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Global Energy Advisory November 24, 2017

Permian

WTI prices got a serious boost this week after TransCanada shut down the Keystone pipeline following a leak of 5,000 barrels in South Dakota. The leak could not have come at a worse time for the Canadian pipeline builder and operator: just three days after the leak Nebraska’s regulatory authorities removed the last hurdle standing in front of Keystone XL.

The regulators, however, suggested an alternate route for the section of the pipeline that passes through Nebraska, an alternate route could give opponents one more cause to challenge the project in court. Already a group of environmental organizations announced victory when a federal judge gave the go-ahead to a lawsuit against the presidential administration for approving Keystone XL. The suit alleges the approval was based on inadequate environmental impact data.

Meanwhile, South Dakota regulators warned they might reconsider their own approval of Keystone XL if an investigation into last week’s leak discovers that TransCanada had violated the conditions the state set in exchange for approving the first Keystone project.

The company is still working to fix the section of the 590,000-bpd pipeline that leaked and has warned that as a result its shipments from Canada will be 85% lower until the end of the month. WTI is at a two-year high.

Deals, Mergers & Acquisitions

• Tellurian has reached an agreement with Texas-based Rockcliff Energy to buy natural gas assets for over $85 million. The assets are located in the Haynesville shale play and produce some 4 million cubic feet daily. Reserves are estimated at 1.3 trillion cubic feet. According to Tellurian, the gas from the acreage can be extracted and delivered to market at $2.25 per mmBtu and Tellurian could produce LNG from it at $3 per mmBtu.

• Ineos has acquired majority interests in two exploration blocks in the deep-water section of the UK continental shelf in the North Sea from Siccar Energy. This acquisition follows the purchase of DONG Energy’s North Sea acreage earlier this year, which cost the chemicals company $1 billion and turned it into one of the top North Sea oil producers pretty much overnight. In October, Ineos further expanded its North Sea presence with the acquisition of BP’s Forties pipeline network, which transports some 40% of the UK’s oil production to shore.

• Private equity investors are hungry for pipeline deals in the North Sea. According to one such firm, Ancala Partners, which has an extensive portfolio of midstream assets, the advantage of pipelines is that they generate predictable income and come with attractive growth prospects. For producers, selling infrastructure would also be beneficial as it would release quite a lot of capital they could put to other use.

• BP has struck a deal with Serica Energy to sell it a package of North Sea assets for a total $400 million. The assets include stakes in the Bruce, Keith, and Rhum fields and will turn Serica Energy into one of the top three oil producers listed in Europe. The size of the stakes ranges from 35% to 50%.

• India’s ONGC Videsh will buy a 15% stake in an offshore oil block in Namibia from Africa-focused explorer and producer Tullow Oil. The deal is part of the Indian company’s international shopping spree to make India less dependent on crude oil imports. Tullow, however, will become the operator of the block after it acquires a 15% stake in it from the other partners.

Tenders, Auctions & Contracts

• Emirati energy company Mubadala has expressed interest in oil and gas investments in Sudan, and more specifically in its section of the Red Sea. The area has yet to see major development but for this to happen, new seismic survey data is necessary, said Sudan’s oil and gas minister during an industry event in the UAE. After the split between Sudan and South Sudan, the bulk of oil reserves remained with the southern state.

• Wood Group has started work under a multimillion-dollar contract with Ancala Midstream concerning the day-to-day operation of a pipeline that transports gas from the North Sea to a processing facility in Scotland. The contract, according to Wood Group’s CEO, will strengthen the company’s presence in the UK continental shelf and boost its reputation in the industry.

• Ecopetrol has won the rights to develop four offshore blocks in the U.S. section of the Gulf of Mexico in partnership with Spain’s Repsol. The lease is for five years, with the depth of the blocks reaching as much as 240 meters. According to Ecopetrol, they are also in close proximity to operating production platforms, which should speed up first production in case a meaningful discovery is made.

• Rosneft has sealed an oil supply deal with China’s CEFC. Starting January next year, the Russian giant will supply to the Chinese company up to 60.8 million tons of crude oil over a period of five years. The price will be tied to global benchmarks. Earlier this year, CEFC, which is shaping up as the new big player on the global energy market, paid more than $9 billion for a 14.2% stake in Rosneft.

Discovery & Development

• Oil explorer FAR has discovered a reservoir containing at least 1 billion barrels of crude offshore Gambia. The Australian company, which focuses on exploration in West Africa, said geotechnical data has revealed strong reserves in two offshore prospects, Samo and Bambo. The Samo prospect is particularly promising – the chance of a successful discovery is as high as 50%. The two are adjacent to FAR’s SNE discovery in Senegal waters.

• The Nigerian National Petroleum Corporation and Chevron have completed an alternative financing agreement worth a total $1.7 billion that will see Nigeria’s crude oil production increase by 39,000 bpd. The increase will come from the Sonam and Okan fields.

• Trafigura has plans to build a second LNG terminal in Pakistan as demand for the fuel grows and local production is not enough to meet it. The commodity trading house announced the plan at the official opening of the first floating storage and regasification terminal in Pakistan, in the port of Karachi. The terminal will double Pakistan’s current regasification capacity and will be able to supply 90 million cubic feet of gas to consumers on a daily basis.

• BP and Eni are among those interested in taking over the development of the giant Majnoon field in Iraq after Shell leaves in 2018. That’s according to Iraqi government officials, who said both companies had approached the country’s Oil Ministry with official expressions of interest but no talks have been started yet. BP is the operator of another large filed, Rumaila, and Eni operates the Zubair field whose reserves are estimated at 4 billion barrels.

• Dana Petroleum, a subsidiary of the Korean National Oil Company, has begun production from a $2-billion oil projects in the North Sea. The Western Isles project involves two fields with four production wells drilled by the Korean company. The reserves of the fields are estimated at 100 million barrels of oil equivalent, of which 45 million barrels are recoverable.

• FERC has cleared Kinder Morgan to build an extension to a pipeline that will increase the deliveries of feedgas to the fifth liquefaction train at the Sabine Pass LNG complex operated by Cheniere Energy. The extension will increase deliveries by 600,000 Dt per day.

Politics, Geopolitics & Conflict

• Germany is facing a government crisis after Chancellor Angela Merkel failed to form a broad coalition after this year’s elections. This means that Germans are looking at new elections and Merkel is looking at the door out of politics.

• The Supreme Court of Kenya has upheld the election results that showed current incumbent Uhuru Kenyatta as winner. The ruling comes after in August the same court ruled Kenyatta’s win null and void. It has now cleared the president for a second term.

• Zimbabwe’s president, Robert Mugabe, has stepped down, after his own party voted him out. He will be replaced by Emmerson Mnangagwa, who says investors are already flocking to Harare.




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