Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints

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new pipeline projects in the permian

Wink to Webster Texas Pipeline

• Companies: Plains All American Pipeline L.P. and Exxon Mobil, Lotus Midstream LLC

• Capacity: 1 million b/d capacity

• Projected In-Service: In-Service: Q1 – Q2 2021

• More Info:https://winktowebsterpipeline.com/

 

Gray Oak

• Company: Phillips 66

• Capacity: 800,000 b/d capacity

• Projected In-Service: Q4 2019

• More Info:https://grayoakpipeline.com/

 

Cactus ii

• Company: Plains All American

• Capacity: 670,000 b/d

• Projected In-Service: Q4 2019 – Q2 2020

• More Info:https://www.plainsallamerican.com/about-us/subsidiary-websites/permian-projects

 

Jupiter Crude Pipeline

• Company: Jupiter Pipeline LLC

• Capacity: 1.1 million b/d

• Projected In-Service: Q3 2020

• More Info:https://www.jupitermlp.com/

 

Epic Crude Pipeline

• Company: EPIC Midstream Holdings

• Capacity: 900,000 b/d

• Projected In-Service: Q4 2019 – Q1 2020

• More Info:https://epicpipelinelp.com/projects/crude-pipeline/

 

 

Permian Global Access Pipeline

• Companies: Tellurian

• Capacity: 2.0 bcf/d

• Projected In-Service: 2023

• More Info: http://www.pgap.com/

 

Gulf Coast Express

• Companies: Kinder Morgan, Targa Resources, DCP Midstream

• Capacity: 2.0 bcf/d

• Projected In-Service: Q3 2019

• More Info: https://www.kindermorgan.com/pages/business/gas_pipelines/projects/kmtp/

 

Permian Highway Pipeline 

• Companies: Kinder Morgan, EagleClaw Midstream Ventures

• Capacity: 2.0 bcf/d

• Projected In-Service: Q4 2020

• More Info: https://www.kindermorgan.com/pages/business/gas_pipelines/projects/php/

 

Pecos Trail

• Companies: NAmerico Energy

• Capacity: 1.85 bcf/d

• Projected In-Service: Q3 2019

• More Info: https://www.namerico-energy.com/portfolio/energy/pecos-trail-pipeline/

 

Permian-Katy Pipeline 

• Companies: Sempra LNG & Midstream, Loews/Boardwalk Pipeline Partners

• Capacity: 2.0 bcf/d

• Projected In-Service: Q3 2020

• More Info: http://www.p2kpipeline.com

 

Whistler Pipeline

• Companies: Targa Resources, NextEra Energy Pipeline Holdings, WhiteWater Midstream and MPLX

• Capacity: 2.0 bcf/d

• Projected In-Service: Q4 2020

• More Info: http://www.targaresources.com/operations/operations-map

 

 

 

Grand Prix Pipeline

• Company: Targa Resources

• Capacity: 450,000 b/d

• Projected In-Service: Q2 2019

• More Info: http://www.targaresources.com/operations/operations-map

 

Epic ngl Pipeline

• Company: EPIC Midstream Holdings

• Capacity: 440,000 b/d

• Projected In-Service: Q3 2019

• More Info: https://epicpipelinelp.com/projects/ngl-pipeline/

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Total SA has agreed to take over Toshiba’s portfolio of LNG, including a 20-year tolling agreement for 2.2 million tonnes/year of LNG from Freeport LNG Train 3 in Texas and the corresponding gas transportation agreements on the pipelines feeding the terminal. Train 3 is expected to start commercial operations by second-quarter 2020.

Under the transaction, Total will acquire all shares of Toshiba America LNG for $15 million to be paid by Total to Toshiba and will be assigned all contracts related to the LNG business by Toshiba Energy Systems and Solutions Corp. for a consideration of $815 million to be paid by Toshiba to Total.

Total will therefore receive from Toshiba a net cash consideration of $800 million.

The takeover is in line with Total’s strategy to become a major LNG portfolio player, said Philippe Sauquet, president gas, renewables, and power at Total. “Already an integrated player in the US gas market, Total is set to become one of the leading US LNG exporters by 2020 with a 7 million-tpy portfolio,” he said.

The transaction is expected to close by yearend.

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Rystad Energy: US oil output poised to set yet another record in 2019

US oil production keeps accelerating towards new highs. New records are expected both when the final numbers for May emerge and at the end of the year.

Rystad Energy is raising its forecast for US crude output to 13.4 million bpd by December 2019. For May 2019, research and calculations point to crude oil production averaging 12.5 million bpd. Both are new all-time highs.

“Our US supply projections have been revised up yet again. US oil production is already higher than many in the market believe,” says Bjørnar Tonhaugen, Head of Oil Market Research at Rystad Energy.

Preliminary US well production data shows that tight oil production alone reached pre-winter levels of around 8.5 million bpd in May. This prompted an upward revision of the 2019 US total production exit rate by approximately 200 000 bpd, to 13.4 million bpd. The 2020 exit rate was also revised up to 14.3 million bpd, up by approximately 75 000 bpd.

“Strong growth persists in the Permian Basin on both the New Mexico and the Texas sides. Updated production estimates suggest that the Permian Basin surpassed 4.5 million bpd in May. Considering the ongoing recovery in fracking activity, Rystad Energy maintains its previous expectation that Texas production will exceed 5 million bpd at some point during the second quarter of 2019,” Tonhaugen added.

The energy consultancy sees production in the Gulf of Mexico reaching 1.95 million bpd by the end of 2019, up by 135 000 bpd since its last update, partly thanks to the early start-up of Shell’s Appomattox field.

Oil prices

Rystad Energy expects crude oil prices to stay flat in the near term.

“The oil market is again in a tug-of-war situation with downwards pressure currently dominating. Downside pressures exist from weak demand and fear of economic growth degradation, partially induced from protectionist policies in the US and partially from structural forces, as exemplified by Chinese PMIs showing a dip again in May,” Tonhaugen remarked.

OPEC production

Rystad Energy estimates OPEC crude oil production of 29.9 million bpd for May, the lowest monthly output level in more than five years and an astonishing 2.6 million bpd below October 2018 reference levels. For 2019 as a whole, Rystad forecasts OPEC crude production of 30.3 million bpd, down 1.6 million bpd year-on-year. It also lowers its projections for Saudi Arabia to around 10.3 million bpd, from 10.6 previously.

“We continue to expect OPEC production to increase through the remainder of 2019, but risks to short-term supply are undoubtedly still plentiful, with a total of 1.3 million bpd at risk from Iran, Venezuela, Libya and Nigeria,” Tonhaugen said.

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The U.S. currently holds the title of global leader in recoverable oil resources, according to the latest annual report of world recoverable oil resources by energy research firm Rystad Energy.

With 293 billion barrels of recoverable oil resources, the U.S. beats out both Saudi Arabia and Russia by 20 billion barrels and 100 billion barrels, respectively.

Rystad’s estimates of U.S. recoverable oil is also five times more than reported proven reserves published in the BP Statistical Review of World Energy 2019.

According to Rystad analysis, the Permian’s tight oil plays hold 100 billion barrels of recoverable oil resources and the resources there remain largely flat from the previous year. Improvements in well configuration plays a part in this.

“We also note that production has not been fully replaced by increased reserves in some U.S. shale plays, including Eagle Ford in Texas and Utica in Ohio,” Rystad Energy CEO Jarand Rystad said in a release “Oil companies have been focusing on core development and cash flows rather than exploration and de-risking non-core assets.”

Using the standard of the Society of Petroleum Engineers (SPE) when estimating reserves and resources in fields in order to consistently compare OPEC and non-OPEC countries as well as conventional and unconventional fields, Rystad estimates the world’s proven oil reserves to total 386 billion barrels.

“Official reserves reporting from Saudi Arabia indicates an upwards revision of 10 percent, but we don’t see increases in activity that would justify such a large upgrade, so this revision could be due to changes in reporting methodology,” said Per Magnus Nysveen, Rystad’s head of analysis. “The 20 percent revision to official U.S. reserves, on the other hand, is due to higher reserves reported by the operators and is based on more stringent rules from the U.S. Security Exchange Commission.”

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US to become net oil exporter in November: EIA

Imports projected to meet 8% of US demand this year

US net oil exports to average 550,000 b/d in 2020

The US will become a net oil exporter for the first time on a monthly basis in November, with crude and refined product exports exceeding imports by 220,000 b/d, the Energy Information Administration said Tuesday.

 

EIA sees the US continuing to be a net oil importer on an annual basis in 2019, with imports exceeding exports by an average of 620,000 b/d. Then the US will flip to annual net exporter in 2020, with exports exceeding imports by 550,000 b/d.

The US snagged the net oil exporter title for all of one week last November, driven by a surge of 3.2 million b/d in crude exports that pushed crude and product exports above 9 million b/d, according to S&P Global Platts Analytics.

The growth of the Gulf Coast refining sector made the US a net exporter of refined products in 2011. Rising crude exports since 2015 have made the overall net oil exporter status possible.

Still, US crude imports will continue to exceed crude exports by 4.43 million b/d in 2019 and 4.4 million b/d in 2020, EIA said.

IMPORT RELIANCE PLUMMETS

EIA's Annual Energy Outlook 2019 predicted in January that foreign oil would meet just 7.5% of US demand this year.

A decade ago, EIA forecast in its 2009 AEO that foreign crude would meet 44% of US demand in 2020. Imports met 60% of US consumption in 2006 and were projected to fall to 50% by 2010, according to the 2009 report. That was before the US tight oil revolution got underway in earnest.

EIA's projections have accelerated as US oil production growth keeps beating expectations.

Even just two years ago, EIA's 2017 AEO forecast the US remaining a net importer through 2050, with foreign oil meeting 17.7% of national consumption that year. Last year's AEO predicted the US would gain net exporter status in 2029 - nine years later than the current forecast.

President Donald Trump praised the net oil exporter milestone in his State of the Union speech to Congress in February, albeit before it actually happens.

"The United States is now the number one producer of oil and natural gas anywhere in the world. And now, for the first time in 65 years, we are a net exporter of energy," Trump said at the time.

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The US will maintain oil production despite falling prices, says deputy energy secretary

• Despite low oil prices, shale producers in the U.S. will continue to produce 12 million barrels a day — which are all-time highs — throughout next year, and perhaps going up to as high as 13 million barrels, U.S. Deputy Energy Secretary Dan Brouillette told CNBC on Wednesday.
• While shale drillers in the U.S. have been said to face obstacles on growing output, and the number of operating oil rigs have declined this year, Brouillette said that production is not actually the biggest problem.
• Meanwhile, Chinese tariffs on U.S. natural gas will not put a dent in the country’s ambitions to be a top energy exporter, he indicated, citing high demand from the rest of Asia.

• The U.S. will maintain its oil production — or even ramp it up higher — despite low energy prices and slowing economic growth, Deputy Energy Secretary Dan Brouillette said Wednesday.

  Shale producers in the U.S. will continue to produce a record 12 million barrels a day throughout next year, he said, citing projections from the Energy Information Administration. They may even go up to as high as 13 million barrels, he added.

   

  “U.S. production numbers are going to continue for quite some time,” Brouillette told CNBC.

  U.S. West Texas Intermediate (WTI) crude futures have fallen almost 20% since reaching their 2019 peaks in late April, as oil prices were dragged down by intensifying fears of an economic downturn that’s started to impact oil consumption.

  But Brouillette rejected fears that oil demand would be hit amid slowing growth.

  “Growth is slowing down slightly ... over the course of early 2019. But I suspect that as the economy begins to rev up, we’ll start to see that demand pick up as well. And it’s going to be good news for oil producers,” he said.

  On Wednesday, Brent crude futures were at $61.34 per barrel, and U.S. crude futures were at $52.40 per barrel — off this year’s highs of around $74 and $66 per barrel in April.

  Even though shale drillers in the U.S. have been said to face obstacles on growing output amid a wave of belt-tightening that’s cutting billions of dollars from budgets, and the number of operating oil rigs have declined this year, Brouillette said that production is not actually the biggest problem.

  “Our biggest challenge in the United States is not maintaining production, it’s actually getting the product to market. We are developing infrastructure ... at a rapid pace, but we need to do more. We need more pipeline capacity in order to have the oil and the gas reach these export markets,” he said.

  In fact, Brouillette said, there will be increased production, not falling output, in the U.S.

  Last year, the global appetite for natural gas grew at the fastest pace since 2010. Most of that supply is expected to come from the U.S., amid its ambitions to be a top liquefied natural gas (LNG) exporter.

  American gas output surged by 11.5% in 2018 — marking the fastest growth since 1951, according to the International Energy Agency. Currently, Australia and Qatar are the top two exporters of LNG, which is a form of the fuel chilled to liquid for transport by sea.

  But amid the trade war, Chinese tariffs on U.S. natural gas could put Washington’s ambitions on hold, with the Asian giant accounting for a large share of global demand and taking the spot as the world’s number 2 importer for LNG.

  Brouillette dismissed that notion, however, pointing to high demand from the rest of Asia.

  He said that sales to South Korea and Japan look “very, very large” relative to China. With Mexico numbers added to that tally, “the future looks pretty bright,” he added.

  “We still see continued LNG export growth all throughout the world,” Brouillette added.

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Shale deposits drawing plastics attention to Ohio Valley

Houston — The shale-rich Ohio Valley region continues to draw interest from materials firms because of its abundant supplies of natural gas.

The region now produces 50 percent more oil and gas than it did during its previous peak in the 1970s, Greg Kozera said June 5 at Global Plastics Summit 2019 in Houston. Kozera is marketing director for Shale Crescent USA, a trade group that promotes the Ohio Valley region of Ohio, Pennsylvania and West Virginia to potential investors.

Shell Chemical is making the region's potential a reality with a massive petrochemicals project near Pittsburgh that's set to open in the early 2020s. That project will include around 3.5 billion pounds of annual production capacity for polyethylene resin.

Shell, which is based in Houston and London, chose the western Pennsylvania site because of the availability of natural gas via hydraulic fracturing (fracking) from the Marcellus and Utica shale deposits. Shell officials also have touted the proximity of the region to a large number of American consumers and end markets.

 

A similar resin and feedstocks joint venture in Dilles Bottom, Ohio, is being analyzed by PTT Global Chemical of Thailand and Daelim Industrial Co. of South Korea.

At GPS 2019, Shale Crescent USA business manager Nathan Lord said that 85 percent of U.S. natural gas production growth from 2008-18 took place in the Ohio Valley. The region "produces more natural gas than Texas with half of the land mass," he added.

The area "is based on top of feedstock and in the center of customers," he added. "And a large amount of the U.S. population is within a one-day drive."

Lord also cited a 2018 study from IHS Markit, which co-hosted GPS 2019, that showed the Ohio Valley has a 23 percent cost advantage on PE and a 10-11 percent advantage on polypropylene vs, the U.S. Gulf Coast for material made and shipped in the same region.

"It comes down to a shipping advantage," he said. "Shell will be able to deliver material in 25-45 hours instead of in 25-45 days from the Gulf Coast."

"The challenge is to see the opportunity and go for it," Kozera added.

 

 

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Big Oil’s growing shale footprint may stabilize US oil outlook: BP’s Dale

US tight oil production could become less sensitive to price volatility in the coming years as more cash-rich oil majors pile into the sector and commit to new development spending, BP’s chief economist Spencer Dale said.

Over the last two years, the concentration of investment spending by the top 10 US tight oil producers has started to rise, edging up to 50% from 45%, according to BP’s latest Statistical Review of World Energy, indicating that recent shale acquisitions by oil majors is feeding through to spending plans.

Uncertainty over longer-term global oil demand, the falling costs of drilling and fast development times for US shale have underpinned a strategic shift by many oil majors to prioritize shorter cycle returns from shale developments.

Major acreage holders in the key Permian US shale Basin include the supermajors Chevron and ExxonMobil with the scale of Occidental’s shale stake set to grow sharply following its recent $33-billion deal for Anadarko. Both BP and Shell have said they are looking to grow their production and footprint in US shale and unconventional oil projects.

“Big Oil has increased its footprint and the incentives for consolidation to exploit the benefits of scale and contiguous acreage have increased,” Dale said, presenting the Statistical Review.

“The intuition here is large oil companies have bigger balance sheets and so are able to smooth through variations in oil prices and capital and may make production less sensitive [to prices],” he said.

US production of tight oil and natural gas liquids from shale plays has bounced back from the 2014 oil prices slump, jumping by a record 2.2 million b/d last year, according to BP.

Continued IOC expansion into shale plays means the majors now make up some 18% of shale drilling activity in the US, Citi Group’s head of commodities research Ed Morse said last month.

With the role of oil majors in the US shale sector growing, Morse said some industry watchers are underestimating the growth potential of shale developments. The US could be producing more than 29 million b/d of oil and other liquids within just six years, over 50% more than current levels, Morse told an S&P Global Platts event.

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Low natural gas prices drive up generation share in US Midwest

Gas-fired power 25% less expensive than coal

Switching may boost July, August power burn

Low natural gas prices in the Midwest have helped boost gas-fired generation in the region this year and could lead to even greater coal-to-gas switching during the peak summer months of July and August.

 

 

Total electricity loads across the Midcontinent Independent System Operator shows coal has dropped by 9 average GW year on year while gas-fired generation has increased by 0.6 average GW year on year, according to MISO data.

In fact, gas as a percentage of thermal loads is averaging 45% month to date in June, or nearly 10% higher year on year. For the summer in general, gas as a percentage of thermal loads are averaging 46%, or roughly 6%, higher year on year.

Looking ahead, seasonally expanding loads should help drive gas burns higher. Notably, relative to June's month-to-date average, S&P Global Platts Analytics forecasts total loads within MISO will average about 90 average GW and total gas generation will be 25.7 average GW, up 18% and 14%, respectively.

Based on Platts Analytics reference prices, gas as a percentage of thermal loads is forecast to average 42% for the peak summer months of July and August, 3% higher than last year. But the recent selloff in both Henry Hub and regional gas hub prices will likely stimulate higher than expected levels of coal-to-gas switching. This would allow gas to take more incremental market share than previously expected.

COAL-TO-GAS SWITCHING

Regarding switching, with Chicago city-gates pricing below $2.15/MMBtu over the next few months, gas is much more economical relative to coal across MISO's North and Central regions. Looking at delivered coal costs to the region, and adjusting for a gas-fired combined-cycle power plant heat rate advantage, gas is trading at more than a 25% discount to the price level over a coal-fired power plant.

Because of this pricing advantage, Platts Analytics sees MISO adding anywhere from 300 MMcf/d to 400 MMcf/d of more-than-expected gas-fired generation over the peak months of July and August.

Part of the higher gas-fired generation stems from a wave of coal plant closures. Nearly 10 GW of coal generation has retired since 2015 while more than 2 GW of gas generation has come online in the Midwest over the same period. Platts Analytics' expects another 2 GW of coal retirements by the end of 2019 combined with 2 GW of new gas-fired generation online by year's end.

The coal retirements played a significant role in the Midwest reaching record-high levels of gas-fired generation last winter. In January, Midwest power burn averaged 3.2 Bcf/d, reaching a single-day, all-time high of 3.9 Bcf/d, according to Platts Analytics. This record occurred despite the Chicago city-gates averaging more than $3/MMBtu for the month.

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Citing a “growing mismatch” between hope and action, BP executives released the company’s annual Statistical Review of World Energy featuring slow progress on climate change and rapid growth in energy demand and emissions of carbon dioxide.

The report also noted that the US recorded the largest-ever annual production increases by any country for oil and natural gas, “the vast majority” coming from onshore shale plays.

Global energy demand grew by 2.9%, and carbon emissions grew by 2% in 2018, “faster than at any time since 2010-11,” BP said in a press release.

“There is a growing mismatch between societal demands for action on climate change and the actual pace of progress,” said Chief Economist Spencer Dale, citing the increases in energy demand and carbon emissions. “The world is on an unsustainable path.”

Natural gas consumption and production increased 5% last year and accounted for 40% of global energy demand growth.

Consumption of renewable energy grew by 14.5%, near the record increase of 2017, but still accounted for only one third of the increase in total power generation.

Global oil consumption grew by 1.5%.

The record production increments in the US were 2.2 million b/d for oil and 86 billion cu m for the year for natural gas.

 

https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html

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US oil supply keeping lid on prices despite global risks: IEA chief

Growth in US oil production has kept prices at "reasonable levels" despite the recent oil tanker attacks near the Strait of Hormuz and other supply risks around the world, International Energy Agency chief Fatih Birol said.

"There is substantial amount of oil coming from the United States, which puts a strong ceiling on oil prices," Birol said in an interview Friday on the sidelines of the G20 energy ministerial meetings in Karuizawa, Japan.

"Growth from the United States is a welcome addition to oil markets, especially looking at from an oil security point of view and looking at affordability for oil importers, including Japan, Korea and other Asian importers."

The IEA's June Oil Market Report forecast non-OPEC supply growth will rise to 2.3 million b/d in 2020, from 1.9 million b/d this year amid a surge in US shale and strong output from Brazil and Norway as new fields start up.

"According to our numbers, in five years' time, the United States will be the largest exporter in the world," Birol said.

"This is great news for consumers. Think about the fact we are seeing so many developments in the world: Venezuela, Iran, Libya, Nigeria and many [others]. Still, oil prices are staying at reasonable levels."

TANKER ATTACKS A WAKE-UP CALL

The alleged attack on two oil tankers near the Strait of Hormuz Thursday was a wake-up call to stakeholders in oil markets, Birol said.

"We are seriously concerned about the recent attacks, and we are monitoring the situation very closely in consultation with our member governments. We are ready to act if and when it is necessary."

The Front Altair and the Kokuka Courageous were carrying cargoes including naphtha. The incidents followed attacks on May 12 on four tankers near the bunkering port of Fujairah.

"Having lots of supply does not mean that oil security is not important, and this very important incident reminds all of us, all actors in the markets once again, how important an issue oil security is," Birol said.

The Strait of Hormuz was the most important oil choke point, especially for Asian energy importers, he said.

"Today about 18 million barrels of oil on a daily basis flows through this choke point coming from Saudi Arabia, emirates and other countries to China, Japan, India and other Asian customers."

"But at the same time it is a major route for LNG, liquefied natural gas. About 30% of LNG goes through this strait, coming again to Japan, South Korea, and other Asian countries."

Asked whether oil importers will need to seek alternative supplies away from regions so as not to have to transit the Strait of Hormuz, Birol said: "I think this will be a situation observed by oil importers, especially in this part of the world."

Birol said he did not expect a major shift in oil flows any time soon.

The tanker attacks and heightened supply risks came at a time of concerns about lower global oil demand growth.

Asked which was the biggest risk to the oil market, Birol said the IEA cut its oil demand growth forecast in its June report mainly because of a slowing in the global economy -- "not only the advanced economy, but [also] the emerging countries. Chinese economic growth prospects are much lower than previously thought".

The IEA cut its 2019 oil growth again to 1.2 million b/d, but it sees 2020 growth of 1.4 million b/d on petrochemical demand.

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Port Arthur Terminal Expansion Wraps Up
Howard Energy Partners (HEP) reported Thursday that it has largely completed expansion projects at its bulk liquid terminals in Port Arthur and Corpus Christi, Texas.

“The substantial expansions at our Port Arthur and Corpus Christi facilities signify HEP’s commitment to designing and constructing fully engineered facilities that are tailored to meet the exact needs of our customers,” Brad Bynum, HEP co-founder and president, said in a written statement.

According to HEP, the projects raise the company’s Gulf Coast terminal storage capacity to 2.6 million barrels. Moreover, the firm noted that it now boasts three ship docks, three barge docks, unit train loading capacity for up to two trains per day and direct pipeline connectivity through wholly owned pipelines to seven refineries.

The expansion at Port Arthur added 12 tanks, four butane bullets, two barge docks, one ship dock and a 6.5-mile bidirectional pipeline, HEP stated. The company added that the facility – equipped to handle bulk liquids including refined motor fuels, crude oil and condensate – can now blend gasoline with up to six separate components at delivery rates of up to 40,000 barrels per hour to comply with regional and international quality specifications. With the expansion, HEP pointed out the Port Arthur facility now comprises:

    16 tanks with 1.35 million barrels of total storage
    Four butane bullets (360,000 gallons total capacity)
    8.8 miles of rail track capable of loading one 94-car unit train per day and track capacity to handle up to five unit trains simultaneously
    Three barge docks with vapor control capability
    One ship dock with a loading rate up to 40,000 barrels per hour that can load one 500,000- to 750,000-barrel ship every other day
    A bidirectional pipeline
    Permitting and engineering for a second ship dock that is nearing completion.

HEP also reported that it has added rail capacity at its terminal within the Port of Corpus Christi. The company stated that it has contracted with an existing customer to load additional unit trains at Corpus Christi bound for new destinations in Mexico. In conjunction with that contract, HEP is acting as an agent to assist with engineering, procurement and construction oversight of a new receiving terminal in northern Mexico. The firm stated that the new receiving terminal will increase utilization of its 65,000-barrel-per-day rail loading facility in Corpus Christi.

According to HEP, the Corpus Christi terminal facility includes six tanks with 480,000 barrels of storage capacity, an MR class ship dock, a 12-inch pipeline linked to six local refineries and unit train facilities capable of loading one unit train per day. The company added that the terminal is permitted for immediate expansion up to 1.2 million barrels, also pointing out the facility is expandable up to 2.5 million barrels of total storage capacity.

HEP reported that it, along with the port authority, also jointly funded the engineering and permitting of a new Suezmax class dock. The company stated the dock will facilitate the movement of refined products, crude oil, condensates, natural gas liquids and liquefied petroleum gas.

“We currently have more than 470 acres for additional Gulf Coast expansion projects, including significant water frontage,” noted Bynum. “We will continue to work closely with our customers to understand their needs and evaluate growth projects that create beneficial results for all participants within the supply chain.”

 

 

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Permian NGL Access a Plus for Exxon-Sabic Project

The Gulf Coast Growth Ventures (GCGV) ethane steam cracker complex that Exxon Mobil Corp. and Saudi Basic Industries Corp. (SABIC) have decided to build near Corpus Christi, Texas, will enjoy closer proximity to a major source of natural gas liquids (NGL) feedstocks than other Texas Gulf Coast sites.

That’s an important advantage, according to Larry Schwartz, principal with Houston-based LS Consulting and former NGL Fundamentals Advisor with BP-IST.

The San Patricio County site – located near the town of Gregory – is “closer to the Permian Basin production of NGL than either Houston or Mont Belvieu,”  Moreover, he cited lower-cost ethane supplies and plentiful natural gas and acreage for building as other selling points for the GCGV project, which secured permits Wednesday from the Texas Commission on Environmental Quality (TCEQ).

To be sure, Schwartz observed that the project faces a significant challenge regarding where to put the facility’s feedstocks and products.

“There is no available storage for ethane/ethylene within the area surrounding this proposed plant,” he said. “The closest storage is further up the coast at Stratton Ridge and Markham, which implies that pipelines will be needed to utilize storage there for both ethane feed and ethylene production.”

Could the storage issue, coupled with significant local opposition to the project, derail GCGV?

“Well, it has been proposed by others to add additional NGL fractionation in Corpus Christi and thus they will also be required to add storage to manage this situation,” said Schwartz. “These new NGL fractionators would be required to supply the nearly 115,000 barrels per day of ethane feed. Lastly, Enterprise Products has announced an extension of their ethylene pipeline system to the Corpus Christi area so that may be an adjunct to any new requirements this new complex would have.”

An attempt to obtain details from GCGV about the project's storage component was unsuccessful as of Friday morning.

The experiences with other Gulf Coast ethane crackers also leads Schwartz to view the announced GCGV project timelines with a skeptical eye. The Exxon-SABIC joint venture has reported that it expects to begin construction during the third quarter of this year and start-up the facility in 2022.

“I must take issue with this for the reason that this is much faster than the norms for expansions at already existing facilities,” said Schwartz. “Please note that ExxonMobil and its Baytown project was much longer than two years, closer to four years, and Chevron Phillips Chemical – which also built a new cracker on an existing site – was also in the three-plus-year range. Lastly, please note that the head of the TCEQ is quoted as saying, ‘If they begin construction, they would be doing so at their own peril.’ This suggests that the permit may yet be overturned due to court actions by the local and environmental communities.”

he believes the GCGV project will get built – but not by 2022. His view is that by late 2023 or even early 2024 is a more likely time frame.

“Will the timing for the EPIC NGL system and fractionation in Corpus Christi support this project?” Schwartz concluded. “Likely. Watch out for the vagueness of the permit that was issued for this project.”

Edited June 14, 2019 by ceo_energemsier

[ceo_energemsier + 1,818]

U.S., Canada, Brazil oil output nearly doubles in last decade -BP SRWE 2019

Global oil production shows the U.S. leading with 16.2% share
- Canada moved to 4th in the world last year from 7th in 2008 h

From 2008 to 2018 the amount of oil produced by the U.S, Canada and Brazil almost doubled. These three countries now produce roughly one quarter of the world's oil, according to BP's annual Statistical Review of World Energy 2019 .

The U.S. alone in this time has more than doubled its oil output and effectively grabbed an additional 8 percentage point slice of the world's oil production. Annual oil production data by country shows the U.S. with a world leading 16.2% share of global production last year. In 2008, the U.S. ranked third in the world with an 8.2% share. The top two a decade ago, Saudi Arabia and Russia, now trail at 13% and 12.1% of total 2018 production, respectively.

Other countries with the largest gains in production over the last decade, following the U.S., are Iraq, Canada, Brazil, and the United Arab Emirates. Canada ranked seventh in the world in 2008 with a 3.9% world share but it rose to fourth globally with a 5.5% share last year. Iraq moved up six spots to sixth in the world. Kazakhstan and Qatar also each moved up six spots to 13th and 14th among the world producers. The Republic of Congo moved up seven spots, but accounts for a relatively small 0.35% share of global oil output.

Countries in turmoil were the largest decliners over the past decade, namely Syria, Venezuela, Sudan and Yemen. Syria fell 16 spots, Venezuela 11 and Sudan and Yemen each dropped 10 spots in the global ranking of output. Venezuela, the largest producer among the four, is now ranked 17th in the world with a 1.6% share.

Oil production from countries in the Persian Gulf and Arabian Sea regions rose from a 31.2% global share in 2008 to 33.3% by 2018.

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US crude oil exports buoyed by widening WTI/Brent spread

 

The US exported more than 3 million b/d of crude for the second week in a row in the week ended June 7, aided by macroeconomic factors that have made US oil prices more attractive.

According to S&P Global Platts Analytics data, more than 3.18 million b/d was exported from the US last week, down slightly from the estimated 3.35 million that was exported during the week ended May 31. The Energy Information Administration reported US crude exports averaging more than 3 million b/d since the week ending May 24.

At least 4 million barrels loaded last week are destined for delivery to India, including one VLCC cargo that was loaded June 4 on to the tanker New Prime at the Louisiana Offshore Oil Port. New Prime was chartered by Shell for the voyage, according to Platts’ fixtures reports.

It was not the only VLCC that loaded at LOOP last week. A second ship, the Captain X Kyriakou, chartered by Mercuria, was loaded and sailed from LOOP on June 2. That cargo of US crude is expected to be delivered to South Korea, according to Platts trade flow software cFlow.

LOOP has rarely loaded two cargoes in one week since it began exports more than one year ago. The offshore facility typically loads about one cargo a month for export, and has the capacity to load some 900,000 b/d, according to company officials. LOOP declined to comment on the recent loadings.

The two VLCCs that loaded last week join another LOOP loading noticed in recent weeks. Coswisdom Lake sailed from LOOP on May 31 and is destined for Qingdao, China.

The US’ four-week crude oil exports average is 3.221 million b/d. It’s the first time that the four-week average has reached over 3 million b/d since March, according to EIA data. Various factors encourage and limit US crude exports. However, it is expected that more US crude will be exported in coming years as US production increases and infrastructure along the US Gulf Coast is expanded. Currently, the US Gulf Coast has the capacity to handle some 5.92 million b/d of crude.

Macro factors favor exports
US crude for export has benefited over the past four weeks from certain macroeconomic and geopolitical factors that have helped widen the Brent/WTI spread. Over the last four weeks, the Brent/WTI swap spread, an indicator of the competitiveness of WTI-based crudes versus their Brent-based counterparts, has averaged $8.23/b. In the four weeks prior, the swap spread averaged $7.71/b, while the four further weeks prior, the swap spread average $7.15/b.

A widening swap spread is indicative of WTI-based crudes becoming more competitive in comparison to their Brent-based peers.

The factors affecting the Brent/WTI spread can be placed into two categories: demand-side and supply-side. On the demand side, lingering US-China trade tensions have created fear of an overall slowing of the global economy. Any dip in demand growth spurred by a cooling relationship between the world’s two largest economies has potential to disrupt global supply chains and investment.

US-China trade tensions have contributed to an overarching decline in momentum for European and Asian markets. Business confidence has weakened and economic indicators ranging from car production in Germany, investment in Italy, and external demand in emerging Asia have all been lackluster.

US crude oil stocks and OPEC-plus production cuts have driven supply-side concerns in the global oil complex. US crude stocks have trended upwards in 2019, with stocks climbing 6.77 million barrels in the week ending on May 31, and up nearly 40 million barrels since the start of the year, according to data from the EIA. With US crude production at record levels, and production in the Permian Basin forecast to grow 26% year over year in 2019, the global market is a natural outlet for the new barrels.

OPEC and partners, Russia in particular, sought to bring nearly 1.2 million b/d off the global market in the first half of 2019, a goal they accomplished and passed by 300,000 b/d in March. As a continuation of OPEC cuts is expected, and Saudi oil output at a four-and-a-half year low, US crude exporters are well positioned to grow market share.

WTI FOB with a loading window from June 22 to July 22 was assessed by S&P Global Platts on June 7 at a $7.30/b premium to the WTI strip. That represents a 31 cents/b premium to July barrels of WTI at the Magellan East Houston Terminal.

[ceo_energemsier + 1,818]

OPEC’s Battle for Control of the Oil Market

 

Oil supply is confounding expectations. At Wood Mackenzie, we have just raised our forecasts for non-OPEC production, the latest in a series of incremental increases.

Cumulatively, we’ve increased volumes for 2025 by an astonishing 9 million barrels per day (b/d) compared with our forecasts in 2016, the oil price nadir. Non-OPEC supply has already bounced from the 2016 low of 54 million b/d and will touch 60 million b/d this year.

Our latest Macro Oils Long Term Outlook expects a peak of 66 million b/d in 2025, 5% above our forecast last year. Oil demand too has grown more quickly than expected, up 6 million b/d on 2016 forecasts.

Production keeps on growing despite structurally lower oil prices and upstream investment still 40% below peak.

Did we, like many others, underestimate the industry’s ability to adapt and innovate in the face of financial adversity – and keep on producing oil? Maybe. But where on earth is it all coming from? Dougie Thyne, Director of Oil Supply Analysis, identifies four main buckets.

U.S. Lower 48: tight oil and natural gas liquids (NGLs) together contribute 4.3 million b/d, half of the increase versus 2016. This primarily reflects the emergence of the Permian basin as the dominant tight oil play.

The delineation of sweet spots, more efficient drilling, and the present shift to industrialized exploitation have led to a significant improvement in Permian well economics.

Innovation has boosted expected recovery from the more mature Bakken, Eagle Ford and Scoop-Stack plays to a lesser extent.

NGLs associated with the gassier parts of the Permian and shale gas plays make up about one-third of the U.S. Lower 48 increase.

Russia: our forecasts for 2025 are 1.4 million b/d higher than three years ago, in spite of sanctions which restrict inward investment and the transfer of the latest technological advances.

The weakness of the ruble has buoyed upstream margins in Russia since the price fell, supporting higher investment, including an intense drilling program in deeper, low-permeability plays in West Siberia.

Sanction of some greenfield projects has been deferred by Russia’s involvement in OPEC+, effectively pushing new volumes out by a few years.

Guyana: only the original Liza discovery was in our 2016 forecasts. We’ve added another 0.5 million b/d by 2025, reflecting multiple subsequent deepwater discoveries. First production is due in 2020, setting Guyana on track to enter the top 12 non-OPEC producers with over 1 million b/d by the end of the decade.

Mature producers: Together, these have added over 2 million b/d compared with our 2016 forecasts. Colombia, UK, Norway, U.S. (Alaska) and Canada are among a plethora of countries which have surprised on the upside.

Cost cutting, efficiencies, reduced maintenance outages, high-grading and streamlining of new projects, new discoveries tied into existing infrastructure and, in some cases, reduced tax rates have combined to slow decline rates and boost production.

There are valid questions whether production from ultra-mature basins is sustainable at these rates, or volumes are merely being accelerated. As a result, some of these producers are slated to see steeper declines.

Non-OPEC supply won’t grow at this rate forever – in fact, it stops after 2025 as tight oil plateaus, with decline setting in by 2030. In the meantime, the OPEC+ strategy to boost revenues by constraining production and buoying up price has helped its competitors boost production and gain market share.

We estimate non-OPEC production will swallow up 4.3 million b/d, or 76%, of contestable demand over the next five years. OPEC’s scope to increase volumes through this period is limited to just 1.3 million b/d.

The mathematics sits at odds with Abu Dhabi, Kuwait and Iraq which are investing heavily in new capacity. Some producers in OPEC do see flat or declining volumes in this period.

Major supply outages are helping OPEC+ to balance the market today. Disruptions are set to leap to a record 5 million b/d later this year, including 2.5 million b/d from Iran (sanctions) and Venezuela (economic meltdown and U.S. sanctions).

It may suit the rest of OPEC, as well as the U.S., if exports from Iran and Venezuela are kept off the market for some years – at least until non-OPEC production growth shows signs of abating.
Source: Wood Mackenzie

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Phillips 66 is looking to build an offshore export terminal in the Gulf of Mexico, a project that would join a growing list of facilities being planned to handle the growing shipments of U.S. shale oil.

The proposed deepwater port would be located about 21 nautical miles off the Texas coast, near the Port of Corpus Christi, the company said Wednesday in a statement. Phillips 66, the largest U.S. refining company by market value, would construct two parallel pipelines to carry crude to the facility’s two floating jetties, known as single-point mooring buoys, according to people familiar with the matter, who asked not to be named because the plan hasn’t been announced.

Any offshore terminal would require approval from the U.S. Coast Guard and the U.S. Department of Transportation’s Maritime Administration.

The proposed project “would provide an additional safe and environmentally sustainable solution for the export of abundant domestic crude oil supplies from major shale basins to global markets,” Dennis Nuss, a spokesman, said in an emailed statement.

Phillips is already a partner in a venture to develop a deepwater marine terminal in Ingleside, Texas. Going ahead with an offshore project as well would put the company in direct competition with commodity trading house Trafigura Group Ltd., which is developing its own terminal in the Gulf of Mexico. That proposal has faced opposition from the Port of Corpus Christi, which along with The Carlyle Group is developing an onshore export terminal.

[ceo_energemsier + 1,818]

PTT Global Chemical taps Bechtel for possible Utica Shale ethane cracker

Marcellus, Utica could support four more crackers: DOE

Sequential cracker projects could more easily draw workers

Appalachian gas producers, under pressure from prices below $3/Mcf, got a boost Thursday with engineering giant Bechtel's announcement that Thailand's PTT Global Chemical had awarded it a contract to build an ethane cracker in Belmont County, Ohio, in the heart of the Utica Shale.

 

The project still needs a final investment decision. But selecting Bechtel as the contractor of the project is a major step toward that decision. Bechtel Oil, Gas & Chemicals Senior Project Manager of Pennsylvania Chemicals Paul Marsden, already working as the manager of Bechtel's work on Royal Dutch Shell subsidiary Shell Chemical Appalachia's multibillion-dollar ethane cracker in Monaca, Pennsylvania, made the announcement at the Northeast Petrochemical Conference in Pittsburgh.

Another new cracker would give producers a new outlet for ethane, a natural gas liquid that they blend in the gas stream when it cannot be sold. The project is expected to be capable of producing 1.5 million metric tons per year of ethylene and its derivatives. Shell's plant will produce up to 1.6 million mt/year of polyethylene. Analysts speculated full capex for the project could reach $6 billion.

Charlie Schliebs, managing director of private equity funds at Stones Pier Capital, said the lack of a final investment decision announcement at this stage is to be expected. "These things [FIDs] take a long time, but that project is happening," Schliebs said.

The US Department of Energy has estimated that the Marcellus and Utica shales can support up to four more crackers, besides PTT's and Shell's. Observers expected a final investment on PTT Global's project more than a year ago. PTT Global could have been watching to see if costs on Shell's project spiraled out of control.

Asked whether Bechtel would face challenges getting enough labor to work on both the Shell project and the PTT, Marsden said it would be "a challenge. We will have to manage that." But he noted that the timing of the projects could actually work in the builder's favor, as having sequential projects lined up could encourage welders and other key workers to relocate to the region instead of simply coming in for one project at a time.

NGLs, which sell at prices linked to crude oil, are becoming a larger share of the revenues of Appalachian shale gas drillers. Producers see NGL production as the only escape from stable, low natural gas prices. Two Appalachian producers, Range Resources and Antero Resources, are already shipping ethane, propane and butane to Europe via Sunoco Pipeline's Mariner East family of pipelines.

PTT Global's US subsidiary, PTTGC America, is using the site of a shuttered FirstEnergy coal-fired power plant in Mead Township of Belmont County as the future cracker's site. The company has already allocated $100 million on surveys and permits.

Belmont County is the leading gas-producing county in Ohio with 2.6 Bcf/d of production in the first quarter, according to Ohio's Department of Natural Resources.

[ceo_energemsier + 1,818]

Pres. Trump threatens to lessen US security role in Strait of Hormuz, unveils sanctions

In tweet, Trump signals change to 40-year-old maritime security doctrine

Analyst sees move as a negotiating tactic amid heightened US-Iran tensions

US unveils new sanctions on Iranian leaders following attacks on drone, tankers

 

President Donald Trump signaled Monday that the US may lessen its role in the Strait of Hormuz as domestic oil and gas output grows and US energy imports from the Middle East decline.

"China gets 91% of its Oil from the Straight [sic], Japan 62%, & many other countries likewise," Trump wrote in a pair of tweets Monday. "So why are we protecting the shipping lanes for other countries (many years) for zero compensation. All of these countries should be protecting their own ships on what has always been....a dangerous journey. We don't even need to be there in that the US has just become (by far) the largest producer of Energy anywhere in the world!"

Trump's tweets indicated a weakening of a nearly 40-year-old US policy to defend national interests in the Persian Gulf at a time when key administration officials and allies have been attempting to reassure allies of the US commitment to safe transport of energy through the Strait of Hormuz as tensions increase between the US and Iran.

"I don't think it's a full doctrinal change, but I think it's a partial one," Scott Modell, Rapidan Energy Group's managing director and head of geopolitical risk service, told S&P Global Platts Monday.

Modell said Trump's tweets were likely a tactic aimed at bringing Iran to the negotiating table, or at least pausing military escalation between the two nations.

US Secretary of State Mike Pompeo met Monday with Saudi King Salman and Crown Prince Mohammed bin Salman to discuss the regional tensions and the "need for stronger maritime security to promote freedom of navigation in the Strait of Hormuz," the State Department said in a statement. Pompeo is traveling to Saudi Arabia, the UAE, India, Japan and South Korea this week, part of an effort to build a coalition against Iran.

The governments of Saudi Arabia, UAE, the UK and the US issued a joint statement Monday calling on Iran to "halt any further actions which threaten regional stability, and urge diplomatic solutions to de-escalate tensions.

"These attacks threaten the international waterways that we all rely on for shipping," the governments said, according to a statement released by the US State Department. "Ships and their crews must be allowed to pass through international waters safely."

In a tweet Monday, Senator Lindsey Graham, Republican-South Carolina, wrote that "safe navigation of sea lanes -- vital to a world economy -- is always in America's national security interest."

Last week, however, Air Force General Paul Selva, vice chairman of the Joint Chiefs of Staff, told reporters that while the US has defended freedom of navigation through the Strait of Hormuz for decades, maritime security was not "a US-only problem."

"If we take this on as a US-only responsibility, nations that benefit from that movement of oil through the Persian Gulf are bearing little or no responsibility for the economic benefit they gain from the movement of that oil," Selva said, according to a Defense News report.

In a tweet Monday, Javad Zarif, Iran foreign minister, wrote that Trump is "100% right that the US military has no business in the Persian Gulf."

About 20.7 million b/d of oil, or about 21% of global petroleum liquids demand, flows through the Strait of Hormuz each day, according to the US Energy Information Administration.

"Flows through the Strait of Hormuz in 2018 made up about one-third of total global seaborne traded oil," EIA said in a recent report. "More than one-quarter of global liquefied natural gas trade also transited the Strait of Hormuz in 2018."

It is unclear on what data Trump based his tweet claiming that China got 91% of its oil from the Strait of Hormuz. From January through April, China imported less than 44% of its crude oil from the Middle East, according to China's General Administration of Customs.

Still, US imports of Middle Eastern crude have reached historic lows as US oil output continues to shatter records, data shows.

US oil imports of crude oil from Persian Gulf countries averaged less than 1.05 million b/d in March, down from a peak of nearly 3.08 million b/d in April 2003, according to the US EIA. US oil output grew to over 11.9 million b/d from about 5.73 million b/d over the same time period, according to EIA data.

MORE SANCTIONS

The US, which reimposed oil sanctions on Iran in November, allowed sanctions waivers given to Iran's biggest crude and condensate buyers to expire in early May.

Iranian crude oil and condensate exports, which averaged about 1.7 million b/d in March, fell to about 1 million b/d in April and an estimated 800,0000 b/d in May, according to  trade flow software, and shipping sources. The majority of those flows in May were to China, Turkey and Syria, according to these sources.

Modell with Rapidan said he expects the Trump administration, which has sanctioned all oil exports out of Iran with a stated aim of pushing Iran exports to zero, would need to formally allow about 1.2 million b/d of oil exports out of Iran for nuclear talks between the two sides to commence.

The US Department of the Treasury on Monday sanctioned Iranian Supreme Leader Ayatollah Ali Khamenei and eight senior Islamic Revolutionary Guards Corps commanders, freezing any US assets they hold and blocking them from the US financial system. Any foreign financial institutions that knowingly facilitate significant financial transactions with them could also be cut off from the US banking system.

Treasury Secretary Steven Mnuchin said the additional sanctions would be "highly effective" at increasing pressure on Iran. He said he did not consult European or other allies about the new measures.

Mnuchin declined to say whether last week's shooting down of an unarmed drone over the Gulf of Oman or recent oil tanker attacks triggered the latest sanctions.

"Some of this was in the works; some of this was in response to recent activities," he said during a White House briefing.

Trump tweeted Friday that the US had prepared a strike against Iran Thursday night, but he had called it off with 10 minutes to spare.

[ceo_energemsier + 1,818]

Southeast Asia contributing heavily to ample US-Asia crude flows in 2019

Southeast Asia will likely continue to play a pivotal role in support of ample US-Asia crude oil trades in the second half of 2019 despite China's faltering appetite for US energy products, with Vietnam aiming to procure two more WTI crude cargoes over the coming quarters.

 

China -- Asia's biggest importer of US crude oil in 2018 -- has put sharp brakes on light sweet and medium sour US crude purchases since October last year amid a prolonged trade tension between Washington and Beijing.

China imported 6,991 b/d of crude from the US in Q1, down significantly from 316,771 b/d received in the same period a year earlier, according to data from General Administration of Customs.

However, Vietnam and Indonesia have burst into the North American crude arbitrage trading scene for the first time earlier this year, contributing to yet another year of ample US-Asia crude flows despite the tepid Chinese demand.

Vietnam's 148,000 b/d Dung Quat refinery will receive its second cargo of US crude oil consisting of 1 million barrels of WTI Midland crude in October, refinery operator Binh Son Refining and Petrochemical, or BSR, said in a statement on Friday.

A third cargo of 1 million barrels of WTI Midland crude will be delivered in December, BSR chairman Le Xuan Huyen said in the statement.

US Assistant Secretary of State for Energy Resources Francis R. Fannon and senior officials at PetroVietnam and BSR held a ceremony in Vietnam on June 18 to celebrate the Southeast Asian buyer's first ever import of a US-origin crude oil cargo.

The Suezmax tanker Almi Horizon carrying 995,067 barrels of light sweet US crude discharged at Dung Quat port on April 30, BSR said in the statement.

In total, Dung Quat will import roughly 3 million barrels of WTI Midland crude from the US via PV Oil Singapore this year.

PV Oil Singapore is the trading arm of PV Oil. Further information about the seller of the US crude to PV Oil Singapore was not available.

Fannon and PetroVietnam chairman Tran Sy Thanh agreed to bolster cooperation between PetroVietnam and the US side, including the purchase of US crude for Dung Quat.

Apart from the US crude purchases for 2019, Dung Quat also plans to import another 4.45 million barrels of crude oil from other countries, the statement said. BSR did not provide further details.

Elsewhere, Indonesia's state-run Pertamina also bought its first cargo of US crude in a recent trading cycle. The cargo of light sweet WTI Midland crude arrived in Indonesia earlier this month and more cargoes could be purchased later in H2, company sources said.

EXPENSIVE REGIONAL SWEET CRUDES

With official selling prices and spot differentials for various light sweet Southeast Asian crude grades rising sharply this year, Vietnam's fast growing appetite for light sweet US crude comes as little surprise, Asian market and industry sources said.

Vietnam mostly imports sour crude from Kuwait to feed its new Nghi Son refinery complex, while the country also buys some sweet crudes from neighboring producers for Dung Quat refinery amid declining domestic low sulfur crude production.

Brunei was the main external source of sweet crude for Vietnam in Q1, with Hanoi importing around 1.85 million barrels from the oil-rich sultanate, according to latest customs data.

Brunei Shell has set the OSP of flagship Seria Light crude lifted in January, February, March and April at $63.56/b, $68.03/b, $70.12/b and $75.36/b, respectively. Brunei Shell is a 50:50 joint venture between the Brunei government and Shell.

With Platts Dated Brent averaging $65.09/b over January-April, Seria Light's OSP differential to the light sweet crude benchmark for the first four months averaged a premium of $4.18/b. The premium averaged $2.54/b in 2018.

The light sweet Brunei grade's OSP differential against Platts WTI Magellan East Houston [MEH] on a CFR Asia basis was assessed at an average premium of $1.87/b over January-April.

[ceo_energemsier + 1,818]

How Is the US-China Trade War Affecting Oil?

The greatest impact of the United States-China trade war on the global oil industry is its effect on oil prices, explains Steve Wood, a managing director at financial services company Moody’s.

“The market is concerned that a prolonged dispute will result in slower global economic growth leading to lower demand for oil,” Wood told Rigzone.

“This, in turn, has caused oil prices to weaken, which reduces cash flow and earnings for oil producers,” he added.

Given the current considerations on the supply side, the oil market should have seen risk premium pushing up oil prices, according to Rystad Energy Senior Analyst Artyom Tchen.

“Instead we haven’t seen that over the last month,” Tchen said.

“We believe that [the] United States-China trade war and resulting weak economic growth sentiment is among those factors that balance supply risks and cap oil prices,” the Rystad Energy representative added.

Already introduced tariffs, excluding the latest U.S. round on $200 billion worth of Chinese goods and Chinese retaliation on $60 billion worth of U.S. goods, have dented oil demand growth this year by around 150,000 to 200,000 bpd, according to Rystad Energy estimates.

“We forecast 2019 demand growth at 1.2 million barrels per day (bpd), as opposed to [a] pre-trade-war forecast of 1.4 million bpd,” Tchen stated.

What Would a US-China Trade Deal Mean for Oil?

A deal would certainly help to stabilize things, according to Michael Burns, an oil and gas partner at law firm Ashurst.

“There are obviously other uncertainties and complications … but getting the United States-China conflict resolved would eliminate at least one destabilizing factor,” he told Rigzone.

Moody’s Wood said a trade deal would remove the overhang of weaker global economic growth from the market. This would provide support to oil prices leading to higher cash flow and earnings for the industry, Wood added.

Rystad Energy’s Tchen highlighted that new rounds of tariffs, that could include direct oil-related tariffs, would be avoided with a United States-China trade deal.

“These could result in increased tightness, oil price volatility and [a] wider WTI-Brent differential,” Tchen told Rigzone.

The Rystad Energy representative also expressed that a deal would help avoid further demand growth declines caused by the latest $260 billion worth of reciprocal tariffs and provide a sentiment relief to the oil price from the demand side.

Will There be a US-China Trade Deal?

Logic suggests that there will be a deal, according to Burns, who said the United States has “much to lose” if there is a drop in the oil price.

Burns added however that, given how “politically charged” the situation is, it’s “hard” to make any credible predictions.

Rystad Energy refused to speculate on whether there would be a trade deal between the United States and China. Moody’s also chose not to predict whether or not there would be a trade deal.

Kaho Yu, a senior Asia analyst at global risk consultancy Verisk Maplecroft, said a ceasefire would shift the wind in the United States-China dialogue back towards commercial opportunities in the oil industry but added that this would likely be temporary.

“Geopolitics are dynamic, and the United States-China relationship can quickly change,” Yu stated.

“We expect geopolitical tensions between Washington and Beijing to last regardless of whether a trade deal is reached,” the Verisk Maplecroft representative added.

Last month, U.S. President Donald Trump announced on Twitter that the United States would make a deal with China “when the time is right”.

“My respect and friendship with President Xi is unlimited but, as I have told him many times before, this must be a great deal for the United States or it just doesn’t make any sense,” Trump said in the Twitter statement.

 

When the time is right we will make a deal with China. My respect and friendship with President Xi is unlimited but, as I have told him many times before, this must be a great deal for the United States or it just doesn’t make any sense. We have to be allowed to make up some.....

— Donald J. Trump (@realDonaldTrump) May 14, 2019

[Boat + 1,324]

On 6/12/2019 at 4:39 PM, ceo_energemsier said:

US to become net oil exporter in November: EIA

Imports projected to meet 8% of US demand this year

US net oil exports to average 550,000 b/d in 2020

The US will become a net oil exporter for the first time on a monthly basis in November, with crude and refined product exports exceeding imports by 220,000 b/d, the Energy Information Administration said Tuesday.

 

EIA sees the US continuing to be a net oil importer on an annual basis in 2019, with imports exceeding exports by an average of 620,000 b/d. Then the US will flip to annual net exporter in 2020, with exports exceeding imports by 550,000 b/d.

The US snagged the net oil exporter title for all of one week last November, driven by a surge of 3.2 million b/d in crude exports that pushed crude and product exports above 9 million b/d, according to S&P Global Platts Analytics.

The growth of the Gulf Coast refining sector made the US a net exporter of refined products in 2011. Rising crude exports since 2015 have made the overall net oil exporter status possible.

Still, US crude imports will continue to exceed crude exports by 4.43 million b/d in 2019 and 4.4 million b/d in 2020, EIA said.

IMPORT RELIANCE PLUMMETS

EIA's Annual Energy Outlook 2019 predicted in January that foreign oil would meet just 7.5% of US demand this year.

A decade ago, EIA forecast in its 2009 AEO that foreign crude would meet 44% of US demand in 2020. Imports met 60% of US consumption in 2006 and were projected to fall to 50% by 2010, according to the 2009 report. That was before the US tight oil revolution got underway in earnest.

EIA's projections have accelerated as US oil production growth keeps beating expectations.

Even just two years ago, EIA's 2017 AEO forecast the US remaining a net importer through 2050, with foreign oil meeting 17.7% of national consumption that year. Last year's AEO predicted the US would gain net exporter status in 2029 - nine years later than the current forecast.

President Donald Trump praised the net oil exporter milestone in his State of the Union speech to Congress in February, albeit before it actually happens.

"The United States is now the number one producer of oil and natural gas anywhere in the world. And now, for the first time in 65 years, we are a net exporter of energy," Trump said at the time.

One small potential problem with the US becoming an net oil exporter around November. The number of well completions seems to have leveled off the last 3 months. That’s the one data point I track that seems the most relevant.

[ceo_energemsier + 1,818]

US crude inventories fell last week amid a surge in export activity, US Energy Information Administration data showed Wednesday.

Commercial crude stocks dipped 3.11 million barrels to 482.36 million barrels during the week ended June 14, the EIA data showed. The draw brought in the surplus to the five-year average to 8.35%, narrowing the supply overhang for the first time in eight consecutive weeks.
The inventory draw was concentrated on the US Gulf Coast, where storage levels fell 5.83 million barrels to a six-week low at 241.28 million barrels. A key driver of this draw was a 300,000 b/d surge in exports to 3.42 million b/d, the second-highest weekly figure on record and just 5% below the all-time high reported by the EIA in mid-February.

USGC export volumes to Europe rose for a fifth straight week to 8.12 million barrels, a 1.14 million barrel uptick from the week prior, according to cFlow, Platts trade flow software.

WTI has become increasingly competitive in Europe amid the rapid build out of a supply overhang in recent weeks. To-date in June, WTI has averaged at slightly more than a $2.00/b discount compared to Dated Brent delivered into Rotterdam, up from around a $1.00/b discount averaged in May and a 60 cent/b discount in April, Platts calculations showed.

But arbitrage economics for US crudes in Asia continue to dim relative to Middle Eastern grades. To date in June, WTI delivered into North Asia has averaged at a 70-cent/b premium compared with Murban crude in North Asia, Platts calculations showed, up from a 31-cent/b premium in May. US crude outflows to Asia fell back 3.17 million barrels to 8.477 million barrels last week, a 27% decline from week-ago levels, according to cFlow data.

Notably, crude stocks were higher across all other regions outside of the Rockies, where they slipped 171,000 barrels to 23.3 million barrels.

In the Midwest, crude inventories were 748,000 barrels higher last week at 146.55 million barrels. The bulk of this build — 642,000 barrels — was realized at Cushing, Oklahoma, the delivery point of the NYMEX crude contract. The build pushed inventories there to the highest since November 2017, and came despite a 7.8 percentage point bump in Midwest refinery runs rates that took regional utilization to the highest since mid-January at 95.9% of total capacity.

A 961,000 barrel-build on the US Atlantic Coast pushed inventories there to 16.22 million barrels, the highest since August 2017, and West Coast stocks were just shy of 12-month highs after building 1.12 million barrels to 55.02 million barrels.

GASOLINE STOCKS DRAW AMID RECORD-HIGH DEMAND
Total gasoline inventories fell 1.7 million barrels last week to 233.22 million barrels, EIA data showed. The draw ran counter to analysts expectations of a 1 million-barrel build in a Platts Monday analysis and sent NYMEX RBOB futures sharply higher in midmorning trading.

The draw was predicated in large part upon record-high end-user demand levels. Total product supplied for gasoline, a proxy for demand, edged up 51,000 b/d to 9.93 million b/d — the highest weekly figure ever reported by EIA. Gasoline demand was 4.75% stronger than the five-year average for this time of year.

USAC gasoline inventories dipped 1.4 million barrels to 62.15 million barrels, taking stocks 3.9% below the five-year average. Rising refinery utilization in the Midwest contributed to a 620,000 barrel increase in regional gasoline stocks to 48.95 million barrels, but despite the uptick inventories were still 4.8% below the five-year average and nearly 7% under year-ago levels.

Distillate stocks also showed a counter-consensus draw last week, slipping 550,000 barrels to 127.82 million barrels.

Midwest combined low and ultra-low sulfur diesel stocks fell 325,000 barrels to 31.65 million barrels, narrowing the regional surplus to the five-year average to 3.1% — the lowest since late March. Flooding and severe weather across the Midwest this spring has impacted regional farming activity and weighed on diesel demand, contributing to local price discounts. The Platts Chicago ULSD differential to NYMEX ULSD averaged at minus 19.5 cents/gal last week, compared with minus 9.05 cents/gal during the week prior. But after peaking at minus 21.25 cents/gal late last week this spread has sharply narrowed, coming in to minus 8.5 cents/gal on Tuesday, the latest day data is available.

[ceo_energemsier + 1,818]

US Oil Production Hits New All Time High

U.S. crude oil production reached a new all time high of 12.2 million barrels per day (MMbpd) in May.

That’s according to the American Petroleum Institute’s (API) latest monthly statistical report, which revealed that Texas crude oil output exceeded 5 MMbpd last month for the first time.

“These milestones were achieved despite less drilling activity, which is testament to productivity but also pipeline infrastructure expansions that helped enable drilled but uncompleted wells to come to market,” the API report stated.

Last month also saw record U.S. petroleum exports at 8.1 MMbpd and a U.S. crude oil inventory increase of 10.5 percent over May 2018, the report revealed.

In its second quarter industry outlook report, released on the same day as the latest monthly statistical report, the API said the United States is poised for a continuation of record oil production. This report also highlighted that while U.S. crude oil export capacity has been “sufficient”, some capacity estimates suggest “some urgency to plan forward”.

“The historic milestones in U.S. oil production this quarter underscore the necessity of pipeline infrastructure to continued U.S. energy leadership,” API Chief Economist Dean Foreman said in an organization statement.

“With the surge expected to continue, our focus must now shift toward ensuring the necessary infrastructure and logistics are in place to support growth in providing energy to consumers, as well as exports,” he added.

“If current predictions by the U.S. Energy Information Administration and others prove correct, the U.S. will likely push up against the lower bound of existing crude oil export capacity by the end of this year, which creates urgency around building new infrastructure to ensure we don’t miss out on this rare opportunity,” Foreman continued.

Earlier this month, Rystad Energy stated that U.S. crude output would hit 13.4 MMbpd by December and average 12.5 MMbpd in May.

The API describes itself as the only national trade association representing all facets of the natural gas and oil industry. The API has more than 600 members, including large integrated companies, exploration and production, refining, marketing, pipeline, marine businesses and service and supply firms.

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Shale gas from Permian to source new plastics plant near Gulf

 

Food packaging, construction materials and agricultural films may soon be produced from shale gas sourced from the Permian Basin. Gulf Coast Growth Ventures LLC, a joint venture between ExxonMobil and Saudi Basic Industries Corp., has asked its construction company, Zachry Group, to place an order for a 1.3-million-ton polyethylene plant near Corpus Christi, Texas.

The polyethylene plant will be part of a larger shale gas-fed plastics plant built in the area. Zachry Group has placed an order for the plant design, supply and procurement of equipment and building of certain modules with Mitsubishi Heave Industries Engineering from Tokyo.

The original order for the plant was placed in 2017. Mitsubishi was selected in part for its ability to create the plant around a modular construction process that will help bring the plant online sooner. Mitsubishi and ExxonMobil previously worked together on polyethylene plants in Singapore in 2011 and Texas in 2017.

According to Mitsubishi, “the U.S. chemical plant market is expanding rapidly with increased production of shale gas.”

Once complete, the plant would create more than 600 permanent jobs with an average salary of roughly $90,000 per year. The GCGV joint venture was formed in 2018 and has always been focused on building the shale gas facility.