Politics, Geopolitics & Conflict
• Today, the prime topic of discussion has to be the inauguration, if only because of the vast level of uncertainty the swearing in of Donald Trump brings to the geopolitical playing field. The game is always about containment—and who, exactly, to contain. If things went the way they should, the game would probably look like this: Suddenly take a new, friendly stance with the Russia in direct contradiction to the long-running strategy coming out of Washington, but with an agenda in mind: Lure it away from China. It’s called divide and conquer, and it’s as old as time itself. It’s a passive-aggressive way to contain China at the end of the day. Will it work? No one can know, but in theory (and assuming there will be smart people guiding it, which is a rather hefty assumption), it’s a fairly sound strategy. It’s not Trump’s policy per se (nor is it really ever any president’s policy), but he will serve as its deliverer. And it is important for the campaign against Russia to intensify sufficiently to give the new U.S. president something to work with when extending the olive branch. The negative has to be raised to a certain level in order for Russia to respond effectively to the positive. There has to be a clear polarization to make this work (without putting too fine a point on it).
• As Iraqi forces continue the battle for Mosul in northern Iraq, a secondary development…
Politics, Geopolitics & Conflict
• Today, the prime topic of discussion has to be the inauguration, if only because of the vast level of uncertainty the swearing in of Donald Trump brings to the geopolitical playing field. The game is always about containment—and who, exactly, to contain. If things went the way they should, the game would probably look like this: Suddenly take a new, friendly stance with the Russia in direct contradiction to the long-running strategy coming out of Washington, but with an agenda in mind: Lure it away from China. It’s called divide and conquer, and it’s as old as time itself. It’s a passive-aggressive way to contain China at the end of the day. Will it work? No one can know, but in theory (and assuming there will be smart people guiding it, which is a rather hefty assumption), it’s a fairly sound strategy. It’s not Trump’s policy per se (nor is it really ever any president’s policy), but he will serve as its deliverer. And it is important for the campaign against Russia to intensify sufficiently to give the new U.S. president something to work with when extending the olive branch. The negative has to be raised to a certain level in order for Russia to respond effectively to the positive. There has to be a clear polarization to make this work (without putting too fine a point on it).
• As Iraqi forces continue the battle for Mosul in northern Iraq, a secondary development is worth watching closely. It is not lost on the Iraqis that the cost of relying on Kurdish Peshmerga forces to fight back the Islamic State will be high. The Kurds will be eyeing the expansion of their northern territory—into Mosul, which they play a great role in liberating. Arab media is reporting a 650-mile long trench outside of Mosul, dug by the Kurds and following the line of Kurdish military control. In the meantime, the battle for Mosul rages on, and some expect it to come to a conclusion possibly by spring, but possibly by summer.
Discovery & Development
• Exxon Mobil and Hess have successfully drilled a deepwater exploration well in South American Guyana, hoping to confirm one of the biggest oil and gas discoveries in decades. Expert estimates say we’re potentially looking at 1.4 billion barrels of oil mixed with natural gas, in a single field. Production could feasibly start in 2020, assuming the discovery is proved up. The local government is planning to build a $500-million petroleum processing and service center in the meantime.
• ConocoPhillips Alaska is reporting a new oil discovery in the Greater Mooses Tooth (GMT) Unit in the National Petroleum Reserve—Alaska (NPRA). The wells were drilled early last year. The company now reports that they have encountered 72 feet of net pay in one, and 42 feet of net pay in the second. The Ti?miaq 2 well was tested and established good reservoir deliverability with a sustained 12-hr test rate of 3,200 bpd of 44-degree API oil. ConocoPhillips holds a 78 percent working interest in the project, with Anadarko Petroleum holding 22 percent. What are we looking at overall? Possibly more than 300 MMbbl of oil, according to initial technical estimates. Next step: the acquisition of 3D seismic.
Mergers & Acquisitions
• Exxon has doubled its acreage in the Permian with a $6.6-billion acquisition from the Bass family. The stock and cash deal will see Exxon pay $5.6 billion for the assets in stock plus a further $1 billion in cash contingent on the performance of the assets. This is the largest asset acquisition deal in the U.S. since the start of the price crash in 2014.
• Sudan has offered 15 oil and gas fields for development to Belarus during a visit by Belarus President Alexander Lukashenko to Khartoum. Sudan Oil Minister Mohamed ZayidAwad said that the country is eager to cooperate with Belarus in oil and gas, as well as power generation. This is part of more general talks about economic cooperation between the two countries.
• Norwegian investment company Aker ASA is mulling over the sale of its offshore engineering operations Aker Solutions, according to unofficial information from sources close to the company, who added that Aker ASA has hired Goldman Sachs as adviser on the potential deal.
Company News
• Schlumberger reported earnings of $0.27 per share for the last quarter of 2016. Revenues stood at $7.11 billion, down from $7.74 billion a year earlier. On a GAAP basis, the fourth-quarter performance was a negative $0.15 per share. For the full year, the largest oilfield services provider in the world booked a net GAAP loss of $1.24 per share. The fourth-quarter result was affected by a $536-million restructuring charge.
• Gazprom reported a net profit of $1.6 billion for the third quarter of 2016 despite a drop in revenue. In the respective period of 2015, the gas major had booked a loss due to unfavorable currency rates. Gazprom also benefited from higher gas exports to Europe, revenue from which offset lower prices.
Regulatory Updates
• What environmentalists praised as a permanent ban on Arctic and Atlantic drilling could be over as soon as Donald Trump enters office, based on a definition. The ban, enacted by President Obama’s administration last month is defined as indefinite, rather than permanent. This means that any licenses denied by the last administration could be reinstated during Trump’s tenure, which is more than likely given his focus on energy independence, of which offshore drilling is an indispensable part.
• The lower house of Russia’s parliament has given the go-ahead to the Turkish Stream project that Russia is developing in partnership with Turkey. In the explanatory notes to the ratification, the Duma noted that the project will reduce transit risks and ensure Gazprom can fulfill its gas export contracts with Turkey and the European Union after 2019.
