Wednesday, May 29, 2013

Ghana, Jubilee Field Partners In Oil Block Feud

VENTURES AFRICA – A dispute has broken out between the Ghana government and its Jubilee Partners (partners working in the country’s largest oil field) over the implementation of the Tweneboa, Enyina and Ntumme (TEN) oil block project in the Western Region.
Whereas the government demands the Jubilee Partners to drill the Ntumme well for the former to fully assess its commercial viability and risks for the project before approving the Plan for Development (POD), the latter insists the project has enough economic value for which it should be approved.
Reports indicate that the Jubilee partners have already spent $1 billion on the project and after the approval is granted, the will have to sink a further $6billion on it. The field is reported to hold about one billion barrels of oil reserves and when it comes on stream, it is expected to produce 100,000 barrels per day.
The government was making this request as it wants to protect the national interest and also to avoid the technical difficulties encountered by the partners during phase one of the project, according to officials of the Ministry of Petroleum and Energy and the Ghana National Petroleum Corporation (GNPC).
The officials argued that those technical errors accounted for the country’s inability to achieve the 120,000 barrels per day (bpd) of oil production it had targeted when Ghana commenced commercial oil production. The country was thus forced to incur additional cost in remedial technical works before the current 115,000 bpd was reached.
Since Ghana commenced commercial oil production in 2010, production has hovered around 80,000-90,000 bpd until the technical challenges were rectified last year before production inched up towards the targeted 120,000 bpd. This led to reduced oil revenues and lowering of expectations among Ghanaian’s who had expected so much from their oil sector.
In an interview with Ghana’s Daily Graphic newspaper however, an official speaking on anonymity on behalf of the Jubilee partners denied this accusation, saying the delay in approving the POD was costing the nation more.
The official revealed that the POD for the TEN project was submitted to the government in November last year and that tender processes for the construction of the project’s Floating, Production, Storage and Offloading (FPSO) vessel and others will be awarded as soon as the approval was granted.
Government officials are however adamant that the TEN project will not be rushed as “Ghana has learnt a lot from the past mistakes and we know the GNPC will always object t anything that will work against the interest of the country. If we fast-tracked the Jubilee we must be careful with the TEN project”.
A government official further told the newspaper that “we must take our time. When we rushed the first one, they went to rent the expensive rigs which played to their advantage; local content was thrown to the dogs; we have simply learnt and we will look for the best POD”.
The Jubilee partners include Tullow Oil, Kosmos Energy, Anardarko and Sabre Oil and Gas which sold its stake in the Jubilee field last year to South Africa’s PetroSA.

NPA Ask For Tema Oil Refinery Privatization.

Alex Mould - CEO of National Petroleum Authority
Alex Mould – CEO of National Petroleum Authority

Alex Kofi Mould, Chief Executive Officer (CEO) of National Petroleum Authority (NPA), says until Tema Oil Refinery (TOR) is privatized or sold to private investors, it cannot perform to expectation, let alone compete internationally.
According to him, government currently does not have the money to invest into TOR and therefore it would be appropriate if the current managers of the economy allow investors to take over the state refinery.
Speaking recently at a presentation on opportunities for bulk distribution companies in Accra, Mr. Mould stated: “TOR is a huge organisation that needs a lot of money to maintain and also keep a standard to be able to compete with the international market. Government, as a shareholder, should ensure that TOR is fit for growth.  And how Government looks for the money depends on Ghanaians.”
But analysts in Ghana’s petroleum sector have expressed different views, saying TOR would be bought by government officials as they have since the beginning of their tenure of office ‘given a dog a bad name to hang it.’
An analyst, who refused to be named, noted that “if government is saying that it cannot support TOR at this time, how can it ensure it is handled well when it is sold to investors?”
“It should invest into refinery if it can do it better and more efficiently than the private sector and ensure that there are cheaper products that are supplied consistently at the right time.  “If government cannot do that then we should encourage the private sector to come into that industry.
“We can do this by not protecting the government sectors and as such stifling the private sector from competition. Government should not allow its agencies to pay a different price on petroleum products while the private sector pays a different price. They should pay the same price, compete on a level field and ensure that any organization it invests in is fit for growth and can compete with the private sector.
Do we want the taxpayer to pay it or Government to go and borrow it or do, we want TOR as an organisation to stand alone and borrow and do it. As a shareholder, government needs to step up to that responsibility and spell out exactly how it wants to do it. That has nothing to do with NPA. The NPA’s job is to give licences out to anybody who wants to compete in this space – the supply and distribution chain of petroleum products- to ensure that the consumer receives quality products at the right price and also services that are given to the consumer, they should have choice.
Asked how margins are set on petroleum products in relation to what pertains in the developed world, Kofi Mould noted that the petroleum sector is a heavily private sector one.
“Although NPA is the government regulator, we did not compete with participants. We ensure that the framework is open to all and that those who can meet the standards have a fair playing field.
“We have to encourage people to invest and to do this, they have to be reasonable return. You cannot have 17 bulk distribution companies (BDCs) if the return is not good. Some are bound to wither away. Likewise we cannot have over 60 oil marketing companies if the return is not good. You can’t have over 2000 trucks moving products around the country with over 150 transporters in this sector if the margin is not good.
By Samuel Boadi

Tuesday, May 28, 2013

GE To Invest Billions Of Dollars In Fracking .

Ge Fracking
PITTSBURGH (AP) — One of America's corporate giants is investing billions of dollars in the new boom of oil and gas drilling, or fracking. General Electric Co. is opening a new laboratory in Oklahoma, buying up related companies, and placing a big bet that cutting-edge science will improve profits for clients and reduce the environmental and health effects of the boom.
"We like the oil and gas base because we see the need for resources for a long time to come," said Mark Little, a senior vice president. He said GE did "almost nothing" in oil and gas just over a decade ago but has invested more than $15 billion in the past few years.
GE doesn't drill wells or produce oil or gas, but Little said the complexity of the fracking boom plays into the company strengths. Wells are being drilled horizontally at great depths in a variety of formations all around the country, and that means each location may require different techniques.
There are also big differences in how surrounding communities view the boom. There's been little controversy in traditional oil and gas states such as Oklahoma, but nearby landowners in Pennsylvania, Colorado and other states have complained of environmental and health effects.
"My own view is there things can be managed," Little said of concerns about drilling, adding they need to be managed carefully. He drew a parallel to GE's work with the aircraft industry, since many decades ago flying was considered a risky business, but the industry evolved so that even as the speed, distance and number of flights increased, overall safety improved greatly.
Little also pointed out that GE has significant experience in wind energy, solar, and in nuclear power. "I think the world needs all of these kinds of systems," Little said.
One environmentalist welcomed the news.
"It's exciting to see. I think it is a positive response to legitimate public concerns about the environmental impacts" of the fracking boom, said Michael Shellenberger, one of the founders of Oakland's Breakthrough Institute. He added that other companies are working to reduce and clean up wastewater, use more benign fracking methods, and reduce air pollution related to drilling.
"It's the kind of continuous improvement of technologies that's needed," Shellenberger said.
Little said the GE strategy ultimately comes down to looking at "minds and machines together." For example, they have devices that can literally be put down into a well to give people on the surface information about exactly what's happening a mile or two below ground.
"We'll get more information than ever before," he said, and that can be used to help improve production and profits, and to monitor and reduce environmental impacts.
One scientist said that the approach makes sense, and that there are past examples of success.
Modern cars are "incomparably cleaner" than older ones, said Neil Donahue, a professor of Engineering and Public Policy at Carnegie Mellon University in Pittsburgh. "There are some real technical issues that these folks at GE might be able to make real progress on."
But Donahue added that GE's research is separate from — and can't address — the issue of how society should regulate fracking. He said it's likely that over time, GE will be able to look back and "say we've made it safer."
"It's up to a different level of discussion, how do we deal with this as a society," he said of the benefits and risks that come with fracking. "It's less obvious that GE research will reduce" the many other contentious issues around fracking, such as whether it should be allowed at all in some communities.

Wednesday, May 15, 2013

U.S. oil boom leaves OPEC sidelined from demand growth

By Dmitry Zhdannikov and Christopher Johnson
LONDON (Reuters) - Rising U.S. shale oil production will help meet most of the world's new oil demand in the next five years, even if the global economy picks up steam, leaving little room for OPEC to lift output without risking lower prices, the West's energy agency said.
The prediction by the International Energy Agency (IEA) came in its closely watched semi-annual report, which analyses mid-term global oil supply and demand trends.
"North America has set off a supply shock that is sending ripples throughout the world," IEA Executive Director Maria van der Hoeven said on Tuesday.
"The good news is that this is helping to ease a market that was relatively tight for several years," she added. Oil on Tuesday traded near $103 a barrel, well below its peak of $147 in 2008.
The IEA said it expected global demand to rise 8 percent on aggregate between 2012 and 2018 to reach 96.7 million barrels per day (bpd) based on a fairly optimistic assumption by the International Monetary Fund of 3 to 4.5 percent global economic growth a year during the period.
That incremental demand will be met mainly by non-OPEC production, which will rise by more than 10 percent between 2012 and 2018 to 59.31 million bpd, the IEA said, increasing its estimate of non-OPEC supply in 2017 by 1 million bpd versus its previous report in October 2012.
The United States will overtake Russia as the world's largest non-OPEC producer as early as 2015, the IEA said.
That may leave OPEC, which had been long seen as the last resort for the world to meet rising demand, with output fluctuating around the current levels of 30 million bpd for the next five years.
The agency cut its estimate of the demand for OPEC crude in 2017 to 29.99 million bpd, down by 1.22 million bpd from its previous report six months ago.
It said OPEC's spare capacity will rise by over a quarter to reach 6.4 million bpd or 6.6 percent of global demand, giving an additional cushion to potential supply shocks, the report said.
The adoption of U.S. shale technology could help Russia and China boost production from unconventional reserves, but new projects may slow in other areas.
"Several members of the (OPEC) producer group face new hurdles, notably in North and sub-Saharan Africa. The regional fallout from the 'Arab Spring' is taking a toll on investment and capacity growth," the IEA said.
"Downward adjustments across the (OPEC) group are partly offset by substantially stronger growth in Saudi capacity than previously expected, reflecting newly announced development projects," it added.
Iran's sustainable crude production capacity is likely to fall by as much as 1 million bpd to 2.38 million bpd by 2018, the lowest in many decades, due to Western sanctions, the IEA said.
The IEA said the balance of global supply growth, until recently evenly split between OPEC and non-OPEC, was tilting towards the latter.
"North America thus increases its share of supply growth both within the non-OPEC group and more globally," it added.
In every other aspect of the supply chain, be it demand, refining, trade or storage and transportation, the fast rise of emerging market and developing economies is striking, it said.
These economies are projected to overtake advanced economies in oil product consumption from the second quarter of 2013. This lead will widen from 49 percent of global demand in 2012 to more than 54 percent by 2018.
The IEA said that beyond the well known story of growth in Brazil, China, Russia, India, Saudi Arabia and South Africa, many African nations were also on the rise on the global oil consumption map.
The IEA also predicted shifts in the global refining industry as countries such as India and Saudi Arabia build new refining capacity.
The expansion of global refining capacity will outpace upstream supply growth as well as demand growth, bringing refining margins under pressure. Higher-cost refineries will face stronger competition.
"European refineries are at particularly high risk of closure over the forecast period," the IEA said.
The IEA added that another consequence of the surge in U.S. production was a shift in natural gas pricing, which would challenging the conventional wisdom that products produced from oil will continue to dominate the market for transport fuels.
"Cheap and abundant natural gas has already facilitated the transition of the U.S. economy towards broader use of the fuel," the agency said. Natural gas will increase its share of road transport fuels to 2.5 percent in 2018 from 1.4 percent in 2010, it forecast.
(editing by Jane Baird)

Monday, May 13, 2013

Has the gold rush come to an end?

<p> FILE - In this Nov. 8, 2006 file photo, gold bars are on display at the "Gold" exhibit in the American Museum of Natural History in New York. Gold, often touted as the most trustworthy of investments, has looked wild over the past month. After starting April 2013 above $1,600 an ounce, it dropped below $1,361 on April 15 and has steadily recovered to settle at $1,436 on Friday, May 10, 2013. (AP Photo/Seth Wenig, File)
Associated Press -
FILE - In this Nov. 8, 2006 file photo, gold bars are on display at the "Gold" exhibit in the American Museum of Natural History in New York. Gold, often touted as the most trustworthymore of investments, has looked wild over the past month. After starting April 2013 above $1,600 an ounce, it dropped below $1,361 on April 15 and has steadily recovered to settle at $1,436 on Friday, May 10, 2013. (AP Photo/Seth Wenig, File) less
NEW YORK (AP) -- When the price of gold plunged $200 last month, many people thought they caught the sound of the gold bubble popping.
What Peter Schiff, CEO of the brokerage Euro Pacific Precious Metals, believes he heard was a stampede of fair-weather speculators fleeing the precious metal.
Schiff and other champions of gold weren't shaken by the plunge. To them, it was just a short breather in preparation for another long climb.
All the reasons they give for buying gold haven't changed: gold remains a refuge from disaster, they say, arguing that a steep drop in the dollar and a spike in the price of consumer goods are a threat.
For speculators, buying gold was simply a way to profit from its popularity.
"That's what happens in a bull market," Schiff says. "The selloffs shake out the Johnny-come-latelies. It's healthy. Now we can have a real rally."
Gold, often touted as the most trustworthy of investments, has looked wild over the past month. After starting April above $1,600 an ounce, it dropped below $1,361 on April 15 and has steadily recovered to settle at $1,436 on Friday.
But gold was supposed to be a haven from turmoil. When the housing market started cracking and the stock market sank in 2007, the price of gold began to surge. Over the next two years, it soared from around $600 an ounce to nearly $900 in the depths of the financial crisis in late 2008.
For those who were wary of financial institutions or thought the Federal Reserve's rescue efforts would backfire, it became the favored investment. The television personality Glenn Beck advised his audience to stock up on gold bars in case the dollar became worthless. The tea party called for a return to linking the value of the dollar to the price of gold.
"People treated gold like the cure for everything," says James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis. "If you were worried about a depression, buy gold. If you were worried about inflation, buy gold."
Fear of economic collapse started the gold rally, and greed accelerated it. By 2009, speculators and others looked to ride gold's popularity. Hedge funds and other big investors piled in.
Anxiety and gold prices kept climbing in tandem. Right after Standard & Poor's stripped the U.S. of its top credit rating in August 2011, the price peaked above $1,900.
Instead of buying gold bricks and stashing them in their basement, many hedge funds and big investors turned to buying gold exchange-traded funds, which trade on markets like stocks. The most popular offering, the SPDR Gold Trust, attracted big investors like John Paulsen, who made billions betting on the mortgage meltdown, and George Soros.
As money poured in, the SPDR Gold Trust grew into the second-largest exchange-traded fund behind the SPDR S&P 500, which follows the stock market. And its supply of gold swelled from 780 metric tons at the start of 2009 to 1,353 metric tons in December.
But now it looks like the fast-money has soured on the yellow metal. George Soros slashed his stake in the SPDR Gold Trust fund by 55 percent at the end of last year, according to the most recent regulatory filing.
Judging by the numbers, it looks like others decided to jump out of the market at the same time. Hedge funds and big investors pulled $8.7 billion out of gold funds last month, according to EPFR Global, a firm that tracks where big investors put their money.
EPFR says it was the biggest monthly withdrawal out of gold funds since the firm started collecting data in 2000. The SPDR Gold Trust unloaded 12 percent of its gold in April, selling 146 metric tons.
There's no single destination for all the money rushing out of gold, says Cameron Brandt, EPFR's director of research. The most popular places for investors now are real estate funds, junk bonds, emerging-market bonds and stocks in big companies that pay dividends. One clear trend that Brandt sees is investors pulling cash out of the safety of money-market funds in search of something better. Some of that money appears to be trickling back into the U.S. stock market.
So where's gold headed next?
The answer depends partly on where you think inflation is headed. At one extreme, Schiff and others in his camp believe the Fed will eventually let inflation loose and gold will hit $2,000.
"They're going to print and print until money is worthless, or they run out of trees," Schiff says. "I think people will look back at this time period and think, 'Wow, what a great opportunity.'"
Others see no reason for gold to resume its climb. They point to a recent academic study that said current consumer prices imply a gold price below $800 an ounce. Gold forecasts from Wall Street banks sit somewhere in the middle.
Samuel Lee, an ETF strategist at Morningstar in Chicago, has less than 5 percent of a portfolio he manages in gold, and plans to keep it that way. He considers gold a protection against inflation over the very long-term — from 50 to 100 years.
Lee says he isn't sure where gold prices are going this year or the next, "but I'm convinced they won't do as well as stocks." He adds, "I'm not really a big believer in gold. I'm fully aware that it can lose me a lot of money. I just care that it gives me some diversification."
With banks looking stable and the economy slowly improving, there's lets of a need to hide in the gold market. Fear of another financial crisis has diminished.
Ralph Preston, a market analyst and broker at Heritage West Financial in San Diego, Calif., envisions a few scenarios in which gold could shoot higher this year. If the war in Syria spreads, or if North Korea launches an attack on other countries in Asia, it could head back above $1,900.
"Owning a little bit of gold is probably not a bad idea," he says. "But I don't think we'll be using it to buy groceries someday."

Thursday, May 9, 2013

Gold Prices Up 11% Since Market Collapse On Physical Demand, But Bullishness Is Lacking

After a massive decline in mid-April that shattered any sort of confidence in the gold market, bullion prices have remained relatively range bound. While physical demand has picked up, ETF liquidation has kept the gold market flush with supply. Amid light volumes, record-high stock markets, and relative tranquility in Europe, gold has failed to garner enough momentum to break out, despite gaining more than 10% since hitting its 52-week low of $1,323 after the massive April plunge.
If you bought gold on April 16 and held on, you would think you’ve made a good investment. At least a good trade. The yellow metal is up 11% since then, the day after a multi-session market collapse that saw bullion prices fall more than $200, or nearly 15%. The decline was so hard that it wiped out $640 million from the portfolios of hedge fund billionaires John Paulson and David Einhorn, if one includes gold equities and assumes their holdings haven’t changed since their latest regulatory filings.
On Thursday, the yellow metal was trading down 0.4% to 41,468.60 an ounce by 2:32 PM in New York.
Gold prices have lacked direction, UBS UBS’ Edel Tully explained, as neither headlines nor data have had a material impact on sentiment. Bullion’s gradual ascent over the past few weeks has been tied to a resurgence of physical demand, which has helped the market remain tight in the face of thin liquidity.
The physical market has guided prices as production has been strained. Major producers like GoldCorp, Newmont, and Barrick Gold Barrick Gold all made reference to a difficult environment in their recent earnings releases. They face a sort of new paradigm, with prices no longer making new highs and costs that continue to rise. Rumors of producers hedging prices appear unjustified, Tully argued, given the large amount needed for such hedges.
Capping that rise in prices is the continued liquidation of ETF gold holdings, which according to Tully has gone on for 22 consecutive days. This not only tempers price action, but also clouds sentiment and adds to the lack of direction as more supply flows in.
Gold markets are at a difficult crossroads. Continued money printing by Ben Bernanke in the U.S., Kuroda in Japan, and possibly Draghi across the Eurozone has the potential to debase some of the world’s major currencies, which should be supportive of the yellow metal. Yet several factors seem to be conspiring to keep a lid on prices, and pushing equities and other risk assets to higher highs. Relative calm across the Eurozone, a continued, albeit tepid, recovery in the U.S., and a relative slowdown in China are all gold-negative. Until these factors play out, and investor sentiment takes a clearer direction, gold is set to remain range bound.

Wednesday, May 8, 2013

TransCanada plans crude oil infrastructure in Alberta

TransCanada is to build, own and operate a proposed pipeline and terminal facility in Alberta, Canada after reaching binding long-term shipping agreements.
The storage terminal could have a capacity for up to 1.9 million barrels of crude oil. The Heartland Pipeline would be 125 miles long and able to transport up to 900,000 bpd of crude oil, connecting the Edmonton region to facilities in Hardisty, Alberta and a terminal facility in the Heartland industrial area north of Edmonton.
Both projects, estimated to cost $900 million (€690 million) and enter service during the second half of 2015, are being developed to support growing crude oil production in Alberta.
'With Alberta oil production projected to increase by almost 3 million barrels per day over the next 15 years, it is important to have the right infrastructure in place to move these resources safely and reliably to market at the right time,' says Alex Pourbaix, TransCanada's president of energy and oil pipelines. 'These projects will help link Canadian crude oil resources in northern Alberta to markets in Eastern Canada and the US.'
The company says it plans to file a regulatory application for the terminal by the middle of this year, followed by a separate application for the pipeline towards the end of 2013.
TransCanada currently operates 15,000 miles of natural gas pipelines across Alberta and 2,150 miles of crude oil pipelines through its Keystone Pipeline.

The world's biggest container ships prepare for delivery

In Asia and Europe, ports are preparing for a big arrival — a vessel taller than a 20-storey building, wider than most freeways and 12 times longer than a blue whale, the largest animal alive today. Maersk Line, the world's biggest container shipping operator, is expecting delivery of the first of 20 massive container ships of a new class called the Triple-E in late June.
No port in North or South America is currently able to take the vessels, nor are the newly expanded Panama Canal locks, due to open next year. The Triple-Es will squeeze through the Suez Canal, allowing them to service the China-to-Europe route, bringing in goods but returning mostly empty, save for some scrap metal and plastic waste for recycling.
The ships are called the Triple-E class for the three main purposes behind their creation — economy of scale, energy efficiency and environmental improvement. Four-hundred metres long, 59 metres wide and 73 metres high, Triple-Es will be the largest vessels of any type on the water. Its 18,000 TEU (20-foot container) capacity is large enough to hold 108 million pairs of sneakers.
Maersk Line, a unit of Danish group A.P. Moeller-Maersk, carries more than 15 per cent of all sea-borne containers. "When we bring in these bigger ships, we will take other ships out in order to make sure that overall we don't put more capacity into the trade than we need," said Tim Smith, Maersk’s North Asia chief.

Tuesday, May 7, 2013

Brent slips below $105 after gains, supply worries stem losses

By Manash Goswami
SINGAPORE (Reuters) - Brent futures slipped below $105 a barrel on Tuesday, as investors saw the recent surge in prices as an opportunity to book profits, with concerns of an escalation in tensions in the Middle East helping to stem losses.
The benchmark hit its highest in nearly a month above $105 in the previous session as supply worries following Israeli air strikes on Syria trumped concern of weak global demand. Oil also drew support from a record close of the Standard & Poor's 500 Index on hopes of a steady U.S. recovery.
Brent crude dropped 56 cents to $104.90 a barrel by 0639 GMT, after settling up at $105.46, its highest finish since April 10. Brent has rebounded more than $6 a barrel since falling below $99 last Wednesday. U.S. oil fell 78 cents to $95.38, after ending 55 cents higher.
"There is some profit-taking coming in after the sharp rise in prices we saw in the recent days," said Tetsu Emori, a commodities sales manager at Astmax Investments in Tokyo. "The current fundamentals are very weak, with China slowing down and with U.S. demand not so strong."
China's crude oil imports last month are expected to have held near March levels, which were 2.1 percent lower than a year earlier, as some refineries have continued with maintenance programmes amid high fuel stocks. China's preliminary April trade data is due on Wednesday.
Expectations of a further build in U.S. commercial crude stocks, after hitting a record high, are also weighing on prices.
A preliminary Reuters poll, taken ahead of weekly inventory reports from the American Petroleum Institute (API) and the U.S. Energy Department's Energy Information Administration (EIA), forecast on average that crude stocks increased by 1.8 million barrels in the week ended May 3.
Israel played down weekend air strikes close to Damascus reported to have killed dozens of Syrian soldiers, saying the raids were not aimed at influencing its neighbour's civil war, but only at stopping Iranian missiles reaching Lebanese Hezbollah militants.
Brent looks like forming a top around $105.50 per barrel and is due for a deep correction, while U.S. oil is expected to re-test support at $94.65, according to Reuters technical analyst Wang Tao.
Brent may find strong support at $100 a barrel and the U.S. benchmark at $90, Emori said. Prices are unlikely to break below those levels, as many producing and exporting countries need oil to hold near there to support annual budgets, Emori said.
"The option to influence prices is more with producers than with the demand side," said Emori. "If prices fall sharply, producers will just lower output and exports."
Analysts at ANZ expect Brent to trade "near the $100 per barrel floor this month," as Europe's prolonged debt crisis and uncertainty over China's growth weigh on the market.
"Even though supply-side factors should be supportive, we believe the market has largely priced in the ongoing Middle East tensions and Saudi Arabia's production declines during the seasonally softer demand period," ANZ said in a note.
But prices may rise in the second half of 2013, Morgan Stanley said in a research note. The bank said the global oil balance looked much tighter this summer, with Brent likely to trade up to $110 to $115 in the second half.
In the week to April 30, hedge funds and other large speculators increased bets on higher Brent prices, upping net long positions by 9,614 contracts to 108,741, data from the IntercontinentalExchange (ICE) show.

Monday, May 6, 2013

Mahama negotiates for regular supply of crude to TOR

President John Mahama
Tema Oil Refinery (TOR) is expected to have regular supply of crude following recent negotiations between Ghana and Nigeria.

There has been a concern over the irregular supply of crude oil to the refinery which over the years has led to constant closure of the refinery.

At full capacity, the refinery in a month needs about one million barrels of crude to operate. This will be at a cost of $120 million.

The state refinery in January secured $30 million from government for its plant sustainability and profit enhancement programme.

President John Mahama speaking at the national thanks giving ceremony at the Independence Square in Accra on Sunday revealed that his recent visit to Nigeria was to negotiate for regular supply of crude among others to power the refinery.

“I had to travel to Nigeria to ensure we had a continuous flow of gas to power the many thermal plants that operate on gas as soon as the repair of the West African gas pipeline is completed later this month.”

“I also went to arrange for regular supply of crude to our refinery when it restarts,” he added.

Friday, May 3, 2013

Crude price fluctuations worry tanker market

Price volatility in Brent crude brought levels below $100 per barrel in recent weeks.

This sparked concerns among some OPEC members that current production levels are too high, and that output needs to be cut in order to maintain ‘acceptable’ price levels, said Gibson Research in the broker’s weekly report.
Despite the recent move back above $100 per barrel, concerns are often raised from the so-called ‘hawk members’, who rely heavily on price strength to sustain oil revenues.
However, Saudi Arabia’s Oil Minister Ali Al-Naimi viewed current prices as “reasonable” (balancing concerns about global economic growth with national oil revenues).
Should oil prices fall further, Saudi Arabia holds a significant leverage of supply to reduce crude availabilities and drive a price rally, as we have seen during the first few months of this year, Gibson said.
OPEC may have to address the problem of rising Iraqi production at a time of no demand growth to see out the extra barrels.
IEA estimates said that Iraqi crude production was around 2.96 million barrels per day in March, with the expectation that this will rise to between 3.3-3.5 mill barrels per day on average this year.
The fast-growing oil exporter is undercutting Saudi Arabia by selling its crude cheaper to grab a bigger slice of the Asian market, but the sharp price cuts from both parties suggests the market share is going to remain competitive.
One positive result seen recently from the falling oil prices was the reduced bunker costs. Bunker prices have been falling steadily since the start of April; Rotterdam 3.5% sulphur bunker prices have dropped by $29 per tonne over the period, to average $575 per tonne last week.
However, if prices fall too far there is always a double-edge sword scenario when OPEC cuts production, thereby reducing crude tanker demand and raising bunker prices, Gibson said.
VLCCs shipping crude out of the AG to Asia (TD3) are being fixed at a rate of a round WS30, having remained at similar stagnant figures throughout April. Our estimates for equivalent earnings are around $6,000 per day, not even enough to cover fixed operational costs of around $10,750 per day, Gibson said.
There is no wonder why whispers of lay-up are growing louder, the broker said.
For now, it can be assumed that subdued Asian demand for crude is temporary and heavy refinery maintenance in the East, which is expected to be restarted in May/June should bring owners out of the dark; but it is still OPEC (including Iraq) and its responses to prevailing oil prices that will have a major impact on the crude tanker market, the report concluded.