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Eni’s Oil Tanker Fiasco

Global Intelligence Report - 13th February 2019

Oil Workers

Sources

-Western diplomat in Libya
- Libyan government official
- Energy consultant with background in Libyan oil plays
- Political analyst/expert on Libyan domestic politics and geopolitics
- Turkish private intelligence source

The Global Power Play for Libya: This Is Where It Ends

There is now almost no doubt that there is a parallel organization operating within the Libyan Interior Ministry—a concern even recently expressed by Interior Minister Fathi Bashagha, and confirmed by a Western European diplomatic source. That parallel organization represents the interests of external actors—primarily Western countries, and most clearly, France and Italy.

The climax of this Libyan power play is coming to a close right now, and 2019 is very likely to see its conclusion. That conclusion is now, more than ever, shaping up to be Ghaddafi 2.0 in the form of the rise to power of General Haftar of the Libyan National Army (LNA).

The GNA failed. The Petroleum Facilities Guard (PFG) also failed to protect Libya’s oil infrastructure; nor did it have any chance of succeeding when it was operating like a fractured group of militias trying to secure Libya’s oil resources for one group or another. When they succeeded in hijacking Libya’s oil resources for two years, which only ended some 8 months ago, they gave Haftar the justification he was waiting for, and he jumped on it.

But Haftar is but a small, localized being in the larger picture. According to our diplomatic source, it’s the bigger game we should all be watching: “Libya has become the battleground between rival foreign interests vying to gain control of the country’s energy sector”. Haftar is playing his part well. As the head of the LNA, he is determined to unify Libya militarily and to that end, he has split some of Libya’s main government bodies, including the Central Bank, the House of Representatives and the Security Forces.

All the while, the GNA continues to lose the support of Western countries, while Haftar continues to be supported by Egypt and the UAE, and is also gaining the backing of France and Italy. At the same time, the GNA is dangerously gaining the attention and support of Qatar and Turkey.

The UN-backed GNA is also facing internal divisions that have only added to the fighting. For example, GNA’s internal divide is still the main reason why the 2019 budget is yet to be agreed as its financial priorities clash with the Central Bank’s objectives.

According to a Western political analyst specializing in Libya and the wider region, Haftar’s growing attractiveness within certain Western countries is driven by the need for political stability rather than the promotion of democracy. This shift amongst Western countries is also seen in the recent attempts by the Attorney General’s Office to assert its presence in establishing political stability. Since January 2019, the Attorney General’s Office has issued 48 arrest warrants, including for Ibrahim Jadran, the former commander of the PFG—the same entity that was supposed to act as an independent body and protect the country’s oil installations. These warrants were perceived as another attempt by Western countries to support Haftar, weaken the current governing structure and neutralise militia groups that oppose the LNA.

An energy consultant that has operated in Libya’s energy sector for two decades highlighted that “2019 will see a major shift in allegiances in preparation for the upcoming elections and the rise of Haftar as the new main political figure”.

It has all become even clearer as of Monday, when Haftar’s forces took control of the country’s biggest oilfield, the Sharara, which had been shuttered due to protesters and “friends” in the form of another PFG militia. This is a 300,000/bpd oilfield that will now resume production. So far, the pattern has been clear: Libya’s oil will keep producing as long as Haftar gets control; otherwise, it’s at the mercy of fractious militias. This is what the biggest external powers are looking at now—not a democratic leadership for Libya. Just whatever will bring the stability necessary to keep the oil flowing. Haftar is now supposed to hand the field over to the National Oil Company (NOC). That hasn’t happened yet, so we assume negotiations are still ongoing but expected any day. Late on Monday, the NOC said it wasn’t reopening the field until it was assured of worker safety, but this is code for “Haftar hasn’t handed it over yet”. Force majeure has not yet been lifted. It’s also possible that Haftar himself is still negotiating with the allied armed Tuareg tribe that retook the field for him.

Nothing ‘Mysterious’ About The Man Behind Turkey’s Venezuelan Gold

Bloomberg has wooed us with headlines about the “mysterious” Turk helping Maduro move Venezuelan gold, but the individual is anything but a ghost. The individual is jeweller and gold trader Ahmet Ahlatci and he is a well-known acquaintance of Reza Zarrab, a Turkish-Iranian-Azeri gold trader and the leader of a criminal network who was arrested in the US in 2016 for Iran sanctions busting via gold transactions. According to a Turkish private intelligence source, after Zarrab’s arrest, another gold trader (and jeweller) Ahmet Ahlatci, took over his network. Now, he’s found a new source of gold for his refineries—Venezuela. The source knew at least one other Turkish tycoon involved in transporting Venezuelan gold to Turkey with his private aircraft. But they are all afraid of U.S. sanctions, and are being extremely careful not to end up like Zarrab.

Global Energy Advisory February 13, 2019

The balance of oil production in South America is shifting fast with Guyana, a country that currently doesn’t pump even a barrel daily, about to become a major producer, possibly even overtaking troubled neighbor Venezuela in just five years.

Exxon, which is developing the Stabroek block offshore Guyana recently announced two new discoveries there, bringing the total up to a round dozen, with reserves estimated at more than 5 billion barrels. There are problems with Venezuela, whose president, Nicolas Maduro, has threatened Exxon it will run into problems if it drills in disputed waters between the two countries but Maduro’s own position is uncertain, so the prospects for Stabroek remain bright.

According Exxon and its Guyana project partner Hess Corporation, the Stabroek block could pump 750,000 bpd in 2025. That’s less than what Venezuela produces at the moment, at around 1 million bpd, but if the political situation remains as unstable as it is now and U.S. sanctions remain in place, the country’s total will continue falling and could even reach 600,000 by 2025.

Exxon has scheduled the start of production in Stabroek, at the Lisa field, for mid-2020, at a rate of 120,000 bpd. The second phase of the project should start this March, with production seen to begin in 2022. A third section of the block will begin development later this year, with startup scheduled for 2023. It looks like the tiny South American country will become a factor to reckon with in global oil while its neighbor risks sinking further into an economic crisis.

Deals, Mergers & Acquisitions

- Total is mulling over a takeover bid for Dutch energy company Eneco, which could be worth up to $3.14 billion. No decision has been made yet as Total stays true to its cautious approach to M&A but if it decides to make a bid, it will have serious rivals including Shell. Eneco is one of the Netherlands’ top suppliers of natural gas and electricity, two areas where Total has been expanding actively in the past few years.

- Noble Energy has bought into two [pipelines that will move crude oil from the Permian to Gulf Coast refineries. A subsidiary of the company acquired 30% in the EPIC pipeline and another 15% in its twin EPIC Y-Grade pipeline. Noble said it expected its purchases to cost it about $500-600 million.

- Equinor is looking into acquisition opportunities both at home and abroad, including in renewable energy as well as in its core business area of oil and gas exploration and production. One of the potential targets could be Indian ReNew Power, whose shareholders Goldman Sachs and the Canada Pension Plan are looking for a buyer of their stakes.

Tenders, Auctions & Contracts

- Somalia’s government has released a legal and regulatory framework for oil block tendering in hopes to jumpstart its oil industry after three decades of idling. The government is now preparing to hold its first oil block tender after delineating as many as 50 blocks spanning more than 173,000 sq km. proposals will be accepted until July 11.

- A Mozambican LNG project could get its final approval this year, with the country’s government expecting it by March or April. If approved, the project could tap reserves of as much as 75 trillion cubic feet. The biggest shareholder in the Area 1 project is a consortium of Indian energy companies, Mozambique’s state energy firm ENH, and Anadarko.

- India has announced the third oil and gas block tender under new, laxer rules, eyeing proceeds of $700 million for the 23 blocks it is offering. These include 10 onshore blocks with the rest offshore, among them one deepwater block. The Open Acreage Licensing Program aims to spur more local exploration and production as India is currently overdependent on imported crude and fuels.

- Algeria’s state energy company Sonatrach has inked a $1-billion deal with Indian Larsen & Toubro for the construction of new natural gas plants in the North African country. Algeria, which is a major natural gas supplier to Europe, last year pumped 135 billion cubic meters of the fuel. The new plants will produce some 11 million cubic meters of gas daily.

- Last year saw central banks from around the world buy 651.5 tons of gold, which is the second-highest amount on record and a 74% increase from 2017. The increased demand for gold from central banks reflects a heightened sense of uncertainty regarding the future of the global economy with too many wild cards in the game for bankers’ comfort. The annual increase in gold-buying was the highest in about 50 years.

Discovery & Development

- Equinor’s Johan Sverdrup is on track to begin commercial production in November this year, on schedule. The field is one of the five largest in Norway’s continental shelf, with resources estimated at between 2.1 and 3.1 billion barrels of oil equivalent. It is also one of the most significant discoveries in the North Sea in recent history and a cornerstone of Norway’s future oil and gas production strategies.

- Total has announced a large-scale discovery offshore South Africa, which could contain as much as 1 billion barrels of oil equivalent. The discovery was mostly gas, according to CEO Patrick Pouyanne, as well as condensate. This could turn out to be the biggest oil and gas discovery in South Africa.

- South Sudan’s oil production should rebound to mover 350,000 bpd by the middle of 2020, with this year’s total rising from the current 140,000 bpd to 270,000 bpd, according to government plans. The country, which split from Sudan in 2011 has been plagued by conflict and only recently improved its relations with Sudan enough to make its oil industry viable again: Sudan is home to the only pipeline that could carry South Sudanese oil to the coast and export markets.

- A $1-billion solar farm has begun operation in Japan. It is the biggest such facility in the country, featuring 900,000 PV panels, with a capacity of 235 MW. The facility is expected to generate enough electricity to power 80,000 households.

- Meanwhile in the UK the world’s largest offshore wind farm is about to begin operation. The 1.2-GW Hornsea One project is still in construction and this will be its first phase of development. The total capacity of the farm will reach 6 GW after the completion of three more phases.

Company News

- BP beat analyst expectations, reporting a net profit of $12.7 billion for 2018 versus a forecast $11.88 billion. The result was also a twofold increase on the year.

- Rosneft reported a 2.5-fold increase in net earnings for 2018, with free cash flow for the year up by more than 100% to $17.9 billion.

- Suncor reported a net loss for the fourth quarter of 2018, at $0.14 per share, versus earnings of $0.63 a year earlier. The loss came on the back of a mefty foreign exchange loss and low oil prices even though production hit a new record of 831,000 barrels of oil equivalent daily.

- Record-high oil production helped Total book a 28% rise in net profits for 2018, to $13.6 billion. Cash flow was also higher, by 18%, at $26 billion.

- Shell has agreed to pay a fine of $2.2 million for a spill of almost 2,000 barrels of crude in the Gulf of Mexico, which occurred in 2016.

Politics, Geopolitics & Conflict

- The Sharara oil field in Libya has once again become the scene of a political clash, this time between the Libyan national Army, which currently controls the force majeure-d field, and the Petroleum Facilities Guard, sent to take over by the Un-backed government in Tripoli.

- Venezuela’s opposition is calling for another protest against the Maduro government with a demand for aid to be let into the country. Maduro has countered with the argument that the U.S. aid is a stepping stone to an invasion.

- The Islamic state might have as many as 18,000 fighters in Iraq and Syria despite the successful offensive against the terrorist group in both countries. This confirms predictions that the war with IS is far from over despite the breakdown of all their strongholds in the region.

Elsewhere

China has established the world's largest clean coal power generation system, setting a new milestone in cutting emissions and saving energy. According to the data from National Energy Administration, by the end of the last year, the capacity of the coal power generators with ultra-low emissions reached more than 750 million kilowatts, accounting for over 75 percent of the country's total installed capacity of coal power generating units.

President Donald Trump urged the Tennessee Valley Authority (TVA) to consider "all factors" before the agency votes on whether to close a coal plant in Kentucky. TVA, federally owned corporation, is studying whether to close the Paradise Fossil Plant's Unit 3 generator, as its two other power producing units have already been converted to cleaner-burning natural gas. The agency provides power to roughly 10 million people in seven states, including Tennessee, Kentucky, Alabama and Mississippi.

In 2018, the U.S. solar industry lost jobs for the second year in a row, according to numbers reported by the non-profit Solar Foundation. According to the study, the number of jobs in the solar industry fell by 8,000 to 242,000 in 2018, down 3.2 percent over 2017. In 2017, the solar industry lost 10,000 jobs after the “boom year” of 2016.

Dubai authorities announced to seek partners this year to build its first solar-powered desalination plant as the emirate tries to diversify away from burning fossil fuels to increase its water supply. Using reverse osmosis technology, the plant will have capacity to produce 120 million gallons a day of drinkable water by 2024.

According to Energy Information Administration data, wind power is on track to surpass hydropower as the U.S. grid’s largest source of renewable electricity in 2019. The EIA report says it expects a total of 10.9 GW of wind capacity to come online nationally in 2019.




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