Russian Energy Minister Arrested On Embezzlement Allegations

Politics, Geopolitics & Conflict

Jordan is expecting to resume oil imports from Iraq this month to the tune of 10,000 bpd, after it had to suspend imports completely in August due to the pandemic. Jordan gets as much as 7% of its oil imports from Iraq, through a deal they forged last February. The current import deal is set to expire in November.

As another part of the saga that never ends, Nigeria is asking a Milan court for an immediate advanced payment from Eni and Shell - a payment that would exceed $1 billion - in the corruption trial over the infamous OPL 245 oilfield. Nigeria, the largest oil producer in Africa, gets 86% of all export revenue from its oil and gas industry, yet the country is riddled with energy insecurity and corruption. Nigeria’s budget office warned that the country could fall into a recession in the third quarter on the back of low oil prices and the pandemic.

Russia has detained Deputy energy Minister Anatoly Tikhonov on embezzlement (allegedly $7.9 million) allegations after a search of the ministry this week. Tikhonov will be jailed for two months while he awaits trial. Tikhonov is one of eight deputy energy ministers under Alexander Novak, and his arrest (in a country where corruption is endemic) will likely signal that he or whoever he is connected to has fallen from Putin’s good graces.

There was a fair amount of premature excitement over news of Hess (a mid-cap American oil company) possibly attempting to load a crude cargo at Libya’s Es-Sider port this week. It was unlikely to happen. Nor did it. The Libyan NOC deemed it too dangerous for Hess to dock at the port. Hess is a partner in Libya’s Waha concessions, with an interest in 13 oilfields in the Sirte Basin.

Also in Libya, renewed incidents of armed clashes in the giant Al-Sharara oilfield have been reported by the NOC. As the stalemate continues between the GNA and Haftar backers, Sunday saw an armed group enter the field, resulting in a shootout leading to the death of one and wounding of another. It was unclear which armed group was behind the latest incident.

The EU is reportedly drawing up a list of potential sanctions against Turkey, in an effort to get Ankara to tone down its gas exploration activities in the disputed areas of the eastern Mediterranean. Brussels may target individuals, ships or the use of European ports. In July, the EU agreed to bring financial and political sanctions against Turkey after repeated warnings that culminated in Ankara proceeding with drilling operations off Cyprus. At the same time, Turkey is making a loud deal about talks with Libya’s GNA regarding oil and gas opportunities in the conflict-ridden country.

Markets & Trends

Tullow Oil reported a $1.3 billion loss for H1 after being the latest energy company to write down billions in assets as the bottom falls out of oil demand. This compares to a profit of $103 million last year. The explorer is $3 billion in debt and it is now trying to find new means of refinancing--a process that puts it at risk for being a going concern. Tullow also said that a farm-down process in Kenya has been suspended. Tullow is a joint partner in the project with Africa Oil Corp and French Total SA.

Equinor is talking to BP to sell 50% of its interests in the Empire Wind and Beacon Wind projects in the United States in what would be a landmark renewable partnership between the two oil giants. Equinor will be the operator of the project. The wind projects span a total of 200,000 acres, boasting 10 MW of installed capacity capable of supplying power to more than a million homes.

Deals, Mergers & Acquisitions

Cairn Energy PLC has agreed to sell its 40% Rufisque Offshore, Sangomar Offshore, and Sangomar Deep Offshore stake in Senegal to Woodside Petroleum, after Woodside took advantage of its right to usurp Cairn’s sale to Lukoil. Lukoil had agreed to purchase Cairn’s stake in the RSSD production sharing contract in July for $300 million with contingent consideration of up to $100 million. Woodside, however, who will hold 75% once the deal is complete, agreed to the same terms. The deal should close in the fourth quarter.
A year and counting now, all of Nigeria’s four state-run refineries are still shut down because the pipelines feeding them are damaged and essential maintenance has yet to be done. Nigeria is considering ditching its majority stake in its refineries because the years of maintenance that it would require to get them back up and running is too much for the state to take care of.

High-profile and often combative hedge fund manager Paul Singer, through Elliott Management Corp, is attempting to derail the deal between Chevron and Noble that would see the larger acquire the smaller. The hedge fund has $40 billion under management and disclosed that it holds a stake of an unknown size in Noble Energy. Singer is known for his pro-Israel stance and funding pro-Israel causes, which is in line with Noble’s involvement in the Leviathan gas field off Israel’s coast. Singer believes that the deal would not fairly compensate Noble shareholders and that they would not be able to benefit from the oil price recovery - whenever that will be. Noble is set to vote on the deal on October 2.

Kosmos Energy will let go of some of its frontier exploration assets offshore Suriname, Namibia, South Africa, and Sao Tome & Principe for $200 million. The Shell subsidiary will pay $100 million upfront and $50 million upon each commercial discovery (with a $100 million cap) from the first four exploration wells drilled across the assets.

Eni is in talks to build a $4 billion 300,000 bpd refinery in near Iraq’s Zubair field, with the first phase--at a rate of 150,000 bpd--expected to be operational in 2025. Eni operates the Zubair oilfield (41.56% stake). Like other oil-rich countries such as Nigeria, the state is looking for foreign partners for the project because it does not have the resources to develop the project alone.

Mexico has revised down energy giant Pemex’s oil production target for next year by more than 8%. The government said it now expected Pemex to produce 1.857 million bpd in 2021, down from a projection of 2.027 million bpd made in April.

Discovery & Development

Exxon yet again has increased its recoverable resources offshore Guyana with a new Redtail-1 discovery. It is the supermajor’s eighteen discovery in Guyana. Exxon’s total finds from Guyana’s Stabroek Block sits at 8 billion barrels of oil equivalent in recoverable resources. This Redtail-1 discovery is about 2.5 kilometers from its Yellowtail discovery. Exxon’s partners in the Stabroek project are Hess and CNOOC.

Husky Energy is asking for federal and provincial help with financing a partially completed $2.2 billion West White Rose offshore oil project, after putting the project in review with a one-year delay as the low oil prices and pandemic seek to undermine the viability of oil developments around the world. Husky has stressed that it’s not looking for a handout, rather, a partner who would receive a return. There is precedent for such a collaboration, with Exxon’s Hibernia project, in which the government of Canada owns 8.5%.

Enterprise Products Partners has canceled part of a Permian pipeline project--the Midland to ECHO 4 project--which would have carried 450,000 bpd of oil from Midland to Houston, where the ECHO 4 terminal is located. The project is the latest in a series of oil project delays and cancellations as oil prices remain low and the demand outlook is uncertain at best.

Russia's natural gas monopoly Gazprom has increased its natural gas supply to China via the new pipeline Power of Siberia in July and August, compared to June. The supply of natural gas to China via the Power of Siberia rose to 12 million cubic meters per day in July and August, from 10 million cubic meters supplied in June

Legislation & Regulation

Fifteen states are the latest to sue the Trump administration for opening the ANWR up for oil and gas development. The suit follows others from environmental groups and indigenous groups. The latest lawsuit argues that the government did not look hard enough at the impacts of greenhouse gas emissions, climate change, and migratory birds.

In a true shocker for the oil industry, the Trump Administration has extended a ban on oil and gas exploration along the coast in Florida, Georgia, and more. The move is definitely more political than practical, highlighting the critical importance of Florida in particular to Trump during the November election. A swing state upon which the entire Presidential election could hinge, Trump is reading the room and clearly banking on how important coastal tourism is for the state, while still not being seen as overly anti-oil. It was thought that Trump would let the ban expire as planned next year.

In the second surprise anti-oil legislation move this week, Colorado regulators are now backing the infamous 2000-foot setback for oil and gas drilling. In fact, four of the five members of the Colorado Oil and Gas Conservation Commission supported the measure. The commission did agree, however, that there should be exceptions to certain projects that would allow oil and gas projects within that 2000 feet. The legislation is important because about one-third of all drilling applications over the last two years fell within that 2000 buffer. A ballot proposal in Colorado to extend the buffer to 2500 feet failed during the last election, with 56.75% against the legislation. The measure was hotly contested by Big Oil.

Mexican authorities have given Pemex the green light to start drilling in seven deepwater blocks located in the Perdido Fold Belt with a total value of investment of $395 million.