Monday, February 29, 2016

Putin summons top Russian oilmen on Tuesday: sources

 Russian President Vladimir Putin listens to a statement from his Belarusian counterpart Alexander Lukashenko after a session of the Supreme State Council of Russia-Belarus Union State in Minsk, Belarus, February 25, 2016. REUTERS/Alexei Druzhinin/Sputnik/Kremlin


MOSCOW (Reuters) - President Vladimir Putin has called for a meeting with top managers of Russia's leading oil producers on Tuesday, which is is expected to be dominated by low oil prices and taxation, industry sources said on Monday.

The Vedomosti business daily cited a government source as saying that while there was no solid agenda for the meeting, global oil markets, low oil prices and taxation were topics likely to be discussed.

Russia's largest oil firms declined to comment on the meeting. Vedomosti reported Kremlin spokesman Dmitry Peskov as saying that preparations for the meeting were underway, but he declined to confirm that the event would take place on Tuesday.

Earlier this month, Russia and OPEC members Saudi Arabia, Qatar and Venezuela agreed to work on a global deal to freeze oil output at January levels if other producers follow suit in a bid to tackle the global crude glut and support prices.

Putin keeps close tabs on an energy industry that normally generates half of the state budget, which has suffered from a 70 percent fall in oil prices over the last 18 months.

(Reporting by Vladimir Soldatkin; Editing by Dmitry Solovyov and Louise Heavens)

Cushing, OK, Storage Domino Effect Sends USGC Stocks Higher


http://www.genscape.com/blog/cushing-ok-storage-domino-effect-sends-usgc-stocks-higher

Hillary Stevenson and Dylan White, Oil Analysts

U.S. Gulf Coast storage inventories have increased nearly 7mn bbls so far in 2016, and could continue to build as market participants seek storage there as an alternative to Cushing, OK, where stocks are near maximum capacity.

As of February 19, 2016, Gulf Coast stocks, including those in Houston, Beaumont-Nederland, TX, and Corpus Christi, TX, reached near 75mn bbls, only 739,000 bbls shy of the record high level reached in October 2015. On January 5, 2016, Cushing inventories surpassed a previous record high level by 125,000 bbls.

Due to extensive storage expansion, capacity utilization at Gulf Coast storage locations was lower the week ending February 19, 2016 at 58 percent compared with capacity utilization during the October 2015 high. At that time utilization was 62 percent. The inventory peak in October 2015 also followed a record-high at Cushing.

The 2015 stock high at Cushing, set April 14, was followed by inventory builds in the Gulf Coast and West Texas region. Of the Gulf Coast-monitored storage locations, stocks at Beaumont-Nederland were the first to hit a record high the week ending September 25, 2015, and other terminals followed.
Beaumont-Nederland inventories were also the first to hit record levels after Cushing inventories surpassed the previous high on January 5, 2016. Similar builds are likely to occur in other Gulf Coast storage locations, as they did in late 2015.


US Storage Record Highs by Location
U.S. Storage Record Highs by Location. Click to enlarge
 
Lower waterborne crude loadings have also contributed to the recent increase in Gulf Coast stocks. As of February 19, 2016, Gulf Coast domestic waterborne loading volumes were 34 percent lower than the beginning of the year and 36 percent lower than 2015 average loading volumes. Additionally, less loadings have left the Gulf Coast. As of February 19, 2016, 80 percent of loadings were destined for other Gulf Coast ports, compared to 42 percent for the week ending January 1, 2016.

Since the crude export ban was lifted in December 2015, a handful of waterborne shipments have shipped from the Gulf Coast for destinations in Europe. However, these shipments are being displaced from preexisting destinations, such as refinery markets in eastern Canada. Therefore, total outgoing waterborne volumes from the Gulf Coast has not significantly increased since the ban was lifted.

Genscape's U.S. Gulf Coast Crude Storage Report delivers critical storage-level information for crude oil stocks at the most significant port cities in PADD 3: Houston, Nederland, and Corpus Christi a full day ahead of EIA estimates. Click here to request a free trial of the U.S. Gulf Coast Crude Storage Report.

Additionally, Genscape's Cushing Crude Oil Storage Report offers insight into the largest concentration of above-ground storage on earth two days ahead of the EIA and provides much more granular information to assess oil storage by owner or purpose. To learn more or request a free trial of the Cushing Crude Oil Storage Report, click here.

Friday, February 26, 2016

Markets - A slow week with falling rates

Thai Oil Hires NYK's VLCC Tateyama


A very slow week was reported for VLCCs, as cargoes were scarce for most major routes. 
 
The few deals that were concluded came under pressure and hence rates softened. However, earnings still hovered around the mid $40,000s per day for MEG/East, Fearnleys said in the broker’s weekly roundup.

The lack of activity weighed heavily of sentiment and rates were expected to remain under downward pressure. Extensive delays in eastern terminals, combined with prolonged waiting times at BOT might change the supply of tonnage, which as a result, could halt the softening trend.

As expected, the Suezmax market corrected downwards after the spike seen last week. Activity was limited in both the West African and Black Sea regions, resulting in a soft sentiment in these areas.

However, the Ceyhan pipeline is back into operation after being out of service since 17th February, resulting in a bit more activity being seen in the Mediterranean. The position list seems ample enough to take care of the current enquiries entering the market, Fearnleys said.

In West Africa, ‘force majeure’ was declared for Forcados liftings, due to an oil spill at the terminal, leaving tonnage spot in the area.

In the North Sea and Baltic, the tonnage list built up, due to a lack of activity. It will require a lot more cargo volumes over an extended period of time to absorb the present vessel oversupply. So until the current situation changes, rates are likely to remain under downward pressure or at best moving sideways.

In the Med and Black Sea quite good activity was seen this week, especially out of Black Sea. The list of available tonnage looked thinner and owners were trying to push for higher rates with varied success.

Black Sea/Med rose by WS2.5 points to WS102.5, but at the same time, in the Med, charterers held their ground keeping the market just below WS100.

We are looking at some prompt replacements in the Med, which will most likely be concluded at high numbers, but expect rates on normal dates to remain stable for the week to come, Fearnleys concluded.

Meanwhile, period fixtures reported recently included Shell’s fixtures of the 2004-built VLCC ‘New Century’ for three years at $36,500 per day and the 2010-built Suezmax ‘Front Njord’ for two years at $32,000 per day.

Gener8 Maritime has announced that it took delivery of the Eco VLCC’Gener8 Hera’ on 24th February, 2016 from Daewoo. She is the seventh of 21 VLCCs to be delivered into Gener8 Maritime's fleet. 

Upon delivery, the ‘Gener8 Hera’ entered Navig8's VL8 Pool.

BG was said to have taken the 2004-built Suezmax ‘Astro Polaris’ for nine months at $35,000 per day.

In the Aframax segment, Phillips 66 was thought to have fixed the 2003-built ‘Lady M’ for 12 months at $26,000 per day, while Vitol was believed to have taken the near 1998/99-built sisters ‘Kilimanjaro Spirit’ and ‘Kiowa Spirit’ for nine months at $22,000 per day each.

It was thought that the two latter vessels had been sold to Estoril in a deal which included a three year charter back at $23,000/$22,750 per day.

US Military Sealift Command (MSC) was reported to have fixed the 2011-built MR ‘Glenda Melody’ for 23 days at $31,333 per day.

In the S&P market, sellers were still asking firm prices, according to brokers. It was thought that this scenario would not last long and the wet trades would follow the dry sector in declining values. 

The 2006-built Aframax ‘Ocean Mare’ was believed on subjects to Eurotankers for about $27 mill, while Indonesian buyers were said to have picked up the 1992-built Aframax ‘Concertina’ for $4 mill, probably for a conversion project.

Rumours were circulating that the 2011-built VLCC ‘Hanjin Ras Tanura’ was in the process of being sold to Maran Tankers but further details were not forthcoming.

In the MR/Handy sector, Scorpio Tankers (STI) confirmed that it had agreed to sell five 2014-built MRs - ‘STI Chelsea’, ‘STI Lexington’, ‘STI Mythos’, ‘STI Olivia’ and ‘STI Powai’- for about $166.5 mill in total.

The buyer was believed to be Bahri.

STI said the sales of two of the vessels were expected to close in March, 2016, and the three remaining vessels were expected to complete in 2Q16. STI will record a write-down of around $3.2 mill during 1Q16 in connection with the sales.

Elsewhere, the 2004-built ‘Amalienborg’ was reportedly sold to undisclosed interests for $15.9 mill, while the 1998-built methanol carrier ‘Maracas Bay’ was thought sold to Indonesian buyers for $7.75 mill.

Thursday, February 25, 2016

ExxonMobil Terminates Rig in Angola

 gsf-development-driller-i


Transocean has joined the ranks of several other firms that over the past couple of months has seen early termination notices for their rigs.

The US supermajor sent Transocean a notice of early termination notice for the GSF Development Driller I semi-submersible rig that it has been using offshore Angola.

According to Transocean the drilling contract will end in May, with demobilization to be completed in June. The company said it will not receive compensation for the remaining contract term.

Wednesday, February 24, 2016

W. Africa Crude-More Angolan oil sells but Nigerian grades languish


                             

http://af.reuters.com/article/energyOilNews/idAFL8N16357L?sp=true 



* Nigeria's Erha programme surfaced after weeks of delays that traders said related to a disagreement between state oil firm NNPC and the field operator.

* Differentials for Nigerian crude were weak despite a force majeure on Forcados.

* Angolan differentials firmed on solid Asian buying interest.

* Nigerian crude in ample supply even after delays to the loading of Forcados.
ANGOLA

* Sonangol only had an end-month Dalia for sale having already sold five spot cargoes including Sangos, Gimboa, Palanca and Dalia.

* China's Sinochem took six term cargoes under term agreements while Unipec took four.

* Asian buyers snapped up spot cargoes but traders said U.S. firm Phillips66 had also taken at least two April cargoes, including a Plutonio and a Hungo.


* Total sold a spot cargo of Pazflor to Asia though the buyer was not immediately clear.

* Offers for other April loading cargoes were firming with Sonangol offering Dalia at dated Brent minus $3.20.

NIGERIA

* Programmes for Erha were issued after several weeks of delay. Four cargoes will loading in March and three in April, the programmes showed.

* NNPC also issued its official selling price for Erha in March at 9 cents above dated Brent, up from a 17 cent discount in February.

* About 15 March-loading Nigerian crude cargoes are still available, traders said, and a force majeure on Forcados exports was doing little to boost differentials for most grades.

* Bonny Light for April loading was offered at dated Brent plus $1.50 per barrel and Bonga at a $1 premium.

* Nigeria's NNPC is in discussions over long-term agreements to exchange crude oil for imported oil products, but fresh deals are unlikely to be finalised this week. The delays have put the country at risk of gasoline shortages.


ASIAN TENDERS

* Traders said India's HPCL had taken a cargo of Nigerian crude, likely Qua Iboe, from Exxon. This was not confirmed.

* HPCL has several other tenders pending, including one to swap Nigerian crude of its own for different grades.

* The results of a tender from Taiwan's CPC to buy West African oil were not immediately clear. (Reporting by Libby George; editing by David Clarke)

Monday, February 22, 2016

Oil soars on expected fade in U.S. supply


 Crude oil prices soar after a forecast from the International Energy Agency predicts fading U.S. production, though IMF chief warns prices should still low for the foreseeable future. Photo by John Angelillo/UPI 


The expected decline in U.S. crude oil production boosted market sentiments of a return to balance, pushing crude oil prices sharply higher Monday.

The International Energy Agency said in a report published Monday it revised its total global output forecast lower. In a midterm market report, the IEA said 4.1 million barrels of oil will be added to the global market between now and 2021. That's significantly lower than the 11 million bpd added in the six-year period ending in 2015.

In the United States, which in part helped pushed markets toward the supply side, IEA said oil production reaches its peak of 14.2 million bpd by 2021, but short-term output fades through 2017 under pressure from low crude prices.

Brent crude oil prices moved up by about 5 percent in early Monday trading to start the day in New York at $34.68 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, moved back above the psychological threshold of $30 per barrel to rally 6.4 percent to $31.54 per barrel.

U.S. shale oil production has so far been resilient despite pressure from lower crude oil prices. Oil production in North Dakota, the No. 2 oil producer in the country, is down about 6 percent from last year.

Monday's report is not the first prediction of a decline in U.S. output from the IEA. In November 2014, when oil was selling for around $80 per barrel, the IEA warned growth in U.S. shale oil production "levels off" by the next decade and Middle East producers once again take the lead as the major source of new oil supplies.

The rally in crude oil prices comes despite warnings from the International Monetary Fund that markets will remain suppressed for the foreseeable future.

"Not only have oil prices fallen by around two-thirds from their most recent peak, but supply and demand-side factors suggest that they are likely to stay low for an extended period," IMF Managing Director Christine Lagarde said during a conference in Abu Dhabi.

Lagarde said it's not only the United States that's pressured by the weak market. Oil exporters in the Middle East and North Africa last year said a combined $340 billion in oil revenue vanish from their budgets last year.

January petroleum demand hits 8-year high: API



Total petroleum deliveries for January, a measure of demand in the U.S., rose 0.8 percent, to 19.4 million barrels a day, the highest January levels since 2008, API said Friday.

"The industry also produced record amounts of gasoline for the month of January that more than met rising consumer demand," Erica Bowman, API's chief economist, said in a release. "Additionally, refineries found plenty of international buyers for excess production leading to a record-setting January export level."

Motor gasoline deliveries also recorded their best January since 2007. API also said crude oil production decrease 1.4 percent in January year over year, to average 9.2 million barrels per day. 

Oil prices fell on Friday as talk of a plan by some producers to freeze output levels was tempered by continued concerns of an oversupplied market after a record build in U.S. crude inventories. 

Brent futures dropped $1.32, or 3.85 percent, to $32.96 a barrel. U.S. crude settled at $29.64 a barrel, down 3.67 percent, or $1.13. WTI, however, managed to rise 0.67 percent for the week.

Investors also digested the latest Baker Hughes rig count data, which showed a drop of 26. U.S. oil rigs have now fallen for a ninth straight week, and now total 413. Baker Hughes also said rigs have fallen by 606 year over year. 

Oil prices rose by more than 14 percent earlier in the week on Saudi Arabia and Russia's agreement to freeze output at January levels. 

But while Iranian Oil Minister Bijan Zanganeh welcomed the plan, he fell short of committing to it and Iranian sources told Reuters that capping output is not enough to rebalance the market. 

Saudi Arabia repeated that it had no plans to cut output and would continue to protect its market share. 
 
"If other producers want to limit or agree to a freeze in terms of additional production, that may have an impact on the market, but Saudi Arabia is not prepared to cut production," foreign minister Adel al-Jubeir told Agence France-Presse in an interview on Thursday.

Russia's first deputy-energy minister Alexey Texler said on Friday an output freeze deal could clear half of a global oversupply of 1.8 million barrels per day (bpd).

"The OPEC output freeze, coupled with very affordable retail gasoline fuel prices, should help push oil back to $47 by June," Bank of America Merrill Lynch said in a note on Friday.

Iraq's oil minister Adel Abdul Mahdi said on Thursday talks would continue between OPEC and non-OPEC members to find ways to restore "normal" oil prices after a meeting in Tehran on Wednesday.
 
A record build in U.S. crude inventories last week stoked concerns over persistent global oversupply. Crude stocks rose by 2.1 million barrels to a peak of 504.1 million, data from the U.S. government's Energy Information Administration (EIA) showed on Thursday. 

The recovery at the back end of the WTI curve this week is prompting U.S. shale producers, for the first time in months, to inquire and place new hedges to lock in 2017 prices of around $45 a barrel. 

The activity reflects expectations of growing investor and lender pressure to safeguard heavy debt requirements down the road, as well as declining drilling costs, allowing companies to break even at lower prices.

Friday, February 19, 2016

Tanker market upside constrained



There is limited upside for tanker earnings from current levels to April, as timecharter rates will come under pressure, as a result of growing supply of large crude and products tonnage, a consultancy has warned. 
 
According to the latest ‘Tanker Freight Forecaster’ from Maritime Strategies International (MSI), following a strong last quarter of 2015, the tanker freight market witnessed a substantial drop during the first half of this year.

For example, VLCC spot earnings have effectively halved from their December highs and are currently at around $50,000 per day. Product tanker rates also drifted substantially lower after a spike at the start of the year.

MSI said that global oil demand growth is likely to be higher this year than the cautious estimates given by the IEA, supported by low prices, although this view is based on macro-economic stability, the consultancy said.
Floating storage will provide a potential outlet to a weaker trade growth scenario for crude and product tanker markets in what will be another year of excess oil supply at the global level.

Tim Smith, MSI’s senior analyst, said: “Strong Middle Eastern production, potential for rising US crude imports, and China’s appetite for crude driven by both new import licenses and storage builds should provide support this year for crude tankers, but risks on the demand-side are growing.

“Our spot rate outlook sees muted upside from current levels by April whilst we expect to see T/C rates start to come under pressure this year as a result of growing fleet supply, particularly at the larger ends of both the crude and products segments,” he said.

As in the crude tanker sector, floating storage is likely to play a growing role for products tankers this year, particularly for larger sizes. This could act as a useful brake on what will be high LR2 fleet growth.

A growing middle distillates glut in Asia, combined with an influx of large crude tanker newbuilds, could see an increase in clean products stored and moved on these vessels' first voyages. Diesel inventories in Europe are swollen and the influx is set to continue in 1Q16, as global exports from regions, such as the Middle East, Asia and US show little sign of let up.

Refinery maintenance is likely to partially redress the balance in 2Q16 and could provide an opportunity for tighter margins but over a six-month horizon, distillate oversupply is likely to remain a key theme.

The MSI forecast reflected a market in which imbalance has, thus far, proved positive for rates, although downside risks appear to be growing from a macro-economic perspective., the consultancy said.

Thursday, February 18, 2016

Venezuela raises gas prices 6,200%


venezuela 


Venezuela just raised gas prices for the first time in about two decades. 

Prices will now increase more than 60 times — to 6 bolivars a liter up from 9.7 centavos, a 6,200% increase according to Bloomberg's Javier Blas.

Using the weakest exchange rate of 202.94 bolivars per dollar, Venezuela's announced increase translates to about $0.11 a gallon, according to Bloomberg

Even with this price hike, however, Venezuela still has the lowest gas prices in the world!

Venezuela's government has long subsidized the country's fuel, allowing the people to have the cheapest gas in the world. Back in 1989, an increase in food and gasoline prices led to nationwide protests, which eventually led to the late President Hugo Chavez's rise. Venezuela last raised gas prices in 1996. 

Venezuela also devalued its currency on Wednesday, cutting the value 37% and taking its primary exchange rate to 10 bolivars a dollar from 6.3.

"The devaluation will ease the drain on government coffers by giving state oil company Petroleos de Venezuela SA more bolivars for each dollar of oil revenue, while higher gasoline prices will reduce expenditure on subsidies," wrote Bloomberg's Andrew Rosati and Pietro Pitts.

"At the same time, the devaluation will probably force the government to raise the cost of staple foods such as rice and bread that most of the country now depends on to eat," they added.

In the larger scheme of things, things in Venezuela have not been great as its economy has been crushed by lower oil prices. The country relies on the commodity for about 95% of its export revenue.

IMF figures suggest that Venezuela's GDP contracted by a record 10% in 2015 and is set to decline 8% in 2016. Inflation is expected to rise from a world high of 275% in 2015 to a mind-blowing 720% in 2016.

Given the situation, many economists and analysts think that the country is looking at another rough year.

"Perhaps no country in OPEC has suffered such a severe economic shock amid the collapse in oil prices as Venezuela," wrote RBC Capital Markets' Helima Croft earlier this week

"Given these severe headwinds, we believe that Venezuela’s economic fortunes – and its ability to avoid a humanitarian catastrophe – will largely hinge on whether China continues to open its checkbook to the country this year," Croft added.

Nigeria Reveals Details Of $20 Billion Dollar Oil Swap Corruption

 

http://oilprice.com/Latest-Energy-News/World-News/Nigeria-Reveals-Details-Of-20-Billion-Dollar-Oil-Swap-Corruption.html

By

A Nigerian parliamentary committee has announced major anti-corruption findings in relation to a multi-billion-dollar crude oil swaps program with foreign companies.

The ad-hoc committee revealed that there were no formal contracts between the Nigerian National Petroleum Corporation (NNPC) and trading companies that received $24 billion worth of Nigerian crude oil between 2011 and 2014.

According to the results of the investigation, the former minister of petroleum resources, Diezani Alison-Madueke, illegally allowed for a swap of Nigerian crude oil for refined products to trading firms Duke Oil and Trafigura.

In 2010, the NNPC began taking 445,000 barrels of crude daily for refining in a bid to meet the country’s local demand of petroleum products. When the refineries failed to meet this commitment, the NNPC moved to swap the crude for refined products with trading firms.

The official contracts with the two trading firms expired in 2011, according to Nigerian media reports citing the investigation results; however, Alison-Madueke reportedly granted an extension of the contract without the NNPC’s formal signing.

Earlier this month, the government suspended swaps with foreign suppliers. The new policy, Direct-Sale–Direct-Purchase (DSDP), is scheduled to be launched in March.

President Muhammadu Buhari, who was elected last March, promised the reconstruction of oil industry and investigation into previous government officials suspected of oil embezzlement. Buhari has previously said treasury coffers were virtually empty when he took office in May and that huge sums of money had been stolen.

Africa’s biggest economy faces its worst economic crisis in years, since it relies on oil exports for about 58 percent of government revenue. In the oil sector alone, Buhari said $150 billion was believed to have been looted by crooked politicians and that 250,000 barrels of crude oil were stolen in Nigeria each day.

Buhari has already split the state-owned NNPC oil company into two entities in a bid to tackle corruption.

Alison-Madueke was arrested in October in London on the request of Nigerian authorities who alleged that $20 billion in oil money had gone missing under her watch. Several other officials under former president Goodluck Jonathan are also being investigated by the authorities.

By Charles Kennedy of Oilprice.com

Wednesday, February 17, 2016

Iran to OPEC: No deal on output cut

Iran Oil Minister Calls for Enhanced Ties With China


TEHRAN, Iran - Iran on Wednesday snubbed a proposal agreed to by four influential oil producers to cap their crude output if others do the same. A senior Iranian Oil Ministry official said Tehran has no intention of freezing oil output levels.

Mahdi Asali, Iran's OPEC envoy, said his country will in fact keep increasing its crude exports until it reaches levels attained before international sanctions were imposed on Tehran over its nuclear program.

Asali's comments came as Iran's oil minister was expected to hold three-way, closed-door talks in Tehran with his counterparts from Iraq and Venezuela.

On Wednesday, Venezuela joined Russia, Saudi Arabia and Qatar in conditionally agreeing to cap their output at last month's levels in order to halt a slide that has pushed oil prices to their lowest point in more than a decade. Oil prices recently plummeted below $30 a barrel, the lowest in 13 years.

The four countries made their announcement following an unexpected meeting on Tuesday in the Qatari capital of Doha that pointedly did not include Iran. They agreed to act only if other producers made similar freezes.

Asali said the fall in oil prices should be blamed on oversupply and that it was up to Saudi Arabia and others to cut down production to boost oil prices. He said the four nations that participated at the Doha gathering could stabilize oil prices on their own -- if they cut their production by 2 million barrels a day.

"These countries increased their production by 4 million barrels when Iran was under sanctions," Asali was quoted as saying by the Shargh daily. "Now it's primarily their responsibility to help restore balance on the market. There is no reason for Iran to do so."

Iran is eager to ramp up its exports now that sanctions related to its nuclear program have been lifted, saying recently it aims to put another 500,000 barrels a day on the market. Figures from the International Energy Agency show it pumped 2.9 million barrels daily in December, before sanctions were lifted.

Iran used to export 2.3 million barrels per day, but its crude exports fell to 1 million in 2012.
On Tuesday, Iran's petroleum minister, Bijar Namdar Zangeneh, signaled the Islamic Republic has no intention of giving up its share of the market. He acknowledged that global markets are "oversupplied," but he said Iran "will not overlook its quota," according to comments carried by his ministry's Shana news service.

Even with Iran's cooperation, it was unclear if the Doha plan would be enough to put a floor under prices.

The United Arab Emirates' energy minister, Suhail Mohamed al-Mazrouei's, refused on Wednesday to discuss the Doha proposal after giving a keynote address at a Dubai conference in which he mentioned low oil prices only in passing.

"I will only talk about this conference," he said, before smiling and walking away from reporters' shouted questions.

He later took to Twitter to say his country's oil policy "is open to cooperate with all producers toward mutual interest of the market stability and we are optimistic on the future."

Kuwait, another Gulf OPEC member, signaled it was willing to go along with the Doha plan.

Anas al-Saleh, Kuwait's deputy premier, finance minister and acting oil minister, said in a statement his country was committed to the proposal if others join in: "Kuwait hopes the agreement would provide a positive atmosphere for oil prices, and for the market to regain balance, and calls on all to support stability of markets."

Tuesday, February 16, 2016

Jim Cramer -- Don't Fall for the Big Oil Price Freeze Hype


So let me get this straight. The Saudis, Venezuelans, Russians and Qataris agree to freeze production at the highest levels imaginable and will keep them there unless Iraq and Iran increase production, and in that case all bets are off?

And some oil bull likes this deal?

First, the prices they would freeze them at -- presumably around $29 a barrel or lower, because oil ran up to $30 on talk of a deal -- are uneconomic for just about every oil company in the U.S. You can rest assured most would be wiped out at these prices.

Second, Iran and Iraq have already stated that they will not back away from increasing production. Just the opposite. They are going to ramp production.


Third, when Saudi oil minister Ali Al-Naimi says "we don't want significant gyrations, we don't want a reduction in supply. We want to meet demand. We want a stable oil price," he is simply dissembling. They are obviously more than meeting demand at these levels, and they are locking in levels that more than meet demand. How in heck does that not put a lid on oil and ensure that it will go lower over time as Iraq and Iran go over the top?

In fact, it seems more like a declaration of war than anything else.

How critical is all of this? Once again, we find bulls trying to craft stories about how oil companies should be bought off this news. Have they considered the recent work, for example, of RBN, which show that Canadian oil sands production is on the increase and that the companies may actually be losing money on every barrel, or at most making a couple of bucks?

Have they considered that there is almost no more storage space and that the posted price for crude is actually well below WTI in many areas?

I just think this is one more case of people hoping that things will get better. What you need to see is that the Saudis say "prices are too low; we are cutting back and letting oil rise."

And then you have to see if they actually do.

Tall orders, both.

Neither of which you got from this bit of folderol.

Big oil producing countries agree production freeze

Financial Times

 http://www.ft.com/fastft/2016/02/16/big-oil-producing-countries-agree-production-freeze/

Qatar’s energy minister said the world’s big oil producer countries had reached a conditional agreement to freeze production at January levels.

Mohammed Bin Saleh Al-Sada said the provisional deal, announced after a meeting of oil ministers from Saudi Arabia, Russia, Venezuela and Qatar, would be contingent on major producers following suit, reports Anjli Raval, the FT’s Oil & Gas Correspondent.

“We believe this step will stabilise the market,” he said, according to Reuters.

In a news conference in Doha after the meeting, Ali Al Naimi, the Kingdom’s powerful oil minister, said the meeting was successful . Since global supply is already declining as a result of current prices, a freeze in output at levels from the start of the year was “adequate” for the market, he told reporters.

Despite the agreement, oil prices pared their gains. The global Brent benchmark increased 40 cents to $33.84 a barrel after reaching as high as $34.51 a barrel ahead of the meeting.


Venezuela’s oil minister said he would meet his counterparts from Iran and Iraq on Wednesday.

As oil prices languish near lows last seen in 2003, Eulogio Del Pino has led a push for a meeting of ministers from Opec and non-Opec producers to stem the slide in prices to 2003 lows, that has decimated the budgets of producer countries.

Although the decision will be welcomed by some in the oil market, others have pointed to the fact that many Opec producers are pumping at full capacity already.

The group’s production has surged by more than 1m barrels a day since Opec in November 2014 decided not to cut output to shore up the price of oil that had been spiralling lower.

Saudi Arabia and its Gulf allies made a case for not reducing production and losing market share, which would only benefit rivals with higher-cost output.

Mr Naimi said he hoped producer countries inside and outside Opec would adopt this proposal. He added “We will assess in [the] next few months the next steps to stabilise [the] market.”

Monday, February 15, 2016

Jubilee Exceeds Production Expectations in 2015

1294382123_jubilee.gif


Tullow Oil and its partners on the Jubilee field offshore Ghana saw production from the field exceed expectations in 2015, averaging 102,600 bpd. A stable rate of gas was achieved following final commissioning of the onshore gas processing plant in March 2015, averaging around 90 Mmscf/d in Q4 2015. This strong gas export performance significantly reduced the requirement for gas reinjection at the field.

Tullow, in its Full Year Results statement, is forecasting Jubilee 2016 average production to be around 101,000 bpd gross. This reflects the impact of a planned two week FPSO maintenance shutdown scheduled for March and a period of reduced water injection capacity during H1which is currently being addressed.

The partners on the Jubilee continued their Jubilee Phase 1A drilling and completions with two oil producers coming onstream in September and December and a water injector which has yet to be completed being spud. With the Phase 1A investment program nearing completion, Tullow and partners submitted the Greater Jubilee Full Field Development (GJFFD) Plan in December and discussions are ongoing with the government regarding its progress.

The GJFFD, aimed at extending field production and increasing commercial reserves, has been redesigned given the current environment to reduce the overall capital requirement and allow flexibility in the timing of the capital investment. During 2016 and beyond, a continued focus on cost reduction opportunities and the careful balancing of future capital investment initiatives, including infill drilling as part of the GJFFD, will be key as Tullow seeks to ensure maximum return on investment from this world-class oil field.

Friday, February 12, 2016

Another tank cleaning fatality



One crew member died and two were hospitalised after they inhaled poisonous fumes while cleaning cargo tanks on board the 7,704 dwt Palmali-managed 2007-built chemical tanker ‘Araz River’ on 5th February. 
 
Italian media reported that the solvent, which the three seafarers were using to clean the tanks on board the Russian-flagged tanker, reacted with the cargo remnants to form toxic fumes.

The deceased 24-year crew member died immediately due to a cardiac arrest, while the other two, aged 42 and 28, were transferred to a hospital in a serious condition, the media reported.

The ‘Araz River’ subsequently returned to Vasto where it had discharged a canola cargo and the vessel remained in port for an investigation to be conducted.

There were 13 Russian crew members on board at the time of the incident, the reports said.

Thursday, February 11, 2016

OPEC-Russia Rumors Persist After Comments From Rosneft Chief

 Oil prices - Oilprice.com
 
 

The rumors over a coordinated production cut between OPEC and Russia continue.

On Wednesday, the head of Russia’s state-owned oil company Rosneft floated the idea of participating in a production cut. Or did he?

Rosneft’s chief Igor Sechin, arguably the most important voice from Russia’s energy sector, said major oil producers should cooperate to remove some of the supply overhang.

"A coordinated supply cut by major exporters by around 1 million barrels per day would sharply reduce uncertainty and would move the market towards reasonable pricing levels," Sechin said on February 10 at the International Petroleum Week conference in London, as reported by Reuters. On its face, that sounds as if he is expressing a willingness from Moscow to participate. But Sechin was careful not to say who, exactly, should do the cutting.


“Who are we supposed to be talking to about cuts? Will Saudi Arabia or Iran cut production?" Sechin said to reporters when asked if Russia would participate in coordinated cuts. The FT took this as a rejection of Russia’s possible participation.

In the past, Sechin has clearly stated that Russia would not cooperate with OPEC on production cuts, saying that it could outlast other competitors in a downturn. It is also difficult for Russia to turn its oil fields on and off, especially in winter. Sechin has laid the blame for the oil price crash at the feet of OPEC and U.S. shale before, although at this week’s conference he was more measured.


Separately, Sechin also dismissed the long-term viability of U.S. shale, noting that elevated output would be a temporary phenomenon. "Shale oil production has its limitations in scope and time ... U.S. shale oil production will reach its peak in 2020," he said.

In short, Russia appears no closer to cooperation with OPEC than before, despite the support for such a move from other oil executives in Russia. Without a clear statement from Russian President Vladimir Putin, the markets may continue to react to comments from figures such as Sechin.
By Charles Kennedy of Oilprice.com

Wednesday, February 10, 2016

FPSO En Route to Aje Field

 Panoro Energy- fpso


The FPSO vessel for the Aje field in Nigeria is now in transit from Singapore according to Panoro Energy. The vessel is expected to arrive in Nigeria mid-March 2016, following a brief stop in Cape Town.

All key equipment related to the field development has been delivered to Nigeria. Anchor handling operations in the field started in January and will continue until mid-February. The construction vessel has commenced operations and will install the subsea equipment including the manifold and flowlines during February. Once the FPSO arrives in Nigeria it will be hooked-up to the mooring system and risers and a short test of the production systems will be conducted.

Panoro’s CEO, John Hamilton, said: “We are excited to be approaching first oil at Aje, offshore Nigeria. Significant operational and contractual progress has been made on the final phase of field development. With the drilling phase now concluded, the installation work and the arrival of the FPSO are the main remaining work streams. The field is expected to be producing by the end of March 2016.”

Tuesday, February 9, 2016

Iran's crude oil sales to Europe have reached above 300,000 bpd after sanctions: Shana

 Iran's Oil Minister Bijan Zanganeh is seen on a screen as he speaks during an extraordinary ministerial meeting of the Gas Exporting Countries Forum (GECF) in Tehran November 21, 2015.  REUTERS/Raheb Homavandi/TIMA/Files
Iran's Oil Minister Bijan Zanganeh is seen on a screen as he speaks during an extraordinary ministerial meeting of the Gas Exporting Countries Forum (GECF) in Tehran November 21, 2015.

http://www.reuters.com/article/us-oil-iran-sales-idUSKCN0VF0NE

Iranian Oil Minister Bijan Zanganeh said on Saturday that Iran's crude oil sales to Europe after the lifting of international sanctions on Tehran had already reached above 300,000 barrels per day (bpd), according to the ministry’s news agency.
Iran's oil exports, which had peaked at more than 3 million barrels per day (bpd) in 2011, fell to a little more than 1 million bpd after tougher sanctions were imposed in 2012 because of its nuclear program.

After the rubber-stamping of the nuclear deal with world powers last year, however, Tehran has ordered a 500,000 bpd increase in oil output.

"Based on the contract signed between the National Iranian Oil Co and France's Total, it was agreed that Total will buy 160,000 bpd of crude oil from Iran to be delivered in Europe," Zanganeh was quoted as saying by news agency SHANA, adding that the contract would be finalised on Feb 16.

Zanganeh also said Italy's Eni was interested in buying 100,000 bpd of crude oil from Iran and its representatives would visit Tehran in near future to discuss the contract.

"Eni has voiced its interest in one of Iran's fields which will be treated like the agreement reached with Total," he said.

Iran's oil minister said Italian refiner Saras was interested in buying 60,000 to 70,000 bpd of crude oil from Iran.

Tehran is sweetening the terms it offers on oil development contracts to draw the interest of foreign investors deterred by sanctions and low crude prices, as its pragmatic president seeks to deliver on his promise of economic recovery.

The new contracts, which include those in the upstream exploration and development sectors are expected to attract more than $40 billion in foreign investment.

Iran has postponed a planned oil conference in London, which was due to have taken place in February to reveal its new contracts, until November. An Iranian official said "the U.S. urged Tehran to hold off" until a final nuclear deal was penned.

(Reporting by Bozorgmehr Sharafedin; Editing by Elaine Hardcastle)

Monday, February 8, 2016

Cheniere Energy scraps its crude trading desk

                           

http://www.reuters.com/article/condensate-exports-cheniere-energy-idUSL2N15N1R2
Feb 8 Cheniere Energy is closing its newly formed crude oil trading desk, according to several sources, just two months after its board voted to replace the company's chief executive to focus more closely on its core businesses.

The liquefied natural gas (LNG) company, best known for taking the lead on U.S. LNG exports at its costly Sabine Pass terminal at the Texas and Louisiana border, had planned to pursue condensate exports with the development of a $550 million storage and dock facility near Corpus Christi, Texas.

In mid-2015, the company launched a crude trading and origination desk by hiring Nelson Lee from BHP Billiton, where he had helped orchestrate some of the first-ever exports of U.S. condensate, a very light form of crude.

It was not immediately clear how many traders and support staff would be laid off as a part of the closure.

Sources confirmed that Lee and a second trader, Robert Harris, would be leaving the company.

Cheniere's board in mid-December voted to fire CEO Charif Souki at the urging of activist investor Carl Icahn, who had taken a big stake in the company.

The board made the decision after reevaluating Souki's plans to expand the company's scope beyond exporting liquefied natural gas.

As recently as September, Cheniere had publicly discussed the development of the proposed condensate terminal, but presentations published by the company in the past few months made little to no mention of it.

If completed, the export terminal would be operational by 2017 and include up to 2 million barrels of storage as well as docks capable of handling Aframax-sized vessels.

A spokesperson for the company did not respond to a request for comment on the project. But sources said at best the project was on hold.

Cheniere's stock is down 38 percent year-to-date. On Monday the stock briefly traded below $23, its lowest level since March 2013, before closing at $23.65.

As of Dec. 7, Icahn was Cheniere's second largest investor, with a 13.8 percent stake, or 32.65 million shares, according to data available on Reuters Eikon. (Reporting by Liz Hampton and Kristen Hays; Additional reporting Catherine Ngai in New York; Editing by Terry Wade and Leslie Adler)

Crude Oil Slips As Saudi, Venezuela Meeting Yields Little

 opec_logo


Crude oil prices eased in thin trade on Monday as a meeting between OPEC producers, Saudi Arabia and Venezuela showed little indication that steps would be taken to boost prices.

Global benchmark Brent futures LCOc1 were down 8 cents at $34.98 while U.S. crude futures CLc1 fell by 23 cents to $30.66.

Both contracts firmed slightly earlier in the session on Monday in see-saw trade on low volumes as many Asian markets were on holiday for the Lunar New Year.

Saudi Arabia’s Oil Minister, Ali al-Naimi, discussed cooperation between members of OPEC and other oil producers to stabilise the global oil market on Sunday, but there was no sign any agreement had been reached.

“It was a successful meeting and (conducted) in a positive atmosphere,” Naimi was quoted as saying.
Venezuela’s Oil Minister, Eulogio Del Pino, who is on a tour of oil producers to lobby for action to prop up prices, said his meeting with Naimi was “productive”.

“The picture is neither clear nor harmonious,” PVM Oil Associates analyst David Hufton, said in a note on Monday.

“The market is likely to remain highly volatile and dangerous.

“ Unless there is some pretty bullish news in the next few days, the contracts are likely to erode value and head south,” Hufton warned.

The market is also eyeing U.S. Federal Reserve Chair, Janet Yellen’s testimony to lawmakers on Wednesday along with U.S. crude inventory data from the Energy Information Administration on the same day.

“We are on hold, waiting for that with a nervous tone,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

The International Energy Agency and OPEC are also due to release their monthly reports on Tuesday and Wednesday, respectively. (Reuters/NAN)

Friday, February 5, 2016

Markets - A ‘wait and see’ attitude prevails

0275-mv berge sigval - ulcc.jpg


A relatively active week for VLCC, despite the fact that activity appeared a bit slow. 
 
Fixing continued well under the ‘radar’ and in particular, Chinese ships were being hoovered up for local business. However, non-Chinese tonnage was also quietly disappearing, Fearnleys reported.

MEG tonnage is in tight supply up to the middle of February, although more ample for second half of the month. Reports of tonnage ballasting from the Far East to Caribbean raised some eyebrows.

Iran remained in the headlines with a couple of crude deals concluded, but the country is still not a major factor, as many owners remained undecided.

The market was adopting a bit of a ‘wait and see’ attitude, the broker said, but appeared steady for the major VLCC routes, although there was some increased activity Caribbean/East.

The soft trend continued for Suezmaxes as the market tumbled for WAfrica/UK-Cont-Med voyages last week. Rate yields were about $27,000 per day, the lowest seen year-to-date. There are, however, more cargoes to be worked ex WAfrica for the remainder of the month, but as charterers were patient in approaching the market, we may not see the rates move up yet, Fearnleys said.

Looking forward, there are many WAfrican cargoes already reportedly sold for long haul voyages and particularly for Asia on VLCC’s in March, which did not help the Suezmaxes.

Daily returns for Aframaxes trading in the ice market ex Baltic is now around $50,000 per day, compared with earnings of about $30,000 per day for voyages ex North Sea. The Baltic was looking a bit softer in the 14th-20th February window.

The March loading programme ex Hound Point is expected to be one of the largest in years. This, coupled with the VLCC berth being down for maintenance during the first half of the month, will lead to an upward pressure on rates.

The Med/Black Sea market plunged this week. Most thought that the market had hit rock bottom, but charterers managed to make life harder for owners. Sidi Kerir/Portugal was done at WS73,5 which gives a daily return of about $9,000 per day. It seems that the priority for a lot of owners today is to keep their ships moving.

As the position list could take a vessel form one side of the Mediterranean to the other, we don't expect any quick recovery the next couple of weeks, Fearnleys said.

In the past couple of weeks, brokers reported that Unipec had fixed the 1999-built ‘Maran Gemini’ for 12 months at $45,000 per day, while the 2003-built ‘Nave Celeste’ was said to be fixed to Core Petroleum at $45,500 per day.

The newly built VLCC ‘Alice’ reported last week as fixed for a gasoil cargo, was said by brokers to have been fixed by Total for six months at $62,500 per day, which included the gasoil cargo on her maiden voyage.
ST Shipping was believed to have fixed the 2011-built Aframax ‘Green Warrior’ for three months at $40,000 per day, while CCI was reported as taking the 2009-built LR1 ‘Summit Africa’ for 15 months at $23,500 per day.

Another Aframax - ‘Cakra Partiot’ ex ‘Aegean Legend’ was reported fixed to Glovis for 12 months at $24,000 per day.

Masel was said to have taken the MR sisters ‘Gotland Sofia’ and ‘Gotland Aliya’ for 12 months at $17,250 per day, including a profit sharing partnership. Koch was believed to have fixed the 2003-built MR Qurtuba for 12 months at $17,500 per day.

St Shipping was again said to be behind the fixture of the 2003-built Handysize Vallermosa’ for 12 months at $17,250 per day, while Flopec fixed the 2006-built Handysize ‘Arionas’ for three years at $19,000 per day, Capital confirmed.

In the S&P market, the 2003-built Handy ‘Cielo di Roma’ was confirmed as sold to Turkish buyers Akar Shipping for $13.8 mill.

The elderly 1992-built shuttle Aframax ‘Navion Torinita’ was reported sold to undisclosed interests for $6 mill.

Leaving the fleet was the 1986-built parcel tanker ‘Stolt Sapphire’ thought sold to Indian ‘green recyclers’ for $260 per ldt.

In the newbuilding sector, Turkish owner Ditas was believed to have ordered two Suezmaxes at HHI for $63 mill each.

Stena Bulk has decided not to exercise options to build another two IMOIIMAX MRs at CSSC Offshore & Marine Engineering.

New Asphalt carrier classed by BV

Asphalt Splendor. Credit: Bureau Veritas


Paris-based class society Bureau Veritas has classed the 37,000 dwt asphalt carrier ‘Asphalt Splendor’, which was delivered to US-based Sargeant Marine last December. 
 
The vessel was built at Avic Dingheng, China and is the first of two designed by Chinese design institute SDARI in co-operation with Sargeant.

The hot asphalt cargo can be carried liquid at temperatures of up to 170 deg C in 16 independent tanks with a total capacity of 35,666 cu m.

Philippe Donche-Gay, Executive Vice-President and Head of the Marine & Offshore Division, Bureau Veritas, said, “The high cargo temperatures in asphalt carriers place special demands on structure, construction quality and equipment.

“Bureau Veritas is a world leader in this sector and currently classes a large number of these ships. The ‘Asphalt Splendor’ will be a state of the art vessel, with excellent environmental and operational performance. We welcome this project, which builds on our strong relationship with Sargeant Marine.”

Dan Sargeant, Sargeant Marine president, said, “It is imperative to stay ahead of the game, thinking innovatively when it comes to economics, as well as operations. We are looking forward to the second of these new vessels, also BV classed, which give us a distinct advantage in the marketplace, as there is truly nothing like this out there.”

Hijacked chemical carrier freed

 


The Greek chemical tanker, said to be hijacked by Biafran separatists off Nigeria last weekend, has been freed.
 
It was reported that threats had been made that the 2003-built 9,055 dwt ‘Leon Dias’ and its crew would be blown up if the government did not release a Biafran leader, Nnamdi Kanu, from jail. However, the Nigerian Government claimed that there were no Biafran activists left and that the tanker was not in Nigerian waters when attacked 

Five seafarers on board were reported as kidnapped and taken hostage, and also that the Chief Officer was seriously wounded during the attack.

Although exact details were still vague, the vessel was said to have been hijacked in the Gulf of Guinea while sailing from Lome to Bata and taken towards Cotonou in Benin. AIS tracking data shows the vessel off Cotonou.

The Benin navy was subsequently thought to have taken control of the chemical tanker, which is owned Athens-based Peregrine Shipping and managed by Leon Shipping & Trading, according to Equasis.

Thursday, February 4, 2016

Flint is a horrible tragedy. But a gas leak in Los Angeles may spell an even greater environmental disaster.






CLICK IMAGE for sldeshow: A woman holds a sign at a public hearing before the South Coast Air Quality Management District to stop a nearby massive natural gas leak, on Jan. 16, 2016, in Granada Hills, near Porter Ranch, California. More than 80,000 metric tons of methane gas have spewed from the Aliso Canyon natural gas storage facility since Oct.23.


LOS ANGELES — The drinking-water crisis in Flint, Mich., is both an outrage and a tragedy: a sordid tale of government cost-cutting, callousness and coverups that exposed 27,000 children to extremely high levels of lead and may have killed at least 10 people.

It has also brought attention to the wider risk of toxic lead exposure, whether from hazardous urban soil or from the estimated 3.3 million utility lines nationwide that contain the poisonous metal.

Yet at the same time Americans have been shocked and saddened by Flint — and rightfully so — another environmental calamity has been unfolding 2,300 miles away in the Porter Ranch community of Los Angeles that may be even more troublesome for more people in the long term.

“Flint is the more egregious case of neglect, and it’s far worse in terms of the human cost,” says Rob Jackson, an environmental scientist at Stanford University. “But nothing about Flint has the sort of national or global consequences that the problems at Porter Ranch have.”

That’s because, as horrific as it is, Flint is the exception that proves the rule. Lead exposure in the U.S. has declined dramatically over the past four decades thanks to government-mandated monitoring and treatment — and that isn’t going to change.

Meanwhile, Porter Ranch hasn’t received nearly as much national news coverage as Flint. But if nothing is done, what’s happening there could happen more and more throughout the U.S. in the years ahead.

The short version of the Porter Ranch story is that on Oct. 23, the Southern California Gas Co. discovered a rupture in an underground pipe linking nearby Aliso Canyon, one of the country’s largest natural-gas storage reservoirs, to the surface of the earth. Authorities soon determined that the amount of methane leaking from Aliso Canyon each day  — 2.5 million pounds, the most in U.S. history — was roughly equivalent, in terms of environmental impact, to the daily emissions from six coal-fired power plants, 2.2 million cows, or 4.5 million cars.

Local children — and pets — began to suffer from headaches, nosebleeds, and vomiting. The Federal Aviation Administration, fearing that a plane would ignite the massive methane cloud hovering over the area, instituted a no-fly zone. More than 2,500 families fled their homes. Lawsuits were filed (including new criminal charges Wednesday against SoCalGas). Businesses struggled to stay open. Property values plummeted. Even today, more than three months later, the leak still isn’t under control. All told, Porter Ranch has become one of the worst environmental disasters in recent memory, with a carbon footprint larger than the catastrophic BP oil spill of 2010.

Still, it makes sense that Flint is a bigger news story than Porter Ranch. SoCalGas waited three days before reporting the leak. In Flint, state and federal officials dragged their heels for more than a year. Residents of Porter Ranch have reported various short-term illnesses, mostly from the sulfurous odorants added to methane to aid in detection. (Experts say the gas itself isn’t harmful.) In Flint, thousands of children have been exposed to a toxin that could cause irreversible damage to their developing brains and nervous systems. Porter Ranch is an affluent, largely white community; Flint is largely poor and largely black.

But while Porter Ranch isn’t as unjust as Flint, and while the immediate human toll isn’t nearly as harrowing, the leak has exposed major problems with our growing natural-gas system that will only get worse, even after the well is capped. And this, like Flint, should be cause for nationwide concern.
 
Alison Canyon isn’t unique. In fact, it’s one of more than 400 such natural-gas storage sites across the country, and the vast majority of those aging facilities are likely to have the same vulnerabilities — in this case, 60-year-old pipes and a missing shut-off valve that was never replaced after breaking in 1979 — that led to the Porter Ranch rupture. Recent research estimates that natural-gas-gathering facilities alone routinely leak 100 billion cubic feet of methane each year — more gas than the entire country burns in a day.

And that’s just what seeps out on a regular basis, without any sort of catastrophic breach. According to a recent FiveThirtyEight report, the city of Boston alone had at least 1,868 documented unrepaired leaks in its gas lines as of March 2015, and the oldest has been leaking since 1985. The truth is, much of America’s natural-gas network has operated for decades with little investment in updates and inspections, and regulations — both state and federal — are outdated and underenforced. That’s left companies to decide how much they will or won’t spend to keep their gas fields modern and safe.

If the only effects of methane leakage were headaches and nausea, loose regulations and lax enforcement would be unfortunate. But what makes Aliso Ranch such a wake-up call is the staggering effect it’s having on the environment. As of Jan. 24, estimates showed that the leak had released the equivalent of 2.1 million metric tons of carbon dioxide into the atmosphere — more greenhouse gas than 440,000 cars emit in a year. Given the fact that methane’s effects on global warming are 84 times as potent as carbon dioxide’s, that’s enough gas to make Aliso Canyon the single biggest contributor to climate change in California and to set back the state’s efforts to curb emissions — some of the most aggressive in the nation — by an entire year. Similar leaks have also caused devastating explosions in the past.

At a time when new fracking technology is fueling the rapid expansion of America’s natural-gas system and generating more wear and tear on aging facilities, lawmakers should be working to prevent the next Porter Ranch. In the Golden State, Gov. Jerry Brown has issued an emergency order requiring SoCalGas and other utilities to “conduct daily inspections of wellheads using infrared leak-detection technology, verify the mechanical integrity of wells, measure gas flow and pressure and regularly test safety valves, among other steps.” Meanwhile, state legislators have proposed stringent new safety regulations for all 14 of California’s underground natural-gas storage facilities.

But Porter Ranch isn’t just a California problem; it’s a national problem. And while it may not be as tragic a tale as Flint, it has the potential to become a more familiar and environmentally devastating one if the rest of the country simply forgets and moves on.