Oil price, Rockhopper, Sound Energy, And finally…

A mixed day yesterday, it might have been worse as the EIA inventory stats were worse than forecast at a build of 4.95m barrels against expectations of +1.77m. Crude did stage a late comeback which saved the day to a certain extent. More on the OGA licences later when I have looked at them all.

Rockhopper has announced that it has commenced international arbitration proceedings against the Republic of Italy in relation to the Ombrina Mare project. This follows the decision by the Ministry of Economic Development not to award the company a production concession covering the Ombrina Mare field which has clearly resulted in very significant lost profits. It seems that the Energy Charter Treaty (ECT) that was set up in 1998 and had Italy as a founding signatory has been breached and damages and compensation are distinctly possible.

Given the wording of the statement from Rockhopper I would be incredibly surprised if they were taking this lightly and of course have said that they have taken ‘legal and expert opinions’ which must have helped make this decision. In addition to this the company say that they have secured non-recourse funding for the arbitration from a specialist in this form of claim. To you and me this means no win no fee and seems very wise, above a certain level RKH still get a ‘very material proportion’ of any award…

 

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An OPEC Deal Extension Isn’t As Simple As It Sounds

It’s been six months now that oil prices have been reacting to OPEC, first to the possibility of an agreement, and then to the production cut deal itself, forged by OPEC to rebalance the market. The deal–initially aired as ‘an agreement to agree on a deal’ in September and signed at the end of November—will likely impact the market for at least the next six months.

The agreement clearly states that it is production that OPEC producers are vowing to cut, but Iraqi oil minister Jabbar al-Luaibi has recently claimed—rather emphatically—that it is exports, not production, that serve as the baseline for the cuts. And according to Iraq, the agreed-upon cuts have been all about exports all along.

Of course, exports are the logical ‘by-product’ of production of oil exporting nations, but each of those producers feels the weight of production cuts differently. Each OPEC nation has a specific domestic demand for oil based on population numbers and the share of oil and petroleum products in the energy mix and electricity generation. Each member has unique buyers of their crude, along with differing agendas in keeping and/or growing market shares in various corners of the world…

 

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Light, sweet or heavy, sour? Oil industry needs new benchmark

The U.S. oil industry has changed dramatically in the past decade. Driven by technological advancements in drilling, crude oil production has reached new record highs and currently hovers at around the 9 million barrels-per-day (b/d) mark, up roughly 70 percent from 2007.

But nearly three-quarters of oil production in the U.S. is light sweet crude oil or condensate. That is the kind of crude oil a majority of U.S. refiners typically do not consume. Rather, Gulf Coast refiners, whose combined capacity of 9.6 million b/d makes up more than half of the U.S. total, are still largely consumers of medium-to-heavy sour crude.

U.S. refineries process a wide range of crude oil grades, and some have been adjusting their crude slates in recent years to take advantage of the growing supply of light sweet crude in North America…

 

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Dakota Access Pipeline races to start moving Bakken crude

Oil will likely flow through the Dakota Access Pipeline under Lake Oahe in North Dakota early next week.

Barring any more twists or turns — and there have been plenty in the last seven months of this project — the contentious 470,000 b/d crude oil pipeline will start commercial service very soon thereafter. It will open up a major new route for Bakken and Three Forks production to flow to Illinois and onto the Texas Gulf Coast.

A March 7 ruling by Judge James Boasberg of the US District Court for the District of Columbia cleared the way for the startup, when he turned down two North Dakota tribes’ request for a preliminary injunction to prevent oil from flowing under Lake Oahe. On Tuesday, he ruled against the tribes again in denying an injunction pending appeal by the US Court of Appeals for the District of Columbia Circuit…

 

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Benedict Peters: Nigerian firms fuelling the recovery

When Nigeria emerges from recession, the way we do business must change forever. This does not just mean an emphasis on diversification; though as the recession has bitten over the last 12 months, the need for diversifying the source of government revenues and our export base has never been more urgent. It means changing the fundamental approach that we – businesses – take to managing the primary fuel of our economic growth: oil.

Whilst there is nothing desirable about the hardships placed on businesses and their loyal employees in times of recession, one cannot deny the cleansing effect of the economic cycle. Recessions force businesses to identify, eliminate and fortify pockets of previously inefficient activity. Fat is cut, waste is curtailed and sweeping efforts to streamline are pushed to front of the queue.

The businesses which will not adapt rarely survive the downturn. But those who do emerge, emerge in a win-win situation. Not only are they more dominant in the market – a position which they then have to defend against newer entrants in the upturn – but through the newly found efficiencies, they are leaner and therefore more profitable…

 

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Letters: Oil sector poised for rebound

Once oil prices began to drop precipitously during the summer of 2014, so did capital expenditures on offshore energy exploration and production in the Gulf of Mexico. Louisiana’s economy suffered as result. Now we’re beginning to see offshore capital expenditures rebound, and that’s good not only for the Pelican State but for the entire country as well. A new study by the Norwegian analyst firm Rystad Energy found that for every dollar invested in the North American shale market this year, a dollar is also earmarked for the development of new offshore resources. Both will receive approximately $70 billion in capital expenditures in 2017, an equivalence not seen since 2013. Two new field development projects, by BP and Shell, have now been sanctioned for the Gulf of Mexico. This trend is driven in part by higher oil prices, which have climbed from a low of less than $30 per barrel to roughly $52 per barrel today — and by cost-cutting and efficiency improvements undertaken by the offshore drilling industry and its suppliers.

With offshore deposits again becoming sound investments, the impact of this rebound on Louisiana’s economy in terms of jobs, growth and tax revenue is clear. But it’s also good for the country as a whole, as the offshore energy industry contributes significantly to U.S. energy security and supports hundreds of thousands of jobs in all 50 states and contributes tens of billion dollars in economic activity each year…

 

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Voices: Pipeline bolsters our economy, preserves our environment

I write in response to a recently published letter (“Voices: What will Louisiana look like in 20 years?”). I don’t discredit the notion that tourism and the responsible management of Louisiana’s natural resources can bring immense value to the state’s economy. However, those goals are not mutually exclusive from the construction of energy infrastructure projects like the Bayou Bridge Pipeline. Louisiana can support the energy industry while also preserving its environment.

The oil and gas industry has been a crucial component of our state’s economy for decades, providing employment for countless residents and creating opportunity for several industries. If we look 20 years into the future, Louisiana’s economy would undoubtedly be much worse off without the energy industry.

It’s critical, then, to invest in projects that sustain not only the oil and gas industry but also preserve Louisiana’s environmental resources. The Bayou Bridge Pipeline stands as a sterling example of this type of investment. With the ability to transport up to 480,000 barrels per day of crude oil from Lake Charles to St. James, the pipeline will serve as a key connection for refineries in the Baton Rouge area…

 

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OPPOSING VIEWS: Foster Campbell: Coastal ruling lets oil companies off the hook, shows lack of concern

I’m very disappointed with the federal court decision letting major oil companies off the hook for damaging Louisiana’s coastal wetlands.

ExxonMobil, Royal Dutch Shell, British Petroleum and other companies may be happy that they again avoided liability for helping to erode our coastline, but the people concerned about this issue aren’t smiling.

Some politicians claim that Louisiana is better off for the ruling by the Fifth U.S. Circuit Court of Appeals stopping the 2013 lawsuit by the Southeast Louisiana Flood Protection Authority-East, but the facts are not on their side. The oil industry’s own studies admit that decades of drilling, canal-dredging and other coastal activities caused a significant part of Louisiana’s disastrous loss of coastline, which continues to this day…

 

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Why natural gas is the future — not coal

King Coal is dead, long live the king — in this case, natural gas. President Donald Trump has vowed to reverse coal’s dwindling hold as the fuel of choice. But the trend toward gas is undermining his coal boosterism.

The president recently repealed a  regulation, enacted under the Obama administration, that prevented the dumping of coal mining debris into nearby streams. That won cheers in coal regions like West Virginia, where during his election campaign last year, Mr. Trump decried what he called the “war on coal” and blamed “job-killing” environmental rules as the culprit. Indeed, U.S. coal employment, 126,000 in 1940, now is 53,000 and dropping.

While coal usage worldwide for electriciy generation has accelerated over the past quarter-century as less-developed nations expanded their economies, that trend has leveled off lately. And in the U.S., coal-fired generation has dropped 25 percent since 2008. Europe is the midst of a movement to ease away from coal, in keeping with the 134-nation Paris climate accord reached last year. “They just don’t want coal in Europe,” said William Clough, chief executive of CUI Global (CUI), which monitors gas pipelines there…

 

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Recent Russian oil production data confirms delayed compliance from minor producers

Russian oil output averaged 11.11 million bbl/d in February 2017, representing no further output reductions relative to the January 2017 level. Since the early December 2016, the Russian government has been reassuring the industry that the country will reach the production cut target of 300 kbbl/d relative to October 2016 by April 2017.

According to the latest production numbers by operator, the top three producers are on track with meeting their production targets. Rosneft contributed the most to the output reduction so far, while most of the smaller operators have not yet shown compliance with their individual production cut targets.

“Our Russian production forecast for March 2017 is 11.03-11.05 mmbbl/d, a cut of an additional 60 kbbl/d from February 2017 output. As of today, we see an upside risk to Russian oil output due to the lack of evidence of production cuts from the smaller producers” says Veronika Akulinitseva, Analyst at Rystad Energy…

 

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