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Thursday, December 18, 2008

OPEC slashes production with Russia joining in

OPEC slashes production with Russia joining in18 December 2008 - Russia Today - OPEC has slashed crude production by a larger than expected amount in response to falling global demand. Russia and other non-members have joined in, with a promise of more to come if prices stay flat next year. At its extraordinary meeting, in the Algerian city of Oran, OPEC decided on Wednesday to cut crude production by a further 2.2 million barrels per day, to add to the 2 million barrel per day which has been trimmed since September. The latest cut, a record, and more than was even being talked about the day prior to the meeting by Saudi Oil Minister Ali al Naimi, is aimed at preventing a further collapse in crude prices. Julian Lee, Senior Energy Analyst, at the Centre for Global Energy Studies says the widespread expectation of a 2 million barrel per day cut, wasn’t having much effect on prices. “A cut of 2 million barrels per day was widely publicised ahead of the meeting. It didn’t really have much impact on prices, normally you expect to see prices react to the anticipation of what the meeting will bring, particularly there seems to be such unanimity as there was before this meeting. And that really didn’t happen very much. “ The OPEC move was backed by some non-member countries, boosting OPEC's ability to prop up the market. Azerbaijan announced a 300 thousand barrel a day cut, and Kazakhstan is also reducing output. Russia’s Deputy Prime Minister, Igor Sechin, says it has already cut output 350 thousand barrels a day in November and is ready to cut up to 320,000 a day more next year if current low prices persist, as they are hitting the capacity of oil companies to invest in new production. “The fair price should include investment for oil output. Almost all Russian companies are working on new oilfields. So a part of this investment is direct operating expenses for any oil company. Cuts in investment for these projects will lead to huge cuts in supply.” Deputy Prime Minister Sechin also proposed holding an OPEC meeting in Russia and said that the organisation is considering a new status for Russia, as a permanent observer. Opec has taken another set of measures to bring oil market to some state of balance, and closer to what producers are calling a fair price, of $70-80 per barrel .The danger for the producers is that if the cut is too big, and prices spike in response, that could tip the world economy into an even deeper recession than it’s already in.

BP to sell stake in Caspian Pipe JV to Kazakhstan's KazMunaiGaz

MOSCOW, December 17, 2008 (RIA Novosti) - British oil major BP has agreed with Kazakhstan's KazMunaiGaz to sell its stake in a joint venture that holds 1.75% of the Caspian Pipeline Consortium (CPC), a source in Russian pipeline monopoly Transneft said on Wednesday. BP holds 6% in the Caspian Pipeline Consortium, designed to carry Kazakh and Russian crude to a terminal on the Black Sea. The company owns the stake through two joint ventures, one with national oil and gas company KazMunaiGaz (Kazakhstan Pipeline Venture, a stake of 19%), and the other with Russia's largest independent crude producer LUKoil (Lucarco B.V. a 49% stake). Transneft operates Russia's 31% stake in the CPC on behalf of the state. The CPC was originally established in 1992 by the governments of Russia, Kazakhstan and Oman to build an oil pipeline from Kazakhstan to export routes through the Black Sea, and was later joined by international private companies. In October, Oman sold its entire 7% stake in the CPC to Russia and withdrew from the project. The CPC, which was commissioned in October 2001, currently has capacity of around 30 million metric tons of oil per year and is expected to double it by 2012. Meanwhile, a BP spokesman said the company was also holding talks with LUKoil on selling its stake in the CPC and the joint venture with the Russian crude producer. The Transneft source said none of the CPC shareholders would object to BP's withdrawal from the project.

Big cut in Opec oil production fails to stop prices falling to 4?-year low

Dec 18, 2008 - Your Oil and Gas News - Oil prices slipped to a four-and-half-year low last night even as Opec announced its largest production cut, totalling nearly 5 per cent of global output, in the cartel's latest effort to bolster prices. At a meeting in Oran, Algeria, the organisation of oil exporters said that it would slash supplies by a further 2.2 million barrels a day to 24.84 million barrels from January 1. The cut exceeded Opec's previous record cut in 1999 of 1.7 million barrels. Chakib Khelil, the Opec president and Algerian Energy Minister, said that the latest cuts had brought the total reductions announced by the cartel since August to 4.2 million barrels a day - or just under 5 per cent of global production, which averaged 86.3million barrels a day during the third quarter of this year. “The impact of the grave global economic downturn has led to a destruction of demand, resulting in unprecedented downward pressure being exerted on prices,” Opec said in a statement justifying the action. Nevertheless, oil traders remained unimpressed, with some questioning whether all Opec members would comply with the steep cuts - a continuing problem for the organisation. After the announcement, the price of a barrel of benchmark US crude quickly dropped to a low of $40.20, its weakest level in four and a half years. With demand collapsing, as some of the world's biggest economies enter recession and growing signs that Chinese oil consumption is also weakening, crude prices have slipped by more than $100 since July, when they briefly touched a record of $147 a barrel. Andrew Horstead, energy analyst for Utilyx, predicted further price falls below $40 unless other countries joined forces with Opec with production cuts of their own. He said: “The demand numbers coming out of the US are incredibly weak, so I doubt if this will be enough to push prices higher on its own.” Earlier, there had been speculation that Russia and Azerbaijan, which are not Opec members, would join in with the co-ordinated action and make cuts amounting to 600,000 barrels per day.John Hall, an independent oil analyst, said that these represented a “token gesture” because both countries were already reducing production for reasons such as a lack of investment and were dressing these up as collaborative market action with Opec. “The real problem Opec has is one of compliance,” Mr Hall said. “The market just doesn't believe it can demonstrate its members are going to follow through in full.” Mr Khelil rejected claims that some members might choose to produce more than their quotas. “I can tell you it's going to be implemented and it's going to be implemented very well because we do not have a choice,” he said. “If not, the situation is going to get worse.” Opec, which was formed in 1960 and whose 12 members include Saudi Arabia, Iran, Iraq, Nigeria and Venezuela, produces about 40percent of the world's oil supplies. The cartel's production cuts were condemned by the White House. Tony Fratto, a spokesman, said that the cuts risked further undermining an already fragile global economy. “Opec has an obligation to keep the market well supplied and to consider the health of the global economy, so efforts to limit the benefits of lower energy prices are short-sighted,” Mr Fratto said. Oil exporting governments are struggling to deal with the rapid collapse of oil prices, which is undermining their public finances. Saudi Arabia, Opec's biggest producer and de facto leader, said last month that it was targeting $75 a barrel, which it considered a fair price for oil. Other members, including Venezuela and Iran, have been pushing for higher prices. The AA said this week that UK average petrol prices have fallen to their lowest level for more than 21 months. The price of petrol fell 5.4p between mid-November and mid-December, from 94.9p to 89.5p a litre, a level last seen in March 2007. Diesel costs, helped by hefty cuts by supermarkets, dropped 6.89p, from 108.82p to 101.93p a litre. A family with two petrol cars is spending £64.77 less per month than it was in the summer.
Demand in US tails off: Opec's efforts to turn round the oil market have traditionally been like steering a supertanker. It is a lengthy process. Historically, the price of oil has been closely correlated with economic performance. High energy prices have fuelled inflation, hit demand and crimped output. The record price of oil only five months ago undoubtedly played a part in the present slowdown. Yesterday's production cuts were dramatic, but until the extent of the economic downturn becomes clearer, the recent slump in oil prices will be difficult to arrest and harder to reverse. Opec knows that the issue of price is one of supply and also demand. The US Government predicted yesterday that demand for oil in the US, the world's largest consuming country, is set to level off and is unlikely to grow at all between now and 2030. Growing use of alternative fuels, increased energy efficiency and a decline in the use of gas-guzzling cars and SUVs is shifting US oil use, according to the Energy Information Administration. In a report yesterday the agency predicted that the use of renewable energy, including solar, wind, biofuels and tidal power, would grow by 3 per cent per year. Overall energy use is expected to increase gradually but at a significantly slower pace than expected a year ago. The EIA, the arm of the US Government that produces official statistics on energy, also concluded that US reliance on imported oil will fall. It said that imported liquid fuels, mainly oil, would meet 40 per cent of US needs by 2025, down from 58per cent. US oil demand is weakening rapidly as the country slips into recession. Figures from the International Energy Agency this month showed November demand in the 50 continental states was about 18.5 million barrels per day, down nearly 10 per cent on a year ago. That still represents some 21 per cent of global demand of about 86 million barrels. But US reliance on imported oil from countries such as Saudi Arabia and Venezuela has become a major political issue. President-elect Barack Obama has pledged to reduce America's dependence on the fuel and this week appointed Stephen Chu as his energy secretary. Mr Chu, a Nobel prize-winning physicist from the Lawrence Berkeley Laboratory in California, is a proponent of alternative fuels and a developer of scientific solutions to climate change. T. Boone Pickens, the Texan oil billionaire, has started a campaign to shift America away from its dependence on imported oil by building huge windfarms across a central belt of the US. Without incentives to further reduce US reliance on fossil fuel, the EIA forecast American CO2 emissions would continue to rise by 0.3 per cent a year, compared with an annual average increase of 1.1 per cent since 1990.

Azerbaijan, Not Russia to Cut Output

azerbaijan flagReuters by Dmitry Zhdannikov - Ex-Soviet Azerbaijan became the only non-OPEC producer on Wednesday to offer a real output cut to support oil prices, while Russia refrained from making firm commitments despite previous declarations that it would. Azeri Energy Minister Natik Aliyev told reporters on the sidelines of an OPEC meeting in the Algerian town of Oran the country was ready to cut output by 300,000 barrels per day to 540,000 bpd, which will be its lowest output level in two years. "We have production capacity of 1 million bpd, but currently output is reduced to 840,000 bpd and we are ready to cut further to 540,000 bpd and sustain this production for several months," Aliyev said. Most of Azeri oil output is controlled by a BP-led consortium, which reduced production in the past months due to technical problems at an offshore platform in the Caspian Sea. Saudi Arabia's Oil Minister Ali al-Naimi told Reuters on Tuesday producers outside OPEC could cut 500,000-600,000 bpd along with any curbs agreed by OPEC at its meeting on Wednesday. Top non-OPEC producers Russia, Mexico and Norway signed up to production curbs with OPEC in 2002 to help shore up oil prices after they fell below $20. But after Norway and Mexico said they had no plans to join production cuts this time, oil markets focused on Russia, which like many OPEC members badly needs a price of above $70 per barrel to protect its economy, currency and social stability. Russia's President Dmitry Medvedev said last week Moscow was not ruling out joining production cuts and even the Organisation of the Petroleum Exporting Nations. Moscow also sent the highest-ranked delegation ever to an OPEC meeting this week, chaired by Russia's top energy official Igor Sechin and the heads of all five top national oil firms. Sechin told OPEC delegates on Wednesday Russian oil firms could extend oil export cuts in 2009 after having already cut deliveries by 350,000 bpd in November.
RUSSIAN EXPORT ALREADY DOWN: Russian exports fell to 3.7 million bpd, the lowest level since 2004, after the government kept a very high oil export duty which made exports loss-making and encouraged companies to refine more at home and focus on exports of refined products. But Sechin said nothing about immediate oil output cuts, only warning an extended period of oil price weakness would reduce capex. "If current prices on the global oil market prevail, Russian oil firms will be forced to cut the volumes of supplies next year by 16 million tonnes (320,000 bpd)...," he said in a speech to delegates, the text of which was obtained by Reuters. "(They may) also cut investments which may in the near future lead to a much sharper decline in production." Russian oil output is poised to decline by around 1 percent this year, the first time in a decade during which output of the world's second largest oil exporter rose by more than 60 percent to approach the landmark 10 million bpd level. Many analysts and industry insiders say production may decline by a further 2-3 percent next year and have been predicting that Moscow could try to repackage a natural decline in production as a coordinated cut with OPEC. Sechin also said Moscow was not seeking OPEC membership status but wanted to become a permanent observer. "There are different kinds of cooperation with OPEC and we have already made such proposals to OPEC," he told Reuters. "We are ready for close cooperation, coordination but all must progress step by step," he added.

Wednesday, December 10, 2008

Global LNG Supply to Surge to 2012, Crunch Later

December 10, 2008 - AFX News Limited - A 50% surge in global liquefied natural gas production capacity over the next three years, at a time of shaky demand, may make for a buyers market in LNG for a few years but the supply crunch will return later, an executive from BG Group plc said on Wednesday. "We are about to see a supply surge ... It is really unprecedented," Elizabeth Spomer, BG North America's senior vice president told the CWC World LNG Summit in Barcelona. "One of the repercussions of this financial crisis will be what happens to the pace of new projects going forward." Spomer said new projects due to come online over the next three years would make much more LNG available to the market but warned of a supply crunch from 2012-2015 as developers slow plans for new production facilities. BG, one of the world's leading LNG companies, estimates that about 14 million tonnes of the super-chilled gas will be sent from the Atlantic basin to Asia in 2008, double the amount sent to Asian buyers in 2007. But Asian demand has begun to wane and how much LNG consumers around the world will need is unclear, making it difficult to commit to new projects. "Markets don't know how much gas they need," Spomer said. "With that kind of uncertainty it's very difficult to do business."

Monday, December 08, 2008

Partners pay $100m Kazakh signing bonus

5 December 2008 - Upstream OnLine - US ConocoPhillips and the United Arab Emirate's Mubadala will pay Kazakhstan a $100 million signing bonus as part of a deal to buy a stake in a Kazakh offshore oil block, officials said today. ConocoPhillips and Mubadala agreed in October to buy 24.5% each in a Caspian block known as "N" from Kazakh state energy compnay KazMunaiGaz, have not given details of the deal. "According to the agreement, our foreign partners will pay a signing bonus of $100 million," Reuters quoted KazMunaiGaz chief executive Kairgeldy Kabyldin as telling reporters after the three companies signed another provisional agreement in Almaty. He declined to say how much the two would pay in total. The final deal will be signed early next year after the contract is changed from a production sharing agreement to a concession, Kabyldin said. The change means companies will be subject to higher taxes and all future tax law changes. The "N" block, previously known as Nursultan, is estimated to hold 2.1 billion barrels of recoverable oil reserves, Kabyldin said. "We plan to launch commercial production in 2016 if all current hydrocarbon reserve estimates are confirmed," he said. Kabyldin said foreign partners would finance all exploration costs and pay a discovery bonus if drilling is successful.

Caspian thaw raises Nabucco hopes

Ilkham Aliev and Kurbanguly Berdymukhamedov04 December 2008 - Upstream OnLine - The European Union sees an improvement in relations between Caspian producers Turkmenistan and Azerbaijan as a step towards implementing the Nabucco gas pipeline project, a senior official said. The two gas-rich nations, eyed by Brussels as a key source of energy for the $10 billion Nabucco pipeline, took steps to overcome past disagreements this year by forging closer energy ties and agreeing to diversify energy shipments. EU representative for Central Asia, Pierre Morel, on a visit to the Turkmen capital Ashgabat, said that would help speed the implementation of Europe's broader Southern Corridor project which includes Nabucco. "I think this prepares the ground for the Southern Corridor," Morel told Reuters. "I am convinced the EU should step up its efforts to build Nabucco. The next steps might be taken in the coming months and in early 2009." Turkmenistan pledged to seek better ties with Azerbaijan after Saparmurat Niyazov, who showed little interest in regional co-operation, died in 2006. His successor, Kurbanguly Berdymukhamedov, visited Baku this year to settle old disputes over the ownership of borderline offshore Caspian oil and gas fields and mutual debts. Most recently, he met with his Azeri counterpart Ilham Aliyev last week. "President Berdymukhamedov's serious efforts with regards to Azerbaijan look promising," Morel said after talks with the Turkmen leader. Turkmen gas could reach Nabucco either through Azerbaijan, via a planned pipeline across the Caspian, or through Iran, but the latter option faces political challenges due to Iran's complicated relations with the West. EU officials have been frequent visitors to Ashgabat this year and Berdymukhamedov last month visited Germany and Austria to discuss energy and investment. "All these visits are like pieces of a puzzle coming together," Morel told Reuters. Turkmenistan currently produces about 70 billion cubic metres of gas a year, most of which goes to Russia. But analysts said the country, which has already promised to sell 10 Bcm of gas per year to Europe, needs foreign investment to ramp up gas production and meet its supply commitments. "Our companies are waiting for Turkmenistan to create the environment needed for investment," Morel said.

Monday, December 01, 2008

OPEC Seeks for Help from Non-Members

OPEC General Secretary Abdullah Badri01.12.2008 - [Neftegaz.RU] - "All non-OPEC should come and help; it is a big burden for OPEC," El-Badri told reporters in Cairo after the meeting, adding that Russia's energy minister is expected to attend their next summit on Dec. 17 in Algeria. "We always ask Russia to join us, starting today and starting yesterday," said El-Badri, who was previously an oil minister for Libya. Mexico, Norway and Russia were among non-OPEC producers that cooperated with OPEC in trimming production to help raise oil prices a decade ago, which sank to almost $10 a barrel in December 1998. The group warned in a statement that demand would be "much lower" than was expected a month ago. The cost of crude has continued to slide even after the group agreed last month to lower production by 1.5 million barrels a day. Oil ministers from OPEC members Saudi Arabia, Venezuela, Algeria, Nigeria and Iraq said Saturday that an oil price of $75 a barrel would be a "fair" level that supports investment in new capacity. New York prices rallied to a record near $150 in July then fell below $50 this month.

Caspian pair look at export options

Turkmen leader Kurbanguly Berdymukhamedov28 November 2008 - Upstream OnLine - Turkmenistan and Azerbaijan - both major Caspian Sea producers - have agreed to diversify their energy shipments out of the region as par of a wider energy co-operation agreement. Speaking after talks with Azeri President Ilham Aliyev, Turkmen leader Kurbanguly Berdymukhamedov said the two nations would develop closer relations for energy exploration, development and shipments. "Our countries have abundant energy resources. We do agree that we should have open doors. We stand for diversification," Reuters quoted Berdymukhamedov as saying. Europe wants to pump Central Asian gas along the Nabucco route via Turkey through a 3300 kilometre network of pipelines - a plan that has irritated Russia which sees the energy-rich region as part of its sphere of interest. Turkish President Abdullah Gul is due to visit Turkmenistan on Saturday to meet Berdymukhamedov and Aliyev to discuss energy. Turkmenistan has long said it is seeking to diversify energy shipments and work closer with Europe while maintaining good relations with Russia, which controls its gas exports through gas monopoly Gazprom . Adding weight to Turkmen ambitions to start shipments to the West without cutting back on Russian exports, UK outfit Gaffney, Cline & Associates (GCA) this year classified the South Iolotan-Osman gas field as one of the world's biggest. Speaking alongside the Turkmen leader, Aliyev, on his first visit to Turkmenistan, also urged more co-operation. "Turkmenistan and Azerbaijan play a key role in ensuring the energy security of other countries," said Aliyev. "There is no doubt that this role will only increase in the future."

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