Blockchain platform goes live for North Sea crude oil trading
Oil majors and trading firms can start finalising crude oil deals on a live blockchain-based platform for the first time, in a move that could revolutionise the market. Commodities trading firms have piloted similar schemes in recent years as blockchain technology has the potential to drastically cut costs in an environment of razor-thin profit margins. London-based platform Vakt is the first of these to go live, with shareholder Gunvor Group saying it was rolled out on Wednesday, although no trades took place that day. Blockchain, the platform behind cryptocurrency Bitcoin, is viewed by many as a solution to trade and settlement inefficiencies, as well as a way to improve transparency and reduce the risk of fraud. Vakt was created in 2017 by a consortium that includes oil majors BP and Royal Dutch Shell, Norway’s Equinor, global energy trading firms Mercuria Energy Group and Koch Supply and Trading, as well as Gunvor. These firms will initially be the only users of Vakt but access will be opened up in January next year. Banks ABN Amro, ING and Societe Generale are other shareholders. Vakt digitises and centralises what was previously a mountain of a paperwork shared between all the parties involved in each deal. It will be linked to another platform launched earlier this year, Geneva-based komgo, which will provide financing including digital letters of credit. “Vakt is the logistical arm…Once a deal is executed through our book of records, it gets pushed through Vakt. The next leg is the financing and the link-up with komgo gives access to several banks,” said Eren Zekioglu, Chief Operations and IT Officer at Gunvor Group. komgo, which is due to go live before the year end, is backed by a consortium including 10 global banks and most of the Vakt shareholders. The financing platform will target the full spectrum of commodities trading, from oil to wheat. Use of Vakt will at first be limited to contracts for the five North Sea crude grades that are used to set dated Brent, a benchmark used to price most of the world’s crude oil. In early 2019, the platform plans to include U.S. crude pipelines and barges of refined products like gasoline in northern Europe. “It’s an exciting time,” Andrew Smith, Shell’s head of trading, said. “Collaboration with our peers and some of the industry’s key players is the best way to combine market expertise and achieve the scale necessary to launch a digital transaction platform that could transform the way we all do business.”
BP sees Brazil’s new biofuels policy boosting investment
Brazil’s latest policy to boost biofuels use has improved the outlook for ethanol production and should attract new investment in plants, BP Plc’s chief executive for biofuels, Mario Lindenhayn, said on Wednesday. Brazil is advancing with additional regulation for the policy, called RenovaBio and expected to be enacted in 2020, Lindenhayn said, adding that he does not see signs that the government of President-elect Jair Bolsonaro, which kicks off in January, would put up obstacles. “We are very positive. This is a very important signal the country is giving, creating a stable regulatory environment that will allow companies to invest,” Lindenhayn told Reuters on the sidelines of an energy presentation at the company’s corporate office in Sao Paulo. RenovaBio will mandate fuel distributors to gradually increase the amount of biofuels they sell. The program aims to double the use of ethanol by 2030 from around 26 billion liters currently. The program also targets increases for other renewables such as biodiesel. BP has three ethanol mills in Brazil, crushing 10 million tonnes of sugar cane per year. It formed a venture last year with Brazil’s Copersucar, a leading global ethanol seller, to jointly operate one of the largest fuel terminals in the country located in Paulinia, in Sao Paulo state. Lindenhayn said the program provides an opportunity for mills in Brazil, which have experienced stagnation caused by years of low sugar prices and a long period of subsidized gasoline prices that led to the closure of many firms. “If the program advances as planned, it will be a large opportunity. There are no greenfield projects around, and the country is a net fuel importer,” he said. Asked if BP would be interested in increasing ethanol capacity via acquisitions, since there are several assets being offered in Brazil by companies with financial difficulties, Lindenhayn said: “We will see, we will consider.” On Wednesday, Brazilian oil and fuels regulator ANP published in the official gazette another part of RenovaBio complementary legislation, with rules for biofuel companies to obtain certification. With that, the plants will be able to issue and trade emissions reductions credits, called CBios, that fuel distributors could buy to comply with targets in case they fall short. It would be Brazil’s first emissions reductions market, although limited to the fuels industry.
Three Reasons Why LNG Prices In Asia Are Plunging
Prices for liquefied natural gas (LNG) remain weak going into what forecasters are claiming will be a warmer than usual winter season in the Northern Hemisphere. In fact, last week spot prices for the super-cooled fuel in Asian tumbled some 10 percent, hitting three month lows, an uncharacteristic development for this time of year. Reuters, citing traders, said that LNG spot prices for January delivery in North Asia LNG-AS were estimated at $10 per million British thermal units (MMBtu), 90 cents lower than last week. Factors continuing to put downward pressure on prices include warmer temperatures, LNG storage levels in the world’s top three LNG importers (Japan, China and South Korea) remaining high and plunging Brent oil prices which long term LNG contracts are mostly linked to. Though spot purchases are not usually linked to oil prices, they often follow either oil prices upward or downward trajectory. A Singapore-based trader said that “the big question mark right now is how the weather will pan out as the market will quickly turn once it starts to get cold. But until then, it’s tank-top (inventory levels) right now in many places.” LNG doldrums Japan’s weather bureau earlier this month said the El Niño weather pattern appears to have formed and that there was a 70 percent chance it would continue into the Northern Hemisphere for spring. Meanwhile, a U.S. government forecast predicted a 80 percent chance of El Nino lasting in the Northern Hemisphere unto spring. El Niño is a climate cycle in the Pacific Ocean that occurs every five years or more which has a global impact on weather patterns. The cycle begins when warm water in the western tropical Pacific Ocean shifts eastward along the equator toward the coast of South America. Global oil prices are also putting downward pressure on LNG prices as oil prices have pivoted in just a little more than a month after hitting the mid $80s per barrel price point for global benchmark Brent crude and the mid $70s price point for U.S. benchmark, NYMEX-traded West Texas Intermediate Crude (WTI) crude futures. Prices are now 30 percent off recent highs amid concerns of a growing supply glut widening from record oil output in the U.S., Russia and Saudi Arabia and after Washington issued sanctions waivers to several countries for their Iranian oil imports. This extra supply comes as demand growth is projected to dampen amid economic downturn from the ongoing trade war between Washington and Beijing and continued sluggish economic growth in emerging economies. A robust U.S. dollar is also eating into demand for oil since oil is traded in dollars and a strong greenback adds to the cost of oil imports, hitting particularly hard countries like India, the Philippines, Indonesia and others. However, weaker oil prices over the last month has offered some respite for oil import dependent countries. The third reason that LNG spot prices in Asia are tumbling is that storage levels, as already mentioned, are full – particularly in China as energy planners in Beijing try to avert a repeat of last year’s fiasco when the government sought to replace coal with cleaner burning natural gas during the winter too quickly, resulting in a shortage of natural gas and the diversion of the cleaner burning fuel from industrial end users to residential users. As far back as August, China began filling underground gas storage tanks, including state energy giant PetroChina, operator of the Xiangguosi storage facility, injecting gas from Myanmar to fill the vast chambers 3,000 meters (9,900 ft) under the mountaintop. Reports said at the time that China was aiming to turn hundreds of tapped and some still producing wells into storage facilities after a severe winter supply crunch left it short of the clean-burning fuel.
Iran halts gas exports to Iraq for pipeline repairs: Ministry
Gas exports from Iran to Iraq were halted late on Tuesday for several days, as Iranian authorities work to repair damages caused to the pipeline during a recent earthquake. The cuts deprive Iraq’s power grid of 2,500 megawatts (MW), Iraq’s electricity ministry said in a statement, as Iraq relies heavily on Iranian gas to feed its power stations. Iranian authorities informed the electricity ministry in Baghdad that the flow of gas exports will be resumed “during next few days” after maintenance on the pipeline inside Iranian territory are completed. The pipeline supplies several major power stations, including two in Eastern Baghdad and one in Eastern Diyala province near the Iranian border, the ministry said. The oil ministry will supply the power stations which have been affected by the halt with fuel to keep operations going, the ministry said. However, both provinces can expect power cuts as a result, the ministry said. Iran, which has large gas reserves alongside its oil resources, exports small amounts of gas to Turkey but production has struggled to keep pace with rising domestic consumption. The United States said earlier this month that Iraq can continue to import natural gas and energy supplies from Iran for a period of 45 days, as long as Iraq does not pay Iran in U.S. dollars. Sanctions on Tehran’s oil sector took effect on Nov. 5. Baghdad is seeking to renew and extend the exemption as it needs more time to find an alternative source, Iraqi officials said.
Petrol pumps bonanza: Dealers to move court
Barely 72 hours after the Centre announced a pre-election bonanza of distributing a staggering 55,649 new petrol pumps in the country, the apex body of their dealers plans to challenge the move in court, a top office-bearer said here on Wednesday. The All India Petrol Dealers Association (AIPDA) President Ajay Bansal said that the government’s latest move (of November 25) appeared contrary to its own policy and the dealers would question its legal validity. “On one hand, the Centre has announced the closure of petrol pumps in India replacing them with alternative fuels by 2025. But, now they are publishing advertisements for allotting the second string of new petrol pumps. So what exactly is this policy?” Bansal said. Presently, India has 56,000 retail petrol pumps of the three government oil marketing companies — Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL), and Indian Oil Corporation Ltd (IOCL), besides another 6,000 outlets owned by private companies. From these fuel stations, the average monthly sales for the three Oil Marketing Companies (OMCs) are between 120-130 kilolitre with an average increase in demand on petrol-diesel of around four per cent per annum.
EPA will not reallocate waived biofuel volumes to 2019 mandate
The US Environmental Protection Agency (EPA) has rejected requests from the corn lobby to reallocate biofuel volumes waived under its small refinery exemption program into its 2019 mandate, an agency official told Reuters on Tuesday. The official also said the 2019 biofuel mandate figures, due to be released this week, would be largely in line with the agency’s June proposal of 19.88 billion gallons, which includes 15 billion gallons of convention biofuels like ethanol. The powerful corn lobby and top officials in the US Department of Agriculture have complained for months that the Trump administration’s expansion of the EPA refinery waiver program threatens demand for crucial farm products like ethanol. Under the US Renewable Fuel Standard, oil refiners must blend increasing amounts of biofuels into their fuel each year or purchase blending credits from those that do. Small refineries can be exempted from the RFS if they prove that complying would cause them financial strain. “It is an issue of timing,” said the EPA official, who declined to be named due to the sensitivity of the issue. “The primary reason why we’re not reallocating in this rule is because we have no idea what the volume of SREs (Small Refinery Exemptions) will be for calendar 2019 and we won’t know that late 2019, early 2020. All we could do is guess, and we don’t do regulations by guessing here.” The refinery waiver program is among the most controversial issues dividing the US corn lobby and the oil industry. Since President Donald Trump’s election, the EPA has vastly expanded the number of waivers it has handed out to small refineries in a bid to reduce the refining industry’s regulatory compliance costs. The move has infuriated another key Trump constituency, the Farmbelt, which argues the program erodes demand for biofuels. Under pressure, the EPA earlier this year began studying a potential overhaul in which biofuels blending obligations eliminated under the waiver program would be reallocated, possibly in the following year, to other facilities, to ensure there was no net loss in overall blending volumes. “We would like to make everybody happy. It is not often the case we can,” the EPA official said. The EPA is set to formally announce its 2019 biofuels mandate volumes by November 30.
Murphy Oil Corporation in talks to sell Malaysian oil and gas assets
Murphy Oil Corporation is in talks to sell its Malaysian oil and gas assets after an unsolicited bid that could fetch between $2 billion to $3 billion, people familiar with the matter said, in the latest energy M&A deal in the Southeast Asian nation. The independent U.S. oil and gas exploration and production company has tapped banks for the potential sale of its majority interests in eight separate offshore production sharing contracts in Malaysia, said the people, who declined to be identified because the matter is confidential. “Murphy wasn’t considering a sale but was approached by a party that put forward a very compelling bid. They are in negotiations,” said one of the people. Murphy, which has been in Malaysia since 1999, could agree on a deal in a couple of weeks, the person said. Others familiar with the matter suggested Spanish oil major Repsol, whose presence in Malaysia is focused on its upstream business, or other global majors could be potential buyers for Murphy’s assets. The possible transaction comes as M&A activity is heating up in Malaysia’s oil and gas sector, where international companies pursuing expansion plans are spotting opportunities. Repsol and Murphy Oil declined to comment on any potential sale or talks. There was no immediate response to a query sent by Reuters to Malaysian state-owned Petronas, who partners Murphy in Malaysia. In September, Austrian oil and gas company OMV agreed on a joint venture with Sapura Energy Bhd, paying $540 million for a 50 percent stake in the exploration assets of the Malaysian firm. In August, citing sources, Reuters reported that U.S. company Hess Corp’s Southeast Asian offshore natural gas assets had attracted bid interest from the likes of Thailand’s PTTEP PCL and OMV. Hess later said it had no plans to sell its Southeast Asian assets. People familiar with Murphy’s business said the company could use the sale proceeds to fund its global expansion plans. Last month, Brazil’s state-controlled oil company Petrobras and Murphy announced a joint venture to explore oil and gas fields in the Gulf of Mexico. In September 2014, Murphy announced the sale of a 30 percent stake in its Malaysian assets to Indonesian state-oil company Pertamina for $2 billion as it cut its overseas holdings. Murphy produced nearly 46,700 barrels of oil equivalent a day in the quarter ended Sept. 30 in Malaysia, the company said in response to a query from Reuters. “The potential exit seems like a strategic decision based on where Murphy sees greater growth potential. These are high quality assets and of a good size for companies looking for a strong footprint in the region,” said one banker familiar with Murphy’s business. Murphy’s deal with Pertamina was announced when oil prices were hovering around $90 a barrel. On Wednesday, U.S. oil prices were trading near $52 a barrel, having lost almost a third of their value since early October.
France’s Macron tries to ease popular anger over gas prices
French President Emmanuel Macron is trying to defuse protests over rising fuel taxes by explaining his plans to wean the country off fossil fuels and promising to shift out of cheap nuclear energy more slowly. After days of sometimes violent protests over high energy prices, Macron stuck to the small tax increases on gasoline and fuel that had prompted the popular anger. But he proposed a mechanism to regularly review the tax when global oil prices are rising. “I have a deep understanding of the expectations and frustrations, the resentment of citizens … Our duty is to bring a response,” Macron said in a speech at the presidential palace. Macron insisted he will show “no weakness” toward troublemakers who used the protests to damage businesses and clash with police – including in the heart of Paris, on the famous Champs-Elysees avenue. “I don’t confuse thugs with fellow citizens who want to send out a message. I feel understanding for these fellow citizens but I will not indulge those who want destruction and disorder,” he said. Outlining France’s energy strategy for the next 30 years, Macron said the government will by 2035 shut down 14 nuclear reactors out of the 58 now running at 19 plants. Yet he said France would cap the amount of electricity it derives from nuclear plants at 50 percent by 2035. That is a delay compared with the goal of 2025 set by his predecessor, Francois Hollande. France depends more on nuclear energy than any other country, getting about three-quarters of its electricity from the plants. The delay on the cap would in theory help move France from fossil fuels, which Macron wants to do to fight global warming, and toward renewables without increasing the price of energy too much. Germany saw an increase in energy prices after it started a big push from nuclear to renewable energy. Macron confirmed the first nuclear reactors to close will be those of Fessenheim, on the border with Germany, in a process that will start by 2020. Germany has long called for the plant to be shut down. The state government of Baden-Wuerttemberg, on the German side of the Rhine river that separates the countries, has warned that if there were a large-scale incident at France’s oldest still operating nuclear plant it would be forced to evacuate the nearby city of Freiburg. “It’s encouraging that President Macron has personally vouched for the closure of Fessenheim in the summer of 2020,” German Environment Minister Svenja Schulze said in a statement. “What’s important now is that actions follow these words as well.” In an attempt to calm protesters in France, Macron also proposed a three-month consultation with associations and activist groups, including the so-called “yellow jackets” who have led the recent protests, about how best to handle the rising energy costs. Environment minister Francois de Rugy will meet with some of the “yellow jackets” leaders later on Macron’s request, the president’s office said. Jason Herbert, a spokesman for the protesters, told BFM Television that Macron’s speech “didn’t meet the expectations of the yellow jackets.” He said the consultation offer is a step “in the right direction” but “not enough given the urgency of the situation.” Greenpeace said in a statement that Tuesday’s measures “don’t help rapidly reduce greenhouse gas emissions” and “don’t accelerate the transition toward renewable energy. On the contrary, Emmanuel Macron continues to provide a blind support to the nuclear (sector).”
World’s largest pork company to convert pig manure into renewable natural gas
The world’s largest pork company is teaming up with a major energy company to turn pig manure into renewable natural gas. Smithfield Foods and Dominion Energy announced a joint venture partnership on Tuesday to trap methane from hog waste and convert it into power for heating homes and generating electricity. Smithfield previously announced that its company-owned and contract farms over the next decade will cover waste-treatment pits to capture the gas and keep out rainwater. The gas will be channeled to processing centers and converted into natural gas. The joint venture with Dominion will operate initially in North Carolina, Virginia and Utah. The first projects are scheduled to be operating by late 2019.
Algeria’s Sonatrach awards gas contract to Britain’s Petrofac
Algerian state energy firm Sonatrach awarded a contract worth 60 billion dinars ($506 million) on Tuesday to Britain’s Petrofac to boost gas output at the Tinhert field by 4.7 million cubic metre per day, Sonatrach’s CEO said. The value was about $100 million less than originally announced. Sonatrach CEO Abdelmoumen Ould Kaddour said the difference in value was because part of the work, worth 10 billion dinars, had been awarded to Algeria’s GCB. The project in the Illizi region was expected to come online in 36 months, he told reporters.