Your Weekly Oil and Gas News Update: 2–6 Oct

Last week in World oil:

Prices

  • Despite OPEC’s best efforts to insist the ‘supply freeze is working’, crude oil prices continue to dawdle as the market instead focuses on continued oversupply, particularly with US production returning from Hurricane Harvey closures. Brent is trading at US$55/b, and WTI at US$49/b.

Upstream

  • In a potential landmark decision, Brazil’s oil regulator ANP approved Petrobras’ request to source a rig platform from abroad, skirting the country’s obligation to source from domestic producers. Meant to explore the oil-rich pre-salt Libra area, the waiver to strict local content rules was granted due to a lack of domestic capacity, potentially paving the way to opening up the Brazilian services sector to international competition.
  • Total, Eni and Statoil are courting buyers for their stake in the Teesside oil terminal, which receives crude from Norway’s Ekofisk fields. A price of up to US$400 million is expected for the trio’s joint 70.5% stake, with ConocoPhillip intent on remaining as operator through its 29.3% stake.
  • Ties between Venezeula and Russia continue to deepen out of necessity as the former moves to stave off a domestic financial crunch by consorting with Rosneft. The Russian energy firm currently holds 49.9% collateral in PDVSA’s American refining subsidiary Citgo, and Venezuela is negotiating to swap that for shares in its oilfield assets and a fuel supply deal to provide some much need energy products for the cash-strapped nation.
  • US drillers reduced active rigs by 4 — two oil, two gas — with energy firms delaying spending plans as prices remain weak.

Downstream & Midstream

  • TransCanada has given up on the Energy East pipeline, which would have delivered oil sands crude from landlocked Alberta to Canada’s eastern seaboard ports. Facing stiff opposition from environmental groups, the C$15 billion project is less important than it once was, now that the Keystone XL pipeline — which will send Alberta crude down to the US Gulf Coast — is resuming.
  • Shell and Vitol subsidiary Varo Energy have agreed to discontinue talks to sell Shell’s 37.5% stake in the 220 kb/d PCK refinery in Scwedt, Germany to the latter. The deal would have included the Arhem terminal in the Netherlands, then seen as part of Shell’s global divestment drive.

Natural Gas and LNG

  • Statoil and its partners on the Troll gas field, Norway’s largest, are working to increase its output. Work to allow oil and gas to be produced simultaneously from the Troll West reservoir will introduce some much-needed flexibility to a field that represents 40% of Norway’s gas resources. Output is expected to reach a record high of 36 bcm this year.
  • The BRUA natural gas pipeline in Eastern Europe is back on track after an earlier hiccough in summer when Hungary doubted the commercial viability of the pipeline that will connect Bulgaria, Romania, Hungary and Austria. All four countries have now agreed to resume the project, which will deliver an initial 1.75 bcm of gas from Bulgaria and Romania in 2019

Last week in Asian oil

Upstream

  • Reliance is selling a Marcellus shale oil and gas block it acquired in 2010 for US$126 million, almost a third of the price it paid seven years ago. It illustrates how highly competitive the US shale industry has become, and many majors that invested are now backing out due to low oil prices. Reliance sold the asset to BKV Chelsea LLC, with Carrizo Oil & Gas — the operator of the asset — also selling out. This cuts Reliance’s US shale assets to two, acquired in the 2010 US$2 billion spending spree, and Reliance is likely to cut the other two loose as well.

Downstream & Midstream

  • India’s Reliance has purchased US crude for the first time, as the widening differential between US WTI and Brent prompts the owner of the largest refining complex in the world to capitalise on crude spreads. Capable of processing even the most challenging crudes, the Jamnagar refinery bought a million barrels of West Texas Intermediate Midland crude and a smaller cargo of Eagle Ford Crude — a light, sweet mix that is slightly unusual for its configuration. Reliance itself may be giving up on upstream assets in the US, but cheaper American crude has prompted it to join IndianOil, HPCL and BPCL in buying American cargoes, with year-to-date purchases of 7.85 million barrels so far, a record high.

Natural Gas & LNG

  • LNG output has begun at Chevron’s Wheatstone in Australia, with the first cargo expected at the end of October. Operational after six years of construction, Wheatstone has faced less hurdles in achieving operation than Chevron’s larger Gorgon LNG, but also suffered a similar cost blowout. Only the first liquefaction train is operational; the second will join within eight months, with a total capacity of 8.9 mtpa of LNG, most of which is destined for East Asia. Wheatstone is the sixth of Australia’s mammoth LNG projects to start up, with the only two remaining being Shell’s Prelude floating LNG unit and Inpex’s Ichthys project.
  • Kazakhstan will begin exporting natural gas to China by pipeline on October 15, shipping an initial 5 bcm to PetroChina over a year for a reported price of US$1 billion. It is the first such deal between China and Kazakhstan, which has until now shipped its gas to Russia as additional pipelines were required to connected to the main pipeline linking China and the three main Central Asia energy producers.
  • Shell has cancelled its US$900 million deal to sell its Thai gas field stakes to the Kuwait Foreign Petroleum Exploration Company. Originally announced in January this year as part of Shell’s ongoing divestment drive to reduce debt, the collapse of the sale looks to be linked to Shell having reached its US$30 billion divestment target early, which has led it to retain some of the smaller jewels it had put on sale. Through its local subsidiaries, Shell has a 22.22% stake in the Bongkot natural gas field, whose concession is set to expire in 2023.

Source: Your Weekly Update: 2–6 Oct | NrgEdge