Your Weekly Update: 22–26 Jan

Market Watch

Headline crude prices for the week beginning 22 January 2017 — Brent: US$69/b; WTI: US$63/b

• After a correction last week, oil prices have found renewed strength, on hints that OPEC may continue supply management into 2019
• Saudi Arabia and Russia have jointly signalled that they may have to extend the production cuts in 2019 — as the rising tide of US shale production may derail prices later this year. However, this may be a sign of longer-term cooperation — as the two have been getting cosier.
• Despite this, Russian Deputy Prime Minister Arkady Dvorkovich said a decision on the OPEC/NOPEC global oil cuts could be made in late spring, ahead of OPEC’s initial timeframe of June, during its next meeting.
• Kuwait, however, stressed that there is no plan or intention among OPEC members to break from the production freeze agreement, as Iraq claimed that the global market is stabilising with crude inventories falling.
• Strong global economic data, particularly from the US and Japan, is also supporting the rise in crude prices towards US$70/b.
• US crude stockpiles are estimated to have fallen by 2.3 million barrels last week, but with refinery maintenance season ongoing in North America until March, this number could start to rise again.
• After a sizable leap last week, the active US oil and gas rig count by Baker Hughes fell by a net 3 last week. Two gains in gas rigs offset a 5 site drop in oil rigs, with gains in the Permian cancelled out by losses elsewhere.
• Crude price outlook: OPEC and Russia’s signs of willingness to act should keep prices strong this week. Brent will stay above US$70/b, while WTI should push towards US$66/b.

Headlines of the week

Upstream

• Shell’s decision to go ahead with the Penguin FID has been hailed as a return to confidence after a period cautious investment in the North Sea. The FPSO redevelopment will be the largest FID since Culzean in 2015.
• Tullow Oil has snapped up two new oil and gas blocks (CI-520 and CI-524) in the Ivory Coast, bringing its total in the country up to 9.
• Nigeria’s parliament is moving ahead with passing the new Petroleum Industry Bill, aimed to increasing transparency and stimulating growth.
• Total purchased A.P Moeller-Maersk’s shares in three Kenyan blocks. Full production at the Tullow Oil blocks in Turkana is expected in 2021.
• A consortium of BP and Kosmos Energy has picked up two offshore blocks in Sao Tome and Principe, right in the upstream hotbed of West Africa.
• Vitol is investing some US$530 million into the OML 30 oilfield owned by Nigeria’s Shoreline in exchange for access to estimated output of 50 kb/d.

Downstream

• India’s ONGC has secured a US$2.83 billion loan from three banks to fund its US$5.8 billion acquisition of state oil refiner HPCL.
• Saudi Aramco, CB&I and Chevron Lummus have signed a joint agreement to move ahead with the ‘crude-to-chemical’ plan, integrating the technologies of all three companies as Saudi Arabia pushes downstream.
• Philadelphia Energy Solutions, which owns the 350 kb/d Philadelphia refinery, is filing for bankruptcy, citing high compliance costs.
• Nigeria’s NNPC will confirm the investors participating in the revamp of its three ailing refineries, in Port Harcourt, Warri and Kaduna.
• Statoil has started work on an onshore oil terminal in northern Norway that will handle flows from the Johan Castberg offshore field in the Arctic.

Natural Gas/LNG

• Iraq has inked a deal with US energy firm Orion, which will process 100–150 mmcf/d of natural gas extracted from the Nahr bin Omar oilfield, as part of a move to cut down the high incidence of gas flaring across Iraq.
• Trafigura and US LNG exporter Cheniere have signed a 15-year deal that will deliver 1 mtpa of LNG to Trafigure beginning 2019.
• India’s GAIL has renegotiated the terms of a long-term LNG contract with Gazprom, the third such successful renegotiation by an Indian company.
• ExxonMobil has announced a new find in Papua New Guinea, with the onshore P’nyang South-2 well showing hydrocarbon (gas) reservoirs.
• South Korea’s SK E&S has offered to build a floating LNG import terminal in Sri Lanka for ‘free’, in an unusual loss-leading strategy.
• A leak in the Sabah-Sarawak gas pipeline has not affected Petronas LNG shipments, with repairs ongoing. Gas flows to the Bintulu LNG complex from Sabah Oil and Gas Terminal have been temporarily halted.
• No LNG cargoes left Chevron’s Wheatstone project in December 2017 due to scheduled downtime, as Chevron faces an emissions enquiry. Wheatstone Train 2 is on track for mid-2018, with domestic gas production also scheduled for this year.

Corporate

Halliburton and Schlumberger have both reported better-than-expected profits for Q417, a sign that the service industry health may be improving.

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