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OPEC fretting about fall in oil demand

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Fall in demand for oil is a bit of an oxymoron. Yet, OPEC ministers are losing their sleep over increasing in the global efforts to reduce dependence on oil. In a recent statement, OPEC has warned that it may respond to efforts of curbing oil demand by stunting supply and limiting investment in its oilfields. OPEC believes that its members (oil producers) are as ‘addicted’ to oil revenues as consumers are dependent on regular supplies. Although, the current prices are skyrocketing, there is a prospect of a consequent crash in demand. OPEC is troubled by the thoughts of a repeat of the mid-1980s scenario, when sky-high prices caused a sudden slump in demand and a flood of new supply of oil, eventually brought down crude prices to rock bottom levels. In its monthly oil bulletin, OPEC said: What the leaders and opinion makers of consuming countries seem to have overlooked is that producing countries need security of demand since they, too, are dependent on oil. The comments come in the wake of a U.S. proposal that seeks to reduce gasoline consumption of forecast demand. The U.S. Senate committee has sent a bill that would require the Energy Department to come up with a plan to reduce gasoline consumption of forecast demand by 20 per cent, 35 per cent and 45 per cent in 2017, 2025 and 2030 respectively. The legislation also seeks to boost the usage of alternative fuels. Still, the reaction of the global cartel is a bit premature because the primary hydrocarbons are expected to meet lion’s share of world’s energy needs irrespective of the increasing significance of the alternative fuels. The Saudi Arabian oil minister, Ali bin Ibrahim al-Nuaimi, has said that a drive towards fuel efficiency might trigger a slowdown in the investment by the OPEC members. He says further expansion of Saudi Arabia’s production capacity may not be needed as consumers switch over to ethanol and try to conserve oil. The kingdom – world’s larget exporter of oil – is enhancing its capacity from 11.3 million barrels per day now to 12.5 million barrels per day by the end of 2009. Ali al-Nuaimi has said: Our feeling now with this thrust and push for conservation, efficiency and the use of alternatives is that we probably need not go beyond 12.5 million barrels per day. Saudis will ‘then watch the market for further signals.’ OPEC also says that its members will need to review ‘their future expansion plans.’ With oil prices hovering above $60 for quite a while now, such statements might seem a bit out of place and the oil experts view them as making little sense. It is in the interest of oil producers to enhance capacity and bring down the current level of prices to discourage conservation. The demand for reducing oil consumption is more when prices are high. A fall in prices, on the other hand, tends to reduce intensity of conservation efforts. Source: Thepeninsulaqatar

China discover huge oil deposits in Bohai Bay

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China National Petroleum Corporation (CNPC) has found an oil field with proven reserves of 405.1 million tonnes of oil equivalent in north China’s Bohai Bay, near Caofeidian port in Hebei Province. Experts are hopeful that the discovery of large oil deposits will lead to a rapid growth in CNPC production in the area. Premier Wen Jiabao, with CNPC praised the discovery and quoted that the discovery of the high-quality Nanbao oil field is the most exciting one in more than 40 years, which will help to meet the china needs as the field could contain up to one billion tonnes of oil equivalent. China is the world’s second largest oil consumer, imported a record 145.2 million tonnes crude oil in 2006 or 47 percent of total consumption as domestic output stagnated. Image: igadi Via: AFP

Bill in US Senate to increase fuel efficiency

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Expressing regard on the mounting call for energy security, a key Senate panel on yesterday recommended for increasing fuel efficiency measures for all kinds of vehicles in the US. The bill tabled by Daniel Inouye and Ted Stevens, the democratic and republic senators from Hawaii and Alaska respectively, is the first one to cover vehicles like tractor trailers and large trucks. The proposed law aims at increasing fuel efficiency in the US without harming the domestic auto industry. It targets to achieve fleet fuel economy on a national scale. The bill suggests bringing down the average fuel efficiency to 35 miles per gallon by 2020 for passenger cars, sport utility vehicles and pickup trucks from the present requirement of about 25 mpg. To comply with the projected 40 percent higher average by 2020, the transport sector needs to illustrate an improvement of 4 percent a year in fuel effectiveness. Medium duty and heavy duty trucks, required in trucking and construction, would also require to follow fuel economy by increasing energy efficiency 4 percent a year commencing in 2011. Giving a breather to the auto industry, the bill gives the Transportation Department power to set flexible standards if the automobile sector cannot meet the criteria. The plan is also welcomed by environmentalist lobby as it provides an alternative to the proposal by Detroit based automakers bid to sell flexible fuel vehicles capable of operating on 85 percent ethanol blended fuel by 2009. The environmentalists are opposing the later on the ground that few people in fact, has flex fuel vehicles running on E85 ethanol by that time. IMAGE Via: MSN

Weak demand slashes oil prices to US$61.67 a barrel

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Oil prices slashed below US$62 a barrel in Asian trading amid weak crude demand, as light sweet crude for June delivery dropped 26 cents to US$61.67 a barrel in electronic trading on the New York Mercantile Exchange in Singapore. Market of crude oil is falling continuously, as it is not showing any signs of recovering any time soon, so traders have closed longs. On the close of the last week trading, the contract dipped US$1.26 to settle at US$61.93 a barrel. Tobin Gorey, a commodity strategist with Commonwealth Bank of Australia in Sydney It looks like a continuation, a reaction here in Asia, of the very sharp dip in the U.S. Its taken quite a sharp fall on the open of U.S. trade and quite a few people haven’t quite caught up yet Analysts were worrying about a shortfall in U.S. gasoline supplies ahead of peak summer demand and suspecting that refineries will not be producing enough gasoline by then to meet demand and it will be a pressure point for the market. The market is also affected by the rampant corruption and violent crime in the world’s eighth-largest oil exporter Nigeria. Foreign worker are leaving the country to save their life, as 95 foreign workers have been kidnapped from Nigeria’s oil-rich southern region. In the Nymex trading on Monday morning, heating oil futures lost 0.55 cent to US$1.8254 a gallon (3.8 liters) while natural gas prices fell 12.3 cents to US$7.815 per 1,000 cubic feet. Image: express.howstuffworks Via: iht

Chaos at Nigerian oil fields raises worries for US

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Oil prices slashed below $62 a barrel, despite a rally fired by rebels on Nigeria’s oil industry that halts up to 150,000 barrels per day of exports. Rebels blew up several pipelines on an oil export terminal in Niger Delta, which hinder the supplies to the Brass facility operated by Italian oil group Eni. Work has resumed at Brass until further notice. This attack was the most damaging on oil facilities, which closed down 30 per cent of Nigeria’s total output. Country has lost billions of dollars in lost oil revenue over the past year. Turmoil at Nigeria pumping and exporting area worries other nation like U.S, as weather forecasters strongly believe that there is an above-average chance that a hurricane will hit the Gulf Coast this year, as in 2005 when storms knocked out a swathe of the country’s oil platforms and coastal refineries. U.S. government forecast that global demand for oil would increase to 84.6 million bpd, up 400,000 bpd from its previous forecast that mounts the U.S. demand at 20.7 million bpd, from last month’s 20.68 million bpd forecast. Although U.S. crude fell 28 cents at $61.98, but it firmly believe that demand will surge on harsh Atlantic hurricane season. Crude stocks expected to rise to 400,000 barrels. Image: imageshack Via: financial times

Poor maintenance behind BP oil spill in Alaska

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Misdemeanor cost cutting and profit increase intention of the British Petroleum (BP) were the reasons behind Alaska’s worst ever onshore oil spill in March 2006. Two reports released by the BP Plc, hold the management culture of the company responsible for the accident. These accusations have surfaced after a U.S. congressional committee investigating the effect of oil spill in Alaska found that the draconian cutting in the maintenance cost by the BP led to fissures in a moldy oil pipeline at Prudhoe Bay, oozing at least 200,000 gallons of crude oil in the Arctic tundra area. An aid to the US Congressional Committee investigating the matter said, “The reports speak to the fact that top-down cost cutting was going on without any risk analysis.” To add to this, a case study prepared by CC Technologies, a firm specializing in pipeline corrosion control revealed that poor maintenance practices by BP, particularly not flushing out sediments inside the transport pipeline allowed corrosive bacteria to grow and effect the spill. Even the spokesman of BP, Daren Beaudo, confirmed this. He said, “The sediment was certainly a contributing factor, as well as the slow flow of oil through the pipe.” The incident is now being discussed by linking to 2005 fatal explosion at BP’s refinery in Texas City that killed 15 workers and injured 170 others. The stringent cost cutting measures by the company led to BP Texas not using an apparatus called a pig to unsoil the inside of the transit pipeline since 1998. Accumulation of silt within shielded the bacteria and caused blasts. Alaska state records illustrate BP had identified for years that sediment was building up in the pipelines. Seeing the pressure piling on, BP is about to overhaul its entire top management in the US. The head of American operations is being given more power to ensure proper maintenance and managers are being appointed to make sure that operating units conform to BP’s corporate policies and responsibilities. Image Via:CNN

Democrats to take on Big Oil on Gas price issue

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Democrats in the US Congress have decided to take on big oil companies after the gasoline prices hit a near-record $3.05 per gallon within a week. Picketing in front of an Exxon station near the Capitol Hill, half a dozen senators belonging to the party, vowed to sponsor a legislation to control the oil industries, though the analysts opine that such a bill has scanty effects on oil companies. It is well known that gas prices are getting higher, and American people are concerned about it. Adding to their protest at the station on Massachusetts Avenue, lawmakers have already been look into breaking up the monster companies. The Senate Commerce Committee adopted Sen. Maria Cantwell’s anti-price-gouging bill on Tuesday. Sen. Bernard Sanders is to sponsor bill on a windfall profits tax, pointing to $440 billion in proceeds over the past six years for the nation’s five major oil companies. He said, “I think it’s time to say to these people, ‘Stop ripping off the American people.” The Energy Information Administration of the US federal government earlier predicted unleaded gasoline price as $2.95 a gallon this summer, 11 cents a gallon rise compared to last summer. This week in a press release, it said, “Continuing problems for refineries in the United States and abroad, combined with strong global gasoline demand, have raised our projected average summer gasoline price by 14 cents per gallon.” In a mid-April survey conducted by Washington Post-ABC News, the Americans expressed strong views against the rising gasoline prices. More than two-thirds of U.S. citizens said that gasoline price swell had caused financial suffering for their households whereas 36 percent said that the hardship had been grim. Over the preceding four years congressional outrage on price increases have become a ritual.Even last year, the Republican dominated Congress discussed a $100 discount for consumers, a levy on oil inventories, steps against price scrape and regulatory changes. But most of these washed out at the end of the legislative sessions. This time, Democrats have focused on two-prong strategy on gasoline prices. First one is direct measures like pricing bill and secondly, for increase in fuel efficiency . On Tuesday, Nancy Pelosi, the house chairwoman asked the Energy and Commerce Committee to adopt a bill proposed by Republican Bart Stupak to give the federal government more authority to pursue indictments of price gouging. This bill backed by 100 co-sponsors, aims at preventing unconscionably extreme pricing or instances of gross discrepancy between the prices of crude oil and gasoline and calling for tough penalties, including fines up to $150 million or up to 10 years in imprisonment for executives. It is scheduled for hearing on May 27. But analysts are cynic about efficacy of such a bill. Even last year, on congressional query on price gouging, Federal Trade Commission could barely define it. American Petroleum Institute economist John C. Felmy told at a Senate Committee hearing, “The price-gouging legislation was of grave concern. It is so vaguely written in terms of what is price gouging and has such onerous penalties that we are very concerned that it could have unintended consequences. Gasoline suppliers, uncertain about their ability to raise prices, might just shut down.” Democrats representatives blame a series of oil mergers in past years for giving large companies the market control to drive up price margins. David Sexton, president of Shell Oil Products, disagrees with this view. He said, “I would beg to differ about whether this is a question of industry concentration and instead a factor of supply-and-demand economics.” Democrats are also prepared to bring a bill to mandate a 10-miles-per-gallon boost in fuel efficiency for new vehicles over coming 10 years. But this won’t look potent to lower gasoline prices. Severin Borenstein, director of the University of California Energy Institute told, “This is the usual song and dance that politicians feel the need to go through when prices go up. The increase in mileage standards would not be enough to offset the growth in demand as the economy and population grow.” Image Via:Washington Post

Industry bigwigs stay away from Oil auction in Nigeria

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Several of the big names in the oil industry failed to turn up at the auction of oil blocks that the Nigerian government undertook yesterday. The outgoing Nigerian government put up for auction nearly 45 oil exploration licenses on Friday, but managed to attract only the small companies and that too for approximately half the total number of blocks. Despite having been courted in advance, several Western oil corporations decided to stay away from the bid, deterred by the political uncertainty and rampant violence in the country. The current government is to vacate office in the favor of a new government, which will step in on 29 May. The investors were worried by the fact that the contracts might not stand in the long term. The timing of the auction is surprising indeed, given that the government will vacate its offices in three weeks. A Nigerian court had passed an order, a day before, asking the government not to sell two of the oil exploration sites and the fact that government has gone ahead is bound to raise some concerns. Majority of the bids were submitted by domestic oil companies. The few foreign bidders were virtual unknowns. Amongst the 11 deep offshore blocks, only two were bought by Yorkshire Energy World – a small UK firm. Of the 11 blocks on the continental shelf, seven were claimed. 11 inland blocks, in areas that are not considered very prospective, received no bids at all. The process also suffered from lack of transparency. Ten investors, mostly belonging to China and India, were granted preferential rights on 20 blocks in return for a promise to invest in the Nigerian infrastructure. These firms include: CNOOC (China), CNPC (China), ONGC Mittal (India), KNOC (Korea), Repsol (Spain) and Centrica (Britain). Analysts say that the decision to grant priority rights to some companies undermined the whole reason of auction and compelled many Western companies to stay away from the entire process. Another reason for lack of foreign interest could be the violence that grips the entire Niger Delta and shows no signs of abating. This month alone, nearly 30 foreigners have been abducted for ransom in the region. Even though there was an evident lack of interest, analysts believe that it could have been worse. Now it only remains to be seen whether President Olusegun Obasanjo, pushes ahead and finalises the deals with successful bidders. This would give him only 18 days to finalize the deals which were six to nine months in the making. Image Read

IEA urges OPEC to raise output to ease tight oil, crude supplies

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The International Energy Agency has warned of a summer of worries in global oil and products markets unless the Organization of Petroleum Exporting Countries introduces a substantial output increase shortly. In its closely watched monthly oil-market report, the Organization for Economic Cooperation and Development’s energy-security watchdog raised a serious question over the capacity of refiners and the keenness of OPEC to meet a 1.6 million barrels-a-day jump in oil-product demand in June. The agency also noted that suggestions by OPEC officials that there is no need to boost its production levels ‘appear wide off the mark’. The IEA has said that it was alarmed that the market might struggle to keep up with rising demand for oil products. It has urged oil cartel OPEC to increase its export ceilings to bridge the potential shortfall. Petrol prices could be set for a significant jump in the coming months, after the world’s important energy expert alerted that fuel prices were expected to rise later this year. The Paris-based IEA also raise alarm that continued unrest in Nigeria, the world’s sixth-biggest crude exporter, would also support the price in the coming months. Economists and experts have all the reasons to be worried as any further increase in oil prices could push inflation higher in the coming year. The IEA in its report said it expected global oil demand to fall slightly this year, but added that oil and petrol markets could tighten. The IEA left its 2007 oil demand growth forecast unchanged at 1.8 percent or 1.5 million barrels per day. At the same time it lowered its non-OPEC supply growth forecast for 2007 by 100,000 barrels per day and raised estimated demand for OPEC oil in the third quarter alone by up to 400,000 barrels per day. In the world’s one of the leading exporter of crude oil Nigeria, militant attacks have already closed a quarter of production so far. The IEA anticipated total Nigerian outages had swelled up to 815,000 barrels per day in early May. The IEA has further noted in its report that since the OPEC was ‘apparently unconvinced of the need to review crude production before its scheduled September meeting, steady output at current levels would lead to the group undershooting our calculated range for a call on it crude, and thus tightening stock further.’ Moreover, oil prices shot up above $62 a barrel Friday after the report from the IEA raised concerns about the market’s ability to meet an expected jump in demand for oil-based products. Soon after the report became public fears that world oil prices could soar to record levels of $80 a barrel this year started to emerge in markets. Image Read

Russia gets gas pipeline deal; now Europe to dance on its tune

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Russia, Turkmenistan and Kazakhstan have agreed to build a new natural gas pipeline around the Caspian Sea, giving Russia significant control over Central Asia’s massive natural gas reserves. The agreement ensures Russia’s supremacy over Turkmenistan’s gas and gives a major setback to US and European plans to send Central Asian natural gas exports directly to Europe. Agreement is set to sign in September this year and Russian President assured that the deal would increase energy supplies to Europe. The sketch for the new pipeline will draw from the Turkmenistan, through Kazakhstan to Russia and Caspian shore pipeline will have capacity of 10 billion cubic meters per year. The deal represents a victory for Russia, which buys Turkmen gas at below-market prices, increasing Washington, Brussels and Beijing’s, woes, who have all been vying for direct access to Turkmenistan’s gas. U.S. officials have already criticized the growing Russian supremacy around the Caspian Sea oil sources as US Vice President Dick Cheney said new energy routes that bypass Russia as tools for intimidation and blackmail. Russia is getting handsome business out of the deal as at present Russia pays only $100 per cubic meter of gas for Turkmenistan and then resells it to European customers for $250 per cubic meter and further improvements to existing gas pipelines will definitely add millions to Russian authority. For two decades, Turkmenistan was facing isolation from the outer world but now country’s new leader Gurbanguli Berdymukhammedov shows a sign to improve its relation as he hinted to open the possibility to construct U.S.-supported pipeline, along with the prolonged under consideration pipeline projects to Iran, China, Afghanistan, India and Pakistan. Image: jamestown Via: BBC