Oil and Gas Flashpoints
Since fighting broke out in South Sudan in December 2013, oil production has fallen by at least one-third, with officials now giving us a closer look at what production and sales look like, if we can rely on these figures. The official story is that the newly independent country has earned $1.9 billion from oil sales in the 12 months through May 2014. According to the Petroleum Ministry, total crude oil sales amounted to 35.3 million barrels for $3.5 billion. The Ministry claims that $857 million was allocated to Sudan for the export of South Sudan’s oil to a Red Sea port, as Sudan controls all the export channels here. The rest of the difference went to loan settlements. Fighting continues between factions loyal to President Salva Kiir and those loyal to a former presidential deputy, Riek Machar. The country’s oil infrastructure is a key target for rebel sources. Whoever controls this will control the country’s leadership. Last week, the South Sudanese Finance Minister said the government had borrowed $200 million from oil companies operating in South Sudan in order to make up for government revenue losses.
Turkey has begun selling oil imported from Iraqi Kurdistan on the international market, prompting warnings from the Iraqi central authorities in Baghdad that buyers and traders in this “stolen and smuggled” oil will be pursued through legal channels. The Kurds had directly exported their first oil to the Turkish port of Ceyhan, where…
Oil and Gas Flashpoints
Since fighting broke out in South Sudan in December 2013, oil production has fallen by at least one-third, with officials now giving us a closer look at what production and sales look like, if we can rely on these figures. The official story is that the newly independent country has earned $1.9 billion from oil sales in the 12 months through May 2014. According to the Petroleum Ministry, total crude oil sales amounted to 35.3 million barrels for $3.5 billion. The Ministry claims that $857 million was allocated to Sudan for the export of South Sudan’s oil to a Red Sea port, as Sudan controls all the export channels here. The rest of the difference went to loan settlements. Fighting continues between factions loyal to President Salva Kiir and those loyal to a former presidential deputy, Riek Machar. The country’s oil infrastructure is a key target for rebel sources. Whoever controls this will control the country’s leadership. Last week, the South Sudanese Finance Minister said the government had borrowed $200 million from oil companies operating in South Sudan in order to make up for government revenue losses.
Turkey has begun selling oil imported from Iraqi Kurdistan on the international market, prompting warnings from the Iraqi central authorities in Baghdad that buyers and traders in this “stolen and smuggled” oil will be pursued through legal channels. The Kurds had directly exported their first oil to the Turkish port of Ceyhan, where it was intended for sale on international markets. However, the Turks held on to that oil at Ceyhan in an attempt to buy time to come to some agreement with Baghdad over the issue. There is no longer enough storage capacity at Ceyhan to keep this oil, and the Turks have agreed to sell it onwards, despite Baghdad’s threats. "The [Iraqi] Ministry of Oil confirms its warning to the world companies and markets not to buy the oil cargo on the vessel (United Leadership), which is loaded with crude oil extracted from the oilfields of Kurdistan region," the ministry said in a statement. The Iraqi ministry confirmed that it is tracking the United Leadership oil tanker and will sue any oil firm or market that may deal or market its cargo.
Corruption & Compliance
A crackdown on corruption in China has led to the suspension and detention of a senior official of PetroChina Company Limited, vice-president Bo Qiliang, along with his secretary. Bo was in charge of PetroChina’ overseas operations through its parent company, China National Petroleum Corporation (CNPC). Bo and his secretary are being further investigated and prevented from leaving the country. Bo is suspected of colluding with senior Chinese oil executives to steal state assets, including during his tenure as head of PetroKazakhstan, where he is alleged to have bribed Kazakh officials to enlarge the company’s holdings.
The Mexican Attorney General’s Office has apprehended the CEO and majority owner of Oceanografia oil services company in connection to a high-profile fraud case against Citigroup. In late March, Oceanografia CEO Amado Yanez Osna had voluntarily turned himself in for questioning. Citigroup accuses Oceanografia of defrauding its Mexican unit Banamex. At the time of the questioning, the Mexican Attorney General requested a temporary detention order to forbid Yanez from travelling. On 28 May, the authorities arrested Yanez. Oceanografia has been under state control since February 2014, when authorities began investigations into allegations that the company used false Petroleos Mexicanos (Pemex) documents to obtain loans, according to our partners at Southern Pulse. Pemex told the bank on Feb. 20 that it couldn’t verify documents backing $400 million that Banamex had loaned to Ciudad del Carmen-based Oceanografia. On 3 June, Yanez posted bail at $6 million.
Regulatory Alerts
On 19 August, Alaskans will vote in a referendum on a new oil tax regime that could make energy investments in Alaska much more attractive. In 2013, lawmakers reversed higher levies on oil and gas, but if Alaskans vote on 19 August to kill the new regime, those levies will be re-implemented. Opponents of the oil tax cuts say the new laws would drain the state's $16 billion savings fund and cost state coffers $4.6 billion through the end of the decade. At risk are a massive LNG project that could cost up to $65 billion, along with the expensive rejuvenation of Alaska’s oil fields.
The U.S. Coast Guard and National Transportation Safety Board are opening a week of hearings into the collision of a barge and a freighter that spilled nearly 170,000 gallons of fuel oil into the Houston Ship Channel on 22 March, on the waterway between Texas City and Galveston. The hearings began on Monday.
The US State of Washington has adopted a new rule that will require refineries to limit greenhouse gas (GHG) emissions by 2025. The WAC Petroleum Refinery Greenhouse Gas Emission Requirements was adopted on May 28 and establishes reasonably available control technology (RACT) to limit GHG emissions from the state’s refineries. Compliance is mandatory by 2025 for the state’s five refineries.
In Ecuador on 31 May, President Rafael Correa introduced a number of incentives to attract mining investment in Ecuador, such as charging mining companies at least 50 percent of their profits only after they have recovered the investment made in the country, and the opening of tax credits to international companies. However, the President also highlighted that the government will implement a tax on the companies’ capital gains, according to Southern Pulse.
Discovery & Development
On 2 June, El Salvador officially joined the Venezuela-led Petrocaribe. On 30 May 2014, the Secretary General of the FMLN, Medardo González explained that being a member of Petrocaribe would increase the country’s fuel supply threefold, and that the country would only be required to pay 50% of the annual fuel bill immediately, freeing other funds for investment in education and public security. Petrocaribe is the brainchild of Hugo Chavez that envisioned the creation of an energy bloc to provide low-interest oil sales to nearby countries facing expensive imports. Petrocaribe allows governments to pay for petroleum over time, with up to 25 years to pay off on bills and the option to provide goods and services in exchange for oil.
UK-listed BG Group and Ophir Energy (LON:OPHR) have made another gas discovery offshore Tanzania, in Block 1 at the Taachui-1 well. The well was drilled down to 4,215 meters and found gas in a 289-meter single column, with 155 meters of net pay. The well is estimated to contain 1 trillion cubic feet of recoverable gas. Ophir has a 20% interest in Block 1, which is one of three blocks that will be part of a major LNG development project in Tanzania. So far there has been 100% drilling success on this block.
Argentina state-run oil company YPF—nationalized in 2012—has announced a tight gas discovery in the western Argentine province of Mendoza. The find by the Paso de las Bardas Norte xp-37 exploration well has a potential 25 million barrels equivalent of recoverable resources, the company said in a statement. There was also "important potential" for oil. Gas production infrastructure is already in place in the area, allowing for immediate production, said YPF.
In a report released on 4 June, members of OAPEC (Organization of Arab Petroleum Exporting Countries) announced 34 new oil discoveries and 10 new natural gas discoveries made during the course of 2013. The most significant of these discoveries is said to be an estimated 1.3 billion barrels in Algeria’s eastern region of Hassi Messaoud, followed by a find of around 71 billion cubic meters of natural gas in Qatar’s Al-Shimal field.
Deals, Mergers & Acquisitions
• France's EDF is reportedly planning to sell a 70% stake in Italian unit Edison’s wind farms possibly by the end of this month. The buyer is said to be local infrastructure fund F2i.
• Mexico’s state-run Pemex has sold off another 7.86% of its interest in Spanish Repsol for around $3 billion, and is preparing to sell its remaining 1.4% stake in Repsol in August, which is a continuation of the sell-off process due to management disagreements.
• Russian Rosneft may seek to acquire a stake in Azerbaijan’s Absheron gas project, which would use the Baku-Tbilisi-Ceyhan (BTC) pipeline for oil deliveries to Europe, according to sources from Azerbaijan’s state-run oil company SOCAR, cited by Reuters.
