Monday, October 31, 2016

GE to Combine Oil and Gas Business With Baker Hughes


General Electric Co. reached a deal to combine its oil-and-gas business with Baker Hughes Inc., creating a publicly traded energy powerhouse that would give GE a cost-effective way to play any recovery in the industry.

GE will contribute its oil-and-gas business and $7.4 billion through a special one-time cash dividend of $17.50 for each Baker Hughes share. The new company will be publicly traded on the New York Stock Exchange and will be 62.5% owned by GE and 37.5% owned by Baker Hughes shareholders.
The Wall Street Journal reported last week that the companies were in talks about a potential transaction.

A combination creates a company with more than $32 billion in revenue that could cut costs to better compete with rivals such as Schlumberger Ltd. to provide equipment and services to oil rigs and wells. It would enable GE to benefit from an expected recovery in the industry without having to pay for a full acquisition of Baker Hughes. It would also enable the companies and their shareholders to benefit from savings and other synergies from putting the two businesses together.

After two brutal years for the oil-and-gas business, GE and some of its rivals in the industry have begun to see signs of hope. Crude prices, which plunged to $30 a barrel this year from more than $100 in 2014, have rebounded to around $50 recently.

GE expects the deal to add about 4 cents to its earnings per share in 2018 and 8 cents by 2020.

Lorenzo Simonelli, chief executive of GE Oil & Gas, will be chief executive of the new company and GE Chief Executive and Chairman Jeff Immelt will be its chairman. Baker Hughes Chairman and Chief Executive Martin Craighead will serve as vice chairman. The board of the new company will consist of five directors appointed by GE and four appointed by Baker Hughes.

GE shares rose 1.1% to $29.57 in morning trading in New York as Baker Hughes shares increased 0.2% to $59.22.

GE provided glimmers of improvement in the energy sector from the third quarter, noting that U.S. rig and well counts remained down 50% from the previous year but had ticked upward in the previous three months. Still, orders for services were down across all of GE’s oil business, the company said.

General Electric CEO Jeff Immelt Photo: Steven Senne/Associated Press 
In recent public comments, GE has said it is still committed to the oil and gas unit for the long term, but GE said operating profit in the unit will be down by 30% for the year. GE is cutting more than $1 billion in costs out of the company over two years.

The announced deal comes in what has already been a strong year for mergers and acquisitions. Such strength defies conventional wisdom, coming less than two weeks before the presidential election. The fact that companies are inking mergers at a breakneck pace ,without knowing who the next president will be, shows how strong the imperative to consolidate across industries is, bankers say. 

There is no guarantee a GE-Baker Hughes deal will be completed. The last merger agreement Baker Hughes entered into—a $35 billion proposed union with Halliburton Co.—was rejected by antitrust regulators this year amid a tough environment for deals in Washington. 

Before Baker Hughes and Halliburton had to abandon their merger plans, the companies held talks with GE to sell a package of assets valued at more than $7 billion to help win regulatory approval. 

A combination with Baker Hughes would be among GE Chief Executive Jeff Immelt’s biggest deals. The company has done more than $14 billion of acquisitions since 2007 to build its oil-and-gas business.

Mr. Immelt has pledged to be opportunistic about acquisitions in the segment and predicted that GE would exit from the oil downturn with a lean organization and a strong position against competitors such as National Oilwell Varco Inc. and Schlumberger.

Activist Trian Fund Management LP last year took a $2.5 billion stake in GE and has said the company must be more “disciplined” in its deal making. GE shares had done little since then and are still well below their high of more than a decade ago.

Baker Hughes has its own activist holder. ValueAct Capital Management LP purchased a stake after the Halliburton deal was announced that is now at 7%. ValueAct had suggested Baker Hughes could sell at least some of its businesses.

Write to Dana Cimilluca at, Dana Mattioli at and David Benoit at

Goldman Sachs Upgrades Chevron (CVX) and Adds Stock to Conviction Buy List


Goldman Sachs upgraded Chevron (NYSE: CVX) from Neutral to Conviction Buy with a price target of $118, implying upside of 14%. Analyst Neil Mehta thinks Chevron is at inflection in terms of production growth, free cash flow generation and the relative multiple. 

Mehta explained, "First, we see a strong volume improvement story after a decade of relatively flat production, driven by: (1) Australia/Africa LNG projects, which now appear on track for growth; (2) the Permian in the US; and (3) long-term, from Tengiz in Kazakhstan. Second, as new projects ramp and oil prices improve to $50-$60/bbl WTI, we forecast a robust free cash flow improvement, more than covering the dividend yield of 4.2%. Third, we expect CVX will see further relative multiple expansion vs. XOM with ROCE improvement."

Discussing catalysts, the analyst said, "We see a series of positive catalysts over the next 12 months that we believe can help to unlock value at Chevron. In 4Q2017 results, we project a major step-up in production and cash flow from Gorgon and ALNG, providing evidence of LNG project execution. We expect the acceleration in asset sales, with as much as $8 bn in asset sales possible by YE2017, particularly in downstream. Additionally, we expect the company to provide more details on its Permian acreage and growth plans, which we view as a premier asset in the Chevron portfolio, particularly at the March 2017 analyst day."

For an analyst ratings summary and ratings history on Chevron click here. For more ratings news on Chevron click here.

Shares of Chevron closed at $103.82 yesterday.

Friday, October 28, 2016

Shipping Markets


In general VLCC chartering activity was slower during the week. 
Older tonnage built up in the MEG weighing down on rates, which fell to mid-WS50’s MEG/East, Fearnleys reported.

The tonnage list was somewhat thinner for the more modern VLCCs, as owners clearly expected rates to firm throughout the winter.

However, West Africa/East rates did not fall nearly as much as seen in the MEG and the rate difference between the trades widened by about WS10 points. Owners expected volumes to increase and rates for now may have bottomed out, Fearnleys said.

Suezmaxes in West Africa fell to WS67.5 levels as the tonnage hangover from October began to bite.
As the week progressed, there has been further softening and rates plateaued at WS65 for TD20.

Meanwhile, eyes have been focussed on the Novorossiysk and CPC programmes where activity picked up but the availability of ships has also increased due to West Med tonnage ignoring West Africa and focusing on the better TCE returns ex Black Sea.

The coming week will be challenging for owners in West Africa, as the latter part of the 2nd decade is overtonnaged due to sparse activity. The Black Sea is expected to stabilize as the heavy programme continues.

Last week was fairly busy in the North Sea and Baltic, and an increase in rates was expected by the majority of owners. The result was year to date’s smallest and most short-lived spike going up a staggering WS2.5 points for nearly a day.

However, softening rates for the week to come should be expected, due to upcoming maintenance at Primorsk.

In the Black Sea and Med, it has been an interesting week for everyone involved. Rates were under pressure at the end of last week, and high WS80s was paid from Black Sea early November loading dates.

After the weekend, we saw more prompt tonnage in place, and three cross-Med market quotes made owners give up putting the market back at low WS70s. The Black Sea programme should get extremely busy from next week, so the market has some upward potential for the rest of the month, Fearnleys concluded.

Sale and leasebacks are becoming an increasingly popular way of financing.

One of the latest deals to come to light was Singapore-based product tanker owner and operator BW Pacific’s sale of two LR1s on a lease back basis.

The vessels were thought to be the 2006-built ‘Compass’ and ‘Compassion’ which were said to have been sold to China’s Bank of Communications.

The price was not disclosed but each tanker was chartered back to BW Pacific for seven years.

Bank of Communications had earlier agreed sale and leaseback agreements for five MRs with commodity trader Trafigura.

Navig8 Product Tankers has taken delivery of the LR2 ‘Navig8 Guide’ from Guangzhou Shipyard International Co (GSI), formerly CSSC Offshore & Marine Engineering (Group) Co.

‘Navig8 Guide’ is the fourth of eight vessels contracted at GSI to be delivered to the company and is the fourth vessel to be delivered under the sale and leaseback agreements entered into with CSSC (Hong Kong) Shipping Co (CSSC).

Following her delivery from GSI, the LR2 was delivered to CSSC under the terms of the sale MOA and then taken back by the Company under a bareboat charter.

She has joined Navig8 Group's Alpha8 commercial pool.

Meanwhile, Navig8 Chemical Tankers has taken delivery of the ‘Navig8 Stellar’, a 25,000 dwt stainless steel chemical tanker from Kitanihon Shipbuilding.

She is the fourth of six vessels contracted at the yard to be delivered to the company and is the second and final vessel to be delivered under the sale and leaseback arrangements entered into with subsidiaries of SBI Holdings.

‘Navig8 Stellar’ will be operated in Navig8 Group's Stainless8 commercial pool.

Gener8 Maritime took delivery of the VLCC ‘Gener8 Miltiades’ on 25th October, 2016 from Shanghai Waigaoqiao Shipbuilding (SWS). She is the 16th of 21 VLCCs due for delivery into Gener8 Maritime's fleet.  

Upon delivery, ‘Gener8 Miltiades’ entered Navig8 Group's VL8 Pool.

She is the sixth VLCC to be delivered by SWS, concluding the company’s new building programme at the yard.

Tsakos Energy Navigation (TEN) has taken delivery of the Aframax ‘Leontios H’ from Daewoo Mangalia Heavy Industries.

‘Leontios H’ entered into a long term contract to a northern European charterer that could generate gross revenues in excess of $100 mill, TEN said. She is the third vessel in a series of nine purpose built Aframax tankers on long term time charters at accretive rates.

The company also reported the delivery from Hyundai Heavy Industries of its second LNGC, the 174,000 cu m TFDE ‘Maria Energy’ and immediate charter to a major end-user for a minimum 18 months and a maximum of three years, which could generate gross revenues in excess of $70 mill if options were exercised.

George Saroglou, TEN COO, said. "Following the delivery of the ‘Leontios H’, TEN is in the midpoint of its 15 vessel growth program. With eight more tankers scheduled for delivery over the next five quarters, a minimum of $720 mill will be added to TEN's secured revenues from new vessels. This increases the company's minimum secured income to $1.5 bill and further solidifies TEN's bottom-line and provides healthy cash visibility going forward.”

d’Amico International Shipping (DIS) has launched three tankers at the Vietnamese shipyard Hyundai Vinashin Shipyard  - one Handysize (recently delivered) and two MRs.
The total investment in the three ships amounted to $104 mill.

With the delivery of the ‘Cielo di Salerno’ on 21st October, DIS’ fleet includes 51.8 ships. The delivery of the MR ‘High Wind’ is expected in the first half of November, 2016, while her sistership ‘High Challenge’ will be in operation by the start of 2017.

One of the tankers has already been chartered to an international oil major for three years, while the others will be placed on the spot market, DIS said.

“We have added three new assets of great value to our fleet, which is among the most innovative and updated on the international panorama,” said Paolo d’Amico, DIS chairman. “We are successfully working in partnership with a shipyard of the highest calibre, Hyundai Vinashin Shipyard, which guarantees us ecological, safe and exceptionally performing ships to offer our clients.”

In the charter market, broking sources reported the fixture of the 1999-built VLCC ‘Ridgebury Pioneer’ to Litasco for six months at $29,500 per day.

The 2000-built Suezmax ‘Sri Vishnu’ was said to have been fixed to BPCL for two years at $18,700 per day.

Jellicoe was believed to have taken the 2006-built Aframax ‘Jag Lyall’ for 12 months at $15,500 per day, while the 2003-built Aframax ‘Astro Sculptor’ was said to have been fixed to Teekay for 12 months at $17,000 per day.

Stena Bulk was thought to have fixed the 2015-built MR ‘Essie C’ for 12 months at $12,750 per day, while Koch was said to have taken the 2012-built MR ‘Nave Aquila’ for six months at $11,500 per day.
Frontline’s two VLCCs - the 1999-built ‘Front Circassia’ and the 2001-built ‘Front Ariake’ were believed sold to Russian interests for $50 mill en bloc.

Reported to be leaving the fleet was the 1994-built VLCC ‘Progress’ believed sold to Bangladesh breakers on private terms. She had been recently used as a storage vessel.

There were a few more orders reported this week. 

For example, Nordic American Tankers (NAT) has confirmed that it had entered into agreements with Samsung Heavy Industries for the construction of three Suezmaxes to be delivered during the second half of 2018. 

"This is another large step forward for Nordic American," said chairman and CEO Herbjørn Hansson. "By adding these ships, we substantially increase the dividend capacity and bolster our earnings potential. We believe that our solid balance sheet as well as our well-defined and transparent operating model are elements supporting the competitive position of NAT. The stock issue of about $120 mill that we completed 30th September, will part finance this transaction. A 33 vessel homogenous Suezmax fleet is making NAT stronger and the company becomes even more attractive for our customers."

Gulf Navigation (GulfNav) has formed a strategic long-term partnership with Wuchang Group, which has led to the ordering of six chemical tankers.

Khamis Juma Buamim, Gulf Nav board member, managing director and Group CEO, said "This partnership with Wuchang Heavy Industry Group, which is one of the largest companies worldwide in its field, is a significant step that will enable us to strengthen the company’s capabilities by expanding our fleet with modern and advanced tankers. This will enhance our competitiveness in the transfer of chemicals; a market that is steadily expanding and is witnessing increasing demand.

“We started with Wuchang Group by signing an agreement to immediately begin building six chemicals tankers. At the same time, we discussed with them co-operation opportunities in various areas. One of the most important pillars of this agreement is to pave the way for Chinese investors and attract them to work in the local market, which will reflect positively on the region as a whole,” Buamim said.

A few smaller units were also ordered by Baltic Sea-based owners.

These included two dual fuel Ice Class 1A 25,600 dwt chemical tankers for ESL Shipping, contracted at Jinling for 2017-2018 deliveries. 
Furetank and Älvtank have also extended their orders with two more intermediate product/chemical tankers with LNG propulsion. They will be operated in the Gothia Tanker Alliance.

The latest two will also be built at Avic Dingheng Shipbuilding to the same design as the other vessels. They will be delivered during 2018/2019.

Including the previous order, Gothia Tanker Alliance now has six tankers on order - three for Furetank, two for Älvtank and one for Thun Tankers. They will be commercially managed by Furetank Chartering.

Worldwide fuel sulphur cap agreed for 2020

Approved Stamp Royalty Free Stock Images

On Thursday, the IMO rubber stamped 2020 as the start date for the 0.5% m/m global sulfur cap on bunkers.
This decision was taken this week at MEPC 70 following the outcome of a review, which was submitted to the session. 

A steering committee consisting of 13 member states, one intergovernmental organization and six international non-governmental organizations had overseen the review.

The original MARPOL rule, limiting sulfur oxide emissions from ships, provided for a 0.5% global cap to be implemented on 1st January, 2020, but also required a review of the availability of the required fuel oil to be carried out and concluded by 2018. 

If the review found that the required fuel would not be available in time, the 1st January 2025 would have been the new date for the sulfur cap.

More details were due to be released later today, after Tanker Operator News was due to be circulated.

We will publish a roundup of other major decisions taken at MEPC 70 next week, including any news on the controversial ballast water equipment standards.  

Thursday, October 27, 2016

Don’t underestimate China’s capacity to import crude oil

The above is an extract from an upcoming quarterly report on the outlook for the tanker market by Richardson Lawrie Associates Ltd (RLA), a firm of international maritime economists and business consultants. More information can be found at

For much of the year, there have been concerns that the slowing pace of Chinese economic growth and burgeoning refined product stocks would lead to a softening in China’s appetite to import oil. However, the latest figures for September show a record level of imports (8.04 million b/d) up 18 per cent year-on-year. As shown in the chart below, we estimate that China’s full year imports are set to increase by 14 per cent, which is by far the fastest rate of growth this decade.

There are a number of factors underpinning the surge in imports, including the significant volume of deliveries generated by contracts signed in July when renewed selling pressure pushed crude below $42 a barrel, the decline in Chinese domestic crude oil production, and rekindled activities from refineries – including teapot refineries ‒ looking to increase deliveries as the maintenance season comes to an end. However, perhaps the most important factor is China’s apparently insatiable hunger to add to its storage reserves during the current era of low oil prices.

One reason why stocking is not more often proclaimed as the potential saviour of Chinese import demand is because the exact size of Chinese reserve capacity is uncertain.

Despite occasionally releasing data, China is under no obligation to provide accurate storage numbers – whether SPR or commercial – and this has created problems with estimating China’s crude oil demand because nobody really knows what the storage capacity is. Some commentators, like JP Morgan, believe that China’s reserves are full, while others, like Orbital Insight and Energy Aspects Ltd, believe that China has much greater reserve capacity than previously thought and will keep filling it while prices are low. The difference between these positions is equivalent to an adjustment in China’s forecast crude oil import demand estimates of 1.1 million b/d.

So opaque is the information about Chinese reserve capacity that, eschewing the occasional official pronouncements, monitors are forced to rely on counting ships or studying satellite imagery. For example, Orbital Insight calculates China’s unreported oil supplies and oil storage capacity by analysing high-resolution satellite images of the country’s storage facilities. The company uses algorithms to quantify oil supply and oil capacity by monitoring the changing shadows cast by the floating roofs of the storage tanks, which rise as supply increases and fall as supply decreases.

Despite the best efforts of monitors, they may still fail to capture the complete picture of the size of Chinese reserve capacity. For example there are accounts that the government has been building an additional network of emergency storage sites dotted around the country, which include underground caverns by the Yellow Sea and a scattering of islands in the Yangtze River delta.

The reason China chooses to keep the details of its storage capacity partially obscured is probably that it sees commercial advantage in this strategy. Whatever the reason, it is certainly giving the market pause for thought, and it may just be that while oil prices remain low, China will continue to maintain high levels of crude oil imports, thus providing an important support to tanker freight rates over the coming months.

Wednesday, October 26, 2016

Oil back above $50 after another surprise U.S. crude draw

A worker walks past a drilling rig at a well pad of the Rosneft-owned Prirazlomnoye oil field outside the West Siberian city of Nefteyugansk, Russia, August 4, 2016. REUTERS/Sergei Karpukhin/File Photo
A worker walks past a drilling rig at a well pad of the Rosneft-owned Prirazlomnoye oil field outside the West Siberian city of Nefteyugansk, Russia, August 4, 2016. REUTERS/Sergei Karpukhin/File Photo

Oil prices recovered most of their early losses on Wednesday, with Brent returning to above $50 a barrel, after the U.S. government reported a drawdown in domestic crude stocks that extended a trend of unexpected inventory declines this autumn.
The U.S. Energy Information Administration (EIA) said domestic crude stockpiles fell 553,000 barrels last week, against a 1.7 million-barrel build forecast by analysts polled by Reuters. 

A preliminary report from trade group American Petroleum Institute on Tuesday suggested a build as high as 4.8 million barrels for the week ended Oct. 21.

Brent crude futures LCOc1 were down 27 cents, or 0.5 percent, at $50.52 a barrel by 10:49 a.m. (1439 GMT). They earlier touched a session low of $49.65, the weakest since Sept. 30.

U.S. crude futures CLc1 were down 2 cents at $49.94, after earlier dropping to $48.87, the lowest since Oct. 4.

With last week's drawdown, U.S. crude stocks have fallen unexpectedly in seven of the past eight weeks.

Crude stocks generally rise at this time of year as refineries go into maintenance. Refinery utilization in the week to Oct. 14 was down to 88 percent from nearly 94 percent in early September.

(Additional reporting by Amanda Cooper in LONDON and Henning Gloystein and Keith Wallis in SINGAPORE; Editing by Jeffrey Benkoe and Meredith Mazzilli)

Tuesday, October 25, 2016

OPEC to curb supply

  • Output cuts ‘not an option for us’: IFX cites Russian envoy
  • U.S. stockpiles probably rose by 2 million barrels: survey
Crude fell to a one-week low as speculation mounts that Russia won’t join OPEC to curb supply and analysts predict U.S. stockpiles climbed.

Futures dropped 1.1 percent in New York. Output cuts aren’t “an option for us,” said Russia’s envoy at OPEC, Vladimir Voronkov, according to Interfax. The producer group has wanted Russia to join it in curbing shipments to support prices. U.S. crude supplies probably rose 2 million barrels last week, a Bloomberg survey showed before Energy Information Administration data Wednesday. Oil came off its lows as the dollar retreated against its peers.
Oil has fluctuated near $50 a barrel amid uncertainty about whether the Organization of Petroleum Exporting Countries can implement an accord to cut output when its members gather in November. A committee will meet this week to try to resolve differences over how much individual members should pump. Last month’s OPEC deal pushed prices higher, bringing some drilling back in the U.S., which has in turn prevented crude from making new highs.

“The nonsense around the production agreement comes in and out of the market,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “It’s coming out of oil today because of the Russian statements, which come after Iraq made it clear that they weren’t going to make a cut.”

West Texas Intermediate for December delivery slipped 56 cents to settle at $49.96 a barrel on the New York Mercantile Exchange. It’s the lowest close since Oct. 17. Total volume traded was 15 percent below the 100-day average.

Brent for December settlement dropped 67 cents, or 1.3 percent, to $50.79 a barrel on the London-based ICE Futures Europe exchange. It’s the lowest close since Sept. 30. The global benchmark ended the session at an 83-cent premium to WTI. 

U.S. Stockpiles

U.S. crude supplies dropped to 468.7 million barrels in the week ended Oct. 14, the lowest since January, according to EIA data. Inventories have declined in six of the past seven weekly reports.
“The most important dynamic that’s been a surprise is the drop in U.S. supplies,” said Jay Hatfield, the New York-based portfolio manager of the InfraCap MLP ETF with $120-million in assets. “The OPEC agreement brought the rally forward by a few months. It was going to happen early next year because of supply and demand.”

Saudi Arabia faces the prospect of much deeper -- and financially painful -- oil production cuts after Iraq joined the queue of group members seeking immunity from the deal hatched in Algiers. Iraq is the fourth OPEC member -- after Iran, Nigeria and Libya -- to seek an exemption. Iraq shouldn’t have to take part because it’s embroiled in a war with Islamic militants, Oil Minister Jabbar Al-Luaibi said Sunday in Baghdad.

Mind Boggling

“The idea that they will come together and form a coalition to make cuts is mind-boggling,” said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania.

Iraq could accept a decision to freeze output based on an “actual” production level of more than 4.7 million barrels a day rather than the lower figure OPEC uses from secondary sources, Oil Ministry spokesman Asim Jihad said Tuesday. The organization pegs Iraqi production at less than 4.2 million barrels a day.

OPEC Secretary-General Mohammed Barkindo said the 14-nation group is facing its toughest challenge after meeting Al-Luaibi for talks in Baghdad Tuesday. The organization is also trying to woo non-OPEC producers to join in the cuts.

So far this month, Libya and Nigeria have managed to increase their daily output by 220,000 barrels and 300,000 barrels respectively. Iran has steadily increased production since sanctions were lifted at the start of the year. Tehran has repeated it aims to ramp up its output to around 4 million barrels day from around 3.7 million a day estimated by OPEC for September.

“OPEC is not a well-oiled machine when it comes to implementing cuts,” Hatfield said. “Their credibility is low and they’re deeply divided politically.”  
Oil-market news:
  • Nigerian militants have attacked Chevron Corp.’s Escravos pipeline, Niger Delta Avengers spokesman Mudoch Agbinibo said in a Twitter post. Chevron’s Houston-based spokeswoman Isabel Ordonez declined to comment.
  • A key pipeline capable of carrying 400,000 barrels a day of crude to the Texas Gulf Coast from the largest U.S. storage hub at Cushing, Oklahoma, was shut after a spill late Sunday.

Monday, October 24, 2016

Trafigura Consortium Buy Indian Refining $10.9 Billion USD Retail Assets

Trafigura Logo

Trafigura-led consortium have bought Essar Oil Limited's (EOL) refining and retail assets for $10.9 billion, according to EOL.

The all-cash deal encompasses EOL's 20 million ton refinery in Gujarat, India, and its pan-India retail outlets. The closing of the transaction is conditional upon receiving requisite regulatory approvals and other customary conditions.

The parties expect to obtain the relevant approvals before the end of this year.

This transaction is the single largest tranche of foreign direct investment in India, and re-establishes the image of India as an attractive destination for foreign investments, Essar said. With the current transaction, this is the second instance that Essar has brought in world leaders in the sector to participate in the India growth story, it said.

Essar Energy Holdings Limited and Oil Bidco (Mauritius) Limited -- companies incorporated and managed under the laws of Mauritius -- the controlling shareholders of Essar Oil Limited (EOL), have entered into separate definitive

agreements for the sale of 98% of EOL.

The first sale and purchase agreement envisages the sale of 49% to Petrol Complex Pte. Ltd (a subsidiary of PJSC Rosneft Oil Company), and the second envisages the sale of the remaining 49% to Kesani Enterprises Company Limited (owned by a consortium led by Trafigura).

The total sale value was pegged at $10.9 billion, and another $2 billion will be paid for the acquisition of Vadinar Port, which has storage and import/export facilities.

The Indian refinery sale to Rosneft follows an OPIS report in March on Rosneft's plan to buy equity in Essar's Vadinar refinery, the second largest refinery in India.

Investing in EOL, which operates one of the world's most complex refineries and runs India's largest private sector retail network, gives the new stakeholders a strong foothold in the Indian market that will witness robust demand growth for petroleum products in the long term, Essar said. The growth for refined petroleum products in the Indian market for the next five years is expected to be in the 5%-7% range, it said.

EOL's value has also been strengthened by the integrated nature of its business and the strategic positioning of its assets, Essar said. Its 20-million-ton oil refinery in Vadinar, which accounts for 9% of India's total refining output, is

supported by a 1,010 MW captive power plant, and complemented by a network of around 2,700 operating retail outlets, the company said.

The additional $2 billion that the new stakeholders have agreed to pay is for the 58-million-ton deep draft port in Vadinar that helps in importing crude and exporting finished products, Essar said.

Rosneft Oil Company is the world's largest petroleum company with revenues in excess of $80 billion, according to Rosneft. The company's main business activities include exploration and production, refining and product marketing in Russia and across countries in North America, Latin America, Europe, Asia and the Middle East.

Trafigura Group is one of the world's largest independent commodity trading and logistics group of companies with revenues of approximately $100 billion. United Capital Partners (UCP) is a large independent Russian private investment group with investments of over $3.5 billion in various industrial sectors. 

Subsea 7 Wins Atoll Job


Subsea 7 was awarded a contract for wok offshore Egypt. The contract, deemed ‘substantial’ by the company, came from Pharaonic Petroleum Company for work on the Atoll field.

The scope of work under the contract calls for the EPCI of more than 40 km of rigid pipelines and associated structures for the new Atoll field, tying into the existing Taurt field at a water depth of 100 meters. A 105 km umbilical will also be installed linking the Atoll field to onshore facilities.

Engineering and procurement services have already commenced. Offshore campaigns will take place in H2 2017 and the early months of 2018, using the Subsea 7 vessels Seven Borealis, Seven Eagle, and Seven Arctic.

Friday, October 21, 2016

Great sign for the oil markets, floating oil storage has plummeted

In a clear sign that the glut is abating, oil in floating storage has plummeted in the past few months. 

Although the oil stored in ships is a relatively tiny portion of world oil inventory, it is a good early indicator of what is transpiring in the murky physical oil market. 

A rise in floating storage is driven by a confluence of cheap shipping and oil prices that are depressed near-term but higher long-term (known as a contango market), thus rewarding arbitragers who hang on to the oil rather than sell it on to end-user refineries. 

"The contango market is no longer working and Dubai is in backwardation," said the Energy Aspects chief oil analyst Amrita Sen, referring to a market with higher prices for prompt versus future delivery.

A floating production, storage and offloading ship owned by Petroleos Mexicans
Susana Gonzalez | Bloomberg | Getty
A floating production, storage and offloading ship owned by Petroleos Mexicans
Floating oil storage – defined as a full tanker docked for at least a week – "is a broad indicator to the extent there is a rebalancing and the crude overhang is being run down slowly", said Ms Sen, who added: "by no means is the crude overhang gone". 

Tracking the physical oil market, including floating storage, is a highly imprecise science. It involves various competing analysts using methods ranging from satellite tracking and algorithms to individuals standing on the shore with binoculars. 

Read more from The National:

One of the big mysteries in the market is Iranian oil stored in offshore tankers, which is excluded from Energy Aspects' data. 

Ellen Wald, an independent energy and geopolitics analyst, pointed out that there is dispute among analysts about how much Iranian oil is stored. 

The estimates range from 30 million barrels to 47 million barrels, with the difference giving very different signals about how much oil Iran is capable of producing at present. It was a key question during tense negotiations within Opec about whether and to what extent Iran might be required to contribute to production constraint if they can agree a deal by the end of November. 

"If Iran actually has had more oil in offshore storage than [some analysts] report, it could mean that Iran's production levels are less than otherwise believed and that its exports over the last few months have come from stored oil," Ms Wald said. 

Still, the virtual disappearance of non-Iranian floating oil storage – from an estimated 75 million to 80 million barrels to about 10 million barrels – is supported by data from the largest consuming countries. Commercial inventories in the wealthy OECD countries fell in August for the first time since March, and early September data for Japan and the US showed the trend continuing, according to last week's report from the OECD energy think tank, the International Energy Agency.

Bahri to be the largest VLCC operator in the world

 Image Courtesy: Bahri

The company, 20 per cent owned by Saudi Aramco has placed orders for ten new supertankers

Abu Dhabi: The National Shipping Company of Saudi Arabia (Bahri) is to be the largest VLCC (very large crude carrier) operator in the world after it acquires ten more super tankers in the coming years, a senior executive of the company told Gulf News in Abu Dhabi on Sunday.

“We placed orders for ten more VLCCs to be delivered in the next two years with an investment of $1 billion. We will be the largest VLCC operator once we have them,” said Matthew Luckhurst, line manager at Bahri general cargo.

The company has signed a contract with Hyundai Samho Heavy Industries last year to build the giant ships that are capable of carrying huge amount of crude oil in a single trip.

Currently, the company operates 36 VLCCs transporting crude from Saudi Arabia to the rest of the world. “There is growth in the market and we are committed to crude oil industry,” said Luckhurst without giving further details.

Bahri is the second largest owner of VLCCs in the world and the largest owner of chemical tankers in the Middle East.

The company owns 83 vessels including 36 VLCCs, 36 chemical, six multipurpose vessels and five dry-bulk carriers. It is 20 per cent owned by Saudi Aramco.

Matthews was speaking to Gulf News on the sidelines of a press conference to announce details Breakbulk Middle East conference that will be held in Abu Dhabi from October 23 to 26.

The conference will bring together the region’s leading shippers, carriers, freight forwarders, transport specialists and related service providers to discuss current trends in the market.

Thursday, October 20, 2016

Oil Traders Increase Risky Lending Even as Some Deals Go Bad

Trading houses’ lending to distressed producers and refiners is booming and cheaper than ever even though many are owed hundreds of millions of dollars after the collapse of some risky pre-financing deals.

The suspension of production at Morocco’s oil refinery Samir last year cost a string of trading firms and oil majors a total estimated at close to $1 billion (£0.82 billion), and similar arrangements this year have come under stress in Nigeria.
But executives from trading houses speaking at the Reuters Commodities Summit this week said appetite for such deals was rising as the levels of distress in the industry from a more than two-year price rout intensifies.

“That’s maybe the sweet spot for us,” BB Energy Chief Executive Mohamed Bassatne said. “Where we are willing to take the risk, get a foothold and develop that business.”

BB Energy had roughly $120 million tied up in Samir when it collapsed, and it is unclear whether it will recoup that.

Pre-financing is an arrangement under which those with money or access to it – such as oil trading houses – can give cash in advance to companies and countries who need it in exchange for oil, refined products or another form of payment.

When they go well, companies can get exclusive access to crude or oil products to trade on international markets.

But the deals are dicey. Those seeking money enter into such deals often because more traditional finance deals are unavailable for them or are more expensive due to higher risk.

“Every time these things happen, we look at ourselves and say we have to price risk more aggressively…correctly. And then we turn around and somebody else has cut the risk premium dramatically in terms of some other trade,” Vitol Chief Executive Ian Taylor said. “The market is very competitive.”

Vitol, the world’s largest trading house, also has dozens of millions of dollars trapped in Samir.


Part of the drive for risk is the cost of finance – with interest rates at multi-year lows, banks and others with capital are hungry for any investments that could bring a better return.

“Our view is…the risks are higher now, rather than lower, compared to a year and a half ago,” Gunvor Chief Executive Torbjorn Tornqvist said.

But financing costs, even on what would fall into the higher risk category, had not increased. “Generally we are living in a world where capital is less of a problem than it has ever been,” Tornqvist said.

Trafigura Chief Financial Officer Christophe Salmon said even though more banks are asking questions about commodity exposure before lending money to trading houses, the cost of borrowing has fallen over the past year. Global interest rates remain exceptionally low.

All trading executives said they had beefed up their compliance teams and examined deals more closely to ensure they are not caught out, although mistakes would still be made.

“We have seen defaults before and we will see more in the future,” said Glencore’s head of oil Alex Beard, whose company is one of Samir’s large creditors.

“That (pre-financing) has been a core part of the business, it’s been a good part of the business,” Beard said.

Wednesday, October 19, 2016

80% Of U.S. Oil Reserves Are Unaccounted-For


U.S. crude oil storage is filling up with unaccounted-for oil. There is a lot more oil in storage than the amount that can be accounted for by domestic production and imports.

That’s a big problem since oil prices move up or down based on the U.S. crude oil storage report. Oil stocks in inventory represent surplus supply. Increasing or decreasing inventory levels generally push prices lower or higher because they indicate trends toward longer term over-supply or under-supply.

Why Inventories Matter
Inventory levels have reached record highs since the oil-price collapse in 2014. This surplus supply is a major factor keeping oil prices low.

Current inventories are 45 million barrels higher than 2015 levels, which were more than 100 million barrels higher than the average from 2010 through 2014 (Figure 1). Until the present surplus is reduced by almost 150 million barrels down to the 2010-2014 average, there is little technical possibility of a sustained oil-price recovery.

Figure 1. U.S. Crude Inventories Are ~150 Million Barrels Above Average Levels. Source: EIA, Crude Oil Peak and Labyrinth Consulting Services, Inc.

U.S. inventories are critical because stock levels are published every week by the U.S. EIA (Energy Information Administration). The IEA (International Energy Agency) publishes OECD inventories, but that data is only published monthly and it measures liquids but not crude oil. It also largely parallels U.S. stock levels that account for almost half of its volume. Inventories for the rest of the world are more speculative.

Understanding U.S. Stock Levels

Understanding U.S. stock levels should be straight-forward. Every Wednesday, EIA publishes the Weekly Petroleum Status Report which includes a table similar to Figure 2.

Figure 2. EIA publishes adjustments and defines them as “Unaccounted-for Oil.” Source: EIA U.S. Petroleum Status Weekly (Week Ending September 16, 2016), Crude Oil Peak and Labyrinth Consulting Services, Inc.

The calculation to determine the expected weekly stock change is fairly simple:

Stock Change = Domestic Production + Net Imports – Crude Oil Input to Refineries

Domestic production and net imports account for crude oil supply, and refinery inputs account for the volume of oil that is refined into petroleum products. If there is a surplus, it should show up as an addition to inventory and a deficit, as a withdrawal from inventory.

But that’s not how it works because EIA uses an adjustment in order to balance the books (Table 1).

Table 1. Calculation of Crude Oil Stock Change. Source: EIA Petroleum Status Weekly, Crude Oil Peak and Labyrinth Consulting Services, Inc.

The logic is that estimated stock levels in tank farms and underground storage are relatively dependable and that any imbalance must be from less reliable production, net import or refinery intake data.

There is nothing wrong with adjustment factors if they are small in comparison to what is to be balanced. In the Table 1 example from September 2016, however, the adjustment is 60 percent of the stock change–a bit too much.

A one-off perhaps? No, it’s a permanent problem that has gotten worse during the last several years.

Figure 3 shows that crude oil supply and refinery intake of oil vary considerably on a weekly basis. The balance is cumulatively negative over time beginning with a zero balance in January 1983. That suggests that crude oil stocks should be falling over time but instead, they have been rising.

Figure 3. Difference between U.S. crude oil supply and refinery intake. Source: EIA Petroleum Status Weekly.

The vertical bars show the weekly crude supply from production and net imports either exceeding the refinery input requirements (positive, green) or not reaching these requirements (negative, red). The solid red line is the cumulative.

Between 1991 and 2002, the deficit increased to a whopping 1.3 billion barrels.

Looking at only recent history, an additional gap of nearly 200 million barrels developed as refinery intake exceeded crude oil supply for most of 2010 through 2014 (Figure 4).

Figure 4. Difference between U.S. crude oil supply and refinery intake 2002-2016 (12-month moving average values). Source: EIA Petroleum Status Weekly, Crude Oil Peak and Labyrinth Consulting Services, Inc.

Adjustments were introduced in late 2001 so let’s look at the period starting January 2002 (Figure 5).

Figure 5. EIA adjustments to supply to reconcile stock changes. Source: EIA Petroleum Status Weekly, Crude Oil Peak and Labyrinth Consulting Services, Inc.

There are both upward (blue) and downward (red) adjustments. Upward adjustments resulted in a 420-million-barrel stock increase over the period January 2002 through September 2016.

All together now

Expected or implied stock changes calculated from weekly crude oil balance indicate falling inventories from May 2009 through the present. Yet, EIA makes adjustments to that balance in order to match observed inventory levels. Rising inventories result after those adjustments are added to the physical balance or implied stock changes (Figure 6).

Figure 6. Unaccounted-for oil in U.S. storage: the result of adjustments to the supply balance. Source: EIA Petroleum Status Weekly, Crude Oil Peak and Labyrinth Consulting Services, Inc.

The green area represents the physical balance (crude production plus net crude imports minus crude refinery intake). The gray area shows the unaccounted-for (adjusted) stocks.

The adjustment for unaccounted-for oil averaged about 15 percent from 2002 through 2010. In 2016, almost 80 percent of reported stocks are from unaccounted-for oil.

When You Have Eliminated The Impossible
There is no obvious solution for the mystery of unaccounted-for oil in U.S. inventories. Possible explanations, however, include:

1. Crude field production is underestimated
2. Net crude oil imports are underestimated
3. Refinery inputs are over-reported
4. Crude oil stocks are over-reported
or any combination of those possibilities.

Production, imports and refinery inputs are taxable transactions. It is likely that reporting errors are largely self-correcting over time because of the financial incentive for government to collect its due.
State regulatory agencies are the source of production data. Their principal objective is to assess production taxes. It is unlikely that states would consistently under-estimate production and forego substantial tax revenue.

Also, producers must state crude oil production in their SEC (U.S. Securities and Exchange Commission) filings and pay federal income tax on revenues from oil sales. It seems improbable that the SEC and U.S. Treasury would consistently accept under-reported production and associated lower tax payments.

Crude oil imports are subject to both tariffs and excise taxes so it seems unlikely that the U.S. government would consistently fail to identify under-payment of those revenues.

Similarly, taxes are involved when refiners buy crude oil and sell refined products. It seems improbable that they would over-state those transactions and consistently over-pay associated taxes.

The principal components of supply balance—production, imports and refinery intake—are shown in Figure 7. In a general way, increased production and decreased imports tend to cancel each other out. Refinery intake has increased since about 2010.

Those trends determine the physical balance or implied stocks. The inescapable conclusion is that implied stocks (in light blue) are substantially less than reported stocks (in gray).

Adjustments for unaccounted-for oil are unreasonable and out of proportion to the underlying factors that determine crude oil stock levels.

Figure 7. Components of unaccounted-for oil in U.S. storage. Source: EIA Petroleum Status Weekly, Crude Oil Peak and Labyrinth Consulting Services, Inc.

It would be speculation to blame anyone for this apparent statistical disaster. Nevertheless, there is a problem that has major implications for oil price and the reliability of reported data.

In several of his Sherlock Holmes mystery stories, Arthur Conan-Doyle wrote, “When you have eliminated the impossible, whatever remains, however improbable, must be the truth.”

We have not eliminated any impossible explanations. We have, however, eliminated the three most improbable explanations for unaccounted-for oil.

The truth—however improbable—is that inventories are probably much lower than what is reported. Source.

Chevron’s $6B Expansion Near the Finish Line

Image result for Chevron Phillips Chemical baytown 
 Chevron Phillips Chemical Co. Baytown, TX

The army of cranes that can be viewed easily from I-10 in Baytown will be gone after a few short months as Chevron Phillips Chemical’s $6 billion expansion inches nearer to a close.

The pricy “U.S. Gulf Coast Petrochemicals Project” is over 80 percent finished. The project is estimated to be operating within a year’s time. The project consists of constructing a huge ethane cracker on a plot of land the size of 44 football fields at Chevron’s Cedar Bayou plant located in Baytown. The cracker will convert natural gas into ethylene at the rate of 1.5 million metric tons each year. Ethylene is the most commonly used building block in the production of plastics.
In addition to the petrochemicals project, Chevron will also build two brand new polyethylene plastics facilities just southwest of Houston in Old Ocean. The facilities, located near Phillips 66’s Sweeny complex, will take converted ethylene to create plastic resin that will be domestically and internationally shipped.

Ron Corn, Chevron’s senior VP of projects and supply chain, said that the idea for project started in 2010 following the company’s shift in focus to their growing presence in the Middle East. Chevron had massive projects in both Qatar and Saudi Arabia.

“It was quite radical at the time,” said Corn of constructing major petrochemical projects on Texas soil, “These are big, big projects — very complex.”

The endeavor is an attempt to continue the petrochemical boom along the Gulf Coast and to cash in on the abundant, inexpensive ethane created from natural gas through the current shale revolution.

The American Chemistry Council, an industry trade group, predicts that over 250 petrochemical projects are either currently under construction or planned all over the nation through 2023 and that the projects will produce around 70,000 new jobs. The total cost is nearly $160 billion with $50 billion of that cost in Texas alone.

The mounting demand for plastics is coming primarily from Asia, particularly China. However, India and Indonesia account for some of the demand as well. “They’re basically entering the consumer class,” said Corn of these countries which are pushing for products such as single-serve packets of shampoo for the very first time.

Other crackers that are being built in Texas and Louisiana have become competitors for Chevron and their new project. The Chevron Phillips cracker has eight huge furnaces that heat the ethane until it becomes ethylene. So far, the project has produced 10,000 temporary construction jobs in Baytown and Old Ocean and will produce 400 permanent position when it is finished.

Exxon Mobil is another company building a cracker in Baytown that will also hold a capacity of 1.5 million metric tons. The company’s new plastics plants are being constructed in Mont Belvieu. Exxon is also in the middle of selecting a site in either Texas or Louisiana to make the world’s largest cracker in a joint deal with the Saudi Arabia Basic Industries Corp or SABIC.

Corn stated that he is sure that the demand for global plastics is growing rapidly enough to consume the imminent explosion in supply. “The spotlight is on the U.S., and the world needs the U.S. production,” he said.

ISIS' Last Stand: The terror group's fighters have begun setting fire to oil wells as they carry out scorched earth tactics

ISIS thugs have resorted to using human shields as they attempt to defend Mosul as it emerged the terror group's leader Abu Bakr al-Baghdadi is thought to be trapped in the city. Aerial pictures show how ISIS fanatics are torching oil in the city

Chevron Working to Meet $2B Asset Sales Target in 2016


U.S. oil giant Chevron is looking to divest its assets in Bangladesh, aiming to fulfill its assets sales program set at between $5 and $10 billion in 2016 and 2017.

Earlier this year, as part of its previously announced divestment plans, Chevron sold 19 fields in the U.S. Gulf of Mexico to Cox Oil for an undisclosed price.
Based on the company’s latest earnings report, the asset sales, aimed at making the company cash balanced in 2017, stood at around $1.4 billion at the end of July, 2016.

The news of the company looking to shed it Bangladesh assets has been confirmed to Offshore Energy Today by a Chevron spokesperson who said that Chevron has been “in commercial discussions about our interests in Bangladesh.”

In Bangladesh, Chevron produces natural gas and condensate from three fields in the northeast of the country.

“At this stage, no decision has been made to sell our interests. We will only proceed if we can realize attractive value for Chevron,” the Chevron spokesperson said.

Most of the Chevron’s planned asset divestments is expected to occur in 2017, with the company expecting to get around $2 billion in 2016 – according to the second quarter earnings report from July.

As for the strategy on selecting the assets to be divested, the California-based oil company has said that they all have these things in common: the assets are not essential to delivering on its strategy, their valuations are not particularly oil price-sensitive, and there are multiple interested buyers.

The $1.4 billion in sold assets until the end of July came from several transactions: New Zealand marketing, Canadian gas storage assets, pipeline assets in California, and upstream assets in the Gulf of Mexico.

US Crude Oil Prices Trading near 15-Month High: What’s Next?

Getty Images

November WTI (West Texas Intermediate) crude oil futures contracts rose 0.8% and were trading at $50.32 per barrel in electronic trade at 5:25 AM EST on October 18, 2016. Crude oil prices could come under pressure due to high crude oilgasoline, and distillate inventories. For more on crude oil prices and the US dollar, read part one in this series.

US Crude Oil Prices Trading near 15-Month High: What’s Next?
US crude oil settled at $26.21 per barrel on February 11, 2016, the lowest level since 2003. As of October 17, 2016, prices were up 90.5% from their 2016 lows. Low crude oil and refined product prices have a negative impact on crude oil and gas producers’ earnings such as Carrizo Oil & Gas (CRZO), WPX Energy (WPX), and PDC Energy (PDCE).

The roller coaster ride in oil and gas prices also impacts funds such as the United States 12 Month Oil ETF (USL), the ProShares UltraShort Bloomberg Crude Oil (SCO), the ProShares Ultra Bloomberg Crude Oil (UCO), the Direxion Daily Energy Bear 3x (ERY), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and the Energy Select Sector SPDR (XLE). 
US crude oil prices settled at $51.35 on October 10, 2016, the highest settlement since July 2015. Brent crude oil prices hit $53.73 per barrel on October 10, 2016, the highest level since October 9, 2015. As of October 17, 2016, US crude oil prices were down 2.7% from their 2016 highs.

For more on crude oil prices, read part one in this series. WTI oil prices have risen 15.8% on a year-to-date basis.

In the next part of the series, we’ll discuss OPEC’s upcoming meeting in November 2016.

Tuesday, October 18, 2016

India Gets First Iranian Crude Oil Cargo for Strategic Reserves

India received its first consignment of 260,000 mt of Iranian crude for its strategic reserves on the west coast, oil ministry officials said on Thursday.

Indian Strategic Petroleum Reserves Ltd, or ISPRL, a state-owned company under the oil ministry, has the mandate to set up 11 million barrels of strategic crude oil storage at Mangalore.

State-run Mangalore Refinery and Petrochemicals Ltd. received the first parcel of Iranian mixed crude on Wednesday that was discharged from a VLCC at the Mangalore cavern.

ISPRL targets to develop 39 million barrels of strategic crude oil storage capacity at three locations on the eastern and western coasts.
The other two strategic reserve sites are at Visakhapatnam on the east coast with capacity of 9.75 million barrels, while Padur in southern India's Kerala will have the highest capacity of around 18.33 million barrels when it becomes operational by the end of this year.

Around 5.5 million-6 million barrels of storage at the Mangalore facility is to be filled with Iranian crude.

State-run Bharat Petroleum Corp. Ltd. will receive a similar VLCC cargo by this month and a second cargo early next month into Mangalore, an industry official said.

The South Asian nation has also been exploring sourcing crude from Saudi Arabia and the UAE to fill nearly half of the strategic reserves storage at Mangalore.

The main idea behind developing the storage facilities in the three locations is to maintain at least 10-14 days of crude supply in case of any supply disruptions.

India relies heavily on imported crude as it meets about four-fifth of its demand via overseas purchase. 

Monday, October 17, 2016

Expanded Panama Canal Changes Tanker, Rail Traffic Flows in U.S.

The Panama Canal expansion will shift cargoes from the U.S. West Coast to the U.S. East and Gulf coasts, and will in turn allow rail shipments inland to move farther west from the East Coast and reduce U.S. West Coast rail shipments with little net change in inland diesel demand, Kevin Lindemer, managing director of downstream consulting at IHS Markit, said this week.

Lindemer spoke on projected imports and exports of gasoline and diesel as well as the Panama Canal expansion at the OPIS Supply and Transportation Summit held in Scottsdale, Ariz., this week. The expanded Panama Canal is encouraging larger container ships to move the rail "null point" farther west in the U.S., and it also is allowing larger vessels to move from the Pacific to U.S. Gulf and East Coast ports, he said.

Bunker demand may increase on the East Coast and in the Gulf Coast, but any net impact is likely to be relatively small, Lindemer said.

U.S. crude oil and refined products exports could increase in terms of larger vessels moving west, but the volume impact will also be small, he said.

Markets on the west coast of South America will continue to be the largest market through the Canal to the west, Lindemer said. Larger west-bound oil tankers from the U.S. Gulf Coast will continue be uncompetitive in Asia, he added.

Longer-term market fundamentals indicate continued weak U.S. demand, which will continue to drive product exports higher, Lindemer said. U.S. refiners and liquids processors are increasingly exposed to the global market, he added.

U.S. demand for oil products, excluding LPG, is expected to start to fall again about 2018, and Latin American demand will rise with lagging refinery investments, Lindemer said. This combination of push and pull factors will provide long-term export markets for U.S. refiners for both gasoline and distillates, he said. Besides South America, U.S. products are exported to Europe, Africa and other destinations.