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Daniel J. Graeber

Daniel J. Graeber

Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

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Global Energy Advisory April 25th 2014

Canada goes off the rails for crude oil transport

A unilateral move from Canadian Transport Minister Lisa Raitt to phase out older rail cars used for crude oil transportation could mean the U.S rail system could see an increase in traffic. Last year's derailment in Lac-Megantic, Quebec, left 47 people dead and brought attention from regulators worried about the increase in crude oil deliveries by rail. Thousands of the DOT-111 railcars need to be off the Canadian rail system almost immediately. Edward Hamberger, president of the Association of American Railroads, said the industry would work quickly to respond to Canada's "aggressive timeline." With North American oil production straining existing pipeline capacity, the American Petroleum Institute said the new rules may shift risk from one part of the oil sector to another.

 U.S. crude oil inventories 'well above' average

The U.S. Energy Information Administration said crude oil inventories stood at 397.7 million barrels, not counting the barrels stored in the Strategic Petroleum Reserve. EIA said inventories for the week ending April 18 are "well above the average range for this time of year." Crude oil imports, meanwhile, were down by 475,000 barrels per day compared with the previous week.  Canada remained the primary source of crude oil imported to the U.S. market, though imports were down more than 300,000 bpd compared to the previous week's report. Refineries were operating at more than 90 percent of their operable capacity last week, though gasoline production decreased. This in part pushed the average price for a gallon of regular unleaded gasoline up for the eleventh week in a row to average $3.65 per gallon, nearly 15 cents higher than the same time last year.

 Discoveries & Exploration Results

Swedish company Lundin Petroluem said it spent a combined $118 million on drilling into basins in Norway and Indonesia that turned out dust. During the first quarter, the explorer said it spent about $127 total on exploration. The company said expenses would be offset by tax credits. Last month, the company said it was encouraged, however, by drilling results from the Johan Sverdrup oil field in the North Sea.

Related Article: Norwegian Continental Shelf Continues to be a Sure Bet for investors

Production from the Buzzard oil field in the North Sea dropped by about 25 percent because of planned maintenance from operator Nexen. Billed as the biggest discovery in the British waters of the North Sea in the last 20 years, the field's oil is funneled through the Forties pipeline to a terminal in Scotland. Buzzard oil is one of the four oils contributing to the Brent global benchmark.

British explorer Soco International aims to start seismic tests in the Lake Edward region of the Democratic Republic of Congo. The company said it plans to use similar survey techniques as Tullow Oil does about 100 miles away in the Lake Albert region of Uganda, one of the premier African basins.  DRC holds an estimated 180 million barrels of oil reserves and Soco's program could help the government increased its output from 25,000 bpd. Advocacy group WWF is complaining about the effort, saying it encroaches on national parkland protected by UNESCO.

Genel Energy said production from its Taq Taq and Tawke fields in the northern Kurdish region of Iraq averaged 81,000 barrels of oil equivalent per day and 57,000 bopd respectively during the first quarter.  Production is expected to increase throughout the course of the year as Kurdish pipeline infrastructure comes online. The semiautonomous Kurdistan Regional Government said sales of crude oil and products brought in more than $4.9 billion since 2007.

Political Developments

U.S. Deputy Secretary of State William Burns said the Libyan government has an "enormous challenge" in tackling extremism within its borders. It's been more than three years since the uprising against Gadhafi's government began and the internal rivalries he was able to suppress through despotism are pulling the country apart. Tripoli in early April managed to broker a deal with rebel authorities that was supposed to ease a blockade on export terminals, though oil output is still far below its pre-civil war peak.

Bolivian President Evo Morales accused the U.S. government of pushing Venezuela toward civil war.  At least 40 people have died and more than 600 others have been injured since anti-government protests erupted in Venezuela in February. Opponents of Venezuelan President Nicolas Maduro say his administration is responsible for rising inflation and food shortages, though Morales says it’s the U.S. "empire" to blame because it wants dibs on Venezuela's oil reserves.

Related Article: Instability In Energy Producing Countries Brings Risks, Rewards


The Israeli government said it was calling off talks with its Palestinian counterparts after President Mahmoud Abbas signed an agreement to collaborate with Hamas. Noble Energy said it was optimistic about prospects for the Leviathan gas field offshore Israel after landing deals with Jordanian and Palestinian partners.  Leviathan developments were dinged earlier this year, however, when Australian energy group Woodside Petroleum balked on an acquisition citing Israeli tax policies.

Former Afghan Foreign Minister Abdullah Abdullah is set to square off against former World Bank official Ashraf Ghani after neither candidate secured the clear majority needed to take the place of Hamid Karzai. Afghanistan boasts oil, gas and mineral wealth and the outcome of the vote to be a key factor in determining how regional developments play out.

The turmoil in Ukraine continues. Russia this week sent the Ukrainian government a bill for $11 billion, saying the gas debt was in part from Kiev's take-or-pay scheme.

By Daniel J. Graeber of Oilprice.com

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