Danh mục tin tức

News 21st August 2014

21/08/2014

Ghana Expects Hess Offshore Oil Field to Join Project Lineup

By Ekow Dontoh Aug 20

Ghana, the nation seeking to increase its oil output fivefold in the next decade, expects an offshore development by Hess Corp. (HES) to join the nation’s project pipeline, according to the Petroleum Commission.

Hess will drill a third appraisal well later this year on the Deepwater Tano/Cape Three Points block to establish commercial viability and reserves, Kwaku Boateng, director of special services at the commission, said in an interview. The results on the first two wells were “fantastic,” he said.

Ghana is aiming to increase oil output to 500,000 barrels a day in the next 10 years as projects including Tullow Oil Plc’s TEN and Eni SpA’s Sankofa-Gye Nyame start production. Tullow operates the Jubilee field that will produce an average of about 100,000 barrels a day this year, according to a July 30 statement.

“We have to wait for the final report but from the numbers that we are seeing we are expecting that Ghana gets its fourth development from Hess,” Boateng said Aug. 18 in Accra.

Hess will give results on Ghana by year-end following completion of the appraisal program, Patrick Scanlan, a Hess spokesman at Sard Verbinnen & Co. in New York, said yesterday, declining to comment further.

The TEN, or Tweneboa-Enyenra-Ntomme, and Sankofa-Gye Nyame fields are expected to be developed within the next three years, with combined daily output of about 130,000 barrels, Boateng said. Both fields will also produce natural gas.

Iraqi Kurds, Turkey to Double Oil Export Pipeline Capacity

By Ali Berat Meric and Selcan Hacaoglu Aug 20

The Kurdish regional government in Iraq and Turkey are working to at least double the capacity of a pipeline that allows the Kurds to export crude oil, Turkish Energy Minister Taner Yildiz and an industry official said.

A second pump has been installed near Fishkabur in the semi-autonomous Kurdish region to speed up the injection of Kurdish oil into the main Iraq-Turkey pipeline, according to the industry official with knowledge of the work who asked not to be named, citing policy. Turkey is also upgrading the part of the pipe that runs to its Mediterranean terminal at Ceyhan, he said today in an interview

The added pumping strength “would double the flow of oil from 100,000 to 125,000 barrels per day in the first stage,” Yildiz said in an interview in Ankara. “It would be good if the daily supply capacity can reach 250,000 barrels and even exceed that.” Calls to the press office of the Kurdish administration’s Ministry of Natural Resources either didn’t connect or weren’t answered.

Turkey has been allowing the sale of Kurdish oil through Ceyhan since May, dismissing legal action by the Iraqi federal government, which calls the trade illegal. For the Kurds, whose armed forces have played a central role in countering an Islamist insurgency in northern Iraq over the past three months, the oil pipe offers an economic lifeline as they consider moves toward fuller independence from Baghdad.

Huge Reserves

Oil isn’t currently being pumped from northern Iraq due to some “work related to pipes,” Yildiz said, without elaborating. The industry official said the oil flow may resume within days after Turkey and the Kurdish regional government finish the pipeline upgrade.

So far 6.5 million barrels of 7.8 million barrels of Kurdish oil have been loaded from Ceyhan on a total of seven tankers, Yildiz said at a news conference on Aug. 18. The shipment came as the federal government in Baghdad, responsible under the Iraqi constitution for managing oil shipments and revenues, had tried to block Kurdistan from exporting oil on its own. Iraqi Kurds, ignoring Baghdad, separately export crude on trucks via Turkey as well.

The Kurdish government estimates untapped resources may total 45 billion barrels of oil, more than all remaining reserves in the U.S. Iraqi Kurdish President Massoud Barzani’s administration, which has promised a vote on independence from the rest of Iraq, says output may jump from 400,000 barrels a day in 2014 to 1 million barrels a day next year, and twice that much by 2019.

More Russia Sanctions Are Needed, Ukraine Ambassador Says

By Indira A.R. Lakshmanan Aug 20, 2014 11:00 AM GMT+0700

Tougher U.S. and European sanctions on finance, military sales and energy are needed to stop Russia arming and supporting separatists and end the conflict in Ukraine, the country’s ambassador to the U.S. said.

At a Bloomberg Government lunch yesterday in Washington, Olexander Motsyk ruled out a unilateral cease-fire by Ukrainian forces and questioned a purported humanitarian aid convoy from Russia. He said stronger sanctions are needed, even if that would restrict the energy exports on which Ukraine and other European countries depend.

“Yes, there is some level of sacrifice, but it is sacrifice in the name of the peace and stability in Europe,” Motsyk said.

Waging Financial War

While the sanctions already imposed on dozens of companies and scores of individuals linked to efforts to divide Ukraine send a message that “a state that violates international law has to be held accountable,” they have “not changed Russia’s actions yet,” he said. More sanctions on vital sectors are needed to force Russia to back down and return Crimea to Ukraine, he said.

U.S. non-lethal assistance such as body armor, bulletproof helmets, communications equipment and meals are bolstering the Ukrainian military, Motsyk said. Government forces have reversed their losses in the last several weeks, recapturing three-quarters of the territory that had been seized by pro-Russian fighters, he added.

The U.S. and other NATO members are working with Ukraine, Motsyk said, though he declined to specify whether the assistance includes military training, intelligence or logistics. “Some things we already got, some things we hope to get as soon as possible,” he said. “Step by step, we’ve improved our logistics and chain of command.”

Military Momentum

The Ukrainian envoy said that his military’s momentum recapturing cities in the country’s east from pro-Russian militants brings with it the risks of urban warfare.

Many of the militants, he said, are Russian citizens armed by the Russian military, an assertion backed by U.S. intelligence reports.

“If Russia would close the border to heavy armaments, we would solve the problem,” he said. “The problem is that Russia continues to send across arms and assistance.”

Motsyk said Ukraine is prepared as part of any resolution of the conflict to “provide a corridor” for pro-Russian militants to leave Ukraine for Russia. While he said Ukraine will “never, ever recognize the annexation of Crimea” by Russia, the government in Kiev is prepared to provide more autonomy and financial and taxation authority to local regions.

Asked about OAO Gazprom (GAZP), the Russian energy company that supplies about 30 percent of Europe’s gas imports, and which cut off supplies to Ukraine two months ago in a payment dispute, Motsyk said his government still hopes a resolution can be reached.

Seeking Alternatives

In the meantime, Ukraine is boosting its gas production; cutting consumption; seeking alternate sources such as coal, oil and nuclear power; and buying gas from Poland, Slovakia and other neighbors, he said.

The showdown over Gazprom and possible cutoff of Russian gas during winter is not a “life-or-death” crisis, he insisted.

“Yes, we’re dependent” on Russian gas, “but at the end of the day, we will find a way, maybe even to agree with Russia,” he said. “It’s in the interest of Russia to resume negotiations, as well.”

Russian Gas

Motsyk dismissed concerns that Russia might try to bar other customers from selling gas to Ukraine. “It’s a market: we can sell and we can buy,” and Russia has no right to tell other countries that they can’t resell Russian gas to Ukraine, he said.

Last week, Ukraine’s parliament approved a law allowing U.S. and EU investors to buy up to 49 percent of NAK Naftogaz Ukrainy, which operates pipelines that are used to transport gas for domestic use and half of the Russian gas that Europe imports.

Motsyk said U.S. and European companies have expressed interest in bidding for transportation, storage and operations. He cited Chevron Corp. (CVX) based in San Ramon, California, as among the U.S. companies most involved in Ukraine’s energy industry.

Sweden’s Tethys comes of age as oil producer as Oman output grows

Sweden’s Tethys Oil has made the transition from oil exploration company to producer thanks to its oil development in Oman, the company said Tuesday.

“We are now an oil company with substantial assets and strong finances. Future exploratory and appraisal work can now be funded from cash flow, or bank borrowing secured by reserves,” Tethys Managing Director Magnus Nordin said in the company’s second quarter results statement.

Tethys, which produces oil from Oman’s onshore blocks 3 and 4 in each of which it has a 30% working interest, said it had set new production records in each of the past seven months, culminating in 8,239 b/d in July.

Average Q2 production reached 7,232 b/d, up 64.6% year-on-year. The company’s Q2 net sales of Omani crude rose to SEK245 million ($35.7 million) from SEK110 million in the year-earlier period, while net earnings increased to SEK107 million from SEK39 million.

“We made it here not through mergers or acquisitions but through success with the drill bit,” Nordin said. The main driver behind Tethys’ steadily increasing production during the year to date was the continued successful appraisal of the Lower Buah reservoir on Block 4, he added.

The partners in blocks 3 and 4, which also include Lebanon’s CC Energy Development as operator with a 50% and Japan’s Mitsui with 20%, have completed fournewappraisal/exploration wells in the Lower Buah reservoir and one in the Khufai reservoir on Block 4.

All have been put into production, Tethys reported.

“As a consequence, we commissioned an interim reserve report from our reserve auditors, DeGolyer and MacNaughton, to estimate Lower Buah reserves as at June 30, 2014,” Nordin said. The new appraisal estimates Tethys’ share of oil at 2.3 million barrels of proved reserves, up from 1.2 million b at December 31, 2013, while proved plus probable reserves more than doubled to 5 million b from 2.2 million b.

Nordin noted that the partners have made additional oil discoveries in the Khufai formation and that most of their production from Oman still comes from the Barik reservoir in the previously drilled Farha South field. “Appraisal work will continue throughout 2014 and we look forward to a new year-end reserve audit,” he said.

In Lithuania, where Tethys also has interests in exploration licenses, drilling was expected to start later this year, Nordin said. “As our growth continues, we are staffing up with new senior colleagues,” he reported, adding that a former Omani oil official, Hussain al-Lawati, had agreed to join the company from September 1. Nordin did not specify what position Lawati would take with Tethys. Most recently he was external affairs manager at state-owned Oman Oil Company Exploration and Production.

Angolan Oct provisional loadings fall to 52.95 mil barrels from 54.98 in Sep

Loadings of Angolan crude oil in October are set to fall to 52.95 million barrels compared with 54.985 million barrels in September, according to the provisional loading schedule seen by Platts on Tuesday.

On a daily average basis, October loadings also fell to 1,708,065 b/d compared with 1,832,833 b/d in September. A total of 55 cargoes will load in October compared with 57 in September, according to the loading program.

This is the shortest loading program seen for Angola since July, Platts data showed. The provisional October program so far consists of seven stems each of Nemba and Pazflor, six stems of Dalia, five cargoes each of Cabinda, Clov, Girassol and Saturno, four parcels each of Hungo and Plutonio, three cargoes of Kissanje, and two stems each of Mondo and Saxi.

Explorer Cairn Energy pulls back from Arctic, slashes spending

UK independent Cairn Energy said Tuesday it cannot afford to drill at its Pitu block offshore northwest Greenland without further cutting its license stake, as it slashes its exploration spending and pulls back from frontier areas.

Cairn has been reducing its operated drilling globally since failing to discovery commercial quantities of hydrocarbons in the course of drilling eight wells offshore Greenland in 2010-11 — two thirds of the total ever drilled offshore the island. In its half-year results Tuesday it said it “remains encouraged by the opportunity” in Pitu given 3D seismic survey work already carried out, but any further activity will be subject to farming down its stake “in line with the stated strategy of minimizing capital expenditure on high risk frontier acreage positions.”

Cairn already sold a 31% stake in Pitu to Norway’s Statoil in January 2012, but the latter company has not made Pitu a priority, partly reflecting its location as Cairn’s northern-most Greenland license and the associated costs.

Cairn said Tuesday all its exploration and appraisal drilling beyond current operations will target “mature and emerging basins,” although this still includes the Arctic as it has farmed into a Barents Sea prospect operated by Statoil.

It expects its capital expenditure on exploration next year to be $110 million, focused on northwest Europe, having incurred $213 million in unsuccessful exploration costs last year. Amid ongoing staffing cuts the company managed to reduce its losses for the first six months to $62 million, following a full-year loss last year of $556 million. In addition to an ongoing two-well exploration program offshore Senegal, Cairn’s plans for the next 12 months comprise one appraisal well and three non-operated wells in northwest Europe and one non-operated well off northwest Africa.

Cairn says it now has debt facilities in place to ensure it can cover $1 billion of development costs for the UK Catcher and Kraken projects, operated by Premier and EnQuest respectively. It expects its share of production from these two to peak at 25,000 b/d of oil equivalent in total.

SacOil takes 20% stake in Nigerian shallow water oil field

Johannesburg-listed SacOil said Tuesday it had made its first move into the Nigerian upstream having been granted a 20% stake in license area OPL 223 offshore Nigeria by state-owned NNPC.

SacOil said OPL 233 is a shallow water oil block covering 126 sq km in water depths of 3-10 meters. “The assignment of the participating interest is a milestone in the company’s evolution and is the first asset over which the company has perfected title in Nigeria,” SacOil said in a statement. “The focus now is to continue the progress made on the assets by working in collaboration with the joint venture partners to deliver reserves and production,” it said.

Last week, SacOil was forced to deny it was buying a producing asset in Nigeria, but said it was on the lookout for acquisitions and hinted at a possible material deal. In a statement, the company said it was not in discussions to make an acquisition of a production asset in Nigeria, nor was it seeking to buy a 5,000 b/d producing asset.

That followed media reports that SacOil was close to buying a producing asset in Nigeria. The Africa-focused company said it continuously seeks opportunities to expand and optimize its portfolio of upstream assets. SacOil, which is also listed in London, has oil assets in Malawi, Botswana and the Democratic Republic of Congo. “OPL 233 fits with our strategy of acquiring and exploiting assets with discovered hydrocarbons,” CEO Thabo Kgogo said. “This award now moves us to the next phase of unlocking the resource potential and delivering production,” Kgogo said.

Russia boosts oil, product line access for companies trading on exchanges

The Russian government has made access to domestic crude oil and product pipelines easier for companies that trade on commodity exchanges, according to a statement published Wednesday on the government’s website.

The move aims to spur the development of domestic commodity exchange trading and create a level playing field for all companies interested in doing so, the statement said. The government abolished the law that allowed only registered oil refineries and oil production licence holders access to the oil and product pipeline network run by state-owned Transneft and its subsidiary Transnefteprodukt.

Under the new rules, companies that trade crude oil and products via commodity exchanges do not need to present their downstream or upstream licences to Transneft, provided that the traded volumes are shipped domestically. The same rule applies to companies selling oil products via Russian commodity exchanges for export. The requirement that only upstream licence holders can engage in trading crude volumes for export via commodity exchanges remains in force. Transneft spokesman Igor Dyomin confirmed that his company was ready to ensure the transportation of oil and products volumes traded on commodity exchanges under the new rules.

“This is in line with our [earlier] proposals,” he said. Under Russian law, key domestic oil producers have to sell no less than 10% of their gasoline and jet fuel, 5% of their diesel and 2% of their fuel oil output on commodity exchanges. Over 96% of all Russian oil products sold via domestic commodity exchanges in 2013 were traded on Moscow-based SPIMEX, according to the company’s data.

Last year, SPIMEX oil product trading volumes reached 13.52 million mt, up 41.4% year on year. Crude oil trading started in April 2013 and reached 1.02 million mt at SPIMEX by the end of December, according to the company’s data. Last year, only three companies — Transneft, Bashneft and state-owned Zarubezhneft — sold crude oil on SPIMEX.

Crude oil volumes traded on commodity exchanges are not regulated, although earlier this year Federal Anti-Monopoly Service officials said they considered recommending domestic oil producers trade at least 10% of their crude production on commodity exchanges.

Transneft opposes the draft law that aims to facilitate access of new refineries to the domestic oil pipeline network by abolishing the requirement to provide to Transneft monthly crude oil supply plans for three years after the plant’s launch, the Transneft spokesman said. “This would inevitably result in fluctuating oil flows and a drop in oil quality in the pipeline,” Dyomin said, reiterating Transneft’s position. FAS last week finalized the draft law that requires approval from the government.

Iraq opens new Halfaya oil facility and pipeline

Crude oil has begun flowing through a new 1 million b/d pipeline from the Halfaya and Missan oil fields, connecting the fields directly to export facilities in the south of Iraq for the first time, the Oil Ministry announced in a statement late Tuesday.

The new 42-inch pipeline will transport crude from the fields in the southeast of Iraq over 275 km (171 miles) to the Al-Fao storage depot in the very south of the country, where it will be stored ready for export through the Persian Gulf.

The project was developed as a joint venture between PetroChina and its partners developing the Halfaya field, along with China National Offshore Oil Company (CNOOC), which operates the Missan oil fields.

The engineering, procurement and construction was carried out by China Petroleum Pipeline Bureau, another state owned Chinese firm. Oil Minister Abdulkarim al-Luaibi also announced in the statement released on the ministry’s website the start of production from the second-phase, central processing facility at the Halfaya oil field with a capacity of 100,000 b/d.

Phase-one production facility began operations in 2012 and is currently producing 110,000 b/d. With production at the field ramping up, PetroChina issued a tender earlier this week for the construction of the third and final phase of processing facilities at the field which will lift production capacity to more than 500,000 b/d by 2018.

The Missan province contains four major oil fields being developed by international oil companies, of which Halfaya is the largest. CNOOC is currently developing the Buzurgan, Abu Ghraib and Fakka oil fields, near the Iranian border and plans to increase production to 450,000 b/d by the end of 2017.

Mozambique passes amended petroleum bill, but challenges remain

The Mozambican parliament is to approve this week updates to its tax regime and other regulations governing the petroleum sector, no doubt to reflect the successful discoveries of hydrocarbons. The alterations to the tax regime seek to bring the country’s oil and gas legislation in line with internationally accepted practices in the sector.

Mozambican lawmakers last week also passed an amended petroleum law that will allow the government to award new gas and oil exploration blocks, but it also requires investors to partner with the state-owned oil company, ENH.

The revised law will come into effect by the end of the year and a new licensing round for oil and gas exploration blocks will be held before the end of the year. The new legislation, which introduces a series of amendments to the existing 2010 Petroleum Act, states that at least 25% of the gas produced must be sold on the domestic market. The ministry of mineral resources estimates Mozambique will need around 36 Tcf over the next 20 years, although industry officials expect this figure to rise as the downstream industrial sector grows.

Mozambique holds 184 Tcf of gas reserves, ahead of Nigeria’s 182 Tcf, making it Africa’s leading nation in terms of gas reserves. “The LNG will be sold to the international markets and on the spot markets but 25% of the gas produced will be allocated to the local market,” ENH Commercial Director Tavares Martinho said Wednesday.

What is not clear is the percentage ENH is to have in the partnership, though Martinho said company’s interest has not been defined in the law and will be “negotiable.” The answer will be of great significance to prospective players as Mozambique looks to commercialize its natural gas resources.

If the percentage is too high, it could have the effect of putting off investment, as has been demonstrated in South Africa recently. The South African government caused mayhem earlier this year when it imposed a series of far-reaching changes to mineral and petroleum legislation, forcing one major player to stall spending on exploration in the country.

Unauthorized sales of Iraqi oil may help finance IS jihadists

Iraq’s Ministry of Oil warned international crude oil buyers Wednesday that oil exports made without their authorization may contain crude originating from fields under the control of the militant jihadist group, Islamic State, and so could contribute to financing it.

The ministry said it welcomed a recent UN Security Council resolution seeking to block crude purchases which generated income for IS and other jihadist groups in Iraq, allowing them to support recruitment efforts, improve operational capability and to carry out attacks.

“The Ministry of Oil is troubled by reports that crude from fields currently under the control of IS is being smuggled to export markets, generating revenues for this terrorist organization,” the ministry said in a statement on its website.

IS currently controls about a dozen developed and undeveloped oil and gas fields in territory seized since the group’s rapid expansion across the north of Iraq from the middle of June. The total design capacity of the fields is estimated at less than 70,000 b/d, however.

Any crude exported from Iraq by a party other than the ministry’s subsidiary, the State Organization for Marketing Oil was unauthorized and may contribute to the financing of terrorist activities, which may expose the buyer to sanctions, the ministry added.

The federal government in Baghdad has previously condemned what it also sees as rogue crude oil exports from the semi-autonomous Kurdistan Regional Government bypassing SOMO.

The KRG operates its own oil fields and infrastructure in the north of the country and exports crude by road tanker and pipeline to Turkey. Oil is transported to the Mediterranean port of Ceyhan and onto international buyers who are willing to take on the disputed cargo.

Hungary’s MOL became the latest international buyer to test the ministry’s will on exports, announcing Monday that it had purchased a 80,000 mt (580,000 barrels) cargo of Kurdish crude in the Croatian port of Omisalj.

Baghdad has so far declined to comment on the sale, but sources close to the ministry said Tuesday it is in contact with Croatian authorities to halt further exports.

US Gulf Coast crude runs highest on record; crude stocks draw: EIA

New York (Platts)--20Aug2014/449 pm EDT/2049 GMT

* Crude runs at 8.74 million b/d, counter to analysts expectations

* USGC imports up despite LOOP closure as Saudi, Mexico flows rebound

* Cushing stocks up, weighing on prompt NYMEX WTI, easing strong backwardation

* US Atlantic Coast gasoline stocks recover on higher imports

* US distillate demand continues over 4 million b/d for third-straight week

Crude runs at US Gulf Coast refineries hit a record high last week, up 177,000 b/d to 8.74 million b/d, weekly Energy Information Administration oil data showed Wednesday.

This helped to push USGC refinery utilization -- which includes feedstocks other than crude -- up 2.5 percentage points to a record 96.9% of capacity. Refinery utilization had last been higher at 96.5% of capacity in December 2012, when USGC operable capacity was just 3.72 million b/d. EIA has pegged USGC operable capacity at 3.81 million b/d since May.

The increased crude runs helped cut USGC stocks 5.47 million barrels to 191.22 million barrels for the week ended August 15. Despite the sharp drop, USGC crude stocks are still well-supplied, sitting more than 7.5% above the EIA five-year average.

Imports to the region rose 172,000 b/d to 3.53 million b/d, likely capping an even larger draw in crude stocks. Imports from traditional USGC suppliers Saudi Arabia and Mexico rallied, with the latter jumping 384,000 b/d to 1.25 million b/d and the former surging 506,000 b/d to 1.04 million b/d, highest since late-February. The boost in USGC imports, however, comes despite the closure August 15 of the Louisiana Offshore Oil Port (LOOP). But much of Saudi imports head to the 600,000 b/d Motiva Port Arthur refinery -- largest in the US -- thus the refinery was likely spared any effects from the LOOP outage.

Imports from Venezuela fell 271,000 b/d to 585,000 b/d last week, which could have been impacted by the outage. A large share of Venezuelan production heads to the massive, 425,000 b/d PDVSA-owned Citgo refinery in Lake Charles, Louisiana.

Meanwhile, total US crude stocks fell 4.47 million barrels to 362.55 million barrels last week, well-below analysts' predictions of a 1.6 million-barrel draw, which involved expectations of a 0.5 percentage point decline in US refinery utilization rates.

Yet total US refinery utilization -- aided by the surging USGC runs -- rose 1.8 percentage points to 93.4% of capacity.

Crude stocks at Cushing, Oklahoma -- deliver hub for the NYMEX crude futures contract -- jumped 1.76 million barrels to 20.16 million barrels last week. This puts Cushing stocks at their highest since the week ended July 11. That said inventories are still tight, sitting 46% below the EIA five-year average.

The build comes despite a sharply wider backwardation in prompt NYMEX crude, which blew out to $2.66/b on Monday from under $1/b last week. Analysts initially pegged the widening to the LOOP outage and the likely need for USGC refiners to pull crude out of Cushing storage.

With news that LOOP would be reopening ahead of schedule, backwardation narrowed again Tuesday to settle at $1.62/b.

Genscape analysts Monday said their data confirmed Cushing stocks were building -- a fact since borne out by both American Petroleum Institute as well as EIA data -- and this had been the main driver of sinking crude futures, which have fallen $10/b since trading over $104/b in June.

Crude futures indeed backed off following the release of EIA data, with the September contract -- expiring following Wednesday trade -- up just 40 cents at $94.48/b around 12:12 EDT (1612 GMT). Prior the the release, the contract was up well over $1/b.

But Genscape analysts did not mention the sharp backwardation -- which in this case was likely caused by strong prompt demand -- as evidenced by the soaring refinery runs -- and tight supply, at least temporarily.

Other analysts this week were puzzled by the backwardation in crude as the US is technically awash with supply amid surging shale production. But the temporary tightness influencing the backwardation is a product of inadequate pipeline capacity between surging Permian Basin production and hungry US Gulf Coast refiners.

Additional pipelines coming online soon are expected to alleviate this congestion and ease backwardation further.

US GASOLINE STOCKS RECOVER

US gasoline stocks rose 585,000 barrels to 213.27 million barrels last week, putting them nearly flat to the five-year average, EIA data shows.

But stocks on the US Atlantic Coast -- home to the New York Harbor-delivered NYMEX RBOB contract -- rose 675,000 barrels to 58.64 million barrels, putting them almost 4.5% above the five-year average. This is up from the prior reporting period, when EIA data showed USAC stocks were just 2% above the five-year average.

Amid an otherwise sharp correction in prompt RBOB prices, perceived tightness and expectations of a recovery in demand amid summer driving season has helped to arrest the slide twice over the past two weeks.

Front-month RBOB has largely fallen since June 23, when it traded above $3.15/gal. But the contract briefly found support around $2.75/gal on August 6, after EIA data for that week showed USAC stocks had tightened. However, prompt RBOB again drifted lower to around $2.63/gal at the end of last week -- only to again rebound Monday amid expectations of tightening supply amid remaining summer demand.

September RBOB was trading 66 points higher at $2.7019/gal around 12:25 EDT (1625 GMT).

The boost in USAC stocks was likely helped by an increase in imports, which rose 199,000 b/d to 650,000 b/d last week, highest since mid-June and more than double year-ago levels. Platts cFlow ship-tracking software shows there is likely more to come, with more than 13 tankers en route from Europe due to arrive within the next two weeks.

US distillate stocks fell 960,000 barrels to 121.54 million barrels last week as implied demand remained above 4 million b/d for the third straight week.

Combined low and ultra low sulfur diesel stocks on USGC fell 1.64 million barrels to 31.07 million barrels, putting them at a more than 22% deficit to the five-year average.

EIA continued to peg weekly US distillate exports at 1.19 million b/d - in line with the more accurate, and latest, monthly data for May.

Nigeria's July oil revenue drops 7% on month on output, export disruptions

Lagos (Platts)--20Aug2014/718 am EDT/1118 GMT

Nigeria's oil revenue in July fell 7% month on month to Naira 483.5 billion ($3.02 billion) due to disruptions to crude production and exports at facilities operated by Shell and Total in the Niger Delta, the finance ministry said late Tuesday.

"The decline in revenue is attributable to the force majeure declared by Shell and a series of shutdowns of trunk lines and pipelines at various oil-loading terminals including [the] Akpo [oil field]," the ministry said in a statement.

Shell declared a force majeure in June on crude oil exports from the offshore EA field after the shut-in of 40,000 b/d of production due to damage to a facility linked to the field's floating production storage and offloading vessel.

Oil accounts for more than 80% of Nigeria's revenue.

The decline in oil export revenue also saw Nigeria's total revenue drop to Naira 630.3 billion in July from Naira 784.8 billion in June.

Nigeria has struggled to produce anywhere near its installed capacity of around 3.2 million b/d because of frequent disruptions due to attacks on the facilities.

While production has improved slightly to around 2 million b/d, it is still to meet the government's target of 2.39 million b/d in the 2014 budget.

Japan's July crude imports fall 2.7% on year to 3.32 mil b/d: MOF

Tokyo (Platts)--20Aug2014/601 am EDT/1001 GMT

Japan imported 16.383 million kiloliters (3.32 million b/d) of crude oil on a CIF basis in July, down 2.7% from 16.830 million kl a year ago, preliminary figures released Wednesday by the Ministry of Finance showed.

The July total was, however, up 8.8% from 15.059 million kl in June, according to the data.

Crude imports over July 21-31 were 6.264 million kl, up 18.3% from 5.293 million kl in the year-ago period.

Japan's CIF crude price in July rose 1.3% month on month to Yen 71,420/kl ($111.62/barrel), from Yen 70,528/kl in June, MOF data showed.

The July crude import price was up 9.9% from Yen 65,001/kl a year ago, the data showed.

The dollar averaged Yen 101.73 in July, compared with Yen 101.97 in June and Yen 98.75 a year ago.

Both the MOF and the Ministry of Economy, Trade and Industry release data on Japan's monthly crude imports, but their figures vary due to differing accounting practices.

METI's data is based on monthly reports it gets from refiners and trading houses and takes into account barrels lifted during the period, including condensates.

The MOF data comprises crude cargoes cleared by customs. It excludes condensates but includes fuel oil used as refinery feedstock.

METI's monthly crude imports data for July is due to be released August 29.

Japan's peak summer gasoline demand falls to 6-year low on high prices

Tokyo (Platts)--20Aug2014/558 am EDT/958 GMT

Japan's gasoline demand during last week's peak summer travel period fell below the 1-million-kiloliter (6.29-million-barrel) mark for the first time during the Obon holiday week since 2008, according to the Oil Information Center.

The lower-than-expected demand was attributed to a combination of 70-month-high retail gasoline prices and Typhoon Halong, an Oil Information Center official said Wednesday. The severe tropical storm crossed the country August 10, the first day of the holiday week.

Workers in Japan typically take summer holidays and travel long distances to their hometowns during Obon in mid-August, which boosts demand for gasoline. The week is not a public holiday.

In the week to August 16, Japan's estimated gasoline shipments were around 965,000 kl, down from 1.124 million kl the previous week, according to the Oil Information Center's calculations based on Petroleum Association of Japan data.

The country's gasoline shipments over August 10-16 were estimated at 1.27 million kl, down 24% year on year, while the estimated gasoline shipments over August 3-9 were nearly flat from 1.122 million kl a year earlier, according to the Oil Information Center calculations.

Japan's average retail price for regular gasoline slid for a fifth straight week to Yen 169/liter ($6.08/gal) as of August 18 due mainly to weaker international crude benchmarks, according to the Oil Information Center.

The national average retail gasoline price remains the highest since Yen 170.2/l on September 29, 2008.

Japan's gasoline stocks increased 3.2% week on week to 1.6 million kl over August 10-16, while the stocks slid 4.4% week on week to 1.55 million kl over August 3-9, according to PAJ data released Wednesday.

Japan exported 36,740 kl of gasoline in the week to August 16, 77 times higher than 479 kl exported over August 3-9, PAJ data showed.

The August 3-9 gasoline exports plunged 98.8% from 39,523 kl the previous week, according to PAJ.

Dropping Oil Prices Threaten Moscow’s Budget

By Andy Tully | Wed, 20 August 2014

Oil and gas are at the heart of the Russian economy and are largely responsible for keeping Moscow’s government budget in balance. But the recent decline in the price of oil from the North Sea and Texas has now spread to Urals crude, giving President Vladimir Putin one more economic headache.

The price of Urals crude fell just below $100 per barrel on Aug. 18, an 18-month low. On Aug. 19, it dropped to less than $97 per barrel. These declines coincided with similar drops in the price of Brent crude from the North Sea and U.S. oil.

The reasons are fairly easy to recognize. First, the United States has been on a drilling tear, extracting oil at record levels to increase its supply at a time when demand is waning. Second, though more tentative, is that conflicts in North Africa and the Middle East are so far not interfering with oil production in these regions.

This oil production boom raises problems for Moscow. Two-thirds of Russia’s exports are oil and gas, accounting for fully half of the central government’s revenues. That means that so far this year, every dollar drop in the price of Russian oil means a cut of about $1.4 billion in revenues.

This comes as Russia’s oil industry joins its defense and finance sectors as targets of sanctions by the European Union and the United States over Moscow’s unilateral annexation of the Crimean peninsula in Ukraine and its suspected role in the fighting between Ukrainian forces and pro-Russian separatists.

Some analysts say the effects of the lower oil prices may not be lasting unless the drop in oil prices fall further in coming years. Vladimir Kolychev, the chief economist at VTB Capital, a global investment firm with headquarters in Moscow, says brief dips have less of an impact on Russia’s budget than the average cost of oil over an entire year.

“The first thing to remember is that the oil price projected by the finance ministry is ... $104 average for the year – that still looks conservative,” Kolychev told Reuters. “Even if the oil price falls to $90, we’ll still have $105 average.”

As an example, Kolychev calculates that Russia’s budget would balance if oil’s average price fell to $103 per barrel.

Even if Moscow can tame its budget, it seems clear that Russia’s oil sector will feel the pain from the one-two punch of Western sanctions and lower prices. Vedomosti, a Russian financial journal, reported Aug. 14 that government-owned Rosneft, Russia’s largest oil company, has asked Moscow for more than $40 billion in debt relief because of the sanctions.

That’s a sharp reversal from just a month ago. Western sanctions were imposed on July 15, and three days later, Rosneft officials shrugged them off, saying the company would continue to pursue its plans and reap profits. In fact, a week after that statement, Rosneft CEO Igor Sechin boasted that the company’s revenues were soaring.

Acting Libya oil minister to be replaced by NOC chairman

BENGHAZI: Libya's Acting Oil Minister Omar Shakmak will resign and be replaced by the chairman of the state oil firm National Oil Corp. (NOC), Mustafa Sanallah.

Shakmak, a technocrat, told Reuters Prime Minister Abdullah Al-Thinni had informed him he would be replaced.

"I will abide by the decision because it is not a matter of job but it is Libya. We can serve Libya in different jobs," he told Reuters by phone.

NOC spokesman Mohammed El Hariri said Sanallah had been told he would take over Shakmak's job as deputy oil minister while remaining at the helm of the state firm.

Since there has been no oil minister for months Sanallah will effectively become acting oil minister.

The change at the top comes at a time when Libya's oil production has made a comeback after a year of protests and blockages at major fields and ports.

Output has risen to 562,000 barrels per day (bpd), NOC said, well above lows of barely 100,000 bpd seen a few months ago but still well short of previous production levels of about 1.4 million bpd.

"The production of the Libyan crude oil has begun to recover gradually and is expected to return to its previous status as it was at the end of the year, if the situation stabilizes in the different oil regions," Shakmak said.

But he said Libya was facing difficulties to return to markets after losing customers due to protests by various armed groups.

In a rare success for the government, a tanker started loading oil at top port Es Sider for the first time since the end of a year-long blockade by a group seeking autonomy in the east of Libya, NOC said.

Libya Restarts Oil Exports From Biggest Port

August 20, 2014 4:14 PM

Libya has restarted oil exports from its biggest port, Es Sider, for the first time since the end of a year-long blockade, which is a boost to the central government struggling with a wave of clashes in the capital.

The OPEC member's oil production has risen in the past few weeks to about 560,000 barrels a day as ports in the east have resumed work under a deal with a group of federalist rebels, adding to a crude market that is already well supplied.

But in a reminder of the risk of further instability, the acting oil minister said he had resigned, while heavy fighting erupted in a suburb of the main eastern city Benghazi between forces of a renegade general and Islamist fighters. Explosions were so loud they could be heard in the city center.

Home to the headquarters of several oil firms, Benghazi is located some 130 kilometer from Zueitina, one of the four reopened eastern ports.

A tanker has docked at Es Sider and begun loading 600,000 barrels of oil, said Mohamed El Harari, spokesman for state-run National Oil Corp (NOC). Ship tracking data on Reuters showed the Aframax tanker Maria Bottiglieri anchored at Es Sider.

Technical problems and mistrust between the rebels and the government had delayed implementing an oil port deal but output has risen to 562,000 barrels per day (bpd), NOC said on Tuesday. This is well above lows of barely 100,000 bpd seen earlier this year, but still well short of levels of about 1.4 million bpd a year ago.

Traders and shipping sources expect several more cargoes to be shipped by companies with stakes in the Waha Oil Co, which runs the Es Sider port and connected oilfields, such as Marathon Oil, Hess, and ConocoPhillips. Austria's OMV AG is also expected to lift a cargo.

The North African country badly needs higher exports to cover budget needs as oil is the only source of income.

The Es Sider port currently holds some 4.5 million barrels in storage, but once the tanks are emptied, the connected oilfields can restart production, officials said.

“The returning oil supply from Libya is flooding a market that is already amply supplied,” said Commerzbank analyst Carsten Fritsch

New oil minister

Clashes in Tripoli and Benghazi have mostly occurred away from oilfields and ports, which in the past have often been the target of takeovers by armed factions pressing political or economic demands on the country's fragile government.

Apart from fighting another constant feature in post-Gadhafi Libya is frequent changes of senior government positions, reflecting political infighting and fast-changing alliances.

Acting Oil Minister Omar Shakmak said on Wednesday that he would resign following a written request by Prime Minister Abdullah al-Thinni.

“I will abide by the decision because it is not a matter of job, but it is Libya. We can serve Libya in different jobs,” he told Reuters by phone. He did not say why he would be replaced.

NOC Chairman Mustafa Sanallah will take over Shakmak's job as deputy minister while remaining at the helm of the oil firm, Harari said. Since there has been no oil minister for months Sanallah will effectively become acting oil minister.

Domestic oil production prompts North Augusta business to expand

By Tim Rausch

Wednesday, Aug 20, 2014

Carolina CoverTech, a manufacturer of awnings and medical compression boots, is experiencing sales growth because of the expansion of oil and gas fracking.

The 8,000-square-foot expansion should be done by December, President Rian True said.

“Our biggest area of growth is spill containment,” he said. “We have for 25 years been manufacturing portable, flexible secondary containment.”

With the shale oil expansion in North America, he said, there has been an explosion of demand from oil companies to have protection against spills. CoverTech can make oil and chemical resistant tarps for those drilling sites.

“There is a ton of equipment that goes onto these sites. The oil companies are all about safety and cleanliness,” True said. “Some people don’t like drilling … so they really are doing a fantastic job of keeping it clean. The product we make keeps it clean.”

In its 21,000-square-foot facility at 114 Shortcut Road, Carolina CoverTech designs and manufactures products in vinyl, cotton and plastics.

The products range from boat covers and vinyl tubing to golf cart accessories and zip-up industrial storage tarps.

True said concrete work will take a couple of weeks, after which a metal building will be delivered.

CoverTech has 71 employees and will grow by 10 more during the next year, True said.

“It’s a great day when I see jobs being created,” said U.S. Rep. Jeff Duncan, R-Laurens. “I see energy as a segue to job creation. As we approach energy independence in this country, there is going to be expanded energy production, and that means expanded opportunities for Carolina CoverTech products.”

The company was founded in 1858 as a furniture store and began making canvas awnings in 1925.

CoverTech was in Olympic news in 2012 when one of its product lines, which it makes for medical device company NormaTec, was highlighted in a New York Times article on the U.S. women’s soccer team at the London games. It still manufactures the air compression boots and arm sleeves.

US government sells 400,000 acres offshore Texas

The federal government has sold more than 400,000 acres in the Gulf of Mexico off the Texas coast for oil and gas exploration and development, an official with the U.S. Bureau of Ocean Energy Management said Wednesday.

The acreage represents a fraction of the 21.6 million acres the agency had offered as part of the Obama administration’s five-year program to aggressively develop resources on the Outer Continental Shelf. Previous offerings in the Western Gulf attracted buyers for about 60 million offshore acres, adding about $2.3 billion to the U.S. Treasury.

Wednesday’s sales, if approved, will bring in about $110 million, the agency’s Western Gulf of Mexico Deputy Director Michael Celata said.

BP PLC, which was allowed to participate in this year’s sale for the first time since the Deepwater Horizon explosion and oil spill in 2010, submitted the most high bids and won 27 of the 81 tracts that sold.

Conoco Philips spent the most of the sale’s 93 bidders, paying about $61 million for a single tract in the ultra-deep-water Alaminos Canyon area.

“The most interest was deep water in the Lower Tertiary, a trend that we saw in previous years,” Celata said from New Orleans, where the sale was held.

The Lower Tertiary is an ancient layer of the earth’s crust made of dense rock. To access the mineral resources trapped within it, hydraulic fracturing activity is projected to grow in the Western Gulf of Mexico by more than 10 percent this year, according to Houston-based oilfield services company Baker Hughes Inc., which operates about a third of the world’s offshore fracking rigs.

“We expect that there will be more offshore stimulation in coming years,” said Douglas Stephens, president of pressure pumping at Baker Hughes.

Within 90 days, bidders must prove their financial capacity to complete the sales, provide assurances of their continued participation and submit exploration and development plans.

KRG to increase capacity of oil pipeline via Turkey amid conflict

ANKARA — The Kurdistan Regional Government is in the process of increasing the capacity of the pipeline running to the Turkish port of Ceyhan from 120,000 to 300,000 barrels a day, according to KRG sources.

Turkey's Energy Minister Taner Yıldız said on Monday that there is a temporary suspension of oil deliveries from the Kurdistan Regional Government's (KRG) oil pipeline via Turkey due to maintenance work. However, according to sources the KRG suspension is due to ongoing work to increase capacity that is expected to finish in two weeks' time.

Last December the KRG administration completed the construction of the Taq Taq-Khurmala-Fish Khabur pipeline that connects the Taq Taq oil field to the entry point for the Kirkuk-Ceyhan pipeline. Despite the threat from the Islamic State of Iraq and al-Sham (ISIS), the oil flow from the KRG region to Ceyhan has continued with around 120,000 barrels without interruption. However, KRG sources said that planned capacity of 300.000-barrel of oil export by July, could not achieved due to the ongoing ISIS threat. "[Nevertheless] Capacity increase works are currently continuing and are expected to be completed by September. When works are finished we will be able to export 300,000 barrels on a daily basis via Ceyhan," another KRG official told Daily Sabah.

KRG Energy Minister Ashti Hawrami announced in June that a link between the Kirkuk oilfields and the KRG's recently-built pipeline to Turkey were completed. The pipeline connects the Kirkuk Avana dome to the Khurmala dome from which the Kurdish pipeline runs. However, Kurdish official declined to comment regarding the question about the capacity increase of the pipeline due to controversial Kirkuk oil. KRG oil exports from the port of Ceyhan began on May 23 and so far almost 6.5 million barrels of crude oil have been loaded onto seven tankers.

Despite the U.S. and Baghdad's international pressure, the KRG has managed to sell around 2 million barrels of crude oil so far. Even though officials from the Turkish Ministry of Energy declined to comment about the payment details, industry sources believe that the payment for the second tanker was about $ 100 million (TL 216.43 million), which is estimated to be collected by Turkey's state-run Halkbank. Minister of Energy Yıldız announced on June 23 that the first payment, totalling $93 million, was deposited to Halkbank.

The KRG's total production capacity is currently slightly more than 400,000 barrels per day and it plans to increase this amount to 1 million by 2015 and 2 million by 2019. The KRG controls an estimated 40 billion to 45 billion barrels of oil as well as 6 trillion to 7 trillion cubic feet of natural gas reserves with an estimated combined worth of $5 trillion.

Minister: Turkey's stance on Kurdish oil to remain firm

ISTANBUL — There is a temporary suspension of oil deliveries from the Kurdistan Regional Government to the port of Ceyhan due to maintenance work, but the flow will continue, said Turkish Energy Minister Taner Yıldız.

Turkey's Minister of Energy and Natural Resources Taner Yıldız said on Aug. 18 during a press conference in Ankara that 7.8 million barrels of crude oil were transported from Northern Iraq to Turkey and finally the seventh tanker was directed to international markets. Yıldız noted, "6.5 million barrels of oil were shipped from Turkey.

There won't be any delivery soon since there are some maintenance works on the pipeline." The energy minister stated that agreements which are subject to private law provisions made by public and private sectors would continue. "No matter what, ISIS is not our addressee and we don't make our plans regarding the energy sector with any consideration to remarks or actions by the Islamic State of Iraq and al-Sham (ISIS). Some fields in Iraq pass into other hands because there is serious political instability. But this doesn't change our point of view."

Yıldız said that although it seems like there is a decrease in the price of crude oil, energy costs haven't dropped enough due to the increase in exchange rates. He noted that some goods are sold at lower prices than purchasing prices, adding that they expected a decrease in both crude oil prices and exchange rates.

Answering questions about Iranian natural gas, Yıldız said that there were some meetings in April and July, and after another meeting in September, the process would end. Saying the ministry will closely follow the issue about short delivery from Iran in the past, Yıldız also claimed, "We haven't received a tangible offer from Iran about a reduction in the price so far." Reminding that if Iran offers more natural gas at reasonable prices, Turkey will demand it. Yıldız pointed out that there was an important study about piping but he added that it was a prospective issue.

First domestically engineered oil driller introduced

ISTANBUL — Minister of Energy and Natural Resources Taner Yıldız participated in an event held to introduce a drilling platform that was domestically produced by Turkey's Pi Makina. Yıldız said that they are taking important steps to enable Turkey to make its own drilling studies about oil, natural gas and geothermal. "We will declare a mobilization to produce national vehicles for the energy sector," stated Yıldız.

Pointing out that when a national drilling platform is produced, the Turkish Petroleum Corporation (TPAO) will the first to order it, Yıldız noted that public and private sectors allocated resources valued at TL 7.4 billion for the energy sector in the last 11 years and that TL 5 billion of it was used for equipment import. He said that in an environment where search activities increase, producing national equipment would make a significant contribution to the sector and help decrease the current account deficit. Yıldız said that 4,484 wells had been drilled since 1934, and one third of them were drilled during AK Party governments.

Stating that 305,000 meters of drilling was made last year, Yıldız pointed out that the national drilling platform, which was produced by Turkish engineers and workers by using mostly national equipment, was of huge importance. Saying that there are nearly 50 companies in Turkey involved in search activities, Yıldız stated that 173 wells were drilled last year and that the national drilling platform was needed in this environment more than before. Yıldız said that 2.3 million meters of drilling had been made in the last 11 years and most of them were made using imported equipment. He said: "We will use our own drilling platform in national drillings.

When Iraq achieves stability and Syria gets back to its stable status, the demand from our neighboring countries for our drilling platform will increase. In the last 11 years, we transferred TL 2.6 billion directly to the Treasury from income we earned via these studies, and nearly 10,000 people were provided with jobs." Yıldız also said that after they opened the way for oil, natural gas and geothermal search activities, the private sector would benefit from all opportunities. "The TPAO has nearly 23 drilling platforms. The TPAO will be the first to use our national drilling platform. I am also giving advice to representatives from the private sector," stated Yıldız.

ERG İnşaat Chairman Vural Erbilgin provided some information about the deep water-drilling platform. Saying that the design of the platform completely belongs to them, Erbilgin said that this kind of a platform could be imported for $40-50 million, but national production decreased its cost by half. He stated that the platform was used in Turkey, and there was demand from abroad, adding that 90 percent of the platform was produced using national equipment, while some hydraulic systems were supplied from Italy.

Lukoil’s West Qurna-2 field production tops 280,000 b/d

HOUSTON, Aug. 20

08/20/2014

By OGJ editors

OAO Lukoil issued an update on West Qurna-2 field in Iraq, saying its production has exceeded 280,000 b/d compared with 120,000 b/d when Lukoil started producing from the field in March.

West Qurna-2, still being developed, is expected to play a role in Iraq’s plans to increase production from its southern fields. Lukoil said the West Qurna project is being implemented on schedule.

Iraq has set a goal of producing 8.4 million b/d from its southern oil fields by yearend 2020, and West Qurna-2 is expected to contribute 1.2 million b/d by that date.

In an Aug. 19 news release, Lukoil said Sea Triumph, a crude oil tanker chartered by a Lukoil marketing subsidiary, has left the port of Basra with 1 million bbl, which was the first shipment of oil in reimbursement for Lukoil’s costs as part of the West Qurna-2 project.

Upon unloading, the oil will be transported for refining to its ISAB refinery in Priolo Gargallo near Siracusa in Sicily.

The Oil & Gas Journal

UPDATE 2-Libya restarts oil exports from biggest port as fighting rages in Benghazi

By Ahmed Elumami and Feras Bosalum

BENGHAZI, Libya Wed Aug 20, 2014

Aug 20 (Reuters) - Libya has restarted oil exports from its biggest port for the first time since the end of a year-long blockade, a boost to the central government which is struggling with a wave of clashes in the capital.

The OPEC member's oil production has risen in the past few weeks to around 560,000 barrels a day as ports in the east have resumed work under a deal with a group of federalist rebels, adding to a crude market that is already well supplied.

Home to the headquarters of several oil firms, Benghazi is located some 130 km from Zueitina, one of the four reopened eastern ports.

Traders and shipping sources expect several more cargoes to be shipped by companies with stakes in the Waha Oil Co, which runs the Es Sider port and connected oilfields, such as Marathon Oil Corp, Hess Corp and ConocoPhillips. Austria's OMV AG is also expected to lift a cargo.

The North African country badly needs higher exports to cover budget needs as oil is the only source of income.

The Es Sider port currently holds some 4.5 million barrels in storage, but once the tanks are emptied, the connected oilfields can restart production, officials said.

"The returning oil supply from Libya is flooding a market that is already amply supplied," said Commerzbank analyst Carsten Fritsch

NEW OIL MINISTER

Apart from fighting another constant feature in post-Gaddafi Libya is frequent changes of senior government positions, reflecting political infighting and fast-changing alliances.

Acting Oil Minister Omar Shakmak said on Wednesday that he would resign following a written request by Prime Minister Abdullah al-Thinni.

"I will abide by the decision because it is not a matter of job but it is Libya. We can serve Libya in different jobs," he told Reuters by phone. He did not say why he would be replaced.

Russia uses South Stream gas pipeline to widen EU division

August 19, 2014

Plans for tougher economic sanctions against Russia are adding to a rift among European Union countries at the same time as there is division over Russia’s South Stream gas pipeline project, says GIS consultant Dr Frank Umbach, Senior Associate at the Centre for European Security Strategies (CESS) GmbH, Munich, Germany.

Some EU-member states and their national corporate energy champions have sided with Moscow over the pipeline dispute when the EU’s authority and common political will is already being questioned by internal disagreement over sanctions.

‘It is no coincidence that countries backing the South Stream project - Austria, Bulgaria, Italy and Hungary - are also opposing harsher sanctions,’ he says. ‘These countries do not want to risk their energy and trade ties with Russia. They prefer bilateral relations with Moscow at the expense of common EU energy security policies.’

Bulgaria has annual gas consumption of 3 bcm, but is almost entirely dependent on Gazprom gas supplies. Russia’s bilateral relationship is such that it was able to directly influence Bulgaria’s energy legislation in Bulgaria.

Hungary’s Prime Minister Viktor Orban has said that Russia’s South Stream pipeline is ‘a must’ for Hungary. The government does not want to rely on the outcome of the Ukraine crisis to decide its course of action.

Rome, which currently holds the EU’s six-months presidency, has emerged as the biggest obstacle to imposing harsher sanctions on Russia after Moscow intensified its pressure and leverage on Italy as Russia’s second-largest EU trading partner.

Austria is a key natural gas hub in Europe. Half its natural gas imports arrive from Russia via Ukraine and Slovakia, and are transported to Italy, France, Hungary, Germany, Slovenia and Croatia. A third of all Russian gas exports to Western Europe pass through the Austrian gas hub in Baumgarten which explains its close energy dependence on Russia and its major importance to Gazprom and the Kremlin.

‘Disregard of the common policies has prompted Poland to demand the direct involvement of the European Commission in all inter-governmental agreements and negotiations to ensure EU law is followed,’ says Dr Umbach.

‘The EU is again standing at another strategic crossroads to live up to its long-term defined common strategic energy security interests.’

BP Oman to boost drilling, general manager says

by ELHAM POURMOHAMMADI | August 18, 2014

Share Share on facebookShare on twitterShare on googleShare on emailMore Sharing Services

Muscat: BP Oman plans to increase its drilling activity in the Khazzan project to unlock the massive unconventional gas reserves in the field, said BP Oman general manager Dave Campbell.

So far, more than 15 wells have been drilled and five or six more wells will be drilled by the end of 2014, Campbell told reporters on Monday on the sidelines of a function to inaugurate BP Oman's Technicians Training Centre in Ghala.

"We have, at the moment, two drilling rigs, and by the middle of next year to the end of next year, we will have eight drilling rigs. So we are ramping up the drilling activity," he added.

Campbell also noted that the remaining projects (about 20 per cent) will be awarded soon.

Speaking at the inauguration ceremony, he said, "This is a significant year for BP in Oman, with the BP-operated Khazzan Project now under development following the Royal Decree (11/2014) in February 2014 and our announcement of the project sanction in December 2013.

"Since then, we have been 'in action' as we prepare to unlock the massive unconventional gas reserves of the Khazzan field. The development of the Khazzan tight gas field in Block 61 will involve a drilling programme of around 300 wells over 15 years and deliver plateau production of one billion cubic feet of gas per day."

BP had earlier said that the project will significantly contribute towards ensuring continuing stable supplies from domestic sources.

To contact our reporter: elham@timesofoman.com

European Gas Reverses Biggest Drop Since 2009 on Ukraine

By Isis Almeida, Anna Shiryaevskaya and Volodymyr Verbyany Aug 21, 2014

European natural gas prices are reversing their biggest slump in five years as concern mounts that tension between Russia and Ukraine will again disrupt flows to the region.

Gas for next-month delivery in the U.K. rallied 17 percent over the past six weeks as Ukraine said it may ban OAO Gazprom, Europe’s biggest supplier, from shipping the fuel across its territory because of Russia’s support of separatists. The Moscow-based company, which meets 15 percent of European gas demand through Soviet-era pipelines across Ukraine, halted supplies to its neighbor on June 16 in a debt and price dispute.

Gas storage in Ukraine is less than half full and the nation began this month to limit domestic use to conserve fuel. U.K. prices, the regional benchmark, fell to their lowest since 2010 last month after a mild winter left storage sites across the 28-nation European Union at their fullest for this time of year since 2008. Wholesale costs next quarter will be 11 percent higher than what companies are paying for that period now, according to a forecast by Societe Generale SA in Paris.

“The continued threat of gas transit interruption is putting upside risk into gas prices,” Nick Eagle, director of sales and trading at Clean Energy Trading Ltd. in London, said yesterday by e-mail. “While there’s no denying European gas storage levels are in a very healthy position, there would be significantly more concern if any disruption was to occur during the winter period.”

Seasonal Low

U.K. gas for next-month delivery gained 6.05 pence since falling to a four-year low on July 8 to 41.3 pence a therm ($6.87 a million British thermal units) at 5:06 p.m. in London, according to broker data compiled by Bloomberg. The front-month price is the lowest for this time of year since 2010.

Gas flows to Europe were interrupted for 13 days during freezing weather in January 2009 in a similar dispute between Russia and Ukraine. Gas for same-day delivery surged as much as 27 percent the day before the stoppage.

In Ukraine, Kiev’s biggest utility restricted Eka Beradze-Fokina’s hot water to save gas, leaving her to use an electric immersion coil and a pot to prepare her 3-month-old son’s bath. The 35-year-old lives in one of 9,166 residential buildings affected after PAT Kyivenergo, which supplies 75 percent of the capital’s heating and all its power, cut hot water to 59 percent of its customers.

The limits may last through the end of September, Kiev Mayor Vitali Klitschko said Aug. 4.

Heating Water

“It’s good it’s summer now and a lot of people are on vacation,” said Beradze-Fokina, a director at OAO Interregional Stock Union (MFS) who lives on the 19th floor of a 145-apartment building. “When they all return to work and it becomes cold, there will be a lot of pressure on electricity” as people try to heat water.

Ukraine consumes 34 billion cubic meters of gas in the heating season and produces about 10 billion, estimates Alexey Grivach, deputy director of Russia’s National Energy Security Fund. The nation will have less than 17 billion cubic meters in storage at the start of winter from about 15.4 billion, Thierry Bros, an analyst at Societe Generale, said Aug. 7.

Ukraine’s parliament approved Aug. 14 a bill allowing it to impose sanctions on 65 Russian companies and 172 individuals for supporting separatists in east Ukraine. More than 2,000 people have been killed in the conflict since the middle of April, according to the United Nations.

European Revenue

Gas flows to Europe probably won’t be disrupted as Gazprom depends on revenue from the sales and Ukraine won’t tap transit fuel as it seeks closer ties to the EU, said Daragh McDowell, a senior analyst at risk consultants Maplecroft in Bath, England. Former President Viktor Yanukovych was ousted in February after refusing to sign a deal to strengthen ties with Europe.

“Gazprom still needs to sell its gas to Europe and Ukraine needs to be on the good side of the European Union,” McDowell said by phone yesterday.

While Europe may be able to cover its gas needs under normal winter weather by using inventories and importing more liquefied fuel and pipeline gas from Norway, that would deplete storage to 2012-13 levels, Citigroup Inc. said in an Aug. 11 report. EU storages were 21 percent full on April 13, 2013, the lowest for that time of year since Gas Infrastructure Europe, a lobby group in Brussels, started publishing the data in 2007.

Central Europe will probably be the most affected region if supplies are cut, Trevor Sikorski, head of gas, coal and carbon at London-based consultants Energy Aspects Ltd., said Aug. 8 by phone. In 2009, Balkan nations were forced to use emergency supplies, ration gas, employ backup generators and cut power usage.

Russian Dependence

Latvia and Estonia are completely dependent on Russian gas, while Slovakia, Hungary and Bulgaria get 80 to 90 percent of their fuel from Russia.

Ukraine owes Gazprom $5.3 billion for past deliveries, according to the Russian gas exporter. Naftogaz, Ukraine’s national supplier, refused to pay after Gazprom raised costs in April by 81 percent to $485 per 1,000 cubic meters.

U.K. gas will average 64 pence a therm in the fourth quarter, forecasts Societe Generale. The contract for that period closed at 57.9 pence yesterday. The risk-premium built into gas prices in the U.K. is about 5 pence to 7 pence a therm, Pira Energy Group said in a report e-mailed today.

“I’m still more bullish than the curve,” Paris-based Bros said by e-mail Aug. 7. “Ukraine has a long history of not paying for its gas bill. This will end badly soon.”

Ukraine’s Winter

Ukraine can cope without Russian gas through winter if it imports enough fuel from Europe and cuts use, Andriy Kobolyev, Naftogaz’s chief executive officer, said in an Aug. 12 interview with Bloomberg Television.

The country can get as much as 15 billion cubic meters a year of gas from the EU, according to Prime Minister Arseniy Yatsenyuk. RWE AG, Germany’s second-biggest utility, started delivering gas to Ukraine in April through Poland. Slovakia will start flows to Ukraine next month, the grid operator said.

Europe can mitigate disruptions by diverting gas through the Yamal pipeline from Russia via Belarus and Poland and Nord Stream, a link from Russia to Germany, according to National Grid Plc. About 90 million cubic meters a day could be rerouted, leaving the EU short of 117 million cubic meters in case of a full cut, the U.K.’s grid operator said July 31.

Ukraine will allow European utilities to buy Russian gas at its eastern border and sign new transit contracts with Naftogaz to bring it through its pipes even if a ban on Russian gas is imposed, Kobolyev said.

Possible Deal

Such renegotiations can’t be done in the “short term,” EU Energy Commissioner Guenther Oettinger said Aug. 12 in a statement. The bloc, which has been trying to broker a deal between Gazprom and Naftogaz since May, is working to set up trilateral talks in “early autumn,” he said, without providing dates.

“Ukraine respects European buyers’ long-term Russian natural gas contracts and understands that amendments require time and careful negotiation,” Naftogaz said Aug. 13. “The possibility of a crisis similar to 2009, when Gazprom terminated gas transit to Europe, cannot be ignored.”

Russian President Vladimir Putin banned imports of some food items from the EU and other nations on Aug. 6 in response to sanctions against his country.

Putin “doesn’t seem to be in a hurry to end the conflict and nor does Ukraine,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by e-mail yesterday. “We could easily see this confrontation drag on into the winter.”