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US$/bbl
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Domestic Market Refinery Operation NPDC Equity Production Strategic Plan on Domestic Market Energy In Brief Upcoming Events in the Energy Industry Disclaimer
The justification given by the banks analysts for this price cap is possible government action to release oil from strategic stockpiles, if the market which is now at $110 continues to rally. The Petroleum Intelligence Weekly, August, 2013 reports that the prospect of consumer countries opening the spigots as they did in 2011 when Libya produc-
US gasoline prices remain above 280 cents/gallon for most part of the month. Although the US economy is fragile, US product demand has surprisingly increased, helping to underpin global oil prices. But a seasonal downturn in gasoline demand al-
Economic Research & Data Management (ERDM) of Corporate Planning & Strategy (CP&S)
6/27/2013 2/7/2013 4/7/2013 8/7/2013 10/7/2013 12/7/2013 16/7/2013 18/7/2013 22/7/2013 24/7/2013 26/7/2013 30/7/2013 8/1/2013 8/5/2013 8/7/2013 8/9/2013 8/13/2013 8/15/2013 8/19/2013 8/21/2013 8/23/2013 8/27/2013
tion dropped is a bearish signal, but there are other factors keeping prices in check. These include the numerous threats to prices at current levels, a Crude Oil Market slowdown in emerging markets, the probability of the US Federal Reserve moving to ease back its International Crude oil and Petroleum Product stimulus measures, possible price-induced dePrices: mand erosion, profit-taking among speculators and Benchmark crude prices continued to rally. The even the possibility of higher OPEC output among prices remained above $105/bbl due to relative others. increase in demand and concern over geopolitical US Conventional Gasoline Prices crises, particularly Syria, Egypt and Libya. Brent & 310 WTI prices which averaged $107.85 & $104.55 per 300 barrel respectively in July, increased by about $2 290 each to averaged $109.80 & $106.36. Similarly, 280 average OPEC basket price increased by almost 270 $2 to settled at $106.33 per bbl. Current higher oil New York Harbor U.S. Gulf Coast 260 price is nearing the Goldman ceiling of $115 per 250 bbl which can trigger possible government intervention to tame the prices.
Cents/Gallon
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ready looms, and a weaker economy would ac- 108.8 cent/gallon as at August 19, 2013. Concelerate any decline. Average gasoline price as sistent increase in price is attributed to rising deat August 19, 2013 is about 0.4% below the av- mand for transport and storage ahead of winter season. Only residual fuel recorded decline in erage for previous month. demand. Generally, US demand for petroleum products averaged 18.9mb/d last month, up 1.7% from year ago and heating a 3 year high acUS Diesel Prices 320 cording to API monthly Statistics.
Cents/Gallon
300 280
6/27/20
China to Pass US as Top Oil Importer: EIA has predicted that China will soon overtake US in oil importation. Asias largest economy became the worlds biggest energy consumer in 2010 and the largest emitter of carbon dioxide since 2006. Since passing those milestones, Chinas surging oil demand has far outstripped the modest growth in its own production, fuelling the appetite for imports, while the shale revolution in the US has boosted domestic oil supply and reduced US liquids import requirements. These dynamics mean that China is now set to emerge as the worlds largest net oil importer as early as October, according to the US Energy Information Administration (EIA). In its most recent forecast predicted that China would reach the inflexion point this October, surpassing the US as the largest net oil importer. The EIA estimates Chinas net oil imports crude and products will reach 6.44 million barrels per day in October versus 6.23 million b/d for the US, and the gap will then continue to grow. The US agency expects total US crude and liquid fuels production to hit nearly 12 million b/d by 2014, when China will be producing 4.57 million b/d
Los Angeles
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Similarly, diesel price which rose 0.88%, averaged 303.79 cent/gallon as at August 19, 2013 compared to previous month driven mainly by increase in demand. Summer travel brought greater demand for diesel, gasoline and other fuel types. Distillate deliveries increase 8% from previous year levels. Gasoline demand rose 2.2% to 9mb/d while jet fuel demand rose 2.3% according to API Statistics, 2013.
Mont Belvieu (LPG) Price
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Cents/Gallon
105 100 95 90 85
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Mont Belvieu average propane price increased CNOOC in Bohai announced that the Company by more than 6% for two consecutive months to has made two new exploration discoveries (Bozhong 8-4 and Kenli 10-4 in Bohai). Bozhong
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8-4 is located in the west slope of Bozhong Sag in Bohai, with an average water depth of about 28 meters. The discovery well Bozhong 8-4 is drilled and completed at a depth of 1,962 meters and encountered oil pay zones and gas reservoir with a total thickness of about 50 meters and 11 meters, respectively. During the test period, the oil production of the well was around 660 barrels per day. The discovery well Kenli 10-4-1 is drilled and completed at a depth of 2,395 meters and encountered oil pay zones with a total thickness of about 45 meters. During the test period, the oil production of the well was around 2,800 barrels per day.
Chinese oil companies have been consistently aggressive in offshore petroleum exploration expedition in the recent past. This has been paying off with the success of offshore oil discoveries made. The most recent discoveries made by CNOOC in Bohai led to a total addition of about (660+2800) b/d to Chinas national daily crude oil production. This development may have a negative impact on Nigerias oil export since China is one of the destinations. The continuous successful discoveries of oil and gas in Nigerias oil export market destinations could exert a serious pressure on the revenue accruable from crude oil sales. This effect may suggest the business model of adding value to Nigeria crude and taking advantage of both its domestic and the sub regional African market.
China Oil Demand Rose to more than 6.6% in August versus a Year Ago: China's oil demand in August 2013 rose to more than 6.6% to an average 9.82mb/d or 41.52 million mt. On a month-over-month basis, apparent demand in July was down 1.7% but still demonstrated robust growth, which is an indicator of Chinas recovering economy. Apparent oil demand in August 2013 had soared 11.7% from same time last year to average 9.99 million b/d which was the highest growth rate 2012. Refinery runs, or capacity utilization, was 9.53 million b/d in August 2013, up 7.1% from the same time a year ago. But on a month-over-month basis ports in August more than doubled on a year-over-year basis to 310,000 mt, while jet/kerosene export jumped 33.9% from August 2012 to 790,000 mt. China typically does not import gasoline. For the first eight months of 2013, China's total oil demand on a year-on- year basis increased by more than 4.2% to an average of 9.86 million b/d. China Industrial production, electricity generation and fixed-asset investment all saw higher growth rates in August 2013. Based on current indications, this pace of growth would continue till 2014, especially if this pattern of growth holds till 4Q13 peak winter period.
Chinas consumption increase is supported by its improving Macro-Economic Environment. The month-to-month demand in China is viewed subject to short -term anomalies which are of interest and important which reveals the countrys underlying demand trends. Year-to-year comparisons are viewed by the marketplace which indicates the countrys energy profile. China's apparent or implied oil demand is on the basis of crude throughput volumes at its domestic refineries and net petroleum products imports. From the foregoing trend, it is obvious that China is aiming at becoming a petroleum products net exporter which is achievable in the nearest future if its economy continues to improve, which is evident in China not importing gasoline at all.
Economic Research & Data Management (ERDM) of Corporate Planning & Strategy (CP&S)
European LNG imports have dropped to a level last seen in 2003 due to a combination of improved prices for contract gas from pipeline sources and sizable arbitrage opportunities in diverting the LNG to markets in South America and Asia. The projected 70-mmcm/d Y/Y drop in LNG imports during August is not a new phenomenon in Europe. It reflects weaker gas demand in Europe due primarily to the obliteration of gas use in power and is secondarily tied to weaker industrial sector demand. Imports will recover in the months to come as global supply loosens up and European LNG contract holders find fewer opportunities in other regions.
Chinese LNG imports surged by 25% YoY to 8.34 million tons. Recent increase in LNG import is attributed to petrochinas gas supply cut to domestic LNG plants in a bid to force government to increase gas prices. This resulted in domestic LNG though unusually, costing more than imported LNG which in turn prompted buyers to turn to imports to meet local demand. Average LNG import price in 1H2013 is $11.18 per mmBtu which is 6.2% higher than previous year, although China still pays less than regional buyers ( see price chart below).
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Sizeable increase in pipeline imports from Russia has more than upset the decline in LNG imports. This shift to more Russian gas and less LNG is important on a broader level for two main reasons. One reason is that Russia is making a concerted effort to market more gas during injection season because it has too much gas during the middle of the year and not enough gas during the winter. Evening out the export profile on an annual basis will lead to fewer problems with emergency export reductions during the winter periods when peak demand is occurring both inside of Russia and in Western Europe. Such reductions have not happened often, but the likelihood of them occurring more in the future is strong if Russia goes ahead with its planned connection of its eastern and western gas grids. The second reason is Europes substitution of expensive gas with relatively cheaper one by diverting contracted LNG to higher arbitrage markets while replacing lost volumes with cheaper pipeline gas from Russia.
A preliminary report of World Bank-led Global Gas Flaring Reduction (GGFR) Initiative indicates increased gas flaring among OPEC member countries. The GGFR partnership, a World Bank-led initiative, facilitates and supports national efforts to use currently flared gas by promoting effective regulatory frameworks and tackling the constraints on gas utilization, such as insufficient infrastructure and poor access to local and international energy markets, particularly in developing countries.
The public-private GGFR partnership is yet to release its authoritative world-wide gas flaring data for 2012 based on satellite imaging after releasing comparative 2011 data in 2012. The OPEC secretariat does collect gas data from its members, the exercise is incomplete due to Saudi Arabia and Iran not admitting to any flaring at all. Thus, the GGFR figures are at odds with OPEC reported figures for most of its member countries. Table below shows that OPEC flaring has increased since 2011, with Iraq and Venezuela both significantly higher and Libya volumes tripled. Among reliable reporters include Nigeria Gas flaring still high among OPEC countries and Kuwait who have recorded reduction in flaras Nigeria records impressive reduction. ing, perhaps by increased harnessing of gas for Opec Member States 2012 Gas Flaring Vs Gas Marketed power generation. Angola flare remains significantly high by accounts of both OPEC and GGFR in view of its low gas monetization. The Table also includes non-OPEC Russia and U.S. Russia still appears to be under-reporting, perhaps because of $200m of fines levied on firms that failed to meet flaring targets last year. U.S. has not yet produced a tally for 2012 but looks likely to have increased flaring nationwide due to growing shale gas and oil production.
Economic Research & Data Management (ERDM) of Corporate Planning & Strategy (CP&S)
Domestic Market
The Refinery Operations:
continuously, reaching a month peak at 16.68 million barrels. The first three week of the month averaged 16.3million barrels per week or 2.33 million barrels per day. This is an improvement Refinery production for August 2013 was the lowfrom the last month figure of 15.5 million barrels est this year due to complete shut down of PHRC per day. while WRPC only partially operated during the month. The lack of refining activities in PHRC This volume improvement was attributed to prowas attributed to feedstock supply problems as duction increase from Bonny, Qua Iboe, reported since mid-July 2013 in addition to the Stardeep, Sapetro, Snepco and Addax as well as suspected line break. However, the Refinery the restoration of power failure at Erha field and repairs of a leak on sealine pipeline along Okwas available to receive imported PMS during poho field. the month. th Therefore, reported refinery figures in August as The year-to-date national production as at 20 of depicted below were mostly KRPC operation. A August 2013 was 514.030 million barrels, which combined production of PMS, DPK and AGO for translates to 2.225mmb/d. the month August 2013 was less than 100 million litres. NPDC Equity Production: Currently, KRPC is running at 68%, 70%, 51% and 52% of installed capacities of CDU, VDU NHU and CRU respectively for most part of the month of August 2013. Shutdown of the other refineries have negatively affect local contribution to product sufficiency. National Production: The national crude oil and condensate production volume for the month of August 2013 improved
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The NPDC equity production for the month of August 2013 averaged 718,000 barrels per week (about 102,590 b/d). There was a significant dip in production in week-32 to below 630 kbpd as a leak on Trans Forcados Trunk and Sealine Pipeline along Okono, Oben, Egbema, Amukpe and Sapele fields. However, repair of the Trans Forcados Trunk boosted production afterwards.
low of 1.2%. LPG and Plant-Condensate Production: The activities for LPG and Plant-Condensate as depicted in the chart below mirror that of LNG. As a byproduct of an LNG plant, improvement in LNG production by extension means improvement in its by-products volume production.
The NPDC year-to-date production as at August Plant Condensate and LPG production averaged 20th, 2013 was 24.55 million barrels, averaging 21.87 kilotons and 16.67 kilotons respectively for the month of August 2013. 106.227kb/d.
Nigeria LNG Production: Near normalcy had return to NLNG operation after the NIMASA impasse reported in July. A peak of 447.7 kilotons was recorded in week-32 in August, the highest output since May 2013. Average production for the first three weeks in August 2013 was 420.77 kiloton despite the reported leak on 24 Trans Niger Pipeline that affected feedgas supply from Obite and Gbaran Ubie outfield. Following the resolution, more than 20 cargoes of LNG had been exported to Asia, Europe, North and South America with Asia maintain the lead in terms of destination. Plant availability and reliability in August was optimal at 99% and utilization has improved to 89% as at 15th August from July
Highlights of NNPC 2013-2015 Strategic Plan: (Immediate and Near-term outlook): The immediate and near-term outlook for the domestic market as captured in the recently released NNPC 2013 2015 Strategic Plan are highlighted below. NPDC is projected to increase its crude reserve base to 1,723 million barrels by the end of 2013 from 358 million barrels achieved in 2012 through various organic and inorganic acquisitions. With this plan, production is projected to increase from 106,118 bopd achieved in 2012 to an average of 133,315 bopd by 2013. Production as at 20 th of August 2013 averages 106,227 bopd.
Economic Research & Data Management (ERDM) of Corporate Planning & Strategy (CP&S)
Refining and Petrochemicals activity focus will be on overcoming the low capacity utilization, poor products yield and other operational issues in the Refineries. This will be achieved in the Refineries through modified ownership and financing options such as Technical Service Contract Arrangements, Investor Product Sharing Agreement, Equity Participation Agreements and Partial Privatization.
The Nigerian domestic market further strengthened following the full blast operation in the Nigeria LNG after the protracted NIMASA impasse. National production maintained a 2.3 million bpd average production in August while the NPDC equity contribution improved in the month with about 102.6kbd. This is still a long shot at the projected 133.3 kbpd for 2013 and requires a run rate much higher than current daily production average. Given the passage of NNPC 2013 budget, several projects geared towards the actualization of NPDCs 2013 production targets are expected to be set in motion. Through various organic and inorganic growth path, we are optimistic that the target is achievable. Partial operations in WRPC coupled with the total shutdown of all Units in PHRC significantly affected local supply of petroleum products to the national stock. This situation is likely to subsist in the coming month given the reason for the shutdown and could potentially affect negatively, the daily products sufficiency rates. The 2013-2015 Strategic Plan succinctly outlined immediate and remote measures to properly aligned the Refineries on the path to profitability. The overall outlook for the Nigeria Energy Industry in line with the 2013-2015 Strategic Plan remains hugely positive and encouraging despite present circumstances. Supporting this optimistic view is the global energy demand that remains positive. We expect the month of September to start reflecting the positive impacts of the recently approved and released NNPC 2013 Budget and 2013-2015 Strategic Plan. To this end, we are very optimistic for the domestic market.
Energy In Brief
Modified Carry Agreement (MCA) Vs Carry Agreement (CA): Carry Agreement is a financing agreement adopted by NNPC whereby the International Oil Companies (IOCs) will advance loan to NNPC for the purpose of investing in joint upstream projects and the repayment thereof will be based on agreed oil quantities to be carried by the IOCs. Modified Carry Agreement on the other hand is also a loan advanced for the purpose of investing in joint upstream projects but the repayment here is not based on oil quantity but on agreed amount. While one is oil-quantity based, the other is oil-value based. Aromatic compounds are organic compounds which always have a benzene ring in them. Because of this they can be quite reactive and have some interesting properties. The dye and pharmaceutical industries depend heavily on aromatic compounds. Aliphatic compounds are organic compounds which are not aromatic. They include single bonded (ethane, propane, butane), double bonded (ethene or called ethylene, propene, butene), and triple bonded (ethyne or called acetylene, propyne, butyne) straight chain hydrocarbons as well as cyclic non-benzene structures (cyclopentane, cyclobutane) (every organic compound in the world is either aromatic or aliphatic). A Barrel (bbl.) of crude contains 42 gallons or 158.8 liters. No one actually ships petroleum in barrels anymore because they are too small, but the term is still used to describe a defined volume. Petroleum literally means "rock oil". It is a very
Economic Research & Data Management (ERDM) of Corporate Planning & Strategy (CP&S)
broad word referring to all liquid hydrocarbons which can be collected from the ground. Even natural gas and solid hydrocarbons are sometimes referred to as petroleum. When petroleum first comes from the ground it is called crude oil. Later it is usually just referred to as oil. It can flow like water or be as viscous as peanut butter. It can be yellow, red, green, brown, or black. Isomers are chemicals which have the same number and type of atoms but have them arranged in a different way. Methane (CH4), ethane (C2H6), and propane (C3H8) have no isomers because there is only one way the carbons can hook together. Butane (C4H10) has two isomers (n-butane and isobutane). Decane (C10H22) has seventy five isomers, and a molecule with 20 carbon atoms (C20H42) has over 100,000 isomers. Crude oil contains molecules having 1 to 100+ carbon atoms. Naming these compounds based upon normal chemical rhetoric would be very tedious. The huge number of possible molecular arrangements is why people talk of fractions instead of using proper chemical nomenclature.
Upcoming Events
5th South Russia International Oil & Gas
Exhibition, Krasnodar, Russia September 3 September 5, 2013 http://www.ite-russia.ru/en-GB/exhibitions.aspx?id=51051
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Disclaimer
This publication presents extracts of the global oil and gas industry news. Its content reflects individual as well as general analysis and trend of activities that characterized the industry. Although NNPC endeavours to ensure accuracy of information in this document, it cannot guarantee 100% accuracy. Users are to note that use of any information herein is purely at their discretion.