Politics, Geopolitics & Conflict
As the Syrian conflict rolls in earnest up to the Turkish border, and Turkey pledges to take on the Syrian Kurds who are fighting the Islamic State (ISIS), the oil industry is looking only for that silver war-time lining that could be the only thing to push oil prices up. They may get what they want. A major bomb attack earlier this week in the Turkish capital is being taken as a call to war, and the Turks are blaming Syrian Kurds (YPD) for the attack, which killed 28 people and wounded 45 others at last count. The Syrian Kurds had moved in to fill a vacuum left by retreating Syrian rebels in a northern town in the Aleppo province. The rebels were retreating in the face of Russian air strikes and a push by Syrian regime forces. The Syrian Kurds took the chance here to take over territory in their retreat—but also to keep ISIS from moving in. It’s a messy conflict at best in terms of alliances, with Russian and Iranian-backed Shi’ite militias helping the Syrian regime to defeat rebels on one hand and ISIS on t
he other; the U.S. hoping to hold back both the regime and ISIS, and supporting the Syrian Kurds in that process (but not, ahem, those Syrian Kurds who have taken territory near the Turkish border, apparently); and Turkey threatening all-out war against the Syrian Kurds and the PKK, straining already abysmal relations with Russia and increasingly Iran, as well as quietly hoping that the Islamic State is a frenemy.
In…
Politics, Geopolitics & Conflict
As the Syrian conflict rolls in earnest up to the Turkish border, and Turkey pledges to take on the Syrian Kurds who are fighting the Islamic State (ISIS), the oil industry is looking only for that silver war-time lining that could be the only thing to push oil prices up. They may get what they want. A major bomb attack earlier this week in the Turkish capital is being taken as a call to war, and the Turks are blaming Syrian Kurds (YPD) for the attack, which killed 28 people and wounded 45 others at last count. The Syrian Kurds had moved in to fill a vacuum left by retreating Syrian rebels in a northern town in the Aleppo province. The rebels were retreating in the face of Russian air strikes and a push by Syrian regime forces. The Syrian Kurds took the chance here to take over territory in their retreat—but also to keep ISIS from moving in. It’s a messy conflict at best in terms of alliances, with Russian and Iranian-backed Shi’ite militias helping the Syrian regime to defeat rebels on one hand and ISIS on t
he other; the U.S. hoping to hold back both the regime and ISIS, and supporting the Syrian Kurds in that process (but not, ahem, those Syrian Kurds who have taken territory near the Turkish border, apparently); and Turkey threatening all-out war against the Syrian Kurds and the PKK, straining already abysmal relations with Russia and increasingly Iran, as well as quietly hoping that the Islamic State is a frenemy.
In other geopolitical developments …
• Taking the fight directly to ISIS as it attempts to gain a foothold in Libya, the U.S. has begun to launch airstrikes on insurgent positions around Sabratha, about 70 kilometers west of the capital, Tripoli.
• The European Union has agreed to lift the bulk of sanctions on Belarus, which were set to expire. Sanctions against 170 individuals and three companies will be lifted, but an arms embargo will remain in place.
• Bosnia-Herzegovina has formally applied to join the European Union, but this still considered a long shot and we don’t expect the country to be accepted into the union anytime soon; indeed, not until it cannot prove up its reform process, which will continue to languish in ethno-nationalist stagnation.
• Ugandan strongman, President Yoweri Museveni bid to extend his 30-year rule in elections that took place on Thursday. Security was out in full force for the tense poll. At lot is at stake in Uganda, which is set to launch oil production in two years. Major oil companies, including Irish explorer Tullow Oil and French Total SA, are developing Uganda’s estimated 6.5 billion barrels of resources. Museveni rose to power in 1986 in the wake of a five-year guerrilla war. He has since been re-elected four times—always in disputed polls.
Discovery & Development
• Bolivia has launched full operations at its Rio Grande LNG plant, build by a Spanish consortium led by Sener engineering company. The plant aims to first supply domestic consumption needs and export the rest to Brazil, Peru and Paraguay. The plant is located in the eastern province of Santa Cruz and is the first plant of its kind in the country. It will produce 201 tons of LNG per day, with a capacity to store 3,000 cubic meters.
• Proving up the giant Libra discovery in Brazil’s pre-salt Santos Basin, the multinational consortium led by state-run Petrobras has the discovery of more oil. The latest well, for which drilling began just this month, is the 3-BRSA-1305A-RJS. The consortium confirmed the discovery of good quality oil in reservoirs with excellent productivity, citing a column of around 270 meters and high-quality reservoirs in communication with previous wells in this area. The consortium, which includes Royal Dutch Shell Plc, French Total SA and China’s CNOOC and China National Petroleum Corp. (CNPC), are also drilling two more wells in the Libra block as part of a three-well discovery and evaluation project currently under approval.
• French Total SA has signed a deal to exploration for oil in Sri Lanka, sealing a deal that has been in discussion for two years. Total will gain the rights to explore marginal areas on the east coast. The deal worked out after Indian Cairn back out last year, but Cairn had discovered two gas wells here in 2011.
• The U.S. Bureau of Ocean Energy Management has announced that the federal government will offer up some 45 million acres of oil and gas concessions in the Gulf of Mexico in two lease sales in March.
• Norway’s Statoil ASA will invest as much as $200 million in renewable energy over four to seven years. A new fund, Energy Ventures, will take a minority stake in startups developing technologies including wind power, energy storage and smart grids. The fund will focus on growth-phase investments in renewable energy, and will operate alongside Statoil's existing venture entity, Statoil Technology Invest (STI), which focuses on early-phase investments in upstream oil and gas. This is Statoil’s diversification program.
Regulatory Updates
• Oklahoma state regulators have issued a directive to oil and gas operators to reduce wastewater injection volumes by 40 percent. Some 245 injection wells are affected by the directive, which comes just days after the state experienced its third-largest earthquake. Oklahoma was struck by a magnitude 5.1 earthquake last weekend. A total of 9 minor earthquakes were reported, and the surge is seismic activity is being linked to fracking. Felt across Kansas, Missouri, New Mexico, Nebraska, Texas, Arkansas and Iowa, the epicenter was near the East Campbell Gas Field and about 75 miles west of Cushing, one of the largest oil storage hubs in the world. The directive also comes as the U.S. Energy Information Administration has raised estimates for total state production by 100,000 barrels per day. The new numbers boost oil production in the state 25 percent to 30 percent.
• North Dakota is considering new oil and gas rules to regulate pipelines and reduce the potential for oil spills. New rules include a requirement for bonding for all crude and saltwater pipelines and requirement of berms of at least a foot high to be built around a well site. Public hearings on the issue will be held in April, and the rules could be implemented—if all goes well—as early as October. The proposed rules seek to amend 20 sections of oil and gas regulations, and should be released next week.
• Portugeuse Galp Energia will dispute a decision by the Brazilian state of Rio de Janeiro to impose a series of new taxes on the industrial sector to boost state revenues. The new tax package was announced by the state government last month, and will hit hard at industrial production. Specifically, the new tax on oil services oversight is US$0.70 per barrel of oil produced. The state government has announced a projected increase in revenue of about US$ 5.5 billion with the extra taxes if they are passed. The state also imposed an 18 percent goods and services tax on each barrel of oil or natural gas equivalent produced. The tax will be applied on the reference price for each well's oil set by Brazil's oil regulator, ANP.
• The U.S. Department of Energy approved Houston based ConocoPhillips' application to export about 40 billion cubic feet of natural gas from its Kenai LNG gas export terminal in Alaska over the next two years. The company’s previous export license for the Kenai plant in Nikiski, on the Kenai peninsula, expired at the end of March 2013. It had mostly exported to Japan.
Deals, Mergers & Acquisitions
• Austria's OMV oil and gas is preparing to sell of its Petrol Ofisi retail network in Turkey. OMV acquired a 54 percent share in the network in 2010 at a price of $1.39 million. For now, this is early days. We have no pricing information, nor has OMV begun talks with any prospective buyers. Total sales volume in 2015 amounted to ca. 10 million tons. Among OMV Petrol Ofisi’s in Turkey are the largest fuel storage and logistics business in the country, with total storage capacity of over 1 million cubic meters. OMV would have benefitted from the Nabucco pipeline project, which was scrapped in 2013, and would have carried Caspian gas to European markets via Turkey. Why is OMV considering a sell-off of its Turkish retail unit? Well, last month CEO Rainer Seele said the situation in Turkey was not sustainable and that profitability had suffered due to state intervention. Six months ago, French Total SA sold most of its fuel retail activities in Turkey to the local conglomerate Demirören for $365 million.
• Brazil's Petrobras is in talks to sell its assets in Argentina. Local Argentine firms, such as electricity company Pampa Energia and investment group Corporacion America, have emerged as potential buyers. Petrobras has been trying to unload these assets for two years, and they include 30 oil reservoirs in Neuquen, more than 100 fuel stations and a stake in natural gas pipeline operator Transportadora Gas del Sur (TGS), along with the oil refinery and hydroelectric dam. Argentina’s state-owned YPF recently offered US$900 million for the assets, but Petrobras rejected the offer as too low.
