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Oil prices rose on Friday morning, fueled by strong U.S. fuel consumption data, but held back by continued uncertainty about the OPEC+ deal.

Seven straight weeks of inventory draws didn’t go unnoticed, and according to the EIA, U.S. gasoline demand rose by 870,000 bpd last week as summer driving season heats up. U.S. gasoline consumption figures reached their highest level since 2019, and yesterday’s crude inventory report helped oil prices back in the black.

Vienna Stays Silent Amid OPEC+ Impasse. While the Joint Ministerial Monitoring Committee (JMMC) of OPEC+ still has to decide on a new official meeting, behind the scenes, high-placed Russian and U.S. officials are said to have talks to convince both camps of a reasonable output hike. 

Upside For Oil Prices Limited Without OPEC+ Agreement. Despite the strong demand fundamentals in the U.S., markets continue to gauge the impact of the discord within the OPEC+ alliance. Reuters quoted Stephen Brennock of oil broker PVM as saying: “Clearly, U.S. oil markets are tight. However … the only way to prevent further losses is for the threat of an OPEC+ price war to be contained,” he added.

New Full-Blown Oil Price War Seems Unlikely. As we mentioned in Tuesday’s newsletter, the risk of a new 2020-style price war is low. The OPEC+ group as a whole is currently reaping the benefits of a much tighter oil market and it’s in no one’s interest to destroy the current price environment. According to Rystad Energy’s Louise Dickson: ‘’It is in the interest of the group to provide some leniency to the UAE and other supply hawks to produce a bit more within the framework of the deal instead of triggering a free for all supply regime of chaos.’’

China’s CNOOC Looks To Exploit Large Ultra-Deepwater Gas Field. CNOOC’s recent success in the South China Sea has been an important step for the Asian giant. In late June, the company started producing gas from its ultra-deepwater Lingshui 17-2 prospect, a deposit with proven reserves of around 100 billion cubic meters, with some wells at a depth of more than 4000 meters below the seabed. According to CNOOC, full operational capacity will be reached as of 2024 at 3 billion cubic meters per year, representing about 1% of China’s current gas demand.

France Calls For Global Carbon Price Floor. At a G20 meeting with his counterparts, French Finance Minister Bruno LeMaire said that the world needs a carbon price floor in order to efficiently tackle carbon emissions. LeMaire said that while countries cannot come to agree to a ‘’unique carbon price’’, a ‘’global floor could be a good starting point’’.

Japanese Oil Company Japex May Pull Out Of Canadian Oil Sands Project. Japan’s state-backed Japex is considering selling its 75% stake in the Hangingstone project according to Reuters. The Japanese company said that it would either consider selling its entire stake in the 20,000 bpd project or cutting production costs to improve the profitability of the project.

Soaring U.S. Economy Drives Boom In Coal Production. U.S. domestic coal production is set to increase by 15% this year compared to 2020. According to the EIA, coal output is set to rise to 617 million short tons this year, some 78 short tons more than last year, because of higher power demand and rising natural gas prices. The production boom, however, is likely to be short-lived as the agency expects production volumes to fall slightly in 2022.

Almost Half Of Oil & Gas Emissions Could Be Cut At No Cost. Analysis from the IEA Methane Tracker shows as much as 40% of current methane emissions could be avoided at no net cost. So what’s the magic? The IEA suggests governments and producers focus on cutting methane emissions by replacing pumps, valves, and compressors. CBSNews quotes the IEA’s Christophe McGlade as saying: “Natural gas is essentially just methane, and in many cases, if you can avoid that methane leak, you can sell that gas for profit,”

Japan Remains Committed To Oil & Gas. In an interview with S&P Global, Japan’s Ministry of Economy, Trade and Industry (METI) confirms that it will continue to pursue oil and gas development. Commenting on the IEA’s net-zero 2050 roadmap, METI Director of petroleum and natural gas Takeshi Soda said that “While the IEA says it is only one pathway, Japan does not intend to refrain from upstream developments based on that,”, he went on to say that “it remains extremely uncertain whether the IEA’s net-zero 2050 will be realized.”.

India’s New Oil Minister To Focus On Boosting Oil & Gas Production. Hardeep Singh Puri, India’s new Petroleum Minister looks to cut India’s mounting energy import bill by boosting domestic hydrocarbon production. Puri sees a big role for natural gas as India looks to transform itself into a $5 trillion economy. The fast-growing Asian economy is grappling with rising crude prices and falling oil production from its aging domestic oilfields.

EIA: U.S. Refining Capacity At Six-Year Low. As a result of refinery closures in 2020, total U.S. refining capacity has fallen to 18.1 million bpd at the start of 2021. EIA’s Refinery Capacity Report states that at the beginning of the year, 129 sites were operating or idle versus 135 at the beginning of last year.

Texas Oilfield Services Struggle To Find Employees. After having laid off more than 100,000 employees in 2020, the oil industry is once again hiring, and Texas oilfield services companies now report that they are struggling to find new hands. In order to contract drivers, derrickmen, floor hands, and supervisors, companies are now even offering startup bonuses as high as $20,000

OilPrice, by Tom Kool, July 15, 2021

Plant would be the first of its kind in Canada.

The company that owns the Prince George Refinery is looking to develop a plant on the refinery site to convert vegetable oils, used cooking oil and animal fats into millions of litres of renewable diesel per year.

Calgary-based Tidewater Midstream and Infrastructure Ltd. Is seeking city council’s approval to rezone part of the refinery site on PG Pulpmill Road to allow the construction of the plant. A project summery provided to city council by the company said Tidewater hopes to begin construction as early as this month and have the facility operational in two years or less.

Once complete, the plant is expected to produce 150 million litres of renewable diesel per year – nearly 25 per cent of the province’s target to produce 650 million litres of renewable fuel in B.C. by 2030.

“Renewable diesel differs from bio diesel in that it lacks the oxygen that makes bio diesel prone to separation and unsuitable for cold temperatures without blending; renewable diesel does not require blending with traditional diesel to be utilized, and is, therefore not subject to blending limitations,” Tidewater’s report said. “Once in operation, the Prince George renewable diesel facility is estimated to have a carbon intensity (CI) rating of 10-20 g CO2eq/MJ, which yields an ~80-90% reduction in greenhouse gas (GHG) emissions based on various viable feedstocks.”

Tidewater says its proprietary process produces renewable diesel that meets all the specifications for diesel in Canada and the U.S. While the technology has been commercialized in Europe, the U.S. and Asia, the Prince George Refinery project would be the first in Canada.

The project would use much of the current infrastructure of the Prince George Refinery, however the project will require the installation of a small boiler, several heaters and six additional storage tanks on the site.

“The gas fired heaters and the small boiler will utilize modern burner technology to minimize combustion emissions,” Tidewater’s report said. “The reformer gas fired heater will be equipped with a Selective Catalytic Reduction (SCR) unit to minimize emissions. SCR is a process capable of abating emissions of nitrogen oxides (NOX) to extremely low levels by utilizing an ammonia catalyst to convert the nitrogen oxides to naturally occurring nitrogen and water.”

A “minimal increase in emissions” were expected as a result of the project.

The rezoning necessary for the project are going before city council on Monday night for first and second reading. Public consultation and a public hearing will be required before council considers final approval of the rezoning.

Tidewater purchased the Prince George Refinery from Husky Energy in 2019.

PrinceGeorgeCitizen, by Arthur William, July 16, 2021

An unnamed oil trader will build the 25,000 barrel per day unit, which will be operated by Brooge’s subsidiary BPGIC

Fujairah-based Brooge Energy has signed an agreement to develop a 25,000 barrel per day fuel refinery with an oil trading company.

Nasdaq-listed Brooge did not disclose the name of the trading company, which will sublet the site and foot the full cost of constructing the refinery, it said.

Brooge will assume responsibility for the operations and will earn revenue from tolling fees on a take-or-pay basis. The tolling contract with the oil trader is valid for 20 years.

“The modular refinery will be focused on producing very low sulphur fuel oil and will be fully compliant with the new IMO [International Maritime Organisation] 2020 very low sulphur rule,” said Nicolaas Paardenkooper, chief executive at of Brooge Energy.

The IMO reduced the limits on the amount of sulphur allowed in shipping fuel in January last year to 0.5 per cent, from 3.5 per cent previously, as it looked to lower the volume of the toxic chemicals released into the world’s oceans.

Although demand for shipping fuel is estimated to have fallen 4.3 per cent last year due to the Covid-19 crises and a decline in international trade, the market for very low sulphur fuel increased by 1.4 million barrels per day as a result of the new rules, according to the International Energy Agency.

The outlook for very low-sulphur fuel oil is expected to increase over the coming years as countries look to decarbonise the energy sector amid global efforts to reach net carbon neutrality by mid-century.

“With the UAE adding to its oil production capacity, which we anticipate will drive demand for refining services for both the domestic and export market, we believe this is an opportune time to enter this segment of the oil industry,” Mr Paardenkooper said.

Brooge will focus on the operational aspect of the plant, with the additional revenue earned from the toll fees helping to boost its revenue.

The midstream storage provider said in April that it planned to issue $500 million worth of new shares to fund its phase three expansion plans.

Last year, Brooge Petroleum and Gas Investment Company, a subsidiary of Brooge Energy, signed a land lease deal with the Fujairah Oil Industrial Zone for a 450,000 square metre plot of land on which the firm plans to develop its phase III refinery.

Brooge’s phase three project is set to be around three-and-a-half times the size of its operations once work on phase two work completes, by which time it will have a storage capacity of 1 million cubic metres.

BPGIC intends to use the land to house extra storage and refinery facilities and that initial studies suggest the land could house storage tanks with a capacity of 3.5 million cubic metres and a refinery capable of handling up to 180,000 barrels per day.

Brooge Energy reported a profit of $17.2 m on revenue of $41.8m for 2020, compared to a loss of $75.3m on revenue of $44.1m in 2019

By TheNationalNews, July 16, 2021

The world’s largest oil company, Saudi Aramco, is planning to raise tens of billions of dollars by selling more stakes in its businesses.

The Saudi Arabian state-controlled firm created a new team to review its assets last year, soon after the coronavirus pandemic triggered a plunge in energy prices and strained its balance sheet. Aramco raised $12.4 billion by selling leasing rights over oil pipelines to a U.S.-led group of investors in April.

The sales will continue in the next few years, according to Abdulaziz Al Gudaimi, senior vice president for corporate development.

They will happen “irrespective of any market conditions” and Aramco aims to generate “double-digit billions of dollars,” Al Gudaimi said in an interview. “It’s a strategy meant to create value and create efficiency, it’s not about a specific capital target or financing the dividends of the company.”

Second Deal

The comments are the first from Gudaimi since he was appointed last August to lead a new team that focuses on “portfolio optimization” and reports to Chief Executive Officer Amin Nasser. The company is reviewing what other infrastructure can be monetized and will start seeking investors for a second deal soon, Al Gudaimi said, without commenting further.

After being almost entirely closed off to foreign portfolio and private-equity investors since it was fully nationalized in the 1980s, Aramco is increasingly courting outside capital. It sold a debut international bond in 2019 to help fund a $70 billion acquisition of Saudi Basic Industries Corp., a chemicals maker. That was followed later the same year by an initial public offering in Riyadh, which raised almost $30 billion but failed to attract as much interest from international money managers as Crown Prince Mohammed bin Salman was hoping.

Aramco is planning to sell a stake linked to its natural-gas pipelines, Bloomberg has reported. It has subsidiaries and units involved in several other industries. They include power plants, an aviation company, a real-estate arm and an insurance firm.

Big Spender

Proceeds from the oil-pipelines deal and others will be used for “future growth projects,” he said. “We will continue unlocking value from our assets.”

The asset review was planned before oil’s drop in 2020, Al-Gudaimi said.

Aramco has substantial spending plans, even as it tries to cut its debts and ensure it can keep paying $75 billion in annual dividends, almost all of which go to the Saudi government.

Capital expenditure will probably rise by a quarter this year to $35 billion. Over the longer term, it plans to spend $110 billion developing the Jafurah gas field and an additional amount to boost its daily oil-production capacity to 13 million barrels from 12 million.

Gearing, a measure of debt to equity, has risen to 23%, above the company’s target of between 5% and 15%, after the company borrowed to pay for the Sabic acquisition and following last year’s collapse in earnings.

The transaction for the oil pipelines brought in investors from the United Arab Emirates, South Korea and China as well as the U.S. It was more than twice the value of all the foreign direct investment in the kingdom in 2020.

Learning from Others

Al Gudaimi declined to comment on a separate strategic review of Aramco’s upstream business. It’s a move that could potentially bring external investors into some oil and gas fields, people with knowledge of the matter told Bloomberg in April.

Aramco’s effort to sell and leverage assets mirrors those of other state energy firms in the Persian Gulf. Qatar Petroleum sold a $12.5 billion bond — its first in dollars in 15 years — last month. Oman’s OQ SAOC also issued a debut international bond and is considering an IPO, Bloomberg has reported. And since June last year, firms including U.S. private-equity giant Apollo Global Management Inc. have invested about $15 billion in Abu Dhabi National Oil Co.’s pipelines and property. Adnoc is also looking to list its drilling and fertilizer units.

“All the major international oil companies have gone through a process of portfolio optimization, so we can learn from all of them,” Al Gudaimi said.

Bloomberg, by Matthew Martin, July 16, 2021

Anglo-Dutch major Shell has plans to leave a joint venture with ExxonMobil that accounts for about 25% of the oil and gas production in California.

Relying on four people that Reuters said were familiar with the talks, the news service reported that Shell has plans to leave its joint venture with Exxon, called Aera Energy.

The partnership produces about 125,000 barrels/day of oil and 32mn ft³/d of natural gas, representing about a quarter of all of the production in California. Gavin Newsom, the state’s governor, has called for a ban on new hydraulic fracturing in the state, and potentially the end of its oil production.

Aera CEO Erik Bartsch said last month the proposal was counter-intuitive, as the state would still need oil and gas despite its ambitous climate initiatives.

The report followed rumours that surfaced in June about the potential Shell sale of assets in the Permian shale basin for as much as $10bn.

Shell produced about 193,000 barrels of oil equivalent/day from the Permian basin last year, down from its average of 250,000 boe/d in 2019. The shale basin, situated predominately in Texas, is the top oil producer in the continental US and the second-largest gas producer, behind the Haynesville play in northwest Louisiana and eastern Texas.

Sources familiar with the Permian matter told Reuters that the potential sale aligned with the company’s shift away from fossil fuels.

Shell’s shift away from oil began years ago. In 2015 it acquired UK oil and gas company BG Group for $70bn as part of a shift toward natural gas. The company unveiled a new strategy in February expanding its energy transition plans, forecasting a 1-2% annual decline in its oil output over the coming years. 

A Dutch court in May ruled that Shell’s climate ambitions fell short of the goals outlined in the Paris climate agreement, ordering the company to make steeper cuts in its Scope 1, 2 and 3 emissions.

By Natural Gas World, July 6, 2021

The oil and gas exploration company with licences in the proven oil province of Guyana and the highly prospective basins of Namibia, has received a detailed update from JHI Associates Inc. (‘JHI’). The Jabillo-1 well in the Canje Block, offshore Guyana, reached its planned target depth and was evaluated but did not show evidence of commercial hydrocarbons. Jabillo-1 will now be plugged and abandoned. This well was drilled at no cost to JHI or Eco and was completed on a full carry basis.

The Jabillo-1 well was drilled to test Upper Cretaceous reservoirs in a stratigraphic trap. The well was positioned offshore Guyana, approximately 265 km northeast of Georgetown, in 2,903 meters of water and was safely drilled to a total depth of 6,475 meters.

The Stena DrillMax Rig is currently operating in the ExxonMobil Operated Stabroek Block and is expected to move on to drill the Sapote-1 well, in the eastern portion of the Canje Block. The Sapote-1 Well is expected to be spud in mid-August 2021 with an estimated drilling time of up to 60 days.

The Sapote-1 prospect is located in the south eastern section of Canje, and is a separate and distinct target from Jabillo. Sapote-1 lies approximately 100 km southeast of Jabillo and approximately 50 km north of the Haimara discovery in the Stabroek Block which encountered ~207 feet (63 meters) of high-quality, gas-condensate bearing sandstone reservoir and approximately 60 km northwest of the Maka Central discovery in Block 58 which encountered ~164 feet (50 meters) of high-quality, oil-bearing sandstone reservoir.

Eco recently acquired a 6.4% interest in JHI with the option to increase its stake to 10% on a fully diluted basis. JHI, a private company incorporated in Canada, holds a 17.5% Working Interest in the Canje Block and was carried on the Jabillo-1 well.

Eco remains well funded to progress its planned Orinduik Block drilling program, subject to partner approval, and now as a result of this recent investment in JHI, it is also fully funded for the ongoing program on Canje Block that includes the upcoming committed Sapote-1 well and any additional potential wells considered for this year.

The Canje Block is operated by ExxonMobil and is held by Working Interests partners Esso Exploration & Production Guyana Limited (35%), with TotalEnergies E&P Guyana B.V. (35%), JHI Associates (BVI) Inc. (17.5%) and Mid-Atlantic Oil & Gas Inc. (12.5%).

Gil Holzman, Co-Founder and Chief Executive Officer of Eco Atlantic, commented:

‘While today’s update from JHI is disappointing, this is the nature of oil exploration. Our stakeholders continue to support our exploration efforts and look for us to continue to define these near term high impact opportunities. Our next focus is the Sapote-1 prospect to be spud in the upcoming weeks which brings us another opportunity to share in what we hope to be another major ExxonMobil led discovery. JHI was carried on the Jabillo-1 well and this is just the first in a series of exploration wells that Eco expects to be involved in this year and next. Guyana has proven to be one of the most prolific hydrocarbon regions on the globe and the high discovery ratio continues and the Company continues to be excited about its near-term future prospects on both the Orinduik and the Canje Blocks.

‘The next well in the program, Sapote-1, is located adjacent to existing discoveries and it is expected to be spud in mid-August 2021. The targets in the region have proven to hold some hundreds of millions of barrels of oil and oil equivalent and we look forward to similar scaled results from this upcoming well.

‘I am happy that we managed to become a part of JHI and the Canje Block exploration program in time that offers our stakeholders a stream of high impact catalysts and an ongoing drilling program operated by ExxonMobil. I have a great confidence that our Canje Block exposure will yield great returns and oil discoveries as it also paves the way to a broader exposure and collaboration in the Guyana-Suriname Basin.’

Qualified Person’s Statement:

Colin Kinley, Co-Founder and Chief Operating Officer of Eco Atlantic, has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person, as required under the AIM rules. Mr Kinley has over 35 years’ experience in the oil and gas industry.

About Eco Atlantic:

Eco Atlantic is a TSX-V and AIM quoted Oil & Gas exploration and production Company with interests in Guyana and Namibia, where significant oil discoveries have been made.

The Group aims to deliver material value for its stakeholders through oil exploration, appraisal and development activities in stable emerging markets, in partnership with major oil companies.

In Guyana, Eco Guyana holds a 15% Working Interest alongside TOQAP Guyana B.V. (‘TOQAP’) a company jointly owned by Total E&P Guyana B.V. (60%) and Qatar Petroleum (40%) and Operator Tullow Oil (60%) in the 1,800 km² Orinduik Block in the shallow water of the prospective Suriname-Guyana basin. The Orinduik Block is adjacent and updip to ExxonMobil Operated Stabroek Block, on which twenty discoveries have been announced and over 9 billion BOE recoverable resources are estimated. On 28 June 2021, Eco acquired a 6.4% interest, with the option to increase its stake to 10%, in JHI Associates Inc. a private company which holds a 17.5% WI in the 4,800km² Canje Block. The Canje Block is operated by ExxonMobil and is held by Working Interests partners Esso Exploration & Production Guyana Limited (35%), with Total E&P Guyana B.V. (35%), JHI Associates (BVI) Inc. (17.5%) and Mid-Atlantic Oil & Gas Inc. (12.5%).

Jethro-1 was the first major oil discovery on Orinduik Block. The Jethro-1 encountered 180.5 feet (55 meters) of net heavy oil pay in excellent Lower Tertiary sandstone reservoirs. Joe-1 was the second discovery on the Orinduik Block and comprised of high quality oil-bearing sandstone reservoir, with a high porosity of Upper Tertiary age. The Joe-1 well encountered 52 feet (16 meters) of continuous thick sandstone.

In Namibia, the Company holds interests in four offshore petroleum licenses totalling approximately 28,593km² with over 2.362bboe of prospective P50 resources in the Walvis Basin. These four licenses, Cooper, Guy, Sharon, and Tamar are being explored with industry partners with Eco Operating and maintaining an average 60% Working Interest. Eco has been granted a drilling permit on its Cooper Block (Operator).

Eco Atlantic is a 70% shareholder in Solear Ltd., Solear is an independent private clean energy investment company focused on low cost, high yield solar development projects in southern Europe. Solear offers investors exposure to a portfolio of pre-construction opportunities across the renewable energy value chain, from Ready-to-Build to early-stage development.

By Street Insider, July 6, 2021