First time in a decade global oil demand expected to drop

LONDON (Bloomberg) - Global oil demand will drop this quarter for the first time in over a decade as the coronavirus batters China’s economy, the International Energy Agency said.

The new estimates show that oil markets face a significant surplus despite the latest production cuts by OPEC and its partners. Crude already sank to a one-year low below $50 a barrel last week and the impact of the epidemic will be felt throughout the year, the agency said.

“Demand has been hit hard by the novel coronavirus and the widespread shutdown of China’s economy,” the Paris-based IEA said. “The crisis is ongoing and at this stage it is hard to be precise about the impact.”

World fuel consumption -- which had previously been expected to grow by 800,000 barrels a day during the three-month period, compared with a year earlier -- will instead contract by 435,000 a day, the IEA said in its monthly oil market report.

For 2020 as a whole, the virus will curb annual growth in global consumption by about 30% to 825,000 barrels a day, the lowest since 2011. The effects will be more significant than those of the 2003 SARS epidemic because of China’s increased importance and integration within the world economy.

The outbreak has shuttered businesses and prompted the quarantine of tens of millions of people in China, the world’s biggest crude importer. The country accounted for about 75% of last year’s oil-demand growth, according to the IEA, which advises most major economies.

Earlier this week, the U.S. Energy Information Administration also cut its demand outlook due to the virus. The EIA lowered its first quarter global petroleum and liquids consumption forecast by 880,000 barrels a day.

U.S. crude futures have fallen 17% this year as traders assessed the impact of the epidemic. Consumers are unlikely to benefit from the drop in fuel prices because the disease will inflict damage on the wider economy, the IEA said.

The outbreak has prompted Saudi Arabia, the world’s largest oil exporter, to push its allies in the Organization of Petroleum Exporting Countries and beyond to consider an emergency meeting and further production cuts. However, Russia, the kingdom’s most important partner in managing supplies, has so far resisted the initiative.

Even though the group launched new supply curbs at the start of this year, the slump in demand threatens markets with a surplus of about 1.7 million barrels a day during the first quarter and 560,000 in the second. Last month, OPEC was already pumping the least crude since the financial crisis of 2009, according to the IEA.

The OPEC+ alliance had already faced an oversupply in the first half of 2020 because of the ongoing output surge from U.S. shale-oil drillers, the agency said. That industry is likely to remain resilient against the price slump until later in the year, it predicted.

Given the abundance of supply, disruptions in OPEC members such as Libya and Nigeria are having little impact on prices, the agency said.

Read More

9:03:00 PM | 0 comments

Oil declines as Saudis boost output, China balks at trade truce

NEW YORK (Bloomberg) - Oil slid the most in two weeks after Saudi Arabia boosted crude output by more than a million barrels a day against the backdrop of renewed worldwide trade woes. Futures fell as much as 2.5% in New York on Thursday. The Saudis lifted daily production to about 9.8 MMbbl just weeks after crippling missile attacks on crucial installations, consultant JBC Energy said. That supply increase comes amid signs that Chinese officials are resisting some of U.S. President Donald Trump’s key trade demands. Canadian drillers may also add crude supplies to the market after the government loosened output caps for companies that will ship Albertan oil via railroad. “We have to keep an eye on the trade deal,” said Ashley Petersen, oil market analyst at Stratas Advisors in New York. “This is going to be a problem from the rest of the year so there’s going to be more inter-week volatility to come.” Thursday’s slump dashed what would have been crude’s first monthly gain since July. In addition to international developments such as the Saudi recovery and Chinese trade, TC Energy Corp. declared force majeure after it shut a major U.S. pipeline because of an oil spill. West Texas Intermediate for December delivery lost $1.31 to $53.75/bbl at 10:56 a.m. on the New York Mercantile Exchange. Brent for December, which expires Thursday, fell $0.48 to $60.13 on the London-based ICE Futures Europe Exchange. The global benchmark crude traded at a $6.38 premium to WTI. Chinese policy makers are gathered in Beijing for a key political meeting that’s set to conclude on Thursday. In talks ahead of that plenum, some officials have relayed low expectations that future trade negotiations could result in anything meaningful unless the U.S. is willing to roll back more tariffs. Elsewhere, Royal Dutch Shell Plc cast a warning for next year, with Chief Financial Officer Jessica Uhl saying that oil price expectations for 2020 are trending lower.

Read More

7:04:00 AM | 0 comments

Jemena's Atlas Gas Pipeline in Queensland Completed

Senex Energy announced Wednesday that first gas production has been achieved at Project Atlas following completion of Jemena's Atlas Gas Pipeline in Queensland, Australia.

(source: Senex Energy)

Jemena reached mechanical completion of the pipeline less than three months after construction began in July. Construction of the Project Atlas gas processing facility is ongoing, with commissioning of the facility and pipeline to begin soon, Senex said.

Senex and Jemena said they continue to achieve all stated milestones for Project Atlas, with first sales gas expected by the end of calendar 2019.

Project Atlas is the first acreage in Australia designated to supply gas to the domestic marketand will supply major Queensland manufacturers.

“Achievement of this latest milestone by Jemena supports Senex in its continuing transformation into an important supplier of natural gas to the east coast market," said Senex Managing Director and CEO Ian Davies. “Project Atlas is supporting both local construction jobs and the manufacturing industry."

The Atlas Gas Pipeline Project plays an important part in delivering Jemena’s Northern Growth Strategy, which seeks to build an interconnected supply chain of energy delivery assets in northern Australia through targeted acquisitions and greenfield developments.

Senex's Project Atlas drilling campaign commenced in August 2019, and 11 wells of the planned 60-well campaign have now been drilled and completed, the company said.  The first four wells were recently brought online and produced gas immediately, it said.

Project Atlas gas will be produced to flare prior to expected commissioning and start-up of the 15 petajoule per annum gas processing facility.

Senex said it has contracted most of its expected gas production volumes in 2020,with more contracts currently under negotiation.

“Senex was granted the petroleum lease for Project Atlas in March 2018. The delivery of a greenfield natural gas development in 18 months is an outstanding achievement, Davies said.

“The remainder of 2019 will be active and exciting as we bring more wells online, commission the gas facility and increase production to meet sales agreements commencing 1 January 2020,” Davies added.

Senex and its partners continue to meet all development milestones for the Project Atlas and Roma North work programs. These will deliver a Surat Basin gas production rate of 18 petajoules per annum by the end of FY21, with low cost expansion options, the company said.

Read More

9:47:00 AM | 0 comments

Pembina Pipeline has agreed to acquire Kinder Morgan Canada and the U.S. portion of the Cochin Pipeline system in $3.3 Billion

HOUSTON (P&GJ) — Calgary-based Pembina Pipeline has agreed to acquire Kinder Morgan Canada and the U.S. portion of the Cochin Pipeline system in a C$4.35 billion (US$3.3 billion) deal that expands Pembina's crude oil storage capacity in a period of high regional demand.

Kinder Morgan Canada's Vancouver Wharves (photo: KML)

The sale includes a significant crude oil storage and terminalling business in Western Canada's key energy complex, including the Edmonton storage and terminal business and Vancouver Wharves, a bulk storage and export/import business. The complex connects Pembina's conventional and oil sands pipelines to all major export pipelines.

The transaction includes 100% of the 1,810-mile Cochin Pipeline system, including the Canadian portion owned by Kinder Morgan Canada and the U.S. portion, which accounts for nearly half of the deal at C$2.05 billion (US$1.54 billion).

"(The acquisition) represents an ideal opportunity to continue building on our low-risk, long-term, fee-for-service business model while extending our reach into the U.S. through a highly desirable cross-border pipeline, said Mick Dilger, Pembina's president and CEO. "Further, it will enhance our diversification as well as Pembina's customer service offering as a leading provider of integrated services to hydrocarbon producers in Western Canada."

The 95,000-bpd Cochin system, which currently imports condensate into the Alberta region to dilute its heavy oil production, crosses seven three U.S. states and three Canadian provinces.  It connects Pembina's operations in the Channahon, Bakken and Edmontonareas to markets in Mont Belvieu, Conway and Edmonton. Pembina said there is also potential to connect the eastern leg of the Cochin system to its assets and markets in Sarnia, Ontario.

The Edmonton crude oil complex includes 10 million barrels of storage capacity, inbound and outbound connectivity, which Pembina views as "highly attractive in the current environment."  Pembina said it has identified a number of expansion possibilities at Vancouver Wharves, a 125 acre bulk marine terminal facility that currently transfers more than 4 million tons of bulk cargo annually.

Crude oil storage has been in high demand in Canada, as production from Alberta's oilfields has  exceeded pipeline takeaway capacity and producers have limited transport options. Kinder Morgan Canada assets included in the sale are:

Asset	Capacity
Edmonton South Terminal	5,100 mbbl (storage)	15 tanks under long-term lease agreement from Trans Mountain. Storage capacity is contracted to 3rd parties in unregulated service (merchant tanks)
North Forty	2,150 mbbl (storage)	Merchant crude oil storage and blending services
Base Line Terminal	4,800 mbbl (storage)	Operated 50/50 joint venture with Keyera (six tanks placed into service through June, 2018; remaining six tanks will be placed into service by year-end 2018)
Edmonton Rail Terminal	210 mbpd (capacity)	Operated 50/50 joint venture with Imperial Oil (largest origination crude-by-rail terminal in North America)
Alberta Crude Terminal	40 mbpd (capacity)	Non-operated 50/50 joint venture with Keyera (fully contracted)
Vancouver Wharves	4.0 mmtpa bulk + 1,500 mbbl per year	Bulk commodity marine terminal provides handling, storage, loading and unloading services

This is an attractive transaction for (Kinder Morgan) KMI and (Kinder Morgan Canada) KML stockholders,” said Steve Kean, CEO of Houston-based Kinder Morgan. “It enables KMI to reduce leverage and gives us the flexibility to create additional value for shareholders through share buybacks, project investments, or both.”

The deal is expected to close late in the fourth quarter of 2019 or in the first quarter of 2020, subject to customary closing conditions, including KML shareholder and regulatory approvals.

Kinder Morgan's sale of Kinder Morgan Canada follows its $4.5 billion sale of the Trans Mountain Pipeline system and Trans Mountain Expansion Project to the government of Canada in August 2018.

Read More

3:52:00 PM | 0 comments

Refinery Unit Owned By Pertamina Caught in Fire after Pipeline Repair

Balikpapan, Indonesia  (Pipeline-Engineer.com) A fire broke out in one of the pipes in the RU V Balikpapan refinery area, East Kalimantan, Thursday morning (8/15). Sparks were suspected to have arisen at around 9.30 WITA when the pipeline was repaired.

Fire fighting has been successfully carried out by Pertamina RU V using foam and water media, by deploying 4 units of fire trucks and 1 unit of trailer foam. According to the Manager of Region Communication Relations and CSR Pertamina MOR VI Kalimantan, Heppy Wulansari, the location of the fire has been localized and the main fire lane successfully extinguished.

Until the outage is complete there is no evacuation of workers and the blackout can be handled by the Pertamina team. "The cause of the fire is still awaiting the results of an investigation by Pertamina's internal team," he said.

Read More

6:30:00 PM | 0 comments