Saudi Aramco CEO Amin Nasser also spoke about investment plans, telling an audience that Saudi Arabia is building out its capacity, as part of an investment push that is necessary to avoiding future price spikes. "If there is no investment, prices will spike," Mr. Nasser said.

http://www.marketwatch.com/story/bps-recent-buys-show-discipline-ceo-dudley-says-2017-01-17

Saudi Arabia has promised it will reduce the overall tax rate paid by its national oil company to make its 2018 initial public offering -- potentially one of the largest in history -- more appealing to investors.

“Definitely the fiscal regime will be changed," Saudi Arabian Oil Co. Chief Executive Officer Amin Nasser said in a Bloomberg Television interview on Tuesday in Davos, Switzerland. “When you look at the fiscal regime and the taxes, it has to be aligned with other listed companies.”

Aramco, as the company is commonly known, currently pays a 20 percent royalty on its revenue plus an 85 percent tax on income, Nasser said. He declined to say what tax rate the kingdom is considering.

Saudi officials said Aramco’s tax rate wouldn’t need to be slashed because the company -- considered the crown jewel of the country’s economy -- is able to make a profit even when oil prices plunge. In 2016, under the existing tax regime and with crude dipping to 12-year lows, Aramco was able to pay a dividend and fund its biggest-ever capital investment program, Nasser said.

"Based on the advice of the different banks that we use during the process of the IPO, we are setting a certain fiscal regime that will meet investors’ requirements,” Nasser said.

Saudi Arabia is looking at markets including Hong Kong, London, New York and possibly even Canada as international venues for the sale. The kingdom will offer 5 percent of the world’s biggest oil producer as part of a plan by Deputy Crown Prince Mohammed bin Salman to set up a giant biggest sovereign wealth fund and help reduce the economy’s reliance on hydrocarbons.

Nasser said the kingdom was considering whether to do a double listing, with shares sold in the domestic market in Riyadh and a foreign exchange, or a triple-listing, with two foreign locations on top of the local bourse.

In his most extensive comments yet about the IPO plans, Nasser said the Aramco IPO will include the so-called concession, which comprises the oil and gas reserves of the kingdom. Saudi Arabia sits on about a fifth of the world’s reserves.

"The listing is based on Saudi Aramco maintaining the concession," Nasser said. "If you have the concession, you have the physical oil.”

The concession dates from 1933, when King Abdulaziz, the founder of modern Saudi Arabia, granted it to an American company. Riyadh nationalized Saudi Aramco, which at one point was owned by the companies that are today Exxon Mobil Corp and Chevron Corp., in a series of deals from 1973 to 1980.

Nasser said the IPO will take most likely in the second half of 2018, narrowing the window from earlier comments by Saudi officials who said a flotation was planned for some point through 2018.

In the past, Saudi officials have said the flotation would value the company at as much as $2 trillion -- which, if true, will make it the world’s most valuable. Selling just five percent could raise $100 billion, ranking it as the IPO the biggest ever. However, some investors have cautioned that Aramco is unlikely to be worth as much, noting that other national oil companies that have sold shares have achieved relatively low valuations.

Nasser said that Aramco wasn’t planning as yet to increase its production capacity, currently at about 12 million barrels a day, saying the matter would be decided after the IPO. The company has "ample" spare capacity to meet any incremental demand, he added.

Instead, Nasser said the focus is in expanding the company’s refining capacity to 8 million to 10 million barrels a day, up from 5.4 million barrels a day currently. Saudi Arabia invested in the 1980s in refineries in the U.S. and more recently has been spending money in South Korea and Indonesia.

"This is an area of interest for us: expand our refining capacity globally and also our petrochemicals,” he said.

https://www.bloomberg.com/news/articles/2017-01-17/saudi-aramco-ceo-says-oil-tax-rate-would-be-reduced-for-ipo

China's crude oil output is expected to drop by 7 percent by 2020 compared with the previous five-year plan as output from some of the nation's largest, but oldest, wells falls, while natural gas supplies will rocket by almost two-thirds.

Under a plan covering the period 2016-2020 published by the National Development and Reform Commission (NDRC) on Tuesday, crude output will be around 200 million tonnes by 2020, equivalent to 4 million barrels per day (bpd). That would be down from 215 million tonnes in the 2011-2015 plan.

The drop reflects falling output at aging, high-cost fields as producers scale back production in a lower oil price environment. For the first 11 months of 2016, production was down 6.9 percent at 182.91 million tonnes, just under 4 million bpd.

Consultancy Wood Mackenzie, however, forecasts a decline of nearly 500,000 bpd in Chinese crude oil production over the next four years at 3.5 million to 3.6 million bpd.

"We don't see any large greenfield oil developments coming stream by 2020. As such, given the maturity and age of the main oil fields ... we forecast an ongoing decline in output," said Angus Rodger, Woodmac's upstream research director.

Meanwhile, the NDRC said natural gas supply would be 220 billion cubic meters (bcm) by 2020, compared with 134 bcm under the 2012-2015 five-year plan as Beijing prioritizes the sector's growth.

The government is maintaining an earlier target for shale gas output at 30 bcm, or 13.6 percent of the total.

The government has said it will prioritize the expansion of liquefied natural gas terminals and will "appropriately" add new capacity. Annual pipeline capacity to carry gas will exceed 400 bcm, the NDRC said on Tuesday.

In the oil sector, pipeline capacity will be around 650 million tonnes for crude - equivalent to 13.1 million barrels per day - and 300 million tonnes for refined products by 2020.

China will also further improve fuel quality to cut emissions, aiming to roll out the "national six" grade for gasoline and diesel from 2019, after implementing "national five" specifications from this year.

"National six" has the same cap on sulfur content as "National five" but tighter limits on other pollutants such as olefins and aromatics.

Overall refining capacity will be capped but state-of-art new capacities will be "appropriately" expanded, as the world's second-largest oil consumer is already facing a supply glut, the report said.

http://www.reuters.com/article/us-china-energy-idUSKBN15118K

Russian gas flows to Europe and Turkey were already 25.5% higher year on year in the first 15 days of January, according to the latest Gazprom data, having hit an all-time high daily level on January 8.

The continued high flows in 2017 -- following record-breaking volumes last year -- come as cold weather across Europe, especially in the east, triggers increased demand for Gazprom gas.

Russian gas prices also remain competitive compared with European hubs -- the oil price rally of end-2016 will only filter through to oil-indexed gas contracts in the coming months -- so European buyers are thought to be maxing out their Russian gas purchases.

In a statement Monday, Gazprom said gas flows to what it calls the Far Abroad -- Europe and Turkey but not the ex-Soviet states -- were 25.5% higher than in the same period of 2016.

"In absolute terms, the increase amounted to about 1.9 Bcm of gas," Gazprom said.

Flows to Germany were 20.7% higher in January 1-15, it said, without giving absolute volumes.

"We are reaching record levels through the Nord Stream pipeline," CEO Alexei Miller said.

Russian gas flows via the Nord Stream pipeline to Europe continue to run at maximum capacity, with flows to Germany at 158 million cu m on Monday, according to data from Platts Analytics' Eclipse Energy.

Of that, 76 million cu m was delivered into the OPAL pipeline to the Czech Republic, up on the average 44 million cu m/d in 2016 before Gazprom was granted additional capacity in OPAL in October by the European Commission.

Flows into OPAL continue at these higher levels despite uncertainty over the legality of the European Commission decision to allow Gazprom to use more capacity in OPAL after an appeal by Poland's PGNiG.

The increased flows through Nord Stream come at the expense of exports of Russian gas via Ukraine, which have fallen by the same amount since mid-December.

That implies volumes are simply being diverted to the Nord Stream route away from the Ukraine route, the former being a cheaper route to market for European buyers.

Gazprom's supplies to Europe and Turkey hit a total of 179.3 Bcm in 2016, a significant jump on its previous highest level of 161.5 Bcm from 2013 and well above the 2015 total of 158.6 Bcm.

http://www.platts.com/latest-news/natural-gas/london/russian-gas-flows-to-europe-turkey-surge-25-on-26640920

Indonesia's state-owned oil and gas company Pertamina is eyeing more LPG imports from the US to replace part of its Middle Eastern supply as US cargoes are currently cheaper, a senior company official said Tuesday.

"Currently more than 90% of LPG supply comes from the Middle East and the rest from the spot market. We would like to import more from the US into Indonesia. We expect to get a more competitive price from US," said the senior vice president of Pertamina's integrated supply chain, Daniel Purba, on the sidelines of the LPG Indonesia 2017 conference in Jakarta.

The expansion of the Panama Canal enables US LPG cargoes to reach the Asia Pacific, including Indonesia, faster than the Cape of Good Hope passage.

With that, Pertamina expects its LPG imports from the Persian Gulf to decline, although it estimates overall US LPG imports will remain lower than Middle Eastern supplies, according to Purba.

US cargoes currently make up 3% of Pertamina's overall imports.

The biggest domestic LPG supply currently comes from Bontang in East Kalimantan.

Pertamina also expects Indonesia to get LPG supply from undeveloped LNG projects, according to Bambang.

Inpex Masela is the biggest LNG project that is expected to come on stream around 2021. BP's third train at Tangguh is due to come on stream in 2019.

"Pertamina and the government are studying other energy resources so it can cut back on LPG imports in the future. We are studying brown coal," Bambang said.

http://www.platts.com/latest-news/oil/jakarta/indonesias-pertamina-eyes-us-lpg-to-replace-some-27752292

The state-owned Pakistan LNG is set to open financial bids for its two tenders seeking the supply of 240 cargoes of liquefied natural gas on January 19.

The contracts for the successful bidders will be awarded on January 31, Pakistan’s Business Recorder reported, citing sources in the Ministry of Petroleum and Natural Resources.

In the first tender issued in November 2016, Pakistan LNG sought the delivery of 60 cargoes for a period of five years and in its second tender the company sought 180 cargoes over a period of 15 years. According to the report, a total of 14 bids were received.

In addition, it was reported that the company is looking to issue new tenders for more LNG supplies as soon as the current process is finalized.

The start of the deliveries is set for July 2017, with a nominal cargo capacity set at 140,000-cbm, according to the initial documents.

Cargoes will be delivered to Pakistan’s second LNG terminal at Port Qasim, Karachi being developed by Pakistan GasPort Limited that has chartered BW’s 170,000-cbm FSRU for the project under a 15-year deal signed in August.

The vessel, named BW Integrity, is currently under construction at the Samsung Heavy Industries shipyard in Geoje, South Korea.

http://www.lngworldnews.com/report-pakistan-lng-soon-to-name-240-cargo-tender-winners/

French gas grid operator GRTgaz said a force majeure situation in Algeria and tensions in the global gas market were impacting deliveries of liquefied natural gas (LNG) to southern France.

Deliveries to the Fos-sur-Mer terminal were at about 40 gigawatt-hour (GWh) per day, compared with almost double that at 70 GWh per day needed for this period of the year when there is increased demand for power and heating, GRTgaz chief executive Thierry Trouve told journalists on Tuesday.

Trouve said there was enormous demand for gas for power generation in southern France, due to the cold weather, at about 85 GWh per day.

He added that tensions in the world gas market, with expected U.S. gas production going to Asia instead of Europe, were also exacerbating the problem.

"We are doing everything to have more LNG deliveries by end
February," Trouve said.


Read more: http://www.nasdaq.com/article/algeria-force-majeure-hurting-lng-deliveries-to-southern-france-grtgaz-20170117-00152#ixzz4W0uz5aHr

Global shipping insurers have devised a way to ensure nearly full coverage for Iranian oil exports from next month after striking a deal to provide cover without involving U.S.-domiciled reinsurers, officials in Tokyo and London said.

Restrictions on U.S. firms handling Iranian goods had greatly limited the number of reinsurers of cargoes, but the new arrangements - which essentially allow re-insurance of ships without the involvement of U.S. firms - should boost the number of eligible shipments.

That will provide a boon to Iran, which is trying to raise oil exports after most sanctions were lifted last year, though banking restrictions that remain in place that could cap any major rise in exports.

"There will be no U.S.-domiciled reinsurer participation on the 2017 IG reinsurance program," Andrew Bardot, secretary and executive officer at the International Group (IG) of P&I Clubs in London told Reuters on Tuesday.

The new arrangements take effect on Feb. 20, he and other officials said.

"This will substantially address the potential shortfall in reinsurance recoveries in the event of Iranian-related claims," Bardot said in an email.

The sanctions were lifted after a landmark deal in 2015 with world powers that put constraints on Iran's nuclear activities.

But some prior U.S. sanctions remain in place, which had meant U.S. reinsurers could not participate in covering Iranian cargoes.

To plug the shortfall by U.S. insurers, the group of the world's top 13 ship insurers created so-called "fall-back" insurance last year, under which tankers carrying Iranian oil were insured up to around $830 million per ship.

That was below normal coverage for a tanker and risk-averse shippers refrained from lifting cargoes. However, it still allowed Iran to more than double crude exports from as low as about 1 million barrels per day (bpd) at the height of the sanctions. Iran's exports were as high as 3 million bpd before the sanctions.

From next month, normal coverage will apply up to $3.08 billion and compensation beyond that up to $7.8 billion for accidents and oil spills would be collected from shipping companies insured by P&I group members.

OBSTACLES REMAIN

Other obstacles to lifting Iranian oil remain though, including the incoming administration of President-elect Donald Trump, who has described the nuclear deal as a "disaster" and threatened to scrap it, which could mean new oil export sanctions.

Additionally, owners may still not call on Iran because they could be banned from Saudi Arabian ports on subsequent voyages, a European supertanker broker said.

Saudi Arabia has banned tankers if they have previously carried Iran crude due to tensions between the countries over the conflict in Yemen, the shipbroker said.

There is a premium of between $4,000 to $12,000 per day for foreign-owned ships hired to transport Iranian crude compared with rates to transport crude from other Middle East countries, a Singapore-based supertanker broker said. That could also limit Iranian liftings.

Banking restrictions under the remaining U.S. sanctions are also likely to stay in place for some time and constrain Iran's trading activities, said Jonathan Hare, general counsel with Norwegian P&I club Skuld.

"I think the main obstacle for everyone remains the banking system," he said.

The government of Japan, one of the biggest buyers of Iranian crude, is working to extend a sovereign insurance scheme it started in 2012 to continue Iranian oil imports in the year starting in April, to cover any shortfalls from the P&I insurance, a senior government official told Reuters.

Iran has complied with a deadline under the 2015 accords to remove nuclear equipment called centrifuges from one of its atomic sites, the International Atomic Energy Agency said on Monday.

http://www.reuters.com/article/us-iran-oil-shipping-exclusive-idUSKBN15110G

BP Plc boss Bob Dudley is not yet ready to boost spending despite the rebound in oil prices.

The company will keep capital expenditure below $17 billion this year and next, Chief Executive Officer Dudley said in a Bloomberg television interview in Davos, Switzerland. That’s $6 billion lower than 2014, when crude prices first started to slump, showing that the impact of the two-year industry downturn still lingers.

“I think we are climbing very, very slowly out of a very tough period for the industry,” Dudley said Tuesday. “Our focus now is to get our own engine moving again” while staying disciplined and being ready for more volatility, he said.

While the London-based company is keeping a tight grip on spending and new projects, it is also seeking to grow again. It has finally settled billions of dollars of payments related to the 2010 Gulf of Mexico spill, which shrank the company by a third, Dudley said. BP has agreed to spend more than $4 billion on assets since the end of last year.

The oil industry has become more optimistic since the agreement last month between the Organization of Petroleum Exporting Countries and 11 other producers to cut output with the aim of ending three years of oversupply. BP will be able to cover spending and dividends from its income at an average crude price of $55 a barrel this year, Dudley said, potentially bringing an end to two years of negative cash flow and rising debts.

Brent crude, the global benchmark, traded at $56.52 a barrel in London as of 10:43 a.m. Prices will average $55.88 this year, according to the median of 46 analyst estimates compiled by Bloomberg.

BP approved a $9 billion project to develop a deep-water field in the U.S. Gulf of Mexico and another to expand a liquefied natural gas export project in Indonesia last year. A $2.2 billion expansion of output in Abu Dhabi and a $916 million investment in fields in Mauritania and Senegal last month were followed by a A$1.785 billion acquisition of Woolworths Ltd.’s network of Australian gas stations.

The company will continue to be “very selective on projects this year,” Dudley said. BP plans six major developments in 2017, he said.

https://www.bloomberg.com/news/articles/2017-01-17/bp-ceo-won-t-boost-spending-signaling-caution-on-oil-rebound

Genscape Cushing inventory week ending 1/13: -756,302 bbl w/w.

@Lee_Saks  

Oil production in the Permian Basin could rise by 53,000 barrels a day by next month, the Energy Department said Tuesday, and analysts expect the flurry of West Texas land deals to keep drillers pumping oil.

That’s the largest monthly increase in the region since January 2016, according to data compiled by the Energy Information Administration. The EIA’s first shale oil forecast of the year comes after U.S. shale drillers dispatched scores of rigs to the region and companies like Exxon Mobil Corp. and Noble Energy announced multibillion-dollar land grabs there.

“All these guys putting money to work are going to have to drill to get a return on their investment,” said Stephen Trauber, head of global energy investment banking at Citigroup in Houston. “They’re going to see pretty significant growth. There are still several more deals that could get done.”

The EIA said oil production across the nation’s seven major shale plays is set to rise by 41,000 barrels a day, with the Permian’s increase offset by declines in the Bakken Shale in North Dakota and the Eagle Ford Shale in South Texas.

http://fuelfix.com/blog/2017/01/17/oil-production-accelerating-in-the-permian-basin-eia-says/

U.S. oil prices hit their biggest discount to global benchmark Brent crude in five months on Tuesday as President-elect Donald Trump said an oil import tax plan would be too complex and as a global deal to reduce supply hits Middle East output.

The deeper the discount, the easier it is for U.S. crude producers to export oil to refiners worldwide. A glut in global supply had limited the appetite for crude from the United States until late last year, even after the United States had lifted a long-standing ban on exports.

The spread between U.S. West Texas Intermediate (WTI) and Brent is widening enough to open the window for exports for some U.S. crude grades, said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

It was already wide enough in December for traders and major producers to line up a flotilla of carriers to ship more oil to Asia than in nearly two decades.

A proposal spearheaded by U.S. House of Representatives Speaker Paul Ryan to boost jobs and the economy by taxing crude imports and exempting exports has fueled expectations for tighter supply into the United States and bolstered WTI.

However, Trump called the tax plan "too complicated," casting doubts on the passing of such a law and widening the spread between the two crude benchmarks.

The comments pushed U.S. crude's discount over Brent to the deepest in nearly five months on Tuesday and just two cents away from the biggest discount since late February 2016.

An agreement by the world's top exporters in late November to cut output has had a bigger impact on Brent than on U.S. crude. Most of the oil-producing countries that are cutting output price their crude against Brent, while in the United States the higher oil price is likely to lead to higher supply as shale producers increase activity.

Since the OPEC deal was announced on Nov. 30, the WTI-Brent spread has widened by more than $1 per barrel.

If the crude tax is not passed, the spread may widen further. Money managers piled into options in mid-December on the premise that the law would pass, one trader said. They bet that WTI could rise to parity with Brent in 2018, partly if the tax was signed into law.

http://www.reuters.com/article/us-usa-oil-tax-idUSKBN151379

Goodrich Petroleum Corporation today announced preliminary results on two Haynesville Shale wells in North Louisiana.

The Company has participated in two Haynesville Shale wells in Caddo Parish, Louisiana that have reached a combined 24-hour peak rate to date of approximately 72,000 Mcf per day. The Company owns a 17.4% working interest in each of the wells which came online the middle of December.

As previously announced, the Company has established a preliminary capital expenditure budget for 2017 of $40 million, which will be concentrated in the core of the Haynesville Shale play in North Louisiana. The budget, which will be monitored quarterly, contemplates 12-16 gross (3-4 net) wells for the year, with plans to commence drilling operations on its Wurtsbaugh 26-14-16 1 Alt well by early February.

The Company currently owns approximately 24,000 net acres prospective for the Haynesville Shale, with approximately 16,000 net acres in the core of North Louisiana, where it estimates 235 gross locations with an approximate 41% working interest. The Company also owns approximately 8,000 net acres in the Angelina River Trend of East Texas, where it estimates approximately 123 gross Haynesville Shale locations and 123 gross Bossier Shale locations, with an average working interest of approximately 33%.

In addition, the Company has entered into a natural gas hedge through a costless collar of $3.00 – $3.60 for 12,000 Mcf per day for calendar year 2017.

http://boereport.com/2017/01/17/goodrich-petroleum-announces-haynesville-shale-well-results-and-operational-update/