Do Politicians have a stake in BDCs?

Dr Mohammed Amin Adam

http://www.spyghana.com/do-politicians-have-a-stake-in-bdcs/

THE Executive Director of African Centre for Energy Policy (ACEP),  Dr Mohammed Amin Adam has identified the lack of political will and commitment to solving the country’s Petroleum difficulties because of the strong conviction that some politicians have a stack in the Bulk Distribution Companies (BDC) otherwise why has it taken the Mahama administration too long a time to give the remaining $30 million to Tema Oil Refinery (TOR) for retooling he asked.

 He said retooling TOR is one surest way of solving the Petroleum downstream challenges the country faces that led to a week country-wide shortage of fuel last week. He said any scientific analysis of the situation on our hands has shown that Ghana losses more in terms of freight and insurance cover of finished products that are imported.

To this end ACEP support Government’s proposal of seeking collaboration between TOR and the Saudis in a joint venture arrangement.  This ACEP say will greatly increase the domestic sourcing of petroleum products and reduce the additional cost associated with importing petroleum products such as cost, insurance and freight charges.   ACEP also recommended that NPA should embark on aggressive demand management programmes particularly in Government, Ministries, Departments and Agencies  and closely work with  Customs and the Ministry of Transport to check inefficient vehicles importation.

Implications

ACEP say much as they understand the social implications of the a full deregulations, Government’s social interventions such as expanding the Metro Mass Transport, affordable health, access to education etc have been proven to significantly reduce the social impacts of market prices in many countries. Government should also expand the Livelihood Empowerment Against Poverty (LEAP) to support poor families.

Supported by Mr. Alfa Nasir and Benjamin Boachie, Dr Adam noted that a predetermined benchmark price could also be applied beyond which Government’s intervention is justified. During these times  tax reliefs on petroleum products could be applied, Price stabilization of a pesewa could be levy and invested in a stabilization fund  which could used in times of price volatilities.

Finally he suggested that Government must build a number of initiatives to inure public confidence in the administration of petroleum pricing which includes transparency such as publishing and making full disclosure of “accounts of all statutory levies on petroleum products and how funds are spent.  These include cross subsidization account, the Road fund account, the Energy fund account, the Exploration levy and Tor Debt Recovery levy.

He asked who knows whatever  amount of funds is in the various accounts, or how much has accumulated or how much is left in the various accounts. Good governance demands that tax payers be informed about all these developments for confidence sake. Just like the CEO of National Petroleum Authority (NPA) “Government must stop absorbing price increases for fear of political upheavals and seek a bi-partisan consensus on the petroleum pricing”. Dr Adam suggested.

By Seibik Bugri

www.spyghana.com

www.goxi.org/profile/seibikbugri

OPEC: Rising global oil demand driven by U.S.

http://americasmarkets.usatoday.com/2014/07/10/opec-rising-global-oil-demand-driven-by-us/

Global demand for oil will pick up next year as U.S. consumption reverses a four-year decline, and the United States will produce an increasing share of the world’s supply, the Organization of the Petroleum Exporting Countries said Thursday.


As the world economy continues to recover, oil demand will grow by 1.2 million barrels per day next year (up from 1.1 million estimated for 2014)  partly because of rising U.S. consumption, the 12-member oil producers’ group said in its first 2015 forecast.


Since 2010, fuel conservation and weak economies have lowered oil consumption in most


industrialized countries. While OPEC expects oil demand will continue to shrink in Europe, it sees an uptick in China and even faster growth in the United States, where demand is forecast to rise 180,000 barrels a day in 2015.


Surging U.S. crude oil production, due mostly to extraction from shale deposits in North Dakota and Texas, will help meet this growing demand. It’s expected to grow 7% to 13.12 million barrels a day next year, OPEC said. The United States strictly limits how much crude oil can be exported.


In its own forecast Tuesday, the U.S. government said the nation’s oil production – rising steadily since 2008 -  will likely reach its highest level next year since 1972. Jumping from 5 million barrels per day in 2008 to 7.4 million last year, production is expected to average 8.5 million per day this year and 9.3 million next year, according to the Energy Information Administration, the analytical arm of the Department of Energy.


The OPEC forecast says the United States will see the highest production growth of any non-OPEC country. In contrast, OPEC said its production, which fell in 2012 and 2013, has continued to dip this year. Its June total, 29.7 million barrels per day, was 79,000 barrels less than that of May, driven mostly by unrest in Iraq where Islamic Sunni militants seized control last month of northern areas including Mosul.


“Iraq led the crude oil output decrease while crude oil production from Saudi Arabia and Nigeria experienced an increase in June,” OPEC said. Iraq remains OPEC’s second-largest producer, after Saudi Arabia, although Iran, Kuwait and United Arab Emirates are not far behind.
The report said OPEC won’t likely benefit from the rising global demand. It expects demand for its oil will, for the third straight year, continue to decrease — about 300,000 barrels a day in 2015. As a result, its share of the world’s crude oil market will fall from 35% in 2012 to 32% next year.

Will Oil Export Ruling Doom Your Refining Stocks?

http://www.fool.com/investing/general/2014/07/16/will-oil-export-ruling-doom-your-refining-stocks.aspx

By Arjun Sreekumar | More Articles             
       

U.S. refiners have had a great run over the past few years. Valero (NYSE: VLO  ) , the nation's largest independent refiner, is up more than 250% over the past five years, while shares of HollyFrontier (NYSE: HFC  ) have surged more than 400% over the same period. And Phillips 66 (NYSE: PSX  ) is up nearly 120% since it made its debut on the NYSE in April 2012.

The main factor driving refiners' strong performance has been a wide gap between the price of domestic crude oil benchmarks like West Texas Intermediate, or WTI, and the global crude benchmark, Brent. This price difference, known as the Brent-WTI spread, is the chief determinant of U.S. refiners' margins.

But some argue that a new federal ruling announced late last month could end refining stocks' multi-year run, since it could potentially lead to a compression of the Brent-WTI spread. Since the announcement, shares of Valero and HollyFrontier are down by about 13%, while Phillips 66 has slumped 7%. Is this simply a hasty knee-jerk reaction, or is refining stocks' run really over for good?

Hard to tell

Based on the information provided so far, the short answer is that we can't really be sure at this point because key questions remain. Most importantly, what kind of condensate export volumes can we expect, and how exactly do federal regulators define processed condensates?

As I understand it, the ruling qualifies condensate that has been stabilized by passing it through a distillation tower to qualify as a processed petroleum product that is eligible for export. That, by itself, does not appear to signal a sea change to the 40-year-old crude export ban, since stabilized condensate is chemically closer to a refined product than to unrefined crude oil.

What could, however, be a game changer is if the ruling turns out to be part of a broad strategic change in the Obama administration's policy toward oil exports. To be sure, there's a good case for exporting condensate -- we have way too much of it. Domestic production of condensates has surged by about 70% over the past three years to more than 1 million barrels per day, according to RBN Energy LLC.

But because most Gulf Coast refineries can't process condensate, it is trading at a massive discount to other crude oil benchmarks. By exporting it, we can help eliminate this price gap and allow domestic oil producers to get a higher price for their condensate production, thereby giving them incentive to boost production. Still, even if the ruling does mark a broad shift in U.S. policy, additional hurdles remain.

For instance, infrastructure limitations and the additional costs of processing and export, which could be at least $4-$5 per barrel, may deter some companies from exporting condensate, according to analysts at Morgan Stanley. Further, Eagle Ford condensate's low distillate yield and high paraffin content may make it undesirable for many global refiners, limiting its export potential, Morgan Stanley added.

Outlook for refiners

As you can see, the outlook for refiners hinges largely on whether the recent condensate export ruling is simply a minor technical tweak of existing statute or whether it signals a broad shift in the Obama Administration's policy toward oil exports. If it is the former, then I think refiners are still a good place to be, especially Valero and Phillips 66.

Valero's heavy concentration along the U.S. Gulf Coast should continue to boost the company's overall refining margins, as it has done in recent quarters. That's because the region is expected to remain oversupplied with crude oil for quite some time, driving down Valero's feedstock costs. The company is also investing heavily in new topping units at two of its Gulf Coast refineries that should further increase its ability to process cheap Eagle Ford crudes.

Phillips 66 also benefits from its leading position along the Gulf Coast and from its favorable crude slate, which consisted of 91% cost-advantaged crudes as of the first quarter. But the company's biggest advantage over other refiners is its midstream and chemicals segments, whose stronger and more stable margins help offset volatility in refining margins. As these business segments account for a greater share of the company's earnings and cash flow over the next few years, they should allow it to comfortably grow its dividend.

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Ghana oil companies call for Buipe depot to be reactivated ‘immediately’

http://www.tankstoragemag.com/industry_news.php?item_id=8035

Oil marketing companies in Ghana's Northern Region are calling for the Buipe petroleum storage depot to be reactivated immediately following a business downturn.

The depot was temporarily shut down in November 2013 for maintenance. At the time it was serving a large part of the Northern Region and parts of the Brong Ahafo Region.

The facility has a capacity of 50 million litres - 37 million of which are dedicated to diesel and 13 million to petroleum.

According to local news reports, there was a daily demand for 800,000l of petrol and 700,000l of diesel when the depot was in full operation with a maximum of 50 tankers in use on a daily basis.

The shutdown has reportedly been affecting business in the region, with costs increasing for petroleum transport between Tema and the north. Fred Ayarkwa, MD of the facility, anticipates that Buipe will resume operations in September this year.

See more at: http://www.tankstoragemag.com/industry_news.php?item_id=8035#sthash.WYGytIHr.dpuf

Does America Need More Oil Refineries?

http://www.usnews.com/opinion/economic-intelligence/2014/07/02/does-america-need-more-oil-refineries

The U.S. has far fewer refineries that it used to, but is that a bad thing?

Does America have enough oil refineries? Enough refining capacity? The answers often depend not only on whom you ask, but when.

If it’s springtime, when refineries are wrestling with annual maintenance checks and balances and the often bumpy transition from "winter-blend" to "summer-blend," many consumers and perhaps some oil industry observers too may be inclined to say that a few more refineries might ease bottlenecks and price spikes, particularly in some regions where fuel supply options are nonexistent or extremely limited. (Sure, build those refineries almost anywhere, they’ll say, except the Gulf Coast, which already has nearly 50 percent of the nation’s refining capacity.)

On the other hand, if you ask these questions in October or November, when most states see substantial declines in gas prices from mid-summer levels, you might hear that’s not needed now; it’s a problem that’s under control.

The Energy Information Administration last week released its "Refinery Capacity Report," which surveys refinery ownership and capacity at the start of each year. Most notable is the fact that U.S. refineries continue to increase capacity, even as domestic consumption of gasoline is projected to show consistent decline. As of January 1, 2014, there were 139 operating refineries and three others currently idle, with a total capacity of 17.9 million barrels per day.

In 2000, the U.S. had 159 refineries operating with a capacity at 16 million barrels per day. And in 1990, believe it or not, there were 205 refineries in operation, at a capacity of 15.1 million barrels per day. It's hard to believe, but apparently the 139 refineries the U.S. now has are easily meeting current demand for domestic needs, as well as exports of petroleum products other than crude oil and gasoline.

 The current refining leaders ranking first, second and third are Valero Energy, ExxonMobil and Marathon Petroleum. Philips 66 and Motiva rank fourth and fifth, and combined, according to Downstreamtoday.com, these five companies own 45 percent of U.S. refining capacity.

 

Some are looking to increase their production of distillates such as ultra low-sulfur diesel and decrease gasoline, reflecting emerging trends in domestic and international demand. While domestic gasoline demand appears tame, if not flat, keep an eye on the millennials (those born between the early 1980s and early 2000s). Their apparent indifference to automobiles is more a lifestyle fit than a deeply-held position, and for that reason it’s likely to change, perhaps quickly, once they find spouses and children arrive.

Gold Down Sharply on Heavy Profit Taking, Weak Long Liquidation, Sell Stops Hit

http://www.forbes.com/sites/kitconews/2014/07/14/gold-down-sharply-on-heavy-profit-taking-weak-long-liquidation-sell-stops-hit/

(Kitco News) - Gold prices ended the U.S. day session sharply lower Monday, pressured by heavy profit taking and capitulation by weak-handed longs. The steep downdraft in prices also set off pre-placed sell-stop orders. The sell-off accelerated shortly after the Comex futures market opened in early U.S. trading, which suggests a big sell order hit the futures market at that time. August Comex gold was last down $30.60 at $1,307.00 an ounce. Spot gold was last quoted down $33.00 at $1,306.50. December Comex silver last traded down $0.533 at $20.99 an ounce.

The gold and silver bulls were hit hard Monday and need to recover very quickly to avoid near-term chart damage. Price action Tuesday and Wednesday will be extra important for the gold and silver markets. Rebounds in prices would suggest prices can work to maintain their recent uptrends. Good follow-through selling pressure would suggest near-term price uptrends are finished and that prices could work sideways to lower in the coming weeks.

One ominous clue for both gold and silver, and the rest of the raw commodity sector, is the recent sharp downturn in the Goldman Sachs Commodity Index (GSCI). Gold and silver held up well during last week’s shellacking in the general raw commodity sector, but the pummeling appeared to catch up with those two metals Monday.

The lack of fresh concerns about the geopolitical front also led to better risk appetite in the market place Monday, at the expense of safe-haven gold. However, four situations remain simmering on low heat on the back burner of the market place: the European Union sovereign debt crisis, the Iraqi civil war, the latest flare-up between Israel and Hamas, and the Russia-Ukraine tensions. Any one, or more, of these conflicts could quickly move to the front burner–and gold would likely see good safe-haven demand quickly develop.

The highlight of the trading week is likely to be testimony on U.S. monetary policy from Federal Reserve Chair Janet Yellen before the U.S. Congress on Tuesday and Wednesday.

U.S. corporate earnings reports will also be featured this week.

There was no major U.S. economic data due for release Monday.

The London P.M. gold fix was $1,306.00 versus the previous A.M. fixing of $1,321.25.

Technically, August gold futures prices closed nearer the session low and hit a three-week low Monday. Gold market bulls faded quickly today and lost their near-term technical advantage. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at last week’s high of $1,346.80. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at $1,300.00. First resistance is seen at $1,309.40 and then at $1,315.70. First support is seen at Monday’s low of $1,302.20 and then at $1,300.00. Wyckoff’s Market Rating: 5.0

December silver futures prices closed near the session low Monday on heavy profit taking and weak long liquidation. The bulls still have the slight overall near-term technical advantage but need to show fresh power soon to keep it. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $21.67 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at $20.47. First resistance is seen at $21.25 and then at $21.385. Next support is seen at $20.89 and then at $20.70. Wyckoff’s Market Rating: 5.5.

December N.Y. copper closed down 165 points at 325.25 cents Monday. Prices closed near the session low after hitting a six-month high early on today. Profit taking was featured. Copper bulls still have the firm overall near-term technical advantage. Copper bulls’ next upside breakout objective is pushing and closing prices above solid technical resistance at the January high of 334.40 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at 316.50 cents. First resistance is seen at 327.50 cents and then at today’s high of 329.45 cents. First support is seen at Monday’s low of 324.75 cents and then at last week’s low of 323.30 cents. Wyckoff’s Market Rating: 6.5.

By Jim Wyckoff, contributing to Kitco News; jwyckoff@kitco.com

 Follow me on Twitter @jimwyckoff

Iraq's crude oil storage plan in South Korea suspended indefinitely, says source

Seoul (Platts)


http://www.platts.com/latest-news/oil/seoul/iraqs-crude-oil-storage-plan-in-south-korea-suspended-26813818


Iraq's plan to store crude at a South Korean oil terminal has been suspended indefinitely due to Baghdad's debt problems, a South Korean government source told Platts Wednesday.

Iraq and South Korea signed a memorandum of understanding in September last year that included joint storage of Iraqi crude at a South Korean oil terminal. The deal was signed between Iraqi oil minister Abdul Karim al-Luaibi and his South Korean counterpart Yoon Sang-Jick at a meeting in Seoul.

Speaking to reporters in Seoul last September, al-Luaibi said Iraq had planned to store "about 4 million barrels" of Iraqi crude for marketing in Asia in storage tanks in South Korea.


A month later in October, the two nations agreed to begin the storage "at the earliest date possible" and hold a meeting of their respective energy ministers in first half of 2014 to get the project off the ground in H2.

At that time, a South Korean energy ministry official told Platts Baghdad was looking to start storing crude oil at a South Korean oil terminal in H2, but Seoul wanted it to begin earlier.

"The joint storage project has [now] been suspended due to Iraq's debt problems that has kept vessels carrying Iraqi crude from leaving for South Korea for joint storage as they could be distrained by creditors," the source said. He declined to elaborate on the extent of Iraq's debt, saying only: "South Korea concluded the MOU last year on the condition that Iraq's debt problem was resolved and we cannot start the project before then."

Iraqi crude imported by South Korea refiners is owned by the refiners. The cargoes to be jointly stored in South Korean tanks will be owned by Iraq and could be seized by creditors over the debt problem, the source said.

South Korean refiners imported 23.71 million barrels of Iraqi crude over January-April, down 23.4% from the same period last year, mostly under term contracts, according to state-run Korea National Oil Corp.

KNOC, which runs the country's state oil storage facilities, said the joint storage plan would not start in the near future.

"Some details on the joint storage have not fixed yet," a KNOC official told Platts, without elaborating. "KNOC cannot comment on Iraq's debt because the MOU was led by the Ministry of Trade, Industry and Energy."

JOINT STORAGE SEEN AS A 'WIN-WIN'

The ministry has described tank leasing as a "win-win", giving South Korea first access to the foreign oil stored in its tanks in the event of an emergency, and foreign owners logistical advantages in tapping into the growing Asian market.

The joint storage is part of South Korean efforts to transform its southern coast, which houses oil refiners and tank terminals, into an oil hub for Northeast Asia.

The United Arab Emirates has 6 million barrels of crude stored at a base in Yeosu under a 2012 joint storage deal between KNOC and Abu Dhabi National Oil Company. The first 2-million barrel shipment arrived last September, the second last December and the third in January.

KNOC operates nine storage bases that can hold a total 146 million barrels of crude oil and oil products, including tunnel-type underground tanks and the world's single largest oil storage base. Of the total capacity, 127.5 million barrels is for crude oil, 14.1 million barrels for refined products and 4.4 million barrels for LPG.

--Charles Lee, newsdesk@platts.com
--Edited by Wendy Wells, wendy.wells@platts.com