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Global Energy Advisory February 9th 2018

oil

India has plans in place to increase its LNG import capacity to 70 million tons a year, which means the country will import more LNG than China did last year and bring it closer to the world’s top LNG importer, Japan.

The plans will make India a top destination for LNG importers and could bring prices lower as the world is still oversupplied and production is set for further growth, intensifying competition.

India currently has just four LNG import terminals and will need to build another 11 over the next seven years to boost its import capacity from the current 20 million tons. The LNG plans are part of a strategy aiming to expand the national electricity network and move households away from wood for heating and cooking, replacing it with electricity and also reduce its dependence on coal as a primary energy source.

The 11 import terminals will be just the start, as well. At some point in the future, India will need more than 15 of these to satisfy its demand for the fuel. This should be music to the ears of all large LNG producers, or rather a starting pistol to position themselves for the Indian market.

Deals, Mergers & Acquisitions

• Japan’s Mitsui has struck a deal for the acquisition of Australian oil and gas player AWE for $478 million. The AWE board unanimously recommended the deal. The Japanese company said the acquisition is part of its expansion into quality oil and gas assets. AWE is operator and 50% owner of the Waitsia gas field in Western Australia – one of the most promising ones in the country.

• Total has bought stakes in two offshore oil and gas blocks in Guyana and an option to buy an interest in a third block. One of these is operated by Exxon, another by Tullow Oil and Spanish Repsol, and the third one, for which Total has a purchase option, is operated by Tullow Oil. The stakes that the French company has bought range from 35% to 25%. The company said the acquisitions will expand its presence in one of the new hot spots for oil and gas. Separately, Total sold a 25% interest in an offshore block in South Africa to Qatar Petroleum.

Tenders, Auctions & Contracts

• Indonesia’s Ministry of Energy announced five winners of exploration rights to oil and gas blocks, including a unit of Premier Oil, Singapore-based KrisEnergy, and local Perusahaan Gas Negara. The country has been having difficulties in attracting fresh investment in its oil and gas industry to reverse a gradual decline in production. Recently, Jakarta resorted to tax breaks and a profit split mechanism to encourage investors to enter its energy sector.

• Jordan’s government has greenlit a contract with the government of Iraq for the construction of two oil and gas pipelines that will connect the two countries. The oil pipeline will carry some 1 million barrels of crude per day to Jordan, while the gas pipeline will ship 258 million cu ft of natural gas. Most of the oil, however, would be exported from Jordan’s Aqaba port, as the kingdom’s needs are much more modest, coming in at around 150,000 bpd.

Discovery & Development

• The Permian Basin has the second-largest spare oil production capacity to just Saudi Arabia, according to a former senior Aramco executive. According to Nansen Saleri, drillers in the Permian have an unused capacity of around 1 million bpd that they could tap when they need, which compares to around 1.5 million bpd for Saudi Arabia.

• Kosmos Energy announced disappointing results from a drilling project off the coast of Senegal. The Requin Tigre-1 well in the Saint Louis Offshore Profond block yielded no oil and no gas at a depth of 5,200 meters. Kosmos is BP’s minority partner in the exploration of the block, with a 30% interest.

• Shell has started to increase the production at its Bonga oil field in Nigeria after a brief shutdown to repair a pipeline. The Bonga field has a production capacity of 225,000 barrels of crude daily and 150 million cu ft of gas. The oil from Bonga is a solid part of Nigeria’s overall output, which is currently around 1.8 million bpd.

• BP said that production from the second phase of development of the Shah Deniz gas and condensate field is on track to start this year. It will raise the total output from the field to 25 billion cu m annually, from the current 9 billion cu m. Development at the field started in 1996. Its reserves are estimated at 1.2 trillion cu m of gas.

• Total will partner with Siemens to build an LNG terminal in Myanmar as the Southeast Asian country joins the rush to switch to LNG from other fossil fuels. The French company has been present in Myanmar for 25 years and operates the Yadanar offshore gas field.

• Statoil plans to begin commercial oil production from the Carcara oil field offshore Brazil in 2023 or 2024, the company said, adding that the Carcara field could turn out to be a very valuable asset – as valuable, in fact, as the largest modern-day discovery in Norway’s North Sea section, Johan Sverdrup.

• Reuters reported that Utah's Bureau of Land Management is preparing for a possible rush of mining claims in the area opened up by President Trump's decision to reduce the size of the Bears Ears and Grand Staircase-Escalante National Monuments. Millions of acres of land will soon be open for mining claims governed by an 1872 law describing the process for prospecting and staking claims in the western United States.

Company News

• Higher oil prices helped BP weather the crisis and post a twofold increase in net profits for 2017, at $6.2 billion. A boost in production also contributed to the better result, enabling the supermajor to start share buybacks to improve shareholder returns.

• Aker BP, the Norwegian oil company, reported a more than twofold increase in fourth-quarter profits thanks to higher oil prices and increased crude oil and gas production.

• Tullow Oil reported its first annual profit in four years for 2017 as it focused most of its efforts on getting crude oil to flow in Kenya. The shift to Kenya was made possible by higher oil prices and lower debt.

• Statoil will return more cash to shareholders and increase capital expenditure thanks to higher profits that beat analyst expectations. The Norwegian company booked $3.96 billion in net profits for last year, a twofold increase in 2016.

• Anadarko also benefited from higher oil prices and beat analyst expectations, reporting a profit of almost $1 billion for the last quarter of 2017. The result was boosted by a one-off income tax benefit of $1.1 billion following the corporate tax reform approval by Congress.

• Total reported an 86% increase in profits for the fourth quarter of 2017 to $1.02 billion, noting that besides prices and production, the bottom line benefited from the continued strict financial discipline the company implemented.

Politics, Geopolitics & Conflict

• Secretary of State Rex Tillerson said during a visit in Argentina that Washington is considering new sanctions against Venezuela that could this time include a ban on Venezuelan oil imports and U.S. fuel exports.

• A U.S.-led air strike killed more than 100 Syrian government troops that were preparing for an attack on anti-government SDF. A Russian lawmaker called the attack on the Syrian army an act of aggression.

• Saudi Crown Price Mohammed bin Salman has postponed a visit to the UK for fear of protests. Various campaign groups in the UK and overseas have been criticizing the Crown Prince for the war in Yemen.

• Three Canadian companies that make solar panels are suing the Trump administration over the 30-percent tariffs the president imposed last month on their products. In the lawsuit filed in the United States Court of International Trade, companies say that since Canadian solar imports do not harm United States producers and that the tariffs violate the NAFTA

• While the EU whines about Nord Stream 2 but does nothing to speed up the Trans-Adriatic Pipeline, Poland is taking actual action and diversifying away from Russia, so it can say goodbye to Gazprom in 2022, when its current gas supply contract ends.




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