Friday, October 19, 2018

Exclusive: OPEC, allies struggle to fully deliver pledged oil output boost - internal document

The flag of OPEC stands on a desk ahead of the 174th Organization Of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Friday, June 22, 2018. OPEC and its allies reached a preliminary agreement in the face of strong opposition from Iran to boost production by a theoretical 1 million barrels a day - the actual increase will be smaller as several countries are unable to raise output. Photographer: Stefan Wermuth/Bloomberg Photo: Stefan Wermuth / Bloomberg / © 2018 Bloomberg Finance LP

https://www.reuters.com/article/us-opec-oil-exclusive/exclusive-opec-allies-struggle-to-fully-deliver-pledged-oil-output-boost-internal-document-idUSKCN1MT1G0

OPEC is struggling to add barrels to the market after agreeing in June to increase output, an internal document seen by Reuters showed, as an increase in Saudi Arabia was offset by declines in Iran, Venezuela and Angola. 

The Organization of the Petroleum Exporting Countries and allies agreed in June to boost supply as U.S. President Donald Trump urged producers to offset losses caused by sanctions on Iran and to dampen rising prices. 

Saudi Energy Minister Khalid al-Falih said OPEC and non-OPEC would pump roughly an extra 1 million barrels per day (bpd) following the June agreement. The OPEC document seen by Reuters adds to signs they have yet to deliver the full amount. 

OPEC says it is on course to do so, although it hasn’t given a timeframe. “It is a work in progress,” OPEC Secretary General Mohammad Barkindo said earlier this week. 

The internal document prepared by OPEC’s Vienna headquarters for a technical panel meeting on Friday showed that OPEC members, excluding Nigeria, Libya and Congo pumped an extra 428,000 bpd in September compared to May. 

The OPEC and non-OPEC technical panel called the Joint Technical Committee reviews producers’ compliance with their oil supply pledges. 

Top exporter Saudi Arabia pumped most of the extra oil, raising output by 524,000 bpd in September compared to May, the document showed. Other increases came from Iraq, Kuwait and the United Arab Emirates. 

Iran, facing U.S. sanctions on its oil exports from Nov. 4, cut production by 376,000 bpd in September versus May, and has said OPEC and Saudi Arabia are not able to make up for a total loss of its exports. 

“There is no spare capacity,” Iran’s OPEC governor, Hossein Kazempour Ardebili, said last month.
Among other OPEC members, production fell by 189,000 bpd in Venezuela and by 17,000 bpd in Angola. 

The non-OPEC nations cooperating with OPEC pumped an extra 296,000 bpd since May, the OPEC document showed. Russia increased output by 389,000 bpd, although Kazakhstan, Mexico and Malaysia posted declines. 

Trump calls Fed his 'biggest threat'
 
Nigeria, Libya and Congo are not included in OPEC’s supply-limiting pact. Including them brings the increase in OPEC’s output in September to 628,000 bpd. 

Editing by David Evans

Thursday, October 18, 2018

Ghana Launches First Ever Competitive Bid Round



Ghana launched a licensing round on October 15. This is the first open and competitive bidding round that the country has held, previously choosing to hold direct negotiations with oil and gas firms for acreage. Ghana is offering up three blocks in its offshore Central Basin.

According to reports, the licensing round has already attracted interest from major E&P firms, which have been conspicuously absent in Ghana’s burgeoning oil and gas sector to date.

Initial indications from sources in the Ministry of Energy suggest that BP, ExxonMobil, Total, Chevron Texaco, Rosneft, Sinopec and CNOCC will all be participating in the bidding.

The tender process is specifically focused on expediting exploration activity in the Central Basin. Ghana is calling on firms with the financial capacity and technical competence, coupled with the timescale for work program activity. Fiscal terms, including royalty payments to the government and Ghana National Petroleum Corporation (GNPC) equity is also an important issue in the tender process, as well as the equity and skills transfer to local partners under the local content aspect.

Wednesday, October 17, 2018

Don't mention the oil price - U.S. legal threat prompts change at OPEC

Khalid Al-Falih, Saudi Arabia's energy and industry minister, arrives for the 171st Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Wednesday, Nov. 30, 2016. 
 Akos Stiller | Bloomberg | Getty Images
Khalid Al-Falih, Saudi Arabia's energy and industry minister, arrives for the 171st Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Wednesday, Nov. 30, 2016.


OPEC has urged its members not to mention oil prices when discussing policy in a break from the past, as the oil producing group seeks to avoid the risk of U.S. legal action for manipulating the market, sources close to OPEC said.

Proposed U.S. legislation known as “NOPEC”, which could open the group up to anti-trust lawsuits, has long lain dormant, with previous American presidents signaling that they would veto any move to make it law. 

But U.S. President Donald Trump has been a vocal critic of the Organisation of the Petroleum Exporting Countries, blaming it for high oil prices and urging it to increase output to relieve pressure on a market hovering around four-year highs. 

That has made OPEC and its unofficial leader, Saudi Arabia, nervous about what it might mean for NOPEC, or No Oil Producing and Exporting Cartels Act. 

The decision to refrain from discussing a preferred oil price level — one way the group can guide market expectations — underlines how Trump’s aggressive stance on the oil market is unsettling OPEC and testing ties between allies Riyadh and Washington. 

In July, senior OPEC officials attended a workshop in Vienna with international law firm White & Case to discuss the NOPEC bill, and the lawyers advised avoiding public discussion of oil prices and rather talk about the stability of the oil market, two sources familiar with the matter said. 

OPEC officials were also advised to explore diplomatic lobbying channels to try and prevent the NOPEC bill from becoming law, one of the sources said. 

On Aug. 1, the OPEC secretariat sent a letter to the ministers making a similar recommendation. 

“We solemnly believe that market stability, and not prices, is the common objective of our actions,” UAE Energy Minister Suhail al-Mazroui, who holds the rotating OPEC presidency this year, wrote in the letter, seen by Reuters. 

“I would like to call upon OPEC Member Countries, as well as our participating Non-OPEC colleagues, to refrain from any reference to prices in their commentary about our collective efforts or oil market condition,” he added. 

White & Case did not respond to a Reuters request for comment. 

Specifying oil prices is not the only way OPEC tries to guide the market. By cutting production it can support prices and by raising supplies it can do the opposite, for example. 

But the private coordination of how to communicate OPEC’s message to the market represents a departure from past practice, when Saudi Arabia would often signal a preferred price level when speaking about OPEC policy and seek to push through actions to achieve that.

TIES STRAINED

While chances of the law passing this year appear slim, concerns among OPEC members and other oil producers are growing that it may ultimately get the support of Trump, given his open criticism of OPEC and high oil prices. 

The OPEC letter came two months before U.S.-Saudi relations were further strained when a Saudi journalist disappeared during a visit to the kingdom’s consulate in Istanbul. 

Turkish officials say they believe Jamal Khashoggi, a critic of Saudi policies, was murdered and his body removed. Saudi Arabia has strongly denied killing Khashoggi. 

Some members of the U.S. Congress, which has long had a testy relationship with Saudi Arabia, have criticized the kingdom over the case. 

A Senate source familiar with the bill said renewed interest in NOPEC was likely, as lawmakers weigh any actions in response to Khashoggi’s disappearance. 

The source, who declined to be named, said that with lawmakers out of town for the next several weeks, it was difficult to measure current sentiment.

LITIGATION RISKS MAY BE BEHIND IPO DELAY

Over much of the last year, Saudi Arabia irked Washington by pushing OPEC to adopt measures to boost oil prices in a shift from its previous, more moderate stance. 

Industry sources have linked that shift to a desire to maximize revenues and raise the valuation of state energy giant Saudi Aramco ahead of a planned IPO, a key part of Crown Prince Mohammed bin Salman’s reforms aimed at diversifying the economy. 

The share float, expected by some to be worth up to $100 billion, has been put on hold, sources have told Reuters. 

Prince Mohammed said this month the float was postponed to 2021, and several industry sources say the delay was partly because of litigation risks if Aramco was listed in New York, a preferred venue by the Saudi crown prince. 

“There is a major fear NOPEC could turn into another JASTA,” one of the sources familiar with Aramco IPO preparations said, referring to the Justice Against Sponsors of Terrorism Act which allows victims of the Sept. 11, 2001, attacks to sue Riyadh. 

Saudi Arabia, which denies involvement in the attacks, had long had broad immunity from the lawsuits. That changed in 2016, when the U.S. Congress overrode then-President Barack Obama’s veto of JASTA. 

With close to $1 trillion in investments in the United States, including assets owned by Aramco, Riyadh has a lot to lose if the NOPEC bill was passed into law. 

It would revoke the sovereign immunity which oil producers, including OPEC members, currently enjoy from U.S. legal action. 

Washington-based legal firm Gibson Dunn and the Saudi embassy there signed a contract in late August, according to a copy of the contract filed to the U.S. Department of Justice. 

The contract outlines that among its other responsibilities, Gibson Dunn would be “opposing NOPEC”. 

Saudi Energy Minister Khalid al-Falih has also raised concerns over NOPEC with senior U.S. officials including U.S. Energy Secretary Rick Perry during private meetings, two sources familiar with the talks told Reuters, on condition of anonymity. 

Additional reporting by Jarrett Renshaw in New York and Yara Bayoumy in Washington; Editing by Mike Collett-White

Monday, October 15, 2018

Iranian Tanker Discharges Oil into Storage in China Ahead of U.S. Sanctions

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A vessel carrying 2 million barrels of Iranian oil discharged the crude into a bonded storage tank at the port of Dalian in northeast China on Monday, according to Refinitiv Eikon data and a shipping agent with knowledge of the matter.

Iran, the third-largest producer in the Organization of Petroleum Exporting Countries (OPEC), is finding fewer takers for its crude ahead of U.S. sanctions on its oil exports that will go into effect on Nov. 4. The country previously held oil in storage at Dalian during the last round of sanctions in 2014 that was later sold to buyers in South Korea and India.

The very large crude carrier Dune, operated by National Iranian Tanker Co, offloaded oil into a bonded storage site at the Xingang section of the port, according to a shipping source based in Dalian, adding this was the first Iranian oil to discharge into bonded storage in nearly four years.

The tanker left the Iranian oil port at Kharg Island on Sept. 12, according to ship-tracking data. The Xingang area is home to several tank farms including commercial and strategic reserves. China National Petroleum Corp (CNPC) [CNPC.UL] and Dalian Port PDA Co Ltd (601880.SS) both operate commercial storage in the area, according to information on their company websites.

An investor relations official at Dalian Port declined to comment.A manager at the bonded crude storage site operated by Dalian Port declined to comment whether Iranian oil were moved to the tanks, calling it the “worst time” to give any comment regarding Iranian crude because of the U.S. sanctions.

A person at the CNPC-owned storage site who refused to identify himself when contacted by Reuters said it is “impossible” that the oil is stored there.

A spokesman for CNPC said he had no information on this matter. An executive with the China office of National Iranian Oil Co (NIOC) declined to comment. NIOC also did not respond to an email request seeking comment if it is storing oil at Dalian.

The shipping source said there is no buyer earmarked for the cargo.

Three other NITC tankers are set to arrive in Dalian in the next week or two, the ship-tracking data shows. Some of those cargoes are also likely to end up in bonded storage as the refineries in the region, controlled by CNPC, are not equipped to process Iranian oil, said three sources at state-run Chinese refiners.

China’s Iranian oil buyers, including state-owned refiner Sinopec (0386.HK) and state trader Zhuhai Zhenrong Corp, have shifted their cargoes to vessels owned by NITC since July to keep supplies flowing as the U.S. sanctions have been re-imposed.

Keeping oil in bonded storage gives the shipment owner the option to sell into China or to other buyers in the region. In early 2014, NIOC leased bonded tanks in Dalian and oil from there was shipped to South Korea and India, Reuters reported.

Sunday, October 14, 2018

Saudi threatens to retaliate against any sanctions over Khashoggi disappearance

Missing Saudi Journalist's Apple Watch May Have Sent Evidence: Report


By Andrew Torchia

DUBAI (Reuters) - Saudi Arabia on Sunday warned against threats to punish it over the disappearance of journalist Jamal Khashoggi last week, saying it would retaliate against any sanctions with tougher measures, as international criticism increased.

Khashoggi, a U.S. resident and Washington Post columnist critical of Saudi Arabia, disappeared on Oct. 2 after entering the Saudi consulate in Istanbul. Turkey's government believes he was murdered inside the building and his body removed. Saudi Arabia has denied that.

U.S. President Donald Trump has threatened "severe punishment" if it turned out Khashoggi was killed in the consulate, though he said Washington would be "punishing" itself if it halted military sales to Riyadh, a key ally.

"The Kingdom affirms its total rejection of any threats and attempts to undermine it, whether by threatening to impose economic sanctions, using political pressures, or repeating false accusations..." the official Saudi Press Agency (SPA)quoted an unnamed government source as saying.

"The Kingdom also affirms that if it receives any action, it will respond with greater action, and that the Kingdom's economy has an influential and vital role in the global economy," the source added, without elaborating.

Britain, France and Germany told Saudi Arabia they were treating the case with "the utmost seriousness".

"There needs to be a credible investigation to establish the truth about what happened, and - if relevant - to identify those bearing responsibility for the disappearance of Jamal Khashoggi, and ensure that they are held to account," the foreign ministers from the three countries said in a joint statement.

"We encourage joint Saudi-Turkish efforts in that regard, and expect the Saudi Government to provide a complete and detailed response. We have conveyed this message directly to the Saudi authorities." 

The statement, by British foreign minister Jeremy Hunt, France's Jean-Yves Le Drian and Germany's Heiko Maas, made no mention of potential actions the countries might take.

The Saudi stock market lost $33 billion of its value on Sunday amid investor worries about deteriorating international relations, one of the first signs of the economic pain that Riyadh could suffer over the affair. 

In a column published just after the SPA statement, Saudi-owned Al Arabiya channel's General Manager Turki Aldakhil warned that imposing sanctions on the world's largest oil exporter could spark global economic disaster.

"It would lead to Saudi Arabia's failure to commit to producing 7.5 million barrels. If the price of oil reaching $80 angered President Trump, no one should rule out the price jumping to $100, or $200, or even double that figure," he wrote.

U.S. senators have triggered a provision of the Global Magnitsky Human Rights Accountability Act requiring the president to determine whether a foreign person is responsible for a gross human rights violation. The act has in the past imposed visa bans and asset freezes on Russian officials.

Anti-Saudi sentiment in the U.S. Congress could conceivably raise pressure to pass the so-called No Oil Producing and Exporting Cartels Act, which would end sovereign immunity shielding OPEC members from U.S. legal action.

A senior member of Saudi Arabia's ruling family, Prince Khaled al-Faisal, has met Turkey's President Tayyip Erdogan to discuss Khashoggi's disappearance, two sources with knowledge of the matter told Reuters without providing details of the talks.

On Friday, a source with links to the prince's family said Prince Khaled, the governor of Mecca, had been sent to Turkey in his capacity as special adviser to King Salman.

A Turkish official told Reuters on Sunday that the Saudis had said they would allow the consulate to be searched, and that this would happen by the end of the weekend, though he had conceded to "flexibility on this date."

"But Turkey is determined on the subject of entering the consulate and carrying out a criminal inspection. There is no alternative to carrying out this inspection. Time is important in terms of evidence," the official said. 

(Reporting by Aziz El Yaakoubi and Asma Alsharif; writing by Stephen Kalin; editing by Jason Neely/Robin Pomeroy)

Friday, October 12, 2018

Zero August US crude exports to China



This was a significant change to the export pattern seen since early 2017.

Chinese buyers, led by the world’s top tanker charterer, Unipec, were rumoured to have stayed away – and new data proves it, the organisation said.

Current rumours suggest that Chinese buyers returned early this month but to what extent will be clearer later.

Despite being left out of the ‘official’ trade war at the last minute, crude oil was removed from the Chinese $16 bill list before it came into force on 23rd August, 2018, crude exports are now taking centre stage.

BIMCO’s Chief Shipping Analyst, Peter Sand, explained: ”The tanker shipping industry is hurt when distant US crude oil export destinations like China, are swapped for much shorter hauls into the Caribbean and South, North and Central America.

“The trade war is all around us now. What appeared on the horizon half a year ago is now impacting many seaborne trading lanes. All commodities may be impacted regardless of them being officially tariffed or not. What we see in terms of crude oil transport, is harmful to the global shipping industry as well as cumbersome to the exporters and importers of the product,” he warned.

In 2017, Chinese imports accounted to 23% of total US crude oil exports. This year, they fell slightly to 22% during the first seven months. In August the share dropped to zero.

In September, total US crude oil exports, excluding to china, hit a new record at 6.96 mill tonnes.

Exports to Asia jumped in June and July, from a 43% share of total exports since the start of 2017 to reach a 56% share. In August, that share fell back to 46%.

The two other major importing regions are Europe (26%) and North and Central America (18%), while South America (5%), Caribbean (2%) and others (4%) make up the rest. (August share of exports in brackets).

Sand added: “For the crude oil tanker shipping industry distances often matter more than volumes. Even though volumes were a record high, tonne/mile demand dropped by 19% from July to August, due to the shift in trade patterns.

“Exports to Asia are by far the most important. When measuring the tanker demand in tonne/miles, exports of US crude oil to Asia generated 70% of tonne/mile demand on that trade in August– down from 78% in June and 75% in July,” he concluded.