Opec-Plus Seen Staying the Course - Energy Intelligence
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December 24, 2021
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CONTENTS Opec-Plus Seen Staying the Course
Opec-Plus Seen
Staying the Course Firming crude prices have taken the pressure off Opec and its non-Opec allies to take emergency
Abu Dhabi Sees action after Omicron worries sent prices spiraling downward.
Progress in Shale Push
Novak Sees Russia's Mideast Gulf delegates are now expecting the producer group’s next meeting scheduled for Jan. 4 to
Output Up 4% in 2022 go ahead as planned, and some predicting another rollover.
Nigerian Oil Woes
Weigh on Budget Benchmark crude prices have improved heading into the Christmas holiday period after tumbling
below $70 per barrel late last month amid growing signs that the Omicron variant’s impact on oil
Oil Ticks Lower in
Holiday Trade demand will be less severe than had been feared.
In Brief One Opec-plus delegate said he did not expect the group’s “ongoing” meeting to resume before Jan.
4 unless there were major changes to the demand picture, a view supported by another delegate.
Gazprom Neft Ups
Serbian Petchems
Stake The recent fall in the global financial markets was not driven by fundamentals but was part of a
wider sell-off due to Omicron fears, the second delegate argued.
Singapore Stocks Dip
India’s Crude Oil At its last meeting on Dec. 2, Opec-plus chose to stick to plans and raise oil output by 400,000
Imports Jump in barrels per day in January, continuing its policy of increasing production by that amount each month
November
since August, despite some pressure to cut after prices briefly sank below $66/bbl.
Editor's Note:
Christmas Holiday
But in its communiqué, the alliance added a note of caution, saying the meeting would “remain in
session pending further developments of the pandemic ... and make immediate adjustments if
Data Snapshot
required.”
Oil and Gas Prices,
Dec. 24, 2021 Petroleum Turns Positive
Equity Markets, Dec.
24, 2021 Despite some European countries going back into full lockdown, many more reinstating work-from-
home orders, and air travel restrictions being tightened, Brent futures settled at $76.85 on
Thursday, their highest level this month but still nearly $10 lower than October’s seven-year high.
A third Opec-plus delegate argued that, given the forecasts in Opec’s latest Monthly Oil Market Report published last week, another
400,000 b/d rollover remains the likeliest outcome at the next meeting, while cautioning that the market was “so volatile, with a lot of
factors impacting demand.”
The report played down Omicron’s likely impact on oil demand growth. The group revised up its estimates for 2020, 2021 and 2022 by
200,000 b/d, and increased the projected call on Opec crude by 200,000 b/d as well.
A UK study published on Thursday estimated that the risk of hospitalization among people catching Omicron was 50%-70% lower than
for the Delta variant of Covid-19, even if it appears to be far more infectious.
UK scientists continue to stress, however, that the data is preliminary and more research is needed to confirm the findings.
Supply Side Uncertainties
There remain serious uncertainties on the supply side as well.
In Libya, the National Oil Corp. (NOC) said on Monday that armed guards had shut in production, the country’s largest field, and
several others, ahead of delayed presidential elections.Some 300,000 b/d remains off line and the political volatility makes it hard to know when production is likely to be restored.
Separately, the prospect of a new nuclear deal being struck in Vienna between Iran and the US that would trigger US sanctions relief
and allow Iranian barrels back to the market have narrowed sharply in recent months.
But an eighth round of talks is due to resume on Dec. 27, after the previous one — the first since Iran’s hard-line President Ebrahim
Raisi came to power — ended without a breakthrough. Some diplomats see urgency in the timing of the new negotiations.
“This is an indication that all negotiators don’t want to waist [sic] time and aim at speediest restoration of #JCPOA,” Russia’s
Ambassador Mikhail Ulyanov tweeted on Thursday.
Simon Martelli, London
Abu Dhabi Sees Progress in Shale Push
Abu Dhabi's plans to join the shale gas revolution look poised to come to fruition amid expectations that TotalEnergies will green light
further development of the Ruwais-Diyab unconventional gas concession, an industry source says.
Total is roughly three years into a seven-year exploration phase after which it can opt into a 40-year concession alongside Abu Dhabi
National Oil Co. (Adnoc).
The French major has so far drilled and fracked a total of four wells, marking the end of the first exploration stage, sources tell Energy
Intelligence.
Well test results from the concession, located in the far west of Abu Dhabi and targeting deep shale gas formations, have been
encouraging. After completing the fracking of the fourth well in May, Total moved to carry out long-term tests on the wells.
The industry source signaled that Total was expected to approve proceeding with further drilling next year.
Ruwais Diyab, awarded to Total in 2018, is the first development of its kind in the United Arab Emirates, of which Abu Dhabi is the
largest and holder of almost all the Opec member's hydrocarbon resources.
Unconventional Gas Flows
First unconventional gas from the concession was delivered in November 2020 via a purpose-built 33 inch gas pipeline and centralized
early production facility in the Diyab field, and fed into Adnoc's gas network.
Production from the shale formation, located around 3,000 meters below ground, is ultimately seen to be in the range of 1 billion cubic
feet per day of low-sulfur, lean gas to be maintained over a 20-year plateau. For the successful development of 1 Bcf/d, an estimated
1,000-2,000 wells are expected to be required.
Making gas production from developments such as Ruwais Diyab commercially feasible is in part due to cost reductions realized from
the new type of partnerships Adnoc has pursued under CEO Sultan al-Jaber since early 2016.
Adnoc Drilling, in which US oil-field services firm Baker Hughes took an initial 5% stake in 2018, for example, has been able to
transform itself into an integrated drilling services provider with the capability to offer a complete range of drilling services which
lowered well costs significantly.
Adnoc Drilling's shale efforts got a further boost in October when US drilling contractor Helmerich & Payne became a cornerstone
investor in Adnoc Drilling's initial public offering.
Transition Fuel
The unconventional gas plans will contribute to Adnoc's goal of making the UAE self-sufficient in natural gas production by 2030.
The initiative largely rests on three pillars comprising the development of more of the emirate’s abundant but technically challenging
resources — unconventional gas, sour gas and gas caps in oil fields.
The reason for the push is driven by a mix of domestic demand needs and geostrategic considerations.Domestically, demand from gas-fired power stations, industrial use and oil-field injection has been increasing over the past two
decades.
Adnoc has also doubled down on its gas plans even as the global energy transition accelerates because it believes the fuel will play a
pivotal role in the global energy system and in the domestic economy for decades to come.
Other regional players are also pushing ahead with unconventional gas developments.
Saudi Arabia's $110 billion Jafurah unconventional gas scheme, revived this year on Saudi Aramco's improved financial position, will
help reduce the kingdom’s reliance on crude oil for power generation, and support efforts to produce blue hydrogen, both in line with
net zero by 2060 ambitions.
Oliver Klaus, Dubai
Novak Sees Russia's Output Up 4% in 2022
Russia aims to boost crude oil and gas condensate production by some 4% in 2022 as Moscow expects demand to fully recover by the
end of next year, according to Deputy Prime Minister Alexander Novak.
Russia's production of crude and condensate is set to grow up to 540 million-550 million metric tons (10.83 million-11.03 million
barrels per day), Novak estimated.
Russia's output this year should come in at 524 million tons (10.51 million b/d), a 2.1% increase from 2020, he said in an interview with
Rossiya 24 TV on Friday.
The increase, however, would still leave output below the levels Russia was producing in April 2020, before it cut more than 2 million
b/d under the Opec-plus production deal.
Overall, Novak expects the Opec-plus group to increase the joint output by 4 million-5 million b/d next year.
Russia was producing 11.32 million b/d of crude and condensate in April 2020. Without condensate which is excluded from the Opec-
plus calculations, output stood at 10.5 million b/d.
Novak once again stated that the 10.5 million b/d threshold would be reached by May 2022.
But there are doubts even among Russian producers on the feasibility of such an increase. Official statistics point to a slowdown in
production growth as well.
In the article for the Energy Policy magazine, Novak wrote that Russian production could reach 562 million tons (11.27 million b/d) in
2023.
Stable Prices Into 2022
Novak believes that prices next year could hold at the current levels of $75 per barrel "plus, minus 10%."
"I don't see risks of serious deviations" from that level, he said.
"The market is balanced now in terms of supply and demand," he said, noting that "countries learned to live" with the Covid-19 virus
thanks to vaccination programs.
Stable prices are crucial for planning and investments for Russian oil companies.
According to Novak, investments this year by the vertically integrated companies in upstream are expected to reach 1.4 trillion rubles
($19 billon), up 7.6% from 2020 and a 5.5% increase from pre-pandemic levels.
The state budget benefited from high energy prices as well. Oil and gas income into government coffers will total 8.5 trillion rubles
($116 billion) this year, Novak said.No Gas Relief for Europe
European gas prices, which have soared in recent weeks, will remain high, Novak said.
Repeating the line of Russia's President Vladimir Putin, Novak pointed to the refusal of Europe to sign long-term contracts in favor of
buying in the spot markets, and to the policies that discourage investments in traditional hydrocarbons as the cause for the spikes.
Delays with the commissioning of the Nord Stream 2 gas pipeline mainly for political reasons, doesn't help prices go down, he said.
According to Gazprom CEO Alexei Miller, the second pipeline of Nord Stream 2 will be filled in and ready to start pumping gas by the
end of the year.
Novak said Russia is increasing gas production in 2021 by 10%, while exports grew by 9.5%.
According to Miller, Gazprom's production this year would amount to 515 billion cubic meters, 62.2 Bcm more than in 2020.
But Russia’s own demand is soaking up almost half that growth. Supplies to domestic markets increased 29.7 Bcm and are set to grow
further.
Gazprom is working on a program of sending more gas to storage to cope not only with winter peaks but to support bigger demand in
the summer months as well.
This could mean less gas is available for export to Europe.
Nelli Sharushkina, Moscow
Nigerian Oil Woes Weigh on Budget
Nigeria’s senate has approved a budget for next year of 17.13 trillion naira ($41.37 billion), which is based upon an average oil price for
the year of $62 per barrel for benchmark Brent crude and average production of 1.88 million barrels per day.
The budget will soon be signed into law by President Muhammadu Buhari, who had wanted a lower budget and more conservative oil
price estimate.
But analysts see little chance Nigeria will reach the production target as frequent disruptions in the Niger Delta force down output,
with scant hope for a rebound next year.
Opec’s largest sub-Saharan African oil producer, Nigeria has been producing well below its quota for several years, due to theft and
sabotage in the Delta and chronic underinvestment in the upstream sector.
Production in October and November fell below the 1.3 million b/d mark — compared to its Opec quota of 1.631 million b/d — after the
shutdown of a key pipeline that hooks up to the Bonny export terminal.
Now, less than a month after the pipeline was repaired and Bonny Light exports resumed, another incident has forced the closure of
the Forcados terminal that handles around 200,000 b/d of crude.
On Dec. 22, Shell declared force majeure on Forcados shipments and it remained in force at press time.
The same terminal was shut for around a month in August and September due an oil spill. This time around, it was caused by a broken-
down barge that is preventing tankers for loading.
The gap between the reality on the ground and predictions made by senior Nigerian officials appears to be growing.
Last month, the head of Nigerian National Petroleum Corp. Mele Kyari, said he was confident production would bounce back to 1.8
million b/d by year's end, and 2 million b/d if gas condensate is included.
Besides its production woes, Nigeria is also facing rising imports of refined products to meet demand, putting the treasury under
further strain.
The country’s three refineries are barely working at all, despite periodic attempts to get them back up and running.The start-up of a planned new jumbo refinery in Lekki province outside Lagos, now being built by billionaire Aliko Dangote, has been
pushed back repeatedly.
Paul Sampson, London
Oil Ticks Lower in Holiday Trade
Brent crude futures snapped a three-day rally on Friday in light trading before the Christmas holidays, but the benchmark ended the
week higher, with the market focusing on next steps by Opec-plus and the impact of the Omicron variant.
Brent crude futures settled 71¢ lower at $76.14 per barrel at the early close, rising by about 3% on the week.
US markets are closed on Friday for the Christmas holiday.
Oil prices have recovered this week as fears over the impact of the highly infectious Omicron variant on the global economy receded,
with early data suggesting it causes a milder level of illness.
"The omicron-is-mild rally could well continue into January now, but reality will bite in February I believe, as the end of the Fed taper
moves into sight," OANDA analyst Jeffrey Halley said.
The US Federal Reserve said last week it would end its pandemic-era bond purchases in March, paving the way for three interest rate
increases that most Fed policymakers now believe will be needed next year.
The Opec-plus producers group, will meet on Jan. 4 to decide whether to go ahead with a 400,000 barrel per day production increase
in February.
Russia believes oil prices are unlikely to change significantly next year with demand recovering to pre-pandemic levels only by the end
of 2022, Deputy Prime Minister Alexander Novak said on Friday.
Some investors remained cautious amid surging infection cases.
Omicron advanced across the world on Thursday, with health experts warning the battle against the Covid-19 variant was far from
over despite two drugmakers saying their vaccines protected against it and despite signs it carried a lower risk of hospitalization.
Coronavirus infections have soared wherever the variant has spread, triggering new restrictions in many countries, including Italy and
Greece, and record numbers of new cases.
Global oil demand roared back in 2021 as the world began to recover from the coronavirus pandemic, and overall world consumption
potentially could hit a new record in 2022 — despite efforts to bring down fossil fuel consumption to mitigate climate change. (Reuters)
IN BRIEF
Gazprom Neft Ups Serbian Petchems Stake
Russia's Gazprom Neft is purchasing a stake in HIP Petrohemija, the largest producer of petrochemicals in Serbia.
The oil arm of Russian state-run Gazprom holds a stake in oil and gas company Naftna Industrija Srbije (NIS).
Gazprom Neft said Friday that NIS, the Serbian government and HIP Petrohemija reached an agreement on a strategic partnership.
Under the agreement, NIS will increase its stake from the current 20.86% to 90%.
The deal will require additional capitalization for HIP Petrohemija worth some €150 million ($169 million).
The partners plan to construct a high-tech polypropylene complex with a capacity of 140,000 tons and modernize the main facilities of
the Serbian petchems producer to improve its energy efficiency.Gazprom Neft boss Alexander Dyukov recently told journalists that the company is looking at expansion in the petchems business both
in Russia and abroad as it looks to take advantage of growth in the sector to diversify its business.
Nadezhda Sladkova, Moscow
Singapore Stocks Dip
Singapore onshore oil product inventories dipped by a marginal 0.4% from a week ago to 40.88 million bbl on Dec. 22, according to
data released by government agency IE Singapore. The stocks levels are one of the indicators of the products supply situation in
Singapore, the Asia-Pacific's trading and pricing hub.
SINGAPORE ONSHORE PRODUCT STOCKS
('000 bbl) Dec 22 Dec 15 Vol. Chg. %Chg.
Light distillates 12,022 12,073 -51 -0.4%
Middle distillates 7,922 8,037 -115 -1.4
Fuel oil 20,935 20,929 6 0.0
Total 40,879 41,039 -160 -0.4%
Source: IE Singapore
Freddie Yap, Singapore
India’s Crude Oil Imports Jump in November
India’s crude oil imports surged 11% on month in November, to their highest in volume terms since January, according to the latest oil
ministry data. However, imports were up only marginally compared with November last year.
The world’s third-largest oil consumer meets 85% of its oil demand via imports. India’s crude price basket averaged $80.64/bbl during
November compared with $82.11/bbl in October and $43.34/bbl in November last year.
The imports surged as refiners ramped up run rates, operating refineries at 105% of their nameplate capacity to 5.25 million b/d, their
highest volumes since January. Although domestic oil product demand contracted 0.7% on month in November to 5.02 million b/d, it
has picked pace in December underlining a pickup in economic growth.
India’s oil imports are likely to remain shaky as several states have started imposing night curfews and have canceled celebrations for
Christmas and New Year due to a surge in Covid-19 cases. It also deferred its decision to relax restriction on commercial air travel from
overseas from mid-December to end of January.
INDIA NOVEMBER OIL DEMAND
('000 b/d) Nov '21 Oct '21 M-o-M %Chg Nov '20 Y-o-Y %Chg
Crude Oil Import 4,496 4,043 11.2% 4,471 0.5%
Domestic Crude Production 586 591 -0.8 611 -4.0
Refined Oil Product Consumption 5,022 5,057 -0.7 5,181 -3.1
Refined Product Export 1,383 1,364 1.4 1,091 26.8
Refinery Throughput 5,253 4,965 5.8% 5,082 3.4%
Source: Energy Intelligence calculations and Ministry of Petroleum and Natural Gas, Govt. of India
Rakesh Sharma, New DelhiEditor's Note: Christmas Holiday Today's edition is published as a joint issue of Oil Daily and International Oil Daily due to the Christmas holiday in the US. The usual review of oil and gas prices is not included. DATA SNAPSHOT Oil and Gas Prices, Dec. 24, 2021 Today's edition is published as a joint issue of Oil Daily and International Oil Daily due to the Christmas holiday in the US. The usual review of oil and gas prices is not included. Equity Markets, Dec. 24, 2021 Today's edition is published as a joint issue of Oil Daily and International Oil Daily due to the Christmas holiday in the US. The usual review of oil and gas prices is not included. Copyright Notice Copyright © 2021 by Energy Intelligence Group, Inc. ISSN 1529-4366. Oil Daily® is a registered trademark of Energy Intelligence. All rights reserved. Access, distribution and reproduction are subject to the terms and conditions of the subscription agreement and/or license with Energy Intelligence. Access, distribution, reproduction or electronic forwarding not specifically defined and authorized in a valid subscription agreement or license with Energy Intelligence is willful copyright infringement. Additional copies of individual articles may be obtained using the pay-per-article feature offered at www.energyintel.com Other publications: EI New Energy, Energy Compass, Energy Intelligence Finance, International Oil Daily, Jet Fuel Intelligence, LNG Intelligence, NGW's Gas Market Reconnaissance, Nefte Compass, Nuclear Intelligence Weekly, Oil Market Intelligence, Oil Markets Briefing, Petroleum Intelligence Weekly, World Gas Intelligence. Web Site: www.energyintel.com
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