Business Monitor has just released its latest findings on Nigeria’s volatile oil and gas sector in its newly-published Nigeria Oil and Gas Report.

The report notes that Nigeria's hydrocarbon sector continues to struggle amid a worsening political and business environment. Most recently, Chevron’s decision to move out of the OKLNG project signals that even the large upside potential of the Nigerian gas market is not sufficient to offset the degradation in investor sentiment. The weak output flows in 2012 were the consequence of flooding, repeated oil thefts and regulatory uncertainty. Business Monitor expects continued feeble production from 2013 and for the following two years. They note that output should ramp up more significantly as many large fields come online after 2014, more than offsetting current depletion. Adoption of the Petroleum Industry Bill, which they expect around Q413-Q114, would, Business Monitor believe, be a strong signal for investors that Nigeria's hydrocarbons sector is ready to move forward.
 

The main trends and developments Business Monitor highlight for Nigeria's oil & gas sector are as follows:
 

■ China agreed on a US$1.1bn loan deal with Nigeria bearing a very advantageous interest rate. In

exchange, the West African country will allow the lender to get a privileged access to natural resources

including oil. Business Monitor expect that, as such, further deals could be an occasion for Nigeria to revive its oil and gas sector by boosting export potential for producers.


■ Chevron decided to withdraw from the OKLNG project following the path Shell adopted last year. This brings another blow to Nigeria's gas market limiting further upside potential for liquefied natural gas (LNG) exports. The report notes, however, that the soon-to-open Escravos GTL plant could help monetise part of the gas currently flared.


■ Disturbances and outages due to oil thieves are continuing throughout 2013, with Shell having declared force majeure on Bonny Light exports several times since the beginning of the year. Business Monitor therefore forecast that 2013 production will be slightly lower than 2012 estimates, reaching 2.50mn barrels per day (b/d).


■ Business Monitor expects oil production to increase from an estimated 2.5mn b/d in 2012 to 2.70mn b/d by 2020, as ambitious projects such as Usan (180,000b/d) peak and Egina (150,000-200,000b/d) come on stream in the coming years.


■ Consumption of crude is forecast to rise at a compound annual rate of 7% year-on-year between 2012 and

2022, boosted by anticipated strong GDP growth. Business Monitor forecast consumption rising from an estimated

252,000b/d in 2012 to 495,000b/d by 2022.
 

■ Business Monitor forecasts gas production increasing from an estimated 36.4bn cubic metres (bcm) in 2012 to

56.2bcm by 2022, as the authorities and companies reduce the practice of flaring and start monetising associated gas resources.
 

■ Booming demand from the government's ambitious power sector plans and large export engagements will thus bolster production growth. The report sees Nigerian gas consumption rising from an estimated 5.8bcm in 2012 to 15.0bcm by 2022.
 

■ Nigeria National Petroleum Cooperation (NNPC) is aiming to more than double its annual production of LNG, from 22mn tonnes per annum (tpa), or 30.36bcm, to over 52mn tpa (71.76bcm). This was announced on September 19 2012, at a forum of LNG producers and consumers held in Japan. Group Nigeria managing director of NNPC, Andrew Yakubu, gave no deadline as to when this target would be met, but he did clarify that new LNG projects in Nigeria will help the company meet this goal.
 

■ In October 2012 Nigeria's Petroleum Minister, Diezani Allison-Madueke, announced that the government is planning to direct more than US$1.6bn towards the repair of three of its refineries. The maintenance work started in late 2012 and is due for completion in October 2014. The three refineries are located in Port Harcourt, Warri and Kaduna. The Port Harcourt refinery is currently halted indefinitely, as oil thieves damaged the feeding pipeline in early 2013.

Business Monitor is a leading, independent provider of proprietary data, analysis, ratings, rankings and forecasts covering 195 countries and 24 industry sectors. It offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities.

Keep up-to-date with Business Monitor's latest Oil & Gas insights here

A leading engineering consultant says the 2013 rate of investment in North Sea assets is unsustainable and that more carefully-targeted maintenance is now essential for the region to stay profitable.

Philip Lawson, of ABB Consulting in Aberdeen, says North Sea operators are only likely to achieve an acceptable return on investment if they maintain and invest in the right areas from now on.

Offshore industry body Oil & Gas UK recently revealed* that maintenance on ageing infrastructure had dented outputs for 2013, with levels at a record low. Average output for the year has been forecast at between 1.2m and 1.4m barrels of oil and gas per day (BOEPD), down from 1.54m in 2012.

The drop has been attributed to downtime caused by the extent of asset improvements and repairs that have taken place this year, with investment estimated at £13.5bn so far.

Lawson, who is due to address delegates at September’s Offshore Europe exhibition in Aberdeen, said: “There is no question the region can still be profitable for many years to come, but maintenance programmes must now be targeted very carefully in order to achieve those targets.

“There has been record investment in assets this year but it cannot continue at that rate if an acceptable ROI is to be achieved.

“Assets may be ageing but many of them are capable of safely reaching the end of their design life, particularly over the next two decades as activity in the North Sea slows down.

“It is possible, therefore, to target the right areas effectively – applying maintenance only to the right equipment and systems at the right time, and prioritising investment in areas that are most likely to fail.”

He said it could sometimes be difficult for those working offshore to identify priority areas, which meant onshore support and consultancy was playing an increasingly vital role in the industry.

“Sometimes it can be hard without an outside perspective to identify the most critical assets correctly. Resources and skills are currently at an absolute premium so strategies have to be implemented perfectly in order to achieve profitability for the next 20 years,” he added.

* Oil and Gas UK’s 2013 Economic Report

Noble Corporation (NYSE: NE) announces that its Board of Directors has approved a plan to separate a business comprised of many of its standard specification drilling units, resulting in the creation of two separate and highly focused offshore drilling companies.  The drilling units that would be owned and operated by the new company comprise most of the standard specification drilling units in the Noble fleet, including five drillships, three semisubmersibles, 34 jackups, two submersibles, and one FPSO.  The new company would also be responsible for the Hibernia platform operations.  Noble will continue to own and operate its high-specification assets with particular operating focus in deepwater and ultra-deepwater markets for drillships and semisubmersibles and harsh environment and high-specification markets for jackups.

The plan approved by the Board of Directors involves the separation of the standard specification business through the distribution of the shares of the new company to Noble shareholders in a spin-off that would be tax-free to shareholders.  Subject to business, market, regulatory and other considerations, the separation may be preceded by an initial public offering of up to 20 percent of the shares of the new company. Consummation of the transaction is contingent upon the receipt of a tax ruling from the IRS, which Noble expects to receive soon.  If Noble proceeds with the IPO as part of the spin-off, Noble expects that the new company would file a registration statement for the IPO with the U.S. Securities and Exchange Commission in late 2013 or early 2014.  The transaction is also subject to the approval of Noble's shareholders, which the company anticipates seeking in the second quarter of 2014.  Noble anticipates that the spin-off would be completed by the end of 2014.  Noble expects that the new company would use the net proceeds from borrowings by the new company (and the IPO if undertaken) to repay to Noble the debt the new company would incur to Noble in order to acquire the standard specification business and assets from Noble.  Noble expects that, in turn, it would use such proceeds to repay outstanding indebtedness of Noble and its subsidiaries.

The purpose of the separation is to:

•    separate Noble's existing rig fleet into high specification and deepwater and ultra-deepwater assets, which will remain with Noble, and many standard specification assets, which will comprise the new company's fleet, as set forth in the attachment to this release;

•    allow each company to have a more focused business and operational strategy;

•    enhance each company's growth potential and overall valuation of its assets;

•    provide each company with a greater ability to make business and operational decisions in the best interests of its particular business and to allocate capital and corporate resources with a focus on achieving its strategic priorities;

•    better utilize the professionalism and skills of Noble's team and culture to deliver excellent service, safety and operational integrity to its customers;

•    improve each company's ability to attract and retain individuals with the appropriate skill sets as well as to better align compensation and incentives with the performance of these different businesses; and

•    allow the financial markets and investors to evaluate each company more effectively.

David W. Williams, who will remain as Chairman, President and Chief Executive Officer of Noble, said, "The purpose of the separation is for Noble to move forward with our development as a robust high specification and deepwater drilling company through continued execution of newbuilds and fleet enhancements.  By separating these two businesses, we believe each company will be able to better leverage the overall value of its fleet by focusing on the drivers of its particular business."

There can be no assurance that Noble's proposed plan will lead to an initial public offering or spin-off of the new company or any other transaction, or that if any transaction is pursued, that it will be consummated. This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, any securities. This announcement is being issued pursuant to, and in accordance with, Rule 135 under the Securities Act of 1933, as amended.

Due to limitations imposed by U.S. securities laws, Noble will not hold a conference call to discuss the contents of this release.

For more detailed information click here

NYC-based PIRA Energy Group reports that Brent crude prices have moved higher and are likely to stay strong. On the week, U.S. commercial stocks increased. In Japan, crude imports rose sufficiently to produce a moderate stock build. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Bullish Oil Prices

It is hard not to be bullish oil prices with the global economy gradually improving, tight physical oil markets and MENA turmoil, which is already substantially reducing global oil supplies and has the potential to reduce supplies further. Current positioning and likely September deflationary type headlines, due in part to a challenging calendar, but also the startup of Iranian nuclear negotiations, pose downside risks to oil prices. Yet, the burgeoning momentum to own oil seems poised to push oil prices higher for now with SPR chatter somewhat limiting the upside.

Slight U.S. Commercial Stock Build

Commercial inventories increased for the week ending August 30 as product stocks swung from a draw the week before to a build. Added supply resulted from reported product demand weakening and product output increasing. This more than offset a product import decline. Last year for the same week, product stocks declined as refinery operations were curtailed by Hurricane Isaac. Hence the year on year product stock excess widened with the bulk of the excess in gasoline and other products.

Japanese Crude Runs Decline as Turnarounds Gear Up

Crude runs began to decline as turnarounds started to gear up and crude imports rose sufficiently to produce a moderate crude stock build. Gasoline demand eased modestly, while gasoil demand remained strong. Stocks of both posted only modest changes on the week. Kerosene demand perked up and with a lower yield the stock build rate slowed. Refinery margins remain very poor.

Saudi Formula Crude Prices for October Tightens for Asia, Less Aggressive in Europe

Saudi’s formula prices for October were recently released. In Asia, differentials were raised most aggressively on lighter grades, but the differential for Arab heavy was left unchanged. While the price adjustment was termed "less aggressive" than market expectations, refiners still cannot be too pleased given the woefully weak refining margins, particularly for topping configurations.

Cushing Stocks Drop 15 Million Barrels in Last 9 Weeks

Crude stocks at Cushing, Oklahoma have fallen for nine consecutive weeks – a total of 15 million barrels since late June. Southern price spreads remained tight, with WTI discounts to Atlantic Basin light crudes averaging $4-5/Bbl in August. Northern spreads were mixed, as oil sands upgrader maintenance restricted synthetic crude supplies while raising bitumen production.

Slow Stock Building in U.S.

Propane building season continues but at a slow pace, despite the latest week's surge, in the U.S. as exports remain quite high, petchem feed usage is ongoing and the crop drying season is just weeks away. Europe is starting to attract cargoes as North Sea maintenance continues and petchem feedstock usage is quite favorable. The Northern Hemisphere needs to start preparing for the upcoming heating season.

U.S. Ethanol Prices Soar

U.S. ethanol prices rose to a two-month the week ending August 30. The jump was primarily due to the scarcity of corn in the Midwest, causing ethanol production to drop to a 21-week low. Also providing support were petroleum prices which rose to a two-year high.

The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.

By Steven Kopits, Douglas-Westwood, New York

Alaskan oil production peaked in 1988 at around 2 million bpd and has been falling since, possibly down to 510kbpd this year. Virtually all of this production flows through the 800 mile Trans-Alaska Pipeline (TAPS), to Valdez, in southern Alaska. But TAPS is struggling, operating below a quarter of its capacity, with fears that it will lose its viability below 300kbpd.

In the wake of the run-up in oil prices before the recession, then governor Sarah Palin brought in a 75% tax rate from 2007. This stalled investment and production decline rates increased to nearly 7% from 4% a decade earlier. Alarmed by this, the current governor, Sean Parnell reduced the top tax rate to 35%. This brought promises of investment by BP and ConocoPhillips. However, expectations remain modest, at best to reduce declines to 20kbpd / year from the current 40kbpd pace. If expectations are met, TAPS will reach the 300kbpd threshold in 2024, rather than 2020. Many Alaskans are unimpressed and are forcing a referendum to re-instate the higher tax rates – they see the end of the state’s golden age of oil and want to get all they can, while they can.

On the other hand, Shell has big plans, as much as 1.8 mbpd from Alaska’s Outer Continental Shelf, 40% more than Gulf of Mexico production today. But cost to first oil is in the $40-60 bn range, and one has to wonder whether Shell has the fortitude to hold out until initial production in 2025. Indeed, Goldman Sachs spent much of a recent report berating Shell for “overspending in low return assets and unproductive capital”. Shell’s incoming CEO, Ben van Beurden, comes from the chemicals division, where he managed to increase profitability and lower Capex. Will a downstream manager feel the exotic lure of Alaska as much as the upstream team has? Or will he decide that 2025 is just too long for investors who are looking for cash quarter by quarter? Alaskans have good cause to feel nervous.

NYC-based PIRA Energy Groupbelieves that Asia Pacific refinery margins begin recovering and global crude markets are supported. On the week, the U.S. had a small stock build, while Japanese stocks drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Asia Pacific Refinery Margins Begin Recovering, Global Crude Markets Supported

Refinery margins in Asia are starting to recover from poor levels amid increasing refinery turnarounds and good demand growth. Global crude markets are supported by continuing supply outages, and with strong crude stock draws resuming in November and increasing sharply into December. Product demand growth increases seasonally through year-end which should support improved cracks, particularly gasoil, and refinery margins.

U.S. Small Stock Build

Crude stocks surprised to the upside with a sharp drop in runs for the week ending September 20, making the week earlier 16.1 MMB/D print an outlier, while product stocks fell for the second consecutive week. Crude stocks remain above average, but this is largely due to new infrastructure to service growing U.S. production, while the inventories of the four major products are below the historic average. The stock excess to last year widened, particularly gasoline. Last year's stocks were especially low and the current gasoline inventory level is equal to the average of 2009-2011.

Japanese Crude Runs Continue Declining, But Crude Stocks Draw

Crude runs continued declining as turnarounds ramp up. The crude import rate was sufficiently low to produce a large crude stock draw. Gasoline demand was higher with a low yield that drew stocks. Gasoil demand stayed low reflecting holiday impacts and despite lower exports, yield dropped sufficiently to keep stocks flat. Refining margins began to improve, but remain statistically poor.

Higher U.S. Octane Values Here to Stay

U.S. octane value has trended higher in 2012 and 2013. One of the main reasons is that the U.S. has effectively reached its maximum ethanol utilization, and gasoline blenders cannot adjust octane with additional volumes of ethanol. In addition, increasing runs of paraffinic U.S. shale crudes are putting downward pressure on catalytic reforming yields and generating substantial quantities of low octane light naphtha.

Refiners Continue to Maximize Diesel/Gasoil Yield

In the Atlantic Basin, refiners have responded to the higher price of diesel/gasoil vs. gasoline by steadily increasing diesel/ gasoil yields as a percentage of crude. Even in Western Europe, where it was thought refiners were close to maximum diesel/ gasoil yields in 2007-8, yields have continued to creep up. In the United States, diesel/ heating oil yields have increased from roughly 26-27% to over 30% or more. Hydrocracking additions have played an important role.

VLCC Rates Improving

VLCC rates improved somewhat when chartering activity picked up substantially in September as production from Saudi Arabia continued at record levels. While this has produced only a modest increase in rates, it has at least kept rates from falling further in an over-supplied market. On the vessel supply side, the international order book seems to have bottomed with the focus increasingly on product tonnage. The biggest new developments are in the U.S., where high rates, thin spot markets, and uncertain availability have prompted a significant increase in orders for Jones Act tonnage.

Chemical Demand Supporting Propane

Preparations for winter are beginning, with a far better crop drying season than last year anticipated. Higher demand and exports will keep U.S. propane inventory relatively low. Propane remains a preferred feedstock over naphtha in international markets.

Ethanol Manufacturing Margins the Highest Since November 2011

Ethanol prices rose in most of the U.S. the week ending September 20, reversing some of the prior week’s losses. Cash Margins for ethanol manufacture were the highest since November 2011. RIN prices fell to the lowest values since February.

Ethanol Output and Inventories Decline

U.S. ethanol supply was tight the week ending September 20 as production fell to 832 MB/D from 838 MB/D in the previous week and inventories declined by 565 thousand barrels to 15.6 million barrels. PADD I stocks are at the lowest level in over 3 years.

The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.

Click here for additional information on PIRA’s global energy commodity market research services. 

NYC-based PIRA Energy Group reports that U.S. crude stocks declined relative to the same week last year. On the week, U.S. commercial inventories declined, while Japanese stocks rose. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

U.S. Commercial Inventories Decline

Commercial inventories declined for the week ending September 13 led by lower crude inventories but also lower gasoline and distillate. U.S. commercial stocks are now 12.7 million barrels above last year. This is down sharply from last week due both to the stock draw this past week and the huge stock build for this same week last year. The excess continues to be largely in gasoline. While crude is down compared to last year and distillates are nearly flat and remain quite low relative to history.

Japanese Crude Imports and Stocks Rise, Demand Weakens

Crude stocks and imports jumped and gasoline demand was surprisingly soft. Kerosene stocks returned to building mode as demand eased back. Refinery margins remain abysmal with gasoline cracks being the biggest drag, though fuel oil cracks are also very weak.

Low Propane Stocks in the U.S. and High Levels of Feedstock Usage

High levels of propane exports and on-going feedstock usage will keep propane stocks relatively low going into the winter. Growing LPG imports into Europe as well as the winding down of North Sea maintenance are pressuring prices. Steam cracker operators should be maximizing propane use in both Europe and Asia.

Ethanol Values Plummet

U.S. ethanol values plunged for the week ending September 13 as the 2013/2014 corn harvest has begun and corn prices have fallen, lowering the cost to manufacture the fuel. The supply/demand balance also shifted from tightness to a surplus position.

Ethanol Output Lower

U.S. ethanol production fell to 838 MB/D for the week ending September 13, erasing some of the gains made in the previous week. Output is expected to increase soon as the corn harvest begins in the Midwest and several plants restart.

The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.

Click here for additional information on PIRA’s global energy commodity market research services.

NYC-based PIRA Energy Group believes that burgeoning momentum to own oil seems poised to push oil prices higher for now. On the week, U.S commercial stocks built led by crude, while Japanese crude stocks drew strongly. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Bullish Oil Prices

It is hard not to be bullish oil prices with the global economy gradually improving, tight physical oil markets and MENA turmoil, which is already substantially reducing global oil supplies and has the potential to reduce supplies further. Current positioning and likely September deflationary type headlines, due in part to a challenging calendar, but also the startup of Iranian nuclear negotiations, pose downside risks to oil prices. Yet, the burgeoning momentum to own oil seems poised to push oil prices higher for now with SPR chatter somewhat limiting the upside.

U.S. Commercial Stocks Build Led by Crude

Overall U.S. commercial oil inventories increased for the week ending August 23 according to the latest weekly DOE data with the entire build occurring in crude, while product inventories declined. Overall U.S. oil inventories are in the upper end of their historic range, in part because of high "other" products. Crude and the four major products stocks (gasoline, distillate, jet and resid) are at the average of their historic range, although crude stocks are indeed relatively high. The stock increase for the same week last year was higher, thereby narrowing the year-on-year stock excess. Nearly the entire excess is in gasoline.  

Strong Crude Stock Draw in Japan, Refinery Margins Very Weak

Crude runs were little changed, but a very low crude import figure drew stocks strongly. Gasoline demand remained strong and gasoil demand rebounded from abnormally low levels. The kerosene stock build rate moderated. Refinery margins collapsed to very weak levels as all cracks gave ground. While cracking margins are weak, topping margins are even worse. 

Withdrawal of Half of Libya’s Oil From the Market

Crude oil trade flows have been significantly altered in 3Q13 by the withdrawal of nearly half of Libya’s 1.4 MMB/D of oil from the market and the subsequent increase in production from Saudi Arabia to record levels to compensate for these losses and to accommodate growing global demand over the second half of the year. Tanker markets are adjusting with more West African crude staying in the Atlantic Basin, which is shifting tonnage demand to smaller vessels. More sour crude production has also benefited ship operators by lowering bunker prices, which have risen less than crude. 

LPG Market Appears Tight

The slow pace of propane stock building has pushed prices higher and will keep prices supported as crop drying and winter heating demand are approaching.  Gasoline blending season is starting, increasing the pull on butanes. Prompt European LPG markets are relatively tight given low arrivals in August and North Sea maintenance. More imports will be attracted from the USGC and West Africa.

Ethanol Output Drops to 21-Week Low

Ethanol output fell to a 21-week low of 820 MB/D the week ending August 30 from 844 MB/D in the preceding week, while imports dropped to 4 MB/D from 19 MB/D over the same period.  Inventories decreased by 232 thousand barrels to 16.3 million barrels as PADD II stocks fell below 5.0 million barrels for the first time since the DOE began reporting weekly ethanol data in June 2010. 

The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.

NYC-based PIRA Energy Group reports that Brent crude prices came off their early September highs. On the week, the U.S. had strong product demand trend but a large crude stock build. In Japan, crude stocks built. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Brent Crude Prices Came Off Their Early September Highs

Brent crude prices came off their early September highs, but the further crude price declines will be limited by tighter near-term supply/demand balances. Supply losses remain huge. Refinery runs bottom in October as maintenance peaks but then runs recover. The WTI-Dated Brent spread is stabilizing near negative $5-6/Bbl. Atlantic Basin gasoline cracks should stay generally weak as inventory coverage remains ample. Middle distillate cracks should move higher over the next few months. Margins will recover in the weeks ahead, led by growing middle distillate strength.

Strong U.S. Product Demand Trend but Large Crude Stock Build

Product inventories declined for the week ending September 27, but this was overwhelmed by a crude inventory build. The resulting 5 million barrel inventory increase is in sharp contrast to last year's inventory decline for the same week last year. This widened the year-on-year inventory excess to 2.2%. Most of the excess is in gasoline.  

Japanese Crude Stocks Build; Turnarounds Continue

Crude stocks built due to imports rising following the impacts of the most recent typhoon, while gasoline and gasoil stocks drew. For gasoline, the draw was due to good demand, while for distillate it was driven by low refinery yield and higher incremental exports. The kerosene stock build rate increased, but the 4-week build rate remained about the same. Refining margins continue to slowly improve from poor levels.  

Saudi Formula Crude Prices for November Reflect Weak Asian Margins

Saudi’s formula prices for November were recently released. In Asia, differentials were lowered most aggressively on lighter grades, but the differentials for Arab Medium and Heavy were raised, with Heavy being raised the most. Asian margins have been poor, so the more generous terms on the lighter grades were in line with market economics.   

Latest Oil Inventory Update: Continued Low Stocks

The final June data and preliminary July data for OECD Europe were released this past Thursday and when combined with U.S. and Japanese estimates continue to point to low inventories in the three major OECD markets. The June stock data were revised lower and the second quarter is now showing an inventory decline compared to last month's increase. Relative to the year earlier, stocks began the year with an excess and ended August with a deficit. 

Ethanol Prices and Cash Margins Soar

Ethanol values in Chicago rose during the week ending September 6 because of the scarcity of corn in the Midwest, causing production to fall to a 22-week low and inventories to drop to the lowest level in two months. Cash margins for ethanol production rocketed to the highest level since November 2011.

Ethanol Production Rebounds

U.S. ethanol production rose to a 4-week high of 848 MB/D the week ending September 6 from 819 MB/D in the preceding week. Some plants restarted after routine summer turnarounds. In addition, facilities in the Midwest have been able to secure corn via barge and rail from as far south as Mississippi, where the 2013/2014 harvest has already begun.

Relatively Low Propane Stocks to Start Fourth Quarter

U.S. propane stocks entered the fourth quarter relatively low and are likely to remain so given crop drying activity, petchem feed use and growing exports. Ethane stocks continue relatively high, while butane inventory is dropping as gasoline blending picks up the pace. The contango in Asia has widened helping support winter stock building. Propane continues as a preferred olefin cracker feedstock in Europe, helping sustain demand until winter requirements pick up.

The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets. 

Click here for additional information on PIRA’s global energy commodity market research services. 

Apache Corporation (NYSE, Nasdaq: APA) has announced it has completed the previously announced sale of its Gulf of Mexico Shelf operations and properties to Fieldwood Energy LLC, a portfolio company of Riverstone Holdings, for $3.75 billion in cash (subject to customary post-closing adjustments) and assumption of liabilities for future abandonment costs of the properties with a discounted value of $1.5 billion.

Apache retained 50 percent of its ownership interest in all exploration blocks and in horizons below production in developed blocks, where high-potential deep hydrocarbon plays are being tested.

Portfolio rebalancing progress

"Completing this transaction is a significant step toward our goal of rebalancing Apache's portfolio to focus on assets that can generate strong returns and drive more predictable production growth, including our deep inventory of onshore liquids assets in North America," said G. Steven Farris, chairman and chief executive officer.

On a pro forma basis accounting for the Fieldwood transaction and the previously announced  partnership with Sinopec International Exploration and Production Corp. in Egypt,  Apache's second-quarter 2013 production from North American onshore assets and from Egypt would have comprised approximately 55 percent and 15 percent, respectively.  In 2010, onshore North America contributed 31 percent of Apache's overall production, Egypt represented 25 percent and the Gulf of Mexico Shelf represented 17 percent.

Apache also announced that it has completed the previously announced sale of oil and gas producing properties in the Nevis, North Grant Lands and South Grant Lands areas of western Alberta, Canada, to Ember Resources Inc., a private Canadian company, for $214 million. Proceeds from the Ember transaction are subject to customary post-closing adjustments.

Including the Fieldwood and Ember transactions, the partnership with Sinopec and two additional agreements to sell oil and gas producing properties in western Canada, Apache has completed or announced more than $7 billion in asset sales year-to-date.

"In addition to enhancing our production and return profile, these transactions enable Apache to retain our an optimal capital structure for growth by reducing debt, enhance shareholder value through a 30-million-share repurchase authorization, and fund future capital expenditures including high-impact international projects," Farris said.

Chevron Technology Ventures LLC (CTV) has announced that it has launched CTV Fund V, a $90 million venture capital fund to invest in early- to mid-stage companies and in limited partnership funds. Investments from CTV Fund V will focus on companies developing emerging technologies that have the potential to improve Chevron’s oil and gas base business performance or create new opportunities for growth.

“We provide an excellent source of innovative technologies that can deliver value to Chevron’s business units when applied,” said CTV President Barbara Burger. “We are using venture capital as a conduit for early adoption of emerging technologies and to build a pipeline of innovation for Chevron.”

CTV-managed strategic investments prior to Fund V have supported a wide range of companies and venture capital funds. Partner technologies are used across Chevron’s Upstream and Downstream business units, producing substantial earnings for the company. CTV screens more than 400 opportunities per year, selecting one to three companies in which to invest. The company has a current portfolio of 37 companies.

Formed in June 1999, CTV invests in technology start-up companies whose innovations could significantly benefit Chevron’s existing businesses and lead to new growth opportunities. CTV identifies, sponsors and demonstrates emerging technology and champions its integration into Chevron.

 has announced that it has launched CTV Fund V, a $90 million venture capital fund to invest in early- to mid-stage companies and in limited partnership funds. Investments from CTV Fund V will focus on companies developing emerging technologies that have the potential to improve Chevron’s oil and gas base business performance or create new opportunities for growth.

“We provide an excellent source of innovative technologies that can deliver value to Chevron’s business units when applied,” said CTV President Barbara Burger. “We are using venture capital as a conduit for early adoption of emerging technologies and to build a pipeline of innovation for Chevron.”

CTV-managed strategic investments prior to Fund V have supported a wide range of companies and venture capital funds. Partner technologies are used across Chevron’s Upstream and Downstream business units, producing substantial earnings for the company. CTV screens more than 400 opportunities per year, selecting one to three companies in which to invest. The company has a current portfolio of 37 companies.

Formed in June 1999, CTV invests in technology start-up companies whose innovations could significantly benefit Chevron’s existing businesses and lead to new growth opportunities. CTV identifies, sponsors and demonstrates emerging technology and champions its integration into Chevron.

Anadarko Petroleum Corporation (NYSE: APC) has announced it has entered into a definitive agreement with ONGC Videsh Ltd. (OVL), a wholly owned subsidiary of Oil and Natural Gas Corporation Limited, to sell a 10-percent interest in Mozambique's Offshore Area 1 (Area 1) for $2.64 billion in cash. Anadarko will remain the operator of Area 1 with a working interest of 26.5 percent.

"This transaction demonstrates our continuing ability to create substantial value through exploration and to again accelerate the value of our longer-dated projects through attractive monetizations and third-party capital," Anadarko Chairman, President and CEO Al Walker said. "Mozambique LNG is a premier global energy project, and we look forward to working with our partners and the government to advance this world-class development.

"As the operator of Area 1, we are very pleased to have reached this agreement with OVL, which values our pre-transaction interest at more than $9.6 billion. We expect to use the net proceeds from this transaction to further accelerate the short- and intermediate-term oil and liquids opportunities we have in the Wattenberg field, Eagleford Shale, Permian and Powder River basins, as well as the Gulf of Mexico and other evolving plays in our portfolio. Our objective with this allocation of capital will be to further increase our cash-flow growth with attractive wellhead margins, while providing additional value to our shareholders as evidenced by our recent dividend increase and continued portfolio-management activities."

The transaction is expected to close around the end of 2013, and is subject to existing preferential rights, governmental approvals and other customary closing conditions.

Area 1 is operated by Anadarko Moçambique Area 1 Limitada (a wholly owned indirect subsidiary of Anadarko) and is located in Mozambique's deepwater Rovuma Basin. The block contains the Prosperidade and Golfinho/Atum natural gas complexes that combined hold an estimated 35 to 65-plus trillion cubic feet (Tcf) of recoverable natural gas resources. In cooperation with the Government of Mozambique, Anadarko, its partners, and Eni (as the operator of the adjacent Area 4 block) continue to advance the development of an LNG park with first LNG cargoes expected in 2018.

Anadarko's partners in Area 1 include Mitsui E&P Mozambique Area 1, Limited (20 percent), BPRL Ventures Mozambique B.V. (10 percent), Videocon Mozambique Rovuma 1 Limited (10 percent) and PTT Exploration & Production Plc (8.5 percent). Empresa Nacional de Hidrocarbonetos, E.P.'s (ENH) 15-percent interest is carried through the exploration phase.

Total announces that it has received approval from the South African authorities and has completed the acquisition of a 50% interest in Block 11B/12B, from CNR International (South Africa) Ltd., a wholly owned subsidiary of Canadian Natural Resources Limited.

The asset is located in the Outeniqua Basin, around 175 kilometers off the southern coast of the country, and covers an area of 19,000 square kilometers with water depths ranging from 200 to 1,800 meters.

Total also becomes Operator of Block 11B/12B and will drill an exploration well on the Block in 2014.

“Our acquisition in this extensive frontier exploration asset demonstrates our determination to establish ourselves in new plays. South Africa's deep offshore, in particular the Outeniqua Basin, is one of the few remaining under-explored offshore regions in Africa. Recent discoveries in the Falkland Islands (Malvinas Islands) together with the prospects identified on the block offer us very promising opportunities." commented Marc Blaizot, Senior Vice President, Exploration at Total. “The results of the upcoming exploration well will be decisive, especially in terms of operability of the area in such a harsh environment. As the Operator, we will leverage our recognized deep offshore expertise and experience in challenging waters such as the North Sea and the Barents Sea, to quickly appraise the potential of this acreage." This acquisition is aligned with Total’s strategy of expanding its exploration and production operations in under-explored countries with strong growth potential.

Total in South Africa

Present in South Africa since 1954, Total is now the country’s fifth-ranked marketer, with sales of 3.1 million tons of products each year, a network of 528 service stations, its biggest outside Europe, and a 36.6% interest in the Natref refinery alongside Sasol. The Group is also South Africa’s third-ranked LPG marketer and fifth-ranked coal exporter.

Total’s solar affiliate, SunPower, is active in ground-mounted solar power plants and off-grid solar facilities in South Africa. It is currently building two solar power plants near Douglas, in The Northern Cape. Total is also implementing decentralized rural electrification programs through KwaZulu Energy Services (KES).

The newly created exploration and production affiliate is based in Cape Town.

Firm represents Teekay Shuttle Tanker Finance LLC in issuing 10-year senior secured notes for delivery of a pair of identical tankers built in Korea to work Brazil’s  offshore oil fields

In its latest major transaction in the service of Brazil’s  burgeoning offshore energy sector, Milbank, Tweed, Hadley & McCloy has advised Teekay Shuttle Tanker Finance LLC, as issuer, in the $174,150,000 financing of two Suezmax-class shuttle tankers designed to operate between Brazil’s  offshore oil fields and coastal refineries and terminals.

The bond financing is to be split into two equal tranches and funded through two issuances the first taking place this month, the second scheduled for November, prior to the delivery of each tanker.  Proceeds from the secured 10-year notes will be used to fund delivery of the two vessels.

The two tankers are being built by Samsung Heavy Industries Co. Ltd. of South Korea and will be under 10-year charter to BG in Brazil.  Each identical tanker, Bossa Nova Spirit and Sertanejo Spirit, is 282 meters in length and with a capacity of 167,500 cubic meters.

Teekay Shuttle Tanker Finance LLC is a wholly owned subsidiary of Teekay Offshore Partners LP, one of the world’s leading owners and operators of shuttle tankers, which since the 1970s has provided an alternative to conventional pipelines for transferring oil from offshore to storage or refining facilities. Shuttle tanker technology permits their operation in deep water and harsh or remote locations, which has earned them the moniker “floating pipelines.”

Project Finance partner Daniel Bartfeld, who co-led Milbank’s  team, says that the successful notes offering for the two shuttle tankers marks a significant milestone and is noteworthy for its multi-vessel and multi-issuance structure, which we believe is a first in this industry.  We’re very pleased to have led in this private placement for Teekay.”

Co-lead partner Jay Grushkin, a member of Milbank’s Structured Finance group, added, This is yet another example of the willingness and appetite of the traditional private placement market to fund non-traditional assets.”

Also working on the transaction were Milbank associates Caroline Conway, Sean O’Neill and Mikhel Schecter.

Patrick Lagrange will lead the charge to build the investment arm of CSA

Continental Shelf Investment Capital, Inc. (CSIC) is pleased to announce that Patrick Lagrange is joining the firm as its new Managing Director. Lagrange will help manage CSIC’s existing investments in the coastal, ocean, and subsea industries and look for new opportunities.  Working with fledgling and established entrepreneurs alike, Lagrange and CSIC will work to help entrepreneurs develop their concepts and ideas into great businesses.   “CSIC’s mission of supporting and growing companies with the capital needed to get to the next stage is exciting.  I’m thrilled to be part of this effort,” said Lagrange.

Hailing from New Orleans, Lagrange brings with him nearly two decades of experience investing in and advising companies in a variety of capital markets, M&A, and restructuring transactions.  Lagrange began his career as an attorney working for the oil industry through the early 1990s.  He then made a career shift that would allow him to pursue his interest in finance by earning an MBA from New York University.  After that he worked with several leading investment and financial advisory firms in the Northeast.  He joins CSIC from Carl Marks Advisory Group LLC, a leading middle market New York-based investment bank and financial advisory firm where he served as CEO of the firm’s broker/dealer affiliate and head of its strategic research unit.

Lagrange has played a leading role in the corporate restructuring industry.  In 2009 – 2010, he served as President and Chairman of the Turnaround Management Association, the premier global professional organization dedicated to corporate renewal with over 9000 members in 47 chapters in the Americas, Europe, Asia and Africa. 

In addition to his work at CSIC, Mr. Lagrange will serve as President of Pelagic Strategic Partners LLC (Pelagic).  Pelagic is a newly formed CSA affiliate that will bring high-quality strategic and management consulting services to small-growth stage companies in the coastal, ocean, and subsea industries.  “Pelagic will work in partnership with CSIC to help entrepreneurs build great companies by combining its capital with Pelagic’s management services,” said Lagrange.

NYC-based PIRA Energy Group reports that global Asian oil markets remain supported on a global basis. On the week, U.S. stocks fell, split about equally between crude and products.  In Japan, crude stocks drew on higher runs and contained imports. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following: 

Asian Oil Markets Remain Supported on a Global Basis

Oil prices remain at the top of their trading range with firmness being supported by tightened crude balances which are being fueled by supply losses from producers such as Libya and Iraq and ongoing outages from Syria and Nigeria. All told, the market is currently at its maximum point of physical strength, with high runs, supply losses and crude stock declines. 

Overall Commercial Inventories Decline

U.S. stocks fell for the week ending August 16, split about equally between crude and products and matching last year's inventory decline for the same week. This left the inventory excess 1.9% above year ago levels. The bulk of the excess inventory is in gasoline. Overall adjusted oil demand growth is now running just 0.9% above year ago levels. This is the second week in a row that demand growth was no higher than 1% after three earlier weeks of near 3% growth. Some of PIRA's other energy indicators of economic growth (e.g. electricity demand) have also been weakening, which is not a good sign for the economy. 

Two Weeks of Japanese S/D Data

Two weeks of data were reported this past week due to the mid-August hiatus. Crude stocks drew on higher runs and contained imports. Gasoline demand was expectedly strong. Conversely, gasoil demand eased sharply due to the typical mid-August vacation impacts and stocks built, even with higher exports. Kerosene stocks continued to build seasonally, with the average build rate over the last two weeks being relatively high. 

Slow U.S. Stock Building

U.S. propane storage is building rather slowly pushing its price higher going into the crop drying and heating seasons. Butane demand will gain for gasoline blending while ethane continues to be impacted by steam cracker outages. 

Ethanol Prices Advance

U.S. ethanol prices rose the week ending August 16 due to higher corn costs and a tighter market with lower inventories. Prices were also supported by concerns that output will decrease prior to the next harvest because of plant maintenance and corn shortages. RIN prices rebounded after falling to a three-month low in the previous week.

Ethanol Output Decreases

U.S. ethanol production declined to 844 MB/D the week ending August 16, the second lowest level since April, and down from 857 MB/D in the preceding week. Due to dwindling supplies, some ethanol producers have contracted to barge in corn from as far south as Louisiana, where the 2013/2014 harvest has already started. 

The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.