Iraq’s oil industry is on a roll. Production has jumped more than 40 percent since mid-2014 and exports are at near-record levels.
 
It probably won’t last. Plunging government revenue is hampering the state’s ability to invest, while OPEC’s second-biggest crude producer is reaching the limits of its capacity to store and export oil, according to analysts at Energy Aspects Ltd. and FGE. Spending on the country’s biggest fields may shrink to as little as $7 billion this year from about $13 billion in 2015 and $20 billion in 2014, Richard Mallinson of Energy Aspects said Monday.

Iraq has boosted output after decades of sanctions, war and under-investment, with international companies such as BP Plc and Lukoil PJSC developing some of the largest deposits in its oil-rich southern region. The country is exporting 3.3 million barrels a day of crude this month from the southern port of Basrah, and it targets keeping shipments at that level for the rest of the year, Deputy Oil Minister Fayyad Al-Nima said in a May 13 interview. Without more investment, these exports are sure to slide, the analysts said.

“We’re going to see production growth flatten and then start to decline by late this year and into 2017,” Mallinson said by phone from London. “What does that mean if Iraq doesn’t deliver growth this year? If you were expecting a big increase from Iraq and we don’t see that, it will add to bullish sentiment in the market.”

While crude continues to flow from Rumaila, West Qurna and other fields in the south, parts of northern Iraq are a battleground for forces trying to dislodge the Islamic State militants who have occupied swathes of territory since 2014. The conflict has prevented the government from exporting oil through its northern pipeline to Turkey, and the collapse of a plan to share oil revenue with the self-ruling Kurds in northeastern Iraq has limited sales from fields in the region.

Iraq pumped a record 4.51 million barrels a day in January and 4.31 million in April, according to data compiled by Bloomberg. Its total production capacity, including in Kurdish areas, is 4.8 million barrels a day, and increasing that to a target of 5 million will depend on oil prices, Al-Nima, the deputy minister, said. Domestic demand for oil as fuel for power plants is also a constraint on exports, Al-Nima said.

Investment in Iraq’s southern fields may fall by 30 percent to 40 percent this year as the government, which gets most of its income from oil sales, delays payments to foreign companies and limits future spending, said Tushar Tarun Bansal of FGE in Singapore.

“Investment in new wells isn’t getting done, and that will show up in reduced production later in the year,” Bansal said. “The market is yet to account for the impact that will have, and it could lead to higher prices.”

http://www.bloomberg.com/news/articles/2016-05-16/iraq-oil-surge-seen-losing-steam-just-as-markets-need-more-crude

China's April preliminary oil demand rose 1.7 percent from a year ago as refining throughput rose as independent refiners increased their processing runs and as fuel exports dropped.

China consumed about 10.62 million barrels per day (bpd) of oil in April, a record daily consumption volume, according to Reuters calculations based on preliminary government data published on Friday.

The gain in demand, which excludes adjustments of oil stocks, was mainly due to an increase in refinery throughput in part at independent plants.

In April, Chinese refiners processed 10.89 million bpd of crude oil, up 2.4 percent year on year, data from the statistics bureau showed. The figure compared to March's runs at 10.58 million bpd.

Throughput for the January to April period rose 2.9 percent on year to about 10.69 million bpd.

China's refined fuel exports fell to 3.68 million tonnes in April from 3.75 million tonnes in the previous month. A year ago, China was a net importer of refined oil products.

The implied oil demand is the sum of domestic refinery throughput and net imports of refined products. Reuters will publish a more detailed demand calculation later in April, broken down by products and amended for changes in fuel stocks based on data yet to be released.

http://www.reuters.com/article/china-economy-oil-demand-idUSL3N18D356

State oil giant Saudi Aramco IPO-ARMO.SE has awarded a $1 billion-plus contract to India's Larsen & Toubro (L&T) and Singapore-based Emas AMC for the expansion of the offshore Hasbah sour gas field, industry sources said.

Increasing its supply of gas is a top priority for Saudi Arabia. Many industrial firms have complained about a shortage crimping expansion plans, while the kingdom is trying to use more of the fuel for power generation and water desalination instead of burning crude oil, which it wants to export.

Work on the expansion scheme includes building platforms and pipelines, with the field's supply feeding the Fadhili gas plant, a $6 billion complex that will include a gas processing unit and sulphur recovery.

Saudi Aramco declined to comment. L&T did not respond to emailed requests for comment, while Emas was not available for immediate comment.

It is the second major contract win for the duo in recent months: Emas AMC, a unit of Ezra Holdings, also teamed up last year with the Indian firm to secure a long-term contract with Aramco to work on offshore facilities.

The expansion of Hasbah will supply 2 billion standard cubic feet per day (scfd) of gas to the Fadhili plant, for which Aramco awarded a construction contract last year. The remaining 500 million scfd of supply for the plant will come from the onshore Khursaniyah field.

Hasbah already feeds Wasit, another major gas plant. Aramco said in March it had started producing natural gas from the offshore field ahead of peak summer demand in the world's largest oil exporting country.

An industry source told Reuters the Wasit plant would reach full capacity in July of processing 2.5 billion scfd of gas.

http://www.reuters.com/article/saudi-aramco-gas-idUSL5N18C05U

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May 16 Libya will resume oil shipments from the port of Hariga after an agreement was reached at talks in Vienna between rival oil officials representing the east and west of the country, Libyan oil sources told Reuters.

Exports from the port have been blocked since early this month due to a standoff between the rival eastern and western National Oil Corporations (NOC).

The NOC in Benghazi, which is loyal to Libya's eastern government, has prevented the loading of a tanker sent by the NOC in Tripoli, since the former tried unsuccessfully last month to export a cargo of crude for the first time.

http://www.reuters.com/article/libya-oil-exports-idUSL5N18D46D

- Average daily hydrocarbon production of 5.21 mmboe, an increase both compared to Q1 2015, and for two consecutive quarters (+2.5% compared to Q3 2015)
- Production drilling grew by 52% with maintaining in-house OFS share above 50%
- Gas production grew by 6% to 16.72 bcm against Q1 2015
- Refining throughput optimization with refining depth up to 68.9%
Euro-5 motor fuel production increased by 1.7 times against Q1 2015

Upstream

Hydrocarbon production continued to grow in Q1 2016. The level of production reached 5.21 mmboed (64.0 mmtoe), up by 0.2% against Q1 2015 and by 2.5% over the last two quarters.

In Q1 2016 the Company increased its production drilling by 52% against Q1 2015 to 2.08 million meters as established by the targets for the year. The share of in-house services in the total drilling footage consistently exceeds 50%. New wells put into operation grew by 59% compared with Q1 2015 (with horizontal wells share of 30%).

Liquid hydrocarbon production in Q1 2016 returned to the level of Q1 2015 and amounted to 50.2 mmt. The largest contribution to these positive production dynamics was provided by: RN-Uvatneftegaz (+13.2%), RN-Severnaya Neft (+17.6%), Sakhalin-1 project (+23.1%), Samaraneftegaz (+6.0%), as well as the Northern tip of the Chayvo field (+39.4%).

RN-Uvatneftegaz started commercial oil production at a new field of the Uvat project - the West Epasskoe (crude oil ABC1+C2 recoverable reserves exceed 17 mmt). The technological targets of the West Epasskoe field are included in the Eastern Hub in the south of the Tyumen region enabling to gain synergies through the use of existing fields' infrastructure.

In March 2016, the Company produced 120 mmt of oil at the Vankor field since its commissioning in 2009. The project of drainhole well completion is being successfully implemented at the field. Experience in operating such wells has shown a significant increase in their productivity.In Q1 2016, Rosneft in cooperation with Statoil successfully completed a pilot project on the selection of efficient technologies PC1 reservoir development in the North-Komsomolsk field (Yamalo-Nenets Autonomous District, operator - RN-Purneftegas LLC). Total ABC1+C2 recoverable reserves of the North-Komsomolsk field amount to 203 mmt of oil and condensate and 197 bcm of gas. We were able to conduct pilot operation of 2 horizontal wells in different operating modes, and perform a number of well tests to update the geological and hydrodynamic field models. The average flow rate during the operation exceeded initial expectations and reached more than 75 tpd. Production potential is estimated at more than 100 tpd per well. Over 7,000 tons of oil was produced during the period of pilot operation.

In Q1 2016, the Company started production drilling at the Tagul field (ABC1+C2 recoverable reserves stand at 286 mmt of oil and condensate and 228 bcm of gas), which is part of the Vankor cluster. The drilling is directional with primarily horizontal completions. During 2016, it is planned to complete drilling about 9 wells and continue with field infrastructure development.

In Q1 2016, gas production amounted to 16.72 bcm, which is 1% above the level of Q4 2015 and 6% above Q1 2015. One of the key factors in gas production growth for the periods indicated is the startup of the 2nd stage of Rospan's Novo-Urengoi comprehensive gas and condensate processing plant in a comprehensive testing mode in Q4 2015. This facility will enable to increase the actual performance of the GPP to 11 million cubic meters of gas per day and 1,700 tons of condensate per day. Another significant factors of the gas production growth are the start of the third and fourth wells at the Northern tip of the Chayvo field and commissioning of the gas processing plant at RN-Purneftegaz's Barsukovsky field in December 2015.

The utilization of associated gas in Q1 2016 grew to 91% compared with 87% in Q1 2015. The improvement of APG utilization is an important element of environmental policy.

Much more information: http://www.oilvoice.com/n/Rosneft-announces-first-quarter-2016-operating-results/d76191ef527d.aspx?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29

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Japan's upstream oil and gas investment to tumble in 2016/17

Investment by big Japanese firms in upstream oil and gas developments is set to fall by around 40 percent to about 1.2 trillion yen ($11 billion) in 2016/17 due to current low prices, a government Energy White Paper showed on Tuesday.

The upstream investments by 10 firms including Inpex Corp, JX Holdings, Mitsubishi Corp and Mitsui & Co had already slipped from 2.1 trillion yen in 2014/15 to 1.9 trillion yen in the year ended in March, the trade ministry said.

The other firms surveyed are Japan Petroleum Exploration (Japex), Cosmo Energy Holdings, Idemitsu Kosan, Itochu Corp, Marubeni Corp and Sumitomo Corp.

Globally, top oil companies have struggled to cope with a roughly 55 percent decline in oil prices since their 2014 peak, triggering a wave of spending cuts on new wells and projects to conserve cash.

International Energy Agency (IEA) Executive Director Fatih Birol said last month that global upstream investment fell by 24 percent in 2015 and is set to fall by 18 percent in 2016.

This would be the first time that the upstream investment has fallen for a second straight year since the 1980s, he said.

Birol said annual global upstream investment needs to be at about $630 billion a year to compensate for declining output at existing fields and maintain current production levels.

http://www.reuters.com/article/us-oil-investment-japan-idUSKCN0Y808D

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A massive wildfire burning around the oil sands hub of Fort McMurray was growing and moving rapidly north late on Monday, forcing firefighters to shift their focus to protecting major oil sand facilities north of the city, officials said.

The sudden movement of the fire prompted the evacuation of some 4,000 people from work camps outside Fort McMurray, with all northbound traffic once again cut off at the city, the Regional Municipality of Wood Buffalo said.

Suncor Energy Inc and Syncrude Canada confirmed they had evacuated workers from the affected area. Their major facilities were under a precautionary notice with the fire still some 15 to 20 kms (10-12 miles) away, officials said.

A dozen work camps south of the major projects faced mandatory evacuation notices.

"The urgency we're looking at is with regards to the oil gas infrastructure," Scott Long, executive director of the Alberta Emergency Management Agency, told reporters in Edmonton, adding Fort McMurray itself appeared to be safe for now.

The entire population of Fort McMurray, about 90,000 people, was forced to flee nearly two weeks ago as the uncontrolled wildfire raged through some neighborhoods and destroyed about 15 percent of structures.

On Monday, the blaze continued to burn uncontrolled, now covering 285,000 hectares (704,000 acres), officials said. By Monday evening it was moving 30 to 40 meters (98 to 131 feet) every minute and had jumped a critical firebreak north of the city to push into the oil sand camp areas.

"When you have this type of extreme fire behavior, it doesn't matter what tankers you put in front of it, or how many helicopters, mother nature is going to continue to move that fire forward," wildfire manager Chad Morrison said.

Morrison said the blaze was expected to slow into the evening and that it was unclear if it would reach the major oil sand facilities, though responders were preparing for that eventuality.

A Suncor spokeswoman said 120 people were evacuated from its MacKay River plant and camps as a precautionary measure Monday afternoon, adding the facilities were not at risk from the fire.

Syncrude, a joint venture among numerous energy companies operating in the region, said on Twitter that it was relocating its workers to safety.

The fire also threatened Enbridge Inc's Cheecham crude oil tank farm south of Fort McMurray. The blaze, about 1 km (1,094 yards) away from the tank farm, was under control with the wind cooperating as the company's industrial firefighters tackled the fire, officials said earlier in the day.

Enbridge said a firebreak around the terminal was being widened and that crews were assessing other fire suppression tactics like spraying down facilities. It said some pipelines in and out of the terminal were operating, and the situation was being monitored.

Roughly a million barrels per day of oil sands crude production was shut in as a precaution and because of disruptions to regional pipelines, and much of that production remains offline.

http://www.reuters.com/article/us-canada-wildfire-enbridge-idUSKCN0Y71ZT

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Range Resources Corp., a Fort Worth, Texas, natural-gas producer, on Monday said it agreed to buy rival energy company Memorial Resource Development Corp. in an all-stock deal valued at $3.3 billion.

The agreement also calls for Range to take on $1.1 billion in debt owed by Memorial. Range will absorb the smaller driller, adding its Louisiana operations to existing acreage and wells across Pennsylvania, Texas and Oklahoma.

Once it closes, the transaction will rank as one of just a handful of deals executed between sizable independent U.S. energy producers during the oil-and-gas downturn.

When Whiting Petroleum Corp. announced its acquisition of Kodiak Oil & Gas Corp. in mid-2014, the deal was valued at $3.8 billion, plus $2.2 billion in debt. Noble Energy Inc.’s acquisition of Rosetta Resources Inc., announced a year ago, was valued at $2.1 billion, plus $1.8 billion in debt.

Jeff Ventura, chief executive of Range, said integrating Houston-based Memorial’s assets will give Range a strategic position on the East and Gulf coasts, and more exposure to natural gas demand. Gas accounted for 71% of the Range’s production last year, while oil and other liquids accounted for 29%, company filings show.

Both Range and Memorial have seen the value of their shares cut in half during the energy bust, as the price of oil has dropped from more than $100 to under $50 today. In that time, the benchmark U.S. natural gas price has fallen from more than $4.50 per million British thermal units to just over $2. Range shares closed at $42.01 Friday, down from more than $90 just before oil prices peaked in late June 2014. Shares of Memorial have fallen from nearly $30 in September 2014 to $13.45 a share as of Friday.

Range will issue 0.375 shares, worth $15.75 based on Friday’s closing price, for each share of Memorial, a 17% premium to the Memorial’s closing price on Friday. Memorial shareholders will own 31% of the combined company, and Memorial will have the right to nominate one of its independent directors to Range’s board.

The companies expect the deal to close in the second half of the year.

http://www.wsj.com/articles/range-resources-to-buy-memorial-resource-development-for-3-3-billion-1463394029

SandRidge Energy Inc and master limited partnership Breitburn Energy Partners LPfiled for bankruptcy protection on Monday, the latest U.S. oil and gas companies to fall victim to weak oil prices.

A plunge in global crude prices LCOc1 has now pushed at least 28 publicly traded North American oil and gas producers to seek bankruptcy protection since early 2015, according to a Reuters review of regulatory filings.

SandRidge said in a court filing that it had total assets of $7.01 billion and total debt of $4 billion as of March 31. 

Breitburn listed assets and liabilities of $1 billion to $10 billion.

SandRidge, which has been in talks with creditors on a restructuring deal, said on Wednesday it would not be able to file financial results for the quarter ended March 31 on time.

Small oil and gas producers have largely exhausted funding alternatives after issuing more equity and debt, tapping second-lien loans and shedding assets over the last two years to stay afloat as banks trim credit lines.

http://www.reuters.com/article/us-sandridge-bankruptcy-idUSKCN0Y718Y

Canadian oil and gas producer Penn West Petroleum Ltd said on Monday it may default on its financial covenants at the end of the second quarter and raised doubts about its ability to continue as a going concern.

Penn West had long-term debt of C$1.86 billion as of March 31, or $1.44 billion at current exchange rates.

The company said it was in talks with lenders on amending its financial covenants, which if successful would reduce the risk of default.

Penn West said it would try to raise money by selling more assets and would seek funding from investors.

The Calgary-based company, like other oil and gas companies, is suffering from a near-60 percent slump in global crude prices since mid-2014.

The plunge has pushed at least 28 publicly traded North American oil and gas producers to seek bankruptcy protection since early 2015, according to a Reuters review of regulatory filings.

Penn West, which reported a smaller first-quarter loss on Monday due to lower expenses, said total production fell 18.9 percent to 77,010 barrels of oil equivalent per day in the three months ended March 31.

The company slashed its budget by as much as 90 percent in January. It also cut about 35 percent of its workforce in September and stopped paying dividend from the next month in an effort to reign in spending.

http://www.reuters.com/article/penn-west-debt-idUSL3N18D3XM

Producer/merchants massively boosted their total holdings in crude futures for the reporting week ended May 10, data from the Commodity Futures Trading Commission showed Friday.

This brings their total holdings in NYMEX crude -- the sum of longs and shorts -- to 702,586 contracts, the most since October 2013, the CFTC data showed.

The group added 25,041 longs and 20,180 shorts, which effectively left them net short by an unremarkable 283,534 contracts. However, the action comes amid a rather large increase in total open interest for December crude futures, which rose 8,511 contracts to 212,925 contracts.

With December crude touching $49.26/b last week, crude producers -- a substantial portion of the producer/merchant category -- were likely attempting to help lock in a floor through the traditionally very liquid December contract.

This week, a number of crude producers said they were more actively hedging. Devon Energy said it would look at more "opportunistic" hedges while keeping crude production around 50% hedged. And Marathon Oil said it was looking at a $40/b floor for its 2016 oil hedges. Pioneer Natural Resources said it was 50% hedged for 2017 and 85% hedged this year.

ConocoPhillips, too, may start to hedge, CEO Ryan Lance said Tuesday. The company currently does not hedge any of its roughly 800,000 b/d of global crude and bitumen production, Lance said.

Money managers, meanwhile, piled headlong back into short positions. The group added 20,367 shorts and cut 659 longs, pulling their net long position lower by 21,026 contracts to just 191,731 contracts.

This marks the second straight week the group has trimmed its net long position, and comes as prompt crude futures rose just over $1 to $44.46/b over the reporting week.

Money managers had built up a substantial net long position between the beginning of the calendar year through mid-March, a period that saw crude prices hit bottom in mid-February before rising steadily ever since. That net long has proven difficult to maintain, however, having drifted below 200,000 contracts both last week as well as in early April.

Swap dealers were also very active last week, adding 12,868 longs and cutting 5,857 shorts, leaving their net short position 18,725 contracts leaner at 8,087 contracts. Other reportables were less busy, but still cut their net long by 5,558 contracts to 100,229 contracts.

http://www.platts.com/latest-news/oil/newyork/producermerchants-total-holdings-in-nymex-crude-26443952