April 2020, Vol. 247, No. 4

Global News


Trafigura, Phillips 66 Form JV for Deepwater Texas Oil Port

Global commodities trader Trafigura said it formed a joint venture with U.S. refiner Phillips 66 to build a major deepwater port in Texas capable of handling supertankers, ditching its own competing project. 

The Bluewater Texas Terminal, to be located 21 nautical miles east of the entrance to Corpus Christi port, will have two single-point mooring buoys that can load very large crude carriers (VLCCs), each capable of carrying about 2 million barrels of oil.

Geneva-based Trafigura, the biggest U.S. crude exporter handling about 600,000 bpd, said it had withdrawn its Texas Gulf Terminals project submitted to the United States Maritime Administration (MARAD) in July 2018.

The United States became a crude exporter in early 2016 after a decades-long ban was lifted but infrastructure has lagged behind the country’s sky-rocketing shale production.

Severe pipeline bottlenecks out of the Permian basin, the biggest in the United States, have improved with the start of three major pipelines last year but export terminals capable of handling supertankers are still in short supply.

A flurry of port projects has been proposed to fix the gap. Phillips 66, the fourth-largest U.S. refiner, first proposed Bluewater terminal in July. At the time, at least eight other projects had already been announced. A final investment decision is expected to be made this year, the statement said. 


Williams Seeks to Raise $5 Billion by Selling Stake in Pipelines 

Williams Companies is looking for a partner to invest in a network of its pipelines in the western United States, a deal that could raise close to $5 billion for the Tulsa, Okla.-based company, according to a Reuters report, citing unnamed people familiar with the matter.

The collection of pipelines Williams is purportedly offering a stake in are gathering and processing (G&P) assets.

The investment would be larger than the joint venture that Williams clinched last year with the Canada Pension Plan Investment Board (CPPIB) in the Marcellus and Utica shale basins of Appalachia, which gave the pension fund a 35% stake in the assets for $1.33 billion.

The deal would underscore how pipeline operators are cashing out on some of their assets, so that they can pay down debt and put money into new projects, which have the potential to give them better returns.

Williams Chief Financial Officer John Chandler said on a quarterly earnings call that it was “looking at potential opportunities for asset sales or selling interest in some of our assets” to help the firm reduce its debt pile.

Marathon Petroleum Explores $15 Billion MPLX Asset Sale 

Marathon Petroleum Co, the largest U.S. independent refiner, is exploring the sale of assets of its pipeline subsidiary MPLX LP worth as much as $15 billion, people familiar with the matter told Reuters.

The divestment would give the Findlay, Ohio-based company a cash boost at a time when a looming economic slowdown triggered by the global coronavirus outbreak and lower oil prices are weighing on its prospects. Marathon’s shares have lost half their value in the last three weeks.

Marathon is exploring a sale of MPLX’s gathering and processing (G&P) business, which transports hydrocarbons from drilling sites to major pipelines, the sources said. Intrepid Financial Partners is advising on a sale process for the business, which is at its early stages, the sources added. If there is a deal, it could involve divesting a majority or minority stake in that business, according to the sources.

Marathon previously said it had formed a special board committee to explore options for its midstream operations but has not announced specific plans.  

API Issues New Pipeline Safety, Sustainability Standard

The American Petroleum Institute (API) has issued a new standard for pipeline inspectors to enhance safety and sustainability during pipeline construction.

“The new inspection standard demonstrates the industry’s commitment to building energy infrastructure that is safe and environmentally protective,” Global Industry Services Senior Vice President Debra Phillips said. “Additional emphasis has been placed on building communication and rapport between operators, inspectors and contractors to not only create effective working relationships between the parties, but also drive a culture of safety throughout pipeline construction. The new standard is a key asset to delivering pipeline projects that are safe for the workers that build them and the local communities they serve.”

The pipeline standard updates the issues that pipeline inspectors should review when overseeing each phase of a pipeline’s construction. While the first edition of the standard concentrated on new pipeline construction, the second edition expands the scope of covered activities to cover all pipeline construction along the right of way, including repairs and excavations of existing lines. 

The inspector’s role under the updated standard begins during the pre-construction phase of the pipeline project. 

OMV to Sell $2.3 Billion of Assets, Delays Gas Asset Purchase

Austrian oil and gas group OMV plans to sell $2.3 billion of assets by the end of next year and has delayed plans to purchase gas assets. 

A first divestment could be OMV’s 51% stake in gas pipeline operator Gas Connect Austria to hydropower specialist Verbund. Austria’s largest utility said in mid-March it was in exclusive talks with OMV over a possible deal. The energy group delayed plans for a nearly $1.12 billion (1 billion euro) purchase of Siberian gas assets.

The sale is intended to help fund a $4.7 billion deal to make it the majority owner of plastics maker Borealis and one of the world’s leading polymer producers.

OMV signed the previously announced deal with Abu Dhabi state investor Mubadala that will see it increase its stake in Borealis to 75% from 36%.

Judge Approves $143 Million Natural Gas Explosions Settlement

A Massachusetts judge approved a $143 million class-action settlement for residents and business owners affected by natural gas explosions in Massachusetts in 2018. The settlement came days after Columbia Gas of Massachusetts pleaded guilty to causing the explosions that killed one person, injured dozens of others, and damaged or destroyed more than 100 buildings.

Columbia Gas will also pay a $53 million criminal fine – the largest ever imposed for breaking a federal pipeline safety law. Its parent company will sell off the Massachusetts operation. Parent company NiSource has agreed to sell the assets of Columbia Gas of Massachusetts to Eversource Energy.

The National Transportation Safety Board concluded last year that Columbia Gas poorly planned a routine pipeline replacement project in Lawrence, causing natural gas over-pressurization that led to the explosions and fires in homes and businesses on Sept. 13, 2018.

The board also determined that the utility inadequately responded to the disaster, which resulted in a prolonged recovery effort in which residents and businesses were without natural gas service for heat or hot water, sometimes for months through the winter. 

Danly Confirmation as FERC Commissioner Widens GOP Majority

The U.S. Senate easily confirmed James Danly as a Republican member of the Federal Energy Regulatory Commission last month, widening the Republican majority on the panel. 

The vote was 54-40, with Democratic Senators Joe Manchin, Doug Jones and Kyrsten Sinema joining Republicans to support Danly, who has been the commission’s general counsel. FERC now has a 3-1 Republican majority, but that is expected to narrow in late June, when Republican commissioner Bernard McNamee’s term ends.  McNamee said in January he will step down at the end of the term; if a nominee is not approved by then, FERC would lose its quorum.

Manchin said he would not support another Republican “no matter how well qualified, when the next Republican vacancy arises later this year, unless (President Donald Trump) sends us a nomination for the vacant Democratic seat as well.” If McNamee steps down in June without a new nominee being approved, the FERC would lose its quorum.

Trump nominated Danly to fill a vacancy after the 2019 death of former Chairman Kevin McIntyre. Danly’s term will expire on June 30, 2023. 

Russian Production Increase Limited by Export Constraints

Russia’s ability to quickly lift oil production following the collapse of a global agreement to cut is restrained by bottlenecks in exporting capacity, market sources said and Reuters calculations showed.

Russian Energy Minister Alexander Novak said all production restrictions related to the prior OPEC agreement were to be lifted April 1, pitting Russia and Saudi Arabia against each other in a fight for market share. Novak said Russia has the ability to lift oil production by 200,000-300,000 bpd, and potentially as much as 500,000 bpd, from around 11.3 MMbpd currently.

But shipping that oil outside Russia may be complicated by bottlenecks in export infrastructure. Russian refineries hit peak season for maintenance in April and May, meaning more crude will need to be exported instead of being refined domestically. Russia has also still not struck a delivery agreement for this year with Belarus, which usually buys 1.5 million tonnes of Russian oil a month. 


Cameron LNG Train 2 Begins Commercial Operation

Cameron LNG has begun commercial operation of Train 2, which is jointly owned by affiliates of Sempra LNG, Total, Mitsui & Co. and Japan LNG Investment, following its substantial completion, according to McDermott International.

McDermott and its joint venture member on the project, Chiyoda, have provided the engineering, procurement, construction and commissioning for the project since it began. The project includes three liquefaction trains with a projected export capacity of more than 12 million tonnes per annum of LNG, or approximately 1.7 Bcf/d.

Cameron LNG Train 3 is expected to reach initial LNG production in the second quarter of 2020. 

Poland Ready to Supply Belarus with Oil if Pipeline Upgraded

Poland is ready to supply Belarus with oil, but first needs to invest in its pipelines to enable reverse flows, Poland’s minister responsible for energy infrastructure said.

“The supply to Belarus requires investment on the Polish side. We are ready to help Belarus provided they want us to,” Piotr Naimski told reporters.

Belarus and Russia have been locked in a row over oil supply and flows have slowed to a trickle since Jan. 1, while refineries in Belarus have been operating at 50% of capacity. The Druzhba pipeline, which crosses Belarusian territory, also supplies about 1 MMbpd of Russian oil to Europe, including Poland and Germany.

Polish pipeline grid operator PERN said in a February statement that it had started to look for a contractor for the Druzbha reverse flows project.


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