WEEKLY PUBLICATIONS
The Oil Sands Weekly
Energy Market Review
US Inventory Report


WEEKLY NEWSLETTER
Sign-up for the latest oil sands news, site updates and what's moving energy markets, delivered to your inbox every week-end:

WE RESPECT YOUR PRIVACY
Opt out anytime by clicking "UNSUBSCRIBE" at the bottom of the newsletter.
The Oil Sands Weekly

The Oil Sands Weekly

IN THE NEWS THIS WEEK:
  • More production cuts at Syncrude
  • Asset sales continue at Pengrowth
  • Husky pilots a new approach to carbon capture
  • BC wildfires encroach on major pipelines
  • Statoil comes up dry in Newfoundland
  • Canadian oil production dips again in April
  • Opening up exploration in Alaska
  • Earthquate rocks Cushing storage hub
  • Lowering royalty rates south of the border
  • Frenzy around US shale drilling "unsustainable"
  • Historic discoveries offshore Mexico
  • Shell exits Ireland
  • Global energy investments sink for third consecutive year
  • Oil majors pile on US$100 billion in new debt
  • Future oil price forecasts sink lower, lower and lower.

ALBERTA

Small fire cuts July production at Syncrude
A small fire at Syncrude's sulphur emissions reduction unit earlier this week has reduced production once again at the oil sands facility. According to a Syncrude spokesperson, the fire was extinguished within two hours. No injuries were reported but the company has yet to assess the extent of the damages. July's production figures were trimmed back from an initial forecast of 8.4 million to 5.2 million barrels. Syncrude's Mildred Lake upgrader has the capacity to produce about 10.5 million barrels of light, sweet crude per month. The facility was in the process of returning to normal after a March fire at the upgrader's hydrotreater unit.

Asset sales continue at Pengrowth
Pengrowth Energy announced the sale of its Olds/Garrington area assets in Central Alberta to an unspecified buyer for $300 million. The assets produce about 14,000 boe/day. The company says the sale will help reduce its debt load and put more resources towards its Lindbergh thermal project and Groundbirch Montney play.


CANADA

A new approach to carbon capture
Vancouver-based Inventys has struck a $10 million equity financing deal with Husky Energy. Proceeds from the transaction will fund a 30 t/day CO₂ capture pilot plant at Husky’s enhanced oil recovery (EOR) program near Lloydminster, Saskatchewan. Inventys is the developer of the VeloxoTherm™ System, a process where carbon dioxide is adsorbed onto a rotating assembly, then released using low pressure steam.

Cenovus sales expected in Q4
According to Reuters, Cenovus Energy says it expects to raise as much as $2.5 billion from the sale of its Weyburn and Palliser assets, expected to be announced sometime in the fourth quarter. The Weyburn properties located in southern Saskatchewan are expected to fetch $1.5 billion, while the Palliser assets in southeastern Alberta are worth about $1 billion. Cenovus has indicated it wants to raise as much as $5 billion in asset sales, including its Pelican Lake and Suffield conventional oil and gas assets.

Statoil comes up dry in Newfoundland
Statoil says it hasn't found any hydrocarbons in two wells drilled in the Flemish Pass Basin, located 500 km off the east coast of St. John’s, NL. The company says they are disappointed by the results but will continue to evaluate opportunities in the area. Flemish Pass is part of the Bay du Nord field, estimated to hold 300 million barrels of recoverable oil. Husky Energy is a partner in the venture.

Wildfires continue to burn in the heart of BC
Wildfires continue to burn in the interior of BC, mostly centred around the Williams Lake area. Kinder Morgan has been clearing vegetation and watering down along the Trans Mountain pipeline right-of-way. Enbridge says it has taken a natural gas compressor offline, although there are no reports of reduced shipments so far. There are currently about 185 fires burning across the province, which have disrupted logging and mining operations throughout the central region.

Canadian oil production dips again in April
Statistics Canada reported another decline in oil production for the month of April, now down over 500,000 bbl/day from the highs of February. Bitumen production declined 92,000 bbl/day while upgraded bitumen output fell 226,000 bbl/day due to the shutdown of Syncrude's Mildred Lake upgrader. Total production for the month was reported at about 3.5 million bbl/day.


USA

Opening up exploration in Alaska
The Bureau of Ocean Energy Management (BOEM) has approved a plan by Eni to explore for oil in federal waters off the coast of Alaska, a first since 2015. The BOEM says they are confident there are "vast oil and gas resources" under the Beaufort Sea, and they look forward to working with Eni to develop the area.

Earthquake hits near Cushing
The USGS reported a A 4.2 magnitude earthquake shook Stroud, Oklahoma this week, about 20 miles from the Cushing storage hub. A series of small aftershocks followed. So far, there are no reports of damages or injuries. Cushing holds about 60 million barrels of crude and is a major crossroad for many large pipelines. The last major incident was a magnitude 5.0 quake that struck last November.

Lowering royalty rates south of the border
The US government is now offering reduced royalty rates for shallow water leases. The country plans to sell offshore leases in Texas, Louisiana, Mississippi, Alabama and Florida in mid-August, a first for the new US Administration. Interior Secretary Ryan Zinke says he hopes to speed up approval of permits and help expand production out the Outer Continental Shelf.

Pipeline rupture in Texas
A pipeline operated by Magellan Midstream Partners has ruptured near the city of Bastrop, Texas, about 30 miles southeast of Austin. A contractor accidentally hit a fitting while doing maintenance work on the line, spilling about 1,200 barrels of oil. Residents near the site of the spill were evacuated. Magellan says clean-up activities are in progress and no oil has reached any water bodies.

Exxon fined for 2016 Baton Rouge explosion
The US Occupational Safety and Health Administration (OSHA) has fined ExxonMobil US$165,000 for an explosion that injured four workers last year at its Baton Rouge refinery in Louisiana. OSHA cited 9 counts of safety infractions, including inadequate training and insufficient maintenance at the aged facility. The US Chemical Safety Board is still investigating the explosion, which occurred in the sulphuric-acid alkylation unit. Five years ago the EPA accused the company of failing to address corrosion and inadequate shutdown/emergency procedures at the same facility. Exxon says it will contest the fines.

Anti-trust concerns in the oil storage business
California's Attorney General is seeking to block Valero Energy and partner Plains All American (PAA) from purchasing two petroleum storage and distribution terminals in the Bay area on grounds of anti-competitiveness. Valero and PAA say they will "vigorously defend" the transaction, noting that the two companies do not directly compete with each other in the state of California. The assets in question are currently owned by a subsidiary of PAA.

Frenzy around shale drilling not sustainable
Halliburton says the current frenzy around drilling for US shale is not sustainable, and likely to fizzle out next year. The number of oil rigs in service reached a 2-year high last week, despite a WTI price firmly below US$50/bbl. The company sees rig counts rising above 1,000 by the end of this year, then levelling out to the 800-900 range. Halliburton also says demand for oil field services remains tepid outside of the US.

Missing the old job
Former ExxonMobil CEO and current Secretary of State Rex Tillerson received a lifetime achievement award at the World Petroleum Congress this week for his 41 years of service in the energy sector. Tillerson says he misses his former colleagues, both within Exxon and in the oil business in general.

2018 expected to be a record year despite lower oil prices
The US Energy Information Administration (EIA) is now projecting US oil production to average 9.9 million bbl/day in 2018, down from a previous forecast of 10.0 million bbl/day. Despite the downward revision, those figures would be a new record high, surpassing the previous record of 9.6 million bbl/day reached set in 1970. The EIA has also lowered their WTI forecast by about US$2/bbl, now expected to average US$49 this year.


US PRODUCTION & INVENTORY DATA

The EIA released a rather bullish petroleum inventory report this week. Higher exports and lower imports help reduce crude inventories by over 7 million barrels last week.

 
steelwork-1031485_1280.jpg

WEEKLY US INVENTORY REPORT

JULY 12, 2017

CRUDE INVENTORIES FALL SHARPLY AS IMPORTS DIP AND EXPORTS GAIN

 

AROUND THE WORLD

Shell exits Ireland
Royal Dutch Shell has sold its upstream operations in Ireland to the Canada Pension Plan Investment Board (CPPIB) for US$946 million and up to US$285 million in contingency payments, depending on the price of gas and production. The assets mainly consist of Shell's 45% stake of the Corrib gas project, located 83 km off the northwest coast of Ireland. Once the deal closes, CPPIB will give Vermilion Energy a 1.5% stake for US$22 million, bringing Vermilion's stake to 20%. Vermilion also takes over operation of the field, formerly run by Shell's Irish subsidiary. Corrib has a gross nameplate capacity of 350 MMcf/day of natural gas. The Dutch oil major will take a US$350 million impairment charge on the transaction. Statoil's 36.5% stake in the field is unaffected.

Lack of clarity in Brazil
Statoil has purchased an additional 10% interest in Brazil’s Santos basin from Rio-based QGEP for US$379 million. QGEP citing "lack of clarity" around the timing of first oil from the field, which is operated by Statoil.

Major discoveries offshore Mexico
Italian oil major Eni has accelerated its plans to develop the Amoca field offshore Mexico, which is now estimated to hold about 1 billion barrels of oil equivalent. Talos Energy, Sierra Oil and Gas, and Premier Oil also announced a "historic" discovery in the Zama-1 exploration block, estimated to hold as much as 2 billion barrels of light crude, making it one of the largest discoveries in shallow water in the past two decades.

US$50 billion needed in Venezuela
Low oil prices have prompted Venezuela's state-owned PDVSA to renegotiate its October bond payments. The country currently produces about 2 million bbl/day but says it needs US$50 billion over the next 7 years to raise that number closer to 3 million. Venezuela holds world's largest crude reserves, mostly oil sands located in the Orinoco Belt.

Exxon sent back to the drawing board
A US appeals court has unanimously ruled that ExxonMobil cannot enforce an arbitration award against Venezuela stemming from the seizure of the Cerro Negro and La Ceiba projects in 2007, when the country nationalized its oil industry. The company was initially awarded US$1.8 billion, which was later reduced to US$188 million. Exxon says it disagrees with the ruling and will consider its legal options.

Exxon moves into Suriname
A subsidiary of ExxonMobil and partners Hess and Statoil signed a production sharing contract for Deepwater Block 59, located 305 km offshore Paramaribo, located on the border between Guyana and the sovereign state of Suriname. Exxon will operate the field, the third so far in the same region.

Drilling in disputed waters
According to the Philippine government, drilling may resume in the South China Sea by the end of this year, as the country prepares to auction new drilling licenses in the Reed Bank, located 85 miles off the island's western coast. Exploration was halted at the end of 2014 due to a territorial dispute with China, who has claimed sovereignty over the entire South China Sea. A Dutch court invalidated China's claim to the entire region, giving the Philippines a 200 mile buffer zone. China has so far refused to recognize the ruling.

Total bullish on Qatar
French energy giant Total and Qatar Petroleum have taken over operation of the giant Al-Shaheen offshore oil field, which currently produced about 300,000 bbl/day. Total CEO Patrick Pouyanné says his company "is fully committed to the development of its partnership with Qatar Petroleum both in Qatar and internationally, and is willing to further expand its cooperation in particular with new projects in Qatar." Al-Shaheen accounts for about half of Qatar’s total oil output.

Global oil & gas investment down 25% while majors pile on debt
According to the International Energy Agency (IEA), total global Investment in the oil and gas sector declined another 25% in 2016 to US$649 billion, split two-thirds upstream and one-third downstream. Oil and gas spending is now down 44% from the highs of 2014 but the IEA expects a slight rebound this year, driven by higher spending in the US, Middle East and Russia. Despite lower oil prices and aggressive cost-cutting, global oil majors have increased debt by over US$100 billion in the past three years.

Turning the corner on FIDs
Wood Mackenzie says 2017 may be a turning point for sanctioning major upstream projects. A total of 12 major projects got a positive Final Investment Decision (FID) in 2016, which will see the development of 8.8 billion barrels of oil equivalent (boe). So far in the first 6 months of this year, 15 projects (mostly brownfield) have been sanctioned. Continuing on the trend of recent years, the brownfield projects are lower risk and lower capital than greenfield projects of the past. Woodmac estimates this year's new projects will bring 1.6 million boe/day online by 2024.

Going public at the wrong time
Following in the footsteps of Saudi Arabia and the UEA, Abu Dhabi may IPO various business units of its national oil company, ADNOC (Abu Dhabi National Oil Company). The funds would be used to help the country diversify its revenues away from crude exports.

World oil supply growth - Part 1
In this month's Oil Market Report, the IEA reported that global oil supply rose by 720,000 bbl/day in June to 97.46 million bbl/day, driven by higher production from both OPEC and non-OPEC producers. On a brighter note, the agency expects demand to grow by 1.5% this year to 98 million bbl/day. Stockpiles in OECD countries declined by 6 million barrels in May and are expected to decline again in June. Worldwide, refinery throughput is expected to reach a record high of 81 million bbl/day in the third quarter of this year, driven mostly by the US.

World oil supply growth - Part 2
According to the IEA and OPEC, OPEC's output rose to 32.6 million bbl/day in June, up 340,000 bbl/day from the previous month. The increase was driven by higher supply out of Saudi Arabia, Nigeria and Libya. OPEC has allegedly asked Nigeria and Libya to curb production increases. Nigeria's oil minister says he may consider the request later this fall. Nigeria is expected to increase output by another 200,000 bbl/day in July to 2 million bbl/day, still below its nameplate capacity of about 2.2 million bbl/day. The next OPEC meeting will be held on July 24 in St. Petersburg, Russia.

World oil supply growth - Part 3
OPEC also says it expects 2018 non-OPEC supply to grow by 1.1 million bbl/day to about 59 million bbl/day. The US, Brazil, Canada, Russia, Kazakhstan, Congo and the UK will be the main drivers of growth, offsetting declines from Mexico, China, Colombia and Azerbaijan. 

Tripping over each other to lower oil price forecasts
This week's notable oil price downgrades include Goldman Sachs, who warned that oil prices might fall below US$40/bbl, Scotiabank, who lowered its WTI forecast to US$51/bbl in 2017 and US$53 next year, BNP Paribas, now forecasting US$51 Brent in 2017 and US$48 for 2018 and Barclays, who also cut its 2017 and 2018 Brent forecasts to US$52 for both years. BP CEO Bob Dudley also chimed in, noting that he doesn't expect oil prices to rise much from here over the next 5 years. Citigroup is the lone outlier, predicting US$60 oil by year end on higher global demand and lower OPEC production.


NEXT WEEK'S EVENTS

Monday:

Tuesday:

  • API Weekly Statistical Bulletin released @ 4:30pm ET

Wednesday:

Thursday:

Friday:

  • June Consumer Price Index (CPI) released by Statistics Canada @ 8:30am
  • Q2/2017 earnings releases: Husky Energy, Encana and Schlumberger
  • Baker Hughes Rig Count released @ 1:00pm ET

Next edition of the Oil Sands Weekly: Friday July 21, 2017 @ 1pm MT.

The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

The Oil Sands Weekly

0