Putin Furious After Major Oil Spill

Politics, Geopolitics & Conflict

- Following a massive 20,000-ton diesel oil spill last week in the Ambarnaya River, which eventually feeds into the Arctic Ocean, Russian President Vladimir Putin has declared a state of emergency and is now training his sights on Norilsk Nickel tycoon Vladimir Potanin. Norilsk Nickel's power plants in the Arctic area and the spill comes from its fuel tanks. The company is now under additional investigative scrutiny for failing to report to the authorities in a timely fashion. Norilsk has said it suspects the accident was the result of melting permafrost.

- Amid the intensifying standoff with Turkey, as noted above in our top story this week, Cyprus' Natural Gas Infrastructure Company (ETYFA) has signed off on moving forward with the contract to build the island's biggest-ever energy project: An LNG import terminal that has been awarded to a Chinese-led international consortium. The total project budget is 290 million euros.

- Indications are emerging that ISIS is again asserting itself into the Syrian oil equation, with a Thursday attack on a key oil installation in Deir Ez Zor in eastern Syria (an area controlled by Kurdish forces that are nominally backed by the US). Militants are said to have stormed the Azraq oil well in the Tanak oilfield, extorting payments for safe-passage for oil transports.

- Nicolas Maduro has put an end to fuel subsidies that Venezuelans have enjoyed for decades, in part because it is now importing Iranian fuel to sell domestically. The subsidy retirement comes at a time when Venezuela continues to grapple with one of the worst humanitarian crises in history.

- With major LNG projects at stake, if true, Mozambique authorities' claims that the leader of a militant Islamic group that has been terrorizing the country for some six years has been killed could mean a slight reprieve for multi-billion-dollar projects that have been the cause of investor jitters. It could also simply be a very temporary reprieve depending on the elusive group's leadership structure and its ability to regroup. Nonetheless, Total SA's key LNG project here is expected to sign a $15-billion financing package for the project this month, barring any unforeseen circumstances.

Deals, Discovery & Development

- French Total SA is planning to acquire a controlling 51% stake in the Seagreen 1 offshore wind project off the coast of Scotland in a major deal that defines the oil giant's aggressive new renewables trajectory. The project is scheduled to be built and operational by the end of 2022, producing enough energy to power approximately 1 million homes.

- Undeterred by the pandemic, US companies Global Infrastructure Partners and Brookfield Asset Management are looking to buy a 49% stake in a state-owned natural gas pipeline in the UAE. The divestment of this pipeline infrastructure is part of the UAE's push to diversify its economy and rustle up capital.

- French Total S.A. is acquiring a majority stake in Scotland's 1,075-megawatt Seagreen 1 offshore wind project as part of the French giant's push toward renewables. Total will acquire a 51% stake. The FID was announced Wednesday. Total has already paid $88 million for the project, with an additional $74 million due for earn-outs based on performance. The deal should be finalized in July, but is still pending regulatory approvals.

- China has reinstated a $20-billion project to develop a petrochemical facility that will include a 400,000 bpd refinery and a 3-million-tonne per year ethylene plant. The project received approval on Monday.

- Shell is considering raising more than $2 billion from the sale of a 26% stake in the common facilities at its Queensland Curtis LNG plant in Australia where Shell is the operator. The sale is part of a divestment strategy to drop some non-core assets in the wake of the oil price crash. It would follow another LNG project (Lake Charles) that Shell exited in Louisiana in March.

- Qatar Petroleum signed three major LNG shipbuilding agreements this week with Daewoo Shipbuilding and Marine Engineering, Hyundai Heavy Industries, and Samsung Heavy Industries that will secure 100 ships worth nearly $20 billion. The project will allow Qatar to satisfy the requirements for LNG expansion projects in Qatar and the United States.

- Petrobras is looking to sell some of its exploration blocks in the Espirito Santo Basin in order to better allocate capital and optimize its portfolio. The blocks are located near post-salt discovery areas of Parque dos Deuses, Parque dos Doces, and Parque dos Cachorros. The offers will be made by concession.

- Nigeria has launched its marginal field licensing round for 57 undeveloped discoveries after a long wait. It is the first marginal field licensing round in twenty years. Typically, these smaller fields are developed by local indigenous companies, but Nigeria revoked these licenses to put them up for auction again to spur additional oil development.

Legislation & Regulations

- Trump has signed an executive order removing environmental requirements for new projects in a bid to expedite permitting for construction and energy projects overseen by federal agencies. The order essentially gives the federal government the power to bypass key elements of environmental regulations, including those set forth by the Endangered Species Act, the Clean Water Act, and the National Environmental Policy Act.

- The US this week added four more maritime companies to the sanctions list for dealing in Venezuelan crude. The sanctioned companies include Afranav Maritime Ltd, Adamant Maritime Ltd, Sanibel Shiptrade Ltd, and Seacomber Ltd--all of which moved crude oil from Venezuela this year between February and April. Venezuela's crude exports fell to under 500,000 bpd in May.

- The US government has "postponed" two more oil and gas lease auctions that were scheduled for June, in Nevada and Mississippi. Last month, the BLM had canceled a lease auction in New Mexico at the 11th hour--canceling the online auction the night before it was supposed to begin. This is awkward for the buyers, who must have cash on hand in order to place bids. BLM confirmed to OilPrice that the New Mexico auction was merely "postponed" and not scrapped, but failed to disclose the reasoning for the cancelation. This month's auction cancellation also comes without reason. It's possible that the BLM is hoping to squeeze more out of buyers who may feel leery of shelling out cash with WTI sitting below $37.