da “La Stampa” del 23-AGO-2016
Archivio mensile:agosto 2016
THE OIL FACTOR III/ IRAN: IRAN IS TRYING TO MAKE A COMEBACK IN OIL MARKET NAFTER YEARS OF CRUSHING ECONOMIC AND FINANCIAL SANCTIONS
EODE/ 2016 08 21/
GEOPOLITICS/ with Forbes/
« Getting teach by the enemy is a duty and an honor »
– General Haushofer, German geopolitician
(father of the concept of « continental Bloc »).
* FG Energy chairman Fereidun Fesharaki said: “Iran was the second largest OPEC exporter and important. With sanctions, it lost money and became irrelevant. It becomes relevant again and becomes now number three after the Iraqis.”
* Iran continued its OPEC defiance on Tuesday (2016 08 16), dampening hopes of a production cut next month.
Iran is trying to make a comeback after years of crushing economic and financial sanctions placed against its energy sector by Western powers over Tehran’s nuclear ambitions.
Further complicating the issue, some analysts claim that the ongoing rivalry between Iran and Saudi Arabia will also keep Iran from agreeing to production cuts any time soon. Iran and Saudi Arabia are on opposing sides of a more than 1,000-year old argument at the heart of Islam – disagreements between Sunnis and Shia. This animosity has led to a power struggle in the Middle East and beyond.
PRESS REVIEW/ FORBES:
PRICKLY IRAN DEFIES, THEN KEEPS OPEC GUESSING
Excerpts :
“Iran is trying to make a comeback after years of crushing economic and financial sanctions placed against its energy sector by Western powers over Tehran’s nuclear ambitions. In January, Iran’s deal with the so-called P5+1 (the U.S., U.K., France, Germany, Russia and China) came into effect, effectively reopening international markets to hundreds of thousands of barrels of Iranian oil and returning billions of dollars in frozen oil money to Iran. However, the lifting of sanctions came at an adverse time for global oil markets which have been over supplied for more than two years mostly due to U.S. shale oil production. Prices have trended downward from $107 per barrel in July 2014 to current prices averaging in the low to mid-$40s per barrel range.
Iran also pledged in January to ramp up production to pre-sanction levels – a promise it’s making good on. UBS analysts Giovanni Staunovo and Dominic Schnider said at the time that “the likely increase of Iranian oil production could not have come at a more unfavorable point in time with the oil market oversupplied amid renewed economic concerns (particularly related to China) darkening the outlook for oil demand growth.” FG Energy chairman Fereidun Fesharaki said: “Iran was the second largest OPEC exporter and important. With sanctions, it lost money and became irrelevant. It becomes relevant again and becomes now number three after the Iraqis.”
The Islamic Republic is also battling OPEC de facto leader Saudi Arabia for oil market share not only in Europe but also in Asia which has the world’s second and third largest oil importing countries, China and Japan, respectively.
PRODUCTION LEVELS NOT MET YET, SAYS IRAN
Iran continued its OPEC defiance on Tuesday, dampening hopes of a production cut next month when the 14-nation oil producing cartel meets in Algiers. Iran said that its production will not have risen to the levels the country needs to justify cooperation with its rivals, adding that it hasn’t yet made a decision whether or not it will attend the Algiers meeting.
However, we have been here before. In February, less than a month after sanctions were lifted, Iran refused production cut backs after Qatar, Saudi Arabia, Russia and Venezuela pledged to freeze output at January levels. If Iran doesn’t agree to cut production, other OPEC members have also refused to cut production as well – effectively allowing Iran to play the spoiler within both OPEC and in global oil markets. “Iran has to be there or there will be no freeze,” an OPEC delegate said recently.
According to OPEC’s most recent monthly report, Iran’s oil production stood at 3.629 million barrels per day (bpd) in July, a 12,000-barrel increase compared to the preceding month. However, Iran’s production is still short of pre-sanction levels of 4 million bpd, adding credence and justification to Tehran’s refusal to agree to a production cut.
* See on FORBES:
Prickly Iran Defies, Then Keeps OPEC Guessing
Pic: Iran’s Minister of Petroleum Bijan Zangeneh (bottom L) attends the 169th meeting of the Organization of the Petroleum Exporting Countries, OPEC, at OPEC headquarters in Vienna, on June 2, 2016. / AFP / JOE KLAMAR / Getty Images
EODE / GEOPOLITICS
THE OIL FACTOR II/ CHINA: CHINA NOW RIVALING THE U.S. TO BECOME THE WORLD’S LARGEST OIL IMPORTER.
EODE/ 2016 08 21/
GEOPOLITICS/ with Forbes/
« Getting teach by the enemy is a duty and an honor »
– General Haushofer, German geopolitician
(father of the concept of « continental Bloc »).
* China’s oil imports have risen 16%, with the country now rivaling the U.S. to become the world’s largest oil importer.
The U.S., once the poster child of foreign oil dependence, has largely changed its energy future due to its shale oil and gas boom. Though the U.S. energy resurgence created the ongoing oil supply glut with more than two years of downward prices, it has helped stem the unprecedented transfer of U.S. wealth to foreign nations, notably Saudi Arabia and OPEC.
China’s dependency on imported oil exceeded 60 percent for the first time in 2015 and is expected to rise further this year, according to an industry report released Tuesday. Actual oil consumption rose 4.4 percent last year, up 0.7 percentage points from a year earlier, bringing the proportion of net imports in total oil consumption to 60.6 percent, said a report released by the China National Petroleum Corporation (CNPC) Economics & Technology Research Institute.
In 2016, the oil dependency rate will go up to 62 percent and oil demand will grow 4.3 percent, as car ownership increases, urbanization advances and the state boosts oil reserves, said Qian Xingkun, deputy head of the institute. China is one of the world’s largest oil buyers. But as its economy slows, its appetite for energy is shrinking too. Report put China’s annual energy consumption at 4.2 billion tonnes of standard coal last year, falling 0.5 percent year on year, the first drop in 30 years. The report forecast global oil prices would stay low due to plenty of supply and lackluster economic growth.
PRESS REVIEW/ FORBES:
CHINA’S THIRST FOR OIL SPELLS TROUBLING NEWS FOR BEIJING
Excerpts :
“According to legendary oil tycoon T. Boone Pickens the U.S. transferred $7 trillion to OPEC nations between 1976 and 2012. It reached its apex in the aftermath of the Arab Oil Embargo in 1973, while it continues to have geopolitical ramifications to this day – from democracy movements to terrorism to civil wars. Now, this four decade old quandary will be one that China has to deal with as the Middle Kingdom continues to increase it reliance on imported foreign oil. So far this year China’s oil imports have risen 16%, with the country now rivaling the U.S. to become the world’s largest oil importer.
China’s increased oil imports have had the knock-on effect of helping to put upward pressure on bearish global oil prices which are down from $107 per barrel in July 2014 to just over $40 per barrel currently. In February, Chinese oil imports breached the 8 million barrels per day (bpd) mark and comes as the country’s oil fields mature, one of the reasons why Beijing has pushed its territorial claims so fervently in the South China Sea.
State-owned oil major China National Offshore Oil Company (CNOOC ), responsible for most of China’s offshore hydrocarbon development, estimates that the South China Sea holds around 125 billion barrels of oil and 500 trillion cubic feet (tcf) of gas in undiscovered areas, although these figures haven’t been confirmed by independent studies.
OIL DEPENDENCY RATE EXCEEDS 60 PERCENT
Approximately 80% of current Chinese crude production capacity is located onshore, while 20% of its crude oil production is from shallow offshore reserves as of 2014, according to the U.S. Energy Information Administration’s (EIA) latest analysis of China’s energy sector.
Meanwhile, China’s foreign oil dependency rate hit 60% in 2013, while it has now exceeded that mark – troubling news for Beijing. In January, state-run news agency Xinhua, citing Qian Xingkun, deputy head of the China National Petroleum Corporation (CNPC) Economics & Technology Research Institute, said that the country’s foreign oil dependency rate would reach 62% this year as oil demand grows 4.3% due to car ownership increases, urbanization advances and filling strategic reserves.
Admittedly, China’s oil imports could dip slightly as its economy continues to slow. China is also close to filling up its strategic petroleum reserves. Though Beijing doesn’t regularly report the capacity or storage level of its strategic reserves, J.P. Morgan places it at 511 million barrels. Bloomberg said in late June that “at the current rate of China’s stockpiling, storage would reach full capacity in August, leading to a potential import drop in September. Though the country’s oil imports will slow it will not be enough.” China will still be overly reliant on imported oil and likely maintain a foreign oil dependency rate of at least 60%.”
* See on FORBES:
China’s Thirst For Oil Spells Troubling News For Beijing
Pic : Sudanese President Omar al-Bashir, right and his counterpart then-Chinese president Hu Jintao, third right front, look at a mock compound of the Khartoum oil-refinery during his visit to the facility in the town of Jayli, 40 km North of Khartoum, Sudan Friday Feb. 2, 2007. China is a large importer of Sudanese oil and according to Sudanese media China currently controls 75% of oil investment in the country. (AP Photo/Abd Raouf)
EODE / GEOPOLITICS
THE OIL FACTOR I/ RUSSIA: SANCTIONS AS A LETHAL WEAPON AGAINST RUSSIA …
EODE/ 2016 08 21/
GEOPOLITICS/ with Forbes/
« Getting teach by the enemy is a duty and an honor »
– General Haushofer, German geopolitician
(father of the concept of « continental Bloc »).
* Russia is one of two major oil producing countries to have felt the brunt of Western economic sanctions.
* How long will sanctions remain in place?
That depends on who you ask and on Russia’s future geopolitical developments …
Russia is one of two major oil producing countries to have felt the brunt of Western economic sanctions. Iran, who suffered for years under Western sanctions due to Tehran’s nuclear ambitions, emerged from sanctions in January, but not unscathed. Years of crippling sanctions took a toll on the Islamic Republic’s finances, a situation that the country is still trying to recover from as it continues to ramp up oil production in an effort to reach pre-sanction output levels of 4 million barrels per day (bpd).
PRESS REVIEW/ FORBES:
PROLONGED SANCTIONS RIP INTO RUSSIA, CAUSING ANGST FOR PUTIN
Excerpts :
“As Iran continues to increase oil production, it is effectively playing the role of spoiler in global oil markets awash in supply amid a price plunge that has changed the global oil industry. However, Iran’s sanction problems are quickly fading while Russia’s have no end in sight. Since Russia’s annexation of Crimea in March, 2014, the U.S. and EU have also leveled sanctions against Russia several times, tightening restrictions on major Russian state banks and corporations, including blacklisting dozens of Russian officials and firms, including energy firms. Three major state oil firms have been targeted: Rosneft , Transneft and Gazprom Neft, the oil unit of gas giant Gazprom.
Russian banks and Gazprom’s ability to secure long term funding in U.S. dollars were also blocked. The U.S. and EU also banned exports of services and technology to Russian state oil firms engaged in Arctic and deep-water and unconventional oil and gas exploration and production.
SANCTIONS STILL HITTING RUSSIAN ENERGY PROJECTS
Sanctions have hit Russian energy companies hard, especially its longer term projects. In late April, independent Russian energy companies Lukoil and Novatek , told attendees at the annual IHS CERAWeek energy conference in Houston that they were feeling the sting of the sanctions. “We feel the impact of sanctions, but we need some time for Russia and the industry to adjust,” said Lukoil CEO and founder Vagit Alekperov. One Novatek project, the massive $27 billion Yamal LNG project to be built in the Russian Arctic, has suffered considerable setbacks. Prohibited from securing financing in U.S. dollars, it scrambled for at least a year in search of funds and finally turned to Chinese banks, which are more expensive and less flexible than Western funding.
Moreover, when Russia’s oil production starts to decline, new oil discoveries will be needed while lack of access to Western technology for offshore drilling will have repercussions for Russia’s oil industry for years to come. Unable to replace declining production, Moscow’s’ state coffers will also decline. As much as half of the offshore and fracking technology used by Russia comes from the West.
LOW OIL PRICES ALSO TAKE A BITE
Oil prices, which have tumbled from $107 per barrel in July 2014 to the mid to high $40s level now, have also caused considerably angst in Russia. Around half of Moscow’s state revenue is derived from oil and natural gas exports, though Moscow claims a much lower figure. Budget problems from low oil prices have also caused Moscow to try selling large stakes in its state-controlled energy companies. In late June, Russian media reported that the Russian government was considering selling 19.5 % of its shares ($10 billion) in oil major Rosneft to China and India. Last week, however, Russia was forced to delay its privatization of Rosneft as it waits for oil prices to improve.
Russia’s oil exports have been helped to some degree by the massive devaluation of the Russia ruble, whose 20% loss against the dollar last year was added to a nosedive of 44% the previous year. Though a weak currency hurts Moscow, it makes Russian oil exports cheaper. In late June, Russian President Vladimir Putin tried to persuade the EU to not renew sanctions, but to no avail. A week later, the EU extended sanctions in connection with the ongoing conflict in eastern Ukraine. They are in effect until January 31, 2017, then will be reviewed again.
Now the question is: just how long will sanctions remain in place? That depends on who you ask and on Russia’s future geopolitical developments and finally, how the West continues to respond. On Tuesday, Chris Weafer, a senior partner at economic and political analysis firm Macro-Advisory, told CNBC that “Crimea-related sanctions will stay indefinitely because clearly Crimea is not going to go back (to Ukraine) as far as the Russians are concerned”.”
* See on FORBES:
Prolonged Sanctions Rip Into Russia, Causing Angst For Putin
EODE / GEOPOLITICS
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