FGE offers more than just high quality research. We maintain close links with our clients, offering flexibility in the way the service is delivered, genuine research support and personal interaction.
- Mr. Mark F. Lewis,
Managing Director, FGE - London
6th Annual China Petroleum and Gas Briefing (CPGI 2013) Singapore
The China Petroleum and Gas Briefing (CPGI 2013) provides extensive coverage of China's oil and gas markets dynamics in the Asia Pacific regional and global contexts with a special emphasis on downstream refining, the future outlook of oil demand, supply, and trade, natural gas sector developments, LNG imports, and other key oil and gas issues in China.
CPGI will be highly relevant for all senior management, business developers, traders and analysts, corporate/strategic planners, investment bank project managers and executives responsible for China markets.
A long-running annual briefing, trusted by senior management and corporate planners responsible for business development and strategic direction seeking an insightful vision of the Asia Pacific downstream market.
PPI has become the most authoritative assessment of the downstream oil market in the Asia Pacific over the last 22 years. In addition to providing analysis of key industry developments on an annual basis, it has also given insiders rare insights into the Decisions Makers, who attend this event on a yearly basis and use many of the key indicators examined to structure and re-align their operations.
13th Pacific Gas Insiders Briefing (PGI 2013) Singapore
The Pacific Gas Insiders Briefing (PGI 2013) briefing will assess the options for building successful strategies for investment in LNG, pipelines, and downstream natural gas and power markets.
PGI 2013 will examine key developments in new and existing markets for natural gas in Asia; evaluate the prospects for new LNG supplies both from expansion of existing plants and from new greenfield developments; assess the potential competition between LNG, pipeline gas, and unconventional gas supplies; compare and contrast the developments of the various markets and their impact on the overall gas/LNG trade in the region; and analyze trends in LNG pricing and contract terms.
17th Asian Oil and Gas Conference (AOGC 2013) Kuala Lumpur
AOGC 2013 will once again play host to diverse and high level participants, including eminent speakers, industry leaders and policy makers, as well as important clients and distinguished representatives of the leading oil and gas companies and other renowned public and private establishments.
The conference will address the full range of energy issues that may be expected to be commanding the attention of industry, academics, analysts and policy-makers.
International Iranian Economic Association (IIEA) Conference Istanbul, Turkey
More information will be available soon.
Tue/Wed
1-2
Oct 2013
Oil and Money 2013 London, United Kingdom
This year's Oil and Money conference will tkae place at the InterContinental Hotel, Park Lane, London.
Oil and Money 2012 brought together over 550 of the world's most senior executives for two days of high-level discussions and debate on the issues facing the energy community worldwide.
Oil on Troubled Waters
April 22, 2013 (CNN)
Rob Smith, Principal Consultant FGE - FACTS Global Energy speaks with John Defterios about the impact of lower demand on crude oil prices, worldwide.
Energy Dynamics: Will the US Become Energy Self-Sufficient
March 18, 2013 (Credit Suisse Asian Investment Conference (AIC) 2013)
Recent data from the US department of energy shows that US oil imports have declined. This is a result of a combination of increased supply and weakening demand, says Dr. Fereidun Fesharaki, Chairman, FGE - FACTS Global Energy. He says it is likely that the US will become partly energy self-sufficient and explains what that means for global oil and gas prices in the short- and long-term.
Brent Oil Prices Face Downward Pressure
March 18, 2013 (Bloomberg)
Dr. Fereidun Fesharaki, Chairman at FGE- FACTS Global Energy, talks with Rishaad Salamat on Bloomberg Television's "Asia Edge" about the outlook for oil prices.
Venezuela's Oil Future
March 8, 2013 (CNN)
Dr. Fereidun Fesharaki, Chairman at FGE- FACTS Global Energy, talks with John Defterios about the future of Venezuela's Oil.
Oil Prices Too High Compared to Demand
February 26, 2013 (Bloomberg)
Dr. Fereidun Fesharaki, Chairman at FGE- FACTS Global Energy, talks with Rishaad Salamat about the outlook for oil prices.
Strategic Shifts in the Oil Market
November 16,2012 (CNN)
Dr. Fereidun Fesharaki, Chairman at FGE- FACTS Global Energy, talks with John Defterios about the global strategic shifts in the oil market.
Outlook for Global Oil and Natural Gas Markets
October 24, 2012 (Bloomberg)
Dr. Fereidun Fesharaki, Chairman at FGE- FACTS Global Energy, talks with Rishaad Salamat on the outlook for global oil and natural gas markets.
Petronas Bid for Progress Energy Resources Blocked
October 22, 2012 (CNBC)
Dr. Fereidun Fesharaki, Chairman at FGE- FACTS Global Energy, shares his views on why Ottawa in Canada blocked a 5.2 billion dollar acquisition by Petronas for Progress Energy, the Canadian natural gas producer.
Middle East Oil Markets
September 24, 2012 (CNN)
Dr. Fereidun Fesharaki, Chairman at FGE - FACTS Global Energy, speaks with John Defterios on the Middle East oil markets.
"Chop Sui Resources": Fueling our future: Getting Real on Our Vision
July 25, 2012 (The College of Social Sciences)
Shasha Fesharaki, COO at FGE - FACTS Global Energy speaks about LNG in this interesting feature by the College of Social Sciences "Chop Sui Resources: Fueling our future: Getting Real on Our Vision".
Brent to Hit $108 on Iran Sanctions and Euro Zone Woes
July 11th, 2012 (CNBC)
Praveen Kumar, Senior Consultant at FGE - Singapore, talks on CNBC's Commodites Corner about the rising cost of Brent.
OPEC Members to Meet in Vienna
July 2, 2012 (CNN)
Dr. Fereidun Fesharaki chairman at FGE - FACTS Global Energy speaks with John Defterios on global oil production.
OPEC Won't Allow Oil to Fall Below $90
June 14, 2012 (Bloomberg)
Dr. Fereidun Fesharaki, chairman at FGE - FACTS Global Energy, talks about the outlook for crude oil and natural gas markets. Dr. Fesharaki also discusses his expectations for today"s meeting of the Organization of Petroleum Exporting Countries. He speaks with Rishaad Salamat on Bloomberg Television"s "On the Move Asia." (Source: Bloomberg)
Oil Prices Expected to Fall Over Short Term
April 30, 2012 (Bloomberg)
Dr. Fereidun Fesharaki, chairman at FGE - FACTS Global Energy and a former energy adviser to the Iranian government, talks about the outlook for crude oil prices and demand. Dr. Fesharaki also discusses Japan's energy requirements. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)
What's causing oil prices to rise?
March 26, 2012 (CNN)
Dr. Fereidun Fesharaki chairman at FGE - FACTS Global Energy discusses the factors driving oil prices higher.
Brent Crude Oil May `Jump Up' $5, Fall to $110
March 7, 2012 (Bloomberg)
Dr. Fereidun Fesharaki, chairman of FGE - FACTS Global Energy and a former energy adviser to the Iranian government, talks about crude oil prices and demand. Oil traded near the lowest price in more than two weeks in New York after a report showed increasing U.S. crude stockpiles and the European Union offered to resume talks with Iran over its nuclear program. Dr. Fesharaki speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Oil and natural gas market outlook
January 10, 2012 (CNN)
Dr. Fereidun Fesharaki on the impact of Iran sanctions on oil prices and the Middle East's dependence on gas imports (source CNN).
FGE - Newsletter
Welcome to our newsletter. Delivered once a month, these newsletters will provide you with a snapshot of market highlights across the globe, followed by key events both provided and attended by FGE. If you would like to receive this newsletter via email please subscribe from link below:
Welcome to the April 2013 Newsletter. In addition to our usual features, we would like to draw your attention to the 6th Annual China Petroleum and Gas Insiders (CPGI 2013) Briefing in Singapore 13-14 June 2013, and our new Multi-Client Study, 'Crude Oil Supply and International Trade Outlook'. Please follow the link below for more information
6th Annual China Petroleum and Gas Insiders (CPGI 2013)
The China Petroleum and Gas Insiders Briefing (CPGI 2013) provides extensive coverage of China's oil and gas markets dynamics in the Asia Pacific regional and global contexts wiht a special emphasis on downstream refining, the future outlook of oil demand, supply and trade, natural gas sector developments, LNG imports, and other key oil and gas issues in China.
CPGI will be highly relevant for all senior management, business developers, traders and analysts, corporate/strategic planners, investment bank project managers and executives responsible for China markets.
Key Topics:
What's Hot in the Global/Asia Pacific Oil Business
Key Issues in China's Oil Market in the Global Context
Crude Oil Imports and SPRs
The Downstream Refining Sector and Fate of "Teapot" Refineries
Oil Market Dynamics in China
Future Growth: Regional and Global Impact
What's Hot in the Global Gas and LNG Business
Key Issues in China's Natural Gas Market
Upstream Natural Gas Developments
Unconventional Gas: Current and Future
Natural Gas Markets and Price Reforms
Outlook for LNG and Pipeline Imports
Future Role of Gas
Briefing Opened by:
Dr. Fereidun Fesharaki
Chairman, FGE
Briefing Leader:
Dr. Kang Wu
Executive Director for Asia Operations & Managing Director,
FGE - FACTS Global Energy Hawaii
Multi-Client Study: Crude Oil Supply and International Trade Outlook
FGE is pleased to announce our upcoming Multi-Client Study, Crude Oil Supply and International Trade Outlook.
This report provides detailed demand/supply forecasts and trade flows for 2010-2020, by region and quality. Given the magnitude of new developments in both the U.S.A and Canada, and the impact on global trade flows, these countries are analyzed individually. The impact on backed-out imports by quality, and resulting change in other inter-regional flows is analyzed and discussed in detail.
Key Features and Scope of Our Study
Detailed projections of crude oil/NGL production by country.
Quality change issues - sulphur and gravity.
The evolving demand side - refinery capacity expansions & closures.
The conundrum of surplus light crudes in the West vs. incremental heavy crude demand in the East.
How shale liquids are transforming the US crude oil balance and the international ramifications.
Implications for trade flows and price differentials.
Key Reading For
National Oil Companies and Governments
Oil Majors, Producers
Refiners
Crude and Product Traders and Energy Investors
Storage Operators
Shippers/Brokers
Market/Commercial Analysts
Consultants
Research managers
Investment Bankers
Commercial Managers
Petroleum Economists and Planners
If you would like to order a copy, or would like more information about its coverage, please get in touch at [email protected]
Global Oil Review
Oil Prices
Total ‘long-lost’ non-OPEC volumes down to 850 kb/d in Q1 2013, from peak of 1 mob/d in March 2012. A few months ago, we detailed the large volumes of “long-lost” non-OPEC production which had been shut in for a year or more, in addition to the normal temporary shortfalls which often occur, from 6 non-OPEC producers: China, Yemen, Syria, Brazil, Sudan and the UK. We estimate this shut-in production peaked at over 1 mmb/d in March 2012, but that it had since fallen to about 850 kb/d in the first quarter of this year as the shut-in volume in China had slowly recovered to normal.
However, now it looks likely that these “long-lost” volumes could be coming back quite rapidly. Following the restart of the Elgin-Franklin field in the UK sector of the North Sea recently, latest reports are that South Sudan’s output is being geared up right now, while official approval has just been given for the restart of the Frade field offshore Brazil. As a result, we estimate that the “long-lost” volumes could fall by another 200 kb/d this month to just over 600 kb/d, then progressively shrink for the rest of this year. However, we still project that total “long-lost” volumes could still be near 400 kb/d by end-year (taking a deliberately pessimistic view), on the assumption that Syrian output is unlikely to return in the foreseeable future due to the civil war, that the political instability in Yemen is likely to keep 100 kb/d or more shut in, while South Sudan may not be able to restore full volumes for some time.
ASIA
Chinese refinery runs for March fell to 9.64 mmb/d, about 440 kb/d lower compared to February. After 4-months run averaging at 10.36 mmb/d, refinery runs were pared back due to maintenance works. We expect that runs will continue at a lower range of around 9.5-9.6 mmb/d for most of the second and third quarters as refiners look to reduce product stock while at the same time rebuild crude stocks. Ample stock shave led to higher exports of gasoline and diesel recently. Recent economic data showed China GDP growth rising at a “disappointing” 7.7%. As far as oil demand is concerned, we think growth will pick up modestly this year on stronger demand for naphtha and diesel due to increased industrial activity, and are forecasting demand to rise by 4.8% on a full year basis.
Refinery maintenance is currently at its peak for the year. In Asia, we estimate about 1.4 mmb/d of capacity is offline in April, falling to 680 kb/d in May and 420 kb/d in June. South Korean still has significant levels of CDU maintenance scheduled through until July. Refineries Taiwan, Thailand and Japan also have further maintenance scheduled over the next 2 months. However, the recent weakening of refining margins (in particular for gasoil) over the past two month when supply is supposed to be at its tightest is worrying for refiners. If refining margins continue to slide over the next 2 months, it seems likely that marginal swing producers such as South Korea, Singapore and Thailand could cut back runs
LATIN AMERICA
Demand data for early 2013 showing faster growth in LatAm 4 (+65% y-on-y in January), led by Brazil, particularly for fuel oil.
Refinery crude runs expected to fluctuate in next few months, with drop in April to 5.75mmb/d due to heavy maintenance and unplanned downtime in several countries, but then to recover in May/June.
Forecast for fuel oil demand this year raised; hydropower shortfall in Brazil expected to keep supporting fuel oil requirements through the end of the year.
LatAm 4 net product imports to remain stable at 1 mmb/d through March-June.
Middle East
Total product demand in the MEG-8 region rose in March by 1% y-on-y as a result of higher gasoline (+12%) and gasoil (+2%) consumption and despite lower fuel oil (-6%) and kerosene/jet fuel (-9%) demand in the region.
Total product output from the MEG-8 countries dropped in March by 5% y-on-y as a result of lower gasoline (-6%), kerosene/jet fuel (-15%), gasoil (-3%) and fuel oil (-3%) production.
As a result of higher demand and lower refinery output, total product imports into the MEG-8 region rose by 12% y-on-y largely on the back of higher gasoline (+35%) and kerosene/jet fuel (+25%) imports into MEG-8 countries and total product exports dropped by 3% y-on-y due to lower gasoil (-14%), gasoline (-27%) and fuel oil (-4%) deliveries.
Average refinery utilization rates in the MEG-8 region during March dropped by five percentage-point y-on-y mainly as a result of lower refinery runs in Bahrain, Iraq, Oman and the UAE.
Global LNG Review
Asia Pacific:
It was a busy month for shale farm-ins in Australia, with another global oil major and a large Asian national oil company (NOC) joining the fray, following predecessors such as BG, ConocoPhillips, Hess, Statoil and Total. In late February, Chevron Corp. made a deal with Beach Energy to acquire up to a 60% interest in two shale exploration permits located in the Cooper Basin, valued at up to US$349 million. Chevron’s deal with Beach came hot on the heels of a three-pronged alliance between ConocoPhillips and PetroChina that centered on the joint pursuit of conventional and unconventional gas monetization opportunities in Australia and unconventional gas development in China. All these agreements require respective government, foreign investment and partner approvals. This flurry of alliances indicates the level of interest shown in Australia’s nascent shale gas sector: perhaps echoing the path to development observed in the US, multinational companies appear increasingly interested in opportunities to farm into shale gas acreage currently held by smaller independent petroleum companies in Australia.
Indonesia’s Tangguh LNG plant in West Papua has “delivered” its first ever domestic LNG cargo, albeit indirectly. Tangguh’s customer, state-owned fertilizer producer Pupuk Iskandar Muda, lacks access to LNG regasification facilities, so the gas was actually sourced from the ageing Arun plant in Aceh province and delivered to the fertilizer producer via pipeline instead. However, the arrangement leaves Arun short of feedgas and unable to honor its contractual LNG supply commitments to South Korea’s KOGAS. To make up the shortfall, fellow Indonesian LNG producer Tangguh agreed to provide KOGAS with an LNG shipment of the same size. The ‘transfer’ of a LNG cargo from Tangguh to the state fertilizer manufacturer has proved to be a milestone, highlighting the local government’s shifting focus to meet domestic gas requirements.
India’s government has announced its intent to review the guidelines governing petroleum exploration and production in India, as well as the nation’s natural gas pricing policy. It’s hoped that the reviews – especially with regards to gas pricing – will remove the regulatory uncertainty clouding India’s upstream and downstream gas business. This might not only stimulate investment in the country’s upstream, but also provide a broader economic justification for LNG imports, thereby supporting India’s longer-term security of supply. With the rapid decline in gas production from the KG-D6 field, LNG is now widely seen to be the future for India’s gas supply. With international supply prices significantly higher than current domestic prices, pricing policy review has become a key issue, with domestic and international companies likely to be closely watching the results of the government’s current policy reviews.
Europe/Americas:
On March 4, the Japan Petroleum Exploration Co., Ltd. (JAPEX) signed a Heads of Agreement (HOA) with PETRONAS to acquire a 10% stake in the Malaysian company’s proposed Pacific Northwest LNG project and associated upstream acreage in western Canada. By so doing, JAPEX joins a growing list of Asian companies with LNG demand in their own right that seek direct participation in a greenfield Canadian LNG export project. Together with the US, Canada is viewed by Asian LNG buyers – especially Japanese buyers coping with the uncertainty presented by ongoing nuclear power outages – as a promising means to diversify their LNG supply base going forward. The extent of the UK’s dependence on Norwegian gas was highlighted in early March when a power outage at the Ormen Lange gas field temporarily constrained supply and resulted in a surge in UK spot prices. UK gas stocks are already at a low ebb, thereby fuelling concerns about the impact of an unseasonably-late cold snap and/or upcoming scheduled gas production outages in Norway. Perhaps in light of the UK’s not-altogether comfortable gas supply situation, British integrated gas company Centrica chose early March to announce its intent to procure LNG for the UK from the US.
Winter seasonal gas demand highs combined with niggling gas supply issues have generated an upward swing in UK gas prices of late. These supply issues center on declining UK gas production combined with a decline in LNG deliveries. This in turn has resulted in the UK becoming more dependent than ever on imports from Norway. The extent of the UK’s dependence on Norwegian gas was highlighted in early March when a power outage at the Ormen Lange gas field temporarily constrained supply and resulted in a surge in UK spot prices. UK gas stocks are already at a low ebb, thereby fuelling concerns about the impact of an unseasonably-late cold snap and/or upcoming scheduled gas production outages in Norway. Perhaps in light of the UK’s not-altogether comfortable gas supply situation, British integrated gas company Centrica chose early March to announce its intent to procure LNG for the UK from the US.
Gazprom has finalized the investment terms for the greenfield Vladivostok liquefaction plant on Russia’s Pacific Coast. Gazprom views the project as a vehicle for strengthening its presence in the global LNG market and enhancing its status as an LNG supplier. Gazprom’s decision to build on its position as an LNG supplier to buyers east of Suez must be viewed in light of its falling pipeline gas sales to Europe, which has been the traditional mainstay of its position as an international gas exporter. Gazprom’s concerns about falling pipeline sales to Europe might also account for its decision to procure LNG from an LNG export project currently under development in Israel. Procuring LNG from a project located in the Mediterranean Basin and seeking buyers on the Continent would, after all, be a good foil for its falling pipeline gas exports to Europe.
Welcome to the March 2013 Newsletter. In addition to our usual features, we would like to draw your attention to our upcoming Middle East Petroleum and Gas Briefings. Please follow the link below for more information.
20th Annual Middle East Petroleum Insiders Briefing (MPI 2013)
Now in its 20th year, the annual Middle East Petroleum Insiders briefing offers authoritative and insightful analysis regarding the outlook for this crucial region. It will be an opportunity to hear from FGE personnel and discuss issues that are fundamental to how the oil markets evolve with industry leaders.
Key Topics:
Key Issues Confronting the Global Oil and Gas Markets
The "Ripple Effect" of Increasing US Production
Global Oil Supply and Demand
China Focus: The Sustainability of the Global Powerhouse
Asian Downstream - Will SEA Remain a "Trade Sink"
Atlantic Basin Refining - Does Declining Demand Mean Reduced Margins?
Middle East Refining - Too Much for the Market to Bear?
Trading Implications
Briefing Leaders:
Dr. Fereidun Fesharaki
Chairman, FGE
Mr. Mark Lewis
Vice Chairman/Managing Director, FGE London
Ms. Gemma Parker
Consultant, FGE London
7th Annual Middle East Gas Insiders Briefing (MGI 2013)
The 7th annual Middle East Gas Insiders Briefing (MGI 2013) will examine key developments in new and existing markets for natural gas in the Middle East, evaluate technological and commercial issues in the upstream gas sector, discuss the outlook for gas imports as well as exports in the region, and analyze trends in LNG pricing.
Key Topics:
Key Paradigm Shifts in the Oil and Gas Industry
Key Technical and Economical Aspects of Unconventional Gas Production
Key Issues in the MENA Upstream Gas Sector
Liquids from Gas—Implications for the ME Region
In-Depth Review of Domestic Gas Supply and Demand in the MENA Countries
Evolution of the Gas Dynamics: New Prospects for Gas Imports in the MENA Region
Role of MENA in the Atlantic Basin and Asian Markets
Global LNG Trade: MENA's Supply and Competing/Complimentary Markets
Salient Issues About LNG Contracts: What are Other Markets Offering?
Briefing Leaders:
Dr. Fereidun Fesharaki
Chairman, FGE
Mr. Shahriah Fesharaki
Chief Operating Officer and Principal Consultant, FGE Honolulu
Mr. Siamak Adibi
Senior Consultant, FGE Singapore
Global Oil Review
Oil Prices
The impact of the death of President Chavez in Venezuela earlier this month seems to have been neutral so far. The political situation there will remain fluid until the elections for a new President on 14th April. It is generally expected that Vice-President Maduro will be elected as new President, with no subsequent change in policy. In the near-term, this outcome would imply that the Venezuelan oil sector will probably deteriorate further, especially on the downstream side, leading to more net product imports. In the longer-term, the end of the Chavez era might lead to a more positive attitude towards foreign investment, perhaps resulting ultimately in a higher oil output profile. But we do not expect major changes there now, unless there is a political meltdown.
In the meantime, the future of Venezuelan oil and its impact on the world’s oil markets is the subject of much debate. Venezuela has the world’s largest oil reserves at some 297 bn bbls and there is considerable interest in the relatively easy (and cheap) extraction of heavy oil and a significant incentive to increase production with most of it of the very heavy kind located in the prolific Orinoco belt. During the Chavez leadership, oil production fell by some 800 kb/d, with much of the revenues used to fund social projects (rather than reinvested in the oil industry). We will have to wait and see if this is continued but. But it does need highly-upgraded refineries to process it and there are plenty of those on the USGC who would welcome it as an excellent blendstock for the ever-increasing volumes of light domestic crude being produced (from Eagle Ford, Bakken etc). However, even if there is a defrosting of the US/Venezuela relationship, the oil will be in competition with Canadian crude (as long as the Keystone pipeline is built), and could pose problems for the Canadians who will see a big incentive to progress their export routes to their west coast.
ASIA
South Korea will move to eliminate a tax loophole that has led to substantial volume of North Sea crudes imports over the past 12 months. In July 2011 a free trade agreement came into effect between the EU and South Korea which lifted a variety of import tariffs. Under the FTA, Korean refiners were exempt from a 3% import tariff on crudes imported from the EU, while being able to claim rebate on resulting product exports.
Korean authorities have indicated from April 1st they now plan to make the product export rebate inapplicable on tariff-free crudes. In 2012, North Sea crude imports averaged 120 kb/d, about 5% of Korea’s total imports over the period. Light-sweet North Sea crudes are not a natural fit for South Korean refiners, who source about 90% of their crude intake from sour medium-to heavy grades from the Middle East.
Refining margins in Asia have continued to ease from recent highs. Last month saw margins rally to their strongest since mid-2008 on the strength of expectations of tighter supply as a result of refinery maintenance. But with supply now seemingly less tight than expected, cracks for light and middle distillates have begun to retreat somewhat. We expect that this correction will be modest, and cracks will eventually reach a stable level lasting up until the end of maintenance in the summer.
LATIN AMERICA
Latest data confirm resilience of LatAm 4 demand with transport fuel (apart from jet) and fuel oil remaining buoyant.
Boost in Brazil’s ethanol consumption is expected due to higher blending ratio and signs of a good sugar cane harvest.
Venezuelan products shortfall persists but post-Chavez government will have to tackle the issues of the fuel subsidies.
Higher than expected refinery runs have resulted in a weaker trend in imports in recent months.
We still expect March to April imports to run at relatively high levels with stable gasoline and gasoil imports.
Middle East
Total product demand in the MEG-8 region rose in February by 3% y-on-y as a result of higher gasoline (+4%) and fuel oil (+11%) consumption in the region.
Total product output from the MEG-8 countries remained unchanged y-on-y in February at around 6.44 mmb/d in February.
Total product imports into the MEG-8 region rose by 16% y-on-y on the back of higher gasoline (+32%), kerosene/jet fuel (+17%) and gasoil (+52%) imports into MEG-8 countries and total product exports dropped by 2% y-on-y due to lower gasoil (-5%) and fuel oil (-4%) deliveries.
Average refinery utilization rates in the MEG-8 region during February dropped by one percentage-point y-on-y on the back of lower refinery runs in Iraq and Saudi Arabia.
Global LNG Review
Americas/Europe:
Poland is planning to invest about 1.1 billion Euros (US$1.5 billion) to develop a natural gas pipeline network, linking its planned LNG import terminal at Swinoujscie, on the Baltic coast, to the Czech Republic, Slovakia and Ukraine. Polish state-owned pipeline operator, Gaz-System, anticipates commencing operations at the regasification terminal in the summer of 2014. The pipeline project, which will involve the laying of approximately 1,000 km of pipeline linking the terminal to Czech and German transmission networks, is also planned to be completed in the same year. Poland also plans to link the terminal to Lithuania, which intends to commission its own floating LNG receiving terminal by late 2014.
The British Columbia (BC) government recently mooted plans to institute a new tax on LNG exporters as a means of ensuring that the local population can directly benefit from the state’s expected LNG boom. The tax will play a critical role in building the government’s newly envisioned Prosperity Fund, which will also be financed through natural gas royalties and corporate tax income from the LNG industry. The specifics of the potential tax have not been revealed, and could possibly take a year to be finalized. The timing of the announcement – months before the May 2013 BC general election – highlights the significance of domestic LNG developments in the local political scene.
In some of the German Chancellor’s first comments on the issue of hydraulic fracturing (or fracking), she warned that Germany should be cautious in developing its shale gas reserves. According to EIA estimates, the country could hold approximately 8 tcf of shale gas reserves. However, development of these reserves has been stalled by concerns over the potential seismic risks that the technology poses, as well as its potential to pollute drinking water. In her comments, the Chancellor called for further national debate on the issue, rather than setting out a plan for the utilization of the country’s shale resources.
Asia Pacific Market
Freeport LNG has signed a binding tolling agreement with BP that covers all the output from the project’s second liquefaction train. The 20-year tolling agreement, which was announced in the first half of February 2013, entails the offtake of 4.4 mmtpa of LNG. The tolling agreement will take effect when the liquefaction train enters service, which is currently scheduled for the second half of 2018. The deal is a coup for both buyer and seller. With volumes from Freeport incorporated into its portfolio, BP will expand its global LNG supply pool substantially. The company will also be better-equipped to discharge two recent LNG sales agreements with Japanese buyers.
In early February, SKK Migas announced that the BP-operated Tangguh liquefaction plant would divert 16 LNG cargoes a year (approximately 1 mmtpa) to South Korea’s KOGAS. The cargoes will come from volumes initially allotted to California-based Sempra Energy. Sempra Energy signed a sale and purchase agreement (SPA) with BP and its partners in the Tangguh LNG project in 2004 for up to 3.7 mmtpa to be delivered to its regasification terminal in Baja California, Mexico. Under the original terms of the agreement, the Tangguh joint venture has the option to sell 50% of Sempra’s quota to other buyers if it is offered a better price.
India’s GAIL has been in the news lately over its recently commissioned 5-mmtpa Dabhol LNG terminal. The terminal, which has had a tumultuous history since it was first envisioned by the disgraced US merchant energy company Enron, was delayed several times but was finally commissioned in January 2013. While work on the terminal still continues, with the crucial breakwater facility still under construction, the terminal’s start-up is an important step in the development of India’s gas infrastructure. In fact, the terminal, along with the development of GAIL’s cross-country gas pipeline network will help integrate India’s gas market from Bathinda-Nangal in the north, to Kochi in the south.
Welcome to the February 2013 Newsletter. In addition to our usual features, we would like to draw your attention to our upcoming Middle East Petroleum and Gas Briefings. Please follow the link below for more information.
Thomson Reuters Global Oil Forum - Annual World Refining Outlook
Date: 6 March 2013 Time: 9:00 a.m. (GMT)
Mr. Mark Lewis, Group Vice Chairman and Managing Director, FGE London, will be taking part in Reuters upcoming Global Oil Forum on March 6, 2013. During this question and answer session, Mark Lewis will be discussing FGE's Annual World Refining Outlook.
If you are interested in attending this online session and don't already have access to the Global Oil Forum, please contact Andy Chan[email protected]
If you are already a Reuters Messaging user simply click on the following link to join the Global Oil Forum
Complimentary Webinar on China Petroleum
Date: 22 March 2013 Time: 10-11 a.m. (GMT)
Dr. Kang Wu, FGE China will host this session, which will offer in-depth analysis and insights for China's Oil Market, a strategic assessment of the latest developments in China, and their implications for the rest of the world, as well as an opportunity for you to ask any questions you may have on the topic.
If you are interested in attending this webinar, please email your contact details to [email protected]
20th Annual Middle East Petroleum Insiders Briefing (MPI 2013)
Now in its 20th year, the annual Middle East Petroleum Insiders briefing offers authoritative and insightful analysis regarding the outlook for this crucial region. It will be an opportunity to hear from FGE personnel and discuss issues that are fundamental to how the oil markets evolve with industry leaders.
Key Topics:
Key Issues Confronting the Global Oil and Gas Markets
The "Ripple Effect" of Increasing US Production
Global Oil Supply and Demand
China Focus: The Sustainability of the Global Powerhouse
Asian Downstream - Will SEA Remain a "Trade Sink"
Atlantic Basin Refining - Does Declining Demand Mean Reduced Margins?
Middle East Refining - Too Much for the Market to Bear?
Trading Implications
Briefing Leaders:
Dr. Fereidun Fesharaki
Chairman, FGE
Mr. Mark Lewis
Vice Chairman/Managing Director, FGE London
Ms. Gemma Parker
Consultant, FGE London
7th Annual Middle East Gas Insiders Briefing (MGI 2013)
The 7th annual Middle East Gas Insiders Briefing (MGI 2013) will examine key developments in new and existing markets for natural gas in the Middle East, evaluate technological and commercial issues in the upstream gas sector, discuss the outlook for gas imports as well as exports in the region, and analyze trends in LNG pricing.
Key Topics:
Key Paradigm Shifts in the Oil and Gas Industry
Key Technical and Economical Aspects of Unconventional Gas Production
Key Issues in the MENA Upstream Gas Sector
Liquids from Gas—Implications for the ME Region
In-Depth Review of Domestic Gas Supply and Demand in the MENA Countries
Evolution of the Gas Dynamics: New Prospects for Gas Imports in the MENA Region
Role of MENA in the Atlantic Basin and Asian Markets
Global LNG Trade: MENA's Supply and Competing/Complimentary Markets
Salient Issues About LNG Contracts: What are Other Markets Offering?
Briefing Leaders:
Dr. Fereidun Fesharaki
Chairman, FGE
Mr. Shahriah Fesharaki
Chief Operating Officer and Principal Consultant, FGE Honolulu
Mr. Siamak Adibi
Senior Consultant, FGE Singapore
Global Oil Review
Oil Prices
Oil markets still potentially exposed to loss of light-sweet crudes from Libya and Algeria.
Recent developments in various North African countries have raised concerns in oil markets that there could be a repeat of the instability seen this time two years ago in Egypt, Libya and Tunisia – but with the added uncertainty now that Algeria might be added to the list, following the deadly terrorist attack on the country’s gas processing plant major at In Amenas in mid-January. As was discovered two years ago following the uprising against the Gaddafi regime, the loss of any crude exports again from Libya (and now potentially Algeria) would be particularly critical for oil markets, because there is still no spare output capacity elsewhere in the world of the specific quality to cover the loss of their very light, sweet crude exports of about 1.7 mmb/d combined. All of the world’s spare output capacity of about 3 mmb/d, which is effectively all in Saudi Arabia currently, is more heavy and sour. Two years ago, although Saudi Arabia offered a “special blend” of its lighter crudes including condensate to try to make up for the shortfall in Libyan exports, there was little uptake as the sulphur content was still regarded as too high – with a resultant surge in the price premium for Libyan-similar crudes such as Azeri Light. So there is a risk that if there is another disruption to exports, there could be a similar effect.
Another key feature is that only just over half of Algeria’s oil exports (around 550 kb/d) are in the form of crude oil – the country also exports about 150 kb/d of condensate/NGL and some 250 kb/d f products. Also, Egypt and Tunisia export crude/products, some 270 kb/d and 65 kb/d respectively.
Egypt is also significant potentially in oil market terms, because of the threat from political instability to the major oil flows through the Suez Canal (recently totalling some 1.7 mmb/d south-north and 1.2 mmb/d north-south) and through the SUMED pipeline of about 1.1 mmb/d south-north.
Although Tunisia is pretty small in terms of oil supply/demand (exporting about 50 kb/d of crude, but importing a similar volume of products), it was of course the country where the “Arab Spring” started just over two years ago, so there is some concern of a repeat in view of the street protests currently after the killing of an opposition leader.
ASIA
The Brent-Dubai spread for January averaged $5.60/b, the highest since September 2011. The relative weakness of heavier Middle Eastern grades was underlined by Saudi Arabia’s recent move to cut prices for its crude to Asian buyers across all grades, with demand in the region seen as weakening over the next few months as refineries enter maintenance. For now, it seems that Brent is riding a wave of economic optimism and rising premiums for light and middle distillates, while the Dubai benchmark remains relatively sluggish in line with broader demand fundamentals. We are forecasting both a lower Brent price and a narrowing premium to Dubai going forward.
Product cracks were up strongly this week, with prices for all major product groups seeing improved differentials vs Dubai on the Singapore market. Singapore refining margins are currently at a 6-month high, with upcoming refinery maintenance, cold weather and rising economic optimism boosting product margins. Gasoline cracks have risen to a 6-month high, while naphtha cracks are currently at their strongest since May 2011, buoyed recently by improved petrochemical margins and a stronger outlook for industrial production in Asia.
Middle distillates were also stronger, with both jet fuel and gasoil grades gaining on support from cold weather, which is driving demand for heating fuels. Fuel oil cracks continue to lag, as firm margins for light and middle distillates are likely to keep refinery runs relatively high, which will in turn result in higher volumes of fuel oil being pushed into the market. Nevertheless, fixtures of fuel oil from the West to Asia are expected to slow during February and into March.
LATIN AMERICA
Recent data indicates that oil demand in the main countries has been running at higher levels than previously thought, with fuel oil in particular being boosted by the power sector, responding to shortfalls of gas and hydro power.
This helped push the total year 2012 oil demand growth and we have now raised our 2013 forecast.
In contrast, regional refinery output during the latter months of 2012 was lowered due to outages in Venezuela and low utilization elsewhere; we expect this trend to continue through the early months of this year.
As a result, the overall products shortfall has tended to be higher than expected, with November’s net deficit at close to a record for Latam4.
Although the January 2013 regional deficit will have been much lower for seasonal reasons, we believe the overall deficit is now expanding again.
Middle East
Total product demand in the MEG-8 region rose in January by 6% y-on-y as a result of higher gasoil (+8%), fuel oil (+7%) and gasoline (+6%) consumption in the region.
Total product output from the MEG-8 countries increased in January by 4% y-on-y amid higher gasoil (+9%) and gasoline (+6%) output.
Total product imports into the MEG-8 region rose by 19% y-on-y on the back of higher middle distillate and fuel oil imports into MEG-8 countries and total product exports rose by 15% y-on-y largely due to higher gasoil and fuel oil exports.
Average refinery utilization rates in the MEG-8 region during January rose by one percentage-point y-on-y on the back of higher refinery runs in Kuwait and the UAE.”
Global LNG Review
Americas/Europe:
Canada’s National Energy Board (NEB) has granted export authorization to the Shell-led LNG Canada joint venture. The firm also announced plans to convert two LNG receiving terminals, at Tokyo Bay, to receive lean LNG.
The US Department of Energy (US DOE) has granted the Pangea LNG project permission to export LNG to FTA countries. Pangea LNG plans to build a liquefaction plant on Corpus Christi Bay to export up to 8 mmtpa of LNG.
Asia Pacific Market
TEPCO has announced plans to procure 0.8 mmtpa of US LNG through Mitsubishi and Mitsui from 2017. The firm also announced plans to convert two LNG receiving terminals, at Tokyo Bay, to receive lean LNG.
Singapore’s largest power generation company, Senoko Energy, has inaugurated a US$0.8 billion re-powering project that involved the conversion of three oil-fired power plants, with a total capacity of 750 MW, to two gas-fired combined-cycle plants (CCPs). The CCPs have a combined capacity of 862 MW and are expected to help the company cut 1 million tons of carbon emissions annually.
Welcome to the January 2013 Newsletter. In addition to our usual features, we would like to draw your attention to our upcoming Multi-Client Study - Annual World Oil Refining Outlook 2013, as well as our new Long-Term Service. Please follow the links above for more information.
Annual World Oil Refining Outlook 2013
We are pleased to announce that our latest Annual World Oil Refining Outlook 2013 is now available.
The refining business has suffered another turbulent year with a 2 mmb/d of actual or pending closures announced and a swathe of asset disposals, which have highlighted the extent to which this downturn is not only shifting the sector's international centre of gravity but also restructuring ownership in the mature markets.
This year's study not only covers our traditional, rigorous assessments of the future operating environment facing refiners, but also tries to make sense of the changing location and ownership patterns, and their impact on regional products balances.
Key issues addressed in this year's report include:
How long is the US likely to remain a major products exporter;
Are we near the end of European capacity closures or are there more to come;
How will delays to new Middle East plants affect the pressure on products trade flows;
How long is the Latin American shortfall likely to help keep US refiners afloat;
Will China emerge as a significant products exporter;
What is the likely impact of the unexpected growth in US shale liquids.
This year's report extends the forecast period for individual years through 2020 and projects oil demand, refining capacity, runs and output for 12 regions as well as products prices and margins.
FGE's New Long-Term Global Oil Service
FGE has restructured and enhanced its coverage of the mid/long term global oil market. This now comprises an interlinked suite of reports covering the mid-longer term forming an integrated, comprehensive series of research studies mapping out the likely developments in regional and global oil demand and supply, refining utilization and profitability as well as the implications for both crude oil and products trade.
The suite of reports covers:
Oil Demand and the Global Oil Price
The World Refining Outlook
Oil Production and Regional Crude Oil Trade
Regional Oil Products Balances and Products Trade
A key part of FGE's new Long-Term Oil Market Service, is the interactive support, integral to each of the individual reports.
Each of the reports is accompanied by one half-day presentation which is orientated towards a client's particular requirements which could include a focusing on the conclusions towards a particular sector of the business, providing tailor-made sensitivities or scenarios and including more detailed assessments of specific aspects of the study's coverage. Also included in the study support is access to the detailed data in spreadsheet form and PowerPoint presentation of the associated charts.
For more information on our new Long-Term Global Oil Service, please contact us at [email protected]
Global Oil Review
Oil Prices
Since the start of 2012, several prolonged unplanned outages at oil facilities and continued unrest have significantly reduced non-OPEC production below expected levels, at one point last year by around 900 kb/d in total (in South Sudan, Yemen, Syria, China, Brazil and the UK).
Although recently some production has begun to resume, while there are indications that other shut-in output could also be restarted soon, some 800 kb/d remains shut in now.
Despite these persistent shortfalls, we are still projecting healthy growth in non-OPEC production in 2013 overall, forecasting an increase of almost 900 kb/d an average compare to 2012, with most of this projected growth coming from the US. Of course, if any of these shut-in volumes outlined above were to come back sooner/faster than we assume, it is worthy bearing in mind that the rise in non-OPEC output this year could be even bigger than we currently forecast.
ASIA
The Indian government announced last week that diesel prices are to rise by between 40-50 paise (100 paise = 1 rupee). What is more significant is that the government has indicated the state-owned oil companies will now be allowed to make “small corrections” to retail diesel prices, with the eventual goal of elimination losses currently incurred by below-market prices. Diesel prices could be set to see a similar regulation process to that implemented for gasoline in 2010. Gasoline pricing is nominally deregulated with state-owned companies. However, in practice the government still has strong oversight over pricing, although prices change on average once a month and track the international market. However, diesel deregulation will be much more politically problematic due to its significance for India’s agricultural sector and rural farmers.
Latest data showed China’s crude imports reaching 5.59 mmb/d in December. The month’s total was little changed from October and November, with imports in 4Q 2012 averaging 5.62 mmb/d. On a y-o-y basis, imports were up by 8%, or 413 kb/d. On a full-year basis, China’s crude imports in 2012 were up by 6.4%, or 335 kb/d. Chinese refinery runs remained high in December at 10.18mmb/d. By our calculation this was slightly (30 kb/d) higher than last month’s previous record high, and up by 790 kb/d (8.4%). The record high run rates probably point to a draw on crude stocks and a resulting build in product inventories. December’s total crude imports of 5.59 mmb/d are more consistent with runs of about 9.6 mmb/d, which leads us to think runs may fall back in January. On an annual basis, runs averaged 9.36 mmb/d for the whole of 2012 – up by 3.7% (330 kb/d), from 2011.
LATIN AMERICA
Oil consumption is now coming off the seasonal highs following the surge in net imports in December.
Although January's import requirements are expected to drop back sharply, this is likely to be temporary since the shortfall should grow again in February/March. Gasoil imports in particular are expected to look strong in the coming months.
Overall oil demand last year seems to have come out stronger than expected in particular to a surge in October, boosted by shortfalls in both gas and hydro power in key markets.
The outlook for 2013, however, is for a slowdown in LatAm-4 demand growth with fuel oil, notably, moving back into decline.
Although dipping slightly in January, regional crude throughput is expected to remain relatively high.
Problems in Argentina continue with Petrobras following Exxon's lead and announcing plans to depart the downstream.
Middle East
Total product demand in the MEG-8 region dropped in November by 2% y-on-y as a result of lower fuel oil (-12%) and gasoil (-3%) consumption in the region and despite higher gasoline (+5%) and kerosene/jet fuel (+7%) demand.
Total product output from the MEG-8 countries increased in November by 1% y-on-y amid higher gasoline (+6%) and fuel oil (+5%) output.
Total product imports into the MEG-8 region rose by 15% y-on-y on the back of higher middle distillate imports into MEG-8 countries and total product exports rose by 4% y-on-y largely due to higher gasoline and fuel oil exports.
Average refinery utilization rates in the MEG-8 region during November dropped by one percentage-point y-on-y on the back of lower refinery runs in Bahrain which dropped by 17% y-on-y.
Global LNG Review
Americas/Europe:
A court has confirmed Dominion’s right to build liquefaction facilities at its Cove Point import facility in the eastern state of Maryland. Dominion’s quest to reconfigure its baseload LNG tanker discharge facility as a 5.5 mmtpa bi-directional terminal was – and is - opposed by the Sierra Club. The issue went before the courts in the summer of 2012, but a judge ruled in favor of Cove Point in January 2013.
Chevron announced its intent to secure a foothold in Canada’s Nascent LNG export business shortly before Christmas. The company will buy a 50% stake in the country’s “oldest” LNG export project, Kitimat LNG. Chevron’s entry into the project could help generate momentum for the 10 mmtpa Kitimat LNG venture, which has already received all significant environmental approvals and a 20-year export license from the Canadian federal government.
The British Government lifted a ban on hydraulic fracturing (fracking) on December 13. Westminster gave the green light to upstream companies to commence/resume shale gas exploration efforts using fracking, subject to new controls to prevent seismic risks. Westminster imposed a moratorium on fracking in November 2011 owing to two small earthquakes that occurred in the spring of 2011. The earthquakes occurred after Cuadrilla Resources fracked a well in the northwest England.
Asia Pacific Market
Woodside’s planned Browse LNG project received approval from Western Australia’s (WA) Environmental Protection Authority after being declared a “derived” proposal. A broader multi-user LNG precinct intended for James Price Point (JPP) near Broome was already okayed on environmental grounds in November 2012, after being put forward by the WA Department of State Development.
BG Group has secured a US$1.8 billion loan from the US Export-Import Bank towards the construction of coal seam gas-based Queensland Curtis LNG. The 8.5-mmtpa project, due to start in 2014, announced a major cost increase (36%) in May 2012 as a result of the strong Australian dollar and high labour and materials costs, to reach a total capital expenditure of US$20.4 billion.
In a major milestone for the under construction Ichthys LNG project, the joint venture sealed the largest project financing deal in the international market, arranging for US$20 billion in funds from 24 commercial banks and eight export credit agencies. Total capital expenditure on the project is estimated at US$34 billion, so the remaining $14 billion will be funded from sales revenue.
Welcome to the December 2012 Newsletter. In addition to our usual features, we would like to draw your attention to our upcoming Multi-Client Study - The Annual World Refining Outlook 2012, as well as our new Long-Term Service. Please follow the links above for more information.
The Annual World Refining Outlook 2012
We are pleased to announce that we are close to completing our latest Annual World Refining Outlook.
The refining business has suffered another turbulent year with a 2 mmb/d of actual or pending closures announced and a swathe of asset disposals, which have highlighted the extent to which this downturn is not only shifting the sector's international centre of gravity but also restructuring ownership in the mature markets.
This year's study not only covers our traditional, rigorous assessments of the future operating environment facing refiners, but also tries to make sense of the changing location and ownership patterns, and their impact on regional products balances.
Key issues addressed in this years' report include:
How long is the US likely to remain a major products exporter;
Are we near the end of European capacity closures or are there more to come;
How will delays to new Middle East plants affect the pressure on products trade flows;
How long is the Latin Americas shortfall likely to help keep US refiners afloat;
Will China emerge as a significant products exporter;
What is the likely impact of the unexpected growth in US shale liquids.
This years' report extends the forecast period for individual years through 2020 and projects oil demand, refining capacity, runs and output for 12 regions as well as products prices and margins. It is due for completion late December 2012.
FGE's New Long-Term Global Oil Service
FGE has restructured and enhanced its coverage of the mid/long term global oil market. This now comprises an interlinked suite of reports covering the mid-longer term forming an integrated, comprehensive series of research studies mapping out the likely developments in regional and global oil demand and supply, refining utilization and profitability as well as the implications for both crude oil and products trade.
The suite of reports covers:
Oil Demand and the Global Oil Price
The World Refining Outlook
Oil Production and Regional Crude Oil Trade
Regional Oil Products Balances and Products Trade
A key part of FGE's new Long-Term Oil Market Service, is the interactive support, integral to each of the individual reports.
Each of the reports is accompanied by one half-day presentation which is orientated towards a client's particular requirements which could include a focusing on the conclusions towards a particular sector of the business, providing tailor-made sensitivities or scenarios and including more detailed assessments of specific aspects of the study's coverage. Also included in the study support is access to the detailed data in spreadsheet form and PowerPoint presentation of the associated charts.
For more information on our new Long-Term Global Oil Service, please contact us at [email protected]
Global Oil Review
Oil Prices
Attempts in Doha last week to limit long-term global temperature increase to 2 °C look likely to fail. Last week, the Climate Change Conference in Doha came to an end. Looking at the fundamentals underlying the CO2 emissions, it seems obvious that the attempts to limit the long-term global temperature increase during this century to 2°C will fail. Officially, the propaganda is still targeting this figure. The United Nations says “it is achievable, but time is running out”.
Several significant background factors form a backdrop to these talks:
According to the IEA, worldwide energy-related CO2 emissions increased by 3.2% in 2011. Emissions had fallen in 2008-09, but only because of the economic contraction, then rebounded strongly thereafter.
Fossil-fuel subsidies in 2011 worldwide increased by $111 billion from 2010 to $523 billion in 2012.
According to the United Nations Environment Programme’s (UNEP) most recent analysis, it is likely that around 58 gigatonnes of GHG will be emitted worldwide by 2020, compared to some 50 gigatonnes today. However, GHG emissions need to be brought down to 44 gigatonnes or lower to limit the global warming to 2°C.
Carbon prices have just fallen to lowest level in years. In the middle of a sluggish economic recovery period, costly energy conservation is somewhat of a “luxury” while burning relatively cheap coal and oil to fire up economies is the first choice. While the debate in Doha was mainly a ping-pong game between “total emitters should reduce most” (i.e. China first) and “highest per capita emitters should reduce most” (i.e. industrialized countries first), carbon prices fell to the lowest levels for years. In Europe, carbon dropped to below $6 per tonne, while in California it is around $10 per tonne. Low prices degrade carbon trading schemes, which were considered to be the most important tools in capping emissions by encouraging a shift from dirty to clean fuels, to paper tigers.
Although CO2 is not only emitted from oil burning, there is a strong historical correlation between a country’s share of global oil demand and its share in worldwide CO2 emissions. Looking at our long-term oil demand forecasts, it becomes obvious that China will remain by far the highest emitter of CO2 over the next decades, with probably India becoming the second highest by around 2030. In fact, from some 1,200 coal-based power plants currently planned across the globe, 363 will be located in China, while 455 will be built in India. Already today, single sectors in these countries emit the same amount of CO2 as large countries elsewhere emit in total: cement production in China produces 820 million tonnes of CO2 per year, compared to total Germany CO2 emissions of 810 million tonnes.
More information and analysis forthcoming in our Long Term Oil Market Report.
ASIA
China’s refinery runs continued their recent resurgence in November, with the latest data indicating runs hitting a new high of 10.15 mmb/d. This is 9.9%, or 912 kb/d, higher y-on-y, and almost 700 kb/d over the previous high of 9.46 mmb/d seen in September. Over the past three months, Chinese refinery runs have averaged 9.68 mmb/d, higher than any monthly total seen before.
In Japan, nuclear power output remains limited to two reactors at Kansai Electric’s Ohi plant in Japan, with a combined capacity of 2.4 MWH, equivalent to about 60 kb/d of oil-fired generation. However, we expect the further restart of reactors after the Japanese elections, which are likely to see the entry of the more nuclear-friendly LDP government. Public sentiment against nuclear power is also seeing some signs of reverse, as households are hit by higher utility bills. Nevertheless, in the short term we still expect to see fuel oil burning reach some 600 kb/d in January or February, which is likely to boost the market for low-sulphur fuel oil grades.
Data for November showed Singapore’s bunker fuel sales down by 9.4% y-o-y to a nine-month low of 730 kb/d. Bunker sales have been depressed since the middle of the year, down by some 4.5% y-o-y over the past six months, underscoring the progressive decline in fuel oil prices and margins, which have recently been at 3-year lows. Nevertheless, there are signs that this is bottoming out, but a significant recovery may still be some months away.
LATIN AMERICA
With the seasonal peak in oil demand taking place in December, deficit could widen but will drop sharply back in January, before a partial recovery in February.
Gasoline in particular will reflect this, with a potential peak in December, whilst the gasoil shortfall is likely to remain below the recent high levels of October/November.
Although this import spike is mainly the result of seasonal demand, it is being supported by a weaker trend in refinery output and low crude runs for the whole region, which are unlikely to pick-up until February.
Refinery operating difficulties in Venezuela, which have led to capacity utilisation rates falling and the need to import gasoil and gasoline, are not expected to change significantly in the near term.
Middle East
Total product demand in the MEG-8 region rose in October by 6% y-o-y largely due to higher fuel oil consumption in the region.
Total product output from the MEG-8 countries remained unchanged y-o-y.
Total products imports into the MEG-8 region rose by 15% y-o-y on the back of higher middle distillate imports into MEG-8 countries.
Total product exports rose by 4% y-o-y due to higher gasoil and gasoline exports and despite lower naphtha and kerosene/jet fuel exports.
Average refinery utilization rates in the MEG-8 region dropped during October by three percentage-points y-o-y on the back of higher refining capacity y-o-y.
Global LNG Review
Americas/Europe:
Bulgaria has signed a 10-year contract for the supply of up to 2.9 bcm of pipeline natural gas from Russia’s state energy exporter, Gazprom. As part of the deal, Bulgaria will receive a 20% discount on the gas supplies. The contract, based on an oil-linked pricing mechanism, includes a renegotiation clause after the sixth year of operation as well as a ‘take-or-pay’ obligation for a percentage of the contractual volumes. On the same day of signing the supply contract, Gazprom and Bulgarian Energy Holding reached final investment decision (FID) on the construction of the Bulgarian section of the South Stream pipeline. Separately, Gazprom and its consortium partners made FID on the entire US$ 20.5 billion South Stream project, on which they began construction in early December.
Ukraine’s plans for the construction of its first LNG receiving terminal were marred with controversy after it was discovered that a representative from Gas Natural Fenosa who signed an investment deal for the terminal was not authorized to do so. The terminal, designed to have a capacity of 10 bcm/y (roughly 7.1 mmtpa), is a crucial part of the country’s plan to reduce its reliance on high-priced pipeline gas imports from Russia. The total project is estimated at US$ 1.1 billion and includes a US$ 145 million pipeline link from the terminal to the country’s national gas network. Ukraine plans to fund only about 7% of the total project costs, and expects the rest to come in the form of loans and investments from foreign companies.
In early December Gazprom completed its first LNG delivery to Japan via the Northern Sea Route (NSR). The delivery was made by the LNG tanker ‘Ob River,’ which was accompanied by two Russian nuclear powered icebreakers for the first section of the journey. The carrier loaded an LNG cargo from the Snøhvit LNG plant in Hammerfest, Norway, on November 7 and commenced its journey to the Tobata regasification terminal, in the southern Japanese prefecture of Fukuoka. This was the Ice Class 1A carrier’s second journey across the NSR – the first was in October when it conducted a test voyage from Japan to Europe with its tanks empty.
Asia Pacific Market
Japan’s Kansai Electric signed a Key Terms of Agreement with BP for the supply of 0.5 mmtpa of portfolio LNG over a 15-year period starting from the 2017-2018 fiscal year. The volumes will be delivered on an ex-ship basis and will be linked to the US Henry Hub natural gas price. This is the first deal by a Japanese company for portfolio LNG linked to the US Henry Hub natural gas price. Previously, Chubu Electric and Osaka Gas signed tolling agreements with the proposed Freeport LNG project for supplies linked to Henry Hub. However, deliveries are contingent on the project obtaining approval from the US Department of Energy (DOE) to export to countries with which the US does not have Free Trade Agreements (FTAs).
Egypt’s Citadel Capital has formed a joint venture (JV) with Qatari investors to import LNG into Egypt from mid-2013. Egypt, traditionally known as a pipeline gas and LNG exporter, has been suffering from a significant gas deficit of around 1-1.2 bcf/d. The JV, 51% owned by Qatari investors and investment bank QInvest, plans to build and own a floating storage and regasification unit (FSRU) on the Egyptian coast. The terminal will be able to receive LNG cargoes and pump regasified LNG into the Egyptian national gas grid.
In late November Singapore’s Energy Market Authority (EMA) called for proposals for a six month study looking at the feasibility of a large LNG terminal as well as smaller, satellite terminal. The study, which is expected to start in March 2013, will consider potential sites, pipeline network requirements and economic viability. Through the study the EMA would like to ascertain, among others, whether another LNG receiving terminal can meet Singapore’s projected future gas demand, and how a new terminal can figure in supply disruption situations.
Welcome to the November 2012 Newsletter. In addition to our usual features, we would like to draw your attention to our upcoming Multi-Client Study - The Annual World Refining Outlook 2012, as well as our new Long-Term Service. Please follow the links above for more information.
The Annual World Refining Outlook 2012
We are pleased to announce that we are close to completing our latest Annual World Refining Outlook.
The refining business has suffered another turbulent year with a 2 mmb/d of actual or pending closures announced and a swathe of asset disposals, which have highlighted the extent to which this downturn is not only shifting the sector's international centre of gravity but also restructuring ownership in the mature markets.
This year's study not only covers our traditional, rigorous assessments of the future operating environment facing refiners, but also tries to make sense of the changing location and ownership patterns, and their impact on regional products balances.
Key issues addressed in this years' report include:
How long is the US likely to remain a major products exporter;
Are we near the end of European capacity closures or are there more to come;
How will delays to new Middle East plants affect the pressure on products trade flows;
How long is the Latin Americas shortfall likely to help keep US refiners afloat;
Will China emerge as a significant products exporter;
What is the likely impact of the unexpected growth in US shale liquids.
This years' report extends the forecast period for individual years through 2020 and projects oil demand, refining capacity, runs and output for 12 regions as well as products prices and margins. It is due for completion in December 2012.
FGE's New Long-Term Global Oil Service
FGE has restructured and enhanced its coverage of the mid/long term global oil market. This now comprises an interlinked suite of reports covering the mid-longer term forming an integrated, comprehensive series of research studies mapping out the likely developments in regional and global oil demand and supply, refining utilization and profitability as well as the implications for both crude oil and products trade.
The suite of reports covers:
Oil Demand and the Global Oil Price
The World Refining Outlook
Oil Production and Regional Crude Oil Trade
Regional Oil Products Balances and Products Trade
A key part of FGE's new Long-Term Oil Market Service, is the interactive support, integral to each of the individual reports.
Each of the reports is accompanied by one half-day presentation which is orientated towards a client's particular requirements which could include a focusing on the conclusions towards a particular sector of the business, providing tailor-made sensitivities or scenarios and including more detailed assessments of specific aspects of the study's coverage. Also included in the study support is access to the detailed data in spreadsheet form and PowerPoint presentation of the associated charts.
For more information on our new Long-Term Global Oil Service, please contact us at [email protected]
Global Oil Review
Oil Prices
Med refinery runs over the last three months have been up by around 270 kb/d year-on-year. Refinery runs in the European Mediterranean (excluding Turkey, which reports later than other countries), have been just over 4 mmb/d in the last three months, up a huge 270 kb/d compared to last year, despite 500 kb/d of closures since the start of 2011. The swing in crude runs of 620 kb/d since April/May is unusual in Southern Europe, where there is not a strong seasonal peak in summer. Most of this recent surge has come from Spain (+270 kb/d) and Italy (+240 kb/d). Both of these countries were using their refineries at over 86% of capacity in September, a 10 percentage-point rise from earlier this year.
Spain became a net exporter (of a sizable 50 kb/d) for the first time in July, compared to net imports of 150 kb/d a year earlier. The 270 kb/d jump in runs since April is more than simply the effect of the 100 kb/d Cartagena expansion (which included a 48 kb/d hydrocracker), and is also a reaction to higher margins, bringing back at least 100 kb/d of idled capacity. Crude runs will be lower this month due to 190 kb/d of maintenance at Cepsa’s Huelva and Gibraltar sites, but with no further downtime scheduled from December, net exports are likely to be the new norm whenever margins are favorable.
Italy is normally a net exporter to the tune of 130-200 kb/d, and July was at the top of that range (gross exports were over 250 kb/d for only the sixth month since 2007). However, the crude run levels that allowed these exports are not expected to be reached again in Italy, where Q4 runs are likely to be fairly flat with 2011 levels. The drop in October is due to the capacity reductions at Rome and Trecate (totaling around 140 kb/d), and then a further fall should occur in January when the permanent closure of Porto Marghera and the 6-month idling of Falconara take place, as well as the scheduled partial maintenance of part of ISAB refinery for three weeks (from late January).
A new hydrocracker will come online at the Sines refinery in Portugal during December. Portugal became a net exporter of 20 kb/d in June, from its more normal position of imports of the same scale. This is a sign of things to come, as a hydrocracker is about to be completed at the main refinery, Sines (which appears to have had some partial downtime in September and through October, with the new unit expected to be online in December). Last year configuration changes at Matasinos increased the VGO yield, which is currently being processed on-site but will now partly be transferred to Sines for hydrocracking.
Greece had a net gasoil surplus of 75 kb/d over May to July (despite the 100 kb/d Elefsis being offline for half this period), more than twice the exports of the year earlier and a new record for the summer period. Part of this is down to higher margins, but also the new hydrocracker and coker just completed at Elefsis. With no downtime scheduled for 2013 so far, and demand still weak, we are likely to see even higher exports next summer if margins allow high runs. However, the strong seasonality in Greece means the next 4 months are likely to see trade being more balanced, albeit it still higher than last year due to the new upgrade.
France and Turkey are the key recipients of extra volumes from the four countries. The two Med countries not covered here (France and Turkey) are key recipients of the additional volumes coming out of the four countries, as capacity reductions in the former, and demand growth in the latter have increased net gasoil import requirements by around 50 kb/d and 30 kb/d respectively.
Excluding French data however, the European Mediterranean region became a net exporter of gasoil in July, the first time we have seen this occur for the month. The previous four years had seen July net imports of 110-340 kb/d, so it is clear that, as in 2012, future combinations of high refinery margins (and therefore throughput rates) with weak demand will potentially have a major impact on the dynamics of gasoil trade in Europe. Our upcoming edition of the Annual World Refining Outlook (to be published in December), will address the mid-term outlook in more depth.
ASIA
China’s refinery runs remained strong in October at 9.43 mmb/d. This was only slightly lower from the month before, which saw runs hit a new record high of 9.46 mmb/d. Compared to a year before, October’s total was some 7.6% or 66 kb/d higher. The past two months have seen Chinese refinery runs rebound after a relatively flat period through the early and middle part of 2012, as runs averaged less than 9.0 mmb/d in the 6 months prior to September. During this period, the major state oil companies drew down on product inventories, while at the same time adding to crude stocks. Nevertheless, if Chinese runs were to hold at 9.4 mmb/d through November and December, this would translate into an average of about 9.2 mmb/d. This would represent growth of 2.6% or 230 kb/d for the full year, a clear slowdown from the 4.9% growth seen in 2011. We think that actual underlying demand is probably tracking refinery runs to a similar degree, with the slowdown in industrial growth resulting in sluggish diesel demand since the beginning of the year.
Prices and margins for fuel oil have seen a significant weakening over the past month. On the Singapore market, cracks for the 180 cst and 380 cst grade recently at the largest discount relative to Dubai in 18 months. The Swaps markets indicate a deepening prompt-to-2nd month contango, as sentiment is increasingly bearish in the face of weak bunker demand and continued arbitrage supplies heading eastwards. On the demand side, bunker demand has been weak with Singapore bunker sales down by 4% y-on-y during 3Q 2012, while supply is expected to rise as refinery runs begin to increase towards the end of the year. We expect that from here fuel oil cracks are more likely to recover than deteriorate further, but seem likely to remain weak for some period of time.
Data for October showed Japan’s 10 major utilities consumed a total of 460 kb/d of oil for electricity generation (about 220 kb/d of fuel oil and 240 kb/d of crude). This was about 18% lower from the summer peak in August, but still some 50 kb/d higher y-o-y due to fewer nuclear reactors in operation. Nuclear power output remains limited to two operating reactors at Ohi plant, accounting for just 2.5% of total electricity supply during the month. There seems no political momentum to push through further nuclear restarts before the winter. As a result we expect that oil burning for electricity generation is likely to peak towards the end of winter, around February. Utilities will seek to first maximize use of coal and LNG, but supply and capacity constraints could push oil burning up to between 600-700 kb/d. Last winter, oil burning peaked at some 760 kb/d in February as nuclear reactors were progressively shut.
LATIN AMERICA
Demand seasonality is set to create wide fluctuations in imports requirements over the coming months, with a sharp peak in December.
We still expect demand to remain buoyant over the coming months.
Brazil's crude throughput reached a record high in August.
Outages at Mexico's refineries and seasonal spike in consumption to boost imports into the country.
Plant upgrades in LatAm countries have resulted in a steep increase in petroleum coke output.
Global LNG Review
Americas/Europe:
Pieridae Energy Canada announced in late October that it plans to develop an LNG export facility in Goldboro, Nova Scotia. The facility will feature 5 mmtpa of export capacity and an on-site storage capacity of 420,000 cbm of LNG. The company plans to complete the preliminary environmental, engineering and stakeholder engagement work in time for construction to begin in 2014. First LNG is expected by late 2018. The site was chosen because of its proximity to existing natural gas infrastructure – it is adjacent to the Maritimes and Northeast Pipeline (M&NE), which was conceived to deliver natural gas from the ExxonMobil-operated Sable offshore gas project to Canada and then on to the northeastern US. The M&NE pipeline also accommodates gas from the Canaport LNG import terminal in New Brunswick, whereas gas from the Encana-operated Deep Panuke project, which is expected to start production later this year, will also come onshore at Goldboro.
As part of a strategic move to reduce its dependence on imported Russian gas, Poland secured the final sums required to start construction on its first LNG receiving terminal. The 5 bcm/y (3.6 mmtpa) facility, to be located at Swinoujscie, on the coast of the Baltic Sea, is ambitiously scheduled for completion in 2014. The total investment of €250 million (US$324 million) was secured through a 12-year loan from the European Bank for Reconstruction and Development (EBRD), along with funding from the European Union (EU), the European Investment Bank, and Poland’s domestic gas grid-operator, Gaz-System. Poland currently receives more than half of its gas requirement from Russia’s state gas exporter, Gazprom, primarily through the 2,000-km Yamal-Europe trunkline that passes through Belarus.
In a move to emphasize its relevance in the fast-changing LNG landscape, Gazprom has announced that it will invest more than US$38 billion to develop the Chayanda deposit, in eastern Siberia, and to build a pipeline from the field to the Pacific port of Vladivostok. Of the total amount, approximately US$24 billion will be invested in the 2,000 mile pipeline, while the remaining US$14 billion will be invested in the development of the Chayanda deposit, which is expected to have close to 1.3 tcm of gas resources. The company expects the pipeline to be completed by 2017, when it will connect the field with Gazprom’s proposed Vladivostok LNG plant. The plant, which the company plans to build in partnership with Japanese firms, is anticipated to start production by 2020, with a capacity between 10 and 20 mmtpa.
Asia Pacific Market
Chubu Electric, Japan’s third largest power utility, has signed a sale and purchase agreement (SPA) with Qatargas. Under the terms of the 15-year agreement, Chubu Electric will purchase approximately 1 million metric tons per annum (mmtpa) from 2013 to 2017, and 0.7 mmtpa from 2018 to 2028. These volumes will be sourced from the Qatargas-3 project on a delivered ex-ship (DES) basis. Chubu Electric’s decision to acquire more Qatari LNG may be a response to growing uncertainty about the fate of the 3.6 GW Hamaoka nuclear power plant in the city of Omaezaki, which was shuttered a couple of months after the Tohoku Pacific earthquake and associated tsunami of March 2011. The nuclear facility’s long-term prospects remain fraught with uncertainty because of its location on the projected epicenter area of a long-predicted massive earthquake that could devastate the Tokai region of Japan.
Korea Hydro and Nuclear Power Co. Ltd (KHNP), a full subsidiary of state-owned utility Korea Electric Power Corp (KEPCO), shut two nuclear units after uncovering a scandal involving parts with forged safety certifications. Though the Ministry of Knowledge Economy (MKE) has stressed that the parts involved are non-crucial for the safe operation of the units, it is wary of taking any chances in the aftermath of Japan’s Fukushima incident. The two units concerned are Younggwang’s unit #5 and #6, each with generating capacity of 1,000 MW, located in the south west. In addition to the two units, at the time of writing, there are another five units that are undergoing maintenance, closing out a total of 6.6 GW of nuclear capacity in the North Asian country. South Korea currently uses coal as base load generation fuel but is in the transitional stage of shifting to nuclear. The country has 23 nuclear reactors with a total capacity of approximately 21 GW, supplying close to 34% of its power demand.
After initially submitting a request for assessment one year ago, Bonaparte LNG received environmental approval from the Australian Environment Minister. Bonaparte LNG will monetize the Petrel, Tern and Frigate fields in the Bonaparte Basin utilizing a 2 to 2.5-mmtpa capacity floating liquefaction (FLNG) vessel to process the gas. The project’s environmental impacts were assessed at the national level as the Petrel field, where the FLNG will be located, is in Commonwealth waters, approximately 250-km from Darwin. The 15 environmental requirements addressed the FLNG’s management of impacts to migratory birds and cetaceans, including a scientific monitoring program, and pollution contingency plans. Further management plans must be submitted for approval of the operational phase of the project.
