Bcf to 98 Bcf that a consensus of analysts predicted.
The build was above the 86 Bcf reported a year ago, as well as the 70-Bcf five-year average, according to EIA data.
As a result, the 344 Bcf deficit to last year fell to 336 Bcf, while the 362-Bcf deficit to the five-year average of 3.731 Tcf fell to 338 Bcf.
The EIA reported a build of 47 Bcf in the East, boosting inventories to 1.872 Tcf, compared with 1.94 Tcf a year ago. The West saw an 8-Bcf build to 482 Bcf, compared with 548 Bcf last year. The Producing region saw a 39-Bcf injection to 1.039 Tcf, compared with 1.240 Tcf a year ago.
Inventories are now 142 Bcf below the five-year average of 2.014 Tcf in the East, 36 Bcf below the five-year average of 518 Bcf in the West, and 161 Bcf below the five-year average of 1.2 Tcf in the Producing region.
a New Guinea LNG project boosts Oil Search's quarterly output by 81%
Sydney (Platts)--23Oct2014/343 am EDT/743 GMT
Papua New Guinea-based Oil Search's petroleum production in the third quarter of 2014 was a record 6.67 million barrels of oil equivalent, up 81% from 3.69 million boe in Q2 and nearly four times the output achieved in the corresponding period of 2013.
The surge in production for the three months, which was only marginally lower than output for the whole of 2013, was driven by the first full quarter of contribution from the ExxonMobil-operated PNG LNG project, Oil Search said.
The company's share of output from the two-train, 6.9 million mt/year PNG LNG project was 4.84 million boe.
The PNG LNG project reached full operating capacity ahead of schedule in late July, following a largely trouble-free ramp-up, Oil Search said. The company holds a 29% stake in the project.
During the quarter, 23 LNG cargoes were lifted from the PNG LNG project and 21 were delivered to Asian buyers, taking the total to 30 LNG lifted and 26 sold for the year to date.
In September, the first LNG cargo sold under long-term contract was delivered, and all of the project's long-term deals are expected to begin by the end of Q4 2014, the company said.
Oil Search also benefited during the quarter from steady output at its base PNG oil and gas business, which contributed 1.83 million boe.
The company said it remained on track to deliver 2014 full-year production within its 18 million to 20 million boe guidance range.
Oil Search and its partners are working to aggregate gas in the Highlands' P'nyang and other fields to support an expansion train at PNG LNG.
The company is also a stakeholder in the InterOil-operated Elk/Antelope gas fields in the Gulf province, which are being appraised to determine whether they can support one or two LNG production trains.
The company said it was targeting final investment decisions on the additional trains by the end of 2016. The trains would start up progressively from 2019 to 2022, Oil Search added.
"Oil Search's best estimate is that there is more than 20 Tcf of discovered gas in PNG of which only 9 Tcf is under development (committed to the PNG LNG project)," Oil Search Managing Director Peter Botten said.
"More than 9 Tcf lies in licenses in which Oil Search has an interest ... This is sufficient to underpin at least two and, with modest exploration and appraisal success, potentially three, additional LNG trains in PNG."
Meanwhile, Oil Search completed a six-month strategic review shortly after the end of Q3. The review found that debottlenecking of PNG LNG would be the highest-return project in Oil Search's portfolio.
One of the review's key findings was that Oil Search was uniquely positioned over the next 12 months to drive an optimal LNG development plan in PNG through promoting a cooperation agenda.
According to the company, around $3 billion of potential capital cost savings and about two years of production acceleration could be achieved through coordinated development of PNG's undeveloped resources. "Because of [our] position across a number of projects, in conjunction with the government as the other stakeholder that owns across all projects ... we're looking at driving and promoting a period of cooperation where the various LNG projects can work together," Botten said at a briefing.
He added that cooperation could range anywhere between the development of a second standalone project at Elk/Antelope to a completely integrated development with PNG LNG.
Botten said it would be "more challenging" to achieve an FID on a standalone Elk/Antelope project in the 2016 time frame.
"That's one of the reasons why we are encouraging cooperation between the joint ventures because we think that is the best way of getting the shortest possible time to development and the best way of managing the capital cost of that development."
Elsewhere, Oil Search is part of a joint venture appraising the 1-billion-barrel Taza oil field in Kurdistan. Analysts at Bernstein Research said they expected an extended well test to begin at Taza in the second half of 2015, leading to commercial declaration of the field.
In the longer term, Oil Search is targeting production growth from 19 million boe in 2014 to 50 million boe by 2022, Bernstein added.
Analysts expect US EIA to estimate 94-98 Bcf natural gas storage injection
Knoxville, Tennessee (Platts)--22Oct2014/224 pm EDT/1824 GMT
A consensus of analysts surveyed by Platts expects the US Energy Information Administration on Thursday will estimate a natural gas storage injection of between 94 Bcf and 98 Bcf for the reporting week that ended October 17.
An injection within those expectations would be above the 86 Bcf build at this time last year as well as the 70 Bcf five-year average, according to EIA data.
The wider range of analyst expectations for this Thursday's report spanned from an injection of 79 Bcf to 103 Bcf.
Last week, the EIA reported a 94 Bcf injection that pushed inventories up to 3.299 Tcf. Inventories are still 344 Bcf, or 9.4%, below the year-ago level of 3.643 Tcf, and 362 Bcf, or 9.9%, below the five-year average of 3.661 Tcf.
Demand last week "looked fairly similar to the previous week," with a slight decline in power burn of 700,000 Mcf/d that was partially offset by a an uptick in industrial demand of 300,000 Mcf/d week-over-week, said Jeff Moore, storage analyst at Platts unit Bentek Energy.
Temperatures across the US remained mild last week and kept demand fairly suppressed, which along with record production levels helped to keep injection activity well above historic levels, Moore added. Bentek data shows US dry gas production hit a new record above 70 Bcf/d last weekend.
"Allowing for the modest demand-softening presence of the Columbus Day holiday last week (affecting mostly government offices), we think the overall amount of gas injected will have risen slightly compared to last week's reported injection," said Martin King, analyst at FirstEnergy Capital.
Analyst Richard Hastings at Global Hunter Securities noted that heating degree days were "a whopping 21 degree days below normal" last week.
"If it were not for the higher outage rates in coal power generation, combined with seasonal maintenance in nuclear and diminished hydroelectric power generation in the Pacific [Northwest], then we might have assumed a higher contribution to storage," Hastings said.
The gas industry has refilled 2.477 Tcf since the end of March when inventories hit an 11-year low of 822 Bcf. In order to reach the 3.5 Tcf level most analysts are expecting by the end of this month, another 201 Bcf has to be injected, or an average of 67 Bcf/week over the next three reporting weeks.
Refills will likely continue into November as weather allows, analysts agree, with the fall peak potentially reaching past 3.6 Tcf. However, that would still leave inventories below the 3.848 Tcf five-year average as of November 7, according to EIA data.
US ethanol stocks drop 416,000 barrels despite production boost: EIA
Houston (Platts)--22Oct2014/512 pm EDT/2112 GMT
US ethanol stocks for the week ended October 17 shed 416,000 barrels, to 17.940 million barrels, their lowest level since August 29, Energy Information Administration data showed Wednesday.
The draw was the largest since August 22, while the lower stock level was despite an 11,000 b/d recovery in production, to 896,000 b/d, the EIA data showed.
Supplies were lower amid tighter supplies in three of five regions, led by a 196,000-barrel draw in East Coast stocks, which hit 6.743 million barrels, also the lowest since August 29.
Midwest stocks shed 190,000 barrels to 5.515 million barrels and West Coast stocks dropped 56,000 barrels to 2.279 million barrels.
Gulf Coast stocks, on the other hand, made a modest gain of 11,000 barrels to 3.039 million barrels, while Rocky Mountain stockpiles were up 15,000 barrels to 364,000 barrels.
At least three vessels carrying an estimated 567,000 barrels of US ethanol were seen leaving the US Atlantic and Gulf coasts last week. Shipping reports show the Sequoia and the Cavatina were expected to head toward Southeast Asia, and the Calypso was to go to the Persian Gulf.
After experiencing the first imports in 11 weeks in the previous reporting week, there were no ethanol imports reported.
The four-week rolling average of gasoline demand ticked up 14,000 b/d to 8.796 million b/d, while the four-week rolling average of the refiner and blender net ethanol input moved down 3,000 b/d to 870,000 b/d. The weekly refiner and blender net ethanol input soared 9,000 b/d to 876,000 b/d.
As the rising gasoline demand outpaced the dip in blending demand, the four-week rolling average of the ethanol blending rate -- calculated by dividing the four-week rolling averages of the net ethanol input and gasoline demand -- was 5 percentage points lower at 9.89%, falling from a 17-month high to be 0.11 percentage point shy of the 10% "blend wall."
The blend wall occurs when the maximum amount of the US gasoline pool has been blended to a level of 10% ethanol. Refiners then will be under pressure to run higher ethanol blends, buy renewable credits known as RINs or push for Congress to alter the Renewable Fuel Standard.
September US ethanol production tumbles to a six-month low: EPA
Houston (Platts)--23Oct2014/1254 pm EDT/1654 GMT
Production of corn-based ethanol in the US fell 39.22 million gallons, or 3.27%, in September compared with August to a six-month low of 1.16 billion gallons, US Environmental Protection Agency data released Thursday show.
US monthly ethanol production fell for a second straight month following the all-time high of 1.26 billion gallons posted in July.
The fall in ethanol production was unsurprising to sources as margins steadily weakened throughout September amid tumbling prices in the spot ethanol market.
The estimated production margin for a typical US Midwest dry-mill ethanol plant averaged 75.78 cents/gal on a weekly basis in September, 25.7 cents lower than the August weekly average of $1.0147/gal, a review of US Department of Agriculture and Platts data showed.
Esther Ng, Platts biodiesel editor, talks about the demand for PME as crude and gasoil prices fall, Chinese interest in winter-grade PME, and Malaysia's move to scrap the export tax on crude palm oil until December.
Saudi Arabia’s Crude Oil Supply Said to Fall in September
The amount of oil Saudi Arabia supplied to markets fell last month, according to a person familiar with the country’s oil policy. Its production climbed.
The world’s biggest crude exporter supplied 9.36 million barrels a day last month, a reduction of 328,000 barrels daily from August, according to the person, who asked not to be identified, citing policy. The supply figure excludes what’s stored. Saudi Arabia produced about 100,000 barrels a day more than in August, the person said.
Crude collapsed into a bear market this month as Saudi Arabia and other producers deepened price discounts for their oil, amid speculation they’re competing for market share in Asia. Global supplies are rising as the U.S. pumps the most in almost three decades and Russia’s output nears a post-Soviet record. Brent, the global oil benchmark, rose more than 1 percent immediately after the person’s comments.
“If this was an intentional cut by Saudi Arabia, I’d expect them to have cut the actual amount of oil produced and not just the supply to market,” Richard Mallinson, a London-based analyst at Energy Aspects Ltd., said by phone. “More is being read into the fluctuations than should be. I don’t see anything in these latest numbers to indicate a unilateral production cut.”
Cut Calls
Angola, Libya and Venezuela have all said OPEC needs to take action on prices, with the Latin American nation’s President Nicolas Maduro calling for an emergency meeting in a televised address Oct. 17. Global markets are oversupplied by about 1 million barrels a day and OPEC needs to reduce collective output by at least 500,000 barrels a day, Libya’s OPEC governor Samir Kamal said by e-mail yesterday, adding that his comments reflected personal views.
Saudi output in September was 9.7 million barrels a day, up from almost 9.6 million barrels a day in August, the person familiar with Saudi policy said. That’s the same as OPEC reported in its most recent market assessment.
Brent crude for December settlement rose as much as $1.94, or 2.3 percent, to $86.65 a barrel in London. West Texas Intermediate crude for December delivery gained as much as $1.38, or 1.7 percent, to $81.90 a barrel on the New York Mercantile Exchange.
“The market is reacting instantly to any news on oil market fundamentals,” Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, said by phone. “So far these gains have been only a short-term reaction, and then the market seems to go back to its bearish sentiment.”
China Scores Cheap Oil 14,000 Miles Away as Glut Deepens
By Bloomberg News
China is finding oil supplies 14,000 miles away, aided by the global rout in prices that’s left producers vying for new markets.
PetroChina Co. said it bought Colombian oil for a northern refinery for the first time because it was good value. The transaction underscores how drillers from the Middle East to Latin America are shoring up sales by seeking customers in Asia.
Brent oil futures tumbled to the lowest level since 2010 as the highest U.S. output in almost 30 years cuts its consumption of foreign crude. OPEC’s biggest producers are reducing prices to defend their market share. China consumed the second-biggest amount of crude on record in September and imported the largest volume ever for that time of year, customs data show.
“China will just look to get the cheapest crude possible from whatever source it can,” Virendra Chauhan, a London-based analyst at Energy Aspects Ltd., said by phone Oct. 21. “I expect a lot more volumes flowing to China in particular.”
The country’s crude imports rose 7.8 percent to 27.6 million tons, or 6.74 million barrels a day, in September from last year, the data show. The number of supertankers sailing toward China’s ports surged to a nine-month high last week, according to IHS Fairplay vessel-tracking signals compiled by Bloomberg as of Oct. 17.
Colombian Shipments
China’s purchases of Colombian crude totaled 7.8 million metric tons from January to September, more than twice the amount a year earlier, customs data showed Oct. 22. Shipments from Saudi Arabia, its biggest supplier, shrank about 11 percent to 36.6 million tons, according to the data.
Colombian oil output increased about 10 percent since 2011 and the nation is seeking sales in Asia to compensate for the weakening in short-haul exports as U.S. production increases, said Bernard Leung, a Bloomberg oil strategist in Singapore.
China’s supplies from Colombia cost an average of $94.56 a barrel last month while Saudi shipments were purchased for $102.30, according to data compiled by Bloomberg.
Saudi Arabia, the largest oil exporter, earlier this month reduced the price of its Arab Light crude for Asia to the lowest level since December 2008, sparking speculation that a price war was set to start among members of the Organization of Petroleum Exporting Countries. OPEC members Kuwait, Iran and Iraq also cut official selling prices this month.
Refining Capacity
Refiners including PetroChina processed 42.02 million tons of crude in September, or about 10.3 million barrels a day, according to data from the National Bureau of Statistics in Beijing. That’s up 9.1 percent from a year earlier and the most since a record 10.5 million in February.
China’s refining capacity will rise 20 percent to 800 million tons a year by 2020, from about 668 million at the end of this year, China National Petroleum Corp.’s Economic and Technology Research Institute said in a report in January.
Brent crude futures slid 8.3 percent on London’s ICE Futures Europe exchange in September, the biggest monthly loss since May 2012. They slumped a further 8.3 percent to $86.83 as of yesterday, after touching $82.60 on Oct. 16, the weakest since November 2010.
“Chinese buyers are jumping on the opportunity to buy crude on the cheap at the moment,” David Wech, the managing director of JBC Energy GmbH in Vienna, said in an Oct. 17 e-mail. “Refining margins have surely benefited from weak outright crude prices.”
Refineries Shut
The U.S. imported 7.62 million barrels of crude a day in July, 29 percent less than the peak in June 2005, data from the Energy Information Administration show. Shale oil has boosted the country’s crude output to the highest since 1985. European consumption is also shrinking as refineries shut or convert to storage depots at the fastest pace since the 1980s.
Crude that may have previously found a buyer in the U.S. or Europe is now available for Asia and competing with traditional suppliers from the Middle East, according to the Paris-based International Energy Agency. Asia will account for almost 80 percent of global demand growth this year, with China alone responsible for a third, IEA data show.
“The next area we see being backed out if the U.S. production continues growing is some of the Latin American producers such as Colombia and Venezuela,” said Chauhan of Energy Aspects.
PetroChina’s Liaohe refinery processed about 30,000 tons of Colombian crude as of Oct. 20, its parent company, China National Petroleum, said on its website Oct. 21. The plant ran 792,000 tons of imported oil last year, or about 15 percent of its total throughput. Suppliers included Russia, Brazil and Venezuela. Mao Zefeng, PetroChina’s Beijing-based spokesman, didn’t answer five calls to his mobile phone seeking comment.
Processed Crude
China Petroleum and Chemical Corp.’s Maoming refinery processed crude from Brazil’s Ostra field for the first time last month, the company known as Sinopec said on its website Sept. 17. China’s purchases of Russian crude increased by 57 percent in September, the customs data show.
“China will continue to import more crude from Russia next year,” said Wech of JBC. “Imports from Latin America are also likely to increase as Mexican and Venezuelan volumes are gradually eased out of the U.S. Gulf Coast.”
U.S. Energy Exports to Top Imports by 2025, WoodMac Says
U.S. companies will export more energy than they import by 2025 as shale oil and gas production keeps climbing and the transportation sector becomes more efficient, Wood Mackenzie Ltd. said in a note today.
Horizontal drilling and hydraulic fracturing in hydrocarbon-rich layers of shale rock have boosted U.S. oil and gas production by 42 percent in the past seven years. The U.S. vehicle fleet will become 40 percent more energy-efficient by 2030, said James Brick, a senior analyst at the Edinburgh-based research firm.
“A country can achieve energy independence through two channels,” Brick said in the note. “It can either produce more or consume less, and the U.S. is doing both.”
Crude production in the U.S. has risen to 8.9 million barrels a day, the highest level since 1985, according to data from the Energy Information Administration. Natural gas output is 2.3 trillion cubic feet a day, the highest on record.
Oil production is expected to rise to 10.3 million barrels a day, and the peak level could be more than 13 million by 2030 depending on developing technologies in the enhanced oil recovery and refracturing fields, Brick said.
If the U.S. government lifts restrictions on exporting crude oil that were put in place after the 1973 Arab oil embargo, domestic producers could get $5 a barrel more for their oil and output could rise by 350,000 to 450,000 barrels a day.
Repsol Cleared to Explore for Natural Gas Off Northern Spain
Repsol SA (REP) won environmental clearance to drill two exploratory wells for natural gas off the Basque coast of northern Spain.
The project, first proposed to the country’s environmental regulators in 2008, must adopt a series of safeguards against spills and other potential risks to the ocean and coastline, according to a resolution published today and signed by deputy environmental minister Federico Ramos de Armas.
Spain’s government has supported a resurgence of oil and gas exploration that had dwindled in previous decades. Madrid-based Repsol, which has projects as far away as Russia and Alaska, won environmental approval this year to drill off Spain’s Canary Islands in a decision opposed for years by conservationists and city officials in the islands.
The two wells, Fulmar-1 and Pelicano-1, will be drilled in waters about 15 kilometers (9 miles) and 20 kilometers from the coast where the Urdaibai estuary crosses the port of Mundaka, a world-class competitive surfing spot. They are proposed in waters 170 meters and 385 meters deep, respectively. Such shallow-water drilling projects can cost about $40 million each.
The Basque regional government, which lacks direct control over exploration permits, in a statement on Oct. 2 praised the recent surge of petroleum projects for “generating resources, creating jobs, industrial activity and social well-being.”
The north of Spain and the Canary Islands have been focal points for environmental demonstrations in the past two years against proposed oil-drilling and fracking projects.
Norway’s Arctic Oil Ambitions Threatened by Slump in Oil
Norway’s push to exploit Arctic waters for oil, already denounced by environmentalists, is now under threat from the slump in crude prices.
The Arctic Barents Sea off northern Norway is reckoned to contain 40 percent of the country’s undiscovered resources and seen as key to extending oil output as aging North Sea fields decline. But operating there is expensive, and even before the recent plunge in prices, state-controlled Statoil ASA (STL)’s key project in the area had been delayed twice.
“The premises for what we’re discussing could be gone because of a weakening market,” Terje Aasland, a lawmaker from the opposition Labor Party, said during a debate on Arctic oil in Oslo yesterday. “What we believed a few months ago, we don’t believe today.”
Arctic oil and gas projects from Greenland to Russia have faced hurdles for years, including rising costs, lawsuits, technical challenges and political opposition. Royal Dutch Shell Plc (RDSA) halted drilling offshore Alaska twice in two years after investing $5 billion, and the development of OAO Gazprom (OGZD)’s Shtokman gas field has been shelved.
The slide in benchmark Brent crude oil prices from $115 a barrel in June to about $85 today adds to those challenges.
“The high cost in Norway, and particularly in areas like the Barents Sea, are still a major issue,” Lennert Koch, an analyst at Edinburgh-based consultant Wood Mackenzie Ltd., said in a phone interview. “If you’re going to adjust your oil-price forecasts downwards, it’s putting even more pressure on these projects that are already marginal.”
Gulf Stream
Norway, where oil workers are the best paid in the world, is already one of the most expensive places to do business. And while the Barents Sea is more hospitable than other parts of the Arctic thanks to warming currents of the Atlantic Gulf Stream, oil deposits are more expensive to develop than in the North Sea due to a lack of pipelines, platforms and terminals.
No crude finds have yet been brought to production here, and Eni SpA (ENI)’s Goliat field is headed for a 50 percent cost overrun when it starts producing in 2015.
Statoil’s Castberg project has been delayed because of higher costs and taxes and a disappointing 3 billion kroner ($450 million) exploration campaign that failed to add enough new resources. It may be delayed again as crude hovers near the project’s break-even price of $70 to $80 a barrel, managing partner Jarand Rystad of Oslo-based consultant Rystad Energy AS said last week.
Shareholder Returns
The Norwegian Petroleum Directorate has urged Statoil to link Castberg with other finds in the area to make the developments profitable. The company will make a decision on the project next year just as it reins in investments and cuts costs to raise shareholder returns.
Any project that “doesn’t go the distance in our profitability assessments, it goes without saying” won’t be prioritized, Statoil’s Runi Hansen said in an interview yesterday. He declined to comment on Castberg specifically.
Statoil fell 1.8 percent to 154.7 kroner as of 3:37 p.m. in Oslo.
When Norway’s parliament last year opened an area of the Barents Sea previously disputed by Russia, it was the first time the country’s exploration acreage was expanded since 1994, underscoring the Arctic’s importance in Norway’s national petroleum strategy. The government has since proposed 61 blocks for the next licensing round, of which 54 are in the Barents Sea, including the northernmost acreage ever. Awards are expected in 2016.
Policy Change
The minority Conservative-led government is already facing pressure from the Liberal Party and the Christian Democrats, whose support it depends on to govern, to withdraw as many as 15 blocks because they’re too close to the edge of the Arctic ice cap, a sensitive ecosystem supporting animals from polar bears to fish.
Now, Labor could support the two parties as they start negotiating with the government, Aasland said. His comments signal a change in policy after Jonas Gahr Stoere succeeded former Prime Minister Jens Stoltenberg as party leader.
“It’s obvious Labor is in movement,” he said. “Fossil-energy production is becoming more and more challenging.”
The Liberals are also seeking to tighten rules that let oil companies write off exploration expenses from taxable income, making Arctic ventures even less attractive and avoiding subsidizing projects that end up being unprofitable, the party’s deputy leader Ola Elvestuen said.
Arctic fields including Castberg are among uneconomic projects that risk wasting $1.1 trillion of investor’s cash through 2025, a report by the Carbon Tracker Initiative said earlier this year.
The oil-price drop “makes the discussion on stranded assets more relevant,” said Truls Gulowsen, head of Greenpeace’s Norway operations. “It’s not certain that everything will be profitable, and that reality check is very positive.”
WTI avoids falling below $80 per barrel
NEW YORK, Oct. 23 (UPI) -- An expected cut in Saudi crude oil production and reports of higher U.S. output helped keep the price for West Texas Intermediate above $80 in Thursday trading.
WTI for December delivery bounced back from a low mark of $80.05 per barrel to move above $81 in early Thursday trading.
The move comes on word Saudi Arabia was cutting oil supply to around 9.4 million barrels per day.
Some members of the Organization of Petroleum Exporting Countries are working to shore up market positions in a bear market for oil. Supplies have outstripped demand in recent weeks, though both WTI and Brent, the international benchmark, have recovered.
China, a leading energy consumer, said this week its economy was healthy despite signs of a recent slowdown.
For North America, the U.S. Energy Information Administration said in a weekly petroleum status report crude oil stockpiles were just shy of 378 million barrels, up about 1.89 percent from one week ago.
Brent for December delivery was up nearly $1 per barrel early Thursday to $85.66, showing signs its moving beyond a long string of declines.
Oil not only Islamic State target, advocacy group says
WASHINGTON, Oct. 23 (UPI) -- Action beyond hitting the Islamic State's oil revenues with bombs in Syria is needed if the campaign is to succeed, a peace advocacy group said.
In September, U.S. President Barack Obama announced a military campaign to take out militants from the Sunni-led terrorist group in control of parts of Iraq and Syria. Now dubbed Operation Inherent Resolve, the campaign has focused on Syrian oil installations controlled by the group calling itself the Islamic State.
Paul Kawika Martin, director of advocacy group Peace Action, said the military campaign has so far failed to contain IS.
"Instead of methods that are likely to cause more extremism like air strikes to reduce oil revenues, other options include freezing bank accounts of ISIS supporters, negotiating with local villages where oil pipelines are being used and cracking down on the market of cultural artifacts from Syria and Iraq," he said in a statement e-mailed Wednesday to UPI.
IS was said to be generating as much as $2 million per day from illicit oil. Martin said the group may be in control of as much as 80,000 barrels of oil per day, but noted a decline in oil prices since June may be hurting the group's ability to generate revenue.
A report last week from IHS Energy found IS is selling its oil on the black market for about half of the market price.
BP, GDF Suez make North Sea oil find
LONDON, Oct. 23 (UPI) -- French energy company GDF Suez and British counterpart BP said Thursday they made a significant new oil discovery in the central waters of the North Sea.
"As BP marks its 50th year in the North Sea and as the industry looks to maximize economic recovery from the basin, increasing exploration activity and finding new ways to collaborate will be critical to realizing remaining potential," Trevor Garlick, BP's regional president, said in a statement. "This discovery is a great example of both."
The discovery, which straddles two license areas operated separately by the companies, tested at an initial flow rate of 5,350 barrels of oil equivalent per day.
Garlick said the discovery shows how more oil can come from North Sea basins if regional players join forces to capitalize on what he said was a considerable amount of oil and natural gas reserves left in the area.
The British side of the discovery was named Vorlich, while GDF Suez gave its part of the find the moniker of Marconi.
For GDF Suez, the discovery marks its third so far in British waters.
"We are determined to have set the right fiscal and regulatory regimes to make sure we can get the maximum possible economic extraction of oil and gas from the North Sea," added British Business and Energy Minister Matthew Hancock.
Texas shale lifts Oxy output
LOS ANGELES, Oct. 23 (UPI) -- Occidental Petroleum Corp. said Thursday its quarterly production was boosted by Texas shale, but income was down for the third quarter.
Occidental, known commonly by its ticker symbol Oxy, said reported income for the third quarter was $1.2 billion, compared with $1.6 billion for third quarter 2013. The company blamed the decline in part on the drop in oil prices since the second quarter.
In terms of production, the company said output increased 20,000 barrels per day year-on-year.
"For the fifth consecutive quarter, we have delivered strong year-over-year domestic oil production growth, bolstered by strong results from Permian [shale] resources, which grew by over 26 percent," President and Chief Executive Officer Stephen Chazen said in a statement.
Aggregate production from the Permian basin increased 58 percent from 2007 to reach 1.35 million bpd last year, which represents 18 percent of total U.S. crude oil production.
Oxy subsidiary California Resources Corp. said Wednesday oil prices were in part responsible for the 20 percent decline in net income from third quarter 2013. It posted a record, however, with 100,000 bpd during the latest quarter.
Continental Resources declares win in Oklahoma basin
OKLAHOMA CITY, Oct. 23 (UPI) -- The Springer reserve area in Oklahoma is emerging as one of the premier oil basins in the region, Continental Resources said Thursday.
Continental, which has headquarters in Oklahoma City, said four wells in the Springer play inside the South Central Oklahoma Oil Province, known by its initials SCOOP, should yield as much as 940,000 gross barrels of oil equivalent for the company.
"The Springer adds another significant oil resource driver to Continental's strategic growth outlook," Continental Chairman and Chief Executive Officer Harold Hamm said in a statement. "It's distinguishing itself as the most productive play in Oklahoma, and it's right in our back yard."
Oil services company Baker Hughes said shale basins in Oklahoma were among those witnessing the biggest gains in wells started during the third quarter.
SCOOP lies in part of the Woodford shale that spreads out over southern part of the state.
Continental said it's producing about 6,000 barrels of oil equivalent per day in the Springer basin, of which 70 percent is crude oil. It has nine rigs working in the play.
Russia may go it alone on arctic exploration
MOSCOW, Oct. 23 (UPI) -- Russian energy companies should join forces for exploration in the arctic as part of a strategy to counter Western sanctions, a Kremlin official said Thursday.
U.S. energy company Exxon Mobil has a partnership with Russian oil company Rosneft for work in the arctic waters of Russia. With Western sanctions impeding developments, the Russian government has placed a greater emphasis on domestic exploitation of arctic reserves.
"Where the Arctic is concerned, we will probably grant the last licenses on the arctic shelf [exploration] to Rosneft and Gazprom," Orest Kasparov, deputy director of the Russian Federal Agency for Subsoil Use said.
Western governments blacklisted Rosneft and other Russian energy companies in response to the Kremlin's stance on the separatist campaign in eastern Ukraine. In mid-September, the European Union took additional steps by barring Russian oil company Rosneft and its counterparts Transneft and Gazprom Neft from working in European capital markets.
Sanctions have hit a Russian economy that depends heavily on oil export revenue. The Russian Central Bank said inflation was expected to rise above 8 percent this year.
Alaska awards oil and gas leases near ANWR
JUNEAU, Alaska, Oct. 23 (UPI) -- Alaska's government said it was able to award oil and gas drilling licenses after clarifying authority near the border of the Arctic National Wildlife Refuge.
The Alaska Department of Natural Resources said it awarded two licenses in the Beaufort Sea pending since 2011 after assessing the western boundary of the ANWR.
"I'm pleased that we are now able to award these leases to the 2011 bidders and clarify the acreage that is available for oil and gas exploration in this highly-prospective region," Natural Resources Commissioner Joe Balash said in a statement Wednesday.
The DNR's decision stems for a state assertion that it owns the 3,000 acres of coastal land that it says was improperly mapped as part of the arctic refuge area. The state said uncertainty over the legal demarcation has created obstacles for authorities trying to administer leases.
The leases were awarded to private land investors.
Alaska Gov. Sean Parnell last year said parts of the refuge area may contain "billions of barrels of recoverable oil."
Leaders in the U.S. House of Representatives responded by calling on the Department of Interior to "protect the biological heart of the refuge from oil and gas exploration and drilling."
U.S. oil exports at highest level since 1957
WASHINGTON, Oct. 23 (UPI) -- The United States exported more crude oil than it has in more than 50 years, analysis from the U.S. Energy Information Administration finds.
EIA in its weekly petroleum status report said the United States exported 401,000 barrels of oil per day in July, the latest full month for which data are available.
U.S. crude oil exports are restricted under legislation enacted in response to the embargo from Arab members of the Organization of Petroleum Exporting Countries in the 1970s.
Some exports are permitted from Alaska's Cook Inlet, to Canada for domestic consumption there and in other case-by-case scenarios. EIA said some of the oil exports include Canadian crude oil exported to the United States and then re-exported.
"Typically, crude exports are sourced domestically and are sent only to Canada," the Wednesday report from EIA found. "However, since April, crude exports have included modest amounts of Canadian-produced barrels that were moved through the United States and re-exported to Switzerland, Spain, Italy, and Singapore."
Exports for July were the highest since 1957 and the second highest since EIA started keeping records in 1920.
Supporters of easing export restrictions argue it would make energy cheaper for U.S. consumers, though those in the refining sector said it would cost more to purchase U.S.-sourced crude oil.
More U.S. funding targets solar energy research
WASHINGTON, Oct. 23 (UPI) -- Solar energy in the United States is becoming a major part of the nation's power sector as installation costs decline, Energy Secretary Ernest Moniz said.
Moniz announced more than $53 million in funding for more than three dozen research and development projects aimed at driving down the cost of solar energy.
"As U.S. solar installation increases and the cost of solar electricity continues to decline, solar energy is becoming an increasingly affordable clean energy option for more American families and businesses," he said in a Wednesday statement.
The secretary said the country has 15.9 megawatts of installed solar power, enough to meet the energy demands of more than 3.2 million average households.
Moniz in early October rolled out $25 million in funding for research and development of concentrated solar power technology, which uses mirrors to focus the sun's rays onto a transfer system in such a way that thermal energy is stored around the clock.
A recent report from the International Energy Agency found solar energy resources could combine to become the world's largest source of electricity by 2050, while at the same time offsetting more carbon dioxide emissions than the United State currently puts out.
Moscow investigating crash involving Total boss
The court confirmed driver Vladimir Martynenko is under investigation for his role in Monday's accident. Authorities say he was under the influence of alcohol at the time of the incident, but denied that charge during interrogation earlier this week.
De Margerie and three French crewmembers of a private business jet died when the plane struck the snowplow during takeoff Monday from a Moscow airport.
A spokesman for the Russian team investigating the situation said four other airport employees have been questioned in the incident.
"All of them are suspected of failing to ensure compliance with safety rules for flights and airport ground operations, which resulted in a tragedy," spokesman Vladimir Markin said. "The detainees have already been questioned as suspects."
Russian President Vladimir Putin offered his condolences to the French government over the incident, describing de Margerie as a pioneer who helped steer major developments in the Russian energy sector.
Total said Wednesday it named former refining director Patrick Pouyanne as chief executive officer and former CEO Thierry Desmarest as the chairman of the board of directors, splitting de Margerie's role between two executives.
