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Regulatory alerts, compliance, geopolitical/conflict developments & latest deals
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22/08/2014
 

BP Corruption Update, Latest Deals and Alerts

 
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Greetings from London.

Quick Note: Dan Dicker has written a very important report for our premium subscribers today which looks at the coming super spike in oil prices. For those of you invested in oil stocks or the oil markets this is a must read. Click here to get this sent this and our other reports for free today.

This week, the ‘news’ is that the start of the most active part of the six-month hurricane season promises something big, maybe, possibly, no one’s really quite sure, but the headlines continue to work their magic, because it’s the easiest way to deal with the climate change debate.

Bloomberg’s offering begins with the subtly dramatic “The Atlantic has begun to stir”, which it then qualifies with “while there aren’t any tropical storms on the map, a candidate has caught the eyes of forecasters …”, while the National Hurricane Center in Miami says there is a “60 percent chance of becoming the season’s next storm within five days.”

However, Bloomberg notes, don’t run to the hardware store to buy plywood just yet: Earlier this week, the news that was never realized was that it would touch down in Houston, or perhaps New Orleans—or maybe Haiti and the Dominican Republic.

What does it all have to do with climate change? That depends on whom you ask.

“The impact of extreme weather events is raising concern about global warming became apparent following Hurricane Katrina. The psychology of immediate and visible loss is far more salient than hypothetical problems in the next century. Hence extreme weather events have been effectively used in propaganda efforts. This is in spite of the assessment of the IPCC [Intergovernmental Panel on Climate Change] that doesn’t find much evidence linking extreme weather events to global warming, other than heat waves,” American climatologist Judith Curry told Oilprice.com in an
interview last week.

Curry is one of those rare scientists who likes social media, and feels that scientists have largely been pushed out of the debate because of their failure to realize the importance of this medium to help foster a more intelligent debate.

Curry has also chimed in on climate-related policy issues, bemoaning that “it has never made sense to me for climate change to be the primary driver for energy policy.”

“Even if we believe the climate models, nothing that we do in terms of emissions reductions will have much of an impact on climate until the late 21st century. Energy poverty is a huge issue in much of the world, and there is no obvious way to reconcile reducing CO2 emissions with eradicating energy poverty.”

The story of coal speaks volumes on this incongruity.

The developing world—and indeed even Europe—are increasingly turning to dirty coal because they cannot afford natural gas. The economics simply are not the same as they are in the US, where a natural gas boom has ensured that coal can be sidelined. Energy poverty quite simply dictates that carbon dioxide emissions cannot realistically be cut in countries who can’t afford to get rid of coal.

As the US gets rids of coal, American coal producers need an outlet or they will collapse. The answer is to export to coal-hungry Asia, which can get it cheaply.
Environmentalists have a problem with this because it does nothing to reduce greenhouse-gas emissions and just shifts them geographically. The lobbying effort to keep American coal from being exported, though, ignores the energy poverty part of this equation and maintains a distinctly privileged Western viewpoint.

This weeks special report comes from our
Intelligence Notes section in Premium and takes a detailed look at what has happened around the energy world this week and makes forecasts and recommendations for the coming weeks and months. (Full report below).

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That’s it from us this week. I hope you enjoy the below report and have a great weekend.

Best regards,

James Stafford
Editor, Oilprice.com

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Global Energy Advisory - 22nd August 2014

Regulatory Alerts

A new tax law granting tax credits to oil companies appears to have survived a close referendum battle on Wednesday, with partial vote counts in showing that efforts to repeal the legislation trailing behind. The legislation, Senate Bill 21, only narrowly made it through the Senate last year, advertising itself as a way to attract investment for new wells to produce more for the trans-Alaska pipeline. However, critics say it provides no guarantees that oil companies will invest in Alaska.

Mozambique has approved favorable new petroleum laws that open the way for new oil and gas bids as well as a special tax break for offshore fields operated by US Anadarko Petroleum and Italy’s Eni. According to the new legislation, at least 25 percent of gas produced must be for local consumption. Mozambique also approved this week another bill on taxation for the Rovuma-1 and Rovuma-4 areas. Anadarko operates the Rovuma-1 field, in which the state owned oil company Empresa Nacional de Hidrocarbonetos, owns a stake. The fuel will feed liquefied natural gas export plants for shipment to world markets. The government is finalizing the process for new oil and gas bids, which is scheduled to be concluded by the end of 2014. The bottom line is that the new bill will mean lower taxes for Eni and Anadarko.

European exports of certain energy-related equipment and technology to Russia will be subject to prior authorization by EU member state authorities, as the bloc increases sanctions against Russia. Export licenses will be denied if the equipment is provided under a contractual obligation which post-dates the European Council's announcement of 29 July and the products are destined for deep water oil exploration and production, arctic oil exploration or production and shale oil projects in Russia, according to one expert. The sanctions will largely apply to new contracts, with existing contractual obligations allowed to carry on for a limited (still undefined) period.

Transparency & Compliance

Anti-corruption group Global Witness is claiming a lack of transparency in Angola’s use of payments by BP and its partners for a development project. BP and partners including Cobalt International Energy agreed to contribute $350 million, in installments, to be used for a research and technology center, Global Witness said in a statement. BP and Cobalt agreed in December 2011 to provide $350 million to construct a research institute in Angola, as a condition of gaining drilling rights for an offshore block of the African country's coast. So far, the companies have paid half that amount, and the anti-corruption group maintains that there is no indication that the project exists.

A new report from the US-based Natural Resource Governance Institute alleges that sub-Saharan governments are selling crude in dubious deals worth hundreds of billions of dollars without accounting for them. The report says that sub-Saharan Africa’s top 10 oil-producing countries have sold more than $254 billion in crude through their state-owned oil companies over the past three years, and that the biggest purchasers were large Swiss trading firms, including Glencore, Arcadia and Trafigura. These three accounted for one-quarter of the aforementioned purchases between 2011 and 2013. The institute is calling for new regulations for nationally owned oil companies and big trading firms to disclose their oil deals. “The sales to Swiss traders were worth an estimated $55 billion - more than twice as much money as these 10 countries - Angola, Cameroon, Chad, Côte d‘Ivoire, Republic of Congo, Equatorial Guinea, Gabon, Ghana, Nigeria and South Sudan - received in net foreign aid,” the report said.

Geopolitical/Conflict Developments

•    According to the Turkish Energy Ministry, some 6.5 million barrels of Iraqi Kurdish crude oil have been shipped to world markets via Turkey's Ceyhan port so far since May, and a seventh tanker is now being loaded. As we have noted before, some of these shipments have been held up due to pressure from Baghdad, but it is finding its way to markets and the flow will not likely be staunched at this point. Most recently, a delivery of crude oil from Iraqi Kurdistan arrived at Croatia’s Adriatic Sea port of Omisalj. The tanker had 80,000 cubic meters of crude on board. The crude was purchased by Hungary’s MOL, for its refinery. MOL party owns Croatia’s two refineries and has invested in oilfields in Iraqi Kurdistan. The Kurdistan Regional Government (KRG) in northern Iraq is in the process of increasing the capacity of the pipeline running to Turkey from 120,000 to 300,000 barrels a day, citing the threat of the crisis in Iraq.

•    In Ukraine, coal plants are closing down, or facing significantly reduced output, as supply lines are cut. Some that we know of will run out of coal in 15-35 days. The conflict is already dealing a severe blow to the industry. As always, oligarchs are meddling in affairs here as well, attempting to position themselves in the post-Yanukovych playing field, using new puppets in the government to crush rivals in the power-generation sector, to the detriment of the state and the war effort itself. (For more information, contact our intelligence wing, OP Tactical).

•    Turkey has decided to suspend drilling in six oil fields operated by Turkish state-run company TPAO in Iraq. This includes fields in Basra, Siba and Mansuriye. Non-essential staff were already evacuated in June as the Islamic State (IS) advanced. Iraq is now attempting to boost production in its fields in the south, as the IS advances cuts off production in the north. A key field in the south is West Qurna II, which has more than doubled its production since March, up from 120,000 to 280,000. The field is operated by Russian Lukoil Holdings.

•    Hamas is claiming to have fired two rockets at Noble’s Israeli gas installation, Noa. We doubt the veracity of this report, and Israeli military reports say there have been no incidents of this nature. The gas installation is owned by Noble Energy and its Israeli partner, Delek, and is situated in a largely depleted gas field. The statement by Hamas is more indicative of where this six-week conflict could lead, than it is of the actual present-day reality. Noa is only about 19 miles off the Gaza Strip coast. Other, more important offshore gas installations are further away. The Tamar field, which only recently launched production (again, Noble) is about 50 miles offshore from the port of Haifa. Experts say, however, that Hamas rockets could reach the Tamar platform and escalate the conflict further.

Discovery & Development

•    Argentina’s shale prospects are heating up with another new discovery on 14 August by YPF in the Neuquen basin, showing shale oil in the Agrio formation. George Soros has also boosted the prospects here by doubling his stake in state-owned YPF. Our assessment is that Argentina will pull out of its debt problem and the stigma of the seizure of Spanish Repsol’s YPF shares is being reduced significantly.

•    US-based Apache Corp reports that an exploration well offshore Western Australia state had found as much as 300 million barrels of crude. Apache predicts this could turn out to be one of Australia’s largest discoveries in decades. Drilling was in the Phoenix South-1 well in the offshore Canning Basin. The well was drilled in 133 meters of water.  

•    Uruguay’s state-run oil company Ancap began exploring for petroleum reserves in Salto along with the American company Schuepbach Energy Uruguay. On 13 August 2014, Ancap President José Coya, Director of Exploitation and Production Héctor de Santa Ana, and Schuepbach Director Martin Schuepbach officially announced the initiative in San Antonio. Samples are being sent to laboratories in the U.S. for analysis, which is expected to be completed by the end of 2014, according to our partners at Southern Pulse.

Deals, Mergers & Acquisitions

•    Turkish state-run Vakifbank and private Isbank will lend $1 billion to state oil company TPAO so it can buy Total's stake in an Azeri gas project, an energy official told Reuters on condition of anonymity. With the purchase of Total’ shares, TPAO becomes the second-largest shareholder in Azerbaijan’s Shah Deniz field, after BP. The Shah Deniz oil field produces 120 million barrels of crude per day. Shah Deniz is operated by BP with a share of 28.83%. TPAO holds 19% and the Azeri state-run oil company, SOCAR, holds 16.67%.

•    Kuwait has concluded a new 10-year deal with China’s Sinopec Corp to nearly double supplies by offering to ship the oil and sell on a more competitive cost-and-freight basis. State-run Kuwait Petroleum Corp will export 300,000 barrels per day (bpd) of crude oil under the agreement, which would amount to 15% of Kuwaiti petroleum exports and estimated to be worth $120 billion. The previous contract, which expired, was for between 160,000 bpd and 170,000 bpd.

•    Mexican conglomerate Alfa SAB de CV said it paid C$189.4 ($172.7 million) to increase its total stake in Pacific Rubiales Energy Corp to 17.07%.

•    Russian oil company Rosneft is preparing to acquire the bulk of U.S. bank Morgan Stanley's physical oil trading operations

•    Norwegian energy firm Det Norske Oljeselskap is set to acquire Marathon Oil Corp's Norwegian business

•    Vine Oil & Gas LP of Dallas, and Blackstone Energy Partners, an affiliate of Blackstone, have announced an agreement to acquire the Haynesville assets of SWEPI LP and Shell Gulf of Mexico Inc., affiliates of Royal Dutch Shell plc, for $1.2 billion. The assets comprise over 107,000 net acres in North Louisiana in the core of the Haynesville Shale natural gas shale basin.

•    Brightoil Petroleum Holdings Ltd has just completed a $1.05 billion purchase of Anadarko Petroleum Corp's oilfield stakes in China, and plans to make another major acquisition in the next 12 months.

•    According to our partners at Southern Pulse, the Colombian government delayed the sale of its majority stake (58% of shares) in the electricity company Isagen for up to a year on 13 August 2014. Finance Minister Mauricio Cárdenas explained that the purpose of the delay is to increase the number of bidders in the auction, which would raise the selling price. Originally, there were seven foreign companies interested in buying the state-owned company when the announcement was made, but that number has gone down to three.

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