The Global Perspective
The IEA’s October Oil Market Report Highlights indicates crude oil benchmarks rallied on expectations of lower US output and rising tension in the Middle East. Global demand growth was expected to slow from a five-year high of 1.8 million barrels per day (mbpd) in 2015 to 1.2 mbpd in 2016.
OPEC’s October 2015 monthly monitoring report said world oil demand growth in 2015 is predicted to rise by 1.50 mbpd after an upward revision of around 40 thousand barrels per day (tbpd), mostly due to better-than-expected data in Q3. Global oil demand is now forecast at 92.86 mbpd. In 2016, demand is expected to rise by 1.25 mbpd, following a downward revision of 40 tbpd, ‘mainly reflecting the high base-line effect’. However, Iranian oil and gas production looks set to increase; and Egypt has discovered a huge natural gas field off its Mediterranean coast which may extend into Cypriot waters.
Indonesia hoped its anticipated return to OPEC in December would take it closer to global oil producers, easing its reliance on a small group of traders. OPEC’s approval of Indonesia’s request to reactivate full membership would make the country OPEC’s only net crude oil importer. Despite gloomy reports for the petrochemicals industry, France’s Total and Saudi Aramco remain interested in expanding production at their joint refining project in Saudi Arabia. It would reportedly involve production of linear alpha olefins, poly alpha olefins and elastomers. Russia’s Lukoil is also reported to be in negotiations for the development of more than one petrochemicals plant in Iraq.
In October, Daewoo Engineering & Construction Co, Tecnicas Reunidas SA and Hyundai Heavy Industries Co signed contracts to build Kuwait’s USD16 billion, 615,000 barrels per day (bpd) Al Zour oil refinery, which will more than double the country’s processing capacity when completed in 2019. Heavy oil from new fields in Kuwait will be used to produce low-sulphur diesel, 340,000 bpd of high value light products and 225,000 bpd of fuel oil to feed power-generation plants in the country. In September, BP officials met with Iranian oil executives as it seeks a return once sanctions are lifted. Lukoil’s CEO says it also aims to sign an Exploration and Production deal following changes to Iran’s tax laws. Lukoil stopped work in Iran as a minority partner in the Anaran project in 2010 due to sanctions. Italy’s Eni says it is also interested in returning to Iran, provided it can recover previous investments made there.
Subject to final court approval, BP has agreed to pay USD20 billion to settle US claims stemming from the Deepwater Horizon oil spill. It says it gives ‘certainty with respect to its financial obligations.’
The development of the UK’s largest new North Sea field in a decade has been approved by the UK Oil & Gas Authority. The Maersk Oil-operated Culzean field is expected to produce enough gas to meet 5% of total UK demand by peak production in 2020–21. The gas condensate field has an estimated 250–300 million barrels of oil equivalent. Production is expected to start in 2019 and continue for 13+ years, with plateau production of 60,000–90,000 barrels of oil equivalent per day.
Global supply of LNG is set to increase significantly from 245 million tons per annum (mtpa) in 2014 to 297 mtpa in 2017. Three major projects have recently been completed; over 100 mtpa of LNG projects are currently under construction; and 600 mtpa of projects are under consideration.
However, the future of LNG projects ‘under study’ is questionable. According to Reuters: ‘China’s energy giants – after years spent scrambling to secure supplies for the world’s third-biggest gas market – are being forced to sell a glut of the fuel to buyers in other countries as soaring demand grinds to a halt.’
‘Downsizing’ by some of the international oil and gas majors appears to have benefitted India’s state-run energy explorer, ONGP, which believes its exploration costs will drop a fifth as fees for rigs and vessels moderate after businesses including BP and Royal Dutch Shell curbed outlays. It could mean a saving of INR49 billion (USD749 million) on ONGP’s planned exploration spending in year ending March 2016.
An overview by Marhaba Oil and Gas correspondent Gina Coleman, using published information compiled from media sources (October 2015).
Image credit: me-ogp