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The Fight for Northern Iraq’s remaining oil

The Fight for Northern Iraq’s remaining oil

Iraq_crude_oil_exports_Jul2009_Sep2017Fig 1: Iraqi crude exports by SOMO

The above graph shows Iraqi crude oil exports by the SOMO oil marketing company. Until March 2014 Kirkuk crude from North Oil Company (Avana and Baba domes and Bai Hassan fields) was flowing through the Iraq-Turkey pipeline (ITP) Kirkuk – Baiji refinery – Faysh Khabur (capacity 600 kb/d, metering station under Baghdad control near the border with Turkey) and on to the Ceyhan terminal in Southern Turkey. It stopped operating due to frequent attacks by militants. In June 2014 ISIL attacked the Baiji refinery (230 kb/d) and heavy fighting started with the Iraqi army.

Baiji_North_refinery_fireFig 2: Baiji refinery in September 2014

The refinery changed hands several times and was finally retaken by the Iraqi army in Nov 2015 but it was badly damaged.

The Kurdish Government built their own pipeline infrastructure with following capacities

  • Tawke oil field to Faysh Khabur (250 kb/d)
  • Taq Taq oil field to Khurmala, the northern dome of the Kirkuk oil field (150 kb/d)
  • Khurmala to Faysh Khabur (700 kb/d)

Kurdistan_oil-mapFig 3: Northern Iraq’s oil field and pipeline map and KRG’s oil production 2015

The map is from here:

http://www.petroleum-economist.com/articles/politics-economics/middle-east/2017/iraq-in-for-the-long-haul

The oil data are from the KRG government

http://mnr.krg.org/index.php/en/press-releases/540-mnr-publishes-updated-oil-production-and-revenue-report-for-2015

Projects (a) – (c) were completed by end 2013. Another pipeline between Khurmala and Avana was built and opened in mid 2014. This allowed Kirkuk oil to be exported via the KRG pipeline.

In December 2014 an agreement was made between Baghdad and KRG with following provisions:

(1) the KRG give 250,000 b/d of the crude oil produced in its territory to SOMO at the Ceyhan terminal to market the crude,

(2) Iraq (Baghdad) export 300,000 b/d of Kirkuk crude through KRG’s pipeline to Ceyhan

…click on the above link to read the rest of the article…

Mideast Turmoil: Follow the Oil, Follow the Money

Mideast Turmoil: Follow the Oil, Follow the Money

In this scenario, time is running out for Saudi Arabia’s free-spending royalty and state– and for all the other free-spending oil exporters.

While there are numerous dynamics at work in the turmoil roiling Saudi Arabia and by extension, the Mideast, one way to cut to the chase is to follow the oil, follow the money. Correspondent B.D. recently posited a factor that has been largely overlooked in the geopolitical / fate-of-the-petrodollar discussions:

Perhaps the core dynamic is a technical one of diminished oil production. Here is Bart’s commentary:

“I think the Saudis may be quickly running out of profitable oil to produce/export.

I think they tried to over-produce for a while to damage the competition… and they now have production issues resulting from that. (As has happened in the past)

I think they may have recently slipped over the event horizon for being the world’s swing producer of ‘cheap-ish and abundant’ oil. That has huge ramifications for the global markets ability to quickly respond to supply/demand fluctuations.

I suspect they’re no longer cutting production voluntarily … they are now in the grip of a technically driven decline in output. (Why else begin selling off ARAMCO now?)

I doubt that many national economies can handle $70+ oil for very long… price will be limited by the ability of the consumers to pay. What I assume should happen is relentless severe volatility in the absence of a big swing producer that can open up or shut in production with comparative ease.”

Thank you, B.D. Let’s start with what’s well-established about Saudi oil production:

1. The days of sticking a straw in the sand and oil gushing out are long gone. Oil production now depends on costly technologies such as pressurizing the wells with seawater, CO2, etc.

…click on the above link to read the rest of the article…

If The Saudi Arabia Situation Doesn’t Worry You, You’re Not Paying Attention

A key geopolitical axis is swiftly shifting

While turbulent during the best of times, gigantic waves of change are now sweeping across the Middle East. The magnitude is such that the impact on the global price of oil, as well as world markets, is likely to be enormous.

A dramatic geo-political realignment by Saudi Arabia is in full swing this month. It’s upending many decades of established strategic relationships among the world’s superpowers and, in particular, is throwing the Middle East into turmoil.

So much is currently in flux, especially in Saudi Arabia, that nearly anything can happen next. Which is precisely why this volatile situation should command our focused attention at this time.

The main elements currently in play are these:

  • A sudden and intense purging of powerful Saudi insiders (arrests, deaths, & asset seizures)
  • Huge changes in domestic policy and strategy
  • A shift away from the US in all respects (politically, financially and militarily)
  • Deepening ties to China
  • A surprising turn towards Russia (economically and militarily)
  • Increasing cooperation and alignment with Israel (the enemy of my enemy is my friend?)

Taken together, this is tectonic change happening at blazing speed.

That it’s receiving too little attention in the US press given the implications, is a tip off as to just how big a deal this is — as we’re all familiar by now with how the greater the actual relevance and importance of a development, the less press coverage it receives. This is not a direct conspiracy; it’s just what happens when your press becomes an organ of the state and other powerful interests. Like a dog trained with daily rewards and punishments, after a while the press needs no further instruction on the house rules.

…click on the above link to read the rest of the article…

“End Of Oil” Narratives Are Misleading

“End Of Oil” Narratives Are Misleading

Oil

The world isn’t reinventing the wheel. But we are changing how it turns, who it carries and where it’s going.

Over the next few decades we’ll be plugging in more cars, hailing and sharing them, and reminiscing about the good ol’ days of the steering wheel.

To be sure, these looming mobility changes are all exciting and impactful. But none of these nascent trends extrapolate easily into a narrative about “the end of oil,” a disruptive displacement of the fuel everyone loves to hate.

Contrary to armchair calculus, more electric vehicle (EV) sales do not equate to the world using less oil anytime soon.

In fact, whichever way you cut the spreadsheets, the numbers are pointing in the opposite direction. By 2030, less than 15 years from now, I expect around 400 million more internal combustion engines will accumulate into the global fleet of passenger cars – even after assuming that EV market penetration is accelerated with the heavy-handed help of governments around the world.

Here is an indication of the scale of vehicle accumulation: So far this year, to the end of September, over 70 million vehicles with internal combustion engines have been sold worldwide. Every new vehicle that’s sold lingers in the fleet.

Simplistic assumptions and analogies abound. A petroleum-powered vehicle is not like a cheap DVD or videocassette that gets pitched out the minute you buy a Netflix subscription. A car already on the road is an expensive asset –most often financed with debt – that’s put to work for as long as possible by a string of owners. What’s under-appreciated is that most oil-burning vehicles will resist going to the scrap yard, due to their stubborn and improving reliability (see my column Old Pistons Die Hard from October 16th.)

…click on the above link to read the rest of the article…

Satellite Images Reveal Saudis May Be Lying How Much Oil They Have In Storage

Satellite Images Reveal Saudis May Be Lying How Much Oil They Have In Storage

A little over a year ago, specialized satellite imaging company Orbital Insight which uses its proprietary imaging and algorithms to track above-ground oil storage, confirmed something we had alleged earlier in the year: that China was vastly under-representing the amount of oil it had stored in its Strategic Petroleum Reserve (with significant implications for prices). As we said last September “according to Orbital Insight, China had not only misrepresented how much oil it has stored, it has done so at a massive scale, with the real number dwarfing even JPM own estimate: the real amount of Chinese oil in storage, according to Orbital, was a whopping 600 million barrels as of May” an amount nearly 3 times greater than the official, at the time, number of 234 million barrels.

The resultant doubt about China’s true purchasing capacity was one of the several factors that led to the subsequent swoon in oil prices which OPEC was unable to overcome until nearly a year later, when the market became increasingly confident that the OPEC strategy of eliminating excess inventory, was working and pushed the price of WTI and Brent to two year highs, above $57 and $63 respectively.

That confidence may not last, however, and the reason may be the same one as last year: Orbital Insights.

As the FT’s David Sheppard writes, “while the oil market’s attention has been gripped this week by the corruption purge in Saudi Arabia and its tensions with Iran, from miles above the earth’s crust one company is highlighting a different kind of intrigue.”  He is, of course, referring to Orbital Insight, whose analysis of Saudi crude inventories in recent months has thrown up an “interesting anomaly.’

…click on the above link to read the rest of the article…

The Secret Reason Trump Is So Cozy With Saudi Arabia

The Secret Reason Trump Is So Cozy With Saudi Arabia

As a candidate, Donald Trump used uncommonly harsh language to criticize Saudi Arabia—the world’s largest oil exporter.

He called the Saudi regime the world’s biggest funder of terrorism.

He also said the Saudi government uses “our petro dollars—our very own money—to fund the terrorists that seek to destroy our people, while the Saudis rely on us to protect them!”

At another point, Trump said, “Who blew up the World Trade Center? It wasn’t the Iraqis, it was Saudi [Arabia].”

Trump also criticized Hillary Clinton for taking Saudi money for the Clinton Foundation. (They were its biggest “donors.”) He even challenged her to return the money.

He also famously got into a Twitter spat with a prominent member of the Saudi royal family, Alwaleed bin Talal.

As a candidate, Trump blasted the Saudis countless other times.

But, after he took office, Trump did a complete 180. He stopped criticizing the Saudis. In fact, he’s now singing their praises.

It’s bizarre… as if someone put a severed horse head in his bed.

Mere months after criticizing the Saudis, he was on Air Force One headed to Saudi Arabia to do the sword dance with his new friends.

It was his first foreign trip as president.


President Trump with King Salman

Trump’s about face was astounding. But his newly adopted deference to the Saudis is no different than Obama’s, Baby Bush’s, or any previous president’s.


President Obama with King Abdullah


President G.W. Bush with King Abdullah

Today, I’ll tell you why Trump made such an abrupt turnaround. I’ll also explain why the Saudis get special treatment from the US Deep State.

“As Good As Gold”—From Bretton Woods to the Petrodollar

It’s been rightly said that he who holds the gold makes the rules.

 

…click on the above link to read the rest of the article…

How Broke is the House of Saud?


Salvador Dalí The oecumenial council 1960
Trying to figure out what on earth is happening in the Middle East appears to have gotten a lot harder. Perhaps (because) it’s become more dangerous too. There are so many players, and connections between players, involved now that even making one of those schematic representations would never get it right. Too many unknown unknowns.

A short and incomplete list of the actors: Sunni, Shiite, Saudi Arabia, US, Russia, Turkey, ISIS, Syria, Iran, Iraq, Libya, Kurds, Lebanon, Hezbollah, Hamas, Qatar, Israel, United Arab Emirates (UAE), Houthis, perhaps even Chechnya, Afghanistan, Pakistan. I know I know, add your favorites. So what have we got, or what do we know we’ve got? We seem to have the US lining up with Israel, the UAE and Saudi Arabia against Russia, Iran, Syria, Hezbollah. Broadly. But that’s just a -pun intended- crude start.

Putin has been getting closer to the Saudis because of the OPEC production cuts, trying to jack up the price of oil. Which ironically has now been achieved on the heels of the arrests of 11 princes and scores of other wealthy and powerful in the kingdom. But Putin also recently signed a $30 billion oil -infrastructure- deal with Iran. And he’s been cuddling up to Israel as well.

In fact, Putin may well be the most powerful force in the Middle East today. Well played?! He prevented the demise of Assad in Syria, which however you look at it at least saved the country from becoming another Iraq and Libya style failed state. If there’s one thing you can say about the Middle East/North Africa it’s that the US succeeded in creating chaos there to such an extent that it has zero control left over any of it. Well played?!

…click on the above link to read the rest of the article…

Oil Jumps To $56, Highest Since July 2015 On Saudi Turmoil, Venezuela Default

Oil Jumps To $56, Highest Since July 2015 On Saudi Turmoil, Venezuela Default

With the launch of electronic trading, WTI crude has jumped from the highest close since July 2015 amid Saudi turmoil which over the weekend included a crackdown on 11 Saudi princes – including billionaire Alwaleed – and dozens of current and former ministers as Saudi Crown Prince Mohammed bin Salman, i.e. MbS, who’s backed policy of capping oil output to raise prices, consolidates power with anti-graft probe, and shortly after a helicopter that carried 8 high-ranking Saudi officials inexplicably crashed near the Yemen border.

Adding to the upside pressure are concerns about Venezuela’s viability, following Friday’s default-cum-restructuring confusion, which sent PDVSA bonds crashing on the realization that the long-deferred sovereign default may finally be inevitable.

As shown in the chart below, December WTI briefly touched $56, and was up +0.5% to $55.87/bbl shortly after 6pm ET, the highest price since July 6, 2015…

… while January Brent was also higher by 0.5% to $62.39/bbl.

Will The Third Great Energy Revolution End The Oil & Gas Industry?

Will The Third Great Energy Revolution End The Oil & Gas Industry?

Oilfield

The history of crude oil and natural gas is a history of technological innovation. Until recently the innovation supported crude oil and natural gas. Now, it challenges it, causing structural changes in the crude oil and natural gas markets.

Originally, crude oil was only used for lighting. This changed following the invention of the internal combustion engine, which outperformed steam engine in power, range and ease of operation and maintenance, and the invention of the conveyor belt, which made it possible to mass-produce the internal combustion engine at a price which was affordable to the masses. Not much later, crude oil became the transportation fuel of choice. The horse drawn carriage was replaced by the car; the locomotive by the diesel train; the steamship by the motor vessel; and the zeppelin by the airplane.

For a long time, natural gas was an unwanted by-product from crude oil production, and typically burned off (flared) at the production site. That was until, again, technological innovation made utilization of the benefits in natural gas possible. Improvements in pipeline technology made it possible to use natural gas as a feedstock for the chemicals industry, and as fuel for home heating, cooking and power generation. Later on, LNG technology improvements greatly expanded the market for natural gas and made it truly global.

Technological innovation was therefore not only behind the first great energy revolution—from wood to coal—during the Industrial Revolution of the 18th and 19th century, but also behind the second great energy revolution—from coal to crude oil and natural gas—during the first half of the 20th century.

…click on the above link to read the rest of the article…

A New Oil Crisis Is Developing In The Middle East

A New Oil Crisis Is Developing In The Middle East

oil

After over 40 years in the energy business, more than two decades of that with a parallel career in intelligence, I regularly witness the impact of global developments on the energy markets.

So it’s hardly surprising that I often address geopolitical events here.

Currently, situations in Latin America (Venezuela), Asia (the South China Sea crisis), and Africa (ongoing civil conflict in Libya and Nigeria) show how widespread the geopolitical impact is on energy prices and availability.

Each one either is, or could easily, spike oil price volatility.

But the instability in a different region remains the biggest single factor in how the two sectors interact…

The Middle East.

There, two significant events unfolded over the past week. Each is certain to have an impact on how crude oil trades in the near-term.

The curious de-certification of JCPOA (the Joint Comprehensive Plan of Action, more popularly known as the “Iranian nuclear accord”), by President Trump, was followed in short order by the ominous hostilities between Iraq and Kurdistan over the status of the city and region of Kirkuk.

Both impact the northern Persian Gulf, already a region with a short fuse.

The toppling of Raqqa, the self-styled ISIS capital, may be underway in Syria, but the ongoing cross-border disagreements have already spread elsewhere.

And they could set the whole region on fire…

Sanctions Don’t Work Very Well

First, take the Iranian nuclear deal. Decertifying it was a curious choice by the White House, as it actually accomplishes very little.

The move kicks the can back to Congress, where the legislative branch has 60 days to decide whether the U.S. remains in the accord.

What it does do, of course, is increase volatility.

…click on the above link to read the rest of the article…

Washington Is Destroying American Power

Washington Is Destroying American Power

 

Readers at home and around the world want to know what to make of the announcement that China henceforth will conduct oil purchases and sales in gold-backed Chinese currency.

Is this an attack by Russia and China on the US dollar? Will the dollar weaken and collapse from being discarded as the currency in which oil is transacted? These and other questions are on readers’ minds.

Below is my opinion:

The US dollar’s value depends on whether central banks, corporations, and individuals are content to hold their assets or wealth in dollars. If they are, it does not matter what currency is used to transact oil. If they are not, it does not matter if all oil is transacted in dollars. Why?
Because if they don’t want to hold dollars, they will dump the dollars as soon as the transaction is completed and move into other currencies or gold. What China is doing is creating a currency that might be a more attractive currency to hold.

It is possible that the gold-backed Chinese currency is a move against US power, but I see it differently. I see it as a protection against US power. China and Russia are disassociating from the dollar system, because Washington, in its abuse of the world currency role, uses the dollar payments mechanism to impose sanctions on other countries and to threaten them with exclusion from the payments clearing system.

In other words, Washington, instead of operating a fair system, uses its world currency role to dominate other countries. Russia and China are too strong to be dominated, and, thus, are throwing off the dollar system. If other countries follow, the dollar will cease to be an instrument of US control over the rest of the world.

…click on the above link to read the rest of the article…

OPEC Boosts Oil Demand Estimates, Admits Oil Prices Can’t Rise Above $55

OPEC Boosts Oil Demand Estimates, Admits Oil Prices Can’t Rise Above $55

In its latest OPEC Monthly Oil Market Report (October) the oil cartel has increased its oil demand estimates for 2017, 2018 on strengthening world economy, and weaker outlook for supplies from its rivals.

Specifically, OPEC forecasts that based on the current global oil supply/demand balance, demand for OPEC crude in 2017 is estimated at 32.8 mb/d, around 0.6 mb/d higher than in 2016. Similarly, OPEC crude in 2018 is projected at 33.1 mb/d, 350k b/d higher than September production, and ~200k b/d higher than the group estimated last month.  Global oil demand seen rising +1.38m b/d, or 1.4% in 2018 to 98.19m b/d

Meanwhile, OPEC claims that oil inventories in developed nations continued to decline, -24.7m bbl to 2.996b bbl in August, curbing surplus relative to a 5-year average to 171m bbl.

Here are the key highlights from the report:

Crude Oil Price Movements

The OPEC Reference Basket rose to $53.44/b in September, its highest value since July 2015. Crude futures prices also saw gains, with ICE Brent averaging above the $55/b, supported by increasing evidence that the oil market is heading toward rebalancing. Geopolitical tensions and lower distillates stocks also pushed prices higher. ICE Brent averaged $55.51/b in September, a gain of $3.64, while NYMEX WTI increased $1.82 to average $49.88/b. Hedge funds raised net long position in ICE Brent and NYMEX WTI futures and options by almost 200,000 contracts. At the end of the month, the Brent crude contract curve had flipped into backwardation through December 2021. The sweet/sour spread widened significantly in Asia and Europe.

World Economy

Growth in the world economy continues to improve, with the forecast for 2017 revised up to 3.6% from 3.5% in last month’s report. Similarly, the 2018 forecast has been adjusted higher to 3.5% from 3.4%. The improving momentum is visible in all economies, particularly the OECD, which is seen growing by 2.2% in 2017 and by an upwardly revised 2.1% in 2018.

…click on the above link to read the rest of the article…

A Desperate OPEC Asks US Shale For Help In Cutting Oil Output

A Desperate OPEC Asks US Shale For Help In Cutting Oil Output

While OPEC has been presenting an optimistic facade in recent months, repeating at every oppostunity that the global oil market is “rebalancing” and demand is rising, the oil production cartel made a rare slip today when it addressed what should not be named in public: US shale production. Speaking on Tuesday, OPEC Secretary General Mohammed Barkindo called on U.S. shale oil producers to help curtail global oil supply, warning extraordinary measures might be needed next year to sustain the rebalanced market in the medium to long term. Which is odd because in every other public address by OPEC members, we hear precisely the opposite: that the market is already in a state of “healthy rebalancing” and… the oil production cut which was supposed to last until this past June may now be extended beyond March of 2018.

“We urge our friends, in the shale basins of North America to take this shared responsibility with all seriousness it deserves, as one of the key lessons learnt from the current unique supply-driven cycle,” said Barkindo quoted by Reuters during a speech delivered at the India Energy Forum organized by CERAWeek in New Delhi.

“At the moment we (OPEC and independent U.S. producers) both agreed that we have a shared responsibility in maintaining stability because they are also not insulated from the impact of this downturn,” Barkindo said, referring to a slide in oil prices that spurred OPEC to agree production cuts late last year. “The call by independents themselves (is) that we need to continue this interaction.”

Some independents… but not all, and certainly not the cas-flush US shale producers.

…click on the above link to read the rest of the article…

Russia And China Continue To Boost Oil Ties

Russia And China Continue To Boost Oil Ties

Oil

Even before the OPEC/non-OPEC production cuts took effect in January 2017, Russia had already beaten Saudi Arabia to become China’s single largest oil supplier for 2016. Since then, Saudi Arabia has sacrificed still more of its market share in the prized Chinese market, while Russia has dominated Beijing’s top suppliers’ list for most of this year.

Now Russia’s oil giant, Rosneft—whose chief executive Igor Sechin is a close ally of Vladimir Putin—is reportedly aiming to further increase its crude oil deliveries to China, as Russia looks to boost energy ties with the world’s biggest crude oil importer and top driver of global oil demand growth.

Since the OPEC/Russia oil production deal began, the U.S. has stepped up sanctions on Russia, which made Western banks and companies even more cautious in dealing with Russian firms. Considering this, it’s not a huge surprise that Rosneft and Russia want to boost ties with Chinese firms, refiners, and banks.

Rosneft now aims to almost double its crude oil exports to China through Kazakhstan, Reuters reported last week, citing industry sources.

Although it’s not immediately clear when that increase will take place, this plan is only the latest in a series of projects that boost Russian oil supplies to Chinese refiners. Chinese firms, on the other hand, recently made big investments in Russian energy projects and firms, including in a large stake in Rosneft.

Chinese industrial conglomerate CEFC recently agreed to buy 14.16 percent in Rosneft for approximately $9 billion. The deal didn’t come as a surprise, coming on the heels of a Rosneft announcement regarding the sealing of a strategic partnership deal with CEFC, but it’s clearly indicative of a continuing warming between Moscow and Beijing that gave the former the upper hand in the race for market share with Saudi Arabia.

…click on the above link to read the rest of the article…

The Geopolitical Consequences Of U.S. Oil Exports

The Geopolitical Consequences Of U.S. Oil Exports

Tanker

Two crucial things happened yesterday.

The first you may have noticed – oil prices moved back up.

As for the second, most so-called “experts” seemed to have missed.

See, the environment we’re seeing in energy markets is very different from what we saw only a week ago, when oil prices were also rising.

Because yesterday also saw – for the first time in world history – a reigning Saudi Arabian monarch in Moscow for talks with Russia’s head of state.

Historically, Russia has been much closer to Iran – Saudi Arabia’s main regional enemy.

Now, King Salman and President Putin are expected to endorse the plan to extend the OPEC-Russia deal to cut oil production and boost prices beyond the current end date of March 2018.

But that’s not all they’re going to talk about…

Other, more far-ranging matters will also be on the agenda, including the war in Syria.

And the catalyst for this huge shift in global geopolitics is surprisingly simple.

It’s all about America’s record-breaking oil exports…

Russia and Saudi Arabia Need Each Other… for Now

Now, there’s no indication that Russia and Saudi Arabia are on the road to an alliance on anything beyond oil prices.

Even then, that accord remains only as long as it is in the subjective interest of the parties.

Nonetheless, it is disquieting to Washington that any such prospects may be on the horizon… or that U.S. oil exports may be introducing a range of foreign policy concerns.

From an energy perspective, the main issue at hand is the OPEC-Russian deal to cap oil production, which is now almost certain to continue further than the agreed-on end date of March next year.

And after some concerns had been raised over individual OPEC members exceeding the quotas the deal assigned them, evidence is now emerging that the restraint is holding.

…click on the above link to read the rest of the article…

Olduvai II: Exodus
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Olduvai
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Olduvai II: Exodus
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Olduvai III: Cataclysm
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