OIL PRICE INTELLIGENCE REPORT
| Oil prices were flat on Friday amid light trading as the holiday approaches. After a volatile year, it appears that oil markets are set to enter the New Year in a far calmer manner. Important Note for Energy Investors: The World Economic Forum, the Institute of Electrical and Electronics Engineers, the MIT Technology Review, prestigious national laboratories, and a slew of other experts are buzzing about this new element that will transform the energy industry. Early investors are already reaping the benefits. Are you in?       Friday, December 22, 2017 Oil prices were flat amid light trading at the end of the week after strong gains on Thursday. The EIA reported some mixed figures – more strong oil production gains from the U.S., but also a sizable drawdown in crude inventories. The approaching holidays has the market subdued. Saudi oil minister: Market will rebalance in 2H2018. Saudi oil minister Khalid al-Falih told Reuters that the inventory surplus will be eliminated in the second half of 2018, and the earliest date to reassess the market will be at the OPEC meeting in June. And while the IEA has forecasted strong supply growth next year from U.S. shale, al-Falih says demand will help drive the market towards rebalancing. “[T]he untold story is demand. Demand has been extremely healthy in the last couple of years. 2017 will prove to be a very robust year in terms of demand and we expect that momentum to continue,” al-Falih said. Separately, Reuters reported that OPEC has quietly started working on an exit strategy behind the scenes, and the group will reportedly consider several options. “It’s a continuity strategy, rather than exit,” one of the OPEC sources told Reuters. Ineos: Forties pipeline will restart in early January. The operator of the Forties pipeline system, Ineos, said that the pipeline will be repaired by Christmas and will restart operations by January. “Based on current estimates the company expects to bring the pipeline progressively back to normal rates early in the new year,” Ineos said. BP CEO not worried about shale threat. BP (NYSE: BP) CEO Bob Dudley told the FT that he isn’t worried about shale threatening conventional oil producers in the long-term. He argued that shale won’t be able to grow forever, so the threat to permanently low oil prices is not as big as most people think. “There are cracks appearing in the model of the Permian being one single, perfect oilfield,” he said. Over the long run, that could diminish shale’s importance. “I don’t think [U.S. shale] will be the perfect swing producer now,” Dudley said in an FT interview. “For a while, I was worried. But I think it is going to be less solid.” An estimate from Wood Mackenzie finds that shale growth will face problems in the 2020s after the sweetest spots are picked over. BP has dabbled in shale drilling, but is overwhelmingly concentrated in conventional oil fields. Saudi Aramco hunts for U.S. shale. In a sign of the times, Saudi Aramco is reportedly looking to make an acquisition in the U.S., perhaps for shale assets. The WSJ reports that Aramco is exploring the purchase of a stake in Tellurian Inc., an LNG exporter. Aramco has also reportedly inquired about shale assets in the Permian and Eagle Ford, although such discussions are preliminary. Analysts speculate that the move could help Saudi Arabia better understand the U.S. shale business. Arctic National Wildlife Refuge opens as part of tax bill. The decades-old fight over ANWR came to a rapid conclusion this week, as a provision tucked into the Republican tax bill opens up ANWR for two lease sales. Area 1002 of ANWR is thought to hold between 5.7 and 16 billion barrels of oil equivalent, but that assessment dates back to 1998. The uncertainty over the resources, combined with the fact that development could be costly, could deter investment. Additionally, there is still political uncertainty – the first lease sale is years away and could be vulnerable to reversal by a future administration in Washington. Eni starts gas production at Zohr. Eni (NYSE: E) started up natural gas production at the Zohr field in offshore Egypt, a little more than two years after the initial discovery. The rapid turnaround arguably sets a new standard for such large-scale projects, and Eni’s CEO Claudio Descalzi trumpeted his company’s approach. The industry should shift its focus “from outsourcing to in-sourcing,” Descalzi said, according to Bloomberg. "Things should move in parallel, of course this implies more risk, but it’s mitigated by in-house expertise, and this leads to a lower overall cost.” Zohr is critical to Egypt as well as Eni. Meanwhile, in the same week, Descalzi found out that he will stand trial along with other top officials at Eni and Royal Dutch Shell (NYSE: RDS.A) over an alleged bribery scheme in Nigeria. Oil discoveries at lowest point since 1940s. The oil industry discovered the least amount of oil in 2017, dating back to the 1940s. Only about 7 billion barrels of oil equivalent were discovered this year, according to Rystad Energy, a seven-decade low. The total was even lower than the last record low set in 2016. Sharp cutbacks to exploration budgets have led to a steep drop off in new discoveries. Rystad warns that the dearth of new oil means that there could be a supply shortage in the 2020s. The oil industry only replaced 11 percent of the oil reserves the world burned through this year, and it hasn’t had a reserve-replacement ratio over 100 percent since 2006. PDVSA in talks with Trafigura for oil swap. Reuters reports that Venezuela’s PDVSA is in talks with oil trader Trafigura over a deal that would swap 10 percent of PDVSA’s oil output for imported refined fuel. The talks are taking place because Venezuela is out of money and cannot access credit due to U.S. sanctions, which means it needs to rely on bartered deals. Oasis Petroleum sees shares plunge on Permian plans. Oasis Petroleum (NYSE: OAS) saw its share price dive by more than 20 percent when it announced plans to expand into the Permian Basin. Oasis is a Bakken driller without any Permian assets. The shale producer said it would spend $946 million in cash and stock to acquire acreage in the Permian. The reaction from Wall Street highlights the view that shale drillers should focus on profits and keep drilling plans conservative, but analysts say that because the Bakken is maturing, Oasis needed to look elsewhere. “Oasis had to do something,” Tim Rezvan, an oil analyst with Mizuho Securities, told Reuters. “The core inventory they had in the Bakken was finite, and to not have another asset with similarly high returns would have been challenging for shareholders.” In our Numbers Report, we take a look at some of the most important metrics and indicators in the world of energy from the past week. Find out more by clicking here. Thanks for reading and we’ll see you next week. Best Regards, Tom Kool Editor, Oilprice.com P.S. – While oil markets have remained largely flat since the extension of the OPEC production cut deal, there remains a significant downside risk to markets that most analysts appear to be ignoring. Claim your risk-free 30 day trial on Oil & Energy Insiderand find out what Jim Hyerczyk can see an oil sell off coming in 2018. |
 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||||||||||||
 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Global Energy Advisory 22nd December 2017 |
| While Washington was busy saber-rattling, Russia was busy deploying soft power to strengthen its hold on Venezuela. Russia’s Rosneft is expanding its presence in Venezuela: the company recently signed contracts for the development of two offshore gas blocks, with CEO Igor Sechin saying this is the first time Caracas has awarded a foreign company 100% of the exploration and operation rights to a hydrocarbons block. Under the terms of the contract, Rosneft will have the right to market overseas all the gas it extracts from the blocks. The two blocks have combined reserves of 180 billion cubic meters, and Rosneft will develop them for 30 years. It is possible that the deals have something to do with the $6 billion Caracas owes the Russian company. Then again, it may be eager to allow one of its very few remaining allies to get something in return for agreeing to restructure a debt owed to Moscow that Caracas is finding it impossible to pay as per the original schedule. In the same week as the Venezuela deal became public, Rosneft also said it had plans to start exporting natural gas to Europe. Naturally, this won’t be Venezuelan gas but the fact Rosneft is eyeing the European market is indication enough that whatever the EU thinks about Nord Stream 2 and Russian gas in general has very little to do with market realities, which come down to who will offer the lowest prices. For now, this is Russia and it would do the EU well to try and accelerate alternative gas supply projects, such as the Trans-Adriatic Pipeline, that should bring in gas from the Caspian Sea but is being wildly outpaced by Nord Stream. In October, Venezuela’s state-owned PDVSA was negotiating to swap Russian oil producer Rosneft’s collateral in Venezuelan-owned, U.S.-based refiner Citgo. Rosneft holds a 49.9 percent collateral in Citgo for a loan last year of about $1.5 billion Deals, Mergers & Acquisitions • Exxon and BHP Billiton have decided to pull the plug on their 50-year-old gas marketing joint venture operating in Australia. The decision was prompted by Australian market regulatory authorities that are currently focusing a lot of attention on competition in the gas market due to fast-rising prices. After the dissolution of the JV, Exxon and BHP will each market the gas they extract from the Gippsland Basin on their own. • Statoil has bought a 25% stake in the Roncador offshore field in Brazil, which will allow it to triple its crude oil output in the country, from 40,000 boepd to 110,000 boepd the Norwegian company said. It paid $2.9 billion for the interest to Brazil’s Petrobras, which will be its partners in the development of the mature field, located in the prolific Campos Basin. The field started producing in 1999 and as of November averaged 240,000 barrels of crude daily. • Aker BP has bought a 17% interest in Fishbones – a company active in the development of unconventional stimulation technology for oil and gas extraction from tight plays. The acquisition will provide Aker BP with cost savings and higher recovery rates, initially to be enjoyed at Valhall, a mature field in the Norwegian section of the North Sea. Besides Aker, Fishbones shareholders include Norway’s Statoil, with a 25% interest, and Freyer Holding, a private Norwegian company, with a 51% stake. Tenders, Auctions & Contracts • Aramco awarded GE-owned Baker Hughes a $175-million contract for enhancing gas recovery and processing rates at two gas fields that are part of the Al-Ghawar oil and gas field – the largest in the world. Baker Hughes will supply 27 high-efficiency gas compression trains to boost production rates. The fields, Haradh and Hawaiyah, are instrumental in Saudi Arabia’s attempts to utilize its not-too-impressive gas resources more fully, as petrochemical production grows and as domestic demand for gas soars sky-high. Plans are to boost gas production in the kingdom to 23 billion cubic feet daily over the next 10 years. Riyadh also plans to increase the share of gas in its energy mix from 50% to 70%. • The Australian government plans to include a block in the Great Australian Bight in its 2018 offshore Petroleum Exploration Acreage Release, which has sparked the anger of the Wilderness Society. The block will be among 21 that will be the subject of public consultation before the final decision on the 2018 tender, but environmentalists have been quick to speak out against any oil and gas drilling plans for the Bight, which is home to fragile marine ecosystems and endangered species. Even if the block goes on to be offered in the tender, the chances of any company taking up drilling there are questionable: recently, two Big Oil majors quit exploration in the Bight—BP and Chevron—citing economics. Discovery & Development • French Total SA has announced it will commission the construction of the first-phase floating production, storage, and offloading vessel for the Libra oil and gas project in Brazil’s Santos Basin. The vessel will have a daily capacity of 150,000 barrels of oil, to be extracted from 17 wells, at technical costs of less than $20 a barrel. • The giant offshore Zohr gas field in Egypt has begun production, its operator, Eni, said. The company noted that the launch of production had taken a record-short time but given Egypt’s eagerness to expand its natural gas production, the rush is understandable. According to Eni, Zohr’s reserves in place reach more than 30 trillion cubic feet of gas, or 5.5 billion barrels of oil equivalent. The field was discovered in 2015 and is to date the largest gas discovery not just in Egypt but in the whole Mediterranean. • Tellurian has a plan to build a $7-billion natural gas network from the Permian and the Haynesville shale plays to the LNG export terminals along the coast of southern Louisiana. The pipelines will be connected to existing gas transport infrastructure in the region as well as to another pipe planned by Tellurian, to carry gas to the company’s future Driftwood LNG export terminal on the Louisiana coast. Plans are to have the new network ready by 2022, as long as Tellurian can find enough paying customers to fund the project. • Colombia’s Ecopetrol says it struck oil and gas in the Middle Magdalena Valley Basin in northwestern Colombia. The well yielded crude oil of a grade lighter than the heavy oils typical of Colombia’s fields. The discovery was made in an already producing region with processing infrastructure in close proximity, which significantly improves the commercial viability of the discovery. Politics, Geopolitics & Conflict • The U.S. has started talks with China on the prospects of new sanctions targeting North Korea after Pyongyang’s latest missile test conducted at the end of November. The sanctions will aim to cut the country’s access to oil products as a means of slowing down its nuclear weapons program. A military option is also being discussed in Washington. • The giant corruption scandal that shook Brazil and Petrobras has spilled into Peru: President Pedro Pablo Kuczynski is now facing impeachment on charges of bribery from Brazilian conglomerate Odebrecht. • Congress has passed the Republican tax bill that will see some major corporate tax cuts and will also allow oil and gas drilling in parts of an Alaskan wildlife refuge. • Former executives from oil Royal Dutch Shell and Italian Eni are to be tried on charges of aggravated international corruption for their role in a $1.1 billion deal for Nigerian oil block OPL 245 in 2011. The Nigerian people lost out on over $1 billion because of this, and the precedent of trying Big Oil CEOs should have the industry on edge. • Kazakhstan's oil fund has just been frozen on grounds of corruption as a Moldovan investor Anatolie Stati allegedly was pushed out of his oil and gas investments by the Kazakhstan government. Freezing a sovereign wealth fund is another precedent no one was expecting. |
Comentarios