MYANMAR: Crude oil pipeline to China starts up

(EnergyAsia, January 30 2015, Friday) — Myanmar has officially started up the final 771-km section of a major pipeline to deliver crude oil from a new deepwater port on the Bay of Bengal in southwestern Rakhine state to China’s landlocked Yunnan province.


Twinned with a 793-km natural gas pipeline launched in July 2013, the oil pipeline forms part of a China-led effort to develop overland infrastructure across Myanmar to facilitate trade to bypass the use of the increasingly congested Straits of Malacca that has long been the main channel linking East Asia to Europe, Africa and the Middle East.

Myanmar Vice President U Nyan Tun officially launched the project with the January 28 ceremony commissioning a crude oil unloading terminal on Maday Island that is linked by the pipeline to Yunnan’s Anning city where PetroChina is planning to build an oil refinery and petrochemical plant.

China National Petroleum Corp (CNPC) and Myanma Oil and Gas Enterprise (MOGE) are joint owners of the South-East Asia Crude Oil Pipeline Company Ltd (SEAOP), the operator of the pipeline that is designed to deliver 22 million tons of imported crude oil per year from the new Kyaukphyu deep-sea port and terminal. The Chinese firm has a 50.9% majority stake in the pipeline.

The gas pipeline and six processing stations are owned by South-East Asia Gas Pipeline Company, Ltd (SEAGP), a consortium comprising six Asian companies to deliver 12 billion cubic metres of natural gas per year. Led by CNPC, its other members are Daewoo and Korea Gas Corp of South Korea, ONGC Videsh Ltd and GAIL of India, and state-owned Myanmar Oil and Gas Enterprise (MOGE).

Continuous protests by environmental groups and local residents have delayed the project including the oil pipeline which was completed last May after four years of construction.

CNPC has also built oil storage tanks on the island to support trade and infrastructure development in southwestern Myanmar. Alongside the twin pipelines, China is also investing in a major rail line and a highway to link Kyaukpyu to the Yunnan cities of Ruili and Kunming.

The project fulfils a dream by the British colonial power and other regional governments since the late 18th century for an alternative passage to the Straits of Malacca to serve trade East Asia.

The project could alter the pattern of international trade in Asia as the 960-km Straits of Malacca leads to Singapore as the region’s main transshipment and distribution point for the region. China and Myanmar are hoping to develop Maday Island into a major transshipment hub.

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MARKETS: OPEC boosts outlook for global oil demand for 2015, economic growth in the US and Eurozone

(EnergyAsia, January 30 2014, Friday) — With oil prices trading new near six-year lows, Organisation of Petroleum Exporting Countries (OPEC) has boosted its 2015 outlook for global oil demand and the economic prospects of the US and Eurozone. Crude prices are still under selling pressure despite North Sea Brent hitting a low of US$47.57 a barrel and US WTI slumping below US$44 this week.


While consumers are benefitting from lower oil prices, the cartel does not expect the windfall from energy savings to ignite economic growth.

It kept unchanged its January forecasts for the world economy to grow by 3.6% this year, with further improvements in the US and the Eurozone expected to be offset by weakness in Japan and Russia.

OPEC expects the Chinese economy to experience slower growth this year after expanding 7.4% in 2014 for its slowest rate since 1990. Beijing could be targeting growth of just seven percent this year.

“China will focus on deepening reforms which will have immediate economic benefits in 2015, although the country is notably delaying meaningful implementation of some major items,” said OPEC

Global oil supply will rise further as producers are unable to slow or shut down operations to maintain momentum.

The cartel estimates non-OPEC countries boosted production by 1.98 million b/d to 56.22 million b/d in 2014 compared with the December report’s estimate of 55.96 million b/d. It attributed the higher output to additional supplies coming out from the US, Russia, the UK, Brazil, Vietnam, Kazakhstan and Latin America.

“Non-OPEC oil supply in 2015 is projected to grow by 1.28 million b/d, down 80,000 b/d from the previous assessment, to average 57.49 million b/d,” it said.

 

January 2015

Table 1. World oil demand, million b/d

2013   2014    2015    2015/14 %

Americas                   24.08 24.18   24.37   0.79

Europe                       13.61 13.40   13.31   -0.67

OECD Asia                   8.32   8.14    8.02   -1.47

Total OECD                 46.01   45.72   45.70   -0.04

 

Other Asia                 11.06   11.28 11.53   2.22

China                          10.07   10.45   10.75   2.87

Latin America                        6.50  6.71    6.91   2.98

Middle East               7.81    8.07    8.35   3.47

Africa                           3.63    3.73    3.82   2.41

FSU                              4.49    4.54    4.58   0.88

Other Europe                         0.64    0.65    0.66   1.54

Total world                 90.20   91.15   92.30   1.26

Previous estimate   90.20   91.13   92.26   1.24

 

December 2014

Table 1. World oil demand, million b/d

2013   2014    2015    2015/14 %

Americas                   24.08 24.15   24.31   0.66

Europe                       13.61 13.39   13.30   -0.67

OECD Asia                   8.32   8.16    8.04   -1.47

Total OECD                 46.01   45.71   45.64   -1.53

 

Other Asia                 11.06   11.28 11.52   2.13

China                          10.07   10.42   10.73   2.98

Latin America                        6.50  6.78    6.93   2.21

Middle East               7.81    8.09    8.38   3.58

Africa                           3.63    3.72    3.81   2.42

FSU                              4.49    4.55    4.60   1.10

Other Europe                         0.64    0.65    0.66   1.54

Total world                 90.20   91.13   92.26   1.24

Previous estimate   90.14   91.19   92.38   1.31

 

November 2014

Table 1. World oil demand, million b/d

2013   2014    2015    2015/14 %

Americas                   24.05 24.17   24.33   0.66

Europe                       13.61 13.41   13.34   -0.52

OECD Asia                   8.29   8.16    8.06   -1.23

Total OECD                 45.95   45.74   45.73   -0.02

 

Other Asia                 11.06   11.29 11.52   2.04

China                          10.07   10.41   10.72   2.98

Latin America                        6.50  6.72    6.95   3.42

Middle East               7.81    8.12    8.41   3.57

Africa                           3.63    3.72    3.81   2.42

FSU                              4.49    4.55    4.60   1.10

Other Europe                         0.64    0.65    0.66   1.54

Total world                 90.14   91.19   92.38   1.31

Previous estimate   90.14   91.19   92.39   1.31

 

October 2014

Table 1. World oil demand, million b/d

2013   2014    2015    2015/14 %

Americas                   24.05 24.17   24.33   0.66

Europe                       13.61 13.41   13.34   -0.52

OECD Asia                   8.29   8.16    8.06   -1.23

Total OECD                 45.95   45.74   45.73   -0.03

 

Other Asia                 11.06   11.29 11.52   2.04

China                          10.07   10.41   10.72   2.98

Latin America                        6.50  6.72    6.95   3.35

Middle East               7.81    8.12    8.41   3.43

Africa                           3.63    3.72    3.81   2.42

FSU                              4.49    4.55    4.60   1.10

Other Europe                         0.64    0.65    0.65   0.01

Total world                 90.14   91.19   92.39   1.31

Previous estimate   90.14   91.19   92.38   1.30

 

September 2014

Table 1. World oil demand, million b/d

2013   2014    2015    2015/14 %

Americas                   24.05 24.19   24.35   0.66

Europe                       13.61 13.41   13.34   -0.52

OECD Asia                   8.29   8.23    8.06   -2.07

Total OECD                 45.95   45.77   45.75   -0.04

 

Other Asia                 11.06   11.29 11.52   2.04

China                          10.07   10.39   10.70   2.98

Latin America                        6.50  6.72    6.95   3.42

Middle East               7.81    8.12    8.41   3.57

Africa                           3.63    3.72    3.81   2.42

FSU                              4.49    4.55    4.60   1.10

Other Europe                         0.64    0.63    0.64   0.01

Total world                 90.14   91.19   92.38   1.30

Previous estimate   90.01   91.11   92.32   1.32

 

 

January 2015

Table 2. World economic growth: OPEC’s forecast

World OECD   US       Japan Eurozone       China

2014                3.2       1.8       2.4       0.2       0.9                   7.4

2015                3.6       2.2       2.9       1.2       1.2                   7.2

 

December 2014

Table 2. World economic growth: OPEC’s forecast

World OECD   US       Japan Eurozone       China

2014                3.2       1.8       2.2       0.4       0.8                   7.4

2015                3.6       2.1       2.6       1.2       1.1                   7.2

 

November 2014

Table 2. World economic growth: OPEC’s forecast

World OECD   US       Japan Eurozone       China

2014                3.2       1.8       2.1       0.8       0.7                   7.4

2015                3.4       2.0       2.6       1.2       1.1                   7.2

 

October 2014

Table 2. World economic growth: OPEC’s forecast

World OECD   US       Japan Eurozone       China

2014                3.2       1.8       2.1       0.8       0.7                   7.4

2015                3.4       2.0       2.6       1.2       1.1                   7.2

 

 

January 2015

Forecasts: Non-OPEC oil supply in 2014 and 2015, million b/d

2013    2014    %         2015    %

Non-OPEC                   54.24   56.22   3.65     57.49   2.26

Previous estimate   54.23   55.95   3.17     57.31   2.43

 

December 2014

Forecasts: Non-OPEC oil supply in 2014 and 2015, million b/d

2013    2014    %         2015    %

Non-OPEC                   54.23   55.95   3.17     57.31   2.43

Previous estimate   54.23   55.91   3.10     57.16   2.24

 

November 2014

Forecasts: Non-OPEC oil supply in 2014 and 2015, million b/d

2013    2014    %         2015    %

Non-OPEC                   54.23   55.91   3.10     57.16   2.24

Previous estimate   54.23   55.91   3.10     57.16   2.24

 

October 2014

Forecasts: Non-OPEC oil supply in 2014 and 2015, million b/d

2013    2014    %         2015    %

Non-OPEC                   54.23   55.91   3.10     57.16   2.24

Previous estimate   54.23   55.91   3.10     57.16   2.24

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CHINA: Agencies expect slower oil demand growth in 2015

(EnergyAsia, January 29 2015, Thursday) — China will not ride to the rescue of slumping oil prices as its demand will continue to grow at a slower rate in response to a weakening economy and the government’s drive to improve energy efficiency.


The research arm of China National Petroleum Corp (CNPC) expects the world’s second largest oil consumer to use another 3% more in 2015 compared with last year’s 10.68 million b/d, while the International Energy Agency (IEA) is forecasting an even lower rate of 2.5%. The US Energy Information Administration (EIA) believes Chinese oil demand will rise 2.9% to 11.3 million b/d in 2015 and 3.1% to 11.65 million b/d next year.

These forecasts represent a sharp reduction in China’s oil demand growth compared with the previous decade. According to Platts, Chinese oil consumption rose by 3% last year and 2% in 2013.

China’s slowing oil demand growth comes as no surprise as its economy is no longer expanding at the breakneck annual rates of 10% or more of previous years. According to the National Bureau of Statistics, the economy grew by 7.4% in 2014, the slowest rate in 24 years, missing the government’s target of 7.5%.

Under President Xi Jinping, who came to power two years ago, the Chinese government has declared it will focus on improving the quality of growth including

Platts said Chinese oil product imports in 2014 tumbled 24.2% from 2013 to 30 million tonnes, the lowest annual level since the US media firm started tracking the country’s oil demand data in 2005.

China’s oil appetite may have been further weakened by the government’s campaign to reduce waste and greenhouse gas emissions while raising domestic energy efficiency. The State Council, the country’s leading planning agency, said these measures have helped reduce the economy’s energy intensity by 4.8% last year, exceeding the official target of 3.9% as well as improving on 2013’s 3.7% rate.

The 55% plunge in oil prices since mid-2014 has helped China save around US$100 billion, Lin Boqiang Lin, the dean of the China Institute for Energy Policy Studies, told the World Economic Forum in Davos last week.

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MARKETS: After months of decline, crude trades in holding pattern just below US$50 a barrel

(EnergyAsia, January 28 2015, Wednesday) — After seven months of largely uninterrupted decline, crude prices appear to have settled into a trading range between US$45 and US$49 per barrel in recent weeks.

Analysts are divided over whether this represents a lull before the next leg of the market’s sustained plunge or the medium-term floor for its eventual recovery. Some are calling for prices to slide to the mid-$20s while the International Energy Agency (IEA) believes a recovery will take hold later in 2015. OPEC’s secretary-general, Abdullah al-Badri, was more than hopeful when he told Bloomberg that crude prices could spike all the way to US$200 a barrel if the industry failed to make new investments amid the present carnage.

In its January report, the IEA said has detected “signs” that the tide is turning in favour a price recovery. As a result of weak prices, the agency has reduced its forecast for US production growth in 2015 by 75,000 b/d to 850,000 b/d and for Canadian output growth by 95,000 b/d to 220,000 b/d.

UK-based consultant DW said oil prices are being held down by oversupply, but suggested it may not be for too long.

“Production from wells declines naturally at some 9% p.a., and even with costly intervention at perhaps 5% p.a. With global demand at some 92 million b/d, this suggests a requirement to replace in excess of 4.5 million b/d of production in 2015 and more in 2016, etc., but where will the new oil come from?” it asked.

Citing the IEA, it said US oil production may grow by 500,000 b/d in 2015 but could start to peak as early as 2016.

“Investment in production is already being hard hit. Around 400,000 low output stripper wells each pump less than 10 b/d, but in total produce three-quarters of a million b/d and are prime candidates,” it said. At the other end of the scale, BHP Billiton has said it would cut back on its planned US$4 billion spending on its US shale assets.

Offsetting these losses, DW said projects underway worldwide will add production to complement OPEC’s near 2.5 million b/d of spare capacity.

Making the case for a possible price recovery as early as late 2015, DW said the market may see a balanced state soon, and then encounter insufficient supply and rising prices.

“Furthermore, we must not forget there is always potential for supply disruption, OPEC has at times lost some 2 million b/d, non-OPEC producers near 1.2 million b/d,” it said.

“Unless we keep adding production, surplus capacity will be quickly eroded. The next oil price surge is already being set up.”

Canada’s RBC bank also read the IEA projections as being positive for crude prices on account of the agency reducing its non-OPEC supply forecast by 350,000 b/d to 57.5 million b/d for 2015.

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MARKETS: EIA sees further increases in global oil demand and supply for 2015, slashes crude price outlook

(EnergyAsia, January 27 2015, Tuesday) — The US Energy Information Administration (EIA) has raised its forecasts for both global oil demand and supply growth for 2015 in its January report compared with the previous month.

It has also sharply slashed its forecast for crude prices with North Sea Brent to average $58 per barrel in 2015 and US West Texas Intermediate (WTI) to trade at US$54 to $55. In December, the agency had called for Brent to average US$68 per barrel in 2015, down US$15 from its November forecast, while WTI would trade at an average US$63 instead of US$78.


Helped by these low prices, the EIA believes global oil demand will rise to record highs over the next two years, by 1.09% to 92.39 million b/d in 2015, and 93.42 million b/d next year. It estimated 2014 demand at 91.39 million b/d.

On the supply side, the agency has boosted its forecast for 2015 global output to 92.97 million b/d, compared with 91.96 million b/d in the December report. Despite the weak outlook on oil prices, the industry will continue to raise production in 2016 to 93.58 million b/d.

As mentioned by President Barack Obama, the US has become a leading global oil and gas producer. The EIA expects US liquid fuels output to rise more than 6% to 14.83 million b/d in 2015, and by a further 3.65% to 15.37 million b/d next year.

It is projecting US crude oil production to average 9.3 million b/d in 2015, and 9.5 million b/d in 2016, just slightly less than the record 9.6 million b/d achieved in 1970.

In contrast, OPEC crude oil production fell slightly to average 29.9 million b/d in 2014 as losses in Libya, Angola, Algeria and Kuwait more than offset production growth in Iraq and Iran.

The EIA expects OPEC crude oil production to remain flat in 2015 and to fall by 300,000 b/d in 2016.

While positioned to become OPEC’s largest contributor of growth over the next two years, Iraq’s production and export face the threats of sabotage and theft by the Islamic State (ISIS).

The EIA said it expects global oil inventories to continue to build to keep the glut of new supplies from hitting the markets and further putting pressure on prices.

It estimates that global oil inventories rose by almost 800,000 b/d in 2014, the largest build since 2008 when falling demand caused prices to plunge in the second half of the year.

This time around, it said the market’s weakness has been caused by the production surge in the US and other non-OPEC countries which hit a record high totalling two million b/d in 2014.

“Global oil inventories are expected to continue to grow by 900,000 b/d during the first half of 2015, but to taper off by the end of the year as non-OPEC supply growth, particularly from the US, weakens because of lower oil prices,” said the EIA.

Within the Organization for Economic Cooperation and Development (OECD), commercial oil inventories grew by a record 158 million barrels in 2014, after ending 2013 at the lowest end-of-year level since 2003.

Underlining the continuing global supply glut, the EIA said it expects OECD commercial inventories to grow by 68 million barrels in 2015 and to stay flat in 2016.

 

Jan 2014: EIA’s world liquids demand forecast, in million b/d

2014    2015 * y/y %   2016 * y/y %

  1. America 23.45 23.67   0.94     23.76   0.38

China                          10.98   11.30   2.91     11.65   3.10

Others                                    56.96   57.42   0.81     57.47   0.09

TOTAL                         91.39   92.39   1.09     93.42   1.11

*forecast

 

Dec 2014: EIA’s world liquids demand forecast, in million b/d

2013    2014 * y/y %   2015 * y/y %

  1. America 23.44 23.39   -0.21    23.51   0.51

China                          10.61   10.98   3.49     11.34   3.28

Others                                    56.43   57.07   1.13     57.47   0.70

TOTAL                         90.48   91.44   1.06     92.32   0.96

*forecast

Nov 2014: EIA’s world liquids demand forecast, in million b/d

2013    2014 * y/y %   2015 * y/y %

  1. America 23.44 23.34   -0.43    23.48   0.60

China                          10.61   10.98   3.49     11.34   3.28

Others                                    56.43   57.06   1.11     57.68   1.09

TOTAL                         90.48   91.38   0.99     92.50   1.23

*forecast

 

Oct 2014: EIA’s world liquids demand forecast, in million b/d

2013    2014 * y/y %   2015 * y/y %

  1. America 23.40 23.36   -0.17    23.56   0.86

China                          10.61   10.98   3.49     11.35   3.37

Others                                    56.44   57.13   1.22     57.80   1.17

TOTAL                         90.45   91.47   1.13     92.71   1.36

*forecast

Sept 2014: EIA’s world liquids demand forecast, in million b/d

2013    2014 * y/y %   2015 * y/y %

  1. America 23.38 23.35   -0.13    23.54   0.81

China                          10.61   10.98   3.49     11.41   3.92

Others                                    56.52   57.22   1.24     58.03   1.42

TOTAL                         90.51   91.55   1.15     92.98   1.56

*forecast

Jan 2015: EIA’s world liquids supply forecast, in million b/d

2014    2015 * y/y %   2016 * y/y %

OPEC                           36.00   36.13   0.36     36.14   0.03

Non-OPEC                   56.18   56.84   1.17     57.37   0.93

– US                                              13.98     14.83     6.08        15.37     3.65

TOTAL                         92.18   92.97   0.86     93.51   0.58

*forecast

 

Dec 2014: EIA’s world liquids supply forecast, in million b/d

2013    2014 * y/y %   2015 * y/y %

OPEC                           36.03   35.96   -0.19    35.92   -0.11

Non-OPEC                   54.13   56.00   3.45     56.84   1.50

– US                                              12.34     13.90     12.64     14.89     7.12

TOTAL                         90.16   91.96   2.00     92.75   0.86

*forecast

Nov 2014: EIA’s world liquids supply forecast, in million b/d

2013    2014 * y/y %   2015 * y/y %

OPEC                           36.03   35.92   -0.31    35.93   0.02

Non-OPEC                   54.16   56.03   3.45     56.98   1.70

– US                                              12.36     13.86     12.14     14.95     7.86

TOTAL                         90.18   91.95   1.96     92.91   1.04

*forecast

 

Oct 2014: EIA’s world liquids supply forecast, in million b/d

2013    2014 * y/y %   2015 * y/y %

OPEC                           36.03   35.78   -0.69    35.51   -0.75

Non-OPEC                   54.12   55.98   3.44     57.15   2.09

– US                                              12.34     13.82     11.99     15.05     8.90

TOTAL                         90.15   91.76   1.79     92.67   0.99

*forecast

 

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RUSSIA: Crude sales to surge on reduced export duty and weaker refinery demand, says ESAI

(EnergyAsia, January 26 2015, Monday) — Russia will increase its crude sales abroad by about 200,000 b/d next month in response to reduced export tax rates and weak demand from domestic refiners, according to US-based consultant ESAI Energy. In its CIS Watch report, ESAI said it expects Russia to export more crude oil and less petroleum…

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MIDDLE EAST: Oil-exporting countries in region and nearby areas to lose US$300 billion from falling prices, says IMF

(EnergyAsia, January 23 2015, Friday) — The oil-exporting countries in the Middle East, North Africa, Afghanistan and Pakistan (MENAP) and the Caucasus and Central Asia (CCA) regions will lose an estimated total of US$300 billion in export revenues this year as a result of the oil price collapse, said the International Monetary Fund (IMF).


The price of Brent crude has fallen from a high of US$115 a barrel last June to less than US$50 this week, with some analysts forecasting further declines in the months ahead.

But, net consuming countries will have little to celebrate either as demand for their goods is falling, eroding “the windfall gains from lower oil import bills,” said the fund in an update of its economic outlook for the regions on January 21.

It expects the collapse oil priced to lead to “significant declines in the fiscal balances of oil exporters in the MENAP and CCA regions.”

Except for Kuwait, Qatar, and Turkmenistan, the countries in MENA are expected to run fiscal deficits in 2015.

For countries in the CCA, the impact of lower oil prices is compounded by the deepening recession in Russia, to which the region is closely linked through trade, remittances, and foreign direct investment, the report said.

The fund advised oil exporters to “avoid abrupt spending cuts” and importers to “treat savings from lower prices as transitory.”

For this year, it said most oil exporter governments have the financial resources to avoid a steep reduction in their spending plans.

However, over the medium term, they would need to “gradually but decisively adjust their fiscal positions to ensure sustainability and intergenerational equity,” said Masood Ahmed, the fund’s Middle East director at a press conference in Washington DC.

“Importing countries are well-advised to avoid entering into spending commitments that would be hard to reverse if oil prices returned to higher levels,” he added.

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AUSTRALIA: Chevron signs five-year deal to supply LNG from Gorgon field to South Korea’s SK Group

(EnergyAsia, January 22 2015, Thursday) — US major Chevron Corp said it has secured a five-year agreement to supply liquefied natural gas (LNG) from its US$54 billion Gorgon field in Australia to South Korea. SK LNG Trading Pte Ltd, a division in the SK Group, will purchase a total of 4.15 million tons of the…

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AUSTRALIA: Earnings from resources and energy exports to decline by 10% in 2014-15, says Department of Industry

(EnergyAsia, January 21 2015, Wednesday) — Due to lower commodity prices, Australia’s earnings from natural resources and energy export earnings will fall by about 10% to A$176 billion in the current financial year to June 30, said the Department of Industry. (US$1=A$1.22). Earnings from liquefied natural gas (LNG) exports will buck the general trend to…

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MARKETS: Low LNG prices to boost 2015 global imports beyond 250 million tons for the first time, says Australia

(EnergyAsia, January 20 2015, Tuesday) — Helped by expected weak prices in 2015, the world’s import of liquefied natural gas (LNG) will reach a record of more than 250 million tons for the first time, said Australia’s Department of Industry.


“After four relatively flat years, global LNG imports are expected to increase more rapidly in 2015,” said the department in its latest resources and energy quarterly report for December 2014.

“Low spot prices are expected to be particularly important in increasing European, Middle Eastern and South American imports. Increased regasification capacity will support greater imports into Southeast Asia and China, where growing energy demand and more competitive LNG prices will also result in increasing gas use,” it said.

According to energy media Platts, spot LNG prices for delivery to Asia, the world’s largest market for the fuel, have fallen to a four-year low of US$9.911 per million British thermal units (/MMBtu). After holding mostly above US$15 since 2011, prices have fallen as LNG sold to Asia is linked to crude oil prices, which have plunged by 60% since mid-2014. Traders expect oil prices to remain weak this year.

Asian LNG imports will grow from an estimated 182 million tons in 2014 to 188 million tons in 2015, said the Australian Department of Industry.

It expects global liquefaction capacity to rise to 258 million tons, up 5.3% from around 245 million ton in 2014 and 2013, due largely to new projects in Australia and resumption of operations at Angola’s Soyo plant.

Papua New Guinea’s new export facility was the only new project to have started up last year, offsetting declines in Africa.

Australia’s gas outlook

unit         2012–13       2013–14                      2014–15                forecast %

Production (a)                  bcm        62.1                          62.8                         67.2                          7.0

LNG export volume         Mt (b)     23.8                         23.6                          26.2                       11.2

– real value (c)                 A$m        15,034                 16,745                      17,568                        4.9

(a). Production includes both sales gas and gas used in the production process (i.e. plant use).

(b). 1 million tonnes of LNG is equivalent to approximately 1.36 billion cubic metres of gas.

(c). In current financial year Australian dollars.

(f). forecast.

Sources: ABS, Company reports and World Bank.

 

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AUSTRALIA: Woodside, Adani to jointly develop LNG assets and business opportunities

(EnergyAsia, January 19 2015, Monday) — Australian upstream company Woodside Petroleum is hoping to develop and sell liquefied natural gas (LNG) to India through its budding relationship with one of India’s leading infrastructure companies, Adani Enterprises Limited. The companies announced last week that they had signed a memorandum of understanding to identify and develop liquefied…

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MARKETS: Most developing countries will benefit from oil price slump, says World Bank

(EnergyAsia, January 16 2015, Friday) –— Most oil-importing developing countries are positioned to reap “substantial” benefits benefit from the collapse in crude prices, now expected to hit six-year lows, said the World Bank.

In an analysis in its latest edition of Global Economic Prospects, the bank said it expects oil prices to remain weak through with “significant” real income transfers from oil-exporting to importing countries. For many oil-importing countries, lower prices contribute to growth and reduce inflationary, external and fiscal pressures.

“The decline in oil prices reflects a confluence of factors, including several years of upward surprises in oil supply and downward surprises in demand, receding geopolitical risks in some areas of the world, a significant change in policy objectives of the Organisation of the Petroleum Exporting Countries (OPEC), and appreciation of the US dollar,” the bank said.

Although the relative strength of the forces driving the recent plunge in prices remains uncertain, supply related factors appear to have played a dominant role.

“For policymakers in oil-importing developing countries, the fall in oil prices provides a window of opportunity to undertake fiscal policy and structural reforms as well as fund social programmes, said Ayhan Kose, the bank’s director of development prospects.

However, the bank also warned that weak oil prices present significant challenges for major oil-exporting countries, which will be adversely impacted by weakening growth prospects, and fiscal and external positions.

“If lower oil prices persist, they could also undermine investment in new exploration or development. This would especially put at risk investment in some low-income countries, or in unconventional sources such as shale oil, tar sands and deep sea oil fields,” it said.

It observed that global trade grew by less than 3.5% in 2012 and 2013, well below the pre-crisis average annual rate of 7%, holding back developing country growth in recent years.

“Weak demand, mainly in investment but also in consumer demand, is one of the main causes of the deceleration in trade growth. With high-income countries accounting for some 65% of global imports, the lingering weakness of their economies five years after the crisis suggests that weak demand continues to adversely impact the recovery in global trade,” it said.

However, long-term trends have also slowed trade growth including the changing relationship between trade and income.

Specifically, the bank said trade has become less responsive to changes in global income because of slower expansions of global supply chains and a shift in demand from trade-intensive investment to less trade-intensive private and public consumption.

ASIA: Chinese, Malaysian state firms interested in TAPI gas pipeline

(EnergyAsia, January 15 2015, Thursday) — Chinese and Malaysian state-owned firms along with France’s Total are believed to have expressed interest in participating in the development of a proposed US$10 billion pipeline to deliver natural gas from Turkmenistan to Afghanistan, Pakistan and India.


International firms will play an important role in planning, designing, building and operating the 1,800-km pipeline, according to the project’s adviser, the Asian Development Bank (ADB). After years of delay, the bank announced last November that the state gas companies of Turkmenistan, Afghanistan, Pakistan and India had jointly set up a company to build, own and operate the pipeline.

The Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline will be equally owned by state-owned Turkmengas, Afghan Gas Enterprise, Pakistan’s Inter State Gas Systems (Private) Limited, and GAIL (India) Limited.

The issue of identifying and selecting a consortium to build and operate the pipeline was discussed at the project’s 19th steering committee in Turkmenistan last November.

India is interested to invite a Chinese state firm to lead the consortium to build the pipeline given the enormous political and financial risks involved, and China’s experience in building and operating gas infrastructure.

Malaysia’s state energy firm Petronas is reported to be in contention for a role in the project through a joint venture with French major Total SA to produce gas from onshore fields in Turkmenistan. According to the ADB, the consortium leader must be a technically capable and financially sound company as it will be tasked to help design, finance, construct, own and operate the gas pipeline.

Total is eyeing a lead role, but it will need to scrap or water down its pre-condition for a stake in Turkmenistan’s gas reserves. Chevron and ExxonMobil have dropped out after learning that they will not be allowed to own a stake in TAPI.

Through the pipeline, Turkmenistan will export up to 33 billion cubic metres of natural gas a year from its giant Galkynysh field to the other three countries for 30 years. With a proposed long-term capacity to deliver 90 million cubic metres a day (cm/d) of gas, the pipeline is expected to begin operating in 2018, although this could be delayed by negotiations among the various stakeholders. The current slump in oil and gas prices along with the ongoing political turmoil in Afghanistan and Pakistan has also cast a pall over how quickly companies would respond to the call for investment in the region.

India and Pakistan have indicated they each are ready to commit to buying 38 million cm/d of TAPI’s capacity with Afghanistan the remaining 14 million cm/day. From the Galkynysh field which is said to hold some 16 trillion cubic feet of natural gas, the pipeline will run through the Afghan provinces of Herat and Kandahar, Pakistan’s Multan and Quetta before ending at Fazilka, in India’s Punjab state.

The issue of identifying and selecting a consortium to build and operate the pipeline was discussed at the project’s 19th steering committee in Turkmenistan last November.

India is interested to invite a Chinese state firm to lead the consortium to build the pipeline given the enormous political and financial risks involved, and China’s experience in building and operating gas infrastructure.

French major Total SA has also expressed interest to play a lead role, but it will need to drop its pre-condition for an equity stake in Turkmenistan’s gas reserves. Chevron and ExxonMobil have also dropped out after learning that they will not be allowed to own a stake in TAPI.

Malaysia’s state energy firm Petronas is also reported to be in contention for a role in the project through a joint venture with Total to produce gas from onshore fields in Turkmenistan. According to the ADB, the consortium leader must be a technically capable and financially sound company as it will be tasked to help design, finance, construct, own and operate the pipeline.

The ADB did not say when the pipeline’s construction will begin and complete, and how much the project will cost.

In 2008, Turkmenistan, Afghanistan, Pakistan, and India signed a framework agreement to start work on TAPI, but there was no progress the following two years until the governments and the UN were able to resolve basic security issues. As the pipeline will pass through deserted mountainous areas, the four governments and the UN will have to provide guarantee of security. Taliban and Al Qaeda militia as well as local tribesmen have warned that they will attack the pipeline.

 

INDIA: Industry calls for expansion of storage capacity and stockpiling deals with oil producers

(EnergyAsia, January 14 2015, Wednesday) — India should take advantage of the collapse in global oil prices by expanding its storage capacity and securing deals to stockpile crude for producing countries, said local industry officials.


Unlike China, India has been slow in building up its strategic petroleum reserves, with just one terminal in Andhra Pradesh state and two in Karnataka. Plans for another four bases are still on the drawing board at Bikaner in Rajasthan, Rajkot in Gujarat, Padur in Karnataka and Chandikholein Odisha.

Industry association Assocham said the government and the country’s oil companies should speed up as well as expand their stockpiling programme with Brent crude prices now trading at less than half its peak of US$115 a barrel last June.

“It is once in several decade opportunity for India to scale up its strategic oil reserves at much higher level than even three months’ consumption, which itself is a long way to go for us at this point of time,” said Assocham.

In a research paper, Assocham said India’s crude oil import bill fell by US$3 billion in November 2014 as compared to May.

Given the long lead time needed to expand oil stockpiles, it urged the Indian government and oil refining companies to “aggressively” explore opportunities to plan and develop new storage facilities.

“To take advantage of the situation, we need to build physical infrastructure which…would take at least a few months even if the brick is laid today. Who knows by the time our storage capacity for the reserves is ready the crude would not have bounced back.”

The government said it has begun talks with its Middle Eastern counterparts to store crude oil for state-owned Saudi Aramco, Kuwait Petroleum Corporation (KPC) and Abu Dhabi National Oil Company (ADNOC).

Indian and Saudi officials discussed the proposal at the G20 meeting in Australia’s Brisbane last November. While India wants to raise its stockpile level to meet 90 days of consumption, Saudi Arabia is looking for additional outlets for its crude oil to hedge against falling prices.

Saudi Arabia’s deputy premier, Crown Prince Salman bin Abdulaziz Al Saud, discussed with Indian Prime Minister Narendra Modi the possibility of investing in oil storage projects in the Asian country, according to Saudi Press Agency.

Their talks built on an earlier meeting between Oil Minister Dharmendra Pradhan and his Saudi counterpart, Ali al-Naimi, on energy cooperation as the Middle Eastern state supplies about 20% of India’s oil imports.

Saudi Aramco has a long-term agreement to store crude oil in Japan for free in return for guarantee of supply for the host nation during emergencies.

KPC and ADNOC are also in talks with the Indian Strategic Petroleum Reserves Ltd (ISPRL) to stockpile as much as two million barrels of crude oil when India starts up its storage bases.

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ASIA: ABB and Alstom sign power solutions agreements in Japan and Singapore

(EnergyAsia, January 13 2015, Tuesday) — In separate announcements, European power solutions providers ABB and Alstom have signed agreements to supply their technology and services in Japan and Singapore.

ABB said it is partnering Hitachi Limited to supply high voltage direct current (HVDC) technology services to meet Japan’s energy demand while Alstom will work with Singapore’s Nanyang Technological University (NTU) to design, develop and deploy microgrid power management solutions to support the country’s renewable energy initiative.

The ABB-Hitachi venture will provide design, engineering, supply and after-sales services related to the DC system of HVDC projects featuring ABB’s technology with the Japanese firm acting as the main prime contractor and 51% shareholder.

HVDC technology enables the smooth transmission of electricity between two grid systems by converting alternating current (AC) from the supply side to direct current (DC) before transmission. Power is re-converted to AC in the receiving system for use.

ABB said its system is ideal for long-distance transmission as the technology minimises electricity losses, is inexpensive to instal, and is well-suited for interconnections between two different frequencies.

Global demand for the use of HVDC technology to connect renewable energy sources has been rising rapidly, expanding the demand for voltage source converter (VSC) HVDC systems to facilitate grid-stabilisation. It is ideal for long-distance underground and underwater power links and interconnections for land-based and offshore wind farms, offshore oil and gas platforms, city center in-feeds where space is a major constraint, and cross-border interconnections that often require subsea links. Its ability to comply with grid codes ensures robust network connections regardless of application, said ABB..

It is ideal for long-distance underground and underwater power links and interconnections, and is increasingly deployed for the integration of renewable energy from land-based and offshore wind farms, the mainland power supply to islands and offshore oil and gas platforms, city center in-feeds where space is a major constraint, and cross-border interconnections that often require subsea links. Its ability to comply with grid codes ensures robust network connections regardless of application, said ABB.

With the increasing introduction of renewable energy and innovation in electric power systems, Japan’s demand for voltage source converter (VSC) HVDC systems is expected to increase to support applications such as wide-area power transmission grids and connection of offshore wind farms.

“Since the first development in the 1970s, Hitachi has participated in every HVDC project in Japan and has continued to underpin the stabilisation of the electricity grid. The establishment of a new company combining the strengths of Hitachi and ABB will provide a framework for the timely provision of the new technologies required by the Japanese HVDC market,” said Hiroaki Nakanishi, Hitachi’s chairman and CEO.

“By enhancing and expanding the HVDC business through its partnership with ABB, Hitachi will continue to contribute to the stabilisation of Japan’s electric power grid.”

Ulrich Spiesshofer, ABB’s CEO, said:

“ABB pioneered HVDC 60 years ago and has continually pushed the boundaries of this technology. Our presence across half the world’s installed base and our capability to develop and manufacture all major components of the HVDC value chain inhouse have put us in a leading position in the industry.”

In Singapore, Alstom has begun collaborating with the Nanyang Technological University (NTU) to design, develop and deploy MicroGrid Power Mix Management (MPMM) solution as part of the country’s Renewable Energy Integration Demonstrator (REIDS) initiative.

Announced last October, REIDS is a pioneering effort to construct and operate a microgrid to manage and integrate electricity generated from multiple sources including solar, wind, tidal and diesel as well as provide energy storage and power-to-gas solutions.

The partners said they will jointly develop their unique MicroGrid Power Mix Management solution, based on Alstom’s Digital Automation Platform (DAP), to manage power exchanges within a microgrid whether it is connected to or separated from the main grid.

The solution will be implemented at NTU’s EcoCampus and later on the Semakau Landfill, an offshore landfill between the islands Pulau Semakau and Pulau Sakeng, located south of the main island of Singapore.

NTU said EcoCampus’s deployment will enable it to enhance the energy efficiency on its premises while integrating a mix of distributed energy resources. The Semakau Landfill project will demonstrate the ability to manage new energy mix based on high penetration of renewable sources in an off-the-grid environment.

“The main objective of this project is to ensure a greener and stable supply of energy through the integration of smart energy management and energy storage systems,” the partners said.

“The microgrid solution in Semakau Landfill can also be used to power small islands and rural communities off the national grid. It may also function as a back-up solution during emergencies within urban areas.”

Hervé Amossé, Alstom’s vice president for substation automation solutions, said:

“We are delighted with this opportunity to bring our experience, technology and expertise to support Singapore’s, ever growing energy requirements. This landmark project sets the country on a strategic path of integrating and fully utilising multiple sources of energy for long term sustainability.”

Lam Khin Yong, NTU’s chief of staff and research vice president, said:

“Renewable and sustainable energy is a key pillar of NTU’s research efforts. NTU’s collaboration with a global corporation such as Alstom underpins the university’s strength in transforming its engineering expertise into practical industry applications.  Micro-grids will play an ever-growing role in the rapidly expanding electric energy technologies and systems in the Southeast Asian region and NTU is well-placed to contribute to this growth. The systemic integration of renewable energies and energy storage based on the micro-grid technology presents many collaboration opportunities between NTU and the industry.”

Goh Chee Kiong, executive director for cleantech and cities, infrastructure & industrial solutions at Singapore Economic Development Board (EDB) said:

“Singapore aims to be the leading clean energy hub in Asia where companies can develop and commercialise energy management solutions able to effectively integrate multiple energy sources. Singapore has set up innovation platforms such as REIDS to foster co-innovation among complementary companies in the energy industry ecosystem. We are pleased to partner with Alstom, a global leader in power engineering, to use Singapore as a springboard to grow the markets in Asia.”

The project will largely be delivered by Alstom’s engineering teams in Singapore, France and the UK.

IRAQ: IMF may have to lower economic growth forecast on weak oil prices

(EnergyAsia, January 12 2014, Monday) — With Brent crude prices plunging to a near six-year low below US$50 a barrel, the International Monetary Fund (IMF) may have to lower its earlier forecast for Iraq’s oil-dependent economy to grow by two percent this year.

An IMF team which met Iraqi Minister of Finance Hoshyar Zebari and other government officials in early December had raised the war-torn economy’s prospects after an earlier survey in October had called for it to expand by just 1.5% in 2015. The Iraqi economy was expected to rebound on account of rising domestic oil production after shrinking by an estimated 0.5% last year.

Brent crude was trading at around US$70 in early December amid hopes that prices were probably ready for a rebound after falling from a high of US$115 in June. Instead, the North Sea benchmark has fallen another US$20 a barrel to a low of US$48.90 in early January as fears grow that the global oil glut could push prices down by at least another US$10 a barrel.

“Growth is projected to rebound to about two percent as oil production and exports increase further, helped by the recent agreement between the central government and the Kurdistan Regional Government (KRG) on oil exports from KRG and the Kirkuk oil fields,” said the December statement issued by the IMF team led by Carlo Sdralevich. It said the economy had shrunk by a smaller rate in 2014 than the 2.7% projected in October.

“Iraq’s GDP is expected to contract by about 0.5%…largely because of the economic effects of the ISIS (Islamic State) insurgency,” it said. The country’s non-oil sector has been dealt a major blow by the destruction of infrastructure, reduced access to fuel and electricity, low business confidence, and disruption in trade.

In contrast, the oil sector has been able to operate relatively smoothly as most of its infrastructure is in the south of the country and beyond the reach of ISIS, said the IMF.

Including Kurdistan’s output, the IMF said Iraq produced an estimated 3.3 million b/d in 2014, up from 3.1 million b/d in 2013, with exports remaining at 2013 levels of 2.5 million b/d.

Towards the end of last year, Baghdad and the semi-autonomous KRG, which has long claimed a section of oil-rich Iraq, settled their long-running dispute over oil and revenue sharing.

Under the Baghdad Agreement, the KRG will deliver 250,000 b/d of its production to the central government and facilitate the export of 300,000 b/d Kirkuk crude through a pipeline that it controls. In return, Baghdad will resume paying the KRG 17% of the federal revenue that had been suspended since early 2014. The Iraqi government will also pay the KRG to help fight ISIS.

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MARKETS: Global oil stockbuild to continue amid weak demand growth and rising supply

(EnergyAsia, January 9 2015, Friday) — Based on current projections of weak demand growth and robust supply, the IEA said it expects global oil inventories to rise by nearly 300 million barrels in the first half of 2015 in the absence of disruption, shut-ins or cut in OPEC production. If half of this took place…

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MARKETS: Analysts fear heightened global political and economic risks from oil price crash and growing volatility

(EnergyAsia, January 8 2015, Thursday) — The collapse of oil prices has injected new political, economic, financial and social risks into an already uncertain global environment grappling with heightened geopolitical conflicts and economic uncertainties, said the International Energy Agency (IEA) and oil companies.


Caught out by the 50% price plunge since mid-2014, some shale-based operators in the US, heavy oil producers in Canada and deepwater explorers have been forced to sharply cut their capital expenditure in 2015, and possibly beyond.

State-owned firms like Malaysia’s Petronas said it plans to slash budgets by up to 20% on the basis of Brent crude selling at an average US$75 a barrel in 2015. Since December 17, Brent has fallen below US$60 and is now on course to test support at US$50.

Russia’s economy could shrink by at least 4.5% this year and around 1% in 2016 on account of low oil and gas prices, and sanctions imposed by the West on its economy for the dispute over Ukraine. Venezuela and Iran, two of OPEC’s most anti-Western nations, are faring much worse, with riots becoming common in Caracas as mass panic sets in over shortages of essential goods and fears of hyperinflation.

“The resulting downward price pressure would raise the risk of social instability or financial difficulties if producers found it difficult to pay back debt,” said the IEA.

The pain threshold varies widely across oil-producing countries, according to the International Monetary Fund (IMF).

In a study released in October, it found that pro-western Kuwait, Qatar and the UAE are capable of achieving a balanced budget with oil at about $70 a barrel while sanctions-hit Russia needs US$101 and Iran US$136. Politically fractious Venezuela and conflict-ridden Nigeria each require US$120 oil to keep alive vital social programmes.

The special case of Saudi Arabia

For all its bravado, even Saudi Arabia is going to feel the pain for crashing its own oil party in the form of incurring a record 145-billion riyal budget deficit for 2015. (US$1=3.75 riyal).

Announced on Christmas Day, the 2015 budget assumes an estimated 16.3% reduction in the kingdom’s mostly oil-derived revenues to 715-billion riyal against spending of 860-billion riyal. Oil still accounts for around 90% of the Saudi government’s revenues.

Based on an average Brent crude price of US$60 a barrel, Saudi Arabia expects to see a near 50% drop in this year’s oil revenues compared with 1,035-billion riyal in 2013. The kingdom, which plans to maintain oil production at around 9.6 million b/d, expects to earn around 930-billion riyal this year.

However, the Saudis along with the pro-western regimes of Kuwait, Qatar, the UAE and Oman are far better positioned to ride out a prolonged period of oil price weakness. Saudi Arabia has amassed an estimated US$750 billion for foreign exchange reserves to more than compensate for any losses in oil export revenues over the next few years.

In authorising the Saudi government to draw on its financial reserves to cover the budget deficit, King Abdullah bin Abdulaziz Al Saud is using the kingdom’s new found financial muscles to  beat up the oil competition.

Making a note of Riyadh’s  “strong external and fiscal positions”, ratings agency Standard and Poor’s has underlined the government’s success in building up the kingdom’s non-oil sector and financial investments over the past decade.

While Saudi Arabia’s financial health may be robust, the same cannot be said of its ageing King Abdullah, who is in his early 90s and believed to be in frail health. News of his admission to hospital for medical tests alone was enough to send Saudi stocks plunging 6.5% on the last day of 2014.

While the kingdom’s succession plans are in place with 79-year-old Crown Prince Salman the designated heir apparent, there are concerns that a transition of power now in the midst of the oil price slump and threats from the Islamic State could provide an opportunity for political unrest. The King supported oil minister al-Naimi’s risky strategy to let prices go into freefall and potentially threaten the economy.

Among oil companies, ExxonMobil is well-positioned to weather markets conditions with crude at US$40 a barrel, said chairman and CEO Rex Tillerson. Speaking at CNBC’s Business Roundtable summit in December, he said ExxonMobil’s “massive” liquefied natural gas and deepwater drilling projects are decade-long investments that have been tested to perform across a broad range of price ranges, from US$40 to US$120 per barrel.

With Saudi Arabia-controlled OPEC sticking to its position, consultant Wood Mackenzie said the onus will fall on producers outside the cartel to scale back their supply.

“Weaker than expected global economic growth could put even more pressure on prices. Oil companies will be forced to adapt, and a buyers’ market could emerge in 2015,” said Paul McConnell, Wood Mackenzie’s principal analyst for global trends.

China looms large

China will remain a vital factor, and its slowing energy and commodity demand growth will require suppliers to adjust. The Chinese government is expected to announce more policy changes in 2015 that will shape the country’s economic growth as well as its energy demand growth over the medium term.

“A twin-pronged approach to environmental protection and support for domestic mining companies means a shift to cleaner coal consumption and a reduction of seaborne imports,” said Mr Connell.

“Details of the 13th Five Year Plan will become clear in 2015, but are likely to accelerate the drive towards a more sustainable China. Such policies could mean further damaging impacts on global coal producers.”

Longer term, he said “deep-seated geopolitical, economic and technological trends” may point to a new era of weak hydrocarbon demand growth.

IEA: Supply-demand forces need time to adjust to price collapse

It will take time for supply and demand forces to respond and eventually adjust to the shock of 2014’s oil price collapse which few have foreseen, said the IEA. The conditions for the oil market’s collapse were created by several years of record high prices, which encouraged the record surge in non-OPEC supply and a contraction in global demand growth to five-year lows.

Six months of sharply lower oil prices have led to producers slashing spending, but this will affect output in the medium- and long-term as near-term supply remains abundant. It will take a long time before the current price shock works its way through the supply chain.

The IEA expects most projects that have already been funded to proceed through implementation.

“Today’s oil spending cuts will dent supply – just not right now,” it said.

Non-OPEC supply growth for 2015 will not come close to its 2014 record, due largely to the slump in Russia.

With OPEC refusing to budge, the IEA expects Russia to trim production in response to the collapse of both oil prices and its currency along with the worsening impact of western sanctions on Moscow over their struggle to control Ukraine.

Earlier, Russia‘s Deputy Energy Minister Kirill Molodtsov had insisted that his country would maintain production at 526 and 528 million tonnes or more than 10.5 million b/d.

Meanwhile, North America, particularly the US, will continue to boost supply in the near-term, said the IEA.

“The short-term outlook for US light tight oil production remains unchanged at current prices as long as producers maintain access to financing,” said the Paris-based agency.

As for demand, the IEA said the stimulus effect of the oil price collapse on the global economy will be modest, dashing the hopes of many who have been comparing it to a major tax cut.

“For producer countries, lower prices are a negative:  the more dependent on oil revenues they are and the lower their financial reserves, the more adverse the impact on the economy and domestic demand,” said the IEA.

Russia, along with other oil-dependent but cash-constrained economies, will not only produce less but is likely to consume less in the coming months.

In oil-importing countries, the IEA said price effects are asymmetrical.

“Demand lost to substitution or efficiency gains during prolonged periods of high prices will not come back in a selloff,” it said.

“Several governments are wisely taking advantage of the price drop to cut subsidies. Consumers thus might not see much of the decline.”

The US dollar’s strength and oil sale taxes in some countries will also limit the feed-through from crude oil to retail product prices.

In the developed economies, the agency said a tepid economic recovery, weak wage growth and worrying deflationary pressures will further blunt the stimulus of lower prices.

 

 

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MARKETS: Following WTI’s lead, Brent poised to crash through support at US$50

(EnergyAsia, January 7 2015, Wednesday) — Brent crude price could follow WTI to break through support at US$50 a barrel as the world oil markets is on course to make a six-year low under relentless selling pressure. On Monday, the US benchmark hit a new multi-year low of US$49.95/barrel before settling at US$50.40 while Brent…

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CHINA: Role as oil products exporter boosted by crude price collapse, storage and refining capacity expansion

(EnergyAsia, January 6 2015, Tuesday) — As if China needed any encouragement, the near 50% collapse in oil prices since June has greatly aided its crude stockpiling and import programme with desperate suppliers lining up to unload their cargoes at huge discounts.



Brent, the benchmark crude that prices much of Asia’s oil imports, is trading well below US$60 a barrel and could fall further to new six-year lows to Beijing’s delight as it accelerates crude imports for stockpiling and to feed its rising refining capacity. At current prices, China’s oil import bill could fall by almost half from 2013’s US$222 billion.

Analysts expect Chinese state firms to import between 50 and 60 million barrels of crude for three new storage sites in 2015, and by up to 100 million barrels in 2016 to meet the government’s official target to stockpile 500 million barrels of crude by 2020. This does not include storage held by China’s private companies and in tankers berthed in offshore locations.

Chinese refiners are also joining the import frenzy to feed at least 4.3 million b/d of new capacity that they are expected to start up between 2012 and 2018, said the International Energy Agency (IEA). According to BP, China’s refining capacity rose from 10.3 million b/d in 2010 to 12.6 million in 2013.

With the unexpected bonus of discounted oil, China will not only complete its stockpiling programme ahead of schedule, its planners could be encouraged to raise their target as well as expand the country’s tank storage capacity.

According to the IEA, China has completed four stockpiling bases with a combined capacity of 103 million barrels under the first phase of its strategic petroleum reserve (SPR) plan. Combined, the first phase’s four terminals at Zhoushan, Zhenhai, Dalian and Huangdao currently hold more than 91 million barrels, according to the National Bureau of Statistics (NBS). Completed in 2009, the terminals were initially filled to capacity, but were tapped when oil prices spiked.

Construction of the project’s second phase along with planning of the third phase are well underway to meet the SPR’s target to hold 500 million barrels of crude in stockpile by 2020. The long-term goal is to store enough crude to cover 90 days of net imports.

Despite a widely publicised slowdown, China’s economy is still expected to grow by at least six percent a year over the next few years that will underpin the country’s rising demand for oil, gas and coal.

The world’s second largest oil consumer will use 11.34 million b/d in 2015, up by 3.3% from 2014 to follow on a 3.5% rise in 2013, said the US Energy Information Administration (EIA).

As the world’s oil supply glut worsens, China has become the most important major market for producers to lock in their supply contracts.

Tanker owners and brokers said that since mid-2014, there has been a sharp surge in vessel booking and oil traffic headed for China, pushing chartering rates to their highest levels in five years.

Amid the rising glut on the world markets due largely to the surge in North America’s production, Chinese buying alone is unlikely to stem oil’s bearish trend in 2015.

Product exports on the rise

With its economy now growing at a slower rate, China’s domestic oil consumption rose by just 2.3% in the first 11 months of 2014, according to US energy media Platts. However, its crude intake rose 9% while product imports plunged by more than 26% over the same period.

This trend will worry refiners in the region as China’s twin expansion of storage and refining capacities is paving the way for it to become a products exporter. With sales of oil products up 3.8% to 26.85 million tonnes for the first 11 months of the year, Platts expects China to become a net oil exporter in 2014.

Further aiding its cause towards greater sustainability, China expects to reduce the energy intensity of its economy in coming years as reward for energy conservation and efficiency measures being implemented.

According to the National Development and Reform Commission (NDRC), the country’s leading planning agency, China is on course to use less resources including energy to generate a unit of economic growth.

For 2014, the NDRC estimates that the Chinese economy will be using 4.7% less energy to produce one unit of GDP. The agency expects this trend to continue, enabling China, the world’s largest energy user and greenhouse gas producer, to reduce its 2015 energy intensity to 84% of the 2010 level.

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SINGAPORE: Singapore’s Keppel Shipyard to develop two FLNG terminals for Golar LNG Ltd in Cameroon

(EnergyAsia, January 5 2014, Monday) — Golar LNG Ltd said it is building Africa’s first floating project off the coast of Cameroon to liquefy natural gas for export to Asia. It has awarded Singapore’s Keppel Shipyard the contracts to convert two vessels into floating liquefied natural gas (FLNG) terminals, Golar Hilli and Golar Gimi, at…

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AUSTRALIA: BG Group exports first Queensland LNG cargo to China

(EnergyAsia, January 2 2015, Friday) — UK’s BG Group said it has shipped out the first liquefied natural gas (LNG) cargo, with a second one to follow next month, from its newly completed US$20.4 billion terminal in Queensland’s Curtis Island in Australia. The buyer is believed to be Chinese state firm CNOOC, which holds a…

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MIDDLE EAST: New large refineries add to bearish pressure on oil prices

(EnergyAsia, December 31 2014, Wednesday) — The Middle East will deal another blow to the world’s crumbling oil markets next year as it starts up giant refineries to boost net exports of products by nearly one million b/d, compared with less than 400,000 b/d last year.


According to the International Energy Agency (IEA), the Middle East will expand its primary refinery capacity from 7.8 million b/d in 2013 to 9.3 million b/d next year. The added capacity of nearly 1.5 million b/d will far exceed the region’s oil products demand growth of 600,000 b/d over the 2013-2015 period, forcing its refiners to sharply raise exports.

“The configuration of the plants, designed to maximise diesel production, seems somewhat at odds with market trends that in recent months have shown stronger demand growth for gasoline and jet fuel than for middle distillates,” said the IEA.

Saudi Arabia’s product exports have surged since the startup of the Saudi Aramco-Total 400,000 b/d Jubail refinery in September 2013, with further increases expected next year, said the IEA. According to the multilateral Joint Organisations Data Initiative (JODI), the kingdom’s diesel exports have more than doubled to 195,000 b/d in the first seven months of this year compared with the same period in 2013.

Aramco’s other 400,000 b/d Yanbu plant, coowned with China’s Sinopec, is undergoing test runs, with full operation expected in early 2015, while the UAE’s new 420,000 b/d Ruwais refinery is expected to start up shortly.

The arrival of three large refineries could not have been timed worse for the global oil markets which have been reeling from a crude supply glut that has caused prices to crash by nearly 50% since June.

“The current economic and oildemand picture is quite different from what was envisaged at the time when they got underway in the mid2000s. Not only was oil demand expected to be higher, but the makeup of the demand barrel has also changed,” said the IEA.

Since the financial crisis of 200809, the economic slowdown has had a more marked impact on the demand for mid-distillates compared with gasoline and other products.

“Diesel demand has also been adversely affected by subsidy reductions in key nonOECD markets, such as India, and concerns over local pollution levels and a slowdown in diesel sales in key markets such as France, have also been stemming growth.”

The three refineries are heavily focused on diesel production. When fully commissioned, they will produce as much as 800,000 b/d of ultra low sulphur diesel (ULSD) and jet fuel.

Citing the companies and market estimates, the IEA said Jubail has the capacity to produce 235,000 b/d of ULSD diesel while Yanbu will produce 260,000 b/d of ULSD and 90,000 b/d of gasoline and Ruwais will produce an additional 175,000 b/d of diesel and 85,000 b/d of jet fuel. Regional distillate demand growth, meanwhile, is forecast to grow by less than 100,000 b/d per annum in 2014 and 2015.

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