Japan Asks Mitsui, Mitsubishi To Stay On In Crucial Sakhalin-2 Project

By Irina Slav - Aug 05, 2022, 

The Japanese industry ministry has asked Mitsui and Mitsubishi to "think positively" about their participation in the Russian Sakhalin-2 oil and gas project after the Russian government announced it would boost state ownership.

Reuters reports that industry minister Koichi Hagiuda today asked the two companies, which are minority shareholders in Sakhalin-2, to consider staying on, saying he was due to discuss the matter with a Mitsubishi executive in the coming days.

"The public and private sectors will work together to protect the interests of Japanese companies and ensure a stable supply of LNG," Hagiuda said.

A day earlier, Hagiuda told media that "The Sakhalin-2 project is extremely important for stable energy supply to Japan, and we will basically continue to maintain the stakes."

Japan is one of the biggest LNG importers in the world and gets about a tenth of the LNG it consumes from Russia.

Earlier this year, the Japanese industry minister said that the Sakhalin-1 and Sakhalin-2 projects "are essentially important for energy security because the projects allow Japan to procure supplies below the market price, especially amid current high energy prices."

In early July, Moscow said it would set up a new state-owned company to take over the assets and debt of the Sakhalin-2 consortium, with Gazprom to get a little over 50 percent of the new entity.

Shell, the third foreign minority shareholder in the project, has already announced it would be leaving it and is looking for buyers. The Japanese shareholders, however, were in no rush to leave.

"We continue to work on finding an acceptable arrangement that enables us to withdraw from our share in Sakhalin Energy in line with applicable legal requirements and project agreements," the supermajor said earlier this week, per Reuters.

Under the terms of a new decree announced earlier this month, Mitsui and Mitsubishi could claim their stakes in the new company within the next month.

The two companies said today they will cooperate with the Japanese government and with their business partners "to decide on whether or not they would join the new entity," Reuters reported.

By Irina Slav for Oilprice.com

PIPELINE LEAK

Gulf Of Mexico Pipelines Could Restart Today

By Charles Kennedy - Aug 12, 2022

Gulf of Mexico offshore oil producers are working to restart output after damages to a pipeline halted operations at seven platforms, with Reuters reporting that the pipeline could be replaced by the end of today.

The Mars and Amberjack pipelines in the Gulf of Mexico that had shuttered earlier in the week could be restarted today, a Louisiana port official Chett Chiasson told Reuters on Friday.

The shutdown of the Mars and Amberjack pipelines triggered platform shutdowns on Thursday from Shell, Equinor, and Chevron across seven platforms following a leak in the Fourchon booster station.  An estimated 600,000 bpd of production has been halted, according to Reuters sources.

Shell halted production at three offshore platforms in the Gulf of Mexico on Thursday following damage to a pipeline, shuttering Mars, Ursa and Olympus with a combined capacity of 410,000 barrels per day.

Early on Friday, Chevron followed suit, shuttering three of its Gulf platforms with combined capacities of around 134,000 boepd.

Chevron said on Friday that it was in the process of restarting those platforms.

On Thursday, announcing the shutdown, Shell had indicated that the repairs would likely be completed on Friday, though no estimate was given for the resumption of production at the time. 

The shutdown potentially adds to the tight situation in the crude oil and refined products markets in the United States, which has been forced to tap into its Strategic Petroleum Reserve to bring prices down at the gas pumps.

The United States is witnessing crude oil inventories that are 5% below the five-year average, with production now 900,000 bpd below its peak prior to the COVID pandemic.

Crude oil prices were trading down 1.56% as of 1:25 EST on Friday.

By Charles Kennedy for Oilprice.com

Gulf Of Mexico Oil Outages Balloon Beyond Shell

By Julianne Geiger - Aug 12, 2022, 

At least two other oil majors shuttered their Gulf of Mexico platforms on Friday following a leak in the Fourchon booster station, shutting down the flow of crude through the Amberjack Pipelines.

On Thursday, Shell halted production at its Mars, Ursa, and Olympus platforms, which can produce 410,000 bpd. Shell did not provide an estimate for when the platforms would resume production.

On Friday, Shell was joined by Chevron, which shuttered Jack/St. Malo (57,000 boepd), Tahiti, and Bigfoot (75,000 bpd) platforms, which also feed into the Amberjack lines. Equinor joined Shell and Chevron on Friday, shuttering its Titan platform—a minor platform in the Gulf of Mexico that typically produces just 2,000 boepd.

The Fourchon booster station, which leaked two barrels of oil before being shut down, is expected to be repaired later today. It is not yet clear when platforms will resume production.

The shutdown, which now spans seven platforms in the Gulf of Mexico, comes at a time when the United States is battling high retail gasoline prices and tight crude oil and refined products markets. Already the United States has tapped into its Strategic Petroleum Reserve to the tune of 800,000 and 1 million barrels per day to alleviate the prices at the pump.

Crude oil inventories in the United States remain 5% below the five-year average. U.S. crude oil production currently sits at 12.2 million barrels per day, 900,000 bpd shy of its pre-Covid peak. 

Crude oil prices were trading down on Friday, but still up week over week—a reality that could arrest the pattern of falling retail gasoline prices in the United States. The Biden administration has lobbied OPEC and Saudi Arabia specifically to raise oil production in the runup to midterm elections.

By Julianne Geiger for Oilprice.com

Shell Halts Oil Output At Three Gulf Of Mexico Platforms

By Julianne Geiger - Aug 11, 2022, 

Shell has halted production at three of its deepwater platforms in the Gulf of Mexico, Shell said in a statement to Reuters on Thursday.

Shell has halted production at its Mars, Ursa, and Olympus platforms, which combined can produce 410,000 barrels of Mars sour crude oil per day, after a leak shut in the Mars and Amberjack Pipelines that connect to the platforms. Shell has not provided a timetable for restart, although the company said it was evaluating "alternative flow paths" to bring the oil to shore through other pipeline routes.

"Shell is coordinating with local authorities and mobilizing personnel and equipment to assess the situation," Shell said in a statement.

The leak was detected at the Fourchon booster station, which increases the pressure and the flow of crude on its way to the Clovelly Dome Storage Terminal in LOOP. The Clovelly Dome terminal stores crude oil in underground salt caverns before heading to a refinery. The terminal is capable of holding 40 million barrels.

The United States is already releasing between 800,000 and 1 million barrels of crude oil per day from its Strategic Petroleum Reserves in an attempt to alleviate the tight market and bring down prices. Crude oil inventories in the United States are 5% below the five-year average, with crude oil production in the United States failing to return to pre-Covid levels.

Current crude oil production in the United States is at 12.2 million barrels per day, compared to the pre-Covid peak of 13.1 million bpd reached in March 2020.

By Julianne Geiger for Oilprice.com

TWOFER BIDEN

Falling Gasoline Prices Keep Inflation In Check

By Charles Kennedy - Aug 10, 2022,

The U.S. Consumer Price Index (CPI) saw no real change in July, suggesting that inflation is easing as a result of falling gasoline prices, according to the latest data from the Bureau of Labor Statistics released Wednesday. 

Overall, the CPI that tracks gasoline prices dropped by 7.7%, while other indexes, including food, saw increases. Used vehicles and airline tickets saw decreases along with gasoline. 

It could mean we’ve already suffered peak inflation, with inflation slowing as a direct result of falling gasoline prices. 

Consumer prices saw a 8.5% increase in July, year-on-year, but down from the 9.1% increase year-on-year recorded in June. June’s figures represented a forty-year high. 

Wells Fargo predicts that inflation in the U.S. could fall to 5% over the next few months due to steep drops in energy prices. 

"We would not be surprised to see the headline 12-month consumer price inflation reading post a sudden, large drop, maybe from 9.1% for June to 5% or 6% in the next two or three months," the bank's investment institute team said in a note to clients Monday, as reported by MSN. 

Gasoline prices in the United States have fallen for 57 consecutive days, reaching down to a national average per gallon of $4.010 on Wednesday, according to AAA. The month-ago average price per gallon was $4.684. On Tuesday, at locations tracked by GasBuddy, the average price per gallon was $3.99. 

The CPI numbers follow a promising jobs report last week. 

President Joe Biden on Wednesday said the zero rise in inflation from June to July “underscores the kind of economy we’ve been building”. Speaking at the White House, Biden said there were “some signs” that inflation is beginning to “moderate”. 

By Charles Kennedy for Oilprice.com

French Nuclear Giant Sues Government For $8 Billion

By Charles Hugh Smith - Aug 10, 2022, 

French nuclear giant EDF, forced to sell power to competitors below market value, is now suing the French government for over $8 billion in compensation. 

EDF says it has lost 8.3 billion euros (nearly $8.6 billion at today’s exchange rate) as of the date of filing the claim against the government, and anticipates losing more than 15 billion euros for the full year.

The French power company, which is already 84% owned by the government and is in the process of being fully nationalized, is forced to sell electricity it produces to rival power plants to increase competition as EDF holds a monopoly. 

The initial government decree states that suppliers can purchase up to 25% of EDF’s annual nuclear output between July 2011 and December 2025 at a fixed, discounted price of about $47 per MWh. However, in January this year, the government implemented a larger cap at one-fifth in order to reduce consumer energy bills for this year. Then, in March, the government issued additional decrees, further increasing the volume and reducing the price for EDF. 

The losses cited by EDF stem from this time period. 

In June, EDF reported earnings showing its largest ever half-year loss. EDF lost 5.3 billion euros in the first half of this year, compared to 4.2 billion euros in profit for the same period of 2021. 

EDF’s power stations account for 70-75% of France’s power consumption, and the government is keen on nationalizing the giant in order to ensure energy supplies amid a looming crisis that began when Russia invaded Ukraine. 

Losses are mounting for EDF in other areas, as well. 

Last week, EDF was forced to slash output at nuclear power stations on two rivers as a heatwave spreading across Europe has rendered the rivers too hot to cool the units. 

By Charles Kennedy for Oilprice.com

Alberta Oil Output Hits Record High

By Irina Slav - Aug 11, 2022

Crude oil production in Alberta reached a record high in the first half of the year, at 3.6 million bpd, which was 100,000 bpd higher than the average output for the first half of 2021.

CBC noted in a report on the news that production from oil sands accounted for some 85 percent of the total output during the period, according to ATB Financial. Yet the financial services provider noted that while most of the total came from the oil sands, production from conventional resources increased more substantially.

Oil sands accounted for 24,000 bpd in the overall output increase, while conventional oil accounted for 62,000 bpd.

"You can incrementally respond quicker because it's about taking a rig, putting it out there and drilling it," market analyst Kevin Birn said, as quoted by CBC. He said he expected production to rise even further in the second half of the year.

Over the longer term, however, the outlook is more vague, not least because of government efforts to enforce a cap on emissions from the industry, which accounts for the biggest part of Canada's total emissions.

Ottawa is planning to make the oil and gas industry reduce its emissions by 40 percent by 2030, with the most recent tactics discussed involving a cap-and-trade system or a new carbon pricing system.

Meanwhile, Rystad Energy has forecast that Alberta could turn into Canada's biggest renewable energy producer, thanks to its unregulated market, natural resource wealth, and a skilled energy workforce.

"Canada is no stranger to renewables, but Alberta has been a minor player until now. That's about to change. The region's unregulated power market, minimal regulatory hurdles and abundant natural resources make it an attractive prospect for developers, in addition to an existing workforce of industry professionals increasingly eager to adapt to green energy. Other provinces may want to follow suit if they have ambitions to attract lucrative green investments," said Rystad analyst Geoff Hebertson.

Former UK PM Calls For Energy Utility Nationalization

Aug 11, 2022, 

A former British Prime Minister has called for the nationalization of energy utilities that cannot offer their customers lower electricity prices.

In an op-ed for The Guardian, Gordon Brown wrote that the energy cap on electricity bills needs to be removed before it is updated later this month, and energy firms’ “windfall profits and bonuses have to be properly taxed now before the money flees the country.”

The “government should pause any further increase in the cap; assess the actual costs of the energy supplies being sold to consumers by the major companies; and, after reviewing the profit margins, and examining how to make standing charges and social tariffs more progressive, negotiate separate company agreements to keep prices down,” Brown argued.

If any energy companies failed to comply with these requirements, he continued, they had to be nationalized, as a last resort, “until the crisis is over”.

A growing number of Britons are facing energy poverty as the price of electricity continues climbing. CNN reported earlier this week that annual bills could before long hit the equivalent of $5,000, or over $400 per month.

This would be a threefold increase in prices from the start of this year, which would push a third of the UK’s population into energy poverty. That’s about 10.5 million households.

Meanwhile, British energy companies are being pressured into using their windfall profits from higher electricity prices to invest in more low-carbon energy, the Financial Times reported.

Indeed, Chancellor Nadhim Zahawi threatened to level more windfall taxes on the energy sector if companies do not pour more money into wind and solar instead of using it to return cash to investors.

“The government continues to evaluate the extraordinary profits seen in certain parts of the electricity generation sector and the appropriate and proportionate steps to take,” a government spokesman said earlier this week.

By Irina Slav for Oilprice.com