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.