2016 1Q

BP and CNPC sign BP's first shale gas production sharing contract in China (31 March 2016): BP and China National Petroleum Corporation (CNPC) today signed a production sharing contract (PSC) for shale gas exploration, development and production in the Neijiang-Dazu block in the Sichuan basin, China. Witnessed by BP Group Chief Executive Bob Dudley and CNPC Chairman Wang Yilin, the contract is BP’s first shale gas PSC in China and covers an area of approximately 1,500 km². CNPC will be operator for this project.

A rescue of Houston by Washington, DC? It’s not unthinkable (18 March 2016): Sometimes it pays to think the unthinkable. Think about the rescue of Houston, TX, by Washington, DC. Think about an oil business crushed by market distress and overregulation, hundreds of thousands of professionals and skilled workers jobless, and an influx of smiling emissaries from the nation’s capital on a mission of mass retraining. “I see you have a master’s degree in petroleum engineering from Texas A&M,” says the bureaucrat.

The robber baron who botched the world’s first oil storage trade (19 February 2016): A century and a half before the current supply glut sent oil prices into contango, one of America’s greatest industrialists tried to make money by storing crude. He failed. In 1862, Andrew Carnegie and a partner bought several oil wells in western Pennsylvania and dug a giant hole in the ground to hold the crude. That year, oil was worth about $1/bbl, according to the BP Statistical Review. They thought they could make $1 million when supply ran out and prices jumped to $10. Instead, supply kept coming, the oil began leaking and Carnegie had to abandon the idea.

Study: Volumes rise, costs fall for North America’s unconventional gas (19 February 2016): North America’s natural gas resource base is more abundant and lower cost than ever, according to a new assessment by global consultancy IHS. The findings show a considerable growth of the low-cost segment of the resource base since 2010. The study, Shale Gas Reloaded: The Evolving View of North American Natural Gas Resources and Costs, concludes that approximately 1,400 Tcf of natural gas in the US Lower 48 and Canada is recoverable at a current break-even Henry Hub price of $4/MMBtu or less (in real terms). This is a 66% increase over 2010 estimates.

Low oil prices push liberalization of GCC project finance (12 February 2016): Slumping crude prices are forcing oil-producing countries of the Gulf Cooperation Council to finance projects with funding sources other than national treasuries and bank debt, including capital markets and private investment. A report by Standard & Poor’s Ratings Services (S&P) estimates GCC governments need $604 billion to fund projects through 2019, including $100 billion on infrastructure. Planned capital spending is much lower: about $330 billion, with $50 billion for infrastructure. Projects are transactions involving construction risk, including real estate, oil and gas, transport, and infrastructure. Saudi Arabia, the United Arab Emirates, Kuwait, and Qatar account for 92%

Mistras, E2G to form new engineering alliance for plant management (4 February 2016): The collaboration draws upon the strengths of each organization – the breadth of MISTRAS’ asset protection and inspection portfolio fused with E2G’s engineering consulting services. Technology leaders MISTRAS Group and The Equity Engineering Group (E2G) are forming a multi-faceted alliance to enable interoperability across software platforms, services, and support collaborative development efforts for new client-centric solutions.

Shell delays final decision on LNG Canada as profits slump (4 February 2016): Shell is postponing the final investment decision (FID) on its multi-billion-dollar LNG Canada project in British Columbia, the company announced on Thursday. “We are making substantial changes in the company, reorganizing our upstream, and reducing costs and capital investment, as we refocus Shell, and respond to lower oil prices,” Shell’s CEO Ben van Beurden said on a Thursday conference call announcing its fourth quarter and full-year results.

Iran kicks off plan to boost oil exports as sanctions lifted (17 January 2016): Iran is beginning efforts to boost oil production and exports amid a global supply glut after the removal of sanctions that shackled its economy and capped crude sales. The Persian Gulf country is targeting an immediate increase in shipments of 500,000 bopd, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sunday in an interview in Tehran. Iran plans to add another half million barrels within months. The additional crude will push prices lower when it enters markets that are already oversupplied, said Robin Millsof Dubai-based oil consultant Qamar Energy.

Activist is correct: Climate change needs attention in debates (15 January 2016): Fox Business snubbed wealthy climate activist Tom Steyer in its selection of questions for the Republican presidential debate Jan. 14. Steyer, a former hedge fund manager who runs the advocacy group NextGen Climate, issued a statement and bought advertisements before the debate calling on Fox moderators to “facilitate a robust discussion of climate change solutions.” The journalists indeed facilitated a robust discussion—but not about climate change. This is regrettable. A discussion free of the insipid moralizing that short-circuits most discussions about climate change would be refreshing and possibly enlightening. It also would reveal much about candidates.

68 upstream projects delayed (14 January 2016): About US$380 billion worth of upstream oil and gas projects have been deferred because of low oil prices, with deepwater hit the hardest, according to Wood Mackenzie. On top of the 46 projects and 20 billion boe of reserves postponed previously, an additional 22 major projects and 7 billion boe of commercial reserves have been deferred, in the last six months of 2015. The firm says deepwater accounted more than half of new project delays, up from 17-29, which is about 62% of total reserves and 56% of total CAPEX.

Cheniere Energy delays first exports of US LNG (14 January 2016): Construction for Train 1 was completed well ahead of the guaranteed contractual schedule and within budget. However, instrumentation issues were discovered during the final phases of plant commissioning and cool down that will require some additional work in the coming weeks. Cheniere Energy Partners expects to export the first LNG commissioning cargo from its Sabine Pass liquefaction project in Cameron Parish, Louisiana, in late February or March.

Analysts: Global oil, gas M&A to rise in 2016 as companies shed assets (7 January 2016): Oil and gas producers should see an increase in deals this year as cheap crude prices and limited funding options force debt-saddled energy companies to sell assets, according to consultant IHS. An uncertain oil price outlook discouraged M&A last year, with the value of transactions falling 22% to $143 billion, despite the boost from Royal Dutch Shell’s agreement to take over BG Group, IHS said in a report on Wednesday. The deal pace will probably pick up as energy companies face further financial pain after a 35% drop in Brent prices last year.

MARKET WATCH: NYMEX oil prices end 2015 down for second consecutive year (4 January 2016): Light, sweet crude prices for February on the New York market gained modestly on Dec. 31, 2015, to settle above $37/bbl, but US oil futures prices ended the year down about 30%. It was the second consecutive year that oil prices fell on the New York market. The Wall Street Journal reported it’s the first time since 1998 that US prices fell for two consecutive years. Brent crude oil prices in London were down for a third consecutive year, the WSJ said.