Australian oil and gas producer Santos Ltd, looking to beef up its balance sheet after knocking back a $5 billion takeover offer this week, flagged on Friday it would cut capital spending by a further 10 percent this year.

Santos also lowered the top end of its 2015 oil and gas production forecast by 5 million barrels to 57 million to 59 million barrels of oil equivalent (mmboe), blaming the change on unscheduled outages and lower than expected demand for its gas in Queensland.

It said capital spending would drop to A$1.8 billion ($1.3 billion), as it deferred some development activity amid a wider strategic review and auction of assets as it races to cut its A$8.8 billion net debt pile.

Santos on Thursday rejected a A$7.1 billion bid from Scepter, a firm backed by the royal families of Brunei and the United Arab Emirates, calling the offer opportunistic and saying the conditions would have hurt consideration of other alternatives.

Its third-quarter sales revenue fell 24 percent to A$808 million, hit by weaker oil prices. This was partly offset by a 4 percent rise in gas production to 14.5 mmboe, due mostly to its prized stake in the Papua New Guinea liquefied natural gas (LNG) project.

"We said that we would produce more for less and this quarter's figures are a strong reflection of that. Year to date production is up 10 percent while capex is down 55 percent and unit production costs are down 15 percent," Santos CEO David Knox said in a statement.

Santos has just started exporting from its $18.5 billion Gladstone LNG project, the biggest project it has ever built and operated, boosting its credentials as a gas supplier to Asia.

http://www.reuters.com/article/2015/10/22/santos-ltd-results-idUSL3N12M2QR20151022

Australia's antitrust regulator raised concerns on Friday about Halliburton Co's proposed $35 billion buyout of rival Baker Hughes Inc , in another setback for a deal that has already hit competition snarls in the United States.

Delaying its final ruling for a third time, the Australian Competition and Consumer Commision (ACCC) said joining the world's No. 2 and No. 3 oilfield services firms to eclipse the current No. 1, Schlumberger NV, "may create conditions that would facilitate coordinated behaviour in the market".

"The ACCC is concerned that the acquisition would result in the merged entity being one of only a small number of suppliers that could service the relevant markets," ACCC Chairman Rod Sims said in a statement, which described the companies as "close competitors across a broad range of oilfield goods and services in Australia".

"The ACCC is particularly concerned in relation to the supply of complex or high-risk projects, such as off-shore drilling projects," Sims added.

The regulator will give a final ruling on Dec. 17, but the remarks signal the hurdles the companies face as they try to push through a deal first announced 11 months ago as a way to cut costs amid an oil price downturn.

The two firms have already committed to selling businesses to appease U.S. authorities, but the ACCC's Sims noted that authorities in Europe, India and China are also looking at the deal.

The deal originally had a deadline of Dec. 16, but the two companies, which both provide services, technology and systems to the oil and gas industry globally, have more recently said it may not close until 2016.

The ACCC initially said it expected to give a decision by July 9 but postponed that twice to collect extra information from both companies. The regulator said it has requested more information by a deadline of Nov. 12.

The ACCC on Thursday also postponed a final decision on Royal Dutch Shell's $70 billion takeover of BG Group by a week, its second delay for a ruling on that deal, amid a flurry of M&A activity in the global energy sector that ias increased its workload.

http://www.reuters.com/article/2015/10/23/baker-hughes-halliburton-ma-idUSL3N12M6FS20151023

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Australian oil and gas producers Beach Energy and Drillsearch Energy Ltd agreed to a billion dollar merger on Friday, the day after Santos rejected a $5 billion offer, signalling the industry's fortunes may be bottoming.

The pace of deals in the sector has picked up as a slump in oil prices since June last year has battered share prices to such weak levels that companies and assets are proving irresistible to buyers with sufficient funds.

"Here it's been a particularly painful year for (energy) equities, which has generated once-in-a-cycle type opportunites for people with a more bullish long-term view on oil prices," said Adrian Prendergast an analyst with Morgans in Melbourne.

Analysts said the string of bids over the past month, including Suncor's C$4.3 billion bid for Canadian Oil Sands, suggested acquirors see oil prices bottoming as supply comes out of the market, especially in the United States.

"It does provide some indication the industry thinks it may miss the opportunity to transact in this recent oil price rout as people in the market have become more positive about oil prices next year," said Scott Simpson, an analyst at GMP Securities in Perth.

The Drillsearch-Beach merger followed a A$7.1 billion ($5.2 billion) bid for Santos from a firm backed by the royal families of Brunei and the United Arab Emirates and an A$11.7 billion bid by Woodside Petroleum for Oil Search Ltd.

"We are starting to see M&A as a real theme as cashed-up groups seek assets with exposure to oil price upside," UBS analyst Nik Burns said in a note on the Scepter bid for Santos.

Drillsearch agreed to a takeover offer valuing it at A$384 million, a 27 percent premium to its close on Thursday, to create a combined company worth about A$1.2 billion. The enlarged group would be Australia's biggest onshore oil and gas producer.

The two companies, both with good cashflows and little debt, said they would be well-positioned to snap up distressed assets, possibly from Santos or Origin Energy, which is also beefing up its balance sheet, to expand beyond their core in the Cooper Basin.

"This is not about squeezing the lemon, this is about finding growth opportunities," Drillsearch Chairman Jim McKerlie told analysts.

The merger of Beach and Drillsearch had long been expected as they are already partners in Cooper Basin oil and gas acreage, Beach owns a 4 percent stake in Drillsearch and they are both 19.9 percent owned by Seven Group Holdings.

Combined, they expect to produce 10.6 million to 11.8 million barrels of oil equivalent in the year to June 2016.

http://www.reuters.com/article/2015/10/23/drillsearch-beach-energy-ma-idUSL3N12M6BD20151023

The world's biggest oil traders are sitting on a war chest worth billions of dollars, but are reluctant to embark on a spending spree, because the pool of available assets is either too pricey or simply not for sale.

Vitol, Mercuria, Trafigura and Gunvor, the four privately-owned houses that traded nearly a billion tonnes of raw materials last year, have all said they are open to opportunities, but not at any price.

"The assets are (either) problematic, so it's not clear you want to own them, or they are reasonable assets, but their price hasn't come down low enough to create an opportunity," Mercuria chief executive Marco Dunand told the Reuters Commodities Summit.

The trading companies, which profit from volatility in the price of commodities, rather than falls or rises, have used this downturn in raw metals to rid themselves of assets they no longer want and prepare the ground for juicier targets.

Mercuria sold a 51 percent stake in Henry Bath, one of the world's oldest metals storage firms that it acquired through its purchase of JPMorgan Chase's physical commoditiesbusiness, in September, for $60 million.

Rival Trafigura netted nearly $900 million last year from the sale of an 80-percent stake in the Corpus Christi complex, its oil asset in the Texas shale hub, to U.S. firm Buckeye.

Chief financial officer Christophe Salmon said Trafigura was open to opportunities, but only those that would not compromise the company's balance sheet.

"Obviously, if you divest from existing assets, this leaves you more ability to reinvest, to recycle this capital into future acquisitions, so it's a moving piece," he said.

"Now that valuations are coming to a more reasonable level, we could be looking at opportunities again on a very selective basis," Salmon said.

With that in mind, Trafigura is drawn more by infrastructure than in upstream producing assets, he said.

Gunvor, one of the world's top four oil trading houses, has raised some $2 billion from selling its Russian assets, since former co-owner, Russian billionaire Gennady Timchenko, was hit with U.S. sanctions last year.

Gunvor chief executive Torbjorn Tornqvist told the summit he definitely saw his company growing in the coming years.

The company's series of divestments has left it with a healthy cash pile that it could invest in new business in places like Europe, the United States and China.

Vitol on the other hand has snapped up a number of assets in the last year, from taking control over a series of European oil refineries through its Varo Energy joint venture, to buying a stake in the Nigerian downstream assets of Oando, to taking over oil storage firm VTTI

http://www.reuters.com/article/2015/10/22/commodities-summit-ma-idUSL8N12L4F220151022

Two giant compressors that started up on the Troll A platform offshore Norway earlier this month will ensure a daily export capacity of 4.23 billion cubic feet of gas from the Troll field, according to Statoil.

The compressors will help the Troll field meet its long-term production profile, currently extending to 2063. They are operated by land-based power from Kollsnes west of Bergen, ensuring zero emissions of carbon dioxide and nitrogen oxides from the platform. During the past 18 months Statoil has started up low-pressure compressors on Troll A, Kvitebjørn, Heidrun, Kristin, Åsgard and Gullfaks, which has increased the recovery rate of the installations by more than 1.2 billion barrels and has extended their lives.

Gunnar Nakken, a senior vice president at Statoil, commented in a company statement:

“This is a new strategic milestone for the Troll field. The compressors are an important investment to ensure sustainable, long-term production and activity on the Norwegian continental shelf.”

- See more at: http://www.rigzone.com/news/oil_gas/a/141226/Statoil_New_Compressors_Boost_Gas_Recovery_at_Troll_A#sthash.Qk2vR1KR.dpuf

Cameron International’s profits slipped 10.5 percent as the Houston-based oil tool maker offset weaker demand for its onshore products by cutting costs and nearly tripling its subsea operating income.

CEO Scott Rowe said in a statement said the company’s third quarter earnings were nearly identical to those a year ago, before the dramatic collapse in oil prices and the deep plunge in the U.S. rig count.

“These results validate the journey we began in 2014 to reduce the company’s fundamental cost structure and improve execution across our four segments,” he said.

Cameron posted earnings of $213 million, or 98 cents per share, in the three-month period ending Sept. 30. That’s down from $238 million, or $1.12 per share, during the same time a year ago.

Revenues fell from $2.7 billion to $2.2 billion amid weaker demand for all of its products and services, the company said.

Cameron’s subsea and drilling segments boosted its operating income despite the brutal downturn, in part due to project cost reductions, the company said.

Its surface divisions and valves and measurements segments continued to struggle with waning demand and pressure from producers for deeper discounts.

Although Cameron has been able to protect its balance sheet by improving operations and cutting costs, Rowe said the tough times show no signs of abating, which means the company will likely see operating income margins decline in all business segments in the fourth quarter.

“In the face of market headwinds, we will maintain our relentless focus on the things we can control: execution, customer relationships, cost reduction and technology,” he said.

The company has cancelled its conference calls with investors as it continues to work on a merger with Schlumberger. Cameron said it expects the $12.8 billion deal to close in the first quarter of 2016.

Cameron has warned of further weakening in the fourth quarter after the company posted a reduced profit in the latest period.

http://fuelfix.com/blog/2015/10/22/camerons-profits-slip-10-5-percent-as-cost-cutting-offsets-weaker-demand/?utm_source=twitterfeed&utm_medium=twitter

Japanese trading and investment house Marubeni Corporation is believed to be seeking a stake in the Santos and Oil Search-backed PNG LNG gas project.

As Santos and its advisers at Deutsche Bank and Lazard juggle a fistful of proposals stemming from the wide-ranging strategic review, Street Talk understands one option under serious consideration for Santos is to sell a 3.6 per cent stake in PNG LNG to Marubeni in a deal that could be worth as much as $2 billion.

Santos has a 13.5 per cent stake in the PNG LNG project, which it owns alongside ExxonMobil (33.2 per cent and operator), Oil Search (29 per cent), National Petroleum Company of PNG (16.8 per cent), JX Nippon Oil and Gas Exploration Company (4.7%) and Mineral Resources Development Company (2.8 per cent).

The asset's strategic value was underscored by Woodside Petroleum's bid for Oil Search in September and Santos executive chairman Peter Coates has already called PNG LNG his company's "jewel in the crown". But Santos' stake would be worth less than Oil Search's because it does not own as much of the gas that would be used for an expansion.

That said, everything is on the table at Santos and there are plenty of balls in the air.

Other sources reckon Santos' preferred deal is the sale of assets in Western Australia and Victoria, along with an equity raising. [Bids for assets were due on October 20, however it's understood they were pushed back by one week.] However, hiving off a 3.6 per cent stake could allow Santos to achieve twin goals of paying down debt and maintaining a material interest in the project.

It comes as Santos rejected a $6.88 a share cash proposal from Middle East-backed Scepter Partners, saying it was an "opportunistic" approach. Scepter's team, headed by former Blackstone Advisory Partners banker Anthony Steains, is understood to have sought meetings with Santos, along with no-talk no-shop conditions and four-to-six weeks due diligence. Highbury Partnership and Gilbert + Tobin are advising the bidder.

Fund managers and analysts were also left wondering on Thursday night how Santos could price an equity raising given the 16 per cent share price jump on Thursday and the $6.88 a share line in the sand.

They were also left guessing at the strength of Scepter's bid. It's a new entity and listed equities investors are yet to see exactly how the bidder funds its deals.

There is a theory that Steains and co made the bid without pitching the deal to the underlying equity sponsors [i.e. sovereign wealth funds and Brunei royalty]. It's also understood Scepter needed due diligence to line up debt funding.



Read more: http://www.afr.com/street-talk/marubeni-corp--santos-png-lng-stake-20151022-gkfo85#ixzz3pIv6TVDO
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Weatherford International plc reported a net loss before charges of $42 million ($0.05 net loss per share non-GAAP) on revenues of $2.24 billion for the third quarter of 2015. GAAP net loss for the third quarter of 2015 was $170 million, or a net loss of $0.22 per share.

Third Quarter 2015 Highlights

Net debt decreased by $28 million and positive free cash flow from operations was $123 million;
Operating income increased 3% and by 47 basis points sequentially, driven mostly by improvements in North America where revenue increased by 2% and operating margins increased 493 basis points with the modest recovery from spring break up in Canada and continued cost reduction measures;
Best-in-class sequential incrementals of 2% and year-on-year decrementals of 29%;
Completed the previous reduction in force target of 11,000 employees by September 30, 2015, with realized annualized savings of $803 million; and
Repurchased $236 million of long-term debt through open market transactions generating a gain of $35 million.

Bernard J. Duroc-Danner, Chairman of the Board, President and Chief Executive Officer, stated:

'We continue to make rapid and deep cost progress and drive structural change, while effectively redirecting our culture and strengthening our talent bench. Our actions remain centered around perennially improving our cost structure through cycles and intensifying capital allocation and cash generation as a company-wide discipline. Our direction is steadfast.

Our free cash flow from operations in the third quarter increased to $123 million. We are confident in our ability to generate positive free cash flow every quarter going forward and on a full year basis this year and beyond. Our path further takes us towards operating excellence and a strict focus on our industrial core.'

http://www.oilvoice.com/n/Weatherford-announces-third-quarter-2015-results/ae9eec7577a1.aspx

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Including the non-cash charges discussed below, the Company reported a net loss of $226 million, or $1.54 per share, for the third quarter of 2015, compared to net income of $16.0 million, or $0.11 per share, for the quarter ended September 30, 2014.  Revenues for the third quarter of 2015 were $422 million, compared to $846 million for the third quarter of 2014.

The financial results for the three months ended September 30, 2015 include pretax non-cash charges totaling $280 million ($187 million after-tax, or $1.28 per share).  These charges include $125 million from the impairment of all goodwill associated with the Company's pressure pumping business, $131 million from the write-down of drilling equipment primarily related to mechanical rigs and spare rig components, $22.0 million from the write-down of pressure pumping equipment and closed facilities and $1.9 million related to the impairment of certain oil and natural gas properties.  For the nine months ended September 30, 2015, the financial results also include pretax charges of $19.8 million related to a legal settlement and the impairment of certain oil and natural gas properties during the first six months of 2015.

Andy Hendricks, Patterson-UTI's Chief Executive Officer, stated, "During the third quarter, our rig count averaged 105 rigs in the United States and four rigs in Canada, compared to the second quarter average of 122 rigs in the United States and two in Canada.  Current commodity prices are, of course, negatively impacting drilling activity.  For the month of October, we expect our average rig count will be 92 in the United States and four in Canada."

Mr. Hendricks added, "We recognized $28.9 million of revenues related to early contract terminations in contract drilling during the third quarter.  These early termination revenues positively impacted our total average rig revenue per day of $26,010 by $2,870.  Excluding early termination revenue, total average rig revenue per day during the third quarter would have been $23,140, compared to $24,330 per day in the second quarter.

"Total average rig operating costs per day during the third quarter decreased $140 to $13,580 from $13,720 in the second quarter.  Excluding the positive impact from early termination revenues in both the second and third quarters, total average rig margin per day was $9,560 during the third quarter, compared to $10,600 during the second quarter.

"At the end of the third quarter our rig fleet included 160 APEX® rigs.  During the fourth quarter we expect to add one additional new APEX® rig under contract to our fleet.  We currently have no plans for additional newbuild rigs in 2016.

"As of September 30, 2015, we had term contracts for drilling rigs providing for more than $800 million of future dayrate drilling revenue.  Based on contracts currently in place, we expect an average of 71 rigs operating under term contracts during the fourth quarter, and an average of 45 rigs operating under term contracts during 2016.

http://finance.yahoo.com/news/patterson-uti-energy-reports-financial-100000421.html

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Production of 4,862 thousand barrels of oil equivalent ("MBOE") during the third quarter 2015 for average production of 52,844 barrels of oil equivalent per day ("BOE/D") driven by continued outperformance of Catarina wells

The Company received approximately $345 million in cash with the close of the Western Catarina Midstream Divestiture, with annual lease operating costs expected to rise approximately $0.75 per barrel of oil equivalent over previous guidance as a result of the transaction

The Company's joint venture ("JV") with Targa Resources Partners LP (NGLS)("Targa") to construct a cryogenic processing plant expected to have initial capacity of 200 million cubic feet per day ("MMcfd") and associated high pressure gathering pipelines near Sanchez Energy's Catarina asset in the Eagle Ford Shale is expected to provide a path to improved yields, lower processing fees, and significant marketing benefits

MANAGEMENT COMMENTS

"During the third quarter 2015, we continued to realize operational success driven by strong production and declining well costs," said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy.

"Production for the third quarter 2015 averaged approximately 52,844 BOE/D, exceeding the high end of our guidance range of 46,000 to 50,000 BOE/D. A comprehensive optimization of our drilling and completion practices, along with direct sourcing strategy has resulted in cost savings of approximately 50% of our total well cost relative to third quarter 2014.

Extensive changes have been made to our processes and systems with essentially no change to our well design. As a result, our production remains strong and we have developed the financial flexibility needed to successfully manage a two-rig program in today's more challenging commodity price environment."

http://finance.yahoo.com/news/sanchez-energy-announces-third-quarter-103000892.html

 Northern Oil and Gas, Inc. today announced that, during the semi-annual redetermination period under Northern's revolving credit facility, its bank syndicate group reaffirmed and maintained the existing $550 million borrowing base.

"Capital discipline, combined with our exposure to the core of the Williston Basin, supported the reaffirmation of our borrowing base," commented Northern's Chairman and Chief Executive Officer, Michael Reger.  "The financial flexibility of our business model and the discipline we are showing through our capital allocation process gave our lenders the confidence they needed to maintain our borrowing base.  We appreciate the continued support provided by the entire syndicate of banks in our facility."

http://finance.yahoo.com/news/northern-oil-gas-inc-announces-110000008.html

China's shale gas exploration and development technology has entered the early stages of large-scale development, a report said on Wednesday.

Released during a three-day international event - China Mining 2015 - the report said exploration and development of shale gas in the Sichuan Basin has made a major breakthrough, as they discovered the first un-compartmentalized field with a geological reserve of one hundred billion cubic meters.

By the end of 2014, China had spent 23 billion yuan for exploration and development and has proven reserves of 106.8 billion cubic meters with an expected annual output of 3.2 billion cubic meters, the report said.

It said the shale gas resource was rich and widespread in China with huge potential for commercialization.

From 2009 to 2012, the Ministry of Land and Resources spent 660 million yuan on investigative work in key areas. It also made evaluations on the potential resource in 41 basins and regions.

http://en.chinamining.com.cn/Specials/2012ChinaMining/2015-10-14/1444805400d74079.html

Embattled Australian oil and gas producer Santos Ltd on Thursday rejected a A$7.1 billion ($5.1 billion) takeover proposal from a fund backed by the ruling families of Brunei and the United Arab Emirates.

Santos effectively put itself on the block in August, looking to sell assets in a bid to cut its A$8.8 billion net debt as its Gladstone liquefied natural gas (LNG) project begins operations amid a sharp slump in oil prices.

It said the bid from Bermuda-headquartered Scepter, pitched at a 26 percent premium to its close on Wednesday, was too cheap and included conditions that would hurt its consideration of asset sales and a wider strategic review.

"The Proposal is considered to be opportunistic in nature and does not reflect the fair underlying asset value of the company," Santos said in a statement to the Australian stock exchange.

Santos shares jumped as much as 20 percent on news of the bid, but were still worth only half as much as a year ago. The stock was trading at $6.28 at 0225 GMT, well below the proposed offer of A$6.88 a share.

Scepter had no immediate comment on the rejection, its head of merchant banking, Anthony Steains, said.

Two analysts said they thought shareholders would welcome the bid, given that the stock dipped below A$4 less than a month ago, but said valuations hinge on a long-term view of oil prices.

"It looks a fairly punchy price relative to value of the assets," said Bernstein analyst Neil Beveridge. "It looks to be a pretty decent bid."

Scepter, with offices in New York, London and Beijing, describes itself as a syndicate of ruling families, sovereign wealth funds and ultra-high net worth industrialists who have committed more than $14 billion to back large transactions.

Prince Abdul Ali Yil Kabier, a member of Brunei's ruling royal family, is a founder and director of the firm alongside financier Rayo Withanage. Other directors include Brunei's Prince Bahar Bin Jefri Bolkiah, the United Arab Emirates' Sheikh Juma al Maktoum, former HSBC chairman John Bond and former U.S. ambassador to Qatar Patrick Theros.

Incorporated this year, the management team is made up of several former directors of Blackstone Advisory Partners in Asia.

Santos' spokesman declined to comment on any other alternatives the company was considering or what conditions Scepter had sought in its bid sent on Oct. 20. Analysts and investors assumed one of the conditions was exclusivity.

While analysts said the offer was a full price relative to their valuations on Santos based on a long-term oil price around $75 a barrel, a top 10 shareholder said it made sense for the board to reject the bid.

"If you're prepared to auction off your assets, why would you offer someone exclusivity if they didn't offer a cracking (takeover) price?" said Jason Beddow, chief executive of Argo Investments, Santos' eighth largest shareholder.

Santos has stakes in oil and gas production in Australia, Papua New Guinea, Indonesia and Vietnam, with the jewel in its crown considered to be its 13.5 percent stake in the Papua New Guinea LNG project.

Analysts have said that stake alone could be worth more than A$5 billion, based on the value implied in a recent takeover bid by Woodside Petroleum for Oil Search Ltd, a bigger stakeholder in PNG LNG.

http://www.reuters.com/article/2015/10/22/santos-ltd-ma-idUSL3N12L5TW20151022

Brazil has told Dutch SBM Offshore NV, the world's top oil production ship leaser, to agree soon to a $250 bribery settlement if it wants to regain its biggest client in the world's largest oilship market, a government source told Reuters.

The ultimatum gives SBM several days to sign a leniency deal that includes financial reparation and other clauses such as cooperation with a corruption investigation. The settlement, which has been under negotiation for months, would lift a ban on the Amsterdam-based firm from bidding for new business with Petrobras, Brazil's state-run oil company.

Petrobras, whose officials were accused by Brazilian prosecutors of accepting bribes from SBM representatives in order to win contracts, will receive the proceeds of the deal, gaining badly needed cash to finance expansion and pay debt, the largest in the oil industry.

Petrobras officials were not immediately available for comment. SBM had no immediate comment on the matter.

The government source, who asked not to be named because he is involved in the negotiations, told Reuters on Wednesday that an agreement was very close but there remained a 50-50 chance of the talks folding over difficulties related to a few final clauses.

"We have negotiated endlessly and we gave them an ultimatum: Either we finish now or we break off talks and the company will be penalized," the source said.

The official did not detail the stumbling blocks but he said negotiations had been particularly complex because they involved several parties, including the Comptroller General's office, which is the main negotiator, as well as Rio de Janeiro state prosecutors and Petroleo Brasileiro SA, as the oil company is formally known.

The source confirmed that the leniency deal under negotiation involves payment by SBM to Petrobras of about 1 billion reais ($253 million), part of which would be paid in cash and the rest in services to be provided by the Dutch company to Petrobras.

Brazilian prosecutors had accused SBM of paying millions of dollars in bribes between 1995 and 2003 to secure contracts with Petrobras. Since the corruption scandal emerged, SBM and other suppliers, including construction and engineering firms, have been implicated, resulting in a ban on doing business with Petrobras.

http://www.reuters.com/article/2015/10/22/brazil-petrobras-sbm-offshore-idUSL1N12L1NF20151022

                                      Last Week  Week Before  Last Year
Domestic Production........ 9,096          9,096            8,934

http://ir.eia.gov/wpsr/overview.pdf

U.S. oil inventories rose by 8 million barrels last week, as another week of refinery downtime meant fewer barrels of oil were processed and more flowed into storage.

The larger-than-expected build reminded traders that an end to the glut of oil driving down prices remains far off. U.S. benchmark oil prices fell by 90 cents or 1.94 percent in early trading Wednesday.

U.S. inventories stood at 476.6 million barrels in the week ending Oct. 16, the highest level for this time of year in at least eight decades, according to the U.S. Energy Information Administration. Traders had expected a build of about 3.75 million barrels, according to the median estimate of 10 economists surveyed by Bloomberg.

The gain comes as U.S. refineries have reduced the amount of oil they process during the fall maintenance season. Refineries ran at 86.4 percent of their full capacity, up 0.4 percentage points from last week but still far below the 95 percent-plus rates common a few months ago.

Gasoline inventories fell by 1.5 million barrels to 219.8 million barrels. Distillate fuels fell by 2.6 million barrels to 145 million barrels.

Wednesday’s weekly data showed the fourth consecutive weekly build in U.S. inventories and the second second consecutive gain of more than 7.5 million barrels.

http://fuelfix.com/blog/2015/10/21/inventories-post-another-large-gain/

Baker Hughes Inc. on Wednesday reported a 39% drop in revenue for its third quarter, as the oil-field services company forecast difficult conditions for its current quarter while depressed oil prices continue to pressure spending from its customers.

Baker Hughes, which is being acquired by larger rival HalliburtonCo., has cut thousands of jobs and closed facilities as plunging oil prices have prompted many of its clients to curtail or cancel projects. Baker Hughes and its peers are particularly struggling in the U.S., where shale producers have dialed back operations.

Chief Executive Martin Craighead said Baker Hughes is seeing greater interest in its production offerings, as customers focus on optimizing production from existing wells over exploration and production. Mr. Craighead said he expects the company to face further reductions in activity and pricing pressures throughout the remainder of the year.

For the quarter ended Sept. 30, Baker Hughes reported a loss of $159 million, or 36 cents a share, compared with a prior-year profit of $375 million, or 86 cents a share.

Excluding restructuring charges and merger costs, among other items, the company’s adjusted per-share loss was 5 cents a share.

Revenue fell to $3.79 billion from $6.25 billion a year earlier.

Analysts polled by Thomson Reuters were expecting an adjusted loss of 14 cents a share on revenue of $3.79 billion.

Revenue fell across all of Baker Hughes’s geographic segments in the quarter compared with a year ago, with the biggest drop in North America. The division saw a 57% decline in revenue to $1.4 billion, as average rig counts fell 54% and customers cut spending.

Latin America posted a 23% decline in revenue, while revenue fell 21% in the Middle East and Asia Pacific division.

http://www.wsj.com/articles/baker-hughes-revenue-falls-39-on-depressed-oil-prices-1445430736

Japan's JERA Co, set to become the world's biggest buyer of liquefied natural gas (LNG) next year, plans to significantly cut the amount of gas it purchases on long-term contracts, the company's president told the Reuters Global Commodities Summit.

JERA, a joint venture set up by Tokyo Electric Power (Tepco) and Chubu Electric Power to initially handle fuel procurement with a possibility of eventually taking over thermal power stations, has more than 10 million tonnes of gas on long-term contracts that expire by around 2020.

But the company will not automatically renew them, President Yuji Kakimi said.

The move puts more question marks over planned big LNG projects, which rely on long-term contracts to get financing approved, amid a downturn in commodities markets that has cut investment in many areas.

JERA, which buys around 80 percent of its gas on long-term contracts, will only contract volumes to cover the absolute minimum of fuel needed, using the most optimistic scenarios for rebooting its nuclear power plants and the take-up for renewable energy being promoted by the government.

Additional requirements for gas will be met with mid-term and short-term contracts or spot purchases, Kakimi said.

"Our original mission of procuring at a similar level to Europe and the U.S. is close to being achieved with oil price falling, but even if oil prices rose, we have to make sure that (procurement) costs are capped," he said.

JERA will surpass Korea Gas Corp as the world's single biggest buyer of LNG with annual purchases of around 40 million tonnes once it fully integrates the partners' existing contracts next summer.

Kakimi said Jera's annual purchases of gas are expected to decline in line with government forecasts, implying the company will be burning around 28 million tonnes a year by 2030.

He also said the company is expanding Chubu Electric's unit in Houston to start LNG trading opportunities when the Freeport LNG project, in which Chubu invests in, starts export in 2018.

CUTTING COAL PROCUREMENT COST

JERA also aims to broaden its sources of coal to lower its reliance on high-quality Australian coals in order to cut costs.

Australia is by far the biggest supplier to Japan, accounting for nearly 80 percent of Japan's thermal coal imports in the first eight months of this year.

"Since it looks difficult to see more flows from Indonesia under current market circumstances, it is important to develop new sources such as Russia, the U.S., Colombia and Africa," Kakimi said.

JERA, which buys about 20 million tonnes of thermal coal a year, is also interested in buying into in coal mines to hedge against rises in coal prices, he said.

He declined to say how much a stake it aims to buy, but said stakes equivalent to 30-40 percent of its procurement would be "too much" under the current market.

http://www.reuters.com/article/2015/10/21/commodities-summit-jera-reuters-summit-p-idUSL3N12L2U420151021

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Oilfield services provider Baker Hughes Inc said it expects less drilling in the current quarter due to reduced customer spending but said it was seeing "stronger interest" in services that help increase oil and gas production.

http://www.reuters.com/article/2015/10/21/baker-hughes-results-idUSL3N12L41K20151021

Cost reductions being achieved on both existing and new field projects off Norway will result in a rebound in investment and activity levels as early as next year given an oil price above $60 a barrel, according to a contractor boss.

http://www.upstreamonline.com/live/1414564/usd-60-barrel-could-fuel-norway-revival?utm_source=twitterfeed&utm_medium=twitter

IMr Pawel Olechnowicz the chief executive of Poland's No 2 oil refiner Lotos said that he was interested in refining Saudi and Iranian oil as part of efforts to diversify away from Russian crude.

Mr Olechnowicz said that "We are interested in refining any oil, including Saudi and Iranian oil. Diversification allows for greater safety of the company."

Last week, the head of Russia's biggest oil company Rosneft said that Saudi Arabia had started supplying crude oil to Poland, a market traditionally dominated by Russia.

http://steelguru.com/gas-oil/polish-lotos-ceo-says-interested-in-saudi-iranian-oil/437306#tag

Russia beat Saudi Arabia to become the biggest seller of crude to China for the second time this year in the race to supply the world’s biggest energy consumer.

Asia’s largest economy bought a record 4.04 million metric tons of crude from Russia, or about 988,000 barrels a day, in September. That’s 42 percent more than a year earlier and 31 percent higher than in August, according to data from the General Administration of Customs in Beijing on Wednesday. Oman was the third-biggest supplier, behind Saudi Arabia, while Angola slipped to fourth place from second in the previous month.

China, the world’s second-biggest oil user, is buying near record amounts of crude from overseas as it seeks to take advantage of a plunge in prices to boost its stockpiles. The International Energy Agency estimates the nation will be responsible for more than a quarter of global consumption growth next year, making it a keybattleground for producers seeking to defend market share amid a worldwide oversupply.

“The biggest battle to supply oil to China is between Russia and Saudi,” Gao Jian, an analyst at SCI International, a Shandong-based energy consultant, said by phone. “Russia is gaining momentum with its pipeline and buying interest for its crude from teapot refineries.”

A direct pipeline to northern China has boosted exports of East Siberia-Pacific Ocean crude. Seaborne shipments were also spurred by the proximity of the Kozmino port in Russia’s east to the Asian nation, while new rules allowing small independent refineries known as teapots to buy imported supplies have also helped sales.

Shandong Kenli Petrochemical, a teapot refiner, bought ESPO crude as its first directly imported cargo after gaining a license last month, according to ICIS China, a Shanghai-based commodities researcher. The grade would help increase the plant’s production of both gasoline and diesel, it said in an emailed note earlier in October. Russia last beat Saudi Arabia as the Asian nation’s biggest supplier in May.

Saudi Arabia, the biggest producer in the Organization of Petroleum Exporting Countries, exported 3.95 million tons to China in September, 17 percent lower than a year earlier, the customs data show. Oman’s sales jumped 18 percent to 3.17 million tons for the month.

http://www.bloomberg.com/news/articles/2015-10-21/russia-races-past-saudi-arabia-in-tussle-for-chinese-oil-market

Only five non-OPEC countries have sent representatives to a meeting of OPEC and non-OPEC oil market experts that began on Wednesday at the petroleum exporter group's Vienna headquarters.

The Organization of the Petroleum Exporting Countries had invited eight non-member nations including Russia for talks on the market, ahead of OPEC's policy-setting meeting on Dec. 4.

Wednesday's talks are not expected to increase the prospect of cooperation on oil supply curbs or show much support for a price band proposed by OPEC member Venezuela.

But participants could agree to share information or continue to assess the market, OPEC delegates and analysts say.

"There will be an exchange of views, discussion of the market and the OPEC secretariat's presentation, but I don't think there will be an agreement to coordinate," an OPEC delegate said.

Of the non-OPEC countries invited, Mexico, Russia, Colombia, Kazakhstan and Brazil are understood to have sent representatives. A similar meeting held in May failed to achieve cooperation between the two sides.

Non-OPEC producers have refused to work with OPEC in cutting supply to reduce a surplus that has prompted oil prices to sink below $50 a barrel from $115 in June 2014.

In turn, OPEC has refused to limit supply alone and many of its members have raised output.

Most OPEC countries have sent their national representatives - oil experts who rank below ministers - to the event, although Venezuelan Oil Minister Eulogio del Pino and his Ecuadorean counterpart Pedro Merizalde-Pavón are attending.

Cash-strapped member Venezuela is pushing for OPEC and non-OPEC cuts and has proposed reviving OPEC's price band mechanism, attempting to set a price floor of $70 a barrel.

But the Gulf OPEC members, including top exporter Saudi Arabia, have shown no interest in returning to a strategy of supporting prices, seeking instead to fight for market share.

http://www.reuters.com/article/2015/10/21/opec-meeting-idUSL8N12L22V20151021

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Sound Energy announces strategic collaboration with Schlumberger

Sound Energy, the European / Mediterranean focused upstream oil and gas company, is pleased to announce:

a Memorandum of Understanding between Sound Energy and Schlumberger Oilfield Holdings Limited in respect of a strategic relationship between Sound Energy and Schlumberger across Europe and Africa; and
a Term Sheet with Schlumberger Production Management, the production management arm of Schlumberger regarding the Tendrara licence, onshore Morocco.

The non-binding Term Sheet represents the first preliminary agreement to be entered into under the MOU and where it is envisaged that, subject to the execution of a definitive project agreement, SPM will collaborate with the Company on the Tendrara licence in Morocco. This collaboration would include SPM providing integrated technical services on a risked basis with an upside linked to production performance.

http://www.upstreamonline.com/live/1414547/schlumberger-in-sound-morocco-deal?utm_source=twitterfeed&utm_medium=twitter

Non-OPEC oil supply development Last year, non-OPEC oil supply witnessed a record-high growth of 2.24 mb/d. OECD Americas saw the highest output of all regions with an increase of 1.92 mb/d, much of which came from non-conventional sources. Actual data for the first half of this year shows non-OPEC supply grew by 1.77 mb/d, before dropping to 0.42 mb/d in the third quarter, according to preliminary data (Graph 1). 

This declining trend has been driven mainly by the low oil price environment, with prices down by around 50% since 3Q14. As a result, the oil industry has experienced a rapid fall in global upstream spending, down by more than 20%, with North America cutting as much as 35% (Graph 2). This has led to lower activity – less drilling and the delay or cancellation of new projects – which has put pressure on production growth. Moreover, the current price environment has incentivized the entire oil industry to become more efficient and cost effective. 


Graph 1: Non-OPEC supply growth, y-o-y 




The case of tight oil supply provides a clear example. With the decline in oil prices, rig counts were reduced by half and US shale producers took steps to increase efficiency and cost saving. Smaller operators active in tight oil have been particularly impacted by low prices, as they are usually pressed for cash. Many companies have also attempted to endure by hedging their crude output, as well as securing new loans. More recently, accessing credit has become more challenging as the decline in oil prices has diminished the value of companies’ collateral. This has resulted in less cash available for capex, leading to an evident acceleration in the decline in production in 3Q15. 

In light of these developments, US liquids output in the last quarter of this year is expected to show a contraction of 0.15 mb/d quarter-on-quarter and by 0.33 mb/d year-on-year, down from 1.91 mb/d in 4Q14. In terms of non-OPEC supply, the impact of lower oil prices on production has resulted in the supply growth forecast being downwardly revised to 0.72 mb/d in 2015, some 0.6 mb/d less than the initial forecast and well below the previous year. 

In 2016, the postponing or cancelling of upstream projects will likely continue, resulting in contraction of 0.13 mb/d in non-OPEC supply. US oil supply in 2016 is expected to decline by 0.1 mb/d. Production in FSU, Africa, Middle East and OECD Europe is also expected to fall. In contrast, Brazil’s output is projected to increase, although at a slower pace as a number of anticipated projects have been deferred. The 2016 forecast for non-OPEC supply is associated with a high level of uncertainty. Oil price fluctuations and technical challenges – such as unplanned shutdowns and sharper-than-expected decline rates – along with geopolitical conditions could affect non-OPEC supply in the coming year. 

While the increase in non-OPEC supply last year was more than twice that of global oil demand growth, this relationship is expected to flip this year before widening further in 2016 so that world oil demand growth exceeds the change in non-OPEC supply. This should reduce the excess supply in the market and lead to higher demand for OPEC crude. Required OPEC crude in 2016 is expected to average 30.8 mb/d, with the second half of the year reaching as high as 31.4 mb/d, resulting in more balanced oil market fundamentals.

http://www.opec.org/opec_web/static_files_project/media/downloads/publications/MOMROctober2015.pdf

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China registered a crude stock build for the fourth straight month in September at 784,000 b/d on an increase in net imports and a decline in refinery throughput, Platts calculations based on recently released official data showed.

The crude stock build compared to the 47,000 b/d rise in August.

China does not release official data on stocks. Platts calculates China's net crude stock draw or build by subtracting refinery throughput from the country's crude oil supply.

The latter takes into account net crude oil imports and domestic crude production.

The build in September resulted in an average of 755,000 b/d of stock build, or total 92 million barrels, over this stockbuilding wave that started in June -- higher than the 572,700 b/d, or total 68.72 million barrels, in the previous four-month wave seen over November 2014 to February 2015.

Moreover, this wave is likely to extend to November.

Chinaoil, the importing arm of state-owned oil giant PetroChina, alone purchased 72 crude cargoes of 500,000 barrels each during the Platts Market on Close assessment process in August.

The delivery month for these will fall across October and November, which will likely push up imports in November.

On the other hand, Chinese independent teapot refineries, which have been given import quotas in recent months, are in a hurry to import crude, sources have said.

All this suggests that the country is speeding up stockbuilding.

China is planning to have a strategic petroleum reserve to cover 90 days of its net crude imports in 2015.

"To meet these targets, an estimated 600 million barrels of crude will be needed by the end of this year," said James Lu senior analyst from Platts China Oil Analytics.

A total of around 8 million cu m (50.3 million barrels) of SPR storage facilities are scheduled to be put into operation by the end of this year, while more independent companies are building oil storage, which will allow more crude inflows to oil tanks in China.

http://www.platts.com/latest-news/oil/singapore/china-crude-stocks-up-for-fourth-straight-month-27893910

Image Source: presstvSaudi Arabia’s petrochemicals giant, Saudi Basic Industries Corp. (SABIC), has reported a 9.4-percent profit loss in the Q3 of this year as a result of a decline in the price of its products.

SABIC, which is the Middle East's largest listed company, posted a net profit of SAR 5.6 billion in the July to September period this year compared with SAR 6.18 billion in the corresponding period last year.

The company, however, did not provide any explanation for the price drop.

According to the statement, SABIC’s net profit in the first nine months of the year also dropped 17.7 percent. It net income in the first three quarters of 2015 stood at SAR 15.7 billion compared to SAR 19.1 billion in the same period in 2014.

Mr Yousef Abdullah al-Benyan, the company’s acting chief executive, said that SABIC, which is 70-percent state-owned took steps to cut costs by an average of 22 percent during the first three quarters of this year.

Mr Benyan said that cost reduction helped mitigate the impact of a 22-percent fall in the company’s third-quarter sales to SAR 37.3 billion from SAR 48.7 billion a year earlier, but did not explain on how SABIC reduced costs.

http://steelguru.com/infra/saudi-arabia-s-sabic-reports-9-4pct-drop-in-q3-profit/437237#tag

U.S. lawmakers from the House of Representatives and Senate have reached an agreement to extend a Dec. 31 deadline for railroads to implement new safety technology, a leading Republican senator said on Tuesday.

Senate Commerce Committee Chairman John Thune, a South Dakota Republican, said that talks between the two chambers have successfully bridged differences on a three-year extension of the deadline for railroads to implement positive train control, or PTC.

"Congress now needs to pass this plan in the coming weeks to avoid service disruptions that will impact shippers across the country and commuter railroad passengers," Thune said in a statement issued by the committee. "This PTC extension will keep the pressure on freight and passenger railroads to ensure safety benefits are realized as soon as possible."

PTC is a complex communications system that can avoid derailments and other accidents by automatically slowing or stopping a train. U.S. safety officials say the technology would have avoided the May 12 Amtrak derailment that killed eight people and injured more than 200 in Philadelphia.

Most U.S. railroads are expected to miss the Dec. 31 deadline for adopting the technology and have threatened to suspend freight and passenger service on major lines after Jan. 1, 2016, if lawmakers fail to grant an extension.

Railroads say PTC implementation has been hampered by high costs, bureaucratic delays and technological hurdles.

House lawmakers introduced legislation last month to extend the deadline for at least another three years.

Senators enacted their own bipartisan measure in July that would allow the U.S. Transportation Department to approve extensions on a case-by-case basis.

Rail operators have warned that they could begin notifying customers of possible service suspensions as early as the end of October.

http://www.reuters.com/article/2015/10/21/usa-trains-safety-idUSL1N12L01Y20151021

Stagnating rig productivity shows U.S. shale oil producers are running out of tricks to pump more with less in the face of crashing prices and points to a slide in output that should help rebalance global markets.

Over the 16 months of the crude price rout, production from new wells drilled by each rig has risen about 30 percent as companies refined their techniques, idled slower rigs and shifted crews and high-speed rigs to "sweet spots" with the most oil.

Such "high-grading" helped shale oil firms push U.S. output to the loftiest levels in decades even as oil tumbled by half to less than $50 a barrel and firms slashed rig fleets by 60 percent.

But recent government and private data show output per rig is now flatlining as the industry reaches the limits of what existing tools, technology and strategies can accomplish.

"We believe that the majority of the uplift from high-grading is beginning to wane," said Ted Harper, fund manager and senior research analyst at Frost Investment Advisors in Houston. "As a result, we expect North American production volumes to post accelerating declines through year-end."

Drillinginfo, a consultancy with proprietary data, told Reuters well productivity has fallen or stabilized in the top three U.S. shale fields - the Permian Basin and Eagle Ford of Texas and the Bakken of North Dakota - since July or August.

The U.S. Energy Information Administration, whose benchmark drilling productivity index is based in part on Drillinginfo data, forecasts next month's new oil production per rig in U.S. shale fields to stay at October levels, which it estimates at 465 barrels per day (bpd).

The big challenge of shale oil work is that well output drops off quickly - often more than 70 percent in the first year alone. So producers need to keep squeezing more oil out of new wells drilled by the currently deployed rig fleet just to offset steep declines in what existing wells produce.

OLD WELL DRAG

If that is no longer possible and firms remain reluctant to add rigs because of low crude prices and an uncertain outlook, overall production is set to sink. (Graphic:link.reuters.com/jem85w)

Chip Davis, managing partner at energy venture capital firm Houston Ventures, says the downward pull of declining output from older wells is getting stronger.

In the Eagle Ford, production from so-called legacy wells fell by 145,485 bpd last month, a drop that was 23 times larger than the 6,293 bpd lost in September of 2010, before the fracking boom brought thousands more wells online.

"The boulder that is decline is much bigger in size and rolling much faster than before," Davis said. "We've got very few rigs to buttress the rate of decline."

That growing drag suggests the fall in U.S. output could be sharper than a 10 percent drop the EIA sees between a peak of 9.6 million bpd in April and next August, when it expects production to bottom at 8.66 million bpd before starting to recover.

Producers' coping strategies with the worst cash crunch in years could be also hurting productivity of new wells.

To save money, many have started drilling shorter and cheaper vertical wells. They have also cut back in some cases on the size of multi-million dollar hydraulic fracturing jobs for long horizontal wells. Both factors can hurt the average amount of oil being added by new wells.

Analysts say it is hard to predict how much U.S. output will fall and whether it will undershoot official forecasts because lower production could lift prices and that in turn might prompt producers to redeploy idle rigs to pump more.

But for now, most companies are budgeting less next year for new drilling work and the U.S. rig count has tumbled to 595, according to Baker Hughes.

Analysts at Bernstein Research have said that productivity gains so far in this downturn have come from improved efficiency rather than fundamental leaps in technology.

Yet such advances, which are hard to predict, would be necessary to boost productivity again because analysts say shale firms seem to have fully exploited techniques such as drilling multiple wells from one location, drilling longer horizontally, and more intensive fracturing along a well bore.

Initial production rates for new wells in major oil basins also appear to be slowing, Bernstein analysts said, citing their analysis of peak rates dating back to 2009.

"Shale inefficiencies will be unable to overcome rig count collapse, leading to a roll in production which is bullish for oil price," they said.

http://www.reuters.com/article/2015/10/21/usa-oil-productivity-idUSL1N12J2K220151021

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Attached Files

In January 2014 Hess Corporation sold 74,000 of its 95,000 100%-owned Utica Shale acreage leases to Aubrey McClendon’s American Energy Partners for $924 million

After the sale, Hess still owned 21,000 acres of leases plus a 50% share of a joint venture with CONSOL Energy in another 65,000 acres. In January of this year, Hess (like other drillers) cut way back on their budget for Utica drilling.

It appeared that Hess was still in love with the Utica as recently as August when Hess’ top managers said some flattering things about their Utica acreage. Perhaps that was a buildup to selling their remaining position–because that’s exactly what they’re now doing.

According to unnamed sources who have seen an offering document being circulated, Hess is shopping all of their remaining Utica acreage, including the jv with CONSOL Energy.

http://marcellusdrilling.com/2015/10/hess-quietly-shops-the-rest-of-their-ohio-utica-acreage/?utm_source=dlvr.it&utm_medium=twitter

Iran will pay foreign oil companies larger fees than it did under previous buy-back contracts to attract $100 billion of investments needed to rebuild its energy industry.

The Persian Gulf state, once OPEC’s second-largest crude producer, will also offer 20-year contracts on oil and natural gas projects, Roknoddin Javadi, managing director of state-run National Iranian Oil Co., said in an interview in Tehran.

“What’s been announced so far looks like an attractive contract -- no doubt it’s a vast improvement on the buy-back contracts,’’ saidRobin Mills, a Dubai-based consultant who worked formerly for Royal Dutch Shell Plc on projects in Iran from 1998 to 2003.

New contract terms will be introduced next month, as part of plans to boost oil production to 5.7 million barrels a day and gas output to 1.4 billion cubic meters a day by 2021, Javadi said.

“The new contract that we’re going to present has raised the opportunity for those who invest to be able to participate in operation and production for a long term, let’s say 20 years,” he said. “This is the major incentive.”

Iran’s previous buy-back contracts merely paid oil companies a fixed fee over five to seven years, without giving investors a share of a field’s production in the longer term. The new contract will link payments to oil companies to the quantity they produce, Javadi said.

The new contract looks more appealing to investors than the service fees offered by neighboring Iraq, and it shares some features with the production-sharing agreements in common use elsewhere in the oil industry, Mills said. Investors will apparently have an incentive to produce more oil and develop a field for much longer than permitted under a buy-back, he said.

“It’ll be one of the most attractive contracts in the Middle East for the size and quality of the fields that are being offered,” Mills said.

Iran will present its new oil and gas contracts on Nov. 27-28 in Tehran, Javadi said.

The country has already lined up buyers in Europe and Asia for increased oil production it plans as soon as sanctions are lifted, Javadi said. The country will pump and sell 500,000 barrels a day in additional oil within a week of sanctions being lifted and will raise that by at least another 500,000 barrels a day within six months, he said.

http://www.bloomberg.com/news/articles/2015-10-20/iran-plans-20-year-contracts-as-incentive-for-energy-investments

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Schlumberger Technology Corp. has signed a 15-year deal with Energy Recovery, Inc., which grants Schlumberger exclusive rights to Energy Recovery’s VorTeq hydraulic pumping system, the first hydraulic fracturing manifold (“missile”) built to isolate hydraulic fracturing pumps from abrasive proppants that cause pump failure.

The VorTeq system is a hydraulic pumping system that replaces the missiles traditionally used in hydraulic fracturing. In current operations, the missile routes water, proppants (sand or ceramics) and chemicals downhole at treating pressures up to 15,000 psi.

However, the proppants cause frequent failures in the high pressure hydraulic fracturing pumps. With VorTeq, high-pressure hydraulic fracturing pumps will process clean or proppant-free water and transfer the hydraulic energy to the hydraulic fracturing fluid within the VorTeq missile.

Under the terms of the agreement, Schlumberger will pay a $75-million exclusivity fee immediately. Schlumberger will also pay two separate $25-million milestone payments (for a total of $50 million) subject to the satisfaction of certain key performance indicators, which are expected to occur in 2016. The agreement also includes continuing annual royalties for the duration of the license agreement, subject to the satisfaction of certain key performance indicators.

“We believe VorTeq is a paradigm shift for the hydraulic fracturing industry as it significantly reduces maintenance costs associated with pumping downtimes and provides considerable redundancy efficiencies,” Energy Recovery’s President and CEO Joel Gay said.

“We believe this technology offers Schlumberger the immediate benefit of reducing wear and tear on its pumps, as well as reducing downtime. In the medium-term, we believe it provides Schlumberger additional savings associated with eliminating redundant equipment onsite,” said Gay. “For a company in this market who wants to keep producing but needs to be mindful of costs, this technology tackles these challenges and delivers meaningful results.”

The heart of the VorTeq system is Energy Recovery’s Pressure Exchanger technology, which is the leading pressure energy recovery device in desalination with over 16,000 devices deployed globally.

The technology works by capturing and recycling otherwise wasted pressure energy in fluid flows, by a clean liquid-to-liquid energy exchange between high pressure and low pressure fluids. With a single moving part made of tungsten carbide, one of the most abrasion resistant materials on the planet, the system has been engineered to withstand tremendous pressure and harsh conditions, and transfers up to 95% of the hydraulic energy from one fluid to the next.

http://www.worldoil.com/news/2015/10/20/schlumberger-in-125-million-deal-for-vorteq-hydraulic-fracturing-technology

Russia's Gazprom has revised its 2015 investment programme to 1.043 trillion roubles ($16.8 billion), the state gas company said in a statement on Tuesday.

It said that represented an increase of 238.7 billion roubles compared with a preliminary figure given late last year.

- See more at: http://www.rigzone.com/news/oil_gas/a/141178/Russias_Gazprom_Says_2015_Investment_Program_Revised_to_1043_Trillion_Rou?rss=true#sthash.aXTmWGmn.dpuf

Pipeline company Kinder Morgan Inc said it would buy 15 refined products terminals in the United States from a unit of BP Plc in a deal valued at about $350 million.

Kinder Morgan said on Tuesday that it would hold 14 of the acquired assets under a joint venture with BP.

Kinder Morgan, which will own 75 percent of the joint venture, will be the sole owner of one of the terminals.

http://www.reuters.com/article/2015/10/20/kinder-morgan-de-bp-jv-idUSL3N12K4CT20151020

Statoil has reportedly cut costs by more than 30% on the stalled Johan Castberg field project in the Barents Sea off Norway, with the state-owned operator still on course for a concept decision next year.

http://www.upstreamonline.com/live/1414471/costs-cut-on-johan-castberg?utm_source=twitterfeed&utm_medium=twitter

Genel Energy Plc, an oil producer in Iraqi Kurdistan, reduced its output forecast for this year after suffering delays to payments for its exports.

The London-based company said Tuesday it expects to pump 85,000 to 90,000 barrels a day in 2015, compared with a previous forecast of 90,000 to 100,000. It also lowered guidance for spending and revenue. Shares of the company dropped 5.8 percent.

Oil producers in Kurdistan including Genel, Gulf Keystone Petroleum Plc and DNO ASA have been caught for years in a spat over revenue-sharing between the regional authorities and Iraq’s federal government. In December, both parties agreed to allow increased oil shipments, yet payment eluded the companies untillast month as the oil-price slump and the costs of fighting Islamic State militants put pressure on government resources.

“Given the payment situation has been irregular, we stopped investing in the drilling of the fields,” Genel’s Chief Financial Officer Ben Monaghan said in a phone interview. “Inevitably with conventional oil fields, if you stop investing, the production will begin to decline.”

The Kurdish authorities resumed payments to oil companies in September. Genel said in a separate filing Tuesday that partners in the Taq Taq oil field received a gross payment of $30 million for exports, of which its own share was $16.5 million, matching the amount received last month.

The company is still awaiting a payment for its share of the Tawke field which should be “imminent,” Andrew Benbow, a Genel spokesman said. Genel received a payment of $8 million for its share in the Tawke field last month.

“The reduction of production at Taq Taq and Tawke in the current uncertain political context in Kurdistan is an issue,” FirstEnergy Capital LLP wrote in an e-mailed note. “We appreciate this is likely to be a way to put pressure” on the Kurdish authorities to boost payments, it said.

Genel lowered its capital-expenditure forecast for this year to $150 million to $175 million from previous guidance of $150 million to $200 million. The company also narrowed its forecast range for 2015 sales to $350 million to $375 million from $350 million to $400 million, based on a Brent price of $50 a barrel in the fourth quarter. Brent is currently trading at about $48.50.

http://www.bloomberg.com/news/articles/2015-10-20/genel-cuts-2015-oil-production-forecast-on-iraq-payment-delays

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Vitol, the world's largest oil trader, believes the crude price will struggle to trade above $60 a barrel next year, as the effects of slowing global demand growth could be compounded by a return of Iranian and maybe even Libyan barrels.

Ian Taylor, the chief executive of Vitol, said his company forecast global oil demand growth in 2016 to reach around 1.35 million barrels per day (bpd), slowing from this year's strong expected growth of 1.7 million bpd.

Cheap oil encouraged record refining runs, but even this has not been enough to absorb oversupply and, as such, the price has held below $50 a barrel for much of the second half of this year .

Taylor said he expected consumption in China to increase next year, but global demand growth would likely still fall short of the levels seen this year.

"Will we get 1.7 million barrels a day in 2016? No. I don't think so and that's one of my worries. If we did get 1.7 million bpd in 2016, then we could easily get to $60, but I don't think we will," Taylor told the Reuters annual Commodities Summit.

The International Energy Agency forecasts demand growth of 1.21 million bpd in 2016.

Taylor said he did not expect OPEC's meeting in early December to yield any change to the producer group's stance of retaining market share by pumping record amounts of oil. The policy has exacerbated a global glut of crude.

"I don't expect it, but I'm certainly not going to take any big bets, because it still could happen and all we need is 500 (500,000 bpd) less from Saudi to give the market a bit of a serious shock," he said.

The consensus among industry players is for Iranian exports to rise by around 300,000-500,000 bpd by next spring.

"There will be a battle for market share, particularly in Asia and a little bit in the Mediterranean. It will be difficult to place that (Iranian) oil. I think it will depend very much how far U.S. production has gone down by then," Taylor said.

The risk to the oil market balance is that the void left by shuttered U.S. shale capacity could be quickly filled by Iran and Libya, which is producing around 400,000 bpd, a fraction of the 1.6 million bpd of its heyday prior to 2011.

"Can the market make room for (Iran)? Probably yes, but I'm not sure the market can make room for that and a doubling or tripling of Libyan production, which is my other big worry," Taylor said.

"The Libyans could easily get back 300,000 or 400,000 bpd. If you have 500,000 from Iran and 400,000 from Libya and you lose 1 million barrels from the Americans, you're back to where you started, which is why I don't see the market moving hugely."

http://www.reuters.com/article/2015/10/20/commodities-summit-vitol-reuters-summit-idUSL8N12K2HG20151020

We took a stab at assessing the impact of October borrowing base redeterminations on a set of high yield borrowers on which we get the most questions.  Reading accounts in the press you might believe that upstream operators are buckling under crippling debt loads. We beg to differ. Most of the high yield borrowers in the upstream space are reasonably well positioned to continue drilling even at current oil and gas prices.  Our analysis suggests just a handful of these upstream companies will have to make asset sales, renegotiate lending terms or curtail drilling activity further. And we certainly don’t expect the October borrowing base redeterminations to have meaningful influence on oil supply.

Reserve-based lending (RBL) is a form of revolving credit extended by banks to operators on the basis of their oil and gas reserves in the ground .  Twice a year, in April and October, banks re-assess the value of those reserves and adjust the credit lines. With the steep decline in oil prices, there has been much attention this time around on the October redetermination. The “hit” based on oil price assumptions this October versus this past May should be around 20%. However,most companies have the capacity to absorb this, either because they have that unused capacity on their credit lines and/or cash on the balance sheet.

Credit lines are determined nearly entirely on the value of the cash flow streams from producing wells. While cash is generally being consumed at the corporate level, what some stories miss is that adding producing wells extends companies’ ability to borrow. With the focus on the cash burn, many forget to take into account the resulting additions to the borrowing base, which partially offset that cash burn. It is this piece of the puzzle that can allow upstream companies to drill at the current pace for longer than many imagine. When we layered this additional production into our analysis, what was already a manageable liquidity situation for most became even more so.

Although it seems irrational to drill new wells into such low oil prices, it is not as irrational as you might imagine.   Equity markets are valuing public companies at oil prices well above those you see on your screen, roughly US$65 to US$70 or higher, so companies drilling wells at US$45 to US$50 are only responding to the incentives set out for them by the capital markets. Banks may only be valuing reserves at US$50 for the purpose of lending, but the US$65 to US$70 equity market valuation provides incentive for operators to drill – and to add producing reserves.

So don’t believe what you hear about the demise of the upstream oil and gas industry. All but a few are well positioned to continue their current pace of drilling activity.  Increasing their production base in turn grows upstream companies’ borrowing bases.  Meanwhile, equity markets are pricing higher oil prices and stand by to fund shortfalls. Those industry obituaries will have to be put on hold for the time being.

http://www.forbes.com/sites/woodmackenzie/2015/10/16/reports-of-the-energy-industrys-demise-greatly-exaggerated/?utm_source=twitter&utm_medium=social%20media&utm_campaign=wmorgani

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Oil Search Ltd., the target of a takeover bid from Woodside Petroleum Ltd., posted a 30 percent decline in third-quarter sales after a drop in energy prices.

Revenue fell to $379 million from $538.2 million a year earlier, according to a  statement from Oil Search on Tuesday. Sales dropped 3 percent from the June quarter. Output rose to a record 7.42 million barrels of oil equivalent, the company said.

Oil Search, which has a stake in the Exxon Mobil Corp.-operated liquefied natural gas project in Papua New Guinea, is among companies grappling with a slump in prices amid a surge in new supply. Benchmark Brent crude averaged $51.48 a barrel in the third quarter, compared with $103.59 during the same period in 2014.

“We are aiming to reduce costs and enhance production while continuing to move forward with our high-value growth opportunities,” Managing Director Peter Botten said in the statement. “The company is in an excellent position to withstand sustained low oil prices and capitalize from an oil price recovery.”

Oil Search last month rejected Woodside’s $8 billion takeover approach as too low. The offer is “fully priced,” Chief Executive Officer Peter Coleman said last week, amid speculation Woodside will increase its bid.

http://www.bloomberg.com/news/articles/2015-10-19/oil-search-quarterly-sales-decline-30-as-energy-prices-slide

Efforts to secure financing for Russia's Yamal LNG plant have stalled, with the owners baulking at costly Chinese loans and Western sanctions hampering alternatives, two Russian banking sources said, warning the search could drag into next year.

The quest to bankroll the $27 billion project ahead of a planned 2017 launch is seen as a test of Russia's ability to secure foreign loans at a time when the country's access to capital markets is severely limited by Western sanctions over its involvement in the conflict in eastern Ukraine.

The lead Russian company in the project -- Novatek , Russia's largest private gas producer -- is under U.S. sanctions, making it harder for it to find cash for an export project that envisages three liquefied natural gas (LNG) production lines with a capacity of 5.5 million tonnes a year each.

Novatek has a 50.1 percent stake in what will be only Russia's second LNG plant. France's Total and China's CNPC hold 20 percent each. And last month, Novatek agreed to sell a 9.9 percent stake to the China Silk Road Fund.

Originally, Novatek, where a close ally of President Vladimir Putin, Gennady Timchenko, is a co-owner, had expected to raise up to $20 billion from Chinese banks, with the first funds expected by the end of 2014.

But two Russian banking sources, who declined to be named, told Reuters they saw little movement on a deal for now.

One of the sources said that Yamal LNG was not happy with earlier offers from the banks and had been forced to relaunch the bidding process.

"Chinese money is expensive, so Novatek and Total would like European banks to take on the larger share of financing which is complicated by sanctions," the source said.

He said it was unclear whether the loans would be provided by the end of the year.

"There is no movement at the moment," another source said. "Of course, everything could be done in the course of one night ... but so far it looks unlikely that there will be anything before the year-end."

Russia's state development bank VEB has pledged $3 billion in banking guarantees, while the country's Sberbank and Gazprombank preliminarily agreed to provide $3 billion and $1 billion in loans, respectively.

"The delay in announcing project financing for Yamal LNG also raises concerns about the project's timing and possible increased equity investment in the project," Goldman Sachs said in a research note on Monday.

http://www.reuters.com/article/2015/10/19/russia-novatek-yamal-financing-idUSL8N12G2F020151019

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Saudi Arabia will probably sell about 120 billion riyals ($32 billion) of debt in 2016 as the country seeks to prop up its finances after oil’s slump, according to Saudi Fransi Capital.

Next year’s expected 10 billion riyals a month of sales will add to an estimated 135 billion riyals of debt issuance this year, analyst Aqib Mehboob wrote in a note to investors on the country’s banking industry.

Saudi Arabia is responding to the decline in crude, which accounts for about 80 percent of revenue, by tapping foreign reserves, cutting spending, delaying projects and selling bonds. Net foreign assets fell by about $82 billion at the end of August after reaching an all-time high last year. The country has raised about 75 billion riyals from debt issuance this year, according to the bank.

Saudi Arabia’s public debt is among the world’s lowest, with a gross debt-to-GDP ratio of less than 2 percent in 2014. “Even with the government running a 20 percent of GDP deficit again, and only funding 25 percent of the deficit through bond issuance, the foreign reserves remain at very comfortable levels,” Mehboob said in the report.

Falling for a seventh month in a row, net foreign assets held by the central bank dropped to $654.5 billion in August, the lowest since February 2013.

Saudi Fransi Capital is the investment-banking arm of Banque Saudi Fransi, a lender that is part-owned by France’s Credit Agricole SA.

http://www.bloomberg.com/news/articles/2015-10-19/saudi-arabia-seen-raising-32-billion-in-2016-saudi-fransi-says

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Economic TimesIndian Oil Corporation, the nation's largest refiner and fuel retailer, now purchases 30% of its crude requirements in the spot market, compared to 20% last year, helping it lower procurement cost and gain flexibility in responding to the consumer demand.

IOC's move is part of the larger shift among refiners towards the spot market as longterm price contracts put them at a disadvantage in a sharply falling crude oil environment.

In 2014-15, most refiners were saddled with huge inventory losses due to falling prices that hurt their profits. The volatility in crude prices, which have halved in a year, is a headache for refiners, which aim to counter this by enhanced spot purchases.

Mr AK Sharma, director (finance), said that "It (spot purchases) is saving us money. This also gives us flexibility in terms of the types of crude we want to purchase, depending on the demand of the products. Otherwise, you have to buy and process and sell the kind of things there is no demand for."

Mr Sharma said that the company now has enhanced flexibility on which crude to buy and when depending on the intensity of the demand for products like diesel, petrol, naphtha and LPG as some variety of crude oil are more suited to produce certain kinds of products in higher quantity. So now, IOC is able to better respond to the consumer demand and is less caught in situations when it would produce something more because of the supply of the crude and less because of the demand. The purchase term agreements for refiners usually last a year with prices fixed every month on the basis of a formula dependent on the average prices in the international market topped by a premium.

http://steelguru.com/gas-oil/indian-oil-corporation-purchases-30-of-its-crude-from-spot-market/437107#tag

State-run Japan Oil, Gas and Metals National Corp (JOGMEC) on Monday bought about 2.52 million barrels (400,000 kilolitres) of light crude via tender for the government's Strategic Petroleum Reserves, a trade ministry official said.

JOGMEC was seeking four sets of 630,000-barrel light crude, which are to be delivered to two government stockpiling bases in Tomakomai City in Hokkaido, northern Japan, by Feb. 24, 2016.

The ministry official declined to comment on the crude grades or the prices.

The tender comes after Japan in June sold a total 4.15 million barrels of crude from the government's Strategic Petroleum Reserves as part of a plan to replace the oil with other grades.

In recent years, Japan has been replacing heavier crude in its reserves with lighter crudes to reflect the growing share of light crudes in recent imports. The tender is not linked to any emergency release coordinated by the International Energy Agency.

http://www.reuters.com/article/2015/10/19/crude-japan-tender-idUSL3N12J1V220151019

Austria's OMV will take around 1 billion euros ($1.1 billion) in special charges to reflect the damage to the value of its oil fields and equipment by weak crude prices, conceding the oil price outlook was significantly more bearish than it had previously predicted.

Reflecting trends across the sector due to the slump in oil prices, Austria's biggest industrial company said on Monday the decline had "significantly burdened" its performance in the third quarter, adding it had slashed its assumptions for the coming years by as much as $25 a barrel.

The company's shares, which had risen on Friday to their highest in nearly four months, fell 3.8 percent in early trading, though they pared losses and were down 1.8 percent at 25.01 euros by 0749 GMT.

"These revised assumptions have required impairments to asset valuations in the upstream business, covering both assets under production and development, as well as exploration assets, to be recognized during the quarter," the company said.

The comments from OMV, which also said it planned to sell a stake of up to 49 percent in its pipeline unit Gas Connect Austria, echo similar moves from European competitors. Spain's Repsol for instance said last week it would step up asset sales, trim investments and cut costs.

OMV is due to report its third-quarter earnings on Nov. 5.

The group's new assumption for the price of benchmark Brent crude was $55 a barrel in 2016, it said. Its previous assumption was $75 a barrel, according to its 2014 annual report.

For 2017, the forecast was trimmed to $70 a barrel from $90, and the figure for 2018 was reduced to $80 a barrel from $105 a barrel. From 2019 onwards, it expected $85 a barrel.

"Net special charges recorded in the (third) quarter, predominantly as a consequence of the reduced oil price assumptions, will amount to approximately 1 billion euros," OMV said.

The company said potential buyers of up to 49 percent of its Gas Connect Austria unit had expressed "strong interest" and a deal was expected to be signed next year.

"In times of a difficult oil price environment, we are taking the appropriate measures to both optimize the portfolio and strengthen the group's cash flow and balance sheet", Manfred Leitner, head of OMV's downstream division, said.

The company said its production had fallen to 292,000 barrels of oil equivalent (boe) per day from 307,000 a day in the previous quarter and 311,000 in the same quarter last year.

http://www.reuters.com/article/2015/10/19/omv-production-idUSL8N12J0N720151019

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Halliburton Co, the world's No.2 oilfield services provider, reported a better-than-expected quarterly profit as deep cost cuts helped offset the impact of a drop in drilling activity.

The company earned 31 cents per share on an adjusted basis, higher than analysts' average estimate of 27 cents, according to Thomson Reuters I/B/E/S.

However, total revenue fell nearly 36 percent to $5.58 billion, missing analysts' estimate of $5.64 billion.

Revenue nearly halved in North America in the third quarter ended Sept. 30, mainly due to weak drilling activity and pricing. The region accounts for nearly 50 percent of the company's revenue.

Net loss attributable to the company was $54 million, or 6 cents per share, in the third quarter, compared with a profit of $1.20 billion, or $1.41 per share, hurt mainly by charges related to asset write-offs and severance costs.

"We are pleased with our third-quarter results, especially the resilience of our international business, where we outperformed our largest peer on a sequential a

http://www.reuters.com/article/2015/10/19/halliburton-results-idUSL3N12J3VZ20151019

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Niko Resources Ltd. provides the following updates:

The previously disclosed waiver of certain financial covenants and undertakings under the facilities agreement (as amended) with the institutional lenders of its US$340 million senior term loan facilities and a related forbearance agreement expired on October 15, 2015.

The Company is in negotiations with its senior lenders to extend the covenants in the third amendment to the facilities agreement and to extend the forbearance period in the forbearance agreement entered into on September 22, 2015, and expects to complete these negotiations next week. The Company has been advised that the senior lenders will not seek to enforce any of their rights under the amended facilities agreement during this period.

http://www.scandoil.com/moxie-bm2/news/niko-resources-provides-corporate-update-2.shtml

Economic Times Russia said that it’s prepared to discuss crude- price ranges and output cuts when it meets with the Organization of Petroleum Exporting Countries next week.

Mr Alexander Novak, Russia’s energy minister, said that “So far, we have not seen any proposals except for the one that concerns production cuts. We are not ruling out altogether the possibility of discussing the issue, both with OPEC and non-OPEC countries.”

Following a meeting with other oil producers in Vienna last November, Novak said Russia doesn’t have the ability to reduce or increase output quickly because of the harsh winters and complex geology at its Siberian fields. While previous attempts by Russia and OPEC to cooperate on cutting production have failed, the government is under increased budgetary pressure after the nation entered its first recession in six years.

Mr Novak said that Russia still believes production cuts are “inefficient” as they only result in short-term price gains. Any artificial price increases lead to investment inflows and, in turn, to price declines.

Mr Igor Sechin, chief executive officer of Russia’s largest oil producer OAO Rosneft, said that Saudi Arabia is “actively dumping” its supply and expanding in Europe, traditionally a key market for Russian exports.

http://steelguru.com/gas-oil/russia-ready-to-discuss-oil-price-bands-output-cuts-with-opec/437062#tag

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Saudi Arabia is delaying payments to government contractors as the slump in oil prices pushes the country into a deficit for the first time since 2009, according to three people with knowledge of the matter.

Companies working on infrastructure projects have been waiting six months or more for payments as the government seeks to preserve cash, the people said, asking not to be identified as the information is private. Delays have increased this year and the government has also been seeking to cut prices on contracts, the people said.

Saudi Arabia is tackling the slump in crude, which accounts for about 80 percent of revenue, by tapping foreign reserves, cutting spending and selling bonds. Net foreign assets fell by about $82 billion at the end of August after reaching an all-time high last year. The country has raised 55 billion riyals ($15 billion) from debt issuance this year. The government is also seeking to cut capital spending and delay projects.

“It’s hard to hold back from boosting spending when oil is on the rise, but very hard to cut when oil prices fall,” Simon Williams, chief economist for central and eastern Europe, the Middle East and North Africa at HSBC Holdings Plc, said in e-mailed comments. “Cuts are coming -- the budget deficit is too large to ignore and pretend it’s business as usual.”

Payment delays could slow the completion of projects under construction, including the $22 billion Riyadh metro, and curb the expansion needed to create jobs for a rising population. In the past, government spending has been a catalyst for growth. For example, when authorities announced $130 billion in social spending in 2011, the economy expanded 10 percent. This year, growth will probably be about 3 percent, according to data compiled by Bloomberg.

A spokesman for the finance ministry declined to comment.

http://www.bloomberg.com/news/articles/2015-10-19/saudi-arabia-said-to-delay-contractor-payments-after-oil-slump

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As China closes in on the United States as the world's biggest crude oil importer, demand from private refiners and stockpiling of cheap oil is expected to keep imports at record levels after a wobble in the third quarter.

Despite slower growth in recent months - crude imports rose just 1.3 percent in September on a year earlier - buying for October-November delivery has picked up strongly, traders and analysts say.

The purchases will ease concerns of a sharp slowdown in Chinese buying and support prices in coming months, analysts said.

The increased buying has shown up in tanker movements and freight rates, said Energy Aspects analyst Virendra Chauhan, and analysts are upgrading earlier forecasts for second half growth.

"Despite a slowing Chinese economy, crude imports remain robust on the back of accelerated stockpiling activities into operating and commercial storage," said Wendy Yong, analyst at oil consultancy FGE.

Since July, China has also granted nearly 700,000 bpd of crude import quotas to small refiners, known as "teapots", or roughly 10 percent of China's current total imports, as part of efforts to boost competition and attract private investment, creating a new source of demand.

"The teapots are super-active," said one oil trader, with many racing to fill their new quotas.

And state-owned refiners are restocking after a third-quarter lull. Unipec, the trading arm of Asia's top refiner Sinopec, bought 6 million barrels of North Sea Forties crude and 2.9 million barrels of Russian ESPO for loading this month, and it has also stepped up Angolan crude purchases for November.

To accommodate the oil, new storage tanks on southern Hainan island have either been put to use or are due to be filled with crude from end-2015.

FGE expects China's crude imports in the second half to rise by 12 percent from a year ago, up from a previous estimate of 10 percent. It forecast China's crude imports to rise 9 percent for the year.

Such a rise would take Chinese imports to 6.75 million barrels per day, not far off U.S. imports of 7.3 million bpd. China's imports outpaced the United States in April were roughly on par in September.

http://www.reuters.com/article/2015/10/19/china-oil-idUSL3N1221O420151019

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China's implied oil demand fell slightly in September from the same period last year even as passenger car sales rose for the first time in six months.

China consumed roughly 10.13 million barrels per day (bpd) of oil in September, down 0.1 percent from a year ago, and down 1.3 percent from August, according to calculations based on preliminary government data.

The fall came as Chinese auto sales climbed 2.1 percent in September from a year earlier, according to an industry association last week.

Daily implied oil demand is the sum of domestic refinery throughput and net imports of refined products, not counting adjustments for inventory changes.

The latest throughput and net import figures put China's implied oil demand in the first nine months of 2015 at 10.35 mln bpd, up 3.9 percent from the same period last year.

The year-to-date growth is running behind the International Energy Agency's most recent forecast for Chinese demand in 2015, which was revised higher to 4.9 percent earlier this month.

Reuters will publish more detailed demand calculations later in August, broken down by product and adjusted for estimated changes in fuel stocks based on data yet to be released.

In September, Chinese refineries C-CNREFPROC processed 0.5 percent more crude oil than a year ago at 10.32 million bpd. That was down 1.1 percent from August on a daily basis. Refinery runs in the first nine months of the year were at 10.38 million bpd.

The National Bureau of Statistics will provide a breakdown of output by refined products later this week.

China's domestic crude output rose 2.7 percent to 4.32 million bpd in September and recorded the same percentage growth in the first nine months of the year, the statistics bureau data showed.

http://www.reuters.com/article/2015/10/19/china-economy-oil-demand-idUSL3N12J15F20151019

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BP Plc and China's CNPC will next week unveil a strategic alliance

BP Plc and China's CNPC will next week unveil a strategic alliance to develop oil resources in Iraq and other regions, industry sources said on Friday.

The deal, one of several high profile deals to be signed during a visit by Chinese President Xi Jinping to London, will aim to bolster cooperation between the two companies in Iraq, where they are developing the giant Rumaila oilfield.

Rumaila, in southern Iraq, is the world's second largest oilfield and produced 1.34 million barrels per day in 2014, according to BP's website.

The two companies will also seek to expand into new joint ventures in other parts of the world, according to the sources. No clear production or investment targets are expected to be included in the deal, they said.

State-owned China National Petroleum Corp is Asia's largest oil producer and parent of PetroChina Co Ltd...

http://www.reuters.com/article/2015/10/16/bp-china-idUSL8N12G2HD20151016

Parex Resources Inc., a company focused on Colombian oil exploration and production, provides an operational update.

Q3 Production.

Quarterly (Q3 July 1-Sept 30, 2015) production grew to 27,375 barrels of oil per day compared to Q2 2015 production of 27,025 bopd and from Q3 2014 production of 25,175 bopd

Jacana 2015 Discovery (LLA-34, 55% WI, Non-op)

The Jacana-2 well was drilled to a depth of 11,092 feet approximately 820 meters northeast of the Jacana-1 well in the direction of the Tigana field. The well encountered potential oil bearing zones in both the Mirador and Guadalupe formations. The Guadalupe reservoir was tested with the use of an electric submersible pump and after 112 hours, a total of 3,941 barrels of 15 API oil had been recovered at an average rate of 845 bopd. The production rate on the final day of testing was 1,152 bopd with a water-cut of 0.5% and a producing drawdown of 20% indicating a production capability beyond the limitation of the current testing facility. The long term testing facility for the Jacana field has been completed and the Jacana-1 well is currently producing approximately 1,800 bopd with a watercut of 1%. 

Tilo 2014 Discovery (LLA-34, 55% WI, Non-op)

The Tilo-2 appraisal well was drilled 740 meters southwest of the Tilo-1 discovery well in the direction of the Tigana field to delineate the Guadalupe reservoir. The well encountered two potential oil bearing sections in the Guadalupe reservoir. The lower Guadalupe reservoir was the first zone that tested over a 53 hour period with the use of an ESP. The well recovered a total of 1,358 barrels of oil for an average production rate of 615 bopd. The final measured water-cut from the well was 88% indicating that a water contact is present in the wellbore. The well was recompleted into the upper Guadalupe reservoir and tested for a period of 144 hours. A total of 4,851 barrels of 14 API oil was recovered from the test at an average rate of 809 bopd and a final rate of 857 bopd with a water-cut of 12% .

Bazar 2015 Discovery (LLA-26, 100% WI, Operated)

The Bazar-2 well was drilled approximately 2.2 kilometers northeast of the 2015 Rumba-1 discovery and 1.1 kilometers northeast of the Rumba-2 appraisal well. The well encountered similar potential oil bearing zones in the Mirador formation as Rumba-1 and Rumba-2 wells and was tested in the upper Mirador zone with the use of an ESP. The well was tested for a period of 183 hours and recovered a total of 14,267 barrels of 18 API oil at an average rate of 1,871 bopd and a final facility restricted rate of 2,300 bopd with a water-cut of 1% .

Q4 Guidance

Capital expenditures for 2015 are estimated to be $140-$145 million. Fourth quarter 2015 oil production is forecast to be 28,500 bopd, an increase of 7% from production of 26,544 bopd for the fourth quarter of 2014. As at June 30th 2015, Parex had no bank debt, an undrawn credit facility of USD$200 million and working capital of approximately USD$90 million.

http://www.oilvoice.com/n/Parex-provides-operations-and-third-quarter-production-update/3955b80c8ad6.aspx

LiveBusiness Line reported that the Petroleum & Natural Gas Regulatory Board has ordered the encashing of 25 per cent of GAIL (India)’s performance bank guarantee for failing to achieve financial closure for the Surat-Paradip pipeline project.

The board found that GAIL failed to achieve financial closure for the project even after 42 months. The company had been given the authorisation to lay a 1,724-km natural gas pipeline from Surat in Gujarat to Paradip in Odisha in 2012.

On September 30, the board had passed an order for encashing 25 per cent of the bank guarantee.

However, this order was challenged in the Delhi High Court by GAIL (India).

On October 10, the Delhi High Court gave the company one week to satisfy the PNGRB with respect to its financial capabilities, the regulator said in its October 13 order.

Following the development, PNGRB asked GAIL (India) to furnish proof of tying up funds from banks or a company resolution approving the allocation of funds for the project.

PNGRB said that “On hearing the representative of GAIL, we find that neither any error in the order dated September 30 has been pointed out nor any resolution of the Board of Directors of GAIL has been placed before us and moreover, no other reason could be placed which could convince the Board to re-look into its earlier decision.”

http://steelguru.com/gas-oil/regulator-orders-encashing-25pct-of-gail-s-bank-guarantee/436939#tag

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Reliance Industries Ltd.’s second-quarter profit climbed 14 percent as gross refining margins widened at the operator of theworld’s biggest oil-refinery complex and a weakening rupee boosted export earnings.

Net income increased to 65.61 billion rupees ($1 billion) in the three months ended Sept. 30 from 57.42 billion rupees a year earlier, the Mumbai-based company said Friday in a stock exchange statement. That beat the 58.8 billion-rupee mean of 12 analyst estimates compiled by Bloomberg. Sales fell 37 percent to 608.17 billion rupees.

Mukesh Ambani-controlled Reliance is hoping to cut energy costs at its 1.24 million barrels-a-day Jamnagar refinery complex in the western state of Gujarat as well as petrochemical units by using synthesis gas and imported ethane as feedstock. Lower costs will help the company boost margins and face competition from China, which exported a record volume of fuel in August.

Asian refiners, including Reliance, have benefited from lower crude prices in the third quarter with Brent averaging about half of what it was a year ago. The company is also betting on a fourth-generation telecommunications network, which is expected to start later this year.

“Refining and petrochemical companies in India should do well on the back of higher refining margins compared with the year ago period,” Sudip Shah, London-based chief executive officer at Orbit Investment Securities Services Plc said before the earnings. His clients hold Reliance Industries’ bonds.

The adjoining refineries at Jamnagar have a combined capacity of 1.24 million barrels a day and can process cheaper, lower grades of crude into high-value products. Brent oil, the global benchmark, averaged about $51 a barrel in the quarter.

Reliance earned $10.6 for every barrel of crude it turned to fuels in the quarter, compared with $8.3 a year earlier and $10.4 in the preceding three months, according to the statement.

http://www.bloomberg.com/news/articles/2015-10-16/reliance-net-income-rises-14-on-higher-refining-margins

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Saudi Arabia, the world’s largest oil exporter, is storing record amounts of crude in its quest to
maintain market share as it cut shipments.

Commercial crude stockpiles in August rose to 326.6 million barrels, the highest since at least 2002, from 320.2 million barrels in July, according to data posted on the website of the Riyadh-based Joint Organisations Data Initiative. Exports dropped to 7 million barrels a day from 7.28 million.

“The fall in Saudi crude exports reflects the market reality,” Mohammed Ramady, an independent London-based analyst, said Sunday by phone. “It’s normal to see this fall knowing that the market is becoming highly competitive, with many countries in OPEC selling at discounts and under-pricing the Saudi crude.”

Crude inventories have been at record highs since May, a month before Saudi Arabia’s production hit an all-time high of 10.56 million barrels a day. The nation has led the Organization of Petroleum Exporting Countries in boosting production to defend market share, abandoning its previous role of cutting
output to boost prices.

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