MARKETS: OPEC holding on to previous months’ forecasts for world oil demand and non-OPEC supply

(EnergyAsia, June 30 2015, Tuesday) — With so much uncertainty on the economic and geopolitical fronts, the Organization of Petroleum Exporting Countries (OPEC) has frozen its crystal ball on how much oil the world will be consuming over the next two years in its latest monthly report for June.

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CENTRAL ASIA: Oil production from Kazakhstan, Azerbaijan and Turkmenistan to decline in 2015, says OPEC

(EnergyAsia, June 30 2015, Tuesday) — Largely in response to lower oil prices, Kazakhstan, Azerbaijan and Turkmenistan will reduce crude and condensate production by a combined 50,000 b/d in 2015 from last year’s 2.86 million b/d predicts the Organisation of Petroleum Exporting Countries (OPEC).

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INDIA: Japan’s MHI to build two storage tanks for IndianOil Corp’s new LNG terminal

(EnergyAsia, June 29 2015, Monday) — Japan’s Mitsubishi Heavy Industries, Ltd (MHI) said it has received an engineering, procurement and construction (EPC) order from Indian Oil Corporation Ltd to construct two storage tanks for a liquefied natural gas (LNG) terminal 25km north of Chennai city, formerly known as Madras.

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SINGAPORE: Trafigura to use excess capacity at LNG terminal

(EnergyAsia, June 28 2015, Sunday) — European commodities trader Trafigura said it has signed an agreement with Singapore LNG Corporation Pte Ltd (SLNG) to use excess storage capacity at the company’s liquefied natural gas (LNG) terminal on Jurong Island. SLNG is the owner and operator of the country’s first LNG terminal that is capable of…

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CHINA: Analysts forecast weakening gas demand and oversupply through 2017

(EnergyAsia, June 26 2015, Friday) — Analysts are reducing their forecasts for China’s natural gas consumption over the next two years in view of a slowing economy, low oil and coal prices, and the high cost of gas-fired electricity.

UK consulting firm Wood Mackenzie has sharply reduced its forecast for Chinese gas demand to 360 billion cubic metres (cbm) in 2020 and 560 bcm in 2030, compared with 420 bcm and 640 bcm previously for the two respective years.

In the short term, Chinese gas demand growth is being held down by low oil prices and high domestic gas prices, reversal of environmental policies, competition from coal and hydro and warmer winter weather, said the firm’s principal gas consultant Gavin Thompson.

Structural factors are also in play as China is developing its services sector to reduce the country’s dependence on heavy industries and manufacturing to continue driving the economy.

The sharp slowdown in China’s gas demand growth appears to have surprised the country’s main gas companies which have signed on to import an annual total of 66 bcm of LNG, including a ramp-up of 23 bcm into the domestic market by 2018. The increasingly oversupplied market is exerting downward pressure on domestic prices and hurting the bottomlines of the gas importers.

According to Wood Mackenzie, the companies are attempting to re-negotiate with suppliers longer import schedules, lower pricing terms and increased flexibility for the resale of their LNG allocations to other markets in the Pacific. Central Asia is a major source of the new LNG supplies into China.

“We expect China will be over-contracted by about 18bcm from 2015 till 2017,” said Mr Thompson.

The state-owned firms will deal with the looming glut by restricting or delaying investment in expensive projects, and maximising contract sales to domestic customers while PetroChina will control the import of pipeline gas using take-or-pay provisions.

“With strong growth in contracted LNG and low prices, we expect that some LNG will be sold back into the broader market,” Mr Thompson said. Some of this will be seasonal – in particular LNG that might otherwise have supplied northern China during the warmer months – but even at times of higher demand it is unlikely that all contracted LNG will find a market in China.

If and when it occurs, an oil price recovery will stimulate Chinese gas demand.

Earlier, the CNPC Economics & Technology Research Institute reported that Chinese gas demand has been growing at a slower rate. It rose 6.9% over the first four months of 2015, compared with a much faster 9.8% for the same period last year. It attributed to the slower demand growth to the weaker pace of China’s economic expansion.


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MARKETS: Refiners failed to unleash “wave” of new oil products supply, says consultant

(EnergyAsia, June 22 2015, Monday) — Led by Saudi Arabia in the Middle East and Brazil in Latin America, refiners failed to unleash a much-anticipated new “wave” of petroleum products to meet rising global demand, said a US energy consultant. In the first quarter of 2015 when global oil products demand roared to life, ESAI…

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KAZAKHSTAN: Economic growth to hit 15-year low in 2015, predicts World Bank

(EnergyAsia, June 22 2015, Monday) — After nearly 15 years of rapid growth, Kazakhstan’s high-flying economy will slow to a new low of just 1.7% this year under the combined weight of Russia’s problems and low oil and gas prices, predicts the World Bank.

Starting from a low base at the turn of the century, the Kazakhstan economy grew at an average annual rate of 8.3% between 2000 and 2010. It began slowing down since the start of this decade, and hit a low of 4.3% last year as oil prices collapsed from last June.

“This reflects the combination of falling oil prices, recession in Russia, declining confidence, and lower capital inflows,” said the bank’s assessment of the country as part of its mid-year update on the world’s economic prospects. Kazakhstan relies on crude oil for about 70% of its export revenues, and sales of various commodities to Russia for around seven percent of earnings.

2000–10a      2011   2012   2013   2014e             2015f             2016f             2017f

8.3                    7.5      5.0      6.0      4.3                  1.7                   2.9                 4.1

The government’s 19% devaluation of the local currency against the US dollar in February 2014 helped avert a recession last year, but its effects have largely petered out this year. Central Asia’s largest economy will also suffer the consequences of continuing production delays in the giant Kashagan oil field, said the bank.

With commodity prices expected to stay low, Kazakhstan’s current account surplus will shrink further despite the offset provided by weak domestic demand and slower import growth.

“Fiscal balances have deteriorated significantly. A 3% deficit is projected in 2015, largely reflecting lower revenues from oil exports,” said the bank.

Kazakhstan’s economic growth might revive slightly next year to about 2.9%, and 4.1% in 2017.

“Almost all economies in the region, have been negatively affected by the spillovers from the recession in Russia and Ukraine, weakening confidence related to the on-going geopolitical tensions, and growth slowdown in oil-exporting Azerbaijan and Kazakhstan, to various degrees,” said the bank.

Only Uzbekistan and Turkmenistan, two relatively closed, resource-rich economies with strong buffers and linkages with the East and South East Asia regions, were less affected by the commodity price declines and regional headwinds.

Central Asia’s oil-importing eastern countries face tough prospects despite the benefit of lower oil and gas prices as they are hit by lower trade and investment inflows, and income remittances.

Weaker exports and exchange rate pressures have proved detrimental for the economies of Armenia, Belarus, Georgia, the Kyrgyzstan, Moldova and Tajikistan.

With most imports invoiced in US dollars, and foreign exchange receipts in rubles, the slide of the ruble and local currencies against the greenback have triggered a deterioration in the region’s terms of trade and a rise in inflation.

Russia’s economy is expected to contract by 2.7% this year and to reverse to grow by 2.5% next year, hardly sufficient to boost Central Asia’s outlook.

The World Bank said Russia’s economy will continue to underperform, growing by about half its average rate in the 2000–10 decade. And this is the best case scenario, as it is based on the assumption of a modest recovery in oil prices and no major deterioration in geopolitical tensions.

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DUBAI: ENOC secures US$1.5b syndicated loan facility following successful £3.7b bid for Dragon Oil

(EnergyAsia, June 18 2015, Thursday) — Following its £3.7b successful bid for oil producer Dragon Oil, Dubai’s state-owned Emirates National Oil Company (ENOC) said it has secured a US$1.5 billion term debt facility from a syndicate of local, regional and international banks. The nine-year facility denominated in US dollars and UAE dirhams was fully underwritten…

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MALAYSIA: Environmental, aboriginal groups affirm opposition to Petronas-led LNG venture in Canada

(EnergyAsia, June 16 2015, Tuesday) — In attaching two major conditions to its twice-delayed final investment decision (FID), Malaysian state energy firm Petronas has thrown the initiative back to Canada over the fate of its proposal to build a C$36 billion liquefied natural gas (LNG) project in British Columbia province. (US$1=C$1.25).

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NEW ZEALAND: Chevron to complete exit with sale to Z Energy for NZ$785 million

(EnergyAsia, June 11 2015, Wednesday) — Weeks after divesting its stake in New Zealand’s only refinery, US major Chevron said it is selling its retail and lubricants operations to local company Z Energy for a total of NZ$785 million. (US$1=NZ$1.40). Chevron will sell 150 Caltex service stations together with 70 truck fuelling stations and the…

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CHINA: ‘Belt and Road’ strategy to be implemented through projects worth an estimated US$900 billion

(EnergyAsia, June 9 2015, Tuesday) — Chinese officials said they expect the country to invest a total of nearly US$900 billion in more than 900 projects under its strategy to develop an expanded Silk Route and a new maritime belt to connect various parts of the world.

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ASIA: IMF sharply downgrades Central Asia’s growth prospects

(EnergyAsia, June 9 2015, Tuesday) — The eight economies of Central Asia and the Caucasus will experience a sharp slowdown in growth this year on the twin negative impacts of weak global commodity prices and Russia’s financial troubles, said the International Monetary Fund (IMF).

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ASIA: A route for US warships through the South China Sea, by Grenatec

Comment by Grenatec (EnergyAsia, June 8 2015, Monday) — If US navy ships traverse the South China Sea to demonstrate freedom of navigation, what route might they take? A US Navy flotilla tour of the South China Sea could underscore Reed Bank’s potential as a Joint Development Area. One route could be a broad arc passing…

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US: Proposed LNG projects to start well ahead of Canada’s, says Wood Mackenzie

(EnergyAsia, June 1 2015, Monday) — The US is well ahead of its resource-rich northern neighbour in developing projects to liquefy and export natural gas projects to Asia, said consultant Wood Mackenzie.

“While North America’s huge gas resource base offers significant potential for LNG exports, 50 million tonnes per annum (mmtpa) of LNG production capacity is now under construction in the US, compared to none in Canada,” it said.

Canada’s slow pace of development is due largely to the high cost of building expensive infrastructure in remote, pristine parts of the country to support LNG projects. Investors also face fierce opposition from aboriginal and environmental groups, making it difficult for the projects to yield viable commercial returns.

By contrast, in the US, LNG developers are focused on low-cost brownfield expansion. Wood Mackenzie said the only incremental expenditure for many US projects is the price of adding  liquefaction trains and making some modifications to existing facilities.

While US costs are rising, particularl in the active Gulf Coast area, LNG projects close to sanction like Corpus Christi will likely proceed with a second wave of investment expected to follow.

“The availability of cheap gas feedstock has created a resurgence in gas industry developments, pushing up demand for craft labour and leading to wage pressures. We believe it could be 18-24 months before capital costs for new LNG developments return to the level they were prior to the gas-fed construction boom,” it noted.

Meanwhile in Canada, the oil price collapse offers the potential for a lowering of LNG-related costs. Oil companies are slowing down investment in Alberta, freeing up capital and labour to the emerging LNG sector.

Wood Mackenzie believes Malaysia’s Petronas will sanction its 62%-held Pacific North West LNG project in 2015 after squeezing contractors of discounts of at least 15%.

“It remains to be seen whether contractors will oblige. If they do not, then the worry will be that a rising oil price will push the costs of Canadian LNG back up,” it said.