OPEC urged cooperation from U.S. shale oil producers
23-10-2017Last week some comments from OPEC Secretary General Mohammed Barkindo signaled that OPEC may not understand how the U.S. oil industry functions.Reuters reports that Barkindo urged cooperation from U.S. shale oil producers to help keep the global oil market out of an oversupply situation. Barkindo stated, “We urge our friends, in the shale basins of North America to take this shared responsibility with all seriousness it deserves, as one of the key lessons learnt from the current unique supply-driven cycle.”But the U.S. oil industry is nothing like OPEC. In 2016, the 14-member countries of OPEC produced nearly 43 percent of the world’s oil. The cartel also controls 71.5 percent of the world’s oil reserves. In comparison, the U.S. produced 13.4 percent of the world’s oil last year. That’s significantly more than any OPEC member except Saudi Arabia, but there are thousands of companies, each acting in its self-interest, responsible for U.S. oil production. In Saudi Arabia, one company — Saudi Aramco — was responsible for as much production as all U.S. producers combined. Each of the U.S. producers acting individually can only impact a fraction of a percentage of the world oil market. Without significant collusion, U.S. oil producers just can’t affect the global oil balance in the way OPEC seems to think they can.Yes, by increasing production — particularly shale oil production — the U.S. has added to the global oil glut. But there is no mechanism by which they can (legally) restrict production to benefit all producers. Production restrictions in the U.S. are a function of the collective decisions of those thousands of oil producers, based on their outlook for oil prices.The comments from the Secretary General may just mean that OPEC is hedging its bets. In its newly released Monthly Oil Market Report, the cartel has again raised its demand forecast for 2018. That is the third consecutive upward revision in OPEC’s 2018 demand forecast. The report even raised the possibility of a global supply deficit in 2018 unless oil output is increased.
Russia will supply LNG to Pakistan
17-10-2017The agreement to this effect was signed by the governments of the two countries. As the Russian Energy Ministry reports, the document is signed for three years with subsequent automatic prolongation for three-year periods. The ministry specified that Gazprom and the Pakistan LNG Ltd state company plan to prepare to sign a long-term contract within two months for the sale of liquefied gas. The Russian LNG will be used by power plants in Pakistan. However, the amount of the deal is unknown.
Rosneft will finance the project of the regional gas pipeline of Iraqi Kurdistan
18-09-2017On Sept 18, Rosneft announced that it has agreed with the authorities of Iraqi Kurdistan to finance a regional gas pipeline project and to sign an appropriate agreement by the end of this year. Rosneft already has agreements concerning the Ceyhan oil pipeline and five licensed fields. The new pipeline is supposed to be launched in 2020 and to pump as much as 30bn c m to Turkey and Europe in addition to the main supplies.
In five months of 2017, U.S. exported 36bln cu m of gas
17-08-2017The United States has turned into a major gas exporter, as its gas exports exceeded imports this year, according to the U.S. Energy and Information Agency (EIA). “The United States has been a net natural gas importer (on an average annual basis) for nearly 60 years. Declining net pipeline imports from Canada, growing natural gas pipeline exports to Mexico, and increasing exports of liquefied natural gas (LNG) are all contributing to the nation’s ongoing shift toward being a net exporter,” according to EIA.The Agency reports that in five months of 2017, U.S. exported 36bln cu m of gas mainly from Canada, and exported 36.6bn cu m. The positive difference, though not very large – 600mln cu m, was registered in February, April and May.Mexico and Canada trade by pipeline accounted for over 29bln cu m of total.“In fact, United States could be considered a gas exporter yet last year, when export from Sabine Pass was launched,” says Igor Yushkov, senior analyst at the National Energy Security Fund (eadaily.com/en/news/2017/08/16/united-states-of-gas-on-the-threshold-of-global-expansion). “Gas flows with Mexico and Canada reflect peculiarities of local infrastructures: somewhere in Canada, for instance, they are supplied gas from U.S. and the vice versa.”Anyway, the expert believes that the current significant increase in gas output in U.S. is a breakthrough for the country. “Presently, gas price at Henry hub is below $100, though once it reached $600 and part of the world’s projects were oriented at U.S., for instance, development of Arctic offshore Shtokman gas field,” Yushkov says. He believes that LNG exports growth is beneficial for U.S. producers, as low gas price in U.S. will be corrected to comply with the world prices and rise, which is a good impetus for companies to recover more.EIA reported about record-breaking levels of LNG exports. However, daily shipment of liquefied gas from so far the only LNG terminal – Sabine Pass – has reached 55mln cu m just in May. It is about 1.7bln cu m per month – 10-fold less than Gazprom’s average monthly export.By various data, the U.S. is expected to boost gas exports to 110bln cu m annually. However, even U.S. experts are not sure about these forecasts. “The United States is actively advertising itself. They have repeatedly misreported gas reserves to attract investors,” Igor Yushkov says and recommends being cautious of American LNG forecasts, since U.S. may face gas deficit in the long-term outlook. In addition, many export terminal construction projects may not be implemented, despite the construction permits granted. “Much depends on the gas prices as well,” Yushkov says.Key consumers of U.S. LNG for the five months of 2017 were Asian countries – 2bln cu m out of total 7.2bln cu m. The second major importer of U.S. LNG is Mexico – 1.7bln. Europe goes the third leaving behind Latin America. In the period from January to May, U.S. supplied 1bln cu m of LNG to Portugal, Poland, Spain, Netherlands and Turkey.