Western Canadian crude is heading across the Atlantic Ocean as Canada’s oil companies seek buyers outside North America.
Suncor Energy Inc. (SU), the largest Canadian oil company by market capitalization, loaded its first tanker of heavy crude from Canada’s eastern coast this week. Enbridge Inc. (ENB)’s Line 9B is scheduled to complete its reversal next month, bringing 300,000 more barrels a day to the Saint Lawrence River, which empties into the Atlantic.
Canada’s search for overseas markets comes as its crude production is rising along with that of its traditional buyer, the U.S. Combined output of those countries has risen 51 percent in the past five years to 12.2 million barrels a day, according to their governments. Unlike the U.S., Canada has no restrictions on exporting crude.
“As we get more and more production in North America, prices will get lower and companies will have more opportunities to ship crude into international markets,” Jackie Forrest, vice president at Calgary-based ARC Financial Corp., said by phone yesterday.
Suncor on Sept. 21 loaded about 700,000 barrels of railed Alberta crude onto the Minerva Gloria at the port of Sorel near Montreal, according to a person familiar with the booking who asked not to be identified because the information is not public. The crude is going to Italy, the person said.
The ship is heading to Sarroch, on the Italian island of Sardinia, according to ship-tracking data compiled by Bloomberg.
First Shipment
This is Suncor’s first waterborne shipment of Western Canadian Select from Canada’s eastern coast, Sneh Seetal, a Calgary-based spokeswoman, said by e-mail yesterday. She declined to comment on the shipment’s size.
“Canada and the U.S. remain the key markets for us, but it’s important that we establish customers outside of North America,” Seetal said. The cargo is heading for Europe, she said by e-mail today.
A second tanker, the Stealth Skyros, is scheduled to load WCS crude from Montreal at the end of next week for delivery to the U.S. Gulf Coast, a person with knowledge of booking said today. That shipment will be the first waterborne delivery to the Gulf from eastern Canada for the oil, which is typically carried by pipeline.
Less Expensive
Western Canadian Select, a heavy, high-sulfur blend of Alberta oils and bitumen, is among the cheapest crudes in the world, priced at about $76 a barrel yesterday, according to data compiled by Bloomberg. That’s about $19 less than Dated Brent, the benchmark for more than half the world’s oil. Two cargoes of Russian Urals, a medium, sour grade, recently sold for about $2 less than Dated Brent.
It costs about $12 a barrel to rail WCS from Alberta to Montreal, and $3.50 more to ship by tanker, said Simon Jacques, a Saint John, New Brunswick-based consultant who advises energy traders on shipping economics.
Suncor built a rail terminal near Montreal at the end of 2013 with capacity to offload about 36,000 barrels a day of crude, according to company regulatory filings. It had been used to supply crude to the company’s 137,000-barrel-a-day refinery there.
That refinery began an 11-week-long maintenance project on Sept. 22, Suncor said in a news release.
This shipment might have been tied to the refinery maintenance, Jacques said. There will be more opportunities to ship crude out of Montreal when Enbridge completes the reversal of Line 9B, which will connect Montreal with the company’s mainline that carries crude from Alberta and North Dakota into the Chicago area.Line 9B
Enbridge is scheduled to begin filling 9B with crude by Oct. 15, subject to regulatory approval, Calgary-based spokesman Graham White said by e-mail. The line will be able to deliver 300,000 barrels a day to Montreal.
“The landscape is completely changing,” Jacques said. “The Saint Lawrence River is going to become a little Mississippi River.”
Canadian producers are looking for other ways to get their crude to water. Pipelines already connect Alberta to the Houston Ship Channel, the largest U.S. export hub. Federal laws prohibit most exports of unrefined crude oil from the U.S., although re-exports of foreign oil are allowed, as are shipments to Canada.
Export Licenses
The U.S. Commerce Department approved 118 crude export licenses from October through the end of May, the last time the department made the information public. Of those, 63 licenses were to re-export foreign crude. The department approved 66 total oil export licenses in 2012, up from 45 in 2011 and 22 in 2007. A license is good for one year and allows a company to export a set amount of crude.
Kinder Morgan Inc. (KMI) has proposed expanding its Trans Mountain pipeline that runs from Alberta to British Columbia and the U.S. Northwest to 890,000 barrels a day from 300,000. “The bulk of” the new oil on the system will end up on tankers heading to Asia, Ian Anderson, president of Kinder Morgan’s Canadian division, said in December.
Enbridge and TransCanada Corp. (TRP) have also proposed pipeline projects to bring Alberta crude to Canada’s coasts.
By Nayla Razzouk, Grant Smith and Anthony DiPaola Sep 24, 2014 11:48 PM GMT+0700
Plentiful oil supplies are pinning crude prices near a two-year low as the U.S. extends its campaign against Islamic State militants into Syria.
Brent, which has traded below $100 a barrel for more than two weeks, fell 12 cents yesterday after the broadest Arab-U.S. military coalition since the 1991 Gulf War struck Islamic State targets in Syria. U.S. aircraft began bombing the group six weeks earlier in Iraq, OPEC’s second-largest producer and holder of the world’s fifth-biggest reserves. Brent slumped today to $95.60 a barrel, the lowest since July 2012.
“The impact for oil prices from the U.S. airstrike is effectively zero,” Giovanni Staunovo, an analyst at UBS AG in Zurich, said by e-mail. “The market focus has shifted from supply risks to oil glut fears to weak oil demand from China Europe and Japan.”
An increase in global crude supply that prompted the Organization of Petroleum Exporting Countries to consider cutting its production target is helping to calm markets in the face of potential output disruptions, according to the International Energy Agency. Oil demand is growing at its slowest since 2011, while the U.S. shale boom means production outside OPEC is rising by the most since the 1980s, the Paris-based IEA said in a monthly report Sept. 11.
Coordinated Action
Saudi Arabia, the United Arab Emirates, Jordan, Bahrain and Qatar all joined the first wave of U.S.-led airstrikes against Islamic State insurgents in Syria yesterday. Fighter jets, bomber aircraft and drones hit 22 targets near the group’s stronghold of Raqqa and along the Iraqi border, according to the U.S. military.
Most U.S. partners in the Arab world had shied away from joining American military action in the region since the 1991 war to force Iraqi soldiers out of Kuwait, and many publicly opposed the 2003 invasion that toppled Saddam Hussein.
“The current attacks won’t in the short term defeat ISIS,” Gala Riani, a Middle East analyst at consultants Control Risks in London, said by phone, using a former acronym for Islamic State. “In Iraq they’ve already shifted tactics, for example, by moving in smaller groups to avoid attack, and they will probably also do so in Syria.”
Workers Evacuate
Brent, a benchmark used to price more than half the world’s oil, surged to a nine-month high in June after the militants emerged from Syria, where they had seized land and oil fields, to capture large parts of northern Iraq.
While fighting in Iraq has spurred companies including BP Plc (BP/) and Exxon Mobil Corp. (XOM) to evacuate workers from the country since June, the country pumps and exports most of its crude from its Shiite-dominated southern region, where Islamic State’s Sunni insurgency has had little impact. The conflict has largely spared the south, home to about three quarters of Iraq’s oil production according to the U.S. Energy Information Administration.
“The U.S. and its allies are very unlikely to directly target oil infrastructure because of the long-term damage that could do and the environmental consequences and the opposition that might face locally,” Richard Mallinson, an analyst at Energy Aspects Ltd. in London, said by phone. “There is limited amounts of infrastructure that the Islamic State could easily reach out and attack that it doesn’t already control, even if it wanted to retaliate.”
Iraqi Exports
Iraq’s export pipeline from northern oil fields into Turkey has been out of operation since March 2, and the central government now exports all its crude by sea from southern terminals. The semi-autonomous Kurds of northern Iraq are producing crude and exporting it without the government’s approval through their own pipeline to Turkey.
“Most of the production in the regions controlled by Islamic State is already lost to the market,” Mallinson said. “Syrian production was lost several years ago early in the civil war there, and Iraqi production in the north has been shut in or disrupted for several months now.”
Syria produced 56,000 barrels a day of crude in 2013, while Iraq pumped 3.141 million that year, according to data from BP. Syria’s crude reserves of 2.5 billion barrels are a fraction of Iraq’s 150 billion, the data show.
Concerns for the long term remain, Mallinson said. Non-state armed groups in the Middle East and North Africa, including Libya, with Africa’s biggest oil reserves, continue to wield military and challenge the authority of governments.
“At the moment there’s not so much impact for prices because there’s no distortion of supplies yet, but it is destabilizing the situation in the whole region,” Eugen Weinberg, head of commodities research at Commerzbank AG, said by phone from Frankfurt. “The real concern is whether Islamic State will infiltrate Sunni states like Saudi Arabia - then it’s a grave danger.”
By Moming Zhou Sep 24, 2014 11:31 PM GMT+0700
U.S. refineries may reduce their operating levels from the highest levels for this time of year as plants start maintenance.
Refineries processed 16.6 million barrels a day of crude and other liquids in the week ended Sept. 19, a seasonal high and up 0.4 percent from the previous week. Refineries typically schedule maintenance in September and October when units move from maximizing gasoline output to producing winter fuels. The total processed has fallen in four of the past five Octobers.
“Refineries usually start their seasonal maintenance at this time of year and I suspect that it will start to happen here in the next couple of weeks,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston. “From that perspective, crude runs are going to go down and demand is going to go down.”
U.S. refineries operated at 93.4 percent of capacity of 17.8 million barrels a day last week, up from 93 percent the previous week, the EIA said. Analysts surveyed by Bloomberg expected a drop in the rate.
Maintenance has begun at Total SA (FP)’s 225,500-barrel-a-day Port Arthur, Texas, refinery, which started repairs at the biggest crude unit, a person familiar with operations said on Sept. 22. Oil was removed from the 151,000-barrel-a-day unit in preparation for 30 days of planned work.
PBF Energy Inc. (PBF) is shutting units at the 135,000-barrel-a-day Toledo, Ohio, refinery on Oct. 6 for maintenance, two people familiar with operations said Sept. 16.
U.S. crude inventories may increase as refineries process less oil, Cooper said. Stockpiles dropped 4.27 million barrels last week to 358 million, the lowest level since January, the EIA said. Stockpiles at Cushing, Oklahoma, the delivery point for West Texas Intermediate futures, rose 191,000 barrels to 20.2 million.
WTI crude for November delivery rose 21 cents to $91.77 a barrel at 12:12 p.m. on the New York Mercantile Exchange.
U.S. bombs and missiles attack 12 oil refineries in Syria that provide up to $2 million per day to the Islamic State.
By Danielle Haynes | Sept. 24, 2014 at 8:04 PM | Updated Sept. 24, 2014 at 8:04 PM | 1 Comment
DAMASCUS, Syria, Sept. 24 (UPI) -- U.S. air strikes targeted 12 oil refineries being used by Islamic State militants in eastern Syria in an effort to halt funding to the terror group.
The small refineries, which were bombed Wednesday in the first round of strikes in Syria, provided up to $2 million per day for the Sunni extremist group, Navy Rear Adm. John Kirby, the Pentagon spokesman, told CNN.
"We are still assessing the outcome of the attack on the refineries, but have initial indications that the strikes were successful," U.S. Central Command said in a statement. "These small-scale refineries provided fuel to run ISIL operations, money to finance their continued attacks ... and an economic asset to support their future operations."
The bombing came after the U.N. Security Council voted to focus on choking the finances of terrorists and halting their abilities to cross borders.
The Islamic State — also known by the acronyms IS, ISIS and ISIL — makes most of its money through oil smuggling, robberies, ransoms, extortion and taxing local communities.
Some 160 bombs and missiles were fired in Syria by the United States and its allies, causing extensive damage and killing some IS and Khorasan members.
Methods could add another 3 million barrels of oil per day.
New methods could boost U.S. shale oil output, Wood Mackenzie finds. UPI/Gary C. Caskey
HOUSTON, Sept. 24 (UPI) -- A Wednesday report for energy consultant group Wood Mackenzie finds emerging shale technology could add at least 1 million barrels per day to U.S. output.
Primary recovery from oil deposits in the United States relates to natural pressure in the reservoir. Secondary recovery involves water or gas injection into the well to increase production. Enhanced oil recovery techniques include further stimulation from steam, gas or chemical injections into the well.
Wood Mackenzie finds enhanced oil recovery is still in its infancy in U.S. shale plays like Bakken, Eagle Ford and Permian.
The consultant group finds the emerging shale technology could result in a 100 percent increase in recovery rates and add between 1.5 million and 3 million barrels per day in oil production by 2030.
Some of the early efforts at enhanced oil recovery have been problematic. Regulators in Canada placed restrictions on steam injection at an Alberta exploration site in June 2013.
The Alberta Energy Regulator said four so-called flow-to-surface events spoiled about 50 acres of land. A report from operator Canadian Natural Resources Ltd. said a process called cyclical steam stimulation, or CSS, may have cracked open other subsurface layers, allowing oil to leak out of control from the site.
Company aims to invest heavily in Bakken crude developments.
By Daniel J. Graeber | Sept. 24, 2014 at 10:23 AM | 0 Comments (Leave a comment)
NEW YORK, Sept. 24 (UPI) -- U.S. energy company Hess Corp. said Wednesday it filed the paperwork for an initial public offering it said could help advance its Bakken crude oil ambitions.
Hess Corp. said its subsidiary, Hess Midstream Partners, filed a statement with the Securities and Exchange Commission related to its proposed initial public offering.
"The offering is expected to occur in the first quarter of 2015," the company said in a statement.
Hess said it intends to use the master limited partnership as the primary vehicle to support its Bakken production growth.
The company in January said it plans to spend $2.85 billion of the $5.8 billion budgeted this year for exploration and production on exploiting shale reserves, mostly in North Dakota.
Oil production from the Bakken and Three Forks area of North Dakota topped the 1 million barrel per day mark for the first time this year.
There isn't enough pipeline capacity in the state to handle the amount of oil produced, which energy companies say leaves rail as the primary transit alternative.
Exploration and production accounts for the upstream sector in energy, while downstream includes refining operations. Midstream typically refers to the means of getting energy reserves to refineries using transit options like pipelines or rail.
Country losing race on renewables as demand accelerates.
WASHINGTON, Sept. 24 (UPI) -- Saudi Arabia aims to use more renewable energy, but for now it burns more crude oil directly than any other nation in the Middle East, a Wednesday report found.
By 2023, Saudi Arabia plans to have 120 gigawatts of solar and nuclear power available, more than twice what's installed currently.
Saudi Arabia has few alternative options for power generation, with no domestic coal reserves and a natural gas sector stymied by a lack of foreign investments.
As a result, it's one of only a few nations in the world that utilizes crude oil directly for power generation.
A report for the U.S. Energy Information Administration, a branch of the Energy Department, found Saudi Arabia burned 900,000 barrels of oil per day in July, the highest ever recorded for that month.
"Saudi Arabia used an average of 700,000 bpd of crude oil for power generation during the summers from 2009 to 2013," EIA said. "During that same period, Iraq and Kuwait, the next two largest users of crude oil for power generation in the Middle East, each averaged roughly 80,000 bpd of crude burn."
Meanwhile, Saudi Arabia's economy continues to expand. Growth in gross domestic product in the first quarter was 4.7 percent, compared with 3.8 percent growth during first quarter 2013.
Europe already seeing the benefits, Barroso says.
By Daniel J. Graeber | Sept. 24, 2014 at 8:18 AM | 0 Comments (Leave a comment)
http://cdnph.upi.com/sv/em/upi/UPI-4741411560067/2014/1/52bec38553ac02a60646217161497192/EU-Look-to-low-carbon-for-big-growth.jpg
European Commission President Jose Manuel Barroso sees economic opportunity in low-carbon policies. UPI/Mark Wilson/Pool
UNITED NATIONS, Sept. 24 (UPI) -- The effort to address the threats posed by climate change should be seen as an opportunity for economic growth, the European Commission president said.
European Commission President Jose Manuel Barroso was among the more than 100 leaders on hand for a climate summit at the United Nations headquarters. European leaders are debating policies that extend beyond a 2020 commitment to cut emissions, increase energy efficiency and expand on renewable energy resources from their 1990 benchmark.
Barroso told delegates during his Tuesday address the international community can only meet the threat with a united front.
"At the same time, climate change also presents an opportunity to reinvent our economies, a chance to reinvent our economies in a cleaner, leaner, greener and more efficient way," he said.
A report published last week by the Global Commission on the Economy and the Climate finds as much as $90 trillion will be invested during the next 15 years on low-carbon infrastructure and energy systems.
Barroso said EU efforts with renewables are making on impact on the European economy.
"Since 1990, Europe's greenhouse gas emissions have fallen by 19 percent, while our gross domestic product rose by 45 percent," he said. "We prove that climate protection and a strong economy can -- and must -- go hand-in-hand."
Houston (Platts)--24Sep2014/304 pm EDT/1904 GMT
US jet fuel stocks, which hit 18-year lows in August, have rebounded to their highest levels since October, US Energy Information Administration data showed Wednesday.
High production and imports helped stocks spike for a third straight week, up 1.74 million barrels to 40.33 million barrels for the week ended September 19, the highest weekly total since since October 18, 2013.
That is a sharp reversal from 34.2 million barrels for August 1, which was a low since April 1996. The last weekend of August registered the second-lowest level in that time frame as high demand from airlines and exports took its toll.
Total stocks are only 0.4% below the same week a year ago, and above the one-year average of 37.57 million barrels. The East Coast was 16.7% lower than last year despite a 932,000-barrel week-on-week gain to 10.19 million barrels.
West Coast stocks increased 298,000 barrels to 9.46 million barrels, 10% higher than last year, while the Midwest rose 696,000 barrels to 7.62 million barrels, or 6.5% above a year ago, and the Rocky Mountains added 236,000 barrels to 766,000 barrels.
The Gulf Coast saw the only dip, down 426,000 to 12.3 million barrels, although many of those barrels were likely shipped up Colonial Pipeline from Houston to New York Harbor. Gulf Coast inventory was 3.6% above a year earlier.
Total US jet fuel production slipped 29,000 b/d week on week to 1.68 million b/d, but was 10.6% higher than a year ago and not far from 1.728 million b/d two weeks earlier, which was the highest since July 1, 2005.
Imports dropped 190,000 b/d to 103,000 b/d, but was still one of the higher levels of the summer, equal to about two and a half cargoes.
Production supplied, also referred to as implied demand, slipped 183,000 b/d to 1.4 million b/d as expected at the end of summer air travel. It was still 3.1% above year-ago levels.
Singapore (Platts)--24Sep2014/206 am EDT/606 GMT
The backwardation in the FOB Singapore 92 RON gasoline market firmed sharply Tuesday, September 23, as concerns that replacement barrels in Asia could be limited going forward perked up sentiment, traders said Wednesday.
The spread between FOB Singapore October and November 92 RON gasoline swaps widened 25 cents/barrel, or 27% day on day, to be assessed at $1.15/b Tuesday.
The spread was last assessed at the same level on August 29 this year, data showed.
In a backwardated market, the price for the distant delivery month is lower than the prompt delivery month and the firming of a backwardated curve could indicate rising demand and lower supply.
The September average for the front-month/second-month swap spread was at plus 77 cents/b Tuesday, while the average for August was plus 35 cents/b, data showed.
"As we head closer to October, there is a sense that [North Asia] supply may not be able to meet spot demand," a Singapore-based trader said Wednesday.
"The current refinery turnaround season ... has led to the tight market."
During Tuesday's Platts Market on Close assessment process there was active buying interest for the prompt swap spread seen.
PTT bought the October/November swap spread from Vitol at $1.10/b, after which JP Morgan bid for the same swap spread at $1.10/b which was left standing at the close.
"Replacement barrels from India have not been coming into Singapore [in recent weeks]," another trader said.
"And some cargoes have been drawn away from Asia into the Persian Gulf and East Africa," he added.
Amid this tight supply situation, incremental demand from the region's biggest importer Indonesia was seen, with state-owned Pertamina's trading arm Petral seeking an additional 800,000 barrels of 88 RON gasoline for October via private talks amid lower domestic production, Platts has reported.
According to trade sources, Pertamina has so far covered at least two 200,000-barrel cargoes of 88 RON for October.
There was additional demand coming from the Middle East, Indian subcontinent and East Africa as well.
The Abu Dhabi National Oil Company is seeking three 30,000-mt-parcels of 95 RON gasoline for delivery into Ruwais over November 5-7, November 13-15, and November 21-23. The tender closes Thursday and has four-day validity.
Elsewhere, India's Indian Oil Corp. is seeking up to 40,000 mt of 92 RON gasoline via tender for delivery in October, said sources.
Late Tuesday, Kenya's Oil Industry Pipeline Co-ordination Secretariat bought 12,200 mt of 93 RON gasoline for delivery over October 27-30 into Shimanzi Oil Terminal, Mombasa, Kenya.
The parcel was sold by Gapco at a premium of $33.12/mt to October Mean of Platts Mediterranean Premium Unleaded 10 ppm gasoline assessments, CFR, said trade sources.
Pakistan too is tipped to buy seven 50,000-mt cargoes of 87 RON gasoline to be loaded over October-December, up from six 50,000-mt cargoes it had bought earlier via tender for loading over August 21-October 10, trade sources said Wednesday.
The August 21-October 10 cargoes were heard to have been awarded at premiums of $55.44-59.97/mt to Mean of Platts Arab Gulf naphtha assessments, for loading from the Persian Gulf.
The sellers were heard to be Gunvor, Swiss Singapore Vitol and OTI.
Houston (Platts)--24Sep2014/513 pm EDT/2113 GMT
Line space for gasoline on the nation's busiest pipeline has lost value this week as market players held onto pipeline access, driven by recent rises in Gulf Coast product, market sources said Wednesday.
Space on the 55th cycle for Colonial Pipeline gasoline-only Line 1 was heard Wednesday at a bid/offer range of minus 4 cents/gal to minus 3 cents/gal and traded at minus 3.5 cents/gal.
On Monday, space for the 54th cycle was heard at a range minus 50 to minus 25 cents/gal.
For distillates-only Line 2, line space value was heard talked Wednesday at negative 40 points, down from a bid/offer range of minus 25 points to flat earlier in the week.
The Gulf Coast spot assessment of conventional gasoline at 11.5 RVP (M3) rose four consecutive trading days ending at $2.6336/gal on Tuesday and was at a peak since Platts assessments shifted to 11.5 RVP product on September 5. M3 values early Wednesday were heard traded roughly equal with Tuesday's assessment.
"It kills the economics to ship," a US products trader said.
A higher spot value means a higher price to which any premium for line space would be added, beyond the 4.5 cent tariff to ship gasoline on Colonial. Higher spot prices discourage trade for line access, market sources said.
Another factor: The 55th cycle for gasoline lasts six days, up from the typical three to five for most Colonial cycles. Line space likely might gain value as the calendar approaches next Tuesday, when 55th cycle gasoline will be scheduled, market sources said.
"The Gulf Coast is just ripping right now," a second US products trader said. "The swing market for the Gulf is New York Harbor. There's always going to be demand in the south because it's not affected much by the weather, if there's not a hurricane."
Gulf Coast RBOB at 11.5 RVP, now at 13 cents over the NYMEX November RBOB, is not attractive to ship at that differential to the Atlantic Coast market, he said.
Negative values in the line space trade suggest that holders of Colonial capacity are willing to pay to give it away so they can maintain access to space. Allowing a line space commitment to go unfulfilled can hurt a shipper's standing with a pipeline owner.
Platts does not assess Colonial line space.
The 1.37 million b/d Line 1 carries gasoline from Pasadena, Texas, to Greensboro, North Carolina, where it links with multi-product Line 3 to the New York Harbor hub in Linden, New Jersey. The 1.16 million b/d Line 2 carries distillates from Pasadena to Greensboro.
New York (Platts)--23Sep2014/349 pm EDT/1949 GMT
NYMEX October RBOB closed 4.40 cents higher at $2.6287/gal on Tuesday, while oil futures were mixed on news of US-led airstrikes in Syria and increased Libyan production.
NYMEX November crude closed 69 cents higher at $91.56/barrel. ICE November Brent settled 12 cents lower at $96.85/b. NYMEX October ULSD closed up 39 points at $2.6832/gal.
"Some ongoing refinery issues are allowing RBOB to break free a little bit from the balance of the complex, and concern related to the airstrikes in Syria are helping to keep a floor on crude prices," Tony Headrick, an analyst at CHS Hedging, said.
Two Canadian refineries started planned maintenance last week that are typically major sources of gasoline to the US East Coast.
Irving Oil started an eight-week turnaround at its 300,000 b/d Saint John, New Brunswick, refinery, while Suncor began work on its 137,000 b/d refinery in Montreal, which is expected to last 11 weeks.
In the Middle East, geopolitical risk resurfaced as a US-led coalition widened the fight against jihadists, bombing parts of Syria overnight.
Libyan crude production continued to increase Tuesday after the state-owned National Oil Corp. reopened the Sharara oil field and associated export terminal and refinery a day earlier.
Yuzhno-Sakhalinsk (Platts)--24Sep2014/532 am EDT/932 GMT
The vice chairman of Tokyo Gas, Japan's second-largest buyer of Russian LNG, said Wednesday, September 24, it is difficult to commit to new Russian LNG supplies amid concerns over sanctions.
"At this moment because of the sensitivity of sanctions, it is hard to make a new commitment to take Russian LNG volumes," Shigeru Muraki said.
Speaking about Tokyo Gas' interests in prospective Russian LNG supplies, Muraki said: "We are more interested in the Sakhalin projects, rather than Vladivostok, particularly Sakhalin 2 because it already has the infrastructure."
Tokyo Gas has said previously that it has maintained its business-as-usual purchases of LNG from the Sakhalin 2 project but is monitoring Russian events.
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In the fiscal year ended March 31, Tokyo Gas imported 1.417 million mt of LNG from Russia, which accounted for around 12% of its total imports of about 12.17 million mt.
Houston (Platts)--23Sep2014/520 pm EDT/2120 GMT
The dramatic ramp-up in North American natural gas and oil production, combined with shifting gas flow patterns, such as from LNG exports, signals the need for new investments in pipeline infrastructure, speakers at the Platts Pipeline Development and Expansion conference said Tuesday.
Along with the need for new infrastructure comes the need to tap traditional sources of financing as well as develop new ones, panelists at the Houston conference said.
Potential investors must weigh the inherent risk that the construction of new pipelines inevitably carries, said Lucien Pugliaresi, president of Energy Policy Research Foundation.
Pipelines that cross federal land must comply with the strict requirements of the National Environmental Policy Act, which can delay the construction of a project by months or years, he said.
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"The NEPA process is very cumbersome," he said.
For its part, pipeline construction that runs along private land has its own impediments, with private landowners increasing raising issues over the use by the pipeline companies of eminent domain to secure right of way, even in such industry-friendly states as Texas, Pugliaresi said.
In rapidly developing oil-producing plays such as the Bakken Shale of North Dakota, the lack of pipeline infrastructure to move the commodity to market is giving rise to the use of railroads, with all of the inherent risks that entails.
Pugliaresi commented that while shipping crude oil by rail is a temporary solution to the transportation problem, construction of needed infrastructure has been slow to meet the needs of the market, as many energy producing companies are wary of the long-term commitment a pipeline represents.
"Rail's like dating, while a pipeline is like marriage," he said.
Last month, the world of pipeline financing was shaken up when pipeline giant Kinder Morgan announced plans to abandon the tax-advantaged master limited partnership structure that had allowed it to grow into one of the largest infrastructure companies in the world in favor of becoming a traditional C corporation.
However, panelists at the conference said that Kinder Morgan,s situation was unique to that company and they do not foresee a rush by other pipeline players to jettison the MLP structure that has served the industry well as a financing vehicle for the last dozen or so years.
Gabriel Moreen, senior analyst at Bank of America/Merrill Lynch, said Kinder's decision came about as a result of a "winner's curse," after the company has positioned itself in the top tier or the industry for a decade and a half.
"Distribution rights tend to become a bigger burden to the MLP, raising the cost of capital for the MLP," he said.
Another transaction in which a pipeline company moves away from the MLP space similar to the Kinder Morgan deal is unlikely to occur "over the near or medium term," Moreen said.
Meanwhile, the real estate investment trust, which like the MLP offers tax advantages to investors, is increasingly becoming popular as a financing vehicle for infrastructure companies, Jeff Fulmer, senior vice president CorEnergy, said on the sidelines of the conference.
"It's a pass-through tax entity that, as opposed to an MLP allows an investor a simplified tax experience in the form of a 1099 form at the end of the year, as opposed to a K-1," he said.
Thus, the REIT provides "a means for investors not only in their taxable accounts, but also importantly in their tax- exempt accounts to participate and invest in US energy infrastructure," Fulmer commented.
By using the REIT structure energy infrastructure companies can gain exposure to a broader range of financing options, he said.
"There are institutional investors that for good reason want to participate in the US energy industry, but they may have an unwillingness to invest in other ways, whether it is through private equity or MLPs," he said. In addition, the REIT form of financing allows US pipeline companies to tap overseas sources of capital. "A REIT is something that everyone is comfortable with, not only here but also abroad," Fulmer said.
This gives US infrastructure companies the option of attracting foreign investment without ceding to foreign control of their assets, he said.
"It's not the same as a foreign company coming in and owning and operating wells."
(Reuters) - Saudi Arabia pumped 9.597 million barrels of oil per day in August, down by 408,000 bpd from around 10 million bpd in July, an industry source said on Wednesday.
But the amount of crude supplied to the market inched up to 9.688 million bpd in August, the source said.
The OPEC heavyweight supplied around 9.66 million bpd in July.
Supply to the market - both domestically and for exports - may differ from production depending on the movement of barrels in and out of storage. (Reporting by Rania El Gamal; Editing by Larry King)
BEIJING, Sept 24 (KUNA) -- Kuwait's crude oil exports to China in August stood at 809,000 tons, equivalent to about 191,000 barrels per day (bpd), the latest government data showed Wednesday.
Shipments from Kuwait to China fell 19.2 percent from a year earlier, according to data released by the General Administration of Customs.
China's overall imports of crude oil in August rose 17.5 percent on the year to 5.96 million bpd. Saudi Arabia remained China's top supplier last month, with its shipments growing 4.2 percent to 933,000 bpd, followed by Angola with 761,000 bpd, up 5.0 percent. Oman became third with imports from the country surging 102.4 percent to 688,000 bpd.
Russia ranked fourth and Iraq fifth, respectively. China is the world's second oil consumer after the United States. Last month, state-run Kuwait Petroleum Corporation (KPC) and China's top energy trader Unipec signed a landmark deal that will significantly boost crude oil deliveries over the 10 years, the biggest-ever sales contract in KPC's history by volume and revenues in all regions.
Under the agreement, KPC will supply Unipec with 300,000 bpd of crude oil starting from this year, with a strong possibility of increasing the volume to 400,000 bpd, KPC told Kuwait News Agency (KUNA) after the signing ceremony. (end) mk.hb
TEHRAN (FNA)- The Iraqi army, backed by tribesmen and volunteers, countered an attack by the ISIL terrorist group on the country’s largest oil refinery.
The successful operation by the Iraqi army on Tuesday came after the Takfiri militants launched an attack on the Baiji refinery near the town of Tikrit in the Northern province of Salahuddin, press tv reported.
The militants fired dozens of rockets toward the refinery and caused damage to the facility, however. The Takfiri militant temporarily took control of the oil refinery back in June. The Iraqi armed forces, however, reestablished control over Baiji later in the month.
Following the Takfiris’ assault, Iraqi warplanes bombed the militants’ hideouts around the Baiji refinery.
Iraqi security forces, along with tribesmen and volunteers, eventually managed to push back the Takfiri militants.
Dozens of ISIL Takfiri terrorists were killed in the operation, and many others were injured.
The Baiji refinery has recently been the site of several battles between government forces and militants.
Over the past few weeks, Iraqi forces have killed a large number of Takfiri terrorists in their mop-up operations across the crisis-hit country.
The ISIL terrorists that control swathes of Syria’s East and North, sent its Takfiri militants into Iraq in June, seizing large parts of land straddling the border between Syria and Iraq.
The Takfiri terrorist group has committed heinous crimes and threatened all communities, including Shiites, Sunnis, Kurds, Christians and Ezadi Kurds, during its advances.
Senior Iraqi officials have blamed Saudi Arabia, Qatar, Turkey and some other Persian Gulf Arab states for the terrorism in their country.
By Press Association, 24 Sep 2014 2.03pm Updated: 8.30pm
Limited platform space is a problem affecting oil extraction in the North Sea, experts said
New gas and water technologies could add decades to the life span of oil reserves in the North Sea, according to researchers.
A team at Edinburgh's Heriot-Watt University say they have made a breakthrough in developing clean and cheap methods to maximise extraction from existing fields.
The university's Centre for Enhanced Oil Recovery has been working on a technique known as low-salinity water injection and researching which fields would benefit most from it.
The team has also been developing gas injection technologies for use in reservoirs that are already flooded with water.
Professor Mehran Sohrabi, the centre's director, believes new technologies could be a game changer for the industry and has called for more investment to reverse the decline in North Sea production.
He said: "At least half of the original oil still remains in the North Sea reservoirs but there are great challenges in extracting it using enhanced oil recovery (EOR) techniques.
"These include limited platform space and large well spacing, making extraction too expensive to pursue.
"Following years of research at the university, we now believe we can overcome these challenges."
Low-salinity water injection works by reducing the salt levels in sea water that is already injected into reservoirs.
Mr Sohrabi said: "It has the potential to make a huge impact on the current output of the North Sea's oil production.
"We have developed a robust method to screen oil reservoirs to identify the ones that would respond positively to low salinity water injection.
"This allows us to estimate the size of incremental oil recovery, which is vital for economic calculations of enhanced oil recovery projects.
"This is a massive leap forward, especially in an offshore setting. The process is relatively inexpensive, meaning the costs for EOR could fall dramatically while yields could rise.
"It's also cleaner as you're removing the need for potentially toxic chemicals."
He added: " After 40 years of production, the North Sea oil reservoirs are now mature and in rapid decline. Urgent action is needed now.
"The Government and industry must invest in new gas and water technologies, in order to reverse that decline."
Ghana says oil firms can keep working during border arbitration By Reuters Updated Wednesday, September 24th 2014 at 08:01 GMT +3 Share this story: Accra; Ghana: Oil firms operating on Ghana's disputed maritime border with Ivory Coast can continue working while an arbitration suit filed under a U.N. convention is resolved, Ghana's Attorney General Marrieta Brew Appiah-Oppong told a news conference on Tuesday. British firm Tullow Oil is the largest stakeholder in the TEN offshore project signed with the Ghana government and located close to the disputed area. Its partners are Anadarko, Kosmos Energy, Sabre Oil & Gas Holdings Ltd and the Ghana National Petroleum Corporation.
Turkey has exported 13.7 million barrels of crude oil from the northern Iraqi region controlled by the Kurdistan Regional Government (KRG), with the 19th oil tanker in the port of Ceyhan loaded and ready to be dispatched, Energy and Natural Resources Minister Taner Yıldız has said.
Speaking at a live broadcast of a state-run TV station on Wednesday, the minister said the 20th tanker is waiting in line for crude to be loaded into it's storage container.
Payments for the crude have reached $400 million so far, and this money has been deposited in the HalkBank accounts of the KRG, he added.
Already tense, the relations between the autonomous Kurdish region and the Iraqi central government have soured even further, as Baghdad has accused the KRG of blatantly violating theIraqi constitution, which only permits the central government to conduct the oil trade in the country. It has also condemned Turkey for promoting a rift in the internal affairs of the country.
The KRG is reported to be employing a number of small tankers in addition to its 1-million-barrel carriers in order evade Baghdad's efforts to block the sales. The buyers are not publicly known. The Iraqi government has made it clear that any country that purchases the Kurdish oil in violation of the Iraqi constitution is an accomplice and will be treated accordingly.
The Iraqi government's persistent efforts to inhibit sales have deterred some potential buyers. But the amount of oil from the Kurdish region reaching customers has been on the rise. Israel was rumored to have shown particular interest in the oil, which is alleged to be marketed at a much lower price than standard prices in international markets.
The KRG's direct oil sales began in May through an independent pipeline at the Turkish border. The autonomous administration sees the trade of oil extracted in the region as their right and no longer wants to share it with Baghdad. Kurds see the oil trade as an important indicator in their progress toward independence and are not willing to make any concessions on the matter.
Turkey has diplomatically positioned itself on the side of the KRG. The autonomous administration also sees its ties the central government as ineffective, as the Iraqi army did virtually nothing to protect the region from Islamic State of Iraq and the Levant (ISIL) militants, who have been attacking Kurdish regions for months.
Yıldız was asked about claims that Turkey has been mediating oil smuggling from ISIL-controlled regions in Iraq. “When we have all this [Kurdish oil], why would we need to purchase oil from ISIL? Smuggling is smuggling, whether its source is ISIL or someone else,” said the minister.
Neither does ISIL have such oil nor does Turkey engage in such trade, Yıldız said. “Now think of it: You have $52 billion of oil ... and $8 billion of exports [of this kind]. Of this $52 billion, we deliver $2 million to ISIL. Sorry, but are we the madmen of the neighborhood? Could such a thing be ever possible?” Yıldız asked.
Energy giants in İstanbul
Meanwhile, the All Energy Turkey summit began in İstanbul on Wednesday, gathering together a number of prominent experts on energy as well as representatives of major energy companies for two days to discuss current issues in the sector. Minister Yıldız was expected to attend the opening ceremony, but he failed to show up.
Undersecretary of the Energy and Natural Resources Ministry Metin Kilci, President of the Energy Market Regulatory Authority (EPDK) Mustafa Yılmaz and Borsa İstanbul's (BİST) İbrahim Turhan were among the key speakers in the opening panel.
By Andy Tully | Wed, 24 September 2014 21:33 | 0
ExxonMobil Corp. was the first Western company to bow to Western sanctions against Moscow and suspend offshore Arctic drilling for Rosneft, the Kremlin-owned oil giant. Now another large Western energy company, France’s Total, is ending its effort with Russia’s Lukoil to explore for shale oil in Siberia.
But Total CEO Christopher de Margerie told the Financial Times that the move isn’t likely to have much of an impact on the company. “The Lukoil joint venture is definitely stopped,” he said. “But it hadn’t started, so it doesn’t have any impact [on Total].”
Still, de Margerie made the comments the same day his company announced a program to sell $10 billion in assets from 2015 through 2017, and reduced its goal for oil production in 2017 from 3 million barrels per day down to 2.8 million barrels per day.
Under Total’s May, 2014 deal with Lukoil, the two companies were to develop the Bazhenov shale formation in Western Siberia. Total would have controlled 49 percent of the venture and Lukoil would have controlled 51 percent.
The most recent round of sanctions also more severely limits Russian energy companies’ access to Western financing and technology in support of developing energy resources.
Meanwhile, Total is moving ahead with a $27 billion joint project with both Novatek, Russia’s largest natural gas producer, and China National Petroleum Corp. to develop liquefied natural gas in Russia's Yamal peninsula in the Arctic.
Novatek is also subject to the Western sanctions, but de Margerie told the Financial Times that he hoped it could obtain financing, “but not in dollars,” and thereby not violate the sanctions. He said China already had committed to put up 60 percent of the project’s financing.
Total also is part of a syndicate working to develop the $50 billion Kashagan oil field in Kazakhstan. CEO De Margerie said production at the site would resume in the third quarter of 2016 -- 11 years after it was originally expected to come online.
The development of Kashagan, the largest oil field outside the Middle East, has been plagued by a series of problems that have led to delays and billions of dollars in cost overruns. De Margerie attributed the problems less to technical challenges than to poor collaboration among the project's partners, saying, “Our reputation has really been hurt, for all of us.”
By Andy Tully of Oilprice.com
RIO DE JANEIRO, Sept 24 Wed Sep 24, 2014 5:46pm EDT
(Reuters) - Brazil's state-run oil company Petroleo Brasileiro SA discovered natural gas in a well being drilled to help measure the potential of a giant Brazilian offshore find, the company said in a securities filing on Wednesday.
Petrobras, as the company is known, owns 75 percent and its Indian partner Oil and Natural Gas Corp 25 percent of the discovery.
The discovery was made in an extension well being used to evaluate the Poco Verde prospect in the BM-SEAL-4 block. The well was drilled in 2,196 meters of water 58 kilometers off the coast of Aracaju, the capital of Brazil's Sergipe state.
The discovery is one of several in recent years in an area believed to hold more than 1 billion barrels of recoverable oil, enough to make the area the biggest discovery in Brazil since the 2007 announcement of giant offshore resources south of Rio de Janeiro.
The Sergipe discoveries include an adjacent block where Petrobras is in partnership with IBV Brasil SA, a joint venture between India's Videocon Industries Ltd and Bharat Petroleum Corp. Petrobras owns 60 percent of that partnership and IBV 40 percent in that area.
Petrobras plans to begin producing oil from the Sergipe offshore area in 2018 with a 100,000-barrel-a-day floating production ship. A second ship with the same capacity is expected in 2020. Development of the area is likely to require more than two ships, Petrobras said last week. (Reporting by Jeb Blount and Juliana Schincariol; Editing by Richard Chang)
The European Union is quietly increasing the urgency of a plan to import natural gas from Iran, as relations with Tehran thaw while those with top gas supplier Russia grow chillier, Reuters reported.
Two "ifs" - the removal of sanctions on Iran and the addition of some pipeline infrastructure - are not preventing EU planners preparing, a European Commission source involved in developing EU energy strategy told Reuters.
"Iran is far towards the top of our priorities for mid-term measures that will help reduce our reliance on Russian gas supplies," the source said. "Iran's gas could come to Europe quite easily and politically there is a clear rapprochement between Tehran and the West."
Russia is currently Europe's biggest supplier of natural gas, meeting a third of its demand worth $80 billion a year. The EU has imposed sanctions on Moscow over the conflict in Ukraine, increasing the need for gas from elsewhere.
While sanctioned itself, Iran has the world's second largest gas reserves after Russia and is a potential alternative given talks between Tehran and the West to reach a deal over the Islamic Republic's disputed nuclear programme.
"High potential for gas production, domestic energy sector reforms that are underway, and ongoing normalisation of its relationship with the West make Iran a credible alternative to Russia," said a paper prepared for the EU's Directorate-Generale for External Policies following Russia's annexation of Crimea.
However, the paper added that Iran was not a credible alternative energy supplier in the short-term due to sanctions and large infrastructure needs before exports become viable.
Internal EU energy security documents seen by Reuters also describe plans to tap new non-European gas import sources in central Asia, including Iran.
Iran, exploiting the reversal of old enmities caused by the upheaval of the Islamic State militants in the Middle East, is also keen to sell its gas.
"Iran can be a secure energy centre for Europe," its President Hassan Rouhani was quoted on Wednesday telling Austrian President Heinz Fischer in New York.
Tehran's assertions over reliable supply are likely to ring alarm bells at Russia's giant Gazprom, after interruptions to its exports via Ukraine in previous disputes scared Europe.
"Iran is trying to position itself in Europe as an alternative to Russian gas. It's playing a very sophisticated game, talking with Russia on the one hand about cooperation on easing sanctions and also talking to Europe about substituting Russian gas with its own," said Amir Handjani, an independent oil and gas specialist working in Dubai.
"Given Russia's current strategy politically, which is one of confrontation with Europe, I see the EU having little choice but to find alternative gas supplies," he added.
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U.S. crude oil stocks down 4.27 million barrels
Geoffrey Craig, Platts Oil Futures Editor; James Bambino, Platts Oil Futures & Options Editor
New York - September 24, 2014
U.S. commercial crude oil stocks fell 4.27 million barrels to 358 million barrels during the reporting week ended September 19, U.S. Energy Information Administration (EIA) data showed Wednesday.
Analysts surveyed Monday had expected a 1 million-barrel build.
The U.S. West Coast (USWC) was the main driver behind the weekly draw, with stocks declining 2.34 million barrels to 50 million barrels.
The biggest contributor to the drop in USWC crude oil stocks came from the category "Oil Stocks in Transit (on Ships) from Alaska," which saw inventories fall 2.29 million barrels 1.85 million barrels.
USWC crude oil runs were up 39,000 barrels per day (b/d) to 2.41 million b/d, while a drop in imports also helped push down crude oil stocks come. USWC imports were 76,000 b/d lower at 1.10 million b/d, according to EIA data.
Total U.S. imports declined 1.244 million b/d to 6.87 million b/d. Imports were 13% below the same figure one year ago, reflecting a broader trend of less crude oil being exported to the U.S. as domestic production rises.
Saudi Arabia, Mexico and Venezuela accounted for the majority of the weekly drop. Imports from Saudi Arabia were down 323,000 b/d to 987,000 b/d. Mexican imports fell 285,000 b/d to 637,000 b/d, while imports from Venezuela decreased 354,000 b/d to 590,000 b/d.
Imports from Canada declined 83,000 b/d to 2.91 million b/d.
Total crude oil runs fell 90,000 b/d to 16.21 million b/d, but gross inputs rose, helping to push the refinery utilization rate up 0.4 percentage point to 93.4% of operable capacity. Analysts had expected a drop of 0.92 percentage point.
On the U.S. Gulf Coast (USGC), home to more than 50% of total U.S. operable capacity, the regional refinery utilization rate was 0.9 percentage point higher at 94.3% of operable capacity, as USGC crude oil runs fell, but gross inputs increased.
USGC stocks decreased 1.91 million barrels to 186.68 million barrels. Stocks at Cushing, Oklahoma -- delivery point for the New York Mercantile Exchange (NYMEX) crude oil futures contract -- rose 191,000 barrels to 20.19 million barrels.
GASOLINE STOCKS FALL
EIA data showed U.S. gasoline stocks were down 414,000 barrels to 210.32 million barrels amid lower production and higher demand.
Analysts had expected a draw of 600,000 barrels.
Refiner and blender net production of gasoline decreased 39,000 b/d, while implied demand* rose 74,000 b/d to 8.78 million b/d.
The four-week moving average of EIA data puts gasoline demand at 8.89 million b/d, which is essentially flat compared with the same period a year ago.
Stocks on the U.S. Atlantic Coast (USAC) -- home to the New York Harbor-delivered NYMEX RBOB contract -- increased 1.05 million barrels to 55.45 million barrels.
The build came as USAC gasoline imports increased 110,000 b/d to 407,000 b/d, despite planned maintenance at two Canadian East Coast refineries. This time last year, imports averaged 453,000 b/d. Blending and net production also rose, up 111,000 b/d to 3.04 million b/d.
Weekly EIA data shows U.S. gasoline exports held steady at 362,000 b/d for the fifth straight week, consistent with the more accurate monthly data for June.
DISTILLATE STOCKS RISE
EIA data showed U.S. distillate stocks increased 823,000 b/d to 128.60 million barrels. Analysts had expected stocks to build 160,000 barrels.
U.S. production was down 35,000 b/d to 4.88 million b/d. Implied demand fell 80,000 b/d to 3.75 million b/d. On a four-week moving average, implied demand was steady at just above 3.7 million b/d for the third straight week.
Combined low- and ultra-low-sulfur diesel stocks on the USAC decreased 478,000 barrels to 34.27 million barrels, putting inventories 17% above the five-year average and amply supplied heading into the U.S. Northeast winter-heating-demand season.
Combined stocks on the USGC increased 2.24 million barrels to 34.50 million barrels. The uptick puts USGC stocks at a more than 16.3% deficit to the five-year average.
Platts cFlow ship-tracking software shows the amount of distillates carried by vessels departing the USGC for Europe fell by 60,000 metric tonnes (mt) the week ended September 19.
Weak clean tanker freight rates for a USGC-Europe voyage, basis 38,000 mt, support this. Platts data shows rates have been wallowing around Worldscale** 75 for the week ended September 19.
EIA monthly data for June pegs exports at 1.18 million b/d. EIA weekly data continued to estimate exports at 1.2 million b/d for the fifth consecutive reporting week.
*Implied demand is the amount of product that moves through the U.S. distribution system, not actual end consumption.
**Worldscale freight rates are used to price the cost of shipping crude oil or refined products from one port to another by tanker.
HOUSTON, Sept. 23
09/23/2014
By OGJ editor
Crude oil prices in the Permian basin at Midland, Tex., have been falling below similar crude priced at Cushing, Okla., due to increasing production in the area and insufficient pipeline systems to move the crude to refineries, according to an analysis of the US Energy Information Administration.
“
EIA’s latest Drilling Productivity Report (DPR) estimates that August Permian basin oil production will be almost 1.7 million b/d, 0.3 million b/d more than a year ago. A series of recent outages at refineries in or near the Permian, and along the US Gulf Coast caused the West Texas Intermediate price at Midland to fall $17.50/bbl below the price at Cushing, a record difference.
The previous record was set in late 2012 at a time when production also exceeded pipeline takeaway capacity. The price gas closed in 2013 when Magellan Midstream Partners reversed and repurposed part of its Longhorn Pipeline to move crude from the Permian to Houston, with a capacity of 225,000 b/d. In addition, the first expansions on the Sunoco Logistics Partners’ Permian Express pipelines and other portions of Sunoco’s pipeline system also came online in 2013.
“
With several projects that will allow more crude to flow from the Permian to the Gulf Coast coming online soon, this price difference is expected to narrow.
Magellan’s 300,000-b/d BridgeTex Pipeline, which will move crude from West Texas to refining centers in Houston, Texas City, and Galveston, is expected to begin operating soon. Beginning in early 2015, the Cactus Pipeline, with an expected capacity of 200,000 b/d, will move Permian crude south to connect with an expanded Eagle Ford Pipeline that will deliver crude to Corpus Christi, Tex.
By Esa Ramasamy | September 23, 2014 04:04 PM Comments (1)
The Greece-registered Minerva Glory oil tanker is expected to load another parcel of Western Canadian Select from Sorel, Montreal, Quebec.
This is the second parcel of WCS heavy sour crude to move out of Montreal. The destination of the Minerva Glory is not clear but players say it is most likely bound for the US Gulf Coast. The first parcel of WCS was shipped end-July to Louisiana .
Suncor has confirmed it is the seller of the parcel. Its need for the crude is probably diminished; it has begun maintenance work at its 137,000 b/d Montreal refinery. The maintenance is scheduled to last 11 weeks.
The Minerva Glory’s previous port of call was Corpus Christi, Texas, leading players to believe that this vessel’s last journey was to ship US domestic light sweet crude into Quebec’s 265,000 b/d Jean Gaulin refinery outside Quebec City.
Canadian crude oil players are convinced that the longer it takes to build the Alberta to Texas Keystone XL pipeline, the Edmonton, Alberta, to Kitimat, British Columbia Northern Gateway pipeline and the Energy East (Alberta to New Brunswick) line, ports like Montreal will be used to capitalize on any opportunity that arises to export crudes.
Montreal is getting into the spotlight also because Enbridge’s reversal of Line 9 from Montreal to Westover, Ontario, will be completed before the end of the year. This development will result in 300,000 b/d of mostly heavy sour crudes and some light crudes, including Bakken crude produced in Canada, having the ability to move into Montreal.
“
“
By Ernest Scheyder
(Reuters) - Crude oil would cost at least $150 a barrel due to supply disruptions in the Middle East and North Africa were it not for rising production in North Dakota and Texas, U.S. Energy Information Administration (EIA) chief Adam Sieminski said in an interview on Wednesday.
Oil output from the oil-rich Bakken, Permian and Eagle Ford shale formations in those two states, as well as other smaller formations around the nation, has spiked in the past decade to more than 4 million barrels per day.
That new oil has helped the United States weather supply disruptions from Libya, Iraq and other one-time major oil producers in which political and military turmoil has sharply depressed production, Sieminski said ahead of the North Dakota Petroleum Council's annual meeting.
"If we did not have the growth in North Dakota, in the Eagle Ford and the Permian, oil could be $150 (per barrel)," Sieminski said. "There is a long list of countries with petroleum outages that add up to about 3 million barrels per day."
Sieminski was appointed EIA administrator by President Barack Obama in 2012. His visit to the petroleum council's annual meeting, his first time in North Dakota, comes as Hess Corp and other major oil producers invest billions in the state to extract and process crude and natural gas from the Bakken shale formation.
Alongside the energy companies, commercial and residential investors have plowed billions into new apartments, grocery stores and other projects around the western part of the state, fueling economic growth and creating jobs.
While some have questioned whether North Dakota's oil boom will continue or peter out, as similar oil booms did in the 1950s and 1980s, Sieminski said he expects production to continue and could eventually hit 2 million barrels per day.
North Dakota's oil production was 1.1 million barrels per day in July, according to data released earlier this month by state regulators.
"Our current modeling shows production in the Bakken continuing to climb, and then peak off," Sieminski said. "But the technology still seems to be in the early stages. Modeling changes in technology seems to be the hardest thing to do." (Reporting by Ernest Scheyder; Editing by Chizu Nomiyama; and Peter Galloway)
By Benoit Faucon
Libya's oil production has jumped to 900,000 barrels a day--its highest in more than year--after the country's largest field restarted, a top oil official said Wednesday.
This despite lingering disruption in the North African nation, with two rival governments now claiming control.
A spokesman for the state-owned National Oil Co. said Libya's overall oil production is now around 900,000 barrels a day after the resumption of the Sharara oil field Monday added about 200,000 barrels a day.
The facility had shut last week after rockets fell near the oil-port complex it supplies.
Production hadn't reached that level since July 2013, when rebels and protesters shut key oil ports and fields. Deals with the government this summer led to a gradual increase of production despite fighting in the country's largest cities in Tripoli and Benghazi.
Write to Benoit Faucon at benoit.faucon@wsj.com
Wednesday, September 24, 2014 7:06 PM
Flames rise from an oil refinery in Cairo, May 6, 2008. REUTERS/Nasser Nuri
DUBAI, Sept 24 (Reuters) - Kuwait said on Wednesday it would ship around two million barrels of crude oil in early October to Egypt, giving it priority as a buyer ahead of sales from storage into the Mediterranean market.
The deal for two million barrels a month of Kuwaiti crude was signed this week with the Arab Petroleum Pipeline Co., known as SUMED.
SUMED, which owns and operates Egypt's Mediterranean port of Sidi Kerir, is half owned by state run oil company Egyptian General Petroleum Corp (EGPC) while a group of four other Gulf Arab countries - Saudi Arabia, Kuwait, United Arab Emirates and Qatar - own the other half.
"The storage contract with SUMED aims at streamlining crude oil exports to Europe across the Mediterranean", Nasser al-Mudhaf, managing director for international marketing at state owned Kuwait Petroleum Corp (KPC) told state news agency KUNA.
The first shipment of two million barrels will go to the Egyptian Red Sea port of Ain Sukhna, then will be pumped through pipelines to Sidi Kerir terminal.
"Egypt will be given priority according to its need", KUNA quoted Mudhaf saying.
The SUMED pipeline allows oil firms to by-pass the shipping chokepoint of the Suez canal, which is too small to allow the passage of fully laden very large crude carriers (VLCCs) with cargoes of two million barrels.
The UAE, Saudi Arabia and Kuwait have together provided Egypt with billions of dollars in grants, loans and petroleum products since former President Mohamed Mursi of the Muslim Brotherhood was overthrown by the army last year.
Last week, Egypt said it would buy 65 percent of its oil product imports for the next year from the UAE. (Reporting by Rania El Gamal, editing by William Hardy)
By: OilPrice_Com
Commodities
Not even the specter of a spillover of Islamic extremism from Somalia can dampen the atmosphere in Kenya, where commercial oil production is expected to begin in 2016 and discovery after discovery has made this the hottest and fastest-paced hydrocarbon scene on the continent.
When it comes to new oil and gas frontiers, today it’s all about Africa. And more specifically, it’s all about the eastern coast, with Kenya the clear darling--not just because it’s outpacing neighboring Uganda by leaps and bounds, but also because despite some political instability hiccups and the threat of militant al-Shabaab, it’s still one of the safest venues in the region.
Six of the last 10 biggest finds have been in Africa, where—all told--there are some 130 billion barrels of crude oil waiting to be tapped by more than 500 companies, according to a recent report by PriceWaterhouseCoopers.
Topping this list are Kenya’s Anza and South Lokichar basins where the discovery and development news has been fast-paced.
In the last days of August, Tullow Oil—the British explorer behind Kenya’s oil discovery debut in 2012—announced another oil find that will extend the already proven South Lokichar basin “significantly northwards”.
Earlier this year, in May, Tullow and partner Africa Oil Corporation left a hefty impression on the market with the announcement of the country’s first commercial oil discovery, worth $10 billion, in this basin.
And the next testing ground will be the neighboring Kerio Basin, which should get off the ground later this month, while there has been a flurry of attention lately surrounding the Ogaden basin where initial estimates are enough to send stocks soaring.
In the meantime, while bigger players such as Tullow and Africa Oil have benefited from the fame of their initial discoveries, they have also become burdened by the pressure of rising expectations for more discoveries. Not so the smaller players on this scene, who stand to benefit from the original discoveries and continued drilling—without the pressure. Investors will now be looking at who is poised to make the next discovery.
Africa Oil and Marathon are currently drilling an appraisal well on the Sala gas discovery in the Anza Graben Basin onshore Kenya, which will benefit other explorers with acreage just south of this, including UK-listed Afren Plc, UK-listed Tower Resources and Taipan Resources Inc (TPN-TSK), which has two onshore blocks in key basins. If these explorers come up with their own first find, it will be a superior risk-reward scenario.
In the Ogaden Basin, the market will certainly take notice of Afren’s new estimates late last month that a large under-explored sub-basin, El Wak, contains up to 6.65 billion barrels of oil. If this estimate is accurate—and it comes in well above partner Taipan Resources’ earlier estimates of about a quarter of that—they would be looking at the largest onshore target ever drilled anywhere in Africa. Later this year, Afren will be conducting seismic surveys to further define El Wak’s potential, and investors will be watching closely.
The bigger picture, though, is of an East African country that has the advantage over its neighbors due to a convergence of add-on factors, including infrastructure aims, relative stability and what appears to be a smarter use of natural resources to generate more investment and economic growth, according to Jennifer Cooke of the Center for Strategic and International Studies.
Among other planned infrastructure projects of a massive scale, discussions are under way for a pipeline from neighboring Uganda, which would pass through the South Lokichar basin and come close enough to some of the prime drilling areas that could be the site of Kenya’s next discoveries.
The World Bank’s approval in July of $50 million for the Kenyan government to boost its management and distribution of natural resource revenues, with an eye on long-term sustainable growth, has further boosted confidence in long-term sustainable growth.
In the meantime, political stability has also been given a slight reprieve with the International Criminal Court’s (ICC) indefinite adjournment of the trial against Kenyan President Uhuru Kenyatta due to lack of evidence that he organized post-election ethnic violence in 2007.
But the security situation with the regrouping of the Somalia-based al-Shabaab militant group and an uptick of the group’s apparent attacks on Kenya continue to be problematic, even more so because no one seems to be sure whether the threat is emanating entirely from al-Shabaab.
While this remains a clear threat, it has not affected exploration and development—and it certainly has done little to scare foreign investors from this hydrocarbon frenzy that is expected to continue over the next five years, further boosted by relatively cheap exploration licenses.
In this race, Kenya is the top contender, moving forward at double the speed of neighboring Uganda which discovered oil in 2006, six years before Kenya, but will lag a year behind the newcomer in terms of commercial production.
By James Stafford of Oilprice.com
© 2014 Copyright OilPrice.com- All Rights Reserved
Geopolitical tensions between Russia and the West and troubles in Middle East have dominated headlines all summer, but investors so far have managed to shrug off fears, with the market reaction remaining fairly contained.
The Organisation of Petroleum Exporting Countries (OPEC) basket of 12 crude oils slid to $94.31 on Tuesday, the lowest level since July 2012 even as the U.S. confirmed 14 air strikes against ISIS, with large explosions confirmed in eastern Syria.
As recently as June, the cartel was getting as much as $110 per barrel. Political tensions traditionally impact markets through an oil price shock or disappointing growth – so why are things different this time?
Chief oil analyst at Energy Aspects, Amrita Sen said the age-old supply and demand argument was to blame – with an oversupply driving prices lower.
"I do think that it still sends a signal, that the Middle East isn't really where companies will want to invest in the future – so I think this is much more of a longer-term issue. But for the shorter term, given the kind of oversupply we have people are viewing this for now as contained – southern Iraqi fields are not going to get affected," Sen told CNBC.
Sen predicted that Brent crude, currently trading at $96.59 per barrel, could fall a further $10 per barrel in the short term.
The demand and supply factors that have been bubbling under for two years are now finally hitting the oil markets according to research analysts at Citi, which is damping the connection between Middle East turmoil and financial markets.
"The dynamic that drove oil's rally last decade was robust demand growth meeting consistent disappointments on the supply side. Citi believes those two have now flipped in this decade," head of energy strategy at the group, Seth Kleinman said.
The U.S. shale revolution is a key factor hitting both the demand and the supply side, as the spread between oil and gas prices is encouraging a shift from oil to gas in transportation, petrochemicals and other oil demand sectors, he said.
"The only clear path to rebalancing the oil markets — absent some new and significant disruption — is for Saudi Arabia and OPEC to start to pull back on production to rein in the inventory builds," he added.
So should investors steer clear of the likes of oil majors BP and Total while the downward pressure on oil price looks set to continue at least in the short term?
"A lot of the margins get squeezed – but it's just by how much. We are looking at total costs of production and they are still exceptionally low," global equity strategist at Coutts James Butterfill, told CNBC, who said investors are also being rewarded with a very attractive dividend.
"For BP for instance, they (costs of production) are $25 per barrel. At Total they are $56, $57. So there is still a long way to go before these energy companies are not making any money. We own BP, we think these issues (relating to Russia and Macondo) will sort themselves out over the longer term," said Butterfill.
When it comes to new oil and gas frontiers, today it’s all about Africa, Stafford writes. More specifically, it’s all about the eastern coast, with Kenya the clear darling of an emerging oil industry.
Not even the specter of a spillover of Islamic extremism from Somalia can dampen the atmosphere in Kenya, where commercial oil production is expected to begin in 2016 and discovery after discovery has made this the hottest and fastest-paced hydrocarbon scene on the continent.
When it comes to new oil and gas frontiers, today it’s all about Africa. And more specifically, it’s all about the eastern coast, with Kenya the clear darling--not just because it’s outpacing neighboring Uganda by leaps and bounds, but also because despite some political instability hiccups and the threat of militant al-Shabaab, it’s still one of the safest venues in the region.
Six of the last 10 biggest finds have been in Africa, where—all told--there are some 130 billion barrels of crude oil waiting to be tapped by more than 500 companies, according to a recent report by PriceWaterhouseCoopers.
Topping this list are Kenya’s Anza and South Lokichar basins where the discovery and development news has been fast-paced.
In the last days of August, Tullow Oil—the British explorer behind Kenya’s oil discovery debut in 2012—announced another oil find that will extend the already proven South Lokichar basin “significantly northwards”.
Earlier this year, in May, Tullow and partner Africa Oil Corporation left a hefty impression on the market with the announcement of the country’s first commercial oil discovery, worth $10 billion, in this basin.
And the next testing ground will be the neighboring Kerio Basin, which should get off the ground later this month, while there has been a flurry of attention lately surrounding the Ogaden basin where initial estimates are enough to send stocks soaring.
In the meantime, while bigger players such as Tullow and Africa Oil have benefited from the fame of their initial discoveries, they have also become burdened by the pressure of rising expectations for more discoveries. Not so the smaller players on this scene, who stand to benefit from the original discoveries and continued drilling—without the pressure. Investors will now be looking at who is poised to make the next discovery.
Production from Prolific Shale Plays Up 31.5% Compared to Year Ago Levels
PR Newswire
DENVER and HOUSTON, Sept. 19, 2014
DENVER and HOUSTON, Sept. 19, 2014 /PRNewswire/ -- Oil production from shale formations in North Dakota and Texas increased by more than 78,000 barrels per day (b/d) in August or 3.1% in August, according to Bentek Energy, an analytics and forecasting unit of Platts, a leading global provider of energy, petrochemicals, metals and agriculture information.
The latest data shows that South Texas, Eagle Ford oil production was 37% higher than August 2013, just short of 400,000 incremental barrels per day available to the domestic market, according to Jack Weixel, Bentek Energy director of energy analysis.
"This production is important to sustain storage levels at Cushing, Oklahoma in the face of higher refinery demand in the U.S.," said Weixel. "Bentek estimates that from August 2013 to August 2014, total U.S. crude oil production has increased by over 1.5 million b/d."
Crude oil production in the North Dakota section of the Bakken shale formation of the Williston Basin averaged nearly 1.2 million b/d in August, according to Bentek. This was 227,000 b/d higher than levels seen in August 2013.
"Prices of Bakken shale oil fell to the mid-$80.00 per barrel (/b) area between mid-August and mid-September, while prices of Eagle Ford shale oil trended below the $100.00/b level since mid-August," said Richard Capuchino, Platts managing editor of Americas crude.
The Platts Eagle Ford Marker, a daily price assessment launched in October 2012 and reflecting the value of oil out of the Eagle Ford Shale formation in South Texas, has dropped 0.9% since January 1, with an average year-to-date price of $103.234/b. The marker has fluctuated between $94.20/b and $110.71/b since the first of the year.
The price of oil out of the Bakken formation at Williston, North Dakota, has ranged between $83.35/b and $96.27/b since April 22, according to the Platts Bakken price assessment. It reached a high of $96.27/b in mid-June before leveling off and trading closer to the $90.3669/b average for the year.
The Platts Bakken, introduced earlier this year, is a daily assessment of price for oil closest to the wellhead prior to determination of transportation by rail or pipe. The assessment reflects a sulfur content of 0.2% or less and an American Petroleum Institute (API)** gravity of 42 or less, similar to the nature of North Dakota Light Sweet crude. The Platts Eagle Ford Marker reflects the value of a median 47-API Eagle Ford crude barrel, based on the crude's product yields and Platts product price assessments, adjusted for U.S. Gulf Coast logistics.
Platts introduced the world's first independent daily price reference valuing crude oil produced from a shale formation in May 2010 when it began assessing Bakken Blend shale oil injected into pipelines at Clearbrook, Minnesota, and Guernsey, Wyoming. Platts began publishing its Platts Bakken assessment on April 22.
For more information on Platts' price assessments methodology visit these links: Details of Platts Bakken and Platts Eagle Ford Marker. Bentek Energy's shale oil production figures are derived from proprietary data models using publicly available data. For more information on data models, reports or Bentek's methodology, contact info@bentekenergy.com.
Platts will publish monthly updates via press release on Bakken and Eagle Ford shale oil production and price data.
Visit this link to see the Platts May 2014 special report: Bakken: The King in the North.
* The Bakken formation spans North and South Dakota, Montana, Saskatchewan, Manitoba and Alberta.
** API gravity is a measure of how heavy or light a grade of crude oil is compared to water.
French oil and gas company Total said western sanctions against Russia has forced it to halt a joint venture with Russia’s Lukoil to explore shale oil in western Siberia.
The move signals that the latest sanctions against Russia over its involvement in Ukraine will hinder the Kremlin’s plan to develop its shale oil resources with imported fracking technology, which had been seen as a key driver to the next 5 to 10 years of production.
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The latest sanctions against Russia, announced two weeks ago by the U.S. and EU, prohibit and restrain western financing and technology to some Russian energy projects, including shale oil development. Russia has massive untapped shale oil deposits that are considered recoverable, about 75 billion barrels worth, according to the U.S. Energy Information Administration.
On Monday, Total hosted an investor day to announce plans to sell $10 billion worth of assets between next year and 2017. The company also reduced its 2017 production goal from 3 million to 2.8 million barrels of oil equivalent each day.
Total has 15 major projects producing oil, of which two-thirds are operated by the company. Total has a stake in Kazakhstan’s largest oil field, Kashagan, which has been troubled with setbacks for nearly a decade. Margerie said production would restart in the third quarter of 2016. Technical problems on the field have racked up billions of dollars in costs.
Total's second major project in Russia, the Yamal liquified natural gas with Russia's Novatek, remains in place though targeted by sanctions. Total can raise financing from western banks but not in dollars, and China has committed to cover 60 percent of the costs, Margerie said.
By Fatih Karimov – Trend:
Iran is negotiating with 18 foreign companies to explore new oil and gas reserves in the country.
National Iranian Oil Company's director for exploration, Hormoz Qalavand, said some of the companies have announced their readiness to implement explorations operations, Iran’s IRNA news agency reported on September 22.
To date, 40 hydrocarbon blocks have been defined in the country, he said, adding that 15 blocks may be proposed to foreign companies to be explored.
Iran's oil reserves will last for another 60 years, according to Bahmani Soleimani, deputy director for exploration affairs at National Iranian Oil Company.
Bahmani also said that the country's gas reserves will also last for another 200 years, Iran's IRNA News Agency reported on Aug. 20.
"Iran is the world's top country in term of success rate of exploration," he said, adding that the success rate of Iran's explorations is around 70 percent.
"Iran even registered the unprecedented rate of 90 percent in the Iranian calendar year of 1391 (which ended March 20, 2013)," Bahmani added.
The official said Iran has secured 95 percent of the successful explorations predicted in the Fifth Five-year Socio Economic Development Plan (2011-2015).
According to the Oil & Gas Journal, as of January 2014, Iran has an estimated 157 billion barrels of proved crude oil reserves, representing nearly 10 percent of the world's crude oil reserves and 13 percent of reserves held by the Organization of the Petroleum Exporting Countries (OPEC).
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Matar Hamed Al Neyadi, the Undersecretary of the Ministry of Energy, said there is strong demand on UAE oil exports
By Alexander Cornwell, Staff Reporter
Gulf News
Matar Hamed Al Neyadi, the Undersecretary of the Ministry of Energy, said that the UAE is increasing production to 3 million barrels a day by year-end to meet international demands.
Fujairah /Abu Dhabi: The UAE is continuing in its plans to step up oil production levels in line with 2017 targets despite falling global prices, a senior government official said on Tuesday.
The UAE marginally increased production in August by 20,000 barrels per day (bpd) to reach 2.85 million a day, according to the International Energy Agency (IEA). The UAE has targeted to produce 3.5 million barrels a day by 2017.
Matar Hamed Al Neyadi, the Undersecretary of the Ministry of Energy, said that the UAE is increasing production to 3 million barrels a day by year-end to meet international demands. The UAE primarily exports to Asian markets. He was speaking at the Gulf Intelligence Energy Markets Forum 2014 in Fujairah on Tuesday.
Al Neyadi’s comments come at a time when global oil prices are falling to record lows amid United States-led intervention in Iraq and Syria against the Islamic State and increasing tensions between Ukraine and Russia.
In contrast with the UAE, neighbouring Saudi Arabia cut its production output by 330,000 a day to 9.68 million in response to weakening US demand, according to IEA.
Last week, Brent crude, a global market indicator, hit a 26-month low and on Tuesday was at $97.15 a barrel in early morning London trade. Analysts say that a combination of oversupply, growth in United States shale production and weakening growth in China is behind falling prices.
Pressed on the UAE’s outlook on declining oil prices, Al Neyadi, speaking on the sidelines of the forum, said the government believes prices will soon stabilise. “$100 [a barrel] is a fair price,” he said.
In November, the Organisation of the Petroleum Exporting Countries (Opec) will meet to discuss the drop in prices, a sensitive note for the oil-rich Arab Gulf states that are dependent on energy exports to fund national budgets.
Last week, Opec Secretary General Abdullah Al Badri said he expects the 12-member nation group to lower its target following the decline in oil prices. Opec’s preferred price is $100 a barrel.
Meanwhile, in Abu Dhabi on Tuesday, the UAE Minister of Energy, Suhail Al Mazroui, said it is too early to say whether Opec should cut its target.
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The Undersecretary made similar comments in Fujairah by saying the UAE would reach a consensus with the Opec members.
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