Norway Oil Companies Lower 2017 Spending Plans
Norway's oil companies have lowered their 2017 investment plans, a Statistics Norway survey showed, raising the chances of a central bank interest rate cut in the coming months.
Norway's biggest industry has curbed spending in the wake of a more than 50 percent fall in oil prices over the last two years, bringing the economy to a near standstill.
The country's oil companies plan to invest 146.6 billion crowns ($17.21 billion) next year, the survey showed, down from 150.5 billion crowns when surveyed in August by Statistics Norway.
"The decline is mainly due to lower estimates for exploration and shutdown and removal (of platforms). Exploration wells and removal projects originally planned for 2017 are now postponed," Statistics Norway said in a statement.
Plans now point to a 10 percent cut versus 2016, economists at Handelsbanken said, much deeper than the approximately 4 percent cut expected by the Norwegian central bank.
"This suggests that the offshore oil sector will continue to drag down Norway's industrial sector and economic activity next year, by maybe more than we thought," Handelsbanken Chief Economist Kari Due-Andresen said.
The oil sector accounts for 20 percent of the Nordic country's economy.
Due-Andresen expects the central bank to leave its key policy rate unchanged at 0.50 percent on Dec. 15 but she said the bank could cut its rate path, or outlook.
Norges Bank has said since September that it expects the key policy rate to stay at 0.50 percent "in the period ahead".
Kyrre Aamdal an economist at DNB Markets, agreed that the central bank would likely leave the rate untouched as it worries about overheating in the housing market.
However, "the downside risk is high and has increased after the oil investment numbers," Aamdal said.
The crown had weakened to 9.0700 against the euro by 0755 GMT from 9.0501 just ahead of the data.
Nigeria Oil Minister Summoned Over Deals
Nigeria's parliament summoned the country's oil minister to clarify details of oil and gas infrastructure agreements worth $80 billion with Chinese companies and a $15 billion deal with India.
Nigeria, which relies on crude sales for around 70 percent of its national income, is in recession for the first time in 25 years largely due to low global oil prices.
The country's oil and gas infrastructure needs updating. Its four refineries have never reached full production due to poor maintenance, causing the OPEC member to rely on expensive imported fuel for 80 percent of its energy needs.
Oil Minister Emmanuel Ibe Kachikwu was in China in June for a roadshow aimed at raising investment. Nigeria's state oil company said memorandums of understanding (MoUs) worth over $80 billion - to be spent on investments in energy infrastructure - were signed with Chinese companies.
On a trip to India last month, Kachikwu said a $15 billion cash-for-oil pact with that country was likely to be signed by the end of this year.
The Senate, the upper house of parliament, passed a motion on "the need for a detailed explanation" of the deals and said Kachikwu would appear before a committee on petroleum upstream, gas and foreign affairs at a date to be arranged.
"The essence of the motion was to ensure transparency in a matter that involves future investment in the oil and gas sector of the country," said Senate President Bukola Saraki.
Oil Reserves Rising, Gas Reserves Falling
Oil reserves increased in 2015 and gas reserves recorded a decline, according to Eni’s 15th World Oil and Gas Review published.
The annual statistical report on world reserves, production and consumption of oil and gas showed that oil output set another yearly record growth (+2.9 percent), driven by the Middle East and North America. Among the top ten producers, Iraq showed the biggest rise and the USA, the largest producer, kept growing for the seventh year in a row. Geopolitics still affects the production of Libya, Syria and Yemen, the report stated.
World oil demand grew by 2 percent, one of the biggest increases in recent years, stimulated by the rapid fall in oil prices that began in the second half of 2014, the report said.
In 2015, world gas production increased by 1.6 percent, driven by USA and Iran (+5 percent each). In Europe, Norway had a strong production increase (+8 percent), whereas European Union output continued to decline (-8.5 percent). In Russia, after the previous year’s decline, its output grew by 1.3 percent.
Gas demand started to rise again in 2015 (+1.7 percent against -0.2 percent in 2014) with a strong increase in some emerging markets (MENA +4.8 percent) but also in mature areas like North America (+2.2 percent) and Europe (2.2 percent). Asia stopped its continuous growth as a consequence of a slowdown in China (+3.1 percent vs +9.4 percent in 2015) and a strong decline in Japan and South Korea (-6.0 percent and -8.8 percent, respectively), due to the restart of nuclear plants and an increasing role for coal and renewables in power.
US Coal-Fired Generation Projected to Surpass Natural Gas
Coal, the unchallenged leader in U.S. power generation for most of the past century, may regain its place at the top of the energy mix hierarchy this winter, according to projections released by the U.S. Energy Information Administration (EIA).
The EIA’s November Short-Term Energy Outlook suggests that prices for natural gas delivered to the power sector will continue rising, resulting in gas-fired generation reaching a seasonal peak of nearly $31/MWh in February 2017. That’s a far cry from the low recorded in March 2016 of about $16/MWh.
Increased gas prices would be a favorable development for the coal power sector. The national average price for power generated by coal has been between $21/MWh and $23/MWh for the past couple of years, making it the more economical choice.
As recently as 2010, coal supplied nearly twice the electricity generated from gas. However, falling gas prices as a result of the shale boom and coal plants closing due to more stringent environmental regulations have changed the landscape substantially.
In April 2015, gas generation surpassed coal generation for the first time ever. Since July 2015, gas has beaten coal every month except January 2016. But if the projections are accurate, coal will be back on top by the beginning of the year.
The news comes on the heels of what some consider the biggest turn of events for the coal industry: the election of Donald Trump as president. During his campaign, Trump was a big coal supporter.
“We’re going to save the coal industry,” he said.
Whether that’s true or simply a campaign promise that will fall by the wayside is yet to be seen, but it offers some hope for an industry that has been struggling.
Saudi Aramco to Supply More Oil to Asia
State oil giant Saudi Aramco has agreed to supply some customers in Asia with incremental crude that will load in January, as it holds to a strategy of maintaining market share.
The decision made by the world's top exporter to give extra oil, came weeks before Saudi Aramco was due to notify customers of their monthly supply allocation. For January supplies, allocations would have been made only around Jan. 10.
By exercising flexibility to meet customers' demand, Saudi Arabia is signaling that it won't budge on market share even as it works with members of the Organization of Petroleum Exporting Countries to finalize plans for a production cut at their Nov. 30 meeting, the sources said.
"We're going into winter so we need lighter grades," said an official with a North Asian refiner who spoke on the condition of anonymity.
"It's just as usual. There is no indication of a change in their behavior (in giving additional supplies)," he said.
The excess Saudi supplies, combined with a rise in arbitrage inflow from Europe and the United States, have depressed Asia's demand for similar quality light sour crude such as those from Abu Dhabi.
Aramco is selling more Arab Extra Light crude, a second source with a North Asian refiner said.
"CPC Blend, Forties, there are a lot of replacement barrels," he added.
Demand for Saudi Arab Extra Light crude has been robust in Asia because of its competitive pricing and its higher yield of naphtha, which is used to produce petrochemicals.
Refiners' profits for producing naphtha are at their highest since April, Reuters data showed.
Some Asian refiners have also requested to lift more Arab Medium crude in January although Saudi Aramco has yet to commit to an increase, trade sources said.
----Russia Cements Leading China Oil Supply Position
Russia is cementing its position as the main oil supplier to China, the world's biggest net importer and growth market for the fuel, taking over the lead from Saudi Arabia in the first 10 months of the year, customs data showed.
Russia also took the monthly lead back from Angola, which briefly had top supply spot to China in September, the data showed.
Chinese crude oil imports from Russia in October climbed 39 percent on a year earlier to 1.12 million barrels per day (bpd), making it the biggest supplier. That also left it the largest supplier over the first 10 months of the year, totaling around 1.03 million bpd in that period, customs data showed.
China's total crude oil imports in October have, however, dropped from a record high the previous month to their lowest on a daily basis since January. Independent refineries have cut back purchases because of higher prices and tighter government controls into their import activities, which are highly regulated.
Crude oil imports from Iran in October also rose, jumping 129 percent year-on-year to 773,860 bpd, while imports from Iraq rose 60 percent to 875,400 bpd.
Imports from Saudi Arabia, traditionally the biggest supplier to China, eased 0.28 percent to 935,800 bpd.
The data comes just days ahead of a Nov. 30 meeting of the Organization of the Petroleum Exporting Countries (OPEC) to finalize a planned production cut aimed at propping up prices, which continue to languish below $50 per barrel due to oversupply.
Exemptions to the planned cuts were given to Libya and Nigeria, where output has suffered from conflict, and sanctions-hit Iran.