Oil Producer Pleas Snubbed by Norway as Development Costs Surge
By Mikael Holter May 9, 2014 5:01 AM GMT+0700 0 Comments Email Print
Oil and gas companies can expect little help from Norway on tackling surging costs as the government of western Europe’s biggest crude producer tones down plans for measures that producers hope will boost earnings.
“I don’t really expect us to present a package of measures,” Petroleum and Energy Minister Tord Lien said in a May 7 interview in Oslo. Cost increases challenging offshore projects are “partly due to the fact that we’re not smart enough in the way we work. The responsibility for that lies first and foremost with the operators and suppliers.”
Lien, a member of junior coalition partner the Progress Party, said in December his administration could by the end of the year present measures, including tax incentives, aimed at cutting costs that have doubled during the past 10 years.
Expenses have jumped amid rising complexity, increasing raw-materials prices and rising demand. Coupled with stagnating energy prices, they’ve led companies such as Statoil ASA (STL), the state-controlled operator of more than 70 percent of Norway’s production, to cut spending plans. Investments by oil companies in Norway are expected to fall after peaking at 214 billion kroner ($36.5 billion) next year, according to the Norwegian Petroleum Directorate.
Oil and gas production has fallen 20 percent during the past decade as aging North Sea fields are depleted.
Project Uncertainty
Statoil last year delayed its Johan Castberg oil project in the Arctic Barents Sea, citing costs and a tax increase by Norway’s previous government, shelving $15 billion of investments that included a new oil terminal at North Cape. The Stavanger-based company is also reviewing a plan to raise recovery at the North Sea’s Snorre field, and has scrapped building a gas-export pipeline at its Kristin field.
Royal Dutch Shell Plc (RDSA), Europe’s biggest oil company, last month shelved a gas-compression project at Ormen Lange, the Norwegian Sea field that supplies about 20 percent of the U.K.’s requirements.
The Norwegian Oil and Gas Association, a lobby group representing companies including Statoil, Shell, Exxon Mobil Corp. (XOM) and ConocoPhillips (COP), has said last year’s tax increase, combined with transition rules decided by the new government, are jeopardizing drilling projects valued at 80 billion kroner.
The increase by the previous, Labor-led administration reduced the part of investments that can be deducted from oil income while keeping the top tax rate at 78 percent. It will be especially detrimental to increased-recovery projects and marginal new developments, oil and gas companies have said.
Statoil Disappointment
The oil lobby was “both surprized and disappointed” that its criticism wasn’t taken into account in the transition rules, Erling Kvadsheim, manager for licensing policy at the Norwegian Oil and Gas Association. “It’s clearly a move by authorities that conflicts with the intentions they’ve had to stimulate good resource management, increase recovery and keep costs in check.”
While Norway’s Conservative-led government hasn’t ruled out fiscal changes after it completes a study into the impact of the tax increase, the “overall picture is that petroleum taxation in Norway works well,” Lien said.
The Norwegian government sees great cost-cutting potential in the industry’s efforts to standardize development solutions like offshore platforms, Lien said.
“I want to leave this to operators and suppliers as much as possible,” he said. “There’s no point for a Progress Party minister to get involved in things that the private sector can solve on its own.”
Government Warning
“The industry is prepared to do its part,” the oil lobby’s Kvadsheim said. “At the same time, it’s clear that authorities can also play a role when it comes to the cost level, for example when it comes to shaping regulations in a way that doesn’t make operations more expensive.”
Statoil and partners Eni SpA (ENI) and Petoro AS will probably end up developing the Castberg oil deposits regardless of cost and tax challenges, Lien said. The government still hopes the companies will opt for an onshore terminal and infrastructure able to handle volumes from future discoveries in the area even though Statoil deemed a recent exploration campaign to boost Castberg’s resource base as disappointing, he said.
Both Prime Minister Erna Solberg and Lien have warned oil companies against delaying time-critical projects to boost recovery rates at fields in operation, such as Statoil’s plan to build a platform at Snorre to boost recovery by 300 million barrels of crude. Norway needs to attract more companies able to compete with Statoil, Lien has said.
“We need to maintain the ambition of creating the conditions for more diversity among the players that have the financial and technological capacity to develop the really big projects on the Norwegian shelf,” the minister said yesterday.
The government will next month present a white paper on state ownership in companies. While it has signaled it could reduce its 67 percent stake in Statoil, it currently has no plans to do so, Lien said
To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net
To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net Alastair Reed
Tumble in Fuel Sales Adds to Evidence of China Slowdown
By Winnie Zhu May 9, 2014 7:38 AM GMT+0700 1 Comment Email Print
Declining demand for ship fuel in Singapore, the merchant fleet’s biggest refueling hub, is signaling weakening prospects for a rebound in Chinese growth.
Fuel oil for immediate delivery traded at the biggest discount to later supplies in 16 months on April 28, according to data from PVM Oil Associates Ltd. Sales of so-called bunker dropped for a third month in March, the longest retreat since November 2007, the latest Maritime and Port Authority data show.
The discount in Singapore’s fuel market shows how growth in demand to ship goods in and out of the world’s second-biggest economy weakened this year. While China’s trade volume unexpectedly rose last month, economists surveyed by Bloomberg anticipate the slowest annual economic growth in almost a quarter century.
“Falling fuel-oil prices are a consistent reflection of a slowing Chinese economy,” Victor Shum, a vice president at IHS Energy Insight, a consultant in Singapore, said May 6. “I expect the fuel oil market to remain weak on sluggish bunker demand.”
Front-month 380-centistoke fuel-oil swaps cost $3.25 a metric ton less than second-month contracts on April 28, the biggest discount since December 2012. While front-month swaps since rebounded to a premium of $1.50 as the contracts rolled into a new month, this year’s peak was $9.13 in January.
Bunker Sales
Sales of bunker in Singapore, which supplied fuel valued at about $26 billion last year, dropped to the lowest level since February 2013 in March, Maritime and Port Authority data show. The 2 percent decline in the first quarter was the biggest for the period since at least 2005.
“Bunker volumes here are very low, as trade slows not only in China, but also in India,” Simon Neo, the executive director of Piroj International LLP, a Singapore-based broker, said April 28. Sales were previously “largely supported by Chinese trading activities,” said Neo, who was chairman of the International Bunker Industry Association until the end of March.
China’s exports in April were 0.9 percent higher than a year ago, when data were inflated by fraudulent invoicing. That compares with the median estimate for a 3 percent drop in a Bloomberg survey of analysts. Exports fell 6.6 percent in March and 18.1 percent in February.
First-quarter economic growth slowed to 7.4 percent, the weakest pace in six periods. The government’s official full-year target is 7.5 percent, which would be the slowest since 1990, and the median of 58 economist estimates compiled by Bloomberg is for growth of 7.3 percent.
Global Market
India’s economy, Asia’s third-largest, expanded 4.5 percent in the year through March 2013, the slowest pace in a decade. The government estimates gross domestic product increased 4.9 percent in the year ended March 31.
The decline in fuel sales in Singapore is “marginal” and it remains a competitive bunker port in the region, said Paul Bradshaw, the Singapore-based general manager for Asia at OW Bunker A/S, which controls 7 percent of the global market.
“The reduced demand for raw-commodity products in China has impacted regional bulk and tanker trade flows and led to a subsequent drop in vessels calling in the region,” Bradshaw said May 6. “Secondly, there has been a transfer of volumes to other ports, primarily in Far East Russia and Europe, as shipping companies opt for lower-cost ports.”
Declining prices for bunker, typically produced at a loss after making gasoline and diesel, may shrink refiners’ margins while also lowering costs for vessel owners. About half of all fuel oil is used by ships, according to the Paris-based International Energy Agency.
Quarterly Purchases
Fuel-oil imports by China, the region’s second-biggest buyer after Singapore, fell to 1.51 million tons in March, the least in three months, government data show. First-quarter purchases dropped 23 percent from a year earlier.
Independent refiners in China use fuel oil as feedstock to produce higher-value fuels such as gasoline. They cut processing rates to 29.4 percent of capacity in the week through April 11, the lowest level in almost a year, according to Oilchem.net, an industry website. The so-called teapot plants account for more than half of the nation’s fuel-oil imports.
Declining fuel-oil supplies to Asia from sources such as the U.S., Europe and the Caribbean, may help boost prices in Singapore, according to KBC Energy Economics, an industry consultant based in Walton-on-Thames, England.
Western nations are scheduled to send 3.12 million tons of fuel oil to Asia this month, compared with a monthly average of 3.48 million tons last year, according to data from shipbrokers including Poten & Partners Inc. About 3.86 million tons arrived in April, the most in eight months.
“Inflows should be lower for the month of May, that should help,” Jit Yang Lim, a Singapore-based analyst at KBC, said April 28. “Demand may not pick up, but the supply side is lesser.”
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 Alexander Kwiatkowski
Ukraine Renews Dialogue Offer as Russia Holds Army Drills
By Olga Tanas, Daria Marchak and Daryna Krasnolutska May 9, 2014 4:53 AM GMT+0700 12 Comments Email Print
Ukraine’s leaders said they’re ready for a dialogue with peaceful representatives of the eastern regions, where pro-Russian separatists said they’ll push ahead with a vote on autonomy after Russian President Vladimir Putin called for a delay.
Putin yesterday presided over nationwide army drills, a day after he softened his tone by promising to withdraw troops from the border, voicing support for Ukraine’s presidential election, and saying it’s not the right time for a referendum on secession in the Donetsk and Luhansk regions. Ukrainian premier Arseniy Yatsenyuk said he’s concerned that Russia is “planning provocations” today, when the country holds army parades to celebrate victory in World War II.
The government in Kiev and its U.S. and European allies say there’s no sign of a Russian pullback from the border. They accuse Putin of fomenting separatist unrest in eastern Ukraine and warn that he may follow the annexation of Crimea with another land grab against his neighbor. Pro-Russian groups have seized government buildings in parts of eastern Ukraine, and Yatsenyuk’s government has sent its army to the region to reassert Kiev’s control over it.
Yatsenyuk and interim President Oleksandr Turchynov said in a statement late yesterday that they want to hold “a national dialogue with those who don’t have blood on their hands,” and invited “representatives of all political forces of all the regions” to participate.
Referendum On
The Kiev government, which took over after pro-Russian President Viktor Yanukovych was toppled by protesters in February, opposes the referendums on secession. It has declined to engage in dialogue with those it holds responsible for separatist violence, while Putin says only talks that include the pro-Russian groups can succeed in easing tensions.
Aleksandr Maltsev, a spokesman for the separatists’ “Donetsk People’s Republic,” said by phone yesterday that the autonomy referendum in the region will go ahead as planned on May 11. A similar decision was announced in Luhansk.
Sporadic violence continues across the region. In Luhansk, one person died yesterday in an exchange of fire at a checkpoint manned by gunmen, according to Ukraine’s Interior Ministry.
There was also shooting in the southern city of Mariupol yesterday, with one person injured as troops surrounded a government building, according to the local Mariupolskie Novosti news service.
Ukraine Poll
A study by the Pew Research Center found that even in the east, where Russian is widely spoken, Ukrainians reject secession. Pew said 70 percent of respondents in eastern Ukraine, and 93 percent in the west, preferred the country to remain a unified state and keep its current borders. It interviewed 1,659 people between April 5 and April 23.
In Moscow, Putin watched the Russian army drills by video link from the Defense Ministry. He said they involved “all of the armed forces across Russia, including our nuclear deterrent.” Today, he may attend a naval procession in Crimea, the region he seized from Ukraine in March.
Putin said efforts are under way to “de-escalate tensions in Ukraine, first of all by organizing a direct, equitable dialogue between the powers that be in Kiev and representatives of the southeastern regions.” He was referring to a road map proposed by the Organization for Security and Cooperation in Europe.
Putin ‘Shadow-Boxing’
Putin is “shadow-boxing,” Shada Islam, a director at the Friends of Europe policy-advisory group in Brussels, said by phone. “The West is so desperate for any sign of a softening of Russia’s hardline stance that some people will believe it. He’s pulled this kind of thing before, and Europe must stay skeptical about words and wait for deeds -- for facts on the ground, like a verified troop pullback from the Ukrainian border.”
Russian markets surged on May 7 after Putin’s comments. Stocks extended the rally yesterday, with the Micex equity index adding 0.6 percent. The ruble pared gains, dropping 0.1 percent against the central bank’s target dollar-euro basket. Ukraine’s bonds also extended gains, with the yield on dollar notes due in April 2023 dropping 11 basis points to 10.08 percent.
North Atlantic Treaty Organization Secretary General Anders Fogh Rasmussen said there was no sign of the withdrawal Putin pledged. The alliance estimates that Russia has massed about 40,000 troops along the Ukrainian border.
“We haven’t seen any indications that they’re pulling back their troops,” he told a news conference in Warsaw.
Sanctions Threatened
The U.S. and the European Union have imposed sanctions on Russian companies and individuals and threatened to tighten them if Putin doesn’t end his support for the separatists.
The EU is preparing to extend sanctions to companies in Crimea that it alleges benefited from annexation when foreign ministers meet May 12, an EU official told reporters in Brussels yesterday.
Russia has used its control of energy resources to apply pressure. Ukraine’s Energy Minister Yuri Prodan said yesterday that the country is refusing to pre-pay for natural gas supplied by OAO Gazprom (GAZP), after it almost doubled the price. He said Ukraine is also disputing Gazprom’s claim that it owes $3.5 billion.
To contact the reporters on this story: Olga Tanas in Moscow at otanas@bloomberg.net; Daria Marchak in Kiev at dmarchak@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net
To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Ben Holland, Michael Shepard
White House reviews crude oil export ban
Financial Times
The White House is examining the longstanding U.S. ban on exports of crude oil, a senior official said, offering the Obama administration's most detailed statement yet of its thinking on the issue.
John Podesta, who is one of President Barack Obama's most senior advisers, said the administration was "taking an active look" at the strains caused by the U.S. shale oil boom.
His comments indicate that the administration is actively discussing one of the hottest topics in U.S. energy policy. Any change would have implications for global oil traders, refiners and consumers.
U.S. oil production has surged from its 2008 nadir as drillers developed ways to unlock supplies from shale formations.
Exporting crude pumped in the U.S. is essentially barred to any country but Canada. Although the bulk of U.S. export curbs date back to legislation passed in 1975, the White House has authority to loosen them.
Oil price rise will give incentive for sustainable energy: Pro
Mark Lewis, senior analyst of sustainability research at Kepler Cheuvreux, says a rise in the oil price would give and incentive for policy makers to increase push sustainable energy.
Domestic output gains have been especially dramatic in the Eagle Ford shale of Texas and Bakken shale of North Dakota. North Dakota's oil production has risen more than fivefold in the past five years to 951,000 barrels per day in February, while Texas' has more than doubled to 2.9m b/d.
The light, low-sulphur quality of shale oil is ill-suited to much of the refining infrastructure lining the Gulf of Mexico, which was designed to process heavier barrels from countries such as Saudi Arabia and Mexico. Commercial crude oil stocks on the Gulf coast are now above 200m barrels, a record high, leading some to warn of a looming glut.
Asked Thursday about the administration's thinking on crude oil exports, Mr Podesta said: "We're taking an active look at what the production looks like, particularly in Eagle Ford, in Texas, and whether the current refinery capacity in the U.S. can absorb the capacity increase to refine the product that's being produced."
"We're taking a look at that and deciding whether there's the potential for effectively and economically utilizing that resource through a variety of different mechanisms," he told a conference at Columbia University's Center on Global Energy Policy in New York.
The Obama administration has so far been reticent on the issue of the export ban. The Department of Commerce, which administers export licences for crude oil, has given no indication of any policy changes.
Lawmakers including Mary Landrieu and Lisa Murkowski, the Democratic chair and Republican ranking member of the U.S. Senate energy committee, respectively, have urged the government to look into easing the ban.
The oil industry is conflicted, with producers firmly behind freer trade in crude and refineries divided on whether to keep the export ban.
The Energy Information Administration, an independent research wing of the U.S. Department of Energy, has said it will examine the impact of U.S. crude oil exports on global markets.
Mr Podesta formerly led the Center for American Progress, a Washington think-tank which supports keeping the export ban in place.
More U.S. Coal Being Exported to Europe
By Charles Kennedy | Thu, 08 May 2014 19:14 | 0
The United States is moving away from coal as it seeks to clean up its generation profile, but U.S. coal continues to expand into markets overseas. U.S. coal is often cheaper than its European competitors, even when factoring in the cost of transatlantic shipment, according to the Wall Street Journal.
In particular exports of high-sulfur coal from the Midwest are surging at the same time that the U.S. is trying to cut back. Coal can be shipped from Indiana and Illinois down the Mississippi River and out to sea. When it arrives in the United Kingdom, it can sell for as low as $65 a ton, while some British mines sell their coal for $80 per ton.
The U.S. is on track to achieve a third straight year of exceeding 100 million tons of coal exports. And while China often makes headlines for its insatiable demand for coal, the European Union remains the biggest buyer of American coal. In 2013, the U.S. exported 47.2 million tons of coal, more than triple the 13.6 million tons it exported in 2003. That is an astonishing figure considering the concerted effort on behalf of EU member states to reduce their greenhouse gas emissions.
But it is those efforts to clean up that now give many European utilities leeway to burn more coal now that the economy is weaker. As the WSJ reports, a power plant in Drax, England began burning cleaner biomass to meet stricter rules, but in doing so its sulfur emissions dropped significantly, now giving it flexibility to burn more high-sulfur coal, which is cheaper than low-sulfur coal.
Germany is also a big buyer of U.S. after it decided to phase out its nuclear industry. Germany now imports around 15 million tons of coal from the U.S. each year, up from less than one million tons in 2003.
By Charles Kennedy of Olprice.com
Gazprom Takeover Leaves Southern Kyrgyzstan Without Gas For Three Weeks
By Eurasianet | Thu, 08 May 2014 19:25 | 0
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When Russian state energy giant Gazprom took control of Kyrgyzstan’s gas network last month, the prime minister called the transfer a “historic event.” Gazprom chairman Aleksey Miller promised his company "guarantees a stable gas supply.”
Neither seems very reliable to residents of southern Kyrgyzstan today, the 24th day the region has been without gas.
Four days after the formal transfer ceremony, Uzbekistan cut gas supplies to southern Kyrgyzstan. Residents of Osh, Kyrgyzstan’s second-largest city, complain they have been forced to use expensive electricity or cook over wood or dung stoves. Fortunately, the weather is warm. One resident describes a previous cut-off, during winter, when he used seven candles to boil water to make tea for his children.
Gazprom was meant to end such outages. Under the deal, which the Kyrgyz parliament approved in December, for a symbolic $1 Gazprom snapped up Kyrgyzgaz and its property and gained rent-free use of land any facilities stand on. In exchange it took on Kyrgyzgaz’s estimated $38 million debt and pledged some $600 million to improve Kyrgyzstan’s crumbling gas grid. In the long-term, the Kyrgyz hope Gazprom can streamline energy supplies and ease the dire power shortages the country experiences every winter.
But since the agreement, the supply has only gotten worse. Uzbekistan’s state-run gas purveyor, UzTransGaz, suspended deliveries because the previous agreement between Kyrgyzgaz and UzTransGaz stipulated that if the Kyrgyz firm changed hands, the Uzbek party would no longer be required to supply gas, Bishkek’s 24.kg news agency reported on April 14. "We didn't warn Uzbekistan about the sale of Kyrgyzgaz to Gazprom, which is why gas supplies were cut off this morning at midnight," Mamatkalyk Akmatov, head of the Osh gas department, told the news agency. (Southern Kyrgyzstan cannot tap into gas from northern Kyrgyzstan because the network does not run across the mountains.)
Today, May 7, Prime Minister Joomart Otorbayev complained that his Uzbek counterpart is not taking his calls.
Uzbekistan often turns off the gas to southern Kyrgyzstan, citing payment arrears. That doesn’t seem to be the problem this time. Kyrgyzgaz said on April 30 that it had made a $70,000 advance payment to UzTransGaz.
Instead, as frustration mounts, many are starting to suspect that Uzbekistan, famously sensitive about Russian encroachment in Central Asia, may be trying to undermine the Gazprom deal.
By Murat Sadykov
Originally published on Eurasianet
U.S. To Issue Rules on Decommissioning Oil Rigs
By James Burgess | Thu, 08 May 2014 19:19 | 0
The former Director of the Bureau of Ocean Energy Management (BOEM) said on March 6 that the Obama administration will soon issue new rules governing the decommissioning of old offshore oil infrastructure. Tommy Beaudreau spoke at the Offshore Technology Conference in Houston and said BOEM would publish a notice of new rules this summer. BOEM is the agency that regulates offshore oil and gas drilling, and is housed within the Department of Interior.
“This will be an open, transparent process (on) how we meet these challenges around aging infrastructure and decommissioning,” Beaudreau said, according to Fuel Fix.
Beaudreau said that existing laws concerning decommissioning old offshore oil infrastructure, such as oil platforms and pipelines, are insufficient. Offshore oil drilling in the Gulf of Mexico is as active as ever, but many of the rigs and pipelines are aging. Drillers prefer to use rigs as long as possible, as the daily costs of operating are high.
But Beaudreau also went to lengths to calm concerns from the industry.
“I know in an environment where costs are always a key concern for you — including rising operating costs — conversations around decommissioning costs can be uncomfortable and maybe even a little painful,” Beaudreau said. “But it’s something we all need to own up to and face up to.”
He noted that the notice that the agency will publish in the summer is only the beginning of a long process before regulations are finalized. He said BOEM would work with the oil and gas industry to ensure the rules work well, and he wants the industry “to provide us feedback on the types of issues we need to be thinking about in the context of decommissioning.”
Tommy Beaudreau is now the Chief of Staff to Secretary of Interior Sally Jewel.
By James Burgess of Oilprice.com
North Sea Dumbarton crude June loadings unchanged at 850,000 barrels
June loadings of the North Sea’s Dumbarton crude oil grade were scheduled at two cargoes of 425,000 barrels each, according to traders Thursday, unchanged from May. March and April saw one 425,000 barrel cargo each.
Dumbarton output is usually one 425,000 barrel cargo on the 30th of the month, although the size of the cargo is sometimes increased. Maersk owns the field, after purchasing Noble Energy’s 30% stake in 2012.
Dumbarton crude is derived from the Donan oil field, 235 kilometers northeast of Aberdeen, Scotland. The field, which Maersk bought in 2005, had previously been abandoned and its FPSO decommissioned by operator BP in 1997. The field was redeveloped by Maersk, with the Global Producer III FPSO being brought to the site.
Azeri crude moved by BTC pipeline in April up month on month to 2.47 mil mt
The volume of Azeri crude transported via the Baku-Tbilisi-Ceyhan pipeline from Azerbaijan to Turkey in April was 2.47 million mt, up 3.5% month on month,, Azerbaijani state-owned oil company Socar said Thursday. On a daily average basis, shipments rose to an average 613,399 b/d, compared with 573,478 b/d in March. In April, 2.63 million mt loaded in Ceyhan, up from 2.39 million mt in March. The first tanker of Azeri crude left Turkey’s Mediterranean terminal at Ceyhan in June 2006. Some 242.6 million mt have been exported from Ceyhan since the pipeline was commissioned, Socar said.
Norway’s Norne crude Jun loadings at 40,000 b/d, down 18,065 b/d on May
Loadings of the Norwegian Sea Norne crude oil grade are set to reach 40,000 b/d in June, compared with 58,065 b/d the previous month, traders said Thursday.
Two 600,000-barrel cargoes of Norne are scheduled to load in June, totaling 1.2 million barrels, compared with three in May totaling 1.8 million barrels. Norne, which came on stream in 1997, is produced in the Norwegian Sea to the north of the North Sea, from the Norne floating production, storage and offloading vessel.
The FPSO also sources crude from the Urd, Staer and Svale fields, which are to the north of Norne. Norne has an API gravity of 32.7 and a sulfur content of 0.21% by mass, according to a Statoil assay.
The grade is also particularly waxy, with a pour point of 9C and a viscosity of 14.1 CST at 20 degrees Celsius. Norne is owned by Statoil (39.1%), Petoro (54%) and Eni (6.9%), according to the Norwegian Petroleum Directorate.
US studying prospects of exporting US crude
The Obama administration is studying whether the US should export some of its growing crude production, a top White House energy adviser said Thursday.
John Podesta, a special adviser to President Barack Obama, said the prospects of US crude exports are “a topic that’s under consideration” and that the administration is conducting an inter-agency study of the issue.
Podesta’s comments came on the sidelines of an event at Columbia University’s Center for Global Energy Policy in New York. Earlier in the event, Podesta said during a panel discussion that the US is studying whether refineries can handle the boom in domestic oil production, as many producers have called on the US to lift its decades-old ban on most crude exports.
“We’re taking an active look at what production looks like, particularly Eagle Ford, and whether the current refinery system can support the capacity increase [needed] to refine the product that’s being produced through the boom,” Podesta said. “We’re taking a look at that and deciding whether there’s potential for effective and economically utilizing that resource through a variety of different mechanisms.”
The US largely bans exports of crude under restrictions imposed by Congress in the wake of the 1973 Arab oil embargo. The Department of Commerce can issue permits for crude exports under certain prescribed conditions, but has generally only allowed small quantities to Canada.
With US production surging thanks to the shale boom, many upstream operators and integrated majors have begun to push for an end to the ban, as much of the oil being produced is light, sweet crude that most refineries in the US are not optimized to use.
The US Energy Information Administration has forecast that domestic crude production will double from 2008 levels to 9.6 million b/d by 2019.
Madagascar Oil declares Tsimiroro field commercially viable
London-listed Madagascar Oil on Thursday declared its Tsimiroro heavy oil field a commercial discovery following successful test production, paving the way for a field development plan.
Having successfully tested production from Block 3104 using steam technology, Madagascar Oil hopes to sell 55,000-73,000 barrels of Tsimiroro crude starting in the second half of this year, it said in a statement. It describes the crude as sweet and heavy, with API gravity of 15 degrees.
“It is clear to the board that the new government is actively encouraging the development of projects such as Tsimiroro, which should have very positive economic benefits for the country,” Madagascar Oil Executive Director and Chief Financial Officer Gordon Stein said in the statement.
The test sale is intended “to establish Tsimiroro crude as a blended heavy fuel oil substitute in the local market, mainly for power generation purposes, and currently stored oil volumes will initially be made available for blending,” the statement said.
“A new purpose-built facility for custody transfer, blending and truck loading has been built ... for this test period,” it added. Madagascar Oil estimates resources at the Tsimiroro field, 125 km from Madagascar’s west coast, at 1.7 billion barrels of oil in place.
It did not say what it thinks commercial production rates could be, after previous management gave an estimate as high as 370,000 b/d. Thursday’s declaration triggers a 180-day period within which the company must submit a full field development plan to its state partner L’Office des Mines Nationales et des Industries Strategiques (OMNIS) under their production sharing agreement.
The company’s “steam flood pilot” program has produced 83,600 barrels of oil in a year, of which 46,000 barrels are in storage and the remainder have been used for steam generation, it said. Tsimiroro produced 468 b/d of oil in April, up from 361 b/d in March, 425 b/d in February and 330 b/d in January.
It said the fluctuation in output is a feature of its current steam technology method. The company has requested government approval to go ahead with sales of the test production over a maximum of six months.
Iran Oil Minister Rejects Export Limit From Nuclear Deal
By Golnar Motevalli and Anthony DiPaola May 8, 2014 11:06 PM GMT+0700 0 Comments
Iran will export crude oil at the maximum level possible, regardless of restrictions imposed in an interim deal that offered the country some relief from sanctions over its nuclear program, Oil Minister Bijan Zanganeh said.
Iran shipped about 1.37 million barrels a day of crude on average during the first three months of the year, according to data from the International Energy Agency. Under an interim accord aimed at curbing the country’s nuclear program in return for easing some sanctions, Iran should limit exports to an average of 1 million barrels a day in the six months through July, the U.S. said in November.
“We don’t accept any figure or number that is told to us in terms of a measure for our own exports,” Zanganeh told reporters at an energy exhibition in Tehran today. “Iran will set Iran’s export level, and we will export at the maximum level possible.”
Crude output in Iran, the fourth-largest producer in the Organization of Petroleum Exporting Countries, plummeted in the last two years after U.S. and European Union sanctions targeted energy and financial industries. Iran pumped 2.84 million barrels a day of crude in April, down from 3.5 million in January 2012, according to data compiled by Bloomberg.
Iran’s deputy oil minister, Ali Majedi, said April 14 that he expects crude exports to average about 1 million barrels a day during the period covered by the interim deal.
LNG Exports
The country’s government is trying to attract foreign investment in crude, natural gas and chemical production as it seeks removal of the sanctions. The U.S. and its allies say Iran is working to develop nuclear weapons, a claim the country’s government denies. The interim accord between the two sides expires July 20.
Iran could sell liquefied natural gas to Europe within two years, Zanganeh said. Once a planned LNG export facility is completed, Iran could ship as much as 10 million metric tons a year of the fuel to Europe, Zanganeh said.
Transporting the fuel by ship in liquid form is the best method for Iran because it doesn’t have pipeline capacity to Europe, Zanganeh said. Building a pipeline that could transport gas to Europe through Turkey is a “long-term idea,” he said.
To contact the reporters on this story: Golnar Motevalli in Tehran at gmotevalli@bloomberg.net; Anthony DiPaola in Dubai at adipaola@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron
DNO Closer to Kurdish Exports as Turkey Stockpile May Spur Deal
By Mikael Holter May 8, 2014 6:39 PM GMT+0700 0 Comments Email Print
DNO International ASA says it’s closer to selling Iraqi Kurdistan oil overseas as more than a million barrels of crude piling up in storage may help spur regional and federal authorities to resolve a dispute over the proceeds.
“We’re closer than ever,” Chairman Bijan Mossavar-Rahmani said in an interview in Oslo. “The last remaining piece of this is the access to international markets in terms of both security of movement and in terms of payments. And we’re getting there.”
The Oslo-based company and its partner Genel Energy Plc are caught in a dispute between the semiautonomous Kurdistan region and central Iraqi government over revenue sharing, contracts and land. While political negotiations continue, oil producers have this year begun exports through a new pipeline to the Turkish port of Ceyhan, where the crude is stuck pending a resolution.
DNO missed analyst estimates for first-quarter net income, partly because it wasn’t able to book revenue from the oil. The company’s shares fell 1.3 percent to 21.27 kroner by 1:37 p.m. in Oslo after doubling in the past year.
The company, which has been selling its oil locally below international prices, now has “well over” a million barrels stuck in Turkey and storage capacity will be reached this month, possibly within 10 days, at current export rates, Mossavar-Rahmani said.
“Either this will trigger an unlocking of this impasse with respect to Kurdistan exports, or it’ll cause us to try to continue to focus on the local market,” the chairman said.
Export Puzzle
“If by contributing some oil, risking it and betting it’s going to unlock the Kurdistan export puzzle, it’s a heck of an investment to make. I think it’s money and oil well spent.”
Turkey’s Energy Minister Taner Yildiz says the country may begin selling Kurdish oil in Ceyhan this month even without an Iraqi deal. Ceyhan has 2.2 million barrels of oil stored and capacity of 2.5 million barrels, Yildiz said yesterday.
Repatriating the exported crude to sell it at a discount in the Kurdistan market isn’t an option, Mossavar-Rahmani said.
In the past 10 days, Kurdistan’s Tawke field has exported 100,000 barrels a day of its total output of 120,000 barrels. DNO, which operates the field with a 55 percent stake, affirmed plans to raise capacity to 200,000 barrels by the year-end.
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 Tony Barrett, Alex Devine
US crude to hit 1972 highs
Written by OilOnline Press — May 8th, 2014 | 43 Views
The US Energy Information Administration (EIA) estimates US total crude oil production averaged 8.3MM bbl/d in April—making it the highest monthly average production since March 1988.
US total crude oil production, which averaged 7.4MM bbl/d in 2013, is expected to increase to 8.5MM bbl/d in 2014 and 9.2MM bbl/d in 2015. The 2015 forecast represents the highest annual average level of production since 1972.
The figures were released as part of the EIA’s short-term energy outlook.
The EIA said Brent crude oil spot prices averaged US$108/(bbl in April. This was the 10th consecutive month in which the average Brent crude oil spot prices fell within a relatively narrow range of $107/bbl to $112/bbl.
New pipeline capacity from the Midwest into the Gulf Coast helped reduce inventories at the Cushing, Oklahoma storage hub to 25MM bbl by the end of April, the lowest level since October 2009. The discount of WTI crude oil to Brent crude oil, which averaged more than $13/bbl from November through January, fell below $4/bbl in early April.
Total US commercial crude oil stocks at the end of April reached a record high of nearly 400MM bbl, which is expected to put downward pressure on crude oil prices. EIA projects Brent crude oil prices to average $106/bbl in 2014 and $102/bbl in 2015, and the WTI discount to Brent to average $10/bbl and $11/bbl in 2014 and 2015, respectively.
Natural gas working inventories on April 25 totaled 0.98 Tcf, 0.79 Tcf (45%) below the level at the same time a year ago and 0.98 Tcf (50%) below the previous five-year average (2009-13). Very cold weather and low inventories contributed to volatile Henry Hub natural gas spot prices over the past few months, increasing from $3.95 per million British thermal units (MMBtu) on January 10, to a high of $8.15/MMBtu on February 10, before falling back to $4.61/MMBtu on February 27, and then bouncing back up to $7.98/MMBtu on March 4. EIA expects that the Henry Hub natural gas spot price, which averaged $3.73/MMBtu in 2013, will average $4.74/MMBtu in 2014, $0.30 higher than in last month's STEO, and $4.33/MMBtu in 2015.
Chinese Premier to Sign Trade Agreements in Oil Supplier Angola
By Colin McClelland and Manuel Soque May 8, 2014 11:16 PM GMT+0700 0 Comments
Chinese Premier Li Keqiang arrived for a two-day visit to Angola, China’s second-largest oil supplier, where he’s expected to approve funding agreements and hold talks with President Jose Eduardo Dos Santos.
It’s the first trip to the southwest African country by a Chinese premier in eight years and deals to finance hydropower and agriculture will be signed, state-run China Daily.com reported today. Several government lenders are considering investing amounts in the billions of dollars in the country, according to an administrator at China Railway Airport Construction Group Co. in Luanda, Angola’s capital, who declined to be identified in line with company policy.
Angola is Africa’s second-biggest crude producer, pumping about 1.54 million barrels a day last month, and sells about half its output China. The Asian nation was among the first to finance Angola’s rebuilding after a 27-year civil war ended in 2002, offering oil-backed loans to fund construction projects as European and other donors imposed conditions such as improving democracy and transparency.
“The trouble for China is that its oil-for-infrastructure model is not sustainable long-term in Angola,” Alex Vines, head of the Africa Program at Chatham House in London, said in a May 6 report. “If Beijing is to continue to lock in oil supplies, a new type of partnership not reliant on Chinese construction contractors will need to be established.”
Angola’s crude shipments to China rose 9.9 percent to 10.7 million metric tons in the first quarter, second only to Saudi Arabia, Vines said. There are more than 258,000 Chinese working in Angola and Li will meet with company leaders as concerns mount about the host country’s unemployment, estimated at about 25 percent by the African Development Bank.
Housing Project
Li is expected to tour Kilamba, one of several residential complexes built by Chinese companies such as Beijing-based Citic Construction Co. to accommodate tens of thousands of people around the capital, which has a population of about 6 million. Kilamba’s 900-hectare first phase cost $3.54 billion to build 115 apartment blocks. Li is scheduled to meet his Angolan counterpart tomorrow afternoon.
China-Angola trade reached $36 billion last year, according to China Daily.com. Accumulated investment by China in Angola has exceeded $8 billion, it said. China Railway Airport Construction is building a new international airport in Luanda and spent about $1.8 billion refurbishing the Benguela Railway linking the Democratic Republic of Congo to the Atlantic Ocean.
Africa Trip
Li and his 129-member delegation are on the third stop of a four-nation African tour following Ethiopia and Nigeria before heading to Kenya. Angola, a communist country from its 1975 independence from Portugal until after the Berlin Wall fell, has been run by dos Santos since 1979. He’s the longest-serving ruler in Africa after Equatorial Guinea President Teodoro Obiang Nguema Mbasogo.
“This visit emphasizes that China continues to invest in Africa, is a long-term predictable partner and offers ‘win-win’ partnerships for African governments without conditionality,” Vines said. “The visit to Luanda from 8 May is the most important on this trip for Premier Li.”
To contact the reporters on this story: Colin McClelland in Luanda at cmcclelland1@bloomberg.net; Manuel Soque in Luanda at msoque@bloomberg.net
To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net Paul Richardson, Ben Holland
Chinese Premier to Sign Trade Agreements in Oil Supplier Angola
By Colin McClelland and Manuel Soque May 8, 2014 11:16 PM GMT+0700 0 Comments
Chinese Premier Li Keqiang arrived for a two-day visit to Angola, China’s second-largest oil supplier, where he’s expected to approve funding agreements and hold talks with President Jose Eduardo Dos Santos.
It’s the first trip to the southwest African country by a Chinese premier in eight years and deals to finance hydropower and agriculture will be signed, state-run China Daily.com reported today. Several government lenders are considering investing amounts in the billions of dollars in the country, according to an administrator at China Railway Airport Construction Group Co. in Luanda, Angola’s capital, who declined to be identified in line with company policy.
Angola is Africa’s second-biggest crude producer, pumping about 1.54 million barrels a day last month, and sells about half its output China. The Asian nation was among the first to finance Angola’s rebuilding after a 27-year civil war ended in 2002, offering oil-backed loans to fund construction projects as European and other donors imposed conditions such as improving democracy and transparency.
“The trouble for China is that its oil-for-infrastructure model is not sustainable long-term in Angola,” Alex Vines, head of the Africa Program at Chatham House in London, said in a May 6 report. “If Beijing is to continue to lock in oil supplies, a new type of partnership not reliant on Chinese construction contractors will need to be established.”
Angola’s crude shipments to China rose 9.9 percent to 10.7 million metric tons in the first quarter, second only to Saudi Arabia, Vines said. There are more than 258,000 Chinese working in Angola and Li will meet with company leaders as concerns mount about the host country’s unemployment, estimated at about 25 percent by the African Development Bank.
Housing Project
Li is expected to tour Kilamba, one of several residential complexes built by Chinese companies such as Beijing-based Citic Construction Co. to accommodate tens of thousands of people around the capital, which has a population of about 6 million. Kilamba’s 900-hectare first phase cost $3.54 billion to build 115 apartment blocks. Li is scheduled to meet his Angolan counterpart tomorrow afternoon.
China-Angola trade reached $36 billion last year, according to China Daily.com. Accumulated investment by China in Angola has exceeded $8 billion, it said. China Railway Airport
Construction is building a new international airport in Luanda and spent about $1.8 billion refurbishing the Benguela Railway linking the Democratic Republic of Congo to the Atlantic Ocean.
Africa Trip
Li and his 129-member delegation are on the third stop of a four-nation African tour following Ethiopia and Nigeria before heading to Kenya. Angola, a communist country from its 1975 independence from Portugal until after the Berlin Wall fell, has been run by dos Santos since 1979. He’s the longest-serving ruler in Africa after Equatorial Guinea President Teodoro Obiang Nguema Mbasogo.
“This visit emphasizes that China continues to invest in Africa, is a long-term predictable partner and offers ‘win-win’ partnerships for African governments without conditionality,” Vines said. “The visit to Luanda from 8 May is the most important on this trip for Premier Li.”
To contact the reporters on this story: Colin McClelland in Luanda at cmcclelland1@bloomberg.net; Manuel Soque in Luanda at msoque@bloomberg.net
To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net Paul Richardson, Ben Holland
Iran partners with Germany to produce fuel from residual oil
Published 08 May 2014
Iran's Research Institute of Petroleum Industry (RIPI) and a German company have signed a memorandum of understanding for producing fuel from residual and ultra heavy oil.
The RIPI International and Technology Affairs deputy Amir Abbas Hosseini told Iranian IRNA news agency that the German company will help RIPI in developing domestic technology for producing fuel from heavy oil, under the terms of the accord.
Hosseini said, "while the oil reserves in the Iran's fields are changing from light to heavy, it is necessary for the country to have the technology of producing fuel from ultra-heavy oil."
In March, Iran's total oil output hit 2.9 million barrels per day (bpd), which is about 65,000 bpd more when compared with the total oil output in February, AzerNews reported.
Iran comprises 157 billion barrels of recoverable crude oil reserves, marking world's fourth largest reserves of crude oil
Saudi Arabia crude output rises to 9.66 million bpd
ALKHOBAR: Saudi Arabia produced 9.66 million barrels per day (bpd) of crude oil in April, up from 9.566 million bpd in March, an industry source familiar with the matter said.
Saudi Arabia supplied 9.650 million bpd in April to the market, up from 9.533 million bpd in March, the source said.
Supply to market may differ from production depending on the movement of barrels in and out of storage.
“It is generated by customers,” the source said when asked about the reason for higher output and supply from the Kingdom.
“But an increase of 100,000 to 200,000 is not an indication of anything. It is not an indication that there is a change in the global market.”
“The market is balanced. We expect the situation to remain the same for the rest of the year in terms of prices and market demand and supply, unless we see surprises,” the source added.
A Reuters survey showed output from the Organization of the Petroleum Exporting Countries rose by 160,000 barrels per day (bpd) in April on increases in Saudi Arabia, Algeria, Iraq and Libya.
Overall OPEC supply remains below its supply target of 30 million barrels per day (bpd). Output rose above that level in February, after four straight months below 30 million bpd, according to Reuters estimates.
OPEC ministers will meet on June 11 to decide on output policy for the rest of the year.
Brent oil fell below $108 a barrel on Thursday as tensions in Ukraine appeared to show signs of easing but the crisis in Libya and a jump in Chinese crude imports to a record high underpinned prices.
Front-month Brent, the international benchmark, shed 59 cents at $107.54 per barrel by 1328 GMT, after settling $1.07 higher on Wednesday.
US crude was 60 cents lower at $100.17 per barrel, having briefly dropped below $100 and notched its biggest daily percentage fall in a week. It had gained $1.27 in the previous session on data showing a surprise drop in US crude stocks.
The price differential between WTI and Brent widened to $7.38 a barrel, after it hit $6.56 in the previous session, its narrowest in two weeks.
“Things have dipped a little bit on the basis of slightly more positive signs or at least less worrying signs out of Ukraine,” Simon Wardell, an analyst at Global Insight, said.
Brent also found some support from the standoff in Libya, where rebels in the east boycotted the new prime minister and said they would keep two major terminals shut.
Optimism about higher Libyan exports had helped to put pressure on oil prices since the end of last month, when some oil ports shut since last year were reopened. But Libyan production remains at just over 250,000 bpd, less than a fifth of the output around 1.4 million bpd in mid-2013.
“One week we think that the flows are going to come back and then they don’t come back, so it’s difficult to have a trending market when you have this uncertainty on Libya,” added Jakob.
Brent had received some support earlier in the session from Chinese data showing crude oil imports rose to a record 6.78 million barrels per day (bpd) in April, after slipping below 6 million bpd in March for the first time since November 2013.
The data also showed that total exports rose, against forecasts for a decline, offering some rare good news for China’s slowing economy.
Oil futures rose by more than $1 on both sides of the Atlantic on Wednesday after data from the US Energy Information Administration (EIA) showed an unexpected drop in US inventories in the week ended May 2, although total stocks remained close to record high levels.
Total stocks fell 1.8 million barrels last week, according to the EIA. Stocks fell 1.4 million barrels at the Cushing, Oklahoma, delivery point for the US futures contract, to their lowest since 2008.
UPDATE 8-U.S. crude falls on technical trade, eyes Ukraine conflict
* Libyan rebels boycott new PM, keep 2 ports closed
* Pro-Russian rebels in Ukraine to go ahead with referendum
* China's crude oil imports jump 22 pct to record in April
* Oil prices up more than $1 on Wed on U.S. crude stock drop (Rewrites throughout, adds settlement prices, analyst commentary)
By Elizabeth Dilts
NEW YORK, May 8 (Reuters) - U.S. crude oil prices fell on Thursday after hitting resistance at a key technical level, and Brent also fell as traders awaited developments in Ukraine.
Low oil exports from Libya, where rebels refuse to cooperate with the new prime minister to reopen major ports, and rising oil imports to China provided some support to the markets.
New jobless claims fell last week in the United States, a sign of a strengthening labor market that also helped set a floor beneath U.S. crude oil prices.
The U.S. Energy Information Administration's inventory report on Wednesday showed an unexpected drop in U.S. commercial crude inventories and a drop in stocks at the Cushing, Oklahoma, delivery point for U.S. crude last week.
The market appeared to ignore those supportive factors Thursday, outweighed by a strong U.S. dollar and weakness in the U.S. gasoline contract.
Brent futures, settled down 9 cents at $108.04 a barrel. U.S. crude settled 51 cents lower at $100.26 per barrel. Both contracts settled more than $1 higher on Wednesday, but U.S. crude encountered resistance at the 200-day moving average and could not continue a rally to the upside.
"I think it's still reflective of yesterdays' inventories and another draw in Cushing that helped to keep the market somewhat supported," said Dominick Chirichella, a senior partner at Energy Management Institute in New York. "We have a limited downside. There are still a lot of international issues - Libya, Ukraine and Libya."
Pro-Moscow separatists in eastern Ukraine ignored a public call Russian President Vladimir Putin to postpone a referendum on self-rule, declaring they would go ahead on Sunday with a vote that could lead to war.
U.S. Deputy Secretary of State William Burns said Russia was heading down a dangerous and irresponsible path and the situation in Ukraine was extremely combustible.
Putin's surprise move on Wednesday and his announcement that Russian troops had withdrawn from the border with Ukraine have weighed on Brent, but caution remained in the markets as NATO and the White House said they were still waiting for evidence.
LIBYA, CHINA SUPPORT BRENT
Libyan oil exports will remain stagnant at low levels for now as rebels in the east said they plan to boycott new Prime Minister Ahmed Maiteeq and keep two major oil terminals shut.
Brent prices had been pressured since the end of April after the rebels reached an agreement with Maiteeq's predecessor, Abdullah al-Thinni, to reopen four ports. Only two smaller facilities have been handed over to government forces so far.
Government officials said they are committed to implementing the original agreement with rebels, but analysts said they are waiting for more substantial news. Libyan production remains at around 250,000 barrels per day, less than a fifth of the 1.4 million bpd output produced until mid-2013.
"Very much like Ukraine, Libya is a situation that, on a daily basis, can either put the wind in the sails or take it out of them," said Smith.
Brent had received some support earlier in the session from Chinese data showing crude oil imports rose to a record 6.78 million bpd in April after slipping below 6 million bpd in March for the first time since November 2013.
The data also showed that total exports rose, against forecasts for a decline, offering some rare good news for China's slowing economy. (Additional reporting by Julia Fioretti and Lin Noueihed in London, and Jacob Gronholt-Pedersen in Singapore; Editing by Susan Thomas, Jason Neely, Chizu Nomiyama and Marguerita Choy)
U.S. on Sidelines in South China Sea Standoff
By Nick Cunningham | Thu, 08 May 2014 19:44 | 0
Vietnam and China are engaged in a heated standoff in the South China Sea, with both sides thus far unwilling to back down. The problem started earlier this week when China sent an oil rig and other accompanying vessels into an area within the 200-mile exclusive economic zone of Vietnam. From there, things took a turn for the worse.
Vietnamese officials reported that Chinese vessels rammed Vietnamese ships and fired water cannons on May 7, from which several sailors were injured. China also allegedly used low flying aircraft to intimidate Vietnam. The following day, Vietnam apparently returned the favor, according to officials in Beijing. China claims that Vietnam rammed Chinese ships 171 times since May 3.
China is “deeply shocked” (shocked!) at Vietnam’s “disruption” of what China sees as its perfectly legal drilling operation in the South China Sea.
“We cannot tolerate any behavior that would undermine the safety of our personnel or our rig or drilling operation,” said Yi XianLiang, Deputy Director General of Boundary and Ocean Affairs, said at a press briefing according to Bloomberg. “In the face of Vietnamese disruption, China had to increase its security forces at the scene.”
The two sides are fighting over control of the Paracel Islands, but the problem is that China’s claim to territory in the South China Sea has no basis in international law. Under the UN Convention on the Law of the Sea (UNCLOS) countries can submit claims to territory up to 200 miles from their shores. China’s oil rig is sitting well within the 200 mile boundary of Vietnam’s EEZ.
But China’s “Nine Dashed Line” principle – which China uses to claim territory – draws its boundaries so deeply into neighboring countries’ waters, hundreds of miles from the Chinese mainland. The fight centers around the Paracel Islands, which China occupies and claims are islands. Neighboring countries insist they are just rocks, not islands, and thus cannot be used to justify the extension of territorial claims 200 miles outwards under UNCLOS.
The Philippines is formally seeking international arbitration on the legality of China’s “Nine Dashed Line,” hoping to get China’s claims thrown out.
China is dismissing such complaints and decided to unilaterally move in to Vietnamese waters to drill for oil. The EIA estimates that the South China Sea holds 11 billion barrels of oil and 190 trillion cubic feet of natural gas, but precise figures are unknown. China believes the totals could be several times as big. This is why the conflict over control of the South China Sea has become such a hot issue.
At the same time, China blames the U.S. for emboldening Southeast Asian nations to confront China. President Obama’s recent trip to the region was largely meant to reassure allies of America’s backing in the face of Chinese encroachment.
The U.S. expressed concern over the latest incident. “We oppose any act intimidation by vessels, particularly in disputed areas,” said Daniel R. Russel, the Assistant Secretary of State for East Asian and Pacific Affairs. “Competing sovereignty claims in disputed areas, including the Paracels, must be dealt with peacefully, must be dealt with diplomatically and must be dealt with in accordance to international laws,” he said.
International arbitration may yet deliver a defeat to China, but the U.S. undermines its own credibility by being one of the few holdouts on the UN Convention on the Law of the Sea. Despite President Ronald Reagan helping to shape the final document, the U.S. did not sign UNCLOS, owing to a bizarre notion on behalf of some Republicans that doing so will mean submitting the U.S. to a world tax, global redistribution of wealth, and a supranational government.
So it is a bit ironic that the State Department urges the conflict be dealt with “in accordance with international law.” Without having ratified UNCLOS, the strongest statement from the U.S. can merely be to “urge restraint” on all sides.
By Nicholas Cunningham of Oilprice.com
Can Rail Rebound From Rough Winter With New Oil Rules?
By Daniel J. Graeber | Thu, 08 May 2014 19:38 | 0
Railroad companies fared well last year as the U.S. economy expanded, though how quickly they're able to adapt to transportation rules for oil delivery may determine how well they steam ahead.
Rail operator Genesee & Wyoming reported an 80 percent increase in operating revenue last year on increased traffic. When issuing its first quarter 2014 report May 1, the company said its bottom line was severely impacted by the harsh winter that gripped most of the United States this year.
The company said May 8, however, North American traffic increased 10.8 percent and monthly delivery of petroleum products was up 12.5 percent year-on-year.
There isn't enough pipeline capacity in place to keep up with the increased rate of crude oil production in North America. That's left the rail sector as the primary delivery method of choice in the interim.
The U.S. Department of Transportation issued an emergency order May 7 for rail cars carrying crude oil, specifically from the Bakken reserve area in North Dakota. Operators delivering more than 23,800 barrels of Bakken crude oil, which fits in about 35 tank cars, are required to notify authorities along their route of how much they're carrying and how much traffic is expected.
A CSX Corp. train carrying Bakken crude oil to a refinery in Virginia derailed April 30. Though no injuries were reported, several rail cars caught fire and some of the oil spilled into the James River in Lynchburg, Va.
When it announced its first quarter earnings April 15, CSX said operating income declined 16 percent because of the harsh winter. Looking ahead, it said it expects "modest growth" for the year.
Canadian Transport Minister Lisa Raitt ordered thousands of legacy DOT-111 railcars off the Canadian rail system in response to increased accidents involving those cars. Along with its emergency order, U.S. regulators urged Bakken crude oil deliverers to avoid using DOT-111 rail cars "to the extent possible."
BNSF said May 1 it was investing close to $1 billion to overhaul rail capacity along its Northern Corridor, which sees rail running from the Pacific Northwest through North Dakota to Chicago. Carl Ice, the company's president and chief executive officer, said the investment was "critical" given the growing regional demands for rail.
The Association of American Railroads, which described the Canadian order as "aggressive," said railroads companies will "do all they can" to meet the honor the Department of Transportation's orders. Already hammered by a rough winter, and facing the prospects of increased traffic, how well the industry is able to keep up with the quick pace of development could determine their financial future going forward.
By Daniel J. Graeber of Oilprice.com
U.S. To Move LNG to Help Europe
By Joao Peixe | Thu, 08 May 2014 19:17 | 0
U.S. Secretary of Energy Ernest Moniz indicated that the U.S. will approve more LNG export licenses in an effort to enhance the energy security of Europe. In an interview with Bloomberg News, Sec. Moniz said two more LNG export applications will be approved “fairly soon.”
The interview occurred in Rome shortly after his visit to the G-7 conference. Representatives at the G-7 agreed to a call for greater energy diversity, including renewable energy and energy efficiency. Beyond that, there was disagreement. For example, some countries prefer more nuclear power, greater interconnections between EU member states, shale gas, or LNG.
For his part, Sec. Moniz suggested that the U.S. would send more LNG to Europe in the coming years. “They asked me what was our plan with LNG exports, and I told them what our process is and where we are,” Moniz said. “The expectation is that the United States will become a substantial natural gas exporter towards the end of this decade.”
His comments suggest that the Obama administration is putting much greater weight on geopolitics than in the past. The U.S. must decide whether or not individual LNG export terminals are in the “public interest,” but for many of the permits approved last year, that often centered around the economic impact. After the flare up in tensions between Russia, Ukraine, and the West, many members of the U.S. Congress have called on greater LNG exports to help Europe reduce its dependence on Russia. Sec. Moniz’s comments point to the fact that the Obama administration agrees.
Still, U.S. LNG exports could be years away. In the meantime, Europe will need to find its own way to enhance its energy security. “No one expects that we can reduce Europe’s dependency overnight,” U.K. Energy Secretary Ed Davey told Bloomberg News. “There’s clearly a lot of investment we can do in everything from energy efficiency to renewables to nuclear, as well as other forms of gas.”
By Joao Peixe of Oilprice.com
N.Sea's Gullfaks, Stafjord, DUC to shut for maintenance
May 8 (Reuters) - The Statfjord and Gullfaks oilfields in the Norwegian North Sea will shut down for maintenance from late May until the second half of June for maintenance, operator Statoil told Reuters on Thursday.
Separately, Maersk Oil, a subsidiary of shipping giant Maersk, said its production platforms in the Danish North Sea would be shut for around 12 days in June for maintenance.
ConocoPhillips also said its Eldfisk project would be shut for a "handful of days" this year. (Reporting by Gwladys Fouche; Editing by Balazs Koranyi)
