Politics, Geopolitics & Conflict
- Turkey has become intricately involved in the conflict in Libya, aiding the UN-backed Government of National Accord (GNA). This has led to a severe backlash from General Haftar and the LNA, which has vowed to target Turkish nationals and Turkish assets in the country. While Haftar released 6 Turkish sailors held captive in this strategy, this is not the end of this external element of the conflict. Turkey is now preparing to get another shipment of drones to the GNA, after having helped GNA militias to retake a strategic town from Haftar last week, who responded by shooting down a Turkish drone. Turkey considers Libya as a keystone of proxy wars for Mediterranean energy reserves. Turkey’s ultimate goal, according to our official sources in Ankara is to use the GNA to unify Libya in order to reach a deal for maritime demarcation of the Mediterranean. A Turkish Foreign Ministry official told us that such a deal would “push Greece, Cyprus, Israel and Egypt out of the equation”, and as such is a “strategic target”. In other words, Libya is the key to Turkey’s energy battle with the Greek Cypriots, and with Israel, and this is the sideshow unfolding while Turkey taunts Cyprus with its own drilling offshore in the Cypriot EEZ. There was a suggestion here that Turkey is willing to take this further, militarily, with the official noting that “Libya is not as far from Turkey as some think”.
- Iraq and Oman have signed an MoU on oil and gas cooperation, with the most significant aspects being the construction of a shared refinery in Oman for processing imported Iraqi crude and oil storage facilities in both countries.
- China raises security warning for its vessels traveling through the Strait of Malacca to Level III, its highest level after attacks on oil tankers in the Strait of Hormuz. The Strait is the second most important oil chokepoint in the world.
- Iraqi firefighters managed to put out a fire at an oil pipeline in northern Iraq that links oil-rich Kirkuk to the Turkish port of Ceyhan. The fire started after six improvised explosive devices went off if Nineveh province’s Shura sub-district, some 43 miles south of Mosul. It is Iraq’s largest crude oil export line with a capacity of 1,600 thousand barrels per day. Last month, a rocket struck the Basra region, which is home to a number of international oil giants, including ExxonMobil, Shell and Eni.
- Late last week, India won a trade dispute against the US when the WTO ruled that subsidies and mandatory local content requirements by 8 US states were in violation of global trade rules. The dispute reaches back to 2016 when India fought back against a US challenge to Delhi’s own solar power policies, which Washington viewed as unfair and resulting in a more than 90% cut in US solar panel exports to India. So, who really won this battle? Depends on who you ask. From Washington’s perspective, the WTO ruling will have little if any impact. Just days prior to that ruling, the US imposed a 25% safeguard duty on Indian solar modules. India exported $53 million in solar modules to the US in 2018-19. Earlier this month, India increased tariffs on some 30 US products because Trump ended a duty-free trade program with the country that had been in effect for decades. So this isn’t about solar panels in general - it’s a widening trade dispute.
Deals, Mergers & Acquisitions
- Saudi Arabia’s oil giant is resuming preparations for the massive listing of Aramco after it was earlier delayed indefinitely. It has met recently with investment banks to discuss their potential roles.
- Energean Oil & Gas agreed to buy the oil and gas business of Electricite de France SA’s (EDF) Italian unit for up to $850 million. Energean will pay $750 million upfront for operational assets in Egypt, Italy, Algeria, the North Sea and Croatia. It could also end up paying another $100 million following first gas from the Cassiopea development off Italy.
Discoveries & Development
- The UAE’s Al Dhafra Petroleum, a JV between ADNOC and KNOC, started pumping oil from a new field, Haliba, this week - despite the extended OPEC agreement. Expected production from the field should reach 40,000 bpd by the end of 2019.
- Mexico's Pemex is looking at deepwater projects despite an earlier strategic declaration that it would stick to less risky shallow water projects.
- Italian oil giant Eni has won an E&P license for Ghana’s offshore BLock WB03, in the Tano Basin’s medium-deep waters. Eni will be the operator, with Vitol and Ghana’s National Petroleum Corporation as minority partners.
- French Total SA has produced its first biofuel at the converted La Mede refinery, which has a capacity of 500,000 tons per year. The refinery will produce both biodiesel and biojet fuel for the aviation industry.
- Eni has begun early production from the Miztón field in Area 1, offshore Mexico. This is the first offshore production since Mexico’s energy reform five years ago opened the door to private companies. The area is estimated to hold 2.1 billion boe in place.
- Equinor has made what is being billed as a major oil discovery at its Oseberg area in the Norwegian North Sea, with an estimated recoverable resource of 22 million barrels.
- The National Trust, Europe’s biggest conservation charity, said it will sell off the shares it holds in fossil fuel companies. For now, 4% of its $1.3-billion in investment is in fossil fuels, but it will now start balancing that with green start-ups and other environmentally friendly companies.
- Israel’s Delek Drilling was hoping to have started commercial gas sales to Egypt by the end of June. That hasn’t happened, despite the fact that tests on the subsea pipeline that would get it there have been completed. Now, we’re looking at a delay until the end of the year - assuming geopolitics do not interfere. Delek, though, is suggesting the delay is about Israeli gas demand, which won’t let up enough to export to Egypt until the end of the year, which is also when the giant Leviathan gas field is slated to come online. The deal, when it finally gets off the ground, is for Delek and Noble Energy to export $15 billion in Israeli natural gas (from both the Tamar and Leviathan fields) to Egypt. Israel also has an agreement to export 106 billion cubic feet of gas per year to Jordan beginning in 2020 through a 65-kilometer pipeline. This deal, which Jordan needs desperately, is a hard sell for the Kingdom’s Palestinian population. Earlier this week, Israeli media, citing Palestinian Quds news agency, said a
Jordanian parliamentarian had called on his countrymen to “sign a code of honor to blow up the gas pipeline” and be martyrs of the project. The statement was reportedly made on the sidelines of a press conference that revealed details of the gas agreement.
- Saudi Arabia and Kuwait are close to restoring oil output from the neutral zone that they share after recent talks proved fruitful. The oilfields there haven’t produced anything in years, but the area has the capacity to pump 500,000 bpd. The next meeting to discuss the neutral zone will be held in Kuwait later this month.
- Operators of the Haliba oil field in Abu Dhabi, ADNOC and Korea National Oil Corporation said they have started production, with plans to boost output to 40,000 b/d by the end of this year. The appraisal program of the field enabled companies to discover more than 1.1 billion barrels of original oil-in-place
Tenders, Auctions & Contracts
- Petrobras began non-binding phase of Polo Reconcavo tender for 14 fields. Current production in Polo Reconcavo is 2800 bpd (oil) and 588,000 cbm (gas).
Legal & Regulatory Alerts
- The US has blacklisted Cuban Cubametales - a state-run company accused of violating sanctions by continuing to import oil from Venezuela. According to the US Treasury Department, the company has also expanded its operations to include sulfur fuel and diluted crude oil to and from Venezuela. Italian-owned PB Tankers, which was previously targeted by authorities for shipping oil from Venezuela to Cuba, has been removed from the US sanctions list for cancelling its contracts with Cubametales.
- In a single-state blow for Tesla, the governor of Wisconsin has denied the company the right to use a direct-sale model in the state, meaning it will not have access to Wisconsin consumers directly. For investors, it’s no reason to panic. The Tesla Direct (straight to your driveway) program can only, for now, operate in 10 states (it’s been banned in 11), but that isn’t stopping Tesla from top-selling luxury car stats.
- Oilfield services company Weatherford International PLC--after amassing more than $8 billion in debt, filed for Chapter 11 bankruptcy on Monday.
- Legal & General Investment Management has divested its Exxon shares from the $6.3-billion Future World fund because of the oil giant’s perceived failure to respond to climate change. This is another example of the immensely mounting pressure on Big Oil to which we refer above. It’s not a huge deal for Exxon because the fund only held around 0.6%, but the message is clear and it’s a growing trend to watch out for.
- Private-equity backed Siccar Point is contemplating a sale later this year. Siccar Points portfolio includes 500 million boed of discoverable reserves, which have expected lives of at least 40 years. Siccar could fetch around $2 billion and is one of the largest private oil and gas field operators in the North Sea.