Outlook for North Sea Revenues Slashed

With the outlook for revenues from the North Sea having been slashed, firms drilling for shale gas in the UK will get a massive tax break in an effort to boost exploration. In March 2013, the UK government forecast that £6.8 billion ($11.15 billion U.S.) would roll into Treasury coffers from North Sea levies, but that amount has since been cut back to £5 billion ($8.2 billion U.S.), and expectations downgraded for every year until 2018. The main reasons for the wane in rev­enues are the reduction of oil and gas production and the

record levels of capital expenditure.

As there has recently been a large decline in U.S. inven­tories, oil has risen to above $100 per barrel, which was inter­preted as a sign of stronger demand in the United States. In the UK, Brent oil supplies have been hovering around the $106 to $108 (U.S.) per barrel mark.

During the past month, LPG prices in general have dropped significantly, but whether the peak in prices this year has occurred remains to be seen.

In Northwest Europe, the severe weather in the North Sea had caused delays in shipping schedules. However, the markets now appear to be reasonably well balanced. Propane prices for large, fully refrigerated cargoes have now fallen to $890 per tonne cif Northwest Europe, and butane prices have dropped down to $956 per tonne. The coaster markets have also experienced a very quiet period since the start of the new year with only a few butane cargoes being taken by blenders and petchems.

The latest indication of propane swap deals are Feb­ruary $853-$857 and March $808-$812, both per tonne cif Northwest Europe. North Sea prices are at $908 per tonne fob North Sea terminals for propane and $940 for butane.

With mild temperatures for this time of year still prevalent in the Mediterranean area, LPG storages are still well topped-up. Prices for large, fully refrigerated cargoes are now at $890 per tonne cif Lavera, South of France for propane and at $1105 per tonne for butane. There is also limited activity in the smaller pressure propane sector of the market where south-of-France petrochemical manufacturers have been cracking LPG. Also, several propane mixed car­goes were shipped ex Black Sea for Malta, Albania, and South of France at undisclosed conditions.

Sonatrach of Algeria has posted new contract prices for January at $910 per tonne fob Skikda and Bethouia for propane and at $1005 per tonne fob Bethouia for butane. Saudi Aramco has negotiated new contract prices for Janu­ary at $1010 per tonne fob Middle Eastern terminals for propane and at $1020 per tonne for butane. Spot premiums against contract prices in the Arabian Gulf currently stand at minus $1 to plus $1 per tonne for both grades of LPG.

Activity in the Far East since the start of the New Year has been very light and as yet there are no signs of any improvement.