Author: admin

The OPEC+ voluntary production cuts, on paper promising curtailments amounting to 1.66 million b/d, should have been the main story for May. Regrettably for many in the Middle East, just as participating countries were preparing to curb output, the overall market sentiment worsened greatly.

First it was refinery margins that forewarned of difficulties ahead, then data on Chinese manufacturing depressed markets even further and protracted negotiations on the US debt ceiling put the icing on the bearish cake.

As Middle Eastern producers were thinking of formula prices for their cargoes loading in June, they did not necessarily see the scope of the headwinds that they were up against. There was still no mention of ouching, of punishing market short-sellers and there was hope that the negative trends in market positioning could be turned around once the reality of OPEC+ production cuts brakes through the clouds.

Things have taken an awkward turn, however, and clouds have been the mainstay for the region’s main exporters.

Saudi Aramco’s Official Selling Prices for Asian Cargoes (vs Oman/Dubai average).

Saudi Arabia’s national oil company Saudi Aramco has cut all its Asian formula prices for June-loading cargoes going to Asia, simultaneously ramping up the OSPs for European destinations.

For Asia, the month-on-month downward revision was expected. Despite the slight increase in the Dubai cash-to-futures spread, up $0.15 per barrel compared to March, refinery margins have been in freefall throughout April and that gloom has set the sentiment for prices. Surprisingly, the biggest month-on-month drop (down $0.90 per barrel compared to May OSPs) came for Arab Heavy, a grade that saw the biggest increases in the past months, whilst Arab Light was only cut by $0.25 per barrel to a $2.55 per barrel premium vs the Oman/Dubai average.

Considering the substantial pricing decrease and Saudi Arabia’s pledge to cut 500,000 b/d from its production targets, it might come as surprise that Saudi Aramco vowed to allocate full requested volumes to Asian customers. Assuming Aramco will cut output, this can only mean that demand for Saudi barrels is getting weaker amidst recessionary pressures.

Formula prices of US-bound cargoes by selected grades (vs ASCI).

Saudi exports to the United States have halved year-on-year so far, averaging a meagre 230,000 b/d this year, according to Kpler tracking data. Not only that, the Gulf Coast is no longer the key region for whatever remaining volumes still are delivered to the US as crude-strapped refiners in PADD 5 have been ramping up their purchases recently.

Saudi OSPs have been at their highest in years and remain well above any other Middle Eastern exporter for some time already. The difference between a Basrah Medium and an Arab Medium cargo into the US Gulf Coast stands at an unbelievable $8 per barrel, even though the latter’s quality is only marginally better than the former’s. Despite its pricing, Saudi Aramco profits fell 19% year-on-year to $31.9 billion, declining in unison with the average realized crude price that dropped to $81 per barrel in the January-March period.

ADNOC Official Selling Prices for 2017-2023 (set outright, here vs Oman/Dubai average).

The headache of setting official selling prices in such a volatile market is no longer there for ADNOC as its formula prices are set by the Murban contract which came in at $84.11 per barrel, up almost $5 per barrel from May. Whilst the flat prices have moved up, the weakness of light grades globally has also seep into Middle Eastern pricing as the region’s main benchmark has been gradually getting closer to Murban, finishing the month at a meagre $0.71 per barrel discount to the UAE grade.

This is a notable feat considering in early 2023 the same Murban-Dubai spread ticked in at around $5 per barrel. As Dubai was strengthening on the heels of the upcoming OPEC+ cuts, the UAE’s other key export grade Upper Zakum finally edged nearer to Murban with its differential hiked $0.40 per barrel to a $0.70 per barrel discount. Considering Dubai was trading almost neck-to-neck to Murban in the first half of May, Upper Zakum should see further increases when the time will come for July 2023 formula prices. The other light grades Umm Lulu and Das saw only marginal changes as their quality characteristics are very similar to Murban.

Iraqi Official Selling Prices for Asia-bound cargoes (vs Oman/Dubai).

For Iraq, the fact that Turkey seems to be stalling the resolution of the Kurdish issue (at least until the second round of presidential elections is over) has been an unnecessary hindrance to the state oil marketing company SOMO. Should President Erdogan get re-elected in the second round, the resumption of exports will most probably be a matter of several weeks if not days. After all, the debts that Turkey owes the Iraqi federal government were all incurred in the Erdogan era. For its Asian buyers, SOMO decided to roll over Basrah Medium prices (quite the contrast to Saudi Aramco which cut every single Asia-bound grade) and increase Basrah Heavy formula prices by $0.10 per barrel compared to May, placing it at a -$3.30 per barrel discount to Oman/Dubai.

Iraqi selling prices for Europe-bound cargoes (vs Dated Brent).

Mirroring Saudi Aramco, SOMO’s European formula prices are much more in line with the overall Middle Eastern trend. For Iraq, a downward pricing correction has been long overdue as the levelling out of Brent Dated and ICE Brent (the former is used by SOMO, the latter is used by Saudi Aramco) has rendered Iraqi barrels much cheaper than its peers. To take but one example, Basrah Medium is some $4 per barrel cheaper than Arab Heavy, despite being less sulphurous. Despite such discrepancies, Iraqi exports into Europe didn’t pick up and have been hovering around the same 600,000 b/d for most of this year and even the halting of Kurdish exports failed to boost Europe-bound outflows above this level.

Iranian Official Selling Prices for Asia-bound cargoes (vs Oman/Dubai average).

Iran has been enjoying a surprisingly undramatic 2023 so far, with a prospective Iran nuclear deal being completely scrapped from the geopolitical agenda of the day. Enjoying a period of strong exports with monthly outflows coming in above 1 million b/d every month of the year so far, Iran’s authorities also claim that production has surpassed the 3 million b/d mark for the first time since late 2018. The figures came from Javad Owji, Iran’s oil minister, and are more some 400,000 b/d above consensus figures provided by OPEC secondary sources. Perhaps reflecting this increasing confidence, Iran’s national oil company NIOC has the formula price of its Iran Light grade to Asia 5 cents per barrel above Arab Light, for the first time this has happened since November 2020. Overall, Iran has followed Saudi Aramco’s pricing strategy and cut its Asian OSPs by $0.20 per barrel and $0.80 per barrel, respectively for Iran Light and Iran Heavy.

Kuwait Export Crude official selling prices into Asia, compared with Arab Medium and Iranian Heavy (vs Oman/Dubai average).

Kuwait has managed to bounce back from the series of hard knocks it has endured last month, restarting the second CDU of the al-Zour refinery after month-long repairs. Seeking to start up the third (and last) distillation unit of the 615,000 b/d refinery in June-July, Kuwait might finally be reaching that point when all its capacity is at last commissioned. As Kuwaiti exports continue to decline and currently are some 200,000 b/d below the 1.8 million b/d average of 2022, the ramp-up of al-Zour is set to shrink crude availability even further. As for formula prices of Kuwaiti crude in June, the state oil company KPC lowered its Kuwait Export Crude OSPs to Asian customers by $0.70 per barrel to a $1.70 per barrel premium vs the Oman/Dubai average. With this, Kuwait’s pricing changes were more modest than Saudi Aramco’s hikes for Arab Medium and Arab Heavy, a trend that was also reflected in KPC increasing Europe-bound cargoes by $0.50 per barrel, half the Saudi increases to European customers.

Oilprice.com by Gerald Jansen, June 9, 2023

OPEC producer Iraq has awarded a project to a Chinese firm to build its largest crude oil depot for export with a capacity of around 3.2 million barrels, according to officials.

The China Petroleum Pipeline Engineering Company (CPP) will build the storage facility in Nasiriyah city in the Southern Dhi Qar Governorate, they said.

“It will be Iraq’s largest crude oil storage facility as it will be built on an area of around 2.5 million square metres,” project manager Ali Ibrahim said in a statement published on Monday by Aliqtisad News and other Iraqi publications.

Ibrahim said the facility would comprise seven large storage tankers, including four tankers for heavy crude and four for light crude.

He noted that the project aims to pump crude through a pipeline to Faw Port, which is under construction in South Iraq.

“Crude will then be exported through Arabian Gulf ports….there are also plans to transport crude from the storage tankers through pipelines to refineries and power plants in central and North Iraq,” Ibrahim said, adding that the project is expected to be completed in the second quarter of 2025.

ZAWYA by Nadim Kawach, June 9, 2023

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Kinder Morgan, Inc. (NYSE: KMI) today announced its plan to expand the working gas storage capacity at its Markham Storage facility (Markham) in Matagorda County along the Texas Gulf Coast.

KMI has reached an agreement with Underground Services Markham, LLC, a subsidiary of Texas Brine Company LLC, to lease an additional cavern at Markham to provide more than 6 billion cubic feet (Bcf) of incremental working gas storage capacity and 650 million cubic feet per day (MMcf/d) of incremental withdrawal capacity on KMI’s extensive Texas intrastate pipeline system.

Anchor shippers have subscribed to approximately half of the available capacity under long-term agreements, and commercial in-service for the project is expected in January 2024.

“During Winter Storm Uri, KMI’s storage portfolio was critical to supplying human needs customers in Texas while also providing much needed supply to numerous electric generation facilities during the storm.

We are pleased to increase our natural gas storage solutions to further support Texas customers, particularly during severe weather events,” said KMI Natural Gas Midstream President Tom Dender. “Storage capabilities on highly utilized assets are critical to support Texas’ ability to respond to an energy crisis and ensure energy reliability as renewables become a greater portion of the state’s energy mix.

This expansion will provide much needed capacity that could supply gas-fired electric generation facilities within ERCOT and provide electric service to well in excess of one million homes in Texas.”

Prior to the expansion, Markham had 21.8 Bcf of working gas storage capacity with peak delivery of 1.1 Bcf/day of natural gas with multiple receipt and delivery points on KMI’s nearly 7,000-mile Texas intrastate system.

By Kinder Morgan, June 9, 2023

Gasunie and Vopak today announced that they have entered into a cooperation agreement.

The aim is to jointly develop future terminal infrastructure projects that will facilitate the necessary imports of hydrogen into Northwest Europe via Dutch and German ports. Both parties have been working together in the Gate LNG-terminal in the Port of Rotterdam that came into operation in 2011.

Alongside domestic production of hydrogen, large-scale import of green hydrogen will become essential for reaching the European Green Deal and the Fit for 55 targets.

Import initiatives are developing rapidly: the first import streams to Germany and the Netherlands are expected by 2025. Global supply chains and logistics infrastructure need to be developed and operated to facilitate the import of green hydrogen required for the energy and feedstock transition.

The cooperation agreement includes import projects for hydrogen through green ammonia, liquid organic hydrogen carriers, and liquid hydrogen technologies.

To safely and reliably handle products like hydrogen and ammonia, high quality infrastructure and operations are needed. Vopak and Gasunie will focus on developing import infrastructure related to storage that enables further distribution of hydrogen to end users (e.g. by means of pipeline, vessels, road and rail) and contributes to the security of supply in Northwest Europe.

Both parties have a long track record in developing infrastructure and safely storing and handling these types of products.

As independent infrastructure companies Gasunie and Vopak will focus solely on the development as well as safe and reliable operation of open access infrastructure. Open access logistics infrastructure that is available to all market parties is most effective, both from a cost and environmental footprint perspective.

It can further accelerate the import and use of green energy to a wide range of end markets. On April 11, 2023. Gasunie, Vopak and HES International announced that they joined forces to develop an import terminal for a hydrogen carrier in the port of Rotterdam, named ACE Terminal.

Ulco Vermeulen, Director Business Development Gasunie: “With this agreement, Vopak and Gasunie continue their many years of successful co-operation. Hydrogen is an essential component of the sustainable energy mix of the future.

Our joint goal is to enable the international hydrogen value chain by providing the necessary import infrastructure. As a renewable energy infrastructure company, we already function as a linking pin for the energy transition in various public private partnerships in the Netherlands. With this agreement, Vopak and Gasunie can play a role in the transport, storage and import as part of the international hydrogen value chain.”

Frits Eulderink, Executive Board Member and COO of Royal Vopak comments: “We are delighted to extend our partnership with Gasunie beyond our successful Gate LNG terminal operations in the Port of Rotterdam and jointly develop vital infrastructure supporting the energy transition. We are looking forward to working together with Gasunie in the development of new infrastructure for the future vital products.”

By Vopak, June 2, 2023

Enbridge has announced that, through a wholly owned subsidiary, it has entered into a definitive agreement with FortisBC Holdings to acquire its interest in FortisBC Midstream, which holds a 93.8% interest in Aitken Creek Gas Storage facility and a 100% interest in Aitken Creek North Gas Storage facility (collectively, Aitken Creek Storage) for $400 million (€362 million).

Aitken Creek Storage is an underground reservoir located 120 km northeast of Fort St. John, British Columbia, Canada, and is the largest and only underground natural gas storage facility in British Columbia, totalling 2.2 bcm of working gas capacity.

‘Enbridge is pleased to acquire Aitken Creek Storage, a well-located and connected facility that will enable us to continue to meet regional energy needs as well as support increasing demand for west coast LNG exports,’ says Cynthia Hansen, Enbridge executive vice president and president, gas transmission and midstream. ‘Natural gas plays an increasingly important role in the energy transition, and this investment further aligns with Enbridge’s focus on providing the affordable, sustainable and reliable energy that is needed now and into the future.’

The transaction is expected to close later in 2023, subject to receipt of customary regulatory approvals and closing conditions.

By Tank Storage Mag, June 2, 2023

Harvest Midstream announced that it closed on the acquisition of Paradigm Midstream from funds managed by Ares Management’s Infrastructure Opportunities strategy after agreeing to the purchase on February 24, 2023.

“We are pleased to complete this transaction,” said Harvest CEO Jason C. Rebrook. “The addition of the Paradigm systems will enable us to further expand our services in the Eagle Ford and develop new long-term relationships in North Dakota.”

The newly acquired systems include four wholly owned gathering systems known as the Charlson Gathering System, Van Hook Gathering System, Mountrail Gathering System, and Eagle Ford Gathering System. In total, the systems transport over 110,000 barrels of oil per day, approximately 75 MMcf/d of natural gas, and include approximately 350 miles of trunk lines and gathering lines for oil, gas, and water.

The purchase also includes Paradigm’s ownership interest in two joint ventures with Phillips 66. The joint ventures own all of the Keene and Palermo storage terminals and 99% of the Sacagawea crude lines and the Blue Buttes gas line.

By Citybiz, June 2, 2023

Royal Vopak (“Vopak”) (XAMS: VPK) and AltaGas Ltd. (“AltaGas”) (TSX: ALA) are pleased to announce the execution of definitive agreements for a new 50/50 joint venture to further evaluate development of the Ridley Island Energy Export Facility (REEF), a large-scale liquefied petroleum gas (LPG) and bulk liquids terminal with marine infrastructure on Ridley Island, British Columbia, Canada.

REEF, as part of the previously submitted regulatory filings (under the name of Vopak Pacific Canada), will have the capability to facilitate the export of LPGs, methanol, and other bulk liquids that are vital for everyday life. REEF has been granted the key Federal and Provincial permits to construct storage tanks, a new dedicated jetty, and rail and other ancillary infrastructure required to operate a state-of-the-art and highly efficient facility. REEF would be developed on a 190-acre (77 hectare) site on lands administered by the Prince Rupert Port Authority for which the joint venture has executed a long-term lease that sits adjacent to AltaGas and Vopak’s existing Ridley Island Propane Export Terminal (RIPET), which has been in operation since April 2019.

Should REEF reach a positive final investment decision (FID), it is planned to be developed and brought online in phases. This approach will provide the most capital efficient build out of the project, match energy export supply with throughput capacity, mitigate the challenges that large development projects can have on local communities, and provide local construction and employment opportunities that would extend over longer time horizons. AltaGas has executed a long-term commercial agreement with the joint venture for 100% of the capacity for the first phase of LPG volumes, subject to a positive FID. AltaGas will also be responsible for the construction and operational stewardship of the facility. Future phases of the project will be developed as additional long-term commercial agreements and critical milestones are achieved to deliver the maximum value for all stakeholders.

Vopak, AltaGas, and the Prince Rupert Port Authority have been working closely with First Nations rights holders and key stakeholders, including the local communities in Northwestern British Columbia and the Federal and Provincial regulators, to deliver a project that will operate with industry-leading environmental stewardship and bring the strongest benefits to all parties involved. Key determinations and permits have been received from the Federal Government and an Environmental Assessment Certificate has been received from the British Columbia Provincial Government.

REEF Benefits from Structural West Coast Advantage to Asian Markets

With only ten shipping days to the fastest growing demand markets in Northeast Asia, REEF will be able to efficiently connect Canada’s vital energy products to the world. This includes having an approximate 60 percent base time savings over the U.S. Gulf Coast, which requires a minimum 25-day shipping time to Northeast Asia, and approximately 45 percent base case time savings over the Arabian Gulf, which requires a minimum 18-day shipping time. This geographic advantage expands when there is significant congestion in the Panama Canal or when other global shipping pinch points experience disruptions. Furthermore, the Port of Prince Rupert provides REEF year-round ice-free operations and has the deepest natural harbour in North America, leaving it able to accommodate the world’s largest vessels, which ensures safe and reliable market access and allows AltaGas and Vopak to efficiently connect upstream and downstream markets.

Joint Venture is Targeting Advancement of Critical Workstreams Over 2023

REEF is currently working through front end engineering design (FEED) activities, where deliverables will include a refined capital cost estimate, a project execution plan, a construction schedule, and a projected in-service date, among numerous other items. FEED and other development activities are expected to be completed by late 2023, followed by an FID by the joint venture. Solidifying long-term economic rail agreements in partnership with the rail operator will also be key for the joint venture to be able to reach a positive FID and ensure the project advances, and, in turn, delivers the strong benefits to the joint venture partners, First Nations rights holders, the Prince Rupert Port Authority, local communities, upstream and downstream customers, and other key stakeholders.

Vopak and AltaGas are excited to further evaluate the development of REEF and build on the strong partnership between the two companies, under this new joint venture agreement. Vopak and AltaGas thank all stakeholders for the continued embracement and ongoing partnerships as part of this project. Working with stakeholders and seeking strong partnerships is part of both organization’s individual and collective DNA and is engrained in how Vopak and AltaGas approach their businesses every day.

“We are excited to build on our success with AltaGas in Prince Rupert”, said Dick Richelle, Chairman of the Executive Board and CEO of Royal Vopak. “Our goal is to create together with partners high quality critical infrastructure for vital products. The strategic location of Prince Rupert, with the shortest shipping distances between North America and Asia, has the potential to increase the trade between Canada and the Asia Pacific region. REEF fits very well within Vopak’s strategic pillar to grow in gas and industrial infrastructure. We look forward to further collaboration with First Nations rights holders and key stakeholders to make this project a reality.”

“We are excited to execute this agreement and continue to advance our relationship with Vopak, the Prince Rupert Port Authority, First Nations rights holders, and the local communities surrounding Prince Rupert” said Randy Crawford, President and CEO of AltaGas. “Canada has a structural advantage in delivering LPGs into Asia from its world class resources and through the shortest shipping time and lowest maritime emissions footprint. AltaGas delivers more than 12% of Japan’s propane and 12% of South Korea’s LPG imports through connecting our valued upstream customers with key downstream markets in Asia. REEF fits our corporate strategy of operating long-life infrastructure assets that connect customers and markets and provide resilient and durable value for our stakeholders. We look forward to working with all our partners to achieving the remaining milestones required to reach a positive FID on the project.”

“We congratulate Royal Vopak and AltaGas on this significant milestone towards advancing development of the terminal project at the Port of Prince Rupert” said Shaun Stevenson, President and CEO, Prince Rupert Port Authority. “Once operational, the new facility will substantially increase and diversify the Port of Prince Rupert’s liquid bulk cargo capabilities and capacity, while providing a much-needed export solution for Canadian producers during a critical time in the global energy transition.”

“We commend Vopak and AltaGas on their efforts to-date on building long-term relationships with our community,” said Chief Harold Leighton, Metlakatla First Nation. “We are excited with the potential this joint venture project provides to our area and the Metlakatla First Nation.”

By Vopak, June 2, 2023

ADNOC Logistics & Services (ADNOC L&S), the shipping and maritime logistics arm of ADNOC, announced today the successful berthing of LNG carrier, Ish, at the AG&P Philippines LNG (PHLNG) Import Terminal in Batangas Bay, as it continues expanding its operations globally.

Following her arrival, Ish will be commissioned as a Floating Storage Unit (FSU) at PHLNG, the first LNG import terminal in the Philippines. AG&P subsidiary, GasEntec, converted the vessel, which has a capacity of 137,500 cubic meters, to an FSU in five months.

The supply, operations and maintenance of the FSU will be undertaken by ADNOC L&S.

The agreement to charter Ish to AG&P, was signed in 2022 and spans 11 years with the option to extend a further four years. This arrangement bolsters ADNOC L&S’ FSU revenue stream and extends the life of the vessel while securing PHLNG’s resilience of LNG supply.

The agreement builds on an existing long-term charter signed between ADNOC L&S and AG&P to provide another FSU in India.

Captain Abdulkareem Al Masabi, CEO of ADNOC L&S, said: “Successful partnerships create new value collaboratively, and the repurposing of vessels provides a blueprint for sustainable value creation.

“For ADNOC L&S, this translates to extending the operational life of our vessel and unlocking new revenue streams and opportunities for growth. For AG&P, this means availing a flexible storage solution for their new LNG terminal, which will catalyze wider economic and social prosperity.”

The partnership between ADNOC L&S and AG&P highlights the importance of collaboration and innovation in the energy sector.

Through this agreement, the companies are working together to bring affordable and reliable energy to the Philippines and beyond, while setting new standards for safety and efficiency in the industry.

Joseph Sigelman, Chairman and CEO of AG&P said: “AG&P prizes its growing partnership with ADNOC L&S. With the Ish docking at PHLNG for the next decade or longer, AG&P is proudly set to open the first LNG terminal in the Philippines.

“As the first cargo of fuel originated in Abu Dhabi and with the long-term presence of the Ish, ADNOC L&S is playing a pivotal role alongside AG&P and San Miguel, our anchor customer, in bringing clean energy to the Philippines.

“We are proud to see the relationship between the UAE and Philippines grow in this way, with PHLNG as a prime case study.”

The vessel is part of ADNOC L&S’ diverse fleet of close to 245 owned vessels and approximately 600 operated and charted vessels per year.

Combined with its 1.5 million square meter logistics base in Abu Dhabi and its integrated logistics capabilities, ADNOC L&S is one of the region’s largest shipping and integrated logistics companies. 

By Transport&Logistics Middle East, June 2, 2023