Last week in World Oil:
Prices
- Global crude prices remain firmly in their existing range, with Brent starting the week around US$56/b and WTI at US$53/b. Rising US production and signs that buyers are seeking alternate supplies have capped any gains made from the OPEC production cut, with the Iraqi oil minister publicly stating that he believes the cuts may have to be extended to the end of the year to support the current price environment.
Upstream & Midstream
- Iran’s northern city of Kirkuk continues to be an incendiary environment. After four bombs hit a pipeline connecting the Bai Hassan oilfield to the degassing station – thought to be the world of Islamic State militants – additional disruption came when Kurdish forces seized a processing site, threatening to hold it hostage until the national Iraqi government to building a refinery in a region that wants additional autonomy.
- Another week and another rise, though the rate of expansion is slowing down. This is the seventh consecutive rise in the weekly US active site count, with seven new gains in oil outweighing a loss of five gas rigs.
Downstream
- South American nation Guyana has struck oil. With ExxonMobil and its partners discovering between 800 million to 1.4 billion barrels of oil offshore Guyana and production expected in 2020, the next question is what to do with the oil. Guyana does not currently have any refinery facilities, and the government is now mulling striking an agreement with neighbours Trinidad and Tobago, a Caribbean refinery centre, to ship its crude there for third-party processing. Suriname, which also has an underperforming refinery, has also been approached.
- Two separate American lobbies behind the rise of Donald Trump are clashing, over the nation’s biofuels program. In the fossil fuel corner, billionaire Carl Icahn wants to shift the responsibility of the ethanol blending mandate from oil refiners (where it currently lies) to fuel blenders, who oppose the regulation change that has the potential to effect the entire ethanol chain, including farmers that supported Trump.
Natural Gas and LNG
- That Canada is an LNG powerhouse is not in doubt, but it has not actually exported a single parcel of LNG yet, waiting for its export facilities along the British Columbia to approach completion. In a roundabout way, however, the very first Canadian LNG parcel may be sold overseas this year…. from Louisiana. American LNG player Cheniere has been quietly building a portfolio of natural gas suppliers to support its Sabine Pass export terminal, and has now begun sourcing gas from as far as the Montney shale play, straddling Canada’s Alberta and BC provinces.
Corporate
- Total and Brazilian state player Petrobras have sealed a ‘strategic alliance’ that will see both companies collaborate closely. Petrobras will be transferring rights to some of its domestic fields to Total, maintaining ownership of key assets while balancing its severe debt situation. Total is a strategic choice in this case with its open attitude to investment.
Last week in Asian oil:
Upstream & Midstream
- Attempting to fulfil its ambitious forecast of tripling its crude production, Pertamina has been looking overseas for assets. Shut out of sites in Africa and Asia over competitive forces, Iran has been the main target on its radar. The state player has submitted official proposals to Iran’s NIOC to develop the Ab-Teymour and Mansouri fields, containing up to 1.5 billions of oil each, meeting the deadline set back in August 2016 when Pertamina and NIOC agreed to a MoU to evaluate the development of the fields.
Downstream & Shipping
- China’s Sinopec has announced a US$29 billion plan to upgrade four refineries over the next four years, envisioning a literal brighter future by siphoning out the pollution responsible for the perpetual smog in China’s cities. The four sites – in Shanghai, Nanjing, Zhenhai and Zhanjiang – will have their collective capacity raised to 2.6 mmb/d (and ethylene capacity up to 9 million tons per year), representing 45% of Sinopec’s refining capacity. The fuel specifications will be based on the so-called National VI standard, up from the current Euro V, which is being implemented in Beijing this year and rolled out across China over the next four years.
- China’s largest independent refiner is teaming up with CEFC China Energy and the Rizhao port authority to construct what is believed to be the first ‘teapot’-owned crude oil terminal in Shandong. Long restricted from importing crude until last year, China’s refined products output from independent refineries exploded last year, but also revealed a weakness – the complete lack of crude terminal facilities to serve the teapots. The logistical bottleneck has prevented the teapots from expanding further, so a move into storage and terminals is natural. Dongming Petrochemical, the largest such teapot, is planning to build a 300,000 deadweight tonnage (DWT) crude terminal, two 150,000 DWT crude berths and a 9.8 million barrel storage farm in Rizhao, south of Qingdao, China’s largest oil port by volume that is almost completely saturated.
- Indonesia’s Pertamina expects to finalise its partner for the US$10 billion Bontang refinery by April. Unusually offering a majority stake in the 300 kb/d refinery – up to 95% – the move seems an admission that Pertamina simply does not have the capacity to develop its expansion plans alone. Rosneft and Saudi Aramco are names that have been linked as possible partners, but interest seems to have petered out, a chronic problem in Indonesia as ambition clashes with practical reality. This also casts doubt on Pertamina’s ability to develop the Balongan refinery expansion project on its own, after Saudi Aramco pulled out of the project last year.
Natural Gas & LNG
– India’s state gas player GAIL has inked a deal with Swiss trader Gunvor for LNG cargo swaps. A glut in Asia has caused Asian spot LNG prices to fall sharply over the past six months, making it unfeasible economically to bring GAIL’s US LNG cargoes over. Gunvor will supply 800,000 tons of LNG to India’s west coast from its portfolio at more feasible prices, receiving 600,000 tons of Sabine Pass LNG in return. GAIL went on a spending spree in the US, buying into natural gas assets during a period when prices kept rising, and now that the market has upended, is stuck with an overhang of expensive (and distant) gas.
This article was originally found on NrgEdge.net.
