Qatar to Drill in World’s Biggest Gas Field After 12-Year Freeze

Qatar Petroleum plans to start a new development in the offshore North Field, ending a 12-year ban on new projects that allowed the company to assess how its current rate of extraction affects the giant reservoir it shares with Iran.

The patch, in the southern section of the field, will have a capacity of 2 billion cubic feet per day, or 400,000 barrels of oil equivalent, and should start production in five to seven years, Chief Executive Officer Saad Sherida Al Kaabi told reporters Monday at Qatar Petroleum’s headquarters in Doha.

Boosting natural gas production at home and searching for similar assets abroad signals Qatar Petroleum’s confidence in the longevity of gas demand, and its ability to remain a low-cost supplier in a market that has slumped amid a glut driven by output from U.S. shale and Australia.

“Global demand for gas is expected to rise,” Al Kaabi said. “There are no analysts who can say when demand for gas will wane. For oil, there are people who see peak demand in 2030, others in 2042, but for gas, demand is constantly growing.”

Qatar Petroleum’s decision is a sign that it wants to increase its LNG market share, Giles Farrer, research director, global LNG, at Wood Mackenzie Ltd., said in an email. It’s “also a threat to other developers of new capacity worldwide, as Qatar can add new capacity at a lower cost than anybody else.”

The North Field, and the connected South Pars in Iran, is the world’s biggest reservoir of non-associated gas. Qatar Petroleum was quicker to exploit it, becoming the world’s top exporter of liquefied natural gas and, thanks to a boost in condensate output, the fourth biggest energy company in terms of oil and gas production. Iran is catching up, extracting gas from its portion mainly for domestic consumption and to re-inject into oil fields to boost crude production.

By ending the moratorium and earmarking new volumes for exports, QP is giving itself the fuel necessary to reclaim the top spot among LNG exporters it will relinquish to Australia in 2019, if it wants it. Al Kaabi said the company hasn’t decided if exports will be in the form of LNG, or other products. If it goes for the super-chilled fuel, the new production can be converted to 15.3 million tons of LNG a year. Qatar currently produces about 77 million tons annually.

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Iraq has pledged to fully comply with oil cut deal, OPEC chief says

FILE PHOTO:  Flames emerge from flare stacks at the oil fields in Basra

Iraq has assured OPEC it will fully comply with an agreement to cut oil supply in order to bolster crude prices, OPEC Secretary General Mohammed Barkindo said on Sunday in Baghdad.

Iraq’s compliance stands now at 98 percent, the nation’s oil minister Jabar al-Luaibi told reporters, after addressing a conference in the Iraqi capital, also attended by Barkindo.

Compliance with the deal agreed by OPEC and non-OPEC producers at the end of last year to cut supply is “encouraging,” Barkindo told the forum.

General compliance with supply cuts by the oil producers was 86 percent in January and 94 percent in February, he added.

The market is already balancing, Barkindo said, adding stocks of crude were coming down.

Luaibi said he was satisfied with the existing deal, but declined to say whether Iraq would support an extension, leaving it to an OPEC ministerial meeting planned in May.

The current deal, he said, “contains many positive elements and achieved a lot of targets; work is ongoing to reach the reduction of 1.8” million barrels per day (bpd) agreed by OPEC and 11 other nations including Russia for their combined production in the first half of 2017.

The accord has lifted crude to about $50 a barrel. But the price gain has also encouraged U.S. shale oil producers, which are not part of the pact, to boost output.

While Iraq is committed to achieving 100 percent of its target reduction, it will proceed with projects to boost oil production capacity to 5 million barrels per day before the end of the year, Luaibi said.

OPEC’s second-largest producer, after Saudi Arabia, Iraq will proceed in parallel with exploration plans to increase its reserves by 15 billion barrels in 2018, to reach 178 billion barrels, he said.

Among the plans to increase output capacity from existing fields is a sea water injection plan which is in process of being tendered, he added.

Iraq’s oil production has averaged 4.464 million barrels per day (bpd) so far in March, a reduction of more than 300,000 bpd on levels before OPEC cuts were implemented from Jan. 1, state-oil marketer SOMO said on Thursday.

Average crude exports were 3.756 million bpd in March, versus a record of more than 4 million bpd in November, according to SOMO.

Most of Iraq’s crude is exported from southern ports, the region where it is produced. Exports from the south averaged 3.2 million bpd in March, Luaibi said.

Barkindo described as “very constructive” meetings he had on Saturday with Prime Minister Haider al-Abadi and other Iraqi leaders in Baghdad.

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Libya’s oil output down 252,000 barrels per day due to armed protests

Oil production from the western Libyan fields of Sharara and Wafa has been blocked by armed protesters, reducing output by 252,000 barrels per day (bpd), a source at the National Oil Corporation (NOC) said on Tuesday.

NOC declared force majeure on loadings of Sharara crude from the Zawiya oil terminal in the west of the country and Wafa condensate loadings from the Mellitah terminal.

Supplies were stopped by the shutdown of pipelines leading from the fields to Zawiya refinery and port, a Libyan oil source said. The identity of the group was not immediately clear and there had been no claim of responsibility, he said.

The shutdown at Sharara, which had been producing about 220,000 bpd, began on Monday, a day after the Wafa shutdown, the NOC source said.

There was no official comment from the NOC.

The stoppage threatens a partial revival of Libyan output after years of disruptions due to conflict, political divisions and local protests. Pipelines and ports have repeatedly been blocked by groups demanding salary payments or other funding.

National production has still more than doubled since last year to reach about 700,000 bpd. Three eastern oil ports were reopened in September, and Sharara resumed operations in December when a two-year pipeline blockade was lifted.

Production remains far below the 1.6 million bpd that OPEC member Libya pumped before the 2011 uprising in the North African nation. NOC has set ambitious output recovery goals.

NOC said last week it hoped to raise production from Sharara to nearly 300,000 bpd, and that it was targeting national output of 800,000 by the end of April.

Austrian oil firm OMV, one of the foreign partners in Sharara, was due to load a 600,000 barrel cargo of Sharara crude from Zawiya on board the Sea Vine tanker later this week.

The booking for the tanker has been canceled, a Libyan port source with knowledge of the shipment told Reuters.

OMV did not immediately respond to a request for comment.

The oilfield is operated by a joint venture between NOC and a consortium of Repsol, Total, Statoil and OMV.

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Wayne Geffen, First Serve Capital & Energy

Wayne Geffen

Wayne Geffen currently resides in New York City. A native New Yorker, Wayne was born in Brooklyn and raised on Long Island. For the past 12 years, Wayne’s primary focus has been on the energy sector and its political ramifications around the globe. Over the last decade, the landscape for energy has changed drastically, from the rise of shale in the United States, to the compliance between OPEC and non-OPEC members, causing numerous consequences both domestically and internationally.

When Wayne is not focused on the changing landscape for energy and its geopolitical effects, you can find him discussing the many political events that change how we live our daily lives. Outside of finance, he enjoys playing tennis with friends and family, as well and traveling to experience the many cultures around the world.

Wayne Geffen graduated New York University with a degree in Economics.

Saudi pledges stable oil supply as market confused by data

Output or exports? OPEC members have argued for decades over which of the two they should monitor to gauge compliance with oil-output cuts.

This month, Saudi Arabia has thrown a third metric – supply – into the debate.

The move saw oil prices declining, with confused traders fearing Riyadh would pump more crude, thus complicating OPEC’s efforts to reduce a global glut and prop up the market.

But sources in Riyadh argue that those worries are overblown.

They say that while Saudi production could fluctuate slightly from month to month, supply will remain stable at around 10 million barrels per day (bpd), fully in line with the Saudi OPEC quota.

“What we are watching closely is the supply. Saudi Arabia will not supply the market more than 10 million bpd,” a Saudi-based industry source said.

On Jan. 1, a deal between the Organization of the Petroleum Exporting Countries and some non-OPEC states to curb production by 1.8 million bpd came into effect.

Production is the volume of crude pumped from the wellhead, while supply is the amount of crude sent to the market, domestically and for export. This may vary from production on a monthly basis based on movement of barrels in or out of storage.

For the past couple of years, the difference between Saudi production and supply figures has not been large. Discrepancies in January and February were notable after the OPEC agreement as the market has focused more on production and compliance.

Riyadh’s plea for OPEC and market watchers to focus on Saudi supply rather than production or exports is driven by the kingdom’s unique position in OPEC as a holder of huge stockpiles.

Saudi Arabia, the world’s top oil exporter, has long been OPEC’s only holder of significant spare capacity, a cushion to help smooth possible shortages in global supply.

Spare capacity can be achieved through increased pumping or by taking oil out of storage.

Riyadh expanded the latter over several decades as its domestic needs grew and new refineries were built.

Saudi oil inventories peaked in October 2015 at a record 329.43 million barrels but have declined every month since as the country drew down its stockpile to meet domestic demand without affecting exports.

At the end of December 2016, the kingdom held 272.621 million barrels of crude inventory – almost a tenth of all oil held in storage in industrialized nations, or members of the Organisation for Economic Cooperation and Development.

By comparison, the U.S. Strategic Petroleum Reserve, an underground facility in Louisiana and Texas that serves as the largest emergency supply in the world, has the capacity to hold more than 700 million barrels of oil.


Riyadh has often communicated two sets of output figures to the market: its pumped crude production, which it reports directly to OPEC, and a supply figure usually leaked to journalists by industry sources familiar with the matter.

Supply can give a fuller picture of how much oil is reaching the market and it is monitored by OPEC secondary sources as well as industry media such as Reuters, although production is the main metric used to gauge compliance.

The past two OPEC deals were also based on production.

Saudi sources say operational issues require the regular addition or withdrawal of oil from storage.

Saudi Arabia, which is responsible for a third of OPEC’s output and more than a tenth of global production, told OPEC its production increased to 10.011 million bpd in February from 9.748 million bpd in January.

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UPS to spend $90 million more on natural-gas vehicles, fueling stations

Natural gas has not proven popular for vehicles bought by individual consumers, but some fleet operators continue to find it an attractive alternative to gasoline and diesel.

That’s because the lack of public fueling infrastructure proves a major drawback for natural-gas passenger cars, but fleets can circumvent that by operating their own centralized fueling stations.

That’s the case with UPS, which invested $100 million in natural-gas fueling stations and vehicles last year, and now plans to expand that program.

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The company will spend an additional $90 million on compressed natural gas vehicles and stations, as well as liquefied natural gas vehicles.

CNG remains in its gaseous form, while LNG is cooled until it liquefies.

The denser LNG can be transported in tanker trucks, while CNG is generally transported by pipeline.

UPS plans to add 390 CNG tractors and terminal trucks, as well as 50 LNG vehicles, as part of this latest initiative.

It will also build six new CNG fueling stations, to be located in: Ontario, California, Orlando, Florida, Salina, Kansas, Louisville, Kentucky, Greensboro, North Carolina, and Vancouver, British Columbia, Canada.

UPS currently operates 31 CNG fueling stations, spread across 15 states.

ALSO SEE: Oklahoma claim: first state with natural-gas fueling on highways (Jul 2016)

Its CNG vehicles operate in 38 states, as well as Germany, The Netherlands, and Thailand.

The 50 new LNG vehicles will be deployed in Chicago, Indianapolis, Nashville, and Earth City, Missouri—all locations where UPS has existing LNG fueling stations.

Some UPS fueling stations dispense renewable natural gas, also known as biomethane.
Unlike conventional natural gas, which is generally extracted from the ground, so-called “RNG,” is derived from sources that include decomposing landfill waste, wastewater treatment plants, and agriculture.

It is distributed through the natural-gas pipeline system, and can be converted into either compressed or liquefied form.

The UPS fleet of more than 4,400 natural-gas vehicles consumed more than 61 million gallons of natural gas last year, including 4.6 million gallons of RNG.

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Qatar Will Begin Construction On 200 Megawatt Solar Project This Year

A joint venture between Qatar Electricity and Water Company and Qatar Petroleum will start work on the largest solar power project in Qatar this year.

According to media reports, construction work on a 200 megawatt (MW) solar power project will begin in June of this year and is expected to be fully operational by 2020. The project can be expanded to a capacity of 500 megawatts.

The project will be developed by Siraj Power, a joint venture of Qatar Electricity and Water Company and Qatar Petroleum. Siraj Power, which has a capital base of $500 million, is owned 60% by QEWC while Qatar Petroleum owns the 40% balance.

Qatar has already announced plans to set up 1,800 MW of solar power capacity by 2020, which is expected to contribute up to 16% of total power generation. The country has expressed its intention to hold auctions for solar power projects on multiple occasions, however, these intentions have not yielded any substantial results so far.

Under a long-term program, Qatar plans to set up 10 gigawatts of solar capacity by 2030. Interestingly, however, these targets — or any other renewable energy targets, for that matter — are not listed under Qatar’s commitment to the United Nations through the Intended Nationally Determined Contribution (INDC).

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Haftar’s Army Says Key Libyan Oil Ports Back Under Its Control

Forces controlled by Libya’s eastern-based military commander Khalifa Haftar said they had retaken two of the country’s major oil ports which had been seized by a rival group about two weeks ago, triggering clashes that curbed oil production in the holder of Africa’s largest crude reserves.

The ports of Es Sider and Ras Lanuf, a petrochemicals factory and the nearby Harouge storage tanks had all been recaptured on Tuesday in a land, air and sea offensive, said Miftah Al Magaraif, head of a Petroleum Facilities Guard faction loyal to Haftar. His Libyan National Army announced its full control of the ports on its official Facebook page. The facilities were seized from Haftar earlier this month by a rival group, which later said it handed them to the United Nations-backed government in Tripoli.

Haftar’s recapture of the two terminals will help boost the OPEC country’s oil exports to 550,000-600,000 barrels a day within days, Riccardo Fabiani, a London-based senior analyst at consultants Eurasia Group, said in an emailed report. It will also allow the increase in output from oil fields which normally feed the terminals, he said.

More than a year after a UN-mediated peace deal meant to end years of conflict and economic ruin that have followed the ousting of former leader Muammar Qaddafi, Libya remains deeply divided, primarily between administrations in the west and east. The latest fighting is a setback for political efforts to restore stability and plot an economic recovery. Control of oil assets would provide leverage in future talks on ending Libya’s crisis and have been a key focus of competing factions.

There was no immediate comment from the UN-backed administration. Late on Monday, the head of the Petroleum Facilities Guard units affiliated with it had called for international help to enforce a no-fly zone over the Gulf of Sirte, home to Es Sider, Libya’s largest oil export terminal. The media office of Prime Minister Fayez al-Serraj’s Presidential Council said Haftar had been targeting the oil facilities since Sunday.
Powerful Allies

Before Haftar’s forces announced the success of its offensive, Jadalla Alaokali, a board member at National Oil Corp., said by phone that no damage to oil infrastructure had been reported so far.

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Trump Tax Cut May Save Oil Explorers $10 Billion, Boost Drilling

The Trump administration’s plan to slash corporate tax rates could free up more than $10 billion a year for U.S. oil explorers, opening new opportunities to boost drilling at a time of uncertainty in the marketplace.

Crude prices in New York have fallen 10 percent since the end of 2016 as added drilling in America’s shale fields offset an OPEC-led drive to raise prices by cutting production. The U.S. push has spurred concern that another price rout could be just around the corner, following a two-year decline that saw prices fall as low as $26.05 a barrel in February 2016.

Republicans led by President Donald Trump have said they want to cut the top corporate rate to 15 or 20 percent, from 35 percent now. That could mean more than $10 billion in savings for oil producers that are one of the country’s most-heavily taxed industries, according to Bloomberg Intelligence research. The final number will hinge on whether drillers surrender other tax breaks in exchange, said Vincent Piazza, a senior analyst at BI.

“In theory,” explorers would divert tax savings to more domestic drilling, Piazza said in a telephone interview “But nothing is ever one-for-one.”

West Texas Intermediate crude fell 0.2 percent on Monday to $48.47 after it hit a high of $55.24 on Jan. 3.

The number of rigs drilling U.S. fields for crude almost doubled to 617 since the end of May, when the full impact of the oil-market collapse shrank the fleet to a 6 1/2-year low, according to Baker Hughes Inc. The oil rig count has advanced in 18 of the past 19 weeks as explorers coped with reduced cash flows by finding cheaper ways to pump each barrel from the ground.

U.S. drillers lifted crude production more than 3 percent since the end of 2016 to 9.088 million barrels a day as of March 3, according to the Energy Department in Washington.
‘Stiff Challenges’

It’s not clear when a tax cut plan might be finalized by the U.S. Congress and signed into law by the president. “A reform bill faces stiff challenges, and would likely come with tradeoffs such as fewer tax breaks,” the Bloomberg Intelligence report said.

Still, the discussion comes as the future of the global industry is under debate. At CERAWeek by IHS Markit, the largest annual gathering of industry leaders, some top executives warned against overindulgence by U.S. drillers.

Harold Hamm, the billionaire shale oilman, said the U.S. industry could “kill” the oil market if it embarks into another spending binge.

U.S. production “could go pretty high,” Hamm, the chairman and CEO of Continental Resources Inc., said at the meeting. “But it’s going to have to be done in a measured way, or else we kill the market.”

Saudi Arabia’s oil minister, Khalid Al-Falih, told the conference that global oil stockpiles haven’t drained as quickly as expected, opening the door for an extension to OPEC production cuts that were originally due to expire at mid year.

Without such an extension, the price of oil could drop to $40 a barrel, said Scott Sheffield, chairman of Irving-based Pioneer Natural Resources Co.

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Oil output cuts past June must include non-OPEC members: OPEC Secretary General

Any decision to extend OPEC production cuts past June would have to include the continued participation by the non-OPEC members of the November accord, OPEC Secretary General Mohammad Barkindo said on Tuesday.

The group held talks in recent days with shale oil producers and hedge fund executives, he said during a media conference at the CERAWeek energy conference in Houston. This is the first time OPEC held bilateral meetings with shale producers and investment funds, Barkindo said.

“I think we have broken the ice between ourselves and the industry, particularly the tight oil producers and the hedge funds who have become major players in the oil market,” he said in remarks on the sidelines of the energy conference.

OPEC plans to hold an event to consider the impact of oil futures on physical crude markets, he said, without providing details.

The November deal to reduce output, which was joined by non-OPEC countries including Russia and Kazakhstan, is intended to reduce global output by about 1.8 million barrels per day, and help reduce a glut. The six-month agreement took effect on Jan. 1.

Compliance among top global oil producers should improve in February from January, he said. Members of the production accord last month reported 86 percent of the reduction target had been met in the early weeks of the agreement.

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