platts oilgram news sep 17 2014 pag 5 colombian pipelines attacks

Volume 92 / Number 183 / Wednesday, September 17, 2014

[OIL ]

www.platts.com OILGRAM NEWS

Top stories

Asia Pacific

KNOC sees new opportunity in shale 2

Total launches development of Sisi-Nubi 2

PTTEP to invest $3.3 billion in Myanmar upstream 2

Europe, Middle East & Africa

Russian firms flag delay to Siberian fields 3

Iran completes gas line to Iraq but delays exports 3

Nigerian oil workers strike over pensions 4

Ophir expands African LNG plans after new find 4

Sasol to push ahead in South Africa despite uncertainty 4

The Americas

Cano Limon pipeline still shut after attack 5

Corpus Christi splitter project progresses 5

ExxonMobil’s Kara Sea drilling must stop 6

Indian refiners eke out a profit on diesel as oil falls 6

Markets & Data

Crude futures higher ahead of weekly stock reports 7

Firm West African demand tightens Europe products 7

US ‘near miss’ offshore reporting system on the wayWashington—A voluntary federal data col-lection program aimed at improving offshore oil and gas safety will be sent to the White House for approval next month and is expect-ed to be in place before the end of the year, spokesmen for the two agencies developing the program said.

The “near miss” data collection program is being developed by the US Transportation Department’s Bureau of Transportation Statis-tics and the Interior Department’s Bureau of Safety and Environmental Enforcement.

Under the system, which is modeled after a similar system to track near-miss incidents in the airline industry, offshore operators will voluntarily and anonymously report near inci-dents which otherwise would not be required to be reported.

An information collection request will be sent to the White House’s Office of Management and Budget next month, BTS spokesman David Smallen, said Tuesday. The new system is expected to be in place by the end of the year, BSEE spokesman

Nicholas Pardi said.The US offshore industry has bristled at

some of the details of the data collection pro-gram, claiming it may be too broad and could create administrative headaches for both off-shore operators and regulators.

The American Petroleum Institute and its Center for Offshore Safety claimed that how regulators define a “near miss” is too vague and does not including a ranking system for the severity of potential incidents. This could lead to a number of reports on inconsequen-tial events submitted, which would overwhelm oversight efforts.

“The proposed definition of ‘near miss’ leaves much leeway, and may impact the num-ber of reports submitted,” the industry groups wrote in a recent letter to the DOT.

In a separate letter, Louisiana-based LLOG Exploration, an offshore operator, wrote that by not ranking the incidents by severity “there is the risk of reporting incidents out of con-text from both an under-reporting and over-

(continued on page 5)

World needs less OPEC oil in 2015: BadriOil producer group may lower output by 500,000 b/d

London—OPEC may lower its oil output next year in response to weaker demand for its crude, the organization’s secretary general Abdalla el-Badri said Tuesday in comments widely interpreted as a hint that OPEC is con-sidering cutting its production targets before year-end in response to weaker oil prices.

Speaking in Vienna after talks with Rus-sian energy minister Alexander Novak, Badri was reported as saying that he thought the group’s output target would be lowered by 500,000 b/d for 2015.

But Badri, speaking to Platts later by tele-phone, stressed that he was not predicting the outcome of OPEC’s November 27 ministe-rial meeting, which will review the current 30 million b/d output ceiling that has been in place since January 2012, but was referring to lower expectations of demand.

“I said this is only an outlook,” he told

Platts. It is “not a decision,” he said, adding: “Our outlook is 29.5 million b/d.”

According to its latest monthly report released last week, OPEC expects demand for its crude to average 29.45 million b/d this year and to fall to 29.2 million b/d in 2015, a year-on-year average drop of 250,000 b/d. But between the fourth quarter of this year and the first quarter of 2015, OPEC expects demand for its crude to plunge by nearly 1.8 million b/d—from 30.15 million b/d in the fourth quarter to 28.39 million b/d in the first three months of next year.

Badri’s comments provided additional sup-port to rebounding crude prices Tuesday, with the front-month WTI contract gaining over $1/barrel in US trading hours.

“Talk of an OPEC quota reduction for 2015 is the bigger influence here, and the statement from Secretary General El-Badri is at least a reminder that OPEC is well aware of the declining call on OPEC crude, and willing to offset it with reduced output,” Citi said in a note.

(continued on page 6)

�� Comments spark oil price rebound�� Sees oil price recovery by year-end

2 Oilgram News / VOlume 92 / Number 183 / wedNesday, september 17, 2014

ASiA PACifiC

Seoul—State-owned Korea National Oil Corp. is eyeing tight oil development in North America or elsewhere as part of its efforts to secure cheaper energy resources for South Korea, a senior KNOC official said Tuesday.

Mounting geopolitical risks in the Middle East and Africa leaves KNOC with few places where it can pursue upstream projects, but shale provides new opportunities, Choi Byeong-goo, KNOC’s technology chief, said on the sidelines of the International Shale Gas Conference in Seoul.

“Upstream is becoming more technologi-cally challenging, more time-consuming and more costly,” Choi said. “Under the chang-

ing energy paradigm, just efforts to secure resources are not economically viable. What is at stake is how to secure technology,” said Choi, who is the president of KNOC’s Petro-leum Technology Institute.

“KNOC is currently in the stage of accu-mulating technology and experience for shale gas development by participating in Canadian and US projects,” Choi said. KNOC is involved in two shale gas projects—Deep Basin in Canada and Eagle Ford in the US.

KNOC has drilled 40-80 wells a year in the Deep Basin through its Canadian unit Har-vest Operation Corp.

In 2011, KNOC bought a 23.7% stake in

the Eagle Ford shale from Anadarko, its first acquisition of unconventional assets. Several KNOC engineers are jointly working with Anadar-ko in the Eagle Ford shale project, Choi said.

“Over the next three years until 2017, KNOC will push for joint operatorship in upstream shale gas projects to acquire tech-nical expertise,” he said. “On the basis of the accumulated technological skills and experi-ence, KNOC would seek independent opera-torship from 2018,” he added.

FinancingHe did not say where debt-laden KNOC

would find the money for shale gas proj-ects. However, another KNOC official said that the company’s recent divestment plans and belt tightening would not affect its shale gas projects.

“KNOC has sold some foreign assets as part of its efforts to improve its financial con-dition, but this does not mean it would refrain from investing in upstream projects,” he said. “KNOC will refrain from costly M&A deals that require massive cash input, and instead will push for more upstream exploration projects.”

High development costSeveral speakers at the conference spoke

about how cost was the biggest hurdle in shale gas development.

“Cost reduction and technology improve-ment is the key to the future of the shale gas boom. Technology is a key to identifying, developing and producing shale and other tight rock unconventional reserves,” said Edward Poole, vice president for tight and unconventional resources at Chevron.

Dong Xiucheng from China University of Petroleum said that despite having abundant shale gas resources, China’s technology and equipment were in a nascent stage.

Reiterating that China would be able to meet the target of 6.5 billion cubic meters of shale gas output in 2015, he said shale gas exploration and development still faced many challenges. — Charles Lee

KNOC sees new opportunity in shaleLooks to acquire technology and expertise before investing big

Total launches development of Sisi-NubiJakarta—France’s Total has launched develop-ment of the Sisi-Nubi Phase 2B project—a key project to arrest declining production at the giant Mahakam gas block offshore East Kalimantan in Indonesia.

Sisi Nubi Phase 2B is part of an approved development plan for Sisi Nubi Phase 2, which includes Phase 2A and 2B, Hardy Pramono, President of Total E&P Indonesia, said Tuesday.

The entire project is expected to cost $1.033 billion, with Sisi-Nubi Phase 2B cost-ing $739 million, Pramono said.

The Sisi Nubi Phase 2B is designed to produce 350,000 Mcf/d of gas and produc-tion is expected to start before the expiration of the current production sharing contract for the block in 2017, a source, who declined to be named, said Tuesday.

About 70% of the output will be allocated for export and the remaining 30% for domes-tic use, the source said.

Mahakam is Indonesia’s largest gas block and most of its output is fed to the Bontang LNG plant.

The block had proven and probable reserves of 1.68 billion barrels of crude and 21.2 Tcf of natural gas when it was discov-ered in 1972. Total and Inpex have so far exploited 80% of the block’s reserves.

The block is currently estimated to have 2.7-3 Tcf of proven gas reserves, but this is expected to fall to 1.3-1.6 Tcf in 2018 due to natural depletion.

Total and Japan’s Inpex each have a 50% stake in the block.

The companies have been seeking an early extension to the block’s PSC and have in the past said an extension is crucial in order for them to proceed with their invest-ment plans for Mahakam and maintain pro-duction levels there. But negotiations with the government have dragged on, mainly due to continued uncertainty surrounding Indonesian state-owned Pertamina’s role in the asset.

A senior Total official said in May that the

company was concentrating on its operations and on delivering production for as long as possible despite the uncertainty surrounding the PSC extension.

The partners plan to spend $2.5 billion a year in 2014 and 2015 to maintain output at the block.

Besides Sisi Nubi Phase 2B, Total is also developing other projects on the block — South Mahakam 3 and Bekapai 2A and 2B — to help maintain production at cur-rent levels.

The Bekapai projects are expected to add more condensate than gas, producing up to 1,800 b/d of liquids and 20,000 Mcf/d of gas, the source said.

“Drilling activities are expected to start next year and production can be achieved before the contract ends. But again, it will only offset declining production and won’t increase the output,” the source said.

The Mahakam block is currently produc-ing about 1.7 Bcf/day of gas and 67,000 b/d of liquids. — Anita Nugraha, with Mriganka Jaipuriyar in Singapore

PTTEP to invest $3.3 billion in Myanmar upstreamSingapore—Thailand’s PTT Exploration & Pro-duction plans to invest over $3 billion, or a fifth of its capital budget, a little in Myanmar’s exploration projects.

Spending in Myanmar will focus on seven exploration blocks, the company said.

Three of these—MOGE 3, PSC G and EP 2—were awarded during Myanmar’s last onshore bid round. PTTEP said extensive explo-ration drilling has started in PSC G and EP 2.

The offshore M11 block in the Mottama basin was awarded to PTTEP in 2005. It has a 45% stake, partnering France’s Total (40%) and Japan’s JX Nippon (15%). The partners drilled the Manizawta-1 deepwater well in the block in the fourth quarter of last year, although that came up dry. They have since started a subsur-

face study for more potential prospects in the area during the first half of this year.

In the nearby M3 block in the Gulf of Martaban, PTTEP, which operates the acreage with 80% stake alongside Japan’s Mitsui, is planning to drill five appraisal wells and one wildcat well during 2014-15.

Lastly, the company has completed 2D seismic acquisition and is interpreting the data at blocks MD-7 and MD-8 offshore in the Andaman Sea.

Earlier this year, the Zawtika gas field—Myanmar’s fourth producing project —came on stream in March. PTTEP said Zawtika pro-duction has ramped up to 300,000 Mcf/d, the majority of which is exported to Thai-land.— Song Yen Ling


Moscow—Russia’s oil majors have flagged delays to a number of oil field projects in Siberia in order to assess the impact of the latest Western sanctions on their operations, the country’s national pipeline operator Trans-neft said Tuesday.

Transneft has also postponed the launch of two new lines connecting greenfield sites in Siberia into Russia’s domestic pipeline network on the back of the expected delays of between two and three years at some of the fields, a company spokesman said.

Producers Rosneft, Lukoil, Gazprom and its oil arm Gazprom Neft have informed Transneft that they need more time to reappraise estimat-ed start-up dates for some of their Siberian oil projects after flagging initial setbacks to the gov-ernment during the summer, Igor Dyomin said.

The government ordered the oil compa-nies to present new estimated oil loading pro-grams to Transneft by September 15 in order for the state pipeline giant to plan the launch of two new Siberian oil routes.

“Due to recently imposed sanctions the companies asked to extend the deadline as they have little clarity due to the changing situation,” Dyomin said

The comments come just days after the EU and US imposed new sanctions on Trans-neft, Rosneft and Gazprom Neft, banning Western firms from supporting their activities in exploration or production from deep water, Arctic offshore or shale projects and limiting access to Western financing and technology.

The US also added Russia’s Gazprom, Lukoil, and Surgutneftegas to its list of sanctions.

Dyomin denied, however, that Transneft itself has seen its pipelines plans hit by sanc-tions and was unable to say why the oil com-panies had flagged the initial project delays to the government.

Transneft’s initial plan envisaged the 900,000 b/d Zapolyarye-Purpe pipeline and 300,000 b/d Kuyumba-Taishet coming online in 2106 to ship crude from new fields in northern Russia and East Siberia into the

ESPO network.Russia has recently been redirecting some

of its westbound oil flows to the east to take advantage of the stronger Asia Pacific market, as well as commitments by Rosneft to gradu-ally boost deliveries to China.

Construction of the Zapolyarye-Purpe and Kuyumba-Taishet routes fits in with the redi-rection strategy, as the lines will help boost eastbound oil flows.

The development of Russia’s East Siberia oil fields are considered a key growth driver for the country’s oil sector.

In April, oil giant Rosneft said it expected to launch crude production at the Yurub-cheno-Tokhomskoye field, the company’s second-biggest oil asset in East Siberia, in 2017. At the time, Rosneft said it expected the construction of a pipeline to link the Kuyumba and Yurubcheno-Tokhomskoye fields to the East Siberia-Pacific Ocean oil pipeline was expected to be completed by the end of 2016.

East Siberian C1+C2 crude reserves—roughly equivalent to proved undeveloped, probable and possible under international standards—are estimated at 2.4 billion mt, the gas reserves stand at just over 8 billion mt, according to recent estimates by All-Russian Research Geological Oil Institute. — Dina Khrennikova, Robert Perkins

Russian firms flag delay to Siberian fieldsTransneft postpones two oil pipelines over setbacks

iran completes gas line to iraq but delays exportsTehran—The National Iranian Gas Export Com-pany (NIGEC) said Tuesday that Iran has com-pleted a natural gas pipeline to Iraq but that Tehran won’t begin gas exports to its neighbor until the insurgency situation in Iraq has stabi-lized, oil ministry news service Shana reported.

“Iran is waiting for stability in Iraq for gas exports,” NIGEC Managing Director Alireza Kameli said. “Iran will be ready to export gas to Iraq as of next year but the start of gas export operations definitely depends on establishment of normal conditions in the country.”

The new Iranian year starts in March.Tehran and Baghdad finalized an agreement

in July last year under which Iraq would receive an initial flow of around 4 million cubic meters/day of natural gas, with the volume rising to 25 mil cu m/d at a later phase and eventually reaching as much as 45 million cu m/d.

The first-phase pipeline starts at the town of Charmaleh in the western Ilam province and runs 220 km to the border town of Nafthshahr.

The gas will feed a power plant in the Iraqi city of Sadr and another facility north of Bagh-dad, producing a total of 2.5 GW of electricity.

“Iraq plans to use the gas for its power plants...but the recent incidents have caused problems for them,” Kameli said.

Offensives by the Islamic State insurgency have destabilized large parts of Iraq in recent few months.— Aresu Eqbali

EUROPE, MiDDlE EAST & AfRiCA

News Briefs

Conoco reported to sell UK field stakeConocoPhillips plans to sell its 24% stake in the UK’s giant Clair field, off northwest

Scotland, and is targeting a price of $2-3 billion, the Financial Times reported Tuesday.ConocoPhillips has hired banks to carry out the sale, according to the report which com-

pany decline to comment on.A sale would be the latest in a series of withdrawals from the UK by US companies

increasing their focus on booming domestic production.The report came as Scotland prepares to vote in a referendum on independence from

the UK on Thursday, with opinion polls showing a close race.BP confirmed that its Clair Ridge project—a second development phase intended to add

640 million barrels of production over four years—will come on stream in 2017 rather than 2016, as previously planned. It is expected to produce up to 120,000 b/d of oil.

Protesters vacate Chevron platform in Niger DeltaChevron Nigeria’s oil producing unit confirmed on Monday that protesters from the Niger

Delta seized one of its offshore production platform but added the protesters have now vacated the facility.

The youths shut down the facility to protest non payment of compensation by the US firm for an oil rig blow-out in January 2012, sources said Monday.

“Some youths claiming to be from communities neighboring our operations in Bayesa state, who illegally bordered our North Apoi platform off the coast of Nigeria have vacated peacefully,” Chevron said in a statement.

“No one on the platform was harmed abduction there was no damage to the facilities,” Chevron said.

The platform was producing around 220,000 b/d before the protest.

Russian Samburgskoye field starts new phaseRussia’s Novatek reported Monday the launch of the third phase of the Samburgskoye

gas condensate field in West Siberia, to raise the project’s capacity to peak production of 7 billion cubic meters/year of natural gas and over 900,000 mt/year of condensate.

The third phase adds 2 Bcm/year of natural gas to the field’s capacity, it said.The Samburgskoye field is being developed by SeverEnergia, a joint venture between

Novatek and Gazprom Neft.Its proved reserves stood at 90 Bcm of natural gas and 14.3 million mt of liquids as of

31 December 2013, according to the SEC classification.Commercial production started in April 2012 and accounted for 4.8 Bcm of natural gas

and 646 mt of liquids in 2013, it said.


Lagos—Oil workers at state-run Nigerian National Petroleum Corp., began an indefinite strike Tuesday that could disrupt oil produc-tion and exports from the African OPEC mem-ber, unions officials and the NNPC said.

Workers have already halted loading of gasoline at the four state-owned refiner-ies and depots across the country, Nojeem Korodo, a spokesman for the unions, said, adding that NNPC workers and their coun-terparts at the department of petroleum resources have also been directed to pull out from oil export terminals.

“The strike is total because the NNPC management failed to meet the deadline set by the unions,” Korodo said. The unions took the action after failing to resolve a dispute

over pensions and other issues, a union offi-cial said earlier Tuesday.

NNPC’s headquarters in Abuja have been shut to workers and visitors, the union official said. It could not be independently confirmed if the workers’ withdrawal from the export ter-minals halted crude shipments by Nigeria.

The union spokesman said that if NNPC management failed to meet workers’ demands, “in the shortest time possible, oil export terminals will be shut down.”

Gasoline suppliesNNPC manages the government’s interest

in joint ventures with foreign firms, including Shell, ExxonMobil, Chevron, Eni and Total. It accounts for about 90% of Nigeria’s 2 million b/d of oil production.

NNPC staff monitors and approves crude shipment documents at the terminals in con-junction with industry regulators.

NNPC joint venture partners said they

were closely monitoring developments in the corporation.

One official at a Western oil company oper-ating in Nigeria who preferred not to be identi-fied said it may take up to a week before the oil companies feel the impact of the strike on production and exports if action is maintained.

NNPC spokesman Ohi Alegbe said Tuesday that company was prepared to address the workers’ pension concerns and end the strike.

“NNPC is taking steps to avert a looming industrial action by the corporation’s arm of the National Union of Petroleum and Natural Gas Workers and the Petroleum and Natural Gas Senior Staff Association of Nigeria,” Alegbe said.

Officials also said Tuesday the NNPC strike could hit gasoline imports and distribu-tion, as the corporation accounts for 60% of the Nigeria’s gasoline imports.

NNPC has had difficulty meeting its portion of cash call contributions to funding joint ven-ture operations with its foreign oil partners, a source said. For pension contributions, the com-pany has fallen Naira 85 billion ($531 million) short, according to sources. — Staff Reports

Nigerian oil workers strike over pensionsDomestic gasoline supplies hit, exports at risk

Ophir expands African lNG plans after new findLondon—African-focused explorer Ophir Ener-gy said Tuesday it has made a new gas find offshore Equatorial Guinea, supporting plans for an expanded floating LNG export develop-ment in the West African country.

Ophir said its Silenus East-1 well on Block R discovered a 67-meter gross gas column in a “high-quality” reservoir. The find is esti-mated to hold reserves in line with pre-drill estimates of 405 Bcf, Ophir said.

Including recent discoveries, the total mean recoverable resources for Block R are now estimated at 3.4 Tcf, the company said.

“The Silenus East well result has confirmed sufficient incremental volumes for Ophir to be able to expand the Block R FLNG project from a 2.5 million mt/year to a 3 million my/year project,” CEO Nick Cooper said in a statement. “This is important in that it provides economies of scale that increase the value of this already economic project,” he said.

The FLNG project is expected to deliver first gas in early 2019, Ophir said, somewhat later than earlier hopes of exports in late 2017 or 2018.

Ophir’s drilling update was not all positive. Ophir said a deeper secondary drilling target at the well, which had been targeting oil, was water-filled with only weak oil shows. Inves-tors have harbored hopes that Ophir could strike more valuable oil off Equatorial Guinea, which is already one of sub-Sahara’s largest oil producers.

Ophir is seeking a major mid-stream partner to help fund the planned floating LNG facility in Block R and is agreeing gas terms for the development.

“This discovery may help, however at 3.4 Tcf, this remains at the limit of what most larger players would consider commercial,” analysts at Westhouse said in note.— Robert Perkins

Sasol to push ahead in South Africa despite uncertaintyLondon—South Africa’s Sasol will continue work under the terms of its exploration per-mit for a license area offshore Durban, but moving to a next phase of exploration will depend on the results of the review of draft legislation designed to cover the nascent upstream sector in the country, a company spokesman said Tuesday.

Several companies, including the US’ Anadarko Petroleum and Shell, have expressed reservations about spending on operations in South Africa while the review of the country’s Mineral and Petro-leum Resources Development Amendment (MPRDA) bill is ongoing.

“Work to be undertaken with regard to the Durban exploration permit continues,” the Sasol spokesman said.

He added that a seismic survey carried out in March and April this year has been complet-ed and analysis of the data is ongoing.

The company’s CEO David Constable ear-lier this month said the company was awaiting the outcome of the review before taking explo-ration efforts to the next stage.

Sasol was awarded the three-year license in November last year, and then in June Italy’s Eni took control of the ER236 permit after taking a 40% stake and operatorship.

The unexplored block covers 82,000 sq km in the Durban and Zululand offshore basins which are of interest because they sit at the southern end of the Mozambique Channel.

Sasol shot a first phase of seismic at the end of 2013 covering 4,000 km.

Sasol’s position is not as clear-cut as that of Anadarko, which earlier this year said it had mothballed spending due to the lack

of clarity over the proposed changes to the MPRDA, which was passed by parliament March 2014.

Anadarko has an 80% interest in two blocks with state-owned PetroSA in the Orange Basin.

“We have suspended all our expenditure until the petroleum law and fiscal terms are more clear, so that’s a bit disappointing,” Anadarko’s exploration manager for East Afri-ca, Tom Fletcher, said in Nairobi in April.

Shell also said it hoped the current uncertainty over the bill would be resolved to allow the company to move forward with drill-ing plans.

Shell was awarded the permit, situated in water depths of up to 3,500 meters and covering an area of more than 37,000 km, in 2012.

The MPRDA offers the state a 20% free carried stake in all new develop-ments, no limit on state ownership of assets and no clarity regarding the pricing terms for stake acquisition, according to industry experts.

The concern within the industry centers on its potential deterrent to investors as it ultimately awards the state unfettered discre-tion to acquire exploration opportunities with-out its having to contribute to capital develop-ment costs.

Although South Africa still awaits a large discovery, the sector has drawn interest from companies including Shell, Total, Sasol, Canadian Natural Resources, ExxonMobil and a number of independents with all of its off-shore hydrocarbon blocks now under license. — Stuart Elliott

EUROPE, MiDDlE EAST & AfRiCA


Corpus Christi splitter project progressesNew York—CCI Corpus Christi’s condensate splitter project, geared towards finding a home outside of the US for rapidly growing North American production of ultra-light, sweet liquids, made progress Monday after receiving federal environmental regulatory approval.

With domestic refineries reaching their saturation point when it comes to the pro-cessing of light sweet crude, US producers are looking for export outlets in order to keep prices high enough to fund exploration and production in unconventional plays such as Texas’ Eagle Ford Shale.

CCI Corpus Christi, owned by merchant commodities firm Castleton Commodities Inter-national, still needs two further state environ-mental permits before construction can begin on Phase I of its planned 100,000 b/d facility, a spokeswoman for the Texas Commission on Environmental Quality (TCEQ) said Tuesday.

“There are two air permits under techni-cal review,” said TCEQ spokeswoman Andrea Morrow, adding that the project needs approval of its New Source Review (NSR) and Prevention of Significant Deterioration (PSD) permit applications.

Both relate to air quality and permitted levels of emissions, she said, adding that there is no timeframe for when the approvals for the two outstanding permits will be given.

“A technical review varies tremendously based on the scope of the project,” Morrow said, adding that the review is considered complete when the engineers are satisfied and sign off on it.

Export plansA 40-year ban on crude oil exports to

most countries means potential exporters like CCI Corpus Christi need explicit export permission from the US Department of Com-merce before they can ship out any liquids.

Two companies, oil and natural gas produc-er Pioneer Natural Resources and midstream giant Enterprise Products Partners, received approval during the summer to export a cargo each of processed condensate to Asia.

The port of Corpus Christi is located near the Eagle Ford Shale play, where produc-tion was up to 1.5 million b/d in July from 411,000 b/d in July 2013, according to data from Bentek Energy. Bentek Energy is a unit of Platts.

During Phase 1 of the project, CCI plans to build a condensate splitter with two 50,000 b/d splitter trains, as well as associated equip-ment. The second phase of the project will include construction of a bulk terminal capable of exporting 500,000 b/d of not only conden-sate but diesel, jet fuel, naphtha, gasoil, and Y-grade liquids, according to the PSD permit application made with the TCEQ.

A Castleton spokeswoman was not avail-able for comment Tuesday. Prior to January 2013, Castleton Commodities International LLC was known as Louis-Dreyfus Highbridge Energy. — Janet McGurty

Bogota—Colombia’s 220,000 b/d Cano Limon pipeline remained closed Tuesday after the weekend killing by suspected leftist guerril-las of two contractors sent to fix a rupture caused by a bombing the week before. Pipe-line operator Ecopetrol has given no indication of when the 500-mile line might reopen.

Bogota-based security consultant Orlando Hernandez of Agora Consultores said repair crews are still working near the half-way point of the line that connects Occidental Petroleum’s Cano Limon oil field in Arauca province with the Covenas offloading port on the Caribbean.

The Cano Limon line, which is second only to the 585,000 b/d OCENSA pipeline in size and importance to Colombia’s oil industry, was bombed a total of three times in August in addition to last week’s attack.

The killing of the two workers by sus-pected members of the National Liberation Army (ELN) on Sunday is part of a pattern of attacks on Colombian oil infrastructure carried out by the ELN and another leftist rebel group known by its initials FARC. The FARC currently is involved in peace negotiations in Havana.

Ecopetrol president Javier Gutierrez told El Tiempo newspaper on Monday that Colombia’s oil field infrastructure has been attacked 140 times so far this year. He called on Colom-bia’s armed forces to beef up security at oil installations and bring the killers to justice.

Production loss strains budgetCombined with community protests that

have halted operations at several oil fields this year, the attacks have cost the country 40,000 b/d of production so far this year, according to energy vice minister Orlando Cabrales. Crude output this year is expected to fall short of the 1.007 million b/d averaged in 2013.

The loss of anticipated oil export sales has been the single most significant contribu-tor to the Colombia government falling about $6 billion short of the tax and royalty revenue it expected to collect this year to fund social programs and infrastructure projects, causing a huge fiscal hole.

Security consultant Hernandez said that

the number of guerrilla attacks on oil field operations and personnel is running at a lower rate than last year, but the economic consequences of the attacks have been much more severe in 2014.

The uptick in oil field violence has also been partially blamed for the relatively poor results of the 2014 Colombia Bid Round completed in July in which only 26 of 95 exploration blocks on offer received bids from oil companies.

Earlier this year, the Cano Limon line was down a total of 90 days after indigenous com-munities along the pipeline route refused to allow repair crews on-site to fix bomb damage, claiming the government first had to promise to clean up oil spills caused by the attacks. In addition to bombings, guerrillas have kid-napped seven oilfield workers so far this year, all of whom have been released.

In Sunday’s attacks, the two contractors, welder German Ariza Camacho and heavy equipment operator Jairo Aguilar of the Ter-moelectrica Coindustrial firm were killed by snipers as they labored to restore operations where the pipeline crosses the Teorama town-ship in North Santander state near the Ven-ezuelan border.

Hernandez said it was the first time guer-rillas had killed oilfield workers with gunfire since July 2012, when five Ecopetrol contract workers were killed in Puerto Caicedo town-ship in southern Putumayo province. The workers were then fixing the 45,000 b/d Transandino pipeline that runs from Orito to Tumaco on the Pacific coast.

In August, the Transandino complex of pipelines was bombed a total of five times by suspected rebels, Hernandez said. Numer-ous tanker trucks that producers use to haul crude were forced by rebels to empty their loads, causing extensive environmental dam-age. — Chris Kraul

Cano limon pipeline still shut after attackPattern of violence continues on Colombia’s oil infrastructure

reporting standpoint.”These industry groups also pushed against

a plan in the proposed program to allow report-ing of near misses by individuals, in addition to companies, which they claim “allows for alleged near misses to be reported by dis-gruntled individuals who may want to create inconveniences for industry organizations.”

Similarly, the Offshore Operators Com-mittee, another industry group, wrote that allowing reporting from companies only “will

provide more consistent and focused report-ing data.”

Earlier this year, BSEE Director Brian Salerno said the program will give indus-try and regulators a “broad view” of which safety barriers are working and which ones have failed.

He said that the anonymous nature of the reporting system allows operators to partici-pate without fear of added scrutiny from regu-lators. — Brian Scheid

US ‘near miss’ offshore reporting system on the way...from page 1

ThE AMERiCAS


OPEC’s biggest producer Saudi Arabia cut its crude production by 408,000 b/d in August, according to its submissions to OPEC, the biggest monthly reduction since late 2012.

A Platts survey of OPEC and oil industry officials and analysts last week estimated OPEC crude output to have averaged 30.2 mil-lion b/d in August. The International Energy Agency estimated OPEC production to have averaged 30.31 million b/d. OPEC’s Vienna secretariat, using secondary sources, estimat-ed August production at 30.347 million b/d.

In its latest monthly report last week, the IEA said it saw a need for less OPEC crude, cutting its “call” of OPEC oil by 300,000 b/d to 29.6 million b/d.

Oil pricesBadri was also quoted as saying he

expected world oil prices to stage a recovery from two-year lows by the end of this year.

The oil producer group’s crude basket, which dipped below the $100/barrel level in mid-August and has been falling since, stood at $94.68/b on Monday.

“The oil price has been falling over the past two months but we believe that the price will grow again by the end of the year,” Rus-sian news agency Prime quoted Badri as say-ing after the talks with Novak.

Last week, Saudi oil minister Ali Naimi played down the sharp drop in oil prices,

saying prices “always go up and down so I really don’t know why the big fuss about it this time.”

A joint statement said the Vienna talks had reached “a general consensus that the market is well-supplied with healthy stock levels and adequate spare capacity.” Both delegations, the statement said, “also under-scored the importance of stable and predict-able markets for the health of the industry and investments and the well-being of the global economy.”

The meeting between Badri and Novak was a regular annual meeting to discuss the general oil market situation, a Russian minis-terial spokeswoman said.

Russia’s budget envisages crude prices for Urals, the country’s key export blend, at $96/barrel, and the current decline in oil prices puts pressure on a country already hit by western sanctions over Moscow’s role in the Ukrainian conflict.

The sanctions limit access to capital markets for a number of Russian key oil pro-ducers and also ban exports of equipment and technology for oil drilling in the Arctic and deepsea as well as for shale.

The spokeswoman also said that the min-istry planned to offer a new date for trilateral talks among Kiev, Brussels and Moscow to discuss ways to resolve the ongoing gas dis-pute between Russia and Ukraine — Margaret McQuaile with Nadia Rodova in Vienna

World needs less OPEC oil in 2015: Badri...from page 1

Washington—If ExxonMobil intends to halt its Kara Sea drilling project with Rosneft, as required under the latest round of US sanc-tions, it is not tipping its hand.

But the US Treasury Department says its sanctions, implemented in response to Rus-sia’s continued involvement in the Ukraine crisis, are clear—all US companies involved in Arctic, deepsea and shale oil projects in Russia must cease them by September 26.

“Any joint project, any ongoing existing project or contract that involves this activity would fall under these sanctions,” a Treasury official, who spoke on condition of anonymity, told Platts.

ExxonMobil has yet to say how, or even if, it will unwind its Kara Sea drilling operations, which began in mid-August.

In a statement, company spokesman Alan Jeffers would only say that ExxonMobil is “assessing the sanctions” and would “comply with all laws.”

He would not comment on whether Exxon-Mobil would withdraw its staff and equipment, or if it would restrict partner Rosneft’s access to any data. Nor would he say whether Exxon-

Mobil will continue to finance the project, as the US sanctions do not cover financing.

ExxonMobil and Rosneft began drilling their first exploration well in the Arctic Kara Sea on August 9, at the Universitetskaya structure in the East Prinovozemelsky-1 block.

US sanctions at the time had prohibited US companies from providing technology for Arctic, deepsea and shale oil exploration, but sources have said ExxonMobil exploited a loophole in the sanctions that allowed compa-nies to provide services for such projects.

The new sanctions announced Friday close that loophole and expressly prohibit any US companies from offering technology, services and expertise for those complex projects.

Rosneft and ExxonMobil inked a strate-gic cooperation agreement in August 2011, calling for joint development of offshore blocks in the Arctic and in the southern Black Sea and shale oil resources in West Siberia, as well as a number of joint proj-ects in North America.

The two companies earlier this month launched seismic exploration work at blocks in the Arctic Laptev Sea. — Herman Wang

ExxonMobil’s Kara Sea drilling must stopUS sanctions unambiguous about Russian venture

indian refiners eke out a profit on diesel as oil fallsSingapore—The recent drop in oil prices led to a thin and rare profit margin on diesel for India’s state-owned refiners and rekindled a debate that the subsidies for the fuel be scrapped

The refiners are earned Rupees 0.35 (0.6 cents)/liter on diesel sales as fall-ing international oil prices coupled with a government-regulated Rupees 0.50/liter monthly price hike that completely wiped out their under-recoveries—losses suffered from selling diesel at below market prices.

This brought speculation that the Indian government may use the opportu-nity to officially deregulate diesel prices, though elections in two major states next month have made this a politically sensi-tive decision.

Raghuram Rajan, the governor of the country’s central bank, the Reserve Bank of India, in a speech Monday said that the coun-try needs to “seize the moment and eliminate diesel subsidies.”

The basket of India’s crude oil price as calculated by the Petroleum Planning and Analysis Cell was $95.50/barrel on Septem-ber 15, down from $96.74/b on the previous publishing day, September 12, the petroleum ministry said in a statement Tuesday.

India subsidizes diesel, LPG and kerosene prices. New Delhi, under the previous govern-ment, introduced controlled deregulation of diesel prices in January 2013—when the under-recoveries stood at Rupees 14/liter—allowing prices to rise by Rupees 0.50/liter each month.

The Indian budget for fiscal 2014-2015 (April-March), announced in July by finance minister Arun Jaitley, stated that the govern-ment is aiming to fully deregulate diesel prices within one year via monthly price hikes “if there are no global price shocks,”

The government also reduced its subsidy estimates for gasoil, LPG and kerosene for the current fiscal year (April 2014-March 2015) to Rupees 634.27 billion, compared with Rupees 854.80 billion in the previous fiscal year. — Mriganka Jaipuriyar, with M.C Vaijayanthi in Mumbai

ThE AMERiCAS

Capital Crude Platts Podcast

What can the US crude oil industry learn from Pabst Blue Ribbon?Platts senior editors Brian Scheid and Herman Wang compare the ongoing campaign to allow export of US crude oil to some of the most successful beer marketing campaigns.

http://plts.co/capitol-crude-091514


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New York—The oil complex settled higher Tues-day as an expected drop in weekly US commer-cial crude stocks helped strengthen prices.

NYMEX October crude futures settled $1.96/b higher at $94.88/b. Front-month ICE Brent closed $1.17/b higher at $99.05/barrel, one day after the expiration of the October contract.

In refined products, NYMEX October ULSD finished the day up 1.67 cents at $2.7563/gal, while NYMEX October RBOB settled 2.8 cents higher at $2.7563/gal.

Oil analysts surveyed by Platts Monday

said they expected US crude commercial crude stocks to have fallen 400,000 barrels for the reporting week ended September 12. Declining crude stocks can be interpreted as a sign of accelerating demand, which traders interpret as a bullish for oil prices.

Carl Larry, president of Oil Outlooks, said he expects a weekly draw of 1.5 million bar-rels, noting a number of refineries may hold off performing routine maintenance.

“The refining margins are just too good right now,” he said.

Refinery owners typical shut down their plants after the end of the summer driving sea-son in order to conduct regular maintenance work. The resulting drop in crude runs typically causes downward pressure on oil prices.

A few weeks ago, analysts had been predicting a large number of refineries would come offline for maintenance, Larry said. That view has shifted as high refining margins are providing an incentive for refinery owners to keep producing products, he said.

US Gulf Coast cracking margins for Loui-siana Light Sweet averaged almost $18.50/b last week. West Texas Sour coking margins averaged over $20/b.

Platts margin data reflects the difference between a crude’s netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.

Tradition Energy analyst Gene McGillian said Brent futures were due for an increase after the October contract settled Monday at a front-month low not seen since 2012.

“I think we were oversold, making the mar-ket vulnerable to corrective covering,” he said.

The fall in oil prices is causing atten-tion to turn to whether OPEC will decide to lower its output ceiling at its next ministerial meeting November 27. OPEC’s current 30 million b/d target has been in place since

January 2012. The oil producer group’s last monthly report, released last week, forecast OPEC demand to average 29.2 million b/d in 2015.— Geoffrey Craig

Crude futures higher ahead of weekly stock reports

firm West African demand tightens Europe productsLondon—Increased demand from West Africa is tightening the gasoline blending components market, as increased blending activity for low-Reid Vapor Pressure summer grade gasoline exerts upwards pressure on premiums for octane boosters, market sources said Monday.

“There is overall demand for European summer gasoline...in particular from WAF,” said a refiner, adding that the discounts at which the higher-sulfur, lower-octane WAF grade trades to the 10 ppm premium unlead-ed gasoline barges were decreasing from previously-heard values of $30/mt to single-digit values for FOB loading.

In October, Europe will transition from the more expensive summer-specification low-RVP gasoline to the typically cheaper high-RVP win-ter specification. West Africa, however, typically imports low-RVP gasoline throughout the year.

Premiums for Light Virgin Naphtha [LVN], a key blending component for WAF grade gaso-line, were seen rebounding, with the product heard pegged on offer at a $30/mt premium to the CIF NWE naphtha assessment, higher than the $20/mt premiums previously observed.

“WAF pulled so much and everyone had empty systems,” said a trading source.

Increased buying interest was also observed for reformate, a key octane booster, with the 102 RON specification heard pegged at a high $20/mt premium to the EBOB barg-es from single-digit values.

The arbitrage from NWE to WAF was also favored by a rebound in prices for summer-grade gasoline in the US Gulf Coast, which typically competes with NWE to supply WAF. — Francesco Di Salvo

MARKETS & DATA

NYMEX crude settle, �rst month

NYMEX natural gas settle, �rst month

($/bbl)

($/MMBtu)

91

92

93

94

95

91.67

92.83

92.2792.92

94.88

16-Sep15-Sep12-Sep11-Sep10-Sep

September 16 settle: $94.88, up $1.96

3.80

3.85

3.90

3.95

4.00

3.954

3.823

3.857

3.931

3.995

16-Sep15-Sep12-Sep11-Sep10-Sep

September 16 settle: $3.995, up $0.064

What crude & natural gas markets are doing...

Exchanging valuein the oil markets

As an array of new supply sources for Asian buyers have been freed up due to rising US production and unconventional energy options, what impact will this have on the low margin downstream environment?

Exchange ideas and opinions on Asia’s growingdominance in global crude oil markets. Analyse upstream developments and key market changes affecting trading, risk management and pricing through presentations, panel discussions and interactive onstage interviews with over 100 of your peers including senior strategic upstream executives from the world’s IOCs, NOCs and independents, senior oil traders, analysts, regulators and government officials at Platts’ 2nd Annual Asian Crude Oil Summit.

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