Centrica Looks To Reopen Britain’s Biggest Natural Gas Facility

By City A.M - Jun 10, 2022

Centrica has filed a formal application to reopen Britain’s biggest natural gas storage site after the site was closed five years ago for “economic” reasons.

The Windsor-headquartered utility company has submitted a formal application to the North Sea energy regulator to reopen the Rough facility off the east coast of Yorkshire.

Centrica previously closed its gas storage facility in 2017, after the government refused to subsidise the cost of repairs to the North Sea facility.

The application comes as the government pushes forwards with plans to increase the UK’s gas storage capacity as a means of limiting the impacts of the energy crisis ahead of the coming winter.

The plans come as global natural gas prices have soared in recent months as demand has outstripped supply, due to rebounding global demand following Covid and Russia’s invasion of Ukraine.

The Rough facility consists of a depleted natural gas field, which lies 2.7km below the seabed, 18 miles off the coast of Yorkshire.

HOW'S THAT NATO NATION BUILDING COMING ALONG 

Libya Loses 1.1 Million Bpd As It Shuts Down Nearly All Its Oil Fields

By Irina Slav - Jun 13, 2022,

Libya is losing oil production at the rate of 1.1 million barrels daily, the country’s oil minister Mohammed Aoun has said, adding that almost all of the country’s oil fields were shut down.

Libya’s largest field, El Sharara, was shut down last month along with El Feel, with reports saying that it was groups affiliated with the eastern parliament that shut down oil production, among them the Libyan National Army of Halifa Khaftar.

According to Aoun, however, “it appears that the closure instructions were issued by an official body, the Petroleum Facilities Guard in the closure areas.”

Libya is currently in the throes of yet another flare-up of violence as two politicians vie for the post of Prime Minister: interim PM Abdul Hamid Dbeibah and eastern-affiliated Fathi Bashaga. According to reports, the groups shutting down fields and export terminals are affiliated with the Bashaga camp.

Bashaga has been sworn in as the new prime minister of the country, but Dbeibah has refused to step down.

According to the oil minister, the only functioning fields right now in Libya are Hamada and the Mellitah complex, with the Wafa field producing from time to time.

This means that Libya is producing almost no oil, putting further strain on an already undersupplied oil market. The North African country was already producing about 600,000 bpd in May due to the large field and export terminal closures, and now, based on Aoun’s comments, its output rate is close to about 100,000 bpd.The impact of such outages on international prices could have been significant were it not for the fact that outages in Libya are frequent and the latest news from China, which is mass-testing citizens in a Beijing district after an outbreak of Covid. The latter sparked concern about China’s demand prospect in case it decides to impose more lockdowns to stem the spread of the virus.

Oilprice.com

The UK Goes After Fuel Retailers Over Price Gouging

By Tsvetana Paraskova - Jun 13, 2022

• UK Competition and Markets Authority to look into the implementation of the government's fuel duty cut.
• 
  
• The UK government cut fuel duty by the equivalent of $0.062 per liter in March.
• 
  
• The average UK gasoline price last week was the equivalent of more than $8.60 per U.S. gallon.

The UK is launching an urgent review into the retail fuel market to see whether retailers have passed on the government's fuel duty cut from March to filling stations, UK Business and Energy Secretary Kwasi Kwarteng said this weekend.  

Kwarteng asked the Competition and Markets Authority to conduct an urgent review of the retail fuel market, as well as a longer-term investigation under the Enterprise Act, to explore whether the retail fuel market has adversely affected consumer interests.

"Fuel prices are always quick to go up but slow to come down - let's see why," Kwarteng said.

"The British people are rightly frustrated that the £5 billion package does not always appear to have been passed through to forecourt prices and that in some towns, prices remain higher than in similar, nearby towns," the energy secretary said in a letter to the Competition and Markets Authority dated June 11.

The investigation comes as the average price of filling up the tank of a typical family car last week exceeded triple digits in UK currency for the first time ever.

The UK government cut fuel duty by the equivalent of $0.062 per liter in March, but prices have jumped by a lot more since then.  

Wholesale gasoline costs in the UK have already jumped fivefold the amount of the fuel duty cut, Simon Williams, fuel spokesperson at the UK's motoring organization RAC, said last week.

Gasoline prices in the UK—where total taxes on gasoline account for an average 46% of the retail price, per RAC—saw last week the highest daily price jump in 17 years. The average UK gasoline price last week was the equivalent of more than $8.60 per U.S. gallon.

Records continued to be broken in the following days until the average cost of filling a 55-liter family car passed the £100 ($125) mark, the first time in history that drivers are paying triple digits for a full tank. 

 Oilprice.com

Natural Gas Prices Tank Again As Freeport LNG Remains Shut For Almost A Month

By Irina Slav - Jun 09, 2022

• Natural gas prices fell another 7.5% percent on Thursday morning.
• 
  
• Freeport LNG outage to lead to drop in exports to Europe and Asia
• .
• The cause of the explosion on Wednesday remains unclear.

Amid robust demand for U.S. LNG, one  biggest liquefaction facilities on the Gulf Coast, Freeport LNG, will be out of commission for at least three weeks following an explosion yesterday.

An explosion rocked the Freeport LNG liquefaction plant yesterday morning, with its cause as of yet unclear. An investigation is ongoing, but according to the operator of the facility, Freeport LNG, the facility will remain shut down for weeks. It accounts for a fifth of total U.S. liquefaction capacity.

The Freeport facility has three liquefaction trains, and a fourth is being constructed. Its current gas processing capacity is 2.1 billion cu ft daily. With the outage, the situation with U.S. LNG exports will become problematic, as evidenced by the gas market’s reaction to the news of the explosion.

Initially, prices fell as traders worried that the outage would reduce American LNG’s market share, per a Financial Times report from earlier today. Bloomberg noted that the fire means a lot of gas will remain stranded at the fields amid surging demand for gas overseas.

Yet prices on international LNG markets might react differently because the Freeport LNG outage effectively means there will be less natural gas for export, especially to energy-thirty Europe and Asia.

In Europe, gas prices have been on the decline for the past few days as an early start of summer reduced immediate demand. An ample supply of LNG has also contributed to the price trend. With the outage, this trend might at some point reverse.

Asian demand, however, is on a strong rise as buyers seek to build inventory for the winter season, Bloomberg reported this week, which is lending further upward support to prices.

“LNG prices remain well above where they normally are, even adjusting for higher crude oil prices,” Sanford C. Bernstein analysts said in a note, as quoted by Bloomberg. “We expect this to be a lull before what looks like a tough winter ahead for consumers.”

Oilprice.com

U.S. SPR Release Is Creating A Problem For Canada’s Heavy Crude Oil

By Julianne Geiger - Jun 09, 2022

• Heavy crude released from the U.S. SPR is competing with Canadian heavy crude.
• 
  
• WCS discount to WTI has increased to $20 per barrel.
• 
  
• Steep discount of WCS to WTI isn't bringing down crude prices in general.

The Strategic Petroleum Reserve release in the United States—a large one designed to release a million barrels per day from storage into the commercial markets—is creating a bit of a problem for the Canadian oil industry.

All crude oil grades aren’t equal, and a large share of what the SPR is releasing into the Gulf Coast area is heavy sour crude—a similar grade to the oil shipped down from Canada.

The heavy Mars and Poseidon grades—both hailing from the GoM area and both heavy grades—are getting lost in the sea of heavy crude flooding the market from the SPR. So is Western Canadian Select (WCS)—the Canadian crude oil that traverses pipelines from Hardisty, Alberta, to the U.S. Gulf Coast.

The WCS discount to the U.S. crude benchmark West Texas Intermediate (WTI) is now the steepest in years at $20 per barrel.

“It’s not great timing,” Rory Johnston, founder of the Commodity Context newsletter based in Toronto, told Reuters. “The vast majority of what’s coming out of the SPR is medium sour crude. It’s hitting directly at that marginal pricing point for WCS.”

Canada is no stranger to battling steep discounts—also referred to as wide spreads—compared to U.S. crude oil. For several years, their lack of pipeline capacity into the United States created a situation where all their pipelines were full, and the bottlenecking in this midstream segment created a pricing situation most unfavorable to Canada.

By 2020, Canada had increased its storage capacity and slacked crude oil production, which dragged up the price of WCS—and shrunk the gap between WCS and WTI. Compared to today’s steep $20 discount, June 2020 contract pricing for WCS was just $3.80 per barrel.

For those thinking that the steep discount to WTI means the SPR is working to bring down crude oil prices, that is not the case. As of Thursday morning, WCS was trading at $108.01—nearly double what it was trading this time last year.

By Julianne Geiger for Oilprice.com

 BP Quits Canada’s Oil Sands

By Tsvetana Paraskova - Jun 13, 2022

BP is divesting its last interest in Canada’s oil sands to Canadian firm Cenovus Energy as part of a portfolio reshaping that will see it buy into an offshore oil project in eastern Canada.

BP has agreed to sell its 50-percent interest in the Sunrise oil sands project in Alberta to Cenovus Energy, the UK supermajor said in a statement on Monday.

BP’s exit from Canada’s oil sands follows other divestments from one of the most carbon-intensive oil production types, such as the ones that Shell and Equinor have made in recent years, as international oil majors look to lower their emissions profile under intense pressure from investors and campaigners.

As part of its net-zero plan, BP has said its oil and gas production would decline by 40% by 2030 through active portfolio management.

After the oil sands exit, BP is not abandoning the Canadian oil sector and is shifting its focus to future potential offshore growth. As part of the deal with Cenovus, the UK major will buy the Canadian firm’s 35-percent interest in the undeveloped Bay du Nord project offshore Newfoundland and Labrador. The deal includes 467 million (C$600 million) in cash, a contingent payment with a maximum aggregate value of C$600 million expiring after two years, and Cenovus’s 35-percent position in Bay du Nord.

The project Bay du Nord is led by Norway’s Equinor and received in April this year a positive environmental assessment by the Government of Canada. The project has yet to take a final investment decision, with first oil expected to be produced in the late 2020s.

“This is an important step in our plans to create a more focused, resilient and competitive business in Canada. Bay du Nord will add sizeable acreage and a discovered resource to our existing portfolio offshore Newfoundland and Labrador,” said Starlee Sykes, bp senior vice president, Gulf of Mexico & Canada. 

Currently, BP holds an interest in six exploration licenses in the offshore Eastern Newfoundland Region.

By Tsvetana Paraskova for Oilprice.com

NEWFOUNDLAND

L’Anse aux Meadows Reduced to One Lane for Oil Spill Clean-Up

Jun 11, 2022 | 2:00 PM

L’Anse aux Meadows Road near Gull Pond is down to one lane due to an oil spill.

St. Anthony RCMP say that clean-up efforts continue to deal with a massive amount of fuel that spilled when an oil tanker tipped over Friday.

It is unknown when the process will be completed.

ONTARIO

Sheen from oil spill starting to dissipate: Ministry of the Environment

Echo Bay's mayor says calling a state of emergency was necessary as the community faces water shortages due to the spill

Kenneth Armstrong
06/13/2022

Shore of the Lake George Marsh at the mouth of the Echo River.

Carol Martin/SooToday

Echo Bay’s mayor says Monday’s state of emergency called in the wake of last week’s oil spill on the St. Marys River is necessary as the small community is running out of clean drinking water.

The community’s water treatment plant was shut down soon after the spill was discovered, said Mayor Lynn Watson.

“We were told to shut down our systems when they identified the spill in the river,” said Watson. “Of course, we are unable to start it up until we get assurances from the Ministry of the Environment and the Algoma health unit.”

He said nothing like it has happened in his 34 years as mayor of the community just east of Sault Ste. Marie.

In the meantime, Echo Bay is warehousing clean water in its iconic water tower and a holding facility at its water treatment plant. Those storage methods can hold about four days’ worth of water at normal usage.

“We have asked our residents to cut back on the use of water, but even that — the necessities of life require you to use water — so we are just making sure by bringing in water that we have a clean supply of fresh water for everyone,” said Wheeler.

The Environmental Centre in Echo Bay treats water for about 600 residents in the town.

Currently, that clean water is being brought in from nearby Bruce Mines, and Wheeler said the community has been in talks with Sault Ste. Marie to bring in more.

Sault Ste. Marie's drinking water was not affected by the spill because its intake is near Gros Cap, upriver from where the incident occurred.

“In case this goes on because there is no light at the end of the tunnel as of yet, we have to keep bringing water in,” Watson said. “The longer this goes on, the more cost there is. Our little municipality really can’t afford the additional costs we hadn’t counted on.”

“The sooner we can get the okay to start our system back up, the better it will be for all of us,” he added. “We shut it down very shortly after they identified the spill, so we haven’t had any contaminants in our system, but we can’t turn it back on until they make sure there are no contaminants out where our water intake is.”

By declaring a state of emergency, Watson hopes to be able to recoup some of those costs from the provincial government.

“By declaring a state of emergency, it opens the doors for provincial funding and assistance if this goes on for an extended period of time or if we need to bring in more trucks to haul water,” he said.

On Monday, Ministry of the Environment, Conservation and Parks spokesperson Gary Wheeler told SooToday that the visible oil on the river is beginning to disperse.

”As of June 13, there are no reports of any impacts to fish or birds from the oil spill,” said Wheeler.

Algoma Steel is currently engaged in daily monitoring to assess the clean-up.

”In addition to implementing clean-up and monitoring plans, the ministry is requiring that Algoma Steel prepare and submit a report that outlines the cause of the spill and preventative measures to prevent a re-occurrence,” said Wheeler.