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Washington Threatens Greece In Tanker Seizure Saga

Politics, Geopolitical & Conflict

- Iran and the US continue to trade barbs over the tanker seizures near the Strait of Hormuz. Iran’s recently released Grace 1, since renamed the Adrian Darya 1, is now on its way to an undisclosed location. The US has asked Greece not to assist the tanker in reaching its final destination and has threatened to sanction anyone who is involved in any way with the Adrian Darya 1 or its cargo, promising to aggressively enforce US sanctions.

- US presidential candidate Senator Bernie Sanders has unveiled a $16.3 trillion plan to address climate change - a plan he sees as a way to "end the greed of the fossil fuel industry." Sanders’ ‘Green New Deal’ promises massive direct public investment for a decade-long program that hopes to achieve 100% renewable energy and complete decarbonization by at least 2050.

- The state-owned Belarusian Oil Company has hired David Gencarelli to lobby the US government for sanctions relief because for the first time ever it is seeking to buy U.S. oil for its refineries, instead of Russian oil. Belarus was sanctioned by the US in 2006 for “undermining democratic processes” over unfair presidential elections. In 2007, Washington extended sanctions to include refiner Belneftekhim. While some sanctions have been lifted since 2015, others remain in place. The lobbying, under normal circumstances in Washington, would be successful as this presents the US with an opportunity to trump Russia at a time when Russia is trying to tighten its grip on relations with Belarus.

Discovery & Development

- TAQA (Abu Dhabi National Energy Company PJSC) Iraq has set a new production record from the Atrush oilfield in the Kurdistan region. In July, the total monthly production volume exceeded 1 million barrels of oil for the first time since the fields commenced production operations in 2017.

- Construction will soon be underway on Canada’s Trans Mountain pipeline expansion project, with contractors to hire workers and come up with a plan within 30 days. Ottawa approved the project mid-June, facing a resurgence of green opposition forces, which attempted to get insurers to refuse coverage of any oil sands projects. The move forward on the pipeline work will alleviate serious pipeline capacity constraints that have resulted in mandatory production cuts to Alberta’s oil producers.

- South Sudan has found 5.3 million barrels of recoverable oil, the first oil found since the country announced its independence. The oil was found through a JV with China and will add to its 180,000 bpd. South Sudan is the most oil-dependent nation in the world, and China, for now, appears to be its oil industry’s biggest benefactor, offering loans to South Sudan that it can only repay through future oil finds.

- A new way of analyzing how much gas is in the ground left to be fracked has suggested - quite controversially - that the UK does not have nearly as much frackable gas as previous analyses have shown. Previous estimates by the British Geological Survey six years ago showed that there were 1,300 trillion cubic feet - 50 years’ worth - of recoverable shale gas in England and Scotland. But a new study by the University of Nottingham suggests it may only hold 10 years’ worth.

- Russia has announced that the construction of the Nord Stream 2 pipeline in the Finnish economic zone has been completed. The Nord Stream 2 project involves the construction of two pipelines with a total capacity of 55 billion cubic meters of gas per year from the coast of Russia through the Baltic Sea to Germany. Earlier this month, Gazprom reported that the pipeline was already 74% complete.

Deals, Mergers & Acquisitions

- Canada-based Pembina Pipeline Corp has agreed to buy Kinder Morgan’s Canadian unit as well as Kinder’s US-section of the Cochin Pipeline system for $3.3 billion. The deal casts doubt on the notion that Kinder Morgan plans to purchase the Trans Mountain pipeline from the Canadian government, leaving the fate of the pipeline uncertain at best.

- Scottish energy services company Wood agreed to sell its nuclear business to US consultant Jacobs in a deal worth $305 million. The sale is part of a debt-cutting drive following its acquisition of Amec Foster Wheeler for $2.6 billion and a prolonged oil-price slump.

- China’s CNNC, Russia’s Rosatom, and South Korea’s Korea Hydro & Nuclear Power Co - all state-run companies - are looking to get in on Bulgaria’s Belene nuclear project. Belene was originally scrapped in 2012. Bulgaria is expected to shortlist companies in three months. The project is expected to be completed in 2030.

- Norway’s BW Offshore has won approval from the Brazilian oil regulator ANP for the purchase of the Maromba oilfield from Chevron Corp and Petrobras. This is part of BW Offshore’s bid to become an operator and not just a supplier of oilfield services for the oil industry.

- Also in Norway, state-run Enova has approved funding of US$256 million to support a project that would develop the world’s first floating offshore wind farm to power offshore oil and gas installations in the northern North Sea. The offshore wind farm will consist of 11 floating wind turbines with a total capacity of 88 MW.

- China’s Ganfeng Lithium said it had completed a $160 million deal with Minera Exar to raise its stake in the Cauchari-Olaroz lithium brine project in Argentina to 50%. Last year it bought a 37.5% stake in the Cauchari-Olaroz project from Chile's Sociedad Quimica y Minera (SQM). Gangfeng is one of the world's biggest producers of lithium, a key ingredient in rechargeable batteries, and a supplier of electric carmaker Tesla. The remaining 50% interest in the project is owned by Lithium Americas.

- Royal Dutch Shell has made an offer to purchase all the shares of Australian electricity retailer ERM Power for $417.2 million. ERM Power is the country’s no.2 energy retailer to businesses and industry. The deal falls in line with Shell’s ambition to become the world’s top power producer by 2030 in an effort to insulate itself from the fate of the oil industry.

- Britain’s Premier Oil said it has begun the process to sell its 25% interest in the Zama field offshore Mexico to cut debt. Company’s debts have already been cut to $2.1 billion, from $2.3 billion at the end of last year.

More Market Movers

- The closure of the East Coast’s largest refinery has cut crude by rail shipments from the Bakken to the refinery completely. In response, oil flowing through pipelines from the Bakken has increased to a six-month high. reaching 90% of capacity at 980,000 bpd.

- Hedge funds reduced their net long position in the six major petroleum futures and options contracts for the second week in a row last week, by 35 million barrels on weakening demand prospects. The position on petroleum prices is now neutral. Fund managers now hold just 543 million barrels, compared to 911 million barrels held in April.

- Alberta has announced that it will continue its oil production quotas it had imposed on oil producers in the province through the end of 2020. While the production cuts have eased since their inception, but persistent delays in the country’s ability to get pipelines approved, which will allow producers to get the oil to market, has left Alberta with worries that the sharp discount of WCS to WTI prior to the production cuts may surface again.

Licenses, Tenders, Auctions & Contracts

- 29 oil and gas companies made $178.1 million in high bids for federal leases in the Gulf of Mexico. The auction offered 77.9 million acres of which 835,006 acres received bids, according to preliminary data from the BOEM. Equinor and BP bid on the most tracts, with 23 and 21 bids respectively. BHP Group submitted 20 bids. Combined with a March auction that drew $244.3 million in winning bids, the total was the highest annual bid level since 2015.

- Nigerian state oil company NNPC said that of fifteen companies were picked for its annual crude oil for refined fuel swap, known as the Direct Sale Direct Purchase (DSDP) arrangement. NNPC said a total of 132 companies placed bids for the project, and the winners include Trafigura, BP, Vitol, and Total.

- South Korea’s Samsung Heavy Industries, one of the largest shipbuilders in the world, has secured a $621-million order to build 10 crude oil tankers fueled by LNG. The customer remains undisclosed. Demand for LNG-powered ships is growing due to the new environmental regulations of the International Maritime Organization (IMO) that will go into effect at the beginning of the year. Samsung Heavy Industries has achieved 54% of its annual target of $7.8 billion by obtaining orders for 29 vessels equivalent to $4.2 billion so far.

- Russia’s state-controlled oil producer Rosneft has submitted a sole bid for the West Irkinsky block in East Siberia. The region has probable oil and gas reserves of 500 million tons of conditional fuel, according to the authorities.

Regulations & Legislation

- A judge overseeing PG&E Corp’s bankruptcy case allowed the California utility to hold on to sole rights to its Chapter 11 exit plan. Judge Dennis Montali of the U.S. Bankruptcy Court in San Francisco turned down requests from two groups of creditors wanting to propose a Chapter 11 exit plan. The company, whose main subsidiary is the California utility Pacific Gas and Electric Company, sought bankruptcy protection earlier this year after severe wildfires in 2017 and 2018 resulted in more than $30 billion in liabilities.

Earnings Calls

- Russian Rosneft’s profits fell 15% on the temporary Druzhba pipeline crisis, in which millions of barrels contaminated with chemicals were exported to Europe. The company’s earnings for the second quarter of 2019 slid from $3.45bn $2.94, while its net income margin fell from 11% between April and June last year to 9.1% over the same period this year.

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