Your Weekly Update: 16–20 Oct
Last week in the world oil:
- There are no clear trends in crude prices, with Brent and WTI stuck in their respective ranges of US$57/b and US$52/b. Reductions in US drilling rates were offset by Iraqi supply disruptions, while OPEC’s hints that the supply freeze will persist did little to move the market.
- Mexico is planning a third auction in 2018, hiking up the pace as the country seeks to exploit new-found private interest in its hydrocarbons in a election year. The auction will focus on conventional onshore oil and gas blocks, with terms to be announced early 2018 and awarded by mid-2018. This joins the planned deepwater Gulf auction scheduled by January 2018 and a shallow water auction in March 2018.
- BP and SOCAR will sign a new production-sharing agreement for a new block, D-230, in the North Absheron basin of the Caspian Sea. With equal stakes, this cements BP as the main international player in Azerbaijan, with existing stakes in the Azer-Chirag-Guneshli and Shah Deniz fields.
- Thailand’s PTTEP is delaying the FID for the Mariana Oil Sands project in Canada, the latest holdup in the region’s once booming oil sands sector. There is a high likelihood that the project, 100% owned by PTTEP, may be dropped, given the company’s recent focus on midstream and gas.
- The US active rig count dropped by 15 last week — 7 oil and 8 gas — as drilling activity retreats against stagnant oil prices. All rig losses were onshore, with the most declines in the Haynesville and Permian basins.
Downstream & Midstream
- Nigeria has announced that the planned 650 kb/d Dangote refinery, being built by Africa’s richest man Aliko Dangote, will come onstream by end-2019, which would help ease the country’s growing dependence on imports. Envisioned as Nigeria’s own Jamnagar refinery, an operational Dangote refinery will also ease the pressure on NNPC, which has been struggling to find partners to help revamp its three existing refineries.
Natural Gas and LNG
- Natural gas action in the Eastern Mediterranean is heating up. With Egypt, Israel, Greece and Cyprus already exploiting resources, Energean Oil & Gas is backing a new player: Montenegro. Two blocks explored by the Greek company hold an estimated 1.8 trillion cubic feet of recoverable gas reserves, with Energean CEO Mathios Rigas saying that Montenegro is sitting in the ‘sweet spot of untapped potential in the eastern Adriatic.’ Energean was awarded a 30-year licence for the blocks in March 2017.
- Russia’s Novatek is planning to expand the Yamal LNG by one more train. With an additional capacity of 1 mtpa, the smaller fourth train is planned for end-2019, with Yamal Trains 2 & 3 tracking ahead of schedule.
- BP’s Chariman Carl-Henric Svanberg has announced his retirement after steering the supermajor through the Deepwater Horizon disaster just months after he assumed his position. Svanberg will remain in his position until a successor is identified.
Last week in Asian oil
- China will continue to be more and more dependent on imported crude, as domestic production fell by 2.9% y-o-y to 3.78 mmb/d in September. Low oil prices have made some marginal and ageing fields uneconomic, exacerbating the country’s declining trend. Domestic natural gas output, however, was up 10.7% y-o-y to 11.15 bcm, bringing YTD gas production up by 9.1% y-o-y. With China’s private sector shying away from developing the country’s ast shale oil and gas reserves after yeas of limited success, the outlook is poor. Which makes recent deals like CEFC China Energy’s US$9.1 billion investment in Rosneft more important, as it gives China access to up to 260,000 bpd of Russian oil. China has also apparently offered to purchase outright 5% of Saudi Aramco, potentially circumventing the Saudi Arabian firm’s IPO ambitions.
- As Iraq’s strife with its rebel Kurdish province wanes following the capture of Kirkuk, the country has wasted no time in making plans to exploit the region’s large oil reserves. Iraqi Oil Minister announced plans to collaborate with international investors to double oil production at the northern Kirkuk fields to exceed one mmb/d. However, Iraq is unlikely to work with Rosneft — as the Russia producer announced a deal with Iraqi Kurdistan authorities to operate an oil export pipeline and purchase stakes in five oil blocks for up to US$400 million. It may have lost Kirkuk, but Iraqi Kurdistan still controls three northern provinces, and its only outlet to export its crude is through a pipeline through Turkey, which is under jeopardy from the recent independence referendum. The Rosneft pipeline project, together with current Kurdish pipeline operator Kar Group, would provide an alternative supply route… but continue to stoke domestic tensions with the central Iraqi government.
- As Shell finalises its exit from the Iraqi upstream oil sector, Total is gunning to fill the void left by the supermajor, which is focusing on natural gas production in Basra. Total is reportedly aiming for the Majnoon oilfield as well as the Nassiriya oil and gas project, both in the south, signalling its interest to the Iraqi Oil Minister.
- Indonesia will be launching its second oil and gas licenceround for 2017 in November, despite the first auction’s deadline having been pushed back twice. Acreage to be offered in the second round will comprise both conventional and unconventional blocks. Delays are expected, given that the government is still fine-tuning new upstream regulations that will govern the gross split mechanism applicable to new E&P contracts — the cause of the first 2017 round’s repeated postponements.
Natural Gas & LNG
Indonesia has agreed to extend Inpex’s contract to operate the Masela natural gas field by up to 27 years once the current contract expires in 2028. This comes after Inpex lobbied for the extension, given that President Joko Widodo’s decision to reject a planned US$15 billion FLNG facility in favour of an onshore facility had pushed anticipated start of production by several years to the late 2020s. The extension — a standard 20-year extension and an additional seven years as compensation for changing the LNG refinery development plan — was necessary assurance for Inpex and its partner Shell to proceed with the project.