By Ben Sharples
Australian liquefied natural gas producers may face pressure to renegotiate long-term sales contracts amid a flood of low-cost supply into Asia, according to former BHP Billiton Ltd. executive Alberto Calderon.
Russia and the U.S. are developing projects with capacity to produce about 100 million metric tons a year that will determine the long-term LNG price for China, Calderon, a board member of Orica Ltd. (ORI), said yesterday at a Bloomberg seminar in Melbourne.
Cheniere Energy Inc. and Sempra Energy are among companies seeking to tap the U.S. shale boom and build LNG export projects to compete with Australian suppliers that are constructing seven developments at a cost of about $190 billion. Russia will be able to supply gas at about $11 per million British thermal units, compared with $12.50 to $16 for Australian producers, Calderon said.
“What is clear is that Australia will become a major producer of LNG,” said Calderon. “The problem is that most Australian LNG production sits on the right hand side of the cost curve. Contracted tons will be under pressure.”
Australia is poised to surpass Qatar as the world’s biggest supplier of LNG. Exports are forecast to climb to 83 million tons a year by 2020, compared with 79 million tons for Qatar, Citigroup Inc. estimated in a July 28 note.
LNG for northeast Asia gained 6.8 percent to $12.50 per million Btu during the week ended Sept. 1, according to Energy Intelligence Group’s World Gas Intelligence publication. Prices are near the lowest level since 2011.
By Mark Shenk
U.S. crude production will surge to a 45-year high next year, lowering prices and reducing the need for imports, government forecasters said yesterday.
The U.S. Energy Information Administration raised its estimate of 2015 output by 250,000 barrels a day to 9.53 million, the most since 1970, Adam Sieminski, the administrator of the EIA, said in a statement yesterday. The agency forecast output of 8.53 million barrels a day this year, up from 7.45 million in 2013.
“U.S. production levels are astounding,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.6 billion, said by phone yesterday. ‘We will see further revisions, because these technologies get better over time.’’
The EIA also reduced its price forecasts. West Texas Intermediate will average $94.67 a barrel in 2015 versus the August projection of $96.08, the EIA said in its monthly Short-Term Energy Outlook. The agency trimmed its 2015 Brent crude forecast to $103 from $105 and cut the gasoline prediction to $3.41 from $3.46.
“Rising monthly crude oil production, which will approach 10 million barrels a day in late 2015, will help cut U.S. fuel imports to just 21 percent of domestic demand, the lowest since 1968,” Sieminski said.
Falling Imports
Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in North Dakota, Texas and other states. U.S. crude production jumped to 8.6 million barrels a day in August, the most since July 1986. Those gains have prompted calls for lifting the U.S. ban on crude exports, including one yesterday from Larry Summers, formerly the top economic adviser to President Barack Obama.
WTI will average $98.28 a barrel this year, down from last month’s projection of $100.45, the report showed. Brent is forecast to average $106 this year, lower that the August estimate of $108.11. WTI settled at $92.75 a barrel yesterday on the New York Mercantile Exchange. Brent settled at $99.16 on the London-based ICE Futures Europe exchange.
Oil production outside of the Organization of Petroleum Exporting Countries will rise 3.4 percent from 2013 to 55.91 million barrels a day this year. The 2014 output projection was increased 100,000 barrels from August’s report.
OPEC members will produce 35.77 million barrels a day this year, the EIA said. Last month’s forecast was 35.84 million.
American Bulk
“Global oil supplies are expected to grow by 1.3 million barrels a day in 2015, with output growth in the United States accounting for about 91 percent of that,” Sieminski said.
The department left its forecast for global oil consumption this year little changed at 91.55 million barrels a day from 91.56 million last month. The forecast for 2015 demand was cut to 92.89 million barrels a day from 92.96 million.
Total global liquid fuel consumption in projected to climb 38 percent to 119 million barrels a day in 2040, the EIA said in a separate report released yesterday. Asia and the Middle East will be the main drivers of the demand surge, according the International Energy Outlook 2014.
“The growth outlook for liquid fuels use will be largely driven by demand in the developing world, especially in Asia and the Middle East,” Sieminski said. “Those two regions combined account for 85 percent of the total increase in liquid fuels use worldwide over that period.”
By Vladimir Kuznetsov
Oil falling below $100 a barrel for the first time in 15 months is a signal that Russia can’t stay out of the bond market indefinitely after the Finance Ministry canceled its eighth auction in a row.
Crude dropped to $98.96 in London today, what would be the weakest level on a closing basis since April 17 last year and a 12 percent retreat in the third quarter. Ruble-denominated debt handed investors the biggest loss in the period in dollar terms among 31 emerging markets monitored by Bloomberg.
With no auctions since mid-July, a steeper decline in Russia’s main export earner could flip the nation’s $19 billion budget surplus into a deficit by year-end, according to Bank of America Corp. U.S. and European Union sanctions over Ukraine drove 10-year ruble borrowing costs 120 basis points higher since June. That compares with a 66 basis-point drop in Brazilian yields.
Oil at current levels means “the budget surplus will be erased by the end of the year,” Vladimir Osakovskiy, an economist at Bank of America in Moscow, said by e-mail yesterday. A $10 drop in the average price “will make borrowing needs more apparent,” he said.
Should the price fall by that amount, the budget will end the year with a 600 billion-ruble to 700 billion-ruble ($16 billion to $19 billion) shortfall, according to Osakovskiy.
No Premium
Borrowing costs of the world’s largest energy exporter have come under pressure this year as the standoff over Ukraine escalated, with the U.S. and EU imposing penalties to punish President Vladimir Putin for his alleged role in separatist unrest in Ukraine’s east.
Bonds extended declines after the Bank of Russia raised its main interest rate by 50 basis points to 8 percent on July 25, taking its total increase since Putin’s March incursion into Crimea to 250 basis points. The rise in Brent to as high as $115 a barrel in June and the weaker ruble have so far helped the country shelve bond sales since the depreciation boosted its dollar-denominated oil proceeds.
Government bonds due in February 2027 yielded 154 basis points above the central bank’s key interest rate. That’s 30 basis points higher than the last time Russia said it would proceed with a local bond auction on July 15, before the U.S. and EU imposed penalties blocking Russian companies from accessing funds abroad.‘Too Expensive’
“The yield is too expensive and the Finance Ministry doesn’t need to borrow at such a cost,” Konstantin Nemnov, the head of fixed income at TKB BNP Paribas Investment Partners in St. Petersburg, said by phone yesterday. “Sanctions are making investors nervous, hence the premium.”
Russia’s five-year bond yield climbed above the rate on 10-year notes for the first time in two years on July 28. The spread was zero yesterday, after widening to as much as 12 basis points on Aug. 11.
“Investors don’t want long bonds now, it’s too large a market risk,” Dmitry Dudkin, the head of fixed-income research at UralSib Capital in Moscow, said yesterday. “There’s no premium to shorter debt and the Finance Ministry doesn’t want to sell short bonds.”
The borrowing-cost pressure may keep climbing as analysts at banks including Sberbank CIB project the central bank will lift interest rates again as early as this week. Eight of 22 analysts in a Bloomberg survey project policy makers will increase the main rate by as much as 50 basis points at their Sept. 12 meeting. The rest expect no change.
Any Price
While the government has leeway to refrain from debt offerings due to the weaker ruble, it will be harder to carry on with the same strategy next year, Konstantin Artemov, a money manager at Raiffeisen Capital Asset Management, said yesterday.
The currency weakened 0.3 percent at 37.2325 per dollar at 11:28 a.m. in Moscow, bringing this year’s retreat to 12 percent, the third-worst among 24 developing nations monitored by Bloomberg. Russian local-currency notes in the Bloomberg Emerging Market Local Sovereign Index lost 11 percent this quarter.
“The Finance Ministry fully realizes that it’s not so much the problem of this year as the problem of next,” Artemov said. That’s when it will need “to enter the market and borrow at any price,” he said.
By Rania El Gamal
DUBAI (Reuters) - Iraq's new oil minister is a veteran politician who will need to deploy all his experience to resolve disputes over Kurdish oil production and allay foreign investor fears about Islamist militia control in northern oil fields.
Adel Abdul-Mehdi, a former finance minister and vice president who was given the oil portfolio in a new government approved by parliament on Monday, is seen as welcoming foreign investment and business in Iraq.
Some Iraqi Kurdish sources say they also view him as a relatively conciliatory figure who might bring a more positive atmosphere to tense talks between Baghdad and the Kurdistan region over rights to oil production.
But he faces a daunting task, taking over when Islamic State militants are in control of swathes of land and a few oilfields in northwestern Iraq, while the Kurds are defying Baghdad by exporting crude directly via the Mediterranean port of Ceyhan.
In addition to those grave security and political challenges, he must also overcome foreign concerns over Iraq's entrenched bureaucracy and poor infrastructure -- a legacy of years of sanctions, war and internal conflict.
Any policies which Abdul-Mehdi pushes will have to run a gauntlet of sectarian tensions as the OPEC member's new leaders struggle to keep the country united.
"The challenges ahead of the new minister are very big and very wide," said Samuel Ciszuk, analyst at the Swedish Energy Agency.
POLITICS
Abdul-Mehdi has heavyweight political credentials which could help him. A member of a family involved in politics since the days of the Iraqi monarchy, he was in the Baath party briefly in the 1960s before Saddam Hussein seized power, then became a prominent Marxist and ultimately an Islamist.
A Shi'ite, he is a senior leader in the Supreme Iraqi Islamic Council, one of Iraq's main Shi'ite parties that has traditionally strong ties with the Kurds.
The Kurdish connection may go some way to defusing the long-running dispute between Baghdad and the regional Kurdish capital of Arbil over natural resources and territory.
The Kurds began exporting oil in May via an independent pipeline. Iraq has asked a U.S. court to seize $100 million worth of Kurdish crude oil on a tanker near Texas, and has threatened to sue potential buyers of the cargo.
Abdul-Mehdi "is an old politician who has held many posts. He is a man of dialogue and trust. I do believe he may be the best bridge between Baghdad and Arbil," said Mithal Alusi, a secular lawmaker. "He was the best choice."
A Kurdish source said: "He is a conciliatory figure. He never had any anti-Kurd rhetoric like other Shi'ite politicians, and has frequently visited the Kurdish Regional Government. I think this might be good for the Kurds."
Former deputy prime minister for energy affairs Hussain al-Shahristani - seen by the Kurds as leading a hostile policy against independent Kurdish oil development and exports - was not named for any energy-related post in Iraq's new cabinet.
Some observers see this as a goodwill gesture, showing the new government of Prime Minister Haidar al-Abadi may be willing to resolve its row with Arbil over oil resources and revenues as a step towards boosting national output.
"The main challenge now for Iraq’s oil sector is to achieve a common national policy along with the required supporting legislation to enable the massive investments needed to achieve the country’s production potential,†Majid Jafar, chief executive of the UAE's Crescent Petroleum, told Reuters.
In addition to his domestic political challenge, Abdul-Mehdi will need to deal with the foreign oil firms which Iraq needs to exploit its oil reserves.
"The industry definitely wants somebody who understands contractual negotiations and the technicality of the oil industry," Ciszuk said.
Abdul-Mehdi does not have an oil industry background, but he was finance minister in 2004-2005. His website says he has degrees in political science and political economy from France, and previously worked as an economist.
SOUTH
Iraq originally set an overall oil production capacity target of 12 million barrels per day by 2020, rivalling that of top oil exporter Saudi Arabia, after it signed service contracts in 2009-2010 to develop its giant southern oilfields.
Oil majors working in Iraq include BP
But crumbling infrastructure, red tape and a lack of clear oil legislation have stunted investor interest. Iraq failed to reach its targets and Baghdad has now reduced the overall capacity target to 8.5-9 million bpd, after negotiating revised plateau production rates with oil companies.
All of Iraq's oil exports now come from the south, with frequent bomb attacks on the northern Kirkuk-Ceyhan pipeline halting exports from there since February.
Abdul-Mehdi will lead efforts to raise oil exports beyond their current level of 2.4 million bpd, and will work with oil companies on developing Iraq's southern oilfields to boost output above 3.2 million bpd.
"In terms of what the minister has to deal with, it is really a continuation of the past and current challenges -- ensuring that the obligations of the government are met in executing the technical service agreements," said one oil industry source.
That includes ensuring foreign oil companies are protected and that decisions on contracts for service work, such as building new pipelines or drilling wells, are not being held up by administrative issues, the source added.
MOSCOW (Reuters) - Russia will continue to support its companies under Western sanctions, irrespective of their ownership structure, Prime Minister Dmitry Medvedev was quoted as saying on Tuesday.
"This is the government's responsibility - to protect Russian business if it is facing unfair and unlawful actions by foreign states or foreign companies," Medvedev was quoted by news agencies as telling Novatek CEO and co-owner Leonid Mikhelson.
Novatek and its other co-owner, Gennady Timchenko are under U.S. sanctions for Moscow's policy on Ukraine. Novatek leads the Yamal-LNG project that has an estimated cost of $27 billion. The project should become Russia's second plant to produce liquefied natural gas (LNG).
Medvedev did not say, however, if Novatek or Yamal LNG will get any state aid as a result of the sanctions. A number of Russia's companies, including state oil giant Rosneft, have already asked the government for the help.
Asia-focused Yamal should more than double Russia's share on the global LNG market at times when Moscow - the world's top energy producer - is trying to diversify its energy flows eastwards amid stance with the West over Ukraine crisis.
Novatek and other shareholders with Yamal, France Total and Chinese CNPC, plan to ship the first LNG cargo from Yamal in 2018.
Mikhelson told Medvedev on Tuesday that Novatek did not plan to change its plans, including for Yamal LNG.
"I think that putting us on the sanctions list will not force us to change our plans," Mikhelson said. "All orders are being placed. Almost all (LNG) volumes are covered by contracts."
He added that some 200 billion roubles (£3.34 billion) have already been invested in the project and 80 billion roubles more will be put in by the end of the year.
Novatek declined to comment.
Timchenko said in May that Chinese banks expected to provide up $20 billion at a time when European lenders were less willing to do so. The first tranche of investment from China was expected in the fourth quarter.
Chinese financing is coordinated by China Development Bank Corporation. Russia's state development bank VEB and Gazprombank - both under Western sanctions - are coordinating financing from the Russian side.
WASHINGTON, Sept 9 (Reuters) - The United States should commit to exporting oil and natural gas to Europe under a transatlantic trade deal in light of the European Union's geopolitical situation, the EU trade commissioner said on Tuesday.
Tension between Russia and the West over the future of Ukraine is spurring the European Union to renew efforts to end decades of dependence on Russian gas. One solution would be greater access to abundant U.S. resources.
Overturning a 40-year U.S. ban on oil exports by agreeing to send oil to Europe could pressure Russian President Vladimir Putin by lowering global crude prices.
"It is important that we come forward with a position on that (energy agreement) as soon as possible, because maybe you may have noticed that some things are going on in Europe," EU trade chief Karel De Gucht told reporters at a briefing in Washington.
"I cannot imagine that there will ever be a TTIP without such (energy) provisions," he added, referring to the Transatlantic Trade and Investment Partnership.
De Gucht was in town for meetings with U.S. Trade Representative Michael Froman, ahead of negotiations later this month on the trade pact, which aims to integrate two markets accounting for half the world's economy.
The rewards of a U.S.-EU energy agreement could be big for the European Union, where natural gas prices are around three times those in the United States. The Europeans want a detailed chapter in the trade pact that lays out U.S. commitments to energy exports, hoping to make supply more secure.
But the politically sensitive subject is likely to complicate trade talks already spanning everything from agriculture to finance.
The United States worries more exports could push up the price of fuel at home, potentially costing politicians votes and damaging competitiveness for industries with heavy energy use.
The U.S. ban on exporting crude oil without a license dates from the 1970s when U.S. lawmakers sought to conserve reserves following an Arab oil embargo.
Washington is now facing growing international pressure to ease the ban, as resource-hungry allies seek a reliable energy trading partner.
De Gucht said even though the trade pact will likely not take effect for more than a year, Washington and Brussels could both benefit from a clear political agreement on energy sooner rather than later, implying that it would send a strong signal to Moscow about the European Union's reduced energy dependence.
"I mean, an agreement on TTIP, in the best of all worlds, would be (at) the end of next year," De Gucht said. "I think everybody would agree that energy is a little bit more urgent for the time being, and also, very much geostrategic." (Reporting by Anna Yukhananov; Editing by Tom Brown)
By Jonathan Stearns
European Union governments meet to consider pulling the trigger on tougher Russian sanctions as the bloc weighs the viability of President Vladimir Putin’s truce in Ukraine.
The talks in Brussels among the 28 member nations follow the EU’s abrupt decision this week to put on hold for at least a “few days” a second package of economic penalties against Russia over its encroachment in Ukraine. The delay offered more time to assess the effectiveness of the cease-fire without risking further trade retaliation by the Kremlin.
The planned sanctions, originally due to be published in the Official Journal yesterday, include barring some Russian state-owned defense and energy companies from raising capital in the EU, according to a European official who spoke on the usual condition of anonymity. The diplomatic deliberations are due to start at 10 a.m. CET today.
Alexander Stubb, prime minister of Russia’s neighbor Finland, said he’s “very worried” about the possibility of Russian counter-sanctions should the EU enact the new package. At the same time, “we are strongly of the opinion that the cease-fire has so far not been permanent,” Stubb told reporters in Helsinki.
Putin, Poroshenko
The Sept. 5 truce between Ukraine and pro-Russian separatists has raised the prospect of ending a conflict that has killed at least 3,000 people, displaced more than 1 million more and soured Russia’s ties with former Cold War foes.
“Now it’s up to the member states to look at this situation again and examine the implementation of the cease-fire agreement and decide how to take this forward,” Maja Kocijancic, spokeswoman for EU foreign-affairs chief Catherine Ashton, told reporters in Brussels yesterday.
The agreement to halt fighting came in the midst of an EU push to ratchet up penalties against Russia in coordination with the U.S. in a bid to force Putin to end support for the rebels in eastern Ukraine. Putin’s backing of Ukrainian separatists and his annexation of Crimea have jolted the security order in Europe.
Putin and his Ukrainian counterpart, Petro Poroshenko, agreed on the need to sustain the truce during a phone call late yesterday, the Kremlin said on its website. Putin reiterated Russia’s “readiness to continue to contribute to the peaceful settlement of the crisis.”
‘Not Optimistic’
The U.S. is finishing measures to “deepen and broaden” its penalties across Russia’s financial, energy and defense sectors, State Department spokeswoman Marie Harf told reporters in Washington yesterday. So far the cease-fire is ‘mostly holding,’’ Harf said.
In a sign the cease-fire accord has been shaky, Ukrainian Defense Ministry spokesman Oleksiy Dmytrashkovskyi said in a YouTube video that pro-Russian rebels overnight on Sept. 8 shelled government positions near the airport of the eastern city of Donetsk, as well as four more positions of Ukrainian soldiers in other areas, without causing troop casualties.
“I am not optimistic at all -- I have not been optimistic from the beginning,” Didier Burkhalter, chairman of the Organization for Security and Co-operation in Europe, which helped mediate the cease-fire and is monitoring it, told reporters in Geneva. Even so, “we want to give it a chance.”
Russia hopes the truce “will be consolidated” within days, Foreign Minister Sergei Lavrov said in Moscow.
Farm Goods
In an initial set of sanctions imposed in late July, the EU barred five state-owned Russian banks from selling shares or bonds in Europe; restricted the export of equipment to modernize the oil industry; prohibited new contracts to sell arms to Russia; and banned the export of machinery, electronics and other civilian products with military uses -- so-called dual-use goods -- to military users.
Those measures prompted Russia to ban imports of some EU farm goods, a step that has cut off about 5 billion euros ($6.5 billion) of annual trade and left the bloc scrambling to aid its producers. In a statement on Sept. 6, the day after EU member-state diplomats drew up the latest sanctions plan, the Russian government signaled it would take further retaliatory action should the extra penalties be enacted.
“In the case that they are introduced, a reaction from our side will undoubtedly follow,” the Foreign Ministry said in a statement in Moscow.
EU sanctions decisions require the support of all EU governments, giving any one nation leverage to seek concessions. Several European leaders including Stubb and his Hungarian counterpart, Viktor Orban, have expressed concerns the penalties against Russia will hurt the their own economies.
Defense Companies
The delayed EU package would extend to three energy companies -- OAO Gazprom Neft (SIBN), OAO Rosneft (ROSN) and OAO Transneft -- as well as to nine defense companies the ban on share or bond sales in the EU, according to the European official who spoke anonymously.
It would also shorten to 30 days from 90 days the threshold for the maturity of debt whose sale in the bloc by the targeted Russian businesses is banned; prohibit European banks from offering syndicated loans to sanctioned Russian companies; expand the restrictions on dual-use goods and widen the curbs on technologies for the oil industry, according to the official.
EU governments on Sept. 8 approved the measures in principle while stopping short of giving the green light for their publication in the Official Journal and entry into force. The Ukrainian government yesterday pressed the bloc to complete the process for enacting the sanctions, saying they are key to countering Russian aggression.
Political Sensitivities
“We urge the European partners to implement this important decision without any delay,” Kostiantyn Yelisieiev, Ukraine’s ambassador to the EU, said in a statement on the website of the Ukrainian mission to the bloc.
In a sign of the political sensitivities of applying the tougher measures, EU diplomats met on short notice on Sept. 8 in Brussels to discuss the package they had approved three days earlier.
An additional outcome two nights ago was that the EU put on hold a parallel plan to expand a blacklist of people and companies subject to asset freezes in Europe in connection with the Ukrainian unrest. EU leaders on Aug. 30, beyond calling for more economic penalties against Russia to be prepared, asked for proposals to blacklist people and institutions “dealing with” separatist groups in the Donbass region of eastern Ukraine.
‘Oligarchs, Cronies’
The latest people who would be targeted include the new leadership in Donbass, the government of Crimea and “Russian decision-makers and oligarchs,” EU President Herman Van Rompuy said in a Sept. 5 statement after the EU diplomats had approved the new measures and sent them to the bloc’s national governments for final approval on Sept. 8.
The new blacklist would add 24 people, including two additional Kremlin “cronies,” according to a second European official who spoke on the usual condition of anonymity.
Like the tougher economic penalties, the latest blacklist targets had been due to be disclosed yesterday in the Official Journal. The economic penalties would normally take effect the day after publication, while the blacklist decisions would enter into force the same day.
By Jim Snyder
Larry Summers, President Barack Obama’s former top economic adviser, gave a full-throated endorsement of lifting the U.S. ban on crude oil exports today, saying few public policy issues held such unequivocal benefit.
“I don’t really understand who the losers are who are very important,” Summers said at an event at the Brookings Institution in Washington, a think tank that released its own analysis today that found allowing more exports would lower, not increase, gasoline prices.
Summers declined to predict whether Obama would lift the ban, which was put in place by Congress in 1975 in response to the Arab oil embargo two years before. Summers said the law gave the president the authority to end the restriction if he found doing so to be in the nation’s interest.
Summers’s remarks and the report from Brookings adds support for exports beyond the oil industry lobbyists who’ve argued removing the ban is the best way to ensure the U.S. energy renaissance continues. That probably won’t change the political dynamics immediately.
While some members of Congress support allowing overseas sales, including Senator Lisa Murkowski, an Alaska Republican, measures to overturn the ban with legislation haven’t advanced. Other lawmakers, such as Senator Ed Markey, a Massachusetts Democrat, have said more exports could raise gas prices at home and keep the U.S. overly dependent on foreign oil.
Fracking Advent
For four decades, the crude export ban was of little consequence. Domestic production was falling as producers like Irving, Texas-based Exxon Mobil Corp. (XOM) looked overseas for easier-to-reach reserves.
The advent of horizontal drilling and hydraulic fracturing, or fracking, in which drillers shoot water, sand and chemicals underground to break up rock and free trapped oil and gas, reversed the trend. Production is now at its highest point since 1987.
This U.S. energy renaissance has prompted companies awash with crude to seek new markets. Supporters say without them, drilling will decline in the U.S.
Brookings said in its report that oil production in the Gulf Coast alone could increase as much as 1.5 million barrels a day if exports were allowed. The added oil to the global market could reduce gasoline prices 7 cents to 12 cents a gallon, Brookings said.
Summers said the only losers of lifting the ban would be refineries that are now benefiting from cheaper crude prices than the global benchmark. He agreed that lifting the ban would lower domestic gasoline prices, and create jobs and economic growth.
To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net
To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Romaine Bostick
By Lynn Doan
Alon USA Energy Inc. (ALJ), the refiner that shut its Bakersfield plant in California almost two years ago amid high oil prices, won approval today to unload crude from rail cars at the complex.
The Kern County Board of Supervisors voted in Bakersfield today to approve Alon’s $170 million plan to upgrade units at the refinery to process a wider range of crudes, unload about 150,000 barrels of oil a day from trains and send any crude it doesn’t use by pipeline to other plants in the state.
Alon’s complex will expand California refiners’ access to North American oil sources that they can’t reach by pipeline, including heavy crude from Canada and light oil from North Dakota’s Bakken shale formation. The project’s approval comes after a year’s worth of environmental reviews, during which groups including San Francisco-based Earthjustice warned the complex would increase pollution and the risk of derailments.
As part of the project, Alon will build a rail loop from a new spur connection off of BNSF Railway Co.’s tracks and install boilers that will allow the complex to unload both light and heavy oils. The company is also planning upgrades at a crude unit, two hydrocrackers and two hydrotreaters. Crude-processing capacity at the plant will remain at 70,000 barrels a day.
Paul Eisman, Alon’s president and chief executive officer, said in May that the upgraded plant would process light, sweet crude should it restart.
“It could come from the Bakken, could come from Colorado, could come from, I guess, potentially from West Texas,” he said in a conference call with analysts May 2.
Rising Shipments
California’s oil-by-rail shipments have jumped to a seasonal record as the state’s refiners turn to trains to reach surging production from U.S. shale formations. The boom has boosted domestic output to the highest level in 28 years, bringing the nation closer to energy independence.
Alon estimated in March that shipping Bakken oil by rail to Bakersfield would cost $14 a barrel. The North Dakota crude was assessed at a $4.90-a-barrel discount to the U.S. benchmark West Texas Intermediate oil today, data compiled by Bloomberg show.
Alaska North Slope oil, which makes up about 12 percent of California’s crude slate, was meanwhile at a $4.15 premium.
The upgraded Bakersfield refinery would be able to send 19,000 barrels of diesel and gasoline a day to nearby Fresno, California, by pipeline, displacing fuel sent from refineries in the San Francisco Bay area, Alon said in filings to the county.
The project’s completion may increase Alon’s value by $7 a share, Credit Suisse Group AG (CSGN) analyst Edward Westlake said in an e-mailed research note from New York yesterday. The complex would allow the company to create a tax-exempt master limited partnership, “forcing the value of logistics and opening an avenue to value creation for logistics projects,” Westlake said in the note.
By Dan Murtaugh and Lynn Doan
Drivers across the U.S. enjoying the lowest pump prices for this time of year since 2010 will probably see further declines as refineries benefiting from the shale boom produce record amounts of fuel.
The average is $3.433 a gallon, down 6 percent since Memorial Day on May 26, AAA data show. That’s the largest decline from the start of the summer driving season since 2008. U.S. refineries operated at the highest-ever seasonal rates every week since July 4.
Processors are using domestic crude that costs less than foreign imports as horizontal drilling and hydraulic fracturing in shale formations increased output to the most since 1986. Gasoline will drop another 10 to 20 cents a gallon by the end of October as retailers switch to cheaper winter-blend fuel, said Michael Green, a Washington-based spokesman for AAA, the largest U.S. motoring group.
“Refineries this summer were running at record-high levels due to the increase in domestic oil production,” Green said Sept. 4 by phone. “That has helped cushion U.S. consumers from many concerns overseas and helped to alleviate any price spikes this summer.”
Crude oil, which makes up about two-thirds the cost of gasoline at the pump, has fallen 14 percent since June 20. U.S. benchmark West Texas Intermediate is selling for $92.75 a barrel compared with $99.16 for European Brent, the benchmark for more than half of the world’s oil.
Record Production
U.S. crude futures have closed below Brent every day since Aug. 16, 2010. Shale drilling has boosted U.S. production 63 percent in the past five years and restrictions on the export of most unprocessed crude increased supply to a record earlier this year.
Oil output will reach a 45-year high in 2015, the Energy Information Administration reported yesterday in its Short-Term Energy Outlook. Gasoline pump prices will average $3.41 a gallon next year, the agency estimated, down from $3.46 forecast in August.
Refineries processed 16.63 million barrels of crude a day the week of July 11, the most in Energy Information Administration records dating back to 1989. Plants used 16.43 million barrels a day in the week ended Aug. 29, the ninth-straight week with inputs at a seasonal record. Refiners and blenders produced a record 9.89 million barrels a day of gasoline in June.
Domestic Crude
Domestic crude accounted for 54 percent of refinery demand in June, up from 37 percent in June 2011. Imports into the Gulf Coast region, home to more than half the nation’s refining capacity, fell 42 percent during that period to 3.02 million barrels a day, the least since 1990.
While refinery production is at an all-time high, gasoline consumption at the end of the summer is the lowest in 12 years. Four-week average demand was 9.07 million barrels a day in the period ended Aug. 29. U.S. gasoline supplies at the end of summer are 1 percent above the average of the past three years.
“Demand going into the Labor Day holiday was disappointing,” Phil Flynn, a senior market analyst at Price Futures Group in Chicago, said Sept. 8 by phone. “This was going to be the year. And then it really kind of fell short.”
Prices typically fall as retailers switch from summer-blend to winter-blend gasoline in September. Over the past three years, costs at the pump dropped by an average of 28 cents a gallon from Sept. 1 to Oct. 31.
Winter Blend
Gasoline is a complex blend of hydrocarbons and additives. The federal government requires a different mixture in the summer to reduce damage to ozone levels. Refiners and blenders can mix less-expensive components into gasoline sold after Sept. 15. September futures settled on Aug. 29 at a premium of 15.98 cents a gallon to October futures.
“Near term, retail prices could continue falling a few more cents because of the reduced cost of manufacturing,” said Trilby Lundberg, president of the Lundberg Survey Inc., which publishes retail gasoline prices.
Any price declines could be erased if crude prices spike or if an unplanned refinery outage reduces production more than expected. About 1 million barrels a day of U.S. refining capacity will go offline in September and 2 million in October for planned maintenance, according to London-based consulting firm Energy Aspects Ltd.
A major stimulus package from the Chinese government or continued strengthening in the U.S. economy could also slow the slide in prices, Carl Larry, president of Oil Outlooks & Opinions LLC, said from Houston by phone Sept. 8.
Greater Demand
“We could add a few hundred thousand jobs by the end of the year,” he said. “People drive on summer vacation, but more people drive when they go to work.”
The center of the country has benefited more from the shale boom than the East and West coasts, EIA data show. New York City prices this year have averaged 31 cents a gallon more than Houston, the largest gap in data going back to mid-2000. Los Angeles prices are a record 70 cents more than Houston.
Drivers have already been helped by the shale boom, even if they haven’t seen it, said Green of AAA. Under ordinary circumstances, oil and gasoline prices would have shot up this summer because of global supply concerns tied to violence in Iraq and political tumult in the Ukraine.
“Gas prices continued to fall for much of the summer despite fighting in the Middle East and Ukraine,” Green said. “Before the boom in petroleum production, it’s likely those international events would have resulted in significantly higher prices.”
By Juan Pablo Spinetto and Sabrina Valle
Petroleo Brasileiro SA (PBR) requested access to a former executive’s allegations of a kickback scheme involving the state-run oil producer in a scandal that threatens to influence the outcome of presidential elections.
Petrobras, as the Rio de Janeiro-based company is known, asked the judge investigating the so-called Car Wash money-laundering case for details of testimony given by former refining head Paulo Roberto Costa, it said yesterday in a statement. The oil producer also wrote to companies cited by Brazilian press as allegedly involved in kickbacks, Petrobras said, without identifying them.
Veja magazine reported over the weekend that a group of more than 30 politicians, including members and allies of President Dilma Rousseff’s Workers’ Party, allegedly received bribes linked to Petrobras contracts. The Sao Paulo-based magazine said the list of names was given by Costa during testimony to the federal public prosecutor.
Costa, who is in jail as the police investigate him for money laundering, is collaborating with prosecutors in exchange for a lighter sentence. The scandal, which has been on the front page of Brazil’s main newspapers, is breaking four weeks before presidential elections, triggering comments by the three main candidates including incumbent Rousseff.
Leaked Information
“It is in the best interests of the company’s management to see the completion of all ongoing investigations,” Petrobras said in yesterday’s statement. “Any irregular acts that may have been committed by a person or group of people, whether or not they are company employees, do not represent the conduct of the Petrobras institution and its workforce.”
Petrobras slid 1 percent to close at 21.48 reais in Sao Paulo. The stock has risen 26 percent this year.
Silvio Sinedino, a Petrobras board member representing employees, said he requested that Costa’s reported testimony be discussed at a Sept. 12 board meeting.
“I want to know what management is doing to prevent the ongoing erosion of Petrobras’ image,” Sinedino said in a text message responding to Bloomberg questions.
Brazil’s federal police said it will investigate the information leaked to the press in a statement posted on its website.
Rousseff’s secretary general Gilberto Carvalho said the leaked information is an attempt to alter election results. The candidate for the opposition Brazilian Social Democracy Party Aecio Neves, who is in third place in the polls, said Rousseff, a former energy minister and former chairwoman of Petrobras, owes Brazilians an explanation.
‘Political Use’
Eduardo Campos, former governor of Pernambuco state and presidential candidate for the Brazilian Socialist Party, who died in a plane crash last month, was named by Costa as one of the politicians supposedly involved, according to Veja. The magazine didn’t give details on the alleged scheme, which also involves money laundering, or provide proof to back up Costa’s allegations.
Petrobras “has been destroyed by its political use, corruption and handing out favors,” Marina Silva, who replaced Campos as presidential candidate, told reporters in Sao Paulo. She said Campos always supported the creation of a special committee to investigate irregularities within Petrobras.
The attempt to involve Campos in the scandal was a reaction to polls that show Silva ahead of Neves in the first-round and beating Rousseff in the runoff, Silva’s party, the PSB, said in a Sept. 6 e-mailed statement.
‘Only Malice’
“There is no accusation worthy of honest consideration,” the PSB said. “There is only malice.”
In a Sept. 2-3 Datafolha poll, Silva had 34 percent support in the first round, compared with 35 percent for Rousseff. Neves garnered 14 percent support in the poll, which had a margin of error of plus or minus two percentage points. Silva would beat Rousseff in the second round by 48 percent to 41 percent, the poll showed.
If the frontrunner doesn’t get more than 50 percent of the vote in the Oct. 5 first round, Brazil will hold a runoff between the top two candidates who received the most votes.
By Jesper Starn Sep 10, 2014 1:33 AM GMT+0700
Divergent tax policies mean Norway risks missing out on most of a $6 billion wind-power boom while neighboring Sweden benefits.
Norway, which aims to triple wind capacity by the end of the decade, has erected one turbine for every seven installed in Sweden since the countries signed a pact to share renewable production two years ago. Norway, western Europe’s biggest oil and gas producer, has so far installed less than 10 percent of what it’s expected to complete by 2020 under the accord.
The countries’ mismatched tax rules threaten to deny Norway investment in an industry where jobs will triple by 2030, according to the European Wind Energy Association in Brussels. While Statkraft AS, Norway’s state-owned power company, didn’t build any wind projects in its home country in the eight years through 2013, it spent as much as 7.5 billion kroner ($1.2 billion) on turbines in Sweden.
“Changes must be made now or there will be no significant investment in renewables in Norway, all investments will go to Sweden,” Ola Elvestuen, leader of the Norwegian parliament’s Energy and Environment Committee, said by phone on Sept. 3. The country’s minority government relies on support from Elvestuen and his Liberal Party to get its budget passed.
Under their renewable energy agreement, Norway and Sweden give tradable certificates to renewable energy producers for each megawatt-hour they generate for the first 15 years of a unit’s lifetime. Electricity suppliers must buy those certificates to match demand, the cost of which is passed on to residential ratepayers regardless of where the projects are.
Rising Costs
Norwegian consumers have paid about 1.8 billion Norwegian kroner into the system. Those costs will rise to as much as 40 billion kroner over 15 years at current prices, with most of the money going to producers in Sweden, according to wind lobby group Norwea in Oslo.
Norway and Sweden are jointly seeking to add 26.4 terawatt-hours of new annual renewable energy production by 2020, or about 9 percent of all output last year from all energy sources in the region. Before joining, Norway expected to build half the system’s wind power, or about 3,000 megawatts of capacity, requiring investment by developers of at least 36 billion kroner based on an average cost of 12 million kroner per megawatt, according to Norwea.
Hydro Power
Sweden’s wind output rose 38 percent to an unprecedented 9.9 terawatt-hours last year, according to its energy agency. That compares with the 9.4 terawatt-hours generated at EON SE’s Oskarshamn-3, the biggest nuclear reactor in the Nordic market. One million megawatt-hours is one terawatt-hour.
While Norway gets 97 percent of its electricity from hydropower, it joined the system to boost security of supply when cold, dry weather draws on water reserves and to help meet renewable energy targets. It adopted European Union goals the year before, committing it to meet 68 percent of all its energy needs including transport and heating with green sources by 2020 from 58 percent in 2005.
What Norway and Sweden didn’t foresee was how a drop in power prices would force renewable energy developers to scrutinize project costs, such as the countries’ treatment of asset depreciation, according to Peter Chudi at brokerage Svensk Kraftmaekling AB in Stockholm. Year-ahead Nordic electricity prices have fallen 21 percent since 2012.
“Those in Norway were surprised that the margins for new projects got so squeezed that it came down to the different tax rules for write-offs,” Chudi said Sept. 4 by phone. “If prices for power and green certificates were higher, the tax difference wouldn’t have got the same focus it has now.”
Market Choice
The certificates closed today at 185 Swedish kronor ($26.02), down 8 percent from their February peak, Svensk Kraftmaekling data show. That would give a wind-power producer a combined income of 52 euros ($67) a megawatt-hour based on an average day-ahead power price of 32 euros a megawatt-hour at the Nordic Nord Pool Spot AS exchange in Oslo last month.
Policy makers originally envisaged wind power investment would be split evenly between the countries. Norway’s government is unfazed by the shift to Sweden as the certificate program is designed to direct investment to where it’s best suited, regardless of what share is in Norway or Sweden, said Lise Rist, a senior communications adviser at Norway’s Energy and Petroleum Ministry in Oslo.
“It is for the market to decide which projects will be built,” Rist said by e-mail on Aug. 15.
Lag Behind
Since 2012, Sweden and Norway increased renewable power production by 7.9 terawatt-hours, Norway’s Energy Agency said Aug. 18. Sweden, which accounted for 85 percent of the added output, built 771 turbines in the period. Norway erected 112.
Between January and July, 5.8 million certificates were issued for wind production in Sweden, compared with 95,000 in Norway, Swedish grid operator Svenska Kraftnaet AB data show.
“We knew we would lag behind at the start,” Andreas Thon Aasheim, an adviser for Norwea in Oslo, said by phone on Aug. 6. “But what has been made much clearer during the last two years is how large the differences between the two countries are.”
Under Swedish tax law, most of the value of all equipment and machinery including wind turbines depreciates in the first five years. Norway treats wind generators separately, assigning varying write-off times that can be as long as 17 years, according to Aasheim. A shorter depreciation period means turbine owners can reduce their taxable income by more in the first years of a project, cutting the total tax bill.
Tax Harmony
Elvestuen of Norway’s Liberal Party plans to propose changes to the country’s tax law in negotiations for the 2015 budget due to be unveiled Oct. 8.
“The Norwegian depreciation rules must be harmonized with Sweden’s, so it is equally beneficial to invest in Norway as in Sweden,” Torbjoern Steen, the head of communications for wind power and technology at Statkraft, said Aug. 15 by e-mail.
Wind industry employment across the EU has climbed 30 percent since 2007 to 238,154 jobs, according to the European Wind Energy Association. That’s expected to reach almost 800,000 by 2030, Oliver Joy, a spokesman at the Brussels-based lobby group, said Sept. 8 by phone.
Even without the tax disadvantage, Norway’s geography is less attractive to wind developers than Sweden, where milder conditions are better suited for turbines, according to Scanergy AB, a renewable energy company in Billingstad, Norway, that’s building 16 wind units in Sweden.
Norway, whose 25,000-kilometer (16,000-mile) coastline is Europe’s longest, has only 45 megawatts of wind projects under construction and one park built since 2012. A typical onshore turbine has a capacity of 2 to 3 megawatts.
“Norway has significantly better wind resources compared with Sweden, but the experience from Norway is that high winds give more turbulence,” Tor Arne Pedersen, Scanergy’s chief executive officer, said by e-mail. “High average winds aren’t necessarily good.”
By Daniel J. Graeber |
TEHRAN, Sept. 9 (UPI) -- There are few barriers in the way of expanded ties in the energy sectors of Iran and Russia, officials said during bilateral meetings in Tehran.
Iranian Energy Minister Hamid Chitchian hosted Russian Energy Minister Alexander Novak for a two-day summit concluding Tuesday in Tehran.
Both sides already cooperate in a variety of fields, with Russia supplying fuel for Iran's nuclear reactor at Bushehr. The Iranian minister said Russia agreed to help build four new conventional power plants in Iran.
The new facilities could add as much as 3,500 megawatts of electricity to the Iranian grid.
Russian officials during the summit said energy is an "instrumental" part of the bilateral relationship with Iran.
Western governments have expressed concern over the possibility that Iran was working on an oil-for-goods swap deal with Russia. Iran is the target of Western sanctions imposed in response to a controversial nuclear program, while Russia's energy sector was sanctioned in response to the conflict in Ukraine.
Novak said from Tehran sanctions have no impact on bilateral affairs.
"Russia cooperates with Iran in the energy sector, peaceful nuclear energy and oil and gas issues and anti-Russia sanctions do not block cooperation," he said.
By Daniel J. Graeber |
JUNEAU, Alaska, Sept. 9 (UPI) -- Alaska Gov. Sean Parnell announced his government signed a memorandum of understanding with Japan to facilitate liquefied natural gas exports.
Parnell signed with the Japanese Ministry of Economy, Trade and Industry a memorandum of cooperating regarding an LNG project led by Exxon Mobil.
Exxon announced Monday it started a process with the Federal Energy Regulatory Commission for an environmental review of the project.
"This agreement [with Japan] is yet another key milestone in the state's rapid advancement of the commercialization of our world-class North Slope natural gas resources -- to Alaskans first and then to markets beyond," the governor said in a statement Monday.
Exxon's proposed facilities include a plant on the Kenai Peninsula that would cool natural gas to the liquid form as well as an 800-mile pipeline.
In May, Parnell signed a state measure that made the state of Alaska an owner in the project. Construction of the project could begin in 2019.
Exxon is leading the project alongside U.S. counterpart ConocoPhillips, British energy company BP and pipeline builder TransCanada.
By Daniel J. Graeber |
WASHINGTON, Sept. 9 (UPI) -- The Independent Petroleum Association of America said it rejected complaints over decisions that cleared the way for the export of petroleum products.
Crude oil exports are restricted under legislation enacted in the wake of the oil embargo imposed in the 1970s by Arab members of the Organization of Petroleum Exporting Countries.
Refinery consortium Consumers and Refiners United for Domestic Energy last week said a June decision by the Commerce Department's Bureau of Industry and Security to clear exports of so-called condensate as a petroleum product rather than crude oil was incorrect.
IPAA said the refiner's real complaint has more to do with competition than the "realities surrounding U.S. energy security." IPAA argues for more exports, citing the exponential rise in U.S. oil production that came as a result of the shale boom.
"It's sad that an organization that purports to stand up for consumers would distort the plain language of regulations to limit competition," IPAA said.
The Commerce Department in June said the decision on condensates does not represent a major shift in U.S. export policy.
The department's decision upset Senate Democrats, who said it lacked the authority "to issue exemptions for condensates or some subset of condensates from the crude export restrictions."
LONDON, Sept. 9, 2014 /PRNewswire/ -- Platts – Oil production from the Organization of the Petroleum Exporting Countries (OPEC) climbed 70,000 barrels per day (b/d) to 30.2 million b/d in August from 30.13 million b/d in July as Libyan output surged despite the downward spiral of political chaos in the country, a Platts survey of OPEC and oil industry officials and analysts showed Tuesday.
The OPEC total in August represents the highest volume from the oil producer group since August 2013, when output averaged 30.28 million b/d.
The increase from Libya, supplemented by a 50,000 b/d rise in Angolan output and smaller 20,000 b/d boosts from the United Arab Emirates (UAE) and Venezuela, more than offset decreases of 80,000 b/d and 50,000 b/d from Iraq and Saudi Arabia, respectively. Iranian output remained steady at 2.85 million b/d.
"The second half of this year looked a bit tight, given that OPEC output was significantly less than what the International Energy Agency projected was the 'call' for OPEC crude," said John Kingston, global director of news for Platts, a leading global provider of energy, petrochemicals, metals and agriculture information.
"But the August increase reflected here doesn't include the fact that Libya has moved higher still, and doesn't reflect that Saudi Arabia can easily take some of that high level of production which was being used for summertime domestic electricity generation and put it in the open market," said Kingston. "It's good news that output stayed healthy despite the obvious problems with Iraqi output and obviously, it's a good report if you're a consumer."
Libya's crude production averaged 550,000 b/d in August, the country's highest level for a year, according to Platts estimates. Output steadily ramped up in August as exports finally resumed from the eastern ports of Es Sider and Ras Lanuf following one year of rebel occupation.
Libyan state-owned National Oil Corporation said in early September that it expected production to recover to 1 million b/d by October. Output was last at that level in July 2013, as protesters forced fields to be shut and anti-government rebels began occupation of the country's key oil export terminals.
International crude prices have dropped in recent weeks, with early London trade on Monday seeing North Sea Brent sliding below the $100/barrel level for the first time since June 2013. OPEC's own crude basket, which had held steadily above $100/b until mid-August, stood at $97/b on Monday. However, on a year-to-date basis the basket value on Tuesday was $104.58/b.
"Some OPEC members with limited capacity to compensate for lower prices with higher volumes are likely experiencing some anxiety about the potential for further price drops," said Margaret McQuaile, Platts senior correspondent. "But OPEC production policy depends to a large extent on Saudi Arabia, and, despite the dip in Saudi volumes in August, there has been no indication so far that Riyadh is overly concerned about prices. Indeed, according to analysts, cuts in crude prices announced by Saudi Aramco this week suggest that Riyadh is currently more preoccupied with market share than with outright crude price levels."
Since January 2012 OPEC has an official output ceiling of 30 million b/d with no individual country quotas. Effectively, this put Saudi Arabia, the only member country with substantial surplus production capacity, in the lead of managing output. The group is scheduled to meet on November 27 in Vienna.
For output numbers by country, click here. You may be prompted for a cost-free, one-time-only log-in registration. For the latest OPEC news features, visit this OPEC Features link and for an OPEC guide, access this link: http://www.platts.com/news-feature/2014/oil/opec-guide/index.
Libya has restarted oil exports from its biggest port for the first time since the end of a year-long blockade, a boost to the central government which is struggling with a wave of clashes in the capital.
The OPEC member’s oil production has risen in the past few weeks to around 560,000 barrels a day as ports in the east have resumed work under a deal with a group of federalist rebels, adding to a crude market that is already well supplied, according to Reuters.
But in a reminder of the risk of further instability, the Acting oil Minister said he had resigned, while heavy fighting erupted in a suburb of the main eastern city Benghazi between forces of a renegade general and Islamist fighters. Explosions were so loud they could be heard in the city centre.
Home to the headquarters of several oil firms, Benghazi is located some 130 km from Zueitina, one of the four reopened eastern ports.
Tuesday, 09 September 2014 21:33
Posted by Muhammad Iqbal
imageMOSCOW: Russia is looking to supply grain worth up to $500 million per year to Iran in exchange for oil, Russia's state grain trader said, in a further reduction to the value of a long-negotiated barter deal between the two countries.
Russia and Iran have been discussing an "oil-for-goods deal" since early 2014 as a way to get around Western sanctions imposed on both countries on Moscow over the Ukraine crisis and Tehran over its nuclear programme.
Andrey Gormakh, first deputy chief executive of Russia's state-controlled grain trader, United Grain Company (UGC), was quoted by RIA news agency as saying the company was ready to supply between 1 million and 2 million tonnes of grain to Iran per year in return for oil.
That would be worth up to $500 million, according to Reuters calculations based on current Russian wheat prices.
"This question is being discussed at the working meeting, but we've not been informed of the solution to the financial question," RIA quoted Gormakh as saying on the sidelines of a Russian-Iranian business forum in Tehran.
The European Union and the United States have imposed sanctions on Russian officials, banks and businessmen over Moscow's support for pro-Russian separatists in eastern Ukraine.
Washington has also warned Russia against the oil-for-goods swap with Iran and said that kind of deal would affect talks on Iran nuclear programme.
In January, sources told Reuters Iran and Russia were negotiating a swap worth $1.5 billion a month, but as talks progressed, the figures of potential oil sales edged lower and were quoted at a 10th of the original plan by sources of business daily Kommersant in August.
Despite the possible political fallout, grain supplies are likely to be a win-win deal for Moscow and Tehran as Russia is set to harvest its largest wheat crop in six years, while Iran faces a poorer-than-expected domestic harvest.
Iran bought around 200,000 tonnes of wheat, traders said on Monday, as the Islamic Republic stepped up its import activity. In recent years, it has imported around 5 million tonnes of the essential staple, but sources estimate the current requirement at up to 6 million tonnes.
Gormakh estimated Iran's grain import needs at between 5 and 7 million tonnes per year.
He also said shipping Russian grain supplies to Iran's southern ports, if agreed, was likely to be expensive, while Iran's northern ports would not be able to accept large vessels from Russia.
Russia, one of the world's largest wheat exporters, has already harvested 50 million tonnes from 64 percent of the planned area.
Its wheat exports for the 2014/15 marketing year which started on July 1 are seen at 22 million tonnes by Russia's Grain Union.
Kazakhstan, Central Asia's largest grain producer, also hopes to increase grain supplies to Iran fivefold to 2.5 million tonnes per year, Kazakh President Nursultan Nazarbayev said in Astana on Tuesday.
He said the possibility of increasing supplies would come after the launch of the Iranian section of a railroad between Kazakhstan, Turkmenistan and Iran in November.
Kazakhstan has been exporting the bulk of its grain mainly wheat and wheat flour by rail. Nazarbayev did not say when 2.5 million tonnes of grain could be supplied to Iran.
Copyright Reuters, 2014
ASTANA.KAZINFORM - Kazakhstan and Iran plan to restart crude oil swap operations, Iranian President Hassan Rouhani announced after the bilateral negotiations with Nursultan Nazarbayev in Astana.
"We used to do oil swap operations in the transport sector, but it has been suspended. We have discussed the possibility to resume the swap operations with President Nazarbayev today," the Iranian leader said.
President Rouhani said that decisions related to the agricultural sector had been made at the top-level meeting as well.
"If all these decisions take effect, Kazakhstan and Iran will make a huge step forward in terms of sales turnover," H. Rouhani added.
Wendy Koch, USA TODAY
Despite upcoming climate talks to curb heat-trapping carbon emissions, the U.S. government said Tuesday that global use of oil and other liquid fuels will jump 38% by 2040.
World consumption is projected to grow from 87 million barrels per day in 2010 to 119 million barrels in 2040 – up 4% from last year's forecast, according to the International Energy Outlook 2014 by the U.S. Energy Information Administration.
"The growth outlook for liquid fuels use will be largely driven by demand in the developing world, especially in Asia and the Middle East," says EIA Administrator Adam Sieminski in announcing the results. Most, 72%, of this increase will come from developing Asian countries, including China and India.
In contrast, EIA says that liquid fuel demand in the United States, Europe and other regions with well-established oil markets seems to have peaked because years of high oil prices have prompted energy efficiency efforts and fuel switching.
The U.S. forecast is hardly good news for leaders of the 100-plus nations who will meet Sept. 23 in New York City for the United Nations' Climate Summit. The summit aims to spur countries to pledge cuts in their carbon dioxide emissions, which are largely due to the burning of fossil fuels.
"We believe the summit will be a turning point in how the world approaches climate change," Selwin Hart, director of the U.N. Secretary-General's Climate Change Support Team, told reporters Monday. He said countries are motivated to address the issue because they're already seeing dire impacts such as rising sea levels.
Jennifer Morgan of the World Resources Institute, a research group, sees reason for optimism. Since the last time many countries pledged emission cuts – in 2009 at U.N. climate talks in Copenhagen, Denmark, she said the price of solar and wind power has fallen and more policies to address climate change have been introduced.
"There's more experience on the ground," said Morgan, director of WRI's climate and energy programs.
Still, global emissions have continued to rise. On Tuesday, the World Meteorological Organization said the concentration of carbon dioxide in the atmosphere reached a record high in 2013 and posted the biggest year-to-year change in three decades. The U.N. weather agency said it hit 396 parts per million last year, which is 42% higher than before the Industrial Age.
Along with increased demand, the EIA expects global supply of oil and other liquid fuels will also rise. It says rising oil prices, along with new drilling techniques such as hydraulic fracturing or fracking that can extract "tight" oil from shale rock, are boosting production in the Untied States and Canada.
"Other countries, including Mexico, Russia, Argentina and China, begin producing substantial volumes of tight oil between now and 2040," the EIA reports. Still, it expects about 44% of the growth in liquid fuels supplies will come from producers in the Organization of Petroleum Exporting Countries, 90% of which will come from its Middle East members.
The EIA forecast offers a bit of hope for climate negotiators eager to promote non-polluting renewable energy. "Rising prices for liquid fuels improve the cost competitiveness of other fuels" and will prompt some users to switch to alternate power sources, it says. From now until 2040, it sees a decrease in liquid fuel use in homes, businesses and power plants but not in the transportation and industrial sectors.
With the EU poised to unleash more sanctions over Ukraine, previous measures mean Rosneft is cutting staff and production as its access to Western financing and technology has been severely curtailed.
That makes it more difficult to service $55 billion of debt and get the imported equipment needed to develop new fields and upgrade refineries.
Rosneft has had to ask for the equivalent of $40 billion in state help from a Russian sovereign wealth fund.
Prime Minister Dmitry Medvedev has said the company could get it, calling it reasonable, as the investment would be repaid from revenues from oil sales.
Talking about sanctions generally he said: “The government’s responsibility is to protect Russian businesses facing unfair and unlawful actions by foreign states or foreign companies”.
Rosneft, which alongside gas monopoly Gazprom is a top contributor to Russian government coffers, needs to invest heavily to bring new east Siberian fields online.
Last week it said it would cut staff to reduce costs: Kommersant business daily said Rosneft’s Moscow headquarters would see cuts of up to 25 percent from the current 4,000.
Rosneft’s output is four percent of global supply. But last week it reported a 1.3 percent production drop in August, as production in West Siberia regions declines.
President Vladimir Putin said last week Rosneft would welcome China buying a stake in the prized Siberian Vankor field. It was a major about-turn given the Kremlin’s long resistance to allowing its powerful neighbour access to such deposits.
“Rosneft’s decision to offer China a stake in the mega Vankor oil field in East Siberia signals that Moscow’s bargaining position has been further weakened by sanctions and that it needs the capital infusion,” said Emily Stromquist, analyst at Eurasia.
Copyright © 2014 euronews
The Ministry of Energy and Mineral Resources signed an agreement with a Jordanian-Spanish consortium to develop storage capacity for oil derivatives in the Madona area at a total cost of $174 million.
Minister of Energy and Mineral Resources Mohmmad Hamed said the agreement's signing comes within the Ministry's strategy to achieve energy security through all means, including making arrangements for adequate strategic storage for oil derivatives.
The project, he added, will provide 340,000 tons worth of storage capacity for oil derivatives including diesel, benzene and jet fuel and 10,000 for liquefied gas.
The minister added that the project, to be implemented in two years, will be financed by the Abu Dhabi Development Fund.
© Jordan News Agency - Petra 2014
(Reuters) - The U.S. government on Tuesday jacked up its forecast for oil production next year by 250,000 barrels per day (bpd) as the boom in shale oil drilling continues to confound expectations of slower growth.
The U.S. Energy Information Administration now expects domestic output to rise to 9.53 million bpd, growing by around 1 million bpd for a third consecutive year, according to its latest monthly short-term energy outlook. A month ago the EIA had predicted output growth would slow in 2015 to 800,000 bpd.
The U.S. shale boom has allowed producers to unlock thousands of barrels of reserves, putting the United States on course to become the largest producer of oil globally, which would dramatically reduce its dependence on imports.
"Rising monthly crude oil production, which will approach 10 million barrels a day in late 2015, will help cut U.S. fuel imports next year to just 21 percent of domestic demand, the lowest level since 1968," EIA Administrator Adam Sieminski said.
The EIA also raised forecasts for 2014 U.S. output to 8.53 million bpd from the previous estimate of 8.46 million bpd. It said U.S. growth would account for 91 percent of the 1.3 million bpd rise in global oil output next year.
U.S. crude oil production has reversed years of decline thanks to the development of shale resources, which have boosted output by more than 70 percent in six years. Production averaged 8.6 million bpd in August, the highest level since July 1986, EIA data showed.
Total U.S. consumption of petroleum and other liquids was expected to dip to 18.92 million bpd in 2014 year on year, down 0.2 percent from a year earlier.
In 2015, total U.S. consumption of petroleum and liquid fuels was expected to rise by 0.8 percent to 19.08 million bpd, the EIA said. That figure is an upwards revision of 100,000 bpd from the previous forecast.
LESS NEED FOR OPEC OIL
The EIA also lowered production forecasts for Organization of the Petroleum Exporting Countries as member states adjust to accommodate growing production elsewhere.
It decreased its 2014 forecast for OPEC supply by 0.2 percent to 35.77 million bpd and reduced its 2015 forecast by 0.6 percent to 35.86 million bpd.
The EIA added that while almost all of Libya's export terminals are able to export crude as protests have stopped, major issues that incited the protests remain unresolved. As a result, it does not expect Libya's oil production to recover to previous levels over the forecast period.
The EIA forecast that supply for non-OPEC countries will rise 0.3 percent to 25.37 million bpd in 2014 and increase 0.5 percent to 26.38 million bpd in 2015. (Reporting By Catherine Ngai; Editing by David Gregorio)
9 Sep 2014, 9.08 pm GMT
Bogota, 9 September (Argus) — Colombia produced an estimated 999,000 b/d of crude oil in August, deputy energy minister Orlando Cabrales Segovia told Argus on the sidelines of an energy conference today.
The August production estimate is down by 3.3pc from 1.033mn b/d produced in the same month last year, and up by 3.2pc from 968,000 b/d in July 2014.
In the wake of high-impact rebel attacks and community blockades, which undercut production through the first half of the year, Colombia is struggling to keep output from falling further in anticipation of a potential fiscal deficit in 2015.
"Colombia would have to average 1,060,000 b/d next year in order to avoid a fiscal gap," Cabrales said.
Energy minister Tomas Gonzalez has said he expects Colombia to restore production to levels above 1mn b/d by the end of the year by "expediting environmental licenses, building confidence between the oil sector and community groups, and providing the best protection possible from the armed forces."
By OGJ editors
According to the US Energy Information Administration’s most recent Short-Term Energy Outlook (STEO), weakening global demand and growing Libyan oil exports drove down North Sea Brent crude oil spot prices to an average of $102/bbl in August, $5/bbl lower than the July average and $10/bbl below the average in June.
August was then the first in 13 consecutive months in which average Brent crude oil spot prices fell outside the relatively narrow range of $107/bbl to $112/bbl. The forecast Brent crude oil price averages $106/bbl in 2014, and $103/bbl in 2015, both $2/bbl lower than in last month’s STEO.
The average West Texas Intermediate crude oil spot price fell to $97/bbl in August from $106/bbl in June. After falling to an annual low of $3/bbl in July, the discount of WTI crude oil to Brent crude oil increased to $5/bbl in August. The discount of WTI to Brent is forecast to widen from current levels, averaging $10/bbl in this year’s fourth quarter and $8/bbl in 2015.
US regular gasoline retail prices fell to an average $3.49/gal in August, driven in large part by falling crude prices. EIA projects US regular gasoline retail prices to continue to decline to an average $3.18/gal in December, 12¢ lower than projected in last month’s STEO.
In the September outlook, EIA has revised upwards the total 2013 US petroleum and other liquids consumption by 74,000 b/d to 18.96 million b/d. With this revision, consumption is expected to fall slightly, by 0.2%, in 2014. A year-over-year increase in total consumption of 170,000 b/d during the first quarter is expected to be more than offset by an average 150,000 b/d decline during this year’s second half. Total consumption is forecast to rise by 150,000 b/d in 2015 to average 19.08 million b/d, an increase of 100,000 b/d from last month’s STEO.
EIA forecasts total US crude oil production to increase from an estimated 7.45 million b/d in 2013 to 8.53 million b/d in 2014 and 9.5 million b/d in 2015. The 2014 and 2015 forecasts are 70,000 b/d and 250,000 b/d higher, respectively, than in last month’s STEO.
Petroleum imports continue to decline and the share of total US liquid fuels consumption met by net imports is expected to decline to 21% in 2015—the lowest level seen since 1968.
By Zack Colman | September 9, 2014 | 5:47 pm
Lifting 39-year-old restrictions on oil exports would boost the U.S. economy and lower gasoline prices, while strengthening the nation's hand in international disputes, according to a study released Tuesday.
Eliminating or ending some of the restrictions in the near-ban of crude oil exports could yield an economic infusion of between $600 billion and $1.8 trillion, the joint Brookings Institution and NERA Economic Consulting study said. Removing the export ban also would reduce gasoline prices by 9 cents per gallon in 2015, largely by encouraging more oil and gas production, the study found.
"We think the key lesson of our economic history in the energy space is that the U.S. economy works better embracing market forces than trying to resist them," the study said.
The export restrictions were established following the 1973 oil crisis and currently allow just a trickle of unprocessed crude to be shipped overseas. Lawmakers and Obama administration officials — including Energy Secretary Ernest Moniz — have called for a re-look, given a gusher of new domestic supplies.
The study underscores arguments from the growing number of export supporters in Congress and the oil industry. They say U.S. refineries aren't currently equipped to handle the large amount of light, sweet crude that has resulted from the domestic shale boom, a dynamic that they say could lead to future gluts at refineries.
The Commerce Department looked poised to open an avenue for exports when it permitted two companies' requests to send lightly processed condensate, a light form of crude, to other nations, but the department put a hold on additional requests in late July.
Some refining companies, however, have pushed back against efforts to end the restriction. Refineries have enjoyed sizable windfalls in recent years because current regulations permit exports of refined petroleum products — such as gasoline — that have grown as the U.S. produces more domestic oil.
A number of Democrats — and some Republicans — have voiced concerns that sending more crude abroad would roll back recent strides toward greater energy independence.
But the study said such worries were unfounded, noting that shipping more crude overseas would facilitate new production to replace whatever leaves the U.S. It also argued that exporting crude would solidify the nation's role as an arbiter of stability in the global arena.
"[T]he greater U.S. exports of crude oil, the greater the economic and energy security benefit to the country," the study said. "In addition to the parochial benefits to the nation, as a leader in world trade circles ... continued restrictions on crude oil exports have the potential to tarnish the U.S. global standing and hinder its pursuit of strengthening energy security."
The study warned, however, that removing export restrictions would affect climate change by freeing up more greenhouse gas-emitting fossil fuels that most scientists say drive global warming.
"Clearly if lifting the ban leads (as we believe it will) to higher U.S. oil production and this oil is then burned either domestically or processed in foreign refineries, there will be larger [greenhouse gas] emissions than if the oil had remained in the ground," the study said.
By BLOOMBERG NEWS
Oil prices are poised to drop next year as U.S. crude production reaches a 45-year high, government forecasters said Tuesday.
West Texas intermediate will average $94.67 a barrel in 2015 vs. the August projection of $96.08, the U.S. Energy Information Administration said in its monthly Short-Term Energy Outlook. The EIA trimmed its Brent crude forecast for next year to $103 from $105.
Rising U.S. crude output is bolstering the country's energy independence, said Adam Sieminski, the administrator of the EIA. The agency forecast output of 8.53 million barrels a day this year, up from 7.45 million last year, and 9.53 million in 2015, the most since 1970. It's also pushing down the EIA's forecast for gasoline prices.
"The U.S. oil production forecast for 2015 was revised up by 250,000 barrels per day, with total output expected to be at the highest level since 1970," Sieminski said. "Rising monthly crude oil production, which will approach 10 million barrels a day in late 2015, will help cut U.S. fuel imports to just 21% of domestic demand, the lowest since 1968."
Retail gasoline is forecast to average $3.46 a gallon this year and $3.41 in 2015, according to the EIA. That's down from last month's forecasts of $3.50 and $3.46.
Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in North Dakota, Texas and other states.
U.S. crude production jumped to 8.6 million barrels a day in August, the most since July 1986, the EIA said.
[HOUSTON] Orders have surged for a type of oilfield equipment primarily used for to make a light variety of crude safe for pipelines, after a federal ruling signalled that the specialised units also offered a workaround for companies eager to export oil from the US shale boom.
The units, known as stabilizers, process that type of crude, known as condensate, just enough to qualify it for export as a refined product, allowing oil producers to ship it abroad without violating a decades-old ban.
Dozens of companies that build stabilizers, ranging from small private firms to pipeline and logistics leader Kinder Morgan Energy Partners, stand to benefit from new orders.
Oil producers in condensate-heavy shale crude plays like the Eagle Ford and the western Permian Basin in Texas also could fetch better condensate prices if exported, as US refiners have limited demand for it.
By Mark Shenk Sep 10, 2014 2:00 AM GMT+0700
Oil prices are poised to drop next year as U.S. crude production reaches a 45-year high, government forecasters said today.
West Texas Intermediate will average $94.67 a barrel in 2015 versus the August projection of $96.08, the U.S. Energy Information Administration said today in its monthly Short-Term Energy Outlook. The EIA trimmed its Brent crude forecast for next year to $103 from $105.
Rising U.S. crude production is bolstering the country’s energy independence, Adam Sieminski, the administrator of the EIA, said in a statement. The agency forecast output of 8.53 million barrels a day this year, up from 7.45 million last year, and 9.53 million in 2015, the most since 1970. It’s also pushing down the EIA’s forecast for gasoline prices.
“The U.S. oil production forecast for 2015 was revised up by 250,000 barrels per day, with total output expected to be at the highest level since 1970,” Sieminski said. “Rising monthly crude oil production, which will approach 10 million barrels a day in late 2015, will help cut U.S. fuel imports to just 21 percent of domestic demand, the lowest since 1968.”
Retail gasoline is forecast to average $3.46 a gallon this year and $3.41 in 2015, according to the EIA. That’s down from last month’s forecasts of $3.50 and $3.46.
New Techniques
Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in North Dakota, Texas and other states. U.S. crude production jumped to 8.6 million barrels a day in August, the most since July 1986, the EIA said.
WTI will average $98.28 a barrel this year, down from last month’s projection of $100.45, the report showed. Brent is forecast to average $106 this year, lower that the August estimate of $108.11. WTI settled at $92.75 a barrel today on the New York Mercantile Exchange. Brent settled at $99.16 on the London-based ICE Futures Europe exchange.
Oil production outside of the Organization of Petroleum Exporting Countries will rise 3.4 percent from 2013 to 55.91 million barrels a day this year. The 2014 output projection was increased 100,000 barrels from August’s report.
OPEC members will produce 35.77 million barrels a day this year, the EIA said. Last month’s forecast was 35.84 million.
“Global oil supplies are expected to grow by 1.3 million barrels a day in 2015, with output growth in the United States accounting for about 91 percent of that,” Sieminski said.
The department left its forecast for global oil consumption this year little changed at 91.55 million barrels a day from 91.56 million last month. The forecast for 2015 demand was cut to 92.89 million barrels a day from 92.96 million.
Rising Demand
Total global liquid fuel consumption in projected to climb 38 percent to 119 million barrels a day in 2040, the EIA said in a separate report released today. Asia and the Middle East will be the main drivers of the demand surge, according the International Energy Outlook 2014.
“The growth outlook for liquid fuels use will be largely driven by demand in the developing world, especially in Asia and the Middle East,” Sieminski said. “Those two regions combined account for 85 percent of the total increase in liquid fuels use worldwide over that period.”
TEHRAN (FNA)- Iranian Oil Minister Bijan Namdar Zanganeh announced that the value of trade exchanges between Tehran and Moscow stood at $5.1 billion in the last Iranian year (ended March 21, 2014), while the figure can grow ten-fold in future.
"The value of Iran-Russia trade exchanges which hit $5.1 billion last year can be increased by 10 times," Zanganeh said, addressing Iran-Russia Trade Conference in Tehran on Tuesday.
Addressing Iranian businessmen, Zanganeh said, "Russia is a big market with high demand and rapid economic growth for us and we have many world quality goods and services which can meet the increasing needs of that country."
Addressing the same conference earlier today, Russian Energy Minister Alexander Novak underlined that his country is willing to implement joint projects and ventures with Iran and boost the two countries' trade value to $10 billion.
"We will boost the level of the two neighboring countries' trade transactions to $10 billion," Novak said.
Novak underlined that the Iranian and Russian private sectors are so interested in trade exchange that 80 Russian businessmen representing 40 companies have attended the conference, each of whom introduces a service or equipment to the Iranian companies.
He noted that the Russian companies participating in the conference are specialized in nanotechnology, electronics, nano-electronics, atomic power stations, aviation and airplane equipment.
Novak pointed to the willingness of Iran and Russia to strengthen their relations in the recent decades, and said, "Russians' partnership in the construction of Isfahan Steel Mill, power plants and Bushehr Nuclear Power Plant which started in the second half of the 20th Century indicates good cooperation between Iran and Russia."
The Russian energy minister also reminded Tehran and Moscow's similar diplomacies towards Afghanistan, Syria, Iraq and Caspian Sea as a launchpad for the further expansion of relations.
He also expressed Moscow's willingness to supply Iran with plane parts and equipment, and transportation, oil and gas and atomic power plants equipment.
Novak said both Iran and Russia have strong determination to implement joint projects and set up joint ventures, adding, "The two countries will hold a trade meeting in Moscow to continue their talks."
He also mentioned that Iran and Russia have intensively worked to remove obstacles such as method of payment of trade exchanges.
Novak is in Tehran leading an economic delegation to attend the 11th meeting of Iran-Russia Trade Council.
Iran-Russia trade currently totals $5bln a year, but economists say the two countries can multiple the volume of their trade exchanges.
