Politics, Geopolitics & Conflict
The purge in Turkey is continuing and gathering pace, as it expands into more industries. Last week, President Erdogan shut down more than 100 news outlets, major and minor alike, and removed the head of Petkim – the country’s largest refiner and a subsidiary of Azerbaijan’s state oil company SOCAR. Confidence in Turkey’s economy will deteriorate quickly, though Erdogan appears to have no qualms about this. He is now working to restoring Turkey’s connections with Russia, which started with his apology for the downing of a Russian military place last year and now continues with the arrest of two officers responsible for it.
The Kremlin sided with Erdogan over the coup and this has been recognized quite vocally by Ankara. Turkey shows no regard whatsoever for its European allies. He also has no regard for Washington, which he accuses of having been behind the coup. The key takeaway here is that a geopolitical realignment is in the works, and Turkey is looking eastward, to Russia. A new axis of Russia, Iran and Turkey is emerging and the spoils of the Middle East are on the table, beginning with the Syrian playground. Turkey will also be more heavily courting China.
Meanwhile, none other than Saudi Arabia is courting Russia, one of its two biggest rivals on global – more specifically Asian – oil markets. Realizing the threat of an Ankara-Moscow-Tehran axis, Riyadh has promised Russia…
Politics, Geopolitics & Conflict
The purge in Turkey is continuing and gathering pace, as it expands into more industries. Last week, President Erdogan shut down more than 100 news outlets, major and minor alike, and removed the head of Petkim – the country’s largest refiner and a subsidiary of Azerbaijan’s state oil company SOCAR. Confidence in Turkey’s economy will deteriorate quickly, though Erdogan appears to have no qualms about this. He is now working to restoring Turkey’s connections with Russia, which started with his apology for the downing of a Russian military place last year and now continues with the arrest of two officers responsible for it.
The Kremlin sided with Erdogan over the coup and this has been recognized quite vocally by Ankara. Turkey shows no regard whatsoever for its European allies. He also has no regard for Washington, which he accuses of having been behind the coup. The key takeaway here is that a geopolitical realignment is in the works, and Turkey is looking eastward, to Russia. A new axis of Russia, Iran and Turkey is emerging and the spoils of the Middle East are on the table, beginning with the Syrian playground. Turkey will also be more heavily courting China.
Meanwhile, none other than Saudi Arabia is courting Russia, one of its two biggest rivals on global – more specifically Asian – oil markets. Realizing the threat of an Ankara-Moscow-Tehran axis, Riyadh has promised Russia increased influence in the Middle East, more or less a restoration of the balance of powers in the region from the time of the Soviet Union. Some observers, however, believe this is a scenario aimed to lure Moscow into a trap, with all the promised contracts and a quick rebalancing of the oil market in favor of Russia to be retracted as soon as Russia agrees to them. The very fact of agreeing will put Russia at odds with its current allies in the Middles East, Iran and Syria, which is what Riyadh wants, eventually undermining the influence of both Russia and Iran in the Middle East and reinforcing its own.
The situation in this part of the world is likely to remain extremely dynamic in the near term, and any change in the current balance of power, however slight, will have global reverberations.
Deals, Mergers & Acquisitions
• Chevron is planning to up to $5 billion in assets in Asia to raise cash, with sales set to being this month. The focus will be on offshore China assets. All told, Chevron is seeking to raise up to $10 billion from assets sales. Up for grabs will reportedly be Chevron’s stake in an offshore oilfield production venture with China’s state-owned CNOOC for potentially $1 billion, along with geothermal assets in Indonesia potentially worth $2 billion. Natural gas field assets in Thailand are also on the block.
• Norway’s state-run Statoil has agreed to buy a 66% interest in an offshore Brazilian field from Petrobras for a consideration of $2.5 billion. The field, Carcara, is located in the oil-rich Santos basin and has estimated recoverable reserves of between 700 million and 1.3 billion barrels of oil equivalent. At the same time, Statoil has reduced its shale holdings in the U.S.: the company announced it has decided to divest from non-operated assets in the Marcellus shale play worth $96 million.
• Egypt is studying the option of floating eight state-owned oil companies, among them Middle East Oil Refinery and the Egyptian Ethylene and Derivatives Company. The initial public offerings for the eight companies will take place before the year’s end.
• Hungarian energy major MOL has closed the acquisition of Italian Eni’s retail business in the central European country, which consists of 173 Agip-branded gas stations. MOL is also buying Eni’s wholesale operations in Hungary. The deal will expand MOL’s network to more than 500 stations across the country. Recently, another oil company, Lukoil, announced plans to divest from its retail operations in Europe, or, alternatively, to spin them off, in order to focus on production.
• India is planning a 13-way merger for state-owned oil and gas companies that include ONGC and Oil India. This is not the first attempt at unifying various energy entities owned by the state but if all goes as planned it will be the first successful one. Should the merger happen, it will create a huge company on par with Russia’s Rosneft.
• Phillips 66 is planning to sell its Ireland refinery Whitegate by the end of the year. The U.S. refiner said there was significant interest in the sale, which has been on the table since last year but could not be realized until the end of this July, in accordance with the refiner’s contract with the Irish government. Whitegate has a daily capacity of 72,000 barrels of crude.
• Tesla has received the go-ahead for its proposed acquisition of SolarCity for $2.6 billion. The tie-up was proposed a month ago as a means of improving efficiencies at both companies. The deal will likely close in the last quarter of the year, after getting approval from shareholders and relevant regulators.
• Energy Transfer Partners and Sunoco Logistics have announced an agreement to sell $36.8% in the Bakken pipeline project to MarEn Bakken Company, a joint venture of Marathon Petroleum and Enbridge Energy. The value of the deal is $2 billion.
Licenses & Tenders
• Three Nigerian and one Australian company will bid for six license blocks in Uganda, which cover a combined 6,000 sq km. The tender was announced early last year and seven companies submitted bids. The four chosen ones will bid for five production-sharing agreements for the development of four of the six blocks. The blocks are located in the Albertine Basin, which has estimated reserves of 3.5 billion barrels of crude.
Discovery & Development
• Shell said it has struck oil from the Fort Sumter deepwater well in the Gulf of Mexico. According to the company, the recoverable reserves at the site may exceed 125 million barrels of crude. The company will continue drilling wells in the area, which is likely to increase the recoverable total substantially.
• Tullow Oil announced first oil from its TEN project off the coast of Ghana is expected to flow in September. By the end of the year, production at the site should reach 80,000 bpd, which is the daily capacity of the floating storage and offloading vessel that was settled at TEN earlier this year and recently connected to the rest of the production equipment.
• India announced a major gas discovery in the Bay of Bengal, which could be the first economically viable gas deposit of its kind in the Indian Ocean. The discovery was made by a team including researchers from the U.S. Geological Survey, Japanese scientists and Indian government representatives. The deposit contains natural gas hydrates – a mixture of gas and water.
Company News
• Devon Energy reported a net loss of $1.57 billion for the second quarter of the year, translating into a negative EPS of $3.04, an improvement from a loss of $2.82 billion for Q2 2015. In adjusted terms, the EPS result was a positive $0.06 per share.
• Chevron reported a loss of $1.47 billion for Q2 2016, down from a profit of $571 million a year earlier, with the upstream business loss at $2.46 billion. On an adjusted basis, the oil major posted earnings per share of $0.35.
• ExxonMobil posted a 59% drop in net profit for the second quarter, to $1.7 billion, or EPS of $0.41, versus analyst expectations for $0.64.
• Suncor reported a net loss of C$735 million for the second quarter, down from a profit of C$729 for the same period of 2015, blaming production cuts that the company was forced to make in May due to wildfires.
• Transocean turned in a surprising profit of $.0.17 per share for the second quarter, versus analyst expectations for a loss of $0.02 apiece, despite offshore rig drillers suffering one of the most serious blows from slumping oil prices.
Regulations & Litigation
• OPEC has a new secretary general, Sanusi Barkindo from Nigeria. Barkindo is replacing Libya’s Abdalla Salem Badri, who served as head of the organization from 2007, making him the longest-serving secretary general in the history of OPEC. Barkindo has been elected for the next three years.
• New York has approved a plan that will see half of the state’s power generation to come from renewable sources. The Clean Energy Standard will also see subsidies being introduced for nuclear plants. The plan will come into effect from 2017.
• Brazil’s former president Luiz Inacio Lula da Silva is facing court on charges of hampering what has become known as Operation Carwash – a major investigation into government corruption heavily involving the senior management of state-owned giant Petrobras. Lula da Silva has denied the allegations.
