Politics, Geopolitics & Conflict
• Our boots on the ground say that Libya’s Special Deterrence Force (Radda) in Tripoli has arrested the Islamic State’s (ISIS) newly appointed “prince” in Sabartha, which is just 60 kilometers west of the capital, Tripoli. The special forces stormed a farm where Mohamed Saad Tajuri (aka Abu Suliman) and his group were hiding out. Abu Suliman and his underlings represented ISIS’ new leadership in the Libyan coastal town of Sirte, which the group controls, along with hundreds of miles of coastline. ISIS is carving a path to the Libyan interior now, heading towards the oil-producing territories in the desert, and Sirte is its main base for operations planning right now. U.S. air strikes will prove a mild hindrance to the ISIS advance at this point, as will alleged covert French operations.
• In Venezuela, where the oil price downturn has led to severe austerity measures that could lead to destabilizing riots, opposition leaders are rallying for the ouster of President Nicolas Maduro. A delegation of opposition deputies headed to Brazil earlier this week on stop one of an international tour to gather international support to legally remove Maduro from power. At issue is a 11 February emergency economic decree enforced by Maduro to deal with the global oil price squeeze. Debt defaults are looming and inflation is soaring. For the first time in decades, the government has moved to increase gas prices. That increase will be more than 6,000%, and is expected to prompt high-level unrest in a country used to getting gas for virtually nothing.
• Crude exports from Iraqi Kurdistan via a pipeline to Turkey look likely to be halted temporarily, possibly until the end of the month, due to security issues. At stake here is the transportation of 600,000 barrels per day of crude to the Turkish port of Ceyhan from fields in Iraqi Kurdistan and the disputed territory of oil-rich Kirkuk in northern Iraq. Exports have already been halted since the middle of this month due to attacks on the pipeline. The Kirkuk-Ceyhan crude oil pipeline near the city of Urfa in southeastern Turkey was sabotaged on 16 February. Kurdish authorities put the loss from the sabotage at roughly $14 million a day. Militants of the Kurdistan Workers’ Party (PKK) have also blown up the Kirkuk-Yumurtalik oil pipeline’s section running through Turkey’s Sanliurfa province, suspending operations to deliver Iraqi oil to Turkey. The Kirkuk-Yumurtalik oil pipeline has a 1.5-million-barrel daily capacity. Turkish security forces have been engaged in large-scale operations against the PKK in the southeast since December. In early January, Turkish officials said they killed more than 300 Kurdish militants during the raids in Southeastern part of the country.
• Nigerian Bonny crude is left without buyers due to delays emanating from a disagreement between the state-run Nigerian National Petroleum Corporation (NNPC) and ExxonMobil. At issue here is the fate of future agreements to exchange crude oil for imported oil products. Prior contracts to this effect have been under high-level scrutiny in an ongoing corruption scandal in Nigeria, related to questionable contracts the former Nigerian oil minister struck with traders. Also in Nigeria, Nigerian naval forces have rescued an oil tanker from hijackers in an operation that led to the death of one of the hijackers. The pirates were targeting the vessel’s 4,700 tons of diesel fuel off the coast of Abidjan, Ivory Coast. The vessel was flying a Panamanian flag. It was escorted into Nigeria’s Lagos harbor. The hijackers were from Nigeria and Ghana.
• The newly-reappointed head of the IMF has called on the countries of the Gulf Cooperation Council (GCC) to introduce a regional value-added tax as soon as possible warning that low crude prices are likely to continue. Oil exporters in the Middle East and North Africa lost last year more than $340 billion in oil revenue from their budgets, amounting to 20 percent of their combined GDP.
Deals, Mergers & Acquisitions
• As North American E&P companies release dour quarterly reports and struggle to avoid bankruptcy, plenty of assets are being sold or put up for sale, with investors responding as positively as they can to this negative cash environment. The latest fire sales in the patch come from Chesapeake Energy, which is selling off the rest of its Western Anadarko Basin assets for $385 million to Colorado-based FourPoint Energy LLC. Last July, Four Point paid $850 for assets belonging to two Chesapeake subsidiaries in western Oklahoma.
• Whiting Petroleum, operating in North Dakota, has also announced that it will suspend all fracking and new well completions in the state until oil prices rebound. This means the suspension of planned wells in 20 Bakken shale and Three Forks sites, as well as the shelving of a pipeline that was to be built to Tesoro Logistics.
• Danish Maersk Oil has completed the acquisition of 50% of Africa Oil’s share in three onshore exploration licenses in northern Kenya and two in southern Ethiopia. Africa Oil received US$427 million from Maersk. The licenses, located in the Turkana region, cover about 100,000 sq km and include nine recent oil discoveries, four of the blocks operated by Tullow Oil. Turkana has an estimated 2.3 billion barrels of recoverable oil discovered to date. Four of the blocks are operated by Irish explorer Tullow Oil and one is operated by Africa Oil.
Discovery & Development
• Spain’s Repsol has discovered 4 trillion cubic feet of possible natural gas reserves in Bolivia--an amount that could boost the country's reserves by 40%. Shell expects production from three fields in the Caipipendi block in southern Bolivia--Boicobo, Ipaguazu and Boyuy—to begin in 2019. Repsol has a 37.5% stake in the block and Bolivia's state-run energy company YPFB can take 82% of earnings on new energy production.
• Egypt’s Ministry of Petroleum and Mineral Resources has approved a deal that would see Italian oil giant Eni officially obtain the Zohr development lease. The development plan envisages the start of production by the end of 2017. Output should eventually reach to around 500,000 barrels of oil equivalent per day by 2019. This is one of the biggest recent discoveries, and competes with Israel’s 2010 discovery of the Leviathan field in the Levant Basin, which is still languishing under regulatory hurdles. Zohr could meet Egypt’s natural gas demand for decades once it is fully developed. The Zohr field is estimated to potentially hold up to 30 Tcf of lean gas in place, or 5.5 billion boe, over approximately 100 square kilometers. The discovery of Zohr was announced last August, following the drilling of the Zohr-1 well. The first appraisal well, Zohr-2, is currently being drilled.
• A consortium of French Total, Austria’s OMV and Spain’s Repsol have announced plans to start drilling by June in Bulgaria’s largest offshore block in the Black Sea. Last September, Shell won a tender for a five-year permit for exploration at the Silistar block that covers 7,000 sq km September with a plans to US$20.5 million in seismic surveys. Silistar is near a block in Romanian waters where OMV has said it could produce up to 84 billion cubic meters of gas.