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Funny BP forecast and the Ukraines gas problems (weeks news review)

February 20/ 08:05

Starting from March 1st the crude export duty for Russian oil will grow by $1.5 and reach $91 per ton. This is the result of a little rise in the global oil price in the last 30 days. Consequently, the average Urals price has reached $53.25 for a barrel or $388.7 for a ton.

BP company presented the latest Energy Outlook until 2035 in Russia. This is a very vague forecast, which more than once falls into options like “there could be a lot, or there could be not too much, or there could be a little”. I’ll highlight the most important points.

I’d like to thank the authors for not reducing the current demand for oil, leaving it with the 1% increase rate for the nearest years. Although, it is supposed to decrease to 0.4% by 2035. Since BP itself has been producing less and less oil, they’ve decided to persuade everybody that NOBODY needs oil anymore.  

As for gas, BP produces it in large amounts, so they are predicting a 1.9% increase in the demand for it. Here I agree with the authors.  Though, further go the wildest dreams. It turns out that the lion’s share of the increase will be due to the US shale gas, whose production is going to DOUBLE (!!!). The authors seem to have been too lazy to look at the proved reserves data; with this generosity the reserves won’t last for more than 10 years. 

And since it is impossible to build pipelines from the US through the oceans, BP is expecting that LNG will account for the gas transport increase. And then the American shale gas will flood not only the Central and South America, but also Europe and Asia. Hoorah!

Some time ago I stopped trusting the greatly biased reviews from BP and now I take them the other way round. And since the company did a special presentation of this report in Russia, it is clear WHO this disinformation is FOR.

I’d like to add here that any forecasting of energy for the period of over 10 years is doubtful in itself. The situation in the world changes too quickly. Personally I believe that gas processing into liquid fuel (GTL-technologies) will rise sharply, and as the wars in the Middle East subside, gas pipelines will be built from Qatar, Iran and Turkmenistan to India. New truly revolutionary discoveries are also possible.

Iran announced its oil reserves increment by 15 bln bbl. At first glance the news shakes you to the core: 2 billion tons is a very big figure. I felt doubtful at once, because I took a special interest in Iranian oil. It turned out that this piece of news should also be treated the other way round. There are only 2 billion barrels of proved (recoverable) reserves, so the oil recovery factor is 13.3%, meaning the deposit is among the poorest. Compared to the available Iran’s reserves, the increment also looks modest (1.3%).

Rosneft has started drilling the first exploratory well in Venezuela. Solimoes project in the Amazon basin includes 18 license areas covering the total territory of 37 thousand square km. Rosneft has a 55% share in the project and acts as an operator. Last year the companies working with Rosneft in Venezuela produced 9 mln tons of oil.

The Ukrainian Naftogaz sadly warned its consumers about the increase in gas prices by 40% starting from April 2017. It seems unwilling to do this, but IMF is pressing. The consumers not only owe 58 bln hryvni  ($2.1 bln) or $50 per every poor head as it is, and will have to pay the debt in April, but they will also have to switch to prepayment.

On the other hand, Naftogaz is expecting Stockholm arbitration court to satisfy its claim to Gazprom in autumn and to make the Russian company sell gas at the price of European hubs, excluding transport costs. Why not for free then? One should think big. Besides, the import gas accounts for less than 40% of the Ukrainian gas consumption, the country produces the remaining 17 bln cubic meters. The problem is that the deposits are buried deep (4500-5500 m), the wells take two years to drill and cost a lot. In response to that the Ukrainian prime minister solemnly swore that gas price won’t be increased. 

In January OPEC cut the total oil production by 890.2 thousand bpd. Ten countries, as agreed, cut it by the total of 1.2 mln bpd, but Iran, Nigeria, Libya combined increased the supply by 217 thousand bpd. Russia decreased the production by 117 thousand bpd.  

The stock exchange has begun to waver: the Brent prices have been in the narrow range of $53.5-57.5 for a month now. On the one hand, the exporters have been complying with the agreed reduction. On the other hand, the US commercial reserves have grown by 34 mln barrels or 7%, which is not a trifle. It’s hard to bring yourself to sell oil and it’s scary to buy it. As for the commercial reserves, we’ll deal with them separately, some other time. Now I can say that the technical analysis shows that Brent price has chances to go up, to the benchmark of $60, slightly above the other scenarios. 

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