Saudi Arabia's Crude Exports Rise 5.8% in October

A gas flame is seen in the desert near the Khurais oilfield, about 160 km from Riyadh, Saudi Arabia June 23, 2008. REUTERS/Ali Jarekji/File Photo

https://aawsat.com/english/home/article/2042806/saudi-arabias-crude-exports-rise-58-october

Saudi Arabia’s crude oil exports in October rose 5.8 percent to 7.06 million barrels per day (bpd), from 6.67 million bpd in the previous month, official data showed on Wednesday.

The country’s total crude output climbed by 1.17 million bpd to 10.30 million bpd in October.

Crude stocks rose by 15.60 million bpd to 168.08 million bpd while domestic refinery crude throughput dipped by 387,000 bpd to a 34-month low of 2.20 million bpd, the data from the Joint Organizations Data Initiative (JODI) showed.

Saudi Energy Minister Prince Abdulaziz bin Salman had said the Kingdom’s oil production would recover in October and November to levels above those seen before attacks on its energy installations in September.

Earlier this month, oil producers led by Saudi Arabia and Russia agreed to cut output by an extra 500,000 barrels a day in the first quarter of 2020.

Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries provide monthly export figures to JODI, which publishes them on its website.

Oversupply of oil and demand for gas expected in 2020

https://fluidhandlingmag.com/news/oversupply-of-oil-and-demand-for-gas-expected-in-2020/

Multinational law firm DWF has highlighted a number of trends for the global energy sector for 2020, with global head of energy Slava Kiryushin offering various insights.

Oil

Commenting on the global oil trade in 2020, Kiryushin expects there to be an oversupply: "Many oil traders have predicted a bullish 2020 for the global oil industry, with some going as far as speculating the revival of a $100 [€90] per barrel [bbl] price tag. However, recent market analysis demonstrates that this is unlikely to happen and the market will be in a position of oversupply. My view is that this will primarily be due to increased shale production and a slower than expected growth of the global economy. The International Energy Agency's latest reports support the view that there will a global oversupply.

"Even the new shipping fuel regulations set to be implemented in January 2020, known as IMO 2020, are not expected to change this trend despite potentially leading to an increased demand for low-Sulphur gasoil and diesel. No doubt that the growth of the oil supply is a sensitive topic for OPEC+ members as 500,000 bbl/day were agreed to be cut from OPEC's supply. Overall, the market is less optimistic over the ‘revival’ of the oil price."

Natural gas

Natural gas is likely to experience growing demand in 2020, according to Kiryushin: "Unlike its hydrocarbon counterpart, natural gas is likely to experience growing demand in 2020 and beyond. Whether this is due to IMO 2020, the demand for chemical products (which require gas) or the environmental push to cut greenhouse emissions, is arguable.

"The biggest influencer on gas demand is likely to be China. Its growing appetite for gas (which is higher than the next 10 countries combined) will remain constant in 2020.

"A change in climate also has a significant impact on the demand for natural gas. Whether used as fuel to keep the northern hemisphere warm during the colder winters or converted into electricity to power air conditioning during hotter summers, gas will remain at the forefront of the energy sector in 2020.

"The only real question is whether the oil-linked gas price is competitive enough against alternative fuels. If it is deemed not to be, this is likely to further increase the ongoing price review negotiations and disputes in the Asian market.

Renewables

As for renewables, Kiryushin said: "2020 is unlikely to be any different from the previous years for the renewables market. The key operating term is going to be "growth". Some commentators are forecasting that renewable energy generation growth will outpace gas growth by a factor of four. While this sounds optimistic, the rise in new technology, availability of funding and emerging markets may make this a reality. Whether this takes place in 2020 remains to be seen, but there is absolutely no stopping on the horizon for renewables.

"If further technology is developed to improve energy storage, it is likely that the renewable sector will thrive beyond current predictions, which are already promising. According to the IEA estimations, offshore wind has a technical power production potential of 36,000 TWh per year. In contrast, the US potential is roughly a third of this amount. We expect wind generation to continue thriving and a number of EPC contractors are already making adjustments to their businesses to supply offshore jackets instead of their traditional offshore oil and gas construction projects.

"Like wind, solar has tremendous potential and will remain a growing market. However, in order to ‘shine’ brighter, solar energy generation will require further support from governments and policymakers. By way of example, the uptake of solar energy in Africa could have a significant impact on the global market. Currently, Africa generates only around 5GW of solar power (i.e. less than 1% of global capacity). However, if 2020 hails a change in policy and funding for solar in Africa, the current power generation figure will change rapidly."

Power

The global power market will continue to witness a growing demand, according to Kiryushin. He said "Whether generated by gas, coal, oil or renewable sources, power will continue to witness growing demand. There is no doubt that demand in growing markets such as China, India and the Middle East will increase steadily. The ongoing urbanisation of Africa is also likely to have an impact on demand in 2020. The main question for most commentators is not 'whether' Africa demands more power but 'how quickly and by how much' this demand will rise.

"Finally, the rise of EVs, living standards in China and India (dictating more demand for HVAC systems) and industrial consumption is expected to further increase the demand. 2020 is unlikely to be any different from the previous years as more power projects will be funded, constructed, commissioned and upgraded."

Goldman Sachs is first big US bank to rule out loans for Arctic drilling

 

 The Prirazlomnaya offshore ice-resistant oil-producing platform is seen in the Pechora Sea, Russia, on May 8, 2016. It is the world's first operational Arctic rig that processes oil drilling, production, storage, end product processing and loading. Getty Images

https://www.cnn.com/2019/12/16/business/goldman-sachs-arctic/index.html 

Golddman Sachs (GS) is the first big US bank to say it won't finance new oil projects in the Arctic.

On Sunday, the bank announced a raft of changes to its environmental policies, including a pledge not to finance drilling in the Arctic. The restrictions also rule out projects in Alaska's Arctic National Wildlife Refuge, which President Donald Trump has sought to open to development.

 

The funding freeze extends to new thermal coal mine and power plant development around the world, as well as projects that "significantly convert or degrade a natural habitat," Goldman Sachs said on its website.

 

The bank also announced a commitment to invest $750 billion over the next 10 years into areas that focus on climate transition and inclusive growth.

 

Goldman Sachs' move comes as activists and scientists decried the global climate agreement reached Sunday at a UN summit in Madrid, saying its watered-down language fails to deliver clear carbon-cutting commitments. 

 

Goldman Sachs won praise from environmental groups. 

 

The Rainforest Action Network said in a statement that Goldman's commitments are the "strongest fossil finance restrictions of any major US bank."

 

It still lags behind global competitors though, the environmental organization said.

 

According to The Sierra Club, more than a dozen of the world's largest banks have made similar commitments to stop drilling in the Arctic, including UniCredit (UNCFF), Royal Bank of Scotland (RBS) and Barclays (BCS).

 

The Arctic is warming at a rate of almost twice the global average, leading to rising sea levels, changes in climate and rainfall patterns and more severe weather events, according to the World Wildlife Fund.

Caribous are seen at the Arctic National Wildlife Refuge in Alaska.

 

"Goldman Sachs is right to recognize that destroying the Arctic Refuge would be bad business. We hope other American banks will follow their lead," Ben Cushing of The Sierra Club said in a statement. 

 

David Solomon, the CEO of Goldman Sachs, meanwhile called on governments to put a price on the cost of carbon in a Financial Times op-ed.

 

"There is not only an urgent need to act, but also a powerful business and investing case to do so," Solomon said. 

 

The company said it will "phase out" financing of thermal coal mining companies that do not have plans to diversify away from coal.

 

In October, the Sierra Club and Rainforest Action Network were part of a wider coalition that urged Goldman Sachs, JPMorgan Chase (JPM) and other leading investment banks to withdraw financial support for the Saudi Aramco IPO. 

 

According to the coalition, the state-owned oil company, which listed Goldman as a joint financial adviser on its public market debut, is "the world's largest corporate emitter of carbon dioxide."

WPX Energy buys Permian firm for $2.5 billion

https://www.chron.com/business/energy/article/WPX-Energy-buys-Permian-firm-for-2-5-billion-14909443.php

Oklahoma's WPX Energy will pay $2.5 billion to buy a Permian Basin producer backed by a Houston private equity firm as the consolidation of the still-booming Permian heads into a new year.

WPX, which focuses on the Permian and North Dakota's Bakken shale, will acquire Denver-based Felix Energy, which is supported by the Houston private equity player, EnCap Investments.

WPX is specifically interested in scooping up Felix's acreage in Texas' Loving, Winkler and Ward counties in Texas near the New Mexico border. That position of part of the core region of the Permian's more active western lobe, the Delaware Basin.

The Tulsa-based producer will pay $900 million in cash and $1.6 billion in WPX stock, including handing over two board seats to EnCap.

"This is an exciting day for both Felix Energy and EnCap. Over the past four years, the Felix team has worked tirelessly to build what we consider to be a world-class Delaware Basin asset," said Doug Swanson, EnCap managing partner. "Given the current market environment, we are strong believers in consolidation and feel that the Felix asset base is a clear strategic fit for WPX."

In an environment with more modest oil pricing, more Permian consolidation is anticipated. However, contrary to that trend, Wall Street has of late punished the acquiring companies, arguing they are overspending at a time when investor sentiment is valuing conservatism and reduced spending. As such, until this deal, big Permian deals had slowed down since the massive acquisition of Anadarko Petroleum by Occidental Petroleum.

 

RELATED: Wall Street’s stern discipline cools fervor for M&A in energy sector

Felix Energy brings with it 58,500 net acres in the Delaware Basin, including an estimated 1,500 remaining drillable locations.

The deal is expected to close early in the second quarter of 2020.

Tullow Oil Stock Stages a Recovery. But for How Long?

https://www.barrons.com/articles/shares-in-tullow-oil-stage-a-recovery-but-for-how-long-51576074707

Shares in Africa-focused Tullow Oil rose nearly 6% on Wednesday just two days after the oil producer slashed its production outlook for the fourth time this year and said it had ousted its chief executive and head of exploration, after weak performance of its main producing assets in Ghana.

–– ADVERTISEMENT ––

The back story. The London-listed company (ticker: TLW.UK), which was founded in 1985 by Irish businessman Aidan Heavey, has suffered a series of setbacks in Ghana, Uganda, and Kenya. Demand for Jubilee field gas from the Ghana National Gas Company has been much lower than expected, and Tullow has experienced technical problems on two new wells at one of its other fields. The company also failed to sell a $900 million stake in a Ugandan project to Total and Cnooc in August. 

Tullow now expects production for 2020 will be a third lower than previously forecast, averaging between 70,000 and 80,000 barrels of oil a day, down from around 87,000 barrels in 2019.

What's new. Shares in Tullow have recovered for a second day in a row—a welcome reprieve for shareholders after the stock experienced a 70% crash and hit a 16-year low Monday, valuing the company at just £560 million. On Wednesday, shares had recovered slightly and were trading almost 6% higher in London at 48.32 pence, valuing the company at around £676 million. Still, that’s a long way from the £13 share price in 2012.

Looking Ahead. Tullow has started a strategic review of the business, with the aim of cutting the cost base to match the production profile and boost execution on existing operations. Dorothy Thompson, Tullow’s interim executive director, will give investors a full financial and operational update at Tullow’s full-year results on Feb. 12, 2020. 

However, the company’s lower output will have a knock-on effect on the company’s free cash flow, which it now anticipates will be $150 million next year. To pay down its debt load of around £2.3 billion, management may have to sell some parts of the business—or indeed put the whole company on the block.

IEA: An Oil Glut Is Inevitable In 2020

https://oilprice.com/Energy/Crude-Oil/IEA-An-Oil-Glut-Is-Inevitable-In-2020.html

Despite the OPEC+ cuts, the oil market is still facing a supply surplus in 2020, according to a new report from the International Energy Agency (IEA).

OPEC+ announced additional cuts of 500,000 bpd, which sounds more impressive than it is because the group was already producing under its limit. In November, for instance, OPEC was producing 440,000 bpd below the agreed upon ceiling.

Saudi Arabia agreed to shoulder an additional 400,000 bpd of voluntary cuts. But the deal also exempts 1.5 million barrels per day (mb/d) of Russia’s condensate production, allowing Russia to actually increase condensate output by 0.8 mb/d.

Still, the deal should take supply off the market. “If all the countries comply with their new allocations and Saudi Arabia delivers the rest of its voluntary cut of 0.4 mb/d, the fall in production volume versus today will be about 0.5 mb/d,” the IEA said.

OPEC said in its own report that the oil market would be largely in balance in 2020, albeit with a temporary glut in the early part of the year. The IEA sees inventories building at a rate of 0.7 mb/d in the first quarter.

The IEA cut its forecast for non-OPEC supply growth from 2.3 mb/d to 2.1 mb/d, due to weaker growth from Brazil, Ghana and the United States. The U.S. typically gets all of the attention, but disappointing news from Brazil and Ghana also led the IEA to revise forecasts lower.

Notably, Tullow Oil revealed a major disappointment from its Ghana operations, causing a complete meltdown in its share price this week. Its stock fell nearly 70 percent in a single day as investors overhauled their valuation of the company. Tullow admitted that its production from Ghana would decline in the years ahead.

But even the combined effect of slower non-OPEC production growth and the OPEC+ cuts is not enough to erase the glut entirely. “[W]ith our demand outlook unchanged, there could still be a surplus of 0.7 mb/d in the market in 1Q20,” the IEA said.

“Even if they adhere strictly to the cut, there is still likely to be a strong build in inventories during the first half of next year,” the IEA warned. Related: Can Argentina Replicate The U.S. Shale Boom?

But the forecasted glut largely depends on ongoing production growth from U.S. shale drillers. The IEA admits that there will be a slowdown, but is still optimistic on production growth, with gains of 1.1 mb/d in 2020, compared to 1.6 mb/d this year.

The agency has consistently been at the optimistic end of the spectrum regarding shale growth, even as major investment banks long ago slashed their forecasts. The IEA cut its U.S. supply forecast by 110,000 bpd from last month’s report, but at 1.1 mb/d, its figure still seems generous. The IEA is betting that the oil majors, who are less responsive to lower prices and problems with cash flow, will continue to scale up drilling.

Meanwhile, a new report from IHS Markit highlights the accelerating rate of decline among the U.S. shale complex, a decline rate that grows in tandem with production increases. “Oil and gas operators in the Permian Basin, the most prolific hydrocarbon resource basin in North America, will have to drill substantially more wells just to maintain current production levels and even more to grow production, owing to the high level of recent growth,” IHS said in a statement. The base decline rate in the Permian has “increased dramatically” since 2010.

“Base decline is the volume that oil and gas producers need to add from new wells just to stay where they are—it is the speed of the treadmill,” said Raoul LeBlanc, vice president of Unconventional Oil and Gas at IHS Markit. “Because of the large increases of recent years, the base decline production rate for the Permian Basin has increased dramatically, and we expect those declines to continue to accelerate. As a result, it is going to be challenging, especially for some companies with cash constraints, just to keep production flat.”

The firm sees U.S. production growth of only 440,000 bpd in 2020, before flattening out in 2021. If this proves accurate, OPEC+ might not need to worry as much.

By Nick Cunningham of Oilprice.com

The world has its first $2 trillion company. But for how long?

 

 Saudi Crown Prince Mohammed bin Salman aka MBS: Since his father became king in early 2015, MBS has made powerful enemies. Photograph: Fayez Nureldine/AFP/Getty Images

https://www.cnn.com/2019/12/12/investing/saudi-aramco-2-trillion/index.html 

London (CNN Business)Saudi Aramco shares zoomed higher on Thursday, turning the massive state oil producer into the world's first $2 trillion company and achieving the valuation long sought by Crown Prince Mohammed bin Salman.

The stock gained 10% for a second consecutive day, reaching 38.70 riyals ($10.32) per share before giving up some of its gains.

 

Saudi Aramco has gained roughly $300 billion in value since its shares debuted on the Riyadh stock exchange on Monday in the biggest initial public offering on record. It's by far the most valuable company in the world, dwarfing runner up Apple, which is worth around $1.2 trillion.

 

The vast majority of buyers for the stock are in Saudi Arabia. Samba Capital, which managed the IPO, said Tuesday that 97% of retail investors who received shares were from the country. And more than 75% of shares sold to institutional investors went to Saudi companies, funds and government institutions.

 

 

Saudi Aramco shares spike after historic market debut

 

The $2 trillion valuation was a priority for the crown prince ever since he first touted the partial privatization in 2016, but many analysts considered the figure a stretch despite Aramco's monopoly on oil production in Saudi Arabia, the world's largest exporter of crude.

 

Analysts at Bernstein Research said Thursday that the $2 trillion valuation was "too much, too soon" given weak expected earnings growth and little upside for global oil prices. The company looks expensive, they said, compared to peers such as Exxon (XOM) and Royal Dutch Shell (RDSA). 

 

"Aramco should trade at a discount rather than premium to international oil majors," the analysts said. More than 98% of the company is still owned by the kingdom, they noted, suggesting that investors should be concerned about corporate governance. Bernstein reckons the company is worth as little as $1.4 trillion.

 

"Aramco could trade in a league of its own for some time, but the stock market is a weighing machine in the long term and the laws of economic gravity will eventually apply," said the Bernstein analysts. They recommended that investors sell Aramco shares now.

The long road to an IPO

International skepticism over the valuation, combined with low oil prices, the climate crisis and geopolitical risk, forced Saudi Arabia to scale back its initial ambitions for the flotation. 

 

The IPO was supposed to usher in a new era of economic liberalization and foreign investment in Saudi Arabia. The Saudi government discussed floating 5% of the company in 2018 in a deal that would raise as much as $100 billion. It was looking at international markets such as New York or London, as well as Riyadh.

 

 

 

OPEC's plan to boost oil prices may not work

 

But the deal was hampered by concerns about the valuation and potential legal complications in the United States. It was shelved after the murder of journalist Jamal Khashoggi in a Saudi consulate in Turkey sent a chill through business ties with the kingdom. 

 

Yet the listing was revived earlier this year, and Aramco moved ahead despite receiving muted interest from international investors. Aramco ultimately raised $25.6 billion by selling 1.5% of the company at a valuation of $1.7 trillion. 

 

Gianna Bern, an energy expert who teaches at the University of Notre Dame's Mendoza College of Business, said the local offering was able to attract a "friendly audience" of Saudi nationals. International investors will watch how the company handles disclosure and regulatory requirements before considering whether to buy into a potential future international listing.

 

"The real test will be a global offering, in another jurisdiction, such as London or Asia with more stringent regulatory requirements," said Bern, who is also the founding principal of energy consultancy Brookshire Advisory and Research.