Latest market news

Iraq committed to oil projects but flags delays: Update

  • Market: Crude oil
  • 20/10/20

Adds detail from Iraq Petroleum virtual event

Iraq has no plans to cancel or shelve projects with foreign oil companies on account of the Covid-19 pandemic, but the difficult market conditions and lower oil price environment are causing some delays, Iraqi oil minister Ihsan Ismael said today.

"Our contracts with our [international oil companies] IOCs in Iraq will stay as is — there is no cancelling of projects," he told the Siemens MEA Energy Week conference. "There is some slowdown due to the cash shortage, but our commitments with our IOCs will stay."

Iraq's long-stalled Common Seawater Supply Project — which is key to maintaining and ultimately expanding production at mature fields in the south of the country — has been further delayed. And more urgent work to finish laying three "Sea Line" pipelines to boost Iraq's southern crude export capacity is also on hold. Iraq had planned to complete Sea Line 3, which will increase capacity by 700,000 b/d, by the second quarter of this year.

But Iraq is sticking with its crude production capacity target of 7mn b/d by 2027 — up from 5mn b/d currently — even with Opec cuts and low oil prices, Ismael told the Iraq Petroleum virtual event today. He expects the second quarter of next year to yield a more attractive environment to reactivate the country's energy projects.

On the gas side, Basrah Gas Company (BGC) has reviewed a business plan to bring forward its date to build two natural gas liquids (NGL) plants to 2023, from 2027 previously, Ismael said. BGC made a final investment decision (FID) last year on the construction of the facilities — each able to process 200mn ft³/d (2.1bn m³/yr) of associated gas from the Rumaila, Zubair and West Qurna 1 oil fields. BGC is a joint venture between state-owned South Gas, Shell and Japan's Mitsubishi.

And the oil ministry aims to move forward with an action plan in the next three months to start the Ratawi gas project, in which Saudi Arabia has expressed interest.

Ismael said payments to foreign oil companies have been impacted by the downturn but the delays are "acceptable for both sides". Iraq already reimburses its foreign partners for capital investment and production costs, on top of a fixed per-barrel remuneration fee. This means that it pays companies a higher percentage of oil revenues as prices decline. In the last oil price downturn in 2014-16, deferred remuneration payments to foreign firms took until the end of 2017 to clear.

Foreign investment remains fundamental to Iraq's oil sector. "Without welcoming the external investment, we cannot manage the development challenge in Iraq," Ismael said.

Ismael said he expects the oil market to return to a "normal" pattern of demand growth in 2023. "I think 2021 will be similar to quarter three or quarter four of 2020," he said. "The reports speak about the recovery starting in 2022… [But] in my reading and understanding of the market, 2023 will see the start of normal oil demand increases — I mean the 3pc/yr."

Ismael said he sees the next couple of years as "the grace period for the recovery, and no more." This is in line with the Stated Policies scenario in the IEA's latest World Energy Outlook (WEO), where global oil demand returns to pre-Covid-19 levels around 2023, assuming that the pandemic is brought under control by next year.

Opec's latest Monthly Oil Market Report (MOMR) forecasts that demand will rebound by around 6.5mn b/d next year but that still leaves consumption almost 3mn b/d below 2019 levels.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
18/09/24

Citgo auction result delayed amid last-minute motions

Citgo auction result delayed amid last-minute motions

Houston, 18 September (Argus) — The US court-appointed special master overseeing the auction of US refiner Citgo plans to object to a last-minute motion from the Venezuelan government to delay the sale process by four months. The Republic of Venezuela and state-owned oil company PdV filed a motion on Tuesday seeking a four-month pause in the sale of its refining subsidiary Citgo, which is being auctioned off to satisfy debts owed by PdV. Special master Robert Pincus said in a court filing today that he intends to object to Venezuela's motion for a pause. The last-minute motion from Venezuela comes days after the US District Court for the District of Delaware was expected to announce results of the winning bidder. The court asked for a second extension to the auction process in August, delaying announcing a successful bidder to on or about 16 September with a sale hearing on 7 November. But Pincus is now dealing with last-minute legal challenges filed last week outside of the Delaware courts by so-called "alter ego" claimants seeking to "circumvent" the Delaware court's sales process and "jump the line" for enforcing claims against PdV, the special master said in a filing last week. Bidders for Citgo's 804,000 b/d of refining capacity, terminals, retail fuel stations and other plants expect the assets to be sold free and clear of future claims by PdV creditors. Unresolved legal liabilities could lower the value bidders are willing to pay for Citgo, decreasing the pool of money available to those owed by PdV. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Find out more
News

US seeks to purchase 6mn bl for SPR


18/09/24
News
18/09/24

US seeks to purchase 6mn bl for SPR

Washington, 18 September (Argus) — President Joe Biden's administration is trying to purchase 6mn bl of sour crude for delivery to the US Strategic Petroleum Reserve (SPR) as part of a plan to issue solicitations when prices are "favorable for taxpayers." The US Department of Energy (DOE) today released a solicitation to purchase up to 6mn bl of sour crude for delivery in February-May to the SPR's Bayou Choctaw site in Louisiana. If the purchase is successful, it would be the largest single purchase since the Biden administration launched its crude purchase program in early 2023. The solicitation offers a chance for the administration to buy crude for the SPR at a lower price than earlier purchases. Nymex WTI crude futures for delivery in February settled at $68.41/bl on Tuesday. The lowest-priced crude purchase under Biden was a 1.7mn purchase at a price of $72/bl in June 2023, and the average purchase price is about $76/bl. Bids for the solicitation are due by noon ET on 25 September. DOE has already purchased more than 50mn bl of sour crude for the SPR, of which 30mn bl have already been delivered. On 9 September, DOE said it purchased 3.42mn bl of sour crude for the SPR's Bryan Mound storage site at a price of $72.46/bl from the trading firm Macquarie Commodities Trading. The crude will be delivered in January-March, adding to an earlier purchase of nearly 2.5mn bl that will be delivered to the Bryan Mound site over the same time frame. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

TMX is a fossil fuel subsidy of at least C$8.7bn: IISD


18/09/24
News
18/09/24

TMX is a fossil fuel subsidy of at least C$8.7bn: IISD

Calgary, 18 September (Argus) — Canada's newest crude pipeline to the country's west coast amounts to a fossil fuel subsidy of at least C$8.7bn ($6.4bn), a research and policy think-tank said. The federal government is unlikely to recover its C$34bn investment to construct the 590,000 b/d Trans Mountain Expansion (TMX) connecting oil producers in Alberta to the Pacific coast, qualifying the project as a major subsidy for the fossil fuel industry, according to the International Institute for Sustainable Development (IISD) on Wednesday. This runs contrary to the government's policy to eliminate direct support for the oil and gas sector , a goal Justin Trudeau's Liberals said was achieved in 2023. The government was the first G20 country to hit this milestone, following a 2009 commitment by the group to reach the goal by 2025. The subsidy as it relates to TMX could be as high as C$18.7bn, the Canadian non-profit said, but noted the entire amount could still be recovered by increasing tolls and/or implementing a levy. This levy could be against either all producers, or all shippers, of crude in the Western Canadian Sedimentary Basin (WCSB), whether they use TMX or not, the IISD suggested. About 90pc of Canada's crude production comes from western Canada, with much of that derived from Alberta's oil sands region. "A levy in the range of C$1-2/bl . . . over a 10-year period would be sufficient to recover the entire cost of the subsidy and the loss to the Canadian taxpayer," according to the IISD. Alternatively, fixed tolls on TMX would need to be more than doubled to C$24.53/bl from C$11.37/bl to recover all capital costs for the line that went into service on 1 May this year, according to IISD's figures. Variable tolls would be added to this. The terms in the original contracts signed between shippers and then-owner Kinder Morgan were no longer appropriate as they did not reflect the rising risks of the project, said the IISD. Kinder Morgan suspended the project in 2018, which led to the Canadian government buying both the expansion project and the original 300,000 b/d Trans Mountain line from US midstream company that same year. The federal government has maintained its plan to sell the pipeline once operational, but the final tolls are yet to be determined. Whether the operator or shippers will bear the brunt of the massive cost overruns is also still unknown. Tolls, representing cash flows for any prospective buyer, will help dictate the price that the expanded Trans Mountain system will fetch. The IISD suggests a sale price is likely to be between C$17.6bn-26.6bn, resulting in a net loss to the government of between C$8.9bn-18bn assuming its cost of investment climbs to nearly C$36bn before a sale is reached. But despite warnings by opponents it would go underused, TMX has been as advertised, opening a new frontier for oil sands operators and disrupting trade flows throughout the Pacific Rim. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Indian windfall tax on domestic crude output at zero


18/09/24
News
18/09/24

Indian windfall tax on domestic crude output at zero

Mumbai, 18 September (Argus) — India has reduced the windfall tax on domestic crude production to zero from a previous 1,850 rupees/t ($3/bl), in line with a fall in global oil prices. The new rate is effective from 18 September. The rate was last revised on 31 August when it was cut by 12pc . The rate is revised every two weeks. Global crude prices fell nearly 9pc during 1-18 September. The windfall tax was cut to zero during 4-19 April and 16 May-15 July 2023. The Indian government first imposed the windfall tax in July 2022 because of a sharp increase in crude prices that led to domestic crude producers making windfall gains. Indian producers sell crude to domestic refineries at international parity prices. India's crude production in August fell by 4pc from a year earlier to 520,000 b/d, oil ministry data show. Crude imports in August fell by 8pc from July and by nearly 1pc against a year earlier to 4.22m b/d in August, Vortexa data show. India has again extended a deadline to 21 September for submitting bids for the ninth bidding round under the Hydrocarbon Exploration and Licensing Policy's Open Acreage Licensing Programme, as it attempts to boost investment to lift domestic upstream output. By Roshni Devi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Indonesia issues regulation to build energy reserves


17/09/24
News
17/09/24

Indonesia issues regulation to build energy reserves

A strategic energy reserve comprising stocks of LPG, oil and gasoline could be ready by 2035 under a presidential decree, writes Prethika Nair Singapore, 17 September (Argus) — Indonesia's government has issued a presidential decree outlining plans to build strategic energy reserves, including LPG, by 2035. The decree sets out the goal of establishing stockpiles amounting to 9.64mn bl of gasoline, 10.17mn bl of oil and 525,800t of LPG within the next 11 years. "The government is aware of the importance of having sufficient energy reserves to handle risks such as global oil price fluctuations, natural disasters, or supply disruptions," Indonesian agency the National Energy Council's (NEC) secretary general, Djoko Siswanto, said on 6 September. "The provision of the [reserves] will be carried out in stages until 2035, according to the country's financial capabilities." Funds for establishing the reserves will come from the state budget and other legitimate resources, he said. The NEC will oversee the regulations while the energy ministry and companies with permits in the energy sector will manage the reserves, according to Djoko. Management includes procurement of supplies from domestic production or imports, as well as investment in infrastructure and maintenance, and the use and recovery of the reserves. The location of the reserves will be based on local geology, ease of distribution, spatial planning, supporting infrastructure and the potential for crises or emergencies, and where infrastructure is not sufficient, new facilities will be built, Djoko said. Indonesia aims to reach 1mn b/d of oil production and 12bn ft³/d (124bn m³/yr) of gas production by 2030. But its oil output fell to 606,000 b/d in 2023 from 612,000 b/d in 2022, energy ministry data show. The country's LPG imports amounted to about 6mn t in 2023, energy minister Bahlil Lahadalia says. This contrasts with imports of just over 7mn t, relatively unchanged from a year earlier, Kpler data show. The country imported around 369,000 b/d of gasoline and 29,000 b/d of crude. The energy ministry in August announced plans to boost oil and gas output by reactivating up to 1,500 idle wells, drilling more than 1,000 new wells a year and increasing recovery rates at existing wells to 50pc from 30pc. Indonesia gas production Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more