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U.S. Oil Major Receives Reassurance From Venezuela

Politics, Geopolitics & Conflict

- Venezuela’s opposition leader Juan Guaido has vowed to protect Chevron’s assets in the country if the US doesn’t extend its license to operate there. Without naming Chevron specifically, Venezuela threatened in April to have its allies take over any non-producing assets. Chevron wins either way: The U.S. could grant it a license to continue operations, or Guaido will ensure asset protection for Chevron if the oil giant is forced to take a step back temporarily. Chevron has survived as much before, including Chavez. The deadline for renewing Chevron’s license is July 27th.

- Japanese diplomat Yukiya Amano, who led the International Atomic Energy Agency (IAEA) for a decade and was involved in negotiations over Iran's nuclear program, has died. He was 72. No details were given on the cause of death. However, the announcement was made on the day Amano was expected to announce his decision to step down due to an illness.

- Nearly one-third of Libya’s oil output was taken offline for three days this week after a pipeline was sabotaged from the giant Al-Sharara field, which produces 315,000 bpd. On Monday, production resumed, but not before Libya lost 290,000 bpd for 48 hours. That’s about $19 million a day in losses, confirmed by our sources at the Tripoli-based National Oil Company (NOC). The NOC is not keen to discuss publicly what the cause of the shutdown was, or who was behind the sabotage. Instead, they refer to it publicly only as a “criminal act”. The unwillingness to discuss the nature of the sabotage suggests that it may have been perpetrated by Islamic radical forces. What this means is this: It’s always been General Haftar (presently trying to seize Tripoli from the GNA) who fought off ISIS-related forces from the country’s oil facilities. The GNA and NOC are not keen to highlight this at a time when they are bringing on external parties to help fight back Haftar’s offensive on the capital city. The Sharara oilfield is only functioning effectively because of Haftar, who has rescued it from armed groups several times already.

- British Foreign Secretary Jeremy Hunt is trying for a European-led maritime security force in the Gulf following Iran’s dramatic seizure of a UK tanker, but Hunt’s efforts are being rejected by not only Iran but also incoming PM Boris Johnson. The US is launching its own Gulf protection force, Operation Sentinel, to escort ships through the Persian Gulf, Strait of Hormuz and Gulf of Oman. Iran is trying to force the UK into to confirm its support of the nuclear deal. And it’s winning so far because Boris Johnson’s allies appear prepared to do just that. In the meantime, this is a standoff, and Iran is playing it expertly, most recently hinting that it could offer a swap deal - the British tanker for the one the UK seized off Gibraltar carrying Iranian crude.

- Putin has just granted Russian citizenship to Novatek’s finance chief, Mark Gyetvay. This is a brilliant and not-intended-to-be-subtle move on Putin’s part. It will help Novatek sneak by US sanctions in some ways. US nationals, like Gyetvay, cannot help organize long-term funding for Novatek because of sanctions. So it doesn’t help if your finance chief is a US national.

- Ukrainian authorities have seized a Russian tanker moored in Izmail, a port on the Danube River near the country’s border with Romania. The Ukrainians claim that tanker was responsible for blocking Ukrainian warships near Crimea last November. Ukraine’s SBU security service said that the vessel had changed its name to avoid detection. Last November, Russia seized three Ukrainian ships near Crimea saying that the vessels had violated its state border.

Discovery & Development

- Italian Eni has launched production with its South West Meleiha Development in Egypt. Starting production is 5,000 bpd, which will hit 7,000 bpd by September. Eni owns a 50% interest in the project. Egyptian General Petroleum Corp. holds the remaining 50%.

- Norway’s Aker has made a significant oil discovery of the Alvheim field in the Norwegian section of the North Sea, near the UK border. The company said recoverable oil discovered is estimated to be between 82-200 million barrels of oil equivalent.

- Italian Eni has announced a gas and condensate discovery in the Song Hong basin, offshore Vietnam. Eni operates Block 114 with a 50% share and is partnered by India's Essar with the remaining 50%. The company is planning a drilling campaign early next year to fully assess the substantial upside of the discovery.

- It’s tricky to be in the lithium business these days. We know we’re on the cusp of a major shortage, but we’re not quite there yet, so keeping the smaller lithium miners in business amid major cost overruns and an unclear and dynamic demand picture for lithium in the immediate and short-term isn’t easy. That is the exact situation in which Nemaska Lithium Inc’s hard rock lithium mine and electrochemical plant in Quebec has found itself. Now, it has announced a tentative agreement secure up to $600 million in financing to get the plant off the ground. The stock has lost over 80% in two years. The deal, if it goes through, would make Pallinghurst Group the largest shareholder in Nemaska.

- Wood Mackenzie said this week in its outlook that global solar installations are set to reach a record high in 2019, thanks to improving markets in Europe and the US, as well as notable growth in India and Vietnam.

Deals, Mergers & Acquisitions

- Brazil's state-owned oil giant Petrobras approved the sale of $2.3 billion worth of shares in its fuel distributor Petrobras Distribuidora, the largest distributor and marketer of petroleum derivatives and biofuels of Brazil and Latin America. BR has more than 34,000 gas stations in Brazil and has an annual turnover of more than US$25 billion. Petrobras already sold 30 percent of its stake in the company back in 2017, cashing in some $1.25 billion. This time, the company said it would reduce its 71 percent to 46 percent or even 38 percent, giving up total control of the subsidiary. Last month, Brazil’s Supreme Court ruled that Petrobras do not need congressional approval to sell their subsidiaries, which will help the company to go ahead with its plans to divest $27 billion of non-core assets by 2023, key to reducing its bloated debt load. Following the ruling, Petrobras sold its TAG pipeline network in an $8.6 billion deal.

- Saudi Aramco is hoping to have its east-to-west pipeline expansion project complete by September, which would increase the line’s capacity by 2 million bpd, which is 2 million more barrels of oil that could be exported without going through the Strait of Hormuz.

- Japan’s Inpex has reached a deal with Anadarko to buy 40% in four exploration blocks in the Gulf of Mexico. Inpex already holds interests in the nearby Lucius and Hadrian North oil fields. Anadarko will remain the operator.
Licenses, Tenders, Auctions & Contracts

- Angola has announced a tender for 9 offshore oil blocks in the Namibe Basin, which Angola expects to hold similar deepwater resources to the Gulf of Mexico and Brazil. The blocks being offered up this time are 11,12, 13, 27, 28, 29, 41, 42, and 43. Exxon and state-run Sonogal signed an MoU in December for blocks 30, 44, and 45 in the same basin.

- Russia’s Novatek has awarded TechnipFMC a $7.6-billion Engineering, Procurement and Construction (EPC) contract for the Arctic LNG 2 project located in the Gydan peninsula in West Siberia, Russia. The project will consist of three liquefied natural gas (LNG) trains, each with a capacity of 6.6 million tons per annum each. TechnipFMC previously built Novatek's Arctic LNG export terminal on the nearby Yamal Peninsula.

- UK’s Subsea 7 has been selected by Danish energy giant Orsted to install inner array cables for wind turbines in UK offshore wind farm Hornsea 2. Offshore wind farm will be powered by 165 wind turbines each with 8.4MW of capacity. Expected to be operational by 2022, the wind farm will generate enough clean electricity to power 1.3 million homes in the UK.

- With second quarter revenues and profits dropping 12 percent compared to last year’s Q1, French Total announced that it aims to sell $5 billion worth of assets in this quarter. Last month, the company sold its UK North Sea to Oman-based Petrogas for $570 million. Total’s production reached 2.9million barrels of oil equivalent per day in the second quarter, up 9% on the previous year.

- The UK government has made a $23-million financial commitment to the consortium led by Rolls-Royce to develop small nuclear modular reactors (SMRs) for commercial use. The initial investment will be used to mature the design, address manufacturing technology requirements, and complete the regulatory licensing process. The consortium says its SMR program could contribute $110 billion to the UK economy and open up a global export market. The consortium includes Rolls-Royce as well as Arup, Siemens, National Nuclear Laboratory (NNL) and Nuclear AMRC.

- South Sudan said it will launch a formal licensing round this fall to revive oil production hit by a recent civil war. The government has reiterated plans to return to pre-war production levels of 350,000 bpd by 2020.

- Turkey granted Shell a license to export natural gas from Turkey to Europe. Aygaz - a private gas company in Turkey - also received a license for the same, bringing the total number of gas export licenses to 14 on its way to become a significant exporter of natural gas.

- PDVSA will cease all production of its upgraded Orinoco Belt synthetic oil grades next month. There are four Orinoco upgraders, one which is the JV with Chevron. The change is being made as the synthetic crude grades processed here were traditionally bound for the US - a market which has since dried up.

Regulatory, Legal Alerts

- Nigeria’s NNPC has stopped making cash call payments to Eni over an unnamed dispute with an unnamed asset. NNPC also said that several of Eni’s licenses would not be renewed, and that it would take over the licenses for certain assets itself. It is unclear how NNPC reclaiming expired licenses fits in with its work on reshaping its oil industry that has long suffered violence and pipeline sabotage that disrupted oil production for years. Despite the new dispute between NNPC and Eni, Nigeria’s state-run oil company has urged Eni to continue work on its critical Port Haricort refinery rehabilitation project, which has a due date of October. NNPC has said that it hopes to resolve the dispute with Eni quickly. Eni’s involvement in the OPL 245 deal in Nigeria has seen the Italian oil compay dragged to courts in multiple countries, a black spot on its record.

- The US Federal Energy Regulatory Commission (FERC) announced that the US government is setting up a new division to regulate the expansion of demand for LNG. In a statement, FERC said that new division is created to accommodate the growing number and complexity of applications to site, build and operate liquefied natural gas export terminals.

- Ohio Governor Mike DeWine on Tuesday signed House Bill 6 into law, enshrining what will be new fees on electric bills to bail out two nuclear power plants owned by bankrupt FirstEnergy Solutions. This is a defeat for renewables in the state because the bill offsets the new nuclear bailout fees by cutting incentives for renewable energy.

- A US Senate panel is set to vote next week on whether it will levy sanctions against any companies involved in building Russia’s controversial Nord Stream 2 pipeline. The bill will need to be passed in both the House and Senate, and then would need to be signed by Trump. The vote was supposed to take place this week but was pushed into the next.

- Spain’s green movement suffered a setback late this week as its Socialist Prime Minister Petro Sanchez lost a confidence vote. It is unclear whether another PM will be proposed or if another election will be held at this point. The Socialist party had proposed a $53 billion public investment plan to combat climate change over the next decade, finds itself on the back foot. The plan called for 74% of Spain’s electricity to come from renewable sources by 2030, reaching 100% by 2050.

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