Thursday, December 18, 2014

IPA Calls For Change of Gas Allocation System

Jakarta, Bisnis Indonesia  – The Indonesian Petroleum Association (IPA) called for revision of gas  allocation approval system as in application  it takes long time.

Chairman of the Board of Directors of the Indonesian Petroleum Association (IPA) Lukman Mafoedz said that the gas allocation system needs a number of approvals from various parties such as from the SKK Migas , the country’s oil and gas regulator and the director general of oil and gas at the Ministry of Energy and Mineral Resources.

“Even there have been longer time for revisions sometimes in case of changing situation related to commercial matters,” he said on Wednesday, December 17, 2014.

In addition, approvals are long to get and those getting gas allocation have not  gone  immediately in action for further process.

This has caused companies which have discovered gas allocation cannot directly  sell its gas  as they must wait gas purchasing deals  from buyers , he said.

“The gas allocation should be removed and leave it to the market mechanism based on a business-to-business scheme,” he said in an interview with Bisnis Indonesia.

Under such market mechanism, he said, producers or production sharing contractors (PSCs) can seek reliable  buyers who have strong buying commitment.
Under the scheme, there will be no impacts for the electricity sector, he said in the interview.

He said the state utility company PT Perusahaan Listrik Negara (PLN) is a priority of gas sellers as the state utility company so far buys gas in good prices and smooth payment.

Under the mechanism, the government can remain in a good control over gas prices as there have been gas sales agreements (GSA) to be approved by the government, too.

Can Be Monetized

He was of the view that the simplification of the allocation system will help the domestic industry in more competitiveness so that gas which has been discovered can be monetized soon.

“Contractors can soon get  return of investment in handling gas  projects,” he said in the interview. 

Meanwhile, separately acting secretary general of oil and gas at  the Ministry of Energy and Mineral Resources (ESDM), Naryanto Wagimin,  said that the gas allocation system is already under the ESDM Ministerial Regulation (Permen) ESDM No 03/2010 on the allocation and the Utilization of Gas for the Domestic Need.

“The allocation of gas is for fertilizer  and electricity production  cannot be  based on  the market scheme or based on business-to-business scheme,” he said recently.

He said the government remains in a commitment that production sharing contractors to comply with the ESDM Ministerial Regulation, adding that the market scheme is okay to be applied for other sectors outside the fertilizer and electricity sectors by considering the condition of the state revenue.

In the Chapter 6, article 3 of the ESDM Ministerial Regulation No 03 of 2010, it is stated that  the allocation and the utilization of  gas is based on priorities such as to increase the production of oil and gas and second is to improve the development of the fertilizer  production, and third is for the electricity sector and  industrial sector in general.                 

Wednesday, December 17, 2014

ADB Trims Growth Forecasts for Developing Asia, Says Cheaper Oil Good for Most

Manila. The Asian Development Bank slightly trimmed its growth forecast for developing Asia for this year and next, but said sliding prices for oil should help economies in the region push through with growth reforms.

In its update to the 2014 outlook, ADB said on Wednesday developing Asia was now expected to grow 6.1 percent this year, a tad below its 6.2 percent forecast in September. Growth in 2015 was seen at 6.2 percent, from 6.4 percent previously.

“While growth in the first three quarters of this year was somewhat softer than we had expected, declining oil prices may mean an upside surprise in 2015 as most economies are oil importers,” said ADB chief economist Shang-Jin Wei.

The ADB cut its 2014 and 2015 growth forecasts for China to 7.4 percent and 7.2 percent, respectively, from the 7.5 percent and 7.4 percent estimates made in September, due to falling property prices and the spillover effects on the construction sector.

Reforms brought by Indian Prime Minister Narendra Modi will help his country grow 5.5 percent this year and, if they are extended, should lift growth to 6.3 percent next year, the ADB said.

Southeast Asia is expected to grow slower than previously thought in 2014 and 2015 due to a slackening in economies in the region. The region is seen growing at 4.4 percent in 2014, down from a previous estimate of 4.6 percent, and 5.1 percent in 2015 instead of 5.3 percent.

“Falling global oil prices present a golden opportunity for importers like Indonesia and India to reform their costly fuel subsidy programs,” Wei said. “On the other hand, oil exporters can seize the opportunity to develop their manufacturing sectors as low commodity prices tend to make their real exchange rates more competitive.”

Since June, Brent crude has fallen 49 percent to below $60 a barrel, which means big savings for Southeast Asia’s large oil-importing economies — Thailand, Philippines and Indonesia.
Inflation in the region in 2014 is now forecast to be lower at 3.2 percent in 2014 and 3.5 percent in 2015, compared to the 3.4 percent and 3.7 percent seen in September.


U.S. consumer prices fall on gasoline; eyes on Fed

(Reuters) - U.S. consumer prices recorded their biggest drop in nearly six years in November as gasoline prices tumbled, but that did not change views the Federal Reserve would start raising interest rates in mid-2015.
The Labor Department said on Wednesday its Consumer Price Index (CPI) fell 0.3 percent, the largest decline since December 2008, after being flat in October.
For the 12 months through November, the CPI increased 1.3 percent, the smallest gain since February, after advancing 1.7 percent in October.
Economists who expected the CPI to dip only 0.1 percent from October said Fed officials were likely to shrug off the disinflationary trend as transitory when they issue a statement at the end of a two-day meeting later Wednesday.
"Beside a brief mention about keeping an eye on oil prices, do not expect this inflation report to materially impact today's Fed decision," said Jay Morelock, an economist at FTN Financial in New York.
While inflation is running below the U.S. central bank's target of 2 percent, job growth has shifted into higher gear and the pace of slack absorption in the economy has accelerated in recent months.
The Labor Department report also showed average weekly earnings, adjusted for inflation, recorded their biggest gain in six years in November.
Many economists expect the Fed could signal its intention for a mid-2015 interest rate hike on Wednesday. Such a signal could come through changes to the Fed's so-called forward guidance on rates and new economic projections.
U.S. stocks traded higher, while prices for U.S. Treasury debt fell. The dollar rose against a basket of currencies.
Plunging crude oil prices, which hit a new 5-1/2 year low this week on increased shale production in the United States and slowing global demand, are keeping overall inflation in check for now.
Underlying price pressures also ebbed a bit after showing some signs of creeping up in October.
Stripping out food and energy prices, the so-called core CPI edged up 0.1 percent after rising 0.2 percent in October. In the 12 months through November, the core CPI rose 1.7 percent after increasing 1.8 percent in October.
Low inflation could still urge caution for the Fed, which has kept its short-term interest rate near zero since December 2008.
"The Fed will be walking a fine line in welcoming the healing effects that falling prices at the pump have on consumer balance sheets, while at the same time acknowledging that no one wants inflation that is too low," said Diane Swonk, chief economist at Mesirow Financial in Chicago.
Gasoline prices have recorded their biggest drop since December 2008. They have now declined for five straight months. Within the core CPI, shelter costs increased 0.3 percent last month after rising 0.2 percent in October.

There were also increases in airline fares, medical care and alcohol prices. But new motor vehicle prices fell as did the cost of household furnishings, apparel and used cars and trucks.

Oil holds below $60 as OPEC, Russia keep pumping

(Reuters) - Brent crude oil traded below $60 a barrel on Wednesday, near 5-1/2-year lows, as major oil producers signaled that they would maintain output despite a supply glut and faltering demand in Russia and Europe.
Core Gulf OPEC members have said they are prepared to wait as long as a year for the market to stabilize, undercutting hopes they will step in to stem crude price losses.
Oil prices have almost halved over the last six months as increasing volumes of light, high-quality crude from North American shale have overwhelmed demand.
"Every day now you have some Gulf OPEC member actively trying to talk the market down," said Olivier Jakob, oil analyst at Petromatrix. "OPEC is trying to choke U.S. oil producers."
Front-month Brent fell 20 cents to $59.66 a barrel by 9:47 a.m. ET. The January Brent contract, which expired in the prior session, hit a low of $58.50 on Tuesday, its weakest since May 2009.
U.S. crude fell by 70 cents to $55.23 a barrel, after touching its lowest since May 2009 at $53.60 on Tuesday.
On Wednesday, Iraqi Kurdistan government officials said Iraqi crude oil exports to the Turkish port of Ceyhan could reach 800,000 bpd next year, higher than previously announced. Oil shipments from Angola, Africa's second-largest exporter, are also set to increase in February to 1.86 million barrels per day, the highest since 2012.
Russian Energy Minister Alexander Novak has said Moscow will not cut output in 2015, even if pressure on its finances rises with the economy showing signs of severe stress as the rouble collapses.
The crisis in Russia has sparked further concerns about energy demand growth.
"The weak demand increases the amount of supply that must be removed from the market," said Carsten Fritsch, an analyst with Commerzbank.
In the United States, crude inventories rose by 1.9 million barrels last week, compared with analysts' expectations for a decrease of 2.4 million barrels, data from the American Petroleum Institute showed on Tuesday.
Analysts said stock data from the U.S. Energy Information Administration due on Wednesday could also weigh on market sentiment. [API/S] [EIA/S]
"Unless we see a huge drop in U.S. stocks ... it will be bearish," Fritsch said.

Tuesday, December 16, 2014

Iran Said to Discount Light Crude to Asia to Deepest in 14 Years

Iran is said to be offering its main crude grade to customers in Asia at the deepest discount in 14 years, taking a cue from Saudi Arabia in trimming price differentials.
National Iranian Oil Co. cut its official selling price for January shipments of light crude to Asia to a discount of $1.80 a barrel below the regional benchmark as Middle Eastern producers vie to keep selling in the region, according to four people with knowledge of the decision. An official at NIOC’s crude-marketing department in Tehran declined to comment.
Iran cut the differential to a discount from a premium of 13 cents a barrel to the average of the Oman and Dubai benchmark crudes for December. The light crude grade hasn’t sold at such a steep discount since Bloomberg began tracking the country’s official selling prices in March 2000.
Oil prices have collapsed since the Organization of Petroleum Exporting Countries decided on Nov. 27 to maintain its output target, fanning speculation that Saudi Arabia and other members are determined to make North American shale drillers and other producers share the burden of reducing oversupply. Saudi Arabia’s state oil company prompted speculation that the kingdom was seeking to preserve market share when it lowered prices for November.
Expanding supplies from North American shale deposits coupled with weakening demand growth in China, the world’s second-largest oil consumer, helped push crude into a bear market this year. Middle Eastern producers are increasingly competing with cargoes from Latin America, North Africa and Russia for buyers in Asia.

Arab Light

Saudi Arabian Oil Co. lowered the official selling price for its Arab Light grade to Asia next month to $2 a barrel less than a regional benchmark, the company said by e-mail Dec. 4, marking the biggest discount since Bloomberg began compiling data in June 2000. Saudi Aramco, as the company is known, cut all differentials in January for buyers in Asia and the U.S. and raised them for customers in Europe.
Fellow OPEC members Iraq and Kuwait also cut selling prices to Asia, on Dec. 8 and Dec. 10, respectively.
Iran deepened the discount for Iran Heavy crude to $3.51 a barrel for January sales to buyers in Asia, compared with a $1.66 discount for December, according to the people, who asked not to be identified since the pricing information is confidential. That cut puts Iran’s heavy crude at the deepest discount December 2008.

Saudi Aramco set the discount for its comparable Arab Medium crude at the deepest level since December 2008.


Monday, December 15, 2014

Oil prices fall, stumbling emerging markets dent outlook

(Reuters) - Oil prices fell on Tuesday, with Brent mired near a 5-1/2 year low close to $60 per barrel, as Chinese factory activity slowed for the first time in seven months and stumbling emerging market currencies dented demand expectations.
Oil futures have almost halved since June amid rising output and cooling demand, but producer club OPEC has so far resisted calls to cut production to shore up prices.
Data showing activity in China's factory sector shrank for the first time in seven months in December, adding to a slew of reports showing more fatigue in the world's No.2 economy, further dragged on oil prices.
"China leaves 2014 on a weak note (and) the calls for further monetary stimulus are getting louder," Singapore-based PhillipFutures said on Tuesday.
Brent for January delivery LCOc1 was at $60.70 a barrel at 0520 GMT (12:20 a.m. EST), down 36 cents and close to the 5-1/2-year low of $60.20 hit on Monday.
U.S. crude for January delivery CLc1 was at $55.64 a barrel, down 27 cents, off a low of $55.02 reached on Monday - the weakest since May 2009.
"The oil market is experiencing a cost re-basement which makes determining when the market is oversold extremely difficult," U.S. bank Goldman Sachs said.
"For the market to be oversold, it requires prices to be far below costs, (which) are falling nearly as fast as the price, which means oil producers can spend less to get the same or potentially even more in terms of production," it added.
Analysts said weakening emerging market economies and their currencies were also weighing on oil prices.
In Russia, the central bank hiked its key interest rate by 6.5 percentage points to 17 percent on Tuesday in an attempt to halt a collapse in the rouble.
In India, the Reserve Bank has been intervening in support of the struggling rupee in recent sessions, triggered by a worsening trade deficit, and in Indonesia the rupiah dropped to its lowest value in 16 years against the U.S. dollar amid spiking emerging market volatility.

"The sharp decline in nearly all commodity prices and the weakening in commodity currencies creates headwinds for oil demand in the commodity producing emerging markets in Latin America and the Middle East. Historically these regions didn't contribute much to oil demand, today they do," Goldman Sachs said.

Denmark Claims Potentially Energy-Rich Arctic Waters

Copenhagen. Denmark will lay claim to energy-rich, but contested territory around the North Pole on Monday by submitting data to the UN which it says demonstrates the area is an extension of its continental shelf.

The Danish government said it would tell the UN Commission on the Limits of the Continental Shelf that data collected since 2002 supports its claim to ownership over an area of about 895,000 square kilometers beyond the current nautical borders of Greenland, an autonomous Danish territory.

“The submission of our claim to the continental shelf north of Greenland is a historic and important milestone for the Kingdom of Denmark,” Foreign Minister Martin Lidegaard said in a statement.
“The objective of this huge project is to define the outer limits of our continental shelf and thereby — ultimately — of the Kingdom of Denmark,” he added.

Claims on a continental shelf beyond 200 nautical miles from a country’s borders must be supported by scientific and technical data. However, the remote region is hotly disputed by other countries.

Norway already lays claim to an area overlapping the one outlined in the Danish submission to the UN, and there is “potential overlap with Canada, the Russian Federation and the US,” the Ministry of Foreign Affairs said in a statement.

“It will be up to the parties themselves to negotiate bilateral delimitation agreements,” it said.
Moscow has increased its military presence in the pristine but energy-rich Arctic region, while Canadian Prime Minister Stephen Harper’s government has made asserting sovereignty over an expansive Arctic archipelago and surrounding waters a key policy.

When Russia planted a flag on the Arctic sea bed directly under the North Pole in 2007, Canada raised its voice to highlight that both countries claim sovereignty over the area.
Greenland geographically forms part of North America rather than Europe and is largely self-governed, but it remains part of former colonial master Denmark, which controls foreign affairs and defense policy.

According to a study by the US Geological Survey from 2008, the Arctic could hold 13 percent of the oil and 30 percent of the natural gas still to be discovered in the planet.

The melting of the ice cap also offers shorter shipping routes between the Pacific and the Atlantic oceans, which has attracted the interest of countries far from the Arctic region, including China.

Agence France-Presse, Jakarta Globe