Rosneft to Lift Global Oil Market Share
Russia’s Rosneft , the world’s top listed oil producer by output, has an opportunity to boost its market share if there are shortages on the global oil market, Chief Executive Igor Sechin said.
Rosneft, with BP and Qatar among its shareholders, accounts for around 40 percent of Russia’s total oil production and is key to Moscow sticking to its commitments under the global oil output cut deal by OPEC and some non-OPEC countries.
“Today, the market is quite united in expectations of the structural oil deficit in the next 10 years, as growing demand comes along with a fall in production,” Sechin told a Rosneft shareholders meeting.
Sechin, Russia’s most influential oil executive and a close ally of President Vladimir Putin, said an oil deficit of around 700-750 million tonnes a year was estimated by 2025.
His presentation said that to avoid a global shortage, 15 million barrels of oil per day (bpd) in new production globally would be needed.
OPEC+ countries - the cartel’s members, plus another 10 major producers including Russia - meet in Vienna this week to discuss a possible increase in production.
“For Rosneft ... such a situation creates a unique opportunity to increase global market share,” Sechin said.
He did not say by how much Rosneft was ready to increase its production if the group decided to ease global cuts from July 1.
Alexander Novak, Russia’s energy minister, has said Moscow would propose a gradual increase in oil output across the group by 1.5 million bpd from next month.
Current global curbs stand at 1.8 million bpd, of which Russia has pledged 300,000 bpd. Rosneft’s oil production was at 4.52 million bpd last year.
Rosneft plans to increase its oil and gas output to 330 million tonnes of oil equivalent by 2022, Sechin told the Rosneft shareholders meeting, with new oil and gas projects expected to yield 87 million tonnes of oil equivalent.
Without giving figures, Sechin also promised shareholders a “material” increase in dividends for 2018, saying the board of directors would meet soon to discuss parameters of a share buy-back announced by the company earlier.
Rosneft paid around 50 percent of its net profit in dividends on last year’s results.
Earlier this year, Qatar agreed to increase its stake in Rosneft to almost 19 percent after buying out Swiss trader Glencore almost entirely from their two-year-old joint venture.
Faisal Alsuwaidi, a Qatari representative on the Rosneft board of directors, said Qatar may consider increasing its stake further, thouigh there were no immediate plans to do so. He said the company was “a good investment”.
Qatar’s sovereign investment fund QIA, together with Glencore, bought 19.5 percent of Rosneft for 10.2 billion euros ($11.8 billion) during the Russian firm’s partial privatisation in 2016.
Poland to Route Baltic Pipe Gas Line Via Sweden
Poland’s gas grid operator Gaz-System has decided to route the undersea section of its Baltic Pipe project which will connect the country to Norwegian gas deposits and reduce reliance on Russian deliveries through Swedish waters, it said.
Gaz-System said this was the most preferable route for the 275 kilometre-undersea part of the gas pipeline between Niechorze in Poland and Faxe South in Denmark, considering potential environmental impact and security.
“This is an important moment as from today very specific technical work will be conducted,” Piotr Naimski, the government official responsible for power and gas infrastructure told a press conference.
The alternative, “southern”, route that was also considered would have run through the German exclusive economic zone of the Baltic Sea.
“The southern route was a zigzag route, as the number of constructions to bypass, including wind farms, was significant. It will be much easier to build the pipe through Swedish waters,” Naimski said.
The Baltic Pipe will cross the existing Nord Stream pipe, which brings gas to Germany from Russia, and possibly its planned second line Nord Stream 2.
Construction work of the undersea section is expected to start in June 2020. Poland wants the pipeline to be completed in 2022 when a long-term deal between state-run gas firm PGNiG and Russia’s Gazprom expires.
In other attempts to diversify sources of supply, Poland opened its first liquefied natural gas (LNG) terminal on the Baltic Sea, which it plans to expand, and PGNiG has been buying more and more gas from sources other than Gazprom.
Naimski said the 10 billion cubic metre (bcm) capacity of the Baltic Pipe and 7.5 bcm capacity at the LNG terminal plus Poland’s own production would be enough to meet Polish gas demand which is currently around 16 bcm a year.
Australia No Longer Faces Gas Shortfall
Australia no longer faces a looming gas shortage, thanks to government pressure on exporters to divert gas into the domestic market and reduced demand forecast for gas-fired power, according to the latest estimates from the nation’s energy market operator.
“No supply gaps are forecast before 2030 under expected market conditions,” the Australian Energy Market Operator said in its annual outlook for gas.
The outlook is starkly different from a year ago, when dire warnings from the market operator about potential shortfalls in eastern Australia from 2018 onward prompted the government to threaten to curb liquefied natural gas (LNG) exports.
The nation’s three east coast LNG plants, operated by Royal Dutch Shell, ConocoPhillips, and Santos , averted those curbs by promising to plug the expected deficit.
Their moves, combined with greater availability of LNG on the global market, the start-up of a new pipeline from the Northern Territory to Queensland, and growth in wind and solar power diminishing the need for gas-fired power, have eliminated the feared shortage.
“Alongside international market changes, newly committed electricity generation resources have resulted in a favourable increase of gas availability for the east coast market,” AEMO executive general manager David Swift said in a statement.
More than 4,000 megawatts of wind and solar power are due to start up in the next two years, which should ease demand for gas-fired power except when renewable generation is low, he said.
AEMO cut its gas consumption forecast for 2019 by 55 petajoules from its last estimate made in September, while increasing its gas production outlook from fields in the southern states by 16 PJ.
In September, it had predicted a supply gap of between 54 PJ and 107 PJ for 2018, or up to 17 percent of market demand.
An extra eight PJ of gas has also been freed up for the local market as a global LNG glut has given overseas buyers more supply choice, AEMO said.
While producers told the market operator output would increase from southern gas fields, AEMO’s forecasts “still show that further exploration and development will be needed to meet demand from as early as 2022,” Swift said
Small US Oil Producers Face Output Squeeze
As pipelines out of the largest U.S. oil field reach capacity in the coming months, further depressing West Texas crude prices, smaller producers will have to slow or shut-in production, according to oil executives.
Soaring production in U.S. shale fields has driven output to a record 10.47 million barrels per day (bpd) this year and any cutbacks would hurt companies recovering from 2014’s crude-price drop.
Oil in Midland, Texas now sells for about $6 a barrel less than the U.S. benchmark, compared with $1.50 less in January. It was $13 under the U.S. benchmark in May.