Opinion

Your Weekly Update: 9 - 13 Oct


Last week in the world oil:

Prices

-          Crude prices remain stuck in their range – Brent at US$57/b and WTI at US$51/b – as swings in US inventories outweigh Middle Eastern geopolitical concerns, with little on to horizon to move the market. 

Upstream

-          Chinese major Sinopec is planning to exit Argentina, after losses and labour woes prompted it to put its oil assets on sale. Acquired in 2010 from Occidental Petroleum for US$2.45 billion, the acquisition was part of Sinopec's drive to establish a portfolio of international upstream assets. However, a shaky political and economic situation in Argentina caused losses, and the oil and gas assets – mainly in the southern province of Santa Cruz – now have a price estimate of US$750 million-1 billion.

-          Uganda is quickly becoming a potential new African upstream bright spot, with Nigeria's Oranto Petroleum recently signing two PSCs to explore around the Lake Albert basin. The Ngassa Shallow Play and Ngassa Deep Play are located within the Albertine rift basin where Uganda first struck oil in 2006; Uganda's first domestic oil is expected in 2020.

-          Cote d'Ivoire has concluded four PSCs with Tullow Oil in a bid to jumpstart its fledgling upstream industry. Producing a mere 8 kb/d of oil and 200 mcf/d of gas, Cote d'Ivoire lags behind Senegal and Ghana, but is hoping that recent big finds in its neighbours hint at potential within its waters. State oil firm Petroci will hold 10% of each PSC.

-          US drillers cut active rig counts for the fourth time in five weeks, as price realities impact production plans. Eight rigs were removed from service last week – five oil and three gas – leaving the total active count at 928.

Downstream & Midstream

-          Another international joins the queue to exploit Mexico's recently deregulated fuel retail industry, joining Shell, BP, ExxonMobil and Glencore. France's Total is expanding its downstream presence in Mexico from specialty products to a full service station network, rebranding some 250 Mexico City-area GASORED group sites to the Total brand. The first site will be opened in late 2017, rolling out over 2018 and 2019. 

Natural Gas and LNG

-          More LNG this way comes. A week after Chevron began operations at Wheatstone, Russia's Yamal LNG project in the Arctic confirmed that it will ship its first LNG cargo in November. Operated by Russia's Novatek with France's Total, China's CNPC and the Silk Road Fund, Yamal will begin with two shipments in November, four in December, then ramp up to ten in 2018. The first cargoes were reportedly sold on the spot market.

Corporate

-          Indications are the Saudi Aramco's planned IPO has hit some snags. Recent reports indicate that some delays are expected, with a two-stage IPO likely – floating in Riyadh by the end of 2018 and delaying the planned international portion until 2019. Some chatter on the market even suggests that Aramco may scrap the international portion altogether, replacing with a private share sale to select world sovereign funds and institutional investors.

Last week in Asian oil

Upstream

-          Malaysia's Petronas has outlined its plans for the Bukit Tua field in Indonesia. Phase one of Bukit Tua came on stream in May 2015; phase two is currently underway and Petronas wants to expand into a phase three that will exploit the field's Kujung horizon. Expansions will continue through July 2022, lifting production from its current peak rate of 20 kb/d of oil and 50 mmscf/d of gas. Petronas holds 80% of the PSC, with the remainder held by Pertamina.

Downstream & Midstream

-          CNOOC's 200 kb/d refinery in Huizhou is ready for commissioning. Crude trial runs have been completed at the site in Guangdong, which is part of CNOOC's Huizhou refining and petrochemical complex that represents the firm's move downstream to compete with Sinopec and PetroChina. The focus of the complex is for both fuels and chemicals, with a 1.2 mtpa ethylene plant (a joint venture with Shell) due to be completed in Q12018.

-          From a loose and scrappy group, China's independent refiners – the teapots – are increasing becoming more structured and united, as they face increasing criticism from Sinopec and PetroChina. After forming a crude buying alliance last year, six influential teapots – including Dongming, the country's largest independent refiner – set up the Shandong Refining & Chemical Group last month, and has now bolstered it with a CNY33 billion (US$5 billion) fund. The joint fund will go to joint production, operation and investment plans, as well as lobbying efforts, to support the group's refining capacity of 660 kb/d.

-          Once dismissed as a pipe dream, the private Pulau Muara Besar refinery planned by Hengyi Petrochemical in Brunei actually appears to be progressing to reality. The Chinese group has started up a trading office in Singapore, which will buy crude and trade fuel products produced at the 175 kb/d, US$3.4 billion project. Primarily a petrochemical play to support Hengyi's fabric and industrial arms, the refinery will also produce a significant amount of gasoline, gasoil and jet fuel, which Hengyi has no internal use for. The company has also announced a US$12 billion second phase that will include expanding capacity to 280 kb/d and secondary units to produce some 1.5 mtpa of ethylene and 2 mtpa of PX.

Natural Gas & LNG

-          Bangladesh is striving ahead in its LNG ambitions, signing up for a third floating LNG project with Malaysia's Petronas and China's Hong Kong Manjala Power. Planned to be located at Kutubdia in Cox's Bazaar, the 3.5 mtpa import terminal is planned for a 2019 start, just in time to replace Bangladesh's dwindling natural gas production. The country's first FSRU – a 3.75 mtpa facility off Moheshkhali in the Bay of Bengal – is expected to start up in 2018.

CNPC has started up its third natural gas pipeline servicing Shanghai, aiming to meet the growing demand for clean power generation fuel in the city. The new 88km pipeline connects the Rudong LNG receiving terminal in Jiangshu with Shanghai's Chongming island, with a capacity of some 1.84 billion cbm per year.


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