Monday, October 31, 2011

OPEC oil supply falls in October

LONDON — OPEC oil output has fallen for a second month in October as reduced supplies from several members offset a further rise in Libyan supply, a Reuters survey found on Monday.

Supply from all 12 members of the Organization of the Petroleum Exporting Countries is expected to average 29.59 million barrels per day (bpd) this month, down from a revised 29.90 million bpd in September, the survey of sources at oil companies, OPEC officials and analysts found.

OPEC supply has fallen for a second month from August’s total of 30.15 million bpd, which was the group’s highest since October 2008 according to Reuters surveys.

OPEC output:

Iraqi output declined by 190,000 bpd, the most in the group, because of reduced exports from the country’s south due to a pipeline bombing and as bad weather disrupted shipments.

Saudi Arabian supply fell further, sources in the survey said, citing a fall in domestic use from peak summer demand and reduced purchases from Shell which cancelled some October-loading shipments after a fire at its Singapore refinery.

© Copyright (c) Reuters

Libya's National Oil Co Takes Rare Step Of Disclosing Oil Deals

By Benoit Faucon & Iman Dawoud and Sarah Kent

LONDON -(Dow Jones)- Libya's National Oil Co. this week took the unusual step of disclosing oil transactions--from fuel purchases to cooperation agreements with foreign giants--made by rebels during the civil war.

The new government, dominated by the opposition to Moammar Gadhafi after they toppled him in August, has said it wanted to break with what it sees as a legacy of opacity and mismanagement under the previous regime.

The documents offers an unprecedented insight into Libya's oil industry during the civil war, revealing the steps taken by the likes of Vitol Group and Repsol YPF SA (REP.MC) as they jockey for positions in the country holding Africa's largest oil reserves. In a statement accompanying hundreds of individual transactions spanning from March to Sept.15, NOC said they were published to apply "the principle of transparency in light of the new era heralded by the revolution of 17 February," the date of the beginning of the Libyan uprising.

The disclosures came after speculation over the terms of deals with Vitol and over discussions with foreign companies on services or security to NOC.

One document says the rebels examined competing bids submitted by foreign companies offering to sell fuel and Vitol made the most satisfactory proposal.

Crude--used in repayment for Vitol fuel supply--carried a $1.5 a barrel discount for Mediterranean delivery compared with the competing U.K. Brent contract and $4.4 a barrel if sent East of Suez. Vitol declined to comment on the disclosures.

Vitol also typically offered a premium of about $40 per ton for oil products supplies, according to the documents.

In a July 4 memorandum of understanding, a unit of Turkiye Petrolleri AO also offered to supply oil products. In the same document, NOC agreed to accept TPAO, which has exploration and production licences in Libya, "as an eligible partner to cooperate in oil field development, production, exploration etc. in the near future." TPAO didn't return a request for comment.

In a proposed, unsigned MoU, Repsol said it supplied food and medicine to rebel-held cities and offered fuel supplies, oil equipment and to help restart production in assets, including where it is not a titleholder.

A Repsol spokesman said the company "gladly provides aid, be it humanitarian or technical assistance, if we are in a position to do so."

The disclosure is unusual because though most national oil companies in Africa--such as Angola's Sonangol and Algeria's Sonatrach--do publish their accounts, they don't detail individual contracts or transactions.

With the disclosure, "businesspeople will be less likely to offer, and officials to demand, bribes if they know that it will be very difficult to square the accounts with a demanding public," said Robin Hodess, director for research and knowledge anti-corruption watchdog Transparency International. "This is one step to ensuring that Libya's citizens see more benefits from Libya's oil wealth," Hodess said, adding foreign companies should "match the disclosure by publishing their own payments."

(Ilan Brat in Madrid contributed to this report.)

EarthSearch Delivers Critical Oil Tanker Monitoring Solution to Ghana
By East Coast Diversified Corporation

ATLANTA, -- /PRNewswire/ -- East Coast Diversified Corporation (OTC.BB:ECDC - News), through its subsidiary EarthSearch Communications, Inc., announced that it has shipped products on purchase orders from its Ghanaian partner MultiPlant LTD for oil tanker monitoring and other logistics solution.

Under a Unified Petroleum Price Fund program (UPPF), the Ghanaian government reimburses oil companies delivering oil to interiors of the country in order to stabilize gas prices in regions that otherwise will not get services due to cost of delivering product to the consumers in those regions. To discourage and prevent fraudulent claims for payment by oil distributors, our integrated RFID/GPS devices can monitor opening and closing of the Spicket, the fuel level, combined with the location of the tanker using Google API, provide critical data that must be submitted by the distributors to the government with the filing of claim for payment.

The EarthSearch LogiBoxx RF communicates wirelessly with the RFSeal (RFID Seal) device which is used to secure the Spicket on oil tankers travelling the highways. The LogiBoxx can be programmed to recognize and monitor destination and content of the oil tanker, the LogiBoxx RF GPS system will communicate wirelessly with the RFSeal lock on each Spicket, recognizing each time the RFSeal is commission or unlocked, utilize Google API to recognize the location, compare the data to designated destination, monitor content dispensed and generate alerts if any anomalies are recognized.

"We are prepared and ready to support customers globally including this and many other projects currently ongoing," said William Johnson, Global Operations Manager for ECDC.

For partners, system analysts, or fleet managers wishing to see how LogiBoxx may assist you in optimizing your supply chain management, or critical infrastructure monitoring, please email us for a brochure at

About EarthSearch Communications

EarthSearch Communications, an ECDC Company (OTC.BB:ECDC- News), is a US-based business whose flagship product, LogiBoxx™, integrates GPS and RFID at the hardware level. When combined with its proprietary Global Asset Tracking and Identification System (GATIS) middleware, LogiBoxx and GATIS become the centerpieces of a LogiBoxx Certified Solution. An unprecedented business decision-making tool, a LogiBoxx Certified Solution offers continuous visibility within the Supply Chain, Logistics, and Asset Management and Control industries. Along with its integrated, patent-pending GPS and RFID technologies, EarthSearch also offers a complete line of innovative RFID solutions. Its expertise with GPS and RFID technologies, combined with exceptional support and service facilities, distinguishes EarthSearch as a leading manufacturer and supplier of real-time location solutions in the marketplace. For more information on EarthSearch, visit

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: The statements contained in this release which are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks and uncertainties include the Company's entry into new commercial businesses, the risk of obtaining financing, recruiting and retaining qualified personnel, and other risks described in the Company's Securities and Exchange Commission filings. The forward-looking statements in this press release speak only as of the date hereof, and the Company disclaims any obligation to provide updates, revisions or amendments to any forward-looking statement to reflect changes in the Company's expectations or future events.

Editorial ContactsGlenn DavisEarthSearch Communications, an ECDC Company +1 770-953-4184

Investor Relations Contact:Equiti-trend Advisors, LLC1 (800) 953-3350

SOURCE East Coast Diversified Corporation

Tullow Expands in Mauritania on Success of Ghana Oil Development

By Eduard Gismatullin

(Bloomberg) -- Tullow Oil Plc, the U.K. explorer with the most African licenses, will expand in Mauritania after the success of the Jubilee field in Ghana.

The company revised a production-sharing contract with the Mauritanian government to start developing discoveries made off the West African country and continue exploration, it said today in statement. Tullow has increased its interest in the projects following transactions with Australia’s Roc Oil Co. and Petroliam Nasional Bhd. of Malaysia.

“The real driver of this deal surely must be securing the exploration acreage offshore Mauritania under a long-term deal,” said Phil Corbett, an analyst at Royal Bank of Scotland Group Plc, which is Tullow’s in-house broker.

Tullow has been producing oil from Chinguetti, Mauritania’s first oil field and one that failed to meet its targets, prompting the U.K. explorer to consider exiting the project. The company is also exploring off Mauritania with a unit of Korean National Oil Corp. Tullow’s Jubilee oil field in Ghana has propelled that country into the top 50 producers in the world.

“The announcement injects a new lease of life into Mauritania for which the industry lost its enthusiasm post the disappointing Chinguetti development,” Richard Griffith, a London-based analyst at Evolution Securities Ltd., wrote in an e-mailed report. “Tullow expects to extend its experience from the Cretaceous in the transform margin in Ghana to new exploration opportunities in Mauritania.”

--Editors: Alex Devine, Randall Hackley

To contact the reporter on this story: Eduard Gismatullin in London at

To contact the editor responsible for this story: Will Kennedy at

Move over Boko Haram, Nigeria's MEND rebels set to restart oil war in Niger Delta
Leaders of Nigeria's MEND rebel group – and other militia commanders in the oil-rich Niger Delta – say they're ready to launch fresh attacks after two years of relative quiet following a 2009 amnesty.

Port Harcourt, Nigeria

Earlier this month, Nigerian President Goodluck Jonathan was forced to move a large outdoor celebration marking the 51st anniversary of Nigeria's independence from British colonial rule from Eagle Square, a large public space in the capital city of Abuja, to his presidential residence.
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Boko Haram – the Muslim militant group that killed 23 in an Aug. 26 bombing on the United Nations headquarters in Abuja – had threatened the festivities.

But Boko Haram was not the only group to threaten an attack.

The Movement to Emancipate the Niger Delta (MEND) – a militant group from the oil-rich area of Nigeria's predominately Christian South – issued its own threat. It claimed responsibility for a bomb at a similar celebration last year, which killed 12 people, and said it would strike again.

MEND's threat was its most audacious public announcement in years – a sign of its growing frustration over the Nigerian government's decision to shift its attention to the country's mainly Muslim northern half, where Boko Haram operates.

It's also one of the latest signs that MEND and other militant groups that terrorize the Niger Delta region are set to revamp their campaign of attacks after remaining relatively quiet since amnesty was offered to top militant leaders in 2009.

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Before the amnesty, in which some militant leaders agreed to put down their weapons in exchange for an unconditional pardon, MEND had been steadily ramping up the intensity and effectiveness of its attacks on oil facilities, causing global oil prices to spike repeatedly.

The amnesty calmed that, but systemic problems in the Delta – extreme poverty, environmental degradation, claims of exploitation by oil companies, and the ever-present threats of crime and violence – still exist.

MEND, while weakened in the wake of the amnesty, is strengthening again, determined to make Mr. Jonathan pay attention to the Delta's woes.

Access to top leaders

MEND and other militant groups typically speak to the media through spokespeople: Access to leadership is rarely granted.

In recent weeks, I traveled through the slums in and around Port Harcourt to interview high-ranking officials in MEND and the Niger Delta People's Volunteer Force (NDPVF), the two largest and most capable militant groups operating in the Delta.

I also met with a general in the Ice­landers, a smaller group that ruthlessly controls shantytowns along Port Harcourt's waterfront.

What these interviews reveal is a vibrant and active militant movement, simmering with anger and resentment over the government's failure to keep promises.

These groups are primed to fight Boko Haram, a movement they dismiss as irrelevant to Nigeria's future.

These leaders also say that the war they waged against the Nigerian government, which has been dormant in recent years, is about to begin again.

Amnesty's short-lived effect

The amnesty brought about a decrease in kidnappings and attacks against foreign workers and oil installations. This year, these attacks are again becoming common.

According to interviews with two MEND generals – one who uses the alias TK and one who calls himself Eybele – this uptick in violence is planned.

Both say that while other groups might operate under the name, the core of MEND has developed a sophisticated organizational structure in recent years and is again capable of kidnappings and complex quick-strike bombings and attacks.

They say dissatisfaction with government efforts to improve the Delta, and frustration over Jonathan's focus on Boko Haram, will lead to an increase in MEND activity.

TK and Eybele say there are four MEND generals. Each general has approximately 400 "boys," or soldiers, under his command, making the full MEND fighting force about 1,600. Both say they were former students and activists who turned to militancy when the Delta's problems were ignored.

Their independent descriptions of MEND's organization corroborate each other.

The generals say they answer to a man called Tomonu. It is unclear if they are referring to MEND's Gen. Godswill Tomunu, who has not been heard from since a BBC interview in 2006.

Meeting in an alleyway

I met with TK in an alley of a waterfront slum. Eybele, the more polished and soft-spoken of the two, met me in the bedroom of one of his fighter's homes in a shantytown farther inland. Both decry the government's lack of progress toward improving infrastructure in the Delta and say that violence was the only way to bring attention to unacceptable living conditions.

"We want to live in an environment with good schools for our young ones, good piped-in water, good infrastructure," TK says. "We're living in shambles."

"The government promises and fails you," he continues. "If there's no revolution, this place will not be a better place."

Eybele stresses that renewed attacks against oil companies would be collateral damage in a war against the government, which he says did not live up to commitments made during amnesty negotiations.

"We survive through armed struggle," Eybele says. "Most of our boys need something meaningful, but they don't have it. The government is celebrating 51 years of independence while we have nothing. What are we celebrating for?"

"If the oil companies and the government can collaborate and give 50,000 jobs to [the] indigenous [people] so we can partake in the sharing of the system, it would go a long way to assist our people," he says.

An unassuming militant leader

Later that day, I met with Blessing Dumo, a young commander in the NDPVF, next to a pool in one of Port Harcourt's walled-in expatriate communities. When he approached the table I thought he was just a college student – indeed, he is studying computer science at a university in Port Harcourt. His arguments are grounded in political principles and he speaks with the conviction of an activist.

Mr. Dumo says the number of soldiers in the NDPVF is in the thousands. He shares many of the same complaints as TK and Eybele, but his anger is focused on the amnesty, which he calls a failure.

"We are not criminals and we're not taking amnesty," Dumo says. He joined the NDPVF to fight for indigenous rights, he says. "We accept the peace of the amnesty, but we're not taking the cash. I don't want to be paid, but I want the Niger Delta to get employed."

He reserves particular anger toward Royal Dutch Shell, which was forced to shut down a major pipeline here after it was bombed Oct. 6. Dumo neither confirms nor denies NDPVF's involvement in the attack.

"Shell is messing up the community, polluting the areas," he says. "Shell cannot stay in the Niger Delta. They are not a plus to us. They cause a commotion in our communities."

Militancy bred in the slums

After Ateke Tom, the notorious leader of the Niger Delta Vigilante, accepted amnesty, the group split into smaller factions, according to sources close to the militancy.

One such group is the Icelanders, which controls slums along Port Harcourt's waterfront as well as on the island of Okrika in the Delta.

I met with an Icelanders general named JB in one of the shanties he controls. JB seems to lack the sophistication of the MEND generals or Dumo, but his passion is unmatched.

He throws his hands about as he rants about government inaction. His eyes are wild with rage as he compares the Niger Delta community to the Israelites, each deserving of a Promised Land.

His soldiers stand outside and watch me closely through an empty window frame.

"The Okrika man is silent. He is watching what the government will do," JB says. "If need be, we will come out again in our full force in arms."

JB is joined by his second in command, Lucky Lagogo, and a bodyguard named George. When I bring up Jonathan's amnesty offer, all three men become agitated.

"The amnesty paid a few people; a few people took that money. I want Goodluck [Jonathan] to pay everyone in the Niger Delta!" George shouts.

"The government [doesn't] honor gentlemen. They honor those who are radical. By paying the ones who are radical, you pay the gentle ones to become radical," says JB. "Let [amnesty payments] go around to all youths in Niger Delta. When it goes down to the youth, there will be peace."

JB leans over and puts his finger in my chest.

"You are a live witness," he says. "You came to this community today. You can see people struggling. They are supposed to be empowered by the government."

All of the militants I spoke with are dismissive of Boko Haram and the threat the Islamist group poses to the country.

The MEND generals say they sympathize with the group's grievances, but that they do not approve of their tactics, particularly the random killing of Christians and the burning of churches.

'The answer is Western education'

When I ask TK what would happen if Boko Haram entered the Delta, he waves the question away.

"Boko Haram should not come here," he says without elaborating.

Dumo is more animated in his criticism of the group. He says its members are looking for a payout similar to the one the Delta rebels were offered during amnesty.

"The answer is Western education," he says, referring to Boko Haram's name, which translates to "Western education is a sin." "To hell with Boko Haram."

JB, for his part, offers the Icelanders' services to fight Boko Haram. He says the Niger Delta brings oil wealth to the country while the north produces nothing.

"The problem of Boko Haram is not a problem," JB says. "We'll tell the nation to observe and declare a 48-hour war between Boko Haram and the Niger Delta youth."

"Let them see what happens. If it comes to that, we will be very much grateful," he adds. "We must shame them to the general public. Boko Haram has nothing to be proud of."

Thursday, October 27, 2011

Saudi King names interior minister as crown prince

Shell: Nigeria Oil, Gas Output Declines For First Time In 2 Years

LONDON -(Dow Jones)- Oil and gas production from the Nigerian joint venture led by Royal Dutch Shell PLC (RDSB) has shown a year-on-year decline for the first time in two years, according to third-quarter data published by the company Thursday.

Third quarter oil and gas production from the Shell Petroleum and Development Co. of Nigeria fell to 281,000 barrels of oil equivalent a day, compared with 291,000 barrels of oil equivalent a day a year earlier, the first such decline in two years.

This signals a reversal of an encouraging trend of diminishing attacks on oil infrastructure in the troubled Niger Delta. SPDC has been forced to shut down several major fields in recent months after damage resulting from attacks on oil pipelines.

Such attacks are often related to militant activity in the Delta region or attempts to steal oil from pipelines.

Read more:

Wednesday, October 26, 2011

Lukoil explores Africa's west coast

Kester Kenn Klomegah, Buziness Africa

Russia's Lukoil is one of the world's biggest vertically integrated companies for the production of crude oil and gas as well as refining them into petroleum products and petrochemicals. The company is a leader on both Russian and international markets in its core business, and its key mission is to harness natural energy resources for human benefit. The company also supports long-term economic growth, social stability, prosperity and progress in the regions where it operates. Pavel Bogomolov, Government & Public Relations Manager of Lukoil Overseas Ghana Ltd, spoke to Kester Kenn Klomegah of Buziness Africa about the company’s operations of Lukoil in Ghana and its plans to expand business operations to other African countries, such as Cote d'Ivoire and Sierra Leone.

Buziness Africa: What are Lukoil’s priorities in Africa and what is the level of Lukoil company's involvement in the economy of Africa?

Pavel Bogomolov: However modest our priorities may seem at the moment, Lukoil’s current plans for 2011-2012 are strictly focused on the attempt to carry out exploration and subsequently, the appraisal of our 3 offshore blocks in Cote d'Ivoire, 1 block in Ghana and, in the near future, yet another block in Sierra Leone that has been acquired. All this does not exclude the probability of some additional acquisitions of upstream projects in the waters of other West African states. Lukoil Overseas will resume active operations under the CI-205 project as soon as the situation in Cote d'Ivoire subsides.

But, once again, we would draw the attention to the fact that, geographically, Lukoil’s expansion is now still limited to the Gulf of Guinea, although we also demonstrate some interest in those remote opportunities that are on offer in other parts of Africa. Taking the above into account, we would say that the level of our company's involvement in the economy of the region is not so high yet, and quite understandably so.

Usually, it is only after the establishment of some commercial reserves of crude that the oil majors decide on the continuation of their business presence in the corresponding countries. This brings about some increasing volumes of the companies' multi-faceted involvement in the local economy as a whole. Certainly, we have not yet reached such a determining point of our investment program in West Africa so far.

B.A.: What difficulties does Lukoil faces on the continent? Do you think that some government policies pose some problems to the smooth operations of your company in Africa?

P.B.: Until now, the only real difficulty Lukoil has faced on the African continent was the recent constitutional crisis and armed conflict in Cote d'Ivoire. Those lamentable events temporarily paralyzed foreign investment in that country. But otherwise, we do not truly believe that, in general terms, African leadership and government policies pose serious problems to our operations in the region.

B.A.: What kinds of competition do you face from related companies (both local or foreign) in similar oil exploration and extraction, as well as refining spheres in Africa?

P.B.: As regards the refining sector, we would like to specify that, for the time being, Lukoil is not planning any involvement in refining or other spheres of downstream in West Africa. Therefore, it is only upstream activities where your question about competition might sound relevant to us, but only in theory, because in practice, we do not face any true competition from any rivals, local or western.

However, your question might acquire more validity in the future when the waters of the Gulf of Guinea will become a lot more crowded and some controversies about the best possible export schemes and most profitable routes would possibly emerge.

B.A.: In future, would LUKOIL like to redefine or diversify its priorities there? And in what directions?

P.B.: Such a redefinition or diversification of our priorities, although not guaranteed 100 percent, might hypothetically happen as a result of our appraisal program offshore. And, of course, these steps would not be made unilaterally, but together with our partners including such national petroleum companies as GNPC and PETROCI, as well as the American shareholder of some of our joint projects, Vanco. Lukoil’s senior management has emphasized on more than one occasion that, if the quantity of the reserves to be evaluated on our blocks proves to be sufficient for their industrial development and exports, some intensifying and broadening of this regional program would become likely to consider.

B.A.: What additional useful information would you like to give to policy makers, politicians and oil business executives in Africa?

P.B.: We believe that, apart from our direct investment (which in Ghana alone had already totaled $200 million dollars), there are also some additional advantages of a dialogue with Lukoil. Such benefits are worth appreciation and use by African policy makers and business people. This is all primarily about Lukoil’s high professional and ethical stance in the national and global entrepreneurial community.

Indeed, our energy giant, while celebrating its 20th anniversary this year, attributes a huge deal of importance to the so-called "oil diplomacy" in the best sense of this formula. It is precisely Lukoil that gives Africans the widest access and introduction to the modern business world of Russia. For instance, last year our company became the organizer, sponsor and the key partner to the biggest-ever African public gathering at Moscow's Radisson Hotel where the first Russia-African Inter-parliamentary and Business forum were successfully held.

Equally, it is Lukoil who presents African arts, including the brilliant Noyam folkloric dance ensemble, to our fellow-citizens. We are also launching a highly promising program of multi-year bachelor & master degree studies for competitively selected Ghanaian students at the Moscow State University of Oil and Gas in such faculties as petroleum geology, field development, etc.

The advantage of this program is that Lukoil will take care of their pre-diploma practice on the Russian oilfields and, after that, their post-university employment with Lukoil’s West African projects.

Next year, probably, we might be able to share our vision of certain directives for our humanitarian cooperation in some other countries of the Gulf of Guinea area, for example, Sierra Leone. And, finally, Lukoil uses every single opportunity to take African colleagues to our oil rigs in the Caspian Sea for their acquaintance with our "zero-contamination" technologies. While judging all these you will unavoidably come to the conclusion that the pioneer of the Russian vertically-integrated petroleum business really contributes to this starting period of Russian-African "cooperation's renaissance" somewhat more than just project investment.

This interview first appeared at

Oil’s Hottest Race From Kenya to Guiana Spurs Record Quest

By Brian Swint

(Bloomberg) -- When the Leiv Eiriksson, a rig built to hunt for oil beneath 10,000 feet of water in the world’s roughest seas, finishes drilling a well off Greenland’s west coast next month, it will sail for its next job -- a prospect 9,000 miles away, south of the Falkland Islands.

The monthlong voyage from top to bottom of the Atlantic Ocean, at a cost of about $500,000 a day, exemplifies how the world’s drillers have never spent so much searching for oil and gas in so many places, spurred by crude prices above $100 a barrel and depleting reserves at existing fields.

After holding back in the aftermath of the financial crisis, Exxon Mobil Corp., BP Plc, Royal Dutch Shell Plc and other producers will increase exploration spending by the most since 2007 this year to a record $70 billion, said Wood Mackenzie Consultants Ltd. That’s bringing rigs to countries with no history of oil and gas production, from French Guiana in South America to Kenya in east Africa.

“The race for exploration has become hotter than ever,” said Michael O’Dwyer, managing director for oil and gas at Morgan Stanley & Co. in London. “The biggest change I’ve seen in the activities of oil companies over the last 24 months is the focus on exploration.”

About three-quarters of exploration money for conventional oil and gas is spent offshore, where 284 wells will be drilled next year, 30 percent more than in 2011, targeting more than 100 billion barrels of potential reserves, according to Morgan Stanley.

Offshore Focus

BP and Total SA are increasing exploration budgets after the world’s largest oil companies were beaten to the biggest discoveries by smaller competitors in recent years, such as Tullow Oil Plc’s Jubilee field in Ghana, which is now pumping 120,000 barrels a day.

“Majors have overlooked a number of the biggest basins in the world,” BP Chief Executive Officer Bob Dudley said at a press conference yesterday.

U.S. independent Anadarko Petroleum Corp. has found fields off Mozambique in east Africa that hold more gas than the U.K.’s total remaining reserves. Rockhopper Exploration Plc’s Sea Lion discovery is the Falkland Islands’ first commercial find and may contain as much as 1.4 billion barrels of oil.

‘Courageous Activity’

“We’re seeing some courageous exploration activity at the moment, particularly with the medium-sized companies such as in Greenland and east and west Africa,” said John Martin, managing director for global energy at Standard Chartered Plc in London.

The so-called supermajors have responded in two ways. First, by becoming partners with smaller companies and secondly, by drilling more exploration wells themselves.

When Tullow’s Zaedyus well made a potential find of 700 million barrels of oil in deep water off French Guiana last month, its partners were Shell and Total, Europe’s largest and third-largest oil companies. Paris-based Total is looking to replicate Anadarko’s east Africa success in Kenya, where it’s acquired control of five deepwater exploration blocks.

At BP, the experience of drilling a well in the Gulf of Mexico that exploded and caused the U.S.’s worst oil spill hasn’t deterred it from exploration. The company plans to double spending on exploration from $2.7 billion in 2010. The company plans drilling in waters off Australia, China and the U.K., and will increase its exploration wells to as many as 25 a year by 2013 from six wells drilled this year.

‘Exploring More’

“It’s very hard to grow and make a profit with an oil and gas company unless you are good at, and are investing in, exploration,” Helge Lund, chief executive officer of Statoil ASA, Norway’s largest oil company, said in an interview. “It seems that compared to what we saw in the 90s, oil and gas companies are exploring much more now.”

Exxon CEO Rex Tillerson, whose company spent $3 billion on exploration last year, signed an agreement with Russia’s biggest oil company, OAO Rosneft, this year to spend an initial $3.2 billion exploring undrilled areas of Russia’s Arctic Ocean and the Black Sea.

“As long as oil prices stay above $80, no one’s going to slow their exploration programs,” said Jason Gammel, an analyst at Macquarie Capital Europe Ltd. in London. “Exploration is very high risk, but the highest rates of return on capital tend to be from fields you discover yourself. Unlocking new frontiers can bear fruit.”

Oil Prices

The 11 percent drop in prices in the past six months isn’t likely to deter exploration, Wood Mackenzie analyst Andrew Latham said. Brent oil, a benchmark price for two-thirds of the world’s crude, is still more than 30 percent higher than its five-year average. Futures contracts show prices above $100 for the next two years.

Brent crude futures for delivery in December traded at $110.79 a barrel in London today. The contract for delivery at the end of next year was at $103.70.

“The recent softening in oil prices doesn’t change exploration planning,” Latham said. “Most of the industry is planning on prices ranging from $70 to $80.”

Wood Mackenzie’s figures for exploration spending don’t include investment in so-called unconventional oil and gas, which is extracted from oil sands or by grinding underground rocks.

Still, many wells will find nothing more than sand or water. Edinburgh-based Cairn Energy Plc’s $1 billion drilling campaign in the Arctic waters off Greenland has yet to make a significant discovery. While the success rate for exploration wells worldwide is about 48 percent this year, typically only one in four exploration wells will find oil or gas, according to Morgan Stanley.

Market Turmoil

That’s a factor that may also play to the balance sheet strength of the largest oil companies as worsening financial conditions make funding harder to find for smaller explorers. An index of oil and gas companies on London’s junior AIM market --a leading source of equity finance for smaller drillers -- has dropped 39 percent this year.

“The big question is whether financial market turmoil will put pressure on spending,” said Lucy Haskins, an equity analyst at Barclays Plc in London. “Most of the big-cap companies are very keen not to get into a stop-go investment cycle that has dogged their production in past, but some of smaller players may be a more cautious short term.”

--With assistance from Tara Patel in Paris and Maryam Nemazee and Olivia Sterns in London. Editors: Will Kennedy, Stephen Cunningham

To contact the reporter on this story: Brian Swint in London at

To contact the editor responsible for this story: Will Kennedy at

Oil refiners fall on rising costs, pinched profits


Oil refinery stocks slumped Tuesday with mounting evidence of a collision between a sustained rise in the price of crude and a decline in demand for energy.

That puts refiners in a very tough position. They are paying more for their stock material, oil, while at the same time they are unable to demand higher prices for their finished product, whether it is kerosene, gasoline, or jet fuel.

Optimism, at least compared with last month, about stability in Europe and the U.S. have pushed crude price steadily higher in October. Benchmark U.S. crude prices rose 2.5 percent Tuesday after jumping 4 percent the day before. In afternoon trading, prices reached $93.52 per barrel, the highest level since early August.

Yet demand is moving in the opposite direction, particularly with the summer driving season in the U.S. vanishing in the rearview mirror. Gasoline futures fell about 1 percent Tuesday to $2.65 per gallon.

Demand is not just lower in comparison to last year, either. MasterCard SpendingPulse, which tracks retail gasoline purchases in the U.S., says drivers have cut back on spending at the pump for nearly eight months in a row.

A similar situation arose in the lead up to the recession, when many consumers were already cutting back on spending even as oil prices hit record highs close to $150 per barrel.

Shares of Marathon Petroleum fell $3.43, or 9.6 percent, to $32.42 in midday trading. Valero Energy Corp. dropped $1.47, or 6 percent, to $21.78.HollyFrontier Corp. fell $3.70, or 11.4 percent, to $28.84.

Sunoco Inc. lost 20 cent, or less than 1 percent, to $36.13.

Tesoro Corporation fell $1.58, or 6 percent, to $24.36.

CVR Energy Inc. lost $1.69, or 6.6 percent, to $23.89

Western Refining Inc. fell $1.26, or 7.8 percent, to $14.99.

Oil-Tanker Glut Shrinks to Four-Month Low as Demand Rises

By Rob Sheridan

(Bloomberg) -- A surplus of the largest crude-oil carriers competing to load 2 million-barrel cargoes at Persian Gulf ports shrank to a four-month low as demand for vessels increased, a survey showed.

There are 10 percent more very large crude carriers, or VLCCs, available for hire over the next 30 days than there are likely cargoes, according to the median estimate in a Bloomberg News survey of four shipbrokers and two owners today. That’s the smallest excess since June 21 and down from the week-ago surplus of 18 percent, the data show.

“Refineries in Asia are coming out of a period of maintenance,” Thomas Zwick, an analyst at Oslo-based shipping consultant Lorentzen & Stemoco AS, said by phone today. “This is increasing the number of ships required for crude-oil cargoes.”

Oil companies booked 55 vessels to collect cargoes from Middle East ports last week, up from 43 in the prior seven-day period, according to a weekly report from Norwegian investment bank Pareto Securities AS e-mailed late yesterday. That was 77 percent above the five-year average, the report showed.

“Sentiment remains quite firm for now,” Pareto wrote in an e-mail today, citing “decent activity in the Persian Gulf yesterday.”

Eighth Increase

Returns for VLCCs on the industry’s benchmark Saudi Arabia- to-Japan route climbed today for an eighth session, jumping 46 percent to $7,097 a day, according to the London-based Baltic Exchange. Income from the voyage turned positive Oct. 20 after almost eight weeks of negative returns stemming from a glut of ships.

The bourse’s assessments make no allowances for speed cuts on return journeys after unloading that may increase rental income by curbing fuel use. The price of ship fuel, or bunkers, is up 31 percent from the start of the year to $667.28 a metric ton, according to data compiled by Bloomberg from 25 ports worldwide.

VLCC charter rates on the benchmark route increased for an 11th session, gaining 4.2 percent to 54.44 Worldscale points, according to the exchange. That’s the highest rate since June 24. The points are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

The Baltic Dirty Tanker Index, an overall measure of shipping crude that includes vessels smaller than VLCCs, declined 2.7 percent to 817, the exchange said. The drop was the biggest since March 23.

--Editors: Dan Weeks, John Deane.

To contact the reporter on this story: Rob Sheridan in London at

To contact the editor responsible for this story: Alaric Nightingale at

Abducted oil workers regain freedom

The Joint Task Force (JTF) patrols the Creeks at Bodo waterways, Ogoniland in Rivers State.Photo: Getty Images

Two oil workers abducted by unidentified gunmen at the Qua Iboe oil fields operated by Mobil Producing Nigeria Unlimited have regained their freedom, security sources said on Wednesday.

The News Agency of Nigeria (NAN) recalls that armed men attacked a fuel supply vessel at an offshore location within the company's oil block on September 30, abducting the captain and injuring a crew member.
A similar attack on October 17 led to the abduction of another captain of a vessel named `MV Wilbert Tide'.

The security sources at the Qua Iboe crude export terminal told NAN that the two captains regained their freedom last weekend, but declined to state if any ransom was paid to secure their release.

``The captain of MV Wilbert Tide, Mr. Huque, a Bangladeshi national and his Nigerian counterpart, whose name could not be ascertained, were released at Ibaka brigde from where they made contact.

``The Bangladeshi captain contacted diplomats from his country who facilitated his return to his home country to meet his family and relatives,'' an anonymous security source said.

Mobil's Public Affairs Manager, Mr. Nigel Cookey-Gam, confirmed the release of the contract workers in a telephone chat with NAN on Wednesday.
``Reports from our contractors indicate that the abducted captains have regained their freedom and re-united with their families,'' Cookey-Gam said.

IMF ‘agrees’ with Ghana on $3b Chinese loan

The International Monetary Fund (IMF) has agreed on the $3 billion Chinese loan secured by the Ghana government to finance critical infrastructure development in the country especially in the oil and gas sector.

“The government has secured a large financing package on non-concessional terms to finance critical infrastructure investments, some of which are expected to be self-financing. The mission agreed with the government on the importance of infrastructure investment to boost Ghana’s growth potential and economic development,” said the IMF in a statement October 25, 2011 after conducting discussions for the fifth review of Ghana’s economic programme under the IMF’s Extended Credit Facility (ECF).

The IMF Mission led by Christina Daseking visited Accra during October 12–25, 2011 and did their assessment on Ghana’s economy. The team met with Ghanaian authorities including President John Evans Atta Mills, Finance Minister Kwabena Duffuor, Bank of Ghana Governor, Kwesi Amissah-Arthur as well as other senior officials, members of parliament, and representatives from the private sector, academia, and civil society.

According to the Fund, discussions focused on the appropriate evaluation and phasing of investment projects and on supportive revenue and expenditure measures to create the space for larger capital spending, while preserving macroeconomic stability and the sustainability of public debt.

“This is particularly important in light of the prospective decline in Ghana’s access to concessional financing reflecting its new middle-income status,” the IMF added.

Christina Daseking said “Plans for a significant scaling up of infrastructure investment call for new revenue measures and restraint in other spending areas in the 2012 budget.”

Parliament approved the $3 billion loan, which would be used on a number of projects such as a gas processing facility, gas transmission pipelines, the building of railways and trunk roads

But the Minority New Patriotic Party (NPP) who abstained during the approval in Parliament said government would be short-changed if it goes ahead with the agreement.

The IMF was positive on Ghana’s economic outlook fueled by oil production.

Boosted further by the start of oil production, the IMF says Ghana’s overall economic growth is projected to reach 13.5% this year and more than 8% in 2012, with average inflation expected to remain broadly unchanged at a rate of 8.5-9%.

“The main risks to the generally favourable outlook arise from possible adverse developments in world commodity prices and foreign investment inflows, and from public spending pressures ahead of the 2012 elections,” it added.

By Ekow Quandzie

Russia Selling $4 Billion Fleet to Billionaires: Freight

By Ilya Khrennikov and Ekaterina Shatalova

(Updates with mandatory state leasing in 20th paragraph.)

Oct. 26 (Bloomberg) -- Russia is set to move 40 percent of the state’s 475,000 rail cars into billionaires’ hands in the government’s biggest sale of transportation assets.

State-run OAO Russian Railways is offering almost 75 percent of its OAO Freight One cargo unit, owner of 192,000 railcars used to carry oil products, metals, fertilizers and coal across the country and for export. The auction is scheduled for Oct. 28 with a starting price of 125 billion rubles ($4 billion).

Gennady Timchenko, co-founder of energy trader Gunvor Group Ltd., is favored to beat steelmaking billionaire Vladimir Lisin, 55, and an oil transportation company called ZAO Neftetransservice, said Konstantin Yuminov, an analyst at ZAO Raiffeisenbank in Moscow. Timchenko’s oil business faces less risk from a slowing economy than do other kinds of commodity companies, he said.

Russia ships 42 percent of its freight over the world’s second-longest rail network, with an average journey of almost 1,700 kilometers (1,000 miles). Putting Freight One into private hands may hasten upgrades of the fleet, said Elena Sakhnova, an analyst at VTB Capital in Moscow.

“The stakes are high,” Sakhnova said. “The winner will get about a quarter of Russia’s rail-freight transportation market.”

Losing Ground

Russian Railways, formed from a government ministry in 2003, is losing market share to the upgraded fleets of large, non-state railcar operators. Last year, the rail monopoly’s share of cargo shipments dropped below 50 percent for the first time, according to its 2010 annual report.

Since 2003, cargo rail volume has risen 21 percent and industry costs have fallen 22 percent, Salman Babayev, a Russian Railways vice president, said in e-mailed comments. “Private companies ensure a balanced approach to maintain prices affordable to clients.”

The increase is slowing: Cargo volume rose 3 percent to 921.7 million metric tons in the first nine months of the year from the same period a year ago, Russian Railways said Oct. 3. That compares with 8.8 percent growth for all of last year. Moscow-based Freight One had earnings before interest, taxes, depreciation and amortization margin of 22 percent last year. That probably will climb under new ownership, VTB said.

Transcontainer IPO

Globaltrans Investment Plc, Russia’s largest non-state operator, had a 43 percent Ebitda margin, compared with 38 percent at Omaha, Nebraska-based Union Pacific Corp. and 32 percent at Canadian Pacific Railway Co.

Lisin and Timchenko’s jockeying may boost Freight One’s price as much as 15 percent from the starting level, said Alexey Rozhkov, an analyst at IFC Metropol in Moscow. Lisin has about the same influence in government as Timchenko, who is seen as an ally of Prime Minister Vladimir Putin, he said. Putin, 59, who was honorary head of a judo club founded by Timchenko in St. Petersburg, has said he isn’t involved in the billionaire’s businesses.

Russian Railways, whose prices are regulated by the government, started selling blocks of railcars and stakes in its cargo units last year. One was a $400 million initial public offering of almost 35 percent of OAO Transcontainer, to help fund a 1 trillion-ruble, three-year upgrade.

Lisin, Russia’s richest man according to Forbes magazine, and Neftetransservice, controlled by brothers Vadim and Vyacheslav Aminov, each acquired lots of 20,000 railcars.

Global Conditions

Russian Railways retains 50 percent of Transcontainer, whose shares have slid 1.3 percent in London from its November sale price. The unit may be the country’s next big rail-industry offering.

Globaltrans, which decided not to participate in the auction for Freight One “due to global financial conditions,” will bid instead for Transcontainer. Lisin’s UCL Holding transportation company and Neftetransservice may also turn to Transcontainer, which focuses on container traffic between Europe and Asia, if their bids fail this week.

Neftetransservice is unlikely to present a challenge at the auction because of its limited access to the funds for the deal, Rozhkov said.

While the Freight One sale is aimed at opening up the market and encouraging investment in newer and better railcars, it may lead to higher tariffs for small customers without resolving bottlenecks and lack of cars that held up grain and coal cargoes this year.

‘More Flexible’

“Freight One will become more flexible, trying to remain attractive to large commodity producers, while boosting tariffs for small and medium clients,” Rozhkov said.

A win by Lisin, whose OAO Novolipetsk Steel is Russia’s biggest steelmaker by value, may help solve the dearth of general-purpose railcars such as gondolas and boxcars used to carry coal and metals, while a triumph by one of the oil carriers may prolong the issue, Korolev said.

Putin ordered Russian Railways Oct. 15 to pull about 200,000 railcars leased to small operators and clear backlogs that had tied up grain and coal shipments. Most of the current 1,850 operators should be consolidated, leaving only five to seven of the largest and a handful of regional carriers, and the government needs to charge fines for idling railcars, Freight One Chief Executive Officer Igor Asaturov said last month.

Mandatory Leasing

Russian Railways is seeking the right to lease cars from non-state owners on demand to fight bottlenecks, a regulated price corridor within which it can lease cars, First Vice President Vadim Morozov told reporters today. The monopoly is in talks about the share of the fleet it will have claims on.

Andrei Romashkin, a St. Petersburg-based Transoil spokesman, and Dmitry Baukov, a Moscow-based UCL spokesman, both said by phone the proposal won’t affect plans to bid.

Lisin controls about $2 billion of transportation assets. Among them are seaports in St. Petersburg and Tuapse, shipping companies and Independent Transportation Co., which has 27,000 railcars to carry bulk cargoes and metals and is the country’s third-biggest rail carrier by market share.

Timchenko’ rail carrier, OOO Transoil, runs 30,000 cisterns and 36 locomotives. His Gunvor Group handles more than a fifth of Russian seaborne oil export and is expanding in coal.

Whichever businessman wins, he faces long hours of talks with state officials.

“The new shareholder will have to work out a long-term plan with the government and shippers of socially important goods,” said Dmitry Korolev, head of the Railcar Operators’ Council, which includes Timchenko’s and Lisin’s rail units. “Determining a new tariff policy will be a priority.”

--Editors: Torrey Clark, Anne Swardson

To contact the reporter on this story: Ilya Khrennikov in Moscow at; Ekaterina Shatalova in Moscow at

To contact the editor responsible for this story: John Viljoen at

U.S. DOE Weekly Petroleum Status Report for Oct. 21

By Mike Sebany

Following is the text of the weekly Petroleum Status Report from the U.S. Department of Energy:

U.S. crude oil refinery inputs averaged about 14.7 million barrels per day during the week ending October 21, 253 thousand barrels per day above the previous week’s average. Refineries operated at 84.8 percent of their operable capacity last week. Gasoline production decreased last week, averaging 8.9 million barrels per day. Distillate fuel production increased last week, averaging 4.4 million barrels per day.

U.S. crude oil imports averaged just under 9.4 million barrels per day last week, up by about 1.5 million barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged about 8.8 million barrels per day, 9 thousand barrels per day below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 675 thousand barrels per day. Distillate fuel imports averaged 147 thousand barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.7 million barrels from the previous week. At 337.6 million barrels, U.S. crude oil inventories are in the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 1.4 million barrels last week and are near the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 4.3 million barrels last week and are in the middle limit of the average range for this time of year. Propane/propylene inventories increased by 0.2 million barrels last week and are below the lower limit of the average range. Total commercial petroleum inventories increased by 0.7 million barrels last week.

Total products supplied over the last four-week period have averaged just under 18.8 million barrels per day, down by 0.7 percent compared to the similar period last year. Over the last four weeks, motor gasoline product supplied has averaged about 8.8 million barrels per day, down by 2.7 percent from the same period last year. Distillate fuel product supplied has averaged about 4.2 million barrels per day over the last four weeks, up by 7.5 percent from the same period last year. Jet fuel product supplied is 3.0 percent higher over the last four weeks compared to the same four-week period last year.

To contact the reporter on this story: Mike Sebany in Washington at

To contact the editor responsible for this story: Alex Tanzi at

Tuesday, October 25, 2011

Gold set for best three-day rise in a month
By Amanda Cooper


(Reuters) - Gold was set for a third consecutive daily rise on Tuesday, benefiting from growing investor optimism over the ability of European leaders to stem the spread of the debt crisis, which restricted gains in the U.S. dollar.

EU leaders are to meet on Wednesday with tentative plans in place for Greece's debt to be reduced, European banks to be recapitalized and the euro zone's EFSF rescue fund to be increased to provide partial insurance for sovereign bonds.

Uncertainty about just how close European Union leaders will come to solving the euro zone debt crisis kept many markets trading in a tight range on Tuesday and gold was no exception.

Implied volatility on gold options has fallen to its lowest in over two months this week, having spiked to a 2-1/2-year high in late September, when the price tumbled by as much as 20 percent from a record $1,920.30 an ounce.

Spot gold was last up 0.4 percent on the day at $1,658.40 an ounce, having risen by 2.5 percent over the last three trading days, its best three-day performance in a month, although this month, it has underperformed most major markets.

"At the moment, gold is rudderless, it is rootless and is looking for some direction and lead," said ANZ head of metal sales Peter Hillyard.

"With more turmoil, more uncertainty, the end of the fourth quarter and early into the new year, I believe the gold price will be higher based on what I think will be a failure to resolve, in a satisfactory way, all of the euro zone problems and so on ... at the moment, I would rather be long of gold than short of it," he added.


As some of gold's traditional correlations to other assets such as equities or base metals have broken down, the price has become more unpredictable.

Gold's performance over the last two weeks, in which time it has lost 0.4 percent, has been among the weakest of the major asset classes, having lagged against copper, European, U.S. and Chinese equities, as well as the trade-weighted euro, the dollar index and government bond futures.

Its correlation with European equities has reached its most positive in nearly six months, while its correlation with the copper price -- often viewed as a key indicator of investor risk appetite -- is at 70 percent, its highest in a year.

That said, longer-term investors are not deterred.

Holdings of metal in exchange-traded funds, often a measure of investor desire for physical bullion, staged their largest one-day rise since mid-September, following a net inflow of over 200,000 ounces, bringing total holdings to their highest in a month.

"The yellow metal is showing little independence at the moment and still moving in line with commodities and equity markets, albeit underperforming. We therefore do not expect any great price swings either in the wake of the EU summit on Wednesday," said Commerzbank in a note.

"Should a solution to the debt crisis be presented, gold will probably be pulled up slightly. Should expectations be disappointed, its character as a safe haven is likely to limit the downside potential."

Silver rose by 0.3 percent to $31.75 an ounce, on course for its third straight daily rise.

Options on U.S. silver futures expire on COMEX on Wednesday. Most open interest centers on put options -- which give the holder the right, but not the obligation to sell metal at a pre-determined price by that date -- at $32.00 an ounce and on call options -- which give the holder the right but not the obligation to buy metal -- at $31.00.

Platinum was up by 0.8 percent at $1,550.49 an ounce, also having risen for three days in a row, marking its largest three-day gain since mid-August.

Platinum has fallen by more than 12 percent this year, as concern has grown about the impact to car demand, particularly in Europe, from the euro zone debt crisis. Europe is home to the world's largest market for diesel-fueled vehicles, which require a higher loading of platinum in their catalytic converters.

Platinum has had some fundamental support in the last week from import and export data from key trading centers.

Customs data from Switzerland, a major clearing hub for both platinum and palladium, showed exports rose to their highest in three months in September, while customs data from China, a key consumer of metal for jewelry, showed imports nearly doubled year-on-year last month to hit their highest in six months.

Palladium was last up 0.1 percent on the day at $636.47.

(Reporting by Amanda Cooper; editing by Keiron Henderson)

Ghana's Oil Potential Unknown and Growing

All that Glitters is not gold, they say. In the case of Ghana, it is gold, cocoa, relative institutional strength and newly discovered oil wealth.

The country has raced to put in place an adequate legislative framework to guard against official abuses and ensure long term benefit for the country. The Petroleum Revenues Management Bill is particularly impressive in its transparency requirements. However, given the relatively weak anti-corruption authorities, accountability may still prove to be an issue.

The regulatory template and institutional knowledge that is now in place, but was not only a year ago, should give investors some confidence that they can avoid contractual turbulence such as affected Kosmos Energy while it considered cashing in on its oil exploration investment in 2009.

For all that, Ghana's developmental needs and winner takes all political system mean that activities in the sector will remain politically sensitive.

Jubilee field oil production, having got underway in December 2010 has raised Ghanaian hydrocarbon output from around 4,000 to 77,000 barrels per day (bpd) as of August 2011. This is behind the expected 120,000 bpd but nevertheless a significant boost to economic growth and foreign exchange earnings. Assisted by a bumper cocoa harvest, the government expects real GDP growth of around 14% this year and perhaps 12% in 2012. The latter assisted by the tardy roll out of oil output.

More recent oil finds suggest that we do not yet know the full extent of Ghana's hydrocarbon potential. For example, the expected 2013-14 peak production of 240,000 bpd does not take into account Deepwater Tano Block discoveries - Enyera and Tweneboa yet to be confirmed as commercially viable.

Oil juniors such as UK-based Tullow Oil and Anadarko of the US have been trailblazers but the buzz is drawing others, including the major players. Hess of the US and Nigeria's Sahara Energy Fields have reportedly made queries about Ghana's West Keta and East Cape Three Points blocks. Shell Global Head of Trading Mike Muller recently declared "a growing appetite for Ghana [and] working to acquire a licence for exploration".

Political Calendar

There has been no single-term president in Ghana's post-1993 democratic history, and the current incumbent President John Evans Atta Mills looks particularly strong in light of the country's post-2009 macro-economic stabilisation and his defeat of an internal challenger at the ruling party primaries.

Still, the 2008 elections were exceedingly close and there is little to suggest the environment has become less polarised. With one eye on the approaching December 2012 elections, the government is under pressure to create tangible benefits to maintain and even grow its constituency of supporters. Large scale borrowing e.g. US$3 billion from China should be seen in this light.

Songhai Advisory LLP is a bespoke business intelligence consultancy providing critical insight on market opportunities in Sub-Saharan Africa.

Plains bids $1 bln for pipeline rival SemGroup
* Bids $24 per SemGroup share, a 1.9 percent premium

* SemGroup shares jump as much as 20 pct to $28.35

* SemGroup assets seen as good fit for Plains (Adds shareholder comments, possible bidders; updates share price)

By Michael Erman and Krishna Das

(Reuters) - Plains All American Pipeline LP (PAA.N) made an unsolicited $1 billion bid for rival SemGroup Corp (SEMG.N), as it seeks to expand its presence in North America's most important crude oil storage hub at Cushing, Oklahoma.

SemGroup rejected the Plains bid on Monday, saying it "substantially undervalued the company." But it said it was "willing to consider any transaction that reflects the full and fair value of SemGroup's current business and future prospects."

Houston-based Plains said on Monday it offered $24 a share for SemGroup, a 1.9 percent premium over the stock's closing price on Friday. But SemGroup shares surged well past the offer price, indicating that investors are looking for a higher bid.

Shares of Tulsa, Oklahoma-based SemGroup were trading at $27.55 in afternoon dealings on the New York Stock Exchange, after jumping as much 20 percent to $28.35,

"It's possible that some other bidders emerge," said Avi Feinberg, an analyst with Morningstar Inc, adding that master limited partnerships focused on crude oil or refined products could consider a bid.

Jerry Swank, founder of Swank Capital, named companies such as Magellan Midstream Partners (MMP.N), Sunoco Logistics Partners (SXL.N), Enbridge Energy Partners (EEP.N) and Kinder Morgan Energy Partners (KMP.N) as potential bidders.

Swank owns shares of all the above-named companies except for SemGroup.

Plains, which had offered to buy SemGroup for $17 per share in March last year, said it would be willing to consider increasing its latest bid if it could get access to SemGroup's financial information.

SemGroup's board "has refused to engage in constructive discussions with us regarding a possible transaction," Plains said in a statement.


SemGroup's assets include a 620-mile (998-kilometer) pipeline network in Kansas and Oklahoma as well as a 51 percent stake in a 527-mile pipeline that transports crude oil from Colorado to Oklahoma.

A Plains unit owns 34 percent of the White Cliffs Pipeline.

Plains owns and operates a network of about 16,000 miles (25,750 kilometers) of pipelines and gathering systems. It also has about 90 million barrels of liquids storage capacity.

"SemGroup has very good oil infrastructure in midcontinent, which is a great complement to Plains' existing assets," Swank said.

Both companies are major players in crude oil storage at Cushing, which has experienced a storage boom in recent years as growing volumes of crude flow into the landlocked midcontinent region from prolific oil fields in Canada and shale oil deposits in the northern U.S. plains.

Cushing tanks have proved highly profitable for oil traders during bouts of contango -- when crude prices for prompt delivery trade at a discount to oil for future delivery -- since they allow oil storage plays for profit. The oil market was in contango for three years until Monday, when prompt futures jumped above second-month prices.

SemGroup, once the 14th-largest privately held U.S. company, was forced to file for bankruptcy protection in 2008 under the weight of heavy trading losses on energy futures and derivatives. Last week, SemGroup co-founder Thomas Kivisto agreed to give up more than $1.3 million to settle U.S. Securities and Exchange Commission charges that he misled investors about liquidity risks from his energy trading.

Plains said SemGroup has underperformed expectations since its 2009 emergence from bankruptcy.

"We continue to believe ... that on a stand-alone basis SemGroup will continue to fall materially short of expectations," Plains Chief Executive Greg Armstrong said in a letter to SemGroup's board.

In August, SemGroup agreed to sell its SemStream LP unit for about $282 million in cash and stock to NGL Energy Partners LP (NGL.N). That deal also calls for SemGroup to take a 7.5 percent interest in the general partner of NGL Energy.

Plains' bid for SemGroup follows a number of other large U.S. pipeline deals this year, including Kinder Morgan's (KMI.N) $21 billion takeover of El Paso Corp (EP.N) and Energy Transfer Equity's (ETE.N) more than $5 billion deal for Southern Union (SUG.N).

Plains has hired Evercore Partners (EVR.N) to advise on its bid.

Barclays Capital and LCT Capital are serving as SemGroup's financial advisers.

(Reporting by Michael Erman and Krishna Das in New York; additional reporting by Joshua Schneyer and Matt Daily in New York; editing by Gerald E. McCormick, Dave Zimmerman, John Wallace, Phil Berlowitz)

Nigeria to Export 6 Brass River, 6 Akpo Oil Cargoes in December

By Lananh Nguyen

(Bloomberg) -- Nigeria, Africa’s largest oil producer, will export six cargoes each of Brass River and Akpo crudes in December, according to loading schedule obtained by Bloomberg News.

December’s volume is higher than November, when five consignments of each grade were scheduled to load. Akpo cargoes comprise 1 million barrels, while Brass shipments include five 950,000-barrel shipments and one lot of 300,000 barrels.

Loading programs are monthly schedules of crude shipments compiled by field operators to allow buyers and sellers to plan their supply and trading activities.

--Editors: Alessandro Vitelli, John Buckley.

To contact the reporter on this story: Lananh Nguyen in London at

To contact the editor responsible for this story: Stephen Voss at

Monday, October 24, 2011

The oil price. Libya and the WTI-Brent spread.

By Kathleen Brooks, Research Director UK EMEA,

Change has been in the air in Libya since August, when Qaddafi was ousted from power, however now that Qaddafi is dead the pace of change could accelerate very quickly.

What does this mean for the markets?

Geo-political tensions and revolutions are always difficult to price into the market especially when they take place in a major oil producer nation. However the Libya conflict is considered one of the strongest forces keeping upward pressure on Brent crude oil, which has stayed close to $100 per barrel during the recent market turmoil and threat of a global recession. It is also one of the reasons why Brent crude (considered European oil) has maintained a large premium to its US counterpart WTI in recent months.

Libya is important to the oil market, especially in Europe. It has the largest reserves in Africa and the ninth largest in the world with more than 40 billion barrels. Before the revolution Libya produced around 1.6 million barrels per day, and the bulk of this was exported to Europe. During the past 6 months of conflict production has been suspended or sharply reduced, which has kept upward pressure on the Brent price.

Going forward there are a couple of situations that could arise:

1, Oil production resumes, Brent crude comes under pressure reducing the Brent-WTI spread. We think this may happen in the long-term but we are reluctant to conclude that just because Qaddafi is dead the price of Brent will moderate. We think this for a couple of reasons: firstly, we don't know the extent of the damage to production facilities caused by the civil unrest. Secondly, just because Qaddafi may be dead does not mean that the fighting will end. We need to know who will take over power and until a stable government is created it is unlikely production will be reinstated to its previous capacity.

2, Events in the Middle East have a negligible impact on the price of Brent and the Brent-WTI spread. We think this is more likely, at least in the near-term. The wide Brent-WTI spread was also caused by excess supply at Cushing ? a major hub for US oil, so factors outside the US may keep upward pressure on Brent. Signs are emerging that Brent crude may be taking over the mantle of the global oil benchmark, which previously rested with WTI. Interestingly, even as supplies were drawn down at Cushing during the summer months, the spread between Brent and WTI did not start to narrow.

Supply is also an issue in Europe. Low stock levels combined with interruption to supply from the Middle East means that stocks of oil in Europe are low and they will take some time to build up, which should limit downward pressure on Brent prices.

Forward curves suggest the spread may narrow in 2012

This is an impossible question to answer with any degree of accuracy. But traditionally WTI has traded at a premium to Brent because it is higher quality, so on a historical basis then the spread should narrow. Added to this, the forward curves for Brent and WTI are completely different. Whereas the WTI curve is in Contango (forward prices are higher than spot prices) the Brent forward curve is in Backwardation (i.e. Prices are meant to fall in future). This may cause the spread to narrow as soon as Q1 2012 if crude forecasts on Bloomberg turn out to be correct. However, for the spread to narrow that would mean the Brent curve needs to remain in backwardation, and due to the sensitivity of commodity prices at the moment that cannot be guaranteed.

European risks:

While the Middle East is important for oil investors from a supply perspective, the European Sovereign Debt crisis could dent demand. The sovereign crisis remains unresolved and this is threatening to dent global growth. Germany, the US and China have all seen their economies impacted by austerity measures and stresses in the banking system in the currency bloc. Added to this the main pillar of the commodity story has been emerging market demand, But if global growth slows then this pillar may start to crumble, which would inevitably weigh on the oil price. It is hard to say if Brent would fall more sharply than WTI because it has appreciated more in recent months, or if Brent would be more protected due to supply concerns in Europe.


We don't anticipate any major change in trend in the oil price in the near-term. The situation in Libya remains unclear, the Eurozone debt crisis is still a threat to global commodity demand and we also can't forget that the weather phenomenon La Nina is expected to deliver a very cold winter to the East coast of the US and Europe...So there are many variables that determines the oil price and Libya is only one of many moving parts.

More important is whether the forward prices remain in Contango for WTI and Backwardation for Brent.

Brent-WTI spread:

WTI and Brent forward spreads (December 2011 = white line, December 2012 = green line) As you can see, according to forward contracts, the spread between Brent and QTI is expected to moderate throughout 2012.

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What Gadhafi's Death Means for Gas Prices

By Jonathan Berr

Oil prices fell in the wake of last week's death of Col. Moammar Gadhafi. But it was a small dip, and it didn't last for long.

Still, while the Libyan dictator's death may not lead to lower gas prices for U.S. drivers in the short term, down the road improved world crude supplies should stabilize prices. That in turn would lead to fewer surprises at the gas pump.

Why Libya's Troubles Are Ours, Too

Though Libya only produces about 2% of the world's oil, even small disruptions in crude supplies can have a big effect on production and prices.

Before civil war broke out, Libya had been producing about 1.5 million barrels of oil per day. As output dried up, European refiners, which buy about 85% of Libya's output, were hurt badly and prices for Brent crude soared to as high as $127 a barrel in April.

Even though only about 3% of Libyan oil winds up in the U.S., gasoline prices in the U.S. surged on concerns about Libya. Gas prices now average $3.47 a gallon, up from $2.83 a year ago, according to the AAA Daily Fuel Gauge Report.

Many experts believe that it will be months before the Libyan oil sector is running at full capacity again. As the Associated Press notes, analysts expect Libya to produce 600,000 barrels per day by the end of the year and 1.6 million a day by the second half of next year.

If that prediction proves accurate, oil could drop by between $10 and $25 a barrel. However, prices may rise further amid concerns about other issues, such as rising demand from the developing world.

Libya's Opportunity ... Or Its Demise?

According to the U.S. Energy Information Administration, many experts believe that Libya's oil reserves, reported to be Africa's largest, have been underexploited, even though many foreign companies tried to do business with the Gadhafi regime when relations warmed between Washington and Tripoli after sanctions were lifted during the Bush administration.

With billions to be made, many companies will be willing to take the risk. But the results might be mixed.

ExxonMobil (XOM) returned to Libya in 2005 after a nearly 25-year absence. Later, it said a well that it drilled off the Libyan coast was not commercially viable. The enthusiasm of other oil companies also waned. Chevron (CVX) and Occidental Petroleum (OXY), which also came back, decided in 2010 not to renew their five-year license to explore for oil and gas.

Though it was not mentioned at the time, many oil companies were worried that Gadhafi would nationalize their assets. To further complicate matters, many foreign oil workers fled Libya in recent months as the fighting intensified.

Still, Libyan's light, sweet crude is especially attractive to refiners because it is easier for them to convert it into gasoline and diesel. Getting to it is just a little bit easier now that Gadhafi is gone.

Motley Fool contributing writer Jonathan Berr owns none of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Chevron.

COSCO Dalian completes VLCC to FPSO conversion job

Chinese shipyard COSCO Dalian has completed its part of the conversion of the VLCC Radiant Jewel into what will be FPSO Cidade de Sao Paulo MV23, to be deployed in the pre-salt region of Brazil's Santos Basin.

The FPSO will be capable of processing 120,000 barrels of oil or 150,000 barrels of total fluids per day.

MODEC is responsible for the engineering, procurement, construction, mobilization, and operation of the FPSO, including topsides processing equipment as well as hull and marine systems. SOFEC will design and provide the spread mooring.

COSCO Dalian's work on the conversion involved steel fabrication, module installation and integration and the installation of cables, pipe and equipment.

The topsides modules will be lifted and integrated on the FPSO in Brazil.

Iraq's Shahristani says sees no need for OPEC cut

* Shahristani says supply and demand balanced

* OPEC scheduled to meet Dec. 14

BAGHDAD(Reuters) - Iraq's deputy prime minister for energy, Hussain al-Shahristani, said on Monday current oil prices are acceptable for both consumers and producers and that he saw no need for OPEC to cut production at its next meeting.

"Current prices are acceptable for both consumers and producers, and we do not see any impact of the Europe debt crisis on global oil prices," Shahristani said.

Shahristani, a former oil minister who oversees Iraq's growing oil sector, told Reuters there were indications global demand for oil is increasing despite the debt crisis.

"Currently oil supply and demand are balanced and we noticed a gradual increase in demand since last year and we expect the increase to continue," Shahristani said.

"I can't see a need for OPEC to decide on a production cut at its next meeting, and I think current output levels are meeting global demand," he said.

OPEC is scheduled to meet on Dec. 14 at its Vienna headquarters.

Iraq, seeking to ramp up its production capacity to rival global leaders, has boosted its output to 2.9 million barrels per day this year.

Saudi Arabia, Kuwait and the United Arab Emirates boosted output unilaterally after Iran, African countries and Venezuela blocked a Saudi-led proposal to increase output targets at OPEC's last meeting on June 8.

Brent crude LCOc1 rose above $110 on Monday, and U.S. crude CLc1 was valued above $88. (Reporting by Waleed Ibrahim; Writing by Ahmed Rasheed; Editing by Jim Loney and Jane Baird)

Crude Oil Rises for Second Straight Day on Economic Growth in China, Japan
By Moming Zhou

Crude oil rose for a second day as data showed economic growth in China and Japan and as U.S. equities rose to the highest level in nearly 12 weeks.

Oil climbed as much as 2.5 percent as China’s manufacturing may expand in October and Japan’s exports exceeded economists’ forecasts. China is the second-largest consumer of oil, trailing the U.S., and Japan is third. The Standard & Poor’s 500 Index gained for a third day after Caterpillar Inc. (CAT) earnings beat analyst estimates.

“We’ve got some decent numbers out of China and Japan and oil is up because of this economic optimism,” said Phil Flynn, an analyst with PFGBest in Chicago. “Oil has been moving with equities recently.”

Crude for December delivery rose $2.04, or 2.3 percent, to $89.44 a barrel at 10:58 a.m. on the New York Mercantile Exchange. Prices are down 2.1 percent so far this year.

Brent oil for December settlement increased 92 cents, or 0.8 percent, to $110.48 a barrel on the London-based ICE Futures Europe exchange.

China’s manufacturing may expand this month for the first time since June, snapping the longest contraction since 2009, according to a preliminary index of purchasing managers by HSBC Holdings Plc and Markit Economics released today.

The reading of 51.1 for the index was the highest in five months and compares with the final reading of 49.9 for September and August. A reading above 50 indicates expansion.

Japanese Exports

Japanese exports rose 2.4 percent in September from a year earlier as demand for cars and auto parts increased, the Ministry of Finance said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg was a 1 percent increase.

“As long as China and Japan are growing, they are going to buy an increasing amount of crude oil from the rest of the world, and that’s good for the oil market,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis.

The Standard & Poor’s 500 Index advanced 0.8 percent to 1,248.24, the highest level since August. The Dow Jones Industrial Average rose 0.4 percent to 11,855.79. The S&P’s GSCI Index of 24 raw materials increased 1.4 percent to 639.59.

Caterpillar, the world’s largest maker of construction and mining equipment, said full-year sales will be at the top end of a previously forecast range of $56 billion to $58 billion.

GDP Growth

U.S. gross domestic product, the value of all goods and services produced, rose at a 2.5 percent annual rate in the third quarter after advancing 1.3 percent in the previous three months, according to the median forecast of 68 economists surveyed by Bloomberg News before the Commerce Department’s Oct. 27 release.

Orders for business equipment increased in September and new-home sales stabilized, other data may show this week.

European leaders yesterday held their 13th crisis summit in 21 months, debating how to cut Greece’s debt burden, boost the firepower of the region’s bailout fund and bolster banks ahead of a further meeting on Oct. 26.

“If Europe doesn’t come up with anything, this is going to get ugly, and that’s what’s driving the boat right now,” said O’Grady.

Hedge funds boosted bullish bets on oil by the most in five weeks in the week ended Oct. 18.

Net-long positions, or wagers on rising prices, in U.S. oil held by managed money, including hedge funds, commodity pools and commodity-trading advisers, in futures and options combined expanded by 13,685 futures equivalents, or 8.7 percent, to 171,378, the biggest gain since Sept. 13, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Oct. 21.

Tropical Storm Rina, the 17th named storm of the Atlantic hurricane season, is forecast to become a hurricane tomorrow on a path toward Mexican resorts on the Yucatan Peninsula, the National Hurricane Center said.

Rina, about 370 miles (595 kilometers) east-southeast of Chetumal, Mexico, and moving northwest at 6 mph, the center said in a website advisory before 11 a.m. Miami time.

To contact the reporters on this story: Moming Zhou in New York at;

To contact the editor responsible for this story: Dan Stets at