Politics, Geopolitics & Conflict
• Libya is facing an intensified threat to its oil as east and west continue in a standoff over control of the country’s oil wealth following the east’s thwarted attempt at unilaterally exporting. There is now talk that Libya’s production could fall by 120,000 barrels per day as this battle intensifies. The problem here is that the West has taken the stance that the Unity government (the Government of National Accord, GNA) is the only way out of the Libyan chaos. It hasn’t been approached very adeptly, however. The GNA showed up in Tripoli and got help from armed factions that the internationally recognized government (until recently) finds a bit intimidating. The eastern government in Benghazi is now concerned that it will be sidelined—and rightly so; hence the attempt to export oil unilaterally and gain some leverage. And it is not impossible for them to gain this leverage. While it’s the Tripoli-based National Oil Company that has run things since Gaddafi’s fall in 2011, if the newly established Benghazi National Oil Company manages to makes its own oil money, it will indicate that it can survive on its own, and this would be a break-up of the country and a full-fledged civil war, which ISIS would absolutely love. The eastern government will not sign off on the GNA at this point—at least not until they are sure they can’t gain enough leverage to get back into the game.
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Politics, Geopolitics & Conflict
• Libya is facing an intensified threat to its oil as east and west continue in a standoff over control of the country’s oil wealth following the east’s thwarted attempt at unilaterally exporting. There is now talk that Libya’s production could fall by 120,000 barrels per day as this battle intensifies. The problem here is that the West has taken the stance that the Unity government (the Government of National Accord, GNA) is the only way out of the Libyan chaos. It hasn’t been approached very adeptly, however. The GNA showed up in Tripoli and got help from armed factions that the internationally recognized government (until recently) finds a bit intimidating. The eastern government in Benghazi is now concerned that it will be sidelined—and rightly so; hence the attempt to export oil unilaterally and gain some leverage. And it is not impossible for them to gain this leverage. While it’s the Tripoli-based National Oil Company that has run things since Gaddafi’s fall in 2011, if the newly established Benghazi National Oil Company manages to makes its own oil money, it will indicate that it can survive on its own, and this would be a break-up of the country and a full-fledged civil war, which ISIS would absolutely love. The eastern government will not sign off on the GNA at this point—at least not until they are sure they can’t gain enough leverage to get back into the game.
• The real game for oil is being played out in the east, and while all eyes are on the Middle East, it’s really the Russia-China strategic maneuvering that is important over the longer term. China’s CNPC is moving in on the top oil producer in Russia—Rosneft. CNPC is angling for just under 20 percent of Rosneft’s shares in the next phase of this relationship. Rosneft doesn’t need to sell this stake; it’s not in financial trouble. It’s about getting out from under the U.S. dollar—getting past the “petrol dollar”. But it doesn’t involve guns and terrorists, so no one’s taking notice.
• In Nigeria, we must return to the Niger Delta, where the 2009 amnesty is all but irrelevant with a new government in place. That amnesty, for the most part, bought out the militants and gave them a piece of the oil corruption pie that has long characterized Nigeria. But now there is a new government at the helm, and it’s focusing on those corrupt actors from the previous government and the militants that it absorbed. In the meantime, new militant groups are emerging, as they say, to pick up where the traitorous militants left off. The most high-profile of these groups is the newly formed Niger Delta Avengers, who have targeted a pipeline and export terminal recently, and then this week blew up a Chevron oil platform. Make no mistake about it—this is the revival of Niger Delta militancy; it’s not a one-off.
Deals, Mergers & Acquisitions
• Canadian Suncor Energy has acquired an additional 5% stake in the Syncrude oil sands mining consortium from the local unit of Murphy Oil Corp., boosting its position as the largest owner. The deal will increase its interest in Syncrude from just under 49 per cent to nearly 54 per cent. US$744 million deal for Murphy Oil’s equity, worth the equivalent of 17,500 barrels of oil a day is expected to close by midyear.
• Ecuador plans to sell a 49 percent stake in oil shipping firm Flopec as part of the effort to offload state-owned assets that have been valued at $533 million. The assets also include the new 487MW Sopladora hydroelectric plant.
• Brazil’s state-run Petrobras has concluded the sale of $1.38 billion in assets in Argentina and Chile. This includes its 67.2 percent stake in Petrobras Argentina to Argentina’s Pampa Energía for $892 million. It also sold all of Petrobras Chile Distribución to Southern Cross Group for about $490 million. The company is targeting a total of $14.4 billion in divestments by the end of this year. The Argentina and Chile sales are the first to be concluded so far. Petrobras posted record losses of $9.6 billion last year, up from $7.2 billion in 2014.
• National Iranian Oil Company (NIOC) and Austrian OMV have signed a memorandum of understanding (MoU) for the evaluation of fields for development in the western Iranian region of Zagros. New projects include the Cheshmeh Khosh and Band-E-Karkheh fields where OMV initially started working in 2011, and the Fars field in the south. Iranian authorities have also said that BP Plc will open offices in Iran sometime this summer.
• Chesapeake Energy has announced it will sell $470 million in assets in Oklahoma to Newfield Exploration Co. as the company tries to chip away at more than $9 billion in debt. The assets include 42,000 net acres in the STACK field in Oklahoma, which produces about 3,800 boe/d.
Regulatory Updates
• Brazil's Supreme Court has suspended lower house speaker Eduardo Cunha from his mandate for involvement in so-called Car Wash investigation into a corruption scheme at the state-owned oil player Petrobras. Prosecutors are accusing Cunha of taking $5 million in bribes to secure contracts with Petrobras. Cunha denies the allegations. Suspension came about based on a request by the country's attorney general, who said Cunha had tried to obstruct a corruption investigation against him and was intimidating lawmakers. It’s worth noting that Cunha is an outspoken critic of President Dilma Rousseff and has led an impeachment drive against her.
• Local fracking bans in two Colorado cities have been overturned by the state’s Supreme Court in a victory for the industry. The Court ruled unanimously against the city of Longmont's hydraulic fracturing ban and the moratorium in Fort Collins. In Fort Collins, voters had supported the five-year fracking ban put in place in 2013, while in Longmont, the ban was voted into place in 2012.
• Operatives of the Nigerian Navy have intercepted a marine tanker suspected of illegal bunkering activities in the Niger Delta. Nigerian navy said that they detained the crew members and vessel for investigation into “covering up” illegal activities. A total of 13 people have been arrested in connection with illegal bunkering in the area. Twelve were arrested at the Forcados River, while one was picked up following a shootout between naval personnel and pirates at Nodolo in Ekeremor Local Government Area of Bayelsa State. On Monday, the Turkish tanker Puli was seized by pirates off Nigerian Port Harcourt. Earlier this week, the UN revealed that Nigeria is losing about 1.5 billion dollars a month to piracy, armed robbery at sea, smuggling and fuel supply fraud.
• Tanzania’s gas contracts could come into some trouble amid increased scrutiny. A recently appointed Controller and Auditor General (CAG) has indicated regulatory flaws in gas exploration contracts awarded between 2010 and 2014, and talk of corruption related to these deals. The CAG report was tabled in parliament last week and submitted to the president the week prior. The CAG noted loopholes that could have been used for corruption during the tender process.
Contracts, Licenses & Tenders
• BP has awarded a $15-billion contract for the transport and installation of the subsea systems for its Shah Deniz Stage 2 project in Azerbaijan. The contract went to a consortium of BOS Shelf, Saipem Contracting and Start Gulf FZCO. Shah Deniz is the largest natural gas field in Azerbaijan. Stage 2 will add 16 billion cubic meters per year of gas production to the existing 9 bcma from Stage 1.
• Brazil has reportedly extended the deadline for its next onshore oil licensing round. At stake are 16 inactive onshore oil and gas areas.
• Egypt is planning to offer up 28 blocks for bidding soon, according to officials. There is no exact date, but the authorities indicated it would be in a matter of “a few weeks”. The blocks are in the Gulf of Suez, the Red Sea, the Western Desert and the Mediterranean.
Discovery & Development
• Italian Eni has launched work on the onshore gas reception facility for its Offshore Cape Three Points (OCTP) project in Ghana. The facility will have a production capacity of 180 million standard cubic feet per day and oil production of about 45,000 barrels per day.
