Global Energy Advisory - June 15th 2018
Global Energy Advisory - June 15th 2018
Crude oil prices are back on the seesaw as the market prepares for next week’s OPEC+ meeting in Vienna. Most analysts expect the group to agree to start raising crude oil production gradually, although there are those uwho oppose such a move, such as Iraq and Iran.
Iraq has been particularly vocal in its opposition to a production recovery although it has been the OPEC member that has most consistently failed to cut production to its assigned quota. However, now Baghdad is angry with Riyadh and Moscow: both Saudi Arabia and Russia have already upped their crude oil production ahead of the meeting.
President Trump, meanwhile, has launched another Twitter offensive against OPEC, blaming the cartel for keeping oil prices high even though both Brent and WTI are palpably lower now than they were in April, when Trump railed against OPEC’s cuts for the first time.
Russia’s Alexander Novak has said Russia and Saudi Arabia are in agreement about a gradual increase of production but this agreement would not mean much if Iraq and Iran try to put their foot down. If this happens and the June 22 meeting ends with no unanimous decision, it would not mean that everyone will keep pumping at the lower levels. It means that a lot of producers will start cheating and production will be higher again.
Deals, Mergers & Acquisitions
• Hong Kong-based Ck Infrastructure has offered $9.8 billion for Australian gas pipeline operator APA Group, the largest player in the sector in the country. The deal, if approved, offers a premium of 33% to APA’s closing stock price on the day before the bid was made. It will turn the Hong Kong company—already a large player on Australia’s gas market, into one of the top gas companies in the eastern part of the country.
• Alberta-based oil drillers Akita and Xtreme have announced a plan to merge their operations in a deal worth $160 million. The new company will operate under the name Akita. The two have operations on both Canada and the United States, notably in the Permian, where Xtreme has a solid presence.
• GeoPark has expanded its footprint in Argentina’s Vaca Muerta shale play after the acquisition of the Los Parlamentos block together with local state major YPF. The Latin American independent will receive 50% in the block in exchange for footing 50% of the bill for drilling one exploration well and conducting 3D seismic survey. The block neighbors producing fields in the prolific Neuquen basin.
Tenders, Auctions & Contracts
• Algeria’s Sonatrach inked a gas field development deal with French Total and Spanish Repsol. The three partners plan to invest a total $324 million in the Tin Fouye Tabankort field in order to maintain its output level at 3 billion cubic meters of gas annually over the next six years. Part of the sum will go towards developing other reserves at the field, which are estimated at more than 250 million barrels of oil equivalent.
• Aramco and Indonesia’s Pertamina signed the first contract for Saudi supply of gasoline over the second half of the year. The deal will give Aramco access to the largest importer of gasoline in Asia. The agreed amounts are 1 million barrels of the fuel per month. The source of the gasoline has yet to be determined but it will likely be South Korean S-Oil Corp, the third-largest refiner in the country, in which Aramco holds a majority stake.
• Citgo, the U.S. retail division of Venezuela’s PDVSA has tapped the open market for crude as supplies from the parent company dwindle amid plummeting production and export capacity constraints. Trading data shows that Citgo has been buying heavy crude from Colombia and Ecuador, as well as Azeri Light and Arab heavy and medium blends.
Discovery & Development
• Equinor has received the approval of the Norwegian parliament to move ahead with the development of the Johan Castberg field in the Norwegian sector of the Barents Sea, in the Arctic. The $5.85-billion project is one of the biggest recent discoveries in Norway but attracted a lot of environmentalist opposition because of its location in the fragile ecosystems of the Arctic. Production is slated to begin in 2022. The field holds reserves estimated at 558 million barrels.
• Shell is moving closer to the start of production at its Preluge LNG project off the coast of Australia by introducing feed gas into the floating LNG production facility. Feeding gas into the system is part of the equipment cooling process ahead of start-up, which should take place later this year. Shell has declined to set a date but has said it plans to generate cash flow from Prelude before the year’s end.
• Exxon has begun development drilling in its Liza field offshore Guyana. The start of production is scheduled for 2020. During the first phase of development of the field, Exxon and its partners in the project will drill 17 wells to tap the estimated 3.2 billion barrels of oil equivalent in reserves. Royalties from the Phase 1 development are seen at over $7 billion.
Regulatory Updates
• The U.S. Army Corps of Engineers will complete its environmental assessment of the Dakota Access pipeline project within the next two months. The court-ordered assessment was originally supposed to be done by early April but the Army Corps said it had encountered problems in obtaining necessary information from four tribes that live in the vicinity of the route of the pipe and fiercely oppose it.
• Enbridge Inc.’s costs to build its Line 3 replacement project through Minnesota could rise by US$1.2 billion, or 16 per cent, ahead of a critical regulatory decision in Minnesota. The Minnesota Public Utilities Commission is set to rule on the Line 3 pipeline during the two-day-hearings on July 26 and 27.
Politics, Geopolitics & Conflict
• The U.S. embassy in Mozambique has urged American citizens in the African country to leave if they live in the northeastern town of Palma, close to a major gas field but also part of an area that has seen a recent increase in Islamic militant activity.
• Saudi-led forces launched strikes against the main port in Yemen, held by the Houthi rebel group, which is also the main point of entry for humanitarian aid in the war-ravaged country. The battle could become the biggest in the war and is likely to aggravate the already dramatic humanitarian crisis in Yemen.
• Former Brazilian president Liuz Inacio Lula da Silva has promised he will suspend the sale of Petrobras assets if he is elected president again in October. Lula da Silva is currently serving a prison sentence but will run for president nevertheless.
Crude oil prices are back on the seesaw as the market prepares for next week’s OPEC+ meeting in Vienna. Most analysts expect the group to agree to start raising crude oil production gradually, although there are those uwho oppose such a move, such as Iraq and Iran.
Iraq has been particularly vocal in its opposition to a production recovery although it has been the OPEC member that has most consistently failed to cut production to its assigned quota. However, now Baghdad is angry with Riyadh and Moscow: both Saudi Arabia and Russia have already upped their crude oil production ahead of the meeting.
President Trump, meanwhile, has launched another Twitter offensive against OPEC, blaming the cartel for keeping oil prices high even though both Brent and WTI are palpably lower now than they were in April, when Trump railed against OPEC’s cuts for the first time.
Russia’s Alexander Novak has said Russia and Saudi Arabia are in agreement about a gradual increase of production but this agreement would not mean much if Iraq and Iran try to put their foot down. If this happens and the June 22 meeting ends with no unanimous decision, it would not mean that everyone will keep pumping at the lower levels. It means that a lot of producers will start cheating and production will be higher again.
Deals, Mergers & Acquisitions
• Hong Kong-based Ck Infrastructure has offered $9.8 billion for Australian gas pipeline operator APA Group, the largest player in the sector in the country. The deal, if approved, offers a premium of 33% to APA’s closing stock price on the day before the bid was made. It will turn the Hong Kong company—already a large player on Australia’s gas market, into one of the top gas companies in the eastern part of the country.
• Alberta-based oil drillers Akita and Xtreme have announced a plan to merge their operations in a deal worth $160 million. The new company will operate under the name Akita. The two have operations on both Canada and the United States, notably in the Permian, where Xtreme has a solid presence.
• GeoPark has expanded its footprint in Argentina’s Vaca Muerta shale play after the acquisition of the Los Parlamentos block together with local state major YPF. The Latin American independent will receive 50% in the block in exchange for footing 50% of the bill for drilling one exploration well and conducting 3D seismic survey. The block neighbors producing fields in the prolific Neuquen basin.
Tenders, Auctions & Contracts
• Algeria’s Sonatrach inked a gas field development deal with French Total and Spanish Repsol. The three partners plan to invest a total $324 million in the Tin Fouye Tabankort field in order to maintain its output level at 3 billion cubic meters of gas annually over the next six years. Part of the sum will go towards developing other reserves at the field, which are estimated at more than 250 million barrels of oil equivalent.
• Aramco and Indonesia’s Pertamina signed the first contract for Saudi supply of gasoline over the second half of the year. The deal will give Aramco access to the largest importer of gasoline in Asia. The agreed amounts are 1 million barrels of the fuel per month. The source of the gasoline has yet to be determined but it will likely be South Korean S-Oil Corp, the third-largest refiner in the country, in which Aramco holds a majority stake.
• Citgo, the U.S. retail division of Venezuela’s PDVSA has tapped the open market for crude as supplies from the parent company dwindle amid plummeting production and export capacity constraints. Trading data shows that Citgo has been buying heavy crude from Colombia and Ecuador, as well as Azeri Light and Arab heavy and medium blends.
Discovery & Development
• Equinor has received the approval of the Norwegian parliament to move ahead with the development of the Johan Castberg field in the Norwegian sector of the Barents Sea, in the Arctic. The $5.85-billion project is one of the biggest recent discoveries in Norway but attracted a lot of environmentalist opposition because of its location in the fragile ecosystems of the Arctic. Production is slated to begin in 2022. The field holds reserves estimated at 558 million barrels.
• Shell is moving closer to the start of production at its Preluge LNG project off the coast of Australia by introducing feed gas into the floating LNG production facility. Feeding gas into the system is part of the equipment cooling process ahead of start-up, which should take place later this year. Shell has declined to set a date but has said it plans to generate cash flow from Prelude before the year’s end.
• Exxon has begun development drilling in its Liza field offshore Guyana. The start of production is scheduled for 2020. During the first phase of development of the field, Exxon and its partners in the project will drill 17 wells to tap the estimated 3.2 billion barrels of oil equivalent in reserves. Royalties from the Phase 1 development are seen at over $7 billion.
Regulatory Updates
• The U.S. Army Corps of Engineers will complete its environmental assessment of the Dakota Access pipeline project within the next two months. The court-ordered assessment was originally supposed to be done by early April but the Army Corps said it had encountered problems in obtaining necessary information from four tribes that live in the vicinity of the route of the pipe and fiercely oppose it.
• Enbridge Inc.’s costs to build its Line 3 replacement project through Minnesota could rise by US$1.2 billion, or 16 per cent, ahead of a critical regulatory decision in Minnesota. The Minnesota Public Utilities Commission is set to rule on the Line 3 pipeline during the two-day-hearings on July 26 and 27.
Politics, Geopolitics & Conflict
• The U.S. embassy in Mozambique has urged American citizens in the African country to leave if they live in the northeastern town of Palma, close to a major gas field but also part of an area that has seen a recent increase in Islamic militant activity.
• Saudi-led forces launched strikes against the main port in Yemen, held by the Houthi rebel group, which is also the main point of entry for humanitarian aid in the war-ravaged country. The battle could become the biggest in the war and is likely to aggravate the already dramatic humanitarian crisis in Yemen.
• Former Brazilian president Liuz Inacio Lula da Silva has promised he will suspend the sale of Petrobras assets if he is elected president again in October. Lula da Silva is currently serving a prison sentence but will run for president nevertheless.
Volf
16.06.2018 kl 09:37
1999
Friday, June 15, 2018
Oil prices bounced around over the past few days as the markets await OPEC’s decision in a week’s time. While the meeting is shaping up to be a contentious one, the hype also demonstrates OPEC’s clout years after the group’s obituary was written. “With unplanned outages escalating, geopolitical risks rising, and U.S. shale production facing infrastructure bottlenecks, Saudi Arabia is once again back in the driver's seat exerting significant influence over the oil market in 2018,” Helima Croft, the global head of commodity strategy at RBC Capital Markets, said Thursday. “All eyes are on what course of action it will call for at the June 22 OPEC meeting in Vienna.”
IEA: Venezuela and Iran could leave supply deficit. The IEA said in its latest Oil Market Report that robust U.S. shale growth will underpin 2.0 million barrels per day (mb/d) of non-OPEC supply growth this year, plus 1.7 mb/d of non-OPEC output gains in 2019. That should more than meet demand growth…in theory, at least. The agency warned that significant losses in Venezuela and Iran could leave a supply gap. “Even if the Iran-Venezuela supply gap is plugged, the market will be finely balanced next year, and vulnerable to prices rising higher in the event of further disruption,” the IEA said. “It is possible that the very small number of countries with spare capacity beyond what can be activated quickly will have to go the extra mile.”
Libyan export terminals knocked offline. Libya’s two largest oil export terminals suffered disruptions this week due to clashes between rival groups. The outages at the Es Sider and Ras Lanuf terminals disrupted some 240,000 bpd of supply, Libya’s National Oil Corp. said on Thursday. The two facilities account for 40 percent of Libya’s oil exports. If the losses are sustained for any lengthy period of time, it will put more pressure on the OPEC+ group to increase output at its meeting on June 22.
OPEC+ production increases to cut into spare capacity. Any increase in the volume of output from OPEC and Russia will necessarily cut into spare capacity levels, which analysts say could drop to the lowest level in decades. “You would essentially be taking 3.2 million barrels per day (bpd) of spare capacity down to approximately 2 million bpd,” Jefferies analyst Jason Gammel told Reuters, assuming around 1 mb/d increase in output. Periods of low spare capacity have historically been associated with times of high and volatile prices.
Floating storage rising in European waters. More crude oil is being stored on ships at sea in European waters than at any time in the past 18 months, according to Reuters. A quarter of global floating storage is now located in European waters, compared to just 10 percent in March and April. The sudden increase in oil stashed at sea is the result of Asian buyers scooping up cargoes from the U.S., rather than from Nigeria, Angola and the Middle East. The premium for Brent relative to WTI has made U.S. oil cheap compared to oil linked to Brent. “It is possible that U.S. crude is displacing some lighter end North Sea (and non-North Sea) grades that have traditionally managed to find a home in Northern European refineries,” Kpler economic analyst Reid I’Anson told Reuters.
Saudi Aramco eyes investments in petrochemicals and refining. Saudi Aramco plans to increase investment in petrochemicals and refining as a way of securing markets for its crude oil sales. The strategy is also a way of diversifying investments as a hedge against future oil demand.
Austin Chalk to see uptick in interest. The Austin Chalk, a rock formation that stretches along the Gulf Coast, is starting to see a revival in interest from oil and gas companies, according to Bloomberg, more than two decades after being largely left for dead. “It is a play that I think is going to have a lot of legs," Bernadette Johnson, a vice-president for researcher DrillingInfo Inc., told Bloomberg. A series of deals so far this year indicate a sudden uptick in activity for acreage in the Austin Chalk.
Alaska taps oil fund. The state of Alaska will tap into its oil wealth fund to help plug budget gaps for the first time since the 1970s. The state has socked away $65 billion in oil funds, which helps finance annual dividend checks to every state resident each year. However, declining production has depleted oil revenues and has put a strain on the budget.
BP: Permian productivity growth coming to an end. BP’s chief economist Spencer Dale said that the productivity gains in the Permian are likely coming to an end. Such a surge in drilling has forced companies to move out away from top tier acreage. Output per lateral foot fell last year even as overall production grew, the consequence of a spectacular increase in drilling activity. "It does perhaps suggest that the very rapid increases in tight oil productivity that characterized much of the initial phase of the shale revolution may be beginning to fade," Dale said. The Permian is now at the center of global supply growth forecasts, so any slowdown would have global ramifications.
With everyone selling, no one is buying. U.S. shale companies have announced a wave of divestment plans under pressure from investors, and companies that signaled an intent to focus on capital restraint and asset disposals have been rewarded by Wall Street. However, even as shale drillers look to sell off less desirable acreage, they are having trouble finding willing buyers because many other companies are pursuing the same strategy, according to Reuters. “If these companies cannot execute the divestiture(s) that gave investors’ confidence on their future leverage profile, you would likely see less risk-tolerant investors trim or sell their positions,” said Tim Dumois, portfolio manager at BP Capital Fund Advisors. In other words, shale drillers will see their stocks take a hit if they can’t find buyers for their unwanted assets.
Oil prices bounced around over the past few days as the markets await OPEC’s decision in a week’s time. While the meeting is shaping up to be a contentious one, the hype also demonstrates OPEC’s clout years after the group’s obituary was written. “With unplanned outages escalating, geopolitical risks rising, and U.S. shale production facing infrastructure bottlenecks, Saudi Arabia is once again back in the driver's seat exerting significant influence over the oil market in 2018,” Helima Croft, the global head of commodity strategy at RBC Capital Markets, said Thursday. “All eyes are on what course of action it will call for at the June 22 OPEC meeting in Vienna.”
IEA: Venezuela and Iran could leave supply deficit. The IEA said in its latest Oil Market Report that robust U.S. shale growth will underpin 2.0 million barrels per day (mb/d) of non-OPEC supply growth this year, plus 1.7 mb/d of non-OPEC output gains in 2019. That should more than meet demand growth…in theory, at least. The agency warned that significant losses in Venezuela and Iran could leave a supply gap. “Even if the Iran-Venezuela supply gap is plugged, the market will be finely balanced next year, and vulnerable to prices rising higher in the event of further disruption,” the IEA said. “It is possible that the very small number of countries with spare capacity beyond what can be activated quickly will have to go the extra mile.”
Libyan export terminals knocked offline. Libya’s two largest oil export terminals suffered disruptions this week due to clashes between rival groups. The outages at the Es Sider and Ras Lanuf terminals disrupted some 240,000 bpd of supply, Libya’s National Oil Corp. said on Thursday. The two facilities account for 40 percent of Libya’s oil exports. If the losses are sustained for any lengthy period of time, it will put more pressure on the OPEC+ group to increase output at its meeting on June 22.
OPEC+ production increases to cut into spare capacity. Any increase in the volume of output from OPEC and Russia will necessarily cut into spare capacity levels, which analysts say could drop to the lowest level in decades. “You would essentially be taking 3.2 million barrels per day (bpd) of spare capacity down to approximately 2 million bpd,” Jefferies analyst Jason Gammel told Reuters, assuming around 1 mb/d increase in output. Periods of low spare capacity have historically been associated with times of high and volatile prices.
Floating storage rising in European waters. More crude oil is being stored on ships at sea in European waters than at any time in the past 18 months, according to Reuters. A quarter of global floating storage is now located in European waters, compared to just 10 percent in March and April. The sudden increase in oil stashed at sea is the result of Asian buyers scooping up cargoes from the U.S., rather than from Nigeria, Angola and the Middle East. The premium for Brent relative to WTI has made U.S. oil cheap compared to oil linked to Brent. “It is possible that U.S. crude is displacing some lighter end North Sea (and non-North Sea) grades that have traditionally managed to find a home in Northern European refineries,” Kpler economic analyst Reid I’Anson told Reuters.
Saudi Aramco eyes investments in petrochemicals and refining. Saudi Aramco plans to increase investment in petrochemicals and refining as a way of securing markets for its crude oil sales. The strategy is also a way of diversifying investments as a hedge against future oil demand.
Austin Chalk to see uptick in interest. The Austin Chalk, a rock formation that stretches along the Gulf Coast, is starting to see a revival in interest from oil and gas companies, according to Bloomberg, more than two decades after being largely left for dead. “It is a play that I think is going to have a lot of legs," Bernadette Johnson, a vice-president for researcher DrillingInfo Inc., told Bloomberg. A series of deals so far this year indicate a sudden uptick in activity for acreage in the Austin Chalk.
Alaska taps oil fund. The state of Alaska will tap into its oil wealth fund to help plug budget gaps for the first time since the 1970s. The state has socked away $65 billion in oil funds, which helps finance annual dividend checks to every state resident each year. However, declining production has depleted oil revenues and has put a strain on the budget.
BP: Permian productivity growth coming to an end. BP’s chief economist Spencer Dale said that the productivity gains in the Permian are likely coming to an end. Such a surge in drilling has forced companies to move out away from top tier acreage. Output per lateral foot fell last year even as overall production grew, the consequence of a spectacular increase in drilling activity. "It does perhaps suggest that the very rapid increases in tight oil productivity that characterized much of the initial phase of the shale revolution may be beginning to fade," Dale said. The Permian is now at the center of global supply growth forecasts, so any slowdown would have global ramifications.
With everyone selling, no one is buying. U.S. shale companies have announced a wave of divestment plans under pressure from investors, and companies that signaled an intent to focus on capital restraint and asset disposals have been rewarded by Wall Street. However, even as shale drillers look to sell off less desirable acreage, they are having trouble finding willing buyers because many other companies are pursuing the same strategy, according to Reuters. “If these companies cannot execute the divestiture(s) that gave investors’ confidence on their future leverage profile, you would likely see less risk-tolerant investors trim or sell their positions,” said Tim Dumois, portfolio manager at BP Capital Fund Advisors. In other words, shale drillers will see their stocks take a hit if they can’t find buyers for their unwanted assets.
Volf
16.06.2018 kl 16:36
1845
Idar I
Ja jeg holder 2 knapper på FRO fra høsten av,meget spenene for den risikovillige, kan fort doble seg.
Ha en fin helg.
Ja jeg holder 2 knapper på FRO fra høsten av,meget spenene for den risikovillige, kan fort doble seg.
Ha en fin helg.
Idar1
16.06.2018 kl 17:41
1802
Takk Volf
Ser frem til litt spenning i hverdagen.
Ha en fortsatt god helg.
Ser frem til litt spenning i hverdagen.
Ha en fortsatt god helg.