AUSTRALIA: Exploration and production headed for further decline, says Department of Industry

(EnergyAsia, October 23 2016, Sunday) — Oil and gas explorers are losing their appetite for Australia with investment expenditure now at their lowest in over a decade, said the Department of Industry, Innovation and Science.

In its latest quarterly update, the department reported that petroleum exploration expenditure in Australia had declined for a sixth consecutive quarter in June, falling by 34% to A$283 million. (US$1=A$1.3).
“Exploration activity now stands at its lowest level since the March quarter (of) 2006,” it said.
The report confirms consultant EnergyQuest’s earlier finding that the oil price collapse since mid-2014 is having a devastating impact on Australia’s upstream oil and gas sector.
CEO Graeme Bethune said last year’s drought in offshore drilling marks the beginning of “a prolonged period of very low Australian offshore activity” despite the large take up of new acreage in offshore release programs between 2012 and 2014.
“The total number of exploration and development oil and gas wells drilled in Australia nearly halved, falling from 1,534 in 2014 to just 821 in 2015, including exploration wells falling from 119 to 54,” said Dr Bethune.
“In that time, exploration spending fell from A$1,034 million in Q4 2014 to A$446 million in Q4 2015. This is Australia’s lowest oil exploration spend in a decade.”
Production is in even worse shape than exploration, with last year’s output of 76 million barrels the lowest since 1970.
Low oil prices have resulted in “significant” downwards revisions of reserves, leading to negative reserves replacement ratios over the past year, said Dr Bethune.
This has greatly reduced the valuation of oil and gas companies listed on the Australian Securities Exchange (ASX), which saw its energy index fall to a 11-year low in January.
The reduced investment in exploration will further depress future production, with the Department of Industry predicting Australia’s output of crude and condensate will fall by five percent to 301,000 b/d in the current fiscal year to June 2017. Last year, production fell by 3.5% to 317,000 b/d.
BP confirmed the industry’s growing risk aversion to Australia with its announcement to discontinue its A$600-million exploration programme to drill in the Great Australian Bight (GAB) off the coast of South Australia state.
The British major said the project will not be able to compete with other upstream opportunities in its global portfolio in the foreseeable future.
“We have looked long and hard at our exploration plans for the Great Australian Bight but, in the current external environment, we will only pursue frontier exploration opportunities if they are competitive and aligned to our strategic goals. After extensive and careful consideration, this has proven not to be the case for our project to explore in the Bight,” said Claire Fitzpatrick, BP’s managing director for exploration and production in Australia.
Dr Bethune said Australia’s politicians are adding to the industry’s problems as they are “killing what little oil and gas exploration activity there is, with Senate inquiries now into unconventional gas as well as proposed oil and gas exploration in the Great Australian Bight.”

AUSTRALIA: Crude and condensate exports to fall, product imports to rise in FY2016, says Department of Industry

(EnergyAsia, October 21 2016, Friday) — Australia’s petroleum trade will remain a tale of two opposing trends for the rest of the current fiscal year ending June 30 2017: falling crude and condensate exports, and rising product imports.

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INDIA: Russia makes statement with Rosneft’s joint purchase of Essar Oil, sale of upstream stake to ONGC

(EnergyAsia, October 20 2016, Thursday) — The geopolitics of the international oil trade are about to be redrawn with a consortium led by Russia’s Rosneft PJSC making a proposed US$12.9 billion purchase of India’s privately-owned Essar Oil Ltd in the biggest corporate deal between the two countries.

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ASIA: LNG market breaking down and undergoing reforms

(EnergyAsia, October 12 2016, Wednesday) — Asia’s liquefied natural gas (LNG) market is undergoing massive restructuring brought on by surplus production capacity, pricing competition, the rise of spot trading, slowing demand growth and geopolitical manoeuvring.

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JAPAN: Saudi Aramco confirmed to increase crude oil storage on Okinawa from 2017

(EnergyAsia, October 11 2016, Tuesday) — Saudi Arabia’s state-owned oil giant Aramco will increase the amount of crude oil it currently stores on Japan’s Okinawa Island from 6.3 million barrels to around 8.3 million barrels from next year.

The new three-year agreement with Japan Oil, Gas and Metals National Corporation (JOGMEC) will enhance energy security for both countries as part of their push for expanded bilateral ties. Japan will have first call on the stored oil in the event of any supply disruption while Saudi Arabia will boost its crude stockpile outside of the volatile Middle East to supply its customers in Asia.

The expanded deal was announced during the visit to Japan by Deputy Crown Prince Mohammed bin Salman who led a high-level Saudi delegation that included Energy Minister Khalid al-Falih, other ministers, and Saudi Aramco CEO Amin Nasser. Price Salman met Japanese Prime Minister Shinzo Abe and Emperor Akihito during his four-day trip.

Japan initiated the unique crude oil storage agreement in 2010 when it offered Saud Arabia free stockpiling services in exchange for security of supply. At that time, Brent crude was trading at more than US$100 a barrel amid fears over the stability of global supply.

As part of its 2030 vision to reduce dependency on oil, Saudi Arabia is looking to enlist Japan’s help to develop the other sectors of its economy. Aramco would consider listing its shares on the Tokyo Stock Exchange, Mr Nasser told the Nikkei newspaper.

In a separate but similar deal, state-owned Abu Dhabi National Oil Co (ADNOC) has also agreed with JOGMEC to expand its stockpile of crude on Okinawa by two million barrels to around 8.3 million barrels.


MARKETS: Prices rebound on news of OPEC output cut, but for how long?

(EnergyAsia, October 4 2016, Tuesday) — Crude oil prices rebounded to their highest levels in nearly two months following the Organisation of Petroleum Exporting Countries (OPEC)’s surprise announcement on September 28 that its members would cut production.

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MALAYSIA: Petronas, Canadian government play “conditional” approval game to further delay proposed LNG project

(EnergyAsia, October 2 2016, Sunday) — The Canadian government and Malaysian state energy firm Petronas are playing a game of giving each other “conditional” approvals that will further delay the construction of a proposed liquefied natural gas (LNG) export terminal on the north-western coast of British Columbia province.

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