Deals, Mergers & Acquisitions
- A number of deals related to Algeria’s state-run Sonatrach have already fallen by the wayside due to the country’s political crisis. But more precisely, big deals are being halted or dropped altogether because Sonatrach is likely to come under new investigation related to earlier corruption accusations. This comes in the aftermath of the resignation of President Abdelaziz Bouteflika, with protesters continuing demonstrations to pressure real change in the regime, which includes Sonatrach. Bidding for a majority stake in Greece’s largest refinery, Hellenic Petroleum, has been cancelled definitively. A consortium of Sonatrach and Vitol were expected to make the winning bid. Instead, Hellenic will now pursue a different strategy of expansion through acquisitions, according to our sources in the Greek government. On Wednesday, Algeria’s army boss said that the judiciary would reopen corruption cases against Sonatrach (among others), rendering the state-run oil giant a hands-off entity for partners and new deals right now more than ever. On Wednesday, the interim presidency said elections would be held on July 4. In the meantime, this morning, masses of protesters again took to the streets - this time against the military and the interim presidency, whom they view as attempting to keep the “system” in place, just without Bouteflika.
- And since we’re in the season of busted deals, it’s…
Deals, Mergers & Acquisitions
- A number of deals related to Algeria’s state-run Sonatrach have already fallen by the wayside due to the country’s political crisis. But more precisely, big deals are being halted or dropped altogether because Sonatrach is likely to come under new investigation related to earlier corruption accusations. This comes in the aftermath of the resignation of President Abdelaziz Bouteflika, with protesters continuing demonstrations to pressure real change in the regime, which includes Sonatrach. Bidding for a majority stake in Greece’s largest refinery, Hellenic Petroleum, has been cancelled definitively. A consortium of Sonatrach and Vitol were expected to make the winning bid. Instead, Hellenic will now pursue a different strategy of expansion through acquisitions, according to our sources in the Greek government. On Wednesday, Algeria’s army boss said that the judiciary would reopen corruption cases against Sonatrach (among others), rendering the state-run oil giant a hands-off entity for partners and new deals right now more than ever. On Wednesday, the interim presidency said elections would be held on July 4. In the meantime, this morning, masses of protesters again took to the streets - this time against the military and the interim presidency, whom they view as attempting to keep the “system” in place, just without Bouteflika.
- And since we’re in the season of busted deals, it’s also worth noting that BP is exiting from two PSCs for shale gas drilling in China after disappointing results in up to 10 wells. That basically leaves no Western majors left in China’s shale patch.
- At the same time, Shell has announced that it will withdraw from its Gazprom-led LNG project in the Baltics. Shell was behind the development of a technology that would be used for the Sakhalin Energy LNG plant, in which it is a shareholder along with Gazprom. But a related 50-50 JV with Gazprom, which would have helped Gazprom develop supercooling gas technology and which Shell now plants to exit, was a problem because it would have essentially made it possible for Gazprom to bypass any new US sanctions related to LNG. But what apparently really irked Shell was Gazprom’s attempt to slip a sanctioned tycoon into the mix, Arkady Rotenburg.
- A consortium led by French utility Engie and also involving Canada pension fund Caisse de Depot et Placement du Quebec will buy Petrobras’ 90% stake in a gas distribution pipeline network for $8.6 billion. The value of the deal includes the assumption of $800 million in debt. It is the largest divestment since Petrobras embarked on the asset sale path to reduce its own sizeable debt pile.
- Total’s battery-making unit Saft has set up a joint venture with a Chinese peer, Tianneng Energy Technology to jointly produce lithium ion batteries in the world’s largest EV market. The capacity of the venture, to be located at the Changxing gigafactory, will be up to 5.5 GWh and part of it is already operational.
- Shell has struck a deal with Israeli Delek for the sale of its 22.45% stake in the Caesar-Tonga field in the U.S. section of the Gulf of Mexico. The value of the deal is $965 million and will make Delek partner of Anadarko, Equinor, and Chevron. The Caesar-Tonga field produces an average of 70,000 bpd.
- Offshore Israel, ExxonMobil is reported in talks to build and LNG platform to get Leviathan field gas to export markets. Getting a deal on a massive undersea pipeline to get significant Israeli gas finds to market are a problem, and Exxon could end up being the first major to get in on this--quite a feather in the Israeli cap since the country was only recently placed on the oil and gas map.
- Norway’s Okea oil company, partially owned by Bangchak Corporation (Thailand) and Seacrest Capital, has announced plans for an initial public offering this year on the Oslos stock exchange. The company is the brainchild of former Norwegian oil minister Ola Borten Moe.
Tenders, Auctions & Contracts
- Ecopetrol, Colombia’s state oil company, and Exxon have both signed bilateral contracts with Spain’s Repsol for joint offshore exploration in the Caribbean. The deals follow amendments in Colombia’s exploration licensing regime that have made bidding for oil and gas blocks an ongoing affair as the country seeks to boost production.
- Shell has struck a deal for joint shale gas exploration with China’s Sinopec. The country has vast reserves of gas trapped in the shale rock but the geology is more challenging than it is in the U.S. shale patch, which has delayed efforts to boost domestic production at a time when demand is growing in leaps and bounds. Shell and Sinopec will explore a shale block in eastern China, in the province of Shandong.
- Woodside Petroleum has inked a 10-year deal for the supply of 1 million tons of liquefied natural gas to Chinese ENN Group. The deal is preliminary and the final terms and conditions have yet to be hammered out but it is yet another long-term purchase commitment, which LNG producers have been eager to secure to make their future LNG projects viable.
- Brazil’s government will pay Petrobras $9 billion as part of the settlement of a long-running dispute concerning the transfer of exploration and development rights to several offshore oil and gas blocks that Petrobras received a decade ago in exchange for a package of shares in the company. Yet Petrobras found a lot more oil and gas than expected that it did not have the rights to develop. Estimates pegs the resources of the blocks at 17 billion barrels of recoverable crude.
Discovery & Development
- A highlight of the LNG week--beyond market data showing another boost in Chinese demand--is the Total/Exxon deal with the government of Papua New Guinea for a new LNG project. The deal allows the supergiants to start work on the $13-billion facility, which will have an annual capacity of 5.4 million tons--tapping into reserves estimated at more than 1 billion boe. But while this playing fields gets increasingly crowded, it’s only of mild help that Chinese natural gas demand is expected to grow 14% this year.
- Indonesia’s state energy company Pertamina announced several commercial discoveries made during the first quarter of the year, including one holding resources of 540 million barrels of oil and another of up to 15 million barrels of oil and gas. The company has yet to confirm the viability of the discoveries, to which end it has set aside $200 million for seismic studies.
- Saudi Arabia could become the largest wind power producer in the Middle East with capacity of 6.2 GW to be added to the region’s total between this year and 2028. This represents 46% of the total. However, Riyadh has shown a bias towards solar, so it will focus on this over the medium term.
- Indonesia’s state oil and gas company Pertamina announced a productive first quarter in the exploration department, with discoveries in excess of 500 million barrels of oil. The company has been trying to boost its domestic production of both oil and gas and has doubled the number of wells planned for drilling this year to 346, of which 27 exploration wells.
- Norway’s Equinor has decided to delay the start of commercial production at the Mariner field in the North Sea to the second half of the year. The company cited problems with electrical couplings, which displayed a high failures rate. There are 40,000 couplings at the platform that need to be checked to make sure they are not a safety hazard. The Mariner project is worth almost $6 billion and this is the second delay. The field contains an estimated 300 million barrels of crude.
Company News
- Aramco has sold bonds worth $12 billion in its first-ever international debt issue although according to fund management sources demand topped $100 billion. The company, interestingly, said it will not use the money to fund part of its acquisition of a 70% stake in petrochemicals major Sabic. This, Aramco said, it would fund from its cash reserves, though reports have also suggested that it will fund the $70-billion Sabic deal with the bond proceeds.
Regulatory Updates
- President Trump has signed executive orders that will make it harder for states to block the construction of oil and gas pipelines on their territory. As a result, Trump said, the approval process for new pipeline projects would take no longer than 60 days. The orders come in response to what the current administration considers abuse of powers by states unwilling to accommodate any new pipelines under a provision in the Clean Water Act.
- On the nuclear front, following disclosures that the Department of Energy gave companies permission to share nuclear technology with Saudi Arabia, a group of bipartisan senators has introduced legislation to require the executive branch to “regularly” disclose when it hands out permission for nuclear energy cooperation with foreign countries.
- General Electric has been fined $58 million for providing inaccurate information to European Commission investigators during GE’s proposed takeover of LM Wind. GE notified the Commission of its merger plans in January 2017, and simultaneously said that it was not developing any offshore wind turbine more powerful than an existing 5 six-megawatt turbine. According to the Commission, however, using third-party sources, GE was offering 12-megawatt offshore wind turbine to potential customers.
Politics, Geopolitics & Conflict
- It’s been a month of military offensives and the fall of iron-fisted leaders in what is shaping up to be a second run at the “Arab Spring”, with Sudan following Algeria this week. On Thursday, Sudanese President Omar al-Bashir, the country’s leader for three decades, was overthrown and arrested in a coup, following four months of protests. The coup followed mass protests over the past week. But now this is a military game, and just as in Algeria, protesters aren’t letting up: They have vowed to defy the military leaders who have taken al-Bashir’s place. South Sudan - also in the middle of an ongoing conflict - has reason for more concern: This is where all the oil is, while Sudan itself is the throughway for that oil, and a very shaky independence deal could soon crack.
