Nigeria, exempt from OPEC’s oil output cut deal, has agreed to stop ramping up its production once it hits 1.8 million barrels per day. A milestone that is nearing, with output hitting 1.733 million bpd in June, according to secondary sources. Secondary-source data is considered closer to reality than self-reported output from OPEC members. For June, for example, the head of the NNPC said that Nigeria was producing 2.2 million barrels per day.
Just days after the cap announcement helped lift international oil prices, a militant attack took down the Trans-Niger pipeline, cutting out 150,000 bpd in daily production. What the incident highlights yet again is that improvements in Nigeria’s oil output are far from consistent for the time being.
So, while the willingness to cap production at a certain level boosted optimism, it was only for a short while. The report of the militant attack and its consequences is likely to have more of an impact on prices unless headwinds such as Libya’s unbound production growth prevail. Libya announced that it isn’t planning to join any agreement to curb output until it reaches its target of 1.25 million barrels per day by the end of the year.
These headwinds have weakened recently amid four consecutive weeks of oil inventory draws in the U.S. and indications of a slow-down in production growth across the shale patch. This has served to prop up prices somewhat, aided by an announcement from Saudi Arabia that it will cut crude exports from next month to 6.6 million bpd. Still, the price improvement remains tentative as the global discrepancy between supply and demand remains.
Deals, Mergers & Acquisitions
• QEP Resources is selling its Pinedale Anticline Field in Wyoming for $740 million to an affiliate of Oak Ridge Natural Resources. The gas asset divestment is part of QEP’s focus on oil. The proceeds from the sale will be added to another $37.5 million from an earlier gas asset sale, also in Wyoming, and will be used for expanding QEP’s footprint in the Midland Basin, in the Permian.
• Schlumberger has asked the Russian Federal Antimonopoly Service to approve its proposed acquisition of 51% in sector player Eurasia Drilling. Schlumberger has been trying to buy the stake since 2015 but the FAS has been postponing its go-ahead.
Tenders, Auctions & Contracts
• Scotland-based Proserv won oil services contracts worth $4 million in Asia and Western Australia. In Asia, Proserv will be responsible for the decommissioning of oil and gas facilities operated by Premier Oil in Indonesia, Chevron in the Gulf of Thailand, and Malaysian PCPP Operating Company in Malaysia. The Western Australian contracts were awarded by BHP Billiton.
• The British Oil and Gas Authority has announced a new tender for oil and gas blocks in the North Sea. This round of bidding, the 30th, will focus on 813 mature deposits, where, the OGA estimates, there may be about 3.8 trillion cubic feet of untapped tight natural gas. Bidders have until November 21 to come up with their proposals and the blocks will be awarded in the second quarter of 2018.
• Petrofac announced new contracts worth $100 million in Iraq, including construction management, engineering, commissioning, and startup services for two international oil field operators in OPEC’s second-largest oil exporter. The new contracts follow deals worth $70 million for Iraqi fields inked earlier this year.
Discovery & Development
• Vietnam has suspended drilling in a disputed block in the South China Sea after China threatened to strike Vietnamese offshore bases. The suspension came just a few days after a major gas discovery was made in the block. Drilling was carried out by a division of Spain’s Repsol. China had also commissioned drilling in the disputed area.
• The Philippines and China may start joint exploration of a disputed area in the South China Sea, the Reed Bank, if negotiations between the two states come to a successful end. This, however, is not too likely because of sovereignty concerns if any of the two accepts the other’s claim to the area, which, analysts say, will be the case if they agree on joint exploration.
• Malaysia’s Petronas has pulled out of its biggest foreign investments – the Pacific Northwest LNG project in Canada. The $29-billion project should have turned British Columbia into a major LNG export hub, opening up new markets for Canadian gas, but the project leader has concluded that the project is not viable in the current LNG market situation, with prices still depressed from global oversupply.
• Exxon announced another oil find off the coast of Guyana, in the Payara reservoir. This brings the total reserves discovered so far to 500 million barrels of oil equivalent. With it, the total recoverable reserves in the Stabroek block rise to an estimated 2.25-2.75 billion barrels. Exxon has 45% in the Stabroek block, where it has partnered with Hess, with 30%, and CNOOC, with 25%.
• China’s Sinopec will spend $5 billion on the construction of a pipeline that will carry LNG from the country’s largest underground LNG storage facility in Henan and from Tianjin to a new economic zone near Beijing. The pipeline will have an annual capacity of 30 billion cubic meters of natural gas.
• Shell reported a huge increase in its net profit for Q2 2017, to $3.6 billion, from $1 billion for the respective period of 2016. Revenues were also up substantially, to $72.13 billion but CEO Ben van Beurden said the company will remain “very disciplined” amid still low oil prices.
• French Total reported a 14% increase in net profits for the second quarter of the year, at $2.5 billion, beating analyst expectations thanks to cost cutting and positive cash flow developments, especially in the upstream division.
• Norway’s Statoil booked net profits of $3.02 billion for the second quarter of this year, versus expectations for $2.97 billion. On an annual basis, the improvement was substantial: net income for Q2 2016 stood at $913 million.
• Anadarko Petroleum reported a net loss of $415 million for the second quarter of the year, more than double the figure forecast by analysts. The loss was caused by low oil prices but also to a sharp increase in costs related to remedial activities after a gas leak from a well in Colorado caused an explosion that killed two people and prompted Anadarko to shut down 3,000 wells in the state.
• Suncor Energy booked a net profit of $349.57 million for the second quarter of the year, up from a loss of $591 million a year earlier. Canada’s number-two oil and gas producer benefited from stronger oil prices and higher production. Emboldened by the results, Suncor has raised its capital budget for 2017 to $4.3-4.5 billion from $3.86-4.18 billion.
• Chevron has agreed to pay $20 million on safety upgrades as part of a settlement with the California health and safety regulator Cal/OSHA. The settlement concerns a 2012 fire at a Chevron refinery in the state, in Richmond.
Politics, Geopolitics & Conflict
• The Houthi rebels in Yemen have struck with a Scud missile a Saudi Arabian oil facility near the port of Yanbu.
• Washington imposed sanctions on 13 senior Venezuelan government officials on allegations of human rights violation, corruption, and undermining democracy in the country.
• Tensions between India and China over a remote mountain pass spiked recently, with some observers warning the conflict could heat up further.
• Egypt has established a national council to combat Islamist terrorism. The council’s responsibilities will include devising a national strategy for the fight against terrorism and extremism.