Oil Gas Gasoline Diesel and Energy Markets

March 29, 2019 - Nom Geo

Reservoir to Bowser 4

Markets

Adding to my previous article (http://is-this-just-business-as-usual-in-the-oil-patch ) explaining that the energy patch is now in a “business as usual” mode, oil and gas prices remained relatively stable to reach US$67.82 per barrel for Brent crude while West Texas Intermediate was at US$59.30 per barrel. Happily for producers in Alberta, Western Canadian Select closed the month at US$50 per barrel of the upgraded version of the heavy stuff. Energy prices in the United States were reflected in the price of US$2.75 per mmBtu of natural gas at Henry Hub.

Oil Markets Worldwide

Over the last three months, markets have been caught between the uncertainties of Brexit and the manoeuvrings between Russian, American and Chinese powers. Despite much noise, the car crash that is Venezuela’s oil industry is now a sideshow, putting it into the same league as Libya.

US 3:2:1 crack-spreads have recovered to over US$13 per barrel to the relief of refiners, up from around US$2 per barrel in late December. Over the quarter, diesel and gasoline inventories have fallen to match movements in previous years. Total US crude stocks are slightly under the 5 year average which is helping to support prices. The United States is now producing more than 12 million barrels of oil every day – who would’ve thought?

On a global scale and confounding the 2018 upwards price trajectory, LNG (liquefied natural gas) prices are at record historical lows. Even in the usually premium markets East Asia the price is less than US$4.50/mmBtu on a spot basis, down from an already low US$6.10/mmBtu at the start of the month. However supply of LNG under contracts are expected to be enjoying slightly higher prices as these are oil linked.

The higher global capacity of LNG from new facilities in the US and Australia has naturally flooded more supply into spot market trading. But long term it still appears that this will correct as Asian demand is expected to continue it’s runaway growth.

What we are seeing in LNG is really a see-saw between growing supply and growing demand. This pattern is expected to continue to at least 2025. Regardless, investments in new LNG import terminals continue to be made and it looks as if the fundamental long-term business case for this highly traded cryogenic hydrocarbon remains robust.

Highlighting this trend, Germany confirmed it will construct more LNG import terminals in a move driven partly by politics while India opened yet another LNG terminal. This is GAC’s newly constructed LNG terminal inside Kamarajar Port, Ennore in Chennai which received the first, 78,000m³ consignment of commissioning LNG from Qatar.

Reservoir

It appears as if Eni has added 650 million barrels of new oil discoveries to the global resource pool in the highly permeable sands of Angola’s Kwanza Basin. The Agogo-1 NFW discovery in block 15/06 will one day be developed via FPSO (floating production, storage and offtake) units, in keeping with Eni’s other fields in the province. But it is still too early to state exactly what reserves will eventuate. Light oil and associated gas perhaps? Just kidding – production will almost certainly replicate the style of existing fields, albeit in deeper waters.

Getting things done…

In shale, Chevron plans on building production from its Permian basin shale oil acreage to 900,000 barrels per day by 2023, while ExxonMobil is planning to achieve 1 million barrels per day in 2024. BP is currently lining up a huge sale of “non-core” shale assets as it focuses on optimising BHP’s former acreage in the Permian Basin and also the Woodford and Eaglo Ford shales. It goes without saying that while shale dominates on-land activity, all major operators are lining up to invest billions in deepwater projects.

Shale and deepwater projects are at opposite ends of oil – field engineering and require completely different management tools. It is impressive that these large companies can succeed in both. Strategies for achieving shale growth rely on specialist units and contractors. For example, ExxonMobil’s Permian shale growth will be in the hands of its specialist subsidiary unit XTO which focuses exclusively on unconventional oil and gas production.

As a sign of the times, Eni’s latest press release states that along with other integrated energy initiatives it intends to develop ” advanced biofuels, renewables and reforestation. With an ambitious target – to reduce CO2 emissions in conventional production to zero by 2030.

Eni is planning to use big-data and a digital transformation to achieve this vision, with its HPC4 supercomputer claimed to be capable of 22.4 million billion mathematical calculations per second.

Refining

In refining, Uganda is moving ahead with the letting of the US$68m FEED (front end engineering and design) contract to Saipem for a new, 60kbpd (3Mtpa) refinery in Kabaale, in western Uganda’s Hoima district. The refinery will be built at an estimated cost of $4 billion.

With population growth in Africa set to dwarf even Asian growth to reach as many as 4 billion people by 2100 (according to the United Nations), nobody should be surprised if the continent becomes the global centre of future growth in new refining capacity.

Next week – Renewables and Energy Update

What’s really going on in wind, solar and new power projects? Please check back next week to find out about this very important sector and some interesting new players.

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