Russia and Saudi Arabia are holding talks about investments worth tens of billions of U.S. dollars in various energy projects, Russia’s Energy Minister Alexander Novak said at an economic forum in Russia on Friday. Russia and Saudi Arabia have many bilateral projects, and their respective energy ministers discussed some of them at their meeting on the sidelines of the St. Petersburg International Economic Forum in Russia on Thursday. The two countries are planning projects in petrochemicals, liquefied natural gas (LNG), and joint research centers in Russia, Sputnik quoted Novak as saying on Friday. The talks are being held at a critical time when Saudi Arabia—or, rather, OPEC—needs Russia to be amenable to extending the production quotas past the June expiry. At the meeting with Saudi Energy Minister Khalid al-Falih on Thursday, Novak said that Saudi Arabia is one of Russia’s key partners in the Middle East. The Russia-Saudi partnership is evolving, including with the cooperation between the Russian Direct Investment Fund (RDIF) and the Saudi Arabian sovereign wealth fund, which have invested around US$2 billion in joint projects, Novak said at the meeting with al-Falih, as carried by the Russian energy ministry. Gazprom, Gazprom Neft, Transneft, and other Russian companies are interested in cooperation with Saudi firms, Novak said. Related: New Infrastructure Could Spur Gas Demand Boost In China Saudi Aramco, on the other hand, has long been rumored to be considering buying a stake in the Arctic LNG 2 project led by Russian gas company Novatek. In March this year, Novatek’s CEO Leonid Mikhelson told Russian media that the Russian firm was ready to consider selling up to 30 percent in the Arctic LNG 2 project to Aramco. In April, Novatek signed agreements with two Chinese companies, under which the Asian firms will become shareholders in the Arctic LNG project with 10 percent each. Earlier this year, France’s Total, a partner of Novatek in the producing Yamal LNG project, signed a deal to buy a direct 10-percent interest in Arctic LNG 2. The final investment decision on the Arctic LNG 2 project is expected to be made in the second half of 2019, while the first liquefaction train is planned to start up in 2023. By Tsvetana Paraskova for Oilprice.com
Three Greenpeace activists stopped a BP exploration rig that was supposed to leave this weekend from Scotland to an offshore oil field.
In a Tweet, one of the activists who identified herself as Jo, posted a statement saying, “I’m occupying a @BP_plc oil rig that intends to drill up 30 million barrels of climate wrecking oil in the North Sea. As long as I’m here, the rig isn’t going anywhere.”
A later statement released by the organization to media and quoting the same activist said “This rig and the 30 million barrels it seeks to drill, are a sure a sign that BP are committed to business as usual, fueling a climate emergency that threatens millions of lives and the future of the living world,” as quoted by Reuters.
BP said in response that “While we recognize the right for peaceful protest, the actions of this group are irresponsible and may put themselves and others unnecessarily at risk.” The supermajor added that it was working with the rig’s owner, Transocean, to fund a solution to the situation. BP further added that it supported the Paris Agreement on Climate Change and shared Greenpeace’s concern about the environment.
Yet the organization will hardly take BP’s assurances to heart. In a string of Tweets, the activist that posted the original announcement of the rig boarding said BP was spending billions on new exploration despite its claims to support climate action.
This is the second recent environmentalist attack on the UK-based oil supermajor. Last month, amid large-scale protests in London initiated by Extinction Rebellion, Greenpeace activists staged a blockade of BP’s HQ. Again, the motive was to force BP to stop oil and gas exploration. The plan was to keep the blockade for at least a week but the custom-made boxes housing activists in front of every entry of the building were removed sooner.
By Irina Slav for Oilprice.com
China’s crude oil imports dropped in May from a monthly record in April, as Chinese refiners drastically reduced Iranian oil imports after the end of the U.S. waivers and as some state refineries were offline for planned maintenance.
According to data from China’s General Administration of Customs, reported by Reuters, Chinese crude oil imports fell by 8 percent from 43.73 million tons in April to 40.23 million tons in May. This, converted in barrels per day, is an 11-percent drop from April to May, to average 9.47 million bpd last month, according to Reuters estimates.
According to Seng Yick Tee, an analyst with Beijing-based consultancy SIA Energy, the key reason for the lower Chinese crude oil imports in May was the sharp drop in imports from Iran as the U.S. ended all sanction waivers for Iranian customers on May 2, including for Iran’s biggest oil buyer China.
In April, just before the waivers ended, China had stocked on Iranian crude oil. China imported around 800,000 bpd of crude from Iran in April—the highest amount that Iran’s top oil customer had purchased since August of 2018—as Chinese refiners rushed to buy Iranian oil ahead of the expiry of the U.S. sanction waivers.
The surge in Iranian imports in April resulted in China setting a new monthly oil import record that month, despite the fact that there was refinery maintenance and fuel demand was lukewarm, analysts told Reuters at the time.
Apart from the sharp drop in Iranian imports and regular maintenance at several refineries, another factor for the decline in Chinese crude oil imports in May were the weak refining margins across Asia.
Although refiners in Asia are not left without choice for crude oil after the end of the U.S. sanction waivers for Iranian oil, the higher price of alternative supplies, as well as soaring fuel exports from China, are depressing refining margins across Asia.
Last month, reports emerged that persistent pressure on profit margins had forced Asian refiners to start considering a reduction in their run rates as Asia’s refining margins slipped to a 16-year low.
By Tsvetana Paraskova for Oilprice.com
Shenghong Group started to build a 16 million mt/yr (320,000 bbl/day) crude distillation unit (CDU) and some other units in Jiangsu province on June 1, which indicated that the company launched the full-scale construction of its new refinery.
This is the largest CDU in China.
The company also began construction of a 3.10 million mt/yr continuous reform, a coal gasification unit and some other units on the day in east China’s Lianyungang city, the company said.
Shenghong’s 320,000 bbl/day refinery will be another large private refining-chemical one in China, following Hengli Petrochemical and Zhejiang Petrochemical. The refinery, scheduled to come online in 2021, will produce a total of about 5.90 million mt of gasoline and diesel per year when it runs at full capacity.
Increasing supply when demand lags behind will intensify competition in the domestic market which is already oversupplied. Refineries with a total capacity of 5.08 million bbl/day are scheduled to come on stream during 2019-2024 according to recent JLC data. Hengli Petrochemical and Zhejiang Petrochemical expect to start supplying gasoline and diesel in the second half of 2019, to be followed by more refineries in the coming years.
On the demand front, gasoline demand growth has been slowing as a direct result of disappointing car sales in China. A total of 28.08 million conventional cars were sold in 2018, a decline of 2.8% from the previous year, according to industry data. Meanwhile, the sales of ‘new energy vehicles’, such as EVs and hybrids saw a 61.7% jump year on year. The sales of conventional cars are expected to stabilize in 2019, while those of new energy cars will jump further.
In addition, gasoline demand will be impacted further by alternative energy such as ethanol gasoline and methanol gasoline.
And it’s not just gasoline, diesel demand is under pressure because of slowing economic growth, the country’s supply-side reform, and stricter environmental regulation that constrains industrial activities.
As the glut of refined products continues to grow, China is set to boost oil product exports significantly this year.
By JLC International
U.S. refiners and motorists may have dodged a bullet after the U.S. suspended indefinitely the threat to impose tariffs on all imports from Mexico after reaching a deal on immigration with its southern neighbor.
Since a week before Friday, June 7—when President Donald Trump said that the tariffs that would have entered into force on June 10 are indefinitely suspended—oil industry executives and lobbyists have been frantically urging state officials from the White House to the Commerce Department to the Treasury to reconsider the tariffs on imports of crude oil from Mexico.
Gulf Coast refineries import heavy oil from Mexico to blend with the lighter oil to produce gasoline and other refined oil products. The tariffs that President Trump threatened at the end of May would have meant that U.S. refiners would pay more for the heavy crude from Mexico in a global market that is already short of heavy oil with the U.S. sanctions on Iran and with the sanctions on Venezuela, which resulted in U.S. imports from the Latin American country plunging from 603,000 bpd for the week ending January 25 to just 12,000 bpd for the week ending May 31.
So executives and lobbyists were busy working for a week toward some kind of solution or compromise and called for crude oil imports to be exempted from the tariffs on Mexico.
Last year, U.S. crude oil imports from Mexico averaged 665,000 bpd and accounted for most U.S. energy imports from Mexico, according to EIA data. Mexico was the source of 9 percent of U.S. imported crude oil, America’s third-biggest foreign oil supplier, behind only Canada and Saudi Arabia.
Related: Large Chinese Refiner Starts Construction Of 320,000 Bpd Complex
Chet Thompson, President and CEO of the American Fuel & Petrochemical Manufacturers (AFPM), said in a statement right after the Trump Administration announced tariffs on products made in Mexico:
“Imposing tariffs on Mexican products, particularly crude oil, could raise energy prices for U.S. consumers, disadvantage the U.S. refining industry and jeopardize passage of USMCA — all bad outcomes. We thus urge the President not to pursue energy tariffs against one of our most important trading partners.”
In the week when tariffs on Mexican goods were on the table and imminent, lobbyists were busy explaining to the administration that tariffs on Mexican crude oil in a tight heavy crude market would mean rising gasoline prices just at the start of the summer driving season, a refinery lobbyist told Reuters last week.
By Tsvetana Paraskova for Oilprice.com
Saudi Arabia’s oil giant Aramco has offered to buy a stake in Russia’s liquefied natural gas project Arctic LNG 2 and hopes that project operator Novatek will accept the offer, Saudi Arabia’s Energy Minister and chairman at Aramco, Khalid al-Falih, told Russian news agency TASS in an interview published on Monday.
Saudi Aramco has long been rumored to be considering buying a stake in the Arctic LNG 2 project.
Asked about recent reports that Aramco has backed out of a possible deal for the Russian LNG project, al-Falih told TASS:
“No, no, this is not true. Aramco extended the offer and we hope that offer will be accepted by Novatek.”
In April, Novatek signed agreements with two Chinese companies, under which the Asian firms will become shareholders in the Arctic LNG project with 10 percent each. Earlier this year, France’s Total, a partner of Novatek in the producing Yamal LNG project, signed a deal to buy a direct 10-percent interest in Arctic LNG 2.
The final investment decision on the Arctic LNG 2 project is expected to be made in the second half of 2019, while the first liquefaction train is planned to start up in 2023.
At the end of last week, Russia and Saudi Arabia held talks about investments worth tens of billions of U.S. dollars in various energy projects.
Related: A New Trend In The Middle East? Oman Taxes Energy Drinks As Oil Income Falls
Apart from Arctic LNG 2, Aramco is looking at other projects in Russia, including potential projects with oil giant Rosneft and with natural gas giant Gazprom, as well as in petrochemicals, al-Falih told TASS.
Aramco could also be interested in some joint projects or even equity investment in Russia’s petrochemical company Sibur, “but the interest has to be from both sides. So we will wait for Sibur and its shareholders to express their interest in future cooperation,” al-Falih told TASS.
Referring to the OPEC+ production cut deal after the talks he held with Russia’s top officials last week, the Saudi energy minister told TASS that “I am fairly confident that from the OPEC side almost everyone agrees that we need to extend the Declaration of Cooperation,” adding that “So, I think the remaining country to jump onboard now is Russia.”
By Tsvetana Paraskova for Oilprice.com
Of all the signatories to the OPEC+ agreement forged to rebalance the oil market through production cuts, Russia is the lone holdout, according to Saudi Arabia’s Energy Minister Khalid Al-Falih, cited in The New Arab, and is the last member to not get on board with additional production cuts.
The comment was made during the meeting between Al-Falih and Alexander Novak that is taking place on Monday to discuss various energy projects between Russia and Saudi Arabia.
Russia has been a wild card during this entire production quota process, sometimes with various Russian officials disagreeing in the media over what oil price should be targeted, what production cuts will balance the market, how quickly to scale down production, how quickly to ramp production back up, and what compensation, if any, Russian oil producers should receive in exchange for restricting oil output.
Russia’s oil production prowess is substantial, and for the first time since the quota was implemented, Russia restricted its output in May. Russia’s oil production decrease in May was largely due to oil contamination issues.
“So, I think the remaining country to jump onboard now is Russia. I will wait for the Russian dynamics to work themselves out,” Al-Falih told TASS, adding that there was still a debate within Russia about what level of oil production Russia should target for H2 2019.
Russia and Saudi Arabia are the two largest oil producers that are part of the OPEC+ agreement.
Russian Energy Minister Alexander Novak said on Monday that there was a risk still that oil prices could fall to $30 per barrel, because the amount of oil produced in H2 could exceed market demand for oil—a sign that Russia may actually be on board for an extension of the production cuts, at least in some form and in some quantity.
By Julianne Geiger for Oilprice.com
India is holding a series of telephone conversations with US Secretary of Energy Rick Perry on Monday to discuss the oil price volatility created in part by the perception of a tighter oil market in the wake of US sanctions on India’s neighbor, Iran, according to a press release from India’s Ministry of Petroleum & Natural Gas.
India’s Minister of Petroleum and Natural Gas Dharmendra Pradhan also discussed crude oil purchases from the United States, and ways to “further develop gas-based economy in India.”
The spot price of a Brent barrel fluctuated between $60 ad $64 in the last week alone. While it has come down substantially since mid-May when Brent was sitting around $72 to barrel, oil prices are still up significantly from the lows this year in January when prices were closer to $50 per barrel.
The higher prices are a significant concern for India, who has a high import need for crude. In 2018, India imported the third-highest volume of crude oil by value after China and the United States.
Secretary Perry and Minister Pradhan also discussed the important role that the United States has in establishing the global oil price stability.
Reports in late May suggested that India may decide to resume oil purchases from Iran, after India’s Prime Minister Narendra Modi won the country’s elections, according to an Indian news outlet.
India is feeling the pinch of the US sanctions on Iran after the US refused to renew the sanction waivers that it had granted to eight large Iranian oil buyers, including India. For now, Indian refineries have made up for the loss of Iranian barrels by increasing its purchases of oil from Saudi Arabia and Kuwait, according to Sputnik. Some Iranian oil is still trickling into India that was purchased prior to the end of the sanction waiver expiration, the outlet reported.
By Julianne Geiger for Oilprice.com