US EIA boosts estimates of Mexican long-term oil production on reform
The US Energy Information Administration on Monday boosted its long-term projection of Mexican oil production by 75%, saying that reforms to the country’s energy sector would reverse its declines.
While the EIA had projected last year that Mexico’s oil production would drop from 3 million b/d in 2010 to 1.8 million b/d in 2025 before ranging from 2 million to 2.1 million b/d in 2040, the agency said it now expects the country will stabilize its production at 2.9 million b/d through 2020 and then increase it to 3.7 million b/d by 2040.
“Although there are many complexities to the new reform and many details that still must be settled before the reforms can take effect, reform is expected to improve the long-term outlook for growth in Mexico’s petroleum and other liquids production,” the EIA said in a report on its website.
Mexican President Enrique Pena Nieto on August 11 signed legislation that would for the first time in 75 years open up the country’s oil and gas sector to direct foreign investment, ending state-owned Pemex’s monopoly.
Mexico has seen its oil production decline precipitously as a result of underinvestment. In a separate report, a former Obama administration official predicted that the reforms would transform Pemex into a leaner, more efficient corporation through competition and partnerships with outside firms.
David Goldwyn, who headed the US State Department’s energy office during President Barack Obama’s first term, said Mexico’s reforms could bolster cross-border trade, as companies will have strong interest in deepwater, shallow-water and heavy oil auctions.
“On the upstream side, as long as the government keeps to its schedule and gets the regulations out in October, drafts of contracts released in November and then holds auctions in the first half of 2015, they’ll see a huge amount of interest,” he said on a conference call to unveil his Atlantic Council report on the Mexican reforms.
But spurring investment in Mexico’s unconventional resources will be a challenge, he said, given security concerns in areas where Mexico has shale plays, as well as a lack of infrastructure.
“It is important for Mexico to make sure the terms of contracts match the risks,” said Goldwyn, now an international energy consultant.
Mexico’s refinery industry stands to gain plenty if the US relaxes its ban on crude exports, he added. He noted that much of Mexico’s production is heavy oil, which could be blended with US light oil to make it more marketable. “If you want to refine anything other than heavy oil, you’d need to import light oil,” Goldwyn said. “Mexico would be an export market for our light oil, and it would expand Mexico’s ability to market its production.”
Vietnam’s Dung Quat refinery takes first delivery of Suezmax-size crude cargo
Vietnam’s state-owned Binh Son Refining and Petrochemical took delivery of its first Suezmax-sized crude cargo on Saturday, following the upgrade of the single-point mooring (SPM) at Dung Quat refinery, the company said on its website over the weekend.
The company said it took delivery of 1 million barrels of crude oil from Azerbaijan. The cargo was Azeri Light crude delivered as part of a long-term agreement with Azerbaijan’s state-owned Socar via PV Oil, a source close to the matter said Monday.
The delivery follows the $300,000 upgrade of the SPM, which allows it to receive vessels of up to 150,000 dwt in size from 80,000-110,000 dwt previously, the company said.
“Dung Quat oil refinery now has the ability to receive crude oil from different regions of the world such as West Africa and the Mediterranean, which will enable it to diversify sources of crude oil supply,” BSR said, adding that this will help it save $10-15 million/year in production costs.
In March BSR said it had tied up 3.5 million barrels of crude oil supply for 2014 from Socar as part of a contract covering 2014-2016. The term volumes are negotiated on an annual basis. BSR is the operator of the country’s sole 130,000 b/d refinery at Dung Quat while PV Oil, a unit of PetroVietnam, is the only importer and exporter of crude oil for the country.
Russia energy ministry warns new tax maneuver to hit oil industry hard
The Russian government hopes to agree long-discussed changes to the oil industry’s taxation by
early September, but the energy ministry has criticized the latest plan, saying it would drastically increase the burden on the oil industry and have “a serious negative impact” on the industry. The increase in the fiscal burden would come at the time when oil companies need to raise
investments into maintaining crude production and completion of full-scale modernization of the refining sector, it said.
The government is currently revising the so-called “tax maneuver” that envisages cuts in export duties for crude and oil products and growth of the mineral extraction tax to compensate for the resulting lower federal budget revenue.
The initial tax maneuver was introduced in January but the government is now planning to drastically accelerate cuts in export duties and increases in the MET, following a recent decision by Russia, Kazakhstan and Belarus to introduce a single oil market by 2018, as part of the Customs Union the three formed recently.
In line with this decision, Russia needs to reduce its crude export duty, otherwise Russian companies may opt to export crude via those countries to reduce their export duty payments, causing losses to the Russian budget. The changes to the taxation plan were discussed through the first half of the year and last week the finance ministry finally published its latest proposals on the issue, roughly approved by the government Thursday.
Following the discussion, the energy ministry warned that “the proposed increase in the MET in 2015 and increases in excises for nearly all oil products in 2017 will have a serious negative impact on the industry.”
Neither does the latest plan take into account proposals to stimulate crude production from hard-to-access reserves, it said. As a result, if the proposed version of the tax maneuver is approved, earnings of oil companies in 2015 and 2016 will be below the 2014 level, the ministry said in an emailed reply.
It estimated the companies’ earnings would drop Rb68 billion ($1.882 billion) in 2015 and Rb56 billion in 2016, in comparison with the 2014 level.
Saudi Aramco will not respond to Libyan output by cutting production
The CEO of Saudi Aramco said Monday that his company would not consider cutting production because of Libyan production coming onstream. Khalid A. Al-Falih, speaking to Platts on the sidelines of the ONS conference in Stavanger, Norway, said that was not his company’s intention.
“No, of course not,” he said. “We respond to markets.”
Four days ago a spokesman for Libyan state-owned National Oil Corp. said oil production continued to ramp up in the country, reaching a new high of 615,000 b/d. Producers have been able to increase output after exports finally resumed from the eastern ports of Es Sider and Ras Lanuf. Libya’s oil sector seems to be on the road to recovery now the country’s export terminals are all back under state control and operational.
Al-Falih said he could not discuss indications of August and September production, currently at around 10 million b/d.
On August 11, Saudi Arabia told OPEC it boosted crude production to 10.005 million b/d in July, up 225,000 b/d from June and the highest monthly level since September 2013, when Riyadh told the oil producer group it pumped an average of 10.123 million b/d. The July figure also marked the first time Saudi production had been above 10 million b/d since September last year.
Earlier, Al-Falih, in a speech to the conference, said his group was committed to spending huge amounts with an eye on production capacity. “At Saudi Aramco, as we solidify our upstream leadership while also diversifying our business portfolio, our investments over the next 10 years will exceed $40 billion annually,” he said. “Though our investments will span the value chain, the bulk of those $40 billion a year will go to the upstream and increasingly from offshore with the aim of maintaining our maximum sustained oil production capacity at 12 million b/d while also doubling our gas production.”
The CEO said Aramco was diversifying across the value chain and increasing its global footprint. “And even as many majors globally are retrenching, we will be investing to build a vertically and horizontally integrated top tier downstream business,” he added.
Aug 25 (Reuters) - China Oil Corp, a unit of state-run CNPC, in July received two 240,000-barrel cargoes of jet fuel from Petroleos de Venezuela, and the shipments were sent to the United States, according to an internal PDVSA document seen by Reuters on Monday.
China National Petroleum Corporation (CNPC) and its trading arm Petrochina normally take cargoes of Venezuelan fuels such as diesel, fuel oil and jet fuel. It either uses those cargoes for its own needs or resells them directly to refining companies.
China receives the Venezuelan oil as payment for loans made to Venezuela's government that date back to 2007.
China Oil received the first jet fuel cargo on July 4 on the tanker Pretty Scene with the island of Puerto Rico as its destination. The second one was loaded on July 29 on the tanker Walnut Express with Florida as its destination.
PDVSA normally offers four to six cargoes of jet fuel and ultra low-sulfur diesel (ULSD) each month on the open market. But recently its exports of fuels have declined as it works to meet growing domestic demand for diesel and fulfill delivery quotas to China.
The document also shows that PDVSA did not directly sell any ULSD cargo to the international market in July, as happened in June. But it sent two cargoes from its eastern terminals to its 645,000-barrel-per-day Amuay refinery on Venezuela's western coast.
Domestic demand for diesel in Venezuela has been growing in recent months while the government increases thermoelectrical generation, instead of hydroelectrical.
PDVSA also sent from its eastern terminals in July seven cargoes of heavy Merey crude to Phillips 66's terminal in Freeport, five crude cargoes to Cuba, three light virgin naphtha cargoes to Brazil, one crude cargo to Jamaica's Petrojam, another to Dominican Republic's Refidomsa and one crude cargo to Nicaragua. (Reporting by Marianna Parraga; Editing by Terry Wade and Jonathan Oatis)
Slovakia has sufficient oil, petrol and diesel reserves to last 210 days if supplies from Russia through Ukraine are halted, Prime Minister Robert Fico said on Monday, though he does not expect Kiev to interrupt deliveries.
The Ukrainian parliament approved a law on Aug. 14 to impose sanctions on Russian companies and individuals supporting and financing separatist rebels in eastern Ukraine a law that could be used to block oil and gas flows.
After a meeting with officials from state oil pipeline company Transpetrol on Monday, Fico acknowledged that any decision by Ukraine to cut oil supplies would be damaging for Slovakia but said: "We expect Ukraine, after signing the association treaty (with the European Union), will treat EU member states responsibly."
Slovakia now receives its oil through the Druzhba pipeline that crosses Ukraine from Russia. Fico said that Slovakia could also obtain oil via the Adria pipeline running from the Croatian coast through Hungary in the event that supplies are disrupted.
The Adria pipeline has capacity limited to 3 million tonnes a year but upgrades will double that figure by November, which would fully cover the country's needs, Fico said..
Platts Survey of Analysts
Crude oil stocks down 2.5 million barrels
Gasoline stocks down 1.7 million barrels
Distillate stocks down 1.2 million barrels
Refinery utilization, or run rate, down 0.8 percentage point to 92.6% (EIA)
U.S. commercial crude oil stocks likely fell 2.5 million barrels during the reporting week ended August 22, according to a Platts analysis and survey of oil analysts Monday.
The American Petroleum Institute (API) will release its weekly report at 4:30 p.m. EDT (2030 GMT) Tuesday and the U.S. Energy Information Administration (EIA) is scheduled to release its weekly data at 10:30 a.m. EDT Wednesday.
The expected draw runs counter to seasonal norms. EIA five-year average data shows crude oil stocks often rise around 3.3 million barrels during this reporting week. Analysts expect a 0.8 percentage-point decline in U.S. refinery utilization rates, which is likely to limit the size of the draw in crude oil stocks.
EIA data for the reporting week ended August 15 shows crude oil runs on the U.S. Gulf Coast (USGC) -- the region which accounts for more than 50% of the U.S. total -- were at a record-high 8.74 million barrels per day (b/d). This suggests that even if runs do come off, the still-elevated levels likely will continue to eat into crude oil inventories.
Platts data shows Shell's 340,000 b/d Deer Park, Texas, refinery underwent unplanned maintenance the week ended August 22. Also that week in Texas, a cooling tower experienced issues at Valero's 90,000 b/d Houston refinery, although it was unclear if any production was affected.
On the U.S. Atlantic Coast (USAC), Philadelphia Energy Solutions shut and then restarted a benzene/toluene/xylene mixture (BTX) unit at its 335,000 b/d Philadelphia refinery the week ended August 22.
U.S. crude oil imports could get a boost in this week's data. Platts cFlow ship-tracking software shows four dirty tankers entered the USGC the week ended August 22 from the Persian Gulf, up from two tankers during the prior reporting period.
U.S. gasoline stocks are expected to have fallen by 1.7 million barrels the week ended August 22, almost double the drop shown by the EIA five-year average.
Oil Outlooks President Carl Larry expects the draw will come amid a major adjustment to the EIA implied demand* figure. EIA data for the week ended August 15 showed U.S. gasoline demand at 8.78 million b/d, which is well below last year's 9.2 million b/d. The upcoming coming Labor Day holiday often represents a large portion of summer demand, Larry said.
"The thing that I have a problem with is last week's demand numbers, and I think there's going to be a pretty big adjustment this week, and we might see one of the highest of the year," he said.
Despite expectations of a draw, gasoline imports are likely to rally. Platts cFlow shows seven clean tankers, some of which were likely carrying gasoline or blending components, entered the USAC the week ended August 22.
U.S. distillate stocks are expected to have fallen 1.2 million barrels the week ended August 22 amid strong domestic agriculture demand, as well as continued export demand.
"We're heading into fall harvest season, so we might get a nice bump [in terms of futures price] there from the farmland," Larry said.
The five-year average of EIA data shows distillate stocks typically rise by around 300,000 barrels during this reporting week as agriculture demand historically counters pre-winter heating oil supply building.
But with exports likely steady over 1 million b/d, there is less incentive to build distillate stocks.
WASHINGTON, August 21, 2014 ─ Total U.S. petroleum deliveries (a measure of demand) rose 1.3 percent from July 2013 to average nearly 19.3 million barrels per day last month. These were the highest July deliveries in four years.
“Last month generated new records for many of the petroleum statistics we track,” said API Chief Economist John Felmy. “Refinery gross inputs, gasoline production, distillate production and exports of refined products all set new highs for the month of July. On the other side of the equation, imports of crude oil and refined products set multi-decade lows for the month.”
Gasoline demand gained 1.0 percent from July 2013 to average 9.1 million barrels per day, the highest level for the month since 2010. Demand also increased for distillate (6.6 percent), jet fuel (3.3 percent) and “other oils” (5.5 percent). Deliveries of residual fuel, which have declined in recent years due to environmental restrictions and the relative price of natural gas, fell 49.4 percent from the prior year to a new all-time low of 183 thousand barrels per day.
U.S. crude oil production in July remained strong, rising 13.9 percent from last year to average nearly 8.5 million barrels per day, the highest July output level since 1986. According to the latest reports from Baker-Hughes, Inc., the number of oil and gas rigs in the U.S. in July was 1,876, up 15 counts from June, and up 110 counts from July 2013. This was the highest count since August 2012.
Total imports last month decreased 11.6 percent from July 2013 to average 9.1 million barrels per day. Meanwhile, crude oil imports averaged 7.5 million barrels per day on a 7.2 percent drop compared to the prior year. Both figures represent a 19 year low for the month of July. Imports of refined products fell 28.0 percent from last year to the lowest July imports level in 33 years at just below 1.6 million barrels per day.
Production of gasoline in July averaged 9.9 million barrels per day, up by 6.6 percent from July 2013 to the highest July output on record and just 1.9 percent below the all-time record set in June. Production of distillate fuel also set a new July high at just over 5.0 million barrels per day. This was a 1.5 percent increase from the previous year.
Another July record was seen in U.S. refinery gross inputs, which rose 0.9 percent from last year to reach 16.6 million barrels per day. Exports of refined petroleum products were up by 1.3 percent from the prior year to average 3.9 million barrels per day, also a July record. The refinery capacity utilization rate averaged 92.8 percent in July. API’s latest refinery operable capacity was 17.934 million barrels per day.
Crude oil stocks ended at 363.9 million barrels, a 0.7 percent decrease from July 2013. Stocks of motor gasoline were down by 4.2 percent from last year to 213.6 million barrels. Distillate, jet fuel and “other oils” stocks were all down from year ago levels.
Profits in first half at $5.2 billion.
China's Sinopec sees oil and gas production accelerating, with major gains coming from overseas. UPI/Hamid Forotan
BEIJING, Aug. 25 (UPI) -- China Petroleum and Chemical Corp. said Monday oil and natural gas production increased 8 percent year-on-year, with most of the gains coming from overseas.
The company, known also as Sinopec, said combined oil and natural gas production during the first half of the year was up 8 percent from the same time last year. Crude oil production in China of 154.1 million barrels of oil was up 0.3 percent year-on-year, though the 23.7 million barrels produced overseas was more than twice what Sinopec produced during first half 2013.
Natural gas production of 354.8 billion cubic feet was 9.5 percent higher year-on-year, though Sinopec offered no breakdown of the origin.
The company said net profits through June 30 were $5.2 billion, up 7.2 percent from the same time last year.
In terms of the Chinese economy itself, Sinopec said it expected steady growth with gross domestic product up by 7.4 percent year-on-year. Chinese demand for refined oil products grew by 3.6 percent, the company said.
By Golnar Motevalli Aug 25, 2014 8:23 PM GMT+0700
Iran is delaying by three months a conference to offer international companies rights to develop oil deposits there, allowing the London event to fall after negotiations on the country’s nuclear program are set to end.
Foreign companies will be able to express interest in producing crude and natural gas in Iran “immediately” after a final nuclear deal is reached, said Mehdi Hosseini, head of the Oil Contracts Revision Committee.
Iran and six global powers have given themselves until Nov. 24 to agree on limits to the Persian Gulf state’s nuclear program in return for lifting sanctions on the country. The London conference, previously scheduled for Nov. 3, will take place in late February, to allow companies to participate that would otherwise be barred by sanctions from dealing with Iran, Hosseini said.
“We are very interested in seeing the international companies, especially the major companies, participate in that conference,” Hosseini said in an interview at his Tehran office yesterday. He declined to name fields or indicate how many will be offered, saying details will be announced in February.
Sanctions targeting Iran’s energy and financial industries have cut crude output and exports. Production in Iran, a member of the Organization of Petroleum Exporting Countries, has fallen below 3 million barrels a day since July 2012, from as much as 4.1 million barrels a day in 2005, according to data compiled by Bloomberg. The U.S. and its allies say Iran may be seeking to develop atomic-weapons technology. Iran says its nuclear program is for peaceful purposes only.
Future investors in Iran’s oil and gas fields will be able to disclose the size of reserves in those deposits and the level of production as an annex to their financial statements, without having any ownership rights over those assets, Hosseini said. International companies seek access to hydrocarbons to book reserves, a form of reporting by which they can claim a share of oil and show they can replace barrels they produce.
By Mariam Fam and Salma El Wardany Aug 26, 2014 5:00 AM GMT+0700
Libya’s outgoing parliament defied its successor by naming an alternative premier, while government officials called for international help amid growing violence between rival militias.
The General National Congress, the legislature that has refused to disband even after a new one was elected in June, invited Omar El-Hassi to form a salvation government during a meeting yesterday in the capital, Tripoli. The congress, where Islamists are among the strongest factions, also announced a “public mobilization” in all institutions and the highest level of security alert, the official news agency Lana said.
The newly elected parliament has been meeting in the east of the country instead of Tripoli, the seat of the outgoing legislature. El-Hassi was nominated as a rival to Prime Minister Abdullah Theni, whose house was set ablaze by militia fighters yesterday, according to Al-Arabiya television.
The political schisms and spread of violence highlight the lack of central authority in Libya three years after the overthrow of Muammar Qaddafi by rebels who received military support from the U.S. and its European allies. The chaos has undercut efforts to revive oil output in the OPEC member, which holds Africa’s largest proven crude reserves.
An alliance of Islamist militias, called Libya Dawn, said Aug. 23 it wrested control of Tripoli’s international airport from a rival force.
‘Real Engagement’
In Cairo yesterday, Foreign Minister Mohamed Abdel-Aziz told a meeting of Libya’s neighbors that the country needs “real engagement from the international community” within the framework of United Nations Security Council resolutions. He said that didn’t mean military intervention.
Egyptian Foreign Minister Sameh Shoukry said the activities of “extremist and terrorist groups” in Libya may be spreading to other countries, as militants infiltrate across borders.
Egypt and the United Arab Emirates, whose governments are staunch opponents of Islamist groups in their own countries, have denied allegations by Libya Dawn that they carried out airstrikes against Islamist militias in Libya. The New York Times yesterday cited U.S. officials confirming the airstrikes.
Abdel-Aziz said Libyan officials have asked the Security Council to send “a strong political message” to the armed groups to end the conflict. Libya’s ambassador to Egypt, Mohamed Jibril, told reporters that the country is “suffering from the inability of the state to protect its airports, ports and oil fields.”
Participants at the meeting issued a closing declaration that called for an immediate end to all military operations, and said armed groups should surrender their weapons as part of a gradual and mutual process.
By Daryna Krasnolutska Aug 26, 2014 4:00 AM GMT+0700
Ukrainians will vote in early parliamentary elections Oct. 26, called by President Petro Poroshenko to replace the ruling coalition that collapsed last month as the nation fights a pro-Russian insurgency.
Poroshenko announced the decision on Twitter yesterday. The governing alliance fell July 24, when two parties pulled out to force a snap vote. Arseniy Yatsenyuk, who became prime minister in February after months of protests turned deadly and led to the ouster of ex-President Viktor Yanukovych, will remain in a caretaker role until his successor is installed.
Ukrainians will elect a legislature that will pick a government to run the country wracked by nine months of political turmoil, violence, military insurgency, and economic hardship. The nation is locked in a conflict with Russia, its biggest trading partner, which annexed the Crimea peninsula in March. The government in Kiev accuses the Kremlin of stoking the separatist unrest in its easternmost regions that has cost thousands of lives, including civilians.
“This is the only correct and responsible decision,” Poroshenko said in a statement on his website. “The composition of parliament doesn’t represent the political leanings of Ukrainian society. Society has changed so fast that lawmakers haven’t been able to keep up with its historic pace.”
Lawmakers will continue to work until a new parliament is elected, and their most important task is to vote on the ratification of the nation’s trade agreement with the European Union, Poroshenko said.
IMF Lifeline
The conflict, which Russia says it isn’t involved in, is draining the country’s resources, leaving the government to rely on a $17 billion lifeline from the International Monetary Fund. The economy will shrink 6 percent this year, according to the government.
The hryvnia has lost 39 percent against the dollar this year, the worst performance among more than 170 currencies tracked by Bloomberg.
Calling a snap ballot to replace the legislature dominated by Yanukovych’s Party of Regions was among the pre-election pledges of Poroshenko, who won a May 25 presidential vote with 55 percent support. Power in the legislation shifted as more than 60 percent of Yanukovych’s allies quit his party since December.
‘Pro-European Majority’
Poroshenko’s Solidarity party had 17.5 percent backing, according to a June 28-July 10 poll by the sociology research company Rating. A party led by Oleh Lyashko, a lawmaker who is a proponent of military action against pro-Russian separatists, was at 9.8 percent and former Prime Minister Yulia Tymoshenko’s Batkivshchyna party had 8.5 percent. The survey of 4,000 eligible voters has a margin of error of 1.5 percentage points.
“People want snap elections and they can’t be delayed,” Oleksiy Haran, a professor of comparative politics at the Kyiv-Mohyla Academy, said by phone. “We will see a pro-European majority in the new parliament. The government that’s formed will face enormous challenges and pressures.”
By Ilya Arkhipov and Kateryna Choursina Aug 26, 2014 3:15 AM GMT+0700
Ukraine said an armored column including 10 tanks entered from Russia early today as the government in Moscow unveiled plans to send a second convoy with humanitarian aid into its neighbor’s rebel-held territory.
Government forces destroyed two tanks, captured crew members and seized other vehicles from the column that was flying separatist banners, Andriy Lysenko, a spokesman for Ukraine’s military, told reporters in Kiev today. Russian Foreign Minister Sergei Lavrov said he had no information about the incident and accused Ukraine of providing “a lot of disinformation.”
Talks scheduled for tomorrow between the leaders of Russia and Ukraine are bringing no respite to the conflict that the United Nations says has left at least 2,000 dead since President Vladimir Putin annexed Crimea in March. Lavrov called on the Red Cross and Ukraine to help with the second delivery of assistance as the humanitarian situation continues to deteriorate in the war-torn regions.
Standoff in Ukraine
“Russia is looking to go into tomorrow’s negotiations with the strongest possible hand,” Alexei Makarkin, a deputy director at the Moscow-based Center for Political Technologies, said today by phone. “The Kremlin’s moves to boost the rebels’ position and Lavrov’s hard-line statements, while seeming to contradict Russia’s stated desire to reach a deal, are aimed at entering the talks from a position of strength.”
Ruble, Micex
The ruble weakened 0.2 percent to 36.1646 against the dollar. The Micex (INDEXCF) stock index gained 0.6 percent to 1,454.67 by the close in Moscow. Ukrainian markets were closed for a holiday.
Putin and Ukrainian President Petro Poroshenko will attend talks with European Union representatives in the Belarusian capital of Minsk during a summit of the Russian-led Customs Union. No separate bilateral meeting is yet planned between them, according to Lavrov.
Russia has informed Ukraine of plans to dispatch another column of trucks this week, with the convoy taking the same route through rebel-held territory as the tractor-trailers that returned to Russia two days ago, Lavrov told reporters in Moscow today. The U.S. and the European Union condemned the decision to send the first convoy of about 280 trucks, which the government in Kiev called an “invasion” after it crossed the border without authorization.
Second Convoy
Poroshenko expressed concern about the plan for a second aid convoy when he discussed tomorrow’s talks with European Union President Herman Van Rompuy, according to a statement on the Ukrainian leader’s website.
The new delivery of aid by Russia needs Ukraine’s agreement and should allow for the Red Cross to control the distribution of humanitarian cargo, Didier Burkhalter, chairman of the Organization for Security and Cooperation in Europe, said today in Tallinn, Estonia.
“We want to coordinate our actions with Ukrainian authorities, which are also planning to send additional humanitarian aid to the southeast,” Lavrov said. “We’ll work on ensuring security guarantees from the side of the militias.”
The Russian Red Cross said it will discuss the plan for the second convoy with Pascal Cuttat, the head of the International Committee of the Red Cross’s regional delegation, the state-run RIA Novosti news service reported.
“It would be right if the second convoy went under the flag of the Russian Red Cross,” said Igor Trunov, the head of the Russian Red Cross’s Moscow office, according to RIA. “This would simplify the situation significantly.”
Early Elections
Meanwhile in Kiev, Poroshenko dissolved parliament and called early legislative elections for Oct. 26. The ruling coalition collapsed last month when two parties pulled out to force a snap vote. Arseniy Yatsenyuk, who became prime minister in February after months of street protests turned deadly and led to the ouster of ex-President Viktor Yanukovych, will remain in a caretaker role until his successor is installed.
Tensions continued to flare in the border areas, with the Ukrainian military saying that Russians disguised as insurgents tried to infiltrate the country and the column of armored vehicles crossed the frontier.
Armored Column
Border troops stopped the advance of the armored column into Ukraine from Russia, blocking the main roads as it tried to move toward the port city of Mariupol in the southern Donetsk region, according to a statement. Authorities detained 10 people, with documents that identify them as Russian marines, and are holding them for questioning, the country’s security service said on its website.
The press services at the Foreign Ministry and the Defense Ministry in Moscow were unable to comment immediately when reached by Bloomberg after working hours.
The village of Komuna in the Donetsk region was shelled by rebels using Grad missiles, Lysenko said. Government troops engaged rebels 39 times in the past day as clashes left four soldiers killed and 31 wounded, he said today.
The Ukrainian army beat back attempted counterattacks by insurgents in the main population centers of Donetsk and Luhansk, as well as in Ilovaysk and Rovenki, Lysenko said. The country’s air force also destroyed a column of rebel vehicles in the region, inflicting “severe losses” on the separatists, he said.
Parallel Parades
While Russia has repeatedly denied any involvement in the conflict, the U.S. and its EU allies say Putin is supplying the insurgents with weapons, manpower and financing and say he could stop the war if he reined in the separatists.
Celebrating the 23rd anniversary of independence from the Soviet Union yesterday, soldiers, armored vehicles and missile launchers passed down the main Khreshchatyk thoroughfare in the Ukrainian capital, with some sent to the frontline from the parade.
Insurgents in Donetsk countered by forcing captured Ukrainian soldiers to walk through the city center at gunpoint and displaying incinerated hardware lost by government troops. The parade of prisoners, who were showered with insults by onlookers, was “a blatant violation of the laws of war,” Ole Solvang, researcher and security adviser for Human Rights Watch, said in a statement.
Lavrov said he saw no humiliation of Ukraine’s prisoners of war at the event.
Spending Increase
Speaking at the parade in Kiev, Poroshenko announced a military spending increase, pledging to allocate more than 40 billion hryvnia ($3 billion) in 2015-2017.
“Unfortunately, there will always be a military threat to Ukraine,” Poroshenko said. “War has come from the side nobody expected.”
Ukrainian authorities requested to buy weapons from neighboring Poland, a member of the North Atlantic Treaty Organization, the TVN24 BiS television station reported on its website, without saying where it got the information. The Polish government is waiting until the military alliance’s Sept. 4-5 summit with its decision, it said. Jacek Sonta, a spokesman for the Polish Defense Ministry and Marcin Skowron, a spokesman for the country’s National Security Bureau, declined to comment.
German Chancellor Angela Merkel, who met Poroshenko in Kiev two days ago, said “one big breakthrough” is unlikely at talks between him and Putin tomorrow. Lavrov said the talks will focus on economic ties, the humanitarian crisis and the prospects for a political resolution in Ukraine.
‘Increasing Pressure’
Ukraine, which agreed to a $17 billion bailout with the International Monetary Fund in May, may need as much as $8 billion in additional external aid during the next two years to finance the mounting costs of war, military revamp and reconstruction in the east, Chris Weafer, a founder of Macro Advisory in Moscow, said by e-mail.
Putin and Poroshenko have both “tried to strengthen their respective positions in recent weeks, but both are under increasing pressure to bring an end to the conflict,” he said. “The problem remains that neither wants, nor can afford, to be seen as a loser in the conflict.”
To contact the reporters on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net; Kateryna Choursina in Kiev at kchoursina@bloomberg.net
To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net Jim Silver
ENN Boosts Cooperation With Sinopec Retail Ahead of Sale
By Aibing Guo Aug 25, 2014 1:45 PM GMT+0700
ENN Energy Holdings Ltd. (2688), a distributor of natural gas in China, said it would increase cooperation with Sinopec’s fuel stations business, as Asia’s biggest refiner seeks buyers for about a third of the unit.
The accord with Sinopec Sales Co. covers areas including buying and transporting natural gas, ENN, based in China’s Hebei province, said yesterday in a statement. The details of its agreement with Sinopec, officially known as China Petroleum & Chemical Corp. (386), are still being discussed, it said.
State-controlled Sinopec is at the forefront of China’s push to restructure government-backed companies and allow markets a bigger role in the allocation of resources. It’s seeking to raise 100 billion yuan ($16.3 billion) from the sale of the retail unit, which operates the nation’s largest fuel station network.
ENN is looking closely at the offer to invest in Sinopec Sales, although its agreement to co-operate doesn’t mean it will buy a stake, Vice Chairman Cheung Yip Sang said at a press briefing in Hong Kong today, after the gas supplier posted a 65 percent increase in first-half net income to 1.21 billion yuan ($197 million).
“ENN has the potential to be one of the stake-buyers of Sinopec’s retail unit,” said Shi Yan, an analyst at UOB Kay Hian Ltd. in Shanghai. “Sinopec obviously wants to tap into ENN’s expertise in the liquefied natural gas distribution business and add the fuel supply into its vast fuel station network across the country.”
Eventual Listing
Sinopec Chairman Fu Chengyu has said he would favor strategic investors for the retail unit who could contribute commercial expertize to its growth. The sale would pave the way for an eventual listing of the unit, two people familiar with the matter said in July, noting that about 20 companies were in the bidding for the unit.
“Strategic cooperation with Sinopec Sales will benefit both the company and Sinopec Sales by utilizing their strengths in their respective businesses and thereby create further efficiencies, synergies and opportunities in the clean energy sector,” ENN said in yesterday’s statement.
Sinopec’s Beijing-based spokesman didn’t answer two calls to his office. The company has announced partnerships with three other companies in recent months for the retail unit, including one insurance company. Sinopec Sales operates more than 30,000 fuel stations in China and more than 23,000 convenience stores.
Previous Partners
ENN and Sinopec previously partnered in a failed hostile takeover attempt of natural gas distributor China Gas Holdings Ltd. (384) in 2011.
ENN currently operates about 60 LNG stations for trucks and larger vehicles within Sinopec’s fuel retail network, and the plan is to expand that offering nationwide, Vice Chairman Cheung said today.
Sinopec said on Aug. 21 that Sinopec Sales had partnered with e-commerce platform yhd.com. The company signed Taiwan’s Ruentex Group as a partner to develop its convenience chain store business earlier this month.
China Taiping Insurance Holdings Co. (966) became Sinopec’s first partner in its retail operations in May, when the insurer agreed to offer financial products at 1,500 convenience stores located at fuel stations by the end of the year.
To contact the reporter on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Iain Wilson
Natural Gas Futures Climb on Outlook for Late-Season Heat
By Christine Buurma Aug 26, 2014 2:01 AM GMT+0700
Natural gas futures climbed the most in two months on forecasts for above-normal temperatures that would spur demand for the power-plant fuel, slowing the pace of supply restocking.
Hotter-than-usual weather may blanket parts of the eastern and central U.S. through Sept. 3, said MDA Weather Services in Gaithersburg, Maryland. Gas inventories were 17 percent below the five-year average in the seven days ended Aug. 15, the biggest deficit for the time of year since at least 2005.
“The heat in the Midwest is nothing short of oppressive,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “The market is really getting support from the shock of the hot temperatures. We’re going to go into winter with some of the tightest supplies we’ve had in a long time.”
Natural gas for September delivery rose 9.7 cents, or 2.5 percent, to $3.937 per million British thermal units on the New York Mercantile Exchange. The percentage gain was the biggest since June 12. Volume for all futures traded was 10 percent below the 100-day average at 2:45 p.m. Prices are up 13 percent from a year ago.
Net-long wagers on U.S. natural gas climbed in the seven days ended Aug. 19, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report released Aug. 22. Bullish bets rose 14 percent to 149,608, the first gain since June.
Adjusted Contracts
The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract.
The high in Detroit tomorrow may be 88 degrees Fahrenheit (31 Celsius), 9 more than average, according to data from AccuWeather Inc. in State College, Pennsylvania. New York may reach 90 degrees on Aug. 27, also 9 more than usual.
Power plants account for 31 percent of gas demand, data from the Energy Information Administration show. The agency is the Energy Department’s statistical arm.
“The late-inning heat wave gripping the South and Midwest has gotten the attention of the market,” Mike Fitzpatrick, the editor of the Energy OverView newsletter in New York, wrote today.
Gas deliveries to electricity generators have jumped 23 percent since June 21 to average 28.7 billion cubic feet as of Aug. 23, according to LCI Energy Insight in El Paso, Texas.
Gas inventories totaled 2.555 trillion cubic feet as of Aug. 15 compared with 3.063 trillion at the same time last year.
U.S. gas consumption may climb 1.7 percent this year to 72.6 billion cubic feet a day, led by industrial users, the EIA said Aug. 12 in its monthly Short-Term Energy Outlook report. Stockpiles may total 3.463 trillion cubic feet at the end of October, the lowest start to the peak heating season since 2008.
New York (Platts)--25Aug2014/359 pm EDT/1959 GMT
Wildfire growth in Permian Basin crude output is outpacing the building of infrastructure to move the oil out of West Texas and eastern New Mexico to Gulf Coast refineries or the oil hub at Cushing, Oklahoma, causing a glut of crude in the region that will depress crude prices until the beginning of 2015, according to an analyst.
Platts unit Bentek Energy projects August Permian crude production at 1.7 million b/d, with current pipeline capacity out of the region at 1.27 million b/d. Rail will play a negligible role in moving crude in the Permian, expected to carry only 627,000 b/d in 2015, Bentek data shows.
"WTI Midland/Cushing differentials should revert to historical levels in early 2015 with completion of Plains' Sunrise pipeline," John Mayes, director of special studies at Turner, Mason, told attendees in Houston at last week's RBN Energy/Turner Mason conference called "Surviving the Flood."
Demand for pipeline capacity has grown so quickly that Enterprise Product Partners, holder of a 13% stake in the Basin Pipeline that is majority-owned by Plains All American, filed with the Federal Energy Regulatory Commission in August to enact a lottery system as a way for new shippers to get space on the line.
In the filing, Enterprise said 214 new shippers submitted nominations totaling 1.8 million b/d of Permian crude on the 450,000 b/d line in July 2014. Just a year ago, in September 2013, there were 11 new shippers seeking space on the line, which still has six regular shippers.
The stranding of crude in the Permian Basin has affected crude price spreads. The differential between WTI out of Cushing and the smaller oil hub in Midland, Texas, widened to $11.50/barrel on Friday. Since last August, the spread has averaged $6.02/b in favor of WTI ex-Cushing, Platts data showed.
WTS ex-Midland traded on average at a $5.70/b discount to WTI ex-Cushing over the last year, in line with recent historical pricing relationships. However, as Permian production ramped up, the more sour WTS has been trading at more than a $10/b discount; it was at $10.55 below WTI Cushing on Friday.
Current pipeline takeaway capacity in the region will be expanded, which is expected to narrow the crude spread differentials.
Following are the major exit pipelines now carrying crude out of the Permian:
| Company | Pipeline | Capacity | Origin | Destination |
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Current pipeline takeaway capacity will be increased as midstream companies build new lines or repurpose existing natural gas or products pipelines. Below are some of the projects that are expected to send more crude either to the Gulf Coast's refineries or to Cushing:
| Company | Pipeline | Capacity | Origin | Destination | Service Date |
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Source: Platts, Bentek, RBN/Turner Mason
Houston (Platts)--25Aug2014/328 pm EDT/1928 GMT
New York jet fuel differentials skyrocketed more than 10 cents Monday amid high demand at the end of summer and inventories 12% off year-ago levels.
Traders said 25,000 barrels traded for delivery into Buckeye Pipeline, which takes jet fuel the final leg into most regional airports, at NYMEX September ULSD futures plus 22 cents/gal, compared with plus 11.50 cents/gal Friday. Sources said Vitol bought from Valero, but at least two other companies also have been bidding up all morning, with few offers.
"It might go even higher. It's nuts," one jet trader said.
New York barges and Colonial Pipeline barrels were said to be 1 cent below Buckeye barrels, rising from plus 10.75 cents/gal on Friday. Benchmark New York barges were flat to the NYMEX going into August.
US jet fuel stocks reached 1996 lows in early August before rebounding 891,000 barrels to 35.56 million barrels as of August 15. The East Coast remained the region with the largest year-on-year decline, down 12% to 9.23 million barrels. The region's stocks were whittled down by exports to Canada, with another cargo, Seto Express, heard loading over the weekend.
A second trader was not aware of a USAC jet export but said it could have been fixed much earlier and was too difficult to unwind. He said the more likely reason for the tight USAC market was too few barrels moving on Colonial from Houston to New York Harbor.
"There's been so many issues on Gulf Coast production, so people don't have the oil to ship to NYH," he said.
Export demand, especially to Latin America, could also be taking up high-demand barrels in the Gulf Coast, where it was heard traded 1.25 cent higher to plus 4.50 cents/gal Monday morning.
Friday's Gulf Coast pipeline assessment marked the first time since March 26, 2013, that the USGC differential was a premium to the underlying futures contract, which switched its basis at that time to ULSD grade instead of lesser-quality heating oil, which made further historical comparisons difficult.
Industry group Airlines for America predicted last week that Labor Day holiday demand for air travel would be 2% above last year, with 14 million passengers flying.
Stavanger, Norway (Platts)--25Aug2014/126 pm EDT/1726 GMT
The CEO of Saudi Aramco said Monday that he did not see US shale as a threat, but rather as a stabilizing influence globally on the industry.
"First of all we have our own tremendous opportunities in shale and gas, ... we are transferring that experience in the US in a very accelerated way in the Kingdom," Khalid Al-Falih told the ONS conference in Stavanger, Norway.
"We will be actually delivering our first increment of shale within a couple of years to a major development in the Kingdom," he said.
Al-Falih added that he saw US shale as benefiting the industry internationally.
"I also think, globally, shale oil and gas is the best thing that has happened because it has kept prices within a band that allows consumers and producers to plan appropriately for investment and to meet rising energy demand," he said.
"Without that share, the world would have been in a tight spot given the interruptions that have taken place in some other producing areas," he said.
Asked whether he believed OPEC could be able to control the oil price going forward, Al-Falih said that the no single force controlled the price.
"This is a market driven business. It's not OPEC, it's not IEA, it's not producers nor consumers that should get into the business of trying to control the market," he said.
"Supply and demand will play the key role. OPEC has played a role, trying to step in ... when shortages take place, which is I think something being appreciated globally," Al-Falih said. "But prices are very much market driven."
Houston (Platts)--25Aug2014/1008 am EDT/1408 GMT
* Russian Urals, Saudi Arab Heavy margins improving as discounts widen
* Saudis could be looking to expand market share in Europe
* Lukoil heard to buy 500,000 barrels of WCS for Sicily refinery
Refining margins in Europe have been improving over much of the past month as a flood of supply in the market has depressed spot crude prices.
As European refiners compete for market share, crude producers that supply the region have been forced to discount local grades amid an influx of crudes from West Africa, the Persian Gulf, Latin America and even the US.
Urals cracking margins in Italy were 3.44/barrel Wednesday, up from a 30-day moving average of just $1.42/b, and up from just 23 cents/b from August 2013.
This improvement comes as spot Urals prices have come off. Urals CIF Augusta prices were assessed at $99/b on August 18, down from over $106/b in late July. Urals cracking yields, meanwhile, have fallen to just $104.59/b on Wednesday, down from a 30-day moving average of nearly $107/b.
Platts margin data reflects the difference between a crude's netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.
The weaker market for crude has led Saudi Arabia to discount its grades as well, as the country seeks to gain market share in Europe. This has played into European refiners' hands, as the economics of running Saudi crudes have show an even greater improvement.
Saudi Arab Heavy margins hit $6.09/b Wednesday, up from a 30-day moving average of $3.78/b. This time last year, Arab Heavy margins were just $1.46/b over the month of August.
"It's very plausible that Saudi Arabia has shifted its priority slightly toward the other markets, such as Europe and Asia," Turner, Mason & Co. Director of Special Studies John Mayes said.
At a recent industry conference in Houston, Turner, Mason & Co. Executive Vice President John Auers said that the Saudis were increasing the discounts their crude could fetch in the European market, highlighting a potential change in strategy.
Auers has said in the past that the Saudis would not willingly cede market share in the US, and Mayes Thursday said the issue going forward would likely be driven by economic considerations, rather than political.
With the advent of North American unconventional production, Saudi market share in the US will most likely be maintained, but the question is where can the Saudis go to look for growth.
Saudi netbacks favor the US Gulf Coast, but they have been falling in each region. Thus, strength in margins are reflecting lower Saudi crude prices, and prices to Europe have led the way lower. This is best shown by looking at actual Saudi OSP discounts. Platts Arab Heavy differential to BWAVE in Northwest Europe was minus $8.40/b on August 1, down from minus $6.15/b on July 1. While this has since risen back up to minus $7.50/b for September 1, it is still almost $4/b cheaper than year-ago OSPs. "It's a question of how far the Saudis are willing to go," Mayes said. "Are they willing to vacate crude supply to the US, or will they keep it up for political reasons. There are probably better markets out there for their crude than the US, namely Europe and Asia."
WCS CARGO HEARD RE-EXPORTED TO SICILY
It is not just producers that are seeking to maximize market share. Despite widely discounted local grades, struggling European refiners have been forced to look further afield for crudes.
Lukoil was heard recently to have purchased a Suezmax-sized cargo of likely Western Canadian Select, re-exported from the US Gulf Coast, for its 320,000 b/d ISAB refinery in Sicily. The cargo left the US in early July and arrived in Sicily in early August, Platts cFlow ship-tracking software showed.
WCS is a 20 API, 3.5% sulfur crude.
This marks at least the second time WCS has gone over to Europe, following Repsol's purchase of a similar sized parcel in May. But WCS is not the only Western grade making inroads in Europe. Colombia's 24.3 API, 0.83% sulfur Vasconia has also become popular with Mediterranean refiners as it too can be had at a significant discount to Urals.
WCS delivered to the Mediterranean cost around $97.83/b on a July average of Platts data, including rail costs and freight costs. This put WCS at a near-$9/b discount to Urals for that month. The Repsol deal was heard tied to April prices, when WCS was at a less than $7/b premium to Urals.
And while the economics of the Lukoil deal are similar to the Repsol deal, the Lukoil refinery does not have a coker and is thus likely not seeking to maximize the distillate yield from heavy, sour crudes. Repsol's extensive upgrades, by comparison, were intended to do just that.
Lukoil's website says the Sicily facility has the ability to process medium-heavy and sour crudes, but Turner, Mason's Mayes said the WCS could be going into asphalt production, or even for bunker fuel. In Lukoil's case, the difference in delivered costs between the grades is likely more representative of Urals' superior quality and the unlikelihood that a refiner would seek to replace Urals with WCS.
Hanoi (Platts)--25Aug2014/956 am EDT/1356 GMT
Vietnam's Cuu Long Joint Operating Company plans to produce first oil from its Su Tu Nau (Brown Lion) field in Block 15.1 in the Cuu Long Basin offshore the country's south in October, state-owned PetroVietnam said in a statement Monday.
PetroVietnam's upstream unit, PVEP, is the biggest stakeholder in the field.
It did not provide estimated output for the field, which was discovered in September 2005.
Installation of production platforms and related equipment at the field will be completed later this week, PetroVietnam said.
PVEP has a 50% stake in block 15.1, along with Anglo-French Perenco (23.25%), Korea National Oil Corp. (14.25%), South Korea's SK Energy (9%) and Geopetrol (3.5%).
Apart from Su Tu Nau, block 15.1 includes Su Tu Den, Su Tu Den Northeast, Su Tu Den Southwest, Su Tu Vang, Su Tu Vang Northeast and Su Tu Trang.
These fields were producing 46,000 b/d of crude oil as of January 31, according to the website of KNOC.
The estimated recoverable reserves of the Su Tu Den, Su Tu Vang, Su Tu Trang and Su Tu Nau fields is 645 million barrels of oil equivalent, and production at the fields is forecast to last until 2023, KNOC said.
Houston (Platts)--25Aug2014/1008 am EDT/1408 GMT
UK gas demand so far in August has been around 19% higher than last year despite a much slower rate of storage injections this month, as demand from other sectors has risen, a Platts analysis of National Grid figures showed Friday.
UK gas demand so far this month has averaged around 159 million cubic meters/day -- up from around 133 million cu m/d during the same period last year -- as higher gas burn and exports, stronger local distribution zone (household) demand and a boost in demand from industrial units all contributed to the demand hike.
This has continued the recent trend of UK gas demand being higher than in 2013, after June demand was higher than a year earlier. UK gas demand averaged 176 million cu m/d in June against the June 2013 average of 160 million cu m/d. This also confirmed the recent bucking of the trend from the first half of 2014, where UK gas demand was 16% lower than for the first half of 2013, with each of the six months in H1 being lower year on year.
INCREASED GAS BURN AND EXPORTS
The largest contributors to the higher gas demand have been gas-for-power and gas exports.
Gas-for-power demand is up 62% year on year so far in August due to gas becoming the dominant fuel in the UK generation mix. The amount of gas used by gas-fired power plants has averaged 47 million cu m/d so far during August compared with 29 million cu m a year earlier.
With coal-fired power plants undergoing annual maintenance to operate at full capacity during the high demand winter period, and EDF currently only having nine of its 15 nuclear reactors online after closing the 550-MW unit 2 reactor at the Dungeness B power plant Friday until August 29, demand for gas from power plants can be expected to remain high for the remainder of August and possibly into September.
Furthermore, demand for UK gas from neighboring countries is up 79% so far this month compared to the same period of 2013, rising from 17 million cu m/d to 31 million cu m/d.
Moreover, LDZ demand has been boosted by temperatures dropping back below average for the time of year recently, and has increased by 6 million cu m (11%), with industrial demand 1 million cu m (16%) higher year on year.
Only demand from storage facilities for gas injections is down year on year, more than halving to 13 million cu m/d so far in August compared with 26 million a year earlier.
Tanker carrying Kurdish crude changes course toward Cyprus
Aug 25 (Reuters) - A tanker carrying 300,000 barrels of Kurdish crude oil has changed its destination to Limassol, Cyprus, as it returned from the United States without delivering its disputed cargo to a New Jersey refiner.
The Minerva Joy tanker had previously listed its destination as "Gibraltar orders," which usually implies a destination in the Eastern Mediterranean or further east. It changed its destination to "Limassol orders" at around 1600 GMT on Saturday, according to Reuters AIS Live shiptracking.
On Aug. 13, the Minerva Joy began sailing eastwards from off the coast of Paulsboro, New Jersey, after refiner Axeon Specialty Products said it would not buy or accept delivery of any cargoes of disputed Kurdish crude oil for its Paulsboro refinery.
Iraq's central government has sought to block independent exports of crude by the Kurdistan Regional Government (KRG).
The KRG argued it was allowed to sell crude under the Iraqi constitution, which Baghdad disputes. Several cargoes of Kurdish Shaikan crude have recently reached the United States, but not all have been able to discharge their oil.
The United Kalavrvta is anchored outside of Galveston, Texas, with its cargo of Kurdish crude still unloaded.
In total, about $140 million worth of Iraqi Kurdish crude oil has been stopped from entering the United States in the last month.
The United States has not banned companies from buying Iraqi Kurdish oil, but has warned firms they may face legal action from Baghdad.
Axeon has said it received a separate cargo of Kurdish Shaikan crude in June.
At the end of July, refiner LyondellBasell NV confirmed it had recently bought "modest quantities" of what public records showed was Kurdish Shaikan crude and said it would scrap further purchases of the disputed oil for the time being. (Editing by Jessica Resnick-Ault and Jeffrey Benkoe)
WASHINGTON D.C. -- Energy reform could increase Mexico’s long-term oil production by 75%, the Energy Information Administration (EIA) has said. On Aug. 11, Mexico' s president signed into law legislation that will open its oil and natural gas markets to foreign direct investment, effectively ending the 75-year-old monopoly of state-owned Pemex.
These laws, which follow previously adopted changes in Mexico' s constitution to eliminate provisions that prohibited direct foreign investment in that nation' s oil and natural gas sector, are likely to have major implications for the future of Mexico' s oil production profile. As a result of the developments in Mexico over the past year, EIA has revised its expectations for long-term growth in Mexico' s oil production.
Although there are many complexities to the new reform and many details that still must be settled before the reforms can take effect, reform is expected to improve the long-term outlook for growth in Mexico' s petroleum and other liquids production. Analysis in EIA' s upcoming International Energy Outlook 2014 will include the potential effects on upstream oil exploration and production and the potential for foreign participation.
The changes in EIA' s assessment of Mexico' s liquids production profile are profound. Last year' s International Energy Outlook projected that Mexico' s production would continue to decline from 3.0 MMbpd in 2010 to 1.8 MMbpd in 2025 and then struggle to remain in the range of 2.0 to 2.1 MMbpd through 2040.
However, the forthcoming Outlook, which assumes some success in implementing the new reforms, projects that Mexico' s production could stabilize at 2.9 MMbpd through 2020 and then rise to 3.7 MMbpd by 2040 -- about 75% higher than in last year' s outlook.
Actual performance could still differ significantly from these projections because of the future success of reforms, resource and technology developments, and world oil market prices.
Since 2008, the contract structure for any private company partnering with Pemex was a performance-based service contract, which offered financial incentives to private contractors working in Mexico' s upstream sector. Incentives were provided in some cases, such as when a project is completed ahead of schedule, when Pemex benefits from the use of new technology provided by the contractor, or when the contractor is more successful than originally expected. These contracts also include penalties for environmental negligence or failure to meet contractual obligations.
Mexico' s legislation introduced three new contract types that will provide more opportunity for foreign investment in its energy sector:
• Profit-sharing contracts allow companies to receive a percentage of the profits resulting from oil and natural gas development. While companies entering into these contracts would not own the resources being developed, they would be allowed to include the revenue from their part of the estimated future profits.
• Production-sharing contracts allow companies to own title to a percentage of resource volumes as they are produced.
• Licenses allow participating companies to be paid in the form of oil and natural gas extracted from each project.
The production-sharing contracts and licenses will effectively allow foreign companies to account for reserves, which is a particularly attractive incentive for investment in Mexico' s energy sector. Different contract types will likely be applied according to the degree of risk associated with specific projects. For instance, licenses will likely be used for projects that are very capital intensive and high-risk, requiring advanced technology, like oil shale or ultra-deepwater projects. Less risky onshore and shallow offshore projects would more likely use profit-sharing arrangements.
STAVANGER: Saudi Aramco, the world’s biggest oil producer, plans to invest $40 billion a year over the next decade to keep oil production capacity steady and double gas production, Chief Executive Khalid Al Falih said on Monday.
State-owned Aramco sees more capital going into offshore projects and expects rising costs across the oil sector to underpin oil prices, Al Falih told a conference.
Oil prices fell to a 14-month low of $101.07 last week as global demand growth weakens, even as production ramp ups in several places create a glut of oil.
“To meet forecast demand growth and offset (global output)decline, our industry will need to add close to 40 million barrels per day of new capacity in the next two decades,” Al Falih said.
“Although our investments will span the value chain, the bulk will be in upstream, and increasingly from offshore, with the aim of maintaining our maximum sustained oil production capacity at twelve million barrels per day, while also doubling our gas production.”
Al Falih said that the Organization of the Petroleum Exporting Countries or the International Energy Agency should not try to control oil prices but fundamental problems within the industry, like rising costs, increasing technical challenges and the falling size of finds would support the price.
“I share ... the belief that this is a market driven business, it’s not OPEC, the IEA, and consumers that should be in the business of trying to control the market,” Al Falih said. “OPEC will take the price as it comes.”
Reuters
MOSCOW, August 25 (RIA Novosti) - Iraq exported 75.7 million barrels of oil in July, or 2.442 million barrels per day, a 5 percent increase compared to the same period a year ago, according to a Crude Oil Exports report released by Iraq’s Oil Ministry on Monday.
In June 2014, Iraq sold 72.8 million barrels of oil to the foreign markets, in May – 80.8 million barrels.
Iraq’s oil revenues in July reached $7.74 billion. However, the average price per barrel of crude oil was $102.27 in July, in comparison to June’s level of $102.96.
The oil exported in July was produced at fields located in the Basra province. Since April, Baghdad has not been exporting oil from the Kirkuk Field, a subject of territorial dispute with the Iraqi Kurds.
The Kurdish enclave in northern Iraq has significantly strengthened since the beginning of the Islamic State (IS) insurgents’ offensive on the country. Following the fleeing by Iraqi troops from IS forces, the Kurdish Regional Government took Kirkuk and its giant oil field under its control. Turkey has been allowing the sale of the oil produced by Iraqi Kurdistan since May, despite legal actions being taken by the Iraqi government. According to Bloomberg, on August 20, Turkish Energy Minister said the Kurdish Regional Government and Ankara were planning to double the capacity of the 600-mile long Kirkuk–Ceyhan Oil Pipeline, Iraq’s largest crude export pipeline.
