DUBAI: Top oil exporter Saudi Arabia is committed to supplying the market with extra crude to meet any rise in demand or if there are disruptions in oil supplies, a Saudi oil official said yesterday.
Saudi Arabia, which currently produces around 9.7 million barrels per day (bpd), has the ability to pump to its full capacity of 12.5m bpd.
"Saudi Arabia has the capability to produce up to 12.5m bpd when the customers ask for it. The oil resources, production facilities and the management all support this," the official said.
"If there is an increase in demand or disruption in supplies, Saudi will supply the market. Saudi will continue to make sure there is a balance in the international oil market. Saudi did that in the past and will continue to do so," he said.
Saudi Arabia has in the past shown an ability to raise production to meet its customers' needs, the official added, citing times when Riyadh had to up its output to cover disruptions in the oil market during the Iraqi invasion of Kuwait in the 1990s, and Libya's civil strife in the aftermath of its 2011 uprising, among others.
Oil slipped below $114 a barrel yesterday as concerns eased that violence in Iraq would hit supplies from the country.
© 2013 Gulf Daily news, PO Box 5300, Manama, Bahrain
By Valerie Volcovici and Timothy Gardner
(Reuters) - U.S. officials have told energy companies that they may export a variety of ultra-light oil if it has been minimally refined, an apparent marginal loosening of a decades-old ban on selling U.S. crude abroad.
The Wall Street Journal reported that the Department of Commerce, which has come under growing pressure to ease restrictions amid a resurgence in domestic production, had given approval via a private ruling to Pioneer Natural Resources Co and Enterprise Product Partners LP to export the so-called condensate.
A Commerce spokesman did not comment on the specific rulings, but told Reuters that there had been "no change in policy" toward crude oil exports, a topic that has emerged as one of the most contentious energy policy issues this year.
Condensate may be exported if it has been run through a distillation tower, a type of refining unit, because the process "results in the crude becoming a petroleum product (that) is no longer defined as crude oil," said Commerce spokesman Jim Hock. Refined products such as gasoline and diesel are not restricted.
"Existing statutes provide both specific restrictions and allowances regarding crude oil exports," Hock said. Some energy experts also agreed that the ruling appeared consistent with existing interpretation of the 40-year-old law.
Still, U.S. oil prices rose more than $1 to $107.05 a barrel after the report, highlighting the intensifying scrutiny of a gray area in regulations that prohibit export of condensate that has been produced directly from an oil field but allow it if the same type of oil emerges from a natural gas plant or a refinery.
Pioneer and Enterprise did not immediately respond to requests for comment.
Reuters reported in May that U.S. oil producers, including Pioneer, had met with the Department of Commerce's Bureau of Industry and Security (BIS), which oversees exports, and were hopeful of some form of easing on condensate limitations.
The U.S. shale oil boom of recent years is expected to soon make the country the world's top crude producer, surpassing both Saudi Arabia and Russia. It has also led to a glut of light oil in Texas and Louisiana that is difficult to process there because refiners have invested billions of dollars to process heavier oils from Mexico and Venezuela.
Some ultra-light oil could be reclassified as fuel after it has been minimally processed, putting it in a regulatory gray area that has been seen by some export backers as a way to ease the ban on exports.
Senator Lisa Murkowski, a Republican from Alaska, said the move on condensate was "a reasonable first step that reflects the new reality of our energy landscape."
Murkowski, the top Republican on the Senate Energy Committee, urged the White House to fully lift its ban on crude oil exports.
A Senate aide said the shipments that will be allowed are limited because they are "stabilized" condensates, or crude that has been processed to remove light ends like butane gas so that it can be sent through pipelines for shipping.
It was not immediately clear how much condensates the companies would be able to ship though exports could begin as soon as August. Pioneer Chief Executive Officer Scott Sheffield said in March that recent U.S. oil production includes some 800,000 barrels per day of condensate.
Congress is not expected to pass legislation lifting the ban on crude exports before the Nov. 4 elections, as no lawmaker wants to be blamed for a move that could boost U.S. oil prices.
Senator Edward Markey, a Massachusetts Democrat, blasted the export approvals saying it puts America on a "slippery slope" to send more oil abroad when the Middle East is in disarray and tensions are high with Russia.
"Congress put this oil export ban in place. It should be Congress that decides when and how to change it, not through a private ruling by the Commerce Department without public debate," he said. (Reporting by Ros Krasny, Timothy Gardner and Valerie Volcovici; Editing by Sandra Maler, Cynthia Osterman and Lisa Shumaker)
English.news.cn
LONDON, June 24 (Xinhua) -- Canadian Finance Minister Joe Oliver said here on Tuesday that as a responsible energy supplier in the world, Canada can export more oil and gas across the Atlantic to European countries.
Giving the opening keynote at the Global Borrowers and Investors Forum 2014, Oliver said that Canada cannot immune from the global uncertainties that has emerged since the financial crisis, but the country has the less severe impacts from them, and it has recovered earlier and emerged with better shape than most of the other developed countries.
He said the country's strong natural resources will be continuing contributing Canada's economic growth, which is also underpinned by stable banking system, strong private sectors, tax cuts policy and stimulus measures that supporting jobs creation.
"Canada's energy infrastructure is booming. Hundreds of major natural resources projects, with about 650 billion dollars worth of investment are underway or planned for the next decade," said Oliver.
Canada can ship more oil to Europe with better infrastructure, and "Canada is a reliable and responsible energy supplier, contrast to some of our competitors," he said.
Besides, "every major resource program in Canada benefits every region in Canada," he added.
When asked whether there was a housing bubble in Canada, Oliver answered "no".
"The advice we have received is that we are not in a bubble," he said.
The value of bilateral trade in goods between the European Union (EU) and Canada was 58.8 billion euros (about 80 billion U.S. dollars) in 2013, according data compiled by the European Commission.
Machinery, transport equipment and chemicals dominate the EU's exports of goods to Canada, and also constitute an important part of the EU's imports of goods from Canada.
On Oct. 18, 2013, the EU and Canada reached a political agreement on the key elements of a trade agreement (CETA). The agreement will remove over 99 percent of tariffs between the two economies and create seizable new market access opportunities in services and investment, announced the European Commission on its website.
Oliver will visit London, Berlin, Warsaw from June 23 to June 28, said the Department of Finance of Canada on its website.
Agence France-Presse, Washington | Business | Wed, June 25 2014, 6:40 AM
The US will allow two companies to export unrefined oil for the first time in four decades, taking steps to break a ban on crude exports, The Wall Street Journal reported Tuesday.
The Commerce Department will permit the two Texas-based companies to export the ultra-light condensate, which has grown in supply on the back of the boom in fracking-based exploration and production of natural gas.
"With relatively minimal processing, oil shipments could begin as early as August, according to one industry executive involved in the matter," the Journal said.
Pressure has been building for a year for the government to end the 1970s ban on exports, an energy security measure long seen crucial in a country heavily dependent on oil imports to meet domestic needs.
But the surge in production from shale-based deposits in areas like North Dakota and Texas, made possible by advances in hydraulic fracturing technology, has sharply reduced the need for imports and created regional surpluses due to distribution bottlenecks.
That has given rise to industry pressure to allow exports from areas like the Gulf of Mexico, even as the country imports crude through east coast ports.
Some resistance has come from refiners and consumer advocates who fear that competing with export markets for the crude could drive up their prices, and eventually raise the cost of fuel to consumers.
Still, despite pressure in Congress and from the industry, the ban on crude exports has not been lifted. The Commerce Department instead made a special ruling to allow the export of condensate on the grounds that it has been processed enough to qualify it for export, even if it has not been refined.
The US already exports large volumes of refined oil products.
The Journal said the two companies receiving permits to export condensate are Pioneer Natural Resources of Irving, Texas, and Enterprise Products Partners of Houston. (***)
By Nick Cunningham | Tue, 24 June 2014 21:30 | 0
On June 20, the oil tanker SCF Altai docked in Israel and offloaded oil from Kurdistan. The completion of the sale marked a huge win for the semi-autonomous region in Iraq and has emboldened its leaders to accelerate their push for independence as the rest of the country seemingly collapses.
The oil delivery to Israel was apparently not the first. According to a statement by Iraq’s Oil Ministry, earlier this year the Kurdish Regional Government (KRG) sold four other shipments of oil to Israel. The Iraqi government has condemned the sales and labeled it “smuggling.” Not only is the sale of oil without Baghdad’s approval illegal in the eyes of Iraq’s leaders, but the KRG sold the oil to Israel, a country with which Iraq does not have a relationship and is still technically at war.
But the Shiite government led by Prime Minister Nouri al-Maliki is powerless to stop the KRG, as Iraq’s institutions succumb to the onslaught by the Islamic State of Iraq and Syria (ISIS), the Sunni militant organization now in control of large swathes of the county.
The only thing Baghdad can do in the face of increasingly assertive moves by Kurdistan is issue scathing press releases.
In fact, the KRG is eyeing independence sooner rather than later. In the immediate aftermath of the Mosul invasion by ISIS, Kurdish Peshmerga forces quickly moved to secure Kirkuk, a once-disputed territory between Kurdistan and Iraq. The KRG criticized the Iraqi security forces for incompetence and hinted at the fact that they would not return Kirkuk to the control of the Iraqi government.
On June 23, however, Kurdish leaders suggested they are considering going further. In an interview with CNN, Kurdish President Massoud Barzani suggested that the deterioration of the foundations of Iraq have changed everything. “Iraq is obviously falling apart. And it’s obvious that the federal or central government has lost control over everything. Everything is collapsing – the army, the troops, the police.”
He went on: “We did not cause the collapse of Iraq. It is others who did. And we cannot remain hostages for the unknown. The time is here for the Kurdistan people to determine their future and the decision of the people is what we are going to uphold.”
The successful sale of oil is a stepping stone towards that goal of independence. Kurdistan has been suffering from a shortage of cash after Baghdad cut off the KRG’s portion of national revenue sharing earlier this year. This led to budget shortages and the inability to pay salaries for many Kurdish workers. But the sale of oil to Israel has brought in a deposit of $93 million for the KRG, which was sent to a bank in Turkey.
That will provide an immediate influx of cash, but more importantly, it could pave the way to future exports and access to credit with international financial institutions. “When we approach international finance houses, they look to whether we can export and sell the oil. Now that we have done that, it is easier to get loans,” a KRG spokesman told The Wall Street Journal.
Greater economic independence coupled with the collapse of the Iraqi state means that the dream of independence for the Kurdish people is closer to being realized than ever before.
One key missing ingredient is the blessing of the United States, a longtime ally. The U.S. government has thus far opposed the notion of an independent Kurdish state, not wanting to sow instability in Iraq, which the American government has tried to prop up for years. Now with the onslaught by ISIS and the crumbling of Iraq, the U.S. fears the complete failure of Iraq as a viable country.
On June 24, U.S. Secretary of State John Kerry made a surprise visit to Erbil, the capital of Kurdistan, to press the KRG to support the Iraqi government and prevent its collapse. But Barzani didn’t make any commitments. “We are facing a new reality and a new Iraq,” he said.
By Nick Cunningham of Oilprice.com
By Robert Bensh | Tue, 24 June 2014 21:35 | 0
There are exactly five things Kiev must do to become energy independent and disentangle itself from the Russian-driven geopolitical gas war:
1. Sell its pipeline system (most importantly);
2. Sell the remaining state interest in oil and gas company Ukrnafta;
3. Aggressively farm out as brown-field developments areas licensed by state-owned Ukrgazproduction;
4. Develop additional import resources, either through Europe or liquefied natural gas (LNG) through the Black Sea;
5. Provide security in pricing and contracts.
Before we embark on the specifics of this roadmap, it’s important to look at exactly how we got where we are today.
Call it what you want — unrest, separatism, foreign invasion — but the fact is there are troops running around eastern Ukraine killing people. The current situation is dire from any standpoint; economically, it is disastrous, triggering high taxes and steadily increasing inflation.
In addition, Ukraine and Russia are once again fighting over gas supplies and the transport of Russian gas to Europe.
The primary reason we’re here, of course, is economics. We’re all familiar with the events of the Maidan protests, what led to this and what has happened since. However, one could argue — as I have chosen to do during the Fifth Annual Ukrainian Energy Forum that kicked off in Kiev June 24 -- that the failure to secure and develop independent energy resources within Ukraine has allowed Russia to conduct geoeconomic warfare which has escalated to low-intensity conflict in eastern Ukraine.
Gas supply, and the threat to that supply for Europe, is what has forced Russia to move aggressively on multiple fronts to defeat Ukraine in its efforts to modernize and westernize its economy, its future, and its way of life.
So, how to start the liberalization process? Ukraine has argued that its gas transportation system is a strategic asset. Business-minded people take issue with this interpretation, which ignores the commercial potential of the pipeline system. Now that we have come full circle in a long-brewing Ukraine-Russia gas war, perhaps the pipeline should be considered “strategic” — if not in the way the Ukrainian authorities have long understood. The pipeline system, worth $20 to $30 billion, can indeed play a strategic and tactical role in resolving Ukraine’s crisis with Russia, but only if it’s sold off.
Ukraine should sell 50 to 75 percent of it for cash to a consortium involving the EU, U.S. and Russia and operated by a U.S. business enterprise, preferably based in Houston. This can only happen if Russia agrees to remove troops and other proxies in eastern Ukraine and then works with Ukraine to secure the border and cease all low-intensity conflict efforts, including on the ground, and in cyberspace and the trade arena.
Russia would pay cash for the gas transmission system and absolve Ukraine of the existing gas debt (given the Russian gas price of $395 per th.m3, Ukraine owes Russia $4.58 billion).
Doing so would allow Russia to continue to supply gas to Europe. The Ukraine crisis is as much about Ukraine not joining the EU and NATO as it is about Russia securing reliable and ongoing gas sales to Europe. A consortium-run pipeline system is the only neutral solution that allows Russia a face-saving way out.
The pipeline system, and the state-run company that manages it, should be turned into a transparent public company in London, for instance. The sale of 50 percent of the company could generate sizable profits, part of which could be invested in modernization.
All of this requires the recognition that Ukraine’s pipeline system is strategic only for Moscow — which needs it to control gas to Europe -- while for Kiev, it should be a commercially viable asset.
The crippling level of debt, the loss of Crimea, the continued destabilization of eastern Ukraine by Russia through the use of various proxies -- including Chechen mercenaries -- the suspension of gas supplies to Ukraine only last week, an apparent terrorist attack that resulted in an explosion on the gas pipelines in central Ukraine — all of this points to the necessity of an urgent rethink of strategic versus commercial philosophies. As a privatized commercial asset, the pipeline could raise $50 billion for Ukraine.
Until now, the pipeline system has been nothing but a conduit for Russian gas into Europe. Russia already ships almost half of its gas to Europe via pipelines that bypass Ukraine, and in 2015, if Gazprom’s South Stream pipeline comes online as planned, it will be shipping a lot more gas to Europe without Ukraine. In this current dynamic, it could be even less than that. But it SHOULD be much more.
Beyond Pipelines
In this time of chaos and uncertainty, there is one thing about which there can be no ambiguity: Ukraine must transform its energy sector.
The ambiguity is more European than it is Ukrainian. The current crisis promises to become further exacerbated with Ukraine’s planned signing of the Association Agreement with the European Union on June 27. Ukraine hopes this will put pressure on Europe to resolve the gas sales issue, but it is unlikely to have much immediate impact on gas supply to Europe, particularly in the summer season, when gas stocks are relatively high.
Kiev presumably thinks that gas supply disruptions might just refocus EU countries back on the crisis in Ukraine, as they care above all about their own economic interests. The message Kiev is hoping to send is that if Europe cares about energy security for the next winter, it should help resolve the crisis in Ukraine now rather than letting it fester into the autumn.
The transformation must be comprehensive and it must be done with a clear understanding of what strategic assets really are. It is a process that must be completed over the course of years, and which must start definitively with the sale of the pipeline system, which is at the heart of the crisis in Ukraine.
Beyond this, Kiev will have to start selling off other assets and making the industry much more transparent, which will bring Western investors in to take advantage of the favorable gas price environment. But that’s the end game. Right now it’s about starting off the big transformation.
While it starts with the sale of the pipeline system, there are also abundant natural resources waiting to be development, and they will continue to wait without greater transparency. There are some other hard decisions Kiev will have to make as well, including selling off the state-run gas companies, Ukrnafta and Ukrgasproduction.
Kiev must realize that its eastern areas of Donetsk and Luhansk account for around 15 percent of Ukrainian GDP and have very significant linkages back to the rest of the Ukrainian economy. The risk in accepting the status quo in these two oblasts is an economic weight that the post-Maidan administration will not be able to handle and that will in the end be its downfall.
Right now, the Maidan government is tenuous, and the West needs to do much more to give it a chance to succeed, either by getting more serious with sanctions or lending financial support to Ukraine, or both. Ukraine assumes that sanctions pressure is keeping the Russian tanks from rolling across the border en masse, but this is a gamble at best.
By Robert Bensh for Oilprice.com
BRUSSELS,: The head of OPEC said there was no oil supply shortage due to the crisis in Iraq and that any increase in price on the markets was due to speculative trading.
“
“
Global oil prices have risen from around $109 a barrel to nine-month highs of over $114 on the back of the crisis but are nowhere near what analysts predict they could reach if Iraq were to halt exports.
“
The price rise seen on the oil markets was “not because of shortage but because of speculation,” he added.
Iraq, faced with a massive jihadist offensive that threatens to split the country, is a leading OPEC oil producer at more than three million barrels per day (mbpd) and more than 11 percent of all known oil reserves.
In May, Iraq produced 3.37 mbpd of crude oil according to the International Energy Agency (IEA), mainly from oilfields in the south along with others near the northern city of Kirkuk.
Among OPEC members, Iraq ranks behind Saudi Arabia but ahead of Iran and Kuwait. It has proven crude reserves of 140.3 billion barrels and 3.158 trillion cubic meters of natural gas, according to cartel figures.
25/06/2014 | 12:46 AM | World News
تصغير الخطتكبير الخط
VIENNA, June 24 (KUNA) -- Russia's Gazprom and Austria's OMV Group on Tuesday signed an agreement to construct the USD-45-billion South Stream gas pipeline project, which is expected to deliver 32 billion cubic meters of Russian gas to the country, bypassing Ukraine.
According to a statement by OMV, the project will be 50 percent owned by Gazprom, Russia's largest gas producer, and 50 percent by OMV, Austria's largest oil and gas company.
Construction on the Austrian section is expected to begin in 2015 and that the first deliveries will start in 2017, reaching full capacity in January 2018.
The agreement was signed amid the controversial visit of President Vladimir Putin to the country.
OMV CEO Gerhard Roiss said that South Stream fully complies with EU legislation.
"This project - investment in European energy security - will fully comply with EU legislation," Roiss said, as quoted by Itar-tass.
There has been controversy over South Stream, as is it needs EU approval so that it does not violate Europe's 'Third Energy Package', which says a company cannot both own and operate pipelines within the European Union.
Bulgaria and Serbia, countries nearly 100 percent dependent on Russian gas, have faced pressure from the EU to halt construction.
Ahead of Putin's visit to Vienna, Austrian ministers said they remained committed to Russia's South Stream project and that they plan to speed it up. (end) amg.hb
VIENNA (AP) -- The U.S. is trying to derail a project to build a gas pipeline that bypasses Ukraine to supply Europe, Russian President Vladimir Putin said Tuesday after Russian and Austrian energy firms agreed to build the pipeline's western end.
Austria's OMV and Russia's Gazprom signed a contract for the construction of the pipeline's Austrian section hours before Putin arrived on his second trip to the West since tensions spiraled over Russia's actions in Ukraine, a crisis that has prompted calls for Europe to lessen its reliance on Russian gas.
OMV general director Gerhard Roiss said the South Stream pipeline will "ensure energy security for Europe, particularly for Austria." Austrian President Heinz Fischer, who met with Putin, noted that large sections of the pipeline will cross NATO and European Union members Bulgaria and Hungary.
"No one can tell me why ... a gas pipeline that crosses NATO and EU states can't touch 50 kilometers (31 miles) of Austrian territory," he said.
Asked about American criticism of the pipeline, which is expected to start running in late 2016, Putin said that "our American friends ... want to supply Europe with gas themselves."
"They do everything to derail this contract. There is nothing unusual about it. It's competition, and political means are used in this competition," he said.
Bulgaria this month froze work on its section of the pipeline on orders from the EU Commission, which said Bulgaria hadn't respected rules on awarding public contracts. The Commission has also delayed some political talks on the pipeline amid the crisis in Ukraine.
Austria is a member of the EU, which along with the U.S. has imposed visa bans and asset freezes on a number of Russian officials.
The U.S. Embassy in Vienna said earlier Tuesday that trans-Atlantic unity has been essential to "discouraging further Russian aggression" and that the Austrians "should consider carefully whether today's events contribute to that effort."
© 2014 THE ASSOCIATED PRESS. ALL RIGHTS RESERVED. THIS MATERIAL MAY NOT BE PUBLISHED, BROADCAST, REWRITTEN OR REDISTRIBUTED. Learn more about our PRIVACY POLICY and TERMS OF USE.
Washington (Platts)--24Jun2014/202 pm EDT/1802 GMT
Delays in implementing Mexico's sweeping energy sector reforms will prevent the country from producing over 3 million b/d until at least 2020, an executive with the country's state oil company Pemex said Tuesday.
"We can increase, of course, but not enough to arrive at 3 million [b/d]," Fluvio Ruiz Alarcon, a professional and independent board member at Pemex, said on the sidelines of a Wilson Center event on Mexico's energy reform. "I'm sure we're going to produce over 3 million [b/d] but not by 2018. Maybe 2020, but not before."
Mexican President Enrique Pena Nieto set the 3 million b/d by 2018 production goal as the country's Congress passed a reform bill to end Mexico's 75-year state oil monopoly in December. But hurdles in finalizing the secondary legislation needed to implement the reforms, a process which includes modifying or creating 21 separate laws and faces significant opposition from the country's pro-business national action party (PAN), have already made this goal seem highly unrealistic."A lot of us didn't understand how hard it would be to get the secondary legislation passed," said Duncan Wood, director of the Wilson Center's Mexico Institute. "This is far from being a done deal, this is far from over."
New technologies and partnerships with some foreign firms could boost production in the near term by roughly 200,000 b/d, largely in mature, established fields, according Marcelo Mereles, a partner at EnergeA and a former Pemex international affairs advisor.
But production in undeveloped fields, in the Gulf of Mexico or in fields abandoned by Pemex will likely not be close to development by 2018, Mereles said.
"Virtually no greenfield project can take off in three and a half years," Mereles said.
Still, Mereles said the delays in implementing the reforms are "not that substantial."
At the same time, he said Nieto's administration has political reasons to show the impact of the energy sector reform ahead of mid-term elections in July 2015. To do this, Mereles said he expects the first round of bidding for production rights to begin by December and to be wrapped up by May or June next year.
"I think that the government understands that there is a lot of pressure to show results here," Mereles said.
The reforms will give foreign oil and gas companies development rights to gas and oil plays through production-sharing contracts or licenses. Despite stagnant production levels since 2009, Mexico has potentially the world fourth largest non-conventional oil and gas resources, according to Jeffrey Eppink, president and founder of Enegis, an energy consulting firm.
"Mexico has extremely good potential," Eppink said in a presentation Tuesday.
Over the last 100 years, 41 billion barrels of oil and 72 Tcf of gas have been extracted, with about 160 billion barrels equivalent remaining, according to Pemex estimates.
--Brian Scheid, brian.scheid@platts.com
--Edited by Derek Sands, derek.sands@platts.com
London (Platts)--24Jun2014/743 am EDT/1143 GMT
August loadings of Nigeria's flagship Qua Iboe crude oil blend are set to fall to 11.40 million barrels, according to a copy of the program obtained by Platts Tuesday.
August crude loadings are scheduled to total 11.40 million barrels, down from 12.35 million barrels in July, according to Platts data.
Twelve cargoes of Qua Iboe are scheduled to load in August, compared to 13 in July, according to the program.
On a daily average basis, loadings will fall to 367,742 b/d from 398,387 b/d in July.
The August loading program indicates that ExxonMobil holds four cargoes while the Nigerian National Petroleum Corp. holds eight.
Qua Iboe is produced from a number of offshore oil fields in the Bight of Biafra. The crude, from fields 20 to 40 miles off Nigeria's southeastern coast, is brought to shore via a subsea pipeline to the ExxonMobil-operated Qua Iboe Terminal.
ExxonMobil operates the Qua Iboe Terminal with a 40% interest, with NNPC owning the remaining 60%.
--Eklavya Gupte, eklavya.gupte@platts.com
--Edited by Alisdair Bowles, alisdair.bowles@platts.com
Moscow (Platts)--24Jun2014/946 am EDT/1346 GMT
Russian gas transit via Ukraine to Europe is continuing normally, and in the last 24 hours reached some 214 million cu m, Gazprom's official representative, Sergei Kupriyanov, said Tuesday.
"[Gas] transits via Ukraine are in line with contracts [between Gazprom and its European clients], in the past day they reached around 214 million cu m," Kupriyanov said in a written statement.
Gazprom has been increasing its gas flows to Europe via Ukraine in the past several days due to a planned halt in operations of the Nord Stream twin lines for maintenance works that started Tuesday.
The maintenance works are to last until July 4, however, starting June 28 the Nord Stream lines will operate intermittently, thus shipping half of the normal daily gas volumes.
Last week, Gazprom CEO Alexei Miller said gas transit via Ukraine was above 185 million cu/d, while on Sunday it reached some 205 million cu m, according to Gazprom.
Russian gas supplies via the Nord Stream lines remain well below the route's total capacity of 55 billion cubic meters/year.
Stability and security of Russian gas flows to Europe via Ukraine has become a focus of particular attention as Gazprom last week switched to a pre-payment system for gas supplies to Ukraine, raising concerns over potential illegal siphoning of the transit volumes.
Ukrainian government officials, however, on numerous occasions, have said the country is committed to ensuring steady and stable gas transit.
Ukraine's gas transportation system remains a key transit route for Russian gas flows to Europe.
In 2013, Ukraine transported 86.1 Bcm, or around a half of total Russian gas supplies to Europe.
--Dina Khrennikova, dina.khrennikova@platts.com
--Edited by Jeremy Lovell, jeremy.lovell@platts.com
Washington (Platts)--23Jun2014/300 pm EDT/1900 GMT
Below-normal temperatures are likely in July and August in the US Northeast, North Central and Southwest regions and will help keep pressure on natural gas prices and refill storage inventories depleted by a cold winter, private forecaster WSI said Monday.
In its latest outlook for the three-month period starting July 1, the Andover, Massachusetts-based company said cooler-than-normal weather is expected over the next two months in the Northeast, North Central and Southwest, with above-normal temperatures likely in the US Southeast, Northwest and South Central regions as El Nino conditions continue to develop in the tropical Pacific.
Consultant ESAI Power, which assesses the potential energy market effects of WSI's forecasts said the outlooks will likely mean aggregate North American natural gas demand next month is expected to be below normal due to the cooler-than-normal temperatures.
"These mild summer temperatures should result in relatively soft energy prices, particularly in the Northeast and Midwest markets," ESAI said. "Natural gas prices in the Northeast and Midwest will continue to see significant discounts to Henry Hub due to mild weather demand and continued production growth from Marcellus shale gas region."
It added that "robust gas injections should help offset some of the Northeast price weakness and allow storage levels to improve relative to last year, however. ... Slightly warmer-than-normal temperatures in the South should also help to support Henry Hub prices relative to the shale production region of Pennsylvania."
The expected replay of July weather in August will lead to lower power generation in the Mid-Atlantic and Midwest, helping keep gas prices in both regions below Henry Hub, ESAI said.
WSI is forecasting September will bring above-normal temperatures to the Northeast, Southeast and Northwest, with below-normal temperatures elsewhere. ESAI said that continued mild temperatures in the Midwest should help gas "inventories close the deficit to last year's storage levels. We expect generally mild temperatures across the Consuming East region this summer will allow natural-gas inventories to recover from the very large drawdown this past winter."
--Jeff Barber, jeff.barber@platts.com
--Edited by Derek Sands, derek.sands@platts.com
Houston (Platts)--24Jun2014/652 pm EDT/2252 GMT
US demand for traditional heating oil has waned ahead of the impending switch to lower-sulfur products in several Northeast states, sending differentials for the product into decline.
The vast majority of US heating oil demand lies in the Northeast, where several states -- including the high-demand Massachusetts, Connecticut and New Jersey -- are tightening sulfur specifications for home heating oil to less than 500 ppm sulfur on July 1.
But the market has already lost interest in traditional heating oil, which has less than 2,000 ppm sulfur, traders said.
"Demand is nonexistent," one trader said. "I don't see anything changing. Until the arbitrages open out of New York Harbor, heating oil is likely to get weaker."
Any impact from the sulfur switch is already being factored into the market, a second trader said, as some buyers have already begun preparing for the 2014 winter demand season with lower-sulfur product.
US Gulf Coast traditional heating oil fell to NYMEX July ULSD futures minus 14 cents/gal Tuesday, 1.25 cents/gal less than Monday. The same product on the Atlantic Coast fell 25 points to minus 10 cents/gal, the lowest level since minus 10.25 cents/gal on September 11.
Platts assessed the NYMEX July ULSD futures contract up 87 points to $3.0491/gal at 3:15 pm EDT (1915 GMT).
--Joshua Mann, joshua.mann@platts.com --Edited by Annie Siebert, ann.siebert@platts.com
London (Platts)--24Jun2014/1034 am EDT/1434 GMT
BP has pushed back plans to drill its first exploration well offshore Libya to 2015, a spokesman said Monday, while the UK major also continues to examine its options for its onshore assets due to ongoing security concerns in the country.
BP was set to start drilling offshore when the Libyan uprising in February 2011 forced the company to postpone its plans.
It is still moving towards finalizing the offshore well, the spokesman said, but the spudding is not likely to take place before the end of this year."We're planning toward 2015," the spokesman said.
The UK's ambassador to Libya, Michael Aron, met on Sunday with Libya's oil minister Omar Shakmak and a Libyan delegation to discuss both UK-Libya relations and BP's role in developing Libya's oil sector, according to a statement posted to the website of state-owned NOC.
"During the meeting, they discussed bilateral relations between the two countries and developments in the field of the oil and gas industry and investment in the relevant areas," NOC said.
"They discussed the security situation in the fields and oil ports and the support of foreign companies operating in Libya and the British in particular, and BP keeping its role in the development of the oil sector in Libya," it said.
BP signed an exploration and production deal with NOC in May 2007 worth at least $900 million for one license in the onshore Ghadames Basin and one in the offshore Sirt Basin.
The company has said it is looking at possibly bringing in a partner for its onshore license, which is close to the Algerian border where BP suffered an attack on its In Amenas gas plant early last year.
BP CEO Bob Dudley in July last year said BP was looking at possibly giving up operatorship of the onshore license.
--Stuart Elliott, stuart.elliott@platts.com
--Edited by Jeremy Lovell, jeremy.lovell@platts.com
London (Platts)--24Jun2014/747 am EDT/1147 GMT
Low-sulfur crude differentials dropped in West Africa and Europe at the start of the week due to poor demand, following run cuts at European refineries, and with WAF grades providing heavy competition for European crude oil in both the Mediterranean and Northwest Europe.
"You've got to look at the global picture -- is the East taking as much from WAF as usual," said one trader Tuesday. "And is WAF oversupply from July [programs] causing oversupply in other regions."
There were still about 15 cargoes or approximately 15 million barrels of Nigerian crudes unsold left from the July loading program Monday, with Europe being the most likely home for material at this phase of the trading cycle.But against a backdrop of thin refining margins, and rising freight rates out of West Africa, European demand for West Africa's light sweet crudes has been very low.
Offers have fallen steadily in the past week, sources said, with grades like Bonny Light falling below Dated Brent plus $2.00/b to four-month lows, and Brass River assessed down five cents on Monday at Dated Brent plus $0.95/b,its lowest since August 2012.
Further falls are expected by traders if demand remains this subdued.
Exacerbating the situation, Bonny Light and Escravos cargo injections were seen for July, traders said.
IMPACT IN EUROPE
The entire Mediterranean crude complex has dropped sharply over the last few weeks, weighed down by low demand and competing alternative crudes from West Africa, traders said.
"Margins are still not good," a crude trader said. "There are too many cargoes around -- specifically from West Africa."
On Monday, Aframax cargoes of Saharan Blend (FOB Algeria) were assessed at Dated Brent minus $0.15/b, their lowest in more than a year.
Kazakhstan's CPC Blend which, like Saharan, is naphtha-rich, was assessed at Dated Brent minus $1.73/b, holding at a near two-year low.
"CPC came off so much, and all of the usual buyers have already bought," one crude trader said, adding that there are still cargoes of the grade available at the prompt. "But people can't buy more because of mercaptan restrictions, so it is really feeling the impact from the margins."
In the North Sea, with a competitive offer and no buying interest, Troll fell to Dated Brent plus $2.00/b Monday, its lowest since Platts began assessing the grade on March 1, 2012.
The Oseberg differential fell to Dated Brent plus $0.71/b Monday, its lowest in eight months, according to Platts data.
Brent/Ninian Blend was also offered lower, and fell to Dated Brent plus $0.05/b, its lowest in seven months.
--Paula VanLaningham, paula.vanlaningham@platts.com
--Eklavya Gupte, eklavya.gupte@platts.com
--Ned Molloy, ned.molloy@platts.com
--Edited by Jonathan Dart, jonathan.dart@platts.com
Press Trust of India | New Delhi June 24, 2014 Last Updated at 16:47 IST
India's crude oil production dropped marginally in May as a fall in output at fields operated by state-owned ONGC and OIL negated increased flows from private firms including Cairn India.
Crude oil production was at 3.16 million tonnes in May compared with 3.17 million tonnes in the same period a year ago, according to data released by the Oil Ministry here.
Oil and Natural Gas Corp (ONGC) reported a 1.3 per cent drop to 1.87 million tonnes as its fields in Gujarat produced less. Oil India Ltd (OIL) produced 5.2 per cent less at 284,143 tonnes, while output from fields operated by private firms rose 3.1 per cent to 1.005 million tonnes.
Natural gas production dipped 2.2 per cent last month to 2.94 billion cubic meters as private operators saw an almost 10 per cent drop in output. While ONGC's gas production was almost unchanged at 1.93 bcm, production from offshore fields of private firms such as Reliance Industries dropped 9.8 per cent to 685.22 million cubic meters.
India's April-May oil production at 6.26 million tonnes was almost unchanged from the previous year. Gas output in the period dropped 5 per cent to 5.94 bcm.
Growing US Rockies Niobrara Shale crude production is adding to the pool of light, sweet oil giving US refiners an economic edge over foreign competition in producing gasoline, diesel and other refined products. Some of the most recent announcements about the crude have been about new movements to the East Coast, but the West Coast may ultimately be the market for it.
The latest news came from Meritage Midstream, which on Friday sent its first train of Niobrara crude to an undisclosed East Coast refiner. The 99-car train was carrying 70,000 barrels on the Union Pacific rail line from the Black Thunder Terminal in Wyoming, one of several new terminals.
As production ramps up beyond regional refinery needs, Niobrara crude is expected to compete more with Bakken Shale and Eagle Ford Shale crudes for the attentions of Gulf and West coast refiners. But those regions may not be ready for it.
On the West Coast, several proposed California crude-by-rail projects are on hold while they wait for permits,” said John Auers, senior vice president at Turner, Mason & Co. “The Gulf Coast is glutted with light crude from the Permian and Eagle Ford, so I don’t see much making it there,” Auers said. “The USWC is a logical market [to displace waterborne imports and ANS] but the infrastructure to get it there is not in place.”
The Energy Information Administration puts regional Rockies refinery capacity at about 630,000 b/d. Crude production in the DJ Basin of Colorado and Wyoming, which houses the Niobrara Shale and other formations, is just over 200,000 b/d, up from about 50,000 b/d in early 2010, according to Bentek, a unit of Platts.
Bentek expects that production to be more than 450,000 b/d by 2019. Like other US shale plays, transportation out of the Rockies is limited for now as rail and pipeline infrastructure construction continues. The only pipeline that brings Rockies crude to Gulf Coast refiners is the 80,000 b/d White Cliffs pipeline, from Platteville, Colorado, to Rose Rock’s storage facility in the oil hub of Cushing, Oklahoma.
Loading volumes for Republic of Congo’s two main crude oil grades — Djeno and N’Kossa — in August are set to be unchanged month on month at 7.42 million barrels, or an average 239,355 b/d, according to copies of preliminary loading schedules seen by Platts Tuesday.
Djeno, the country’s flagship grade, is set to load six 920,000 barrel cargoes in August, with N’Kossa loading two 950,000 barrel cargoes. Djeno, a heavy medium-sweet crude grade with an API gravity of 28.1, is suitable for direct burning in power generation, according to the website of Total, which operates the Djeno terminal.
It is a popular grade among Chinese refiners, especially Sinochem and Unipec. N’Kossa, a light sweet grade also loaded by Total from the Djeno terminal, has a gravity of 39.93 API and a sulfur content of 0.06%, according to the company. The program for the country’s third main grade, Azurite, has not been released, sources said.
The potential redirection of high sulfur crude from Bashkortostan to eastern destinations is not going to bring the ESPO crude sulfur content above the specification of 0.65%, Russian pipeline operator Transneft said on its website.
Last week, Bashneft CEO Alexander Korsik said that Transneft is considering building new pipeline infrastructure to allow crude produced by Bashneft in Bashkortostan to be pumped directly into the East Siberia-Pacific Ocean pipeline system.
The project envisions around 4 million mt of high sulfur Bashkiria crude to be sent to the ESPO pipeline system, Transneft said Friday, adding that as a result “the ESPO blend will not deteriorate.”
Currently, ESPO has 0.5% sulfur content, whereas the maximum allowed by specification is 0.65%. In order to keep the sulfur within this limit, the high sulfur crude will be fed under strict control, Transneft said.
Access to ESPO from fields in Bashkortostan could be more lucrative for Bashneft, Korsik said, adding that “the project is under consideration” and no decision will likely be taken on the project within the next year.
The partial redirection of high sulfur crude from western to eastern destinations as well as its increased domestic processing at adjacent to the fields refineries is necessary in order to mitigate the gradual deterioration of the western crude flows, Transneft said.
Transneft expects further increase of the sulfur content in the Urals export flows this year, although it will remain below the specifications. Based on preliminary expectations, the sulfur content of the crude exports from the Black Sea port of Novorossiisk will reach 1.36% in 2014, up from 1.25% in 2007.
This is still below the specifications of 1.5%. Likewise, the sulfur content of the Baltic Sea port of Primorsk’ flows is set to rise to 1.44% this year, compared to 1.32% in 2007, but remain below the 1.55% limit. The nearby Ust-Luga port will see sulfur go up to 1.6% in 2014, from 1.51% when exports started in 2012. Specifications for Ust-Luga and the Druzhba pipeline crude put the sulfur content at 1.7%, which is the highest level among all of Russia’s main crude export routes.
CSX railroad is sending eight to 20 trains per week, each carrying at least 1 million gallons of crude oil, through Virginia, a disclosure the company filed with the state showed. Meanwhile, in Washington, short-line railroad Tacoma Rail, which is owned by the city of Tacoma, is moving three trains per week through Pierce County, each carrying 2.5 million to 3.4 million gallons of crude.
Virginia and Washington, which posted the crude-by-rail details on their websites this week, became the first states to reject efforts by some railroads to keep routing and oil train volume information from being disclosed publicly for competitive and security reasons.
In Virginia, a 105-car CSX train carrying 3 million gallons of Bakken crude derailed and caught fire in Lynchburg on April 30, and state officials in Washington have become increasingly concerned about the volumes of crude moving through their state, particularly as crude by rail has skyrocketed amid booming Bakken production.
Jeffrey Stern, Virginia’s coordinator of emergency management, said officials there had originally agreed to sign a nondisclosure agreement with CSX but later determined that the information “is readily available from other public sources” and therefore should not be withheld from public posting. CSX could not immediately be reached for comment.
Under an emergency order issued by US Transportation Secretary Anthony Foxx in May in response to several derailments and accidents involving oil trains, railroads are required to inform states about how many trains transporting more than 1 million gallons of crude are traveling through them and what routes they are using.
The information is to be shared with state emergency responders to allow them to better anticipate and respond to any incidents. But several railroads, including CSX and BNSF, have asked states not to provide some of that information to the general public, in some cases threatening legal action against states if they do so, according to local media reports.
Virginia, in its website posting, said CSX was the only railroad with trains carrying more than 1 million gallons of crude through the state. CSX’s disclosure said its oil trains operate four routes through the state spanning 20 counties. Each route has an estimated average of two to five oil trains per week. CSX had told the state that the routing and volume details comprised “highly confidential and sensitive business information that can only be shared with individuals with a need to know” and asked the state to sign a nondisclosure agreement.
By Grant Smith Jun 24, 2014 11:38 AM GMT+0700
The worsening conflict in Iraq poses a bigger risk to long-term oil prices than traders anticipate, according to banks from Citigroup Inc. and Bank of America Corp.
Brent crude contracts for December 2018 cost $15.26 a barrel less than August, a spread that’s widened by 9.9 percent since the end of May. Violence in Iraq is the biggest risk to new supply this decade from any nation in the Organization of Petroleum Exporting Countries, the International Energy Agency said June 13.
While fighters from the Islamic State in Iraq and the Levant have seized cities north of Baghdad, the majority of oil assets are in the south and east. Still, having the al-Qaeda splinter group within miles of the nation’s capital threatens to derail plans to increase production.
“The market has worked itself into an extraordinary level of complacency,” Seth Kleinman, European head of energy research at Citigroup in London, said by phone on June 19. “The reality is that Iraq matters now and, given what a big component it is of global production growth, it matters possibly even more for the future.”
Brent reached a nine-month intraday peak of $115.71 a barrel on June 19 and settled yesterday at $114.12. December 2018 futures of the grade have advanced 4 percent since ISIL seized Mosul, settling at $98.86 a barrel. The North Sea grade is used to price more than half the world’s oil, including Iraq’s Basrah Light grade.
Shia South
Markets haven’t panicked because Shia-dominated southern regions remain unaffected and will be fiercely defended against the ISIL insurgency, Harry Tchilinguirian, BNP Paribas’s head of commodity markets strategy, said by e-mail on June 20. Southern Iraq produced more than 85 percent of the country’s 3.1 million barrels a day of crude in April and shipped all of its 2.5 million barrels of daily exports, Oil Ministry data show.
A long-term deterioration of security because of regular terrorist attacks could affect international oil companies and they might scale back operations, Tchilinguirian said.
Exxon Mobil Corp. (XOM) and BP Plc began removing some employees from projects in Iraq last week. The IEA cut its forecast for Iraq’s capacity expansion to 2019 by 470,000 barrels a day in a report on June 17, citing the insurgency. The country will boost production by a “conservative” 1.28 million barrels a day to 4.54 million over the period, the IEA estimates.
No Flood
“Foreign upstream investment will be reduced as will the government’s capacity to progress major infrastructure projects and resolve bureaucratic issues,” threatening Iraq’s target of 5 million barrels of daily production by 2020, Amrita Sen, chief oil markets analyst at London-based consultant Energy
Aspects Ltd., said by e-mail yesterday. Brent for delivery at the end of this decade will probably advance because current price levels need “a lot of incremental oil supply from Iraq, while all the current dynamics suggest that the flood may just be a trickle,” said Sen.
“What’s happening in Iraq is exacerbating the problem” of prolonged supply disruptions caused by sanctions on Iran, political feuding in Libya and the civil war in Syria, Francisco Blanch, head of commodities research at Bank of America in York, said by phone on June 19. The bank said it expects long-dated Brent prices to rise.
Critical Source
With Iraqi Kurdish forces moving to secure territory threatened by the militants, including the northern Kirkuk oilfield, the current turmoil may yet allow a near-term increase in the nation’s crude exports, Citigroup and Barclays Plc predicted.
Production growth from non-OPEC nations such as the U.S., which are as important in determining long-term prices as OPEC supplies, may also mute the market reaction, said Tchilinguirian.
Still, any persisting danger to such a critical source of supply growth as Iraq should push long-term prices a few dollars higher, said Miswin Mahesh, an analyst at Barclays in London.
“The extra production capacity is supposed to come from Iraq, and you have a big, fluid situation there,” Mahesh said by phone on June 19. “That does throw the door open for the value of the back end to be reassessed.”
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Ramsey Al-Rikabi, Alexander Kwiatkowski
By Sabrina Valle and Peter Millard Jun 24, 2014 10:21 PM GMT+0700
Petroleo Brasileiro SA shouldered at least 829 million reais ($373 million) in spending at an oil refinery that a Brazilian state had previously agreed to assume after requests by then governor Eduardo Campos, according to internal documents obtained by Bloomberg News.
In his previous role as governor of Pernambuco state, Campos sent requests to then refining director Paulo Roberto Costa to have Petrobras (PETR4) cover expenses related to the Abreu & Lima project that Pernambuco had originally agreed to pay, according to the documents signed between 2007 and 2010. Now a Brazilian presidential candidate, Campos said his dealings with Petrobras were always transparent and in the public interest.
Passing on expenses to state-run Petrobras is one example of how the refinery’s budget swelled to $18.5 billion from $2.5 billion. Chief Executive Officer Maria das Gracas Foster has called the project -- which is the subject of unrelated federal probes involving over billing and money laundering -- an example of inefficiency that can’t be repeated. The internal documents don’t indicate any wrongdoing by Campos.
Campos was Pernambuco governor from 2007 to April 2014 when Petrobras started building the plant and now is running third in the presidential polls. Petrobras didn’t provide a response to at least three e-mails and several phone calls seeking comment. The office of President Dilma Rousseff referred questions to the Rio de Janeiro-based company.
Refining Losses
Operational losses at Petrobras’s refining unit have reached more than $40 billion since 2011 when Rousseff started using the company to subsidize fuel imports to rein in inflation. Runaway spending at the unit has led to a host of federal investigations this year and put Rousseff on the defensive ahead of October elections.
The various investigations have prodded Petrobras to begin its own internal probe amid a four-year slide in the company’s share price and criticism from analysts and investor groups that Brazilian government meddling in the company’s affairs is central to its poor performance.
There is no evidence that Rousseff, who chaired Petrobras from 2003 to 2010, was aware of the requests that were made to Petrobras management, not the board of directors. While Rousseff holds a lead in polls, the combined support of opposition candidates Aecio Neves and Campos may be enough to force her to compete in a runoff election on Oct. 26.
‘Political Component’
Former president Luiz Inacio Lula da Silva, who was born in northeastern Brazil where the ruling Workers’ Party remains popular, said in 2005 that the project would create jobs and accelerate the economy in one of Brazil’s most undeveloped regions. He also pitched it as a source of regional integration. Venezuela originally planned to pipe in tar oil from the Orinoco region before pulling out of the venture.
“There’s a heavy political component that can’t be neglected,” Marcela Segade, senior manager of downstream research at consulting firm IHS, said in a telephone interview. “Pernambuco is where Lula is from, so that’s a project close to his heart.”
Petrobras’s decision to build at a new site instead of continuing to expand capacity at existing plants with related infrastructure probably contributed to the high price tag, said Mike Leger, president of Turner, Mason & Co., a Dallas-based energy consultant.
The refinery is more expensive than similar projects globally that are designed to turn medium and heavy grades of crude into high value transportation fuels including diesel and gasoline, he said.
No Bargain
“They’re building a lot of complexity, I would have expected it to be more in the $10 billion plus range, so it doesn’t appear they got a bargain compared to competitive projects around the world,” Leger said by phone.
Motiva Resources LLC spent about $10 billion to add a new 325,000-barrels-a-day processing train to its refinery in Port Arthur, Texas. That’s about $30,000 per barrel of capacity, compared to more than $80,000 at Abreu & Lima. Reliance Industries Ltd. spent $6 billion, or $10,000 per barrel of capacity, to expand its Jamnagar complex.
Foster has cited infrastructure related to refinery access as one of the reasons costs rose more than sevenfold; others include design changes and swings in the exchange rate. The project is 87 percent complete and Petrobras plans to start operations in November, Foster told lawmakers last week.
“Building a refinery in Brazil requires off-site construction,” she said. “In other places, needed investments don’t go beyond the heart of the refinery.”
The documents show Campos, the heir of a political family from Pernambuco state where his grandfather was also a governor, wrote that the state was short of funds and the project would be delayed unless Petrobras assumed the cost of building refinery infrastructure, including shipping channels, a pier, access roads and part of an expressway.
Flood Relief
“During my two administrations in Pernambuco, relations with Petrobras were always institutional, transparent and oriented toward the public interest,” Campos said in an e-mailed response. He didn’t reply to questions about spending increases.
Campos was first elected as part of the ruling coalition, was science minister under former president Lula and was active in Rousseff’s 2010 campaign. He broke with Rousseff after the largest street protests in two decades last June against inflation, poor public services and corruption eroded the president’s popularity.
In a Sept. 23, 2010 letter to Costa, Campos requested 200 million reais from Petrobras for an access channel to allow tankers to dock at the refinery’s port because flood relief efforts had drained the state’s budget, the documents show.
Legal Steps
Foster told lawmakers that the channel is being finished with Petrobras’s own money and without compensation. She made no mention of Campos. Dredging work at the Suape industrial complex is being investigated by the country’s audit court in Brasilia.
Campos’ requests for payments from Petrobras later reached at least 829 million reais because the state government was unable to pay for other construction work to which it had previously committed, the documents show. Fifty-six percent of the resources would be returned to Petrobras over 25 years with fees the port complex would generate, they show.
It is common to have this kind of a contract and the investments are almost complete, the Suape port said in an e-mailed response. The requests for spending increases were made jointly by Petrobras and the state government and were approved through the appropriate legal steps, Suape said.
Beyond Reach
“The total budget, including dredging and rock fragmentation, reached an amount that the state considered beyond its possibilities,” one of Costa’s deputies wrote in a letter requesting the additional spending that Costa, the former head of refining, signed and sent to the executive board for approval.
Prosecutors are investigating Costa in an unrelated matter for allegedly diverting funds from Abreu & Lima to informal currency changers, Judge Sergio Fernando Moro said in a June 11 statement. Swiss authorities blocked $28 million held in accounts linked to Costa, according to the statement.
Costa’s lawyer Nelio Machado didn’t respond to phone calls and e-mails requesting comment.
Dismissed in 2012 after Foster became CEO, Costa told lawmakers he couldn’t recall any direct negotiations with the state government to authorize cost increases at the refinery. The documents obtained by Bloomberg show he signed off on at least two of the cost increases Campos had requested, and his name appears on other correspondence with Campos.
To contact the reporters on this story: Sabrina Valle in Rio at svalle@bloomberg.net; Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Carlos Caminada
By Dan Murtaugh Jun 25, 2014 2:51 AM GMT+0700
Motorists in the U.S. may pay the most for gasoline in six years over the July 4 Independence Day holiday as the escalating conflict in Iraq pushes oil prices higher during the peak driving season.
Retail gasoline averaged $3.704 a gallon yesterday, up 1.8 cents from a week earlier and the highest level for late June since 2008, the U.S. Energy Information Administration reported. Brent crude futures, the price basis for imports of crude and gasoline, jumped $5.29 a barrel this month as energy companies including Exxon Mobil Corp. (XOM) and BP Plc (BP/) evacuated workers from Iraq because of the worsening violence in OPEC’s second-largest oil producer.
“There’s a fear that the rebels will take Baghdad or the oil-producing regions, and that’s driving up the cost of oil and making it more expensive to produce gasoline,” Michael Green, a Washington D.C.-based spokesman for the AAA motoring organization, said by phone yesterday. “There’s a good chance that drivers will pay the most expensive price for July 4 in six years, based on what we’re seeing now.”
Gasoline Imports
The U.S. imported 766,000 barrels a day of gasoline in the week ended June 13, up from 556,000 a year earlier. Gasoline futures are up 17.59 cents a gallon on the New York Mercantile Exchange this month, reaching a nine-month high of $3.1277 June 20. The August contract gained 1.82 cents to $3.1258 today.
Militants from the Islamic State in Iraq and the Levant have been battling Iraqi forces for almost two weeks over the country’s largest refinery, the 310,000-barrel-a-day plant in Baiji.
Iraq’s crisis flared when ISIL militants this month captured Mosul, the country’s biggest northern city, and advanced to towns just north of Baghdad. Iraq pumped 3.3 million barrels of oil a day last month, data compiled by Bloomberg show, second only to Saudi Arabia in the 12-member Organization of Petroleum Exporting Countries. Production remains unaffected in the southern part of the country, where about 85 percent of output is located.
Regional Prices
Pump prices advanced in every region of the U.S. except for the Midwest, where they fell 2.1 cents. The biggest gain was in the Rocky Mountain area, where fuel costs rose 7.6 cents to $3.606 a gallon, the EIA report showed.
The EIA collects information from about 800 filling stations as of 8 a.m. local time on Mondays.
Prices have risen 1.4 cents in June, after falling an average of 21 cents for the month the previous three years, according to data from Heathrow, Florida-based AAA.
“We thought prices would fall 10 to 15 cents in June, so from that point of view the net effect is significant,” Green said.
To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Stephen Cunningham
By Grant Smith and Ben Sharples Jun 24, 2014 7:35 PM GMT+0700
Brent crude traded near its lowest in a week and West Texas Intermediate slipped amid speculation that Iraqi oil production won’t be disrupted by violence in OPEC’s second-largest producer.
Futures fell as much as 0.5 percent in London. Iraqi forces regained control of the Baiji refinery in the north from Islamist militants, and fighting hasn’t spread to the south, home to more than three-quarters of the country’s crude output. Saudi Arabia can boost oil output to more than 12.5 million barrels a day if needed, according to a Saudi oil official. There isn’t a shortage of supply or need for OPEC to meet because of the Iraq crisis, the group’s secretary-general said.
“Iraq is still the talk of the town, even though the situation on the ground has not escalated materially,” Amrita Sen, chief oil markets analyst at London-based Energy Aspects Ltd., said in a report. “Iraqi supply losses have been minimal so far.”
Brent for August settlement dropped as much as 57 cents to $113.55 a barrel on the London-based ICE Futures Europe exchange and was at $114.27 at 1:01 p.m. London time. The contract slid 0.6 percent to $114.12 yesterday, the lowest close since June 17 and the biggest loss since May 16. The volume of all futures traded was almost double the 100-day average for the time of day. Prices are up 3.1 percent this year.
WTI for August delivery fell as much as 92 cents to $105.25 a barrel in electronic trading on the New York Mercantile Exchange. The U.S. benchmark crude traded at a discount of $7.94 to Brent, from $7.95 yesterday.
Iraq Fighting
Front-month Brent futures are trading at a premium of 34 cents to the September contract, a structure known as backwardation.
That premium has dropped from 57 cents on June 20, signaling a lack of concern about the immediate risk to supplies, according to Energy Aspects. It could also reflect that traders expect the U.S. to tap its emergency Strategic Petroleum Reserve if the market tightens, Energy Aspects’ Sen said in the report.
Saudi Arabia will respond to any shortage and can sustain output at 12.5 million barrels a day for as long as demand requires, said the kingdom’s official, who declined to be identified. It pumped 9.7 million barrels a day last month, Bloomberg data show.
OPEC Perspective
There’s no need for the Organization of Petroleum Exporting Countries to hold an emergency meeting before its scheduled Nov. 27 conference, Secretary-General Abdalla El-Badri said today in Brussels. Prices are being driven up “nervous” sentiment and speculation, he said.
Brent rose 1.2 percent for a second weekly gain in the period ended June 20 as the unrest in Iraq fanned concern that oil supplies may be threatened. The nation pumped 3.3 million barrels a day last month, data compiled by Bloomberg show, making it the largest producer after Saudi Arabia in the 12-member Organization of Petroleum Exporting Countries.
Iraqi forces recaptured the Baiji refinery in overnight clashes with the Islamic State in Iraq and the Levant, Lt. Col. Muslih Mahmoud, one of the army officers assigned to protect the facility, said by phone from the plant. The crisis in Iraq flared this month when insurgents captured the northern city of Mosul and advanced to towns just north of Baghdad.
U.S. Stockpiles
U.S. crude supplies probably shrank by 1.4 million barrels last week to 384.9 million, according to the median estimate of seven analysts in the Bloomberg survey before an Energy Information Administration report tomorrow. Stockpiles reached 399.4 million through April 25, the highest level since the Energy Department’s statistical arm started publishing weekly data in 1982.
Gasoline inventories expanded by 1.5 million barrels, the survey shows. The peak U.S. driving season typically starts on Memorial Day, which came on May 26 this year, and runs through Labor Day on Sept. 1.
The American Petroleum Institute is scheduled to release separate supply data today. The industry-funded API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Rachel Graham, John Deane
By Todd White Jun 24, 2014 7:10 PM GMT+0700
Repsol SA’s plans to explore for oil off the Spanish Canary Islands in a $10 billion project won backing from the nation’s Supreme Court.
The justices rejected seven appeals against Repsol’s exploration permits, and sentence will be published in coming days, according to a court official who spoke on condition their name not be used.
Today’s favorable ruling removes one of the last few hurdles remaining for the biggest Spanish biggest oil company to begin drilling off Fuerteventura and Lanzarote islands near West Africa. Should Repsol discover oil, it has estimated the project will cost 7.5 billion euros ($10.2 billion).
The appeals contested the Spanish government’s decision in 2012 to reapprove exploration permits that were originally given in 2001. They had been held up since that year in court battles and administrative delays.
To contact the reporter on this story: Todd White in Madrid at twhite2@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
By Stephen Bierman and Jasmina Kuzmanovic Jun 24, 2014 6:52 PM GMT+0700
Fifteen years after Wesley Clark led NATO’s bombing campaign against Serbia, the retired U.S. general is back in the Balkans -- looking for oil.
Clark, who was also a presidential candidate in 2004, is a director of two Canadian explorers working in Albania, Bankers Petroleum Ltd. (BNK) and Petromanas Energy Inc. (PMI) They’re using modern drilling techniques to revive production in one of Europe’s poorest countries, where oil was first produced in the 1920s.
“Albania has an enormous economic significance for Europe as it has a robust supply of oil, and it should be a strong component of European energy policy,” Clark said in a telephone interview.
Oil exploration is part of Albania’s strategy to repair the damage of four decades of economic isolation under the communist regime of Enver Hoxha, who built more than 700,000 concrete military bunkers before he died in 1985. Albania’s economy, where per capita income remains the lowest in Europe after Bosnia, Ukraine and Moldova, has almost doubled in size in the last decade, according to the World Bank.
Clark, who’s been on Bankers Petroleum’s board since 2008 and became a Petromanas Energy director last year, was NATO’s supreme allied commander in Europe when the alliance’s bombing campaign forced Serbia to withdraw from Kosovo, where ethnic Albanians make up the majority of the population.
Horizontal Drilling
Bankers Petroleum, based in Calgary, is using horizontal drilling and water flooding to revive Patos-Marinza, first discovered in 1928 and once Europe’s largest producers. Output, which had dwindled to almost nothing in 2004, is now 20,000 barrels a day and Bankers plans to drill 170 wells a year to boost production to almost 50,000 barrels a day by 2020.
“Bankers is a lower risk investment alternative that provides predictable and growing production on a significant reserves and resource base,” Darren Engels, an analyst at FirstEnergy who rates the company a buy, said this month.
Bankers Petroleum has a return potential of 20.3 percent above the C$7.23 close on June 23, according to 17 analysts surveyed by Bloomberg. The company has 14 buy recommendations, three holds and no sell recommendations, according to data compiled by Bloomberg.
Southern Italy
Petromanas Energy, also based in Calgary, is a partner with Europe’s largest oil company, Royal Dutch Shell Plc (RDSA), to hunt for new oil fields in Albania, where the geology is similar to southern Italy, home to some of Europe’s largest onshore fields.
Two wells drilled by the companies have found about 375 million barrels of oil, according to Petromanas, which holds a 25 percent stake in the venture. A third, called Molisht-1 is being drilled at the moment.
“What’s happening in Albania is representative of the fact that if price of oil stands at $100 a barrel, people are looking at new opportunities,” Clark said. “If the price stays there, it has changed the geography of oil; it is happening in Albania, it is happening elsewhere in Europe.”
To contact the reporters on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net; Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Torrey Clark
By Bloomberg News Jun 24, 2014 1:46 PM GMT+0700
China may be bolstering its emergency crude reserves as refiners in the world’s second-largest oil consumer expanded commercial stockpiles to a record high in May.
Crude inventories rose 4 percent from April, China Oil, Gas & Petrochemicals, published by the official Xinhua News Agency, said in an e-mailed report today. That’s about 33.59 million metric tons, or 246.2 million barrels, the most in records going back to January 2010. Gasoline supplies also swelled to a record, climbing 0.9 percent to an estimated 7.6 million tons.
China’s commercial oil stockpiles can be channeled for strategic use, according to industry consultants including ICIS-C1 Energy in Shanghai and FGE in Singapore. Refiners accelerated crude imports in April and May as the nation sought to increase its energy security with prices at a “fairly” high level, said Amy Sun, an oil analyst at ICIS-C1.
“We believe high commercial stocks may indicate refiners are potentially stocking feedstock for the government,” she said by phone from Guangzhou today. “China may be taking this opportunity to start filling strategic storage.”
OGP said its inventory data excludes supplies in national reserves, while the Chinese government doesn’t publicly release strategic stockpile figures.
Brent crude, the benchmark grade for more than half the world’s oil, gained 1.2 percent in London trading in May and has advanced 4 percent this month to about $114 a barrel.
China, which trails only the U.S. in consumption, is also maximizing its gasoline production amid rising domestic demand and improved refining margins, Ye Manman, another ICIS-C1 analyst, said by phone today. Auto sales in May climbed 13.9 percent from a year earlier to 1.59 million units, according to data from the state-backed China Association of Automobile Manufacturers.
To contact Bloomberg News staff for this story: Sarah Chen in Beijing at schen514@bloomberg.net
To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Yee Kai Pin, Mike Anderson
By Elffie Chew and Lilian Karunungan Jun 24, 2014 9:33 AM GMT+0700
The ringgit will weather a surge in oil prices better than other Southeast Asian currencies as Malaysia is the region’s sole net exporter of crude, providing support for bonds, BNP Paribas Investment Partners says.
Options traders are the least pessimistic on the ringgit’s outlook, while the currencies of net oil importers such as Indonesia and Thailand are viewed as the most vulnerable, data compiled by Bloomberg show. Crude climbed last week to the highest level since September, driven by concern escalating violence in Iraq will disrupt world supply, and Malaysian bonds outperformed the rest of the region over the past month.
While higher oil prices inflate the cost of fuel subsidies and hamper government efforts to rein in Malaysia’s budget deficit, the nation has a current-account surplus that provides support for the ringgit. Indonesia and Thailand also subsidize fuel costs and face worsening budget shortfalls at the same time as their current-account gaps swell.
“We are a little more positive on the ringgit,” Mark Capstick, a London-based portfolio manager at BNP Paribas Investment Partners overseeing 488 billion euros ($663 billion) globally, said in a June 20 interview. “Malaysia stands to benefit from oil-price rises. The total return that comes from bonds with the currency has made it more attractive.”
One-week options contracts giving the right to sell the ringgit over those to buy are at a 0.1 percentage-point premium, compared with 0.7 point for Indonesia’s rupiah, 0.5 for the Thai baht and 0.3 for the Philippine peso, according to data compiled by Bloomberg.
Bond Returns
While Capstick purchased forwards in Malaysia’s currency to benefit from potential gains, he said bond yields could still rise on prospects the central bank will boost borrowing costs for the first time since 2011. One-year interest-rate swaps climbed three basis points, or 0.03 percentage point, to 3.67 percent in June, above Bank Negara Malaysia’s 3 percent rate.
The nation’s local-currency sovereign notes returned 0.5 percent over the past month, compared with a gain of 0.4 percent in Indonesia, according to indexes compiled by HSBC Holdings Plc. Philippine notes fell 0.6 percent and Thai securities dropped 0.3 percent.
The ringgit gained the most among Asian currencies today, climbing 0.2 percent to 3.2135 per dollar as of 10:27 a.m. in Kuala Lumpur. It has advanced 2.7 percent in the past three months, the best performance in Southeast Asia after the peso’s 2.8 percent advance, according to data compiled by Bloomberg. One-month non-deliverable forwards rose 0.1 percent to 3.2184 today.
GDP Impact
“Since Malaysia is a net oil exporter, the ringgit should be more resilient to rising oil prices compared to import-intensive countries in the region such as Indonesia,” Chua Hak Bin, a Singapore-based economist at Bank of America Merrill Lynch, said in a June 18 telephone interview. The oil price increase will be positive for Malaysia’s gross domestic product and current account, which will support the ringgit, he said.
While a 10 percent sustained rise in the cost of crude will add 20 basis points to Malaysia’s GDP growth, it will shave 45 basis points off Thailand’s pace and 30 basis points from that of the Philippines, Chua said.
Malaysia’s economy will expand 4.5 percent to 5.5 percent this year, while Thailand will grow 1.5 percent, according to official forecasts. In Indonesia, the GDP increase is predicted at 5.5 percent and the Philippines is seeking expansion of as much as 7.5 percent.
More Attractive
The rupiah is offering more attractive returns to investors willing to take more risk than the ringgit, according to LGT Group. The Federal Reserve’s pledge this month to keep borrowing costs low will also encourage more carry trades, said Simon Grose-Hodge, head of investment strategy for South Asia.
Indonesia’s benchmark interest rate is 7.5 percent, while the nation’s 10-year government bonds yield 8.16 percent. Similar-maturity notes in Malaysia pay 4.07 percent. In a carry trade, investors borrow money in a country with low rates and park the money elsewhere seeking higher returns.
“For the more conservative investors, the Malaysian ringgit and the Philippine peso are nice, middle of the road currencies,” Grose-Hodge said in a June 19 telephone interview in Singapore. “Those that are more aggressive tend to look at the more exotic currencies.”
Rising oil prices may force Malaysia’s government to raise fuel prices in the third quarter to reduce its subsidy bill, a measure that may be needed if it wants to achieve the target of cutting the fiscal deficit to 3.5 percent of GDP in 2014 from 3.9 percent last year, said Bank of America’s Chua.
Fuel Subsidies
Indonesia is more susceptible because its fuel-subsidy bill amounted to about 3.4 percent of GDP in 2013, compared with 2.9 percent in Malaysia and 1.4 percent in Thailand, Chua wrote in a June 17 research report. Oil prices climbed to a nine-month high of $107.73 a barrel in New York on June 20 and are up 2.9 percent this month.
Malaysia had a current-account surplus of 19.8 billion ringgit ($6.2 billion) in the first quarter, rising from 14.8 billion ringgit in the previous three months, official data show. In the Philippines, the broadest measure of trade was a $2 billion excess, or about 3.1 percent of GDP, the central bank reported June 20.
The first-quarter shortfall in Indonesia narrowed to $4.2 billion from $4.3 billion, while Thailand’s turned to a $643 million deficit in April from March’s $2.9 billion surplus.
“People are less pessimistic about the ringgit because Malaysia is a net exporter of oil, and that means its currency will benefit most in the region,” Wong Chee Seng, a foreign-exchange strategist at AmBank Group in Kuala Lumpur, said in a telephone interview yesterday. “Indonesia will be most affected as higher crude oil prices will worsen the nation’s fiscal and current-account deficits and this will weigh on the rupiah’s outlook.”
To contact the reporters on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net; Lilian Karunungan in Singapore at lkarunungan@bloomberg.net
To contact the editors responsible for this story: Sandy Hendry at shendry@bloomberg.net Simon Harvey, Anil Varma
By Bloomberg News Jun 24, 2014 5:01 AM GMT+0700
Beijing Enterprises Water Group Ltd. (371), the biggest publicly traded water-treatment systems developer in China, plans to increase capacity by almost a fifth, enough to serve a city the size of the capital.
The Hong Kong-listed company is expanding daily capacity by 3 million metric tons this year, benefiting from the government’s increased focus on water issues by adding new distribution, sewage treatment and reclaimed water, Chief Operating Officer Zhou Min said in an interview in Beijing. That’s without considering acquisitions and possible overseas investments in the U.K., France and Germany.
The group is targeting an annual revenue increase of 40 percent to 50 percent for its water fee-based business, the executive said. The capacity increase may be “the most among the industry this year,” Zhou also said.
Beijing Enterprises’s addition of 59 percent more water capacity through the end of last year boosted its total daily capacity to 16.7 million tons, it said in March.
Most of its projects concentrate on Chinese coastal areas with strong economies such as Shandong and Guangdong provinces though the company is seeking development elsewhere, Zhou said. It may secure a 550,000-ton water-treatment plant soon in the Tongzhou district of Beijing, a former “weak link,” Zhou said.
‘Continue Acquisitions’
“Given favorable policies, we’ll continue acquisitions,” Zhou said. The targets should have an internal rate of return of at least 10 percent, he said.
When selecting new projects, the company considers the local economy and sewage-treatment fees as well as whether big water plants are near, Zhou said.
The company started cleaning Liangshui River in Beijing and Luohe River waters in Luoyang this year. Beijing Enterprises will spend three or four years to complete the 3.5 billion-yuan ($562 million) Liangshui project, Zhou said.
It will complete a 10th of the spending in 2014 for the 5 billion-yuan Luohe waterway cleanup works, he said.
The company is planning on three overseas projects this year to expand, Zhou said. Current investments are in Malaysia, Portugal and Indonesia.
The Hong Kong-based company is interested in the U.K., France, Germany and Singapore, Zhou said. This month it opened headquarters in Singapore for investments outside China, which are estimated at as much as S$2 billion ($1.6 billion).
Beijing Enterprises Water in April said it will construct a 200 million-yuan water-supply project in Medan, Indonesia.
To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net
To contact the editors responsible for this story: Randall Hackley at rhackley@bloomberg.net; Reed Landberg at landberg@bloomberg.net Tony Barrett
By Belinda Cao Jun 24, 2014 3:52 AM GMT+0700
Chinese stocks fell for a third day in the U.S., with China Petroleum and Chemical Corp. leading the drop, amid mounting concern that slumping real estate prices will curtail growth in the world’s second-largest economy.
The Bloomberg China-US Equity Index (HSCEI) declined 0.9 percent, the most in six weeks, to 103.76 yesterday. China Petroleum, the oil refining company also known as Sinopec, fell 3 percent for the biggest slump in two months. China Life Insurance Co., the nation’s biggest insurer, dropped the most since April. Cell phone service provider China Mobile Ltd. (941) slid to a six-week low.
Stocks fell amid concern a weakening real estate market will test China’s ability to achieve its 7.5 percent target for economic expansion. Home prices fell in 35 of 70 major cities last month from April, data showed last week. Policy makers appear to be tolerant of a gradual decline in prices, a signal that they won’t intervene to stem the decline, according to Qinwei Wang, a London-based economist at Capital Economics.
“Policy makers seem unwilling to use large-scale stimulus to revive economic growth this time,” Wang said by phone yesterday. “People are worried about a hard landing of the economy should investment in real estate continue to drop. It would impact not only property prices but also related manufacturing and consumption.”
JPMorgan Chase & Co. analysts led by Ryan Li wrote in a report yesterday that China’s property market may further deteriorate in the next six to eight weeks on poor sentiment, pushing more developers to cut prices. Concern that falling real estate prices and tighter liquidity in the banking system will squelch growth outweighed data showing an increase in manufacturing.
Sinopec, China Mobile
China’s benchmark money-market rate rose to a seven-week high as new share sales drained funds and banks hoarded cash to meet quarter-end requirements, data from the National Interbank Funding Center showed.
Sinopec fell to $93.79. Cnooc Ltd., China’s largest offshore oil explorer, tumbled 1.9 percent to $177.59, sliding the most this month.
West Texas Intermediate oil for August delivery fell 0.6 percent to $106.17 a barrel while Brent crude futures slipped from the highest level in almost nine months as the widening conflict in Iraq has so far spared the country’s main oil-producing region.
China Mobile, the nation’s biggest wireless network carrier, fell 1.7 percent to $47.96. Its smaller rival China Unicom Hong Kong Ltd. (762) slid 1.2 percent to $15.10, the lowest level in a week.
China Life dropped 2.8 percent to $39.61. Aluminum Corp. of China Ltd., the country’s biggest producer of the metal, slumped 1.6 percent to $9.05.
The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., sank 1.2 percent, the most in two months, to $37.36. The Standard & Poor’s 500 was little changed after reaching a record high on June 20.
The Hang Seng China Enterprises Index slid 1.9 percent, the most since April 15, to 10,198.10. The Shanghai Composite Index (SHCOMP) slipped 0.1 percent to 2,024.37.
To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net
To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Richard Richtmyer, Marie-France Han
Gazprom to Build Gas Link to Austria Bypassing Ukraine With OMV
By Elena Mazneva and Jonathan Tirone Jun 24, 2014 9:54 PM GMT+0700
OAO Gazprom, Russia’s biggest company, moved forward on building a natural gas pipeline to the European Union to cut transit dependence on Ukraine, the same day Russian President Vladimir Putin asked lawmakers to revoke a right to use force in the smaller country.
Gazprom and OMV AG (OMV) agreed today to create a joint venture to build and operate the 50-kilometer (30-mile) section of the South Stream pipeline in Austria at a signing ceremony in Vienna. They approved a final investment decision for the link, with capacity to carry as much as 32 billion cubic meters of gas a year, Gazprom said in a statement. That is about 20 percent of Russian exports to Europe.
Russia has pushed for South Stream after years of disputes with Ukraine, which carries half of Gazprom’s Europe-bound gas through its pipelines. Russia cut deliveries to Ukraine this month over debts as tension between the former Soviet allies mounted. Pricing rows disrupted EU flows during cold weather in 2006 and 2009.
The Austrian link “isn’t very long, but that doesn’t diminish its importance because it is the endpoint of South Stream,” Gazprom Chief Executive Officer Alexey Miller told reporters in Vienna. Today’s agreement will strengthen the role of Baumgarten, the gas hub where the pipeline will terminate, in central and eastern Europe, he said.
Dwindling Supply
The accord comes two days before European Union leaders meet in Belgium to discuss energy security strategy for the 28-nation bloc and measures to avert gas-supply disruptions in the 2014-2015 winter. The European Commission has questioned how Gazprom and its partners will use the link, while Ukraine has said Russia is using gas as a political tool.
Putin made his request to parliament today before his trip to Vienna to help stabilize the situation in eastern Ukraine, Dmitry Peskov, his spokesman, said by phone.
OMV head Gerhard Roiss said the deal will increase Europe’s security of gas supply and will comply with EU legislation, which seeks to increase competition in the market.
“Europe needs Russian gas and it will need more Russian gas as its own supply dwindles,” Roiss said at a news briefing.
South Stream, which may cost about 16 billion euros ($22 billion), will send as much as 63 billion cubic meters of gas to the EU annually. The pipeline will run 900 kilometers under the Black Sea to the Balkans, where it was planned to split into northern and southern routes, finishing in Austria and Italy.
The Austrian link is set to start operating from the end of 2016, under the 50-50 joint venture with OMV, Gazprom said in its statement. Miller said commercial deliveries will begin in 2017 and reach project capacity within 12 months. The agreement is legally binding, he said.
Italy, Austria
Gazprom shelved plans to bring the pipeline to Austria in 2011, favoring partner Eni SpA (ENI)’s home country Italy.
The Russian company signed an accord with OMV on the Austrian link in April of this year. Since then, Gazprom has considered dropping the Italian route. The company will decide about building both routes or just one by July, Leonid Chugunov, Gazprom’s project management department head, said in May. The company’s press service declined to comment on the matter today.
South Stream will be built regardless of the questions it faces in Europe, according to Miller.
“Major projects always face various working moments, and I can say that we are in a constructive dialogue with the European Commission,” Miller said, referring to almost daily talks with EU Energy Commissioner Guenther Oettinger. “The timeframe of the project has not yet been affected in any way.”
The European Commission has called for Gazprom to allow access to South Stream in line with the EU’s internal unbundling laws, a demand that Russia and the state-run exporter have rejected. Earlier this month, the commission asked Bulgaria to suspend works on South Stream, citing concerns over a public tender processes.
To contact the reporters on this story: Elena Mazneva in Moscow at emazneva@bloomberg.net; Jonathan Tirone in Vienna at jtirone@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Torrey Clark, Alex Devine
By Daniel J. Graeber | June 24, 2014 at 9:24 AM | 0 Comments (Leave a comment)
Spanish energy company Repsol declares major oil finds in Russia. (UPI Photo/Lou Dematteis)
MADRID, June 24 (UPI) --Spanish energy company Repsol said two oil discoveries in Russia are the largest made in the country in the last two years.
Repsol said it made the discoveries in the Western Siberian oil field, Ouriyinskoye. Discoveries from wells Gabi-1 and Gabi-3 are estimated by Russian authorities to hold a combined 240 million barrels of oil equivalent.
The Russian Ministry of Natural Reserves says this is the largest find made in Russia in the last two years, the company said in a statement Monday.
"The use of modern seismic techniques to detect these potential resources has allowed Repsol to make these significant finds in a relatively unexplored area of West Siberia," it said.
The Kremlin last week said it expected major investments in oil operations in the eastern part of Russia will boost export potential by 2035.
Russia is one of the world's leading oil producers, producing more than 10 million barrels of oil per day on average. Most of the country's oil fields are in the western region of Siberia.
Follow @dan_graeber and @UPI on Twitter.
Contact the Author
© 2014 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
Bloomberg in Beijing
China may be bolstering its emergency crude reserves as refiners in the world's second-largest oil consumer expanded commercial stockpiles to a record high last month.
Crude inventories rose 4 per cent from April, China Oil, Gas & Petrochemicals, published by Xinhua, said in a report. That is about 33.59 million tonnes, or 246.2 million barrels, the most in records going back to January 2010. Petrol supplies also swelled to a record, climbing 0.9 per cent to an estimated 7.6 million tonnes.
The mainland's commercial oil stockpiles can be channelled for strategic use, according to industry consultants including ICIS-C1 Energy in Shanghai and FGE in Singapore.
Refiners accelerated crude imports in April and May as the nation sought to increase its energy security with prices at a "fairly" high level, said Amy Sun, an oil analyst at ICIS-C1.
"We believe high commercial stocks may indicate refiners are potentially stocking feedstock for the government," she said. "China may be taking this opportunity to start filling strategic storage."
OGP said its inventory data excludes supplies in national reserves. Beijing does not publicly release strategic stockpile figures.
Brent crude, the benchmark grade for more than half the world's oil, gained 1.2 per cent in London trading in May and has advanced 4 per cent this month to about US$114 a barrel.
China, which trails only the United States in consumption, is also maximising its petrol production amid rising domestic demand and improved refining margins, Ye Manman, another ICIS-C1 analyst, said. Auto sales in May climbed 13.9 per cent from a year earlier to 1.59 million units, according to data from the state-backed China Association of Automobile Manufacturers.
Oil prices
The long-term outlook for oil is little changed, economists say, and the rising oil prices carry benefits that could outweigh the drawbacks.
The Canadian Press
Published Tuesday, June 24, 2014 4:06PM EDT
CALGARY -- Economists see more good than bad for Canada's economy as recent tensions in Iraq drive up global crude oil prices.
Scotiabank commodity market specialist Patricia Mohr says the increase has a "two-pronged impact," but the benefits should outweigh the drawbacks.
"Of course on the positive side, it really bolsters earnings for Western Canada's oil industry, but also the oil industry in Newfoundland and Labrador," she said. That, in turn, brings more tax and royalty revenues to government coffers.
On the downside, crude is a big factor in gasoline prices. So the higher it goes, the more consumers are pinched.
"But I would guess that the positive impact on earnings and also on our merchandise trade performance would offset the negative impact on consumers of higher gasoline prices," said Mohr.
Todd Crawford, senior economist at the Conference Board of Canada, agrees the higher prices will be good for the bottom line of industry and government alike, but not necessarily on a sustained basis.
The long-term outlook for oil is little changed, he said.
"In general, when we have a higher risk of conflict in that region of the world, it tends to put an additional premium on oil prices," he said.
"It's not really related to the underlying fundamentals of oil right now, which are still very strong, but wouldn't have supported the $4 and $5 per barrel jump that we've seen, say, in the last 30 days or so."
"So in reality, the status quo hasn't changed. This is just an additional risk premium that results in a flow of financial benefit, but not necessarily an impact on the real Canadian economy."
A rise in oil prices also tends to drive up the Canadian dollar, which can be a drag on exporters.
"Exports were incredibly weak in the first quarter, so it's really not the best time to see this," said Crawford.
"And of course it has a roundabout impact on our monetary policy. We're sort of out of room to cut our interest rates any more. So there's no monetary policy that can lessen the impact of higher oil prices on our Canadian dollar if there is a goal to keep the Canadian dollar trading at around 90 cents (US)."
Oil prices have climbed to 10-month highs in recent weeks amid rising sectarian tensions in Iraq. To date, the violence has not had a substantial impact on crude output there, but it's been causing market jitters.
West Texas Intermediate oil for August delivery, the main North American benchmark, was trading at around US$106 per barrel on Tuesday.
The head of the Organization of Petroleum Exporting Countries, Abdullah Al-Badry, said market speculation is to blame for the increase in prices as Iraq is "still producing as normal," with 95 per cent of its capacity in the country's south unaffected by the violence.
June 25, 2014 12:08 AM
Reuters
LONDON: Iraqi Kurdistan has sold a second cargo of about 1 million barrels of crude oil delivered via its new pipeline for $106 million, a spokesman for the regional government said, a steep discount compared to regional alternative sour grades.
The oil was sold at about a $13 per barrel discount when taking the current level of benchmark dated Brent, whereas Urals has been at a discount of $1.50 to $3/barrel this month.
The spokesman added that the money had been deposited in Turkey’s Halkbank.
The grade is sourer than Urals, meaning it has a higher sulfur content, which makes it cheaper to buy as a refiner will have to spend to remove the sulfur.
The risk associated in buying Kurdistan’s first pipeline shipments have also likely weighed on the price. Most refineries and traders have been reluctant to get involved in the trade that Iraq’s central government calls “smuggling.”
Baghdad has opened arbitration against Turkey for allowing the sales and has threatened to pursue buyers.
The first tanker of piped crude is still waiting off Morocco after local authorities asked it to leave its waters, while a second discharged at Israel’s Ashkelon port last week.
A quality assessment by a shipping agent of the oil in May, pegged the grade at around 31.3 degrees API with a sulfur content of around 2.7 percent.
The grade is a mix of Kurdistan’s Tawke and Taq Taq grades and is expected to change over time as the first loadings from storage were mixed with some residue of Iraq’s Kirkuk grade.
The crude is loaded onto tankers at the Mediterranean port of Ceyhan in Turkey.
Separately, British oil and gas services group Petrofac reported a record order backlog of $20.1 billion Tuesday and said violence in Iraq had not so far affected its operations there.
The group, Britain’s largest oil services company, maintained its profit forecast for this year after downgrading it last month.
The crisis in Iraq has not had any impact on the FTSE 100 company’s operations in the country which are concentrated south and east of Baghdad and represent less than 5 percent of the group’s revenues for 2014, it said.
The group’s order backlog grew by around $6.1 billion in the first six months of the year, with the bulk coming through its core onshore engineering and construction business with several new projects in Oman, Kuwait and Algeria. The profits are expected to be weighted toward the end of the year as projects are delivered, Petrofac said.
“The group’s backlog stands at record levels, giving us good revenue visibility for the rest of this year and beyond,” Chief Executive Officer Ayman Asfari said in a statement.
Service companies, which provide the engineering and construction on oil and gas projects, have seen profits squeezed as big oil companies face huge project delays and tighten their budgets.
Petrofac last month lowered its profit forecast for 2014 by 11 percent after weak results in integrated energy services in which it invests alongside oil companies and earnings are linked to the volume of barrels taken out of the ground.
On Tuesday it maintained its group profit forecast in a range of $580 to $600 million.
