Russian Pacific port raises 2014 crude oil export forecast
Tuesday, 10 June 2014 17:11
Russia's Pacific port of Kozmino plans to export 24.6 million tonnes of oil this year (494,000 barrels per day), up from 21.3 million tonnes last year, Deputy Energy Minister Kirill Molodtsov said on Tuesday.
Russia is ramping up exports eastwards as it tries to reduce reliance on its main market, Europe, because of the threat of expanded EU sanctions against Russia over the crisis in Ukraine.
In January, the port operator said that exports this year were expected to total 22-23 million tonnes. Molodtsov did not say whether exports to Europe would fall as a result of the planned increase.
Igor Dyomin, a spokesman for oil pipeline monopoly Transneft , confirmed the new figure. He said that of the total 24.6 million tonnes to be shipped, 1.2 million would be delivered to the port by railway and the rest via the East Siberia-Pacific Ocean pipeline.
An increase in exports eastwards may push up the price of Russia's main export blend, Urals, to European refineries which receive it via pipelines and ports.
That could further squeeze their margins at a time when many are under pressure because of large volumes of oil product exports from Russia and the United States, and some European plants have been forced to close.
Russian oil exports declined by 2.5 percent to 228.5 million tonnes in 2013, according to Energy Ministry data, and are expected to fall further to 225 million tonnes (4.5 million bpd) this year due to an increase in domestic production of refined products.
As a part of Moscow's shift eastwards, the Energy Ministry predicts that the share of oil and oil products sent to Asia will double to 23 percent by 2035.
By then, Russia aims to ship a total of 32 percent of its oil to Asia, with gas rising to 31 percent from 6 percent.
Russia sent around 16 percent of its total oil exports to Asia last year and is exporting gas to Asia only from the Sakhalin-2 LNG plant, which has total annual capacity of 10 million tonnes.
Last month, Gazprom signed a $400 billion deal to ship 38 billion cubic metres of gas to China annually after the necessary pipeline infrastructure is built - a volume comparable to what it now ships to its largest client, Germany.
Copyright Reuters, 2014
June 3, 2014 by Ibrahim KhalilNo Comments
The Badra oil field is located in Wasit Province in Eastern Iraq 650x354 Gazprom to start production of oil in Badra field [06/09/2014]
The Badra oil field is located in Wasit Province in Eastern Iraq
Baghdad (IraqiNews.com) New infrastructure for the field’s commercial development has been put in place. The CGS’s first line has been constructed with a capacity of 60 thousand barrels per day and in March 2014 the Badra field was connected to the 165-kilometre-long main Iraqi oil pipeline system.
Production in the field will reach its peak of 170 thousand barrels per day (around 8.5 million tonnes per year) in 2017 and then remain the same for a period of 7 years.
Vadim Yakovlev, First Deputy CEO of Gazprom Neft said in a statement reviewed by IraqiNews.com “Development at the Badra field is one of Gazprom Neft’s first international assets in oil production. We launched this project from scratch and over a short period of time have completed all of the complex work necessary for the industrial development of the Badra field.”
It is worth mentioning that Badra oil field is located in Wasit Province in Eastern Iraq.
OPEC crude output averaged 29.69 million b/d in May, up 250,000 b/d from a revised April figure of 29.44 million b/d, US Energy Information Administration data showed Tuesday.
The increase was led by a 100,000 b/d rise in Saudi Arabian crude output to 9.7 million b/d in May. OPEC production was higher in May because of a drop in supply disruptions, the EIA said.
“Unplanned crude oil supply disruptions among OPEC producers averaged 2.6 million bbl/d in May, down from the 2.7-million-bbl/d average in April,” the EIA said in its June Short Term Energy Outlook.
“Libya continues to experience variation in its production, contributing to changes in the OPEC disruption estimate.” Libya produced 230,000 b/d in May, up from 210,000 b/d in April, the EIA data showed.
Angolan and Nigerian production was also a bit higher. Looking forward, the EIA forecast 2014 OPEC production dropping to 29.8 million b/d, and 29.69 million b/d in 2015, down from 29.91 million b/d in 2013.
“EIA expects OPEC crude oil production to fall by 0.1 million bbl/d in 2014 and an additional 0.1 million bbl/d in 2015 to accommodate growing production in non-OPEC countries,” the agency said.
Angolan crude values remain under pressure amid weak refining margins, fragile product cracks and thin Chinese demand, with all grades seeing their values fall sharply in the past two weeks, trading sources said Tuesday.
The trend is broadly expected to continue this week although some sources said that spot activity had picked up slightly towards the end of last week, with some trades heard done, albeit at much weaker levels.
There are up to 12 July cargoes still available, according to sources, consisting of some Cabinda, Dalia, Plutonio and Hungo stems. Cabinda was assessed at Dated Brent minus $1.28/b on Monday, the lowest since April 21, 2011, while Dalia was assessed at Dated Brent minus $2.28/b, the weakest since March 19, according to Platts data.
“We are still seeing so many offers, the market is still very much under pressure. Values continue to fall,” said a trader. “The Chinese are buying a little more now as the market has dropped.
It was expected that there would be more buying more from them at this stage,” he added. Sources said that demand in Asia — particularly China and Taiwan — had been very slow in the past two weeks especially for grades like Cabinda, Plutonio, Pazflor, Dalia, Kissanje and Girassol.
As a result, values have been coming off. On top of that, demand from European refiners has also been lackluster as margins in Europe have been very low. But sources said the demand was looking a little bit better after some grades had traded at very low levels.
“[The WAF] market is quiet this morning. [Indian company] MRPL’s tender is the next one to be awarded on Wednesday,” a second trader added. “Difficult to say [how the market would fare this week] — there has been some activity last week so I would expect the cargoes to continue moving slowly.”
Near-historic-high US production will continue to put downward pressure on crude oil prices this year, the US Energy Information Administration said Tuesday, forecasting that WTI will average $98.67/barrel and Brent will average $107.26/b in 2014.
Total US crude oil production, which averaged 7.4 million b/d in 2013, is forecast to climb to 8.42 million b/d in 2014 and then 9.27 million b/d in 2015, which would be the highest annual oil production average since 1972, EIA said Tuesday in its June Short-Term Energy Outlook.
EIA’s forecast for 2014 average prices was increased by $2.08 for WTI and $1.56 for Brent from May’s STEO forecast. EIA forecasts prices to fall further in 2015, with WTI averaging $90.92/b and Brent averaging $101.92/b, the same estimates the agency released in May.
EIA said that because of high seasonal demand and strong refinery runs, it expects the WTI discount to Brent will remain around $7/b this summer before widening to $12/b in December.
“EIA expects the discount to average of $9/b in 2014 and $11/b in 2015, reflecting the economics of transporting and processing the growing production of high API gravity (very light) sweet crude oil in the United States,” the agency said.
Overall US liquid fuels demand is estimated to be 18.93 million b/d in 2014, rising to 18.98 in 2015, estimates which nearly match those EIA released last month.
While motor gasoline consumption grew by 90,000 b/d in 2013, a 1.1% increase from 2012 and the largest increase since 2006, it is only expected to climb by 30,000 b/d in 2014. Consumption of motor gasoline in the US also is expected to fall by 10,000 b/d in 2015 because of improved vehicle fuel economy.
NYMEX July crude settled near flat Tuesday, down 6 cents at $104.35/barrel, after pulling back from a three-month high on profit-taking ahead of Wednesday’s OPEC meeting.
July crude reached the three-month high of $105.06/b during the session on expectations that US inventories fell last week. The price action narrowed the front-month Brent-WTI spread to an eight-week low of $5.07/b during the session.
The Brent-WTI spread then settled at a two-month low of $5.17/b. That’s down from $5.58/b on Monday and $6.16/b a week ago. ICE July Brent settled 47 cents lower at $109.52/b. In products, NYMEX July ULSD settled 71 points lower at $2.8841/ gal and July RBOB ended 1.03 cents lower at $2.9745/ gal.
Petroleum futures retreated from session highs on what appeared to be light volume profit-taking ahead of Wednesday’s OPEC meeting, said Tim Evans, commodity analyst at Citi Futures Perspective.
Although, Evans said, there seems to be near universal agreement that OPEC will leave the group’s 30 million b/d production target unchanged. Analysts polled by Platts Monday expect crude stocks to have declined 1.2 million barrels last week.
ICE front-month Brent had pushed near a two-week high of $110.32/b, but easing geopolitical risks from ongoing peace talks between the Ukraine and Russia limited the upside, noted Gene McGillian, analyst at Tradition Energy.
Geopolitical news was mixed, with a chance for a ceasefire in Ukraine, but fighting in Mosul, Iraq, putting oil pipeline exports via Turkey at risk, Evans said.
Near-historic-high US production will continue to put downward pressure on crude oil prices this year, the US Energy Information Administration said Tuesday, forecasting that WTI will average $98.67/barrel and Brent will average $107.26/b in 2014.
Total US crude oil production, which averaged 7.4 million b/d in 2013, is forecast to climb to 8.42 million b/d in 2014 and then 9.27 million b/d in 2015, which would be the highest annual oil production average since 1972, EIA said Tuesday in its June Short-Term Energy Outlook. EIA’s forecast for 2014 average prices was increased by $2.08 for WTI and $1.56 for Brent from May’s STEO forecast.
EIA forecasts prices to fall further in 2015, with WTI averaging $90.92/b and Brent averaging $101.92/b, the same estimates the agency released in May. EIA said that because of high seasonal demand and strong refinery runs, it expects the WTI discount to Brent will remain around $7/b this summer before widening to $12/b in December.
“EIA expects the discount to average of $9/b in 2014 and $11/b in 2015, reflecting the economics of transporting and processing the growing production of high API gravity (very light) sweet crude oil in the United States,” the agency said.
Overall US liquid fuels demand is estimated to be 18.93 million b/d in 2014, rising to 18.98 in 2015, estimates which nearly match those EIA released last month. While motor gasoline consumption grew by 90,000 b/d in 2013, a 1.1% increase from 2012 and the largest increase since 2006, it is only expected to climb by 30,000 b/d in 2014. Consumption of motor gasoline in the US also is expected to fall by 10,000 b/d in 2015 because of improved vehicle fuel economy.
By Post Carbon | Tue, 10 June 2014 21:17 | 0
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The International Energy Agency has just released a new special report called “World Energy Investment Outlook” that should send policy makers screaming and running for the exits—if they are willing to read between the lines and view the report in the context of current financial and geopolitical trends. This is how the press agency UPI begins its summary:
It will require $48 trillion in investments through 2035 to meet the world’s growing energy needs, the International Energy Agency said Tuesday from Paris. IEA Executive Director Maria van der Hoeven said in a statement the reliability and sustainability of future energy supplies depends on a high level of investment. “But this won’t materialize unless there are credible policy frameworks in place as well as stable access to long-term sources of finance,” she said. “Neither of these conditions should be taken for granted.”
Here’s a bit of context missing from the IEA report: the oil industry is actually cutting back on upstream investment. Why? Global oil prices—which, at the current $90 to $110 per barrel range, are at historically high levels—are nevertheless too low to justify tackling ever-more challenging geology. The industry needs an oil price of at least $120 per barrel to fund exploration in the Arctic and in some ultra-deepwater plays. And let us not forget: current interest rates are ultra-low (thanks to the Federal Reserve’s quantitative easing), so marshalling investment capital should be about as easy now as it is ever likely to get. If QE ends and if interest rates rise, the ability of industry and governments to dramatically increase investment in future energy production capacity will wane.
The shale bubble’s-a-poppin’. In 2012, the IEA forecast that oil extraction rates from US shale formations (primarily the Bakken in North Dakota and the Eagle Ford in Texas) would continue growing for many years, with America overtaking Saudia Arabia in rate of oil production by 2020 and becoming a net oil exporter by 2030. In its new report, the IEA says US tight oil production will start to decline around 2020. One might almost think the IEA folks have been reading Post Carbon Institute’s analysis of tight oil and shale gas prospects! www.shalebubble.org This is a welcome dose of realism, though the IEA is probably still erring on the side of optimism: our own reading of the data suggests the decline will start sooner and will probably be steep.
Help us, OPEC—you’re our only hope! Here’s how the Wall Street Journal frames its story about the report: “A top energy watchdog said the world will need more Middle Eastern oil in the next decade, as the current U.S. boom wanes. But the International Energy Agency warned that Persian Gulf producers may still fail to fill the gap, risking higher oil prices.” Let’s see, how is OPEC doing these days? Iraq, Syria, and Libya are in turmoil. Iran is languishing under US trade sanctions. OPEC’s petroleum reserves are still ludicrously over-stated. And while the Saudis have made up for declines in old oilfields by bringing new ones on line, they’ve run out of new fields to develop. So it looks as if that risk of higher oil prices is quite a strong one.
A “what-me-worry?” price forecast. Despite all these dire developments, the IEA offers no change from its 2013 oil price forecast (that is, a gradual increase in world petroleum prices to $128 per barrel by 2035). The new report says the oil industry will need to increase its upstream investment over the forecast period by $2 trillion above the IEA’s previous investment forecast. From where is the oil industry supposed to derive that $2 trillion if not from significantly higher prices—higher over the short run, perhaps, than the IEA’s long-range 2035 forecast price of $128 per barrel, and ascending higher still? This price forecast is obviously unreliable, but that’s nothing new. The IEA has been issuing wildly inaccurate price forecasts for the past decade. In fact, if the massive increase in energy investment advised by the IEA is to occur, both electricity and oil are about to become significantly less affordable. For a global economy tightly tied to consumer behavior and markets, and one that is already stagnant or contracting, energy constraints mean one thing and one thing only: hard times.
What about renewables? The IEA forecasts that only 15 percent of the needed $48 trillion will go to renewable energy. All the rest is required just to patch up our current oil-coal-gas energy system so that it doesn’t run into the ditch for lack of fuel. But how much investment would be required if climate change were to be seriously addressed? Most estimates look only at electricity (that is, they gloss over the pivotal and problematic transportation sector) and ignore the question of energy returned on energy invested. Even when we artificially simplify the problem this way, $7.2 trillion spread out over twenty years simply doesn’t cut it. One researcher estimates that investments will have to ramp up to $1.5 to $2.5 trillion per year. In effect, the IEA is telling us that we don’t have what it takes to sustain our current energy regime, and we’re not likely to invest enough to switch to a different one.
If you look at the trends cited and ignore misleading explicit price forecasts, the IEA’s implicit message is clear: continued oil price stability looks problematic. And with fossil fuel prices high and volatile, governments will likely find it even more difficult to devote increasingly scarce investment capital toward the development of renewable energy capacity.
As you read this report, imagine yourself in the shoes of a high-level policy maker. Wouldn’t you want to start thinking about early retirement?
By Richard Heinberg of Post Carbon Institute
Jun 10 2014 11:15
(Shutterstock)
Paris - Demand for natural gas is set to nearly double within five years in China but the emerging market giant will meet half that with domestic supplies, the International Energy Agency (IEA) said on Tuesday.
In its latest medium-term forecasts for the natural gas sector, the IEA trimmed its five-year outlook for consumption by 0.2 points to an annual increase of 2.2% as European countries step up use of renewable energy.
However, it said demand for cleaner-burning natural gas was likely to grow in China as air quality concerns prompted authorities to take measures to reduce pollution
"Driven by booming demand, the 'Golden Age' of natural gas that is now firmly established in North America will expand to China over the next five years," said the IEA.
"The power, industrial and transport sectors will drive overall Chinese gas demand to 315 billion cubic meters in 2019, an increase of 90% over the forecast period."
The energy analysis arm of the Organisation for Economic Co-operation and Development (OECD) group of advanced countries said China was also set to benefit from a boom in gas production.
"While China will remain a significant importer, half of its new gas demand will be met by domestic resources, most of them unconventional: Chinese production is set to grow by 65%, from 117 bcm (billion cubic metres) in 2013 to 193 bcm in 2019," said the IEA.
The IEA was somewhat cautious about the outlook overall for natural gas given efforts to switch to renewables, high prices for liquefied natural gas (LNG) supplies, and competition from other fuels such as coal.
"High LNG prices are threatening to crimp demand as many countries are increasingly unwilling, or unable, to afford these supplies - and that could open the door to coal," IEA executive director Maria van der Hoeven said in a statement.
That is of major concern as increased Asian demand for gas is expected to be met mostly by LNG supplies, which the IEA forecasts to increase by 450% to reach 450 bcm in 2019.
The IEA expects half of all new LNG exports will come from Australia and North America to account for 8% of global LNG trade by 2019.
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By Andy Tully | Tue, 10 June 2014 20:51 | 0
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Talks between gas supplier Russia and gas consumer Ukraine broke up on June 10 without a resolution, but a spokesman for Russia’s government-owned Gazprom said the westward flow of gas remained uninterrupted.
The talks are being held in Brussels and moderated by EU Energy Commissioner Guenther Oettinger. Also attending are the energy ministers of Russia and Ukraine, and the CEOs of Gazprom and the Ukrainian gas company, Naftogaz.
Oettinger stressed that the talks had not ended, but were only on hiatus. “All points of the deal were negotiated and discussions will resume,” he said.
Russia had threatened to cut off gas supplies to Ukraine by the morning of June 10. The effect on Europe could be dire, as EU nations get one-third of their gas supplies from Russia, and half of that amount flows through Ukraine. The supply of gas to Europe was interrupted twice before, in 2006 and 2009 because of similar disputes.
The current trouble arises from the flight in February of Viktor Yanukovich, who as president of Ukraine faced mounting protests for his insistence on maintaining close ties with Russia and not with the EU. Moscow responded by invading Crimea in March and quickly annexing it.
Russia also increased the price Ukraine must pay for gas by 81 percent, and demanded that Kiev pay $5.17 billion for past gas deliveries and scheduled deliveries through June. Ukraine calls that “economic aggression.”
Despite any word of progress in the June 10 negotiations, Ukrainian Energy Minister Yuri Prodan said, “The good news is talks are continuing.”
In the meantime, a Gazprom spokesman told Reuters that he knew of no cut in the gas supply to Ukraine.
Before this latest round of negotiations there was broad optimism that an agreement could be reached between the two former Soviet republics. Most observers expected that Russia would settle on a cost of $360 per 1,000 cubic meters of gas – splitting the difference between the price it originally charged Ukraine and the higher price set after Yanukovich’s departure.
Adding to the optimism, one anonymous Ukrainian official told the Agence France-Presse that Naftogaz would offer to pay $1 billion to settle its arrears.
By Andy Tully of Oilprice.com
By ANDREW E. KRAMER and STANLEY REEDJUNE 9, 2014
MOSCOW — Like many chief executives of American companies, Rex W. Tillerson of Exxon Mobil didn’t attend the major business forum in Russia last month, at the urging of White House officials. But the company’s exploration chief, Neil W. Duffin, did.
In a ceremony at the event, Mr. Duffin signed an agreement with Igor I. Sechin, the head of the state-owned Rosneft, to expand its joint ventures to drill offshore in the Arctic Ocean, to explore for shale oil in Siberia and to cooperate on a liquefied natural gas plant in Vladivostok.
The deal came just weeks after the United States government imposed sanctions on the personal dealings — though not the corporate activities — of Mr. Sechin, a former military intelligence agent and longtime aide to President Vladimir V. Putin.
David S. Cohen, pointing at center, runs the Office of Terrorism and Financial Intelligence, which creates and administers the financial sanctions that the United States imposes on foreign governments.
Despite the push by Western governments to isolate Moscow for its aggression in Ukraine, energy giants are deepening their relationships with companies here by striking deals and plowing more money into the country.
As President Vladimir V. Putin of Russia watched, David Campbell, BP’s Russia chief, left, signed a preliminary agreement in May with Igor Sechin, president of Rosneft, right, to study shale oil deposits. Credit Sergei Karpukhin/Reuters
Along with Exxon, BP of Britain and Total of France also signed contracts at the business forum in St. Petersburg to explore for shale oil in Russia. Exxon plans to drill its first exploratory well offshore in the Russian sector of the Arctic Ocean this summer. Statoil of Norway is in talks for another shale joint venture. Royal Dutch Shell’s chief executive, Ben van Beurden, met with Mr. Putin in April and told him, “Now is the time to expand,” referring to a liquefied natural gas plant project.
The companies are taking a calculated risk, given the threat of further sanctions. But they also want to protect their long-term interests in Russia, the world’s largest energy-exporting nation.
“They are likely to continue to engage until there is a clear policy signal that they should stop. It is not rational to think they would act in any other way,” said David L. Goldwyn, who served as the State Department’s special envoy and coordinator for international energy affairs during President Obama’s first term. “If the government wants them to stop, it needs to say louder they should stop.”
Exxon declined to comment on the deal signed in St. Petersburg. Total and BP have emphasized that their agreements fully comply with sanctions.
So far, the United States and the European Union have imposed only limited sanctions, aimed largely at individual Russians and a handful of companies. The existing sanctions don’t explicitly bar the energy giants from operating in Russia. Though Mr. Obama authorized an executive order on March 20 that could outlaw such deals, it has not yet been put into effect by the Treasury Department.
The risk for energy companies is that the next stage of sanctions, called the third phase, will be broader, cutting off dealings with major sectors of the economy like finance, metals and energy. The United States and its allies proposed such sanctions at a Group of 7 summit meeting in Brussels last week, to be carried out if the violence in Ukraine did not subside within a month.
While the companies are not violating the current rules, they are walking a fine geopolitical line.
At the St. Petersburg gathering on May 24, the British oil giant BP signed a $300 million preliminary agreement with Rosneft to study shale oil deposits in the Volga Valley and Ural Mountains, west of the area where Exxon Mobil will be working. BP’s chief executive, Robert W. Dudley, an American citizen, attended the forum. But David Campbell, BP’s Russia chief and a British citizen, signed the agreement with Mr. Sechin.
Also at the business forum, Total signed a deal with Lukoil, another Russian oil company, for exploring more than 1,000 square miles of western Siberian wilderness for shale oil. “My message to Russia is simple — it is business as usual,” Total’s chief executive, Christophe de Margerie, told journalists there.
To keep it that way, oil companies are publicly and privately pushing back against more sanctions by speaking out at shareholders’ meetings and by lobbying in Washington.
“We have a responsibility to stand with our partners in a difficult time,” Mr. Dudley of BP told an audience at the St. Petersburg forum.
Mr. Tillerson, Exxon’s chief executive, told reporters last week in Dallas that the company was making its skepticism about sanctions clear to the United States government. “Our views are being heard at the highest levels,” he said.
“There has been no impact on any of our business activities in Russia to this point, nor has there been any discernible impact on the relationship” with Rosneft, he added.
The energy giants, in part, are wary of offending their partners in Russia. Several big Western companies have large existing investments and important joint ventures in Russia that they want to protect from a government that is sometimes seen as fickle on property rights.
Exxon has a wide-ranging relationship with Rosneft, including existing oil production off Sakhalin Island in eastern Russia. BP has a nearly 20 percent stake in the Russian company. In all, Western energy companies have invested an estimated $35 billion in Russia.
The future opportunities could prove even more valuable.
The recent agreements signed by BP, Exxon and Total will help Russia push its petroleum industry into the high-tech field of extracting oil from shale. The big Western companies mostly arrived late to the shale boom in the United States as smaller companies took the lead, and Russia, which geologists estimate has the greatest potential for shale outside of the United States, represents a chance to gain an early edge. In the last few years, shale formations like the Bakken in North Dakota and the Eagle Ford in Texas have added three million barrels a day to the oil output of the United States.
Exxon is also gaining access to offshore drilling sites in the Russian Arctic Ocean, while the waters off Alaska remain tied up in lawsuits and regulation. Exxon and Rosneft plan to drill the first exploratory well this summer in the Kara Sea, one of the shallow extensions of the Arctic Ocean north of Russia, where there could be enormous oil and gas resources.
And Exxon is joining with Rosneft to explore the Bazhenov shale formation in western Siberia, an area that has already produced tens of billions of barrels of oil through conventional drilling methods — a good sign for shale drillers, according to geologists. “Compared to other opportunities worldwide, Russia is certainly one of the most promising,” said John Webb, an analyst at the market research firm IHS who specializes in Russian energy.
Rosneft welcomed the deals: Extracting oil from these types of reserves represents a technical challenge, the statement said. “That is why Rosneft teamed up with the best international companies like Exxon Mobil and Statoil for the scope of exploring and producing those resources.”
The energy giants, in a sense, are betting that the Russian oil and gas industry will not be hit by direct sanctions.
The energy industry provides financing for the Russian government and military, making sanctions a threat to continued action in Ukraine. But the United States and Europe must tread carefully, given the industry’s major role in world markets.
From its swamps, tundra and wilderness, Russia pumps about the same volume of oil as Saudi Arabia, while exporting more energy than the desert kingdom, if oil and gas are counted together. Russia supplies about one-third of the gas to heat homes and generate electricity in Europe. And Russian oil and gas exports help ease energy reliance on the politically volatile Middle East.
For that reason, many analysts think Russian energy companies like Rosneft are simply too big to punish.
The companies are making “a hedged bet that the Russian energy sector will escape sanctions and the Ukraine crisis will quiet down,” said Cliff Kupchan, a Russia analyst at the Eurasia Group.
By Daniel J. Graeber | Tue, 10 June 2014 21:47 | 0
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In another sign that the United States has evolved into a major oil-producing nation, the first company to receive government permission to fly commercial drones over unpopulated areas isn’t Amazon, but British energy company, BP.
The U.S. Department of Transportation's Federal Aviation Administration (FAA) gave BP approval to use the Puma unmanned aerial vehicle (UAV) for surveys of the Prudhoe Bay oil field in Alaska, the first time in history it has authorized the use of a commercial drone over land.
"These surveys on Alaska’s North Slope [where the field is located] are another important step toward broader commercial use of unmanned aircraft," Transportation Secretary Anthony Foxx said in a statement. "The technology is quickly changing, and the opportunities are growing."
A little bit smaller than a Honda Civic, the Puma was originally designed by AeroVironment for military use, which has long used drones – controversially -- to target suspected terrorists overseas.
BP plans to use a non-military version of the Puma to survey pipelines and other infrastructure. Last year, the UAV conducted limited operations over Arctic waters to survey icebergs and monitor drilling platforms in the region. It’s essential information for any oil company considering operations in uncharted waters.
The FAA said the Puma would save BP time and money by monitoring oil field installations in a way that protects the sensitive environment in northern Alaska.
The British company is one of the biggest oil producers working in Alaska and Prudhoe Bay is among the largest oil fields ever discovered in the world. In April, the company announced it was selling off four of its oil fields in the region so it could focus on Prudhoe Bay developments, which it said was one of its "great strengths" in North America.
Oil production peaked in Alaska's North Slope region in 1988 at 2.2 million barrels per day (bpd). Since then, production has declined as fields like Prudhoe Bay start to mature. Alaska Gov. Sean Parnell said more output is critical for a state that relies on oil for more than 90 percent of its revenues. Production as of last year was around 575,000 bpd.
BP said it plans to deploy two more drilling rigs in Alaska and aims to spend more than $1 billion there during the next five years. If the company's plans bear fruit, oil operations in Alaska will contribute to the estimated 9.2 million bpd expected in the United States by next year.
That would be the highest level of oil production since 1972, four years after the Prudhoe Bay oil field was discovered.
Meanwhile, Amazon says it hopes to have the option to deliver packages to your doorstep using drones as early as 2015. The goal, the company says, is to get packages delivered in 30 minutes or less. But with U.S. oil outpacing even the world's largest online retailer, it's BP that has bragging rights for the first new sanctioned use for commercial drone technology.
By Daniel J. Graeber of Oilprice.com
Swedegas and Vopak LNG Holding have been granted a permit for an LNG terminal at the energy port in Gothenburg (Sweden). The terminal will supply the shipping, industry and heavy transport sectors with gas as fuel as they make the switch from oil.
The permit comes into effect immediately and covers LNG storage of up to 33,000 cbm and the handling of up to 500,000 t of LNG each year.
The terminal will be constructed in collaboration with the port of Gothenburg, which will invest in the port infrastructure. The LNG terminal in Gothenburg is also part of a project being run together with port of Rotterdam and Gasunie to create an efficient LNG infrastructure between Sweden and the Netherlands. The common project, LNG Rotterdam Gothenburg is co-financed by the European Union's TEN-T programme.
www.portofgothenburg.com
By Nick Cunningham | Tue, 10 June 2014 22:04 | 0
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OPEC’s second largest oil producer is in severe disarray just as the world has come to rely upon Iraq for greater energy supplies.
Iraq is facing its biggest security threat in years following a surprise attack by Sunni militants on Mosul. In the June 10 attack on Iraq’s second largest city, members of the Islamic State of Iraq and Syria (ISIS) surprised Iraq’s security forces, driving them out and storming military bases, police stations and the provincial governor’s headquarters.
Government security forces shed their uniforms to avoid capture and abandoned their posts as Prime Minister Nouri Al-Maliki declared a state of emergency in the entire country. Eyewitness reports said civilians were streaming out of Mosul, fleeing the violence.
The attack by the militant Sunni group is not the first. In January, ISIS attacked Ramadi and Fallujah in Anbar province, briefly taking control of the cities entirely. Despite Maliki’s attempts to pacify the region, ISIS has retained control of some territory in Anbar.
Iraq has been deeply divided, with Maliki’s government becoming increasingly authoritarian. Sunni groups claim that Maliki discriminates and unfairly targets them. But the problem appears to be a cycle of fear and distrust; as Sunnis resist oppression and increasingly take to the streets, Maliki tries to strengthen his position by cracking down.
The January attacks by ISIS came after Maliki bulldozed a Sunni protest encampment in Ramadi, and intentionally conflated Sunni protestors with Al-Qaeda terrorists. Support for his government vanished in Anbar and Maliki’s security forces withdrew as a result, paving the way for an ISIS takeover. (For a detailed rundown of the events that led to the crisis, read Kirk Sowell’s exhaustive piece in Foreign Policy from earlier this year).
Now that the insurgency has spread to Mosul, the future of Iraq has again been thrown into question. Maliki’s emergency decree may not matter much. He already has consolidated enough power to act but has shown an inability to quell the violence.
The turmoil in Mosul threatens to upend some of Iraq’s oil production. Most of Iraq’s oil is located in the south near Basra, but there are significant oil fields near Mosul, as well as in nearby Kurdistan. Perhaps more importantly, the fighting in Mosul has brought to a standstill the repairs to Iraq’s main oil pipeline to Turkey.
Moreover, the violence could threaten future investment in the country, which has plans to triple its oil production by the end of the decade. The phenomenal level of investment required to achieve such a feat will not happen in a country suffering from severe violence. “Taking over Mosul will likely halt investment in oil and gas in that area,” Paul Sullivan, a Middle East expert at Georgetown University, told Bloomberg News. “Who wants to drop hundreds of millions or billions in a place where ISIL could attack at any moment?”
One additional development that is complicating Iraq’s oil picture is the central government’s relationship with Kurdistan. After a second ship full of Kurdish oil left from the Ceyhan port in Turkey on June 9, an Iraqi government representative said that it would bring a complaint to the United Nations.
The move comes even as uncertainty shrouds the ultimate destination of both tankers. The first ship still has not docked – it initially traveled towards the U.S. Gulf Coast, but reversed course and is near the shore of Morocco. While the violence in Mosul is an acute threat to Iraq’s oil industry, the lingering political conflict with Kurdistan is also holding back Iraq’s potential as an oil exporter.
As I mentioned in my June 9 piece, OPEC is currently meeting in Vienna to discuss its output quota, which is expected to remain unchanged. But the oil supply picture is becoming more strained than experts predicted only a few short months ago.
Iraq intended to lift its oil production to over 4 million barrels per day (bpd) this year, but that seems unlikely at this point, especially given what’s happened in Mosul. After hitting a 35-year high in February at 3.6 million bpd, production slipped the following month by almost 300,000 bpd. With other OPEC members also losing output, OPEC may need to rely upon Saudi Arabia to make up for any shortfall later this year if demand rises.
https://oilprice.com/images/tinymce/James%209/AE3292.jpg
As oil markets have tightened, prices have climbed. WTI is up more than 10 percent since the beginning of the year, from $93 per barrel in January to over $103 in June. Brent prices are up a more modest 3 percent, from $106 per barrel to $109.
If Iraq’s security situation continues to deteriorate, it is not inconceivable that some of its production would be knocked offline. The world has come to take Iraqi oil for granted, and a significant loss of production would send prices skyrocketing.
By Nick Cunningham of Oilprice.com
Associated Press
Published: June 10, 2014 - 07:34 PM
Mohammed Bin Saleh Al-Sada Minister of Energy and Industry of Qatar arrives at a hotel for a meeting of the Organization of the Petroleum Exporting countries, OPEC, in Vienna, Austria, Tuesday. (AP Photo/Ronald Zak)
VIENNA: All is not well within OPEC as the oil cartel focuses on how much crude to pump for the rest of the year.
Kurds in Iraq are defying the central government and selling their oil directly abroad. Nigeria is hurting due to shale oil production in the United States, its most important customer.
While worrisome for the two countries, such problems might help global supplies. But there is trouble in production, as well. Sales from Iran, normally second only to Saudi Arabia, are severely crimped by sanctions. And internal conflicts and domestic chaos have slashed Libya’s exports.
The upshot is that OPEC oil ministers are likely to keep their production targets unchanged at their meeting today.
While the International Energy Agency, oil consultant to major consuming countries, sees demand rising for the rest of the year, many of the 12 OPEC members are at their production capacity limits.
Once again, that will leave it to OPEC powerhouse Saudi Arabia to make up for any shortage. The kingdom is now pumping less than 10 million barrels a day. But Saudi oil minister Ali Naimi said last month its total capacity is above a daily 12 million barrels.
OPEC sets official output goals on total production by its members. With many members producing near their limits, however, Angolan oil minister Jose Maria Botelho de Vasconcelos said Tuesday that the meeting could decide to extend the present target of 30 million barrels a day. That would allow the Saudis to adjust their production according to world market needs.
“I am confident that Saudi Arabia will, as always, discretely increase production to cover any losses from the shortfalls of others,” said John Hall, chairman of the analysis group Alfa Energy.
Iran-Saudi regional rivalries spilled into OPEC’s December meeting, with Tehran saying it plans to pump as much oil as it can once sanctions are lifted even if its extra output drives prices into the basement.
With sanctions still biting, that confrontation remains on ice, but both nations want the post of OPEC secretary-general. Incumbent Abdullah Al-Badry of Libya has been extended twice since 2012 because of the deadlock.
London, 10 June 2014
With evidence of climate change becoming clearer than ever, European countries should think carefully before allowing fracking in their territory. Although hydraulic fracturing — or fracking — offers the benefits of abundant supplies of unconventional oil and gas and lower carbon emissions than other combustibles such as oil and gas, it is not a sustainable solution due to its large environmental costs and its potential contribution to climate change. Moreover, the short-term economic promises fracking it offers are also taking our sense of urgency away from transitioning to more renewable sources of energy such as wind and solar power.
Although natural gas has come to be seen as an ideal form of clean energy, the unburned methane gas that escapes during the fracking process can pollute the environment much more than conventional energy sources such as coal and oil. According to studies carried out in Colorado in the United States, three percent or more of natural gas can leak during the drilling process for shale gas. This gas is 80 times more toxic to the environment than coal.
Now fracking is coming to Europe. In 2011, France declared its moratorium on fracking. The German Government did the same just after its 2013 election pending an environmental risk assessment. However, during the the past few days Berlin announced that it is ready to lift the ban on fracking oil in early 2015, mainly to reduce the country’s dependency on gas imports from Russia. Unfortunately this decision is not a sustainable solution. The temporary relief of geopolitics should not be achieved at the long-term cost of environmental degradation. To put our economy and our world on a path to sustainability, governments and companies need to focus on doing real good for society and not just doing less harm, as seems to be the case with fracking.
We know the economics of sustainability, but who will pay? To quote Albert Einstein “We cannot solve problems by using the same kind of thinking we used when we created them”. Over the past 30 years, the triple bottom line concept that consists of focusing on the sustainability of the environment and society as well as profit has not helped the productive sector do real good for the world.
Fracking in Europe would provide short-term economic benefits at best, and what is clear is that developed societies cannot continue consuming as we do now if we want to ensure the sustainability of our world for future generations. Europe needs to find a new way of thinking.
Ends --
By Radio Free Asia
China's massive natural gas deal with Russia could drive the government to speed pricing reforms, spurring a significant rise in household rates.
Nearly three weeks after the two sides signed the US$400-billion (2.5-trillion yuan) export deal in Shanghai, the terms remain a commercial secret, but most analysts have cited a starting price of US$350 (2,186 yuan) per thousand cubic meters.
The Russian export price, which is subject to periodic increases under a formula tied to oil and oil products, would be higher than the cost of gas from Central Asia but lower than Russia's prices for Europe or China's imports of liquefied natural gas (LNG).
First supplies from Russia's state-owned Gazprom under the 30-year contract are not expected before 2019, but the starting price suggests that rate increases will be needed to avoid losses for China National Petroleum Corp. (CNPC).
Current charges in Beijing stand at 2.28 yuan (US$3.64) per cubic meter for households and 3.23 yuan (US$5.16) per cubic meter for industrial and commercial use, the official Xinhua news agency reported.
The rates suggest that CNPC would face growing losses on residential service after pipeline costs, distribution, and delivery are taken into account. More...
Reprinted with the permission of Radio Free Asia. For original article, see here
Copyright (c) 2014, Radio Free Asia.
June 10, 2014
BAGHDAD,— Iraq's oil minister on Monday condemned the export of pipeline crude from Iraqi Kurdistan and threatened the Kurdish region and Turkey, its point of export, with severe measures.
"What happened in my view was the biggest mistake that has been made by the Kurds and the Turks...and the Iraqi government will take severe measures," Abdul Kareem Luaibi told a news briefing.
He repeated that Baghdad would sue the Turkish government and Turkish pipeline state owned operator Botas for facilitating the sale of crude from the Kurdish region without the central government's consent. The Iraqi government was in the process informing the United Nations about Ankara's role in the shipment, he added.
"We have no choice but to go to arbitration and they (Turkish government) have been informed," Luaibi said.
The semi-autonomous northern Kurdish region has not been exporting any crude through the Baghdad-controlled Iraq-Turkey pipeline since the end of 2012.
The oil minister said he expects production this year to average 3.7 million barrels per day without any output from the Kurdish region. Exports would average 3 million bpd in 2014, he added.
Baghdad has signed a series of deals to develop its giant southern oilfields with major oil companies - including BP which is leading the project at Rumaila, ExxonMobil is in charge of West Qurna 1, while Royal Dutch Shell is operating Majnoon.
Luaibi said he expected finalising amendements to the existing contracts "within days" to lower the previously estimated output capacity from 9 million bpd to 8.4 million bpd after 2018 and extending the life of the deals beyond 20 years.
Need to be mentioned that a second shipment of Iraqi Kurdish crude has sailed from the Turkish port of Ceyhan on Monday, industry and government sources said, increasing thewww.Ekurd.net stakes in a battle with Baghdad over control of oil sales from the autonomous Kurdistan region.
The United Emblem suezmax tanker, carrying 1 million barrels of crude, sailed from the harbor on Turkey's Mediterranean coast on Monday, Reuters AIS Live ship tracking showed.
Copyright ©, respective author or news agency, Reuters | Ekurd.net
Oil sands production estimates down by more than 7 percent.
By Daniel J. Graeber | June 10, 2014 at 10:09 AM | 0 Comments (Leave a comment)
http://cdn.ph.upi.com/sv/em/upi/UPI-4431402408343/2014/1/d5e2beb60b2b8126bcf1a767c654dd49/Canada-lowers-oil-expectations.jpg
Canadian oil production expectations revised downward. UPI/Gary C. Caskey
CALGARY, Alberta, June 10 (UPI) --The Canadian Association of Petroleum Producers said 2014 estimates for oil production to 2030 are down more than 7 percent from the previous year.
CAPP said oil sands are the primary source of production growth from Canadian reserves. Production from those deposits is expected to increase to 4.8 million barrels per day by 2030, down from the 5.2 million bpd estimated in its 2013 forecast.
Conventional oil production, meanwhile, is expected to remain stable at 1.5 million bpd, up from the 1.4 million bpd estimate in 2013.
CAPP said Monday the difference between the two forecasts reflects growing uncertainty for the timing of new oil developments and the capital necessary to exploit those reserves.
Canada sends nearly all of its oil to the United States. CAPP Vice President Greg Stringham said the Canadian economy needs more options to get its oil to a more diverse market.
"Global demand for oil continues to increase and Canada's large reserves make it an attractive supply source for markets in the United States and beyond," he said in a statement. "Connecting Canadian supplies to these markets, safely and competitively, remains a key priority for our industry."
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By David Malingha Doya Jun 11, 2014 4:00 AM GMT+0700
Kenya, Uganda and Tanzania plan to allocate money in their annual budgets to spur investment in infrastructure to exploit oil and natural gas from deposits that companies including Tullow Oil Plc (TLW) are developing.
Ugandan and Kenyan oil discoveries, made in 2006 and 2012 respectively, and new gas finds off the coast of Tanzania that have boosted reserves to as much as 46 trillion cubic feet have seen East Africa become a frontier for petroleum exploration.
The three countries, along with Rwanda, which are all members of the East African Community, will tomorrow present their budget statements for the financial year starting July 1.
“If there is one thing most EAC partner states agree upon it’s infrastructural development,” Ahmed Salim, a senior associate based in Dubai for research consultancy Teneo Intelligence, said in an e-mailed response to questions. State spending will go toward “development of their respective extractive industry sectors.”
Kenya is building a port in Lamu in the country’s southwest linked to a proposed pipeline to export crude, while Uganda expects to select a company by December to build and operate the country’s first oil refinery. The neighbors aim to start oil production within three years. Tanzania, which already produces natural gas for domestic consumption, wants in 2014 to complete construction of a gas pipeline from its south to the commercial hub of Dar es Salaam on the coast.
Higher spending on infrastructure may require governments to boost borrowing. Kenya plans to sell an inaugural Eurobond this month to raise as much as $2 billion for infrastructure, while Tanzania may sell its first sovereign debt in 2014-15, according to the country’s President Jakaya Kikwete.
Petroleum Focus
“East African budgets will be closely watched for attempts at fiscal consolidation amid hydrocarbons discoveries across the region,” said Razia Khan, head of African economic research at Standard Chartered Plc in London, referring to the need for countries to control deficits and debt accumulation.
“Spending on infrastructure will be a key theme of the budgets, but close attention will also be paid to affordability,” she said in an e-mailed response to questions.
Kenya may become the EAC’s first oil exporter by 2016 as Tullow and its partner, Canada-based Africa Oil Corp. (AOI), explore the South Lokichar basin, where they have found an estimated 600 million barrels of crude. The Kenyan Finance Ministry said in its 2014 budget policy statement that the government wants to “fast track” building a pipeline to export the crude.
Construction of the first three berths at the planned port in Lamu, which will add to Kenya’s main harbor in Mombasa, is scheduled to be completed next year at a cost of $664 million, according to the Kenya Ports Authority.
Infrastructure Spending
Kenya expects to increase its spending on infrastructure by 15 percent to 250 billion shillings ($2.9 billion) in 2014-15 from a year earlier, according to the Treasury’s budget policy statement.
In Uganda, Tullow, France’s Total SA (FP) and China’s Cnooc Ltd. (883) are developing oil fields and have agreed with the government to help construct a refinery and export pipeline. The country holds an estimated 3.5 billion barrels of oil, the fourth-largest reserves in sub-Saharan Africa, from which commercial production may start in 2017.
Uganda is considering four bids to construct a 60,000 barrel-per-day refinery from companies including Marubeni Corp. (8002) based in Japan and a group of investors led by China Petroleum Pipeline Bureau. Negotiation of the contract may be concluded in the final quarter of 2014, according to Uganda’s Energy Ministry. The refinery is a “major priority” in the 2014-15 budget, according to the nation’s Finance Ministry.
Gas Pipeline
Tanzania is building the $1.23 billion Mtwara gas-pipeline project with a loan from the Export-Import Bank of China, while Norway-based Statoil ASA (STL) and BG Group Plc (BG/), based in London, are working on a project to build a liquefied natural gas export plant, Kikwete said in April. The government plans to present new natural gas rules to parliament in November aimed at helping the country get more benefit from its natural resources.
The International Monetary Fund expects Kenya’s economy to expand by 6.3 percent this year, Tanzania 7.2 percent, Uganda 6.4 percent and Rwanda 7.5 percent. Burundi, which is the fifth member of the EAC, sets its budgets on a calendar year.
To contact the reporter on this story: David Malingha Doya in Nairobi at dmalingha@bloomberg.net
To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net Sarah McGregor, Paul Richardson
By Ewa Krukowska, Elena Mazneva and Volodymyr Verbyany Jun 11, 2014 6:01 AM GMT+0700
EU Energy Commissioner Guenther Oettinger said, “We have some open questions and some... Read More
Russia and Ukraine will resume talks with the European Union on a gas-supply deal today after failing to reach agreement in discussions earlier this week.
Negotiations between Russian Energy Minister Alexander Novak and his Ukrainian counterpart, Yuri Prodan, along with EU Energy Commissioner Guenther Oettinger, will restart at 9:30 a.m. in Brussels and will follow bilateral meetings, the European Commission said late yesterday. The talks were postponed from last night because the Russian delegation was scheduled to arrive very late in Brussels, the EU executive said.
Novak and OAO Gazprom Chief Executive Officer Alexey Miller met in Moscow with Russian President Vladimir Putin before they departed for the Belgian capital, said an official who declined to be named as the gathering was private. Gazprom declined to comment when contacted by Bloomberg.
The EU, dependent on Russian gas piped through Ukraine for about 15 percent of its supplies, is trying to broker a deal to avert the threat posed to shipments from a dispute between the two nations over payments for the fuel and territorial claims. In Ukraine, clashes between rebels claiming allegiance to Russia and government forces continued in the east of the country.
Oettinger said yesterday that he was optimistic an agreement to end the gas-price dispute can be found in the next days.
Export Monopoly
Gazprom, Russia’s natural-gas export monopoly, was waiting for the money that Ukraine owes, said Sergei Kupriyanov, a spokesman for the Moscow-based company. This month, Gazprom said Ukraine should settle its debt or pay for gas upfront, with the threat of being cut off if the money doesn’t arrive by June 10.
Prodan declined to say if Ukraine would start paying.
Gazprom had already delayed the deadline from June 2 after receiving $786 million for February and March supplies.
“I asked the company to postpone this with the hope of reaching an agreement,” Putin said on June 6 after a first meeting with new Ukrainian President Petro Poroshenko in France.
Gazprom and NAK Naftogaz Ukrainy have been at loggerheads over both debt for past supplies and the level of future prices since April, when Russia raised prices by 81 percent.
Gazprom rescinded a discount granted in December because of Ukraine’s mounting debts, while Russia stripped its neighbor of a 2010 export-duty break that it exchanged for a lease on its Black Sea fleet’s port in Crimea, which Putin annexed in March.
Ukraine has refused to pay the increased price of $485 per thousand cubic meters, instead demanding a return to the first-quarter level of $268.50.
To contact the reporters on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net; Elena Mazneva in Moscow at emazneva@bloomberg.net; Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net
To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net; Will Kennedy at wkennedy3@bloomberg.net Mike Anderson, Ramsey Al-Rikabi
By Maher Chmaytelli, Nayla Razzouk and Fred Pals Jun 11, 2014 5:00 AM GMT+0700
OPEC nations representing 94 percent of the group’s output said they were at ease with supply and demand in global oil markets before a meeting in Vienna today to decide on a collective production limit.
Oil ministers from Angola, Ecuador, Kuwait and Venezuela all said they anticipated that the Organization of Petroleum Exporting Countries would roll over its existing ceiling of 30 million barrels a day. Saudi Arabia, Libya, Nigeria and the United Arab Emirates said supply and demand are well matched. Iraq’s minister said there were indications the limit would be retained, while his Iranian counterpart also expected no change.
The 10 nations accounted for about 28.2 million barrels a day of output in May, while the group’s combined production amounted to about 30 million barrels, data compiled by Bloomberg show. Ministers from Algeria and Qatar declined to comment on the oil market or OPEC’s production as they arrived in Vienna yesterday.
Brent oil, Europe’s benchmark, has traded above $100 a barrel for a year and is the least volatile ever, the data show. Still, there will be pressure on Saudi Arabia to produce record amounts in the second half of the year to cover disruptions in Libya, Iran and Iraq.
“OPEC has no incentive to change anything when it also has to deal with the uncertainty of Libya and Iran,” Olivier Jakob, managing director of Petromatrix, a Zug, Switzerland-based consulting firm, said in a report yesterday. “The production of OPEC is currently matching its official quota.”
Historical Volatility
Brent oil settled at $109.52 a barrel on the ICE Futures Europe exchange in London yesterday. The crude was last below $100 in intraday trading on June 24 last year. The 20-day historical volatility of Brent crude declined to 7.2 percent on June 2, the lowest since trading began in 1988, according to data compiled by Bloomberg News.
Ministers from the 12 OPEC nations will meet today to decide whether the official 30-million-barrel limit currently in place should be maintained.
Saudi Arabia’s Oil Minister, Ali al-Naimi, said the market is balanced and crude prices suitable for both producers and consumers, according to state-run Saudi Press Agency. Al-Naimi, who spoke yesterday in Riyadh, will arrive in Vienna and depart today, two people familiar with his plans told Bloomberg News June 9.
While OPEC’s limit may be unchanged, the onus is growing on Saudi Arabia to meet demand. Iraq’s daily production contracted 8 percent since reaching a 35-year peak of 3.6 million barrels in February amid political disputes and pipeline bombings, according to the International Energy Agency. Militant fighters of the Islamic State of Iraq and Levant seized Mosul after battling government forces for control of the northern Iraqi city.
Libya, Iran
In Libya, output has fallen to a 10th of pre-conflict capacity because of protests at oil fields and strikes at export terminals. Iran may face in July an end to relief from international sanctions, which have reduced oil exports, if it cannot reach a broader deal on its nuclear program.
“There is enough oil in the market right now and prices are balanced,” Iran’s Oil Minister Bijan Namdar Zanganeh said upon arriving in Vienna late yesterday.
Saudi Arabia, the world’s biggest oil exporter, may need to produce an unprecedented 11 million barrels a day of crude later this year, according to Energy Aspects Ltd., a London-based consulting firm. IHS Inc., another researcher, projects about 10.3 million while Societe Generale SA anticipates from 10.2 million to 10.5 million barrels a day in the third quarter.
“The onus will fall primarily on Saudi Arabia, which can pose upside risk to prices, if falling spare capacity coincides with further unplanned outages,” Amrita Sen, chief oil markets analyst at Energy Aspects, said in an e-mailed report June 9. “The real danger today is that the focus of the market is becoming so short-term that some of these structural changes are unnoticed.”
To contact the reporter on this story: Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Stephen Cunningham
By Todd White Jun 11, 2014 12:34 AM GMT+0700
Spain’s government set rules for Repsol SA (REP) to explore for oil off the Canary Islands, noting that the $10 billion project drew opposition from almost 12,000 people and institutions over its environmental risks.
The main safeguards imposed to avoid major environmental damage such as a spill were largely those that the Madrid-based company had proposed for itself, according to a 41-page regulation published today. The government had already said on May 29 that it would clear the exploration plans.
One requirement calls on Repsol to employ blowout preventers, devices to avoid spills, when it drills the two or three deepwater exploratory wells now approved off the Canary islands of Lanzarote and Fuerteventura. Should it strike oil, Repsol has said it will invest about 7.5 billion euros ($10.2 billion) in developing the fields.
The project, frozen for 12 years in court challenges and administrative reviews, is moving forward under a government that’s trying to revive fossil-fuels development in a country highly dependent on imports of oil and gas.
In 2012, the government restored Repsol’s original permit from 2001. A torrent of opposition followed from ecologists and local government officials in the island communities off the West African coast, one of Spain’s major tourist destinations that’s known for biodiversity. Waters off the islands are rich in sealife including 30 varieties of whales, as well as dolphins and turtles.
Challenges Continue
Some 11,840 people signed documents that were sent to the government opposing the drilling, according to the resolution today. Public comment on Repsol’s 2013 environmental-impact study was required under Spanish law.
“A great number of the arguments were of the opinion that the environmental impact study’s contents are insufficient and highly vague, thereby underestimating the impacts,” according to the resolution signed by Deputy Minister Federico Ramos.
Challenges to the project are continuing. Spain’s Supreme Court today began to hear cases contesting the exploration permit. A decision is unlikely today, a court spokesman said. Final approval is still needed by Spain’s Industry Ministry.
Abel La Calle, an environmental law attorney who is advising Fuerteventura’s local government, said he was surprised that the government relied so heavily on safeguards proposed by Repsol.
“This is unheard of,” La Calle said in an interview. “The government came up with recommendations for safety, but they’re not legal obligations. We’ve never before seen that happen with a project that carries a risk of a catastrophic accident.”
Spill Scenario
Four recommendations were made by the government, in addition to requirements on waste water, nature reserves and fishing resources.
The government studied two scenarios. The first, for environmental impact of activities that definitely will take place during drilling, and the second for impact from a possible spill or other accident. The government cleared the project under the first scenario, with a “favorable” finding, and didn’t specifically rule on impacts under the second.
Spokesmen at the environment ministry referred questions to today’s resolution itself. A Repsol spokesman didn’t have any immediate comment.
To contact the reporter on this story: Todd White in Madrid at twhite2@bloomberg.net
To contact the editors responsible for this story: Timothy Coulter at tcoulter@bloomberg.net Robin Saponar
EIA Increases 2014 WTI Price Forecast to $98.67 a Barrel
By Moming Zhou Jun 11, 2014 12:09 AM GMT+0700
The Energy Department increased its price forecasts for West Texas Intermediate crude for 2014, narrowing the U.S. benchmark’s discount to Brent.
WTI will average $98.67 a barrel this year, the Energy Information Administration, the Energy Department’s statistical arm, said in its monthly Short-Term Energy Outlook. That’s up from May’s estimate of $96.59. Brent, the North Sea-based grade, will reach $107.82, up from $106.26. WTI is estimated to trade at a discount of $9.15 to Brent, down from $9.67 in May.
The WTI-Brent spread has averaged $6.66 in the second quarter, according to contracts traded on the London-based ICE Futures Europe, down from $9.41 in the January-March period. The gap narrowed as inventories at Cushing, Oklahoma, the delivery point for WTI futures, decreased and as refineries increased operating rates. The differential will widen to $11 next year, the EIA said.
“We raised the Brent price forecast and raised WTI a little more, reflecting a narrowing WTI discount to Brent in the second quarter,” said Tancred Lidderdale, an EIA economist who helped write the monthly report. “Despite the narrowing, we still expect the WTI discount to widen later this year.”
WTI will average $90.92 in 2015 and Brent $101.92, unchanged from May estimates, according to the EIA.
WTI Discount
WTI for July delivery slipped 26 cents to $104.15 a barrel on the New York Mercantile Exchange today. July Brent dropped 77 cents to $109.22 on the ICE, $5.07 more than WTI.
High seasonal fuel demand and strong refinery runs will keep WTI’s discount around $7 “over the next few months,” the EIA said. The spread will widen to $12 in December.
The EIA decreased its forecast for this year’s U.S. crude output to 8.42 million barrels a day, a 13 percent increase over 2013 levels, from 8.46 million. Output will average 9.3 million in 2015, the highest annual level since 1972.
A combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked oil trapped in shale formations in North America. The shares of total U.S. liquid fuel consumption met by net imports will decline to 23 percent next year, the lowest since 1970 and down from 60 percent in 2005, according to the EIA.
U.S. petroleum demand was forecast to reach 18.93 million barrels a day in 2014, unchanged from May. Global consumption may be 91.79 million, up from 91.56 million.
To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Richard Stubbe
Second Tanker With Kurd Oil Sails From Ceyhan Amid Legal Threats
By Naomi Christie and Khalid Al-Ansary Jun 10, 2014 7:38 PM GMT+0700
Iraq’s oil ministry said the country’s self-governing Kurds illegally shipped a second crude cargo from a Turkish port and urged other governments to help ward off potential buyers.
The United Emblem loaded 1.045 million barrels of crude at Ceyhan, Turkey, yesterday and is now in the Mediterranean Sea, Fayyad al-Nima, Iraq’s deputy oil minister for refining affairs, said by phone from Baghdad today. “We informed the foreign ministry to inform our ambassadors to tell governments not to deal with illegal oil,” he said.
The ship is the second tanker owned by Marine Management Services MC to be identified by Iraqi authorities as carrying crude produced in the Kurdish region, according to a database maintained for the International Maritime Organization. Senior officials at the company’s offices in Piraeus, Greece, weren’t available to comment, according to a person there who answered two phone calls and wouldn’t identify herself.
The loading and departure of the United Emblem intensifies a years-long dispute over oil revenue and territory between the Kurds and central government of Iraq, OPEC’s second-biggest producer. Tensions flared last month when the Kurdistan Regional Government began pumping oil through its own pipeline to Ceyhan, where ship-tracking data show the crude was loaded on the Marine Management Services ship United Leadership.
‘Substantial Discounts’
Iraq’s state oil-marketing company last week advised possible buyers to shun the United Leadership’s cargo. The vessel is currently in international waters near Morocco, according to ship-tracking data. Nadia Laraki, director general for Morocco’s Agence Nationale des Ports, said on June 5 it hadn’t discharged its oil.
An inability to sell the crude would “really damage” Kurds’ hopes of forcing the central government in Baghdad to accept independent exports from their region, Richard Mallinson, an analyst at London-based consultant Energy Aspects Ltd., said today by phone. “It would give Baghdad’s negotiators an extra boost to feel that they had blocked these cargoes,” he said.
Safeen Dizayee, the KRG’s spokesman, didn’t immediately respond to a call or a text message to his mobile phone seeking comment. Falah Mustafa Bakir, head of the KRG’s department of foreign relations, said earlier today in an interview in the city of Erbil that the Kurds are “determined to sell” their first shipload of oil. ““We know that Baghdad is trying to stop the sale, but we’re determined to continue,” Bakir said.
The KRG estimates its region to hold about 45 billion barrels of crude reserves. Iraq, which has about 150 billion barrels without the Kurdish reserves, surpassed Iran in 2012 to become second in the Organization of Petroleum Exporting Countries.
Shipping signals can be wrong because much of the information is entered manually and because not all data are captured.
To contact the reporters on this story: Naomi Christie in London at nchristie5@bloomberg.net; Khalid Al-Ansary in Baghdad at kalansary@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Bruce Stanley
By Saleha Mohsin and Mikael Holter Jun 10, 2014 4:54 PM GMT+0700
Drilling rigs stand on the horizon off the Norwegian coast. Instead of using on-site... Read More
Producers in western Europe’s biggest oil and gas exporter must brace themselves for a new legislative age that will disrupt the status quo, according to Norway’s Green Party.
After entering parliament last year, the Greens are now seeing evidence that lawmaking affecting the energy industry is changing to allow greater debate around processes that until now have been taken for granted. The oil lobby says that allowing the political debate to delay decision making will hurt Norway’s biggest export industry.
“People have gotten used to not having government interference in oil projects in Norway,” Rasmus Hansson, who fills the one seat the Greens won last year, said in an interview. “Now the bigger parties see an acute need of getting out of a position of being totally attached to the oil business.”
Parliament’s latest move forcing producers to rely on a more costly form of energy to power their operations is a case in point. Instead of using on-site power, parliament last week pushed companies to rely on so-called electrification, requiring them to build electric cables to the mainland for key new oilfield developments.
The Greens say its accession to parliament in 2013 is already influencing larger opposition groups like Labor to pay more attention to the offshore industry’s environmental impact.
Climate Consequences
It’s time for Norway to “accept that climate consequences need to be factored in during an early phase,” Hansson said.
Labor and the rest of the opposition last week reached an accord with the minority government to require Statoil ASA (STL) and other oil companies to power three fields in the North Sea’s Utsira High area from land by 2022. Though the final accord was a softer version of parliament’s original plan, it marked a break from lawmakers pattern thus far of not questioning processes inside the energy industry.
Both Labor, which relies on backing from oil industry unions, and the ruling Conservatives say that the last week’s interference in the early planning process was extraordinary.
Still, at the Norwegian Oil and Gas Association, which represents firms such as Statoil, Royal Dutch Shell Plc (RDSA) and Exxon Mobil Corp. (XOM), there is now concern that the new legislative approach will create industry doubts that disrupt their ability to plan and budget accurately.
Clean Alternative
Statoil shares fell 0.9 percent to 182.9 kroner as of 11:51 a.m. in Oslo. Norway’s government owns a 67 percent stake in the Stavanger-based company.
“An uncertainty has been created that Norwegian politicians may change the framework on short notice,” Erling Kvadsheim, the lobby’s environment and policy director, said by phone. “The industry will account for that in its investment forecasts,” risking project delays and cancellations at a time where oil companies are already reining in spending, he said.
Offshore installations are typically powered by gas turbines on site and oil and gas platforms contribute more than 25 percent of Norway’s total emissions. By tapping power from land, Norway can use its abundant and clean hydropower.
The Greens are trying to halt development in the Barents Sea, where companies such as Statoil and Lundin Petroleum AB (LUPE) are exploring to make up for dwindling North Sea output. The sea is among areas where companies risk wasting money on uneconomic projects, according to a Carbon Tracker Initiative report released this month.
Wasting $1.1 Trillion
The report shows that the high cost potential of oil production in the Barents Sea, along with deep-water and tar-sands projects, would need market prices of at least $95 a barrel to break even. Brent crude was at about $110 on yesterday.
“We have reached the peak of wealth and jobs from an oil economy and now there is a political moment where Norway can start launching a socio-political project to find the next industry,” said Hansson, a biologist and environmental activist. “We need to look toward renewable energy.”
Oil explorers risk wasting $1.1 trillion of investors’ cash through 2025 on these projects, even as the total amount of oil the world can afford to burn without warming the planet to unsafe levels is available from less costly deposits at $75 a barrel, the study said.
The Greens are also planning a proposal that would make it mandatory to conduct a climate-impact assessment prior to opening new offshore acreage, Hansson said.
Parliament’s electrification demands will be “very expensive,” and the industry should be trusted to weigh such measures’ climate benefits against costs, the Norwegian Oil and Gas Association’s Kvadsheim said. Still, the lobby expects focus on the climate and the environment in policies affecting the oil and gas industry to grow.
“That trend is here to stay,” Kvadsheim said.
To contact the reporters on this story: Saleha Mohsin in Oslo at smohsin2@bloomberg.net; Mikael Holter in Oslo at mholter2@bloomberg.net
To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net
By Rebecca Penty Jun 11, 2014 1:44 AM GMT+0700
Canada’s Pacific Coast, where locals are opposing exports of oil-sands crude, has attracted another refinery proposal long before the supplies can reach the shore by pipeline.
After a newspaper publisher and an aboriginal entrepreneur, a telecommunications executive for Mexican billionaire Ricardo Salinas is proposing a C$10 billion ($9.2 billion) plant near Prince Rupert, on British Columbia’s northern coast.
Samer Salameh, who runs telecommunications businesses for Salinas’s group of companies, is planning a unit that would export gasoline and diesel to avoid the risks of tankers spilling bitumen. He said the refinery would produce close to no carbon emissions.
“If you’re going to be in the birthplace of Greenpeace in British Columbia, it behooves us to build something that’s never been done before, which is to build the greenest oil refinery every built,” Salameh said in a phone interview today from Vancouver.
Salameh, the executive chairman of Vancouver-based Pacific Future Energy Corp., is proposing the refinery days before Prime Minister Stephen Harper’s cabinet is slated to rule on Enbridge Inc. (ENB)’s Northern Gateway pipeline project linking the oil sands to the Pacific Coast. While energy companies support the line, Enbridge faces mounting opposition from locals.
The Pacific Future Energy proposal follows those of newspaper publisher David Black and aboriginal entrepreneur Calvin Helin. Black put forward a plan for a C$25 billion refinery in Kitimat, the proposed terminus of Northern Gateway.Premier Endorsement
British Columbia Premier Christy Clark has endorsed the idea of a refinery in the province as a way to create local jobs and avoid the risks of bitumen spills along the coast, which are harder to clean up than average crude. Black and Helin have yet to announce any support from oil producers based in Calgary.
Pacific Future Energy plans to apply for regulatory approval for the refinery in as few as nine months and envisions starting operations around 2022, Salameh said.
The refinery could process as much as 1 million barrels a day if it’s supplied by a leg of the Northern Gateway pipeline, he said, and would initially have a capacity of 200,000 barrels a day, supported by shipments of crude by rail.
Fifty-four percent of almost 3,500 Canadians surveyed in an online poll by the Vancouver-based Asia Pacific Foundation of Canada published today said the hazards exceed the advantages of shipping crude and liquefied natural gas to Asia, up from 51 percent last year.
Aboriginals’ Opposition
Coastal aboriginal groups have opposed Gateway’s planned terminus point in Kitimat, further south and more inland than Prince Rupert. They argue the 300-kilometer (186-mile) route between Kitimat and open sea would force oil tankers to navigate shallow, narrow channels prone to treacherous weather, raising the risk of oil spills.
Kitimat, a town of 9,000, voted against Gateway in a non-binding April plebiscite.
The federal government is slated to rule on Northern Gateway by June 17.
To contact the reporter on this story: Rebecca Penty in Calgary at rpenty@bloomberg.net
To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net Carlos Caminada, Jim Efstathiou Jr.
By Rachel Morison and Isis Almeida Jun 10, 2014 11:29 PM GMT+0700
Regulators plan to publish indexes based on power and gas market data to be collected under stricter European energy market transparency rules.
The Agency for the Cooperation of Energy Regulators will publish the information in aggregated form as indexes, ACER Director Alberto Pototschnig said yesterday in an interview in Ljubljana, Slovenia, at the group’s head office. He declined to provide further details.
ACER will next year begin to collect information about transactions in Europe’s 900 billion-euro ($1.2 trillion) power and gas markets as it boosts scrutiny in the wake of the financial crisis. Data based on transactions is already published by price reporting agencies including McGraw Hill Financial Inc.’s Platts, Reed Elsevier Plc’s ICIS and Argus Media Ltd. Buyers and sellers use their numbers as reference in long-term energy contracts.
“We aren’t trying to compete with them, we are trying to make the market more transparent,” Pototschnig said. “There will still be a business to interpret what is happening in the markets. We will enter the same pond but there will still be water for the price reporting agencies.”
Price reporting agencies collate data from traders on a daily basis to get prices for delivery from the next day to several years ahead. They gather data on completed deals as well as bids and offers and produce prices based on individual methodologies.
Innovation Needed
“If ACER is collecting all this data, it is good to put it to use,” Aviv Handler, a managing director at consulting firm ETR Advisory, said today in an interview at the group’s annual conference in Ljubljana. “Over time the quality of ACER’s data will increase and the market will work out what to do with it, some of that may be using it for benchmarks. The price reporting agencies will have to innovate and come up with something else to offer.”
Platts, which dates back to 1909, also offers price assessments and news for markets from crude oil to petrochemicals, according to its website.
“Platts’ role as an independent price reporting organization is not only to provide the market with numerical assessments of value, but also to explain why the price is the price,” the company said today in an e-mailed statement. “We bring that transparency through our market commentaries that accompany our price assessments, through our news coverage and through our analytical skills in interpreting market data.”
Seana Lanigan, a spokeswoman for Argus in London, declined to comment when reached today by e-mail.
Adding Transparency
“ICIS welcomes the Remit regulation and all the added transparency it brings to the European energy markets,” the company said today in an e-mailed statement.
Price reporting agencies will have to add more value to what they provide, Pototschnig said.
“There will still be a business to interpret what is happening in the markets” as ACER won’t be providing commentary on the markets, he said.
Brokers in the region’s over-the-counter markets are also publishing indexes based on gas trades. Marex Spectron, ICAP Plc and Tullett Prebon Plc started the Tankard indexes in February last year, based on transactions on their platforms. The three brokers handled more than 450 billion euros worth of physically-settled natural gas forwards in 2012, according to Tankard’s website. Candice Adam, a spokeswoman for Tankard, declined to comment today when reached by phone.
Trade Group
It’s important for investor protection that the market have an understanding of the underlying data that price reporting agencies use to set indexes, Verena Ross, executive director at the European Securities and Markets Authority, said today at the ACER conference.
The European Federation of Energy Traders “is strongly in favor of information transparency, but we will have to wait to see the details of ACER’s proposal before we comment further,” Colin Lyle, chairman of the group’s gas committee, said today by phone.
Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy markets news and information.
To contact the reporters on this story: Rachel Morison in London at rmorison@bloomberg.net; Isis Almeida in London at ialmeida3@bloomberg.net
To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Andrew Reierson
By Anna Shiryaevskaya Jun 10, 2014 9:24 PM GMT+0700
Global natural gas demand will increase at a slower rate than previously expected through 2019 amid weaker economic growth and competition from coal and renewables, according to the International Energy Agency.
Gas use will climb by 2.2 percent annually through 2019 from 2013 after last year posting the slowest growth among fossil fuels, the Paris-based International Energy Agency said today in its medium-term gas market report. Consumption will be driven by non-developed countries, which will see their market share rise to 57 percent of the total from parity in 2007.
“Slower economic growth, the ever-strong competition from both coal and renewable energies, together with high gas prices, are all slowing down the growth of natural gas across all sectors,” the IEA said. “The maturity of most markets, slower economic growth, and competition from renewable energies or coal” will damp demand from developed nations, it said.
Nations outside the 34-member Organization for Economic Cooperation and Development will provide 85 percent of additional gas demand, led by China, where usage will rise 11 percent a year to 2019, according to the report. Europe and the former Soviet Union will see zero growth in the period.
Global consumption of gas increased 1.2 percent last year to 3.49 trillion cubic meters (123 trillion cubic feet) as oil use grew 1.4 percent, coal demand 3 to 4 percent and renewable power generation more than 4 percent, according to the IEA. Europe’s push for green power and lower coal prices led to a loss of almost 40 billion cubic meters of gas in power generation alone over the past three years, the IEA said.
Power Demand
“As the European case has shown, lower power demand, the stronger than expected growth of one type of energy and high gas prices can easily send gas demand in the doldrums for an extended period of time,” it said.
Usage will reach 3.98 trillion cubic meters a year in 2019, a 2 percent downward revision from last year’s edition of the report, according to the IEA. Consumption will fall in the residential and commercial sectors, while demand from the power sector is set to increase, initially in North America and eventually in Europe, the IEA said.
“The current very low levels are starting to test the limits of the whole power system, and the decommissioning of coal-fired plants in the U.K. will help the return of gas use in the power sector,” the IEA said.
Road Transport
While there will be some improvement from European power generation, gas won’t become the preferred fuel in the sector as renewables are expected to climb by about 260 terawatt-hours in OECD Europe, according to estimates to be released in the medium-term renewable energy market report in August, the IEA said. Gas-fired plants will generate 673 terawatt-hours by
“In particular, generation from wind continues to increase strongly,” the IEA said. “Against this backdrop, renewable energies generate more additional power than the additional generation needed. If not for a declining nuclear output, combustible fuels (gas, coal and oil) would face an absolute decline, but the drop in nuclear actually compensates for the surplus of renewable sources.”
Use of gas in road transport, especially in the U.S. and China, will double to 93 billion cubic meters in 2019 from 2013, accounting for 10 percent of incremental global demand, the IEA said. Gas will increase its share in the transport sector at the expense of oil over the next few years, accounting for about 3.4 percent in 2019 from about 1.8 percent in 2013.
Gas Supply
Global gas supply will rise 2.3 percent a year from 2013, reaching 3.98 trillion cubic meters by 2019, after climbing 1.1 percent in 2013, the IEA said. OECD nations in North and South America, Asia and Oceania will provide additional volumes, while unconventional and traditional gas developments in China will boost the country’s output by 65 percent to 193 billion cubic meters by 2019. Outside China and Australia, and potentially Argentina and Mexico, unconventional output will be “modest,” the IEA said.
“Despite some hopes, shale gas in the U.K. or in Poland will not reverse the trend because it will account for only a couple of billion cubic metres,” the IEA said.
The Netherlands will probably become a net importer by the next decade, as Europe’s own production declines by 25 billion cubic meters over 2013-2019. Russia, the world’s second-biggest producer after the U.S., will have flat production over the period. After a collapse in 2013, Africa’s production should recover to 254 billion cubic meters by 2019.
To contact the reporter on this story: Anna Shiryaevskaya in London at ashiryaevska@bloomberg.net
To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Rob Verdonck, Andrew Reierson
By Rudy Ruitenberg Jun 10, 2014 8:30 PM GMT+0700
World production of biodiesel is forecast to climb to a record this year, with output in Brazil rising as the country increases mandates for incorporation in transportation fuel, Oil World said.
Biodiesel production may rise by 2 million to 2.1 million metric tons, or about 8 percent, to 29.1 million tons in 2014, the Hamburg-based oilseed industry researcher wrote in an e-mailed report. That’s less than last year’s 2.9 million-ton increase, Oil world said.
Processed vegetable oils can fuel diesel engines, with engineer Rudolph Diesel running the first working prototype of his engine on peanut oil in 1893. Governments from Brazil to the U.S. have set rules to boost use of renewable transport fuels and reduce burning of fossil fuels.
Rising use of vegetable oil for biodiesel is “still sizably exceeding the growth rates in other usage categories, like the food sector,” Oil World wrote. “Palm oil is gaining importance as a feedstock, accounting for roughly a third of biodiesel output worldwide.”
An estimated 9.5 million to 9.6 million tons of palm oil will be used to make biodiesel this year, according to the researcher. Indonesia’s production of palm-oil based biodiesel may increase by 1.2 million tons to 3.8 million tons, Oil World wrote.
Soybean oil use for biodiesel production is forecast to rise by 300,000 tons to 7.3 million tons, according to the report. Soybean-based biodiesel output in the U.S. is seen at 2.3 million tons, Brazil may produce 2.1 million to 2.2 million tons and Argentina 2.05 million tons.
Brazil’s biodiesel inclusion mandate will rise to 6 percent in July from 5 percent, climbing later to 7 percent, according to Oil World.
Higher Mandates
“Assuming that the higher mandates will be largely fulfilled, Brazilian biodiesel production may increase by 17 percent to 3 million tons in 2014,” Oil World said.
Production in Brazil may show a “further massive increase” to 4 million to 4.1 million tons next year as 7 percent biodiesel inclusion is mandatory year-round, according to the industry researcher.
Global use of rapeseed oil as a raw material for biodiesel may be 6.4 million tons this year, according to Oil World. Used cooking oils have become more important as a feedstock, with an expected 2.3 million tons turned into biodiesel this year.
The European Union used a record 6.9 million tons of palm oil in 2013, according to Oil World estimates. Energy accounted for 3.6 million to 3.7 million tons of use in 2013 from 2.68 million tons, lifting the proportion of palm oil used as fuel to about 53 percent from 45 percent.
EU consumption of 17 oils and fats totaled 30.85 million tons last year, with 17.8 million tons for food use and 9.01 million tons for biodiesel, according to Oil World. Within the EU’s palm oil use, 3.25 million tons was for food and chemicals, 2.51 million tons for biodiesel and 1.14 million tons to generate electricity and heat, Oil World said.
To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net
To contact the editors responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net John Deane
