Category: Nieuws

Chinese refineries’ throughput fell for the first time in more than a decade during the first half of the year, by 6 percent to 13.4 million bpd.

In June alone, processing rates were higher than in May, but some 10 percent lower than the all-time high reached last year in June, Reuters said in a report citing official data.

Oil imports also fell in June, according to data from energy analytics firm OilX—by 1.6 million bpd to 9.2 million bpd.

On an annual basis, OilX analysts noted, the June average was about 1 million bpd lower than what China imported in crude oil in June 2021. They noted, however, that despite the recent series of lockdowns because of Covid flare-ups, China’s oil imports were remarkably stable over the past few months.

Chinese oil production rose during the first half of the year, by 4 percent from a year ago, with the daily average at 4.15 million bpd. In June, domestic output hit an all-time high of 4.18 million bpd.

Refinery runs have suffered from Covid restrictions since the start of the year as Beijing maintained its zero-Covid policy and by fuel export restrictions the government has imposed on refiners.

The Covid restrictions have also dampened domestic demand for fuels, but analysts expect a pick-up in refinery runs in the current quarter as the government considers making amendments to its Covid policy and steps up infrastructure spending to boost economic growth. Gasoline and jet fuel demand were the worst affected by the Covid restrictions.

According to an earlier Reuters report, Beijing plans to set up a $75-billion infrastructure spending fund to stimulate growth. China booked GDP growth of 0.4 percent for the second quarter of the year, far below analyst expectations because of the worst outbreak of Covid since 2020 in the country.

Oilprice.com by Charles Kennedy, July 27, 2022

Russia turns off the Nord Steam 1 gas pipeline to Europe for its annual 10 days’ maintenance and no one is sure that it will be turned on again. If that’s it for gas deliveries this year, how many days of gas are currently in the storage tanks?

Europe is afraid that the Kremlin will spark a major energy crisis this winter by turning off its gas supplies completely. Gazprom reduced flows of gas to Europe by 60% in mid-June just as the tanks were half full.

The EU has set a target of having the tanks 80% full by the end of October and as bne IntelliNews reported, even at the reduced flow rates Europe should hit that target after the tanks reached 60% of capacity in the first week of July. Despite the reduction of gas from Russia, Europe is currently importing record amounts of LNG from the US that allow the gas in tank storage to continue growing.

But things are not quite that simple. Just getting to 80% full by the end of October is not enough gas to get through the whole heating season, which runs from October 1 to March 31, without continuous supplies of more gas during the winter.

Europe has large storage capacity, with the biggest facilities being in Germany and Ukraine. However, those facilities cannot hold enough to meet demand for the entire winter.

Storage levels and storage capacity vary greatly in the EU. The tanks in Poland and Portugal are already close to 100% full. However, even the full tanks in Poland and Portugal are not enough to get through the whole winter. They hold enough gas for 79 days of consumption and 24 days respectively. That means without new supplies during the winter they would run out of gas by January 18 and November 24 respectively if all gas supplies were cut off from the current levels of gas stored.

Indeed, this is the case for all the countries of Europe; most countries’ storage doesn’t hold enough gas to last the whole winter. The exceptions are the Slovak Republic and Austria, where their tanks do hold enough gas to get to the end of the heating season if full. Everyone else starts running out of gas as soon as October (assuming gas withdrawals start on October 1, but a mild winter means drawdowns can start as late as the start of November), although some survive until February. Czechia is in the third best position, as its tanks can last to April 5 if full.

But neither Poland nor Portugal will run out of gas even if Russia turns off the spigots. Poland will open a new pipeline to Norway on October 1 and is the first EU country to have entirely weaned itself off Russian gas supplies. Portugal’s supplies of gas are almost all LNG that is brought by ship under long-term contracts and also stands little chance of running out.

With the other countries much depends on their relations with Russia and the size of their tanks. Hungary’s storage tanks hold 133 days’ worth of gas, which means it would run out on March 13 if its tanks were full when Russia turned off supplies, but earlier this year it signed a new gas supply contract with Russia and has locked in supplies for this winter.

Germany remains the most exposed, as it is almost entirely dependent on Russian gas imports. Despite having by far the largest storage tanks in Europe, its demand for gas is equally large and its tanks only hold 108 days of consumption – full tanks would run dry on February 16 and they are currently only 60% full, which would be emptied on December 8 if Russia turned off the gas tomorrow.

The EU as a whole is in the same position with an average storage capacity of 98 days of consumption, so full tanks run dry on February 6, but as the tanks for the whole of the EU are also 60% full, if the gas were turned off tomorrow Europe would run out of gas on November 28 (assuming an October 1 start to winter).

And the country in the worst position is Ukraine, which also has huge storage tanks accounting for about 20% of Europe’s entire capacity, but those tanks are currently only 21% full. In the normal course of things Ukraine’s hold enough gas for 135 days of consumption, which takes it through to the middle of March, but the current amount of gas will run out on October 29 if deliveries are turned off tomorrow and at best the end of November if the autumn is mild.

Ukraine is very likely to have an energy crisis this winter, as it has not imported gas from Russia for over three years and its European friends will be short of gas for themselves this winter.

So even if Europe gets to its 80% full tank target by October 1, it remains at Russia’s mercy, as it will still need to import gas during the winter from somewhere to cover the missing months, albeit at lower volumes than now.

It is not clear how much LNG can make up the shortfall, but in general LNG supplies can cover some 15% of Europe depend and there are also technical limits on how much LNG Europe can import due to the capacity of available LNG terminals in Europe. There are other sources of gas from production in Norway and the Netherlands, but it is not enough for everyone.

Depending on how aggressive Russia is and to what extent it reduces flows, the scenarios Europe may face could be extreme. Europe needs to cut its usage by 15%, according to study by Bruegel, if it is to get through the winter. In the more extreme scenarios, it would have to ration gas and order companies to reduce industrial production to make sure there was enough gas to heat homes.

Germany has already introduced the “alert” status, the second of the EU’s energy crisis warning system, while another 12 EU member states are on the first “early warning” state. German Vice-Chancellor Robert Habeck, in charge of the economy and energy, has ordered coal-fired power stations to be readied in case Germany runs out of gas. Germany uses the bulk of its gas for heating and only 15% is used for power generation, which can be replaced by coal-fired power plants.

With a 15% reduction in consumption and by making use of non-Russian sources of gas, plus the alternative power sources like nuclear and coal, Europe should be able to survive the upcoming winter, the think-tanks said. But it won’t be fun.

bne INTELLINEWS by Ben Aris, July 14, 2022

Oslo has said the oil fund will only shed its stakes in oil and gas explorers and producers. It was widely expected that the world’s biggest sovereign fund would dump all of its oil and gas investments for good.

The Norwegian government said on Friday its $1 trillion asset manager— the world’s biggest sovereign fund — will sell its stake in oil and gas explorers and producers but will continue to invest in energy companies that have refineries and are engaged in distribution and retail sales of oil and gas products.

The announcement means the fund will remain invested in Big Oil companies such as Shell, BP, Total and ExxonMobil, in which it owns significant stakes.

Oslo said the move is based solely on financial considerations and that it does not reflect any particular view of the oil industry’s future prospects. Return on the fund’s investment in oil and gas stocks fell 9.5 percent last year.

Norway’s central bank, which manages the mammoth fund, has long maintained that the divestment was aimed at reducing the country’s exposure to the energy sector. The fund is used to invest the proceeds of the country’s oil and gas industry, amounting to more than 20 percent of Norway’s revenue.

“The Government is proposing to exclude companies classified as exploration and production companies within the energy sector from the Government Pension Fund Global,” the finance ministry said in a statement. “The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline.”

It was widely expected that the fund would dump all of its oil and gas investments for good. Norges Bank, the central bank, had in 2017 proposed a total divestment of oil and gas stocks.

The fund had holdings worth around $37 billion — 5.9 percent of its total equity investments — in the oil sector at the end of last year. But a bulk of that amount is invested in integrated oil companies that are engaged in everything from exploration to selling fuel at the roadside.

‘Missed opportunity’

Norway’s decision evoked mixed feelings among climate activists, who were expecting Oslo to go the whole hog.

“It’s a lost opportunity,” Martin Norman of Greenpeace’s Norwegian chapter told DW. “We are running against time and Norway had a chance to move fast but instead decided to move slowly.”

Norman, however, said the Norwegian government’s announcement was a “step in the right direction” that would prompt other investors to back away from fossil fuels.

“The government has acknowledged the problem of over exposure to oil,” he said. “But I disagree with the medicine they are prescribing.”

By desi123.com, July 14, 2022

It’s not about the oil. This is what President Biden has said about its upcoming visit to the Middle East and, more specifically, Saudi Arabia. He even said, as reported by Politico, that he was not going to ask the Saudis for more oil. And yet it seems that few believe this. 

“No, I’m not going to ask them [to increase oil production],” the U.S. President said last week on his visit with the King and Crown Prince of Saudi Arabia.

“All the Gulf states are meeting. I’ve indicated to them that I thought they should be increasing oil production generically, not to the Saudi Arabia in particular. I hope we see them in their own interests concluding that makes sense to do,” he also said.

This is where Biden is quite wrong. It is not in the Gulf oil kingdoms’ interest to pump more. Most of them do not have any spare capacity, and the couple that do may have seriously overestimated that spare capacity. And this includes Saudi Arabia.

The issue of actual spare capacity came into the spotlight also last week when Reuters recorded France’s Emmanuel Macron telling Biden that the UAE was pumping near its maximum and Saudi Arabia could only add about 150,000 bpd to its production in short order.

“And then he [Sheikh Mohammed bin Zayed al-Nahyan] said (the) Saudis can increase by 150 [thousand barrels per day]. Maybe a little bit more, but they don’t have huge huge capacities before six months’ time,” the French President said, per the Reuters video footage.

According to estimates by the International Energy Agency, Saudi Arabia has a short-order capacity of 1.2 million barrels daily—the amount that can be added to current production in less than 90 days. The longer-term spare capacity, the IEA has estimated, stands at 2.1 million bpd. And the Kingdom’s sustainable production capacity is 12.2 million bpd, again per IEA estimates.

The problem with estimates is that they often tend to rely on insufficient information, including information supplied by the country with the spare capacity. But there is, in fact, no hard, verifiable data on Saudi Arabia’s or any other OPEC member’s spare production capacity. No OPEC member is obliged to report its spare capacity, and there is no way for the figures that they do report as spare capacity to be verified.

Per OPEC’s latest Monthly Oil Market Report, Saudi Arabia pumped 10.424 million bpd in June. That was 60,000 bpd higher than the average for May, and the Kingdom has pledged to boost production a lot more sharply this month and in August. But it might not be able to do it.

Reuters’ John Kemp noted in an analysis on the topic that Saudi Arabia has only ever reached a production level of 12 million bpd once, in April 2020. As for production sustained over a three-month period, the maximum demonstrated rate was 10.8 million bpd, pumped between October and December 2018, according to data from the Joint Organisations Data Initiative.

It gets even worse over a longer period. Per the data quoted by Kemp, Saudi Arabia’s maximum demonstrated output over a period of 12 months has been 10.5 million bpd.

So, on the one hand, Saudi Arabia is quite unlikely to have the resources needed to boost production in any meaningful way that would have an impact on international prices in the immediate term. But it also probably does not want to.

The thing about spare capacity in oil production is that it can be tapped in case of an emergency. But there is no oil emergency right now, not according to Riyadh. In fact, so far, Saudi Arabia, in the face of its energy minister and brother to the Crown Prince, Abdulaziz bin Salman, has claimed that the oil market is relatively balanced, but years of underinvestment in new production have now combined with sanctions to reduce supply.

The other thing about spare capacity in oil production is that once tapped, it stops being spare, if we are talking about more than a month or two. The less spare capacity, the less flexibility a producer would have when an actual emergency arises.

Saudi Aramco last year revealed plans to boost its production capacity to 13 million barrels daily. The expansion is scheduled to take until 2027, according to chief executive Amin Nasser. In other words, boosting the country’s maximum sustained oil production capacity by 1 million bpd will take eight years.

This does not mean there is nothing Saudi Arabia can do to boost production, according to Reuters’ Kemp. According to him, it could restart old wells that have been closed to “rest the fields” and maintain pressure, or they can drill new wells in producing fields.

Yet, while it could do these things, whatever its spare capacity actually is, the bigger question is whether Saudi Arabia would want to do these things. After all, it was just last month that Prince Abdulaziz said that the relations between Saudi Arabia and Russia were as warm as the weather in Riyadh.

Oilprice.com by Irina Slav, July 14, 2022

Exxon Mobil Corp.’s second-quarter refining earnings surged by as much as $5.5 billion, signaling a season of windfall profits for the fuel-making sector as consumers bear the burden of near-record gasoline prices.

Widening refining margins added as much as $4.6 billion during the quarter while the value of unsettled derivatives provided up to $900 million more, the Irving, Texas-based company said in a regulatory filing on Friday. Meanwhile, surging oil and natural gas prices boosted results by as much as $3.3 billion. 

Sky-high pump prices are intensifying broader inflationary trends and increasing pressure on political leaders to shield consumers through giveaways such as suspending fuel taxes. US President Joe Biden singled out Exxon’s profits for criticism last month, accusing the company of making “more money than God” at a time when consumers were suffering. 

Exxon’s bumper profits “are largely a result of underinvestment by many in the energy industry over the last several years,” spokesman Casey Norton said by email. The company invested in new supplies during the pandemic despite incurring a $22 billion loss in 2020, he noted.

Exxon has the largest refining footprint of the major oil companies at a time of soaring margins around the world due to high demand for gasoline and diesel and a shortage of facilities to make them. The world lost about 3 million barrels of daily refining capacity when the Covid-19 pandemic slashed consumption and fuel supplies have been further strained by Chinese export controls and sanctions on Russia.

High product prices and refining margins are “set to stay high for some time,” and at least through the first half of next year, Alastair Syme, an analyst at Citigroup Inc. write in a note.

Exxon invested almost $120 billion in capital projects between 2017 and 2021, more than double what it earned, Norton said. “We did this to meet society’s energy demands and, in fact, are investing more than any other US company to grow oil and natural gas production.”

RIGZONE by Kevin Crowley, July 8, 2022

Saudi Arabia’s refining capacity rose 13.7% in 2021, one of the biggest increases among its peers, as the world’s largest exporter for crude continues to expand its downstream capabilities, according to the latest OPEC Annual Statistical Bulletin.

The OPEC+ kingpin added 400,000 b/d of refining capacity in 2021, raising its overall capacity to refine crude to 3.327 million b/d. The increase was largely due to the addition of the 400,000 b/d Jizan refinery in the country’s Red Sea-facing western coast.

Jizan is currently operating at a “little over 200,000 b/d”, Saudi Aramco CEO Amin Nasser said earlier this year.

The company plans to incrementally raise operating capacity by adding gasifiers to the facility this year.

Saudi Aramco is developing the facility to be a major exporter of power by 2023.

Saudi Arabia’s refining capacity is likely to rise over the coming decade in one of the rare additions globally as its main oil exporting company Saudi Aramco looks for downstream joint ventures in China and India – the major centers for growth.

Aramco has an interest in China’s downstream sector as it looks to lock in demand for its crude in Asia’s largest economy.

Saudi Aramco decided to move forward with a 300,000 b/d oil refinery and petrochemical project in northeast China on March 10.

Aramco said it had taken the final investment decision to develop a liquids-to-chemicals complex under a joint venture with North Huajin Chemical Industries Group Corp. and Panjin Xincheng Industrial Group.

The company also plans to develop a $44 billion integrated refining complex at Ratnagiri on India’s western coast with Abu Dhabi National Oil Company. The project has faced delays due to the complexity of land acquisition in India and the opposition from local villagers. OPEC’s second-largest producer Iraq also saw a marked jump in refinery capacity additions. Refining capacity rose 34.7% to 1.116 million b/d in 2021 from 828,000 b/d in 2020.

The increase was largely due to the upgrades in Baiji and Basrah refineries. The Baiji refinery, which suffered damages during its takeover by the Islamic State added 87,000 b/d, raising its capacity to 140,000 b/d. The Basrah refinery added 70,000 b/d, raising its capacity to 350,000 b/d.

Product growth

Saudi Arabia also marked the highest growth in production of petroleum products, which rose 17% to 2.548 million b/d in 2021 from 2.177 million b/d in 2020, according to OPEC Statistical Bulletin. The growth in product comes amid accelerating efforts to capture the growing market for product and feedstock in Asia.

Saudi Aramco has plans to convert up to 4 million b/d of crude into chemical products by 2030, from 1 million b/d presently.

Upstream data

Saudi Arabia’s proven crude reserves remained largely flat at 267.192 million barrels in 2021. The country added six additional rigs, taking the overall count of active rigs in 2021 to 65. Saudi Arabia’s cumulative production rose 11.7% in 2021 to 9.125 million b/d from 8.166 million in 2010.

The kingdom is producing significantly higher with output in April averaging 10.45 million b/d, according to Platts’ survey of OPEC+ producers in June. The country has increased output in line with OPEC+ directives to expand supply. However, the expanded volume is still below its quota of 10.549 million b/d.

OPEC+ ministers are set to meet on June 30 ahead of a trip by US President Biden to pressure Saudi Arabia and its allies to bring more supply to the market.

S&P Global by Jennifer Gnana, July 5, 2022

The Netherlands is planning a €1.5 billion ($1.6 billion) green hydrogen network that will consist of 85% recycled natural gas pipes. It is expected to go online in 2027.

Gasunie, a state-owned natural gas infrastructure specialist in the Netherlands, has announced plans to build a national network that will link up “carbon-free” hydrogen supply and demand.

It said the network will have an initial capacity of 10 GW and its construction will require an investment of approximately €1.5 billion.

“The national hydrogen network must be ready in 2027 and will consist of 85% recycled natural gas pipes, supplemented by new pipes,” it said. “A major advantage of this is that the costs will be a factor of four lower than if entirely new pipelines were laid.”

The development of the first pipelines will likely start after the summer and regions with strong hydrogen development, such as Rotterdam and Groningen, will be prioritized.

“The interconnected national infrastructure will not only link our ports and industrial clusters with each other and with hydrogen storage locations, but also with our neighbouring countries,” said Gasunie CEO Han Fennema.

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The first parts of the network will be built in the northern Netherlands. They will eventually be linked with assets in northern Germany, with initial operations scheduled for 2025.

“In the field of hydrogen, we have gained experience with the underground pipeline that we converted to hydrogen three years ago in Zeeuws-Vlaanderen,” said Fennema, in reference to a 12-kilometer hydrogen pipeline that Gasuine built on existing gas infrastructure in 2018.

In April, Gasunie, Rotterdam-based bulk products supplier HES International (HES) and Dutch storage specialist Vopak signed a deal to jointly develop an import terminal for green ammonia as a hydrogen carrier.

“The terminal will operate on the Maasvlakte under the name ACE Terminal and will be operational from 2026,” the company said at the time.

Dutch transmission system operator Enexis, Gasunie, and Nederlandse Aardolie Maatschappij BV (NAM) began considering the use of excess solar power generation capacity in the northeastern Netherlands for hydrogen production in late 2019.

FocusTechnica by Peter Moore, July 5, 2022