Crude Oil Cuttings (Week Ended 6/19/13)

CRUDE OIL IN THE MEDIA

*Brent Holds Above $106, All Eyes on Fed – CNBC

Oil prices rose slightly on Wednesday as investors looked to a meeting of the U.S. Federal Reserve for clues on the outlook for its stimulus program that has underpinned commodity prices. Violence in the Middle East and lower oil stockpiles in the United States supported prices. Brent futures for August delivery were up 25 cents above $106 a barrel, while U.S. crude for July delivery added 20 cents to trade under $99. Global investors have been on edge since Fed Chairman Ben Bernanke suggested the U.S. central bank could be looking to roll back monetary stimulus, and a statement at the end of the policy meeting on Wednesday may provide a timeline.
– Read More

*US Energy Production Growing by Leaps and Bounds: BP – CNBC

The shale revolution sweeping the U.S. helped push oil production in the world’s largest economy to a record last year, BP said in a report this week, underscoring expectations of the nation’s energy independence. In a statistical review of energy demand in 2012, the U.S., the world’s third-largest oil producer, said energy production rose 1.3 percent to 15 percent of the global total. A bounty of shale and natural gas helped energy supplies set record for the third straight year, according to BP.
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*Exclusive: Talisman considers sale of Eagle Ford assets – sources – Reuters

Canadian oil and gas company Talisman Energy Inc (TLM.TO) is exploring the sale of its shale assets in the Eagle Ford basin in south Texas, hoping it could raise as much as $2 billion, two people familiar with the matter said on Monday. Talisman is working with Royal Bank of Canada (RY.TO) and has reached out to a few potential buyers, including private equity, to gauge interest, one of the sources added. The people asked not to be identified because the matter is confidential. They cautioned that the talks are at a very early stage and may not lead to a sale. – Read More

*As U.S. production soars, oil companies eye far horizons – FuelFix

Even as much attention focuses on the Gulf of Mexico and U.S. onshore production from shale plays, new frontiers for exploration are taking drillers, engineers, geologists and services firms to Brazil, the Arctic, Africa, Australia and parts of the Middle East and Asia. Advanced drilling techniques, including hydraulic fracturing combined with horizontal drilling, have heightened the buzz surrounding shale and other unconventional petroleum sources. But conventional oil and gas wells will still be in high demand years from now, especially in the deep sea.
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*Salman Khurshid’s Iraq visit: Oil import likely to be top on agenda – The Times of India

External affairs minister Salman Khurshid will embark on a two-day visit to Iraq on June 19 during which he will hold talks with top Iraqi leadership on issues of mutual interest including import of oil.  Khurshid, the first senior Indian leader to visit the oil-rich Arab country in last 23 years, will meet his Iraqi counterpart HoshiyarZebari and discuss bilateral, regional and international issues of mutual interest.
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*Pena Nieto Plans End to 75-Year Pemex Monopoly in Crude Oil – Bloomberg

Mexican President Enrique Pena Nieto said he’s negotiating support to break the state monopoly over oil and gas exploration and production this year to accelerate economic growth. The peso pared its loss. In the model envisioned by Pena Nieto, state-owned Petroleos Mexicanos would develop certain fields, with others being tapped by foreign and private companies. He declined to discuss details of the proposal, or whether it would require a change in the constitution.
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*Letter of Intent with SINOPEC – Press Release

Petróleo Brasileiro S.A – Petrobras , announces that it has executed, on June 11, 2013, a Letter of Intent with CHINA PETROCHEMICAL CORPORATION SINOPEC (SINOPEC), for the development of joint study for the Premium 1 Refinery Project, in the state of Maranhão.  The Letter of Intent is based on the interest of the SINOPEC, jointly with PETROBRAS, studying the feasibility of establishing a joint venture between the companies for the implementation of Premium Refinery 1. Such Letter of Intent is not binding and does not create any obligation between the parties to enter into future trade or operational agreements after the outcome of the feasibility studies.
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*Iraq’s Kurds to Export Oil by New Pipeline ‘Very Soon’ – Bloomberg

Iraq’s Kurds will start exporting crude by pipeline “very soon” after the completion of a new link to the Turkish border by the end of September, the Kurdistan Regional Government Natural Resources Minister said. The pipeline to Fishkabour near the frontier with Turkey, will eventually have a capacity of 1 million barrels a day by 2015, Ashti Hawrami said today at a conference in London. The semi-autonomous region in northern Iraq is “well on its way” to have enough oil to fill the line’s capacity, he said.
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*U.S. Needs Oil Sands as Surge From Shale Bonanza Seen Overdone – Bloomberg

The U.S. will continue to need crude from Canada’s oil sands because rising production from its shale formations is too expensive to maintain. Increased crude output from U.S. shale isn’t “sustainable production,” Mike Tims, chairman of Canadian investment bank Peters & Co., said yesterday at a Bloomberg energy forum in Calgary. Producers need to invest too much to sustain production from wells in the Bakken and Permian basins, which falls as much as 70 percent in the first year, Tims said.
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*Oil, gas have central role in British economy – United Press International

The British government will continue to rely on oil and natural gas reserves despite a push to advance a low-carbon economy, the British energy minister said. The British government said it is committed to cutting its greenhouse gas emissions by 80 percent of their 1990s benchmark by 2050. The commitment comes as members of the European Union debate climate goals to replace the 20 percent emissions reduction planned for 2020.
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*Regulators say Deloitte unit agrees to 1-year ban from new NY bank consulting, $10M fine – Associated Press 

New York regulators reached an agreement Tuesday for Deloitte Financial Advisory Services to pay $10 million and cease new consulting for one year at state-regulated banks to settle an investigation into misconduct. The probe involved Deloitte’s work for the New York branch of Standard Chartered Bank in 2004 and 2005.
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*Credit Agricole’s sale of CLSA to CITIC hits snag in Taiwan – sources – Reuters 

CITIC Securities’ $1.25 billion agreement to buy brokerage CLSA from Credit Agricole has hit a snag in Taiwan, according to people familiar with the matter, as regulators resist the plan for a Chinese company to own an entity on Taiwanese turf. Nearly one year after China’s state-backed CITIC Securities agreed to buy the Asian brokerage from France’s Credit Agricole SA, the deal still awaits clearance from Taiwan’s Financial Supervisory Commission (FSC). Taiwan contributes less than 5 percent to CLSA’s overall revenues, so a rejection by Taiwan would not kill the CITIC deal or impact the asking price, one of the people added. – Read More

RESEARCH COMMENTARY

*Bank of America Merrill Lynch (6.19.13)

Fast-track to pre-salt Bid Rd.: Draft details due next week

Notes from meeting with ANP in Rio de Janeiro

The key subject of the meeting with the ANP (National Petroleum Agency in Brazil) was the upcoming pre-salt auction, scheduled for October 22, 2013. Key details for this first auction under the new pre-salt production-sharing contract structure remain to be finalized. The agency is expecting to publish a draft of the contract and tender document sometime during the week of June 24.

Some key factors are already defined

Already defined factors for the pre-salt auctions are: (1) Only one area, Libra (est. 8-12bn boe of recoverable resources), will be auctioned. (2) Consortiums will have a maximum of 7 participants besides Petrobras, and each consortium will need to have at least one qualified “experienced” member. (3) Petrobras will be the operator of all new pre-salt concessions with minimum 30% stake, though it could have a higher stake. (4) Winning bid will be the bid with the highest stake of profit oil offered to the government. (5) Contracts will have a 35-year term.

Key factors that remain to be finalized

Several important factors that should be finalized in the draft documents expected to be released next week: (1) Signing bonus will be the same for all participants; though this has not yet been finalized (press speculation has suggested R$10bn or US$4.6bn bonus); (2) Minimum work program; (3) Local content requirements.

*Western Energy Alliance (6.18.13)

The Sleeper Story of the Last Five Years

After five years of delays in Montana, a judge has finally thrown out a lawsuit from environmental groups attempting to stop oil and natural gas leasing on the basis of climate change. In a strongly worded decision dismissing the case, U.S. District Judge Sam Haddon concluded that the groups, the Montana Environmental Information Center, Earthworks Oil & Gas Accountability Project, and WildEarth Guardians, failed to show that leasing in Montana will lead to climate change, nor had the standing in court to so argue.

Western Energy Alliance intervened along with API, Montana Petroleum Association, and the Montana Chamber of Commerce to support the Bureau of Land Management in its defense. It’s always nice to be supporting BLM on responsible oil and natural gas development.

The case hasn’t generated a huge amount of interest from the press, but the importance of this case cannot be stressed enough. It demonstrates a familiar pattern from the “Big Green” lobby – start small, set a legal precedent, and then use it far and wide to stop economic prosperity. Had they been successful, the environmental lobby would have used the same tactic to grind oil and natural gas development on federal lands to a virtual halt, as every action would require extensive environmental analysis, no matter how infinitesimal the greenhouse gas emissions generated from the lease, project or permit.

They chose to start with federal leasing in Montana as the camel’s nose under the tent. Had that been successful, they would have followed that up with suits in every producing state, and it wouldn’t be long until BLM would be forced to require lengthy analysis for every oil and gas action nationwide.

But this case would also have emboldened them to use the legal precedent to go after oil and natural gas development on non-federal lands using laws such as the Clean Air Act and the Endangered Species Act to engage EPA and Fish & Wildlife, whose jurisdiction extends well beyond federal lands.

As Judge Haddon points out in his decision, if the groups had prevailed the absurdity of the situation would be that “anyone could be liable for the most innocuous of acts – driving to work, watching the television or [turning] on a light” – as all contribute to global warming and climate change.

The decision was also important for limiting the ability of environmental groups to make weak arguments about their standing in court as a means to engage in endless lawsuits. Other gems from Judge Haddon include:

• Statements made by declarants who lack factual support or a basis in science are pure conjecture, constitute inadmissible opinion testimony, and are not sufficiently reliable or trustworthy to establish injury-in-fact.
• Plaintiffs have failed to show they have standing before this Court. They have not demonstrated that the sale of the oil and gas leases at issue will lead to climate change impacts resulting in injury to their recreational and aesthetic interests in lands near the leases.
• The potential methane emissions from these leases is approximately 7,330 metric tons per year. This volume of methane gas is so small that it amounts to only .02 percent of the total GHGs emitted in Montana in 2005, only .00011 percent of the GHG emitted in the United States each year, and only .000015 percent of the GHGs emitted worldwide each year. It cannot be said that methane emissions from the leases at issue would make a meaningful contribution to global GHG levels.

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