Category: Nieuws

Glencore may acquire Shell’s oil operations in Singapore after several previous candidates for the assets changed their minds about competing for them.

This is according to unnamed sources who spoke to Reuters, saying that the Swiss commodity trading major was currently in the process of evaluating the assets with the help of Indonesian PT Chandra Asri Petrochemical.

The assets in question include Shell’s Singapore refinery, which has a capacity of 237,000 barrels daily, an ethylene plant, and a mono-ethylene glycol production facility in the vicinity. These were subjected to a strategic review in June last year and following that, Shell decided to get rid of them.

The refinery started as an oil storage and refinery complex but over the years grew into a more complex facility that also produces biofuels and recycles plastics, according to the company.

Previously, there were four potential buyers of the assets that Shell said it wanted to divest from last year. These included Vitol and three Chinese companies, including CNOOC and two petrochemical producers—Befar Group and Eversun Holdings.

These, according to the Reuters sources, have now dropped out of the race, clearing the space for another buyer. Per the sources, Glencore is working with Morgan Stanley on drafting a deal with the Big Oil major.

China’s Sinopec was also among the prospective buyers for the Singapore assets but in August last year, it said it would instead invest in a natural gas project in Saudi Arabia, in partnership with TotalEnergies.

The acquisition will give the commodity trader a physical presence in Singapore, which is a major regional oil hub. However, Reuters notes that the two petrochemical facilities that Shell is selling are old and are finding it increasingly difficult to compete with newer refineries and petrochemical complexes in China.

Shell planned to have the fate of the Singapore assets sealed by the end of this year.

By: Oil Price / Irina Slav, February 29, 2024

Oil prices are being driven higher by geopolitical events, James Davis, FGE’s Director of Short-Term Global Oil Service and Head of Upstream Oil, told Rigzone.

“You can say there is some ‘risk premium’ as a result, but it would be more accurate to say part of this ‘risk premium’ is due to ‘trade friction’ as shippers avoid the Red Sea,” Davis added.

“Vessels avoiding the Red Sea, means longer voyage times, which means more oil on the water, less oil on the land, and as a result, premiums for prompt crude,” he continued.

“Whether you call it a risk premium or trade friction, the geopolitical events are pushing oil prices higher,” Davis went on to state.

When Rigzone asked Carole Nakhle, the CEO of consultancy Crystol Energy, if there is a geopolitical risk premium in the oil price right now, Nakhle said, “we all know that geopolitics affect oil markets but no one knows how to quantify the risk premium which depends on one’s own perception of the risk to supply disruptions”.

“But the geopolitical risk should not be taken in isolation from other important market conditions, including – how tight supplies are to start with? how rapidly demand is growing? Is there sufficient spare capacity in the system? The answer to these questions will determine the magnitude of the geopolitical risk premium,” Nakhle added.

“Today, we haven’t seen supply disruptions. Demand is not booming. Non-OPEC+ supply is healthy, so is the spare capacity largely thanks to OPEC+ cuts,” Nakhle went on to state.

When Rigzone asked Macquarie the same question, the company responded with a report published earlier in February, in which Macquarie strategists said, “a combination of factors have driven the recent oil rally”.

“The key factors include an increase in Middle East and Russia related risk premiums, and an unusually large number of global production outages,” the strategists added in that report.

In a separate report sent to Rigzone on January 23, Macquarie strategists noted that, “without current geopolitical tensions, we believe crude would sell off meaningfully”.

“Over time, we expect supply risk premiums to decouple from conflict risk, analogous to Russia-Ukraine,” they added at the time.

The Brent Crude oil price closed at $77.33 per barrel on February 2, $82.77 per barrel on February 13, $83.67 per barrel on February 22, and $83.65 per barrel on February 27.

Middle East Incidents

In a statement posted on its X page on February 28, U.S. Central Command (Centcom) noted that, on February 27, between the hours of 9.50pm and 10.55pm Sanaa time, U.S. aircraft and a coalition warship “shot down five Iranian-backed Houthi one-way attack (OWA) unmanned aerial vehicles (UAV) in the Red Sea”.

“Centcom forces identified these UAVs originating from Houthi-controlled areas of Yemen and determined they presented an imminent threat to merchant vessels and to the U.S. Navy and coalition ships in the region,” Centcom added in the statement.

“These actions will protect freedom of navigation and make international waters safer and more secure for U.S. Navy and merchant vessels,” it continued.

In a statement posted on its X page on February 27, Centcom revealed that, on February 26 between the hours of 4.45pm and 11.45pm Sanaa time, its forces “destroyed three unmanned surface vessels (USV), two mobile anti-ship cruise missiles (ASCM), and a one-way attack unmanned aerial vehicle (UAV) in self-defense”.

“The USV and ASCM weapons were prepared to launch towards, and the UAV was over, the Red Sea. Centcom forces identified the USVs and missiles in Houthi-controlled areas of Yemen, as well as the UAV over the Red Sea, and determined that they presented an imminent threat to merchant vessels and to the U.S. Navy ships in the region,” it added.

“These actions are taken to protect freedom of navigation and make international waters safer and more secure for U.S. Navy and merchant vessels,” Centcom continued.

In a previous X post, Centcom noted that, on February 24 at 11.45pm Sanaa time, “the Iranian-backed Houthis launched one anti-ship ballistic missile likely targeting the M/V Torm Thor, a U.S.-flagged, owned, and operated chemical/oil product tanker in the Gulf of Aden”.

“The missile impacted the water causing no damage or injuries. Earlier in the evening, at about 9pm Sanaa time, USCENTCOM forces shot down two one-way attack unmanned aerial vehicles over the southern Red Sea in self-defense,” it added.

“A third UAV crashed from an assessed in-flight failure. Centcom forces identified the UAVs and determined they presented an imminent threat to merchant vessels and to the U.S. Navy ships in the region,” it continued.

Coalition Strikes

In another X post on February 24, Centcom stated that, at approximately 11.50pm Sanaa time, Centcom forces, alongside UK Armed Forces, and with support from Australia, Bahrain, Canada, Denmark, the Netherlands, and New Zealand, “conducted strikes against 18 Houthi targets in Iranian-backed Houthi terrorist-controlled areas of Yemen”.

“These strikes from this multilateral coalition targeted areas used by the Houthis to attack international merchant vessels and naval ships in the region. Illegal Houthi attacks have disrupted humanitarian aid bound for Yemen, harmed Middle Eastern economies, and caused environmental damage,” it added.

“The targets included Houthi underground weapons storage facilities, missile storage facilities, one-way attack unmanned aerial systems, air defense systems, radars, and a helicopter. These strikes are intended to degrade Houthi capability and disrupt their continued reckless and unlawful attacks on international commercial and U.S. and U.K. vessels in the Red Sea, Bab AI-Mandeb Strait, and the Gulf of Aden,” Centcom went on to state in the post.

“The goal of this multi-national effort is to defend ourselves, our partners, and allies in the region and restore freedom of navigation by destroying Houthi capabilities used to threaten U.S. and partner forces in the Red Sea and surrounding waterways,” it continued.

By: Rigzone /  Andreas Exarheas, February 29, 2024 

Driven by China’s industrial decarbonisation, the global liquefied natural gas (LNG) market will continue to grow into the 2040s, according to a new report.

As industrial coal-to-gas switching gathers pace in China, amid its modest economic recovery, global demand for LNG is estimated to rise by more than 50% by 2040, according to Shell’s LNG Outlook 2024 report.

The report shows that the development of China’s gas infrastructure has been accelerating in recent years. The growth in scale and connectivity has also enabled China to balance the LNG market worldwide, it said.

According to the report, long-term gas and LNG demand outlook in China remains strong while supply diversification is also a key characteristic of the growth in the country.

China has been ramping up construction of LNG infrastructure in recent years, including receiving terminals and storage facilities, as the country prioritises a transition away from coal.

The total turnover capacity of LNG receiving stations in China reached 97.3 million tonnes per year by the end of 2022, according to the Economics and Technology Research Institute under China National Petroleum Corp.

“China is likely to dominate LNG demand growth this decade as its industry seeks to cut carbon emissions by switching from coal to gas,” said Steve Hill, executive vice-president for Shell Energy.

Hill said gas has an essential role to play in tackling the carbon emissions in China’s steel sector by replacing coal during the production process.

China’s natural-gas market achieved growth last year amid economic recovery. Data from the National Development and Reform Commission revealed that China’s apparent natural-gas consumption exceeded 394.53 billion cubic metres, an increase of 7.6% year-on-year.

China also overtook Japan as the world’s largest LNG importer last year, with imports reaching 71.32 million tonnes, up 12.6% year-on-year, it said.

According to BloombergNEF, China’s optimised anti-Covid-19 measures last year have lifted gas consumption since the second quarter of 2023, with total demand in 2023 reaching 384 billion cubic metres, 4.8% higher than that the year before.

The residential and commercial sector’s gas demand gained from the optimisation of measures, while transport gas consumption spiked as LNG trucks became more cost-competitive compared with diesel ones, it said.

China has become the dominant force in LNG worldwide as it works toward a green transition with what is seen as a relatively clean bridge fuel, said Li Ziyue, an analyst with BloombergNEF.

Li said gas burn in the transport sector is set to see the fastest growth due to the favourable economics of natural-gas commercial vehicles.

“Power gas burn may grow fast with a gas power capacity expansion and lower fuel prices,” she said.

State-owned enterprises have led China’s expansion of its capacity to handle LNG, while private companies are playing an increasingly active role in building LNG terminals, she said.

About 60% of the LNG facilities under construction are by state-owned enterprises, while the rest are by private companies in China, Li added.

China is among the countries with an extensive list of LNG terminals under construction, with some being constructed from scratch and many existing terminals undergoing expansion, Anne-Sophie Corbeau, a researcher with the Center on Global Energy Policy at Columbia University, was quoted as saying by South China Morning Post.

BloombergNEF said it expects China’s base-case natural gas demand in 2024 to increase 7% year-on-year to 413 billion cubic metres, while LNG imports are estimated to rise 7% annually to 76 million tonnes this year.

By Zheng Xin / Investor , February 27, 2024

Canadian oil producers expect the discount on their crude to shrink significantly when the Trans Mountain pipeline expansion (TMX) starts this year, but the relief may be short-lived as surging supply looks set to exceed the country’s pipeline capacity in just a few years.

TMX will ship an extra 590,000 barrels per day (bpd) of crude, trebling existing capacity to Canada’s Pacific Coast once the C$30.9 billion ($22.8 billion) expansion is finally complete. The Canadian government-owned project has hit technical issues on its final leg of construction, but is still targeting a second quarter in-service date.

For much of the last decade, oil companies in the world’s No. 4 producing country have been forced to sell their barrels at a deep discount to global prices due to lack of pipeline capacity to export crude.

Once TMX is operating, Canadian heavy crude differentials should narrow to around $10-$12 a barrel under U.S. benchmark crude from more than $19 a barrel currently, BMO analyst Ben Pham said in a note to clients last week.

He estimated the expansion would lift Canada’s total takeaway capacity to 5.2 million bpd, leaving 220,000 bpd of unused space on pipelines.

Still, oil sands production is rising so rapidly that some market players think Canada could again run out of pipeline space in less than two years, said RBN Energy analyst Martin King.

“Originally it was thought TMX would give us a four- or five-year window,” King said. “It now looks like that window of spare capacity might actually be a lot smaller.”

Canadian producers could add up to 500,000 bpd of supply this year and next year alone, Colin Gruending, executive vice president of liquids pipelines at midstream firm Enbridge Inc (ENB.TO), opens new tab, estimated on an earnings call this month.

The prospect for more bottlenecks would likely widen the discount again, and could deter companies from longer-term investments in growing Canada’s production.

For existing pipeline operators, the rising production and strong demand for capacity is good news. Enbridge said it may continue rationing space on its 3.1 million bpd Mainline pipeline system even once TMX starts operating, allaying concerns among some analysts the company could see a drop in volumes and revenues.

MORE OPTIONS

Most of the new capacity on TMX will be for heavy crude barrels, meaning light and synthetic crude oil is most likely to face rationing on the Mainline and any resulting price discounts, said RBN’s King.

The new capacity on TMX will give heavy crude producers a choice of sending barrels to the U.S. west coast and Asia, or to the U.S. Midwest and Gulf Coast on existing pipelines.

On a recent earnings call, Imperial Oil (IMO.TO), opens new tab CEO Brad Corson said having spare pipeline capacity would lift the value of heavy crude for the entire Canadian oil industry.

Imperial will continue to move most of its barrels to the Midwest and Gulf Coast, while keeping a look out for the highest-value markets, he added.

Ryan Bushell, president of Newhaven Asset Management, which holds shares in pipeline companies including Enbridge, said TMX would likely run at less than full capacity if strong pricing on the Gulf Coast, the world’s largest heavy crude refining centre, drew barrels onto pipelines heading south.

“It all depends on where the best pricing is, for the first time in a long time producers will have optionality,” Bushell said.

No matter how fast TMX fills up, it is likely to be Canada’s last major export pipeline ever built, due to regulatory hurdles, environmental opposition and uncertainty about future oil demand.

“The potential for brand new pipelines getting built is pretty close to zero,” RBN’s King said.

By Nia Williams / Reuters , February 21, 2024

Energy Traders Europe has called on the European Commission and energy regulators’ association Acer to provide guidance on the legality of gas storage levies as soon as possible.

The association recently changed its name from European Federation of Energy Traders (Efet) to help people “immediately understand who we represent”, its chief executive, Mark Copley, told Argus. At a time when “energy is more political than ever”, it wants to be “more vocal in making the arguments that explain why trading helps customers across Europe”, Copley said.

The commission and Acer have been reticent to provide a full opinion on the gas storage levy imposed by Germany and the one planned by Italy, and while Copley “knows that both are taking this seriously and working on it, public statements would be welcome”, he said. The association’s members have been “providing them with their views and experiences”, but the “risk of contagion grows over time”. But the association remains “hopeful that German authorities recognise that this will ultimately impose additional costs on German consumers and can propose new tariffs without a legal challenge”, Copley said.

Storage levies “should not be charged on cross-border points at the expense of consumers in other member states”, as this “creates uncertainty, fragments markets, increases price spreads between countries and goes against the spirit of energy solidarity”, Copley said, echoing previous comments by the association. Attempts to recover the costs of strategic or national stocks should instead be carried out in a “non-discriminatory way via domestic network tariffs”. The size of the levies perhaps reflects the “unintended consequences of developing policies too quickly”, Copley said.

The potential imposition of a similar charge in Italy would “translate into an economic incentive to import gas from Russia” for countries in central and eastern Europe and would make storing gas in Ukraine more expensive, Copley said. If these levies are deemed legitimate, “many countries in central and southeastern Europe may end up facing additional pancaked costs of importing gas from western routes that cross more boundaries”, going “directly against Europe’s efforts to diversify supply”, he said.

Mandatory storage filling targets are another measure that should “certainly not exist in ‘normal’ situations, and there are respectable arguments that they should not exist at all”, he said. While the rush to ensure there was gas in storage is understandable from a political perspective, “too often transmission system operators were assigned very interventionist roles, channelled gas purchases into a narrow window that contributed to prices spiking and stopped traders doing what they’d normally do”. Gas was injected into storage “irrespective of what was happening” elsewhere in the market, he said. Some of the costs that are now having to be recovered through higher tariffs are “a result of badly designed storage policies”.

There has been a notable increase in new pipelines, interconnection capacity and LNG import capacity in central and eastern Europe over the past five years, but the “slowness of market reform in the region is preventing the use of that infrastructure efficiently”, Copley said. The priority should be improving access terms rather than building more pipelines, he said, noting that there is “already huge south-to-north capacity in the Trans-Balkan pipeline that could be better used”. There are “various worries” for association members, such as Turkey-Bulgaria capacity being tied up in the deal between state-owned incumbents Botas and Bulgartransgaz, and issues in Romania regarding centralised market obligations. These types of issues “chill the interest and usability of capacity”, he said.

“Greater stability and predictability in European energy policy” would also support European domestic gas production, and biomethane can play a role here too, he said. “But there is work to do to develop functioning biomethane markets, including the import of renewable gases from third countries”.

In the power market, Europe needs a “massive expansion” of most capacity types, including combined-cycle gas turbines with carbon capture. The key is to “make sure that the market design can reward the capabilities that a renewables-heavy system needs” — including the pricing of flexibility — hopefully helping to steer investment into the right assets”, he said. This includes a further merging of balancing markets and better functioning intra-day markets, he said. “The interaction with gas and hydrogen markets — and the price signals in all of those markets that will enable efficient decisions — will be a key part of addressing the challenges that will arise,” Copley concluded.

By Brendan A’Hearn / argusmedia , 02/15/24