Politics, Geopolitics & Conflict
The fate of Libyan oil is at a critical juncture. The eastern port of Hariga has been blocked by the associates of the eastern government in Tobruk, who feel they have been sidelined as the powers that be carve up the country’s government (read: oil wealth). To gain leverage, they have attempted, through a parallel National Oil Company, to export unilaterally. This failed. The UN blacklisted the ship and it was turned back. Then they blocked exports from the Hariga port, which the eastern government controls. Earlier this week, the Libyan authorities in the capital Tripoli said they had agreed to unblock the port allow exports again. But in the meantime, it’s the Haftar militias that are in control of the oil fields in the Marada and Zilla basins. That’s a total of 14 fields—guarded by fully armed militias. These militias are loyal to General Khalifa Haftar.
Haftar is an important figure here. He is a former Gaddafi loyalist and one of his most important military generals—until he had a falling out with Gaddafi and exiled himself to the U.S., where he was likely a CIA source. He returned to Libya in 2011 and was a key player in the toppling of Gaddafi. He commanded a rebel force in the east. We didn’t hear much from him after that, until early 2014, when he made a move for control and was a fundamental fighting force against the Islamist Ansar al-Sharia (and also now against the Islamic State (ISIS).
He was appointed commander of the Libyan National Army (LNA) in March 2015 by the elected parliament of Libya. It was the LNA, under Haftar, that managed to push ISIS out of Benghazi in the east earlier this year. But—and there is a big BUT—now we’ve got the UN-backed Government of National Accord, which sidled into Tripoli (controlled by an Islamist-leaning government backed by various militias), bought off the militias and has now declared a unity government that is leaving the previously recognized government in Tobruk (the east) marginalized in the process. Haftar is livid, partly because he isn’t being handed the defense portfolio, which he likely assumed would be his. The House of Representatives (the one that appointed him military commander) can’t get enough votes to approve the new government of national accord, and Haftar is likely the one keeping this from happening. And he’s using oil for leverage to get back into a game for which he has been an integral player (particularly in fighting back Islamic militants). So now there is a three-front war for Libya’s oil unfolding and Haftar will have to fight back not only ISIS threats to the oil, but the ‘new’ government that has sidelined him. Of course, the markets are happy to wait a bit longer for Libya to start ramping up its exports again—but Libya won’t hold out much longer one way or the other.
It is against this backdrop that the U.S. Treasury Department has added Libyan House of Representatives president Ageela Saleh to its sanctions list for obstructing the approval of the Government of National Accord. This move has effectively blocked Saleh’s US assets. Prior to this, the U.S. blacklisted Khalifa Ghwell, General National Congress PM.
Discovery & Development
• Norway has awarded 10 oil licenses in the Arctic in an area that has not been open to exploration for over 20 years. This area is an offshore zone in the Arctic Barents Sea that borders Russia. The licenses went to 13 companies, including Statoil, ConocoPhillips and Chevron.
• Tullow Oil Norge and Total E&P have each been granted separate drilling permits for offshore wildcatters in the central North Sea. In its license, Tullow is the operator with a 40% interest. Concedo ASA has 20%, Wintershall Norge 20% and Petoro 20%. Tullow’s will be the first well to be drilled in the Johan Sverdrup field, within the production license area. The total wildcat, Block 30/4, is operated by Total with a 51% interest, with Petoro holding 30% and Statoil holding 19%. It will be Total’s third well in this license area.
• Malaysia state-run Petronas has launched its first floating LNG facility (FLNG), which has embarked for the Kanowit gas field, offshore Sarawak. The facility will be 180 kilometers offshore Sarawak. The FLNG can operate in waters between 70 and 200 meters deep and has a 1.2 billion tpy processing capacity.
• Brazilian Petrobras plans to drill 65 new wells this year, with output for the year expected to average 2.145 million barrels per day. The company’s quarterly earnings were just released on 12 May, showing a quarterly loss of US$358 million.
• A local Nigerian company has apparently made a crude oil discovery in Lagos, prompting the Lagos state governor to declare the area an official oil producing state in Nigeria. The discovery was reportedly made by Tunde Folawiyo Petroleum Company Limited, of Badagry, Lagos. There is every reason for Lagos to want to become an official oil producing state: According to the state governor, citing the country’s constitution, an oil producing state gets 13% of the derivatives. Of course, the federal government still has to agree to the claim, which so far is being made to our knowledge only through the Nigerian media. The oil well in question is said to have a 12,000-bpd capacity, with the potential to ramp up to 25,000-50,000 bpd in the “nearest future”. Again, none of this has been independently confirmed.
• Russian Rosneft has won the right to use the Bogatinsky subsoil area in the Russian Sea of Okhotsk, per a decree signed by Prime Minister Dmitry Medvedev. The decree gives Rosneft the right to use the area for subsurface studies, exploration and production. The area covers over 3,000 square kilometers and is believed to have some 82 million tons of oil and over 62 billion cubic meters of natural gas.
Contracts, Licensing, Tenders & Auctions
• The coming weeks will see Greece finish evaluating the bids for its deep-sea oil and gas exploration concessions. Preferred bidders will be announced shortly after the evaluation. Three bids are being evaluated. Rumor has it that French Total SA (as part of a consortium with Greek refiner Hellenic Petroleum and Italian Edison) are behind one of the three bids being evaluated.
• For anyone looking to get in on Kenya’s new oil potential, the country is now reporting that it has 63 total oil and gas exploration blocks, with the addition of 17 news blocks, which it intends to auction off in a new licensing round next year. These aren’t, however, ‘new’ blocks in the traditional sense. In 2012, there were 46 blocks. Now there are new production-sharing contracts that have seen the original companies relinquish 20-25% of their blocks. The 17 new blocks were created from this. Tullow Oil and Africa Oil are the major players here and behind the Lokichar basin discovery of 2012.
• This month, Algeria has granted some $206 million in contracts to American oilfield services companies, including a $75-million contract to Schlumberger; an $11-million contract to Weatherford; a $50-million contract to Baker Hughes BJSP subsidiary (half owned by Algerian state-owned Sonatrach). Last month also saw a number of Algerian contracts awarded, including a $45-million deal for National Oilwell Varco and another $25-million contract to Schlumberger.
Deals, Mergers & Acquisitions
• Indian media are claiming that Russian state-owned Rosneft is interested in potentially buying as much as 74% of India’s Essar oil company as soon as June this year. There are no confirmations of this coming from the Russian side, but the Indian sides claims that talks are now in their final stages. In July 2015, the two signed a preliminary deal that would see Rosneft acquire a 49% stage in Essar.
• Norwegian Statoil is farming-in to Toronto-listed Valeura Energy’s Banarli exploration licenses in the Thrace Basin, Turkey. More on this as it develops. …
• As activity in the North Sea starts ramping up, in tandem with slightly higher oil prices, BP Plc has also said it plans to acquire a 16% interest in a major North Sea field east of Aberdeen, the Culzean field, from Japan’s JX Nippon. This will double BP’s investment in the field.
Bankruptcy & Debt
• Mexican state-run Pemex has paid off over $5 billion in outstanding debt to contractors and plans to settle remaining obligations in a matter of months.
• The list of bankruptcies has grown again this week, with three more US oil companies added to the list: Halcon Resources Corp (NYSE:HK), Midstates Petroleum Company and Ultra Petroleum.
• The UK’s new Energy Act has officially taken effect, rendering the Oil and Gas Authority (OGA), for all intents and purposes, a government company overseeing the North Sea oil and gas industry as an ‘independent regulator’. The OGA is now has access to external meetings, data acquisition and retention and will have dispute resolution and sanctions authority.
• Iranian oil tankers will start shipping oil to Europe in June. Due to unresolved classification issues, Iranian tankers have been unable to ship to Europe for five years. The country now says it is in talks with the relevant classification bodies and should be back in business by next month. The tankers belong to the National Iranian Tanker Company, which was privatized in 2009. This is said to be the fourth largest tanker fleet in the world, though there is some speculation that it is in need of repair.