Politics, Geopolitics & Conflict
- The Saudi-led coalition in Yemen has launched an offensive against Houthi forces in the capital Sanaa after Houthi forces claimed a drone attack on Saudi pipeline installations earlier this week - an attack the Saudi crown prince says was ordered by Iran in his effort to ensure that Trump starts an all-out war with Tehran. Beware the Saudi propaganda (with help from UAE black ops).
- The US has suspended all commercial and cargo flights to and from Venezuela on the grounds of unrest in the vicinity of Venezuelan airports.
- As we anticipated, China has slapped a 25% retaliatory tariff on US LNG, but has not targeted American crude oil. The new LNG tariff adds to a previous 10% tariff from China on US LNG. China is already importing significantly reduced amounts of crude oil from the US. In June 2018, it was importing over 500,000 bpd from the US; by February this year that was down to about 135,000 bpd, based on EIA figures.
- In Libya, as the horse-jockeying continues on the international scene, with Haftar making a “surprise” trip to Rome and expected to hit up France as well, while the GNA is wooing Houston with promises of lucrative oil deals, the GNA’s earlier move to revoke the operating licenses of foreign companies on its soil (including French Total SA) was reversed 24 hours later – a message apparently sent out of desperation.
Deals, Mergers & Acquisitions
- Pacific Oil & Gas Ltd., a Canadian energy company that leads the Woodfibre LNG project, has inked a deal for the acquisition of Canbriam Energy, which produces natural gas from the Montney formation. The Woodfibre LNG project will be located in British Columbia and will have an annual capacity of 2.1 million tons of the fuel annually. It has yet to get the final go-ahead for construction.
- Equinor will buy Shell’s 22.45% stake in the Caesar Tonga field in the Gulf of Mexico exercising its right of first refusal after Shell earlier struck a preliminary deal with Israeli Delek for the same interest. The price for the stake for Delek was $965 million and this is the sum Equinor will also pay to increase its stake in Caesar Tonga to 46%.
- Australian Santos Energy will buy part of Exxon’s and Oil Search’s stakes in the P’nyang natural gas field in Papua New Guinea. Output from the field will be fed into a new liquefaction train at Exxon’s PNG LNG facility. The Australian company, which is also a partner in PNG LNG, will pay $187 million for the stakes that will increase its holding in the field to over 13%.
Tenders, Auctions & Contracts
- Algeria’s government has invited Chinese companies to step in and help it diversify its economy away from oil and gas by investing in other industries including mining, electronics, steelmaking, and textiles. Algeria is one of the largest natural gas suppliers to Europe and an oil producer as well but there has been a push recently to reform the economy and the country’s leadership after long-serving president Abdelaziz Bouteflika announced amid protests he would not be running for president again.
- Schlumberger has expanded an existing contract with Google Cloud to incorporate the development of cloud-native applications in the area of exploration and production. Under the expanded terms of the deal between the two, the oilfield services major will tap Google’s artificial intelligence and cloud infrastructure expertise.
- East Timor has signed a contract with a Chinese state firm to move ahead with the Sunrise LNG project that Shell and Conoco recently abandoned as they did not see eye to eye with the government. East Timor wants to build the liquefaction trains onshore in a bid to spur more local economic growth but this will be costlier and more complex than building an offshore facility, which was why the two supermajors quit the project.
- Saudi Aramco is opening a trading office in London this summer, with the aim of increasing oil supply to Europe by 300,000 bpd over the next two years. The goal is to supply Europe with crude and offtake refined products to supply to the southern countries (Italy, Cyprus, Balkans).
Discovery & Development
- French Total SA has announced that it will begin drilling its first exploration well in Lebanon’s offshore Block 4 in December 2019 and a year later in Block 9.
- Hurricane Energy, a UK-based independent, will soon begin commercial production from the Lancaster oil field in the North Sea. Lancaster holds more than 500 million barrels of crude and the first phase of its development, from a floating production, storage, and offloading vessel will average 17,000 bpd.
- In another update from the North Sea, Siccar Point reported promising drilling results from the Blackrock prospect. Blackrock is part of the Corona Ridge Area that could contain more than 800 million barrels of recoverable oil and gas. Most of these are located in the Rosebank and Combo fields, where Siccar is the operator and has Suncor as minority partner.
- A new decree by the Mexican government will help Pemex boost oil production by as much as 400,000 bpd by making mature fields economical again through increasing capital deductions from 12/5% to 60%. The decree is related to the extension of a credit line worth $5.5 billion and the refinancing of $2.5 billion in debt.
- The Mozambican government has approved the development plan for the Rovuma LNG project, which is led by Exxon and which will have an annual production capacity of more than 15 million tons of LNG from two liquefaction trains. The final investment decision on the project has not yet been made but it expected later this year.
- Italy’s Eni reported yet another oil discovery off the Angolan coast, in the deepwater Block 15/06. The well could yield some 10,000 bpd, Eni said, and production could be easily fast-tracked as the place of the discovery is in proximity to already existing production infrastructure. This is the fourth commercial-scale discovery in the block 15/06 since mid-2018.
Legal, Regulatory Alerts
- New York regulators have rejected the construction of a $1-billion natural gas pipeline that would connect gas fields in Pennsylvania to New Jersey and New York, operated by the Oklahoma-based Williams Company. Environmental activists won this battle over proponents who view this as the answer to New York’s future gas supply problems.
- Investors eyeing the Exxon/Hess string of discoveries in Guyana and first phase 1 production planned for 2020 are uneasy over the potential for new elections that create uncertainty over already controversial PSAs. On May 10th, the Caribbean Court of Justice (CCJ) was scheduled to rule on the validity of a no-confidence motion against the current government; however, the Court reserved judgment and there are not yet any indications as to when a decision will be announced. Our sources indicate that it could be more than a week. Again, we do not expect the situation to change in terms of Exxon’s PSA; rather, the point of the opposition here is to try to gain control of the National Assembly, which would be in charge of approving the distribution of revenues from Guyana’s new-found oil wealth. We believe that all talk of a deal with Exxon that is not in the national interest is for campaign purposes only.
- Jordan is demanding a complete review of the country’s deal with Israel for gas from the massive Leviathan field in the Levant Basin, operated by US Noble Energy. This puts a $10-billion contract at stake. The Jordanian king is under enormous public pressure here over this deal, which is vital to Jordan’s energy supply but which also means cozying up to Israel--an idea that is strongly opposed with the Palestinian question not only unresolved but intensifying in recent weeks. The Jordanian king is hoping that his call for a review of the deal will appease protesters and also pressure Israel to lower its gas prices. We do not believe the deal itself is at stake at this time. The timing is also important for Noble as Leviathan is now 80% complete and the company is expecting first gas by the end of this year.