No Need for More OPEC Oil - Kuwait

Reuters In, Kuwait, Jan 5, 2011 Wed 5:19 PM IST
Kuwait's oil minister said on Wednesday he considered oil at $80 to $100 a barrel to be a "fair price" and did not expect OPEC to increase output in the first half of this year.

Speaking to reporters outside the Kuwait parliament, Sheikh Ahmad al-Abdullah al-Sabah also said he did not foresee the oil producer group gathering ahead of its next scheduled meeting in June unless "something dramatic happens." He did not elaborate. [Read also my blog post here -- D.R.]

Last month, al-Sabah said that the global economy can withstand oil to be at $100 a barrel. Analysts have warned that the rallying oil price may hurt the global economy unless producing countries boost output this year.

Oil prices fell further from 27-month highs on Wednesday as a stronger dollar sapped investor risk appetite for commodities, despite signs of tighter oil supply fundamentals.

ICE Brent for February fell 50 cents to $93.03 a barrel, last month the price had spiked to $94.74 a barrel [Dec 24, 2010], its highest since Oct. 2008. Full

(Oil prices rose to a 27-month peak on Monday (Jan 3) as upbeat European and U.S. manufacturing data and forecasts for cold weather reinforced optimism about economic and energy demand growth. US crude oil for February delivery rose 17 cents to settle at $91.55 a barrel on Monday, its highest settlement since early October 2008, after earlier rising as high as $92.58. In London, ICE Brent crude for February rose nine cents to settle at $94.84 a barrel, also the highest close since October 2008. Oil prices slid on Tuesday, retreating from a 27-month high. In London, ICE Brent crude for February fell $1.31 to settle at $93.53. ICE Brent for February fell further on Wednesday -- 50 cents to $93.03 a barrel. -- See above. See also 26-month highs, last month, here -- D.R.)

CNOOC Says First Ever Diesel Imports Arrived on Dec 18 in E China

Platts, Jan 5, 2011
China National Offshore Oil Corporation said Wednesday its first ever imported diesel cargo of 27,000 [metric tons] mt from South Korea arrived on December 18, signaling that the country's [largest] offshore oil and gas producer [and the country's third-biggest oil company] is likely to become an active player in the trading of refined products.

"The imported diesel cargo is the first such shipment of refined product procured by the company on the international market and it marks a useful attempt by the company in carrying out importing and exporting of refined products," CNOOC said in a statement on its website.

The cargo imported by its subsidiary, CNOOC Chemical Import & Export Co., was part of efforts by the company to help ease a domestic diesel shortage late last year, said the state-owned parent of Hong Kong- and New York-listed CNOOC Ltd.

The cargo was unloaded at the port of Nanjing in eastern China's Jiangsu province.

In China, only companies approved by the government and granted import licenses can import gasoil, while state-owned China National Aviation Fuel Group is the only organization allowed to import jet/kerosene to supply the aviation industry.

Currently, only four state-owned enterprises -- Sinopec, PetroChina, CNOOC and Sinochem -- have been granted approval and hold licenses to import diesel into the country.

Up until the December cargo, CNOOC has never imported any diesel on its own. [Full story]

(For China's diesel shortage and imports, see also my blog post here. Furthermore, see the Wood Mackenzie provisional data here. Although there is no domestic crude oil production (no proven domestic crude oil reserves), South Korea is home to three of the ten largest crude oil refineries in the world -- SK Energy's Ulsan, GS Caltex's Yeosu and S-Oil's Onsan. -- D.R.)

U.S. to Ease Requirements on Some Deepwater Projects

by Ayesha Rascoe, Reuters, Washington, Jan 3, 2011 Mon 8:11 PM EST

Credit: Reuters/Lee Celano. Description: Unused oil rigs sit in the Gulf of Mexico near Port Fourchon, Louisiana August 11, 2010.

The Obama administration on Monday eased new environmental barriers to some oil and gas deepwater projects, but companies will still have to meet stringent regulations before drilling resumes.

Oil companies and Republican lawmakers have complained that regulations imposed after the BP oil spill have brought Gulf of Mexico drilling to a standstill.

The [Interior] department's decision to waive some environmental requirements comes as Noble Corp announced that Marathon Oil Co canceled a four-year, $752 million contract for a deepwater rig in the Gulf due to lack of drilling permits.

The policy will impact 13 companies with projects that were already underway when the department imposed its ban on deepwater drilling. Companies will be able to forego additional environmental reviews depending on new calculations of the worst-case flow rate estimates for their wells.

While removing one potential obstacle for these companies, it does not automatically mean drilling will begin immediately.

Affected companies such as Chevron and Royal Dutch Shell, which were drilling wells when the department imposed its moratorium, must still meet new offshore drilling regulations before restarting their projects.

"We are taking into account the special circumstances of those companies whose operations were interrupted by the moratorium and ensuring that they are able to resume previously approved activities," said Michael Bromwich, head of [the Department of the] Interior's Bureau of Ocean Energy Management, [Regulation and Enforcement (BOEMRE)].

Since lifting its ban in October ... , the department has yet to approve any new deepwater exploration drilling permits.

Shell characterized the government's move as a good first step, but said more action is needed "to improve the timeliness and efficiency of the permitting process," according to a statement from the oil company.

Republicans, who will control the House of Representatives in the new Congress, vow to press the Obama administration on the slow permitting process. More

(For the Gulf of Mexico oil spill, see also my post, here -- D.R.)

US Ethanol Production Hit All-Time High in October: EIA Data

Platts, Dec 31, 2010
US monthly production of fuel ethanol reached an all-time high in October, figures released Thursday by the US Energy Information Administration show.

In October, US producers manufactured 27,410,000 barrels of fuel ethanol, up from 26,061,000 in September. The previous record was set in August, at 26,963,000 barrels, according to EIA's data.

The agency's data also showed stocks declined in October, to 17,295,000 barrels, from 17,408,000 barrels at end-September.

The US imported no fuel ethanol in October, EIA's report showed.

Industry analyst Andy Lipow calculated the percentage of ethanol in the US gasoline pool at 9.5% for October by converting the October ethanol production figure to 884,200 b/d, using US Department of Agriculture data to put exports at 26,800 b/d, and factoring in the stock draw.

Using EIA figures, Lipow calculated the overall October demand in the US for fuel ethanol to be 861,000 b/d. EIA put gasoline demand for October at 9,086,000 b/d, resulting in his 9.5% of the gasoline pool figure.

The January-to-October figures show average fuel ethanol production of 851,300 b/d, imports of ... , consumption of 825,700 b/d, and gasoline consumption of 9,054,000 b/d. This put ethanol at 9.1% of the US gasoline pool, according to Lipow.

The percentage of ethanol in the total pool of gasoline is significant in that a typical gallon of ethanol-blended gasoline has 10% ethanol in it; the 9.5% figure shows that ethanol has nearly saturated the US market.

The US Renewable Fuel Standard will push the required use of ethanol in coming years to well over the 10% of the gasoline pool. To that end, the Environmental Protection Agency has changed regulations to allow up to 15% blends in newer US vehicles. Automakers and gasoline sellers have criticized that move, citing insufficient testing of the new fuel in engines.

(Ethanol is a renewable fuel made from various plant materials, which collectively are called "biomass." In the United States it is most commonly produced from corn and used in gasoline at volume fractions of 10 percent or less, creating a fuel called E10 or "gasohol." Low-level blends, up to E10 (10% ethanol, 90% gasoline), are classified as "substantially similar" to gasoline by the U.S. Environmental Protection Agency (EPA), meaning they can be used legally in any gasoline-powered vehicle. On October 13, 2010, the EPA partially granted Growth Energy's waiver request application submitted under section 211(f)(4) of the Clean Air Act. This partial waiver will allow fuel and fuel additive manufacturers to introduce into commerce gasoline that contains greater than 10 volume percent (vol%) ethanol and up to 15 vol% ethanol (E15) for use only in model year (MY) 2007 and newer light-duty vehicles (i.e., cars, light-duty trucks and medium-duty passenger vehicles) once certain other conditions are fulfilled. -- See here . E10 has also been mandated in the state of Florida by Dec 31, 2010. -- See Ethanol Blend Mandate, here. It is important to emphasize that ethanol is increasingly available in E85 (i.e. 85% ethanol, 15% gasoline) -- see photos below, an alternative fuel that can be used in flexible fuel vehicles. Studies have estimated that ethanol and other biofuels could replace 30% or more of U.S. gasoline demand by 2030. -- See here.
                                                  Biofuels pumps

                                           Source: www.fueleconomy.gov here   

Source: http://news.tennesseeanytime.org/ here. Description: Green Island Grants support retail E85 and B20 pumps like these at a station along I-65 in Goodlettesville, just north of Nashville.  

E10 and other blends would help reduce foreign oil demand and greenhouse gas emissions. B20, shown in the photos above, is a mixture of 20 percent biodiesel and 80 percent petroleum diesel and can be used in almost all diesel engines without modifications. Biodiesel is a clean, renewable fuel produced from vegetable oils, such as soybeans, or animal fats. B20 is the most common biodiesel blend in the United States. Using B20 provides substantial benefits but avoids many of the cold-weather performance and material compatibility concerns associated with B100. -- D.R.)

U.S. Looks to Japan for EV Quick-Charge Plug

by Chuck Squatriglia, Wired (blog Autopia), Dec 30, 2010

 Photo: The i-MiEV charging at the nation’s first public DC quick charger, which opened earlier this year in Vacaville, California. /Mitsubishi

One major hurdle to the widespread adoption of electric vehicles is the time needed to recharge them. So-called quick chargers that do the job in about 30 minutes address that problem, but one major obstacle to the widespread adoption of quick chargers is the lack of a standardized plug.

That may soon change.

Earlier this year the Japanese embraced a standard plug they call CHAdeMO. Now it appears the United States may follow suit. According to a report in Yomiuri Shimbun, the United States (presumably through the Department of Energy) will install 310 CHAdeMO-equipped quick-chargers in Arizona, California, Texas, Tennessee, Oregon and Washington.

Those markets happen to be where the Nissan Leaf and Chevrolet Volt are currently available.

As Yomiuri Shimbun notes, widespread adoption of CHAdeMO by the United States and Japan almost certainly would make it the world standard for 440-volt DC charging. The Nissan Leaf already features a CHAdeMO-ready socket — it’s the larger one in the photo above. This is the first large-scale use of the standard outside of Japan, and speaks to the foresight of the Japanese automakers in rallying around a standard.

CHAdeMO, adopted by Toyota, Nissan, Mitsubishi and Subaru and 154 other Japanese companies, is a riff on charge de move, or, roughly, “charge for moving.” It’s also a pun on the Japanese phrase “O cha demo ikaga desuka,” which means, “Let’s have a tea while charging.” Full

(For EVs see also Deutsche Bank's research note, in my blog, here. -- D.R.)

Deutsche Bank Forecast Sees Slower Transportation Electrification and Greater Gasoline Demand Near-Term; Increased Confidence in the Pace and Breadth of Long-Term Shift to Efficient Transportation Systems

by Green Car Congress, Jan 1, 2011
In a December 2010 research note on the 2011 outlook for the oil market, Deutsche Bank (DB) analysts have revised their earlier expectations of the pace of near-term transportation electrification trends (slower) and gasoline demand (greater) but note that the developments in the global transportation sector in 2010 have increased their confidence “in the pace and breadth of the long-term shift to a more efficient transportation system.”

Their analysis is in the context of the “surprising [oil] demand strength of 2010“; 2010 saw absolute incremental demand at around 2.2mb/d of growth—the second highest in 30 years, despite oil prices in the $90/bbl region. Key developments in the transportation sector that they note include:

Positive for gasoline demand:

• Strong Chinese car growth in 2010, particularly in the first half of the year, with vehicle sales up 30% year-on-year (YoY) through the first eleven months of 2010. In DB’s Fall 2009 note, they had forecast 12% growth. By mid-2Q, the team had increased its estimate to 25%.
  Deutsche Bank’s China Auto analyst, Vincent Ha, continues to see robust light vehicle sales over the next few years, with a slow to about 11% YoY growth in 2011 (due to a high base from the 2010 surge, and reductions in government stimulus), followed by sustainable low double digit growth in 2012. He also believes that sub-1.6L passenger cars will outgrow larger vehicles due to favorable policies.
• Slower than expected sales of hybrids everywhere in the world but Japan in 2010. In the US hybrids fell from about 3% of total sales in 2008-09 to 2.2% in 2010. The DB team attributed the reduction to less concern about gasoline prices, and therefore fuel efficiency, as well as fewer government subsidies for hybrids.
  

  As we’ve said before, it may take another $140/bbl+ oil price surge to truly and finally change US transportation behavior and policy.

• Increasing political animus towards the ethanol tax credit, which was “begrudgingly renewed for one year in the lame-duck tax bill.” The team suggests that this may be the last extension for the credit. ...

Negative for global gasoline demand ... :

• Rapidly falling lithium-ion battery prices, and steepening expected cost reduction curves for both batteries and electric drive components.

Based on discussions with industry experts and several automakers, the DB Auto team has lowered its advanced lithium ion battery cost projection by about 30% for 2012. Current prices have fallen from $650/kWh+ in 2009 to about $450/kWh now, and DB’s forecast is the price to fall at about a 7.5% CAGR from 2012 through 2020 to about $250/kWh.

The consumer economics of a pure electric start to work without subsidy by about 2020 under this battery price decline scenario. The industry rule of thumb suggests that consumers will consider a 3-4 year payback to be an economic choice. With no subsidy, 2012 electric vehicle models will have a 10+ year payback vs. a typical combustion analog, assuming $3.25/gallon gasoline. With a $7,500/vehicle subsidy in 2012, an electric will have about a 5 year payback. Around 2015, assuming a $4,500/vehicle subsidy, the payback period starts to fall into a range at which consumers will view the economics favorably. By 2020, the economics should be able to more or less stand on their own with subsidy, and a small subsidy would clearly nudge the payback below 3 years. 

• Strong indications of commitment by the Chinese government to support the rapid development of both domestic demand for electric vehicles and a competitive domestic electric vehicle industry.
• New US fuel efficiency/emissions standards which will not be achievable without significant penetration of electric vehicles, according to the DB analysis.
• Fuel standards in Europe, Japan and Canada that will require widespread adoption of electrics. There is pressure to make European standards even more aggressive.
• More governmental consumer incentives (rebates or tax credits) to encourage the purchase of new electrics and plug-in electrics.
• An explosion of hybrid sales in Japan. The Toyota Prius became the biggest selling car in Japan in 2009, and has remained in that position throughout 2010. Several other hybrid models also made the leaderboard. Hybrids went from about 8% of sales in 2009 to over 11% in 2010. Honda believes that hybrids will account for 23% of the market by the end of 2011.
• Strong pre-sales of electrics in the US by commercial enterprises. In November General Electric put in a pre-order for 12,000 GM electric cars, and said it planned to buy 25,000 EVs from all manufacturers by 2015 for its corporate fleet. At the consumer level, dealers have put in more 2011 orders than can be produced for both GM’s Chevrolet Volt and Nissan’s Leaf. Volt manufacturing capacity will rise from 10K in 2011 to about 65K in 2012. Nissan is building a 150K capacity plant in Tennessee for the Leaf which will come on line in 2012.
• New business models, combined with government incentives and subsidies, that dramatically lower the entry price for consumers.
• A growing number of xEV options around the world. The DB auto team counts at least 130 models in the global pipeline for 2012.
• Aggressive near-term OEM lease pricing.
• Increasingly micro-hybridization, with a majority of ICE’s being micro-hybrids (e.g., equipped with start-stop and/or some regen functionality) by 2020.

Read Full

Petrobras to Miss 2010 Brazil Oil Output Goal by 4.6%

by Peter Millard, Bloomberg, Dec 30, 2010
Petroleo Brasileiro SA, Brazil’s state-controlled oil company, will miss its 2010 domestic production target by 4.6 percent even after reaching record daily output earlier this week.

Petrobras, as the Rio de Janeiro-based company is known, produced an average 2 million barrels of oil a day in Brazil this year, below a 2.1 million-barrel target, according to a regulatory filing today. Daily output reached a record 2.26 million barrels on Dec. 27, Petrobras said. [Oil and liquids but not including natural gas production in barrels of oil equivalent per day, i.e. boed. -- D.R.]  

"2010 was a disappointment," Marco Saravelle, an equity analyst at Coinvalores in Sao Paulo, said today in telephone interview. "They need to set targets that they can meet."

Output fell in October to the lowest level since July, 2009, after Petrobras shut several offshore platforms for maintenance. The company has boosted output since November after starting several wells in the offshore Campos Basin. [Above -- full, see also map in this blog, here]

(Even falling below target, Petrobras has had a good performance in 2010. Petrobras performs various activities overseas too, and maintains a steady international operation. It is present in Angola, Argentina, Bolivia, Nigeria, etc. In late 2009, ultra-deepwater drillship Petrobras 10000--see image below, for instance, has started work in Angola. Petrobras monthly average in Brazil for December will be approximately 2.12 million barrels a day, 4.4% higher than the production achieved in November 2010, which was 2.03 million barrels a day -- see Scandinavian Oil-Gas Magazine, here. If the natural gas production is figured in, Petrobras’ total production in Brazil, in November, in barrels of oil equivalent per day--boed, reaches 2,378,674. This is 4.2% more than the daily average reached in October 2010 [2,283,689 barrels], and 3% more than its total average, i.e. including oil and gas, in November 2009. Considering the fields in Brazil and abroad, Petrobras' total oil and natural gas production averaged 2,620,347 boed in November 2010, compared with 2,534,274 boed in October 2010 -- see Scandinavian Oil-Gas Magazine, here. Brazil’s oil output, including foreign output, rose to a record 2.089 million barrels a day in November 2010, from 1.986 million barrels a day in November 2009, namely a 5.2% rise. Petrobras has been ranked fourth in the Platts Top 250 Global Energy Companies Rankings 2010, reflecting the 2009 financial performance, behind ExxonMobil, BP and Gazprom Oao---please see my post, here. Also, Petrobras retained its spot as the No. 15, in the 2011 Petroleum Intelligence Weekly's/PIW's ranking for 2009---please see my blog stand-alone page "Companies" > Petrobras, here. -- D.R.)             

Source: Shipspotting.com. Specifications: 6th generation deepwater; builder - Samsung; design - Samsung 10000 Double Hull. Description: Petrobras 10000 in the yard in Geoje, South Korea.