Thursday, February 28, 2019

Citgo formally cuts ties with Venezuela-based parent company: sources

The Citgo Petroleum Corporation headquarters are pictured in Houston, Texas, U.S., February 19, 2019. REUTERS/Loren Elliott

(Reuters) - U.S. refiner Citgo Petroleum Corp is formally cutting ties with its parent, state-run oil firm Petroleos de Venezuela SA, to meet U.S. sanctions imposed on the OPEC country, two people close to the decision told Reuters on Tuesday.

Executives at the Houston-based firm set a Feb. 26 deadline to end relationships with PDVSA following sanctions designed to curb oil revenues to socialist President Nicolas Maduro and support the nation's transition government formed by Venezuelan congress head Juan Guaido.

The United States, Canada and dozens of other nations have recognized Guaido as Venezuela's legitimate president, but Maduro still controls the military, public institutions and PDVSA, which provides 90 percent of the country's export revenue.

Citgo has halted payments to its parent, subscriptions to corporate services, email communications and minimized mentions to PDVSA on marketing materials and its website.

Expatriate Venezuelan employees this month returned to Venezuela and a procurement subsidiary operating from Citgo's headquarters, PDVSA Services, was shut, the people familiar with the matter said.

A Citgo spokeswoman did not respond to requests for comment.

The company is trying to free itself of sanctions that have hampered access to financing. It is prioritizing refinancing a revolving credit and term loan by the end of July, the sources said. Credit rating firm Fitch on Monday placed Citgo on rating watch citing heightened refinancing risk due to sanctions.

"We have been told that we have to organize the house by Feb. 26 to avoid conflicts with sanctions," one of the sources said.

A new Citgo board of directors was appointed this month by the Venezuelan congress under Chairwoman Luisa Palacios, who last week named a management team under Rick Esser, the company's new executive vice president. New boards for PDVSA and subsidiaries, PDV Holding and Citgo Holding, also have been appointed by the Venezuelan National Assembly.

Citgo is Venezuela's main foreign asset. It is the eighth largest U.S. refiner, with a 750,000-barrel-per-day refining network capable of supplying 4 percent of the country's fuel through a network of some 5,000 gas stations in 30 states.

The Venezuelan congress has been researching the South American nation's assets and bank account around the globe in an effort to gain access to cash and foreign facilities.

It is unclear if Citgo's new board has completed a registration process in Delaware to legally take control of the company. The new board could face a legal challenge by PDVSA's current leadership if the board was not legally constituted.

Venezuela removed 8 tons of central bank gold last week - legislator - Venezuela's President Nicolas Maduro touches a gold bar as he speaks during a meeting with the ministers responsible for the economic sector at Miraflores Palace in Caracas, Venezuela, March 22, 2018. 

CARACAS (Reuters) - At least 8 tons of gold were removed from the Venezuelan central bank’s vaults last week, an opposition legislator and three government sources told Reuters, in the latest sign of President Nicolas Maduro’s desperation to raise hard currency amid tightening sanctions.

The gold was removed in government vehicles between Wednesday and Friday last week when there were no regular security guards present at the bank, Legislator Angel Alvarado and the three government sources said. 

“They plan to sell it abroad illegally,” Alvarado said in an interview.
The central bank did not respond to requests for comment. 

Alvarado and the government sources, who spoke on condition of anonymity, did not say where the central bank was sending the gold. They said the operation took place while central bank head Calixto Ortega was abroad on a trip. 

In 2018, 23 tons of mined gold were transported from Venezuela to Istanbul by plane, according to sources and Turkish government data. 

The central bank bought part of this gold from primitive gold-mining camps in the south of Venezuela and exported it to Turkey and other countries to finance the purchase of basic food supplies, given widespread shortages, according to more than 30 people with knowledge of the trade. 

Some 20 tons of monetary gold were also removed from the central bank’s vaults in 2018, according to the bank’s data, leaving 140 tonnes remaining, the lowest level in 75 years. 

Abu Dhabi investment firm Noor Capital said on Feb. 1 that it bought 3 tons of gold on Jan. 21 from the Venezuelan central bank and would not buy more until Venezuela’s situation stabilized. Noor Capital said its purchase was in accordance with “international standards and laws in place” as of that date. 

Maduro’s government has been seeking to repatriate some 31 tons of gold in the Bank of England’s vaults on fears it could be caught up in international sanctions on the country. 

Pakistani PM says Indian pilot to be released Friday as peace gesture
“As you would expect, the Bank does not comment on individual customer relationships,” the Bank of England wrote in response to a request for comment. “In all its operations, the Bank observes the highest standards of risk management and abides by all relevant legislation.” 

Venezuelan Foreign Minister Jorge Arreaza said on Wednesday, during a United Nations meeting in Geneva, that the Bank of England had blocked the government’s assets. 

Maduro’s government has resorted to selling off gold after falling oil production, the country’s wider economic collapse and mounting sanctions hit public income and made it hard for the country to access credit. 

The United States, which is backing an attempt by opposition leader Juan Guaido to force Maduro to step down and call new elections, has warned bankers and traders not to deal in Venezuelan gold.

Wednesday, February 27, 2019

Muhammadu Buhari Wins Second Term as Nigeria’s President

President Muhammadu Buhari of Nigeria after casting his vote in his hometown Daura on Saturday.CreditCreditBen Curtis/Associated Press

ABUJA, Nigeria — Officials declared early Wednesday that Muhammadu Buhari had won a second term as president of Africa’s most populous country, where voters rejected a corruption-stained candidate in favor of a leader who promised to continue a campaign to eliminate graft.

Not long after midnight, election officials finished counting the votes, making it apparent that Mr. Buhari had defeated the leading candidate, Atiku Abubakar, by a wide margin in an election that was marred by pockets of violence. He was declared the winner shortly before 5 a.m.

On Wednesday morning, Mr. Abubakar released a statement calling the results a “sham election” and saying that he would contest the outcome in court. He cited what he called a “statistical impossibility” of the results in some states — where turnout was high despite the fact that life there has been upended by war — as well as anomalies in states that are opposition strongholds.

Referring to violence in some states in the south where, he said, soldiers had fired on civilians, Mr. Abubakar added, “The militarization of the electoral process is a disservice to our democracy and a throwback to the jackboot era of military dictatorship.”

Local civil society groups had also ticked off lists of irregularities during the voting. At one point Mr. Abubakar’s had party demanded a halt to the counting. Some international observers had indicated earlier in the week that the problems likely hadn’t been widespread enough to sway the outcome.

But violence did punctuate the voting on Saturday, and civil society groups decried the deaths of at least 39 people killed across several states. One of the victims was a young election worker struck by a stray bullet.

Also on Wednesday morning, Mr. Buhari said he planned to keep working to improve security and the economy, and to fight corruption. He asked supporters “not to gloat or humiliate the opposition. Victory is enough reward for your efforts.”

Nigeria’s election was in many ways a referendum on honesty, as voters once again embraced a candidate who held up a broom at rallies, declaring to sweep away the graft that has given the nation a bad reputation worldwide.

It was also a tribute to the power of incumbency. For all Mr. Buhari’s talk of fighting corruption, some prominent suspects — including a governor caught on camera handing out a bribe — have gone unprosecuted under his regime. Critics say he targeted political opponents in his antigraft inquiries.

Yet the president, who is 76, managed to overcome his deficits, and in some ways benefited from them. Turnout was low on Election Day, a factor that buoyed the president’s fortunes since his loyalists were among those who bothered to vote in a race that had once been too close to call. Some analysts said many voters had stayed away from the polls because of despondency over the failures of the past four years.

“There’s a growing sense of disconnect between the Nigerian people and the political elite,” said Hussaini Abdu, chairman of the Youth Initiative for Advocacy, Growth and Advancement, a team of local observers, speaking before the results were announced.

Another factor was that election officials decided to delay the vote by a week just hours before polls were to have opened. Numerous registered voters had made long journeys to their home districts to vote, because Nigeria has no absentee balloting system. When officials postponed the election, many people simply gave up and returned home.

Voters rejected Mr. Abubakar, 72, a former vice president who was considered so corrupt by the United States that he was refused a visa for many years.

But Mr. Abubakar’s campaign focused on an issue that resonated with many voters: improving the economy. His raft of proposals included privatizing some government operations and floating the currency.

Many people blamed Mr. Buhari for his decisions during a currency crisis that launched Nigeria into recession. Yet it was also under his watch that the nation lifted out of recession in 2017. Progress since then has been slow, however, and unemployment has climbed.

Last year, Nigeria, one of the world’s largest oil producers and Africa’s biggest economy, was named the nation with the largest number of people living in extreme poverty.

In the weeks leading up to the election, it was unclear which candidate had leverage in a race that had more than 70 candidates on the ballot. It came down to two members of the political establishment in their 70s. Mr. Abubakar received more votes than Mr. Buhari in the area that makes up the capital city. Fiery rhetoric flew on both sides — Mr. Abubakar called Mr. Buhari a dictator at one point — and after the election each side accused the other of vote-rigging.

But many Nigerians see Mr. Buhari as an honest man. Unlike others in the political establishment, he has not enriched himself with money from the public treasury. His soft-spoken demeanor stands out among more flashy, blustery politicians.

Mr. Buhari made headway in cleaning up graft, appointing a team that arrested political figures, seized millions of dollars and jailed corrupt officials. But critics said that his targets were his political opponents. He brushed off charges of corruption against his allies, who were not prosecuted.

His victory is “a popular call to be more evenhanded with his anticorruption campaign,” said Dr. Sadeeque Abba, a political-science professor at the University of Abuja.

Mr. Buhari captured the vote of northerners who viewed him as a son of the region, though Mr. Abubakar also hails from the north. But Mr. Buhari has paved roads in rural areas where crops and animals had been brought to market on crumbling highways.

Mr. Buhari’s health likely will be on voters’ minds. He was absent from Nigeria for several months in 2017 when he sought treatment in London for an illness he never disclosed to the public.

While Mr. Buhari failed to keep some of his early promises, especially in cracking down on terrorism, many voters still see the former general, who led the nation under military rule in the 1980s, as a strongman with the credentials to fight Boko Haram, the Islamist militant group ravaging the country’s northeast.

Boko Haram has launched more complex attacks against military installations in recent months, and on the morning of Election Day a faction loyal to the Islamic State fired rockets at the biggest airport in the area. Mr. Buhari has told the public several times that the group has been defeated.

Mr. Buhari also had promised to crack down on human rights abuses, but reports of impunity are a regular feature of Nigerian life. Security forces have opened fire on unarmed protesters on several occasions, with high body counts. Rapes by security forces of women and teenagers in camps for people fleeing war have gone uninvestigated.

Mr. Buhari’s armed forces also stormed the main office of a major newspaper in January, seizing laptops and cellphones. His campaign adviser indicated in an interview on Tuesday that Africa’s largest democracy may face further clampdowns.

“The right to free speech must be subordinated and subjugated to the right to national security,” said Babatunde Fashola, who is also the minister of power, works and housing.

Mr. Buhari’s efforts so far have failed to quell battles over land between farmers and herders, or armed gangs carrying out kidnappings and killings.

And lost in the fray of the election were the high-profile kidnapping victims of Boko Haram, including the remaining students from Chibok who were kidnapped nearly five years ago. Mr. Buhari had promised to free all of them.

Though he helped broker the release of about half of the missing students, more than 100 remain held by militants. Those students and others who have gone missing during the nearly decade-long war seem forgotten by the many Nigerians who live in cities far from the fighting. Unity Fountain, the site where #BringBackOurGirls protesters once marched regularly, is often empty.

Only a giant broom remains there in place of the protesters, stuck in the ground as a reminder of the president’s anticorruption pledge.

Tony Iyare contributed reporting from Lagos, Nigeria.

BP CEO Dudley: U.S. Shale Is ‘A Market Without A Brain’

Dudley BP 
 BP’s Chief Executive Bob Dudley

The U.S. shale industry responds only to oil price signals and is like “a market without brain”, BP’s chief executive Bob Dudley said on Tuesday.

“The U.S. is the only country that completely responds to market signals ... like a market without a brain. It just responds to price signals,” Reuters quoted Dudley as saying at the ongoing International Petroleum Week conference in London.

“Unlike Saudi Arabia and Russia, which adjust their output in response to gluts or shortages in oil supplies, the U.S. shale market responds purely to oil prices,” said the CEO of the UK oil supermajor, which completed last year a US$10.5-billion deal to buy U.S. shale assets from BHP in what was BP’s biggest acquisition this century, and one that BP will rely on for boosting production and margins. 

The acquisition adds oil and gas production of 190,000 barrels of oil equivalent per day (boe/d) and 4.6 billion oil equivalent barrels (boe) of discovered resources in the liquids-rich regions of the Permian and Eagle Ford basins in Texas and in the Haynesville natural gas basin in East Texas and Louisiana, BP says.

The U.S. shale sector is sensitive to oil prices and drillers respond to them by adding or reducing working rigs, also because shale production is shorter-cycle and easier to switch on and off than complex conventional oil projects.

While OPEC and its Russia-led allies have been looking for two years now at supply and demand and adjusting production to avoid another oil glut similar to the one that crashed oil prices in 2014, U.S. shale has been benefiting from the OPEC/non-OPEC coordinated market action and the increase in oil prices over the past two years. Producers have been pumping record amounts of crude oil in the United States, which is already the world’s top oil producer ahead of Russia and Saudi Arabia.

U.S. crude oil production hit a record 12 million bpd in the week ending February 15, rising by 100,000 bpd from 11.9 million bpd in the previous week, EIA data showed last week.

By Tsvetana Paraskova for 

Monday, February 25, 2019

US Will Remain the Top Global Oil Producer Through 2020, Energy Department Projects

US #1 wine consumer

The U.S. is on a solid trajectory to retain the title of the world's largest oil producer well into next year's presidential election season, the Energy Department said on Thursday.

The U.S. became the largest oil producer in the world last year, a fact that President Trump has touted, including in his State of the Union address earlier this month.

The U.S. will not only maintain its lead spot as top producer, but will greatly exceed what it produced last year in both 2019 and 2020, the Energy Information Administration said Thursday in its weekly oil analysis. 

Oil production will average 12.4 million barrels per day in 2019 and 13.2 million barrels per day in 2020, according to the agency, up from 11 million in 2018.

The gains in oil production will come primarily from the oil drilling taking place in the Permian shale region of Texas and New Mexico, according to the agency. But significant offshore oil production is also expected to come online in the Gulf of Mexico.

The agency's analysis accounts for 19 new offshore drilling projects to begin operations in 2019 and 2020. 

EIA expects production in the Gulf to average 2.0 million barrels per day in 2019, exceeding the record high last year of about 1.8 million barrels per day.

Gulf oil production is projected to increase to an average of 2.3 million barrels per day in 2020.

Friday, February 22, 2019

Shipbuilding fundamentally changing

Queen Elizabeth aircraft carrier shipyard BAE Systems megablock construction shipbuilding
Image: BAE Systems

This year has already been busy in terms of tanker ordering activity with VLCCs and MRs once again appearing to be in vogue. 
So far this year (mid-February), at least 12 VLCCs and 11 MRs were ordered. Both types also received the most interest in 2018, with 42 and 49 units ordered, respectively.
Now, the question is - was the start of 2019 just a blip or a sign of things to come? Gibson Shipbrokers asked in a report.
Many factors will play a role in an investment decision - from fleet renewal programmes and regulatory developments, to speculative investments based on anticipated future demand.
Other influences, such as prices and yard slot availability, will also play a role. Precisely determining shipbuilding capacity can be a tricky game, with different vessel types occupying slots for different periods of time, depending on their complexity.
However, some conclusions can be drawn from what we know, and what we think might logically take place, Gibson said.
Looking at historical activity, overall, ordering across all shipping sectors declined last year and remained low compared to the busier ordering periods seen in 2013-2015 and prior to that, the 2006-2008 boom.
This implies that there is plenty of shipbuilding capacity to take care of higher ordering activity this year. Yet there are factors to consider, Gibson said.
First, the shipbuilding industry has not been in good health in recent years. Many yards that were active during the last shipbuilding boom remain idle, while offshoot yards, such as Hanjin Subic Bay have struggled, having recently filed for rehabilitation following loan defaults.
At the same time, consolidation is increasing, with Hyundai Heavy Industries (HHI) taking control of Daewoo Shipbuilding & Marine Engineering (DSME).
Second, whilst investment in 2018 was well below record levels, contracting of complex LNGCs and containerships roughly doubled year-on-year, suggesting that newbuilding slots at premium yards could be a little scarcer over the next few years.
This may be particularly true if, as widely reported in the press, a large LNGC order (for up to 60 vessels) is placed by Qatar. The timing of this deal may be unclear, but with the final investment decision now taken on the joint Exxon/Qatar Petroleum Golden Pass LNG project and Qatari aspirations to increase domestic capacity, the requirement is certainly there.?
Higher consolidation should reduce 'overcapacity' in the South Korean shipbuilding sector, which, coupled with higher demand from other sectors (eg LNG), could support higher prices, potentially impacting on the volumes of newbuilds contracted. However, much depends on what happens in the Chinese shipyards and whether this sector also sees further consolidation.
Nevertheless, prices have already increased over the past 12 months, with a newbuild VLCC (non-scrubber, South Korea) having risen around $10 mill over the past 12 months.
Regulations may also make the decision trickier, owing to uncertainty over which fuel choice/compliance method represents the future. Some owners may wait to see how the next few years evolve before committing to newbuilding designs.
Regardless of how these factors play out, replacement tonnage will be needed, and ordering activity will eventually surge. When this takes place, however, is key to the shape and timing of the next market upcycle, Gibson concluded.

Two Venezuelan tankers stuck in Portugal to lose crews

Seafarers on board two PDVSA controlled tankers are to be dismissed, due to unpaid debts accumulated by subsidiary PDV Marina.
The vessels are the Suezmax ‘Rio Arauca’, which has been anchored in the River Tagus, off Lisbon for almost two years and the Aframax ‘Parnaso’, which is at the Setenave shiprepair yard in Setubal. 

In a message to Reuters, the vessels’ manager, Bernhard Schulte Shipmanagement (BSM) confirmed that both crews will be removed.

Lisbon’s maritime court ruled to take possession of the ‘Parnaso’ last August.

PDV Marina owes BSM at least $15 mill, according to a source at the company and a document seen by Reuters.

BSM said the ‘Rio Arauca’ arrived in Lisbon in May, 2017 but has been inactive and unable to dock since then. She was seen in the Tagus by Tanker Operator’s Editor during a trip to Lisbon on 26th December, 2017.

“BSM, as the manager for ‘Rio Arauca’, has operated a crew rotation, maintaining sufficient manning levels on board to ensure the vessel’s safety and security while at anchor in the Tagus for the past 21 months,” BSM told Reuters, adding that the vessel was securely at anchor.

Legal responsibility for the vessel now sits with the arresting parties, BSM confirmed.

Lisbon’s Port Authority (APL) told the newswire that ‘Rio Arauca’ had arrived with a cargo of crude for Portuguese oil company Galp Energia, but later local Portuguese company Navex declined to continue to be the tanker’s agent.

As a result, the tanker was then subject to “successive arrest orders”, APL said.

APL filed a petition against PDV Marina in April, 2018 over accumulating monthly charges of €200,000. APL said PDV Marina owed the port authority €1.7 mill as of the end of last year.

In August, 2018 another arrest order was issued by bunker fuel broker, Amoil. BSM explained that Amoil had secured a maritime lien on the vessel claiming an unpaid debt by PDV Marina.

‘Rio Arauca’ arrived in Lisbon with 26 crew members but Portugal’s Immigration and Border Service (SEF) said only 16 people remained on board.

Thursday, February 21, 2019

Twelve Empty Supertankers Reveal Truths About Today’s Oil Market

Sunset, Tanker, Oil Tanker, Sea, Abendstimmung
  • Ships are sailing without cargo after producers cut exports
  • Booming U.S. shipments still need to go to Asian refineries

They are slowly plowing their way across thousands of miles of ocean toward America’s Gulf of Mexico coastline. As they do, twelve empty supertankers are also revealing a few truths about today’s global oil market.

In normal times, the vessels would be filled with heavy, high sulfur Middle East oil for delivery to refineries in places like Houston or New Orleans. Not now though. They are sailing cargo-less, a practice that vessel owners normally try to avoid because ships earn money by making deliveries.

The 12 vessels are making voyages of as much as 21,000 miles direct from Asia, all the way around South Africa, holding nothing but seawater for stability because Middle East producers are restricting supplies. Still, America’s booming volumes of light crude must still be exported, and there aren’t enough supertankers in the Atlantic Ocean for the job. So they’re coming empty.
“What’s driving this is a U.S. oil market that’s looking relatively bearish with domestic production estimates trending higher, and persistent crude oil builds we have seen for the last few weeks,” said Warren Patterson, head of commodities strategy at ING Bank NV in Amsterdam. “At the same time, OPEC cuts are supporting international grades like Brent, creating an export incentive.”

The U.S. both exports and imports large amounts of crude because the variety it pumps -- especially newer supplies from shale formations -- is very different from the type that’s found in the Middle East. OPEC members are likely cutting heavier grades while American exports are predominantly lighter, Patterson said.

Gasoline Glut

By industry standards, American oil is considered light and low in sulfur, making it great for churning out gasoline, with the result that a glut of the automotive fuel is starting to build up. By contrast, Middle East crude often needs more processing -- not a problem for Gulf of Mexico plants that were designed specifically for that task -- but it can have a smaller gasoline yield.

“There is still going to be a lot of growth from U.S. tight oil this year,” said James Davis, director of short-term global oil service at Facts Global Energy. “This will continue to push U.S. exports up.”

Shippers are counting on the U.S. exports to help the tanker market withstand supply restrictions by the Organization of Petroleum Exporting Countries and allies including Russia. Industry analysts, who actually raised their estimates for what they think the ships will earn this year after the OPEC+ pact was announced in December, are citing rising American shipments as a contributing factor.

There are usually three or four empty supertankers -- very large crude carriers in industry jargon -- that would sail empty to the U.S. at any one time, according to shipbrokers.

The shift has produced knock-on effects around the shipping market. Daily earnings for the VLCCs, which can haul two million barrels of oil, on the benchmark Middle East-to-China route doubled to $29,337 in the past week, according to Baltic Exchange data.

“Following a fixing frenzy from the U.S. Gulf Coast late last week, most available tonnage in the Atlantic basin has been soaked up,” said Espen Fjermestad, an analyst at Fearnley Securities AS in Oslo. “With ships ballasting West, rates have shifted up also in the East.”

— With assistance by David Marino, Alex Longley, Zimri Smith, and Julian Lee

Wednesday, February 20, 2019

Fire hits pumping station, disrupts Venezuela crude transportation

A fuel filling station of PDVSA, the Venezuelan state-owned oil and natural gas company. 
Valery Sharifulin | TASS | Getty Images
A fuel filling station of PDVSA, the Venezuelan state-owned oil and natural gas company.

  • On Tuesday, a fire hit a Venezuelan crude oil pumping station and disrupted crude transportation, state-owned oil company Petroleos de Venezuela said.
  • The fire at the Ero pumping station, which has the capacity to transport 300,000 barrels per day of crude, was controlled and no one was injured. But the incident will affect transport of crude through pipelines, a source at the company said.
  • This incident comes as the cash-strapped firm struggles with the impact of U.S. sanctions.

A fire hit a crude oil pumping station in Venezuela's Orinoco belt region on Tuesday, state-owned oil company Petroleos de Venezuela (PDVSA) said, disrupting crude transportation as the cash-strapped firm struggles with the impact of U.S. sanctions.

The fire at the Ero pumping station, which has the capacity to transport 300,000 barrels per day of crude, was controlled and no one was injured, the company said in a statement. But the incident will affect transport of crude through pipelines, a source at the company said, without providing further details.

The incident comes weeks after the United States slapped sanctions on PDVSA to try to oust socialist President Nicolas Maduro from power. Venezuela, a founding member of the Organization of the Petroleum Exporting Countries (OPEC), holds the world's largest crude reserves, but production has collapsed amid mismanagement and an economic crisis.

In the statement, PDVSA said the fire was caused by "an act of sabotage perpetrated by the right-wing opposition."

PDVSA said the Ero station receives crude from its Petrocarabobo oilfield, a joint venture with Spain's Repsol, and from its Petroindependencia joint venture, which is 34 percent owned by Chevron.

PDVSA's facilities for producing, refining and transporting oil and fuel often experience outages due to a lack of spare parts and delayed maintenance following years of underinvestment.

Tuesday, February 19, 2019

Saudi Arabia's oil deal with Russia is now 'more fragile than ever,' analyst says

Saudi Arabia's Minister of Energy, Industry and Mineral Resources, Khalid Al-Falih (R) speaks during a press conference with his Russian counterpart Alexander Novak at the Ritz Carlton Hotel in the capital Riyadh on February 14, 2018.

  • Crude futures have been slowly rising after Russia and Saudi Arabia agreed to cut oil supply.
  • Saudi producers appear to be doing more to meet supply commitments than Russian counterparts.
  • Riyadh's oil deal with Moscow is now 'more fragile than ever,' analyst says
A rolling oil pact between Russia and Saudi Arabia which seeks to support prices by reducing output looks to be on shaky ground with only the Arab nation appearing to fulfil its promises.

Late last year, OPEC producing countries, and non-OPEC producers, led by Russia, agreed to cut supply by 1.2 million barrels per day(bpd), an arrangement known as OPEC+.

Saudi Arabia agreed to account for the bulk of OPEC nation cuts and has confirmed it will drop its crude oil production by a further 400,000 barrels per day to 9.8 million b/d in March. If achieved it would mean that since the December, Saudi Arabia has become responsible for 70 percent of the total OPEC+ target.

In turn, Russia was set to account for the greater share of non-OPEC cuts, but from October to the beginning of February had only decreased output by 47,000 barrels per day.

The slow pace to cuts from Russian oil producers drew criticism from Saudi Arabia's Energy Minister Khalid al-Falih, who told CNBC in January that Moscow had moved "slower than I'd like."

That barb led to a response from Russian Energy Minister Alexander Novak who said at the beginning of February that Russia was "completely fulfilling its obligations in line with earlier announced plans to gradually cut production by May this year."

During 2018, oil prices were dragged lower by increasing U.S. shale supply and fears over global demand. President Donald Trump has repeatedly criticized OPEC on its decision making, claiming prices should be lower.

In November 2018 Trump tweeted that he hoped OPEC wouldnot cut oil output.
On Tuesday International benchmark Brent crude was trading at $66.39 a barrel at around 12 p.m. London time (7 a.m ET), down around 0.1 percent, while West Texas Intermediate (WTI) stood at $56.09, almost 1 percent higher.

Oil prices have steadily edged higher since the OPEC+ promise to cut supply and are now sitting at levels not seen since November 2018.

But Torbjorn Soltvedt, principal MENA politics analyst at Verisk Maplecroft, said in a note Tuesday that any end to Russian-Saudi coordination would likely add significant downward pressure on prices.

"Although our base case is still that Riyadh and Moscow find a compromise to extend the agreement, the pact is now looking more fragile than ever," said Soltvedt.

The political analyst added that to save the pact he expected Saudi Arabia may even have to settle for "low levels of (Russian) compliance to save the pact."

Verisk Maplecroft estimate that Riyadh needs $80 a barrel in order to fund its 2019 budget while in turn, Russian President Vladimir Putin has claimed that $60 is enough to satisfy Moscow's needs.

The next meeting of OPEC and non-OPEC oil producers takes place in mid-April.

Monday, February 18, 2019

Nigeria's new gusher just made OPEC compliance a little harder


ABUJA and LONDON (Bloomberg) -- Nigeria is about to ship the first cargo of crude oil from a new deposit about 90 mi off its coast.

The 1 MMbbl consignment, which will head toward the Dutch port of Rotterdam, comes at a tricky moment for the West African country, given a pledge it has made to OPEC and other oil producing countries to help them avert a glut of crude.

The tanker, the Achilleas, will export from a mooring linked to the Total SA-operated Egina field. When fully up and running, the European oil company anticipates flows reaching about 200,000 bopd.

The kind of crude is exactly the variety the oil market needs, but is also the kind that the Organization of Petroleum Exporting Countries doesn’t. It has an API gravity of 2.73° degrees, making it a so-called medium grade, and a very low sulfur content of 0.165%, according to Total marketing literature seen by Bloomberg. That will make it invaluable for making fuels that comply with International Maritime Organization rules to restrict shipping’s sulfur emissions starting next year.

The extra barrels come just as the country is supposed to be lowering its output by 53,000 bopd in the first half of this year as part of a wider initiative by OPEC and allied nations to restrict collective supplies. It’s supposed to pump about 1.685 MMbopd in the first half of 2019. In January, it averaged 1.792 MMbopd, according to OPEC figures.

Nigeria’s Minister of State for Petroleum Resources Emmanuel Kachikwu has suggested the oil might be classified as a condensate -- a much lighter, more gasoline-rich oil that’s not bound by the OPEC+ curbs.

Condensates are hydocarbons that are gases at reservoir temperature and pressure, but condense into liquids at the surface. There is no simple way to distinguish crude and condensate once they have been extracted, as the definition relates to the type of field from which they are produced. Condensate comes from gas fields, crude from oil fields.

OPEC agreed a technical definition of condensates in 1988 that is based on API gravity, the ratio of gas to liquids in the production stream and the composition of that stream.

Condensates normally have an API gravity above 45° (the higher the number, the lighter the oil). To put the 27.3 figure into context, even Brent and West Texas Intermediate crudes are both around 40 API, making them lighter than Egina.

In its January press release announcing the start of production from Egina, Total made no mention of gas, suggesting that the gas:oil ratio may be fairly low. That would reduce the likelihood of Egina meeting OPEC’s requirements for classifying its output as condensate.

If that is indeed the case, then Nigeria may have a decision to make when Egina really gets going: cut output elsewhere to adhere to its OPEC pledge, or not.

Friday, February 15, 2019

Venezuela Supreme Court orders prosecution of new oil boards

Opposition leader Juan Guaido (L) is locked in a battle with President Nicolas Maduro (R) for control of Venezuela (AFP Photo/Federico Parra , Leo RAMIREZ)

Caracas (AFP) - Venezuela's Supreme Court on Thursday ordered that executives appointed to boards affiliated with state oil firm PDVSA -- in a bid for control by opposition leader Juan Guaido -- face criminal prosecution.

The court -- packed with Maduro loyalists -- ordered legal action against 15 executives that the National Assembly, headed by Guaido, named on Wednesday to form four new executive boards for PDVSA and its US-based affiliate Citgo.

Guaido -- who has been recognized as acting president by more than 50 countries -- is locked in a battle with Maduro for control of the crisis-hit country.

Guaido celebrated the appointments as a "step forward in the reconstruction of PDVSA," but Maduro had warned that those accepting "illegal" appointments would face justice.

The high court ruled that the executives were named by a legislature whose decisions are "null," and that the appointees should face prosecution for crimes including "usurpation," "corruption," "organized crime" and "terrorism."

The Supreme Court decision set in motion the process of extraditing the accused, most of whom are in the United States, and freezing their accounts.

U.S. judge rules former Venezuelan oil minister owes $1.4 billion

Rafale Ramirez
Venezuela's Rafael Ramirez

HOUSTON (Reuters) - A federal judge in Houston ordered a former Venezuelan oil minister this week to pay the owners of a defunct Houston oil company $1.4 billion in damages in a fraud suit, although it is unclear if or how the payment will ever be made. 

U.S. District Court Judge Lee Rosenthal issued the default judgment on Wednesday after Rafael Ramirez did not contest Harvest Natural Resources’ claims, according to an opinion accompanying the ruling. 

James Edmiston, Harvest Natural’s former chief executive and director, said on Thursday he was pleased with the order. Whether the shareholders of Harvest will ever receive a payment from Ramirez “is the $1.4 billion question,” he said. 

Ramirez, in a message to Reuters, said he was not surprised by the order, but declined further comment. 

Harvest’s suit claimed Venezuela refused to allow the company to sell its assets in the country from 2012, leading it to lose $472 million. It accused Ramirez and others of seeking a $10 million bribe to approve the transaction. 

Rosenthal initially awarded Harvest $472 million in damages in December, an amount he tripled this week. 

Ramirez was appointed energy minister by late Venezuelan President Hugo Chavez, serving in that job until 2014. He later was the country’s ambassador to the United Nations, but left after being accused of corruption by Venezuelan officials amid a purge of executives at state oil firm PDVSA. 

Reporting by Erwin Seba, Editing by Rosalba O'Brien

Trafigura halts oil trade with Venezuela - source

FILE PHOTO: Trafigura logo is pictured in the company entrance in Geneva, Switzerland March 11, 2012. REUTERS/Denis Balibouse/File Photo

By Julia Payne

GENEVA (Reuters) - Global commodities firm Trafigura has decided to stop trading oil with Venezuela due to U.S. sanctions on the OPEC nation's energy sector, a source with direct knowledge of the matter said.

The decision will come as a blow to Caracas as Swiss-based Trafigura has a long-standing arrangement with state-run PDVSA to take Venezuelan crude and, in exchange, supply the Latin American country with refined products.

Washington imposed fresh sanctions on PDVSA last month to cut off a key source of revenue for President Nicolas Maduro. The move came after congress head Juan Guaido invoked constitutional provisions to become interim president, arguing that socialist Maduro's re-election last year was a sham.

Last year, trading company Trafigura directly took 34,000 barrels per day (bpd) of Venezuelan crude and products, which were mostly resold to U.S. and Chinese refineries, according to internal PDVSA trade documents seen by Reuters.

Trafigura will stop business with PDVSA after completing a small number of already-concluded trades, the source said.

Due to the size of Venezuela's oil-for-loan agreements with China and Russia and the weight of previous U.S. sanctions, cash-strapped PDVSA has become increasingly reliant on intermediaries to export its crude and import refined products.

PDVSA did not immediately respond to a request for comment.

Trafigura is due to load two cargoes of Venezuelan crude before the end of February, the source with direct knowledge and a shipping source said.

It was not immediately clear whether these two tankers were the last of the already-concluded trades, or how many - if any - product tankers would be sent in return.

For the trading firm, the decision means giving up a source of crude supply for Russia-backed Indian refiner Nayara Energy, in which Trafigura holds a near 25 percent stake.

Nayara would still be able to buy Venezuelan crude through Russia’s Rosneft and other intermediaries.

The U.S. sanctions limit U.S. refiners to paying for Venezuelan oil by using escrow accounts that cannot be accessed by Maduro's government. Foreign firms that use the U.S. financial system for oil trading or U.S. units are similarly restricted, cutting off avenues for PDVSA to collect revenue.

In an effort to ease domestic fuel shortages, PDVSA's imports skyrocketed last year. Its own refining system is hobbled by technical failure, a lack of investment, delayed maintenance and insufficient crude supply.

In the last three months of 2018, Venezuela exported about 1.45 million bpd of crude and products. Trading houses lifted 225,000 bpd of that, according to the PDVSA documents and Refinitiv Eikon data.

Exports to the United States, Venezuela’s primary export customer, have since dried up, as well as those to other destinations, with loaded tankers left stranded off Venezuelan ports.

(Reporting by Julia Payne; Additional reporting by Marianna Parraga in Mexico City; Editing by Dale Hudson)

Sulfur and Greenhouse Gas reduction a priority - ICS

Global Sulphur Cap

International Chamber of Shipping (ICS) members expressed concern over the looming sulfur and greenhouse gas (GHG) reduction rules at a Board meeting last week. 
“The 2020 global sulfur cap will be the regulatory game changer of the decade with profound implications for the economics of shipping,” Chairman, Esben Poulsson, said. “But there are even more profound changes to come. We are rapidly moving into a multi-fuel future to be followed we hope, in the 2030s, by the arrival of commercially viable zero CO2 fuels suitable for global application.”
The ICS reviewed progress in persuading the IMO to take measures to address expected implementation problems, including  outstanding safety and fuel compatibility issues associated with the use of new 0.5% sulfur blends and continuing uncertainty over the availability of compliant fuels in every port worldwide, a particular challenge for tramp trades. 
It was concluded that it will be vital for the IMO Marine Environment Protection Committee (MEPC) to complete this work at its meeting in May, 2019, as shipowners begin ordering compliant fuels.
“While fuel suppliers must play their part in providing sufficient quantities of safe and compliant low sulfur fuels, shipowners must urgently prepare their ship specific implementation plans for 2020,” said Poulsson.“This should be carried out using the IMO template adopted at the industry’s request and the detailed advice prepared by ICS, which we have just updated to take account of other recent IMO decisions. This will be vital to reduce the possibility of teething problems or in the event of initial Port State Control difficulties due to factors beyond the shipowner’s control.”
With regard to achieving the ambitious greenhouse gas reduction targets agreed by IMO last year, including a 40% efficiency improvement by 2030 and a 50% total cut in the sector’s GHG emissions by 2050, the ICS Board endorsed the finalisation of proposals to IMO on short term measures. 
These included tightening of the Energy Efficiency Design Index (EEDI) for new ships – which already requires ships built in 2025 to be 30% more efficient than those delivered before 2013 – as well as proposals for a ‘Super SEEMP’ whereby existing Ship Energy Efficiency Management Plans (SEEMP) could be subject to mandatory external audits, probably as part of the ISM Code.
“We need IMO to make progress with short term GHG reduction measures as soon as possible to achieve measurable additional GHG reductions by 2023, in addition to the 8% total reduction already achieved by the sector since 2008, despite a massive increase in maritime trade over the same period,”  Poulsson explained.“But while these short term measures are very important we want IMO to move on to developing the critical long term measures that will truly help the industry to decarbonise completely.”
“The ICS Board agreed that the industry cannot achieve the 2050 GHG reduction target using fossil fuels. Over the next decade, we are therefore going to require massive investment in research and development of zero CO2 emitting propulsion systems and other technologies, which don’t yet exist in a form that can be readily applied to international shipping, especially in deepsea trades.This will need to be a key component of the IMO strategy when detailed ideas for long term measures are taken forward during 2020,”he said.
The ICS Board also endorsed the recommendation of the ICS Manning and Training Sub-Committee that the Chamber should encourage the IMO to embark on a comprehensive review of the IMO STCW Convention governing seafarers’ and training and certification standards, given increasing questions as to whether the STCW regime, which was last given a major overhaul in 1995, is still fit for purpose in the 21st Century.
The meeting also expressed serious concern about the deteriorating security situation in the Gulf of Guinea (as discussed last week by the UN Security Council) where there has been a sharp increase in the number of attacks on ships’ crews, many of which were extremely violent.