NYC-based PIRA Energy Group reports that PIRA is cautiously optimistic the global economy will withstand the Fed's policy shift. In the U.S., stock build slows. In Japan, crude runs perk up, crude stocks draw. Specifically, PIRA's analysis of the oil market fundamentals has revealed the following:

World Oil Market Forecast, September 2014
PIRA is cautiously optimistic the global economy will withstand the Fed's policy shift and lift into next year with growth above trend. Despite this, and a rebound in oil demand growth, oil market balances are forecast to deteriorate in 2015. Low first half 2014 stocks hid blemishes but now that inventories have rebuilt.

U.S. Stock Build Slows
Overall inventories increased this past week with crude stocks declining, while product stocks increased. The product inventory increase was 4 million barrels greater than the week earlier as reported demand fell, product imports increased and runs were trimmed. Runs were higher than PIRA forecast as the industry ran just about every bit of capacity it could to take advantage of attractive margins before capacity goes down for maintenance.

Japanese Crude Runs Perk Up, Crude Stocks Draw

Crude runs rose and crude imports declined such that crude stocks drew. Finished product stocks continued rising. A good part of the rise has been in kerosene, which is strictly seasonal. But gasoline and gasoil have also posted modest stock builds. Refining margins remain soft.

Latin America Oil Market Forecast
Latin American refining capacity is constrained in 2014 by refinery maintenance leading to increased product import growth and higher crude exports, particularly in the 4th quarter. Latin American economic growth prospects have been ratcheted down in the last few months. With slower demand growth and returning/expanded refinery capacity next year, product import growth will not be as strong. Nearly all other Latin American countries are also seeing substantial product imports from the United States which supplies about 80% of regional import needs for diesel.

Asia Leads World LPG Markets Lower
November propane FEI futures fell 5.1% to $821/MT, the lowest price in six weeks. The markets are posturing for tomorrow's announcement of October contract prices by Aramco. The latest CP futures markets are betting that propane CPs are lowered by $10/MT, while the weighted average of September trading indicates that prices could remain unchanged from September at $745/MT. Butane's premium to propane was stable in September, falling $3 to $34/MT.

Ethanol Prices Plummet
The downward spiral in U.S. ethanol prices accelerated, with values pressured by soaring inventories, weak consumption, and higher production. Cash margins for ethanol manufacture declined for the fifth straight week to the poorest value since February.

The information above is part of PIRA Energy Group's weekly Energy Market Recap - which alerts readers to PIRA's current analysis of energy markets around the world as well as the key economic and political factors driving those markets.

In many of the key deepwater markets, estimated to be worth $72bn by 2018, E&P and OFS companies alike are exposed to challenging local content requirements. Local content agreements are typically motivated by a desire to stimulate industrial development, and promote technology transfer. A typical local content agreement stipulates that E&P companies must procure a minimum percentage of equipment and services from local contractors. Recent examples can be seen in countries such as Brazil (Petrobras new-build FPSO units to use domestically-built hulls), Angola (BP partnering with Sonangol) and Nigeria (Total utilising a 90% local work force for the AKPO FPSO).

Governments in developing countries are now trying to look beyond basic economic multiplier effects, with the aim to improve local yard infrastructures, encourage sustainable and ongoing investment, community support and training, and improve on in-country fabrication and supervision. The typical risks associated with local content include lack of in-country cutting edge technology and a shortage of engineering skills, competitiveness compared to developed economies, government instabilities, all of which can combine to result in delays, re-work and cost overruns.

Local content requirements can cover everything from basic services and manpower to manufacture of more complex capital equipment. While the most critical items in a deepwater development, such as subsea trees, are typically manufactured in the US, Europe and APAC countries, the major vendors have built assembly facilities in order to service key markets such as Angola and Brazil.

The reality of international markets is that local content will remain a key selection criteria for oil and gas projects. For example, in the first round of bidding for Brazilian Pre-Salt, minimum local content of 37% was expected of bidders, increasing to more than 55% in the development phase, and there is little sign of a slowdown in political ambitions with many countries targeting 70%. However, given that deepwater spending in Latin America is expected to reach $24.8bn by 2018, local content needs to be viewed as an opportunity area rather than a threat.

www.douglas-westwood.com

Helix Energy Solutions Group, Inc. (NYSE: HLX)has  announced that its wholly owned subsidiary, Helix Q5000 Holdings S.A.R.L., has entered into a credit agreement with a syndicated bank lending group for a term loan in the amount up to $250 million. The term loan will be funded at or near the time of delivery of the Q5000 vessel, which is currently estimated in early 2015.

The key features of the new secured credit facility include:
• Debt nonrecourse to Helix
• 5 year term
• Pricing at Libor plus 250 basis points, with an undrawn fee of 87.5 basis points
• Quarterly amortization payments on the term loan based on a seven year straight line repayment profile with a balloon payment at maturity

"This new credit facility provides attractive financing not only for the Q5000, but also allows Helix to maintain the capital resources to execute our capital spending plans for new well intervention vessels, both in progress as well as potential future vessels," commented Anthony Tripodo, Executive Vice President and Chief Financial Officer.
Nordea Bank Finland Plc acted as Lead Arranger and Bookrunner of the new facility. Nordea Bank Finland Plc will serve as Administrative Agent.