06 BUSINESS DAY
C002D5556
Wednesday 02 May 2018
WEST AFRICA
finance people appointments ENERGY intelligence Brief Shell touts offshore momentum in quarterly report
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UAE’s ADNOC set to start crude oil, refined products trading unit
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bu Dhabi National Oil Company is close to setting up a new crude oil and refined products trading unit, as it presses ahead with plans to build up its downstream sector. The new unit will introduce and manage nonspeculative trading to further maximize value from every barrel of crude oil and refined product that is produced and marketed by the company, ADNOC said in a statement. Currently, all of ADNOC’s crude and oil products are sold on an FOB basis. The new unit could begin selling on a delivered basis, and manage the shipping and logistics of these products to customers. “As ADNOC grows and expands its upstream and downstream business, we will produce more products, and in turn, our marketing, sales and trading functions will play an even more critical role. Engaging in non-speculative trading will allow us to maximize value from our domestic, and over time, international downstream operations,” ADNOC CEO Sultan al-Jaber said in the statement. Philippe Khoury, a former CEO at Total’s trading and shipping affiliate for the Americas, Atlantic Trading & Marketing Inc in Houston, has been appointed as ADNOC’s group
head of trading. However, it was not clear when the new unit will start trading. ADNOC expects to see petrochemicals demand to grow by 150 percent in the new two decades. “To capitalize on this opportunity and make ADNOC more resilient against possible price volatility, our goal is to become a major global downstream player, creating a strong pull for our products, combined with a flexibility to respond quickly to shifting market needs,” Jaber said in the statement. ADNOC now plans to boost its total refining capacity from 922,000 b/d to ensure fuel self-sufficiency as well as growing its petrochemicals portfolio. The plans include the construction of a new 600,000 b/d refinery next to the giant Ruwais complex. ADNOC’s announcement is in line with a regional trend which began a few years ago, where national oil companies started establishing trading arms. Oman was the first with Oman Trading International, a joint venture with Vitol. This was followed by Saudi Aramco, which set up Aramco Trading in 2012 to market refined products, base oils and bulk petrochemicals. Kuwait is also looking to setting up a new company to market its oil products.
s part of its effort to retool the evolving portfolio, Royal Dutch Shell is adding more opportunities in the offshore sector. Shell is the latest in the supermajors to publish results for the first quarter. Shell’s net income was $5.3 billion, up more than 40 percent from the same period last year. Production of 3.8 million barrels of oil equivalent marked a 2 percent increase. The Dutch supermajor’s earnings report came two days after it sold off its refinery business, including its retail service stations, in Argentina for close to $1 billion in cash. “We continue to upgrade our portfolio through performance improvement new projects, divestments, and the development of new businesses,” Chief Executive Officer Ben van Beurden said. As of year-end 2017, Shell said about 80 percent of its proven oil and gas reserves will be produced by 2030, and then 20 percent from then on. The company is retooling its portfolio
following the 2015 megamerger with British energy company BG Group. In January, the company announced one of its largest discoveries ever in the Whale prospect in the deep waters of the Gulf of Mexico. Its total deepwater production is on pace to flirt with 1 million barrels of oil equivalent per day by 2020. In the first quarter, the company took nine explo-
ration blocks put in the auction block for the Mexican waters of the Gulf of Mexico. “This win, depending on future exploration success, gives us a competitive deepwater entry into Mexico and an opportunity to add a new deep-water heartland to our portfolio in the 2020s,” Shell Chief Financial Officer Jessica Uhl said in comments on the quarterly report. “Elsewhere in deep water,
we won four additional exploration blocks in Brazil, and for two of these blocks we will be the operator.” In a new era where oil prices are close to $70 per barrel, 19 of the 29 contracts on the auction block were awarded last month, with supermajor Royal Dutch Shell taking the lead in the tenders. Mexico aims to produce around 3.5 million barrels per day by 2025.
Schlumberger warns of oil supply gaps unless E&P raise CAPEX
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il services giant Schlumberger warned of an increasing likelihood the world will face growing oil supply chal-
lenges as cautious upstream producers show capital budget restraint even at current robust oil prices, while the impacts from spending cut during
the recent industry downturn accelerate. Notable year-over-year declines in Mexico, Angola, China, Malaysia, and Indonesia, coupled with Venezuela’s production “freefall” and potential new sanctions against Iran have left Saudi Arabia, the UAE, and US shale oil as the only major feasible sources of short-term supply growth to remedy global production declines, Schlumberger CEO Paal Kibsgaard said during the company’s first quarter earnings conference call. The company, which provides equipment and services to the upstream industry, is typically the first to hold its quarterly call and provides an early
glimpse at the rest of the year’s likely outlook for the sector. Despite “clear signs of a tightening oil market,” no upward revision to 2018 upstream budgets has taken place so far, with North America and the rest of the world still expected to spend just 20 percent and 5 percent higher, respectively, over last year’s levels, Kibsgaard said. “Based on these investment levels, it’s increasingly likely industry will face growing supply challenges in the coming years and that a significant increase in global E&P CAPEX will be required to minimize an impending production deficit,” Kibsgaard said.