Oil Industry Analysis
>>EIA estimates that members of OPEC earned $673 billion in net oil export revenues in 2007, a 10 percent increase from 2006. Saudi Arabia earned the largest share of these earnings, $194 billion, representing 29 percent of total OPEC revenues. On a per-capita basis, OPEC net oil export earning reached $1,140, a 8 percent increase from 2006. Through May, OPEC had earned an estimated $423 billion in net oil export
earnings in 2008. Based on projections from the EIA June 2008 Short Term Energy Outlook (STEO), OPEC net oil export revenues could be $1,178 billion in 2008 and $1,214 billion in 2009.
WHAT IS BIODIESEL?
Biodiesel is the name of a clean-burning alternative fuel, produced from domestic, renewable resources. Biodiesel contains no petroleum, but it can be blended at any level with petroleum diesel to create a biodiesel blend. It can be used in compression-ignition (diesel) engines with little or no modifications. Biodiesel is simple to use, biodegradable, nontoxic, and essentially free of sulfur and aromatics.
TECHNICAL DEFINITIONS
Biodiesel - a fuel composed of mono-alkyl esters of long chain fatty acids derived from vegatable oils or animal fats, designated B100, and meeting the requirements of ASTM (American Society for Testing & Materials) D 6751.
IS BIODIESEL USED AS A PURE FUEL OR IS IT BLENDED WITH PETROLEUM DIESEL?
Biodiesel can be used as a pure fuel or blended with petroleum in any percentage. B20 (a blend of 20 percent by volume biodiesel with 80 percent by volume petroleum diesel) has demonstrated significant environmental benefits with a minimum increase in cost for fleet operations and other consumers.
Biodiesel is the only alternative fuel to have fully completed the health-effects testing requirements of the Clean Air Act. The use of biodiesel in a conventional diesel engine results in substantial reduction of unburned hydrocarbons, carbon monoxide, and particulate matter compared to emissions from diesel fuel. In addition, the exhaust emissions of sulfur oxides and sulfates (major components of acid rain) from biodiesel are essentially eliminated compared to diesel.
Of the major exhaust pollutants, both unburned hydrocarbons and nitrogen oxides are ozone or smog-forming precursors. The use of biodiesel results in a substantial reduction of unburned hydrocarbons. Emissions of nitrogen oxides are either slightly reduced or slightly increased depending on the duty cycle of the engine and testing methods used. Based on engine testing, using the most stringent emissions-testing protocols required by the EPA for certification of fuels or fuel additives in the U.S., the overall ozone-forming potential of the speciated hydrocarbon emissions from biodiesel was nearly 50 percent less than that measured for diesel fuel.
>>Bio-fuel technology tops Brasil Tech 2008
As South Africa, like the rest of the world, battles to deal with sky-high crude oil prices, a business delegation from Brazil is attempting to offer their knowledge and expertise to the country.
The delegation are attending Brasil Tech 2008, where they will offer the country strategic trade and co-operative partnerships in areas such as energy, Information Communication Technology (ICT), machinery and nano technology.
Brazil is the world’s leader in bio-fuel research.
The exchange between South Africa and Brazil follows a natural path of growth experienced by both economies.
Consultant to the Brazilian government on Technology Affairs, Eduardo Tadao Takarashi said: “The Brazilian company Petrobras is the greatest producer of oil in deep waters, and this has resulted in Brazil not being dependent on external sources of oil.
“Petrobras have gone from operating at a depth of 2 000 meters to a depth of 5 000 meters.”
This is far beyond what other companies can do and has allowed Brazil to move towards becoming an energy producing country.
With regard to bio-fuels and the production of bio-ethanol, Mr Takarashi said Brazil produced bio-ethanol from sugar-cane and not maize like other countries, and could therefore be excluded from a global debate on the link between famine and the production of bio-fuels.
The usage of bio-ethanol to power motor-vehicles has been adopted in Brazil and 80 percent of manufactured vehicles are able to use either regular fuel or bio-fuel.
Global and geo-political instability in the Middle East affecting the price of crude oil has not affected Brazil in such a big way, said Mr Takarashi.
He said this was because of the wide use of bio-fuels in Brazil and the country’s vast knowledge of deep water oil production has largely buffered it from price shocks.
Inflation in Brazil stood at 3.2 percent in 2006, with 70 percent of Brazil’s exports being manufactured goods, and not commodities, as is commonly thought, said Mr Takarashi.
Brazil is the 5th largest country in the world and has the 7th largest economy with the 4th largest telecommunications sector globally.
The South American economic giant has strong monetary and fiscal policies in place, institutional stability, decreasing public and foreign debt, decreasing interest rates, and the Brazilian government has invested heavily in development and research.
However, despite all the gains that have been made by Brazil in growing its economy, there are some 40 million people out of the 190 million population that live in poverty.
“We still have many challenges. However, we do have about 10 000 new graduates entering the market every year, so highly skilled jobs are being filled,” said Mr Takarashi.
Brazilian Ambassador to South Africa José Vicente de Sá Pimente told the conference that bilateral trade has grown substantially between the two countries and trade agreements such as the India, Brazil, South Africa (IBSA) agreement is an example of their strengthening relationship.
“Our doors are always open, so let us use the opportunity of your embassy in Brazilia and our embassy here in Pretoria to further build and strengthen business relations between our two countries,” said the Ambassador. - BuaNews
>>PetroSA increases capacity at Coega plant
The Petroleum Oil and Gas Corporation of South Africa (PetroSA), the country’s state-owned oil company, has increased the size of a planned refinery at Coega near Port Elizabeth. The plant, which will cost about $11 billion, will have a capacity of 400 000 barrels a day, rather than the previously proposed 250 000 barrels a day (kbpd).
The board approved this increase on Thursday, after evaluating the conclusions of a recently completed pre-feasibility study undertaken by a leading US-based refinery engineering company, KBR.
The Coega refinery (known as Project Mthombo) will be the lowest cost producer in sub-Sahara Africa.This is due to economies of scale, proven world-class technologies and crude processing flexibility. “This will enable it to accomplish a balancing role and sustain a competitive advantage in open market conditions within both local and export environments while meeting the highest global standards of product quality and environmental responsibility,” PetroSA Vice-President of New Venture: Midstream, Joern Falbe, said on Thursday. “The design configuration to process a wide spread of feedstock, with prominence given to lower-cost heavy, sour and acid crudes, is the primary driver in maximising commerciality as well as security of supply.” By 2014, when the refinery is due to be commissioned, South Africa will already be experiencing a shortfall of locally-refined product of about 200 000kbpd.
This will be due to its projected economic growth and low investment in existing refineries.
This shortfall will be met by importing product - an expensive solution that has a major impact on foreign exchange and increases potential supply vulnerability.
PetroSA’s original base case of a 250kbpd crude refinery on the east coast of South Africa proved robustly attractive to meet the country’s medium term fuel growth requirements. However, acknowledging the National Oil Company’s mandated role to reduce external dependency in national energy security requirements, combined with input from potential international partners who recognise the flexibility of Coega to supply diverse markets and mitigate risk, the Board of PetroSA has approved expanding the planned refining capacity to 400kbpd. “After evaluating all operational, logistical and environmental considerations, 400kbpd was deemed the most suitable configuration,” said Mr Falbe.
He added that this increase from 250 to 400kbpd increased project funding. “However, due to the economies of scale, the investment cost per barrel reduces by 20 percent and operating costs improve by 30 percent, boosting the original project economics substantially.
“A recently-completed logistics study has confirmed that crude supply in ‘VLCCs’ [very large crude carriers] via a SPM [Single Point Mooring] is technically and operationally feasible, and PetroSA now awaits the outcome of an environmental and engineering analysis to determine the most suitable location for the facility,” said Mr Falbe.
The positioning of this highly competitive, world-class mega refinery will help to diversify crude and product supply structures in South Africa by providing an essential strategic supply alternative to the country’s main inland markets.
A future product pipeline from Coega to Gauteng, commercially viable, becomes a justifiable reality in the medium term.
Fast track project projections indicate that the streaming of Coega remains on target for 2014.
Source - BuaNews
>>Accra,GNA - President John Agyekum Kufuor on Thursday announced the Government’s decision to reduce Excise Duty and Recovery Levy on gas oil, kerosene and marine gas oil as part of a package deal to bring relief to Ghanaians in the midst of the global challenges, resulting from crude oil and food price hikes.
Additionally, debt recovery levy and excise duty on premix fuel as well as import duties on staples including rice, wheat, yellow corn and vegetable oil are to be removed.
In a nationwide broadcast, President Kufuor said the Government would also increase its support for the production cost of electricity, subsidize the cost of fertilizer and ensure effective distribution to farmers. He said he had directed the Finance Minister to urgently seek parliamentary approval for these to help to reduce transportation fares and food prices. President Kufuor warned that it would be criminal for anyone to attempt to re-export items declared tax-exempt purposely for the benefit of the local market.
The measures come at a time the nation’s crude oil import bill has been mounting. From 500 million dollars in 2005, it rose to 2.1 billion dollars at the end of 2007 and now heading towards 2.5 billion dollars.
The country’s current budget was prepared on an estimated crude oil price of 85 dollars per barrel but within the first quarter of the year, it had overshot beyond 125 dollars per barrel with experts projecting that the price could hit an all time record high of 200 dollars per barrel. President Kufuor acknowledged that the trend was throwing the budget out of control and said although the measures would involve cutting down on some of the Government’s development projects, there was not going to be any cut back on policies designed to protect the vulnerable in the society. Among these are the school feeding programme; the capitation grant; National Health Insurance Scheme; the Metro Mass Transport; National Youth Employment Programme and the micro-finance and small loans scheme.
President Kufuor said to help to enhance the national food security the Government was in consultation with the country’s development partners to import and stockpile additional supplies of rice and wheat. He further outlined a number of policy interventions to strengthen the performance of the agricultural sector of the economy, saying, the Government was stepping up attention and investment and had directed the Reforestation Programme to increase the planting of foodstuff in the “Tunja” demarcated areas around the country. Again there had been a re-launch of the Aveyime Rice Project with the local farmers being encouraged to go into satellite farming in cooperation with the nucleus farm to boost local rice production. Besides, the supply of tractors to farmers at subsidized rates and provision of small irrigation dams, improved seeds and ensuring best practices would be intensified while the implementation pace of the Millennium Challenge Account Programme in selected districts are accelerated.
President Kufuor said these needed the support of all sections of the society for effective and successful implementation. He, therefore, asked all to rally solidly behind the Government to ensure that the country went through the difficult times with minimal stress. The rising crude oil and food prices had led to dislocation of economies, rioting and strikes in some countries. President Kufuor said Ghana’s economy had managed to withstand the terrible shocks of the market so far because of its strength and resilience and gave credit to the disciplined and far-sighted management of the economy over the past seven years by the Government backed by the Central Bank.
Debt cancellation through the highly Indebted Poor Countries (HIPC) Initiative freed the nation of indebtedness to the tune of about eight billion dollars from both bilateral and multi-lateral creditors.
Source: GNA TMA/BDB
22 May 08
>>Dubai Gold and Commodities Exchange (DGCX), Middle East’s leading derivatives exchange, has announced the launch of West Texas Intermediate Light Sweet Crude (DWTI) and Brent Crude oil (DBRC) futures trading from May 27.
The launch of WTI and Brent Crude Oil futures on DGCX makes the world’s two most significant crude oil benchmarks available to market participants in Dubai, WAM news agency reported Wednesday.
‘The growing need of market participants to access viable risk management and investment tools and increased recognition from our international clients of the benefits of transacting and clearing business from within the UAE makes our offering of WTI and Brent Crude Oil contracts an extremely attractive proposition,’ said DGCX CEO Malcolm Wall Morris.
‘Making the world’s crude oil benchmarks available directly to the world’s premier oil producing region and allowing regional participants to maintain business within the Middle East has benefit beyond measure,’ said Chairman of DGCX Ahmed bin Sulayem.
Crude oil is one of the world’s most widely used commodities and is amongst the most liquid futures contract.
Crude oil refers to petroleum in its raw form. After refining it is converted into numerous component products such as diesel, petrol and asphalt.
Brent crude oil is named after the Brent oil field in the North Sea, off the coast of Britain.
WTI, also known as Texas Light Sweet is a type of light crude, lighter and sweeter than Brent Crude. Its properties as well as production site make it ideal for being refined in the US.
(IANS)
>> The Wall Street Journal reports
The Nigerian government is demanding $1.91 billion from Royal Dutch ShellPLC and Exxon Mobil Corp. as it reviews contracts governing growing offshore energy production, a spokesman for the country’s president said Tuesday.
The office of President Umaru Yar’Adua said he had ordered the state oil company NNPC to take “immediate steps” to recover the money from the two oil majors. A presidential adviser, Olusegun Adeniyi, said the funds were due to the government under production-sharing contracts governing two big offshore oil fields, Bonga and Erha.
Mr. Adeniyi said Nigeria is seeking $850 million from Shell, which operates Bonga, and $646 million from the Exxon-operated Erha. NNPC and the government are also seeking to recover $414 million they say are owed from sales of natural gas from Bonga.
“This matter is the subject of ongoing discussions between NNPC, SNEPCO [Shell Nigeria Exploration and Production Co, which operates Bonga] and other partners” in the offshore block, a Shell spokesman said.
Exxon Mobil said its affiliates “fully comply with all laws and regulations and have paid taxes and royalties to Nigeria accordingly.” It said it was in ongoing discussions with a number of Nigerian government agencies on issues such as taxes but would not comment on the talks.
The claim comes at a critical time for Shell in Nigeria, Africa’s biggest crude exporter. Militant attacks on its operations in the Niger Delta have forced it to shut down a big chunk of its onshore production. The company has also complained that the Nigerian government is failing to meet its funding obligations for the joint venture it runs with Shell, known as the Shell Petroleum Development Company or SPDC.
Shell isn’t the only company to suffer from such funding shortfalls. French oil major Total SA reached an agreement with NNPC on Tuesday to resolve its own funding crisis in Nigeria, concluding a deal on “financial assistance” that would cover three joint-venture projects in the west African country.
The outlook for big Western oil companies operating in Nigeria became even more uncertain last year when Mr. Yar’Adua said he wanted to renegotiate contracts governing offshore fields to better reflect soaring oil prices.
Bonga and Erha are covered by production-sharing contracts, which allow oil companies to recoup more of their costs before having to share substantial profits with the government. But the steep rise in crude prices has encouraged many oil-producing countries to rewrite such contracts so they get a bigger share of income from big oil and gas projects.
http://online.wsj.com/article/SB121131828596508245.html?mod=googlenews_wsj
>> European protests against soaring fuel prices spread across the continent Wednesday, as fishermen, truckers and other groups called for government action as crude-oil prices hit yet another high.
The protests are creating conflicts for European policymakers, who have used every tool available to governments — taxes, congestion charges, public-transport incentives and even bicycle rentals — to reduce their countries’ reliance on cars and trucks to cut fuel consumption and protect the environment. It’s unlikely that a few protests will reverse that unified goal, although temporary rescue plans are expected.
France’s politically powerful fishing unions want the government to increase a $480 million rescue plan aimed at offsetting a doubling in the cost of diesel fuel since November. The fishing fleet also has been blockading French ports and oil terminals on the Atlantic and the Mediterranean coasts for more than a week.
A clash in Paris between around 200 protesting fishermen and police Wednesday came as Brent crude oil futures for July delivery, the benchmark contract for Europe, jumped more than $1 to hit an all-time high of $129.70, driven by robust demand and reluctance among oil producers to increase output.
European governments are under pressure to cut excise taxes on fuel to provide relief. Rising oil and gas prices already pose an inflation conundrum for central banks and impose higher costs for businesses and commuters that could put economic growth at risk. Now fuel prices risk triggering strikes and roadblocks that could wreak havoc in Europe’s largely fragmented transport industry.
Hefty sales, environmental and excise taxes on fuel mean prices are already far higher in Europe than they are in the U.S. A gallon of unleaded gasoline costs around $9.00 a gallon in most of Europe, more than double the nearly $4.00 currently paid by U.S. drivers.
Governments have so far been reluctant to cut these taxes, seeking instead to shift the blame on oil producers.
Germany’s lobby group for car drivers, the ADAC, wants to see cuts in the “eco tax,” used to help finance the state pension program. “The threshold of pain has been reached for car drivers,” said Otto Saalmann, a spokesman for ADAC.
But some analysts say lower fuel taxes would only magnify demand.
“A one-off cut in excise taxes could even worsen the situation in the all-too-likely case of oil prices rising further,” said Enrico D’Elia, a senior economist at Italian think-tank ISAE. Excise taxes are levied on volume, not price, and so actually dampen price volatility, he noted.
Italy’s new industry minister, Claudio Scajola, called the price Italians pay for fuel “intolerable.” He met with oil-industry leaders last Friday and warned he might take “structural measures” if the companies didn’t bring their prices more in line with the rest of Europe.
People who don’t own cars are also hit by rising fuel prices as businesses try to pass the higher costs they incur on to their consumers.
“We’re already talking about raising prices, because at current fuel price levels we can’t operate,” Roman Smidbersky, head of sales at the Czech Republic’s largest trucking and logistics operator, CS Cargo AS, told a local newspaper Wednesday. He estimated that logistics companies will have to lift their rates by as much as 10% just to keep their trucks on the road.
In Bulgaria, around 1,000 truckers besieged roads leading into Sofia earlier this week to protest the rise in diesel prices. They are particularly incensed that the price of diesel is now above that of regular gasoline, and note excise taxes on diesel have been hiked fourfold in only a few years. Those tax hikes were largely designed to comply with European Union rules and eliminate previous subsidy schemes.
Up to a thousand British truckers coordinated by protest group TransAction 2007 plan to drive their rigs into London next Tuesday, snarling traffic as they deliver demands for relief on fuel taxes to Prime Minister Gordon Brown’s Downing Street residence. The action marks an escalation from a protest last month, when 65 trucks blocked traffic in some of London busiest thoroughfares.
U.K. haulers claim rising oil prices now mean that fuel represents over 40% of their total operating costs, up from 30% just six months ago. “The haulage industry is on its knees, it’s unable to recover all these price increases,” said Mike Presneill, a haulage contractor from Kent, England, who will take part in the protest.
Write to Andrea Thomas at andrea.thomas@dowjones.com
http://online.wsj.com/article/SB121140824369312241.html?mod=hps_us_whats_news
ISSUERS OF NEWS RELEASES AND NOT OILANDGASPRESS.COM ARE SOLELY RESPONSIBLE FOR THE ACCURACY OF THE CONTENT
>>The UAE’s temporary power sector is expected to grow by 25 per cent year-on-year with major demand coming from Dubai, according to experts in the industry.
With the growing population and mega scale industrial and real estate developments, demand for power is estimated to rise considerably. “Currently, the Gulf has more than 2,000 major projects in sectors such as oil and gas, infrastructure, power and water and petrochemicals, valued at an estimated US$1 trillion (Dh3.6trn) and we expect temporary power sector to grow by 25 per cent until 2015,” Colin Cave, General Manager - Northern Gulf of Rental Solutions and Services, told Emirates Business.
“The UAE alone has 743 major construction projects. Each project has several buildings, facilities and utilities. Let us presume that each major project requires 400 amps of power. Even if we consider this on the very conservative side we will need 297,200 amps of power – approximately 240MVA,” said Cave. “It is difficult to answer the exact size of the temporary power sector in the region as there are no official independent figures to verify this against. However, our estimate of the total rental market in Middle East would be in the order of US$300 million to US$400m of which we have an estimated 50 per cent to 60 per cent share. Globally, we estimate the energy rental market to be valued at up to US$3 billion,” Julian Ford, business development director of Aggreko International, said.
Aggreko has provided power to a number of Dubai-based developments, such as Dubai Festival City, during the construction phases and until the national power distribution lines are set up.
“In Dubai, Dewa currently has a generating capacity of around 5,500 MW, with a further 1,800 MW of capacity being added this year alone. As we all know, the power supply in the UAE, and Dubai in particular, is highly reliable. The issue in Dubai is the availability of power connections for new building projects,” he said.
- Emirates Business 24|7
>>Petrochemical capacity to expand in UAE: Already a global force to be reckoned with, the Middle East’s chemical and petrochemical sector is on the brink of a new era of investment and expansion. The GCC already produces 30 of the most common intermediate petrochemical products, representing 7 per cent of worldwide production. This is set to increase to 20 per cent of global output by 2010, with Saudi Arabia accounting for almost half of that increase.
The UAE is investing heavily in its petrochemical industry, and will see capacity increase threefold, opening up new opportunities in the downstream and end-use processing sector.
An estimated US$40 billion in new investments is expected in the GCC chemical and petrochemical sector, including non-oil products such as polymer resins, polystyrene and liquid industrial chemicals, by 2010.
According to Abdul Rehman Falaknaz, President of International Expo Consults (IEC), organisers of CHEM Middle East exhibition, this is just the start of a period of rapid growth for the region’s chemicals sector.
“With petrochemical facilities in Europe and the US facing cutbacks due to increasingly high prices and shortage of feedstock, the Gulf countries have emerged as the world’s first choice for new facilities and best choice for investment in this industry”, Falaknaz says.
The decision of where to locate a new complex is an important one for petrochemical companies. The major staging ground in recent years has been the Middle East, and there seems to be valid reason for international companies to locate facilities in this area.
“The continuing expansion and growth in the Middle East has resulted in a need for more sophisticated logistics and supply chain processes to distribute more than 40 million tons of petrochemicals and plastics to over 70 countries on a plant-to-customer basis,” Falaknaz explains.
“For the next 10 years at least the Middle East will continue to have an edge over others. Beyond that, new technologies may change the way we produce polymers and petrochemicals. Economics will ultimately decide the future,” he adds.
CHEM Middle East exhibition takes place May 18-20 at Dubai World Trade Centre. The international trade event for the chemical, petrochemical and chemical process industries will feature leading international companies and associations from over 20 markets, including China, Korea and Germany.
- The Gulf Today
UPI Energy Correspondent, EU eyes Gazprom’s Nigeria play
BERLIN, April 11 (UPI) — Russia’s Gazprom is making sure it keeps its dominance of the European gas market, observers say, by trying to influence a potential alternative supplier to Europe — Nigeria.
Europe’s dependence on Russian gas has worried officials in Brussels ever since Russia in 2006 temporarily shut off Ukrainian gas supplies until the country agreed to pay higher prices. What followed were a string of strategies to diversify Europe’s energy imports, including a pipeline bypassing Russia and greater use of liquefied natural gas.
Western officials say they hope West Africa, though it has less reserves than the Middle East, may turn into a viable alternative supplier to Europe; already, the area is one of the fastest growing producers of LNG.
In West Africa, Nigeria is the uncut diamond: Boasting on- and offshore oil reserves of 35 billion barrels (twice as much as Mexico’s) and 176 trillion cubic feet of natural gas (as much as the United States’), it’s no surprise Nigeria’s energy sector has been courted by U.S. and European officials.
There are problems, however. Violence in the oil-rich Niger Delta and widespread government corruption have cut production, according to some estimates, by as much as a third. Becoming a viable source of supply to Europe will require the reduction of violence to an acceptable level. Still, with most of the world’s easy energy gone, Nigeria could be an attractive prospect — a fact not lost on the Europeans.
Yet since last year, another player has entered the race: Gazprom is in talks with the Nigerian government about investing in the West African country’s gas industry.
“We made a decision to go global in terms of acquiring assets and developing strategy outside Russia. Africa is one of our priorities,” a Gazprom spokesman said.
It’s also one of Europe’s top priorities: A 2,700-mile pipeline linking the Niger Delta to existing gas transmission hubs to the EU in Algeria has already been proposed, a development that hasn’t been exactly met with excitement in the Kremlin. While no specific Russia-Nigerian project has been mentioned yet, observers in Europe are worried that Gazprom’s planned investments are of geopolitical, rather than economic interest: Gaining influence in Nigeria means keeping the ball in Russia’s court when it comes to Europe’s exports, observers say.
“A deal between Gazprom and Nigeria will increase Europe’s dependence on Russian gas,” Rob de Wijk, of the The Hague Center for Strategic Studies, a Dutch policy research institute, told the new energy magazine European Energy Review. “Russia has a deliberate policy aimed at controlling the whole gas market that is meant for Europe.”
Yet while some observers fear Russia aims to block an alternative import route, others argue that by exploring gas fields in Nigeria, more gas will eventually get on the market, benefiting consumers in Europe in the long run. And Gazprom’s decision, of course, makes absolute sense in business terms.
Others say European companies and governments simply need to do more to strike new contracts in Africa, where not only Russia, but also China has been very active — and successful — recently, scoring most of the important business deals connected to sub-Saharan oil resources.
Rather than speaking with one voice when it comes to investing in the continent’s energy sector, European governments still act as a bunch of lone warriors in Africa. A disunited and thus “weak” Europe will not beat Gazprom to the table, however. And that may have far-reaching consequences.
“Europe wants to diversify its energy supplies away from the Middle East. When the Russians gain clout in Nigeria and elsewhere in the region as well, Europe risks exchanging OPEC for Gazprom,” Cyril Widdershoven, energy expert at the Institute for the Analysis of Global Security, told the European Energy Review. “Which in my view is bad news. I fear an Arab camel less than I fear the Russian bear.”
By STEFAN NICOLA
UPI Energy Correspondent
BERLIN
© 2008 United Press International. All Rights Reserved.
>> Nymex crude for May delivery fell 44 cents a barrel to $109.70 in Globex electronic trading by 2213 GMT after having gained three cents on Friday. Prices hit a record high $112.21 a barrel on Wednesday after US government data showed a big drop in US crude and fuel stocks, Reuters reported
March’08 >>Saudi Arabia is keeping its word that it would boost production and ease global oil prices, U.S. Vice President Dick Cheney said in Jerusalem.
Cheney said the Saudis promised three years ago to raise production, investing $90 billion in the process and increasing production capacity from 10.5 million barrels a day in 2005 to 11.8 million barrels today, reaching 12.5 million barrels by 2009, The Wall Street Journal reported Monday.
Cheney spoke about oil production and other topics in a meeting with reporters in Israel before he departed for Turkey during his visit to the Middle East. When summarizing his talks with Israeli leaders, Cheney said Iran and Syria are “doing everything they can to torpedo the peace process” by supplying and supporting Hamas and Hezbollah.
Emerging as an area of concern is arms smuggling into the Gaza Strip, rocket attacks from Hamas-controlled Gaza into Israel and stymieing the Israeli-Palestinian peace negotiations, he said.
Cheney called the mounting U.S. military death toll in the Middle East a “tragedy” but today’s world is violent and “we do live in that kind of world.”
Copyright 2008 by United Press International
>>Chinese demand for West African crude for April rose 45 percent to a record high, pushing overall Asian demand higher despite the expensive cost of crude oil at around $100, trading sources said. China, the world’s second-largest oil consumer, bought 38 cargoes, mostly Nigerian and Angolan crude oil, for April, amounting to about 1.2 million bpd, the sources said. This is a 45 percent increase from March. The previous high was November 2007, when China bought 30 cargoes, or about 919,000 bpd. “Asian demand is strong. We do not see a sign of weakening,” a crude oil trader in Singapore said. Some industry officials said a new Sinopec Corp.’s refinery might be behind the strong demand. The 200,000 bpd refinery in Qingdao is set to start test operation in April and is likely to run on West African grades, mostly light-sweet, before moving on to heavier, sour crude.
Earlier in March, Nobuo Tanaka, the International Energy Agency’s head told Reuters that global oil demand was holding up despite the recent high oil prices at around $100 due to robust demand from emerging markets, such as India and China. India also increased its April purchases of West African crude. It has bought 11 cargoes, or 348,000 bpd, compared with 7 cargoes for March. Overall Asian demand for West African crude totalled about 1.62 million bpd for April, which was a 28 percent increase from the previous month, the highest volume since March 2006. The rise in Chinese and Indian purchase volumes were greater than that of slowdown in demand from the Far East. South Korea and Japan did not buy any cargoes, traders said. The increase in exports to Asia also came as Royal Dutch Shell lifted a force majeure on Nigerian Forcados and Bonny Light shipments. Despite expectations they would be depressed because of larger supplies, spot Nigerian crude oil barrels traded at record high premiums for April due to strong demand. The following table gives the latest breakdown of April, March and February-loading West African crude cargoes sold into Asia, according to trade sources. www.upstreamonline.com
>>>> 25/3/08, US light crude for May delivery stood 79 cents lower at $100.07 a barrel by 0955 GMT, up from an earlier low of $99.66, but sharply down from a record high $111.80 a barrel touched on 17 March.
London Brent crude was down 37 cents to $99.49 a barrel, recovering from an earlier $98.70 low. http://www.upstreamonline.com/live/article151090.ece
Crude oil futures prices for delivery until 2016 have surged above $100 a barrel as investors bet that oil costs will remain high in the long term even if they weaken in the short because the impact of the US economic slowdown.
Every futures contract until December 2016 finished last week above $100 a barrel for the first time after a strong rally in long-dated futures prices. The Nymex December 2016 future settled on Friday at $103.59 a barrel according to the FT.
January’08
Angola is the third largest oil producer in Africa behind Nigeria and Libya and is expected to have significant oil production increases in the short-term as new offshore projects come online. On January 1, 2007, Angola became the 12th member of the Organization of Petroleum Exporting Countries (OPEC) and in December of that year, received an oil production quota of 1.9 million barrels per day (bbl/d) effective January 1, 2008. /www.eia.doe.gov
>>>> Posted by Royal Dutch Shell Plc.com at December 23rd, 2007
23 December 2007
LAGOS (AFP) — Despite being the world’s eighth petroleum exporter and sitting on huge gas reserves, Nigeria will not have it easy over the next two years, between peristent unrest in the Niger Delta and strained relations with the major oil companies.
“In view of the current problems, their goal of 4.0 million barrels per day in 2010 seems inaccessible in the current situation,” said the head of one multinational company operating in the delta, the oil region where violence and insecurity are endemic.
This absence of security means that Nigeria, which ranks fifth among suppliers of crude oil to the United States, lost one quarter of its production in 2006 and 2007. Production is currently estimated at 2.1 million barrels per day.
Oil from the Niger Delta continues to bring in 90 per cent of Nigeria’s foreign currency earnings and, thanks to the recent rise in crude prices, the country’s foreign reserves are close on 50 billion dollars (73 billion euros).
Nevertheless the government is pleading poverty and is trying to reduce its share in investments in the sector, asking oil majors to look for alternative forms of financing.
“Nigeria is supposed to fund part of the onshore activity but hasn’t actually put any money in for three years now,” one foreign oil executive said.
Oil Minister Odein Ajumogobia said recently that of the 15 billion dollars of projected total investments in the sector in 2008, the government was supposed to shoulder 8.8 billion but that it had in fact allocated only araound 5.0 billion.
The government has asked the oil companies to find the missing 3.8 billion.
Shell, Chevron, Exxon Mobil, Total and ENI/Agip point out that Nigeria’s 2008 budget was based on an oil price of 53 dollars per barrel, when it is currently close to 100 dollars and looks set to continue its rise.
The majors are also worried about the Nigerian government’s intention to renegotiate the oil revenue sharing agreement.
“Given the massive investments entailed, notably in the deep offshore, our margins are already very narrow,” the chairman of one oil group said.
Another complained that when oil was at 80 dollars a barrel, his company was making a profit of 3.0 dollars, with the remainder all going to the Nigerian government.
“We were all in difficulty in 2007,” said an executive at Shell, Nigeria’s biggest producer.
This past year Shell Nigeria (SPDC) spent one billion dollars on pipeline maintenance alone. The company had initially been looking at a total budget of 6.6 billion dollars but pruned it drastically, first to 4.5 billion, then to 2.7 billion.
In November the company announced one thousand job cuts.
“We’re operating in an extremely difficult environment where production levels have been hard hit by the unrest,” Director General Basil Omiyi said.
In 2003 SPDC was producing one million barrels per day. By 2007 that had fallen to 460,000.
Another European operator noted that numerous projects have been postponed or put on hold because of the restructuring at Nigerian National Petroleum Corporation (NNPC), the partner with whom foreign companies are obliged to set up joint ventures if they want to operate in Nigeria.
To complicate matters further Nigeria is now telling the oil companies to stop gas flaring in early 2008, on pain of sanctions.
“They want everything tomorrow but in this industry we count in decades,” said one oil executive.
For Shell, oil-producing zones are one of three colours, depending on the level of risk: red, yellow or green.
Most of the Middle East is “red.” Nigeria, despite all the difficulties, is still “green”. But for how long?
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>>>> Shell finance chief sees continuing high oil prices
Energy prices will remain high next year, driven by demand from developing countries, but energy companies face massive cost pressures, Royal Dutch Shell chief financial officer Peter Voser was quoted as saying. Voser told Swiss newspaper Finanz und Wirtschaft he did not expect a global recession next year, but growth would slow down, and the credit crisis would weigh on the economy in the United States and Europe, although less so in Asia. “Energy prices will remain high … Our concern is the development of costs. Financial spending for modernising our production plans is rising rapidly and cost inflation reduces profits,” he said. Voser said costs rose at Shell by 10 percent this year against an industry average of 20 percent.
Oil rose 2.4 percent on Monday after a report showing a jump in U.S. personal spending relieved some concerns about the economic health of the world’s top oil consumer. U.S. crude traded up $2.19 to $93.25 a barrel by 1850 GMT. London Brent crude gained $1.53 to $92.41. Shell expects to get a green light to drill for oil in Alaska next year, despite resistance from environmentalists, he said. “We are very interested in the Alaska project because we expect to find large reserves there and the United States is the biggest market,” he said. Voser said Shell’s liquefied natural gas and crude project in Sakhalin, in Russia’s far east, would start to contribute to the company’s production growth in 2009. The project was originally led by Shell but last year Shell agreed to sell control to Russia’s Gazprom after Russia’s environmental watchdog agency threatened to strip it of production licences for breaking ecological rules. In September, the project, Sakhalin Energy, said it would delay year-round exports of crude to 2008 from the end of 2007. It said on Monday it would complete its LNG plant in late 2008, effectively delaying supplies to Asia by at least few months. Industry sources said the delay, arising from slow construction work could be extended to spring 2009.
>>> According to current estimates, more than three-quarters of the world’s oil reserves are located in OPEC countries. The bulk of OPEC oil reserves is located in the Middle East, with Saudi Arabia, Iran and Iraq contributing 56% to the OPEC total. OPEC countries have made significant contributions to their reserves in recent years by adopting best practices in the industry. As a result, OPEC proven reserves currently stand well above 900 billion barrels. www.opec.org
>>> According to Ernst & Young’s Global Oil & Gas Center, demand is expected to drive industry transformation for 2008 in the following ways:
… Increased activity on the part of National Oil Companies;
… Unprecedented competition for reserves;
… Increased emphasis on enterprise-wide risk management;
… High-volume and high-priced transaction activity; and
… Expanded use of International Financial Reporting Standards.
Ernst & Young’s Global Oil & Gas Center works with companies throughout
the world, helping them succeed in the ever-evolving oil and gas business.
Drawing from industry experience gained from working with our oil and gas
clients, the center’s practitioners offer the following assessment of the oil and gas industry in the year ahead.
Upstream E&P
The cost of exploration and production (E&P) continues to rise sharply.
Heightened resource nationalism and geopolitical issues are increasing costs and decreasing access to reserves for International Oil Companies.
Investment opportunities are becoming less lucrative, and returns are decreasing. On a positive note, access restrictions may be lifted in the Gulf of Mexico, creating new opportunities for upstream activity. Ernst & Young anticipates that companies will take a slower, more cautious approach
to upstream spending in 2008.
Midstream
New midstream opportunities are emerging in support of the Canadian oil
sands, Rocky Mountain natural gas, Barnett Shale, and liquefied natural gas
(LNG). New technologies, like carbon sequestration, may prompt major changes in the way midstream companies conduct business in the coming year.
Downstream
This segment of the industry continues to walk a tight rope, balancing capacity and margins. Global refining capacity continues to be tight, and margins are expected to remain volatile. Ernst & Young expects that margin averages may fall from recent highs, but remain above longer-term historical levels until new capacity is added. Upgrades later this decade should alleviate the strain.
Enterprise Risk Management
Despite healthy revenues in recent years, energy companies face a growing number of business risks ranging from uncertain energy and environmental policies, to talent shortages, and supply interruptions. In years past, these risks were often managed independently, but there is a growing recognition of the value to capturing and weighing all risks across the enterprise and understanding the relationships they may have to each other and the combined impact on the business.
Transactions
Investors seeking attractive growth and high margin acquisition opportunities will look to the oil and gas industry’s significant, sustained, and growing cash flows. Just as outside investors are investing in oil and gas, large oil and gas companies flush with cash will look for opportunities to enhance technology capabilities and reserve bases through acquisition. Smaller E&P companies will be of particular interest to this investor.
In the United States, Master Limited Partnerships (MLPs) have emerged as the dominant deal structure in oil and gas and will gain more ground in the coming year, according to a recent Ernst & Young survey. The MLP structure, however, is creating companies with unbalanced portfolios as specific areas or divisions of a company are bought up and developed as stand-alone entities. Private Equity continues to have a keen interest in energy, with a particular focus in refining.
International Financial Reporting Standards (IFRS)
European Union countries have all adopted IFRS, almost 100 other countries require or allow the use of IFRS, and other countries - including the United States - are moving to do the same. If implemented by the US Securities and Exchange Commission, IFRS could transform global financial operations. IFRS standards, which could go into effect as early as the first half of 2008, would streamline financial operations by creating one set of international accounting rules. IFRS could be a watershed event for global oil and gas companies.
Looking Ahead
Ernst & Young is constantly evaluating and assessing oil and gas industry trends in order to better determine the impact for their clients.
The oil and gas industry is subject to many unpredictable factors. While forecasts can be useful for planning and strategy, hindsight is the only true measure of industry performance.
About the Global Oil & Gas Center
The Ernst & Young Global Oil & Gas Center brings together the people and ideas that help you successfully address the complexities of today’s global oil and gas business. We bring together a global network of energy professionals that can work closely with you to develop coordinated approaches to managing risk, optimizing performance, and increasing your operational effectiveness, while bringing you insights into the major trends that impact your business - both now and in the future.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 130,000 people are united by our shared values and an unwavering commitment to quality. For more information, please visit http://www.ey.com.
Ernst & Young refers to the global organization of member firms of
Ernst & Young Global Limited, each of which is a separate legal entity.
Ernst & Young Global Limited, a UK company limited by guarantee, does not
provide services to clients.
This news release has been issued by EYGM Limited, a member of the
global Ernst & Young organization that also does not provide any services
to clients.
SOURCE Ernst & Young
