Politics, Geopolitics & Conflict
• The Turks have launched a ‘decisive’ military campaign against the Kurds in southeastern Turkey, forcing some 200,000 people to flee their homes so far as the government goes after the PKK (Kurdistan Workers’ Party). This will create further instability in Turkey and weaken the fighting forces trying to push back the Islamic State in northern Syria. This fight with the PKK will be protracted, and there will be no clear winner, but plenty of losers.
• And, keeping to form, Turkey’s military foray into Iraq is being met with high-level unrest, with some 4,000 Iraqis protesting this week in Baghdad and oil-rich Basra, calling on Turkish troops to be removed from their positions around Mosul in northern Iraq. We’ll see how long the Turks can hold onto their theory that ISIS is part of their pathway to a new Ottoman Empire after IS launched an attack on Mosul that took out four Turkish troops along with seven Kurdish Peshmerga forces last Wednesday.
• The European Union is—at the time of writing—meeting to decide whether to extend sanctions against Russia for another six months. Countries that may block this extension include Hungary, Cyprus, Greece and Italy.
• As the geopolitical playing ground heats up, Afghanistan, Turkmenistan, Pakistan and India have broken ground on the $10-billion TAPI pipeline—a 1,735-kilometer pipeline that will carry 33 billion cubic meters of gas annually from Turkmenistan to the Pakistani border, and then onwards. This pipeline will be a perfect target for terrorist attacks, which none of these countries is prepared to thwart effectively.
• Based on projected oil prices of $45/barrel, Iraq's parliament has adopted a 2016 budget of $88.2 billion, while its deficit is around $20 billion. The budget includes oil production the federal government does not now control and envisions a rise in oil prices, meaning revenue may fall short of projections. Iraq’s oil exports have risen above 3 million barrels per day this year. Iraqi Parliament also approved a plan to give 17% of the national budget to the Kurdistan Regional Government (KRG). We’ve heard this story before from Baghdad, but it is no guarantee that it will resolve the ongoing dispute with the Kurds over their share in the national budget and Baghdad’s share in Kurdish oil exports.
Discovery & Development
• French Total SA has brought on stream the Moho Phase 1b project, which is located 46 miles off the coast of Pointe-Noire in the Republic of the Congo. Moho Phase Ib—part of the Moho Bilondo license--is operated by Total E&P Congo with a 53.5% participating interest. Moho Phase 1b has a production capacity of 40,000 barrels oil equivalent per day. The other partners in the project are Chevron, with a 31.5% interest, and Société Nationale des Pétroles du Congo, with a 15 % interest. The project is in water depths ranging from 2,400 to 4,000 feet (750 to 1,200 meters). This 1b phase is part of the Moho Nord joint development project, the largest-ever oil and gas project undertaken in the Republic of Congo. This phase includes 11 wells tied back to an existing floating production unit.
• After more than seven years of planning and construction, production has commenced at Origin Energy's Australia Pacific LNG project in Queensland. The $17.5 billion project is the third CSG-LNG development on Curtis Island following the BG Group and the Santos group in the past 12 months. APLNG’s first LNG shipment is expected before yearend. Origin with 37.5% is partnered by ConocoPhillips, also 37.5%, and Sinopec with 25%. Sinopec is also the major customer for the LNG with an agreement to take 7.6 million tons/year for 20 years. Kansai of Japan will take 1 million tpy for 20 years.
• Mexico is planning to invest around $23 billion over the next three years to upgrade state-owned oil giant Pemex's six refineries. Among the projects are clean gasoline, which will reduce the sulfur content of fuels and cut emissions of greenhouse gases and pollutants by about 90%, as well as use of petroleum residues, low-sulfur diesel and cogeneration. The projects, requiring a level of investment equivalent to double the Federal District's annual budget, are part of the transformation of Pemex launched with the energy industry overhaul. The projects, some of which have already started, come amid Pemex's struggles with budget cuts and new competition from foreign and private companies in the wake of energy reform. The company’s six refineries yielded output of around 1.27 M/bd of refined products in the first 10 months of this year.
• Woodside Petroleum of Australia has approved a $2-billion gas development in Western Australia’s North West Shelf project, which is operated by Woodside. Partners in the project include BHP Billiton, BP, Chevron, Shell and Japan Australia LNG. Together, they will develop 1.6 trillion feet of gas, which will be piped to the existing Goodwyn A platform. Production is expected to start in the first half of 2020.
• Tullow Oil said an exploratory well drilled in the South Lokichar basin in northern Kenya encountered 102 meters of net oil pay in two columns. The company operates Blocks 13T and 10BB and has 50% interest, with Africa Oil Corp. owning the other 50%. In Block 10BB, Tullow said it has completed the Ngamia extended well test, producing 38,000 bbl. Shares in Tullow, which drills for oil in West Africa, jumped as much as 7.7% to 163.87p per share.
• In Pakistan, state-run Pakistan Petroleum Limited (PPL) has announced the country’s ‘largest discovery in 10 years’, hitting 56 million cubic feet per day of gas in Matiari, in the Sindh province. From a global perspective it’s not a huge discovery; nonetheless it would be very significant for energy-starved Pakistan, which desperately needs a new find.
Deals, Mergers & Acquisitions
• Al Motahaden Petroleum Refineries—based in the United Arab Emirates (UAE)--will invest $500 million in a new oil refinery in Pakistan. The refinery is tentatively planned for Pakistan’s northwestern Khyber-Pakhtunkhwa province. It will have capacity to process about 15,000 to 20,000 barrels of oil per day. According to the signed memorandum of understanding, Al Motahaden Petroleum Refineries will form a consortium consisting of local and foreign companies to develop the project and make the required foreign direct investment in Pakistan.
Tenders & Auctions
• The government of Thailand has approved a draft oil law after delaying a bidding round for concessions earlier this year due to criticism of contract terms from politicians and activists. The new law adds a production-sharing contract (PSC) in addition to existing concession contracts under which companies pay taxes and royalties. Under existing deals, the government receives taxes and royalties that add up to around 67% of pre-tax profit. Critics would like to see Thailand get a bigger cut of revenue here. The bidding round was delayed in February—and it would have been the country’s first since 2007. The February delay, however, was only one of many earlier delays caused by everything from natural disasters to political crises and even a coup, which ended in May 2014. With the new draft oil law approved, the government is eyeing the relaunch of the next bidding round by mid-next year.