THE MONTH IN BRIEF: Prices tumble, Iraq gains at Iran's expense, and energy firms in trouble

• Date: 01 November 2013
• DOI: http://doi.org/10.1111/oet.12109
• Published date: 01 November 2013

THE MONTH IN BRIEF

This section summarizes downstream developments of the previous month. Exploration & Production are covered in

‘‘Upstream Review’’.

Prices tumble, Iraq gains at Iran’s expense, and energy firms

in trouble

Crude oil markets turned bearish amid indications that

demand was weak and stock levels were high. There

were particular concerns over the health of the US

economy after parts of the government were shut down

following arguments in Congress about the high level

of government debt. Various US economic statistics

and data on stock levels pointed to a combination of

low demand and high levels of supply, helping to push

WTI below $97/bbl by the end of the month. There were

further indications of ample supply as exports from Libya

and Iraq began to recover following earlier problems.

Libyan production, which had been reduced to

150,000 bpd by civil strife, rose to about 700,000 bpd,

though several oilfields remained closed, along with

some export terminals, and the government showed

no sign of being able to establish control over large

areas of the country. Iraq’s export rose by an estimated

500,000 bpd following the completion of work designed

to increase export capacity in the Persian Gulf. Iraq’s

total export capacity is now 3.35 mn bpd, of which

2.70 mn bpd is in the Gulf. The government forecast oil

exports of 3.4 mn bpd in 2014: a rise of 900,000 bpd

over 2013s expected total. Asian import data meanwhile,

revealed that Iraqi exports to China were up by 175,000

bpd compared with the first nine months of 2012, at just

over 470,000 bpd. A year-on-year rise in volume was

reported by a number of other Asian importers. Much

of the rise occurred at the expense of the Iranians whose

exports remained affected by US and EU sanctions. Iran

stated that it would consider offering price discounts

in future to help regain its former market share east

of Suez.

China and Russia signed a number of agreements to

increase energy ties between the two countries, including

deals with Russian state oil company, Rosneft, to increase

crude oil exports from 300,000 bpd to 1 mn bpd

by 2020 and to build a 320,000 bpd export refinery

with China National Petroleum Corporation (CNPC) at

Tianjin in northeastern China. South Korea’s National

Oil Corporation, which was established to challenge

the oligopoly of the country’s four refiners, has signed

memoranda of understanding with firms in Bahrain and

Turkey to import petrol and diesel to be sold in Korea at

discounted retail prices. Following the announcement

of the closure of JX Nippon Oil & Energy’s 180,000 bpd

Muroran refinery in Hokkaido, the Japanese island’s

one remaining refiner, Idemitsu Kosan, is to increase

products storage and upgrade its terminal facilities.

Australian fuel deliveries were disrupted by a nationwide

strike by the road tanker company Cootes Transport.

British energy companies were attacked by customers,

church leaders, and politicians for fuel and electricity

price rises of nearly 10%. The companies blamed the

government’s green levies for part of the increase. There

were renewed fears over the safety of rail transport in

Canada when a train carrying crude oil from Alberta

to Chevron’s Burnaby refinery in British Columbia was

derailed and three liquefied petroleum gas (LPG) tank

wagons caught fire. Ineos’ 210,000 bpd strike-hit refinery

and associated petrochemical plant in Grangemouth,

Scotland, was saved from closure after a last-minute

climbdown by the Unite trade union over demands

for better pay and pension terms. The petrochemical

plant has been hit by a decline in North Sea gas liquids’

production and needs to build a terminal to import

feedstocks for its two olefin crackers. A strike stopped

work on Colombia’s 165,000 bpd Reficar refinery, which

is already over a year behind schedule.

Hungarian oil and gas company MOL announced

the closure of its 55,000 bpd Mantova refinery in

northern Italy. Cosmo Oil, Mitsui Oil and TonenGeneral

are to coordinate their refining operations at Chiba,

in Japan, in order to increase efficiency and save

costs. Cosmo has a 240,000 bpd unit at Chiba while

Mitsui and TonenGeneral own the nearby 175,000

bpd Ichihara refinery. Vietnam’s long-delayed Vung

Ro refinery project finally got underway with the award

of the Front End Engineering and Design contract to

Japan’s JGC. Completion is now expected in 2019. An

outline deal was agreed between Iraq’s Oil Ministry

and Switzerland’s Satarem for a 150,000 bpd refinery in

Missan province. The government of Dubai announced

that China Sonangol was to build a refinery in the

emirate.

©2013 John Wiley & Sons Ltd