MARKETS: IEA dampens expectations for major oil price rise as supply growth slows from mid-2015

(EnergyAsia, February 26 2015, Thursday) — Forget about oil prices overshooting to the upside and making a strong recovery even as the growth in global oil supply slows sharply from mid-year, predicts the International Energy Agency (IEA). With the drastically changed market conditions, the agency said it expects the crude oil price to average US$55…

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MARKETS: EIA expects global oil supply growth to lag behind demand in 2015 and 2016

(EnergyAsia, February 26 2015, Thursday) — Reflecting the bleak outlook on oil prices, the US Energy Information Administration (EIA) expects a further narrowing of the global supply-demand gap on slowing production growth next year.


In its February report, the US government agency is forecasting global liquid fuels supply to grow by 0.5% in 2016, down progressively from the preceding months’ forecasts of 0.58%, 0.86% and 1.04%.

Supply will still reach new all-time highs of 93.76 million b/d in 2015 and 94.23 million b/d next year, but the net surplus will narrow as the EIA has raised annual global demand growth by 1.1% to 93.14 million b/d and 1.08% 94.15 million b/d over the next two years.

Amid the on-going slowdown in US production growth, the agency kept its crude price forecast unchanged with North Sea Brent to average $58 per barrel in 2015 and US West Texas Intermediate (WTI) to trade at US$54 to $55.

US liquids production growth is expected to weaken to 3.51% to 15.35 million b/d in 2016 after a projected 6.38% surge to 14.83 million b/d this year. A weakening trend is in sight as the EIA held its latest forecast for US production this year unchanged from last month.

Unplanned supply disruptions among non-OPEC producers averaged slightly more than 600,000 b/d in 2014, about 200,000 b/d less than the previous year. Crude oil production declines in Libya, Angola, Algeria and Kuwait more than offset production growth in Iraq and Iran, said the EIA.

Iraq, the largest contributor to OPEC production growth, is shaping up as a growing concern on the rising military threat of the Islamic State (ISIS).

EIA expects OPEC surplus crude oil production capacity, which is concentrated in Saudi Arabia, to increase to an annual average of 2.3 million b/d in 2015 and 2.7 million b/d in 2016, after averaging about two million b/d last year.

“Surplus capacity is typically an indication of market conditions, and surplus capacity below 2.5 million b/d is an indicator of a relatively tight market,” it said. However, the current and forecast levels of global inventory builds make the projected low surplus capacity level in 2015 less significant.

The agency expects global oil inventories to continue to build in 2015, limiting upward pressure on oil prices because of declining drilling activity.

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

2014    2015 * y/y %   2016 * y/y %

  1. America 23.42 23.68   1.11     23.76   0.34

China                          10.67   11.00   3.09     11.34   3.09

Others                                    58.04   58.46   0.72     59.05   1.00

TOTAL                         92.13   93.14   1.10     94.15   1.08

*forecast

 

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

 

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

2014    2015 * y/y %   2016 * y/y %

OPEC                           36.49   36.49   0.00     36.18   0.85

Non-OPEC                   56.45   57.27   1.45     58.05   1.36

– US                                              13.94     14.83     6.38        15.35     3.51

TOTAL                         92.94   93.76   0.88     94.23   0.50

*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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MALAYSIA: Petronas new chief Wan Zulkiflee faces immediate challenges on investment decisions amid low oil prices

(EnergyAsia, February 25 2015, Wednesday) — Faced with the prospect of a prolonged oil price collapse, Malaysia’s state energy firm Petronas Berhad will demand its incoming chief executive and president to immediately cut costs and make nerve-wracking decisions on the fate of several multi-billion-dollar projects.

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OMAN: UK’s Amec Foster Wheeler starts work on design of Ras Markaz crude oil storage tank farm

(EnergyAsia, February 24 2015, Tuesday) — UK’s Amec Foster Wheeler has started work on the front-end engineering design of the Ras Markaz crude oil storage tank farm in Oman following the contract’s award by state-owned Oman Tank Terminal Company (OTTCO) last month. The London-based firm declined to reveal the contract’s value for the project which…

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MARKETS: OPEC boosts outlook for 2015 global oil demand, cuts economic growth and non-OPEC supply

(EnergyAsia, February 23 2014, Monday) — Will a combination of rising demand and lower supply growth be sufficient to reverse the slump in world oil prices?


It certainly helps, but it may not be enough to kickstart a recovery even with the latest improved supply-demand forecasts by the Organisation of Petroleum Exporting Countries (OPEC).

In its February report, the cartel said it expects global demand to rise by 1.28% from last year’s 91.15 million b/d to 92.32 million b/d in 2015. Both numbers are an upgrade from the January’s report which estimated the world’s 2014 consumption at 91.13 million b/d, and forecast next year’s at 92.26 million b/d.

Non-OPEC supply, the main reason for the world’s oil glut, is seen rising by a mere 1.53% from 56.23 million b/d last year to 57.09 million b/d in 2015. That’s quite a drop from the January forecast for the 2015 supply to rise 2.26% to 57.49 million b/d.

The cartel said non-OPEC oil supply grew by 1.99 million b/d last year, with increases reported for North America, Brazil, Kazakhstan and China and partially offset by downward revisions from Azerbaijan, Mexico and most of Asia and Australia.

Since plunging to the US$40-barrel range in late January, crude prices have rebounded above US$50 for US WTI and over US$60 for North Sea Brent. But traders and analysts are warning the recovery is temporary and will stall in the face of record production and stockpile levels that are still rising.

UK major BP was the latest to jump on the bear bandwagon when its chief executive Bob Dudley said he expects oil prices to remain weak for years. In announcing its latest quarterly results and a US$6 billion reduction in capital spending for 2015, he said the industry will have to adjust to this new reality.

OPEC has also dimmed its 2015 outlook for the global economy with a forecast for growth at 3.4% compared with 3.6% in January. That weaker outlook is due mostly to slower growth in the Chinese economy, which OPEC now expects to expand by 7% instead of 7.2%.

The rosier outlook for India’s economy — a forecast 6% expansion from last month’s 5.8% call — will be more than offset by an expected 2.4% contraction in the Russian economy and a meagre 0.7% rise in Brazil’s. In its January report, OPEC had expected the Russian economy to show no growth and Brazil’s to expand by 1%.

 

February 2015

Table 1. World oil demand, million b/d

2013   2014    2015    2015/14 %

Americas                   24.08 24.18   24.39   0.87

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   45.72   0

 

Other Asia                 11.06   11.28 11.53   2.22

China                          10.07   10.46   10.77   2.87

Latin America                        6.50  6.70    6.90   2.99

Middle East               7.81    8.06    8.34   3.47

Africa                           3.63    3.74    3.83   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   92.32   1.28

Previous estimate   90.20   91.13   92.26   1.24

 

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   -0.07

 

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

 

 

 

February 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                3.4       2.2       2.9       1.2       1.2                   7.0

 

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

 

 

February 2015

OPEC’s forecasts for non-OPEC oil supply in 2015, million b/d

2013    2014    %         2015    %

Latest estimate        54.24   56.23   3.67     57.09   1.53

Previous estimate   54.24   56.22   3.65     57.49   2.26

 

January 2015

OPEC’s forecasts for non-OPEC oil supply in million b/d

2013    2014    %         2015    %

Latest estimate        54.24   56.22   3.65     57.49   2.26

Previous estimate   54.23   55.95   3.17     57.31   2.43

 

December 2014

OPEC’s forecasts for non-OPEC oil supply in million b/d

2013    2014    %         2015    %

Latest estimate        54.23   55.95   3.17     57.31   2.43

Previous estimate   54.23   55.91   3.10     57.16   2.24

 

November 2014

OPEC’s forecasts for non-OPEC oil supply in million b/d

2013    2014    %         2015    %

Latest estimate        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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MARKETS: Analysts predict oil market rebalance to take years as stockpiles, production remain high

(EnergyAsia, February 20 2015, Friday) — The global oil markets will remain under selling pressure possibly for the next few years as consumption is not growing as fast as production amid record level of stockpiles, say traders and analysts.


After over six months of relentless selling, crude prices began rising to their highest levels for 2015 on short-covering with Brent climbing above US$62 a barrel and WTI topping US$53 over the past week.

But analysts at Wall Street banks and research groups have been quick to douse any flicker of hope that a sustained price recovery is in place. Citigroup presented a dire outlook with WTI plunging to US$20 a barrel before any recovery can take place while Goldman Sachs said US oil companies will have to further reduce operating rigs and slash production to help curb the global glut.

Last month, the International Energy Agency gave suppliers some hope when it said oil prices might begin recovering in the second half of 2015.

But its latest monthly report for February added a dampener that Organization for Economic Cooperation and Development (OECD) countries are building up stockpiles that it expects to reach a new high of 2.83 billion barrels by mid-2015.

“Despite expectations of tightening balances by end-2015, downward market pressures may not have run their course just yet,” said the Paris-based organisation.

US-based ESAI Energy said it expects the imbalance caused by the supply glut to to be eliminated only by 2018.

Global demand grew by just 900,000 b/d last year after averaging an annual 1.7 million b/d between 2000 and 2013, it said.

Taking into account the drop in global oil prices, changes to subsidies and taxes, and the strong US dollar, ESAI Energy projects oil demand growth to recover to about 1.2 million b/d in 2015-2016, then slow down again for the rest of the decade.

“Higher oil demand from lower oil prices is inevitable, but for some countries and products the results will be very mixed,” said Sarah Emerson, the company’s principal consultant. Global supply growth will begin to decelerate in the face of weak prices, with non-OPEC output rising by 1.2 million b/d in 2015, 900,000 b/d in 2016-2017 and by a smaller amount for the rest of the decade.

If OPEC holds production at close to 30 million b/d over the next three years, ESAI said the global oil glut will dissipate.

While crude oil prices will remain under pressure, the market will remain subjected to potential supply disruption from geopolitical threats. But a price recovery is still not on the cards given the enormous glut expected to be in place over the next few years.

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INDIA: Ambitious coal reforms likely doomed by weak market conditions, opposition from green, business and labour groups

(EnergyAsia, February 19 2015, Thursday) — The spirit may be willing but weak market conditions and strong growing opposition from environmental, business and labour groups are combining to block India’s pent-up desire to heal its sickly coal industry.


Since its election to office last May, the government of Prime Minister Narendra Modi has made a top priority of reforming India’s corrupt and inefficient coal supply system that lies at the heart of the country’s economy-killing energy crisis. India derives more than 65% of its electricity from coal-fired power plants that are operating well below capacity due to a long-running, nationwide shortage of feedstock. Without the security of stable power supply, the Indian economy has suffered as businesses cannot expand and people face constant disruption to their daily activities.

Riding on Modi’s initial popularity, the government has set bold targets to double domestic coal production and cease imports by 2019 combined with a huge promise to provide round-the-clock electricity supply to all of the country’s estimated 1.3 billion citizens by 2022. As part of its efforts to expand India’s coal reach at home and abroad, the government said it wants to open up the sector to foreign participation for the first time.

Unrealistic to begin with, many of these goals have been dropped hard and fast on an unsuspecting public with little consultation. The inevitable and immediate all-out backlash from a variety of disparate groups representing environmental, business and labour interests virtually dooms the Modi government’s efforts to reform and expand the coal industry.

Having discredited the energy policy of the previous government under Manmohan Singh, Greenpeace is attacking the Modi government on the same points: that it is lying to investors by exaggerating the size of India’s coal reserves and will not solve the country’s energy crisis by trying to boost coal production.

Instead, in an updated report, Greenpeace said the government’s efforts will only increase India’s greenhouse gas emissions and further degrade vast swathes of rainforests which sit on top of some of the country’s largest untapped coal reserves.

Ironically, Modi’s BJP Party, which swept to power partly on its campaign to clean up corruption and cronyism, now stands accused of trying to reward political supporters with some of its recent initiatives to boost coal supply. The opposition Congress Party is demanding explanations for the State Bank of India’s proposed US$1 billion loan to privately-owned Adani Group for its troubled A$7 billion coal project in Australia and the government’s plan to invest US$1 billion to expand rail infrastructure for coal distribution across the country.

Critics are also accusing the government of selling out the country with its plan to open up India’s heavily protected coal mining and distribution sector to foreign participation and ownership.

In a rare show of unity, domestic business groups have joined hands with their eternal enemies, the labour unions, to oppose the move on nationalistic grounds playing on fears of widespread jobs losses and foreign control over a strategic asset.

While the move might force India’s coal industry to become more efficient, the government has failed to present a viable plan to deal with the short-term pain of mass jobs losses, and coal and electricity price hikes. Inevitably, private and foreign companies will slash jobs and demand higher prices for making expensive investment bets on an industry that has become bloated and unprofitable from four decades of state protection.

Furthermore, with coal prices hovering at a five-year low and likely to go lower, foreign companies are unlikely to be tempted to rush in. The government, to no one’s surprise, is unable to set a deadline or schedule on how it plans to open up the sector to private participation.

But that has not stopped the coal ministry from making ambitious projections that foreign investors will help India’s privately owned mines boost domestic coal production from less than 50 million tonnes last years to 400 million tonnes by 2019.

For now, state-owned Coal India Limited (CIL) accounts for around 80% of domestic output, with power, steel and cement companies producing the rest for their own consumption.

Power and Coal Minister Piyush Goyal has also forecast that CIL, notorious for missing production targets, will more than double output from 462 million tonnes for the year ending March 31 2014 to one billion tonnes five years later.

Speaking at an industry conference in New Delhi last November, he confidently predicted the combined production increases from CIL and private mines would enable India, the world’s third largest coal buyer, to cease all imports by 2018.

India’s coal imports reached a record 204.1 million tonnes in 2013 year with domestic demand exceeding 772.8 million tonnes to further dwarf domestic production at just 568.7 million tonnes. The country spent more than US$16 billion on coal imports, contributing to its rising fiscal deficit.

Citing the government’s plan to expand electricity access to some 300 million poor Indians currently not served, Goyal challenged environmentalists and scientists to find a mass solution that would bypass the use of cheap coal as a feedstock.

While his ministry is also pushing for the expansion of renewable energy production and consumption, he said coal-generated electricity will remain the main energy source for years to come.

He said India’s development imperatives will take precedence ahead of the environment and the world’s climate concerns.

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MARKETS: Storage, the silver lining in oil’s clouded outlook

(EnergyAsia, February 18 2015, Wednesday) — In the latest oil crisis caused by crude prices plunging 50% over the second half of 2014, traders turned to storage to hedge against a protracted supply glut. The same strategy of stockpiling was deployed in 2008 when Brent crude went the other way, surging to a record high of over US$145 a barrel on fears of supply shortages.



The storage sector’s status as the oil industry’s all-round performer in good and bad times has largely been cemented in Asia over the past two decades where traders have refined the art of stockpiling and blending with futures trading, pricing and just-in-time logistics to buy and sell oil.

Storage has played a key role in shaping Asia’s oil trade following the first two oil shocks of 1974 and 1979 that broke the international distribution system controlled by the supermajors.

Asia’s rapid oil and gas demand growth, liberalisation of its energy sector, the rise of futures trading, and the waning influence of the supermajors have created demand for independent storage operators to help traders build and manage new supply chains.

Today, the region offers a creative mix of storage choices provided by independent operators like Royal Vopak and Oiltanking, state-owned firms, the supermajors, floating vessel operators, and traders. With Brent crude down from a high of US$115 a barrel last June to around US$50 at the end of January, China, South Korea, Southeast Asia and Australia have staked out unique positions in the region’s oil trading and storage play.

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CHINA: Energy demand has decoupled significantly from GDP, says Wood Mackenzie economist

(EnergyAsia, February 17 2015, Tuesday) — Breaking from a two-decade trend, China’s demand for energy and other natural resources grew at a significantly slower rate than the 7.4% increase in its GDP last year, said UK consultant Wood Mackenzie. Calling this a “decoupling”, its principal economist for Asia, Cynthia Lim, said the energy sector will…

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PAPUA NEW GUINEA: ExxonMobil, InterOil make case for LNG investments as economy set to become world’s fastest-growing

(EnergyAsia, February 16 2015, Monday) — While the oil and gas industry is in retreat around the world, Papua New Guinea is blazing ahead with the planned expansion of a liquefied natural gas (LNG) project that was launched just months ago and the proposed development of a second greenfield project.


An ExxonMobil-led consortium is preparing to expand its recently launched US$19-billion LNG project through the proposed addition of a third train and the debottlenecking of the existing two that were already operating at capacity shortly after start-up last May.

New York-listed InterOil is adding to PNG’s emergence with a proposal to develop the country’s second LNG project.

ExxonMobil expects to make the final investment decision for the proposed expansion of the 6.9-million tonne/year PLNG LNG project in 2017.

The PNG LNG consortium bolstered its case for expansion after operator ExxonMobil PNG Limited announced last week that it had secured a memorandum of understanding with the government to supply up to 20 million cubic feet a day of domestically produced natural gas for 20 years to fuel the country’s growing power demand.

The Pacific country badly needs to expand its electricity supply and infrastructure to support its economy, which is expected to be the world’s fastest-growing this year. According to the Asian Development Bank, PNG’s GDP will grow 21% in 2015 to follow through on last year’s six percent expansion.

In a statement, ExxonMobil PNG said the natural gas supply will enable PNG LNG to provide up to 25 megawatts of electrical power, or about 20% of Port Moresby’s current generation capacity, for an interim period while the government addresses long-term power generation options.

“The remainder of the gas supply will be used to fuel a new state-owned gas-fired power generation unit expected to be located near the LNG plant outside of Port Moresby,” it said.

The agreement is in addition to an existing gas commitment for Hides domestic power generation.

“This agreement enables a reliable long-term supply of natural gas to support Port Moresby’s urgent power generation needs,” said Peter Graham, ExxonMobil PNG’s managing director.

The MoU also provides for the award of licences for the consortium to develop petroleum reserves and pipeline infrastructure to tap P’nyang’s natural gas both to generate power and support expansion of the PNG LNG project.

The US major said subsidiary Esso PNG P’nyang Limited and its partners will start preparing to drill an appraisal well within two years of the awarding of the petroleum development licence.

With these moves, the consortium is on course to overcome the delayed start-up and cost overruns on its US$19 billion project, and taking a lead against rivals in other parts of the world struggling to deal with falling oil and gas prices.

Compared with other countries, the industry has encountered considerably less domestic opposition, labour disputes and environmental headwinds in developing and liquefying PNG’s natural gas reserves. After settling initial disputes with local landowners and wrestling with high start-up cost, the PNG LNG consortium has experienced a relatively smooth implementation of the project.

The project’s other shareholders are JX Nippon Oil & Gas, the National Petroleum Company of PNG, Mineral Resources Development Company and Petromin PNG.

Last month, the consortium launched its first custom-built ship, the 172,000-cubic metre Papua LNG carrier, at the Hudong-Zhonghua Shipbuilding Group Shipyard in China.

The Papua will be operated by Japan’s Mitsui O.S.K. Lines (MOL) on behalf of ExxonMobil PNG Limited. It will join a fleet of another four dedicated carriers to ship LNG to PNG LNG’s customers in Asia: the Spirit of Hela, Gigira Laitebo and another ship now under construction by Hudong.

With a new board and management team firmly in place after years of turmoil including disputes with the PNG government, InterOil is hoping to launch the country’s second LNG project.

The New York-listed, Singapore-based company started off in the mid-1990s with plans to develop an oil refinery and downstream retail business around the Port Moresby area. In PNG’s frontier environment, the company later secured licences to explore and develop large tracts for oil and gas.

After over a decade of shareholder and management changes, the company has decided to focus on developing the natural gas reserves in its large Elk-Antelope field with plans for production from 2017 to support an export-oriented LNG project.

French major Total has bought a stake in the project which also includes Australia-listed Oil Search as a partner.

Analysts have rated PNG as one of the world’s lowest-cost and most competitive players in the crowded LNG industry today.

 

 

 

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RUSSIA: Local oil producers to survive this year without external funding, says Goldman Sachs

(EnergyAsia, February 13 2015, Friday) — With its large cash hoard of over US$90 billion, most of in US dollars, the Russian oil industry is not in imminent danger of financial collapse and will be able to operate without external funding at the current oil price level for at least a year, said Goldman Sachs.


According to a ZeroHedge report, the Wall Street bank estimates that Russian oil companies have accumulated as much as US$64 billion in surplus and another US$26 billion to meet short-term and on-going operations. The sector has debt payments of US$40 billion due throughout this year that Goldman Sachs said will be fully covered by earnings.

As a bonus, the companies expect to generate at least US$13 billion in cashflow for 2015 if their budgets and dividends are left intact. However, this is looking increasingly difficult to defend in the face of falling oil and gas prices.

Assuming an oil price of US$60 to US$70 per barrel and an exchange rate of 60 rubles to the US dollar, Goldman said the Russian industry “should be able to maintain 2015 capex, dividends, and debt payments even without refinancing.”

With Brent averaging less than US$50 per barrel in January amid fears oil prices could fall further, Goldman may have to revisit its conclusion later in the year.

If conditions deteriorate, the industry can always look to Moscow for funding.

 

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RUSSIA: Oil production to decline on depletion of reserves and low prices, says top official

(EnergyAsia, Februay 12 2015, Thursday) — Russia’s oil production reached a new peak of 10.6 million b/d last year, putting it well ahead of nearest rivals Saudi Arabia and the US.


However, it will be hard pressed to maintain this level of output amid the oil price collapse, and the financial and trade sanctions imposed on Moscow by the US and its Western allies, said Deputy Prime Minister Arkady Dvorkovich.

Speaking at the World Economic Forum in Davos, Switzerland last month, he said Russian oil production could fall by as much as one million b/d if oil prices remained weak and the industry is unable to make new investments to protect existing fields and find new reserves.

The Russian economy has been hard hit by the combined impacts of Western sanctions and the oil price collapse. After expanding by more than 4.2% in 2012, the economy is likely to have plunged into recession from the second half of last year.

Last month, two US ratings agencies downgraded Russia’s credit to junk status that will further make it harder and costlier for the country to borrow from foreign lenders. Standard & Poor’s rated Russia’s credit as junk while Fitch Ratings downgraded the country’s long-term foreign and local currency default ratings (IDR) to BBB-from BBB while giving it a long-term negative outlook.

“The economic outlook has deteriorated significantly since mid-2014 following sharp falls in the oil price and the rouble, coupled with a steep rise in interest rates,” said Fitch.

“Western sanctions first imposed in March 2014 continue to weigh on the economy by blocking Russian banks’ and corporates’ access to external capital markets.”

The agency expects the Russian economy, which grew by 0.6% last year, to contract by 4% in 2015, with growth expected to return only in 2017.

Fitch warned that if oil prices remained below US$70 per barrel, the Russian economy could plunge into a deeper recession in 2015 and suffer further strain on public finances.

Russia’s Central Bank has reported that capital flight from the country hit a record US$152 billion last year after averaging US$57 billion annually between 2009 and 2013. The nation’s foreign exchange reserves have crashed below US$380 billion, down more than  20% from a year ago while the Russian ruble has plunged from around 33 to the US dollar last June to 70 recently.

Relations between Russia and the West have plummeted to their lowest levels since the Cold War. Hostilities are being revived amid their growing rivalry over Ukraine and the Middle East.

Russian business leaders are worried that their nation’s economy could collapse with devastating impact on Europe and the world if the two sides continue with their path of confrontation.

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MARKETS: Selling resumes at the end of short-covering, Citi predicts US$20 crude

(EnergyAsia, February 11 2015, Wednesday) — Selling has resumed after last week’s show of strength from short-term covering had helped crude prices stage a brief rally. North Sea Brent is trading above US$56 a barrel while US WTI is just about holding onto the US$50 support. Through January, the oil markets clawed back a wee…

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SHIPPING: IHS expects maritime casualties to increase as world continues to expand trading fleet

(EnergyAsia, February 10 2015, Tuesday) — IHS, a leading global provider of critical information and insight, said it expects maritime casualties to increase around the world, particularly in hotspots in northeren Europe and Southeast Asia as trading fleets continue to expand. The incidences of hull and machinery damage, wrecking and stranding, ship-on-ship collisions and contact…

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MALAYSIA: Johor state agency to take 10% stakes in Pengerang oil and LNG terminals

(EnergyAsia, February 9 2015, Monday) — The Johor state government will acquire a 10% stake in two proposed terminals at the Pengerang Integrated Complex (PIC) being developed by Malaysia’s national oil and gas firm Petronas, all targeted for start-up in 2019. In a statement, Petronas said the State Secretary Incorporated Johor (SSI) has also signed…

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SHIPPING: UK-based broker Seacurus offers insurance cover for petroleum-related piracy in Southeast Asian waters

(EnergyAsia, February 6 2015, Friday) — UK-based Seacurus said it is offering insurance coverage on pirate attacks against oil tankers, cargoes and crew transiting the South China Sea, Malacca Straits, Indonesian Archipelago and Gulf of Guinea. The cover is being offered to customers’ existing Kidnap & Ransom (KR) insurance policies in response to the rising…

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MARKETS: Negative impact of oil price drop on producing countries exceeds benefits for consumers, says World Bank

(EnergyAsia, February 5 2015, Thursday) — On balance, the negative economic impact of an oil price decline on producing countries exceeds the benefits accruing to consuming countries, said the World Bank. In its flagship ‘Global Economic Prospects’ report, it said oil-exporting economies could expect to contract by 0.8 to 2.5 percentage points in the year…

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CHINA: Economy receives huge boost from lower oil and gas prices

(EnergyAsia, February 3 2015, Tuesday) — China’s economy is slowing down, but that’s more than offset by the benefits from the sharp decline in oil and gas prices since mid-2014, said analysts.

The 55% plunge in oil prices since mid-2014 has helped the country save around US$100 billion in import costs, Lin Boqiang Lin, the dean of the China Institute for Energy Policy Studies, told the World Economic Forum in Davos, Switzerland last month. China depends on imports to meet nearly 60% of its domestic oil consumption which is expected to reach 10.75 million b/d this year, according to OPEC.

The world’s largest energy consuming country imported more than 6.2 million b/d of crude oil and 59 billion cubic metres of natural gas last year, according to CNPC’s Economics & Technology Research Institute.

Since regulated fuel costs are adjusted according to global prices, the World Bank said it expects China’s CPI inflation to decline over several quarters. But the overall effect would be small given that the weight of energy and transportation in the consumption basket is less than one-fifth.

The fiscal impact is also expected to be limited since fuel subsidies are only 0.1 percent of GDP. Despite significant domestic oil production and the heavy use of coal, China remains the world’s second-largest oil importer.

The bank predicts China’s current account surplus will widen by 0.4 to 0.7 percentage points of GDP if oil prices remain at near current level throughout 2015.

Despite the lure of cheaper assets from the oil price collapse, the country’s three main state-owned oil and gas firms have become far less acquisitive as they are now more focused on improving profitability, said CNPC’s research institute.

It found that CNPC, CNOOC and Sinopec spent a total of less than US$3 billion in foreign acquisitions last year compared with US$22.2 billion in 2013.

In 2012, the Big Three invested a record US$34 billion abroad, triggering criticisms in Beijing that led to police investigations and the arrest of several senior executives and powerful politicians on corruption, bribery and fraud charges.

Analysts said the Chinese firms overpaid for many of the assets, and are unlikely to make a profit on the acquisitions.

 

 

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SINGAPORE: Bunker sales down for third consecutive year, but overall maritime performance improved

EnergyAsia, February 2 2015, Monday) — For the third consecutive year, Singapore reported lower bunker sales in 2014 as trade fell on a combination of tightening credit and confusion following the bankruptcy of a key supplier, the imposition of tighter fuel specifications, better fuel efficiency, and fears of a slowing global economy amid the sharp…

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