Saudi Arabia's crude exports are expected to fall below 7 million barrels per day this summer, according to industry sources familiar with the matter, and shipping data so far supports those figures.

Saudi Energy Minister Khalid al-Falih said in May shipments were set to drop from June, particularly to the United States, as the top OPEC producer aims to limit supply to help balance the market.

Exports in May, when the kingdom's total production was 9.880 million bpd, averaged below 7 million bpd, three industry and shipping sources told Reuters. Early indications suggest that remains the case this month, one of the sources said.

"I'm only looking at the first week of June, and on the face of it there's not much change," said Roy Mason of Oil Movements, a UK-based firm that estimates supply by tracking tanker shipments.

Indicating lower Saudi exports, he said tanker movements suggested shipments to the United States were "less than would be seasonally normal."

Lower exports could help reduce bloated inventories in the United States, the world's largest and most transparent oil market. High stockpiles have weighed on crude prices.

U.S. oil imports from Saudi Arabia were above 1 million bpd from May-August last year, according to U.S. government data. So far in June, Saudi exports to the United States were below 1 million bpd, according to shipping data and industry sources.

Overall, Saudi exports are set to be lower than last year, when the kingdom shipped about 7.4 million bpd on average from May to August.

This is partly because Saudi Arabia usually burns more crude in power stations at home in the summer months to meet extra demand for power as people rely on air conditioners to deal with temperatures that can reach 50 degrees Celsius.

This year, Saudi Arabia is also leading OPEC and other producers in a pact to cut output, a deal initially due to run during the first half of 2017 and now extended until March 2018.

Under the deal, the kingdom should not produce more than 10.058 million bpd until March. In the first five months of 2017, its output has been below that target.

Industry sources with knowledge of Saudi crude exports data said state oil company Saudi Aramco aimed to cut its exports to the United Sates to below 1 million bpd in June and July.

Aramco has raised its official selling oil prices (OSPs) for its crude to the United States for July, a move seen as discouraging a further buildup in U.S. oil inventories.

"The high-price numbers prompted U.S. refiners to lower nominations," one industry source said.

The company has cut allocations in July to the United States by 35 percent and to Europe by 11 percent in July. Allocations to Asia were cut by some 300,000 bpd.

Reuters shipping data also points to Saudi exports below 7 million bpd in the first two weeks of June, averaging 6.98 million bpd.

Last year, Saudi Arabia burned 700,000 bpd of crude to generate power in the peak summer months. That figure was expected to fall by about 100,000-120,000 bpd this year, as the kingdom uses more natural gas, one industry source said.

Two sources said Saudi Arabia could draw from inventories to meet local and export requirements if needed. Saudi inventories rose to 267.854 million barrels in March from 264.704 million in February, according to official data.

But the kingdom would still keep crude production and supply within its OPEC target, another source said.

http://www.reuters.com/article/us-saudi-oil-exports-idUSKBN1952AW

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RUSSIAN OIL EXPORTS AND TRANSIT VIA TRANSNEFT PIPELINE SYSTEM SEEN RISING TO 61.2 MLN T IN Q3 FROM 60.5 MLN T IN Q2 - INDUSTRY SOURCES

@EnergyBasis  

Traders are increasingly storing oil in aging supertankers in Southeast Asia as they grapple with a supply overhang that has left the system clogged with unneeded fuel despite an OPEC-led drive to cut production to prop up prices.

Around 10 very large crude carriers (VLCCs), all between 16 and 20 years old, have been chartered since the end of May to store crude for periods ranging from 30 days to around six months, brokers told Reuters. Each VLCC can carry 2 million barrels of oil.

These vessels are in addition to around 30 supertankers used for long-term storage around Singapore and Linggi, off the West coast of peninsula Malaysia.

One of the main drivers for storing oil in tankers is that crude prices for immediate delivery are cheaper than for future sale, a market condition known as contango.

Brent crude futures, the international benchmark for oil prices, have fallen by 13 percent since late May, to around $47 per barrel. Brent for delivery at the end of 2017 is $1.5 per barrel more expensive <0#LCO:>.

"Floating storage does seem ... viable assuming time charter rates of under $20,000 per day," said Rachel Yew, oil and tanker market analyst at Oceanfreightexchange.

Current rates to charter a five-year-old 300,000 DWT for one year are $27,000 per day, according to shipping services firm Clarkson. Rates for VLCCs at least a decade-old are much cheaper.

"It makes a lot of sense for a trader to pay $16,000-$19,000 per day to take an older VLCC for 30-90 days to store oil," said a Singapore-based supertanker broker, asking not to be identified.

The festering supply glut comes even as the Organization of the Petroleum Exporting Countries (OPEC) pushes to withhold production until the end of the first quarter of 2018.

WAITING FOR CHINA

Floating storage is an indicator of oversupply.

"Too much unsold oil is headed to Asia," said Oystein Berentsen, managing director for oil trading company Strong Petroleum.

A shortage of spare onshore storage in China, as well as an expectation that new Chinese crude import quotas for independent refineries will be announced soon, are also playing a role in putting crude into tanker storage in Southeast Asia.

"Once China's quota are released, you want to have oil close to China. Because onshore storage there is pretty full, the next easiest location is around Singapore and Malaysia," said one trader.

"This expectation of new Chinese orders also helps explain why future crude is more expensive than current crude. That's why we store it for later sale," he added.

http://www.reuters.com/article/us-asia-oil-storage-idUSKBN19709N

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When BP boss Bob Dudley clinched a final deal to settle litigation over the deadly Deepwater Horizon disaster, many oil industry executives and investors thought his mission was accomplished.

But now, two years later, the 61-year-old is showing no sign of easing into retirement. In fact he plans to oversee an ambitious expansion plan and stay at the helm of the British oil major until at least the end of the decade, according to sources familiar with the matter.

The American CEO has told his leadership team that it is in his family's tradition to not retire until 65 - which would take him to 2020 - and that he could perhaps work even longer than that, the sources said.

In another signal that there is unlikely to be a change at the top anytime soon, there has been no imminent succession planning at the firm, according to the sources, one of who said succession was "not a live project".

When Dudley finally decides to go, there will no shortage of candidates to take his place, however.

BP's chief financial officer, British national Brian Gilvary, 55 and the head of upstream, Irishman Bernard Looney, 46, have been cited as possible successors.

There has been persistent industry speculation about when Dudley will call time on his BP career since he struck the 2015 settlement deal under which the company agreed to pay out a total of about $60 billion over the disaster that left 11 dead and led to the largest oil spill in U.S. history.

He had been made CEO in 2010 - the first American to lead BP in its 108-year-old history - to steer the company through the swathe of U.S. litigation, and the deal represented a milestone.

But rather than stepping back from the fray, he has since embarked on the biggest expansion plan in a generation for BP, even in the face of a collapse in oil prices.

'SAFE HANDS'

The company has become the fastest-growing oil major in the world. It will launch seven oil and gas fields this year - more than any other year in its history - and will launch nine more before the end of the decade, adding 800,000 barrels per day (bpd) of oil and gas to its production.

By 2020 the company, including its stake in Russian oil giant Rosneft (ROSN.MM), will be producing as much as 4 million bpd - the same as before the Deepwater Horizon spill and up from the 3 million bpd it was producing after offloading assets to cover the litigation costs.

"We are firing on all cylinders," Dudley told a shareholders meeting in May as he aims to catch up with production volumes of its biggest rivals Exxon Mobil (XOM.N) and Royal Dutch Shell RDSa.l.

Whether this strategy will prove effective in the long-term is by no means certain; BP's large liabilities linked to Deepwater Horizon mean it requires a significantly higher oil price - than the present price and compared with rivals - to pay for its operations and dividends. A sluggish recovery in oil prices could also lead to its already high debt rising further.

Rating agency Moody's upgraded BP's credit rating last week for the first time in 19 years while, in another sign of confidence, 97 percent of BP shareholders voted to approve Dudley's new pay package last month.

"Bob hasn't done anything that we wouldn't agree with so far. When times are hard and bad, I would want someone who is pretty sensible and conservative," said Rohan Murphy from Allianz, which holds BP shares.

"Dudley is a safe pair of hands. He won't do anything too maverick," Murphy added. "The recent rating upgrade shows the story hangs together."

OLIGARCH BATTLE

The calm and softly spoken Dudley was stress-tested more than once before getting the top job. His career included three punishing years fighting a corporate war with Russian oligarchs at the firm's giant Russian venture TNK-BP that forced him to flee the country and go into hiding.

He became BP chief executive when his predecessor Tony Hayward's tenure ended abruptly following the explosion of the Deepwater Horizon platform in the Gulf of Mexico in 2010.

Dudley was given a task of steadying the ship as BP struggled with a firestorm from the U.S. government, victims of the spill, environmental groups and shareholders.

Over the next five years, the company shed more than $55 billion worth of oil fields, refineries and infrastructure to pay for the spill clean-up.

BP was abandoning low-margin projects and mature markets like Venezuela or Vietnam, often getting top dollar for its sales as oil prices hovered above $100 per barrel.

In retrospect, BP had unknowingly stolen a march on most of its rivals who had to embark on similar asset sales much later when crude prices began to collapse in 2014.

DEBT PILE

Just as BP was slowly emerging from the spill fallout, the collapse in oil prices drove it to its biggest loss ever in 2016. Like its peers, BP responded by slashing thousands of jobs and tightening budgets.

The efforts bore fruit. In the first quarter of 2017, its profits tripled and its production rose to a five-year high thanks to higher production.

Dudley's team argues that this will only improve over time as the company's strategic change of tack means it is producing more profitable oil and gas from a smaller number of fields.

Another metric investors are also closely watching is BP's debt, standing at $38.6 billion, or 28 percent of its total equity including debt - the highest figure among oil majors.

That ratio is set to improve as Deepwater Horizon cash payments decline over the coming years. They amounted to about $7 billion in 2016 and $4.5 billion in 2017 but will fall to $1-$2 billion from 2018.

BP can currently balance its books only at $60 per barrel, compared to $50 for most of its rivals, but that figure should also fall as Deepwater Horizon payments decline.

"Bob Dudley is building something that could be very interesting in the future ... he just gets on with business and that's what investors want," said James Laing, equities fund manager at Aberdeen Asset Management, which holds BP shares.

"The dividend is still sustainable, debt levels are high but will come down, the cash breakeven has been lowered, the resource base is still increasing," he added. "It doesn't feel like there is a lot of criticism to be made."

Traditionally a net exporter of gasoil, India's aggressive push to implement sweeping upgrades to its refineries in an effort to extend the Euro-4 norms, has led to an elevated level of maintenance-related closures, which may trigger unusually high gasoil imports in the near term, traders and analysts said.

"We do think gasoil imports will continue," said Sri Paravaikkarasu, head of oil, East of Suez, at Facts Global Energy.

In April, India fully rolled out the Bharat Stage IV vehicle emission and fuel standards for diesel, capping the sulfur limit at 50 ppm across the country. Previously, the country had both BS III specifications, with a maximum sulfur content of 350 ppm, as well BS IV standards, in operation.

Since then, India's demand for imported gasoil has been robust.

"Refinery upgrades at IOC [Indian Oil Corp. Ltd.] and CPC [Chennai Petroleum Corp. Ltd.], aimed to meet the Bharat-IV fuel standards implemented on April 1, coincided with a recovery in gasoil consumption, as the impact of demonetization eases," Facts said in a note.

"This, together with summer demand, called for gasoil imports in recent months. Looking ahead, the early arrival of monsoon in several parts of the country would seasonally weaken gasoil consumption. But, we believe imports should continue, as IOC has scheduled for heavy turnarounds," it added.

State-run IOC plans to shut its 150,000 b/d Haldia refinery in the Purba Medinipur district of West Bengal for three weeks during November-December. The maintenance shutdown plans are part of the state-owned company's plan to synchronize its refineries to upgrade production capabilities for higher-grade and lower-emission fuels.

In addition, IOC plans to shut its 160,000 b/d Mathura refinery in Uttar Pradesh for 15 days in mid-August, and half of the the 150,000 b/d refining capacity at its Panipat refinery for planned turnaround in July. It also plans to shut its 120,000 b/d Barauni Refinery in Bihar for five weeks during July-August.

"There is pretty high probability that there will be heavier-than-average maintenance for IOC refineries in 2017, going by the assumption that refineries typically undergo major maintenance every four-five years and the historical frequency of shutdowns," Platts Analytics said in a note.

Domestic demand for diesel from India tends to peak just before the monsoon season to meet higher consumption during the harvesting season.

MARKET IMPACT

Tenders by India to import gasoil so far has totaled 595,000 mt for delivery over the May-July period, data from S&P Global Platts showed.

Gasoil import tenders were mainly from IOC and state-run Hindustan Petroleum Corp. Ltd., with both refiners seeking 40-ppm sulfur gasoil into terminals, such as Chennai, Visakhapatnam, JNPT, and Kandla and Mundra.

Robust appetite for 40-ppm sulfur gasoil from India has triggered an upward movement in the FOB Arab Gulf 10-ppm gasoil cash differential between late-May and June, data from S&P Global Platts showed.

On May 29, the 10-ppm gasoil cash differential hit a 10-month high of $1.76/barrel to the Mean of Platts Arab Gulf Gasoil assessment, climbing 46% from May 24, when it stood at a premium of $1.30/b. However, the cash differential has since eased from the lofty levels to $1.70/b on June 6.

The 10-ppm gasoil cash differential was last assessed higher on July 19, 2016, at a premium of $1.80/b to MOPAG Gasoil assessment.

Cash differentials for physical gasoil represent the price buyers are willing to pay for the product, below or above the benchmark prices published around the day a cargo loads.

Recent purchases of 40-ppm sulfur gasoil made by IOC were concluded at premiums in the range of $2.70-$3.20/b to the Mean of Platts Arab Gulf 0.005% sulfur gasoil assessments, CFR basis. IOC then bought two cargoes -- 40,000 mt each -- of 40-ppm sulfur diesel for delivery over the second half of June. The seller could not be confirmed.

In addition, IOC's most recent buy tender was for two parcels -- of up to 40,000 mt each -- for 40-ppm sulfur diesel, for delivery over the first half of July.

EXPORTS CONTINUE

Even as the country's oil marketing companies seek to buy gasoil from the international market, outflows of gasoil from the country are continuing.

According to the latest data from IE Singapore, as much as 141,993 mt of gasoil moved into Singapore from India in the week ended June 7.

The bulk of gasoil exports from India are mainly by private refineries such as Reliance and Essar Oil. The cargoes are shipped directly by the refiners or sold to traders on FOB basis, which are then shipped to the oil-trading hub of Singapore.

In May, Singapore's gasoil import from India reached 499,945 mt, almost double of April's import level of 254,173 mt. In May 2016, gasoil imports to the city-state from India was 270,701 mt, the same data showed.

According to Platts Analytics, India's overall export of oil products is estimated to trend lower in 2017, with gasoline and gasoil outflows reducing by about 6% and 3% year on year, respectively.

It added that the impact of India's demonetization would diminish by the third quarter of 2017, resulting in India's overall projected oil demand growth for 2017 outpacing refinery capacity additions. HPCL-Mittal Energy Ltd.'s Bathinda refinery's expansion from 180,000 b/d to 225,000 b/d is the only one expected this year.

https://www.platts.com/latest-news/oil/singapore/analysis-refineries-upgrade-related-closures-26752898

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BP and India's Reliance Industries Ltd will invest a further 400 billion rupees ($6.2 billion) in their jointly owned KG D6 gas block off India's eastern coast, the heads of the two companies said on Thursday.

BP Chief Executive Bob Dudley, appearing alongside Reliance Chairman Mukesh Ambani at a news event in New Delhi, said the new investment is expected to produce 30-35 million cubic meters of gas a day, phased over 2020 to 2022.

"This is an important step forward for BP in India. Working closely together, Reliance and BP are now able to develop these major deep-water gas resources offshore India efficiently and economically," Dudley said.

In 2011, Reliance agreed to sell a stake in 23 of its oil and gas blocks to BP for $7.2 billion. But output from the D6 block, expected to contribute up to a quarter of India's gas supply, has been falling since April 2010.

Reliance holds a 60 percent stake in the gas block in the Krishna Godavari (KG) basin and BP owns 30 percent, while Calgary-based Niko Resources Ltd (NKO.TO) holds the rest. Reliance and BP have invested around $1.6 billion to May this year in deep-water exploration and production.

India, the world's third-largest oil importer, has said it will move gradually to a gas-based economy, and its demand is expected to grow rapidly as the country industrialises.

BP and Reliance also said on Thursday that they would look to tap new opportunities in India, including developing "differentiated" fuels, trading carbon emissions and advanced low-carbon energies.

http://www.reuters.com/article/us-india-reliance-bp-idUSKBN1961KK

Oil-services company CGG Group filed for bankruptcy protection Wednesday in the U.S. and France after reaching a restructuring deal with lenders and bondholders that will eliminate about $2 billion in debt from the company's books.

Under the deal, bondholders will swap nearly $2 billion in debt for most of the equity in a reorganized CGG, the company said. The restructuring plan calls for up to $500 million of new money to be raised from a $125 million rights offering and the issuance of $375 million in new debt.

CGG's senior lenders, owed about $800 million, will extend the maturity on their loans in return for $150 million payment from the proceeds of the new money investment. Existing shareholders, who will be able to participate in the rights offering, will see their investments reduced to a 4.5% stake in the restructured CGG following completion of the debt swap, according to filings in U.S. Bankruptcy Court.

Beatrice Place-Faget, general counsel of parent company CGG SA, said in court papers the prolonged downturn in oil and natural gas prices left the company unable to pay its debts.

CGG's 2016 annual revenue was roughly one-third of what it was before the current downturn began, she said. In 2012, before oil prices dropped, the company had total operating revenues of more than $3.41 billion. By 2016, that number was $1.195 billion.

In addition, the company has been losing money for years, including losses of $1.14 billion in 2015 and another $404.7 million last year.

CGG was founded in 1931 as " Compagnie Générale de Géophysique" and focuses on seismic surveys and other techniques to help energy companies locate oil and natural-gas reserves. The company also makes geophysical equipment under the Sercel brand name.

CGG launched its court-supervised restructuring bid in Paris on Wednesday by opening a "sauvegarde" proceeding, the French equivalent of a chapter 11 bankruptcy filing. Fourteen CGG subsidiaries filed for chapter 11 in U.S. Bankruptcy Court in New York and the parent intends to seek U.S. court recognition of the Paris case under chapter 15, the section of U.S. bankruptcy law dealing with international insolvencies.

http://www.marketwatch.com/story/frances-cgg-files-for-bankruptcy-protection-2017-06-15

The coming slate of oil auctions in Brazil will give the industry its biggest crack at developing the country's crude in two decades. But nothing in Brazil comes easy

A crisis, it is said, is a terrible thing to waste. Brazil seems to have taken it to heart. Mired in its worst recession in a century, deep economic reforms are being pushed through, including to long-untouchable pension and labour rights. Change is coming on the oil front as well, where a massive corruption scheme at state-led oil company Petrobras has cost Brazil hundreds of billions of dollars, and stalled the development of massive offshore resources.

At the heart of the Temer government's efforts to reset the oil industry is a record slate of 10 oil-rights auctions over the next three years. The extensive and promising rights on offer, along with a reduction of local-content requirements, an end to rules requiring financially-hobbled Petrobras to operate all pre-salt fields and other investor-friendly moves represent Brazil's biggest oil market opening in two decades.

The industry has long agitated for these changes, and President Michel Temer deserves credit for adopting them. But his Democratic Movement Party's (PMDB's) past opposition to the badly-needed reforms helped spark the crisis in the first place. Before replacing his impeached predecessor Dilma Rousseff last year, Temer and the PMDB were key architects and backers of the nationalist oil policies at the center of Rousseff and her predecessor Luiz Inácio Lula da Silva's 13 years in power. The billions of dollars stolen by the PMDB from Petrobras and through programmes expressly created to facilitate graft was second only to the Rousseff's Workers' Party's take. That Temer and his party are so deeply implicated in the scheme makes it unlikely he or the party will remain in power after the 2018 elections, putting the durability of their policy shift in doubt.

10 - The number of auctions scheduled in Brazil over the next three years

Still, the government has high expectations for the round, both for refilling the government's coffers and accelerating development. Oil royalties in 2016 were down more than 40% from 2012 in local currency terms and nearly two-thirds in dollars, thanks to both low oil prices and stagnant output. Saddled with nearly $125bn of debt, Petrobras' pre-salt investment and operation obligation became a recipe for no development at all. Energy minister Fernando Coelho Filho said he expects the four auctions scheduled for this alone to raise 8.5bn reais ($2.72bn) in cash bids and to generate about $60bn in direct investment over a decade.

Décio Oddone, the head of Brazil's oil regulator, The National Agency of Petroleum (ANP), expects the 10 rounds to spark a drilling revival over the next decade. He sees the rounds resulting in more than 300 new offshore wells, 20 additional rigs drilling around the country, the deployment of more than 17 new offshore production units and the construction of thousands of kilometres of new pipelines. In total, Oddone says, the rounds could uncover 10bn barrels of new resources and lead to 2m barrels a day of new output by 2027.

Here are the highlights of the upcoming auctions:

14th Round Oil and Gas Concession Auction, 27 September 2017

ANP will offer a broad mix of 287 onshore and offshore areas that include mature and frontier areas in the Campos, Espírito Santo, Paraná, Parnaíba, Pelotas, Potiguar, Reconcavo, Santos and Sergipe-Alagoas basins. Under the concession regime, winners get the right to all oil discovered and produced in exchange for royalties and minimum investment commitments. All Campos and Santos areas are outside the pre-salt areas where Brazil's largest prospects are auctioned under production-sharing accords. ANP has estimated the areas could hold as much as 50bn barrels of oil equivalent in place. The 14th Round sale will be Brazil's first serious test of oil-investor interest since the 11th and 13th rounds in 2013 and 2015. The 2013 round saw wide interest from international oil companies, but no winner has yet secured environmental permits to explore their leases, forcing a two-year concession extension last month. The round may act as a cautionary tale for companies interested in new frontier acreage. The 2015 sale largely failed after Petrobras and international majors stayed away as prices were falling.

2nd Production-Sharing Subsalt Auction, 27 November 2017

The auction will offer areas subject to unitisation adjacent to the giant Carcará and Gato do Mato prospects and the Sapinho field in the Santos Basin and the Tartaruga Verde Field in the Campos Basin. These fields extend beyond the limits of concession leases into the Presalt Polygon where rights are let under production-sharing contracts. Confusion about how to unitise production between concession and production-sharing leases has blocked development of the concession discoveries for nearly a decade. The round aims to reconcile the contracts and kick-start development.

4th Production-Sharing Subsalt Auction, May 2018

ANP plans to offer the Saturno, Três Marias and Uirapuru prospects in the Santos Basin, and a slew of exploration blocks in the Campos Basin under production-sharing terms similar to the 3rd round.

15th Round Oil and Gas Concession Auction, May 2018

ANP to offer offshore concessions in the Foz do Amazonas, Ceará and Potiguar basins, ultra-deepwater blocks in the Campos and Santos basins, and onshore blocks in the Paraná, Parnaíba, Sergipe-Alagoas, Recôncavo, Potiguar and Espírito Santo basins under terms similar to the 14th round.

5th Production-Sharing Subsalt Auction, second half of 2019

ANP considering the auction of the Aram, Sudeste de Lula, Sul e Sudoeste de Júpiter e Bumerangue, prospects in the Santos Basin, on terms similar to the 3rd and 4th production-sharing rounds.

16th Round Oil and Gas Concession Auction, second half 2019

ANP expected to sell offshore rights in the Camamu-Almada and Jacuípe basins, ultra-deepwater blocks in the Campos and Santos basins outside the Presalt Polygon and onshore blocks in the Solimões, Parecis, Sergipe-Alagoas, Recôncavo, Potiguar, and Espírito Santo Basins. Terms similar to the 14th and 15th concession rounds.

Give and take

Nearly everything important in Brazil right now and for at least the next decade will depend in large measure on the progress and outcome of the country's Lava Jato, or "Car Wash" scandal.

The enormous corruption probe began with the uncovering of a massive contract fixing, bribery and political kick-back scheme at state-led oil company Petrobras. So it's no surprise that those connected to Brazil's battered oil and gas business understand the importance of Car Wash better than most.

The crisis has come with a clear upside for the oil industry. A slew of reforms to fight graft, strengthen the finances of Petrobras, the country's principal oil and gas producer, and open the industry to more foreign investment are real, if far from over. A plan for 10 lease auctions by the end of 2019 is the largest and fastest ever. Restrictions on foreign control of strategic resources and local content requirements have been eased.

But excitement should be tempered. While the Car Wash crisis has forced the reforms many now applaud, it could also sink them.

The 2018 elections are expected to boost the prospects of untested, inexperienced and politically extreme candidates

President Michel Temer's government led the reforms that are behind the growing enthusiasm about Brazil and its oil patch. But his centre-right Brazilian Democratic Movement Party (PMDB) party was also deeply implicated in the Car Wash scandal. Its members not only benefited from the scheme, it was a key architect and cheerleader for the old, failed oil model, including policies that facilitated the graft.

Temer and his party's involvement in the corruption scandal leaves them legally and politically exposed, threatening to undermine the credibility of the reforms. The courts are looking into potential campaign finance violations from Temer himself, which could see the president ousted from office. Eight ministers and much of the PMDB Congressional delegation, the main support for recent oil-industry change, are under investigation. Even if Temer survives, the PMDB's role in Car Wash makes a return to power in 2018 elections slight. The reforms could go down with them. Investors checking their calendars will notice that nearly a third of the planned auctions are scheduled for 2019.

Scandal aside, Temer's reforms are hardly popular with the public, or even in his own PMDB, meaning they will need a strong steward. But with all major parties tainted by Car Wash, their leaders under investigation, indictment or in jail, Brazil's political landscape is fracturing. The 2018 elections are expected to boost the prospects of untested, inexperienced and politically extreme candidates. In such an environment, the reform's stability looks tenuous.

Oil's hold on the national imagination remains strong. The probe's leaders insist Petrobras is blameless, the victim of just a few bad apples. History, however, shows liberalisations born from crisis rarely last in the face of Brazil's deep faith in government control of all aspects of the oil industry. Many still insist Car Wash is nothing more than an attempt by dark foreign forces to steal Brazil's resources. One such person is former president Luiz Inácio Lula da Silva, whose Worker's Party most benefited from the Car Wash fraud. He is mounting an unlikely comeback and leads early polls for president in 2018.

http://www.petroleum-economist.com/articles/upstream/licensing-rounds/2017/brazil-on-the-block

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The Qatar crisis is reverberating in Libya, inflaming political divisions in the war-torn oil exporter and dragging commodity-trading giant Glencore Plc into a dispute over crude sales.

The row involves competing administrations of the National Oil Corp. that are vying to control crude exports from the OPEC member. In eastern Libya, the local military commander is backed by Saudi Arabia, the United Arab Emirates and Egypt, three of the countries attempting to isolate Qatar. The head of the NOC in that part of the nation has accused Qatar of using its 8.5 percent stake in Glencore to control the the Swiss trader’s sales of Libyan crude.

The chairman of the NOC administration in the western city of Tripoli, Mustafa Sanalla, denied that Qatar has control over Glencore’s operations. He said NOC extended an agreement with Glencore to sell all quantities of Mesla and Sarir crude blends that exceed the needs of local refineries.

The deal, originally signed in 2015, was renewed in December and now runs through the end of the year, Sanalla said in a June 11 letter addressed to a Libyan legislator and given to Bloomberg.

“The National Oil Corp. succeeded in selling all the available production from Mesla and Sarir thanks to its contract with Glencore despite the fierce war for consumers in the international markets,” Sanalla said in the letter. “This contract allowed Libya to earn regular foreign currency inflows.”

Glencore declined to comment.

Instability Risk

Qatar, the world’s richest country per capita and biggest producer of liquefied natural gas, faces commercial isolation after Saudi Arabia, the U.A.E., Bahrain and Egypt cut economic and diplomatic ties with the country last week. Their gambit threatens to exacerbate instability in Libya, which is struggling to restore oil output and exports after it collapsed into lawlessness following a 2011 uprising.

The Abu Attifel oil field, operated by Mellitah Oil & Gas, resumed production after halting in March due to a technical failure and lack of storage space, a person familiar with the situation said Wednesday. In another sign of progress, the Sarah oil field also restarted pumping crude after the NOC announced it has settled differences with Wintershall AG, according to another person familiar with the matter.

Nagi Maghrabi, chairman of the eastern NOC, accused Qatar of “financing terrorists” in Libya through Glencore’s sales of the country’s crude. Qatar controls Glencore through its shareholding, he said in a June 9 interview with the Cairo-based Youm7 newspaper.

Qatar Links

The head of the eastern government, Tobruk-based interim Prime Minister Abdullah al-Thinni, ordered an NOC unit called Arabian Gulf Oil Co. and other companies to immediately halt crude exports and cancel all deals with Glencore or any other business that has links with Qatar. Agoco operates the eastern port of Hariga, which exports the Mesla and Sarir crude blends. Any violators of the order will face legal challenges, Al-Thinni said in a statement dated June 14 and posted on his cabinet’s website.

Hariga is operating normally, Agoco spokesman Omran al-Zwai said Thursday by phone. Agoco’s board will meet in a few days to discuss the order, he said.

The Qatar Investment Authority, the nation’s $335 billion sovereign wealth fund, has a stake of less than 9 percent in Glencore. It also has significant shareholdings in Rosneft PJSC, Royal Dutch Shell Plc, Barclays Plc and Volkswagen AG. The QIA has no representatives serving on Glencore’s board so has no operational control over the company, Sanalla said in his letter, addressed to Yousef al-Akouri, a member of Libya’s parliament and president of the committee in charge of NOC affairs.

For Libya’s remaining crude blends, the Tripoli-based NOC has sales agreements with 15 other companies, Sanalla said. They include Eni SpA, Total SA, OMV AG, Repsol SA, Rosneft Oil Co., Lukoil PJSC, Cepsa, Saras SpA, Socar, Unipec, Vitol Group, Gunvor Group, Petraco SpA and BB Energy, he said.

https://www.oilandgas360.com/qatar-crisis-spills-libya-entangling-glencore-oil/

India's oil imports from Iran have fallen to their lowest since June 2016, shipping data shows, in possible retaliation for Tehran not awarding a gas field development to Indian companies.

India, Iran's top oil client after China, shipped in 487,600 barrels per day (bpd) in May, about 9 percent less compared with April and nearly 40 percent less than a peak registered in October, according to ship tracking data obtained from sources and data compiled by Thomson Reuters Oil Research & Forecasts.

Most Western-led sanctions against Tehran's nuclear programme were lifted in January last year, and India's Iranian crude imports began climbing two months later in March.

In the fiscal year to March 2018, though, India has said it plans to order about a quarter less Iranian crude due to a snub over development of Iran's Farzad B gas field.

"We stood by them in difficult times. We still buy substantial amounts of oil from them, and we expect reciprocity from Iran," Indian oil minister Dharmendra Pradhan told reporters on Wednesday when asked if India was still hopeful of getting the development rights for the Farzad B field.

Following years of seeming rapprochement over the field, Iran has likely reached an agreement on the concession with Russia's state-controlled gas giant Gazprom, Russian and Indian media have reported.

Iran last month said India had not offered an acceptable proposal on the Farzad B development.

Sri Paravaikkarasu of energy consultancy FGE said India's lower Iran imports were a "reaction of Iran's decision to award the gas field to Russia and the availability of cheaper grades like those from Russia."

India was one of four countries - China, Japan and South Korea being the other three - that continued to import large amounts of Iranian oil after sanctions were toughened in 2012.

Some of the drop in imports from Iran may be due to lower demand. Overall, India imported about 4.2 percent less oil in May, compared with April, due to a shutdown of the 180,000-bpd Bathinda refinery for upgrades.

In the first five months of 2017, India's oil imports from Iran still jumped about 64 percent, the data showed.

While Iran's oil exports to India are stalling, supplies to Europe and Turkey hit their highest level since the lifting of sanctions in 2016.

Iraq continued to be India's biggest oil supplier for the second month in a row in May, followed by Saudi Arabia.

Middle Eastern oil in May accounted for 65 percent of India's overall imports, compared to 71 percent a year ago, while the import share of Africa and Latin America have risen, the data showed.

The shift is likely a result of an effort led by the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) to cut production to prop up oil prices.

http://www.reuters.com/article/india-oil-iran-idUSL3N1JA4BU

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South Korea’s Kogas said Thursday it started commercial operations of three liquefied natural gas (LNG) storage tanks at its Samcheok receiving terminal located some 290 kilometers east of Seoul.

Kogas has been testing the three 270,000-cbm capacity LNG storage tanks since March this year.

The company claims that these tanks are the largest of its kind in the world.

Kogas, the world’s second-biggest corporate LNG importer said in a statement the first storage tank began operating last month with the two other tanks starting operations on June 14 and June 15, respectively.

The Samcheok import terminal now has a total storage capacity of 2.6 million cubic meters of LNG in twelve storage tanks.

Including the latest additions, Kogas operates in total 74 LNG storage tanks in South Korea and overseas.

The company imports approximately 96 percent of Korea’s LNG demand via its four LNG terminals, namely Incheon, Pyeongtaek, Tongyeong and Samcheok.

http://www.lngworldnews.com/south-koreas-kogas-fires-up-samcheok-lng-tanks/

India's LNG bunkering plans are on a "fast track" with LNG-fueled river sea vessels and LNG refueling stations likely to emerge in the coming months, Arun Sharma, executive chairman of Indian Register of Shipping, or IRClass, a Mumbai-based globally recognized ship classification society told S&P Global Platts Tuesday.

IRClass is working with Inland Waterways Authority of India on a number of projects with respect to design approval of LNG-fueled vessels, he said. "We are also working with Petronet for facilitating use of LNG kits on smaller vessels meant for inland waterways which transports cargo such as coal, cement, grain etc.," Sharma added.

IRClass has a memorandum of understanding with Bureau Veritas in various areas of classification, LNG being one of these.

The emphasis on LNG comes at a time when the marine industry is gearing up for stricter environmental regulations. Promoting LNG in the country's inland waterways would not only result in lower cost per ton mile transported compared with other options such as road and rail but would also be significantly more environment friendly, Sharma said.

GLOBAL FOOTPRINT

In terms of geographical footprint, presently IRClass has 48 offices, 24 of which are outside India. "We are aggressively targeting further growth both domestically and internationally," Sharma said.

"We have on a base of 10 million GRT [gross register tonnage] in January 2015, added about 1 million GRT in 2015, and another 1 million in 2016. As of June 2017, our tonnage stands close to 13 million tons with over 17,000 ships. We are looking at about 15 million tons by early 2018," Sharma said.

IRClass, which became a full member of the International Association of Classification Societies in 2010 and was recognized by the European Commission in 2016, is presently seeking recognition from the Singapore flag, and flags of Malta, Greece and Cyprus, Sharma said.

"In Europe, we will need to move in a more strategic manner targeting smaller owners and tonnage. Quality of service and cost competitiveness is our main focus," Sharma said.

However, IRClass also wants to expand its non-marine segment with a view to diversify in segments other than marine because of tough market conditions. "Shipping markets have become challenging. There is not too much new build taking place either," Sharma said, adding that this was prompting more competition among classification societies with some even resorting to fee cuts to retain market share.

"But some correction will have to take place sooner or later."

IRClass also provides services in classifying ship breaking yards in India and Bangladesh. "We ventured in this area about a year and half ago, our main focus being certifying compliance with Hong Kong Convention and verifying compliance as an independent verifier for European Commission," Sharma said.

IRClass has also been undertaking surveys in Qatar. "In the current situation, we will handle Qatar from our India office instead of Dubai till [the] situation normalizes," he said.

This comes after a major diplomatic crisis erupted in the Middle East last week, when five countries -- Saudi Arabia, the UAE, Egypt, Bahrain and Yemen -- decided to sever diplomatic ties with Qatar.

https://www.platts.com/latest-news/shipping/singapore/interview-indias-lng-bunkering-plans-moving-into-27845758

Oil and gasmajor Santos has reaffirmed its commitment to developing the Narrabri gas project, in New South Wales, with MD and CEO Kevin Gallagher saying the project could deliver a substantial share of the state’s gas needs.

Speaking at the American Chamber of Commerce, in Sydney, on Thursday, Gallagher said Santos had spent nearly ten years, and over $1-billion trying to develop the Narrabri project.

However, he noted that following the company’s recent lodgment of the State Significant Development Application, including the environmental-impact statement, the Department of Planning had received more than 23 000 submissions that needed to be reviewed and responded to.

“Santos welcomes the opportunity for the community to have their say on the Narrabri gas project and we recognise the important role this part of the assessment process will play in ensuring a robust and thorough assessment,” Gallagher said.

“However, 98% of the submissions are from people who live outside of the Narrabri community, who have no experience with Santos operations or the project. Their objections highlighted general opposition to coal seam gas and fossil fuels, including concerns about climate change and the need to transition to renewable energy.”

Gallagher noted that only 500 submissions were received from local Narrabri residents, with the majority of these supporting the project.

With Santos expected to prepare a report to these submissions, Gallagher lamented the time and resources that this would require, along with the cost to review and respond to the 23 000 submissions.

However, he noted that despite the challenges, Santos was still committed to the project.

http://www.miningweekly.com/article/santos-committed-to-narrabri-2017-06-15

Cash, people and equipment are pouring into the prolific Permian shale basin in Texas as business booms in the largest U.S. oilfield. But one group of investors is heading the other way - concerned that shale may become a victim of its own success.

The speed of the recovery in the U.S. shale industry in the past year has surprised oil investors after a global supply glut led to a two-year crude price slump and bankrupted many shale firms.

Eight prominent hedge funds have reduced the size of their positions in ten of the top shale firms by over $400 million, concerned producers are pumping oil so fast they will undo the nascent recovery in the industry after OPEC and some non-OPEC producers agreed to cut supply in November.

The funds, with assets of $286 billion and substantial energy holdings, cut exposure to firms that are either pure-play Permian companies or that derive significant revenues from the region, according to an analysis of their investments based on Reuters data.

The Permian, which stretches across West Texas and eastern New Mexico, produces about 2.5 million barrels of oil per day (bpd), accounting for more than a quarter of overall U.S. crude production.

"We'll have to see if these U.S. producers have the discipline to not go crazy and keep prices where they keep making money," said Gary Bradshaw, portfolio manager at Dallas-based investment firm Hodges Capital Management.

Hodges Capital owns shares of Permian play firms including Diamondback Energy Inc (FANG.O), RSP Permian Inc (RSPP.N) and Callon Petroleum Co (CPE.N). Bradshaw's firm has maintained its exposure to the Permian.

There is no sign that shale producers will restrain production. They redeployed rigs and personnel quickly since prices began strengthening in 2016 and made shale profitable again; rig counts have risen by 40 percent this year in the Permian, which accounts for about half of all U.S. onshore oil rigs. [RIG/U]

Hedge funds pulled back in the first quarter, according to the most recently available regulatory filings, and the stocks have continued to struggle as oil prices have come under renewed pressure.

The value of these funds' positions in the 10 Permian companies declined by 14 percent, to $2.66 billion in the first quarter, the most recent data available, from $3.08 billion in the fourth quarter of 2016.

Hedge funds have continued to reduce their exposure to energy stocks in the second quarter, said Mark Connors, global head of portfolio and risk advisory at Credit Suisse, though he could not provide figures specific to shale companies.

MARGINS SQUEEZED

Fund managers interviewed expressed concern that volatile oil prices along with rising service costs and acreage prices are not reflected in overly optimistic projections for the Permian.

The funds analyzed include Pointstate Capital LP, a $25 billion fund with 16 percent in energy shares, and Arosa Capital Management, a $2.1 billion fund with more than 90 percent of assets in energy stocks. Pointstate and Arosa declined comment.

"Margins will continue to be squeezed by a 15 to 20 percent increase in service costs in the Permian basin," said Michael Roomberg, portfolio manager of the Miller/Howard Drill Bit to Burner Tip Fund.

A Reuters analysis of 10 Permian producers, including several that almost exclusively operate in Texas, carry an average price-to-earnings ratio of about 35, compared with the overall energy sector's P/E ratio of about 17.8.

"These are not great returns, but the problem is the market is rewarding them," said an analyst at one of the hedge funds on condition of anonymity, because he was not authorized to speak to the press.

Concerns about lofty land prices are driving some of the pullback by hedge funds, according to two fund analysts who could not speak on the record. Values for Permian acreage have increased 30 percent from two years ago, according to Detring Energy Advisors in Houston.

The 10 Permian stocks analyzed have, on average, dropped 18 percent so year, compared with the broader S&P 500 energy sector's 13 percent fall.

Permian production is expected to reach 2.47 million bpd by July, a 330,000 bpd increase from the beginning of the year, according to the U.S. Energy Department.

Last month the Organization of the Petroleum Exporting Countries (OPEC) and other key producers, including Russia, extended a historic output cut agreement to combat a global glut.

However, production from non-OPEC countries, especially the U.S., continues to rise and weigh on prices. U.S. crude prices CLc1 on Wednesday hit a six-month low just above $44 per barrel. [O/R]

Reuters analysis shows many shale companies reduced hedges in the first quarter, leaving them vulnerable to falling oil prices.

Still, fund managers say compared to other U.S. plays, the Permian still has the lowest break-even costs.

"In terms of the time horizon, the economics of the Permian are so good they’re going to keep on drilling," said Colin Davies, senior analyst at oil services company AB Bernstein.

http://www.reuters.com/article/us-usa-permian-funds-idUSKBN1970EW

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A federal judge ordered the U.S. Army Corps of Engineers to reconsider its environmental review of the Dakota Access Pipeline on Wednesday, opening up the possibility that the line could be shut at a later date.

U.S. District Judge James Boasberg in Washington said the Army Corps did not adequately consider the effects of a possible oil spill on the fishing and hunting rights of the Standing Rock Sioux tribe.

Operations of Energy Transfer Partners LP's pipeline have not been suspended but that could be considered at a later date, the order said. The $3.8 billion line began interstate crude oil delivery in May.

The parties are expected to meet Boasberg next Wednesday to discuss future steps. The Standing Rock Sioux are expected to argue that pipeline operations should be halted.

The judge said in a 91-page decision that, while the Army Corps substantially complied with the National Environmental Policy Act, federal permits issued for the pipeline violated the law in some respects, saying in a court order the Corps did not "adequately consider the impacts of an oil spill on fishing rights, hunting rights, or environmental justice."

"To remedy those violations, the Corps will have to reconsider those sections of its environmental analysis upon remand by the Court," the judge said.

The tribe had sued the Army Corps over its approval of the controversial Dakota Access Pipeline in North Dakota, arguing the line could contaminate their water source, the Missouri River.

"We applaud the courts for protecting our laws and regulations from undue political influence, and will ask the Court to shut down pipeline operations immediately,” Standing Rock Sioux Chairman Dave Archambault said in a statement.

It was unclear whether the judge would agree that the line should be shut. Independent research firm Clearview Energy Partners of Washington D.C. noted in a comment late on Wednesday that Judge Boasberg's order pointed to "omissions" in the Corps' analysis, which the Corps may be able to address quickly, rather than larger errors that might require more study.

"We think that the Corps may be able to persuade the court to allow Dakota Access to continue operating while the omissions are addressed and the court reviews them for adequacy," they wrote.

ETP was not immediately available for comment.

In February, the Army Corps of Engineers granted the final easement needed to finish the controversial pipeline, which had been delayed for several months after protests led by the Standing Rock Sioux tribe and climate activists.

The controversial pipeline needed a final permit to tunnel under Lake Oahe, a reservoir that is part of the Missouri River.

Two previous arguments by the Standing Rock tribe - that the construction had threatened sacred sites, and that the presence of oil in the pipeline would damage sacred waters, had been rejected by the court.

President Donald Trump issued an executive order days after being sworn in directing the Army Corps to smooth the path to finishing the line, prompting complaints by the tribe and environmental groups that it had not done an adequate environmental review.

http://www.reuters.com/article/us-northdakota-pipeline-dapl-idUSKBN19538I

TransCanada Corp. is moving ahead with a $2-billion expansion to its natural gas pipeline system in Alberta and British Columbia as producers in the region struggle with chronic export snarls.

Calgary-based TransCanada said on Wednesday that the new capacity is backed by firm contracts with producers to ship roughly three billion cubic feet per day of gas on its Nova Gas Transmission Ltd. (NGTL) system.

The plan adds to a $5.1-billion capital program aimed at boosting pipeline capacity in the Montney and Deep Basin exploration zones, where producers have been hampered by weak prices owing in part to shipping constraints.

The move comes as plans for major West Coast liquefied natural gas plants have stalled indefinitely, prompting companies to seek alternative outlets for fast-growing production.

Earlier this year, TransCanada sought clearances from regulators to build portions of its $1.4-billion North Montney line – a project previously tied to approvals of a multibillion-dollar export plant proposed by state-run Petronas of Malaysia.

TransCanada said the latest expansion comprises numerous projects totalling 273 kilometres of new pipe and related facilities. The company aims to start construction in early 2019, pending approvals from the National Energy Board.

Royal Bank of Canada analyst Robert Kwan said the announcement provides visible growth through 2021 and enhances the value and stability of the NGTL system.

TransCanada also said it has contracts totalling 381 million cubic feet a day for new capacity to move gas south to the Pacific Northwest, California and Nevada markets.

https://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/transcanada-pushes-ahead-with-2-billion-gas-pipeline-expansion/article35307020/

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