Shell aims to keep only 10 'top notch' refineries
Shell aims to reduce its refining portfolio further, to around 10 facilities capable of enduring downturns in refining cycles, chief executive Ben van Beurden said today.
"If you look back a decade or more, we had something like 54 refineries. We are down to 19 now, and we think we will end up with something like 10", van Beurden said. "And this will be really top-notch refineries that have longevity and resilience through the [refining] cycle," he said.
He said the fundamentals of the refining industry means that the firm's refining segment is cyclical, and that its strategy is to have refining assets "that are somewhat less affected [by cycles] at least at the bottom of the cycle can have an acceptable performance".
"[We] have previously said we would continue reshaping our refining portfolio", he said.
Van Beurden did not provide a timeline or point at a particular region where further divestments could take place.
Like other majors, Shell has said it is focusing its downstream strategy on integration with trading hubs and petrochemicals complexes. Shell's capital expenditure (capex) in refining reached $2.4bn last year, stable compared with 2017, and it increased investments in chemicals by $0.7bn to $3.2bn.
Shell agreed in April to sell its 50pc stake in the Sasref joint venture, which owns the 305,000 b/d Jubail refinery in Saudi Arabia, to state-owned Aramco. More recently, it said it will sell its 156,000 b/d refinery in Martinez, California, to US refiner PBF Energy.
Most of Shell's refining capacity is located in the Americas, Europe and Africa. It has assets in Asia-Pacific.
Refineries in northwest European have long been under threat of competition from larger and more economical facilities in the Mideast Gulf, Asia-Pacific and the US. Shell's recent investments in Europe included a new solvent de-asphalting (SDA) unit to maximise production of middle distillates at its 420,000 b/d Pernis refinery in the Netherlands in 2018. But the firm scrapped plans for an SDA at its 140,000 b/d Wesseling plant, western Germany, the same year.
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UK bitumen production at highest since July 2021
UK bitumen production at highest since July 2021
London, 2 July (Argus) — UK bitumen production in April hit its highest in nearly three years even though there is only one remaining bitumen-producing refinery in the country, in Eastham. The UK government's latest provisional data showed production at 68,000t in April, up by 7pc compared with the same month last year. Bitumen production declined overall last year by 147,000t on the year to just 373,000t, the lowest since records began in 1995, after UK energy company Prax Group ceased all bitumen production at its Lindsey refinery in the northeast of England in early 2023. In January-April this year, the UK produced 77,000t of bitumen, a decrease of 10,000t from the same period last year. UK consumption in April was at 122,000t, up 7,000t since the other refineries in the UK closed by April 2023. With the UK's general election taking place on 4 July, parties have made promises which could support bitumen consumption. The UK government this year committed £8.3bn ($10.52bn) to fill potholes and resurface roads by 2034, and the UK opposition party Labour last month pledged to keep this plan in place if elected while additionally funding councils £320m over five year by deferring the planned A27 Arundel bypass works in Sussex. Asphalt Industry Alliance (AIA) in March 2024 published a report stating that the total number of potholes filled in 2022 was 1.4mn, down from 1.7mn in 2021 and the equivalent of one every 22 seconds. Spending on pothole repairs fell to £93.7mn last year from £107.4mn in 2021. By Fenella Rhodes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Prompt European gasoline forward curve in contango
Prompt European gasoline forward curve in contango
London, 2 July (Argus) — Prompt Eurobob gasoline time spreads have entered a contango structure — where prompt values are at a discount to forward prices — signalling the weakest structure for the time of year since the pandemic year of 2020. July Eurobob swaps were at a 75¢/t discount to August swaps at the close on 1 July. The spread had been in a relatively shallow backwardation — when prompt prices are at a premium to later dates — in recent sessions, although it has been narrowing steadily from $6.50/t on 1 June. It is uncommon for the forward structure to be in contango at this time of year. In the corresponding session last year the July swap was at a $19/t premium to the August swap, and since 2009 the current scenario has occurred only twice — in 2020 when much of Europe was under Covid-19 lockdown measures, and in 2016 when the front of the curve was pressured by high European inventories and high US supply. The contango structure reached $5.50/t on both occasions. The recent move builds on weakness exhibited last month , when the front of the forward curve between June and July moved into contango, a structure which was maintained through the rest of June. Demand for gasoline has failed to meet traders' expectations this European summer. Stock levels have been robust, particularly in the US where high refinery utilisation rates have boosted supply and stifled the requirement for European product. This was shown in gasoline crack spreads to North Sea Dated crude in June , which moved sharply lower — counter-seasonally — to an average of $14.87/bl, $5.83/bl lower than in May and down by $9.68/bl compared with year ago. There are already signs of this reversing however. In early trading today the front of the forward curve strengthened, with July marked at parity to August, according to brokers. Discounts in the spot barge market at the Amsterdam-Rotterdam-Antwerp (ARA) hub have narrowed relative to August Eurobob swaps today, indicating firmer demand, with participants saying there is a more workable transatlantic arbitrage. By Jonah Sweeney Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Petroecuador expects more crude with fewer wells
Petroecuador expects more crude with fewer wells
Quito, 1 July (Argus) — State-owned oil company Petroecuador will drill fewer wells this year than first planned but still expects to produce 5,000 b/d more crude than initially forecast for 2024, according to the work plan of interim chief executive Diego Guerrero. Petroecuador plans to drill 90 wells this year, including 27 drilled through May and 63 planned for the rest of the year — well below the 156 wells initially forecast under former chief executive Marcela Reinoso , who resigned in May. But the company expects crude output to average 390,000 b/d by December, according to Guerrero's plans, higher than the 370,000 b/d estimate made before he took office, and up from 369,000 b/d reported for June. Ecuador is expected to lose about 50,000 b/d come 1 September when it shuts down the Ishpingo, Tambococha and Tiputini (ITT) fields in block 43 after Ecuadorians voted to end oil activities in the environmentally sensitive region. Guerrero's plan did not break out how much output it expects from ITT this year. Petroecuador did not respond to a request for comment. Reinoso told the national assembly in February that without ITT, Petroecuador's production would fall to 358,500 b/d in September before rising again to 373,300 b/d in December, leading to a 2024 average of about 385,000 b/d. But petroleum engineers' association vice-president Fernando Reyes said that both the new and old goals for December production are too optimistic without ITT. After a 50,000 b/d drop with the end of ITT production, Reyes believes under a best-case scenario new drilling could add 20,000–30,000 b/d of production, bringing December output to 360,000-370,000 b/d. But Guerrero's higher projections are feasible if Petroecuador keeps pumping crude from ITT, Reyes said. Ecuadorian president Daniel Noboa in January proposed a one-year delay on plans to end drilling in the ITT, but the plan has not advanced. Guerrero's work plan also includes new projects to recover associated gas from the Sacha Norte 2, Sacha Central, Drago and Shushufindi fields, and also workovers in four wells in the offshore Amistad natural gas field. Petroecuador produced 81pc of Ecuador's crude output of 484,499 b/d in May. By Alberto Araujo Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Shale to emerge leaner from M&A boom
Shale to emerge leaner from M&A boom
New York, 1 July (Argus) — The recent flurry of deals in the US shale patch is poised to deliver significant productivity gains, potentially offsetting a drilling slowdown and suggesting that it might well be a mistake to bet against the sector any time soon. Ownership of top shale basins, such as the Permian in west Texas and New Mexico, is increasingly falling into the hands of fewer but larger operators, with the necessary resources to chase technology breakthroughs and drive economies of scale that could support further output growth. The flood of deal-making comes as shale growth is likely to slow after defying all expectations last year. Even as acquirers look to fine-tune their combined portfolios and slow activity in favour of shareholder returns, they will still be targeting ever longer lateral wells that reduce the need for more rigs and hydraulic fracturing (fracking) crews. Fracking multiple wells at the same time and shifting to electric fleets will also help them become more efficient. All in all, shale could continue to be a thorn in Opec's side for years to come. Underestimate US shale at your peril was the title of a recent report from analysts at bank HSBC. "We expect the mergers and acquisitions to result in substantial capital efficiencies," they wrote. Concentrated operations have reduced inefficiencies in the supply chain, and the elimination of downtime has also helped producers become leaner, according to consultancy Wood Mackenzie. But costs remain 15-30pc higher than 2020-21 levels, suggesting scope for further improvements. And while efficiency gains will inevitably become exhausted at some point, opportunities to tackle unproductive processes might still crop up. "The will and the technology are there for some operators, who should be able to keep cutting capex while modestly growing and maintaining shareholder distributions for a while to come," Wood Mackenzie research director for the Lower 48 Maria Peacock says. ExxonMobil flagged $2bn in annual savings from its $64.5bn takeover of shale giant Pioneer, with two-thirds to come from improved resource recovery and the rest from efficiencies. Leading US independent ConocoPhillips says improved technology will help it extend its inventory of top-quality drilling locations in both the Eagle Ford and Bakken basins after its $22.5bn tie-up with Marathon Oil. Return to spender Productivity gains are hardly the preserve of firms that have been active participants in the $200bn of shale deals seen over the past year. For example, US independent EOG, which has sat out the mergers and acquisitions (M&A) boom so far, plans to deliver the same level of growth for this year as seen in 2023 with four fewer rigs and two fewer fracking fleets. "Technology has evolved so much that you can go and drill horizontal wells in these and exploit that technology and you can get just absolutely outstanding returns," chief operating officer Jeff Leitzell says. Still, almost half of oil and gas executives recently polled by the Dallas Federal Reserve think that US oil output will be "slightly lower" if consolidation continues over the next five years. But the answer differed by company size. All executives from E&P firms that produce 100,000 b/d or more envisaged "no impact". Service company executives are more concerned: "Consolidation by E&P firms has curtailed investment in exploration," one said. "Our hope is that it's a temporary situation that will work itself out as the integration is completed." And even though the prolific Permian basin is due to peak before the end of the decade, analysts forecast robust growth in the intervening years. Relatively high oil prices that remain above breakeven costs and efficiency gains — which will shift the mix of wells to newer and more productive ones — will be the main drivers, according to bank Goldman Sachs. By Stephen Cunningham US tight oil production Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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