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OPEC Breaks Bread With Shale Drillers in Texas: CERAWeek Update


Mar 11, 2019, by Javier Blas
(Bloomberg)

OPEC officials sat down to dinner with senior executives from North America’s booming shale oil industry on the sidelines of CERAWeek by IHS Markit, the annual gathering in Houston of some of the energy industry’s biggest names.

On the first day of the week-long event, topics of discussion included geopolitics, environmental regulations and Royal Dutch Shell Plc’s hunt for acquisitions in the biggest U.S. shale oil field.

Time stamps are Houston.

Oil Still Main Driver of OPEC Economies: Barkindo (7:01 p.m.)

Even as OPEC members seek to diversify their economies, Mohammad Barkindo, secretary general of the cartel, noted that oil production “will continue to be the dominant source of not only energy but also revenue.”

Meanwhile, International Energy Agency Executive Director Fatih Birol noted that electric vehicles are not yet a huge threat to oil demand.

Rebalancing Market a ‘Work in Progress’: Barkindo (6:04 p.m.)

Bringing oil supply and demand back into equilibrium remains a “work in progress,” Barkindo said.

“We are getting there,” the IEA’s Birol said as he and Barkindo shared the stage with industry historian Daniel Yergin.

Shell Sees Permian Output Growing by 30% Annually (4:39 p.m.)

Shell will grow production from its existing Permian Basin assets, which currently produce about 145,000 barrels of oil equivalent a day, by about 30 percent a year for the foreseeable future, Gretchen Watkins, its U.S. president, said in an interview.

Cash flow from shale assets, which includes fields in Canada and Argentina, will reach $1 billion to $2 billion by 2021, she said.

OPEC to Break Bread With Shale Competitors (4:04 p.m.)

The dinner meeting between OPEC officials and shale drillers is due to take place Monday night, Barkindo said in an interview with Bloomberg News. It will be the third consecutive year that rival producers have gathered on the sidelines of CERAWeek. The event has become an informal communication channel between the cartel and fast-growing shale producers.

The dinner will follow an afternoon gathering behind closed doors of OPEC officials and some of the leading lights of American finance, including Michael O’Dwyer, a senior natural resources banker at Morgan Stanley.

India Warning Companies Away From Venezuelan Oil (3:39 p.m.)

The Indian government is warning companies to halt purchases of Venezuelan oil or face undisclosed consequences, said M.M. Kutty, the nation’s secretary of petroleum and natural gas.

Shell Says It Can Be World’s Top Power Producer (3:09 p.m.)

Shell plans to become the world’s biggest power company despite electricity’s historically narrow margins.

The world’s second-largest oil explorer by market value is spending up to $2 billion a year on its ‘new energies’ division, mainly to grow in a power sector it envisions delivering 8 percent to 12 percent annual returns, according to Maarten Wetselaar, director of Shell’s integrated gas new energies unit.

“We believe we can be the largest electricity power company in the world in the early 2030s,” Wetselaar said in an interview with Bloomberg TV on Monday. “We are not interested in the power business because we like what we saw in the last 20 years. We are interested because we think we like what we see in the next 20 years.”

Pemex’s Top Execs Skip CERAWeek Conference (2:45 p.m.)

Petroleos Mexicanos Chief Executive Officer Octavio Romero and his finance chief, Alberto Velazquez, won’t attend CERAWeek, according to a company representative who asked not to be identified, citing internal policy. No additional details were disclosed.

EPA To Sign E15 Proposal This Week, Wheeler Says (2:41 p.m.)

The U.S. Environmental Protection Agency expects to ratify a new rule governing ethanol use in gasoline this week, Acting Administrator Andrew Wheeler said during a meeting with reporters.

Wheeler said he also hopes to have small-refinery exemptions to the new rule out in the next week or two.

Perry Sees Venezuela Worsening Until Regime Ends (1:42 p.m.)

U.S. Energy Secretary Rick Perry said the decline of oil output from Venezuela will continue until there’s a change of leadership.

The International Energy Agency said Monday it expects Venezuelan output to fall to 800,000 barrels a day this year. Power outages in the nation have slowed production that was already stunted in the aftermath of U.S. sanctions on Petroleos de Venezuela SA, the state-owned oil company.

“I think that until there is a change of leadership there, that being able to get their oil and gas production back in a positive direction is going to be threatened,” Perry told reporters at a press gathering.

Conoco Says Returns on U.S. Gas Exports Not Worth It (1:37 p.m.)

ConocoPhillips rejected the idea of building natural gas export terminals in North America, bucking a trend among competitors such as Exxon Mobil Corp. and Royal Dutch Shell Plc undertaking ambitious plans to export booming output from shale fields.

Conoco, the best-performing oil stock in the S&P 500 Energy Index in the past year, sees too much competition among would-be liquefied gas producers pushing down prices over the long term, said Chief Operating Officer Matt Fox.

“We’ve decided not to invest in LNG exports from North America because we believe ultimately the returns from that will be pushed down,” Fox said in an interview.

Conoco Sees Venezuelan Collection a Year Away (12:07 p.m.)

ConocoPhillips will probably not be able to collect its $8.7 billion ICSID award from Venezuela for at least a year, Chief Operating Officer Matt Fox said in an interview with Bloomberg TV.

“It will take some time for the process to work through,” Fox said. “It could be a year or more before we’re actually in a place where we can start collecting on that.”

Shell Is Hunting Permian for Targets, Sawan Says (10:02 a.m.)

Shell is searching for acquisition opportunities in the Permian Basin to satisfy an “appetite to bulk up” in the world’s biggest shale oil field, according to Wael Sawan, who will take over as upstream director in July.

“Are we looking? Of course we’re looking,” Sawan said in an interview on the sidelines of the conference. “Question mark on whether we’ll find a deal that works for the buyer and the seller.”

Shell’s Permian operations were cash-flow positive for the first time last year, he said. Cash flow will grow to a “material position” in coming years, he added.

Venezuelan Output Crashing Toward 16-Year Low: IEA (9:41 a.m.)

Venezuelan crude output probably will drop to 800,000 barrels a day this year, Birol said during a meeting with reporters.

Crude production in the Latin American nation is tumbling “significantly” but can rebound if conditions improve, he said. Venezuela’s daily output was 1.07 million barrels last month, according to a Bloomberg estimate based on data from oil companies, governments, OPEC, analysts and tanker tracking.

The last time Venezuelan output dropped below the 1 million-barrel mark was 2003.

“The deterioration has accelerated,” Birol said during an interview on the sidelines of the gathering. “I am not optimistic. There’s a vicious circle. Since the oil isn’t exported, there’s not revenue; since there’s not revenue, you cannot invest in infrastructure.”

Even before the recent blackouts swept across Venezuela, the IEA was expecting output to decline a further 500,000 barrels a day over time. “I don’t see a reversal of the production trend in the current context,” he said.

Shale on Brink of M&A as Oil Majors Flex Muscles (8:40 a.m.)

Cowboy boots and turquoise belt buckles are giving way to smart suits and silk ties as the world’s busiest shale field prepares for mergers.

The Permian, which straddles the Texas-New Mexico border, is on the cusp of a radical transformation with one simple premise: bigger is better. The energy industry appears primed for deals at a time when Big Oil is flexing its muscle in the region.

“The ability of the larger companies to do an accretive acquisition is probably at its highest level since the beginning of the shale revolution,” said Michael Roomberg, a fund manager at Miller/Howard Investments Inc. which manages $5 billion. “M&A interest is at its highest in nearly a decade.”

Women in Oil Snubbed as Men Dominate Premier Gathering (6 a.m.)

What do oil ministers, rappers and the Winklevoss twins have in common? They’ll all be in Texas this week as two radically different industry conferences kick off in cities just a 50-minute flight apart.

In Austin, Harlem rapper A$AP Rocky and Vox Media Inc. Chief Executive Officer Jim Bankoff fly in for SXSW, formerly a music festival that’s morphed into a celebration of art, tech, commerce and branding excess. In Houston, United Arab Emirates Minister of Energy Suhail Al Mazrouei and BP Plc CEO Bob Dudley meet at CERAWeek.

One of the glaring differences between the two week-long events is the number of women slated to speak. Of SXSW’s 190 featured speakers, 39 percent are women. In Houston, it’s just 16 percent.



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