News 31th October 2014

Noble gas output from Israel up 21 percent

HOUSTON, Oct. 28 (UPI) -- Energy explorer Noble Energy said Tuesday production during the third quarter soared because of advancements off the coast of Israel.

Noble, a partner in the development of the Tamar and Leviathan gas basins, said gas sales volumes from its Israeli assets were up 21 percent from the second quarter and up 3 percent year-on-year.

Tamar managing partners Noble and Israel's Delek Group estimate the field holds as much as 10 trillion cubic feet of natural gas. Last week, they said they were negotiating the sale of at least 175 billion cubic feet of natural gas per year over the next three years with Egyptian buyer Dolphinus Holdings Ltd.

During the third quarter, the company said the "debottlenecking" of Tamar facilities led to a peak product of more than 1.1 billion cubic feet of gas output per day

Delek last week said gas sent from Tamar would be "interruptible," or designated only from excess reserves from the offshore field

"Combined for Tamar and Leviathan, Noble Energy and partners have executed letters of intent to export gross daily volumes of up to 1.7 billion cubic feet per day and total volumes of more than 8 trillion cubic feet of natural gas to regional export customers," the company stated. "Negotiations of final gas purchase and sales agreements are underway."

Noble reported net income for the third quarter of $419 million, up from $205 million during the same period last year.

ConocoPhillips Becomes First to Cut Spending on Lower Oil

ConocoPhillips became the first major oil company to announce plans to reduce spending due to falling crude prices as drilling in some emerging North American fields becomes less profitable.

The third-largest U.S. energy producer can meet its target to boost production by as much as 5 percent a year even as it reduces annual spending to below $16 billion, Chairman and Chief Executive Officer Ryan Lance told investors today. U.S. oil prices have declined 24 percent from a high of $107.26 a barrel in June because of increased North American supplies and reduced global demand forecasts.

ConocoPhillips plans to scale back drilling in emerging oil regions such as West Texas and the Rocky Mountains. The company’s ability to produce oil at lower costs in more established areas that have fueled the U.S. shale boom make growth sustainable. Houston-based ConocoPhillips (COP) could also reduce exploration spending, he said.

“Events like the recent price downturn underscore the importance of staying focused on the fundamentals,” Lance said. “We know this is a cyclical business, and we’ve been here before.”

Major oil companies such as Royal Dutch Shell Plc (RDSA) and Exxon Mobil Corp. (XOM) turned to asset sales and spending cuts even before oil prices fell, with a focus on higher returns instead of production growth.

ConocoPhillips is on track to spend $16.7 billion this year exploring for and producing oil and gas. A cut in 2015 to below $16 billion would represent at least a 4 percent decline.

Oil Slump

Lance has helped transform the one-time energy conglomerate, which spun off its refining business and has sold $10 billion assets in the past two years to fund dividends and expansion in North America. The dividend, which is among the most generous in the industry at 73 cents a share, a 4 percent yield over 12 months at today’s price, will continue to be the company’s top priority, he said.

The shift coincided with an oil market slump that has seen U.S. prices fall four consecutive months to $81.12 a barrel today, prompting some to question the longevity of North American drilling prospects. The company has gone from a small player in fast-growing U.S. shale regions to a dominant force able to turn a profit at an oil price of $40 a barrel.

“They have plenty of places to put capital, and they can take the time to make sure that when they drill an unconventional well, they are successful and realize a high margin,” James Sullivan, a New York-based analyst at Alembic Global Advisors, said today in a telephone interview.

ConocoPhillips became the second major oil company today to report rising profits in the face of falling crude prices as an asset sale in Nigeria and higher output in Texas and North Dakota boosted returns.

Higher Profits

Third-quarter net income rose to $2.7 billion, or $2.17 a share, from $2.48 billion, or $2, a year earlier, ConocoPhillips said today in a statement. Excluding one-time items, per-share profit was 8 cents more than the $1.21 average of 20 analysts’ estimates compiled by Bloomberg.

Earlier today, Shell also reported higher third-quarter profits as earnings from refining and gas offset the impact of lower crude prices.

ConocoPhillips increased production 33 percent to the equivalent of 212,000 barrels of oil a day in North Dakota’s Bakken and Texas’ Eagle Ford formations, two of the fastest-growing U.S. oil fields. That follows a 41 percent output increase in the second quarter. The company also completed a sale of its interest in Nigeria for $1.4 billion.

The company, which has 17 buy, nine hold and one sell recommendations from analysts, rose 0.9 percent to $71.35 at the close in New York.

Why Oil Prices Went Down So Far So Fast

The reasons oil prices started sliding in June were hiding in plain sight: growth in U.S. production, sputtering demand from Europe and China, Mideast violence that threatened to disrupt supplies and never did.

After three-and-a-half months of slow decline, the tipping point for a steeper drop came on Oct. 1, said Ray Carbone, president of broker Paramount Options Inc. That’s when Saudi Arabia cut prices for its biggest customers. The move signaled that the world’s largest exporter would rather defend its market share than prop up prices.

“That, for me, was the giveaway,” Carbone said in an Oct. 28 phone interview from his New York office. “Once it started going, it was relentless.”

Oil Prices

The 29 percent drop since June of the international price caught traders and forecasters by surprise. After a steady buildup of supply and weakening demand, the outbreak of an OPEC price war is casting doubt on investments in new oil resources while helping the global economy, keeping inflation in check and giving motorists a break at the pump.

Brent crude, the global benchmark, declined to $82.60 a barrel on Oct. 16, the lowest in almost four years, from $115.71 on June 19. In the U.S., West Texas Intermediate touched $79.44 on Oct. 27, the lowest since June 2012. U.S. regular unleaded gasoline is averaging close to a four-year low of $3.01 a gallon nationwide, according to AAA.

The bear market exceeded the decline anticipated in exchange-traded futures, used by producers to hedge price swings. As recently as a month ago, Brent for delivery in November traded at $94.67 a barrel, 10 percent above the current price.

Following Market

OPEC Secretary-General Abdalla el-Badri denied the existence of a price war. “Our countries are following the market,” he said yesterday at the Oil & Money conference in London. “People are selling according to the market price.”

Officials from the Saudi oil ministry could not be reached for comment after hours.

Prices stayed higher earlier this year as traders focused on the risk that armed conflicts in Libya, Iraq and Ukraine could interfere with oil production, according to Jeff Grossman, president of New York-based BRG Brokerage. The disruptions never materialized.

“This one caught a few people off guard because they were still worried about some of these geopolitical things that were happening all over the world that never came to fruition,” said Grossman, a New York Mercantile Exchange floor trader. “We probably never should have been over $100.”

Libya’s Output

Libya’s production tripled since June to about 900,000 barrels a day, still 40 percent lower than two years ago, according to an official with direct knowledge of the matter. War hasn’t stopped production in Iraq, which is pumping 3.1 million barrels a day, within 10 percent of February’s 13-year high. The Organization of Petroleum Exporting Countries boosted September production to an 11-month high of 30.9 million barrels a day.

London-based Barclays Plc cut its oil-price forecasts on Oct. 28 for the second time this month, citing a global surplus. Brent will average $93 a barrel in 2015, while WTI averages $85, down from previous estimates of $96 and $89, respectively, the bank said.

The revision follows Goldman Sachs Group Inc. cutting its 2015 forecasts a day earlier, to $85 a barrel from $100 for Brent, and to $75 a barrel from $90 for WTI. Brent will average $99.65 a barrel in 2015, down from a September prediction of $105.50, according to the average of 46 analyst estimates compiled by Bloomberg.

Horizontal Drilling

OPEC faces increasing competition from the U.S., where technological breakthroughs -- hydraulic fracturing and horizontal drilling -- have enabled domestic production to replace imports at a historic pace. Output surged 14 percent in the past year to 8.97 million barrels a day, the highest since the U.S. Energy Information Administration’s weekly estimates began in 1982.

Yet U.S. production has been booming for years now without setting off a bear market, said Katherine Spector, an analyst at CIBC World Markets Corp. What changed this summer was macroeconomic data indicating weak demand in Europe and Asia, she said in an Oct. 16 report.

The International Monetary fund this month cut its forecasts for global growth in 2015 to 3.8 percent from 4 percent. The Paris-based International Energy Agency predicted world oil consumption would expand at the slowest pace since 2009 after cutting its forecast in October for the fourth time in a row, to half what it predicted in June.

Price Cut

On Oct. 1, Saudi Arabia lowered prices on its crude exports to Asia to the lowest in more than five years. Iraq and Iran followed. Frankfurt-based Commerzbank AG called it a price war.

“That’s where the perception of their action changed overnight,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen. “They must have been aware how the market would interpret that when they’d been such a guarantor of stable prices for so long.”

Brent crude for December settlement fell 1.3 percent to $86.01 a barrel on the ICE Futures Europe exchange as of 4:15 p.m. in New York. West Texas Intermediate lost 1.5 percent to $80.97.

The plunge does not accurately reflect the balance between oil supply and demand, OPEC’s El-Badri said at the London conference yesterday.

Growing Demand

“We see that demand is still growing, that supply is also growing, but the magnitude in the increase in supply does not really reflect this 25 percent change in the market,” he said. “Unfortunately, everybody is panicking.”

As Saudi Arabia tolerates lower prices to protect its market share, the kingdom is also testing the level at which higher-cost U.S. production remains profitable, according to the IEA. As much as 50 percent of shale oil is uneconomic at current prices, El-Badri said. New York-based Sanford C. Bernstein & Co. estimates about a third of U.S. production from shale loses money at $80 a barrel.

“We think there’s a lot of economic oil at $75, economic meaning we earn 15 percent, 16 percent, 17 percent returns,” Stephen Chazen, chief executive officer of Houston-based Occidental Petroleum Corp. (OXY), said during a conference call with analysts Oct. 23.

Other U.S. drillers have already altered plans due to lower prices.

Consumer Celebration

ConocoPhillips today became the first major oil company to announce plans to reduce spending in emerging oil regions such as West Texas and the Rocky Mountains. Dallas-based Exco Resources Inc. (XCO) will defer some drilling in North Louisiana because of lower prices, President Harold Hickey said on a conference call yesterday.

“We’ve used $100 Brent as the basis for our plans even as Brent has averaged nearly $110 for the last three years,” John Hess, New York-based Hess Corp. (HES)’s billionaire CEO, said on a conference call yesterday. “However, with Brent now at approximately $87 per barrel, we are reviewing our plans and actions that we might take in a lower price environment.”

Al Walker, chairman and CEO of The Woodlands, Texas-based Anadarko Petroleum Corp. (APC), said on a conference call yesterday that the company will “watch this for a few more months and when we announce our capital plans in March, we’ll have a much better idea of what we expect.”

Consumers, on the other hand, have cause to celebrate. A 20 percent drop from the average oil price of the past three years amounts to a $1.1 trillion annual stimulus to the world economy, Citigroup Inc. estimates. In the U.S., gasoline continuing at the current level would add 0.4 percent to annual economic growth, according to Joseph LaVorgna, New York-based chief U.S. economist at Deutsche Bank Securities Inc.

“Historically, when price changes kick in, they are usually more violent than the forecasts,” said Torbjoern Kjus, senior oil market analyst at DNB ASA in Oslo. “It’s difficult for analysts to see such a massive drop, as you will look like a conspiracy theorist.”

Some analysts do, however, see a price rebound. Brent will climb to as much as $100 a barrel next year, according to London-based Standard Chartered Plc, Sanford C. Bernstein and Barclays.

Mexico Passes 2015 Budget Revenue Bill After Oil Forecast Cut

Mexico’s Congress passed the revenue side of next year’s budget after lowering its forecast for the price of oil to account for volatility in global crude prices.

The lower house today passed changes approved last night in the Senate, sending the bill to President Enrique Pena Nieto for enactment. The Senate Finance committee this week lowered its estimate for oil exported by Mexico next year to $79 a barrel from the $81 originally passed by the lower house earlier this month. The government had projected the price to be $82 in its budget proposal on Sept. 5.

Mexico is seeking to reduce the deficit in 2015 and erase it in coming years after increasing spending this year in an effort to boost an economy that grew 1.4 percent in 2013, the least since the 2009 recession. Pena Nieto also pushed through an overhaul last year to open the state-controlled energy industry to private investment and lessen the government’s dependence on oil revenue that funds about a third of federal spending.

“The volatility that we’ve seen in recent days in the price of oil makes clear the wisdom of Mexico’s energy reform and the fiscal measures that have reduced the dependence of public finances on the price of oil,” Manlio Fabio Beltrones, the lower house leader for Pena Nieto’s Institutional Revolutionary Party, said on Radio Formula before the chamber’s vote today.

Economic Growth

The deficit would narrow to 1 percent of gross domestic product next year from the 1.5 percent approved for 2014 if Mexican President Enrique Pena Nieto’s spending bill is passed unchanged by the Nov. 15 deadline. The spending bill only requires lower house approval. The budget assumes economic growth of 3.7 percent for next year, which would be the fastest since Pena Nieto took office in 2012.

Mexico’s mix of oil closed at $78.31 per barrel yesterday and has fallen 24 percent from a 2014 high in June. Brent crude for next month delivery, a global benchmark, has fallen 25 percent since June to $86.03 a barrel as global demand growth slows while threats to supply in Iraq and Libya recede.

The budget doesn’t include any new taxes or increase existing duties. The government at the start of the year raised the sales tax in areas bordering the U.S., a move opposed by the National Action Party, or PAN, the second-biggest group in Congress after Pena Nieto’s party. Consumer confidence in January tumbled to the lowest level in almost four years. The PAN advocated unsuccessfully in this year’s budget debate for Mexico to lower taxes.

The government forecasts economic growth will accelerate in 2015 from 2.7 percent this year after Pena Nieto ended Petroleos Mexicanos’s oil monopoly and opened the telecommunications industry to more competition. His administration expects the moves will lift growth to about 5 percent starting in 2016.

TransCanada Applies to Build Energy East Oil Pipeline

TransCanada Corp. (TRP) the company that has been trying to build the Keystone XL pipeline since 2008, applied today for a C$12 billion ($10.7 billion) link between Alberta’s oil sands and Canada’s Atlantic Coast.

The 4,600-kilometer (2,859-mile) Energy East line would be North America’s largest crude conduit, carrying as much as 1.1 million barrels a day within Canada to refineries and marine export terminals in Quebec and New Brunswick. Canada’s National Energy Board has 15 months to review the application and make a recommendation to the cabinet of Prime Minister Stephen Harper.

Keystone XL, a project to ship oil-sands crude to refineries on the U.S. Gulf Coast, has been set back by environmental backlash and President Barack Obama’s 2012 rejection of TransCanada’s initial application. Developers of Canada’s landlocked oil sands need more pipelines to the coasts to handle expanding output and reach new markets for their crude.

“There is room for both export via the Keystone XL pipeline to the Gulf Coast but also through the Energy East pipeline,” Russ Girling, chief executive officer of Calgary-based TransCanada, said on a conference call today.

About half of Energy East’s volumes will probably be exported from Canada to markets including the Gulf Coast, Girling said. Using Energy East and crude tankers to get the oil to the Gulf Coast will cost about $2 to $3 a barrel more than Keystone XL, he said.

TransCanada, the largest Canadian pipeline company after Enbridge Inc. (ENB), is planning to convert portions of an existing natural gas line to carry crude and lay new pipe for Energy East, which is expected to begin carrying oil in late 2018.

Winning Support

Like Keystone XL, Energy East is attracting opposition from environmental organizations opposed to development of the oil sands, which releases more greenhouse-gas emissions blamed for climate change than other crude production methods.

National Wildlife Federation, based in Merrifield, Virginia, today said it joined a coalition of green groups vowing to block Energy East.

“Climate-disrupting tar-sands oil is a disaster for wildlife and habitat,” Jim Murphy, senior counsel for the federation, said in an e-mailed statement.

TransCanada has won support from communities along the route by negotiating with landowners and politicians and making changes to plans ahead of its regulatory filing, Girling said in a May interview.

Gas Conversion

The Federation of Northern Ontario Municipalities has voted to support Energy East because of the jobs it will create, Alan Spacek, president of the group that represents 110 communities, said on a conference call.

The plan to convert a section of pipeline to moving oil has prompted fears of a supply shortfall for gas-heated homes and gas-fired power plants in Quebec and Ontario. Gas distributors have spoken out against Energy East, in part because of tolls it will charge to install a replacement pipeline. Quebec’s Gaz Metro Inc., Enbridge’s Toronto-based gas distributor and Spectra Energy Corp.’s Union Gas are among those opposing the project, saying it could raise prices for consumers.

TransCanada and Energy East’s customers will pay C$500 million of the C$1.5 billion cost to build the gas pipeline replacement, Girling said today.

“There are still concerns among some of our customers,” Girling said. “We continue to have conversations with them to understand those concerns better.”

Keystone XL

The Energy East application comes six years after TransCanada first sought U.S. approval to build Keystone XL to link the oil sands to the largest refining center in the world.

The U.S. State Department, which has jurisdiction over pipelines that cross the country’s borders, delayed its decision on Keystone XL amid a court case in Nebraska. TransCanada split the project in two to build the southern portion first and re-applied for the northern leg in 2012 after Obama rejected the project, which Girling said may now end up costing as much as $10 billion.

Canadian heavy oil prices have lagged other benchmark futures because of transportation bottlenecks, plummeting to $42.50 a barrel less than the U.S. benchmark in December 2012. The discount narrowed to $14 a barrel yesterday as new U.S. pipeline capacity to the Gulf Coast eases some congestion and producers increasingly turn to trains to move their crude.

Other proposals to bring oil sands to market include Enbridge’s Northern Gateway project and expansion of Kinder Morgan Energy Partners LP’s Trans Mountain line. Energy East is the largest of about C$39 billion in projects backed by contracts that TransCanada is planning.

OPEC Boosts Oil Output as Prices Slide to Four-Year Low

OPEC countries boosted oil output to a 14-month high in October as crude futures sank into a bear market, a Bloomberg survey showed yesterday.

Production by the 12-member Organization of Petroleum Exporting Countries climbed by 53,000 barrels a day to 30.974 million, led by gains in Iraq, Saudi Arabia and Libya, according to the survey of oil companies, producers and analysts. Last month’s total was revised 14,000 barrels a day lower to 30.921 million because of changes to the Iraqi, Kuwaiti, Nigerian and Qatari estimates.

OPEC nations lifted output as Brent crude dropped to a four-year low amid ample global supplies and sluggish demand. The group’s biggest producers, Saudi Arabia, Iraq, Iran and Kuwait, have cut their official selling prices, sparking speculation they will compete for market share rather than trim output. Ministers will gather next month to discuss the group’s production target.

“The data confirms that there’s a battle over market share,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone yesterday. “The members are playing chicken with the market.”

Brent crude for December settlement slipped 88 cents, or 1 percent, to $86.24 a barrel on the London-based ICE Futures Europe exchange yesterday. Brent, the benchmark for more than half the world’s oil, touched $82.60 on Oct. 16, the lowest since November 2010 and down more than 20 percent from its June high, meeting the common definition of a bear market.

West Texas Intermediate fell 1.3 percent to $81.12 on the New York Mercantile Exchange yesterday. WTI reached $79.44 Oct. 27, the least since June 2012.

U.S. Production

OPEC is also seeing demand for its crude drop as U.S. crude production surges. U.S. output rose 0.4 percent to 8.97 million barrels a day last week, the highest in weekly Energy Information Administration estimates that began in January 1983. The agency’s monthly data, which goes back to 1920 and is based on data collected by state and federal agencies, shows production at the highest since 1986.

“The members of OPEC are in a tough position,” Mike Wittner, head of oil market research at Societe Generale SA in New York, said by phone yesterday. “The lack of action so far shows that the Saudis are serious about other members doing their part.”

Iraqi output climbed 150,000 barrels a day to 3.3 million this month, according to the survey. It was the biggest gain in October and left the country pumping the most oil since May.

Saudi Concern

Saudi Arabia, the group’s biggest producer, bolstered output by 100,000 barrels a day to 9.75 million this month to meet demand from two new refineries, Yasref and Satorp.

“The Saudis seem to be more concerned about their volumes than about falling prices,” Kilduff said.

Libyan output climbed by 70,000 barrels a day to 850,000 this month, the sixth straight increase. It was the highest level since June 2013. The country’s current output is about half what it was before the 2011 rebellion that ended Muammar Qaddafi’s 42-year rule.

Angolan output dropped by 170,000 barrels a day to 1.7 million, the biggest decline in October. The country will pump 2 million barrels a day next year, Petroleum Minister Jose Maria Botelho de Vasconcelos said last month in Jornal de Angola.

OPEC ministers kept their output target unchanged at 30 million barrels a day on June 11 in Vienna. The group is scheduled to meet next on Nov. 27.

Support Prices

“There’s a lot of dissension in the cartel,” Kilduff said. “It appears that most members want the Saudis to make the cuts needed to support prices and they’re not inclined to oblige. The Nov. 27 meeting could easily end without agreement, which would send the market another leg lower.”

The group last cut quotas in December 2008 at a meeting in Oran, Algeria, amid the global financial crisis. OPEC trimmed its target by 2.46 million barrels a day, in response to the crisis that sent WTI tumbling from a record $147.27 a barrel in July 2008 to a low of $32.40 in December of the same year.

“This could be an ugly meeting, taking much longer than we’ve come to expect,” Wittner said. “I bet OPEC will eventually come to an agreement where we won’t see cuts just from the Saudis, Kuwait and the UAE. They will demand that countries like Venezuela and Iran make painful cuts as well.”

OPEC Head Tells Oil Market to Stop Panicking About Prices

Everyone in the oil market should stop panicking because crude supply and demand will return to equilibrium, OPEC’s Secretary-General said.

Members of OPEC, who pump about 40 percent of the world’s oil, aren’t waging a price war and haven’t demanded an emergency response to the plunge in crude futures, Abdalla El-Badri said at the Oil & Money conference in London yesterday. While the direction of oil prices, which have collapsed about 25 percent since June, remains unclear in the short term, they will have to rebound to guarantee long-term supply, he said.

“We don’t see really fundamental changes in the supply side or the demand side,” El-Badri told reporters during a briefing at the event. “Unfortunately everyone is panicking. The press is panicking, consumers are panicking. We really should think and see how this will develop.”

Crude collapsed into a bear market this month as Saudi Arabia and other producers deepened price discounts for their oil. U.S. crude production climbed to the highest level in at least 31 years last week as the shale boom moved the country closer to energy independence. Global consumption will increase this year at the slowest pace since 2009, according to the International Energy Agency.

The Organization of Petroleum Exporting Countries itself doesn’t face a “critical situation” as a result of the price slump, El-Badri said. OPEC’s collective output in 2015 will remain close to this year’s level of about 30 million barrels a day, he said.

Investment Risk

This is in line with the 12-member group’s current output target, which it will review at its next meeting on Nov. 27 in Vienna. “We are not seeing a clear picture of what the direction of price will be, even in November,” El-Badri said.

Producers of tight oil from shale rock formations will suffer first from crude’s collapse because they need higher prices to keep pumping profitably, El-Badri said. About 50 percent of current shale output will be curbed if oil remains at current levels, he said.

“If the price is declining a lot of the investment will go out of the market,” El-Badri said. “Deep areas, remote areas, many areas will be affected and this includes tight oil.”

U.S. output rose 0.4 percent last week to 8.97 million barrels a day, the most since at least January 1983, according to data available from the Energy Information Administration.

Price War

Citigroup Inc. and Commerzbank AG have said that price discounts offered by OPEC members for November shipments indicate they’re competing to defend market share. El-Badri said the price changes are simply a reflection of market conditions, not a battle for customers.

“There is no price war,” El-Badri said. “Our countries are following the market. People are selling according to the market price.”

OPEC may have a relaxed attitude because prices above $80 a barrel are still high enough to fund members’ spending needs, Christopher Bake, member of the executive committee and head of origination at Vitol Group, the world’s largest oil trader, said at the conference.

“Obviously there’s a lot of budgetary pressure at $80 or below, but I think a lot of the larger OPEC producers are going to take a little bit of a wait-and-see attitude,” Bake said in an interview in London. “Short term, I don’t expect much of a reaction from them.”

Brent crude for December settlement fell 68 cents to $86.44 a barrel on the ICE Futures Europe exchange as of 9:55 a.m. in London. West Texas Intermediate dropped 79 cents to $81.41.

Spending Needs

Some members say they have been affected by oil’s collapse. Iran’s revenue from crude sales, the OPEC member’s most important export, dropped 30 percent because of the recent fall in global oil prices, President Hassan Rouhani said in remarks to the nation’s parliament that were published yesterday by the Oil Ministry’s news website Shana.

Representatives of OPEC remain divided over the need for action. The group’s output target should be cut to 29.5 million barrels a day, Libyan OPEC governor Samir Kamal said by e-mail on Oct. 27. Conversely, Kuwaiti Oil Minister Ali Al-Omair said “there is no room for countries to reduce their production,” according to comments reported by state news agency Kuna on Oct. 13.

OPEC Head Tells Oil Market to Stop Panicking About Prices

Everyone in the oil market should stop panicking because crude supply and demand will return to equilibrium, OPEC’s Secretary-General said.

Investment Risk

“If the price is declining a lot of the investment will go out of the market,” El-Badri said. “Deep areas, remote areas, many areas will be affected and this includes tight oil.”

U.S. output rose 0.4 percent last week to 8.97 million barrels a day, the most since at least January 1983, according to data available from the Energy Information Administration.

Price War

“There is no price war,” El-Badri said. “Our countries are following the market. People are selling according to the market price.”

Brent crude for December settlement fell 68 cents to $86.44 a barrel on the ICE Futures Europe exchange as of 9:55 a.m. in London. West Texas Intermediate dropped 79 cents to $81.41.

Spending Needs

Case for U.S. Oil Exports Seen Strengthened by Report

The U.S. Energy Department said the nation’s gasoline prices are linked to international crude oil, a conclusion that backs those in favor of lifting 39-year-old restrictions on crude exports.

The analysis by the Energy Information Administration, the department’s statistical arm, is the latest in a series of reports exploring the ramifications of ending the near-total ban, which was put in place in 1975 amid gasoline shortages following the Arab oil embargo.

Overturning the restrictions could lift U.S. oil prices, which have traded below global counterparts since 2010 as booming shale production has been mostly trapped within the country’s borders. That could mean $16 billion a year in extra revenue for producers, while refiners who have profited off cheaper domestic oil would lose their advantage. Higher production may follow, which could reduce global oil prices, the EIA said.

“The EIA is saying that exporting oil won’t hurt the consumer,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. “It would benefit the oil industry, which means more jobs.”

The U.S. average price at the pump is $3.01 a gallon, Heathrow, Florida-based AAA said on its website. It’s dropped 18 percent from June to the lowest since December 2010. The gap between West Texas Intermediate, the U.S. benchmark, and Brent, the global marker, narrowed to $5.06 a barrel at 4:02 p.m. in New York from $5.35 earlier.

Direct Competition

“You are putting WTI, which is essentially a very similar grade of crude with Brent, directly in competition with Brent, so you would expect those prices to be more aligned with each other,” said Kyle Cooper, director of commodities research at IAF Advisors in Houston.

Brent plays a larger role than WTI in determining U.S. gasoline prices, the EIA said in the report. “The effect that a relaxation of current limitations on U.S. crude oil exports would have on U.S. gasoline prices would likely depend on its effect on international crude oil prices, such as Brent,” it said.

Senator Lisa Murkowski, an Alaska Republican, said the study supports her push to loosen U.S. rules that restrict the sale of domestically produced crude oil overseas.

Lower Prices

“If domestic gasoline prices are tied to the Brent worldwide index price, then exporting U.S. oil to our friends and allies will not raise gasoline prices here at home and should, in fact, help drive down prices,” said Murkowski, who stands to be in charge of the committee with jurisdiction over the issue next Congress if Republicans retake the majority in the upcoming mid-term election.

Congress put the restrictions in place in the Energy Policy and Conservation Act of 1975. Exceptions exist, most prominently allowing exports to Canada, and the U.S. is shipping the most crude abroad in 57 years. President Barack Obama has wide leeway to set aside the restrictions if he believes it’s in the nation’s interest to do so.

Lifting the ban faces challenges in Congress. Democratic Senators Edward Markey of Massachusetts and Robert Menendez of New Jersey have led calls to keep the crude limits in place.

“I would caution anyone from drawing broad conclusions from today’s EIA report, which acknowledges that we do not know what will happen to gasoline prices if the export ban is ended—because we do not know if OPEC will cut their own exports in response,” Menendez said in a statement.

Not Necessary

Proponents of easing restraints, such as Exxon Mobil Corp. (XOM) and billionaire Harold Hamm’s Continental Resources Inc. (CLR), argue that the law is no longer necessary because horizontal drilling and hydraulic fracturing in underground shale rock layers have boosted U.S. oil production 66 percent in the past five years to the highest level since 1983.

The oil from that shale is mostly low density and low in sulfur, making it easier to refine. Many U.S. refineries have spent billions in recent decades upgrading equipment to be able to refine heavy, high-sulfur crudes that are cheaper because of their lower quality.

U.S. oil refiners including PBF Energy Inc. (PBF), Delta Air Lines Inc. (DAL)’s Monroe Energy LLC subsidiary and Philadelphia Energy Solutions, a joint venture of Carlyle Group LP (CG) and Sunoco Inc., have formed a group to oppose any easing of the export ban.

The EIA report reaffirms how U.S. drivers are benefiting from the surge in domestic output, Jeffrey Peck, a spokesman for the U.S. refiners’ group, said in an e-mailed statement today.

“In our view, the reason crude oil prices are lower and therefore, gasoline prices are low in the United States, is because of the existing crude oil export ban,” he said. “If the ban were lifted, EIA acknowledges that the U.S. crude oil prices would lead to less domestic gasoline production and, therefore, higher gasoline prices at home.”

Shale Boom Redraws Oil Routes as Alaskans Ship to Korea

For signs of how the U.S. shale boom is transforming the global flow of oil, look halfway across the world at South Korea.

The Asian nation, which relies on the Middle East for about 86 percent of its oil imports, is benefiting as new output from Texas to North Dakota displaces the crudes that fed U.S. refineries for decades. South Korea received this month a shipment of Alaskan oil for the first time in at least eight years and may buy more, the importing company said. The country was one of the first to receive a cargo of the ultralight U.S. oil known as condensate after export rules were eased.

The U.S. shale revolution has driven oil output to the highest in more than three decades, reducing America’s need for overseas purchases and sinking global prices into a bear market. South Korea is seeking to reduce its dependence on Middle East crude just as OPEC’s biggest members discount supplies to protect market share and Goldman Sachs Group Inc. predicts the group is losing influence.

“The import burden for the U.S. has come down over the last few years,” Virendra Chauhan, a London-based analyst at Energy Aspects Ltd., said by phone Oct. 29. “A lot more crudes have become available to flow east into countries such as Korea.”

South Korea, which imports about 97 percent of the supplies used to satisfy its energy needs, receives more than a third of its oil from Saudi Arabia, the world’s biggest crude exporter and the largest member in the Organization of Petroleum Exporting Countries.

Mideast Supplies

Its purchases from other OPEC members are declining. Crude imports from Iran fell to 4 million barrels last month, 27 percent below the five-year average, according to data from Korea National Oil Corp. compiled by Bloomberg. Libyan supplies declined 55 percent last month from August, while shipments from Iraq dropped by 16 percent.

“The need for diversifying supplies grew more than ever as the Middle East turned into a region full of instabilities,” Oh Sae Sin, an associate research fellow at Korea Energy Economics Institute, a government-funded researcher, said by phone on Oct. 27. “South Korea is laying the groundwork for a relationship with the U.S.”

Political Unrest

The Middle East and North Africa, home to eight OPEC members, have been rife with political instability and potential threats to oil supplies since 2011. Libyan leader Muammar Qaddafi was ousted and an uprising against Syrian leader Bashar al-Assad began in that year. In 2014, Islamic State militants routed the Iraqi army in the north, raising concern they were a danger to oil fields in the country’s south.

The U.S. imported 7.6 million barrels a day in July, 9.7 percent below the five-year average, according to the Energy Department. The country will export more energy than it imports by 2025, Wood Mackenzie Ltd. said this month.

As shipments from traditional suppliers shrink, crudes from the Americas and Africa are making their way to South Korea. Bogota, Colombia-based Ecopetrol SA sold its first cargo of Castilla Blend crude to South Korea this month and the country’s refiners this year imported the first Ecuadorean oil since at least January 2010.

Tax Rebate

Starting next year South Korean refiners can receive a tax rebate of as much as 16 won (2 cents) per liter (0.26 gallon) of refined fuel sold domestically derived from non-Middle East crude, according to the Petroleum and Petroleum-Alternative Business Act signed into law in September by President Park Geun Hye.

“South Korean refiners are testing different crudes to cut their expenses as their profits are suffering,” Lee Chung Jae, an analyst at KTB Securities Co. in Seoul, said by phone on Oct. 28. “Refiners will need to figure out if the subsidies they get will take away the additional costs they needed to pay to get crude from outside the Middle East.”

The U.S. Commerce Department in June opened the door to more U.S. oil exports as long as the crude is lightly processed, tempering the impact of a law that’s banned most overseas petroleum shipments for the last four decades. Condensates have been abundant in shale formations during the drilling boom, leading to oversupply on the U.S. Gulf Coast.

SK Innovation Co., South Korea’s largest refiner, bought 400,000 barrels of the U.S. condensate for delivery next month from Mitsui & Co. and is seeking to purchase more, a company official said on Oct. 2.

Diversifying Supply

“Companies need to get qualified products,” Kim Seung Woo, a senior analyst at Samsung Securities Co., said by phone on Oct. 28. “But as long as the prices are right and there’s a guarantee that companies are getting the products they need, they will want to diversify supplies to reduce risks.”

GS Caltex Corp., which unloaded 800,000 barrels of Alaskan North Slope crude this month is considering whether to buy more of the grade, according to a company official. U.S. West refineries, traditional buyers of Alaskan oil, are turning to other North American crudes.

To defend market share, Arab producers are cutting prices instead of reducing output because their ability to influence the value of benchmark crudes is waning as U.S. shale production boosts global supplies, according to Goldman Sachs. The bank cut forecasts for Brent and West Texas Intermediate this week, saying a decline in benchmark U.S. prices would need to fall to $75 a barrel to slow the growth in output.

Saudi Cut

State-owned Saudi Arabian Oil Co., the largest crude exporter, on Oct. 1 cut its Arab Light price differential for shipments to Asia to the lowest since December 2008. The company holds the largest stake in S-Oil Corp. (010950), South Korea’s third-largest oil refiner.

The joint venture helps ensure a market for Saudi oil and limits the amount of new crudes and suppliers refiners can choose from, Ehsan Ul-Haq, a senior market consultant at KBC Energy Economics in Walton-on-Thames, England, said by phone on Oct. 27.

The hunt for more oil suppliers goes on. Crude may flow from Canada to South Korea after the two signed a free-trade agreement in September that removed a 3 percent import duty on oil. JBC Energy GmbH said last month the Asian nation’s refiners were beginning to show interest in Canadian grades.

“It is because of huge demand for crude in Korea,” International Energy Agency Executive Director Maria van der Hoeven said Oct. 27 in Singapore. “They would like to diversify their sources and that’s a very legitimate wish.”

OPEC Oil Output Rises in October as Prices Tumble: Survey

OPEC crude production rose to a 14-month high in October as oil futures sank into a bear market, a Bloomberg survey showed.

Output rose as Brent crude dropped to a four-year low amid ample global supplies and signs that demand will be sluggish through the end of the year. OPEC’s biggest producers, Saudi Arabia, Iraq, Iran and Kuwait, have cut their official selling prices, sparking speculation they will compete for market share rather than trim output. Ministers will gather next month to discuss the group’s production target.

“The data confirms that there’s a battle over market share,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The members are playing chicken with the market.”

Brent crude for December settlement fell 88 cents, or 1 percent, to close at $86.24 a barrel on the London-based ICE Futures Europe exchange today. Brent, the benchmark for more than half the world’s oil, touched $82.60 on Oct. 16, the lowest since November 2010. West Texas Intermediate oil slipped $1.08, or 1.3 percent, to $81.12 on the New York Mercantile Exchange.

U.S. Production

“The members of OPEC are in a tough position,” Mike Wittner, head of oil market research at Societe Generale SA in New York, said by phone. “The lack of action so far shows that the Saudis are serious about other members doing their part.”

Iraqi output climbed 150,000 barrels a day to 3.3 million this month, according to the survey. It was the biggest gain in October and left the country pumping the most oil since May.

Saudi Concern

Saudi Arabia, the group’s biggest producer, bolstered output by 100,000 barrels a day to 9.75 million this month to meet demand from two new refineries, Yasref and Satorp.

“The Saudis seem to be more concerned about their volumes than about falling prices,” Kilduff said.

OPEC ministers kept their output target unchanged at 30 million barrels a day on June 11 in Vienna. The group is scheduled to meet next on Nov. 27.

Support Prices

Gazprom Neft Raises Spending Plan to $4 Billion at Badra

OAO Gazprom, Russia’s natural-gas exporter, said the portion of total capital expenditure by its oil arm Gazprom Neft to develop the Iraqi Badra field would reach $4 billion, about double the original estimate.

The increase is partly because the field needs more wells to meet output targets after initial exploration revealed more complex geology than expected, Gazprom Neft’s press service said by e-mail. The other reason is the original cost estimate didn’t include all spending categories, the company said.

Iraq’s central government awarded an investor group led by Gazprom Neft and including Korea Gas Corp., Petroliam Nasional Bhd and Turkiye Petrolleri AO the operating contract to develop the Badra oil field in 2009. Gazprom Neft is seeking to boost oil and gas output to 100 million metric tons annually by 2020 from 62.3 million tons last year.

The Iraqi government is allowing the group to recoup initial investments, awarding a fee of $5.50 a barrel produced over the 20-year span of the contract.

Gazprom Neft, which started production in May, plans to reach output of 170,000 barrels a day in 2018, slightly later than the previous 2017 target, according to a bond prospectus from Gazprom.

Sinopec Buys Saudi Yanbu Refinery Stake for $562 Million

China Petroleum & Chemical Corp. (386) will invest $562 million to buy its parent’s stake in an oil-processing plant in Saudi Arabia to consolidate its position as Asia’s biggest refiner.

The Beijing-based company, known as Sinopec, will hold 37.5 percent in Yanbu Co., it said in a filing yesterday to the Hong Kong stock exchange. Saudi Arabian Oil Co., known as Saudi Aramco, will owns the balance of 62.5 percent, Sinopec said.

China Petrochemical Corp., Sinopec’s state-owned parent, signed an agreement with Aramco in January 2012 to develop a refinery in the Saudi city of Yanbu at a cost of as much as $10 billion. The 400,000 barrel-a-day plant may start this year, Saudi Aramco Chief Executive Officer Khalid al-Falih said at the time.

The deal will enhance Sinopec’s global network and international refining operations, the company said in the statement. The Yanbu project is in an area with prime infrastructure, a cheap, quality supply of natural gas and a long-term steady supply of crude oil, it said.

Sinopec said it will pay $556 million to one unit of its parent for 99 percent of the vehicle that owns the Yanbu stake and $6 million to a separate unit for the balance of 1 percent.

Shell Profit Increases as Refining Trumps Lower Oil Prices

Royal Dutch Shell Plc (RDSA) said third-quarter profit rose 31 percent, beating estimates, as earnings from refining and natural gas countered the impact of lower crude prices at Europe’s biggest oil company.

Profit excluding one-time items and inventory changes increased to $5.8 billion from $4.5 billion a year earlier, the Hague-based company said today in a statement. That beat the $5.48 billion average estimate of 16 analysts surveyed by Bloomberg. Sales fell 7 percent to $107.9 billion.

Even as Shell’s oil production slumped and prices fell since June, a mix of better refining margins, lower spending and higher earnings from selling natural gas around the world bolstered profit. That contrasts with the company’s largest European competitors, BP Plc (BP/) and France’s Total SA (FP), which reported lower earnings this week.

“Our results today show that we are delivering on three priorities I set out at the start of 2014 -- better financial performance, enhanced capital efficiency and continued strong project delivery,” Chief Executive Officer Ben van Beurden said in the statement.

Shell closed little changed at 2,227.5 pence in London.

New Chairman

Shell appointed former DuPont CEO Charles Holliday to succeed Jorma Ollila as chairman next year. Holliday, who was non-executive chairman of Bank of America Corp. until last month, has been a non-executive director at Shell since 2010 and will be the company’s first American chairman.

“Shell is clearly demonstrating to the market that 2013 was an abnormal year, well below the potential of the company’s toolkit,” Raymond James analyst Bertrand Hodee said in a note. “Shell is probably the most defensive name within our European coverage universe.”

Oil and gas production in the third quarter dropped 5 percent to 2.8 million barrels of oil equivalent a day from the same period last year because of divestments, a license expiry in Abu Dhabi, and security issues in Nigeria.

Van Beurden, who became CEO this year, has prioritized selling underperforming assets and reining in costs. Divestments in the third quarter produced $11.6 billion, “with further disposals ongoing,” he said. Shell agreed to sell its onshore fields in Nigeria, where it lost almost $1 billion to sabotage in 2013.

Nigerian Sale

All of the Nigerian purchase agreements are in place, Shell Chief Financial Officer Simon Henry said on a conference call with reporters, and remain subject to ministerial approval. Once the sales are completed, the company will be close to its $15 billion divestment goal, he said.

“Nigeria still remains a very important country for us,” Henry said. “We expect to grow our position in gas production for LNG and for domestic use and also some attractive deep-water projects, so this is really shifting emphasis from onshore to gas and offshore.”

Net capital investment for the third quarter was $4.8 billion, compared with $9.4 billion for the same period a year ago.

Shell will pay a quarterly dividend of 47 cents a share, an increase of 4 percent from a year ago.

Oil prices have tanked since July as production from U.S. shale fields boomed and the global economy slowed. The price of Brent crude oil, a global benchmark, is down almost 20 percent since the start of this year.

‘Tight Grip’

The drop in oil prices “underlines the importance of our drive to get a tighter grip on performance management, keep a tight hold on costs and spending, and improve the balance between growth and returns,” Van Beurden said in the statement.

The third-quarter results have borne only a third of the impact of the fall in prices, Henry said.

“It is quite likely that we’ll be taking a very close look at levels of investment where we have flexibility if we see the oil-price weakness persisting,” he said.

These areas include exploration in small projects, the shale business, refining and mature upstream assets.

While the company’s two major projects in Russia remain undisturbed, exploration in shale in Siberia has been suspended as a result of sanctions, Henry said.

“For now we continue to operate - the impact has been limited only to stopping what essentially was frontier exploration activity,” he said.

WTI, Brent search for traction

NEW YORK, Oct. 30 (UPI) -- Crude oil prices indices moved down in parity Thursday following reports that OPEC output would hold steady and U.S. production had increased marginally.

Major stock indices struggled to find a consensus in Thursday trading after the U.S. Federal Reserve announced an end to the stimulus program known as quantitative easing. The Nikkei 225 Index was up 0.67 percent while the DAX index in Europe posted a drop of 0.92 percent.

West Texas Intermediate crude oil prices for December delivery drifted off its Wednesday mark to trade down 0.62 to $81.58 in early Thursday trading.

WTI, the U.S. benchmark, has been drifting toward the $80 mark because of supply and demand dynamics in the U.S. market. The U.S. Energy Information Administration said in its weekly report crude oil production for the week ending Oct. 24 averaged 8.97 million barrels per day, an increase of about one half of one percent from the previous week and 14 percent above the same week in 2013.

Brent crude oil followed a similar course, trading down 0.62 to $86.50 in early Thursday trading. Brent and WTI both have shed about 20 percent of their values since mid-summer, though long-term contracts for the international benchmark show a drift toward $90.

Abdalla el-Badri, secretary-general of the Organization of Petroleum Exporting Countries, said Wednesday the 12-member group will likely keep its output steady.

"Don't panic," he said. "I am sure the market will balance itself."

Ukrainian gas deal 'within reach,' Europe says

BRUSSELS, Oct. 30 (UPI) -- An agreement meant to settle longstanding gas disputes between Russia and Ukraine is "within reach," the president of the European Commission said Thursday.

Brussels hosted trilateral meetings between Russian, European and Ukrainian officials aimed at resolving gas disputes growing out of geopolitical rows over post-Soviet Ukriane.

European Energy Commissioner Gunther Oettinger said before the start of negotiations in Brussels there was a "common ambition" to find an interim solution.

Oettinger said during August talks with Russian Energy Minister Alexander Novak an interim price, repayment of unpaid bills and fulfillment of transit obligations must be part of an interim solution.

European Commission President Jose Manuel Barroso said during a phone conversation Thursday with Ukrainian President Petro Poroshenko "that an agreement was within reach on the basis of the proposals put forward by the European Commission."

Russia meets about a quarter of the European gas needs, though most of that runs through the Soviet-era pipeline network in Ukraine. Russian energy company Gazprom in 2006 and 2009 cut gas deliveries through Ukraine because of contractual disputes.

Russian Prime Minister Dmitry Medvedev said Thursday reaching an agreement was "in the interests of Ukraine, in the interests of Europe's gas supply, especially considering the fact that the winter season is here."

Eni makes major oil find offshore Congo

MILAN, Italy, Oct. 30 (UPI) -- Italian energy company Eni said Thursday it made a significant oil discovery at a basin off the western coast of the Congolese republic.

In the Minsala Marine shallow-water prospect, the company said it found about 1 billion barrels of oil equivalent, of which 80 percent exists as oil.

The prospects were enough to start preparations for commercial development of the well, the company said.

"These discoveries are located in conventional waters near existing infrastructure and can therefore be brought into production in very competitive time to market and cost," Chief Executive Officer Claudio Descalzi said in a statement.

Reserves off the West African coast are similar to those in Brazil in that they're located beneath a thick layer of submarine salt. Eni said it's already discovered about 4 billion barrels of oil in basins off the Congolese and Gabonese coasts since it started work there more than four years ago.

Eni has been operating in Congo since the late 1960s, producing around 100,000 barrels of oil per day.

For third quarter 2014, the Italian company reported a net profit of $1.48 billion, up 2.5 percent year-on-year.

Oil and gas production for the company was stable from third quarter 2013 at 1.58 million barrels of oil equivalent.

Texas oil production tops 2.2 million bpd

AUSTIN, Texas, Oct. 30 (UPI) -- Crude oil production for Texas was up more than 20 percent year-on-year to just over 2.2 million barrels per day, a state regulator said.

The Texas Railroad Commission released preliminary figures for August, saying Wednesday production of 2.23 million bpd was up 24 percent from August 2013.

Total monthly production in August was 69.2 million barrels, up from the 55.6 million produced during August 2013.

Texas is the No. 1 oil producer in the United States.

Texas hosts part of the Permian shale basin, which the U.S. Energy Department said is the most prolific with average production of around 1.3 million bpd.

The Texas Railroad Commission adopted new shale rules, effective Nov. 17, meant to address disposal well operations in areas that may be prone to seismic activity.

Hydraulic fracturing operations have been linked to seismic tremors and commissioners said Texas was now taking the lead to ensure oil and gas operations in shale were safe.

"These comprehensive rule amendments will allow us to further examine seismic activity in Texas and gain an understanding of how human activity may impact seismic activity, while continuing to allow for the important development of our energy resources in Texas," Commissioner David Porter said in a statement.

Algeria's Sonatrach to probe offshore energy

ALGIERS, Algeria, Oct. 30 (UPI) -- Algerian energy company Sonatrach announced plans to carry out its first ever offshore drilling campaign by the end of next year.

Interim Chief Executive Officer Said Sahnoun announced the plans during the signing ceremony for contracts awarded during the latest licensing round.

State-owned Sonatrach "intends to drill its first offshore well by the end of 2015," he said Wednesday.

Exploration will take place off the coast of Algerian provinces Oran and Bajaia after the conclusion of a seismic survey campaign to get a better understanding of the reserve potential.

Initial survey data show a probability for reserves in waters more than 1 mile deep.

Algeria has the tenth-largest natural gas deposits in the world and is the third-largest gas supplier to Europe. With Europe looking to diversify an energy sector dependent on Russia, the companies said any shale from Algeria could be an important part of energy security ambitions.

Most of the reserve interest in Algeria has been onshore.

Terrorists sympathetic with al-Qaida stormed the country's In Amenas natural gas facility in January 2013, leaving 38 civilians and 29 militants dead. Statoil and its joint venture partners resumed ordinary operations at the plant after implementing new security measures at the facility earlier this year.

U.S. average gas price headed below $3

WASHINGTON, Oct. 30 (UPI) -- A division of the U.S. Energy Department said the national average retail price for a gallon of regular unleaded gasoline could soon move below the $3 mark.

Motor club AAA reports a national average price Thursday of $3.01, 32 cents less than one month ago. Lower crude oil prices and seasonal demand issues are in part responsible for the declining price at the pump.

The department's Energy Information Administration said its sentiment was consistent with price watchers like AAA, which are showing the average statewide price moving below the $3 mark for more than half of all U.S. states.

"Current market prices and conditions indicate that a U.S. average retail price below the symbolic $3 per gallon mark is possible in the coming weeks," EIA said in a Wednesday report.

EIA said wholesale gasoline prices are following the trend set by crude oil prices, which are down about 20 percent from their June values, and that, too, adds to lower prices at the pump.

South Carolina had the lowest state average for Thursday with $2.76 per gallon. EIA explains prices vary by region because of proximity to refineries and state taxes.

California had the highest price for the Lower 48 with $3.34, down 35 cents from one month ago.

Non-oil exports grow for Iran

TEHRAN, Oct. 29 (UPI) -- Iran earned 20 percent more from non-oil exports during the first five months of the calendar year than it did last year, customs data released Wednesday show.

Iranian government data show non-oil product exports earned Iran $27 billion during the first five months of a calendar year beginning March 21.

Data show the Iranian economy exported petroleum products like butane and liquefied propane predominately to Afghanistan, China, India, Iraq and the United Arab Emirates.

Sanctions imposed on the Iranian economy in response to a controversial nuclear program means oil exports are at about half of their 2.2 million barrel per day rate in 2012. Iran is allowed to export some oil under an international sanctions agreement reached in November, though the International Monetary Fund said the oil-dependent economy is still shrinking at a rate of 1.7 percent.

Hamid Farnam, the energy commissioner in the Iranian Chamber of Commerce, told the Oil Ministry's news website Shana last week the government should work to push oil revenue slowly out of the national budget.

An assessment from the World Bank finds the Iranian economy is contracting. Sanctions imposed by Western powers on Iran's energy sector resulted in a 5.8 percent decline in gross domestic product last year.

U.S. crude oil imports down 15 percent

WASHINGTON, Oct. 29 (UPI) -- Total U.S. crude oil imports for the first nine months of the year are down 15 percent from two years ago, Energy Information Administration data show.

EIA published monthly data for the U.S. energy sector. For the first nine months of 2014, the United States imported an average 7.4 million barrels per day of crude oil, down from the 8.7 million bpd reported during the same period in 2012.

In its latest weekly report, EIA said the country imported around 7.4 million barrels of oil for the week ending Oct. 10, down 7.4 percent from the same week in 2013.

In his latest economic address to the nation, President Barack Obama said the country is producing more than it imports for the first time in nearly two decades. He set a goal in 2012 to cut imports by half by 2020, but expects to meet that goal six years ahead of schedule.

An increase in U.S. oil production from shale has led to a corresponding decrease in imports of oil sourced from foreign countries.

Canada is the No. 1 oil exporter to the United States. Exports from Canada are down 9 percent for the first seven months of 2014 compared with 2012.

Total exports from members of the Organization of Petroleum Exporting Countries are down nearly 22 percent from 2012.

Total vows to continue de Margarie's legacy

PARIS, Oct. 29 (UPI) -- The new chief executive officer at French energy company Total said Wednesday he'd work to cut costs and increase value as crude oil prices slip.

Total tapped former refining director Patrick Pouyanne to take over as CEO after the death of Christophe de Margerie in a mid-October plane crash in Moscow.

Pouyanne in a statement said it was his responsibility to "forge ahead" with de Margerie's plan to make Total one of the strongest companies of its kind in the world.

"The recent decrease in the price of Brent highlights the importance of the programs we launched to reduce costs and control investments to strengthen the resilience of the group," he said in a statement.

Crude oil prices have shed about 20 percent of their value since June. Brent crude oil prices, however, are showing signs of recovery toward the $90 per barrel mark for the September 2015 contract.

Gross sales for third quarter 2014 for the French company were down 2 percent compared with last year. Net income, however, was up 10 percent year-on-year.

Full quarter hydrocarbon production for Total was 8 percent less than during third quarter 2014.

Total share prices in early Wednesday trading were up 2.6 percent.

Canada 'impressed' with Keystone XL vetting

OTTAWA, Oct. 29 (UPI) -- The Canadian government is "impressed" with the State Department's vetting of the Keystone XL oil pipeline, Canadian Foreign Minister John Baird said.

Baird hosted U.S. Secretary of State John Kerry in Ottawa to focus on efforts to contain the Islamic State terror group in the wake of attacks on Canadian lawmakers. On energy issues, the foreign minister said both sides had "a good discussion" about the long-planned Keystone XL oil pipeline.

"We highlighted how impressed we were with the science and the conclusions in the Department of State's report and we look forward to resolving this challenge," his said during a joint press conference Tuesday. "It is obviously an important one for Canada."

A draft environmental impact statement from the State Department says oil sands development in Alberta province would continue regardless of whether the White House gives a permit for Keystone XL.

The pipeline needs federal approval as a cross-border pipeline. Oil sands, the type of oil designated for Keystone XL, are controversial because of the emissions tied to its production and its tendency to linger in the environment.

Pipeline planner TransCanada submitted its application for Keystone XL more than six years ago, to the frustration of supporters who say it's a necessary component of North American energy security.

Kerry said he'd make a decision when it is "appropriate."

"I certainly want to do it sooner rather than later, but I can't tell you a precise date," he said.

Technip gets Indonesia offshore contract

PARIS, Oct. 29 (UPI) -- French engineering company Technip said Wednesday it secured a contract to help Chevron develop its deepwater oil prospect off the coast of Indonesia.

Technip under the terms of the deal will help Chevron Indonesia develop its Bangka project by fabricating pipes and other infrastructure for offshore installations.

Technip provided few terms about the contract for work about 40 miles off the coast of Indonesia.

Chevron operations extend to four offshore production sharing contracts in Indonesia. As of 2011, the company said daily production averaged 32,000 barrels of crude oil and 165 million cubic feet of natural gas.

Natural gas production in Indonesia increased by more than 20 percent in the decade ending in 2012, the U.S. Energy Information Administration reports. The country exports about half its natural gas and is one of the largest exporters of liquefied natural gas in the world.

Chevron in 2011 completed front-end engineering and development work at the Bangka project.

India, Vietnam eye gas in disputed South China Sea

NEW DELHI, Oct. 29 (UPI) -- Indian and Vietnamese energy companies announced memorandum of understanding were signed for exploration in the disputed waters of the South China Sea.

India's Oil and Natural Gas Corp. Ltd. signed the measures to explore several reserve areas off the Vietnamese coast alongside its counterparts at PetroVietnam Exploration Production Corp.

China is at odds with Vietnam and other Asia-Pacific nations over sovereignty in the waters of the South China Sea.

China National Petroleum Corp. in July completed drilling and exploration activity in waters of the South China Sea disputed with Vietnam.

Apart from the rig deployment, China has taken provocative actions in the South China Sea against most of its littoral neighbors.

China says it's operating within its maritime borders, though Vietnam said the rig's deployment was a violation of international laws.

The ONGC agreement with PetroVietnam was signed Tuesday in New Delhi in the presence of visiting Vietnamese Prime Minister Nguyen Tan Dung and Indian Prime Minister Narendra Modi.

Both companies said they were interested in exploiting the gas potential in the areas in question.

Noble gas output from Israel up 21 percent

HOUSTON, Oct. 28 (UPI) -- Energy explorer Noble Energy said Tuesday production during the third quarter soared because of advancements off the coast of Israel.

Noble, a partner in the development of the Tamar and Leviathan gas basins, said gas sales volumes from its Israeli assets were up 21 percent from the second quarter and up 3 percent year-on-year.

During the third quarter, the company said the "debottlenecking" of Tamar facilities led to a peak product of more than 1.1 billion cubic feet of gas output per day

Delek last week said gas sent from Tamar would be "interruptible," or designated only from excess reserves from the offshore field

Noble reported net income for the third quarter of $419 million, up from $205 million during the same period last year.

Petrofac goes ultra-deep for Nova Scotia

LONDON, Oct. 28 (UPI) -- British energy services company Petrofac said Tuesday it would help the provincial government in Nova Scotia tap into potential oil prospects offshore.

The provincial government awarded Petrofac with a contract to examine the prospects of oil trapped in the deep waters off the eastern Canadian coast.

Nova Scotia's government estimates there may be as much as 120 trillion cubic feet of natural gas and 8 billion barrels of oil offshore. Petrofac said the region is geologically similar to oil basins off the northwest coast of Africa, though reserves offshore Nova Scotia are thought to lie nearly 2 miles below the sea bed in mile-deep waters.

Craig Muir, a engineering consultant for Petrofac, said the contract could provide significant returns for the provincial government.

"The potential outcomes of this study are of strategic importance for the Nova Scotia government and a great step forward for Petrofac in the ultra-deepwater market," he said in a statement.

Petrofac said the scope of the study will be completed by early next year. Drilling could begin in 2015 and first oil could be produced from the region within the next 10 years.

Chevron brings Bangladeshi gas on stream

SAN RAMON, Calif., Oct. 28 (UPI) -- Bringing more gas production on stream in Bangladesh is part of an effort to meeting growing energy demands in Asian, a Chevron subsidiary said Tuesday.

Chevron's subsidiary in Bangladesh started operations from an expansion project at the Bibiyana gas asset in the northeastern part of the country. The company said in a statement the additional development boosts production capacity from Bangladesh by more than 300 million cubic feet per day to 1.4 billion cubic feet per day.

Jay Johnson, senior vice president for upstream operations at Chevron, said Bangladesh is a cornerstone of the company's foundation in the growing Asian market.

"The Bibiyana expansion represents Chevron's commitment to developing new resources to meet energy demand in Asia," he said in a statement.

Asian economies, China and India in particular, are growing at nearly twice the rate of their Western counterparts. That growth translates to higher demand for oil and natural gas.

AAA: High oil production means low gas prices

WASHINGTON, Oct. 28 (UPI) -- Retail gasoline prices have moved steadily lower despite geopolitical tensions thanks in part to high U.S. oil production, motor club AAA reports.

AAA reports a national average price of $3.03 per gallon, the lowest national average price in nearly four years and more than 30 cents less than one month ago.

Crude oil prices represent about 60 percent of the price at the pump. Both prices would typically rise because of heightened tensions overseas.

"Continuing unrest in Iraq and geopolitical tensions in Eastern Europe have taken a backseat to an emerging belief by many market watchers that global supply, including significantly higher oil production in the United States, is outpacing global demand growth," the motor club said in a Monday report.

The United States for the week ending Oct. 17 produced 8.9 million barrels of oil per day, the highest level in decades. West Texas Intermediate crude oil prices, meanwhile, hovered around $80 per barrel, off around $10 per barrel since the start of October.

Seventeen states reported average prices below the $3 per gallon mark, which AAA said may become commonplace

Gasoline prices beginning early September typically decline because refiners start using a winter blend of gasoline, which is cheaper to make, and because seasonal demand declines

Continental brings South Korea to Oklahoma shale

OKLAHOMA CITY, Oct. 27 (UPI) -- U.S. shale player Continental Resources said Monday it has signed a deal with a South Korean company to develop its gas assets in Oklahoma.

Continental, which has headquarters in Oklahoma City, announced it sold 49.9 percent of its stake in the Northwest Cana Woodford shale basin to South Korean conglomerate SK Group for roughly $360 million.

"We are excited to establish this joint venture with such an established and highly regarded major international energy company," Harold Hamm, Continental's chairman and chief executive officer, said in a statement.

Continental has a stake in 37 producing wells in the Cana Woodford shale.

The company said it plans to start drilling into the Oklahoma shale basin next month, with four rigs deployed through its partnership with SK Group by the end of the year.

Oil services company Baker Hughes in early October said shale basins in Oklahoma were among those witnessing the biggest gains in wells started during the third quarter.

Since 2007, Oklahoma has produced more than 1 trillion cubic feet of natural gas from shale, and production should increase with the emergence of the Cana Woodford play.

Eni finds major gas deposit off Indonesia

MILAN, Italy, Oct. 27 (UPI) -- Italian energy company Eni said Monday there may be as much as 1.3 trillion cubic feet of natural gas at an exploration prospect off the Indonesian coast.

Eni said it made the discovery in the deep waters. Dubbed Merakes, the prospect is about 100 miles south of the country's Bontang liquefied natural gas plant.

Eni CEO Claudio Descalzi said in a statement the new gas find could help advance Indonesia's LNG ambitions and is a testament to the company's growing presence in Asia.

"This new achievement proves once more the effectiveness of Eni's strategic approach to exploration," he said.

The discovery is the company's first in the reserve area since winning the rights to exploration during a 2012 bidding round.

Eni has been operating in Indonesia since 2001.

Reserve exploration work starts in Romanian waters

BUCHAREST, Romania, Oct. 27 (UPI) -- Austrian energy company OMV and U.S. counterpart, Exxon Mobil, said Monday drilling started into a new reserve prospect off the Romanian coast.

Both companies announced the start of operations at a new prospect dubbed Neptun in the Romanian waters of the Black Sea.

Gabriel Selischi, an exploration and production director at OMV, said the Black Sea plays a central role in its offshore ambitions and results so far have been positive.

"However, much of the activity in the Black Sea deepwater area is of a frontier, pioneering nature, involving high investment risks and therefore requiring a stable investment framework," he said in a statement.

Romania has some of the largest proved oil reserves in Europe, though production has been in a steady decline.

The Neptun block lies in deep Romanian waters. OMV and Exxon signed a partnership agreement for exploration and production in the region in 2008.

Yemen rebel movement in charge of oil ministry

SANAA, Yemen, Oct. 27 (UPI) -- Members of the Houthi movement are handed control over the Yemeni oil ministry under a new government, the prime minister announced.

Yemeni Prime Minister Khaled Bahah unveiled his new government Saturday, allocating control over the Oil Ministry to the Houthi movement.

The government in Sana'a was under dueling threats from the northern Houthi movement, a Shiite group, and southern separatist groups that at times have been associated with al-Qaida.

Western leaders had expressed concerns about rebel activity in Yemen. An August letter signed by U.S., European, Asian and Middle Eastern envoys to Yemen said the Houthi movement had a place in Sana'a, but expressing concerns about the group's disrespect for political transition that began with the so-called Arab Spring in 2011.

In mid-October, Norwegian energy company DNO International declared force majeure in Yemen, meaning it was freed from contractual obligations because of circumstances beyond its control, because of lingering violence in the country.

The Yemeni government said the formation of a new government would put the troubled country on the path to economic stability and peace.

Venezuela scrubs Citgo sale

CARACAS, Venezuela, Oct. 27 (UPI) -- Venezuela's finance minister said the government has shelved plans to sell off the U.S. subsidiary of state oil company Petroleos de Venezuela.

A decline in global oil prices is hurting economies like Venezuela's that rely heavily on oil exports for revenue. Venezuelan newspaper El Universal reported high inflation in the country is eroding consumer purchasing power by as much as 12 percent.

The government said it was considering separate offers for U.S. subsidiary Citgo from Deutsche Bank, Goldman Sachs and JP Morgan ranging from $10 billion to $15 billion. Venezuelan Finance Minister Rodolfo Marco said in a Saturday interview the newspaper that Citgo was no longer for sale.

"The sale of Citgo has been ruled out and the president has affirmed this," he said. "Venezuela will continue with Citgo and will continue to make investments in its refineries."

In July, the government in Caracas said it could free up export volumes and to start directing oil to the Chinese market through the sale of Citgo.

Combined refinery output from Citgo is 757,000 barrels per day, with most of that centered at its Lake Charles facility in Louisiana.

China's oil demand setting records

BEIJING, Oct. 27 (UPI) -- Despite an economic slowdown, Chinese government data show oil demand is at one of the highest levels in nearly a decade.

The Organization of Petroleum Exporting Countries said in its October report the global economy should grow by 0.6 percent next year to 3.6 percent. The Chinese and Indian economies should remain flat, while Europe continues to falter.

Though treading water, analysis from Platts found found Chinese apparent oil demand, a reflection of how much oil goes into domestic refineries combined with net oil product imports, averaged 10.35 barrels per day in September, up 7.4 percent year-on-year.

September's average is up more than 6 percent from the previous month, which was the highest level reported for the year.

Platts attributed the rise to a shift in Chinese economic policies and to the end of routine maintenance at some of its refineries.

Chinese economist Xiang Songzuo said last week gross domestic product expanded 7.3 percent during the third quarter. While slowing, he said the GDP movement was a sign the Chinese economy was shifting away from acceleration to long-term quality.

China is one of the largest oil consumers in the world.

Iran mulling currency side step

TEHRAN, Oct. 27 (UPI) -- Using national currencies for trade deals between Iran and Russian is high on the list of items to be discussed during upcoming talks, an Iranian lawmaker said.

Hadi Qavami, a delegate from an Iranian-Russian committee inside the Iranian parliament, said he's heading to Moscow at the invitation of his counterparts in the Kremlin.

"Replacing (the U.S.) dollar with ruble in bilateral and multilateral transactions between Iran and Russia tops the agenda of the upcoming visit of an Iranian delegation to Russia," he said Saturday.

Iran has long been searching for a way around the U.S. dollar to circumvent sanctions imposed by Western powers in response to its controversial nuclear program. Russia now has sanctions pressure of its own issued in response to Western frustration over Moscow's stance on Ukraine.

Iran and Russia have been mulling an oil-for-goods swap deal for much of the latter half of 2014.

U.S. officials have said it would be "very troubling" if such a deal were to materialize.

Both sides already cooperate in a variety of fields, with Russia supplying fuel for Iran's nuclear reactor at Bushehr.

Producers call for end to oil export ban

WASHINGTON, Oct. 24 (UPI) -- Lifting a crude oil export ban will drive prices down at home while increasing U.S. leverage overseas, an adviser advocating on behalf of oil producers said.

FuelFix, an energy blog from the Houston Chronicle, finds 14 major oil producers, from Occidental Petroleum to ConocoPhillips, are behind a formal lobby called Producers for American Crude Oil Exports advocating for an end to a 1970s ban.

George Baker, a lobbyist hired to lead the group, said several studies have shown U.S. leverage could be increased overseas, while consumers would pay less for energy, if the export ban were lifted.

"More than anything else, the formation of PACE reflects growing public awareness of the need to align policies in Washington with the economic opportunities made possible by America's oil abundance," he said in an interview published Thursday.

Graeme Burnett, a senior vice president from refinery owner Delta Air Lines, testified on Capitol Hill early this year that crude oil exports make little sense because some U.S. markets would be forced to import more oil if the ban were erased.

A policy brief from the Council on Foreign Relations finds "a few fortunate oil refineries in the central United States" are the only ones benefiting from export restrictions.

Exports of crude oil are permitted under certain circumstances. The U.S. Energy Information Administration this week said the export of 401,000 barrels of oil per day in July was the highest level in more than 50 years.

Report: U.S. on path to energy independence

HOUSTON, Oct. 24 (UPI) -- The United States is on the path to energy independence because it's producing more reserves than it consumes, analysis from Wood Mackenzie finds.

Wood Mackenzie finds oil and natural gas production in the United States is up 42 percent from 2007 in part because of hydraulic fracturing, horizontal drilling and other drilling applications tied to the shale industry.

Higher production and lower demand, in turn, means the economy is relying less on external sources to meet its energy demands.

"A country can achieve energy independence through two channels -- it can either produce more or consume less, and the United States is doing both," James Brick, a senior analyst at Wood Mackenzie, said in a Thursday statement.

Wood Mackenzie finds demand is decreasing in United States because the transportation sector is more efficient.

Gains in production have fueled the debate over policies enacted in the 1970s that restrict crude oil exports. Brick said oil production should increase through 2030 regardless of the status of the ban.

With new technologies emerging for shale, Wood Mackenzie said oil output from the United States could increase by 3 million barrels per day to 10.3 million bpd by 2030.

Iran gas exports to Europe ‘would take five years’

Iran would take at least five years to start exporting natural gas to the European Union if sanctions were removed, industry experts said.

Last month, Reuters reported that the EU was 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 due to the Ukraine crisis.

Russia meets a third of Europe's gas 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.

Iran boasts the world's second-largest gas reserves after Russia but has also been hit with sanctions, in this case over its nuclear programme. Diplomats are pessimistic on whether Iran and world powers will conclude a final agreement on those sanctions by a Nov. 24 deadline.

Industry experts at the European Autumn Gas Conference in London said it would take a minimum of half a decade for Iranian exports to start if sanctions were lifted.

"To my understanding, Iran would have to invest a lot in infrastructure. This would take at least five years," said Matthias Keuchel, general manager of Enerjisa Dogal Gaz Company.

"There would also need to be negotiations with Iran on gas sales, which could happen at the same time - but five years could be a realistic term for that," he added.

Tatiana Mitrova, head of oil and gas at the Energy Research Institute of the Russian Academy of Sciences, agreed with that timeframe but said booming domestic demand for gas in Iran could mean exports would be stifled.

"If all restrictions are removed and economic growth starts domestically, (Iran) will need more gas for its internal market and we could see the same situation as Egypt in that its export potential is constrained by domestic needs," she said.

Iran might also prefer to focus on liquefied natural gas (LNG) rather than investing in pipeline infrastructure.

"It is very difficult for Iran to do both - pipeline and LNG. Between the two - supplying Europe or the Asia Pacific, my sense is they are more keen on supplying LNG (to Asia) if they can get the liquefaction sorted," said Ashutosh Shastri, director at EnerStrat Consulting, an energy strategy consultancy based in London.

Some analysts say Iran has already lost out on lucrative LNG exports in Asia, where customers pay the highest prices, to Gulf rival Qatar, so Tehran has to look to Europe. – Reuters

Saudi-Sinopec refinery 'to begin export in December'

Al KHOBAR, 1 days ago

The first fuel exports from a major new Saudi Arabian-Chinese refinery will load in December, slightly later than expected, three industry sources said.

The 400,000-barrel-per-day (bpd) Yanbu Aramco Sinopec Refining Company (Yasref) refinery started trial runs in September and originally planned its first exports by November.

Yasref is the second refinery to start up in Saudi Arabia in the past two years, and will complete state company Saudi Aramco's transformation into a leading exporter of diesel.

The shipment will be off-specification high sulphur gasoil, according to one of the sources.

The sources said it had faced some problems with commissioning, which is a normal when new refineries start up. The construction of the refinery was complete, the sources said, but more tests needed to be done.

"Commissioning is on the way, the crude distillation unit is producing naphtha and intermediate products but full stream of production takes time," said one industry source.

"By around December they will ship out the first product (cargo)."

The state-owned refiner has not detailed plans for its 37.5 per cent share of output from the refinery.

Sources said it will export some naphtha initially as the operator tries to stabilise gasoline-making units.

Officials at Yasref could not be reached for comment.

Sinopec will target Europe and East Africa for diesel shipments from the refinery with the first clean diesel cargo due in the first quarter of next year. - Reuters

US says working with Iraqi Kurdistan to stop Islamic State oil smuggling

SINGAPORE, 13 hours, 45 minutes ago

The US is working closely with the Iraqi Kurdistan Regional Government to clamp down on oil smuggling in a bid to cut off a key source of funding for Islamic State, a senior US official said.

Islamic State militants have seized oilfields and refineries in north Iraq and have been exporting oil through smuggling networks to help finance their campaign, along with ransom, extortion and other criminal activities.

"We are working with the regional government in Arbil to support their efforts in stopping those shipments and those smuggling operations," Acting Energy Envoy for the US, Amos Hochstein, told Reuters at an energy conference.

"It is of critical importance to the US, the international community and to Kurdistan itself to see an increased effort to stop that smuggling."

The Kurdistan Regional Government (KRG) has arrested a number of people for smuggling, said Hochstein, who is meeting with officials in countries neighbouring Syria and Iraq to stop the illegal oil flow.

In July the Islamic State had sold oil via smugglers to Turkish traders at vastly discounted prices while some of the crude had also been refined in Syria and sold as gasoline in Mosul.

An oil ministry adviser had estimated that in the first two weeks of July, Islamic State made nearly $1 million a day.The US is working with the KRG to identify oil routes, trucks and traders involved, and trying to block smuggling via border crossings and the purchasing side, Hochstein said.

"The oil is being smuggled through different routes, into different countries," he said. "So it has to be an entire value chain effort to stop Islamic State smuggling efforts."

But oil routes keep shifting and coalition airstrikes have also changed the dynamic of the flow.

"The routes change, there's some maybe going through Turkey, Iran, KRG and potentially through Jordan," he said. "It's not static and that makes it difficult but I think the effort is succeeding in slowing that process down."

Hochstein was hopeful that the new government of Iraq could reach an agreement on oil exports from Kurdistan. Baghdad has claimed that Kurdish oil shipments are illegal.

"We believe that it would benefit all parties, if oil was exported from all parts of Iraq through agreement, and that will expand the pie and therefore expand the revenues for all Iraqi people," he said.

"We also believe that this is the right time, this is a great window of opportunity, for the two parties to get together and reach that agreement." -- Reuters

Hungary firm to build new oilfield in Iraq

BUDAPEST/LONDON, 16 hours, 32 minutes ago

The Kurdistan Regional Government in Iraq has approved a major new oil field development majority-owned by Hungary's MOL, the company said on Thursday.

The minister of natural resources has given the green light for the field development plan of the Akri-Bijeel Block adjacent to the region's largest oil field, Shaikan, a year after MOL found enough oil to make the project commercially viable.

A number of oil field operators in Iraqi Kurdistan were forced to temporarily curb production this year as the advance of Islamic State militants threatened workers' security.

"MOL Group is committed to maintain its presence and increase investments in the region," Alexander Dodds, MOL's upstream executive vice president, said.

MOL's minority partner in the Akri-Bijeel project is Gulf Keystone Petroleum (GKP).

The partners will tackle the project in two phases, with the first starting immediately and focusing on determining details such as how much oil can be recovered and overall costs.

Shares in MOL traded up 0.3 per cent at the open while GKP jumped 8 per cent. – Reuters

Kurdistan's oil pipeline capacity to double

ISTANBUL/ANKARA, 2 days ago

Iraqi Kurdistan plans to increase the capacity of its oil pipeline via Turkey to 700,000 barrels per day (bpd) following upgrade work, industry sources and officials said.

It will raise the flow to 400,000 bpd by year-end, from a current 280,000 bpd, adding further pressure to falling world oil prices already hit by rising supply.

The Kurdistan Regional Government (KRG) has quietly pressed ahead with plans to expand oil pumping capacity in the teeth of opposition to its oil exports from the Baghdad government and as it fights Islamic State militants.

"There is further technical upgrade work ongoing right now and once that is finished, the pipeline capacity will reach its designed volume which is 700,000 bpd," one industry source said.

"I believe the work will be completed in two to three weeks," the source said.

KRG's pipeline to the Turkish port of Ceyhan, first began operating at the start of this year, angering the central government in Baghdad which claims the sole authority to manage Iraqi oil.

Baghdad, which claims the Kurdish oil shipments are illegal, has taken its refusal to allow Kurdish oil shipments to US courts, blocking the discharge of one tanker off Texas earlier this year.

KRG argues that its shipments are allowed under the Iraqi constitution.

A total of 19.2 million barrels of oil have been exported via Ceyhan, Turkish officials said, and around $400 million has been deposited with Turkish state lender Halkbank as a result.

The KRG has declined to say who is helping it arrange the deals.

In September, Reuters reported that at least 3 million barrels of Kurdish oil were on ships heading to Asia, with trade sources naming China as a possible destination.

Despite the mystery over buyers, an order book for Kurdish oil seems to have been established. At least two tankers per week were regularly lining up at Ceyhan to load Kurdish crude, Turkish officials and industry sources said.

Opec unlikely to cut oil output, says Iran

Opec is unlikely to lower its oil production ceiling when the group meets in November, a senior Iranian oil official said, in comments that reduced the likelihood of any collective Opec action to support prices.

Iran is normally among the first members of the Organization of the Petroleum Exporting Countries to call for action to support prices. Iran needs relatively high prices as Western sanctions limit its oil exports, analysts say.

But Iranian oil ministry news agency Shana on Monday cited Mohsen Qamsari, director for international affairs at the National Iranian Oil Company, as saying a cut was unlikely at Opec's Nov. 27 meeting.

He also said an emergency Opec meeting before then, called for by Venezuela, was not necessary.

"Holding a meeting now is ineffective," he said, according to Shana.

The meeting on Nov. 27 in Vienna is shaping up to be one of Opec's most important in years. Brent oil slid to $85 barrel last week from $115 in June on abundant supply and concerns about weakening demand.

With a month still to go, there is little outward sign that any momentum could be building around the idea of cutting output, which would be the first such move since the 2008 financial crisis.

Top Opec producer Saudi Arabia has been quietly telling market participants it is comfortable with lower prices, Reuters reported earlier this month. Kuwait has said an Opec cut is unlikely.

Amid little sign of support within Opec for a cut, sources familiar with Iranian thinking on Opec policy started saying earlier this month that Iran could live with lower prices.

Iran should set a budget based on much lower oil prices, Qamsari said in separately reported remarks on Monday.

"Iran should arrange its next fiscal year's budget based on $70 to $75 a barrel," the official IRNA news agency quoted him as saying. – Reuters

Don't panic, Opec boss says after oil price fall

LONDON, 1 days ago

There is no need to panic at the recent collapse in oil prices, the secretary general of Opec said on Wednesday, saying low prices would curb competing supplies and require the group to pump far more by the end of the decade.

Abdullah al-Badri did not say whether Opec needed to cut oil production at its next meeting in November, something he has called for previously, and said prices should be set by the market.

Opec members have previously said they wanted oil at around $100 a barrel.

"We do not see much change in the fundamentals. Demand is still growing, supply is also growing. Opec is reviewing the situation," Badri said in London, where he was attending the Oil & Money conference, an annual industry event.

"The most important thing is we should not panic," he said. "Unfortunately, everybody is panicking. We really need to sit, and think and see how this will develop."

The price of benchmark North Sea Brent crude has dropped more than a quarter from a high above $115 per barrel in June as abundant supplies of high-quality oil have overwhelmed demand in many markets, filling stocks worldwide.

Brent was trading around $86.80 a barrel by 1030 GMT on Wednesday after reaching a low of $82.60 two weeks ago.

The Organization of the Petroleum Exporting Countries, which pumps around a third of the world's oil, meets on Nov. 27 in Vienna. The oil-price drop has raised the question of whether the 12-member group will cut its output to support the market.

Badri said last month that he expected the group to lower its oil output target when it meets in Vienna, which would be its first formal output cut since the 2008 financial crisis.

Opec now has a production target of 30 million barrels per day (bpd) and Badri suggested last month that this should be cut to around 29.5 million bpd.

Badri said on Wednesday that the cartel did not have a price target but would instead leave that to the market.

"Opec's average price will still be $100 at the end of this year so we are fine for 2014," he said. "The fundamentals do not reflect this low price."

"Opec does not have a price target. We must let the market settle down."

Badri said Opec had to be ready to pump far more in future.

"In the longer term, Opec must be ready to produce. Around 2018-2020, US tight oil will slow down," he said.

"By 2020, Opec must be ready to produce 40 million bpd of oil, and 50 million bpd of liquids, that's crude and natural gas liquids." – Reuters

Sinopec firm starts laying pipelines for Iraq's Maysan oilfield

BEIJING, 2 days ago

An engineering and construction unit under China's Sinopec Group has started building pipelines for Iraq's Maysan project that will help raise the oilfield's production to 460,000 barrels per day (bpd) by 2016, an industry website reported.

Iraq had set a production capacity target of 12 million bpd by 2020, which would rival that of top oil exporter Saudi Arabia, after it signed service contracts in 2009-2010 to develop its southern oilfields.

China is Iraq's largest oil buyer, and its state energy firms, including PetroChina and CNOOC, together hold more than a fifth of the country's oil projects after securing some of its premium fields through auctions.

Daqing Engineering and Construction Company, owned by state energy group Sinopec, started laying 30 km of pipelines and building power stations last week for the Maysan field, of which China's CNOOC Ltd is the operator, according to a report on news.cnpc.com.cn.

CNOOC won the service contract for Maysan in 2010, in partnership with state-run Turkish Petroleum Corporation (TPAO) and Iraq Maysan oil Company under a 20-year contract.--Reuters

Iraq's oil exports rising in October despite unrest

LONDON, 3 days ago

Iraq's oil exports from its southern terminals are holding close to a record high in October and Kurdish shipments are climbing, a further sign that fighting has not derailed an expansion of supplies from the Organization of the Petroleum Exporting Countries (Opec's) second-largest producer.

Four months after an advance by Islamic State into northern Iraq sent oil prices soaring to $115 a barrel, the unrest has not led to a reduction in Iraq's exports from the south, the main outlet for its crude to world markets.

Exports from Iraq's southern terminals have averaged 2.55 million barrels per day (mbpd), according to shipping data for the first 23 days of October tracked by Reuters. An industry source who monitors the exports had a similar estimate.

The increase in supplies from Iraq, as well as a recovery in Libyan production despite conflict there, adds to the challenge for the Opec, which meets to review supply policy on November 27.

Oil has fallen steeply from June's high to a four-year low of $82.60 a barrel this month on ample supplies, reducing Opec members' income from their principal export.

"So far no country has said it is willing to cut," said Carsten Fritsch, analyst at Commerzbank in Frankfurt. "So it will be difficult for Opec to find an agreement overall," he said.

The export figure has been achieved despite some delays to shipments and loadings caused by bad weather, making the achievement all the more impressive, oil industry sources said.

Southern Iraqi exports so far in October are slightly up from the average of 2.54 mbpd during all of September and are within sight of May's average of 2.58 mbpd, which was the highest since at least 2003.

Iraq's oil supplies were held back by decades of war and sanctions. It has been expanding oil production in the south since Western companies signed a series of service contracts with Baghdad in 2010, and boosted export capacity.

Total exports from Iraq's northern and southern ports hit a record 2.80 mbpd in February. But northern exports of Kirkuk crude have been shut since March 2 due to attacks on a pipeline to Turkey, keeping total exports below their potential.

While Kirkuk exports remain halted and are unlikely to return soon, Iraq's Kurdistan region has been exporting a rising amount of oil independently of Baghdad via Turkey's Ceyhan port.

These averaged 180,000 bpd in September according to the International Energy Agency, and may have reached 200,000 bpd in October, an industry source who tracks the shipments said.

Further, small volumes of Iraqi oil are being sold by Islamic State militants, which seized some oilfields in northern Iraq in June with output of around 28,000 bpd.

Including oilfields it controls in Syria, the militant group was producing about 50,000 to 60,000 bpd before recent US-led air strikes, research firm IHS estimated.

The trade is worth about $2 million a day, IHS said, as the oil is sold on the black market at steep discounts to world prices, ranging between $25 and $60 a barrel.--Reuters

Oman likely to start cutting subsidies next year

MUSCAT, 3 days ago

Oman's government is likely to start cutting some state subsidies next year as the decline in global oil prices pressures its finances, Minister for Financial Affairs Darwish Al Balushi said.

The country's original budget plan for 2014 assumed the government would run a deficit with an average oil price of $85 a barrel. For most of this year the oil price has been much higher, but in the last few months it has dropped steeply to as low as $82.

Oman has been considering ways to reform its costly and sometimes wasteful subsidy system, though reductions in spending would be politically sensitive. Asked by Reuters whether cuts were likely next year, Balushi said: "Yes, I think the time is probable and especially with the decline in oil prices.

"I think the people would be more understanding now, more accepting. They realise that this was natural wealth that is being overused, wasted..."

In an interview on the sidelines of a meeting of Gulf Arab finance ministers and central bank governors in Kuwait, Balushi also said the current subsidy system was ineffective because it did not focus on poorer people.

"Everybody gets, people who deserve and people who do not. I think if we rationalise it and use the saving for better priorities, that will definitely have a return for the people of Oman.”

The subsidy reforms will proceed gradually and make sure people who deserve state aid are not affected, Balushi said. He did not give details of which subsidies would be cut, but in the past has described petrol as an obvious target.

BONDS

Omani officials have said the government may return to the international debt market for the first time since 1997 to cover a budget deficit.

Balushi said, however, that the government's priority was to make its first issue of Islamic bonds for the domestic market. "Sukuk for the local market is I would say more clear at the moment, and we might be doing it during the first quarter of next year.”

Omani bankers say a Rial-denominated sukuk issue would be a boost for the country's fledgling Islamic finance industry, giving sharia-compliant banks a badly needed tool with which to manage their liquidity.

The sukuk issue might be worth the equivalent of around $300 million or $400 million, Balushi said; the government has been considering maturities of five and seven years.

"We want to create a benchmark. We are not under pressure to go and take what comes. No, we look at more options and see which one will serve the government objective and also the economic objective and the financial market.”

The international bond issue is expected to follow later next year and its size "will depend on our requirement based on our 2015 budget”, Balushi said.

Oman's original 2014 budget plan envisaged state spending of OR13.5 billion ($35.1 billion), up just 5

Per cent from the original 2013 budget, which envisaged a 29 per cent leap from 2012.

Balushi said spending in the 2015 budget plan would be around the same level as the 2014 budget or marginally higher. He said there was no plan to cut spending on the big infrastructure projects which Oman is building to diversify its economy beyond oil.

"For years we have been growing at a relatively fast pace and I think we will slow down. But having said that, it is not our intention at the moment to cut expenditure where we would affect especially development projects for infrastructure," he said.

"There is no intention unless if the trend with the oil price continues declining downwards. It is not clear at the moment if oil prices will sustain and at which level.

"We do not want to come up with a policy response that will create nothing but more confusion for our programmes. We want to do it gradually, in a steady manner," he added.-- Reuters

Lower oil prices won't affect development: Kuwait

DUBAI, 3 days ago

Kuwait's oil minister said there was no negative effect on the country's development plan from lower oil prices, state news agency Kuna reported.

Kuna cited Ali Al Omair as saying that he hoped oil prices would stabilise at a "level that benefits producers and importers". He did not specify what that level might be.

Brent crude futures extended declines to below $86 a barrel after Goldman Sachs cut its price forecasts for the contract and for US oil by $15 for the first quarter of next year.

Kuna cited Omair as saying that the current prices still covered the Opec producer's general budget, which the report said was based on an estimated $75 per barrel.--Reuters

Kuwait oilfield shut for ‘purely technical reasons’

KHOBAR, Saudi Arabia, 3 days ago

A senior Kuwaiti official said on Sunday the Khafji oilfield, run jointly with Saudi Arabia, had been shut down for "purely technical and not political" reasons, state news agency KUNA reported.

Crude production from the Khafji oilfield had been halted temporarily to comply with environmental rules, according to an industry source and an internal letter seen by Reuters. But the closure of the offshore field, which has an output of between 280,000 to 300,000 barrels per day, revived speculation of renewed tensions between the two countries.

Kuwaiti Foreign Ministry undersecretary Khaled al-Jarallah, speaking in Riyadh after a meeting of Gulf Cooperation Council foreign ministers, said relations between the two countries were too strong to be affected by discrepancies over oil output from the field.

"This discrepancy is related to the joint zone, joint production and the aspects of this production," he told journalists, according to KUNA.

"The halt of oil production in the divided zone is due to purely technical, rather than political reasons," he said, adding that production could not resume until the technical matters were addressed.

Sources told Reuters last week that an onshore gas gathering plant in Khafji needed to be repaired after a gas leak and that the repairs could take around six weeks.

"Our brothers in the Kingdom (of Saudi Arabia) want to conduct maintenance work and take some measures linked to the environment which the Kuwaiti side understand and is aware of," Jarallah said. – Reuters

Oil production in northern Iraqi oilfields has been on the rise, but for now there has not been enough crude to fill the upgraded capacity of the pipeline.

"We are likely to see 400,000 bpd flowing in the pipeline probably before the end of the year," another industry source said.--Reuters

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News 31th October 2014

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