2016 3Q (2)

OPEC ‘capitulation’ leaves challenges for U.S. shale drillers (30 September 2016): HOUSTON (Bloomberg) -- OPEC finally blinked in its two-year price war with U.S. oil producers. Whether that translates into a financial victory for the American shale industry remains to be seen. Oil prices and the shares of U.S. drillers kept climbing on Thursday, a day after the Organization of Petroleum Exporting Countries promised its first production cut in eight years. The U.S. companies will need oil to hold above $50/bbl for months before they commit to more spending, according to analysts at firms including S&P Global Platts and Oppenheimer & Co.

Goldman sees OPEC buying time as deal could boost oil $7-$10 (29 September 2016): NEW YORK (Bloomberg) -- Goldman Sachs Group said OPEC’s deal to cut output could add as much as $10/bbl to oil prices, though it remains skeptical along with other banks on how the accord will be implemented. The plan to reduce production to a range of 32.5 MMbpd to 33 MMbpd “will likely provide support to prices, at least in the short term,” Goldman said in a report dated Sept. 28, but maintained its crude forecasts for 2016 and next year.

Reconfigured LNG markets are creating major uncertainties, book says (29 September 2016): OGJ Washington Editor - Global LNG markets, which have changed dramatically over the last few years, have created uncertainties that producers and customers will have to address, contend authors of a recent report. Long-term contracts are giving way to spot purchases amid excess supplies, evolving price dynamics, and competition from pipelines, the authors said during the US launch of “LNG Markets in Transition: The Great Configuration” at the Center for Strategic and International Studies on Sept. 28.

OPEC freeze at today’s levels not good enough, Vitol chief says (28 September 2016): LONDON (Bloomberg) -- A move by the Organization of Petroleum Exporting Countries to freeze output won’t be sufficient to buoy the market, according to the world’s largest independent oil trader. Capping production at today’s levels is “probably not quite good enough,” Vitol Group of Cos. CEO Ian Taylor said in a Bloomberg Television interview as OPEC members gathered in Algiers on Wednesday. The organization may need to tighten supply further to drive up prices, a task that could be “too much to grasp at this particular meeting,” he said.

Moody’s sees another tough refining year (27 September 2016): Refiners face another tough year in 2017, predicts Moody’s Investors Service. Citing forecasts by the US Energy Information Administration, the firm says global demand for gasoline and distillate products will grow only modestly and “will continue to lag the anticipated high available supplies.” Across North America, Europe, the Middle East, and Africa, the refining industry’s earnings before interest, taxes, depreciation, and amortization (EBITDA) will decline by more than 15% in the next 12-18 months as crack spreads—the differences between crude costs and product values—remain thin, Moody’s predicts in a research note.

Trump vows to speed energy infrastructure projects (22 September 2016): PITTSBURGH, Pa. (Bloomberg) -- Republican presidential nominee Donald Trump vowed to speed the government’s approval of energy infrastructure projects -- after the Obama administration moved to stall an oil pipeline in the Dakotas that has drawn protests. He also promised to rescind a bevy of Obama administration environmental regulations in remarks to the Shale Insight conference in Pittsburgh, a summit representing natural gas producers.

Column: Coal's cost advantage over LNG slipping, but not yet enough (The opinions expressed here are those of the author, a columnist for Reuters) (22 September 2016): Thermal coal has been one of the commodity success stories this year, but there is a risk that it becomes a victim of its own success by eating into its advantage over LNG in generating electricity. The benchmark Australian thermal coal price, the Newcastle Index, rose to $70.76/ton in the week to Sepember. 16, its highest in 18 months and taking its gain since the start of the year to almost 40%.

OPEC seen failing to clinch oil-output deal at Algiers talks (21 September 2016) LONDON (Bloomberg) -- OPEC probably won’t clinch a deal to limit oil production in Algiers next week as members stay focused on either boosting output or defending their market share, according to a Bloomberg survey. The Organization of Petroleum Exporting Countries, which will hold informal talks with Russia on Sept. 28, faces the same internal rivalries that thwarted a previous agreement in April, according to all but two of 23 analysts surveyed. Iran and Iraq have signaled their resolve to increase output, while group leader Saudi Arabia is maintaining near-record supply.

Crude glut belies risk from OPEC’s dwindling output cushion (16 September 2016) By SHARON CHO, SERENE CHEONG, DAN MURTAUGH on 9/16/2016 SINGAPORE (Bloomberg) -- As most of the world focuses on how unfettered oil production will weigh on prices, a few say a rebound is on the cards as the market starts to reflect a growing risk of shortages. OPEC’s strategy of keeping its taps open is leaving a smaller cushion if there’s an unexpected need for more oil. The group’s spare capacity has dwindled to the least since 2008, U.S. government data show, while global spending cuts have diminished prospects for new output. Crude may jump more than 35% from current levels as the possibility of a supply squeeze begins to get priced in, according to Citigroup Inc. and trader Gunvor Group.

UNDERWATER MONUMENT A TROPHY IN OBAMA’S QUEST FOR LEGACY (16 September 2016): Oil and gas drilling was hardly imminent off New England when US President Barack Obama created an underwater museum for the study of marine life. But that doesn’t mean the oil and gas industry won’t be affected by creation on Sept. 15 of the Northeast Canyons and Seamounts Marine National Monument. Before then, any plan to drill in federal water off New England would have been blocked at state level under the Coastal Zone Management Act.

MARKET WATCH: NYMEX crude oil, gasoline rose on Colonial Pipeline shutdown (16 September 2016): The light, sweet crude oil contract for October delivery modestly regained some of its previous losses, settling on the New York market Sept. 15 at nearly $44/bbl while US gasoline futures prices gained on reports of the partial shutdown of Colonial Pipeline. Strong gasoline sales helped support crude futures on Sept. 15, analysts said, adding that Colonial Pipeline, which extends from Texas to New Jersey, is expected to resume full operations within days once a leak is repaired.

Goldman sees oil staying below $50 as surplus lingers (15 September 2016): LAKE LOUISE, Alberta (Bloomberg) Don’t count on a big rally in crude oil, said Jeff Currie, head of commodities research at Goldman Sachs Group. Or any rally, for that matter. Two years into an oil rout that saw West Texas Intermediate oil fall to about $26/bbl in February, the risk is “to the downside” because there aren’t any clear catalysts to push up prices, Currie said in an interview in Lake Louise, Alberta. For the next 12 months, he said, oil is likely to trade in the $45-$50 range.

UK Government Approves Hinkley Point (15 September 2016): The UK Government has given approval to Hinkley Point after imposing safeguards on future projects. Following a comprehensive review and a revised agreement with EDF, the government has decided to proceed with construction. The agreement now states the government can prevent the sale of EDF’s controlling stake before the completion of construction without any prior notification or agreement. The government will also be able to intervene in the sale of EDF’s stake once the plant is in operation.

Gazprom receives first construction permit for TurkStream (15 September 2016): Gazprom received the first construction permit for the TurkStream pipeline's offshore section from the authorities of the Turkish Republic as part of the preparatory procedures for resuming the TurkStream project. In December of 2014, Gazprom and Turkey's Botas signed a memorandum of understanding to construct the TurkStream gas pipeline. The pipeline will run 660 kilometers along the old route of South Stream and cover 250 kilometers of a new route toward the European part of Turkey. It is planned that the first gas pipeline string will be used exclusively for gas supplies to the Turkish market.

Kashagan field seen taking another decade to reach target (13 September 2016): LONDON (Bloomberg) Kazakhstan’s giant Kashagan oil field has taken 16 years and more than $50 billion to bring to the verge of production. It could take another decade to reach its potential, with initial output at half the forecast level. Eni, working with partners Royal Dutch Shell, Total and the Kazakh state, expects Kashagan to start in October and pump 370,000 bopd within a year. Consulting firm Wood Mackenzie contends the field will produce only about 154,000 bopd in 2017 and won’t get anywhere near targeted volumes until the next decade.

E&P debt recoveries hit ‘catastrophic’ level, Moody’s says (By Emma Orr on 9/12/2016): NEW YORK (Bloomberg) -- Creditors of E&P companies that went bankrupt last year recouped less than half the usual amount for their claims, and 2016 is shaping up just as bad, according to Moody’s Investors Service. Recovery rates for 15 U.S. E&P bankruptcies averaged a “catastrophic” 21% last year, well below the historical average of 59%, Moody’s said in a report released Monday. Senior unsecured bondholders were hammered even more, averaging just 6 cents on the dollar. Collectively, the debacle could be worse than the telecom industry’s collapse in the early 2000s, measured by both the number of companies that go bust and the recoveries, Moody’s said.

Main power generation startup on Ichthys’ two offshore facilities (12 September 2016): The INPEX-led Ichthys LNG Project has reached a key milestone with both its central processing facility (CPF) and floating production, storage and offloading (FPSO) facility safely starting up their main power generators in the South Korean shipyards where they are being constructed. Today, in the Samsung Heavy Industries shipyard in Geoje, the CPF’s three generators run by 25 megawatt dual-fuel gas turbines energized the facility’s distribution network.

Industry interest in decommissioning opportunities evident at Share Fair Spotlight (9 September 2016): Three companies currently involved in decommissioning projects made it clear to a capacity audience at a specialist Share Fair, organised by Oil & Gas UK’s Efficiency Task Force yesterday (September 8), that there are business opportunities available now for enterprising firms ready to take on the efficiency challenge and contribute to the sector’s efforts to improve competitiveness. Fairfield Energy, Petrofac and Wood Group participated in the decommissioning-focused Share Fair Spotlight at Oil & Gas UK’s office in Aberdeen where delegates gained deeper insights into the supply chain services, goods and expertise these major clients require.

Iran schedules primary oil tender for October (1 September 2016): Iran will hold its first tender of an oil field for development under a new contract model on Oct. 21. South Azadegan field is up for the first tender under the Iran Petroleum Contract (IPC), National Iranian Oil Co. Managing Director Ali Kardor said this week. “Next week, we will be sending invitations to foreign companies and ask them to announce if they are interested,” he told reporters at a press conference in Tehran.

Africa set to benefit from EU study on deployment of LNG (31 August 2016): DNV GL supports the development of LNG as alternative fuel with an EU-wide study hoping to drive availability. The market study is being carried out on behalf of the CORE LNGas hive project which is co-funded by the European Commission. With obstacles being availability with increased uptake, the research aims to develop a safe and efficient, integrated logistics and supply chain for LNG in the transport industry (small-scale and bunkering), particularly for maritime transport off the Iberian Peninsula. With a total estimated budget of more than EUR33 mn, the six-year project is scheduled for completion in December 2020.

Refinery wars: China, India win; South Korea, Japan, Singapore lose (By Clyde Russell | LAUNCESTON, AUSTRALIA 30 August 2016): There is little doubt that China's surging exports of refined fuels have cut profit margins for Asia's refiners, but the pain is unlikely to be shared equally across all the region's exporters of oil products. Given the scarcity of detailed official data on oil product imports and exports among many Asian countries, it's nigh impossible to build a completely accurate picture of the likely winners and losers. However, detailed data is provided by China on the export destinations of its product exports, and Australia, the region's biggest importer of refined fuels, also gives a country-by-country breakdown of its imports.

ExxonMobil, BP, ConocoPhillips decide not to invest in Alaska LNG (29 August 2016): The Wall Street Journal reported that ExxonMobil and its partners BP and ConocoPhillips have decided not to move forward with their JV, Alaska LNG, as they believe that current market conditions make the project unprofitable. The project is estimated to cost $45 B–$65 B. The Alaskan state government, which already owns a 25% stake in the project, bought from TransCanada Corp., are still looking to move the project forward.

Potential rebound to $100 crude could hurt oil industry, Lundin says (By Danielle Bochove and Rakteem Katakey on 8/26/2016): TORONTO (Bloomberg) -- Crude could return to $100/bbl because the two-year market downturn has curbed investment, according to Lukas Lundin, a member of Lundin Petroleum AB’s board and chairman of Lundin Mining Corp. That kind of price rebound won’t be good for the industry, said Lundin, a member of the billionaire Swedish family with interests spanning oil and solar energy, to diamonds and gold. “I think between $50 and $80 is probably better for our business,” Lundin said in an interview. “It keeps it more stable and all the good projects would work.”

Achieving operational excellence in a low oil price environment Achieving operational excellence in a low oil price environment (23 August 2016): As oil prices remain low, tight margins are now tighter, increasing the focus on operational excellence and the drive for an efficient, productive, safe work environment. However, since operational excellence means many things to many people, it’s worth considering the five basic premises on which it is based. These are:
• Achieving a workplace that is free from incidents and injuries;
• Mitigating all significant workplace health risks and promoting a healthy and safe workforce.
• Identifying and then mitigating environmental and process safety risks.
• Ensuring that asset integrity and reliability attains the highest standards.
• Ensuring that all natural resources and assets are used efficiently.
But can these standards be met during a shutdown turnaround outage (STO)?

Goldman sees possible OPEC output freeze as self-defeating (23 August 2016): OPEC and some producers from outside the group may agree to freeze output during informal talks next month, which could prove “self-defeating” because it would benefit other suppliers, according to Goldman Sachs Group Inc. A deal would show signs of cooperation from Saudi Arabia’s new energy minister after six failed attempts, Goldman analysts including Damien Courvalin said in a report dated Aug. 22. An output cap would likely prove counter productive for the Organization of Petroleum Exporting Countries if it led to further price gains and an increase in supply from other producers, it said.

Four people injured in Romanian Black Sea refinery fire (23 August 2016): Four people were injured in a fire and blast at Romania's Black Sea Petromidia crude refinery, deputy Interior Minister Raed Arafat said Monday. Arafat told Digi24 TV that a fire and blast at a nitrogen tank in the refinery was being dealt with by firefighters as footage taken from the nearby sea resort of Mamaia showed the facility spewing thick clouds of black smoke. "The fire is now extinguished," a spokeswoman for the refinery, Costinela Dragan, told Reuters by telephone at about 1600 GMT. "Things are now safe."