Hedge funds increased bets on rising oil prices just before crude futures tumbled to a 17-month low on signs that global supply is outstripping demand.
Prices capped the biggest weekly decline in two months after money managers boosted net-long positions in West Texas Intermediate by 4.1 percent in the seven days ended Sept. 30. Long positions climbed 2.7 percent, U.S. Commodity Futures Trading Commission data show.
WTI sank below $90 on Oct. 2 after Saudi Arabia, the world’s largest oil exporter, cut its prices to Asia. U.S. production is the highest since 1986, while OPEC output expanded to the most in a year. The International Energy Agency last month reduced its projections for demand growth this year and in 2015, citing a weakening economic outlook.
“Oil isn’t looking like a good bet anymore,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone Oct. 3. “Production continues to rise, flooding the market, while on a good day the demand picture looks anemic.”
Crude declined 0.4 percent to $91.16 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. Futures slid $1.27 to end at $89.74 on Oct. 3, the lowest settlement since April 23, 2013.
Saudi Arabia
Saudi Arabia reduced the price for Arab Light to Asia by $1 a barrel to a discount of $1.05 to the average of Oman and Dubai crude, the lowest since December 2008. Official selling prices are regional adjustments Aramco makes to price formulas to compete against oil from other countries.
Production by the 12-member Organization of Petroleum Exporting Countries rose to 30.935 million barrels a day in September, the highest since August 2013, a Bloomberg survey of oil companies, producers and analysts showed.
U.S. crude output reached 8.867 million barrels a day in the week ended Sept. 19, the most since March 1986. Production will climb to 9.53 million in 2015, a 45-year high, the Energy Information Administration said in its monthly Short-Term Energy Outlook on Sept. 9.
“Earlier this week there was a debate over whether prices had reached a bottom,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone Oct. 3. “Investors took a chance and gathered length. Sometimes when you put your toe in the water it gets snapped off.”
Downward Pressure
Net-longs for WTI advanced by 7,898 to 201,863 futures and options during the week ended Sept. 30. Long positions increased to 270,441, while shorts slipped 1.1 percent to 68,578.
In other markets, bullish bets on gasoline decreased 14 percent to 10,321 futures and options combined. Futures declined 1.6 percent to $2.5869 a gallon on Nymex in the reporting period.
Regular gasoline at the pump, averaged nationwide, slid 1 cent to $3.297 a gallon Oct. 4, the lowest since Feb. 9, according to Heathrow, Florida-based AAA, the largest U.S. motoring group.
Bearish wagers on U.S. ultra low sulfur diesel increased 10 percent to 29,867 contracts. The fuel decreased by 3.6 cents, or 1.3 percent, to $2.6472 a gallon in the report week.
Natural Gas
Net-long wagers on U.S. natural gas increased 22 percent to 115,355 contracts. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract.
Nymex natural gas surged 30.5 cents, or 8 percent, to $4.121 per million British thermal units during the report week.
Saudi Arabia told OPEC that it cut production in August by the most in 20 months. It will maintain the lower output until the end of the year as demand for winter fuel increases, a person familiar with its policy said Sept. 26.
OPEC may reduce its daily quota by 500,000 barrels to 29.5 million in 2015, Secretary-General Abdalla El-Badri said in Vienna on Sept. 16. Ministers are next scheduled to meet on Nov. 27 in Vienna.
Global oil consumption typically rises during the last three months of the year as the Northern Hemisphere winter increases use of heating fuels. The fourth quarter had the strongest demand in each of the past five years, IEA data show.
“The market should find a bottom soon,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.6 billion, said by phone Oct. 3. “At some point I expect OPEC to take some action while demand from the Northern Hemisphere heating season will provide some additional support.”
By Sabrina Valle Oct 4, 2014 3:43 AM GMT+0700
Petroleo Brasileiro SA (PBR) Chief Executive Officer Maria das Gracas Foster has told Brazil Finance Minister Guido Mantega, who chairs the state-run oil producer, that it needs at least a 10 percent increase in fuel prices, said a person with direct knowledge of the talks.
Foster said at a recent board meeting that the gasoline and diesel increase is needed to reduce the cost of subsidizing fuel imports, the person said, asking not to be identified because the discussions are private. Foster also said a 10 percent rise wouldn’t be enough to completely eliminate subsidies or reduce the debt-to-equity ratio, or leverage, to an internal target of 35 percent by year-end, the person said.
A weaker Brazilian real compared with the U.S. dollar has increased the cost of importing gasoline and diesel and put a strain on the Rio de Janeiro-based company’s finances, the person said. It’s the first time this year Foster has specified the minimum increase needed at a board meeting, the person said.
Brazil’s real is the worst performing major currency in the past month, down 9.1 percent against the U.S. dollar. Fuel subsidies have cost Petrobras at least 60 billion reais ($24 billion) since 2011, according to calculations by Instituto Brasileiro de Petroleo, an industry lobbying group.
Petrobras’s press office didn’t immediately comment when contacted by e-mail. The finance ministry declined to comment on fuel price policy when contacted by e-mail.
Shares rose 6.1 percent to 18.35 reais in Sao Paulo.
Methodology
Mantega said in a Sept. 2 interview that Petrobras should increase fuel prices later this year and that the amount would depend on the foreign exchange rate among other variables.
Petrobras said on Nov. 29 it had approved a new methodology for adjusting gasoline and diesel prices to guarantee that indebtedness and leverage ratios would return to target levels within two years. Foster told the board that the company won’t be able to meet this target before the end of 2015 if domestic fuel prices only rise 10 percent and the exchange rate remains at current levels, the person said.
The company never disclosed details of the methodology and it hasn’t approved a single fuel price increase since it made the announcement last year, when it increased gasoline and diesel prices by four percent and eight percent, respectively.
Minutes after being sworn in as president of Brazil in January 2011, Dilma Rousseff delivered an emotional inaugural address in which she proclaimed the country was at the “beginning of a new era.”
For investors, she was right for all the wrong reasons.
The Rousseff era has ushered in year after year of declines in financial markets, a stark contrast to the go-go days overseen by her predecessor and mentor, Luiz Inacio Lula da Silva, that made Brazil a market darling. She is seeking re-election this weekend after a first term in which the country’s benchmark stock index plunged 22 percent, erasing about $300 billion of market value, and the real sank 33 percent.
It’s a grim snapshot for a president who took over what Lula said in November 2010 was a country enjoying a “magical moment,” posting the fastest expansion in a quarter century and helping lead the global economy out of recession following the financial crisis. After four years of Rousseff’s intervention across the economy and a slump in prices for Brazilian commodity exports, the country is mired in something akin to stagflation as growth weakens to the slowest pace in two decades and inflation surges.
“There’s no doubt the policy framework this government has put in place has made matters worse,” Geoffrey Dennis, the head of emerging-market strategy at UBS AG, said in a phone interview. Dennis, who’s been covering Brazilian stocks since the early 1990s, has an underweight rating on the country. “I remain highly skeptical she’ll get more market-friendly. The market is going to be in ‘show me’ mode” if Rousseff wins re-election to another four-year term, as voter polls predict.
Lula Gains
Brazil’s real and the Ibovespa were the second-worst performers in major markets during Rousseff’s first term. The underperformance comes on the heels of eight years of outsized gains under Lula.
Backed by a surge in commodities during his tenure, Lula, the founder of Brazil’s Workers Party, oversaw a 113 percent rally in the real, the best-performing emerging-market currency in the span. Stocks reached their peak in 2010 under Lula, surging six-fold in his eight years in office. It was the second best performance among major stock gauges, trailing only Hong Kong’s Hang Seng index.
Markets have slumped as recent polls showed increased support for her re-election bid. The Ibovespa has plunged 6.5 percent this week, more than double the drop in emerging-market shares. The real has lost 3 percent in the span, the worst performance among 24 developing-nation currencies.
Itau Outlook
Banco Itau BBA SA recommended yesterday in an e-mailed research report that clients go underweight on Brazilian stocks because the country “does not currently offer an attractive risk/reward balance.”
While missteps by Rousseff’s administration explain part of the poor performance, other factors outside her control also played a role, according to UBS’s Dennis. Faster global growth, led by China, pushed commodities higher during Lula’s tenure and put Brazil “on a launching pad,” he said. Rousseff faced a Chinese slowdown and the end of the commodities super cycle.
Rousseff’s popularity stems from near record low unemployment, strong wage gains and concern opposition candidates could roll back welfare programs that have helped lift 35 million Brazilians out of poverty over the past decade.
Rating Cut
Her policies have also led to above-target inflation even as Latin America’s largest economy this year entered a recession for the first time since 2009. Rousseff’s expansionary fiscal policy fueled Brazil’s first sovereign rating cut in more than a decade, while the increased role the government took in state-run companies in attempts to control inflation sapped profits at oil producer Petroleo Brasileiro SA and electric utility Centrais Eletricas Brasileiras SA.
“Her approach was still to focus more on social equality than on development and growth,” Paul Christopher, the chief international strategist at Wells Fargo Advisors, which manages $1.4 trillion, said by phone from St. Louis.
Press officials for Rousseff’s campaign, the president’s office and the Finance Ministry didn’t reply to requests for comment.
Petrobras has posted $44 billion in operational losses at its refining division since 2011 as it sells imported gasoline at a discount to help curb inflation. The oil producer, which had almost doubled in value this year as the incumbent slipped in voter surveys, could see shares return to close to 2005 lows if she is re-elected, according to Lu Yu, a money manager in San Diego at Allianz Global Investors, which oversees $511 billion in assets.
Volatility Gauge
As the Ibovespa swings with voter polls, traders have been snatching up options on Brazilian stocks, pushing a gauge of volatility on the equities to nearly double since August. The Chicago Board Options Exchange’s Brazil ETF Volatility Index, which tracks options prices on the iShares MSCI Brazil Capped exchange-traded fund, reached the highest level since November 2011 this week. It fell 0.6 percent to 43.49 yesterday.
Brazilian assets also plunged before Lula’s first term in 2002. Investors speculated he would mismanage the economy and lead the country into the biggest debt default ever. The currency reached a record low 3.9505 per U.S. dollar in Oct. 2002, while stocks fell to a three-year low at the time.
Poll Results
Rousseff would get 40 percent of votes in the first round of the election Oct. 5, while opposition candidates Marina Silva and Aecio Neves would receive 24 percent and 21 percent, according to a Datafolha poll released on Folha de S.Paulo’s website yesterday. The survey of 12,022 people had a margin of error of plus or minus 2 percentage points. A separate Ibope poll published yesterday showed Rousseff would beat Silva or Neves in an Oct. 26 runoff.
Moody’s Investors Service cut its outlook on the nation’s Baa2 rating to negative on Sept. 9, citing “the absence of any signs of a recovery.” Standard & Poor’s lowered Brazil’s rating in March to its lowest investment-grade level, with a stable outlook. Consumer confidence as measured by the Getulio Vargas Foundation fell in August to the worst since April 2009.
“All I can see is continued deterioration in the underlying economy,” John-Paul Smith, chief executive officer at Eclectic Strategy in London and a former Deutsche Bank AG strategist who has been bearish on Brazil since Jan. 2011, said by phone. “I find it difficult to look beyond that.”
The Middle East may be sliding toward a warlord era, with nation-states increasingly struggling to control all their territory and millions living under the rule of emergent local chiefs and movements.
Armed irregular forces hold effective power over growing areas of Iraq, Syria, Yemen and Libya where central government authority barely reaches. Motivated by religious ideology or regional separatism, they have grabbed oil facilities and weapons, imposed taxes or changed school curriculums, and fought each other as well as national armies.
“It is almost like the whole regional order that was built in the 20th century is collapsing,” Nadim Shehadi, associate fellow at the Middle East and North Africa Programme at Chatham House in London, said in an interview. “Non-state actors are filling the vacuum.”
Al-Qaeda's Heirs
The breakdown, in a region that holds more than half the world’s oil, has allowed extremist groups to thrive and drawn in external powers bent on stopping them. Underlying many of the conflicts is the inability of governments to provide security and basic services. In turn, economic failure will be even harder to remedy without functioning administrations.
It’s not clear whether interventions such as the U.S.-led bombing campaign in Iraq and Syria can put the pieces back together, said James Coyle, director of global education at Chapman University in California. Military operations will only achieve short-term gains, unless governments are “given legitimacy by the people through the provision of security and basic social services,” he said by e-mail.
‘Too Fragile’
Islamic State, which declared a caliphate on the territory it controls in Iraq and Syria, is the most visible challenge to a Middle Eastern system of nation states that was largely imposed by European colonial powers after the Ottoman Empire collapsed in World War I.
Other non-state forces have also emerged, especially since the Arab revolts of 2011, which plunged Syria into civil war. The latest fighting in northern Syria pits Islamic State against Kurdish irregular forces that have also won de-facto autonomy from Damascus. They’re battling for the town of Kobani near the Turkish border, a region where the Syrian government has had little presence for more than two years.
In Iraq, where the collapse of central authority dates to the U.S. invasion of 2003, much of the fighting against Islamic State has also been done by non-state forces -- Kurdish Peshmerga fighters, or Iran-backed Shiite militias.
In some countries, “the state has been too fragile to withstand the combination of internal challenges and foreign intervention,” Jane Kinninmont, a senior research fellow at Chatham House, said in response to e-mailed questions.
Government Eclipsed
Libya, holder of Africa’s biggest oil reserves, hasn’t suffered as much bloodshed as Syria yet the eclipse of government power is even more complete, as the country slid into chaos after the overthrow of Muammar Qaddafi by NATO-backed rebels. Two rival parliaments and premiers emerged, and separatist groups seized oil terminals and at one point sought to sell the crude themselves. The past few weeks of fighting between rival militias has displaced more than 140,000 people, the United Nations estimates.
Yemen was convulsed by almost a year of protests that toppled its longtime leader in late 2011, and his successor, President Abdurabu Mansur Hadi, hasn’t been able to restore stability. Last month, Shiite Muslim Houthi rebels advanced from the north, seized key buildings in the capital, Sana’a, and forced authorities to change the cabinet and revoke tax increases. Yesterday, they barred the Finance Ministry from making any payments except salaries.
Oil Advantage
Other national governments have experienced lower-level challenges to their authority over parts of their territory. Militants have repeatedly targeted the Egyptian army and police in the Sinai Peninsula, drawing air strikes in retaliation. In the mountainous interiors of Tunisia and Algeria, insurgents elude government efforts to hunt them down. An Algerian militant group kidnapped and beheaded a French mountain guide last month.
The region’s biggest crude producers, many of which have close military or economic ties to the U.S., have largely escaped the centrifugal forces, and maintained strong central governments.
“Oil countries did have an advantage in the Arab Spring,” said Gregory Gause, head of the International Affairs Department at Texas A&M University. “Only Libya saw major upheaval, and that’s largely because Qaddafi didn’t spread the money around. The Saudis actually did a much better job than he did at that.”
Angry Youth
Saudi Arabia, which pumps almost $1 billion-worth of crude every day, has expanded spending on jobs and welfare. Elsewhere, where governments are less flush with cash, efforts to rein in the militias and extremist groups will be difficult as long as there are few economic opportunities for Arab youths, said Eckart Woertz, a Persian Gulf specialist at the Barcelona Centre for International Affairs.
The region has the world’s highest rate of youth unemployment, according to the International Labour Organization.
“There is no shortage of angry young men,” Woertz said. “Sectarianism, religious intolerance and conspiracy theories are unfortunately widespread. Islamic State can thrive in such an environment.”
The U.S. has vowed to crush the militant group, and there are signs that the threat from non-state actors is making some of its regional allies more assertive too. Saudi Arabia and the United Arab Emirates are among five Arab nations to join in the U.S. airstrikes in Syria. Egypt and the U.A.E. have been involved in attacks on Islamist militias in Libya, according to the U.S., though neither country has confirmed it.
Hezbollah Example
It’s not clear whether all non-state actors can be conclusively beaten, and Lebanon offers an alternative route. There, the Shiite militia Hezbollah, classified as a terrorist group by the U.S., has been at least partially integrated into the state structure, retaining its own militia yet also joining coalition governments.
That’s unlikely to be repeated because Lebanon is a “special case,” according to Theodore Karasik, director of research at the Institute for Near East and Gulf Military Analysis in Dubai. He said Hezbollah emerged three decades ago during “a different era in terms of political powers -- regional and international -- and their designs on the Middle East.”
Deficit of Government
The region-wide clash between Sunni Saudi Arabia and Shiite Iran, which both support proxies in other countries, has deepened the recent instability. Beneath the sectarian and ethnic divisions, though, are similarities in political culture that helped enable the rise of non-state actors.
Most Middle Eastern countries are classified as autocracies by the Economist Intelligence Unit’s Democracy Index, and their leaders have typically cultivated an image as strongmen at the head of powerful regimes.
For all that, “the problem in the Middle East is not a surplus of government, but a deficit,” said Coyle, who was also director of Middle East studies at the U.S. Army War College.
By Kasia Klimasinska Oct 3, 2014 9:38 PM GMT+0700
If Vladimir Putin offers to fly you to Russia to talk geopolitics, could you refuse?
That’s the question facing Russia analysts from the U.S. and Europe as Putin convenes a meeting in Sochi Oct. 22-24, extending a decade-old tradition of the Valdai Discussion Club. The group was formed to provide “independent, unbiased, scholarly analysis” of world affairs among experts, and the conference this month includes a session on Ukraine.
As skirmishes in Donetsk undermine a month-long cease-fire between Ukraine and pro-Russian separatists, at least one U.S. analyst is boycotting the Valdai event this year. Others defended their plans to go, saying the talks aren’t controlled and arguing that Russia’s isolation makes it more important than ever to hobnob with the country’s political and business elite.
Standoff in Ukraine
“I did not hesitate to say ‘yes’ when I was invited because it’s an extremely good opportunity to talk with the top leaders,” said Gerhard Mangott, a political science professor at the University of Innsbruck, Austria, who last year asked Putin a question about the treatment of sexual minorities after the leader signed a law banning the spread of so-called gay propaganda.
“It was reported live on Russian television and that was fine -- he answered the question and I’m getting invited again,” he said. “So it’s not as if you attack the Russian president, you will never be invited -- it’s quite to the contrary.”
‘Wrong Signal’
Refusing to participate this year is Ariel Cohen, director of the center for energy, natural resources and geopolitics at the Institute for the Analysis of Global Security, a research group in Potomac, Maryland. He’s turning down the invitation after going to many previous meetings.
“It’s a wrong signal to go this year for anybody because of the war in Ukraine and because the message would be that Russia is immune to international condemnation,” Cohen said in a phone interview. “Not going to Valdai would be one of the signals, at least from the western participants, to indicate that it is unacceptable what Russia is doing.”
This year’s conference is titled “The World Order: New Rules or No Rules?” according to documents circulated to possible attendees. The agenda includes a “special session” on Ukraine, and a paper called “Concept” makes references to the conflict in the former Soviet republic.
“The system of global governance has clearly been shaken,” the document states. “Institutions are powerless, and the selfishness and distrust among political actors prevail over the principles of law and justice.”
More ‘Choreographed’
Cohen, who attended the first Valdai gathering in 2004, said the format evolved from “very pointed” exchanges and debates among an exclusive group of 30 to 40 people to a gathering of about 250 at some of the sessions last year.
“Over time, it became bigger and bigger and more and more choreographed,” he said.
At one meeting, attendees were taken to a cave with eternal frost, and offered raw frozen fish and vodka in ice glasses to wash it down.
In 2006, Putin served octopus carpaccio, lobster and zucchini lasagna, baked sea bass and warm figs with yogurt sorbet, said Andrew Kuchins, a Russia expert at the Center for Strategic and International Studies in Washington, reading from the menu he saved.
Some attendees try to get Putin’s autograph, turning into “little groupies,” said Clifford Gaddy, an economist specializing in Russia at the Brookings Institution in Washington who has attended Valdai gatherings.
Putin’s Attendance
In an e-mail reply to questions about this year’s meeting, Ekaterina Odnostorontseva of the Valdai Club Foundation referred to the group’s website.
Initially, the conference included a dinner with Putin, during which guests could freely ask him questions. Last year, Putin appeared at a panel discussion and opened with a speech, and invited only about 15 guests to dine with him afterward.
Piotr Dutkiewicz, a professor of political science at Carleton University in Ottawa, was a part of that exclusive group and plans to return this year.
“This is tremendously important. We simply made too many mistakes in our policies to Russia,” Dutkiewicz, who received a Ph.D. at the Russian Academy of Sciences in Moscow, said in a phone interview. “An opportunity to go deeper, to go one layer deeper, is very important.”
Several of the analysts interviewed said their costs are paid for by Valdai organizers, while declining to estimate the total bill.
Kremlin PR
Kuchins has been to about five meetings and says attending this year will help maintain a dialogue while government ties are strained. He acknowledges that the event is part of the Kremlin’s public-relations campaign.
“I have pretty strongly held views about Mr. Putin and I’ve certainly never shied away from criticizing him and his government, sometimes in quite brutal ways, and yet I still am invited,” he said by phone. “That’s really very rare, frankly, for a major world leader to meet a group of so-called experts, journalists in a pretty intimate gathering as Mr. Putin generally does for these meetings.”
The fact that the White House National Security Council and State Department ask to be briefed upon his return shows the meetings have value, Gaddy said.
Some of the dinners with the Russian president would go for as long as four hours, and include six to seven courses, according to attendees. On one occasion, Putin brought out the chef to introduce and thank him for the meal. On another, the Russian president was three hours late.
Energy Discussion
According to the Brookings experts’ account, Putin used one of the meetings to explain his views on the dangers of fracking, the technology that allowed the U.S. to top Russia’s oil production and spurred hopes for higher domestic natural-gas production in Eastern Europe, which is highly dependent on imports from Russia.
Conference attendees also include reporters, and Marc Champion of Bloomberg View participated last year. Bloomberg paid for his hotel and travel. He said he may go again this year.
Named after Lake Valdai in northwestern Russia, site of the first meeting in 2004, the sessions are held in various regions of the country, from Siberia to the North Caucasus. A Lena river cruise in 2009 offered limitless vodka at dinners, while bottled water was available for a charge.
This year, Mangott and Gaddy said they expect Putin to appear again. In 2013, Foreign Minister Sergei Lavrov, Defense Minister Sergei Shoigu, representatives of Russia orthodox church and some regional governors attended.
By letting Russia run the program, attendees “run the risk of playing into the Kremlin’s hands,” said David Kramer, a former U.S. assistant secretary of State and now president of Freedom House, a Washington-based nonprofit group. “They control the settings and unless people are really prepared to challenge Putin and take him on, I don’t quite know what the value really is.”
Ukraine Sees Gas Talks With Russia, EU Within 2 Weeks
Ukraine and Russia will probably meet within two weeks for the next round of European Union-brokered talks to resolve a natural-gas dispute before winter, Ukrainian Energy Minister Yuri Prodan said.
The EU, which depends on Russian gas piped through Ukraine for about 15 percent of its demand, proposed an interim deal at negotiations last week to restore flows from Moscow-based OAO Gazprom to NAK Naftogaz Ukrainy before the heating season.
HOUSTON, Oct. 3 (UPI) -- British energy company BP said it wanted a Louisiana court decision the company was negligent in the 2010 oil spill in the Gulf of Mexico reviewed.
A district court in Louisiana ruled in September that BP's activities at the Macondo well beneath the Deepwater Horizon rig in the Gulf of Mexico amounted to willful misconduct. In its 152-page ruling, the court found a series of BP failures at the well "created the catastrophic situation" that lead to the 2010 spill.
The incident left 11 rig workers dead and led to the worst offshore oil spill in U.S. history.
BP said the judge in the case based the decision on information the British oil company said he initially said he wouldn't consider in court.
"Through its motion, BP has asked the District Court to amend its Sept. 4 order or, in the alternative, to grant a new trial because the Court's findings and conclusions are based substantially on expert witness opinions that the Court appropriately and expressly excluded from evidence at trial," the company said in a statement published Friday.
U.S. District Court Judge Carl Barbier's ruling means BP may be liable for as much as $18 billion, about four times as much as the maximum for violating the federal Clean Water Act.
He divided the blame among BP, with 67 percent, rig owner Transocean, with 30 percent, and oil services company Halliburton, with 3 percent.
HOUSTON, Oct. 3 (UPI) -- Analysis of U.S.-led airstrikes on Islamic State targets in Iraq and Syria finds the group's ability to exploit oil for a source of revenue has been diminished.
Analysis published Friday by the Energy Intelligence Group estimates around 4,000 air sorties launched by U.S. forces and their allies have knocked out about half of the refinery capacity captured by the group calling itself the Islamic State.
"Air power alone will not defeat Islamic State, but it has dealt the jihadists' oil industry a significant blow," the report said.
The terrorist group in control of parts of Syria and Iraq is said to be generating about $2 million per day on pilfered oil. Iraqi leaders and peace advocacy groups have said action must be taken to contain oil's role in IS financing.
Friday's report said the biggest loss for the militant network is the destruction of its oil processing capabilities in Syria.
"In addition to significant tax revenues, this helped provide a steady supply of diesel and gasoline for the broad base of people Islamic State now claims to rule and, most significantly, fuel for its fleet of military vehicles," the briefing read.
The Kurdish government in control of parts of northern Iraq said security has improved to the point that oil and gas companies were operating at near capacity. Gulfsands Petroleum, one of the last companies to suspend operations in Syria, said this week its installations in the country were secur
Under the EU proposal, which Russian Energy Minister Alexander Novak on Sept. 26 called “a big step” toward an agreement, Ukraine would pay $3.1 billion by the end of the year for previously delivered supplies and Russia in return would provide at least 5 billion cubic meters of gas to Ukraine in the coming months.
“The trilateral talks will be held either at the end of the next week, which is probably unlikely, or a week later,” Prodan said in an interview in Brussels today. “We’re ready to reach an agreement, but not at the volumes and in the timeframes set by Russia.”
The temporary accord the EU is trying to broker is aimed at restarting supplies from Russia to Ukraine after they were halted in June and at preventing disruptions in the heating season until the international arbitration court in Stockholm, Sweden decides on Gazprom and Naftogaz claims in a price dispute. If the three-party talks fail, the arbitrator could make a provisional ruling in two to four weeks, Prodan said.
“Arbitration could make an interim decision given the heating season and an urgent need to take action to resolve the situation temporarily,” Prodan said. If the trilateral talks end successfully, the court would decide on the gas contract issue “as a whole,” according to the minister.
Interim Solution
The European Commission has proposed an interim solution, which national leaders of Russia and Ukraine must approve. The two countries will exchange their responses to the commission’s plan and report back to Brussels by Oct. 7, Prodan said. The commission will then integrate their positions into a single document as far as this is possible, leaving other points for the next round of talks, he said.
The draft agreement envisages that Ukraine would pay $385 per 1,000 cubic meters for gas for the next six months. That’s the price that Gazprom had said was its final offer and at the highest level the EU had previously said should be paid. It’s higher than the $268.50 Ukraine had paid before the conflict with Russia, which began with the ousting of Ukraine’s Kremlin-backed President Viktor Yanukovych amid street protests in February.
‘Pressure, Discrimination’
In April, Russia rolled back two price discounts amid a growing conflict in which Russian President Vladimir Putin annexed Crimea and a separatist insurgency erupted in eastern Ukraine. As a result, Russia raised the gas price for Ukraine to $485 per 1,000 cubic meters, a level higher than for any EU nation.
“Those aren’t market conditions, that’s an element of pressure, discrimination,” Prodan said.
Gazprom sees its average price in Europe at about $350 this year. Next year, it may decline to $316.50, according to the Russian Economy Ministry.
The interim deal proposed by the EU would run only through March 2015. Ukraine would pay $2 billion of its gas debt by the end of October and $1.1 billion by the end of the year. Ukraine is ready to pay $1.5 billion as the first installment, with “some” part of it to be paid before supplies resume and the remaining part only after shipments restart, Prodan said.
“Today, we have a reserved amount of money -- $3.1 billion -- on a special account in the central bank that can be used to pay for gas,” Prodan said. “But we do not say that’s for the debt.”
Energy Security
While transit to the EU is so far unaffected, concern has grown among its governments over a possible disruption. Russia and Ukraine have been trading accusations of threats to EU-bound gas transit since July. The 28 EU governments agreed in June to take steps to increase supply security and are preparing for a stress test of Europe’s energy system to help overcome a potential cutoff in the 2014-15 winter.
Ukraine is very “scrupulous” in its approach to the gas talks with Russia after previous disappointments, Prodan said.
“We’re not sure that even if we pay a certain amount, we’ll get the gas,” he said. “It seems that at any moment, because of all the unresolved issues, Russia can simply stop” delivering gas “for reasons of its own.”
By Selcan Hacaoglu and Benjamin Harvey Oct 6, 2014 5:09 AM GMT+0700
Islamic State militants battled with Kurdish fighters for control of a strategic hill overlooking the Syrian town of Kobani on the border with Turkey, which the jihadist group has been besieging for three weeks.
A tank and some militants standing next to a heavy machine gun were seen on the hill of Mistenur to the east of Kobani, NTV reported yesterday, showing that Islamic State had taken the position. Ahmet Destan, a Kurdish villager, said by phone that the Kurds regained control of it at one point late yesterday amid heavy fighting. A female Kurdish fighter blew herself up in a suicide bomb attack against the jihadists on the hill, the Kurdish Firat news agency reported, saying that the battle continued into the night.
As the fighting closed in on Kobani, Turkey ordered residents of some nearby border areas to leave for their own safety. Dozens of explosions in Kobani throughout the day sent plumes smoke rising above the skyline, a live broadcast from the Turkish-Syrian border showed.
The militants are seeking to expand territory under a self-declared caliphate that stretches across much of northern Iraq and Syria. In a bid to stop their gains, fighter jets from the U.S. and its allies have struck Islamic State positions in both countries. Kurdish leaders have accused the coalition, and Turkey, of not doing enough to save Kobani from falling.
U.S. Airstrikes
U.S. Central Command said in a statement the coalition had carried out nine strikes against Islamic State targets in Syria and Iraq yesterday and the previous day. The Pentagon has said that while it’s monitoring the situation in Kobani and has carried out strikes in the area, its efforts in Syria are mostly aimed at areas used as safe havens by Islamic State, while in Iraq it’s bombing in support of local forces.
At least three people were wounded on the Turkish side of the Syrian border, by errant mortar fire and bullets. The Turkish military deployed more armored personnel carriers and tanks to the border, where troops used loudspeakers to warn residents to leave their houses, Hurriyet newspaper reported.
The rapid advance of the militants on Kobani has sent tens of thousands of residents, mostly Kurds, fleeing to Turkey over the past three weeks. Few civilians remain in the town, according to the U.K.-based Syrian Observatory for Human Rights, which is monitoring the conflict via local activists. The Islamic State fighters are equipped with tanks and heavy artillery, outgunning the lightly armed Kurds.
Kurdish Autonomy
Syria’s Kurds have gained effective autonomy during the country’s three-year civil war, as central government authority over their region receded. The main Kurdish group there has links to the Kurdistan Workers’ Party or PKK, which has been fighting for autonomy in Turkey for three decades, and is classified as a terrorist group by Turkey and the U.S.
Kurdish politicians in Syria and Turkey have complained of a lack of international support, and say Turkey is seeking to quash the development of Kurdish self-rule in Syria. Turkey, which is pursuing peace talks with the PKK, says it will do whatever is in its power to stop a militant takeover of Kobani.
Turkey’s parliament on Oct. 2 renewed a mandate for military action across its southern borders with Syria and Iraq, citing the regime of President Bashar al-Assad as one of the threats, as well as Islamic State and the PKK. Turkey’s policy in Syria has focused on the removal of Assad since the early stages of the civil war.
MEXICO CITY, Oct. 3 (UPI) -- The Mexican energy company known as Pemex said its agreement with Exxon Mobil is part of an effort to attract private capital to the national landscape.
Emilio Lozoya Austion, director general of Petróleos Mexicanos, hosted Exxon Mobil President Rex Tillerson for the signing of a memorandum of understanding in upstream and downstream sectors of the Mexican energy sector.
"The signing of the memorandum adds to the efforts Pemex has done to attract new technologies, capital and partners to allow them to compete effectively in the new Mexican oil market, ensure production and create jobs in the domestic energy sector," the Mexican company said in a Thursday statement.
Mexican lawmakers embraced plans by President Enrique Peña Nieto to draw international energy companies into the nation's energy sector by privatizing Pemex, which has controlled the Mexican oil sector as a monopoly for the last 70 years.
Peña Nieto set a goal of producing 3.5 million barrels of oil per day by 2025, which would be a 40 percent increase from 2013 levels.
The oil sector accounted for 13 percent of the country's export earnings last year.
KIEV, Ukraine, Oct. 3 (UPI) -- The Ukrainian government is deeply concerned about risks to European energy security caused by the Kremlin, Ukraine's prime minister said.
Ukrainian Prime Miniser Arseniy Yatsenyuk said from Kiev risks to European energy security were "caused by the Russian Federation."
The prime minister hosted regional and European leaders in an effort to allay concerns about natural gas before winter demand increases.
Russian natural gas company Gazprom in 2006 and 2009 cut gas supplies through Ukraine in response to contractual disputes with the government in Kiev. Ukraine's political upheaval in November left its economy in shambles and Kiev's debt obligations are creating risks to European security.
"We are deeply concerned about the erosion of European energy security, the EU and Ukraine from the Russian company Gazprom," the prime minister said Thursday.
Russia meets about 20 percent of European natural gas demand, though 80 percent of the volume sent to Europe runs through the Soviet-era transit network in Ukraine.
Ukraine's energy minister met Thursday with European Energy Commissioner Gunther Oettinger. The Ukrainian government said it was committed to reforming the gas transit system and reorganize state energy company Naftogaz according to the terms outlined by Europe.
WASHINGTON, Oct. 3 (UPI) -- Sanctions targeting the Russian energy sector will be rolled back once the Kremlin addresses its obligations in Ukraine, a U.S. State Department official said.
The U.S. and European governments have imposed punitive sanctions on Russian energy companies Rosneft, Gazprom Neft and others in response to the crisis in Ukraine. The Russian Central Bank this week said sanctions were getting in the way of efforts to control inflation in the country.
Victoria Nuland, assistant secretary of state for the Bureau of European and Eurasian Affairs, told an audience at the Center for European Policy Analysis in Washington sanctions "can and will" be rolled back provided Russia respects Ukraine's sovereignty and pulls heavy weapons from the region.
"It is in Russia's hands when that day comes," she said in her Thursday address.
Exports of crude oil, petroleum products and natural gas account for nearly 70 of all Russian export revenues in 2013.
A World Bank report on Russia says its export-based economy is vulnerable to geopolitical tensions.
Russia annexed the Crimean Peninsula of Ukraine in the aftermath of a political upheaval in November that saw Kiev move closer to the European Union.
WASHINGTON, Oct. 3 (UPI) -- With global crude oil prices plummeting, U.S. retail gasoline is following suit, though the bottom might not be reached until January, an analyst said.
Retail price watchdog GasBuddy.com lists Friday's average price for a gallon of regular unleaded gasoline at $3.32, down more than 10 cents from last month and 6.5 cents less than the same time last month.
Motor club AAA said it expects some retail markets could see a 20 cent drop by the end of November, provided there are no major disruptions in production.
For GasBuddy, a price drop in October is a prelude of things to come.
"We expect nationwide gasoline prices will move to between $3.10 per gallon and $3.20 per gallon in November and December," GasBuddy chief oil analyst Tom Kloza said in a Thursday statement. "The actual bottom in this current down-cycle may not occur until January."
Gasoline prices start a seasonal decline in September because the summer travel season is over and refineries start making a winter blend of gasoline, which is less expensive to produce.
GasBuddy says the futures contract for Brent crude is more than $20 per barrel below the June price. Every dollar drop in crude oil prices translates to about a 2 percent decline in gasoline prices.
The U.S. Energy Department expects the national average for a price for a gallon of gas will be $3.18 in December.
WASHINGTON, Oct. 3 (UPI) -- Sanctions targeting the Russian energy sector will be rolled back once the Kremlin addresses its obligations in Ukraine, a U.S. State Department official said.
The U.S. and European governments have imposed punitive sanctions on Russian energy companies Rosneft, Gazprom Neft and others in response to the crisis in Ukraine. The Russian Central Bank this week said sanctions were getting in the way of efforts to control inflation in the country.
Victoria Nuland, assistant secretary of state for the Bureau of European and Eurasian Affairs, told an audience at the Center for European Policy Analysis in Washington sanctions "can and will" be rolled back provided Russia respects Ukraine's sovereignty and pulls heavy weapons from the region.
"It is in Russia's hands when that day comes," she said in her Thursday address.
Exports of crude oil, petroleum products and natural gas account for nearly 70 of all Russian export revenues in 2013.
A World Bank report on Russia says its export-based economy is vulnerable to geopolitical tensions.
Russia annexed the Crimean Peninsula of Ukraine in the aftermath of a political upheaval in November that saw Kiev move closer to the European Union.
CAIRO, Oct. 3 (UPI) -- After securing loans from national banks, the Egyptian Petroleum Ministry announced it paid off $1.5 billion of its debt owed to foreign oil and gas companies.
"The government aims to reduce the debt to encourage firms to step up research and exploration operations, to boost local production of oil and gas and minimize imports, which in turn will spare the cash to continue paying Egypt's due debts to its foreign partners," Petroleum Minister Sherif Ismail in a Thursday statement.
The ministry's announcement came the same week as it signed an agreement with a consortium of banks led by the National Bank of Egypt for $1.4 billion. The ministry said it still owes $4.9 billion to foreign firms.
Egypt is the largest oil producer in Africa that's not a member of the Organization of Petroleum Exporting Countries and the largest gas producer. It's also the largest oil and gas consumer in the region, leaving it struggling to support a vibrant energy sector that satisfies domestic demand.
The Egyptian government has boasted that British energy company BP was committed to major investments in the country, through rival BG Group has expressed reservations given continued diversions of natural gas to the domestic market.
WASHINGTON, Oct. 3 (UPI) -- While welcoming a presidential address on the economy, the American Petroleum Institute said more stimulus could come as a result of less burdensome regulation.
API, which represents the interests of the U.S. oil and gas sector, welcomed statements Thursday from President Barack Obama that U.S. economic growth was coming as a result of the shale boom.
"The first cornerstone [of growth] is new investments in the energy and technologies that make America a magnet for good, middle-class jobs," the president said during his speech at Northwestern University in Chicago.
API President Jack Gerard said he appreciated the president recognized the role of energy in economic stimulus.
"But let's be clear -- our energy renaissance has occurred despite White House policies, thanks primarily to the support of private investors and state governors who have worked diligently to support new development," he said.
While imports are down because of shale oil production from states like Texas and North Dakota, API said trade restrictions on crude oil mean the energy sector is not performing as well as it could.
Obama added that "tens of thousands" of people have found work in manufacturing wind turbines and in the installation of solar panels.
HOUSTON, Oct. 3 (UPI) -- Occidental Petroleum Corp., one of the largest oil and gas producers in the country, said it was spinning off its California business into a separate entity.
The company known commonly by its stock symbol, Oxy, said the board of directors created a separate company, California Resources Corp.
"California Resources will be an independent, publicly traded company, and Occidental will retain approximately 19.9 percent ownership interest in California Resources for a period of up to 18 months," the parent company said in a Thursday announcement.
When announcing quarterly results, President and Chief Executive Officer Stephen Chazen said oil production was strong, with increases coming from the Permian shale basin in western Texas and from California assets for the fourth straight quarter.
Oxy is the largest oil and natural gas producer in California. Its flagship Elk Hill field produced more than 515 million barrels of oil equivalent since it was acquired in 1988.
California Resources will be traded under the ticker symbol CRC.
WASHINGTON, Oct. 3 (UPI) -- Sanctions targeting the Russian energy sector will be rolled back once the Kremlin addresses its obligations in Ukraine, a U.S. State Department official said.
The U.S. and European governments have imposed punitive sanctions on Russian energy companies Rosneft, Gazprom Neft and others in response to the crisis in Ukraine. The Russian Central Bank this week said sanctions were getting in the way of efforts to control inflation in the country.
Victoria Nuland, assistant secretary of state for the Bureau of European and Eurasian Affairs, told an audience at the Center for European Policy Analysis in Washington sanctions "can and will" be rolled back provided Russia respects Ukraine's sovereignty and pulls heavy weapons from the region.
"It is in Russia's hands when that day comes," she said in her Thursday address.
Exports of crude oil, petroleum products and natural gas account for nearly 70 of all Russian export revenues in 2013.
A World Bank report on Russia says its export-based economy is vulnerable to geopolitical tensions.
Russia annexed the Crimean Peninsula of Ukraine in the aftermath of a political upheaval in November that saw Kiev move closer to the European Union.
CAIRO, Oct. 3 (UPI) -- After securing loans from national banks, the Egyptian Petroleum Ministry announced it paid off $1.5 billion of its debt owed to foreign oil and gas companies.
"The government aims to reduce the debt to encourage firms to step up research and exploration operations, to boost local production of oil and gas and minimize imports, which in turn will spare the cash to continue paying Egypt's due debts to its foreign partners," Petroleum Minister Sherif Ismail in a Thursday statement.
The ministry's announcement came the same week as it signed an agreement with a consortium of banks led by the National Bank of Egypt for $1.4 billion. The ministry said it still owes $4.9 billion to foreign firms.
Egypt is the largest oil producer in Africa that's not a member of the Organization of Petroleum Exporting Countries and the largest gas producer. It's also the largest oil and gas consumer in the region, leaving it struggling to support a vibrant energy sector that satisfies domestic demand.
The Egyptian government has boasted that British energy company BP was committed to major investments in the country, through rival BG Group has expressed reservations given continued diversions of natural gas to the domestic market.
"But let's be clear -- our energy renaissance has occurred despite White House policies, thanks primarily to the support of private investors and state governors who have worked diligently to support new development," he said.
WASHINGTON, Oct. 3 (UPI) -- While welcoming a presidential address on the economy, the American Petroleum Institute said more stimulus could come as a result of less burdensome regulation.
API, which represents the interests of the U.S. oil and gas sector, welcomed statements Thursday from President Barack Obama that U.S. economic growth was coming as a result of the shale boom.
"The first cornerstone [of growth] is new investments in the energy and technologies that make America a magnet for good, middle-class jobs," the president said during his speech at Northwestern University in Chicago.
API President Jack Gerard said he appreciated the president recognized the role of energy in economic stimulus.
"But let's be clear -- our energy renaissance has occurred despite White House policies, thanks primarily to the support of private investors and state governors who have worked diligently to support new development," he said.
While imports are down because of shale oil production from states like Texas and North Dakota, API said trade restrictions on crude oil mean the energy sector is not performing as well as it could.
Obama added that "tens of thousands" of people have found work in manufacturing wind turbines and in the installation of solar panels.
HOUSTON, Oct. 3 (UPI) -- Occidental Petroleum Corp., one of the largest oil and gas producers in the country, said it was spinning off its California business into a separate entity.
The company known commonly by its stock symbol, Oxy, said the board of directors created a separate company, California Resources Corp.
"California Resources will be an independent, publicly traded company, and Occidental will retain approximately 19.9 percent ownership interest in California Resources for a period of up to 18 months," the parent company said in a Thursday announcement.
When announcing quarterly results, President and Chief Executive Officer Stephen Chazen said oil production was strong, with increases coming from the Permian shale basin in western Texas and from California assets for the fourth straight quarter.
Oxy is the largest oil and natural gas producer in California. Its flagship Elk Hill field produced more than 515 million barrels of oil equivalent since it was acquired in 1988.
California Resources will be traded under the ticker symbol CRC.
Caracas (Platts)--3Oct2014/509 pm EDT/2109 GMT
The average price of Venezuela's oil basket fell 76 cents/barrel to $85.89/b for the week of September 29-October 3, the country's Oil and Mining Ministry said Friday.
The prices of the country's main crude grades continued to fall, affected mainly by signals of a slowdown in the global economy and abundant supply of crude oil in the market, the ministry said. The monthly average for September was $89.27/b, compared with $103.75/b in September 2013. The monthly average for October is $85.89 /b, compared with $97.31/b in October 2013, the ministry said.
The year-to-date average fell to $95.29/b in the most recent week from $96.23/b a week earlier.
The basket price is an average of 70% crude oil (light, medium and heavy) and 30% refined products. The crude oil includes the Bachaquero, Boscan, Laguna, Merey, Mesa 30, Santa Barbara and Leona 24 grades. The refined products include asphalt, gasoil, gasoline, jet fuel, naphtha and residual fuel.
The Platts Japan Korea Marker for November delivery fell 17.5 cents over the week to settle at $14.35/MMBtu Friday, as downward pressure on the prompt and declines in crude oil markets began to weigh on sentiment.
Focus had largely shifted to the second half of November and December, although at least one Asian liquefaction facility was revealed to still be holding cargoes for first half of November delivery, while one or two unsold cargoes from H2 October could also roll into H1 November, sources said.
Fueling the bearish sentiment, significant losses in the crude oil markets could begin to erode demand from portfolio sellers looking to optimize positions and end users alike, as LNG term prices threatened to dip lower.
Two deals for late November/early December delivery were heard to have been transacted by Shell to Japanese buyers in the previous two weeks.
Shell sold a cargo at $14.90/MMBtu to Japan Petroleum Exploration, or Japex, according to sources. Shortly after, Shell did a second deal at $14.80/MMBtu with a large Japanese utility which had a limited delivery window of two or three days, forcing prices slightly higher, sources said.
At least one December deal had reportedly been concluded at $15.30-15.40/MMBtu to a northeast Asian buyer, although the delivery period was unclear, several sources said. The cargo was said to have originated from Asia.
A second December deal around $16/MMBtu was also reported this week but many buyers dismissed such levels as too far above bids, which were around $15/MMBtu for the month, saying the deal would have to be concluded for the very end of the month, possibly to a trader.
Several sources questioned whether an Exxon-led Papua New Guinea sell tender for two cargoes delivered in H1 and H2 November had been awarded.
Validity for bids in the tender process -- which had been due to expire September 26 -- was said to have been extended.
Previous reports had said a global portfolio player secured at least one cargo from the facility for H2 November on a FOB basis around the mid-$14s/MMBtu.
Results from Australia's North West Shelf were also due. Validity to bid on the sell tender for an unspecified number of cargoes loading over November 15-22 for DES and November 4-11 for FOB was due to close October 3.
Shipping sources said that there been some interest from traders and sellers to charter vessels.
Elsewhere, Platts cFlow ship tracking software showed the Fuji LNG had left Gwangyang September 23 and delivered a cargo into Senboku, Japan.
Sources said the trade had been part of a swap deal -- a seller offtaking from Bontang LNG had been unable to lift a September cargo as approvals for the sale had not been granted.
This led to talk about whether cargoes sold for October and November delivery would be made available from the facility. At least two parties were heard to have purchased three of the eight cargoes that had been marketed for the period, according to sources, which could result in short positions.
Bontang was heard to be mulling launching a second tender if it could not gain approvals for October/November, one source said.
In the shipping market, the number of requirements in Asia Pacific for November and December was heard to be increasing, but owners were not yet willing to commit vessels, according to a source. This left the Asia Pacific Day rate steady over the week at $62,000/day.
The price of FOB Singapore 500 ppm sulfur gasoil slumped $2.14/barrel day on day to a near 45-month low of $105.48/barrel at the Asian close Thursday, October 2, with a stubborn supply glut of diesel in the region exacerbating a tumble in the wider crude complex.
The gasoil benchmark was last lower on January 5, 2011, when it closed at $105.30/b, Platts data showed.
Front-month November ICE Brent crude futures declined $1.95/b from the previous session to $92.86/b at 4:30 pm Singapore time (0830 GMT) Thursday, hitting a 27-month low.
The contract was last lower at the Asian close on June 28, 2012, when it stood at $92.55/b.
The recent decline in crude prices has been attributed to weak underlying market fundamentals, with a large cut in Saudi Aramco's November crude oil official selling prices dampening sentiment further.
Saudi Aramco cut its November crude OSPs across the board this week, lowering prices for the US by $0.20-0.40/b, Asia by $0.60-1.20/b and Europe by $0.20/b to $1/b.
But even with the plunge in crude prices, the FOB Singapore 500 ppm sulfur gasoil crack against front-month cash Dubai crude fell 44 cents/b to $13.68/b Thursday.
The Asian gasoil market has been reeling from an oversupply brought on by new refineries coming online in the Middle East and China, an increase in India exports on sluggish domestic demand, slowing diesel demand growth in the world's second largest economy, and weaker demand from Saudi Arabia following the end of summer.
The contango in the gasoil market deepened further at the Asian close Thursday, with the balance October/November swap falling 15 cents/b to minus 21 cents/b.
Market sources do not expect to see any reprieve in the regional gasoil market in the near future as more refineries and upgrades in the Middle East are slated to come on stream soon, adding further supply to the market.
London (Platts)--3Oct2014/556 am EDT/956 GMT
The UK government's latest fossil fuel price projections, published Thursday, significantly reduce the expected price of natural gas in the years out to 2025, compared with last year's projections.
In the longer-run, meanwhile, the government foresees US LNG exports driving a link to US Henry Hub gas prices.
The numbers, published by the Department of Energy and Climate Change, are not official forecasts of future energy prices. But they are used as assumptions to feed into other government work analyzing the impact of public policies.
Last year's central case projection put gas prices around 69.70 pence/therm ($11.20/MMBtu) in 2015, rising to 73.8 p/th from 2018 onward.
This year's central case projection values 2015 at 62.10 p/th, sees projections drop as low as 58.00 p/th for 2019, and then rising gradually towards 76.40 p/th by 2030.
While the low case projections for 2014 are similar to the low case values given in 2013, the central and high case projections this year are both significantly lower than last year's, particularly in the years out to 2025.
If the government assumes lower fossil fuel prices in its future analysis of policies, this could impact on, for example, how it views the competitiveness of renewables.
If gas prices are lower, renewables would have to perform better to compete against gas-fired power generation.
DECC's central projection takes forward curve prices for 2014-15, then an average of external forecasts for prices during 2016-19. It applies linear interpolation for 2020-24, then a linkage to US Henry Hub gas prices for 2025-30, based on an expected impact from US LNG exports in the next decade.
"The long-run (2025 onward) price projection is anchored against the cost of LNG exported from the US. This reflects the likelihood of substantial US LNG exports over that horizon," DECC says in its methodology.
DECC's projections have been peer-reviewed by gas market consultant David Ledesma of South Court.
Ledesma writes that "the logic that the marginal LNG supply source for gas to the UK, post 2019-20, will be through LNG, from the USA, is a reasonable assumption. This means that marginal gas could be priced on a Henry Hub related basis."
Nigeria exported 62.9 million barrels of oil including condensate, or an average 2.10 million b/d, in June, up 4.4% month on month, Nigerian National Petroleum Corp. data showed Friday.
Europe accounted for 49% of the exports.
"Four regions, namely Europe, South America, Asia and Africa, remain the major destinations of Nigerian crude and condensate export," the NNPC said.
The NNPC data showed oil production in June averaged 2.16 million b/d, down 7.5% on June.
Gas production was 199.44 Bcf, compared with 209.10 Bcf in June, with about 11.22% of the production burnt.
Nigeria's four refineries operated at an average of 10.5% of their combined nameplate capacity of 445,000 b/d.
Nigeria allocates 450,000 b/d of its production for domestic consumption. NNPC, which manages the refineries, swap a large portion of that domestic crude for refined oil products from international traders.
Cape Town (Platts)--3Oct2014/903 am EDT/1303 GMT
The worsening Ebola crisis has seen oil companies in Liberia evacuate some staff as a precautionary measure but none have suspended work in the west African country, state-owned National Oil Company of Liberia said Friday.
"Naturally the Ebola crisis may be affecting in-country staff and operations in the short term. However, as far as we are aware, all the oil companies in Liberia are fully operational and working as required to fulfill requirements of their work programs," chief operating officer Althea Sherman said.
The offices of most oil companies remained open with the exception of ExxonMobil which has imposed travel restrictions to countries hit by the virus, Sherman said.
"I think the oil companies and all of our partners in the sector understand that the Ebola crisis is short term, i.e it is expected to come under control in the coming months. They are here for the long haul."
The outbreak has seen Canadian Overseas Petroleum, ExxonMobil's partner in block LB-13, delay drilling of the Mesurado-1 wildcat as expatriate staff withdrew from the country.
ExxonMobil has an 80% interest in the block from partner Canadian Overseas Petroleum in 2013.
The US major opened an office in Monrovia, to support operations in Liberia.
Other operators include Chevron, operator of blocks LB-11, LB-12 and LB-14 and Anadarko which operates blocks LB-10 and LB-15.
Other companies include African Petroleum Corporation and Repsol.
The countries hardest hit by Ebola are Guinea, Liberia and Sierra Leone, with the virus also striking in Nigeria, where a doctor in the oil hub of Port Harcourt died in August, and Senegal.
The first case of Ebola in the US was reported earlier this week -- a man who arrived from Liberia and is now being treated in Dallas.
The World Bank said last month about $6 billion could be drained from West African countries by the end of next year if the epidemic, which has already claimed over 3,300 lives, continued to spread.
In urgent need of revenue to fight the Ebola epidemic, the Liberian government in August announced the opening of an oil bidding round for four offshore blocks.
Companies visiting the data rooms in Houston, Lagos and London include Chevron, Eni, Kosmos Energy, Marathon, Noble Energy and Total, Sherman said.
London (Platts)--3Oct2014/748 am EDT/1148 GMT
Outright prices for all middle distillates hit new lows Thursday as ICE 0.1% gasoil futures fell to a 45-month low, following a decline in the ICE Brent contract.
The ICE 0.1% gasoil futures October contract was assessed at $785.25/mt London 4.30 pm time Thursday, its lowest level since January 10, 2011, when the contract stood at $782.25/mt.
Crude oil futures retreated in midday European trade Thursday, with the November contract sinking to $91.60/b as analysts said the decline in prices was escalated by an unexpectedly large cut in Saudi crude oil official selling prices.
Outright CIF Northwest European jet fuel prices fell $23.25/mt to $861.25/mt, their lowest since Jan 7, 2011, Platts data showed.
Jet physical premiums fell slightly after having strengthened throughout the week as a result of disparities between arrival dates for fixed cargoes from the Persian Gulf over the second half of October, and pockets of prompt buying interest, trading sources said.
Outright prices for 10 ppm diesel reached similar lows, losing over $20/mt on the day, with FOB Rotterdam barges closing at $804.50/mt, CIF NWE cargoes at $812.75/mt and CIF Med cargoes at $818/mt.
Despite outright prices hitting new lows, premiums remained supported and strengthened throughout the week as supplies out of Russia and the economics of arbitrages from the US and the East struggling to work on paper left the European market tightly supplied.
Meanwhile, 0.1% gasoil outright prices also lost by over $20/mt, with FOB barges falling to $782.50, CIF NWE cargoes to $789.25/mt and CIF Med cargoes to $794/mt, but premiums remained rangebound, while demand for physical cargoes remains robust in the Med.
During a business conference last week in Houston, Rex Tillerson the CEO at ExxonMobil said that if the government of the U.S. would end the ban on export of crude oil from the U.S. that is decades old, there would be a spike in job creation. Tillerson also said it would boost the energy security via encouraging new investments that would life production.
According to a news report last week, dozens of businesses have lined up to export LNG – Liquefied Natural Gas. In addition, a superlight form of crude oil called condensate. The output in the U.S. of gas and oil has surged to a high of 25 years, thanks in part to advances in horizontal drilling and hydraulic fracturing of tight oil fields.
Currently LNG must go through lengthy reviews by regulators.
Tillerson said that in current talks about crude oil and LNG exports, leaders and economists across the spectrum from both sides agree that having free trade would lead to more investment, job growth and more production.
Giving the marketplace the opportunity to determine viability of energy exports and other infrastructure projects, instead of making decisions solely on political calculus is the proper course to take, added the CEO of ExxonMobil.
He concluded by saying the government is well positioned to have a positive role in opening new markets, strengthening ties internationally and promoting more free trade.
This past June, ExxonMobil started building an ethane cracker worth billions of dollars at its Baytown, Texas chemical complex.
The cracker is part of a new wave of investments that companies are making as they take advantage of inexpensive natural gas from the onshore boom in the U.S.
ExxonMobil has indicated that the new construction project would involve nearly 10,000 new workers, create another 4,000 jobs related to the construction and add over 350 new positions to the Baytown plant.
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The Utica shale formation has consistently been overshadowed by the Marcellus shale formation, which lies above it. But it is time the Utica started receiving some real attention for the incredible growth that has taken place over the last two to three years.
Source: Geology.com
The Utica lies beneath the Marcellus and expands both north and west. It is thicker than the Marcellus, averaging 300 feet, and more porous, but the total organic carbon (TOC) is generally lower. The source rock is about 100 million years older than the Marcellus and often deeper by 3,000 to 7,000 feet. The greater depth leads to higher drilling costs, but the hydrocarbons are estimated to be more pressurized, resulting in better production.
The surge in Utica gas production is so recent that the formation was only added to the Energy Information Agency’s Monthly Drilling Report this past August. Since January 2012, production has increased from 155 million cubic feet per day (MMcf/d) to approximately 1.3 billion cubic feet per day (Bcf/d). Utica’s production per rig has also steadily improved.
Source: EIA
Chesapeake Energy was one of the first major players with a bullish outlook for the Utica. Former CEO Aubrey McClendon called it the “biggest things to hit Ohio since maybe the plow.” McClendon also said that the Utica is “pound for pound, the best gas rock in the U.S.” Shell, Consol, and Chevron are among about a dozen producers now looking to add acreage and expedite their drilling activity.
The old adage that producers will always go after the “lower hanging fruit” rings true as companies decide whether to drill for Marcellus or Utica gas. In many ways, the Marcellus is the low hanging fruit, but the Utica’s offerings are beginning to look more appealing. The Utica producers are now taking advantage of the above-ground infrastructure built to develop the Marcellus. Utica wells drilled today are often stationed on existing Marcellus well pads and connected by roads and pipes that were built for Marcellus takeaway.
Even with these cost saving methods, drilling costs remain expensive. EQT has reported drill costs of $15 million per well, while Fossil Creek Energy announced a $22 million well, about three times the cost of drilling in the Marcellus. Chesapeake Energy is bucking the trend, significantly lowering its drilling cost year over year.
Source: Chesapeake Energy Investor Presentation, September 3, 2014
To find a market for both Marcellus and Utica gas production, existing pipelines are finding creative ways to move growing sources of gas, while new pipelines are proposed to take larger quantities of gas from large interstate pipelines such as the TRANSCO line. Williams’ new “Atlantic Sunrise” pipeline will connect Marcellus and Utica gas from its TRANSCO line. Sabal Trail LLC, a JV of Spectra and NextEra Energy have proposed to build the “Sabal Trail” pipeline, which would connect with TRANSCO. With the Federal Energy Regulatory Commission’s recent approval of the Cove Point LNG plant, it is not farfetched to imagine India or Japan producing electricity from Utica gas by the end of the decade.
By Chris Pedersen of Oilprice.com
IMF Managing Director Christine Lagarde speaks at Georgetown University in Washington on Oct. 2, 2014 ahead of the annual IMF/WB meetings. (AFP/Nicholas Kamm)
MF managing director Christine Lagarde warned of the fragile recovery of the global economy and the effects of the turmoil in the Middle East, especially the war against ISIS and the instability of Iraq and Syria, which could trigger higher global oil prices.
The annual Meetings of the International Monetary Fund (IMF) and the World Bank Group (WBG) is scheduled for October 10–12, 2014 in Washington.
Over 70 years these meetings have brought together central bankers, ministers of finance, private sector executives, and academics to discuss issues of global concern, including international development, and the world’s financial system.
This year’s meetings come as the world faces serious regional threats with potentially negative impacts on global economic growth.
In an exclusive interview with Asharq Al-Awsat, Lagarde highlighted the main issues that will be discussed at the meetings and outlined the IMF’s role in helping Syrian refugees in Syria, Yemen, Tunisia and Egypt.
Asharq Al-Awsat: What are the main topics at the upcoming IMF Annual Meetings, and what is the IMF’s expectation about global economic growth in 2015?
I am looking forward to our Meetings next week. They offer a unique opportunity for officials, as well as journalists, academics, bloggers, parliamentarians, representatives of civil society and the private sector from all over the world to take stock of global economic developments and look at the challenges ahead. While the global economy continues to recover, it remains too fragile and uneven— too weak to effectively address the predicament of the 200 million jobless worldwide. It is also uneven, with growth rates differing considerably across regions in the world and increases in inequality affecting 7 out of 10 people in the world today.
So, I expect that our 188 member countries will want to discuss how to improve our growth prospects, including how to make it more inclusive and job-friendly. We will also be discussing other challenges to growth, such as geopolitical risks, including those posed by the conflicts in the Middle East and in Ukraine. The scourge of Ebola constitutes a new risk, which we will need to help address collectively.
This year also marks the 70th anniversary of the IMF. This will offer an opportunity to discuss our past but, most importantly, to look to the future. I think the Fund is more relevant than ever, as economic cooperation remains essential to face all these critical challenges.
Q: Will there be a discussion inside the IMF about the military conflict in Iraq and Syria and its implications? Do you have fears that ISIS militants’ control of some oil fields could affect global oil prices?
The conflict in Iraq and the ongoing civil war in Syria are first and foremost tragic humanitarian crises, with staggering numbers of people killed and displaced. Of course, the expanding conflicts across the Middle East and North Africa will be very much in the mind of delegates during the Annual Meetings, as there are serious economic implications not just for the countries involved but for the whole region, and indeed for the world.
In Iraq, the conflict has brought the expansion of oil production to a standstill. In the non-oil sector, we are also seeing the adverse effects of the ongoing fighting on economic activity, as it undermines confidence and depresses investment. As a result, the economy is likely to contract this year. The government’s budget is also under pressure as a result of the increased security spending and the humanitarian crisis.
So far, the impact of the conflict on oil prices has been contained. But if the conflict were to intensify and lead to a further disruption in Iraq’s exports, it could trigger higher global oil prices and weakening confidence. We will discuss such a scenario in the upcoming World Economic Outlook that will be launched as part of the Annual Meetings.
Q: You visited the Al Za’atari camp for Syrian refugees in Jordan last May and expressed the IMF’s readiness to help Syria’s neighboring countries to deal with the refugee problem. What has been done to ease the pressure on Lebanon, Jordan, Iraq and Syria’s economies?
I started my visit to Jordan in May by visiting the Za’atari refugee camp, now home to over 100,000 Syrian refugees who fled the conflict in their country. I thought it was important to get a first-hand account of this human tragedy. I saw how the refugees cope under very difficult conditions, and I listened to their painful stories. I was also inspired by their courage. Hopefully, they will be able to return to their homes in Syria soon.
Za’atari has turned into Jordan’s fourth largest city, and I was very impressed by how Jordan and the international community have come together to help alleviate the refugees’ suffering and prevent a bad situation from becoming worse. Most of all, I was struck by the resilience and the ingenuity of the refugees, who are re-creating a community. We at the IMF aim to provide help by supporting Jordan with a 2.1 billion US dollars loan and through technical support. We also continue to urge the international community to do its part in lending a hand to help Jordan and Lebanon cope with the growing influx of refugees and the resulting economic strain. This can take multiple forms.
Q: The IMF made a comprehensive case for further cutting of subsidies and called for strengthening of social safety in MENA countries. In Egypt, Jordan and Lebanon spending on energy subsidies exceeded spending on capital, health or education. How should MENA countries deal with these problems?
Energy subsidies are widely used across the Middle East and North Africa, and as you point out, subsidies can be a drag on governments’ budgets at the expense of much-needed investment in health care, education, and infrastructure. The Fund has done extensive research on energy subsidies—not just in the Middle East, but across a number of countries, rich and poor. We know these subsidies provide some support to poor consumers, but their benefits go mainly to the better-off who consume more energy. When reforming subsidies, it is important to replace them with better-targeted social safety nets for the poor.
We have seen some progress in a few countries in the region where subsidies are being reduced—such as in Egypt, Jordan, Mauritania, Morocco, Sudan, and Tunisia. To varying degrees, these countries are also taking important steps to help mitigate the impact of these measures on the poor—for instance, through targeted cash transfer programs. Yet energy subsidy reform is complex, both technically and politically and there is no one-size-fits-all. Careful planning, including related to the pace of reforms, is crucial to ensure that cash transfers are well targeted to those who are hardest hit by the removal of subsidies and are available in time. It is important to explain these reforms to the public to create the broad political and social buy-in necessary to sustain them.
Q: Egyptian president Abdel Fattah El Sisi approved the cutting of subsidies for car fuel and natural gas, raising their prices by more than 70 per cent. The measures fall in line with the government’s effort to ease its budget deficit to 10 per cent of GDP. What is your evaluation of such measures?
As I have mentioned, we support reforms in this area in many countries, and welcome the recent moves in Egypt to reduce the budget deficit by lowering energy subsidies and raising revenues. This is a good start toward restoring fiscal sustainability. Looking ahead, a plan for continued subsidy reform with measures to protect the poor, as well as policies to accelerate growth and job creation will also be needed.
The energy subsidy cuts are important for many reasons: they will free public resources for investment in priority sectors such as infrastructure, education, and health, which will support growth and jobs. The lower deficit will free resources for private sector investment, also key to growth. By the same token, higher energy prices will encourage energy conservation and reduce blackouts and shortages.
Q: Discussions on an IMF program for Egypt have been going on for almost three years without reaching a deal. Recent press reports claim that both Saudi Arabia and the UAE have advised Egypt to negotiate a 2 billion US dollars arrangement with the IMF. What is the current situation with the Egyptian IMF loan? Is there any plan for the IMF to visit Egypt in the near future?
The Fund stands ready to help Egypt and its people. We have had a lot of discussions recently with the Egyptian government on the macroeconomic outlook, and we have been giving advice on tax policy and value-added tax reform. We hope to conduct an Article IV consultation with Egypt in the foreseeable future, but we are not in talks on a lending program.
What are your views on the huge public funding of a Suez Canal project. Will this kind of public funding for mega project, provide an alternative to getting loans and financing from an international institution like the IMF? How do you evaluate the revenues from this project, when completed?
The Suez Canal project shows that Egypt is focused on growth and economic success. If, as the government expects, the project increases revenues from the Canal, this will certainly help the budget and balance of payments position of the country over the medium-term. But all of this will take time, and in the interim, Egypt will likely need continued support from its partners abroad. The Gulf countries have already stepped up financial support to Egypt in a big way, and the IMF is ready to help, should the authorities be interested.
Q: Is the IMF willing to participate in a donor conference for Egypt in February to attract foreign companies, donors and international organizations? Will this conference enable the Egyptian government to push through reforms needed to reach agreement on a loan package with the International Monetary Fund?
The Egyptian authorities have not asked us for a loan, but they have indeed told us that they would like us to participate in the “Egypt Economic Summit”, and we are happy to do so. The authorities’ recent reform efforts are already encouraging. I hope that through our consultation process—and an Article IV staff report—we can add to the dialogue on the Egyptian reform process and provide conference participants with an assessment of how those reforms can help restore durable economic stability and sustainable growth to Egypt.
Q: Has the IMF taken any steps to follow up on the recommendation from the high-level conference that was held in Amman, Jordan last May, where Arab policy makers and the IMF discussed ways to achieve macroeconomic stability in the region, job creation, a better business climate, and more transparency?
The conference, which we co-hosted with the government of Jordan and the Arab Fund for Economic and Social Development, was an important milestone. It provided a great opportunity to take a hard look—in an open forum with all key stakeholders represented—at some of the main challenges facing the region: namely high and pervasive unemployment, especially for the youth, and inadequate infrastructure and poor living conditions. We had very candid discussions with all participants, including the official sector, non-governmental participants and young people on these issues.
The discussions highlighted the need for more inclusive and job-friendly growth policies—including creating opportunities for youth and women—enhancing governance and transparency, and improving the business climate.
The important question now is where do we go from here? The diagnostic phase is over, now comes the hard part—implementation. While each country has to shape its own path to address these challenges, several countries have already made some progress, in particular by reducing generalized energy subsidies and implementing targeted safety nets for the poorest. But more is needed and, of course, we at the IMF stand ready to help, with advice, technical assistance, and financing, as appropriate.
Q: Yemen is set to receive 553 million US dollars in financial assistance from the IMF over the next 3 years to address high unemployment and poverty. What updates do you have on this assistance given Yemen’s political instability?
Our Executive Board recently approved a loan of 553 million US dollars. It follows a 93 million dollar Fund arrangement that was agreed soon after the onset of Yemen’s political transition. The concessional loan will help the economy get back on a sustainable path and address long-standing challenges that have fueled instability: in particular the high levels of poverty and youth unemployment. A key element of Yemen’s program is increasing social transfers and reorienting public expenditure to pro-growth and pro-poor spending, financed by a reduction of untargeted energy subsidies. The program also aims at reducing ghost workers in public employment and improving the business environment to reduce corruption and encourage private sector investment and job creation.
The economic content of the recent agreement between the government and the Houthis is broadly consistent with this program. Despite some reversal in fuel price increases, the net savings in the subsidy bill remain substantial and will allow to increase spending in infrastructure and the Social Welfare Fund. The national ownership of the reform process is key to success, as is continued strong support from the Friends of Yemen.
Q: The IMF has also supported Tunisia with a Stand-By Arrangement that expires soon. Is the IMF planning to extend the SBA?
I am very encouraged by the recent advancements in Tunisia’s transition and the resilience of its economy despite the deteriorating international economic environment. An IMF team was recently in Tunis for discussions with the government over the country’s economic performance under the current IMF-supported program that is due to expire in June 2015. Tunisia has not requested a new program. Of course, the IMF is ready to continue providing support through policy advice, technical assistance, and financial support as needed.
Q: The IMF approved a 17 billion Us dollar loan program to Ukraine. This was eight times as high as its quota; do you consider that as a bad loan? Some reports say that this loan demonstrates the degree to which the IMF is an arm of the US, what is your comment?
We provide financial support to member countries when they request it. We can lend amounts above normal limits on a case-by-case basis, and in recent years, given the global economic crisis, many countries facing acute financing needs have had exceptional access to Fund resources. So yes, Ukraine has received IMF support of about 17 billion US dollars, which is 8 times its quota—that is its share in the IMF’s capital. But other countries have had similar exceptional financing levels. For instance, Jordan’s 2.1 billion US dollar loan also represents 8 times its quota. At the end of the day, the IMF aims to be even-handed and tailor programs to effectively deal with the serious economic challenges that countries face.
Q: You have been put under formal investigation in France for negligence in a corruption probe relating to your time as French Finance Minister. What is your comment on these charges?
As I have said, the decision to put me under investigation for negligence is without merit, and my lawyers are appealing it. I am very encouraged that the IMF’s Executive Board expressed its confidence in my ability to effectively carry out my duties at the Fund.
By Heba Qudsi
Producing energy to power the modern global economy is a dirty and dangerous business.
Drilling for oil several miles below the surface of the sea involves staggering engineering challenges. Bringing up coal from deep underground puts miners’ lives at risk. Nuclear energy catastrophes, though rare, can lead to hellish, unlivable zones. And Mother Nature’s wrath can wreak havoc by knocking energy supplies offline.
Below is a list of 10 massive disasters that were either a result of something gone terribly wrong during energy production, or that resulted in millions of people losing access to energy.
1. Hurricane Katrina (2005). The damage caused by Hurricane Katrina made it the costliest storm in American history. At least 1,833 people died. The storm knocked 95 percent of the Gulf Coast’s oil production offline; In total, some 113 oil platforms were destroyed, 457 pipelines damaged, and at least 741,000 gallons of oil were spilled.
2. Fukushima (2011). The March 11, 2011 tsunami was unprecedented in Japanese history. The tsunami left 15,000 to 20,000 people dead or missing. It also destroyed the Fukushima Daiichi nuclear power plant, triggering explosions and the meltdown of three of the plant’s six reactors. In aftermath of the disaster, Japan shuttered 48 nuclear reactors, which amounted to nearly one-fifth of the country’s electricity capacity. The country is still struggling to make up for the lost power.
3. BP Deepwater Horizon (2010). The fiery explosion of the Macondo well and offshore oil rig owned by BP left 11 people dead and spilled millions of gallons of oil into the Gulf of Mexico. BP is still paying costs related to the catastrophe, which could total $42.5 billion. As a result of the disaster, then Secretary of Interior Ken Salazar issued a six-month oil drilling moratorium on the entire Gulf. The devastating environmental impact is still being evaluated.
4. Chernobyl (1986). The 1986 nuclear meltdown of the Chernobyl power plant -- in what was then the Soviet Union and is now Ukraine -- was the worst commercial nuclear incident in history. The explosion released radioactive material that blew over much of Eastern Europe. Some 32 people died directly from the incident, and thousands have suffered health problems believed to be caused by the meltdown. As of 2002, more than 4,000 cases of thyroid cancer had been documented in children who lived near the disaster zone, with most cases linked to exposure to radioactivity.
5. Burning Kuwait Oil Fields (1991). During the 1990-91 Gulf War, retreating Iraqi troops set fire to Kuwaiti oil fields as part of Saddam Hussein’s strategy to slow down advancing American troops. A total of 605 to 732 oil wells were set on fire, which caused an environmental nightmare and respiratory problems in people living throughout the region. An estimated 4 to 6 million barrels of oil burned per day for a period of months. Thick black smoke was visible from space as fires raged.
6. Farmington Mine Disaster, WV (1968). An explosion at the Consol No. 9 mine in Farmington, West Virginia on Nov. 20, 1968 was a seminal event for the U.S. coal industry. There were 99 miners inside mine when it exploded, and 21 escaped. Efforts to reach the remaining 78 miners were unsuccessful, and when all hope was lost, the mine was sealed to extinguish raging fires and prevent more explosions. While not the worst coal disaster in U.S. history, it led to major changes for miner safety, including the passage of the Federal Coal Miner Safety and Health Act of 1969, which put in place greater worker safety standards and required mine inspections.
7. India Power Blackout (2012). During the height of summer, the largest power blackout in history struck India. An estimated 670 million people – a staggering 10 percent of the world's population – were without power for about two days. Indian officials struggled to identify a single cause in the immediate aftermath. A combination of factors, including poor infrastructure, high demand, and mismanagement of electricity flows all contributed to the blackout, which stretched for 2,000 miles.
8. Benxi Coal Mining Explosion (1942). An explosion at a coal mine near Benxi in China’s northwest province of Liaoning in 1942 left more than 1,549 people dead. Mining conditions in Japanese-occupied China were horrendous, and workers suffered from disease, lack of food, and were brutalized by Japanese guards. Coal mining continues to be a highly deadly industry in China today, but the Benxi disaster stands out as the worst in coal mining history.
9. Exxon Valdez (1989). An Exxon oil tanker crashed into Bligh Reef on March 24, 1989 and unleashed 11 million gallons of crude oil into Alaska’s pristine Prince William Sound. Wildlife in the surrounding area was severely impacted -- oil-covered dead birds, fish, and mammals washed ashore. The incident spurred action by the U.S. Congress, which passed the Oil Pollution Act of 1990 the following year.
10. Lac-Megantic Train Explosion (2013). A train carrying crude oil derailed on July 6, 2013 in the town of Lac-Megantic, Quebec in Canada’s worst rail accident in more than a century. Train cars carrying crude broke free from their locomotive, rolled down hill and derailed, causing six massive explosions that killed 47 people.
By Nick Cunningham of Oilprice.com
Saudi Arabia’s oil exports reached 2.06 billion barrels in the first nine months of 2014 with proceeds amounting to SR830 billion, local media said quoting an economic expert.
Domestic consumption during the same period reached nearly 621.5 million barrels, or 23 percent of the total output, Fahad bin Jumaa was quoted as saying by Al-Riyadh daily.
The above figures come at a time when Petroleum and Mineral Resources Minister Ali Al-Naimi has calmed fears over the impact of drop of crude oil prices on the Kingdom’s crude production and the possible production cuts by the OPEC (Organization of Petroleum Exporting Countries) later in the year, the paper said.
A top Saudi Aramco official, meanwhile, was quoted as saying that his company is planning to invest $40 billion (SR150 billion) in the next 10 years to keep stability of oil production and double gas production, the daily said.
Jumaa said oil prices and Kingdom’s exports have dropped since the beginning of Q3 in July where prices of Brent remained below $100 per barrel since Sep 5 to reach $ 94.13, which is considered the lowest in more than two years.
The economic expert attributed price fall to a number of factors including volatility of OPEC supplies, production increase of the US, slowdown of global demand outside the US, resumption of Libyan oil production by 900,000 barrels per day, and improvement of Nigerian production to 1.9 million barrels a day.
Based on the supply and demand indications, Jumaa said Brent prices are expected to drop by $5-$10 per barrel to $80 in the next period.
The Kingdom, however, is expected to keep its current export levels regardless of production cut due to drop in local consumption as summer season is over, he said
(Reuters) - The Russia-led South Stream undersea gas pipeline is still going ahead, Energy Minister Alexander Novak was quoted as saying on Saturday, following concerns the European Union might be losing enthusiasm for the project.
The natural gas pipeline, which will cost an estimated $40 billion, is designed to carry Russian gas to the center of Europe on a route that bypasses crisis-hit Ukraine.
The project has yet to be approved by the EU, which is trying to become less dependent on Russian gas. Supplies from Russia currently account for about a third of EU gas imports.
"The South Stream project has not been stopped," Novak was quoted as saying by the Interfax news agency.
"The agreements which were signed remain in force. They can't be canceled on a unilateral basis."
The European Commission has said South Stream as it stands does not comply with EU competition law because it offers no access to third parties.
South Stream also runs counter to the EU policy of diversifying supply sources to reduce dependence on Russia.
The project has run into problems as a European Commission working group, set up to define a mechanism for managing the pipeline, has stopped its work, Novak said.
"We hope that we will resume such work when the new European Commission is appointed," the minister added.
(Reporting by Polina Devitt; Editing by Jason Bush and Mark Potter)
AMMAN, 14 hours, 21 minutes ago
The first shale oil-fuelled power plant in Jordan will be ready by the end of 2018, a report said, adding it is expected to cut the country's energy spending by $500 million annually.
The $2.2 billion plant will have a total capacity of 470 megawatts (MW), will use Jordan’s reserves of oil shale estimated at more than 70 billion tonnes, Minister of Energy and Mineral Resources Mohammad Hamed was quoted as saying in the Jordan Times report.
He was speaking at a press conference after signing a 30-year power purchase agreement with Enefit (Eesti Energia AS), YTL Power International Berhad and Near East Investments, who will build the power plant.
The project will create 3,000 jobs during the construction phase and 700 jobs for ongoing operations, added Hamed.
"The project will greatly help in Jordan's efforts to reduce energy imports from 97 per cent of its needs currently to 60 per cent by 2020," Hamed noted, highlighting that the plant is the first of its kind in the region.
FRANKFURT, 20 hours, 11 minutes ago
German industrial conglomerate Siemens expects low profit margins at its energy division in the next couple of years and could close some factories as a result, the head of the division said.
Lisa Davis told the Boersen-Zeitung newspaper the company was reviewing individual sites and it was unclear whether some would be closed or whether they would be used for different products, according to a report in the Gulf Daily News, our sister publication.
'We will see low margins in the power and gas unit in the next two to three years.'
The newly-created Siemens Power and Gas division makes products ranging from gas turbines and compressors to oilfield equipment. Siemens strengthened it this year with the acquisitions of US-based Dresser Rand as well as Rolls Royce's power unit.
The takeovers will help Siemens adjust to a change in energy markets, where small, decentralised units are on the rise to the detriment of large power plants, Davis said.
'By 2030, about a third of our electricity will come from local systems,' she said.
Siemens chief executive Joe Kaeser last month said he expected demand for products such as gas turbines to rebound from 2016, adding the synergies from the deal justified the purchase price.
Siemens expects more than 150 million euros in annual synergies by 2019 from the Dresser Rand transaction. – TradeArabia News Service
LONDON/DUBAI, 1 days ago
Some Opec countries are calling for supply cuts after a drop in oil prices, but core Gulf members are betting winter demand will revive the market, suggesting the group is no closer to any collective steps.
The differing views within the 12-member Organization of the Petroleum Exporting Countries (Opec) highlight a split between Saudi Arabia and its Gulf allies and other members, such as Iran, who face greater budget pressures from sub-$100 oil.
"It is really bad that prices are falling, which is a result of increased US production, slower economic recovery of the EU and lower growth in China," said a delegate from one of Opec's African members.
"I think that the next Opec meeting will have to deal with the matter."
The organisation meets to set its oil output policy on November 27.
Oil has fallen from $115 in June to a 27-month low below $92 a barrel on Thursday after Saudi Arabia cut its official crude selling prices, raising concern in the market that Opec's top producer would not reduce its output.
A second source familiar with Opec policy said while the market was weak, with supply exceeding demand, it was too early for Opec to think of joint action to bolster prices.
"A collective Opec decision needs clear signals from each country, which is not there yet," the source said.
So far, only Iran has called publicly for Opec to act to support prices. The Gulf producers so far remain unworried, with Saudi Arabia's oil minister appearing to downplay the price drop and delegates have stopped short of calling for action to bolster prices.
output is climbing and in September hit 30.96 million barrels per day (bpd), its highest since November 2012, due to further recovery in Libya and higher output from the Gulf producers, according to a Reuters survey.
That is almost one million bpd more than Opec's official production target of 30 million bpd and almost 2 million bpd more than its forecast of the average global demand for its crude in 2015.
Cutting output would be a challenge for Opec, analysts say. The group has not collectively lowered its supply since the 2008 financial crisis and lacks a system of individual output quotas to enforce any cutback agreement.-Reuters
President of Kazakhstan Nursultan Nazarbayev has met with entrepreneurs and community representatives in Aktau, a city in Western Kazakhstan, Tengrinews reports citing the official website of the President.
During the meeting, Akim of Mangistau Oblast Alik Aidarbayev presented a report on socio-economic development of the region and the Minister for Investment and Development Asset Issekeshev reported on the course of implementation of the state-run industrial and innovation program in the area.
On his part, Nazarbayev touched upon a variety of topics.
First, he said there was a need to develop industries that are not related to oil, like logistics, transit, services and tourism in Mangistau.
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For example, he said the “significant deposits of uranium, strontium, manganese, copper and mineral salts” allowed boosting the metallurgical industry.
The president instructed forming an ad hoc working group and welcomed proposals for the development of Kenderli and other attractive areas.
Kazakhstan President stressed that the region showed a good fertility rate and life expectancy, as well as reduced infant and maternal mortality.
"However, the availability of medical personnel is 20 percent below the country's average. The deficit of places in kindergartens stands at 12 thousand, which is one of the worst country-wise. This region is one of the leaders in the country by the influx of people from other regions and neighboring countries," he said.
The President noted that the government needed to create conditions to encourage migration to other priority regions.
He also said that the region lies in the desert area, which made agriculture there difficult.
"Mangistau region consumes 20,000 tons of meat per year and produces 5.5 tons. 500 tonnes of fish are caught in the region per year, while the demand is 5000 tons. Meanwhile, neighboring Atyrau Oblast is self-sufficient with all the necessary products, including vegetables, fruit and meat. It is necessary to comprehensively solve problems of development of agriculture in the region. And small and medium-sized businesses should join this task," Nazarbayev said.
Nazarbayev addressed the issue of further development of the Special Economic Zone in Aktau.
"The first venue was built in 2012, costing $7 billion tenge of state budget money. However, of 31 registered projects in the zone only 5 now operate. The available enterprises produced goods worth more than 220 billion tenge (approx. $1.21 billion) and have paid almost 10 billion tenge (approx. $55 million) in taxes. There is pay off, so it is necessary to further realize their potential. It is necessary to seriously speed up all the other projects and start attracting new investors," the head of state said.
Nazarbayev also noted the positive dynamics in the development of the region connected to its geographical location. It is one of the only two Oblasts in Kazakhstan that have access to the Caspian Sea.
"The capacity of Aktau seaport has been increased from 12.5 to 16 million tons, and by 2020 it will be further increased to 22 million tons of cargo per year. Iran is ready to buy up to 6 million tons of grain per year. Agreements reached with the country in this and other areas are opening up new opportunities of access to foreign markets. With Aktau seaport, our country has a great export potential," he said.
In addition, the Kazakh President said that a logistics center in Aktau was to be built together with Azerbaijan will open access to quality cheap fruit and vegetables for all Kazakhstani consumers.
Nazarbayev once again drew attention to the importance of attracting foreign investment and using the available capacities for dynamic development of the region.
By Dinara Urazova
ONE of Russia's prized oils, facing increased competition in Asia, is travelling to a rather unlikely destination: the US West Coast.
As the US threatens President Vladimir Putin with further economic sanctions over the conflict in Ukraine, light Sokol oil from Russia's Far East is showing up in California for the first time in six years. Tankers have been carrying the crude to western states from Korea since May as Asia cherry-picks supplies from a growing pool of sources, including West Africa and Latin America, shipping data compiled by Bloomberg show.
Sokol's emergence underscores how oversupplied markets have become with light crude as the US produces record volumes from shale formations and reduces imports. The surplus has grown so large that slowing demand in China and other Asian countries mean it won't be absorbed, according to Barclays Plc.
UAE is looking to offer energy companies such as BP, Royal Dutch Shell and Total ‘a good chance to compete’ for concessions in the nation’s biggest onshore deposits of crude oil, according to a report.
Its Energy Minister Suhail Al Mazrouei said the three companies, together with Exxon Mobil Corp and Portugal’s Partex Oil and Gas, were partners with Abu Dhabi, UAE, in a joint-venture agreement that expired in January, said the Bloomberg report.
The former shareholders, except for Partex, have been seeking deals to keep pumping oil in the Persian Gulf emirate and are among 11 bidders for new accords.
Al Mazrouei did not mention Exxon and Partex was not invited to bid for a new concession.
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Abu Dhabi has pumped oil from its onshore fields under concession deals with Exxon, Shell, Total, BP and Partex – or their predecessors – since January 1939.
Adnoc became a partner in the 1970s, joining with the companies to form Abu Dhabi Co for Onshore Oil Operations (Adco) - a venture that was responsible for extracting 1.5 million barrels a day of Murban grade crude, the UAE’s main blend.
Adnoc picked BP, Exxon, Shell, Total and seven other companies to submit bids for the oil fields by this month.
It is reviewing the offers before submitting recommendations to the Supreme Petroleum Council, Abu Dhabi’s top energy policy body, for a final decision on the new partners.
The UAE is the fourth-largest producer in the Organization of Petroleum Exporting Countries (Opec), pumping 2.85 million barrels a day of oil in September.
The International Energy Agency (IEA) said that US production of petroleum is set to exceed that of Saudi Arabia’s for the first time since 1991. US liquefied petroleum output is set to overhaul Saudi Arabia in September or October. In terms of crude oil production, the US is still third behind, with Russia in the lead.
US production of liquid petroleum reached 11.5 million barrels per day, on track to outpace Saudi Arabia’s 11.6 million barrels in the next few months, according to August IEA data, published on September 10.
Saudi Arabia is the second-largest petroleum exporter to the US, but as domestic production increases in America, less is needed from abroad.
The shale oil boom in the US began in 2008 and has increased US crude output by 60%. In 2012, the United States became a net exporter of liquefied petroleum gases for the first time.
Between January and March 2014, Saudi Arabia exported an average of 1.5 million barrels per day to the US.
Saudi Arabia is the largest exporter of petroleum liquids in the world and is home to the world’s largest proven crude oil reserves, 16% of the world’s total.
However, in terms of crude oil production, Russia is still the world’s leader with 10.1 million barrels per day, with Saudi Arabia coming in second with 9.7 million barrels per day.
The IEA said the US could catch up with Saudi Arabia and Russia in crude production by the end of the decade.
Russian oil output rose to near a post-Soviet record in September, a sign that Western sanctions have not affected the biggest source of revenue for Russian President Vladimir Putin’s government.
Russia increased output 0.7% to 10.61 million barrels a day, according to preliminary data from CDU-TEK, which is part of Russia’s Energy Ministry. The figure is within 0.3% of the record in January and is for crude and condensates, a type of oil that yields a greater proportion of high-value fuels.
The US and the EU have targeted Russia’s oil industry by banning exports of some equipment and technology, due to Russia’s involvement in Ukraine. Production in the oil and gas sector hasn’t been affected by tighter sanctions yet.
Meanwhile, oil prices have been tumbling for months on concerns that ample oil output, especially from the US, is overwhelming demand for petroleum products. US production has exceeded expectations and Libya shocked the market with resurgence in output in recent months.
US oil prices dipped below $90 a barrel for the first time in over a year on October 2 after Saudi Arabia signaled its comfort with current high global supplies and relatively low prices.
The benchmark US oil futures contract later recovered, ending slightly higher. Saudi Arabia cut its prices for November to multiyear lows on October 1, a sign to some market watchers that Riyadh is more concerned with preserving market share than with keeping prices high.
The benchmark US oil futures contract dropped to $88.18 a barrel, a 17-month low, before settling up 0.3% at $91.01 a barrel on the New York Mercantile Exchange.
Brent, the international benchmark, was on track to end at its lowest price in over two years.
Energy analysts have made the largest downward revision to their oil price forecasts in almost two years, a monthly Reuters poll showed, with the marked weakness in the price of Brent seen persisting into 2015.
The survey results pose a challenge to members of the Organization of the Petroleum Exporting Countries (Opec), who have largely argued prices will recover from two-year lows hit below $95 a barrel on stronger demand in the fourth quarter.
The poll of 30 analysts said international benchmark Brent crude oil would average $103.30 a barrel in 2015, down from $105.30 in the August survey. The $2 average price cut is the largest month-on-month decrease according to survey data going back to the start of 2013.
Brent has averaged near $110 a barrel since 2011 but has fallen sharply since June as US shale oil supplies outstripped expectations and Iraqi and Libyan production has risen despite violence and political unrest in the two Opec members.
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Reuters monthly survey of Opec production showed higher supplies from the group last month, despite calls from some members for a cut in output when it next meets in November.
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Saudi Arabia, the group’s largest producer and the most likely to adjust production unilaterally, increased supplies slightly last month, the Reuters survey showed.
US light, sweet crude, also known as West Texas Intermediate or WTI, would average $96.10 next year, below the $98.50 outlook in the previous month’s poll. WTI has averaged $99.57 so far this year.
Oct 4 (Reuters) - The Russia-led South Stream undersea gas pipeline is still going ahead, Energy Minister Alexander Novak was quoted as saying on Saturday, following concerns the European Union might be losing enthusiasm for the project.
The natural gas pipeline, which will cost an estimated $40 billion, is designed to carry Russian gas to the centre of Europe on a route that bypasses crisis-hit Ukraine.
The project has yet to be approved by the EU, which is trying to become less dependent on Russian gas. Supplies from Russia currently account for about a third of EU gas imports.
"The South Stream project has not been stopped," Novak was quoted as saying by the Interfax news agency.
"The agreements which were signed remain in force. They can't be cancelled on a unilateral basis."
The European Commission has said South Stream as it stands does not comply with EU competition law because it offers no access to third parties.
South Stream also runs counter to the EU policy of diversifying supply sources to reduce dependence on Russia.
The project has run into problems as a European Commission working group, set up to define a mechanism for managing the pipeline, has stopped its work, Novak said.
"We hope that we will resume such work when the new European Commission is appointed," the minister added. (Reporting by Polina Devitt; Editing by Jason Bush and Mark Potter)
Oct 3 (Reuters) - Norwegian energy firm Statoil has signed a deal to sell gas to Ukraine state gas firm Naftogaz, the Nordic firm said on Friday, providing another source of gas for Ukraine after Russia cut off supplies.
On Thursday a source in the Ukrainian energy sector told Reuters Ukraine had received its first supplies from Norway via Slovakia and that the price was much lower than for Russian gas.
"Statoil has signed an agreement with yet another new-to-Statoil gas customer in the European gas market. The agreement with Naftogaz is for deliveries of gas in Slovakia," Statoil spokesman Morten Eek said. "From there they are responsible for transportation."
Statoil is Europe's second-largest gas supplier after Gazprom.
He did not say the value of the deal. "In a Statoil context, this is a short-term and relatively low-volume agreement," he said.
Russia, Ukraine's main supplier, cut off supplies in June. Ukraine has imported some gas from neighbouring EU countries Poland and Hungary. In September, Kiev also started gas imports from Slovakia.
Ukraine, which consumes about 50 billion cubic metres (bcm) of gas per year, produces about 20 bcm and imports the rest. Russia cut off gas supplies over a price dispute. (Reporting by Balazs Koranyi, writing by Gwladys Fouche; editing by Jane Baird)
Booming production in America’s shale sweet spots, steady oil and gas demand and still more momentum towards liquefied natural gas exports highlight this week’s US energy scene.
The numbers are impressive, with oil production from North Dakota and Texas shale formations up by more than 78,000 barrels per day in August, representing a 3.1% rise over the previous month, and Texas’ Eagle Ford shale leading the pack with a 37% increase in production overall since the same time last year.
Crude oil production in the Bakken shale in North Dakota averaged nearly 1.2 million barrels per day in August, according to Bentek, representing an increase of 227,000 barrels per day over the same time last year.
US production of oil and related liquids kept pace with Saudi Arabia in August, at about 11.5 million barrels per day, according to the International Energy Agency (IEA), and with production continuing to boom, US output is set to exceed Saudi output this fall, for the first time since 1991. Keep in mind, though, that the figures here count not only production of crude oil—which is the Saudi powerhouse and what really counts—but the production of “oil and oil-related liquids” in general. This somewhat dilutes the game, but it’s still quite impressive.
And while crude oil is probably the most important piece of this global puzzle, in the US, an enormous amount of faith is being placed on natural gas production from shale formations. As Oilprice.com reported earlier this week, “It is difficult to overstate the effect shale gas production has had on the United States.” While shale gas production accounted for only about 5% of natural gas production, by 2013 it accounted for around 40%.
The Energy Information Administration (EIA) expects US natural gas production to grow at an annual rate of 1.6% through 2040, with the largest demand increase coming from the electric power sector.
With this in mind, the announcement this week that Exelon Corporation—a major electric utility—will expand its natural gas-based power generation capacity by 2,000 MW and add to more natural gas plants in Texas comes as no surprise. Right now, more than half of Exelon’s generation units are nuclear-based.
Construction of Exelon’s natural gas units is slated to begin next year, and should be operational in 2017.
The natural gas boom is also feeding American plans to export liquefied natural gas (LNG), with yet another approval this week.
On Monday, Dominion Energy won federal approval to export LNG from its Cove Point terminal on the Chesapeake Bay in Maryland. This is the first East Coast LNG export project to be approved, while three others approved are in the Gulf of Mexico.
Dominion foresees export operations beginning in 2017 and forecasts that 85 ships will export LNG from its terminal every year. Dominion is targeting the Japanese and Indian markets for its LNG.
The pioneer here, though, was the Sabine Golden Pass LNG export project, whose story best illustrates the changing global gas scene. This is where America’s need for Qatar gas ends, and the export future begins—again, with help from Qatar but in the opposite direction. In partnership, Qatar Petroleum and Exxon Mobil will spend at least $10 billion to convert this facility to handle exports rather than imports, with Qatar planning on footing around 70% of the bill.
In the meantime, the EIA reported this week that US natural gas stocks has increased by 112 billion cubic feet for the week ending 26 September—which is higher than the anticipated 107 billion cubic feet.
Stockpiles are around 10.7% below their levels of a year ago, and 11.4% below the five-year average, while the winter heating season should see stockpiles at around 3.55 trillion cubic feet, or the lowest since 2008.
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That’s it from us this week. I hope you enjoy the below report and have a great weekend.
By. James Stafford of Oilprice.com
