Oil
market strong in 2006, positive outlook for 2007
By Energy Correspondent
Trinidad Express
Port
Spain
Petroleumworldtt.com
01 07 07
Wars,
rumours of wars, anticipated disasters, speculation
and surprises, 2006 was an eventful year for the
national and international oil business. It may
well have marked the turning point in another chapter
of the oil industry, as nominal prices reached historic
high levels before retreating in the face of softening
demand and surplus supplies. Non OPEC supplies are
at an all time high, while OPEC experienced its
most active year since 2003. Locally, the emphasis
was on exploration and production activity with
mixed results.
Crude
oil prices peaked at US$78/ bbl in August, the highest
nominal price in history. The price spiral was related
mainly to short term factors, including rising US
gasoline consumption, stock build-up in anticipation
of a bad hurricane season and geopolitical tensions
in the Middle East. Not unexpectedly, the easing
or non realisation of these factors triggered a
slide in prices over the last quarter of 2006. Prices
fell almost US$18 in some markets over August to
November 2006, prompting OPEC into action. For the
year as a whole, crude oil (WTI) spot prices averaged
US$66.35 /bbl, 18 per cent higher than in 2005.
In
light of what it deemed 'unfavorable price conditions',
the cartel cut back production by 1.2 million barrels
per day at the end of October. At its December meeting,
OPEC noted that the decision" had succeeded
in stabilising the market and bringing it into balance,
although prices remain volatile reflecting the continuing
supply overhang in the market. The Conference decided
to reduce current OPEC production by a further 500,000
b/d with effect from February 1st 2007 in order
to balance supply and demand.
Despite
recent signs of weakness, crude oil prices remain
historically high with contrasting impacts on those
involved in production as opposed to consumers.
Oil companies and producing country Governments
continue to reap windfall profits and revenues,
respectively.
In
2006, ExxonMobil, the world's largest oil company,
generated profits at a rate of US$1,316 per second,
compared to US$1,146 per sec. a year earlier. Annual
profits for 2006 are projected to exceed US$48 billion,
35 per cent higher than the US$36.1 billion earned
in 2005. In contrast, high oil prices are hurting
many of the poorest countries in the world including
those in Africa, Latin America and the Caribbean.
The high cost of oil imports continue to gobble
up scarce foreign exchange and worsen the debt crisis
among these countries.
Locally,
the oil industry enjoyed a productive year for the
most part. Oil production averaged 144,850 bbl/d
to October 2006. The last two months, September
and October witnessed a considerable drop in production
of approximately 34,000 bbl/d to 120,600 bbl/d,
and the lowest level for 2006. Production peaked
this year at 162,400 bbl/d in May, easily the highest
level over the last two years.
January
saw the official hand-over of the TSP asset from
bpTT to a conglomeration of Repsol YPF, NGC and
Petrotrin, of which Repsol has the controlling 70
per cent stake. The asset was bought for US$229
million. Repsol has commenced exploiting the newly
discovered Onyx field from which it feels it can
extract 150mmscf/d of natural gas.
The
Ministry of Energy and Energy Industries (MEEI)
opened the bidding round for Onshore/Nearshore Blocks
and Shallow Marine Blocks for exploration and production
rights for eight blocks located in the Combined
Southern Basin land acreage and South Coast Marine
Area and three blocks located in the Shallow Marine
Acreage off the north and east coasts of Trinidad.
This year also has seen the introduction of a new
model of Production Sharing Contract by the MEEI.
The
major disappointment of 2006 was the failure of
the IBIS Deep well, in which bpTT sank an estimated
US$80 million. This was only partly balanced by
the BHP discovery in the Ruby 1 well, drilled some
30 miles offshore, which raised expectations among
those holding acreage in the area.
On
the downstream side, Petrotrin continued its US$1
billion upgrading process, specifically with the
commencement of the construction of an isomerisation
plant to improve the quality of gasoline it produces.
The
outlook for 2007 remains positive. Locally, contracts
for exploration are to be awarded soon, and, given
the continued buoyancy of both local and international
energy markets, one can expect much E&P activity
to continue over the next year. Internationally,
the EIA forecasts prices averaging approximately
US$65.92/bbl for 2007.
The
forecast is based primarily on expectations of increased
winter demand and production cuts by OPEC. Expectations
are that US and Chinese demand for crude will increase
in 2007, after a relatively stable year. Both countries
are expected to consume an extra 750,000 bbl/d over
the next year. World demand is expected to increase
by 1.5 mmb/d. However, OPEC's estimate is a more
moderate 1.3 mmb/d. The situation in Nigeria and
continued volatility in the Middle East leave room
for potential short-term supply shocks.
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Trinidad
Express
Wednesday, December 20th 2006
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