This Week In Energy: Asian Energy Empire Expansion
This week saw WTI prices break the psychological $50 threshold, compounding trader and oil company woes further. However, recent price updates from certain shale areas in the U.S. would seem to indicate many producers arereceiving far less for their oil (as low as $34 per barrel in some cases). As the oil markets now appear to be in contango, near-term prices are cheaper than longer term futures, more and more companies are storing crude in the hopes of reaping profits later in the year once the market stabilizes. Trading firms Vitol and Trafigura as well as oil major Royal Dutch Shell have all reserved oil tankers for up to 12 months, according to Reuters. However, with OPEC digging their heels in, stating that there was “no chance” of reassessing their position prior to their June meeting and that, “Naimi made it clear: OPEC will not cut alone,”when this market stabilization will occur is anyone’s guess. While bearishness abounds amid capex cuts, increased surplus forecasts for 2015 and slow economic growth in various key economies of the world, for others, it’s hunting season.
The state oil companies of major Asian players are, at present, replete with cash and see the coming year as an opportunity to snap up assets around the globe on the cheap. The Oil And Natural Gas Company of India (ONGC) is predicting crude prices to stay at around current levels for 10 months. This provides a once-in-a-decade opportunity to pick off debt-laden exploration companies in Africa, Latin America as well as North America. Competition is rife among Asian state oil companies with India, China, Malaysia and Thailand all looking to expand amid the current oil crisis. ‘‘The current oil and gas prices offer a new opportunity for us to leap-frog our growth trajectory,” ONGC’s Narendra KumarVerma said in an interview. ONGC is predicted to have a budget of around $4 billion to splurge on assets. However, this is dwarfed by China’s PetroChina Co. with an estimated budget of $12 billion. “They’re likely to scour Russia and traditional destinations including South America, Iraq and Africa,”said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. Meanwhile, Indonesia’s state-owned energy company PTPertamina, purchased a 30 percent stake in US-based Murphy Oil Corp. (MUR)’s oil and gas assets in Malaysia for $2 billion last year. Expect such predatory spending to change the face of global energy production and shift dynamics eastward should oil prices continue to remain low as we move further into 2015.
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