US turns screws on Venezuela as Florida beckons

Spanish Market: Crude oil, Natural gas, Oil products
29/10/20

The election-minded US government is tightening its screws on Venezuela in a controversial strategy that appeals to hawkish Latino voters in Florida but divides their compatriots inside the impoverished country.

From diesel supply to an environmentally sensitive crude transshipment, President Donald Trump's administration is seeking to seal off Venezuelan president Nicolas Maduro's access to the oil market. The moves are expedient pre-election optics but will not spark regime change in Caracas, Venezuela watchers in Washington tell Argus.

As of this week, the US has effectively ended a sanctions exemption for diesel supplied by non-US companies under transactions that had been permitted on humanitarian grounds since the US imposed oil sanctions on Venezuela in early 2019.

India's Reliance Industries was a key diesel supplier in swap transactions for Venezuelan crude, while Spain's Repsol and Italy's Eni were lifting crude as payment from Venezuela's state-owned PdV for their natural gas production and historical debts, with diesel shipped back to balance their books.

"We are trying to stop the export of crude by the Maduro regime in Venezuela, and one of the ways we are trying to stop it is to prevent people from swapping various products for it, not just paying cash for it. So swapping debt, swapping diesel," US special envoy to Iran and Venezuela Elliott Abrams told reporters today.

Because the imported low-sulfur diesel is used for power generation, municipal water supply, agricultural activity, some food distribution and public transport, human rights groups — including UN High Commissioner for Human Rights Michelle Bachelet — had been urging the White House for months to maintain the exception.

That position was recently echoed by Miguel Pizarro, the Venezuelan opposition's UN envoy. Local Venezuelan farmers and businessmen, already hit by a severe gasoline shortage, have warned of dire consequences.

But other senior figures in the US-supported interim government led by Juan Guaido — including influential former political prisoner Leopoldo Lopez, now in self-imposed exile in Spain — support tougher measures to oust Maduro, whom they blame for the once-prosperous country's grave humanitarian crisis.

Aside from the loss of the imported diesel itself, detractors say the situation will open more avenues for opaque oil transactions. Crude exports are already tumbling and storage tanks full. And Repsol and Eni will have no sanctions-permitted mechanism to secure payment for their Venezuelan gas production. With only sporadic high-sulfur diesel production from PdV's crippled refineries, little onshore gas flow and only a partially functional network to distribute the gas, western Venezuela in particular will be pummeled by more blackouts and a loss of domestic gas supply.

Risky business

On the other side of Venezuela, the US is similarly resisting international calls to transfer 1.3mn bl of Venezuelan crude from the impaired Nabarima floating storage unit, which is at risk of causing a catastrophic oil spill in the Gulf of Paria.

Eni, which is PdV's minority partner in the Corocoro offshore field where the vessel has been moored for a decade, wants formal US assurances that the company and its contractors would not trigger sanctions by offloading the oil. Talks with the US State Department have been underway for weeks. Without a swift agreement, Eni's proposal will become obsolete, because PdV is already transferring the oil in a risky barge-based process guarded by the Venezuelan military.

The State Department's Bureau of Western Hemisphere Affairs said today that "Eni is under no sanctions risk to begin immediate emergency repairs to the vessel. We hope a resolution can be found soon."

No mention was made of authorizing an oil transfer.

Eni has said it is ready to carry out the safe transfer once it has approval from the US as well as PdV as the operator of the PetroSucre joint venture.

By Patricia Garip

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31/10/24

TMX adds to ‘pulse’ of 4Q freight market: Teekay

Houston, 31 October (Argus) — An increase in monthly Aframax crude tanker loadings in Vancouver, British Columbia, is poised to add a new dynamic to the tanker market this winter, Teekay Tankers chief executive Kenneth Hvid said. So far, tanker rates in the fourth quarter, often the strongest time of year for the market, have lagged the trajectory of fourth quarter 2023. But it is too early in the quarter to assume a rally will not happen, Hvid said. "It feels like the market has called the winter over before it started," he said. "But there is absolutely a pulse in the markets." Part of the support for tanker rates likely will come from heightened demand on Canada's Pacific coast, where exports in Vancouver are continuing to rise following the Trans Mountain Expansion (TMX). In October, 24 Aframaxes loaded in Vancouver, Hvid said. That marks a new high since TMX began operations in May, with the monthly average at around 20 loadings from June through September, according to Teekay. Nine of the 24 cargoes went directly to Asia-Pacific ports and at least four went to the Pacific Area Lightering zone (PAL), where the vessels discharged onto very large crude carriers (VLCCs) for shipment across the Pacific. An increase in direct shipments from Vancouver to Asia-Pacific can clear out available tonnage on the west coast of North America and pressure rates higher, which lifted rates in September . Teekay profits down on year Teekay reported a profit of $58.8mn in the third quarter, down from $81.4mn in the third quarter of 2023, with rates under pressure from lower Chinese crude oil imports. The tanker company expects rates to climb in the fourth quarter on seasonally higher oil demand. Teekay has a fleet of 42 tankers, including 24 Suezmaxes and 18 Aframax/long range 2 tankers, with six additional vessels on time charter. By Tray Swanson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

CNRL 3Q oil and gas output dips

31/10/24

CNRL 3Q oil and gas output dips

Calgary, 31 October (Argus) — Canadian Natural Resources' (CNRL) crude, natural gas and natural gas liquids (NGL) output decreased by 2.2pc in the third quarter. The Calgary-based integrated oil and gas company produced 1.36mn b/d of oil equivalent (boe/d) during the third quarter, down slightly from 1.39mn boe/d in the same quarter last year, the company said Thursday. CNRL's upgraders produced 498,000 b/d of synthetic crude, up from 491,000 b/d in the same quarter last year as the Athabasca Oil Sands Project's (AOSP) Scotford upgrader produced stronger than expected volumes and completed a planned turnaround nine days ahead of schedule. The impact of planned turnarounds to CNRL's annual synthetic crude output was reduced to 5,400 b/d, down from the company's initial forecast of 11,000 b/d. The company also acquired Chevron's Canadian oil sands and Duvernay shale production for $6.5bn in the quarter, increasing CNRL's annual synthetic crude production by 62,500 b/d and its stake in AOSP to 90pc. Bitumen production at CNRL's thermal in-situ projects was 272,000 b/d, up from 269,000 b/d in the same quarter of 2023 as output at Jackfish reached 128,000 b/d, a new quarterly record. The company's crude and NGL output, excluding thermal in-situ, was 228,000 b/d, down from 232,000 b/d in the same quarter last year. CNRL will also increase its committed capacity on the 590,000 b/d Trans Mountain Expansion (TMX) by 75,000 b/d to 169,000 b/d, allowing the company to secure almost one third of the line's committed capacity after PetroChina Canada offloaded its capacity on 10 October. The newly expanded pipeline has provided Canadian producers with more meaningful access to global buyers, reducing Canadian heavy crude price volatility and adding significant egress capacity out of Alberta. Yet, it is uncertain how long unconstrained egress in Alberta can be sustained with oil sands production expected to grow. "It certainly helps secure those barrels which would otherwise be potentially in an egress constrained situation," said CNRL president Scott Stauth on Thursday, adding stronger pricing is now possible by aiming volumes at California or Asia. CNRL posted a profit of C$2.27bn ($1.63bn) in the quarter, down from a C$2.34bn profit during the third quarter of 2023. By Kyle Tsang Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US biofuel feedstock use dips in August

31/10/24

US biofuel feedstock use dips in August

New York, 31 October (Argus) — Renewable feedstock usage in the US was down slightly in August but still near all-time highs, even as biomass-based diesel production capacity slipped. There were nearly 3.5bn lbs of renewable feedstocks sent to biodiesel, renewable diesel, and sustainable aviation fuel production in August this year, up from fewer than 3bn lbs a year prior, according to the US Energy Information Administration's (EIA) latest Monthly Biofuels Capacity and Feedstocks Update report. August consumption was 0.4pc below levels in July and 0.5pc below record-high levels in June. US soybean oil consumption for biofuels rose to 39.3mn lbs/d in August, up by 2.1pc from a year earlier on a per-pound basis and up 6.9pc from a month prior. The increase was entirely attributable to increased usage for renewable diesel production, with the feedstock's use for biodiesel slipping slightly from July. Canola oil consumption for biofuels hit 14.2mn lbs/d, up by 58.1pc from a year prior on a per-bound basis but still 19.4pc below record-high levels in July. Distillers corn oil usage, typically less volatile month-to-month than other feedstocks, bucked that trend to hit a high for the year of 13.6mn lbs/d in August. That monthly consumption is up 13.6pc from a year earlier and 20.9pc from a month earlier. Among waste feedstocks, usage of yellow grease, which includes used cooking oil, rose to 22.4mn lbs/d in August, up 13.8pc from levels a year prior and 5.8pc from levels in July. Tallow consumption for biofuels was at 18.6 mn lbs/d over the month, an increase of 27.8pc from August last year but a decrease of 13.4pc from July this year. Production capacity of renewable diesel and similar biofuels — including renewable heating oil, renewable jet fuel, renewable naphtha, and renewable gasoline — was at 4.6bn USG/yr in August, according to EIA. That total is 24.1pc higher than a year earlier and flat from July levels. US biodiesel production capacity meanwhile declined to fewer than 2bn USG/yr over the month, down by 4.3pc from a year earlier and 1.3pc from a month earlier. US biomass-based diesel production capacity has expanded considerably in recent years, but refiners have recently confronted challenging economics as ample supply of fuels used to comply with government programs has helped depress the prices of environmental credits and hurt margins. The industry is also bracing for changes to federal policy given this year's election and a new clean fuel tax credit set to kick off in January. That credit, known as "45Z", will offer a greater subsidy to fuels that produce fewer greenhouse gas emissions, likely encouraging refiners to source more waste feedstocks over vegetable oils. That dynamic is already shaping feedstock usage this year, with Phillips 66 executives saying this week that the company's renewable fuels refinery in California is currently running more higher carbon-intensity feedstocks ahead of a shift to using more waste early next year. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

China trade tensions could cloud climate summit

31/10/24

China trade tensions could cloud climate summit

China argues that its industrial emissions are needed to provide technology and goods for the global energy transition London, 31 October (Argus) — As the world's leading greenhouse gas emitter, China will struggle to align its reduction efforts closer to those required under the Paris Agreement's 1.5°C global warming target while at the same time fending off trade barriers. "It is imperative to properly handle the relationship between new energy and traditional energy," President Xi Jinping said earlier this year. Chinese CO2 emissions posted zero year-on-year growth in the third quarter, despite a rebound in coal-fired output, as clean power generation also grew rapidly, Helsinki-based Centre for Research on Energy and Clean Air (CREA) says. But Beijing remains guarded on whether its CO2 emissions have peaked, with coal still an integral part of its energy mix. It has set a 2030 target for peak emissions but will likely reach this some years early, the country's new climate envoy, Liu Zhenmin, says. "If we want to achieve global carbon [neutrality], first we have to provide the world with more affordable, secure technology. Second, we need to address financing," Liu says, referring to the finance requested by developing countries from developed countries to enable the former to reach their climate targets. China is set against being dragged into contributing to the new climate finance goal, despite calls from developed countries for it to do so. China deals with climate action on its own terms. It opted out of a pledge to treble renewable power capacity and double energy efficiency at last year's UN Cop 28 climate summit in Dubai, although it did agree to the final conference text, which made mention of the pledge. China's nationally determined contribution (NDC) includes a target date for reaching peak CO2 emissions, but lacks clear goals for peaking emissions of other greenhouse gases such as methane. Beijing is due to update its NDC by February. To remain in line with the Paris accord's 1.5°C target, the new NDC will need to aim for an at least 30pc reduction in CO2 emissions from 2023 levels by 2035 and set absolute reduction targets, CREA says. And sales of new energy vehicles (NEVs) — battery electric, plug-in hybrid and fuel-cell vehicles — need to account for 60pc of total new car sales by 2035, from 50pc currently, to drive transport sector emissions down to 2020 levels, CREA says. China had nearly 25mn NEVs on its roads in June and is on course to quadruple this figure by 2030. Its renewable power capacity has already surpassed a 1.2TW target for 2030, enabling Beijing to cut its approvals for new coal-fired power plants by almost 80pc on the year in January-June, according to environmental group Greenpeace. But China's coal production capacity continues to increase. Chinese power demand is set to rise by more than 500 TWh/yr in the next 5-10 years. Beijing could meet this demand with more renewable and nuclear power generation, but nuclear currently holds a mere 5pc share of China's electricity mix. Brace brace China had seemingly narrowed its climate policy differences with the US in terms of approach and objectives, and played a role alongside the US in bringing a consensus around fossil fuels language at Cop 28. But China is bracing for a showdown on climate finance at Cop 29 in Baku next month. China and advanced economies accounted for more than 95pc of electric vehicle (EV) sales in 2023, energy watchdog the IEA says. But China could be subject to huge new tariffs on exports to the US if Republican candidate Donald Trump wins the US presidential election in November. Tariffs would have to be at 40-50pc to deter Chinese EV imports, consultancy Rhodium says — the EU on 29 October announced a slew of tariffs on Chinese EVs of up to 45pc. Western countries would add $6 trillion to global energy transition costs if they decouple from Chinese products, Liu says. China's carbon emissions by source China's industrial carbon emissions Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US court set to weigh biofuel blend mandates

31/10/24

US court set to weigh biofuel blend mandates

New York, 31 October (Argus) — A US court on Friday will weigh some novel issues that could affect enforcement of the Renewable Fuel Standard (RFS), the federal program that sets minimum biofuel blending levels for domestic motor fuel supplies. The Environmental Protection Agency (EPA) in last year's RFS regulation required refiners and importers to blend increasing volumes of renewable fuel from 2023-2025. But the rule differed from past obligations in a crucial way. While the RFS law set annual volume targets of cellulosic, advanced and conventional biofuels through 2022, it tasked EPA with setting volumes in subsequent years by balancing factors such as the environmental impacts of biofuels, energy security, expected production and consumer costs. In a consolidated case to be heard Friday by the US Court of Appeals for the District of Columbia Circuit, environmental groups and oil refiners are separately challenging aspects of how the EPA applied those factors in setting 2023-25 volumes. The court has previously affirmed the legality of many RFS rules. "Past cases always give you some perspective on how the DC court might see it," said Susan Lafferty, a partner at law firm Holland & Knight. "But the DC court could also say, ‘not relevant anymore because this is a different part of the statute that we are working with.'" Refiners say EPA misapplied the criteria, upping compliance costs more than necessary by setting targets for cellulosic and conventional biofuels too high and targets for advanced biofuels too low. They also challenge EPA's balancing of potential impacts, noting that the agency assumed that all parties can easily pass the costs of compliance on to consumers. In a separate case this year, the DC Circuit discarded EPA rejections of program waiver petitions, in part because judges disagreed that refiners can easily pass on the cost of Renewable Identification Number (RIN) credits used to show compliance with the RFS program. EPA used this pass-through theory in the 2023-2025 rule "like a magic wand, waving it around to dismiss any argument that the rule will cause harm", the American Fuel and Petrochemical Manufacturers and small refineries said in a case filing. Lafferty expects the judges at Friday's hearing to probe the extent to which EPA's volumes relied on this pass-through theory, "a policy that now this very court has gutted." Environmentalists have similarly targeted EPA's cost analysis, arguing that the agency downplayed the environmental drawbacks of growing crops for energy. The Center for Biological Diversity and the National Wildlife Federation argue that EPA has legal discretion to set post-2022 volumes for corn- and soybean-derived biofuels as low as zero. EPA counters that the court owes the agency deference in evaluating scientific data and making predictive judgments. And biofuel groups that have intervened argue that the program is designed to require more biofuel production even if there are no formal volume requirements in law anymore. While EPA's post-2022 authority to set blend mandates is a new issue, the DC Circuit has handled various cases about EPA's implementation and has generally been deferential to the agency's volume decisions. The court this year upheld 2020-2022 targets. In a 2019 decision, the court kept volumes in place , despite telling EPA to more deeply weigh endangered species impacts. While the court might take issue with some aspects of EPA's latest rule, including the agency's lateness in finalizing volumes, judges could again be reluctant to upend fuel markets if they find only small oversights. Depending on how skeptical judges appear about EPA's arguments on Friday, the case could cause concern for biorefineries. A decision is expected next year, meaning any order for EPA to better justify its decisions or go back to the drawing board would likely fall to the next president's administration. On the panel for Friday's hearing are two judges familiar with the program: Democratic appointee Cornelia Pillard, who wrote the opinion this year upholding 2020-2022 blend mandates, and Republican appointee Gregory Katsas, who dissented and said those volumes were excessive. The third judge on the panel is Democratic appointee J. Michelle Childs. RINcrease or decrease RIN market activity has thinned as participants await the results of the court case and November's presidential election. In its latest rule, EPA aimed to provide a clearer picture over a longer timeline by finalizing volumes over multiple years. But the agency underestimated the growth in renewable diesel production, partly because of unexpectedly high feedstock imports. The result has been persistent oversupply, which took D4 biomass-based diesel credit prices from around 150¢/RIN in spring last year to as low as 42¢/RIN a year later according to Argus assessments. Multiple refiners have consequently dialed back biofuel production. In the past, RIN prices have proven sensitive to legal developments as traders anticipate supply and demand shifts. Prices softened this summer after the DC Circuit vacated small refinery waivers, leaving it unclear whether many facilities would have to buy RIN credits at all. By Cole Martin and Matthew Cope Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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