Manup Industry Roundup - W0423: NEWSL -01
Last year, China likely accelerated the pace of crude oil stockpiling. However, since China doesn’t report crude oil inventories, it’s all guesswork as to just how much crude the country has stashed over the past year.
According to IEA China’s reopening is set to drive global oil demand to a record high of 101.7 million barrels per day this year.
Below are the oil and gas stories and news that made headlines this week carefully curated by?Manup.
Summary of the news
Upstream Spending To Rise To $485 Billion In 2023
Over the past three years, the majority of U.S. energy companies have avoided spending big to expand production in the aftermath of the 2020 oil crisis, prioritizing returning more cash to shareholders in the form of dividends and share buybacks. Most oil and gas companies have only announced small increases in their capital spending for the current year, and also plan to grow production modestly.
But this does mean that these companies won’t try to capitalize on oil prices that remain at multi-year highs.
In its?2023 outlook,?Energy Intelligence?notes that global upstream capex will hit $485B in the current year, good for 12% Y/Y increase and a near 30% recovery from the 2020 trough.
According to energy Intelligence, spending is unlikely to hit the $700 billion-plus level seen during the 2013-2014 peak in this decade, with most companies preferring to focus on the most advantaged “barrels’’ i.e. lower cost, lower carbon projects with faster timelines.
NOCs, large independents and western majors are returning to advantaged offshore plays including the Guyana Basin, Brazil, Gulf of Mexico, North Sea and West Africa–the regions also expected to drive the lion’s share of non-OPEC growth.
New FPSO Sets Sail For BP’s Giant Gas Project
UK-headquartered energy giant BP floating, production, storage, and offloading (FPSO) vessel destined for its Greater Tortue Ahmeyim (GTA) liquefied natural gas (LNG) project has embarked on its journey towards the project site off the coasts of Mauritania and Senegal.
According to BP the?Tortue?FPSO set sail on Friday, 20 January 2023, from Qidong, China after completing a series of sea trials following construction at COSCO Shipping Heavy Industry over the past three and half years. The FPSO will now travel 12,000 nautical miles via Singapore to its final destination – around 40 km offshore on the maritime border of the neighbouring countries
The vessel which will sit in about 120m of water, will have up to 140 people on board during normal operation and serve as home for the project’s production team.
When live, it will process around 500 million standard cubic feet of gas daily - equivalent to the daily Energy needs of 5 million homes.
It's worth noting that FPSO which has an area equivalent to two football fields and 10-storeys in height is made of more than 81,000 tonnes of steel, 37,000m of pipe spools and 1.52 million meters of cable. It has also undergone more than 330,00 inspections
China Is Still The Biggest Driver Of Oil Prices
Oil prices settled on Thursday at their highest level since December 1 as the market is turning bullish on China’s oil demand this year.
The Chinese reopening is set to drive oil demand growth and push oil higher if most of the developed economies manage to avoid recessions, analysts say.
China likely accelerated the pace of crude oil stockpiling last year, according to estimates by Reuters’ Asia Commodities and Energy Columnist Clyde Russell based on Chinese data on imports, domestic production, and refinery processing rates.
More stocks in commercial and strategic storage could mean that China’s imports may not be as strong as anticipated. But it could also mean that refiners are preparing for a surge in demand in the coming months once the exit Covid wave after the restrictions were dropped fades.
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Since China doesn’t report crude oil inventories, it’s all guesswork as to just how much crude the country has stashed over the past year.
As China reopened its borders in early January, authorities issued a massive batch of allowances for independent refiners to import crude oil.
There is one certainty in the oil markets – the economic growth in China has been and will continue to be a key factor in global oil demand, capable of moving oil prices in either direction.
Over the past few days, the key driver of oil prices was the Chinese reopening and the improved outlook on Chinese demand due to said reopening.
OPEC and the International Energy Agency (IEA) said in their respective monthly reports this week that the prospects of global oil demand were improving thanks to the Chinese exit from the ‘zero Covid’ policy.
China’s reopening is set to drive global oil demand to a record high of 101.7 million barrels per day (bpd) this year, up by 1.9 million bpd from 2022, the IEA said in its report, raising its demand growth estimate for 2023 by 200,000 bpd from 1.7 million bpd growth expected in December.
“Two wild cards dominate the 2023 oil market outlook: Russia and China,” the IEA?said?in its Oil Market Report.
“China will drive nearly half this global demand growth even as the shape and speed of its reopening remains uncertain.”
OPEC also expressed more optimism about Chinese oil demand and the global economy this year in its?Monthly Oil Market Report?(MOMR).
Fears of recession may have subsided, but the oil market continues to react with selloffs to every weak economic data point from the United States, Europe, or China.
Nevertheless, market sentiment has turned bullish on China over the past two weeks, which resulted in rising oil prices.
This highlights the fact that the Chinese economy and oil demand will continue to drive oil markets this year, alongside economic performance elsewhere, the extent of Russian oil supply losses, and the policy of the OPEC+ group to balance the market and support prices.
Saipem Wins $900 Million In New Offshore Contracts
Saipem has been awarded two offshore contracts for a total amount of approximately 900 million USD. The first contract - in partnership with Aker Solutions has been awarded by TotalEnergies, for the LAPA Southwest (LAPA SW) Development Project, a deepwater oil field in the Santos Basin in the South Atlantic, 270km off the coast of S?o Paulo, in Brazil.
The scope of work encompasses the Engineering, Procurement, Construction, and Installation (EPCI) of Subsea Umbilicals, Risers, Flowlines (SURF) as well as a Subsea Production System (SPS).
LAPA SW Development Project is the first-ever integrated SURF and SPS project awarded by TotalEnergies.
The Lapa South-West project will be developed through three wells, connected to an existing FPSO – located 12km away – currently producing in the northeast part of the Lapa field since 2016. The development represents an investment of approximately $1 billion.
The other contract has been awarded by Equinor for the Irpa Pipeline project.
The project, located in deep waters in the Norwegian Sea, consists of the installation of an 80-km-long swagged Pipe-in-Pipe pipeline connecting the subsea production template of Irpa field to the existing Aasta Hansteen platform.
The offshore operations are planned to take place in 2025 and will be performed by Saipem’s flagship vessel Castorone.
Other stories we are following…
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