Saudi Arabia, the world’s largest crude exporter, cut pricing for all October oil sales to the U.S. and Northwest Europe and reduced the premium on its main Light grade to Asia by 30 cents a barrel.

State-owned Saudi Arabian Oil Co. cut its official selling price for October sales to Asia of Arab Light crude to 10 cents a barrel more than the regional benchmark, the company said in an e-mailed statement. The discount for Medium grade crude for buyers in Asia widened 50 cents to $1.30 a barrel less than the benchmark.

Brent, a global oil benchmark, fell almost 50 percent last year as Saudi Arabia and other OPEC members chose to protect market share over cutting output to boost prices. Brent fell from over $100 a barrel in July 2014 to less than half that six months later. It traded at about $50 on Thursday.

The Organization of Petroleum Exporting Countries led by Saudi Arabia decided on June 5 to keep its production target unchanged to force higher-cost producers such as U.S. shale companies to cut back. The producer group has exceeded its target of 30 million barrels a day since May 2014.

Saudi Arabia reduced production in August to 10.5 million barrels a day, the first decline this year, according to data compiled by Bloomberg.

Middle Eastern producers are competing increasingly with cargoes from Latin America, North Africa and Russia for buyers in Asia. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.

http://www.bloomberg.com/news/articles/2015-09-03/aramco-cuts-all-october-crude-pricing-to-u-s-northwest-europe

OPEC oil output fell in August from the highest monthly level in recent history, a Reuters survey found on Wednesday, as disruptions to flows on Iraq's northern pipeline halted supply growth from the group's second-largest producer.

Largely stable output from Saudi Arabia and other Gulf members of the Organization of the Petroleum Exporting Countries indicated they are not wavering in their focus on defending market share instead of prices.

OPEC supply fell in August to 31.71 million barrels per day (bpd) from a revised 31.88 million bpd in July, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants.

Oil LCOc1 has weakened due to surging output and is trading below $50, not far from a more than six-year low close to $42 reached last month. OPEC's shift to the market-share strategy in 2014, led by Saudi Arabia, deepened the decline.

Despite calls from some members for an emergency meeting, even OPEC delegates who favour supply cuts do not expect any to be agreed, leaving a surplus which OPEC's own numbers indicate is at least 2 million bpd on the market.

"I really see no chance for holding a meeting before the scheduled Dec. 4 meeting, which will reach no concrete agreement to drastically cut production," said a delegate from one of OPEC's African members.

"We know that the present oversupply is more than 2 million barrels per day."

The decline in OPEC output from July's level was the first since February based on Reuters surveys. Even so, OPEC has boosted production by almost 1.5 million bpd since the November 2014 switch in policy to defend market share.

July's output from OPEC's current 12 members was revised lower but is still the highest since Reuters records began in 1997. OPEC output was above 32 million bpd in 2008 until Indonesia left the group at the end of the year.

The biggest drop in August came from Iraq, one of the main drivers of the rise in OPEC output this year.

Exports from southern Iraq edged about 40,000 bpd lower to just above 3 million bpd, according to Iraqi officials and shipping data seen by Reuters.

Shipments from Iraq's north via Ceyhan in Turkey by Iraq's State Oil Marketing Organisation and the Kurdistan Regional Government posted a larger fall because of halts in the flow along the pipeline from Iraq, shipping data showed. 

Top exporter Saudi Arabia kept output largely stable in August, sources in the survey said, following a decline in July. There was no significant change in the other major Gulf producers, Kuwait and the United Arab Emirates.

Nigerian exports rose in August according to loading schedules, although Royal Dutch Shell said on Aug. 27 it shut two pipelines and declared force majeure on Bonny crude exports, which could have a larger impact in September.

Algeria posted a small increase after starting production at two fields and output in Iran, eager to reclaim its traditional spot as OPEC's second-largest producer if and when sanctions are lifted, also edged up slightly.

Libyan production declined in August. Supply remains disrupted by unrest and negotiations to reopen closed oil facilities have yet to succeed.

http://uk.reuters.com/article/2015/09/02/uk-opec-oil-idUKKCN0R21QV20150902

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Wood Mackenzie said that despite the outlook for global LNG demand looking increasingly subdued, the number of LNG projects proposed to take a final investment decision in 2015 and 2016 has not reduced significantly, in contrast to the 45 upstream oil & gas projects which have postponed FID so far in 2015.

Wood Mackenzie says in its new global gas analysis that if there are no postponements the market could see an additional 100 million tonnes per annum of LNG sanctioned in the next 6-18 months, extending the likelihood of an oversupply of LNG in Asia to 2025.

Noel Tomnay, Vice President Global Gas & LNG Research for Wood Mackenzie says: “With the LNG market facing a wall of new supply just as China’s gas demand growth has faltered, it is surprising how few new projects chasing a final investment decision have been postponed.”

Tomnay said that global LNG supply is presently around 250 million tonnes per annum and there is a further 140 mmtpa under construction. “Recognising that the global market will struggle to absorb such a large supply uptick, for some time now we’ve been forecasting a soft global market. However that bearish prognosis is now being exacerbated by a demand downturn,” he added.

Wood Mackenzie points to Asia and China, in particular, as being key to its revised outlook. Tomnay elaborates: “China’s LNG import commitments are set to rise by 17% year-on-year between 2015 and 2020, from 20 to 41 mmtpa but China will struggle to take all this LNG so quickly. In contrast, China’s LNG imports fell by almost 4% yoy in the first half of 2015, as a consequence of subdued industrial output and fuel competition, which was driven by relatively low-priced oil.”

The outlook for longer term incremental LNG demand growth in China is also being negatively affected. And with lower industrial output and power generation competition increasingly characterising other key Asian LNG markets, like South Korea, Asian buyers are not in a hurry to finalise new LNG contracts, adds Tomnay. Wood Mackenzie’s view remains that the market opportunity for new LNG into Asia does not open up significantly until after 2022, with the key implication being that new project FIDs are not required until 2017 at the earliest.

The question remains whether companies are reassessing investment decisions on LNG projects in light of reduced demand. Tomnay points to an example from February this year: “Recognising this oversupply BG deferred its proposed US LNG export project at Lake Charles. But BG’s postponement has been an exception.”

Wood Mackenzie says that thus far most companies are continuing to push ahead with their new LNG projects. “Major project operators including Shell, Petronas, Eni, Anadarko, BP, ExxonMobil and Woodside maintain that their projects will take FID before the end of 2016,” Tomnay qualifies.

WoodMac poses a question why haven’t more companies followed BG’s suit if the market is unlikely to be able to absorb new LNG in the medium to long term? Tomnay explains some of the drivers behind the decision to press ahead: “Postponement could invalidate contracts for the portion of project LNG sold so far, and jeopardise hard-won stakeholder support, including from local communities. Some developers may be worried that a loss of momentum could favour their competitors and that a project postponement may be tantamount to a cancellation.”

Wood Mackenzie warns that if company statements are to be believed we will see FID on some 50 mmtpa of LNG from the US and a further 50 mmtpa from outside the US within the next 6-18 months. “Development of even half of this proposed supply could prolong the Asian oversupply to 2025. Wood Mackenzie’s view is that the global LNG market does not need all this LNG at the pace proposed and, as companies confront this reality, a raft of project postponements will follow,”Tomnay offers in closing.

http://www.lngworldnews.com/woodmac-lng-projects-pushed-ahead-despite-oversupply/

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China National Offshore Oil Corp, the country's largest LNG buyer, has issued its first LNG supply tender, offering two cargoes for loading over October and November from the BG-operated Queensland Curtis LNG export plant in Gladstone, Australia, market sources said Thursday.

The sell tender -- widely regarded to be the first issued by a buyer in northeast Asia -- highlighted a radical shift to the supply and demand balance in the LNG industry, which has seen the Platts JKM fall from an historic high of $20.20/MMBtu in February 2014 to $7.50/MMBtu Thursday.

"CNOOC is snowed under with cargoes due to tepid downstream demand," one northeast Asian buyer said.

"Buyers are already struggling to absorb all the additional contract volumes that are coming to the market," another buyer said.

CNOOC offered the first cargo on an FOB basis for loading October 19-23, and the second cargo on a DES basis for loading November 18-19.

Interest in the tender would likely be limited, sources said, given weak demand in the Asia-Pacific region and the lean specification of the cargoes.

CNOOC was also planning to offer an additional two cargoes for loading in 2016 and an unspecified number of cargoes for loading from 2017 onward, all from QCLNG, they said.

The state-owned buyer has a 50% equity interest in QCLNG Train 1 and a contract with BG Group for the procurement of 5 million mt/year of LNG from the seller's portfolio.

http://www.platts.com/latest-news/natural-gas/singapore/chinas-cnooc-offers-two-oct-nov-cargoes-in-first-26199422

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Excelerate Energy has ended its LNG export project in south Texas because of falling oil prices and other economic factors.

Texas-based Excelerate today asked the US Federal Energy Regulatory Commission (FERC) to withdraw its application to build a floating LNG export project in Lavaca Bay, Texas, making it the first company to halt its FERC proceedings for US LNG exports.

It is unclear if Excelerate is the first company to stop development of a US LNG export project because of low oil prices, as a number of other proposed projects have not entered the expensive FERC construction approval process and have not announced any progress since oil prices started to plummet last summer. Dozens of projects have applied to export up to 48 Bcf/d ofn natural gas from the contiguous US, far more than the market will support.

"Following an internal evaluation of the economic value of the project, Excelerate has determined that it will no longer pursue the project proceedings in the captioned dockets," Excelerate said in a letter to FERC today.

Excelerate in December asked FERC to suspend its review of the project, saying, "Recent global economic conditions — including, among other things, a steep decrease in the price of oil — have created uncertainty regarding the economics of the project."

Excelerate, which pioneered the development of onboard LNG regasification vessels, did not return an Argus inquiry seeking additional comment.

The company told Argus in June 2014 that it had spent about $50mn in the FERC approval process and expected to spend more.

The economics of US export projects are based on a large differential between domestic gas prices and global oil prices, as most long-term LNG contracts to Asia are linked to oil prices at an indexation rate of about 15pc. That means at oil prices of $100/barrel, the delivered price to Asia oil-linked contracts would be about $15/mmBtu, but at oil prices of $50/barrel the oil linked price falls to about $7.50/bl.

http://www.argusmedia.com/News/Article?id=1097475

The £47billion mega-merger between oil giants Shell and BG Group faces regulatory delay after authorities in Australia deferred a decision to let the deal go ahead.

Shell said it was “working closely” with the Australian competition regulator after the watchdog delayed a critical decision on clearance for the deal, signalling it has reservations about the potential impact on gas supply.

The deferral of the decision until September 17 leaves the clearance from the Australian Competition and Consumer Commission as one of three key approvals still outstanding, alongside China and the UK.

The Australian and Chinese approvals are seen as raising the most vexing competition issues.

The proposed mega-merger, which got the green light from the European Commission on Wednesday, has raised worries among industrial energy users along the east coast of Australia that the availability and choice of gas supplies will be further restricted.

Prices for local consumers are already increasing sharply, partly because so much gas is set to be shipped from Queensland to Asia as LNG.

UK-based BG owns the massive Queensland Curtis LNG project, which started exports early this year, while Shell owns 50% of the Arrow Energy venture, the holder of the largest chunk of known, undeveloped gas reserves on the east coast.

In a letter to interested parties in June, the ACCC focused on the potential impact of the takeover on the wholesale supply of gas in eastern Australia.

It asked how closely Arrow and BG competed with each other and others on gas supply and whether buyers believed a combined Shell-BG would change incentives to supply gas to domestic rather than export customers.

A Shell spokesman said the group was informed late on Wednesday by the delay in the decision from September 3 to September 17.

Rosneft has agreed to sell 15 per cent of Vankor, one of its largest oilfields, to India's ONGC.

The Russian state-controlled oil group has been courting Asian investors as it struggles under the burden of hefty debts and falling oil prices, writes the FT's Jack Farchy.

Discussions with ONGC, India's state oil company, over Vankor began last year.

Vankor is one of the jewels in Rosneft's crown, producing 22m tonnes of oil last year to make it the company's third-largest production subsidiary. The Russian state-controlled oil company is also working to expand it by developing a cluster of nearby fields that could more than double overall production.

The price of the deal was not disclosed. Bloomberg last month reported that ONGC was seeking to pay $900m for a stake in Vankor, though it did not say what size of stake was under discussion.

Rosneft has also been discussing the sale of a stake in Vankor to China's CNPC since last year. However, a deal has not yet been concluded as falling oil prices and western sanctions against the Russian group complicate negotiations.

Commenting on the deal, which was signed on the sidelines of the Eastern Economic Forum in Vladivostok, Igor Sechin, Rosneft chief executive, said:

Collaboration in such a large-scale project will allow establishinga brand new level of strategic cooperation between Rosneft and ONGC Videsh. This will accelerate the development of our partnership, in other large-scale oil and gas upstream projects in the region.

http://www.ft.com/fastft/386941/rosneft-sells-15-stake-vankor-indias-ongc

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As rollercoaster oil prices roil markets, Australian oil and gas producer Santos Ltd faces a tough task to raise the $2 billion it needs from asset sales to slash its debt and avoid having to swamp the market with new shares.

Santos put its assets up for sale just over a week ago, desperate to rescue its stock from a 15-year low due to sliding oil prices and worries it will sell new shares to cut A$8.8 billion ($6.2 billion) in net debt.

The company, which has stakes in oil and gas production in Australia, Papua New Guinea, Indonesia and Vietnam, said it had already been approached with offers and would consider any other proposals over coming months.

Santos faces having to give up the jewel in the crown - its 13.5 percent stake in Papua New Guinea LNG, sell off a string of assets, or resort to a share sale to raise the A$3 billion that investors believe it needs.

"It's going to be a tough call for that board room," said a banker in Singapore pitching for work with potential bidders.

Bankers and analysts say a full takeover offer for Santos, which has a market value around A$4.5 billion, is unlikely as bidders would be deterred by its 30 percent stake in the nearly completed Gladstone liquefied natural gas (GLNG) project.

http://in.reuters.com/article/2015/09/03/santos-ltd-ma-idINL4N1181FD20150903

Canacol Negotiates New Gas Sales as It Triples Colombia Output

Canacol Energy Ltd., a natural gas explorer in Colombia, is negotiating new supply deals as it steps up drilling and expects to more than triple gas production in the Andean country by year-end.

The producer is on track to increase gas output to about 90 million cubic feet a day in December to meet existing contracts, up from about 25 million now, Chief Executive Officer Charle Gamba said in an interview. The company is in talks to supply a further 25 million daily cubic feet.

“We are currently working on a number of smaller contracts that we hope to bring on stream early next year,” Gamba said in a telephone interview from Bogota Wednesday. “We are hoping that we can produce right to our productive capacity, which will be 120 million cubic feet.”

Canacol has risen 14 percent in Bogota this year, making it the top performer on Colombia’s Colcap index and one of only two to post a gain. The Andean nation’s two largest oil producers -- state-run Ecopetrol SA and Pacific Exploration and Production Corp. -- are among the worst performers.

Canacol plans to add two more wells at its Clarinete discovery by December, further increasing productive capacity by approximately 35 million cubic feet a day, Gamba said.

Colombian demand for gas is starting to outstrip supply, especially on the Caribbean coast, amid economic growth and fast declining production at aging fields operated by Chevron Corp. in partnership with Ecopetrol.

“It translates into a very strong pricing environment for local gas producers,” Gamba said. “That puts us in a very unique position. Because those fields dominated the supply of gas to the coast for 25 years, nobody has really been exploring around there.”

Gas prices in Colombia are $4 to $8 per million British thermal units at the wellhead, more than double prices in North America, Gamba said.

Canacol has partnered with drilling services company Perfolat de Mexico to participate in Mexican bidding rounds. Officials there have eased several key components of its energy auction to encourage greater interest, in response to the tepid participation for the country’s first private auction earlier this summer.

http://www.bloomberg.com/news/articles/2015-09-03/canacol-negotiates-new-gas-sales-as-it-triples-colombia-output

Royal Dutch Shell is in talks to lease India's new strategic oil caverns at Mangalore on the country's southwest coast, two sources said, giving it increased storage in a market where oil demand is increasing.

A decision on the Mangalore site, which has total capacity of around 11 million barrels of oil, depends on Shell winning relief from local sales tax, the sources said, while commissioning has been pushed back by two months to December.

India, the world's No.4 crude consumer and one of the few major economies which is still seeing strong demand growth, is building up strategic petroleum reserves (SPR) facilities at three locations in the country's south that will hold a total 36.87 million barrels of oil, enough to cover almost two weeks of its needs.

Under the proposal, Shell would use the Mangalore site for commercial storage, but in the event of an emergency would have to make supplies available to state-run refiners and keep the site filled at specified levels.

Shell would likely store oil grades used by a nearby 300,000 barrels per day (bpd) refinery owned by the state's Mangalore Refineries and Petrochemical Ltd (MRPL), the sources with direct knowledge of the matter said.

"It will be like a commercial storage for Shell, but in case of emergency the supplies will have to be made available to MRPL or any other (state-run) refiner," said one of the sources.

No decision had been made as to the origin of the oil to fill the facility, but it would most likely come from Africa where producers are looking for new buyers in the wake of the U.S. shale oil boom.

MRPL currentlly buys an average 2 million barrel of sweet African grades every month from spot markets.

The government expected to resolve the local tax issue, if a leasing deal was reached, the sources said.

Shell and Indian Strategic Petroleum Reserves Ltd (ISPRL), which is building the cavern, declined to comment.

ISPRL chief executive Rajan K. Pillai said the start-up of Mangalore's SPR, as well as sites at Padur further to the south, would be pushed back to December because of a delay in pipeline connections between the port and the storage sites.

Mangalore needed about 3 kms (1.9 miles) of pipelines, Pillai said. Padur, which has four divisions of about 4.6 million barrels each, lacked some 34 kms (21 miles) of pipeline.

India, the world's No.4 oil consumer, relies heavily on fuel imports, producing less than a third of its overall demand.

http://www.reuters.com/article/2015/09/03/india-oil-shell-idUSL4N1174UD20150903

Canadian Oil Sands, the main owner of the giant Syncrude oil sands project in Alberta, said the venture won’t return to normal operations until at least the end of the month.

The project, the largest synthetic crude oil processing facility in Canada, was affected by a fire over the weekend. The incident, still under investigation, forced the company to halt productionat the 326,000 barrel-per-day mining and upgrading project.

Canadian Oil Sands said the project will operate with “minimal synthetic crude oil shipments and operating rates” for the next two weeks as part of a phased recovery.

“Affected units are planned to be subsequently restored to operation, with a return to more normal production rates anticipated towards the end of September,” it said.

The disruption means that Syncrude output this year will be “near the low end” of the current 96 million to 107 million barrel range for the year, the company said


COS confirmed the fire had destroyed “pipes, power and communication lines on a pipe rack between a hydrotreating unit and its associated amine unit.” However, it also said the incident did not cause damage to mining and extraction operations or other major upgrading units.

http://www.mining.com/canadian-oil-sands-project-to-operate-at-minimal-rates-until-end-of-the-month/?utm_source=twitterfeed&utm_medium=twitter

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