Politics, Geopolitics & Conflict
- The battle for Libya is threatening to turn into direct clashes between the Turkish and Egyptian militaries, now that Turkey has categorically rejected Egypt’s ceasefire deal. This rejection was followed this week by the Egyptian Army’s preparations for a military maneuver near its border with Libya - also a direct response to Turkish naval exercises in the Mediterranean. Haftar is still playing cat-and-mouse with the National Oil Company (NOC), in the meantime - unwilling to lose any ounce of leverage as negotiations continue. On July 7th, the NOC noted that it was ready to lift the force majeure at the Es Sider port and allow a tanker to load crude from storage. However, when they attempted to load on July 8th, the Petroleum Facilities Guard (PFG) would not allow the tanker to enter the port. The NOC now says that Libyan oil production will decline to 650,000 b/d in 2022, down by half from the start of this year, “in the absence of an immediate restart of oil production and because of the state’s failure to provide the requested budgets to address the many challenges resulting from the blockade”.
- At the same time, the U.S. role in Libya remains undetermined at best. Under lobbying pressure from Haftar’s allies the UAE and Egypt, as well as pressure on the other side from Turkey and Qatar - for Washington, this is a geopolitical landmine. Supporting Haftar means siding with Russia against…
Politics, Geopolitics & Conflict
- The battle for Libya is threatening to turn into direct clashes between the Turkish and Egyptian militaries, now that Turkey has categorically rejected Egypt’s ceasefire deal. This rejection was followed this week by the Egyptian Army’s preparations for a military maneuver near its border with Libya - also a direct response to Turkish naval exercises in the Mediterranean. Haftar is still playing cat-and-mouse with the National Oil Company (NOC), in the meantime - unwilling to lose any ounce of leverage as negotiations continue. On July 7th, the NOC noted that it was ready to lift the force majeure at the Es Sider port and allow a tanker to load crude from storage. However, when they attempted to load on July 8th, the Petroleum Facilities Guard (PFG) would not allow the tanker to enter the port. The NOC now says that Libyan oil production will decline to 650,000 b/d in 2022, down by half from the start of this year, “in the absence of an immediate restart of oil production and because of the state’s failure to provide the requested budgets to address the many challenges resulting from the blockade”.
- At the same time, the U.S. role in Libya remains undetermined at best. Under lobbying pressure from Haftar’s allies the UAE and Egypt, as well as pressure on the other side from Turkey and Qatar - for Washington, this is a geopolitical landmine. Supporting Haftar means siding with Russia against Turkey; not supporting Haftar means siding against important Gulf allies. NATO is split and faced with ruin over the conflict. Turkey is now enjoying media headlines that suggest investigative cooperation between the Libyan GNA (Turkish-backed) and UN and U.S. officials focusing on suspected gold-for-cash trades between Haftar and Venezuela. Haftar desperately needs cash, and Venezuela is definitely open for business. Investigators are said to be tracking Haftar’s private jet in these alleged dealings.
- Algeria’s state-run Sonatrach - under intense scrutiny since the ousting of long-time president Bouteflika - is now under investigation for corruption related to deals in Italy. Under investigation is Sonatrach’s acquisition of Italy’s Augusta refinery in 2018, for which a former vice president of marketing has been placed in custody on allegations of squandering public funds and even impersonating a public official. Sonatrach acquired the refinery from Exxon’s Italian subsidiary, Esso Italiana for ~$800 million (along with three fuel terminals and their pipelines). The question is whether Sonatrach overpaid and whether bribery was involved.
COVID Market Update
- As COVID-19 culls demand, the oil giants are reassessing, and Italian oil giant Eni is the latest, warning of the pandemic’s “enduring impact on the global economy and the energy scenario”. The company has cut its long-term price guidance, calling Brent crude at $60, down from $70 (its earlier estimate), and issued impairment charge warnings to investors. Eni may also increase the momentum of its February climate strategy.
- At the same time, it’s worth noting that not all crude is equal, and some grades are actually being positioned for shortage - particularly Russian Urals and the Saudi Arab light (medium-heavy sour crudes). These two grades, in particular, are in shortage due to OPEC cuts, leading to a situation in which refiners must compete for them.
Discovery & Development
- Italian Eni (with non-operating partners BP and French Total SA) announced the successful drilling of their first exploration well offshore in Egypt’s Nile Delta in the North El Hammad license. The well discovered a 152-meter-thick gas column and will now be tested for production. The well is less than 12 kilometers away from one producing field and 1 kilometer away from a second producing field.
- Good news for Norway - whose oil and gas production is fated to decline shortly - with the discovery of gas and condensate by Equinor at its first exploration well in license 878 on the Norwegian continental shelf. Equinor is looking at reserves in the new discovery of 19-63 million barrels of recoverable oil equivalent.
- Zama, a giant discovery in Mexico believed to contain some 700 million barrels of oil, is now being targeted by the government of AMLO, who is determined to use his special brand of populism to restore state-owned Pemex to its former greatness. The shallow-water field was discovered by a group led by Talos Energy, which has now been ordered by the government to work out a deal with Pemex for joint development of the field. They have 120 days to work out a deal, which basically forces Talos to relinquish half of its giant find. The Talos consortium behind the Zama discovery includes BASF’s Wintershall and Premier Oil and is a clear indication that AMLO will continue to attack private businesses if viewed to be in the interests of the state.
- The U.S. Department of Energy has approved the final authorization of LNG exports from the Jordan Cove LNG Terminal in Oregon. The project was approved because of expectations that it will give the U.S. greater Asia market share for its LNG. The terminal is owned by Canada’s Pembina Pipeline Corporation and is slated to come online in 2025, creating 6,000 jobs (at the height of the construction process only).
Deals, M&A, Bankruptcies
- San Francisco-based Sunrun has acquired key rival Vivint Solar in a $3.2-billion all-stock deal, making it the biggest consolidation in the solar industry. Sunrun is the biggest U.S. residential solar power company. Vivent is the second biggest in terms of rooftop solar panels. The merger is believed to pose a serious challenge to Tesla.
- Mexican state-run Pemex is planning to offer a $22.4-billion bond swap for bonds maturing between 2027 and 2060. This is another tentative move to reduce Pemex’s massive debt swell, which topped $100 billion in March.
- Premier Oil - a major player in the North Sea - is scrapping its plans to acquire a 25% stake in the Tolmount gas discovery from South Korean-owned Dana Petroleum due to the market slump.
