By Bloomberg News Jun 23, 2014 4:33 PM GMT+0700
China’s natural gas imports via pipeline rose to a record high last month as the government sought to diversify its supply sources for the fuel.
Shipments increased for a second month to 2 million metric tons in May, data from the General Administration of Customs in Beijing show today. That’s up 27 percent from a year ago and is the highest level since Bloomberg started tracking the figures in February 2010.
China has built new gas-import pipelines “on account of energy security,” according to Gong Jinshuang, a senior engineer at China National Petroleum Corp. The world’s largest energy consumer last month reached a $400 billion, 30-year deal to receive its first gas from Russia. In October, the nation starting taking supplies from Myanmar using a pipeline with a designed capacity of 12 billion cubic meters a year.
“With the new pacts with Russia and Myanmar gradually increasing shipment, China will see more imports coming through pipeline,” Gong said by phone from Beijing today.
Supplies from Turkmenistan, which accounted for 88 percent of China’s imports last year, climbed 20 percent in May from a year earlier to 1.64 million tons, the data show. Shipments from Myanmar were at 155,712 tons.
Liquefied petroleum gas imports more than doubled from a year earlier to 729,838 tons last month, according to the data. That’s the highest since at least 2008.
To contact Bloomberg News staff for this story: Jing Yang in Shanghai at jyang251@bloomberg.net
To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Yee Kai Pin, Mike Anderson
Oil Seen Rising Faster Than Market Shows on Iraq Violence
By Grant Smith Jun 23, 2014 9:54 PM GMT+0700
Oil traders are too complacent about the longer-term threat of escalating violence in Iraq, banks from Citigroup Inc. to Bank of America Corp. said.
Brent oil for August delivery rose 4.4 percent this month on the ICE Futures Europe exchange in London, a 10th more than the gain in crude for the end of 2018. Violence in Iraq is the biggest risk to new supply this decade from any nation in the Organization of Petroleum Exporting Countries, the International Energy Agency said June 13.
While fighters from the Islamic State in Iraq and the Levant have seized cities north of Baghdad, the majority of oil assets are in the south and east. Still, having the al-Qaeda splinter group within miles of the nation’s capital threatens to derail plans to increase production.
“The market has worked itself into an extraordinary level of complacency,” Seth Kleinman, European head of energy research at Citigroup in London, said by phone on June 19. “The reality is that Iraq matters now and, given what a big component it is of global production growth, it matters possibly even more for the future.”
Brent contracts for August settlement reached a nine-month intraday peak of $115.71 a barrel on June 19 and traded for $114.25 at 3:30 p.m. today in London. December 2018 futures of the grade have advanced 3.9 percent this month, last trading at $98.47 a barrel. The North Sea grade is used to price more than half the world’s oil, including Iraq’s Basrah Light grade.
Shia South
Markets haven’t panicked because Shia-dominated southern regions remain unaffected and will be fiercely defended against the ISIL insurgency, Harry Tchilinguirian, BNP Paribas’s head of commodity markets strategy, said by e-mail on June 20. Southern Iraq produced more than 85 percent of the country’s 3.1 million barrels a day of crude in April and shipped all of its 2.5 million barrels of daily exports, Oil Ministry data show.
A long-term deterioration of security because of regular terrorist attacks could affect international oil companies and they might scale back operations, Tchilinguirian said.
Exxon Mobil Corp. (XOM) and BP Plc began removing some employees from projects in Iraq last week. The International Energy Agency cut its forecast for Iraq’s capacity expansion to 2019 by 470,000 barrels a day in a report on June 17, citing the insurgency. The country will boost production by a “conservative” 1.28 million barrels a day to 4.54 million over the period, the IEA estimates.
No Flood
“Foreign upstream investment will be reduced as will the government’s capacity to progress major infrastructure projects and resolve bureaucratic issues,” threatening Iraq’s target of 5 million barrels of daily production by 2020, Amrita Sen, chief oil markets analyst at London-based consultant Energy Aspects Ltd., said by e-mail today. Brent for delivery at the end of this decade will probably advance because current price levels need “a lot of incremental oil supply from Iraq, while all the current dynamics suggest that the flood may just be a trickle,” said Sen.
“What’s happening in Iraq is exacerbating the problem” of prolonged supply disruptions caused by sanctions on Iran, political feuding in Libya and the civil war in Syria, Francisco Blanch, head of commodities research at Bank of America in York, said by phone on June 19. The bank said it expects long-dated Brent prices to rise.
Critical Source
With Iraqi Kurdish forces moving to secure territory threatened by the militants, including the northern Kirkuk oilfield, the current turmoil may yet allow a near-term increase in the nation’s crude exports, Citigroup and Barclays Plc predicted.
Production growth from non-OPEC nations such as the U.S., which are as important in determining long-term prices as OPEC supplies, may also mute the price reaction, said Tchilinguirian.
Still, any persisting danger to such a critical source of supply growth as Iraq should push long-term prices a few dollars higher, said Miswin Mahesh, an analyst at Barclays in London.
“The extra production capacity is supposed to come from Iraq, and you have a big, fluid situation there,” Mahesh said by phone on June 19. “That does throw the door open for the value of the back end to be reassessed.”
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron
By David Wethe Jun 24, 2014 3:37 AM GMT+0700
- Comments Email Print
Transocean Ltd. plans to raise as much as $350 million in the initial public offering of a company owning three of its drillships as the world’s largest offshore rig contractor seeks to strengthen its balance sheet.
The new entity, Transocean Partners LLC, expects to sell 51 percent partnership units in each of the three rigs, while Vernier, Switzerland-based Transocean Ltd. retains the remaining 49 percent stakes, the company said in a federal filing today.
Offshore rig contractors have been studying tax-free partnerships for some long-term contract drillships since Norway’s Seadrill Ltd. adopted such a structure in 2012. Transocean has been seeking ways to raise cash to upgrade its fleet and fund its dividend including a tax-free partnership, which is comparable to a master-limited partnership.
“We’ll start at a reasonable number of rigs that will allow us to grow the MLP over time so we can meet the MLP investor’s expectations regarding growth in distributions,” Chief Executive Officer Steven Newman said June 6 in an interview at Bloomberg’s Houston office. Transocean is on track to do a partnership IPO in the third quarter of this year, he said then.
Transocean’s filing didn’t provide timing for the IPO.
Royal Dutch Shell Plc is the latest energy company to announce an MLP. Shell said June 18 it will sell shares in a U.S. pipeline business in the second half of 2014.
It’s still to be determined “how well a new offshore drilling MLP will do with current fundamental conditions,” Luke Lemoine, an analyst at Capital One Southcoast in New Orleans, said today in a note to investors.
New Drillships
Transocean Ltd. owned 77 rigs, including the three being contributed to the new partnership, as of June 16, according to the filing. The company is building another nine drillships and five shallow-water rigs.
Transocean Partners LLC has rigs in the Gulf of Mexico with contracts through at least November 2016. The partnership also will get first rights over the next five years to acquire stakes in four drillships under construction.
Rig contractors responded to rising demand in the past few years with the biggest batch of orders since the advent of deep-water drilling in the 1970s. Almost 100 vessels are on order for delivery before the end of 2017, according to IHS Energy.
Transocean, which has 10 buy ratings from analysts, 19 holds and 13 sells, climbed 1.4 percent to close at $46 in New York. Before today, Transocean was the second-worst performer in the Philadelphia Oil Services index, having fallen 6.2 percent over the past 12 months. Diamond Offshore Drilling Inc. was the worst performer over the past year before today, having slid 24 percent.
Morgan Stanley & Co. LLC and Barclays Capital Inc. will serve as underwriters for the IPO, according to the filing.
To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net
To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net Robin Saponar
By Nidaa Bakhsh and Frederic Tomesco Jun 24, 2014 3:52 AM GMT+0700
SNC-Lavalin Group Inc. (SNC) made its biggest acquisition yet in agreeing to buy Kentz Corp. (KENZ) for 1.16 billion pounds ($1.97 billion) as it seeks to expand in the oil industry where profit margins are high.
The price of 935 pence a share is 33 percent more than last week’s close for Kentz, Montreal-based SNC said in a statement today. SNC said the Kentz purchase probably will close in the third quarter.
Adding Kentz fits Chief Executive Robert Card’s plans to reshape Canada’s biggest engineering and construction company after a corruption scandal. Card, who has been CEO since October 2012, made sure SNC would have enough heft for the deal by agreeing in May to sell the AltaLink power-transmission unit to Berkshire Hathaway Inc. for $2.9 billion.
“The acquisition makes a lot of sense as it accomplishes the commencement of SNC’s oil and gas rebuild cycle, makes lower risk services revenue a dominant share of company’s top line and deploys the proceeds of the AltaLink acquisition into a well-understood and strongly performing asset,” Maxim Sytchev, an analyst at Dundee Securities Corp., said today in a note to clients.
The deal is the company’s biggest since at least 1991, when SNC Inc. acquired smaller neighbor and rival Lavalin Inc., Bloomberg data show. SNC rose 1.7 percent to C$53.31 at the close in Toronto, its biggest gain since June 6.
Boost Backlog
The acquisition will boost SNC’s backlog by C$4.9 billion, more than three-quarters of which will come from lower-risk and higher-margin services-based contracts. The combined company will have a backlog of future work of about C$13 billion, SNC said.
SNC, which will fund the deal with cash and new credit, said oil and gas offers higher growth than other infrastructure and it expects a contribution to earnings within the first year. The company was said to have first looked at buying Kentz last year, when the share price was less than 500 pence.
“Our analysis shows that the oil and gas market over the last decade has overall produced the highest margins, the highest profit figures and the best growth in our industry, which is why there are very few acquisition targets available,” Card said today in a telephone interview.
“Clients are very demanding and sophisticated. That toughens a company up to compete in other areas. So we concluded in our long-term vision of a company roughly twice the size we are that we could make it work without oil and gas, but we’d be a lot more dangerous to our competition if we had it.”
Reasonable Price
Kentz soared 32 percent to 929 pence in London, its biggest single-day gain since the stock began trading in 2008.
“This is a pretty reasonable price for Kentz given it’s all cash,” said Daniel Slater, an analyst at Arden Partners PLC in London, in an e-mailed note. “The fact that the deal is expected to be quickly accretive for SNC-Lavalin could leave room for another bidder at a higher level.”
Kentz was approached last year by companies including Amec Plc (AMEC), a U.K. engineer whose proposal was rejected for being too low. SNC-Lavalin considered a bid then, a person familiar with the situation said at the time.
SNC doesn’t foresee a bidding war emerging for Kentz, though it would be ready to react should a rival suitor emerge, Card said.
Bidding wars “are things best avoided,” the CEO said on the conference call. “That’s why we’ve done a lot of homework around this transaction, so we’re not expecting it but we are fully prepared for it.”
Annual Savings
Christian Brown, the Kentz CEO, will join the Canadian company to lead the oil and gas division. SNC expects annual savings of about C$50 million from moves such as the delisting of Kentz from the London Stock Exchange.
Kentz, which traces its origins to an electrical contractor started in southern Ireland in 1919, employs 14,500 people in 36 countries. In December, the company agreed to buy Valerus Field Solutions for $435 million in cash to expand in U.S. shale and Latin America.
SNC will finance the transaction with an asset sale bridge loan of C$2.55 billion and a term loan of C$200 million. SNC will repay the bridge loan with proceeds from the sale of AltaLink, which the company expects to close by the end of 2014.
Future Transactions?
Card said today he isn’t ruling out further transactions that would allow SNC to continue to expand its oil and gas business. Resources industries will represent about 40 percent of SNC’s revenue once the acquisition closes, he said.
“This sets the foundation for us,” he told analysts on a conference call. “We’re not in a hurry to do something else in any area. We have to digest this. But if something were to come along that would enhance the oil and gas portfolio, we would take a hard look at it.”
To give itself more ammunition for deals, SNC may speed up the planned sale of its minority stake in 407 International Inc., the operator of a toll road near Toronto, Card also said.
“We had been speaking in our last call about 407 as a mid-term opportunity, which I described nominally at one to three years,” he said today. “Given the success of what’s transpired over the last couple of months, I would say that’s more nearer-term than mid-term. We’re looking hard at if we want to accelerate that.”
To contact the reporters on this story: Nidaa Bakhsh in London at nbakhsh@bloomberg.net; Frederic Tomesco in Montreal at tomesco@bloomberg.net
To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net; Will Kennedy at wkennedy3@bloomberg.net Molly Schuetz, James Callan
By David Wethe Jun 24, 2014 3:37 AM GMT+0700
Transocean Ltd. plans to raise as much as $350 million in the initial public offering of a company owning three of its drillships as the world’s largest offshore rig contractor seeks to strengthen its balance sheet.
The new entity, Transocean Partners LLC, expects to sell 51 percent partnership units in each of the three rigs, while Vernier, Switzerland-based Transocean Ltd. retains the remaining 49 percent stakes, the company said in a federal filing today.
Offshore rig contractors have been studying tax-free partnerships for some long-term contract drillships since Norway’s Seadrill Ltd. adopted such a structure in 2012. Transocean has been seeking ways to raise cash to upgrade its fleet and fund its dividend including a tax-free partnership, which is comparable to a master-limited partnership.
“We’ll start at a reasonable number of rigs that will allow us to grow the MLP over time so we can meet the MLP investor’s expectations regarding growth in distributions,” Chief Executive Officer Steven Newman said June 6 in an interview at Bloomberg’s Houston office. Transocean is on track to do a partnership IPO in the third quarter of this year, he said then.
Transocean’s filing didn’t provide timing for the IPO.
Royal Dutch Shell Plc is the latest energy company to announce an MLP. Shell said June 18 it will sell shares in a U.S. pipeline business in the second half of 2014.
It’s still to be determined “how well a new offshore drilling MLP will do with current fundamental conditions,” Luke Lemoine, an analyst at Capital One Southcoast in New Orleans, said today in a note to investors.
New Drillships
Transocean Ltd. owned 77 rigs, including the three being contributed to the new partnership, as of June 16, according to the filing. The company is building another nine drillships and five shallow-water rigs.
Transocean Partners LLC has rigs in the Gulf of Mexico with contracts through at least November 2016. The partnership also will get first rights over the next five years to acquire stakes in four drillships under construction.
Rig contractors responded to rising demand in the past few years with the biggest batch of orders since the advent of deep-water drilling in the 1970s. Almost 100 vessels are on order for delivery before the end of 2017, according to IHS Energy.
Transocean, which has 10 buy ratings from analysts, 19 holds and 13 sells, climbed 1.4 percent to close at $46 in New York. Before today, Transocean was the second-worst performer in the Philadelphia Oil Services index, having fallen 6.2 percent over the past 12 months. Diamond Offshore Drilling Inc. was the worst performer over the past year before today, having slid 24 percent.
Morgan Stanley & Co. LLC and Barclays Capital Inc. will serve as underwriters for the IPO, according to the filing.
To contact the reporter on this story: David Wethe in Houston at dwethe@bloomberg.net
To contact the editors responsible for this story: Tina Davis at tinadavis@bloomberg.net Robin Saponar
By Grant Smith and Ben Sharples Jun 23, 2014 8:06 PM GMT+0700
June 23 (Bloomberg) -- Helima Croft, senior geopolitical strategist at Barclays, and Tobais Levkovich, chief U.S. equity strategist at Citigroup, examine the push by the ISIL in Iraq and how the violent unrest is impacting global oil markets. They speak on “Bloomberg Surveillance.”
Brent traded near the highest level since September and West Texas Intermediate was little changed as militants in Iraq seized more territory and President Barack Obama warned that the crisis may spill over into other countries.
Brent futures climbed as much as 0.7 percent in London. Fighters from the Islamic State in Iraq and the Levant took control of Iraq’s border crossings with Jordan and Syria, Hameed Ahmed Hashim, a member of the Anbar provincial council, said by phone yesterday. A Chinese manufacturing gauge rose to a seven-month high in June, indicating that the economy of the world’s second-biggest oil user may be picking up.
“We see further price gains, regardless of the fact that oil supply remains unaffected” in Iraq, Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt, said by e-mail. “It’s fear that drives prices up, not real supply disruptions. The latter remain very unlikely.”
Brent for August settlement advanced as much as 85 cents to $115.66 a barrel on the London-based ICE Futures Europe exchange and was at $114.83 at 1:37 p.m. London time. The grade traded at $115.71 on June 19, the highest since Sept. 9. Prices have gained 3.6 percent this year. The European benchmark crude was at a premium of $8.04 to WTI on ICE, from $7.98 on June 20.
WTI for August delivery rose as much as 62 cents to $107.45 a barrel in electronic trading on the New York Mercantile Exchange. The July contract expired at $107.26 on June 20. The volume of futures traded was about 2.4 percent below the 100-day average for the time of day.
Iraq Fighting
Brent rose 1.2 percent for a second weekly gain in the period ended June 20 as the unrest in Iraq fanned concern that oil supplies may be disrupted from OPEC’s second-biggest crude producer. The crisis flared this month when insurgents captured the northern city of Mosul and advanced to towns just north of Baghdad as Iraqi forces struggled to halt their gains.
Obama told CBS in an interview that will be aired in full today that the conflict could spread to other countries, including Jordan. The militants “are engaged in wars in Syria where -- in that vacuum that’s been created -- they could amass more arms, more resources,” Obama said, according to a transcript. The fighting hasn’t spread to the south, which the U.S. Energy Information Administration estimates is home to about three-quarters of the nation’s output.
Iraq pumped 3.3 million barrels a day last month, data compiled by Bloomberg show. Saudi Arabia is the largest producer in the 12-member Organization of Petroleum Exporting Countries.
Southern Exports
Southern Iraq accounted for more than 85 percent of the country’s 3.1 million barrels a day of production in April and all of its 2.5 million barrels a day of exports, which are shipped by tanker from the Persian Gulf, according to the latest data from the Ministry of Oil. Some crude can also be sent north to Turkey by pipeline from the autonomous Kurdish region and west to Jordan by truck.
“Tensions in Iraq have deteriorated over the weekend, while people and markets are looking for an imminent resolution of the issue,” Myrto Sokou, senior analyst at Sucden Financial Ltd. in London, said by e-mail. “The escalating crisis continues to support oil prices, raising renewed concerns about possible oil supply problems.”
Hedge funds increased bets on climbing crude prices to a record as fighting continued in Iraq. Speculators raised their net-long position in WTI by 4.3 percent in the week ended June 17, U.S. Commodity Futures Trading Commission data show.
Bullish bets on Brent rose to a nine-month high, according to ICE Futures Europe. Speculative bets that prices will rise, in futures and options combined, outnumbered short positions by 223,750 lots, the highest since Sept. 3, the data show.
A preliminary China Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was at 50.8 for June, exceeding the 49.7 median estimate of analysts surveyed by Bloomberg News and a final reading of 49.4 in May. The gauge is at the highest since November and a number above 50 indicates expansion.
To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Grant Smith at gsmith52@bloomberg.net; Alaric Nightingale at anightingal1@bloomberg.net Rachel Graham, James Herron
U.A.E. Needs to Pare Energy Subsidies, Cut Demand, Minister Says
By Anthony DiPaola Jun 23, 2014 6:12 PM GMT+0700
The United Arab Emirates, OPEC’s fifth-largest oil producer, needs to roll back subsidies on fuel and power to help limit its energy consumption and imports of natural gas, the country’s energy minister said.
“You will never have a strong economy if you are subsidizing,” Suhail Al Mazrouei told reporters in his office in Abu Dhabi yesterday. “In consumption of electricity, we are two to three times the global average, and we are not happy about that level.” The government has yet to determine changes in prices and subsidy levels, he said.
Middle Eastern oil producers including the U.A.E. and Saudi Arabia are consuming as much as 10 percent more electricity each year, governments in the region have said, as they diversify into power-dependent industries such as petrochemicals and steelmaking and as household demand rises. The amount of crude Saudi Arabia has available to export will fall to “unacceptably low levels” over the next two decades if the country doesn’t pare its fuel use, state-run Saudi Arabian Oil Co. said in May.
Possible cuts in subsidies, which Persian Gulf monarchies use to transfer oil wealth to their citizens, are a politically sensitive issue after domestic discontent led to the overturning of governments in Tunisia, Libya and Egypt since 2011. The U.A.E. would retain some subsidies for its citizens, who comprise about a 10th of its population, Al Mazrouei said.
Pipeline Gas
The U.A.E., one of 12 members of the Organization of Petroleum Exporting Countries, is forming a strategy to moderate energy consumption and diversify supply sources by 2030, he said. By then, the country’s domestic needs will be met 70 percent by gas, 25 percent by nuclear power and the rest by renewables such as solar power, Al Mazrouei said. The nation burns gas to generate most of its electricity, importing much of the fuel by pipeline from neighboring Qatar.
Dubai, the U.A.E.’s second-largest emirate, has imported liquefied natural gas since 2010. Two companies owned by Abu Dhabi, the county’s largest sheikhdom, plan to operate a terminal for receiving LNG in the emirate of Fujairah by 2018.
“Any saving we do we will reduce the level of future importation that we need,” Al Mazrouei said. The start of the LNG facility would be a logical time for the U.A.E. to change its policy of selling power below cost, he said.
The cost of generating solar power will have to be competitive with price of imported LNG, he said.
To contact the reporter on this story: Anthony DiPaola in Dubai at adipaola@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Bruce Stanley, James Herron
By Mikael Holter Jun 23, 2014 5:34 PM GMT+0700
A Norwegian oil-workers union said it’s ready to go on strike over pensions in a move that threatens to cut oil production from Exxon Mobil Corp.’s platforms in the North Sea by more than 60,000 barrels a day.
A court in Oslo today ruled that a strike notice by the Safe union that would affect three Exxon platforms is legal, clearing the way for a walkout, according to the group’s leader, Hilde-Marit Rysst. While the union is yet to decide on a public mediator’s proposal that seeks to bridge differences with employers, it will do so by the June 27 midday deadline, she said by phone today.
“Everything is set” for a strike, Rysst said. The mediator’s proposal, endorsed by the Norwegian Oil and Gas Association, which represents employers in wage negotiations, “is not good enough,” she said.
A strike would set Safe apart from two other unions that reached wage agreements in talks that covered 7,615 offshore oil-platform workers. In 2012, workers from all three unions walked out in their longest action, disrupting oil and gas production until the government intervened to stop companies imposing a full lockout that would have halted output from western Europe’s largest producer.
The conflict centers on pension terms for 31 Safe-affiliated workers at Exxon, the world’s largest oil company by market value. While the Norwegian Oil and Gas Association argued that the issue isn’t relevant for industry-wide wage talks, the Oslo court ruled Safe’s strike notice is legal.
Union Threat
The Norwegian Oil and Gas Association could meet with Safe again this week after last week’s state-backed mediation, though there are no talks planned yet, the oil-industry lobby group’s spokeswoman Eli Ane Nedreskaar said by phone. Exxon declined to comment on talks with the union as it’s represented by the Norwegian Oil and Gas Association, spokesman Knut Riple said.
Safe has threatened to take out 154 of its members from Exxon’s Balder, Ringhorne and Jotun platforms, shutting down production that reached 61,000 barrels of oil in April, according to figures from the Norwegian Petroleum Directorate. A strike would also halt production at Det Norske Oljeselskap ASA’s Jette field, which goes through Jotun and amounted to 2,000 barrels of crude a day in April.
To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alastair Reed, Indranil Ghosh
China Fuel Oil Imports Drop to Lowest Level Since at Least 2003
By Winnie Zhu Jun 23, 2014 3:49 PM GMT+0700
China, Asia’s second-largest fuel oil importer, cut shipments last month by 60 percent to the lowest level in at least 11 years, data from the General Administration of Customs in Beijing show.
Overseas purchases of the residual fuel fell to 1.13 million metric tons in May, down from 2.83 million tons a year earlier and the least since Bloomberg started tracking the figures in January 2003. In the first five months of this year, imports declined 33 percent to 8.4 million tons.
China’s smaller, independent refineries in the eastern province of Shandong process fuel oil and crude to make gasoline and diesel. These so-called teapot plants, which account for more than half of the nation’s fuel oil purchases, may be granted more crude-import licenses this year, an official at the National Development and Reform Commission’s Energy Research Institute said in March.
“Teapots are getting access to more crude,” Angie Huang, an oil analyst at ICIS-C1 Energy, a Shanghai-based commodity researcher, said by phone today. “It’s a trend that fuel oil will be more and more replaced by crude.”
China’s fuel oil imports may drop further to about 1 million tons in June, according to Huang.
The country halted purchases from Iran for a fourth month, the data show. Singapore was the biggest supplier with 428,177 tons, followed by Venezuela, which shipped 304,220 tons, while South Korea delivered 179,969 tons.
To contact the reporter on this story: Winnie Zhu in Singapore at wzhu4@bloomberg.net
To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net Yee Kai Pin, Alexander Kwiatkowski
By Alessandro Vitelli Jun 23, 2014 5:59 PM GMT+0700
European thermal coal fell to the lowest in more than four years as Credit Suisse Group AG (CSGN) cut its price forecast for the fuel.
The bank lowered its third-quarter price outlook for Australian and European coal by 6.3 percent to $75 a metric ton, and cut its fourth-quarter forecast by 12 percent to $75. Supply is expected to outweigh demand in the seaborne market through at least 2015, Marcus Garvey, an analyst at the bank, wrote in a report e-mailed today.
Coal for delivery to Europe next year fell to $78.40 a ton, the lowest since Sept. 15, 2009, amid reduced demand caused by warmer temperatures along with supplies from the U.S., Colombia and South Africa. Some power producers in Europe are also shutting coal plants as pollution rules known as the Large Combustion Plant Directive limit the generation of coal-fired electricity.
“We expect a structural downtrend in coal demand to reduce imports by a compound annual growth rate of 6 percent through 2017,” London-based Garvey said in the report. “Plant closures resulting from the Large Combustion Plant Directive and competition from renewable capacity will also continue to weigh.”
The European Union passed the directive to reduce emissions of sulfur dioxide, nitrogen oxide and particulates that cause so-called acid rain from industrial plants. Coal-fired power stations may fit equipment to limit these emissions or opt out of the directive, in which case they may operate for a maximum of 20,000 hours before closing in 2015.
Next-year coal has fallen 9 percent this year, and was trading at $72.35 a ton as of 11:36 a.m. in London, according to broker data compiled by Bloomberg.
U.S. Supplies
Credit Suisse cut its 2015 forecast for coal in Europe and South Africa by 3.6 percent to $80 a ton.
The bank also reduced its third-quarter forecast for South African coal by 6.3 percent to $74 a ton, and lowered its fourth quarter outlook 12 percent to $74 a ton.
Exports from the U.S. in April fell by 32 percent from a year earlier, Garvey said. Overseas shipments may total less than 40 million tons this year compared with 51 million tons in 2013, as U.S. coal-based power generators increase their consumption.
Any reduction in U.S. supplies should be covered by an expected 7 percent increase in Colombian exports to 78 million tons in 2014 and of about 9 percent to 85 million tons in 2015, according to the report.
The annual rate of increase in Chinese coal demand is forecast to drop to 1.7 percent in 2014 from 5.8 percent in 2013 and 31 percent in 2012, Garvey said. Coal-fired power may account for almost 80 percent of total generation this year, compared with more than 80 percent in both 2011 and 2012, he said.
To contact the reporter on this story: Alessandro Vitelli in London at avitelli1@bloomberg.net
To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Andrew Reierson, Claudia Carpenter
Petrobras Bonds Can’t Win as Oil Surge Deepens Fuel Loss
By Peter Millard Jun 23, 2014 5:53 PM GMT+0700
The biggest surge in oil prices in a year would usually be a reason to buy the securities of energy producers. Not in Brazil, where government policies are punishing Petroleo Brasileiro SA. (PBR)
Petrobras notes due in 2023 have lost 1 percent since June 9, when Brent crude prices started a nine-day, 6 percent advance as Iraqi forces battled insurgents. That’s the biggest decline among integrated oil companies with BBB rated bonds tracked by Bloomberg. Through May, Petrobras debt securities had notched the largest gain of the year, returning 9.6 percent.
President Dilma Rousseff has maintained gasoline and diesel price caps since 2011, while Petrobras’s refining division is unable to meet domestic demand, so higher international prices exacerbate losses on fuel sales. They also signal increased royalty payments and taxes for the Rio de Janeiro-based producer, which has the largest cash-flow deficit of any publicly traded oil company in the past 12 months.
“It’s worse for them,” Omar Zeolla, a corporate credit analyst at Oppenheimer & Co., said by telephone from New York, referring to oil price gains. “Dilma could get re-elected and they could keep the same policies, the same prices.”
In an e-mailed response to questions, Petrobras declined to comment on the link between the performance of its bonds and the rise in oil prices. Rousseff’s press office also declined to comment.
Balance Sheets
In Latin America, the only national oil companies that pay for fuel subsidies are Brazil and Venezuela, said Luisa Palacios, managing director and head of Latin American research at Medley Global Advisors, a provider of policy research for institutional investors.
While Mexico and Argentina have a history of subsidizing fuel imports, it is the government, not Petroleos Mexicanos and YPF SA, that picks up the tab, Palacios said. In Colombia, Ecopetrol SA regularly adjusts prices in line with international rates.
“For other oil companies, it’s a straightforward trade,” Palacios said by telephone from New York. “Pemex, Ecopetrol and YPF do not have the cost of of the subsidies on their balance sheets, versus what Petrobras does, and that makes a difference in how investors or markets can assess the impact of higher oil prices.”
Most Debt
Brazilian Finance Minister Guido Mantega turned down Petrobras Chief Executive Officer Maria das Gracas Foster’s requests for fuel-price increases in April and May, telling management that delivering on production targets would ease its financial difficulties, a person with direct knowledge of the talks said this month. Company officials expressed concern to Mantega that continued fuel price caps could result in a lower rating and higher credit costs, the person said.
The most-indebted publicly traded oil company has been subsidizing imported fuel since 2011 as part of a government policy to use price controls to slow inflation, which has exceeded the official 4.5 percent target throughout Rousseff’s term.
“A policy change would improve the economics of downstream,” Michael Roche, an emerging-market strategist at Seaport Group LLC, said by telephone from New York.
Petrobras is building new refineries to reduce imports and improve its return on capital, the company said in a June 2 e-mail. Its five-year business plan calls for a fuel-price alignment to improve leverage and shareholder returns.
Production Slide
The Rio de Janeiro-based producer sells imported gasoline at as much as a 20 percent discount to international prices, Palacios said. Subsidies have cost the company more than $31 billion in three years, Citigroup Inc. said in a May 22 research note.
Petrobras’s production has declined for two years in a row. It expects to boost domestic output 7.5 percent this year as it adds new offshore production units. Average output through April is little changed.
The fuel losses have coincided with a jump in investments as the company expands its capacity to produce and refine oil. A $24 billion cash-flow deficit in the past 12 months is the largest of any publicly traded oil company, according to data compiled by Bloomberg.
Petrobras shares have gained 49 percent since March 17 and bonds rallied amid speculation Rousseff will either be voted out of office in October and replaced with a more business-friendly administration, or start adjusting fuel prices after the elections.
“The pricing policy can actually cap the upside that you get from oil prices or higher production,” Palacios said.
To contact the reporter on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net; Michael Tsang at mtsang1@bloomberg.net Bradley Keoun
by Agencies | June 21, 2014 , 8 : 52 pm GST
Tehran: Akbar Torkan, the secretary of Iran's Free Trade Zones Coordination Council, said on Wednesday that the facility will be Iran's second oil export terminal, Iran's Shana News Agency reported on June 18.
Torkan previously said, "A pipeline with the length of 2,200km transfers Iranian crude oil to the Sea of Oman shores. So, it is planned to establish oil storage and export facilities in the Jask Island."
Iran also plans to establish some four oil storage facilities on Kharg Island, located in the Arabian Gulf.
The construction operation of the four facilities is now 97 per cent complete.
Once the facilities come on stream, the island's storage capacity will reach 28 million barrels.
The facilities will come on stream at the cost of 420 billion rials (about $34.25 million).
Copyright © 2012 Muscat Press & Publishing House SAOC. All rights reserved. Times of Oman is not responsible for the content of external internet sites.
London (Platts)--23Jun2014/752 am EDT/1152 GMT
* First export made from Mellitah port since Elephant restart
* Exports also resume from eastern ports of Marsa al-Hariga, Zueitina
* No sign of Sharara production restarting
Libya's oil sector is showing tentative signs of recovery, with production now averaging around 300,000 b/d after the restart of the key Elephant field and with exports from the eastern ports of Marsa al-Hariga and Zueitina resuming after a brief period of inactivity.
A spokesman for Libya's state-owned National Oil Corp. said output was some 300,000 b/d.
The 130,000 b/d capacity Elephant field, which had been shut in for months because of protests and strikes, restarted on June 16, boosting Libya's production from recent lows of around 150,000 b/d.
Article continues below... Elephant crude can be exported from the 160,000 b/d Mellitah terminal on Libya's Mediterranean coast or be refined in the northern Zawiya refinery.
According to Platts vessel-tracking software cFlow, the crude oil tanker Scorpio loaded at Mellitah over the weekend and is now bound for the Italian port of Trieste.
If confirmed, it would be the first export cargo since Elephant resumed operations.
When production was resumed at the field, the first vessel to load at the port was EBN Batuta, which left laden for Zawiya.
Since the suspension of production at the 340,000 b/d Sharara crude field in southwestern Libya which typically supplies Zawiya, NOC has supplied the plant with crude loaded from other terminals.
There is still no indication of when Sharara may resume production.
EASTERN EXPORTS
Libya has also resumed crude oil exports from the 110,000 b/d Marsa al-Hariga oil terminal, the NOC spokesman said. "We are exporting 750,000 barrels of Mesla and Sarir type crudes," he said.
According to cFlow, the cargo was exported aboard the crude tanker Alexia, reportedly last chartered by Total.
The vessel left Marsa al-Hariga over the weekend carrying the first cargo to load out of the terminal in more than a month.
Alexia had been sitting outside of the port since late May, reportedly prevented from loading by guards at the port.
Previously, the last vessel recorded as leaving the port was Aegean Legend, which departed May 18 for Trieste.
Phoenix Beacon, which also arrived late May, is still outside the terminal.
A second shipment, estimated at 600,000 barrels, is expected to be loaded from Marsa al-Hariga early this week, NOC said.
The first cargo loaded from the eastern port of Zueitina in more than a month has also set sail, and is approaching Genoa.
The Minerva Clara reportedly loaded at the port a little more than a week ago, though it is unclear whether it was carrying the port's few remaining barrels of storage or fresh production from the Zueitina fields which feed the terminal.
Production at the field had been slow to restart after Libya's central government reached an agreement with Cyrenaica separatists to reopen the terminal in late April.
--Sherif Elhelwa, newsdesk@platts.com
--Paula VanLaningham, paula.vanlaningham@platts.com
--Stuart Elliott, stuart.elliott@platts.com
--Edited by Dan Lalor. daniel.lalor@platts.com
By Orhan Coskun
(Reuters) - U.S. oil firm ExxonMobil is in talks with state-run Turkish Petroleum Corporation over a venture to explore for shale gas in the country's southeast and northwest regions, a Turkish energy official said.
Exxon held talks with TPAO in 2012 to over a partnership in shale, but the negotiations were inconclusive. Turkish officials say talks have since advanced and are likely to result in an agreement.
"ExxonMobil is coming to Turkey to partner up with TPAO," Selami Incedalci, the head of the energy ministry's General Directorate of Petroleum Affairs, said late on Sunday.
He said ExxonMobil was interested in onshore opportunities in the southeast and Thrace, in northwestern Turkey.
Turkey wants to reduce its annual energy bill of around $60 billion and is developing domestic resources including nuclear, coal, solar and wind energy.
With domestic gas consumption rising, and its location well-placed to supply international markets, major exploitable reserves could be a game changer for Turkey's economy and highly lucrative for whoever finds them.
Investors from the United States, Europe and Canada are also interested in Turkey's shale gas and oil, Incedalci said, adding that the Ministry was planning to hold talks with potential investors in October.
Royal Dutch Shell is also drilling for shale gas in the region around the southeastern city of Diyarbakir, while Canadian firm TransAtlantic Petroleum is also active in the region.
Estimates of how big Turkey's shale gas reserves are vary wildly.
One energy official said data from some international bodies suggested Turkey could have a massive 20 trillion cubic metres (cbm) of total reserves. Another industry expert said proven reserves so far stood at just 6-7 billion cbm.
That compares with U.S. Energy Intelligence Administration's (EIA) assessment of 7,299 trillion cubic feet of estimated shale gas reserves in the United States, among the world's top producers of the commodity.
(Reporting by Orhan Coskun, Writing by Humeyra Pamuk; Editing by Nick Tattersall and Louise Heavens)
London (Platts)--23Jun2014/919 am EDT/1319 GMT
Nigerian crude values are falling sharply as the remaining July cargoes struggle to clear due to weak European demand caused by low refining margins, market sources said Monday.
There were still about 15 cargoes left in the Nigerian July loading program. Remaining cargoes usually all end up in Europe at this phase of the trading cycle.
But European demand for Nigeria and other West African cargoes has been very thin for July, due to weak product cracks caused by fragile refining margins.
"There are still approximately 15 cargoes remaining and now we are hearing that there will be more cargo injections for July," said a trader.
"There is a lack of interest on the market due to horrifying margins and freight rates out of WAF are also picking up which is not helping," he added.
Sources said offer levels had also fallen steadily in the last week, with grades like Bonny Light and Brass River falling below the Dated Brent plus $2/barrel mark.
Bonny Light was assessed at Dated Brent plus $1.74/b on Friday, making it the lowest value seen since January 31, 2014, Platts data showed. And sources said values would fall further if demand remained this subdued.
In the Platts Market On Close assessment process on Friday, Trafigura offered a 1 million barrel FOB cargo of Bonny Light, loading July 22-23, to Dated Brent plus $1.80/barrel without attracting a buyer.
"There is an oversupply of barrels not only on WAF, but in the sweet market more generally," a second trader said.
"The rally in the flat price with the Iraquncertainty means that, as a result, margins are not doing fantastically well...That period of low demand with the naphtha and distillate crack not performing...and domestic production in the US is constantly displacing the important grades."
--Eklavya Gupte, eklavya.gupte@platts.com
--Paula VanLaningham, paula.vanlaningham@platts.com
--Edited by Jeremy Lovell, jeremy.lovell@platts.com
Singapore (Platts)--23Jun2014/735 am EDT/1135 GMT
China's National Development and Reform Commission has raised domestic retail prices of gasoline and diesel by Yuan 165/mt ($26.50/mt) and Yuan 160/mt, respectively, effective midnight Tuesday.
This is the first fuel price adjustment in a month. Retail prices for both fuels were last raised by 70/mt on May 23.
The benchmark retail price of gasoline in Beijing is now Yuan 9,940/mt, up from Yuan 9,775/mt previously, representing a 1.7% increase.
The retail diesel price in the capital has risen by 1.8% to Yuan 9,175/mt.
The central government sets benchmark retail prices for both oil products for each region.
Under the oil product pricing mechanism, regulated prices are automatically adjusted every 10 working days in line with international crude price fluctuations, unless the resulting price change is less than Yuan 50/mt, roughly equivalent to $1/barrel. If this occurs, the adjustment is rolled over and included in the next price change.
The current system is intended to help refiners cut the losses incurred by the government's cap on oil product prices, which were exacerbated when the government previously reviewed prices every 22 days and at times, refused to adjust prices due to inflationary concerns.
The 10-day moving average prices of Platts Dated Brent, Russian ESPO and Middle Eastern Dubai and Oman crudes -- the benchmark grades to which a large proportion of China's crude imports are pegged -- as of last Friday were about 2.1% higher than on May 23.
--Song Yen Ling, yenling.song@platts.com
--Edited by Alisdair Bowles, alisdair.bowles@platts.com
New York (Platts)--23Jun2014/402 pm EDT/2002 GMT
ICE August Brent settled 69 cents lower at $114.12/barrel Monday, dipping on weak European Purchasing Managers Index data, but with the front-month contract holding near a nine-month high on continued instability in Iraq.
August Brent reached an intraday high of $115.66/b, near Thursday's fresh nine-month high of $115.71/b.
NYMEX August crude settled 66 cents lower at $106.17/b. In products, NYMEX July ULSD settled 1.86 cents lower at $3.0326/gal and July RBOB ended down 2.01 cents at $3.1076/gal.
Brent futures popped higher during overnight trade as militants seized more territory and towns in Iraq, noted Matt Smith, commodity analyst at Schneider Electric. Despite oil production remaining unaffected, the ongoing fear of escalating violence -- and contagion as border crossings with Syria and Jordan are taken over by insurgents -- kept prices "skittish," Smith said.
However, those gains were surrounded after Markit Economics said its Eurozone Composite PMI for June fell to 52.8 points, the weakest level since December, from 53.5 in May.
Data showing that the preliminary PMI for China showed improvement to the highest level in seven months did little to keep futures prices elevated.
Phil Flynn, senior analyst at Price Futures Group, said a new risk-on pattern has developed in futures, with hedge funds adding to the long side, but a lack of a major cut-off in supply in Iraq led to some profit-taking on Monday.
Technically, NYMEX front-month crude broke below one support level at $106.90/b. Remaining support levels are at $105.80/b and $105.20/b.
Mike Fitzpatrick of the Kilduff Report said a break below $105.20/b would open up a run at $104.10/b and lower.
"The overall, long-running uptrend from the March lows remains intact," he said. "The recent consolidation smoothed the steepness of the recent slope and we would stick with the overall trend and look for more upside."
But Tim Evans, commodity analyst at Citi Futures Perspective, said given the current overbought condition in NYMEX crude, there is a significant intermediate-term decline across global petroleum markets in the event of any bearish fundamental development, like a rise in crude oil stocks at the NYMEX hub at Cushing, Oklahoma
--Alison Ciaccio, alison.ciaccio@platts.com
--Edited by Annie Siebert, ann.siebert@platts.com
Hershey, Pennsylvania (Platts)--23Jun2014/458 pm EDT/2058 GMT
Natural gas is poised to play a dominant role in the fuel source mix as electricity demand grows significantly worldwide in the coming decades, an ExxonMobil executive said Monday.
"Natural gas is almost becoming the case to beat everywhere in the world," said Bill Colton, vice president of corporate strategic planning at ExxonMobil.
Colton, who was speaking to a meeting of the Mid-Atlantic Conference of Regulatory Utilities Commissioners, argued that natural gas as an electricity fuel does not need new technology given the advanced state of combined-cycle power generation turbines.
He also highlighted global projections of 200 years' worth of gas supplies still untapped.
"They're really incredible numbers," he said.
Those findings are based on ExxonMobil's annual long-term energy forecast, which was released in December and found that overall demand for gas will increase around 215 Bcf/d, or 65%, through 2040.
With projections that electricity demand worldwide will significantly increase in the coming decades, Colton said the growing natural gas demand is driven in large part by electricity, adding that there will be a huge increase in trading of natural gas across international borders.
Speaking of exports of liquefied natural gas, Colton said "we think this is just another economic opportunity for the US."
--Bobby McMahon, bobby.mcmahon@platts.com
--Edited by Annie Siebert, ann.siebert@platts.com
Washington (Platts)--23Jun2014/300 pm EDT/1900 GMT
Below-normal temperatures are likely in July and August in the US Northeast, North Central and Southwest regions and will help keep pressure on natural gas prices and refill storage inventories depleted by a cold winter, private forecaster WSI said Monday.
In its latest outlook for the three-month period starting July 1, the Andover, Massachusetts-based company said cooler-than-normal weather is expected over the next two months in the Northeast, North Central and Southwest, with above-normal temperatures likely in the US Southeast, Northwest and South Central regions as El Nino conditions continue to develop in the tropical Pacific.
Consultant ESAI Power, which assesses the potential energy market effects of WSI's forecasts said the outlooks will likely mean aggregate North American natural gas demand next month is expected to be below normal due to the cooler-than-normal temperatures.
"These mild summer temperatures should result in relatively soft energy prices, particularly in the Northeast and Midwest markets," ESAI said. "Natural gas prices in the Northeast and Midwest will continue to see significant discounts to Henry Hub due to mild weather demand and continued production growth from Marcellus shale gas region."
It added that "robust gas injections should help offset some of the Northeast price weakness and allow storage levels to improve relative to last year, however. ... Slightly warmer-than-normal temperatures in the South should also help to support Henry Hub prices relative to the shale production region of Pennsylvania."
The expected replay of July weather in August will lead to lower power generation in the Mid-Atlantic and Midwest, helping keep gas prices in both regions below Henry Hub, ESAI said.
WSI is forecasting September will bring above-normal temperatures to the Northeast, Southeast and Northwest, with below-normal temperatures elsewhere. ESAI said that continued mild temperatures in the Midwest should help gas "inventories close the deficit to last year's storage levels. We expect generally mild temperatures across the Consuming East region this summer will allow natural-gas inventories to recover from the very large drawdown this past winter."
--Jeff Barber, jeff.barber@platts.com
--Edited by Derek Sands, derek.sands@platts.com
London (Platts)--23Jun2014/901 am EDT/1301 GMT
With just over 100 days until the start of the new winter gas season, and despite uncertainty over how the ongoing Moscow-Kiev gas dispute will affect European imports of Russian gas transiting Ukraine, the rate of gas injections in the key storage region of Germany remains little changed since the start of summer.
According to data from Gas Infrastructure Europe, German storage was 75.52% full Thursday, with 16.4 billion cubic meters of gas in stock.
Since April 1, regarded as the first day of summer gas season, Germany has been injecting gas into storage at a rate of 30 million cubic meters/day at its weakest and at 83 million cu m/d at its strongest, with the average daily rate standing at just under 55 million cu m.
In the past month, the rate has stood at 57 million cu m/d.
Were Germany to carry on injecting gas into storage at a rate around 55 million cu m/d, German gas stocks should be full by the second half of September, before the October 1 start of winter, with about 5.3 Bcm required to be injected before reaching full capacity.
With that same rate, German storage should be 90% full by August 15.
Withdrawals have been relatively limited, totalling 272 million cu m since April 1 and averaging 3.4 million cu m/d.
These stable rates indicate there has been no pressure for storage facilities in Germany to inject at a faster rate on the back of the Ukraine crisis, with Europe's markets continuing to be well supplied with gas despite Russia cutting off supplies to Ukraine at the start of the week.
Furthermore, Germany receives gas from Russia not only through the Ukraine-Slovakia-Czech Republic route, but also directly from Russia via the subsea Nord Stream pipeline and via Yamal, a pipeline traversing Belarus and Poland.
Morning nominations showed that Germany would receive 101 million cu m/d of Russian gas on Friday via Nord Stream and 84 million cu m/d via Yamal.
On August 15 and October 1 German storage was 68.34% and 82.96% full respectively, GIE data showed. However, a mild October allowed Germany to carry out robust injections into November, and by November 3 German storage was 91.46%, before withdrawals began to outnumber injections.
As a result of a mild 2013-14 winter, German storage was 58.35% full by the March 31, 2014 end of the season, compared with 21.52% full a year before.
--Konstantinos Tsolakis, konstantinos.tsolakis@platts.com
--Edited by Jonathan Fox, jonathan.fox@platts.com
Algiers (Platts)--23Jun2014/556 am EDT/956 GMT
Objections to shale gas development amount to attempts at political destabilization, Algeria's official press agency reported the country's energy minister as saying Saturday.
"These attempts to demonize shale production target countries that advocate energy nationalism to assert sovereignty over their natural resources," Youcef Yousfi was quoted as saying.
While recognizing that some opposition to shale gas exploitation was driven by fear of novel development methods, he rejected recent accusations by certain political parties that Algiers' authorization of pilot shale drilling was an attempt to continue an economic policy of oil revenue dependency.
"Algeria is constrained in the medium term to rely on oil windfalls to finance development," Yousfi said.
Some projects included in the country's next five-year economic plan required extraordinary funding, he said, giving as an example the planned development of the giant Gara Djebilet iron ore deposit, at Tindouf in Algeria's southwest, at a projected capital cost of $10 billion-15 billion.
"We will finance [such projects] with what? With talk? With air?" the minister asked.
Yousfi estimated that Algeria had two million new customers for natural gas. "With what funds shall we service such demand if not by using oil and gas revenue?" he asked.
"Is it not necessary to develop oil and gas production to ensure energy security in the long-term?" Yousfi continued, comparing Algeria's situation to that of other countries with large non-conventional gas resources including the US, Canada, Russia and Australia.
Contending that the purpose of energy policy was to prepare for the future, the minister said Algeria had stepped up oil and gas exploration in recent years, discovering more than 3 billion barrels of oil in 2013 alone.
"Regarding the use of hydraulic fracturing in shale gas extraction, it has been used for several years by Sonatrac to optimize crude extraction from the giant Hassi Messaoud oilfield," he said, referring to Algeria's national petroleum company.
Countering criticism of heavy use of water in shale gas extraction, Yousfi said the amount of water needed for large-scale shale projects was less than that currently used to increase pressure in some of the country's conventional gas fields.
"We will not make the country thirsty," he said.
Official government data put Algeria's recoverable shale gas resources at about 700 Tcf. The country's tight gas resources are estimated at a further 300-500 Tcf.
--Lies Sahar, newsdesk@platts.com
--Edited by Tamsin Carlisle,
