Oil prices mixed on Europe, China worries

Thu 22:24
Oil prices mixed on Europe, China worrie...
Posted: 16 December 2011 0502 hrs
http://bit.ly/uiqa9k



NEW YORK: Crude oil prices closed mixed on Thursday as investors worried about Europe's escalating sovereign debt crisis and China's slowing economy.

The benchmark New York futures contract failed to hold onto gains made earlier in the session despite better-than-expected US economic indicators.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for January, finished the session at $93.87 a barrel, a decline of $1.08 from Wednesday's closing level.

In London, Brent North Sea crude for delivery in January rose 17 cents to settle at $105.09 a barrel.

The WTI contract had shed more than 5.0 percent in New York Wednesday amid fading hopes that the crisis plan unveiled at last week's European Union summit was enough to resolve the eurozone debt crisis.

"Nothing has changed," said Tom Bentz at BP Paribas.

"The market is still very much concerned about the EU problem and the slowdown in China."

Adding to fears of contagion from the debt crisis were weaker data from China, the motor of the global economy and the world's biggest energy consumer.

China's manufacturing activity contracted for the second straight month in December while foreign direct investment fell for the first time in 28 months in November

The New York market earlier had been boosted by a sharp downturn in US weekly jobless claims, which fell to a three-year low last week, and Spain's surprisingly successful government debt sale.

The Commerce Department also reported the US current account deficit fell to its lowest level in almost two years in the third quarter, thanks in large part to growing exports.

In other oil market developments, Iraqi Prime Minister Nuri al-Maliki told AFP on Thursday that oil giant ExxonMobil has promised to reconsider an exploration deal with Iraqi Kurdistan that Baghdad has strongly opposed.

"We had a meeting with (Exxon) in Washington and we discussed the contracts, some of which are located in disputed areas," Maliki said.

"They promised to reconsider their decision," Maliki said.

ExxonMobil on October 18 inked a deal with Kurdistan to explore for oil and gas in six areas, but Baghdad regards any contracts not signed with the central government as invalid.
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Thu 20:13
Iraq to Open New Offshore Oil Terminal
Victor384
1
Iraq plans to start operating “in days” the first of four new offshore terminals for tankers as OPEC’s third-largest producer sets its next energy licensing round for March 7-8 in Baghdad, an Oil Ministry official said.

Iraq will also seek bids to build two pipelines to export crude oil through neighboring Syria in a project estimated to cost $2.2 billion, Abdul Mahdy al-Ameedi, director-general of the Iraqi Oil Ministry’s licensing department, said today at a conference in Amman. Iraq’s revenue mainly comes from oil sales.

It’s not clear if the unrest convulsing Syria would impede the pipeline plans. Iraq holds the fifth-biggest natural-gas reserves in the Middle East and the world’s fifth-largest crude deposits, according to BP Plc (BP/) data that include Canadian oil sands. Iraq has signed 15 gas and oil licenses since the 2003 U.S.-led invasion that ousted former President Saddam Hussein.

The government needs foreign investment and expertise to boost energy exports and rebuild an economy shattered by years of conflict, sanctions and sabotage. Iraq will uphold agreements it has with Exxon Mobil Corp. (XOM) “for now,” al-Ameedi said, even after Exxon signed contracts the government considers illegal with authorities in the semi-autonomous Kurdish region.
‘Considering Measures’

The central government “is considering measures” in response to Exxon’s contracts with the Kurdistan Regional Government, he said, declining to specify the measures or to rule out punitive steps at a later date. The Baghdad government and the Kurds are entangled in a dispute over revenue from crude produced at Kurdish fields.

Exxon, which has not commented publicly on the matter, is operating with Royal Dutch Shell Plc (RDSA) in southern Iraq at the West Qurna field, one of the nation’s biggest.

The first of four single-point mooring facilities off the coast of southern Iraq will add 900,000 barrels a day of exporting capacity for crude, al-Ameedi said. Three more offshore export terminals with similar capacity are due to start operating within months.

Iraq exported crude at an average rate of 2.135 million barrels a day in November, Falah Al-Amri, the director of the State Oil-Marketing Organization, said Dec. 1. It produced an average of 2.705 million barrels a day last month, according to data compiled by Bloomberg.
Pipeline Sabotaged

Iraq is exporting crude at “normal levels” after a sabotage attack yesterday on a pipeline near the southern hub of Basra, Asim Jihad, a ministry spokesman, said today. The explosion did not affect exports as Iraq has enough spare storage, and crude flow has been diverted to an undamaged pipeline, Jihad said in a phone interview in Baghdad.

Iraqi officials are holding a workshop in Amman with the 46 companies qualified to bid in the March auction for 12 exploration areas. Companies can submit comments to the ministry until Jan. 6 and final tender protocols will be issued Feb. 3, al-Ameedi said.

The concessions, seven for oil and five for gas, cover 80,700 square kilometers (31,200 square miles), according to the ministry. They contain 29 billion cubic meters of gas and 10 billion barrels of crude, Oil Minister Abdul Kareem al-Luaibi said in March. The companies include Shell, BP, Exxon and Total SA. (FP)

Iraq is working to raise crude output to 3 million barrels a day by the end of this year from 2.4 million barrels a day in 2010, al-Luaibi said on Nov. 1. Export capacity should reach 2.6 million barrels a day in early 2012 from 1.89 million barrels at the end of last year, he said.

The two planned pipelines, valued at $2.2 billion, will run from Basra in southern Iraq to the Syrian port of Banias, al- Ameedi said. Iraq also plans new networks with neighboring Iran and Turkey.

To contact the reporters on this story: Mohammad Tayseer in Dubai at mtayseer@bloomberg.net; Nayla Razzouk in Dubai at nrazzouk2@bloomberg.net

To contact the editor responsible for this story: Stephen V

================

2012 Oil Price Outlook: How to Profit From $150 Oil
DECEMBER 15, 2011
http://moneymorning.com/2011/12/15/2012-oil-price-outlook-how-to-profit-from-150-oil/

BY JASON SIMPKINS, Managing Editor, Money Morning
2011 was an up-and-down year for oil prices, but don't expect that pattern to repeat in 2012.

No, next year, the trajectory for oil prices will be far more linear - and it's pointed up.

In fact, we could even see $150 oil by mid-summer.

There are two key reasons why:

Despite the economic crisis in Europe, oil demand proved resilient in 2011. It is poised to remain steady in 2012, and then escalate drastically for the foreseeable future.
Supplies will once again be constrained, and the potential for political upheaval in major oil-producing nations has increased.
These are the principal reasons oil prices have surged about 30% since dipping below $80 a barrel in early October. They're also why the world's upper-echelon of energy forecasters has oil prices building a floor above $90 a barrel and rising from there.

Indeed, Goldman Sachs Group Inc. (NYSE: GS) recently recommended that traders buy July 2012 Brent crude futures in anticipation of a rally to $120 a barrel. It was one of the bank's top six trades for 2012 published in its "Global Economics Weekly" report.

Barclays Capital agrees.

"Even in the worst case scenario, the downside to oil prices is unlikely to be anything as severe as during the 2008-2009 cycle," Barclays analysts Roxana Molina and Amrita Sen wrote in a report earlier this year. "As a result, we maintain our price forecast of $115 per barrel for Brent in 2012 and expect $90 per barrel to hold as a sustainable floor even under gloomy macroeconomic conditions."
As for West Texas Intermediate (WTI) crude the Energy Information Administration (EIA) expects it to average nearly $94 a barrel next year.

And even that's a conservative estimate.

"Given the oil volume constriction oncoming and the continuing increase in global demand - this drives the price, not North America or Western Europe - we will reach $150or beyond by July 4," said Money Morning Global Energy Strategist Dr. Kent Moors.

Down But Not Out

Of course it's true the global economy will suffer if the European debt crisis is not contained. However, it's also true that emerging market demand will buoy oil prices and eventually push crude beyond the record levels we saw in 2008.

The International Energy Agency (IEA) said in its annual energy outlook in November that oil demand will rise 14% between 2010 and 2035, from 87 million barrels per day (bpd) in 2010 to 99 million bpd in 2035. And what's more is that the net increase in oil demand will come entirely from the transportation sector in emerging economies.

The IEA projects oil prices of $212 a barrel by 2035, as a result.

"It is hard to overstate the growing importance of China in global energy markets," says Fatih Birol, chief economist for the IEA. "The country's growing need to import fossil fuels to meet its rising domestic demand will have an increasingly large impact on international markets."

Birol says that 700 out of every 1,000 people in the United States and 500 out of every 1,000 people in Europe own cars today. In China, only 30 out of 1,000 people own cars. Birol thinks that figure could jump to 240 out of every 1,000 by 2035.

Furthermore, when Japan hit $5,000 of gross domestic product (GDP) per capita, oil demand grew at a 15% annual rate for the next 10 years, according to oil-industry consultant firm PIRA. The same is true of South Korea. However, China reached the $5,000 GDP per capita mark in 2007, and oil demand has only grown at a 7% compounded annual growth rate.

Clearly demand is far more likely to grow than shrink.

"In the last five years, worldwide consumption of oil products has grown from 3 million barrels a day to 7 million barrels," Sergio Gabrielli de Azevedo, chief executive officer of Petrobras SA (NYSE ADR: PBR), the world's third-largest oil producer, told CNBC.

"We are going to have a very tight market in 2012," he said. "At the same time, we have low interest rates, which means that by the year 2012 we are [probably] going to see prices above $100 per barrel on average, but very high volatility, because we have a lot of speculative contracts that have been traded in the market right now."

Supply Squeeze

Additionally, the supply side of the oil market is far weaker today than it's been in the past. Even though demand has eased slightly, total supply has fallen as inventories were siphoned off throughout the year.

U.S. commercial oil inventories fell for the third consecutive month in November, declining by 20.3 million barrels. And an11.8 million-barrel decline in OECD supplies in September took the inventory level below its five-year average for a third consecutive month, as well. That's the first time that's happened since 2004. Asia-Pacific inventories are declining, too.

"Falling global demand is unlikely to create large spare capacity," wrote Barclays analysts Molina and Sen.

Plus there's a wild card: Political turmoil could easily lead to an oil price spike that eclipses the one we saw last spring during the Libyan rebellion.

That would be impressive, considering Libya's revolution took oil prices from $83.13 a barrel on Feb. 15 to $113.39 a barrel on April 29. That's a 36% surge in a period of about two and a half months.

And yet, that was simply the result of political upheaval in Libya - which at the time was the world's 17-biggest oil producer. Just imagine the impact on prices of a political crisis in one of the major oil-producing nations of the Middle East.

Remember, U.S. President Barack Obama has vowed to pull all U.S. troops out of Iraq by the end of this year. That's almost certainly a relief for Iran, whose nuclear program has already aggravated tensions with the West.

An International Atomic Energy Agency (IAEA) report on Iran in November accused the country of pursuing a nuclear weapons program. This would violate United Nations sanctions and could lead to military intervention from Israel and the United States.

Iran is the world's fourth-largest oil producer, so military conflict there would lead to a spike in oil prices that dwarfs what we saw during the Libya crisis. Iran produces 3.6 million barrels of oil a day, about 5% of the world's total. By comparison, Libya produced about 1.5 million barrels of oil per day prior to its civil war, or about 2% of the world's total supply.

Iran isn't the only political risk in the region, either. Since the Arab spring many Middle-Eastern countries have ramped up social spending to dissuade rebellions of their own. Saudi Arabia alone has unveiled some $129 billion of additional expenditures in recent months.

As a result, the Organization of Petroleum Exporting Countries (OPEC) has raised by $10.00 its estimate for the underlying oil price it uses in its reference case forecast to a range of $85-$95 a barrel. This is the first tacit acknowledgment from the group that the social investment commitments of some key members will necessitate higher oil prices.

"Political unrest is certainly part of why the oil price is getting so supported despite the decline in the macro environment," Sabine Schels, senior director and global commodity strategist, Bank of America Merrill Lynch Global Research, told CNBC. "Iran is flexing its muscles in the region and we have all seen how strongly Saudi Arabia reacted."

The IEA says "consumers could face a substantial near-term rise in the oil price to $150/barrel," if energy exploration and development in the Middle East falls below $67 billion annually.

2012 Oil Price Profit Plays

The easiest way to play the looming rise in oil prices is through exchange-traded funds (ETFs).

There are several from which to choose, including: the iPath S&P GSCI Crude Oil Total Return ETF (NYSE: OIL), the PowerShares DB Oil Fund (NYSE: DBO), the SPDR S&P Oil & Gas Explorers & Producers Fund (NYSE: XOP) and the SPDR Oil & Gas Equipment & Services Fund (NYSE: XES).

Of course, there's also no shortage of companies poised to outperform the market.

China National Offshore Oil Corp. (CNOOC) (NYSE ADR: CEO) is a great way to play growing demand in China.

CNOOC is often referred to as the most "Western" of China's oil majors because it was founded with a mandate to form joint ventures with foreign companies. CNOOC is the vessel through which China is acquiring foreign expertise in the energy sector.

Last year, the company announced it would pay $1.08 billion for a 33% stake in Chesapeake Energy Corp.'s (NYSE: CHK) Eagle Ford shale acreage in Southern Texas, a deal that highlighted China's desire to develop its shale-gas extraction techniques.

"China's natural gas production has tripled in the last decade, a growth rate of 13.3%," said Douglas-Westwood's Kopits. "We project this to double in 2015 and nearly triple to 8.6 trillion cubic feet in 2020, implying 10% annual growth."

And just last month, CNOOC shelled out $2.04 billion to acquire Opti Canada Ltd. and increase its exposure to Canada's rich oil sands. Opti is CNOOC's second step into Canada's vast oil sands. In 2005, China's largest offshore oil acquired a 14% stake in MEG Energy Corp. (PINK: MEGEF), which operates an oil sands project in northern Alberta.

If you want a direct play on Canada's oil sands you might look at Suncor Energy Inc. (NYSE: SU).

Suncor boasts strong and reliable crude oil production from its oil sands operations in Canada. It also has refineries, wholly owned pipelines and specialty lubricant products. The company sells gasoline in retail locations in Canada under the Petro-Canada brand and in the United States under the Phillips 66 and Shell brands.

At a time when the many traditional Middle-Eastern oil producers are besieged by civil unrest, reliable oil production from a country as stable as Canada is especially valuable.

"Of the Canadian oil plays, I most like Suncor because of its position as the most important producer of tar sands oil," said Money Morning Global Investment Strategist Martin Hutchinson. "This is only modestly profitable at current oil prices, but if prices run up or a global crisis restricts supplies, Suncor can be expected to increase hugely in profitability."

Money Morning Global Macro Trends Specialist Jack Barnes likes Suncor, as well. And in recent "Buy, Sell or Hold" columns, he's recommended Anadarko Petroleum Corp. (NYSE: APC), EOG Resources Inc. (NYSE: EOG), and Marathon Petroleum Corp. (NYSE: MPC).

Anadarko has stakes in some of the most prolific U.S. oil fields in Texas, Colorado, Wyoming, Utah, and Pennsylvania. It's also an international leader in unconventional production, employing methods like horizontal drilling to increase productivity rates from deep wells.

EOG has shifted its focus to horizontal drilling techniques, as well, transforming itself from a leading gas drilling company to a major oil producer. Last year, the company increased its liquid production by 49%. The company just reported blowout third-quarter earnings, turning last year's loss into a $541 million profit.

And finally there's Marathon, which has a firm hold on North Dakota's Bakken oil shale formation - the largest known reserve of light sweet crude in North America.

Production from the Bakken shale is soaring. It went from a mere 3,000 barrels a day in 2005 to 225,000 in 2010, and could hit 350,000 barrels a day by 2035, according to the EIA.

All of these companies are worth a look, and paired with the aforementioned ETFs, could conjure up some very big gains in 2012. ================== Iraq talks tough with Exxon http://bit.ly/tkEMOx By BEN VAN HEUVELEN of Iraq Oil Report Published December 16, 2011 BAGHDAD - The Iraqi government is maintaining a hard stance against ExxonMobil even as the two sides have begun talks to resolve a dispute over the company's controversial contracts with the semi-autonomous Kurdistan region. Prime Minister Nouri al-Maliki met with Exxon CEO Rex Tillerson at the tail end of his trip to Washington, DC, according to Deputy Prime Minster for Energy Hussain al-Shahristani. The negotiations have apparently only just begun. "The prime minister has met with ExxonMobil, and (Tillerson) has promised to reconsider their contracts in the KRG, but I haven't heard from the prime minister directly what was the commitment made by Tillerson to him," Shahristani said in an interview with Iraq Oil Report. Iraq's central government enters the negotiations deeply entrenched in its opposition to any of the 48 deals the Kurdistan Regional Government (KRG) has signed with foreign oil companies. Baghdad claims sole responsibility to sign oil contracts and has called Kurdistan's oil contracts illegal, including its new deals with Exxon. "Before they signed the contract, and after they signed the contract, (Exxon) received a letter from the prime minister and from the minister of oil telling them that signing contracts without the approval of the federal government is a breach of their contract for West Qurna Phase 1," Shahristani said. "That remains to be the position." Exxon's Oct. 18 deals, made public in early November, make it the largest company to sign with the KRG and signify an enormous vote of confidence in the region. Exxon's move also represents the first time a company has signed contracts with the central government and then defied Baghdad's policy banning oil deals with the KRG. Under a technical service contract signed in 2010 with the federal Oil Ministry, Exxon is developing the 8.6 billion barrel West Qurna 1 oil field in Basra, which is to reach 2.825 million barrels per day (bpd) in seven years – more than the entire country produces currently. Exxon has also been in negotiations to lead the construction of a water pipeline that is needed to boost production at several southern oil fields. And the company is currently qualified to bid in a March 7-8, 2012, licensing round for 12 exploration blocks. These projects and prospects in the south are now in jeopardy – and their fates may be linked. "Iraq has not taken its decision vis-à-vis ExxonMobil (regarding) the contract that was signed without the approval of the central government," Shahristani said. "Once that decision is taken, of course it will be implemented, in all other areas of bilateral obligations." As oil minister from 2006 to 2010, Shahristani pioneered a strict blacklist policy, barring companies that signed with the KRG from doing oil deals with the central government. Exxon's defiance of this policy seemed so brazen – and Exxon had such a well established reputation for being conservative – that many observers speculated the company must have received some type of advance approval from Baghdad. But Shahristani categorically denied that anyone representing Baghdad had given Exxon a "yes" or even a quiet "maybe." "Nobody in the central government – from the minister of oil, to the deputy prime minister for energy, to the prime minister himself or the Council of Ministers – ever have given any such indication or signal," Shahristani said. Shahristani said that the Iraqi government had sent a letter to ExxonMobil seeking to bring them to the negotiating table, but he also suggested that Iraq had not been willing to negotiate without an important pre-condition. "They have been told that they are welcome to come and discuss it with the Minister of Oil, but first and foremost, they have to acknowledge the authority of the federal government, and to accept the fact that their contracts are not valid without the approval of the central government," Shahristani said. "Otherwise, what's the point of coming to talk with the central government, if they consider the (KRG) contracts to be valid?" It's unclear how the dispute might be resolved. Earlier this week, Maliki reportedly suggested that Exxon's KRG contracts could be renegotiated with the involvement of the Oil Ministry, but Shahristani said no such process was in the works. "This hasn't been discussed," he said. "Those contracts have not even been presented to the Ministry of Oil, so the Ministry of Oil has not studied them – they have no views on that. The sure stand of the central government is that anything that is not approved by the Council of Ministers has no legal value in Iraq." Exxon's Kurdistan play is the latest episode in a larger story about control over the country's oil and the shape of the Iraqi state. Maliki's government has advocated for strong central powers, while the Kurdistan region has pointed to provisions in the constitution that guarantee a share of oil authority for regions. The Constitution itself calls for modern oil legislation that could help clarify the lines of authority. Iraq's Cabinet passed a draft law in 2007, but it stalled in Parliament largely because the different camps have fundamentally different ideas about the nature of Iraqi federalism. Kurdish leaders have worried that too much power concentrated in Baghdad will lead to another dictatorship. They recall the days of Saddam Hussein, when the regime neglected economic development in the north and used its power to pursue genocidal campaigns against the minority Kurds. "We believe that the evil of centralized system of government that inevitably leads to dictatorship and tyranny has been proven a total, utter failure in Iraq," KRG Prime Minister Barham Salih said in his keynote address to investors at the CWC Kurdistan Oil and Gas Conference in Erbil last month. "We believe that federalism is not only good for Kurdistan, but it is a safety net, an insurance policy, for a united Iraq." In Shahristani's view, however, a safe and prosperous Iraq depends on central control of the oil sector. "For me, the unity of the country – the peaceful coexistence of its ethnic and religious and sectarian factions – is extremely important," Shahristani said. "And unless oil is managed centrally and revenues are distributed equally to all Iraqis, oil can be very dangerous, can lead to civil war among the different factions." =============== Author scaramouche View Profile Add to favourites Ignore Date posted today 11:35 Subject Plan B.... Votes for this Posting Voted 74 times. Message On 12 October 2011, Ewen spoke to Proactive Investors about GKP’s future plans for Shaikan... http://www.proactiveinvestors.co.uk/companies/news/34243/gulf-keystone-petroleum-qa-finance-director-ewen-ainsworth-on-groups-ambitious-strategy-34243.html Extract: Proactive: What must be done to take current production levels to the longer term target of 300-500,000 bopd? EA: In the longer term, our aim is to develop the Shaikan processing facilities to achieve plateau production of at least 300,000 with a potential of achieving 500,000 barrels of oil per day. As part of our dedicated pipeline project, we plan to complete the Front End Engineering and Design for the company's pipeline, which will be capable of transporting a minimum of 440,000 bopd from the Shaikan field to the existing Kirkuk-Ceyhan export pipeline.> In the October 2011 Investor presentation that followed, GKP confirmed those intentions. http://www.gulfkeystone.com/uploads/gkpinvestorpresentation1213october2011.pdf The presentation also included a concept diagram on p15 to illustrate how this level of production might be achieved. So, when discussing GKP, FIVE HUNDRED THOUSAND barrels per day has subsequently become one of the standard benchmarks used to determine GKP’s future potential. However, it is worth noting that, at the time GKP had only announced 7.5 billion barrels OIP (P50) at Shaikan. On the basis of an assumed 30% of the oil being recoverable, another way of looking at it would be that GKP’s plan would be to extract 2.25 billion barrels in the course of development phase of their contract (20 years + a 5-year planned extension), at an average of 90 million barrels per annum. 500,000 bpd is equivalent to about 180 million barrels per annum so, if achieved within about 5 years of production starting in earnest in January 2013 (as seems perfectly feasible), GKP would be easily capable of extracting all that oil within the designated time-frame. But what if Shaikan actually holds.... NOT the 7.5 billion (P50) announced on 14 April 2011 on which the 500,000 bpd is based... NOT the 10.5 billion (P50) announced in the latest OIP upgrade on 8 November 2011. NOT that 10.5 billion plus an additional upgrade from SH-4 (with its 2375 m Total Gross Pay Interval) ......which could take us to the present P10 of 13.4 billion. NOT that 13.4 billion plus an additional 2 billion from SH-5, which JG referred to rather casually in the Growth Investor article recently published on GKP’s website...which would then take the OIP figures to around 15.4 billion. But IN FACT the 20+ BILLION barrels which SH-6 is likely to prove when targeting the OWC level by June/July 2012. (Note: SH-6 is due to spud later this month!) *** GKP would then surely need to have a ‘Plan B’ *** In his interview with Dow Jones Newswires on 8 November 2011, the same day as the upgrade to 10.5 billion OIP (P50), JG again referred to the development phase for Shaikan. http://tools.morningstar.co.uk/uk/stockreport/default.aspx?tab=3&vw=story&SecurityToken=0P00007ODX%5D3%5D0%5DE0GBR$$ALL&Id=0P00007ODX&ClientFund=0&CurrencyId=GBP&story=173441516902972 Extract: If all goes to plan, Gerstenlauer expects to submit the plan in mid-2012 and hopes it will be approved by the end of the year, before moving on to the development stage. Gulf Keystone is already working on the plan, and although Gerstenlauer said it is still early days, he said the project will likely require 200 wells over its 25-year life--100 to begin with and 100 more by the end of its life So, it would be reasonable to infer that a plan for a super-major’s development of Shaikan could entail something closer to more than double the OIP figure on which the original plan was based, double the initial number of wells proposed, double Ewan’s target of 500,000 bpd... and plateau production of something nearer to ONE MILLION bpd. With 20 billion barrels of OIP, and a 30% RF, the Reserves would be 6 billion. ONE MILLION barrels per day would be the equivalent of 365 million barrels per annum, which would take about 16 years of plateau production. *** Full production from a full to spill Shaikan (6 billion barrels) would therefore IMHO be quite easily achievable by 'a super-major', targeting one million bpd within 10 years, within the terms of the contract ***. A few weeks ago, JG mentioned that GKP was now preparing TWO plans for the development of Shaikan - one based no doubt on what we have seen already, the other designed for a super-major. JG says that a plan will be submitted in mid-2012 (which coincidentally should be around the time that GKP completes the drilling of SH-6) and we know that the KRG will want maximum production from their flagship SHAIKAN oil-field as soon as is physically possible. Hmmm, what is the betting that GKP’s eyes are very firmly focused... on submitting PLAN B? I am more and more convinced that GKP (or certainly Shaikan) will be gone in about mid-2012. GLA, scaramouche =================== Re: Sinopec bonobo77 29 So they paid US$7.5bn for a 45% operating interest in an asset with 180k bopd potential and they "considered the Kurdish assets sufficiently good to make the risk (at this price) worthwhile." Our company is already talking about 400k bopd potential. Sinopec's 45% at Taq Taq gives them an effective interest in 81k bopd potential (or exactly one fifth of Shaikan's targeted production). For $7.5bn. And they thought it was a risk worth taking. I imagine, after 'doing the math', that Exxon have filed the ICG's letters in a similar bin to the one Sinopec utilised!Shaikan, by any comparison, would be described as more than "sufficiently good". Point of note also on this weekend. I read a Tactical Report a couple weeks back that alleged that Exxon and other US companies have agreed to remain silent on the Kurdish deals for 'two months', until the US withdrawal is completed. Exxon signed its contracts on October 18th. So they may just find their voices after this Sunday. You just never know. =================== Re: $7B was the figure to develop Shaike... livic1971 4 3d - "Thamer Ghadhban said some $50 billion would be spent to upgrade the supergiant West Qurna Phase 1 oilfield which is being developed by Exxon Mobil. " They are prepared to spend $50 billion to develop a resource thats paying them $1.80/barrel and even at max flow rates of 2.5 million per day will pay them about $5 million per day in profit. Your logic is staggeringly flawed as they are already doing something like what you say they won't do on a much bigger scale for less profit. All these costs are recoverable and because the development with be staggered somewhat they are very unlikely to get anywhere near shelling out $7 billion before the past costs recovered start paying for future costs. I think on Shaikan they probably won't go past $1-2 billion of outstanding capital at any one time. GKP will get maybe ~$5 per barrel, $3 per barrel more than West Qurna, for every barrel extracted from their blocks. They have ~4 billion of recoverable and could easily have double that, GKPs purchase price would have to go over ~$3.20 x 4 billion to be a worse deal buying GKP than service contracts on West Qurna. Thats pretty close to the figures coming out for the bid and it ignores any further upside from the four blocks. I personally think Exxon did not go into Kurdistan for exploration drilling. GKP is realistically the only thing a $500 billion company is going to be interested in. The Independent story looks to be made up off posts from this BB so I'll take that with a grain of salt, but its spread to Reuters and the WSJ. While it may not be true, the main reason I think this 'rumour' has got that far is because there is no reason for it not to be true. I think you are deluded if you think Exxon aren't interested and haven't made inquiries simply because of $7 billion of recoverable development costs. Exxon are in Kurdistan for GKP. =============== MERGERS NEWS UPDATE 1-Exxon mulls 7 bln stg approach for Gulf Keystone-paper Sun, Dec 18 11:05 AM EST LONDON, Dec 18 (Reuters) - U.S. oil major Exxon Mobil Corp is mulling a 7 billion pound ($10.9 billion) takeover of Kurdistan-focused explorer Gulf Keystone Petroleum , the Independent on Sunday reported. The newspaper said that Exxon is considering making an estimated 800 pence per share bid for Britain's Gulf Keystone, which has made huge oil finds in the semi-autonomous Kurdistan region of Iraq. "It's not our practice to comment on media reports, rumours or speculation," an Exxon spokesman told Reuters in an emailed statement. Gulf Keystone also declined to comment. Exxon has "sounded out" Gulf Keystone about the possible deal, said the report without citing its sources, adding that it is thought that the company would not accept an offer at the 800 pence per share level. Shares in Gulf Keystone closed at 165.5 pence on Friday, valuing the firm at 1.4 billion pounds. Exxon became the first major to move into the northern Kurdish region in mid-October when it signed with the Kurdistan Regional Government (KRG) for six exploration blocks, a move which has angered the Baghdad government. Baghdad has said any oil deals signed with the KRG are illegal. The Independent on Sunday: Exxon woos GKP to boost Kurdish base US oil supermajor Exxon Mobile has sounded out London-listed Gulf Keystone Petroleum over a possible deal that could value the Kurdistan-focused group at around £7bn. GKP is sitting on what is considered to be one of the world's great recent oil finds, Shaikan, about 50 miles north-west of the capital, Erbil. The regional government is seeking a supermajor on board to properly fund and develop the field. ==================== Exxon Mulls GBP 7 Bln Takeover For Gulf Keystone: Report http://bit.ly/sFU4PT 12/19/2011 1:35 AM ET (RTTNews) - Oil giant Exxon Mobil Corp. (XOM: News ) is mulling a takeover for Gulf Keystone Petroleum Ltd. (GKP.L: News ), valuing the British oil explorer at around 7 billion pounds, the British newspaper the Independent said on Sunday, without naming the source. In the report, the paper said that Exxon has 'sounded' out Kurdistan-focused Gulf Keystone, which has made large oil discoveries in the semiautonomous Kurdistan region of Iraq. GKP has a market capitalization of around 1.5 billion pounds, and operates one of the world's great recent oil finds - Shaikan, about 50 miles north-west of Kurdistan's capital, Erbil. As per the report, the GKP board may not accept Exxon's estimated per share price of 8 pounds, and that a number of other companies, perhaps including Chevron Corp. (CVX)and China's Sinopec, are monitoring the situation. It was also reported that GKP may plan an informal four-way auction, and the company has also spoken to at least two smaller businesses about potentially developing its assets in a joint venture. ============== UPDATE 9-Oil rises on supply worries, supportive data tweet3 Email Print Topics:Commodities MarketInternational On Saturday 24 December 2011, 8:54 EST * Risk of supply disruption from Iran, Iraq supports * Brent's premium to U.S. crude narrows * Trading volumes thin ahead of holiday (Updates market activity, adds CFTC data) By Robert Gibbons NEW YORK (Reuters) - Oil prices rose for a fifth straight day Friday, on concerns about potential supply disruptions in Iran and Iraq and recent signs of a strengthening U.S. economy. Trading volumes were thinned in a shortened session ahead of the Christmas holiday. Oil also found support from stronger equities on Wall Street, with the S&P 500 index turning positive for the year in a four-day rally to end up for the week, on the recent better-than-expected economic data. "It's very thin trading, but stronger equities are helping oil stay up today," said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut. The government on Friday said new U.S. single-family home sales rose to a seven-month high in November, with the supply on the market at the lowest in 5-1/2 years. The home-sales report and Thursday's data showing a fall in initial jobless claims last week helped offset a separate report on Friday showing consumer spending fell for a second straight month. Geopolitical uncertainty, especially in Iraq and Iran, also kept investors focused on potential threats to supply. Brent February crude rose 7 cents to settle at $107.96 a barrel. For the week, Brent rose 4.46 percent, breaking a string of two weekly losses and posting its biggest weekly percentage gain since the week to Oct. 14, according to Reuters data. U.S. February crude rose 15 cents to settle at $99.68 a barrel, reaching $100.23 intraday. Front-month U.S. crude rose 6.57 percent for the week, the biggest weekly gain since the week to Oct. 28. Crude trading volumes were very thin ahead of the Christmas holiday and the approaching new year. U.S. dealings were 76 percent below the 30-day average and Brent 69 percent under its 30-day average. Speculators cut their net long positions in U.S. crude oil futures and options in the week to Dec. 20, data from the U.S. Commodity Futures Trading Commission showed on Friday. The spread between Brent and U.S. crude narrowed to $8.28 a barrel based on settlements, and fell as low as $7.60 intraday. The U.S. Congress passed legislation containing a provision aimed at forcing a quicker decision by President Obama on the Keystone XL pipeline. Analysts say the pipeline, from Canada to refinery and port facilities in Texas, would ease a supply glut at the Cushing, Oklahoma, delivery point for the U.S. crude contract that has hemmed in prices for the U.S. benchmark crude. The euro was little changed against the U.S. dollar, but the dollar was on track to end the week lower against a currency basket. The recent encouraging data from the United States helped key industrial metal copper rise on Friday, but the ongoing worries about Europe's economy and the region's debt crisis limited gains. THREATS TO OIL SUPPLY Iran's navy will launch a 10-day war game in the Strait of Hormuz on Saturday, state TV said, raising concern about a possible closure of the key oil shipping route. In Iraq, a wave of bombings that killed in Baghdad on Thursday pointed to a deteriorating security situation just days after the last U.S. troops left the country. "There are lots of reasons not to carry a short position into the holidays," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis. (Additional reporting by Francis Kan in Singapore and Alex Lawler in London; Editing by David Gregorio, Alden Bentley, Bob Burgdorfer) =========================== UPDATE 4-Brent above $108 on Iraq, Iran worries inShare Share this Email Print Related News World stocks flat after U.S. data, euro near 11-month low 10:57am EST Oil rises as Iran threatens Strait of Hormuz 10:48am EST Oil rises on supply worries, supportive data Fri, Dec 23 2011 Shi'ites targeted as Baghdad blasts kill 72 Thu, Dec 22 2011 Oil up on supply worry, supportive U.S. data Thu, Dec 22 2011 Analysis & Opinion India Markets Weekahead: Time to build a long-term portfolio To build a bridge to Iran, tap the diaspora Related Topics Stocks » Markets » Energy » Tue Dec 27, 2011 9:39am EST * Iran, Iraq, Syrian tensions support prices * Euro zone worries to keep offsetting gains in 2012 * Coming up: U.S. consumer confidence; 1500 GMT By Dmitry Zhdannikov LONDON, Dec 27 (Reuters) - Oil prices edged up on Tuesday, supported by fears of supply disruptions and Iranian naval exercises in a crucial oil shipping route, with gains capped by simmering euro zone debt concerns. Brent crude rose by 10 cents to $108.06 per barrel by 1428 GMT and U.S. crude was up 20 cents to $99.88 a barrel, having previously traded slightly above $100. "The year 2011 may be remembered in the annals of oil market history as the year of the supply shock," analysts from JBC Energy led by David Wech said in a note. "While the quicker-than-expected return of Libyan production has contributed to a general view that supply in 2012 will be ample, we would argue that this need not be the case". "The strong uptick in sectarian violence across Iraq is a serious cause for concern, as it could set back Iraqi production targets by years ... Iran also presents a major wild card," JBC said. Iran on Saturday began 10 days of naval exercises in the Strait of Hormuz. On Monday it warned that the flow of crude could be stopped from the Strait of Hormuz, one of the world's most strategic oil transit channels. in the event of sanctions against its oil. "If they (the West) impose sanctions on Iran's oil exports, then even one drop of oil cannot flow from the Strait of Hormuz," official news agency IRNA quoted Iran's first vice-president Mohammad Reza Rahimi as saying. Broader oil sanctions against Iran have been one of the main fears in the oil market in the past months, although hopes are high that Saudi Arabia and other Gulf OPEC producers might help replace those supplies. In Iraq, at least seven people were killed when a suicide car bomber hit the interior ministry on Monday in the latest attack since a crisis erupted between the Shi'ite-led government and Sunni leaders a week ago. Syria said on Saturday its oil production had fallen by a third due to international sanctions imposed over its nine-month crackdown on anti-government protests. Worries about supply disruptions were offset by concerns that Europe's debt crisis might have broad consequences on oil demand going far beyond just crippling consumption in Europe. Leaders of Germany's major business and industry groups said they expected the economy to lose momentum, although there will be no recession in 2012. In an illustration of how far problems could go in a crippled European refining sector, Swiss refiner Petroplus said lenders had frozen about $1 billion in borrowing allowances it uses to buy oil, meaning supplies for Europe's largest independent refiner could dry up within days. "On the macro side there are no great changes: the Italian 10-year bond yields are still very close to 7 percent, and we still have to wait for S&P to announce which European countries it downgrades and if France is one of those," said Olivier Jakob from Petromatrix consultancy. In a sign of growing uncertaincy, speculators cut their net long positions in Brent crude and gasoil futures and options in the week to Dec. 20, data from the IntercontinentalExchange showed It mirrored similar U.S. data released last week, which showed that the number of hedge funds on the speculative long side of U.S. crude was at its lowest level since the end of August 2010, when the second round of U.S. quantitative easing was announced, according to Petromatrix. Prices were supported by positive U.S. data where new single-family home sales rose to a seven-month high in November and the months' supply of houses on the market was the lowest in 5-1/2 years, adding to signs of a recovery in the sector. Investors will be looking for more positive signs from U.S. data this week, including the S&P Case-Shiller house price index for October and U.S. consumer confidence for December. =================== Oil hovers above $101 amid rising Iran tensions Email Print Reuters – Azeri Energy Minister Natik Aliev (L) and Turkish Energy Minister Taner Yildiz attend the signing ceremony … Slideshow:Oil Industry Play VideoEconomy Video:Congress Richer, Americans Poorer ABC News Play VideoEconomy Video:French economy in doldrums at year-end AFP By ALEX KENNEDY, Associated Press – 2 hrs 1 min ago SINGAPORE – Oil prices hovered above $101 a barrel amid investor concern that rising Middle East tensions could disrupt crude supplies. Benchmark crude for February delivery fell 12 cents to $101.22 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.66 to settle at $101.34 in New York on Tuesday. In London, Brent crude was up 4 cents at $109.31 a barrel on the ICE Futures exchange. Iran's official news agency IRNA reported Tuesday that Vice President Mohamed Reza Rahimi said his country will close the Strait of Hormuz, cutting off oil exports, if Western nations impose sanctions on Iran's oil shipments. The U.S., the U.K. and other nations are mulling more sanctions against Iran, the world's fourth-largest oil producer, over concern about its nuclear power program. The Strait of Hormuz, the choke point of the Persian Gulf, is one of the world's busiest routes for crude shipments with about a sixth of the world's oil production passing through. If tankers could not use the strait, they would have to take longer, more expensive routes to their destinations, which would likely boost prices. "We doubt political posturing will turn into action, but oil remains above $100 regardless," energy consultant and trader The Schork Group said in a report. Schork estimates crude would jump to above $140 if Iran closed the Strait of Hormuz. Signs the U.S. economy is improving also helped bolster crude. The New York-based Conference Board said its Consumer Confidence Index jumped almost 10 points from November, to 64.5, the highest since April. The National Retail Federation said it expects a 3.8 percent increase in Christmas holiday sales, up from its forecast of 2.8 percent in September. In other Nymex trading, heating oil fell 0.4 cent to $2.91 per gallon and gasoline futures slid 0.6 cent at $2.68 per gallon. Natural gas was down 0.7 cent to $3.11 per 1,000 cubic feet. ================