Crude drops as Libyan rebels hand over control of export ports

Brent and West Texas Intermediate crudes fell for the first time in three days after Libyan rebels surrendered control of two oil ports to the government, enabling the OPEC country to increase exports.

Brent dropped as much as 1.4%. The self-declared Executive Office for Barqa handed over the oil terminals of Hariga and Zueitina overnight, and will relinquish the other two ports they control in two to four weeks, said Ali Al-Hasy, a spokesman for the group. Libya’s output fell to 250,000 bpd in March from 1.4 million bpd a year earlier, according to data compiled by Bloomberg.

“The possibility that Libyan barrels are returning to the market is weighing on oil,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Conn. “Rising supplies will drive the market lower.”

Brent for May settlement slid $1.12, or 1%, to $105.60/bbl at 12:13 p.m. New York time on the London-based ICE Futures Europe exchange. The volume of all futures traded was 31% higher than the 100-day average.

WTI for May delivery decreased 77 cents, or 0.8%, to $100.37/bbl on the New York Mercantile Exchange. Volume was 11% above the 100-day average. The U.S. benchmark grade’s discount to Brent shrank to $5.23 from $5.58 on April 4.

Libyan Ports

Hariga has a capacity of 110,000 bpd, and Zueitina can handle 70,000 bpd, according to IHS Inc. The other two terminals are Es Sider, the nation’s largest port at 340,000 bpd, and the Ras Lanuf terminal with 220,000 bpd.

The port opening “is definitely a bearish development,” said John Kilduff, a partner at Again Capital LLC, a New York- based hedge fund that focuses on energy. “But we have to see if that comes to fruition.”

Libya currently exports about 85,000 bpd of crude from the offshore fields of Jurf and Bouri, which are unaffected by the protests that have disrupted output on land, according to the Oil Ministry.

“The protesters are banned from returning or obstructing work at the ports,” Justice Minister Salah Al-Mirghani said after talks with rebels April 6 in Zueitina.

Libya, the holder of Africa’s biggest crude reserves, has become the smallest producer in the 12-member OPEC, as rebels seeking self-rule in the eastern region of Cyrenaica halted production and shipments.

“If Libya production does increase, it should provide some pressure on Brent relative to WTI,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC.
Gasoline Futures

WTI rose earlier with gasoline futures, which reached a one-week high before both declined again. Gasoline for May delivery slipped 1.66 cents, or 0.6%, to $2.9147/gal. It climbed as much as 0.5% to $2.9461, the most since March 28.

The rebound in WTI was “really led by gasoline,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.

With assistance from Grant Smith, in London, and Maher Chmaytelli, in Dubai.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.

South Sudan's Unity State oil production to restart by July

South Sudan plans to resume crude output in Unity state by July after conflict in the world’s newest nation caused the northern region to freeze production.

Oil fields in Unity will gradually raise output toward the 50,000 bpd they produced before the December shutdown, Petroleum Ministry spokesman Nicodemus Ajak Bior said in an interview in the capital, Juba. A new refinery built by Russian and South Sudanese companies near the state capital, Bentiu, will begin producing 3,000 bpd of diesel in July, he said.

“In the beginning there will be a challenge to bring back production to the pre-shutdown levels,” Bior said. “People are working day and night to see to it that production has restarted.”

South Sudan’s oil output has fallen by about a third since fighting erupted on Dec. 15 between factions loyal to President Salva Kiir and his former deputy Riek Machar. Violence has left thousands of people dead and forced more than a million to flee their homes, according to the United Nations.

The country is currently producing about 160,000 bpd from Upper Nile, the only state still pumping crude, Bior said. Machar has vowed to seize key oil installations in a bid to starve the military of revenue.

Government forces retook Bentiu from rebels on Jan. 26 and the Juba-based Sudd Petroleum Operating Co. has assessed damage to the facilities, Bior said. China National Petroleum Corp., India’s Oil & Natural Gas Corp. and Petroliam Nasional Bhd., the main producers of South Sudan’s oil, evacuated employees from the country due to the fighting.

Construction is finished on Bentiu’s refinery, a JV by Russia’s Safinat and the state-owned Nile Petroleum Corp., Bior said. A later expansion will raise output to 5,000 bpd, he said, without specifying a timescale.

“The refinery is ready, however commissioning will commence once the oil field in Unity state resumes production,” Bior said.

Construction of a 10,000 bpd refinery in Melut county, Upper Nile state, has halted due to the conflict, Bior said. Texas-based Ventech Engineers International LLC was building the facility which is set to produce diesel, kerosene and fuel oil, he said.

South Sudan, which gained independence from Sudan in July 2011, has sub-Saharan Africa’s third-biggest oil reserves, according to BP Plc data.

The country’s low-sulfur crude is prized by Japanese buyers as a cleaner-burning fuel for power generation. The country has the capacity to produce as much as 350,000 to 400,000 bpd, Foreign Minister Barnaba Marial Benjamin said on Feb. 11.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.

Energen to sell gas utility to Laclede for $1.28 bn

Energen agreed to sell its Alabama natural gas utility to the Laclede Group for $1.28 bn in cash, becoming the latest energy company to shed assets to raise money for exploration and production.

The sale of Alabama Gas is valued at $1.6 bn in total, including about $320 mn of debt, according to a statement from Birmingham, Alabama-based Energen.Energen’s after-tax proceeds are estimated to be $1.1 bn after drilling costs.

Energen will use cash from the deal to reduce short-term debt, allowing it to accelerate drilling in West Texas’ Permian basin. The purchase gives St.Louis-based Laclede, a utility owner that serves 1.13 mn customers in Missouri, the largest gas distributor in Alabama.

The deal “allows Energen to clarify its corporate structure by becoming a pure exploration and production company, a trend being rewarded by the financial markets,” James McManus, Energen’s Chairman and CEO, said in the statement.

The unit, known as Alagasco, serves 422,000 homes and businesses, according to Energen’s website.

Laclede, in a separate statement, said the effective purchase price is $1.34 bn, after taking into account the present value, amounting to approximately $260 mn, of tax benefits from the transaction.

Energen fell 1.4% to $80.37 at the close in New York.Laclede dropped 2.4% to $45.11, the biggest decline since June 20.

The deal is expected to close this year.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.

Gazprom Neft selects contractor for Badra oil field

Gazprom Neft, operator of the Badra oilfield development project, has appointed a contractor to lay the pipeline connecting the field to the power station in Zubaidiah, Wasit Province. The tender was won by Pakistani company Techno Engineering Services (Pvt.) Ltd.

In line with the contract, Techno Engineering Services will produce the designs, supply the equipment and materials, and carry out construction of the pipeline. The pipeline - which will be nearly 100-km long and have a daily capacity of 4.4 million cubic meters (circa 1.6 Bcm per year) - is scheduled to begin operations in 2015.

Under Gazprom Neft’s contract with the Iraqi government for the development of the Badra oil field, investors are to be compensated for costs related to infrastructure construction.

Gas supply from the Badra oil field will enhance the Zubaidiah power station’s daily power output and provide a 24-hour power supply to the city of Kut, which currently has electricity supplied for only 16 hours per day. Some of the extracted gas will be used to provide electricity to the Badra oil fields themselves.

In March, Gazprom Neft completed testing on a second well at Badra. The laying and testing of the oil pipeline to the Gharraf oilfield was completed in February, connecting the section to Iraq’s main pipeline system. The construction of the first phase of a central gathering station point with a capacity of 60,000 bpd is nearing completion. Work has also started on a gas treatment plant with the capacity to process 1.5 Bcm per year.

Providing useful resources, articles and writings on crude oil, other petroleum products, energy and gas. By Blockline and Associate Ltd Nigeria Ltd, online.