May 2020, Vol. 247, No. 5

Global News

Global News

Global Oil Storage May Hit Capacity Within Months

As coronavirus (COVID-19) wipes out oil demand and big producers pump more, the oil market is creating a global glut that threatens to overwhelm storage capacity within months and force widespread industry shutdowns. 

IHS Markit analysts estimated the global oil supply surplus on a monthly basis to range between 4 million barrels per day (bpd) and 10 million bpd from February to May 2020 – equal to 4% to 10% of global demand.

Standard Chartered Bank expected an “extreme” global surplus of 12.9 MMbpd  in the second quarter – 13% of global demand – and a cumulative surplus exceeding 2.1 billion barrels by the end of the year.

Goldman Sachs said it does not expect the glut to lead to a breach in storage capacity, but “it will likely lead to a breach in logistical capacity, meaning ships, pipelines, terminals and processing units.”

However, some storage facilities are already being overwhelmed.

At mid-April, oil tanks at France’s storage and dispatch services company CIM are completely full due to the glut in global oil supply and the sharp drop in products demand, the director general of the company said.

IM, which handles around 40% of France’s crude imports, has 105.9 million cubic feet (3 million cubic meters) of crude storage capacity and 60 million cubic feet (1.7 million cubic meters) of refined products storage capacity, mostly at the Le Havre oil port hub.

The firm also operates the 2,920-mile (4,700-km) Trapil pipeline network.

“There is no demand; our tanks are full to the brim,” CIM’s Olivier Peyrin told Reuters.

As oil storage options quickly dwindle, railroads including Union Pacific and BNSF are clamping down on rising demand to store oil in rail cars. They are telling oil shippers that they do not want them to move loaded crude trains to private rail car storage facilities on their tracks due to safety concerns, three sources in the crude-by-rail industry told Reuters.

“Most federal regulations require rail cars loaded with ... crude oil to be moved promptly within 48 hours. Therefore, federal regulations discourage shippers and railroads from leaving crude oil in transportation for an extended time,” transportation lawyers at Clark Hill LLC wrote.

There is no federal data on how much oil is regularly put in rail storage, but analysts said it is very little.


INEOS Postpones Forties Pipeline System Shutdown

UK pipeline operator INEOS FPS has delayed its planned shutdown of the Forties Pipeline System (FPS) until Spring 2021.

The decision was taken in the face of the ongoing government restrictions due to the coronavirus (COVID-19) pandemic and in the interest of providing clarity to its customers and the UK oil and gas industry, it said, adding that a majority of customers favored the decision. The shutdown was originally planned for June 16, 2020.

The FPS is a 100% INEOS-owned integrated oil and gas liquid transportation and processing system with a nominal capacity of more than 600,000 bpd, serving the central area of the North Sea in both the UK and Norway.

FPS transports crude oil and gas liquids from offshore and onshore entry points, processes the liquids at Kinneil and redelivers Forties Blend crude oil at Hound Point and either raw gas or fractionated gas products at Grangemouth.

Plains to Pay Over $60 Million for 2015 California Spill

Plains All American Pipeline agreed to pay $60.6 million to settle civil charges that it violated federal pipeline safety laws in connection with the 2015 spillage of 2,934 barrels of crude oil near Santa Barbara, California, the U.S. Department of Justice said.

The government said the payout includes $24 million in penalties, plus additional sums to cover damage to natural resources and clean-up costs.

The settlement also requires Plains to implement safeguards for its nationwide pipeline system, it said, in part to address factors that contributed to the Plains Line 901 spill on May 19, 2015, immediately north of Refugio State Beach.


Sempra Energy to Continue with Costa Azul LNG Project

Sempra Energy said it will go forward with its plan to build the first phase of the Costa Azul liquefied natural gas (LNG) export plant in Mexico and has targeted a final investment decision (FID) by mid-year.

In February, Sempra said it planned to make FIDs to build two LNG export plants in 2020 – Costa Azul in Baja California in the first quarter and Port Arthur in Texas in the third quarter.

At Costa Azul, Sempra said Energia Costa Azul LNG has nonbinding, 20-year agreements with units of France’s Total SA as well as Japan’s Mitsui & Co. and Tokyo Gas Co. Ltd. to buy about 0.8 million tonnes per annum (mtpa) of LNG each. The first phase includes one liquefaction train that can produce about 2.4 MTPA or 320 MMcfd of natural gas.

Sempra said Costa Azul could make its first LNG deliveries in 2023. The project will be built at the existing Costa Azul LNG import plant, which entered service in 2008 and has the capacity to regasify up to 1 Bcf/d (28.32 MMcm). Sempra said Port Arthur LNG is in talks with units of Aramco to buy 5 mtpa of LNG and invest 25% equity, and with Polish Oil & Gas Co. to buy 2 mtpa.


Greece Receives 9 Bids for Stake in Gas Supplier

Greece’s privatization agency said it has received nine nonbinding bids for the sale of a 65% stake in its dominant gas supplier DEPA Commercial, including bids from Shell Gas, Vitol Holding, Power Globe, MET Holding and C.G. 

Gas Limited of Greece’s Copelouzos group said in a statement that other bidders are a joint venture of Hellenic Petroleum and Edison, a joint venture of Motor Oil and Public Power Corp., industrial group Mytilineos and contractor GEK Terna.

The Greek government is selling the stake as part of the terms of the country’s final bailout from the European Union and International Monetary Fund, to help open up the market. Hellenic Petroleum holds the remaining 35% stake in the gas utility.

Athens and Hellenic have agreed that if Hellenic does not acquire the 65% stake, it will sell its remaining holding to the preferred investor, which will then own the whole company.


German Court Rejects Last Legal Challenge to Nord Stream 2

A remaining legal hurdle for the Nord Stream 2 pipeline was cleared as the Higher Administrative Court of Berlin-Brandenburg has rejected a complaint regarding the environmental impact assessment (EIA) for a portion of land to be used for the pipeline. 

The complaint, filed by private landowner Malte Haynen and reported by the Eurasia Review, claimed that the EIA on which the planning approval for the EUGAL pipeline was based was incomplete. The EUGAL pipeline is the land-based portion of the Nord Stream 2 pipeline that will run 310 miles (500 km) across Germany to the Czech Republic. The pipeline would cross 0.02 miles (0.03 km) of Haynen’s property.

Haynen claimed the changes in the climate, directly and indirectly associated with the project due to greenhouse gas emissions, were not adequately determined, described and evaluated by the EIA and that there is no need for the approved project in the energy sector.

The 11th Senate of the Higher Administrative Court dismissed the lawsuit, stating the EIA report contained the minimum information required and that the pipeline was “state-of-the-art and safe.”

Germany’s Gas Imports Dropped 15% in January, Cost 40% less

Germany imported 15.1% less natural gas in January than a year earlier, while its import bill dropped by 40% due to lower prices, according to official data released in April.

The volume of January imports totaled 494,975 terajoules (TJ) or 497.9 Bcf (14.1 Bcm), according to trade statistics office BAFA, which releases data with a time lag.

German importers paid $2.28 billion (2.1 billion euros) in the month compared with ($3.8 billion (3.5 billion euros) a year earlier for their gas, which is partly linked to crude oil prices.


BlackRock Withdraws Bid for ADNOC Gas Pipeline Assets

BlackRock has dropped out of the race to become an investor in Abu Dhabi National Oil Co.’s (ADNOC) natural gas pipeline assets, two sources familiar with the matter told Reuters, leaving Italian infrastructure firm Snam and Global Infrastructure Partners among at least six remaining bidders.

BlackRock, along with buyout firm KKR & Co., last year bought a 40% stake in ADNOC Oil Pipelines for $4 billion and were looking at a deal involving ADNOC’s gas pipeline infrastructure, the sources said. However, it has now decided not to bid for the assets. ADNOC hired Bank of America Merrill Lynch and Mizuho last year to arrange the lease of its natural gas pipeline assets, Reuters reported. ADNOC, BlackRock and Snam declined to comment.

ADNOC, which manages almost all of the proven oil reserves in the United Arab Emirates, has embarked on a major shake-up over the last few years to cut costs, boost efficiency and monetize its assets.


Lagos Gas Explosion Kills 15

An explosion at a gas processing plant killed at least 15 people and destroyed about 50 buildings after a fire broke out in a suburb of Lagos, Nigeria’s commercial capital, emergency services. Several people were injured and taken to a hospital, according to Ibrahim Farinloye, zonal coordinator for the National Emergency Management Agency (NEMA).

The Nigerian National Petroleum Corporation (NNPC) said the explosion was triggered after a truck hit some gas cylinders stacked in a gas processing plant near the corporation’s pipeline in the Abule Ado area of Lagos state. The explosion destroyed some nearby houses, damaged NNPC’s pipeline and caused the corporation to halt pumping operations on the Atlas Cove-Mosimi pipeline, the state-owned oil company said in a statement.

Pipeline fires in Nigeria, Africa’s biggest crude oil producer, are common, and they are mostly caused by theft and sabotage. The methods used to steal oil often result in accidents that cause fires.


Section of Transandino Pipeline Destroyed by Rebels

An explosion destroyed a section of the Transandino pipeline in southern Colombia but did not cause an oil spill, Ecopetrol subsidiary Cenit said. 

The attack against the 190-mile (306-km), 85,000-bpd pipeline happened in the rural Mallama municipality of Colombia’s Narino department. Transandino, which delivers oil to the Pacific Ocean port of Tumaco, was not operating at the moment of the attack, a military official in the region said. 

So far in 2020 the pipeline has suffered eight attacks, according to statistics from Cenit, which did not attribute the attack to any particular group. Leftist guerrilla group, the National Liberation Army (ELN), and dissidents from the former Revolutionary Armed Forces of Colombia (FARC) guerrillas who reject the 2016 peace deal have been blamed for past incidents.


Superior Pipeline Secures Large Stack Play Acreage Dedication

Superior Pipeline Company said it has entered into a long-term, fee-based natural gas gathering and processing agreement with an active producer in the STACK play.

The agreement replaces a prior contract with Superior, expanding the producer’s dedication area to approximately 345,000 gross acres (139,617 hectares). The Cashion system includes two cryogenic processing plants located in Kingfisher County, Okla.

Superior is a joint venture, owned 50% by Unit Corporation and 50% by SP Investor Holdings, LLC. 


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