platts oilgram news 20140404

Volume 92 / Number 67 / Friday, April 4, 2014

[OIL ]

www.platts.com OILGRAM NEWS

Top stories

Asia Pacific

China to lose 1.3 million b/d capacity in Q2 2

Arbitration over deepwater KG-D6 block delayed 2

South Korea’s Posco eyes SNG to cut LNG use 2

Europe, Middle East & Africa

Russia hits Kiev with second gas price hike 3

Murphy, Austria’s OMV seal Namibia offshore deal 3

Murphy in last ditch talks to save UK refinery 4

Genel venture buys into Angolan blocks 5

Libya approves transfer of oil guards to Brega 5

Norwegian oil strike averted but tensions remain 5

The Americas

Rumored Iran-Russia deal could prompt sanctions 6

Energy East pipeline progresses smoothly 7

US Senate committee approves biofuels tax credits 7

Markets & Data

Higher gasoline prices lift USGC margins 8

Record refills needed with US gas storage at 822 Bcf 8

Brent higher over uncertainty of Libyan export deal 9

Magellan moving on Arkansas products pipeline 9

Trafigura’s Puma looks to new partner to fuel growthLondon—Puma Energy, the oil product stor-age and retail fuel business of commodity trader Trafigura, is looking to further spread its wings from under its parent by carving out more growth from importing and selling fuels.

The downstream company, also looking to become more independent financially, is likely to take on a new strategic shareholder as Trafigura trims its holding, Puma CFO Denis Chazarain told Platts in an interview.

But unlike some of its trading rivals such as Gunvor and Vitol, Puma is not interested in building a portfolio of refining assets to support a more integrated asset-backed trad-ing model.

Last year, Angola’s state-run Sonangol paid $500 million to increase its holding in Puma to 30% from 20% as part of a capital increase by Trafigura, which saw the parent’s stake in Puma diluted to 49% from 62%.

Puma’s remaining shares are held by

Cochan, an Angola-based investment bank alongside other institutional investors and employees.

Although there is no current plan, Trafigura is expecting to further trim its stake in Puma to bring in a new shareholder able to propel its global expansion, Chazarain said.

Trafigura plans to remain Puma’s biggest shareholder, however, with a long-term goal of maintaining an equity stake of 30-35%, he said.

“What may happen....at some point...is we may involve another industrial shareholder. The idea is to have someone bringing something to the company in terms of geography or business so we have someone cooperating with us.”

The farm down would likely come through another equity increase and Puma has said it did not expect Cochan or Sonangol to increase their stakes.

“It will depend on what the opportunities there are,” Chazarain said, when asked when Trafigura could bring in a new partner.

Formed in 1997 in Central America, (continued on page 4)

Colombia’s Bicentennial pipeline shutAttacks hobble line; Vasconia crude firm on force majeure

Cartagena—Colombia’s most important new pipeline, the Bicentennial, has been shut since February 20 because of rebel attacks and local communities’ resistance to repair crews, a closure that may be costing the nation thousands of barrels per day in deliver-ies, sources said Thursday.

The shutdown, which was not widely known, was disclosed Thursday by Orlando Hernandez, president of Bogota-based Agora Consultorias. Hernandez is a former officer in the Colombian National Police and his firm tracks rebel assaults and kidnappings and advises multinational oil companies on secu-rity conditions.

Hernandez was interviewed on the sidelines of the annual Colombia Oil and Gas conference.

The six-week shuttering of the $1.5 bil-lion, 235-km first phase of the pipeline was confirmed Thursday by a spokeswoman for Cenit, the transportation-assets company that was spun off by state-controlled Ecopetrol last year.

The capacity of the new line is 110,000 b/d, but the Cenit spokeswoman said the

assumption that the nation is losing that much in deliveries is “not correct.” She did not pro-vide a figure for deferred deliveries however.

According to Hernandez, the impact of the closure to Ecopetrol, which is the major-ity shareholder in the new line, has been an average deferment of 6,000 b/d in deliveries since the beginning of 2014.

The cut in supply supported Colombian Vasconia crude prices as exports have been reduced by 50% due to a force majeure stem-ming from the shutdown, said Latin American crude market sources Thursday.

Platts assessed Vasconia stronger on Thursday at the Latin ICE strip minus $5.75/b, or $100.24/b, $1.86/b higher than Wednesday.

Although exports have been cut in half due to the attacks on the line, a shutdown at the Ecopetrol’s 75,000 b/d Cartagena refin-ery since early March until the remainder of year will free up as much as 2 million barrels of Vasconia or four Aframax-sized cargoes per month, said market sources.

(continued on page 6)

InTErvIEw

2 Oilgram News / VOlume 92 / Number 67 / Friday, april 4, 2014

AsIA PACIfIC

Arbitration over deepwater KG-D6 block delayedMumbai—India’s Supreme Court will have to name a new arbitrator in a dispute between Reliance Industries and the petroleum ministry after the neutrality of the first choice was ques-tioned, further delaying the arbitration process which was originally initiated in late 2011.

On Monday, the court said James Jacob Spigelman, former chief justice of Australia’s Supreme Court of New South Wales, was to be the neutral, third arbitrator in the dispute over falling gas production at an offshore block, for which Reliance and its partners have been penalized.

Government counsel has since pointed out that Spigelman was on a list of preferred arbitrators that Reliance submitted, causing the Supreme Court to reverse its decision, the Economic Times reported Wednesday.

A Reliance spokesman Wednesday con-firmed the court’s order, which has not been published on the Supreme Court’s website.

The paper said the government had also handed over its list of candidates for the role of a neutral arbitrator.

Earlier, the government had appointed former Supreme Court Judge V.N. Khare, and Reliance had appointed former Supreme Court Judge S.P. Bharucha as their respec-tive arbitrators.

Reliance has said it wanted a foreigner as a neutral arbitrator because it had two foreign partners in the KG-D6 block—BP with 30% and Canadian Niko Resources with 10%. BP and Niko have also joined the arbitration process.

Reliance first issued an arbitration notice to the oil ministry late in 2011, after the min-istry penalized Reliance for a fall in production from the KG-D6 block by disallowing costs to the tune of $1.8 billion.

Reliance and the oil ministry have differed on the reasons for the shortfall in output. Reliance has blamed reservoir complexities, with the oil ministry suspecting the company was not fulfilling its drilling commitments.

Gas production has fallen from a peak of 69.43 million cubic meters/day in March 2010 to around 13 million cu m/d at present. — M.C Vaijayanthi

Singapore—China is estimated to lose up to 1.28 million b/d of crude distillation capacity in the second quarter as refineries shut down for maintenance.

The figure represents 14% of total refining capacity owned by China’s three state-owned companies—Sinopec, or China Petroleum and Chemical Corp., PetroChina and China National Offshore Oil Corp. Platts estimates the total refining capacity of these three com-panies reached 450 million mt/year, or an average 9 million b/d, by the end of 2013.

This figure excludes the small, mostly inde-pendent refineries, known as “teapots” which are mainly concentrated in eastern Shan-dong province. It also excludes PetroChina’s 200,000 b/d Pengzhou refinery and trader Sinochem’s 240,000 b/d Quanzhou refinery, which only started trial operations this year.

The second quarter is typically the peak

refinery turnaround season in China—as in other parts of Asia—as the weather gets slightly warm after the peak winter months ear-lier in the year and oil demand tends to be soft ahead of the onset of the summer season.

This year, however, some refineries had already started to go into turnaround from as early as February because of relatively weaker oil product sales.

Persistently high oil product inventories held by refiners since the fourth quarter of last year, along with the planned shutdowns, is likely to dampen refinery throughput rates in the next few months.

According to Platts estimates based on data provided by the Xinhua-published China Oil, Gas and Petrochemical newsletter, total commercial stocks of gasoline, gasoil and jet/kerosene at the end of February were likely to be the highest level since 2010, when Platts

started tracking the data.China OGP said last month that overall

oil product stocks had risen 15.1% month on month at the end of February, and this followed a 10.9% month-on-month jump end-January compared with end-2013.

Refinery runs so far this year have remained muted, falling by 1% year on year over January and February to an average 9.79 million b/d, according to data released last month by the National Bureau of Statistics. Data for March is expected to be announced later this month.

Crude oil imports over January-February, however, surged 11.5% year on year to an average of 6.36 million b/d this year.

This is in contrast to 2013, when crude imports rose 7.4% year on year in January but then contracted in February and March from the high base in the corresponding months of 2012. Sources therefore say crude imports may taper downward in the next few months.

“Crude stocks within China are now quite high and it’s hard to see import growth sustained at those levels [in January and February],” said a crude trader with a Chinese state-owned company.

For example, sources on Wednesday said crude stocks at the main port of Huangdao in Qingdao, Shandong province, are currently very high so refineries in the area are well sup-plied. A source at Sinopec Qilu said it expects to import significantly less crude in the next two months compared with the first quarter. The refinery primarily processes medium sour grades from the Middle East. — Staff Reports

China to lose 1.3 million b/d capacity in Q2High stocks likely to keep throughput low in coming months

south Korea’s Posco eyes snG to cut LnG useSeoul—Posco, South Korea’s top steelmaker, has established a subsidiary to operate a synthetic natural gas business to reduce its LNG consumption.

The subsidiary, named POSCO Green Gas Technology, was established in Posco’s Gwangyang complex on the country’s southern coast, where it is building an SNG plant with a capacity of 500,000 mt/year.

The plant, which will produce SNG by pro-cessing low-cost coal, will be completed by August this year and start commercial produc-tion in January next year.

Posco has spent Won 870 billion ($824 million) since June 2011 on the coal-to-gas plant, which is expected save the company Won 200 billion a year on LNG imports, Posco said in a statement.

Posco has also agreed with Mongolia’s energy-focused MCS Group to establish a 50:50 joint venture to build an SNG plant in Mongolia. The two companies are aim-ing to complete financing by the end of this year and start work on the plant with a tar-get date for bringing it online by the end of 2018.— Charles Lee

China’s Q2 refinery turnarounds

Refinery Capacity (b/d) Units DurationSinopec Zhenhai 400,000 FCC Feb 28-early Apr 120,000 CDU May 19-Jul 5Sinopec Baling 120,000 Entire refinery Mar 18-Apr 26Sinopec Changling 230,000 Entire refinery Mar 23-May 3PetroChina Dalian 410,000 Entire refinery Apr 10-May 19Sinopec Shijiazhuang 100,000 Entire refinery Apr 15-Jul 5Sinopec Qilu 300,000 FCC MayPetroChina Jinzhou 90,000 One CDU, secondary units End Jun-end JulPetroChina Lanzhou 210,000 Entire refinery End Jun-mid AugSinopec Jingmen 100,000 Secondary units May

Source: Company statements, market and refinery sources


new price adjustments for Ukraine, when con-tacted by Platts.

Likewise, he declined to say if Gazprom plans to switch to pre-payment mode with Ukraine due to Kiev’s mounting gas debt, something Gazprom has previously suggested.

The gas purchase and sale agreement between Gazprom and Naftogaz provides a clause under which Gazprom is to switch to pre-payment deliveries if Ukraine fails to pay its bills before the seventh day of a follow-ing month.

Gazprom’s Miller and Naftogaz CEO Andriy Kobolev met earlier Thursday in Mos-cow to discuss gas issues.

“The key discussion point was the need for Naftogaz Ukrayiny to take urgent steps to settle the accumulated debt for Russian gas supplies,” Gazprom said in a statement.

Meanwhile, Ukraine’s Energy and Coal Industry Minister Yuriy Prodan last week said Kiev would continue to pay lower gas prices to Russia in April even if Moscow moves to can-cel its earlier agreed discount.

“They may take steps that contradict leg-islation to take the discount out,” Prodan said at a press conference then. “However, we will continue to pay based on a formula that is adequate and includes the discount.”

With the April 2010 discount in and the December 2013 discount out, Ukraine expects to pay about $387 per 1,000 cu m of Russian gas in the second quarter, up from $268.50/1,000 in the first quarter, Pro-dan said then.

“We are not going to go to court with them. We will pay them $387 [per 1,000 cu m],” Pro-dan said. “If they charge us a different price, we will still pay $387. Let them go to court.”

Storage limitsDuring the Thursday meeting, Miller

and Kobolev also discussed a substantial decrease in the gas volumes held in Ukraine’s underground storage facilities, Gazprom said.

“The need already exists to refill [the stor-age facilities] for Naftogaz to secure meeting domestic demand next winter and smoothly transit Russian gas to Europe,” it said.

Earlier this week, Kobolev described the level of gas in the storage facilities as “very low,” adding that the issue “requires an urgent solution.”

Ukraine’s underground storage facilities are capable of holding up to 32 Bcm of gas and are located near the country’s border with the EU.

Gazprom said previously that Ukraine needs to store up to 19 Bcm of gas to pre-vent disruptions in Russian gas supplies to Europe during the winter.

Naftogaz transported 86.1 Bcm of Rus-sian gas to Europe in 2013, up 3.2% from the 84.2 Bcm shipped in 2012, according to Ukraine’s energy and coal industry ministry. — Nadia Rodova and Dina Khrennikova with Alexander Bor in Kiev.

Moscow—In a sign of new tensions between Ukraine and Russia, Moscow on Thursday increased the price of its gas for Kiev by a further 26% and urged Ukraine to pay its out-standing gas debt of $2.2 billion, adding fur-ther pressure onto Ukraine’s already stretched public finances.

The new hike to $485/1,000 cubic meters is the second this week and comes as Mos-cow canceled Ukraine’s last remaining gas discount, following a unilateral denunciation of a so-called Kharkiv agreement from 2010.

Under the agreement, Moscow granted Kiev a $100/1,000 cu m discount in return for the 25-year extension of a lease for Rus-sia’s naval base in the Crimean port of Sevas-topol through 2042.

Moscow decided to cancel the deal after Crimea’s referendum to join Russia in March, which Ukraine claimed was illegal.

Russia’s Prime Minister Dmitry Medvedev Thursday approved another order which can-

celed a customs duty discount that the gov-ernment gave to Gazprom in compensation for cutting the price for Ukraine.

“Given that there are no legal interna-tional grounds for the [Kharkiv] agreement to exist anymore and that the agreement is denounced, I’m taking the decision to can-cel a governmental order [on customs duty discounts],” Medvedev told Gazprom CEO Alexei Miller, according to a meeting transcript posted on the governmental website.

Based on this, Gazprom is to raise the price of gas it is delivering to Ukraine immediately.

The Russian gas price was increased as recently as April 1 to $385.50/1,000 cu m from $268.50/1,000 cu m for the first quarter. This increase came after Gazprom declined to continue a $100/1,000 cu m dis-count it agreed to provide to Ukraine in late 2013 as it claimed that Ukraine failed to fulfill the core condition of that deal, which envisag-es repayment of Kiev’s outstanding gas debt and timely payments for ongoing deliveries.

Reacting to the latest price rise, Ukraine’s oil minister Yuriy Prodan called the move “unacceptable” and “politically motivated”, saying it will further prompt the country to seek gas imports elsewhere. Ukraine is cur-rently capable of importing up to 10 billion cu m of gas annually from Europe via existing gas pipeline routes in Hungary and Poland, but opening a route via Slovakia would increase such capacity to 25 Bcm/year.

In March, Gazprom delivered 1.956 Bcm of gas to Ukraine and have received no pay-ments for the supply,” Miller said, adding that Ukraine’s total debt for Russian gas has increased to $2.2 billion.

The increase in price would mean a fur-ther worsening of the economic situation in Ukraine, which is on the verge of bankruptcy and is seeking help from the European Union and the US amid ongoing political turbulence.

The troubled country may gain some head-room, however, from a recent rises in regu-lated domestic gas prices. Ukraine’s energy regulator, the National Committee for Power Regulation, on Thursday raised average natural gas prices for households by 56% from May 1.

Ukraine has come under increasing pres-sure to raise domestic gas prices due the ris-ing cost of Russian supplies. Hiking domestic gas prices in Ukraine was also one of the main demands of the International Monetary Fund to unlock up to $15 billion in loans.

The government on March 31 increased domestic natural gas prices for industrial con-sumers by 29.1% starting April 1.

Price disputeMeanwhile, Gazprom’s official representa-

tive Sergei Kupriyanov declined to comment on whether Gazprom is ready to discuss any

russia hits Kiev with second gas price hikeMoscow calls for debt payment as conflict escalates

EuroPE, MIDDLE EAsT & AfrICA

Murphy, Austria’s oMv seal namibia offshore dealCape Town—US independent Murphy Oil and Austria’s OMV have sealed a deal to take interests in two exploration blocks in Namib-ia’s offshore waters.

The companies are taking stakes in blocks 2613A and 2613B in the Luderitz Basin off Namibia’s south coast from Brazil’s Cowan Oil & Gas, OMV said Thursday. Murphy will acquire a 40% interest in each block and assume operatorship while OMV will take 25%, leaving Cowan with 20% and Namibia’s state-owned Namcor with 15%.

The joint venture partners will conduct an extensive 3D seismic program starting before middle of the year.

Platts in March reported that the com-panies were eyeing the blocks which cover a combined 1,000 sq km over water depths of up to 2,000 meters.

“Offshore Namibia offers great exploration potential as it is largely unexplored, yet has all the elements of an effective hydrocarbon system,” OMV’s executive board member for E&P Jaap Huijskes said.

The deal adds to OMV’s position in Africa after it snapped up interests in Madagascar and Gabon in 2013.

“OMV is well on track to position its assets into more high-return upstream proj-ects. Therefore it is part of OMV’s strategy to build up new exploration opportunities also in the region of Sub-Saharan Africa,” OMV’s CEO Gerhard Roiss said.

In the past two years, there has been grow-ing international interest in drilling offshore Namibia. — Jacinta Moran


Murphy in last ditch talks to save uK refineryLondon—US independent Murphy Oil has not taken a final decision to shut its 135,000 b/d Milford Haven refinery in Wales after its latest attempt in a four-year bid to sell the plant fell though.

The future of the refinery’s 500 employees and contractors is now in doubt unless a last ditch deal to save the plant can be reached.

“Following the expiration of exclusive talks with a potential buyer, Murphy and the com-pany plan to speak with a small number of interested parties, which may or may not lead to allowing the refinery to continue to oper-ate,” the company said Thursday.

Murphy said that, given the uncertain outcome of the talks, it was entering into a period of consultation with employees and their representatives, conceding that it is an “unsettling time” for its staff.

Murphy has been in talks to sell the plant and related facilities since 2010 to reduce its exposure to weak European refin-ing margins. The oil company had been in exclusive talks since the end of 2013 to sell the plant to London-based private equity group Greybull Capital for around $500 mil-lion, according to reports.

“For over three years, we have left no stone unturned in trying to find a buyer for

the plant. Our efforts highlight the chal-lenges and on-going changes confronting the European refining industry,” Tom McKinlay, the head of Murphy subsidiary Murco said in the statement.

Murco became the sole owner of Milford Haven in 2007 when it acquired a 70% stake from Total for $250 million. The UK’s smallest refinery, the plant represents about 8.5% of total UK refining capacity and Murco’s local fuel sales represented 2.2% of the total UK market. In addition to the refinery, Murphy controls three terminals and over 400 brand-ed service stations in the UK.

The UK’s oil refining sector has shrunk from 18 refineries in the late 1970s to seven currently with BP and Shell both exiting the sector in last six years.

In early 2012, Total gave up on finding a buyer for its Lindsey refinery in the UK, with industry watchers blaming little interest in a sector plagued by weak margins and overca-pacity. The French major continues to oper-ate the plant.

The latest UK refinery causality was the 2012 closure of the 220,000 b/d Coryton plant in Essex which came in the wake of collapse of failed refiner Petroplus. — Robert Perkins

Puma has expanded through acquisitions to become a global integrated storage and fuel retailer active in over 35 countries. Headquar-tered in Geneva and Singapore, it operates over 1,600 retail sites and handles more than 22 million cubic meters of fuel products each year.

Operating profit for 2013 was $371 million on the back of $11.9 billion in sales revenue.

Networked modelChazarain said Puma wanted to focus

on its core regions of Latin America, Africa and Asia-Pacific. More broadly, Puma is keen to expand in markets where fuel demand is growing but where limited domestic refin-ing capacity and oil product infrastructure provide ample opportunities to benefit from importing and bringing fuels to the market, he said.

The ability to feed that demand for fuels from a global integrated supply network is also key. “We believe a lot in the integration between supply, storage and distribution. We have big hubs and big storage facilities, so we can source product from all over the planet,” Chazarain said.

In the past, Puma has shipped oil prod-ucts sourced from Kazakhstan and Russia to Guatemala via its terminal hub in Estonia, Chazarain said, as it taps margins from arbi-trage opportunities between its regional hubs.


Trafigura’s Puma looks to new partner to fuel growth...from page 1

In Australia, where Puma is the biggest independent fuel retailer, it is looking to fill a void left by the recent closure of refining assets by oil majors by importing fuels and supplying its own pumps.

In addition to jumping on lucrative arbi-trage opportunities around the world to feed its Australian business, the company is taking regular fuel supplies from Asian refineries and can turn to the spot market in Singapore if necessary, Chazarain said.

“It is an integrated profit. We are captur-ing the value chain between the big refineries in Japan or South Korea to the final consumer in Australia.”

Refining assetsWhile new downstream acquisitions are a

key part of growth plans, Puma has no ambi-tion to follow rivals by bidding for refineries to support storage and retail operations, Chaz-arain said.

Gunvor and Vitol bought three of five plants left by the failed refiner Petroplus in 2012.

Chazarain said owning refiners was an expensive business, tying up large amounts of capital in a large fixed facility which did little to improve flexibility of global storage and supply networks.

For that reason, Puma is not interested in picking up downstream and fuel distribution assets being shed by oil majors in western

Europe and the US, he said. Well-supplied fuel markets China and Japan are also not particu-larly attractive markets for Puma’s business model, Chazarain said.

Although Puma did not bid for any of Pet-roplus’s assets, Chazarain did not rule out picking up a European plant if the refining operation can be shut down and converted into a storage and terminal site.

“If it is just to transform it into storage, then why not? What is interesting is the tanks and a terminal,” he said. “[Perhaps] if one day we find a niche, something that we have not identified.

“But I do not think it is what we are targeting,” adding that even if tricky worker layoffs allowed a plant to be shut down, there were still high environmental liabilities and costly conversion work to deal with.

Funding plansIn addition to more acquisitions, Puma is

targeting investment on new tanks, terminals and new service stations to expand its stor-age and retail network, Chazarain said.

The company raised $750 million in a bond issue earlier this year to give it more financial headroom after spending $800 mil-lion in Australia last year.

Chazarain said Puma has no plans to launch a previously-mooted stock market flo-tation as it is well funded and has sufficient cash flow to support organic capital spending for growth.

Puma is generating more than $600 mil-lion operating cash flow per year.

“An IPO is not on the table at all today,” he said. “I do not see it happening unless we have a really very different kind of oppor-tunity where we would have to raise a big amount of equity. But there is nothing hap-pening today.”

The business expects to spend $400-500 million in organic capex in the coming year, of which about 10% covers mainte-nance to sustain the asset base, Puma’s head of corporate finance, Dirk-Jan Vander-broeck, said.

“Typically we would look at something similar [to the $400-500 million/year] on the acquisitive side, although last year it was above that in Australia,” Vanderbroeck said.

“If we see more opportunities where we can accelerate growth by strategic acquisi-tions, that is when the external financing also comes into play.” — Robert Perkins

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norwegian oil strike averted but tensions remainLondon—The Norwegian oil and gas industry averted a strike by oilfield service workers late Wednesday at state-mediated talks but tensions over rising costs continue to rankle, industry participants say.

The Norwegian industrial workers and their employers had meant to wrap up pay talks on Tuesday but meetings ran over deadlines in a rerun of similar brinkmanship that had threatened offshore stoppages in the past.

The latest wrangling over pay and condi-tions has highlighted the continuing tensions between the center-right coalition govern-ment, and an industry increasingly pleading poverty because of rising costs, with some saying openly that some expensive projects could be threatened if some new taxes remain in place.

Last year Norwegian-state controlled Statoil announced delaying the huge $15-bil-lion Johan Castberg project in the remote Barents Sea. While few have followed Statoil’s move to stall projects, others in the industry have become more vocal.

“There are discussions among the com-

panies...and they have discussed whether they could cut investment levels,” said the economic chief of the Norwegian Oil and Gas Association Bjorn Martinsen. “The question is whether this continues.”

Prime Minister Erna Solberg acknowl-edged on Tuesday that the impact of fast rising industry costs had become clear in the past last year. Norwegian operators have chosen international suppliers for some of their largest orders and some Norwegian companies have announced staff cuts as a result, he said.

Norwegian workers, some of the highest paid in the world, continue to get pay rises, while the oil companies seem to be enjoying robust financial health, however.

Martinsen pointed out that planned investment levels for oil and gas still seem to go each year from record high to record high. Statistics Norway last month announced that total investments in oil and gas offshore Norway will reach NOK223.7 billion ($37.4 billion), a new record and up 7% on the previous year’s actual spending. — Patrick McLoughlin

Cape Town—Genel Energy has teamed up with White Rose Energy Ventures to acquire a minority stake in two frontier deepwater explo-ration blocks in the Kwanza subsalt basin offshore Angola.

The companies on Thursday said WRG, a venture owned by Genel and White Rose, will acquire a 15% stake in blocks 38 and 39 from Norway’s Statoil for $281 million.

In block 39, the joint venture will take up the 15% interest and pay Statoil a total of $222 million including a share of past costs and a partial carry on the first explo-ration well.

For block 38, WRG will pay $59 million in back costs to China Sonangol, a joint venture of the Angola’s state owned company and China’s New Bright International.

Statoil operates both blocks and has interests in blocks 22, 25 and 40 in the Kwanza basin which it was awarded in Decem-ber 2011.

Drilling on block 39 is expected to start in the second quarter, followed by exploration on block 38, Genel said.

“This transaction provides a rare oppor-tunity to enter into a low risk, multi-billion barrel resource play,” Genel’s CEO Tony Hay-ward said.

He said the deal, which is its first in Angola, fits with the company’s strategy of securing high quality exploration opportunities and adds to its position in Africa.

“The farm-down reflects the attractiveness of Statoil’s acreage in Angola and having WRG onboard allows us to share exploration risk,

while retaining a significant working interest,” said Gareth Burns, senior vice president for exploration strategy and business develop-ment at Statoil.

The company’s country manager, Steinar Pollen said Angola yielded approximately 200,000 boe/d in equity production in 2013, which is around 28% of Statoil’s total interna-tional oil and gas output.

The deal adds to Genel’s existing African assets including in Somaliland, Ivory Coast, Morocco and Ethiopia.

White Rose also said the transaction was an important first step in building the company’s African exploration portfolio. “This is a highly attractive entry opportunity to the [subsalt] in Angola, where acreage is extremely tightly held and access to opportu-nities is rare,” the firm’s chief executive Jim Bradley said.

The subsalt region, further south along the coast from the well-known Congo Basin, home to Total’s prolific block 17, is seeing a flurry of activity largely due to geological simi-larities with Brazil’s Campos Basin.

Following a period of significant seismic acquisition, Citi’s analyst Michael Alsford believes the industry is about to embark on one of the highest-impact exploration cam-paigns globally, targeting the subsalt play offshore Angola.

Though the exploration remains relatively high risk, better seismic imaging and discov-eries at Cobalt International and Maersk’s blocks, which are located on licenses directly adjacent to blocks 38 and 39, have estab-lished a working hydrocarbon system, accord-ing to Alsford. — Jacinta Moran

Genel venture buys into Angolan blocksExplorers drop $281 million to enter Statoil’s subsalt frontier acreage


Libya approves transfer of oil guards to BregaLondon—Libya’s cabinet has approved the transfer of the headquarters of the national oil facility security service to the eastern city of Brega, meeting a key demand of rebels who have blockaded oil export terminals in the east of the country since last July.

The decision came late Wednesday after eastern Libyan tribal leaders said a deal between the rebels and the government in Tripoli to end the 10-month blockade of the key export ports was imminent.

One of the demands of Ibrahim al-Jath-ran, rebel leader and instigator of the block-ade of the ports of Es Sider, Ras Lanuf and Zueitina, was that the oil guards’ headquar-ters be moved to Brega, close to Jathran’s own base.

The three ports under his control have a combined export capacity of 630,000 b/d, while a fourth port—the 110,000 b/d capac-ity Marsa al-Hariga terminal—is also occupied by guards and protesters who came out in support of Jathran’s action.

Hopes of a breakthrough that would see the ports reopened were boosted when Libya’s prosecutor general agreed Tuesday to release three Libyans who in March attempt-ed to sail an oil tanker, the Morning Glory, loaded with a cargo of Es Sider crude out of Libyan waters.

Brent crude futures closed almost $1/ lower on the news Wednesday but the bench-mark contract retraced most of the ground Thursday amid lingering market doubts that the latest deal will end the long-running stale-mate with rebels.

“Contrary to the knee-jerk reaction in the general oil market, we remain skeptical that this will mean a stable flow of Libyan oil into the global markets,” said Global Risk Manage-ment oil risk manager Michael Poulsen.

On Tuesday, an elder of the Almaghariba

tribe was reported by the Libyan news agency LANA as saying an agreement to reopen the ports was imminent.

Libya has only been able to export lim-ited volumes of oil out of the western ports of Mellitah and Zawiya, and these have also been disrupted by protesters targeting the southwestern fields of Elephant and Sharara as well as pipelines linking the fields to the terminals.

Currently, no Libyan oil is being exported and production has been reduced to 150,000 b/d. — Stuart Elliott


Colombia typically exports approximately 16 Aframax-sized cargoes of Vasconia, however in March 2014 there were eight 500,000-barrel cargoes for export, according to a loading program obtained by Platts.

The closure was forced after the line was hit by nine separate attacks by suspected reb-els, Hernandez said. Efforts to repair the line have been impeded by community blockades led by the U’wa indigenous community that has conditioned access by repair crews on the government’s promising to address envi-ronmental damages as well as adding new security, Hernandez said.

Hernandez said the problems keeping the pipeline open reflect Colombia’s ongoing security and social conflict issues that have slowed the nation’s production growth over the last two years, after a decade of double-digit increases. The rebel group FARC in par-ticular has stepped up attacks to exert pres-sure in Havana peace negotiations, he said.

Another rebel group known as the ELN has also stepped up attacks in a bid to force the government to join the Havana negotia-tions, Hernandez said. So far the government has insisted it will negotiate a peace deal with one rebel group at a time.

Rebel attacks on pipeline infrastructure operated by Ecopetrol, which owns the major-ity of the nation’s pipeline network, increased in the first three months of 2014 above the same period in 2013. The total, however, does not include numerous attacks on trailer trucks used to haul crude in Putumayo and other provinces.

But Hernandez expects a big increase in attacks through June in advance of Colombian presidential elections in late May and the June observance by rebels of the 50th anni-versary of the founding of the FARC, the Span-ish initials of the Revolutionary Armed Forces of Colombia.

The Bicentennial Pipeline’s first phase

Colombia’s Bicentennial pipeline shut...from page 1

ThE AMErICAs

was completed last fall to connect heavy oil fields in eastern Meta province with the under-utilized Cano Limon pipeline that runs from Occidental Petroleum’s Cano Limon oil field in eastern Arauca province to the Cove-nas oil depot on the Caribbean coast.

The Bicentennial’s planned second phase,

PacificOcean

Colombia’s major oil pipelines

Source: Enbridge

COLOMBIA

VENEZUELA

PANAMACovenas

BanadíaCaño Limón

Porvenir Monterrey

Cuisana

RubialesCPE-6 oil �eld

Buenaventura

Araguaney

Bicentennial PipelineOcensa PipelinePlains Pipelineproposed Paci�c Pipeline

that would cost upwards of $4 billion and run mostly parallel with the Cano Limon line, will not be built until the country adds 200,000 b/d of production. Currently, Colombia pro-duces just over 1 million b/d of crude.

The Bicentennial was planned to relieve pipeline bottlenecks that have forced producers to use tanker trucks to haul an average 12% of the country’s daily production.— Chris Kraul, with Richard Capuchino in Houston

rumored Iran-russia deal could prompt sanctionsWashington—The US has seen no evidence so far of any companies or countries signing business deals with Iran, in violation of sanc-tions, a key Obama administration official said Wednesday.

But if rumors of an oil-for-goods barter between Iran and Russia prove to be true, the US would likely ratchet up sanctions against both countries, David Cohen, the Treasury Department’s under secretary for terrorism and financing, told a US Senate committee.

“We’ve been very clear with the Rus-sians and very clear with the Iranians that in the course of these P5+1 negotiations that any sort of deal like this would not be conducive,” Cohen testified. “We’ve told the Russians that we would look at this with great disfavor. It certainly would not be a welcome development.”

He said US officials have been seeing reports of a potential Iran-Russia deal “for many months now,” though he declined to state publicly how far back the US believes clandestine negotiations between Tehran and Moscow might have been going on.

Reuters on Wednesday, citing unnamed sources, reported that Iran and Russia were close to a $20 billion oil-for-goods deal, in which Moscow would receive up to 500,000 b/d of Iranian oil in exchange for metals and food.

Cohen, who was testifying on the Treasury Department’s fiscal 2015 budget proposal before a Senate Appropriations subcommit-tee, said any purchase of Iranian oil by Russia

would be sanctionable.“We’ve been seeing reports about this

kind of deal for many months, and it’s never been consummated,” he said. “We have made clear that we are not unwilling to apply sanctions to Russian individuals and entities if the facts dictate.”

Though the US and EU in January under a preliminary agreement relaxed some sanctions imposed on Iran, Cohen stressed to lawmakers that the vast majority of the most punitive sanc-tions, aimed at preventing Tehran from manu-facturing a nuclear weapon, remain in force.

The agreement, which runs through June, calls on Iran to partially freeze its nuclear program as it negotiates with the P5+1, the US, the UK, France, Russia, China and Ger-many, on a comprehensive deal that would lift full sanctions.

In recent months, Iran, which has seen its oil production plummet with the sanctions imposed by the US and EU, has held meet-ings with senior officials from several interna-tional oil companies seeking investment in its upstream sector once sanctions are eventu-ally lifted.

Cohen told senators that his office does not believe any such contracts have been signed and that US officials have made com-panies aware that if the P5+1 and Iran do not reach a comprehensive deal, all temporary sanctions relief will be revoked, and additional sanctions may be imposed.

“I can say with some confidence that we have not seen companies anywhere — Europe, the Gulf, Asia — trying to take advan-tage of this narrow opening, the quite limited suspending of the sanctions, to get into the Iranian market and enter into business deals that would be otherwise sanctionable,” he said. “This is something we have been watch-ing very carefully and have been taking very aggressive steps to forestall.”

He added: “If anybody tries to violate the sanctions, we’ll come down on them... like a pile of bricks.”

Senators on the committee said they wel-comed Treasury’s vigilance in ensuring that Iran is not freely open for business.

“There’s a perception out there that now’s a time to do business with Iran, and we want that not to get very far,” said Sena-tor Lindsey Graham, a South Carolina Repub-lican. — Herman Wang


us senate committee approves biofuels tax creditsWashington—A key US Senate committee on Thursday approved a bill that would retroac-tively restore and extend through 2015 several energy tax breaks that had expired at the end of 2013, including those for cellulosic biofuels and biodiesel production and blending.

But if Senate Finance Committee Chairman Ron Wyden has his way, the biofuels industry will have to make its case to Congress to per-manently maintain its tax incentives, as the Oregon Democrat said his committee will no longer consider any temporary extensions.

“This will be the last tax extenders bill this committee takes up as long as I am chairman,” said Wyden, who explained that he would be seeking a comprehensive tax reform package. “Let us pass this bill today and then put a lens to each of these provisions before deciding which of these deserve a permanent spot in a 21st century tax code.”

The biodiesel industry has warned of lay-offs and plant closures if its tax incentives are not extended, while the cellulosic industry has said its tax credits will help attract invest-ment as it scales up.

The House of Representatives is expected next week to begin its hearings on tax extend-ers, but most political observers do not expect the full Congress to vote on the pack-age until after the November midterm elec-tions, as fiscal hawks are likely to protest that the tax breaks do not come with correspond-ing cuts in spending.

“Omitting pay-fors increases the likeli-

hood that a final agreement with the House will be postponed to a lame-duck session after the November elections,” FBR Capital Markets analyst Benjamin Salisbury wrote in a note to clients.

The tax extenders package approved by the Senate Finance Committee would reinstate the $1.01/gallon production tax credit for cellu-losic biofuels, retroactive to December 31, and extend it for two years, through 2015.

The 50% depreciation tax deduction on second generation biofuel production plants would also be retroactively reinstated and extended, as would the $1/gal production tax credit for biodiesel or renewable diesel creat-ed from biomass and the small agri-biodiesel producer credit of 10 cents/gal.

In addition, the package will restore and extend a 50 cents/gal alternative fuel tax credit and alternative fuel mixture tax credit for the blending and sale of alternative fuels into transportation fuels, including com-pressed or liquefied natural gas, ethanol, bio-fuels and liquefied hydrogen. — Herman Wang

Toronto—The Alberta government anticipates a “smooth passage” for the planned Energy East crude oil pipeline, with its counterparts in eastern Canada also expected to lend support to the planned facility, the province’s Energy Minister Diana McQueen said Thursday.

“It [the pipeline] is now going through the initial regulatory process and we are working with the governments in Ontario, Quebec, New Brunswick and Saskatchewan to make it a success,” she told reporters on the sidelines on the CAPP Scotiabank Investment Sympo-sium in Toronto.

McQueen said the path forward for Energy East will likely be different than it was for the Northern Gateway, for which the Alberta govern-ment had to work out an agreement with British Columbia after the latter set five environmental and commercial conditions to allow the crude oil pipeline to pass through its jurisdiction.

The 525,000 b/d Northern Gateway, which will run from Hardisty, Alberta, to Kiti-mat, British Columbia, is currently awaiting final approval from the Canadian federal gov-ernment after the National Energy Board gave its conditional approval in December 2013.

The pipeline has the firm backing of the Alberta government, with the province’s Alberta Petroleum Marketing Commission signing last summer an offtake agreement with Energy East Ltd. Partnership for 100,000 b/d of bitumen.

“We are not looking at increasing those volumes,” she said, noting the focus right now is addressing the “concerns” raised by the provincial governments through which the pipeline will cross.

The TransCanada-backed Energy East pipe-line project will call for converting its underuti-lized 3,000 km (1,860 mile) Canadian natural gas Mainline that runs from the Alberta/Saskatchewan border to Cornwall in Ontario. The facility will then entail the construction of 1,600 km of pipeline in Quebec and New Brunswick. In addition, four storage tanks and two marine exports terminals will also be built as part of the project.

Bob Delaney, parliamentary assistant to Ontario’s Energy Minister, Bob Chiarelli, said the project would still need assurances relat-ed to environmental aspects, safety and pro-tecting the rights of the Aboriginal committee.

“We have asked the Ontario Energy Board [the provincial regulator] to prepare a report,” he said at the event, without elaborating on when the report will be released. “But in the meanwhile, we will be working with the Alberta government to ensure the pipeline is built to highest standards with in-built emergency response measures.”

McQueen, while stating that Ontario has a right to have its own opinion on the planned pipeline and “a voice that has to be heard,” said safety and environmental matters will be best dealt with by the NEB.

In early March, TransCanada said it had filed a project description to the NEB that includes information on the project scope, environmental studies, details of stakeholder consultations, pipeline safety and integrity and proposed pipeline route.

“Energy East makes great economic sense for Canada and it comes at a time when crude by rail shipments from my prov-ince is increasing sharply due to pipeline bottlenecks and delays,” Saskatchewan’s Energy and Resources Minister, Tim McMillan, said at the event.

Nearly 20% of Saskatchewan’s total crude oil production of some 490,000 b/d is now moving on rail, McMillan said, with that figure set to rise as investments are planned in 2014 in new rail loading terminals in the province.

Ontario needs Alberta gasWith 3.5 million natural gas consumers in

Ontario and natural gas accounting for 15% of the province’s total energy generation, the eastern Canadian province will still look at Alberta to supply incremental volumes of gas, Delaney said.

“Underground natural gas storage is a growing business in Ontario and [the Union Gas operated] Dawn hub in the province will continue to be the largest storage facility in Canada,” Delaney said.

“As we phase out coal-fired power genera-tion in line with our long term energy plan, demand for natural gas will increase and we will have to figure out ways to work with Ontario,” Delaney.

Ontario has been a traditional market for Alberta, but that scenario has been changing in the recent past as incremental volumes of shale gas are flowing north into eastern Canada from the Marcellus play in the US.

“We have gas in the WSCB [Western Cana-dian Sedimentary Basin] that is seeking mar-ket access,” McQueen said. — Ashok Dutta

Energy East pipeline progresses smoothlyAlberta expects no hurdles in approvals for new west to east line

ThE AMErICAs

Platts Podcast

Interview with Port of rotterdam Authority on bunker industry developments and outlookInterview with the Port of Rotterdam Authority on the importance of fuel oil in the port of Rotterdam, reasons for the decline in demand of bunkers and developments and results to date of the sector wide bunker industry approach which commenced in 2013 in the port.

http://www.platts.com/podcasts-detail/oil/2014/march/europe-port-of-rotterdam-interview-25

http://www.platts.com/podcasts-detail/oil/2014/march/europe-port-of-rotterdam-interview-25


weekly EIA gas storage levels (Bcf)

Estimated working gas in storage for the week ended March 28

This week Last week Change Year ago 5-Year average

Consuming Region East 310 356 -46 669 758Consuming Region West 160 164 -4 331 294Producing Region 352 376 -24 701 762Total US 822 896 -74 1,700 1,814

record refills needed with us gas storage at 822 BcfKnoxville—Storage inventories officially exited the traditional withdrawal season at an 11-year low and the Energy Informa-tion Administration on Thursday reported a 74-Bcf pull that left stocks at 822 Bcf as of March 28.

The focus now shifts to the tremendous task of refilling inventories to a comfortable level ahead of next winter. Most analysts say the market will get there, buy they vary on what they think is doable given supply and demand trends.

“Basically, we’ll need to see the stron-gest injections on record by a large margin in order to get back to 3.8 Tcf by the end of October,” said Jeff Moore, analyst at Platts unit Bentek Energy.

The last time working inventories exited March anywhere near this level was in the week that ended March 28, 2003, when stocks stood at 696 Bcf. The deficit to the five-year average of 1.814 Tcf is now almost 1 Tcf, sitting at 992 Bcf, or 54.7%. The deficit to last year’s winter-ending inventory of 1.7 Tcf is at 878 Bcf, or 51.6%.

In the previous five years from 2009 to 2013, inventories exited the injection season

at the end of October at an average 3.829 Tcf after refills that averaged 2.017 Tcf or 65 Bcf/week.

Reaching 3.8 Tcf this year, however, would require nearly 3 Tcf of injections, equating to about 96 Bcf/week by October 31.

Analysts say this year the market is more likely to refill to between 3.35 and 3.6 Tcf. Moore noted that 2003 set the previous record for refills at about 85 Bcf/week, with some 2.55 Tcf of total injections.

“Bentek expects we can and will set a new record this year and inject around 2.7 Tcf during the summer, bringing inventories between 3.5 Tcf and 3.6 Tcf,” Moore said.

He said much of that additional supply will come from production growth, which Bentek pegs at about 3 Bcf/d more than the previous summer, with dry gas production averaging above 67.5 Bcf/d.

“That being said, it will also likely take some demand destruction due to higher prices, especially in the shoulder seasons,” Moore noted.

“I don’t think we’re getting over 3.6 Tcf,” said Kyle Cooper of IAF Advisors. — Stephanie Seay

New York—US Gulf Coast refining margins have climbed over the past week, lifted by higher gasoline prices and a drop in spot crude sup-ply costs, Platts data showed Thursday.

Platts margins reflect the difference between a crude’s netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.

The Light Louisiana Sweet cracking mar-gin closed at $11.58/barrel Wednesday, up $2.28/b since March 28, while the Mars cok-ing margin climbed $4.06/b to $8.62/b.

The LLS spot crude price closed at $102.53/b Wednesday, down $1.52/b from March 28, while Mars fell $1.72/b to close at $97.33/b.

USGC refining yields inched higher across the board, although crudes with a higher ULSD cut lagged. USGC conventional 87 spot prices closed at $2.8439/gal Wednesday, up the equivalent of $6.05/b from March 28, while ULSD slipped the equivalent of $1.16/b to $2.8627/gal.

While the LLS cracking yield climbed 76 cents/b over the same period to $115.10/b, the yield for Nigerian Bonny Light, which has a higher ULSD cut, climbed just 11 cents/b to $116.01/b. The exception was the Eagle Ford yield, which climbed $2.11/b. Eagle Ford has a higher ULSD cut relative to LLS, but also a higher conventional 87 cut.

The bulk of the USGC gasoline price gains appear to be the result of the seasonal switch to higher priced, lower RVP summer specifica-tion barrels. The conventional 87 differential to NYMEX RBOB futures closed at a 2.50 cents/gal discount Wednesday, up from an 18.25 cents/gal discount March 28.

The USGC is well-supplied with gasoline. Stocks at 76.81 million barrels the week ending March 28 were roughly 6% above the five-year average, US Energy Information Administration data shows. USGC refiners were operating at 89.7% of capacity the week end-ing March 28. While that was up sharply from 85.4% two weeks prior, it left room for refiners to increase gasoline output down the road.

But with diesel in the driver’s seat, refin-ers may not have much incentive to boost gasoline output much, even as they lift runs during the summer.

Last year, for instance, USGC gasoline refinery operations climbed to 95.2% of capac-ity in July from 79.8% of capacity in February. Over that period, distillate production climbed 502,000 b/d to 2.738 million b/d, while gaso-line output dipped 18,000 b/d to 2.047 mil-lion b/d, the EIA’s monthly data shows.

The summer gasoline season has really turned into the diesel export season, for USGC refiners at least, as more barrels leave primar-

ily to South America. Exports to Brazil and Argentina last year peaked in July, for instance, while exports to Chile peaked in June.

Although spot ULSD prices have fallen over the past week, ULSD crack spreads remain at a premium to gasoline crack spreads. The ULSD crack against LLS closed at $17.07/b Wednesday, compared to a con-ventional 87 crack of $14.79/b.

ULSD cracks against Bakken slipOn the US Atlantic Coast, the spot ULSD

crack spread against delivered Bakken has come under downward pressure on higher Bak-ken spot price differentials. The ULSD crack closed at $11/b Wednesday, assuming a $14/b delivery cost by rail for North Dakota Bakken to USAC refiners, down $2.40/b from March 28.

The decline put imported crudes at a slight advantage. The ULSD crack against Bonny Light delivered from Nigeria closed at $12.91/b Wednesday, up 26 cents/b from March 28, while the ULSD crack against Canadian Hiber-

nia closed at $14.52/b, up 8 cents/b.A tighter WTI/Brent spread has given

USAC crack spreads against Brent-based crudes a lift. Both Bonny Light and Hibernia are priced against Brent, while Bakken is priced against WTI. The Bakken differential to WTI, ex-Clearbrook, Minnesota, closed at minus $2.75/b Wednesday, up from minus $3.60/b March 28.

The higher ULSD crack spreads against Brent-priced crudes is a recent development, and has yet to impact trade flows. Asian refin-ers have been buying up West African crude. Platts cFlow vessel tracking software shows that two vessels originally fixed to ship WAF crude to the USAC in April were rerouted.

Petroleum delivered by rail has picked up in recent weeks. Frigid weather had reduced movement by rail earlier this year, and limited production growth in North Dakota.

According to the Association of American Railroads, 15,476 cars moved petroleum the week ending March 28, up from 14,811 the prior week. On a four-week moving average, cars moved by rail at 14,857 were higher for the fourth week in a row, from 13,878 cars the week ending February 28. — Jeff Mower

higher gasoline prices lift usGC marginsPrice gains linked to switch to lower-RVP summer stock

MArKETs & DATA


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Chief Editor: Gary Gentile, [email protected] Editor: Benjamin Morse, [email protected] Oil News: Beth EvansEurope & Africa Oil News: Stuart ElliottAsia Pacific Oil News: James BourneEditorial Director, Global Oil News: Richard SwannGlobal Director, Oil: Dave ErnsbergerEditor Emeritus: Onnic MarashianRegional offices:New York—Janet McGurty; Washington—Herman Wang, Brian Scheid; Houston—Starr Spencer, Bridget Hunsucker; London—Margaret McQuaile, Robert Perkins; Cape Town—Jacinta Moran; Dubai—Tamsin Carlisle; Moscow—Nadia Rodova, Dina Khrennikova, Rosemary Griffin; Singapore—Mriganka Jaipuriyar, Song Yen Ling; Sydney—Christine Forster; Tokyo—Takeo Kumagai

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Magellan moving on Arkansas products pipelineHouston—Magellan Midstream Partners is advancing plans to build a 75,000 b/d refined products pipeline in Arkansas after receiving sufficient commitments during an open sea-son, it said Thursday.

“The partnership continues to finalize the scope and engineering estimates for this potential project, which may include utilization of an existing third-party pipeline for a portion of the route,” Magellan said in a statement. “Subject to finalizing this agreement and receipt of the necessary permits and regula-tory approval for the pipeline construction, the potential Little Rock pipeline could be opera-tional in late 2015.”

The pipeline would transport gasoline, diesel and jet fuel to Little Rock, Arkansas, from the partnership’s Fort Smith, Arkansas, terminal, the company said. It previously said that the project would cost between $250 mil-lion-$300 million.

“Management is currently negotiating an agreement to utilize a portion of an existing third-party pipeline, which will be extended to Magellan’s Ft. Smith terminal and the Little Rock market with newly-constructed pipeline,” Magellan said Thursday.— Bridget Hunsucker, Subhan Usmani

New York—ICE May Brent settled $1.36 high-er at $106.15/barrel Thursday amid specula-tion that a potential deal between the Libyan government and rebels on crude exports would fall through.

NYMEX May crude settled up 67 cents at $100.29/b. This pushed the front-month Brent-WTI spread to close at $5.86/b, out from Wednesday’s six-month low of $4.82/b.

NYMEX products followed Brent higher, led by May RBOB, which settled 4.5 cents higher at $2.9118/gal. May ULSD settled up 3.96 cents at $2.9062/gal.

“Libyan rebels will not be handing over the oil export terminal at Zueitina to the govern-ment as rumored, but an agreement to reopen eastern oil ports is still possible,” Citi Futures Perspectives analyst Tim Evans said, citing a rebel spokesman from the Barqa region.

The Libyan government earlier Thursday met a key rebel demand, approving the transfer of the headquarters of the national oil facility security service to the eastern city of Brega.

Rebels have blockaded oil export termi-nals in the east of the country since last July.

BNP Paribas analyst Harry Tchilinguirian said planned maintenance at the North Sea Oseberg field—an integral part of the Brent price formula—will be conducted from the end of April to mid-May, and that this better explained the partial rebound in ICE Brent futures.

Tchilinguirian also said talk of possible VLCC shipments of North Sea crude to Asia was lending support.

One shipbroker Thursday reported that Shell had on subjects the 270,000 mt Phoe-nix Vanguard VLCC, loading April 24-27, for a Hound Point to South Korea voyage at a $4.85 million lump sum.

Shell declined to comment, while traders at other firms either did not know whether the fixture would go ahead, or had heard it was on subjects.

Despite Thursday’s bullishness, front-month Brent is down around $2.70/b since March 27.

Expectations were that the European Central Bank could put supportive monetary policy in place in the near term. The ECB left its benchmark interest rate unchanged Thurs-day, as had been expected by the market.

Carl Larry, president of Oil Outlooks, said traders viewed the unchanged move in ECB rates as bullish “for the EU recovery and their oil demand,” thus providing upside support to Brent futures.

In the US, initial jobless claims for the week ending March 29 was 326,000, up 16,000 from the previous week’s revised figure of 310,000. The four-week moving aver-age was 319,500, up 250 from the previous week’s revised average of 319,250.

This likely helped to boost RBOB as well, in addition to tight supply in the demand-heavy US Atlantic Coast. US Energy Informa-tion Administration data Wednesday showed USAC gasoline stocks at 55.12 million barrels are 4.6% below the five-year average. — James Bambino, Alison Ciaccio, Jeff Mower

Brent higher over uncertainty of Libyan export deal

MArKETs & DATA

NYMEX crude settle, �rst month

NYMEX natural gas settle, �rst month

($/bbl)

($/MMBtu)

99

100

101

102

101.67101.58

99.7499.62

100.29

3-Apr2-Apr1-Apr31-Mar28-Mar

April 3 settle: $100.29, up $0.67

4.2

4.3

4.4

4.54.485

4.371

4.276

4.364

4.47

3-Apr2-Apr1-Apr31-Mar28-Mar

April 3 settle: $4.470, up $0.106

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