UK sets price floor for oil, gas windfall tax: Update
Adds budget projections in paragraph 4
The UK government today announced a price-floor mechanism for its controversial Energy Profits Levy on oil company profits that will see the 35pc windfall tax removed if low prices for oil and gas persist for two consecutive quarters. The UK oil and gas sector had been calling for such a price-floor mechanism connected to the tax since late last year.
The EPL was first introduced in May 2022 by UK prime minister Rishi Sunak when he was finance minister. The levy's initial tax rate of 25pc was later raised to 35pc in the government's autumn budget in November, when it was also extended for a further two years into 2028. The overall marginal rate on oil and gas profits increased to 75pc as a result.
Now the government has said that the overall tax rate on oil and gas companies will return to 40pc if both average oil and gas prices fall to — or below — $71.40/bl for oil and £0.54 (68¢) per therm for gas for two consecutive quarters. It said that these levels are based on 20-year historical price averages.
The government's own independent analysis of the country's finances does not forecast either price will fall below these levels before 2028.
Since the increase in the levy the upstream oil and gas sector has complained vociferously that it would deter investment and reduce future production on the UK continental shelf, with independent producers focused on the UK North Sea being particularly hard hit by the windfall tax.
The UK's biggest offshore producer, Harbour Energy, launched a review of its UK operations as a result of the levy, confirming in May that this review would result in the loss of 350 jobs. The company noted that work programmes had been cancelled by its partners at the Elgin/Franklin and Beryl fields.
In response to the announcement of the price floor mechanism David Whitehouse, chief executive of industry group Offshore Energies UK, noted that it was "a step in the right direction" but that further steps will need to be taken to restore confidence to the sector. "We will now work closely with government and lenders to understand the detail of the measure and its effectiveness at unlocking investment," he said. "Enabling continued UK energy production now and in future depends on a predictable and fair fiscal environment. The UK must be competitive if we are to be successful in the global race for energy investment."
The government said today that the EPL has raised around £2.8bn to date, pointing out that this helped it to pay just under half the typical household energy bill last winter. "It is right that we recover excess profits resulting from Putin's war and use the money to help people with their energy bills," said Gareth Davies, exchequer secretary to the finance ministry, before adding that the UK also needed to secure investment in its own domestic supply. "It would be beyond irresponsible to turn off the North Sea taps overnight. Without oil and gas from British waters, we would be forced to import even more from overseas, putting our security of supply at risk."
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Pemex bajo presión para mantener refinación alta
Pemex bajo presión para mantener refinación alta
Mexico City, 7 May (Argus) — La refinación de crudo de Pemex, propiedad estatal de México, en marzo alcanzó sus niveles más altos en casi ocho años antes de las elecciones presidenciales del 2 de junio, pero la empresa podría enfrentarse a desafíos para mantener niveles de refinadoaltos en los próximos meses. Las seis refinerías nacionales de Pemex procesaron más de 1 millón b/d de crudo en marzo por primera vez desde junio de 2016, impulsadas por el progreso en la rehabilitación de las refinerías y una disminución de las exportaciones de crudo para alimentar el sistema de refinación. El presidente Andrés Manuel López Obrador busca reducir las importaciones de combustible en su último año en el cargo, en línea con su promesa de campaña de volver a México más independiente en energía. Sin embargo, los niveles de proceso de crudo podrían disminuir en abril-mayo después de que se produjeran incendios en las refinerías Minatitlán y Salina Cruz a finales de abril. Además, las refinerías de Salina Cruz (330,000 b/d) y Tula (315,000 b/d), las más grandes de México, siguen batallando con una producción elevada de combustóleo con alto contenido de azufre, lo que limita las capacidades de las refinerías para operar a altas tasas simultáneamente. Pemex lleva mucho tiempo luchando con la elevada producción de combustóleo, ya que México produce principalmente crudo pesado, lo que crea una serie de desafíos operativos. El combustóleo suele ocupar valioso espacio de almacenamiento necesario para productos de mayor valor, lo que puede limitar la producción de combustibles más ligeros. Las exportaciones récord de combustóleo en marzo, impulsadas por un aumento de la demanda en la costa del Golfo de EE. UU. después de los reacondicionamientos de la refinería, permitieron a Pemex elevar las operaciones en ambas refinerías simultáneamente. Sin embargo, el problema podría volver a afectar a Pemex en los próximos meses cuando la demanda de combustóleo disminuya y la empresa se vea obligada a almacenar el producto. Pemex está construyendo unidades de coquización en ambas refinerías para resolver este problema, pero no se espera que la unidad de Tula comience a funcionar hasta al menos finales de año, mientras que la unidad de coquización de Salina Cruz comenzaría a finales de 2025. Mientras tanto, la refinería Cadereyta de 275.000 b/d podría compensar parcialmente una disminución en el procesamiento de crudo en Tula y Salina Cruz, ya que su configuración le permite producir menos combustóleo, una fuente familiarizada con las operaciones de Pemex ha dicho a Argus . Las tasas de refinación de Pemex comenzaron a caer en 2014 después de que la administración anterior decidiera depender menos de la producción nacional y centrarse en abrir el mercado de la energía, antes hermético a inversiones externas. En cambio, López Obrador invirtió al menos $3.7 mil millones en mantenimiento para las refinerías antiguas de Pemex de 2019-2023, excluyendo proyectos importantes como las coquizadoras en construcción, además de $17 mil millones para la nueva refinería Olmeca. Cambios en el flujo de crudo y combustible Los mayores niveles de refinación de Pemex han disminuido el flujo de crudo y combustible entre México y EE. UU., y el arranque de Olmeca podría alterar aún más los flujos. Pemex redujo sus importaciones de gasolina y diésel en 25pc a 419,000 b/d en marzo, comparado con 562,000 b/d el año pasado, como resultado de un mejor rendimiento de las refinerías. Las exportaciones de crudo de México cayeron un 29pc hasta un mínimo histórico de 687,000 b/d en marzo, por una menor producción y mayores niveles de refinación. El flujo de crudo y combustible entre México y EE. UU. podría disminuir aún más una vez que Olmeca comience operaciones comerciales y si Pemex mantiene un alto nivel de refinación en sus otras refinerías. La refinería Olmeca comenzará a producir diésel de ultra bajo azufre esta semana, procesando destilados enviados desde la refinería Madero, dijo Pemex el 3 de mayo. Pero la refinería no ha cumplido varios plazos prometidos, el más reciente en abril. La unidad de destilación de crudo de la refinería, la primera unidad de procesamiento, se enfrenta a "problemas importantes" que han retrasado el inicio de la refinería, aunque otras unidades de procesamiento secundario están listas para comenzar, dijo a Argus una fuente familiarizada con las operaciones de Pemex. Sin embargo, el mercado se mantiene escéptico de que se puedan mantener los niveles de refinación después de las elecciones del 2 de junio, ya que Pemex sigue enfrentándose a problemas operativos en sus refinerías. Pero la candidata del partido gobernante Claudia Sheinbaum lidera la votación con doble dígito y se espera que continúe el proyecto actual del gobierno para reforzar Pemex y aumentar los niveles de refinación de la empresa. Por Antonio Gozain Exportaciones de crudo, importaciones de combustible de Pemex ’000 b/d Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US set to resume crude purchases for SPR
US set to resume crude purchases for SPR
Washington, 7 May (Argus) — The US is set to resume crude purchases for the US Strategic Petroleum Reserve (SPR), after calling off a planned 3mn bl refill last month following a rise in crude prices. The US Department of Energy (DOE) today said it plans to purchase up to 3.3mn bl of sour crude for delivery in October to the SPR's Big Hill storage site in Texas. The solicitation sets a maximum price of $79.99/bl for the offers, a slight increase from the $79/bl ceiling it used in the recent monthly purchases. The agency last month called off two pending solicitations that sought to buy 1.5mn bl/month for delivery to the SPR's Bayou Choctaw site in August and September, citing higher crude prices. The most recent SPR refill, nearly 2.8mn bl of sour crude for delivery in September, cost an average of $81.34/bl. DOE says it has has already purchased a total of 32.3mn bl at an average price of $76.98/bl, well below the average $95/bl it received from the sale of 180mn bl of crude from the SPR to respond to market turbulence after Russia invaded Ukraine in 2022. Energy secretary Jennifer Granholm told lawmakers last week that two out of four SPR sites were undergoing maintenance and would not be able to accept SPR deliveries until the end of the year. "We want to continue to fill it, and we will," Grahnolm said. The SPR held 367.2mn bl as of 3 May. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Australia’s Gorgon LNG train to be out for five weeks
Australia’s Gorgon LNG train to be out for five weeks
Singapore, 7 May (Argus) — One of three trains at Australia's 15.6mn t/yr Gorgon export terminal will be off line for five weeks, a source familiar with Gorgon operations told Argus on 7 May. The train has been off line since 30 April because of a mechanical fault in a turbine. The five-week shutdown expectation is slightly longer than the initially expected shutdown period of about 2-3 weeks, traders said. Each week of downtime on one train at Gorgon reduces the terminal's available liquefaction capacity by about 100,000t. The five-week shutdown is likely to reduce the terminal's production by about 5-8 cargoes, traders said. One standard-sized cargo is roughly equivalent to 60,000-70,000t of LNG. But overarching sentiment from market participants is that the impact on both prices and supply will be limited, as only one train is affected and there are ample cargoes for June and July. There will be a temporary spike in prices as affected buyers — if any — will have to secure prompt cargoes to replace lost LNG from Gorgon, keeping prices supported well above $10/mn Btu, traders said. The shutdown will have a greater impact on prices if repair works drag on for longer and affect summer deliveries, they added. The ANEA price, the Argus assessment for spot LNG deliveries to northeast Asia, for the first and second half June were assessed at $10.57/mn Btu and $10.58/mn Btu on 7 May, higher by 40¢/mn Btu from the previous day. First- and second-half July ANEA prices were assessed at $10.64/mn Btu and $10.66/mn Btu, up by 36¢/mn Btu/mn Btu from a day earlier. Chevron has rescheduled deliveries of some LNG cargoes for their Asian offtakers, according to some traders. Further details are unclear. Shell might have bought around 3-4 cargoes because of the shutdown at Gorgon, according to traders. It is not clear whether the cargoes are for June or July delivery. Some traders have offered both June- and July-delivery cargoes to Chevron but the firm has responded by saying that the shortfall can be managed by optimising its own portfolio, traders said. The Gorgon LNG joint venture is operated by Chevron with a 47pc stake, while ExxonMobil and Shell hold 25pc each. By Simone Tam Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Panama's new president faces copper, canal issues
Panama's new president faces copper, canal issues
Kingston, 6 May (Argus) — Stand-in candidate Jose Raul Mulino will take office on 1 July as president of Panama with a challenge to decide on the future of one of the biggest copper mines in the Americas. The 64 year-old lawyer won yesterday's presidential election in the central American country, promising a "pro-investment and pro-business" policy. He won with 35pc of the vote and an about 10 percentage point lead over his next closest rival, Ricardo Lombana. But he has delivered no comment on the future on the shuttered Canadian-owned copper facility that is one pillar of the country's economy. His government will use public works projects and incentives for foreign investors to restore economic growth, Molino said, without giving details. Panama also faces a crippling drought that has lowered water levels and reduced transit through the economically important Panama Canal. First Quantum intends to meet the new government to discuss reopening the mine, the company's chairman Robert Harding said in March. "Whatever government is elected, we will work with it," Harding said. "We would like to see this mine reopen." Panama closed the $10bn Cobre Panama mine after a supreme court ruling in November that First Quantum's contract was unconstitutional. The mine accounted for 5pc of the country's economy and 1.5pc of global copper output, according to the government. The shutdown will limit the country's economic growth to 2.5pc this year against 7.5pc in 2023, the IMF has forecast. The supreme court's order to close the mine followed weeks of protests over the terms given to First Quantum in October. Protests wracked the country as opposition parties, trade unions, environmental lobbies and non-governmental organizations objected to the terms. "Although the mine's owners would be happy to negotiate a reopening with the new administration, this is a very hot and controversial matter for the new government," a senior official of the outgoing government of President Laurentino Cortizo told Argus today. "Any suggestion of negotiating a reopening would again bring people on the streets." Mulino ran with former president Ricardo Martinelli until the courts disqualified Martinelli because of a money laundering conviction. Martinelli had proposed that Panama renegotiate the contract with First Quantum to secure higher royalties and a stake. "Mulino is a mentee of Martinelli, but I doubt he would stoke public anger by seeking to reopen the mine," the official said. Cobre Panama produced 331,000 t in 2023, 5pc less than 2022 output, First Quantum said. By Canute James Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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