MALAYSIA: ADB affirms positive economic outlook despite oil price collapse, domestic political turbulence

(EnergyAsia, March 31 2015, Tuesday) — Malaysia remains on track to become a “high-income status” economy by 2020, said Asian Development Bank (ADB) President Takehiko Nakao after recently meeting the country’s leaders in Kuala Lumpur.

Mr Nakao, who met Prime Minister Najib Abdul Razak and senior Malaysian officials, was in the country to attend the 19th meeting of finance ministers of the 10-member Association of Southeast Asian Nations (ASEAN). He also spoke on the region’s economic outlook and policy challenges in the inaugural year of the ASEAN Economic Community (AEC).

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AUSTRALIA: Chevron sold off entire 50% stake in Caltex to focus on LNG projects

(EnergyAsia, March 30 2015, Monday) — US major Chevron has sold off its entire long-held 50% stake in Australia’s largest downstream company for A$4.7 billion to focus on developing its core Gorgon and Wheatstoneliquefied natural gas (LNG) projects. (US$1=A$1.30). Despite the exit, Chevron said in a statement it remains one of Australia’s largest foreign investors and…

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MALAYSIA: Southeast Asia’ s first crude oil storage terminal launched

(EnergyAsia, March 26 2015, Thursday) — Malaysia’s Johor state has started up Southeast Asia’s first commercial crude oil storage terminal with the receipt of one million barrels of Middle Eastern crude from a supertanker last week. MT Mesdar, a vessel chartered by France’s Total, docked at the Pengerang deepwater terminal jointly owned by Dutch oil…

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MARKETS: OPEC raised global oil demand forecast as price outlook remain under pressure and uncertain

(EnergyAsia, March 26 2015, Thursday) — Despite rising demand and an improving global economy, oil prices remain under pressure from continuing supply growth, a strong US dollar, insufficient storage and speculative bets for further declines, said the Organisation of Petroleum Exporting Countries (OPEC).

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MARKETS: EIA holds oil price forecast, sees global oil demand and supply levels at new highs in 2015 and 2016

(EnergyAsia, March 25 2015, Wednesday) — Swimming against a new wave of bearish calls based on rising oil stockpiles, the US Energy Information Administration (EIA) has largely kept its latest forecast for Brent and WTI crude prices for this and next year.

The agency expects the 2015 Brent crude price to average US$59 a barrel, up $2 from its February forecast, while US WTI is seen to trade at US$52, down from $55. For 2016, Brent is expected to cost an average US$75 a barrel, down US$1 from the previous month’s forecast, while WTI is seen rising US$1 to US$71.

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MARKETS: BIMCO developing charter to bring greater flexibility to LNG spot trades

(EnergyAsia, March 24 2015, Tuesday) — In response to the growing liquefied natural gas (LNG) trade, the world’s largest shipping association said it is working with the industry to develop a new contract to provide for better risk and cost-management of the fuel’s transportation under voyage charter terms. The Baltic and International Maritime Council (BIMCO),…

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JAPAN: Analyst predicts energy consumption to rise in fiscal 2015 after four years of decline

(EnergyAsia, March 23 2015, Monday) — After four straight years of decline, Japan’s total energy consumption, buoyed by a mild economic recovery, could begin growing again in the coming financial year starting April 1, according to an analyst at the Institute of Energy Economics, Japan (IEEJ).

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ASIA: Summer LNG price rally to be cut short by additional Australian production, says Wood Mackenzie

(EnergyAsia, March 19 2015, Thursday) — Asia’s liquefied natural gas (LNG) prices will enjoy a brief rally in the summer that will be quickly cut down by the start-up of new production capacity in Australia, predicts energy consultant Wood Mackenzie. The expected resumption of operations at some nuclear plants in Japan will also pressure Asian…

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STORAGE: CME Group to launch first physically delivered crude oil storage futures contract on March 29

(EnergyAsia, March 18 2015, Wednesday) — CME Group, the world’s largest derivatives market operator, said it and two US firms expect to launch a physically delivered crude oil storage futures contract on March 29 upong receiving US regulatory approval. The Chicago-based firm said it jointly developed the pioneering contract with LOOP LLC, operator of the…

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SINGAPORE: Puma Energy expands global bitumen and fuels businesses with acquisitions in Australia and the UK

(EnergyAsia, March 16 2015, Monday) — In separate announcements today, Singapore-based Puma Energy said it has agreed to purchase BP’s bitumen business in Australia and Murco Petroleum’s fuels wholesale and distribution business in the UK. The proposed deals will be subject to local regulatory approvals. The integrated midstream and downstream energy company, which has been…

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INDIA: Former Prime Minister Manmohan Singh and five others charged over alleged role in coal scandal

(EnergyAsia, March 12 2015, Thursday) — The Indian government’s attempt to solve the country’s decade-long energy crisis took an unexpected twist yesterday with the arrest of its powerful former Prime Minister Manmohan Singh and some his allies to face charges of corruption and criminal conspiracy related to the alleged illegal sales and allocations of the country’s coal deposits during his time in power.


Hindalco Industries tycoon Kumar Mangalam Birla, former coal secretary P. C. Parakh and three other individuals have also been charged. If convicted, the six accused, who have been ordered to appear in court on April 8, face life imprisonment. They have all denied the charges.

Singh, who was prime minister from 2004 until his Congress Party’s defeat in a general election last May, held the coal portfolio from 2005 to 2009 when most of India’s coal deposits were awarded to well-connected business and political allies who supposedly were neither qualified nor interested in mining the fuel.

Critics said most of the allocated blocks were never developed as they were used as collateral to trade favours, forcing the operators of India’s mostly coal-fired power plants to import the fuel at high cost. This led to India suffering a series of financial, economic and energy crisis that culminated in a three-day power supply cut-off affecting some 700 million people in the summer of 2012.

That dubious world record-setting power shutdown marked the start of Singh’s political demise as business, labour and student groups rallied popular support to demand an end to the coal-hoarding scandal.

Narendra Modi led his Bharatiya Janata Party (BJP) to a decisive victory with the promise to revive India’s once booming economy by reforming the economy with a focus on the country’s energy policies. Since taking power, Modi has unleashed the Central Bureau of Investigation (CBI) to boldly pursue criminal charges against his predecessor and those connected with the coal-fixing scandal.

The Modi government also paved the way for the Supreme Court to revoke all 218 allocations of coal reserves made between 1993 and 2010. A government audit claimed the reserves were given away or sold cheaply, costing the government billions of dollars in revenue.

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SHIPPING: Piracy, accidents and terrorism threaten Southeast Asia’s energy trade

(EnergyAsia, March 11 2015, Wednesday) — Piracy, maritime accidents and potential terrorist acts are adding to the cost of moving and distributing oil and gas cargoes and general merchandise in Southeast Asia at a time of rising traffic through the increasingly congested Straits of Malacca and the Singapore Straits, said industry officials and analysts.


Transits by vessels of over 300 gross tones through the Straits Of Malacca reached a record 79,344 last year, reported Seatrade Global citing a study by the Nippon Maritime Center. The study found that an average 217 vessels sailed through the strait everyday to deliver cargoes from the Middle East, Africa and Europe to East Asia in 2014 compared with 201 in 2011.

Consultant IHS expects growing incidences of maritime accidents in Southeast Asia and Europe while UK-based insurance broker Seacurus has begun offering coverage for shipowners, operators and charterers of petroleum vessels to deal with the region’s rising threat profile.

The growing threats to Southeast Asia’s maritime sector

Piracy in Asian waters last year reached its highest levels since the ReCAAP Information-Sharing Centre started keeping records in 2006.

According to the piracy watch centre, there were more than 170 actual or attempted sea attacks in Indonesia, the South China Sea, the Strait of Malacca and Strait of Singapore. The number of incidents surpassed the previous record of 167 in 2010.

Of growing concern is that the pirates are also more violent and desperate, said ReCAAP.

Writing for Singapore’s S. Rajaratnam School of International Studies (RSIS) think tank, Sam Bateman said there is growing concern for the safety and security of passenger ships with Singapore becoming an important hub port for cruise liners.

“Singapore has accepted a large responsibility for search and rescue in the region, and would be heavily involved in rescue operations in the event of a major passenger ship accident in regional waters,” he wrote in a recent research paper.

In 2012, Singapore opened a new cruise terminal that now attracts some of the world’s biggest cruise liners.

Asia’s growing affluence has led to an increase in the supply and demand of large cruise vessels sailing in regional waters alongside ferries as well as merchandise and energy vessels.

Human error is a major cause of shipping accidents, including faulty operation of equipment leading to a fire.

Of growing concern to governments in the region is that passenger ships are potentially an attractive target for terrorists.

Already, there have been instances of terrorist bomb attacks on ferries in Indonesia and the Philippines, said Mr Bateman.

 

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INDIA: Surging demand for seaborne metallurgical coal to help offset weak outlook in China

(EnergyAsia, March 10 2015, Tuesday) — India will emerge as the most important market for metallurgical coal from 2015 as its demand rises to surge ahead of Japan 10 years from now and China by 2035, said UK consulting firm Wood Mackenzie.


For the rest of the decade, the company expects China to remain the world’s leading coal importer with purchases exceeding 100 million tonnes by 2020.

But Chinese coal appetite will peak at 880 million tonnes as it reaches the limit of hot metal demand by then.

India will offer a sharp contrast, with coal and hot metal demand growth accelerating after 2020 as its near-term consumption will be constrained by government bureaucratic red tape, regulations and permitting issues. Wood Mackenzie expects India’s steel demand to grow by four to five percent per year through 2020, and by up to seven percent per year in the following 15 years.

“This will skew most of the 51-million tonne coal import growth in India towards the 2020-2035 timeframe,” said Ronnie Cecil, the firm’s principal steel analyst,

Suppliers will be relieved to hear that India will raise imports by two million tonnes this year to partly offset a projected drop of four to five million tonnes in China.

Speaking at Coaltrans India last week, Mr Cecil said India will need the extra coal to boost steel production by around four percent this year.

He expects India’s imports of semi-soft coking coal and pulverised coal to rise sharply at the same time that China will reduce imports on account of its slowing steel sector, lower coke prices and continued uncertainty over the enforcement of trace element standards on met coal.

Wood Mackenzie expects India to account for 40% of the projected 123 million tonnes increase in global met coal trade over the next 20 years, with China in second place at 28%. India will surpass Japan as the world’s largest coal consumer in 2025 and draw level with China 10 years later.

“In 2015, the combined net increase in global seaborne demand will just about be sufficient to offset the negative China impact this year. India offers the main ray of hope with steel production growth on course to advance 4% this year boosting demand for imported met coal,” said Mr Cecil.

“The scarcity of good quality premium hard coking coal locally will continue to support imports.”

 

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IEA dampens expectations for major oil price rise despite call for slower supply growth

(EnergyAsia, March 9 2015, Monday) — 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 IEA.


With the drastically changed market conditions, the agency said it expects the crude oil price to average US$55 per barrel for 2015 and to gradually rise to US$73 in 2020.

In its medium-term market report to 2020, it said the 50% plunge in oil prices since last June will not be sufficient to derail supply growth which will continue to outpace the projected demand increase.

“These prices suggest that participants expect the market to recover somewhat as it rebalances following cuts in upstream investment,” it said.

Despite the recent improvement in fundamentals, “the market does not seem to be expecting prices to revisit earlier highs any time soon. Not only have prompt prices collapsed, even price expectations for the back end of the curve have been significantly downgraded.”

The report affirmed the continuing role of North America and Iraq, the world’s two leading sources of recent capacity growth, in maintaining the global oil glut through the end of the decade.

The recent price correction will merely cause the North American supply “party” to pause, not bring it to an end.

“By the beginning of the next decade, the region’s non-conventional production will account for an even larger share of the supply mix than earlier forecast,” said the Paris-based agency which represents 29 major energy consuming nations.

In the medium term, the IEA said the real issue of the price collapse is how the accompanying supply-demand rebalancing and price recovery might be different from those that followed similar price drops in the past.

It noted that sharp corrections have rocked the market roughly every decade since the price shocks of the 1970s: in 1986, in 1998, and again in 2008.

The IEA said several major trends contributed to the price collapse: the successful mass application of fracking technology in the US to access tight oil reserves, a slowdown in demand growth in China and other emerging economies, and the growing role of natural gas and renewable energy sources in meeting global energy needs.

 

North America and Iraq to continue lead production growth

Despite projecting prolonged oil price weakness, the IEA said it expects global production capacity to grow by more than 5.3% from 98 million b/d in 2014 to 103.2 million b/d by the end of the decade. Two thirds of this growth will come from non-OPEC producers.

Led by North America, non-OPEC supply will reach 60 million b/d by 2020, with growth projected at an average annual 570,000 b/d, down from the average annual rate of one million b/d in 2008-13.

Last year’s non-OPEC supply surged by a record 1.9 million b/d.

It expects North America’s non-conventional production to account for an even larger share of the supply mix than earlier forecast at the start the next decade.

Despite slowing production growth, the region will surge ahead with forecast gains of three million b/d by 2020.

The IEA expects North America’s production increase to continue to offset declines in other non-OPEC jurisdictions — none more so than Russia, now projected to swing into contraction of more than 500,000 b/d by 2020, down from an earlier projection of small growth.

Despite OPEC’s stated policy of defending market share, the IEA expects the cartel to boost its combined crude production capacity by 1.2 million b/d for an average annual increase of 200,000 b/d. Almost all of this gain will be provided by Iraq.

Notwithstanding the threats of the Islamic State (ISIS) insurgency, Iraq succeeded in raising production to a 35-year high of 3.7 million   b/d last December.

 

 

Demand growth slowdown

Meanwhile, China, a leading engine for global oil demand growth, and other emerging economies have entered a new, less oil-intensive stage of development.

The IEA expects the combined annual oil demand of the emerging economies to grow by 1.19 million b/d through 2020, far less than in the past.

“The global economy, reshaped by the information technology revolution, has generally become less fuel intensive,” it said.

“China’s reorientation away from heavy manufacturing and exports towards a more consumer-driven economy puts a crimp on what had been the leading engine of global oil demand growth for the last 15 years.”

Concerns over climate change are recasting energy policies as have the globalisation of the natural gas market and declining cost and availability of renewable energy.

After years of sustained record-high prices, oil has been floored by a severe “inevitable correction,” said the IEA.

Changed trading conditions will contribute to the market’s subdued outlook as “non-OPEC supply has become far more price elastic than in the past, while demand has at the same time become significantly more price inelastic on the downside.”

“The result is that the market rebalancing will likely occur relatively swiftly but will be comparatively limited in scope, with prices stabilising at levels higher than recent lows but substantially below the highs of the last three years,” it said.

 

Lower oil prices could reduce geopolitical risks

The IEA countered the conventional view that low oil prices could heighten geopolitical risks in hydrocarbon-rich countries that are dependent on resource revenues to maintain high level of social spending to placate their restive populations.

The agency states that in some cases lower prices can offer upside risk to supply.

“For producer countries, lower export and fiscal revenues provide an incentive to maximise output and stimulate production growth, in a bid to make up in volume for per-barrel losses,” it said.

“Down cycles typically lead producer countries to tone down resource-nationalistic policies and thus can in some ways at least ease above-ground hurdles to supply,” it said.

“Iran also may be in a position to increase production and exports rapidly if it reached agreement over its nuclear programme with the West.”

 

ASIA: TMF Group sees sustained cheap oil boosting region’s GDP by up to 0.5%

(EnergyAsia, March 6 2015, Friday) — Asia’s collective GDP could be boosted by between 0.25% and 0.5% for 2015 if crude oil prices remain at current levels, said global business services provider TMF Group.

For China, the US$50 per barrel plunge in oil price is generating an immediate stimulus worth US$112 billion or the equivalent of 1.1% of the country’s GDP.

Discounted oil is helping China offset the negative impact of the global economic outlook on its export-led sectors. TMF also noted that the benefit of weak oil in helping subdue inflation and increase consumer purchasing power as the Chinese economy heads for a prolonged period of economic slowdown.

“It has provided the country a great opportunity to shift towards a consumption-driven development model,” said author Paolo Tavolato. At the start of the year, Beijing gave its 40 million civil servants a salary increment of at least 31% in an effort to stimulate domestic consumption.

Japan, the world’s third largest net oil importer after the US and China, is positioned to save more than US$80 billion a year. According to TMF, Japan’s total energy import expense last year of more than US$200 billion  claimed 5% of its GDP.

“Although the yen has depreciated almost 14% in the past six months, crude oil still cost 30% less for Japan and helped the country save US$37 billion (equivalent to 0.8% of its GDP),” it said.

Thanks largely to the sharp fall in oil and gas prices, Japan reported a 60% decrease in its trade deficit in January.

The beleaguered domestic economy has also been given breathing room, enabling the country’s GDP to top US$4.2 trillion for the first time in eight years, said TMF. Japanese industries are enjoying better profits while households have more disposable income as lower energy prices are starting to offset the effects of the depreciated yen over the last two years.

India expects to reduce its annual import bill by US$650 million for every US$1 slide in the crude oil price, said TMF. Energy purchases accounted for 34.5% of the country’s total import bill last year.

India’s current account deficit and fiscal deficit could be pared down by 0.5% and 0.1% of GDP respectively for every US$10 per barrel fall in the fuel price.

Thanks largely to plunging energy prices, TMF said India’s 2015 current account could be in surplus, albeit by a miniscule 0.3%, for the first time in 10 years.

“The substantial improvement in the country’s books will give room for the Reserve Bank of India to implement a more assertive and development-oriented monetary policy,” said TMF.

Taking advantage of the oil price collapse, the government of Prime Minister Narendra Modi was able to partly reduce the country’s fiscally-draining energy subsidies of over 600 billion rupees. His predecessor was unable to push through economic reforms partly because most voters opposed any move to slash the subsidies that otherwise would have been invested in improving India’s inadequate and ageing infrastructure.

TMF noted that the Modi government was able to drop the diesel subsidy that had cost India 0.3% of its GDP. Energy accounts for a quarter of India’s total 2.6-trillion-rupee expense on subsidies. (US$1=61 rupees).

Mr Modi was elected to power last May to revive India’s slowing economy that analysts said was due partly to the failed energy policies of the previous government.

RUSSIA: Labour remittances to Central Asia to fall by US$1.7 billion in 2015, says UN unit

(EnergyAsia, March 5 2015, Thursday) — As a result of the oil price collapse, remittances by Central Asian workers in Russia will fall by an estimated total US$1.7 billion this year, said the UN Economic and Social Commission for Asia and the Pacific (ESCAP). In a recent report, the UN unit said the near 60%…

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ASIA: Consumers hopeful as analysts predict oil market rebalance to take years

(EnergyAsia, March 3 2015, Tuesday) — Faced with the growing threats of deflation and a weak global economy, Asia’s largely export-dependent countries will be hoping Wall Street analysts are spot on with their starkly bearish views on the global oil and gas markets.

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PEOPLE: Fatih Birol to lead IEA; WTI crude’s John Elting Treat laid to rest

(EnergyAsia, March 2 2015, Monday) — The International Energy Agency (IEA) is promoting its chief economist, Fatih Birol, to head the agency from September 1. The 56-year-old Turkish national will succeed Maria van der Hoeven at the end of her four-year term as executive director on August 31. Mr Birol, who previously worked for the…

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