By Saleh Sarrar and Ben Sharples Jul 3, 2014 10:02 PM GMT+0700
Libya is ready to reopen two oil ports in the country’s east and will resume exports as fast as possible after taking back control from rebels who blocked crude shipments for the past year.
Es Sider and Ras Lanuf, which have combined capacity of 560,000 barrels a day, will open after an agreement was reached with rebels, Ahmed al-Amin, a government spokesman, said by phone. The nation’s biggest and third-largest export facilities were handed over in a gesture of support for the newly elected parliament, a spokesman of the rebel group that calls itself the Executive Office for Barqa said yesterday.
“Exports will resume at full capacity, as much as we can,” Mohamed Elharari, spokesman for the state-run National Oil Corp., said by phone from Tripoli. “Loading will resume as soon as possible, we will be speaking with the international companies” about crude sales, he said.
Libya has become the smallest producer in the Organization of Petroleum Exporting Countries in the past year because of unrest in the country. It is currently pumping at a rate of 320,000 barrels a day, Elharari said. That’s less than a third of the level in June 2013, according to data compiled by Bloomberg. The reopening of the two terminals could raise the nation’s crude-export capacity almost five-fold.
“We’re ready to lift force majeure, we’re waiting for a notice from the government,” Elharari said. Force majeure is a legal step that protects a company from liability when it can’t fulfill a contract for reasons beyond its control.
Brent Contango
Brent crude prices declined for a fourth day on expectations that Libya will boost supply. Brent for August settlement decreased as much as 71 cents, or 0.6 percent, to $110.53 a barrel on the London-based ICE Futures Europe exchange.
Front-month Brent crude futures traded at a discount to the second month, marking the first appearance since April of a condition known as contango, which typically indicates that immediate supplies exceed demand.
“The market is weakening in reaction to the Libyan news, as it has on previous announcements,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by e-mail. “For the move in prices and curve structure to hold, you would need a rapid follow-through in terms of actions to resume oil exports.”
Consulting OPEC
Libya will consult with OPEC on how the group can accommodate the North African country’s rising production within its 30-million-barrel daily production target, Elharari said. OPEC produced 30.2 million barrels a day in June, according to data compiled by Bloomberg.
Rebels of the self-declared Executive Office for Barqa are seeking self-rule for the eastern region of the country known also as Cyrenaica. They occupied the ports in the region at the end of July 2013, demanding an oil-revenue-sharing agreement to make up for the neglect the area experienced under Muammar Qaddafi’s 42-year rule.
Es Sider has 340,000 barrels in daily loading capacity and Ras Lanuf 220,000 barrels, according to the Oil Ministry. The nation has a total of nine export terminals, of which three -- Brega, Jurf and Bouri -- are operating with a combined daily loading capacity of 145,000 barrels.
The government has agreed to pay “in the next few days” salaries of Petroleum Facilities Guard members who defected to the Barqa group during the blockade and to implement a preliminary agreement reached on April 6, Ali Al-Hasy, a rebel spokesman, said yesterday. The Barqa group handed over the oil ports of Hariga and Zueitina after that accord in exchange for amnesty and salary payments for the guards, as well as an audit of the National Oil Corp.’s oil sales since the overthrow of Qaddafi.
To contact the reporters on this story: Saleh Sarrar in Dubai at ssarar@bloomberg.net; Ben Sharples in Melbourne at bsharples@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron, Dan Weeks
By Lynn Doan and Dan Murtaugh Jul 4, 2014 1:02 AM GMT+0700
Enterprise Products Partners LP (EPD) and Enbridge Inc. (ENB) said the 512-mile expansion of their Seaway oil pipeline is mechanically complete, with commissioning work remaining before it starts to move oil south from the delivery point for West Texas Intermediate futures in Cushing, Oklahoma.
Enterprise looped the existing Seaway line with a parallel pipe, increasing capacity to the Houston area to 850,000 barrels a day, the companies said in a joint statement.
The expansion will draw barrels from the nation’s biggest oil-storage hub, where stockpiles have fallen 48 percent this year to the lowest level in five years. New pipelines and expansions, including the southern leg of TransCanada Corp. (TRP)’s Keystone XL system, helped eliminate a glut that built at Cushing as oil flooded in from Canada and North Dakota.
“It’s not flowing yet, but it’ll be flowing later this month for sure,” James Williams, president of energy consultant WTRG Economics in London, Arkansas, said by telephone today. “It’s going to give the folks north of Cushing more of an option to trade off going by rail or by pipeline.”
Workers need to perform several tests on the pipe to make sure there are no leaks before pumping oil into it, said Andy Lipow, an oil industry consultant with Lipow Oil Associates LLC in Houston.
Pipeline Testing
“The pieces of the pipe are put together, the pumps are hooked up,” he said. “Now it’s been turned over to operations, and they have to complete their procedures ensuring the line is ready to receive oil and begin routine operations.”
The new 30-inch Seaway Loop Pipeline connects to the Jones Creek storage terminal near Freeport, Texas, the companies said in the statement. Jones Creek connects to Enterprise’s ECHO crude storage facility in Houston by a 65-mile, 36-inch line. A 100-mile pipeline from ECHO to Beaumont and Port Arthur is expected to be completed this month, and commissioning of both lines will continue through the third quarter.
West Texas Intermediate futures were down 54 cents, or 0.5 percent, to $103.94 a barrel on the New York Mercantile Exchange at 1:39 p.m. New York time. WTI’s discount to the European benchmark crude Brent widened by 11 cents to $6.87.
Enterprise, a Houston-based company that operates the Seaway pipeline and co-owns it with Enbridge, reversed the system in May 2012 and expanded its capacity to 400,000 barrels a day in January 2013. As part of the most recent expansion, Enterprise said storage at the ECHO terminal would increase by 900,000 barrels to 6 million.
Cushing Stockpiles
Crude stockpiles at Cushing slid 1.36 million barrels, or 6.2 percent, to 20.5 million in the week ended June 27, the lowest level since Nov. 14, 2008, according to U.S. Energy Information Administration data. They were 41.8 million in January. Supplies in PADD 3, which includes the U.S. Gulf Coast, have climbed 19 percent this year to 204.8 million barrels.
With Cushing inventories as low as they are, Seaway won’t be able to run anywhere close to its new expanded capacity until Enbridge starts pumping crude through its 600,000-barrel-a-day Flanagan South pipeline, which will bring oil to the Oklahoma hub from the Chicago area.
The pipeline is expected to be filled with crude and ready for service late in the third quarter, Larry Springer, a Houston-based spokesman for Enbridge said by e-mail. Most of the pipe construction is complete along the 593-mile route, and work continues on seven pump stations along it.
“You need Flanagan South to be complete before the Seaway twin can really run,” said Amrita Sen, chief oil market analyst for Energy Aspects Ltd. in London.
Seaway’s committed shippers sign take-or-pay contracts to get capacity on the pipeline, meaning they pay Enterprise whether they ship or not. Customers who plan to ship oil to Cushing via Flanagan South and then move it down Seaway will not have to pay their Seaway tariffs until Flanagan South is complete, Springer said.
To contact the reporters on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net; Dan Murtaugh in Houston at dmurtaugh@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Richard Stubbe, Stephen Cunningham
By Will Kennedy Jul 3, 2014 7:28 PM GMT+0700
Genel Energy Plc (GENL), the oil explorer headed by former BP Plc Chief Executive Officer Tony Hayward, said production jumped in June after Iraq’s Kurdistan region opened an export pipeline to Turkey.
Net production averaged 84,000 barrels a day in June compared with a 63,000 barrels-a-day rate for the whole of the first half, the company said today in a statement.
The opening of the pipeline in May allowed the autonomous region to increase exports through Turkey, bypassing the central Iraqi network. While the government in Baghdad disputes Kurdistan’s right to sell oil directly, the regional administration has sold a cargo of oil at international prices and deposited the proceeds in a Turkish bank, Genel said.
Kurdistan, which plans a referendum on independence from Iraq, has largely remained calm as Islamist militants fight the central government for control of large parts of the country. London-based Genel said its operations remain safe and secure.
“Genel Energy looks well placed either as an early producer or as an M&A target by one of the super-majors,” analysts at Bernstein Research said today. “The upside is starting to look more compelling as the probability of a Kurdistan breakaway from Iraq increases.”
The shares gained as much as 2.4 percent to 1,048 pence in London, the highest in a month. The stock traded at 1,040 pence at 1:10 p.m. London time.
Production Forecast
Genel maintained a forecast for average output in 2014 of 60,000 to 70,000 barrels a day and said revenue would be $500 million to $600 million.
The pipeline will allow Kurdistan to raise exports to 200,000 to 250,000 barrels a day this month from 125,000 barrels early last month, Ashti Hawrami, the regional natural resources minister, said on June 18. Daily shipments may increase to 400,000 barrels by the end of the year, he said.
Iraq, excluding the Kurdish region, holds 150 billion barrels of proven crude reserves in the world’s fifth-biggest deposits. The Kurdistan regional government controls 45 billion barrels and has attracted international oil companies including Genel, Exxon Mobil Corp. (XOM) and Total SA (FP) with financial terms many see as more generous than those in the rest of the country.
To contact the reporter on this story: Will Kennedy in London at wkennedy3@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net John Viljoen, Indranil Ghosh
By Khalid Al-Ansary Jul 3, 2014 7:01 PM GMT+0700
Iraqi Kurdish leader Massoud Barzani asked the parliament of the semi-autonomous Kurdish region to set a date for a referendum on independence, a lawmaker said.
Barzani also said disputed areas occupied by Kurdish armed forces last month, which include Iraq’s largest northern oil field, “will not go back to Baghdad’s control,” legislator Abdullah Jasim Rikani added, citing a speech Barzani made today.
The Kurds have been emboldened to push for independence by a Sunni insurgency that has frayed the central government’s authority. Shiite Prime Minister Nouri al-Maliki rejected the Kurdish independence push yesterday, saying, “We don’t have anything called self-determination in our constitution.”
Maliki also demanded the Kurds give up the Kirkuk oil hub, which would make an independent Kurdish state more financially self-sufficient.
“Nobody has the right to take advantage of the current events to impose facts on the ground,” he said. The oil field at Kirkuk “must be returned,” he said.
As al-Qaeda-inspired rebels routed government forces, the Kurds’ Peshmerga force extended its control beyond the semi-autonomous Kurdish region in the north to disputed areas including Kirkuk.
The Sunni group now known as Islamic State has brought Iraq, OPEC’s second-biggest oil producer, to the brink of civil war again after seizing the urban centers of Mosul and Tikrit and other chunks of northern Iraq last month.
More Inclusive
Maliki is now under pressure from domestic opponents to step aside to give the Sunni minority a greater say in government in a bid to undercut the support the insurgents have from some within the community.
The insurgents’ progress has rattled the region, and Saudi Arabia has deployed 30,000 troops to the border with Iraq, Reuters reported, citing Saudi-owned Al-Arabiya television. The Saudi Interior Ministry said the country’s border with Iraq is secure. “We haven’t experienced or noticed any abnormal situation” along the border area, Major General Mansour al-Turki, the Interior Ministry spokesman, said in a text message responding to questions.Loyalty Oath
The Islamic State, which is also fighting in Syria to topple President Bashar al-Assad, earlier this week declared an Islamic caliphate in areas of Iraq and Syria it controls. Iraq’s Al-Mada Press, citing tribal chiefs, reported that the group has threatened to kill residents of the town of Hawijah, about 20 kilometers (12 miles) west of Kirkuk, and at least one other town if they don’t pledge allegiance to Islamic State.
The unidentified tribal chiefs told the website that people were fleeing to Kurdish-controlled areas, including Kirkuk.
The activist Syrian Observatory for Human Rights said on its website that radical groups in rural Deir Ezzor province in eastern Syria declared allegiance to Abu Bakr al-Baghdadi, the leader of Islamic State.
To contact the reporter on this story: Khalid Al-Ansary in Baghdad at kalansary@bloomberg.net
To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net Amy Teibel
Brent in Contango First Time Since April on Libya Ports
By Grant Smith Jul 3, 2014 6:54 PM GMT+0700
Front-month Brent crude futures traded at a discount to the second month, marking the first appearance since April of a condition known as contango, which signals diminished oil-supply concerns as Libya prepares to revive exports.
Brent futures for August settlement were as much as 10 cents cheaper than September contracts on the London-based ICE Futures Europe exchange today. The front-month hasn’t settled at a discount to the second, an indicator that immediate supplies exceed demand, since April 15. Libya is reopening two crude-export terminals in the country’s east after making a deal with rebels who have blocked oil shipments for the past year.
“The market is weakening in reaction to the Libyan news, as it has on previous announcements, and this is most notable on the front Brent spreads,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by e-mail. “For the move in prices and curve structure to hold, you would need a rapid follow-through in terms of actions to resume oil exports.”
The restart of the two Libyan ports could increase export capacity five-fold in the country, where output has been decimated by political protests. The prospect that shipments of its light, low-sulfur oil will rebound puts pressure on the Brent benchmark, a similar grade used to price about half the world’s crude.
Brent contracts for August settlement on ICE traded for $110.65 a barrel as of 12:48 p.m. London time, compared with $110.67 for September.
Port Resumption
The ports of Es Sider and Ras Lanuf, which have a combined capacity of 560,000 barrels a day, will open after an agreement was reached with rebels, Ahmed al-Amin, a government spokesman, said by phone today. The nation’s biggest and third-largest export facilities were handed over in a gesture of support for the newly elected parliament, a spokesman of the rebel group that calls itself the Executive Office for Barqa said yesterday. Preparations are under way to ensure the ports operate at maximum capacity, the Libyan government said on its website today.
Signs that the North African nation will recover are tempering concern that a shortfall would develop if Islamist militants extend territorial gains in Iraq, a fellow member of the Organization of Petroleum Exporting Countries, according to Andrey Kryuchenkov, an analyst at VTB Capital in London.
“Global supplies are still plentiful” and “continue to outpace the more modest consumption increase,” Kryuchenkov said in a report. “Prices could see a little more downside, but the oil price risk premium in London will not be erased fully, given some degree of uncertainty in the Middle East.”
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron, Bruce Stanley
By Tara Patel Jul 3, 2014 5:19 PM GMT+0700
Total SA (FP) and partner Dong Energy A/S will spend 340 million pounds ($583 million) developing the Edradour natural gas and condensate discovery West of Shetlands that will help to revive U.K. fossil fuel production.
The field, named after a whisky like others in the area, will be linked to the nearby Glenlivit find in which Total will buy 60 percent, the company said in a statement. The sites will be tied to the Laggan-Tormore hub, with a capacity of 90,000 barrels of oil equivalent a day, due to start up this year.
The company, based outside Paris, is spending 3.3 billion pounds developing a Laggan-Tormore plant to process gas from fields in the North Atlantic. It has said the Shetland project will help it become the U.K.’s biggest producer in 2015. BP Plc, Royal Dutch Shell Plc, Chevron Corp. and ConocoPhillips are also investing in projects in the region as mature U.K. fields age.
Edradour and Glenlivit will add 65 million barrels of oil equivalent of reserves, with the former reaching a plateau of 17,000 barrels a day, Total said today. A decision on developing the Glenlivit field is “expected shortly,” the company said.
Edradour “demonstrates our focus on cost discipline,” said Patrice de Vivies, senior vice-president of exploration and production for Northern Europe. The project was put on hold last year after cost increases that were subsequently lowered.
Total has 75 percent of Edradour and Dong Energy 25 percent. The French company will have 60 percent of Glenlivit, Dong Energy 20 percent, and Faroe Petroleum (UK) Ltd. and First Oil Expro Ltd. 10 percent each, according to today’s statement.
Laggan-Tormore will be Total’s third hub in the U.K. after Alwyn and Elgin-Franklin, which was shut for almost a year after a 2012 gas leak. Total also plans to start up the West Franklin Phase 2 project this year with a 40,000 barrel-of-oil capacity.
To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Tony Barrett, Indranil Ghosh
By Lynn Doan Jul 3, 2014 11:01 AM GMT+0700
U.S. drivers will pay the most for gasoline over the July 4 holiday weekend in six years after the conflict in Iraq boosted crude oil last month, preventing the typical June decline in pump prices.
The CHART OF THE DAY shows how gasoline at $3.67 a gallon is the highest for this time of year since 2008. Retail prices rose 0.3 cent in June, compared with a average drop of 20.8 cents during the month in the past three years. While prices have slipped in the past five days, they probably won’t fall much more before the weekend as almost 35 million people hit the road, according to AAA.
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“I’m not expecting any big changes,” Michael Green, a spokesman for Heathrow, Florida-based AAA, the biggest U.S. motoring organization, said by telephone from Washington. “We might see a drop of a few tenths of a cent.”
Regular gasoline in the U.S. costs 19.2 cents a gallon more than a year ago, dragged up by oil prices that jumped last month as fighting in Iraq threatened to cut off supplies from OPEC’s second-largest producer. International benchmark Brent crude rose $2.95 a barrel in June, and settled at $111.24 a barrel yesterday.
The increase came just as the most people since 2007 made plans to travel over the July 4 holiday. About 34.8 million people will drive 50 miles or more from home during the five days ending July 6, up from 34.1 million last year, AAA estimates.
“Last year, prices peaked around March, and now they’ve peaked basically in June,” Sean Hill, petroleum economist for the Energy Information Administration, the Energy Department’s statistical arm, said by telephone from Washington. “This is all a function of what crude oil has done because of the Middle East.”
To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Stephen Cunningham
By Nathan Gill Jul 4, 2014 2:57 AM GMT+0700
Ecuador’s state oil company got $2 billion of financing from China backed by future crude supplies, adding to funding the country has obtained this year by tapping the bond market and taking a loan from Goldman Sachs Group Inc.
The OPEC-member country disclosed the China deal in an offering circular to bond investors last month. Under the May agreement, Unipec Asia Co., a unit of China Petroleum and Chemical Corporation, known as Sinopec, prepaid for oil from PetroEcuador over an unspecified timeframe.
President Rafael Correa, who more than tripled public spending since taking office in 2007, had said the government was seeking additional financing sources from China, the world’s biggest oil consumer after the U.S. Ecuador has borrowed more than $11 billion from the Asian nation in the past five years.
The Andean country’s $2 billion bond sale last month was its first offering in international debt markets since a default in 2008. In May, Ecuador obtained a $400 million loan from New York-based Goldman Sachs by using about half of its gold reserves as collateral.
The press offices of Ecuador’s Finance Ministry and PetroEcuador didn’t immediately respond to requests for comment on the agreement with China.
To contact the reporter on this story: Nathan Gill in Quito at ngill4@bloomberg.net
To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Bradley Keoun
By Paul Burkhardt Jul 3, 2014 9:52 PM GMT+0700
Sasol Ltd. (SOL), the world’s biggest producer of motor fuel from coal, is considering a gas-to-liquids plant in Mozambique with Eni SpA of Italy and the southern African country’s oil company.
The joint pre-feasibility study will assess the viability of such a plant in the region, Johannesburg-based Sasol said in a statement on its website.
Eni has found about 75 trillion cubic feet of gas offshore Mozambique in a block known as Area 4 of the Rovuma Basin, site of the biggest gas discoveries in a decade. The country may have 250 trillion cubic feet of reserves, according to state-owned oil company Empresa Nacional de Hidrocarbonetos.
There is “quite an extended study period,” Alex Anderson, a spokesman for Sasol, said by phone. He said it’s too early to determine how long the study will take or the cost of such a plant.
Sasol started its first GTL plant outside South Africa in Qatar in 2007. With Nigerian National Petroleum Corp. and Chevron Corp. it’s built a similar facility in Africa’s biggest economy, and it’s constructing one in Uzbekistan with Uzbekneftegaz and Malaysia’s Petroliam Nasional Bhd.
Sasol will make a final investment choice on a U.S. GTL plant 18 to 24 months after it decides on an associated ethane cracker in Westlake, Louisiana. The GTL facility, which may produce 96,000 barrels of fuel a day, is estimated to cost as much as $14 billion and would be the first of its kind in the U.S.
To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net
To contact the editors responsible for this story: John Viljoen at jviljoen@bloomberg.net Ana Monteiro, Randall Hackley
By Pablo Gonzalez Jul 4, 2014 1:21 AM GMT+0700
Argentina’s oil-producing provinces will postpone discussions with federal authorities scheduled for this week over a proposed energy bill after the government appointed a new energy secretary, two provincial officials said.
Provincial delegates canceled flights to Buenos Aires for a meeting tomorrow and there are no immediate plans to reschedule the meeting, one official said. Both people asked not to be named because negotiations are private.
Mariana Matranga, a 38-year-old chemical engineer and adviser to a director of state-owned YPF SA since August 2012, was appointed by the federal government this week to replace Daniel Cameron, who held the post for 11 years. When YPF was nationalized in April 2012, Matranga said Norway’s Statoil ASA (STL) and Petroleo Brasileiro SA were models for Argentina to emulate.
Provincial governors and federal authorities are discussing a proposal to replace the 1967 hydrocarbons law, including how to distribute revenue from the world’s fourth-biggest shale oil reserves and second-largest shale gas reserves in southwestern Argentina’s Vaca Muerta formation.
Horacio Mizrahi, a spokesman for federal Planning Minister Julio De Vido, didn’t respond to a phone call and an e-mail seeking comment. Chubut Governor Martin Buzzi, who heads the committee of the 10 provinces, and Neuquen Governor Jorge Sapag weren’t available to comment, their respective assistants said.
Shale Experience
Matranga, who has field expertise in shale operations, didn’t reply to several phone calls seeking comment. Matranga’s swearing-in for the new position hasn’t been scheduled.
Argentine President Cristina Fernandez de Kirchner canceled official events for three days this week because of laryngitis, according to a medical report released by her doctors.
A former technical coordinator for engineering projects at Tenaris SA, Matranga is one of several people aligned with Economy Minister Axel Kicillof who are occupying strategic positions in Fernandez’s administration.
Matranga attended Colegio Nacional de Buenos Aires, one of Argentina’s most prestigious high schools, at the same time as Augusto Costa, who last year replaced Guillermo Moreno as Interior Commerce Secretary. Both Cameron and Moreno were appointed by Fernandez’s late predecessor and husband Nestor Kirchner. Kicillof is an alumni of the same school.
Matranga was on the Kicillof-led team that prepared YPF’s expropriation from Repsol SA. A few months before the takeover, she co-authored a paper that concluded that shale appears as “the solution to Argentina’s reserves decrease.”
“Argentina needs an energy secretary who is able to harmonize the provincial interests with those of YPF and private oil market players,” Mauricio Roitman, an analyst at energy consultant Montamat & Asociados, said in a telephone interview from Buenos Aires. He said he didn’t know Matranga.
To contact the reporter on this story: Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Robin Saponar
By Zain Shauk Jul 4, 2014 1:00 AM GMT+0700
Four wastewater wells used in oil and natural gas drilling may be responsible for triggering 20 percent of all earthquakes in the central and eastern U.S. from 2008 to 2013, according to a study published today in the journal Science.
The wells are used to dispose of high volumes of wastewater released from underground rocks when they are fractured using modern oil-drilling techniques. The four wells are likely responsible for a dramatic rise in earthquakes near Oklahoma City since 2009, according to the research.
Oklahoma has had more earthquakes than California so far this year, making it the most seismically active state in the continental U.S. and raising suspicions that drilling activity is influencing a surge in temblors there. The state had 238 earthquakes with a magnitude 3.0 or greater through June, more than double the number in California, which has historically ranked second in earthquakes behind Alaska.
Scientists studied wastewater-injection volumes, geologic information and data from earthquake sensors to show that fluids pumped into the wells increased underground pressures and spread them. The area of elevated underground pressure grew in a way that overlapped with a “migrating front” of earthquakes centered near Oklahoma City.
The data showed that water pumped into wastewater wells can increase and affect underground pressures as far away as 35 kilometers (22 miles), potentially triggering earthquakes at faults that would have previously been considered too distant.
Researchers from Cornell University, University of Colorado, Columbia University, and the U.S. Geological Survey collaborated on the study.
To contact the reporter on this story: Zain Shauk in Houston at zshauk@bloomberg.net
To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net Steven Frank, Robin Saponar
By Ladka Bauerova and Krystof Chamonikolas Jul 3, 2014 11:12 PM GMT+0700
Czech billionaire Zdenek Bakala is going all-in to salvage what’s left of coal miner New World Resources Plc as he asks investors to choose between a severe haircut and bankruptcy, triggering a record stock slump.
The company, controlled by Bakala’s BXR Mining NV, is threatening bondholders and shareholders with the fire sale of almost all assets unless they approve a restructuring plan that would increase the number of shares 25 times and force creditors to accept a reduction of their debt holdings.
NWR invited offers for its mining units OKD AS in the Czech Republic and NWR Karbonia SA in Poland yesterday if its business-overhaul plan fails. Proceeding with the sale “could leave certain categories of stakeholders with minimal or no recoveries,” the company said. The shares slumped 26 percent yesterday and a further 39 percent today in Prague.
“The pressure on bondholders is clearly growing, and they’re running out of time,” said Marek Hatlapatka, an analyst at Brno-based brokerage Cyrrus AS. “It will be very difficult to attract any acceptable offers for the assets.”
The company said it will scrap the auction if the required majority of bondholders and shareholders accept its altered debt-restructuring plan, first announced a month ago. It has named PricewaterhouseCoopers LLP as a prospective insolvency administrator in case the plan isn’t accepted.
‘De-Facto Liquidation’
The sale “would represent the de facto liquidation of the company,” Josef Nemy, an analyst at Komercni Banka AS in Prague who has a sell recommendation on the stock, said yesterday. “In that case, existing shareholders couldn’t expect to get a portion of the sale proceeds.”
NWR posted six straight quarterly losses after coal prices fell and the Czech government forced the company to keep its money-losing Paskov mine open longer than planned.
Bakala, whose worth is estimated at about $1 billion by Forbes, gained control over the Czech mining company OKD, the biggest employer in the industrial eastern Ostrava region, in 2004 and then founded NWR, which sold shares in an initial public offering in May 2008. The stock price peaked later that year and has since plunged 99 percent to 4.05 koruna today.
The billionaire drew fire from labor unions and the government for a plan to close Paskov. In April, NWR agreed to keep the shaft, which employs 3,000 workers and hits the company with an $80 million loss each year, open until 2017.
‘Close to Zero’
Under the revised program, bondholders would accept a haircut and NWR would sell new rights, increasing the number of shares. Bakala’s BXR, which owns a majority of NWR, would buy 75 million euros ($102 million) of the new stock.
NWR’s unsecured Eurobonds due January 2021 fell, lifting the yield 163 basis points to 62.48 percent. The rate on the secured notes maturing in May 2018 was little changed at 19.95%.
The original version of the rescue program published on June 2 prompted Standard & Poor’s three days later to downgrade the company’s long-term credit rating to CC, two steps above default. NWR may be cut to “selective default” and its bonds to “default” if creditors accept the plan or the company misses coupon payments in July or November, S&P said.
Almost 4.7 million NWR shares changed hands today in Prague trading, 21 times the daily average in the past three months, according to data compiled by Bloomberg. The stock market now values the company at 1.1 billion koruna ($53 million) compared with its debt load of 825 million euros.
Yesterday’s proposal indicates NWR would issue shares at about 0.65 koruna each instead of an estimated 9 koruna under the original plan, according to Nemy’s calculations.
“The value of NWR shares is, in our opinion, close to zero,” he said.
To contact the reporters on this story: Ladka Bauerova in Prague at lbauerova@bloomberg.net; Krystof Chamonikolas in Prague at kchamonikola@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; Wojciech Moskwa at wmoskwa@bloomberg.net Chris Kirkham
By Arron Daugherty - Thursday, July 3, 2014
Venezuela's state oil firm PDVSA launched its 2014-19 production plan for the western part of the country.
The plan envisions production reaching 1.1Mb/d of crude and 1.2Bf3/d (34Mm3/d) of natural gas by modernizing current facilities and improving recovery rates through new technology, PDVSA said in a release.
Western Venezuela estimated proven reserves stand at 278Bb of crude and 123Bf3 of natural gas, PDVSA western production director José Luis Parada said in a separate release.
New technologies are expected to boost western oil well recovery rates by 15-16%, increasing the area's production which currently stands at around 800,000b/d.
PDVSA is expecting foreign oil firms to supply the necessary works for its 2014-19 plan. European energy majors Eni and Repsol are currently working with PDVSA to develop western Venezuela's offshore gas potential with the Cardón IV project.
In a related release, PDVSA said it hopes to attract more than US$23bn of investment to finance upgrades to hydrocarbons refineries throughout Venezuela. Works include upgrades and expansions as well as converting refineries to heavy crude refineries.
BNamericas will host its second LatAm Oil & Gas Summit in Houston, Texas, on September 10-11. Click here to download the agenda.
Written by OilOnline Press — July 3rd, 2014 | 58 Views
UK_energy_stats.jpgFossil fuels (petroleum and other liquids, natural gas, and coal) account for most of the United Kingdom's (UK) energy consumption. Although renewable energy use is growing, particularly in the electric power sector, fossil fuels accounted for 86% of total primary energy consumption in 2012.
Like the United States, the UK has experienced significant changes in its net reliance on imported fossil energy sources since 1970. Beginning in the 1980s, the UK first became a significant net coal importer following the removal of domestic production subsidies and trade barriers. With the opening of North Sea production, the UK became a significant net exporter of crude oil beginning in the early 1980s, but has been a net importer since 2005.
Rising North Sea production also enabled the UK to reduce its net imports of imported gas beginning in the mid-1980s. For almost a decade, the UK actually became a net natural gas exporter, before again becoming a net importer of natural gas starting in 2004 as consumption rose and production declined.
Even as it became a net crude oil importer in 2005, the UK remained a net exporter of refined petroleum products. However, refiners in the UK and throughout Europe face increasing challenges, including higher crudes costs and decreasing competitiveness in export markets, due in part to the rapid growth of tight oil and shale gas production in the United States which is reflected in refinery shutdowns and lower utilization rates for European refiners, including those in the UK, leading the UK to become a net importer of petroleum products in 2013.
The desire to limit greenhouse gas emissions has led the UK government to introduce a number of regulations to increase the amount of renewable energy in the country. These regulations call for renewables to provide 30% of total electricity generation in 2020. While these plans include hydropower, wind resources are central to the government's plans.
Renewable accounted for nearly 15% of total electricity generation in 2013, with more than half of that from wind. The UK is a world leader in offshore wind capacity, and last month the UK government approved the construction of the world's largest offshore wind farm, the 1.2Gw East Anglia ONE project.
http://oilonline.com/files/1214/0440/1628/UK_energy_stats.jpg
Austria-based OMV, through its subsidiary OMV (Norge) recorded a success in Norway’s offshore.
‘OMV (Norge) AS, operator of production license 537, is in the process of completing drilling of wildcat well 7324/7-2 Hanssen. The Hanssen discovery was made about 7 kilometers northwest of the 7324/8-1 Wisting Central oil discovery and about 315 kilometers north of Hammerfest,’ reads a note released by the company on Thursday.
According to preliminary calculations estimate by OMV, the Hanssen discovery in the Stø Formation should hold between 20 and 50 mn boe of recoverable resources, largely oil.
"I am excited about the confirmation of the potential of the Wisting area. OMV’s strategy in establishing Norway as a core country for the exploration and production business is advancing very well", Jaap Huijskes, OMV Executive Board member responsible for Exploration and Production, commented.
OMV (Norge) AS is the operator of the licence with 25% share. Its partners are Petoro, Idemitsu, Tullow (each 20%) and Statoil (15%).
EKATERINA SHATALOVA
MOSCOW (Bloomberg) -- Russia’s government has agreed to a plan to divide the country’s largest port operator, OAO Novorossiysk Commercial Sea Port, between its two controlling shareholders to end a battle that has stalled spending on oil terminals, according to two people with knowledge of the deal.
The Federal Property Management Agency sent President Vladimir Putin a request to approve the proposal to split off the port group’s oil terminals to state-run pipeline operator OAO Transneft, according to the people, who asked not to be identified because they’re not authorized to speak on the matter. Businessman Ziyavudin Magomedov’s Summa Group would gain control over the port group’s remaining business, they said.
The agency also asked Putin to decide whether the state will sell its 20% of NSCP Group, as the port group is known, before or after the split, the people said.
NCSP Group, which handles about 33% of Russia’s crude exports, has been unable to approve investments to expand its oil division during the more than yearlong shareholder conflict. Russia depends on oil and gas for half of the government’s revenue.
Transneft and Summa together control 50.1% of NCSP through their jointly owned Novoport Holding Ltd. Transneft will receive the oil-loading facilities, including the Primorsk port on the Baltic Sea and Sheskharis terminal at Novorossiysk on the Black Sea, while Summa will buy Transneft’s stake in NCSP, which will keep the non-oil assets, the people said.
After the deal, Summa will control 60% of the port operator, the people said.
The property agency proposed that NCSP pay out a special dividend before the deal to benefit minority shareholders, the Vedomosti newspaper reported earlier this year. The people declined to comment on whether a decision has been made.
Vladimir Ryzhov, a Federal Property Management Agency official, and Evgeny Timoshinov, a spokesman for Summa, declined to comment. Igor Dyomin, Transneft’s spokesman, said that the companies have agreed on the structure of the deal, while saying he was unaware of any government decision.
Sunni militants under the Islamic State of Iraq and the Levant took over more towns in Syria near the border with Iraq on Thursday, working to expand their claim on the area after declaring a new Muslim state, or caliphate.
They gained ground in towns, including Mayadeen and Ishara in eastern Syria, and took control of Syria’s largest oil field, al-Omar, from fighters in the al-Qaida-linked Nusra Front, reportedly without firing a shot.The Nusra Front and other rebels have been battling Syrian government forces and rejected ISIL’s declaration on Sunday of an Islamic state with Abu Bakr al-Baghdadi as its head. But other fighters allied with tribes in eastern Syria are joining al-Baghdadi’s group.
“The clans of the city of Ishara, and the villages around it … and all of the factions in these areas … announce before God that they will cease fighting with the Islamic State,” says a man in a video with several tribal elders in Ishara, reported the Associated Press.
Meanwhile, Saudi Arabia deployed 30,000 troops to its border with Iraq to protect against the “terrorist threat.”
ISIL forces have seized portions of northern and western Iraq since last month.
By Nick Cunningham | Thu, 03 July 2014 21:07 | 0
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As Americans head into their July 4 holiday weekend, gasoline prices are at their highest levels for this time of year since 2008.
The surge in prices is a direct result of recent turmoil in Iraq. The good news is that prices may have peaked for now, as tensions have eased. Barring any new unforeseen geopolitical flashpoints, oil prices could have reached a temporary peak, and prices could come down in the weeks ahead.
There are multiple reasons for the improved outlook. First, the unrest in Iraq has leveled out for now, with ISIS militants having been stopped short of Baghdad. Much of Iraq’s oil production remains safely removed from ISIS controlled territory. About three-quarters of the 3.2 million barrels per day (bpd) of production is concentrated in the south, where there is little prospect of an ISIS invasion.
Another 700,000 bpd of production lies in the north, where Kurdish forces have fortified their defenses against any incursion by ISIS. Kurdistan has even succeeded in unilaterally selling its oil (despite protests from Baghdad).
As the markets became more confident that the disintegration of Iraq along sectarian lines has thus far not affected oil production, the rally in prices has come to a halt.
Now, oil markets finally have a bit of good news coming their way. The Libyan government has finally retaken control of its two major oil export terminals after coming to an agreement with separatist rebels in the eastern part of the country. The two terminals – Ras Lanuf and Sidra – were held by the rebels for months, cutting off most of Libya’s oil production since last summer.
After several false starts, the political deal between the two factions may finally lead to the restoration of Libyan oil shipments. Acting Libyan Prime Minister Abdullah al-Thani held a joint press conference with rebel leader Ibrahim Jathran to trumpet the settlement. “Today we regained control of the ports at Ras Lanuf and Sidra.” al-Thani said. “We have successfully reached an agreement to solve the oil crisis.”
With the government now in control of the two major ports, an estimated 500,000 bpd of oil production can quickly be brought back online. Eventually, oil traders hope, Libya will be able to build back its oil capacity to what it was before – around 1.5 million bpd.
Finally, negotiations over Iran’s nuclear program have resumed once again, with a deadline for a deal set for July 20. This is the sixth and final round, and despite the warmer relations between Iran and the West over the past year, inking a comprehensive deal will be exceedingly difficult.
Nevertheless, both sides have enormous incentives to reach an accord. If they can, some of Iran’s oil production could eventually be restored. Iran has seen its oil exports slashed from 2.5 million bpd down to only 1 million bpd because of Western sanctions. The market has been able to absorb that loss without too much trouble, but with the latest violence in Iraq, the West feels some added pressure to reach a deal with Iran in the event that an ISIS advance threatens Iraqi oil output.
Just a few weeks ago, a sense of despair struck the oil markets. Oil prices shot up as multiple geopolitical crises conspired to tighten supplies. All of a sudden, things are looking much better, at least for the short-term. Spot prices for the international oil benchmark Brent hit a high of $115.19 per barrel on June 19, and have since fallen back to $110 during midday trading on July 3. WTI prices have also come down from about $107 per barrel in late June to $104 by early July.
The outlook over the long-term, however, still remains grim, as increasing demand runs up against flat supplies. Iraq, in particular, should be a major source of worry. In the short-term, its oil sector may avoid the worst of ISIS, but over the long-term, the country is much less likely to fulfill the expectations the world has placed upon it. The IEA expects Iraq to double its oil production to 6 million bpd by 2020, which is looking increasingly like a fantasy.
Still, in the short-term, oil markets are breathing a sigh of relief, as the worst may be over for now.
By Nick Cunningham of Oilprice.com
[NEW YORK] A US energy company launched a broad effort this week to find buyers for the first ever US exports of ultra-light condensate oil, signalling the start of what could be a growing trade as demand grows worldwide.
One week after US authorities confirmed a ruling easing a 40-year ban on shipping lightly processed oil abroad, Enterprise Product Partners has sold its first cargo to a Japanese trading house and was seeking more buyers in Latin America, according to trading sources.
Two Singapore-based sources said Japanese trading house Mitsui & Co Ltd had bought a 400,000-barrel cargo of US condensate that is expected to be loaded and sent to Asia later this month or in early August. The firm was marketing that cargo to refiners, they said.
One trader at a major global oil company said Enterprise had offered to sell it condensate for export and asked about making potential sales to Latin America.
HOUSTON, July 3
07/03/2014
By OGJ editors
Petroleo Brasileiro SA (Petrobras) has reached 500,000 b/d in production from the Brazilian presalt, a region that has already seen aggregate output of 343 million boe (OGJ Online, June 20, 2014).
The company, which didn’t reach the same level of total production until 31 years after it launched, made its first discovery in the region 8 years ago.
Currently the presalt has 25 production wells—compared with the company’s 4,000 wells when it reached the 500,000 b/d mark in total production in 1984—and accounts for 22% of the company’s total production. Petrobras estimates that the region will account for more than 50% of total production by 2018.
Petrobras expects further increases in production supplied by the Cessao Onerosa production area, where surplus volumes range 9.8-15.2 billion bbl, according to estimates from Brazil’s National Oil, Gas, and Biofuels Agency (ANP).
The operation was approved on June 24 by Brazil’s National Energy Policy Council (CNPE), and production in the area is set to commence in 2021, the company says. Petrobras has already drilled 17 wells in Buzios, around Iara, Florim, and Northeast Tupi. Twelve have been tested at a 100% success rate.
The company emphasized that the areas’ low exploratory risk and the company’s operational presence will generate $18 billion in savings on discoveries during 2015-21.
Petrobras plans to produce an average of 4 million b/d during 2020-30.
HOUSTON, July 3
07/03/2014
By OGJ editors
Unipetrol AS has exercised its right of preemption to acquire soon-to-be former partner Eni SPA’s interest in Ceska Rafinerska AS (CRC), a refining company in Czech Republic (OGJ Online, May 7, 2014).
The company will purchase Eni’s nearly 32.5% stake in CRC for about $40.8 million, Unipetrol said.
Following the completion of the transaction, which is scheduled to occur by yearend, Unipetrol will hold 100% interest in CRC, the company said.
The agreement comes in the wake of Eni’s May announcement that it had agreed to sell its shares in CRC to Hungary’s MOL Group in a deal that was subject to the preemption right on the part of Unipetrol (OGJ Online, May 7, 2014).
Unipetrol’s buyout follows the company’s overall strategy for 2013-17, released in June 2013, in which the operator said it planned to make the largest capital expenditures to further integrate the refining and petrochemical segments of its business in order to ensure the security of petrochemical feedstock supplies for its operations.
CRC operates Czech Republic’s only two running refineries—in Litvinov and Kralupy—which have a combined crude oil processing capacity of 8.7 million tonnes/year, says Unipetrol.
The Intercontinental Exchange said Thursday the average daily volume for its ICE Brent crude futures and options contract was 720,000 lots in June, up 18% when compared with the 610,000 contracts in June 2013.
The average daily volume for gasoil futures and options, however, fell in June, dropping 26% compared with a year earlier to 212,000 contracts. The average daily volume for other oil futures and options, which include futurized oil, WTI, heating oil, RBOB gasoline and Middle East sour crude contracts, meanwhile, was 276,000 contracts, an increase of 7% on June 2013.
Daily volumes for June across the entire ICE oil portfolio averaged about 1.209 million contracts, up 5%. ICE said June daily volumes for natural gas futures and options averaged around 764,000 contracts, down 30%, while for power the average was 87,000 contracts/day, down 36%, and for emissions and others was 32,000 contracts/day, down 36%.
Total energy futures and options contracts for June averaged around 2.091 million contracts/day, down 14% year on year. Across the rest of the ICE portfolio, sugar futures and options traded in June fell 18% to 188,000 contracts/day, while other ags and metals were down 15% to 183,000 contracts/day.
Total agricultural and metals futures and options averaged 371,000 contracts/day in June, down 17%.
Across the entire commodities portfolio, ICE reported an average of 2.462 million contracts/day, down 14% from 2.878 million contracts/day in June 2013. ICE attributed the decline in commodity futures and options volumes during the month primarily to continued low volatility.
ICE also reported financial futures and options for equity indexes, foreign exchange and interest rates of 2.977 million contracts/day, down 38%.
Through the month, ICE reported daily volume records in Short Sterling futures and options, MSCI World Net Total Return index futures, mini MSCI EAFE index futures, mini MSCI Emerging Markets index futures, mini MSCI Pan Euro index futures, two year Euro Swapnote futures and Dutch TTF natural gas futures, as well as total monthly and average daily volume records for Newcastle Coal futures and Coal Rotterdam options contracts.
Open interest records were established in Brent and UK Natural Gas futures and UK Natural Gas, Newcastle Coal and Rotterdam Coal options contracts. For the year-to-date to the end of June, ICE said its Brent futures and options contract averaged 635,000 contracts/day, down 9% year on year.
Gasoil volumes, meanwhile, were down 20% at 219,000 contracts/day and other oil had gained 1% to 258,000 contracts/day. In total, average daily volumes to the end of June for the ICE oil portfolio were 1.112 million contracts/day, down 9%.
Storing crude is becoming an increasingly viable option as Europe deals with a prompt overhang of crude in both the Northwest and the Mediterranean, said traders this week.
“We’ve had such bad margins for a long time, that refiners need to have significant encouragement to go above [the minimum] rate and buy incremental crude,” said one trader Wednesday.
“They needed some contango, and they’ve got pretty significant contango now to justify storage.” The North Sea Dated Strip, formed of weekly CFDs (Contracts for Difference) as a premium to a forward Cash BFOE contract, is in steep prompt contango.
One broker Thursday pegged the July 7-11 week CFD at September Cash minus $1.20/ barrel, and four weeks further out, the August 4-8 CFD at September Cash minus $0.55/b.
This would allow holders of crude to sell the further out CFD at a higher level, effectively locking in a better selling price in future; should Dated Brent fall, losses on their physical sale would be compensated for by profits on the swap entered into.
Russian sour grade Urals, which trades more promptly than North Sea grades, has been going into storage for weeks, said traders. Urals differentials to Dated Brent were also in a steep contango throughout most of June, even at a time when Dated Brent was in backwardation, improving the economics of storage.
But now the steepening contango in other grade differentials is encouraging storage of North Sea grades, traders said. On Tuesday, Forties traded at Dated Brent minus $0.85/b for July 17-19 loading, while trading at Dated Brent minus $0.35/b for further out July 23-25 loading, with Shell selling a cargo to Phillips 66 and BP respectively.
As well as storage, market structure is encouraging holders of oil to absorb demurrage costs and load crude later. “Apparently there is quite a bit of demurrage pricing in WAF,” said one trader, referring to West African cargoes.
“Quite a bit of July volume is being placed with demurrage against August requirements to clear.” There is a hefty overhang of July WAF barrels, according to traders, amounting to approximately 10 million barrels, an unusually high remainder at this point of the monthly trading cycle.
For August loading, more than half of the Angolan program remains unsold, while more than two thirds of the Nigerian program is still to be cleared. Some participants warned the market was only showing enough contango for short-term storage to be viable, rather than speculative storage in the hopes of a broader recovery.
US crude imports in May fell about 671,000 b/d from April, to 6.875 million b/d, Department of Commerce data showed Thursday.
Imports averaged 7.737 million b/d in May 2013, according to the Energy Information Administration. Imports from OPEC members in May averaged 3.046 million b/d, down 400,000 b/d from April, Commerce and EIA statistics showed.
In May last year, such imports averaged 3.784 million b/d. The lower imports from OPEC countries was largely due to the sharp decline in imports from Saudi Arabia. Imports from Saudi Arabia averaged 1.302 million b/d in May, some 277,000 b/d lower than in April and down from 1.44 million b/d in May 2013.The decline from April was the largest month-on-month fall since December 2012, according to EIA data.
The fall in Saudi crude imports was attributed to higher Saudi Aramco’s official selling prices. Aramco’s May Arabian Medium OSP for the US went up by $1.00/b from April, while Arabian Heavy’s OSP rose $1.20/b, according to Platts data. The bulk of Saudi imports are Arabian Medium and Heavy grades.
Imports from Canada in May also declined by 179,000 b/d to 2.59 million b/d on month, but rose 261,000 b/d on year. Sources noted the flood of heavy sour Canadian crudes in April into the US Gulf Coast was part of the lower demand for Canadian and imported heavy sour crudes.
“With Canadian heavy sour in the Gulf Coast trading at flat to its value in Cushing, it made Canadian crudes sitting in the Gulf Coast more competitive than imports,” the trader added.
“Also Gulf Coast refiners have resorted to blending Canadian and Latin heavy sour with domestic light sweets to achieve their ideal crude mix.”
US Seaway twin crude line complete, commisioning continues The Seaway loop oil pipeline from Cushing, Oklahoma, to the Jones Creek storage and terminal facility near Freeport, Texas, is mechanically complete and commissioning will continue throughout the third quarter, operators Enbridge and Enterprise Products Partners said Thursday.
The new 30-inch line will more than double the capacity of the Seaway system to 850,000 b/d. The oil market is keenly watching for the start of the line, which will draw further from the Cushing oil storage hub and add to growing Gulf Coast oil supplies.
Cushing crude stocks have been moving lower, with a 1.3 million barrel draw last week putting inventories there at 20.5 million barrels, or a 48.5% deficit to the Energy Information Administration’s five-year average.
In contrast, US Gulf Coast crude stocks stand at 204.8 million barrels, 11.6% above the five-year average. The Jones Creek facility is connected to Enterprise’s ECHO crude oil storage facility in Houston by a 65-mile, 36-inch pipeline.
Construction of a 100-mile, 30-inch pipeline from ECHO to Beaumont/Port Arthur, Texas, is also expected to be completed in July and commissioned during Q3.
In addition to the pipeline that transports crude oil from Cushing to the Gulf Coast, the Seaway system comprises a terminal and distribution network originating in Texas City, Texas, which serves refineries locally and in the Houston area. The Seaway system also includes dock facilities at Freeport and Texas City.
US rail transport of petroleum and petroleum products for the week ended June 28 totaled 15,894 rail cars, up 18.5% from the corresponding week a year ago, the Association of American Railroads said Thursday.
Shipments of petroleum and petroleum products have totaled 380,961 carloads so far this year, up 7% from the same period in 2013, AAR said in its weekly report.
US railroads saw a 6.3% year-on-year increase in total carloads originated last week, with intermodal volumes rising 6%, AAR said.
Intermodal traffic involves movement by more than one mode of transportation, be it rail, ship or truck. So far this year, total US rail carloads originated are up 3.2% year on year, with intermodal volume rising 5.9%, AAR said.
Rail traffic is seen as a useful gauge of the health of the US economy. Canadian petroleum carloads rose 6.9% last week and Mexican petroleum carloads were up 18% compared with the corresponding week in 2013, AAR said.
So far this year, Canadian petroleum carloads are up 7.7%, but Mexican carloads are down 4.2%, AAR said.
Sydney (Platts)--3Jul2014/1138 am EDT/1538 GMT
Shell Australia is working to complete the $2.6 billion sale of its 120,000 b/d Geelong oil refinery and service station network to Switzerland-based trader Vitol by August 1, 2014, a company spokesman said Thursday.
The deal has been approved by the Australian government's Foreign Investment Review Board and the last details are now being finalized, the spokesman added.
Shell announced the sale of the Geelong refinery in the southeastern state of Victoria and its network of 870 service stations in February. The sale also covers Shell's bulk fuels, bitumen, chemicals and part of its lubricants businesses in Australia, but excludes its aviation supply operations and lube oil blending and grease plants in the Queensland capital Brisbane, which will be converted to bulk storage and distribution facilities.
Shell originally put Geelong up for sale in April 2012, citing its strategy to concentrate investment on world-scale facilities, such as the 500,000 b/d Pulau Bukom refinery in Singapore. The company converted its other Australian refinery, the 79,000 b/d facility at Clyde in the New South Wales capital Sydney, into an import terminal in September 2012.
Australia's refining and marketing sector has undergone significant restructuring in recent years. The industry is characterized by aged, small-scale facilities and all four refiners in the country -- BP, Caltex, ExxonMobil and Shell -- have struggled to compete with new, larger plants operating in the region.
Shell has not been alone in rationalizing its Australian refining assets. ExxonMobil mothballed its 78,000 b/d refinery at Port Stanvac in South Australia in mid-2003, and Caltex will convert its 135,000 b/d facility at Kurnell in Sydney into an import terminal later this year.
In April this year, BP announced it would close its 102,000 b/d Bulwer Island oil refinery in Brisbane by mid-2015. The closure of Bulwer Island will reduce the number of refineries operating in Australia to four: one each by ExxonMobil, BP, Caltex and Vitol.
The wholesale and retail sector has also seen rationalization and increased entry by independents and international players. The number of retail sites across the country has decreased from 20,000 in 1970 to around 6,300 in 2013, although the reduction in numbers has plateaued since the mid-2000s.
--Christine Forster, christine.forster@platts.com --Edited by Deepa Vijiyasingam, deepa.vijiyasingam@platts.com
London (Platts)--3Jul2014/910 am EDT/1310 GMT
Storing crude is becoming an increasingly viable option as Europe deals with a prompt overhang of crude in both the Northwest and the Mediterranean, said traders this week.
"We've had such bad margins for a long time, that refiners need to have significant encouragement to go above [the minimum] rate and buy incremental crude," said one trader Wednesday. "They needed some contango, and they've got pretty significant contango now to justify storage."
The North Sea Dated Strip, formed of weekly CFDs (Contracts for Difference) as a premium to a forward Cash BFOE contract, is in steep prompt contango.
One broker Thursday pegged the July 7-11 week CFD at September Cash minus $1.20/barrel, and four weeks further out, the August 4-8 CFD at September Cash minus $0.55/b.
This would allow holders of crude to sell the further out CFD at a higher level, effectively locking in a better selling price in future; should Dated Brent fall, losses on their physical sale would be compensated for by profits on the swap entered into.
Russian sour grade Urals, which trades more promptly than North Sea grades, has been going into storage for weeks, said traders. Urals differentials to Dated Brent were also in a steep contango throughout most of June, even at a time when Dated Brent was in backwardation, improving the economics of storage.
But now the steepening contango in other grade differentials is encouraging storage of North Sea grades, traders said. On Tuesday, Forties traded at Dated Brent minus $0.85/b for July 17-19 loading, while trading at Dated Brent minus $0.35/b for further out July 23-25 loading, with Shell selling a cargo to Phillips 66 and BP respectively.
As well as storage, market structure is encouraging holders of oil to absorb demurrage costs and load crude later.
"Apparently there is quite a bit of demurrage pricing in WAF," said one trader, referring to West African cargoes. "Quite a bit of July volume is being placed with demurrage against August requirements to clear."
There is a hefty overhang of July WAF barrels, according to traders, amounting to approximately 10 million barrels, an unusually high remainder at this point of the monthly trading cycle.
For August loading, more than half of the Angolan program remains unsold, while more than two thirds of the Nigerian program is still to be cleared. Some participants warned the market was only showing enough contango for short-term storage to be viable, rather than speculative storage in the hopes of a broader recovery.
"The Dated structure makes it easier to sell against later requirements, but it would take a lot of bravery from the markets to put something in storage in expectation of a correction on differentials," said one sweet crude trader Wednesday.
"The global sweet market is so long, [but] only the prompt pays for demurrage. Three months of storage wouldn't make any sense."
--Paula VanLaningham, paula.vanlaningham@platts.com --Eklavya Gupte, eklavya.gupte@platts.com --Ned Molloy, ned.molloy@platts.com --Edited by Jonathan Loades-Carter, jonathan.carter@platts.com
Moscow (Platts)--3Jul2014/544 am EDT/944 GMT
Around 20 European gas suppliers, including the region's key gas traders, have expressed an interest in supplying gas to Ukraine via Slovakia, Ukraine's national energy company Naftogaz Ukrayiny said in a statement late Wednesday.
The statement followed the evaluation of the results of so-called Open Season procedure, during which Slovak gas transmission operator Eustream accepted binding bids for gas shipments via the Vojany-Uzhgorod pipeline in Ukraine's direction.
"Results of the Open Season confirm that gas supplies from the EU to Ukraine are a commercially attractive and perfectly legal business. The major Ukrainian market is interesting for Europeans," the statement quoted Naftogaz CEO Andriy Kobolev as saying.
Eustream in a separate statement late Wednesday also called the Open Season procedure successful.
"The results have confirmed the market interest in gas transmission through the Vojany-Uzhorod pipeline," the Slovak company said.
"The newly established interconnection point Budince [at the Vojany-Uzhgorod pipeline]... shall be added to the other existing interconnection points of Eustream's network," it said.
Set-up of the new interconnection point will facilitate new opportunities for gas transmission and bolster cross-border liquidity, Eustream said. Ukraine expects to start gas imports via the Budince interconnection point, with a capacity of 9.8 billion cu m/year in September, Naftogaz said in mid-June.
Slovakia owns gas pipelines that can supply about 100 billion cubic meters/year of gas from Russia to Europe, and at least 30 Bcm/year of this capacity can be used to organize reverse flows of gas from Europe to Ukraine, according to Ukrainian officials.
Yet Slovakia has been so far refused to allow the "large-flow option." Ukraine is seeking to open additional capacity for imports of natural gas from Europe after Russia's Gazprom suspended gas supplies to Ukraine for non-payment of gas debt.
At present, Ukraine's gas debt to Russia, not including the June debt, amounts to over $4.5 billion.
Currently, Ukraine is able to import between 7 and 10 Bcm/year of gas via Poland and Hungary, according to Naftogaz.
Moscow has been critical of the reverse gas imports via Europe to Ukraine, saying the gas volumes originate from Russia, and are in violation of the transit agreements between Moscow and Kiev are never actually delivered to Europe, instead remaining in Ukraine.
"We know what kind of a reverse this is. It's an artificial reverse, not something real," Russian President Vladimir Putin said Tuesday in remarks posted on the Kremlin website.
"We take no steps currently only because we do not want to aggravate the situation," Putin said, and called for all parties concerned "to draw the necessary conclusions."
Gazprom CEO Alexei Miller earlier called the supplies "a virtual reverse" and a "fraudulent scheme."
--Dina Khrennikova, dina.khrennikova@platts.com --Edited by Jonathan Fox, jonathan.fox@platts.com
Hanoi (Platts)--3Jul2014/555 am EDT/955 GMT
PV Gas, the gas arm of state-owned PetroVietnam, has received a $280 million loan to fund the first stage of its Nam Con Son 2 gas pipeline project, PV Gas said Wednesday.
The seven-year loan was granted by a consortium of 11 Asian banks headed by Taiwanese Cathay United Bank, the company said in a statement.
In the first stage, PV Gas will invest $400 million to build 151 km of gas pipeline connecting the Thien Ung, Dai Hung fields and others in the Nam Con Son basin to the existing Bach Ho field in the Cuu Long basin.
The project will create infrastructure which is expected to attract more investments in deep-water gas fields in the Nam Con Son basin, PV Gas said. PV Gas has not begun construction at the project yet. The company is in the process of securing capital, a PV Gas spokesperson said Thursday, without providing any time frame for construction.
PV Gas will also invest $125 million in the first stage to upgrade the pipeline system in the Bach Ho field to enable it to receive about 7.5 billion cubic meters/year of natural gas and 300,000 cu m/year of condensate from Thien Ung and Dai Hung, Vietsovpetro, a joint venture between PetroVietnam (51%) and Russia's Zarubezhneft (49%) said in March.
In early May, PV Gas awarded Vietsovpetro contracts to build the 151 km pipeline and upgrade the pipeline system in the Bach Ho field.
All gas from the Bach Ho pipeline system will then be transported via the existing Nam Con Son 1 pipeline to supply customers in Vietnam's south, PV Gas said.
Vietsovpetro made a commercial discovery at the Thien Ung field in block 04-3 in 2009. The field is expected to start production in 2016, Zarubezhneft said in December.
However, PetroVietnam Director General Do Van Hau said in May that PetroVietnam hoped to speed up construction of the pipeline to allow first gas from the Thien Ung field to be pumped in the third quarter of next year.
He asked PV Gas and other relevant parties to strive to finish the pipeline in the first stage as planned, PetroVietnam said in May.
The producing Dai Hung oil and gas field is located in block 05-1A and is equally owned by PetroVietnam and its upstream arm PVEP.
The proposed $1.3 billion Nam Con Son 2 pipeline will be capable of transporting about 7 billion cubic meters/year of natural gas from several gas fields in the Nam Con Son basin. The project will comprise 325 km of pipeline offshore and 30 km on land. It will run parallel to the Nam Con Son-1 pipeline project, which was completed in 2003 and has a capacity of around 19 million cu m/day, according to PetroVietnam.
--Dao Dang Toan, newsdesk@platts.com --Edited by Jonathan Fox, jonathan.fox@platts.com
London (Platts)--2Jul2014/954 am EDT/1354 GMT
Dutch and German spot gas prices were trading lower Wednesday on robust system fundamentals, despite ongoing Norwegian field maintenance.
Before midday, the TTF day-ahead last dealt 32.5 euro cents down from Tuesday's close at Eur16.375/MWh, while the corresponding German GASPOOL and NetConnect contracts were 30 euro cents and 20 euro cents lower day on day, respectively, at Eur16.25/MWh and Eur16.65/MWh.
Supply-demand balances remained robust amid continued Norwegian offshore maintenance, with TSO Gassco indicating an aggregate impact of 46 million cubic meters/day.
Norwegian gas exports to Germany are nominated unchanged Wednesday at 58 million cu m, while the Netherlands is receiving 48 million cu m, compared with 43 million cu m Tuesday.
Meanwhile, the Nord Stream pipeline linking Russia and Germany was flowing at around half normal rates, as its operator continued maintenance work due to end Friday.
Nord Stream is nominated to deliver 51 million cu m to Germany Wednesday.
Total Russian flows into Europe are nominated at 244 million cu m, a fall from Tuesday's 267 million cu m.
On the curve, August contracts were also lower in the main continental European markets.
Before midday, August TTF last traded 25 euro cents down at Eur16.65/MWh, while GASPOOL and NetConnect front-month contracts were 27.5 euro cents and 25 euro cents lower, respectively, at Eur16.525/MWh and Eur16.85/MWh.
The August PEG Nord contract last traded before midday at Eur17.40/MWh, a day-on-day fall of 20 euro cents.
Singapore (Platts)--3Jul2014/121 pm EDT/1721 GMT
The first US condensate cargo exported to Asia is expected to arrive in the first half of September, traders said Thursday.
The move follows a ruling late June that allows two US companies, Enterprise Product Partners and Pioneer Natural Resources, to export condensate processed through distillation towers and considered a petroleum product, and thus not subject to the country's crude export restrictions in place for the past 40 years.
Trading sources said the first Asia-bound cargo, heard to be 300,000-400,000 barrels in volume, was being marketed by Mitsui & Co Ltd.
Traders in Asia Thursday said Mitsui had inked the export deal with Enterprise Products Partners. A source at Mitsui was unable to comment on confidential agreements.
One condensate trader said he expects the cargo to be sold at a discount to the West Texas Intermediate or WTI crude price, and added freight from the US to South Korea was estimated at around $5/b currently.
"After calculating, it is cheaper than [cargoes in] the Asian market," the trader said. Prices in Asia are typically priced off Dated Brent or Dubai crude rather than WTI.
The arrival of the US condensates cargo comes as three new condensate splitters are set to come online in Asia.
South Korea's SK Innovation started test runs at its two splitter towers, each with capacity of 100,000 b/d, at its refinery in Incheon in June.
Samsung Total, a joint venture between South Korea's Samsung Group and French major Total, plans to start production at its 150,000 b/d splitter at Daesan in July or August. The splitter is part of a new Won 1.66 trillion ($1.56 billion) aromatics plant.
Singapore's Jurong Aromatics Corporation will bring its 75,000-100,000 b/d splitter online in August, which will see the production of aromatics as well as across-the-barrel oil products.
LITTLE IMPACT ON ASIAN CONDENSATES MARKET
Trading sources said the arrival of US condensate on Asian shores will have no impact on the Asian condensate market in the short term.
At least one cargo a month of US condensate is expected to be exported into Asia in the months ahead, one source said.
"It will take some time to impact the Asian market," the source added.
However, other sources said the volume of condensate exports from the US was likely to grow in the longer term.
"[US] reserves are huge... [it is] not clear how much will be exported," a Singapore-based trader said.
In Asia, premiums for Australia's North West Shelf condensate fell to a discount of around $3/barrel to Dated Brent in June from a discount of around $2.50/b in May amid ample supply and languid demand, due in part to volatility in the refining margin for byproduct naphtha.
At least two North West Shelf cargoes for August-loading remained unsold, traders said Thursday.
--Ada Taib, ada.taib@platts.com --Edited by Wendy Wells, wendy.wells@platts.com
London (Platts)--2Jul2014/848 am EDT/1248 GMT
Mediterranean ultra low sulfur diesel CIF delivered cargoes saw a sharp increase in premiums Tuesday, as refinery run cuts and a lack of arbitrage flows tightened supplies against a pickup in prompt buying interest on the day.
It closed Tuesday at a $28.75/mt premium over front-month July 0.1% ICE gasoil futures, the highest since April 4, and a $10.50/mt premium over Northwest Europe.
"Demand is peaking for driving season in the Med but refiners are cutting runs and the arbs are currently closed from the US due to higher freight, so its a combination of factors," said one trader.
As tight supply supported premiums, those barrels already on the water found buying interest Tuesday, with Shell selling the 50,250 dwt Ridgebury Alexandra to Trafigura, which was seen loading at the Oiltanking facility in Houston and is in the Gulf of Mexico sailing to Europe.
Although there were still larger vessels available to the market, demand for 30,000 mt tankers into Mediterranean ports outstripped supply, according to traders, with USGC-Mediterranean freight rates for a clean 38,000 mt tanker relatively high at $37.14/mt, making the arbitrage uneconomical.
Despite a steep contango on ICE 0.1% gasoil futures, which closed at $4.25/mt, market fundamentals in the Mediterranean shifted the forward curve structure into a backwardation, with the balance-month 10 ppm CIF Med differential swap closing $4.75/mt above the front month swap at $22/mt.
--Alex Pearce, alex.pearce@platts.com
--Robert Friend, robert.friend@platts.com
--Edited by Jonathan Fox, jonathan.fox@platts.com
London (Platts)--3Jul2014/118 pm EDT/1718 GMT
Anglo-Dutch Shell said Thursday it had committed to underwrite the construction of a bulk-breaking unit at the Gasunie/Vopak operated Gate LNG terminal in Rotterdam.
As tighter pollution limits come into force, LNG is set to play a larger role in bunkering for sea and riverborne vessels in Europe. Bulk breaking allows large volumes of LNG, stored in large tanks, to be divided into manageable portions for small offtake loads.
The new LNG for transport infrastructure includes the construction of a new jetty which will make LNG more widely available as a transport fuel for vessels in northwest Europe. Shell is to be the foundation customer for its services but did not disclose any financial details.
Shell's executive vice president for integrated gas, Maarten Wetselaar, said in a statement: "The collaboration between Gasunie, Vopak, the port of Rotterdam and Shell will provide security of supply of LNG for marine and road transport customers in northwest Europe, through dedicated and scalable infrastructure. We believe LNG will form a bigger part of the transport fuel mix in the future, and this project demonstrates our confidence in LNG as a fuel option."
The new, dedicated break bulk terminal is expected to be operational in Q4 2016. It will be positioned alongside the central Gate terminal, where LNG arrives in large carriers from around the world.
Until the new system is online, LNG arriving in to the port will continue to be regasified for the power and industrial sector or re-exported.
Shell said it would charter a specialized LNG bunker vessel to facilitate ship-to-ship transfer operations, and also deliver LNG to secondary distribution terminals outside the port area.
Shell is also planning a network of up to seven LNG truck refuelling stations in the Netherlands. The first of these Shell truck refuelling stations is planned to open later this year in the Rotterdam area.
--William Powell, william.powell@platts.com --Edited by Jeremy Lovell, jeremy.lovell@platts.com
