UAE Oil, Gas and Energy News

Update from the month of July, 2013

• UAE partners lift gas production in Iraqi Kurdistan – Dana Gas and Crescent Petroleum producing 900 tonnes a day of liquid petroleum gas.
• Dubai to expand oil output with Al-Jalila field development – Platform and pipelines contract tendered.
• National Petroleum Construction Company selected for Umm al-Lulu package two – UAE group signs letter of intent with Abu Dhabi offshore operator on $1.4bn-plus deal.
• Gulf RAK Oil, a joint venture of the Ras Al Khaimah government and Hinduja Group’s Gulf Oil International, has opened a lubrication manufacturing plant – The present blending capacity of the plant was 84,950mn cubic metres per annum of lubricants. Proposed expansion plan with new machineries and equipment would see an increased blending capacity of lubricants to 1.2bn cubic metres per annum. Currently, the facility has bulk storage capacity of around 19,821mn cubic metres for base oils and 5,663mn cubic metres of finished products. The production facility at Gulf RAK Oil provided for blending, filling and storage of finished products. The plant has also been set up with a small pack filling line, drum decanting unit, drum and bulk filling facilities.
• Investment and Development Office (IDO) and Gulf Oil, through another joint venture named Standard Greases and Specialties (India), have also commissioned a grease manufacturing plant in the same facility at Ras Al Khaimah.
• US-based Excelerate Energy has won a contract to build a liquefied natural gas (LNG) import terminal in the UAE, sources close to the deal have said – Emirates LNG, a joint venture between Abu Dhabi’s Mubadala Petroleum and International petroleum Investment Company (IPIC), chose Excelerate Energy over Norway’s Golar LNG. The facility at Fujairah, which lies on the east coast of the UAE outside the Strait of Hormuz, is expected to have an annual import capacity of 25.4mn cubic metres of LNG,Emirates LNG officials said. The terminal will be built next to a power and desalination plant at the industrial and oil storage centre.
• According to a Reuters report, from April next year crude from Lower Zakum and Umm Shaif fields will be combined into the new grade known as Das. The API will be about 39 degrees.
• It makes sense to consolidate as the oil produced are of relatively small volumes and similar quality,” a source added.
• Oil output from Lower Zakum field, which has an API gravity of 40.5 degrees and a sulphur content of 1.04 per cent, is around 350,000 bpd. Umm Shaif field produces 280,000 bpd and has a weight of 36.9 degrees and 1.44 per cent sulphur.
• International energy consultancy Xodus Group has acquired the business of Dubai based Prime Energy as part of a major expansion drive
• Fuel oil arbitrage from Europe remains closed – The Mideast Gulf 380cst premium was steady at $2/t as of 1 July. The July-August spread fell to $6/t in backwardation from $7/t previous Monday as demand weakened on the back of ample supplies.
Fuel oil’s discount to Dubai crude reached its widest level since early April at $7.24/bl on 28 June, despite no fresh exports from the Mideast Gulf. High-sulphur fuel oil (HSFO) demand was muted as interest from shipowners and Chinese independent refineries stayed subdued. Stocks of fuel oil have been building in Singapore in recent weeks. About 5mn t of heavy fuel oil is heading to Singapore in July from Europe and the US Gulf Coast. Any cargoes currently heading from Rotterdam to Singapore are a result of older transactions, as the arbitrage between Europe and Asia-Pacific remains closed. But the lack of fresh arbitrage cargoes has yet to lead to supply tightness in August. Rising fuel oil prices in the Mediterranean have prompted BP to fix the Jill Jacob early next week to deliver 50,000t of fuel oil from Yanbu to the Mediterranean, shipping fixtures indicated.
Middle East / United Arab Emirates
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Exports from the Mideast Gulf typically fall in the summer months as producers divert fuel oil to meet domestic demand. Supplies from Saudi Arabia are expected to decline as the summer air-conditioning demand season gets under way ahead of the Islamic fasting month of Ramadan that starts next week. Saudi Arabia typically becomes a net importer of fuel oil during the peak summer demand period. The start of Ramadan will boost power generation demand significantly, with at least 1mn people from outside the country set to visit Saudi Arabia’s holy sites. Saudi Aramco typically uses a very large crude carrier (VLCC) as floating fuel oil storage near Yanbu on the country’s west coast during Ramadan. Yanbu is the safest location for floating storage and is close to power plants in the Mecca area. Egypt’s state-owned oil firm EGPC has a tender outstanding to buy two 40,000-45,000t cargoes of 180cst HSFO each month for power generation during the third quarter. The cargoes will be delivered to Suez from July through September. The tender will close on 2 July. Trading firms BB Energy, Trafigura, Vitol and Astra have in the past supplied 180cst to EGPC. Political turmoil and financial difficulties have caused a severe power shortage in the country.
• Jet Fuel, Sellers stayed away as the premium remained weak. Buyers were mostly looking to supply cargoes within the Mideast Gulf, where demand remained robust as airports reported surging passenger growth. Passenger numbers in the Mideast Gulf continue to rise, with outbound tourist traffic increasing because of high summer temperatures.
• The arbitrage window for jet fuel cargoes from the Mideast Gulf to Europe remained weak on paper, but steady demand within the Mideast Gulf region kept premiums unchanged at $2.10/bl to Mopag.
• Availability of cargoes for July and August delivery to the Mideast Gulf and the Red Sea remained ample, putting pressure on gasoline premiums. Demand from buyers in east Africa supported the market.
• Most of the additional requirement in the Mideast Gulf for the Islamic fasting month of Ramadan starting on 9-10 July has been tied up. Regional importers have bought increased volumes in June to prepare for expected Ramadan demand. This further pressured the market and weakened premiums.

World-wide Oil and Gas News

Updates from the months of July, 2013
• Sonatrach starts development of Tinrhert gas fields – Scheme moves to front-end engineering and design phase.
• Trans-Adriatic Pipeline (TAP) AG has announced that it has won a pipeline contract to supply gas from the Shah Deniz 2 gas field in Azerbaijan to Europe – TAP AG is now expected to provide 10bn cubic metres of gas to Europe per annum via an 800km line partly running subsea. Kjetil Tungland, managing director of TAP, said, “This is an important step in opening up the Southern Gas Corridor and it will have a major role to play in Europe’s energy security and ensuring the diversification of gas supplies to western and south eastern European markets.” The shareholders in project comprise of Axpo Switzerland and Norway’s Statoil with 42.5 per cent interest each and Germany’s E.ON with 15 per cent stake.
• Shell Lubricants Named A Supplier Of The Year By Chrysler Group.
• Russian oil duty set increase 2.9 pct in August 2013.
• The Ice gasoil futures market moved deeper into backwardation, with prompt-month values trading at a premium to the months ahead. July traded at a $7.00/t premium to August, compared with a $2.50/t premium last week, while August traded at a $4.00/t premium to September, against $0.50/t last week. The backwardation in the Ice gasoil market discouraged trading firms from buying jet fuel to put into storage.
• Jet fuel stocks held in independent storage in the Amsterdam, Rotterdam and Antwerp (ARA) trading hub remained higher than a year earlier. Jet fuel stocks fell by 32,000t, or about 8.3pc, over the week to 352,000t as airline demand picked up because of the summer holiday season. But stocks remained about 20pc above the 293,000t level seen during the same week last year.
• The east-west spread stayed positive for July, which is the prompt month, although it narrowed to about $0.90/t from $4.50/t in the previous week. The spreads for August and September moved deeper into the negative at -$4.80/t and -$5.65/t, against -$0.80/t and -$4.40/t respectively in the previous week. The spreads typically have to move deeper into negative territory for the arbitrage to work from the Mideast Gulf to Europe.
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• But the regrade, or the spread between jet fuel and gasoil prices in Asia-Pacific, remained negative as summer gasoil demand remained strong in the region and in the Mideast Gulf. The Asia-Pacific prompt-month regrade has averaged about -$0.80/bl in April-June compared with about +$0.60/t in the year-earlier period and about +$0.30/bl in January-March. This could tighten jet fuel supplies in the region in the months ahead.
• There were no fresh offers from sellers in the region. KPC is likely to have committed the bulk of its production to term supplies, leaving little for spot sales. The refiner has increased term supplies to its Q8 Aviation subsidiary this year. KPC’s last sale was of a 40,000t jet fuel cargo for 1-2 April loading, possibly to Vitol, at Mopag +$2.15/bl.
• Availability remained steady from India, where state-controlled refiner MRPL sold a 40,000t (315,000 bl) jet fuel cargo for loading during 1-3 August from its 300,000 b/d New Mangalore refinery at about Mops -$1.30/bl, possibly to Vitol. The differential was weaker compared to its previous deal with trading firm Mercuria that was done at a discount of $0.90- 1.00/bl to Mops for a similar volume for loading during 24-26 July.
• MRPL issued a new tender to sell a 40,000t (315,000 bl) jet fuel cargo for loading during 11-13 August from New Mangalore. The tender closes on 3 July with validity until 4 July. MRPL exports two or three medium-range size jet fuel cargoes a month. Indian private-sector refiner RIL also exports jet fuel, but mostly to Europe.
• State-owned IOC has a tender to sell 35,000t of naphtha for 28-30 July loading from Chennai. The tender closes on 3 July and has a single day’s validity. These cargoes are likely to head east.
• ONGC’s subsidiary MRPL offered 35,000t of naphtha through a tender for 6-8 August loading from New Mangalore. The tender closes on 4 July with same-day validity. MRPL last sold a similar cargo to Japanese trading firm Marubeni at about $25-26/t above Mopag for 28-30 July loading from the same port. That was MRPL’s fifth cargo for loading during July. MRPL has restarted a 120,000 b/d crude distillation unit at its 300,000 b/d Mangalore refinery, which had been shut since second-half May for maintenance lasting around a month (see news).
• RIL sold 55,000t of naphtha to Chinese trading firm Unipec at a premium of $21-22/t to Mopag for 24-28 July loading from Sikka. It earlier sold another 55,000t cargo to trading firm Vitol at a similar level for 5-10 July loading.
• High prices of LPG, an alternative cracking feedstock, provided some buying support for naphtha. But Asia-Pacific might have difficulty fully absorbing surplus European cargoes. LPG can replace up to 15pc of naphtha in some advanced South Korean and Taiwanese crackers.
• The Mideast Gulf naphtha premium fell by $0.50/t to $24/t as of 1 July as heavy arbitrage inflows enabled buyers to insist on lower premiums.
• Naphtha premiums slipped slightly as ample availability weighed on crack spreads.
• Lower Asia-Pacific demand sent the regional crack spread, or 92R gasoline’s margin relative to Brent crude, down by $2.90/bl or about 26pc to $11.35/bl on 1 July from $14.25/bl on 24 June. The product’s premium to naphtha also edged down by about $0.10/bl over the week to $21.05/bl.
• Acceptance of ‘green’ lubricants growing. Re-refining industry will see a robust growth to an estimated 1.39 million MT by 2016
• Anglomoil’s Synthetic Food Grade (SFG) lubricants range has been awarded ISO 21469 certification NSF International.