January Oil and Gas News

Here’s a quick roundup of news stories from the last few weeks.

US Becomes a Net Gas Exporter for the First Time in 60 Years

Significant for the energy markets in Europe is news that the US is now a net exporter of gas for the first time, aided by LNG exports and buoyed by the gas they extract from fracking.

US Refiners Are Riding High With Strong Margins

After suffering in recent years with the downturn in value of refined oil products, it’s good to hear that refining is back in the black.

I notice that part of the credit is given to Trump and his tax reforms.

Oil at $70 Proves Too Hot to Handle for Some European Refineries

In contrast to the previous article it seems refiners in Europe are suffering.

India’s Reliance Declares 30pct Higher Refinery Capacity at Export Plant

Over in India, the World’s largest refinery increases capacity again.

“The new capacity is the equivalent of 704,000 bpd of crude processing.”

Wow – that’s proper massive!

Saudi’s Refined Oil Exports Offset Crude Curbs

This is an interesting side-story to the oil supply paradox as countries seek to increase revenue by exporting more oil which, in turn, causes prices to fall.

“The share of Saudi Arabia’s exports of refined oil products steadily rose throughout 2017, offsetting a drop in overseas crude oil sales as the kingdom complied with a global supply pact, the International Energy Agency said on Friday.”

So, as Saudi Arabia agrees to cut crude oil supply to maintain oil prices, they increase the supply of refined products to maintain revenues. This is something few other countries can do as refineries all almost all privately owned.

It also indicates Aramco’s strategy to move towards final products rather than relying on crude exports. Interesting.

50 South East Asian Fields ‘Likely’ to be Approved for Development to 2020

Over in the far east, as demand for energy grows they are looking to expand oil and gas production.

A large amount of LNG is already exported from the region. I visited the Malaysia LNG site in Bintulu a few years ago for some troubleshooting.

France’s Virtue-signalling slavish adherence to green dogma takes another step

Here’s a piece that I planned to post some time ago but never quite got around to;

In what must be one of the most bizarre political stunts in my memory, France will stop granting new oil exploration permits next year as it seeks to end all oil and gas production by 2040.

Yep, you read that right, end all oil and gas production by 2040.

“The proposed legislation is part of President Emmanuel Macron’s broader plan to take the lead against climate change, after U.S. counterpart Donald Trump ditched the landmark Paris agreement to fight global warming.”

Now France doesn’t currently produce a whole lot of oil, but Oil revenues are worth

“as much as 300 million euros ($358 million) in annual revenue, and accounts for as many as 5,000 jobs, directly and indirectly”

Of course France won’t stop requiring fuel, power or petroleum-based products so this plan will have Zero impact on global warming and CO2 emissions and is therefore complete folly.

But they will be able to feel morally superior to the rest of the Western World for taking this decision – perhaps with that warm fuzzy feeling they can turn down their heating, then they might actually make a difference to global warming!

IChemE Engages in project fear

If you’re a member of the Institution of Chemical Engineers

you’ll probably have heard about the EGM that’s taking place on 5th January with a vote of no confidence in the current President and Council of the IChemE as the motion.

You will also have seen a remarkable (and surely not coincidental) ramp-up in communications from the Institution – as I write this I have had four emails in five days.

The basic tenets of the motion against the Institution can be read in the attached. The response from the IChemE seems very similar to the Remain campaign during the Referendum;

those in charge do a great job, we’re looking at ways of changing and improving so let us get on with doing that, a No Confidence vote could leave us in a state of limbo and lead to a period of uncertainty.

And the most nonsensical reason –

we might lose our Royal Charter!

Welcome to Project Fear IChemE style.

If you want to read more about the arguments in support of the motion of no confidence then LinkedIn is a good place to start. I saw a recent article from Malcolm Harrison, former Chief Process Engineer at Foster Wheeler and someone I know quite well. He was certainly in favour of “shaking the tree” a little.

And that’s where I sit.

In my opinion, the IChemE is appalling value for money. I get very little for my £314 subscription per year – a monthly magazine that, in today’s 24-hour-news world is always out of date,  full of articles on R&D, sustainability, green initiatives, save the polar bears and let’s castigate those who (like me) work in Oil, Gas, Coal and nuclear.

OK, I get to put the letters after my name – but I worked damn hard for that. I get to join ONE subject group for free (others I have to pay for) – for what benefit I’m really not sure since many of them appear to have been dormant for years.

In today’s world of online forums, LinkedIn and Facebook groups I can chat to people and learn more than I could ever want to know for free, and offer advice to younger engineers when they ask. That you should have to pay more to join any of these SIGs is probably why they are largely defunct.

So which way am I going to vote?  Well it won’t surprise you to know that I’ll be voting in favour of the Motion of No Confidence for another taste of populism and in an attempt to get the IChemE to start providing value for money. Since they have an absolute monopoly in this arena let’s hope they listen.

Merry Christmas and a Happy New Year.

EU – how to lose friends and alienate people

Having come out in almost unanimous revulsion when Trump was elected as US President, the EU now finds itself potentially on the receiving end of the US Presidents’ hard-line approach to Russia.

Last autumn the EU, like much of the political elite across Europe, went into meltdown over Donald Trump’s election success;

Jean Claude-Juncker, who said, “The election of Trump poses the risk of upsetting intercontinental relations in their foundation and in their structure.”

and

Verhofstadt: Donald Trump poses profound threat to EU

and

one senior member even said President Trump would not be welcome in Europe

and

It’s a sad day for the world. Trump is the expression of a virus spreading across the US & Europe. EU should be the anti-body to this virus

and

electing Trump, “today is a sad day; A sad day for the entire world

In the mean time, Trump has united both US houses in looking to pass legislation to enable them to fine companies that are seen to be aiding Russia’s oil and gas expansion plans – some might think that the EU would welcome this, as they have also attempted to sanction Russia over its involvement in Crimea.

However, these new US rules are likely to hit a number of European companies including several German engineering firms.

So now the EU is faced with having to ask President Trump to make exceptions for EU businesses – something that would have been considerably easier had they taken the diplomatic decision to acknowledge that Trump was democratically selected by his Party to be their presidential candidate and, more importantly, democratically elected by the people of the United States of America to be their president. But then democracy has never been the EUs strong point.

Tough Times Continue

It’s been a while since I’ve blogged here, but I’m going to try and be more consistent again.

Although I got back in to work last July after a short 6-week lay off, things haven’t really improved that much in the industry.

Oil prices have stabilised around the $50/bbl mark and it seems that Saudi Arabia (along with most of Opec) and Russia are in agreement that this needs to be maintained – even if they agree about little else.

There is very little movement in the job market and few vacancies advertised so presumably there aren’t many new projects coming along just yet.

I find this really odd, as it’s clear that the oil price dip has stabilised and contractors and suppliers are desperate for work so prices are at rock bottom. Lead times are minimal as workshops are empty and agency rates are down between 30-50% from highs of a couple of years ago.

Many refineries are sitting on significant reserves built up during the period of low oil price but relatively high product prices so now would be an ideal time to use that money to invest – perhaps to expand capacity or allow processing of heavier/ sourer (and hence cheaper) crudes or even look to expand into more downstream units.

The danger of waiting too much longer is that individuals and companies will be forced out of business, so that when the market rallies and projects get started, contracting companies and suppliers will reach their limit more quickly, prices will rise steeply and lead times extend.

If I was in charge, I’d be looking to get in now.

India’s Big Plan for Growth

As one of the most populous nations on earth, India has the opportunity to be at the centre of global growth and demand over the next 30 years, but it needs a coordinated approach in order to truly benefit.

india

This article outlines some of the plans that are being considered;

India plans to form a giant national oil company by combining other state-owned firms, finance minister Arun Jaitley said on Wednesday, as New Delhi wants to expand its foreign presence to meet growing domestic fuel demand.

The problem is that India has a number of separate state-owned companies but individually, they do not have the necessary market capital that allows borrowing of the sums of money necessary for mega-investments.

India has about a dozen state-run oil and gas companies – including Indian Oil Corp, Oil and Natural Gas Corp , Hindustan Petroleum Corp and others – but alone they do not have the financial power to rival global oil majors in bids for overseas exploration and production assets.

Combining them “will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for shareholders,”

The potential for India, Indian companies and Western contractors/ suppliers/ engineers is massive. I hope it succeeds.

 

Egypt Emerging as an Energy Power

This is an interesting development for the North African region;

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Major international oil companies say they plan to step up their investments in Egypt, expecting to find more oil and gas now that ENI’s giant Zohr gas discovery has put its Mediterranean waters on the map.

A good few years ago I worked briefly on proposals for an LNG facility in Egypt which is now running (www.egyptianlng.com) but that was some while ago. Since then there hasn’t been much mention of Egypt on the international oil and gas market until now – as this article outlines.

Once a net gas exporter, Egypt has turned into a major importer in recent years as growing domestic demand outstripped production, but the discovery of the 850 billion-cubic metre Zohr field in 2015 is expected to change that.

The development goes further than reducing Egypt’s cost of importing gas and provides the potential for the Country to become a major player in the international gas markets of the future – refer to my last blog post as to why this is important for Europe – which is a good thing for North Africa as a whole.

 

 

 

Another EU Screw Up

Looks like Russia has outwitted the EU yet again.

Gas Holder 2

Gazprom’s bid to tap into a pipeline meant to wean Europe off Russian gas threatens to undermine a pillar of European energy policy and slow plans to develop rival deposits in the east Mediterranean.

This article outlines how Russia plans to make use of the new Trans Adriatic Pipeline (TAP) – which was intended as a means to reduce Europe’s reliance on Russian gas.

Unfortunately, EU ‘experts’ failed to spot a flaw in the plan to allow any company to bid to fill capacity in the expanded pipeline. Gazprom’s Alexander Medvedev said recently that the company was considering pumping gas through TAP;

“That would be very bad,” one EU official said. “It would be totally contrary to everything we have agreed with partners.”

Having prevented Russia from expanding gas exports via the South Stream project it’s not surprising that they see TAP as an alternative route into Europe’s lucrative gas market. But as usual with the EU, they haven’t grasped the full impact of their meddling;

EU sources said Russian gas flows via TAP may jar with the terms set by its financial backers, such as the European Investment Bank. The bank said it is carrying out due diligence.

At most, officials say they could extend an exemption from EU anti-trust rules to TAP in order to keep Gazprom out, but Brussels would require the firms and governments concerned to initiate the move.

And as usual, the EU’s solution is more regulation and red tape to cover up their failures.

 

 

Beware of Scam messages through LinkedIn.

Yesterday I received a LinkedIn request from Bob Dudley, CEO of BP, to join his network.

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I have to say I was quite flattered and not a little surprised that such an august figure should request me to join his circle. But I did recently spend two and half years on the successful BP Shah Deniz 2 project and assumed that this had something to do with it.

A few hours later I received a message from Bob that read “Dear Chapman,  Bob” with an attachment.

Needless to say I immediately suspected a scam, not least because my Christian name is Paul, not Chapman. So I looked more closely at the profile of this Bob Dudley (which had no profile picture by the way) and saw that he had just 22 connections – not many for a very senior figure in the global Oil and Gas industry – and the email address associated with the account was a strange gmail account.

The message was reported to LinkedIn as a scam/ phishing email.

Just for fun I searched LinkedIn for “Bob Dudley BP” – you would be amazed how many entries there are!

Beware, scammers are operating everywhere.

The Battle For Market Share

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It’s been a while since I blogged about the Oil Price, and since my last note it does appear that things have stabilised and prices are slowly creeping up.

This is good news for for the Oil and Gas Industry and is starting to provide the comfort that producers need to start spending money on new plant again. In particular, it seems that refiners who profited most from the low oil prices early on and have a cash reserve available are starting to look at developing and upgrading their facilities for new and emerging markets.

They are also taking the opportunity to adapt refineries to be able to process heavier (cheaper but poorer quality) crudes and to meet more stringent EU and US fuel specifications.

This article from World Oil paints an interesting picture – a stand-off between those who were prepared to sell on even when oil prices plummeted and those that preferred to keep their oil in reserve and wait for higher prices to return.