Pioneer plans monthly US condensate exports through year-end
Pioneer Natural Resources plans monthly exports of US condensate through the end of the year, the company said Monday.
“Our first cargo was shipped in late July and monthly shipments are expected through the end of this year at prices higher than domestic condensate sales,” said CEO Scott Sheffield, adding the demand is coming from Asian petrochemical companies in particular.
Pioneer and Enterprise Products Partners both recently received US Commerce Department approval to export processed condensate without a license, which the Obama administration stressed did not mark a change in US crude oil export policy.
Commerce determined that the condensate the companies planned to export was not crude oil, and not subject to US export restrictions, since it was processed through a distillation tower.
Several companies, including producers, midstream firms, trading houses and global buyers, are awaiting approval from Commerce for similar exports, according to sources. Other companies are also looking to export processed condensate without explicit Commerce approval, according to lawyers for Pioneer and Enterprise.
China buying more Iranian oil in 2014 to make up for 2013 drop
Iran’s oil exports to China have increased in 2014 to make up for a drop in volumes in 2013, a top Iranian oil official said in remarks published Sunday.
Mohsen Ghamsari, director for international affairs at the National Iranian Oil Company, said one of China’s refiners reduced its purchases from Iran in 2013 but would increase volumes this year.
“One of the Chinese refiners had cut oil exports from Iran last year. With the agreements made in the current year, it was agreed to compensate this oil exports decrease and therefore the volume of oil sales to China has increased in the current year,” Ghamsari said, quoted by the semiofficial Mehr news agency.
Ghamsari said that despite the higher volumes moving to China, Iran’s total crude exports were likely to remain around the 1 million b/d level over the next few months because Tehran’s customers were still vulnerable to US financial sanctions.
An interim agreement between Iran and six world powers on the nuclear issue, initially for six months, has been extended beyond the July 20 expiry to November 24 to give negotiators more time to reach a comprehensive deal. The interim agreement maintains the core oil and financial sanctions imposed by the European Union and United States that have slashed the country’s oil exports by more than 1 million b/d since coming into force in mid-2012.
Washington agreed to grant exemptions to Iran’s main oil customers — including China, India, Japan, and South Korea — from the financial sanctions if those countries reduced their imports of Iranian crude.
Ghamsari said Iran was selling oil under long-term contracts and rarely on a spot basis. He also said bank transfer difficulties were preventing former customers Sri Lanka and South Africa from buying Iranian oil. “These countries haven’t been able to buy crude oil from Iran so far because of the problems in money transfer,” he said.
He was referring to the banking restrictions that have cut Tehran’s access to the bulk of its overseas oil earnings. Separately, in a report published Monday by oil ministry news service Shana, Ghamsari called on the Iranian private sector to help with this particular problem. “Iran is under a lot of pressure with regard to reception of the oil money. Due to the banking sanctions, we face many problems. Therefore, the Central Bank and banking officials should offer ways to transfer the oil money,” he said.
Panama Canal Authority, expansion consortium sign new agreement
The Panama Canal Authority (ACP) and the multinational consortium building the Panama Canal expansion have reached an agreement allowing the ongoing project to continue until completion, the parties said in a statement.
This incorporates a tentative agreement signed in March into the original contract between the Grupo Unidos por el Canal de Panama (GUPC) construction consortium and the ACP after several months of disputes over cost overruns, which included a series of worker strikes putting in jeopardy the completion of the expansion.
“What remains now is to continue working with the commitment to complete the expansion, which is currently at a 78% progress,” ACP administrator Jorge Quijano said in a Friday statement.
The original completion date for the $5.3 billion expansion project was October 2014 but the latest estimate is for a December 2015 completion, with operations starting in January 2016. The parties are in the eighth year of a project to add a third set of locks to the Panama Canal, which crosses a 80-km (50-mile) isthmus connecting the Pacific Ocean with the Atlantic.
The expansion is needed to accommodate newer, larger ships that are currently too large to fit in the canal. The current locks can fit vessels that carry about 5,000 TEUs and the expansion would allow the canal to accommodate ships of up to 13,000 TEUs. (A TEU, or twenty-foot equivalent unit, is a unit of measurement to describe a container and how many a vessel can carry.)
The GUPC consortium is comprised of four main contractors: Spain’s Sacyr Vallehermoso, Italy’s Impregilo, Belgium’s Jan de Nul Group and Panama’s Constructora Urbana.
Dated Brent at 13-month low as supplies outweigh geopolitics
The physical North Sea Dated Brent benchmark has hit a 13-month low amid competition from West African grades as well as reduced risk appetite in the futures market, leading to pressure on the flat price despite geopolitical concerns, traders said.
Dated Brent was assessed Friday down $1.385/barrel to $103.04/b, the lowest since June 2013, Platts data showed.
The current weak market for North Sea crude has coincided with summer maintenance at the UK’s Buzzard field which, in previous years, has been a support factor for the market as it sharply reduces output of Forties Blend, to which Buzzard is the main contributor.
Limited crude demand in Europe in the face of unreliable refining margins has also removed support for prices. “Moderate demand met with quite high non-OECD stocks, refiners are taking a more tentative stance,” said one market source.
Mediterranean light sweet crudes have also felt pressure from West Africa. Azerbaijan’s Azeri Light was holding between Dated Brent plus $1.70-1.90/b, with more than half a dozen cargoes still left from the August loading program, behind the grade’s typical trading cycle, sources said.
Azeri Light was assessed at Dated Brent plus $1.88/b Friday, its lowest since May 2013. The broad availability of crude grades competing at the refinery gate has outweighed supply-side risks from political strife, analysts said, although some thought these risks had been underplayed.
“The oil market has settled into a dangerous state of complacency, as the marked contango in the Brent forward curve suggests,” Commerzbank analysts said in a research note. “This also increases the risk of a noticeable price rise if the news situation prompts investors to rethink. In the Kurdish north of Iraq, extremists from the Sunni terrorist group Islamic State (formerly ISIS) have taken control of two smallish oilfields, a number of cities and an important water reservoir. Fighting is also continuing in Libya between rival groups over the airport in the capital Tripoli.”
By Paul Richardson and Hans Nichols Aug 4, 2014 11:40 PM GMT+0700
Somalia expects to complete an assessment of its oil and gas potential this year as security gains in the battle against al-Qaeda militants enable foreign investors to return, President Hassan Sheikh Mohamoud said.
Seismic studies are being conducted onshore and off the coast of the Horn of Africa nation. Companies including Royal Dutch Shell Plc (RDSA), Exxon Mobil Corp. (XOM) and BP Plc (BP/) are in talks with the government about returning to the country for the first time since war erupted in 1991, Sheikh Mohamoud said.
“We are renegotiating with them” on issues including royalty payments and production-sharing agreements, he said in an interview today in Washington at the U.S.-Africa Leaders Summit. “We’re expecting that soon there will be very good activities that we’ll start.”
Somalia is trying to attract investors to help rebuild its economy after African Union-backed government forces gained control of parts of its southern region that had fallen under the control of al-Shabaab. The Islamist-militant group has waged an insurgency against the government for the past seven years as it seeks to create an Islamic state.
While Somalia has no proven oil reserves, drillers are betting the country has a geology similar to that of Yemen, which lies across the Gulf of Aden and has 2.7 billion barrels of proven oil reserves.
Somalia’s oil deposits may amount to as much as 110 billion barrels, according to a June report published by the Mogadishu-based Heritage Institute for Policy Studies. Saudi Arabia, the world’s biggest oil exporter, has 266 billion barrels of proven reserves, BP data shows.
Drafting Laws
Soma Oil and Gas, funded by Russian billionaire Alexander Djaparidze, is carrying out a seismic study of the country. A licensing round may be held next year, Abdullahi Haider, a federal government adviser, said in March.
Somalia is seeking technical assistance from its international partners to help draft laws that will regulate the natural-resources industries and determine how revenue is shared among regional governments, Sheikh Mohamoud said.
The country also plans to exploit its mineral resources, he said. Somalia has deposits of niobium and tantalum, and may contain reserves of copper and gold, according to the U.S. Geological Survey.
Gains by the military have liberated large parts of the south of Somalia, though al-Shabaab still controls parts of the center of the country, Sheikh Mohamoud said. More than half of the 25 districts in Somalia targeted by African Union-backed government forces have been recaptured from al-Shabaab, while the remainder will be retaken by December, he said.
Shrinking Control
“The geographical control of al-Shabaab is shrinking right now,” Sheikh Mohamoud said. By the end of the year, “maybe they will still remain in very remote areas and the forces will go after them.”
The African Union has more than 22,000 personnel from countries including Kenya, Uganda, Djibouti and Sierra Leone. Kenyan President Uhuru Kenyatta said in an interview on Aug. 2 that additional forces may be needed to eradicate al-Shabaab from central Somalia.
While he’s in Washington, Sheikh Mohamoud said he will hold talks with officials on issues including building the capacity of Somalia’s army and helping develop its police and intelligence capabilities. Once al-Shabaab has been removed from the country, the Somali army needs to be able to exercise its authority, he said.
Sheikh Mohamoud said he plans to highlight the military gains as well as the country’s establishment of laws that promote business to help draw investors, he said.
“Somalia is open for business,” he said.
To contact the reporters on this story: Paul Richardson in Nairobi at pmrichardson@bloomberg.net; Hans Nichols in Washington at hnichols2@bloomberg.net
To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net Simon Casey, Michael Shepard
Oil Bears Bet Right as Futures Retreat to Six-Month Low
By Moming Zhou Aug 5, 2014 1:43 AM GMT+0700
Oil speculators bet right on prices after a fire at a refinery supplied by the biggest U.S. crude hub curbed demand and drove futures to a six-month low.
Hedge funds and other money managers trimmed their net-long position again in the week through July 29, extending the drop from this year’s peak in June to 22 percent, U.S. Commodity Futures Trading Commission data show.
West Texas Intermediate crude fell 6.8 percent in July, the most in more than two years. CVR Energy Inc. (CVI) shut the Coffeyville refinery in Kansas after a fire July 29, reducing purchases from Cushing, Oklahoma, the delivery point for New York futures. Refiners cut back operating rates as gasoline demand dropped and fuel stockpiles increased.
“Coffeyville strikes right at the heart of Cushing and it’s going to have an outsized impact on Cushing inventories,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, by phone Aug. 1. “It’s pushing WTI prices lower and may continue to do so. The demand outlook is building pressure on prices.”
Oil futures fell $3.45, or 3.3 percent, to $100.97 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. Prices settled at $97.88 on Aug. 1, the lowest close since Feb. 6. The contract climbed 41 cents, or 0.4 percent, to end trading at $98.29 today.
Four Weeks
The 115,000 barrel-a-day Coffeyville refinery may be shut for four weeks, Chief Executive Officer Jack Lipinski said July 31 on an earnings call. IIR Energy, an energy information provider based in Sugar Land, Texas, said July 29 that some units at the plant would restart within 72 hours.
Inventories at Cushing are near a six-year low and started declining in January after the southern leg of TransCanada Corp. (TRP)’s Keystone XL pipeline began moving oil from the hub to Gulf refineries. Supplies dropped to 17.9 million barrels in the week ended July 25, the lowest level since 2008, a U.S. Energy Information Administration report last week showed.
The Coffeyville shutdown came as U.S. refineries were already cutting back operations amid weak fuel demand and shrinking margins. Refineries operated at 93.5 percent of capacity in the week ended July 25, from 93.8 percent the previous week.
“They were running these refineries at very high levels for very long, and now they are going to cut the rates,” Carl Larry, president of Oil Outlooks & Opinions LLC in Houston, said by phone Aug. 1.
Weaker Demand
Gasoline demand fell to an average of 8.95 million barrels a day in the four weeks ended July 25, the weakest for this time of year since 2012, the EIA report showed. Inventories rose to 218.2 million barrels, the most since March. Consumption of the motor fuel in the U.S. typically peaks during the summer months.
The crack spread, a rough measure of the profit from processing a barrel of oil into gasoline, narrowed to $16.08 a barrel on July 24, the smallest since February. It settled at $17.38 Aug. 1, based on Nymex contracts.
The Bloomberg Commodity Index (BCOM) dropped 5 percent in July, the biggest monthly decline since May 2012. The Standard & Poor’s 500 Index fell 1.5 percent in July, the first monthly decrease since January. The Bloomberg Dollar Index gained 1.9 percent last month to the highest level since February. A stronger dollar can reduce the appeal of commodities traded in the U.S. currency.
Net-long positions on WTI slid 1,375 to 276,741 futures and options combined in the week ended July 29, according to the CFTC. Shorts position increased 2,193, or 7.4 percent, while longs gained 818.
Nymex Gasoline
In other markets, net-long bets on Nymex gasoline dropped 9.8 percent to 30,755. Futures slid 0.98 cent to $2.8709 in the report week. Regular gasoline at the pump, averaged nationwide, fell 0.4 cent to $3.50 a gallon yesterday, the lowest for this time of year since 2010, according to AAA in Heathrow, Florida. The price has dropped 18.4 cents since June 26.
Money managers’ bearish wagers on ultra low sulfur diesel widened to 7,842 contracts from 1,520 a week earlier. The fuel gained 5.25 cents to $2.9067 a gallon in the report week.
Net longs on U.S. natural gas decreased 4.2 percent to 192,550 contracts. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Future.
Nymex natural gas rose 3.6 cents to $3.808 per million British thermal units during the report week.
WTI has tumbled 6.4 percent from its three-week high of $104.59 on July 21. Prices had climbed on concern that the downing of a civilian airplane in Ukraine on July 17 would increase tension with Russia and disrupt supplies from the world’s biggest energy exporter.
“All the fears of a disruption have gone away,” Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut, said by phone Aug. 1. “The market is shedding all the speculative bets.”
To contact the reporter on this story: Moming Zhou in New York at mzhou29@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Charlotte Porter
By Glen Carey, Ladane Nasseri and Zaid Sabah Aug 5, 2014 4:34 AM GMT+0700
Aug 4. (Bloomberg) -- Eurasia Group President Ian Bremmer examines ISIL activities in Iraq with Tom Keene on “Bloomberg Surveillance.” (Source: Bloomberg)
Kurdish security forces clashed with a breakaway al-Qaeda group that’s trying to extend its control in northern Iraq by seizing the country’s largest dam.
Fighting is raging near the Mosul dam, and it is a “no man’s land,” Sheikh Ahmed Al-Simmari, a resident of the nearby city of Rabia’ah, said in a phone interview. The Kurds retook the Rabia’ah border post with Syria and the nearby town of Sinjar from the militants after fierce fighting late yesterday, the Kurdistan Democratic Party, one of the groups that governs the largely autonomous region of Kurdish northern Iraq, said on its website.
Islamic State, which was previously known as Islamic State in Iraq and Levant, has seized territory throughout Iraq and Syria and declared its own self-styled caliphate, highlighting the central government’s inability to ensure security under Prime Minister Nouri al-Maliki. The group this week seized two oil fields and predominantly Kurdish towns in the north, forcing thousands to flee their homes, and has threatened another key dam at Haditha.
Iraq's Brittle Nationhood
The Mosul dam, about 50 kilometers (30 miles) northwest of the city that the militants captured in June, is a major supplier of electricity and water. Germany’s Hochtief AG helped build the dam on the Tigris River in the 1980s. If it collapsed or was sabotaged, it could flood Mosul and surrounding villages.
Energy Wealth
Seizing the dam “would allow the Islamic State to control water systems for the country’s urban areas and farmlands,” Theodore Karasik, director of research at the Institute for Near East and Gulf Military Analysis in Dubai, said in a phone interview. “It puts them in a position to influence politics by tampering with water suppliers. They would probably cut supplies.”
The dam is still under government control, Abdul-Jaleel Sahib, deputy director general of the state-run Commission for Dams, said in a phone interview yesterday.
Islamic State fighters took over the village of Wana, south of the Mosul dam, Hisham al-Brefkani, a member of the provincial council of Nineveh, said yesterday. Kurdish forces were battling late yesterday to regain it, according to the KDP.
The breakaway al-Qaeda group has enriched itself by seizing infrastructure and energy assets as its makes military gains in Iraq and Syria, where it is battling forces loyal to Syrian President Bashar al-Assad.
Haditha Threat
Its fighters have also made attempts to seize the Haditha dam, on the Euphrates river in Anbar province northwest of Baghdad, in the past two months.
While local tribes have succeeded in fighting off dozens of attacks on Haditha, their resources are stretched, Faleh al-Issawi, deputy head of the provincial council of Anbar, said by phone. The Iraqi army’s presence there is “very weak,” and without support the tribes may not be able to defend the town of Haditha or the dam for more than another 25 days, he said.
Islamic State fighters have captured the town of Zummar and the Ain Zala and Batma oilfields, which together have an output of 30,000 barrels per day, in the past few days, according to the state-run Northern Oil Co.
Share prices of explorers of oil in Iraqi Kurdistan region slumped in Oslo and London trading yesterday on the news. DNO International ASA (DNO), which gets most of its output from the Kurdish region, fell 10 percent, the most in three years. Genel Energy Plc (GENL) sank 3.4 percent and Gulf Keystone Petroleum Ltd. (GKP) dropped 1.6 percent.
Before Kurdish forces regained Sinjar, the militant advance displaced as many as 200,000 people, according to the UN Mission in Iraq. Most of the displaced are Yezidi, a Kurdish community whose faith includes features of the ancient Persian religion of Zoroastrianism, and who are viewed as devil-worshippers by some Sunni Muslims.
Elias Khodayda, a 49-year-old resident, said by phone that the Islamists “captured a large number of old and young men, drove them to an unknown destination.”
To contact the reporters on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net; Ladane Nasseri in Dubai at lnasseri@bloomberg.net Zaid Sabah in Washington at zalhamid@bloomberg.net
To contact the editors responsible for this story: Andrew J. Barden at barden@bloomberg.net Ben Holland, Jack Fairweather
Kurdistan Oil Explorers Fall as Militants Seize Oilfields
By Saleha Mohsin and Anna Hirtenstein Aug 5, 2014 2:20 AM GMT+0700
Aug 4. (Bloomberg) -- Eurasia Group President Ian Bremmer examines ISIL activities in Iraq with Tom Keene on “Bloomberg Surveillance.” (Source: Bloomberg)
Oil explorers in Iraq’s Kurdistan region slumped in Oslo and London after Islamic militants seized two oilfields in Northern Iraq.
DNO International ASA (DNO), which gets most of its output from the Kurdish region, fell as much as 11 percent, the biggest drop in more than six months. Genel Energy Plc (GENL) sank as much as 6.6 percent and Gulf Keystone Petroleum Ltd. (GKP) as much as 3.1 percent.
The Ain Zala and Batma oilfields, which together produce about 30,000 barrels a day, are under the control of the Islamic State, a breakaway al-Qaeda group, according to the state-run Northern Oil Co. The Sunni Islamist militants last month occupied the Qayyara oilfield north of Baghdad.
Islamic State, previously known as Islamic State in Iraq and Levant, has seized territory in northern and western Iraq, taking over oil wells and fighting for control of refineries. Fighters continued their advance yesterday, taking control of the village of Wana, south of the Mosul dam, according to Hisham al-Brefkani, a member of the provincial council of Nineveh.
Kurdish fighters known as peshmerga retreated from the village to protect the dam, al-Brefkani, said by phone. He denied reports the reservoir had fallen into the hands of militants.
Sectarian Conflict
“A lot of people were confident that the peshmerga would have no problem dealing with Isis and defending the Kurdish borders,” Brian Gallagher, an oil analyst at Investec Plc in London who follows several explorers in the region, said today in a phone interview. “It was a shock to the market that Isis had a victory and we saw some readjusting this morning.”
DNO, which produces about two-thirds of its oil in Kurdistan, closed 10 percent lower at 18.90 kroner in Oslo. About 16.9 million shares were traded, four times the average daily volume during the past three months. Genel lost 3.4 percent to close at 967 pence in London, while Gulf Keystone slid 1.6 percent to 79 pence.
Genel declined to comment when contacted by Bloomberg News.
The flare ups raise the prospect of a resurgence of sectarian conflict in Iraq as Prime Minister Nouri al-Maliki’s Shiite-led government struggles to control Sunni-majority regions. Iraq is the second-biggest producer in the Organization of Petroleum Exporting Countries.
Increased Risk
DNO, the first foreign company to drill for oil in Iraq after the U.S.-led invasion in 2003, has operations at the Dohuk and Erbil licenses in northern Iraq, as well as at Tawke, its biggest field.
“We continue to conduct operations at all DNO sites throughout Kurdistan within our established security protocols,” Chief Executive Officer Bjoern Dale said in an e-mail. “Needless to say, we’re in regular contact with the authorities and closely monitor developments.”
“One should always be concerned when there’s a war going on but I don’t believe that the Tawke field and the Kurdish heartland is the main target for the Islamists,” Kjetil Bakken, an analyst at Carnegie AS, said today by phone from Oslo. “The fact that ISIS is progressing towards Kurdish areas is creating fear amongst investors.”
The conflict has increased the risk for the “DNO investment case in the short-term,” Swedbank First Securities analyst Teodor Sveen Nilsen said by e-mail. “In an absolute worst case scenario, with no production from DNO’s Iraqi assets, we see 70 percent to 80 percent downside risk to our cash flow and earnings estimates.”
To contact the reporters on this story: Saleha Mohsin in Oslo at smohsin2@bloomberg.net; Anna Hirtenstein in London at ahirtenstein@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alastair Reed, Jim Efstathiou Jr.
Nigeria to offer gas acreages to power sector investors
Lagos (Platts)--4Aug2014/803 am EDT/1203 GMT
Nigeria is considering offering upstream assets with considerable gasdeposits to investors in the country's power sector in a bid to attract muchneeded investment that will boost electricity generation and end chronic powershortages in the West African country, an oil ministry spokesman said Sunday.
Nigeria is home to the world's ninth biggest gas reserves, with about 187Tcf of proven gas with current production estimated at 8.24 Bcf/day of gas.But the power sector continues to grapple with gas supply shortfalls.
"This time, the Ministry of Petroleum Resources, through the Departmentof Petroleum Resources, is looking at the possibility of making availableacreages that are of gas, which can be developed and targeted for owners andoperators of some of the country's independent power plants," the ministryspokesman told Platts.
The DPR plans to auction 31 marginal fields while several oil majors,including Shell, Chevron and Petrobras, are also divesting multiple assetsonshore and in the shallow waters of the Niger Delta, which Nigeria couldtarget for power investors, industry sources said.
This is not the first time Nigeria would deploy the strategy to improveits infrastructure by securing foreign investment in return for promising oiland gas blocks.
In 2006, the government awarded oil concessions tied to downstreamrefinery development to Asian energy companies.
As for the power sector, the government has transferred most of thecountry's power generation and distribution plants to private investors inNovember 2013.
It also wants to sell 10 additional state-owned gas-fired power plants inthe bid to raise electricity generation to 40 GW by 2020 from the current 4GW.
GAS PRICES RAISED
As part of measures to ensure availability of gas supply to the powerplants, the government has increased the domestic gas price to $2.50/1,000Mcf, from $1.50/1,000 Mcf, over the weekend.
Nigerian oil minister Diezani Alison-Madueke, who announced the new gasprice, said the government also approved $0.80/Mcf as transportation costs fornew pipeline capacity, adding that the new prices reflect the current marketvalue, which would now be benchmarked against US inflation annually.
According to Alison-Madueke, gas supply challenges reduced supply to thepower sector to about 750,000 Mcf/d, which could only provide 4 GW ofelectricity as against the government's target of 6 GW.
"It is expected that barring unforeseen developments these interventionswill add at least 370,000 Mcf/d of gas and assure a generation capacity of atleast 5,000 MW within four to five months," Alison-Madueke said.
The new pricing regime --a key demand by investors in the gas supplychain according to the minister -- would help to accelerate the completion ofnew gas projects.
These include the Utorogu field expansion that would add 60,000 Mcf/d,expansion of the Oben gas plant and drilling of new wells to add 100,000Mcf/d, as well as the re-entry of the Odidi field and revamp of its processingplant and flowlines which would deliver up to 40,000 Mcf/d.
--Staff, newsdesk@platts.com
--Edited by Irene Tang, irene.tang@platts.com
Washington (Platts)--4Aug2014/412 pm EDT/2012 GMT
Several companies are seeking to export processed condensate without a ruling from the US Commerce Department, a path they hope will allow them to avoid months of administrative delay and take advantage of price differentials before US condensate floods the global market.
But this path is complicated by the fact that the recent high-profile orders from Commerce, which gave Enterprise Products Partners and Pioneer Natural Resources legal backing to export crude condensate, remain confidential.
Companies could export condensate now if they feel their product fits within the parameters of the Enterprise and Pioneer orders. But without reviewing the orders themselves, there is no guarantee that the companies would not run afoul of US restrictions on crude oil exports.
"The law says that if your processed condensate qualifies under the classification of the rulings, you can export it even though the ruling wasn't issued to you," Jacob Dweck, a partner at Sutherland Asbill & Brennan, said. "The practicalities of it are more complex."
Dweck represented Enterprise in its application to export processed condensate.
In an attempt to avoid the lengthy Commerce process, some companies are looking to work with Pioneer, Enterprise and their lawyers to assure their condensate is eligible for export, according to lawyers who represented Enterprise and Pioneer. The companies seeking advice include producers, midstream firms, trading outfits and global buyers.
The stakes are high for these companies. If they get it wrong, they risk civil and criminal penalties, as well as the loss of export privileges.
Commerce determined that because the condensate Enterprise and Pioneer were looking to ship to foreign markets was processed through a distillation tower, it was no longer considered crude oil, but a product eligible for export. But the details of just how the condensate is processed, specifically what needs to occur for the condensate to transform from crude oil to a refined product, remain confidential.
Theodore Kassinger, an international trade attorney who represented Pioneer in its export application, said it will be difficult for companies to determine whether their processing efforts meet those detailed by Pioneer and Enterprise.
"There's nothing on a bulletin board that they could go read right now," Kassinger, a partner at O'Melveny & Myers and a former deputy secretary at Commerce during the George W. Bush administration, said. "So they either have to get advice or go to the Commerce Department."
Pioneer, Enterprise or their lawyers would stand to benefit from providing advice to other firms over whether their condensate processing would meet specifications approved by Commerce. The terms under which that advice would be offered are unclear.
Several companies are seeking orders from Commerce on their plans to export condensate, but those applications have been held up by questions the agency has on the applications, sources said. Commerce has acknowledged some delays, but denied reports that they have put a hold on the applications. Applications have been returned for more information, Commerce said.
Dweck said these companies are particularly concerned about getting their own processed condensate export plans in order before the price arbitrage -- between US and Asian condensate markets, for example -- closes.
"A good number of companies are seeing export opportunities now," he said.
Platts data showed Sunoco Eagle Ford condensate postings were pegged around $99.14/barrel on a 60-day moving average. Adding transportation costs, port handling fees and Platts Persian Gulf-US Gulf Coast VLCC assessments, this puts Eagle Ford delivered into Asia around $106/b over the same period. The cost is likely less due to a discounted backhaul rate.
Comparatively, Australian North West Shelf condensate, delivered to North Asia, would be more than $108/b on a 60-day moving average, Platts data showed.
The arbitrage advantage could disappear if Commerce's orders, which are kept confidential for national security reasons, were to be made public.
"Sooner or later the requirements of the rulings will be become known in the industry, by commercial osmosis, and integrated into the way companies at all levels do business," Dweck said. "There is not going to be a need for more and more similar rulings."
--Brian Scheid, brian.scheid@platts.com --Edited by Annie Siebert, ann.siebert@platts.com
New York (Platts)--4Aug2014/303 pm EDT/1903 GMT
NYMEX September crude settled 41 cents higher at $98.29/barrel Monday in what analysts said was quiet consolidation around lower levels.
ICE September Brent settled up 57 cents at $105.41/b.
The gains halt a prolonged slide for both front-month crude contracts. NYMEX crude has fallen almost $7/b since July 22, while ICE Brent is down almost $3/b.
One analyst called chalked the upswing to bargain-hunting.
Products were mixed, with NYMEX September ULSD finishing up 51 points at $2.8712/gal, while September RBOB settled 1.94 cents lower at $2.7249/gal.
"Things are really quiet today," CHS Hedging analyst Phyllis Nystrom said. "We have this questionable RBOB demand overshadowing the market, and ULSD is really trying to get somewhere on its own it would seem."
Front-month RBOB could get a much-needed boost if analysts surveyed Monday by Platts are correct about this week's inventory data. Analysts expect US gasoline stocks likely fell 700,000 barrels last week amid steady demand and strong exports (See story, 1739 GMT).
RBOB tumbled over the past week from more than $2.85/gal at the end of July. Even though that reflects the August-September contract roll, futures are still down from more than $3.10/gal at the end of June. Last year, the August contract expired at $3.05/gal.
And even though the oil complex failed to rally on reports over the weekend that two Iraqi oil fields were overtaken by Islamic State fighters, much of the market appears to have arrested its slide, with RBOB being the lone exception.
"Crude is still supported by events in the Middle East," Lipow Oil Associates President Andy Lipow said. "The market concern is that [Islamic State] took over these oil fields with little resistance on the part of the Kurds. This will be of concern to the oil fields of the south especially if Kurd resistance goes the way of Iraqi resistance."
--James Bambino, james.bambino@platts.com --Edited by Kevin Saville, kevin.saville@platts.com
Amnesty International says Nigeria, Shell not cleaning oil pollution
Lagos (Platts)--4Aug2014/801 am EDT/1201 GMT
Nigeria and Shell have done almost nothing about oil pollution in the Ogoniland region of the Niger Delta, three years after a landmark UN report called for a $1-billion clean-up, Amnesty International said Monday.
Shell on Monday, however, denied Amnesty International's claim, stressing that had made progress in addressing all the recommendations directed to it in the UN report.
"It is important to emphasize that neither SPDC nor any other stakeholder is in a position to implement the entirety of UNEP's recommendations unilaterally," Shell said in a statement.
Environmental devastation in Ogoniland has for many come to symbolize the tragedy of Nigeria's vast oil wealth.
Decades of crude production fueled corruption and generated huge profits for oil majors like Shell, while corruption and spills left the people with nothing but land too polluted for farming or fishing.
Exactly three years ago, a UN Environment Program report said the area may require the world's biggest-ever clean-up and called on the oil industry and Nigerian government to contribute $1 billion.
"Three years on and the government and Shell have done little more than set up processes that look like action but are just fig leaves for business as usual," said Godwin Ojo of Friends of the Earth Nigeria, which partnered with Amnesty and three other groups in a new report called "Shell: No Progress." Shell said implementing the majority of UNEP's recommendations would require "multi-stakeholder efforts" coordinated by the Nigerian government.
"Treating the problem of environmental contamination within Ogoniland merely as a technical clean-up exercise would ultimately lead to failure," the company said.
Shell has not pumped crude from Ogoniland since 1993, when it was forced to pull out because of unrest.
Two years later, environmental activist Ken Saro Wiwa, who had fiercely criticized Shell's presence in Ogoniland, was executed by the regime of dictator Sani Abacha, one of the most controversial episodes in the region's history.
Nigeria returned to civilian rule in 1999 after Abacha's death, but critics say the governments elected since have done little to improve pollution in the Niger Delta.
"No matter how much evidence emerges of Shell's bad practice, Shell has so far escaped the necessity to clean up the damage it has caused," said Audrey Gaughran of Amnesty International.
In April of 2013, Shell staff returned to Ogoniland for the first time in two decades to study how best to decommission their decaying assets in the region.
--Staff, newsdesk@platts.com --Edited by Jonathan Dart, jonathan.dart@platts.com
Mon Aug 4, 2014 10:44pm BST
Aug 4 (Reuters) - Brazil's state-run Petrobras will probably not meet its oil production target for 2014 because of continued delays in the startup of new offshore oil platforms, a government source with direct knowledge of the situation told Reuters on Monday.
Petroleo Brasileiro SA, as Petrobras is formally known, had set a goal of increasing oil output in Brazil by 7.5 percent in 2014, plus or minus one percentage point, compared with 2013.
If met, the target would be the company's biggest one-year rise in Brazilian oil output since at least 2006. Brazil produced an average of 2.06 million barrels a day of oil and related natural gas liquids in 2013, 3.11 percent less than in 2012. Brazilian output fell 2 percent in 2012.
Petrobras officials did not immediately respond to requests for comment. Lacking permission to speak on the record, the source asked for anonymity in exchange for the information.
Because of stagnant output, project delays and government-ordered fuel subsidies, Petrobras has seen its debt rise and cash drain away and is now the world's most indebted and least profitable major oil company, according to Thomson Reuters data.
Petrobras has spent between $22 billion and $47 billion a year since 2008, one of the largest corporate investment programs ever. It has made large new discoveries in that period, but total output in Brazil and abroad fell for the last two years and is only 5.5 percent greater than in 2008.
Petrobras' preferred shares, the company's most-traded class of stock, rose 2.3 percent on Monday to close at 19.45 reais in Sao Paulo. Trading had ended before news of the likely output target miss was reported. (Reporting by Roberto Samora and Leonardo Goy; Writing and additional reporting by Jeb Blount in Rio de Janeiro; Editing by Jonathan Oatis and Dan Grebler)
James Bambino, Platts Oil Futures & Options Editor
New York - August 04, 2014
Platts Survey of Analysts
Crude oil stocks down 1.9 million barrels
Gasoline stocks down 700,000 barrels
Distillate stocks up 1.1 million barrels
Refinery utilization, or run rate, down 0.8 percentage point to 92.7% (EIA)
U.S. commercial crude oil stocks likely fell 1.9 million barrels during the reporting week ended August 1, according to a Platts analysis and survey of oil analysts Monday.
The American Petroleum Institute (API) will release its weekly report at 4:30 p.m. EDT (2030 GMT) Tuesday, and the U.S. Energy Information Administration (EIA) is scheduled to release its weekly data at 10:30 a.m. EDT Wednesday.
Strong crude oil runs and generally weak imports will likely keep crude oil stocks from building, even after the shutdown of CVR Energy's entire 115,000 barrels per day (b/d) Coffeyville, Kansas, refinery the week ended August 1 following a fire in an isomerization unit.
Analysts on average expect crude oil stocks to come off despite a forecasted 0.8 percentage-point decline in U.S. refinery utilization rates. Even if rates fall as much as expected, refinery utilization will still be a robust 92.7% of capacity, according to EIA data.
U.S. crude oil runs were pegged at 16.55 million b/d for the reporting week ended July 25. That was the fifth consecutive week for runs of about 16 million b/d, and just shy of the record 16.63 million b/d set the week ended July 11.
"As we are nearing the exit of peak driving season -- which has been lackluster -- with healthy gasoline stock levels and a deteriorating gasoline crack spread, we should see refinery utilization pull back considerably," Schneider Electric commodity analyst Troy Vincent said.
In addition to the CVR issue, Platts data showed the 306,000 b/d Phillips 66/Cenovus joint venture Wood River refinery in Roxana, Illinois, had a unit upset the week ended August 1, which led to flaring. But it was unclear if production was affected.
"Let's not get too carried away here," Oil Outlooks President Carl Larry said. "A few refineries went down the week ended August 1, but that doesn't mean the whole system fell apart."
U.S. GASOLINE STOCKS EXPECTED TO TIGHTEN
U.S. gasoline stocks are expected to have fallen 700,000 barrels the week ended August 1, in line with the EIA five-year average.
"So here's the funny thing about losing the refineries that we did," Larry said. "[W]e're going to fall short of all our products. That starts with gasoline and we can stop this silliness about selling off. Demand is going to stay solid and if anything, we might see exports cool off to help from falling too far."
But front-month New York Mercantile Exchange (NYMEX) RBOB futures have indeed tumbled during the past week to around $2.73 per gallon (/gal) Monday from more than $2.85/gal at the end of July. Even though that reflects the August-September contract roll, futures are still down from more than $3.10/gal at the end of June. Last year, the August contract expired at $3.05/gal.
The weakness in front-month RBOB is likely a product of ample U.S. Atlantic Coast gasoline inventories, which, at just above 60 million barrels for the week ended July 25, remain nearly 5% above the EIA five-year average.
Implied demand* for U.S. gasoline at just over 9 million b/d for the same reporting week was down year over year, but up on the four-week moving average of 8.95 million b/d.
U.S. gasoline exports were estimated at 487,000 b/d for the week ended July 25, after five straight weeks at 375,000 b/d. The more accurate EIA monthly data pegs U.S. gasoline exports at 487,000 b/d for May.
Platts cFlow vessel-tracking software showed two clean tankers, laden with product, left the U.S. Gulf Coast (USGC) the week ended August 1 en route to West Africa. Nigeria took 61,000 b/d of U.S. gasoline in May, according to EIA data. The country is second only to Mexico in terms of U.S. gasoline imports.
U.S. distillate stocks are expected to have risen 1.1 million barrels the week ended August 1, more than twice the week-over-week change shown by the EIA five-year average.
Implied demand was pegged at 3.83 million b/d for the week ended July 25, more than 100,000 b/d below year-ago levels and slightly off the four-week moving average of 3.99 million b/d.
Exports were estimated at 1.19 million b/d for that same week, with the more accurate monthly data pegging exports at 1.17 million b/d in May. Platts cFlow shows four clean vessels, laden or part-laden with clean products, left the USGC for Northwest Europe the week ended August 1. One vessel left the region headed for the Mediterranean.
HOUSTON Mon Aug 4, 2014 12:59pm EDT
Aug 4 (Reuters) - The Kurdistan Regional Government (KRG) of Iraq asked a U.S. court on Monday to throw out an order to seize some 1 million barrels of disputed crude oil and allow the cargo to be freely delivered in Texas.
The United Kalavrvta tanker, carrying about $100 million worth of Kurdish crude, has been anchored near Texas for nine days, as the Iraqi region of Kurdistan wages a legal battle over ownership with the central government of Iraq.
At the request of Baghdad, the U.S. District Court for the Southern District of Texas ordered the U.S. Marshals Service to take control of the cargo last week, but then said the tanker was outside its jurisdiction and beyond U.S. territory in the Gulf of Mexico.
KRG said the court lacked the authority to sign the order in the first place, claimed the right to export oil under Iraq's constitution, and said it plans to deliver the oil soon.
"The cargo has not yet been transshipped and brought into U.S. territory, but the KRG expects that it will enter the territorial jurisdiction of the Southern District of Texas in the near future," the filing said.
The tanker is too large to enter the port of Galveston near Houston and companies that provide offloading services to bring cargoes ashore have steered clear of the dispute.
Arguing that all oil sales outside its control are illegal, Baghdad last week filed a lawsuit to gain control of the cargo aboard the United Kalavrvta tanker.
Last week, U.S. refiner LyondellBasell said it had recently bought cargoes of Iraqi Kurdistan crude but said it would halt future purchases and not accept any deliveries until the dispute is settled.
The company did not explicitly say if it had agreed to buy the crude on the United Kalavrvta. (Reporting By Terry Wade and Anna Driver; additional reporting by Patience Haggin)
English.news.cn 2014-08-05 07:48:05 [More]
MINSK, Aug. 4 (Xinhua) -- Belarus is ready to supply Ukraine with oil products, the country's President Alexander Lukashenko told his Ukrainian counterpart Petro Poroshenko on Monday.
"Alexander Lukashenko stressed that Belarus understands the acuteness of this problem during the harvesting campaign and therefore, despite domestic needs, will assist Ukraine in ensuring its economy has oil products," the president's press service said in a statement after the two leaders spoke over the phone.
The heads of state also exchanged views on bilateral trade relations and other current bilateral issues as well as cooperation with the Customs Union, the press service added.
Editor: yanting
By Alex Martinelli
Monday, August 4th, 2014
Over 500,000 civilians in Iraq have been displaced since June, and after more fighting this weekend, the country looks closer to a breakup than ever.
The Islamic State (IS) captured northern oilfields, two Kurdish towns, and attacked an important dam in Mosul over the weekend. After their initial offensive in June, much of the media attention focusing on the rebellion against Maliki’s government gave way to reports from Gaza and Ukraine.
But after this weekend’s offensive, which adds more valuable territory to the IS conquest, it looks as though we could see the country break apart and watch oil prices skyrocket to new highs.
The rebel militants seized the northern towns of Sinjar, Wana, and Zumar and began patrolling the streets while demanding that any opposed to their rule leave, convert, or be killed. The territory they now hold also includes the Ain Zala and Batma oilfields, which produce around 30,000 barrels per day.
https://images.angelpub.com/2014/32/25773/chart18114.png
The strangest part in all of this is that both Brent and West Texas Intermediate crude prices were dropping lower on the news. Is the premium on Middle East turmoil finally baked into the market? Some of you might recall back in June, when prices spiked on supply concerns.
Futures Monday morning were at $105 per barrel for Brent crude — the global benchmark — while WTI was at $97 per barrel. Perhaps the Wall Street traders took the morning off, but I could also see the prices rising sooner rather than later as more news from the territory hits the web.
Unlike the previous incursions in Iraq, this weekend’s latest battle sees the Kurdish Peshmerga military force taking its first hits of the crisis.
Although there is widespread belief that the IS offensive is actually helping the Kurds reach independence, it's clear the militants are hoping to gain more influence over the northeastern part of Iraq.
Moreover, the Kurds' problems have compounded after losing 30,000 barrels per day to their daily production, along with the recent seizure of one of their oil shipments.
Of course, another important factor is what happens to the Mosul Dam. The dam is a key part of the region and could have dire consequences for Kurdish oil production if it falls completely under IS control.
That's also not to mention that much of the surrounding land and the Kurdish citizens rely on the dam to prevent flooding, which could have a devastating effect to the area.
The bottom line for us is that the drop in WTI crude was a bit overdone, and there is still plenty of volatility in the Middle East. Our focus, as always, should be on the areas that are actually capable of boosting production over the next few years...
South Texas is a perfect place to start.
Mon, 08/04/2014 - 12:10pm
Gladys Tsai and Ralph Jennings, Associated Press
TAIPEI, Taiwan (AP) -- Authorities in Taiwan's second-biggest city zeroed in on a petrochemical firm Saturday in their investigation into a series of gas pipeline explosions that killed 28 people and injured 286, as anger rose over the handling of the disaster.
The government is seeking to pinpoint the cause of five blasts that tore through streets in the city of Kaohsiung starting at around midnight Thursday, flinging cars into the air and blasting cement rubble at passers-by, many of whom were out late at a nearby night market.
The city's environmental officials said LCY Chemical Corp., a Taiwanese petrochemical firm, had failed to notify authorities of problems with a pipeline in the area despite being aware of irregularities in deliveries going through that pipeline that night. This caused delays in the government's response to the disaster, said the officials, who are facing growing public anger.
"If we were informed earlier by LCY, we could have evacuated everyone," Chen Chin-der, director of the Environmental Protection Bureau in Kaohsiung, an industrial port city of 2.8 million people, said at a televised news conference Saturday.
The pipeline was leaking nearly four tons of propene every hour as pressure dropped at around 8:45 p.m. Thursday, Chen said.
Propene, also known as propylene, is mainly used for making the plastic polypropylene, which is used in a wide variety of packaging, caps and films. It is a highly flammable, colorless gas with a mildly unpleasant smell.
Because the leak went on for so many hours as firefighters and environmental officials struggled to identify the nature of the gas and its source, it was able to rapidly accumulate in density and spread a greater distance, Chen said.
"The leak was at a different location from the explosions, because propene was leaking and spreading through the sewer system everywhere," Chen said in a telephone interview. "When the density of propene is very high, anything can trigger an explosion, anything as small as a cigarette, or starting the engine of a motor scooter."
The city's fire department and environmental authorities first received reports of a gas leak from residents in the area several hours before the explosions. They summoned representatives of a few companies to the site of the leak to check their pipelines, but all of them, including LCY Chemical, said their operations were normal, according to Chen and other environmental officials.
Thinking at first that the leak was that of natural gas, firefighters poured water at the site in the hope of dissolving the gas. When it became clear it was not natural gas, environmental experts were called in to take samples, a city news release said.
The experts were only able to identify the gas as propene at around 11:55 p.m., Chen said. But by then it was too late. A few minutes later, the blasts started ripping the streets apart.
Chang Jui-hui, chief secretary of the Environmental Protection Bureau, said records and data collected later by investigators from LCY's plant and that of its supplier, China General Terminal & Distribution Corp., showed abnormalities in the delivery of propene that night, with significant changes in pressure in the pipeline. Yet the companies did not notify the authorities, Chang said.
The supplier said it had initially shut off the propene pump when it noticed irregularities several hours before the blasts, but had resumed delivery on LCY's request. "Our preliminary judgment is that it is that stretch of line that had the problem," the supplier's assistant manager, Lin Kuo-chung, told local television channel FTV News.
LCY Chemical Corp. said it would cooperate with the investigation. "Our priority is to figure out the truth and responsibility," company spokeswoman Pan Lee-lin told a news conference.
Some local residents questioned the way the authorities handled the leak and subsequent blasts that left a 2-square-kilometer (1-square-mile) trail of destruction. One resident told television channel TVBS that five minutes before the explosions, the authorities told them: "Everything is under control. You can go home and sleep."
The blasts also damaged rows of shops and low-rise apartments. Tens of thousands of people lost utilities in the disaster zone, but a deputy economic affairs minister said Saturday that water and power would be restored within five days.
Industrial-use pipelines run through Kaohsiung's residential neighborhoods because industry preceded the construction of houses, said city spokesman Ting Yun-kung. Kaohsiung contains much of Taiwan's heavy industry, especially petrochemicals, and the explosions were the city's worst in 16 years.
The disaster was Taiwan's second in just over a week, following the July 23 crash of a TransAsia Airways prop jet on the island of Penghu that killed 48 people and injured 10.
Associated Press writer Gillian Wong in Beijing contributed to this report.
MOSCOW/BUDAPEST Mon Aug 4, 2014 4:58pm BST
Aug 4 (Reuters) - Russia's largest private crude producer Lukoil agreed to sell 44 petrol stations in the Czech Republic to Hungarian oil company MOL , the two companies said.
Lukoil also said it would sell 75 stations in Hungary and 19 stations in Slovakia to Norm Benzinkut Kft.
"The decision to sell the assets was taken as part of the effort to optimize Lukoil's business in petroleum product marketing," the Russian company said in a statement.
MOL aims to expand its more than 1,700 filling stations in Central Europe and the Balkans and earlier this year bought Italian Eni's Czech, Slovak and Romanian units.
After buying Lukoil's network, MOL will have 318 filling stations in the Czech Republic, making it one of the leading participants in that market, it said. (Reporting By Alexei Anishchuk and Sandor Peto; editing by Jane Baird)
Kathmandu, Aug 04, 2014, PTI:
In a move to deepen economic ties with Nepal, India on Monday agreed to build a pipeline from Bihar to Kathmandu for supply of petrol, diesel and ATF.
Prime Minister Modi on Sunday signalled India's willingness to build the Rs 200-crore pipeline to supply fuel during his visit to Himalayan nation, the first by an Indian Prime Minister in 17 years.
“The Nepalese side requested and the Indian side agreed to take up the project for the construction of Raxaul (in Bihar) to Amlekhgunj (in Nepal) petroleum pipeline in the first phase and extend it to Kathmandu in the next phase to facilitate the transport of petroleum products,” a joint press statement said.
Nepal is dependent on India for meeting all of its fuel requirement. Petrol, diesel, domestic LPG and jet fuel are currently trucked from IOC depot at Raxaul in Bihar to Nepal.
