Azerbaijan Faces Gas Shortfall
Ex-Soviet Union Azerbaijan is on track to send gas to Western Europe by the end of the decade, but is having to import supplies to use at home, compounding economic hardship that prompted protests last year.
The country contains one of the world's biggest gas fields, Shah Deniz on the Caspian Sea, but it has presold the next stage of output, due by 2020, to Greece, Italy, Turkey and other states keen to reduce their dependence on Russian gas.
At the end of last year, as construction of the pipeline to deliver the gas passed the halfway mark, Azerbaijan's state-run energy company SOCAR said it had begun importing gas from Iran.
Two industry sources told Reuters the gas actually came from Turkmenistan, another ex-Soviet Union republic with prices more affordable for the Azeris, but that supplies had stalled due to a pricing dispute between Iran and Turkmenistan.
Pricing had also stalled talks on possible imports of Russian gas to Azerbaijan to make up the shortfall, they said.
Officials have expressed optimism that projected increases in production from other Azeri gas fields will fill the gap in due course, citing Umid, Bulla Deniz and Absheron, which will be developed under a deal with Total signed in November.
In the meantime, the issue poses a dilemma for Azerbaijan's longtime president Ilham Aliyev, who faces a sharp slide in the manat currency due to the slump in global oil prices and a balancing act between Russia and the West.
In January, SOCAR announced big gas price hikes for Azeris already paying more for staples like bread because wheat and many other food items are imported. One of the company's vice presidents, Suleiman Gasymov, said they may not be the last.
"If the manat were to continue falling, SOCAR would propose revising the price of gas," he said.
Matanat Kasumova, who works in a shop in Baku, said she had cut back on heating after the bill for her family doubled to 100 manats a month ($56), a fifth of an average salary.
Some Azeris blamed the government, rare in a country where complaints are normally kept among friends. "I don't know how I will pay my bills. Tariffs have been increased, prices rise and the government doesn't do anything to help us," a citizen of Azerbaijan Republic said.
Aliyev, who succeeded his father, Heydar, as president in 2003, tightened his grip on power this week by appointing his wife, Mehriban, as first vice president.
Early last year, protests broke out in some Azeri towns against rising prices and unemployment. In some places, there were violent clashes with police, witnesses told Reuters. Police quickly restored order, detaining dozens of people.
South Korea's LPG Demand Revives
A shift in the use of liquefied petroleum gas (LPG) to petrochemicals and away from transport has pushed demand for the fuel to new records in South Korea, after years of slumping consumption, a change which mostly benefits U.S. suppliers.
South Korea mainly used LPG to power cars up to 2010, but sales started to spiral down as drivers of commercial vehicles, mostly taxis, began switching to other fuels such as diesel or gasoline. That forced South Korea's major LPG distributors, SK Gas and E1 Corp, to look to other sectors to offset revenue loss.
Last year strong demand for consumer plastics began to strengthen Asian petrochemical margins, and at the same time SK Gas started up a plant using LPG as a feedstock.
As petrochemical consumption in South Korea began jumping, and with LPG prices dropping to around 30 percent less than naphtha, demand recovered, shooting to its highest ever.
Analysts are expecting to see much the same this year.
"We expect petrochemical consumption to support this year's LPG demand to stay similar to that of last year," said Ong Han Wee of energy consultancy FGE.
In 2016, LPG imports rose by almost a third compared to the previous year, to a record 7 million tonnes, according to data from the Korea National Oil Corp (KNOC), while total consumption rose to a record 9.4 million tonnes.
That came as prices for LPG, a mixture of propane and butane produced as a by-product of U.S. shale gas, undercut naphtha. Both products can be broken down into the building blocks for the plastics used in packaging, toys, cars and clothing.
The average import price of naphtha in 2016 was $44.09 a barrel, whereas LPG cost $30.85 a barrel, KNOC data showed.
"As the largest single (LPG) exporting nation in the world, the U.S. should get its proportionate share of the growth," said Ted Young, chief financial officer at U.S. company Dorian LPG, which is the world's second-biggest LPG shipper.
Between 2015 and 2016, South Korea's U.S. LPG imports more than doubled to about 3.4 million tonnes, according to KNOC, making up almost half its total LPG imports.
Last year around 4.3 million tonnes of South Korea's total LPG consumption was used in the petrochemical and industrial sectors, a jump of more than 70 percent from the previous year, according to KNOC data.
South Korea's record LPG use accompanied a near doubling of its petrochemical production to 3.3 million tonnes last year, up 87.8 percent from 2015.
Analysts expect South Korea's petrochemical production to hold near that level this decade, although JBC Energy's David Wech warned that use of LPG in the system likely "maxed last year".
Apache to Spend 63.2% More This Year
Oil and gas producer Apache Corp said it would spend 63.2 percent more in 2017 than it did last year, joining a growing list of U.S. shale producers who are ramping up spending to take advantage of a recovery in oil prices.
Apache, which reported a smaller loss, plans to spend $3.1 billion in 2017, higher than the $1.9 billion it spent last year.
The company said it would spend nearly two-thirds of its budget in Texas' Permian Basin, of which $500 million is budgeted for infrastructure development in the so-called Alpine High field.
Total production was nearly unchanged at 490,376 barrels of oil equivalent per day in the fourth quarter.
Apache said last September it had amassed more than 300,000 acres in the field it calls Alpine High, most of which is in Reeves County, Texas.
U.S. crude prices, which dipped to a low of $26.05 last year, have largely traded above $50 since late November.
This has prompted producers such as Exxon Mobil and Hess Corp to boost their capital budgets for the year.
Net loss attributable to Apache's common shareholders was $182 million, or 48 cents per share, in the three months ended Dec. 31.
The company had posted a loss of $4.02 billion, or $10.62 per share, a year earlier, when it incurred one-time charges of $5.9 billion.
The Houston-based company's total revenue fell about 2 percent to $1.45 billion.
Algeria's Sonatrach Discusses Offshore Drilling
Algeria's Sonatrach wants to start offshore oil drilling and has begun discussions with U.S. operators Exxon Mobil Corp (XOM.N) and Anadarko (APC.N) as well as Italy's Eni (ENI.MI), a source at the state energy company told Reuters.
The North African OPEC member nation has struggled to attract oil investment in recent years because of tough terms that have made foreign companies wary.
Sonatrach last year began a more flexible approach to bilateral talks with foreign partners.
Low oil prices have also pressured Sonatrach, prompting it to focus on developing production at more mature fields in the southern Sahara and bringing online delayed gas projects. Offshore drilling could offer another area for growth.
"Seismic operations carried out by Sonatrach have shown an interesting potential in the areas including Bejaia and Oran," said the source, who asked not to be identified. Bejaia is an eastern port and Oran is a port city in western Algeria.
Algeria needs the know-how and expertise of major international firms to launch offshore drilling, the source said.
"Foreign partners, including Anadarko, Exxon Mobil and Eni were invited by Sonatrach to provide technical assistance given the experience they acquired in the Gulf of Mexico and deep water in Mozambique," the Sonatrach source said.
"The offshore is complementary to our operations in the south. It will also contribute to boosting our output," the source said.
The source did not give any information on the timing or scale of any offshore projects.
Such details, including when the drilling will start, are expected to be announced soon by Sonatrach's leadership, the source said.
Algeria's earnings from oil and gas fell to $27.5 billion in 2016 from $35.7 billion in 2015 and more than $60 billion in 2014.
Algeria's oil output was previously estimated at 1.1 million barrels per day (bpd) but it has cut production by 50,000 bpd under an agreement between OPEC and non-OPEC producers aimed at raising crude prices.
Kuwait Boosts Oil Capacity
Kuwait is sticking with plans to add half a million barrels a day of oil-production capacity as it prepares for the eventual expiration of the output quotas OPEC adopted to help drain a global oversupply, the head of Kuwait Oil Co. said.
State-run KOC plans to raise the Persian Gulf nation’s capacity from its current level of 3.15 million barrels a day, Chief Executive Officer Jamal Jaafar said in an interview in Kuwait City. The company, which is responsible for most of Kuwait’s domestic crude production, will add capacity even if the Organization of Petroleum Exporting Countries decides to extend the supply cuts beyond June, he said.
“We will continue to enhance production capacity because we have a five-year plan to reach 3.65 million barrels a day by 2021, so we can’t stop investing in that,” Jaafar said. “We will take advantage of the OPEC-cut deal to perform maintenance on facilities in the fields.”
OPEC agreed in November to reverse its strategy of pumping without limits to defend its market share against increased supplies, including oil from U.S. shale deposits. The group won pledges from Russia and other producers to contribute, targeting collective cuts of 1.8 million barrels a day for six months starting in January. Benchmark Brent crude, which traded at more than $115 a barrel in June 2014, has stemmed losses since the deal was announced and was trading down 11 cents at $55.86 in London at 2:41 p.m local time.
KOC has signed three service agreements with Royal Dutch Shell Plc and another with BP Plc to develop exploration and production projects, he said. The company plans to drill its first offshore exploration wells by year-end, including wells near Failaka Island in the Persian Gulf, Jaafar said. Kuwait is OPEC’s fifth-largest producer.
The company plans to shut facilities and oil fields in the east and south of the country for maintenance, while northern fields will remain open because they produce a higher-quality crude that can be used for blends that are exported, he said.
Kuwait’s state company for investing in oil production outside the country has boosted output after spending $900 million on a project in Thailand and an additional $300 million on a deal in Norway, Nawaf Saud Al Sabah, CEO of Kuwait Foreign Petroleum Exploration Co., told reporters. Both projects are providing a “very good’ return on investment, Al Sabah said, without elaborating.
Kuwait Foreign Petroleum Exploration plans further acquisitions, including in the Middle East, as the drop in crude prices in the last few years makes such deals more attractive, he said.
Chile's LNG Imports Soar in December
Chilean imports of LNG jumped to 263,000 mt in December, a threefold increase from the same month of 2015, government figures showed.
The figure also marked an increase from 171,000 mt imported in November.
As a result, imports rose 80.6% to 716,000 mt, while annual imports rose 31.8% to 4.165 mt.
Imports have risen as generation from natural gas expanded to offset limited supplies of hydroelectricity.
Trinidad and Tobago remained Chile's principle gas supplier, shipping 206,000 mt in December. But Chile also received 57,000 mt from the US during December, its first US imports since September.
Chile has become an important market for Cheniere Energy's Sabine Pass liquefaction facility since it began exporting LNG last year. Thanks to the free trade agreement between the two countries, it enters Chile without a 6% import tariff.
Figures also showed that Chile resumed exports of natural gas to neighboring Argentina, pumping 70,000 mt during December, for the first time since August.
Chile began pumping gas over the Andes in May under an agreement between state energy firm ENAP and its Argentinian counterpart ENARSA. The gas, which Chile imports as LNG, reduces Argentina's reliance on other more expensive fossil fuels.
The two companies are negotiating repeating exports during this year's Southern Hemisphere winter.
The country has two regasification terminals - Quintero in central Chile, which is controlled by Spain's Enagas, and Mejillones in the north, operated by Engie.