Politics, Geopolitics & Conflict
• The U.S. seems to be close to exhausting its options in Syria and Iraq. While the battle for Mosul, IS’ stronghold in Iraq, goes on with Iraqi troops on the group and U.S. remote support, Washington is planning to take on Raqqa, the HQ of the terrorist group in Syria. The problem is that as the so-called moderate opposition forces in the war-torn country are showing themselves to be not all that moderate, the Kurdish-dominated Syrian Democratic Forces seem to be the only option to lead the attack on the ground. It’s fairly certain the U.S. won’t send in its own troops to liberate Raqqa from IS and besides the Kurdish forces, its allies in Syria have been revealed as uncomfortably radical. The problem with the SDF is geopolitical: the Kurds have been treated as a pain in the neck by Turkey for decades because of their push for independence. Allying with them more closely won’t do any favors for Turkish-U.S. relations. On the other hand, with what seems like a complete transformation of U.S. politics in the making after the November 8 elections, nothing can be taken for granted or certain.
• Meanwhile, the battle for Mosul continues, with the prospects of an Iraqi success in driving IS out growing. However, according to observers, this will not result in peace returning to Iraq. Quite the contrary: the geopolitical divides in the country and the power play in the Middle East will only become more obvious with direct implications…
Politics, Geopolitics & Conflict
• The U.S. seems to be close to exhausting its options in Syria and Iraq. While the battle for Mosul, IS’ stronghold in Iraq, goes on with Iraqi troops on the group and U.S. remote support, Washington is planning to take on Raqqa, the HQ of the terrorist group in Syria. The problem is that as the so-called moderate opposition forces in the war-torn country are showing themselves to be not all that moderate, the Kurdish-dominated Syrian Democratic Forces seem to be the only option to lead the attack on the ground. It’s fairly certain the U.S. won’t send in its own troops to liberate Raqqa from IS and besides the Kurdish forces, its allies in Syria have been revealed as uncomfortably radical. The problem with the SDF is geopolitical: the Kurds have been treated as a pain in the neck by Turkey for decades because of their push for independence. Allying with them more closely won’t do any favors for Turkish-U.S. relations. On the other hand, with what seems like a complete transformation of U.S. politics in the making after the November 8 elections, nothing can be taken for granted or certain.
• Meanwhile, the battle for Mosul continues, with the prospects of an Iraqi success in driving IS out growing. However, according to observers, this will not result in peace returning to Iraq. Quite the contrary: the geopolitical divides in the country and the power play in the Middle East will only become more obvious with direct implications for the country’s oil industry. The Kurds are stronger in Iraq than they are in Syria, and are likely to push for more influence. The U.S. is taking a damage control approach, keeping away from direct intervention, and Saudi Arabia, Iran, Turkey, and Russia are – quietly for now – wrestling for more influence. Chances are that Iraq will remain a focal point for regional geopolitical tension in the near future.
• OPEC has entered the final phase of its production cut negotiations. Here is a brief timeline of events so far.
September: Saudi Arabia initiates talks about a production freeze as prices stay around $50 a barrel. There is general agreement both inside and outside OPEC that such a move is necessary.
October: A Technical Committee in charge of hammering out the details of the agreement is set up, chaired by Algeria.
Venezuela turns into the most vocal defender of a freeze or a cut as it is perhaps the hardest hit by the low prices. Government officials talk with Gulf, Russian and Iranian counterparts, and even call on the U.S. to join the freeze talks.
Russia, having declared general support for a freeze, refrains from any more specific remarks, repeatedly noting only that if it is to join the drive, OPEC members should be unanimous about it.
Iran, Nigeria, and Libya are exempted from the freeze because of market share loss for reasons other than the oil price crash.
Iraq insists it is exempted too as it is fighting IS and needs the oil revenues. Saudi Arabia refuses.
Production freeze talks turn into production cut talks as it becomes clear the Exempted Club is fast building its output, and so are other OPEC members, plus Russia, Brazil, and Kazakhstan.
November: Saudi Arabia threatens to turn its own taps up if its co-members, namely Iraq, don’t play along with the cut.
Venezuela’s Nicolas Maduro says, after a meeting with OPEC gensec Mohammed Barkindo, that the cartel is ready and willing to use force to make members comply with the agreement, although the means by which this force would be exerted remain unclear.
Russia says it’s optimistic about a final agreement, and so are many analysts. Some argue that if the agreement falls through, OPEC will lose all relevance on international markets. Opexit is also an option for some members.
Iran, Iraq oil ministers say they will not attend talks on the cut between Saudi Arabia and Russia in Qatar.
Tenders, Auctions & Contracts
• Pakistan has invited Chinese energy companies to invest in its oil and gas industry as part of the bilateral China-Pakistan Economic Corridor, which is focused on infrastructure projects in Pakistan. LNG is a separate area of interest, according to Pakistan’s Petroleum and Natural Resources Minister Shahid Khaqan Abbasi.
• Israel is accepting bids for the development of offshore oil and gas deposits in its Mediterranean shelf. A total 24 blocks have been tendered, all in the country’s exclusive economic zone. The deadline for bid submission is April 2017 and the winners will be made public three months later.
• Mexico is tendering 14 onshore oil exploration licenses. The licenses are for 25 fields in the Burgs basin, the Tampico-Misantla area, the Southeast basins, and the state of Veracruz. Winners will be announced in July 2017.
• The UK and Norway will see a higher rate of oil and gas field going out of commission over the next decade, according to Oil and Gas UK. More than 100 platforms are seen to be either completely or partially removed from the two countries’ shelves until 2025 and more than 1,800 wells will be plugged and abandoned.
Discovery & Development
• The U.S. Geological Survey has announced that the Wolfcamp shale in the Permian contains technically recoverable reserves of 20 billion barrels of crude, which makes it the largest onshore unconventional oil discovery in history. The size of the reserves is three times that of North Dakota’s Bakken formation.
• Libya’s Es Sider terminal, the largest of the four export terminals in the Oil Crescent could start shipping cargoes starting next week. The port is currently undergoing some maintenance work. Es Sider has been closed for two years on force majeure grounds.
• Turkish Petroleum plans to spend $1.7 billion on exploration next year, both at home and abroad. Of this, the state-owned energy company will allocate $1.45 billion on overseas exploration for oil and gas. Currently, Turkish Petroleum has presence in Russia, Iraq, Azerbaijan, Libya, and Afghanistan.
• Ghana will soon get its third floating production, storage and offloading vessel (FPSO), to be located in the Sankofa OCTP block of fields, operated by Italian Eni. Gas from the block will be used for power generation. Oil is planned to start flowing at a daily rate of 80,000 barrels in 2017.
• Russia’ Yamal LNG project is at 68 percent of completion, with first production set to start in late 2017, when the completion rate reaches 85 percent. The $27-billion project is operated by Novatek and, according to CEP Leonid Mikhelson, will stay within budget.
• Ithaca Energy expects first commercial oil from its project in the Greater Stella Area in the North Sea to start flowing before the end of November. The UK company said production costs at the field at $23. Output is seen at 20,000-25,000 barrels of oil equivalent.
• Africa Oil, Tullow Oil, and Maersk Oil plan to drill up to eight exploration and appraisal wells in Kenya, beginning next month. The companies have partnered on oil exploration and production in Kenya’s newly discovered reserves. The wells should increase proven reserves and improve the chances of development projects and pipeline construction getting the necessary funding.
• Shell, French Total, and South Korea’s Kogas are discussing a gas pipeline from Iran to Oman with officials from the two countries. The construction of the pipeline, to supply some 1 billion cubic feet of gas from Iran to Oman, has been estimated to cost $1.5 billion. The initial agreement on the project was signed three years ago.
Regulatory Updates
• Nigeria will unify its oil regulation agencies into one body in a bid to improve efficiency. According to the draft National Oil Policy, the different bodies currently responsible for various aspects of oil industry regulation are prone to dysfunction. The new Petroleum Regulatory Commission will take on powers from the Nigerian National Petroleum Corporation, the Department of Petroleum Resources, and the Petroleum Products Pricing Agency, as well as others.
• Russia’s Economy Minister Alexei Ulyukayev has been charged with bribery and detained by the Investigative Committee. According to the authority, Ulyukayev has received $5 million for the Economy Ministry’s green-light of Rosneft’s acquisition of smaller rival Bashneft. The deal itself, however, is legal, the Committee said.
• Fitch has revised to Stable from Negative its outlook for the Russian oil and gas industry for 2017. The ratings agency said that tax rates in 2017 for Russian oil and gas firms would remain largely the same as this year’s, although mover the medium term they could be increased.
