Libyan oil output hindered by budget cuts: NOC head

PEC member Libya’s ability to rebuild its oil output will be hindered by ongoing constraints on National Oil Corporation’s (NOC) budget. (AFP)
Updated 30 January 2018

Libyan oil output hindered by budget cuts: NOC head

LONDON: OPEC member Libya’s ability to rebuild its oil output will be hindered by ongoing constraints on National Oil Corporation’s (NOC) budget, the state-owned group’s head said.
NOC received only 50 percent of its capital expenditure budget from the Libyan government in 2017, Mustafa Sanalla told a Chatham House conference in London on Tuesday.
“In terms of investment, we assume that this year, as in 2016 and 2017, political actors will attempt to use control of the state budget process to control NOC,” Sanalla said.
Crimping the budget of NOC, which employs more than 60,000 people and helps pay the salaries of most workers in Libya, is nonsensical because investments could help restore its pre-civil war oil capacity of around 1.6 million barrels-per-day.
Under Libyan law, NOC hands over oil revenues to the Central Bank and is then allocated its budget by the Libyan government.
Any further investments and any such attempts will be closely watched by the Organization of the Petroleum Exporting Countries. Libya told OPEC in November there was still a lot of uncertainty around its production levels but that its 2018 output is likely to remain around 1 million bpd.
“If NOC is lost, Libya will take a long time to be put back together,” Sanalla told the conference.
While NOC has to a large extent succeeded in raising production levels in recent months by negotiating with various groups to end port and pipeline blockades and raise oil output, security threats to infrastructure remain.
Sanalla said he was hopeful that further blockades in the east of the country would be avoided, expressing faith in the Libyan National Army (LNA) which ended a blockade by the forces of Ibrahim Jathran on key export ports in September 2016.
“I don’t believe the LNA and its leadership will now allow the tactics of Jathran to be used under their supervision, especially because of their devastating economic effect.”
The LNA is dominant military force in eastern Libya, led by military commander Khalifa Haftar.

China’s niche LNG buyers plan billion-dollar investments, double imports amid reforms

Updated 6 min 25 sec ago

China’s niche LNG buyers plan billion-dollar investments, double imports amid reforms

SINGAPORE: A group of niche Chinese gas firms is set to make waves in the global market with plans to invest tens of billions of dollars and double imports in the next decade as Beijing opens up its vast energy pipeline network to more competition.

The companies, mostly city gas distributors backed by local authorities, are ramping up purchases of liquefied natural gas (LNG) as newly formed national pipeline operator PipeChina begins leasing third parties access to its distribution lines, terminals and storage facilities from this month.

The acceleration in demand in what is already the world’s fastest-growing market for the super-chilled fuel is a boon for producers such Royal Dutch Shell, Total and traders like Glencore faced with oversupply and depressed prices.

Just last month, UK’s Centrica signed a 15-year binding deal to supply Shanghai city gas firm Shenergy Group 0.5 million tons per year of LNG starting in 2024.

“They’re very, very interested in imports — we’re talking to a lot of them already,” said Kristine Leo, China country manager for Australia’s Woodside Energy, which signed a preliminary supply deal with private gas distributor ENN Group last year.

China could buy a record 65-67 million tons of LNG this year and is expected to leapfrog Japan to become the world’s top buyer in 2022. Imports could surge 80 percent from 2019 to 2030, according to Lu Xiao, senior analyst at consultancy IHS Markit.

State-owned Guangdong Energy Group, Zhejiang Energy Group, Zhenhua Oil and private firms like ENN were quick to take advantage of the market reforms and low spot prices for LNG, said Chen Zhu, managing director of Beijing-based consultancy SIA Energy.

Their imports will reach some 11 million tons this year, up 40 percent versus 2019, more than 17 percent of China’s total purchases, said Chen.

For years such companies have worked to expand a domestic consumer base among so-called “last mile” gas users like tens of millions of households, shopping malls and factories, but they had to rely on state majors for supplies.

With greater access to distribution networks, they are now incentivized to build their own import terminals that could account for 40 percent of the country’s LNG receiving capacity by 2030, versus 15 percent now, Chen said.

Frank Li, assistant to president of China Gas Holdings, a private piped gas distributor, said his company has been in talks with PipeChina for infr structure access as it prepares to import LNG next year.

In Southern China’s industrial hub Guangdong, companies like Guangzhou Gas, Shenzhen Gas and Guangdong Energy hold small stakes in LNG facilities operated by China National Offshore Oil Company. They imported their first cargoes from these terminals last year.

Guangzhou Gas is set to import 13 LNG shipments this year, up from five last year, after “tough negotiations” with CNOOC won it access to terminals, said Vice President Liu Jingbo.

“The reform is bringing us diversified supplies, helping us cut cost,” Liu said.

Some companies also plan to beef up trading expertise by opening offices overseas, such as in Singapore, executives said.

“Naturally, companies will be thinking of growing into a meaningful player globally,” said a trading executive with Guangdong Energy, adding that his firm looks to Tokyo Gas , Japan’s top gas distributor and trader, as a model.

The rise of niche players will erode some market share held by state giants CNOOC, PetroChina and Sinopec, prompting them to scale back gas infrastructure investment and focus on global trading, while extending into retail gas distribution at home, officials said.