Page 13 - MEOG Week 17

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deal Russia will cut 1.8mn bpd, which is significantly more than before. All in all, the Russian cut is 18% of the total OPEC++ cut, which is the same share as it had before under the old deal.
“The main risk is that after being temporarily shut down, the oil wells may not be able to return to their previous operating capacity, or will require a major overhaul to do so. As a result, there may be irreversible production capacity losses, and some deposits may simply not be viable at current prices,” says Salikhov. “This is by no means inevitable, and much will depend on how well the oil companies prepare for the new regime.”
Moreover, Russia now cuts a million barrels a day more than the Saudis do, a reversal from the previous deal. And despite Russian calls for the US to finally join the OPEC+ structure, Putin only managed to get vague commitments from US President Donald trump, who claims to have brokered the deal. From the Russian perspective the new deal was a humiliating climbdown.
The terms of the tussle between the US, Russia and Saudi have changed and it appears the kremlin has badly miscalculated. Going into the OPEC+ meeting on March 6 the
key elements to a clash between the players was a combination of the cost of lifting a barrel of oil, the amount of money a country has in reserve to deal with deficits, and the breakeven cost of oil needed to balance a budget.
The kremlin was calculating that it was
in a strong position, as its lifting costs are much lower than those in the US and only slightly higher than those in Saudi Arabia.
As Siluanov said, the kremlin believed it had enough reserves to survive low oil prices for
a decade, but then the circa $500bn Saudi Arabia has in reserves is also enough to cover deficits for at least five years. But in a long fight the kremlin believed that Russia’s budget breakeven price of circa $40 vs the $80 Saudi Arabia needs gave it the upper hand.
That all works with oil at around $25, but it doesn’t work with oil at around $0 or even in the teens. Now the terms of the conflict are simply who can most easily turn oil wells on
or off and control the flow of production. here Saudi Arabia has a big advantage over Russia, where most of the fields are mature and have become technically more difficult to work. With many Russian fields, if you turn off the production it is not clear if you can turn it on again later.
“Russia’s geological conditions are inherently worse than Saudi Arabia’s, but even measures that could have helped in
the current standoff were not taken in advance,” says Salikhov. “After the oil crisis of 2014–2015, the Energy Ministry discussed the creation of strategic oil reserves and the construction of storage capacity, but no action was taken.”
however, if the goal was to destroy the US shale industry, or at least significantly reduce US production, that much has probably
been achieved. The US will reduce output by 500,000 bpd this year and 700,000 bpd next year, according to the latest IEA estimates, and the first big US shale producers are already going bust and the number of operational rigs is falling fast.
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Lebanon’s first offshore
exploration well does not
yield gas, oil
A consortium working for Lebanon’s first-ever offshore exploration well has finished drilling work at the site but initial results indicate a ‘negative result’ in the block.
“total E&P Liban has completed the drilling of Byblos well 16/1 on Block 4 to a depth of 4,076 meters,” state news agency NNA reported.
The joint venture between total and ENI
– who owns a 40 percent stake separately – and Novatek, which controls the remaining equity, operate the well located 30 km offshore Beirut and was drilled in a water depth of approximately 1,500 metres.
“We are satisfied to have drilled the first ever exploration well in the Lebanese offshore domain, according to the initial program. We
thank the Ministry of Energy and Water and the Lebanese Petroleum Administration for their invaluable support notably to overcome the challenge resulting from the Covid-19 crisis. Despite of the negative result, this well has provided valuable data and learnings that will be integrated into our evaluation of the area,” said Ricardo Darré, the managing director of total E&P Liban.
The well exploration penetrated the
entire Oligo-Miocene target section, where evidence of traces of gas confirmed the presence of a hydrocarbon system. however, it did not encounter any reservoirs of the tamar formation, which was the target of the exploration well.
Based on the data acquired during drilling, studies will be conducted to understand the results and further evaluate the exploration potential of the total operated JV blocks and for offshore Lebanon, the report added.
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BPGIC to boost crude oil storage in Fujairah
The United Arab Emirates’ Brooge Petroleum and Gas Investment Co (BPGIC) plans to boost crude oil storage capacity in Fujairah, an industry source close to the matter said on Friday.
The company is expected to sign an agreement with a consultant to expand its storage capacity by 2 million to 3.5 million cubic metres, and will start construction in the fourth quarter of the year, the source said.
That amount is in addition to existing storage capacity of 1 million cubic metres for crude and oil products, the source said. BPGIC did not immediately respond to a request for comment.
The move comes as oil storage capacity is dwindling and is part of the UAE-based oil storage company’s expansion strategy. BPGIC, established in 2013, is one of the largest holders of storage assets in Fujairah. eConomIC tImes
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