Aramco Said to Name New Asia Head Amid OPEC’s Share Fight
Aramco sold 53.8 percent of its crude to Asian customers, according to its 2013 annual review.
Saudi Arabia, the largest oil exporter, is seeking to build crude sales and expand in Asia as OPEC producers fight for market share in the U.S.
Ibrahim al-Buainain, formerly in charge of Saudi Arabian Oil Co.’s global energy investments, was appointed head of Saudi Aramco’s Asian operations, based in Beijing, according to three people who asked not to be identified because they’re not authorized to speak to the media. The company, known as Saudi Aramco, didn’t respond immediately to an e-mail seeking comment about the appointment.
Aramco Asia will become a holding company and run all of Aramco’s ventures in the region, the people said. Global oil prices slid into a bear market last month on speculation that the biggest producers in the Organization of Petroleum Exporting Countries were selling their crude for less than their competitors to maintain market share. Saudi Arabia increased oil prices for Asia next month while offering American buyers another month of reductions.
The message from Saudi Arabia to Asia is: “We are here to expand, and we are here to grow together,” Kamel al-Harami, an independent oil-industry analyst and a former president of state-owned Kuwait Petroleum International, said in a phone interview today. “Under one leadership, Aramco now can talk to Asian customers with one voice.”
China is the world’s biggest energy buyer and Saudi Arabia shipped 68 percent of its crude exports to Asia and 19 percent to the U.S. last year, data from the U.S. Energy Information Administration show. Aramco sold 53.8 percent of its crude to Asian customers, according to its 2013 annual review. Fellow OPEC members, including Iraq and Kuwait, are looking to Asia as well for expansion.
MIT History
Al-Buainain was in charge of Saudi Aramco Energy Ventures LLC from its inception in 2012 to 2013, according to two of the people. He also was director of new business development for Aramco from 2009 to 2011, based in South Korea and Hong Kong, and speaks Korean. He had executive management training at the Massachusetts Institute of Technology in the U.S. before returning to Saudi Arabia this year, they said.
mco plans $100 billion of investments to become the world’s largest refiner with capacity to process 8 million to 10 million barrels a day of crude at home and abroad. The company has refineries in South Korea and China and it’s in talks to add other plants in China, Indonesia, and Vietnam.
Aramco is targeting Asia for expansion as it starts to sell chemicals from its Saudi Sadara plant, a joint venture with The Dow Chemical Co., Aramco Chief Executive Officer Khalid al-Falih said said in May in Bahrain.
“Aramco Asia fits very well into this strategy,” al-Harami said. “When you want to sell chemicals, you need to have a single company that can reach all customers across the region.”
Libya’s Biggest Oil Field to Resume Pumping by Tomorrow
Libya, holder of Africa’s largest oil reserves, plans to restart production by tomorrow at its biggest field at Sharara while an export terminal in the country’s east remains closed.
The Sharara and Elephant fields in southwestern Libya will resume output after gunmen returned equipment they had stolen from the sites, state-run National Oil Corp. spokesman Mohamed Elharari said by telephone from Tripoli. Crude shipments from the Hariga terminal remain halted, said Ihab Said, an inspector at the facility.
Libya is seeking to restore crude output after more than a year of political unrest and violence. The nation produced 850,000 barrels a day last month, compared with 1.6 million barrels before the 2011 ouster of former leader Muammar Qaddafi, according to Bloomberg estimates.
Sharara was producing 290,000 barrels a day before the latest shutdown, Mansur Abdallah, director of oil movement at the Zawiya refinery and oil port, said Nov. 6. Sharara is 720 kilometers (450 miles) south of Zawiya, and the two sites are connected by a pipeline.
Exports from Hariga have been disrupted for days, Khalifa Mazeg, the port’s measurement inspector, said yesterday.
Libya’s output has recovered after dropping to as little as 215,000 barrels a day in April. The country is split between an Islamist-led administration led by Omar al-Hassi in Tripoli and the internationally-recognized government of Prime Minister Abdullah al-Theni in the eastern city of Tobruk.
Four Takes on OPEC Vienna Meeting: Output Cut Talk Builds
By Mark Shenk and Grant Smith Nov 8, 2014 4:23 AM GMT+0800
With less than three weeks to go before OPEC meets in Vienna and the selloff in oil showing few signs of letting up, speculation is mounting the group will take action to try to stem the decline.
Brent crude, the benchmark for more than half of the world’s oil, gained 53 cents to close at $83.39 today and is down 28 percent from a high of $115.06 in June on the London-based ICE Futures Europe exchange. West Texas Intermediate oil rose 74 cents to $78.65 on the New York Mercantile Exchange. It’s down 27 percent from its June peak.
OPEC said yesterday the world will need less of its oil for most of the next two decades than previously estimated as U.S. shale production grows. OPEC lowered every forecast for its crude through 2035 except next year.
Here’s how four analysts across Europe and the U.S. see the Nov. 27 meeting playing out.
Giovanni Staunovo, an analyst at UBS AG in Zurich, is predicting the Organization of Petroleum Exporting Countries will reduce output 500,000 barrels a day at the meeting. Such a move would help trigger a rebound in crude to a range of $90 to $100 a barrel, the analyst estimated.
“Quite simply, the world needs less OPEC oil at the moment,” Staunovo said. “But more important to me is that they can realize higher revenues by cutting prices and seeing prices that are stable or higher.”
Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, expects OPEC to take action to stem the slide in prices. He doesn’t think Saudi Arabia is trying to push oil to $70 a barrel in an effort to choke off U.S. shale production.
“The fiscal challenge posed by an oil price of $70 for a year is too high for OPEC, given they have to spend socially speaking after the Arab Spring, and given the threat ISIS poses in the region,” he said yesterday by phone.
Brent will rebound to $90 within two to three weeks if the output cut is at least 1 million barrels, Tchilinguirian said.
In a sign it’s prepared to accept lower prices in favor of defending market share, state-owned Saudi Arabian Oil Co. lowered the cost of crude to the U.S. in December to the lowest in a year.
Jason Kenney, an equity analyst at Banco Santander SA in London, said he sees OPEC reducing its output by enforcing the current target. As recently as last month, the group produced 30.974 million barrels, almost 1 million over the goal, according to a Bloomberg survey of oil companies, producers and analysts. The group has exceeded the target in all but five months since January 2012, according to the survey.
“I don’t see Saudi agreeing to a formal cut in production or quotas,” Kenney said by e-mail yesterday. “It doesn’t want to be seen propping up prices when its global market share is in decline.”
He was the most accurate forecaster of West Texas Intermediate oil prices in the second quarter, according to Bloomberg News rankings. He didn’t give a forecast for what crude will do in response to a cut.
Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania, is among analysts who expect a showdown at the Vienna meeting because the pain from falling oil prices isn’t being felt equally by OPEC’s 12 members, causing strains in the group.
With Brent at $82 a barrel only Kuwait, Qatar, and United Arab Emirates will earn enough to balance their budgets, according to the International Monetary Fund. Nigeria needs oil at $126 to balance its budget while Venezuela requires crude at $162, according to Deutsche Bank.
“This is going to be a very contentious meeting,” Schork said by phone yesterday. “Brent is now approaching $80 a barrel, which will hurt even the more-fiscally responsible members such as Qatar and the UAE. It’s also about $30 below what the Nigerians, Venezuelans and Iranians need.”
Petrobras Lifts Fuel Prices in Rousseff Subsidy Relief
Petroleo Brasileiro SA (PBR) is boosting fuel prices as Brazilian President Dilma Rousseff gives the state-run producer some relief from inflation-fighting policies and the lowest oil prices in four years. Shares gained.
The Rio de Janeiro-based company known as Petrobras was scheduled to raise its subsidized refinery gate prices for gasoline by 3 percent and diesel by 5 percent at midnight local time, it said yesterday in a regulatory filing.
Petrobras booked more than $44 billion in operating losses mainly from selling fuel at below-market prices during Rousseff’s first term and became the world’s most indebted producer. It was granted permission to raise fuel prices even after crude’s 25 percent plunge this year brought them more into line with international benchmarks. The decision comes after Rousseff won re-election by the narrowest margin in Brazil’s history and the central bank raised interest rates sooner than expected last week.
“Rousseff has been very unkind to this company, it’s a step in the right direction,” Robbert van Batenburg, director of market strategy at Newedge USA LLC, said in a phone interview from New York. “They needed it, look at the stock.”
Worst Performer
Shares rose 3.3 percent to 14.52 reais at 2:53 p.m. in Sao Paulo. Earlier today, the stock fell as much as 3.8 percent as Brazil’s currency fell to a nine-year low signaling more expensive fuel imports and Brent oil headed for a seventh straight weekly drop amid the U.S. shale boom.
Petrobras is the worst performing major oil company in the past four years losing 60 percent in dollars, data compiled by Bloomberg show.
The “counterintuitive” measure to increase fuel prices for the first time in a year just as the discount to global benchmarks narrows, “does nothing to improve investor confidence in the company’s commitment to a pricing policy,” Itau BBA Paula Kovarsky wrote in a note to clients.
Management received support from Finance Minister Guido Mantega at a Nov. 4 board meeting to raise fuel prices, without setting a date or an amount, said a person familiar with the matter. The company presented charts during the meeting based on an eight percent increase, the person said.
Board Reconvened
At the previous month’s board meeting, Chief Executive Officer Maria das Gracas Foster said the company needs at least a 10 percent increase in fuel prices, a person with knowledge of the matter said at the time.
The board reconvened this week after suspending an Oct. 31 meeting in which it failed to reach a decision on a proposal to dismiss an executive cited in a money-laundering and bribery investigation that has put Rousseff, who was Petrobras chairwoman from 2003 to 2010, on the defensive.
Sergio Machado, head of the producer’s transport unit Transpetro, said Nov. 3 that he will take 31 days unpaid leave. That followed a refusal by auditor PricewaterhouseCoopers to sign off on the company’s quarterly results bearing his signature, said two people with knowledge of the issue. Machado said he’s done nothing wrong and called the allegations absurd.
‘New Conditions’
In a separate filing, Petrobras said its board will meet Nov. 14 to approve earnings and denied PwC rejected the results. PwC said in an e-mailed response that it can’t comment on clients. The three-year audit contract ends Dec. 31.
Grupo BTG Pactual reduced its 2015 earnings estimate for Petrobras by 14 percent, citing weaker currency and lower oil prices in a note to clients today.
“The new conditions make us see less of a chance that Petrobras’ balance sheet improves,” BTG analysts including Gustavo Gattass wrote. “As such, we’ve raised our chances for a capital increase in 24 months to 80 percent from 70 percent.”
U.S. Gasoline Falls to $2.9421/Gallon in Lundberg Survey
The average price of regular gasoline at U.S. pumps dropped 13.38 cents to $2.9421 a gallon in the two weeks ended Nov. 7, falling below $3 for the first time in almost four years, Lundberg Survey Inc. said.
Prices are 27.55 cents lower than a year ago, according to the survey, which is based on information obtained at about 2,500 filling stations by the Camarillo, California-based company.
The average is the lowest since Dec. 3, 2010, down 78.04 cents a gallon from the May 2 peak of $3.7225, said Trilby Lundberg, the president of Lundberg Survey. She said it was the first average less than $3 a gallon since Dec. 17, 2010.
“Crude oil price slippage again has pulled gasoline prices down, but we are coming to the end of this downhill ride,” Lundberg said in a telephone interview.
The highest price for gasoline in the lower 48 states among the markets surveyed was in San Francisco, at $3.27 a gallon, Lundberg said. The lowest price was in Memphis, Tennessee, where customers paid an average of $2.65 a gallon. Regular gasoline averaged $3.21 a gallon on Long Island, New York, and $3.20 in Los Angeles.
West Texas Intermediate crude, the U.S. benchmark priced in Cushing, Oklahoma, declined $2.36, or 2.9 percent, to $78.65 a barrel on the New York Mercantile Exchange in the two weeks to Nov. 7.
World Demand
Global demand for crude from the Organization of Petroleum Exporting Countries, which is responsible for about 40 percent of the world’s oil supply, may fall to a 14-year low of 28.2 million barrels a day in 2017, its outlook showed. That’s 600,000 a day fewer than last year’s projection and 800,000 below the amount required this year.
U.S. oil output increased to 8.972 million barrels a day the week of Oct. 31, the most since at least 1983, according to Energy Information Administration data. U.S. production has increased about 66 percent in the past five years as companies used horizontal drilling and hydraulic fracturing to tap into hydrocarbon-rich layers of underground shale rock.
Refineries processed 15.5 million barrels of oil a day in the week ended Oct. 31, the highest level for the time of year since 2003.
Gasoline stockpiles shrank by 1.4 million barrels to 201.8 million, EIA data show.
Gasoline futures on the Nymex fell 4.65 cents, or 2.1 percent, to $2.1352 a gallon in the two weeks ended Nov. 7.
Japan Expands, Extends Oil Storage Lease Contract With Abu Dhabi
xpanded and extended for three years a lease that allows Abu Dhabi to store crude oil in the Asian country.
Abu Dhabi’s leased capacity at the Kiire terminal in Kagoshima prefecture, in southwestern Japan, will rise to 1 million kiloliters (6.3 million barrels), Atsushi Taketani, director of the Japanese trade ministry’s petroleum refining and reserve division, said in an interview. The storage project was started at about 600,000 kiloliters in 2009, according to the ministry.
Japan last year agreed to extend a similar contract with Saudi Arabia that lets the kingdom store crude in tanks in Okinawa. In exchange for providing capacity to two of its biggest oil suppliers, Japan has priority for buying the stored crude in the event of an emergency, according to the ministry.
Vice Minister of Economy, Trade and Industry Yosuke Takagi and Hamad Al Hurr Al Suwaidi, a member of the Supreme Petroleum Council, signed a memorandum of understanding to extend the lease on Nov. 9 in Abu Dhabi, capital of the United Arab Emirates, Taketani said.
Imports from Saudi Arabia, Japan’s biggest crude supplier, accounted for about 32 percent of the Asian nation’s total purchases in 2013, according to data from the finance ministry. About 23 percent came from the U.A.E., the data show.
California Oil-by-Rail Drops as Canada Faces Competition
California, the nation’s largest gasoline market, received the least amount of oil by rail in 17 months as cheaper in-state supplies and imports eliminated the need for Canadian supplies.
The most populous U.S. state took 11,612 barrels a day by rail in September, a 7.5 percent drop from a month earlier and down from a peak of 38,086 barrels a day in December, California Energy Commission data show. Shipments from Canada, which made up 76 percent of California’s oil-by-rail receipts last November, tumbled to zero, the agency said on its website.
The slide in Canadian shipments highlights how competition is growing to supply the western U.S. as refining markets elsewhere in the nation drive out imports by processing more domestic shale oil. Exxon Mobil Corp. (XOM)’s Torrance refinery near Los Angeles was said to shut a crude unit in September, cutting the cost of oil from California’s San Joaquin Valley and making rail shipments less economic, according to David Hackett, president of energy consulting company Stillwater Associates.
“The incentive to bring heavy Canadian oil into the state by rail has been eliminated,” Hackett said by telephone yesterday from Irvine, California.
San Joaquin Valley-Kern River oil was assessed at $65.68 a barrel today, $3.97 above the heavy, sour Western Canada Select grade, data compiled by Bloomberg show. On Oct. 16, San Joaquin Valley crude fell to a discount versus the Canadian oil for the first time in four years.
Refinery Shutdown
Exxon’s 149,500-barrel-a-day Torrance refinery in Southern California shut its only crude unit for repairs in September, according to energy market data provider IIR Energy, based in Sugar Land, Texas.
The state’s oil-by-rail shipments had previously surged to a seasonal record as refiners, lacking direct pipeline access, turned to trains to bring in production from Canada and U.S. shale formations. The shale boom has boosted domestic output to the highest level in three decades, bringing the nation closer to energy independence.
Crude-by-rail shipments to California from Colorado and Wyoming rose in September. They fell from every other state, the Energy Commission’s data show.
Deliveries by train still account for a small fraction of oil supplies delivered to the western U.S. In August, the region imported 1.11 million barrels of crude a day from outside the U.S., according to data compiled by the Energy Information Administration, the Energy Department’s statistical unit.
Fredriksen Said to Delay Rosneft Deal Decision on Sanctions
North Atlantic Drilling Ltd. (NADL), the rig company controlled by billionaire John Fredriksen, will extend a deadline to complete deals with Russia’s OAO Rosneft (ROSN) that include $4.25 billion in contracts amid concern over trade sanctions, a person familiar with discussions said.
The deadline for breaking the accords will be extended from Nov. 10, said the person, asking not to be named because the talks are private. North Atlantic, a unit of Seadrill Ltd. (SDRL), is considering alternative assignments for two rigs due to start operating for Rosneft next year, the person said.
North Atlantic and Rosneft rushed to sign five-year contracts for five offshore rigs at the end of July, just days before the European Union broadened sanctions against Russia to target its energy industry over the country’s role in the conflict in Ukraine. Seadrill, which owns 70 percent of Hamilton, Bermuda-based North Atlantic, said at the time the contracts appeared not to be affected and later indicated they may be at risk.
The offshore contracts are part of a broader agreement that will see Rosneft take a 30 percent stake in North Atlantic in return for about 150 onshore rigs and cash. That accord’s break-right period will also be extended, according to the person.
An official at Rosneft and North Atlantic Chief Executive Officer Alf Ragnar Lovdal both declined to comment.
Seadrill Shares
Seadrill rose 3.2 percent to 150.1 kroner at 4:20 p.m. in Oslo, erasing an earlier decline that followed an announcement by Transocean Ltd., another offshore rig company, that it would book $2.8 billion of writedowns. Seadrill has declined 39 percent this year as oil companies rein in spending, creating over-supply in the rig market, and on investor concerns about the Rosneft deal.
North Atlantic fell 0.5 percent to $5.50 a share in New York trading, while Rosneft rose 0.2 percent to 239.71 rubles in Moscow.
The U.S. and the EU in September moved to deepen sanctions against Russia, restricting the export of technology for Arctic, deep-water and shale oil exploration and production and limiting the ability of companies including Rosneft to tap western capital markets.
Exxon Mobil Corp. (XOM), the world’s biggest listed oil company, was forced to halt a venture with Rosneft following a billion-barrel discovery in the Arctic Kara Sea. That find was made with North Atlantic’s West Alpha rig.
Order Backlog
The offshore contracts made up 65 percent of North Atlantic’s $6.3 billion order backlog and almost 20 percent of Seadrill’s on a consolidated basis as of September, according to the companies.
North Atlantic could be forced to sell new shares to raise capital if the deal with Rosneft falls through, Nordea Markets analyst Janne Kvernland said in an Oct. 16 report. A delay or cancellation of the Rosneft deal could also weigh on the Norwegian rig market as idle rigs would boost capacity, she said.
The extension of the break-right period may actually be positive for North Atlantic and Seadrill, Kvernland said in an e-mail today.
“It means it’s still probable that there will be a deal, which in turn increases earnings visibility for both companies,” she said. “However, it’s still unclear when it will fall into place.”
Russia, China Add to $400 Billion Gas Deal With Accord
Russia and China signed a second initial natural-gas supply agreement, following a $400 billion deal earlier this year, as President Vladimir Putin broadens links with the world’s second-biggest economy.
OAO Gazprom is discussing the supply of as much as 30 billion cubic meters of gas annually from West Siberia over 30 years, the company said yesterday. Russia may start selling gas to China within four to six years as part of an agreement with state-owned China National Petroleum Corp., Gazprom Chief Executive Officer Alexey Miller told reporters in Beijing.
Russia has turned to China to spur its economy as relations soured with the U.S. and Europe over the Ukraine crisis. Putin ended more than a decade of talks over supplying China with gas this year when it struck the May deal.
“Together we have carefully taken care of the tree of Russian-Chinese relations,” Chinese President Xi Jinping yesterday said at a meeting with Putin at the Asia-Pacific Economic Cooperation meeting in Beijing. “Now fall has set in, it’s harvest time, it’s time to gather fruit.”
Putin called the earlier agreement between state-run Gazprom and its Chinese partners “epochal.”
CNPC also signed an initial agreement with OAO Rosneft to acquire 10 percent of the Vankorneft hydrocarbon operations in Siberia.
Under the agreement earlier this year, China will import 38 billion cubic meters of gas from Russia annually over three decades starting as soon as 2018.
Statoil completes season in Barents Sea
STAVANGER, Norway, Nov. 7 (UPI) -- Though few commercial discoveries were made, Norwegian energy company Statoil said Friday it showed it can work safely in remote parts of the Barents Sea.
Statoil announced it completed its exploration season in remote arctic waters of the Barents Sea, one of the more prolific campaigns in the company's history.
Irene Reummelhoff, senior vice president for exploration on the Norwegian continental shelf, said the campaign resulted in fewer commercial discoveries than expected, though the program still had its victories.
"We have tested a great variety of geological plays in frontier areas and dramatically increased our knowledge with the huge amount of subsurface data we have collected," she said in a statement. "We have also demonstrated that we can operate in a safe and efficient manner in the remote parts of the Barents Sea."
Activists with the environmental group Greenpeace had said the limited success of Statoil's program indicated the campaign in frontier waters of the Barents Sea wasn't worth the risk.
Many of the discoveries declared by Statoil in untested waters were characterized as small. Greenpeace said much of Statoil's campaign was endangering a vulnerable seabird habitat.
"Statoil should concentrate its resources on preparing the company for a carbon free future and not burn them on trying to extract expensive and dangerous arctic oil," Truls Gulowsen, program manager for Greenpeace in Norway, said in a statement sent to UPI. "Statoil's Arctic venture is simply useless adventurism to the detriment of the climate and the environment."
More than a dozen Greenpeace demonstrators took part in a protest against Statoil's drilling plans for arctic waters by boarding the Transocean rig Spitsbergen in May. Around half of them surrendered their campaign voluntarily and Statoil said the seven activists who remained behind were arrested by Norwegian police
Reummelhoff said the company would analyze data collected from the frontier campaign to decide how to move forward in the region.
"Exploring in the Barents Sea is not a sprint, but a marathon," she said. "It is about long-term thinking, stamina and systematic building of knowledge."
Santos LNG project in Australia nearly completed
ADELAIDE, Australia, Nov. 7 (UPI) -- Australian company Santos said Friday it installed the final pieces of a liquefied natural gas plant on Curtis Island, off the country's eastern coast.
"Once we're in full production, these massive pieces of infrastructure will together produce up to 7.8 million tons of liquefied natural gas each year," Santos Operations Manager Brenton Hawtin said in a statement.
Santos leads the $18.5 billion project designed to convert coal seam natural gas to LNG for exports to the global market.
Hawtin said the company has started testing gas deliveries through the facilities pipeline system and completed its first processing hub for natural gas fields associated with the LNG plant.
Maria van der Hoeven, executive director of the International Energy Agency, said from a conference in Tokyo the advent of LNG represents "a golden opportunity" for Asian economies with high energy demands.
First, however, regional governments need to reform market systems that the IEA director said undermine affordability and accessibility of LNG for regional consumers.
Asian demand for natural gas is expected to grow by as much as 8 trillion cubic feet by 2020.
The Curtis Island LNG project is fed by a 260-mile underground pipeline from the Bowen and Surat basins in Queensland. Santos says first deliveries of LNG are scheduled for next year.
House lays out pro-Keystone XL agenda
WASHINGTON, Nov. 7 (UPI) -- A Republican-led House Energy Committee said that, while Keystone XL is just one piece of the energy puzzle, it's a key component of the wider whole.
The GOP has drafted its new course for the next Congress following the Republican takeover of the Senate after Tuesday's midterm elections. Getting the Keystone XL pipeline approved is at the top of the Republican agenda.
The House Energy and Commerce Committee issued an agenda statement Thursday, saying the congressional energy strategy should be broader than just one pipeline.
"But Keystone XL still remains an important part of any comprehensive energy plan so we will keep fighting for its approval," the statement read.
In an op-ed published by The Wall Street Journal, expected Senate Majority Leader Mitch McConnell, R-Ky., and House Speaker John Boehner, R-Ohio, said authorizing the construction of the Keystone XL pipeline has "obvious" bipartisan support.
When earlier pro-Keystone XL legislation moved through the current Congress, Oil Change International found the nine Senate Democrats and the entire Republican rank, including McConnell, that supported the effort received an average $375,000 in campaign contributions each from the oil industry.
Keystone XL planner TransCanada submitted an application to the U.S. government more than six years ago. A special permit is needed because it would cross the federal border.
President Barack Obama addressed the Republican agenda in a Wednesday address. Keystone XL is "one small aspect" of the larger energy narrative in North America, he said.
The approval process for Keystone XL hinges in part on a Nebraska court decision on whether the governor there has the authority to approve the pipeline's route.
BP awards $40 million Shah Deniz gas contract
AUSTIN, Texas, Nov. 7 (UPI) -- Energy services company Emerson Process Management said it secured a $40 million contract from BP to help develop the Shah Deniz gas field offshore Azerbaijan.
Emerson, which has headquarters in Texas, said Thursday it will provide control and safety systems to BP's operations to ensure safe and efficient gas production offshore and processing at an onshore terminal.
BP has awarded more than $1 billion in development contracts since selecting the Trans-Adriatic pipeline as its option for Shah Deniz last year.
The Trans-Anatolian natural gas pipeline will carry Shah Deniz gas through Turkey to the Greek border. From there, TAP will take the gas to the European market.
Both pipelines are part of the so-called Southern Corridor of gas pipelines for Europe meant to break Russia's grip on the region's energy sector. Europe gets about a quarter of its gas needs met by Russia, though most of that runs through the Soviet-era transit network in Ukraine, where geopolitical conflicts present a risk to energy security.
First gas from the giant offshore natural gas field will be delivered in late 2018.
New low for Russian currency
MOSCOW, Nov. 7 (UPI) -- It's becoming more difficult to find good news for the Russian economy, an analyst said Friday after the national currency crashed to a new low.
By midday in Moscow, the currency hit bottom with trade at 45.7 rubles to the U.S. dollar, besting the previous low by 8 percent.
Dmitry Polevoy, a chief Russian analyst at ING, told Russian news agency ITAR-Tass there were few bright spots for the nation's economy.
"It is increasingly difficult to find augments to describe the current situation, when you look at market figures every morning," he said.
The Russian economy is burdened by Western sanctions targeting Russian energy companies. With oil trading below the $100 mark, sanctions were blamed for record inflation and a struggling ruble.
A report this week from the European Commission said the Russian economy was entering a period of stagflation.
"Geopolitical tensions over the situation in Ukraine, including sanctions, have exacerbated existing structural bottlenecks linked to an exhausted growth model largely centered on the export of natural resources," the report said. "This is taking a heavy toll on the growth outlook."
The EC said there was a small recovery in the Russian investment climate in the latter half of 2013, though that evaporated in 2014. Uncertainties over Russia's reaction to geopolitical concerns over a Ukraine moving closer to Western powers are making would-be investors worried, the commission's report said.
Futures trading show the exchange rate for the ruble at 48.9 per U.S. dollar by December and 50 rubles by August 2015.
Maxin Korovin, an analyst at VTB Capital, told the Russian news agency geopolitical tensions can only partially explain the collapse.
"It is mainly caused by the population's increased demand for foreign currency," he said.
An assessment from the World Bank finds sanctions are taking a dramatic toll on a Russian economy that depends heavily on oil and gas exports for revenue.
U.S. shale gas output breaking records
DENVER, Nov. 7 (UPI) -- U.S. natural gas production has risen for the 10th consecutive month, moving steadily into "unchartered territory," analysis from Platts finds.
Bentek Energy, the forecasting unit of Platts, found gas production in the Lower 48 states averaged 69.9 billion cubic feet per day in October, breaking the previous record and posting the 10th straight month of gains.
Gas production in October was 7.9 percent higher year-on-year.
Jack Weixel, director of analysis at Bentek, said projects slated to come online in the U.S. northeast should push the U.S. gas output above the 72 billion cubic feet per day mark by the end of the year.
"The current level of production is unchartered territory for the domestic natural gas market and shows no signs of slowing," Weixel said in a Thursday statement.
Bentek estimates total U.S. average production for the year will be 67.9 billion cubic feet per day because of growth from the Utica, Marcellus and other premier shale basins.
Utica is an emerging shale play in the United States. The Energy Information Administration included Utica shale, which lies geologically beneath the Marcellus shale, in its monthly drilling productivity report in August because of increased productivity.
EIA said drilling productivity in the Utica shale has outpaced others in the region, including Marcellus.
In 2009, Bentek said the United States averaged 55.1 billion cubic feet per day in natural gas production.
Report: East Africa new energy 'hot spot'
Analysis released from Nevada finds East Africa is expected to add another 1 million barrels per day in production by 2025, led by Mozambique and Tanzania. More recently, the region is home to more than 25 percent of the natural gas discoveries made worldwide between 2010-13.
"East Africa is the new hot spot," Stanislas Drochon, director Africa oil and gas at IHS Energy, said in a Thursday statement.
Drochon said the region is going through a transformative phase and could emerge as a crucial player in the global energy sector, though a lack of infrastructure and a weak regulatory framework could drag on East African growth potential.
Italian energy company Eni is one of the major players in Mozambique and estimates a reserve potential of at least 85 trillion cubic feet of gas in place. The company said it was eager to help Mozambique become a hub for liquefied natural gas exports to Asian economies.
BG Group, a British company, said its most recent appraisal well off the coast of Tanzania yielded a sustained gas flow rate of 101 million cubic feet per day. A similar well last year flowed at 57 million cubic feet per day.
"Gas and LNG production will become a dominant revenue generator in East Africa," Natznet Tesfay, head of Africa at IHS Country Risk, said. "The accelerated growth in the gas sector will outsize the previously important coal sector, but we are unlikely to see an immediate increase in employment opportunities and local supply chain expansions."
WTI, Brent show signs of life
NEW YORK, Nov. 7 (UPI) -- West Texas Intermediate and Brent crude oil prices for December delivery experienced some vitality in Friday trading on good U.S. economic data.
Early data on the employment climate in the United States pushed the Dow Industrial Average and S&P 500 to record closes Thursday. On Friday, the U.S. Bureau of Labor Statistics said total non-farm payroll employment grew by 214,000 last month, pushing the unemployment rate down to 5.8 percent.
While modest, data show average hourly earnings for all employees rose by 3 percent to $24.57 in October.
Overall commodities in early Friday trading were mixed following the report, though oil led the way.
WTI, the U.S. benchmark, gained 74 cents early Friday to trade at $78.43 per barrel for the December contract. Brent crude oil followed suit, trading up 41 cents to $83.27 per barrel for December delivery.
Friday's gains may be threatened, however, by an 87-page report from Citibank that finds the growth in U.S. oil production may have "severe" consequences for members of the Organization of Petroleum Exporting Countries.
Brent and WTI both shed more than 20 percent of their value since June as more North American oil means less demand for OPEC crude.
"Most OPEC countries produce medium to heavy and sour crude oil streams and the refinery system in the US Gulf of Mexico has been the most attractive market in the world for them," the report said. "But now the loss of market share has become inevitable, increasing competition for access to China's more limited market and weighing on global oil prices."
Brent and WTI suffered heavy losses last week following a grim forecast about futures contracts from Goldman Sachs, which trumped some of the optimism that greeted a European Central Bank stress test concluding durability in the face of further financial strain.
El Feel has shut down on Sunday
By Ayman al-Warfalli and Ulf Laessing
BENGHAZI/CAIRO, Nov 9 (Reuters) - An oil field in southwest Libya has closed down, officials said on Sunday, becoming the third oil facility in the chaotic country to shut within a week.
The El Feel field, operated by Libya's National Oil Corporation (NOC) and Italy's ENI, shut down due to a power outage after armed men forced the closure of the major El Sharara field in south Libya last Wednesday, an NOC spokesman said.
OPEC member Libya is in turmoil as two governments and parliaments vie for legitimacy three years after the ouster of strongman Muammar Gaddafi. The internationally-recognised government works from Tobruk in the east since an armed group seized the capital Tripoli in August.
Libya hopes both closed fields, which share one power supplier, will resume work by Monday, said an NOC spokesman, which would gradually bring back up to 300,000 barrels a day.
"We expect El Feel and El Sharara to return to work on Sunday or Monday," Harari said.
The El Sharara field, co-run by NOC and Spain's Repsol , closed when gunmen stormed it, stealing vehicles and equipment. It has a capacity of 340,000 bpd but recently produced less as wells were lost due to two previous closures by protesters, according to previous Libyan comments.
The El Feel used to pump 80,000 bpd in the past but NOC has not provided any update recently.
Libyan state security guards have also blocked all exports from the eastern Hariga port, located in Tobruk near the Egyptian border, an oil official said on Saturday.
The protesters at Hariga are part of a state security oil force that has gone on strike over pay several times this year.
BOMB EXPLOSION
Libya is grappling with a sharply deteriorating security as the country is effectively controlled by former rebels who helped topple Gaddafi but now use their guns to fight for power.
At least one bomb exploded on Sunday in the eastern town of Shahat, where U.N. special envoy Bernadino Leon was meeting the internationally recognised Prime Minster Abdullah al-Thinni, said security officials who reported up to five people were slightly injured.
"According to our colleagues, no one at the meeting was hurt," a U.N. spokesman said, contradicting that report. "The U.N. delegation has returned safely to Tunis."
The United Nations has been trying to mediate between the conflict parties in Tripoli and the east but no progress has been reported publicly.
In the main eastern city of Benghazi, 300 people have been killed in three weeks of clashes. The recent turmoil has also lowered Libya's oil exports to below 500,000 barrels per day, based on previous published figures.
In Tripoli, in the west, gunmen stormed a branch of Sahara commercial bank, robbing 1.7 million dinars ($1.3 million), a central bank spokesman said. (Reporting by Ayman al-Warfalli, Feras Bosalum, Ahmed Elumami, Ulf Laessing and Louis Charbonnneau; Writing by Ulf Laessing; Editing by Tom Heneghan)
Libyan protesters seize eastern oil port
BENGHAZI, 19 hours, 27 minutes ago
Libyan state security guards have started a protest at the 120,000 barrel per day Hariga oil port in the east, halting all oil exports from the terminal, a Libyan oil official said.
The closure only adds to the growing chaos in Libya, whose internationally recognised government has been driven out of the capital by an alliance led by forces from the city of Misrata, which has installed a rival government and parliament.
In the main eastern city of Benghazi, five pro-government soldiers were killed and 28 wounded on Saturday while fighting Islamists, lifting the death toll from three weeks of clashes to 300, medics said.
The protesters at Hariga were part of a state security oil force that has gone on strike over pay several times this year.
"There is a sit-in from security guards who say they have not been paid," said the official, who asked not to be named. "We are trying to solve the issue."
A tanker had been waiting for three days to lift oil from Hariga, located in Tobruk, but the guards did not allow it to do so, the official said. The port was only open for fuel imports and the exports of refinery products, which are marginal, he added.
The closure will lower Libya's output to around 500,000 bpd or even less, based on previous published figures. The state National Oil Corp (NOC) has not given a production update for a month.
Libya's oil industry had already been struggling with the closure of the southerly El Sharara oilfield, which used to pump at least 200,000 bpd, because of attacks by gunmen.
A senior oil worker at the field, who asked not to be named, said authorities hoped to restart the field within three to four days if the security situation allowed it.
But an officer in the Petroleum Facilities Guard (PFG) at the oilfield said gunmen had attacked El Sharara again on Friday.
"There was fighting yesterday between PFG (forces) of the field and invaders, resulting in one wounded PFG member and three killed invaders," he said.
But he said the PFG members had then withdrawn, leaving the remote field to the gunmen. No more details were immediately available.
Some Libyan websites have said the attackers are supporters of the group that seized the capital in August, but Reuters has been unable to confirm this.
The senior oil worker said the El Sharara closure would not affect the Zawiya refinery connected to the field as tanks there had stocks for 17 days. NOC could get fresh supplies from the southwesterly El Feel field or via the Es Sider oil port, he added.
The 120,000 bpd-refinery supplies the capital Tripoli and western Libya with gasoline.
Libya's oil industry had been recovering in the past few months from a wave of protests at ports and oilfields that had lowered output to 100,000 bpd in the first half of the year. - Reuters
Mexico energy minister to meet Ramirez, Al Naimi
MEXICO CITY, 12 hours, 26 minutes ago
Mexico's Energy Minister Pedro Joaquin Coldwell will meet with Venezuela's visiting Foreign Minister Rafael Ramirez and with Saudi Oil Minister Ali Al Naimi, officials said, against a backdrop of weaker global oil prices.
Former Venezuelan energy minister and head of state oil company PDVSA, Ramirez remains Venezuela's Opec delegation head and has led calls for an emergency meeting due to global price declines.
Ramirez met Al Naimi as part of a climate change conference on Venezuela's Margarita Island, but they offered no comment on oil markets afterward.
After his Venezuela visit, Al Naimi plans to attend a natural gas conference in the Mexican resort of Acapulco next week, when he and Coldwell will discuss the oil market.
"We will discuss various issues of mutual interest ... naturally among them the behaviour of oil markets," Coldwell told reporters.
Al Naimi's trip to Latin America has evoked memories of the late 1990s, when he helped broker a deal with Venezuela and Mexico to curb production and revive prices that had fallen to nearly $10 a barrel.
Brent crude oil steadied above $83 a barrel, consolidating after several months of sharp falls, as US jobs data pointed to stronger economic growth and the dollar remained near four-year highs.--Reuters
Kurdistan oil sales hit $3bn, to pay producers
LONDON, 2 days ago
Iraqi Kurdistan has sold 34.5 million barrels of oil worth almost $3 billion since January, the Kurdistan Regional Government said, despite opposition from the federal government to independent oil sales from the region.
The KRG said in a statement on Friday that it would make an initial payment of $75 million to oil producing companies for their exports and would make further payments on a regular basis, sparking a rally in producers' share prices.
Companies producing oil in the semi-autonomous region include the UK's Genel Energy, Gulf Keystone Petroleum and Afren, and Norway's DNO. Shares in Gulf Keystone rose by more than 6 percent, and Genel shares rose more than 3 percent.
The KRG added that the proceeds of the $2.87 billion sales were being treated as part of what it claimed as its "constitutional entitlement" of 17 percent of Iraqi government revenues, which it says have not been paid by Baghdad since January.
"The KRG is balancing almost a year of non-payments of its budgetary allocation from Baghdad," said Ayham Kamel, Middle East and North Africa director at Eurasia Group.
The statement comes a day after the KRG's minister for natural resources told a conference in Arbil that the region's exports were approaching 300,000 barrels a day.
The KRG said that it had shipped 21.5 million barrels of crude to the Turkish port of Ceyhan and trucked 13 million barrels to the Turkish port of Mersin since January.
The KRG said it had received $2.1 billion in cash and $775 million in payments in kind via refined oil product sales. – Reuters
UAE invested $70b to develop and boost oil and gas output capacity
“We don’t see any potential threat of the shale oil usage as producers,” Energy Minister says
Abu Dhabi: Suhail Bin Mohammad Faraj Faris Al Mazroui, Minister of Energy, has revealed that Abu Dhabi National Oil Company (ADNOC) has so far invested $70 billion (Dh257 billion) to develop new oil and gasfields and to boost the current output capacity of the UAE to 3.5 million barrels per day by 2017.
“The Shah Gas Project is on track to commence production in 2014. ... The Abu Dhabi Company for Onshore Oil Operations (ADCO) is set to augment its oil production capacity from the current 1.4 million barrels per day (bpd) to 1.8 million bpd by 2017,” the minister said in an interview with the Emirates News Agency (WAM) on the eve of the three-day Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC).
On how the UAE will meet the exponential demand for gas required by industry, water and electricity projects, Al Mazroui said the UAE was planning a raft of projects under its national strategy to diversify the energy mix as the liquefied natural gas (LNG) production is enough to meet 50 per cent of the local demand while the remaining 50 per cent was imported.
“We expect to develop new gasfields and launch new projects to import LNG. These projects include the awarding of a contract for the Emirates LNG project in Fujairah by the end of 2014 or early 2015.”
Developed by the Abu Dhabi-based companies Mubadala Petroleum (Mubadala), the project, the largest of its kind in the region, was designed on the concept of land-based re-gasification and storage terminal with a total capacity of 9 million tonnes per year (t/y) of LNG.
Speaking about the latest developments in the world oil market, the minister said the average oil prices that have been persisting over the past four years seemed balanced and suitable to both producers and consumers and could stimulate investment in output capacity in order to meet the growing demand.
Answering a question about the threat that the shale oil could pose to conventional oil and gas industry, particularly to the Opec member states, the minister said, “We don’t see any potential threat of the shale oil usage as producers, given the high production cost of this fuel in comparison with that of the conventional oil. On the contrary, we think these new discoveries will help strike a balance in the supply-demand equation and in reaching a fair price in favour of producers.”
On the possibility of the UAE’s import of shale gas from the US to satisfy its gas thirst, the Minister of Energy said, “The UAE is considering import of gas from several LNQ markets. However, we believe that our policy to diversify LNQ import markets will continue. As the shale gas remains one of our promising supply options, it could constitute a proportion of our gas import bill in the future.
Oil price slide threatens energy subsidies in Arabian Gulf states
Low oil prices may lead Arabian Gulf states to issue additional debt and cut energy subsidies, according to the ratings agency Standard and Poor’s.
“If there’s a prolonged oil price correction, corporate and government-related entities may have to change the way they fund [infrastructure, development and investment] projects,” said Tommy Trask, director of corporate ratings in the Middle East at Standard and Poor’s.
A temporary reduction in oil prices is likely to force Gulf states to tap into their reserves, but “a prolonged period of lower government revenues … may push up sovereign and government-related entity capital market issuance”, the agency’s report states.
The benchmark oil price Brent crude has fallen by 29 per cent in the last nine months, from US$107.76 per barrel, to $83.39 per barrel on Friday. Capital Economics predicts that the oil price will hit $85 next year before falling to $80 in 2016.
The UAE’s break-even oil price is $81.3 per barrel, according to Standard and Poor’s. However, Abu Dhabi’s break-even oil price is $45 per barrel, meaning that the capital’s fiscal plans should be unaffected by the recent fall in oil prices.
“The UAE has a comparatively diversified economy by Gulf standards, making it less vulnerable to lower oil prices,” states a recent report from Capital Economics. “We expect the non-oil economy to grow at a solid pace supported by stronger global demand and rising credit growth.”
The federal fiscal surplus is projected to fall to 9.5 per cent of GDP this year, from 10.8 per cent last year, when the oil price was $96.90 per barrel on average.
Low oil prices have led to new calls from GCC ministers to reduce subsidies for domestic energy consumption.
Energy and water tariffs in Abu Dhabi are set to rise, as the government reduces spending on consumer subsidies. Tariff support is set to cost the emirate Dh17.5 billion this year, according to the Abu Dhabi Executive Council.
Producers in energy-intensive industries, such as aluminium, could lose out if energy subsidies are reduced, Mr Trask said.
“There are strategic reasons why the UAE Government provides subsidies to energy-intensive industries,” he said. “But many of these producers have high margins, so there is room for the Government to reduce subsidies, even while these companies continue to be profitable.”
Lower government revenues may lead to increased corporate and state fixed income issuance – which would be good news for the country’s capital markets.
In April, the Securities and Commodities Authority relaxed sukuk issuance regulations in a bid to encourage more issuers to list on the UAE’s bourses.
Global sukuk issuance hit $21 billion in 2013, while Nasdaq Dubai has attracted about $6bn of new listings this year.
Private sector fixed-income issuance in the UAE is equal to about 0.7 per cent of GDP as of this year – considerably lower than in the UK and US, where private sector bond issuance is equivalent to 29 per cent and 44.5 per cent of GDP respectively.
This means there is room for the UAE to grow its fixed-income capital markets, S&P said, which could improve prospects for corporate financing, and the wider economy.
“Developing fixed-income markets should lead to more resilient and stable financial sectors, and more diversified funding structures,” the report states. This would encourage “economic and private sector employment growth”.
BEIJING, November 9 (RIA Novosti) - Russian natural gas supplies to China via the "western route" pipeline could exceed deliveries to Europe in the mid-term perspective, Gazprom CEO Alexei Miller said Sunday in Beijing.
Miller, who heads Russia's state-run energy giant, told reporters that "taking into account the increase in deliveries via 'western route,' the volume of supplied [natural gas] to China could exceed European exports in the mid-term perspective."
This came after Russian and Chinese energy executives signed on Sunday a package of 17 documents, including a framework deal between Gazprom and China's energy giant CNPC to deliver gas to China via the western route pipeline.
Miller said Gazprom and CNPC were in talks on a memorandum of understanding that would see Russia bring gas to China through the western route pipeline, as well as a framework agreement between the two state-owned companies to carry out the deliveries.
The Gazprom chief added that, under the agreements, Russian natural gas exports to China would reach 30 billion of cubic meters over a span of 30 years.
On Sunday, executives of Russian and Chinese energy companies met in Beijing to discuss the signing of bilateral agreements in the sphere of oil and gas trade. The meeting was held in the presence of Russian President Vladimir Putin and his Chinese counterpart Xi Jinping.
Oil Sands Companies Under Pressure Following Wildlife Deaths
Three oil sands companies say scores of birds were killed after landing at their waste facilities in east-central Alberta, Canada, even though their avian deterrents were operational at the time.
All three companies – Canadian Natural Resources Ltd. (CNRL), Syncrude and Suncor – said the birds began landing the morning of Nov. 4 and that their wildlife deterrents were working properly at the time. However, a dense fog was reported at the time, which may have disoriented the birds, contributing to their deaths.
All told, 122 waterfowl died on the companies’ tailing ponds, where waste from oil extraction is dumped, the Alberta Energy Regulator (AER) reported on Nov. 5. CNRL reported finding 60 dead birds at its Horizon site, and Syncrude said it had to euthanize 30 birds that landed on a similar facility at its Mildred Lake site.
Suncor said that about 120 birds closed in on one of its waste ponds at about the same time, but its deterrents frightened most of them away. Six, though, managed to land.
Investigators sent in by the AER are trying to determine whether the companies’ deterrents were, in fact, working that day. The deterrents include ordinary scarecrows as well as more high-tech devices as radar units and acoustic devices such as propane cannons, which shoot nothing more dangerous than noise, to scare wildlife from toxic areas.
The oil companies expressed concern about the birds’ deaths. CNRL spokeswoman Julie Woo said in an e-mail to Canadian Broadcasting Corp. News, “We are saddened that approximately 60 waterfowl were not deterred and we are currently in the process of confirming the final affected number.”
Will Gibson of Syncrude offered a similar sentiment. He said his company noted increased bird activity in the region that morning. “As a result of these observations,” he told Global News, “our bird deterrent system went into heightened alert.”
“We don’t want our operations to harm wildlife,” Gibson said, “so we’re going to be reviewing our systems to see if there’s additional areas to improve on what we’ve already implemented.”
Syncrude, a major oil sands operator in the region, was hit with a $3 million fine for the deaths of more than 1,600 ducks that had landed on its tailings pond in 2008.
Mike Hudema of Greenpeace Canada says wildlife deterrent systems aren’t enough, and that the oil sands operations need to get rid of tailings ponds, period. “The systems that they put in place to try to keep birds off are not working,” he said. “The only way to keep birds and animals safe in, really, what is a toxic brew of chemicals is to get these tailings ponds off the Alberta landscape.”
AER spokesman Ryan Bartlett said his agency is investigating the incident, but the results may not be known for months. Meanwhile, neither Alberta’s Environment or Energy ministry would comment, leaving the matter to AER. Provincial Premier Jim Prentice said he’d have nothing to say until the AER issues a report on its investigation.
By Andy Tully of Oilprice.com
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