11th October 2019
Oil Drilling Activity
Onshore US drilling activity increased by 1 with a total active count of 831 rigs; those targeting oil up 2, with the total at 712. Across the three major unconventional oil basins, the oil-rig count was up 6, with Permian up 6, Williston and Eagle Ford flat.
US domestic crude output increased 200,000 barrels per day; crude production reached a new peak at 12.6 million barrels per day. This week’s domestic crude oil production estimate incorporates a re-benchmarking that affected estimated volumes by less than 69,000 barrels per day, which is about 0.7% of this week’s estimated production total.
Crude stockpiles increased for the fourth time in five weeks; inventories gained 2.9 million barrels compared with expectations for a 2.4 million-barrel gain. A drop in refining activity, to the lowest level since mid-February, has yielded a build to oil inventories.
Carbon Management – Birth of a new type of energy technology company
An Energy Transition has been born from its parents of Sustainability and Technology. It is not the first energy transition, and it will not be the last; but it will be the most dramatic so far given the scale and demands of modern society. As you read this, many industry leaders and innovators are shaping our energy future for the better.
The all-new Baker Hughes is at the forefront of this evolution. As a new type of company, a global energy technology company with 65,000 staff and operations in over 120 countries, Baker Hughes has taken on the challenge of developing and deploying the technologies that will take energy forward. With the goal of being net-zero carbon by 2050, helping its customers reduce their carbon footprints, and growing a new energy portfolio, the new company logo says it all - green, forward-looking, and infinite.
As a first mover from the oil and gas equipment and service industry, Baker Hughes has embraced Carbon Management with efforts in energy efficiency, facility consolidations, logistics optimizations, and an increasing use of renewable and alternative energy in its operations. This has led to a successful reduction in its carbon footprint of 26% since 2012. Delivering this impact at home provides the company a credible platform to help its clients achieve their own reductions.
Baker Hughes has equipment and services that deliver energy efficiency, eliminate oil and gas venting, flaring, and fugitive emissions, integrate renewable and alternative energy sources, and capture and store CO2 emissions for its customers. These equipment and services create a robust suite of low carbon solutions, many of which are commercially and economically deployable today without policy incentives. With impactful and measurable efforts across the full stream of oil and gas production and supply, large-scale energy production can be responsibly and sustainably delivered.
The Carbon Management practice at Gaffney, Cline & Associates provides advice and support to help Baker Hughes to take Energy Forward. The climate clock is ticking, and GCA can help define and deliver your Energy Transition strategy and plans. We listen to your Energy Transition problems, and provide confidential and impartial advice to help find real and practical solutions.
Natural Gas - LNG from A to B must go via the sea!
A lot of media coverage in recent months has been placed on the “next wave” of LNG exports and LNG imports. However, real splashes are being made in the marine sector, which of course is the essential segment of the LNG value chain that connects sellers and buyers. As a guide, the shipping costs involved may account for anywhere between 5% and 20% of the delivered LNG price.
The shipping sector has gone through a tough few years with sustained periods of low charter rates, meaning that some ship owners have barely been able to break even. However, the rise in LNG trade has just seen charter rates for modern vessel LNG carrier rates smash through $100k/day. Whilst this may not be sustained over a long period, one thing is for sure, is that there is an increasing amount of creativity being applied in this space to capture new opportunities.
With the rise in prominence of extinction rebellion, climate change and the energy transition, there are several factors now at play in the marine sector that will enable LNG to play a greater role to ensure gas is an important transition fuel to a lower carbon world:
• There are now less than three months until the official imposing of IMO 2020 regulations, lowering the current global limit for Sulphur content of marine fuels from 3.5% to 0.5% as of January 1, 2020. LNG as a bunker fuel is expected to rise in prominence, which could help to all but eliminate emissions of SOx and particles, reduce NOx emissions by 85-90% and significantly reduce GHG emissions.
• The three years that have passed since the opening of the expanded Panama Canal in mid-2016, have seen rising volumes of LNG transiting the passage. It has just been reported that Panama Canal LNG tonnage is up 38% year on year, cutting not only journey times, but also fuel and energy use.
• On the flipside of this, changes in climate and resulting milder ice and ocean conditions around the Northern Sea route have opened it up to shipping for a longer period during the year, as well as potentially opening up new frontiers for large-scale gas exploration.
• Smaller and smaller demand centers are increasingly looking to substitute gas for coal, HFO and diesel. With the emergence of these new markets for LNG, smaller LNG tankers (capacities under 30,000 cubic meters) are starting to take hold, with new technologies emerging to facilitate lower-cost, mass-produced solutions that are very different from more traditional vessels, which are 5-7 times their capacity.
Much is also changing on the technology, innovation and market side of the marine segment as well:
• FLNG projects in operation have risen with Malaysia’s PFLNG, Cameroon’s Hilli Episeyo FLNG, Australia’s Prelude (in many ways a different beast), and Argentina’s Tango FLNG all building up track records which will help to potentially delineate risks in the next generation of FLNG projects designed to mop up gas from remote or stranded gas fields.
• In terms of ownership of LNG Vessels, according to reports by Vessel Value, Greece ($19.5bn) and Japan ($14.3bn) lead the way, followed closely by rapidly expanding China ($5.9bn) and the historically strong South Koreans ($3.9bn). From both a country perspective, and a new player perspective, the dynamics are changing.
• Another example of this is in FSRU fleet ownership space, which has seen a stark rise in new entrants (including BOTAS, Exmar, Maran, Dynagas, Triumph, Gazprom, Pertamina, Pelindo, Teekay) to challenge the more established market incumbents (Höegh, Excelerate, Golar, BW, Mitsui, OLT).
• In a world where gas is being increasingly used as a geopolitical weapon, novel ideas like that floated by Novatek are also taking hold, to potentially transship Yamal LNG cargoes in Norway or Russia’s Murmansk, to avoid the potential impact of US sanctions on the Chinese COSCO tankers used by Novatek.
From the above, it is clear to note that whilst the common press is dominated by the “next wave” of LNG export and import projects, small splashes are being made in the marine segment, creating a tidal surge of both risk and opportunity across the entire LNG value chain.
Crude Oil – US Production remains flat…..for now!
US oil settled slightly lower, giving up earlier gains, as government data revealed a fourth straight rise in domestic crude supplies. Other than inventory, the level of US crude oil production, which at 12.6 million barrels a day, has grown to the highest level of all time. The rising US production is helping to keep downward pressure on the prices.
The OPEC in its latest monthly report forecast world oil demand to grow by 980,000 barrels a day in 2019, down 4,000 barrels a day from its September estimate. OPEC left its outlook for 2020 demand growth unchanged at 1.08 million barrels a day. OPEC sees total world oil demand averaging 99.8 million barrels a day in 2019 and 100.88 million barrels a day in 2020. OPEC, meanwhile, revised down its forecast for non-OPEC oil supply growth by 160,000 barrels’ day to 1.82 million barrels a day, mainly reflecting downward revisions for the US.
US crude oil production averaged 11.8 million barrels per day in July (the most recent month for which data are available from the EIA), down 0.3 million barrel per day from June. Declining production was a result of Hurricane Barry, which disrupted crude oil production in the Gulf of Mexico. US crude oil production remained relatively flat during the first seven months of 2019 because of disruptions to Gulf of Mexico platforms and slowing growth in tight oil production.
The slowing rate of growth in tight oil production reflects relatively flat crude oil price levels and slowing growth in well-level productivity in the Lower 48 states. EIA expects growth to pick up in the fourth quarter as production returns in the Gulf of Mexico and pipelines in the Permian Basin come online to link production areas in West Texas and New Mexico to refining and export centers on the Gulf Coast.
EIA forecasts growth to level off in 2020 because of falling crude oil prices in the first half of the year and continuing declines in well-level productivity. EIA forecasts US crude oil production will average 12.3 million barrels per day in 2019, up 1.3 million from the 2018 level, and will rise by 0.9 million barrels per day in 2020 to an annual average of 13.2 million barrels per day.
Crude Oil Price
Brent, the global benchmark for oil, increased $0.93 to $59.60 a barrel, reflecting a gain of 1.59% on the week.
WTI crude rose $0.71 to $53.88 a barrel, up 1.34% on the week.
Total US rig count (including the Gulf of Mexico) stands at 856, up 1. The horizontal rig count stands at 750, up 1. US rig activity continues to be restrained and is 207 rigs below (-19%) last year’s total.
US Crude Oil Supply and Demand
Crude oil inventories increased for a fourth week, up by 2.9 million barrels from the previous week. The crude stored at Cushing (the main price point for WTI) increased 1.0 million barrels; total stored is 41.7 million barrels (~46% utilization). Total US commercial crude stored stands at 425.6 million barrels (~54% utilization).
US crude oil refinery inputs averaged 15.7 million barrels per day, with refineries at 85.7% of their operating capacity last week. This was 361,000 barrels per day less than the previous week’s average.
US gasoline demand over the past four weeks was at 9.2 million barrels, up 0.5% from a year ago. Total commercial petroleum inventories decreased by 8.3 million barrels last week.
US crude net imports averaged 2.8 million barrels per day last week, down by 601,000 barrels per day from the previous week. Over the past four weeks, crude oil net imports averaged 3.4 million barrels per day, 38.2% less than the same four-week period last year.
- GCA Oil & Gas Monitor
- Latin America
- North America
- Asia-Pacific & China
- Middle East
- Russia & Caspian
- Business of Energy
- Midstream & Downstream
- Gas & LNG
- Meet our Experts
- Project Experience Brochures
- Training Business
- GCA Oil & Gas Monitor: 2019 archive
- GCA Oil & Gas Monitor: 2018 archive
- US Oil & Gas Monitor: 2017 archive
- US Oil & Gas Monitor: 2016 archive
- US Oil & Gas Monitor: 2015 archive
We're here to help
Europe / Africa / Middle East / Russia & Caspian
gaffney-cline & associates