The world's top crude oil exporter Saudi Arabia has turned itself into a major power of refined fuels, offering customers millions of barrels of diesel and potentially triggering a price war with Asian competitors as its exports feed into a glut.

Saudi Arabia, a leading member in the Organization of Petroleum Exporting Countries (OPEC), already pledged last November to keep crude output high to defend its market share against higher-cost producers.

While the strategy has kept crude markets well-supplied and prices low, the Kingdom has seen mixed success in defending its market share as global production remains high despite low prices.

Saudi Arabia is now processing more of its crude at home as its massive refineries turn it into the world's fourth-largest refiner, in a tie with Royal Dutch Shell, that allows the Kingdom to export more fuel products than ever before.

Aramco Trading Co, a subsidiary of state oil giant Saudi Aramco, offered via tenders 2.8 million barrels of ultra low sulphur diesel for loading in late July to early August, trade sources said, enough to meet Japanese demand for three-and-a-half days.

"We are already seeing the impact in the Asia-Pacific," said Suresh Sivanandam, principal analyst for refining and chemicals at Wood Mackenzie.

"This year there is not a single drop of diesel exported from Singapore to the Middle East," he added, referring to a once popular diesel export route.

The ramp-up mainly of ultra low sulphur diesel to Europe sees the Saudis compete head on with big Asian diesel exporters India and South Korea and reduces Asia's gasoil margin to the lowest in five years.

The flurry of shipping activity out of Yanbu has also pushed up freight rates for long-range tankers by nearly 20 percent since last week, a shipbroker said.

Saudi Arabia opened its newest 400,000-barrels per day refinery in Yanbu in April, reaching full capacity within two months.

"Yanbu has become a distillates monster," a shipbroker said, referring to the hike in exports from the Red Sea port.

http://economictimes.indiatimes.com/news/international/business/saudi-arabia-triggers-potential-fuel-price-war-by-flooding-market-with-diesel/articleshow/48096391.cms

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Royal Dutch Shell expects oil prices to recover gradually over the next five years, with progress slowed by persistent global oversupply and receding Chinese demand growth.

The Anglo-Dutch energy giant is betting on crude rising to $90 a barrel by 2020, a key assumption in its move to buy rival BG Group for $70 billion to help transform it into a leading player in the costly deepwater oil production and liquefied natural gas (LNG) markets.

"We are not banking on an oil price recovery overnight. It will take several years but we do believe fundamentals will return," Andy Brown, Shell's upstream international director, who oversees the company's oil and gas production outside North America, told Reuters in an interview.

"Until such time, we, like other companies, will have to make sure we stay robust," he said, referring to deep spending cuts taken by oil companies in recent months in the face of a near-halving of oil prices since June last year.

A rise in global supplies, mainly due to a sharp increase in output from U.S. shale, has weighed on oil prices.

In the nearer term, Shell expects Brent crude oil to show only a modest recovery from today's $58 a barrel, with 2016 prices forecast to average $67 a barrel and $75 a barrel in 2017, based on the company's BG offer.

http://uk.reuters.com/article/2015/07/16/shell-oil-prices-idUKL5N0ZV3HX20150716

First Iranian ship storing oil sails for Asia after nuclear deal

An Iranian supertanker with two million barrels of oil is heading to Asia after sitting in Iranian waters for months, the first vessel storing crude offshore to sail after a nuclear deal this week, data showed on Thursday.

Iran and six major world powers reached a landmark nuclear deal on Tuesday, clearing the way for an easing of international sanctions on Tehran and higher oil exports.

While oil analysts do not expect Iran to make a major return to the market until next year, it has been parking millions of barrels of oil on tankers for months.

The fully laden Starla, operated by Iran's top tanker group NITC, had been used for floating storage since Dec. 12, a tanker tracking source said.

"This is the first tanker to come off floating storage," the source said. "One of the scenarios is it could do an STS operation, although nothing is known at the moment," the source said, referring to ship-to-ship transfers of oil between two vessels, usually at sea.

ThomsonReuters Eikon shipping data showed the vessel sailing through the Gulf of Oman with a Singapore destination. Earlier this week the Starla was idling offshore the United Arab Emirates in an area known as Khor Fakkan, often used for STS.

It is unclear whether the estimated 2 million-barrel cargo had been sold, or if so whether the deal occurred after this week's agreement. But it is a milestone following a months-long build-up of idling crude tankers holding up to 50 million barrels of oil, equal to over a month's worth of Iran's exports.

Iran is "likely assuming that either a small increase in exports will not undermine the historic accord reached, or, that no one would notice," analysts at Macquarie wrote in a research note. However, if an increase in exports is sustained it will "weigh on near term balances."

Iran's Oil Minister Bijan Zanganeh said last month the country was aiming to add 500,000 barrels per day (bpd) to production within two months of Western sanctions being eased, and as much as 1 million bpd in six to seven months.

The sanctions have halved Iran's shipments to as little as 1 million bpd.

Years of under investment mean Iran may struggle to get its oil industry anywhere near full potential, analysts say. It will also take time to raise output while nuclear inspectors verify Iran's compliance with the terms of the deal, and sanctions are slowly removed.

Last month, tanker tracking sources said Iran was storing as much as 40 million barrels of oil, mostly crude, on board tankers at its anchorages, which could flood the oil market.

Windward, a Tel Aviv operated maritime data and analytics company, estimated this week that Iran was storing 51.4 million barrels of crude and condensate on 28 vessels at sea.

ThomsonReuters Research and Forecasts freight analysts put the figure slightly lower at up to 41 million barrels, according to a report last week.

http://www.reuters.com/article/2015/07/16/iran-oil-tanker-idUSL5N0ZW4GC20150716

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Britain's Buzzard oilfield, the most important source of crude oil underpinning the global benchmark Brent, was closed after power supplies failed, traders said.

It normally pumps 170,000 to 180,000 barrels per day (bpd) but went down in the early hours of Thursday, traders said.

A spokeswoman for Buzzard operator Nexen, a unit of China's CNOOC, declined to comment.

"There was a trip last night," said one crude oil trader, who declined to be identified.

Buzzard is the single biggest contributor to the Forties crude stream, one of four crude grades underpinning the price of over-the-counter Brent, which is linked to Brent futures.

Brent's front-month August futures contract, due to expire later on Thursday, moved to a premium of 30 cents a barrel above the September contract on the Buzzard news, its highest premium for more than two months.

http://www.reuters.com/article/2015/07/16/markets-oil-idUSL4N0ZW1TK20150716

ConocoPhillips said Thursday it would cut spending on its Gulf of Mexico and deep-water exploration programs, as the driller continues to tighten its belt amid lower prices.

Houston-based ConocoPhillips has already trimmed its 2015-2017 capital spending program from an initial $16 billion to about $11.5 billion per year after crude oil prices fell last year. Of that $11.5 billion, less than $1.8 billion was dedicated to exploration.

ConocoPhillips spokesman Daren Beaudo said in an emailed statement the company wasn’t detailing the magnitude of the cut to its deep-water spending at this time, or the number of layoffs that may accompany it. ConocoPhillips reports is second-quarter 2015 earnings on July 30.

The company did say it had terminated a three-year drilling contract with the Ensco Plc DS-9 deep-water drill ship, which was scheduled to begin drilling in the Gulf in late 2015.

The move will require ConocoPhillips to pay Ensco monthly termination fees equal to the about $550,000-per-day operating rate for two years, according to a statement from Ensco. Those fees could be reduced if Ensco is able to re-contract the rig within that time period.

“Our decision to reduce spending in deepwater will further increase our capital flexibility and reduce expenses without impacting our growth targets,” said ConocoPhillips CEO and Chairman Ryan Lance, in a written statement. “This strengthens our ability to achieve cash flow neutrality in 2017 even if lower commodity prices persist.”

http://fuelfix.com/blog/2015/07/16/conocophillips-to-scale-back-deep-water-exploration-and-gulf-of-mexico-programs/#34117101=0

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Schlumberger profit beats estimates as cost cuts pay off

Schlumberger Ltd, the world's No.1 oilfield services provider, reported a bigger-than-expected quarterly profit as its cost-cutting efforts helped soften the impact of reduced global drilling activity.

Schlumberger, which provides drilling technology and equipment to oil and gas companies, now expects exploration and production investment in North America to fall by more than 35 percent.

The company in April forecast North American E&P spending to drop more than 30 percent.

"We believe that the North American rig count may now be touching the bottom, and that a slow increase in both land drilling and completion activity could occur in the second half of the year," Chief Executive Paal Kibsgaard said in a statement.

According to weekly data published by Baker Hughes Inc last week, U.S. energy firms added five oil rigs, the second straight week of increases and a sign drillers were ready to return to the well pad.

"We do see some activity improvement (in North America) although we do think that activity improvement will be limited," Evercore ISI analyst James West said.

"I think if we saw oil prices at $65-$70 per barrel brent, then we would see some type of improvement in activity particularly in North America and likely some stabilisation in the international markets, which should lead to an improvement in activity next year," West said.

Brent oil closed at $57.50 per barrel on Thursday.

Schlumberger, which is less exposed to North America than rivals Baker Hughes and Halliburton Co, said revenue from the region fell nearly 39 percent in the second quarter.

Revenue from the international business, which accounts for two-thirds of total revenue, fell 19 percent.

Cost of revenue fell 23 percent to $7.12 billion in the quarter ended June 30, from a year earlier.

The company earned 88 cents per share, handily beating the average analyst estimate of 79 cents per share, according to Thomson Reuters I/B/E/S.

Schlumberger under CEO Kibsgaard has cut 20,000 jobs in 2015 and scaled back spending in response to weak crude prices.

Shares of Schlumberger rose 1.3 percent to $85 in extended trading.

Through Thursday's close of $83.89, Schlumberger's shares had fallen 1.7 percent this year, compared with a nearly 8 percent fall in the Dow Jones U.S. oil equipment and services companies index.

http://www.reuters.com/article/2015/07/16/schlumberger-nv-results-idUSL4N0ZW5A720150716

Brazil's state-run oil company Petroleo Brasileiro SA said late Thursday it paid 1.6 billion reais ($508 million) to settle part of a tax dispute with Brazilian authorities and will take the charge against second-quarter earnings.

The charge includes 1.2 billion reais in back taxes and 400 million reais in fines, the company, known as Petrobras, said in a statement.

The payment comes after Brazil's CARF, a body within the Finance Ministry that hears appeals on tax disputes, ruled against the oil company on a dispute concerning taxes related to Petrobras' foreign subsidiaries in 2008.

The dispute dates back to 2012 but Petrobras said in a statement that it was necessary to make the payment now prevent the assessment from increasing as well as legal provisions such as a ban on importing oil.

Petrobras, which had not made provisions for the tax payment, is currently revamping the way it accounts for tax liabilities on the behest of new chief executive and former banker Aldemir Bendine, according to recent media reports.

http://www.reuters.com/article/2015/07/17/brazil-petrobras-tax-charge-idUSL2N0ZX01Q20150717

Australian LNG player Santos posted revenue of $786 million, 19% down on the $974 million in the corresponding quarter in 2014.  

Santos recorded higher second quarter production and higher sales volumes, as well as significant reductions to both capital and operating expenditure.

Second quarter production of 14.3 million barrels of oil equivalent and sales volumes of 15.7 mmboe were 12% and 4% higher than the corresponding quarter, the company said in a statement.

Sales revenue were affected by the lower realised oil price, partially offset by higher domestic gas prices and a weaker Australian dollar.

Santos Managing Director and Chief Executive Officer David Knox said, “Year to date capital expenditure is 53% below 2014 levels and our production costs for the first half are tracking below guidance at A$14.0 per boe.”

He added that the company’s flagship GLNG project is progressing well as it moves toward first LNG around the end of the third quarter. All upstream facilities are commissioned and fully operational.

Santos reported that sales gas, ethane and sales gas to LNG production of 65.2 petajoules for the quarter was 17% higher than the corresponding quarter, reflecting a full quarter of PNG LNG production and increased Cooper production.

Total sales gas, ethane and LNG sales revenue increased 15% to $409 million for the quarter due to higher LNG volumes and higher domestic gas prices. The reduction in LNG sales revenues compared to the previous quarter reflects the 3-4 month lag to the oil price in LNG contracts.

http://www.lngworldnews.com/oil-price-drop-hits-santos-revenue/

-Average net daily gas equivalent production was 1,484 MMcfe/d, a 67% increase over the prior year quarter and flat quarter over quarter
-Average net daily liquids production (C3+) was 45,900 Bbl/d, a 127% increase over the prior year quarter and a 15% increase sequentially
-Realized natural gas price after hedging averaged $3.86 per Mcf, a $1.22positive differential to Nymex
Realized C3+ NGL price after hedging averaged $19.51 per barrel (34% of WTI)
-Realized natural gas equivalent price including NGLs, oil and hedges averaged$3.85 per Mcfe
Planning to spud Antero's first Utica Shale well in West Virginia in the third quarter of 2015
-Completed bolt-on acquisition of approximately 4,400 net acres with both Marcellus Shale and Utica Shale potential
-Preliminary net production growth target of 25% to 30% in 2016

Operating Update

All operational figures are as of the date of this release unless otherwise noted.

Antero's net daily production for the second quarter of 2015 averaged 1,484 MMcfe/d, including 45,900 Bbl/d of liquids (19% liquids).  Second quarter 2015 production represents an organic production growth rate of 67% from the second quarter of 2014 and was approximately the same as the first quarter of 2015.  Liquids production for the second quarter of 2015 represents an organic production growth rate of 127% and 15% from the second quarter of 2014 and first quarter of 2015, respectively.

Commenting on second quarter 2015 production and expectations for the remainder of the year, as well as the 2016 outlook, Paul Rady, Chairman of the Board and CEO, said, "We had an outstanding quarter operationally, once again beating our production estimates.  As we look ahead to the second half of 2015, we expect to see a slight decrease in production during the third quarter, but expect a ramp up in completions and production during the fourth quarter as we head into 2016.  Driven by our expected fourth quarter operational momentum and the expected completion of the 50 Marcellus deferred completions in the first half of 2016, we are preliminarily targeting 2016 production growth of 25% to 30%.  

http://marcellusdrilling.com/2015/07/antero-hits-1-5-bcfd-in-2q15-drilling-1st-wv-utica-well-in-3q15/?utm_source=dlvr.it&utm_medium=twitter

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Pipeline company Genesis Energy LP said it would buy Enterprise Products Partners LP's Gulf of Mexico pipelines and services business for about $1.5 billion to expand its offshore pipelines business.

Enterprise said the sale will help fund asset purchases in the Eagle Ford and Permian basin in Texas.

The offshore assets being acquired include Enterprise's stake in nine crude oil pipeline systems with more than 1,100 miles of pipeline and nine natural gas pipeline systems totaling about 1,200 miles.

Enterprise said it expects to record an impairment charge of about $100 million related to the sale in the quarter ended June 30.

Genesis Energy said it expects the acquisition to add to its four offshore pipelines in the Gulf of Mexico.

The company said the acquisition, which is expected to close this month, would immediately add to its cash available for distribution.

http://www.reuters.com/article/2015/07/16/enterprise-prodt-asset-genersis-energy-idUSL4N0ZW3FN20150716