- The new deeper oil production cuts for OPEC have been agreed upon and will soon be underway, thanks apparently to UAE-hosted talks between Russia and Saudi Arabia prior to the Dec 5 meeting. This time around, Saudi Arabia was unable to handle Russia on its own. OPEC needs Russia to sign onto the deal and to comply, and Saudi Arabia will bring in as many people to convince Russia as needed. OPEC once stood on its own, but those heavy-handed cartel days are squarely in the rearview. Russia now wields just as much - if not more - clout.
- Nigerian employees of Chevron launched a strike this week to protest against job cuts and non-payment of allowances, with the potential to disrupt 350,000 bpd in oil production. Chevron is desperate to offload some of its Nigerian assets (OML 86 and OML 88), and has tried to dump them more than once without success, to focus more acutely on fields back home - fields in the US that aren't subject to pipeline vandalism, worker strikes, and other disruptive actions.
- Iran's First Vice President has admitted that Iran's oil exports have fallen thanks to the US sanctions, though he did not reveal the extent. The strategy is to keep accurate export data out of play to avoid any determination of exports slipping out through secret methods, including bypassing shipping transponders. Regardless, there is little doubt that sanctions are cutting deep into revenue. Iran has agreed to take out a $6 billion loan from Russia; asked South Korea…
- The new deeper oil production cuts for OPEC have been agreed upon and will soon be underway, thanks apparently to UAE-hosted talks between Russia and Saudi Arabia prior to the Dec 5 meeting. This time around, Saudi Arabia was unable to handle Russia on its own. OPEC needs Russia to sign onto the deal and to comply, and Saudi Arabia will bring in as many people to convince Russia as needed. OPEC once stood on its own, but those heavy-handed cartel days are squarely in the rearview. Russia now wields just as much - if not more - clout.
- Nigerian employees of Chevron launched a strike this week to protest against job cuts and non-payment of allowances, with the potential to disrupt 350,000 bpd in oil production. Chevron is desperate to offload some of its Nigerian assets (OML 86 and OML 88), and has tried to dump them more than once without success, to focus more acutely on fields back home - fields in the US that aren't subject to pipeline vandalism, worker strikes, and other disruptive actions.
- Iran's First Vice President has admitted that Iran's oil exports have fallen thanks to the US sanctions, though he did not reveal the extent. The strategy is to keep accurate export data out of play to avoid any determination of exports slipping out through secret methods, including bypassing shipping transponders. Regardless, there is little doubt that sanctions are cutting deep into revenue. Iran has agreed to take out a $6 billion loan from Russia; asked South Korea to pay its balance (in violation of sanctions) for previously shipped crude oil; and announced it will offer millions of barrels of crude oil and condensates on the IRENEX at a major discount to Brent in hopes of bringing in more revenue.
Discovery & Development
- Israel's massive Leviathan gas field - the one that put it on the fossil fuels map for the first time - will start pumping natural gas on Monday, and at commercial levels before the end of the year. This is Israel's debut into a new form of geopolitical power that it's never enjoyed before, and it starts with a significant gas export deal with Egypt, the permits for which were signed earlier this week.
- As Mexico's state-run Pemex announces its biggest discovery in three decades, the country's new president, AMLO, is using this as a major victory with a lot of public fanfare. The field - Quesqui - was discovered in May, with the first well completed in June. The timing is critical because AMLO's strategy is to restore Pemex to its former monopoly and boost its production in order to reduce the country's dependence on foreign fossil fuels. The initial analysis of the find claims a 500-million barrel 3P reserve potential. In 2020, Pemex is set to drill 11 wells, and a key focus will be onshore in AMLO's own home state of Tabasco, where Pemex can produce for lower costs.
Deals, Sales, Exits & Bankruptcies
- Multinational Weatherford has emerged from Chapter 11 bankruptcy and named a new board after selling $6 billion in assets and receiving $10 billion in support from bondholders who now control 94% of the company.
- Devon Energy has sold its Barnett, Texas, shale assets to private natural gas operator Banpu Kalnin Ventures (BKV) for $770 million, making BKV the largest natural gas producer in this venue. Net production from the assets averaged 597 million cubic feet equivalent per day in the third quarter of this year from 4,200 producing wells.
- Chevron will sell its Appalachian natural gas operation, including around 890,000 acres in the Marcellus and Utica shales across Pennsylvania, West Virginia, and Ohio. Last week, the company announced that it would take a non-cash, after-tax impairment charges of $10 billion to $11 billion in Q4.
Legislation & Regulations
- Argentina's new Peronist President, Alberto Fernandez, has now reduced an export tax on hydrocarbons in a bill sent to Congress this week. The export tax will be set at a maximum of 8%, where it was previously to be set at 12%. This is still slightly higher than under former president Marci, who had it at around 6.7%. The problem is that Argentina now has its sights set on replicating the U.S. shale boom, and while the new administration is keen to raise taxes, it's not going to get its shale boom if it creates an atmosphere in which foreign companies are not incentivized to make it happen. That said, the backtracking from 12% to 8% happened due to lobbying from the governor of the key shale province, Neuquen, who really knows what's at stake here. That's an interesting development that gives us insight into who holds the ear of the new administration.
- Activist group Follow This are now setting their sights on the other oil majors, including BP, Chevron, Equinor, Exxon, and Shell, filing climate resolutions that will need to be voted on at shareholder meetings in the first half of 2020. If passed, the resolutions would require the oil giants to reduce emissions and align their climate goals with that of the Paris Climate Agreement.
- The world's largest independent oil trader is suing the United States for $52 million in fuel taxes that the US erroneously failed to refund. Vitol claims that the US did not properly classify some oil products, which should have fallen under the "alternative fuel mixtures" category, which would have made it eligible for a tax refund.
Politics, Geopolitics & Conflict
- Nordstream 2 is nearly complete and this will be a significant loss for US LNG leverage in Europe. The US Senate this week approved sanctions on companies working on the massive Russian pipeline project to Germany, and Trump is expected to sign off on these Friday. At this point, however, sanctions are more like throwing rocks from a distance because the project recently won Danish approval (a last hurdle) and is set to be completed in a matter of weeks.
- We're expecting another major push on Tripoli by General Haftar as external forces line up in his favor, oil deals have picked up momentum, and the UN-backed GNA has been semi-deserted because it's beholden to militias that no one wants to associate with. The key uncertainty now is whether Haftar could actually fully take Tripoli beyond an air assault.
- Washington has extended waivers for companies to wind down transactions with the Dalian unit of China's COSCO tanker company. The waiver is now good until February 4th, but only for offloading non-Iranian crude. Sanctions were put in place in September, targeting four Chinese shipping companies including COSCO, for allegedly transporting oil from Iran.
- As Iraq continues to disintegrate, Washington is scaling down its diplomatic presence, paving the way for more Iranian influence. Also in Iraq, while the long-awaited oil deal with the Kurds remains in limbo, the Chinese are stepping in to buy up cheap Kurdish oil that would bypass the Iraqi central government.
- Peru's government has declared a state of emergency and deployed army troops along an 80-kilometer stretch of the TGP-operated natural gas pipeline. This stretch of the pipeline runs through remote jungle areas that are under threat by Shining Path insurgents. The government of Peru did not elaborate on the exact nature or risk-level of what it described as a terrorist threat.
- Oil sector workers of France's CGT union should decide Friday whether to halt production at oil refineries in protest against the government's planned overhaul of pensions. The unions oppose plans to streamline the country's pension and push people to work until 64, instead of the current legal retirement age of 62.
- In a most likely useless attempt to gain leverage over Moscow, Belarusian company GomelTransNeft Druzhba is reportedly planning to hike its tariff for transporting Russian oil through pipelines in Belarus by almost 17%. This comes amid a spat with Russia, which is refusing to give Belarus a discount on gas until Minsk makes good on a plan to strengthen ties between the two countries.
Comments
As for Saudia, they can surely get their way with Pakistan. Sad! Salams