Monday, August 29, 2016

Ghana pumps first oil from second offshore TEN field

The oil ship Prof John Evans Atta Mills is seen moored off the coast of the port of Takoradi, Ghana, July 14, 2016. Picture taken July 14, 2016. REUTERS/Matthew Mpoke Bigg
The oil ship Prof John Evans Atta Mills is seen moored off the coast of the port of Takoradi, Ghana, July 14, 2016. Picture taken July 14, 2016. REUTERS/Matthew Mpoke Bigg
By Kwasi Kpodo | TAKORADI, Ghana
Ghana began pumping crude from a second offshore field operated by British company Tullow Oil on Thursday, hoping the additional revenue will boost its flagging economy.
The Tweneboa, Enyenra and Ntomme (TEN) field expects to average around 23,000 barrels per day (bpd) in 2016, eventually reaching 80,000 bpd along with associated gas to be harnessed to ease a domestic power deficit.

President John Dramani Mahama opened the valves on the $1 billion Floating Production, Storage and Offloading vessel, the Prof John Evans Atta Mills, named after Ghana's former president who died in 2012.

"Current setbacks in the world (oil) market are temporary and we'll see a recovery soon that will give a fair price to producers," Mahama said as he opened the valve. "Its been a long journey but a fruitful one."

TEN, with estimated reserves of 240 million barrels of oil and associated gas of 60 million barrels equivalent, is Ghana's second oilfield after the country's flagship Jubilee project, also operated by Tullow, which began in late 2010.

The revenue from TEN is significantly less than was first anticipated when the country launched the project in 2013, owing to the slump in world oil prices.

"It (revenue from TEN) will ... provide a stronger financial security for our debt servicing arrangements going forward and enhance the stability of the budget," Finance Minister Seth Terkper told Reuters.

Oil revenue is vital as Ghana battles to meet conditions set by a three-year aid program with the International Monetary Fund that aims to bring down inflation and the budget deficit as well as stabilize the cedi currency.

The revenue and TEN's role as a symbol of high-tech national development could also boost government fortunes ahead of what is expected to be a tight presidential election in December in which Mahama faces opposition leader Nana Akufo-Addo.

A senior opposition figure on Thursday told Reuters the oil field's opening would not help the government's chances, given that it has overseen a slump since winning the 2012 election.

Ghana was considered one of Africa's hottest investment destinations due to its exports of gold, oil and cocoa. Since 2013, however, a fall in commodity prices and a resultant fiscal crisis has slowed growth dramatically.

Jubilee produces 100,000 barrels of oil daily and 140 million standard cubic feet of natural gas after a 45-50 day shutdown in May.

Mahama said development of TEN was hindered by a maritime boundary dispute with Ivory Coast but the country was committed to a peaceful settlement and it should be resolved next year.

Ghana hopes next year to open a third field, Offshore Cape Three Points field operated by Italy's ENI.
(Editing by Tim Cocks, Matthew Mpoke Bigg and Alexandra Hudson)

Nigerian offensive launched against Delta oil hub militants

Nigeria on the offensive against Delta militantsNigeria's military said on Saturday it had launched a new offensive against militants in the oil-producing Niger Delta, killing five and arresting 23.

Armed groups have claimed responsibility for a series of attacks on oil and gas pipelines in the southern region, reducing the country's oil output by 700,000 barrels day.

A Special Forces battalion moved against militant camps on Friday in an operation "aimed at getting rid of all forms of criminal activities", army spokesman Sani Usman said in a statement.

"In the course of the operation, five militants that attacked the troops were killed in action, while numerous others were injured and 23 suspects were arrested."

There was no immediate reaction from militant groups, which operate from hard-to-access creeks in the swampland.

The groups say they want a greater share of Nigeria's oil wealth to go to the impoverished region. Crude sales account for about 70% of Nigeria's government revenue and most of the oil comes from the Delta.

A similar military campaign in May drew sharp criticism from rights groups and residents who said soldiers had laid siege to villages, arrested civilians and raped women in a bid to force them hand over militants. The army denies this.

The government has been trying to broker a ceasefire but the militant scene is divided into small groups whose fighters, drawn from unemployed youths, are difficult to control even for their leaders.

On Thursday, Oil Minister Emmanuel Ibe Kachikwu met traditional leaders from the Delta to ask them to mediate in talks with militants but they said they wanted the army first to release prisoners taken during a previous sweep, an official told Reuters.

The army in May arrested a group of school teenagers who community leaders say are not linked to militants.

A group calling itself Niger Delta Avengers, which has claimed several major attacks, said in a statement on Sunday they had agreed to a ceasefire to start a dialogue. Officials have refused to confirm this. 

Friday, August 26, 2016

Suezmax undertakes first tanker transit of new Panama locks


Mjolner Shipping has confirmed that the 2016-built Suezmax ‘Aegean Unity’ has completed a transit of the new Panama Canal and thus claimed to become the first crude oil tanker to go through the new locks. 
"Working with trading partners Core Petroleum and Statoil, the vessel's technical managers, and the Canal authorities, our team expertly planned the first of what is expected to be many transits of the new locks for our fleet," said Mjolner's president and CEO, Kevin Wise.

"As oil majors and traders make sense of the opportunities that the expanded canal can bring we expect to see more demand to move crude oil cargoes in both directions," he said.

Mjolner commercially manages 15 crude oil tankers, ranging in size from Panamax to VLCCs.
‘Aegean Unity’ is technically managed by Arcadia Shipmanagement.

Thursday, August 25, 2016

Fitch: falling associated gas volumes steadying US gas prices


Associated gas production at oil-focused U.S. shale plays has declined in line with lower spending, providing modest support to U.S. natural gas prices, according to Fitch Ratings. The impact of associated gas production, which is natural gas produced alongside oil, could exacerbate any divergence in price trends if either oil or gas prices rebound significantly faster than the other.

Natural gas volumes are down across a number of key liquids-rich shale basins. A review of Energy Information Administration data suggests that associated gas production is down 3.1 Bcf/d relative to peak production levels, including the Eagle Ford (-1.6 Bcf/d), Niobrara ( -1.1 Bcf/d), Permian (-218 mmcf/d), and the Bakken (-162 mmcf/d). On an overall basis, U.S. dry gas production has stabilized at approximately 73 Bcf/d, a year-over-year decline of approximately 1 percent. This contrasts with U.S. dry gas production growth in the 5 to 6 percent range seen as recently as 2014-2015.

Less associated gas, lower activity levels in key dry gas basins and improved demand from hot summer weather have helped gas prices recover from rock bottom levels seen earlier this winter when gas prices briefly dipped below $1.50/mcf.

Unlike the Marcellus or Haynesville, where drilling decisions tend to be driven by dry gas economics, drilling decisions in associated gas plays tend to be more driven by oil/natural gas liquids (NGLs) pricing. As a result, a scenario where natural gas prices remain depressed but oil or NGLs rebound sharply would tend to encourage overproduction of gas and weigh on prices. Conversely, a lagged recovery in oil/NGLs pricing would tend to keep activity in the shales depressed, further reducing associated gas production and supporting gas prices, all else equal.

We believe that the US natural gas market is more reliant on improved demand fundamentals than the oil market, and may therefore take longer to see a reasonable price recovery. Continued drilling efficiency gains and limited export opportunities are likely to cap gas price gains in the near to medium term. Our current base case price deck for Henry Hub natural gas is $2.35/mcf in 2016, $2.75/mcf in 2017, $3.00/mcf in 2018, and $3.25/mcf in the long term.

In addition to supportive weather, current demand drivers include additional coal to gas switching; a further ramp up in industrial demand for natural gas, including the large slate of greenfield chemicals capacity on the gulf coast and elsewhere; export demand to Mexico; and modest liquified natural gas export demand.

Is the US Dollar Impacting Natural Gas Prices?

Natural gas and the US Dollar Index

Between August 17 and August 24, 2016, natural gas (UNG) (FCG) (BOIL) (GASL) (GASX) (UGAZ) (DGAZ) October futures rose by ~6.6% and the US Dollar Index (UUP) rose by ~0.1%.
Is the US Dollar Impacting Natural Gas Prices?
In the last five trading sessions, natural gas futures and the US Dollar Index moved in opposite directions in two instances. The correlation between the two over the last five trading sessions was -50.2%. This could mean that movements in natural gas were influenced by movement in the US Dollar Index, apart from fundamental news. When the dollar falls, it usually makes commodities cheaper for importing countries—this boosts prices. However, US natural gas wasn’t exported earlier. Historically, this relationship wasn’t observed. It will be interesting to see if natural gas and the dollar develop a more long-term inverse relationship—like the one between crude oil and the dollar. The US started exporting natural gas in the form of liquefied natural gas from the lower 48 states to outside North America in February 2016.
Natural gas price movements
On May 2, 2016, the US Dollar Index closed at 92.6—its lowest level year-to-date. Between May 2 and August 24, the US Dollar Index rose by ~2.3%, while natural gas futures rallied by 38.8%.
Between May 2 and August 24, the US Dollar Index and natural gas prices moved in opposite directions based on the closing price in 41 out of 80 trading sessions. So, this isn’t enough evidence to point to an inverse relationship between the two, like the relationship between the US dollar and crude oil prices over the long term. A strong dollar makes crude oil expensive for crude oil–importing countries.

Impact on ETFs
Natural gas prices also impact ETFs such as the Direxion Daily S&P Oil & Gas Exp. & Prod. Bear 3x Shares (DRIP), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the PowerShares DWA Energy Momentum Portfolio (PXI), the Vanguard Energy ETF (VDE), and the Fidelity MSCI Energy Index ETF (FENY).

Summer driving season is ending — here's how far $50 worth of gas will get you on America's highways

US gas prices have hit their lowest point in recent history, falling to levels last seen before the Great Recession. According to The New York Times, the national average fell to $2.18 a gallon in July.

Since gas prices have become inextricably linked to the American road trip, comparing how far a tank will get you on US highways is a useful point of comparison for prices at the pump.

The cost-information website How Much, with an assist from SVM, put together some vividly colored maps to illustrate how far $50 worth of gas would take you from major American cities, based on the average gas prices in June for the years 2005, 2008, 2011, 2014, 2015, and 2016 and assuming that your car gets 24 miles a gallon.

Summer road-trip season is wrapping up, so check out how far you can go below.

Gas milage distance from New York on tank of gas

Wednesday, August 24, 2016

VLCC cargoes from the US could be on the rise

China VLCC ordering 10 VLCCs

In a clear indication of the current lackluster picture of the VLCC freight market, cargoes booked from the US, not the most commercially inticing, could soon be on the rise. In a recent note, shipbroker Alibra Shipping noted that “VLCCs fixed to carry crude from the US are few and far between – not least because the government only permitted the commercial export of American crude in December. Then, of course, there’s the US’s lack of load ports able to handle VLCCs. Nevertheless, this year has seen a regular sort of trade developing, with a VLCC from the VL8 Pool fixed in the spot market around once every two months for the US Gulf to Singapore run. Interestingly, this month alone has seen two such VLCC fixtures! This past week, Gener8 Maritime’s VLCC GenMar Zeus (318,300 dwt, built 2010) has been reported fixed on subs in the spot market for a voyage from the US Gulf to Singapore for ST Shipping, laycan Sept 8-10. The rate was not reported. On August 9, Navios Maritime Acquisition’s Nave Electron (305,200 dwt, built 2002) was reported fully fixed to ST Shipping for a voyage from the US Gulf to Singapore for a lump sum rate of $2.75m, laycan August 27-31. Previous to these fixtures, the last time any VLCC was fixed ex-US Gulf was IN June for ST Shipping (again), which fixed Gener8 Success (320,000 dwt, built 2010) for a voyage to Singapore, loading July 25-30. The lump sum was reportedly $3.75m”, said Alibra.

According to Alibra, “cheap freight rates and a generally weak VLCC market are a big factor in these notable fixtures from the US. The lump sum paid for Nave Electron this month pales in comparison to a failed deal reported in early March, for which $4.85m had been mooted for the US Gulf-Singapore voyage. VLCC voyages from West Africa haven’t been quite as numerous as they have been in previous months, so it looks as though the US is stepping into the breach – especially while the arbitrage with Brent stays open. Consultancy firm Energy Aspects expects exports of US crude to increase in coming weeks, as outages in West Africa squeeze supply and props up demand. Over 10m bbl of oil is rumoured to be “leaving the US over the course of the next month or so – most of which is pointed towards the Med and Northwest Europe,” according to research by Energy Aspects. Two Suezmaxes have been reported fixed this week for a US Gulf-UK/Med trip. The price differential between Brent and WTI crude has also widened this week, and traders are seizing arbitrage opportunities. WTI is currently trading at $48.21/bbl, while Brent is trading 5.45% higher at $50.81/bbl. On Tuesday, the differential was as wide as $2.50/bbl over US crude futures, the most since late February”, the shipbroker concluded.

Meanwhile, in the VLCC market this week, shipbroker Charles R. Weber said that “the Middle East VLCC market observed modest gains this week with the AG‐CHINA route adding 7.5 points through Wednesday to a high of ws42.5 before paring back gains late in the week to conclude at ws40. The gains came despite a slowing of demand; the week observed 20 Middle East fixtures, representing a 29% w/w decline. Elsewhere, the West Africa market was also slower, with a 33% w/w decline to four fixtures. In isolation, the South America/Caribbean/USG market was markedly more active with fixtures jumping to nine from just two last week. The activity there, however, came after CBS‐SPORE rates posted fresh losses, dropping $200k to a seven‐year low of just $2.60m on a widening regional supply/demand imbalance with participants noting last week’s US‐bound fixture tally at an 11‐month high”.

CR Weber added that “despite the widely‐noted ton‐miles generated by stronger recent AG‐USG demand (which has jumped 35% y/y as US crude production declines and liberalized exports have narrowed differentials between US and international crude grades), ton‐miles have remained pressurized by losses from the West Africa market. That region has seen voyages to points in the East drop 12% y/y. Neither development is productive for rate and earnings development, in our view, against the new paradigm of VLCC supply/demand fundamentals which have prevailed in recent years. The market today is heavily driven by the geographic distribution of voyage origination – with the West Africa market competing for the same Asian return ballasters as the Middle East and AG‐USG voyages trading, largely, on the basis of triangulated economics rather than the implied round‐trip TCE of agreed rates. During 2015, the geographic distribution continued widening while the number of AG‐USG voyages were balanced (or often below) those for onward trades from Americas to the Asia. As the number of USG arrivals has now exceeded demand for onward regional voyages, we have observed units ballasting to West Africa, where demand has been hit by forces majeures and compounding reduced West Africa draws on Middle East positions, creating higher availability there. Evidencing this, we note that YTD ton‐mile demand generation is off by just 1.1%, fleet growth has clocked in at 7% since the start of 2015 but earnings are off by 22% YTD y/y (with August poised to observe a 46% y/y earnings decline. As we have noted in the past, ton‐miles adjusted to account for geographical distribution of voyage origination are a better way of analyzing the market’s demand position and our proprietary model shows that on this basis demand declined by 9% y/y during Q2 (the adjusted demand figure was 14% greater than traditional ton‐miles, which compares with adjusted ton‐miles during 2Q15 standing 19% above traditional ton‐miles). During 2013, adjusted ton‐ miles were actually below traditional ton‐miles, largely due to the efficiency of triangulated trades which represented a larger portion of the overall market”.

The shipbroker remained optimistic that Nigeria’s security situation owe to teething problems associated with the start of President Buhari’s term in 2015 (which ended eleven years of executive control by the country’s PDP party) and as such will resolve in the coming months given the urgency of resolution (at least sufficiently to strongly reduce the volume of exports under force majeure). Though VLCC loadings in the region are more heavily associated with Angolan cargoes, the impact of Nigeria’s output losses have reduced interest in West African grades by boosting their price against Brent and Dubai benchmarks.

According to CR Weber, “in the near‐term, some supportive prospects are evident in the September Basrah program, which shows a 9% m/m increase in VLCC cargoes (once likely co‐loads are accounted for) with the bulk of cargoes centered on the month’s final decade. Additionally, recent comments by Saudi Arabia’s oil minister pointing to strong demand for Saudi crude and JODI data showing record production during July of 10.67 Mnb/d imply a likely sustaining of export strength through at least the near‐ term. Corresponding rate strength could materialize once charterers progress into October dates when the stronger end‐September program – and the potential for strong draws to service West Africa cargoes to simultaneously rise – could yield a tighter supply/demand position that that which presently prevails. Twenty September fixtures have been covered to date, leaving a further 23 likely uncovered for loading through September 10th. Against this, there are 40 units available for loading during the same space of time, implying a surplus of 15 units, which compares with 20 surplus units observed at the close of the of the August program”, the shipbroker concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide