• 2 minutes Oil Price Could Fall To $30 If Global Deal Not Extended
  • 5 minutes Middle East on brink: Oil tankers attacked off Oman
  • 8 minutes CNN:America's oil boom will break more records this year. OPEC is stuck in retreat
  • 25 mins The Inconvenient Truth Of Electric Cars
  • 13 hours Here We Go: New York Lawmakers Pass Aggressive Law To Fight Climate Change
  • 2 hours Climate change & Wildfires: More Wildfires To The Western U.S., Will Affect Tens Of Millions Of People
  • 3 hours Hard To Believe: UAE Will Work To Defuse Middle East Tension
  • 4 hours Oil Demand Needs to Halve: Equinor
  • 27 mins The Plastics Problem
  • 3 hours Iran downs US drone. No military response . . Just Completely Destroy their Economy. Can Senator Kerry be tried for aiding enemy ?
  • 30 mins Cherry Picking Climate Data
  • 14 hours Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 4 hours Green vs. Coal: Bavaria Seeks Fast-Track German Coal Exit in Snub to Merkel Plan
  • 11 hours Solar Panels at 26 cents per watt
  • 15 hours Is $60/Bbl WTI still considered a break even for Shale Oil
  • 13 hours Hydrogen FTW... Some Day
  • 12 hours Section 232 Uranium
  • 9 hours Huge UK Gas Discovery

Global Intelligence Report - 7th December 2018

Refinery

Geopolitical Notebook

Sources

- Lawyer in UAE working with high-net-worth Russian clients
- UAE ministry official
- Economist in Dubai

Qatar Exits Cartel to Protect LNG

Qatar’s announcement that it will exit OPEC has sparked a flurry of media speculation. While Qatar holds that its move is in no way political, even if it is clearly economic in the sense that Qatar sees the future in LNG, not crude oil, politics still abound. But economically, this makes sense for Qatar, which wants to ensure that it’s LNG is governed by free trade as it grows—not a cartel.

It was also interesting timing considering that MBS recently mentioned Qatar in a positive light during his speech at the FII. There has been rampant speculation that part of Saudi Arabia’s deal with Turkey’s Erdogan to let up on the murder of Khashoggi was to end the conflict with Qatar that led to a blockade. We see no other explanation for MBS’ sudden change of heart on Qatar at the FII.

Our source in the government of UAE says that the GCC are viewing Qatar’s move to exit OPEC as purely political/geopolitical and not economic in any way. Their strategic goal here is to play to Trump by helping to weaken OPEC on one hand and to present themselves as “non-cartel” on the other hand to boost public image. It makes Qatar look modern, in other words, and the move was intended entirely for a Western audience, and specifically, an American one. The argument from UAE is that Qatar doesn’t need to leave OPEC in order to go its own way with LNG so they give no credence to the economic reason Qatar is spinning.

A high-level economist in Dubai says that Qatar’s move will work to weaken OPEC and its ability to increase prices and bring in more revenue for the Saudis—even if it is a subtle weakening.

Beware South African Oilfield Contractors

We have become aware recently of a high-risk factor for oil companies operating in South Africa in terms of oilfield services, and particularly with relation one of the biggest contractors. Companies who fail to do full due diligence on these contractors risk violating the FCPA and becoming embroiled in red flag situations. Of specific concern is the AAL Group, a global oilfield services contractor that has managed to corner a very large market share in South Africa and is believed to be a front for Russian money-launder and tied to the Russian secret services. It’s unusually rapid growth in South Africa originally brought it to our attention, as well as its rapid growth in the Middle East. In South Africa, they’ve brought in some $50 million in equipment already—at least, but our sources in the Middle East say that Russian investors are pouring tens of millions of dollars into this company in a massive money-laundering operation.

More Trouble for Glencore …

Glencore said Monday its head of copper trading—Aristotelis Mistakidis--was stepping down. He also used to head up Glencore’s copper mining operations in DRC—the subject of a broad corruption and bribery investigation. In fact, Mistakidis helped set up the DRC Congo copper businesses, which means that he would have been the one to cut murky deals with Israeli “middleman” Dan Gertler, a key focus of the U.S. Department of Justice’s investigation. This is the beginning of the downfall of Glencore to our mind. Mistakidis, though many won’t immediately know his name, was largely considered to be the number 2 exec here, second to the chief executive, Ivan Glasenberg.

The announcement comes at the same time as Brazilian prosecutors this week alleged that Glencore (along with Vitol and Trafigura) paid out more than $30 million in bribes to employees at state-owned Petrobras in return for business. Prosecutors said the Petrobras employees offered the trading companies cheaper prices for oil and its derivatives, then shared in the savings—a win-win for everyone who got to pocket this largesse. While Vitol and Trafigura are being names by Brazilian prosecutors in this as well, we focus on Glencore because of the mounting pressure on the UK-based trading house since this time last year.

Nor is Glencore’s once-friendly relationship with DRC strongman Joseph Kabila (arranged by Gertler) what it used to be, so they have no protection here anymore, either. With Gertler sanctioned and under fire, DRC is trying to get more money out of its foreign investors and this honeymoon is officially over. Last week, the DRC authorities said they would be auditing Glencore’s supply chain for its Kamoto project to determine traces of uranium found its cobalt. What’s really going on is that Glencore—under massive scrutiny and taking a serious share price hit over investigations that don’t seem to be going well—earlier in November halted cobalt exports from this mine, saying it needed to build a facility to remove excess uranium first. That facility, it said, would be operational by mid-next year. The DRC authorities were livid and say Glencore is just trying to avoid taxes on Kamoto that would start as soon as the mine was profitable.

Somalia’s First Oil Tender

Somalia plans to launch its first oil tender in 2019. The war-torn country enjoys the longest coast in Africa. The announcement comes at the same time that the U.S. revealed that it will re-establish a permanent diplomatic presence in the Horn of Africa country (the first sine 1991). Since 2013, the U.S. diplomatic mission to Somalia has been housed in neighboring Kenya. The U.S. has also recently launched a series of strikes in Somalia against al-Shabaab, and Islamic terrorist group that in reality is a mafia group, which has recently been clashing with Islamic State fighters who are trespassing on its extortion racket in Somalia. The final block delineation will be unveiled on 7 February, tentatively, and is expected to offer up 50 blocks covering over 170,000 square kilometers.

Libya Is Too Broke to Hold Elections

As we noted last week, Libya’s tentative December election plans fell through as expected and are now planned for June 2019, which is also a long shot. The Libyan electoral commission said this week it has zero budget to prepare for elections and has asked the government for some $29 million and there are no indications that will be forthcoming with warring factions still tearing Tripoli apart.

Iran’s Threat to Block Strait of Hormuz

After threatening to close off the Strait of Hormuz if not allowed to export oil, Iranian state news agencies report that Iran has deployed a 58-strong naval fleet to the Indian Ocean and the Gulf of Aden. Prior this this, Iran deployed a new destroyer to the Persian Gulf, right at the mouth of the Strait of Hormuz. While Iran has made this same threat numerous times, and while it does not solely control the international waterway, Tehran is more desperate than it has been at any other time under sanctions in recent history, and the regime is under pressure to demonstrate a show of force.

Global Oil & Gas Playbook

Accenture this week said it had taken over management consultant firm Enaxis, a Houston-based company almost exclusively focused on digital tech for the upstream oil and gas sector. While details of the deal, including the price tag, were not disclosed, the takeover is significant: It’s the latest indication of a growing industry segment: digital technology for the oilfield.

This segment is growing very fast in the post-2014 oil world where belts are still tight and all cost cuts are appreciated especially if they also improve efficiency and results. In fact, a recent report from future Market Insights estimates the market for digital oilfield solutions could reach a size of $54.4 billion over the next decade.

Everyone is going digital after decades of resisting technology. In response, there has been a flurry of all sorts of startups offering various digital services for the oilfield, from contractor servicing automation to blockchain-based comprehensive operations management platforms.

This digital transition in oil and gas will continue to accelerate in the coming year, according to digital industry insiders. The onshore segment of this emerging market has so far been moving at a faster pace than offshore, partly because offshore production is more complex, so applying digital solutions is more challenging. Yet, automation and the Internet of Things are expanding in both onshore and offshore upstream projects. Between 2017 and 2023, the digital oilfield market is set for growth at a compound annual rate of over 6%.

The expansion of digital technology into the oil and gas industry is not without its problems: no industry is immune to cyberattacks but judging by the general sentiment among sector players, the dangers are for the time being not as important as the potential benefits digital technology can bring to the oil field.

Deals, Mergers & Acquisitions

- Petrobras and Murphy Exploration & Production have inked a joint venture deal for exploration in the Gulf of Mexico. The Houston-based company will be the bigger shareholder in the JV, with an 80% stake, with the Brazilian state major holding the rest. Petrobras received $795 million under the terms of the deal.

- German oil and gas company DEA has struck a deal to acquire Sierra Oil & Gas, a U.S. independent operating in Mexico to expand its presence there. The German company will pay $500 million for Sierra Oil’s assets, which include stakes in six oil and gas blocks, including the Zama discovery, which is operated by U.S. Talos Energy. Zama holds an estimated 400-600 million barrels of recoverable oil and gas.

- Oman Oil will merge with Oman Refineries and Petroleum Industries Company as the sultanate seeks to integrate its state oil players. The tie-up, according to a senior government official, will result in cost savings of as much as $3 billion.

- Tellurian’s in-development LNG export project on the U.S. Gulf Coast has inked a preliminary deal to supply LNG to Vitol in the first deal pricing LNG against Platt’s Japan Korea Market (JKM). We note this as a new hallmark in the LNG sector because it’s the first time these daily spot prices have been used for a long-term offtake agreement (in the U.S., they are priced against Henry Hub gas for the most part).
Tenders, Auctions & Contracts

- Chevron and Exxon plan to quit the Azeri-Chirag-Guneshli offshore oil field after more than two decades of work on one of the largest oil and gas projects in the Caspian Sea. The ACG block is the biggest field of oil and gas in Azerbaijan, operated by BP. However, hopes of huge discoveries have failed to materialize. Exxon and Chevron are now streamlining their operations just like everyone else in the industry and with oil prices still relatively attractive, this may be the best time for a sale. Exxon hopes to raise some $2 billion from the divestment of its 6.8% interest in ACG.

- Argentina’s state oil and gas company, YPF, and Malaysian Petronas will jointly invest $2.3 billion on oil and gas development in the Vaca Muerta shale play. The Vaca Muerta is among the largest shale formations in the world, and YPF has big plans for it. From its deal with Petronas, the Argentine company plans to produce 60,000 bpd of crude oil and gas by 2022, rising to 75,000 bps at peak production rate, at the cost of $4.7 billion in additional investments over 20 years.

- Uganda is seeking foreign oil companies to invest in its nascent oil industry. The African country will tender a number of fields in the Albertine Basin in May next year in a bid to jump start the development of its oil and gas wealth. So far, 121 exploration wells have been drilled in the area, with 106 of them yielding oil and gas. Resources of 6.5 billion barrels of crude have been discovered since 2006, according to the Uganda government, and of these, 1.4-1.7 billion barrels are recoverable reserves.

Discovery & Development

- Exxon has announced yet another discovery in the Stabroek block offshore Guyana, the tenth one in a row, and has increased the estimated reserves of the block to as much as 5 billion barrels of oil and natural gas. The ten discoveries were all made in the last four years and Exxon has ambitious plans: the company said the area had the capacity to support five floating production, storage, and offloading vessels pumping at a daily rate of over 750,000 bpd by 2025.

- Apache Corporation say it has produced first oil from the Garten field in the UK section of the North Sea only eight months after it discovered commercial reserves of crude. The single well drilled on the site began production near the end of last month at the current rate is 16,300 barrels of oil and gas per day, of which 83% oil. The field has reserves estimated at more than 10 million barrels of light crude and associated gas.

- Production of LNG at the Prelude floating LNG facility will begin at the end of this year, Shell, the operator of the project, said this week. The FLNG project has an annual production capacity of 3.6 million tons along with 1.3 million tons of condensate and 400,000 tons of liquid petroleum gas. Like many other FLNG projects, Prelude ran into a series of delays, falling behind neighboring Ichthys, operated by prelude partner Inpex, which began commercial production earlier this year.

- Equinor is preparing to start drilling in its Arctic waters close to its maritime border with Russia after a drilling campaign in the Barents Sea earlier this year failed to produce results that would justify commercial production. Norway’s state oil and gas company will drill in license 615, which it operates in partnership with Aker BP, Lundin, and Petoro.

- Australia last month overtook Qatar as the world’s top LNG exporter, shipping 6.55 million tons abroad. The amount, interestingly, was almost equal to the amount of LNG imported by the new largest buyer of the superchilled fuel: China. China took in 6.56 million tons of LNG in November, up 43% from the previous month.

Company News

- India’s largest oil company, ONGC, has received a $32-million payment from Venezuela’s PDVSA in delayed dividend payments for the San Cristobal project that the two operate together. The total outstanding dividends due ONGC stand at $537 million, of which only $90 million has been paid to date as PDVSA struggles with falling production and exports.

- China’s Unipec, the international trading arm of Sinopec, will resume purchases of U.S. crude oil after Presidents Trump and Xi agreed on a 90-day truce in the trade war between Washington and Beijing. Unipec stopped buying U.S. crude in October and will now, along with other buyers, rush to take advantage of the 90-day window.




Oilprice - The No. 1 Source for Oil & Energy News