argus americas crude · 8/23/2012 · argus americas crude argus americas crude market prices and...

Intermonth Roll

Sep/Oct -0.31

Oct/Nov -0.33

Nov/Dec -0.38

Argus Americas CrudeArgus Americas Crude market prices and analysis

Overview• September LLS' premium to Mars widened by over $2/bl to $6.02/bl ahead of tomorrow's trade month termination.

• On the US waterborne market, delivered pricing for foreign crudes firmed sharply relative to WTI as the US benchmark pushed to wider discounts below its Ice Brent counterpart.

• At the US west coast, a flurry of trade took place during the session for October-delivering Alaskan North Slope (ANS) crude amid concerns demand could outpace sup-plies in the coming weeks.

• In Latin America, WTI-related pricing for regional crudes edged higher as WTI extended its discount to Ice Brent, while Ecuadorean heavy sours found only moderate support following stronger trade levels for Alaskan crude at the US west coast.

• In western Canada on Thursday, the market absorbed apportionment data from Kinder Morgan and Enbridge.

WTI

of 17 Copyright © 2012 Argus Media Ltd

Nymex RollOct/Nov -0.33

Nov/Dec -0.38

Dec/Jan -0.44

WTI/N Sea 4:30pm LondonOct -18.56

Nov -17.56

Dec -16.66

WTI Markers Timing Base Low/High Wtd Avg MTD WAvg

Diff CMA Nym Sep CMA -0.42/-0.38 -0.40 -0.36

Postings-Plus Sep Postings +2.90/+2.95 +2.92 +3.02

“Wtd Avg” is volume weighted average of deals done during the entire trading day

Nymex Lt Sweet Open Low High London 4:30pm Settle Delta

Oct 97.30 95.75 98.29 97.79 96.27 -0.99

Nov 97.50 96.09 98.60 98.10 96.60 -0.95

Dec 98.00 96.46 98.94 98.46 96.98 -0.91

Jan 98.47 96.95 99.38 98.82 97.42 -0.88

Dec 2013 95.80 -0.83

Dec 2014 91.68 -0.90

Dec 2015 88.51 -0.97

Dec 2016 86.61 -0.90

Dec 2017 85.88 -0.79

WTI Cushing 1:30pm CSTBid/Ask Delta

September 95.94/95.98 -1.01

October 96.25/96.29 -0.99

November 96.58/96.62 -0.95

December 96.96/97.00 -0.91

Thursday 23 August 2012Issue 12P- 163

IndustryFlint Hills eyes $250mn shale crude projectPhillips 66, Kinder Morgan to build Eagle Ford lineOneok to launch Bakken oil line open season this fallANS extends premium to WTI for October deliveriesChavez says workers to be paid with Petrorinoco bondsVenezuela to get another $4bn cash for oil loan

InfrastructureTrans Mountain apportioned 67pc for SeptemberOzark, Spearhead pipelines apportioned for SeptemberEnbridge apportions lines 5, 6A, 14 for September

••••••

•••

In the News Page 6

Announcement

Following a period of consultation with the industry and given the realignment of crude oil trade flows over the past few months, Argus is terminating its Midcontinent delivered equivalent assessments on 31 August 2012 for LLS, LSB, Mars, WCS and Syncrude. These reference quotes are calculated by adding transportation costs to each grade’s fob assessments. But due to the emergence of new spot mar-kets in other regions for most of these grades and changed trade flows for LLS and Mars, these calculated Midcontinent delivered equivalent quotes have diminished relevance. If you have any comments or questions please contact Gustavo Vasquez at [email protected] and (713) 968-0014 or Robert Brelsford at [email protected] and (713) 968-0062.

Following a period of consultation with the industry, Argus is expanding its current methodology starting on 4 September 2012 for Latin American crude cargoes due to changes in the pricing basis seen in market activity. Argus feels these changes will more accurately reflect trading in the market, which now occurs at both differentials to WTI and to ICE Brent. Argus will introduce new differentials to Ice Brent futures for Colombian grades Cano Limon, Vasconia and Castilla and Argentinean grade Escalante. The new differentials to Ice Brent will not replace the existing WTI-related differentials for those grades but will be published alongside them. The ICE Brent related differentials will reflect the value of the crude at 7:30pm London time to align with the ICE Brent settlement price. If you have any comments or questions please contact Gustavo Vasquez at [email protected] and (713) 968-0014 or Robert Brelsford at [email protected] and (713) 968-0062.


Argus Americas Crude Thursday 23 August 2012Issue 12P- 163

US Gulf Coast & Midcontinent PipelineSeptember LLS’ premium to WTI soared to a weighted-aver-age differential of about $19.52/bl over WTI and $6/bl over Mars ahead of tomorrow’s September pipeline termination. A wider Ice Brent premium to WTI prompted stronger delivered cargo values to the US Gulf coast as well.

Light sour September LLS was nearly $3/bl stronger against WTI than the prior day with deals between WTI +18.90/+19.75. September HLS traded at $18.65/bl over WTI, fi rming by about $1.80/bl, about 85¢/bl under LLS.

US Gulf Coast

Pipeline Timing Base Low/HighDiff Wtd Avg

Diff MTD

WAvgLow/High Wtd

Avg

LLS Sep Sep WTI +18.90/+19.75 +19.52 +17.84 114.86/115.71 115.48

LLS Oct Oct WTI +17.75/+18.25 +18.00 +16.20 114.02/114.52 114.27

HLS Sep Sep WTI +18.45/+18.80 +18.65 +17.39 114.41/114.76 114.61

Thunder Horse Sep Sep WTI +16.00/+16.50 +16.25 +15.93 111.96/112.46 112.21

Bonito Sep Sep WTI +15.55/+16.05 +15.80 +15.08 111.51/112.01 111.76

Eugene Island Sep Sep WTI +15.75/+16.25 +16.00 +15.11 111.71/112.21 111.96

WTI Midland Sep Sep WTI -1.50/-1.10 -1.18 -0.87 94.46/94.86 94.78

WTS Sep Sep WTI -4.25/-3.75 -4.00 -2.94 91.71/92.21 91.96

WTS Oct Oct WTI -4.85/-4.80 -4.84 -3.56 91.42/91.47 91.43

Poseidon Sep Sep WTI +13.60/+13.85 +13.75 +12.77 109.56/109.81 109.71

Mars Sep Sep WTI +13.40/+13.65 +13.50 +13.00 109.36/109.61 109.46

Mars Oct Oct WTI +13.40/+13.45 +13.44 +12.36 109.67/109.72 109.71

So Grn Canyon Sep Sep WTI +12.45/+12.75 +12.60 +11.68 108.41/108.71 108.56

“Wtd Avg” is volume weighted average of deals done during the entire trading day. Trades are listed in the back of this report, and are available in a sortable csv-format datafile.

Waterborne Timing Base† Low/High Delta Low/HighSaharan Blend del Prompt* Nov WTI +16.90/+17.90 +1.35 115.00/116.00

Qua Iboe del Prompt* Nov WTI +19.30/+20.30 +0.95 117.40/118.40

Escravos del Prompt* Nov WTI +19.30/+20.30 +0.95 117.40/118.40

Forties del Prompt* Nov WTI +16.40/+17.40 +1.00 114.50/115.50

Nemba Prompt* Nov WTI +16.25/+17.25 +0.95 114.35/115.35

Kissanje Prompt* Nov WTI +17.30/+18.30 +0.75 115.40/116.40

Basrah Light del Prompt* Nov WTI +14.70/+15.70 +1.55 112.80/113.80

* Delivery 10-60 days forward, †4.30pm London snapshot

WTI Formula Basis (WTI values used to calculate prices for USGC and Midcontinent pipeline grades.)

Sep 95.96 MTD 92.76

Oct 96.27

hh hhh

0

2

4

6

8

10

29 Feb 12 27 Apr 12 26 Jun 12 23 Aug 12

Mars = 0

LLS vs. Mars $\bl

Eugene Island vs Bonito WTI Cash Roll (continued)Sep +0.20 3000 Sep/Oct -0.32 1667Sep +0.20 3000 Sep/Oct -0.32 2000HLS Sep/Oct -0.32 3333Sep +18.65 1000 Sep/Oct -0.32 5800Sep +18.65 1000 Sep/Oct -0.30 1000Sep +18.65 1000 Sep/Oct -0.30 1000LLS Sep/Oct -0.30 1667Oct +18.00 1000 Sep/Oct -0.30 2000Oct +18.00 1000 Sep/Oct -0.29 1000Oct +18.00 2000 Sep/Oct -0.29 1667Oct +18.00 2000 Sep/Oct -0.29 2000Sep +18.90 1000 Sep/Oct -0.29 6666Sep +19.20 1000 WTI CMA (Merc)Sep +19.40 1000 Oct -0.42 1000Sep +19.60 1000 Oct -0.40 500Sep +19.60 1000 Oct -0.40 1000Sep +19.60 1000 Oct -0.40 2000Sep +19.60 1000 Oct -0.40 5000Sep +19.60 1000 Oct -0.40 20000Sep +19.70 1000 Oct -0.39 2000Sep +19.75 2000 Sep -0.42 5000Mars Sep -0.41 1000Oct +13.40 1000 Sep -0.41 1000Oct +13.45 1000 Sep -0.40 3000Oct +13.45 2000 Sep -0.40 4000Oct/Nov +0.55 3000 Sep -0.40 6000Oct/Nov +0.60 2000 Sep -0.40 10000Oct/Nov +0.60 2000 Sep -0.38 1000Sep +13.35 757 WTI MidlandSep +13.40 1000 Oct -1.45 1000Sep +13.45 1000 Oct -1.45 2000Sep +13.50 1000 Oct -1.45 2000Sep +13.50 5000 Sep -1.50 1000Sep +13.55 2000 Sep -1.25 1000Sep +13.65 1000 Sep -1.15 1367Poseidon Sep -1.15 3000Sep +13.75 1000 Sep -1.10 1000SGC vs Mars Sep -1.10 1000Sep -0.90 4000 Sep -1.10 1000Thunder Horse WTI Phillips 66 P-PlusSep +16.25 1333 Sep +2.90 3333Sep +16.25 2000 Sep +2.95 2000WTI Cash Roll WTSSep/Oct -0.35 1000 Oct -4.85 1000Sep/Oct -0.35 3333 Oct -4.85 1000Sep/Oct -0.32 500 Oct -4.85 2000Sep/Oct -0.32 1667 Oct -4.80 1000Sep/Oct -0.32 1667 Sep -4.00 583

US Pipeline deals done



No September Eugene Island transactions were reported, but discussion was on either side of $16/bl over WTI. September Bonito was exchanged for Eugene Island at a 20¢/bl discount.

September Mars deals were between WTI +13.35/+13.65, fi rming its premium to WTI by only $1.25/bl. Poseidon traded at WTI +13.75 and was valued about 20¢/bl over Mars where it was done Wednesday in a conversion exchange. Septem-ber SGC was exchanged for Mars at a 90¢/bl discount. On Wednesday SGC was assessed 75¢/bl under Mars.

Activity for October delivery crude started to pick up. Octo-ber LLS got done at October WTI +18.00 and October Mars at WTI +13.40/+13.45. Like in September, gains in the two grades premiums to Mars were led by light crude LLS. But for October the LLS premium to Mars was just 40¢/bl wider at about $3.50/bl.

At Clearbrook, Minnesota, a volume of September-deliver-ing Bakken crude changed hands at a $3.90/bl discount to US benchmark WTI on Thursday. As the prompt month has rolled to October, the deal will not affect the Argus assessment Octo-ber-injecting Bakken crude.

The September/October WTI Cash Roll traded between -0.35/-0.29 with a weighted average of -0.31.

US Gulf Coast WaterborneWaterborne discussion remained limited for foreign crudes delivering into the US Gulf coast on Thursday, but a widening in the WTI/Ice Brent spread pointed to sharply fi rmer landed pricing relative to the WTI marker.

By the close of trade in London, the November WTI/Ice Brent spread had widened by 65¢/bl from Wednesday to -$18.34. Combined with alterations in transatlantic freight rates to the US as well as changes in fob prices, calculations on Thursday showed delivered pricing for foreign crude shipments arriving to the Gulf coast region between 75¢-$1.35/bl stronger on the day.

But landed costs for Iraqi Basrah Light appeared to strengthen by even more relative to benchmark WTI. A shipment avail-able for delivery into the Gulf coast during the second half of October still was believed to be seeking placement at a delivered premium of $1.75/bl to domestic deepwater sour Oc-tober Mars, which ended the session at a premium of around $13.45/bl to WTI.

A shipment of Egyptian heavy sour Ras Gharib due for arrival during the second half of November also was believed to be seeking placement in the Gulf coast once again, but a revised asking price on the cargo could not be confi rmed by the end of Thursday’s session. Earlier in the week, the shipment was for sale at a delivered discount of $1.50/bl to November Mars.

Latin America

US West CoastPipeline Timing Base Low/High Delta Low/HighSJLB P-Plus Sep Postings 0.00/+0.25 110.40/110.65

Implied WTI Diff Sep Sep +14.44/+14.69 +0.18

Line 63 P-Plus Sep Postings +1.25/+1.50 111.65/111.90


Midway Sunset P-Plus Sep Postings +0.55/+1.15 105.48/106.08


Light Postings Avg 110.40

Heavy Postings Avg 104.93

Waterborne Timing Base Low/High Delta Low/HighANS del Oct Oct WTI +16.60/+16.85 +0.03 112.87/113.12

Oriente del Prompt* Nov WTI +8.90/+9.90 +0.25 105.50/106.50

hh hhh

-4

-3

-2

-1

0

1

2

29 Feb 12 27 Apr 12 26 Jun 12 23 Aug 12

HLS = 0

LLS vs HLS $\bl

US Midcontinent

Delivered Equivalent Timing Base Low/High Delta Low/HighLLS Sep Sep WTI +19.48/+20.33 +2.28 115.44/116.29

LSB Sep Can CMA +1.30/+2.80 +0.08 97.26/98.76

Mars Sep Sep WTI +14.16/+14.41 +1.28 110.12/110.37

WCS Sep Can CMA -6.48/-5.98 +0.08 89.48/89.98

Syncrude Sep Can CMA +13.33/+15.08 +0.08 109.29/111.04

Pipeline Timing Base Low/High Delta Low/HighBakken Sep Can CMA -1.00/-0.50 95.76/96.26

WCS Cushing Sep Can CMA -11.00/-9.75 85.76/87.01

Waterborne Timing Base Low/High Delta Low/HighOlmeca Aug Sep +16.11 +1.88 112.07

K-Factor Aug +3.85

Isthmus Aug Sep +14.03 +1.72 109.99

K-Factor Aug +3.50

Cano Limon Prompt* Nov WTI +12.55/+13.55 +0.85 109.15/110.15

Vasconia Prompt* Nov WTI +11.15/+12.15 +0.85 107.75/108.75

Escalante Prompt* Nov WTI +11.30/+12.30 +0.85 107.90/108.90

Oriente Prompt* Nov WTI +5.75/+7.25 +0.25 102.35/103.85

Maya (USGC) Aug Sep +5.49 +0.94 101.45

K-Factor Aug +0.65

Napo Prompt* Nov WTI +1.75/+3.25 +0.25 98.35/99.85

Castilla Prompt* Nov WTI +7.65/+8.65 +0.85 104.25/105.25

* Delivery 10-60 days forward



US West CoastAlaskan North Slope (ANS) crude continued to fi rm its pre-mium above WTI for volumes scheduled for delivery into the US west coast during October.

Several deals were confi rmed taking place for October ANS during Thursday’s session at premiums of $16.60/bl up to $16.85/bl above October WTI. These latest deals join an October trade confi rmed done on Wednesday at a premium of $16.70/bl to October WTI.

An additional October trade also was confi rmed taking place late during the previous session, but it was reported too late in the day for inclusion in Wednesday’s pricing. That deal was concluded at a premium of $16.60/bl above October WTI.

To-date for the October delivery month, a total of six cargoes of ANS now have traded in deals concluded in a range of October WTI +16.60/+16.85, leaving the October ANS deliv-ered assessment at the west coast nearly 40¢/bl stronger from where September volumes last changed hands at a premium of $16.35/bl to benchmark WTI.

While the fl urry of trade for October deliveries left some trad-ers surprised that the program has nearly cleared so quickly, others were unfazed given that reduced output at the North Slope amid summer maintenance activities as well as already year-low inventories at the Valdez terminal would persuade buyers to secure available volumes as quickly as possible ahead of any potential supply shortage.

Latin AmericaThe Latin American crude market passed a subdued session on Thursday as traders evaluated WTI’s widening discount to Ice Brent, implying substantially fi rmer WTI-related pricing for grades available out of the region.

Market participants were continuing to await signs of October-loading schedules out of destinations in Latin America, with some anticipating supplies could become available to spot market buyers for loading next month following two consecu-tive months of programs clearing ahead of any release of spot supplies for the August and September loading months.

While a cargo of Colombian Castilla Blend was said to be seeking placement still at the US Gulf coast, traders contin-ued to value the grade at weaker levels compared with where the shipment was for sale. The late September/early October arriving cargo most recently had a delivered asking price of $5/bl below November Ice Brent attached to it. But market

Canada

hh hhh

-3

-2

-1

0

1

2

29 Feb 12 27 Apr 12 26 Jun 12 23 Aug 12

Poseidon = 0

hh hhh

-10

-8

-6

-4

-2

0

29 Feb 12 27 Apr 12 26 Jun 12 23 Aug 12

ANS USWC = 0

SGC vs. Poseidon $\bl

Oriente USWC vs ANS USWC $\bl

Grade Timing Basis Low/High (diff)

Low/High outright Delta Daily Wtd

Avg (diff)Daily Wtd Outright

Daily Deals

Daily Volume

Trade Month Wtd Avg

Monthly Deals

Monthly Volume

Syncrude (SYN) Sep Can CMA +9.00/+10.75 105.76/107.51 +9.88 106.64 - - - - -

WCS Sep Can CMA -11.25/-10.75 85.51/86.01 -11.00 85.76 - - - - -

Condensate Sep Can CMA +7.25/+7.75 104.01/104.51

MSW Sep Can CMA +1.35/+2.50 98.11/99.26

LSB Sep Can CMA -1.75/-0.25 95.01/96.51

LLB Sep Can CMA -11.50/-11.00 85.26/85.76

Canadian CMA Sep 96.76 -0.93

Hibernia Dtd NSea +1.60/+1.85 119.15/119.40

Terra Nova Dtd NSea +1.55/+1.80 119.10/119.35

Pipeline Volume Weighted Indices

Pipeline Low/High Prices

Waterborne



participants continued to value the grade between discounts of $5.50-$6.50/bl to November Ice Brent.

Despite limited spot discussion on Thursday, a sharp widen-ing in WTI’s discount relative to Ice Brent pointed to higher WTI-related pricing for crudes available out of Colombia and Argentina. By the close of Thursday’s session, the November WTI/Ice Brent spread had widened by 85¢ from Wednesday to -$17.66. But Ecuadorean heavy sours Oriente and Napo were said to be gaining only moderate upward price momentum fol-lowing stronger trade for Alaskan North Slope (ANS) crude at the US west coast, which traded up to a premium of $16.85/bl above October WTI on Thursday.

CanadaIn western Canada on Thursday, traders discussed the effects of apportionment on Enbridge and Kinder Morgan pipelines for shipments injecting in September.

Enbridge is apportioning September-delivering crude ship-ments on Lines 5, 6A and 14 of its Lakehead system. All three of these lines went unapportioned in August.

Maintenance programs on the system are ongoing and will continue to result in restrictions until the work is completed.

Enbridge is apportioning shipments on its 491,200 b/d Line 5 by 8pc next month.

The company will also apportion September shipments on its 608,800 b/d Line 6A by 20pc.

September shipments on the 317,600 b/d Line 14 pipeline will be apportioned by 13pc. The line suffered a leak on 27 July in rural Wisconsin and has been running at 80pc of its pre-spill capacity.

Both Lines 6A and 14 were last apportioned in March of last year, when nominated shipments were cut by 7pc.

Kinder Morgan’s 300,000 b/d Trans Mountain crude pipeline system is oversubscribed by 67pc in September – 2 percent-

age points less than it was in August – leaving shippers able to deliver only 33pc of nominated volumes.

Apportionment figures are lower for September due to the absence of scheduled maintenance on the pipeline. In August, 8 hours of work was scheduled.

The line will carry an average of 290,485 b/d of oil in Septem-ber.

The system’s Westridge dock in Burnaby, British Columbia, will ship 78,266 b/d and has three barges and five tankers scheduled to load in September.

Nominations for uncommitted tankers at the Westridge dock are apportioned by 81pc for September, down 6 percentage points from last month. Nominations for September shipments to land-based destinations on Trans Mountain are 70pc appor-tioned, a 1 percentage point decrease from August. Apportion-ment of 70pc does not apply to shippers with firm service commitments.

On Thursday, a Liberian-flagged tankship was spotted moored at the Westridge dock – likely to fill its holds with Canadian crude from Kinder Morgan’s Trans Mountain line. The HS Carmen was last docked at Port Angeles, Washington.

Otherwise, on Thursday Canada’s National Energy Board released data showing that western Canadian refineries expe-rienced a slight increase in refinery throughputs of 6,476 b/d, or 1.1pc, to 587,783 b/d during the week ending 14 August. Refineries in the region reported a 1 percentage point increase in utilization to 89.5pc.

US government data released Wednesday showed midconti-nent refineries increased overall crude runs by 136,000 b/d for an average throughput rate last week of around 3.6mn b/d. This left Padd 2 crude runs just slightly lower than their yearly high, which was hit in the week ending 27 July. Operable re-finery utilization in the US midcontinent was up by 4 percent-age points to 99pc.



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Price Assessment Methodology



Trans Mountain apportioned 67pc for SeptemberKinder Morgan’s 300,000 b/d Trans Mountain crude pipe-line system is oversubscribed by 67pc in September – 2pt less than it was in August – leaving shippers able to deliver only 33pc of nominated volumes.

Apportionment figures are lower for next month due to the absence of scheduled maintenance on the pipeline. In August, 8 hours of work was scheduled. Trans Mountain will carry an average 290,485 b/d of oil next month. The pipeline’s Puget Sound spur will run an average of 141,001 b/d.

The system’s Westridge dock in Burnaby, British Columbia, will ship 78,266 b/d in September and has three barges and five tankers scheduled to load next month.

Nominations for uncommitted tankers at the Westridge dock are apportioned by 81pc for September, down 6pt from last month. Nominations for September shipments to land-based destinations on Trans Mountain are 70pc appor-tioned – a 1pt decrease from August.

Deliveries from Kamloops, British Columbia, will not be apportioned next month. They were last apportioned in April, and then only by 18pc.

Kinder Morgan has plans to more than double capac-ity on the Trans Mountain system, bringing it to a capac-ity of 750,000 b/d, by twinning the line and expanding Westridge’s export capacity.

The expansion of the line is being supported with 20-year binding commitments from BP Canada Energy Trading, Canadian Oil Sands, Cenovus Energy, Devon

Industry News

Infrastructure

Flint Hills eyes $250mn shale crude projectFlint Hills Resources may spend more than $250mn to upgrade its 260,000 b/d refinery in Corpus Christi, Texas, so it can run shale-derived crude from south Texas as feedstock.

A two-year construction project, pending regulatory approv-al, would allow the refiner to increase its processing of Eagle Ford crude, the company said. Flint Hills – a Koch subsidiary – intends to submit permit applications in the next few weeks.

“We think Corpus Christi is the most advantaged location to process this supply and the time is here to evaluate projects to process more of the crude into fuels for Texas markets,” Phil Gaarder, vice-president and refining manager, said.

US independent refiner Valero ran an average 140,000 b/d of the light, sweet crude at its refineries in Corpus Christi, Three Rivers and Houston, Texas, during the second quarter. Phillips 66 and Citgo have also considered taking more crude from the nearby Eagle Ford formation.

Phillips 66, Kinder Morgan to build Eagle Ford lineKinder Morgan will build a 27-mile pipeline to move Eagle Ford crude to Phillips 66’s 215,000 b/d refinery in Sweeny, Texas.

The US independent refiner committed to taking “a signif-icant portion” of the initial 30,000 b/d capacity of the $90mn extension of Kinder Morgan’s Crude Condensate pipeline. Kinder Morgan will build a five-bay truck offloading facil-ity and three storage tanks with an estimated 360,000 bl of crude and condensate capacity at its DeWitt Station in DeWitt County, Texas, and at the Wharton Pump Station in Wharton County, Texas, according to a statement from the company.

Construction could begin in the fourth quarter of 2012, pending regulatory approval, with completion set for the first quarter of 2014.

“This agreement aligns with a fundamental part of the Phillips 66 business strategy to get advantaged crude to our refineries,” Phillips 66 crude and international supply general manager Glenn Simpson said.

The refiner recently said it could run up to 40,000 b/d of Eagle Ford crude at Sweeny, part of a larger effort to increase runs of shale crudes across its entire system from 120,000 b/d to between 450,000-460,000 b/d.

The planned 12-inch Kinder Morgan line will be expand-able to 100,000 b/d. The extension taps into an almost 200-mile pipeline system connecting the Eagle Ford fields to the Houston Ship Channel.

Oneok to launch Bakken oil line open season this fallOneok Partners’ open season on its 1,300-mile Bakken crude pipeline will be held this fall, the Tulsa-based partnership said today in presentation to investors.

The proposed 200,000 b/d crude pipeline – which will span from Stanley, North Dakota, down to Cushing, Oklahoma – is scheduled to go into service in early 2015, according to Oneok’s presentation to the Citi MLP/Midstream Infrastructure Conference.

Designs call for much of the crude line to run parallel to Oneok’s planned NGL pipeline from the Bakken region. That proposed line will carry 135,000 b/d of unfractionated NGLs from North Dakota to the hub at Conway, Kansas.

Bakken shale natural gas production is rich with associated liquids, averaging 8-13 USG/Mcf, the company said.

ANS extends premium to WTI for October deliveriesAlaskan North Slope (ANS) crude has traded in its first deals for October delivery into the US west coast at higher premi-ums above US benchmark West Texas Intermediate (WTI) amid concerns that demand could begin to outpace supply in the coming weeks.

October-delivering shipments of ANS were confirmed changing hands today at premiums of $16.60/bl up to $16.85/bl above the October WTI contract traded on the Nymex, following yesterday’s deals done in a range of WTI +$16.60/+$16.70. These latest trades ushered differential pricing for October volumes in at an average of nearly 40¢/bl higher than WTI compared with where September ANS last traded on 15 August at a premium of WTI +$16.35.

But firmer premium trade for October ANS did not come



as a surprise to traders, who were expecting differential pric-ing to strengthen alongside sharply lower output from North Slope fields as summer turnaround activities continue in the region.

As of 22 August, ANS production to-date for the month has averaged 385,288 b/d, which is down by 25.6pc, or 132,726 b/d, from the same period last year, according to the latest data available from the Alaska Department of Revenue’s tax division.

But upward price support for the Alaskan medium sour crude also stems from a slash in oil supplies in storage at the Valdez export marine terminal. As of 22 August, stored oil there averaged just over 2mn bl for the month. While this leaves Valdez crude inventories looming at their lowest aver-age levels to-date for the year, August supplies at the terminal are down by more than 2.5mn bl, or 55.6pc, compared with the same period during the month of July, tax division data showed. Some market participants are reading the depleted ANS inventory levels as a sign of recovering demand for the grade at the US west coast, which could further bolster premi-um pricing relative to WTI as maintenance projects continue to weigh on North Slope output.

Seasonal summer maintenance work at North Slope production fields typically runs through September but in recent years has continued on through late October and early November amid extended warmer weather patterns before the onset of the harsher, freezing temperatures that characterize the region’s winter season.

Judge to rule TransCanada can seize property for pipelineAn east Texas judge intends to rule that TransCanada has common carrier status, giving it eminent domain rights to seize property needed for the construction of what was once the southern leg of the Keystone XL crude pipeline.

A Texas farmer challenged TransCanada’s status in a Paris, Texas, court, but county court at law Judge Bill Harris emailed the parties to say he will rule in TransCanada’s favor, according to district clerk Marvin Ann Patterson. A signed ruling is likely to be submitted next week, she said.

TransCanada’s Keystone XL project will move Canadian and Bakken crude to Cushing, Oklahoma. From there, what was once the southern portion of that proposed line – now spun off into a separate 700,000 b/d pipeline development and branded the Gulf Coast Project – will move the oil south by pipeline to Port Arthur and Houston, Texas.

“We acknowledge and respect the judge’s decision that TransCanada’s Gulf Coast Project is a common carrier under Texas statute. This ruling reaffirms that TransCanada has – and continues – to follow all state and federal laws and reg-ulations as we move forward with the construction of the Gulf Coast Project,” TransCanada said in a statement.

The company also said the vast majority of the crude that will be moved on the Gulf Coast Project will be discounted crude from west Texas and Oklahoma.

Canada, Husky Energy Marketing, Imperial Oil, Nexen Marketing, Statoil Canada and Tesoro Canada Supply & Distribution.

Ozark, Spearhead pipelines apportioned for SeptemberEnbridge said it would apportion September shipments on its Ozark oil pipeline and both September and October shipments on its Spearhead pipeline in the US midconti-nent, because shippers asked for more space than the sys-tems could handle.

Apportionment levels on both lines are also being affected by carry-over volumes from the previous month that need to be shipped as well as maintenance issues.

Enbridge’s 231,000 b/d Ozark crude pipeline – which runs from the oil hub at Cushing, Oklahoma, to Wood River, Illinois – received 4.51mn b/d of nominations for September, down from the 5.08mn b/d nominated for August. That line will be apportioned by 95.5pc for September.

The apportionment level is up slightly from August, when shipments on the line were apportioned by 95.3pc. One year ago, apportionment levels on Ozark were also high, as Enbridge could only ship 6.05pc of the crude vol-ume that companies had requested.

The Ozark line will ship 5.7pc less crude next month than it will in August. Estimated capacity has fallen to 225,120 b/d in September, from 238,783 b/d this month.

Since April, Enbridge has moved to a two-month nomi-nation period for its 193,000 b/d Spearhead oil pipeline to help assist shippers plan the movement of Spearhead-des-tined volumes further upstream on the Enbridge 2.61mn b/d Mainline system. From Mainline, the Spearhead pipeline delivers crude from Flanagan, Illinois, down to Cushing in the US midcontinent.

For September, Enbridge received 792,392 b/d of nominations and will be apportioned by 77pc, down 3.3pt from August, when the line went 80.3pc apportioned amid 928,819 b/d of nominations.

For October, shippers nominated 236,281 b/d for Spearhead delivery, causing Enbridge to apportion ship-ments by 32.1pc.

In September and October of last year, the Spearhead pipeline went unapportioned.

Enbridge apportions lines 5, 6A, 14 for SeptemberCanadian infrastructure company Enbridge is apportioning September-delivering crude shipments on Line 5, Line 6A and Line 14 of its Lakehead system.

All three of these lines went unapportioned in August. Maintenance programs on the system are ongoing and will continue to result in restrictions until the work is complet-ed, the company said.

Enbridge is apportioning shipments on its 491,200 b/d Line 5 by 8pc next month. Line 5 transports synthetic crude as well as light sweet and light sour conventional crudes from Superior, Wisconsin, to Sarnia, Ontario.

Infrastructure (Continued) Industry News (Continued)



Apache names new senior vice presidentUS upstream independent Apache has promoted Alfonso Leon to senior vice-president and chief of staff.

Leon joined Apache in 2009 and was vice-president for planning and strategy. He will continue to report to chief executive Steve Farris, the company said today.

Apache also announced it has hired Brady Parish, formerly a managing director at US investment bank Moelis & Co., as vice-president for investor relations. Moelis hired Parish away from Goldman Sachs in 2011, when the bank opened a Houston office.

Romney outlines US ‘energy superpower’ planPresumptive Republican presidential nominee Mitt Romney is pledging to give states more power over energy development on federal lands, set output targets for offshore leasing plans and fast-track cross-border pipeline projects, if elected.

The goals are part of the former Massachusetts governor and private equity executive’s “energy superpower” plan, which he outlined today at a campaign stop in Hobbs, New Mexico. The plan is intended to differentiate the candidate from incumbent Democratic President Barack Obama.

The Romney team is framing its ideas around the ongoing “energy revolution” in the US, where oil and gas production has leaped in recent years thanks to shale drilling. Romney’s goal is to achieve North American “energy independence” and 23-28mn b/d of oil production on the continent by 2020. North American output was around 16.7mn b/d last year, according to the US Energy Information Administration.

“We might even be an exporter at some point of energy when you consider all of our resources,” Romney said, noting that he would also work to reduce consumption through tech-nology and innovation.

In a twist on the US federalism model, Romney would seek to accelerate oil, gas, coal and renewable energy out-put on federal lands by giving development and production oversight to the states. He would require federal agencies to certify that state permitting programs satisfy all requirements of US law.

In the offshore, Romney would issue his own five-year leasing plan that “aggressively” opens new areas to oil and gas drilling beginning with the waters off Virginia and the Carolinas. Obama scrapped plans for Virginia coast leasing after the April 2010 Macondo spill. In addition, Romney’s administration would set minimum production targets for each five-year plan.

Another pillar of Romney’s energy platform targets Obama’s delay of TransCanada’s proposed 830,000 b/d Keystone XL oil pipeline between Canada and the US. Romney aims to improve energy ties with Canada and Mexico by not only approving Keystone XL, but fast-tracking other cross-border pipelines and pursuing a regional agreement to facilitate cross-border investment, infrastructure and sales.

At the New Mexico campaign stop, Romney appeared well-versed in oil and gas industry issues, referencing the rise

The company will also apportion September shipments on its 608,800 b/d Line 6A by 20pc. That line moves syn-thetic crude, light sweet and sour crudes, as well as medium and heavy crudes from Superior, Wisconsin, to Griffith, Indiana.

September shipments on the 317,600 b/d Line 14 pipe-line will be apportioned by 13pc. The line suffered a leak on 27 July in rural Wisconsin and has been running at 80pc of its pre-spill capacity. Line 14 transports condensates, synthetic crude, light sweet and sour conventional crude, as well as medium and heavy crude from Superior, Wisconsin, to the greater Chicago area of Illinois.

Both Lines 6A and 14 were last apportioned in March of last year, when nominated shipments were cut by 7pc.

Enbridge also advised shippers of apportionment levels on its multi-line 2.61mn b/d Mainline crude system, but said that the levels could not be calculated as shippers will exercise apportionments on the different lines at varying levels.

Valero Corpus Christi reports SRU upsetA malfunction caused flaring from a sulfur recovery unit (SRU) incinerator today at Valero’s 200,000 b/d refinery in Corpus Christi, Texas.

Flaring began at 2:50am ET and continued for more than two hours. Workers “returned unit to normal opera-tions as quickly and safely as possible” and “refinery pro-duction was not affected,” according to a filing with state environmental regulators.

A company representative could not be immediately reached for comment.

Maintenance underway on Western’s El Paso crude unitWork is underway on a crude unit and reformer at Western Refining’s 125,000 b/d refinery in El Paso, Texas.

The southern crude unit was down during regeneration work on a reformer at the refinery. The northern crude unit continued to operate at the refinery.

It was not immediately clear how long the work would continue.

Citgo returns Lemont gasoline unit to full operationA gasoline-producing unit has returned to full operations at Citgo’s 167,000 b/d refinery in Lemont, Illinois.

The refiner took the fluid catalytic cracker (FCC) down for maintenance in late July, and reported an unsuccessful restart in early August. A company official said this morn-ing the unit now is back to full production rates.

A coking unit at the refinery is also operating normally, the official said. Citgo had reported a compressor failure associated with an unidentified unit on 10 August.

Phillips 66’s Wood river refinery reports failureEquipment failure caused a hydrogen sulfide release yester-




in production of natural gas liquids and expressing hope that Mexico’s new president Enrique Pena Nieto could help turn around stagnating oil output through increased collaboration with the US.

The plan attracted support from Republican lawmakers and oil and gas industry association the American Petroleum Institute. Biofuel industry group the Renewable Fuels Association applauded Romney for pledging to maintain the federal ethanol and biodiesel blending mandate.

The White House said the Republican approach to energy “is written or dictated by big oil and focuses almost entirely on oil and fossil fuels.” House of Representatives energy committee ranking member Henry Waxman (D-California) called it an “oil-above-all agenda.”

Canadian crude runs slip from prior week highCrude throughputs at Canadian refineries were roughly flat a week after reaching a high for the year.

Run-rate declines at refineries in the eastern and cen-tral region brought total throughputs down by 5,472 b/d to 1.808mn b/d in the week ending 14 August, a 0.3pc decrease from the previous week, according to the latest data from the National Energy Board. Refinery utilization nationwide fell by 0.2pt to 89.2pc, according to the agency.

Quebec and eastern Canadian refineries reported a 9,120 b/d, or 1.08pc, decrease in crude throughput, to 835,098 b/d. Utilization in the region fell by 1.01pt to 92.46pc. Ontario refineries’ throughputs dropped by 2,830 b/d, or 0.73pc, to 385,691 b/d, and utilization in the region dropped .59pt to 82.31pc.

Western Canadian refineries reported a slight increase in throughputs of 6,476 b/d, or 1.11pc, to 587,783 b/d. Refineries in the region reported a 0.99pt increase in utiliza-tion to 89.5pc.

Alberta approves Athabasca land use planThe Alberta government today approved a plan that aims to support oil sands development but also govern land use and infrastructure challenges in the resource-rich lower Athabasca region.

The region is part of the broader Athabasca oil sands area, which holds about 82pc of the province’s oil sands resource and much of the Cold Lake oil sands region. The Lower Athabasca Regional Plan (LARP) goes into effect 1 September and will set the stage for the next 50 years of development.

The plan calls for the government to ensure future routes and siting for pipeline gateways are maintained, and to iden-tify links to the Mackenzie Delta to connect with Asia-Pacific markets, a key issue in Canadian crude development as pro-ducers seek to diversify takers of their production beyond the US.

Additionally, the plan sets regional environmental limits for air and surface water quality and a regional groundwater framework, while laying out a plan for land use for recreation

day morning at Phillips 66’s 356,000 b/d Wood River refin-ery in Roxana, Illinois.

A leak from process piping associated with an unidenti-fied unit was discovered at 8:05am ET, according to state and federal filings available this morning. A filing with Illinois emergency management officials said the release was contained before 12:30pm ET.

The US independent refiner declined to comment on operations.

Mississippi river’s backlogged traffic still being clearedThe US Coast Guard is still clearing out a backlog of traffic on the Mississippi river today after a shut-in portion of the waterway was reopened yesterday.

There are now 13 southbound vessels and 38 north-bound vessels still waiting to pass an 11-mile stretch of the river near Greenville, Mississippi, that has been closed intermittently this month amid low water conditions and after multiple barges ran aground.

That backlog of southbound traffic is expected to be cleared in the next four hours, at which point the queue of northbound vessels will be allowed to move.

Once all traffic is cleared, a safety zone will remain in place with restrictions on traffic based on size, US Coast Guard spokesman Ryan Tippett said. The majority of the vessels on the Mississippi are tugs pushing barges.

Colombia’s Trans-Andean oil pipeline resumes shipmentsColombia’s state-controlled oil company Ecopetrol last night resumed shipments of South Blend crude along the Trans-Andean pipeline.

A left-wing guerrilla group had carried out two attacks earlier this month on a section of the pipeline in the south-eastern province of Narino, forcing it to shut down. The company continued exporting crude out of Colombia from stored oil reserves at its terminal at the port of Tumaco.

But the shutdown of the Trans-Andean oil line affected other producers, including Canadian firms Gran Tierra and Petrominerales, as well as Venezuela’s Vetra. Guerrillas appear to be attacking the pipeline about every two weeks, making it the most attacked oil installation in the country.

Attacks against pipelines in Colombia have more than tripled so far this year, as rebels target the energy sector. Guerrillas are also bombing power pylons, creating black-outs in some cities and forcing some oil fields and other installations to run on back-up generators.




and tourism. It also establishes six new conservation areas.“Releasing this plan is a significant step as LARP recog-

nizes the importance of the oil sands as an economic driver while assuring environmentally responsible development of the oil sands resource said Canadian Association of Petroleum Producers (CAPP) vice-president David Pryce.

Sustainable energy think tank the Pembina Institute said today the plan requires more progress on co-management with First Nations groups and more work to limit land impact and water issues.

“While a promising start, today’s announcement is just the beginning of the environmental improvements required to ensure responsible oil sands development. Many elements of the regional plan remain incomplete or works-in-progress,” institute policy director Simon Dyer said. The institute also called for the Alberta government to address greenhouse gas (GHG) pollution from oil sands production.

Chavez says workers to be paid with Petrorinoco bondsVenezuelan president Hugo Chavez has launched a plan to pay off more than $18bn in past-due debts to current and retired government workers with a new bond called the Petrorinoco.

The Petrorinoco bonds are denominated in Venezuela’s currency, with a nominal value of 1000 bolivars and paying 18pc annual interest in four quarterly installments. The bonds will be funded by PdV Social, a new subsidiary of state-owned oil firm PdV.

PdV Social will be capitalized with “dividends from PdV’s Orinoco oil belt joint ventures…the securitization of public housing titles…and other revenue sources,” according to a presidential decree issued last April that formed the fund.

But the Petrorinoco bonds will be issued and administrated by the Workers National Savings Fund, a new state-owned entity also created by decree last April.

Workers that receive Petrorinoco bonds as payment for past-due debts that they are owed by the government will be free to trade them after one year in the state-owned Public Stock Exchange, which is not affiliated with the private Caracas Stock Exchange.

Chavez said this week the first Petrorinoco bonds will be given to workers with state-owned steelmaker Sidor. His announcement came just hours after more than 3,000 steel-workers booed and jeered the president during a nationally televised open meeting in Bolivar state.

Public Stock Exchange president Felix Franco said yesterday the new bonds “offers (government workers) the world’s best advantages for bondholders, including quarterly interest pay-ments and an 18pc interest rate that is higher than the sovereign debt (DPN) bonds that typically pay interest of 14pc to 17pc.”

The Petrorinoco bonds also are a substantially better investment than private bonds in Venezuela that “typically pay interest of only 12pc,” he said.

President Chavez said that his government expects to pay off 100pc of its past-due debts to workers before the 7 October presidential election in 46 days.

Industry News (Continued) But some national union officials – notably Futpv oil union secretary General Jose Bodas and Fetraelec power union president Angel Navas – said the Petrorinoco bonds appear to be a campaign tactic aimed at winning more votes for Chavez’s re-election bid.

Bodas said that with new polls showing Chavez in a vir-tual tie with his opponent, Miranda state governor Henrique Capriles Radonski, the president “obviously is trying to defuse tensions” with government unions that have been working without collective labor contracts and associated job protection for up to five years.

Bodas also questioned how PdV Social expects to capital-ize “non-existent dividends that are not being produced by non-existent Orinoco joint ventures.”

PdV has signed eight Orinoco JV agreements that com-prise the core of its ambitious plans to increase Venezuela’s total crude production capacity from an official level of 3mn b/d today to 4mn b/d in 2014 and 6mn b/d by 2019. But none of these Orinoco ventures are producing oil yet, and dividends probably will not be paid until 2015 or 2016, according to PdV’s own finance officials.

Navas said the 18pc interest rate that the Petrorinoco bonds will pay quarterly “won’t compensate for inflation that over the last several years has averaged well over 20pc annually.”

The Petrorinoco bonds also will lose at least half of their real dollar value early next year when the government is forced to devalue the bolivar by up to 85pc, according to independent economist Jose Guerra.

“The government may issue $18bn of Petrorinoco bonds this year, but after next year’s devaluation the bonds will be worth half that much in dollars,” he said. “But by then it won’t be the central government’s problem since it will have paid of its debts with the Petrorinoco bonds.”

The bonds will bulk up PdV’s total debt very substantially this year, particularly if the central government’s entire $18bn debt to current and retired non-oil government workers is paid in full as pledged by Chavez.

Based on the Central bank’s economic report for the first-half of 2012, issuing $18bn of Petrorinoco bonds would swell PdV’s total debt to about $108bn by the end of the year – not including up to $6bn in additional debt that energy minister Rafael Ramirez has indicated could be issued during the sec-ond half of 2012.

PdV owed Venezuela’s Central Bank about $23.1bn as of 30 June, according to the bank’s first semester 2012 economic report. This is internal debt denominated in Venezuelan cur-rency. Separately, PdV’s external financial debt as of 30 June totaled about $34.5bn, the report said.

But PdV’s combined external and Central Bank debt of $57.6bn as of 30 June does not include over $32bn in out-standing government debts to China that PdV is repaying with crude and refined product shipments that currently average 640,000 b/d.

The Central Bank’s report also said PdV’s account receiv-ables for crude and petroleum product shipments to interna-tional clients totaled $21.4bn as of 30 June, compared with just $616mn at the end of the 1998, the year before President Hugo Chavez assumed power.



Venezuela to get another $4bn cash for oil loanVenezuela’s government expects to sign a new $4bn cash-for-oil loan with China Development Bank (CDB) before the 7 October presidential election, a senior finance ministry offi-cial said today.

The $4bn CDB loan will be used to renew a $6bn special joint fund that was created in 2007 to finance key infrastruc-ture projects in Venezuela. The remaining $2bn will be con-tributed to the joint fund by Venezuela’s state-owned Bandes development bank, which in turn is capitalized with cash transfers made by state-owned oil firm PdV.

The Venezuela-China special joint fund has been renewed four times since 2007, including in 2009, 2010, 2011 and last February, for a total capitalization of $30bn, of which $20bn was borrowed from CDB and $10bn was capitalized by PdV through Bandes. The $6bn renewal expected before the elec-tion will raise CDB’s total cash-for-oil loans to the govern-ment of President Hugo Chavez to $24bn since 2007.

But this does not include a $20bn cash-for-oil loan, half denominated in Chinese currency, signed in 2010. It also does not include $6bn in direct Chinese loans to PdV to fund the development and expansion of existing joint ven-tures in Venezuela. These existing JVs include the expansion of the Sinovensa crude blending facility located at Jose in Anzoategui state to 180,000, up from the current 130,000 b/d, in 2016. PdV and CNPC also have started development of a 400,000 b/d Orinoco extra-heavy crude production JV in the oil belt’s Junin section.

The Chavez government contracted the cash-for-oil loans with CDB, and PdV is repaying the loans with crude and refined products shipments to China. About $14bn of this debt already has been repaid with crude and petroleum product shipments delivered to China’s state-owned energy company CNPC, according to the energy ministry. But this could not be confirmed with the Central Bank or Chinese diplomatic offi-cials in Caracas.

Venezuelan energy minister Rafael Ramirez said this week that PdV now exports 640,000 b/d to China, of which about 264,000 b/d is repayment of the cash-for-oil loans and the rest is commercial sales priced $10/bl higher, on average, than comparable exports to the US.

But official Chinese import data obtained from China’s embassy in Caracas appear to contradict those numbers. During the first six months of 2012, China imported 320,900 b/d of crude and refined products at an average price of $99.67/bl, or 7.14pc less than Venezuela’s first-half 2012 average export price of $107.34/bl.

PdV officials insisted today that exports to China now average 640,000 b/d. But the PdV officials declined to com-ment on why there is a difference of 319,100 b/d between the volumes that PdV says it is exporting to China, and the volumes that arrive in China, according to official Chinese customs data.

Industry News (Continued) Colombian oil minister unexpectedly removed Colombian president Juan Manuel Santos unexpectedly shifted mines and energy minister Mauricio Cardenas to the finance ministry in a cabinet reshuffle today.

Santos did not say who will replace Cardenas, who has held the post since September 2011.

Cardenas was behind the approval of Colombia’s royalty reform, a key initiative that increases oversight of royalties for coal and other resources and redistributes funds among regions that do not currently produce hydrocarbons and coal.

Cardenas was criticized by oil and mining executives who demanded a minister with more industry experience, although he is widely respected for his financial expertise.

A new mines and energy minister will take over the strate-gic portfolio at a time when rebel attacks on oil and electricity installations are on the rise and oil production has been stuck below the government’s 1mn b/d target.

South Korea fails to halt Iran importsSouth Korea’s intention to halt its Iranian crude imports from July has not been borne out by reality, with provisional data showing it actually bought 137,000 b/d for the month.

South Korean authorities said in June that the country was halting its Iranian crude imports from July as it was unable to secure tanker insurance cover because of the EU ban on such shipments as part of tougher sanctions against Tehran. But data from state-owned oil firm KNOC today shows the imports continuing, albeit down 22pc from June and down 42pc against a year earlier.

South Korean refiners indicated this week that they will resume imports of Iranian crude, probably from September, but this may now just be to pre-ban levels. Seoul in June had secured an exemption from possible US sanctions on its Iranian crude purchases, with Washington deciding it had done enough to demonstrate it had cut its Iranian imports suf-ficiently to exempt its financial institutions from the threat of sanctions. South Korean crude imports from Iran in May had totalled 128,000 b/d against 240,000 b/d for all of 2011.

Iran-EU to hold nuclear talksEU foreign affairs representative Catherine Ashton and Iran’s chief negotiator Saeed Jalili will hold a telephone conversa-tion over Tehran’s nuclear programme before the end of this month.

Consultations continue between the E3+3 group of coun-tries — the EU together with France, Germany, the UK, China, Russia, and US. Ashton will “soon” be in contact with Jalili to see how to move forward, her spokesman said. “We expect Iran to take the necessary steps so that a meaningful initial confidence building step could be taken,” the spokes-man said.

Iran wants sanctions to be lifted before negotiating a final agreement over its nuclear programme. “There is no discus-sion among the EU to lift the embargo,” a diplomat said.



Iran was offered various “enticements” at the previous talks in Moscow, Russia, on 18-19 June, including an end to sanctions on the export of aircraft parts. Softening the oil sanctions was not among them.

No quick end to the oil embargo is in sight. Changing the EU’s sanctions regulation requires unanimity among the 27 EU member states and a formal decision by EU foreign ministers. EU sanctions against Iran were agreed in January and came into full force on 1 July. The 27 EU member states are prohibited from importing, trading, or transporting Iranian crude or products, or financing and insuring any of these activities.

Fresh North Sea cargoes for SeptemberBetter than expected production in North Sea fields has result-ed in Forties, Ekofisk and Gullfaks cargoes being added to the September loading programmes.

Shell has been allocated another Forties cargo, due to load 10-12 September, after its 9-11 September loading cargo was advanced to 30 August-1 September because of higher pro-duction than usual at the Nexen-operated Buzzard field. The additional cargo eased Forties differentials, which have been under pressure as looming maintenance at the Buzzard field for most of September cut earlier forecasts to 10 cargoes. The new cargo takes the total to 11. It has a parcel number F0911 and was swift to sell on 21 August at Dated +0.30, 50¢/bl above levels bid for similar dates on the day before.

Traders said Shell has also been allocated an Ekofisk cargo, due to load 24 September, bringing the total number of loadings of that grade next month up to 14. The shortage of Forties cargoes has resulted in increased trade on Ekofisk, with the latter grade being put into chains last week and more expected to follow. With Ekofisk due to produce 300,000 b/d in September, 80,000 b/d more than Forties, market partici-pants expect to see the grade set North Sea Dated. Increased Ekofisk production over Forties has resulted in the former’s differentials coming under pressure, having sold in the after-noon trading window yesterday at Dated +0.80.

Gullfaks is also expected to add a cargo in September, which would take its loadings up to five cargoes equivalent to 130,000 b/d.

Strike threat in NorwayThe Norwegian oil and gas industry could face strike action again after talks got underway today to try to resolve a dis-pute involving 5,800 service company staff.

The dispute is over pay and conditions, including working schedules.

A strike by offshore workers earlier this summer shut in some 15pc of Norway’s crude output.

The oil field services workers – those who repair, ser-vice and generally maintain all Norwegian oil and gas fields both on and offshore Norway in manual and administrative work– are represented by Industri Energi, the oil industry’s largest union.

Industry News (Continued) Industri Energi’s president Leif Sande said: “The main issue is that we want the same pay and conditions that the drilling workers and offshore catering staff achieved earlier this year.” He was unable to give further details of the talks, which are ongoing.

Eli Ane Nedreskar of OLF said the union’s demands were “both extensive and expensive” but OLF denied that a strike would have an immediate effect on production.

The workers are all on separate contracts, working for different companies in various disciplines. If an agreement is not reached by late tomorrow, Industri Energi will terminate all contracts, a formality required to allow it to legally move towards strike action.

The matter would then go before a mediator. A 14-day strike warning cannot legally be issued before then.

They are also constrained by the government’s prerogative to step in and end all action if deemed damaging enough to Norway’s economy and the wider community.

Talks continue tomorrow morning.

Trading head leaves TNK-BPBP Russian joint venture TNK-BP’s head of trading Jonathan Kollek is leaving the company. Some observers suggest Kollek could join state-controlled Rosneft, which announced its interest in buying BP’s 50pc stake in TNK-BP last month.

But a source at Rosneft says it is unlikely Kollek will end up there. Rosneft has recently hired two other former TNK-BP managers, former TNK-BP Ukraine chief executive Didier Casimiro and vice-president Elena Alexeeva. Rumours of Kollek’s possible resignation appeared in 2010 when TNK-BP appointed Graham Sharp — a founder of trading firm Trafigura — to lead expansion of its international trading activities, a role Kollek had been expected to take. TNK-BP later dropped the plan to set up the trading firm. Elena Lobodina, who manages trading at Moscow’s BP office, is expected to replace Kollek at TNK-BP.

Barclays back Norway upstream firmThe private equity arm of UK bank Barclays is to invest at least $200mn in a new Norwegian development and produc-tion company, Tellus Petroleum.

Tellus, led by chief executive Fridtjof Jebsen, aims “to acquire a portfolio of interests in small and medium-sized dis-coveries and producing fields on the Norwegian Continental Shelf,” it said. The company “will then seek to enhance the development of these discoveries, including through time critical satellite tie-backs to existing infrastructure or contrib-uting to improved area solutions, and to increase value in the producing fields.”

Barclays Natural Resource Investments (BNRI) has a $2.1bn portfolio of equity commitments in natural resource investments, including in UK and Ireland-focused indepen-dent Chrysaor, holder of a 40pc stake in the west of Shetland Solan field. Barclays sees a niche for private equity in the Norwegian development and production segment, since new-comers to the country’s continental shelf have mostly focused on exploration.



Nigeria October exports lowest this yearNigeria will export 2mn b/d of crude in October, little changed on September and far from state-owned NNPC’s recent claim of 2.7mn b/d crude production.

The 2mn b/d figure, excluding condensates, is the lowest this year against highs in March and April of 2.4mn b/d for Nigerian exports.

Crude oil theft from pipelines, remains a significant prob-lem in the country with 180,000 b/d estimated to be lost.

Bonny Light suffered a three month force majeure from May to the end of July after repeated pipeline attacks, causing reduced output through the summer for the key grade.

Other light sweet grades, including Amenam and Antan, are suffering lower than average production.

At the beginning of August, NNPC said crude production hit 2.7mn b/d for the first time, citing the success of new secu-rity measures in the Niger Delta in preventing crude theft.

Genel not counting on KRG exports continuingLondon-listed independent Genel Energy is not assuming that the resumption of crude exports from the semi-autonomous Kurdish region of northern Iraq this month will be perma-nent. But the firm is confident that a solution to the impasse between the Kurdistan Regional Government (KRG) and the federal government in Baghdad will be reached eventually. Norway’s DNO, another exporter from the area controlled by the KRG, said it has not been informed that exports will continue beyond the next few days when a one-month deal between the KRG and Baghdad expires.

Trimming Genel’s full-year working interest production forecast, chief executive Tony Hayward said: “The full-year production of 45,000 b/d down to 40,000 b/d is all about the absence of exports. If exports continue, then we will be back up at 45,000 b/d. We have taken the conservative view for the second half of the year that we do not think exports will con-tinue. We may be proved wrong on that.”

Crude exports from the Kurdish region restarted at the beginning of August after a long-running dispute with Baghdad over payments led the KRG to order a halt in April. The KRG said the resumption is a “goodwill initiative” towards Baghdad. The exports have been running at 100,000 b/d for a month but could increase to 200,000 b/d if payments, including reimbursement of costs for foreign firms producing the crude, are forthcoming. That remains the case, Genel said today.

Genel said today that construction of a 150,000 b/d pipe-line linking its Taq Taq oil field to the Iraqi export pipeline at Khurmala is 50pc complete. The firm expects the pipeline to be operational in the fourth quarter.

The pipeline will give the Anglo-Turkish company direct access to Iraq’s state-controlled export pipeline to Ceyhan in Turkey. The company currently has to truck Taq Taq crude exports 135km to Khurmala or 255km to the Fishkabour pump station on the border with Turkey. The pipeline’s capac-ity may be increased to 200,000 b/d with additional pumps,

Industry News (Continued) Genel said. The KRG said in May that the pipeline’s capacity would be 400,000 b/d.

This is the first phase of the KRG’s plans to export crude through Turkey independently of Baghdad. The second phase involves building a 1mn b/d pipeline from Khurmala to Fishkabour and then into Turkey. Genel expects the second pipeline to be complete by the end of 2013. The firm says the new infrastructure will allow it to “more efficiently” access the export market. The pipeline will make KRG exports independent of infrastructure owned by the government in Baghdad. The KRG will then be able to pay Baghdad its share of revenues rather than wait for Baghdad to pay the regional government its allocation.

“The KRG’s hand has been strengthened through the course of the last six or nine months quite significantly by their agreement with Turkey, by the continued arrival of more and more supermajors and by the continuing rise of produc-tion capacity, which will find itself to market,” Hayward said. “You can either look to an agreement between Erbil and Baghdad, or you can look to the creation of infrastructure that allows the KRG to export directly to Turkey. I suspect you may end up finding both coming into play. I suspect ultimate-ly we will end up with both infrastructure in place allowing the KRG to export directly to Turkey and, perhaps as a con-sequence of that, agreement being reached between Baghdad and Erbil primarily over how to share revenues,” he said.

The Taq Taq field produced 66,000 b/d in the first six months of the year, up from 64,000 b/d in the same period last year. Genel has lifted the field’s capacity by 10,000 b/d to 130,000 b/d and is on track to deliver 200,000 b/d capacity by 2014.

The company’s other producing asset in the Kurdish region, the DNO-operated Tawke field, produced 39,000 b/d in January-June, down from 53,000 b/d a year earlier. DNO and Genel are working to increase Tawke’s capacity by 30,000 b/d to 100,000 b/d by the end of the year. They plan to reach 200,000 b/d in 2014.

Genel’s working interest production from Taq Taq and Tawke fell by 5pc in the first six months of the year to 39,000 b/d.

Genel has made significant progress in its two-pronged strategy to expand its presence in the Kurdish region as well as diversify its portfolio by acquiring assets in Africa and other parts of the Middle East. The company has added to its Kurdish assets recently with the acquisition of 44pc stake in the Bina Bawi licence and an additional 40pc in the Chia Surkh licence. A deal with London-listed independent Heritage Oil to acquire a further 26pc stake in the Miran block was completed yesterday. Heritage has also drawn down a $294mn loan from Genel to help fund its planned entry into Nigeria. Under the terms of the loan, Genel can take Heritage’s remaining share in Miran as repayment. It is expected that it will do so.

Genel has acquired its first assets outside Iraq through a series of corporate acquisitions and farm-in deals. It acquired exploration assets in Morocco and Ivory Coast by buying UK-based firm Barrus Petroleum in May. And the firm announced today that it has farmed into the Sidi Moussa block offshore Morocco and area 4 offshore Malta.



In the first half, Genel made a profit of $22.3mn. There is no meaningful comparison as the company was incorporated in April last year and only acquired its first trading business in November.

Oman refinery upgrade progressState-owned Oman Refinery (ORC) has shortlisted a number of international engineering companies for an engineering, procurement and construction (EPC) agreement to upgrade and expand the 116,000 b/d Sohar refinery.

The firms shortlisted include French engineering firm Technip, Spain’s Tecnicas Reunidas, and a joint venture com-prising Indian engineering company Larsen and Toubro and South Korea’s GS Engineering. Others include South Korea’s SK Engineering, Japanese industrial contractor JGC and a joint bid by Japanese engineering corporation Chiyoda and South Korean industrial contractor Samsung. London-listed oil field services company Petrofac and South Korean engi-neering and construction conglomerate Daelim have teamed up, while petrochemicals firm Lurgi and Korea’s Daewoo Engineering and Construction have also put forward a joint bid.

The upgrade and expansion deal is estimated to be worth $1.5-1.8bn and is planned to increase capacity at the refinery to 200,000 b/d.

A vacuum distillation unit and a hydrocracker will also be added to the refinery.

ORC is expected to award the EPC contract in mid-2013, and the project is expected to be completed by the second half of 2016.

As well as the Sohar refinery ORC also operates the 106,000 b/d Mina al-Fahl refinery in Muscat.

Petrochina profits hit by weak downstreamProfit at China’s largest oil and gas producer state-controlled PetroChina fell in the second quarter under pressure from a weaker market, negative refining economics, high inventory and costly imports of piped natural gas and LNG.

PetroChina made a profit of 22.87bn yuan ($3.6bn) in April-June, down by Yn16.28bn or 41.6pc from the first quar-ter and Yn6.1bn or 21pc lower than in the second quarter last year, according to Argus calculations based on company data. Profit for the first six months of this year was Yn62.03bn, up by 6pc on a year earlier thanks to a stronger performance in the first quarter.

Crude production in the first half of the year rose margin-ally to 2.49mn b/d from 2.46mn b/d a year earlier, while the

Industry News (Continued) company cut back refining runs slightly to 2.69mn b/d in the period from 2.71mn b/d a year earlier.

Economics in PetroChina’s refining and chemical opera-tions worsened in the second quarter. The company’s refining segment posted a loss of Yn12.9bn and its chemicals business lost Yn5.2bn, bringing first-half 2012 losses to Yn23.3bn and Yn5.5bn respectively. Government-set retail prices for gaso-line and diesel were lowered twice in the second quarter after two increases in the first quarter of the year, helping extend the company’s refining losses in the half-year period from Yn20.9bn a year earlier.

PetroChina’s capital expenditure (capex) on its refining and chemical segment was Yn9.3bn, or 8.3pc of total capex of Yn111.7bn in the first half of the year. It plans to spend an estimated Yn33.7bn on these operations in the second half of the year.

The company’s small gains in crude production helped its exploration and production segment post a profit of Yn113.9bn in the first half of the year, up from Yn103.7bn a year earlier. But profit in the second quarter was just Yn53.4bn, down from Yn60.4bn in the first quarter, as inter-national crude benchmark prices declined. Realised prices for crude rose by 6.2pc from a year earlier to $107.98/bl in the first half of the year. PetroChina spent most of its capex, Yn69bn, on this segment in the first half of the year and plans to spend an additional Yn103bn in July-December.

But the company continues to struggle with expensive natural gas imports in the form of piped natural gas from Turkmenistan and LNG imports to terminals in east China. Its natural gas business made a loss of Yn353mn in the second quarter after turning a profit of Yn1.9bn in the first quarter. Its natural gas profit shrank to Yn1.6bn in the first half of the year from Yn10.7bn last year.

Domestic natural gas output at the company increased to 7.1bn ft³/d (73.1bn m3/yr) in the first six months of the year from 6.4bn ft³/d a year earlier. Continued work on natural gas pipelines, including the 30bn m3/yr West East 2 pipeline, took capex in this area to Yn30.8bn in January-June, up sig-nificantly from Yn18.6bn a year earlier. PetroChina plans to spend another Yn32.5bn in the second half of the year.

Weak demand for products hit marketing profits, which fell to Yn10bn in the first half of the year from Yn13.6bn a year earlier. Profit was hit by high inventories and ample supply, especially in comparison with the tight market in the first half of last year. But PetroChina added 318 new retail stations, bringing its total to 19,469 or 40pc of market share. Capex in this segment of its business fell to Yn2.5bn in the half-year period from Yn3.9bn a year earlier. The company plans to spend Yn14.1bn in the second half of this year.



Americas Crude Deals Done $/bl

Grade Location Trade month Basis month Differential basis Differential Price Volume (b/d)

WTI Cushing Oklahoma Oct Oct CMA Nymex Trade Days -0.42 1,000

WTI Cushing Oklahoma Oct Oct CMA Nymex Trade Days -0.40 500






WTI Cushing Oklahoma Sep Sep CMA Nymex Trade Days -0.42 5,000








WTI Cushing Oklahoma Sep Sep Phillips 66 Posting +2.90 3,333

WTI Cushing Oklahoma Sep Sep Phillips 66 Posting +2.95 2,000

WTI Cushing Oklahoma Sep Oct WTI -0.35 1,000


WTI Cushing Oklahoma Sep Oct WTI -0.32 500















WTI Midland Texas Oct Oct WTI -1.45 1,000



WTI Midland Texas Sep Sep WTI -1.50 1,000







Eugene Island St. James Louisiana Sep Sep Bonito +0.20 3,000

Eugene Island St. James Louisiana Sep Sep Bonito +0.20 3,000

HLS Empire Louisiana Sep Sep WTI +18.65 1,000




Americas Crude Deals Done (Continued) $/bl

Grade Location Trade month Basis month Differential basis Differential Price Volume (b/d)


LLS St. James Louisiana Oct Oct WTI +18.00 1,000




LLS St. James Louisiana Sep Sep WTI +18.90 1,000










Mars Clovelly Louisiana Oct Nov Mars +0.55 3,000



Mars Clovelly Louisiana Oct Oct WTI +13.40 1,000



Mars Clovelly Louisiana Sep Sep WTI +13.35 757

Mars Clovelly Louisiana Sep Sep WTI +13.40 1,000






Poseidon Houma Louisiana Sep Sep WTI +13.75 1,000

Southern Green Canyon Nederland / Texas City Sep Sep Mars -0.90 4,000

Thunder Horse Clovelly Louisiana Sep Sep WTI +16.25 1,333

Thunder Horse Clovelly Louisiana Sep Sep WTI +16.25 2,000

WTS Midland Texas Oct Oct WTI -4.85 1,000




WTS Midland Texas Sep Sep WTI -4.00 583

argus americas crude · 8/23/2012 · argus americas crude argus americas crude market prices and...

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