By Saleh Sarrar and Maher Chmaytelli May 13, 2014 5:03 AM GMT+0700 1 Comment Email Print
Libya’s daily oil output may double to 500,000 barrels today after protesters agreed to reopen pipelines carrying crude from fields in the country’s western region, according to officials.
The valves at the Sharara field have reopened and oil will reach the Zawiya refinery within a few hours, Mansour Abdullah, an official at the refinery, said late yesterday. Earlier, National Oil Corp. spokesman Mohamed Elharari had said by phone from Tripoli that the Elephant, Hamada and Wafa fields, as well as Sharara, were due to resume production last night or this morning “and progressively increase output.”
The protesters agreed to stop blocking oil shipments after the authorities started preparations to hold elections for a new parliament, Elharari said. Spokesmen for the protesters couldn’t immediately be reached by phone for comment.
Repsol SA-operated Sharara and Eni SpA-operated Elephant are the largest fields in western Libya, with daily capacities of about 340,000 barrels and 140,000 barrels respectively before the shutdowns in March,
Protests in western Libya and a separate rebellion for self-rule in the east have curtailed the North African nation’s production to 237,000 barrels a day, according to National Oil. The country was producing about 1.6 million barrels a day before the revolt that toppled Muammar Qaddafi in 2011.
“For the first time in many months we will have in Libya production from the west and some production from the east,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by e-mail. “If there are no new protests or interruptions then it will have a material impact on crude supplies in the Mediterranean” and raise Libya’s production capacity to 800,000 to 900,000 barrels a day, he said.
Crude exports have resumed from Zueitina and Hariga, two oil ports in eastern Libya shut down by separatists in July. The rebels threatened on May 7 to reoccupy those ports in protest at the election of Ahmed Maitiq as Prime Minister. The two largest oil ports in the east, Ras Lanuf and Es Sider, remain shut down and under rebel control.
To contact the reporters on this story: Saleh Sarrar in Dubai at ssarar@bloomberg.net; Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron, Ben Holland
By Wael Mahdi May 12, 2014 3:49 PM GMT+0700 0 Comments Email Print
OPEC should keep pumping crude at about 30 million barrels a day in the near term amid rising global supply, according to the group’s Secretary General and Saudi Arabia, its largest member.
The Organization of Petroleum Exporting Countries has no reason to change the current output ceiling of 30 million barrels a day at its next meeting on June 11 because oil markets are stable, Saudi Arabia’s Petroleum Minister Ali Al-Naimi told reporters in Seoul today. Supply and demand will remain “fairly balanced” throughout the year, according to comments from OPEC’s Secretary General Abdalla El-Badri, posted on website of the International Energy Forum.
“In the near term, OPEC production will remain steady around the 29-30 million barrels of oil per day level,” El-Badri said. “At present we are seeing growth in non-OPEC supply” and other producers in the group are making up for the supply shortfall from Libya, he said.
OPEC, which is responsible for about 40 percent of the world’s crude supply, produced 29.9 million barrels a day in April, the least since June 2011, according to a Bloomberg survey of producers and analysts. Production from Libya, the holder of Africa’s largest crude reserves, has plunged to 235,000 barrels a day as protests shut down oilfields and export terminals, according to state-run National Oil Corp.
“Libya will be accommodated once it starts bringing back its capacity,” El-Badri said. Shut Libyan production must come back quickly, he said.
OPEC will not discuss this year imposing a quota on growing output from Iraq, its second-largest producer, El-Badri said. Security and the development of new infrastructure remain challenges to the country’s plans to increase production, he said.
Iraq plans to pump 8 million barrels of oil a day by 2020 and become the world’s second-largest exporter of crude by 2030, the country’s Oil Minister, Abdul Kareem al-Luaibi, said in separate comments on International Energy Forum website yesterday. The nation’s output is around 3.25 million barrels a day, according to data compiled by Bloomberg.
To contact the reporter on this story: Wael Mahdi in Manama at wmahdi@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net James Herron
By Jonathan Tirone and Kambiz Foroohar May 12, 2014 7:22 PM GMT+0700 18 Comments Email Print
Diplomats will start drafting a final accord this week to resolve a decade-long standoff with Iran that would rescind oil and banking sanctions in return for limits on the Islamic Republic’s nuclear program.
The five days of scheduled talks in Vienna will be the longest round of haggling since November, when diplomats agreed to a temporary accord. U.S., Russian and Iranian officials have said drafting should begin this week to meet a July 20 target.
“The parties to the negotiation are somehow condemned to succeed,” Francois Nicoullaud, a policy analyst and France’s former ambassador to Iran, said in an interview. “On the Western side, there is no real Plan B.”
A stream of diplomats, including the Austrian and Swedish foreign ministers, and international companies have headed to Iran over the past few months. Six hundred energy companies attended a Tehran investment conference last week. Russia and Iran are negotiating multiple technology and energy trade agreements.
“Everyone understands that failure can have great consequences,” said Ariane Tabatabai, a nuclear security researcher at Harvard’s Kennedy School of Government. “The Iranian leadership wants a deal and so does the White House.”
While President Barack Obama has given the talks only a 50 percent chance of success, negotiators led by European Union foreign policy chief Catherine Ashton and Iranian Foreign Minister Mohammad Javad Zarif have raised hopes by showing willingness to compromise.
Iran agreed to modify a reactor in Arak to lower its plutonium output, which could be used in nuclear weapons, and has offered greater access for International Atomic Energy Agency inspectors. The U.S. has stepped back from demands that Iran cease all uranium-enrichment activities.
IAEA officials are meeting with their Iranian counterparts today in Vienna as follow-up to a February arrangement granting inspectors wider access, the agency said in an e-mail. As part of that deal, Iran offered more detail about development of dual-use detonators that can be used used for petroleum exploitation and nuclear weapons.
“I doubt that the Western parties will seek to exploit the possible-military-dimension issue to cause a train-wreck,” said the U.K.’s former IAEA ambassador, Peter Jenkins, in an e-mail interview. “On the contrary I can imagine them accepting some Iranian explanations.”
The top U.S. negotiator at the talks, Wendy Sherman, joined National Security Adviser Susan Rice last week in Israel, where they tried to show Prime Minister Benjamin Netanyahu Washington’s determination to prevent a nuclear-armed Iran.
Netanyahu, who called the Geneva deal a “historic mistake,” has insisted the Islamic Republic’s nuclear program be dismantled to stop Iran from building a nuclear weapon.
That view isn’t shared by Israel’s former head of nuclear energy, who said Iran is a decade away from a nuclear bomb.
“The main issues are still ahead of us, but it is definitely possible to be optimistic,” said Uzi Eilam, the former head of the Israel Atomic Energy Commission, in an interview published in Israel’s Ynet. “I am not sure that Iran wants the bomb -- it could be enough for them to be a nuclear threshold state.”
In Iran, hardliners continue to oppose the talks. Opponents rallied last week in Tehran under the banner, “we’re worried,” and criticized the Geneva deal as being “weak.” Some Iranian lawmakers have tried to censure Foreign Minister Zarif for recognizing the Holocaust.
“The big issue facing the two sides is not the technical details, but how each side will handle selling the deal back home,” said Vali Nasr, dean of the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University.
Unresolved issues include Iran’s enrichment capacity, sanctions relief and the direction of future nuclear research and development in Iran, said Ali Vaez, senior analyst at International Crisis Group.
“Some issues will be left until the last minute,” Vaez said. “We can judge the progress by what proposals the two sides bring to the table.”
Setting enrichment limits is still one of the thorniest issues, according to Ferenc Dalnoki-Veress, a nuclear physicist analyzing non-proliferation at the James Martin Center in Monterrey, California. Rather than capping the number and types of machines that Iran uses, officials should focus on regulating output, he said.
“Improved centrifuges are like faster vehicles making it easier to get to the final goal,” Dalnoki-Veress said in an interview. “It is important to set an upper limit to the goals that Iran can reach rather than the number of centrifuges.”
The U.S. Congress, which has already passed dozens of sanctions against Iran, has threatened to mete out more punishment if negotiations fail.
That hasn’t stopped Iran and Russia from forging trade ties. China has also vowed to boost defense cooperation with Iran.
“Russia and Iran didn’t start working on the deals because they expected the failure of talks,” said Sergey Batsanov, a former Russian arms-control diplomat. “Russia has its own long-term interests -- to capitalize on good relations now and secure its positions in the Iranian market later.”
To contact the reporters on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net; Kambiz Foroohar in New York at kforoohar@bloomberg.net
To contact the editors responsible for this story: Andrew J. Barden at barden@bloomberg.net; Alan Crawford at acrawford6@bloomberg.net Leon Mangasarian, Eddie Buckle
By Peter Millard May 12, 2014 8:14 PM GMT+0700 0 Comments Email Print
Petroleo Brasileiro SA (PETR4) is stepping up cost-cutting measures to avoid a fourth straight profit decline amid losses derived from government fuel subsidies.
Petrobras, as Brazil’s state-run oil producer is known, raised a 2013-2016 cost-saving target to 37.5 billion reais ($16.9 billion) from 32 billion reais, the Rio de Janeiro-based company said in a May 9 statement accompanying first-quarter results, which included a 30 percent drop in net income.
Chief Executive Officer Maria das Gracas Foster is attempting to counter operational losses at the company’s refining and distribution unit of about $40 billion since 2011 when President Dilma Rousseff started using Petrobras to subsidize fuel imports to rein in inflation. Foster has sought to close the gap between domestic and foreign prices, while cutting operating expenses and increasing production.
“The company has the ability to recover profitability and its market value over the course of 2014, mainly through efficiency gains and increasing operational capacity,” Nataniel Cezimbra, an analyst at Banco do Brasil SA, said in a research report after the results were released.
Petrobras rose 1.5 percent to 17.93 reais at 10:13 a.m. in Sao Paulo. The stock lost 13 percent in the past year before today, the worst performance among 15 global peers tracked by Bloomberg, which had an average gain of 15 percent. Trading at 8.57 times estimated earnings, Petrobras is the group’s cheapest stock.
First-quarter net income declined to 5.39 billion reais ($2.28 billion), or 41 centavos a share, from 7.69 billion reais, or 59 centavos, a year earlier. The average per-share estimate of 13 analysts tracked by Bloomberg was 42 centavos.
Fuel imports rose 13 percent from a year earlier, generating a first-quarter loss for the refining unit of 7.4 billion reais. Profit at its gas unit slumped 41 percent.
Price caps require imported gasoline and diesel to be sold at a loss to domestic distributors. President Rousseff is seeking to keep prices in check ahead of October elections. Increases of 4 percent for gasoline and 8 percent for diesel that took effect Dec. 2 were the first in nine months.
Petrobras’s cash flow will improve after it starts a new refinery later this year, Foster said in the statement. The company will also “gradually” adjust domestic prices to international benchmarks, she said.
“It will be very difficult to have an adjustment in an election year,” Luana Helsinger, an oil and gas analyst at brokerage GBM Brasil, who has the equivalent of a buy rating on the stock, said by telephone from Rio.
Petrobras, the only gasoline and diesel producer in Brazil, ran its 11 crude refineries at an average 96 percent of capacity during the quarter in an attempt to lower reliance on imports. The over-stretching of workers and machinery was one of the reasons behind fires at two plants in December and January, according to the country’s oil workers union.
Petrobras said May 5 that it expects 13 billion reais in savings through 2018 with a voluntary dismissal program.
Petrobras’s debt of more than $100 billion is the highest of any publicly traded oil company, data compiled by Bloomberg show. That compares with about $82 billion at PetroChina Co. and about $66 billion at Russia’s OAO Rosneft, the two most indebted crude producers after Petrobras.
A fourfold increase in the obligations in five years prompted Moody’s Investors Service to cut its rating on Petrobras’s debt by one level last year to Baa1, the third-lowest investment grade.
The company is investing $221 billion in the five years through 2018 as it develops deposits trapped beneath a salt layer miles below the Atlantic Ocean’s floor in deep waters off Brazil’s southeastern coast.
Given the financial needs to develop the so-called pre-salt reserves, borrowing costs will remain at record levels, said Carlos Gribel, vice president for emerging markets at INTL FCStone Securities in Miami.
Higher debt is coupled with the company’s expectation that it won’t generate positive net cash flow this year. Petrobras has posted about $40 billion in operational losses at its refining and distribution unit since it started subsidizing fuel imports in 2011.
“Based on the decisions of the Brazilian federal government, as our controlling shareholder, we have, and may continue to have, periods during which our product prices will not be at parity with international product prices,” The company said in an April 30 regulatory filing.
Petrobras plans to boost domestic crude output 7.5 percent this year as it connects wells to production equipment in deep waters of the Atlantic. A combination of equipment delivery delays, unplanned maintenance at offshore platforms and faster-than-expected declines at the company’s legacy fields in the Campos Basin has left production almost flat since 2010.
“It’s not like they’re still wildcatting, trying to find the resource, they just need to bring that online,” Chris Kettenmann, an analyst at Prime Executions Inc., said in a telephone interview from New York. “The policy situation in my mind can only improve. How much worse can it really get?”
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 Carlos Caminada
By Daryna Krasnolutska, Kateryna Choursina and Anton Doroshev May 13, 2014 1:30 AM GMT+0700 713 Comments Email Print
Rebels in eastern Ukraine said they’re seeking to join Russia after disputed referendums yesterday as the government in Kiev was handed a deadline to pay for Russian gas to prevent supplies being cut off.
The self-styled Donetsk People’s Republic declared itself a sovereign state today after saying 90 percent of voters backed breaking away from Ukraine yesterday. Separatists in neighboring Luhansk announced a similar move. Russia’s state-controlled gas monopoly, OAO Gazprom (OGZD), said Ukraine must pay for next month’s supplies by June 2 or face a shutoff the next day.
The moves ratchet up tensions in eastern Ukraine, where the government in Kiev and its U.S. and European allies accuse Russian President Vladimir Putin of stoking unrest that’s threatening to rip the former Soviet republic apart in the run-up to a May 25 presidential election. The events of the past two days in eastern Ukraine echo those that preceded Putin’s annexation of the Crimean peninsula in March.
“We have chosen a way of independence from the outrage and the blood-stained dictatorship, fascism and nationalism of Kiev’s junta,” Russia’s state-run RIA Novosti news service cited Valery Bolotov, the governor of the self-proclaimed Luhansk People’s Republic, as saying today. “We chose the way of freedom.”
In Brussels, the European Union imposed sanctions on companies in Crimea for the first time and threatened more measures, along with the U.S., to target Russian industries.
Even so, Russian stocks advanced on bets the latest penalties won’t hurt the economy. The Micex Index (INDEXCF) gained 0.3 percent to 1,375.31. while the ruble strengthened 0.4 percent to 35.1005 per dollar. Ukraine’s hryvnia fell 1.1 percent, extending this year’s slide to 30 percent.
“The preliminary results of the vote convincingly show the real sentiment of citizens in the Donetsk and Luhansk regions for the right to independently make decisions over questions vital to them,” the Russian Foreign Ministry said on its website. “We expect the Kiev authorities to take real action, not make general declarations of intent, and hold urgent and effective meetings with representatives of the southeast of Ukraine that would lead to a stabilization of the situation.”
The U.S. and the EU deem the votes illegal and Ukraine’s government denounced them.
The referendums were “inspired by Russia’s leaders to completely destabilize Ukraine, undermine presidential elections and overthrow Ukraine’s authorities,” Ukraine’s acting president, Oleksandr Turchynov, said on parliament’s website. “This propagandistic farce will have no legal impact apart from criminal responsibility for those who organized it.”
The balloting was “illegal under Ukrainian law” and a “transparent attempt” to create further division, White House spokesman Jay Carney told reporters in Washington. He said there were cases of pre-marked ballots and children voting and that the U.S. was “disappointed” Russia didn’t use its influence to prevent the referendums from taking place.
Igor Girkin, known as Strelok or Shooter, who was named today as the head of the rebel forces in the Donetsk region, ordered all Ukrainian government troops and police to submit to his command or leave the region within 48 hours. The rebels will start an “anti-terrorist operation” against the Ukrainian military if the deadline is ignored, the head of the separatist group, Denis Pushilin, said by phone.
Russia is moving Ukraine to prepayments for gas because it owes $3.5 billion for fuel delivered in 2013 and through April this year, Chief Executive Officer Alexey Miller said at a meeting with Russian Prime Minister Dmitry Medvedev. Gazprom will send Ukraine the bill tomorrow.
Ukraine, which depends on Russia for half of its gas consumption, has the opportunity to pay as it received the first $3.2 billion of an international aid package last week, Medvedev said.
“It’s time to stop coddling them,” he said. “I think that all possible ways to settle this situation -- one way or another -- were undertaken by Gazprom.”
Stopping shipments to Ukraine may have a knock-on impact on the rest of Europe because about 15 percent of the region’s gas supply travels through the country’s Soviet-era pipelines.
EU foreign ministers added two expropriated companies in Crimea and 13 people to its list of those sanctioned with asset freezes and travel bans. The names will be released later today.
They also vowed to accelerate preparations for broad economic sanctions against Russia should it disrupt Ukraine’s presidential election, pressing the Kremlin to back down in the biggest standoff since the Cold War. NATO says there are about 40,000 Russian troops near the Ukrainian border.
“Preparatory work is under way,” EU President Herman Van Rompuy told a news conference in Kiev this evening. “I want Ukraine to remain strong and united.”
“Separatist referendums in the east of Ukraine are a brutal mockery of democracy and are all part of the plan to split the Ukrainian state,” Polish Prime Minister Donald Tusk told officials in Warsaw. “We are dealing with a sophisticated and so far unheard-of form of aggression and these referendums have nothing to do with democracy.”
A study by the Pew Research Center found that 70 percent of respondents in eastern Ukraine, where Russian is widely spoken, and 93 percent in the west wanted the country to remain unified within current borders.
Further sanctions against Russia risk undermining the economies of some EU member nations. France’s government said today it will deliver Mistral helicopter carriers to Russia as planned, rejecting requests from its European and U.S. allies to cancel the sale to punish Russia.
Ukrainian Prime Minister Arseniy Yatsenyuk has said national reconciliation talks will start May 14, though it’s unclear who’ll take part. Two months of clashes in the Donetsk region have left 40 people dead and 245 hospitalized, the Unian news service reported today, citing the governor’s office.
To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net; Anton Doroshev in Moscow at adoroshev@bloomberg.net
To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Eddie Buckle
By Anton Doroshev and Elena Mazneva May 13, 2014 12:40 AM GMT+0700 22 Comments Email Print
Russia threatened to stop supplying gas to Ukraine on June 3 unless the country starts paying for the fuel in advance.
Tomorrow, OAO Gazprom (GAZP) will send Ukraine a bill for June, Chief Executive Officer Alexey Miller said today at a meeting with Russian Prime Minister Dmitry Medvedev. If the bill isn’t paid by June 2 the neighboring country won’t receive any Russian gas from 10 a.m. the next morning, Miller said.
“It’s time to stop coddling them, notify them tomorrow and move to pre-payments,” Medvedev said during the meeting. “I think that all possible ways to settle this situation using other measures were undertaken by Gazprom.”
The deadline marks an escalation in the dispute over energy supplies that’s an element in the broader struggle for Russian influence over Ukraine. Stopping shipments to Ukraine may have an impact on the rest of Europe because about 15 percent of the region’s gas travels through the country’s Soviet-era pipeline system.
Ukraine, which depends on Russia for half of its gas consumption, has been seeking to renegotiate a 2009 gas contract since before unrest began in Ukraine’s capital in November.
Russia is moving Ukraine to prepayments because it owes $3.51 billion for fuel delivered in 2013 and through April this year, Miller said today.
Paid Partly
If the bill for June is paid partly, Ukraine will receive what it has paid for, he said.
The neighboring country hasn’t paid for 9.42 billion cubic meters of Russian fuel, which is equivalent to Poland’s annual consumption from Gazprom, Miller said.
Ukraine has the opportunity to pay as it received the first $3.2 billion of the International Monetary Fund aid package last week, Medvedev said today. While the country is able to start paying off the debt to show its desire to settle the problem, Russia doesn’t see any willingness, he said.
Ukraine refuses to prepay for Russian gas and is ready to settle the debt if Gazprom returns an “honest, market price” for gas, Ukrainian Energy Minister Yuri Prodan said last week.
Gazprom raised the price it charges Ukraine for gas by 81 percent in April, to $485 per 1,000 cubic meters, more than any EU member pays.
NAK Naftogaz Ukrainy will seek international arbitration on May 28 if talks with Gazprom fail, according to the Ukrainian company.
Russia will consider a compromise on natural gas prices with Ukraine only after its neighbor pays its debt for previous supplies, Russian Deputy Energy Minister Anatoly Yanovsky told reporters earlier today in Moscow.
Moving Ukraine to prepayments will probably lead to problems supplying Ukraine, Yanovsky said. That in turn may create risks for transit and EU countries may suffer during the winter unless Ukraine has filled its underground storage facilities, he said.
A June gas disruption “could suit Russia, as it would be immediately after the Ukrainian presidential elections,” Energy Aspects Ltd., a research company in London, said today in an e-mailed statement. Though, this could be quickly resolved through the IMF aid to Ukraine, “and as such, the impact on the market is likely to be minimal,” it said.
Gazprom shares closed almost unchanged at 135.71 rubles Moscow after climbing as much as 1.6 percent before Miller’s and Medvedev’s statements on Ukraine.
U.K. next-month natural gas, a European benchmark, erased an earlier decline of as much as 2.4 percent to trade little changed at 46.35 pence a therm ($7.82 a million British thermal units) at 4:10 p.m. on the ICE Futures Europe exchange in London.
To contact the reporters on this story: Anton Doroshev in Moscow at adoroshev@bloomberg.net; Elena Mazneva in Moscow at emazneva@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Randall Hackley
London (Platts)--12May2014/911 am EDT/1311 GMT
Nigerian crude prices are starting to fall as the remaining 15-20 Nigerian June cargoes struggle to sell due to weakening refining margins, trading sources said Monday.
The remaining unsold cargoes are looking to find a home in Europe, although a fall in regional sweet crudes, particularly in the Mediterranean, is starting to put pressure on light sweet crudes in Nigeria.
Sources said there were still 15-20 June loading cargoes available, and prices were expected to trend lower if the remaining barrels failed to clear soon. Some spot activity was heard towards the end of last week.
Qua Iboe was assessed at Dated Brent plus $2.65/barrel Friday. But on Monday, traders were pegging it below $2.60/b.
"Twenty million Nigerian barrels remain available," a trader said.
Sources said there were still four to five Qua Iboe June stems unsold in Nigeria. But they added that these cargoes were expected to be kept by the equity holders for their own system.
"There are still plenty of cargoes on the market, and the offers are still quite high. The grades like Agbami and Akpo sold well, but some grades are struggling. There are still quite a few Brass River cargoes, and the spread between Qua Iboe and the other grades seems to be widening," a second trader said.
Indian tender demand for June has also been low, which put some pressure on Nigerian crudes.
State-owned Indian refiners bought just 8.35 million barrels of West African crudes through tenders for loading in June, compared with 13.975 million barrels for May, a fall of 40%, according to Platts data.
The main reason for the drop was that India's biggest buyer of West African crude, Indian Oil Corp., issued only one June-loading tender compared with three May-loading tenders.
"[Sentiment] is bearish...I would think the hope of moving barrels East is dead due to the low Middle Eastern OSPs, and I think IOC looking to July confirms that...NWE margins are poor," a third trader said.
--Eklavya Gupte, eklavya.gupte@platts.com
--Edited by Peter Lucas, peter.lucas@platts.com
By Andy Tully | Mon, 12 May 2014 21:41 | 0
U.S. President Barack Obama, frustrated by Congress’ unwillingness to work with him, has proposed a partnership between the White House and industry in his effort to improve energy efficiency.
Obama visited a Wal-Mart in Mountain View, California on May 9, where he said, “There are cost-effective ways to tackle climate change and create jobs at the same time."
The president announced several partnerships with industry, as well as executive actions, to lessen emissions of greenhouse gases. Obama has had virtually no success in addressing these problems through legislation, given his fellow Democrats’ slim majority in the Senate and the Republicans’ control of the House.
Republicans argue that human involvement in climate change is not proven, and that any effort to reduce these emissions would kill jobs. Obama countered that acting now “will be good for the economy long-term, and if we don’t, that will be bad for the economy.”
The president said jobs in the U.S. solar-power industry increased by 20 percent in 2013, noting that such jobs cannot be outsourced to foreign countries. And he pointed to the Department of Energy’s expansion of training programs for the solar-power industry at community colleges around the country targeting as many as 50,000 students.
Obama said he had been reaching out to private businesses in hopes of persuading them to reduce carbon emissions. The same day, the White House announced that 10 companies were joining the president. Besides Wal-Mart, they include industry giants such as Ikea, Google, Yahoo! and Apple.
The White House chose a Wal-Mart store for Obama’s announcement because the company plans to double the number of solar-powered projects at its stores in the United States and Puerto Rico by 2020.
That choice is interesting because many of the president’s supporters, especially in the labor movement, accuse Wal-Mart of prospering at the expense of its employees, whom they say are paid too little. The company also has refused to take a stand on Obama’s effort to increase the federal minimum wage.
Meanwhile, Bloomberg News reports that Wal-Mart’s political action committee, or PAC, has made more than $500,000 worth of political contributions to both major political parties so far this year, with slightly more than half going to Republicans.
By. Andy Tully of Oilprice.com
By Andy Tully | Mon, 12 May 2014 21:46 | 0
A senior Russian energy official said May 12 that Moscow would cease negotiations with Ukraine on natural gas deliveries until Kiev pays the Russian gas monopoly Gazprom what it already owes on last month’s deliveries.
Russia also said Ukraine must pay in advance for future gas deliveries by June 1.
“To continue talks, the debt should be paid," Deputy Russian Energy Minister Anatoly Yanovsky told reporters in Moscow.
The Russian government, which owns a slight majority of Gazprom, says Ukraine has not paid the $3.51 billion it owes for gas received in April. Russian Energy Minister Alexander Novak issued a statement on May 8 saying that under Gazprom’s contract with Ukraine’s gas company, Naftogaz, “failure of obligations automatically leads to a switch to prepayment for gas deliveries.”
European nations rely on Gazprom for about 30 percent of their gas, and about half of that mount is shipped through Ukraine.
The negotiations between Kiev and Moscow involve Ukraine’s effort to amend a contract, signed in 2009, that required Kiev to buy a specific volume of gas at a cost of $485 per 1,000 cubic meters, the highest rate paid by any European client of Gazprom.
Last year, Viktor Yanukovich, then Ukraine’s president, decided to abandon a trade treaty with the European Union that was opposed by Moscow. The Kremlin then dropped Ukraine’s cost to $286.50 for the same volume of gas.
Despite the dispute, Gazprom said there has been no interruption in the gas supply to Europe.
Yanovsky also said Monday that Gazprom is close to agreement to supply gas to China.
“We hope that the negotiations will be completed as scheduled,” Yanovsky said. Gazprom and China have been negotiating a contract for more than a decade. “The contract is, I would say, 98 percent ready,” he said.
Yanovsky’s announcement comes about a week before Russian President Vladimir Putin is to visit China.
By Andy Tully of Oilprice.com
By Daniel J. Graeber | Mon, 12 May 2014 22:09 | 0
With a modest hurricane season forecast for 2014, U.S. drivers are unlikely to face weather-related gas price increases, but foreign crises or domestic refinery problems could still impact prices.
That’s according to the American Automobile Association (AAA), which reported a national current average price for a gallon of regular unleaded gasoline at $3.65, about 2 cents lower than last week.
Less demand for gasoline during an unusually harsh winter has kept prices relatively low so far this year. That, and the glut of oil in North America, provided some level of protection for American drivers this spring.
The late spring period, when refineries shift from a winter to a summer blend of gasoline, usually causes some fluctuation for gasoline prices. AAA spokesperson Michael Green told Oilprice.com that after a short lull, gas prices should peak in July because of strong summer demand.
"If everything runs smoothly, the national average could drop 10-20 cents per gallon through late June or early July on rising [oil] supplies," Green said.
U.S. hurricanes usually hit in late summer, just as peak driving season is ending. In the past, major storms have caused huge swings in retail gasoline prices; when Hurricane Katrina struck in 2005, the national average price rose 46 cents in one week because of the closure or damage to Gulf Coast refineries.
But with the 2014 Atlantic hurricane season expected to be weak, the likeliest factors to influence gas prices will be overseas crises or refinery issues, Green said.
Green pointed to the democratic uprisings throughout the Arab world in 2011 -- the so-called Arab Spring period – that sent the national average price to nearly $4 per gallon. Though hard to predict, he said, political crises in oil-rich nations like Libya or Russia can cause a ripple effect in the global oil market that eventually impacts American drivers.
At the refinery level, Green said that section of the oil sector deals with volatile chemicals and high temperatures that can cause serious operational issues without warning if things go wrong. A simple power outage, like the October 2012 failure at Exxon Mobil's refinery in Torrance, Calif., can wreak havoc on gasoline prices at the regional level.
By Daniel J. Graeber of Oilprice.com
By John Daly | Mon, 12 May 2014 22:15 | 0
The Russian-Ukrainian dispute over Crimea has had repercussions in the European energy sector, and as talk grows of more economic sanctions, nations dependent on Russian energy imports are nervously contemplating the potential consequences and reviewing their options for alternative sources.
In Moscow, state-owned firm Gazprom is doing the same, seeking out alternative future markets should its relations with the EU worsen even further.
Turkey is caught in the middle of this geopolitical tussle.
Russian energy imports play a key role in the Turkish economy; in 2013, Turkey imported 26.61 billion cubic meters of Russian gas via the Western and Blue Stream pipelines. Last year, Turkey imported 98 percent of its natural gas and 93 percent of its oil, using the natural gas to generate 46 percent of its electricity and running up an energy bill of up to $60 billion a year, which is a major drain on the country’s foreign currency reserves. After Germany, Turkey is the second largest European importer of Russian gas.
Turkey's electricity market over the past three decades has more than tripled, to its current generating capacity of 64.612 megawatts of electricity.
According to Russia’s Federal Customs Service, the country’s foreign trade surplus increased 1.6 percent year-on-year in the first quarter of 2014 to $56.1 billion, but Turkey’s trade with Russia, the bulk of which was energy imports, actually declined to $7.9 billion, down 0.9 percent.
Seeing a silver lining in Russia’s rising confrontation with the West, Turkish Energy Minister Taner Y?ld?z told reporters that Ankara has decided to take advantage of the political crisis in Ukraine in order to reduce the price of Russian natural gas imports and will ask Gazprom to consider offering discounts its exports of natural gas to Turkey.
Y?ld?z added that he did not expect political tensions in Ukraine to affect the flow of gas to Turkey through the Western pipeline, which delivers 16 billion cubic meters (bcm) annually of Russia fuel to Turkey.
Turkish Foreign Minister Ahmet Davuto?lu has expressed similar views. Speaking about energy cooperation between Moscow and Ankara, Davuto?lu said, "Relations between Turkey and Russia in the energy sector are not limited to the supply of natural gas, but extend to developing nuclear energy. We are making significant efforts to ensure that all these events (in Ukraine) do not have an adverse impact on our cooperation with Russia."
Moscow is apparently taking such concerns in stride, as Y?ld?z later said that Russia has expressed interest in acquiring or building Turkish gas-fired power plants and intends to propose building a natural gas storage facility in Turkey, with Russian energy officials scouting out possible sites for the facility. Turkey currently has natural gas storage capacities of about 2 bcm and is building an additional 5 bcm of capacity.
Underlining the importance of the Turkish market for Russian natural gas exports is Gazprom Deputy Chairman Alexander Medvedev's upcoming visit to Turkey. Geographic pragmatism and a longstanding business relationship mean that Turkey will sit on the sidelines of any future sanctions talk, and that Gazprom will seek to retain its prominence in Turkey’s domestic natural gas market.
As rivals Azerbaijan and Iran are already supplying natural gas to the Turkish market and hoping to expand their presence there, expect to see Gazprom listen carefully to Turkish concerns and proposals lest Ankara take its business elsewhere.
By John Daly of Oilprice.com
By Ky Krauthamer | Mon, 12 May 2014 22:25 | 0
Poland is the largest European Union member state bordering Russia and, under its current center-right government, has been point man for a group of countries urging the EU to reduce its dependence on Russian energy, even before the Ukrainian crisis sent EU-Russia relations into a deep freeze.
Warsaw also heads a group mainly of former socialist countries that want to water down the European Commission’s climate and energy package, especially the 2020 and 2030 deadlines for deep cuts in CO2 emissions.
Now Polish Prime Minister Donald Tusk has folded these two energy goals into one ambitious plan for an EU “energy union.”
Tusk got the ball rolling with a piece in The Financial Times where he, in effect, called for a U-turn in EU energy policy. Instead of the European Commission’s goal of a decentralized market for gas, he foresees a new EU body to coordinate gas purchases and negotiate a single union-wide price with EU’s biggest gas provider, Russia’s Gazprom.
The plan also calls for the EU to help out member states in the event of a supplier cutting the gas flow, as Gazprom did twice in the past few years because of payment disputes with Ukraine. Currently, Gazprom has separate deals with EU customers, and eastern member states, including Poland, pay some of the highest prices.
Tusk also wants the bloc to co-finance gas infrastructure projects and focus its financial resources on countries most dependent on Gazprom.
Overall, the EU imports about a third of its gas from Russia, and some of the bloc’s eastern members depend entirely on Gazprom deliveries to keep power plants running and homes heated.
Tusk claims this strategy “will return the European project to its roots” – namely, centralized control over key energy and industrial assets, harking back to the EU’s beginnings in the 1950s as the European Coal and Steel Community.
The Tusk plan has so far drawn public support from Hungary, Bulgaria and Lithuania. Initial talks with his French, German and Spanish counterparts have been encouraging, according to analyst Piotr Buras of the European Council on Foreign Relations.
Tusk’s proposal also says, “Europe should make full use of the fossil fuels available, including coal and shale gas,” which happens to be one of Poland’s top energy priorities; Tusk recently declared a crusade on several fronts to prop up the country’s struggling coal industry. Days after workers protested plans to scale down production at the country’s largest coal miner, Kompania Weglowa (KW), he pledged state support for the industry, possibly including “state financing and organization,” Platts reported. He also asked state-controlled power companies to buy coal even when other fuels are cheaper.
Overproduction and aging infrastructure are chronic problems for KW and other Polish miners. KW, the EU’s biggest coal producer, employs 55,000 people but with global demand slack, the company is saddled with 5 million tons of unsold coal. CEO Miroslaw Taras recently said the company will soon announce its plan to restore liquidity and return to profitability.
Coal is by far the most important part of Poland’s energy arsenal. The vast beds of black coal and lignite in the southern Silesian region helped fuel Germany’s rise to power before the area was annexed by Poland after World War II. Coal-fired plants generate 90 percent of Poland’s electricity – and also contribute to making the air in the southern industrial belt some of the dirtiest in Europe.
After meeting with Tusk in early May, EU energy commissioner Guenther Oettinger signed on to the idea of a uniform EU-wide price for Russian gas. The European Commission as a whole, however, is extremely unlikely to get behind Tusk’s call for greater reliance on coal and shale gas, nor the implied weakening of the EU climate and energy package.
By 2020, all EU members must reduce greenhouse gas emissions by 20 percent from 1990 levels and increase the share of renewable energy to help meet that overall target of 20 percent, as well as boosting energy efficiency.
With Poland some way from meeting its 2020 renewables target of 15 percent, some analysts suggest Tusk may be angling for a compromise deal that would allow countries with abundant supplies of “dirty” fuels some leeway in adopting the package.
By Ky Krauthamer of Oilprice.com
BY MICHAEL EBOH
Nigeria lost $828.816 million, about N132.611 billion in one month, as the country’s crude oil production dropped by 7.44 million barrels in February 2014.
According to data obtained from the Central Bank of Nigeria, CBN, Economic Report for February 2014, Nigeria’s crude oil production, including condensates and natural gas liquids, was estimated at an average of 1.86 million barrels per day (mbd) or 52.08 million barrels in February.
This is compared to production of 1.92mbd or 59.52 million barrels produced in January 2014, representing a decline of 7.44 million barrels for the month, 0.06mbd or 3.1 per cent.
Specifically, the CBN said, “At an estimated average of US$111.40 per barrel, the price of Nigeria’s reference crude, the Bonny Light (37º API), rose by 1.1 per cent above the level in the preceding month.
“The average prices of other competing crudes, namely the West Texas Intermediate at US$95.00 per barrel; the U.K Brent at US$109.77 per barrel; and the Forcados at US$112.26 per barrel also showed similar trend as the Bonny Light.”
The report further stated that deliveries to the refineries for domestic consumption remained at 0.45mbd or 12.6 million barrels during the month under review.
Also, Nigeria lost $678.426 million, as crude oil export for the month of February stood at 39.48 million barrels, dropping by 13.36 per cent or 6.09 million.
This is an average of 1.41 million barrels of crude oil per day, compared to an average of 1.47 million barrels per day in January,
Giving a review of the economy in the first quarter of 2014, analysts at Cowry Asset Management Limited, said the Nigerian economy faced a hoard of challenges, ranging from limited oil output due to pipeline vandalism and decreased production activities and low power generation due to gas shortage, among others.
On the outlook for the second quarter of the year, the analysts said, “Supply of foreign exchange is expected to come mainly from the central Bank of Nigeria, as current trend in supply from the oil majors’ monthly sales to commercial banks suggests a further reduction.
“However, we expect draw down on the external reserves due to import demand and payment for refined petroleum products, which were been delayed due to the late payment of subsidies and release of Q2 import allocation to oil traders.
“Inflation is expected to be driven by both external and internal factors in 2014. Expected near to long term increase in crude oil supply from the re-opening of Libya’s export terminals, a slowdown in crude oil demand from Asia and increasingly growing importance of shale in the economies of former traditional importers of Nigerian crude oil may result in lower oil revenue for Nigeria and decrease in its external reserves.
“This may limit Nigeria’s capacity to manage the exchange rate, resulting in pressure on the local currency and by extension, generate pressure on Inflation.”
Also, analysts at Asset and Resource Management (ARM) Limited, in their economic update for April 2014, disclosed that major disruptions along the Bonny and Forcados pipelines and its negative impact on crude export will weaken inflows into Nigeria’s foreign exchange reserves.
They said, “Oil prices are likely to remain supported at current levels by the continuing geo-political issues surrounding Russia and Ukraine and reports of fresh political unrest in Libya.
“Nonetheless, the sizable declines in oil production and the May loading schedules, suggest domestic exports are likely to remain pressured. On the flip side, following the Quarter-on-Quarter contraction in recently released NNPC fuel import allocations for the second quarter, imports are likely to trend lower, driven by oil imports.
“As in recent years, the latter decline could work to limit the impact of the lower exports on trade surplus over second quarter 2014.”
Up 160,000 Barrels Per Day from March, Led by Iraq, Angola and Saudi Arabia
London - May 12, 2014
Oil production from the Organization of the Petroleum Exporting Countries (OPEC) totaled 29.72 million barrels per day (b/d) in April, up 160,000 b/d from March, led by increases in Iraq, Angola and Saudi Arabia, according to the latest Platts survey of OPEC and oil industry officials and analysts.
“There are a few striking numbers when you look at the country totals,” said John Kingston, Platts global director of news. “First, when there were the first signs of a loosening of Iranian sanctions, the expectation was that there might be a surge in Iranian output. But the country’s output has barely budged. Secondly, every so often there’s news out of Libya that indicates the country might be headed toward reversal of its depressed production. But April output is the lowest it’s been all year. It’s these sorts of numbers that help to keep world prices above $100/barrel.”
Iraq, despite the continued suspension of pipeline flows from the northern fields to Ceyhan in Turkey, increased output by 100,000 b/d to 3.25 million b/d. The country set a record of 2.509 million b/d for southern exports in April, which averaged less than 2.4 million b/d in March. Despite the coming on stream of new production in recent months, including West Qurna 2 in late March, technical constraints have limited the volume of oil available for export.
Saudi Arabia boosted output by 50,000 b/d to 9.65 million b/d in April. A Gulf source cited slightly higher requirements from customers. Within the kingdom, the 120,000 b/d Riyadh refinery closed down on April 15 for 45 days of maintenance.
Angolan output also rose by 50,000 b/d to average 1.65 million b/d.
Libyan output drifted down to 210,000 b/d in April from 220,000 b/d in March despite an agreement early in the month between Tripoli and rebels in the east of the country that saw the ports of Marsa al-Hariga and Zueitina open for the first time in nine months.
Operations had been expected to restart at Es Sider and Ras Lanuf as part of this pact but these major ports remain closed. The country's oil sector has been under siege since May 2013, with production and exports disrupted intermittently by strikes, protests and port blockades. Among major oil fields shut in are Sharara, Elephant and Wafa.
In Nigeria, where Forcados remains under force majeure, production fell by 60,000 b/d to 1.9 million b/d.
Iranian output was estimated at 2.85 million b/d in April, unchanged from March. The country remains under oil and financial sanctions that have restricted Tehran's access to international oil markets, with Europe off limits and exports moving to just six countries-- China, India, Japan, South Korea, Turkey and Taiwan.
The April total keeps OPEC output within the group's 30 million b/d ceiling, in place since January 2012. There are no individual country quotas. Ministers will meet in Vienna on June 11, but there are no indications at present that a policy change is likely. Saudi Arabian oil minister Ali Naimi said on Monday during a visit to South Korea that he saw no need for OPEC to change output.
Western Europe will continue to rely on imported Russian gas into the 2020s as mature offshore provinces struggle for growth, while large-scale shale gas extraction looks increasingly unlikely in the medium term. Following Moscow’s intervention in Ukraine and the resulting strained diplomatic ties with the West, it remains to be seen if North Sea production can rally to support any drop in gas flow from Russia.
With many IOCs planning investment into UK offshore fields through enhanced oil recovery (EOR), deeper water plays and downstream infrastructure upgrades, our Development Drilling & Production Forecast predicts that production will rally slightly to around 1.75 million bpd by 2017, requiring a maintaining of the recent 6% jump in well completions. The necessary high levels of expenditure are unlikely to be sustained in the long-term due to the UK’s offshore maturity; therefore, DW expect a resumption of decline towards the end of the decade. Hope for any long-term growth rests with much-needed reform of the UK’s offshore regulator, which must swiftly adapt to the shift towards production from smaller fields.
On the other side of the North Sea, Statoil are to attempt improved recovery from brownfield projects offshore Norway. Along with the start of projects in the large Johan Sverdrup and Goliat fields, this will see the number of well completions sustained at around 200 a year beyond 2020. DW expect these projects will see Norway break from the mould of other mature Western European producers and sustain production into the next decade. It must be noted, however, that both of these fields are currently subject to delay. Johan Sverdrup is facing electrification issues whilst ENI’s Goliat FPSO is still to be completed and may take millions of man-hours more.
Potential risks to future growth include rising costs and the potential (albeit currently small, and in the longer term) competition from shale gas production. A recent victim of rising costs was the subsea compression project at Ormen Lange, despite positive results during testing and the backing of Statoil and ExxonMobil. Recent onshore legislation changes in the UK now allows for drilling and pipeline construction under private property. This, along with growing encouragement from Westminster of E&P companies, shows that shale gas extraction could be possible on a larger scale towards the end of the decade.
Matt Cook, Douglas-Westwood London
Adapted from a press release by David Bizley
Published on 12/05/2014
