Politics, Geopolitics & Conflict
• With a great deal of help from Russia, the Assad regime has recaptured the strategic city of Palmyra from the Islamic State-a victory that should indeed to go the Russians, along with a smattering of Syrian special forces, Hezbollah forces, Iranian special forces and Iraqi Shi'ite militias. According to Assad, this victory, more than anything, demonstrated the half-hearted attempt by the global U.S.-led coalition fighting the Islamic State in Syria and Iraq. The Western media, of course, does not know how to deal with this as the gray areas are too wide. The problem they find themselves in is that the Assad regime, and Russia, as well as (uncomfortably) Hezbollah and Iran, are coming out as the good guys in this story-the only ones who have seriously confronted the terrorist threat. Not acknowledging this means evokes some equally uncomfortable realities about our fight against the Islamic State, as well as Turkey's intentions. A lot of the geopolitics that will now arise will have to do with who is on the right side of history here, and it's a tough case to make.
• Baghdad has bitten back at the Iraqi Kurds' gamble on unilateral exports, and the bite is hurting a bit more than usual. The Kurds were hoping to add 150,000 barrels per day to their supply this year, but it's now looking like it will be about 100,000 bpd at best. In the meantime, Baghdad is keeping 150,000 bpd from being exported through the region. So…
Politics, Geopolitics & Conflict
• With a great deal of help from Russia, the Assad regime has recaptured the strategic city of Palmyra from the Islamic State-a victory that should indeed to go the Russians, along with a smattering of Syrian special forces, Hezbollah forces, Iranian special forces and Iraqi Shi'ite militias. According to Assad, this victory, more than anything, demonstrated the half-hearted attempt by the global U.S.-led coalition fighting the Islamic State in Syria and Iraq. The Western media, of course, does not know how to deal with this as the gray areas are too wide. The problem they find themselves in is that the Assad regime, and Russia, as well as (uncomfortably) Hezbollah and Iran, are coming out as the good guys in this story-the only ones who have seriously confronted the terrorist threat. Not acknowledging this means evokes some equally uncomfortable realities about our fight against the Islamic State, as well as Turkey's intentions. A lot of the geopolitics that will now arise will have to do with who is on the right side of history here, and it's a tough case to make.
• Baghdad has bitten back at the Iraqi Kurds' gamble on unilateral exports, and the bite is hurting a bit more than usual. The Kurds were hoping to add 150,000 barrels per day to their supply this year, but it's now looking like it will be about 100,000 bpd at best. In the meantime, Baghdad is keeping 150,000 bpd from being exported through the region. So that's essentially 200,000 fewer barrels per day going through Kurdistan at a time when it needs the cash desperately. When the Kurdish pipeline to Ceyhan, Turkey was shut down in mid-February, it was a hard hit for the budget of the Kurdistan Regional Government (KRG). This pipeline is how Iraq moves oil northward into Turkey, and it's the only route now open because another pipeline that could deliver to the north was too close to Mosul and is now in the Islamic State playground. The Ceyhan pipeline from Iraq to Turkey carried some 450,000 bpd of Kurdish oil and 150,000 bpd of Iraqi oil from the state-run oil company. That 150,000 bpd is no longer going through this pipeline, even though it has since been reopened. At the same time, one of the biggest producers Kurdistan, Genel Energy, has come out with some bad news: Its estimates for reserves in the giant Taq Taq field have been slashed by almost 50%. This is another huge blow for the KRG. The reservoirs in Taq Taq, as it turns out, aren't as porous as originally thought to be, so extraction will be more difficult and almost half of the original reserve won't be commercially viable, even if oil prices rebound. Geology is suddenly lashing out at Kurdistan. Norway's DNO has made significant cuts in its investment plans for the Tawke field, where production has been a bit disappointing and delayed payments from the KRG have made it difficult to stay afloat.
• Amid Russian-orchestrated rumors of a military coup in the works to oust Turkish leader Recep Tayyip Erdogan, the military has felt compelled to issue a statement denying any coup plans exist, but Russia has won this hand, having successfully stirred a very sensitive pot. The general staff of the Turkish military on 31 March issued a statement rejecting any notion of a coup. This is an extraordinary statement that speaks to the fear on the ground in Turkey. The statement said, "Discipline, absolute obedience and single order command is essential in the Turkish Armed Forces. It is not possible there to be any concessions to any illegal or out-of-command chain hierarchy establishment (sic)". They also noted that those who have been spreading coup rumors would be criminally charged. But keep in mind that Russia is much better at these psychological games than Turkey (or pretty much anyone else), so simultaneous news reports to the effect that Russia is trying to mend fences with Turkey should be taken as part of this game.
Deals, Mergers & Acquisitions
• A Jordanian-Chinese consortium has submitted a bit to Iraq's Oil Ministry to build and operate a crude oil export pipeline to the Red Sea port of Aqaba, in Jordan, with a capacity of 1 million barrels per day. This has not been officially confirmed, but comes from media reports citing sources close to the project. For Baghdad, the project would give it an important alternative export route to Persian Gulf terminals. For Jordan it would be a bit of a coup, as the country has little to no oil or gas of its own.
• Exxon Mobil is reportedly in talks to acquire a 15% estimated stake (or more, depending on which anonymous sources you believe) in Italian Eni's Area 4 gas field in Mozambique. Eni holds a 50% operating stake in Area 4. This is a giant field in Mozambique's prolific Rovuma Basin, which holds an estimated 85 trillion cubic feet of gas in place. The gas from Area 4 will feed onshore LNG export plants to largely supply Asian markets. Eni is said to be negotiating with two other companies as well. Two years ago, Eni sold 20% of the field to China's CNPC for $4.2 billion.
• South Africa will cease importing crude oil from Nigeria now that sanctions on Iran have been lifted. Iranian crude will likely displace Nigerian and Saudi Arabian crude oil, which South Africa started to import in greater volume after sanctions were slapped on Iran. South Africa stopped receiving Iranian crude in 2013, making up for the gap most significantly with Nigerian crude and secondarily with Saudi Arabian crude.
• Suncor has officially completed the acquisition of Canadian Oil Sands (COS). Suncor now owns 100% of the issued and outstanding COS shares.
Discovery & Development
• Indian state-run Oil and Natural Gas Corporation (ONGC) will invest $5 billion in the development of its KG Basin fields, which has been put on hold for years. The company will be developing and estimated 23.526 million tons of crude oil and 50.706 billion cubic meters of natural gas, with first gas production expected in June 2019 and first oil production expected in March 2020. Two weeks earlier, the government moved to double prices for gas from difficult reservoirs, such as the fields in the KG basin.
• French Total and Exxon Mobil have launched drilling offshore Uruguay, with plans to drill 3,400 meters of water depth and then more than 2,000 meters below into the ground. Exxon acquired a 35% stake in this from Total in November. Then Norway's Statoil joined the game in January, acquiring a 15% stake, though this deal hasn't officially closed yet, but has been approved by the government.
• Hungarian MOL has made a significant oil and natural gas discovery at an exploratory well in Karak district, Pakistan. During the initial short duration tests carried out, the well flowed oil at the average rate of 1,425 barrels and 1.1MMSCFD of gas per day. Hungarian company is present in Pakistan for over 17 years in Pakistan and holds equity stakes in five blocks in the country. The current discovery is the 11th one achieved in three different blocks. The Karak block is operated by Mari Petroleum Company Limited (MPCL) with a 60% working interest while MOL Pakistan Oil & Gas Co. B.V has 40% in the block.
• Sinopec (China Petroleum & Chemical Corp.) says it plans to double its annual gas output to 40 billion cubic meters by 2020 on the back of a string of new discoveries. Sinopec is slated to produce nearly 30 billion cubic meters of conventional natural gas, 10 bcm of shale gas and 500 MMcm of coal-bed methane by 2020. In 2015, Sinopec produced 20.8 billion cubic meters. Sinopec is the second largest gas company in China, after CNOOC. While Sinopec is doing well with gas, it's oil production in China is only profitable at $60 per barrel.
Regulations & Litigation
• One of the biggest regulatory stories of the week is one that is highly disappointing to anyone banking on the development of the massive gas deposits in Israel's offshore Leviathan Field, in the Mediterranean Levant Basin. Israel's High Court has rejected the development plan for Leviathan, despite an earlier agreement the government had made with discoverers and developers, Texas-based Noble Energy and Israeli Delek Group. The Court rejected the deal over a stability clause that put a 10-year moratorium on any regulatory changes. The Court said the clause was unconstitutional and has given Parliament one year to come up with an alternative. But in the meantime, development gets set aside, and some say that in the best-case scenario it could take a couple of months to sort out, but in the worst-case scenario, Leviathan will indefinitely languish in developmental purgatory. And it's doing nothing to improve Israel's investment climate when a $5-billion game-changing gas resource cannot be developed though it was discovered with great fanfare some six years ago.