PETROL & ENERGY 11.05.2015

Crude futures were little changed on Monday as moves by China to bolster its flagging economy failed to instil confidence that oil demand in the world's largest energy consumer would improve quickly and lift prices.

China cut interest rates for the third time in six months on Sunday to stoke its sputtering economy, which is headed for its worst year in a quarter of century.

"There's been limited response in the oil markets today," said Ric Spooner, chief analyst at CMC Markets in Sydney.

"The stimulus is probably seen as helping to soften a decline rather than really turn things around."

Data on Friday showing record crude imports by China in April did not support oil prices, either.

ANZ analysts said the imports in April were "likely in response to opportunistic buying and stockpiling".

June Brent crude rose 2 cents to $65.41 a barrel by 0228 GMT after dropping 1.6 percent last week. June West Texas Intermediate (WTI) dropped 5 cents to $59.34 a barrel after rising for eight straight weeks, the longest winning stretch since late 2012 to early 2013.

Brent's four-week advance to hit 2015 highs halted late last week as excess European and African crude supply dragged prices down, with the price rally technically exhausted.

In Libya, oil production remained volatile after a protest closed the Nafoura oilfield, cutting output at Libya's Arabian Gulf Oil Co (AGOCO) by some 35,000 barrels per day (bpd).



Chad: Chad’s government is seeking to delay repayment of about $1.5 billion of Glencore Plc-led bank loans to conserve cash after a collapse in crude prices and its intervention in the war against Boko Haram in Nigeria. Rescheduling repayments of advances on oil sales received in 2013 and 2014 will save the government $400 million, according to a Finance Ministry document presented last month to the International Monetary Fund. The document was given to Bloomberg by an official in the ministry who asked not to be identified because it hasn’t been released publicly. The rescheduling highlights the risk that Glencore and banks have taken in Chad, lending the landlocked country the equivalent of almost 14 percent of its $13.5 billion gross domestic product. While the country is sub-Saharan Africa’s seventh-biggest oil producer, it’s also one of the most underdeveloped countries in the world, ranking 184th out of 198 on the United Nations Human Development Index. 

Egypt: In another move to secure energy supplies before the start of summer, Egypt has launched a tender to lease a liquefied natural gas (LNG) import terminal for a five-year period. The terminal, which is a floating re-gasification and import terminal, converts LNG into gas and thus makes it possible for Egypt to import LNG. It would be Egypt's second such terminal after it received an import terminal from Norway's Hoegh LNG last month. The ministry of petroleum has sent requests for offers to eight companies and is expected to receive replies within a week. Egypt has recently struck a number of LNG supply deals, including with Russia's Gasprom and Algeria's Sonatrach, with the LNG to be delivered this year and next. 

Egypt / Tunisia: North Africa focused Independent Resources (IRG) plans to raise £800,000 via share placement to fund its expansion plans in the region. Independent Resources, through a wholly owned subsidiary, currently holds a 86.345 per cent interest in the Ksar Hadada gas exploration permit covering an area of 2,252 square kilometres onshore south-east Tunisia. The proceeds used towards revised strategy to focus on reviewing advanced opportunities inEgypt, fund Ksar Hadada licence costs and general working capital, the company said. The licence period for Ksar Hadada was recently extended by the Tunisian authorities from 16 April 2016 to 7 August 2016. “IRG's wider strategy is to build a portfolio of Mediterranean basin based production assets. Its primary focus remains Egypt where there are significant opportunities for the company,” the company said. 

Ghana: Citi Business News can confirm oil giant ExxonMobil is to begin operations in Ghana. According to state owned oil firm, Ghana National Petroleum Corporation (GNPC,) ExxonMobil has signed a Memorandum of Understanding (MOU) with it to purchase an oil block close to the Hess and Jubilee fields. GNPC’s CEO Alex Mould told Citi Business News ‘we are attracting the right partners, ExxonMobil has signed an MOU with us to look at a block and the minister is going to take it to cabinet and parliament for approval’. The deal which is subject to cabinet and parliamentary approval will see ExxonMobil join a growing list of oil giants who have oil blocks in the country. 

Ghana: The World Bank’s private lending arm is finding projects to fund in Ghana as it completes the groundwork for a local-currency bond sale that was delayed two years ago. Soaring rates on Treasury bills prompted the International Finance Corp. to postpone plans for a 2 billion-cedi ($517 million) sale in 2013. The IFC has finished preparations for the issuance, which would be used as a benchmark by companies if they sell debt, according to Akua Opoku-Mensah, a financial officer at IFC. Oil-producing Ghana’s borrowing costs are stuck near five-year highs because of lower crude prices, depreciation in the currency that’s the worst in Africa this year and a budget deficit that remains near 10 percent of gross domestic product. The International Monetary Fund agreed last month to lend Ghana $918 million in a three-year program aimed at helping the government boost growth and narrow the fiscal gap. The country is investing in roads, water and power projects as it battles an electricity shortage and the slowest economic expansion in 20 years. 

Morocco: Morocco’s natural gas demand will reach 5 bcm by 2025, according to Abdelkader Amara, Minister of Energy, Mines, Water and Environment. Amara on Thursday made a presentation to the government council on country’s LNG plan, reported Morocco World News. The minister said that his department, in coordination with the National Office of Electricity and Water (ONEE) and various stakeholders in the energy sector, has launched a debate seeking to increase the quota of natural gas in the national energy mix. Building of LNG infrastructure in Morocco will require investment of close to 5 billion, he said, reported Morocco World News. The plan is to spend the money on building an LNG terminal in Jorf Lasfar near the western port city of El Jadida within five years. The gas will be carried through a 400 km-long gas pipeline to power plants. 

Nigeria: Gas shortages at Nigeria’s power plants, about 70 percent of which are fueled by the commodity, will take years to resolve, according to Finance Minister Ngozi Okonjo-Iweala. Peak electricity output in the West African nation, the continent’s biggest economy, reaches about 3,800 megawatts, with another 1,500 megawatts unavailable because of gas shortages, the Nigerian Electricity Regulatory Commission said in March. South Africa, which has a third of Nigeria’s population of 170 million, has eight times more installed capacity. Aliko Dangote, Africa’s richest man, plans to quadruple the supply of gas in Nigeria by investing as much as $2.5 billion on pipelines running from the oil-rich Niger River delta region to Lagos, the biggest city, he said last month. Carlyle Group LP and Blackstone Group LP, the world’s two biggest private-equity firms, and the International Finance Corp. may invest in the project, Dangote said. 

Tanzania: Tanzania plans to spend 12 billion shillings ($6 million) in the next fiscal year to buy land for the planned construction of a liquefied natural gas (LNG) terminal, raising hopes it is speeding up progress of the long-delayed project. The two-train onshore LNG export terminal, which the government says could cost up to $30 billion, has run into delays mainly due to complex land acquisition procedures and an uncertain legal and regulatory framework. Along with neighbouring Mozambique, Tanzania is in a race with Russia, Australia, the United States and Canada to build LNG export plants, aiming to exploit a gap in global supply that is expected to open up by 2020. The 2015/2016 fiscal year starts on July 1, 2015. The terminal would be built in the small southern town of Lindi, located close to an offshore deep-sea region where huge natural gas discoveries have been made. Tanzania is estimated to have more than 53.2 trillion cubic feet (tcf) of gas reserves off its southern coast, but its energy sector has long been dogged by allegations of graft and other problems. British gas company BG Group, together with partners Statoil, Exxon Mobil and Ophir Energy, plans to build an LNG export terminal, expected to start operating in the early 2020s, but a final investment decision is only set for 2016. 

Uganda: Before the discovery of large amounts of oil in Lake Albert, Hoima was a forlorn and remote town in Western Uganda, whose main sources of income were farming and the trickle of tourists heading to nearby national parks. A decade later, an oil-fuelled boom is transforming the town nearest the lake, with smart new office blocks and hotels drawing scores of new businesses and people from engineers to prostitutes to bankers. But with the east African nation yet to pump a single drop of oil, this rapid development may be premature. Oil executives say production will start in 2018 at the earliest. CNOOC, Britain's Tullow Oil and France's Total are among companies exploring for oil beneath Lake Albert, a pristine body of water in the heart of the Rift Valley estimated to contain crude reserves of 6.5 billion barrels. The discovery of oil there about 10 years ago unleashed dreams of an economic windfall that would lift Uganda's 38 million people out of poverty but development has proceeded at a snail's pace, stymied by spats over planning and taxes. 

Middle East

Iran: Iran has announced plans to invest $180 billion into its oil, gas and petrochemical industries by 2022, according to Iran's minister of petroleum Bijan Zangeneh. International sanctions against Iran had reduced Iran’s oil exports to around 1 million barrels per day. Zangeneh noted that the exports must return to the level before the sanctions at minimum of 4 million barrels per day. A series of sanctions has reduced Iran’s oil exports to around 1 million barrels per day. Zangeneh noted that the exports must return to the level before the sanctions at minimum of 4 million barrels per day. According to him, any nuclear deal between the P5+1 and Tehran must include cancellation of all financial and energy sanctions so that Iran regains its share in the global market. 

Iran / Iraq: Iran will start exporting natural gas supplies to Iraq before the end of the current Iranian year (ends March 19, 2016), a senior energy official announced on Friday.'Export of Iran's gas to Iraq will happen by transferring 5-7 million cubic meters per day,' Iranian Deputy Oil Minister Hamid Reza Araqi said, addressing a press conference in Tehran on Friday. He noted that the Iranian gas exports to Iraq will increase in the next two years after Iran starts transferring supplies to the neighboring country via the two pipelines of Baghdad and Basra. Iran has agreed to eventually export 25 million cubic meters (mcm) per day of gas to Iraq, Fars news agency said. The 270-kilometer pipeline stretches from the village of Charmaleh, located in Iran's Western province of Kermanshah, into the town of Naft Shahr on the border with Iraq. The pipeline, which is estimated to earn Iran USD 3.7 billion a year in revenues, will be fed by the massive offshore South Pars gas field in the Southern Iran. The pipeline will take Iran's gas from the country's South gas field phases in Southern Iran to the power plant in Iraq. 

Oman: Oman's production of crude oil and condensate stood at 28.81 million barrels in April this year, a 1.67 per cent fall in production compared to the previous month. Average daily crude oil production stood at 960,300 barrels in April, according to a monthly report released by the Ministry of Oil and Gas here on Sunday. Similarly, total crude oil exports were 23.7 million barrels, which was equivalent to 790,132 barrels per day, a decrease of 9.31 per cent, compared to March 2015. Asian markets imported the major share of the Sultanate's crude oil. China continued to maintain its lead among top importers of Omani crude oil in April 2015. However, imports declined by 5 per cent in April, compared to March, to settle at a level of 82.94 per cent. Meanwhile, imports of Omani crude by both Japan and Thailand increased by 3 per cent and 1 per cent, respectively. Taiwan was responsible for the largest rise in April, as purchases of imported crude oil rose by 11 per cent, compared to the previous month, to settle the total exports of Omani crude oil at 12.4 per cent.

Oman: Oman minsitry official has called for transparency in tender processes, saying that better clarity would benefit the Sultanate's oil and gas sector, Times of Oman has reproted. On the question whether current tender processes benefit local service companies, Al Aufi said that there are certain areas where there is still room for further transparency. He added that companies bidding for a certain contract should have the right to know who they are competing against and who the other players are. Furthermore, those companies who do not win should be given the reasons why they were rejected so that they can improve the problematic areas next time, the official said. Oman recently awarded a tender to Galfar Engineering and Contracting for site preparation work for its upcoming refinery at the Special Economic Zone in Duqm. 

Qatar; Qatar's international reserves totalled $39.5bn in March, which QNB said is expected to scale up further this year on continued current account surpluses amid lower oil prices. The country's international reserves stood at $39.1bn at end-February, QNB's latest 'monthly monitor' showed. Accordingly, the import cover rose slightly to 7.3 months at end-March, well above the IMF-recommended level of three months for pegged exchange rates. Qatari oil prices fell slightly in March owing to weaker global demand, it said. The stagnant eurozone economy, the recession in Japan and the slowdown in emerging markets, especially China, are contributing to the weakness in hydrocarbon demand and an oil supply glut, which has led to lower international oil prices. Qatar's crude oil production rose to 708,000 barrels a day in March. Qatar Petroleum (QP) is implementing a redevelopment programme to steady production at its oil fields. This heavy investment in existing oil fields should stabilise oil production around 700,000 barrels per day, going forward. 

Saudi Arabia: Saudi Aramco is ramping up spending in Asian refineries in what is seen as a move to retain its position as the region’s largest crude oil exporter and win loyal customers for years to come. Saudi Aramco and its subsidiaries own, or have equity interest, in refineries in Japan, South Korea and China with around 1.3mn bpd capacity. But China is by far the Kingdom’s biggest market with Aramco being one of the few foreign oil companies with refining ventures in the country. The Saudi national oil company is part of a group of companies building a processing plant in China and together with Asia’s biggest refiner is looking to build another plant in Fujian province. In 2007, Aramco partnered with China Petroleum & Chemical Corp. (Sinopec) and ExxonMobil China Petroleum & Petrochemical Company and set up Fujian Refining & Petrochemical Co. Ltd., a refining and petrochemical producer with 12mn tonnes of annual capacity, and Sinopec SenMei (Fujian) Petroleum Company, a processed oil trader with more than 1,000 gas stations in Fujian. Accoridng to Oakden, integrating Aramco’s oil exports with refineries in Asia would give the company a hedge against fluctuations in oil prices and a lucrative stake in the world’s biggest consumer markets. 

Rest of the World

Bangladesh: Samsung C&T Corporation is interested in building LNG receiving terminal in Bangladesh, according to local daily Dhaka Tribune. The South Korean firm gave a proposal letter in this regard to State Minister of Power, Energy and Mineral Resources Nasrul Hamid in March. The plant will be set up on a “build, own and operate” (BOO) basis, Dhaka Tribune reported adding that Samsung will submit a final proposal after getting the nod from the ministry. The Power Ministry is considering Samsung's proposal and will forward it to Prime Minister Sheikh Hasina, who is in charge of the ministry, a ministry official told the newspaper. Bangladesh has been witnessing acute shortage of gas which has affected industries such as fertilizer and power. In 2011, Bangladesh signed a MoU with Qatar to import annually 4 million tons of LNG from the Qatar Petroleum.  But the country could not import the fuel as necessary infrastructure for this purpose is yet to be built. The MoU expired in March 2015 after a two-year extension from its initial tenure, but Bangladesh expects its tenure to be extended until 2017. 

Canada: Talisman Energy Inc. announces that the acquisition of Talisman by Repsol S.A. by way of an arrangement under the Canada Business Corporations Act has been completed. Under the arrangement, a wholly-owned subsidiary of Repsol has acquired all of the outstanding common shares of Talisman at a price of US $8.00 per share and all of the outstanding preferred shares of Talisman at a price of CDN $25.1093 (representing CDN $25.00 plus accrued and unpaid dividends) per share. With the completion of the arrangement, the common shares will be delisted from the Toronto Stock Exchange and the New York Stock Exchange, and the preferred shares will be delisted from the Toronto Stock Exchange. 

China / Russia: Gazprom and CNPC on Friday signed the heads of agreement for pipeline gas supply fromRussia to China via the western route. The document was signed by the Gazprom Management Committee Chairman Alexey Miller and the CNPC Vice President Wang Dongjin in Moscow in presence of Russian President Vladimir Putin and Chinese President Xi Jinping. The document outlines the main technical and commercial parameters of the future supplies. In addition, Alexey Miller and Wang Dongjin signed another cooperation agreement (previous ten-year agreement had expired in 2014) outlining the main areas of joint actions in the gas sector, Gazprom said in a statement. The western route envisages gas supply to China from Western Siberia's fields. On November 10, 2014 Gazprom and CNPC signed the framework agreement on Russian natural gas supply to China via the western route. The Power of Siberia is a gas trunkline intended for natural gas delivery from the Irkutsk and Yakutia gas production centers to the Russian Far East and China (eastern route). The 30-year contract provides for Russian gas supplies to China in the amount of 38 billion cubic meters per year. 

China / Turkmenistan: Capacity of Turkmenistan-China gas pipeline will reach 55 billion cubic meters (bcm) this year,Trend News Agency reported citing country’s Ministry of Petroleum and Mineral Resources. In 2010, capacity of the first two lines hit 30 bcm and in late 2014 a third line with 25 bcm capacity was added. In 2013, the two nations signed an agreement to construct the fourth gas pipeline with a capacity of 25 bcm per year. The fourth branch will stretch along the Turkmenistan-Uzbekistan-Tajikistan-Kyrgyzstan-China route. The pipeline is planned to be constructed in 2017, Trend News said. Thus, by 2017, the capacity of Turkmenistan’s pipeline system running in the eastward direction will increase up to 80 billion cubic meters. Under the agreement signed between the China National Petroleum Corporation (CNPC) and Turkmenistan’s State Concern Turkmengaz, by late 2021, Turkmenistan will annually supply China with 65 billion cubic meters of gas, Trend News said. 

China / USA: Texas based SCT&E LNG, which is developing an LNG export terminal in Louisiana, is keen on signing LNG supply deal with China. Company executives have just returned from a successful 45-day trip to Latin American and Asia for meetings with government officials, potential off-takers, and investors regarding the development of the $9.2 billion LNG export terminal in Southwest Louisiana. Michaels noted that because China has instituted aggressive climate change policies to reduce their C02 emissions, they are turning to LNG as a fuel source to fulfill their energy demands and diversify their energy portfolio, which will double their demand for natural gas in the next five years and their long-term LNG demand is expected to make China the second largest LNG importer by 2025. The SCT&E LNG project is currently modeled as an LNG tolling facility utilizing cryogenic technologies to liquefy natural gas for the exportation of natural gas globally. The SCT&E LNG plan is to liquefy approximately 1.62 billion cubic feet per day of natural gas to create approximately 12 million tons per annum of LNG at its future facilities on Monkey Island, Cameron Parish, Louisiana. 

Colombia: If Alfa SAB and Harbour Energy Ltd. succeed in buying Pacific Rubiales Energy Corp. they’ll also acquire the oil driller’s battle to avert a steep production decline. With the expiration next year of an agreement to produce crude from its namesake Rubiales field in central Colombia, the company will try to ramp up production at a nearby block known as CPE-6. That effort has met with slumping prices and community opposition, with some landowners threatening to try to halt the project on concern it’s harming the environment. Alfa and Harbour offered to buy Pacific Rubiales, which trades in both Toronto and Bogota, this week for about C$2.1 billion ($1.7 billion) after the collapse in crude prices spurred record losses and pushed up debt, making the stock among the world’s worst performers among oil producers. Pacific Rubiales is now in exclusive talks with Alfa and energy investor Harbour. Alfa, a San Pedro Garza Garcia, Mexico-based conglomerate, is seeking an expanded oil business as its home nation opens production to foreign investment. 

Guyana: ExxonMobil has discovered oil in Stabroek Block off Guyana. The company is evaluating the commercial viability of the discovery. Exxon had signed an agreement with Guyana to explore the 26,800 sq km block, 160 km to 320 km offshore, in 1999. The Guyana government said, it is "optimistic of a hydrocarbon discovery of commercial quantities which will further transform Guyana's economy." Ownership of Stabroek Block: ExxonMobil (70%, operator) and Hess (30%). 

Mexico: Comision Federal de Electricidad, Mexico’s state-owned power company, expects $16.6 billion will be spent on infrastructure including pipelines and power projects in the coming years as the nation opens to outside investment. The CFE is planning for 14 natural gas pipelines, 14 renewable energy projects and six combined-cycle natural gas generation plants, Chief Executive Officer Enrique Ochoa said in an interview Friday at the World Economic Forum in Riviera Maya, Mexico. The renewable energy projects will be hydropower, geothermal and wind farms, he said. Mexican lawmakers in 2013 approved legislation that opens the nation’s oil and power markets to foreign investors. Blackstone Group LP and other power producers have applied to ship electricity across the border from Texas to meet Mexico’s needs, while BlackRock Inc. and First Reserve Corp. are buying stakes in gas pipelines owned by state oil company Petroleos Mexicanos. Ochoa didn’t say which projects the CFE would build itself and for which it would seek outside bidders. 

Norway: Subsea 7 secured a $300 million pipeline and subsea construction contract from Wintershall for Maria field development. The contract consists of engineering, procurement, construction and installation (EPCI) of 95 km of rigid flowlines and associated structures to develop the Maria field which is located in the Norwegian Sea at a water depth of approximately 300m. 

United Kingdom: INEOS has announced it has completed the deal with IGas, announced on the 10th March, making it the UKs third largest shale gas company. The deal includes the acquisition of a 50% interest in seven IGas shale gas licences in the North West of England (the Bowland licences). It also consists of a 60% interest in three Petroleum Exploration & Development Licences (PEDL’s 145, 193 and EXL273) and a 50% interest in a further four licences (PEDL’s 147, 184, 189 and 190). In Scotland, INEOS will acquire IGas’ entire interest in PEDL 133 (the Grangemouth licence) which will give the company 100% ownership of this asset. In addition, INEOS has the option to acquire 20% in two IGas East Midland shale gas licences (PEDL’s 012 and 200). INEOS will assume operatorship of PEDL’s 133, 145 and 193 and EXL 273 in phases.

USA: The oil boom isn’t dead after all. For the first time in five months, a rig in the Williston Basin, where North Dakota’s Bakken shale formation lies, sputtered back to life and started drilling for crude once again. And then one returned to the Permian Basin, the nation’s biggest oil play, field services contractor Baker Hughes Inc. said Friday. Shale explorers including EOG Resources Inc. and Pioneer Natural Resources Co. say they’re preparing to bounce back from the deepest and most prolonged slowdown in U.S. oil drilling on record. The country has lost more than half its rigs since October, casualties of a 49 percent slide in crude prices during the last half of 2014. Futures rallied above $60 a barrel earlier this week, and a sudden return to oil fields would threaten to end this fragile recovery. While rigs are returning to some fields, the total U.S. count has continued to decline, falling 11 this week to a four-year low on Friday. The drilling slowdown won’t reach a real bottom for about another month, James Williams, president of energy consultant WTRG Economics, said by phone from London, Arkansas. 
Energy Prices

Crude Oil ($/BBL)
Brent: $ 65.46 +0.17%

WTI: $ 59.30 +1.09%
OPEC Basket: $ 63.98 -1.51
Natural Gas ($/MMBTU)
Henry Hub: $ 2.90 +6.23%

Steel ($/MT)
Steel Billet: $ 305.00
(LME Official – 3 months Buyer)

€ 1 = $ 1.1146 -0.44%


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