Politics, Geopolitics & Conflict
• For foreign oil companies, all eyes are on Brazil—and what comes next now that President Dilma Rousseff has been suspended for 180 after the senate voted to initiate impeachment proceedings. For the oil industry, it’s tough and go. While there are plenty of things they want to see fixed—from strict local content laws to state-run Petrobras’ mandate to always have a 30-percent operating ownership in the prized sub-salt projects, when vice-president Temer takes the interim helm, no one’s sure what will happen. Interestingly, just two days before Rousseff’s suspension, reports started to emerge that new regulations would allow someone besides Petrobras to have an operating interest in these projects, but there no indication what the government shake-up might mean for that push.
• Everything in Syria right now is about Aleppo, and this is arguably the most decisive battle yet to go down—but it’s also the most chaotic. It’s not just the Islamic State (ISIS) that they’re trying to pin down here, but other militant groups who understand that everything will be definitively decided in Aleppo. They want to make sure they get their own foothold and buy time. The al-Nusra front, which sort of disappeared from everyone’s radar when ISIS began to make major advances, is now back in the game very openly, also staking territory in Aleppo. They aren’t alone. The Free Syrian Army is there, too, and others as well. Telling who is who is beyond…
Politics, Geopolitics & Conflict
• For foreign oil companies, all eyes are on Brazil—and what comes next now that President Dilma Rousseff has been suspended for 180 after the senate voted to initiate impeachment proceedings. For the oil industry, it’s tough and go. While there are plenty of things they want to see fixed—from strict local content laws to state-run Petrobras’ mandate to always have a 30-percent operating ownership in the prized sub-salt projects, when vice-president Temer takes the interim helm, no one’s sure what will happen. Interestingly, just two days before Rousseff’s suspension, reports started to emerge that new regulations would allow someone besides Petrobras to have an operating interest in these projects, but there no indication what the government shake-up might mean for that push.
• Everything in Syria right now is about Aleppo, and this is arguably the most decisive battle yet to go down—but it’s also the most chaotic. It’s not just the Islamic State (ISIS) that they’re trying to pin down here, but other militant groups who understand that everything will be definitively decided in Aleppo. They want to make sure they get their own foothold and buy time. The al-Nusra front, which sort of disappeared from everyone’s radar when ISIS began to make major advances, is now back in the game very openly, also staking territory in Aleppo. They aren’t alone. The Free Syrian Army is there, too, and others as well. Telling who is who is beyond anyone’s comprehension at any given moment, and this makes the ceasefire untenable.
• France’s dramatic and very public debate about whether to ban U.S. fracked gas—amid accusations of hypocrisy—is most likely about price. U.S. shale gas has a landing price of about $6.5 per BTU, making it a lot more expensive than Russian gas. Hiding behind the politics works for sensational media, but at the end of the day, it’s all about math.
• Ukraine is considering opening up its underground gas storage facilities to foreign companies (read: Turkey). The point here would be to then get it on to the European Union.
Discovery & Development
• Africa Oil has announced a 24 percent increase on previous deposit estimates in its key South Lokichar Basin in Kenya. This adds 150 million barrels to original estimate of 766 million barrels. This is great news for Kenyan oil, and partners Tullow Oil Plc and Africa Oil, who first put Kenya on the world’s oil map with a game-changing discovery in 2012. Overall, the partners believe that the basin could hold up to 1 billion barrels of oil. The necessary infrastructure to turn Kenya into a major oil exporter and East African hub is still lacking, however. There is no pipeline to bring oil to the coast, and the competing propositions are a Uganda-Tanzania route and a Uganda-Kenya route.
• Russia’s state-run Rosneft has launched drilling at its Lebedinskoye oil and gas condensate field in the Sea of Okhotsk. The plan is to drill a 5.3-kilometer horizontal extend-reach well under the bottom of the sea. Three horizontal wells are being targeted here, at 5,000-7,000 meters. Production is expected to come online already this year.
• Italian oil giant Eni has boosted production in its Nooros oil field in Egypt to around 65,000 barrels of oil equivalent per day (boe/d). This news comes only 10 months after the initial Nooros discovery was made. The license is located in the Abu Madi West concession in the Nile Delta, about 120km northeast of Alexandria. Daily production at Nooros consists of approximately 10 MMcm of gas, and 5000 bbl of condensates. Eni now hopes to ramp up production to 140,000 boe/d by the end of this year with additional wells. Eni, through its subsidiary IEOC, holds a 75 percent stake in the concession while BP holds the remaining 25 percent. Eni is also developing the gigantic Zohr natural gas discovery in Egypt’s Mediterranean Sea. The field could hold 30 trillion cubic feet of natural gas. Eni announced the discovery in the summer of 2015. Eni has also announced plans to spend $22.5 billion in Africa over the next four years, much it on Zohr—a project with a $14-billion price tag. Zohr is expected to come online in 2017 and produce 2.6 billion cubic feet per day by 2019.
Deals, Mergers & Acquisitions
• Canadian Whitecap Resources has announced purchase of 11,600 boe/d in producing assets in southwestern Saskatchewan from Husky Energy for US$460 million. The sale is still pending approval. Husky is in a bit of a selling spree. This sale would be its third this year. The company agreed to sell its 65 percent interest in some midstream assets in Alberta’s Lloydminster in April for US$1.3 billion. Earlier this month, Husky reportedly struck a deal to sell royalty interests in western Canada for US$125 million cash.
• Australian AWE has rejected an unsolicited US$310-million takeover proposal from global private equity group Lone Star Fund. AWE’s board rejected the offer as opportunistic and below value; however, the company has taken a significant hit due to low oil prices, reporting net losses after tax of US$201 million for last year with a revenue of US$30 million, down 35 percent over the previous quarter. Last week, AWE signed an agreement to sell its 42.5 percent interest in the undeveloped Lengo gas project in the Bulu production-sharing contract offshore Indonesia. It also recently completed the sale of its interest in the U.S. Sugarloaf project.
• Canadian pipeline giant Enbridge is set to acquire 50 percent ownership (for $282 million) of Eolien Maritime France SAS, which is building a total of 1,428 megawatts of generating capacity in wind farms. France’s EDF Energies Nouvelles will own the other half. These wind farms already have 20-year power purchase agreements with Electricite de France. The deal is expected to close on 19 May.
Contracts, Tenders & Auctions
• Argentina's Mendoza province plans to launch tenders for six to seven conventional oil and gas exploration blocks either late this year or early next year. More details are not yet forthcoming, but stayed tuned to the Global Energy Advisory for updates.
• India will auction off 67 small oil and gas fields that have already been discovered for resources. The auction will begin on 25 May. The fields are in 46 contract areas and will be offered up under a revenue-sharing model with the government once production begins. These are likely part of the same 69 fields that were abandoned last year by state explorers, though they are estimated to have some 89 millions of hydrocarbons.
• Scotland’s Wood Group—and energy services company--has won two new contracts in Iraq worth a combined US$140 million for the delivery of technical services and expertise to an unnamed international oil company.
• Dubai-based Topaz Energy has won a contract to supply and operate 15 vessels for the Tengizchevroil joint venture in Kazakhstan for a contract value of US$350 million. Delivery is scheduled between 3Q 2017 and 2Q 2018. The vessels are to be built by Vard Shipyard Group in Romania and Vietnam and operated by Topaz Energy and Marine. The scope for the vessels is to transport modules and cargo up to 1,800 tons through the Russian river systems to the Tengiz oil field in Kazakhstan. Current partners in Tengizchevroil comprise of Chevron, KazMunaiGas, ExxonMobil Kazakhstan and LukArco.
• Halliburton has won a four-year service contract from Wintershall Norge AS for exploration and development in the Norwegian Sea in the Maria development. Drilling should start in the first half of 2017.
Company News
• Abu Dhabi National Oil Co. (ADNOC) has reshuffled its leadership. This is the second major shakeup since February, when Sultan Ahmed al Jaber was appointed CEO. The shakeup also comes as ADNOC seeks to hand out stakes (40-year concessions) to develop its largest oil fields. In the reshuffling, Abdulaziz Abdulla Alhari has been named director of the refining and petrochemicals division and Omar Suwaina al Suwaidi has been named director of the gas division. Six out of 18 operating units also got new CEOs.
• This week we also add two more US independent shale producers to the growing bankruptcy list: On Thursday, both Penn Energy Corp. and Linn Energy filed for chapter 11 bankruptcy.
• TransCanada has received its final two permissions from the British Columbia Oil and Gas Commission to go ahead with its Coastal GasLink Pipeline project. The pipeline will connect to the proposed LNG Canada natural gas liquefaction and export facility near Kitimat. A final investment decision is expected by late this year, while construction is expected to begin next year. The project will cost $4.8 billion and reportedly create some 2,000 new jobs during the construction phase.
