Uganda and Tanzania have agreed to start the construction of a $3.55-billion pipeline that will carry crude from Uganda’s Hoima province to the Tanzanian coast and from there to international buyers. The 1,445-km long pipeline will have a capacity of 216,000 bpd of Ugandan crude, starting from 2020.
Uganda is a newcomer on the oil scene in Africa, along with its neighbor Kenya, but the two have decided to develop and export their new wealth independently of each other. Yet the country is ambitious and has just selected a consortium for the construction of its first refinery. The consortium includes GE and Italy’s Saipem. GE recently acquired Baker Hughes, turning into one of the top three oilfield service providers globally.
The consortium will be in charge of a $4-billion project for the construction of a 60,000-bpd processing facility in the oil-rich Hoima region. Initially, the refinery will have a capacity of 30,000 bpd, which is more than Uganda needs to satisfy its local demand, so part of the oil products will be sold abroad. From 2020, the refinery will receive crude from fields operated by French Total, UK-based Tullow Oil, and China’s CNOOC. The reserves of these fields—the country’s total reserves—are estimated at 6.5 billion barrels of crude, of them about 2.2 billion barrels recoverable.
Deals, Mergers & Acquisitions
• A regional U.S. unit of BP has inked a joint venture agreement with a subsidiary of ArcLinght Capital Partners. The new company will be active in oil and gas product logistics, namely the operation of two oil product terminals in Washington and Oregon, to be acquired after the JV deal is finalized.
• Canadian Pengrowth Energy Corp. has pulled out of negotiations for the sale of oil assets in Alberta to a private company backed by a Chinese-Thai billionaire. The deal fell through because the buyer failed to supply the funding for the deal. The news is a setback for embattled Pengrowth, which is looking to patch up its finances after the 2014 oil price crash.
• Energy independent Samson Resources II will sell its assets in East Texas and North Louisiana to a private Houston company, Rockcliff Energy II, for $525 million. The sale involves 210,000 net acres with daily production averaging 90 million cubic feet of gas equivalent. The seller will use the proceeds from the sale to shrink its outstanding dues on a $280-million revolving facility, which stand at $210-215 million.
Tenders, Auctions & Contracts
• The Greek Energy Ministry has launched two tenders for offshore oil and gas exploration. Bidders will have 90 days to submit their proposals to the country’s Hellenic Hydrocarbons Resources Management. The tender follows interest from a consortium including Total, Exxon, and Hellenic Petroleum in two blocks off the coast of Crete, and from Energean in a block off the western coast of mainland Greece.
• India and Bangladesh are in talks for the building of a natural gas pipeline from Chittagong in Bangladesh to Tripura, in northeastern India. The pipeline will address a shortage of cooking gas in the region.
• Baker Hughes has won a deal to service the development of Papua New Guinea’s first offshore gas field. BH, now BHGE after its acquisition by GE, will provide an extensive range of services to Australian Twinza, which will develop the Pasca A field – a gas condensate deposit. The deal is worth several hundred million dollars.
• Poland’s PGNiG, the state energy company, is eyeing short and medium-term LNG supply contracts, aiming to take advantage of the current glut that has brought gas prices to attractively low levels. For Poland, LNG imports are particularly important as the country seeks to reduce its dependence on Russian gas as much as possible.
• Russian Inter Rao Engineering will build a $200-million refinery in Pakistan, in partnership with a Turkish partner. The refinery will be located in the Khyber Pakhtunkhwa region, which produces 45,000 bpd of crude oil, accounting for about half of Pakistan’s total.
Discovery & Development
• Chinese energy independents are building their own LNG terminals in a bid to circumvent the infrastructure of state-owned majors and make a bigger profit on surging gas demand in the country. Over the first half of the year, gas demand jumped by 15% on an annual basis. One new terminal has already been completed and there are three more planned to be built in the coming years.
• BP has announced an average daily rate of production of 12.9 million cubic feet of natural gas from a well in San Juan County in New Mexico, in the Mancos shale. BP bought the acreage where the well is located from Devon Energy two years ago and now plans to expand its exploration activities there thanks to the promising yield from the well.
• Engie Exploration has announced a gas find in a satellite of the largest gas-producing field in the North Sea. The Bravo satellite is part of the Cygnus development and is currently yielding 250 million cubic feet of gas. That’s equal to 5% of the overall gas production of the UK. Bravo is estimated to have a productive life of 20 years, with proved and probable reserves of 110 million barrels of oil equivalent.
• Woodside Petroleum announced a new gas discovery in an offshore field in Myanmar. The Pyi Thit-1 exploration well yielded about 50 million cubic feet of gas daily over a 44-hour period. The well is located in the A-6 block, in which Woodside holds a 40% stake and operates in partnership with local MPRL E&P Pte Ltd. French Total holds another 40% in the block.
• Shell has launched a methane detection pilot program at a shale gas site in Canada. The 24/7 monitoring system will detect any leaks in the company’s oil and gas infrastructure on the site. Methane detection is a growing issue in the industry and a lot of companies are voluntarily setting up such detection systems, aiming to reduce emissions of the gas but also losses associated with these accidental emissions.
• Ukraine’s state oil and gas company Naftogaz may add $5 billion to its claim against Russia’s Gazprom, which would bring the total to $18 billion. The two companies have been locked in a legal dispute for three years over gas supplies from Russia to Ukraine and Europe. Gazprom claims Naftogaz owes it money for failing to comply with the take-or-pay terms of a contract signed in 2009. Naftogaz, for its part, claims Gazprom overcharged it for the gas it supplied. Gazprom’s claim against the Ukrainian company is much bigger, however, at $47.1 billion.
• U.S. shale oil producers have cut a combined $1.2 billion from their 2017 capital budgets yet they still plan to increase their output further. In fact, despite the capex cut, shale producers plan to produce 160,000 bpd more than previously planned, as they hone their ability to do more with less.
• Chevron and Total have pulled part of their workforce in Venezuela out of the country as the political situation there remains volatile. Spain’s Repsol and Norway’s Statoil have pulled out all their employees from Venezuela. This exodus will complicate life for PDVSA, the Venezuelan state oil company, which is partner of these companies in various oil development projects.
• A new green tech company set up with the support of a Petrofac vet and a former utility executive has debuted on the LSE’s Alternative Investment Market. Verditek, which raised around $4 million from its initial public offering, focuses on solar power, carbon capture and water filtration products.
Politics, Geopolitics & Conflict
• Argentines are voting in a primary parliamentary election this Sunday which wii give some idea of the countries support for President Mauricio Macri. Macri replaced Cristina Fernandez de Kirchner and has so far demonstrated a very investor-friendly attitude to foreign investors, especially in energy.
• The Islamic State has stolen some $830 million from Iraqi banks since 2014, as the terrorist group seized 121 branches of state and private banks in the country in the period.
• Tension between the U.S. and North Korea is growing with threats going back and forth in the wake of a new string of sanctions against the Pyongyang regime, which even China backed. The last in the string of threats was North Korea’s warning it will strike Guam. This led to South Korea warning its neighbor it will face retaliation not just from the U.S. but also from Seoul if it carries out the attack.
• Washington imposed fresh sanctions on eight more Venezuelan government officials but steered clear of hitting the country’s oil industry.
• Forex investors who follow energy should be keeping a close eye on the Saudi Riyal, and speculative talk of de-pegging it from the dollar. We’ll examine this more closely next week…