Thursday, February 25, 2021

Exxon takes Canadian oil sands off its books in historic reserves revision

https://upload.wikimedia.org/wikipedia/commons/7/7a/Athabasca_Oil_Sands_map.png 

This map shows the extent of the oil sands in Alberta, Canada. The three oil sand deposits are known as the Athabasca Oil Sands, the Cold Lake Oil Sands, and the Peace River Oil Sands.

https://www.worldoil.com/news/2021/2/25/exxon-takes-canadian-oil-sands-off-its-books-in-historic-reserves-revision 

HOUSTON (Bloomberg) --Exxon Mobil erased almost every drop of oil-sands crude from its books in a sweeping revision of worldwide reserves to depths never before seen in the company’s modern history.

Exxon counted the equivalent of 15.2 billion barrels of reserves as of Dec. 31, down from 22.44 billion a year earlier, according to a regulatory filing on Wednesday. The company’s reserves of the dense, heavy crude extracted from Western Canada’s sandy bogs dropped by 98%.

In practical terms, the revision clipped Exxon’s future growth prospects until oil prices rise, costs slide or technological advances make it profitable to drill those fields. Exxon has enough reserves to sustain current production levels for 11 years, down from 15.5 years a year ago, based on Bloomberg calculations.

The pandemic-driven price crash that rocked global energy markets was the main driver of Exxon’s reserve downgrade, along with internal budget cuts that took out a significant portion of its U.S. shale assets. The oil sands have historically been among the company’s higher-cost operations, making them more vulnerable to removal when oil prices foundered.

Price Sensitive

The reserves accounting doesn’t mean Exxon is closing up shop or walking away from Canada because the company can bring them back onto its ledger as crude prices rise.

“Among the factors that could result in portions of these amounts being recognized again as proved reserves at some point in the future are a recovery in the SEC price basis, cost reductions, operating efficiencies, and increases in planned capital spending,” Exxon said in the filing.

The blow to future production potential comes just weeks after Exxon posted its first annual loss in at least four decades. Exxon shares were little changed at $56.85 in after-hours trading and have advanced 38% this year.

The Wall Street Journal reported last month that Exxon was being investigated by the U.S. Securities and Exchange Commission for allegedly overvaluing a key asset in the Permian Basin. Exxon has said the allegations are demonstrably false.

CEO’s Priorities

Exxon previously flagged that low prices could wipe as much as one-fifth of its oil and gas reserves from its books but steep cuts in drilling expenditures also imperil the assets its able to keep on the books.

Chief Executive Officer Darren Woods has prioritized high-return projects such as offshore oil in Guyana, shale in the Permian Basin as well as chemical and gas operations along the Gulf Coast in order to defend the company’s dividend. This year’s rally in oil prices will help bolster Exxon’s cash generation, which in recent quarters has failed to cover both its capital spending and dividend, leading to an increase in debt to almost $70 billion.

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Wednesday, February 24, 2021

Gas Surges Above $3 In These States as Oil Prices Jump

 2209 Savannah Hwy, Charleston, SC for sale - Building Photo - Image 1 of 1

https://www.msn.com/en-us/money/markets/gas-surges-above-243-in-these-states-as-oil-prices-jump/ar-BB1dSDx7 

The best predictor of gasoline prices is oil prices. They almost always outweigh refinery costs, transportation costs and state gas taxes. Crude oil prices, which were $36 a barrel at the end of November, have risen to almost $60, the highest price in a year. Gas prices have started to follow. In three states, they have topped $3 a for a gallon of regular.

According to AAA Fuel Gauge, the average price for a gallon of regular nationwide is $2.631. That is up from $2.505 a month ago. Over the past four weeks, the increase has been fairly steady.

Oil prices have risen for three reasons, none of which is likely to change soon. The first is that global stockpiles have fallen. World Oil recently said of crude inventories:

Crude inventories at a key storage hub in the U.S. are now below their five-year average, and nationwide inventories continue to slump, an early indication that Saudi Arabia and allied producers are succeeding in their efforts to eliminate a glut.

The other factor has been called “post-vaccine euphoria.” The base of this is that the economy has already started to spring back from the COVID-19 pandemic. If the rate of vaccine distribution quickens, global economies will reopen and gross domestic product and employment will surge, and with these, the demand for oil.

Finally, refinery shutdowns due to the huge cold and snowstorms that have run through Texas. These massive refineries are critical to U.S. supply.

Gas prices by state are either above or below the national average for several reasons. The first is proximity to refineries. States near the huge refineries along the Gulf of Mexico tend to have the lowest prices in the country. Notably, the four states with the lowest per-gallon gas prices are Mississippi ($2.25), Texas ($2.30), Oklahoma ($2.33) and Louisiana ($2.26). The transportation costs from refineries to nearby areas shaves the average price of gas down, compared with much of the rest of the nation.

Another primary factor is gasoline taxes. According to the American Petroleum Institute survey of state gas taxes as of January 1, the U.S. average is $0.5523 a gallon. States with low gas taxes include Missouri ($0.3582), Mississippi ($0.3719) and New Mexico ($0.3738). The states with the highest gas taxes are California ($0.8145) and Pennsylvania ($0.7710). These are the states with the highest gas taxes in America.

Three states currently have average prices for a gallon of regular of over $3. California’s $3.452 price is clearly affected by its gas tax. In Hawaii, the price of $3.288 is affected by a relatively high gas tax at $0.6524 per gallon. However, the cost of transportation to islands that are 2,500 miles from the west coast is also a major contributor to Hawaii’s price. And, the price for a gallon of regular in Washington State is $3.10. Its gas tax is a high $.678.

Gas prices nationwide were last at $3 a gallon in 2014. There is still a long way to go before prices reach that level again. However, crude prices are on a sharp climb upward, which means gas prices will continue to increase, for now, as well. Moreover, gas prices can affect overall living costs in some places. This is the cost of living in every state in America.

Tuesday, February 23, 2021

Opec, U.S. oil firms expect subdued shale rebound even as crude prices rise

 

FILE PHOTO: A 3D printed oil pump jack is seen in front of displayed Opec logo in this illustration picture, April 14, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

https://www.reuters.com/article/us-shale-opec-outlook-idUSKBN2AM0E2 

LONDON/HOUSTON (Reuters) - OPEC and U.S. oil companies see a limited rebound in shale oil supply this year as top U.S. producers freeze output despite rising prices, a decision that would help OPEC and its allies.

OPEC this month cut its 2021 forecast for U.S. tight crude, another term for shale, and expects production to decline by 140,000 barrels per day (bpd) to 7.16 million bpd.

The U.S. government expects shale output in March to fall about 78,000 bpd to 7.5 million bpd and also sees an annual drop.

 Graphic: U.S. Tight Oil output in 2021 -

 Reuters Graphic

The OPEC forecast preceded the freezing weather in Texas, home to 40% of U.S. output, that has shut wells and curbed demand by regional oil refineries.

The lack of a shale rebound could make it easier for OPEC and its allies to manage the market, according to OPEC sources.

“This should be the case,” said one of the OPEC sources, who declined to be identified. “But I don’t think this factor will be permanent.”

While some U.S. energy firms have increased drilling, production is expected to remain under pressure as companies cut spending to reduce debt and boost shareholder returns. Shale producers are also wary that increased drilling would quickly be met by OPEC returning more oil to the market.

‘MORE DISCIPLINE’

“In this new era, (shale) requires a different mindset,” Doug Lawler, chief executive of shale pioneer Chesapeake Energy Corp, said in an interview this month. “It requires more discipline and responsibility with respect to generating cash for our stakeholders and shareholders.”

That sentiment would be a welcome development for the Organization of the Petroleum Exporting Countries, for which a 2014-2016 price slide and global glut caused partly by rising shale output was an uncomfortable experience. This led to the creation of OPEC+, which began cutting output in 2017.

OPEC+, which includes OPEC, Russia and their allies, is in the process of slowly unwinding record output curbs made last year as prices and demand collapsed due to the pandemic. Alliance members will meet on March 4 to review demand. For now, it is not seeing history repeat itself.

“U.S. shale is the key non-OPEC supply in the past 10 years or more,” said another OPEC delegate. “If such limitation of growth is now expected, I don’t foresee any concerns as producers elsewhere can meet any demand growth.”

Still, OPEC is no rush to open the taps. Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said on Feb. 17 oil producers must remain “extremely cautious.”

OPEC Secretary General Mohammad Barkindo echoed that sentiment.

“U.S. shale is an important stakeholder in our global efforts to restore balance to the oil market,” he told Reuters. “We all have a shared responsibility in this regard.”

$60 OIL HELPS

Shale output usually responds rapidly to price signals and U.S. crude has this month hit its highest level since January 2020, topping $60 a barrel.

While shale companies have added more rigs in recent weeks, a tepid demand recovery and investor pressure to reduce debt has kept them from rushing to complete new wells.

“At this price point, any oil production is profitable, especially the relatively high-cost U.S. shale patch,” said Stephen Brennock of broker PVM Oil Associates.

“Yet despite these positive growth signals, U.S. tight oil production is far from recovering its pre-COVID mojo.”

The chief executive of shale producer Pioneer Natural Resources Co, Scott Sheffield, recently said he expects small companies to increase output but in the aggregate U.S. output will remain flat to 1% higher even at $60 per barrel.

PRODUCTION FREEZE

Last week’s severe cold will wreak havoc on oil and gas production as companies deal with frozen equipment and a lack of power to run operations. The largest U.S. independent producer, ConocoPhillips, said on Thursday the majority of its Texas production remained offline.

But J.P. Morgan analysts said in a Feb. 18 report that rising oil prices might prompt a quicker shale revival.

“As long as operators have sufficient drilled but unfracked well inventory to complete, they should be able to easily grow production while keeping capex in check,” the bank said, using a term for drilling spending.

Forecasts for 2022 such as from the U.S. Energy Information Administration are for more U.S. supply growth [EIA/M], although perhaps not enough to cause problems for OPEC+ for now.

“U.S. oil output will not go back to pre-COVID levels any time soon,” said PVM’s Brennock. “But that is not to say that U.S. shale will not one day return as a thorn in OPEC’s side.”

By Alex Lawler in London and Jennifer Hiller in Houston; Editing by Gary McWilliams, Matthew Lewis and Mark Potter

Monday, February 22, 2021

Plans for $10bn Aramco Refinery in Pakistani ‘Oil City’ Ready by Year-End

Balochistan map

 Balochistan Province Pakistan

A masterplan for Pakistan’s largest oil city, including a $10 billion Aramco oil refinery project, is underway and expected to be ready before the end of the year, Pakistani officials said this week.

The proposed mega oil city will be developed on 88,000 acres of land in the Gwadar district of the southwestern Balochistan province to refine and process petroleum products mainly imported from the Gulf region, for local and regional consumption.

“The planning for the mega oil city which will host an Aramco refinery and petrochemical complex is in progress, and we will take six to seven months to complete the masterplan,” Shahzeb Khan Kakar, director general of Gwadar Development Authority (GDA), told Arab News.

During a 2019 visit by Saudi Crown Prince Mohammed bin Salman, Saudi Arabia and Pakistan signed seven investment deals worth $21 billion. The deals covered mineral, energy, petrochemical and food and agriculture projects, and involved players such as Aramco, Acwa Power and the Saudi Fund for Pakistan.

The $10 billion Aramco Oil Refinery — with a 250,000-300,000 barrel per day capacity — is expected to be commissioned in about five to six years.


The project will have a $1 billion petrochemical complex that will lay the foundations for Pakistan’s petrochemical industry by producing polyethylene and polypropylene.

“Though the federal government is directly dealing with the Saudis, we will invite them after the planning is completed,” Kakar said, adding: “The oil city is equally big as Gwadar. We have made the masterplan of Gwadar as a smart city with an area of 88,000 acres, keeping in view requirements up to 2050.”

Apart from the oil city, Gwadar authorities are also developing an industrial zone expected to be completed by 2023 that will also attract significant investment in the area.

“Industrialization is expected to start from 2023 with the provision of basic utilities, including electricity,” Attaullah Jogezai, managing director of the Gwadar Industrial Estate Development Authority, told Arab News.
Gwadar has been touted as the “crown jewel” of the multi-billion dollar China-Pakistan Economic Corridor.

Through the development projects backed by Saudi and Chinese investment, the GDA chief forecast that the per capita income of Gwadar will surge to $15,000 by 2050.

“Fisheries, an oil refinery, petrochemical complexes, a shipyard, the tourism industry, and most importantly the operations of Gwadar port, will all generate huge incomes and increase per capita income,” Kakar said.
“This can be achieved by providing electricity, protection and a sound management system.”

Authorities developing a 300 MW coal-fired power plant and a 5 million gallon per day desalination plant say both projects will be functional by January 2023.

“Regulations have been framed to allocate lands in the industrial zone,” Manzoor Hussain, additional secretary of industries for Balochistan, told Arab News, adding: “Now land will be allotted only to those industrialists who will set them up within the given time frame.
“Our mission is to create employment in the province.”

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