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Washington Targets Russia With Yet More Sanctions

Sanctions, Politics, Geopolitics & Conflict

- Washington is preparing another sanctions package that, if passed, would put major restrictions on anyone involved in Russia’s $10.5-billion Nord Stream 2 project. Energy secretary Rick Perry said the US Senate will pass the sanctions bill soon, the House will approve it, and Trump will sign it into law. In part, this was meant to appease Ukraine during Perry’s visit to Kiev for the inauguration of President Volodymyr Zelenskiy.

Deals, Mergers & Acquisitions

- Sempra Energy - gunning for the top slot on the US LNG scene, with help from the Saudis - signed a deal this week for the delivery of 5 million tons of LNG annually to Aramco. The Saudi state giant will also buy a 25% stake in the plant that will supply this LNG: in Port Arthur, Texas. Sempra and Aramco said the Port Arthur LNG plant could have a capacity of 45 million tons of LNG annually, produced in 8 liquefaction trains. Port Arthur has not been built yet, but Sempra is at around a 50% completion on another LNG plant in Louisiana, for which it requested a completion deadline extension recently.

- Venezuela’s PDVSA has offered 6.4 million barrels of crude oil on the spot market at discount prices. The company is looking for buyers from China, India, and Russia and the reason for the discount is that PDVSA is facing rising inventories as exports to the U.S.—its biggest market—have all but dried up after the latest round of U.S. sanctions on Caracas.

- Carlyle Group is negotiating with three possible suitors for a 25% stake in its oil export terminal in Corpus Christi, Texas. The stake has a price tag of $625 million. The company needs funds for more oil export terminals as local production continues to rise and so do exports: these hit 3.4 million bpd last week, close to a record high.

- Whiting Petroleum has joined potential suitors for QEP Resources. Callon Petroleum—another energy independent—and Blackstone Group are also in the race for the Colorado-based company, which was first initiated by Elliot Management, which offered $2 billion for QEP earlier this year.

- Aramco has opened a fuel trading office in the UAE and has hired former BP, Trafigura, and Pemex employees to run it. The move is part of Aramco’s expansion into industry segments different from the production and sales of crude oil.

- Brazil’s state-run Petrobras has approved a deal to sell an additional stake in its fuel distribution unit BR Distribuidora through a follow-on stock offering. Petrobras will reduce its holding to under 50%, from over 70%.

- Exxon and BP have withdrawn from bidding for new oil blocks offshore Ghana, with no reason disclosed. Both companies were in direct negotiation talks with the government for blocks 5 and 6, while three other blocks were slated for competitive bidding, according to unconfirmed local media reports.

Tenders, Auctions & Contracts

- Argentina awarded exploration permits for 18 offshore blocks to companies including Exxon, Total, and Shell, as well as the local state energy major YPF. The combined winning bids stood at $724 million in this tender, which is the latest move in a push by the Argentine government to reverse a decline in local oil and gas production resulting from earlier regulation that pushed away foreign investors the Macri government is now trying to coax back into Argentina’s energy industry.

- Italy’s oilfield services provider Saipem has inked a multimillion-dollar deal with the Norwegian arm of Spain’s Repsol to drill a well at one of the company’s local fields. The oilfield services company announced the deal along with another one, in the Middle East, saying the value of the two combined totaled more than $100 million.

- Chevron has partnered with EVgo—an electric car charger maker—to add the option of EV charging to some of its fuel stations in the United States. For now, the chargers will only be added to locations in California, which is home to most of the U.S.’ EV fleet.

- Germany’s Uniper this week announced the start of open season for a proposed LNG import terminal. Companies have until July 19 to express interest in the 7.25-million-ton floating regasification facility in Wilhelmshaven. Uniper has partnered with Exxon on the project as Germany seeks to expand its gas import capacity amid a major shift in its energy mix away from coal and nuclear.

- French EDF and Emirati Masdar have won a tender for the construction of an 800-MW solar farm in Morocco, which will for the first time combine PV technology with concentrating solar power. The combination of the two should increase the facility’s output, which will begin feeding into the grid in 2022.

- In Guyana, as the CCJ continues to delay any ruling over the validity of a no-confidence vote, the State Assets Recovery Agency (SARA) has announced an investigation into all oil and gas licenses issued since 2015, and the decision-making process behind that. This, of course, will include Exxon’s massive-discovery Stabroek project. This is most likely a PR attempt by the current government ahead of the next elections, which could be in November--depending on what the CCJ rules. The opposition is currently attempting to remove the heads of SARA, and we do not expect anything real to come of the alleged investigation.

- Ukraine is preparing for a third licensing round of 35 onshore blocks and 1 offshore block on June 18th. The previous two rounds held in March and May saw concessions awarded for nine blocks.

- GE Energy Financial Services (EFS) and its Japanese and UAE partners have obtained $1bn in project financing for the 1.8GW independent combined cycle power plant in Sharjah, UAE. The plant is Once completed, the power plant is expected to be the most efficient power plant in the Middle East’s utility sector.

- Maryland boosted its offshore wind and solar target after governor of the state Larry Hogan confirmed that legislation known as the Clean Energy Jobs Act is to become law. The legislation will increase the state’s Renewable Portfolio Standard (RPS) to 50% by 2030 and includes a 14.5% carve out for solar and a 10% carve out for offshore wind, which equates to a minimum of 1.2 GW.

Discovery & Development

- Crude oil production in the North Sea is recovering after a series of outages last week tightened supply in the area. Besides planned maintenance at the Ekofisk and Statfjord fields, there was also an outage at the Oseberg field and reports of a leak at Statfjord. A few fields in the UK section of the North Sea also suffered a decline in production due to a leakage in the pipeline infrastructure carrying the crude from them to shore.

- Gazprom has announced the discovery of two new fields offshore the Yamal Peninsula in western Siberia—a legacy oil and gas production region. According to the company, the two fields hold combined reserves of more than 500 billion cubic meters of natural gas. Gazprom plans to ramp up gas production in Yamal to 310-360 billion cubic meters by 2030 both for domestic consumption and exports to Europe.

- Eni and Exxon have stopped drilling off the Karachi coast in Pakistan after their attempts to strike commercial oil proved futile and the Pakistani government cancelled the project. Drilling on the site began in January this year, in the Arabian Sea but like previous attempts to find oil in Pakistan, it failed. The country has a fast-growing population and equally fast-growing energy demand but for now only gas reserves have been discovered.

- A tidal power project in Europe has boasted a 15% reduction in energy costs over the 18 months since it began operation. The Enabling Future Arrays in Tidal off the Scottish shore is the result of a collaboration between nine European companies bent on gauging the potential of tidal power. According to the consortium, further cost improvements are also on the cards, with the degree of reduction rising to 40% by 2022.

- Eni has made a new light oil discovery in Angola’s deep offshore on the Ndungu exploration prospect. The new discovery is estimated to contain up to 250 MMbbl of light oil in place. The result of the data collection indicates a production capacity in excess of 10,000 barrels of oil per day.

Company News

- BP and Shell will donate $1 million each to a federal carbon tax initiative in U.S. Congress that seeks to implement a tax of $40 per ton of emissions that will gradually rise but money would be returned to consumers to compensate for higher energy prices.

- South Africa’s Sasol has upped the cost estimate for a multibillion-dollar chemicals plant in Louisiana. The Lake Charles project will now cost some $12.6-12.9 billion, compared with an earlier estimate of $11.6-11.8 billion.

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