BP Loses Bid to Shift $15B in Gulf of Mexico Oil Spill Costs

http://www.ibtimes.com/articles/288627/20120127/bp-gulf-mexico-15-billion-transocean.htm

By Tom Bergin

(REUTERS) -- Oil giant BP has lost its attempt to shift over $15 billion of costs related to the Gulf of Mexico oil spill onto contractor Transocean, increasing the possibility BP may have to foot the entire $42 billion clean up bill.

A U.S. federal judge on Thursday said BP must uphold a clause in its contract with Transocean Ltd that would shield the Swiss-based driller from compensatory damage claims related to the 2010 disaster.

That means London-based BP may have to shoulder alone compensation claims brought by the likes of fishermen and hoteliers whose livelihoods were affected by largest offshore oil spill in U.S. history.

However, U.S. District Judge Carl Barbier left open the possibility that Transocean might still have to pay all or part of any punitive damages and civil penalties imposed by the U.S. government under the federal Clean Water Act.

Barbier, who oversees multistate litigation over the spill, ruled that BP need not indemnify Transocean for these.
BP has estimated civil fines of around $3.5 billion related to the spill, although maximum possible fines could top $20 billion if gross negligence was established on the part of BP or its contractors.

BP has made no provision for punitive damages because it says there is no legal basis for them. Barbier has limited the cases in which claims for punitive damages can be brought.

Thursday's decision means Transocean's potential liability over the April 20, 2010 Deepwater Horizon drilling rig explosion that caused 11 deaths, was "materially diminished" analysts at UBS said in a research note.

BP had previously sought to shift the whole cost of the disaster, currently estimated at around $42 billion, onto Transocean.

Shares of Transocean rose 8.2 percent at 0856 GMT, while BP shares fell 1.7 percent.

RESPONSIBILITY

Transocean owned the rig, while BP owned a majority of the Macondo well whose blowout led to the spill.

BP has said it would like to reach an out of court settlement with Transocean but Barbier's ruling makes its negotiating position weaker.

Both sides claimed victory over the ruling, which Transocean spokesman Lou Colasuonno said "discredits BP's ongoing attempts to evade both its contractual and financial obligations."

BP said the decision "holds Transocean financially responsible for any punitive damages, fines and penalties flowing from its own conduct.

"As we have said from the beginning, Transocean cannot avoid its responsibility for this accident," spokesman Daren Beaudo said in an emailed statement.

LEGAL ARGUMENTS

BP has already paid out $7 billion in claims to third parties who have suffered losses and has an outstanding provision of $8.2 billion for further claims and litigation, suggesting third party claims are expected to top $15 billion.

However, plaintiffs lawyers say compensatory claims could even end up totaling more than the $20 billion BP has set aside in its gulf coast restoration fund.

Two U.S. government probes have put most of the blame for the disaster on BP, suggesting BP is likely to face the largest share of any fines levied.

The New Orleans-based judge has set a February 27 start date for a trial to apportion blame.

The case is In re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 10-md-02179.

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Iranian parliament to debate immediate cut in oil exports to Europe

http://www.platts.com/newsfeature/2012/iran/index?WT.mc_id=&WT.tsrc=Eloqua

By Aresu Eqbali in Tehran

January 26, 2012 - Iran's Majlis, or parliament, is considering a plan to cut oil exports to Europe before an EU embargo comes into effect on July 1 and will start an open debate on the motion on January 29, two deputies said January 25.

"This bill will oblige the government to stop sales of oil to Europe before the European Union starts Iran's oil exports sanctions," Hassan Ghafourifard told parliamentary news agency ICANA.
"If Iran's oil is sanctioned by the European Union, Iran doesn't have to sell its oil to Europe," he said.

The bill will be debated in parliament in a public session on January 29, he said.

Another member of the Majlis energy committee, Naser Soudani was quoted by the semi-official Fars news agency as saying that the move was supported by a number of deputies.
"Together with several other members of parliament, we are pressing to approve a plan, whereby all the European countries which have targeted Iran with sanctions, will not be able to buy one drop of oil from Iran," Soudani said. "The oil tap will be turned off to them so that they don't play with fire any more."

EU foreign ministers on January 23 approved an embargo on Iranian oil exports to Europe from July 1. Iran exports around 450,000 b/d to Europe, according to the International Energy Agency. Iran's NIOC has put total exports at 2 million b/d.

The move by the Majlis, which is dominated by conservatives, follows a call by a former intelligence minister and prominent cleric, who suggested January 23 that oil exports to Europe be halted before the embargo comes into force.
"In the next part of the game that Europe has started, it will burn in the oil wells of Iran and the damage of the plan they worked out [for us] will be inflicted on them," Soudani said.

"The first reason is that some European countries have no other way but to buy oil from Iran and their refineries are compatible with the specifications of Iran's oil and it's difficult for them to replace Iranian oil," he added.

The second reason, he said, was that the sanctions will lead to higher prices and "the Europeans will have to buy oil at a higher price, and the third reason is that the Europeans...will have to buy Iranian oil indirectly through middlemen and this will add to their costs."
Iran's oil ministry and the state-owned National Iranian Oil Co. have said the country has contingency plans and can divert its exports to other markets.

The OPEC state's biggest market is Asia, with China the single biggest buyer of crude oil and also the biggest foreign investor in Iran, where Chinese state-owned companies are involved in a number of multi-billion dollar upstream projects.

Soudani said that should China join the sanctions against Iran, it would be thrown out of the projects.

"In the economic arena, we are witnessing a confrontation of powers. But India has announced that it can't do without Iran's oil," Soudani said.

"And if China enters the phase of sanctions ... it will be [removed] from all of its projects in Iran. This will inflict heavy and considerable loss on China's economy," he
said.

http://www.platts.com/newsfeature/2012/iran/index?WT.mc_id=&WT.tsrc=Eloqua

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Major oil refinery to close in US Virgin Islands

http://www.tankstoragemag.com/industry_news.php?item_id=4488

One of the world's largest oil refineries will close next month, the company has announced, threatening to upend the reeling economy of the US Virgin Islands.

Industry analysts said the closure is unlikely to have a major effect on the global oil market, but will be a blow for the US territory of about 108,000 people.

Losses at Hovensa, a joint venture of US-based Hess and Venezuela's state-owned oil company, have totaled $1.3 billion (€1 billion) over the past three years and were projected to continue due to reduced demand caused by the global economic slowdown and increased refining capacity in emerging markets.

Hess announced in New York that it will take a $525 million after-tax charge against its fourth-quarter 2011 earnings due to the shutdown.

The refinery, founded in the 1960s, has been producing about 350,000 barrels per day during the rough economic climate. It relies on oil for fuel while competitors on the US mainland use less expensive natural gas.
Hovensa was the third largest US refinery before it cuts its capacity of 500,000 barrels by 30% last year. It is now the eighth largest, according to the US EIA.

Dozens of workers wondered where they would go after the refinery is converted to an oil storage terminal.
The company's website says it is still one of the 10 largest oil refineries in the world, but the closure is not expected to have a major effect on the oil industry because it had not been operating at full capacity, said Fadel Gheit, senior energy analyst for Oppenheimer & Co.

Hess benefits because it had been hemorrhaging money through the refinery, he says.

The closure reflects a three-year trend across the US of refineries closing because of the global financial crisis, a drop in petrol consumption and a shift in growth elsewhere.

‘They cannot compete with the modern refineries being built in India, China and the Middle East,’ he explains.

Despite the closure, the US remains Venezuela's largest customer, and Venezuela is still among the top four suppliers of crude oil to the US.

Alejandra Leon, a Latin America oil analyst for Cambridge, Massachusetts-based IHS CERA, said that in 2010, PDVSA reported the Hovensa refinery processed 389,000 barrels a day, of which 227,000 barrels a day were supplied by Venezuela. She said it wasn't clear where the remainder came from.

She said there is an excess of refining capacity globally, so Hovensa's closure ‘is helping to rebalance the market.

Cushing may gain 8 million barrels of storage in 2012

http://www.tankstoragemag.com/industry_news.php?item_id=4511

Oil storage facilities in Cushing, Oklahoma, will gain 7 million to 8 million barrels of additional capacity in 2012 as rising supply creates ‘bottlenecks’ at the pricing point for crude futures traded in New York, the International Energy Agency says.

The capacity to stockpile oil in tanks increased 11 to 14 million barrels last year after rising by no more than 5 million barrels a year between 2005 and 2010, the Paris-based agency said in a monthly report today.

‘Storage capacity expansion may continue at an accelerated pace until such time as pipeline capacity to evacuate crude to coastal refining centres catches up,’ the IEA said.

West Texas Intermediate crude on the New York Mercentile Exchange has traded at a discount of as much as $28 a barrel to London-traded Brent over the past year as the volume of inventories at Cushing rose.

‘Thanks to technologies such as hydraulic fracturing, output of light, tight oil from locations such as North Dakota and Texas has surged, while output from the Alberta oil sands also continues to ramp up,’ the IEA said. ‘Amid bottlenecks in the ability to ship crude onward to refining centers on the US Gulf and East coasts, storage build has become more of a necessity than an option.’

The storing of crude was encouraged by so-called contango, where oil for delivery several months in the future sells at a higher price than oil for delivery at the end of the month, the IEA said.

US rejects Keystone XL Canada oil sands pipeline

http://www.tankstoragemag.com/industry_news.php?item_id=4493

The US state department has formally recommended the rejection of a controversial crude oil pipeline.

The state department denied a permit for the 1,600-mile (2,700km) Keystone XL pipeline, saying it had insufficient time to review the plans.

The Canada-Texas project has been delayed amid objections by the state of Nebraska and environmental groups.

At the end of 2011, Republicans forced a final decision on the plan within 60 days during a legislative standoff.
US President Barack Obama said he was disappointed that the deadline set by Republicans in Congress had caused the state department to reject the project before a full study could be undertaken.

‘This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the state department from gathering the information necessary to approve the project and protect the American people.’

Canadian Prime Minister Stephen Harper expressed his ‘profound disappointment’ with the decision.

The crude oil pipeline would run from western Canada to oil refineries on the Texas coast.

Officials said that any new plan that was broadly similar to the rejected proposal could be processed more quickly, but it would take between 12 to 18 months to complete a full review.

Keystone XL has been approved by Canada and is supported by US Republicans who say it would create much-needed jobs and improve prospects for US energy independence.

The oil industry has estimated the project would create 20,000 jobs, although the state department and some independent studies suggest a lower figure of 6,000 jobs.
Environmental groups and the US state of Nebraska expressed concerns that the pipeline could contaminate a major aquifer on its route.

There are also concerns about carbon emissions from oil sands production in Alberta, a western Canadian province.

The pipeline would also pass through the US states of Montana, South Dakota, Nebraska, Kansas and Oklahoma.

The White House had tried to postpone a final decision on the project until after the 2012 presidential election.

But during a congressional impasse on a payroll tax holiday in December, Republicans forced the Obama administration to agree to make a decision on the pipeline within two months.

The US state department, however, said this would not be enough time to carry out the legally required environmental studies needed to approve the project.

Tullow puts Ghana's oil production for 2012 at 70,000-90,000 barrels

Tullow Oil Plc, the lead company in Ghana's oil production, said on Wednesday that it expected production at the Jubilee oil field for 2012 to average between 70,000 and 90,000 barrels.

“Gross Jubilee production is currently over 70,000 barrels per say and following a number of remedial activities is expected to average 70,000 to 90,000 barrels in 2012,” it said in a statement.

It said Jubilee field production would ramp back up in 2012 towards the field plateau rate of 120,000 barrels as the Phase 1 remedial programme began to take effect from January 2012 and the new Phase 1A wells were brought on stream from the second quarter.

“The final outcome will be dependent on the well performance achieved, the downtime required to execute the recompletions and the scheduling of available rigs for other operations to ensure the Group’s exploration and appraisal commitments are also fulfilled,” it said.

Gross production from the field reached 88,000 barrels during 2011 before declining to approximately 70,000 at year-end, with an average production for the year of 66,000.

"The cause of this decline in well productivity has been identified as a technical issue related to the design of the well completions and is not expected to have any impact on field reserves and resources. Remedial work aimed at recovering lost well productivity has commenced with the successful sidetracking of the J-07 production well utilising a new completion design," the statement said.

Government of Ghana's approval for the next phase of development, Phase 1A, was received on January 9, 2012. This development will consist of eight new wells; five producers and three additional water injectors and the expansion of the subsea network

WAfrica Crude-Nigeria loadings dip, EG sells to Asia

http://www.reuters.com/article/2012/01/23/markets-oil-westafrica-idUSL5E8CN44N20120123

LONDON, Jan 23 (Reuters)

- Differentials on Nigerian
light sweet crude were supported marginally by the dip in the
March loading programme, while dealing of March Angolan cargoes
slowed down slightly.
Traders said the output of Aseng crude from Equatorial
Guinea has increased and a partial cargo has sailed to Northeast
Asia.

EQUATORIAL GUINEA
* Glencore is marketing all the three cargos of Aseng crude
for March. The first two cargoes carry each 650,000 barrels and
the last carries 950,000 barrels.
* The volume is a rise from one cargo for February.
* The production of heavy-sweet Aseng crude stated in
November. The crude has been sold to a Japanese refiner and
U.S. companies.
* Due to the sulphur content of about 0.25 percent, Aseng
cannot be directly run in oil-fired power plants in Japan, which
burn oil with lower sulphur content.
* Three 1 million barrel cargoes of Zafiro are available for
March.

NIGERIA LOADING
* The preliminary loading schedule showed Nigeria would
export about 1.87 million barrels of crude oil per day in March,
a 3 percent drop from February. The figure does not include
condensate.
* The programme include two Pennington cargoes. Nigeria's
NNPC holds one of them, suggesting it may trade in the spot
market.
* The Akpo programme has not been released. But traders
expected 5 cargoes would be available for March.
* Nigeria has raised the official selling price of Qua Iboe
and Bonny Light crude oil by 30 cents a barrel to dated Brent
plus $2.80 in February from January.
* Trading of March Nigerian cargoes have been limited. Some
traders said BP might have bought Qua Ibo. But this was not
confirmed.
* Traders said Indian refineries have already covered their
March requirement after purchasing about 12 cargoes via tender.
* More than 5 cargoes of February cargoes are still
available to sell, traders said.

ANGOLA
* Trading of Angolan Pazflor crude was particularly slow,
with some of the cargoes seen going to home refining systems.
* China's Unipec has bought 14 Angolan cargoes via term and
spot and one Ceiba from Equatorial Guinea. Two of them have been
sold again.
* CNOOC bought two Dalia cargoes. Statoil's Dalia cargo for
Feb. 29-30 has not been sold, traders said.
* Roughly 15-17 cargoes of 52 cargoes for March loading have
not been sold.

DATABASE
For a database of oil supply and demand fundamentals
upstream and downstream, Reuters subscribers can click on:
here

(Reporting by Ikuko Kurahone)

Ghana Oil at Three-Day High as Marketing Spurs Revenue Outlook

http://www.bloomberg.com/news/2012-01-20/ghana-oil-at-three-day-high-as-marketing-spurs-revenue-outlook.html

Ghana Oil Company Ltd. (GOIL), which runs the second-biggest network of gasoline stations in the West African nation, rose to the highest in three days as investors speculate revenue increased because of a new marketing plan.

The stock gained 1 pesewa, or 3.1 percent, to 33 pesewas, as of 2:39 p.m., in Accra, the capital, the highest since Jan. 17.

“We are looking for a turnover growth of about 30 percent for Ghana Oil for the full financial year 2011,” Hilary Lomotey, a stock trader at Renaissance Capital, said by phone from Accra. “The company has been marketing itself in a roll- out strategy that has made its gasoline stations more convenient for customers than before.”

The company’s results are expected by the first week in February, Lomotey said.

To contact the reporter on this story: Moses Mozart Dzawu in Accra at mdzawu@bloomberg.net

To contact the editor responsible for this story: Emily Bowers at ebowers1@bloomberg.net

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U.S. Spurns Iran’s Demand to Keep Aircraft Carrier Out of Gulf

http://www.businessweek.com/news/2012-01-03/u-s-spurns-iran-s-demand-to-keep-aircraft-carrier-out-of-gulf.html

By Viola Gienger and Heather Langan

(Bloomberg) -- The U.S. rebuffed Iran’s demand not to return an aircraft carrier to the Persian Gulf, a “warning” from Tehran that helped send oil prices to the highest in almost eight months.

The U.S. said it will continue to protect freedom of navigation in the region. The Pentagon doesn’t announce future ship movements and declined to say when the U.S. may send a carrier back to the Gulf following the departure of the USS John C. Stennis last week.

“We usually don’t repeat our warning, and we warn only once,” the head of Iran’s army, Ataollah Salehi, was cited as saying yesterday by the state-run Fars news agency. “We recommend and emphasize to the American carrier not to return to the Persian Gulf.”

He didn’t say what action Iran might take if the U.S. ignores the warning. His statement follows threats from other Iranian officials in recent days to block oil shipping through the Strait of Hormuz in a conflict over new economic sanctions.

While Iran has the military capability to disrupt shipping at least temporarily, it would hurt itself by doing so because it is dependent on the waterway for its oil-export revenues, according to analysts such as Ali Nader of the RAND Corp. research institute. Anthony Cordesman of the Center for Strategic and International Studies in Washington last week called recent threats “an exercise in rhetoric.”

‘Not Seeking Confrontation’

The Stennis, which Iran said it spotted during naval exercises, passed eastward through the Strait of Hormuz on Dec. 27 on a routine voyage and was operating in the northern Arabian Sea, according to the U.S. 5th Fleet, which has a base in Bahrain.

“We are not seeking a confrontation,” State Department spokeswoman Victoria Nuland said yesterday at a briefing in Washington. The U.S. military will continue to play a role in ensuring freedom of navigation, she said.

The U.S. Navy maintains a “constant state of high vigilance” to “ensure the continued, safe flow of maritime traffic in waterways critical to global commerce,” George Little, a spokesman for the Pentagon, said in an e-mailed statement yesterday.

“These are regularly scheduled movements in accordance with our longstanding commitments to the security and stability of the region and in support of ongoing operations,” Little said. “The deployment of U.S. military assets in the Persian Gulf region will continue as it has for decades.”

‘Position of Weakness’

Nuland and White House spokesman Jay Carney asserted Iran is trying to distract Iranians from the nation’s domestic problems. They portrayed Iran as being in a “position of weakness.”

Salehi spoke yesterday at a ceremony to mark the completion of 10 days of maneuvers by the Iranian navy on the east side of the strait in the Gulf of Oman.

Iran doesn’t intend to disrupt shipping in the Strait of Hormuz, Deputy Navy Commander Rear Admiral Mahmoud Mousavi said Jan. 2, according to Press TV.

About 15.5 million barrels of oil a day, or a sixth of global consumption, passes through the Strait of Hormuz between Iran and Oman at the mouth of the Persian Gulf, according to the U.S. Energy Department.

Oil climbed to the highest since May 11 after manufacturing in the U.S. and Asia expanded in December and as concern persisted that further sanctions against Iran may disrupt shipments.

Oil Prices

Crude oil for February delivery rose $4.13, or 4.2 percent, to settle at $102.96 a barrel on the New York Mercantile Exchange. Futures climbed 8.2 percent in 2011, the third consecutive annual increase.

The U.S. Navy said Dec. 28 that it won’t tolerate a disruption to shipping in the strait. The Stennis transited the Strait of Hormuz after a port visit to Jebel Ali in the United Arab Emirates, Navy Commander William Speaks, a Pentagon spokesman, said in an e-mailed response to questions yesterday.

Iran, the world’s third-largest oil exporter, is facing new sanctions on its trade and finances aimed at halting what the U.S. and allies say is a plan to build nuclear weapons. Iran says its atomic program is for peaceful purposes.

Inspectors from the International Atomic Energy Agency are expected to visit Iran soon, the Fars news agency cited Foreign Ministry spokesman Ramin Mehmanparast as saying in Tehran yesterday.

--With assistance from Mark Shenk and Peter S. Green in New York. Editors: Terry Atlas, Larry Liebert

To contact the reporters on this story: Viola Gienger in Washington at vgienger@bloomberg.net; Heather Langan in London at hlangan@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net