Tuesday, January 17, 2012

Skrugard and Havis discoveries

2011 will always be remembered for the major finds on the Norwegian continental shelf (NCS), while at the same time we have completed a great year with regard to improved recovery. We have matured more volumes through improved recovery efforts than the Skrugard and Havis finds combined," says Øystein Michelsen, executive vice president for the NCS.

This is the second high-impact discovery in the North in nine months.

Well 7220/7-1, drilled by the drilling rig Aker Barents, has proved a 48 metre gas column and a 128 metre oil column.

The Aker Barents drilling rig

Statoil estimates the volumes in Havis to be between 200 and 300 million barrels of recoverable oil equivalents (o.e.). The provisional, updated total volume estimate for the Skrugard and Havis discoveries in PL532 is in the region of 400-600 million barrels of recoverable oil equivalents.

“Havis is our second high impact oil discovery in the Barents Sea in nine months. The discovery’s volume and reservoir properties make it Skrugard’s twin. Skrugard and Havis open up a new petroleum province in the North,” says Helge Lund, President and CEO of Statoil ASA.

Havis lies approximately 7 kilometres southwest of the Skrugard discovery, made in April of last year. Havis lies within the same production licence, but forms an independent structure. There is no communication between the two discoveries.

Skrugard Havis  map

The discovery provides further confirmation of Statoil’s faith in the exploration potential of the Norwegian continental shelf, and makes an important contribution to the revitalisation of the NCS in line with what was communicated at Capital Markets Day in June of last year.
Statoil delivered six plans for development and production and matured around 560 million barrels of oil equivalent Statoil shares for the large NCS projects during 2011.

Of these volumes 420 million barrels of oil equivalent are the result of improved recovery alone.

"Statoil's main improved recovery projects in 2011 were Troll 3 & 4 compressors and Åsgard subsea gas compression," says Michelsen.

"They accounted for 350 million barrels of oil equivalent in improved recovery alone for Statoil. In addition we have the volumes resulting from our drilling and well activities and improved recovery from small and large modification projects on our NCS installations."

The total investments on Troll and Åsgard subsea compression amount to NOK 26 billion.

Siri Espedal Kindem, Statoil's head of technology.

"Åsgard subsea gas compression will be the world's first subsea compressor and is a good example of how pioneering technology can help extend the life of our existing NCS fields. We want more technology breakthroughs and is stepping up our technology effort," says Siri Espedal Kindem, Statoil's head of technology.

Statoil's research activities have been increased by 27% and will amount to NOK 2.8 billion in 2012. Furthermore the company plans to expand the research centre at Rotvoll in Trondheim to accommodate the largest improved recovery centre in Norway.

Improved recovery is also key in Statoil's new technology strategy in which four prioritised technology areas have been identified:
Seismic imaging and interpretation.
Reservoir characterisation and recovery
Drilling and well construction
Subsea production and processing

"Technology for better reservoir understanding can alone add reserves of 1.5 billion barrels of oil equivalent to our global portfolio by 2020. In addition we will focus on technology that will reduce drilling time by 30% and drilling costs by 15% by 2020. If we succeed in developing a subsea factory, it will lead to improved recovery, reduced costs and lower energy consumption in the further development of the NCS," says Kindem.

Monday, January 16, 2012

U.S. average gasoline&diesel prices over $3 throughout 2011

The average price U.S. drivers paid for gasoline and diesel during 2011 never fell below $3 per gallon, marking the first time the national pump price for both transportation fuels topped $3 per gallon throughout a calendar year. Crude oil, which accounted for more than 60% of the cost of making the fuels, was the main reason drivers had to pay more to fill up at the pump. At the same time, the difference between the prices of gasoline and diesel reached its widest level on record due mostly to stronger diesel demand.

2011 Weekly gasoline and diesel price

The gap in the prices for gasoline and diesel reached a record 66 cents per gallon in late November. The price difference increased the most during the fourth quarter of 2011. As summer transitioned to winter, refiners were able to switch to making winter fuel blends. Unlike summer blends, which must meet cleaner Federal burning specifications to decrease summer smog pollution, winter fuel blends cost less to refine and thus the resulting gasoline is less expensive. Gasoline demand was also about 4% lower in the fourth quarter compared to the same period a year earlier. Demand for distillates, which includes diesel fuel, was up 5% during the quarter.
Meanwhile, record U.S. diesel exports and higher diesel fuel demand from truckers transporting more finished goods and raw materials as the American economy improved also put upward pressure on diesel prices.
Higher gasoline and diesel prices mostly reflected higher crude oil prices, which rose in 2011 in response to the disruption in Libya's oil production and expected stronger oil demand as the global economy improved. The average spot price for West Texas Intermediate crude oil was $94.87 per barrel in 2011, up from $79.48 per barrel the year before and $61.95 per barrel two years earlier.

2011 U.S average retail gasoline price map 

Based on EIA's weekly survey of retail fuel prices at service stations around the country, the cheapest average price for regular gasoline during 2011 was $3.07 per gallon on January 3, and the highest price was $3.97 per gallon on May 9. The average gasoline price in 2011 was $3.52 per gallon, up from $2.78 per gallon in 2010 and $2.35 per gallon in 2009. The last time EIA's weekly gasoline price was under $3 per gallon was on December 20, 2010. The American Automobile Association's daily survey of gasoline prices also never dropped below $3 per gallon last year.
2011 U.S average retail diesel price map

The lowest price for diesel fuel in 2011 was $3.33 per gallon during the first two weeks of January, while the highest price was $4.12 per gallon on May 2, during a six-week period when diesel averaged more than $4 per gallon. The national pump price for diesel has not been under $3 per gallon since September 27, 2010.
Gasoline and diesel prices vary by region with prices higher on the West Coast because of more stringent air quality rules and less expensive along the Gulf Coast where many refineries are located. Pump prices were most volatile in the Midwest, where several pipeline shutdowns last year disrupted delivery of oil to refineries.

U.S. Motor Gasoline Consumption Forecast

Result of falling steeply from its 2007 peak, U.S. motor gasoline consumption will likely continue to decline in 2012 and 2013, albeit at slower pace, according to the U.S. Energy Information Administration's (EIA) newly released Short-Term Energy Outlook(STEO). There may be more downside than upside uncertainty in the forecast, however, as the strong rate of recovery expected for new car sales in 2012 and their higher fuel efficiencies could lead to greater-than-expected improvements in average fleet fuel efficiency.

U.S. motor gasoline consumption fell sharply between 2007 and 2011. In 2008, consumption fell by 300 thousand barrels per day (bbl/d) from the previous year, as high retail gasoline prices that persisted through October 2008 and the recession reduced highway travel. Consumption flattened in 2009 and 2010, but then dropped by 240 thousand bbl/d in 2011 as high gasoline prices contributed to the dampening of travel for most of the year. The latest STEO projects that gasoline consumption will fall by 20 thousand bbl/d (0.2 percent) annually in 2012 and 2013 (Figure 1), as modest growth in highway travel is more than offset by continuing improvements in the average vehicle fleet fuel economy.

U.S gasoline consumption change from prior year

Population and economic growth, the rate of unemployment, and fuel prices influence vehicle miles traveled. Fleet efficiency, which changes slowly based on the efficiency of new vehicles relative to that of the existing fleet and the rate of fleet turnover, links miles traveled to fuel use. STEO, which has been extended through 2013, projects highway travel will grow at an annual average rate of 0.6 percent, and vehicle fuel economy to continue to increase at a 0.9-percent rate over the next two years. While the 27-percent increase in gasoline retail prices in 2011 had a significant impact on consumption , prices in 2012 and 2013 are not expected to change appreciably from last year's average. Retail regular motor gasoline prices are projected to fall by 1 percent in 2012 and then rise by 2 percent in the following year.

The driving-age population is experiencing a major shift. The total population between the ages of 15 and 64 is projected to grow at an average rate of only 0.7 percent over the next two years, compared with an average 1.3-percent annual growth rate during the period of 1991-2000. In contrast, the total population of drivers 65 years old and over, who drive substantially less than those between 15 and 64 years of age, is projected to increase at an average rate of 3.5 percent, up significantly from the annual average growth rate of 1.2 percent during the period of 1991-2000. Assuming that unemployment rates and retail prices remain close to current levels, EIA expects highway travel growth to be almost a third of GDP growth annually in 2012 and 2013.

As Corporate Average Fuel Economy Standards increase, motor gasoline-related vehicle fuel economy is expected to continue to improve. The U.S. Department of Transportation's Summary of Fuel Economy Performance reports estimated increases in the average vehicle fuel economy of cars and light trucks in use at 0.5 percent per year and 0.6 percent per year, respectively, between 1999 and 2009. Advances in vehicle fuel economy have been especially pronounced in the last few years. Between 2000 and 2005, new car and light truck average fuel economy increased by 6.3 percent and 3.8 percent, respectively. Between 2005 and 2010, average new car fuel economy improved by 11.9 percent while that for light trucks increased by 14.0 percent. EIA expects average fleet fuel economy of vehicles in use to improve by an average of 0.9 percent annually in 2012 and 2013.

Higher-than-projected economic growth would likely raise highway travel and, consequently, motor gasoline consumption. However, an accelerated economic recovery may also boost new vehicle sales, accelerating the replacement of older, less fuel-efficient vehicles and improving the aggregate fuel efficiency. The accelerated replacement of cars at least 10 years old (model year 2002 or older), with an estimated average fuel economy of about 29.0 miles per gallon or less, with new cars with an estimated average fuel economy of about 34 miles per gallon, would at least partially offset the positive effects of increased highway travel on motor gasoline consumption.

Friday, January 13, 2012

Italy, Greece Concern on Iranian Oil Embargo

A European Union embargo on imports of Iranian  oil will probably be delayed for six months to let countries such as Greece,Italy and Spain find alternative supplies, two EU officials with knowledge of the talks said.

The embargo, which would need to be accepted by the 27- nation bloc’s foreign ministers on Jan. 23, is also likely to include an exemption for Italy, so crude can be sold to pay off debts to Rome-based Eni SpA , Italy’s largest oil company, according to the officials, who declined to be identified because the talks are private.

A ban on petrochemical products would start sooner, about three months after EU ministers agree to the measure, one official said yesterday. Once a decision is made, member states would be barred from concluding new oil contracts with Iran or renewing those that are due to expire, while existing deals will be terminated within six months, according to a second diplomat today. Long-term contracts constitute the bulk of Europe’s purchases of Iranian oil.

“Work by experts from the 27 member states is in a very intensive phase,” Maja Kocijancic, a spokeswoman for the European Commission, said by phone yesterday from Brussels. “They are looking into different options for restrictive measures with a view to adoption on Jan. 23.” She declined to comment on possible phase-in periods or exemptions.

Iran's Top Oil Export Destination 

Crude prices dropped on the news, falling 1.8 percent to $99.10 a barrel yesterday on the New York Mercantile Exchange, the lowest settlement since Dec. 30. Oil was at $98.22 today.

Italy, Greece Concern

Phasing in the European embargo would satisfy the concern of nations most dependent on Iranian crude, including Italy, Greece and Spain, the first EU official said. Those three nations accounted for 68.5 percent of EU imports from Iran in 2010, according to European Commission data.

The U.K., France and Germany pressed for a three-month delay, Nigel Kushner, a London-based international-trade lawyer specializing in Iran sanctions, said in an interview.

“It’s my understanding that the Greeks were looking for a 12-month delay” and a six-month compromise appears likely, Kushner said. “No doubt the Greeks are saying to rest of EU, ‘If we play ball, what are you giving us in return?”

Greece, facing a debt crisis, is buying oil from the Persian Gulf state on credit.
Iran Oil Exports 

Nuclear Pressure

Germany, France and the U.K. have been pushing for the embargo to increase pressure on Iran over its nuclear program, and it has the support in principle of all member states, the EU official said yesterday. While Western countries say the Gulf state may be seeking the capability to build nuclear weapons, Iran says its program is for civilian electricity and medical research.

International Atomic Energy Agency inspectors will go to Tehran at the end of the month to discuss Iran’s nuclear program, two diplomats with knowledge of the talks said today.

Iran’s willingness to resume talks doesn’t mean it’s ready to negotiate restrictions on its nuclear program, said Michael Singh, a former official on the U.S. National Security Council.

The nation’s ability to manufacture nuclear fuel rods and its decision to move some of its nuclear-enrichment activities to a well-protected facility near the Shiite holy city of Qom suggest the opposite, he said.
Negotiating Delay

“All the signals from the Iranians are not that they’re now willing to negotiate an end to their nuclear program, but that they’re not,” said Singh, who is now at the Washington Institute for Near East Policy. “They’re probably hoping to use talks as a delaying tactic, and to raise the hopes of those in the international community who think that negotiations can resolve the issue.”

As Europe weighs its embargo, President Barack Obama’s administration has sent teams worldwide to consult with countries on managing the supply and demand of oil, according to an administration official who briefed reporters in Washington.

The teams are part of the administration’s efforts to implement Iran sanctions mandated in a law Obama signed on Dec. 31. The law would cut off foreign financial institutions that knowingly facilitate significant transactions with the Central Bank of Iran. The U.S. intends to close down the bank, said the U.S. official, who wasn’t authorized to speak on the record.
Obama’s Goal

The U.S. goal is to convince countries that the Iran is no longer a reliable source of oil, a strategy that already is paying off as countries that deal with the Gulf state have difficulty getting their financing guaranteed and as nations such as China and India seek to diversify their sources, according to the official.

Iran, the second largest producer in the Organization of Petroleum Exporting Countries, pumped 3.58 million barrels of crude a day last month, according to Bloomberg estimates.

Under the emerging European agreement, every three months the EU would assess its impact on member economies, check whether countries are finding alternate supplies and monitor the effect on oil prices, the EU official said yesterday.

There are no plans to compensate affected European nations, and the current emphasis is on finding oil from alternative sources at similar prices, the official said.

The Iranian government said in a letter to United Nations Secretary General Ban Ki-Moon that a civilian nuclear scientist, Mostafa Ahamdi Roshan, who was killed by a bomb Jan. 11 was the fourth victim of a foreign terror campaign. Iran has accused the U.S. and Israel of targeting Iranian nuclear scientists.
Scientists Targeted

“We are very active in this branch of science,” Iranian Parliament Speaker Ali Larijani told journalists in Ankara yesterday, referring to his country’s nuclear program. “If Israel thinks it can stop us with four acts of terror, their logic is flawed.”

Tensions over the ratcheting up of sanctions led Iranian Vice President Mohammad Reza Rahimi to threaten on Dec. 27 that Iran may block the Strait of Hormuz, the transit for about a fifth of the world’s oil, if the EU bans exports from the Islamic Republic.

U.S. Joint Chiefs of Staff Chairman General Martin Dempsey said on Jan. 9 that Iran can temporarily choke off the waterway, through which 17 million barrels of oil pass each day, the Energy Department estimates.

OPEC’s other members would be able to make up for a drop in Iranian oil supply if the EU agrees to an embargo, said Chakib Khelil, the group’s former president. Even so, prices may temporarily rally to as high as $200 a barrel on news of any such blockade, he said today in London.

“It should be possible to replace, at least, the European consumption of Iranian oil,” Khelil said in an interview with Mark Barton on Bloomberg Television’s “On the Move.”

OPEC Crude Incremental Capacity 2009 2015

OPEC’s members, responsible for about 40 percent of the world’s oil production, are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Khelil was Algeria’s oil minister from 1999 until last year.

Friday, January 6, 2012

Crude Oil Futures 8 month High: Iran Sanctions

Oil headed for a weekly gain in New York on signs that the U.S. economic recovery is gaining momentum and concern that tensions with Iran may lead to a disruption in Middle East exports.

West Texas Intermediate futures have advanced 3.4 percent this week. Hiring in the U.S. probably accelerated in December for a second month, pointing to a strengthening labor market heading into 2012, economists said before a report today. The European Union is working to halt oil purchases from Iran, said Victoria Nuland, a U.S. State Department spokeswoman. European foreign ministers aim to announce harsher penalties on the Persian Gulf nation’s energy and banking industries at a meeting Jan. 30, according to EU spokesman Michael Mann.

“The recent string of better-than-expected macroeconomic indicators from the U.S. has rebuilt some of the optimism and risk appetite,” said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. “Iran has threatened to close the Strait of Hormuz, which would have an immense effect on the global oil market.”

Crude for February delivery was at $102.22, up 41 cents, at 10:04 a.m. London time. Yesterday, the contract fell $1.41 to $101.81, the lowest settlement this week. Prices gained 8.2 percent in 2011.

Brent oil for February settlement on the London-based ICE Futures Europe exchange rose 60 cents, or 0.5 percent, to $111.34 a barrel. The European benchmark contract was at a $11.12 premium to New York-traded West Texas Intermediate crude. The spread was a record $27.88 on Oct. 14.

Iran Sanctions

Brent’s premium has widened from $7.93 a barrel on Dec. 27 amid heightened tension over sanctions aimed at curbing Iran’s nuclear program. The country, the third-largest oil exporter globally, has threatened to shut the Strait of Hormuz, a transit route for a fifth of the world’s oil.

Italian Prime Minister Mario Monti yesterday questioned the scope and timing of possible European Union sanctions against Iran, raising an obstacle to stiffer penalties.

Oil in New York may fall next week on concern that Europe will struggle to contain its debt crisis, a Bloomberg News survey showed. Fifteen of 32 analysts and traders, or 47 percent, forecast futures will decrease through Jan. 13. Fourteen predicted prices will rise.

“The bigger issues are the geopolitical crisis with Iran and the European debt crisis, pushing and pulling against the market,” said Anthony Nunan, a senior adviser for risk management at Mitsubishi Corp. in Tokyo, who described the U.S. stockpile data as bearish. “We had an overreaction to the upside and people are coming back to the reality that the European crisis will still be a big drag on the economy.”

U.S. Supplies

The Energy Department said yesterday U.S. crude stockpiles (DOESCRUD) climbed 2.2 million barrels last week. A decline of 1 million barrels was forecast in a Bloomberg News survey of analysts.

Gasoline stockpiles in the U.S., the world’s biggest oil consumer, rose 2.48 million barrels in the week ended Dec. 30, the Energy Department report also showed. Supplies were forecast (DOEASMGS) to gain 1 million barrels, according to the median estimate of 13 analysts surveyed by Bloomberg News. Distillate-fuel (DOESDIST) inventories, which include heating oil and diesel, were up 3.22 million barrels, more than three times the estimated increase of 1 million barrels.

Gasoline supplies in independent storage climbed to the highest level in almost six months in the European hub of Amsterdam-Rotterdam-Antwerp, according to PJK International BV. Stockpiles rose 14 percent to 706,000 metric tons in the week to yesterday, the researcher in Breda, Netherlands, said yesterday.

U.S. payrolls climbed by 155,000 workers after rising 120,000 the previous month, according to the median forecast of 84 economists surveyed by Bloomberg News. The unemployment rate rose after dropping in November to the lowest level in more than two years, the report may also show.

Retail sales in the euro zone dropped 0.8 percent in November, compared with a median forecast of 0.4 percent, and consumer confidence fell to the lowest in more than two years last month, in line with forecasts. A report later today may show factory orders in Germany, the Europe’s largest economy, slid 1.8 percent in November, a Bloomberg survey showed.