The North American oil boom is proving resilient despite low oil prices, producer group OPEC said in its biggest and most detailed report this year, suggesting the global oil glut could persist for another two years.

A draft report of OPEC's long-term strategy, seen by Reuters ahead of the cartel's policy meeting in Vienna next week, forecast crude supply from rival non-OPEC producers would grow at least until 2017.

Sluggish global demand for oil means the call on OPEC's crude will fall from 30 million barrels per day (bpd) in 2014 to 28.2 million in 2017, effectively leaving the group with two options - cut output from current levels of 31 million bpd or be prepared to tolerate depressed oil prices for much longer.

"Since June 2014, oil prices have experienced a significant reduction, reaching levels even lower than the crisis experienced in 2008, yet non-OPEC supply is still showing some growth," the OPEC report said.

Shale oil production has proved to be more resilient than many had originally thought.

"Generally speaking, for non-OPEC fields already in production, even a severe low price environment will not result in production cuts, since high-cost producers will always seek to cover a part of their operating costs," the OPEC report said.

"For future non-OPEC production, only expectations of an oil price environment in the long-term below the marginal cost of production may deter substantial non-OPEC developments. Over the very long term, the economic threshold at which oil companies invest in upstream projects likely reflects their long-term oil price expectations."

It also said that since 1990, most of the forecasts concerning future non-OPEC oil supply have been pessimistic and often erroneous: "For example, non-OPEC production was once projected to peak in the early 1990s and decline thereafter."

OPEC publishes long-term strategy reports every five years. Its 2010 report did not mention shale oil as a serious competitor, highlighting the dramatic change the oil markets have undergone in the past few years.

The long-term report is prepared by OPEC's research team in Vienna and traditionally cautions that it does not articulate the final position of OPEC or any member country on any proposed conclusions it contains.

SWING PRODUCER

OPEC's ability to cut and raise production over the past decades to balance demand has earned it a reputation of being a swing producer. But the long-term report suggested it is tight shale oil that is now playing this role.

"Recent structural changes in the growth patterns of non-OPEC supply as a result of the substantial contributions from North American shale plays might prove to be a turning point (e.g. short lead times of the projects and higher short-term price elasticity)," the report noted.

It said new and cheaper technologies in extraction of tight crude, shale gas, and oil sands would guarantee aggregate growth at 6 percent per year and contribute 45 percent of the growth in energy production to 2035.

"Improved technology, successful exploration and enhanced recovery from existing fields have enabled the world to increase its resource base to levels well above the expectations of the past... The world's liquids resources are sufficient to meet any expected increase in demand over the next few decades," it said.

"With plenty of oil still left in familiar locations, forecasts that the world's reserves are drying out have given way to predictions that more oil than ever before can be found," the report said.

By 2019, OPEC crude supply at 28.7 million bpd will still be lower than in 2014, the report said, and demand for its oil will start rising only after 2018-2019, reaching almost 40 million bpd by 2040.

http://www.reuters.com/article/2015/05/28/oil-opec-report-idUSL5N0YI3CJ20150528

As Russia prepares to meet OPEC next week, a briefing paper from a Moscow think tank has shed light on how the government was warned against cutting oil output late last year even though global prices were plummeting.

Speculation was rife that Russia and the oil exporters' cartel might strike a production deal to arrest the slide when Energy Minister Alexander Novak met his Saudi Arabian counterpart last November.

However, the think tank had already advised Novak that OPEC would not cooperate and unilateral action would be costly at a time when Russian state finances were in a dire state.

"If Russia cuts output, OPEC will take our market share in Europe," a team led by energy expert Grigory Vygon said in the previously unpublished paper, commissioned by the Energy Ministry before the Nov. 25 meeting in Vienna.

The paper was prepared by the Skolkovo Institute's energy team, which has subsequently set up the independent Vygon Consulting group.

In the event, Novak opted against lowering Russia's output and two days later Saudi Oil Minister Ali al-Naimi also blocked calls at an OPEC conference for production cuts, sending crude prices to a fresh four-year low and declaring a global battle for market share.

Six months on, the agenda at least will repeat itself next week: non-OPEC producers led by Russia are scheduled to meet the cartel in the Austrian capital on Wednesday and Thursday, before an OPEC conference on Friday.

Benchmark crude at around $63 a barrel remains well below where it was before last November's OPEC meeting. However, it has recovered from a low of $46 hit in January, easing the pressure for radical action.

Therefore OPEC, which controls a third of the global oil market, and Russia, which produces another 12 percent, are unlikely to reverse their output strategy.

The confidential briefing paper, seen by Reuters, said that should Moscow decide to cut output or exports, similar quality OPEC crude - mainly from Saudi Arabia but also from Iran and Libya - would replace as much as 1 million barrels per day (bpd) of Russian oil. That is equivalent to a tenth of both Russian production and of European consumption.

Vygon predicted Saudi Arabia would refuse to cut production as it could weather the low oil price. Instead, OPEC's leading member would use the opportunity to win market share at the expense of rival and more costly producers, such as in the United States or Russia, it said.

That has proven true. Far from cutting, OPEC has increased production by 1.4 million bpd over the past year with Saudi output alone jumping by 450,000 bpd year-on-year to 10.15 million in April.

The paper also predicted that U.S. shale oil producers would prove resilient in maintaining output, even with the much lower prices. That has also proved correct, at least so far.

Russia has pushed its own production up by 200,000 bpd over the past year, hitting an all-time high of more than 10.7 million in April. This is mainly thanks to rising output at state-run Gazprom and freshly nationalised Bashneft.

However, a source close to the Russian team responsible for talks with OPEC said that much has changed since then. "The oil price has bounced back and Russia is kind of coping. There is also an understanding that the Saudis will not cut as they would lose market share, so nor should Russia," said the source.

"The consultations (with OPEC) are under way," he said. "Look at the forecasts we had produced earlier. In that sense, you will understand that we are within the (pricing) corridor that we had forecast."

http://www.reuters.com/article/2015/05/27/opec-russia-idUSL5N0YH2RK20150527

After months of bad news, oil companies working in the North Sea can finally see a glimmer of hope after a leading energy consultant forecast operating costs to plummet over the next two years.

Wood Mackenzie now expects costs in the North Sea, which is one of the most expensive and challenging regions for operators, to fall by 15pc through to the end of 2016.

"High capital and operating costs are the single biggest issue for companies in the UK and Norwegian sectors of the North Sea today," said Malcolm Dickson, principal North Sea analyst for Wood Mackenzie.

"Even before the oil price crash, developing and operating fields while making a profit was challenging and we expected some cost deflation in the sector as activity cooled. The drop in oil price has accelerated the need for lower costs, as companies adjust to protect their cash flows, and changes are now required to correct the industry's cost base."

Cost escalation in the North Sea basin has been a persistant concern for the industry, which had been heightened by the 40pc decline in oil prices since last November.

The UK's main oil producing area has found itself caught in the crossfire between US shale drillers and members of the Organisation of Petroleum Exporting Countries (Opec) who appear to be fighting an oil price war to win greater market share.

However, output from the North Sea has been under pressure for years before Opec decided to keep its production levels unchanged last year effectively triggering the current price war.

"We have already seen rig rates dropping significantly with reductions of up to 20pc for new contracts agreed in 2015," said Mr Dickson. "40pc of mobile rigs in the UK and 23pc in Norway are either currently without contract or due to come off by the end of 2015, giving scope for high reductions in future contract renewals."

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11632765/North-Sea-oil-industry-to-get-boost-from-falling-costs.html

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Four months into oil’s rebound from a six-year low, the tanker market is sending a clear signal that the rally is under threat.

A sudden surge in demand for supertankers drove benchmark charter rates 57 percent higher in the two weeks through May 20. OPEC will have almost half a billion barrels of oil in transit to buyers at the start of June, the most this year, while analysts say about 20 million barrels is being stored on ships in another indication the glut has yet to dissipate.

The Organization of Petroleum Exporting Countries is pumping the most oil in more than two years, determined to defend market share rather than prices. A record cut to the number of active U.S. drilling rigs and billions of dollars of spending reductions by companies since last year’s price plunge has yet to translate into a slump in barrels produced. The world is producing about 1.9 million barrels a day more crude than it needs, according to Goldman Sachs Group Inc.

“Supply of oil continues to build,” said Paddy Rodgers, the chief executive officer of Antwerp-based Euronav NV, whose supertanker fleet can haul 56 million barrels of crude. “All of this oil needs to go somewhere,”

Daily rates for supertankers on the industry’s benchmark route reached $83,412 on May 20, from $52,987 on May 6, according to the Baltic Exchange in London. While rates since retreated to $69,594, they’re still the highest for this time of year since at least 2008.

Brent crude futures advanced almost 40 percent from this year’s low on Jan. 13, and traded at $62.58 a barrel on the London-based ICE Futures Europe exchange at 12:53 p.m. Singapore time Thursday.

OPEC’s 12 members have will have 485 million barrels of oil in transit to buyers in the four weeks to June 6, the most since November, Roy Mason, founder of Oil Movements, a Halifax, England-based company monitoring the flows, said by e-mail Wednesday.

Iraq, the group’s second-largest producer, plans to boost exports to a record 3.75 million barrels a day next month, according to shipping programs.

Spare tanker capacity in the Middle East has seldom been tighter. The combined excess of ships competing for the region’s exports stood at 6 percent last week, the lowest for the time of year in Bloomberg surveys of shipbrokers that started in 2009. While that expanded to 12 percent this week, the monthly average was still the lowest on record for May.

Bullish oil traders may get some comfort from the U.S. Recent drops in oil inventories there are signaling a gradual easing of the glut, Paul Horsnell and other Standard Chartered Plc analysts wrote in a report May 26. It may take at least another quarter for the surplus to disappear, they wrote.

“There still seems to be a lot of physical activity, a lot of oil on the water,” Nigel Prentis, the head of research at Hartland Shipping Ltd. in London, said by phone. While the second quarter is usually quieter as refineries switch to summer fuels for the northern hemisphere, “the market is still busy and rates are incredibly high,” he said.

http://www.bloomberg.com/news/articles/2015-05-27/oil-bulls-beware-soaring-tanker-rates-show-supply-glut-persists-ia7cvht4

Brazil's state-run oil company, Petroleo Brasileiro SA, will pay employees 1.04 billion reais ($331 million) in bonuses for 2014 despite recording its largest-ever loss and rejecting investor dividends, a company union said on Wednesday.

The bonus, known as "a share in results", is a third bigger than in 2013, when the company recorded a profit, and was approved at an annual shareholders meeting on Monday, the union, known by its Portuguese initials FUP, said in a statement.

"The shareholders of Petrobras tried hard, but this time did not receive dividends," FUP said. "Disgusted, they even criticized the company for treating the workers differently."

Officials of Petrobras, as the company is known, did not respond to requests for comment or confirm the authenticity of a Petrobras letter dated Wednesday and addressed to FUP outlining the payments. The letter was published on FUP's website.

While Brazil's government owns a majority of voting common shares, non-government investors, primarily holders of preferred shares, own most Petrobras stock.

Petrobras recorded a 23.6 billion real ($7.5 billion) profit in 2013. In 2014 it had a 21.6 billion real loss, the result of a $17 billion write-down of assets as a result of a massive price-fixing, bribery and political-kickback scandal, poor planning and execution and a decline in oil prices.

The union accused investors of "crying for their dividends."

FUP, closely aligned with the Workers' Party of Brazilian President Dilma Rousseff, herself chairwoman of Petrobras from 2003 to 2010, applauded the company's 2014 performance, the only annual loss in at least two decades.

"The company's positive 2014 results, along with the fabulous profits that have marked its history, are the direct result of the workers," FUP said.

Some holders of preferred shares, the company's most traded class of stock, have explored using a Brazilian law that requires, under some circumstances, the conversion of preferred shares into common stock if minimum dividends are not paid.

Petrobras, the world's most indebted oil company, also faces U.S. and Brazilian lawsuits over the corruption scandal. Worth $290 billion in 2008, Petrobras is worth $55 billion today.

Petrobras, according to the unconfirmed FUP letter, agreed during contract talks to a higher 2014 bonus even if it lost money.

In Brazil, most employees automatically belong to a union. All Petrobras employees, including senior mangers, are eligible for bonuses. Petrobras did not say which employees are eligible for payments, which will be made by mid-June.

http://www.reuters.com/article/2015/05/28/brazil-petrobras-bonus-idUSL1N0YJ05220150528

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India's Gail has sold some of its liquefied natural gas from its US portfolio to Anglo-Dutch supermajor Shell ahead of production from early 2018, its head B.C. Tripathi said on Wednesday.

Gail has a deal to buy 3.5 million tonnes per annum of LNG for 20 years from US-based Cheniere Energy and has also booked capacity for another 2.3 mtpa at Dominion Energy's Cove Point liquefaction plant.

Tripathi refused to elaborate on the volumes, pricing and duration of the deal with Shell, but a trade source said Gail has sold at least 0.5 mtpa LNG to Shell, Reuters reported.

Gail would also issue an LNG swap tender in two months to cut transport costs for supplies to India, he said, adding 0.5 million tonnes of its US LNG has already been booked by local clients while talks were ongoing with domestic and foreign firms for more such deals.

Gail was keen to swap about 2 mtpa of its LNG, Tripathi had said in January 2014.

India's gas demand is set to rise as the federal government has approved policies to boost power and fertiliser production using imported gas.

Gas demand in the world's second most populous nation, however, declined in the quarter ending in April as alternative fuel like furnace oil turned cheaper due to rout in global oil markets.

Also, prices of gas sourced under a long-term deal with Qatar have turned costly, tapering the demand for the cleaner fuel.

He said India has used a 10% reduction permissible under a 25-year contract with Qatar's RasGas to import up to 7.5 mtpa the super cooled fuel.

http://www.upstreamonline.com/live/1401146/gail-sells-some-us-lng-to-shell?utm_source=twitterfeed&utm_medium=twitter

Premier Oil has announced an oil discovery at the Isobel Deep exploration well 14/20-1 in the North Falkland Basin, offshore the Falkland Islands, approximately 30km south of the Sea Lion field.

According to Premier, the Isobel Deep exploration well has been drilled to a depth of 8,289 feet reaching top reservoir on prognosis. The bottom 75 feet of the well consists of oil bearing F3 sands.

These sands were at a higher than expected reservoir pressure and this resulted in an influx into the well, the company said. Premier further notes that as part of the operations to remove the influx, oil was recovered from the well and appears similar in nature to Sea Lion crude.

Premier added that as a result of the new geological information it has been decided to suspend operations on the well and release the Eirik Raude drilling rig to drill in the South Falkland Basin. The rig is expected to return to continue operations in the North Falklands Basin in August.

Premier is now considering the optimal appraisal programme for the Elaine/Isobel complex in PL004.

Andrew Lodge, Exploration Director, commented:

“This is an important play opening discovery in the previously unexplored southern area of Licence PL004. The well has successfully demonstrated a trapping mechanism and the presence of moveable oil in the Elaine/Isobel fan complex.”  

Falkland Oil and Gas Limited (FOGL) has 40% interest in the licence PL004a where the well is located.

Tim Bushell, CEO of FOGL, commented: “We are delighted by the results of this well. Whilst it has not been possible to acquire wireline logs over the F3 reservoir (Isobel Deep), the presence of oil bearing sands is highly encouraging. FOGL believes these initial results open up an exciting new oil play in this part of PL004 and also, significantly reduce the risk on FOGL’s other prospects in the adjacent PL005 licence.

http://www.offshoreenergytoday.com/premier-hits-oil-in-isobel-deep-well-falkland-islands/

For months Saudi Arabia was cagey about its oil strategy. The kingdom claimed its decision not to cut production and stop the slide in prices was solely about letting the oil market reset itself. That charade is over.

The Saudis now openly boast that their strategy to let oil prices collapse was an attempt to kill U.S. shale production. Citing the nearly 60% drop in the U.S. oil rig count since October and the slowing of U.S. oil production, they are claiming a brilliant triumph.

But rather than kill the U.S. shale revolution, the Saudis have only made it more resilient, sped up its rate of technological innovation and capped oil prices for at least a half-decade or more.

U.S. shale producers will survive and grow. American consumers, paying less for gasoline and heating oil, will be the big winners. The Saudis and their friends in OPEC, so dependent on oil-export revenue, will be the clear losers.

The U.S. shale industry is by necessity becoming more efficient than ever. Low oil prices have become an opportunity. The Saudis have lit a fire under producers to trim the fat, deploy new productivity-boosting technologies and zero in on the most productive geology.

The result is a rapid decline in the break-even price across shale plays. Already, analysts believe it is now $60 per barrel and before long will fall to $50.

Goldman Sachs now predicts that prices will likely hold at $50 for at least the next five years. Shale efficiency and innovation have created a new ceiling for the price of oil. This certainly was not the Saudis' aim.

But, as the Saudis are finding out, we are just in the early innings of a new revolution — "Shale 2.0" as Manhattan Institute fellow Mark Mills calls it. A strong, increasingly efficient and productive U.S. shale industry — powered by American ingenuity and "Made in the USA" drilling and extraction technologies — is here to stay.

Read More At Investor's Business Daily: http://news.investors.com/ibd-editorials-brain-trust/052615-753977-us-shale-efficiency-innovation-up-after-saudi-oil-price-dive.htm#ixzz3bQIwlyuN
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Police evacuated residents living near a dam southwest of Dallas that was poised to burst on Wednesday due to surging floodwaters as emergency officials searched for bodies from storms that killed at least 17 in Texas and Oklahoma.

Water was topping the Padera dam, about 25 miles (40 kms) southwest of Dallas, and Midlothian Police said they have called on people living downstream to evacuate their houses and move livestock to higher ground in case the structure gives way.

Meanwhile, the death toll is set to rise with numerous people still missing in Texas after the storms slammed the states during the Memorial Day weekend, causing record floods that destroyed hundreds of homes, swept away bridges and stranded more than 1,000 motorists on area roads.

"Right now we still have a lot of our neighborhoods underwater," Michael Walter, a spokesman for Houston's Office of Emergency Management, told NBC's "Today" program.

http://www.reuters.com/article/2015/05/27/usa-storms-idUSL1N0YI0NI20150527

A flamboyant bird will get new protections Thursday when federal regulators announce a plan to limit oil and gas drilling on its sprawling western U.S. habitat, which may stave off declaring the greater sage-grouse as endangered.

With a deadline of September to decide if the chicken-sized bird is endangered, Interior Secretary Sally Jewell will unveil ways the Bureau of Land Management will conserve the bird’s habitat, according to two people familiar with the decision. More than half of the grouse’s range is on federal land spread across 11 states.

“In a sense, BLM has been actively working to deflect a listing for some time,” said Kevin Book, an analyst at ClearView Energy in Washington, who hasn’t seen details of the announcement. “Even without the final plan, BLM has already taken at-risk areas out of play for leasing and development.”

Long a totem of the American West, the greater sage-grouse has been at the center of one of the nation’s biggest conservation disputes, pitting energy and development interests against naturalists in lawsuits and lobbying campaigns. A decision on its status would be among the most far-reaching since the U.S. protected the northern spotted owl, disrupting logging communities in Oregon in the 1990s.

“We’ve seen this story before with what the federal government did in Oregon with the spotted owl,” said Kathleen Sgamma, vice president of the Western Energy Alliance, which represents oil and gas producers. “We believe the science doesn’t justify these restrictions.”

The Interior Department is set to issue proposals for 14 different areas Thursday, covering the land it oversees from Wyoming to Nevada. The plans will ban drilling and mining on some of the most pristine areas, and set protections around the leks, or areas where the birds gather in mating season, according to the people, who requested anonymity to discuss the decision before the announcement.

It’s not clear how large the protected areas would be, and if they could be enough to avoid an endangered finding. And oil interests in the Western states may object.

Interior’s U.S. Fish and Wildlife Service has been considering listing the bird as endangered -- prompting opposition from lawmakers and energy interests. Environmentalists say that it’s not clear BLM’s protections will be enough to ensure the bird’s protection.

http://www.bloomberg.com/news/articles/2015-05-27/sage-grouse-protection-said-to-bar-drilling-on-some-federal-land

South Korea's SK Innovation Co Ltd , which owns the country's biggest refiner SK Energy Co Ltd, said it aims to raise investment in U.S. shale fields and increase partnerships with major crude producers to stabilise energy supplies.

The firm said in a statement on Thursday it wanted to expand its shale gas fields in Oklahoma and Texas, which it acquired last year, into nearby areas. It also aims to boost competitiveness by diversifying crude sources and cutting import costs.

SK Innovation suffered its first loss in decades in the fourth quarter of 2014, though better margins over January to March amid weak global oil prices helped it swing back to a profit of 321.2 billion Korean won ($300.61 million).

The statement, quoting its chief executive and president Chung Chul-khil, also said that for its troubled chemical business its growth strategy would focus on the Chinese market.

The company said it hoped the plans would triple its domestic stock market value to 30 trillion Korean won ($27.09 billion) by 2018.

http://www.reuters.com/article/2015/05/28/skinnovation-southkorea-idUSL3N0YI1JG20150528