Wednesday, September 17, 2014

BP to cut 275 jobs in Alaska after oil field disposals

(Reuters) - BP (BP.L) will cut around 275 staff and contractor jobs in its Alaska operations in early 2015 following the sale of its interests in four oil fields in the North Slope area, it said on Tuesday.
BP, one of the largest oil producers in Alaska, last April announced the sale of the fields to privately held Hilcorp, though it remains committed to developing Alaska's Prudhoe Bay, the largest oil field in North America.
BP has a total of 8,300 employees and contractors in Alaska, according to its website.
Its plans for expansion in Alaska include an additional investment of $1 billion over five years, including two additional drilling rigs, one in 2015 and a second in 2016. "The Alaska business is still very important to BP. It's just a smaller business than it was before," a BP spokesman said.
BP is also considering production of liquefied natural gas (LNG) from reserves in Alaska, the company has said.
The latest cuts are evidence of BP making divestments to simplify its business globally, analysts at Barclays said, though it has further to go.
"What it has not done is simplify the cost base ... This is set to be the next focus for the group and supports our view that material efficiency gains can be made," Barclays said.
BP shares have come under pressure in recent months due to uncertainties over the size of the fine the company faces over the 2010 Gulf of Mexico oil spill as well as over the impact of Western sanctions on its operations in Russia.

By 6:40 a.m. EDT, BP shares were trading 0.6 percent lower at 466 pence.

OPEC's Badri expects OPEC to lower output target

(Reuters) - OPEC's secretary general said he expected the group to lower its oil output target when it meets in late November, which would be its first formal output cut since the 2008 financial crisis.
Abdullah al-Badri was speaking after meeting Russian Energy Minister Alexander Novak on Tuesday. Oil dropped below OPEC's preferred level of $100 a barrel last week, which also marks the pain threshold for top world oil producer Russia's faltering economy.
Badri was asked if OPEC's 30 million barrels per day output target would still be appropriate next year, when OPEC forecasts lower demand for its crude due to rising supplies from the United States and other countries outside the group.
"No, I don't think so," he said. "I think our production will be maybe 29.5 in 2015, not 30 million barrels per day. I think our target will be lower, maybe by 500,000."
Analysts saw the comments as a sign that some in OPEC are becoming concerned.
"It's a signal and it is quite significant," said analyst Samuel Cizsuk of the Swedish Energy Agency. "It is likely that some of the OPEC members will be fretting a bit about potentially lower prices."
OPEC meets on Nov. 27 to review its oil output policy.
Novak said, however, that he did not discuss coordinating output policy in his meeting with Badri, which had been long scheduled.
Benchmark Brent crude fell to a 26-month low on Monday to under $97 after a sharply lower rate of factory output growth in China, the world's biggest energy consumer, sent shivers through the oil market. Brent regained some ground to reach $99 on Tuesday. [O/R]
Prices had already weakened as reviving oil output from Libya added to supply bloated by U.S. production at its highest since 1986 thanks to the shale boom, and on weakening demand.
OPEC member Libya's climb back to around 1 million bpd of output, despite political uncertainty and conflict there, further soothed consuming nations relieved that turmoil in Iraq, OPEC's second largest producer behind Saudi Arabia, had failed to lower output there significantly.
Saudi Arabia, alone in OPEC with significant capacity to make up for shortfalls, has said it cut its output by 400,000 bpd in August to around 9.6 million bpd as the immediate supply worry appeared to ease. OPEC itself has cut back its projection of demand for its oil.
The oil market is accustomed to calibrations in Saudi oil output while the 30 million bpd OPEC target has remained untouched since it was introduced in 2012. Before then, OPEC had not changed its output target since it made a record cut in supplies in December 2008.
"In the near-term we are very likely to see a further pullback of production by Saudi Arabia to balance the market in Q4, probably around 500,000 bpd but calibrated to events in Libya," said Greg Priddy of analysts Eurasia Group in a note.
OPEC's Badri, usually slow to speculate on OPEC policy ahead of formal meetings, played down the price drop.
"Everybody knows that the price is declining now for the last two months, I don't think this trend will continue. We are predicting that (the) price will come up by the end of the year," Badri said.
"I have seen a lot of oil prices coming up or down and I think this is a fluctuation of seasonal behavior."
Russia has had an uneasy relationship with OPEC. A diplomatic dance around possible oil output cooperation failed to produce significant concrete results, even after the oil price collapse of 2008. OPEC said on Tuesday a further meeting would be held in Moscow in the second half of next year.
Badri said Tuesday's talks had covered broad market topics and taken in a long term perspective, showing continued thawing in the relationship.

"For the last three years we've been progressing very well," Badri told Reuters. "I don't want to talk about the past, the past is past."

Tuesday, September 16, 2014

China to Ban Imports of High Ash, High Sulfur Coal From 2015

Shanghai. China will ban the import and local sale of coal with high ash and sulfur content starting from 2015 in a bid to tackle air pollution, with tough requirements in major coastal cities set to hit Australian miners.

The National Development and Reform Commission (NDRC) policy comes as prices on the GlobalCOAL Newcastle index  slump to a five-year low amid a supply glut and slowing demand from China, the world’s top importer.

China accounts for about a quarter of Australia’s coal exports. It took 54 million metric tons of thermal coal and 30 million tons of metallurgical coal from Australia in 2013. All the thermal coal exceeded the new ash limit, while the metallurgical coal was below the limit, according to consultants Wood Mackenzie.

Under the new regulations, previously reported by Reuters and due to come into effect in January, the government has set different level of requirements on coal grades for mining, local sales and imports.

The most stringent requirements are for cities in the southern Pearl River Delta, the eastern Yangtze River Delta and three northern cities including Beijing, Tianjin and Hebei. These will be banned from burning coal that has more than 16 percent ash and 1 percent sulfur, according to a statement on the NDRC website.

Since the coastal regions such as Guangdong and Zhejiang province are some of China’s top coal importers, the regulations are set to block a sizable amount of imports.

“Coal that does not meet these requirements must not be imported, sold nor transported for long distances,” the NDRC said, adding that the customs authority will check the quality of coal imports.

Much of the high ash coal from Australia was developed specifically for the Chinese market and could now be washed to meet the tighter limit on ash, said Rohan Kendall, Wood Mackenzie’s metals and mining manager for eastern Asia.

“The uncertainty is whether the Chinese market will be willing to pay a bit extra for that lower ash product from Australia,” he said.

Among the larger mines that would not meet restrictions on ash content are BHP Billiton’s  Mount Arthur operations, which produce about 16 million tons a year, Glencore’s Mangoola mine, Rio Tinto’s Hunter Valley operations and Bengalla mine, but it was not clear how much of that goes to China.

The Minerals Council of Australia, which represents the coal industry, and Australia’s official resources forecaster disputed the view of Chinese traders that the new restrictions would hit Australian exporters hardest.

“There is nothing in the information released to date to suggest that Australian coal exporters will be disadvantaged and we are confident that we can meet the proposed specifications,” Minerals Council executive director Greg Evans said in an e-mail to Reuters.

Glencore, the world’s biggest thermal coal exporter, said it was reviewing the proposed restrictions. BHP, which gets about a fifth of its coal revenue from China, said it supports the effort to improve environmental standards.

“We expect to be capable of meeting the proposed NDRC regulations … and do not anticipate a material impact to our business,” BHP coal president Dean Dalla Valle said in a statement e-mailed to Reuters.

Rio Tinto had no immediate comment on the policy.

China will also implement a blanket ban on domestic mining, sale, transportation and imports of coal with ash and sulfur content exceeding 40 percent and 3 percent, respectively.

For coal that will be transported more than 600 kilometers from the production site or receiving ports, the minimum energy requirement was set at 3,940 kcal/kg, with a maximum ash and sulfur content of 20 percent and 1 percent, respectively.

When the regulation is implemented, Australian and South African coal with a heating value of 5,500 kcal/kg will be worst hit, since their ash content hovers around 23 percent to 25 percent and they contain sulfur of 0.8 percent to 1.0 percent, traders have said.

Top steam coal exporter Indonesia, which largely ships fuel with low heating value, sulfur and ash content, will be the least affected.

“It looks unambiguously positive for Indonesia. Almost all of Indonesian coal can meet these limits,” Kendall said.

However, further scrutiny may be needed to determine the impact of the restrictions on Indonesia, as even a chunk of the country’s coal output could be affected by limits on calorific value, according to the country’s main coal association.

“If they are talking about NAR of 3700-3800 being the threshold then we’re OK, but if they say the minimum is 4,000 then we have a problem because most of the coal that we’re exporting to China is 3700 NAR. So we’ll see in detail,” Indonesian Coal Mining Association chairman Bob Kamandanu told Reuters.

Indonesia’s coal exports next year could decline by around 14 percent as a result of China’s and Indonesia’s own trade rules, Kamandanu said.

“A significant amount of coal will be coming out of the market, especially from Indonesia and Australia, and this should be the beginning of a price recovery,” he said.


Indonesia 2015 Coal Exports Seen Down 14% on New Curbs

Jakarta. Indonesia’s coal exports are expected to decline by around 14 percent to 300 million metric tons in 2015 as a result of China’s newly announced import curbs and upcoming local export rules, the country’s top coal industry association said on Tuesday.

China will ban the import and local sale of coal with high ash and sulfur content starting from 2015 in a bid to tackle air pollution.

“Coupled with the Indonesian exporter registration regulation it’s the perfect storm already,” Indonesian Coal Mining Association chairman Bob Kamandanu told Reuters. “Everything that 
can go wrong is happening now.”

Indonesia’s new export rules, due to come into effect next month, are intended to rein in illegal operations. They will force coal miners to register with the central government and make royalty payments upfront before they are allowed to export.

Previously the association said it expects Indonesia, the world’s top exporter of thermal coal, to produce 420 million tons and ship around 350 million tons of coal next year.


Oil hits two-year low; dollar rises ahead of Fed

(Reuters) - Brent crude fell below $97 per barrel on Monday, its lowest level in more than two years, as weak Chinese economic data cut the prospect for demand at a time of abundant supply, while expectations that the Federal Reserve will provide new details this week about its plans to raise interest rates lifted the dollar.
Chinese factory output grew at the weakest pace in nearly six years in August as growth in other key sectors also cooled, raising fears the world's second-largest economy, and the biggest energy consumer, may be at risk of a sharp slowdown.
The Brent LCOc1 contract for October delivery, which expired on Monday, fell as low as $96.21 a barrel, the weakest price since July 2012. The contract later pared losses to settle down 46 cents at $96.65 a barrel. The November contract for Brent LCOX4 fell 8 cents a barrel to settle at $97.88.
News that Russian Energy Minister Alexander Novak will meet OPEC officials on Tuesday in Vienna was cited as helping pull oil prices off lows.
"Maybe the pullback on the China data was a little overdone," said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut, echoing the sentiment of other analysts.
U.S. crude CLc1 rose 65 cents to settle at $92.92 a barrel.
The dollar rose on expectations that the Fed's policy-setting Federal Open Market Committee will affirm the U.S. economy's steady recovery at the end of its two-day meeting on Wednesday and possibly provide a timeline as to when it would start to raise rates.
U.S. manufacturing output fell for the first time in seven months in August, but the underlying trend remained consistent with steadily rising factory activity. That was confirmed by other data showing factory activity in New York state jumped to its highest level in nearly five years in September.
The euro fell 0.2 percent against the dollar to $1.2938, while the dollar index .DXY, a measure of the dollar's strength against a basket of major currencies, traded flat at 84.240. The Japanese yen slipped 0.13 percent against the dollar to 107.18 yen.
Most U.S. stocks fell, dragged lower by the tech sector as investors made room in their portfolios for the planned initial public offering of Chinese e-commerce company Alibaba later this week. Biotech shares also weighed on the Nasdaq.
"The Alibaba IPO is going to have a big effect, drawing money out of some stocks, and how it performs can help say a lot about the tech sector," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
Oil giant Chevron Corp (CVX.N) rose 1.29 percent at $124.24 and contributed the most points to the Dow's rise.
The Dow Jones industrial average .DJI closed up 43.63 points, or 0.26 percent, to 17,031.14. The S&P 500 .SPX fell 1.41 points, or 0.07 percent, to 1,984.13, and the Nasdaq Composite.IXIC lost 48.70 points, or 1.07 percent, to 4,518.90.
MSCI's all-country world index .MIWD00000PUS of equity performance across 45 countries fell 0.19 percent to 425.36.
In Europe, the FTSEurofirst 300 .FTEU3 index of top regional shares closed down 0.05 percent at 1,382.32.

U.S. Treasury debt prices rose on bargain hunting as fixed-income investors focused on signs of spotty economic growth, which could slow the Fed's shift away from loose monetary polices.

Monday, September 15, 2014

Yudhoyono Green Lights $1b Gas Projects

Jakarta. President Susilo Bambang Yudhoyono will inaugurate natural gas projects worth Rp 13.6 trillion ($1.15 billion) in East Kalimantan, Indonesia’s upstream oil-and-gas regulator SKK Migas said in a joint statement on Sunday.

The endeavor aims to develop the Ruby natural gas field located in the Sebuku Block, which is operated by a unit of Abu Dhabi oil and gas company Mudabala Petroleum; and Sisi Nubi 2B field at Mahakam Block operated by Total E&P Indonesie, a unit of French energy company Total.

“The total investment for the two projects reaches Rp 13.6 trillion,” acting SKK Migas chief J. Widjonarko said in Sunday’s statement.

Sebuku Block is located in the Makassar Strait between the islands of Kalimantan and Sulawesi. Ruby gas field is expected to produce some 250 billion cubic feet of gas during its 10-year life span and the output is reserved for domestic consumption.

Chris Jones, Mubadala Petroleum’s Indonesia president and country manager, said the company recognizes the importance of completing the Ruby field, not only for the company’s revenue, but also for Indonesia’s economy.

“Mudabala wants to help Indonesia’s economic growth,” he said.

The primary buyer for gas from Ruby Block is state fertilizer company Pupuk Kalimantar Timur, which has signed a contract to purchase gas from Mudabala until Dec. 31, 2021.

Meanwhile, the Sisi Nubi 2B is located offshore from Kutai Kartanegara in East Kalimantan, and was designed to have a production capacity of up to 350 million standard cubic feet per day (mmscfd) of gas. Total has installed two new well-head platforms in the field that include interconnected pipes connecting the two platforms.

According to the approved plans of developments (POD), the second phase of the project involves adding 35 wells that would cost $1.03 billion.

Hardy Pranomo, president and general manager at Total E&P Indonesie said the project will hire 1,200 workers and 42 ships as part of the company’s commitment to increase the involvement of the local people in its endeavors.

Total is the leader in gas production in Indonesia, followed by Conoco Philips, Pertamina, BP and Exxon Mobil.

Indonesia was the fourth-largest exporter of liquefied natural gas last year, trailing Qatar, Malaysia and Australia.

According to BP’s Statistical Review of World Energy, Indonesia is home to the world’s 11th largest reserves of natural gas, with 109 trillion cubic feet, and number one in the Asia Pacific region.

As the nation’s oil production continued to decline, Indonesia has increased natural gas production.

According to research conducted by the US Energy Information Administration, natural gas production in Indonesia has increased by almost 25 percent between 2002 and 2012.
While the archipelago still exports around half of its natural gas output, it has seen domestic consumption rise in line with production.

The bulk of Indonesia’s natural gas production, some 60 percent, is currently conducted offshore, in East Kalimantan, the South Natuna Sea, South Sumatra and North Sumatra.

Relying mostly on foreign oil and gas companies, many of Indonesia’s maturing gas fields saw a tapering off in production, partly due to uncertainty over the government’s intention in giving assurance over investment, for example, in regards to contract extension over gas blocks.

Jakarta Globe

Indonesia Expects Output From ExxonMobil’s Cepu Block to Peak in July/Aug 2015

Jakarta. Indonesia expects crude output from ExxonMobil’s Cepu oil block to peak in July or August next year, an official from the country’s oil and gas regulator said on Monday.

The Banyu Urip field, part of the Cepu block near Surabaya in East Java, is expected to produce on average 119,000 barrels per day (bpd) next year.

“It will reach a peak in the third quarter, or beginning in July or August, at 165,000 bpd,” said 

Johanes Widjonarko, head of the regulator, SKKMigas.

Exxon is developing the Banyu Urip field along with state energy firm Pertamina.
With contribution from Cepu, Indonesia is targeting total crude output of 845,000 bpd in 2015.