The American Petroleum Institute reported a 7.5 million barrel draw in U.S. crude oil supplies on Tuesday, instead of the build that many expected.

American crude inventories were slated to increase by 2.3 million barrels over the past week, according to a survey by Reuters, and 2.8 million barrels were expected to be added according to S&P Global Platts. Zero Hedge’s sources had anticipated an even bigger 3.25 million barrel build.

Gasoline supplies declined by 2.5 million barrels, surpassing forecasts of a 1.4 million barrel draw. Zero Hedge attributed the draw to the250,000-gallon leak in Helena, Alabama, which caused severe gasoline supply shortages along the East Coast. The pipeline’s holding company completed construction on a bypass line on Tuesday and told shippers to expect supplies starting tomorrow.

Distillate inventories rose by 1.4 million barrels, marking six weeks of consecutive increases.

Last week, EIA reported that U.S. crude oil inventories fell 600,000 barrels, after the biggest inventory draw of the century in the week prior, which was a 14.5 million barrel draw.

Tuesday’s API report will either be validated or discredited by the U.S. Energy Information Administration's official crude supplies report Wednesday morning.

Brent futures were down 0.30 percent or 14 cents at $45.80 a barrel one hour before the API report was released. Similarly, West Texas Intermediate futures were down by half a percent or 23 cents at $45.63 a barrel. Nearly 50 minutes after reporting, WTI was trading up 1.3% at $44.43 and Brent up 0.39% at $46.13. Gasoline was down 2.96% at 1.3788.

Zero Hedge noted that barrel prices are expected to remain “rangebound” until the Organization of Petroleum Exporting Countries’ unofficial meeting in Algiers next week, which many are hoping will end with some sort of agreement to curb OPEC’s crude oil production.

http://oilprice.com/Latest-Energy-News/World-News/Crude-Spikes-After-API-Reports-Massive-Crude-Draw.html

Libya's Arabian Gulf Oil Company (AGOCO) said on Tuesday its output had risen to 210,000 barrels per day (bpd) after production resumed at the Nafoura and Hamada fields.

"We will maintain production at this level and we are capable of increasing it, though we are suffering from a financial crisis at the moment," AGOCO spokesman Omran al-Zwai told Reuters.

http://www.reuters.com/article/libya-security-oil-idUSL8N1BW2PR

India’s crude oil imports peaked in August as refineries stepped up purchases to meet record domestic fuel consumption.

Indian refiners imported 18.81 million metric tons (about 4.45 million barrels a day) of crude oil during the month, a 9.1 percent increase over last year, according to the oil ministry’s Petroleum Planning & Analysis Cell. That is the highest level in data on thePPAC’s website going back to April 2009.

The South Asian nation of 1.3 billion people, which meets over 80 percent of its crude oil requirements through imports, has emerged as a bright spot for global oil demand as the the fastest economic expansion among major economies spurs increased use of trucks, cars and motorbikes. The International Energy Agency expects India to be the fastest-growing crude consumer in the world through 2040.

“India’s domestic fuel demand has been rising at a scorching pace,” according to Tushar Tarun Bansal, director at Singapore-based Ivy Global Energy. “To meet this strong growth, India’s refinery runs have been on an uptrend, leading to higher imports.”

The nation’s gasoline consumption reached a record in August, surging 25 percent from a year earlier, while demand for diesel rose 13 percent, the fastest pace since March. Virendra Chauhan, an oil analyst at Singapore-based consulting firm Energy Aspects Ltd., expects India’s oil demand to grow by 0.4 million barrels a day this year and by 0.2-0.3 million barrels a day next year.

Indian refiners are racing to add capacity, spending billions of dollars amid rising fuel consumption. State-run Indian Oil Corp., the country’s biggest refiner, aims to increase its capacity by 30 percent, or about 2 million barrels per day, over the next six years by expanding its existing refineries across the country.

The country’s 23 refineries have a total capacity of 230 million tons a year, while total fuel demand was 183.5 million tons during the financial year that ended March 31, according to the oil ministry.

“There has been strong demand -- gasoline growth is unprecedented and diesel growth will rise after monsoon,” Sanjiv Singh, director of refineries at Indian Oil, said.

http://www.bloomberg.com/news/articles/2016-09-20/india-s-monthly-crude-imports-touch-7-year-high-as-demand-booms

 Major oil producers will rely on acquisitions for about half their reserve replacement in the future after cutting exploration budgets to weather the crude-price collapse, according to Wood Mackenzie Ltd.

Big oil companies are no longer trying to replace all their production through conventional exploration, the energy consulting company said in a report published Tuesday.

"Now their reserves replacement will also require inorganic, brownfield or shale investments," Andrew Latham, vice president of exploration research at Edinburgh-based WoodMac, said in an interview. "Exploration has become incremental."

Investors often use the reserve-replacement ratio -- the proportion of oil and gas production offset by new resources -- to value companies since it forms the basis for future output. Among seven oil majors, only three added more oil than they pumped last year. Exploration spending dropped by half from a year earlier to $7 billion, according to WoodMac, whichsees the industry slashing $1 trillion from exploration and development until the end of the decade.

Acquisitions Push

“The need for M&A in exploration is likely to be here for a considerable time," Latham said. The focus “will be on assets rather than on taking over companies.”

Woodside Petroleum Ltd. is among those snapping up exploration assets. The Australian company agreed to buy ConocoPhillips’ interests off Senegal for $350 million in July. The purchase included the deep-water SNE discovery, which operator Cairn Energy Plc estimates has 473 million barrels in resources.

Exxon Mobil Corp. was also said to be intalks with Anadarko Petroleum Corp. for a stake in a natural-gas discovery off Mozambique, and in advanced discussions with Eni SpA over a stake in another prospect in the same area.

Lower oil prices have taken a toll on majors’ reserves, with some of them -- such as Royal Dutch Shell Plc -- forced to write down as much as 200 million barrels. Shell had the worst reserve-replacement ratio last year at minus 20 percent, the lowest in 12 years, it said in February.

The companies are also disposing of costly assets as oil prices below $50 a barrel curb revenue. The Hague-based Shell aims to raise $30 billion from asset sales in three years following its $54 billion acquisition of BG Group in 2015. Among the assets it may sell are aging North Sea fields.

http://www.bloomberg.com/news/articles/2016-09-20/oil-majors-must-count-on-m-a-to-replenish-reserves-woodmac-says

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Oil and gas exploration economics were broken, even while oil prices were above US$100. Our new research shows that the upstream exploration sector is poised to emerge from the current slump leaner, more efficient and more profitable. Here we look at how they're changing their approach, and what that means for the future.

The oil price downturn has been a catalyst for the industry to fix exploration economics. Rising costs, reducing returns combined with high-risk exploration strategies meant that the sector could not continue to operate in the same manner.

Where does the industry go from here?

Our research shows that the majors have started to look at exploration differently, and they've cut investment more drastically than other sectors. As the industry readjusts, there are now fewer wells being drilled. It's not that there's less oil to find – they're simply investing in less-risky operations. A lot of recent discoveries were not getting commercialised. And the economics of exploration were already broken back in 2014, when oil was at $100 per barrel.

One of the positive findings that we have seen from the majors changing the way they approach exploration is improved returns even at lower prices.






Focussing on high-yield options

Dr Andrew Latham, Vice President of exploration research at Wood Mackenzie says: "The new economics of exploration mean that rather than pursuing high-cost, high-risk exploration strategies – elephant hunting in the Arctic, for example – the majors have become more conscious of costs. Smaller budgets have required them to choose only their best prospects for drilling, including more wells close to existing fields. The industry now has in prospect a different – and potentially more profitable – future."

We've identified five ways that explorers can recover:

1. Focussed investment
Reduced exploration investment has forced only the best-quality prospects to be drilled.

2. Focus on returns and value over volume
A shift towards lower-cost locations, more emphasis on tax shelters against existing production, more focus on near-term opportunities and generally less above and below ground risk.

3. Redirecting investment
Focussing on areas where government support and fiscal terms are most appropriate.

4. Reduce costs
Ongoing efforts to reduce the costs of developing discoveries through project re-design, standardisation and innovation.

5. Lower-cost renewals
Longer-term acreage inventory renewals at a low cost.

Lower costs and more targeted investment

To achieve these aims, the majors have started to change the way they operate. They've cut conventional exploration spend by 53% in 2015 vs 2014. But the number of exploration wells completed fell by just 11% compared to the average of the previous four years. The average spend per well is back down to levels not seen since 2008. They've also refocused exploration on proven basins, nearer to existing production infrastructure, and reduced activity in high-risk frontiers.




Conventional versus unconventional spend



As the majors trim spend and refocus, they will discover smaller conventional volumes. This will lead to them relying more on other renewal options – unconventionals, discovered resource opportunities, enhanced recovery and M&A. We estimate that only 50% of production will be replaced by conventional exploration. This means that unconventionals are now attracting over 15% of exploration spend and have outperformed returns from conventional exploration since 2013. The end result will be a leaner, more fit-for-purpose sector, and will see the majors and the rest of the industry returning exploration to profitability at US$60 oil price.

https://www.woodmac.com/analysis/how-upstream-exploration-economics-are-recovering?utm_source=twitter&utm_medium=social&utm_campaign=wmorganic&utm_content=o

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Brazilian state-run oil company Petróleo Brasileiro SA,or Petrobras, cut its investment budget for the coming years and plans to raise more cash from the sale of assets, amid efforts to reduce its huge debt.

Petrobras on Tuesday said it would invest $74.1 billion in the 2017-21 period, down from $98.4 billion projected for the 2015-19 period, which was announced in January.

Meanwhile, the company said it would seek to accelerate the sale of assets to reduce its debt.

For 2017 and 2018, Petrobras is planning to sell a total of $19.5 billion in assets. By comparison, for 2015-16 period, the company had planned to sell a total of $15.1 billion in assets.

With less investments and more assets sales planned, Petrobras said it seeks to reduce its net debt to Ebitda ratio to 2.5 times in 2018, from 5.3 times at the end of 2015.

Petrobras ended the second quarter with a total debt of $123.92 billion.

http://www.wsj.com/articles/petrobras-reduces-its-five-year-investment-plan-1474372806

Painted Pony Petroleum Ltd. is pleased to announce 180 MMcfe/d (30,000 boe/d) of production volumes were averaged over the previous five days, based on field estimates. The Corporation's production increase represents both absolute and per share production growth of greater than 80% over second quarter 2016 average daily production volumes of 99.8 MMcfe/d (16,634 boe/d).

Painted Pony's production volumes at the Townsend Facilty averaged in excess of 100 MMcfe/d (16,670 boe/d) based on field estimates over the previous five days.

As per previous guidance, Painted Pony anticipates increasing production volumes by an incremental 50 MMcfe/d (8,330 boe/d) to the Townsend Facility in early October 2016. Painted Pony expects total daily production volumes for the third quarter of 2016 to average approximately 138 MMcfe/d (23,000 boe/d) and 2016 exit production volumes to be approximately 240 MMcfe/d (40,000 boe/d).

The recent increase in production volumes is consistent with Painted Pony's strategic 5-year plan and represents a significant milestone in the growth of the Corporation. Painted Pony continues to focus on growing production per share while working to lower capital and operating costs.

Asset Swap Update

Painted Pony anticipates closing the previously announced (press release dated July 27, 2016) asset swap with an industry partner on or about September 26, 2016.

http://www.oilvoice.com/n/Painted-Pony-Petroleum-announces-30000-boed-production-milestone/74a864033069.aspx

China's diesel exports rose 47.6 percent in August over the same year-ago level to 1.07 million tonnes, data from the Chinese customs showed on Wednesday.

Gasoline exports were up 44 percent on year to 670,000 tonnes while kerosene exports rose 16.8 percent to 1.13 million tonnes, the data showed.

http://www.reuters.com/article/china-diesel-exports-idUSB9N1BO008

Algeria is on track for more than 9 billion cubic meters a year additional gas output next year when three delayed projects in its south west come online, a source at state energy company Sonatrach said.

The third largest gas supplier to the Europe Union, Algeria has struggled in recent years to increase production of crude and natural gas because of low foreign investment to boost output at maturing fields and work new production.

For a year, European Union officials and energy firms have been pushing Algeria to adapt to more competitive markets, especially with the fall in crude prices, to attract the investment needed to pump more gas north again.

Three projects

Among the projects are Touat Gas set for February 2017 with an estimated output of 12.8 million cubic meters per day, Timimoun in March 2017 with 4.6 million cubic meters per day, and Reggane will provide 8 million cubic meters per day in June.

“The three projects will come online on time, the outcome will reinforce our position as a reliable gas exporter to Europe. No delays, the projects will be delivered in 2017,” the Sonatrach source told Reuters.

“Further in the south, we have found a huge potential of gas around the fields of Akabli and Tidikelt, in addition to Alrar’s project in the east that will deliver gas and oil,” the source said.

Dent in exports

A drop in European gas demand dented Algerian exports that were squeezed by slowing production at mature fields, low investment and s rapidly increasing domestic need for gas to generate power.

Still, Sonatrach has invested to stabilize and increase production at its large, mature fields and expects to bring five new gas fields online in the south of the country despite delays from state bureaucracy.

Gas output is expected to reach 141.3 bcm in 2017, 143.9 bcm in 2018, 150 bcm in 2019 and 165 bcm in 2020, according to a Sonatrach document.

In another advance, Algeria’s Tiguentourine gas plant resumed full production for the first time since a militant attack in 2013, after its third train came back online. The plant, operated with BP and Statoil with a full capacity of 9 billion cubic meters a year.

At its huge, mature Hassi R'mel field, Sonatrach has engaged in boosting operations to help bolster production.

Sonatrach is also due to recuperate by the end of 2017 important volumes of gas that have been injected in the past decades in Hassi Messaoud and its region.

Algeria is expected to export 50 billion cubic meters in 2016 to Europe, an increase of 15 per cent in comparison with 2015, according to Sonatrach.

Algeria is seen as a natural partner for the European Union as it looks to diversify energy supplies after the Ukraine conflict exposed the risks of relying too much on the bloc’s top gas supplier, Russia.

http://english.alarabiya.net/en/business/energy/2016/09/20/New-fields-to-boost-Algerian-gas-output-in-2017.html

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China's imports of liquefied natural gas grew 60.1 percent in August over the same month last year to 2.26 million tonnes, data from Chinese customs showed on Wednesday.

August imports of kerosene gained 21.3 percent on year to 320,000 tonnes, the data showed.

http://www.reuters.com/article/china-economy-trade-lng-idUSB9N1BO007

A new $24 billion Chinese refinery that’ll use as much crude oil as some of Asia’s biggest plants is set to take on rivals by helping make plastic bottles rather than fuel for cars.

Rongsheng Petrochemical Co. has cleared more than 10,000 acres of land in Zhoushan island to build a 400,000 barrel-per-day facility by 2018, and will double that capacity by 2020, said Shou Bochun, a general manager at the trading arm of the privately owned company. Once the plant in eastern China reaches it expanded size by the end of the decade, it would rank among the top refineries in Asia, rivaling those of India’s Reliance Industries Ltd. and South Korea’s SK Innovation Co.

Hangzhou-based Rongsheng plans to consume all of the plant’s output of naphtha, a key ingredient in the manufacture of petrochemicals, while minimizing production of diesel and fuels, Shou said. At maximum capacity, the refinery will be able to produce 10.4 million metric tons a year of aromatics including paraxylene and 2.8 million tons of ethylene, both of which are used to make plastics, according to a proposal posted on the website of the Zhoushan government.

The company’s ambition underlines China’s increasing appetite for petrochemicals, used to make everything from sportwear to soda bottles. That will also help drive oil demand in the world’s second-biggest consumer amid a global glut and weak prices. Chinese petrochemical makers will need 90 percent more crude oil in 2030 than last year, while diesel demand growth is entering “a 10-year plateau”, according to Li Zhenguang, a senior analyst at China Petroleum & Chemical Corp., known as Sinopec.

“It is chemicals really that is driving China’s oil-demand growth,” said Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong. “Going forward, gasoline and chemicals will be very important when it comes to driving crude oil demand in China.”

The nation’s oil consumption will rise to 700 million tons in 2030, or 14 million barrels a day, from 540 million tons in 2015, according to Li at Sinopec, which is China’s biggest refiner. He estimated the petrochemical sector will account for 19 percent of the country’s crude demand by the end of the next decade from 13 percent last year, which suggests consumption by the industry will almost double to 133 million tons.

China imported 11.6 million tons of paraxylene last year from countries including South Korea, Japan, Taiwan and India, up 17 percent from a year earlier and compared with 3.5 million in 2010, customs data show. That’s about half of its requirements for the product, according to Shou.

Polyester T-shirts

The Zhoushan project by Rongsheng, a polyester fabric producer, may add a blow to other Asian refiners competing for the fast-growing Chinese petrochemical market amid a supply glut in the region. The Asian nation’s factories are forecast to make about 25 million tons of synthetic fibers this year, according to Salmon Aidan Lee, a Singapore-based consultant at Wood Mackenzie Ltd. That’s enough to produce 208 billion T-shirts.

“Not only will this private petrochemical plant take market share away from PetroChina and Sinopec, but it will also take away market share from South Korean refiners and other regional competition,” said Nomura’s Kwan.

Apart from Rongsheng’s 51 percent, privately owned Tongkun Group Co. and state-owned Juhua Group each control 20 percent of the project. Zhoushan Marine Comprehensive Development and Investment holds the remainder. The companies will fund the plant, estimated to cost about 160 billion yuan ($24 billion), by raising debt and selling equity, said Shou.

http://www.bloomberg.com/news/articles/2016-09-20/a-24-billion-china-refinery-bets-on-a-great-future-in-plastics

Over 300 oil service workers in Norway went on a strike on Wednesday morning after mediation between the Norwegian Oil and Gas Association and the Norwegian Union of Industri Energi failed.

To remind, mediation over the collective oil service agreement between the employers’ organization in Norway and the workers’ union took place on Tuesday. The negotiations ended almost four hours past the original, midnight deadline but the agreement has not been reached.

The strike affects the following companies, Schlumberger Norge, Baker Hughes Norge, Halliburton Norge, Oceaneering, and Oceaneering Asset Integrity.

The walkout primarily affects environmental treatment of drilling waste, and could call a halt to some drilling operations, but it does not immediately affect oil and gas production on the NCS.

Industri Energi’s negotiator Ommund Stokka said the employers’ association did not show any willingness to meet the union’s demands. The union believes that by accepting the employers’ proposal, the gap between the operator / drilling / catering and oil service staff would increase dramatically.

The employers’ organization, on the other hand, said the union’s demands were unreasonably high. Karl Eirik Schjøtt-Pedersen, CEO of Norwegian Oil and Gas Association, said it was irresponsible to strike for a wage increase in a year when 40,000 people lost their jobs in the oil industry and while companies are still considering further downsizing.

The union secretary Einar Johannessen stated that at the beginning only a limited number of workers will participate but, if necessary, the strike will escalate unless the deal is reached.

Jan Hodneland, a chief negotiator at the Norwegian Oil and Gas Association, noted the strike is not showing solidarity to those who have lost their jobs.

http://www.offshoreenergytoday.com/oil-service-workers-go-on-strike-in-norway/

Encana Corp., the Canadian oil and natural gas producer, is selling about $1 billion of shares to fund drilling in Texas next year and repay debt.

The company agreed to sell 107 million shares at $9.35 apiece through underwriters led by units of Credit Suisse Group AG and JPMorgan Chase & Co., Calgary-based Encana said in a statement on Monday after the close of regular trading on North American markets. An additional 16.05 million shares can also be purchased, as part of the deal.

Encana joins producers including Crescent Point Energy Corp. in selling shares in recent weeks to fund drilling as U.S. crude is up 65 percent from its February low. Most of the company’s investment next year will be targeted toward increasing output in the Permian Basin in West Texas, the largest U.S. oil field.

One of Canada’s largest gas producers, Encana has increasingly focused its attention on boosting oil and petroleum liquids production from shales including the Permian, where it established a position with the 2014 purchase of Athlon Energy for $7.1 billion. The company said it aims to double the number of wells on stream in the Permian in 2017, compared to this year.

Shares of the producer, which were halted in Toronto after the announcement, are up 85 percent this year. Encana’s U.S.-listed stock dropped in after-hours trading and was down 4.8 percent to $9.39 as of 7:59 p.m. in New York.

http://www.bloomberg.com/news/articles/2016-09-19/encana-selling-107-million-shares-to-fund-drilling-repay-debt

Gas deliveries from Cheniere Energy, the operator of the Sabine Pass LNG export terminal, dropped on Monday and Tuesday, signaling they may now be shutting down for repairs to fix gas flares that had not performed as expected, according to reports.

Cheniere had said earlier this month that the planned shutdown would begin “later this month” and would last four weeks, but no specific date had been given.

Even while the repairs are going on, LNG from the terminal could continue being shipped to various export destinations, Argus Media notes, because it also includes a number of storage tanks capable of holding a combined 17 billion cu ft of gas, and according to Argus, they are full to capacity at the moment. These 17 bcf of gas can be divided into four or five export cargos, with the typical average load of an LNG tanker ranging between 3 and 3.5 bcf.

The terminal received a daily average of 1.18 bcf in the first two weeks of September, but on Monday it only received 20.8 million cubic feet, and the same amount was scheduled for delivery on Tuesday. This indicates that the two operating liquefaction trains at Sabine Pass have been shut down in preparation for the repairs. The terminal is planned to have a total of five trains, each with a daily capacity of 694 million cubic feet of LNG.

At the end of last month, the first cargo of LNG from Sabine Pass reached China, media reported at the time. This was the first cargo of U.S. LNG to be exported to Asia. The continent is the most attractive market for LNG producers worldwide because of ample demand. This demand, however, has slackened recently, as more and more LNG projects came on stream, pushing prices down.

The Sabine Pass project is worth US$20 billion and is one of several such projects being built around the U.S. in a bid to make better use of the abundance of natural gas extracted across the country’s shale plays. So far, however, U.S. LNG has faced stiff competition abroad, more specifically in Europe and Asia, where LNG exporters with a presence are prepared to cut their prices in order to preserve their market share – something not so easily achievable for U.S. exporters.

http://oilprice.com/Latest-Energy-News/World-News/Cheniere-Shuts-Down-LNG-Terminal-for-Repairs.html