Friday, April 26, 2013

Crude-Oil Futures Settle Down at $92.52/Barrel

Attempts to push a rally in U.S. crude-oil futures prices into a fifth day faltered Wednesday under the weight of rising inventories and worries over weak demand.

Data that showed U.S. crude oil supply relative to refiner demand climbed to a 21-year high followed a warning by the International Energy Agency, the West's oil-policy watchdog, that the market is facing weaker oil-demand growth and higher supplies.

"The subdued growth rate of oil demand now looks increasingly entrenched in the face of high oil prices and weak economic growth," the IEA said in its monthly global outlook.

That outlook followed a Tuesday report from the U.S. Energy Information Administration which sees only modest growth in oil-demand growth in the world's biggest oil consumer this year after 2012 consumption hit a 16-year low.

EIA's latest weekly oil-inventory data show U.S. refiners trimmed crude-oil processing rates to a two-year low of less than 14 million barrels a day last week, amid maintenance work and operating snags at some facilities. At that same time, rising domestic output and imports lifted stocks by 2.6 million barrels last week, slightly ahead of expectations.

The combination of lower demand and higher supply means current inventories now are sufficient to cover 27.4 days of refiner needs, the highest level since 1992, and compared with the five-year average of less than 24 days of cover.

The data snuffed out an early attempt to push a four-day, 2.3% rally in prices higher for a fifth day.

"The move to push crude up to $93.50 lost momentum," said Gene McGillian, broker and analyst at Tradition Energy. "The fundamentals aren't really particularly strong" enough to justify prices at those levels which were last hit in late February, he said.

Light, sweet crude oil for April delivery on the New York Mercantile Exchange settled 2 cents lower, at $92.52 a barrel, after trading in a range of $93.40 to $91.91 a barrel.

April ICE North Sea Brent crude settled $1.13 lower, at $108.52 a barrel, the lowest price since Dec. 17, 2012.

Traders said Brent came under pressure as the EIA data showed oil inventories at Cushing, Okla. fell by 1.5 million barrels last week, the biggest decline since May 2011. Analysts said the large drop at Cushing suggests that Gulf Coast refiners appear to be moving more crude oil out of the terminal hub that is the delivery point for the Nymex contract, most likely by rail, as pipeline outlets are constrained.

Crude exiting Cushing for the Gulf Coast refinery hub would increase competition with imports priced in relation to Brent, the international benchmark, and would put pressure on Brent prices, traders said. Supplies of North Sea crudes have been rising after operational snags were resolved in recent weeks and the IEA said a pipeline agreement between Sudan and South Sudan means more crude could be flowing from that area, increasing supplies by 200,000 barrels a day by year's end.

Despite a fall of nearly 3.6 million barrels in gasoline stockpiles last week, prices of reformulated gasoline blendstock futures were weaker for a third day. Analysts said the decline in inventories likely reflected movement of fuel during the transition from winter-grade to summer-grade fuel that are typical at this time year, rather than signalling stronger demand. The EIA said in its Short-Term Energy Outlook on Tuesday it sees gasoline stunted at a 2012 level over the next two years, as improvements in fuel-mileage standards cut consumption.

April-delivery reformulated gasoline futures were 0.79 cents lower, at $3.1423 a gallon. The contract fell 1.9% in the past three sessions.

April heating oil was 2.42 cents lower, at $2.9242 a gallon, and lost 1.9% over the past four sessions.

Copyright (c) 2012 Dow Jones & Company, Inc.

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UK Explorer Cuadrilla Delays Fracking Plans Until 2014

UK Explorer Cuadrilla Delays Fracking Plans Until 2014

LONDON - U.K. shale gas explorer Cuadrilla Resources Ltd. said Wednesday it was delaying its plans to begin hydraulic fracturing at its Bowland shale project in Lancashire, England, to 2014 while it conducts an environmental impact assessment for the site of each exploration well.

Cuadrilla had planned to start hydraulic fracturing, a controversial process used to release natural gas from the rock, this summer. The delay will be a setback for U.K. government ambitions to replicate the North American shale gas revolution that has transformed the U.S. energy market.

"We recognize that within the complex U.K. regulatory framework governing planning this process can prove lengthy but we are determined to spare no effort in meeting our exploration targets in an environmentally and socially sustainable manner," Cuadrilla Chief Executive Francis Egan said.

At the end of last year, the U.K. government lifted a moratorium on hydraulic fracturing, or fracking, as part of plans to stimulate renewed investment in Britain's energy sector and reduce dependence on gas imports as its aging North Sea oil and gas fields start to run dry.

Exploration is still at an early stage in the U.K., making a reliable estimate of the country's reserves difficult. There has been no commercial shale gas production in the U.K. so far.

Cuadrilla said that technical analysis of the Bowland Shale confirms the company's previous estimate that the license area holds at least 200 trillion cubic feet of gas resources.

Cuadrilla, which is the only company using the controversial technology to explore for shale gas onshore in the U.K., halted fracking in May 2011 after two small seismic tremors were detected near their operations.

Cuadrilla is jointly owned by U.S. private-equity firm Riverstone LLC and Australian mining group AJ Lucas and management.

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Talisman May Exit Polish Shale Business

Talisman Energy is currently evaluating the future of its business in Poland, including a possible sale of its shale gas resource concessions there, the company told Rigzone in a statement Wednesday.

The Calgary-based company, which is focusing on North America, Colombia and Asia-Pacific this year, reduced its global exploration budget as part of its strategic priorities.

Moving forward, the company said it would focus its exploration expertise on shorter-cycle opportunities in Colombia, Kurdistan and the Asia-Pacific region.

"The objective of Talisman's 2013 capital plan and operating plan is to significantly increase shareholder returns by improving cash margins on the barrels we produce, more careful allocation of capital and better execution within a focused portfolio," the company told Rigzone in an emailed statement.

Talisman in February 2010 entered a farm-in agreement with San Leon Energy Plc through its Polish subsidiary Oculis Investments Sp. z.o.o. to earn a 60 percent interest in San Leon's three Baltic shale gas concessions.

Last year, the company drilled three wells on its Polish acreage, the Lewino-1 G2, Rogity-1, and Szymkowo-1, which encountered the Ordovician shale with hydrocarbon shows.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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Gregorian Govt OKs Mtsare Khevi Pipeline for Frontera

Frontera Resources Corp. announced that it has received approval to proceed with the installation of the 5-mile (8-kilometer) pipeline and related facilities within the Mtsare Khevi field from the Georgian government. As previously announced, equipment required for the gas pipeline has been procured, mobilized, and stacked in the field and in key staging areas. First gas production is now expected within 120 days. The infrastructure will accommodate production from currently shut-in wells, and the Company is targeting production of approximately 2 million cubic feet per day of gas (57,000 cubic meters per day).

The Mtstare Khevi Field is situated within a larger play area of approximately 31 square miles (80 square kilometers) referred to as the Mtsare Khevi Gas Complex and encompasses gas targets found between 984 and 16,404 feet (300 and 5,000 meters) in depth. Based on Frontera's internal estimates, analysis has revealed significant gas potential throughout this area of up to approximately 1.2 trillion cubic feet of gas in place (28 billion cubic meters) and up to approximately 700 billion cubic feet of recoverable gas (19.8 billion cubic meters). An integrated geologic study, including data from a number of existing wells within the area such as the V-#18 well, previously referenced in the Company's Jan. 31, 2012 announcement, is currently in progress to better understand and define the extent of this potential throughout the greater Mtsare Khevi Gas Complex.

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Subsea 7 Scoops Up Petrobras Work Offshore Brazil

Subsea 7 S.A. announced the award of three contracts with a combined value in excess of $300 million from Petrobras.

The scope of work comprises the installation of flexible lines by the Seven Seas, under two lump sum contracts and one day rate contract.

The lump sum contracts encompass the installation of two export flexible Lazy Wave Risers at the Sapinhoa and Lula NE fields in the Santos Pre-Salt Basin in water depths of approximately 6,890 feet (2,100 meters). The day-rate contract encompasses the project management, engineering and installation of Petrobras - supplied flowlines and umbilicals. Operations will commence in 2013.

"We’re proud to be selected by Petrobras to perform these important projects, using our in-depth experience of operating in ultra-deep water. We look forward to supporting Petrobras in future developments," Subsea 7 Senior Vice President for Brazil Victor Bomfim said.

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Chevron: On Track for 20% Production Growth By 2017

Chevron: On Track for 20% Production Growth By 2017

NEW YORK - Chevron Corp. expects to increase its oil and natural gas production by more than 20% by 2017, the company said Tuesday at its annual investor conference.

Chevron is in the midst of completing a number of expensive, large-scale projects meant to raise production around the globe, including a massive natural gas project in Australia and new oil wells in the ultra-deep waters in the U.S. Gulf of Mexico. The company hopes to boost its daily oil and natural gas production to 3.3 million barrels in 2017 from the nearly 2.7 million barrels it averaged in the fourth quarter of 2012.

"Our key development projects remain on track," said John Watson, Chevron's chief executive.

Global oil companies have scouted the globe for new production fields as such countries as China and India increase their energy appetite. The two countries are expected to increase their natural gas imports by 10% a year for the next decade, Mr. Watson said. Chevron, the second-largest U.S. oil company in terms of capital after Exxon Mobil Corp. (XOM), is spending $36.7 billion in 2013 alone to search for and develop fields in nearly every continent.

"Spending in 2014 and 2015 will be higher," Mr. Watson said. "Any legacy-sized asset will be expensive."

After new projects come online, Chevron expects to generate $50 billion in cash in 2017, up more than $10 billion from 2012, said Patricia Yarrington, Chevron's chief financial officer.

Chevron expects to export natural gas starting in early 2015 from its Gorgon project and the following year from its Wheatstone project, both in Australia, said George Kirkland, Chevron's head of upstream operations. The two projects are expected to have a combined capacity of more than 15 million metric tons a year.

Chevron last month said it started test production at the St. Malo well in the relatively undeveloped Lower Tertiary trend far out in the Gulf of Mexico. Oil production from the well, more than 20,000 feet under the sea floor, was more than 13,000 barrels a day despite being constrained by the use of test equipment, the company said.

Chevron expects St. Malo and its twin well, Jack, to ultimately produce 177,000 barrels a day.

Chevron, of San Ramon, Calif., also may expand its operations in unconventional onshore fields in North America, including the Permian Basin in Texas and New Mexico and the Marcellus gas field in Pennsylvania, the company said. Hydraulic fracturing, or fracking, and other recent innovations in drilling techniques have yielded growing amounts of oil and natural gas from those and other shale rock formations.

Chevron plans to "selectively pursue growth" in petrochemicals and lubricants production, the company said. Demand for chemicals and lubricants is expected to outpace that for motor fuel in Asia, said Mike Wirth, Chevron's head of refining operations.

Chevron also is investing in its California refineries to run more varieties of crude oil in a push to drive down operating costs. Its refinery in Richmond, Calif., has started processing crude oil from North Dakota and will use discounted crudes from a variety of sources, Mr. Wirth said.

"Our bread and butter is optimizing our operations by using different feedstocks," Mr. Wirth said.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Japanese Firm JOGMEC in Ice Gas Breakthrough

Japanese Firm JOGMEC in Ice Gas Breakthrough

Japan Oil, Gas and Metals National Corporation (JOGMEC) reported Tuesday that it has successfully extracted natural gas from methane hydrate deposits from under the seabed offshore Japan. The successful extraction of gas from this source promised a new energy source for the world.

Methane hydrate is a compound in which a large amount of methane is trapped within a crystal structure made up of water, so forming a solid that is similar to ice.

JOGMEC said that it successfully used a depressurization method to flow gas from methane hydrate layers.

The firm has been preparing for an experimental test since February 2012 at the Daini Atsumi Knoll, off the coasts of the Atsumi and Shima Peninsula. After preparatory drilling and an operation to acquired pressurized core samples last summer, it began its flow test Tuesday. The flow test is expected to end at the end of this month.

JOGMEC hopes the experimental test will help it better understand dissociation behavior of methane hydrate under the seabed and the impact to the surrounding environment. A second offshore test is planned ahead of commercial production that could be achieved later this decade.

JOGMEC pointed out that some 40 trillion cubic feet of methane is held in methane hydrate deposits under the sea in the eastern Nankai Trough, off the southern coast of the Japanese island of Honshu. This is equivalent to around 11 years of the amount of liquefied natural gas currently imported to Japan, the firm added.

Dow Jones Newswires reported that Takami Kawamoto, an official responsible for the methane hydrate project at JOGMEC, said developing the technology will take a long time, and "we are studying many things that are not yet known about methane hydrate".

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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Hydro Group Opens Singapore Office

Scottish underwater components firm Hydro Group announced Tuesday it has opened a new Singapore office.

The Aberdeen-based company said that it had made the move since Singapore represents its second-largest export market, with the firm identifying more than $1.5 million of potential sales in the region annually.

The new office is aimed at supporting Hydro Group's increasing presence in South East Asia, where it plans to build on its sales of subsea optical cables, electrical cables and connectors to the wider energy market as well as the defense sector.

Hydro Managing Director Doug Whyte commented in a statement:

"The group has had representation in Singapore for some time, but with an increasing number of our key clients based throughout South East Asia, significant growth in demand for local support from our customers and the expansion of exploration activities in the region, it is vital to our international growth plans to open our first office in the area."

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Chevron: On Track for 20% Production Growth By 2017

Chevron: On Track for 20% Production Growth By 2017

NEW YORK - Chevron Corp. expects to increase its oil and natural gas production by more than 20% by 2017, the company said Tuesday at its annual investor conference.

Chevron is in the midst of completing a number of expensive, large-scale projects meant to raise production around the globe, including a massive natural gas project in Australia and new oil wells in the ultra-deep waters in the U.S. Gulf of Mexico. The company hopes to boost its daily oil and natural gas production to 3.3 million barrels in 2017 from the nearly 2.7 million barrels it averaged in the fourth quarter of 2012.

"Our key development projects remain on track," said John Watson, Chevron's chief executive.

Global oil companies have scouted the globe for new production fields as such countries as China and India increase their energy appetite. The two countries are expected to increase their natural gas imports by 10% a year for the next decade, Mr. Watson said. Chevron, the second-largest U.S. oil company in terms of capital after Exxon Mobil Corp. (XOM), is spending $36.7 billion in 2013 alone to search for and develop fields in nearly every continent.

"Spending in 2014 and 2015 will be higher," Mr. Watson said. "Any legacy-sized asset will be expensive."

After new projects come online, Chevron expects to generate $50 billion in cash in 2017, up more than $10 billion from 2012, said Patricia Yarrington, Chevron's chief financial officer.

Chevron expects to export natural gas starting in early 2015 from its Gorgon project and the following year from its Wheatstone project, both in Australia, said George Kirkland, Chevron's head of upstream operations. The two projects are expected to have a combined capacity of more than 15 million metric tons a year.

Chevron last month said it started test production at the St. Malo well in the relatively undeveloped Lower Tertiary trend far out in the Gulf of Mexico. Oil production from the well, more than 20,000 feet under the sea floor, was more than 13,000 barrels a day despite being constrained by the use of test equipment, the company said.

Chevron expects St. Malo and its twin well, Jack, to ultimately produce 177,000 barrels a day.

Chevron, of San Ramon, Calif., also may expand its operations in unconventional onshore fields in North America, including the Permian Basin in Texas and New Mexico and the Marcellus gas field in Pennsylvania, the company said. Hydraulic fracturing, or fracking, and other recent innovations in drilling techniques have yielded growing amounts of oil and natural gas from those and other shale rock formations.

Chevron plans to "selectively pursue growth" in petrochemicals and lubricants production, the company said. Demand for chemicals and lubricants is expected to outpace that for motor fuel in Asia, said Mike Wirth, Chevron's head of refining operations.

Chevron also is investing in its California refineries to run more varieties of crude oil in a push to drive down operating costs. Its refinery in Richmond, Calif., has started processing crude oil from North Dakota and will use discounted crudes from a variety of sources, Mr. Wirth said.

"Our bread and butter is optimizing our operations by using different feedstocks," Mr. Wirth said.

Copyright (c) 2012 Dow Jones & Company, Inc.

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