Santos today outlined its plans to grow production to more than 100 MMboe by 2025, almost doubling current levels of production.
Speaking at the company’s Investor Day in Sydney, Santos Managing Director and CEO Kevin Gallagher said the successful delivery of the transform-build-grow strategy presented to the market in 2016 had now positioned the company for disciplined growth.
Gallagher said since the beginning of 2016, Santos’ strategy has delivered:
- A diversified portfolio of five long-life natural gas assets generating free cash flow at ~$40/bbl oil price.Australia’s lowest-cost onshore operations.
- A strong balance sheet to support growth.
- The reinstatement of shareholder dividends.
- The sale of non-core assets.
“Our strategy has been to establish a disciplined low-cost operating model that delivers strong cash flows through the oil price cycle,” Gallagher said.
“Subject to regulatory approvals, the recently announced acquisition of Quadrant Energy will further reduce our breakeven oil price and deliver operatorship of a high quality portfolio of low-cost, long-life conventional Western Australian natural gas assets.
“It would also give us a leading position in the highly prospective Bedout basin, including the recent significant oil discovery at Dorado.
“We are now positioned for disciplined growth leveraging existing infrastructure in all five of our assets in the portfolio and are targeting production of more than 100 MMboe by 2025.”
This disciplined growth portfolio includes:
- Barossa backfill to Darwin LNG – targeting FID by the end of 2019.
- PNG LNG expansion and proposed farm-in to P’nyang.
- Cooper basin, GLNG, and Eastern Queensland growth.
- Quadrant acquisition, including Dorado oil.
Oman’s Renaissance Services SAOG, a service provider to the oil and gas industry, is considering an initial public offering for its Topaz Energy & Marine unit, according to people familiar with the matter.
Renaissance, which has a market capitalization of about $379 million, could seek a valuation of about $1.5 billion for the Dubai-based business, the people said. Goldman Sachs Group Inc. and Morgan Stanley are advising on the share sale, which could take place next year in London, said the people, asking not to be identified as the details aren’t public.
Valuation and location are still being discussed and no final decisions have been made, the people said. Renaissance may also choose to retain its stake in the division, for now, they said. Renaissance had abandoned a London IPO of the unit in 2011 and considered selling it a year later. Topaz raised $203 million in May to refinance its debt.
“Given the extensive 3D seismic that exists, these results will be integrated with the existing data set, which should allow for further improvements,” they said in a note.
Explorers have returned to Namibia with the rally in crude this year, hoping to revive prospects in the southern African nation that went quiet after at least 14 wells failed to find commercial oil deposits. Exxon Mobil Corp. bought stakes in Namibian fields in August, while Chariot Oil & Gas Ltd. has contracted the Ocean Rig Poseidon — the same rig used by Tullow — to drill a well this year.
“The Cormorant-1 frontier exploration well was a bold attempt to open a new oil play,” Tullow’s exploration director, Angus McCoss, said in a statement. “We will analyze the data gathered before deciding on any future activity.”
Appraisal well Shwe Yee Htun-2 has been successfully drilled with formation evaluation results indicating a gas column and net pay thickness that substantially exceeds prior expectations, according to MRPL E&P.
The domestic oil and gas firm said this equates to a track record amounting to 100-percent success with five gas discoveries achieved in five wells drilled in Myanmar offshore Block A-6.
The Shwe Yee Htun-2, an appraisal well in offshore block A-6, was tested to be able to produce natural gas, according to an official announcement from the Ministry of Electricity and Energy on September 22.
The well located at about 102 kilometers northwest of Pathein, Ayeyarwady Region, was spudded-in on July 20, 2018, by Dhriubhai Deep Water KG2 (DDKG2) rig.
It reached a total depth of 15,912 feet (4,850 meters) in a water depth of 7,628 feet (2,325 meters). The minimum total gross gas column based on wireline pressure data from both wells is now estimated to be approximately 787 feet (240 meters). Wireline formation evaluation also indicates that Shwe Yee Htun-2 encountered 131 feet (40 meters) of net gas pay.
This discovery showed a gas reservoir which is larger than expected, the company said. MRPL E&P is its Production Sharing Contract (PSC) operator.
As of September 22, drill stem test results indicate Shwe Yee Htun-2 achieving a flow rate of 50 million standard cubic feet per day of gas limited by testing equipment through a 40/64 choke. The well is now being plugged and abandoned as planned.
“This discovery makes a very great potential to go to commerciality. We will have to discuss with JV firms and MOGE. It is extremely promising to go from commercial discovery to development. No new drilling will be made during this year. It is likely in the coming years. To carry on to development stage, negotiations will have to make with both MOGE and JV firms,” U Tint Swe, MPRL E&P’s executive director, told The Myanmar Times.
At this offshore Block A-6, exploring works have been jointly done between the companies – MPRL E&P, a Myanmar company that has 20 percent stake; Woodside Energy, an Australian company that has 40 percent stake; and French Total that has 40 percent stake.
“Our back-to-back ultra-deepwater drilling campaigns in Block A-6 reinforces MPRL E&P’s commitment towards unlocking the energy resources necessary to drive further progress in Myanmar; energy resources that are necessary to meet the rapidly growing energy demand not only in our country but also in the Asia Pacific region,” said CEO U Moe Myint.
Among the offshore oil and gas exploration projects, Yadana, Shwe, Zawtika, and Yetagun are now in progress. From these fields, a further two new potential blocks have been discovered, according to state-owned Myanma Oil and Gas Enterprise.
The ministry will invite international tenders for up to 31 oil and gas exploration fields in early next year.
DALLAS — Halliburton Company has released the iCruise Intelligent Rotary Steerable System (RSS), a breakthrough technology that delivers faster drilling, accurate steering and longer laterals.
The iCruise modular design can be configured to drill a long lateral or to increase accuracy in formations where well trajectory changes rapidly. Steerability and cutting efficiency can be further improved by matching the new Halliburton GeoTech (GTi) drill bit with the iCruise system.
“Halliburton has engineered a rotary steerable system that incorporates advanced sensors and electronics, sophisticated algorithms and high-speed processors to help operators place wells more accurately, reduce well time and maximize asset value,” said Lamar Duhon, V.P. of Sperry Drilling. “The system can also guide decisions around drilling parameters, vibration mitigation and maintenance to improve reliability.”
Operators have deployed the iCruise system in multiple basins around the world including in North America and the Middle East. In North America, iCruise helped an operator drill more than one mile in a complex reservoir while geosteering through a 30-ft productive zone. The system maintained the wellbore 100% in the reservoir reducing time and maximizing recovery.
LONDON (Bloomberg) — The rise of U.S. shale oil is set to extend well into the 2020s, stealing market share from OPEC, the group said in its latest World Oil Outlook.
Total supply from outside of the Organization of Petroleum Exporting Countries will surge by 8.6 MMbpd from 2017 to 2023, to 66.1 MMbpd. This will mainly be driven by increases in U.S. shale oil output, the report said. The estimates from this year’s report are a slight increase from those of the previous year.
American tight oil production will rise to 16 MMbpd by the late 2020s, the report said, making up almost 25% of total non-OPEC supply by then.
Once U.S. production peaks, demand for OPEC’s oil should grow again, rising by 10.5 MMbpd from 2017 to 2040. However, OPEC forecasts that its share of the global crude supply mix will rise just 2 percentage points, to 36%, by 2040.
“On the supply side, the key theme is the sustained recovery and significant growth in U.S. tight oil production,” OPEC said in the report. “The long-term focus for additional liquids remains on OPEC.”
Brent has gained about 18% so far this year — at times topping $80/bbl — as production cuts from OPEC and its allies, as well as robust demand growth, have supported prices. The U.S. benchmark, West Texas Intermediate, has risen by 17% since the start of the year, reaching more than $75/bbl.
Higher prices have helped to boost investment in crude globally, particularly in U.S. shale projects. Weekly American oil exports reached as much as 3 MMbpd in June, while production has set several records this year.
It’s not just the U.S. that’s offering up stiff competition for OPEC. Supplies are also forecast to grow from other producers outside the bloc including Canada, Kazakhstan and Brazil, which will collectively add another 2.6 MMbpd to markets by 2023.
OPEC said that global oil demand is set to increase by 14.5 MMbpd by 2040, to 111.7 MMbpd. That’s up from 97.2 million last year. However, the pace of growth will slow over time. In order to meet global crude demand growth, almost $11 trillion of investment will be needed across the industry to 2040, the producer group said.
The report says that oil is set to retain the highest share in the global energy mix through to 2040. However crude’s share will fall to 28% by then, down from 32% in 2015. OPEC forecasts that despite relatively low demand growth for fossil fuels through 2040, they will remain “the dominant component” in the global energy mix, with a share of 75% in 2040 — a drop of 6 percentage points from 2015.
“While investments picked up slightly in 2017 compared to the previous two years, and the expectations are for higher levels again in 2018, it is vital that as an industry we ensure there is timely and adequate investment so as not to lead to a supply shortage in the future,” OPEC Secretary-General Mohammad Barkindo said.
OPEC launched the report on Sunday in Algiers, as its members met there with allies to discuss whether to increase production. OPEC and other producers allies tried in the Algerian capital to reassure the market that more oil is coming but stopped short of committing to the urgent supply boost that some people are looking for — notably U.S. president Donald Trump. The meeting ended without any member committing to a specific output increase, delegates said.
SINGAPORE (Bloomberg) — The relationship between two major oil benchmarks is charting an unexpected course as U.S. sanctions take Iranian crude out of the market.
As demand for alternative Middle Eastern supply increases, regional marker Dubai crude has reason to strengthen. Yet it’s weakening against London’s Brent — an oil grade with very different chemical characteristics that’s used to price barrels from Europe to Africa.
Brent’s gaining more because futures and derivatives linked to it are accessible to an array of financial investors and traders via a highly liquid market, compared with relatively niche over-the-counter and clearing-house platforms for Dubai. So broader concerns over a potential supply crunch are being reflected to a greater extent in the London marker.
“With the disappearance of Iranian oil, Dubai should be stronger but Brent is outperforming,” said John Driscoll, the chief strategist at JTD Energy Services Pte. “Speculators such as funds, index managers, traders and even oil majors could be taking positions in the Brent complex that includes physical and derivative instruments. If you’re going to play big, this is the market to do it.”
Investors’ bullish bets on Brent have risen more than 35% over the past month in the lead up to the U.S. renewal of sanctions on Iran’s crude exports, according to ICE Futures Europe exchange data. Prices are up about 40% in the past year and are near $80/bbl.
While U.S. measures targeting Iranian exports will go into effect only on Nov. 4, the impending restrictions are already succeeding in forcing buyers to curb purchases. That’s creating demand for similar-quality medium- sour crudes, which have a relatively high sulfur content and lower API gravity. Dubai has traditionally been the benchmark for such supply.
The market for high-sulfur oil was already squeezed due to falling output in Venezuela before Iranian exports were threatened. Over the past few months, it’s tightened further after refiners from nations including India, China and Japan cut or halted imports from the Islamic republic and boosted purchases of other Middle East grades.
While near-term Dubai prices have gained, the Middle East benchmark’s advance is being outpaced by Brent — the marker for light-sweet oil with lower sulfur content and higher gravity. The London crude’s premium, as measured by exchange of futures for swaps, has almost doubled to near $3.50/bbl over the last month, according to data from PVM Oil Associates Ltd.
That rising premium has left traders with more to consider when using the EFS to assess the viability of buying and selling cargoes from the Atlantic Basin to Asia.
“Asian refiners rely on the EFS as a key buying signal,” said Driscoll, who has spent more than 30 years in the oil-trading industry. “When the EFS narrows, they load up on the light Brent-based grades. When it blows out, take the heavier Middle Eastern crudes.”
Dubai’s relative weakness is boosting the status of rival Middle East benchmark Oman crude, with pricing for the medium-sour oil increasingly being accepted as an alternative reference. The grade, processed in top refineries in China and India, is traded on a privately negotiated basis as well as on a physically deliverable futures platform on the Dubai Mercantile Exchange.
An Oman cargo for November loading is currently priced at $2/bbl over Dubai, reflecting the strong premiums seen across competing varieties from the Middle East, Russia and Latin America, according to a Bloomberg survey of four traders who participate in the market.
In the first two weeks of September, Iran sold an average 1.6 MMbpd of crude oil, down from 2.5 MMbpd in April, according to Bloomberg tanker tracking. U.S. President Donald Trump in May ripped up a diplomatic deal that Barack Obama negotiated to curtail Tehran’s nuclear program.
Apart from the sanctions, worries over available spare capacity and a surge in profits from producing gasoline and gasoil compared with heavier residual fuels has lifted sentiment for light-sweet oil, which is typically easier to process and turn into lucrative products such as diesel.
“Profits from producing distillates versus fuel oil in Asia have surged, supporting light-sweet Brent crude while weighing on the heavier grades such as Dubai,” said Den Syahril, a Singapore-based senior analyst at industry consultant FGE. “With crude markets as finely balanced as they are now, traders taking large positions in the oil-futures market can cause a pronounced impact and cause wild swings in benchmarks such as Brent.”
U.S. Gas a No-go for Chinese Buyers Despite Weaker Tariff
Even with China’s smaller-than-threatened tariff on U.S. natural gas, American cargoes may still be kryptonite for Chinese traders trying to navigate the ongoing trade war.
Chinese buyers will seek to avoid purchasing U.S. liquefied natural gas as long as any tariffs are in place because of the risk that duties may rise further and possibly without warning, according to officials from four importers. While they said they would prioritize cargoes from other suppliers, they couldn’t entirely rule out buying U.S. shipments. The officials asked not to be identified discussing procurement strategy.
China announced Tuesday a 10% tariff on American goods, including LNG, starting Sept. 24 in retaliation for a similar-sized levy imposed by the U.S. That China struck below the 25% duty it threatened last month was met with relief, with gas futures in New York jumping more than 4% while companies that develop U.S. export projects, such as Tellurian Inc. and Cheniere Energy, saw their share’s rally.
But the ongoing trade tensions are seen turning off buyers in China, the world’s biggest and fastest-growing natural gas market. That could go for both taking individual, or so-called spot, cargoes, as well as tying themselves to projects with long-term spending and supply commitments in the U.S., where more than a dozen projects are seeking about $139 billion in investments.
“For a Chinese buyer, the overall risk profile for procuring U.S. LNG remains heightened,” Saul Kavonic, Credit Suisse Group’s director of Asia energy research, said by email. “Even with a smaller tariff, there has likely been some longstanding damage done to the perception of reliability of U.S. LNG supply in the eyes of Chinese buyers who will shape the next wave of global LNG projects.”
U.S. LNG sales are linked to the nation’s benchmark Henry Hub gas price, which is down about 1% this year, while supply from most other exporters is tied to oil, which has gained 18% over that period. That’s made American fuel cheaper than other sources, an advantage that’s being eroded by tariffs.
China may shift its buying from the U.S. to other exporters, including Australia, Qatar and Papua New Guinea, according to Bloomberg Intelligence analyst’s Lu Wang and Kunal Agrawal.
PetroChina Co. signed a deal earlier this month with Qatargas Operating to purchase 3.4 MM tons of LNG annually, the Chinese company’s biggest supply deal, while inking a mid-term contract with the PNG LNG project earlier this year. PetroChina’s parent, China National Petroleum, signed a deal to buy U.S. LNG from Cheniere in February. CNPC didn’t respond to requests for comment.
MARKET WATCH : Oil prices fall from months-long highs on emerging market risks
Prices for both light, sweet crude and Brent crude were down Sept. 13 following days of gains as investors focus on demand concerns as trade disputes and possible emerging market crises loom.
In its Oil Market Report released on Sept. 13, the International Energy Agency said global economic growth is still expected to be 3.9% in 2018 and 2019 and it wouldn’t be long before world oil demand reaches 100 million b/d. However, “the economic environment in some emerging markets is deteriorating,” the report said (OGJ Online, Sept. 13, 2018).
“While worries about emerging markets are mounting, alongside fears of escalating trade disputes, it is currently difficult to assess whether it will lead to an economic slowdown in the timeframe of IEA’s forecast,” the report continued.
The light, sweet crude contract for October delivery on the New York Mercantile Exchange fell $1.78 to $68.59/bbl on Sept. 13. The November contract decreased $1.75 to settle at $68.41/bbl.
The NYMEX natural gas price for October was down 1¢ to a rounded $2.82/MMbtu. The Henry Hub cash gas was $2.93/MMbtu, unchanged from the day prior.
Ultralow-sulfur diesel was down 1¢ for October at a rounded $2.23/gal. The NYMEX reformulated gasoline blendstock for October fell 4¢ to a rounded $1.99/gal.
Brent crude oil for November fell $1.56 to $78.18/bbl on London’s International Commodity Exchange. The December contract declined $1.54 to $77.75/bbl. The gas oil contract for October was $683.50/tonne.
U.S. Overtakes Russia, Saudi Arabia as World’s Largest Crude Producer
The United States likely surpassed Russia and Saudi Arabia to become the world’s largest crude producer earlier this year, based on preliminary estimates in EIA’s Short-Term Energy Outlook (STEO).
In February, U.S. crude oil production exceeded that of Saudi Arabia for the first time in more than two decades. In June and August, the United States surpassed Russia in crude oil production for the first time since February 1999.
Although EIA does not publish crude oil production forecasts for Russia and Saudi Arabia in STEO, EIA expects that U.S. crude oil production will continue to exceed Russian and Saudi Arabian crude oil production for the remaining months of 2018 and through 2019.
U.S. crude oil production, particularly from light sweet crude oil grades, has rapidly increased since 2011. Much of the recent growth has occurred in areas such as the Permian region in western Texas and eastern New Mexico, the Federal Offshore Gulf of Mexico, and the Bakken region in North Dakota and Montana.
The oil price decline in mid-2014 resulted in U.S. producers reducing their costs and temporarily scaling back crude oil production.
However, after crude oil prices increased in early 2016, investment and production began increasing later that year. By comparison, Russia and Saudi Arabia have maintained relatively steady crude oil production growth in recent years.
Saudi Arabia’s crude oil and other liquids production data are EIA internal estimates. Russian data mainly come from the Russian Ministry of Oil, which publishes crude oil and condensate numbers.
Other sources used to inform these estimates include data from major producing companies, international organizations (such as the International Energy Agency), and industry publications, among others.
OPEC Highlights Threats to Oil Demand Before Meeting on Output
OPEC highlighted a range of risks brewing in the global economy that could hurt oil demand as ministers prepared for a meeting on production policy, marking a shift from last month’s outlook.
Trade tensions, monetary tightening by central banks and the financial problems of some emerging nations “constitute challenges to the current global economic growth trend,” the organization’s research department said in its monthly report. “It will be essential to monitor the uncertainty in currency and financial markets.”
OPEC, and allies led by Russia will meet in Algiers later this month to assess world markets, having agreed to boost production at their last meeting in June. Oil prices are trading near their highest in two months in London, at almost $80/bbl, as demand concerns arising from U.S.-China trade tensions are countered by supply losses from Iran to Venezuela.
OPEC’s report also forecasts small cutbacks to oil demand, trimming estimates for growth in 2019 by 20,000 bpd to 1.41 MMbpd. Yet it pointed to looming dangers that could further impede consumption, such as fragility in the Argentine and Turkish economies, currency depreciation in India and rising protectionism.
It’s a marked shift in tone from last month’s report, which noted that “healthy economic developments and increased industrial activity” would likely support demand for distillate fuels.
Although this month’s gathering in Algiers is a sub-committee review, rather than a full-scale official OPEC meeting, most major producers will attend. Supply data in the group’s report indicated there could be tensions when ministers get together.
Output slumped further in OPEC nation Iran, dropping by 150,000 bpd to 3.58 MMbpd in August. Saudi Arabia — the organization’s biggest producer — bolstered supplies again to 10.4 MMbpd, according to the report.
The two nations remain sharply divided over the details of the agreement reached in June. The Saudis, supported by other Gulf nations and Russia, said that OPEC had agreed to add about 1 MMbpd to world markets.
On the other hand, Iran, which is seeing its supply pressured by U.S. sanctions, contends that the boost agreed was much smaller, and has complained about increases by fellow members.
The output additions by the Saudis over the past few months, filling in the gap left by Iran, will almost certainly arise in the talks scheduled for Sept. 23 in the Algerian capital.