Friday, April 20, 2018

Tanker Markets - Desperate times

Despite healthy April VLCC cargo volumes for both MEG and WAfrica/East, these have not been sufficient to lift the struggling rate levels. 
Indeed, rates have even softened slightly. VLCC earnings of around $5,000-$7,000 per day (for non eco types) is hardly sustainable over time but ships remain more than ample for now, Fearnleys reported.
The market would need to see increased volumes for all the major VLCC routes to lift the dismal earnings seen today.
The West Africa Suezmax market saw a quiet week. In the MEG, there continued to be a steady stream of cargoes, particularly out of Basrah where Suezmaxes were the preferred size range over VLCC’s.
Finally after a short delay, 1st decade West Africa cargoes began to show earlier this week and have continued to flow. Cargoes have become destination sensitive with owners preferring longer voyages with better flat rates.
The Black Sea and Med were fairly quiet this week. There is a particularly big CPC programme for May and when the activity does pick up and if West Africa continues to remain busy then this could be a catalyst to put pressure on rates.
Bunkers are becoming increasingly expensive on the back of the oil price breaching $70 per barrel putting further pressure on owners earning potential.
Aframaxes in the North Sea and Baltic experienced an upswing in rates last week, due to a rush of Baltic cargoes in the 18-20 window. Rates topped out on Monday and once again softened as this years’ ice season was coming to an end.
Hopefully, the upcoming summer market will deliver, as the ice season has been rather disappointing, Fearnleys said.
The Med and Black Sea market was boiling this week. Charterers were trying to secure a cheap, safe ship at low levels. Libyan activity helped owners and now we at least see numbers starting with an eight.
Going forward we expect rates to stabilise around the current levels, Fearnleys concluded.
Stealthgas announced this week the delivery of its last newbuilding LPG carrier, which marks the completion of its contracting programme.
The vessel delivered was a 22,000 cu m Ice Class semi-refrigerated hybrid scrubber fitted eco LPG carrier - ‘Eco Freeze’, the fourth and final semi- refrigerated eco LPG newbuilding.
Her delivery concluded Stealthgas’ expansion phase, which commenced in 2011 and totalled 26 newbuilding LPG carriers out of which, 20 were delivered from Japanese yards and six from South Korean yards.
Crowley Alaska Tankers also announced this week that it has completed the acquisition of three tankers from SeaRiver Maritime, under a charterback deal covering varying multi-year terms.
The Aframaxes ‘Liberty Bay’ and ‘Eagle Bay’ transport crude from Alaska to US West Coast refineries. The MR ‘S/R American Progress’ ships refined petroleum between the US Gulf and US East Coast ports.
Crowley has renamed the ships ‘Washington’, ’California’ and Oregon’, respectively.
“With the regulatory approvals in place and the sale officially complete, we are now focused on operating these tankers in the safest, most reliable manner possible,” said Tom Crowley, Crowley Maritime Corp chairman and CEO. “Our knowledge, passion, talent, ingenuity and helpfulness drive business for the company and provide the basis for highly successful partnerships, such as the one announced today.”  
With the acquisition of the three vessels, the company now operates 40 Jones Act-qualified tankers in the US.
Crowley Alaska Tankers, based in Bellingham, Washington, with a field office in Valdez, Alaska, is a new subsidiary of Crowley Petroleum Holdings, part of the Crowley Maritime Corp group of companies.
Navios Maritime Acquisition Corp also announced that it had completed a $71.5 mill sale and leaseback agreement for four MR2s.
The proceeds were used to write off $69.25 mill of debt.
This agreement provides for 24 quarterly payments of $1.5 mill each, plus interest at LIBOR plus 305 bps per annum. Navios Acquisition has an obligation to purchase the vessels at the end of sixth year for $35.8 mill.
Angeliki Frangou, Navios Acquisition chairman and CEO, said, “We are pleased to have concluded a sale and leaseback agreement for four product tankers with a leading Chinese institution. We look forward to continuing to develop access to this attractive financing market.”
Broking sources reported the sale of the 2003-built VLCC FSO ‘Sea Equatorial’ to Ocean Tankers for $18.5 mill and the same vintage Aframax ‘Zirku’ to ZPMC for $10.5 mill. She will be converted to a semi-submersible heavy lift carrier.
Shandong Shipping was said to have bought the 2009-built MR sisters ‘Silver Express’ and ‘High Enterprise’ for $16.5 mill each, while PCL Shipping was believed to have purchased the 2013-built MR sisters ‘STI Fontivieille’ and ‘STI Ville’ for $26.5 mill each.
Finally, Nigerian interests were thought to have picked up the 2004-built Handysize ‘Rosita’ for a price said to be in the high $9 mills. 
In the charter market, Navig8 was very active, reportedly taking four LR2s for six, option six months at $15,250 per day each.
Another LR2, the 2017-built ‘Searover’ was said to have been fixed to Chevron for 12 months at $15,500 per day, while Shell was reported to have fixed the LR2 newbuilding ‘Salamina’ for about $15,000 per day.
In the MR segment, the 2008-built ‘DL Navig8’ was believed taken by ST Shipping for 12 months at $12,750 per day.
Meanwhile, VLCC ordering continued.
Among the latest contracts placed were two VLCCs at DSME for Guggenheim Capital for a reported $88.4 mill each.

Thursday, April 19, 2018

Kinder Morgan Inc. Starts 2018 Off With a Bang

 Kinder Morgan HQ

As promised, natural gas pipeline giant Kinder Morgan (NYSE: KMI) returned to growth mode in 2018. Overall, the company hauled in $1.247 billion ($0.56 per share) of distributable cash flow during the first quarter, which was 3% higher than the year-ago period, and beat its forecast.

Those strong results, when combined with an improving financial profile, enabled Kinder Morgan to follow through with its promise to boost its dividend by 60% this year.

Kinder Morgan Inc. results: The raw numbers

A chart showing Kinder Morgan's earnings by segment in the first quarter of 2018 and 2017.
In millions of dollars. Data source: Kinder Morgan Inc. Chart by author.

What happened with Kinder Morgan this quarter? 

Recently completed expansion projects and higher oil prices fueled improving results.
  • Kinder Morgan's natural gas pipeline segment delivered a strong performance in the first quarter, with earnings rising 6% year over year. Fueling that increase was the impact of colder weather (which drove up gas demand), an improvement in drilling activities thanks to better pricing and recent projects placed into service. Overall, natural gas transportation volumes rose 10% versus the prior year.
  • Carbon dioxide segment earnings improved 7% due to higher commodity prices and a 5% hike in oil production.
  • Product pipeline earnings edged up 1% due to increased contributions from two pipeline systems, which more than offset weakness on another one.
  • Earnings in the terminals segment slipped 2% even though volumes went up 5% thanks to recently completed storage capacity expansions. Lower rates on some of the company's existing tankers and falling storage tank utilization in several locations offset the positive impact from its growth projects. 
  • Contributions from Kinder Morgan Canada Limited's (TSX: KML) Trans Mountain Pipeline jumped 7% year over year due to how the company capitalized costs for that pipeline's expansion project.
A gas pipeline under construction with a cloudy sky above.
 Image source: Getty Images.

What management had to say 

CEO Steve Kean commented on the quarter and the company's progress:
One of the strengths of this company is strategically positioned fee-based assets that generate predictable cash flows, and this quarter once again demonstrated that strength. Several business units achieved strong financial performance in the first quarter and are poised to continue that success through the remainder of the year. During the first quarter, we made substantial progress on the Elba Liquefaction Project and began work on the Gulf Coast Express Project. We had very good commercial and operating performance, exceeding our plan for the quarter.
Overall, Kinder Morgan generated $804 million in excess cash above what it will pay out via its increased dividend for the quarter. The company used that money to fund projects like Elba and the Gulf Coast Express and still had enough left over to buy back another $250 million in shares, adding to the $250 million it spent last December.

In addition to making progress on those two key growth projects, Kinder Morgan completed work on about $700 million of expansions during the quarter. The company quickly replenished its backlog by adding $900 million of new high-return projects to the fold. Because of that, it now plans to spend about $100 million more this year, bringing its capital budget up to $2.3 billion. However, its financial plan included more than $500 million of unallocated cash flow, giving it the flexibility to invest that money into new projects like those it recently secured as well as repurchase shares.

Looking forward 

Thanks to that strong quarter, Kinder Morgan remains on pace to meet or exceed its target for both distributable cash flow ($4.57 billion or $2.05 per share) and leverage (5.1 times debt to EBITDA) for 2018. 

While its outlook for 2018 looks positive, though, its future growth prospects dimmed significantly earlier this month when Kinder Morgan Canada threatened to abandon the Trans Mountain Pipeline expansion. The company gave a tight deadline of the end of next month to gain the clarity and protection it needs to move forward. Kean went so far as to say on the quarterly conference call that "it has become clear this particular investment may be untenable for a private party to undertake. The events of the last 10 days have confirmed those views." Consequently, the company could abandon the project or potentially sell it to the federal government and Alberta, which both deem it as a vitally strategic one for the country and the oil sands region. Given the overhang of this uncertainty, shares of Kinder Morgan could be quite volatile until it finally has a firm outcome for this project.

Wednesday, April 18, 2018

Workers are fleeing Venezuela's state oil company, radiating pain through the country's already crippled economy

Venezuela PDVSA oil worker
A man wears a cap with the logo of PDVSA at the swear-in ceremony of the new board of directors of Venezuelan state oil company PDVSA in Caracas, Venezuela, January 31, 2017.
REUTERS/Marco Bello

CARACAS (Reuters) - Chauffeured around in a sleek black pick-up, the head of Venezuela's oil industry, Major General Manuel Quevedo, last month toured a joint venture with US major Chevron.

Flanked by other trucks carrying security guards, Quevedo passed a handful of workers waiting by an oil well cluster. They wanted a word with the OPEC nation's oil minister and president of its state-run oil firm, PDVSA, about the sorry state of the company. 

Quevedo and his caravan drove on by. 

"He didn't get out to ask workers about what is going on," said Jesus Tabata, a union leader who works on a rig in the oil-rich Orinoco Belt. "That way it's easier to keep saying everything is fine — and at the same time keeping us on like slaves on miserable wages." 

What's going on is that thousands of oil workers are fleeing the state-run oil firm under the watch of its new military commander, who has quickly alienated the firm's embattled upper echelon and its rank-and-file, according to union leaders, a half-dozen current PDVSA workers, a dozen former PDVSA workers and a half-dozen executives at foreign companies operating in Venezuela.
Venezuela's Oil Minister Manuel Quevedo talks to journalists at the beginning of an OPEC meeting in Vienna, Austria, November 30, 2017. REUTERS/Heinz-Peter Bader
Venezuela Oil Minister Manuel Quevedo at the beginning of an OPEC meeting in Vienna, Austria, November 30, 2017.
Thomson Reuters
Some PDVSA offices now have lines outside with dozens of workers waiting to quit. In at least one administrative office in Zulia state, human resources staff quit processing out the quitters, hanging a sign, "we do not accept resignations," an oil worker there told Reuters. 

Official workforce statistics have become a closely guarded secret, but a dozen sources told Reuters that many thousands of workers had quit so far this year — an acceleration of an already troubling outflow last year. 

About 25,000 workers resigned between the start of January 2017 and the end of January 2018, said union leader and government critic Ivan Freites, citing internal company data. That figure comes out of a workforce last officially reported by PDVSA at 146,000 in 2016. 

Resignations appear to have increased sharply this year, said Freites, a prominent union leader atVenezuela's major refineries in the northern Paraguana peninsula. 

"It's unstoppable," he said. 

Many of those leaving now are engineers, managers, or lawyers — high-level professionals that are almost impossible to replace amid Venezuela's economic meltdown, the PDVSA workers and foreign executives told Reuters. 

PDVSA and the Oil Ministry did not respond to repeated requests for comment. PDVSA board member and pro-government union representative Wills Rangel acknowledged the flight of talent is a serious problem. 

"The massive resignations are worrying," Rangel said in an interview. "In refinery operations, many have left."
Venezuela's President Nicolas Maduro waves during a pro-government rally with workers of state-run oil company PDVSA, in Barcelona, Venezuela July 8, 2017. Miraflores Palace/Handout via REUTERS
Venezuelan President Nicolas Maduro at a pro-government rally with workers of state-run oil company PDVSA, in Barcelona, Venezuela, July 8, 2017.
Thomson Reuters
The pace of departures has quickened with the rapid deterioration of PDVSA's operations and finances — radiating pain through the OPEC nation's oil-based economy, now beset with food shortages and hyperinflation. 

Quevedo — a little known former housing minister who replaced two executives jailed for alleged graft — has further poisoned the atmosphere, according to the two dozen sources who spoke with Reuters. 

A stiff official who rose through the National Guard, Quevedo fired many long-term employees upon arrival and urged remaining ones to denounce any of their colleagues who oppose Maduro. He tapped soldiers for top roles, giving the oil firm the atmosphere of a "barrack," two company sources said.
"The military guys arrive calling the engineers thieves and saboteurs," said a Venezuelan oil executive at a private company who frequently works with PDVSA. 

Quevedo is also fighting to retain control of a company increasingly riven by turf wars. The ruling socialists, once held together by late leader Hugo Chavez, have succumbed to infighting under Maduro, a former bus driver and union leader who lacks Chavez' charisma and has seen his budget slashed with the decline in global oil prices. 

Quevedo has clashed with Venezuela's powerful Vice President Tareck El-Aissami. When El-Aissami in February appointed a vice president to the PDVSA unit that oversees joint ventures with foreign companies, Quevedo removed the appointee and had him arrested, according to three sources with knowledge of the incident, which has not been previously reported. 

Quevedo is an ally of Socialist Party heavyweight Diosdado Cabello. 

"There is a fight between Diosdado and Tareck for control of the industry," said Hebert Garcia, a former army general who later broke with Maduro and fled the country. 

Venezuela's President Nicolas Maduro Diosdado Cabello
Venezuelan President Nicolas Maduro, right, and then-National Assembly President Diosdado Cabello at a military parade commemorating the 23rd anniversary of a failed coup attempt by late president Hugo Chavez, in Caracas, February 4, 2015.
The political turmoil and mass resignations threaten Maduro's government, which depends on oil for 90 percent of export revenue. 

In the Orinoco Belt, some drilling rigs are working only intermittently for lack of crews, said two sources there. In PDVSA's refineries, several small fires have broken out because there are no longer enough supervisors, two sources in the northern Paraguana peninsula said. Lack of personnel in export terminals have forced some ports to cut back working hours, according to two shippers and one trader. 

Oil production in the first quarter of this year slipped to a 33-year low of 1.6 million barrels per day.

'When are you leaving?'

Jobs at PDVSA were once coveted for their generous salaries and benefits, including cheap credit for housing. Now, many PDVSA workers can't feed their families on wages that amount to a handful of US dollars a month. 

Rampant food shortages that caused Venezuelans to report losing an average of 11 kilograms (24 pounds) last year are particularly tough for oil workers tasked with grueling physical work in often remote oil fields. 

Some oil workers have resorted to working odd jobs on the side, taking vacation to work abroad, or even selling their work uniforms — red overalls — for money to eat. 

Some workers in Lake Maracaibo, a production region near Colombia, can no longer get to their jobs, according to two sources there. Transport can cost up to 55,000 bolivars — equal to only 10 US cents, but close to what some workers earn in a day. 

"Now what we ask each other is: 'When are you leaving and for where?'" said one of the Maracaibo workers, who like thousands of other Venezuelans emigrated to Colombia this month. "Even in the bathroom, people are talking about quitting."

'Who will be left?'

FILE PHOTO: The logo of the Venezuelan state oil company PDVSA is seen next to a mural depicting Venezuela's late President Hugo Chavez at a gas station in Caracas, Venezuela March 2, 2017. REUTERS/Carlos Garcia Rawlins/File Photo
The logo of the Venezuelan state oil company PDVSA next to a mural of late Venezuelan President Hugo Chavez at a gas station in Caracas, March 2, 2017.
Thomson Reuters
At PDVSA headquarters, Quevedo often walks through the offices with a half dozen bodyguards who clear his path, according to one current and one former PDVSA employee. 

The company's ongoing decay is evident all around him in the once polished office tower: Broken elevators, poor cafeteria food, empty desks in once-crowded divisions. 

Maduro has overseen the arrest of dozens of high-level PDVSA executives since late last year, sometimes at the Caracas headquarters as shocked employees looked on. Workers now feel watched by supervisors and are loathe to make any business decision out of fear they will later be accused of corruption, the sources said. 

PDVSA workers, often visibly thinner, sometimes surreptitiously hand out resumes to executives from private companies, according to a source at a foreign firm. 

In a rare protest last month, angry Oil Ministry workers blocked access to the cafeteria, demanding better benefits and chanting that Quevedo should resign.
FILE PHOTO: A man points a fuel nozzle at the camera for a photograph at a gas station belonging to Venezuelan state oil company PDVSA in Caracas, Venezuela, July 21, 2016. REUTERS/Carlos Jasso/File Photo
A man points a fuel nozzle at the camera for a photograph at a gas station belonging to Venezuelan state oil company PDVSA in Caracas, Venezuela, July 21, 2016.
Thomson Reuters
Venezuela's foreign oil partners, which include California-based Chevron, Russia's Rosneft and China's CNPC, are increasingly worried about PDVSA's rapidly departing workforce, according to a half-dozen sources at multinational companies operating in Venezuela. But as minority partners, they have little or no sway over salaries and management. 

The foreign partners have also grown increasingly frustrated with Quevedo, who initially asked for their suggestions on fixing the state-run firm but now appears ill-disposed toward reforms, the sources said. 

At least one foreign company is considering bringing in foreign specialists to improve its operations, one of the sources added. But with crime, power cuts and shortages rampant in Venezuela, luring foreign professionals is tough. 

Still, in the Orinoco belt, some vow to stay in the belief that Maduro's government can't last. 

"We can't give up," said Tabata, the union leader who watched Quevedo's truck drive by that day. "This government is unstable and could fall at any moment — and who will be left?" 

(Reporting by Deisy Buitrago and Alexandra Ulmer; Additional reporting by Mircely Guanipa in Punto Fijo, Marianna Parraga in Houston, and Brian Ellsworth in Caracas; Writing by Alexandra Ulmer; Editing by Brian Thevenot)

Tuesday, April 17, 2018

Refinery news roundup: New projects announced in Africa, Middle East

Valero Energy Corp., which operates this refinery in .Corpus Christi, has stopped importing light, sweet crude because of the growing domestic supply. (Valero Energy photo) Photo: Courtesy Photo 
 Valero Energy Corp., which operates this refinery in .Corpus Christi, has stopped importing light, sweet crude because of the growing domestic supply. (Valero Energy photo)

In Africa and the Middle East refinery maintenance has been slowing down but news continues to emerge of planned upgrades and new launches, according to S&P Global Platts estimates.

-- The hydrocracker at Cote d'Ivoire's SIR refinery will restart in March 2019, a source at SIR told S&P Global Platts. The hydrocracker has been offline since early 2017 due to a supply outage.

-- Sudan's Khartoum refinery will kick off its maintenance program for 2018 on March 17, with the partial closure for around one month of the crude distillation unit with a nameplate capacity of 50,000 b/d, a source from the Khartoum Refining Company said. The repair works are being done in several stages to limit the reduction in fuel supplied to the local market at any one time. This is to be followed by the full closure of the second CDU, which has a total capacity of 40,000 b/d for 45 days from April 1. The first CDU will then go back into maintenance in September for one month.

-- Libya's National Oil Corporation hopes to finally restart operations at the 220,000 b/d Ras Lanuf refinery before Ramadan in May, sources close to the company said. Restarting refinery operations would also allow NOC to bring Libya's petrochemicals industry back online, producing ethylene and polyethylene, the state-owned company said in statement. The Ras Lanuf ethylene plant has been shut since 2011, while the polyethylene plant was closed in 2013. The statement did not refer to the refinery in the east of Libya itself, but this would need to be restarted for the polymers plants to begin production. They will be fed with naphtha from the refinery. Ras Lanuf was heavily damaged in 2011 during Libya's revolution and subsequent clashes between rival militias.

-- Durban's Engen refinery in South Africa is now fully up and running, the company said. The maintenance started February 5 and in late March was entering a "phased start-up" of its units.

-- Ghana's Tema Oil Refinery (TOR), which had restarted in early January after almost a year, is currently running at 25,000 b/d, and will operate closer to full capacity by the end of the year, a source close to the matter said. Currently, only one distillation unit is running out of the three units, the source added, and once all three are in operation, this should bring the capacity close to the full 45,000 b/d. Meanwhile, the fluid catalytic cracker, was last reported as undergoing maintenance with a relaunch date of April 2018.

-- Saudi Aramco Total Refining and Petrochemical Co. (Satorp) has maintenance on its No.1 CDU from January 8. The works include the Jubail refinery's Train 1, involving a 200,000 b/d CDU. Separately, there was maintenance on a 153,000 b/d hydrocracker, traders said.

 -- Sonangol's Luanda is to undergo maintenance work in June and July, the first such works in almost seven years.

-- Sapref, the largest refinery in South Africa, is undergoing "routine maintenance," the company said in early April without providing further details. According to market sources various units are scheduled to have works between April and June, affecting, gasoline and marine fuel. Separately, in November output of marine fuel is to be impacted by maintenance.

-- South Africa's Natref will be undergoing partial works for six weeks in May to June and later in November, industry sources said. Sources said the plant will undergo partial maintenance from May 3 to June 14 which will affect the production of middle distillates, bitumen and hydrogen. The plant will also later carry out partial works over November 1-19, affecting supplies of diesel, gasoline and bitumen, sources said.


-- Zambia's Indeni refinery has set its next turnaround for September/October 2018. It is currently operating at around 18,000 b/d out of its total capacity of 24,000 b/d, a senior official from the refinery said.

-- South Korea's GS Engineering & Construction Co. has won a contract to repair units at the Ruwais refinery in the UAE damaged in a fire in January 2017. GS said it will restore fire-damaged parts of the oil processing plant at Ruwais by early 2019. ADNOC had initially hoped to restart production from the residual fluid catalytic cracking unit in Q1 2018.


-- Kuwait National Petroleum Co. will begin commissioning newly installed units by April, once it has completed its Clean Fuels Project to revamp the country's main refineries, Mina al-Ahmadi and Mina Abdullah. It is also considering the addition of two new gas processing units, Kuwait's sixth and seventh, which will boost LPG output, by 2035, KNPC CEO Mohammad Ghazi al-Mutairi told Al-Rai newspaper. -- Abu Dhabi National Oil Co. awarded a contract to Samsung Engineering worth $3.1 billion for a major upgrade of its Ruwais refinery, which will allow it to process offshore crude, freeing up as much as 420,000 b/d of its flagship Murban crude for export. The crude oil processing flexibility project is scheduled to be completed by the end of 2022.

-- Nigeria's four state-owned oil refineries -- two in Port Harcourt and one each in Kaduna and Warri -- are to be shut for a major overhaul to restore production to their combined nameplate capacity of 445,000 b/d. Nigeria is banking on signing the deal for its refinery rehabilitation program by end-April and sorting out the financing in the second quarter, an official from state-owned NNPC said Tuesday. This program is aimed at ensuring that the existing refineries operate at 90% capacity by 2019.

-- Jordan Petroleum Refinery Co. has awarded a contract to US engineer KBR for the design of a new residue hydro-processing unit as part of its expansion of the Zarqa refinery in Jordan.

-- Bahrain Petroleum Co. has awarded a $4.2 billion contract for the expansion and modernization of the Sitra refinery, slated for completion in 2022 and taking total capacity to 360,000 b/d.

-- Iraq has started work on a 70,000 b/d expansion of its Basra refinery, in the south of the country, raising its capacity to 280,000 b/d from 210,000 b/d, with the addition of a fourth crude unit. The oil ministry hopes to complete the new distillation unit by the end of the year. Along with a crude distillation unit, the project, which is being executed by TechnoExport of the Czech Republic, also includes the construction of units for the treatment of NGLs and water, as well as steam boiler and flare system.

-- US engineer CB&I has been awarded a $95 million contract for the expansion and modernization of the 305,000 b/d Saudi Aramco Shell Refinery (Sasref) in Jubail.

-- Iraq's North Refineries Co. is compiling a list of international equipment suppliers as the oil ministry prepares to rebuild the 140,000 b/d Salah al-Din refinery, part of the 350,000 b/d Baiji refining complex.

-- Iran plans to modernize Abadan, the country's oldest refinery.

-- Zambia's Indeni refinery is looking for an equity partner as it seeks to boost capacity, a refinery spokesman said.

-- Sonangol is planning to build a fluid catalytic cracker at the Luanda refinery to enable it to produce 1,200 mt/day of gasoline, up from current output of 380 mt/day, Angola's Mining and Petroleum Minister Diamantino Azevedo said. The unit, expected to come online in mid-2021, will meet half the country's demand for the product, reducing the current market deficit, Azevedo said.

-- The Republic of Congo's refinery in Pointe Noire is planning to build a fluid catalytic cracker before 2022, the plant's director said. The move is an effort to reduce its current production of fuel oil from 40% and to meet cleaner fuels standards. It is the only refinery in the Republic of Congo, and it is a key exporter of fuel oil, particularly low sulfur straight run fuel oil, and naphtha in the West African region.

-- Gabon's Societe Gabonaise de Raffinage (Sogara) is seeking a waiver from the government to continue producing high sulfur gasoil after cleaner fuels standards are enforced across Africa in 2020, a source close to the matter said. Sogara's plans to build a second refinery in Port Gentil in conjunction with Samsung have also been scrapped, the source said.

-- Senegal's Dakar is currently running at its full capacity of 1.2 million mt/year and plans are still underway for the plant to increase its capacity to 1.5 million mt a year by 2019, according to company officials. In an interview published on the SAR website, the refinery's technical director, M Abdou Aziz Deme, said that the refinery had been struggling to operate at its capacity for several years but in 2017 it produced at record-high levels. The previous low rates of the plant were due to the financial issues that engulfed the refinery. In October last year, SAR carried out "renegeration" works at the refinery's catalytic reforming unit and it is now producing gasoline, another company source said.


-- Iraq opened a downstream tender on October 23 hoping to attract engineering and construction companies to build a new refinery in Basra province.

-- The Dangote refinery in Lagos, Nigeria, will receive its essential parts -- a crude distillation unit and residual fluid catalytic cracker -- in July, a senior official from Dangote Industries told S&P Global Platts. The source confirmed the foundations for the entire site had been fully "piled" and it was now waiting on the CDU and RFCC deliveries. The completion date was last heard to be 2020, but the source at Dangote could not confirm a completion deadline.

-- Algeria has scaled back plans to expand its downstream sector rapidly, dropping plans to build five new 5 million mt/year (100,000 b/d) refineries, and pushing ahead with only two new projects: 5 million mt/year at Hassi Messaoud and 5 million mt/year at Tiaret.

-- Honeywell said Kuwait Integrated Petroleum Industries Co. will use a range of its technologies for the refining and petrochemical complex at Al-Zour.

-- Angola's Sonangol hopes to have more details on which international partner it will tie up with for its new refining project in the first quarter.

-- Kuwait has committed itself to building a new 230,000 b/d refinery at Duqm with its Persian Gulf neighbor Oman, signing a final investment decision for the refinery project.

-- Saudi Aramco aims to start up its greenfield 400,000 b/d Jizan refinery in the second half of 2018 as the project is nearly completed.

-- Construction of the 140,000 b/d Karbala refinery, Iraq's first new downstream facility in decades, has stalled due to a lack of finance.

-- Iraq has signed a deal with two Chinese oil companies to build a new 300,000 b/d refinery and petrochemicals complex at Al-Fao in southern Iraq.

-- Nigeria has reached an agreement with neighbor Niger to build an oil refinery in a border town between Niger and Katsina State in northern Nigeria.

--Kenya is hoping to soon decide the location for a new refinery in either Lamu or Mombasa.

-- Ghana's Ministry of Energy is currently in the process of submitting a proposal to build a new refinery in Tema, a source close to the matter said. "We are yet to submit the proposal to the Cabinet for approval but Tema Oil Refinery has already started talking to some prospective partners," the source said. "Both the ministry and TOR are in agreement that the new refinery at Tema should be the way forward." This will replace the existing 45,000 b/d Tema Oil Refinery, which has been offline for the bulk of the last three years, and is currently operating at reduced capacity due to technical issues. The source added that the "plan is to put a new 100,000-160,000 b/d refinery in the available space of over 700 acres at the existing refinery yard" in Tema.

-- Angola's Sonangol has revived plans for its Lobito refinery project, saying it will build a 200,000 b/d plant at the coastal city by 2022.

-- Iraq is considering a 150,000 b/d greenfield refinery project at Nassiriya.

-- Iraq on February 8 signed a contract with Rania International to build a 70,000 b/d refinery in the restive Kirkuk province.

-- Iraq's oil ministry has announced a tender for a 100,000 b/d refinery in Qayarah, 60 km south of Mosul. It did not say whether it will be a completely new construction or a building out of the existing Qayarah refinery, which has a 20,000 b/d nameplate capacity but has been operating at 4,000 b/d due to damage inflicted in the battle against the self-proclaimed Islamic State group.

-- Houston-based GTC Technology has agreed a deal to provide a gasoline production unit to Iraq's Al-Barham Group, which plans to build a refining complex in the northern city of Kirkuk. The grassroots complex will process 12,000 b/d of straight run naphtha and untreated natural gasoline to produce high octane gasoline to Euro-V specifications, GTC said. It will contain a naphtha hydrotreater, naphtha splitter, C5/C6 isomerization unit, and heavy naphtha reformer.

-- Iraq has announced two new greenfield refinery contracts that would add 170,000 b/d to the more than 1 million b/d of refining capacity it already has said it intends to bring online with new construction as well as repairs and upgrades to existing refineries. The Oil Ministry is accepting proposals for a 100,000 b/d refinery in Kut, Wasit province, located east of Baghdad on the border with Iran. The second refinery will be built Diwaniya, in Qadisiya province, south of Baghdad, with a capacity of 70,000 b/d.

-- The Ugandan government signed an agreement with a consortium to build and operate a 60,000 b/d refinery in the west of the country, President Yoweri Museveni said. According to Museveni, who presided over the signing ceremony for the Albertine Graben Refinery, the consortium will carry out development, design, financing, construction, operation and maintenance of the refinery in Hoima District. The consortium is led by Nuovo Pignone International, a General Electric unit based in Italy. It also includes Italy's Saipem plus Mauritius' YAATRA Africa and Lionworks Group. The consortium was selected after over 40 companies showed interest in the project, the government said. The $4 billion facility is expected to process 30,000 b/d of crude initially, before its capacity doubles in the second phase of development. The project is expected to come on stream by 2020.

--Elza Turner,
--Edited by Maurice Geller,

Monday, April 16, 2018

In which region is the most tank storage capacity under construction?


All over the world, there are independent tank storage companies that support market players in storing their oil products. They help oil companies that have downstream obligations with storing products or support trading companies seizing (arbitrage) opportunities or governments and oil companies with building their strategic reserves. Tank terminals have an important of not a primary function in the oil and gas value chain.

Terminals per region

At the moment, the database consist of more than 4.700 tank terminals per geographical region. This number is not evenly spread over these regions. The applicable regions are Africa, Asia, Europe, Middle East, Oceania, North America, Central America and South America.

Under construction

In figure 1 can be seen that in total there is 37.529kcbm under construction. The most tank storage capacity is in Asia. This is around 20.829kcbm or 56% of the total capacity. The Asian region is followed by South America (5.491kcbm or 15%) and Africa (4.027kcbm or 11%). Other more mature regions with respect to tank storage assets (Europe and North America) have only little capacity under construction. This ranges between 2% and 7%.
Some examples of major projects in Asia are from Brightoil in China. According to the latest news, in Dalian the capacity that is under construction is 4.800kcbm and Zhoushan is 1.200kcbm. Another major project is the joint venture between Petronas and Vopak of 2.100kcbm which will be commissioned in 1Q19.

Under expansion

Figure 2 shows that in total there is 20.461kcbm under expansion. Also in this case, Asia is the region where the most tank storage capacity is under expansion. Around 9.427kcbm or 46% of capacity is under expansion. Asia is followed by Europe (4.250kcbm or 21%) and North America (3.720kcbm or 18%). Other regions have little capacity under expansion which ranges between 1% and 7%.

Curious to learn more about the global tank storage industry and what the value is from these statistics for your business, contact us.

Jacob van den Berge, Market & Sales Manager & PJK International

Friday, April 13, 2018

First Suezmax loads at Corpus Christi

Buckeye Partners and Trafigura Trading have announced the first shipment of crude oil by a Suezmax from the Buckeye Texas Hub terminal located along the ship channel in the Port of Corpus Christi, Texas, US. 
Recently completed modifications now allow the terminal to berth Suezmaxes, enabling an incremental 1 mill barrels of crude oil to be exported each month from the terminal.
The Suezmax ‘Astra’, which completed loading at the terminal on 31st March, was chartered by Motiva Enterprises of Houston, Texas.
“Buckeye Texas Hub has become a premier location providing marine terminal services, allowing growing US energy exports access to global markets,” said Khalid Muslih, executive vice president of Buckeye and president of Global Marine Terminals. “We are very excited to have reached this milestone and look forward to additional opportunities to partner with Trafigura to further expand the terminal’s capabilities and serve the region’s rapidly growing energy production.”
“North American supplies have launched the US onto the world stage as a new crude provider. Upgrading the terminal’s deepwater docks at Corpus Christi will help us to meet the growing demand for this product from European refineries and Far East refineries and petrochemical plants,” said Corey Prologo, head of oil trading and director for Trafigura North America.
The terminal is operated and 80% owned by Buckeye and 20% owned by Trafigura, with the latter retaining exclusive throughput rights. It has about 7 mill barrels of storage capacity for liquid petroleum products, including a refrigerated and compressed LPG storage complex, pipeline connectivity for receiving crude oil and condensate production from the Permian and Eagle Ford shale plays, five vessel berths, including three deepwater berths with the capability to accommodate Suezmaxes, and two 25,000 barrels per day condensate splitters. 
These capabilities allow Trafigura the maximum flexibility to market the full portfolio of crude and products to customers located as near as the Caribbean and Latin America and as far afield as China, the company said.
Also looking to load Suezmaxes is Enterprise Products Partners, which has acquired a 65-acre waterfront site on the Houston Ship Channel to expand its Enterprise Hydrocarbon Terminal (EHT).
This includes the construction of at least two deepwater docks capable of accommodating Suezmaxes.
Located immediately to the east of EHT, the purchased property features two existing docks, dredging infrastructure that will be used for maintenance and dock expansion at the site, and land for expanding Enterprise’s marine facilities on land.
“As one of the last waterfront properties for sale adjacent to our existing ship channel assets, this strategic acquisition complements our world-class EHT marine terminal and strengthens our position as an industry leader in providing waterborne access,” AJ Jim Teague, CEO of Enterprise’s general partner, said. “The growth opportunities available at the 65-acre site enhance our ability to accommodate growing US hydrocarbon production, which is increasingly destined for global markets.”

West African piracy incidents increasing

An undated photo of West African pirates.

A surge in armed attacks against ships around West Africa is pushing up global levels of piracy and armed robbery at sea, warned the International Chamber of Commerce's International Maritime Bureau (IMB).
In its latest report, the IMB's Piracy Reporting Centre recorded 66 incidents in the first quarter of this year, up from 43 for the same period in 2017, and 37 in 1Q16.

Worldwide in the first quarter, 100 crew were taken hostage and 14 kidnapped from their vessels. A total of 39 vessels were boarded, 11 fired upon and four vessels hijacked. IMB received a further 12 reports of attempted attacks.

The Gulf of Guinea accounted for 29 incidents in 1Q18, more than 40% of the global total. Of the 114 seafarers captured worldwide, all but one were reported in this region.

All four vessels hijackings were in the Gulf of Guinea, where no hijackings were reported in 2017. Two product tankers were hijacked from Cotonou anchorage in mid-January and early February, prompting the IMB PRC to issue a warning to ships. Towards the end of March, two fishing vessels were hijacked off Nigeria and Ghana, respectively. 

“The hijacking of product tankers from anchorages in the Gulf of Guinea is a cause of concern.  In these cases, the intent of the perpetrators is to steal the oil cargo and kidnap crew. The prompt detection and response to any unauthorised movements of an anchored vessel could help in the effective response to such attacks,” stressed an IMB spokesperson.

Nigeria alone recorded 22 incidents. Of the 11 vessels fired upon worldwide, eight were off Nigeria – including a VLCC more than 40 miles off Brass.

“Attacks in the Gulf of Guinea are against all vessels. Crews have been taken hostage and kidnapped from fishing and refrigerated cargo vessels as well as product tankers. In some cases, the attacks have been avoided by the early detection of an approaching skiff, evasive action taken by the vessel and the effective use of citadels.

“The IMB is working with national and regional authorities in the Gulf of Guinea to support ships and co-ordinate counter piracy actions. The authorities from Benin, Nigeria and Togo have sent out boats in response to several incidents,” said the IMB spokesperson.

One incident was reported off Somalia, where a product tanker was fired upon and chased by two skiffs around 160 miles Southeast of Hobyo. At the end of March, a Suezmax reported being fired upon in the Gulf of Aden, while transiting within the Maritime Security Transit Corridor.

The distance from land, sighting of ladders and firing upon ships continued to illustrate that the Somali pirates still had the capability and intent to attack merchant shipping in the wider Indian Ocean.

Elsewhere, Indonesia recorded nine low level attacks against anchored vessels.

Meanwhile, Singapore-based ReCAAP reported 14 incidents (comprising nine actual incidents and five attempted incidents) in Asia during January-March, 2018, compared to 27 incidents ( 21 actual and six attempted incidents) during the same period of 2017.

This is a 48% decrease in the number of incidents reported for the period in question. Of the 14 incidents reported during this year, one was of piracy and 13 were armed robbery against ships.

The improvement was due to a decrease in the number of incidents at ports and anchorages in Bangladesh and Philippines, ReCAAP said.

There was no actual incident reported of abduction of crew for ransom in the Sulu-Celebes Sea and no incident of hijacking of ships for theft of oil cargo during January-March, 2018.

Wednesday, April 11, 2018

Cushing's oil market clout wanes amid U.S. export boom

The volume of oil sitting in 300 steel tanks in a nine-square-mile radius in Cushing, Oklahoma has long been a key barometer for the health of U.S. crude supply and the nation’s benchmark for daily trading of billions of dollars in the commodity. 

FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub, in Cushing, Oklahoma, U.S., March 24, 2016. REUTERS/Nick Oxford/File Photo
But those tanks could soon drain to levels near effectively empty, even as U.S. oil production soars past a new record of 10.4 million barrels per day. 

Oil supplies have fallen before in Cushing for a variety of seasonal or market-driven reasons. But this time, there is no shortage of crude in the market. In fact, U.S. production is straining pipeline and storage capacity. 

The declining volumes stored at Cushing reflects a more permanent shift, underscoring the hub’s waning influence as the primary measuring stick for the U.S. oil market and the leading barometer of future supply, demand and prices. 

(For a graphic of falling oil inventories at Cushing, see:

Companies are now spending millions of dollars building infrastructure to facilitate trading and storage elsewhere, such as in Houston and other Gulf Coast ports. 

That could pave the way for a change in the U.S. benchmark oil price, used to value tens of billions of dollars of crude and futures contracts every day. The current benchmark - called West Texas Intermediate crude, or “WTI” - has been derived from the price of physical oil delivered to Cushing for more than three decades. 

Traders and major global crude buyers have advocated replacing WTI with a new benchmark futures contract that would reflect the value of crude delivered to the Gulf Coast. 

The price of oil in Cushing - which bills itself as “the pipeline crossroads of the world” - is used to value crude grades produced around the United States and some oil imported from Canada, Mexico, and South America. Prices at the hub also provide the basis for an average of 1.3 million WTI futures contracts CL-TOT - worth about $82 billion at current prices - that change hands on the CME Group’s New York Mercantile Exchange every day, making it one of the world’s most actively traded commodities. 

But as more pipelines are built to take oil from U.S. shale fields to Gulf refineries or for export markets, much of the crude produced in the giant Permian Basin oilfield in Texas and elsewhere no longer passes through Cushing. 

Instead, producers are increasingly shipping directly to seaports such as Houston, where vessels carry the oil to dozens of countries worldwide. That reflects a major transformation in global crude flows since the United States lifted a four-decade ban on oil exports in late 2015. Some traders and buyers argue the benchmark needs to change to reflect this. 

Joshua Wade, a crude oil marketer in Oklahoma, sees the benchmark delivery point moving south before long. 

“That’s the direction it’s moving,” he said. “As opposed to importing, now you’re exporting through the same infrastructure ... The oil capital of the nation is in Houston.” 

Inventories in Cushing fell to 28.2 million barrels in early March, lowest in more than three years. 

Analysts say a level of 20 million barrels is effectively empty. That’s because tank design necessitates a minimum volume of crude be kept on hand to maintain the physical integrity of the complex and to allow for blending different crude grades to comply with pipeline specifications. 

“There has been a major structural shift in crude flows within the U.S.,” said John Coleman, senior research analyst at consultancy Wood Mackenzie. “I think Cushing is rapidly losing its relevance.” 

FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub in Cushing, Oklahoma, U.S., March 24, 2016. REUTERS/Nick Oxford/File Photo

Cushing got its distinction in the early 1920s when tanks sprung up to store oil en route from Oklahoma and Texas to major metropolitan areas and refineries in the Midwest. 

In 1983, it became the delivery point for the newly-launched WTI futures contract CLc1. Because the U.S. relied on imports - and banned exports - Cushing was key for traders to gauge domestic supply trends. 

BP’s former head of crude trading, Donald Porteous, earned the nickname “the King of Cushing” because of his deep understanding of supply logistics in the Oklahoma town - a strategy that often earned him more money than BP Chief Executive Bob Dudley. 

Porteous, now retired, declined to comment for this story. 

Now, new pipeline projects head straight from west Texas to the Gulf of Mexico, a route well south of Cushing. Lately, Permian Basin prices have declined because pipelines can’t be built fast enough to get crude to the Gulf, even as pipeline firms have added about 600,000 bpd in capacity since late last year, according to data compiled by Reuters.
“We’re trying to make sure we’re ahead of the pinch points for producers to bring product to refiners or to export,” Greg Armstrong, chief executive of Plains All American, said at a recent industry conference. 

Projects in the works could boost outgoing pipeline capacity from the Permian from 2.7 million bpd in March to more than 4.5 million bpd by the end of 2019, according to energy industry information provider Genscape. 

Meanwhile, the Dakota Access pipeline started shipping oil last year, running out of North Dakota’s Bakken shale region to the Gulf - bypassing Cushing. And Marathon Petroleum is considering reversing its Capline crude line to bring barrels from Illinois to the Gulf.


For now, traders watch the price differential between WTI and London-based Brent crude to determine where to ferry shipments globally. 

But traders say the price of physical trades in Houston is growing more important as a barometer for shippers. Earlier this year, even as the WTI crude discount to Brent WTCLc1-LCOc1 narrowed, Houston’s discount to Brent remained steady at about $1.60 a barrel, analysts said, helping buoy export demand. 

As pipeline capacity to the Gulf has increased, and storage has expanded, demand to park barrels in Cushing has waned, said Carlin Conner, chief executive at SemGroup Corp (SEMG.N), which operates about 7.6 million barrels of crude oil storage in Cushing. 

SemGroup Corp (SEMG.N)


A spokesman for Magellan Midstream Partners, which owns about 12 million barrels of Cushing storage, said it will remain important because of its connections to the Gulf and Midwest. 

Cushing is also connected via pipeline to the Gulf, 500 miles to the south, and can offer cheaper storage than what’s available on the coast, said SemGroup’s Conner. 

“I believe Cushing’s next chapter,” he said, “is that it’s going to become an offsite Gulf Coast storage center.” 

Reporting by Devika Krishna Kumar in New York; Additional reporting by Jessica Resnick-Ault in New York; Editing by David Gaffen, Simon Webb and Brian Thevenot

OPEC Political Crises Threaten to Double Its Million-Barrel Cut

  • Trump seen likely to re-impose sanction on Iranian oil exports
  • Venezuelan output is the lowest in decades and still falling
The deal OPEC struck in 2016 to clear a global glut by halting a significant chunk of oil production took almost a year of bargaining and brinkmanship. By year-end, the group may have lost the same amount of crude unintentionally.

The Organization of Petroleum Exporting Countries is already cutting daily production by much more than its pledged 1.2 million barrels. Venezuela’s economic crisis is battering its oil industry and pushing output to the lowest level in decades, with a further decline likely. If U.S. President Donald Trump also reimposes sanctions on Iran, the cartel’s unplanned losses could swell to double the targeted cut.

That would pose a dilemma for Saudi Arabia and Russia, the leaders of the cuts agreement. Should they let the oil market get even tighter, but run the risk that higher prices hurt demand or spur an even bigger wave of American shale-oil? Or should they fill the gap by increasing production, but in the process unravel their historic agreement prematurely?

“When we think about the year end, it’s Iran in combination with Venezuela,” said Helima Croft, head of commodity strategy at RBC Capital Markets LLC in New York. “We could have a snap-back in U.S. sanctions on Iran. In Venezuela, it’s a slow bleed -- the losses just keep adding up.”

Venezuelan Slump

Saudi Arabia and Russia, for years oil-market rivals, assembled a coalition of 24 OPEC nations and non-members to eliminate the surplus created by the U.S. shale boom. The accord has exceeded expectations. Excess inventories will be gone in two to three months, according to the International Energy Agency, and Brent crude prices are above $70 a barrel, the highest in three years.

The collapse of Venezuela’s oil industry has aided the wider group’s efforts. The nation’s daily production of 1.5 million barrels is 560,000 barrels lower than October 2016 -- the starting point specified in the cuts agreement. That’s more than five times its pledged reduction.

The Latin American country’s economic crisis shows no sign of abating and output may slump to 1.1 million barrels a day by the end of the year, according to consultant Rapidan Energy Group in Washington. The decline will be even steeper if the U.S. follows through on threats to impose new sanctions after elections scheduled for May, Rapidan said.

Iran Sanctions

The loss of that much Venezuelan crude would tighten oil markets significantly more than OPEC and its allies intended. The growing tensions between the U.S. and Iran could make the supply deficit even more severe.

Next month, President Trump will review America’s commitment to an international agreement that restricted Iran’s nuclear activities in exchange for relief from sanctions. He has been fiercely critical of the accord and recently fired top officials who were supportive of the deal, replacing them with more hostile figures.

There’s a 70 percent likelihood that Trump will abandon the pact and reintroduce sanctions on oil sales, said Mike Wittner, head of oil market research at Societe Generale SA. That would curb Iran’s exports by about 500,000 barrels a day, he estimates.

Under the terms of the 2016 OPEC deal, Iran didn’t have to reduce production because it was still recovering from the last round of international sanctions. So a half-million-barrel drop in its output, combined with the loss of 900,000 barrels a day of Venezuelan crude beyond its pledged reduction, would double the group’s intended cut.

High Risk

The situation in both countries is highly uncertain and the direst predictions may not be fulfilled. America’s European allies are keen to preserve the accord with Iran, which could mean the impact of renewed U.S. restrictions on oil sales would be limited, said Olivier Jakob at consultants Petromatrix GmbH in Zug, Switzerland. Venezuela’s state oil company has so far managed to avoid defaulting on its debt, although it shows no sign of having the resources required to reverse the slide in production.

Still, the likely outcome is that OPEC’s efforts to tighten the market will go further than intended and “the inventory draw will be more than the target,” said Ed Morse, head of commodities research at Citigroup Inc. in New York.

That would give Russia and Saudi Arabia the dilemma of whether to continue restraining production or restore it. It’s not clear which they would choose.

Before OPEC and Russia agreed to extend their cuts last year, Moscow voiced concerns that letting prices rise too high would only stimulate more production in the U.S.. More recently however, Energy Minister Alexander Novak echoed Saudi support for continuing the curbs until the end of 2018 as planned and spoke of the cooperation lasting indefinitely.

Maintaining the cuts and allowing a significantly tighter market would align with Saudi Arabia’s desire for an oil price of about $80 a barrel to support the valuation of Aramco before an initial public offering. Yet it may also be inclined to boost output to take market share from regional antagonist Iran, just as it did in the last round of sanctions in 2012.

“Saudi Arabia increased its production the last time Iran was under sanctions,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt. “Is it going to be different this time around?”

Tuesday, April 10, 2018

Kinder Morgan stops spending on Canadian crude oil pipeline expansion as risks outweigh rewards

Kinder Morgan is close to pulling the plug on a planned expansion of its Trans Mountain crude oil export pipeline, designed to provide the land-locked province of Alberta with opportunities to send 590,000 b/d of heavy and light barrels to refineries in Asia and the US West Coast, in the face of relentless opposition from stakeholders that is now threatening to erode its shareholder value, the company said Sunday.

Already some C$1.1 billion ($860 million) has been spent on the project since its initial filing with the federal regulator the National Energy Board in 2013, it said, noting going forward no additional shareholder resources will be committed.

The expansion was estimated to cost C$7.6 billion and is aimed at putting 600 miles of new pipe to the ground, installing 12 new pump stations and three export berths at Vancouver, Kinder Morgan said in mid-February. At the time it said the project was targeted to start up in December 2020, a year later than earlier forecast.

That scenario changed Sunday, which Kinder Morgan attributed to project opposition by the province of British Columbia and a failure of the federal government in Ottawa to resolve the issue, despite the planned pipeline expansion already receiving regulatory and government approvals.

"A company cannot resolve differences between governments," Kinder Morgan CEO Steve Kean said in a statement. "While we have succeeded in all legal challenges to date, a company cannot litigate its way to an in-service pipeline amidst jurisdictional differences between governments."

Despite the expansion being backed by the Alberta and the federal governments and a bulk of the stakeholders along the pipeline route, including 43 First Nations bands, the fact remains a substantial portion of the pipeline must be contracted through British Columbia, Kean said.

Since a change of government in British Columbia in June 2017, that government has been clear and public in its intention to use "every tool in the box" to stop the project, he said.

The uncertainty created by British Columbia has not been resolved, but instead has escalated into an inter-governmental dispute, Kean said.

"While we are prepared to accept the many risks traditionally presented by large construction projects, extraordinary political risks that are completely outside of our control and that could prevent completion of the project are risks to which we simply cannot expose our shareholders," said Kean.


Disallowing Kinder Morgan from expanding the Trans Mountain pipeline by taking the matter to court was one of the promises on which the New Democratic Party had fought elections, said Peter Howard, chairman emeritus with the Canadian Energy Research Institute.

Since taking over power, it has spared no effort to throw spanner in the works and ensure delays in starting onsite construction work, Howard said.

"Section 19 of the Canadian constitution says energy projects that are of a national interest are guided by the federal government rather that a province," Howard said.

What the British Columbia government has done now is effectively challenged that section, Howard said.

"We campaigned with a view to protect our coast, land and water," British Columbia Premier John Horgan, told reporters on a webcast. "The Prime Minister [Justin Trudeau] has said this is a project of national importance. But we respectfully disagree. We believe the risk of an environmental spill is too great."

Alberta Premier Rachel Notley said the province will do whatever it takes to get the Trans Mountain pipeline expanded, including taking a stake in the project.

"We are prepared to be an investor," she told reporters in a webcast. "This pipeline must be built and a federal approval of the project must be worth more than the paper it was written on. Ottawa needs to set up."

Trans Mountain Expansion is in the national interest and the Canadian government is determined to find a solution, James Carr, the federal natural resources minister, said in statement, without giving any details.


Kinder Morgan will continue talks with shippers and its shareholders until May 31 before taking a final call on not moving ahead with the planned expansion, Kean said. The project is underpinned by firm 15-20 year firm commitments and has the backing of about 13 oil sands producers including Cenovus, Imperial Oil, Suncor, Total, Husky Oil and Devon Energy.

No comments were immediately available from these shippers.

Japanese refiner Cosmo Oil, which has said it is interested in taking Alberta's diluted bitumen once the expanded Trans Mountain pipeline starts up, said Monday it was still gathering information on Kinder Morgan's announcement Sunday.

Cosmo Oil will continue to monitor the fate of Trans Mountain expansion, as well as pay close attention to Canadian crude exports, said an official at parent Cosmo Energy Holdings.

Cosmo Oil said earlier it sees Canadian crudes as not only helping diversify its supply sources, but also in line with the Japanese government's new regulatory directive to process more residues from heavy crude oil.

The company also sees Alberta's bitumen exports from Vancouver on Aframax tankers helping to increase its oil procurement flexibility as the imports will take around 11-12 days, compared with close to 30 days from the US Gulf Coast via the Panama Canal.

--Ashok Dutta,
--Takeo Kumagai,

Monday, April 9, 2018

US' LOOP loads 2nd VLCC crude export cargo; Shell again charterer: market sources

VLCC Nave Photon / IMO: 9371608

The Louisiana Offshore Oil Port has successfully loaded its second direct-to-VLCC export of US crude, a source familiar with the matter said Tuesday, with market sources suggesting that the VLCC Nave Photon is laden with the Gulf of Mexico medium sour grade Mars and chartered by Shell, which also was responsible for the first export VLCC out of LOOP last month.

LOOP declined to comment Tuesday, and Shell did not respond to a request for comment.

S&P Global Platts vessel-tracking software cFlow showed the Nave Photon in the US Gulf of Mexico on Tuesday, southeast of LOOP's offshore mooring stations. Data showed the tanker arrived in LOOP waters March 15 and departed Sunday. That 10-day time frame is slightly longer than the length of time it took for the first direct-to-VLCC export of crude in the US Gulf Coast. In mid-February, Shell loaded the continental US' first direct-to-VLCC export of US crude. Shell loaded Mars onto the VLCC Shaden, with Unipec reportedly looking to take the crude itself into China. The Shaden arrived at LOOP on February 11 and sailed February 18. Platts cFlow on Tuesday showed the Shaden in the Indian Ocean with an estimated arrival at Rizhao, China, on April 12.

LOOP is currently the only US Gulf Coast export facility that does not require Aframax or Suezmax vessels for reverse lightering onto a VLCC. If, for example, an exporter uses an Aframax at a daily rate of about $300,000 $340,000, that could add as much as 60-68 cents/b to the export cost, depending on how much crude is loaded onto the VLCC, a ship that typically holds around 2 million barrels.

--John-Laurent Tronche,

--Alan Tomczak,

--Edited by Lisa Miller,