Politics, Geopolitics & Conflict
Turkey’s Problems on the Syrian Border
Turkey is attempting to prioritize its enemies here—an activity that has ended up placing the PKK at the top of the enemy list, followed by the Islamic State (IS). Presently, Syrian Kurds are trying to fight back IS forces in Kobani and Turkish interference is going to weaken their effort, which in turn will eventually render IS enemy number one. Turkey is pitting two groups of Kurds against each other, the Iraqi Kurds against the PKK and their Syrian counterparts, the PYD. Erdogan’s plan appears to be to allow the IS to operate unimpeded in the short-term; carry on a long-term war against Damascus; and deal with the Kurds in the immediate-medium term.
Tensions in southeastern Turkey have reached new highs, with Kurdish protesters taking to the streets to demonstrate against the IS assault on Kobani and the Turkish government’s handling of the situation. Almost 40 people have been killed in clashes between Kurds and Turkish radical Islamist groups in the area.
On 24 October, three PKK members were killed in clashes with Turkish forces at a hydroelectric power plant in Kagizman in Kars province. The PKK were purportedly attempted to take over the power plant, but we cannot confirm this and the reporting on the incident is sketchy.
Earlier this week, a member of a Turkish Islamist group that is a known enemy of the PKK was assassinated in the eastern province of Bingol, in a drive-by shooting. Another member of the same group was killed in a probable PKK attack two weeks ago.
In the immediate term, we expect protests by Kurds to pick up momentum as the Kobani siege remains in place. We also expect more targeted assassinations between the Islamists in Turkey and the PKK in the southeast.
If this area of Turkey becomes the border with a Turkish buffer zone inside Syria, as is now being discussed, we expect a full-fledged war on three co-mingling fronts: Turkey vs. the PKK, the PKK vs. the Islamists; and eventually Turkey vs. both, but first using the Islamists to help destroy the PKK. Creating this buffer zone essentially drags southeastern Turkey directly into the conflict.
• Tensions have risen between Saudi Arabia and Kuwait over the Saudi move to temporarily shut down the offshore Khafji oil field, which produces 300,000 barrels per day, as the field is in the Neutral Zone, where the two countries jointly produce. Kuwait will be harder hit than Saudi Arabia by the loss of production in this field. Chevron is caught in the middle of these tensions, with Kuwait asking the supermajor to move out of the Neutral Zone.
• Iraq's State Oil Marketing Organization (SOMO) now plans to market both Basrah Heavy and Basrah Light, and set separate official selling prices for each grade beginning in 2015. Iraq is currently exporting only Basrah Light crude, a designation that does not reflect the specifications of various exported crudes. API gravity has fallen steadily, as heavier streams have been brought online, mainly from the West Qurna-2 oil field, the Halfaya oil field and Badra.
• Brazil’s runoff presidential elections has seen incumbent Dilma Rousseff narrowly re-elected, beating out the center-right candidate. Rousseff won 51.6% of the votes, while her rival came in close, with 48.1%, showing class and geographical divisions. What pushed Rousseff over the edge was the promise of welfare programs for voters in the poorer northeastern states—a promise that will be a challenge for Brazil’s slowing economy.
• Tunisia has held its second parliamentary elections since the 2011 revolution that overthrew long-time dictator Zine El Abidine Ben Ali. We are monitoring the results here largely because this will be an indicator of how 23 November presidential elections may turn out. The parliamentary vote left neither key party—the Islamist an-Nahda or the secular Nidaa Tounes—with a majority, so we will be in for a challenging coalition government negotiation process.
• In Ukraine, a much-awaited parliamentary election following the Maidan protests that overthrew president Viktor Yanukovych in February is likely to result in a coalition between the parties of President Petro Poroshenko and Prime Minister Arseniy Yatsenyuk, with smaller pro-Western parties supporting the new bloc. The Opposition Bloc, which is the new face of Yanukovych’s Party of Regions, was the only pro-Russian party to pass the threshold for parliamentary representation.
Discovery & Development
• Brazil’s state-run Petrobas has made an oil discovery at an exploration well in the giant Libra prospect. Significantly, this is the first well drilled by the Petrobras consortium in the Libra prospect (ultra-deep waters of the Santos Basin), which is estimated to hold eight to 12 billion recoverable barrels of petroleum. The recent discovery was made off the coast of Rio de Janeiro. Petrobas has a 40% stake in the development with Shell and Total each owning 20% and China’s CNPC and CNOOC owning the remaining 10%.
• US Hess Oil Company will proceed with the development of the $6 billion Stampede project in the Gulf of Mexico. Hess has a 25% working interest and is operator. Union Oil Company of California, a Chevron subsidiary, Statoil and Nexen Petroleum Offshore U.S.A. Inc. each have a 25% working interest. First production from the project is expected in 2018. The Stampede Field, discovered in 2005, is located approximately 115 miles south of Fourchon, La., in the Gulf of Mexico. The field is located in approximately 3,500 feet of water, with a reservoir depth of 30,000 feet.
• Russian Rosneft—Russia’s largest oil producer--will continue drilling in the Arctic Kara Sea on its own after Exxon Mobil withdrew due to US and EU sanctions. Rosneft filed law suits last week with the EU Court of Justice over sanctions which had been imposed on them by the EU in late July. (Earlier this month, Russia’s Gazprom Neft also said it would continue developing shale oil production sites in Siberia without the assistance of its joint-venture partner Shell.)
Deals, Mergers & Acquisitions
• BP is selling its Pernis storage terminal in Rotterdam as it continues with a wider asset purge.
• The Philadelphia City Council has opposed the sale of the Philadelphia Gas Works (PGW) to Connecticut-based UIL Holdings Corp. for $1.86 billion.
• French Total SA’s Total E&P Norway will sell stakes in four oil fields in Norway to Poland’s PGNiG Upstream International. The stakes are worth $299 million.
• OneOk Partners has agreed to acquire Chevron Corp’s natural gas liquids assets in the Texas Permian Basin for around $800 million. The deal is expected in the fourth quarter of this year and could boost OneOk production by nearly 40%.
• Carrizo Oil & Gas, Inc. has acquired additional leasehold and producing interests in the Eagle Ford Shale from Eagle Ford Minerals, LLC for $250 million in cash, subject to a closing adjustment credit of $7 million.
• Continental Resources Inc. announced a joint venture with South Korean S.K. E&S Co. Ltd to develop some of its Oklahoma acreage in a deal worth $360 million. The key target here is the Northwest Cana area of the Anadarko Woodford Shale play. Continental sold a 49.9% interest in about 44,000 net acres in the play, including 37 producing wells, for $90 million. The remainder of S.K.’s investment will fund half of Continental’s drilling and completion costs in the play.
Regulatory, Legal Alerts
• The Texas Railroad Commission has amended rules for disposal well operators in response to concerns that high-pressure injections could trigger earthquakes. According to the Texas Commission on Environmental Quality, as of last year, there were 27 disposal wells in Shelby County, though the Texas Railroad Commission has not yet identified a significant correlation between faulting and injection practices. Nonetheless, beginning on 17 November, disposal well operators must research US Geological Survey data for a history of earthquakes within 100 square miles of a proposed well site before applying for a permit. The commission, the state’s oil and gas regulator, can also modify or rescind a well permit if scientists determine a well is likely contributing to seismic activity.
• The European Union’s new energy policy is creating a high level of controversy, with expected divisions among the bloc’s members. The European Commission has three key objectives it hopes to achieve by 2030: to reduce gas emissions by 40 % from 1990, to use 28% renewable energies, and to improve energy efficiency by 30%. The new package will take over from the bloc’s current “20-20-20” goals – which set emissions reduction, renewables usage, and energy efficiency targets for the end of this decade. Poland, whose economy relies on emissions-intensive coal for much of its electricity, is strongly opposed to the new framework. Portugal and Spain have also objected, though less stringently and specifically in relation to what they have called ‘strong language’ in reference to the creation of an interconnected EU energy market.
• A group of 109 Colombian farmers is seeking $28.6 million from BP in a London court for environmental damages over the construction of the Ocensa pipeline in the mid-1990s, which they claim has destroyed their plantations. BP is challenging the claim. The pipeline was built by BP Exploration (Colombia) Limited (BPXC), which cut deals with the farmers to lay the pipeline through their land.