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Oil Stabilizes On Small Crude Draw

Global Energy Advisory 9th September 2016


Politics, Geopolitics & Conflict

• So now that Russia and Turkey are bedfellows once again and making a go at tackling Syria together, it’s (unsurprisingly) not going so well. Controlling the Turks, it would seem, is not as easy as controlling … former Soviet satellites, or Europe for that matter. The new uneasy dynamic is that the Turks appear to think they’ve been given carte blanche by the revived Russian friendship not only to wipe out Kurds from Southeastern Turkey, but also to foray across the border into Syria, where the Kurds have been a key bulwark against ISIS. Now Turkey has gone it alone by advancing its military further into Syria without being invited. In this double or triple or quadruple game that Turkey likes to play, it’s now also pretending to discuss a joint operation with the US to liberate Raqqa in Syria from ISIS. Russia is calling on Turkey to “refrain from steps that could further destabilize the Syrian Arab Republic”. Erdogan is clearly feeling emboldened by the recent failed coup attempt, but the Russian bon homie will only last as long as it’s useful to Moscow, or as long as the pros outweigh the cons in this eternal game of complex shifting alliances.

• Prepare for the worst in Nigeria, as the military tries to take on Niger Delta militants and in the wake of its destruction creates a situation that increases support for the various emerging militant groups in the Delta. Over the past couple of days, the Nigerian military has been on the warpath, targeting militant camps in the Niger Delta and allegedly taking out nearly 75 illegal oil refineries. On Wednesday, the military claimed to have arrested one of the key operatives of the Niger Delta Avengers (NDA)—the original new group behind many of the recent attacks, but the same group that had called for a ceasefire recently. In August, the NDA agreed to a conditional ceasefire after prolonged negotiations with the government. A day after the agreement, a new militant group attacked a state-run pipeline.

• In a bid to compensate for dwindling crude supplies from close ally Venezuela, Cuba is seeking imports from Russia and Iran. The Cuban government is getting ready to launch talks with Russia to start importing oil and refined oil products and plans to talk oil imports with Iran as well, an official at Cuban state-run company Cupet told Argus Media. Under a preferential Cuba-Venezuela deal, Venezuela supplies oil to the island in exchange for Cuba sending experts to work in various industries of its Latin American ally. Venezuela, however, is in the grip of a severe economic crisis and its supplies to Cuba have been diminishing. Cuban President Raul Castro said in Parliament in July that declining Venezuelan crude supplies have put Cuba’s economy under “stress”. In 2015, Venezuela was shipping some 80,000 bpd of oil to Cuba.

Discovery & Development

• Apache Corporation said on Wednesday that it had discovered a significant new resource play, the ‘Alpine High’, in the southern part of the Delaware Basin in Texas. Industry experts have thought that the ‘Alpine High’ area was a poor fit for fracking but Apache now proved them wrong. Apache estimates hydrocarbons in place at 75 trillion cubic feet of rich gas and 3 billion barrels of oil. According to The Wall Street Journal, the discovery could be worth US$8 billion by conservative estimates, or even 10 times more.

• Shell has launched production from the Stones development in the Gulf of Mexico. The Stones is expected to produce around 50,000 barrels of oil equivalent per day, when fully ramped up at the end of 2017.

• UK’s BP Plc and Italy’s Eni have finished drilling two wells in the South Baltim field. A production platform is under preparation to connect 350 million cubic feet of gas daily from the project to the national grid by early 2018. South Baltim is estimated to contain 700 billion cubic feet of recoverable gas, a source in the petroleum sector told Daily News Egypt.

Deals, Mergers & Acquisitions

• Canadian pipeline company Enbridge Inc and Houston-based Spectra Energy have entered into a definitive agreement for a stock-for-stock merger transaction which values Spectra Energy at US$28 billion. The deal will create the largest energy infrastructure company in North America with an enterprise value of US$127 billion.

• Norway’s Statoil and the Norwegian unit of London-based Tullow Oil, Tullow Norge AS, have agreed to a deal under which Tullow Norge will transfer to Statoil stakes in four licenses on the Norwegian continental shelf. The transaction includes the Wisting discovery in the Barents Sea. The Wisting discovery is estimated to have 241 million barrels of oil equivalent of recoverable resources.

• Australia’s Woodside Petroleum Ltd will buy half of BHP Billiton’s Scarborough area assets in the Carnarvon Basin offshore Western Australia, in a deal worth US$400 million. The Scarborough area assets include the Scarborough, Thebe and Jupiter fields, which are estimated to contain gross 8.7 trillion cubic feet of gas resources at the 2C confidence level, of which Woodside’s net share is estimated at 2.6 trillion cubic feet of gas.

• Brazil’s state-run oil firm Petróleo Brasileiro SA, or Petrobras, says it has concluded negotiations with a consortium led by Brookfield Asset Management Inc for the sale of its gas pipeline unit Nova Transportadora do Sudeste. Petrobras did not immediately disclose the value of the deal, saying details will be given after its board approves the transaction. Local media put the value of the transaction at around US$5.2 billion.

Tenders, Auctions & Contracts

• Iran will launch its new upstream oil and gas contracts in January 2017. The new contracts have been stuck in parliament for several months, amid approvals and revisions seen by some as giving big concessions to foreign companies. State-held National Iranian Oil Co (NIOC) has said that it would disclose in September and October details for several fields that will be up for auction.

• Ghana has signed a contract worth US$500 million with Chinese company Yantai Jereh Oilfield Services Group Co Ltd to build a natural gas pipeline. Under the terms of the deal the Chinese group will build and operate the 180-mile-long pipeline which is planned to ship gas to thermal plants at the portal city Tema.

• After it had received first oil supplies from Iran last month, Poland’s refiner Lotos may sign a long-term oil supply deal with the country, its deputy head Marcin Jastrzebski said on Thursday. Poland, which imports the bulk of its oil and gas from Russia, wants to lessen its Russian energy dependence. Supplies from countries other than Russia account for 25 percent of Lotos’ oil refining. In separate Polish contracts news, the state-run oil and gas company PGNiG does not expect to settle its dispute over gas prices with Gazprom out of court, PGNiG’s management board president Piotr Wozniak told RIA Novosti on Thursday. PGNiG is suing Gazprom after it had called upon the Russian giant in 2014 to revise the gas price deal in line with the recent market trends.

Company News

• The Turkish Stream gas pipeline project is unlikely to join the TANAP gas project, Project Manager and Researcher in European Neighborhood Council think-tank, Andreas Marazis, said. Since Azeri state company SOCAR holds 58 percent in TANAP, it is highly unlikely that it would approve such a proposal because it will undermine its ambitions to ship more gas to Europe after fully developing the Shah Deniz gas field, Marazis told Trend news agency.

• UK-based independent oil and gas developer EnQuest saw its unit operating costs reduced to US$23 per barrel for the first half of 2016. The operator also reduced by US$150 million the development costs for its flagship Kraken oilfield in the North Sea.

Regulatory Updates

• Alabama has approved a compromise bill to divide the US$1-billion BP oil spill settlement between repaying state debt, funding highway projects in the Baldwin and Mobile counties, and financing Medicaid.

• A federal judge has put on hold plans by the federal Bureau of Land Management to open 1,500 square miles in central California to fracking. U.S. District Judge Michael W. Fitzgerald ruled that the Bureau must provide additional studies on how fracking would impact the area.

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