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Saudi Arabia pushes back against criticism of Opec+ cut

  • Spanish Market: Crude oil
  • 13/10/22

Saudi Arabia has doubled down on defending the Opec+ group's latest decision to lower production quotas from next month, insisting that any delays to the move would have had economic costs.

In a statement issued overnight, the Saudi foreign ministry said Riyadh once more rejects accusations that the Opec+ decision of 5 October to lower targets by 2mn b/d from November was underpinned by a Saudi incentive to align itself with key sanctions-struck group member, Russia.

"Saudi Arabia would first like to express its total rejection of these statements that are not based on facts and which are based on portraying the Opec+ decision out of its purely economic context," the foreign ministry said. "[Saudi Arabia] clarified through its continuous consultation with the US administration that all economic analyses indicate that postponing the Opec+ decision for a month, according to what has been suggested, would have had negative economic consequences."

The Saudi foreign ministry did not disclose who had authored the postponement proposal. But the Wall Street Journal reported on 11 October that US officials had reached out to Saudi Arabia and other Mideast Gulf Opec+ allies days before the 5 October meeting to request that any move to reduce targets be delayed by one month. A one-month delay would see the supply reductions begin in December, after US citizens head to the polls for midterm elections on 8 November.

Opec+ officials have repeatedly defended the decision as the result of concerns over a global economic slowdown and continued weaker Chinese demand.

"We looked at the technical parameters and global economic indicators and I think it's no secret to anybody that we are facing macroeconomic headwinds," Opec secretary general Haitham al-Ghais said in an interview with Argus after the meeting. "This is clearly evidenced by the actions taken by central bankers all around the world."

And in its latest Monthly Oil Market Report (MOMR) released on 12 October, Opec revised down its estimates of world oil demand growth by 460,000 b/d for this year and by 360,000 b/d for 2023.

Turning up the heat

The White House has been very vocal in its criticism of the Opec+ decision since it was announced last week. US president Joe Biden said on 11 October he would look to re-examine Washington's relationship with Riyadh, while US lawmakers have been pitching legislation that that would target Opec for anti-competitive behaviour in oil markets. The White House is spearheading a price cap initiative that seeks to keep Russian oil supplies accessible to buyers outside of Europe and North America, while lessening Moscow's funding for its war in Ukraine.

US deputy treasury secretary Wally Adeyemo questioned the economic merits of tightening oil supplies, whose firm prices he identifies as one of the "primary" drivers of inflation. "The idea that you would cut supply of the commodity that is driving headline inflation, felt to be something that did not make sense," he said. "We think that it's not only bad for consuming countries, but ultimately, it's bad for Opec, if the global economy weakens, because these are ultimately your customers."

Russia entered the Opec+ alliance as the de facto leader of the non-Opec contingent, receiving baseline and quota levels equal to those of Opec's largest producer, Saudi Arabia. But some Opec+ delegates have been saying that Russia's declining supplies — constrained by western sanctions imposed in response to Russia's invasion of Ukraine — have diminished Moscow's influence within the Opec group.

On 12 October, Saudi Arabia was one of 143 countries that voted in favour of a UN General Assembly resolution that condemns Russia's "illegal so-called referendums" in regions within Ukrainian borders and demands that Moscow should reverse its annexation of four Ukrainian regions. The five states who voted against the measure included no Opec+ members beyond Russia.


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07/10/24

CNRL to buy Chevron's Canadian oil sands, shale: Update

CNRL to buy Chevron's Canadian oil sands, shale: Update

New York, 7 October (Argus) — Canadian Natural Resources (CNRL) agreed to buy a 20pc stake in the Athabasca Oil Sands Project (AOSP) and 70pc interest in the Duvernay shale from Chevron for $6.5bn, extending its lead as Canada's top producer. The all-cash transaction has an effective date retroactive to 1 September, the companies said Monday. Closing is expected during the fourth quarter. The assets being sold accounted for about 84,000 b/d of oil equivalent (boe/d) of production, net of royalties, to Chevron last year. Chevron last October announced plans to acquire US independent Hess for $53bn, pledging to sell $10bn-$15bn of assets by 2028. While the Hess deal has been delayed by a mid-2025 arbitration hearing, Chevron, the second-largest US oil producer, has increasingly focused its attention on the Permian shale basin of west Texas and southeastern New Mexico, as well as an expansion project in Kazakhstan. CNRL's acquisition bolsters its position as Canada's largest petroleum producer after pumping out 1.29mn boe/d of oil and gas in the second quarter this year. About 72pc came from oil and natural gas liquids (NGLs), with the balance from natural gas. CNRL anticipates the oil sands and Duvernay assets will lift the company's production profile by about 122,500 boe/d in 2025. About half, or 62,500 b/d, will come in the form of synthetic crude oil produced from AOSP's 320,000 b/d Scotford upgrader near Edmonton, Alberta. The upgrader is fed diluted bitumen piped from the Muskeg River and Jackpine mines in the oil sands region. The deal would increase CNRL's stake in AOSP to 90pc. Calgary-based CNRL first made its foray into AOSP in 2017 when it bought a 70pc stake from Shell and Marathon Oil Canada for $9.75bn ($C$12.74bn). Muskeg River and Jackpine are adjacent to the company's fully owned Horizon mine and upgrader, and the increase in ownership may allow for increased synergies between the two assets, according to executives. "It allows for a little bit more ease in terms of governance on the asset," CNRL president Scott Stauth said Monday on an investor call. "I can see us utilizing the equipment more effectively between the two sites." Undeveloped oil sands projects Also included in Monday's deal are additional stakes in undeveloped oil sands leases that CNRL could tap as it works through its reserves. This includes a 20pc increase the Pierre River project that would provide CNRL with 90pc ownership; a 60pc increase in the Ells River project that would lift the company's stake to 90pc; a 33pc increase in the Saleski project, for 83pc; and a 6pc working interest in Namur that would reach 65pc. Reserves from Pierre River could be used to extend the life of the Horizon project as the North Mine depletes. A standalone facility there is also possible, but would require a significant capital outlay, CNRL executives said. CNRL in May said it was considering a massive 195,000 b/d increase to its Horizon production using two new technologies. CNRL said production from the light oil and liquids rich assets in the Duvernay is expected to average 60,000 boe/d in 2025, half of which would be natural gas. CNRL anticipates pushing production to 70,000 boe/d by 2027 with more than 340 locations already identified as candidates for drilling. With WTI above $70/bl, "this is a very attractive acquisition for us," CNRL chief financial officer Mark Stainthorpe said. CNRL has been actively acquiring assets in recent years. The company purchased Canadian assets belonging to Painted Pony in 2020, Devon Energy in 2019, TotalEnergies in 2018 and Cenovus Energy in 2017, among other deals. By Stephen Cunningham and Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Chevron shuts Gulf platform ahead of Hurricane Milton


07/10/24
07/10/24

Chevron shuts Gulf platform ahead of Hurricane Milton

New York, 7 October (Argus) — Chevron evacuated and shut in its Blind Faith oil and gas production platform in the Gulf of Mexico in advance of Hurricane Milton, which has strengthened into a category 5 storm as it barrels toward Florida's west coast. Output from Chevron's other operated facilities in the region remains at normal levels, the company said today. The 65,000 b/d Blind Faith platform is located around 160 miles southeast of New Orleans. Milton, with maximum sustained winds of 160 mph, was about out 130 miles west of Progreso, Mexico, according to an 11am ET National Hurricane Center advisory. The storm will move through the Campeche Bank offshore region north of Mexico's Yucatan peninsula — where state-owned Pemex's largest oil and natural gas production operations are located — today and Tuesday, then cross the eastern Gulf of Mexico and approach the west coast of the Florida Peninsula by Wednesday. On its current track, the hurricane is expected to skirt to the south of the majority of US offshore oil and natural gas platforms in the Gulf of Mexico. The region accounts for around 15pc of total US crude output and 5pc of US natural gas production. Hurricane Helene temporarily shut in up to 29pc of oil production and 20pc of gas output in the Gulf of Mexico late last month. By Stephen Cunningham Hurricane Milton projected path Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Concerns remain over plans of firm tapped to run Citgo


07/10/24
07/10/24

Concerns remain over plans of firm tapped to run Citgo

London, 7 October (Argus) — The top bidder in the auction for Venezuelan state-run PdV's US refining subsidiary, Citgo, says it plans to reinvest in its 804,000 b/d of refining capacity, but concerns remain over the private equity-backed buyer's intentions. Amber Energy was selected on 27 September as the top bidder in an auction for the seventh-largest US refiner, with a bid of $7.3bn. The company, backed by investors including Elliott Investment Management, says it would focus on "enhancing the value of its [Citgo's] core assets" by prioritising "operational excellence", reinvesting in the business and pursuing "strategic investments". Amber is led by industry veterans Gregory Goff and Jeff Stevens. The latter was chief executive of Western Refining from 2010-17, while Goff ran refiner Andeavor from 2010-18, during which time it changed its name from Tesoro, bought Stevens' Western Refining and was then bought by Marathon Petroleum. Goff and Stevens' refining pedigree has not allayed concerns in the market that one of their investors, Elliott, and other undisclosed backers, want to split up the assets and sell them for a combined price higher than the investment group's $7.3bn bid. Elliott's track record of activist investing in North American refiners shows a clear preference for improving the core business of processing crude into fuels, with little interest in what the investment firm views as non-core assets. Elliott pushed Canadian integrated energy company Suncor in 2022 for board changes and divestment of its 1,500 retail stores, which it ultimately did not sell. The firm had more luck with Marathon, which agreed to sell its 3,900-store Speedway network in 2019, the year after it bought Andeavor. Last year, Elliott purchased a $1bn stake in Phillips 66 and called for the company to refocus on its refining business and reduce operating costs. Phillips 66 divested some of its retail network and pipelines this year. The investment group, which started out trading in the 1970s but has since expanded into a multi-strategy hedge fund and private equity firm, has shown a clear preference for merchant refiners within its activist investments, and criticised the strategy of integrated refining companies. It is not clear whether that preference carries through to its private-markets investment in Amber, which could also be eyeing an initial public offering for the assets down the line. Elliott did not respond to requests for comment on its strategy. A spokesperson for Amber declined to discuss details of the company's strategy on the record. Seeking closure Amber said it expects the sale to close in mid-2025, pending regulatory approval and a final recommendation by the US Court for the District of Delaware. But investors involved in the auction process and other downstream operators told Argus that higher bids from other refiners or groups are likely, as Amber's bid is considered relatively low for what are widely viewed as attractive refining assets. The auction comes at a time of flatlining domestic demand for road fuels such as gasoline, and ongoing worries about the future of the US refining industry, where smaller and less profitable plants are the most likely to shutter operations. But Citgo's two Gulf coast assets — a 455,000 b/d refinery in Louisiana and a 165,000 b/d plant in Texas — are large, complex refineries that could benefit from access to export markets as domestic demand wanes and the Gulf coast readies for the 2025 closure of LyondellBasell's 264,000 b/d Houston plant. Citgo's 184,000 b/d Lemont refinery in Illinois could gain access to cheap Canadian heavy crude and sell products to the US market when major plants such as ExxonMobil's 252,000 b/d Joliet refinery in Illinois and BP's 435,000 b/d Whiting facility in Indiana are off line owing to outages or maintenance. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Africa seeks trillions in climate finance at Cop 29


07/10/24
07/10/24

Africa seeks trillions in climate finance at Cop 29

Africa faces the heaviest economic burden from climate change, and the most uncertainty over funding, writes Elaine Mills Cape Town, 7 October (Argus) — A key priority for African countries at the UN Cop 29 climate talks in Baku next month is to secure a new climate finance goal for developing countries. But as well as serious commitments on an amount, the continent wants increased accessibility and cheaper funding. Regional alliance the African Group of Negotiators (AGN) is seeking a climate finance commitment from developed countries of $1.3 trillion/yr by 2030, under a new climate finance goal currently being negotiated — the so-called new collective and quantified goal (NCQG). The NCQG is the next stage of the $100bn/yr target that developed countries agreed to deliver to developing countries over 2020-25. It was met for the first time in 2022, according to the OECD, but some countries in Africa have complained that the money never reached them. The AGN wants to steer clear of the old target, contesting whether it has even been met. The group says it wants lessons to be learned, especially regarding the quality of the finance and the difficulties countries have had in accessing it. Uganda asks that the new goal avoids "political statements that are not implemented", referring to uncertainties over how the finance was counted and accessed. African states want the funding to come mostly from public sources, largely in the form of grants and highly concessional loans. This should improve borrowing costs and ease debt burdens, which are forcing countries to make trade-offs with critical development needs. The group does not want market-based loans to be counted as climatefinance — the majority of multilateral climate loans were market-based in 2016-22. Most African countries face an unsustainable debt situation that has been worsened by higher global interest rates, AGN chair Ali Mohamed says. "Our focus is on agreed obligations within the multilateral climate process and the need to improve investments to unlock the continent's potential to tackle the climate crisis, which is paralysing most economies," he says. Africa receives only 2pc of total global climate finance, according to think-tank Climate Policy Initiative. The new NCQG must create the right conditions to push that share to at least 30pc, "otherwise it is a failed process", a South Africa negotiator said last month. The heaviest price The first global stocktake at Cop 28 in Dubai last year acknowledged the world is off track in meeting the Paris Agreement's goals, with significant ambition and implementation gaps in mitigation and adaptation, as well as loss and damage, Mohamed says. African countries submitted ambitious nationally determined contributions, but there has not been corresponding financial and technical support for their implementation. "We lack clarity on the amount of current and future funding, capacity building and technical support," Kenya's cabinet secretary for environment, climate change and forestry, Aden Bare Duale, says. This vagueness undermines transparency of support under the Paris accord, and addressing it should be prioritised in the forthcoming negotiations, he says. African countries lose 2-5pc of their GDPs annually and many divert up to 9pc of their budgets responding to climate extremes, according to the State of the Climate in Africa 2023 report by the World Meteorological Organisation. The report serves as a stark reminder of the urgent need for climate action in Africa, where extreme weather events disproportionately impact the continent's socio-economic development, Zambian environment minister Mike Mposha says. "It is African nations who pay the heaviest price," Simon Stiell, head of UN climate body the UNFCCC, says. "But it would be incorrect for any world leader — especially in the G20 — to think ‘It's not my problem'. The economic and political reality — in an interdependent world — is we are all in this crisis together." Climate finance flows and needs in Africa Bilateral climate finance loans in 2016-2022 Multilateral climate finance loans 2016-2022 Multilateral climate finance loans 2016-2022 Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Nigeria starts local currency crude sales to Dangote


07/10/24
07/10/24

Nigeria starts local currency crude sales to Dangote

Lagos, 7 October (Argus) — Nigeria's state-owned oil firm NNPC began selling crude to the country's 650,000 b/d Dangote refinery in the local currency on 1 October, as planned, the Nigerian government said. Co-ordinating minister of the economy Wale Edun said he has conducted "a post-commencement review" of the programme, where downstream regulator NMDPRA, NNPC and Dangote officials confirmed the start of sales in naira. "From 1 October, NNPC will commence the supply of approximately 385,000 b/d of crude oil to the Dangote refinery, which will be paid for in naira," Edun had said previously. The programme will also involve Dangote supplying gasoline and diesel of "equivalent value to the domestic market to be paid for in naira". The crude and product sales will be valued in dollars at prevailing international market prices, but financial settlements will be completed in naira at a fixed exchange rate that has so far not been disclosed. Maritime and port regulatory costs for coastal deliveries of crude and products under the programme, which are normally collected in dollars, "will also be paid for in naira", Edun said. The Nigerian Ports Authority's managing director, Abubakar Dantsoho, previously confirmed the set-up of a "one-stop shop that will co-ordinate service provision from all regulatory and security agencies", listing Nigerian ports, maritime, customs and tax authorities and the navy as participants. Dangote will sell diesel volumes under the programme "to any interested offtaker", the government said, but gasoline will only be sold to NNPC. "NNPC will then sell to various marketers for now," according to the government. "Since gasoline is still subsidised by the government, using discounted foreign exchange [available] only to NNPC, prices at wholesale and retail are still considerably below the market. That is why only NNPC can buy Dangote's gasoline today," said Bob Dickerman, the chief executive of local oil trader Pinnacle. Nigeria's diesel market has been deregulated since 2003 but efforts to remove the country's longstanding gasoline subsidy have stalled. Dangote started sales of gasoline to NNPC on 15 September under an older contract in which the national oil company pays the refiner in dollars. Argus tracking shows Dangote's crude receipts rose by 5pc on the month to 195,000 b/d in September. Dangote said it is aiming for a run rate of 350,000 b/d in its first phase of operations but has fallen short of that level in every month this year except for June. By Adebiyi Olusolape Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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