US Bombed Wrong Refineries in Syria
Oil is in the news in many countries in many ways. Let’s take a look starting with a couple of paragraphs buried in the Financial Times report Barack Obama Admits US Underestimated Isis.
Allied aircraft on Sunday struck three makeshift oil refineries in an area controlled by Isis in an expansion of attacks intended to damage the militant Islamist group’s financial infrastructure.
Oil has proved crucial to financing Isis’s operations, netting several million dollars a day. But the observatory said the refineries struck early on Sunday, in and around Raqqa, were owned by civilians and not Isis. A separate air strike on a plastics factory on the outskirts of Raqqa resulted in the death of a civilian, the group said.
So, we blow up refineries owned and operated by civilians and it is buried in the news, with no hint of an apology or restitution offered to the refinery owners or to Syria.
Russia Discovers Vast Pool of Oil
Two days ago, Russia announced Arctic Well Drilled With Exxon Strikes Oil.
Russia’s state-run OAO Rosneft said a well drilled in the Kara Sea region of the Arctic Ocean with Exxon Mobil Corp. struck oil, showing the region has the potential to become one of the world’s most important crude-producing areas.
The announcement was made by Igor Sechin, Rosneft’s chief executive officer, who spent two days sailing on a Russian research ship to the drilling rig where the find was unveiled today. The well found about 1 billion barrels of oil and similar geology nearby means the surrounding area may hold more than the U.S. part of the Gulf or Mexico, he said.
The discovery sharpens the dispute between Russia and the U.S. over President Vladimir Putin’s actions in Ukraine. The well was drilled before the Oct. 10 deadline Exxon was granted by the U.S. government under sanctions barring American companies from working in Russia’s Arctic offshore. Rosneft and Exxon won’t be able to do more drilling, putting the exploration and development of the area on hold despite the find announced today.
Output from the Kara Sea field could begin within five to seven years, Sechin said, adding the field discovered today would be named “Victory.”
Exxon was given until October 10 when other companies had to comply with sanctions immediately. Regardless of why that happened, sanctions are ridiculous.
Instead of complaining that Exxon got favoritism, we should simply kill all the sanctions.
Sanctions Won’t Impede Arctic Drilling
Bloomberg reports Russia Oil Chief Says Sanctions No Bar to Arctic Drilling.
The most powerful man in Russia’s oil industry says U.S. sanctions won’t prevent the development of discoveries in the Arctic Ocean.
Igor Sechin, chief executive officer of state oil producer OAO Rosneft (ROSN) and a long-time ally of President Vladimir Putin, spent two days traveling by plane, ship and helicopter last week to announce a billion-barrel crude strike in the iceberg-prone Kara Sea region of Russia’s Arctic Ocean.
“We will continue working no matter what,” Sechin said in an interview on board a polar research vessel as he prepared to unveil the find he named Victory. “We will plan the work for next season. As I said, now we’ve drilled only the first structure — at Universitetskaya. There are more than 30.”
The development of Arctic oil reserves is one of President Putin’s grandest ambitions. As Russia’s existing fields in Siberia run dry, the country needs to find new reserves as it vies with the U.S. to be the world’s largest oil and gas producer.
Sechin said the opportunity offered by today’s oil discovery meant Rosneft would have no problem attracting investors and technology providers. Something he said was possible while respecting the company’s existing agreement with Irving, Texas-based Exxon.
If Exxon is forced to leave the project, “of course we’ll do it on our own and attract the necessary technologies and different partners who don’t have limitations on cooperation,” said Sechin, who featured in Bloomberg Markets 50 Most Influential list this year.
The well drilled in the Kara Sea found about 1 billion barrels of oil, Rosneft said. The crude is “super-light,” the company said, meaning when it’s refined it will produce a high proportion of gasoline and diesel. That’s likely to make it more valuable than Russia’s existing export grade, Urals.
The well was drilled before the Oct. 10 deadline Exxon was granted by the U.S. government under sanctions barring American companies from working in Russia’s Arctic offshore.
US Poised to Become World’s Leading Liquid Petroleum Producer
Back in the States, the Financial Times reports US Poised to Become World’s Leading Liquid Petroleum Producer.
The US is overtaking Saudi Arabia to become the world’s largest producer of liquid petroleum, in a sign of how its booming oil production has reshaped the energy sector.
US production of oil and related liquids such as ethane and propane was neck-and-neck with Saudi Arabia in June and again in August at about 11.5m barrels a day, according to the International Energy Agency, the watchdog backed by rich countries.
With US production continuing to boom, its output is set to exceed Saudi Arabia’s this month or next for the first time since 1991.
Riyadh has stressed that the rise of the US should not detract from its own critical role in oil markets. It says it has the ability to increase its output by 2.5m b/d if needed to balance supply and demand.
Prince Abdulaziz Bin Salman Bin Abdulaziz, Saudi Arabia’s deputy oil minister, said earlier this month that the kingdom was the “only country with usable spare oil production capacity”.
However, even Saudi officials do not deny that the rise of the US to become the world’s largest petroleum producer – with an even greater lead if its biofuel output of about 1m b/d is included – has played a vital role in stabilising markets.
Brent crude hit its lowest level in more than two years last week at about $95.60 a barrel, down from a peak of over $125 a barrel early in 2012.
Over that period, the growth in US production of more than 3.5m b/d has almost equalled the entire increase in world oil supplies.
The US industry has been transformed by the shale revolution, with advances in the techniques of hydraulic fracturing and horizontal drilling enabling the exploitation of oilfields, particularly in Texas and North Dakota, that were long considered uncommercial.
Iran Urges Opec to Halt Oil Price Slide
In spite of turmoil in the Mideast and sanctions on Russia, oil prices are the lowest in two years. Mideast oil producers are not pleased with that outcome and Iran Urges Opec to Halt Oil Price Slide.
Iran’s oil minister called on Opec nations to work together to prevent a further slide in crude prices, highlighting the split among members of the cartel over how to react to the sharp drop in oil to two-year lows in recent weeks.
“Opec members should make efforts to offset their production to keep the prices from further instability,” said Bijan Namdar Zanganeh on Friday, according to the Iranian oil ministry website, Shana.
Oversupply in the North Sea and Atlantic Basin has coincided with greater North American production.Meanwhile, sustained output from Iraq and rising Libyan production – despite bloodshed in both countries – has weighed on the Brent price as has weaker demand from Europe and China.
This month, both the International Energy Agency – the wealthy nations’ energy watchdog – and Opec lowered projections of crude demand next year.
This has fostered speculation of a cut in the oil cartel’s output targets, in defence of the key $100 a barrel price level.
Estimates of fiscal breakeven oil prices for this year – the price at which the budget is balanced – vary across Gulf nations.
Iran’s stands at about $130 a barrel while Saudi Arabia is at $89 and the UAE at $74, according to data compiled by Citigroup
That oil prices are generally trending lower in spite of global turmoil says more about declining demand especially in China and Europe than it does about any increased production in the US.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com