Five cargoes of Nigeria’s Escravos crude grade are expected to load in August, according to a copy of the loading schedule seen by Platts Friday, up from the three seen in July and four in June.
Total exports of the grade are set to come in at 4.75 million barrels at an average daily loading rate of 153,226 b/d across five cargoes of 950,000 barrels each. This is the largest export program since September 2012, according to Platts data.
Sources said the larger-than-normal export program could be tied to a problem at the 110,000 b/d Kaduna refinery in northwest Nigeria, which is typically supplied with Escravos.
“There is a drop in capacity utilization at the Kaduna refinery due to a technical problem and vandalization of the pipeline, which has cut crude supply to the refinery,” a source familiar with the situation said Friday.
Some 50% of the “crude feedstock for the refinery comes from the Escravos stream,” the source added. A spokesman for state-owned Nigerian National Petroleum Corp. declined to comment on the situation.
CIF Northwest European naphtha cargo prices rose $8 Thursday to be assessed at a six-month high of $972/mt as a recent sharp rise in crude futures prices offset a fall in naphtha crack swaps and physical premiums.
The last time the CIF NWE naphtha cargo was assessed higher was December 4, 2013, when it was $975.50/mt, Platts data shows.
Front-month ICE Brent topped $115/ barrel Thursday for the first time in nine months, as increased violence in Iraq heightened concerns over oil supplies.
However, European naphtha cracks fell Thursday, with the front-month CIF NWE naphtha crack swap falling to a two-month low of minus $6.20/b at market close, down from minus $5.95/b Wednesday, and the CIF NWE front-month/ second-month backwardation narrowed 25 cents to be assessed at $5.75/mt, the lowest since October 23.
According to trading sources, naphtha cracks have been falling significantly over the past 10 days as physical length built in NWE due to lower gasoline blending demand, seasonally reduced demand from petrochemical end-users, a closed arbitrage to Asia and cargoes being fixed from other regions to move volumes into Europe.
“The prompt has an overhang as petchems don’t want second half of June barrels and gasoline blending is quiet still,” said a naphtha trader. “Naphtha is struggling a bit in the prompt and there is a bit of contango in terms of cash premiums,” said a broker.
The US is deliberating a new round of “scalpel sanctions” that may target various Russian industrial sectors, including energy, as the Ukrainian crisis continues to broil, a senior Obama administration official said Friday.
The official, who spoke to reporters on condition of anonymity, said the US is consulting with the EU on Russian sanctions “targeted primarily in the financial, defense and high-technology sectors.” Though the official did not mention Russia’s energy sector, a State Department official later clarified to Platts that “all sectoral sanctions are still on the table.”
“The idea here is to deny Russia the kind of investment and next-generation technology that it needs to continue to grow,” the Obama administration official told reporters. “This conversation has been ongoing for some time, but it has intensified over the last week as we have seen Russian materiel move into Ukraine in contravention of our hope and expectations that Russia would take this diplomatic moment to de-escalate,” the official added.
The official said top US and EU diplomats would continue to confer over the weekend and into next week on what, if any, sanctions to impose on Russia, as fighting between Ukrainian troops and pro-Russia separatists entered a second day Friday.
“We have had a number of rounds of discussion at the senior expert level, both with the commission and with nation states of the EU, to try to explain the scalpel sanctions package that we are working on on the US side and to look at what the EU might be able to do ... that matches or is as close to equivalent as our different systems allow,” the official said.
“We have had quite a bit of convergence in the last week or so.” Washington, which has accused Russia of escalating the separatist rebellion in Ukraine, has already imposed sanctions on several high ranking Russian officials and individuals involved in Russian energy companies, including Rosneft CEO Igor Sechin.
Ongoing turmoil in Iraq is not expected to expedite a shift in US crude oil export policy, but a linked increase in gasoline prices could make policymakers more hesitant to liberalize export restrictions. “Even if it may not be true, there may always be a concern for some people that a change in oil export policy will be accused of having led to a run up in pump prices,” said Jason Bordoff, a former White House energy adviser for the Obama administration.
“It’s hard to overstate the political sensitivity around gasoline prices. Potential impacts on gasoline prices are always something that politicians are aware of,” said Bordoff. Front-month NYMEX RBOB settled at $3.1277/gal Friday, and is up around 4.5 cents/gal since late last week, when the ISIS advance in Iraq rallied both NYMEX WTI and ICE Brent crudes to respective nine-month highs of over $107/b and $115/b.
Over the first three weeks of June last year, front-month RBOB averaged just $2.84/ gal. If US gasoline prices continue to climb in response to growing violence in Iraq, Ed Morse, the head of commodities research at Citigroup Global Markets, said a shift in crude export policy may be more difficult to politically justify.
“The higher that crude oil prices go, the higher gasoline prices will go, and the more difficult it will be to have a rational debate on crude exports, despite it being more evident than not that exporting crude will cause gasoline prices to go down,” Morse said.
Several analysts said this week that some Obama administration officials have often stressed that they are not pushing for or against crude exports, but simply do not want to be blamed for rising gasoline prices, even if the policy change is not responsible for that price jump.
Still, the turmoil in Iraq could help bolster the argument for US crude exports as a potential stabilizer to global crude supplies amidst turmoil in the Middle East, said Bordoff, the founding director of Columbia University’s Center on Global Energy Policy. “I could see supporters of oil exports trying to use any perceived threat to global crude supplies to argue that the US can stabilize global markets by exporting oil,” Bordoff said.
By Pietro D. Pitts Jun 21, 2014 4:15 AM GMT+0700
Petroleos de Venezuela SA’s annual net income rose more than three-fold as the state-owned oil producer spent less on social programs, reduced costs after currency devaluation and sold assets.
Profit rose to $15.8 billion last year from $4.3 billion in 2012, according to a bond offering circular dated May 14, a copy of which was obtained by Bloomberg. So-called comprehensive net income was $12.9 billion, up from $5.1 billion.
Spending on social projects declined to $13 billion from $17.3 billion in 2012. Ousted Planning Minister Jorge Giordani, who was also removed from PDVSA’s board this month, said in a June 18 letter that the company had started to show “signs of independence” under President Nicolas Maduro, derailing the long-term development goals of former President Hugo Chavez.
Venezuela devalued the bolivar by 32 percent in February, 2013, taking the primary official rate to 6.3 bolivars per dollar. The country has since introduced multiple exchange rates, opening up in March an alternative system known as Sicad II that sells dollars for about 50 bolivars.
PDVSA’s oil sales fell to $114 billion from $124.4 billion the previous year. The result was boosted by a foreign currency gain of $7.8 billion from last year’s devaluation and a one-time sale of a subsidiary for $9.5 billion.
Output fell about 11,000 barrels a day in 2013 to 2.9 million, while exports fell 143,000 barrels a day over the period to 2.4 million. The company received an average of $98.08 per barrel for its exports compared to $103.42 in 2012. While Venezuela has the largest reserves in the world at 298 billion barrels, according to a 2013 review by BP Plc, its output is dwarfed by Saudi Arabia’s 11.5 million barrels a day.
Refined Products
Venezuelan oil and product exports to North America fell to 845,000 barrels a day from 1 million in 2012 while exports to Asia increased to 1 million barrels a from 958,000.
Demand for refined products in Venezuela rose to 703,000 barrels a day from 681,000 in 2012. PDVSA sells oil into the domestic market for less than the export price.
PDVSA invested $23.5 billion last year compared with $25.1 billion in 2012 and total assets increased to $231.1 billion from $$218.4 billion, according to the report.
Venezuela’s oil industry accounts for 96 percent of the country’s dollar export earnings, Oil Minister Rafael Ramirez said last month. The government intends to increase oil production to 6 million barrels a day by the end of 2019, Ramirez said.
Arbitration Ruling
PDVSA lost a $644 million arbitration case in November 2013 against Sharjah, UAE-based Gulmar Offshore Middle East LLC and Maple Shade, New Jersey-based Kaplan Industry Inc. related to the early termination of a contract. The amount was listed on PDVSA’s balance sheet as part of accruals and other liabilities at the end of 2013, according to the report.
At the end of 2013, PDVSA was involved in other claims and legal actions totaling $2.1 billion. The company has included provisions of $3.3 billion from 2011 to 2013, according to the report. A PDVSA official, who is not authorized to speak publicly, declined to comment on the legal cases.
To contact the reporter on this story: Pietro D. Pitts in Caracas at ppitts2@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Nathan Crooks
By Moming Zhou Jun 23, 2014 6:01 AM GMT+0700
Hedge funds increased bets on rising crude prices to a record as fighting in Iraq threatened to disrupt supply from OPEC’s second-biggest member.
Speculators raised their net-long position in benchmark West Texas Intermediate by 4.3 percent in the week ended June 17, U.S. Commodity Futures Trading Commission data show.
Futures reached a nine-month high on June 13 after fighters from the Islamic State in Iraq and the Levant, or ISIL, seized the northern city of Mosul and advanced toward Baghdad. While production in the south, home to about three-quarters of Iraq’s output, remains unaffected, companies including Exxon Mobil Corp. (XOM) and BP Plc (BP/) began evacuating employees.
“The betting is that there is a greater chance that the price will go up further,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone on June 20. “The fighting is almost certainly going to escalate, and the worse it gets, the more likely you’ll have some threat to the oil supply.”
Futures gained 1.9 percent to $106.36 on the New York Mercantile Exchange in the period covered by the CFTC report. They closed at $107.26 on June 20. Implied volatility for WTI options, a measure of expected futures movement, jumped to 17.9 percent on June 13 from 12.8 percent on June 6, data compiled by Bloomberg show.
Market Risk
Iraq pumped 3.3 million barrels of oil a day of last month, second to Saudi Arabia in the Organization of Petroleum Exporting Countries. Production jumped 52 percent from 2.17 million in September 2008, data compiled by Bloomberg show.
President Barack Obama said June 19 that the U.S. will deploy as many as 300 special advisers to help blunt the insurgency.
“There’s an anxiety premium of $5 to $10 in the price for WTI,” Nansen Saleri, chief executive officer of Quantum Reservoir Impact LLC in Houston, said by phone last week. “There’s a risk right now, but it’s a manageable risk because global supply exceeds demand,” said Saleri, the former head of reservoir management at Saudi Arabian Oil Co.
The conflict also is helping boost U.S. gasoline prices. Futures rose to $3.1277 a gallon, an 11-month high, on June 20. Regular gasoline at the pump, averaged nationwide, increased 0.1 cent to $3.682 a gallon on June 21, the most expensive since May 1, according to AAA in Heathrow, Florida.
Hedge funds and other money managers boosted net-long bets on gasoline by 8 percent to 61,910 futures and options in the week ended June 17.
Energy Agency
The International Energy Agency forecast that Iraq will provide about 60 percent of OPEC’s production growth in the rest of this decade. The country’s output capacity will increase by more than 1.2 million barrels a day in the six years through 2019, the Paris-based group estimated in a June 13 report.
“Surging violence also means that Iraqi oil output is now unlikely to rise above current levels,” Bank of America Corp. analysts including Francisco Blanch said in a report June 15. “Longer term, the risks have also risen as investment projects could be canceled or delayed.”
In other markets, money managers’ bullish wagers on ultra low sulfur diesel jumped 75 percent to 27,131 contracts. The fuel surged 4.6 percent to $3.018 a gallon in the CFTC week.
Natural Gas
Net longs on U.S. natural gas rose 3.8 percent to 315,027 contracts, the first increase in eight weeks. 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 Future. Nymex natural gas advanced 4 percent to $4.709 per million British thermal units during the report week.
Net-long positions on WTI climbed 14,656 to 356,336 futures and options, the most in data going back to 2006. Long positions gained 16,927 and shorts gained 2,271.
Worldwide oil consumption will jump 1.3 million barrels, or 1.5 percent, to 92.8 million a day this year, the IEA said. Demand for crude from OPEC will rise to 30.9 million a day in the second half of the year, an increase of 150,000 barrels from the IEA’s estimate last month.
The 12-member OPEC, which supplies about 40 percent of the world’s oil, kept its production target unchanged at 30 million barrels a day when ministers met in Vienna earlier this month.
“This tightly balanced global market has for some time been one more unplanned supply outage away from a sharply higher price,” Katherine Spector, a commodities strategist at CIBC World Markets Inc., said in report on June 16. “The rapid deterioration of what was already a tenuous stability in Iraq is a cogent reminder of that fact.”
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 Dan Stets, Bill Banker
By Lynn Doan and Richard Stubbe Jun 21, 2014 3:23 AM GMT+0700
Rigs targeting oil in the U.S. gained to a record this week as crude prices surged and energy producers ramped up drilling in the Eagle Ford shale formation of South Texas.
Oil rigs increased by three to 1,545, the highest level since Baker Hughes Inc. (BHI) separated its oil and gas counts in 1987. Rigs targeting crude rose the most in the Eagle Ford shale, where the count added four to 210. Gas rigs climbed by one to 311, and the total count, including miscellaneous rigs, rose to 1,858, the Houston-based field services company said on its website.
Companies are expected to spend a record $165 billion on exploration and production in the U.S. this year, spurred by energy price gains and horizontal drilling that has helped draw record volumes of oil and gas out of U.S. shale formations. The boom has raised domestic crude production to the highest level in more than a quarter-century and brought the U.S. closer to energy independence than it has been in 29 years.
“There is room for additional upside amid the current commodity price environment and the potential for increased capital deployment into the U.S. markets stemming from geopolitical risk internationally, notably Iraq,” James West, an oil services and drilling analyst at Barclays Plc (BARC)’s investment-banking unit in New York, said in a report June 18.
Brent Gains
European benchmark Brent crude gained for a second week as the U.S. said it will send military advisers to Iraq to help repel militants in OPEC’s second-biggest oil producer. U.S. benchmark West Texas Intermediate crude for July delivery rose 83 cents, or 0.8 percent, to settle at $107.26 a barrel on the New York Mercantile Exchange, up 12 percent in the past year.
U.S. oil production climbed by 17,000 barrels a day, or 0.2 percent, in the week ended June 13 to 8.48 million, the highest level since 1986, data compiled by the Energy Information Administration show. Oil supplies dropped 579,000 barrels, or 0.2 percent, to 386.3 million, according to the EIA.
“High oil prices are making people money,” James Williams, president of energy consulting firm WTRG Economics in London, Arkansas, said by telephone today. “While we haven’t had big, stellar increases in the rig count, drilling is becoming increasingly more efficient in a lot of plays.”
Efficient Production
New oil production per rig per day in North Dakota’s Bakken formation is expected to rise to a record 510 barrels in July, the EIA said in a June 9 report. Output in the Eagle Ford will increase to 479, also the most ever, the agency said. Gas yield per rig there is expected to climb to a record 1.29 million cubic feet a day
U.S. gas stockpiles rose 113 billion cubic feet last week to 1.719 trillion, EIA data show. Supplies were 33 percent below the five-year average.
Natural gas for July delivery declined 5.3 cents, or 1.2 percent, to $4.531 per million British thermal units today on the Nymex, up 17 percent in the past year.
Rigs on land rose by four this week to 1,784. Rigs in inland waters were unchanged at 15. The offshore rig count, primarily in the Gulf, were also unchanged at 59.
Miscellaneous rigs, which usually drill for geothermal energy, were unchanged at two.
Energy rigs in Canada surged by 21 to 265, following a seasonal drilling pattern.
To contact the reporters on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net; Richard Stubbe in Houston at rstubbe1@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Richard Stubbe, Stephen Cunningham
By International Business Times | Commodities News | Jun 20, 2014 03:39PM GMT | Add a Comment
By Meagan Clark - After weeks of seeking a buyer for a disputed cargo of millions of barrels of oil pumped and exported from the semi-autonomous region of Kurdistan in Iraq, the cargo remains floating on the Mediterranean Sea amid conflicting ownership claims with Iraq’s central government.
Kurds Look For Oil Buyers As Tension With Iraq IncreasesKurds Look For Oil Buyers As Tension With Iraq Increases
The ship has been tracked to waters nearby Israel's Ashkelon port and Reuters reported that the tanker is expected to dock early on Saturday, although it was not clear whether the oil on board the SCF Altai tanker had been sold to a local refiner or was going to be stored. "We do not comment on the origin of crude oil being imported by the private refineries in Israel," an Israeli energy ministry spokeswoman was quoted as saying by Reuters.
“If that tanker docks, Iraq’s Kurdistan Regional Government (KRG) will take an important step toward independence,” Nihat Ali Ozcan, an analyst at the Economic Policy Research Foundation in Ankara, Turkey, told Bloomberg.
Facing legal threats from Baghdad, European governments have been wary of accepting the contentious cargo that left the Turkish port of Ceyhan in early June.
The KRG exported the crude via a new pipeline from the autonomous region in Iraq to the Turkish port of Ceyhan. The pipeline's construction, designed to bypass the central government's own pipeline network, is at the center of the ongoing row between Baghdad and the Kurds.
Baghdad and the KRG have been locked in a dispute over the right to sell oil produced in the autonomous region for months. Both parties insist that Iraq's constitution allows them to export the oil independently.
The KRG, which accuses Baghdad of withholding government funds it is owed, has long sought to increase its financial independence from the central government.
The SCF Altai tanker loaded the disputed crude from the United Emblem tanker during a ship-to-ship transfer near Malta, ship tracking data showed. The United Emblem was the second shipment of Kurdish crude to leave the port of Ceyhan. The first, United Leadership, remains at sea.
Kurdish administration representatives denied on Friday that they’re offering the load at half-price, according to a Bloomberg report.
Kurdish armed forces wrested control of Iraq’s key northern oil city, Kirkuk, from Islamist militants, who in turn took control of the city from the Iraqi army last week. The Kurds have long claimed the city should be a part of their autonomous region. Selling the oil would allow the Kurdish region to become one step closer to financial independence from Iraq and feed its expanding territory’s economy.
The Kurdish government views the oil exports as within its rights under the Iraqi constitution.
http://c3352932.r32.cf0.rackcdn.com/content/pic63a80de7100d1dfd55dfac924cae3ab1.jpg
“The big question is: ‘who will control the oil’? Counterparts in Baghdad did not identify ‘right’ or ‘wrong’ KRG actions – they just wanted to control the issue completely,” KRG Prime Minister Nechirvan Barzani said on June 4, in an address to Parliament. “We do not view this issue as a path towards Kurdistan’s independence, but rather as the expression of our constitutional rights… upon which we agreed when we returned to Iraq in 2003 and 2004, and they have to be implemented in Iraq.”
Turkey also sees the Kurdish oil, exported through its Mediterranean port of Ceyhan, as “entirely legitimate,” Turkey’s energy minister Taner Yildiz told Bloomberg. At the World Petroleum Congress in Moscow this week, he said the next shipment of oil is scheduled for Sunday, and that currently, 100,000 to 120,000 barrels of oil flow each day from northern Iraq, and 2.3 million barrels of oil are stored in Ceyhan.
According to Bloomberg, Iraq’s Deputy Prime Minister Hussain al-Shahristani said on Iraqiya television Tuesday that “the Iraqi people won’t forget those who conspired against them during tough times,” and “Turkey should be aware that this is like playing with fire. This is plundering the wealth of Iraq.”
Nigel Wilson of IBTimes UK Contributed to this report
TRIPOLI, June 22 Sun Jun 22, 2014 6:25am EDT
(Reuters) - Libya's eastern Hariga oil port has reopened after a protest by security guards ended there, receiving the first tanker loading 750,000 barrels of oil, a spokesman for state-owned National Oil Corp (NOC) said on Sunday.
A second tanker would dock later on Sunday at the port located in Tobruk to load 600,000 barrels of oil, NOC spokesman Mohamed El-Harari said.
He also said the western El Feel oil field was working "normally" after a separate protest had ended there more than a week ago. (Reporting by Feras Bosalum and Ahmed Elumami; Writing by Ulf Laessing; Editing by Sophie Hares)
Monday, June 23, 2014
Escalating violence in Iraq is threatening the development of some of the world's largest oil reserves at a time when the Organization of the Petroleum Exporting Countries' number-two producer was expected to be a key future supplier.
Western majors including BP, ExxonMobil and Shell, along with state-backed mainland giants China National Offshore Oil Corp and China National Petroleum Corp, have plowed billions of dollars into the country's oil fields since 2008.
But now a lightning offensive led by jihadists from the Islamic State of Iraq and the Levant means the anticipated modernization of Iraq's major southern oil fields is threatened.
"There's no question that outside of North America, Iraq is the country that matters the most for future production," said Antoine Halff, head of the International Energy Agency's oil markets and industry division.
Global oil prices have risen from around US$109 (HK$850) a barrel to nine-month highs of more than US$114 a barrel on the back of the crisis, but are nowhere near what analysts predict they could reach if Iraq stops exporting.
"In an `ugly' scenario, where the bulk of Iraqi supply is lost, the price of Brent could easily surge to new record highs above US$140," said Capital Economics.
But in the long term, the bloodshed could hinder access to Iraq's low-cost oil supplies, which account for 11 percent of proven world reserves, just as the depletion of mature fields elsewhere is starting to bite.
Iraq now produces 3.3 million barrels a day. The IEA expects that to grow to six million by 2020, accounting for around 60 percent of the cartel's production growth. Iraq's ability to boost exports is particularly important given that violence is disrupting exports from other producers such as Libya and Syria.
The IEA estimates OPEC's 2014 spare capacity at 3.52 million barrels a day - 80 percent from Saudi Arabia. But that would leave very little margin for error, especially if a rebound in global growth drives a faster-than-expected rise in demand.
Disruption in Iraq would be a particular issue for resource-hungry China, which is now the largest foreign investor in the country's oil sector.
CNOOC and CNPC, parent of PetroChina (0857), both have huge investments in southern Iraq and China has a total of 10,000 workers on the ground. Halff expects Beijing to turn to Saudi Arabia and to Iran and Russia for supplies. AGENCE FRANCE-PRESSE
© 2014 The Standard, The Standard Newspapers Publishing Ltd.
Crisis may also push more countries to do business with autonomous Kurdish region
By Caroline Henshaw June 22, 2014, 7:15 pm 0
A column of smoke rises from Beiji oil refinery, some 250 kilometers (155 miles) north of Baghdad, Iraq, Thursday, June 19, 2014, as Iraqi security forces battled with Islamist militants for control of the facility. (photo credit: AP)
A column of smoke rises from Beiji oil refinery, some 250 kilometers (155 miles) north of Baghdad, Iraq, Thursday, June 19, 2014, as Iraqi security forces battled with Islamist militants for control of the facility. (photo credit: AP)
PARIS (AFP) — Escalating violence in Iraq is threatening the development of some of the world’s largest oil reserves at a time when OPEC’s number-two producer was expected to be a key future supplier.
Western majors including BP, ExxonMobil and Shell, along with state-backed Chinese giants CNOOC and CNPC, have plowed billions of dollars into the country’s oil fields since 2008.
But now a lightning offensive led by jihadists from the Islamic State of Iraq and the Levant (ISIL) means the anticipated modernization of Iraq’s major southern oil fields is looking slimmer by the day.
“There’s no question that outside of North America, Iraq is the country that matters the most for future production,” Antoine Halff, the head of the IEA’s oil markets and industry division, told AFP.
So far, insurgents have forced the shutdown of Iraq’s main oil refinery but has not reached the main oil fields of the south, which account for 90 percent of exports.
Global oil prices have risen from around $109 a barrel to nine-month highs of over $114 a barrel on the back of the crisis, but are nowhere near what analysts predict they could reach if Iraq stops exporting.
“In an ‘ugly’ scenario, where the bulk of Iraqi supply is lost, the price of Brent could easily surge to new record highs above $140,” said Capital Economics.
But in the long-term, the bloodshed could hinder access to Iraq’s low cost-oil supplies, which account for 11 percent of proven world reserves, just as the depletion of mature fields elsewhere is starting to bite.
Huge potential
Iraq has ramped up production in recent years and currently produces 3.3 million barrels a day (bpd). The International Energy Agency expects that to grow to 6 million by 2020, accounting for around 60% of the cartel’s production growth.
That’s key as the agency predicts world oil demand will breach 100 million bpd in 2019, with developing countries overtaking the developing world for the first time.
“For upstream, there are a lot of investments that are going to happen from 2016,” said Hans Nijkamp, vice president of Shell Iraq.
“The Iraqi government is going to ask to sink a lot of money in the country again, [but] the political and security situation needs to be sufficiently good.”
While it is unlikely ISIL could take direct control of fields in the Shiite south, they could target authorities and oil company headquarters in the capital.
They could also spread chaos using sabotage and terrorism as they did in the northern province of Anbar, where a key pipeline has been disabled since March.
The IEA has cut its growth outlook for Iraq by around half a million barrels to 4.29 million bpd by 2018, citing concerns about security, infrastructure and corruption that existed before the latest violence.
“It’s quite clear to all of us what the potential of Iraq is but we all know that the capacity to realize that potential has been seriously compromised,” said Jeremy Greenstock, chairman of Lambert Energy Advisory.
“It’s not just a question of security on the ground… the investment sector has to be reassured that Iraq can manage its business in order to provide return on that investment.”
China hit hardest
Iraq’s ability to boost exports is particularly important given that violence is disrupting exports from other producers such as Libya and Syria.
The IEA estimates OPEC’s 2014 spare capacity at 3.52 million barrels a day — 80% from Saudi Arabia — so in theory the cartel could replace almost all of Iraq’s supplies.
But that would leave very little margin for error, especially if a rebound in global growth drives a faster-than-expected rise in demand.
Disruption in Iraq would be a particular issue for resource-hungry China, which is now the largest foreign investor in the country’s oil sector.
Last year China overtook the US to become the world’s top oil importer and it is expected to be a key driver in pushing up world demand by 2020.
China National Offshore Oil Corp. and China National Petroleum Corp. both have huge investments in the south and China has a total of 10,000 workers on the ground.
Halff said Beijing was likely to turn to Saudi Arabia, which produces crude of similar quality to Iraq’s, and to Iran and Russia for supplies.
The Iraq crisis has also turned the spotlight onto exports from the autonomous region of Kurdistan, which Baghdad says are illegal as it claims the sole right to develop and export Iraqi oil.
Kurdistan wants to increase them to 400,000 bpd by the end of 2014, from 125,000 bpd currently, and said it has already started pumping oil through Turkey.
Buyers have been reluctant to touch the supplies so far as Iraq has threatened to sue anyone who buys Iraqi oil, but the crisis could change that.
“The market will be looking at whether this could be the catalyst that will precipitate an agreement,” said Halff.
Read more: Analysts say conflict could threaten Iraqi oil sector growth | The Times of Israel http://www.timesofisrael.com/analysts-say-conflict-could-threaten-iraqi-oil-sector-growth/#ixzz35Q9Bl6aj
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AYDIN - Anadolu Agency
Smoke rises from a oil refinery in Baiji, north of Baghdad, in this picture taken through the windscreen of a car, June 19, 2014. REUTERS Photo
Smoke rises from a oil refinery in Baiji, north of Baghdad, in this picture taken through the windscreen of a car, June 19, 2014. REUTERS Photo
Iraq has requested to fill its gasoline gap with fuel from Turkey after the shutdown of the country’s biggest oil refinery amid clashes with armed insurgents, Turkish Energy Minister Taner Yıldız has said.
Speaking to journalists during the opening ceremony of a geothermal power station in the western Turkish province of Aydın, Yıldız said the closure of the Beiji refinery created a daily gasoline gap of 4,000 tons in Iraq.
He said Turkey’s state-owned petroleum company TÜPRAŞ had the capacity to respond to these demands, though the transportation would cause long queues of tankers at the Habur border gate, which has a limited capacity.
“Firstly, we will consult with our customs and trade ministry,” said Yıldız, stressing that the transportation would not be easy and would exceed the capacity at the border gate.
Militants led by the Islamic State of Iraq and the Levant (ISIL) have seized a vast swathe of territory in northern Iraq since overrunning the city of Mosul on June 10.
June/22/2014
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