Home' Trinidad and Tobago Guardian : January 22nd 2015 Contents BG8 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt JANUARY 2015 • WEEK FOUR
The Government's rev-
enue is unlikely to
improve for 2015,
according to predic-
tions from the United
States Energy Informa-
tion Agency (EIA)
which is saying that it
expects continued low crude prices for 2015
with oil expected to average US$58 a barrel
down from more than US$90 a barrel.
Delivering the 2015 budget in September
last year, Energy Minister Larry Howai pre-
dicted the country would earn $21 billion
in energy revenue, based on an oil price of
US$80 a barrel and a natural gas netback
price of US$2.75 a unit.
In its latest bulletin, the EIA forecasts
that Brent crude oil prices will average US$58
a barrel in 2015 with annual average West
Texas Intermediate (WTI) prices expected
to be US$3 to US$4 below Brent. It added
that crude oil markets continue to search
for a bottom as prices declined again in
December and the first week of January.
WTI closed at US$46.39 on Tuesday in
New York, which is a decline of more than
50 per cent in the last six months.
The EIA report stated: "The current values
of futures and options contracts suggest
very high uncertainty in the price outlook
of WTI futures contracts for April 2015
delivery, traded during the five-day period
ending January 8, averaged $51/bbl, estab-
lishing the lower and upper limits of the 95
per cent confidence interval for the market's
expectations of monthly average WTI prices
in April 2015 at $34/bbl and $76/bbl, respec-
tively. The 95 per cent confidence interval
for market expectations widens considerably
over time, with lower and upper limits of
$28 and $112 for prices in December 2015."
According to the EIA: "December was
the sixth consecutive month in which
monthly average Brent prices decreased,
falling $17/barrel (bbl) from November to a
monthly average of $62/bbl, the lowest since
"The December price decline reflects
continued growth in US tight oil produc-
tion, strong global supply, and weakening
outlooks for the global economy and oil
Prime Minister Kamla Persad-Bissessar
told the country that the Government
expected crude prices to rebound at the
end of 2015, in keeping with forecasts from
the US EIA and the credit rating agency
Standards and Poors.
The EIA noted that a combination of
news items indicating robust supply and
weak demand growth helped lower oil
prices. It added that Russian crude oil out-
put was at record highs in December and
the Iraq central government reached a deal
with the Kurdish regional government on
oil revenue sharing, which could lead to
higher production volumes in the future.
"Although the US economic data was
strong, economic data in the rest of the
world was generally below expectations
and was met with declining equity prices
and higher bond yields in many countries.
With most of the projected increases in
future global consumption coming from
outside the United States, disappointing
international economic news had more
influence on crude oil prices than positive
US data," the EIA's latest report noted.
On the demand side, the EIA is predicting
that even with lower oil prices the shale
oil and gas revolution continues with record
levels of production predicted and therefore
reducing the US importation of crude oil.
It noted that total US crude oil produc-
tion averaged an estimated 9.2 million bar-
rels per day in December and it was not
forecasting that total crude oil production
averages 9.3 million bbl/d in 2015.
It said: "Under EIA's price forecast, pro-
jected crude oil production averages 9.5
million bbl/d in 2016, which would be the
second-highest annual average level of
production in US history; the highest was
9.6 million bbl/d in 1970."
The low crude prices will have a second
negative effect on the country's revenues
and its foreign exchange with natural gas
prices in Asia and Europe that are indexed
to crude oil also falling and hurting this
country's exports of liquefied natural gas.
The Asian market is the world's largest
LNG market and one that T&T exports
to.The energy sector is the country's leading
foreign exchange earner accounting for 80
per cent of foreign exchange.
BHP Billiton Ltd (BHP), the biggest overseas investor
in US shale, will cut the number of its rigs there by
about 40 percent as plunging petroleum prices add
to concerns about lower iron ore earnings.
Drilling and development spending on US onshore
oil and gas fell to US$1.9 billion in the six months to
December 31 from US$2.1 billion a year ago, Mel-
bourne-based BHP said today in a statement. The
producer will cut the number of active rigs to 16 from
26 by July, it said.
Brent crude, a benchmark for more than half of
the world's oil, declined 48 per cent last year as the
US shale boom contributed to a global glut. The price
of iron ore, the biggest earner at BHP, slumped 47
per cent in 2014 as the largest producers raised volumes
amid weaker demand from China, the largest buyer.
"Their plans to cut oil drilling rigs in the US is a
pointer to what's to come in the oil market," Ric
Spooner, chief strategist at CMC Markets in Sydney,
said by phone today. "We will eventually see a supply
response to the drop in the oil price from the US
BHP, the world's biggest miner, also flagged an
after tax impairment of as much as US$350 million
on its Nickel West unit in Australia and of as much
as US$250 million on the sale of petroleum assets in
North Louisiana and shale gas operations in the Per-
mian basin in North America.
BHP, which is seeking savings from operations of
at least US$4 billion by July 2016, has set out plans
to lower capital expenditure to US$13 billion in fiscal
2016, down more than 40 per cent from 2012.
Petroleum production rose 10 per cent to 63.6
million barrels of oil equivalent in the three months
through December, beating a median forecast of five
analysts of 61.8 million barrels. Bloomberg
Schlumberger, the world's biggest oil-services com-
pany by market cap, announced on Tuesday that it
agreed to acquire a minority stake in Russia's Eurasia
Drilling Company, the largest provider of onshore
drilling services in Russia.
Three things are immediately striking about the
• This is an unusually loud investment by a US
company in a Russian oil company following the
sanctions imposed on Russia after the annexation of
• The investment comes at a time when oil prices
have plunged over the past few months.
• Schlumberger just last week announced that it
would lay off 9,000 employees following what the
company called, "lower commodity pricing and antic-
ipated lower exploration and production spending in
The agreement also extends a long-term strategic
alliance between the two companies, which has
"enabled deployment of a range of drilling an well
engineering services to customers in the Russia land
conventional drilling market."
With this deal, Schlumberger faces several uncer-
tainties: there's a possibility that Western-Russian
relations will further deteriorate. Additionally, lower
oil prices, sanctions, and the plummeting ruble have
increased the risks to Russia's economy.
Over the past year, Eurasia's shares fell by 60 per
cent after its two biggest customers, Lukoil and
Gazprom Neft, came under sanctions.
Eurasia saw a 19 per cent year-over-year drop in
drilling volume for December, and its overall drilling
for the fourth quarter declined by 16 per cent for the
same period of 2013, according to the Wall Street
T&T oil revenue unlikely
to improve this year
Based on US Energy Information Agency report:
signs US$1.7 B
deal in Russia
BHP cuts US
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