Election-year uncertainty, growing concern that provincial production quotas could continue into 2020 and the delay of key pipeline projects appear poised to derail Canadian oil sands production this year.
Oilfield Technology: Canadian oil sands production in 2019 will be almost 230,000 b/d lower than last year, according to ESAI Energy’s recently published North America Watch.
Oil and Gas Journal: Canadian oil sands production in 2019 will be almost 230,000 b/d lower than last year, according to ESAI Energy’s recently published North America Watch.
Venezuela’s crude oil production sank to as low as 250,000 b/d during the blackout last week. We estimate monthly production will be 750,000 b/d, down 200,000 b/d from January and February. While Maduro continues to hang on – and we expect he will manage to do so for months, not weeks — the US continues to apply tighter sanctions. Secondary sanctions are on in practice, if not in law. Rosneft and ChinaOil will still lift as much as 250,000 b/d. With throughput low, a sustainable production level over the next couple of months for Venezuela is around 450,000 b/d. Although a political transition does not appear imminent, a clear-eyed look at what would come next shows that production will not rise back above 1 million b/d any time soon.
Planned Canadian Oil Sands projects are being pushed back in response to further delays in pipeline egress and the mandated output cuts by the Alberta provincial government. The outlook for Oil Sands production in 2019 has worsened, with production now forecast to be almost 230,000 b/d lower than last year, averaging 2.7 million b/d. In 2019, lower levels of production will reduce the call on rail, lowering crude-by-rail volumes from the record highs set in the fourth quarter of 2018.
The January start of the Egina field added to Nigeria’s crude oil productive capacity, but Nigerian production will remain close to 1.65 million b/d while the OPEC+ production deal is in place. By the end of 2019, production could grow to 1.70 million b/d. While bigger gains are possible, prospects are clouded by renewed threats from insurgent groups in the Niger Delta, whose campaigns have crippled oil infrastructure in recent years. The January start of the Egina field added to Nigeria’s crude oil productive capacity, but Nigerian production will remain close to 1.65 million b/d while the OPEC+ production deal is in place. By the end of 2019, production could grow to 1.70 million b/d. While bigger gains are possible, prospects are clouded by renewed threats from insurgent groups in the Niger Delta, whose campaigns have crippled oil infrastructure in recent years.
A package of fiscal and monetary expansion, including recently announced tax cuts of $300 billion, should help stimulate China’s economy in 2019. ESAI Energy expects total consumption of gasoline, diesel, and jet to rise by 110,000 b/d to over 7.4 million b/d after growing by merely 30,000 b/d last year.
This year, Europe’s diesel import requirement will contract for the first time in four years by about 50,000 b/d as domestic production growth outstrips demand. As Europe’s diesel imports fall, the origin of these inflows will shift with Middle Eastern diesel crowding out product from the U.S. and Asia.
February was the fourth month in a row China’s crude imports were above 10 million b/d. In the next few months, we expect crude imports to fall well below this level. Maintenance plans by state-owned refiners could take offline 450,000 b/d in March, 950,000 b/d in April and 1.1 million b/d in May.
There will not be a significant expansion of Russian refining to threaten European refiners. Russia will probably only add a little over 200,000 b/d of distillation capacity in the next 3-4 years, with independent refiners adding none. Russian crude processing rates may not grow at all.
In just 18 months, Russia increased pipeline crude deliveries to China from 530,000 b/d to 800,000 b/d. In 2019, however, that volume and other eastbound export flows are unlikely to grow at all. That will restrain the ability of Russia to expand market share in China at a time when U.S. exports to Asia will grow.
India and Pakistan account for almost 5.0 million b/d of crude oil imports, most headed to India. As a result, any conflict or potential for military escalation is relevant to the global oil market. Last week’s exchange of air strikes between India and Pakistan is a stark reminder of how vulnerable the region is to military confrontation.
Oil and Gas Journal: Stable supplies and unstable prices will characterize global oil markets during 2019, speakers generally agreed during a Feb. 21 discussion at the Center for Strategic and International Studies.
Since replacing the British Navy as the guarantor of regional peace after World War Two, the United States has had a heavy presence in the Middle East. Now, as the U.S. comes closer to net oil exports, the country’s engagement with the Middle East, especially under President Trump, is diminishing. Even more than the Obama pivot to the East, the Trump Administration is moving the United States out of the region. That will implications for U.S. influence in the region, not to mention military conflict.
Kallanish Energy: There’s a lot going on in Venezuela since Juan Guaidó, the head of the National Assembly, declared himself the country’s interim president, and the Trump administration imposed new sanctions on current President Nicolas Maduro and state-run PDVSA to support a government transition.