Geopolitical Notebook
Sources
- High-ranking Turkish armed forces liaison officer
- Turkish editor of a major daily publication
- UAE oil ministry source
Turkey is escalating the situation on the Syrian border, vowing an offensive operation at any moment against US-backed Kurdish forces fighting the Islamic State in Syria. In other words, this would be an attack on the US-controlled part of northeastern Syria—a potential situation that Washington has continued to downplay, but which would have high-level geopolitical repercussions, with Russia, Turkey and Iran all being allied in Syria.
A high-ranking liaison officer in the Turkish Armed Forces told us last week that the military plans which were drawn up months ago for a new operation in northern Syria have been reviewed and revised in recent weeks to adapt them to the new situation on the ground. “The change mostly happened not in the shape of our own forces but on others, including the FSA, and the YPG. The location and capacity of their units changed in these months, and both they and foreign elements including Americans constructed new bases and other facilities,” he said.
As previously planned, the FSA will play a key role again in Turkey’s planned operation. “However, they will not be allowed to ‘roar’ like they did during the Euphrates Shield,” the source said, stressing that Syrian rebel units will be more strictly tied to the Turkish…
Geopolitical Notebook
Sources
- High-ranking Turkish armed forces liaison officer
- Turkish editor of a major daily publication
- UAE oil ministry source
Turkey is escalating the situation on the Syrian border, vowing an offensive operation at any moment against US-backed Kurdish forces fighting the Islamic State in Syria. In other words, this would be an attack on the US-controlled part of northeastern Syria—a potential situation that Washington has continued to downplay, but which would have high-level geopolitical repercussions, with Russia, Turkey and Iran all being allied in Syria.
A high-ranking liaison officer in the Turkish Armed Forces told us last week that the military plans which were drawn up months ago for a new operation in northern Syria have been reviewed and revised in recent weeks to adapt them to the new situation on the ground. “The change mostly happened not in the shape of our own forces but on others, including the FSA, and the YPG. The location and capacity of their units changed in these months, and both they and foreign elements including Americans constructed new bases and other facilities,” he said.
As previously planned, the FSA will play a key role again in Turkey’s planned operation. “However, they will not be allowed to ‘roar’ like they did during the Euphrates Shield,” the source said, stressing that Syrian rebel units will be more strictly tied to the Turkish command to avoid any “dangerous engagement”, such as with the Americans and the French. “Despite YPG’s defiant calls in recent days, we think that they will leave many towns without fighting seriously, including Manbij, Tal Abyad and Kobane, possibly withdrawing toward Qamishli and Raqqa,” the source said.
As such, we can expect that Turkey will launch a careful operation, hoping that YPG will retreat especially from Manbij, which will then be presented to the Turkish voters as a big victory ahead of March 31 local polls.
Meanwhile, Trump is thought to have attempted to calm Erdogan by briefly dangling the Gulen extradition carrot; but if he fails to provide anything substantial (with indications from Washington Monday suggesting this carrot has already been withdrawn), the Turkish President is likely to go ahead with the tastier carrot of northern Syria. This is why we are seeing news reports that Erdogan is saying Washington is “working on” Gulen’s extradition to Turkey, followed by Washington’s denial of such. It’s leverage for both, really. Erdogan will proceed with the Syria plan regardless of Gulen. Washington has recently had the FBI move against Gulenist schools in the US, but this will not likely be enough to tempt Erdogan away from Syria.
Libyan Oilfield Force Majeure
Last week, we noted that Libya’s under-siege Sharara oilfield would be forced to declare force majeure —which has now been realized, as of Monday, December 17.
In the meantime, the situation in Tripoli is cause for concern as various militias have now officially united under the banner of the “Tripoli Protection Force” upon the return of Haithem Tajouri, whom we referenced last week. Their stated aim is to block recent military movements in the western region in an alleged attempt to destabilize Tripoli. It has pledged support for the upcoming Libyan National Conference in January and for the UNSMIL, and will ostensibly operate under the Presidential Council’s government in Tripoli. To wit, the united statement said, “We reject referring the entire Libyan military institution to one person and taking advantage of it to seize power”. This is a direct challenge to General Haftar of the LNA and will not likely go unanswered, according to our sources.
Saudi and American Inaugural Funds Tie-Up
While we noted previously that Qatar’s move to exit OPEC will work to weaken the cartel and Saudi Arabia to the benefit of the US, the fallout from the Khashoggi murder has now added another level to the Saudi story that ties the Kingdom to American election interference. Sources inside Riyadh are significantly concerned about the potential fallout from the Mueller probe into illegal involvement in the Trump campaign—much of which will center around a middleman by the name of Rashid al-Malik, who enjoyed close relations with Trump affiliate Thomas Barrack and Colony Capital. But in the meantime, our official sources in the UAE say that Abu Dhabi has recovered half of the $100 million in cash that they had earlier given Nader. So, not only is OPEC going to be weakened, while Qatar steps in as with its shiny new reputation, but the entire GCC could take a hit in the US. With the Senate already seething over the Khashoggi murder and evidence of MBS’ involvement, if the Saudis are found to have interfered in the presidential elections, it will no longer be open for Trump’s dismissal. The biggest cause for concern here is the wild unpredictability of MBS that could arise out of the growing damage to his reputation, which weakens his position in the Royal family.
It’s not Qatar’s only diplomatic victory, either. The WTO this week said it would investigate Qatar’s allegations of intellectual property breaches against Saudi Arabia—overriding Riyadh’s insistence that the WTO had no authority to hear the case. The Canadian government is also looking to get out of a multibillion-dollar arms deal with the Saudis, which—if it happens—will be more cause for celebration in Doha, which appears to be emerging stronger from the Saudi-led economic blockade.
Global Oil & Gas Playbook
M&A activity has picked up once again in the North Sea, with an actual race between Chrysaor and Premier Oil for the acquisition of Chevron assets in the area. The assets are valued at over $2.5 billion and include stakes in six fields and one production platform, plus a stake in another field, operated by BP: Clair. This divestment alone could generate as much as $1 billion for Chevron.
Chevron has been divesting its North Sea operations for a while now as it seeks to focus on higher-return, lower-cost projects but the presence of two suitors for the assets clearly speaks that one man’s trash is another man’s treasure. Chrysaor is one of the biggest private equity-backed energy independents that are gradually replacing the supermajors in the North Sea. It has hired BMO and Jefferies to help in the discussions.
Premier Oil is another independent focused exclusively on the North Sea that has serious growth plans for the region. It may have to find a partner if it is to acquire all the assets of Chevron, or opt for a partial acquisition, according to analysts. The deadline for the first round of bids is due before the end of this month.
Deals, Mergers & Acquisitions
- Petrofac has finalized the sale of its interest in the Greater Stella Area in the North Sea to Ithaca Energy, a subsidiary of Israel’s Delek Group. Ithaca agreed to pay $146 million for the stake plus a deferred consideration of $120 million, to be paid between 2020 and 2023, and another $25 million, contingent on certain field performance in the GSA. The area contains two fields, Stella and Harrier, as well as the Hurricane discovery and the Twister project.
- Total has sold part of its stake in the Ichthys LNG project off the Australian coast to operator Inpex. The divestment, totaling 4%, generated $1.6 billion for the French company, which said the sale was motivated by the cost overruns at Ichthys, which began producing earlier this year.
- Russia’s Rosneft has reportedly quit a partnership with the National Iranian Oil Company that would have involved investments of up to $30 billion and resulted in production of 1.1 million bpd of oil equivalent. NIOC, however, rejected the reports, saying no contract had been signed with Rosneft to begin with.
- Eni has sold a 35% interest in three offshore blocks in the Gulf of Mexico to Qatar Petroleum. The three, Amoca, Mizton, and Tecoalli, comprise the Area 1 project in the shallow waters of Mexico’s Campeche Bay. After the finalization of the deal, Eni will continue to be the operator of the project with its 65% stake.
Tenders, Auctions & Contracts
- Baker Hughes has won a stimulation and well-testing deal from Saudi Aramco for conventional oil fields across the Kingdom in order to optimize production. The contract would be valid for three years with an option of two extensions, each by one year. While the size of the deal was not disclosed, Baker Hughes said it will create more than 200 new jobs and indirectly support another 300.
- Thailand’s state-owned energy major PTT has outbid Chevron for two offshore natural gas blocks, winning ten-year concessions for their development. Chevron was the operator of one of the blocks, Erawan, for more than 30 years and PTT was the operator of the other block. Erawan is the largest gas deposit in Thailand, producing 1.24 billion cu ft of gas, with the second block, Bongkot, pumping 870 million cu ft.
- In partnership with French EDP Renewables, Shell won a tender for a large-scale offshore wind power project in the United States. The two companies’ joint venture, Mayflower Wind Energy, offered $135 million for the exclusive rights to the 1.6 GW project off the coast of Massachusetts. When built, the wind farm would have the capacity to power close to 700,000 homes.
- Exxon and Angola’s state energy firm Sonangol have inked a preliminary contract for the development of three oil and gas blocks in the Namibe Basin. The deal is part of Angola’s government’s efforts to boost oil production with the help of foreign investment. The offshore Namibe Basin has being compared in terms of resource potential to Brazil’s prolific Santos Basin.
Discovery & Development
- London-listed energy independent Wentworth Resources has announced it will pull out of Mozambique to focus on its exploration operations in Tanzania. The company, whose business is focused on East Africa, said it will relinquish its exploration license for the Tembo block, in the gas-rich Rovuma Basin, where Anadarko and Eni also have a presence.
- Crude oil production from the Halfaya field in southern Iraq has increased by 100,000 bpd to a total 370,000 bpd, amid efforts by Baghdad to raise the country’s national total. The Halfaya field is operated by PetroChina and local Maysan Oil Co. This level of production will be further boosted to 470,000 bpd, once the new production facility, which has a capacity of 200,000 bpd, reaches full utilization.
- Eni has announced a new oil discovery off the Angolan coast. The Italian company has estimated the reserves of the field at 170 to 200 million barrels of light crude. The discovery was made in Block 15/06 and is the second one for the block. Eni’s current production in Angola averages 150,000 bpd.
- Suncor expects oil production next year to rise by a tenth despite a government-imposed restriction on Albertan oil production of 325,000 bpd. Suncor, the second-largest oil company in the country, said it expected to produce 780,000-820,000 bpd of crude in 2019m, up from this year’s 730,000 bpd. The government cuts will only be in effect temporarily.
Politics, Geopolitics & Conflict
- A ceasefire between the Houthi rebels in Yemen and the Saudi-led coalition fighting them has entered into effect after tough talks brokered by the UN. The ceasefire concerns Yemen’s biggest and most important port, Hodeidah, which has become the main theater of fighting.
- A financial system aimed at ensuring Europe continues to trade with Iran should go live before the end of the year, including the special purpose vehicle that should handle payments for Iranian oil.
- A ceasefire between the Houthi rebels in Yemen and the Saudi-led coalition fighting them has entered into effect after tough talks brokered by the UN. The ceasefire concerns Yemen’s biggest and most important port, Hodeidah, which has become the main theater of fighting.
- A financial system aimed at ensuring Europe continues to trade with Iran should go live before the end of the year, including the special purpose vehicle that should handle payments for Iranian oil.
