Refiners struggling to respond to price incentives: IEA

  • Spanish Market: Crude oil, LPG, Oil products
  • 11/08/23

Refiners are seemingly unable to increase production even with this summer's soaring margins, the IEA said today, and this is acting to push product premiums to crude still higher.

The agency's refining margin indicator for northwest Europe — which accounts for some but not all costs — leapt by between 50-300pc in the April-July period, depending on the style of refinery, it said in its latest monthly Oil Market Report (OMR). There were smaller but significant margin rises at the US Gulf coast and in Singapore.

It said profitability at Europe's simple or hydroskimming refineries — those that lack capacity to upgrade heavy products — was the highest on record apart from in the immediate aftermath of Russia's invasion of Ukraine in 2022. This increased further in the early days of August when high-sulphur fuel oil (HSFO), traditionally the cheapest of the major products and the one that more complex refineries are designed to upgrade as far as possible, surged to a premium against crude.

The IEA said European refining is the "epicentre of the operational underperformance." It put average utilisation in European OECD countries at 81pc in June, with crude runs of 11.2mn b/d, down by 530,000 b/d from the same month a year earlier. The summer usually sees the year's highest refining rates, with a lull in planned maintenance work and heightened demand for transport fuels.

The agency said the outlook for European refining is "challenging", forecasting third-quarter crude runs in the region's OECD countries at 11.2mn b/d, lower by 600,000 b/d year-on-year. Other regions will face similar issues, although of smaller magnitude. The IEA forecasts runs in OECD Americas countries down by around 250,000 b/d year-on-year and those in OECD Asia Oceania steady.

The IEA said extreme temperatures in Europe, the US and China this summer have been a constraint on refinery runs, although it is waiting "to confirm the scale of the problem." Market participants in Europe have widely pointed to extraordinary temperatures generating technical problems, with air and water cooling less efficient under hot conditions. Recovery of the lightest products from atmospheric distillation may be disrupted, and the cooling of products before transport may be slowed.

EU and G7 sanctions against Russian crude and feedstocks are contributing to keeping refinery runs lower in Europe, particularly at plants that used to receive crude through the Druzhba pipeline. These must now substitute using seaborne deliveries to nearby ports. But a shortage of heavier grades, thanks to the Russian embargo and Opec+ production cuts, means the use of alternative lighter crudes puts pressure on light-product processing capacity and results in fewer heavy feedstocks for secondary conversion processes like vacuum distillation and cracking.

Most European refineries are mechanically unable to reap the full benefit of lighter crude for straight-run middle and light distillates, nor can they make full use of upgrading capacity they have installed.

European refining throughput has also been affected by a recent succession of unplanned unit outages. It is possible, although unconfirmed, that the challenges of pandemic lockdowns, followed by the economic pressure to maximise processing in 2022, have hindered rigorous maintenance work at some sites.


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29/05/24

Baghdad calls KRG, IOCs for meeting over oil exports

Baghdad calls KRG, IOCs for meeting over oil exports

Dubai, 29 May (Argus) — Iraq's oil ministry has called for a meeting with Iraqi Kurdistan ministry of natural resources (MNR) and the international oil companies operating in the Kurdish region "as soon as possible", to reach a deal on resuming north Iraq crude exports via Turkey's Mediterranean Ceyhan port. "The ministry of oil called… a meeting in Baghdad as soon as possible for the purpose of… reaching an agreement to accelerate the restart of production and resume the export of oil through the Turkish port of Ceyhan and according to the quantities specified in the budget law," Iraq's ministry of oil said. Northern Iraqi crude exports averaging around 470,000 b/d from Iraq's semi-autonomous Kurdistan region have been absent from the market since March 2023 when an international arbitration ruling said Turkey had breached a bilateral agreement with Baghdad by allowing Iraqi Kurdish crude to be exported without the federal government's consent. "We acknowledge the swift, public response from Iraq's Ministry of Oil and look forward to scheduling joint discussions to restore oil exports through the Iraq-Türkiye pipeline," the Association of the Petroleum Industry of Kurdistan (Apikur) said today. Apikur called on 27 May for a tripartite meeting between the association, the MNR and the oil ministry to discuss oil exports. It was responding to Iraqi media reports blaming it for the stalling of the talks, saying that no joint discussions between IOCs and representatives of the [Kurdistan Regional Government] KRG and the [government of Iraq] GoI have occurred since the start of January. "We definitely believe that GoI seems more serious about resolving the issues after PM [Mohammed Shia] al-Sudani's visit to US," a source previously told Argus . Compliance struggles Iraq's federal government is finding it difficult to strike a balance between repairing its rift with the KRG in Erbil and complying with its Opec+ quota commitments. It recently submitted a plan to Opec outlining how it will compensate for producing above quota in the first quarter. Opec and the wider Opec+ group are holding their next ministerial meetings on 2 June, to discuss the 2.2mn b/d voluntary production cuts that eight countries, led by Saudi Arabia and Russia, began implementing from the start of the year, and which are due to expire at the end of June. The meetings were due to take place in person, in Vienna. But an announcement last week that the meetings would be moved online could suggested that the group does not plan to take any radical action. Iraq's struggles with compliance will likely continue with the spectre of returning Kurdish crude looming large over Baghdad. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Ex-Pioneer chief asks FTC to reverse Exxon board ban


28/05/24
28/05/24

Ex-Pioneer chief asks FTC to reverse Exxon board ban

New York, 28 May (Argus) — The former chief executive officer of Pioneer Natural Resources accused of attempting to collude with Opec nations over oil production and prices, said he was wrongly targeted by the US anti-trust regulator. Scott Sheffield, the oil and gas industry veteran who founded Pioneer in 1997 and stepped down at the end of 2023 when ExxonMobil said it would acquire the company, said the Federal Trade Commission (FTC) was "wrong" to imply that he had ever "engaged in, promoted or even suggested any form of anti-competitive behavior." He wants the FTC to rescind a requirement that he not take a seat on ExxonMobil's board as a condition for approving the $64.5bn deal. The FTC "publicly and unjustifiably vilifying me" will have a "chilling" effect on the ability of other business leaders to address shareholder demands and advocate for their industries, Sheffield said in a statement. The regulator alleged that Sheffield had exchanged hundreds of text messages with Opec officials discussing crude pricing and output, and that he sought to align production across the Permian with the cartel. In a filing to the FTC Sheffield argues this is a false narrative, that he had "only sporadic communication with Opec officials" and that because many of them were government officials, not just corporate, the communications fell outside the scope of the Sherman Act, which sets the basis for most US anti-trust laws. The filing called on the commission to vacate the proposed consent order and dismiss the proceeding without further action. ExxonMobil had agreed, "without any admission of liability or findings of fact," to the proposed consent order that would keep Sheffield off the board, his lawyers said. And Sheffield had no opportunity to defend himself before the ExxonMobil board either. The FTC said today it stood by the allegations. "There is no question that Mr. Sheffield publicly urged Texas oil producers to limit production, all while having regular, private back-and-forth communications with senior OPEC representatives over a period of years," said spokesman Douglas Farrar. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Energy Transfer to buy WTG Midstream for $3.25bn


28/05/24
28/05/24

Energy Transfer to buy WTG Midstream for $3.25bn

New York, 28 May (Argus) — US midstream company Energy Transfer has agreed to buy WTG Midstream for $3.25bn, expanding its foothold in natural gas transportation in the Permian basin. The cash-and-stock acquisition includes eight gas processing plants with 1.3 Bcf/d (37mn m3/d) of capacity, as well as two plants under construction with 400mn cf/d of capacity. It also includes more than 6,000 miles of gas gathering lines and a 20pc interest in the 125,000 b/d BANGL natural gas liquids pipeline, which is expandable to over 300,000 b/d, the companies said. Energy Transfer agreed to buy privately held WTG for $2.45bn cash plus about $800mn of Energy Transfer stock. Energy Transfer earlier this month said it was "very optimistic" that its 1.5-2 Bcf/d Warrior natural gas pipeline would be next in line to be built out of west Texas after the planned 2.5 Bcf/d Matterhorn Express gas line enters service this year. Spot gas prices near the Permian have spent much of the last two months in negative territory as crude-focused production has flooded the market with associated gas, for which there is insufficient pipeline infrastructure to ship to more distant customers. The latest acquisition comes amid a frenzy of deal activity in the US oil and gas industry over the past year, especially in the Permian basin, as oil producers there look to secure high-quality inventory. Among North American midstream companies, Energy Transfer's rival Williams in December agreed to buy gas storage assets near the US Gulf coast for $1.95bn, and US gas producer EQT in March agreed to buy Mountain Valley Pipeline developer Equitrans Midstream in a $5.5bn deal . Energy Transfer and WTG expect the transaction to close in the third quarter of this year. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Norway sees record oil, gas investment in 2024


28/05/24
28/05/24

Norway sees record oil, gas investment in 2024

London, 28 May (Argus) — Norway's oil and gas sector is on course to hit record investment levels this year, boosted by rising costs and a flurry of projects that got off the ground in late 2022, according to the latest forecast from government data provider Statistics Norway. Total investment in oil and gas activity in the country, including pipeline transportation, is now projected to reach 247bn Norwegian kroner ($23.5bn) in 2024, up by 15pc from 2023 and 10pc higher than the previous record set in 2014. This year's investment growth is underpinned by higher spending on field development, thanks to a record number of new project approvals in 2022. "It is common for development projects to have higher investments in the second year of development than in the first," Statistics Norway said. There was a flurry of development plans submitted to Norwegian regulators towards the end of 2022 as operators rushed to beat the end of a temporary tax relief regime that was introduced in 2020 to help the oil and gas sector weather the effects of the Covid-19 pandemic. The investment forecast for next year is around Nkr3bn higher than the previous estimate for 2024 made in February. Higher spending estimates on producing fields and on exploration drove the upwards revision. Statistics Norway has also raised its forecast for oil and gas sector investment in 2025, to Nkr216bn from Nkr205bn. Next year's forecast could be revised higher still as companies confirm future spending plans, although Statistics Norway said it expects only a few new developments to be launched in the next 12 months. By James Keates Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Singapore launches commercial methanol bunkering


28/05/24
28/05/24

Singapore launches commercial methanol bunkering

Singapore, 28 May (Argus) — Singapore has launched commercial-scale methanol bunkering at the Tuas port, after a successful run of its first simultaneous methanol bunkering and cargo operation (Simops) on 27 May. Bunkering operations for shore-to-ship, ship-to-ship, and simultaneous cargo operations while bunkering methanol or alternative fuels like ammonia and hydrogen, will now be available at the Port of Singapore, the Maritime and Port Authority of Singapore (MPA) announced. This development comes after MPA's inaugural Simops of Singapore-based shipping firm X-Press Feeders' first dual-fuel engine container vessel. The Rotterdam-bound vessel was refuelled in Singapore with close to 300t of bio-methanol by MPA-licensed bunker supplier Global Energy Trading. The methanol bunkering occurred concurrently while vessel containers were restowed and loaded, and was supported by digitalisation of the bunkering process for near real-time visibility for various stakeholders. All crew members were trained to handle methanol as a marine fuel and respond to emergencies, given that safety remains a key consideration when bunkering alternative fuels. X-Press Feeders' vessel was the first of 14 dual-fuel vessels that it has ordered. The China-built vessel is equipped with a German-designed dual-fuel engine and has the flexibility to operate on green methanol. The firm plans to operate its green methanol-powered feeders mostly in the ports of Rotterdam and Antwerp-Bruges, where it has a fuel supply contract with chemical manufacturing firm OCI Global. "We look forward to working with other like-minded partners, including on the use of digital bunkering and mass flow meter solutions, to operationalise the delivery of the new marine fuels in Singapore," MPA chief executive Teo Eng Dih said. Singapore is steadily advancing towards its multi-fuel transition for maritime decarbonisation. Another ship-to-ship delivery of 1,340t of blended 20pc bio-methanol combined with 80pc of conventional methanol was completed on 24 May. The alternative fuel blend is reported to provide 31pc in CO2 equivalent savings on a tank-to-wake basis as compared to operating on conventional very-low sulphur fuel oil (VLSFO) for the same distance. The Argus -assessed price for VLSFO stood at $582.68/t delivered on board (dob) Singapore on 27 May, while prices for B24 were assessed at $720.50/t dob Singapore. By Cassia Teo Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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