IEA Gets Budapest Offer With Paris Lease Expiring in Two Years

The International Energy Agency, the adviser to 29 governments, got an offer to move to Budapest. The lease on its premises in Paris, home since 1974, is due to expire within two years.

Hungary is willing to house the IEA for free, according to the official government gazette. The agency employs 240 people, including analysts who produce reports, compile statistics and make policy recommendations on energy issues. The lease on the IEA’s current secretariat expires in 2017, Greg Frost, a spokesman for the organization said by e-mail today.

“The IEA and its 29 Members are therefore considering several options for our future accommodation,” he said, without mentioning Budapest. “Any decision on accommodation rests with the IEA Governing Board, and a decision is expected to be taken within the next year.”

The IEA was formed in response to the 1970s oil crisis. Its members, including the U.S., Germany and Japan, are required to hold emergency stockpiles in the case of a shortage.

The agency has tapped into its emergency reserves three times: before the Gulf War in 1991, after Hurricanes Katrina and Rita in 2005, and in response to supply disruptions in Libya in 2011.

Oil Price Plunge Tells Morgan Stanley OPEC Action Is More Likely

OPEC is becoming more likely to curb oil supply when it meets next week because of the scale of this year’s price rout, according to Morgan Stanley.

Brent crude, the global benchmark, slumped 31 percent since rising to its 2014 peak on June 19. A 15-to-20 percent move normally prompts the Organization of Petroleum Exporting Countries to adjust supply limits, Adam Longson, a commodity analyst for the bank in New York, said in a report today. The firm now assigns a two-in-three chance OPEC will cut output or enforce stricter supply limits, he said, without giving prior estimates for those two scenarios.

“The market has hit price levels and timelines that are consistent with prior reductions in the quota,” he said. “We now see a greater possibility of OPEC action.”

Crude futures sank into a bear market last month amid signs leading OPEC members such as Saudi Arabia will refrain from paring a supply glut generated by booming U.S. shale output. Oil analysts surveyed by Bloomberg News this week were evenly split over whether OPEC will cut production or keep targets unchanged at next week’s conference.

Brent crude futures traded at $78.79 a barrel on the ICE Futures Europe exchange in London at 3:53 p.m. local time, having dropped to a four-year low of $76.76 on Nov. 14.

Three Scenarios

Morgan Stanley assigned an equal 33-percent likelihood that OPEC will cut its target to 29.5 million barrels a day, announce tighter compliance with the current 30-million limit, or take no action. A quota cut would spark a rally, a pledge of compliance cause a temporary “modest rally,” while no action would trigger a sell-off, Longson said. The group’s 12 members pumped 30.97 million barrels a day last month, according to data compiled by Bloomberg.

Citigroup Inc. is among banks taking the opposite view. The bank considers OPEC action on Nov. 27 a “remote possibility” because so many members are unwilling to cut their supply, and Saudi Arabia won’t implement the required reductions alone.

Even without an accord at next week’s gathering, OPEC is likely to cut production in 2015 as the group’s own forecasts show declining demand for its crude, Longson said. OPEC projects it will need to provide an average of 29.2 million barrels a day in 2015, according to its Monthly Oil Market Report on Nov. 12.

If the group refuses to pare supply at all, prices may collapse to $35 or $40 a barrel, Morgan Stanley’s Longson predicted.

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.

Nigeria Budget-Cut Pledge Falls Short as Oil Prices Drop

Ngozi Okonjo-Iweala, Nigeria's Finance Minister, said on Nov. 16 she will propose to... Read More

Nigeria’s pledge to trim spending in the face of plunging oil prices may fall short of what’s required as Africa’s biggest crude producer heads into an election year.

Finance Minister Ngozi Okonjo-Iweala’s proposal to cut expenditure by 6 percent may be insufficient to address investors’ concerns after oil prices plunged by about 30 percent since July, said economists including Alan Cameron, of FCMB Group Plc (FCMB) in London. The budget approval process will probably also face delays because of the vote, scheduled for Feb. 14.

“What’s being proposed here is not proportional to the decline in the oil price, so it’s probably overstating it to say this is a prelude to an austerity budget,” Cameron said in an e-mailed response to questions.

The global collapse in oil prices is biting into Nigeria’s income, 70 percent of which comes from crude exports. The government is running down oil savings held in its Excess Crude Account to help plug the shortfall, while the central bank is selling foreign currency from its reserves to defend the naira after it slumped to a record low.

Okonjo-Iweala, 60, said on Nov. 16 she will propose to lower the budgeted benchmark oil price to $73 per barrel next year from $77.5 this year. Brent crude fell to a four-year low of $76.76 a barrel on Nov. 14. It traded at $78.90 per barrel at 10:27 a.m. in London today.

Proposals to reduce the budget to 4.66 trillion naira ($27 billion) next year include measures such as tightening the rules on foreign travel for officials and raising taxes on luxury goods, such as cars, jets and champagne, the minister said.

Sliding Production

Even if oil prices remain close to the government’s estimate, production is under pressure because of crude theft in the Niger River delta region, threatening government revenue. This year’s budget was based on output of 2.39 million barrels a day, while estimated production in October was 2.09 million, according to a Bloomberg survey.

“The problem has been that even if the oil price scenario on which it is based has been realistic, the oil production number has not been,” David Cowan, an Africa economist at Citigroup Inc., said by phone from London.

Okonjo-Iweala said Nigeria, a member of the Organization of the Petroleum Exporting Countries, will produce 2.27 million barrels of oil per day next year.

“The drop in oil prices is a serious challenge which we must confront as a country,” she said. “Our strategy is to continue to strengthen the sectors that drive growth such as agriculture and housing while reducing waste with a renewed focus on prudence.”

Nigeria should have been more careful about saving revenue when oil prices exceeded $100 a barrel, giving it a more substantial cushion to adjust to price shocks, said Cowan.

‘Limited Room’

The Excess Crude Account, which was set up to save the difference between the oil sales price and the budgeted benchmark, may be run down to about half of its current balance of $4.11 billion by the end of the year, Okonjo-Iweala said.

“What the recent oil price weakness shows, is the importance of the Excess Crude Account,” Cowan said. “If, for example, there was $20-$40 billion in it, then that would buy Nigeria six months to make a more gradual and cautious adjustment. But it hasn’t been and their room for maneuver is now much more limited.”

Okonjo-Iweala may also face delays in securing budget approval by lawmakers in the National Assembly in approving the budget. This year’s budget was presented by the Finance Ministry in late December 2013 and only passed into law in May.

“The real question is, what is the chance of getting the budget passed before parliament calls it a day?,” Cowan said. “In recent years the budget has not been passed until well into the year.”

Militants’ Threat

The government is facing spending pressures as it battles an insurgency in the northeast of the country. Boko Haram, an Islamist militant group which has killed more than 13,000 people during a five-year campaign against the government, carries out almost daily attacks on schools, markets, churches and mosques.

“We think that such expenditure constraints will be difficult to implement ahead of the February 2015 presidential election and with high spending needs to counter the Boko Haram insurgency,” Oliver Masetti, a Frankfurt-based economist at Deutsche Bank, said in a Nov. 10 report.

Middle East violence pushes oil prices up

NEW YORK, Nov. 19 (UPI) -- Violence in northern Iraq, coupled with word of continued pitfalls in Libya, helped push the price of oil into higher territory in Wednesday trading.

Brent crude oil prices for January delivery moved closer to the $80 per barrel mark in early Wednesday trading.

At least five people died as the result of a suicide bombing Wednesday in Erbil, the capital of the semiautonomous Kurdish north of Iraq. While no group had issued a claim of responsibility, the region has seen an uptick of violence associated with the group calling itself the Islamic State.

The attack comes less than a week after a breakthrough interim agreement reached between the Kurdish and Iraqi governments on oil.

Baghdad under the terms of the deal pays $500 million to the Kurdish government, which places 150,000 barrels of oil produced from its territory per day at the disposal of the federal government in exchange. The deal is meant to help address disputes stemming from various claims to control over the oil sector in Iraq, one of the top producers from the Organization of Petroleum Exporting Countries.

In Libya, the Islamic State is reportedly waving its banner over government buildings in the east of the country.

Libyan oil production before civil war in 2012 was above 1 million barrels per day, though output has since hovered around 800,000 bpd.

OPEC next week is expected to review its production in the face of increased output from North American shale basins.

West Texas Intermediate, the U.S. benchmark, followed Brent's lead, moving up marginally to $75 per barrel early Wednesday.

The WTI increase follows the late Tuesday defeat of a U.S. Senate bill in favor of the Keystone XL pipeline, meant to bring Canadian crude oil to U.S. refiners situated near key export terminals along the Gulf Coast.

Iran secures gas from Turkmenistan

TEHRAN, Nov. 19 (UPI) -- Turkmenistan under the terms of an agreement will increase the amount of gas it exports to Iran by 20 percent, Iran's deputy oil minister said Wednesday.

Deputy Minister Hamid Reza Araqi told the semiofficial Mehr News Agency a deal ensures adequate gas supplies for the upcoming winter.

Araqi said Turkmenistan has since the beginning of the Iranian calendar year, which begins in March, has exported around 80 million cubic feet of natural gas to Iran, a level that should increase by 20 percent under the terms of a new arrangement.

"According to agreements signed, there is currently no barrier blocking the flow of gas from Turkmenistan," he said.

Turkmenistan is one of the largest natural gas producers in the world. Its Galkynysh natural gas field near the border of Afghanistan is one of the world's largest, with an estimated 925 trillion cubic feet of reserves.

Iran too holds significant natural gas reserves, though mountainous northern terrain makes national dispersal complicated.

"The deal makes it possible to raise the amount imported from Turkmenistan in cold months of the winter," Araqi said.

Western powers have backed a multilateral gas pipeline from Turkmenistan east toward India over an Iranian project for Pakistan.

Russia shifting foreign policy focus to Asia-Pacific

MOSCOW, Nov. 19 (UPI) -- Developing a foreign policy vision that emphasizes ties in the Asia-Pacific is a national priority for the Kremlin, Russia's foreign minister said Wednesday.

"The dynamic development of our eastern territories is a national priority for the whole 21st century," Russian Foreign Minister Sergei Lavrov said. "Hence, our interest towards more active and productive involvement in integration processes in the Asia-Pacific Region and in tapping its potential for an economic upturn in Siberia and the Far East."

A Russian economy hobbled by a reliance on Europe as a destination for oil and natural gas, from which it draws on heavily for sustenance, has pivoted toward energy-hungry Asia-Pacific.

Exports of crude oil, petroleum products and natural gas accounted for 68 percent of all export revenues for Russia in 2013.

Western powers have sanctioned the Russian energy sector in response to Moscow's reaction to political upheaval in Ukraine in November, which resulted in the former Soviet republic drawing closer to the European Union.

On Tuesday, Russian Natural Resources Minister Sergei Donskoy said oil company Rosneft may focus more on Asia as it looks for new partners for exploration and production work in the arctic. He said Rosneft needs to find partners in countries that have not sanctioned Russia.

For Lavrov, the shift is part of a broader geopolitical realignment.

"The Moscow-Beijing tie is a key factor of preserving stability and security on the planet, establishing a steady multi-polar global system, ensuring the supremacy of law in world affairs and democratizing international relations," he said.

The U.S. Defense Department is changing its focus to the Asia-Pacific as military obligations in the Middle East and Afghanistan end.

About 60 percent of the U.S. Navy's assets will be assigned to the region by 2020.

Libya hopes to restart El Feel oilfield next week

Libya hopes to restart oil production at the southwesterly El Feel field next week, a spokesman for the state National Oil Corp (NOC) said.

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.

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 (bpd) 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.--Reuters

 Yemen government oil export revenues fall

Yemeni government revenues from crude oil exports dropped almost 35 per cent in the first nine months of 2014 to $1.34 billion from $2.04 billion the same period a year earlier, official figures published showed.

A central bank report attributed the drop to a fall in the government's share of overall oil output to 12 million barrels in the January-September period, from 19 million barrels in the first nine months of 2013.

Fuel imports amounted to about $1.63 billion from January to September 2014, it said.

Yemen is a small producer with proven oil reserves of around 3 billion barrels, according to the US Energy Information Administration (EIA). It produces crude oil under production-sharing agreements with foreign energy companies.

In March 2014 the IAE estimated Yemen's crude oil output, at about 100,000 barrels per day (bpd).

Yemen's oil and gas exports have been affected by attacks on pipelines by Islamist militants or disgruntled tribesmen which have led to fuel shortages and a slump in revenues since 2011.

--Reuters

 Bahrain sells 2015 naphtha at premium $7.25 per tonne

Bahrain Petroleum Co (Bapco) has signed its 2015 naphtha deal with at least one buyer at $7.25 a tonne above Middle East quotes on a free-on-board (FOB) basis, down 74 per cent from its existing contract price, traders said.

The fresh premium was also the lowest for Bapco in at least four years as high supplies had hit sellers hard, causing prices to dive since the third quarter.

Bapco was initially targeting $15 a tonne before lowering that to $10 against bids at $5.

Bapco is also expected to sign its 2015 diesel and jet fuel deals, but traders said the Middle Eastern supplier is still likely in talks with buyers over the price.--Reuters

Saudi oil policy uncertainty unleashes speculation

LONDON, 12 hours, 39 minutes ago

If Saudi Oil Minister Ali Al Naimi wants to stop speculation spreading before a crucial Opec meeting next week, it's too late.

Al Naimi's intervention last week after a two-month silence failed to address a question energy markets want answered: is the Opec leader no longer willing to defend oil prices which have dived by a third to their lowest since 2010, and is it pursuing new commercial or even geopolitical goals?

Despite Al Naimi's insistance that Riyadh wants stable markets, diplomatic and market sources say Saudi officials told recent private briefings that the kingdom can live for some time with current, or even lower, levels.

Reading Saudi oil policies has long been like Kremlinology - understanding the politics of that other secretive power, Russia. The next Opec meeting on November 27 is taking this art to a new, higher level.

A number of explanations have been offered to fill the information vacuum on Riyadh's intentions and they aren't all from the usual conspiracy theorists in Russia and Iran, which are at loggerheads with the kingdom.

Oil market watchers are divided on the outcome of the meeting in Vienna. Predictions range from a large Opec production cut to revive prices through a small cut to none at all.

Even those who have known Al Naimi for decades are puzzled. "For the first time, I really do not know what is likely to happen at the meeting. It is not clear," said a long-serving senior Opec delegate.

When Al Naimi finally spoke on November 12, he said Riyadh's desire for stable markets had not changed.

"Saudi oil policy... have been subject a great deal of wild and inaccurate conjecture in recent weeks. We do not seek to politicise oil ... For us it's a question of supply and demand, it's purely business," he said.

According to four market and diplomatic sources, who asked not to be named, Saudi officials briefed Opec watchers privately in New York and Riyadh in September and October.

Nasser Al Dossary, Saudi Arabia's national representative to Opec, Al Naimi's deputy Prince Abdulaziz bin Salman and the kingdom's Opec governor Mohammed Al Madhi attended at least one of these meeting to give the message that, with its large currency reserves, the kingdom was prepared to withstand oil prices as low as $70-$80 per barrel for up to a year.

Benchmark Brent crude oil slipped to $79.

Most members of the cartel apart from Saudi Arabia need much higher prices to balance their budgets but ironically are unable or unwilling to reduce their output to counter a global glut caused by slowing economic growth in China and Europe, just as US oil production booms.

Seeing off shale oil

Should the Saudis tell fellow Opec members, badly suffering from the oil price collapse, that they will not cut output, debate will intensify on what prompted the policy shift.

One possibility is Riyadh wants to see off US shale oil, which is believed to need much higher prices than conventional production to remain competitive. "They are after US shale," said one participant in the meetings with Saudi officials.

However, the source added that the Saudis might also regard low prices as an opportunity to put even more pressure on Iran and Russia for supporting Syrian President Bashar Al Assad, an arch-enemy of Riyadh, in the country's civil war.

Several Saudi oil sources have denied over the past month that geopolitics are now driving the policy, but they have failed to stifle theories that Riyadh and Washington are working together to hold down prices.

"What is the reason for the US and some US allies wanting to drive down the price of oil? To harm Russia," Nicolas Maduro, president of fellow Opec member Venezuela, said last month.

 Masoud Mirkazemi, an Iranian lawmaker and former oil minister, said Riyadh was helping the G20 group of major economies. "Saudi Arabia, which intends to manage Opec, serves the interests of the G20 group," he said.

 Global oil war?

 In Russia, the idea of a Saudi-US plot against Moscow has become common currency as the economy struggles under the effects of low oil prices and Western sanctions imposed over its annexation of Crimea and support for rebels in eastern Ukraine.

Leonid Fedun, a co-owner of private oil firm Lukoil, cited President Barack Obama's visit to Riyadh in March. "Obama travelled to meet the king of Saudi Arabia just after the Crimea events to push him to these actions (to lower the oil price)," Fedun, whose firm has large US assets, said last month.

Russia and Iran routinely allege US plots against their economies, but the conspiracy theories are spreading.

 "Is it just my imagination or is there a global oil war underway pitting the US and Saudi Arabia on one side against Russia and Iran on the other?" New York Times columnist Thomas Friedman, wrote last month.

US Secretary of State John Kerry sidestepped the issue after a trip to Saudi Arabia in September. Asked if past discussions with Riyadh had touched on Russia's need for oil above $100 to balance its budget, he smiled and said: "They (Saudis) are very, very well aware of their ability to have an impact on global oil prices."--Reuters

 Opec needs to cut output by up to 1 mbpd: delegate

The Organization of the Petroleum Exporting Countries (Opec) needs to cut its oil output by up to 1 million barrels per day (mbpd) 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 Opec, 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 mbpd and 29.5 mbpd, 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 mbpd in October, according to the group's own figures, although the International Energy Agency has a higher estimate of 30.60 mbpd.

Opec delegates warn reaching an agreement will not be easy when the group meets on November 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. --Reuters

 Aramco's oil resources to grow to 900bn barrels by 2025

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

Aramco's oil resources to grow to 900bn barrels by 2025

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

Bagdad to restart oil flow to Turkey after Arbil deal

REUTERS PhotoIraq’s government will restart the transport of oil to Turkey for the first time since March after it settled a long-lasting revenue row with the regional Kurdish government last week, Turkish Energy Minister Taner Yıldız said at an energy conference in Rome on Nov. 19.

“The central Iraqi government will restart its oil shipment with 150,000 barrels per day,” the minister said, answering reporters’ questions at the Building a Euro-Mediterranean Energy Bridge conference in the Italian capital.

When asked about the timing of the restart, the minister replied, “We will begin any day.”

Baghdad’s oil shipments to Turkey were suspended in March due to several technical setbacks amid a heated dispute between the central and the Kurdistan Regional Government (KRG).

Baghdad had been opposing the Kurds’ plan to export oil via an independent pipeline, which would link up with an Iraqi pipeline at the Turkish border and terminate at the Mediterranean port of Ceyhan.

Iraq and the KRG came to an agreement to resolve the long-standing conflict of oil exports and re-establish trust on Nov. 14.

“Income from oil contributes toward the stability of Iraq, and we [Turkey] argued from the beginning that it belongs to all of Iraq, both north and south. Turkey has done its share of work to form and protect such a system,” Yıldız said.

Need for cooperation in Cyprus

On the separate issue regarding the island of Cyprus, Yıldız said energy resources around Cyprus belong to both Greek and Turkish Cypriot authorities.

Yıldız stressed the need for cooperation and a political structure in the eastern Mediterranean that could ensure economic feasibility.

Greek Cyprus suspended talks over the divided island on Oct. 7.

Negotiations between Turkish Cypriots and Greek Cypriots resumed after a two-year pause in February 2013. The previous round of talks had collapsed, partly because of the impact of the eurozone debt crisis on the government in Nicosia.

According to the Turkish Foreign Ministry, Prime Minister Ahmet Davutoğlu will visit Athens on Dec. 5 and 6 to attend a bilateral cooperation meeting.

November/19/2014

IEA prepares for oil supply disruption scenarios

The International Energy Agency (IEA) completed its latest biennial Emergency Response Exercise (RER) on 18 November, as delegates from member and 10 non-member countries in Paris practiced and improved skills for responding to energy supply disruptions.

This seventh ERE focused on how member and non-member countries can cooperate during significant disruptions to oil supplies, building on lessons learned at the previous ERE in 2012. Participants from the key partner countries China, India, Indonesia and South Africa as well as other non-member countries from three continents works alongside government and industry in the 29 IEA countries to examine how best to resolve potential supply interruptions. The process included simulations of responses to three hypothetical emergencies.

IEA Executive Director Maria van der Hoeven noted that today many non-OECD countries are as vulnerable to oil shocks as IEA members. “It is in this context that this is the fourth ERE in which we have participants from both member and partner countries working together to find solutions”, she said.

Keisuke Sadamori, IEA Director of Energy Markets and Security, said the exercise constituted “two very interesting and productive days of discussions” that, besides deepening potential cooperation between member and non-member countries, had helped participants better assess disruptions and further familiarize themselves with the IEA emergency response tools.

EREs are capstones in the continuous testing and training necessary for effective use of IEA emergency response during an oil supply disruption. All IEA member countries that are net oil importers must stockpile at least 90 days worth of the previous year’s imports. But many hold far more, with reserves this year equaling approximately 220 days of their own net imports (equivalent to 44 days of total global consumption).

The IEA last coordinated a release from member countries’ emergency stocks in 2011, when civil war disrupted Libyan production. While the ERE addressed short term action in the even of oil supply disruption, the IEA’s wider work considers both short and long term energy security for all forms of energy.

Adapted from a press release by Emma McAleavey.

Published on 19/11/2014

The outlook for oil prices

According to Jadwa Investment (JI), Q3 2014 was marked by a sudden decline in oil prices, with the Brent benchmark dropping 7.3% in the quarter, to an average of US$ 102/bbl, down from US$ 110 in Q2 2014. The firm sees this decline coming about from a combination of accelerating US supply, resulting in a glut of light sweet crude in the Atlantic Basin, weaker than expected global demand, stabilization in geopolitics, and an appreciation of the dollar.

Although the growth of light, sweet US crude production has been accelerating in the last few years, global production outages in a number of countries have delayed the impact of US supply rises on oil prices. US production increased by 3 million bpd in the five years since Q3 2009, but outages in five countries (Libya, Iran, Yemen, South Sudan and Syria), totaling 2.4 million bpd, meant oil supplies that were no longer going to the US found alternative markets quite easily. However, since 2012 rising US oil production has been backing out imports of West African crude, mainly Nigerian. Nigerian exports, which are light and sweet also, totaled 1.1 million bpd to the US in 2007, but dropped to an average of 140 000 bpd in H1 2014 and the US imported no crude oil from Nigeria between 27 June – 8 August. As a result, a large portion of this unwanted Nigerian crude has contributed to creating a glut of supply in the Atlantic Basin, putting downward pressure on Brent prices.

The glut in West African crude has also come about at a time when concerns over geopolitical issues, which had previously maintained a floor on prices, receded. In Q3 2014, JI identified no major additional damage to oil infrastructure in Iraq as violence did not spread to the oil exporting areas in the south. The Ukraine-Russian conflict saw sanctions applied by both sides but these sanctions did not impact on short to medium oil supplies and, although conflict continued in Libya, oil output increased. As these key geopolitical even stabilized, the risk premium attached to oil prices decreased, pushing prices downwards.

Lastly, an appreciation of the dollar in the last two months has seen it reach its highest point in over a year which, in turn, has also contributed to decreasing global demand for oil and added to downward pressure on prices. Oil prices and the US dollar exchange rate have a negative correlation, since the global market for crude oil is generally prices in the dollar. Therefore an appreciation of the dollar is usually accompanied by a decline in global oil prices, due to decreases in demand as it becomes more expensive for non-US consumers, and vice versa. The current dollar strength is a result of the expectations of rising interest rates in the US, as the Federal Reserve ceases its asset purchasing program plus looser monetary policy implemented by both the EU and Japanese central banks, to support their respective economies.

Looking ahead to Q4 2014, JI sees oil prices recovering slightly on the back of an uptick in demand during the winter seasons, but ample supply from non-OPEC sources will see global oil surplus reaching 1.73 million bpd in 2014, therefore preventing prices from rising too far beyond the US$ 100/bbl mark. Furthermore, there is likely to be no let up in the strength of the US dollar, which will hold its elevated value, and JI do not foresee any significant cuts in OPEC production taking place. However, they do see any deterioration in geopolitics of Iraq, Russia/Ukraine and Libya resulting in oil prices recovering above US$ 105/bbl.

Adapted from a report by Emma McAleavey.

Published on 19/11/2014

Iraq, Kurdish region implement deal on oil exports, salaries

Nov 19 (Reuters) - The government of Iraq and the semi-autonomous Kurdistan region have begun implementing a deal under which Baghdad resumes funding Kurdish civil servant salaries in return for a share of Kurdish oil exports, Iraq's finance minister said on Wednesday.

The accord aims to reduce friction between Baghdad and Kurdish authorities as they face a common threat from Islamic State insurgents who have seized large parts of the north and west of the country.

Under the agreement reached last week, Kurdish authorities committed to pump 150,000 barrels per day of oil - around half their overall shipments - to Iraqi government export tanks in the Turkish port of Ceyhan.

Baghdad agreed to pay $500 million towards Kurdish salaries.

Finance Minister Hoshiyar Zebari said that the Kurdish Regional Government began pumping oil to State Oil Marketing Organisation (SOMO) tanks at Ceyhan on Tuesday and the $500 million was transferred on Wednesday.

"This payment will be followed by other payments," Zebari, who is a Kurd, told a news conference in Baghdad.

Baghdad cut the Kurds' share of the budget to punish them for exporting oil without its consent. The region was plunged into financial crisis, but has continued pumping oil through its independent pipeline to Turkey, and exports recently increased to around 300,000 bpd.

Iraqi leaders are under pressure to bury differences in order to counter Islamic State militants who control substantial parts of Iraq and neighbouring Syria.

In July, then-foreign minister Zebari said the Kurdish political bloc withdrew from the national government in protest against then-prime minister Nuri al-Maliki's accusation that Kurds were harbouring Islamist insurgents in their capital.

The Kurds later rejoined the administration. But tensions persist even after Maliki's replacement by Prime Minister Haider al-Abadi, also a Shi'ite Muslim but seen as more moderate and capable of cooperating with Sunni Muslims and Kurds.

There are about 5 million Kurds in majority Arab Iraq, which has a population of more than 30 million. Most live in the north, where they run their own affairs, but remain reliant on Baghdad for a share of the national budget. (Reporting by Raheem Salman; Writing by Dominic Evans; Editing by Mark Heinrich)

Russia sees recession if oil price falls to $60

Russia’s economy will sink into a recession next year if the price of oil slumps to $60 a barrel and the U.S. and its allies tighten sanctions over the conflict in Ukraine, Finance Minister Anton Siluanov said.

The economy of the world’s largest energy exporter won’t grow faster than 1 percent in 2015 even if oil prices hold steady and the severity of sanctions remains unchanged, Siluanov said in an interview in Singapore. The price of Brent has slumped by almost a third this year to below $80 a barrel.

“Recession is inevitable in 2015 if the situation worsens,” Siluanov said. “If the oil price declines to $60 per barrel, the economy will have negative growth.”

A worker climbs an access ladder outside an oil storage tank at the custody transfer facility in the Salym Petroleum Development oil fields in Salym, Russia. (Bloomberg)

The comments add to signs of growing unease in Russia after President Vladimir Putin warned last week that the country is bracing for a potential “catastrophic” slump in oil prices. The decline in the cost of crude is exacting a toll on an economy already battered by the U.S. and the European Union’s restrictions imposed over the nation’s role in the Ukrainian crisis.

Economic output is growing at the slowest pace since a 2009 contraction, having expanded 0.7 percent in the third quarter from a year earlier. The central bank last week said that gross domestic product will probably stagnate in 2015. A recession would also force the government into a fiscal adjustment, Siluanov said.

“We’ll have to take a more strict approach to the budget and use all our crisis-fighting tools,” Siluanov said. “We’ll have to adjust our budget strategy and review priorities. All social obligations will be met. Nobody plans to revise them, but second-tier priorities will be postponed.”

Brent, the grade traders look at for pricing Russia’s main export blend Urals, has fallen 28 percent this year. As the market enters a period of weaker demand, the price may fall further in the first half of the next year, according to the International Energy Agency.

There’s a 70 percent chance of a recession in the next 12 months, according to the median estimate of 27 economists in a survey Oct. 30. That’s the highest since Bloomberg started tracking the figure two years ago, up from 60 percent last month.

Even so, Russia predicts the decline will be more moderate than in the wake of the collapse of Lehman Brothers Holding Inc., when the country’s economic output plunged 7.8 percent, Siluanov said.

“The drop in oil prices and the economic contraction won’t be as serious as we had in 2008-2009,” Siluanov said. “Growth will recover after the economy adapts to new conditions.”

The Russian economy will remain stable even under the “unfavorable” conditions of oil at $80 a barrel and sanctions staying in place until the end of 2017, central bank Governor Elvira Nabiullina said Tuesday in the lower house of parliament in Moscow.

The ruble exchange rate depends “directly” on energy prices, she said.

The Bank of Russia, which estimates GDP will expand 0.3 percent this year, last week said that growth may be zero next year as the economy succumbs to sanctions, while the weakening ruble ignites inflation and lower oil prices erode export revenue. The regulator forecast that sanctions will last through 2017 and oil will average $95 a barrel, compared with an estimate of $102 this year.

Under current conditions of the ruble at about 47-48 per dollar and crude near $80 a barrel, oil and gas revenue that accounts for half of the budget will meet the targets in next year’s draft, according to Siluanov.

The budget deficit will be 0.6 percent of GDP in 2015 after this year’s surplus of 0.1 percent to 0.3 percent, according to the ministry’s estimates. Federal revenue and spending may be balanced with an oil price of $90 per barrel next year, according to Siluanov.

“A decline to $70 per barrel, or maybe to $60 per barrel, won’t be a long-term trend,” Siluanov said. “Most likely, the price will be within a range of $80 per barrel to $90 per barrel next year.” (Bloomberg)

Platts Analysis of U.S. EIA Data

U.S. crude oil stocks rose 2.6 million barrels last week

Geoffrey Craig, Platts Oil Futures Editor

U.S. commercial crude oil stocks grew 2.6 million barrels to 381.1 million barrels during the reporting week ended November 14, U.S. Energy Information Administration (EIA) petroleum data showed Wednesday.

Analysts that Platts surveyed Monday had been expecting a 660,000-barrel draw. Crude oil stocks typically decline in mid-November as refineries return from maintenance, increasing demand and pulling barrels from storage.

By region, the biggest crude oil build occurred on the U.S. Gulf Coast (USGC), where stocks increased 1.9 million barrels to 194.5 million barrels.

USGC crude oil imports rose 472,000 barrels per day (b/d) to 3.6 million b/d, helping stockpiles accumulate, despite an increase in crude oil runs.

Crude oil runs at USGC refineries increased 118,000 b/d to 8.4 million b/d. The region's refinery utilization rate increased 1.6 percentage points to 93.9% of operable capacity.

Total refinery utilization was 1.1 percentage points higher, pushing the overall rate to 91.2% of operable capacity. Analysts surveyed Monday had projected a 0.4 percentage-point increase.

Crude oil runs increased for the third week in a row, edging closer to the 16 million-plus b/d seen from late June through mid-September. Crude oil runs were up 161,000 b/d to 15.9 million b/d.

Higher crude oil runs could not offset the impact of rising imports and soaring domestic crude oil production on stockpiles.

Crude oil imports increased 761,000 b/d to 7.6 million b/d. Imports have been zigzagging since September, with the weekly average oscillating between just over 8 million b/d and around 6.7 million b/d.

The biggest swing by country came from Saudi Arabia. Imports were up 680,000 b/d to 1.3 million b/d.

Imports from Canada rose 260,000 b/d to 2.8 million b/d. Imports from Mexico increased 106,000 b/d to 955,000 b/d. Venezuelan imports fell 132,000 b/d to 762,000 b/d.

Preliminary estimates of U.S. crude oil production fell 59,000 b/d to 9 million b/d. But that is still up from 8 million b/d one year ago, evidence of domestic crude oil production's upward trajectory.

Current inventories are well-supplied by historical standards. At 381.1 million barrels, crude oil stocks were 7.4 million barrels below last year's level, but remain 6.6% above the EIA five-year average.

Crude oil stocks at Cushing, Oklahoma, the delivery point for the New York Mercantile Exchange NYMEX crude oil contract, were up 718,000 barrels to 23.2 million barrels. Cushing stocks remain 16.7 million barrels below last year's level, but have been mostly rising since early October, reversing the steep decline seen over the first half of 2014.

U.S. DISTILLATE STOCKS DRAW

U.S. distillate stocks fell 2.1 million barrels, EIA data showed. Analysts had expected a 1.2 million-barrel draw.

Production of the fuel fell 29,000 b/d to 4.8 million b/d.

EIA updates U.S. distillate export statistics only once a month, but the Platts cFlow ship-tracking software showed exports to Europe rising sharply the week ended November 14 to 440,000 metric tonnes (mt) from 140,000 mt the previous week.

A tight supply picture in Europe improved the economics of shipping distillates after a prolonged period of closed arbitrage. Exports provide an additional outlet for distillates, helping drain inventories.

At 114.8 million barrels, distillate stocks were 16.2% below the EIA five-year average.

U.S. Atlantic Coast (USAC) combined low- and ultra-low-sulfur diesel (ULSD) stocks fell 2.5 million barrels to 28.3 million barrels. Stocks remain 3.5 million barrels above last year's levels and 14% above the EIA five-year average.

The supply situation appears tighter elsewhere. USGC combined low-sulfur and ULSD stocks fell 150,000 barrels to 31.4 million barrels, sitting 12.8% below the EIA five-year average.

The U.S. Midwest's combined stocks dropped 275,000 barrels the week ended November 14. Stocks were slightly below last year's level and 9.8% less than the EIA five-year average.

U.S. gasoline stocks increased 1 million barrels to 204.6 million barrels. Analysts had expected gasoline stocks to rise 600,000 barrels.

U.S. Midwest gasoline stocks increased 848,000 barrels, snapping a six-week streak of falling stocks. During that stretch, the region's gasoline stocks plummeted to an all-time low going back to 1990, when the EIA began recording such data.

At 44.5 million barrels, Midwest gasoline stocks were 8.5% below last year's level in the same reporting week.

USAC gasoline stocks are also tight by historical standards. The region's gasoline inventory drew 443,000 barrels lower the week ended November 14. At 49.9 million barrels, gasoline stocks were 4.82% lower than one year ago.

Gasoline stocks on the USGC look better-supplied. USGC gasoline stocks fell 599,000 barrels to 75.2 million barrels. Current levels are still above last year's, as well as the EIA five-year average.

Canadian oil producers finding ways to deal with Keystone XL delay

Calgary (Platts)--19Nov2014/606 pm EST/2306 GMT

Canadian producers are diligently working on options to ship additional volumes of crude to the US Gulf Coast following delays in approving the northern leg of the TransCanada-backed Keystone XL oil pipeline, industry officials said Wednesday.

A bill to approve the stalled Keystone XL failed in the US Senate Tuesday evening by a 59-41 vote, one vote short of the 60 needed to overcome a filibuster and reach President Barack Obama's desk. The White House, however, had indicated Obama would likely veto the bill had it passed the Senate.

At present, about 90,000 b/d of Western Canadian crude flow to the USGC, but the construction of Keystone XL's northern portion could increase that to 830,000 b/d.

Oil sands producer MEG Energy has been relying increasingly on a "portfolio" of pipelines, rail and barges for its Access Western and Cold Lake blends to reach the Houston area, company spokesman Brad Bellows said.

"Our biggest market has been the US Midcontinent, but we are now at the initial stages of not only shipping crude to USGC refineries, but also re-exporting from there to international markets," he said.

The company is also relying on the startup in December of the Enbridge-operated Flanagan South pipeline that will allow it to ship additional volumes of crude from Alberta to the USGC.

MEG has booked capacity of 25,000 b/d on Flanagan South, Bellows said.

Peter Howard, CEO of the Canadian Energy Research Institute, said changes being made to yet another Enbridge-operated line will also facilitate incremental shipments of Western Canadian crude to the USGC.

"They are installing some 70 new pumps on the Canadian Mainline that could potentially allow for an incremental 500,000 b/d of crude to move from Alberta," Howard said.

In the meantime, Canadian National and Canadian Pacific railways have provided Canadian producers with a way to move their crude south.

"Some four years ago, crude by rail was not imagined, " Howard said. "But today some 120,000 b/d is being loaded onto rail cars in Western Canada. "

By 2016, the loading capacity of rail cars in Alberta and Saskatchewan is projected to reach 1.35 million b/d, Howard said.

"We may not be able to load those volumes due to operational and safety reasons, " he said. "But assuming an 85% efficiency level, that would translate into 1.1 million b/d or the equivalent of KXL capacity. "

Using rail as an "interim" solution to transport crude from Alberta to the USGC has also been an option that TransCanada looked into. But Paul Miller, the company's president of liquids pipelines, said it is unlikely to go down that route.

"Loading crude into tank cars and using rail to cross the border before injecting that crude into the southern leg of the Keystone pipeline will not make much sense," he said on a webcast Wednesday from Toronto during the company's Investor Day.

"Rail allows you to develop new [marketing and distribution] hubs, " Miller added. "But our aim is not to do that. We remain optimistic of KXL being approved. "

CERI's Howard said there is a "strategic" reason for Keystone XL to be built because of Alberta's growing oil sands production.

"Even if 1 million b/d were to be moved on rail cars and the Energy East, Northern Gateway and TransMountain Expansion get done, by 2019-2020 we will back up against capacity constraints. KXL will be back in focus," Howard said.

Alberta's producers will need all options, including export pipelines to the east, west and south, Steve Laut, president of Canadian Natural Resources, said November 6 on a third-quarter earnings webcast.

"The USGC is short of heavy oil that's now being bridged by rail from Alberta," Laut said. "However, in 2015 there will be a need to move more heavy barrels to the Houston area."

CNR has taken 120,000 b/d capacity on Keystone XL.

Fellow oil sands producer Cenovus has booked 75,000 b/d on Keystone XL, but has also subleased 199 tank cars to overcome restricted pipeline takeaway capacity.

Gulf Coast fuel oil stocks rise as imports offset lower production

Houston (Platts)--19Nov2014/150 pm EST/1850 GMT

Production of fuel oil in the US Gulf Coast fell 44,000 b/d last week to a six-year low of 114,000 b/d, data from the Energy Information Administration showed Wednesday.

Still, the refinery yield of fuel oil in the region came to 2.57%, well above last week's record low figure of 1.36%.

Despite the falling production, fuel oil inventories in the Gulf Coast rose 568,000 barrels to a nine-month high of 23.345 million barrels, as imports jumped 54,000 b/d to 147,000 b/d.

Gulf Coast gains, combined with a 311,000-barrel build on the West Coast, led to a 772,000-barrel increase in total US stocks to 38.338 million barrels, a five-month high.

The build on the West Coast stemmed in part from a 15,000 b/d rise in production, to 196,000 b/d. Refinery yields continued to climb last week on the West Coast, reaching 7.98%, highest since May 2011.

Imports saw only a modest fall of 12,000 b/d to 243,000 b/d, with a substantial decline in the East Coast largely counterbalanced by the increasing movements into the Gulf Coast and West Coast.

UAE to invest in expanding oil capacity despite low prices: minister

Dubai (Platts)--19Nov2014/336 am EST/836 GMT

The UAE will continue to invest in expanding its oil and gas production capacity to meet global demand despite falling oil prices, UAE energy minister Suhail al-Mazrouei said this week.

"We will also work with OPEC to stabilize the supply-demand equation. ... We don't see any need for politicizing the oil and gas pricing mechanism," al-Mazrouei said at an energy conference in Abu Dhabi, according to state-run WAM news agency.

OPEC meets November 27 in Vienna to discuss possible production cuts after oil prices dropped below $80/barrel in recent weeks.

The minister said world demand for oil and gas was rising 1-1.5% annually. To meet this, Mazrouei reiterated that the UAE is investing more than $70 billion to lift its production capacity to 3.5 million b/d by 2017. Mazrouei said the current slump in global crude prices "will not bode well for sustained investment by small and medium oil and gas companies, particularly in shale gas" because of high production costs.

He estimated UAE's own annual demand growth for power at 6%, adding that the country will depend on three different resources to diversify its energy mix to meet the demand.

Natural gas will remain the primary feedstock for power generation, contributing 70% by 2020, while nuclear power and renewable energy will contribute 25% and 5%.

Abu Dhabi is currently commissioning its $11 billion Shah gas development, after five years of construction.

The major sour gas project is expected to produce 500,000 Mcf/d of gas. Another 500,000 Mcf/d will come from the $10 billion development of the Bab sour field in 2018.

At the same time, the emirate is also planning to complete the expansion of its Integrated Gas Development by 2019, which will increase offshore gas production to 1.6 Bcf/d from 1 Bcf/d currently.

The UAE currently has the capacity to import around 3 million mt/year of LNG at Dubai's Jebel Ali terminal.

By the middle of 2018, it will be able to import another 9 million mt/year at its planned Emirates LNG facility in Fujairah.

The new facility's capacity will be expanded to 15 million mt/year eventually, taking the UAE's total import capacity to 18 million mt/year.

India's October oil product exports rise 1.2% on year to 1.57 mil b/d

Mumbai (Platts)--19Nov2014/320 am EST/820 GMT

India's crude oil imports rose 3% year on year in October to 15.82 million mt, or an average of 3.74 million b/d, provisional data from the Petroleum Planning and Analysis Cell website showed Wednesday, November 19.

Crude imports were also 2.1% higher than 15.50 million mt imported in September.

India's oil product exports rose 1.2% on year to 6.20 million mt, or 1.57 million b/d, as sharp rises in gasoil and gasoline exports were offset by steep falls in fuel oil and jet fuel exports.

Gasoil exports jumped 19.4% on year to 2.82 million mt in October, and was 9.8% higher than September.

Gasoline exports rose 15.1% on year to 1.41 million mt in October, and was 0.9% higher than September.

India's oil product demand fell 1% year on year to 13.09 million mt, or 3.31 million b/d, as gasoil sales fell even as gasoline and LPG demand held steady.

The October demand was however, 4.9% higher over 12.48 million mt in September.

Gasoil sales fell 3% from a year ago to 5.45 million mt, but rose 11.2% from sales of 4.90 million mt in September.

India deregulated gasoil price on October 18, with a price cut followed by a second price cut by the end of the month.

Dealers have been running on low inventory in anticipation of a price cut, which would partly account for the weakness in gasoil sales in September and for part of October.

Gasoline sales rose 10.5% on year to 1.62 million mt in October, while LPG sales grew by 7.1% on year to 1.50 million mt.

Nigeria clears $230 mil debt owed to oil firms for gas supply to power sector

Lagos (Platts)--19Nov2014/629 am EST/1129 GMT

Nigeria has cleared Naira 36.9 billion ($230 million) debt owed to oil companies on gas supply to the power sector, oil minister Diezani Alison-Madueke said Wednesday, as the government signed memorandum of understanding with nine oil firms to bolster gas supply to power plants.

"The legacy gas debt of Naira 36.9 billion owed to gas suppliers by the power sector has been settled by the [Nigerian] central bank-led intervention scheme," Alison-Madueke said in a statement released by her office.

The settlement of the debts, according to the minister, was complemented with commitment from the gas suppliers including Chevron, Shell, Eni and Total, to add 2.5 Bcf/d of gas supply to the power sector.

More than 80% of this would go to the power sector to help raise Nigeria's electricity generation to around 5 GW, she added.

The Nigerian government was in talks with eight oil companies, including ExxonMobil, Nigerian Petroleum Development Co. and domestic company Seplat Petroleum, to ink new sales purchase deals for the supply of natural gas to 10 power plants in the country, Platts reported earlier this month.

The power plants were built to tackle chronic energy supplies in the country and were to be privatized.

But the non-availability of gas had stalled plans by Nigeria to conclude the sale of the power plants previously set for the third quarter.

Gas supplies have been constrained by low gas prices set by the government, which barely cover the cost of producing and processing gas.

However, Alison-Madueke said the government has increased tariffs for gas to power to "reflect commercial rates and enable private investment in our infrastructure."

S Korean Kogas' October LNG sales fall 9.8% on year to 2.51 million mt

Tokyo (Platts)--19Nov2014/109 am EST/609 GMT

State-owned Korea Gas Corporation's LNG sales fell again in October, sliding 9.8% year on year to 2.51 million mt, the company said Wednesday, November 19.

LNG sales to power generation companies dropped 13.6% year on year to 1.34 million mt in October, and sales to retail gas companies for household and business use fell 5.1% over the same period to 1.17 million mt.

Compared with September, the state-owned utility's October LNG sales grew 17.9%, led by a 30.4% rise in sales to retail gas companies, while sales to sales to power generation companies climbed 8.8%.

The year-on-year decline came after its sales climbed 2.5% from a year ago to 2.13 million mt, the first year-on-year increase since November 2013, largely because of the temporary shutdown of nuclear reactors for maintenance.

The company's LNG sales in August fell 21.2% from a year ago to 1.97 million mt, the biggest decline in five years and the 10th straight month of year-on-year declines.

This was due to moderate temperatures, higher use of coal for power generation as prices were relatively cheaper compared with LNG, and nuclear reactors having restarted from maintenance and safety checks.

Kogas did not disclose how much LNG it sold over January-October, but calculations based on previous Kogas reports showed it sold 27.6 million mt, down 9.6% year on year.

The company sold 38.68 million mt of LNG in 2013, up 5.8% from 36.55 million in 2012. The world's single-largest LNG buyer imported 39.33 million mt of LNG in 2013, up 12.5% from 34.97 million mt in 2012.

Few in US oil, gas realm very concerned about possible oil price collapse: survey

Houston (Platts)--18Nov2014/407 pm EST/2107 GMT

Only about 15% of US oil and natural gas sector survey respondents said in late October they were very or extremely concerned about a possible crude oil price collapse, according to a survey from Deloitte released Tuesday.

The results of the survey, titled "2014 Oil & Gas Survey: The Next Chapter of the Energy Renaissance," were released at the 2014 Deloitte Oil & Gas Conference in Houston.

John England, vice chairman and oil and gas sector leader for Deloitte, said Tuesday morning that perhaps the respondents who were concerned about an oil price collapse were "the good prognosticators."

The overall responses to the survey showed optimism, England said, with 90% of respondents saying they believed the US has enough domestic natural gas to meet demand and 20% believing that the US is or will be self-sufficient in oil within the next five years. About 80% of oil and natural gas survey respondents said they believe the US energy situation has improved, compared to five years ago, and is headed in the right direction.

Monetary concerns were raised again in other segments of the survey. Respondents were fairly evenly split regarding capital spending, with 56% expecting more spending in 2015. Half of respondents expect an increase in mergers and acquisitions over the next year.

"We've been in an age of pretty easy credit here for a while ... and I think we still actually have a fair amount of capital out there looking for a home," England said.

Technology and innovation has been instrumental in increasing production, and 66% of respondents said they believe technological advancements in shale extraction have improved the economics of shale. England said these advancements are why break-evens are lower and the industry can survive low oil prices, and he said he does not expect a large drawback in research and development in the near future.

US exports were also seen as crucial to upholding production, according to the survey, with 83% of respondents indicating that exports were important for the long-term viability of unconventional oil and gas production. Further, about two-thirds of respondents said the liberalization of Mexico's oil and gas industry is at least somewhat critical to North American energy self-sufficiency.

The survey, taken before the US midterm election, also showed that 65% of respondents named potential federal regulations as their greatest concern, nearly double 38% who named cost margins as their biggest concern. Nearly half of respondents, 48%, said they were very or extremely concerned about new Environmental Protection Agency regulations that could negatively impact shale economics.

John McCue, vice chairman of Deloitte and US energy and resources industry leader and US power and utilities sector leader, discussed municipal and county bans on hydraulic fracturing. If a county such as Denton County, in Texas, bans hydraulic fracturing, there are still plenty of opportunities in neighboring counties and throughout the rest of the state to drill. The more worrisome scenario is a statewide ban, such as in New York, he said.

"Bans are bad for the industry," he said, but environmental restrictions and their impact on production cost structures are just another part of doing business.