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Oil World Turns Upside Down as U.S. Sells Oil in Middle East

The United Arab Emirates, a model Persian Gulf petro-state where endless billions from crude exports feed a giant sovereign wealth fund, isn’t the most obvious customer for Texan oil.

Yet, in a trade that illustrates how the rise of the American shale industry is upending energy markets across the globe, the U.A.E. bought oil directly from the U.S. in December, according to data from the federal government. A tanker sailed from Houston and arrived in the Persian Gulf last month.

The cargo of American condensate, a type of very light crude oil, was preferred to regional grades because its superior quality made more suitable for the U.A.E’s processing plants, a person with knowledge of the matter said, asking not to be identified discussing a commercially sensitive matter.

“As a member of OPEC and a large crude producer, I would imagine they would be very self-sufficient in their own crude supply,” said Andy Lipow, president of Lipow Oil Associates LLC. The purchases of U.S. oil aren’t likely to continue, given the U.A.E.’s own supply, Lipow said.

The end of a ban on U.S. exports in 2015 coupled with the explosive growth of shale production, has changed the flow of petroleum around the world. Shipments from U.S. ports have increased from a little more than 100,000 barrels a day in 2013 to 1.53 million in November, traveling as far as China and the U.K.

U.S. Exports

With rising crude exports and already booming overseas sales of refined petroleum products such as gasoline, the U.S. net oil imports have plunged to below 3 million barrels a day, the lowest since data available starting 45 years ago, compared with more than 12 million barrels a day in 2006. The U.S. could become a net petroleum exporter by 2029, the EIA said this week.

U.A.E. crude production was 2.85 million barrels a day in January, according to data compiled by Bloomberg. Output has declined from 3.07 million at the end of 2016 as OPEC and allies cut production to reduce a global glut and prop up prices.

The cargo was shipped from Enterprise Products Partners LP’s Houston terminal on the tanker Seoul Spirit, which arrived Jan. 31 at the Port of Ruwais in Abu Dhabi, according to ship tracking data compiled by Bloomberg.

Until last year, the U.A.E. relied on Qatar for its condensate supply. But the two countries are embroiled in a political dispute, and the U.A.E. decided in June to ban all petroleum ships from Qatar.

— With assistance by Anthony Dipaola, and Javier Blas

 

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US Oil Reserve Would Fall Nearly in Half Under Budget Deal

US Oil Reserve Would Fall Nearly in Half Under Budget Deal

The US is poised to sell half of its emergency oil reserves to help pay its bills.

(Bloomberg) — The U.S. is poised to sell half of its emergency oil reserves to help pay its bills, something critics say defies the reason the stockpile was created decades ago as a hedge against supply disruptions.

The spending deal making its way through Congress calls for selling 100 million barrels of oil from the Strategic Petroleum Reserve by 2027. Combined with other sales approved last year, that would mean the volume of oil in the reserve would fall by 45 percent, to about 303 million barrels.

“This is the biggest non-emergency sale in American history,” said Kevin Book, managing director of ClearView Energy Partners in Washington. “This is nothing short of liquidation of a safety net.”

At today’s oil price of about $60 a barrel, a sale of 100 million barrels would raise $6 billion. But it’s impossible to determine exactly how much money the government would raise with the proposed sales because oil prices fluctuate wildly and the budget plan calls for the sales to take place between now and the fiscal year that ends Sept. 30, 2027.

The stockpile is kept inside a network of underground caverns and storage tanks along the U.S. Gulf Coast and has a capacity of 700 million barrels, making it the world’s largest supply of emergency crude oil. It was created in 1970s after the Arab oil embargo sent prices skyrocketing and forced Americans to ration gasoline, but has more recently become Congress’s go-to piggy bank, used to fund everything from roads to drugs to deficit reduction.

Past drawdowns approved by Congress have included 25 million barrels to pay for a medical research bill in 2015 and 66 million barrels to pay for transportation legislation in 2016. A draw down of 7 million barrels, worth an estimated $600 million, helped pay for a package of tax cuts passed by Congress in December.

Emergency uses have included sales after Operation Desert Storm in 1991, Hurricane Katrina in 2005, and an oil-supply disruption in Libya in 2011. It was also tapped last year after Hurricane Harvey left refiners in Texas and Louisiana unable to secure crude. “This is a good example of why we need an SPR,” Energy Secretary Rick Perry said at the time.

The last drawdown, a congressionally mandated sale in September 2017, fetched an average $47.45 a barrel, while the one before that drew $53.88 a barrel. Both sales yielded significantly more money than the government paid for the existing reserve oil, some of which is decades old. According to the Energy Department, the reserve’s inventory cost an average $29.70 a barrel.

With the U.S. awash in crude oil produced at home, some in Washington have questioned its usefulness, including President Donald Trump who proposed drawing down half of it in his budget request last year — a move the White House estimated would raise nearly $17 billion dollars.

“A smaller SPR is projected to be able continue to meet international obligations and emergency needs,” the White House said in its budget proposal.

The spending bill also reduces the reserve’s legal minimum inventory level to 350 million barrels, from 450 million. Since Congress began selling off the reserve to fill budget holes in 2017, it has not authorized the Energy Department to replace any of the crude.

Energy Undersecretary Mark Menezes said in an interview Thursday that the reserve was not intended to be “a government ATM.”

“My own view is that SPR was put in place as an energy security mechanism to ensure that we had supply,” Menezes said.

He’s not alone.

“Selling the SPR to cover non-energy budget expenses is deeply short-sighted and unwise,” said Bob McNally, president of consultant Rapidan Energy Group in Washington and a former senior energy official at the White House under Republican President George W. Bush. “In 1996 and 1997 we sold SPR barrels to pay for unrelated budget expenses and I was in the White House when we put those barrels back at higher prices starting about five years later, after 9/11.”

The pending budget bill also authorizes $350 million in sales to help pay for efforts to modernize the stockpile itself — a sign Congress doesn’t want to completely do away with the emergency oil supply.

“The SPR is only effective if it can get its petroleum to market quickly and efficiently in the event of a supply emergency,” said Robbie Diamond, president of Securing America’s Future Energy, a group aiming to pare U.S. dependence on oil. “Geopolitical risk is alive and well in the oil market, and the SPR is America’s only formal short-term line of defense against oil supply disruptions and price spikes.”

To contact the reporters on this story: Ari Natter in Washington at anatter5@bloomberg.net; Catherine Traywick in Washington at ctraywick@bloomberg.net. To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; David Marino at dmarino4@bloomberg.net Justin Blum.

 

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US Crude Output to Jump Above 11 mln bpd Sooner Than Expected

US Crude Output to Jump Above 11 mln bpd Sooner Than Expected

The U.S. government sees nationwide oil production jumping above 11 million barrels a day much quicker than anticipated.

(Bloomberg) — The U.S. government sees nationwide oil production jumping above 11 million barrels a day much quicker than anticipated.

After oil output already topped 10 million barrels a day back in November, output will climb above the 11 million mark this November, the Energy Information Administration said in its monthly Short-Term Energy Outlook on Tuesday. It previously forecast production above that level in November 2019.

Nationwide output will average 10.59 million this year and 11.18 million next year, up from prior forecasts of 10.27 million and 10.85 million, according to the EIA.

With West Texas Intermediate crude holding above $60 a barrel since late last year, the prospect of pumping in this price environment is seen enticing drillers to pick up the pace. The U.S. oil rig count posted the biggest two-week gain since June, according to the latest Baker Hughes data.

WTI crude will average $58.28 a barrel this year, the EIA said, up from last month’s estimate of $55.33, and $57.51 in 2019, higher than $57.43. The global benchmark Brent is forecast to average $62.39 in 2018, up from $59.74, and $61.51 in 2019 versus $61.43. WTI traded at $63.59 at 1:50 p.m. in New York, while Brent was at $66.91.

“EIA’s forecast expects Brent crude oil prices to be in the $62 per barrel range in 2018 and 2019. That’s down a bit from current levels, as strong U.S. production growth is expected to help moderate global prices,” Dr. Linda Capuano, administrator of the U.S. Energy Information Administration, said in a statement.

Energy Exporter

The EIA increased its estimates for global production and demand in 2018. Output is seen at 100.43 million barrels a day, up from 100.34 million previously, with demand at 100.23 million, compared with 100.11 million. For 2019, world supply is seen at 102.17 million and demand at 101.95 million.

The EIA painted a rosy picture for crude in its 2018 annual forecast released Tuesday. The agency projects that continued shale development and low demand will transform the U.S. into a net energy exporter by 2022 and a net petroleum exporter by 2029. Crude output growth will be driven by Texas’s Permian Basin, with gains in the Dakotas and Rocky Mountain region. Meanwhile, production in Gulf Coast region will flatten out after 2025, as drilling in the Eagle Ford becomes less productive.

By 2050, EIA projects that Brent will reach $114 a barrel in 2017 dollars, with prices rising faster in the short-term because of weak near-term investment and stronger demand.

To contact the reporters on this story: Jessica Summers in New York at jsummers24@bloomberg.net ;Catherine Traywick in Washington at ctraywick@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Mike Jeffers, Joe Carroll

 

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With CNPC Deal, Cheniere’s Train 3 at Corpus Christi Becomes More Likely

With CNPC Deal, Cheniere's Train 3 at Corpus Christi Becomes More Likely

CNPC unit to buy roughly 1.2 mtpa of LNG through 2043.

Cheniere Energy, Inc. has entered into two liquefied natural gas (LNG) sale and purchase agreements (SPA) with China National Petroleum Corp. (CNPC), the Houston-based company reported Friday.

“These long-term SPAs build upon the Memorandum of Understanding we signed in November, and we look forward to a successful long-term partnership with CNPC,” Cheniere President and CEO Jack Fusco said in a written statement.

According to Cheniere, CNPC unit PetroChina International Co. Ltd. will purchase approximately 1.2 million tonnes per annum (mtpa) of LNG under the SPAs with Cheniere subsidiaries Corpus Christi Liquefaction, LLC and Cheniere Marketing International LLP. A portion of the supply will start this year and the balance will begin in 2023, Cheniere added. Each SPA term continues through 2043 and the LNG purchase price will be indexed to the Henry Hub price plus a fixed component, the company stated.

Fusco also stated that Cheniere expects the SPAs to support the development of a third train at the Corpus Christi Liquefaction export terminal that it is building along Corpus Christi Bay in San Patricio County, Texas.

“(W)e are now focused on completing the remaining necessary steps to reach a final investment decision later this year,” said Fusco.

In 2015 Cheniere began construction of the Texas Coastal Bend facility’s first two trains but it is designing the complex for five trains with a projected nominal production capacity of up to 22.5 mtpa of LNG, according to the Corpus Christi LNG website. The company reports that 8.42 mtpa of the project’s production capacity has already been contracted, and foundation customers include:

  • Pertamina
  • Endesa
  • Iberdrola
  • Gas Natural Fenosa
  • Woodside
  • EDF
  • EDP

During President Trump’s trip to China this past November, various U.S. businesses and Chinese entities signed trade and investment deals. According to the U.S. Department of Commerce, the MOU that Fusco references above calls on Cheniere and CNPC to “continue in-depth discussions to strengthen cooperation on LNG export projects and the long-term LNG procurement cooperation between China and the U.S.”

 

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Oil Skids To Biggest Weekly Loss In 2 Years Amid Market Turmoil

NEW YORK, Feb 9 (Reuters) – Oil prices slid more than 3 percent on Friday as U.S. futures fell below $60 a barrel for the first time since December on renewed concerns about rising crude supplies.

U.S. and Brent crude futures have slid more than 11 percent from this year’s peak in late January. Brent fell nearly 9 percent for the week while U.S. crude dropped 10 percent, the steepest weekly declines since January 2016.

Futures posted a sixth straight day of losses, wiping away the year’s gains in a string of high-volume trading sessions, pressured by stronger-than-expected supply figures and a surprising ramp-up of the North Sea Forties Pipeline, which shut earlier in the week.

Turmoil on Wall Street also pressured crude. During the trading session, the S&P 500 stock index fell to its lowest level since Oct. 5. The S&P recovered to end the day higher, which helped oil bounce off session lows.

U.S. West Texas Intermediate (WTI) crude settled down $1.95, or 3.2 percent, to $59.20, the lowest settlement since Dec. 22. The session low for U.S. crude was $58.07. More than 845,000 contracts changed hands in another above-average day for trading volumes.

Brent futures fell $2.02 a barrel, or 3.1 percent, to $62.79 a barrel, its lowest settlement since Dec. 13.

“It’s never just one factor that slams the market like this. It’s several factors,” said Jim Ritterbusch, president of Ritterbusch & Associates.

Oil services company Baker Hughes said total U.S. onshore rigs rose by 26 to 791, highest since January 2017. Drillers have added rigs as oil prices rallied through mid-January.

The market has been pressured by the weak stock market. Also, oil is inversely correlated with the dollar, which has strengthened as equities markets slid.

Crude volumes in the North Sea Forties pipeline continued to ramp up faster than expected following a restart, a trade source told Reuters.

The news that the line will reach full rates over the weekend intensified oversupply worries, said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.

“The idea that it is back up and running normally, combined with the data that show U.S. production is rising, contributes to the overall idea that U.S. production could offset cuts by OPEC,” said McGillian.

Investors were already worried that rising U.S. crude production will overwhelm efforts by OPEC and other producing nations to cut supply. U.S. output rose to 10.25 million bpd in the most recent weekly figures, which if confirmed would represent a record. The Baker Hughes figures should mean still more supply in coming months.

On Thursday, OPEC member Iran announced plans to boost production within the next four years by at least 700,000 barrels a day.

“We think that surging supply and slowing demand growth will tip the market back into a surplus this year,” analysts at Capital Economics said in a note.

(Additional reporting by Ayenat Mersie-Ejibu in New York, Libby George in London, Aaron Sheldrick in Tokyo and Henning Gloystein in Singapore; Editing by David Gregorio)

Copyright 2018 Thomson Reuters.

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Survey: Oil, gas professionals express optimism for 2018 challenges

Senior oil and gas professionals are expressing optimism for 2018 and are feeling better-prepared for the challenges ahead. Of 813 senior-level professionals surveyed for 2018 by DNV GL, 63% said they are confident about growth in the industry, nearly double the 32% that said the same in the survey a year ago. The annual report provides a snapshot of industry confidence, priorities, and concerns for the year ahead. DNV GL outlined five key trends that emerged from responses.

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Interpipe introduces its new divisional management structure

interpipe-introduces-its-new-divisional-management-structure_11758.jpg

Image Source: cbnme.com

Interpipe, a Ukrainian industrial company, introduces its new business structure. Starting from January 1, 2018, Interpipe will have the following operating divisions – Steel, Pipe, and Railway Products Divisions. The Steel Product Division will include following production facilities: Interpipe Steel, Interpipe Vtormet, Lime Factory, as well as the departments for metal scrap procurement and steel billet sales. The division will be headed by Andrey Korotkov, who holds the position of Director of Interpipe Steel mill currently.

The Railway Products Division will include the wheel-rolling shop and the railway axle and wheelset production facility at Interpipe NTRP, as well as the corresponding sales department. Alexander Garkavij, currently Interpipe’ CCO for Railway Products, will be in charge of the division.

The Pipe Division will include pipe-rolling shops of Interpipe NTRP, Interpipe Niko Tube and Interpipe NMPP, as well as pipe sales departments. Interpipe CEO Fadi Hraibi will combine his current position with the post of the Pipe Division Director. Vera Smal is appointed as Deputy Director of this division.

The Center for Technical Competencies, responsible for the quality management, investments and R & D, will be created at the corporate level. Corporate functions such as finance, procurement and logistics, product and resource management, HR, legal support, economic security, corporate affairs, and administrative support will be structured in Centralized Service Center.

Fadi Hraibi, Interpipe CEO, said “The new structure is the next evolutionary step in the company’s development. This operating model provides more possibilities for strategic development of each division. The divisions will have full operational responsibility – both production and sales will be subordinated to the Division Director. Cooperation within divisions will allow more effective execution of operational tasks and speed up the reaction to meet market changes. Strategic decisions such as investments and technical development will be made at the level of the corporate center.”

 

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JSW Steel-Piramal to bid for Bhushan Steel; JFE Steel opts out

Besides JSW Steel, Luxembourg-based multinational steel firm ArcelorMittal and domestic industry major Tata Steel and are said to be in race for Bhushan Steel.

 

JSW Steel and Piramal Enterprises are bidding jointly for Bhushan Steel after Japanese company JFE Steel Corp walked out of the alliance, a source in the know of the matter said.

JSW Steel had roped in its Japanese business partner JFE Steel and Piramal Enterprises to bid jointly for Bhushan Steel, the maker of auto-grade steel in India undergoing insolvency proceedings for non-payment of dues.

“JFE has walked out. JSW Steel and Piramal Enterprises will now bid for Bhushan Steel,” the source said requesting anonymity.

Bids for Bhushan Steel close today. E-mail queries sent to JSW Steel and other two companies to seek their response remained unanswered. Besides JSW Steel, Luxembourg-based multinational steel firm ArcelorMittal and domestic industry major Tata Steel and are said to be in race for Bhushan Steel.

Asked if JSW Steel could lower its bid as the Japanese partner has opted out now, the source said, “JSW is in expansion mode, no matter one partner has gone, JSW can even increase the bid along with Piramal. It will be a 50:50 partnership now.’’

JSW Steel reportedly had plans to offer Rs 30,000 crore, double that of the liquidation amount, for Bhushan Steel. Liquidation value is the minimum value set for a stressed asset by the committee of creditors.

According to Bhushan Steel’s website, the company is the third largest secondary steel producer in the country with an existing steel production capacity of 5.6 million tonnes per annum.

JSW Steel is in expansion mode and is also evaluating various opportunities for acquisitions to achieve a capacity target of 40 mt by 2030.

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Promised Land for Gas Drillers Turns Into Glutted Beach

Natural gas producers who last week were basking in the strongest price environment in almost a quarter century are getting crushed.

A January rally in U.S. gas futures that was on course to be the best for that time of year since 1994 fizzled in the final two days of the month as mild winter forecasts cast gloom on the demand outlook. But investors had already began dumping natural gas stocks, spooked by the specter of a glut later this year.

More than $7 billion in market value has been wiped out so far this year for the eight biggest U.S. gas producers that don’t also pump significant amounts of crude, according to calculation by Bloomberg. Among the hardest hit have been Southwestern Energy Co., Gulfport Energy Corp. and Range Resources Corp., which have been mauled to the tune of 33 percent, 30 percent and 25 percent, respectively, since the end of 2017.

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‘Major’ Deep Offshore Oil Discovery Made in US Gulf of Mexico

'Major' Deep Offshore Oil Discovery Made in US Gulf of Mexico

A ‘major’ oil discovery has been made at the Ballymore prospect, located deep offshore in the US Gulf of Mexico.

Chevron Corporation announced Wednesday that a ‘major’ oil discovery has been made at the Ballymore prospect, located deep offshore in the U.S. Gulf of Mexico.

The Ballymore well reached a total measured depth of 29,194 feet and encountered more than 670 feet of net oil pay with ‘excellent’ reservoir and fluid characteristics, Chevron said in a statement on its website. A sidetrack well is currently being drilled to further assess the discovery, which is already deemed commercially viable.

“The Gulf of Mexico deepwater is an integral part of our company’s long-term strategy,” Jeff Shellebarger, president of Chevron North America Exploration and Production, said in a company statement.

“This discovery is an important addition to our portfolio, especially with its combination of size, quality and proximity to existing infrastructure,” he added.

Located approximately three miles from Chevron’s Blind Faith platform, the Ballymore prospect is situated in water depth of about 6,540 feet, 75 miles from the Louisiana coast, and covers four blocks in the Norphlet play.

Total, which acquired a 40 percent working interest in Ballymore as part of an exploration agreement with Chevron signed in September 2017, said it was thrilled to reveal its latest find.

“This major discovery gives us access to large oil resources and follow on potential in the emerging Norphlet play,” Arnaud Breuillac, president of exploration and production at Total, said in a company statement.

Kevin McLachlan, senior vice president of exploration at Total, confirmed that Ballymore is the largest discovery by the company in the Gulf of Mexico.

Chevron subsidiary Chevron U.S.A. Inc. is the operator of the Ballymore prospect with a 60 percent working interest. Total E&P USA Inc. holds the remaining 40 percent stake.

 

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