Oil Traders Prepare Flotilla to Ship U.S. Exports to Asia
Oil traders and major producers are lining up a flotilla of carriers to ship more U.S. crude to Asia in December than in nearly two decades as higher prices, supported by OPEC's proposed supply cuts, offer a rare opportunity to boost sales to the region.
A 40-year U.S. ban on crude exports was lifted in 2015 but only a few cargoes have shipped during a global glut in supply. The Organization of the Petroleum Exporting Countries last week agreed to its first supply cut in eight years as the cartel sought to end the two-year glut.
As peak winter demand kicks in, the difference between benchmark crude prices in the United States, Asia and Europe has widened to the most since August and opened up the trade route.
"I think Asia is going to pull lots of U.S. oil," one trader said on condition of anonymity as he was not authorized to speak publicly on trading. "There's lots of interest in this."
Trading houses and oil majors are lining up ships that could take as much as 7 million barrels to Asia, traders and brokers said. But actual shipments may be less as increased supplies make exports less profitable.
So far, more than 2 million barrels of crude have been chartered to China in December by Chinese state-owned oil traders PetroChina and Unipec, three sources with knowledge of the matter said on Friday. They requested anonymity because they were unauthorized to talk to the media.
Those two cargoes would fall short of the record volume of oil departing to China, reached in January 1997, by the equivalent of just one vessel, according to U.S. government data.
"We haven't exported a lot previously to Asia because there's a lot of costs, a lot of logistics and there's always been OPEC," said Carl Larry, director of business development for oil and gas at Frost & Sullivan.
"We're fairly new to this export game, but once we figure it out, we'll make it work. The U.S. looks to be pushing out as much as we can."
The flow of oil will help drain U.S. inventories, which are some 32.2 million barrels higher than the same time last year and a concern for OPEC.
Saudi Arabia has told U.S. customers that it would reduce supply in January as part of that deal, and was singling out the United States for the biggest cuts because of inventories, said a Gulf oil industry source familiar with Saudi policy.
U.S. inventories touched 485.8 million barrels in the week through Dec. 2, according to U.S. Energy Information Administration data. This was some 32.2 million barrels more than a year ago and 137.4 million barrels more than in 2014.
The spread between U.S. West Texas Intermediate (WTI) crude and Brent crude, the global benchmark WTCLc1-LCOc1, stood around $1.85 a barrel on Friday and hit $2.29 on Tuesday, the widest since August.
A narrowing of the spread between Brent and Middle East Dubai crude DUB-EFS-1M to the smallest in a year also made U.S. oil more competitive than similar Middle East grades.
But the Saudis have not reduced supply to the world's fastest growing demand centers because it does not want to lose customers there. That means demand for additional U.S. supplies would be limited and spreads between prices would likely narrow as more crude cargoes are set to move east.
PetroChina has chartered the London Spirit, a Suezmax which loaded some crude in the Galveston Offshore Lightering Area (GOLA), Texas, earlier this month, according to the sources and shipping data on Thomson Reuters Eikon.
Unipec, the trading arm of Asia's largest refiner Sinopec, is expected to load 2 million barrels of U.S. crude onto very large crude carrier (VLCC) Xin Han Yang next week, one of the sources said.
The shipments would come on top of nearly 3 million barrels that BP has sent to Asia as oil traders sell growing supplies of cheap U.S. shale oil to the region of the world that consumes the most crude.
It will be Unipec's second shipment of U.S. crude in three months. In October, the company loaded oil on VLCC Overseas Rosalyn which is expected to reach the southern Chinese port of Zhanjiang on Dec 31.
Source: www.reuters.com
Shale Revolution that Shocked U.S. Markets Heads to Japan
The U.S. shale revolution that turned North American energy markets upside down is finally headed to the world’s largest consumer of LNG: Japan.
Jera Co., a joint venture (JV) between Tokyo Electric Power Co. Holdings Inc. and Chubu Electric Power Co., will get its first LNG cargo produced from the formations in early January, spokesman Atsuo Sawaki said. It would be the first supply to reach the Asian nation from Cheniere Energy’s Sabine Pass terminal.
The shipment brings to fruition a contract signed more than two years ago. While U.S. exports are still relatively small, they are having an impact because the contracts are tied to U.S. natural gas prices instead of crude oil that most of the LNG coming to Japan is linked to. They also allow for switching of cargo destinations—a key concern for importers, such as Japan, that are pressuring producers for more flexibility.
“The first U.S. cargo marks a turning point,” Kerry Anne Shanks, an analyst at Wood Mackenzie, said by email. “Japan’s LNG imports are almost exclusively priced on an oil-index price. U.S. LNG provides much needed index diversification of Japan’s LNG price.”
About 70,000 metric tons of LNG produced at the Sabine Pass terminal was loaded onto the Oak Spirit vessel on Dec. 7, according to Sawaki. Jera has a short-term deal with Cheniere to receive as much as 700,000 tons of LNG from July 2016 to January 2018.
Greater Flexibility
Japanese companies have contracted about 14 million tons of LNG on long-term contracts that begin between 2017 and 2022 from U.S. projects in the lower 48 states, according to a November presentation by the Japan Oil, Gas and Metals National Corp.
Japan, China and South Korea, which account for more than half of the global LNG trade, will be oversupplied by about 20 Bcm in 2017 to 2018, the International Energy Agency said in a report earlier this year.
Japan is probing whether destination restrictions in most of its LNG contracts violate fair trade laws. LNG sellers will benefit by allowing buyers more flexibility to resell cargoes because it will make the market more efficient and stimulate demand, Jera Chairman Hendrik Gordenker said in a Dec. 1 interview.
Cheniere’s Sabine Pass terminal shipped the first U.S. LNG cargo produced from shale in February to Brazil.
Source: www.reuters.com
U.S. Slated to Sell $375 million of Emergency Reserve Oil this Winter
The U.S. government is slated to sell $375 million worth of crude oil from the country's emergency reserve this winter after Congress passed a temporary spending bill on Friday that contained a measure authorizing the sale.
President Barack Obama's administration has pushed Congress to approve an up to $2 billion plan for a revamp of the Strategic Petroleum Reserve, a string of heavily guarded underground salt caverns along the Gulf of Mexico filled with crude. The stash currently holds about 695 million barrels of oil.
A Department of Energy spokeswoman said authorization in the spending bill "will allow the Department to take necessary steps to increase the integrity and extend the life" of the reserve.
Congress passed the original funding for the reserve after the 1973 to 1974 Arab oil embargo to protect the country from global supply disruptions that have the potential to spike domestic fuel prices and damage the U.S. economy.
Many of the reserve's steel tanks and pumps are now rusting after decades of being whipped by storms and exposed to salt air. A plan submitted to Congress by the Energy Department in September said "this equipment today is near, at, or beyond the end of its design life."
In addition, the U.S. oil boom of the last decade has reversed the direction of many pipelines away from the reserve, making it more difficult to get oil to market in a hurry.
The $375 million sale, or nearly 7.3 million barrels of oil in today's price, is just the first planned installment. For each of the next three fiscal years Congress would have to approve the annual sales to reach the up to $2 billion revamp plan. It remains to be seen whether President-elect Donald Trump would urge Congress for the annual authorizations in the coming years.
This sale, which could take place seven to nine weeks after the temporary spending bill is enacted, would pay for the design of the revamp of the SPR and other pre-construction costs. Further sales would pay for construction of new equipment and new marine terminals to allow the reserve greater capacity to ship oil by vessels.
Source: www.reuters.com
Update: Coastguard Calls Off Sea Search Near Aberdeen
Aberdeen Coastguard has confirmed it has called off it's sea search off the coast of Aberdeen.
A spokesperson for Aberdeen Coastguard has confirmed that after extensive searches of the Aberdeen coast, they believe the matter to be a false alarm and have called off the search.
The search was initiated after an automated alert was received from a Personal Locator Beacon that broadcasts on an international emergency frequency.
After an initial sweep of the area by Aberdeen Lifeboat and a joint sweep of the area with both Aberdeen and peterhead lifeboat, the spokesperson said they were satisfied that there was nobody in the water.
Earlier today when discussing the alarm an MCA spokesperson said: “It was set off by a device they might have on a life jacket but we received no voice calls, no radio transmissions and so no location details are there.
“It’s probably a maximum of a few miles off Aberdeen
“It could potentially be a faulty piece of equipment or something’s been set off by mistake or someone’s gone over board.'
‘If Russia & Saudi Arabia Lead, Rest will Follow’: Saudi Energy Minister on Historic Oil Deal
The deal between OPEC members and oil exporting countries from outside the group could bring more stability to the oil market for the common benefit, Saudi energy minister, Khalid Al-Falih, told RT, praising the role of Russia in the agreement.
The Saturday meeting of the members of the Organization of Petroleum Exporting Countries (OPEC) with 12 oil exporting countries outside the group “is significant because [it] has brought so many countries together for the first time,” Al-Falih said.
Al-Falih stressed that the total volume of oil produced by the countries that attended the meeting is close to 53 million barrels per day out of a total of roughly 90, so their share in the world’s oil production approaches 60 percent. He went on to say that the share of the countries that took part in the negotiations in Vienna on Saturday is even greater in the total volume of oil that is traded because “oil produced by the countries that were not represented at today’s meeting is mostly consumed within the countries that produce it.”
The minister welcomed the agreement on the oil production reduction and hailed Russia’s commitment to the deal.
“This meeting gave us understanding that we are all in the same boat, we all benefit [from being] together while [our attempts] to take advantage of each other” eventually hurt the market, he said, adding that this agreement showed that the OPEC and non-OPEC countries “were able to build trust.”
He then stressed that the parties to the agreement have to reinforce this mutual trust by ensuring the maximum compliance with the agreement and expressed his hope that Russia will take one of the leading roles in this process.
Al-Falih particularly said that he trusts the word of the Russian Economy Minister Aleksandr Novak and expressed confidence that Russia will comply with the terms of the deal.
“If Russia and Saudi Arabia lead, the rest will follow,” he stressed.
He then said that he “does not expect the US government to react to this in any way” to the Saturday deal as it has “not reacted in the past and let the market respond.”
At the same time, Al-Falih expects oil producers in the US to “respond to the higher prices and more stability” which will result in “healthy” development. Saudi Arabia welcomes the development of the oil industry in the US, as it “has been a center of innovation” and provided “new cost-efficient technologies”, so the Saudis want it to be “competitive and healthy.”
On Saturday, twelve non-OPEC countries, including Azerbaijan, Oman, Mexico, Sudan, South Sudan, Bahrain, Malaysia, Equatorial Guinea, Bolivia, Kazakhstan and Russia, agreed to cut oil production by 558,000 barrels per day (b/d) under the deal with the OPEC members.
OPEC members also confirmed their commitment to the plan to reduce the oil supply by 1.2 million b/d. This, together with the commitments made by non-OPEC states, would lead to the total reduction of oil production by about 1.7-1.8 million b/d, Russian Energy Minister Aleksandr Novak said at the press conference.
The commitments taken by both OPEC and non-OPEC countries put an end to the ’pump-at-will’ policy the group has conducted since 2014, which sent oil prices down from $100 to less than $50 a barrel. Now, both OPEC and non-OPEC oil exporters are trying to push prices up.
Source: www.reuters.com
Coastguard Asks All Vessels Off Aberdeen To Count POB - Sea Search Ongoing
A sea search is ongoing off the coast of Aberdeen after the Coastguard received a man overboard distress from a Personal Locator Beacon at around 4:10pm today.
The RNLI Lifeboat is patrolling the waters to the North and south of Aberdeen in an effort to locate anybody who may have fallen overboard.
An MCA spokeswoman said: “It was set off by a device they might have on a life jacket but we received no voice calls, no radio transmissions and so no location details are there.
“It’s probably a maximum of a few miles off Aberdeen
“It could potentially be a faulty piece of equipment or something’s been set off by mistake or someone’s gone over board.
“We don’t know.”
A Marine Personal Locator Beacon is a device that automatically activates on contact with water and immediately transmits a distress signal on the 121.5 MHz frequency - it can also be manually activated.
The lack of certainty has resulted in the coastguard taking the rare step to broadcast to all ships in the area and request that they perform a headcount to ensure all POB are present.
The coastguard have also been dealing with an offshore med-evac from a Wood Group Operated Platform as a worker took ill and required to be transferred to Aberdeen Royal Infirmary.
CHC to Provide Additional Aircraft for Shell’s Prelude Development
CHC Group has announced that three new Sikorsky S-92 aircraft will begin serving Shell for the company’s Prelude FLNG project from its base in Broome, Australia. These new aircraft will join a fourth S-92 already in use as part of a two-year extension of the current Shell contract in place since mid-2012.
Shell Australia’s Prelude FLNG project will be one of the first to produce natural gas at sea from offshore production platforms, and will then transfer it to a fleet of specialized ships for product transportation directly to customers. By using this process, Shell will use significantly less materials, land and seabed than developing the same gas reserves via a similar onshore facility while also reducing the impact on sensitive coastal habitats.
Source: www.reuters.com
Worlds Largest LNG Company Created After Qatar Merger
Qatar Petroleum (QP) is to integrate the activities of RasGas and Qatargas operating companies under a single entity, Qatargas, which will operate all of the ventures being operated by both entities.
Saad Sherida Al-Kaabi, president and CEO of QP, made the announcement at the company's headquarters in the presence of representatives of the main international shareholders in both companies including Exxon Mobil, Total, ConocoPhillips, and Shell, and the CEOs of Qatargas and RasGas.
The process of combining Qatargas and RasGas into a single entity, to be named Qatargas, will start immediately, with completion expected within 12 months, and will create the world's biggest LNG company by a large margin, Qatar Petroleum's president and CEO Saad al-Kaabi told reporters in Doha.
al-Kaabi said: “The integration aims to create a truly unique global energy operator in terms of size, service and reliability.”
He told reporters that the integration of the activities of these two energy centers of excellence means that upon completion, there will be a single expanded and enhanced operating entity, named Qatargas, that will operate all of Qatar’s LNG ventures.
“The collective resources, talents, and capabilities of two global leaders will be joined to create an even more effective and efficient organization to uphold the best interest of the State of Qatar, our customers and our shareholders,” Al-Kaabi added.
The integration process is planned to start immediately and is expected to be completed within the next 12 months.
Source: World Oil
Asset Integrity Group Launches Into Market Despite Oil Price Dip
Asset Integrity Group Ltd have announced the official launch of the company after successfully securing their first project in Aberdeen.
The Aberdeen-based Asset Integrity consultancy which started in August 2016, boasting a team of professionals who collectively offer in excess of 250 years’ experience, have so far achieved a healthy five figure turnover months after securing an initial project supporting a local operator. This has aligned Asset Integrity Group to surpass its projected targets 6 months ahead of schedule whilst actively bidding for projects throughout various industries including oil and gas and renewables.
This achievement is a credit to the determination of the Directors David Noble and William Mclean, who created Asset Integrity Group and are both experts in reliability, maintainability and risk reduction. Their success is even more notable as it comes at a time when the energy sector has seen a substantial decline in activity and budget spending has been slashed.
William McLean explains, “We are very pleased with our achievements to date, not just on a personal level but also on our progress in establishing a successful independent Asset Integrity consultancy at such a difficult time.
“The low oil price has taken a strong hold of the North Sea Oil and Gas sector over the last two years affecting exploration, production and other operations, with many companies facing real challenges. In some cases, our clients have found that they have been able to use this time to really focus on the condition and integrity of their vital assets, ensuring that performance is not compromised once projects scale up again”.
With current Oil prices sitting at less than $54 per barrel, oil operations have been forced to reduce spend and ensure that the cost of production is at a sustainable level. This has seen the demand for asset integrity services increase, due to the need to create well engineered solutions that ensures maximum uptime of assets.
Dave Noble outlined the plans for Asset Integrity Group over the next twelve months, “2017 is set to be an exciting one for us. We are currently engaged with a number of businesses who are looking to implement our services into various project work scopes, which will allow Asset Integrity Group to predict workflow as we introduce and promote our highly innovative services to the marketplace.
“Our technical team are exceptionally well placed to support a range of client requirements including risk reduction management, incident investigation, maintenance optimization, reliability engineering for uptime excellence and asset life extension. With each of our consultants concentrating on specialist areas, we can offer a more focused approach to Asset Integrity and a strong commitment to our O&G North Sea Operators which is where our core experience lies”.
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