Iraq’s Biggest Oil Plant to Reopen After Militants Moved
Iraq’s biggest oil refinery at Baiji is set to restart processing in about three months after government troops forced Islamic State armed militants away from the facility.
Iraqi troops will expel the militants from areas near a pipeline supplying the refinery 130 miles (209 kilometers) north of Baghdad, Colonel Khalaf al-Jabouri, a member of Iraq’s anti-terror forces, said by phone. It will take about three months to restart the plant because workers have fled to other provinces, refinery units need maintenance and militants still control part of the pipeline network, according to Saad al-Azzawi, an engineer at Baiji.
“We will secure the pipeline network that feeds oil to the refinery,” al-Jabouri said yesterday. “The Iraqi forces are now seeking to clear the path where the pipelines pass through to pump the oil to Baiji and also to export the crude to Turkey.”
The Baiji plant has been at the center of repeated attacks since June as Islamic State militants attempted to seize the facility, seeking to secure fuel and funding for an Islamic caliphate they proclaimed in areas stretching across the Iraqi-Syrian border. Militants controlled the 310,000 barrel-a-day plant for about a week in June.
Iraq has started to assess damage at the facility and is removing any unexploded ammunition found nearby, said Fayyad Al-Nima, Iraq’s deputy oil minister for refining affairs. The assessment may take one week, he said.
Baiji has about 40 percent of Iraq’s refining capacity and its halt prompted the government to import more oil products and fuel, and tap strategic reserves to prevent shortages. State-run North Oil Co. manages the facility.
Iraq, with the world’s fifth-biggest crude reserves, is the largest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia. While fighting spurred companies including BP Plc (BP/) and Exxon Mobil Corp. (XOM) to evacuate workers from the country’s north, Iraq pumps and exports most of its crude from the Shiite-dominated south, where the Sunni insurgency has had little impact.
Oil Diplomacy Takes New Twist as Venezuela Seeks Non-OPEC Help
Venezuela is seeking help from nations outside of OPEC to halt a collapse in global crude prices, adding a new twist to oil-market diplomacy with nine days to go until the group’s next meeting.
Nicolas Maduro, Venezuela’s president, told state television yesterday that he was coordinating with Russia to hold a meeting “very soon” with countries that aren’t members of the Organization of Petroleum Exporting Countries, as well as those within the group, to defend the price of oil.
Venezuela and other Latin American countries have been among the hardest hit by plunging prices in part because the slump has been caused by surging supplies in North America. Combined output from the U.S. and Canada rose last year to the highest since at least 1965 as producers tapped stores locked in shale-rock formations and oil sands, according to BP Plc data.
“I don’t see anyone in non-OPEC volunteering to come to the rescue,” Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by e-mail. “Venezuela is in a hot spot, as they have to fear the expected increase of Canadian crude oil to the U.S. Gulf.”
Venezuelan Foreign Minister Rafael Ramirez met with energy ministers from six producers this month as prices slumped, including the biggest non-OPEC oil exporter, Russia. Ramirez met Russian Energy Minister Alexander Novak in Moscow yesterday, according to the Venezuelan Foreign Ministry.
Russia Proposal
Novak told reporters in Moscow today that they discussed an initiative to halt the fall in oil prices, on which he would consult with the Russian government to develop a proposal before the next meeting with the Venezuelans on Nov. 25 in Vienna.
Ecuador and Venezuela will ask OPEC members to trim production in excess of the group’s output ceiling of 30 million barrels a day, said an official from Ecuador, who asked not to be identified citing government policy. The group produced 30.25 million barrels a day last month, data from OPEC show.
Oil analysts are split on whether OPEC will lower the output ceiling, with 10 of 20 oil analysts, traders, brokers predicting a production cut at the Nov. 27 meeting, according to a Bloomberg News survey this week.
Brent crude has lost 32 percent since reaching this year’s high in June and was trading 1 percent lower at $78.55 a barrel at 5:37 p.m. in London on the ICE Futures Europe exchange.
Vienna Meeting
While in Moscow, Ramirez also met with Igor Sechin, the chief executive officer of OAO Rosneft. The Russian company agreed to a five-year deal to buy crude and oil products from state-owned Petroleos de Venezuela SA.
Sechin will attend the Nov. 25 meeting, which was shifted from Caracas to Vienna at Venezuela’s initiative, Rosneft said yesterday via text message. The event will be two days before the OPEC summit.
Sechin, while serving as deputy prime minister, told OPEC in 2008 that his government was willing to cut output to support prices during that year’s collapse in oil prices. Russia subsequently increased production.
Other OPEC producers accelerated diplomatic visits before next week’s meeting. Saudi Arabia’s Oil Minister Ali Al-Naimi toured Latin America, while senior politicians from Iraq to Libya visited Saudi King Abdullah.
“OPEC has in the past reached out to non-OPEC member countries Mexico, Norway and Russia to help in the reduction of global oil supplies,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA, said by e-mail from London. “Sechin’s visit may simply be ‘exploratory,’ trying to assess which way the OPEC producer group may be swaying.”
Ethanol Credits for 2014 Rise to 3-Month High on Biofuel
Certificates that track how much ethanol is used in U.S. gasoline jumped to the highest since August as rail congestion and export demand helped lift prices for the biofuel.
Corn-based ethanol Renewable Identification Numbers rose 13 percent to 53.5 cents, the highest level since Aug. 7, data compiled by Bloomberg show. Ethanol rose to a premium over gasoline yesterday, compared with an average discount of about 66 cents during the past year.
The surge in the credits comes as congestion along the nation’s railroads, used to transport ethanol from producers in the Midwest to the East, West and Gulf coasts, has helped push ethanol prices higher. A year-long delay by the Environmental Protection Agency in releasing final 2014 consumption targets for refiners has added to demand for credits.
Rail congestion, export demand, speculation that cheaper gasoline prices will pull more drivers to the road and boost consumption, as well as a delay by President Barack Obama’s administration in releasing final consumption targets are all working to push RINs higher, said Jerrod Kitt, an analyst at Linn Group in Chicago.
Denatured ethanol for December delivery fell 0.5 cent to $2.062 a gallon on the Chicago Board of Trade. Gasoline for December delivery advanced 1.69 cents, or 0.8 percent, to $2.0432 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.
Prices for the motor fuel have tumbled 27 percent this year, compared with a 7.9 percent gain for ethanol.
Ethanol Premium
Ethanol traded at a 1.88-cent premium to gasoline today, from 4.07 cents yesterday.
Based on ethanol’s premium to gasoline, a refiner may decide to purchase a RIN to satisfy its renewable fuel obligations instead of blending the physical gallon, Kitt said.
Meanwhile, Nov. 15 marked a year since the EPA proposed reducing the amount of ethanol in gasoline from targets laid out in a 2007 energy law, known as the Renewable Fuels Standard.
“Everybody’s pretty surprised” that it’s taken this long, said Tim Cheung, vice president and research analyst at ClearView Energy Partners LLC in Washington.
Shale Drillers Keep Output High Despite Oil Price Decline
Shale drillers are planning on production growth with fewer rigs despite a worldwide glut that has sent crude prices to a four-year low.
Companies including Devon Energy Corp. (DVN), Continental Resources Inc. (CLR) and EOG Resources Inc. (EOG) said they expect to pump more from their prime properties while cutting back in their least productive prospects. That puts the onus on OPEC nations, led by Saudi Arabia, to cut output if they want to stem the slide in global oil prices.
“There’s a lot more production coming online this year and in the first half of 2015,” said Jason Wangler, an analyst at Wunderlich Securities Inc. in Houston. “This isn’t a machine that you can turn on and off with a switch. It’s going to take months, if not quarters, to turn it around.”
Oil Prices
Domestic output topped 9 million barrels a day for the first time since at least 1983, the U.S. Energy Information Administration said Nov. 13. West Texas Intermediate crude, the U.S. benchmark oil contract, declined $1.03 today to settle at $74.61 a barrel on the New York Mercantile Exchange. Prices fell to $74.21 on Nov. 13, the lowest close since 2010.
“Certainly if prices fall even further than they are now, it’ll have some impact, and it may slow the growth rate of U.S. production,” said Jason Bordoff, founding director of Columbia University’s Center on Global Energy Policy in New York. “I still think, unless they fall significantly further, U.S. production is going to see dramatic increases in growth.”
Growth Streak
Lower prices aren’t stopping U.S. shale drillers. Devon Energy, which pumped 136,000 barrels a day of crude in the third quarter, will boost output by as much as 25 percent next year, said John Richels, the Oklahoma City-based company’s chief executive officer, in a Nov. 5 earnings call. That rivals this year’s expansion, even though Devon will idle four of its six rigs in Oklahoma’s Mississippi Lime prospect.
Continental Resources, which produced 128,000 barrels a day in the third quarter, trimmed $600 million from its 2015 drilling budget by shelving plans to add new rigs. Nonetheless, the Oklahoma City-based company said in its Nov. 6 earnings call it will increase output as much as 29 percent.
Pioneer Natural Resources Co. (PXD) in Irving, Texas, the most active driller in West Texas’s Permian Basin, said in its Nov. 5 third-quarter call that it plans to add as much as 21 percent.
EOG Resources, a Houston-based driller that pumped 293,000 barrels of crude a day in the third quarter, said it will continue its “double-digit” growth streak next year.
Tuscaloosa Marine
Halcon Resources Corp. (HK), also based in Houston, in a Nov. 11 earnings call forecast 2015 growth of as much as 20 percent even after scaling back drilling plans to six rigs from 11. The company said it will slow development in its Tuscaloosa Marine Shale properties in Mississippi and focus drilling on its prospects in North Dakota and Texas.
“Any company that comes out and says we’re cutting growth is going to get hit,” said Wangler, the Wunderlich Securities analyst. “It’s not a fun spot to be in. Do you do what makes sense for the oil market, or do you do what makes sense to investors?”
Industry executives have pinned their hopes on a cutback in international production on Saudi Arabia, the world’s largest exporter and de facto head of the Organization of Petroleum Exporting Countries. The 12-nation cartel, which has increased its output by more than one million barrels a day since the end of May, will decide at its Nov. 27 meeting whether to curb output. OPEC members stepped up diplomatic visits to the kingdom last week, and the Saudi oil minister was in Latin America, as low prices slice into state budgets.
Saudi Production
Saudi Arabia’s production rose 1 percent to 9.75 million barrels a day in October, according to data compiled by Bloomberg. Global production of petroleum and other liquids will rise to 92.91 million barrels a day in 2015 from 91.95 million barrels a day this year, the EIA said last week.
“We’re in a battle with Saudi Arabia with regard to market share versus U.S. shale oil,” Scott Sheffield, Pioneer’s chairman and chief executive officer, said in the Nov. 5 earnings call.
Shale producers are also victims of their own success. New wells are being drilled faster and are pumping more oil. The same thing happened before the 2012 natural gas bust, when prices fell to the lowest in a decade. The improvements make the rig count a less reliable measure of future growth. In North Dakota’s Bakken, for example, 191 rigs will add 104,000 barrels a day in December, double the gains made three years ago, according to the EIA.
Rig Count
Even with the addition of 10 rigs recorded last week, the number of rigs drilling for oil in the U.S. has declined by 31 to 1,578 since the week ended Oct. 10, according to the weekly report from Baker Hughes Inc., an oilfield services company based in Houston.
“If you look at natural gas production, it continues to increase dramatically even as the rig count has fallen, because productivity is improving, because technology is getting better, because the completion time is getting shorter,” said Bordoff of Columbia University. “People are just getting better and better at this.”
Oil Below $80 Yet to Upset Bond Market Seeing Arab Wealth
The 29 percent plunge in oil prices this year has yet to unnerve bond investors in some of the world’s biggest crude-producing nations in the Middle East.
The yield on Abu Dhabi’s April 2019 dollar-denominated security fell six basis points since Brent crude reached its year-to-date high on June 19, with the yield 48 points lower in 2014, according to data compiled by Bloomberg. The rate on Qatar’s January 2022 bond has also declined since oil peaked.
Persian Gulf producers are better prepared this time than when crude tumbled amid the financial crisis in 2008. The benchmark Brent grade has averaged $109 a barrel since January 2011, enabling the region’s wealthiest producers to amass cash. Saudi Arabia has boosted foreign-exchange reserves 68 percent to $739 billion since 2008, while Kuwait, Qatar and the United Arab Emirates have grown at faster rates, data compiled by Bloomberg show.
These countries “can withstand the current low price levels,” Deepti S M, a credit analyst at SJ Seymour in Bangalore, India, said in an e-mail yesterday. “While the impact depends on how long prices remain low, these countries have strong accumulated reserves and assets in sovereign wealth funds to maintain their currency pegs as well as finances.”
Cash Reserves
Brent has dropped 31 percent since June 19 and sells now for about $79 a barrel.
The Gulf states’ fiscal surpluses should support them for at least the next two years, Trevor Cullinan, director of sovereign ratings at Standard & Poor’s, said yesterday by phone from Dubai. S&P’s credit outlook is “positive” for Saudi Arabia and “stable” for Abu Dhabi, Qatar, Kuwait, Oman and Bahrain. The agency doesn’t provide a separate sovereign rating for the U.A.E.
Qatar’s foreign-exchange reserves have more than tripled to $43 billion since 2008, while Kuwait’s holdings have grown by 83 percent to $30 billion and the U.A.E.’s by 146 percent to $78 billion.
“There are sizable fiscal surpluses in these economies,” with investments at home and abroad, Cullinan said. “These are assets available to support the economies in a downturn.”
Saudi Power
The yield on Abu Dhabi’s 2019 bond has slumped 48 basis points to 1.9 percent in 2014, according to data compiled by Bloomberg. The bond traded at a five-year low of 1.8 percent in January 2013.
Saudi Electricity Co. (SECO)’s 2022 bond dropped 97 basis points this year to 3.2 percent today, the data show.
Even so, Gulf producers have expressed concern about the slide in oil prices. Kuwait’s cabinet and Supreme Petroleum Council held an extraordinary meeting on Nov. 16 to discuss the impact on government revenue, state-run Kuwait News Agency reported.
Iran’s Oil Minister Bijan Zanganeh planned to visit the U.A.E. today to meet with his counterpart to discuss ways of propping up prices, the oil ministry’s news website Shana reported Nov. 16.
‘Positive Role’
Saudi Arabia, the world’s biggest oil exporter, will continue its “balanced and positive role” to support stability in crude markets, Crown Prince Salman bin Abdulaziz Al Saud said Nov. 15 at the G-20 Summit in Brisbane, according to state-run Saudi Press Agency.
Tumbling oil prices may lead Gulf governments to cut fuel subsidies to shore up their budgets, Robin Mills, an analyst at Dubai-based Manaar Energy Consulting, said Nov. 6.
The U.A.E. is among countries in the region considering its subsidy policies, according to Harald Finger, who led an IMF consultation team in talks with the government.
“We discussed the area of subsidies and this is something Abu Dhabi is beginning to look into,” Finger said in a Nov. 5 interview in Dubai. “Reducing these subsidies, while putting in place targeted measures for those in need, would be good policy.”
For Related News and Information: U.A.E. Concerned That Oil Glut May Curb Exploration, Output Saudis Return to Caracas for Support Against U.S. Rivals: Energy GCC Bond Pipeline to Banish Worst Slump Since 2011: Arab Credit
Asia Fuel Profits Seen Shrinking as Indonesia Raises Pump Prices
Profits from making fuels in Asia are poised to decline as Indonesia’s efforts to cut energy subsidies shrink the nation’s demand for imported supplies.
President Joko Widodo raised retail gasoline and diesel by more than 30 percent as he sought to free funds for development plans. Every 10 percent gain in pump prices will reduce the nation’s oil consumption by 2 percent, Morgan Stanley said in an e-mailed report today.
Indonesia, Southeast Asia’s largest economy, imports more than half of the gasoline and about 20 percent of the diesel it consumes, according to Energy Aspects Ltd., a London-based energy consultant. While falling oil prices offer Widodo, known as Jokowi, room to limit domestic increases, he has yet to say if he will scrap the decades-old system of fuel subsidies.
“Indonesia is an important importer,” Richard Mallinson, an analyst at Energy Aspects in London, said by phone today. “This is going to be negative for the regional market for the next 12 months at least.”
Subsidized gasoline was raised to 8,500 rupiah ($0.70) a liter from 6,500 rupiah, and diesel to 7,500 rupiah a liter from 5,500 rupiah, Widodo told reporters in Jakarta yesterday.
Indonesia’s gasoline demand averaged 515,000 barrels a day this year until August, and the country consumed 480,000 barrels a day of diesel in the period, according to Mallinson.
Gasoil Crack
Refiners’ profit from making diesel, or gasoil, from Dubai crude in Singapore climbed to $17.17 a barrel on Nov. 14, the highest level since May 9, according to PVM Oil Associates Ltd., a London-based broker. The so-called crack spread, which indicates the return from processing crude into the fuel, was at $16.44 today.
Indonesia’s gasoline demand in 2015 will slide by about 10 percent, or 50,000 barrels a day, while gasoil consumption will drop 5 percent, or 25,000 barrels, according to Energy Aspects.
Brent crude, the benchmark grade for more than half the world’s oil, has dropped about 30 percent in London trading since a peak in June. Indonesia earmarked 276 trillion rupiah for fuel subsidies in the 2015 budget prior to yesterday, or 13.5 percent of its total spending. Oil imports have contributed to a persistent current-account deficit.
At current crude costs, the increase in fuel prices will reduce the country’s oil trade deficit by 0.3 percent of gross domestic product, according to Morgan Stanley. Brent futures declined as much as 46 cents to $78.85 a barrel today.
Indonesia has been subsidizing fuel since the first oil-price shock in the 1970s and motorists have paid less than 20 cents a liter until 2005, according to a World Bank report published in March. Before yesterday’s announcement, gasoline at the pump had most recently been raised last year to 6,500 rupiah a liter from 4,500 rupiah.
Burning Tires
“We learn from last year that consumption will change after the price increase,” Hanung Budya, the marketing and trading director at PT Pertamina, Indonesia’s state-owned energy company, said in Jakarta today.
Previous attempts to dismantle the fuel-subsidy program have met with opposition. Protests accompanied past price increases and riots spurred by rising living costs helped oust dictator Suharto in 1998. After yesterday’s announcement, a student association in Jakarta burnt tires at a road junction and put up a sign that read: “Fuel expensive. Jokowi go.”
“I think there will be a healthier market,” Energy and Mineral Resources Minister Sudirman Said told Bloomberg Television in Jakarta. “The misuse of fuel will be decreased dramatically.”
Indonesia’s economy expanded by 5.01 percent in the third quarter from a year earlier, the least since the period ended September 2009.
“After the initial effect that weighs on consumption, the underlying growth pattern and the increase in vehicles will kick back in,” Mallinson said. “So in 2016 or maybe 2017, you’ll start to see those growth trends reassert themselves in demand.”
Optimism Over Iran Talks Easier to Find in Tehran Than in Washington
By Indira A.R. Lakshmanan Nov 18, 2014 1:00 PM GMT+0800
Nov. 18 (Bloomberg) -- Council on Foreign Relations President Richard Haass discusses Iran nuclear talks on “Bloomberg Surveillance.” (Source: Bloomberg)
Iranians are expressing more optimism than their U.S. and European counterparts as international negotiations resume over the Islamic Republic’s disputed nuclear program.
In the final push to reach a deal before a self-imposed Nov. 24 deadline, each side in the negotiations between Iran and six world powers is making the case that an accord is still possible, if only the other side would act reasonably when the talks resume today in Vienna.
An accord would place curbs on Iran’s nuclear program in return for easing or lifting economic sanctions that have hobbled its economy. Russia has emerged as a potential linchpin if the two sides can agree for Iran to ship enriched uranium out of the country for the Russians to fabricate into fuel for nuclear reactors.
Even so, Russia’s chief negotiator, Deputy Foreign Minister Sergei Ryabkov, said in an interview that his government sees no sign of political will in either Iran or the U.S. to make the concessions required for a deal.
“We have no evidence that the necessary decisions have been taken in the major capitals,” Ryabkov said.
U.S. officials, who spoke on condition of anonymity to discuss the closed-door talks, said gaps remain even after some progress that stemmed from last week’s meeting between Secretary of State John Kerry and Iranian Foreign Minister Mohammad Javad Zarif in Oman.
Kerry, who plans to join the talks in Vienna later this week, is scheduled to meet in London today with Oman’s foreign minister, who has just visited Tehran.
Extending Talks
One of the Americans said it would be possible to get an agreement sealed on Nov. 24, but only if tough decisions are taken by Iran’s leaders.
Officials interviewed from the U.S., France, Germany and the U.K., say the two sides haven’t discussed extending the talks because they want to stay focused on delivering a solution by next week’s deadline, one year after an interim accord was reached in Geneva.
Extending the talks for a second time -- after doing so in July -- would pose its own difficulties. Republicans who take control of the U.S. Senate in January and hard-liners in Tehran opposed to any compromise may throw up obstacles to negotiations if talks continue without at least an agreement in principle before the end of the year.
In Iran, public messaging over the likelihood of a deal has been more positive than in the U.S. or Europe.
If the nations negotiating with Iran act in a “logical” fashion, an accord can be reached, said Ali Shamkhani, secretary of the Supreme National Security Council of Iran, who was quoted in the Shargh newspaper.
Iranian Prediction
Tehran University professor Sadegh Zibakalam, who is seen as close to President Hassan Rouhani’s government, predicted negotiations will succeed and yield a deal that’s good for Iran, according to the Islamic Student News Agency.
With the negotiations taking place in secret, there’s no way for the public to know how much to read into the public statements of any of the participants.
Trita Parsi, founder of the National Iranian-American Council, said Iran’s leadership may be speaking positively to prepare the population for significant concessions necessary to get a deal -- or in an attempt to convey that Iran meant well.
“Sometimes Iran has been very optimistic in the media, which is partly aimed at presenting themselves as very flexible, to send the message that if talks fail, it’s because of the Americans,” said Parsi, author of “A Single Roll of the Dice: Obama’s Diplomacy with Iran.”
Missed Opportunities
Iran says its nuclear program is solely for civilian energy and medical research. The U.S. and its international partners have said Iran is secretly seeking a nuclear weapons capability.
John Limbert, a former senior adviser on Iran at the U.S. State Department, said he fears the last year of nuclear negotiations may only add to a history of missed chances for the two sides over the past 35 years.
“It’s possible that at the end we’re going to look back at this as another opportunity that was lost, when either hard-liners -- opponents on both sides -- scuttled the deal, or the prevailing mistrust simply wouldn’t let the two sides get to an agreement,” said Limbert, who was a hostage in the U.S. embassy during the 1979 Iranian Revolution and is now a professor at the U.S. Naval Academy in Annapolis, Maryland.
Eleventh Hour
Laicie Heeley, director of Middle East and defense policy at the Center for Arms Control and Nonproliferation in Washington, is one of few U.S. analysts who express optimism that a deal may be reached by next week.
“It does look like they should be able to come to one, but both sides are going to have to make some tough choices in the days ahead,” she said on a conference call organized by the Washington-based National Security Network. “I don’t expect any large breakthroughs to happen until at least the 11th hour.”
In Iran, different political factions have been voicing support for an accord.
Ismail Kowsari, a member of the Iranian parliament’s National Security and Foreign Policy Committee, said the “principalists,” a conservative political faction, “have confidence in the negotiating team and support them,” according to the Iranian Tasnim news agency.
Heeley, of the arms control center, said the public and private messaging makes it unwise to stake bets.
“Anything being said publicly could be meant to influence negotiations, and it all should all be taken with a grain of salt,” she said.
Russian energy interests tilting heavily toward Asia
MOSCOW, Nov. 18 (UPI) -- Russian oil company Rosneft may focus more on Asia as it looks for new partners for exploration and production work in the arctic, a minister said Tuesday.
With U.S. partner Exxon Mobil sitting on the sidelines because of sanctions imposed on the Russian energy sector, Russian Natural Resources Minister Sergei Donskoy said Rosneft will release new plans for the arctic before the end of the year.
"China has announced its interest to the arctic," he said. "I think Rosneft has to independently choose partners out of countries which have not sanctioned Russia, and therefore here will be the final choice."
In September, Rosneft estimated a discovery in the Prinovozemelskiy-1 license area in the Kara Sea holds at least 700 million barrels of oil.
Russian energy interests have tilted toward Asian economies that are demanding more energy to cope with expansion.
Rosneft last week signed agreements to examine the feasibility of building an oil refinery in northern China through a partnership with the Chinese National Petroleum Corp. Rosneft Chairman Igor Sechin said similar deals highlighted the "systematic development of the large-scale cooperation with our Chinese partners, including the upstream area in the Russian federation."
In May, Russian gas company Gazprom and CNPC signed a 30-year sales agreement that calls for 1.3 trillion cubic feet of natural gas per year through the so-called Power of Siberia pipeline.
TransCanada: KXL delays make no sense
CALGARY, Alberta, Nov. 18 (UPI) -- The equivalent of eight Keystone XL oil pipelines have been built in the United States since an application was submitted, planner TransCanada said Tuesday.
Members of a lame-duck Senate vote Tuesday on a bill that would authorize the construction of the cross-border Keystone XL oil pipeline. A similar bill passed through the U.S. House of Representatives last week.
Russ Girling, president and chief executive officer at TransCanada, said he was "very pleased" with the level of support on Capitol Hill for the controversial pipeline.
It's been more than six years since Girling's company submitted an application to build the pipeline across the U.S.-Canadian border. In a statement Tuesday, Girling said it was disappointing that the equivalent of eight Keystone XL pipelines have been built in the United States since then.
"And yet our project sits idle, all while the U.S. continues to import 7 million barrels of oil from unstable countries that do not share American values," he said. "It makes no sense to receive oil from the Middle East and Venezuela and not from a friendly neighbor in Canada."
The U.S. Energy Information Administration said in a weekly report published Thursday the United States imported 2.5 million barrels of oil per day from Canada for the week ending Nov 7, nearly three times as much as the No. 2 oil exporter to the United States, Venezuela.
Combined, the United States imported 1.6 million bpd from the Middle East for the week ending Nov. 7.
Supporters of the pipeline argue it would be a source of economic stimulus and energy security. Opponents argue it serves primarily as a pipeline for the export of Canadian crude oil, which they say is far more damaging to the environment than conventional crude oil.
Keystone XL backers are rallying behind a bill co-sponsored by U.S. Sen. Mary Landrieu that comes up for a vote Tuesday. Landrieu, a Democrat, is at risk of losing her Senate seat to Republican challenger Rep. Bill Cassidy, whose Keystone bill passed through the House last week.
Landrieu has said she may have enough Democrats willing to cross the aisle to support a pipeline at the top of the Republican agenda for the next Congress.
When Landrieu introduced a similar bill in May, Oil Change International, an advocacy group opposed to Keystone XL, said she was among those lawmakers backing the pipeline who received major campaign support from the oil industry.
The fate of Keystone XL rests in part on a court case in Nebraska challenging the state governor's authority to sanction the pipeline's route through the state. The Obama administration has said that decision needs to play out first, and the president himself has said he may consider a veto should legislators try to force the issue.
U.S. holiday commuters to save big on gas
WASHINGTON, Nov. 18 (UPI) -- Low U.S. gasoline prices mean those traveling for Thanksgiving will save more than $650 million collectively over last year, price watcher GasBuddy said.
GasBuddy said its survey of more than 81,000 holiday travelers found more than 90 percent plan to drive at least 200 miles for the upcoming Thanksgiving holiday.
GasBuddy reports a national average price for a gallon of regular unleaded gasoline of $2.86. Motor club AAA says the national average price for Tuesday is 4 cents lower than one week ago and 32 cents less than this date in 2013.
By surveying those who use its price survey application on their cell phones, GasBuddy said the low price at the pump translates to a collective saving of more than $160 million per day on holiday travel year-on-year.
AAA said in a weekly report Monday the average price is close to a four-year low.
"The price at the pump is closely tied to the wholesale price of crude oil, and falling global oil prices have been the primary contributing factor to the price at the pump declining for 53 consecutive days," the motor club explained Monday. "This is the longest streak of declines since 2008."
AAA said all eyes are on next week's meeting of members of the Organization of Petroleum Exporting Countries. Should OPEC keep output steady, global crude oil prices, and subsequently gasoline prices, will continue to fall.
Eni extends relationship with Turkmenistan
ASHGABAT, Turkmenistan, Nov. 18 (UPI) -- Italian energy company Eni said Tuesday it signed an extension to a production agreement for operations onshore and offshore Turkmenistan.
Eni Chief Executive Officer Claudio Descalzi signed an addendum to the existing contract in Turkmenistan with his counterparts in Turkmenistan.
The agreement extends the duration of the contract to 2032 and includes a separate agreement for the potential extension of Eni's operations into the waters of the Caspian Sea.
Eni provided no estimate of the expected reserve benefits of the addendum to its production sharing agreement.
The Central Asian country is one of the largest natural gas producers in the world and exports most of its natural gas to China.
Last year, the country opened its Galkynysh natural gas field near the border of Afghanistan. It's one of the largest gas fields in the world, with an estimated 925 trillion cubic feet of reserves.
This week, leaders from Afghanistan and Pakistan met in Islamabad to discuss imports through the Turkmenistan-Afghanistan-Pakistan-India natural gas pipeline.
Pakistan and India would each get 1.3 billion cubic feet of natural gas per day and Afghanistan would get 500 million cubic feet of gas per day from the pipeline from Turkmenistan.
Pakistan's aging infrastructure leaves it short on electricity. Afghan President Ashraf Ghani, elected this year, said addressing regional underdevelopment would help both countries succeed.
Texas plant cleared for LNG exports
FREEPORT, Texas, Nov. 18 (UPI) -- With federal approval in hand, construction should start in December on a liquefied natural gas export facility in Freeport, Texas, the lead company said.
Freeport LNG Expansion announced it received final authorization from the Department of Energy to send gas from its planned facility on Quintana Island off the coast of Texas to countries that don't have a free-trade agreement with the United States.
The first two trains -- facilities that cool gas to liquid form -- should enter into service before the start of the next decade. Freeport LNG will have three trains.
Exporting LNG to countries without a free-trade agreement requires special consideration of the public's interest.
Supporters of LNG exports argue it would provide a source of economic stimulus, while detractors say it would lead to more hydraulic fracturing, the controversial drilling practice known also as fracking.
"This project will have a significant economic impact on this region and our nation," Freeport LNG Chairman and Chief Executive Officer Michael Smith said in a Monday statement.
The U.S. Energy Information Administration said in a report last week the increase in U.S. natural gas production from shale should support as much as 80 percent of the potential increase in demand resulting from the steady gains in LNG exports from the Lower 48 states.
EIA in an analysis found LNG exports reach 2 billion cubic feet by next year, and eventually surge to as high as 20 billion cubic feet per day.
The agency found the "effects on overall economic growth [from the emerging LNG market] were positive but modest."
Iran Negotiations, OPEC Meeting Loom For Oil Markets
By Nick Cunningham | Tue, 18 November 2014 22:43 | 0
As November draws to a close, there are two major events that could profoundly change the oil markets.
With the clock ticking, the 5 permanent members of the UN Security Council plus Germany (P5 plus 1) are negotiating down to the wire with Iran over its nuclear program. The two sides have made substantial progress, but some difficult issues remain unresolved ahead of the November 24 deadline.
“We’re very keen to try to get to a deal, but not a deal at any price,” U.K. Foreign Secretary Philip Hammond said on November 17. “There will have to be very significant further movement by the Iranians if we’re going to be able to get to a deal.”
Both sides have approached negotiations with seriousness and with the intention to actually resolve their differences, according to officials involved in the process. Iran has signaled its willingness to accept international inspections of its nuclear program and the possibility of receiving enriched uranium from abroad. In exchange the U.S. has suggested Iran could maintain some domestic ability to enrich uranium.
Outstanding issues center on the pace at which the U.S. would lift sanctions as well as the exact details of Iran’s enrichment capability. With only days left until a deadline, a deal is highly uncertain. Over at Quartz, Steve LeVine writes that the stakes are high, with either a diplomatic breakthrough or a major collapse in negotiations as the two most likely outcomes.
He says a deal is more likely than not due to the enormous financial pressure Iran is experiencing because of falling oil prices. With prices down more than 30 percent from just a few months ago, and Iran needing somewhere around $135 per barrel for its budget to breakeven, it would be the biggest beneficiary of a diplomatic accord with the west.
Not only that, but the Iranian government has also raised expectations of a deal. It has received foreign business delegations, highlighting the investment opportunities in Iran once sanctions are removed. There is potential for carmakers, mining companies, and financial institutions to expand into Iran if it opens up. BP and the French oil company Total recently said that they would be interested in going back into Iran if sanctions are lifted and the Iranian government offers favorable terms.
Earlier this year, Iranian President Hassan Rouhani promised that the sanctions regime would soon be lifted. “With your support, this government has taken the first steps towards the lifting of the brutal sanctions ... We will witness the sanctions shattering in the coming months,” Rouhani told a crowd in April, according to Reuters. Talk of the pending economic benefits of a deal could make it difficult for Iran to back off.
And sanctions have taken their toll. Iran’s oil exports have more than halved from their pre-sanctions level of about 2.5 million barrels per day. As a result, Iran’s GDP fell by 5.8 percent in 2012, the year that tough western sanctions took effect.
Hardliners in both countries could work to prevent a deal. But in Iran, even among the most conservative, there may not be aggressive opposition to a deal in principle, reports The Economist.
While far from certain, a deal could see the return of several million barrels per day of Iranian oil production, although at a gradual pace.
While nuclear negotiations reach the finish line, a second event is set to take place – OPEC’s meeting in Vienna on November 27 to decide its oil production target. There has been much speculation, but little hint at what the cartel will do. There has been a flurry of diplomatic activity behind the scenes in the last few weeks as OPEC members plead their case with Saudi Arabia to cut back production. Libya’s Prime Minister visited Riyadh on November 13, arriving just as Iraq’s President departed.
Saudi Arabia has thus far showed no willingness to cut production, with officials earlier this month suggesting they would only act if oil prices dropped to around $70 per barrel. At the time, OPEC officials thought that was unlikely, but with Brent crude dropping below $80 on November 17 on news that Japan fell into recession, pressure is mounting on Riyadh to act.
There is a high degree of uncertainty over how the Iranian negotiations and the OPEC meeting will play out, but the end of November will be hugely important for energy markets.
By Nick Cunningham of Oilprice.com
Is Saudi Arabia Waging Economic Warfare?
The G20 is a conference of the world’s top 20 economies as measured by Gross Domestic Product. Some observers have slammed it as an unelected and arbitrary body that is doing some of the work the United Nations was intended to do– only in a much less egalitarian way. The official web site notes.
“The G20 membership comprises a mix of the world’s largest advanced and emerging economies, representing about two-thirds of the world’s population, 85 per cent of global gross domestic product and over 75 per cent of global trade.
The members of the G20 are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.”
Saudi Arabia maintained to journalists that Riyadh is not behind the recent fall in gasoline prices. The suspicion has arisen that Riyadh is “flooding the market,” a technique it has used in the past, of pumping a lot of oil even in the face of weakening market demand, thus driving the price down.
Saudi Arabia is annoyed at Russia over Moscow’s support for the Bashar al-Assad regime in Damascus. SA will support the US in the latter’s annoyance with Russia over Ukraine. Saudi is perpetually annoyed with Iran, its Shiite rival that also supports al-Assad and the civilian nuclear enrichment program of which it fears for its dual-use, weapons potential. And Saudi Arabia is threatened by the rise of hydraulic fracturing as a way to produce petroleum, which detracts from the centrality of the vast Saudi reserves.
Saudi Arabia is not hurt as much by falling oil prices as many other OPEC countries. In part, it has larger reserves than most such countries, and so can afford to be patient until prices recover. In part, it has relatively low extraction costs, so it keeps much more of the current $80 a barrel than many countries. Some proposed drilling projects in Norway and Britain don’t make any economic sense at $80 a barrel or less.
Saudi Arabia, however, says it is no longer the world swing producer. It produces 9.5 million barrels a day or so, about ten percent of the world production of 90 million barrels a day. While it used to matter a lot whether Saudi did 8 mn barrels a day or 9.5 mn barrels a day, nowadays a small difference like that, Saudi Arabia says, would likely be made up by other suppliers, including new fields drilled via hydraulic fracking. The fact is that demand is soft, which is what is driving prices down despite substantial decreases in Libyan, Iranian, Syrian, Iraqi and South Sudanese exports. The softness in demand, in other words, is so great that prices have come down despite significant production shortfalls in some former producing countries. Saudi Arabia may be happy about idling some proposed North Dakota or Norwegian fields, reducing competition. But it denies responsibility.
I’m not so sure the Saudi role is as unimportant as the government says. Riyadh may well be flooding the market against Iran, Russia and North Dakota. It is hard to tell. Would prices really not rise if the Saudis went down to 8 mn barrels a day? (As a country of 23 mn citizens, they don’t need to pump as much oil as they do and could survive nicely on lower production and lower proceeds).
By Juan Cole
OPEC needs to cut output by up to 1 million bpd
Libya's OPEC governor, who has called for a cut of at least 500,000 bpd, is the only other OPEC official publicly to put a figure on the size of the reduction needed.Libya's OPEC governor, who has called for a cut of at least 500,000 bpd, is the only other OPEC official publicly to put a figure on the size of the reduction needed.
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LONDON: OPEC needs to cut its oil output by up to 1 million barrels per day (bpd) at its meeting next week, a delegate from one of OPEC's smaller producers said, as oil prices that have slid to a four-year low squeeze producers' budgets.
The comments are a further sign that support for action is broadening in the Organization of the Petroleum Exporting Countries, although the most influential member Saudi Arabia has yet to say if it supports a cut.
OPEC's current oil output will lead to a supply surplus in 2015, when global demand for OPEC crude will slip to between 29.20 million barrels per day (bpd) and 29.5 million bpd, the delegate said, citing OPEC's own figures.
"We are producing about 1 million barrels above that, which is quite a lot," the delegate, who declined to be named, said. "Probably a cut of 1 million barrels would be enough."
OPEC's 12 members produced 30.25 million bpd in October, according to the group's own figures, although the International Energy Agency has a higher estimate of 30.60 million bpd.
OPEC delegates warn reaching an agreement will not be easy when the group meets on Nov. 27 in Vienna, and oil traders and analysts are split over whether OPEC will be able to act to shore up prices.
Libya's OPEC governor, who has called for a cut of at least 500,000 bpd, is the only other OPEC official publicly to put a figure on the size of the reduction needed.
Among other OPEC members, Algeria supports action to defend prices, Venezuela's foreign minister said after talks with Algeria's president, and Venezuela and Ecuador have also called for OPEC to cut output.
But Kuwait has said a reduction is unlikely and top producer Saudi Arabia has yet to comment publicly except to say that it favours a stable market.
Aramco's oil resources to grow to 900bn barrels by 2025
MOSCOW, 10 hours, 16 minutes ago
State oil giant Saudi Aramco expects to have 900 billion barrels of oil resources by 2025, up from the current 790 billion barrels, a company executive said on Tuesday.
Current recoverable crude oil and condensate reserves stand at around 260.2 billion barrels.
"Demand for hydrocarbons will rise despite things happening with oil prices," Jamal AlKhonaifer, development director at Saudi Aramco, told an industry conference in Moscow.
He said 395 billion barrels within the 790 billion barrels figure are probable and possible contingent resources.
"Aramco produces almost 9.5 million barrels a day, and if it needs to replace these reserves it needs to add almost 35 billion barrels of new reserves every 10 years. That's a very large challenge," said Sadad Al-Husseini, a former top executive at Saudi Aramco.
According to a 2007 US diplomatic cable released by WikiLeaks, Abdallah Al-Saif, who was at the time Aramco's senior vice president for exploration and production, had said that Aramco has 716 billion barrels of total crude reserves, of which 51 percent are recoverable.
He also said that in 20 years, Aramco will have over 900 billion barrels of total reserves and future technology will allow for 70 per cent recovery.
Aramco's CEO Khalid Al-Falih said in January the company is "targeting to increase average recovery rates from our oil reservoirs by 20 percent which could add 160 billion barrels of additional reserves. That's more than the current reserves of the United States, Russia, China, the UK and Brazil combined."
On Tuesday, Khonaifer also said the company is currently pumping 9.7 million to 9.8 million barrels per day (bpd) and plans for next year's oil production depends on demand.
"We do not care about the oil prices, we don't play with them. We even don't have our own benchmark. Of course we are not interested in too high and too low prices," he said, adding that the Opec heavyweight can easily adjust its production according to demand given its significant spare capacity.
Saudi Arabia has an output capacity of 12.5 million bpd.
Opec meets on November 27 in Vienna to decide on output policy amid calls by some members to cut output to support prices. - Reuters
UAE committed to supplying market with crude needs
ABU DHABI, 12 hours, 44 minutes ago
The UAE oil minister said the Gulf state was committed to supplying the market with its crude needs and that the Opec member did not have a target for oil prices.
"We will not fall short from meeting this need and we will also not politicise this operation. It's supply and demand," Suhail bin Mohammed Al Mazroui told a conference in Abu Dhabi.
"Our target is not to put a price for oil but our aim is for the investments to continue. We don't want to witness a crisis after years because we fell short of investments or the price was not suitable." -- Reuters
Saudi crude oil exports edge up to 6.72 mbpd in September
DUBAI, 12 hours, 46 minutes ago
Opec heavyweight Saudi Arabia's crude oil exports edged up in September by around 59,000 barrels per day (bpd) while volumes used by domestic refineries remained high, official data showed.
The world's top oil exporter shipped 6.722 mbpd of crude in September, up from 6.663 million in August but lower than July's 6.989 million, data published by the Joint Organisations Data Initiative (Jodi) showed.
Production rose to 9.704 million in September from 9.597 million in August but was lower than July's 10.005 million, the data showed.
An industry source told Reuters this month that crude supplies for both exports and the domestic market fell by some 328,000 bpd, to 9.36 mbpd in September, from 9.688 million in August.
Total oil products exports were 787,000 bpd in September, down from 1.023 mbpd the month before, the data showed.
Refiners processed 2.035 mbpd of crude in September versus 2.167 million in August and 1.915 million in July, the Jodi data showed.
Meanwhile, Saudi oil use for power generation fell to 648,000 bpd in September from 769,000 in August and 899,000 in July.
Oil markets closely monitor changes in output from Saudi Arabia, which has enough spare capacity to significantly alter production according to demand.
Opec meets on November 27 to decide on its output policy amid some calls by members of the producer group to cut output to shore up oil prices which have fallen to $80 a barrel from $115 in June on abundant supply and weakening demand. -- Reuter
S Korean October LNG imports 2.76 mil mt, 8th straight month of falls on year
Singapore (Platts)--18Nov2014/1222 am EST/522 GMT
South Korea imported 2.76 million mt of LNG in October, 13% lower than a year earlier, and extending year-on-year decreases to the eighth straight month, data released Monday, November 17, by the country's Customs Service showed.
South Korea has had lower domestic demand for LNG, following a warm winter and cool summer, which has resulted in a high inventory build.
On top of milder temperatures this summer, Kogas, which has a monopoly on domestic natural gas sales, attributed the decline in LNG demand to the restart of several nuclear power plants which had been shut down due to malfunctions, higher coal demand for power due to its increased affordability relative to LNG and weaker power demand due to a slowing economic recovery.
This year, Kogas has used a combination of downward tolerance clauses and deferral of volumes in long-term contracts as well as time swaps with other North Asian buyers to avoid possible oversupply and a tank-top situation at their terminals.
Market expectations were that Kogas would only need additional cargoes in January or February, though the exact number remained unknown. So far this year, all of the supply was imported under 16 long-term and three medium-term contracts, the state-owned utility said.
"In Korea, another company was finally allowed to buy a cargo within the last two weeks, so I think their oversupply situation has recently been resolved." a Singapore-based trader said Monday.
Kogas' imports from Qatar and Yemen were down 45.6% and 36.4%, respectively, indicating that it was successful in deferring some cargoes from its long-term suppliers.
Imports from long-term suppliers Indonesia and Malaysia appeared to have recovered, with volumes rising 34.1% on the year from Malaysia to 613,259 mt, and volumes from Indonesia up 28.5% on the year to 416,502 mt.
Kogas has term contracts for 10.02 million-11.02 million mt/year from Qatar, 4 million mt/year from Malaysia, 4 million mt/year from Oman, 3 million mt/year from Indonesia, 1.5 million mt/year from Russia's Sakhalin, 1.3 million mt/year from Egypt, 700,000 mt/year from Brunei and 500,000 mt/year from Australia, according to the company.
South Korea's LNG import prices averaged $840.48/mt ($16.16/MMBtu) in October, down 1.9% from September, but 11.7% higher year on year.
Crude should bottom out mid 2015: Sieminski
Houston, 18 November (Argus) — Oil prices should bottom out by the middle of next year, Energy Information Administration head Adam Sieminski said today on the sidelines of the 2014 Deloitte Oil & Gas Conference in Houston, Texas.
The low end of agency forecasts for benchmark WTI show a price of $62/bl next year, he said. Nymex December WTI was trading at $74.39/bl at midday.
Prices as low as $50/bl were "not out of the realm of possibility," he said, noting crude had traded there historically.
Prices were more likely to stick in the $80/bl range for a while, he said.
Heavily-leveraged oil companies could risk takeover or shut down amid such prices. The prices could also affect major capital projects still in the permitting phase, such as liquefied natural gas export terminals, he said.
But such projects take a 30-year view of petroleum prices. Long-term demand continues to grow.
"I would say in the very, very near term, it's probably not going to make much of a difference to projects that are solidly underway," Sieminski said.
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EIA plans US condensate, rail data in 2015
Houston, 18 November (Argus) — The Energy Information Administration expects to report condensate production volumes early next year and movements of crude by rail by the summer, agency head Adam Sieminski said today.
The agency is continuing to study new areas in need of reporting, including storage volumes on the Texas coast, he said on the sidelines of the Deloitte Oil & Gas conference in Houston, Texas.
EIA expects to begin surveying production data directly, including API gravity information, leaving behind a patchwork of state-level production data on which the agency currently relies.
"I think by January, I hope, we're going to be able to start collecting data," Sieminski said.
Rapidly changing US energy development has exposed gaps in the agency's data, relied upon by both policy makers and industry to help monitor the sector. Condensate, previously a marginal part of crude production, has received special interest as current US policy allows producers of growing volumes of the high-gravity oil to lightly distill and then export it.
EIA will continue to rely on US Commerce Department data to track condensate exports, Sieminski said.
The agency also plans to begin offering third-party data next year on crude volumes moved by rail. EIA will evaluate whether it will still need to develop its own surveying for a crude logistics method particularly important to the US Atlantic and west coasts.
Federal regulations limit the agency's ability to survey companies for the information without administrative approval. Third-party data is, at this point, faster, he said.
But EIA would need administrative approval to modify surveys to gather more information on available storage in the Houston area on the Texas Gulf coast. Sieminski saw a need for such figures, similar to what the agency collects on the crude storage hub at Cushing, Oklahoma.
Pipelines from the Permian Basin in west Texas and New Mexico, from the Eagle Ford of south Texas and from crude storage terminals in the midcontinent, all point toward facilities on the Texas coast.
"I think you want to include, somehow, some kind of Gulf coast number," Sieminski said. "I think that would be useful for the public and policymakers to have something like that."
Libya hopes to restart El Feel oilfield next week
Nov 18 (Reuters) - Libya hopes to restart oil production at the southwesterly El Feel field next week, a spokesman for the state National Oil Corp (NOC) said on Tuesday.
NOC shut down the field more than a week ago when clashes forced the closure of the neighbouring El Sharara oilfield. Both sites use the same power supply.
NOC spokesman Mohamed El Harari said engineers had started technical checks and maintenance work at El Feel, which is operated jointly by NOC and Italy's ENI SpA.
He said NOC hoped to resume production at El Feel next week unless major technical issues came up during the checks, but that the El Sharara field remained shut.
A worker at El Feel confirmed that engineers were preparing to restart the field.
NOC has not published any recent production data but El Feel was pumping at least 80,000 barrels a day earlier this year. El Sharara was pumping at least 200,000 bpd until clashes between local tribesmen and state oil guards broke out this month.
NOC failed to resume output at the El Sharara field last week after unknown people blocked a pipeline.
The struggle for control of El Sharara is part of the turmoil pitting competing militias and tribes against each other, three years after Muammar Gaddafi was ousted. (Reporting by Ayman al-Warfalli; writing by Ulf Laessing; Editing by Kevin Liffey)
