Exxon Launches New Unit At Beaumont Refinery

By Charles Kennedy - Apr 06, 2023

Exxon this week started a new crude oil distillation unit at its Beaumont refinery, boosting its daily capacity to almost 620,000 bpd.

This makes the Beaumont facility the second-largest refinery in the United States after Aramco’s Motiva, Reuters reported.

The new unit itself will have a capacity of 250,000 barrels of crude daily and will process light crude from the Permian.

A refinery expansion is a rarity in the United States where the trend in recent years has been to close refineries or convert them to biofuel production plants.

Since 2020, the United States’ total refining capacity has declined by as much as 1 million barrels daily due to seven refinery shutdowns, including facilities operated by Philips 66, Shell, and Marathon Petroleum.

This has crimped fuel production and contributed to a major draw in U.S. distillate stocks over the past year or so. Now, refining capacity is due for deeper cuts—luckily only temporarily.

Last year, as oil prices soared and fuel prices followed, many refineries did not shut down for regular maintenance, eager to take advantage of higher margins. This year, however, maintenance is a must, so there will be twice as many seasonal refinery closures in the U.S. as usual, Reuters reported in January.

Calculations showed that at least 15 refineries would have to shut down for between two and 11 weeks over the first five months of the year.

The expansion of the Exxon refinery in Beaumont will expand U.S. refining capacity considerably but this will also be only temporary. Later in the year, Lyondell Basell will close a refinery in Houston, basically offsetting the Exxon expansion. The Lyondell facility has a capacity of over 260,000 bpd.

Meanwhile, outside the U.S., some 2 million bpd in new refining capacity is due to come on stream this year.

Kurdistan Oil Flows Yet To Resume After Export Deal

By Tsvetana Paraskova - Apr 06, 2023

Most of Kurdistan’s large oilfields remain shut in as exports from the semi-autonomous region of Iraq to Turkey and the Turkish port of Ceyhan have yet to resume following the Iraq-Kurdistan deal on restarting oil exports, Reuters reported on Thursday, quoting anonymous sources with knowledge of the matter.

Kurdistan and the federal government of Iraq reached an agreement earlier this week to resume exports via an Iraq-Turkey pipeline and the port of Ceyhan on the Mediterranean.

Oil flows from Kurdistan were stopped at the end of March, forcing companies to either curtail or suspend production because of limited capacity at storage tanks.

Kurdistan’s crude oil exports – around 400,000 bpd shipped through an Iraqi-Turkey pipeline to Ceyhan and then on tankers to the international markets – were halted in late March by the federal government of Iraq.

A few days earlier, the International Chamber of Commerce ruled in favor of Iraq against Turkey in a dispute over crude flows from Kurdistan. Iraq argued that Turkey shouldn’t allow Kurdish oil exports via the Iraq-Turkey pipeline and Ceyhan without approval from the federal government of Iraq.

Now that an agreement between Iraq and Kurdistan is in place for the resumption of exports, Iraq is awaiting a response from Turkey, according to one of Reuters’ sources.

Pipeline operators have not yet received instructions to resume flows, another source told Reuters.

London-listed Gulf Keystone Petroleum, Norway-based DNO ASA, and Canada-based Forza Petroleum suspended output at their operated fields in Kurdistan early last week and have yet to announce the resumption of production.

“It is unfortunate it has come to this given the likely impact of a continuing supply disruption on oil prices and at a fragile time in global financial markets,” DNO’s Executive Chairman Bijan Mossavar-Rahmani said on March 29 when the company announced it had started an orderly shutdown of its operated oil fields in Kurdistan.

By Tsvetana Paraskova for Oilprice.com

Major U.S. Utilities Consider Selling Natural Gas Distribution Networks

By Charles Kennedy - Apr 06, 2023

As Democratic lawmakers and governors ramp up efforts to ban gas hookups in new buildings, two large U.S. utilities are considering selling part of their gas pipeline networks, The Wall Street Journal reported on Thursday, quoting sources with knowledge of the plans.

Dominion Energy and National Grid plc are deliberating potential divestments of part of their gas transmission systems as the “gas stove wars” have intensified and towns and cities across the U.S. are considering banning gas hookups for home appliances in new buildings.   

The bans, and the potential bans, would refer to new homes only, and will not remove existing gas appliances, yet the debate has become fierce among politicians and lawmakers.

To minimize possible losses from such bans, Dominion Energy and National Grid are exploring potential sales of gas pipeline networks.

Dominion Energy is considering divesting its gas distribution units in North Carolina, Ohio, and parts of the Western United States, with a total value of those assets at as much as $13 billion, some of the Journal’s sources said.

It is unlikely, though, that all the assets will be sold as a whole package, the WSJ notes. 

National Grid, for its part, is deliberating a possible sale of part of its gas distribution network in the Northeast, with one option being divesting a minority stake, the Journal’s sources said.

The quest of many U.S. towns and cities to ensure that all newly built homes will be all-electric has resulted in a fierce battle in dozens of states, many of which have moved to preemptively prohibit their towns from banning natural gas in new homes.         

In California, the city of Berkeley became the first to enact a ban on new natural gas hookups in new buildings back in 2019. Two years later, Seattle passed an ordinance to ban natural gas for space heating in new construction of new commercial and apartment buildings taller than three stories, or for use in replacement heating systems in older buildings.

By Charles Kennedy for Oilprice.com

It Will Be Difficult To Determine Who Sabotaged The Nord Stream Pipelines

By Charles Kennedy - Apr 06, 2023

The investigation into the Nord Stream sabotage considers the involvement of a state actor as the “absolute main scenario,” but it will be difficult to determine who did it, Mats Ljungqvist, the prosecutor leading the Swedish investigation, told Reuters on Thursday.

“The people who did this have probably been aware that they would leave clues behind and probably took care so that the evidence would not point in one direction, but in several directions,” Ljungqvist said.

It is difficult to clearly point the finger at one actor, he added. 

Gas leaks in each of the Nord Stream 1 and 2 pipelines were discovered at the end of September 2022 from the infrastructure just outside Swedish and Danish territorial waters in the Baltic Sea.

Traces of explosives were found near the sites of the explosions, Sweden said in November, noting that the incident is “gross sabotage.”

Sweden, Denmark, and Germany are also jointly investigating the incident with the gas pipelines built to carry Russian gas to Germany via the Baltic Sea.

Nord Stream 2 was never put into operation after Germany axed the certification process following the Russian invasion of Ukraine. Russia, for its part, shut down Nord Stream 1 indefinitely in early September, claiming an inability to repair gas turbines because of the Western sanctions. 

Sweden’s refusal to share information about the sabotage of Nord Stream is “puzzling,” and withholding the results of the investigation means that “Swedish authorities are hiding something,” Russia’s Foreign Ministry spokeswoman Maria Zakharova said in January.

More recently, a senior Russian diplomat said last week that Russia could demand compensation for damages over the sabotaged Nord Stream gas pipelines.

“We do not rule out raising the issue of compensation for damages as a result of the explosion of the Nord Stream gas pipelines,” Dmitry Birichevsky, Head of the Economic Cooperation Department at the Russian Foreign Ministry, was quoted as saying by Russian media.

The official did not specify with whom Russia would seek compensation.

By Charles Kennedy for Oilprice.com

CAPITAL STRIKE

Harbour Energy Slashes Hundreds Of Jobs, Blames UK Windfall Tax

By City A.M - Apr 06, 2023

The UK’s largest oil and gas producer put the blame for its decision at the hands of the government, which has hiked the Energy Profits Levy to 35 percent.

On top of the 40 percent special rate for corporation tax, this brings overall levies on producers to 75 percent.

It is now expected to run until 2028 – a further three years on original plans.

The company has been undertaking a review of its operations since January, after warning that it was re-assessing its future activity in the UK.

It later confirmed plans to cut jobs last month during its full-year results, when the company revealed its £2.1bn profits had been effectively wiped out through taxes, including a £1.3bn charge from the windfall tax.

Its net profits eventually totaled just £7m.

The company revealed it plans to pivot operations from the UK, which makes up 85 percent of its revenues.

It is now looking to bolster projects in Mexico and Indonesia, and pulled out of the licensing round for new oil and gas projects in the UK last year.

The vast majority of its 1,200 UK onshore staff are based in Aberdeen, Scotland, and Harbour explained that it was working hard to mitigate the impact of the workforce reduction.

A Harbour spokesperson said: “We are working hard to mitigate the impact of this reduction, by for example, a recruitment freeze and opening a voluntary redundancy scheme. These figures do not include UK-based corporate and international roles, which are still being reviewed.

“Nor do they include our offshore organisation, where we expect the impact to be significantly lower. We are very conscious of the impact of this news on our people, and we are carrying out the review fairly and with consideration for everyone who is affected.”

Harbour recently received approval to develop the Talbot oil field in the North Sea and is also involved in two carbon capture projects shortlisted for Track 2 funding later this decade.

The company has its own CCUS vehicle, Viking CCS – as it plans to repurpose its wider portfolio of gas fields.

Earlier this week, it told City A.M. the government was mistaken to not bring a price floor into the windfall tax on Green Day last week – which would have kicked in when oil prices returned to conventional trading levels.

“Industry has repeatedly asked government to introduce a floor price mechanism into the levy to ensure the tax is appropriately targeted at realised windfall profits and ceases to apply when oil and gas prices fall,” a spokesperson for Harbour told City A.M.

By CityAM

What Fast-Growing Oil Demand In Asia Means For The Rest Of The World

By Irina Slav - Apr 03, 2023

• India is being seen by some as the country that could replace China as the single most important driver of global oil demand.
• 
  
• This year, China is seen to account for about half of global oil demand growth.
• 
  
• OPEC is also quite optimistic about India’s demand, expecting the subcontinent to become the leader in oil demand growth in less than 20 years and remain the leader until at least 2045

When earlier this year, prices slumped following the series of bank collapses in the United States, their subsequent recovery was attributed to one factor: China.

The world’s largest oil and gas importer and Asia’s biggest economy, China, has become a staple in analysts’ oil and gas price forecasts. It is China that traders look to when they make their decisions on the oil market. It is also China that producers look to when they make their plans for the future.

And China is not alone. India has grown to be a factor to reckon with in oil and gas markets as well. With its more than 80-percent dependence on imports of crude to satisfy its domestic demand and a growing population and economy, India is being seen by some as the country that could replace China as the single most important driver of global oil demand in the not-too-distant future.

This year, China is seen to account for about half of global oil demand growth, taking it to a record high of almost 102 million barrels daily. That was according to the January oil market report by the International Energy Agency. In its two subsequent reports, the IEA maintained its stance that China’s post-Covid reopening will drive global oil demand significantly higher.

OPEC is also forecasting strong demand growth in China, revising it in its latest Monthly Oil Market Report to over 700,000 bpd from 590,000 bpd in the previous edition of the report.

But OPEC is also quite optimistic about India’s demand, expecting the subcontinent to become the leader in oil demand growth in less than 20 years and remain the leader until at least 2045.

Yet Asia is not just China and India. It is a lot of other countries, too, and their demand for oil and gas is also growing.

Indonesia’s demand for gasoline, for instance, is this year set to beat the record that it booked last year. The country is the largest importer of gasoline in Asia, with 2023 demand rates seen at 670,000 barrels daily.

Malaysia’s Petronas recently boasted of a successful bid round last year and scheduled the next one after awarding licenses for the exploration of nine oil and gas blocks. The country also reported a twofold increase in oil and gas discoveries last year.

Gas demand is also on the rise in Asia, despite last year’s surge in prices that made a lot of gas importers in the region reconsider their intentions of switching from coal to gas.

According to the Gas Exporting Countries Forum, demand for the fuel in ASEAN is set to more than double by 2050 from 2021 levels to 350 billion cu m as the shift away from coal continues despite the recent hiccup. This means that by 2050, the share of natural gas in the region is seen rising to 24 percent, replacing coal. The GECF cited Thailand, Malaysia, and Indonesia as major drivers of the projected demand growth.

Unsurprisingly, given current and expected oil and gas demand growth rates, China, India, and the rest of Asia are the focus of attention of both OPEC and other oil and gas producers. While demand appears to remain quite resilient in other parts of the world despite their efforts to reduce dependence on fossil fuels, Asia is undoubtedly the region everyone in the industry is watching.

It is also the region that will be mainly responsible for the continued tightening of global oil and gas supply, precisely because of these projected demand trends. Regions such as Europe and the U.S. will share this responsibility as they display demand resilience, but Asia will be the leading factor.

The industry has been warning about the tightening supply of oil and—with less certainty—gas for quite a long time now. Executives such as Aramco’s chief executive Amin Nasser, Exxon’s Darren Woods, and Shell’s Ben van Beurden have repeatedly noted that we are facing higher oil prices in the future because of insufficient supply.

However, the developed world appears to have been too focused on its quest to reduce carbon dioxide emissions to pay attention to which way the rest of the world was going. And the rest of the world is going in the direction of growing populations with growing energy needs. It also appears to feature a lot more pragmatic governments that prioritize access to energy over the type of energy.

What all this means is that demand for oil and gas appears set to be rising faster than supply growth. Normally, this would lead to higher prices, which would, in turn, dampen demand, eventually pushing prices lower. But that was when investment in new supply was adequate to demand patterns. Now, things may turn out very differently, with the higher-for-longer price scenario looking like the most likely one.

By Irina Slav for Oilprice.com