Saudi Arabia’s health minister, Khalid Al-Falih, a favorite to take over the oil ministry from his mentor Ali Al-Naimi, was not panicking.
Al-Falih told an audience of oil executives, bankers and policymakers at the World Economic Forum in Davos that the world’s top oil exporter might benefit from oil below $30 per barrel.
It could help to speed up reform and restructure the economy, and move Saudi Arabia to a smaller and more effective government and unleash its private sector, he said.
For decades Saudi Arabia had targeted certain oil price levels.
Things were different this time. For the first time in decades, output cuts were not on the agenda to fix the growing global glut that Saudi Arabia helped create by ramping up supply to drive higher-cost producers such as US shale firms out of the market.
Also for the first time in decades, a royal rather than a non-royal — Deputy Crown Price Mohammed bin Salman — had been appointed a few month earlier to oversee Saudi oil policies and drive the massive change.
Do you not think the deputy crown prince is doing it all a bit too fast for the Saudi society, Al-Falih was asked.
“The Royal Highness is very ambitious where he wants Saudi Arabia to be sooner rather later. I can assure you that everybody who works around him is very excited by his vision and energized by his energy,” Al-Falih told the audience.
“Some people were concerned that we were too slow in the past.. As a former runner, I can tell you that it helps to go through sprints at times to develop your muscular strengths. We are accelerating reform.”
The writing was on the wall, said the executives leaving the Davos conference. Al-Falih would soon become oil minister reporting to the deputy crown prince.
“It is an end of an era when Al-Naimi fought hard and struggled to create a price environment which would have been good for both consumers and producers,” said Gary Ross, a veteran OPEC watcher and founder of New York-based consultancy PIRA.
“We are moving to a new era where OPEC will no longer be managing the market while supply and demand will determine the price. The new Saudi oil leadership believes the market will dictate the price and that means higher volatility. We will see higher highs and lower lows,” Ross said.

IMPETUS TO REFORM

Al-Naimi, born in 1935, had backed several OPEC oil output cuts and increases since taking on the oil minister job in 1995.
The former Saudi Aramco chairman saw oil priced as low as $9 per barrel during the Asian financial crisis at the end of 1990s, as high as $147 in 2008 and back to $36 several months later after the collapse of Lehman Brothers.
Rumors about Al-Naimi being finally allowed to retire have been hitting the market periodically in the past four years.
But even though the Riyadh-born and US-educated Al-Falih has long been tipped to replace Al-Naimi, his fortunes and career kept zigzagging from Saudi Aramco’s chairman to health minister until finally securing the job on Saturday — combining energy, industry and mineral resources in a new super ministry.
Al-Falih takes the job in a much better market environment compared to January — oil prices have indeed recovered from their January lows of $27 per barrel to trade at around $45 last week on the prospect that the market has began to rebalance thanks to lower US output.
Born in 1960, Al-Falih joined Aramco in 1979, and went to study engineering at Texas A&M University in 1982 on an Aramco sponsorship program.
Al-Falih probably knows every oil CEO in the world as he was the key negotiator behind a Saudi initiative to jointly develop gas resources with oil majors in early 2000.
Over the past year, when Al-Naimi was carefully choosing his words or not commenting at all, Al-Falih has become more vocal about his views that the oil market needs to rebalance through low prices and that the Saudi Arabia has the resources to wait.
“That doesn’t really point to somebody who would invest a lot of time and energy in trying to reconcile different OPEC members,” said Richard Mallinson from Energy Aspects.
Al-Falih says job creation and economic reforms are top worries for the Saudi government these days, not an obsession with oil price levels.
“Those transitions sometimes takes years, sometimes decades. The current low oil prices will give us an impetus to accelerate this,” Al-Falih said in Davos in January.

Nigeria is suffering a worsening bout of oil disruption that has pushed production to the lowest in 20 years, as attacks against facilities in the energy-rich but impoverished nation increase in number and audacity.

Chevron Corp. said on Friday it had shut down about 90,000 barrels a day of output following an attack on an offshore platform that serves as a gathering point for production from several fields. Even before that strike on Wednesday night, Nigerian oil production had fallen below 1.7 million barrels a day for the first time since 1994, according to data compiled by Bloomberg.

“This is some very, very sophisticated brazen attack,” said Dolapo Oni, the Lagos-based head of energy research at Ecobank Transnational Inc. “It is a resurgence of militancy. These guys don’t seem to be after money. They just want to frustrate the government.”

The fresh round of attacks come after President Muhammadu Buhari vowed to stamp out corruption and oil theft. They echo a campaign waged by the self-proclaimed Movement for the Emancipation of the Niger Delta between 2006 and 2009, which cost the Nigerian government billions of dollars of lost oil revenue. That violence abated after thousands of fighters accepted an amnesty from late-President Umaru Musa Yar’Adua and disarmed, in exchange for monthly payments from the government in some cases.

Facility Breached

Chevron said it shut down its Okan offshore facility after it was “breached by unknown persons” and had sent “resources to respond to a resulting spill.” The facility, which feeds crude and gas into Escravos, one of the country’s largest export facilities, is jointly owned by the U.S. company and state-owned Nigeria National Petroleum Corp.

A group calling itself the Niger Delta Avengers said on its website that it was responsible for the attack. The authenticity of the claim could not be verified by Bloomberg News.

The Nigerian government is struggling to contain the economic damage of the slump in energy prices and separate attacks in the north of the country by the Boko Haram Islamist insurgency. The country’s foreign reserves have fallen to less than $27 billion, the lowest since 2005. The International Monetary Fund expects the economy to expand 2.3 percent this year, the weakest growth since 1999.

"Lower oil prices have meant that the poorer oil-producing countries don’t have enough money to pay for social services,” said Ehsan Ul-Haq, senior oil analyst at KBC Process Technology Ltd. “Protests are increasing as a result."

Force Majeure

In February, Royal Dutch Shell Plc declared force majeure -- a legal clause that allows it to stop shipments without breaching contracts -- after an attack on a pipeline feeding the Forcados terminal, which typically exports about 200,000 barrels a day.

The International Energy Agency estimated last month that Nigeria could lose an estimated $1 billion in revenue by May, when it expects repairs on Forcados to be completed. The terminal may not restart until June, Nigerian Oil Minister Emmanuel Kachikwu said April 20.

http://www.bloomberg.com/news/articles/2016-05-06/nigerian-oil-output-plunges-to-20-year-low-as-attacks-escalate

China's imports of crude oil rose 7.6 percent in April from a year ago, customs data showed on Sunday, lifted by continued strong demand from domestic private refiners.

The high April inflows were a result of the strong appetite of small domestic independent "teapot" refineries. Beijing has granted licenses to more than 20 of them since last year to import crude for the first time.

China imported 32.58 million tonnes of crude oil in April, data from the General Administration of Customs showed, missing a Reuters forecast.

Thomson Reuters Oil Research and Forecasts had predicted that the total crude arrivals for April into China would reach 33.14 million tonnes, up from a March reading of 32.61 million tonnes.

On a daily basis, April imports were 3.1 percent higher from March to 7.92 million barrels per day (bpd).

On a net basis, after factoring in exports of 440,000 tonnes, China's April crude imports were 7.26 million bpd in April.

Armed with quotas that could make up a fifth of total Chinese crude imports, domestic independent refineries are among the bright spots in the global crude oil market as they ramped up throughput, at the same time adding to China's swelling fuel exports.

In the first four months of the year, China imported 123.7 million tonnes of crude oil, or 7.46 million bpd, up 11.8 percent over the same period a year earlier.

China also imported 2.51 million tonnes of oil products in April and exported 3.68 million tonnes, leaving net oil product exports at 1.17 million tonnes, customs data showed.

http://www.reuters.com/article/china-economy-trade-crude-idUSL3N1822K9

U.S. explorers aren’t the only ones idling rigs as sub-$50 crude forces oil and gas drillers in Africa to slow their search for new reserves.

The number of oil and gas rigs offshore Africa remained at 20 in April, the lowest since 2009, according to data published on Friday by Baker Hughes Inc. Onshore rigs fell to 70 from 71 in March, leaving the total for the continent at 90, near the lowest in four years.

Despite a rebound in crude over the past three months from a 12-year low, prices below $50 a barrel mean only a third of potential projects in Africa have investment appeal, according to Wood MacKenzie Ltd. Tullow Oil Plc, the London-based explorer focused on the continent, cut its projection for 2016 capital expenditure by $100 million to $1 billion on April 28.

"The exploration activity has largely dried up -- I don’t see that returning anytime soon," Anish Kapadia, a London-based analyst at Tudor Pickering Holt & Co., said in a phone interview. "The drilling you’ve got is legacy drilling from oil projects going ahead, so at some point that’s going to slow down further unless you’ve got new projects being sanctioned."

The number of rigs in Angola and Nigeria, Africa’s biggest producers, has dropped to about half of the count when oil began its steep decline two years ago. Only Algeria among the continent’s producers has shown a significant uptick in the activity, with an increase to 55 rigs.

Eni SpA, one of the most prolific explorers in Africa, could provide a buffer against further declines on the continent. The Rome-based company will concentrate exploration through 2019 in North and West Africa and the Far East, Chief Executive Officer Claudio Descalzi, said in a March 18 strategy presentation.

The oil price is still the ultimate determinant of exploration, according to Chris Bredenhann, a partner at PricewaterhouseCoopers in Cape Town. Brent crude traded close to $45 a barrel on Friday, with the price rallying 60 percent from a Jan. 20 low.

"The consensus seems to be that there will be a slowdown in production, and we have already seen the U.S. coming off its 2015 highs," he said in an e-mailed response to questions. "The low oil price has put a dampener on the exploration activity in Africa as well, but the recent upward trend in the oil price may potentially change that."

http://www.bloomberg.com/news/articles/2016-05-06/africa-offshore-drilling-at-six-year-low-as-explorers-curb-quest

Mol Nyrt. more than doubled its net income in the first quarter as a record result from refining and petrochemical operations outweighed a decline from exploration and production.

Hungary’s largest oil company booked a net income of 77.2 billion forint ($281 million) in the three months ending March, 165 percent higher than in the same period a year earlier. Earnings before interest, tax, depreciation and amortization on a clean-CCS basis, the most closely watched gauge that strips out the impact of volatile oil prices on reserve valuation, fell 8 percent to 144 billion forint, above the 137 billion-forint median estimate of eight economists in a Bloomberg survey.

A record downstream profit for the second quarter running and widening petrochemical margins showed Mol’s ability to cushion the blow from Brent oil falling to the lowest in more than a decade in January. The company has said it is scaling down investments into production capacity to focus on assets that are still profitable in the lower oil price environment. The group remains on track to keep clean-CCS Ebitda above $2 billion this year, Chief Executive Officer Zsolt Hernadi said.

"The company is one step closer to achieving its target for this year," said David Sandor, the head of research at KBC Groep NV’s Hungarian brokerage unit. "The earnings results are better than market expectations and we can also be satisfied with the underlying operations at the company."

Ebitda for the company’s downstream operations rose 22 percent from a year earlier to 93 billion forint, when adjusted for stock revaluations, while upstream slumped 30 percent to 42 billion forint, according to results published on the Budapest Stock Exchange website.

http://www.bloomberg.com/news/articles/2016-05-06/mol-net-income-surges-as-downstream-unit-books-record-profit

General Electric Co. is hunting for acquisitions in the beleaguered oil and gas industry after missing an opportunity to buy assets when the merger between Halliburton Co. and Baker Hughes Inc. was scuttled.

GE had been in talks for businesses the two companies were preparing to sell if the combination went through, Chief Financial Officer Jeff Bornstein said in a Bloomberg Radio interview with Tom Moroney and Anne Mostue. After resistance from antitrust authorities forced Halliburton and Baker Hughes to walk away, GE is looking for other deals “at valuations that make sense,” Bornstein said.

“Virtually anything you do, you’re going to be very, very happy with” in three to five years, Bornstein said on the “Baystate Business Hour” program. “So to the extent that there are opportunities to fill out our portfolio, fill in product and service gaps, I think there’s an opportunity to create real value.”

Any deal would advance a dramatic transformation GE is undergoing as it prepares to relocate to Boston later this year. The company has agreed to sell its home-appliances business and more than $160 billion in finance assets in just over a year to renew focus on industries such as energy and aviation. GE aims to be a more streamlined and technologically advanced industrial manufacturer by the time it moves to temporary offices in August.

http://www.bloomberg.com/news/articles/2016-05-06/ge-sees-oil-software-m-a-opportunities-as-boston-move-nears

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Oil producers set aside four more rigs this week, as low prices continued to drag on drilling activity.

The number of active oil rigs fell by four to a total of 328, according to oil field service company Baker Hughes. Rigs seeking natural gas fell by one to 86. The U.S. combined rig count fell by five to 415, including one miscellaneous rig which was unchanged from last week.

Oil drillers have now idled roughly 80 percent of the rigs that were once active at the Oct. 10 peak in 2014. Since this same week last year, the number of oil rigs has fallen by half. The last time the oil rig count was this low was in 1995.

The combined oil and gas rig count is at its lowest level in recent records kept by Baker Hughes.

U.S. oil prices, which drive oilfield activity, rose by about 1 percent Friday to roughly $44.75 per barrel in afternoon trading. Price have been buoyed in April and early May by reports that U.S. oil production has been on the decline, in part due to the falling rig count.

http://fuelfix.com/blog/2016/05/06/rig-count-falls-by-four-as-slowdown-continues/

After three years of spin-offs and asset sales from Brazil to California, Occidental Petroleum Corp. is ready to start growing again, said Chief Executive Officer Vicki Hollub.

Once the world’s largest independent oil explorer finishes reducing its footprint in Bahrain and Libya, Occidental will have achieved all the goals it set out to do when Hollub’s predecessor and mentor, Stephen Chazen, began dismantling the company’s far-flung empire to focus on Texas, Colombia and a handful of Persian Gulf countries.

“We’re almost done with all the things we wanted to do with our portfolio optimization,” she said during a conference call with analysts on Thursday, six days after taking on her new role.

Hollub became the first female CEO of a major U.S. oil explorer on April 29 when she succeeded Chazen upon his retirement from management. She’s taking control of the company at a time when oil prices are barely off 12-year lows and investment in new projects can be a tough sell.

New Goals

Going forward, the goal will be to boost oil production in Occidental’s vast West Texas and New Mexico holdings and harvest more gas from rich deposits in places such as Abu Dhabi, she said. The company controls 1.4 billion barrels of crude in Texas that will take 22 years to flush out using high-pressure carbon dioxide; the cash generated from that will be funneled into higher-margin projects such as horizontal wells in nearby shale formations, Hollub said during the call.

The conference call capped a day in which Occidental boosted its full-year 2016 production target for so-called "core" operating areas by as much as 6 percent even as capital spending declined during the first three months of the year. The "core" excludes fields Occidental sold during its slimming-down phase, such as in North Dakota, or places like Libya, where civil unrest has disrupted the oil industry.

Absent a $285 million asset sale and a $550 million payment from Ecuador stemming from a 2006 oilfield seizure, Occidental’s first-quarter loss was 56 cents, wider that the average 41-cent loss estimated by 25 analysts in a Bloomberg survey. That compared with a loss of $218 million, or 28 cents, a year earlier. Shares climbed 3 percent to settle at $76.14 in New York Thursday.

The company said on the call it expects to receive another $300 million installment in coming months from Ecuador on the $1.1 billion the Latin American nation is ultimately required to pay under a ruling by a World Bank panel.

Spending Cuts

Occidental, the world’s biggest independent oil explorer by market value, has been casting off lower-profit oil and gas fields and curbing spending to conserve cash and maintain dividend payouts to shareholders. Hollub said in an interview last week that she plans to expand the company’s presence in the Permian Basin of Texas and New Mexico, one of Occidental’s largest cash-generating regions.

While other oil companies have been burning through cash reserves to cover expenses amid the market downturn, Occidental had $3.2 billion of cash on hand at the end of the first quarter. The company also has foregone the sorts of job cuts most rivals have resorted to; Hollub said on the call that layoffs have been avoided so Occidental can retain talent.

http://www.bloomberg.com/news/articles/2016-05-05/occidental-posts-wider-than-expected-loss-in-first-quarter

EOG Resources says it can get “triple-digit” returns at $60 a barrel oil, a sign the company has whittled down drilling costs as it moves rigs to its most profitable spots.

Outlining a new strategy, the Houston oil company said Friday it has pointed its drill bits at its top-shelf locations in South Texas’ Eagle Ford Shale and elsewhere that get a minimum 30 percent return at $40 oil.

“Our shift to premium is permanent and not simply a temporary high-grading process in a low-commodity price environment,” EOG Resources Chief Executive Bill Thomas told investors. “If history is any indication, we will continue to push the oil price needed for triple-digit returns even lower.”

It’s a sharp departure from the wild and woolly wildcatter business model that was once common among U.S. shale drillers in the days of $100 a barrel oil.

The company’s plan is among the industry’s biggest moves to address the widespread problem of low oil-production rates in the once-booming shale plays at the center of the nation’s energy renaissance. Thomas said it’s an effort that “extends our lead as the low-cost horizontal oil producer.”

One of the reasons the downturn has been so painful for U.S. oil companies is that squeezing oil out of shale rock is expensive, and though wells across Texas and North Dakota were gushing before the downturn, the shale business has never proven itself to be profitable.

Oil companies took out hundreds of billions in debt to drill thousands of expensive wells that gave up only 4 percent to 8 percent of the buried crude and that lost 70 percent of their production in the first year. Scores of U.S. oil companies have gone bankrupt.

EOG Resources has 220 drilled wells that it hasn’t brought into production but could activate once management believes the oil bust is turning into a recovery. But Thomas said the U.S. oil industry will take at least a year and $60 to $65 a barrel oil prices to restart its growth cycle after the punishing downturn.

Still, he said, his company can start pumping money back into its “premium” assets with oil at $15 to $20 a barrel lower than the average driller. EOG Resources could boost production by completing 40 percent of its backlog of drilled-but-uncompleted wells without renting any more oil field equipment.

“Our shift to premium drilling this year is a game changer,” he said. “We expect well productivity to improve more than 50 percent in 2016.”

http://fuelfix.com/blog/2016/05/06/eog-resources-changing-strategy-to-get-more-crude-out-of-stubborn-shale/

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The mass evacuation of residents from the wildfire-devastated Canadian oil town of Fort McMurray is likely to significantly delay the restart of production, even though energy facilities themselves have escaped major damage from the flames.

The huge wildfire that entered its second week on Sunday has destroyed entire neighborhoods in the town, forcing nearly 100,000 people to flee.

Even though Canadian officials on Sunday showed some optimism that they were beginning to get on top of the wildfire, oil prices jumped in early Asian trading on concerns over the loss of production capacity caused by the fire -- equivalent to around half of the country's oil sands production.

Energy facilities were barely touched through the first week of Alberta's devastating wildfire, protected by fire breaks, other defenses and provincial firefighting crews.

But thousands of evacuees -- many of whom are essential oil industry workers -- are camped out in nearby towns and stand little chance of returning soon, even if their homes are intact. The city's gas has been turned off, its power grid is damaged, and the water is undrinkable.

"It's the human element," said Mark Routt, chief economist for the Americas at KBC Advanced Technologies in Houston.

"When you have an operator and his family needs to be evacuated, the plant may be in good shape, but what is the operator going to do? Humans have to operate the plant, too."

Routt estimated that production will be shut for two to three weeks, minimum. And if fires do pass through major oil operations, he said, a restart could take months:

"Many of these plants have a fireproof control room - the problem will be equipment on the units," he said, referring to production facilities.

Producers whose facilities are untouched may also find that their contractors fared less well.

"If some major service operations (in Fort McMurray) are damaged, the oil sands will still get back online, but it may be at a higher cost than before, maybe having to secure service companies from much further away," said Jackie Forrest, analyst at ARC Financial.

A prolonged shutdown will heighten concerns about supplies after three major oil firms warned on Friday they won't be able to deliver on some contracts for Canadian crude. Fires around the oil sands last summer knocked out 10 percent of capacity but the two firms affected were back up and running within 2 weeks.

Only one oil sands production site, CNOOC unit Nexen's Long Lake facility, has sustained minor damage, and provincial fire officials said on Sunday they expected to hold flames back from Suncor Energy Inc's main oil sands plant north of Fort McMurray.

Alberta's vast oil sands are the world's third-largest crude reserves. The fire has shut down about 1 million barrels per day or 40 percent of total oil sands production.

The fire that some have started calling "the beast" was not the first to hit the oil sands. But the huge scale of the inferno means there is no real precedent for the challenge.

http://www.reuters.com/article/canada-wildfire-restart-idUSL2N1850J7

Cheniere Energy posted a first-quarter net loss of US$320.8 million compared to a $267.7 net loss during the corresponding period in 2015.

The Houston-based company reported a $69 million revenue for the quarter, a statement issued on Thursday reveals.

Cheniere’s Sabine Pass liquefaction project has started shipping cargoes in February and to date seven commissioning cargoes have been loaded and exported.

“Commissioning activities at Train 2 are underway and our remaining Trains under construction continue ahead of their respective contractual schedules and on budget,” said Neal Shear, Cheniere’s Interim President and CEO.

The company noted in its report that the construction of Sabine Pass LNG Trains three and four reached approximately 83.8 percent completion, which is ahead of schedule. Train five is approximately 28.8 percent complete.

Cheniere also informed that the three trains currently under construction at the Corpus Christi LNG project are at various stages of completion.

Trains one and two have reached 32.5 percent completion while the third liquefaction train is under development and the construction is expected to commence once the LNG sale and purchase agreements are in place and adequate financing is obtained.

http://www.lngworldnews.com/cheniere-post-320-million-q1-loss/