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ARA Oil Product Stocks Drop (Week 45 – 2022)

Independently-held oil product inventories at the Amsterdam-Rotterdam-Antwerp (ARA) hub dropped by around 1pc in the week to 9 November, according to consultancy Insights Global.

The decline was driven by a fall in fuel oil stocks, with fuel oil cargoes departing the hub for the UK, Germany and France.

This was partially offset by a rise in naphtha inventories, underpinned by continued lacklustre demand from the petrochemical sector and subsequent minimal interest in moving product up the Rhine into Germany.

No naphtha cargoes departed ARA over the past week, but deliveries arrived from Russia, Norway, Portugal and Algeria.

Gasoline stocks ticked up on the week amid a closed arbitrage for transatlantic shipments, while firm demand pushed jet fuel inventories down on the week to settle.

The drop in jet fuel stocks was more to do with robust demand than refiners opting to blend jet in the diesel pool, according to Insights Global.

Reporter: Georgina McCartney

South Africa, Indonesia Get $1 Billion to Close Coal Plants

South Africa and Indonesia will receive a combined $1 billion from the Climate Investment Funds to replace some of their coal-fired power plants with renewable energy facilities, part of global efforts to cut planet-warming emissions.

The allocation of $500 million each to the coal-dependent countries will come in the form of “concessional,” or low cost, finance, the World Bank-affiliated fund said in a statement Thursday. The money will come from the CIF’s Accelerating Coal Transition investment program.

In South Africa, the money will be used to close coal-fired electricity stations and replace them with renewable energy plants and battery storage systems, it said.

In Indonesia, CIF will work with state power provider PT Perusahaan Listrik Negara and private companies to accelerate the closure of 2,000 megawatts of coal-fired generation in five to 10 years and explore how that capacity can be replaced.

South Africa is the world’s 13th-biggest producer of greenhouse gases, with 45% of its annual 452 million tons of emissions coming from electricity generation. Indonesia is the 10th-biggest emitter. 

Almost all of South Africa’s energy is produced from coal by troubled state power company Eskom Holdings SOC Ltd. and the country suffers from regular blackouts.

“Over the next eight years, South Africa needs $60 billion in investments to effect the transition” away from coal, Barbara Creecy, South Africa’s environment minister, said. 

In South Africa alone, the closures funded by the deal will prevent the emission of 71 million tons of carbon dioxide equivalent, the same as taking 14 million gasoline-fueled cars off the road for a year, the CIF said.

The money allocated there is part of a $2.6 billion package being mobilized from public and private sources by the government to help pay for the clean energy transition, it added.

South Africa is also negotiating $8.5 billion in climate finance as part of an agreement with the US, UK, Germany, France and the European Union known as the Just Energy Transition Partnership.

Bloomberg by Antony Sguazzin, November 3, 2022

Rise in Fuel Oil Stocks Pushes up ARA Inventories (Week 44 – 2022)

Independently-held oil product inventories in the Amsterdam-Rotterdam-Antwerp (ARA) area increased in the week to 2 November, driven by an increase in fuel oil stocks.

Fuel oil inventories increased by almost a fifth. Fuel oil demand has been weak in Europe, with very low-sulphur fuel oil pricing at a discount to Brent for the first time since June 2020, last week.

A suezmax carrying an undisclosed volume of fuel oil was due to depart ARA today. In the week to 2 November, cargoes carrying fuel oil arrived at ARA from Bahrain, Germany. Poland and Saudi Arabia.

Gasoil stocks were down on the week. Less Russian-origin gasoil is making its way into ARA, and higher imports from the Arab Gulf have worked to fill the gap left by Russian sources, although stocks remain lower on the week.

Diesel demand remains strong, with firm backwardation weighing on any incentive to store the road fuel, with refiners opting to sell now. Gasoil cargoes have departed the ARA region for Germany, Norway and the UK.

Gasoline stocks also fell in the week to 2 November. But gasoline stocks could start to recover, with French refinery capacity coming back online after several weeks of industrial action, which left French refining capacity offline.

Naphtha inventories also dropped on the week, with the product being directed into the gasoline blending pool. Demand from the petrochemical sector continues to be weaker, with natural gas prices disincentivising manufacturers from ramping up production.

Reporter: Georgina McCartney

World Is In Its ‘First Truly Global Energy Crisis’ – IEA’s Birol

Tightening markets for liquefied natural gas (LNG) worldwide and major oil producers cutting supply have put the world in the middle of “the first truly global energy crisis”, the head of the International Energy Agency (IEA) said on Tuesday.

Rising imports of LNG to Europe amid the Ukraine crisis and a potential rebound in Chinese appetite for the fuel will tighten the market as only 20 billion cubic meters of new LNG capacity will come to market next year, IEA Executive Director Fatih Birol said during the Singapore International Energy Week.

At the same time the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to cut 2 million barrels per day (bpd) of output is a “risky” decision as the IEA sees global oil demand growth of close to 2 million bpd this year, Birol said.

“(It is) especially risky as several economies around the world are on the brink of a recession, if that we are talking about the global recession…I found this decision really unfortunate,” he said.

Soaring global prices across a number of energy sources, including oil, natural gas and coal, are hammering consumers at the same time they are already dealing with rising food and services inflation. The high prices and possibility of rationing are potentially hazardous to European consumers as they prepare to enter the Northern Hemisphere winter.

Europe may make it through this winter, though somewhat battered, if the weather remains mild, Birol said.

“Unless we will have an extremely cold and long winter, unless there will be any surprises in terms of what we have seen, for example Nordstream pipeline explosion, Europe should go through this winter with some economic and social bruises,” he added.

For oil, consumption is expected to grow by 1.7 million bpd in 2023 so the world will still need Russian oil to meet demand, Birol said.

G7 nations have proposed a mechanism that would allow emerging nations to buy Russian oil but at lower prices to cap Moscow’s revenues in the wake of the Ukraine war.

Birol said the scheme still has many details to iron out and will require the buy-in of major oil importing nations.

A U.S. Treasury official told Reuters last week that it is not unreasonable to believe that up to 80% to 90% of Russian oil will continue to flow outside the price cap mechanism if Moscow seeks to flout it.

“I think this is good because the world still needs Russian oil to flow into the market for now. An 80%-90% is good and encouraging level in order to meet the demand,” Birol said.

While there is still a huge volume of strategic oil reserves that can be tapped during a supply disruption, another release is not currently on the agenda, he added.

ENERGY SECURITY DRIVES RENEWABLES GROWTH

The energy crisis could be a turning point for accelerating clean sources and for forming a sustainable and secured energy system, Birol said.

“Energy security is the number one driver (of the energy transition),” said Birol, as countries see energy technologies and renewables as a solution.

The IEA has revised up the forecast of renewable power capacity growth in 2022 to a 20% year-on-year increase from 8% previously, with close to 400 gigawatts of renewable capacity being added this year.

Many countries in Europe and elsewhere are accelerating the installation of renewable capacity by cutting the permitting and licensing processes to replace the Russian gas, Birol said.

Reuters by FLorence Tan, October 31, 2022

Germany’s LNG Import Project Plans

German is acquiring liquefied natural gas (LNG) terminals as part of its efforts to diversify away from Russian gas.

It leased four floating storage and regasification units (FSRUs) in May, capable of importing at least 5 billion cubic metres (bcm) of seaborne gas per year each. Two of them are due to become available this year.

Wilhelmshaven will become the first LNG hub and Brunsbuettel the second, to be developed by Uniper UN01.DE and RWE RWEG.DE, respectively.

The Elbe river port of Stade and Lubmin on the Baltic Sea will also receive an FSRU each.

Germany has also now formalised chartering of a fifth floating LNG ship for Wilhelmshaven, the economy ministry said on Oct. 25 for the first quarter of 2023.

WILHELMSHAVEN

Uniper in August received approval for the start of construction of an FSRU facility.

Later, facilities to import ammonia and set up an electrolysis plant for turning ammonia into clean hydrogen will be set up at the location.

BRUNSBUETTEL

An FSRU at Brunsbuettel is expected to deliver gas from the end of 2022 or early in 2023 and serve as a forerunner of a fixed LNG facility.

Dutch gas network operator Gasunie, which has a 40% stake in the FSRU project, is planning two related gas pipelines.

State bank KfW (KFW.UL) and RWE are stakeholders in the fixed facility. Shell (SHEL.L) has committed itself to some guaranteed purchases.

STADE

Project operator Hanseatic Energy Hub (HEH), due to receive an FSRU to go into operation from the end of next year, previously launched invitations to market participants to book regasification capacity at a planned land-based hub.

This could materialise in 2026.

It is backed by gas network company Fluxys (FLUX.BR), investment firm Partners Group (PGHN.S), logistics group Buss and chemicals company Dow (DOW.N).

EnBW (EBKG.DE) has committed itself as a buyer.

Applications for the terminal and port have been submitted. A final investment decision is expected next year.

LUBMIN

The operators of the state-leased FSRU destined for Lubmin expect it to be operational at the end of 2023.

Economy Minister Robert Habeck paid a visit on Sept. 19 and said the government would try to source LNG from the United Arab Emirates, among other possible origins.

Reuters by Vera Ecket, October 31, 2022

UAE Says OPEC+ Output Cut Was Correct Decision, No Politics Behind It

The United Arab Emirates believes that OPEC+ made the correct technical choice when it agreed to cut production and the unanimous decision had nothing to do with politics, energy minister Suhail al-Mazrouei said on Tuesday.

His comments came after several members of the oil producers group endorsed the steep cut to output targets agreed this month after the White House accused Saudi Arabia of coercing some other nations into supporting the move, a charge Riyadh denies.

“We fully trust and believe in the technical credibility of OPEC and OPEC+. We always meet and discuss the facts based on our analysis of the market and how we can all contribute to taking the right measures to balance the supply and demand, and that decision is always taken unanimously and the last decision was taken on the same logic,” Mazrouei told reporters.

“I would like to reiterate that there is nothing political about any decision we take in OPEC.”

Coming ahead of November mid-term elections in the United States, the move drew sharp criticism from the Biden administration which said there would be “consequences” for U.S. ties with Riyadh.

The United States has stressed that the cut would boost Russia’s foreign earnings and blunt the effectiveness of sanctions imposed over its invasion of Ukraine.

Mazrouei said the OPEC+ decision stabilised prices, rather than increasing them, adding that it was lack of stability that was driving investors away.

“Prices have been stabilising and actually if you look at October 2021 before anything — before all the crises, the geopolitical ones — you would see we are in the same price environment,” the Emirati minister said.

He voiced concern that many oil producers had lost capacity due to lack of investment.

Asked if the UAE plans to ask for a higher baseline as it works to build its own capacity to 5 million barrels per day by 2030, Mazrouei said there is a mechanism for any country to raise that request.

By Reuters, October 28, 2022

Depleted Naphtha Stocks Drive Drop in ARA Inventories (Week 43 – 2022)

Independently-held oil product inventories in the Amsterdam-Rotterdam-Antwerp (ARA) area faltered in the week to 26 October.

Naphtha stocks dropped most notably, according to the latest data from consultancy Insights Global. Japanese demand has depleted European supplies, with more than half the decline in stocks probably resulting from one Mizushima-bound shipment.

Nord Supreme departed Antwerp on 23 October, carrying naphtha and due to unload in Japan on 1 December, according to data from Vortexa.

Jet fuel stocks also dropped. With firm gasoil cracks, jet fuel is probably being blended into the diesel pool. Diesel cargoes of restricted origin — excluding Russian sources — averaged against North Sea Dated crude in the week to 26 October, incentivising refiners to focus on diesel output. Demand for jet fuel in aviation has also pressured ARA stocks.

Fuel oil stocks dropped on the week, with cargoes departing ARA for Denmark, Estonia, Germany, Poland, Ireland and the Caribbean. Departures have outpaced arrivals, with inventories falling by.

Gasoline stocks actually increased. Inventories of the road fuel probably rose with the conclusion of some refinery strikes in France, which in turn is working to ease tightness in the spot market for finished oil products.

Reporter: Georgina McCartney

Exxon to Partner With CF Industries to Capture Carbon and Make ‘Blue’ Ammonia

Houston-based Exxon Mobil and fertilizer-maker CF Industries are partnering to make “blue” ammonia, a product the companies said could play an important role in decarbonizing industrial facilities such as refineries, petrochemical plants and power generators.

CF Industries, headquartered in suburban Chicago, said it will develop a $200 million carbon capture unit at its nitrogen facility south of Baton Rouge. Exxon will then, through a deal with pipeline company EnLink, move the carbon dioxide to Exxon’s geologic storage facility in Western Louisiana. The project is expected to be operational in early 2025.

Exxon said carbon capture projects are gaining new momentum because of incentives included in the Inflation Reduction Act signed into law in August. The oil major aims to make a name for itself in the carbon capture and management space, offering the services to facilities in Texas and Louisiana that are looking to slash their emissions.

“Exxon Mobil is providing a critical and scalable solution to reduce CO2 emissions,” Exxon’s Low Carbon Solutions President Dan Ammann said, “and we’re ready to offer the same service to other large industrial customers in the state of Louisiana and around the world.”

Through its new partnership with Exxon, CF Industries will capture 2 million metric tons of carbon dioxide from its Donaldsonville, La., facility that would otherwise be released into the air around its facility, the company said. Exxon says the carbon reduction is equal to replacing 700,000 gasoline-powered cars with electric vehicles.

Capturing the carbon created in its manufacturing process will enable CF Industries to market nearly 2 million metric tons per year of “blue” ammonia, the term used for products made with carbon capture technology that catches and stashes away emissions made during manufacturing.

Carbon-neutral ammonia, in particular, could play an important role in decarbonizing industrial facilities such as refineries, petrochemical facilities and power generation plants, the companies said. It can be used both as a fuel itself or as a way to make hydrogen fuels.

“CF Industries will be first-to-market with a significant volume of blue ammonia,” said CF Industries CEO Tony Will. “This will enable us to supply this low-carbon energy source to hard-to-abate industries that increasingly view it as critical to their own decarbonization goals.”

By Houston, September 20, 2022

Saudi Arabia Says OPEC+ Oil Cut ‘Purely Economic’

Saudi Arabia rejected as “not based on facts” statements criticising the kingdom after an OPEC+ decision last week to cut its oil production target despite U.S. objections, saying it serves the interests of both consumers and producers.

The OPEC+ decision was adopted through consensus, took into account the balance of supply and demand and was aimed at curbing market volatility, the Saudi foreign ministry said in a statement on Thursday.

President Joe Biden pledged earlier this week that “there will be consequences” for U.S. relations with Saudi Arabia after OPEC+ said last week it would cut its oil production target by 2 million barrels per day. read more read more

OPEC+, the producer group comprising the Organization of the Petroleum Exporting Countries (OPEC) plus allies including Russia, announced its new production target after weeks of lobbying by U.S. officials against such a move.

The United States accused Saudi Arabia of kowtowing to Moscow, which objects to a Western cap on the price of Russian oil in response to its invasion of Ukraine.

The Saudi foreign ministry statement, quoting an unnamed official, stressed the “purely economic context” of the oil cut.

The statement also referred to consultations with the United States in which it was asked to delay the cuts by a month.

The OPEC+ move has raised worries in Washington about the possibility of higher gasoline prices right before the November U.S. midterm elections, with Biden’s Democrats trying to retain their control of the House of Representatives and Senate.

“The Kingdom clarified through its continuous consultations with the U.S. administration that all economic analyses indicate that postponing the OPEC+ decision for a month, according to what has been suggested would have had negative economic consequences,” it said.

Saudi Arabia also said it views its relationship with the United States as a “strategic one” and stressed the importance of mutual respect.

Reuters by Ahmad Elhamy, September 27, 2022

Chevron Sees LNG Growth Opportunity In Europe On Strong Demand- Top Executive

U.S. oil major Chevron Corp (CVX.N) expects high European prices for liquefied natural gas (LNG) to attract a majority of U.S. LNG exports in the short term, a top executive told Reuters on Wednesday.

Europe is determined to wean itself off Russian gas imports following its invasion of Ukraine, a move that has thrown open the door to U.S. suppliers. Its commitment to building import terminals and regasification facilities shows the region’s demand for U.S. exports could last.

“We have seen a big uptick in demand from European customers so we are adjusting to that,” said Colin Parfitt, who oversees the company’s shipping, pipeline, supply and trading operations. Europe will not “” he said during an interview in London.

Chevron is a large natural gas producer globally, last year pumping more than 7.5 billion cubic feet per day with more than half of its gas production in the United States and Australia.

The major also produces LNG in Australia and Angola, and recently carved out a foothold in U.S. LNG through purchase agreements with LNG producers Cheniere Energy Inc (LNG.A) and closely-held Venture Global LNG. read more

The United States is the world’s top gas producer with output near 99 billion cubic feet per day (bcfd), but as consumption is lower, at about 89 bcfd,  there is room for rising exports with expanding production.

“Gas demand in the United States is roughly flat,” said Parfitt. “What’s growing in the United States is demand for exports,” he said.

Parfitt said Chevron’s oil and gas production in the Permian Basin, the top U.S. oilfield, increased 7% in the first half of 2022 from the same period a year ago, and is expected to grow by 15% in the full year.

Chevron is also studying options to “commercialise” more gas from an Eastern Mediterranean field, off the coast of Israel, either through existing pipelines or some LNG alternatives, he said.

By Reuters, October 21, 2022