An armed faction entered two major Libyan oil ports on Friday, pushing back forces that captured and reopened the terminals in September, officials and residents said.

The move risks increasing the fighting around the ports and casts new doubt over Libya's attempt to revive its oil production. The terminals at Es Sider and Ras Lanuf are two of Libya's largest, with potential combined production capacity of about 600,000 barrels per day (bpd).

It was unclear late on Friday to what extent the faction that attacked, the Benghazi Defence Brigades (BDB), had gained control over the area. There was no statement from the Libyan National Oil Corporation (NOC) in Tripoli, which restarted operations at the ports after the eastern-based Libyan National Army (LNA) took them over seven months ago.

Since then the LNA's opponents have launched several unsuccessful attacks against the ports in Libya's eastern Oil Crescent, in a campaign linked to a broader conflict between factions based in eastern and western Libya.

The LNA had said the ports were well secured. But it said the BDB had launched a rapid, three-pronged attack early on Friday that pierced its defenses.

Air strikes repelled an attack targeting a third port, Brega, but the LNA withdrew men and equipment around Es Sider and Ras Lanuf to avoid a damaging fire fight, LNA spokesman Ahmed al-Mismari said.

Port engineers, oil sources and residents said the BDB entered both Es Sider and Ras Lanuf ports after the attack.

The BDB posted pictures of its fighters at Ras Lanuf's nearby air strip, though the LNA later said it had retaken control there.

At least nine men loyal to the LNA were killed and eight wounded in the fighting, a medical source said.

The LNA took Es Sider, Ras Lanuf, Brega and Zueitina oil ports in September. All but Brega had long been blockaded. After the NOC reopened them, Libya's oil production more than doubled.

The Benghazi Defence Brigades are composed partly of fighters who were ousted from Benghazi by the LNA, where LNA commander Khalifa Haftar has been waging a military campaign for nearly three years against Islamists and other opponents.

The LNA brands its opponents as Islamist extremists, and each side accuses the other of using mercenaries from Libya's sub-Saharan neighbors. Some in the east also accuse elements of the U.N.-backed Government of National Accord (GNA) in Tripoli of backing the BDB and their allies.

The GNA's leadership strongly condemned Friday's escalation, saying in a statement that it "did not give any order to any forces to move towards that area". It suggested the attack could be an effort to scupper Libyan and international efforts to bring peace.

Libya has recently been producing about 700,000 barrels per day (bpd) of oil, more than double its output early last year but still far less than the 1.6 million bpd the OPEC member was pumping before the 2011 uprising.

The Oil Crescent ports suffered major damage in previous rounds of fighting and are still operating well below capacity.

Tankers have been loading at Es Sider since December, with the Amalthea due to arrive on March 7 to load 630,000 barrels for Austria's OMV, according to shipping sources.

The NOC has been lobbying foreign firms to return to Libya and invest in the oil and gas sector as it tries to push production to 1.2 million bpd later this year.

http://www.reuters.com/article/us-libya-security-oil-idUSKBN16A1D4

The recent approval of the Dakota Access Pipeline and rising Permian production is expected to leave Asian refiners spoilt for choice as more US light crude oil from the Gulf of Mexico becomes available to them.

Once Dakota Access comes online, roughly "couple of hundred thousand barrels per day of US light oil could be available by capacity for exports," said Takayuki Nogami, chief economist at Japan Oil, Gas and Metals National Corp.

Nogami said more US light oil could be available for exports as US refiners in the Gulf generally process medium to heavy grades.

The delayed 470,000 b/d Dakota Access Pipeline received final federal approval in early February to complete construction, and start up is targeted between March 6-April 1.

The four-state $3.8 billion pipeline is designed to deliver Bakken and Three Forks crude to Patoka, Illinois, where it will connect with the Energy Transfer Crude Oil Pipeline to Texas, leaving more crude available for export from the Houston terminals.

The Permian is the US' most active crude play by far and the site of most of rig count increases. Production at the Permian Basin has been climbing steadily since September and is projected to reach 2.25 million b/d in March, according to the US Energy Information Administration.

A number of refiners in China, Japan and South Korea said that they are closely watching the developments and will consider importing more light oil and possibly sour grades from the US whenever they became competitive against their main sour crude imports from the Middle East.

"We will definitely watch this [development over the Dakota Access Pipeline and increasing US oil production] and seek more opportunity," said a refiner in South Korea.

"Our principle has not changed. We intend to buy attractive [crudes] from around the world, regardless of whether they are from the Gulf of Mexico or the pipeline coming onstream," said Jun Mutoh, president of Japanese refiner TonenGeneral, an active buyer of US oil including WTI crude and shale.

Gaven Chen, a senior refining engineer with China's state-owned Sinopec, said he expected US refiners will need at least five years to complete their infrastructure reform to crack shale oil, which could result in more availability of light oil for exports until around 2022.

NO INFRASTRUCTURE CONSTRAINTS

A buildout of pipelines and rising production means that exports of US crudes to Asia will not be limited by infrastructure constraints, said Sandy Fielden, director of oil and products research at Morningstar.

But Fielden said the volumes will eventually depend on price.

"You've got a potential for exports into the Asia market, and you're seeing the first talk of exports of offshore Gulf of Mexico sour crude like Southern Green Canyon potentially going to Asia to make up for a lack of barrels due to the OPEC cuts," Fielden said.

"There's going to be circumstances where the price is right and the arbitrage opens up, but I'm thinking this is kind of a sporadic -- it's based on circumstance, it's not going to be a big, sudden opening up of the market that results in a massive outpouring of crude from the Gulf Coast," he said. "It's all going to depend on the relative price."

Some of the US light oil production could also be used for blending with heavier grades, said Nobuo Tanaka, former executive director of the International Energy Agency.

So increasing availability and production of US light oil production may not necessarily lead to a spike in crude exports, although the current crude price is supporting incremental shale oil production, he added.

Currently, pipelines can transport 1.85 million b/d of crude into the Houston area from offshore Gulf of Mexico and Texas oilfields, including the Permian Basin and Eagle Ford, according to Morningstar. Another 1.55 million b/d of crude can be shipped through pipelines originating at Cushing.

In the next year, an additional 500,000 b/d of pipeline capacity from the Permian Basin to Houston will come online, including the expansion of the BridgeTex pipeline and a new Enterprise Products Partners project.

Export capacity is rising at Corpus Christi, where Occidental Petroleum inaugurated its 200,000 b/d Ingleside export terminal in 2016. Plains All American plans to expand its Cactus pipeline by 140,000 b/d to 390,000 b/d this year, supplying more Permian crude to Corpus Christi export terminals.

RISING US CRUDE SUPPLY TO ASIA

Following the December 2015 US Congress decision to lift crude export restrictions, US crude exports to Asia skyrocketed from just 4,000 b/d in 2015 to 54,000 b/d in 2016, according to US Census Bureau data. China received 23,000 b/d of US crude in 2016 and shipments also arrived in Japan, South Korea, Singapore and Thailand.

This year Chinese independent refiners have started buying US crudes, with 2 million barrels of Mars and Thunderhorse crudes arriving in April, according to market sources. Until last year, only state-run refiners imported US crudes in China.

HEIGHTENED ACTIVITY

A widening Dubai premium to WTI and refinery maintenance season in the US are likely to keep export demand healthy in the near term.

A significant amount of coking capacity is currently under maintenance in the region, meaning that previously hard to find grades, like Mars and Southern Green Canyon, may be available for export, market sources said, adding that sour grades have departed the USGC for North Asia in recent weeks.

WTI FOB Houston differentials point to heightened export demand in recent months. The differential rose to average front-month NYMEX WTI plus $2.35/b in December and plus $2.34/b in January, up from plus $1.73/b in November.

The tightening of the Dubai crude market following OPEC's coordinated supply cuts has led Dubai crude to flip to a premium to WTI in recent months, making US crude more competitive in Asian refineries.

Dubai's premium to WTI widened to average 95 cents/b in January and $1/b in February, leading many Asian crude buyers to look beyond the Middle East for supply.

The lack of demand for Middle East sours is reflected in weak forward freight rates.

Persian Gulf-Far East VLCC rates declined to $10.47/mt in January from $12.96/mt last December as the Dubai/WTI spread widened.

The market continues to expect weak demand going forward, with February rates to date averaging $8.78/mt.

By comparison, US Gulf Coast-Asia Suezmax freight has held firm, averaging $23.27/mt and $23.94/mt in December and January, before dipping slightly to $21.39/mt in February.

A Suezmax fixture is the latest example of increasing inquiries for Asia. Mercuria was reported to have put the Tony on subjects to lift a 130,000 mt crude cargo for a USGC-Singapore voyage loading March 1.

"USGC to East is the new hot thing," said a shipbroker.

An industry source said the Suezmax market on Far East runs should continue to firm as tonnage remained tight in the Gulf of Mexico and traders were looking to ship cargo to the East.

http://www.platts.com/latest-news/oil/tokyo/analysis-asia-seen-spoilt-for-choice-as-more-27781634

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Dongming Petrochemical, China's largest independent or 'teapot' refiner, has signed a deal with privately run CEFC China Energy and a local port authority to build a crude oil terminal in Shandong province, seeking to ease a logistics bottleneck gripping the country's teapot oil sector.

The 3.9 billion yuan ($566 million) project with conglomerate CEFC China Energy and Rizhao port authorities comes as China's teapots refiners emerge as a catalyst in the global oil market, ramping up Russian and U.S. imports in frenzied buying that has led to tanker queues and scarce storage space.

Executives at Dongming, formally known as Shandong Dongming Petrochemical Group, and private firm CEFC said on Friday that publicly owned Rizhao Port Authorities will take 51 percent of the project, CEFC 25 percent and Dongming 24 percent. Plans include a 300,000 deadweight tonnage (DWY) crude terminal, two 150,000-DWT crude berths and a 9.8 million barrel storage farm.

"With Qingdao port nearly saturated, Rizhao stands out with its ideal location, with easy access to teapots to the north and close also to Lianyungang, one of China's planned future petrochemical hubs to the south," a CEFC executive told Reuters, declining to be named as he was not authorized to speak to media. CEFC has interests spanning finance and travel as well as oil.

Qingdao port is the country's largest oil port by volume, accounting for 27 percent of China's total crude oil imports last year, with crude shipments into the port up nearly 50 percent over 2015, according to Chinese customs data.

The Rizhao terminal project will be one of a series in Shandong, as other firms have also planned to add new pipeline and storage facilities in the area to provide much-needed infrastructure.

Dongming's vice president Zhang Liucheng told Reuters by telephone that construction of the project is slated to start by mid-year. The teapot refiner already operates a crude oil pipeline connecting Rizhao and its 240,000 barrels per day (bpd) refinery in Heze city of Shandong.

In Lianyungang, a port city in neighboring Jiangsu province, Dongming runs another smaller plant with 60,000 bpd capacity, according to the company website.

There are two existing crude oil berths in Rizhao able to anchor supertankers, according to the CEFC executive. The project marks the firm's second major investment in storage and terminal facilities in China, after its 17.6 million-barrel tank farm in the country's southernmost Hainan province.

http://www.reuters.com/article/us-china-teapot-terminal-idUSKBN16A0FS

Reuters are reporting that GAIL India has signed a time-swap deal with Swiss trader Gunvor to sell some of its US LNG, as the Indian company tries to ease the burden of its costly foreign LNG supplies.

It is the first time-swap agreement by GAIL, which is trying to juggle its LNG portfolio to cut costs for price-sensitive Indian customers after a sharp fall in Asian spot prices made its US gas unattractive.

The deal equates to around 5% of India's 2015/16 LNG imports and will support a government push to promote use of the cleaner fuel.

Under the agreement, Gunvor will supply 15 cargoes or about 0.8 million t of LNG to GAIL on India's west cost between April and December this year in oil-linked prices on a delivered basis in India.

In return GAIL will sell 10 cargoes or about 0.6 million t next year from Sabine Pass on the US Gulf coast in 2018 at a premium to its pricing formula on a free-on-board basis.

The deal means GAIL could get gas from Gunvor at US$6.50 – 7.00 per million British thermal units.

GAIL is saddled with long-term contracts to take expensive US gas after embarking on a buying spree between 2011 and 2013 when the fuel was scarce and prices kept rising.

LNG booked by GAIL under a long-term deal with Cheniere Energy, which owns the Sabine Pass Liquefaction terminal, will cost 115% of Henry Hub prices plus a fixed cost of US$3 per mBtu. At current prices, this equates to a cost of about US$8.50 per mBtu on a delivered basis to India.

The Indian company has a deal to buy 3.5 million tpy of LNG for 20 years from Cheniere Energy and has also booked capacity for another 2.3 million tpy at Dominion Energy's Cove Point liquefaction plant.

It has so far sold about 0.5 million t of its LNG from the US projects to Royal Dutch Shell, but has not been able to attract Indian customers despite repeated attempts.

https://www.lngindustry.com/liquid-natural-gas/03032017/indias-gail-signs-first-time-swap-deal-for-us-lng/

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Australian bank Macquarie Group Ltd is planning on buying Cargill Inc's global oil business, according to people familiar with the matter, marking the second energy business the global commodities trader has shed this year.

Terms of the deal have been agreed upon, but the integration could take several weeks or longer, one of the sources said.

The deal comes as Cargill has spent the past year streamlining its business amid a nearly three-year slump in global commodity prices. In January, sources said that Cargill sold its U.S. gas and power business to commodities trader and investor TrailStone Group.

A Cargill spokeswoman said the company continues to operate its U.S. gas and power business and its global oil business, but declined to comment on the acquisition by Macquarie. Macquarie also declined to comment.

Macquarie had also bid on Cargill's gas and power business, a source said.

Privately held Cargill in January reported a higher quarterly profit, buoyed by strong results in its meats and U.S. crops business.

Many banks exited physical oil trading following the implementation of the Dodd-Frank Act's financial reform. President Donald Trump in February signed an executive order that would scale back the act, potentially creating a better environment for banks to trade physical commodities.

http://www.reuters.com/article/cargill-inc-divestiture-macquarie-group-idUSL2N1GG1BN

Eagle Ford adds 5 rigs, Williston adds 3, Permian adds 2 for the week

Onshore drilling activity remained more or less unchanged for the week ended March 3, 2017, according to Baker Hughes’ (ticker: BHI) weekly report. The number of active rigs drilling onshore in the U.S. increased by just one rig to 734 this week. Total U.S. rigs increased by two to a total of 756, up 267 (55%) from the same period last year.

The number of rigs drilling for crude oil increased by seven week-over-week, but the total rig count was held back a small decline in the number of rigs targeting natural gas. Rigs drilling for gas fell by five from last week to 146, up 49 (51%) from this time last year.

Looking at variance by basin, the Eagle Ford saw the largest increase with five additional rigs this week bringing the total number in the play to 69 rigs. The Williston saw the next largest increase with three rigs, while the Permian added two rigs, and the Arkoma Woodford and Granite Wash added one rig each. The Permian remains the most active basin with 308 rigs drilling in the play.

The Barnett, Cana Woodford, DJ-Niobrara, Haynesville, Marcellus and Utica all reported one fewer rig this week compared to last.

http://www.oilandgas360.com/onshore-rig-count-increases-just-one/

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Chesapeake delays release of 2016 financial results until Monday

Chesapeake Energy will be forced to delay the release of its complete financial results for the full-year 2016 until Monday as a result of "a material weakness in its internal control over financial reporting," the producer said in a filing with the US Securities and Exchange Commission Thursday.

"Chesapeake Energy is unable to file, without unreasonable effort or expense, its Annual Report on Form 10-K for the year ended December 31, 2016," the Oklahoma City-based company said in the SEC filing.

The company said it expects to report a net loss of $4.399 billion for the year, compared with a net loss of $14.635 billion for 2015.

In the company's February 23 fourth-quarter 2016 earnings call, Executive Vice President and CFO Nick Dell'Osso said the financial reporting weakness causing the delay in the release of the 10-K was an isolated problem and was the result of "an oil basis pricing differential calculation in one region for a discrete period of time."

http://www.platts.com/latest-news/natural-gas/houston/chesapeake-delays-release-of-2016-financial-results-21045457

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The first of several new petrochemical plants coming online this year became operational this week when Houston-based Occidental Petroleum opened its new facility near Corpus Christi.

The $1.5 billion ethylene plant in Ingleside is a joint venture between Occidental’s OxyChem subsidiary and Mexico-based Mexichem. The facility, called an ethylene cracker, takes ethane from natural gas production and converts it into ethylene, which is the primary building block for most plastics.

The project is the smallest and first of several Texas Gulf Coast ethylene crackers being completed this year. Others are under construction in the Houston area by Exxon Mobil, Chevron Phillips Chemical and Dow Chemical.

The plant will churn out 1.2 billion pounds of ethylene a year that Occidental will turn into vinyl chloride mononers, which Mexichem will then convert into polyvinyl chloride to make PVC piping.

While the project included thousands of construction jobs, the plant only created about 150 permanent positions. The facility was built by The Woodlands-based CB&I.

The slew of petrochemical plants in Texas are the result of the cheap and ample shale gas supplies that serve as the feedstock for the facilities.

http://fuelfix.com/blog/2017/03/02/occidentals-massive-petrochemical-plant-comes-online-in-texas/

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A trio of companies hope to build a 730-mile-long crude oil and condensate pipeline from West Texas to Corpus Christi.

The so-called Epic pipeline would have a maximum capacity of 440,000 barrels per day of crude oil and condensates, a form of ultralight crude oil. The pipeline would take crude from points in Orla, Pecos, Crane and Midland in West Texas’ Permian Basin and transport it to an affiliate’s terminal in the Port of Corpus Christi and other drop-off points in the area, according to a news release.

It is being built by San Antonio-based TexStar Midstream Logistics, Connecticut-based Castleton Commodities International and Texas-based Ironwood Midstream Energy Partners.
Ironwood maintains its engineering and operations in Dallas while its business development and finance units are based in San Antonio.

The companies are currently bidding out the first 200,000 barrels of pipeline capacity and have not said how much it will cost to build the pipeline or when they plan to start construction. The companies say the pipeline will be operational by the first quarter of 2019.

“TexStar and its partners are excited to extend our business into the Permian Basin, where we see tremendous opportunity and continued growth,” said Phil Mezey, CEO of TexStar. “TexStar has a proven track record of building crude oil pipelines in emerging areas and looks forward to expanding upon its relationships with producers to make the project a success.”

http://fuelfix.com/blog/2017/03/02/730-mile-epic-permian-to-corpus-pipeline-in-the-works/