China's apparent oil demand* rose 10.2% in August from a year earlier to 11.19 million barrels per day (b/d), according to a just-released Platts analysis of Chinese government data.

Barring gasoil and naphtha, China's apparent demand for all other key products--gasoline, liquefied petroleum gas (LPG), jet/kerosene, and fuel oil--saw double digit year-on-year growth in August.

China's refinery throughput in August averaged 10.49 million b/d, up 6.5% from a year earlier, data from the country's National Bureau of Statistics (NBS) on September 12 showed.

Meanwhile, China's net imports of oil products surged 131% year on year to 700,000 b/d in August, driven by strong inflows of LPG, fuel oil and naphtha, according to data released September 21 by the General Administration of Customs.

During the first eight months of this year, China's total apparent oil demand averaged 11.14 million b/d, an increase of 8.2% from the same period of 2014.

China's actual oil demand growth could be higher since stocks of key products have fallen, Platts estimates show. "Inventories of gasoil, gasoline and jet/kerosene fell by between 2.5% and 9.7% at the end of August, from end July," said Platts Associate Editorial Director for Asia Oil News Mriganka Jaipuriyar.

China's apparent oil demand is expected to remain steady at 11.1 million b/d for the rest of the year, according to data from Platts China Oil Analytics, an on-line platform for supply/demand, refining margins, volume forecasts, trade flows and the like. However, it indicates that overall growth for 2015 could moderate to just over 5%, given the high base in the fourth quarter of last year.

Gasoil
Gasoil is the most widely consumed oil product in China and the nation's declining economic growth over the last three years has hit gasoil demand.

Apparent demand in August rose 3.4% year over year to 3.50 million b/d, but actual demand could be higher given the stock draw down, Platts China Oil Analytics indicate.

Stocks of gasoil fell 7.6%, or near 7.5 million barrels, in August from July to an estimated 90.38 million barrels, Platts calculates, based on Xinhua's China Petroleum Stockpile Statistics.

"Some of the government's stimulus measures implemented in prior months are likely filtering down through the economy," said Song Yen Ling, Platts senior analyst for Asia Pacific oil markets. "Industrial production growth improved marginally in August, while other indicators such as highway freight traffic also showed positive growth."

Up to 70% of the fuel is used in the transport sector while the remainder is used by various sectors - including construction, farming and fishing, and industrial heating - to power machinery.

Apparent demand for gasoil rose 3.7% over January to August to 3.58 million b/d.

LPG
Demand for LPG surged 27.3% year on year to 1.27 million b/d in August. Growth was supported by import demand from new propane dehydrogenation plants. Net imports of LPG rose 168.5% year over year to an average 376,000 b/d for the month.

Year to date, apparent demand for LPG is up approximately 21.4% versus a year ago to 1.21 million b/d.

Gasoline
Apparent demand for gasoline rose 21.6% year over year to 2.75 million b/d, with January-August demand rising 11.4% to 2.69 million b/d.

According to Xinhua's China Petroleum Stockpile Statistics, gasoline stocks fell 9.7% year over year at the end of August, suggesting actual demand could be higher than Platts estimates.

Even though overall auto sales contracted in August, China's sales of gasoline-guzzling MPVs and SUVs, which have been the key demand drivers, rose 10% and 44.5% respectively, year on year, according to data from the China Association of Automobile Manufacturers.

Fuel Oil
Apparent demand for fuel oil in August rose 27.20% year over year to 695,000 b/d. Demand for the January to August period rose 14.3% year over year to 952,000 b/d.

Net imports of fuel oil rose 58.5% in August on a year-over-year basis to 549,000 b/d, led in large part by a jump in imports of petroleum bitumen blend.

http://www.platts.com/pressreleases/2015/100115b?hootpostid=8b0961afc522effec218590adf3e9866

Russian oil output rose to a post-Soviet record last month as producers take advantage of the weak ruble to push ahead with drilling.

The nation’s production of crude and condensate advanced to 10.74 million barrels a day, 1 percent more than a year earlier and topping a record set in June, according to data from the Energy Ministry’s CDU-TEK unit.

The increase comes at a time when Organization of Petroleum Exporting Countries are defending market share rather than cutting production amid a global output glut. Russia, which gets about half of its budget income from oil and gas revenues, is maintaining its own supplies in the face of Brent crude prices that fell 50 percent in the past year.

Oil producers, which earn in dollars, pay for services using the ruble, which has weakened to 65.65 to the dollar from 39.56 to the dollar a year earlier.

Crude exports rose 3.4 percent from the previous year to 5.27 million barrels a day, according the data. Exports rose 5 percent from the previous month.

http://www.mineweb.com/news-fast-news/russian-oil-output-reaches-post-soviet-record-in-september/

Russian gas giant Gazprom has exported 41.4 billion cubic metres of gas to Europe and Turkey in the third quarter, up 23 percent from the year-earlier period, the company's head Alexei Miller said on Friday.

In September, gas exports stood at 13.3 bcm, an increase of 24 percent.

European buyers of Russian gas have increased purchases before the cold season and as the price of the commodity, pegged to prices of oil with a lag of six to nine months, fell.

Miller said that Germany, the largest buyer of Russian gas, increased purchases by 19 percent to 11.2 bcm in third quarter. Italy boosted intake by 69 percent to 7 bcm.

http://www.reuters.com/article/2015/10/02/russia-gazprom-exports-idUSL5N12213F20151002

Iran is inviting foreign investors to actively develop the OPEC member's energy industry after implementation of a historic nuclear deal reached between Iran and six global powers, deputy Oil Minister Rokneddin Javadi told Reuters on Thursday.

"We welcome all oil companies, including the Americans, that meet Islamic Republic's requirements to invest in Iran," Javadi said by telephone from Tehran.

Iran plans to increase crude output by 2 million barrels a day from about 50 energy projects slated for investors at a conference in Tehran next month, National Iranian Oil Co. Managing DirectorRoknoddin Javadi said.

The package will also aim to boost natural gas production by 7 billion standard cubic feet, Javadi said at a conference in Berlin Thursday. Oil production is now about 2.8 million barrels a day,data compiled by Bloomberg show. Iran has the world’s largest gas reserves and the fourth largest oil reserves, according to BP Plc figures.

Iran will need $30 billion of investment over five years to boost oil production, starting with about 350,000 barrels of new output next year, Goldman Sachs Group Inc. said in a report Thursday. The supplies could keep pressure on oil prices and delay the market’s return to balance, Henry Tarr, a Goldman analyst, said in the report.

“The global oil market will stay bearish in the short to medium term,” Javadi told the conference.

The July deal agreed by the U.S., France, China, Russia, U.K. and Germany to remove sanctions on Iran in exchange for curbs on its nuclear program point to an early 2016 start if all conditions are met, Goldman’s Tarr said in the report.

Potential investors will be asked to consider contracts over 20 to 25 years, Javadi said. Iran’s council of ministers endorsed a new model contract for the projects in a meeting chaired by PresidentHassan Rouhani in Tehran, the state-run Mehr news agency reported Wednesday. The conference is set for Nov. 16 to Nov. 20 in Tehran. Another seminar about the projects is scheduled Oct. 19 to Oct. 21 in Tehran, with Iran’s Oil Minister Bijan Zanganeh set to attend. There is another conference set for London in February.

Iran needs 210 million cubic meters a year of natural gas, with production seen reaching about 300 million cubic meters by the end of next year, Javadi said. That would leave up to 90 million cubic meters a year available for export. Talks have been renewed with European Union countries to supply them with natural gas via pipeline and liquefied natural gas, with plans to bring its first LNG plant into operation within 2 1/2 years with capacity of 10 million tons a year, he said.


http://www.reuters.com/article/2015/10/01/iran-usa-oil-idUSL5N11X0PJ20151001
http://www.bloomberg.com/news/articles/2015-10-01/iran-aims-to-boost-oil-output-by-2-million-barrels-from-projects

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Oil prices jumped as much as 4 percent on Thursday, boosted by a rally in U.S. gasoline on worries about potential damage to oil installations from a hurricane headed for the U.S. East Coast, traders said.

Heightened geopolitical risk from the worsening war in Syria also boosted crude futures in earlier trade.

Weather forecasters said Hurricane Joaquin could hit the New York metropolitan area as a tropical storm on Tuesday, potentially following the destructive course of Hurricane Sandy in 2012.

Traders watch Atlantic hurricanes because they can lead to precautionary shutdowns of Gulf of Mexico oil and gas platforms, and in exceptional cases damage energy infrastructure.

http://www.reuters.com/article/2015/10/01/markets-oil-idUSL5N1210X020151001

As a shot in the arm for Cairn India, its partner Oil and Natural Gas Corp has asked the government to extend the tenure of prolific Rajasthan oil block by 10 years without any changes in terms and conditions.

Cairn, which holds 30% interest in the Rajasthan block, wants to retain the Rajasthan block beyond the contractual deadline of 2020. And for such an extension the nod of the state-owned firm, which is a licence of the block holding 30% interest, was necessary.

A top official said that ONGC has agreed to the Cairn proposal and written to the Oil Ministry saying the licence term should be extended by 10 years on the existing terms and conditions.

Unlike in 2011, when it had given conditional approval for Cairn being acquired by Vedanta Group to resolve the royalty dispute, ONGC has not put any pre-condition this time.

He said that after ONGC nod, the ministry has now sought a view from the upstream regulator, the DGH for extension of the license term.

Cairn's contractual term for exploring and producing oil and gas from the Rajasthan Block RJ-ON-90/2 expires in 2020 and the area is to return to the block licensee, ONGC.

http://steelguru.com/gas-oil/ongc-supports-cairn-india-plea-for-rajasthan-block-s-term-extension/435869#tag

Taking another step towards easing its energy demand challenges, Egypt welcomed the arrival of a second liquefied natural gas import terminal this week, opening another avenue for needed natural gas imports.

According to media reports, Cairo took in the floating LNG terminal with plans to begin operations later in October, complete with storage and regasification capacity.

The unit was sent by Singapore-based Norwegian group BW Gas, has a capacity of 600 to 700 million cubic feet per day, according to Reuters.

The arrival comes at a time when Egypt continues to struggle to meet its domestic demand, as well as draw down significant debts to international producers.  Egypt has a long history of energy challenges, though they grew significantly more daunting over the last four years. With the collapse of the long-standing government of Hosni Mubarak, the country of over 80 million found itself economically isolated, which served to reduce its foreign reserves and with it, the ability to keep up payments to oil and gas importers.

At the same time, the country’s domestic production has continued to slow, a situation made worse by a series of attacks on eastbound gas pipelines to buyers in Israel and Jordan, further reducing needed energy sector revenue.

Despite such set-backs, Egypt is now flush with confidence thanks to the recent discovery of a “super giant” natural gas discovery off its Mediterranean coastline. According to a Bloomberg report on the discovery, Italy’s Eni outlined a potential “super giant” field that could potentially be home to 30 trillion cubic feet of gas, making it the biggest find in the Mediterranean.

However, even in the best case scenario, access to that gas is a long way down the road, making short-term solutions like LNG terminals all the more important.

http://www.forbes.com/sites/christophercoats/2015/09/30/egypt-expands-energy-import-options-with-second-lng-terminal/

 A bill to lift the 40-year-old ban on U.S. oil exports passed the Senate Banking Committee on Thursday, but the future of the measure is uncertain in the full chamber, after a controversial amendment was added to it.



Senator Pat Toomey, a Republican of Pennsylvania, added an amendment to the bill that would make Iran compensate U.S. victims of Iranian backed terrorism, language that senators said would doom the bill's future.

"The bill is dead," because of the addition of the Toomey amendment that the White House likely opposes, said Senator Jon Tester, a Democrat of Montana.


A similar bill to lift the ban passed earlier in the year in the Senate Energy Committee. This bill too was only supported by one Democrat, Senator Lisa Murkowski of oil-producing Alaska, the head of the panel. Backers of the bill need six Democrats to pass the bill if all 54 Republicans vote for it.

If all 54 Senate Republicans vote for the bill, supporters will need six Democrats to reach the 60 votes needed for approval.

Heitkamp and other supporters of lifting the ban sought to gain Democratic votes by including a provision that would allow the president to halt exports if he deemed they were not in the interest of national security. Heitcamp said that mechanism was put into the legislation to respond to concerns about runaway gasoline prices.

The White House said on Wednesday it does not support Senate efforts to reverse the ban even though Heitkamp's bill contains the provision.

However, Heitkamp said she and others were talking with senior White House officials on a regular basis. She said she was confident President Barack Obama could support a balanced bill doing away with the ban if it included measures such as backing renewable energy like solar and wind power.

Pulling that off could be difficult. Adding a measure to make tax breaks for renewables permanent could cause other senators in states heavily reliant on coal sales to back away from the bill.

Heitkamp said it was premature to discuss what kinds of deals could be made to eventually pass the bill, but that some of the issues on the table could be "surprising."

Oil producers say the domestic drilling boom will eventually be choked if the trade restriction, which Congress passed in 1975 after the Arab oil embargo, is not lifted.

Opponents to lifting the ban say it could hurt employment in oil refining and shipbuilding and damage the environment.

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First Nations elected and Hereditary Chiefs from across Northern British Columbia have joined together to sign a letter that declares their support for the development of a multibillion-dollar energy pipeline corridor through their traditional territories by Eagle Spirit Energy.

First Nations leaders support the government of B.C.’s position that the shipment of LNG is the priority. The proposed energy corridor is not only the solution for shipping B.C. LNG but also Alberta oil, reads a joint statement by the First Nations.

Eagle Spirit Energy was formed as a First Nations-led initiative to develop an energy corridor from Alberta to B.C. tidewater. An energy corridor means that pipelines can be built to efficiently and safely transport liquefied natural gas, and later on oil, to a proposed tanker loading export facility located on tidewater in northern B.C.

This letter to Prime Minister Harper, and Premiers Clark, Notley and Wall states, “our support is for moving forward with Eagle Spirit to continue to meet with all communities, to continue the necessary due diligence in terms of the environmental protection, to assess the viability of the project, and to clearly establish the benefits to our communities.”

This is the first time that First Nations have come together with such a resolution. It is a responsive model developed to provide appropriate consultation, enhanced land and marine environmental protections, and fair compensation for the Province of British Columbia, First Nations, and northern communities.

Exclusivity and benefits agreements, and non-disclosure agreements have been signed by those First Nations through whose traditional territories the pipelines would cross. The initial and ongoing participation of impacted First Nations will be incorporated into the project through the formation of a Chiefs’ Council.

The parties are presently working together to determine the final route and towards the completion of final binding agreements

http://www.lngworldnews.com/first-nations-join-in-support-of-lng-corridor/

When considering the likely production of crude oil in the U.S. in the coming months, and the affect that production will have on prices, one of the large variables is the rate of completions, particularly in the Willison Basin in North Dakota.  That is because there are more than 900 drilled but uncompleted wells in the state.  However, NDIC regulations require that, unless extended, an operator must complete a well within one year of the issuance of the drilling permit.

The tension created by this rule in the era of depressed prices is obvious.  As Ron Ness, the president of the North Dakota Petroleum Council (NDPC) recently stated:  “Why would we want companies to be forced to spend money or complete the wells when the economics don’t warrant it?  In today’s economic of an over-supplied oil market, it makes no sense.”

As a result, the NDIC has “indicated they are leaning towards leniency in their treatment of operators that have drilled but not completed wells within the one-year time frame permitted. Instead of assuming such wells are abandoned, which would otherwise mean an expired drilling permit and about $200,000 in plugging costs, the State plans to give operators more time.”   The NDIC has stated that they are “leaning toward” issuing a greater number of temporary abandonment permits which in general give operators a one-year grace period, with potential extensions by the NDIC.

The NDPC favors such extensions from the NDIC.  As Mr. Ness succinctly put it – “Just defer completions.  So they sit on them two years.  What’s the difference.”

http://energylawtoday.foxrothschild.com/2015/09/articles/ndic/ndic-considering-extending-completions-deadlines/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=View-Original

Chesapeake Energy Corp. bonds plunged Thursday after the energy producer announced an amendment to its credit line that would allow the company to incur as much as $2 billion in junior debt.

The oil and gas producer’s $1.3 billion of 6.625 percent unsecured notes due in August 2020 dropped 8.1 cents to 65.6 cents on the dollar at 8:34 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The Oklahoma City-based company’s $4 billion revolving credit line will now be secured. In exchange, Chesapeake was able to extract some concessions from its lenders, such as the ability to incur new debt and the removal of the total leveraged ratio covenant, according to the statement.

http://www.bloomberg.com/news/articles/2015-10-01/chesapeake-bonds-crater-on-new-debt-leeway-in-amended-revolver

The speed at which oil producers shut down wells spitting out their final drops of unprofitable crude may hold the key to an eventual rebound if prices fall further.

Crude prices tumbling to $30 a barrel would threaten the profitability of about 206,000 barrels per day of production from older wells that produce minimal amounts of oil, according to areport Thursday from Bloomberg Intelligence.

Output from older U.S. wells less profitable as oil prices fall



The wells, which are most prevalent in Texas’ Permian Basin, are about 25 years old on average and produce no more than 15 barrels a day. They require regular maintenance to help pump even that much after years of sagging pressure.

"These wells dance on the edge of profitability," Peter Pulikkan and William Foiles, analysts at Bloomberg Intelligence, wrote in the report. "The reaction of smaller mom-and-pop operators to sustained low oil prices will dictate how quickly uneconomic supply is removed from the market."

Stripper wells represent more than 80 percent of total wells in the U.S. and 12 percent of total production, according to the report. In total, they generate about 1.1 million barrels of oil a day, nearly as much as Algeria, the third-largest African crude producer.

The key decision will be whether operators continue to let the wells produce at losses to hold the lease in hopes that oil prices soon recover, or shut in production and potentially surrender the well, the analysts wrote. While most of the little wells are operated by tiny producers, the two companies with the greatest production from stripper wells are Chevron Corp. and Occidental Petroleum Corp.

http://www.bloomberg.com/news/articles/2015-10-01/stripper-wells-burning-cash-at-30-oil-to-speed-u-s-output-drop

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Penn West Petroleum Ltd. is trying to avoid parting with its best assets as the oil market crash brings its debt into focus. The company appears to be running out of other options.

Penn West has exceeded a target set with its debt holders of selling C$650 million ($489 million) of assets outside its areas of focus, with a deal announced Thursday to dispose of its 9.5 percent stake in the Weyburn oil field in southeast Saskatchewan for C$205 million. That brings the total sold this year to C$810 million, not enough to keep debt in check, according to Desjardins Capital Markets and Dundee Capital Markets Inc. estimates.

“Frankly, I think they have to sell one of their jewels if they want to survive, the jewel being the Viking, most likely,” Brian Kristjansen, an analyst at Dundee in Calgary, said in a phone interview. The Viking tight oil asset in Saskatchewan produces light crude, generates high returns and is probably worth at least C$800 million, he said, which would bring Penn West’s total asset sales to at least C$1.61 billion.

“The resulting company won’t be as attractive because it’s their highest net-back asset.”

An oil market slump that began last year is keeping prices below $50 a barrel for the U.S. benchmark, curbing cash flow for producers. Calgary-based Penn West will probably violate a covenant on its debt in the first three months of 2016 if it doesn’t sell a key property, Kristjansen said.

The producer’s debt remains “a significant headwind,” at more than six times its cash flow, according to a note by Kristopher Zack at Desjardins in Calgary.

In a statement Thursday announcing the Weyburn sale, Penn West said it would stick to its strategy of selling “non-core” assets to further lower debt and will continue to focus on primary operations. A company spokesman declined to comment further.

http://www.bloomberg.com/news/articles/2015-10-01/penn-west-seen-selling-most-prized-oil-assets-as-debt-weighs

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Titanium Corporation Inc. shares gained the most in more than 16 years after reaching an agreement that gave the company access to heavy minerals at Syncrude Canada Ltd.’s oil sands sites.

The stock price rose 78 percent to the intraday high of C$1.39 at 3 p.m. Thursday in Toronto, the biggest increase since April 1999.

Titanium will have “first right” to recover heavy minerals from waste generated at Syncrude oil sites using a patented technology it owns, the company said in a release. Syncrude was given a 50 percent interest in the patented technology, which will also extract bitumen from the waste deposited in tailing ponds.

The company spent 10 years negotiating with oil-sands producers including Syncrude, Suncor and Canadian Natural Resources Ltd. to apply its technology, Scott Rattee, former senior analyst at Edgecrest Capital Corp., said in a phone interview.

The stock is “surging today because people are amazed it finally happened,” he said.

The technology could give Titanium access to “several hundred million” dollars a year worth of minerals including zircon and titanium dioxide that are now dumped, Rattee said. The technology also raises bitumen extraction by 2 percent to 3 percent and makes the resulting tailing ponds much cleaner as a result, he said.

Scott Nelson, Titanium’s chief executive officer, didn’t return a phone call seeking comment.

Oil-sands companies, which emit more carbon than traditional oil producers and leave vast swaths of wasteland from their mining operations, have sought to reduce their environmental impact in recent years.

http://www.bloomberg.com/news/articles/2015-10-01/titanium-surges-most-since-1999-after-agreement-with-syncrude