Politics, Geopolitics & Conflict
• Pressure between Uzbekistan and Tajikistan has heightened with the start of construction of the Rogun Dam – a major power infrastructure project that will reduce Tajikistan’s reliance on imports. This does not sit well with its bigger and richer neighbor, which last time Tajikistan attempted to start the dam’s construction, responded with freight and energy blockades. Now things between the two gas-rich Central Asian countries have mellowed somewhat, following the death of Uzbekistan’s long-time ruler Islam Karimov, but an armed conflict is not out of the question. Uzbekistan has gas reserves estimated at 1.61 trillion cubic meters and crude oil reserves of 594 million barrels. Tajikistan’s oil reserves are unimpressive, at 12 million barrels, but gas reserves are more robust, estimated at 5.663 billion cubic meters.
• As the battle for Mosul pushes IS out and fighters take refuge in oil-rich Kirkuk—the center of the industry in the Iraqi north—Iraqi Kurdish forces, which now nominally control Kirkuk, are reportedly going from home to home, forcing Sunni Arab residents out in an effort to root out ISIS forces. This will spark additional unrest as Sunni Arab civilian refugees in diverse Kirkuk are being targeted in a blanket security sweep, lumped in with ISIS. This will further upset the balance of power in fragile Kirkuk, which has been leaning toward the Kurds of late.
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Politics, Geopolitics & Conflict
• Pressure between Uzbekistan and Tajikistan has heightened with the start of construction of the Rogun Dam – a major power infrastructure project that will reduce Tajikistan’s reliance on imports. This does not sit well with its bigger and richer neighbor, which last time Tajikistan attempted to start the dam’s construction, responded with freight and energy blockades. Now things between the two gas-rich Central Asian countries have mellowed somewhat, following the death of Uzbekistan’s long-time ruler Islam Karimov, but an armed conflict is not out of the question. Uzbekistan has gas reserves estimated at 1.61 trillion cubic meters and crude oil reserves of 594 million barrels. Tajikistan’s oil reserves are unimpressive, at 12 million barrels, but gas reserves are more robust, estimated at 5.663 billion cubic meters.
• As the battle for Mosul pushes IS out and fighters take refuge in oil-rich Kirkuk—the center of the industry in the Iraqi north—Iraqi Kurdish forces, which now nominally control Kirkuk, are reportedly going from home to home, forcing Sunni Arab residents out in an effort to root out ISIS forces. This will spark additional unrest as Sunni Arab civilian refugees in diverse Kirkuk are being targeted in a blanket security sweep, lumped in with ISIS. This will further upset the balance of power in fragile Kirkuk, which has been leaning toward the Kurds of late.
• Kenya and Sudan will jointly advance their oil and gas industries, after the presidents of the two countries signed a series of agreements to this end. Sudan has a long experience in oil and gas while Kenya is a newcomer on the scene, but massive recent discoveries—beginning in 2012—sent the country up to be the biggest energy hub in eastern Africa. Initially, it discussed joining forces with landlocked Uganda, to export their oil together, but Uganda opted for Tanzania as a coastal partner.
Deals, Mergers & Acquisitions
• Finland has approved a $33.3-million investment in the Balticonnector gas pipeline that will connect the Scandinavian country to the European gas distribution network, decreasing its currently complete dependence on Russia. The Balticonnector, a 150-km pipeline between Finland and Estonia, will have a daily capacity of 7.2 million cu m of gas.
• GE will merge its oil and gas operations with Baker Hughes. The deal will result in the second-largest oilfield service provider in the world. The combined company will have annual revenues of some $32 billion, leveraging GE’s experience in equipment manufacturing and Baker Hughes’ drilling and fracking expertise. The new company will be listed on the stock exchange, with GE holding 62.5 percent in the entity. If the deal falls through, GE will compensate Baker Hughes with $1.3 billion.
• Conoco is leaving Senegal, after its local subsidiary sold its 35 percent holding in three exploration blocks off the Senegalese coast to Australia’s Woodside Petroleum for $440 million. The move is part of Conoco’s plan to exit deepwater exploration altogether.
• Saudi Aramco has sealed a joint venture deal with U.S. rig-builder Nabors. The 50/50 company will build and operate onshore drilling rigs in Saudi Arabia, and the rigs will also be manufactured in Saudi Arabia. The company should begin operations by the end of June 2017.
• BP has finalized its joint venture with Rosneft, after committing to fund its operations with $300 million. The joint venture, Yermak Neftegaz, was agreed earlier this year at an economic forum in St. Petersburg, and will involve exploration in West Siberia and the Yenisey-Khatanga basin, in eastern Siberia.
Tenders, Auctions & Contracts
• The UK’s Oil and Gas Authority has received 29 applications from 24 different companies in its latest licensing round for oilfields in the North Sea. OGA’s chief, Andy Samuel, commented that this demonstrates there is still strong potential in the country’s continental shelf.
• Somalia is preparing for its first oil and gas licensing round to take place in 2017. The tender will not include shallow offshore blocks, which were awarded to Exxon and Shell back in the late 1980s, before the government collapsed in 1991. Somalia’s Puntland province is believed to possibly hold as much as 10 billion barrels of crude.
Discovery & Development
• MEO Australia, an energy company operating in Cuba, has discovered oil-rich formations on the island that could hold an estimated 8.2 billion barrels of crude. Of this, according to the Australian company, some 395 million barrels could be recoverable. For MEO, exploration in Cuba is a top priority. The island currently pumps around 80,000 barrels of crude per day.
• Exxon has announced a potentially huge discovery off the Nigerian coast. The Owowo field could hold between 500 million and a billion recoverable barrels of oil. Exxon has a 27-percent stake in the field, with Chevron holding another 27 percent, Total 18 percent, Chinese Nexen 18 percent, and the Nigeria Petroleum Development Company with 10 percent.
• Gazprom Neft announced a new discovery in the Yamal-Nenets autonomous region, in eastern Siberia. The discovery includes six independent deposits, with reserves estimated at over 40 million tons of crude. Production is scheduled to begin in two years.
• Occidental Petroleum is further building its presence in Texas’ Permian basin, after buying 35,000 acres of exploration land for about $2 billion. The acreage is projected to yield a minimum of 7,000 barrels of oil equivalent daily, of which 70 percent crude.
• Gazprom exported 10 percent more gas to countries outside the Commonwealth of Independent States in the first ten months of the year, at 13.05 billion cu m. Denmark’s imports increased the most, by 149.4 percent, followed by the Netherlands, with a 91.8-percent increase, and the UK, which imported 54.6 percent more Russian gas in the period.
• The autonomous region of Kurdistan in Iraq received average monthly oil revenues of $1 billion, the local authorities said. Kurdistan markets about a million barrels of crude daily.
• The head of Libya’s National Oil Company is insisting on the company getting $2.5 billion it needs to ramp up production. The money will be used to raise output to 800,000 barrels of crude per day.
• Noble Energy is selling record amounts of natural gas from the Tamar offshore field to Israel, the company said. Meanwhile, at home, Noble ended its partnership with Consol Energy for the Marcellus shale, where the two operated 669,000 acres of gas-bearing shale, producing 1.07 billion cu ft of gas daily.
Company News
• Shell remained in the black in the third quarter, reporting $2.8 billion in earnings, up from a $2.4 billion for Q3 2015, and trumping analyst projections of $1.7 billion.
• BP reported $1.62 billion in net earnings for the third quarter, half the amount it booked for the third quarter of 2015 but well above analyst expectations for $686 million.
• Transocean booked a net profit of $229 million for July-September, down from $321 million for Q3 2015, on the back of rig retirements.
• Anadarko reported a loss of $830 million for Q3, better than the $2.24-billion loss reported for last year’s third quarter. The company is selling assets to plug the gap in its balance sheet, the most notable among them its acreage in South Texas. Media reports have pegged Sanchez Energy and Blackstone Group as potential buyers, with the assets valued at $3-3.5 billion.
• Norway’s Statoil said it will cut its capital expenditure plan for this year by $1 billion, after it reported a net loss of $261 million for the third quarter, from a profit of $445 million for the respective period of 2015.
Regulatory updates
• Ireland may ban fracking if the parliament approves a bill proposing such. The bill was presented to the lower house of the Irish parliament at the end of last week and passed. Now it is being reviewed by a parliamentary committee.
• The EPA has inadvertently helped some oil supermajors add substantial sums to their bottom lines by trading with ethanol RIN credits. According to the Wall Street Journal, Chevron, Shell, and BP are among those who may enjoy an additional $1 billion this year thanks to RIN credit sales. On the other hand, refiners – especially smaller ones – stand to lose, since they need to buy these credits to be compliant with the regulation.
• Connecticut has cancelled several gas pipeline and production projects on concern that similar legislation in neighboring states would make it harder to fund the projects. The cancellation goes against the state administration’s efforts to promote natural gas as a cleaner alternative to coal and oil but the costs of the gas projects were supposed to be shouldered by taxpayers, which resulted in protests in New Hampshire and Massachusetts. The protests led to legislation effectively prohibiting energy companies from passing on such project costs to taxpayers.
• Alberta’s government has introduced to the regional parliament a bill aimed at making a law out of the government’s plan to limit oil sands CO2 emissions to 100 megatons. Two years ago, oil sands generated 66 megatons of greenhouse gases, accounting for a quarter of Canada’s total.
