PETROL & ENERGY 11.06.2015

Oil halted its advance after rising to a six-month high as investors weighed record Saudi production against signs the U.S. supply glut is easing.

Futures fell as much as 0.6 percent in New York following a 5.7 percent rally the past two days, the most in three weeks. Saudi Arabia, OPEC’s biggest member, pumped 10.33 million barrels a day of crude in May, its data showed Wednesday. U.S. output accelerated even as stockpiles declined for a sixth week, the Energy Information Administration reported.

Oil’s recovery from a six-year low has slowed as a 40 percent surge since March bolstered speculation that global production will expand and fuel a surplus. The Organization of Petroleum Exporting Countries last week decided to maintain its quota as it sought to defend market share against higher-cost producers.

“The story from the Saudis is the same, they see increased demand,” Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney, said by phone. “Their rhetoric is that they have to increase and they’re showing that through their actions.”

West Texas Intermediate for July delivery dropped as much as 38 cents to $61.05 a barrel in electronic trading on the New York Mercantile Exchange and was at $61.18 at 1:05 p.m. Singapore time. The contract climbed $1.29 to $61.43 on Wednesday. The volume of all futures traded was about 58 percent below the 100-day average. Prices are up 15 percent this year.



Algeria: Crude production out of Algeria has dropped under its average rate, coming in currently at about 1.2 million bpd. The country expects to add to this number in H2 with the addition of new production. The country will see new crude flows from the Bir Sebaa and the Bir El M’sena fields. The country is expected to launch a licensing round in H2 in an attempt to generated new resources, although some operators are wary of Algeria’s contract terms, as well as the bureaucracy firms have to deal with to get their programs in order. (Selected by SPTEC Advisory from Petroleum Africa, June 10) 

Angola: Porto de Caio has begun its initial construction phase of a new deepwater port in Angola. The initial phase of construction, awarded to Franki Africa Sucursal Angola, involves the mobilization of equipment delivered from Europe to drill 20 to 60 seabed boreholes to gather information critical to the foundation of the port. A geotechnical barge will use a jacking system to drill the holes. The work is estimated to be completed in eight to 10 weeks. This work is an important step to completing the first berth of the new port in the 3Q 2017, said Porto de Caio. 

Ghana: Ghana discovered oil in commercial quantities in July 2007 but commenced production in November 2010. The expectation of many Ghanaians was that the newly found wealth would boost the fortunes of the country, which also produces cocoa, gold, diamond, manganese and bauxite. Ghana has so far earned 2.7 billion US dollars after four years from oil production with the foreign companies making 8.448 billion U.S. dollars. In March 2009, then President John Evans Atta Mills, in an address to parliament expressed the government’s commitment to full disclosure of all present and future oil contracts to ensure transparency and accountability. Subsequently the country’s legislative body passed the Petroleum Revenue Management Act (PRMA) 2011 Act 815 to regulate the new sector. The World Bank (WB) and the International Monetary Fund (IMF) have projected that Ghana could make 20 billion dollars from its oil fields within 20 years. But a Ghanaian oil and gas management expert, Frank Toledzi, has estimated that the country could earn 20 billion dollars more than the WB and the IMF have projected if it conducts due diligence while signing oil contracts. Ghana, since the discovery and exploitation of oil, has signed 23 contracts with various firms. In 2014, for example, eight oil contracts were signed by the government with Med Songhai, AMNI International, CAMAC Energy and Heritage Oil Plc, Sahara Energy Fields, UB Resources Limited, Brittania-U, and Eco Atlantic Oil & Gas Limited. 

Libya: Islamic State strengthened its hold in central Libya, taking territory near Libya’s largest oil terminal and repelling efforts by militias to halt its advance. The jihadist group had been tightening its grip on Sirte over recent months. It claimed on Tuesday to have finally succeeded in taking Muammar Qaddafi’s hometown, after overrunning a nearby power station. Islamic State already controls the desert town of Naufaliya, about 30 miles from Libya’s largest export terminal of Es Sider and neighboring Ras Lanuf, the third-largest. Controlling Sirte helps cement those positions on the west side of the so-called Sirte Basin, which is home to about 70 percent of the country’s crude reserves. Moving in on Ras Lanuf and Es Sider, shut in December following attacks by a separate group of Islamists, is “definitely one of their goals,” Fabiani said. “What happens when they reopen and Islamic State is within range? I don’t think they could hold on to these facilities but they can definitely overrun them and cause damage.” Es Sider and Ras Lanuf aren’t currently under threat, Petroleum Facilities Guard spokesman Ali al-Hasy said by phone on Wednesday. There are forces in place “ready to stop any attack on the oil region,” he said. 

Mozambique: PTTEP is willing to invest about $1.5 bn in the Mozambique LNG project after the joint venture secured orders for 8 million tons of LNG a year, The Nation newspaper reported Thursday. Company’s chief executive officer Tevin Vongvanich said the company's investment plan for 2015 and 2016 on the further development of petroleum fields would involve LNG production in Rovuma offshore basin Area 1 in Mozambique.  The Thai firm has 8.5 percent equity stake in the project and would contribute is share of around $1.5 bn over the period of four or five years, The Nation said. Total investment in the project will be about $20 billion, including the construction of an onshore LNG plant. The project is expected to produce about 12 million tons of LNG annually from Area 1 and has already secured long-term contracts for 8 million tonnes of LNG a year. The remaining 4 million tonnes of annual output could be sold in the spot market. As for the land-based LNG production plant, Anadarko, the majority shareholder in the project, has already selected a construction contractor; construction of the plant is expected to begin soon. 

Nigeria: For Nigeria’s state-owned energy company, supplying gas to power plants around the country depends on fixing pipelines quicker than they get ruptured. In April, the Nigerian National Petroleum Corp. took 10 days to repair leaks on its Trans-Forcados Gas Pipeline, which transports more than half of all gas going to the country’s power plants. It was the fifth repair since the start of the year. Days later, seven more leaks were found less than a mile away and gas couldn’t be delivered. With Africa’s biggest gas reserves of 184 trillion cubic feet and demand for electricity more than triple the current capacity, gas-generated power was touted as the obvious solution by a succession of governments. To end daily blackouts, Nigeria dismantled the state power monopoly and sold state-owned hydro- and gas-powered plants to companies including Korea Electric Power Corp., Transnational Corp. and Forte Oil Plc. What was missing was security for the pipelines connected to most of the power plants, which run through restive communities in the southern oil-rich Niger River delta with a history of attacking energy facilities. 

South Africa: The Central Energy Fund, which manages South Africa’s energy interests, wants the government to designate PetroSA SOC Ltd., whose executives are in talks over potential suspensions, as the national oil company. The CEF asked for the “official designation” in a presentation to the parliamentary portfolio committee on energy Tuesday. It also wants Petroleum Agency South Africa, which acts as custodian of the national database on the commodity, to be appointed the exploration regulator and housed under the Department of Energy, it said. The expanded role proposed for PetroSA comes as the board is in talks with its two top executives about placing them on leave as they probe the company’s poor performance. South Africa, which meets 70 percent of its energy needs through imports and the balance from processed coal and gas, is amending laws to prepare for investments in exploration, which the government and companies in August estimated will be in the range of $3 billion to $5 billion. South Africa’s revised minerals law, which Mineral Resources Minister Ngoako Ramatlhodi in February said would be finalized by August, proposed giving the state a free 20 percent stake in all new oil and natural-gas projects and enabling it to buy an unspecified additional share at an “agreed price.” The CEF asked that this stake go through PetroSA’s upstream, or exploration, unit. 

Tanzania: Speaking to parliament Tanzania’s Minister of Energy and Minerals, George Simbachawenen, revealed that the country’s 532-km pipeline connecting offshore natural gas fields to the country’s commercial capital Dar es Salaam will be ready for commissioning in September. He said gas processing plants currently under construction will be ready at that time also. The pipeline and the processing plants are financed by a $1.225-billion Chinese loan. Simbachawenen also said the government would invest in new gas-fired power plants to boost electricity supply in the country. “During 2015/16 the government will start implementing the construction of a 240MW power plant that is expected to cost $344 million,” he said. The minister said the government would also start work in 2015/16 on the construction of 1,148 km of a new 400-kV power line at a cost of $664 million for the north-west power grid. “Another project involving the construction of a power transmission line in the north-east grid will be financed by a $693 million loan from China’s Exim Bank,” he said. 

Middle East

Iran: The outcome of Iran nuclear deal on June 30 is going to be crucial for oil prices, an analyst said as the Islamic republic holds discussions with six global powers on the lifting of sanctions imposed following its controversial nuclear enrichment programme. Daniel Ang, an analyst working for Singapore-based Phillip Futures, said oil prices would react accordingly to the speed at which Iranian crude would be allowed to flow out. “A slower pace would suggest prices would only suffer a temporary fall, while a faster pace could have devastating effects on crude prices,” he said. “I would think that the deal would be for Iranian crude to flow into the global market at a snail’s pace and would think that Iran’s crude flows would only be sanction-free by 2017.” An important member of the Organisation of the Petroleum Exporting Counties (Opec), Iran has the world’s fourth-largest proven oil reserves after Saudi Arabia, Venezuela and Canada. The country’s annual production is estimated to be about 2.8 million barrels per day. Opec countries did not disclose what would be their strategy on Iran if sanctions are lifted by the end of the month. Opec secretary-general of Opec Abdullah Salem Al Badri said after the meeting in Vienna on June 5 that they would look into the matter. 

Lebanon: If the international price of oil remains low, Lebanon will be saving up to $1.5 billion on its energy bill annually, Central Bank Governor Riad Salameh said at a conference held Tuesday. “Lebanon has benefited from the decline in oil prices. In fact, our import bill is around $6 billion every year, and with this decline we might save from $1 billion to $1.5 billion,” he said.Global oil prices have fallen sharply over the past year, leading to a significant drop in revenues for many energy-exporting nations, while governments in various countries that import fuel have benefitted by saving on their energy bills. The drop in oil prices has helped the Finance Ministry to drastically reduce allocations to state-owned Electricite du Liban for the purchase of fuel oil that runs most of the country’s aging power plants. But the International Monetary Fund has warned Lebanon that it should not count on the drop of oil prices, urging the government to reduce subsidies to the electricity sector.

Oman: The price of Oman Crude Oil Financial Contract, DME Oman, closed at US$60.79 a barrel for August delivery, atDubai Mercantile Exchange at 12:30 pm, Dubai time.DME Oman crude oil is considered a benchmark for pricing crude oil by the countries that produce it, and it gives them a differential price that reflects the quality of the product.The Dubai Mercantile Exchange Limited , DME , is the premier energy-focused commodities exchange East of Suez, and home to the world's third crude benchmark.DME is a joint venture between Dubai Holding, Oman Investment Fund and CME Group. A number of global financial institutions and energy trading firms have equity stakes in the DME , providing the exchange with a resounding vote of confidence by major players in global energy markets. 

Qatar: Woqod (Qatar Fuel), local distributor of petroleum products, will soon be setting up 15 portable petrol stations at different locations in and around Doha to help vehicles access fuel easily. Woqod has already bought the necessary paraphernalia, including the fuel tanks, to set up the portable fuel stations. They will be installed as temporary filling stations in highly crowded places. The locations have been identified and they are in some of the most crowded places in Doha and in the sprawling suburbs. The portable stations will continue to operate as long as permanent petrol stations are not built by Woqod in different places to help ease their shortages. The shortages, as is known, are being caused as the population of both, the people and vehicles, has been rising and many existing petrol stations have been demolished for renovation and expansion. Woqod has already requested the Ministry of Municipality and Urban Planning to allot it plots of land temporarily so it can install the make-shift filling stations and hopes to get the allotment soon. 

Qatar: Qatar Development Bank (QDB) and Qatar Shell unveiled seven new business opportunities for local small and medium enterprises (SMEs) as part of the supply chain for Pearl GTL, the world’s largest gas-to-liquids plant, Gulf Times reports. Opportunities will include manufacturing of safety boards and electric labels; cafeteria and catering services for staff and events; servicing of custody flow meter calibration; manufacturing of stud bolts; supplying onsite welding inspection services; manufacturing and maintaining fire extinguishers; and managing Qatar Shell’s social media. Local SMEs are the “cornerstone” for achieving a sustainable and diversified economy and key to facilitating a thriving private sector in Qatar, the two organisations said. In 2014, 110 local SMEs and firms were qualified to tender for the seven specific business opportunities and five Qatari SMEs were awarded the contracts for Pearl GTL in December. 

Saudi Arabia: Saudi Arabia, the world’s biggest oil exporter, told OPEC that it kept pumping the most crude in three decades last month amid growing signs that the 12-nation group’s quest to maintain market share is working. The kingdom produced 10.33 million barrels a day in May, an increase of 25,000 barrels from April, according to data the country communicated to the Organization of Petroleum Exporting Countries. The group supplied almost 31 million barrels a day collectively, the most in almost three years. OPEC decided on June 5 to persist with a strategy of maintaining production, insisting suppliers outside the group should be the ones to curb a surplus. Oil stockpiles in developed economies are more than 100 million barrels above the five-year average for the time of year. U.S. production will peak this year and shale supply is starting to slow, Energy Department reports show. “The current oversupply in the market is likely to ease over the coming quarters,” OPEC said in its monthly oil market report Wednesday. The group “expects non-OPEC supply to decline in the second half of 2015, compared to an increase in the first half.” 

Rest of the World

Albania / Italy: Trans Adriatic Pipeline AG (TAP) has issued an Invitation to Tender (ITT) for Engineering, Procurement, Construction and Installation (EPCI) for the offshore section of the project. TAP’s 36-inch offshore part across the Adriatic Sea – between the coastlines of Albania and southern Italy – will be approximately 105 km in length. The ITT is open to the companies who have pre-qualified following the contract notice TAP launched in February 2015. The EPCI scope includes associated works at the landfalls in both Albania and Italy (including micro tunnel), offshore installation, seabed intervention, fiber optic cable supply and installation, as well as pre-commissioning and survey activities. TAP plans to award the contract for offshore EPCI by the end of 2015. Construction of the pipeline offshore section is set to begin in 2017. The next Invitation to Tender that TAP will issue is offshore line pipes. 

Brazil: It will be "very difficult" for Brazil's state-run oil company Petroleo Brasileiro SA to finish and present its 2015-2019 investment plan to its board of directors by June 26 as originally planned, a company official said on Wednesday. Several points in the plan, which is updated annually, need be worked out before it can be submitted to the board, Hugo Repsold Junior, head of the company's gas and energy division told reporters in Rio de Janeiro.

China: China's crude througput grew 7.4 percent in May from the same month a year ago to 43.92 million tonnes, data from the National Statistical Bureau showed on Thursday. Crude oil output rose 2 percent on year last month to 18.14 million tonnes.

China: China invested 23 billion yuan ($3.7bn) in shale gas exploration and development between 2009 and 2014, Xinhua Finance said Wednesday citing latest report by China Geological Survey with the Ministry of Land and Resources (MLR). The country had 54 shale gas blocks spread over an area of 170,000 square km. Total of 780 shale gas wells had been drilled by the end of 2014, according to the report. Shale gas developers reported near 500 billion cubic meters of shale gas geological reserves by the end of 2014, including 106.75 billion cubic meters of proven geological shale gas reserves by Sinopec Corporation, the report stated. By end-2014, China had 3.2 billion cubic meters of shale gas production capacity with accumulated shale gas output at 1.5 billion cubic meters and 1.3 billion cubic meters of shale gas output in 2014, Xinhua Finance said citing the report. In 2015, the MLR would spend 680 million yuan ($109 mn) in shale gas survey to guarantee realizing shale gas output targets. China aims to produce 6.5 billion cubic meters and 30 billion cubic meters of shale gas in 2015 and 2020, respectively. 

China: Wood Mackenzie has significantly reduced Chinese gas demand growth through 2020 to 2030. Gas demand growth in China is now expected to reach around 360 billion cubic metres (bcm) and 560bcm in 2020 and 2030 respectively compared with 420bcm and 640bcm previously, WoodMac said in a report Wednesday. “Short-term drivers include low oil prices and high domestic gas prices, reversal of environmental policies, competition from coal and hydro and warmer winter weather. Structural factors include the switch from industrial production to the service sector as a driver of economic growth.” Gavin Thompson, Wood Mackenzie’s principal gas consultant said. According to WoodMac, Chinese national oil companies (NOCs) are assessing how best to optimise their diverse supply portfolios as gas demand disappoints, leading to an oversupplied market with weaker prices. Chinese companies have signed around 66bcm per annum of term LNG contracts, said WoodMac. Of this total, new contracts will ramp up through 2015, ultimately supplying an addition of approximately 23bcm per annum of gas into the domestic market by 2018.

Indonesia: Indonesia's state oil and gas company Pertamina is interested in acquiring a stake in the Abadi floating liquefied natural gas (FLNG) project currently being developed by Japan's Inpex andRoyal Dutch Shell, an energy ministry official said, reported news agency Reuters. The FLNG project is located in the Masela block near Indonesia's border with northern Australia. Inpex is looking for a 20-year extension to operate Masela up until 2048 from the current expiry schedule of 2028, Reuters said. "Informally, Pertamina said they were interested in owning a stake in the Masela block, because this is a new block and it has big potential," Upstream Oil and Gas Director Djoko Siswanto told reporters on Wednesday. Production at the Abadi LNG development is expected to begin in 2022, three years later than planned. 

Japan: UOP LLC, a Honeywell company, announced that Japan’s Taiyo Oil Co. Ltd. has begun producing petrochemicals with UOP’s Tatoray™ process technology, which provides greater flexibility to produce either gasoline or valuable petrochemicals as demand changes. Taiyo Oil licensed the process technology from UOP in 2013 for its Shikoku Operations in Japan. The new unit started production late last year and met all of its performance guarantees two weeks after start-up. The Tatoray process substantially increases production of benzene and xylenes, which are used to produce polymers and plastics. 

Papua New Guinea: InterOil Corporation (NYSE: IOC; POMSoX: IOC) has resumed drilling at Wahoo with the Wahoo-1 side-track exploration well in Petroleum Prospecting License 474 in the Gulf Province of Papua New Guinea. Wahoo-1 side-track well is the follow-up to Wahoo-1 which was suspended in July 2014 due to higher-than-expected pressures. The Wahoo-1 side-track is a significant step-out from existing gas fields and will test whether the successful trends identified around PRL15 extend 170km to the south-east of Elk Antelope. InterOil holds a 78.1114% interest in the well and is operator. The remaining 21.8886% interest is held by minority interests. InterOil will keep the market informed of material developments.

Myanmar: Thailand's Global Power Synergy PCL (GPSC) said it was joining with Japan's Marubeni Corp and Myanmar's EDEN Group to develop a 400-megawatt (MW) gas-fired combined-cycle power plant in Myanmar as part of its foreign expansion. GPSC, the flagship power business of top Thai energy firm PTT PCL, and the consortium have signed a memorandum of understanding with Myanmar's government, Noppadol Pinsupa, the president of GPSC, said in a statement. The power plant, to be located at Thanlyin, will serve rising demand from the residential and industrial sectors, including the Thilawa special economic zone and the Thanlyin oil refinery improvement project that the PTT group is bidding for, it said. 

Norway: The Norwegian Petroleum Directorate (NPD) has granted a drilling permit to Lundin for 16/1-23 S appraisal well in PL338, located south-east of the Edvard Grieg field in the central part of the North Sea. The well will be drilled by the Rowan Viking drilling facility. The drilling program for the well relates to the drilling of an appraisal well in PL338. Ownership of PL338: Lundin (50%, operator), OMV (20%), Statoil (15%) and Wintershall (15%). 

United Kingdom: Drilling has started on the Niobe exploration well in UK license P1889 in the Outer Moray Firth, off northeast Scotland. The license is in blocks 12/26b and 12/27, close to the Beatrice oil field. The jackup Ensco 100 is drilling the well, the main target being a stratigraphic pinch-out trap in late Jurassic sands 940 m (3,084 ft) below mean sea level. Drilling time to target depth is estimated at 31 days. Noreco, a partner in the Suncor-operated well, says the prospect could hold reserves in the 7-157 MMboe range. 

United Kingdom: The former boss of British energy company Centrica (CNA.L) Sam Laidlaw will head a new $5 billion (3.3 billion pounds) fund backed by private equity firms Carlyle Group (CG.O) and CVC Capital Partners to buy oil and gas assets worldwide. The London-based platform, Neptune Oil and Gas, will focus on investing in large-scale fields and companies in the North Sea, North Africa and Southeast Asia struggling in the wake of the sharp drop in oil prices over the past year. Laidlaw, who stepped down as Centrica's chief executive late last year, said the fund aimed to complete one or two large deal totalling around $5 billion within the next two years to build a new exploration and production (E&P) company of 75,000-100,000 barrels per day, similar to the output of London-based Tullow Oil (TLW.L). A raft of oil and gas assets have been put up for sale in recent months as energy firms ranging from majors Royal Dutch Shell (RDSa.L) and Total (TOTF.PA) to small exploration companies seek to boost balance sheets.

Uruguay: Petrel Energy and Schuepbach Energy International will commence a process to farm-out the Salto and Piedra Sola concessions in the Norte Basin, Uruguay. Mr. David Casey, Managing Director of Petrel, said: “We are actively engaged with a number of parties who have expressed interest in participation in our Uruguayan concessions. We will continue to review all options to maximize shareholder value for this unique high quality and high impact asset”. 

USA: The U.S. has taken Russia’s crown as the biggest oil and natural-gas producer in a demonstration of the seismic shifts in the world energy landscape emanating from America’s shale fields. U.S. oil production rose to a record last year, gaining 1.6 million barrels a day, according to BP Plc’s Statistical Review of World Energy released on Wednesday. Gas output also climbed, putting America ahead of Russia as a producer of the hydrocarbons combined. The data showing the U.S.’s emergence as the top driller confirms a trend that’s helped the world’s largest economy reduce imports, caused a slump in global energy prices and shifted the country’s foreign policy priorities. The other major shift BP’s report shows is China’s energy demand growing at the slowest pace since the Asian financial crisis of the late 1990s as the economy slows and the country tries to reduce its reliance on heavy industry. “Growth in some of China’s most energy-intensive sectors, such as steel, iron and cement -- which had thrived during China’s rapid industrialization -- virtually collapsed in 2014,” said Dale, a former Bank of England chief economist who joined BP last year. 
Energy Prices

Crude Oil ($/BBL)
Brent: $ 65.46 -0.14%

WTI: $ 61.18 +0.21%
OPEC Basket: $ 60.27 +1.43
Natural Gas ($/MMBTU)
Henry Hub: $ 2.89 +1.05%

Steel ($/MT)
Steel Billet: $ 115.00
(LME Official – 3 months Buyer)

€ 1 = $ 1.1300 +0.10%


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