PETROL & ENERGY 27.07.2015

The undisputed king of oil and gas is making some moves that could change the face of the global refining sector.

In June 2015, Saudi Arabia pumped a record 10.564 million barrels a day, a record level. As if being the world’s biggest exporter of oil was not enough, the desert kingdom is now looking to conquer the refining sector as it has quickly become the fourth largest refiner in the world.

"Saudis have moved into the product business in a big way,” said Fereidun Fesharaki of FGE Energy. With Saudi Arabia’s refined fuel contributing to the global supply glut, what will be its impact on the refining markets especially those in Asia?

A refinery’s success is measured by its ‘gross refining margins’. The gross refining margin is nothing but the difference between the value of the refined products and price of the crude oil. In case of Saudi Arabia, the price of crude oil would be extremely low. "The crude is so cheap it's pretty much free for them, the margins are going to be massive. It makes trade flows in products very different,” said Amrita Sen of Energy Aspects.

There is little doubt then as to why the Saudis are shifting their focus to domestic refining. Along with acquiring a controlling stake in Korea’s S- Oil, the desert kingdom is commissioning a new refinery in Jizan which would have a capacity of around 400,000 barrels per day when it begins operations in 2017. 



Algeria: Algeria will trim spending in its 2015 budget by 1.35 percent, expecting a slump in oil prices to reduce its energy earnings by 50 percent, the government said on Thursday. Oil and gas account for 95 percent of Algeria's exports and energy revenues make up 60 percent of the budget. 

Angola: The Angolan Oil minister, José Maria Botelho de Vasconcelos, said Friday that the sector will continue to conduct research and production projects underway in the country, despite oil prices drop. Botelho de Vasconcelos made the pledge at the end of visit to Oil pavilion at the Luanda International Fair. Acknowledging the difficult time the sector is going through, the official said the ongoing projects have been updated and adapted to the current context of low prices. 

Cameroon: Bowleven has discovered hydrocarbons in Zingana exploration well in Bomono Permit, Cameroon. The well has been drilled to its planned total depth (TD) of 1,720m Measured Depth (MD) and logged. Hydrocarbons were encountered in the prognosed Paleocene (Tertiary) aged reservoir intervals and detailed log evaluation is being undertaken. 

Egypt: BG Egypt, a subsidiary of BG Group and one of Egypt's largest natural gas producers, has appointed Khaled Kacem as its president, the company said in a statement on Sunday. Khaled succeeds former BG Egypt President Arshad Sufi, who continues to be part of BG Group's team in Egypt as company chairman, the statement said. 

Egypt: Minister of Petroleum and Mineral Resources Eng. Sherif Ismael stressed importance of continuing development of the modern technological methods, adoption of unconventional ideas and expansion in implementation of the new wells drilling programs. These remarks came during a meeting held between the Minister and the petroleum leaders to review results of the exploration and development activity programs during the past financial year. (Selected by SPTEC Advisory from All Africa, July 26)

Madagascar: OMV has increased its working interest in the Grand Prix block in the Morondava basin, off Madagascar. 

Nigeria: Nigerian President Muhammadu Buhari plans to split the state-owned Nigerian National Petroleum Corporation (NNPC) into two entities, his spokesman said on Saturday. Buhari, elected in March on promises to combat corruption, has made clear he wants to overhaul the oil sector in Africa's biggest economy, which provides the government with around 70 percent of its revenue. He has said his government will trace and recover what he called "mind-boggling" sums of money stolen from the oil sector. 

Nigeria: Delta State Governor Ifeanyi Okowa has appealed to communities to be vigilant against pipeline vandalism which he said led to loss of three million barrels of crude oil in the state recently. Addressing a delegation of Ukoko R'Ivie R'Urhobo, the umbrella body of traditional rulers from Delta-Central Senatorial District, said in April, 2015, the state lost three million barrels of crude oil as a result of attacks on oil pipelines. "I want to say to Deltans that we should be more vigilant against pipeline vandals. They are doing us a lot of disservice, because based on the indices that have been sent to us, we are losing a lot and it will reflect in this July allocation that will be sent to us", he said. 

Uganda: Parliament has paid out close to Shs 40bn to legislators as accrued fuel allowances. Each MP has reportedly received Shs 100m as arrears accrued in fuel allowances since the 9th parliament commenced translating to Shs 37.5bn for the 375 MPs. In its justification for the payments, the Parliamentary Commission says that due to the rising pump prices of fuel, it is imperative that the legislators are paid the difference in price changes between 2011 and now. 

Middle East

Iran / Russia: The National Iranian Oil Company (NIOC) and Lukoil are discussing resuming Iran oil projects, officials have said.Negotiations are currently on in Moscow following talks in Tehran paving the way for the Russian energy firm to resume a project to develop the Azar field in Iran's Anaran block. There are also highly probable plans and negotiations to start again with several other Russian oil companies specializing in other field, an official at the Iranian Ministry of Petroleum has said. 

Iraq: The Iraqi Ministry of Oil announced the exported quantities of crude oil and the revenue generated for June, according to the final statistics issued by the Iraqi Oil Marketing Company "SOMO". The total amount of oil exports reached (95.6) Ninety-five million six hundred thousand barrels, while total earned revenue reached (5.289) and five billion, two hundred and eighty-nine million dollars. The spokesman of the Oil Ministry, Assem Jihad said in an interview received by Shafaq News, that the daily exports of crude oil rate rose, reaching approximately (3.187) three million, one hundred and eighty-seven thousand barrels per day (bpd) which has not been achieved during the past decades.

Kuwait: Kuwait's Al Zour Refinery budget has been increased by $2.88bn (KWD871m) to $16bn (KWD4.871bn), Kuwait's oil minister has announced. Ali Saleh Al Omair said the increase was approved by Kuwait's Supreme Petroleum Council because of the importance of the project, Kuwait's state news agency KUNA said. The 615,000bpd oil refinery, originally planned more than a decade ago, will be the biggest in the Middle East, but the project has been repeatedly delayed by bureaucratic and political issues, including tensions between Kuwait's parliament and cabinet, Arabian Business reported. 

Oman: Dubai Mercantile Exchange (DME)  said that Oman oil price for September delivery reached $40.55. A DME statement yesterday said that the price of Oman oil price has seen a decline of 20 cents over Wednesday's price which was $60.55. It should be noted that the average price of Omani oil for delivery in August stood at $61 and 84 cents per barrel.

UAE: Dolphin Energy Limited has made a number of notable achievements in 2014 including accomplishing a major production milestone of reaching 5 trillion standard cubic feet of gas since operations began, the tie-in of three new export gas compressors to the plant at Ras Laffan Industrial City, and the initiation of a major Industrial Water Management Project to enhance water recovery and utilisation within the Dolphin Energy plant.

Saudi Arabia: Higher product prices and a focus on cost management helped Saudi Basic Industries Corp ( SABIC ) post a second-quarter profit that was much better than analysts had expected, the company's acting chief executive told Reuters. Earlier on Sunday, SABIC reported a net profit of 6.17 billion riyals ($1.64 billion) for the three months to June 30. That was down from 6.46 billion riyals a year earlier but well above the average forecast of analysts polled by Reuters , who had predicted 4.96 billion riyals. 


Rest of the World

Australia: AWE Limited, as Operator of Exploration Permit 455 in the Perth Basin, Western Australia, revealed Friday that after consultation with Joint Venture partner, Titan Energy Limited, it will not proceed with Phase 2 of the Drover-1 exploration program and will not hydraulically fracture stimulate the well. Results from the Diagnostic Fracture Injection Test (DFIT), completed in April, and analysis of the core samples and wireline data taken in 2014 have provided sufficient information for AWE’s assessment of the shale gas potential in the southern extent of its Perth Basin acreage and no further work is required at this location.

Brazil: BG Group Plc on Friday confirmed that it has received final unconditional clearance from Brazilian competition authority CADE for its acquisition by bigger rival Royal Dutch Shell. The clearance of the $70 billion merger follows the 15-day period during which the preliminary approval granted by CADE on 8th July could have been appealed. Shell is set to become the largest Brazilian offshore foreign operator after it completes the merger with BG, which it announced in April. 

Canada: Black Ridge Oil & Gas has signed an agreement with Merced Capital to form an entity that will acquire and develop Williston Basin non-operated assets. The joint venture (JV) will be funded by Merced with an initial investment target of $50 million. Investments will be subject to Merced approval, and will be managed by Black Ridge. Black Ridge will also have the option to co-invest up to 25% on acquisitions and capital expenditures alongside the venture and any such co-investments will reside directly within Black Ridge. Upon the sale of JV assets, Black Ridge will also have the option to bid and acquire the assets. 

China: China-focused Primeline Energy Holdings Inc. signed a Letter of Intent (LOI), valued at $20 million, Tuesday with China Oilfield Services Ltd. (COSL) for the latter to undertake drilling operations in an upcoming exploration program in Block 33/07 in the East China Sea, the firm said Thursday. Under the LOI, which is subject to a final contract, COSL will commence drilling of two wells in August. The first well will be LS23-1-1, while the second will be selected from two prospects following an evaluation of the results of the first well. The total drilling costs exclude costs for any test if oil and gas are discovered. 

Italy: Global Petroleum Limited revealed Friday that its permit applications in Italy are progressing towards approval and claimed that it was pursuing new asset acquisition opportunities. The company’s Italy applications, which cover four blocks in the southern Adriatic offshore Puglia, are nearing environmental impact assessment approval (EIA), according to Global Petroleum. EIA approvals have recently been granted by the Italian authorities to other exploration and production companies with long-standing license applications in the offshore Adriatic, which Global Petroleum regards as very encouraging for the progress of its own applications.

Kyrgystan: China Huarong Energy Company Limited (Huarong Energy, the Company or We, and together with its subsidiaries, the Group) announced Thursday that the fracturing operations of oil wells in the Kyrgyzstan Project have achieved satisfactory results. As of July 21, an aggregate daily production volume of the Kyrgyzstan Project has reached approximately 1,464 barrels. New oil layers were discovered in the newly developed Chigirchik oilfield zone with considerable production test results achieved from an appraisal well in the zone. (

Mexico: Petroleos Mexicanos seems to have misplaced 2.7 million barrels of oil. Since a deadly blast on April 1 tore through one of its offshore platforms, the state oil giant has baffled industry analysts with its assessment of the damage. Pemex has said the disaster, its deadliest this year, affected about 1.5 million barrels of production. But Energy Ministry reports show the actual figure is nearly three times higher: 4.2 million barrels in lost output since April 1. 

Mexico: Mexico's Pemex said on Friday it had agreed to ship six million barrels of its light crude to Japan's largest refinery over the next six months, as the state-run oil company seeks to further develop its ties with Asia. The shipments of Isthmus crude will go via six cargoes between this August and January 2016 to JX Nippon Oil & Energy Corp. Pemex already shipped about 4 million barrels to JX Nippon in the first half of the year. 

Norway: Statoil has commenced drilling the first production well at the Gina Krog, North Sea. The drilling started on 30-Jul-2015 using the Maersk Integrator rig. Gina Krog is located about 30 km north-west of Sleipner. The development of Gina Krog will be among Statoil's major new developments with an estimated 225 million barrels of oil and gas. 

Norway: Norwegian firm Statoil and its partner Total E&P Norge, part of the Total group, made the discovery in the Julius prospect in the King Lear area. Statoil estimates the volumes in Julius to be between 15 million and 75 million barrels of recoverable oil equivalent. The volumes in King Lear are expected to stay within the previously estimation of 70 million – 200 million barrels of recoverable oil equivalent.

USA: With oil prices falling, you wouldn't think Williston, North Dakota, was "the last great place for opportunity," but that is the slogan the state's oil hub has come up with to try to shake off its economic downturn. Those lured by that promise will find apartment rents have begun to plunge in Williston after a 50 percent fall in the price of oil caused hundreds of layoffs and put off job seekers in search of the town's legendary six-figure pay packets. In a state which expects six percent growth this year, largely on agriculture, Williston is trying to convince outsiders it has staying power and won't end up as another has-been boom town.  

USA: U.S. oil producers added 21 oil rigs in the past week, the most in over a year, data showed on Friday, suggesting that drillers were moving more aggressively than expected, just before crude prices' latest dive down. Oil producers, who cut rigs in the face of falling prices late last year, began to add rigs back in the week ending July 2, oil services company Baker Hughes Inc said in its closely followed report.

Energy Prices

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(LME Official – 3 months Buyer)

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