Europe’s oil-trading hub is fast filling up with what may be record amounts of crude and strikes in nearby France are to blame.

Crude inventories in an area known by oil traders as ARA -- Amsterdam, Rotterdam and Antwerp -- jumped by more than 3.5 million barrels to 65.635 million barrels in the week ended June 17, according to data from Genscape Inc. That’s the most since the company began monitoring in 2013 and the supplies occupied 73 percent of available space. Stockpiles of oil in all of the Netherlands and Belgium haven’t exceeded 65 million barrels for at least 11 years, International Energy Agency data compiled by Bloomberg show.

While there’s growing consensus among oil traders and analysts that a global crude glut is starting to erode, the buildup shows how vulnerable the market remains when local demand disruptions arise. French industrial action knocked out as much as 900,000 barrels a day of the country’s refining at one stage in June, about equal to the entire daily shipments of crudes that make up Dated Brent, a global benchmark.

“There was a lot of capacity that was offline and tankers could not discharge” at a key port in northern France, said Olivier Jakob, an analyst at Petromatrix GmbH in Zug, Switzerland. “There may have been some redirection of tankers going for storage in ARA.”

Eighty-four of the ARA hub’s 153 crude storage tanks at independent sites are now more than 75 percent full, while 55 are between 15 percent and 75 percent full, Genscape’s data show. There are zero empty tanks and only a few are even close to empty, according to Paulo Nery, London-based senior director for oil and shipping of Genscape. Traders also reserve space, meaning that the amount available is probably even lower than Genscape’s figures suggest.

“There are literally only four near-empty tanks at somewhere between 10 percent and 15 percent. In January there were 18 tanks at less than 15 percent,” Nery said. “It’s pretty empirical” proof that inventories are filling.

At least three crude tankers with 5 million barrels of cargo-carrying capacity had to divert north from Le Havre on France’s northern coast in May and June amid industrial action at the port and refineries that are mostly close to the coast. Two of the vessels went to Rotterdam.

The strike will have cut France’s average refining output by 150,000 barrels per day in May and 300,000 barrels per day this month, the International Energy Agency said in a report June 14. At the height of the action, at least four of the country’s eight plants were halted and a fifth ran at reduced capacity in late May and early June, curbing as much as 900,000 barrels a day at one point. That’s about the same as average loadings of Brent, Forties, Oseberg and Ekofisk last year, according data compiled by Bloomberg.

Impact from the French strike isn’t just being felt in crude storage. Demand for cargoes of newly pumped crude is weakening, a situation that is apparent in the price structure of derivatives linked to North Sea oil. A handful of cargoes have taken longer than normal to sell in the North Sea. Total SA, one of the companies affected by the French industrial action, took delivery of a cargo of Forties crude onto a supertanker called Maran Thetis in April and was still trying to sell it as recently as last week.

The buildup of stored oil may not last long since the strikers have agreed to restart the plants. Refining rates have dropped in Europe in recent months, primarily because of the industrial action, prompting a large drop in inventories of diesel, according to Ehsan Ul-Haq, senior oil market analyst at KBC Energy Economics. That may have created an opportunity for refiners to build up crude stocks so they can process more of the barrels and replace the missing diesel, he said.

http://www.bloomberg.com/news/articles/2016-06-28/french-oil-refining-strike-fills-europe-trading-hub-with-crude

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Saudi Arabian Oil Co. and Saudi Basic Industries Corp. are one step closer to building their first plant to process crude directly into chemicals, cutting out a link in the production chain from hydrocarbons to the finished products that go into plastics and other consumer goods.

The state-owned companies signed an agreement Tuesday to study such a project to be located in Saudi Arabia, they said in a statement. A joint venture is possible if the companies decide to move ahead after the study is completed by early 2017, they said. Oil companies normally refine crude into transportation fuels including gasoline and diesel and leave byproducts such as naphtha to be processed separately into chemicals.

The companies could “substantially” increase Saudi Arabia’s production of petrochemicals, while enabling them to boost commodity exports and spur industrial diversification, Amin Nasser, chief executive officer of the oil producer known as Saudi Aramco, said in the statement. It could also add more chemical products to the domestic market, he said at the signing ceremony.

Saudi Arabia, the world’s largest oil exporter, is pursuing a plan to modernize its economy by expanding industry and reducing the kingdom’s reliance on crude sales for government revenue. Part of that plan involves using oil-based chemicals to produce materials like plastics that can go into consumer products and form the basis for a larger manufacturing industry in the country.

Saudi Aramco would also be partly listed on the nation’s stock exchange under the plan outlined by Deputy Crown Prince Mohammed Bin Salman, the king’s son. The prince’s strategy calls for both Aramco and Sabic to be owned by the state’s Public Investment Fund, which currently holds 70 percent of the chemical company’s stock, according to date compiled by Bloomberg. The government owns Saudi Aramco directly.

Saudi Aramco and Sabic, the third-biggest petrochemical maker in the world by sales, are planning to build the refinery in Yanbu on the Red Sea coast, two people with knowledge of the plans said in April, asking not to be identified because the project was confidential. Saudi Aramco and Sabic had been working separately on projects to produce chemicals straight from oil without the need to operate separate facilities, the people said. Former Saudi Arabia Oil Minister Ali al-Naimi had announced in 2013 that the ministry was working with Sabic for the construction of an oil-to-chemical refinery in Yanbu.

http://www.bloomberg.com/news/articles/2016-06-28/saudi-aramco-sabic-one-step-closer-to-turn-oil-into-chemicals

Sinopec, the largest oil refiner in China, on Sunday denied it had succeeded in developing "super gasoline", rumoured to be able to reduce fuel consumption by 30 percent, Beijing Youth Daily reports.

In a post on its official Weibo account, the company said: "Encouraging and giving respect to innovation is part of major Sinopec values, and it encourages employees to carry out technological innovations so as to give full play to their creativity.

"Zhou Xiangjin is an employee engaged in synthetic fiber-related work at the company and, with regard to his claim of having invented a new gasoline product and technology, it deems there exists a lack of factual evidence."

Through its mature and standard news release channels, the company's media team would inform the public on major technological breakthroughs in a timely manner, it was added.

Previously, media reports had it that Zhou, who was in charge of Sinopec's chemical division, revealed the invention of a brand new gasoline product that was "clean, highly efficient, energy-saving and environmentally friendly".

According to reports, the new product was easy to make and was less harmful to the environment. It did not freeze in winter, nor contain any aromatics or need any antiknock agents, and was less toxic.

http://en.chinamining.com.cn/Companies/2016-06-28/1467081657d76695.html

The U.S. Supreme Court on Tuesday agreed to weigh Venezuela’s bid to block a lawsuit filed by an American oil drilling company that claims the South American country illegally seized 11 drilling rigs six years ago.

The high court will review a May 2015 ruling by the U.S. Court of Appeals for the District of Columbia Circuit that allowed one of the claims made by Oklahoma-based Helmerich & Payne International Drilling Company to move forward.

http://www.reuters.com/article/us-usa-court-venezuela-idUSKCN0ZE1MV

It seems running an E&P (exploration and production) company these days is an exercise in debt management. How you keep the company out of bankruptcy court.

The latest effort in that regard comes from Southwestern Energy, a major Marcellus/Utica driller. Yesterday Southwestern announced it has cut deals with its bankers and debtholders to push out the due date on its loans/IOUs another two years beyond the existing due date.

That buys the company more time to, well, more time to figure out what else to do: wait for natgas prices to go up; fire more people to reduce overhead; pull a rabbit out of the hat; whatever.

http://marcellusdrilling.com/2016/06/southwestern-energy-buys-more-time-with-banks-debtholders/

China Gas Holdings Ltd. expects natural gas sales to grow 20 percent in the current fiscal year as lower prices and the country’s push to replace coal with cleaner fuels spur consumption.

The fuel distributor, which runs most city gas projects in China, plans to sell 12 billion cubic meters of natural gas in the year ending March, up from 10 billion cubic meters in the previous period, executive Chairman Liu Minghui said in a briefing in Hong Kong Tuesday. Chinese authorities in November reduced prices for the fuel in an effort to encourage usage.

“China’s gas demand is always there, but relatively high prices last year made it unaffordable for many industrial users,” Liu said. “Because of the price cuts in November, consumption is back and we are confident we can achieve the 20 percent sales growth in the year ahead.”

China’s gas consumption growth slowed to 3 percent last year as the fuel’s competitive edge was undermined by cheap oil and while government price cuts lagged a decline in the fuel’s value on the open market, according to Bloomberg Intelligence. The reductions in November have helped push the country’s average gas demand in the first five-months of this year 15 percent higher, according to BI calculations.

China Gas also aims to expand liquefied petroleum gas sales to 3.8 million tons in the year ending March, from 3.2 million tons, and liquefied natural gas sales to 800,000 tons from 300,000 tons. The company’s sales growth in the April-to-June period was “better than the national average,” Liu said.

The company’s annual profit dropped 32.6 percent to 2.27 billion yuan, after posting a 1.4 billion yuan impairment charge caused mostly by foreign exchange losses, according to a statement filed with the Hong Kong stock exchange. China Gas lowered its U.S. dollar debt to 7 percent by March 31 from as high as 83 percent two years ago to avoid future currency risks, Vice President Zhu Weiwei said at the briefing.

http://www.bloomberg.com/news/articles/2016-06-29/china-gas-targets-20-sales-growth-as-lower-prices-boost-demand

Russian oil and gas companies will maintain stable capital spending in the next few years, while the global industry cuts back, thanks in part to advantages provided by the country’s currency, according to Fitch Ratings.

The cumulative capital expenditure in ruble terms of Russian oil companies rated by Fitch increased by 13 percent on an annual basis last year and will remain stable this year before falling by mid-single-digit percentages in 2017 and 2018, the credit-ratings company said in a statement Tuesday. They can manage this because “ruble flexibility” provides “a buffer against low oil prices,” it said.

While most international oil companies are curbing spending to withstand the slump in crude prices, Russian producers have been able to avoid cuts in ruble terms because of their currency’s depreciation against the dollar. Rosneft PJSC, Russia’s biggest oil producer, said on June 8 its capital expenditure rose 20 percent in the first quarter compared to a year ago.

A recent recovery in the exchange rate has producers monitoringcurrency markets closely. A downgrade to Russia’s credit rating or tax increases for producers are also potential threats to the companies’ plans, Fitch said. After an increase last year, taxes are likely to stay elevated for the next two years, it said.

http://www.bloomberg.com/news/articles/2016-06-28/russian-oil-industry-will-keep-stable-spending-plans-fitch-says

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BP Plc will send the first tanker of liquefied natural gas through the expanded Panama Canal in late July, opening up a new trade route for the heating and power-plant fuel as supplies surge.

The British Merchant will begin its journey in Trinidad & Tobago before heading to the canal for passage to the Pacific Ocean, according to an e-mailed statement from the Panama Canal Authority on Tuesday. The tanker, which has a capacity of 138,517 cubic meters of gas, is already anchored in the Caribbean, shipping data compiled by Bloomberg show.

The $5.3 billion expansion will allow the waterway to handle the kind of massive tankers that transport LNG for the first time. The shorter trade route between the Atlantic and Pacific will help cut costs after global LNG prices plunged in the past two years because of lower oil prices, rising supply and softening demand. The U.S. became an exporter of LNG produced from shale gas in February with the start of Cheniere Energy Inc.’s Sabine Pass terminal in Louisiana.

“It’s what a lot of folks have been anticipating for a long time,” said Rusty Braziel, president of RBN Energy LLC in Houston. Given current oil prices and economic conditions, shipments through the canal may be limited to volumes contracted to go to Japan and other Asia-Pacific buyers. The longer-term prospects are more promising, he said.

Earlier this month, the Panama Canal Authority estimated that 20 million tons of LNG may pass through annually, which would be equivalent to about 300 ships a year.

http://www.bloomberg.com/news/articles/2016-06-28/bp-will-send-first-lng-cargo-through-wider-panama-canal-in-july

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The Chevron-led $10 billion Angola LNG project has cancelled an international supply tender just weeks after the plant in Soyo loaded its first post-shutdown cargo.

The 5.2 million tons per year LNG plant was closed in April 2014 after a major rupture on a flare line.

“I can confirm that we have cancelled the next tender with the objective of rescheduling it to align it with our operations. We expect to reissue the tender shortly,” an Angola LNG spokeswoman told LNG World News on Tuesday.

To remind, Angola LNG said the first cargo after shutdown was loaded at Soyo in early June, adding that the facility is expected to load further LNG and LPG cargoes as part of the commissioning and testing process.

The first cargo was reportedly bought by Geneva-headquartered trader Vitol trough a tender launched by Angola LNG.

Angola LNG said earlier this month that further cargoes will be sold globally in a variety of ways, including international sales tenders.

Angola LNG is a joint venture between Sonangol (22.8%), Chevron (36.4%), BP (13.6%), Eni (13.6%), and Total (13.6%)

http://www.lngworldnews.com/angola-lng-drops-supply-tender/

In early 2013 the USGS put out this map of the shales, at that time the Bakken was the only big commercial shale.
This map, from the same time, shows land rigs crisscrossing the US hunting down the shales, at that time we had no idea which shales were significant, commercial or the scale of the technological impact. 

Today, the EIA closely tracks activity in these counties, and we have the Marcellus/Utica which have changed the economics of natural gas (resource the size of Russia, economics make decent returns at $3.) We have the Eagle Ford, which is commercial,but not much larger than the Bakken, and then we have the Permian. In area the Permian is 75000 sq miles or 48m acres.  Under this area there are 13 shale horizons, today at $50, there is active drilling on 3. 

Parsley Energy, an independent with 120000 acres claims 2bn resource barrels on their current drilling methodologies. Thats 16bn boee per million acres. Now Parsley is only including 2 of the shale horizons in this calculation, though management is indicating another 4 horizons have commercial potential. So Oil in the rock under Parsley's land could conceivably yield 4bn boee. If we include all 13 horizons for the calculation of Oil resource in place, and potentially recoverable, that directly leads us to a figure that looks like 8bn boee, or 64bn boee potential per million acres. 

Parsley numbers are not dissimilar to other Permian players. 
EOG, for example, claims 2.3bn boee on 3 horizons. EOG does not disclose acreage particularly well, we can estimate numbers at something like 13-14 boee per million acres, that is in line with Parsley.

CEO did said this:

The third implication is we can return to triple-digit direct rates of return with oil as low as $60 per barrel. And if history is any indication, we will continue to push the oil price needed for triple-digit returns even lower.

EOG uses after tax cash flow return on capital at risk as its core measure of profitability. 

Look, we could go on for pages like this. We have multiple Permian operators giving us approximately the same story. 
Here's Oxy's famous slide, which covers 2.3m acres of land all over the Permian. At $80 oil all 8700 locations are commercial, and that implies some 7.6bn boee of resource, or 3.3bn boee per 1m acres. Oxy's acreage, being legacy, and all over the map, is 'average', unlike EOG, Parsley or others, they have not cherry picked the best acreage.

We can therefore roughly estimate the following:
At >$80 Oil: Permian resource: 159bn boee commercial recoverable. (or approx Canada)
At $80 Oil: Permian resource: 95bn boee commercial recoverable. (Iraq?)
At $70 Oil: Permian resource:  76bn boee (3x China)
At $60 Oil: 63bn boee. (50% of Russia)
At $50 Oil: 21bn boee (Brazil)
At $40 Oil: 6bn boee. (No serious countries we know in conventional are commercial down at $40.)

Further, on Oxy's estimates 29bn boee has been moved into the commercial zone (<$60) over the past year. 

The Permian is in Texas, it has excellent property rights, plenty of quoted equity, some excellent management teams with a history of strong value creation, best of all it is the centre of a technology hurricane which continues to drive capex per boee developed down at a decent clip. 


We'll take Oxy's numbers again because they have AVERAGE acreage. In an environment where we have a rising Oil price across falling development costs in the Permian, I think I am going to make much money owning these stocks. 

Every time I look I go buy more. 

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At least two offshore oil platforms halted operations on Tuesday in the U.S. Gulf of Mexico after a fire at a natural gas processing plant in Mississippi shut a crucial pipeline that brings output onshore, several companies said.

The fire at Enterprise Products Partners plant in Pascagoula was brought under control, but officials were still forced to close the 225-mile Destin gas pipeline system that can carry 1.2 billion cubic feet per day from offshore fields to Pascagoula.

Destin, majority-owned by BP with Enbridge Inc a minority partner, said it was declaring force majeure, a legal clause that allows it to scrap commitments, as a result of the fire.

Offshore company LLOG said it was in the process of shutting its Delta House floating production system in the Gulf of Mexico on Tuesday, a spokesman said.

Murphy Oil Corp said its Thunder Hawk platform was shut in after the fire.

Murphy added it plans to flow natural gas to an alternate processing facility and expects minimal disruptions to its operations.

Several social media messages from Pascagoula residents had said the blaze erupted shortly before midnight at Chevron Corp's 330,000 barrels per day refinery in Pascagoula. The Pascagoula Police Department said the fire was not at the Chevron refinery.

There were no injuries from the blaze, Enterprise said. The cause was under investigation. Enterprise took ownership of the plant from BP Plc on June 1.

http://www.reuters.com/article/enterprise-fire-pascagoula-idUSL1N19K173

The debate over what happens to oil-sands crude in a freshwater spill just got a new twist -- one that could help unlock stalled pipelines.

A study funded by the Canadian government shows diluted bitumen doesn’t sink as readily as conventional oil when spilled in fresh water, upending previous assumptions. Instead, it floats, unless exposed to high temperatures and weathering.

The results may help dispel some concern that a spill of diluted bitumen would be more difficult to clean up and help companies make the case for pipeline projects such as Kinder Morgan Inc.’s Trans Mountain expansion. Investors are watching closely, said Andrew Logan, director of the oil and gas program at Ceres, an investor network promoting sustainable business practices.

“This kind of study is important because there is a battle among crudes" to supply the market, said Logan. Ceres represents investors with $14 trillion worth of assets. More understanding of how to mitigate the risks of heavy oil in a spill would help make the crude more accepted, he added.

Facing Opposition

The Canadian government is preparing a decision on Trans Mountain, which crosses rivers in British Columbia on its route to the Pacific. The province has opposed that pipeline and Enbridge Inc.’s Northern Gateway because of inadequate spill preparation. The risks of spills also featured in the debate -- and ultimate failure -- of TransCanada Corp. to win approval for its Keystone XL line.

The study was funded by the Canadian government, while the oil industry provided the products to be tested and had no input in the design or interpretation of the research, said Heather Dettman, a researcher at Natural Resources Canada’s laboratorynear Edmonton who led the study. The results were presented at an environmental contamination conference in Halifax earlier this month.

The study follows a 2015 report by the U.S. National Academy of Science that showed dilbit tended to quickly sink after being spilled in fresh water, requiring the use of dredgers or divers with vacuums to extract the oil from the sediment at the bottom of rivers.

“The question is always does dilbit float or sink,” said Dettman said. “What we found is that the oil was floating but we also found that the lighter oils mixed in with the water, like adding cream to coffee.” Clean-up crews would still have a narrow window to recover the spilled fuel before it causes damage.

Higher temperatures, which reached 29 degrees Celsius (84 Fahrenheit) during Enbridge’s 2010 spill on the Kalamazoo River in Michigan, accelerate the dispersal of heavy oil in water, according to the study. Cooler temperatures would allow more time to clean up a spill before the oil eventually settles on river bottoms.

Enbridge’s emergency response systems focus efforts on surface collection and absorption in the early stages of an event to help collect floating bitumen, said spokesman Graham White.

http://www.bloomberg.com/news/articles/2016-06-28/study-showing-oil-sands-floats-seen-easing-pipeline-spill-worry

Energy Transfer Equity LP terminated its merger agreement with Williams Cos. after a court ruled that it can walk away from the deal.

“Consistent with its rights and obligations under the merger agreement, ETE subsequently provided written notice terminating the merger agreement due to failure of conditions under the merger agreement,” Energy Transfer said in a statement Wednesday.

Eighteen months after Energy Transfer began talks to acquire the rival pipeline giant, a Delaware judge ruled on Friday that the company can back out of the nearly $33 billion deal. The company’s counsel, Latham & Watkins LLP, has advised Energy Transfer it was unable to deliver a required tax opinion by June 28, the date specified in the merger agreement.

Delaware Chancery Court Judge Sam Glasscock ruled June 24 that Energy Transfer is entitled to terminate the merger after its advisers said the deal didn’t free investors from tax liabilities. Williams remains committed to completing the merger and will “enforce its rights” under the terms of its agreement if Energy Transfer attempts to terminate the pact, the company said in a separate statement after the decision. Williams’s shareholders voted on Monday to approve the takeover and filed a notice of appeal.

The proposed tie-up, hailed by Energy Transfer Chief Executive Officer Kelcy Warren before the price of oil fell by almost half, now stands as one of the largest deals undone by the plunge in prices that has sent shock waves through companies, industries and entire economies.

The merger soured on multiple fronts after it was first announced in September. The collapse in crude prices dragged the market value of both companies down by more than a third, straining the relationship between the two and throwing into question the economics of their deal. The deal began to break down almost from the start as oil sank lower than either expected, undoing the economic logic of the takeover and prompting both companies to accuse each other of sabotaging the deal.

http://www.bloomberg.com/news/articles/2016-06-29/energy-transfer-terminates-williams-merger-after-court-ruling