India Eyes Rupee-Route, Barter for Venezuelan Crude

(The Hindu Business Line, Vishwanath Kulkarni, Richa Mishra, 30.Sep.2018) — India is considering setting up a rupee-payment mechanism for trade with Venezuela, besides exporting rice and drugs to the South American nation, all in return for crude oil.

The Ministries of Commerce, Finance and Petroleum are looking into the proposal.

“Venezuela is among the top 10 crude oil suppliers to India. Since the size of the business would run into several millions, it needs to have a proper trade balance. So, there could be the possibility of using the rupee-payment system as a trade off: Venezuela wants to sell oil, India has to look at what it can sell besides rice and pharmaceuticals, to make the mechanism more attractive,” an official said, adding that the arrangement “could work like a barter system”.

The rupee-payment mechanism is not a new concept, but there is a general agreement that the strategy for Venezuela cannot be similar to that for sanctions-hit Iran.

This mechanism is also being considered to benefit Indian exporters, particularly pharmaceutical products and non-basmati rice. “Rice is well-consumed in Venezuela and we see a huge potential, provided a proper payment mechanism is established,” said BV Krishna Rao, President of the Rice Exporters Association.

So far, the efforts of exporters to tap the Venezuelan market through the Dubai route have not been successful due to payment issues. Rao estimates that India could export up to half-a-million tonnes to Venezuela on a regular basis, if a rupee-based payment mechanism is set up.

Crude oil imports are of prime concern for India in its relations with both Venezuela and Iran. Sri Paravaikkarasu, Director – Asia, Oil at FGE, a global oil and gas consultancy, said: “In the previous round of sanctions (on Iran), India did use rupee payment and barter arrangements for its Iranian crude imports. India is no doubt considering these options to side-step the soon-to-be-imposed US sanctions against Iran. But we must remember that this US President is taking a hardline against Iran, compared to his predecessor.”

Private refiners have already decided not to import oil from Iran. “Even if the national oil companies consider other payment options with Iran and to some extent with Venezuela, they would only achieve limited success. The US intends to track tanker movements out of Iran and monitor the crude/condensate supply-chain down to recipient countries. So, energy firms with any sort of exposure to the US financial system will come under sanctions if they are caught circumventing the sanctions in any way,” she said, adding that Indian companies may well avoid creating the “high-risk scenario”.

As estimate by Vanda Insights, based on shipping information, said that India’s oil imports from Iran stood at 4.81 lakh barrels a day in September, about 4.17 lakh barrels August, and about 6.28 lakh barrels in July. In September 2017, about 3.52 lakh barrels a day came in.

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Trinidad Energy Chamber, Petrotrin Officials Discuss Refinery Closure

(Energy Analytics Institute, Aaron Simonsky, 30.Sep.2018) — Members of the Energy Chamber of Trinidad & Tobago and a Petrotrin transition team meet to discuss issues related to closure of the Petrotrin refinery, among others energy related issues.

The officials discussed the impending closure of the Petrotrin refinery, located Pointe-à-Pierre, and new opportunities with the refocused exploration and production company and the terminal operations, announced the Chamber in an official emailed statement.

During the meetings, Petrotrin provided an overview of planned activities over the coming two to three months, including how the company would settle all outstanding valid contractual obligations.

***

Mexico’s Oil Regulator Backs Pemex Picking Its Own Partners

(Reuters, 30.Sep.2018) — Mexico’s oil regulator supports a proposal to allow state-run oil company Pemex to pick its own equity partners for exploration and production projects, the head of the National Hydrocarbons Commission (CNH) said on Friday.

Aides to President-elect Andres Manuel Lopez Obrador, a fierce critic of a four-year-old energy reform, have said the new government will seek to allow Pemex to select the companies it ties up with for oil and gas projects.

The reform required competitive auctions conducted by the CNH to select Pemex’s joint venture partners.

“I agree (that Mexico’s national oil company picks its partners),” said CNH President Juan Carlos Zepeda at an oil conference in the Pacific beach resort of Acapulco.

“I think its good… but what we have to demand and what needs to be established in law is that Pemex does this with at least the same transparency standards that the National Hydrocarbons Commission has used,” he added.

The current selection process in Mexico is rare in oil producing countries, in which national companies are generally free to choose their partners to better suit their own strategies.

(Reporting by David Alire Garcia and Marianna Parraga; Editing by Sandra Maler)

***

Venezuela to Continue in Defense of Oil Market Equilibrium

(Energy Analytics Institute, Piero Stewart, 29.Sep.2018) — Venezuela’s Oil Minister Manuel Quevedo announced the South American country would continue to seek equilibrium in the petroleum market.

“Under the leadership of President Nicolás Maduro, we will continue to defend a policy of equilibrium and stabilization in the world oil market, having as a fundamental basis a sustained cooperation with OPEC producing countries for the benefit of consumers, producers and investors,” reported PDVSA in an official statement, citing Quevedo.

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Energy Chamber to Host Forum in Guyana in November

(Energy Analytics Institute, Ian Silverman, 29.Sep.2018) — The Energy Chamber of Trinidad and Tobago will host a forum in Guyana in November 2018, to share experiences from Trinidad’s energy sector with stakeholders in Guyana, the chamber announced in an official statement.

Details of the event will be provided at a latter date.

***

Energy Analytics Institute (EAI): #LatAmNRG

Brazil Says to Suspend Energy Imports from Venezuela

(Energy Analytics Institute, Ian Silverman, 28.Sep.2018) — The Brazilian government announced it would suspend, until further notice, the importation of Venezuelan energy to supply Roraima, a state in northern Brazil on the border with Venezuela.

The decision was taken after the Brazilian government announced it considered it more reliable to meet regional demand with electricity produced by four national thermoelectric plants, , reported the Venezuelan daily La Patilla.

Suspension of electricity imports from Venezuela was decided on by members of the Electricity Sector Surveillance Committee, a sector body coordinated by the Ministry of Mines and Energy, the ministry confirmed in a statement.

Venezuelan energy imports had already been temporarily suspended on September 16, 2018 as the Brazilian government further analyzed whether it had the capacity to adequately supply Roraima with its thermoelectric plants in the region.

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Mexico Must Double Oil Exploration Spending to Halt Output Fall: Pemex

(Reuters, Marianna Parraga, David Alire Garcia, 28.Sep.2018) — Mexico will need to double to about $4 billion its annual oil exploration investment to reverse a 14-year decline in output, a move that will require more funding by Pemex and private producers, a top official with the state-run firm said Friday.

The nation’s oil industry needs Petroleos Mexicanos to invest more than $2.5 billion per year and another $1 billion to $1.5 billion from private companies to fully replace its reserves, Jose Antonio Escalera, the firm’s chief of exploration, said at an energy conference in Acapulco.

Pemex this year expects to invest about $1.65 billion, roughly the same as 2017. Reserves fell 7 percent this year, to 8.48 billion barrels of oil equivalent, and have slid more than 40 percent over the past decade, according to government data.

Escalera made the comments as the administration of President-elect Andres Manuel Lopez Obrador is still formulating its plan for Pemex and has given mixed signals over the future of the landmark energy reform.

Lopez Obrador, who will take office in December, has said he aims to boost Mexico’s oil production by a third to 2.5 million barrels per day (bpd,) from 1.82 million bpd in August. He also wants to increase domestic refining to end imports of foreign fuel.

However, he has been a critic of the nation’s opening of its oil industry to outside firms and has called for a review of the more than 100 exploration and production contracts awarded to oil companies, and a suspension of future auctions, casting doubts on what direction the energy reform will take in coming years.

“The reason why Mexico has seen an output decline since 2004 is not because of lack of potential, it is because it stopped exploring,” Juan Carlos Zepeda, chief of Mexico’s energy regulator National Hydrocarbons Commission (CNH), said at the energy conference.

Pemex said it will not meet its annual output target in 2018, and is likely to see a further slide in 2019.

LONG RANGE INVESTMENT

Pemex is making progress: It drilled 24 exploratory wells in 2017 and 35 are planned for 2018. But stemming the oil output decline will require the country to replace its reserves faster, Pemex and experts interviewed at the conference said.

The country will need $20 billion in exploration investment in the long term to confirm its estimated reserves and increase oil and gas output, according to Pemex’s calculations, a difficult task as prospective oil and gas resources to be confirmed are mostly in deep waters and onshore shale formations that require higher investment and technical knowledge.

As a sign of how it has fallen behind in replacing those reserves, Mexico has drilled 58 exploration wells on its side of the deep water Gulf of Mexico, compared with more than 1,100 on the U.S. side.

“What we need is more activity, even more exploration,” said Monica Boe, Mexico country manager of Norwegian oil major Equinor. She said auction terms could be changed to encourage more exploration activity.

***

Petrobras Reports On Adjustment Of Sale Prices

(Petrobras, 28.Sep.2018) — Petrobras, following up on the releases disclosed on Aug. 7, 2018 and Aug. 31, 2018, informs that, due to the methodology established in the National Petroleum Agency (ANP) Resolution no. 743 of Aug. 27, 2018, the average price of diesel will be R$ 2.3606 per liter as of Sep. 30, 2018, which represents a 2.8% adjustment.

The value corresponds to the arithmetic average of road diesel prices free of taxes charged by Petrobras at its refineries and terminals in the Brazilian territory for the 3rd period of the 3rd phase of the Diesel Economic Subvention Program (Sep. 30, 2018 to Oct. 29, 2018).

This new period in the Program provides for adjustment in regional average prices and maintains the condition that the subsidy will be paid against proof that the prices charged by qualified companies are lower than the sale prices defined by ANP for the five regions (South, Southeast, Mid-West, North without Tocantins and Northeast with Tocantins).

The company will continue the economic analysis of the subvention program for the subsequent periods.

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#LatAmNRG

Grid Connection for Over 1 GW of Enel Solar Parks in Mexico

(Renewables Now, 28.Sep.2018) — Italian energy major Enel SpA has switched on and hooked to the grid two solar parks in Mexico totalling 1,089 MW.

The 828-MW Villanueva and 260-MW Don Jose projects were implemented by the company’s subsidiary Enel Green Power Mexico (EGPM). Their construction required an investment of USD 950 million (EUR 815.7m).

Located in the municipality of Viesca, Coahuila state, the Villanueva photovoltaic (PV) park uses more than 2.5 million solar panels and is currently the biggest operating solar farm in Mexico, Enel said. Its output is expected to exceed 2,000 GWh per year, which will help offset more than 1 million tonnes of carbon dioxide (CO2) emissions. Construction of the plant was initiated in March last year, followed by that of the second facility a month later.

The 260-MW Don Jose plant is situated in the municipality of San Luis de la Paz, Guanajuato, and is powered by 810,000 PV panels with an expected annual output of over 625 GWh.

Enel won the two projects in Mexico’s first long-term public tender in March 2016. Following their completion, it has 1,553 MW of grid-connected renewable energy capacity globally that was put on stream since the start of the year, it noted.

(USD 1.0 = EUR 0.859)

***

GB-Texaco Unveils Cashless, Cardless Fuel Payment System

(Jamaica Gleaner, Neville Graham, 28.Sep.2018) — GB Energy Jamaica, the petroleum marketing company that operates the Texaco fuel stations, was to unveil a new automated payment system before business owners and operators at a function last night.

It comes out of an exclusive partnership between GB Energy and Amber Fuels, a subsidiary of tech company Amber Group.

In a first for Jamaica, Texaco will be offering its customers and fleet operators a digital refuelling solution, with payment channels linked to the two largest banks, National Commercial Bank and Scotiabank Jamaica, through Amber Fuel’s multichannel system, Amber’s CEO and founder Dushyant Savadia told the Financial Gleaner in a prelaunch interview.

The Amber Fuels technology that Texaco is deploying at its stations works with the latest radio frequency identification, or RFID, technology that interfaces with the banking platforms through a mobile application.

Texaco will issue free RFID stickers to customers at its stations. The sticker, which will serve as a unique identifier for individual vehicles and owner, is to be mounted on the autos.

To participate in the RFID system, customers are required to download the GB Fuels app and upload their payment details, which will be encrypted on the banking platforms.

They are assigned a four-digit PIN which they input on the GB system when purchasing fuel at the stations. This will give consumers a seamless, cashless, cardless payment option, Savadia said.

The new system is an addition to, and not a replacement of other payment options at Texaco, which include cash and cards.

GB Energy operates a network of 70 Texaco gas stations and is the largest petroleum marketing company in Jamaica with estimated annual sales of US$300 million.

“When that customer goes to a participating Texaco station the machine will read that RFID tag. The amount of fuel purchased will be automatically uploaded to the account. The customer will have the option of paying by cash, card, or it can be automatically applied to their account after the customer enters their PIN code, which is tied to their payment details,” Savadia said.

Information on the total value of the partnership was not immediately available, but country manager for GB Energy Mauricio Pulido says his company is spending US$1.5 million or about $200 million on the digital payment system. The investment covers hardware and software upgrades, the provision of RFID scanners, staff training and advertising, he said.

Pulido said the Amber system was developed exclusively for GB Energy and would be deployed at GB-owned stations across the Caribbean, including Dominican Republic, St Maartin and Haiti.

It’s currently available at 15 select Texaco fuel stations in Jamaica and will eventually be rolled out to all fuel stations across the island by the end of the year.

Amber’s RFID system will also capture analytics on fuel expenditure and payment history that individuals can access through the app. It also allows for automatic invoicing, a service that Savadia said would be valuable to fleet owners and multi-car families.

Amber is a young firm that ramped up its activities after ICD Group took a stake and injected capital in the operation in May 2016. It launched into service in Jamaica as Amber Connect, supplying motor vehicle tracking devices, but has since grown to include Amber Fuels, Cooyah Tech and Aura Tech.

The group operates in 23 countries, according to Savadia.

***

Shell Adds Material Acreage To Its Deep-water Position In Brazil

(Shell, 28.Sep2018) — Shell Brasil Petróleo Ltda, a subsidiary of Royal Dutch Shell plc, and its bid consortium member Chevron Brasil Óleo & Gás Ltda, won a 35-year production sharing contract for the Saturno pre-salt block located off the coast of Brazil in the Santos Basin. Shell will pay its share of the total signing bonus for the block, equating to approximately $390 million [R$ 1,562 billion].

“We are pleased to add another material, operated exploration position to our leading portfolio in one of the world’s most prolific deep-water areas,” said Andy Brown, Upstream Director, Royal Dutch Shell. “We continue to grow an exciting and resilient Upstream business of long-term competitive positions in our heartlands while maintaining strong, capital discipline.”

With the addition of the Saturno block (Shell 50% operating, Chevron 50%) won at the Fifth Pre-Salt Bid Round, Shell increases its total net acreage off the coast of Brazil to approximately 2.7 million acres. Shell will engage with Chevron to define specific plans for exploration drilling in the area just won.

Shell is a major oil and gas producer in Brazil with a clear strategy to continue developing an industry-leading portfolio of pre-salt acreage through exploration. The company plans to drill the Alto de Cabo Frio West and South Gato do Mato pre-salt fields in the Santos Basin next year and is proceeding with seismic studies to mature two exploration blocks awarded earlier this year.

Since 2014, Shell has more than doubled its global, deep-water production and expects to exceed 900,000 barrels of oil equivalent by 2020, coming from previously discovered areas in Brazil, the U.S. Gulf of Mexico, Nigeria, and Malaysia. The company is also developing deep-water, exploration plans for its acreage off the coast of Mexico, Mauritania, and in the Western Black Sea.

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Mexico Oil Auction Winners Stay Positive

(Bloomberg, Amy Stillman, 28.Sep.2018) — Mexico’s oil auction winners BHP Billiton Ltd and DEA Deutsche Erdoel AG are hopeful that the slowdown in bid rounds is a feature of the country’s political transition and won’t be permanent.

“We have expectations that things will pick up again and continue,” said DEA Deutsche chief executive officer Maria Moraeus Hanssen. The company expects to start wells in Mexico in one or two years and is in the process of seeking approval of its development plan for the onshore Ogarrio field that it operates in a joint-venture with Petroleos Mexicanos. It has also won rights to four exploration blocks in Mexico and is the operator of three of them.

Australian miner BHP, which won a 2016 tender to partner with PEMEX in its deep-water Trion field in the Gulf of Mexico, expects to start appraisal drilling before the end of the year and take advantage of higher oil prices, said Steve Pastor, the company’s petroleum operations chief, in a Thursday interview in Acapulco. “The opportunity is very attractive for us to move quickly right now because we’re still enjoying a relatively low point in the cost cycle,” said Pastor.

While Mexico is due to hold competitive bid rounds in February next year, President-Elect Andres Manuel Lopez Obrador has said he could indefinitely suspend oil auctions when he comes into office on December 1. That could see private companies focus their efforts on purchasing stakes of privately-owned oil assets in Mexico.

“At a certain time there will be a secondary market that we are not ruling out,” said Moreaus Hanssen.

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Transocean Extends Contract for Petrobras 10000 Through 2021

(Transocean Ltd., 28.Sep.2018) — Transocean Ltd. announced the ultra-deepwater drillship Petrobras 10000 was awarded a 790-day contract extension offshore Brazil with Petrobras.

The contract is extended through October 2021, and includes a blend and extend modification to the previous contract dayrate, effective September 2018. The additional net contract backlog is approximately $185 million, including cost escalations.

Additionally, Transocean will receive a 5% royalty per day, totaling approximately $16 million, estimated to be from October 2018 to October 2021 associated with the use in Brazil of the company’s patented dual-activity technology on the Petrobras 10000.

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ExxonMobil Grabs Additional Acreage in Brazil’s 5th Pre-Salt Bid Round

(ExxonMobil, 28.Sep.2018) — Irving, Texas-based ExxonMobil increased its holdings in Brazil’s pre-salt basins after it won the Titã exploration block with co-venturer Qatar Petroleum during Brazil’s 5th pre-salt bid round.

The block awarded added more than 71,500 net acres to the ExxonMobil portfolio, expanding the company’s total position in the country to approximately 2.3 million net acres.

“With the acquisition of this block, we continue to increase our holdings in Brazil’s pre-salt basins, which are high-quality opportunities that enhance ExxonMobil’s global portfolio,” said Steve Greenlee, president of ExxonMobil Exploration Company. “These resources will benefit from ExxonMobil’s considerable capabilities, which we will employ as we explore and develop them with our co-venturers and the government.”

Equity interest in the block will be 64 percent for ExxonMobil and 36 percent for Qatar Petroleum. ExxonMobil will be the operator.

Through the remainder of 2018 and into 2019, ExxonMobil will continue to obtain 3-D seismic coverage, as well as continue to progress work on regulatory requirements for exploration drilling by 2020. Development work is also ongoing in the Equinor-operated Carcara field, which contains an estimated recoverable resource of more than 2 billion barrels of high-quality oil.

ExxonMobil subsidiary ExxonMobil Exploração Brasil Ltda. has interests in a total of 26 blocks offshore Brazil and is operator of 66 percent of its net acreage. The company has had business activities in Brazil for more than 100 years and has about 1,300 employees in the country across its upstream, chemical and business service center operations.

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#LatAmNRG

Uruguay Judge Orders ANCAP to Pay $5.6 Mln to Exor Internacional Ltda.

(Energy Analytics Institute, Ian Silverman, 28.Sep.2018) — Uruguayan Judge Carlos Aguirre ordered ANCAP to pay a fine of $5.6 million plus interest to Exor Internacional Ltda. as a result of a “patrimonial trial related to administrative responsibility,” reported the daily LaRed21.

The Exor payment relates to a debt maintained with Venezuela’s state oil company PDVSA, according to the daily.

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Equinor and Petrobras Sign Brazilian Offshore MOU

(WindPowerOffshore, Craig Richard, 28.Sep.2018) — State-owned oil majors Equinor and Petrobras have signed a three-year memorandum of understanding (MoU) to develop the country’s offshore wind sector.

The two companies have already been investigating other potential areas of cooperation, including the development of renewable energy projects, they stated.

Petrobras has four wind farms installed in the state of Rio Grande do Norte in north-eastern Brazil with a combined capacity of 104MW, while Equinor — formerly known as Statoil — operates three wind farms off the coast of the UK, and is developing further offshore sites in Germany and the United States.

The MoU, signed at a conference in Rio de Janeiro, does not oblige either company to undertake any business, they announced.

However, it “indicates the intention of the companies to work together to develop projects in the offshore wind energy segment,” Equinor and Petrobras added.

“Brazil has huge potential for offshore wind power generation and we want to take advantage of this potential together,” said Petrobras’ director of strategy, organisation and management system, Nelson Silva.

Brazil currently has just under 13.9GW of operational wind capacity, according to Windpower Intelligence, the research and data division of Windpower Monthly — all of which is onshore.

Corruption probe

Meanwhile, Petrobras has agreed to pay $853 million to the US Department of Justice (DoJ) and Securities and Exchange Commission, and the Brazilian Federal Prosecutor’s Office, following a long-running corruption investigation.

The US and Brazilian governments had launched the probe in connection with Petrobras’ role in facilitating the bribing of politicians and political parties.

The Brazilian state oil giant admitted it had failed to make and keep accurate and fair accounts, and that the company’s contractors had generated bribes with the cooperation of Petrobras executives.

US authorities agreed not to prosecute in exchange for the funds. The DoJ stressed that Petrobras was a victim of an “embezzlement scheme” carried out by former executives.

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Oil Spill Reported at Venezuela’s Anzoátegui Petrochemical Complex

Source: Ultimas Noticias

(Energy Analytics Institute, Piero Stewart, 27.Sep.2018) — Venezuela’s José Antonio Anzoátegui Petrochemical Complex was the site of a crude oil spill that affected the beaches of the Peñalver municipality in Anzoátegui state.

The presence of oil was detected on September 26, 2018 along the beaches of Puerto Píritu, La Cerca and El Hatillo, located in the western region of the state, by fishermen and tourism promoters, reported the daily Venezuelan newspaper Ultimas Noticias.

“A few months ago fishermen recovered oil from their nets and not fish,” reported the daily citing Peñalver municipality tourism promoter Humberto Guerra. He added that at least five such occurrences have occurred in the region, without stating a specific time frame.

Venezuela’s Ministry for Ecosocialism (Minec) Director Katiuska Homsi announced contingency efforts to collect the detected oil involved 120 persons onshore and another 20 offshore, according to the daily.

Venezuela’s state oil PDVSA did not respond to emails requesting details about the oil spill or clean-up efforts.

***

 

Energy Reform To Continue To Reap Benefits For Mexico: Treviño Medina

(Pemex, 27.Sep.2018) — Petróleos Mexicanos CEO, Carlos Treviño Medina, assured that the Energy Reform is beginning to yield important benefits for Mexico by allowing new financial actors to participate that will contribute to the generation of greater wealth for the country.

He stated that this new framework gives the energy sector greater solidity and added that Pemex has more tools to contribute to relevant development in coming years.

This energy reform “is the great reform,” Treviño Medina explained during his speech at the International Forum titled “The Importance and Role of Partnerships in the Development of the Oil Industry in Mexico,” as part of the XIII edition of the Mexican Oil Conference (Congreso Mexicano del Petróleo).

During the encounter he emphasized the confidence that companies from the energy sector have for investing in Mexico and in developing new projects with complete transparency within an appropriate and solid regulatory framework.

“I believe that the Energy Reform has without any doubt proven to be a great reform and I hope that it will continue to bring great benefits to Mexico,” said Treviño Medina who accompanied the BHP Billiton President of Operations, Steve Pastor, CEO and Chairwoman of the Board for DEA Deutsche Erdoel, Maria Moraeus Hanssen, and CEO Grupo Diavaz, Alfredo Bejos Checa on the panel.

Moraeus Hanssen, as well as Pastor and Bejos Checa agreed that the Energy Reform allowed them to gain presence in Mexico which has made dynamic development of the sector possible and with greater benefits for the public.

Moraeus Hanssen explained that thanks to this reform, companies like DEA Deutsche Erdoel are now in Mexico developing projects and consolidating investment plans for the future.

Steve Pastor underscored that this new framework in the energy sector opens the possibility for companies to enter into partnerships with Pemex to promote mutually beneficial projects and stated that the potential to tap into greater benefits is improved through a partnership with Pemex rather than doing it on their own.

Bejos Checa highlighted the benefits that Grupo Diavaz has obtained through this reform that was approved in 2013, which has allowed the company to grow and contribute more to the financial development of the country.

All three agreed that two of the most important reasons for entering into a partnership with Petróleos Mexicanos are the vast knowledge base and know-how of the company, regarding the geography and geology of the fields, as well as regarding the Way of Doing Business in Mexico.

Likewise, the oil companies including Pemex, acknowledged the transparency and order of the opening processes for the participation in farm-outs and migrations.

As the panel’s moderator, Carlos Treviño Medina spoke about the social role of the oil sector as well as the positive impact of the sector in the communities around the country. He especially underscored the importance of the human capital of the sector.

The participants of the panel recognized the responsibility of the Mexican oil sector towards environmental protection and pointed out that the industry is committed to make all necessary efforts to keep this topic always on their work schedule.

In this regard Pemex CEO, Carlos Treviño Medina, mentioned the meeting held recently in New York with other oil companies. Pemex is a member of the Oil & Gas Climate Initiative (OGCI), which has committed to reduce greenhouse gas emissions into the atmosphere to comply with the Paris Agreement signed in December 2015.

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#LatAmNRG

Pemex to Begin Importing US Crude in H2 October: CEO

(S&P Global Platts, Daniel Rodriguez, 27.Sep.2018) — Pemex plans to begin importing light crude from the US Gulf Coast in the second half of October, CEO Carlos Trevino told S&P Global Platts.

The imports will enable Pemex to raise its total crude processing to 700,000 b/d-800,000 b/d in the final months of 2018, he said on the sidelines of the Mexican Petroleum Congress in Acapulco Wednesday.

A “question many people ask me is, ‘will this benefit us?’ The definite answer is yes,” Trevino said, adding that the measure will allow Pemex to improve its crude processing and marketing margins.

Trevino did not specify the volume or the terms of the purchase, saying it was competitive, private information. He added that the incoming administration has to decide whether the strategy would continue.

It will enable Mexico’s 330,000 b/d Salina Cruz refinery to raise its operational levels by 100,000 b/d. The refinery lacks coking capacity, preventing it from processing Mexican Maya heavy crude blend at a positive margin, Trevino added.

“We are going to empower Salina Cruz as it is the refinery where we can boost crude processing levels the most,” Trevino told reporters on Thursday at a press conference.

Salina Cruz processed 150,550 b/d in August, compared with a 2018 monthly peak of 236,700 b/d in April and an average of 269,000 b/d for the full-year 2014.

Trevino also told reporters the imports could be used to enhance operations at its other two refineries designed to process light oil: the 315,000 b/d Tula and 220,000 b/d Salamanca facilities.

The optimal and profitable operation of these facilities has been affected by light crude shortages. Tula processed 132,200 b/d and Salamanca 158,320 b/d in August.

Pemex’s light crude production has been skidding lower for some time. Its light crude output was 759,250 b/d in August, down from 861,160 b/d in January and 1.16 million b/d in 2014.

The slide has steepened this year because of seawater invading its Xanab shallow water field in on the Tabasco coastline.

Xanab’s production has been in freefall since January, decreasing its output by 68,200 b/d to 104,400 b/d in August. Pemex produced 1.81 million b/d in August, down from 1.93 million b/d in January.

Trevino said the company is doing its best to solve the “premature” water invasion at Xanab as fast as possible.

In August, the company processed 404,300 b/d of light crude, 60% of its overall slate, compared with 455,800 b/d in 2017 and 651,000 b/d in 2014.

The company is focusing on profitability rather than refining fuel at any cost. For the first time in decades, Pemex’s refining unit posted positive results in 2017, although this led to lower crude processing.

Pemex’s downstream director, Carlos Murrieta, previously told Platts the company has been weighing the costs of importing fuel against refining it domestically.

Murrieta also said the company is going to evaluate the differentials between light and heavy crude oil to decide how much sweet crude it could import.

***

Interview: Pemex’s CEO Expects FID for Four New Fields in 2019

(S&P Global Platts, Daniel Rodriguez, 27.Sep.2018) — Mexico’s state oil company Pemex expects to make a final investment decision (FID) and begin development of its Ixachi, Pokche, Xikin, and Suuk discoveries in 2019, CEO Carlos Trevino told S&P Global Platts.

These fields are at the top of Pemex’s project pipeline, but their FID will depend on other stakeholders such as Mexico’s Treasury Secretariat, Trevino said on the sideline of the Mexican Petroleum Congress in Acapulco late Wednesday.

“We expect the incoming president will give a great value to these fields in his mission to raise Mexico’s oil production,” Trevino said.

Based on the information available, Platts Analytics estimates the peak production of these four fields could produce a combined 135,000 b/d.

Xikin has 190 MMbbl 2P reserves, Suuk has 50 MMbl 2P and 205 MMbbl 3P, Pokche has 36 MMbbl 2P and 186 MMbbl 3P, and Ixachi with 67 MMbbl 2P and 120 MMbbl 3P.

President-elect Andres Manuel Lopez Obrador has pledged to raise Mexico’s crude oil production to 2.6 million b/d by the end of his term in 2024, up from 1.8 million b/d in August.

Trevino said Pemex is not going to be able to achieve its goal of having a yearly production average of 1.95 million b/d for 2018.

The company will not be able to achieve its goal because of water invading its Xanab shallow water field in Tabasco’s coastline.

Xanab’s production has been in a freefall since January, decreasing its output by 68,200 b/d to 104,400 b/d in August. Pemex produced 1.81 million b/d in August, down from 1.93 million b/d in January.

THE CHALLENGE: A FINANCIALLY INDEPENDENT PEMEX

The great challenge Pemex faces is to decouple itself from the country’s federal government budget in its mission to become a competitive state-owned company, Trevino said.

“It is hard to know what Pemex’s budget will be as long as it will depend on the state of public finances,” Trevino added.

Since oil prices crashed in 2014, Pemex’s upstream capital investment budget was cut by two thirds to $7.2 billion in 2018, making it difficult for the company to develop its production portfolio.

If prices stay at $80/b, Trevino said Pemex’s upstream capital investment budget should return to levels similar to 2014 or 2015, somewhere between $12.7 and $17 billion.

However, the final budget the company will have will depend on the incoming administration, led by President-elect Andres Manuel Lopez Obrador.

According to Mexico’s National Hydrocarbon Commission, Pemex requires an investment of at least $20 billion to be able to develop the acreage it won at hydrocarbon auction round zero.

According to CNH, this will allow Pemex to increase its crude oil production to 1.96 million b/d by 2022 from a bottom of 1.7 million b/d in 2020.

Trevino said that he expects Pemex to reach an inflection point somewhere before 2020, adding that CNH’s projection is the worst case scenario while the state company’s forecast of producing 2 million b/d by 2020 is the best case scenario.

The critical difference between Pemex and CNH’s projections are the permitting times. “We input the shortest approval times possible while they take the maximum allowed times for granting permits,” he added.

***

Talos Energy Announces Approval Of Zama Appraisal Plan

(Talos Energy, 27.Sep.2018) — Talos Energy Inc. announced the Mexican oil & gas regulator, the National Hydrocarbons Commission (CNH) has approved the appraisal plan for the Zama discovery.

The approval of the appraisal plan by the CNH is a key approval required to commence the appraisal of the Zama discovery. CNH is currently reviewing the application for drilling permits, which are required to commence drilling operations. Talos estimates that it will spud the first appraisal well, the Zama-2, in the fourth quarter of 2018 and that the appraisal program will be completed by mid-2019.

In addition, the Block 7 Consortium – which includes Talos as the operator with a 35% participating interest, as well as Sierra Oil & Gas and Premier Oil – has entered into a firm contract with a subsidiary of Ensco PLC to utilize the Ensco 8503 semi-submersible rig for the appraisal plan. The contract covers the drilling of two wells, a sidetrack and a well test. The rig is expected to be on location ready to commence operations in November.

The appraisal plan includes three new reservoir penetrations. The first well in the program, the Zama-2, will be deepened by approximately 500m to test an exploration prospect called Marte, which has an unrisked recoverable resource range between 60 MMBoe and 150 MMBoe. The estimated cost to deepen the Zama-2 wellbore for the Marte test is approximately $10 million gross, with Talos’s share expected to be approximately $3.5 million.

The CNH approved a gross budget of $325 million for the appraisal plan, which includes approximately $75 million of contingent operations. The budget includes the cost of drilling the wells, performing a drill stem test to gather information about the reservoir continuity and productivity, hole coring across the Zama reservoir, and collecting a number of rock and fluid samples. Talos expects its net share of the costs to be approximately $75 to $80 million for the entire appraisal campaign, before any contingency costs.

President and Chief Executive Officer Timothy S. Duncan commented,

“Following last week’s announcement of the Pre-Unitization Agreement with Pemex. This approval allows us to maintain an accelerated schedule of investments on the Zama project in Mexico, and begin drilling operations on the appraisal plan by the end of this year. This should allow us to stay on track for our ultimate goal of achieving initial production from the Zama discovery in 2022, thereby providing local jobs, increasing government revenues to Mexico, and materially adding to Mexican domestic production.”

***

#LatAmNRG

EP PetroEcuador Manager Supervises Terminal Operations [Video]

(Energy Analytics Institute, Jared Yamin, 27.Sep.2018) — EP PetroEcuador General Manager Pablo Flores supervised operations at the El Chorrillo, Pascuales and a Estación de Transferencia Tres Bocas Transfer Station in the province of Guayas.

***

EP PetroEcuador Controls Fire at Esmeraldas Refinery AOV 14 Tank

(Energy Analytics Institute, Jared Yamin, 27.Sep.2018) — Today at approximately 12:10 pm a fire was reported at the Esmeraldas Refinery AOV 14 Asphalt tank.

The EP PetroEcuador fire brigade located at the refinery acted immediately to smother the flames and reduce harm to the environment and the other facilities related to the industrial plant. No injuries were reported and operations were not affected, announced EP PetroEcuador in an official statement on its website.

Officials with EP PetroEcuador continue to analyze the cause of the fire in order to implement corresponding corrective measures.

***

Argentina Still Owes Bolivia $250 Mln For Gas Imports

(Energy Analytics Institute, Jared Yamin, 27.Sep.2018) — Bolivia’s government plans to meet soon with Argentine authorities in the Casa Rosada to again address the issue of late payments.

“They still owe us two bills, and in the coming weeks we are going to discuss with the government how to regularize the fundamental payment issues,” reported the newspaper La Razón, citing Bolivia’s Hydrocarbon Minister Luis Alberto Sánchez.

***

Petrobras Bolivia Spuds Deep Caranda X1005 Well in Santa Cruz

(Energy Analytics Institute, Jared Yamin, 27.Sep.2018) —The well was spud in the Caranda Field inthe  presence of Bolivia’s President Evo Morales.

The field is located in the Ichilo province of the department of Santa Cruz and is operated by Petrobras Bolivia.

The Deep Caranda exploration well (Car-X1005) will require an investment of $47 million and has potential to produce 35 million cubic feet per day (MMcf/d) of natural gas, reported the daily newspaper La Razón.

“If gas is confirmed, additional investments of $184 million could be made to drill two other wells in the area,” reported the daily, citing Morales.

With drilling of the Car-X1005 well the company aims to certify a potential resource of approximately 0.6 trillion cubic feet (Tcf) of natural gas, which could translate into revenues of $600 million over the next 20 years, reported the daily.

Additionally, the exploratory project, if successful, could lead to the revitalization of a mature field (the Colpa Caranda area), and could generate a new perspective regarding developments, investments, and other activities aimed at boosting gas production.

***

Neuquen Gas Production Reaches 69.8 MMcm/d in August 2018

(Energy Analytics Institute, Jared Yamin, 27.Sep.2018) — Crude oil and natural gas production from the Neuquen Basin rose sequentially in August 2018.

Oil production reached 120,551 barrels per day (b/d) in August 2018, up 6.64% compared to July 2018, and up 16.9% compared to August 2017, while gas production reached 69.8 million cubic meters per day (MMcm/d), up 2.48% sequentially, and up 13.3% year-over-year.

A large part of this growth was due to three massive developments carried out in the unconventional area, the Government of the Neuquén Province reported in an official statement on its website

Of this total, Vaca Muerta today produces 65,186 b/d of oil (54% of what the Neuquen basin produces) and 43.2 MMcm/d of gas (62% of what the Neuquen basin produces). Of this last figure, 30% corresponds to shale gas (20.5 MMcm/d) and 32% to tight gas (22.6 MMcm/d).

***

Venezuela Faces Fresh Blow With Ship-Fuel Rules Threatening Exports

(Bloomberg, 27.Sep.2018) — New rules forcing ships to use cleaner marine fuels may deal yet another blow to cash-strapped Petroleos de Venezuela SA, an exporter of high-sulfur fuel oil.

From Jan. 1, 2020, vessels will have to switch to less-polluting bunker fuel or be fitted with equipment to curb emissions, under new International Maritime Organization rules. That’s expected to weaken demand for the high-sulfur residual fuel oil produced by PDVSA, pushing prices lower at the same time that the cost of importing clean fuels rises, said Mel Larson, a consultant at KBC Advanced Technologies Inc.

As refiners prepare to produce IMO-compliant fuels that rely on low-sulfur crude oils, sour crude produced by Venezuela and Mexico may be sold at deeper discounts. Meanwhile, demand for lighter distillates, including diesel, is expected to increase. That ultimately will take a toll on the economies of Venezuela, Mexico and Ecuador that rely on imported diesel and gasoline.

“IMO 2020 has the potential to hurt GDP growth in most Latin American economies, especially the ones that subsidize fuel prices,” Larson said by email. “As the cost of imported fuels rise, subsidizing gasoline and diesel will only serve to expand a country’s or company’s debt load.”

Most refiners in Latin America haven’t invested in units that can remove sulfur or crack residuals into more valuable molecules. That puts them at a disadvantage ahead of the rule, which is expected to slash global demand for high-sulfur bunker fuel to as low as 1 million barrels daily from 4 million barrels currently.

By this measure, Petroleos Mexicanos and PDVSA, respectively Latin America’s largest and second-largest exporters of fuel oil, are the ones who have most to lose.

Petroleo Brasileiro SA, on the other hand, is set to take advantage of the fuel shift, according to Guilherme Franca, executive manager of commercialization. Petrobras already exports IMO-compliant fuels and is exploring the re-opening of fuel oil storage tanks in Singapore to better supply bunker fuel markets in Asia.

***

Khan: No Fuel Supply Disruption

(Trinidad and Tobago Newsday, Julien Neaves, 26.Sep.2018) — Energy Minister Franklin Khan has assured there would be no disruption in fuel supply to the travelling public with the closure of the Petrotrin Refinery next Monday.

Khan was responding to a question in the House yesterday from Pointe-a-Pierre MP David Lee on the strategic steps to ensure the supply of fuel was not disrupted with the closure of the Petrotrin Refinery on October 1, in a phased manner.

Khan reported the country consumes 25,000 barrels of liquid fuel per day or 3.9 million litres, comprising of aviation fuel, diesel, super and premium gasoline and small amounts of regular.

He said the refinery would be closed on a phased basis in October and upon its closure there would be a 20-day supply of fuel from stock. Khan said steps are currently being put in place for the importation of fuel from international traders and request for proposals from 13 reputable international suppliers and traders were currently out.

Prime Minister Dr Keith Rowley also responded to a question from Lee that given Government’s offer to the Oilfield Workers’ Trade Union (OWTU) of a preferential option to purchase the Petrotrin refinery if the Prime Minister could indicate the other options Government intends to pursue if this offer is not accepted by the OWTU. Rowley said it was Government’s position the refinery would be excised as a separate entity from the rest of Petrotrin’s business and be an independent asset. He said at that stage if OWTU puts forward a proposal to Government, the union would be given the first option. “They have indicated some interest is being shown pertaining to that.”

Lee asked if there were any other proposals but Rowley said he was not aware Petrotrin was in receipt of other proposals but interests have been expressed if the asset becomes available.

***

PetroTal Provides Update On Peruvian Blocks 95 and 107

(PetroTal Corp., 26.Sep.2018) — PetroTal Corp. is increasing production from the Bretaña oil field on Block 95, as well as evaluating the Osheki prospect in Block 107.

Key highlights from the fields follows:

— Bretaña oil field (Block 95):

– One of the largest undeveloped discoveries in Peru

– First oil achieved in June 2018, ahead of schedule

– Installation of initial Long-Term Testing Facilities to handle production of 5,000 barrels of oil per day (b/d) and 5,000 b/d of is expected to be completed on schedule and under budget by late October, 2018

– Average September 2018 production is ~900 b/d naturally flowing, expected to increase to over 2,000 b/d by November 2018

– First development well to be spud in early 2019, allowing for production growth to 5,000 b/d by mid-2019 and to 10,000 b/d in early 2020.

– Significant proved + probable (2P) reserves of 39.8 million barrels of oil, independently verified by Netherland Sewell & Associates, Inc. (NSAI) effective as of December 31, 2017

– Attractive fiscal terms with an initial cash royalty of five percent, not surpassing eight percent at peak production

– Established routes to market with current production being sold at the Iquitos Refinery

“We have achieved operational milestones, ahead of schedule and under budget, including the commencement of production at Bretaña. PetroTal is in a strong financial position with no debt, and our investment case is further de-risked by a relatively simple geological story,” said PetroTal President and Chief Executive Officer Manolo Zuniga.

— Osheki light oil prospect (Block 107):

– Recent confirmation that Osheki prospect is estimated to hold 534 million barrels of mean prospective recoverable resources, estimated by NSAI effective as of June 30, 2018.

– Estimate is based on a recovery factor of 30 percent of the estimated 1.78 billion barrels of mean prospective original oil in place (OOIP)

– Currently in discussions with potential joint venture partners to drill Osheki

– Further potential material upside from additional leads in Block 107

“We are proud to be aligned with the Peruvian government as we play our part in helping the country increase production and reduce oil imports. I am very upbeat about the future as we continue our journey to become a Peruvian focused E&P of scale, creating value from our existing assets, and over time expanding the portfolio in Peru,” concluded Zuniga.

***

PetroTal Corp. Announces Intention for Secondary Quote of Common Shares

(PetroTal Corp., 26.Sep.2018) — PetroTal Corp. announced its intention to seek a secondary quotation of its common shares with their admission to trading on the London Stock Exchange’s AIM market, subject to preparation of the requisite documentation. The company expects that the shares will begin trading by the end of this year.

“We are focused on realizing the value of our material oil assets in Peru. A secondary quotation on London’s AIM would hopefully increase liquidity and allow us to broaden the shareholder register, at a time when we both are rapidly moving ahead in [Peru] with the development of Block 95 and continuing to assess potential partners for Block 107,” said PetroTal President and Chief Executive Officer Manolo Zuniga.

PetroTal Corp. is a junior oil and gas company domiciled in Canada with corporate offices in Houston, Texas. The company is focused on development of oil and gas assets in Peru.

The company is seeking admission to AIM, alongside its current listing on the TSX Venture Exchange, in order to take advantage of AIM’s liquidity, as well as to access a broader range of institutional investors. The Board believes this will help expedite the unlocking the value of PetroTal’s Peruvian assets. PetroTal would be the only exclusively Peru focused independent oil and gas company quoted in London.

Strand Hanson Limited is acting as the company’s Nominated Adviser on the proposed admission.

PetroTal will hold a special meeting of shareholders on October 25, 2018 to amend the Articles of the company in preparation for the secondary quotation. A management information circular and related meeting materials have been mailed to the company’s registered shareholders and filed on SEDAR at www.sedar.com.

***

Bolivia to Launch Super Ethanol 92 in October 2018

(Energy Analytics Institute, Jared Yamin, 26.Sep.2018) — Bolivia is planning to launch a new ethanol: Super Ethanol 92.

“Today, a decree was approved authorizing the mixture of ethanol with base gasoline up to 12%,” said Sanchez.

The Super Ethanol 92 that the Bolivian government plans to launch on October 10 will have up to 12% alcohol, reported the daily newspaper La Razón, citing Bolivia’s Hydrocarbon Minister Luis Alberto Sanchez.

Determination of the percentage of mixture was revealed in a decree approved by a ministerial cabinet, said the official. He added that his office is still ‘fine-tuning’ the final price.

***

Pemex Plans up to 100,000 b/d of Light Crude Imports, Says CEO

(Reuters, David Alire Garcia, Marianna Parraga, 26.Sep.2018) — Mexican state-run oil company Pemex expects to begin importing up to 100,000 barrels per day of light crude oil, likely from the United States, from late October and at least until the end of November, its chief executive said on Wednesday.

“A hundred thousand barrels (per day) more or less is what we’re going to import to process and incorporate into our refineries, mostly at Salina Cruz,” Pemex CEO Carlos Trevino said in an interview with Reuters on the sidelines of the Mexican Petroleum Congress in Acapulco.

The imports, planned to run through at least the end of President Enrique Pena Nieto’s tenure in office on Nov. 30, mark a stark shift for historically major crude exporter Mexico, where decades of oil self-sufficiency are a badge of pride.

Years of under investment and declining crude output have severely hampered Mexico’s refineries and helped necessitate the move.

Salina Cruz, like Pemex’s other five refineries, has recently been producing far below capacity due to accidents and operational problems, as well as Pemex’s focus on maximizing the value of its oil even if that means refining less domestically.

“We’re going to mix it with Mexican crude, with some of our mix to be able to process at the levels we want to get back to in refining. We should be around 800,000 barrels (per day of refining in the country’s entire system) by the end of the year,” he added.

Mexico’s refining network can process up to 1.6 million bpd of crude. It has been working this year at around 40 percent.

Trevino said he expects auctions of oil exploration and production blocks scheduled for February, which include the selection of key partners for Pemex, will take place as planned.

“I think there is total certainty” that Mexico’s oil regulator, the National Hydrocarbons Commission (CNH), will carry out the auctions.

Mexican President-elect Andres Manuel Lopez Obrador has said that oil auctions are suspended until contracts already awarded over the past few years have been reviewed, but he has not specifically weighed in on the February tenders.

Pemex, whose oil production and refining volumes have continued declining this year amid the depletion of some of its main oilfields, will not meet its crude output target of 1.95 million barrels per day in 2018.

“We’re going to be considerably below that,” Trevino told reporters at the conference later in the evening, declining to provide a specific volume.

He expects another year of production decline in 2019, even though Pemex had originally planned to stabilize output by then.

Lopez Obrador, who takes office on Dec. 1, handily won Mexico’s presidential election in part by promising sweeping changes to Mexico’s energy industry. His energy team has signaled they want Pemex to select its own partners instead of having them chosen in auctions run by the CNH.

Trevino said the new process would be “easier,” underscoring that the current selection process “costs us time.”

***

Petrobras, Equinor Ink 3-Year Deal for Wind Energy Projects

(Reuters, 26.Sep.2018) — Norway’s Equinor ASA and Brazil’s Petrobras agreed to jointly seek out offshore wind projects together for the next three years, executives from the two companies said on Wednesday.

Equinor’s Executive Vice President Anders Opedal and Petrobras’s Chief Strategy Officer Nelson Silva did not offer details on the amount to be invested.

The project comes after Petrobras released plans for Brazil’s first offshore wind project, a pilot plant offshore from Rio Grande do Norte state that should begin operations in 2022 and produce about 6 to 10 megawatts. (Reporting by Alexandra Alper and Marta Nogueira; editing by Diane Craft)

***

Giving More Money to Pemex Could Hurt The Company

(Energy Analytics Institute, Ian Silverman, 25.Sep.2018) — Contrary to what is thought, investing in Pemex and increasing its production could weaken the oil company, since it hasn’t achieved the profitability necessary to operate with good finances.

The solution is no as easy as just opening the wellhead and allowing production to flow, as Mexicans sometimes think is the case, reported the daily newspaper El Financiero, citing the Pulso Information Director Pabló Zárate. “On the one hand we need more investment, but we also have to see that investments are done with profitability in mind so that Pemex is strengthened and not be weakened,” he said.

The executive added that giving more resources to Pemex doesn’t mean that its level of debt and finances will improve.

“You could end up pushing Pemex into a scheme where it produces more, its activities expand, its income is higher, but its earnings don’t necessarily increase at the same rate,” he said. “[Instead] what you would have would be something bigger but not necessarily stronger,” he concluded.

***

PetroMonagas, PetroVictoria Rumored to Have Changed President

(Energy Analytics Institute, Ian Silverman, 26.Sep.2018) — The president of the two Venezuelan joint venture companies is rumored to have been changed, according to reports in the daily Noticias Venezuela.

The executive, Edgar Sifontes, is said to have left his position at the helms of both companies, reported the daily, citing Tweets from supposed workers at the companies.

Neither officials at PetroMonagas nor PetroVictoria returned calls seeking to confirm the reports.

***

Petrobras Cuts Gasoline Refinery Price After Pump Record

(Reuters, 24.Sep.2018) — Brazil’s state-owned oil company Petroleo Brasileiro SA said on Monday that it would cut the average price of gasoline at its refineries by 0.59 percent after pump prices hit record levels in the country last week.

Petrobras, as the company is known, said the price reduction to 2.2381 reais ($0.5476) per liter will go into effect on Tuesday.

That’s a decline from the previous fixing of 2.2514 reais per liter, the highest refinery price since Petrobras began nearly daily price adjustments last year.

Gasoline prices at the pump hit an average price of 4.652 reais per liter last week, a record when not accounting for inflation, according to a survey conducted by industry regulator ANP.

Petrobras’ move to cut its refinery rate is at odds with global oil prices, which rose more than 3 percent on Monday to four-year highs after Saudi Arabia and Russia said they would not immediately act to increase production, despite appeals from U.S. President Donald Trump.

Earlier this month, Petrobras unveiled a program that would allow it to hedge against gasoline price moves, allowing it to reduce volatility in refinery fuel prices.

The mechanism will permit Petrobras to maintain prices at a set level for up to 15 days without incurring losses, reducing the frequency of adjustments, according to the company.

Petrobras shares fell 0.74 percent by late afternoon trading on Monday to 19.99 reais. ($1 = 4.0868 reais) (Reporting by Roberto Samora Writing by Jake Spring; Editing by Sandra Maler)

***

Methane Fears Cloud Argentina’s Shale Oil And Gas Future

(Financial Times, Benedict Mander, 23.Sep.2018) — Green energy groups say huge shale oil and gas reserve is leaking greenhouse gases.

Jorge Daniel Taillant used a $100,000 infrared camera this year to investigate whether oil and gas installations in Vaca Muerta were leaking toxic gases. The grainy black-and-white thermal images that the ecology activist took confirmed what he suspected.

Although invisible to the naked eye, gases were detected seeping into the atmosphere from every one of the sites he visited. Particularly significant was methane, a potent greenhouse gas.

“Methane is leaking everywhere,” says Mr Taillant, executive director of the Center for Human Rights and Environment, a non-governmental organisation founded in Argentina and now based in the US. He says at least 5 per cent of Vaca Muerta gas produced is lost, often leaked intentionally when pressure needs to be released.

“There is a history of abuse as no one is controlling the sector,” says Mr Taillant. “And that’s not going to change any time soon — there is no credible environmental authority.”

Argentina’s ambitions to develop Vaca Muerta are ringing alarm bells among environmentalists, since it is considered to be one of the few remaining significant but mostly undeveloped energy reserves left on the planet.

As such, some experts say the development of Vaca Muerta and other comparable resources in Venezuela and Russia could jeopardise the UN 2016 Paris Agreement on climate change.

“If Argentina is to fully develop Vaca Muerta, it would blow a hole in the carbon budget,” argues Guy Edwards, co-director of Brown University’s climate and development lab in the US.

“It is one of the key reserves that, according to climate science, should stay underground if there is a chance of achieving the Paris goals,” he adds.

Most recognise it is unrealistic to expect Argentina to leave Vaca Muerta untouched. Its development is considered a national priority across the political spectrum, given its potential as an engine for economic growth. Javier Iguacel, the energy secretary, ridiculed the idea that Argentina might simply stop exploiting its hydrocarbons. “ Norway is not going to stop producing oil, and nor are we,” he says.

Argentina’s energy-related emissions are projected to increase 45 per cent between 2010 and 2030, according to the Berlin-based non-profit institute Climate Analytics, largely because of Vaca Muerta. Few expect Buenos Aires to meet its commitment to the Paris Agreement. Like every other country, its goals were not very ambitious to begin with, says Mr Edwards.

Instead, activists are pushing to mitigate the problems that can be controlled, with methane being “far and above the biggest issue from a climate perspective”, says Jonathan Banks, senior policy adviser at the Clean Air Task Force, a green energy advocate.

Although carbon dioxide stays in the atmosphere for as long as 1,000 years, methane begins to disappear after 20, during which time it is more than 80 times more potent than carbon dioxide in warming the climate, Mr Banks says.

Fortunately, he adds, methane is also one of the easiest and cheapest climate problems to deal with. That is why many countries and regions such as Canada, Mexico and California have focused on methane emissions when finding ways to meet Paris targets.

“Good maintenance, better equipment and installations, and just good practices can dramatically reduce emissions from these developments,” Mr Banks adds. “As far as climate change goes, it’s cheap stuff. It’s not a nuclear power plant, it’s tightening bolts.”

A study by the International Energy Agency found it is possible to reduce global methane emissions from the oil and gas industry by up to half at no net cost. That would be equivalent to shutting down every coal plant active in China today, the report says.

Yet even if Argentina succeeds in reducing methane emissions, there is the broader question of whether developing Vaca Muerta makes strategic sense, given how environmental concerns and technological advances are shaking up the energy sector.

The Inter-American Development Bank recently highlighted the danger of “stranded assets”, given that renewable energy is becoming increasingly competitive, warning that countries could be stuck with fossil fuel infrastructure that may become obsolete faster than expected. Others, such as Brown University’s Mr Edwards, say backing fossil fuels risks curtailing interest in renewable energy.

Argentina’s plan is to supply its own market with renewable energy and the gas from Vaca Muerta, which officials say is cleaner than other options. This is despite concerns from environmental lobbyists that leaking methane could be just as bad as the pollution from coal-fired power stations. If Argentina manages to fulfil its goal of becoming a net exporter of gas, this could even help China rely less on its dirty coal-fired power stations, indirectly aiding the environment, Mr Iguacel says.

“What’s the timeframe?” Mr Edwards asks. “If most countries are on some kind of path to decarbonising their energy sectors, do you really want to be pumping billions into an industry that is looking like it is on the way out in the coming decades?”

***

Unlocking the Potential of Argentina’s Oil and Gas Resources

(Chevron, Clay Neff, 23.Sep.2018) — ‘A stable and predictable business environment is essential to draw the investment capital needed,’ says Chevron Africa and Latin America Exploration and Production Company President Clay Neff.

Argentina is one of the few nations outside North America that has the potential to replicate its neighbour’s shale revolution.

The unconventional oil and gas resources in Argentina’s Vaca Muerta shale formation are world class. As such, their level of productivity can compete with any of the shale formations at the centre of the US oil and gas boom — and that includes the prime US area of the Permian basin in Texas.

The Argentine government has taken important steps toward creating an environment that encourages investment in Vaca Muerta.

We at Chevron believe that, if the right conditions continue, this large resource will bring additional investment, continued employment and economic growth to the country while helping to meet the growing global demand for affordable, reliable energy.

Vaca Muerta’s current production of about 160,000 barrels of oil equivalent a day could grow to almost 900,000 boe/d by 2024 if the country can attract $4bn of investment a year, according to consultancy Wood Mackenzie.

A stable and predictable business environment is essential to draw the investment capital needed to ensure Vaca Muerta reaches its potential. A key task for industry executives is to analyse how a country’s risk-reward calculus matches up against others competing for investment. It will be particularly important for Argentina’s government to adhere to free market principles.

Reducing drilling and production costs by increasing efficiencies is also important to attract more investment to Vaca Muerta. A key reason the shale revolution has seen such success in the US in the past few years is that companies have become highly efficient in their operations through process improvements and new technologies.

In partnership with Argentina’s national oil company, YPF, Chevron has made great strides in improving hydrocarbon recovery and lowering drilling costs at our Loma Campana joint venture in the Vaca Muerta shale. Horizontal wells and advanced completion techniques are leading to recoveries competitive with areas of the Permian basin.

Last year, our unit development cost, the cost per barrel, decreased 25 per cent compared with 2016. Furthermore, we expect costs to go even lower and close to the levels seen in areas such as Permian’s Midland basin.

Sustaining lower production costs will require better infrastructure. The Neuquén basin, where Vaca Muerta is located, has enough infrastructure to support the production levels of old as far as conventional oil and gas resources are concerned. However, more is required to achieve the large-scale development that will fulfil its much greater potential.

Significant steps in the right direction have been taken with the planned construction of new railroads and pipelines. But more is needed to ensure the area is internationally competitive.

Chevron, one of the largest foreign investors in the Vaca Muerta shale, continues to do its share to advance the development of this resource. In partnership with YPF, we have increased drilling from two to three rigs at our Loma Campana project. We are seeing continued improvement in performance thanks in part to the use of best practices from unconventional oil and gas areas in the US.

We are also looking at the Vaca Muerta shale in other parts of the Neuquén basin. In our El Trapial field, for example, we will be executing an eight-well appraisal programme to assess the potential of its unconventional reserves.

Argentina is on the right path to make the large-scale development of Vaca Muerta a reality. The responsible development of the extensive unconventional oil and natural gas resources has the potential to be an once-in-a-lifetime economic engine for the country.

Clay Neff is the president of Chevron Africa and Latin America Exploration and Production Company

***

Argentina’s Conventional Oil and Gas Attract Explorers

(Ft.com, Charles Newberry, 23.Sep.2019) — Fresh discovery indicates life beyond Vaca Muerta.

A few years ago, when the giant shale play of Vaca Muerta was starting to lure oil majors such as Chevron, ExxonMobil and Shell to Argentina’s south-west, a small company called Roch struck oil far away at the country’s southern tip.

The result surprised Ricardo Chacra, the company’s president. Roch had found oil in Tierra del Fuego, traditionally a source of natural gas, in a formation that had not been thought to hold much promise after more than a century of exploration in Argentina.

“We found something new,” Mr Chacra says. The find has fuelled optimism that Argentina’s mature conventional oil and gas reservoirs may have more to give. “When you drill into a mature field, you expect to drill into a squeezed lemon,” Mr Chacra says. “You take out what you can. But sometimes you find a virgin lemon.”

Argentina first struck oil early last century on the mainland of southern Patagonia, about 1,000km north of Tierra del Fuego, and exploration and production spread to the west and north-west. Argentina has the fourth-largest proven oil reserves in South America, trailing Venezuela, Brazil and Ecuador and equal with Colombia. But production and reserves sagged under the populist Peronist governments of 2003-15, as price controls and other regulation deterred exploration.

President Mauricio Macri has been removing such constraints to bring capital back to Argentina and his policies have attracted several oil majors. Most of them, however, are going to exploit Vaca Muerta’s shale, the source of unconventional oil and gas that is promising to make Argentina an energy powerhouse for the Americas as a whole.

While a handful of smaller companies has wanted to invest in Vaca Muerta, “it’s incredibly expensive”, says Fiona MacAulay, chief executive of London-based Echo Energy. Instead her company is exploring three conventional blocks in the south of the country at what she estimates to be a 100th of the cost of Vaca Muerta acreage.

Thanks to Argentina’s long history of oil activity, talent, services and infrastructure are available. Gas is delivered by pipeline to Buenos Aires and there are ports to handle oil storage and deliveries.

“The big conventional finds have already been made in Argentina,” says Hugo Giampaoli of local energy consultants GiGa. Even so, they have more to offer. Luciano Fucello, country manager for Houston-based services company NCS Multistage, estimates that only 20 per cent of Argentina’s oil has been recovered.

Daniel Kokogian, a director of Argentina’s Compañía General de Combustibles, says his company has more than doubled its gas output over the past two years in the south, and expects to find “a lot” of conventional oil to recover.

Such potential may not be enough to attract the big guns away from Vaca Muerta but a number of small independents are still taking a shot at a more conventional oil and gas approach.

Canada-based Madalena Energy, for example, is using the cash flow from conventional output to finance drilling in costly Vaca Muerta, says its chief executive, José Penafiel. He estimates that while it takes five to six years to generate a positive cash flow in Vaca Muerta, conventional projects pay back in two to three years.

For companies such as his, which are on far tighter budgets than the majors, he says, “you have to make sure you have the sufficient cash flow to stay in the game long enough to see the value creation of the bigger shale plays”.

An alternative is to push offshore. Several small UK companies, such as London-based Premier Oil and Rockhopper, of Salisbury, Wiltshire, in the south of England, have explored waters around the Falkland Islands that are claimed by Argentina. While still in the pre-development phase, these companies’ finds could spur bids for acreage in Argentine waters in a bidding round, the first in two decades, proposed for this year. “Pretty much every major I know is looking to bid in that offshore round,” Ms MacAulay says.

“Offshore is the last big question mark for exploration in Argentina,” says Mr Kokogian. Much hope is being pinned on waters about 300km-400km from the coast in depths of more than 1,500m. “We have to go to see what is there,” Mr Kokogian adds. “The prize could be big, or very big.”

***

Bolivia’s Incahuasi Field Producing 8 MMcm/d of Natural Gas

(Energy Analytics Institute, Ian Silverman, 21.Sep.2018) — Bolivia’s President Evo Morales says natural gas production at the Incahuasi field, discovered in 2004, is currently eight million cubic meters per day (MMcm/d).

Production at the field is expected to increase to 11 MMcm/d over the short-term with additional investments and then to 20 MMcm/d with further investments over the medium-to-long-term, reported the Bolivian daily newspaper La Razón, citing the official.

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Bolivia’s Morales Says $165 Mln In Investments Planned for Incahuasi Field

(Energy Analytics Institute, Ian Silverman, 21.Sep.2018) — Bolivia’s President Evo Morales announced details of investments destined to boost natural gas production at the Incahuasi field, located in the municipality of Lagunillas, south of Santa Cruz.

The investments include the following:

$29.5 million for expansion of plant capacity;

$25.6 million for interconnection of well ICS3;

$62.5 million to drilling the ICS5 well; and

$47.4 million in other investments, reported the daily Bolivian newspaper La Razón.

***

Alvopetro Announces Gas Treatment Facility Construction in Bahia

(Alvopetro Energy Ltd., 21.Sep.2018) — Alvopetro Energy Ltd. announced award of the contract for the construction of its Natural Gas Treatment Facility in the state of Bahia in Northeast Brazil.

This facility is the key strategic asset underpinning the company’s natural gas development project and will be the first 100% independently owned treatment facility in Brazil capable of delivering sales specification natural gas.

Natural Gas Treatment Facility Contract

Following an extensive competitive bidding process, Alvopetro has awarded a 10-year contract to Enerflex Ltd. to build, own, operate and maintain the Facility. Enerflex is a global leader in the natural gas industry providing integrated gas compression and processing solutions with an established Brazilian operating presence.

Under the terms of our agreement, Enerflex will construct the Facility using a mechanical refrigeration unit (the MRU) as the main processing element. The MRU technology was selected by Alvopetro based on the ability to manage a broader range of inlet natural gas specifications, making it ideal for accommodating the richer Gomo natural gas and natural gas from future discoveries and projects. Enerflex will construct and own the Facility providing operations and maintenance, while warrantying the delivery schedule and on-stream availability. The Facility is scheduled to begin commissioning in November 2019 and be operational by the end of 2019. Alvopetro will pay an integrated service fee for the Facility of $2.9 million per year over the 10-year term of the agreement.

Operational Update

The execution of this agreement for construction of the natural gas treatment facility, the key strategic asset in Alvopetro’s natural gas development in Bahia State in Brazil, builds off the momentum achieved over the past five months with the finalization of the unitization agreement for the company’s Caburé natural gas field in April 2018 and its long-term gas sales agreement with Bahiagás in May 2018.

The Caburé and Gomo natural gas assets in Brazil were evaluated by GLJ Petroleum Consultants as of May 31, 2018 with total proved plus probable (2P) reserves of 5.7 MMboe assigned with a before tax value discounted at 10% of $124.0 million.

Over the next few weeks Alvopetro expects to award the turnkey contract for the construction of the 11-kilometre transfer pipeline from the Caburé unit to the Facility. Alvopetro has secured land for the Facility, completed all field survey and initial permitting work, and application for construction of the pipeline and the Facility was submitted for regulatory approval in April 2018. The company’s Gomo natural gas project will also connect to the company’s 11-kilometer transfer pipeline via an 8-km transfer pipeline to be built in 2019, following stimulation of the 183(1) well planned near the end of 2018.

Alvopetro anticipates approximately $1.4 million of capital expenditures for the Caburé and Gomo development later in 2018 and $6 million in 2019, and are in the process of securing the remainder of the project financing for this development.

***

Brazil Presidential Hopeful Vows to Create 2 Million Green-Energy Jobs

(Efe, 21.Sep.2018) — Environmentalist Marina Silva said on Friday that if elected next month as Brazil’s president, she will create 2 million jobs through programs to promote use of renewable energy.

Silva, who finished third in the 2014 and 2010 contests, is currently at 7 percent in the polls ahead of the Oct. 7 election.

“We will work to fulfill the Paris Agreement (on climate change) and for that, we will launch some programs, such as Sun for Everybody” to reduce CO2 emissions, she told a gathering of environmentalists in Sao Paulo.

A day after appearing in a televised debate, Silva denounced “populisms of left and right” and renewed her plea for an end to the “old polarization” of Brazil amid the country’s most unpredictable electoral campaign in recent decades.

Polls show far-right candidate Jair Bolsonaro in the lead with 28 percent, followed at 19 percent by Workers Party nominee Fernando Haddad, a stand-in for jailed former President Luiz Inacio Lula da Silva, who was barred from running.

Marina Silva is in fifth place, trailing center-left hopeful Ciro Gomes (13 percent) and conservative Geraldo Alckmin (9 percent), but says that she won’t quit the race despite the discouraging outlook.

“If Gandhi had stopped believing India could be free, it would still be a colony today. If (Martin) Luther King had declined to fight racial discrimination in the United States, we would never have had Obama,” she said.

***

Solar Array Will Make Bogota Airport the Greenest in Latin America

(Efe, 21.Sep.2018) — El Dorado International Airport will become the greenest terminal in Latin America when an array of 10,369 solar panels enters operation next year, Colombian officials said Friday.

The installation of the panels began on Friday during an event headed by Energy Minister Maria Fernanda Suarez and executives from the companies implementing the project, Celsia and Odinsa.

“Since 2016, Celsia and Odinsa have worked together on a plan based on the best sustainability practices in the sector, and today, we are pleased to announce the start of the installation of the solar panels in El Dorado,” Odinsa president Mauricio Ossa said.

The panels, which will occupy an expanse the size of 20 Olympic swimming pools, are part of a wider plan to make the airport the greenest in the region.

Suarez said that this plan is itself part of a government initiative to promote projects that will help “break the barriers related to the use of energy.”

According to the president of Celsia, Ricardo Sierra, “in eight months, 12 percent of the electricity used by the airport will be based on solar energy.”

El Dorado International is the third-busiest passenger airport in the region and was named in March as the best airport in South America by the World Airport Awards.

***

Petrobras Bondholders Exchange $8.9 Bln Notes for Identical Paper

(Reuters, 21.Sep.2018) — Bondholders in Brazilian state-run oil firm Petroleo Brasileiro SA have accepted the exchange of about $8.9 billion of unregistered notes for identical paper registered with the U.S. Securities and Exchange Commission, the company said in a Friday securities filing.

Of $3.76 billion in 5.299 percent notes maturing in 2025, investors switched $3.51 billion into SEC-registered paper, and of $5.84 billion in 5.999 percent notes maturing in 2028, investors switched $5.4 billion into SEC paper, the firm said.

Petrobras, as the company is known, said the operation will not impact its debt profile. (Reporting by Gram Slattery Editing by Chizu Nomiyama)

***

Pemex, Consortium Sign First Ever Pre-Unitization Agreement in Mexico

(Pemex, 20.Sep.2018) — Pemex and the Block 7 consortium signed the first ever pre-unitization agreement in Mexico.

Petróleos Mexicanos (Pemex) and Talos Energy, as operator of the Block 7 Consortium, announced that Pemex and the international Block 7 Consortium (Talos Energy, Sierra Oil and Gas, and Premier Oil) signed a Pre-Unitization Agreement (PUA) related to certain tracts within the Amoca-Yaxche-03 allocation (assigned to Pemex as part of Round 0) and the contiguous Block 7 production sharing contract (assigned to the consortium by the National Hydrocarbons Commission as part of the first tender of Round 1). Both areas are situated in the offshore portion of Mexico’s prolific Southeast Basin.

This is the first Pre-Unitization Agreement ever to be signed in Mexico. Under the country’s recently revamped legal and regulatory framework, this two-year agreement enables information sharing related to the recently announced Zama discovery and its potential extension into Pemex’s neighboring block. It also sets a clear path for the signing of a Unit Agreement and Unit Operating Agreement in the event a shared reservoir is confirmed, as it establishes a defined process based on international practices to determine the resulting participation of each party in the potential overall development.

As a result of the agreement, both parties will immediately form a Working Group, with the objectives of maximizing operational and informational efficiencies, defining activities on each tract that optimize the collection of data in the area, and reducing any potential hazards, all to maximize the benefits for México. The Working Group will be comprised by legal and technical representatives from the member companies.

The PUA has previously been approved by the Ministry of Energy (SENER).

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Venezuela Doubles Down on Chinese Money to Reverse Crisis

(AP, 20.Sep.2018) — Venezuelan President Nicolas Maduro said Tuesday that new investments from China will help his country dramatically boost its oil production, doubling down on financing from the Asian nation to turn around its crashing economy.

Already a major economic partner, China has agreed to invest US$5 billion more in Venezuela, Maduro said following a recent trip to Beijing, adding that the money would help it nearly double its oil exports to China.

“We are taking the first steps into a new economic era,” he said. “We are on track to have a new economy, and the agreements with China will strengthen it.”

A once-wealthy oil nation, Venezuela is gripped by a historic crisis deeper than the Great Depression in the United States. Venezuelans struggle to afford scarce food and medicine, many going abroad in search of a better life.

Venezuela’s inflation this year could top one million per cent, economists predict.

After two decades of socialist rule and mismanagement, Venezuela’s oil production of 1.2 million barrels a day is a third of what it was two decades ago before the late President Hugo Chavez launched the socialist revolution.

Maduro says that under the deal, Venezuela will increase production and the daily export of oil to China to one million barrels a day.

However, China is taking a strong role in its new agreements. Over the last decade, China has given Venezuela US$65 billion in loans, cash and investment. Venezuela owes more than US$20 billion.

FINALISING OIL PLANS

The head of the National Petroleum Corporation of China will soon travel to Venezuela to finalise plans on increasing oil exports.

Russ Dallen, a Miami-based partner at brokerage Caracas Capital Markets, said the influx of money appears to be investments China will control.

“The Chinese are reluctant to throw good money after bad,” Dallen said. “They do want to get paid back. The only way they can get paid back is to get Venezuela’s production back up.”

Venezuela also agreed to sell 9.9 per cent of shares of the joint venture Sinovensa, giving a Chinese oil company a 49 per cent stake. The sale will expand exploitation of gas in Venezuela, the president said.

Maduro also recently launched sweeping economic reforms aimed at rescuing the economy that include a creating new currency, boosting the minimum wage more than 3,000 per cent, and raising taxes.

Economist Asdrubal Oliveros of Caracas-based firm Econalitica said he doubts that Venezuela can reach the aggressive goal to boost oil exports to China to one million barrels a day, given problems faced by the state corporation PDVSA.

“Increased production I see as quite limited,” Oliveros said. “The Chinese companies alone have neither the muscle nor the size to prop up production.”

***

Petrotrin Loses Board Member

(Trinidad and Tobago Newsday, Yvonne Webb, 20.Sep.2018) — Days before Petrotrin’s refining operation ceases and workers are retrenched, a member of the board who would have participated in the restructuring exercise, has become the first casualty of the plan.

An internal circular from the company to all employees confirmed board member Randhir Rampersad has ceased to be a member of the board of directors. No reason was given for his departure, causing speculation among some workers.

The memo, signed by Sharon Morris-Cummings, advised employees to amend the director listing on the company’s letterheads to only reflect the remaining members – chairman Wilfred Espinet, deputy Reynold Ajodhasingh, Anthony Chan Tack, Nigel Edwards, Joel Harding, Selwyn Lashley, Eustace Nancis and Linda Rajpaul.

The Oilfield Workers Trade Union (OWTU), which also received a copy of the memo yesterday, said this warrants a probe. A spokesman said it is unusual at this point in the process of restructuring, for a Board member to leave without a reason. The trade union said it raises a lot of questions as to whether Rampersad was fired or if he resigned; and why.

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Energy Chamber Gives Thumbs Up to MOU Between Guyana, Trinidad

(Energy Analytics Institute, Ian Silverman, 20.Sep.2018) — The Energy Chamber of Trinidad and Tobago announced its agreement with an Memorandum of Understanding (MOU) signed between the governments of Guyana and Trinidad and Tobago.

The MOU recognizes development of the energy sector contributes significantly to strengthening of economic and social development while improving the quality of life of the citizens of both countries. It also commits both governments to continue the development of cooperation mechanisms to foster the creation of an environment conducive to energy integration, on the basis of the principles of reciprocity, solidarity and respect for sovereignty, the chamber announced in an official statement.

Over the past decade and more, the Energy Chamber has engaged the government and the private sector in Guyana on numerous visits and in various bilateral and regional meetings. This engagement pre-dates the discovery of oil in Guyana and many of the chamber’s member companies have operations in Guyana going back many decades. Since the discovery of oil, this engagement has accelerated, as the chamber has sought to create mutually beneficial relationships between the private-sector of both countries, according to the statement.

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Energy Analytics Institute (EAI): #LatAmNRG

OPEC’s Decade of Turmoil Leaves Cartel Seeking a New Way Forward

(Bloomberg, Christopher Sell, 20.Sep.2018) — A global recession, both $140 and $30 oil, the U.S. shale revolution, a market-share war, and output cuts. OPEC’s 60-year history has rarely confronted a more challenging period than the past decade.

Now, instead of enjoying the higher prices resulting from 18 months of joint production cuts with a coalition of other major producers, the cartel faces new problems. A tweet-happy American president is ramping up geopolitical risk, renewed sanctions are hammering Iran’s exports, Venezuelan production is tanking as its economy collapses, and a political attack from Washington in the form of the NOPEC bill.

The alliance of exporters, spearheaded by Saudi Arabia and Russia, meets on Sunday in Algeria to consider its response to these challenges, while also taking the next steps to cement their alliance into 2019 and beyond. The Organization of Petroleum Exporting Countries response to crises over the past decade offer clues to the path it might take forward.

Global Crisis

Ten years ago, a banking crisis triggered a global economic downturn and a crash in oil prices as demand was obliterated. After peaking at a record $147.50 a barrel in July 2008, Brent crude fell as low $36.20 by year-end. Facing catastrophe, OPEC members put aside internal squabbles and agreed production cuts that were historic in their speed and scale — output fell 16 percent in just eight months. It worked, and prices began to recover in 2009 even as the world was mired in recession. After Chinese consumption came roaring back in 2010, the group was able to open its taps again as the cost of crude surged back toward $100.

Shale Boom

From 2011 onward, OPEC enjoyed years of riches and relative stability as oil traded near $100 a barrel, but a threat was emerging. A new generation of wildcatters from North Dakota to Texas was deploying innovative fracking technology to tap previously inaccessible shale oil deposits. OPEC was blind to the danger at first, then downplayed the risk even as some members raised the alarm — reasoning that shale was an expensive business and the cartel simply had to bide its time. By mid-2014, U.S. production had jumped more than 50 percent, crude prices were teetering on the brink and it was clear this new industry was reshaping the global market as OPEC stood by and watched.

Price War

By late 2014, there was a global oil glut, prices were collapsing and U.S. shale was showing no sign of slowing. Pressure increased on OPEC to respond as it had done in 2008 and cut output, but Saudi Arabia had a different plan. Driven by a combination of hubris and grievance — the kingdom thought it could easily vanquish high-cost shale and was sick of shouldering the burden of stabilizing prices alone — energy minister Ali Al-Naimi rejected requests from fellow members and opened the taps in a war for market share. At first it seemed to work — the price slump worsened and put immense financial pressure on OPEC, but also triggered a collapse in U.S. drilling and forced producers to close the taps.

Alliance with Russia

By mid-2016, Al-Naimi’s gambit looked like a failure. Crude still languished near $40 a barrel, putting some OPEC members on the brink of economic collapse. However, U.S. production was rising again after drillers made huge cost cuts and bloated crude stockpiles threatened to depress prices for years to come. A new Saudi minister, Khalid Al-Falih, was appointed and set about engineering a historic agreement including major producers from outside the group. By late 2016, he had secured the cooperation of 10 other nations, most importantly Russia, who agreed to remove 1.8 million barrels a day of supply from the market. Thanks to this deal, crude has staged a spectacular recovery from its bruising slump. In April, OPEC and its allies concluded they had achieved their goal of re-balancing the market and even higher prices beckoned.

U-Turn

If only it was that simple. OPEC’s moment of celebration faded fast as U.S. President Donald Trump threw a spanner in the oil market. Accusations on Twitter that the cartel was artificially inflating prices were followed by his renewal of sanctions on Iran’s exports and additional penalties that worsened the decline of Venezuela. Within a month, Saudi Arabia and Russia were signaling their intention to roll back the cuts, and in June they successfully pressured the rest of the group to agree. After 18 months of fairly harmonious supply restraint, some OPEC members were hastily reopening the taps, while others howled in protest from the sidelines.

What Next?

Where does OPEC turn now? Lessons from the group’s history point eastwards, toward a permanent partnership with Russia, said Harry Tchilinguirian, head of commodity strategy at BNP Paribas SA. It’s the most effective counterbalance to the shale revolution, which continues to reshape the market, he said.

“U.S. shale oil will be reaching the Atlantic Basin, and Asian markets alike, more regularly and in greater volumes as pipeline connections to the Gulf Coast and oil terminals are built or expanded,” Tchilinguirian said. This competitive challenge, along with demand dynamics that accompany the transition to cleaner energy, give OPEC an incentive to establish a permanent relationship with Russia and a growing number of non-members, he said.

Whether such an alliance would actually prove effective at managing the market in the long term is another matter, said Bob McNally, president of Rapidan Energy Group.

“The jury remains out as to whether this new Saudi-Russia led entity will succeed longer term at preventing future booms and busts or, like a number of other temporary ad-hoc cartels since oil’s earliest days, it will succumb to greed and indiscipline,” McNally said.

To contact the reporter on this story: Christopher Sell in London at csell1@bloomberg.net To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Rakteem Katakey

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Pemex CEO Launches Management System at Cangrejera Petrochemical Complex

(Pemex, 19.Sep.2018) — The CEO of Petróleos Mexicanos, Carlos Treviño Medina, launched the Management Assessment System at the Cangrejera Petrochemical Complex, located in the state of Veracruz that will help increase the production value of oil products processed in this center, through the identification of critical inventory items, oversight the plant´s operation, inputs and consumables for production, maintenance and financial performance.

Following up on the visits he has made to strategic Pemex facilities around the country, on Sept. 20 Treviño Medina toured the Cangrejera Complex and the “Lázaro Cárdenas” Refinery in Minatitlán, to oversee operations and get a first-hand account of the concerns and needs of the oil workers stationed in these work centers.

Regarding the Control Center and the Management Assessment System of Pemex Etileno (Pemex Ethylene), the CEO of the state-owned productive company pointed out that launching this system will allow the company to anticipate and manage changes promptly, solve problems and make better decisions using a single system that allows for real-time monitoring of all processes simultaneously from a single location.

He explained that the automated management system is based on information technologies that promote the coordination of efforts through the periodical exchange and analysis of electronic data providing the characteristics of various different analysis and decision-making systems in a single application. “With this system, we integrate key operating, logistics and financial information for online and prompt decision-making,” he said.

In recent weeks, Treviño Medina has kept up an intense schedule of visits to various strategic facilities to oversee their operation. During July and August, he visited the Storage and Dispatch Terminal (TAD) in the state of Querétaro and the Tanker Vessel Calakmul, which is docked at the facilities of the Integrated Port Management of Puerto Progreso, in the state of Yucatán.

He awarded acknowledgments to both facilities for their outstanding compliance with the Order and Cleanliness Campaign.

He also toured the Antonio M. Amor Refinery, located in Salamanca, in the state of Guanajuato, as well as the Dos Bocas Maritime Terminal in the state of Tabasco, where he learned of the progress made on the Command and Control Center that will safeguard this strategic facility.

He was recently at the “Antonio Dovalí Jaime” Refinery in Salina Cruz, in the state of Oaxaca, where he oversaw the progress of the ongoing reconstruction efforts of several facilities that were damaged during the earthquakes that occurred on September 2017.

During his visits, Treviño Medina has expressed his deepest recognition tothe oil workers, who, with their daily effort, commitment and capabilities, have turned Pemex into the largest company in Mexico and one of the most valued Latin American brand names.

“A time of great change is coming, but what we have sown here will endure forever, because Pemex is one of the foundations of Mexico thanks to the strength you have given this great company, which is a source of pride and wealth for the country,” he affirmed.

***

Pemex Performs Earthquake Drill at 140 Facilities Across Mexico

(Pemex, 19.Sep.2018) — At 13:16 hours, on September 19th a massive, country-wide earthquake drill started and 140 Petróleos Mexicanos facilities participated simultaneously. This country-wide drill is held in Mexico each year to commemorate the National Civil Defense Day and as a day to honor the victims of the devastating 1985 and 2017 earthquakes.

At the Petróleos Mexicanos Management Center (Acronym in Spanish: CAP) in Mexico City, over 12,000 employees were evacuated, 30 percent of whom work in the executive tower. Prior to the drill, a minute of silence was held to honor the victims of both earthquakes.

The drill was supervised directly by Pemex CEO Carlos Treviño Medina and the Corporate Director of Management and Services, Marco Antonio Murillo, from the Emergency Command Center of the company, which is located on the ground floor at CAP building B.

As part of promoting a culture of civil defense and disaster preparedness within the company, which is aimed to promote workers’ safety, the drill allowed for the assessment of current protocols and safety programs in Pemex facilities and test alarm systems, safety and firefighters´ equipment.

After three short bells, members of the safety brigade began to evacuate personnel using established routes to the emergency gathering points, using the slogan: “No running, no yelling, no pushing.”

Additionally, Fire and Rescue personnel from CAP performed a rescue drill for three “victims”, who were taken to the Medical Unit of the Management Center.

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Venezuela’s Retrogressing Economy — Exhibit 1, PDVSA

(Steve Hanke, Contributor to Forbes, 19.Sep.2018) — Two hallmarks characterize capitalist economies. Firstly, property is predominately in private hands. Consequently, goods and services are allocated via market mechanisms in which prices provide signals for businesses, workers, and consumers. Secondly, capitalist economies are highly capitalized. Indeed, the stocks of physical and human capital are relatively large in relation to the capitalist economies’ income flows.

On those two counts, Venezuela is retrogressing. With Chavismo, which commenced when Hugo Chavez took power in 1999, Venezuela has beaten a hasty retreat from anything that would qualify as “capitalist.” Today, it is clearly in the throes of a socialist-interventionist system.

With the transition to a socialist system, capital consumption becomes pronounced. Socialism consumes capital (read: eats seed corn). It fails to accumulate productive capital. And, this is why socialist systems retrogress into states of poverty. After all, capital consumption means that too much is consumed in the present at the expense of the future.

In his 1945 book The Economics of Peace, my professor, the great Ken Boulding, first presented his simple, but powerful, “Bathtub Theorem.” It is actually nothing more than a simple truism. The rate of accumulation is equal to the rate of production, less the rate of consumption. As Boulding put it, “Production may be likened to the flow of water from a faucet, consumption to the flow down to the drain. The difference between these two flows is the rate at which the water in the bathtub—the total stockpile of all goods—is accumulating.”

War, of course, drains the economic bathtub, as capital is destroyed (read: consumed). A transition to socialism also results in capital consumption—a lower level of water in the capital stock bathtub.

In Venezuela, the most important part of the economy is the state-owned enterprise PDVSA, the oil giant. Since Chavismo was ushered in, capital consumption has been the order of the day. Physical capital has been consumed at a rapid rate. In short, capital expenditures have been much lower than depreciation, plus amortization (properly measured). PDVSA hasn’t even been investing enough to maintain its capital stock, let alone add to it. Accordingly, the level of water in PDVSA’s bathtub has been falling. If that wasn’t enough, the quality of PDVSA’s remaining capital stock has also been reduced due to poor maintenance practices.

On top of the reduced PDVSA capital stock and its deteriorating quality, PDVSA has witnessed a dramatic drop in the stock and quality of its human capital. After the 2002 coup attempt on President Chavez, he purged thousands of “non-loyalists” from PDVSA and replaced them with political hacks. The purges have continued under President Maduro. In consequence, the stock of quality PDVSA management and workers has been depleted.

Not surprisingly, PDVSA’s production has fallen (see the chart below). Capital consumption has reduced its ability to produce. At present, production is at levels not seen since 1947. Even though it has the world’s largest reserves, Venezuela is producing less oil than the U.S. state of North Dakota, and the rate at which PDVSA is depleting its vast reserves is so slow as to render them worthless. In contrast to the major oil companies that extract a “median barrel” of oil from their reserves in 8-10 years, PDVSA takes 200 years to extract a median barrel.

The collapse in PDVSA’s production is a stunning indictment of the world’s worst oil company and of Venezuela’s socialist system. The bathtub is nearly empty.

Steve H. Hanke | Professor | Economist | Author | Currency Expert | White House Alum. Steve Hanke is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute. Over four decades Hanke has advised dozens of world leaders from R…

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

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Mexico’s New President Should Postpone Oil Auctions: Former Pemex Official

(Reuters, Collin Eaton, 19.Sep.2018) — A former Petroleos Mexicanos board member said on Wednesday Mexican President-elect Andres Manuel Lopez Obrador has enough political support to change the nation’s energy law and should postpone planned competitive oil auctions until the law is revised.

Fluvio Ruiz Alarcon said, following an address at the Baker Institute of Public Policy, the new administration would have the clout in congress to roll back portions of the nation’s landmark energy reforms that opened its oil fields to foreign investment.

Lopez Obrador, who takes office on Dec. 1, handily won Mexico’s presidential election in part by promising sweeping changes to Mexico’s energy industry. One of his aims is to have the state-owned oil company, known as Pemex, select partners instead of having them chosen in auctions run by Mexico’s National Hydrocarbons Commission (CNH).

“Pemex should choose its own allies,” said Ruiz. “The hydrocarbon law says that it is CNH that makes the bidding for the alliance of Pemex. They say, ‘Who wants to marry Pemex?’ They say, ‘Who offers more?’ We want Pemex to choose.”

He also said Mexico should postpone the competitive tenders for Pemex joint ventures scheduled for February until the law is changed.

The Feb. 14 oil auctions are the only ones scheduled and cover 46 onshore blocks in northern Nuevo Leon and Tamaulipas states, including the first shale areas.

The February tender would also feature seven opportunities to tie up with Pemex on onshore projects in the southern states of Veracruz, Tabasco and Chiapas.

The auctions were originally scheduled this year in the waning months of President Enrique Pena Nieto’s term, but were postponed by the National Hydrocarbons Commission (CNH), Mexico’s independent oil regulator which runs auctions and supervises the contracts.

When it announced the later date, CNH officials said they wanted to give interested oil companies more time to evaluate the projects. They also expressed a desire to work with the incoming administration of President Andres Manuel Lopez Obrador.

To date, 17 companies have begun the process of pre-qualifying for the auctions while another eight have done so for the Pemex joint ventures.

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More Than TT$1 Billion in Compensation for Petrotrin Workers

(CMC, 19.Sep.2018) — The Trinidad and Tobago g overnment Monday said the compensation package for workers being laid off by the closure of the oil refinery of the s tate-owned company, Petrotrin could be more than TT$1 billion (one TT dollar=US$0.16 cents).

But energy minister, speaking in the Senate, said while he would not want to provide an accurate figure, the workers’ representatives, the Oilfields Workers Trade Union and the Petrotrin board of directors will meet on Tuesday to discuss termination packages for the affected workers.

“I personally said the packages will cost upward of one billion dollars and if you take the collective agreement and you do some basic calculations, it is obviously more than one billion.

“But the government and the board of Petrotrin are willing to sit down with the union and go through all the numbers and possibly offer some enhancement to that package,” he told legislators.

Last month, the government announced that it would be closing down the oil refinery after indicating that it was losing an estimated two billion dollars annually.

The Keith Rowley administration said that more than 2,500 workers would be laid off as a result and Khan told the Senate that the figure was 4,700.

“The termination packages and the benefits therein are currently being negotiated by the board of Petrotrin and the Oilfield Workers Trade Union, and a meeting is carded for tomorrow. So, in a sense, I wouldn’t want to pre-empt or prejudge what package they will come up with.

“As to the number of employees that will be impacted, the total number of permanent employees that will be impacted from the Petrotrin restructuring is approximately 3,500 permanent workers and approximately 1200 non-permanent workers,” he told the Senate.

***

President Moise Wants Full Transparency in PetroCaribe Probe

(CMC, 19.Sep.2018) — President Jovenel Moise has called on newly installed Prime Minister Jean-Henry Céant to ensure that there’s total transparency in the investigation regarding the use of funds under the PetroCaribe initiative.

“As I explained in my message of Prime Minister Jean Henry- Céant (and) to the nation, and included in the statement of the general policy statement presented to Parliament, Prime Minister Céant must allow the nation to see clearly what has happened in the use of PetroCaribe funds,” Moise said during the inauguration of the new prime minister and his cabinet on Monday.

“The people are asking for explanations on the use of this money. The competent services of the State, notably the Central Financial Intelligence Unit, the Anti-Corruption Unit, the General Inspectorate of Finance will be mobilised on the PetroCaribe file.

“Besides the work of the Court of Auditors and Administrative Litigation, it is up to these technical services of the State to provide answers to the request for explanation of the population,” Moise said.

He said institutionally, the State must provide answers to the PetroCaribe file, adding “I ask people to remain calm and wait for the results of the work of the relevant institutions.

“We must avoid making amalgams so that honest citizens are not victims or unjustly indexed in the PetroCaribe file. The State is there to guarantee everyone the right to life and honour. This is why, at the institutional level, the State must treat the PetroCaribe dossier with the necessary rigour and give explanations to the citizens,” Moise said.

Concerns as to how the PetroCaribe funds have been used by previous governments have resulted in Haitians taking to the streets in protest at the billions of US dollars that have been allegedly squandered from the Venezuela oil programme.

Haitians have launched the “#petrocaribechallenge” campaign that has already resulted in the removal of the previous government headed by Jack Guy Lafontant.

Following Haiti’s 2010 earthquake, Caracas forgave US$295 million in debt that Port-au-Prince had accumulated since joining the PetroCaribe programme in 2006. However, since the quake the debt has ballooned.

PetroCaribe is an oil alliance of many Caribbean states with Venezuela to purchase oil on conditions of preferential payment. The alliance was launched in 2005 and in 2013 Petrocaribe agreed to links with the Bolivarian Alliance for the Americas, to go beyond oil and promote economic cooperation.

A Haitian Senate Commission investigative report last year alleges a significant amount of money had been embezzled under the programme.

In his address, Moise said that in search of a better being, the Haitian people demand more justice.

“More social justice, more economic justice, more transparency and rigour in the management of public funds. The Haitian youth wants to recover faith, confidence in the future. Accountability must now be a principle that cannot suffer from any derogation. There can be no excuses, no extenuating circumstances for those who have mismanaged state resources.”

He warned that no development is possible without justice, and that the greatness of a nation depends on the quality of justice.

“Justice must act independently. I ask your government to facilitate a fair and equitable distribution of justice.”

Moise said that Haiti “has everything it needs to live up to the glorious history forged by the heroes of 1804” and that by taking the right steps, “we can sustainably and positively change the living conditions of the population”.

He told the new government it must succeed in a number of areas including signing a pact with the private sector to promote jobs and growth, a sustainable solution to the minimum wage issue, as well as enabling the country to have universal and compulsory medical insurance.

Moise said there was also need to accelerate ongoing work in the field of infrastructure as well as to find the appropriate financial mechanism for the construction of the missing classrooms, so that all school-aged children attend school in good conditions and remain there.

He also called on the new government to supervise and continue the work undertaken in the framework of the reform of the State and strictly apply the decree on the reduction of the lifestyle of the State, take appropriate measures to resolve social crises in neighbourhoods and improve the working conditions of the security forces and ensure that the new army under construction is mobilized in the vast site of environmental rehabilitation.

***

New Corruption Scheme Revealed at PDVSA

(Prensa Latina, 19.Sep.2018) — The Public Prosecutor”s Office (MP) has revealed today a new corruption scheme in the state-run Petroleos de Venezuela (PDVSA), which has caused losses of 18,500,000 dollars to the main industry of the country.

In a press conference from the MP headquarters in Caracas, Attorney General Tarek William Saab reported that there have been 17 such cases at the oil company over the past year, exposed as part of the state-sponsored anti-corruption campaign.

He noted the authorities have requested nine arrest warrants against managers and officials linked to the fraudulent purchase of 400 aluminum tanks for transporting fuels, without the appropriate technical specifications for their use in Venezuela.

During a national electrical emergency in 2010, it was decided to purchase by direct award to the Mexican entity Trailers and Aluminum Tanks of 300 cisterns, aimed at completing the fleet of the National Transport Company, subsidiary of PDVSA.

This acquisition would also serve to strengthen electric service, as they would be used to provide diesel to the country’s thermoelectric plants, said Saab.

He pointed out that PDVSA paid nearly 19,000000 dollars for 234 cisterns, of which 168 were delivered and 66 were pending, while these deposits did not fulfill the technical specifications required by PDVSA and a new contract had to be made to adapt them.

The attorney general stressed that through the investigations carried out by the Public Ministry, it was determined that the contracted adaptation was never carried out and the cisterns were unusable for their proper purpose.

Likewise, the MP is investigating another contract with the Mexican company Armadora Carrocera Caban, which does not physically exist, according to the results of the investigations.

During the last year, the Public Prosecutor’s Office prosecuted 90 PDVSA officials linked to several corruption schemes.

***

Aker Solutions Wins Major Services Contract in Brazil

(Aker Solutions, 18.Sep.2018) — The Campos Basin extends approximately 100,000 square kilometers. The three-year contract is valued at more than BRL 250 million and includes an option for a two-year extension.

Aker Solutions will be renovating, repairing and upgrading offshore production units for Petrobras’ Campos Basin Operational Unit (UO-BC). The contract will also allow Aker Solutions to demonstrate its value as a full-service provider, and manage the yard where replacement parts and other equipment will be fabricated.

“We are pleased to expand our business in Brazil, a key international market,” said Luis Araujo, chief executive officer of Aker Solutions. “This is the second big contract we have signed after entering the maintenance and modification market in Brazil, reinforcing the importance of having a complete portfolio and being able to provide an integrated solution from concept to decommissioning.”

The company will execute the work from its C.S.E. Mecânica e Instrumentação Ltda (C.S.E.) services base in Macaé, Rio de Janeiro. Aker Solutions acquired a majority stake in C.S.E. in December 2016. Earlier this year Petrobras named C.S.E. the best supplier for onshore and offshore maintenance and HSSE, highlighting its focus on customers and excellence. The company competed against 5,000 suppliers and won 4 of 21 awards.

The work starts in October 2018, with final deliveries scheduled for 2021.

The contract will be booked in the third quarter 2018.

***

YPF Announce Settlement Of Previously Announced Tender Offer

 

(YPF, 18.Sep.2018) — YPF S.A. announced settlement of the previously announced tender offer to purchase for cash any and all of its outstanding 8.875% Senior Notes due 2018.

The Tender Offer expired at 5:00 p.m., New York City time, on September 17, 2018. At the Expiration Date, valid tenders had been received with respect to U.S.$176,245,000 of the U.S.$452,198,000 aggregate principal amount of the outstanding Securities.

YPF has accepted for payment all Securities validly tendered prior to the Expiration Date. On September 18, 2018, such tendering holders will receive the purchase price in the amount of U.S.$1,005 for each U.S.$1,000 principal amount of Securities tendered, plus accrued and unpaid interest to, but not including, the date hereof.

Itau BBA USA Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as the dealer managers for the Tender Offer. The information agent and depositary is D.F. King & Co., Inc. Copies of the Offer to Purchase, Letter of Transmittal and Notice of Guaranteed Delivery, with respect to the Tender Offer, and related offering materials are available by contacting D.F. King at (800) 628-8509 (toll-free), (212) 269-5550 (banks and brokers) or www.dfking.com/ypf.

Questions regarding the Tender Offer should be directed to Itau BBA USA Securities Inc.

by telephone at +1 (888) 770-4828 (U.S. toll free) or + 1 (212) 710-6749 (collect) or Merrill Lynch, Pierce, Fenner & Smith Incorporated by telephone at +1 (888) 292-0070 (U.S. toll free) or +1 (646) 855-8988 (collect).

***

#LatAmNRG

Nicolas Maduro Says Venezuela to Double Oil Production

Venezuela’s President Nicolas Maduro. Source: PDVSA

(Energy Analytics Institute, Piero Stewart, 18.Sep.2018) — Venezuela, the struggling OPEC producer, is now planning to double its production of crude oil, according to statements from the country’s president.

“With revolutionary spirit we will double the productive capacity of PDVSA,” announced Venezuela’s President Nicolas Maduro during a press conference in Caracas broadcast on national television.

Venezuela – reeling in political, economic and humanitarian crises and suffering from the world’s highest inflation – continues to struggle to stop further declines in its oil production amid a near complete collapse in oil sector investments.

According to data in OPEC’s Monthly Oil Market Report, published on September 12 and citing data based on secondary sources, the South American country’s oil production fell 2.9 percent to 1,235 thousand barrels per day (Mb/d) in August 2018 compared to 1,272 Mb/d in July 2018.

***

Venezuela’s Maduro Says Relationship With China ‘Win-Win’

(Energy Analytics Institute, Piero Stewart, 18.Sep.2018) — In terms of bilateral cooperation, Venezuela and China are seeking a ‘win-win’ scenarios.

“Relations with China are very clear and have been framed around mutual respect and under the premise of win-win, which has allowed for the reactivation of financial funds, and revival of sustained development,” announced Venezuela’s President Nicolas Maduro during a press conference in Caracas broadcast on national television.

***

Expert Says Closure of Petrotrin Refinery Will Decimate Trinidad

(Trinidad Express, 17.Sep.2018) — Former Director of Energy Industries at Industrial, Jim Catterson, says closure of the Petrotrin refinery makes no economic sense. He said the closure would decimate south Trinidad.

Catterson said unemployment would rise and poverty would spread across the nation.

Speaking at a press conference at the Oilfield Workers Trade Union (OWTU) headquarters in San Fernando, Catterson said the Government must consider the proposal presented by the OWTU last week.

“Tens of thousands of people would be unemployed. These people would no longer contribute to the national economy through taxes. They would no longer contribute to the national economy. There would be a downward spiral of the economy into poverty,” he said.

Catterson said it was important that the government have further discussion with the OWTU and Petrotrin management.

“Get around the table and discuss the future of this industry and economy. It is the only way to resolve this situation. Find a way for the country to survive,” he said.

Catterson questioned why a government wanted to close the refinery and import petroleum products.

“Where would you get the foreign exchange to buy the things you need? And when you can produce these products yourself,” he said.

Catterson said oil workers were highly skilled, educated and knowledgeable and should be paid accordingly.

But he dismissed reports by Energy Minister Franklin Khan that salary and wages totalled 52 per cent of Petrotrin’s operating cost.

He said, “Salary and wages is under 10 per cent of the company’s operating cost. Oil workers are highly skilled, educated and handles equipment worth millions and potentially dangerous. So they should be highly paid.”

IndustriALL Global Union is a global union federation representing more than 50 million working people in more than 140 countries, working across the supply chains in mining, energy and manufacturing sectors at the global level.

***

Petrobras to Boost Oil Output in 2019, Cut Debt $10 Billion – CFO

(Reuters, Devika Krishna Kumar, Simon Webb, 17.Sep.2018) — Brazil’s state-run oil giant Petróleo Brasileiro SA aims to raise output as much as 10 percent to around 2.3 million barrels per day (bpd) in 2019 and cut net debt by $10 billion (7.62 billion pounds), Chief Financial Officer Rafael Grisolia told Reuters.

The world’s most indebted oil company is on course to reduce debt to $69 billion by the end of this year despite falling short of its $21 billion asset sales target, Grisolia told Reuters in an interview in New York late Friday.

The firm has significantly reduced its net debt from the $106 billion it had accumulated in 2014 to finance development of massive deepwater Atlantic oil fields. Then, Petrobras lost investor confidence as oil prices fell, a corruption scandal engulfed the company and losses from government fuel subsidies mounted.

Petrobras aims to cut net debt by a further $10 billion in 2019 to reach a ratio of 2 times net debt-to-EBITDA, he said. The firm will continue cutting debt until the ratio hits 1-1.5 times, he said, which would put it in line with global oil majors.

“If you look at our direct competitors and peers like Chevron, Exxon and BP, we need to look for a more light capital structure,” Grisolia said.

The firm should reach a ratio of 1.5 in 2020 as part of its next five-year business plan, he said, although that would depend on international oil prices and other variables such as foreign exchange rates.

Over the next 5-6 years, once the firm had achieved debt restructuring targets, Petrobras may consider foreign investments to facilitate exports of rising output from the development of the prolific deepwater pre-salt fields, he said.

The firm may invest in terminals abroad to receive liquefied natural gas (LNG), he said. That would help Brazil export more gas, he added.

Exxon Mobil, BP and Royal Dutch Shell RDSA.L are among firms that plan to invest billions of dollars in developing deepwater Brazilian energy reserves in coming years. Brazil is expected to account for a large share of the rise in global oil and gas output from non-OPEC countries.

OIL PRICES HELP

Oil production is expected to rise by about 8-10 percent next year from about 2.1 million barrels per day (bpd) in 2018, Grisolia said. That should contribute to increased revenue, he added.

Crude prices rallied to three-and-a-half year highs this summer as global supplies tightened, leading to higher fuel prices.

Higher oil prices than the company estimated in its 2018 budget have raised revenue and allowed Petrobras to hit its debt reduction target, he said. That compensated for the $7 billion from asset sales that Petrobras expected to receive this year, he added.

The company has already received $5 billion from sales and will receiving another $2 billion before the end of the year, he said.

“All the divestment and cash from divestment will help, but we don’t necessarily need them to achieve the target of $69 billion by the end of the year,” he said.

FUEL SUBSIDIES

Earlier this year, a nationwide truckers’ protest over rising diesel prices paralysed Latin America’s largest economy and forced the government to lower diesel prices through tax cuts and subsidies.

That hurt Petrobras’ share price as investors worried the firm would again lose cash to subsidize fuel sales.

The firm expected to receive 2 billion reais to 2.5 billion reais from the country’s oil regulator within two weeks to compensate for subsidies, Grisolia said.

Subsidies have made it less profitable for the private sector to import diesel, he said, but some imports continued and he did not foresee any fuel shortages.

“Although the volume of imports to Brazil is lower, they are not zero, they are happening.” he added. “We do recognise that margins are tighter.”

Petrobras is running refineries close to maximum capacity and importing some fuel, he said.

Petrobras has a gasoline hedge in place to cushion the impact of fuel price volatility and is considering a diesel hedge. The cost of the hedge was marginal, Grisolia said.

Banks that Petrobras typically works with for currency operations were executing the fuel hedge, he said, such as Goldman Sachs, Bank of America, Bank of Brazil and Citibank.

Petrobras has hosted meetings with economic advisors to presidential candidates ahead of wide-open elections next month. Grisolia said talks had been positive, but declined to say which teams he had met or comment on their strategies.

Candidates have different plans for the company and the role of the private sector in energy, bringing some uncertainty to investors.

***

Petrobras Aims To Cut Debt Further, Boost Oil Production In 2019

(OilPrice.com, Tsvetana Paraskova, 17.Sep.2018) — Brazil’s state-run oil firm Petrobras plans to shave another US$10 billion off its huge net debt and increase oil production by as much as 10 percent to 2.3 million bpd in 2019, chief financial officer Rafael Grisolia told Reuters in an interview published on Monday.

Petrobras benefited from the rising oil prices and reported in early August a thirty-fold yearly jump in its second-quarter net income, which also beat analyst expectations.

The heavily indebted company—the world’s most indebted oil company—cut more of its debt in the first half this year. Petrobras’ net debt stood at US$73.662 billion at the end of June 2018, down by 13 percent compared to the end of December last year.

Petrobras is on track to cut that debt to US$69 billion by the end of 2018, despite the fact that it is lagging behind with its US$21-billion asset sales goal, Grisolia told Reuters in New York.

Next year, the company expects to further reduce its net debt by US$10 billion, according to its CFO. The state-held oil firm, which has started to emerge from the huge corruption scandal, has plans to reach a net debt-to- earnings before interest, tax, depreciation, and amortization (EBITDA) ratio of 2 times in 2019, and to continue slashing debt to reach the net debt-to-EBITDA ratio of 1-1.5 times, on par with the ratios at most international oil majors.

At end-June, Petrobras’ net debt/adjusted EBITDA ratio was 2.5 times.

Petrobras currently aims to hit the 1.5 times net debt/EBITDA ratio in 2020, but reaching the goal would hinge on the price of oil and other variables, including foreign exchange rates for the Brazilian reals, Grisolia told Reuters.

In terms of oil production, the company aims to increase output by between 8 percent and 10 percent in 2019 from the expected 2.1 million bpd production this year, the manager said.

Referring to the early October wide-open presidential elections in Brazil, Petrobras has held meetings with economic advisors to candidates, Grisolia told Reuters, but declined to comment on discussions with the candidates’ representatives or on their energy policy strategies.

***

Bolivian Government Approves Bioethanol Made with New Blend of Additives

(Efe, 16.Sep.2018) — Bolivia gave the green light to the massive production of bioethanol to replace the importation of additives for gasoline and diesel fuel in accord with a law signed by President Evo Morales.

Morales signed the Law on Vegetable Derived Additives on Saturday during a ceremony in Minero, a city in the eastern region of Santa Cruz, attended by representatives of the main business and industrial unions, along with workers from the sugar cane sector.

The president emphasized that the promulgation of the measure is “something historic” because farmers and industry have waited 30 years for the project to come to fruition.

“Ethanol is not only for the sugar cane growers, ethanol is for everyone. We all win, the state, the agroindustrial sector and thus we’re building the new Bolivia with economic growth,” Morales said.

The law establishes the legal framework allowing production, storage, transport, marketing and mixing for additives of vegetable origin with an eye toward progressively replacing the importation of additives for fuels, thus guaranteeing the country’s food and energy security.

Calculations are that ethanol production will result in growth in the gross domestic product (GDP) of 0.90 percent in one year and 4.4 percent in the agricultural sector in particular, the president said.

The project will allow the government to save about $20 million the first year by reducing the subsidy for fuels and those savings will total $130 million by 2025, Morales said.

The president noted the investments made in several sugar mills before the promulgation of the law, a situation that – in his judgment – shows the confidence of the private sector in the government.

Last Thursday, Mariano Aguilera, the chairman of the board of the Guabira sugar mill, said in a press conference that he was pleased that the government was moving ahead to enact legislation for the production, sale and blending of vegetable-derived additives.

Aguilera said that once Morales signed the legislation into law, the mill could immediately enter into contracts with state energy company YPFB and start distributing bioethanol so domestic consumers could begin using fuels with the new blend.

YPFB has called on domestic sugar mills to produce some 80 million liters of bioethanol in the first year, Aguilera said, adding that that volume could increase steadily in subsequent years.

Located in Montero, a town in Santa Cruz, Guabira is made up of 1,670 shareholders (sugar cane entrepreneurs), 1,400 industrial workers and more than 1,526 cane growers.

Aguilera said the mill planned to invest $40 million over the next two years to take on the “great challenge” of bioethanol production.

The mill has already produced more than 6 million liters of ethanol that is in its warehouses and ready to be delivered to YPFB when required, he said.

***

EP Petroecuador Detects Illegal Connection at Shushufindi Refinery

(Energy Analytics Institute, Piero Stewart, 15.Sep.2018) — EP Petroecuador detected a clandestine connection in the liquids line of the northern section of the gas capture station of the Shushufindi Refinery.

Technical personnel at the company immediately implemented a contingency plan to eliminate the illegal connection, which was detected on September 15, 2018, reported the state oil company in an official statement on its website.

***

 

Bolivia’s Morales Says Electricity Rates Will Not Rise

(Energy Analytics Institute, Ian Silverman, 15.Sep.2018) — Read my lips. Well, it wasn’t exactly like that.

However, Bolivia’s President Evo Morales clarified that electricity tariffs in the small land-locked South American county would not rise.

Domestic consumption is around 1,500 megawatts, while supply is around 2,100 megawatts, reported the daily La Razón, citing Morales.

No further details were revealed by the daily.

****

Barbados Hunting New Suppliers Following Closure of Petrotrin Refinery

(Jamaica Gleaner, 14.Sep.2018) — Barbados says it is holding discussions with a number of suppliers to replace the energy arrangements it had with oil refinery Petrotrin.

The refinery, based in Trinidad & Tobago, is locking down operations, a measure it blamed on increasing financial losses. The closure has led to the retrenchment of more than 1,700 employees.

In a statement on Wednesday, the Barbados National Oil Company Limited, BNOCL, said it currently imports gasolene from and sells its crude oil to Petrotrin, while diesel and fuel oil are sourced extra-regionally. It said kerosene is imported by the oil companies Sol and Rubis.

BNOCL said that at the time of the Petrotrin announcement regarding the closure of the refinery, it was exporting 260,000 barrels of crude oil annually to the Trinidad refinery and importing 60,000 barrels of gasolene on a monthly basis.

It said the annual contract with Petrotrin entailed the exchange of the crude oil for gasolene, which aided in the reduction of the foreign exchange cost, as the value of the crude offset the outlay for the gasolene.

BNOCL said its storage capacity for gasolene is 80,000 barrels. However, as of Wednesday, September 12, its gasolene stock was at 53,582 barrels, “which is enough inventory for 25 days”.

The inventory is expected to rise to 38 days’ supply, when Petrotrin delivers another 30,000 barrels of gasolene on Saturday, September 15.

BNOCL expects to receive its final shipment from Petron over the period September 24-28 of around 30,000 to 35,000 barrels.

Altogether, assuming the shipments arrive as scheduled, the oil company expects to have enough inventory to supply local needs to November 5, assuming a “usage rate of 2,000 barrels a day.”

The Ministry of Energy and Water Resources said that through BNOCL, it has been in discussion with a number of suppliers with a view to employing a similar arrangement to that with Petrotrin.

“The goal is to ensure that this country has a consistent supply of gasolene at an affordable price, while securing a market for Barbados’ crude oil. BNOCL has never had a stock-out of petroleum products and always has adequate inventory to service Barbados, and is ever mindful of the need to do so, particularly during the hurricane season,” the ministry said.

The Mia Mottley-led government also sought to assure Barbadians that “despite the closure of the Petrotrin refinery, there will be no shortage of gasolene in Barbados,” saying it was keeping on top of the situation.

***

Argentina Owes Bolivia $250 Million for Natural Gas Sales

(Energy Analytics Institute, Ian Silverman, 14.Sep.2018) — Argentina owes Bolivia $250 million, which corresponds to two-months of natural gas sales.

“Hopefully they can honor the debt,” reported the daily newspaper La Razón, citing Bolivia’s Hydrocarbons Minister Luis Alberto Sánchez.

***

PetroTal Announces Grant of Performance Share Units, Deferred Share Units

(PetroTal, 14.Sep.2018) — PetroTal Corp. granted performance share units (PSUs) and deferred share units (DSUs) to certain officers and directors of the company.

PetroTal granted an aggregate of 3,901,666 PSUs to certain officers of the company in accordance of the provisions of the company’s PSU plan. The PSUs will vest annually over three years and each PSU will entitle the holder to acquire between zero and two common shares of the company (Common Shares), subject to the achievement of performance conditions relating to the company’s total shareholder return, net asset value and certain production and operational milestones.

PetroTal also issued an aggregate of 650,000 DSUs pursuant to the company’s DSU plan to the independent directors of the company. The DSUs vest immediately and may only be redeemed upon a holder ceasing to be a director of PetroTal. No Common Shares will be issued under the DSU plan; all DSUs granted are settled in cash.

Further details regarding the PSU plan and the DSU plan are set out in the management information circular of the company dated April 30, 2018, which is available on SEDAR at www.sedar.com.

***

Ecopetrol: Fracking Likely In Colombia, Business Prospects Are Positive

(Seeking Alpha, Dylan Quintilone, 14.Sep.2018) — Ecopetrol SA is a Colombian oil and gas company with headquarters in Bogotá, Colombia. The company is listed by Forbes as the 300th largest enterprise by profits and is the second oil company in South America behind Petrobras from Brazil.

Ecopetrol’s operations are divided between exploration and production; Refining, Petrochemical & Biofuels, Oil Transportation and Logistics. The company has around 8,500 kilometers of transportation pipelines which commercializes crude oil and all kinds of derivatives such as fuel oil, aviation gasoline, cracked naphtha, virgin naphtha, polypropylene resin, and masterbatches. The company offers refined and petrochemical products to multiple markets and has a large presence in Colombia.

The company has almost ten thousand employees and is experiencing a rising period of revenues due to the increase in oil prices in the first half of 2018. Ecopetrol has increased production in recent years and the company produces roughly 730 million barrels per year, which is an 83% production increase over 2010 levels. The company expects to surpass the billion barrel mark within the coming years because of additional discovery of oil reserves of the northern coast of Colombia and new exploration/extraction methods.

Fracking in Colombia? Most likely

Fracking in Colombia has been a big debate since the recently inaugurated president Ivan Duque was proposing the possibility during his election campaign. Upon securing the presidency, his fracking project is moving forward with a majority of the senators in the Colombian Congress who are collaborating with him for the proposal. The fracking issue has long been debated and now with the government reaching a consensus and backing the fracking industry, the approval for the controversial extraction method is likely.

***

Argentine President Inaugurates Biogas-Fueled Electric Plant

(Efe, 14.Sep.2018) — President Mauricio Macri inaugurated on Friday a biogas-fueled electric plant in the Argentine province of Cordoba that he said will supply energy to 12,000 households and generate “quality jobs.”

“A country can’t grow without energy,” he said during the ceremony at the plant in Rio Cuarto, which he described as one of 150 renewable-energy projects under way nationwide.

Within a few years, Macri said, Argentina will be able to export gas and oil while benefiting from “affordable energy to add value” to commodities.
“This is the country we all want, a country that grows from creating quality jobs,” the president said.

Before inaugurating the Rio Cuarto plant, Macri visited a new wind farm in Achiras, 70 kilometers (43 miles) away, equipped with 15 turbines generating 48 MW of power, enough to supply energy to 47,000 homes.

***

Snapshot: Kosmos Energy Explores New Basin Potential in Suriname

(Energy Analytics Institute, Aaron Simonsky, 14.Sep.2018) — Kosmos Energy continues to explore new basin potential outside of Africa.

In December 2011, Kosmos secured a position offshore Suriname, marking the company’s first portfolio expansion beyond Africa.

In Suriname, located in the north-eastern portion of South America, Kosmos participates in two blocks: Block 42 and Block 45

“The extension of the emerging oil petroleum system recently opened in Guyana, provides up to five independent plays and multi-billion barrel potential,” announced Kosmos in an investor presentation on its website.

Drilling was to have commenced in the second quarter of 2018, according to the company.

***

PetroTal Seeks Exploration Partner for the Osheki Prospect in Peru

(Energy Analytics Institute, Aaron Simonsky, 13.Sep.2018) — PetroTal Corp. is seeking joint venture partners to drill the first exploration well by the fourth quarter 2019 or early 2020.

“We are currently engaging potential joint venture partners to drill the exploration prospect and expect the full data room to be open as soon as September 15, 2018,” reported PetroTal in an official statement, citing its Vice President of Asset Development Chuck Fetzner.

The announcement from the company comes after it reported an independent evaluation of the prospective resources with respect to the Osheki prospect in Block 107, located in the Ucayali Basin of eastern Peru. Drilling permits for the prospect have already been approved.

Calgary-based PetroTal id focused on developing and exploiting the Bretaña oil field, as well as evaluating the Osheki prospect in Block 107, which could provide significant growth for the company.

Osheki Resource Upgrade

Based on an independent assessment completed by Netherland Sewell & Associates, Inc. (NSAI), with an effective date of June 30, the Osheki prospect is estimated to have 534 million barrels (MMbbls) of mean prospective recoverable resources. This estimate is based on a recovery factor of 30 percent of the estimated 1.78 billion barrels of mean prospective original oil in place (OOIP), using maps generated from seismic acquired in 2007 and 2014. The mean risked prospective resources figure for the Osheki prospect is 85 MMbbls.

“Today’s increase in prospective resources at Osheki is a milestone in the development of our asset portfolio in Peru. It firmly endorses the quality of the Osheki prospect, which also contains further potential material upside from additional leads in Block 107,” said PetroTal President and Chief Executive Officer Manolo Zuniga in the company statement.

 

He continued: “This important development follows the Bretaña oil field successfully coming online ahead of schedule in June, with the remaining long-term testing equipment installation on schedule to allow us to increase production from the current ~1,000 bopd to over 2,000 bopd by the end of October. Bretaña has a clear path to increasing production to above 10,000 barrels of oil per day by 2020.”

The prospect was de-risked with a new 3D geologic model supporting Cretaceous age reservoirs with high quality Permian source rocks. Block 107 has four additional leads that, with Osheki, could contain a total of 4.58 billion barrels of recoverable resource in the high estimate case.

“In a report commissioned prior to PetroTal taking on the assets, it was estimated there was 313 MMbbls of mean recoverable prospective resource for the Osheki prospect. In NSAI’s June 30, 2018 report, the estimate has increased by more than 60 percent. When we combined the two seismic programs we were able to see closure in as many as three different horizons. The Osheki prospect is a sub-thrust play similar to the Cusiana complex in the Llanos Foothills of Colombia,” concluded Fetzner.

***

IEA Warns of Higher Oil Prices as Iran and Venezuela Losses Deepen

(Bloomberg, Grant Smith. 13.Sep.2018) — The International Energy Agency warned that oil prices could break out above $80 a barrel unless other producers act to offset deepening supply losses in Iran and Venezuela.

Iranian crude exports have fallen significantly before U.S. sanctions even take effect, the IEA said in a monthly report. The Middle Eastern nation will face further pressure in coming months and the economic crisis in Venezuela is pushing output there to the lowest in decades. It’s uncertain whether Saudi Arabia and other producers will fill any shortfall, or how far they’re able to, the agency said.

“Things are tightening up,” said the Paris-based IEA, which advises most major economies on energy policy. “If Venezuelan and Iranian exports do continue to fall, markets could tighten and oil prices could rise” unless there are offsetting production increases elsewhere, it said.

Oil climbed to a three-month high above $80 a barrel in London on Wednesday as fears of a supply crunch eclipsed concern about the risks to demand such as the U.S.-China trade dispute. While the Organization of Petroleum Exporting Countries and allies including Russia pledged to boost supply, the IEA said it remains to be seen how much will be delivered.

Saudi Arabia lifted output by 70,000 barrels a day to 10.42 million last month, but that remains “some distance from the 11 million barrels a day level that Saudi officials initially suggested was on the way,” the IEA said.

While the agency warned that “there is a risk to the 2019 outlook” for demand from challenges in emerging markets such as currency depreciation and trade disputes, it kept forecasts for consumption unchanged.

In the meantime, supply risks dominate. Oil inventories in developed economies are already below-average and will decline further in the fourth quarter, the IEA predicted.

Venezuela, which is pumping at just half the rate it managed in early 2016, could see its output slump another 19 percent to 1 million barrels a day this year as infrastructure deteriorates and workers flee, the agency predicted.

Iranian production has already fallen to the lowest since July 2016, at 3.63 million barrels a day, as buyers retreat ahead of U.S. sanctions that come into force on Nov. 4.

Although Russia, Saudi Arabia and other Gulf members of OPEC promised to bolster production by about 1 million barrels a day, the IEA remained cautious on whether the full amount would be delivered. It’s unclear how quickly OPEC’s spare capacity, which stands at about 2.7 million barrels a day, can be activated, it said.

“We are entering a very crucial period for the oil market,” which could push prices out of the $70-to-$80 a barrel range seen in the past few months, the IEA said.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net. To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Rachel Graham.

***

U.S. Company Manager Pleads Guilty in PDVSA Bribery Scheme

(Reuters, 13.Sep.2018) — A former manager of a U.S.-based logistics company pleaded guilty on Thursday to paying bribes to secure contracts from Venezuela’s state oil company PDVSA, and the guilty plea of the official who was bribed was also unsealed, the U.S. Justice Department said.

Juan Carlos Castillo Rincon, 55, pleaded guilty in federal court in Houston to conspiring to violate the Foreign Corrupt Practices Act, the Justice Department said in a statement.

Judge Nancy K. Johnson also unsealed the guilty plea of Petróleos de Venezuela, S.A. (PDVSA) official Jose Orlando Camacho, 46, whom Castillo had bribed, it said.

Camacho had pleaded under seal to conspiracy to commit money laundering in July 2017, the statement said. It referred to Camacho as a “foreign official” but did not specify the position he held in the company, Petroleos de Venezuela.

Fourteen people have now pleaded guilty as part of an investigation by the Justice Department into bribery at PDVSA that became public with the arrest of two Venezuelan businessmen in December 2015.

Castillo, of Conroe, Texas, was arrested in Miami in April after he was indicted by a grand jury, the statement said.

A manager at a Houston-based logistics and freight forwarding company, Castillo admitted to conspiring with others to bribe Camacho from 2011 through at least 2013 in exchange for help in obtaining contracts and inside information about the company’s bidding process.

The Justice Department said that Camacho, of Miami, admitted as part of his plea deal to accepting bribes from Castillo and the company he worked for, as well as conspiring with him to launder proceeds of the scheme.

Castillo and Camacho have agreed to forfeit the proceeds from their criminal activity, and both are scheduled to be sentenced on Feb. 21, the Justice Department said.

***

France’s Total Enters Orinduik Block Offshore Guyana

(OffshoreEnergyToday, 13.Sep.2018) — French oil major Total has exercised its option to acquire a 25 percent working interest in the Orinduik block offshore Guyana after a competent persons report identified potential for almost three billion barrels of oil equivalent.

Eco Atlantic, a partner in the Tullow-operated Orinduik block, said on Thursday that Total E&P Activités Pétrolières, a wholly-owned subsidiary of Total, exercised its option to acquire a 25% working interest in the block from Eco Atlantic.

Total decided to exercise the option following a competent persons report (CPR) announced on Tuesday. According to the CPR, the Orinduik block could potentially hold 2,9 billion barrels of oil equivalent of P50 (best estimate) reserves identified across a total of 10 leads.

Eco added that the option was exercised before delivery of the final 3D seismic data due to be delivered to Total, which would have triggered a 120-day exercise window for the option.

The option does not effect Tullow which will remain the operator and hold down its 60 percent of working interest. Following the option exercise and the receipt of all requisite regulatory approvals, Total will hold 25 percent while Eco’s interest will decrease from 40 to 15 percent.

In accordance with the terms of the option, Total will pay a fee of $12.5m to the company on receipt of all requisite approvals for the transfer of the 25 percent interest. Eco added that the payment would provide adequate funding to meet Eco’s share of the costs to drill at least two wells on the block as well as recover the costs of the completed 3D seismic survey.

Gil Holzman, CEO of Eco, said: “We are absolutely delighted that Total, one of the world’s largest oil companies, has so quickly chosen to exercise its option to acquire a 25 percent stake in our Orinduik Block to gain further exposure to offshore Guyana, currently one of the most exciting exploration areas globally.

“With Tullow as operator and the technical contribution that both Total and Eco now bring to the project, we look forward to working with these two world-class players in further progressing the exciting exploration of the Orinduik Block.”

Colin Kinley, COO of Eco, added: “Total entering the blocks four months earlier than anticipated is welcomed as they add significant technical horsepower to the interpretation and now bring them into the planning for drilling. Tullow announced last week drilling is anticipated early the third quarter of 2019.”

***

NP CEO Says No Fallout On Refinery Closure

(Trinidad and Tobago Newsday, Sasha Harrinanan, 12.Sep.2018) — Most everyone knows about the 1,700 workers who will be out of a job once Petrotrin closes its oil refinery in Pointe-a-Pierre. What fewer people know is that when confirmation of this came on August 28, some National Petroleum Marketing Co Ltd (NP) workers feared they too would lose their jobs.

This was revealed by Bernard Mitchell, CEO of NP during an interview with Business Day at St Christopher’s gas station, Wrightson Road, Port of Spain on September 5.

“There was some anxiety because when the story broke, there wasn’t clarity about what the implications would have been for NP. So there was a bit of anxiety but what we’ve done is engage our employees – indicate there’s no need to be concerned – at a staff meeting last week.”

Seated in a conference room on the first floor of the popular NP-branded gas station, Mitchell said NP’s customers too can rest assured the refinery’s closure will not affect their fuel supply.

“Whether it’s using the seabridge to Tobago, your car or your travel internationally, nothing has changed in terms of the delivery of fuel. Based on what Petrotrin has indicated, it’s their intention to purchase fuel and sell to us, (so) nothing really changes. If, however, we do have to purchase fuel ourselves, we might want to use a larger vessel to deliver more fuel to our sufferance wharf, rather than making more frequent trips on a smaller vessel.”

NP’s sufferance wharf – a licensed private wharf where dutiable goods may be kept until the duty is paid – is behind its head office in Sea Lots, Port of Spain.

Petrotrin will begin transitioning out of the refining business on October 1, but it has not said when the refinery is expected to cease operating. This is one of the questions Mitchell will ask Anthony Chan Tack – interim oversight team member and director in charge of refining and marketing at Petrotrin – when the two meet.

“We are one of their primary stakeholders, so Petrotrin would be meeting with us soon to determine whether there’ll be any changes and if we need to do things differently. Mr Chan Tack is my point of interface there because he’s the one overseeing the refinery side, so the delivery of fuel is through his area.”

Mitchell and Chan Tack held an initial conversation shortly after the August 28 meeting between Petrotrin and the Oilfields Workers Trade Union (OWTU) at the company’s corporate headquarters, Southern Main Road, Pointe-a-Pierre.

Chester Beeput – general manager of aviation and marine fuels at NP – joined the interview via speaker phone at one point to answer Business Day’s questions about possible upgrades to the sufferance wharf.

“We use an ocean-going vessel to transport refined fuels from Petrotrin to Sea Lots. It brings in roughly 25,000 barrels of product and (the wharf’s) draft is five metres. Dredging the channel down to seven metres allows you to go from 25,000 to between 30,000 and 35,000 barrels, depending on the vessel. The other element to consider is, if we dredge down to seven metres, we would now be restricted by the length. The current length of our vessel is roughly 100 metres. We can go up to a maximum of 120 metres,” Beeput said.

Mitchell added to this, explaining that if dredging is required, it would fall under the purview of the National Infrastructure Development Co Ltd (NIDCO).

“We have been in contact with NIDCO and they are in the process of looking at the issue…It’s only if the opportunity arises for us to purchase fuel internationally, that there would be some urgency in doing that (dredging). Remember, the model is for Petrotrin to continue supplying us with refined fuel, so there’s no need to dredge at this time.”

The supply of aviation fuel to state-owned Caribbean Airlines Ltd (CAL) and all other airlines which refuel in TT was also discussed.

Beeput said after the announcement, several airlines expressed concern about the possible impact on jet fuel supplies.

“They asked if we anticipated any disruptions. I explained that for all intents and purposes – based on the information we have – there would be no disruption because whether Petrotrin provides fuel via refining or via importation, the net effect on the airlines would be zero.”

Petrotrin sells jet fuel to NP, then NP sells that to airlines from its tanks at Piarco International Airport, Piarco and ANR Robinson International Airport, Crown Point.

Beeput said CAL pays NP in TT dollars while foreign-based airlines/aircraft pay in US dollars.

During his September 2 televised address to the nation, the Prime Minister said the OWTU “will be given the first option to own and operate (the refinery) on the most favourable terms.” Dr Keith Rowley’s offer was rejected the following day by OWTU president general Ancel Roget, who accused the PM of already having a potential buyer for the refinery.

Asked if NP was considering entering into a partnership with another entity to purchase the refinery, Mitchell immediately replied, “No, no, no.”

He later said this was “an unlikely scenario, at this point in time, because we have absolutely no information on that refinery. To make such a decision would involve detailed, in-depth analysis. Also, it’s not part of our core business.”

“We don’t have the expertise, we don’t have the background information and we don’t see what that’s going to do to add value if we change our business model to include (refining),” Mitchell told Business Day.

***

Venezuela’s Aug. 2018 Oil Output Continues Decline: OPEC MOMR

(Energy Analytics Institute, Jared Yamin, 12.Sep.2018) — Venezuela’s oil production seems on an unstoppable downward trend.

The OPEC country’s production of crude oil fell 2.9 percent to 1,235 thousand barrels per day (Mb/d) in August 2018 compared to 1,272 Mb/d in July 2018, according to data published in OPEC’s Monthly Oil Market Report, published on September 12 and citing data based on secondary sources.

Ecuador

Ecuador’s oil production rose slightly to 529 Mb/d in August 2018 compared to 525 Mb/d in July 2018, according to OPEC’s secondary sources data.

***

Jamaica’s Economy Gets $5 Bln From PetroCaribe Over 13 Years

(CMC, 12.Sep.2018) — Jamaica says it has benefitted from projects estimated at US$5 billion under the Venezuela-led PetroCaribe initiative over the past 13 years.

CEO of the Petro-Caribe Development Fund Dr Wesley Hughes said the contributions of the fund to Jamaica have been “meaningful and significant”.

Speaking earlier this week at a ceremony marking the 203rd anniversary of the Jamaica Letter written by Venezuela’s liberator Simón Bolívar in 1815, Hughes said the PetroCaribe Development Fund, which has a mandate to strengthen national capacity in the areas of human capital, culture, infrastructure and the environment, had established the Simón Bolívar Cultural Centre as an important vehicle in strengthening the friendship between the two countries.

Hughes said the Jamaica Letter has had a “long-lasting impact on Venezuela and on all of Latin America, and I dare say the Caribbean”.

He said the letter demonstrated that Simón Bolívar understood that social and political organisations had to be based on national foundations and must be inclusive of all classes of the people who lived in those societies.

“Today, 203 years later, we stand here, a few metres from where Simón grappled with the ideas of nationhood, independence and national identity, and how leaders should relate to their citizens,” he added.

PetroCaribe is an oil alliance of many Caribbean states with Venezuela to purchase oil on conditions of preferential payment. The alliance was launched on 29 June 2005 in Puerto La Cruz, Venezuela. In 2013 Petrocaribe agreed for links with the Bolivarian Alliance for the Americas (ALBA) to go beyond oil and promote economic cooperation.

***

Venezuela Constituent Assembly Seeks to Woo Private Oil Investment

(Reuters, Mayela Armas, 12.Sep.2018) — An overhaul of Venezuela’s constitution being prepared by the pro-government Constituent Assembly will likely include changes intended to attract private investment in the country’s oil fields, according to two assembly members.

Production by the OPEC nation’s oil industry is at a 60-year low, leaving President Nicolas Maduro’s government strapped for cash as it grapples with hyperinflation and a fifth year of economic contraction.

The Constituent Assembly, whose powers supersede those of the country’s Congress, would reword some articles of the constitution to reduce emphasis on state control of oil and ease the way for private investment, the assembly members said.

“We must take into account the economic situation of the country. You need investments to recover production,” said Assemblyman David Paravisini.

Assembly colleague Hermann Escarra echoed Paravisini.

***

PDVSA to Reopen Damaged Port Dock by Month’s End -Documents

(Reuters, Marianna Parraga, 12.Sep.2018) — PDVSA expects to reopen the south dock of Venezuela’s main oil port Jose by the end of September, easing strains on crude exports delayed due to a tanker collision last month, according to internal trade documents from the state-run oil firm seen by Reuters.

Last week, PDVSA began diverting tankers to Puerto la Cruz for loading, but the South American country’s crude exports have remained slow in recent weeks as few customers have accepted the 500,000-barrel-per-cargo maximum neighboring terminals can handle.

Besides Puerto la Cruz, tankers waiting to load a total 2.65 million barrels of Venezuelan upgraded and diluted crudes also plan to be serviced this month by two monobuoys at Jose, including cargoes scheduled for U.S.-based Chevron Corp and Russia’s Rosneft, the documents showed.

But a 1-million-barrel cargo of diluted crude oil (DCO) scheduled to be lifted by Rosneft at Jose between late September and early October was cancelled, according to the documents.

Rosneft and PDVSA in April agreed to a “remediation plan” to refinance an oil-for-loan agreement after delays to deliver cargoes of Venezuelan crude on time. DCO shipments scheduled since then belong to that plan.

PDVSA did not immediately reply to a request for comment.

At least three other 500,000-barrel cargoes for Valero Energy and PDVSA’s U.S. refining unit Citgo Petroleum plan to be loaded at Jose’s available docks and monobuoys in the coming days, after delays.

Valero also would pick up two additional 600,000-barrel cargoes of Morichal crude after a maintenance project that would halt the 150,000-barrel-per-day Petromonagas crude upgrader in August was again postponed, allowing more production.

PDVSA and its joint ventures exported 1.292 million barrels per day (bpd) of crude last month, a 7.7 percent decline versus July, according to Thomson Reuters trade flows data.

The country’s oil output fell again in August to 1.448 million bpd, according to numbers reported by OPEC on Wednesday. Venezuela’s accumulated annual production this year is 1.544 million bpd, the lowest since 1950. (Reporting by Marianna Parraga in Mexico City Editing by Marguerita Choy)

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Maduro Looks to China to Bolster Venezuela’s Collapsing Economy

(Afp, 12.Sep.2018) — Venezuela’s President Nicolas Maduro departed Wednesday for China in search of agreements to bolster the oil-exporting country’s collapsing economy.

Maduro said the trip was “very necessary, very opportune and full of great expectations.”

“We are leaving under better conditions, having activated a program of economic recovery, growth and prosperity. We are going to improve, broaden and deepen relations with this great world power,” he said in a televised address.

Maduro’s government has massively devalued the national currency as part of a raft of measures intended to halt the economy’s free-fall into hyperinflation.

The International Monetary Fund projects Venezuela’s inflation rate will reach 1,000,000 percent by the end of the year.

Hundreds of thousands of Venezuelans have fled the country, most of them into neighboring Latin American countries.

The trip to China is Maduro’s first outside the country since he was allegedly targeted by exploding drones at a military parade in Caracas August 4.

***

Jamaica: Gas Prices Down $0.72, Diesel Down $0.35

(Jamaica Gleaner, 12.Sep.2018) — Gas prices are to go down by $0.72 tomorrow Thursday, September 13

The state-owned oil refinery, Petrojam, says E-10 87 will sell for $137.82 per litre and a litre of E-10 90 will sell for $140.65.

Automotive diesel oil will go down by $0.35 per litre to sell for $140.50.

The price of Kerosene will move down by $0.28 with that fuel to sell for $123.22.

In the meantime, propane cooking gas will go down by $0.35 to sell for $58.73, while butane will go down by $0.62 to sell for $64.75 per litre.

Retailers will add their mark-ups to the announced prices.

***

Ecuador Holds Open Licensing Round for Eight Onshore Blocks

(World Oil, 12.Sep.2018) — Carlos Pérez Garcia, Minister of Energy and Non-renewable Resources in Ecuador has announced an open licensing round for eight blocks onshore Ecuador, in Sucumbíos Province.

These comprise: Araza Este, Changue, Iguana, Perico, Espejo, Pañayacu Norte, Charapa and Sahino. The blocks offered are all onshore, conventional opportunities, most with prospective sandstone reservoirs (one with a carbonate reservoir). All are low-risk exploratory blocks and are located close to established fields.

Ecuador is an under-explored country with high oil potential. Existing infrastructure and well-developed oil services industry presents an attractive opportunity to take hydrocarbons to market. The Ministry is offering a Participation Contract, that is equitable and competitive and allows companies to share production and book reserves.

The Intracampos round is an exciting new opportunity to increase investment in the country, as Ecuador offers opportunities for short medium and long-term investment, with future rounds planned.

The licensing round will be launched in Quito at the JW Marriott to invited parties only, on Sept. 11, and the latest date for submission of proposals will be January 2019.

Presentations and data rooms will also take place in Houston on Sept. 25-27, at the St Regis Hotel, Houston.

Data available for viewing includes 3D and 2D seismic, correlation wells (LAS, ASCII or Images) and production data from analog fields.

On the morning of Sept. 25, there will be an opportunity to hear presentations on the exploration opportunities, the contractual and fiscal terms, and the legal framework for upstream petroleum activities in Ecuador. Private data or meeting rooms will be available for two further days, with slots available to book.

***

Venezuela Oil Production Continues to Collapse

(Energy Analytics Institute, Jared Yamin, 12.Sep.2018) — The decline is consistent and constant as well as consistently and constantly bad, writes Caracas Capital Market in a research note emailed to clients.

Summary details from the research note follow:

OPEC released the production counts for its member states today and while overall OPEC production was up 278,000 barrels per day (bpd) during the month, Venezuela’s production continued to collapse.

According to OPEC’s August calculations, Venezuela production fell another 36,000 barrels per day (bpd) to 1.235 million bpd. (Venezuela production actually fell 43,000 bpd from the original OPEC July count of 1.278, but OPEC revises their numbers as new data comes in later in the month and moved Venezuela’s July production count down to 1.272 million bpd from the original 1.278 bpd), according to the research note.

“The decline is consistent and constant.”

OPEC calculated that July’s Venezuelan production fall was 42,000 bpd and that June’s fall was 48,000 bpd. In May, Venezuela production fell 43,000; in April, -42,000 bpd; in March, -55,000 bpd; in February -52,000 bpd; in January, -47,000 bpd. Consistently and constantly bad.

In the one year period from August 2017 — when PDVSA was producing 1.918 million bpd — Venezuela has lost 683,000 bpd of production. At the current year average price, that is lost income of $47 million a day and $17.5 billion in a year.

Making this situation worse is that Venezuela’s current 1.235 million bpd production is just a shade more than a third of what the country was producing 20 years ago before Chavez came to power. Hundreds of billions of dollars lost through communism, corruption and incompetence in a country that can ill afford it.

“By the way, we are seeing just one example of how that corruption works in a case playing out before the U.S. Federal District Court in Miami that sucked $1.2 billion from PDVSA in what I label a ‘perpetual money machine for bad guys’ in today’s Miami Herald and El Nuevo Herald, writes Caracas Capital Markets Managing Partner Russ Dallen. “The cast of characters reaches all the way to the top and includes the Derwick boys (especially Francisco Convit), the Boligarch Raul Gorrin (who bought Globovision), the Maduro family (especially the stepsons ‘los chamos’ but also mentions mother Celia Flores and Nicholas Maduro), and a Swiss banker who has copped a deal to tell all (but still had to put up a $5 million bond yesterday).”

Drilling Rigs Fall

Meanwhile, Venezuela’s drilling rig count dropped by one in August, continues the Caracas Capital Market report.

Baker Hughes reports that the number of active drills operating in Venezuela fell to 27 last month, after popping up 2 in July off June’s thirty year low of 26. One of the two drills that was added in July was drilling for gas – the first in over a year. It was still deployed in August.

Having failed to capitalize on its natural gas (much less build the Mariscal Sucre LNG plant) for decades, Venezuela signed a deal last week to link into an already existing gas pipeline at a Shell platform in bordering Trinidad waters and through that pipeline pump gas to Trinidad’s Atlantic LNG plant where it will be converted into LNG for export.

Long time readers will also recall that Rosneft was given a 30 year totally wide-open lease on a gas field in that area last year.

Maduro Goes to China

Finally, as we predicted in our “China Promises Venezuela More Money” Report yesterday and correctly forecast in a Report and Wall Street Journal column in July, Venezuela seems to be making headway in getting help from the Chinese, writes Dallen.

“No one else seems to have been able to accurately uncover and read these Chinese tea leaves, so I am especially proud of our Caracas Capital team. We continue to knock the ball out of the park for our clients,” writes Dallen.

Maduro has just announced that he is going to China to sign some big new deals.

Minister of Oil and PDVSA head Manuel Quevedo is also in Beijing meeting with CNPC and is offering to expand natural gas agreements as well. Yesterday, Venezuela’s oil ministry released a statement touting that the Sinovensa joint venture had increased oil production from 70,000 bpd to 110,000 bpd.

Aside from oil, gas and drilling, we are anticipating some other upcoming ventures in gold mining, coltan and diamond mining, concludes the Caracas Capital Market note.

***

Venezuela’s Oil Output Continues Fall, Ecuador’s Rises in Aug. 2018

(Energy Analytics Institute, Piero Stewart, 12.Sep.2018) — Crude oil production in August 2018 in South America’s lone OPEC member countries, Venezuela and Ecuador, continued along usual trends, according to data published in the organization’s September 2018 Monthly Oil Market Report

Crude oil production in Venezuela, the country with the world’s largest oil reserves, fell to 1,235 thousand barrels per day (Mb/d) in August 2018 compared to 1,272 Mb/d in July 2018, according to OPEC data from secondary sources.

On the other hand, Ecuador’s crude oil production rose to 529 Mb/d in August 2018 compared to 525 Mb/d in July 2018, according to OPEC

***

#LatAmNRG

UNICEF Works on Developing Resilience in Caribbean Islands Affected by Hurricanes

A year after two category 5 hurricanes caused destruction across parts of the Caribbean, most children in the affected countries are now back in school and have access to the services they need, thanks to the efforts of UNICEF and partners. In Anguilla, children draw as part of their Return to Happiness session. © UNICEF/UN0180293/Ward (CNW Group/UNICEF Canada)

(UNICEF Canada, 12.Sep.2018) — A year after two category 5 hurricanes caused destruction across parts of the Caribbean, most children in the affected countries are now back in school and have access to the services they need, thanks to the efforts of UNICEF and partners.

In September 2017, hurricanes Irma and María caused catastrophic damage and severely impaired facilities and services, including schools, water systems and more, across several countries in the Eastern Caribbean, Cuba and Haiti, leaving at least 1.4 million people, including 357,000 children, in dire need of assistance. A year later, most of the affected children have returned to school, and resumed their access to services—including water and sanitation.

“Despite the fact that rebuilding and recovery are almost complete, vulnerable children in these countries remain our priority, responsibility and mandate,” stated Maria Cristina Perceval, UNICEF Regional Director for Latin America and the Caribbean. “In a region impacted by hurricanes and climate vulnerabilities, building resilience is not just an option, but a need, especially for vulnerable communities and even more so, children,” she added.

The extent of the hurricanes’ impact on several islands had initially made it extremely challenging for UNICEF and partners to reach children and families most in need.

However, thanks to the generous support of donors and partners, $11.6 million was raised in the aftermath of the hurricanes last year, which helped alleviate the impact on affected children and young people. Water and sanitation services were restored, children could go back to school as buildings were rebuilt and classrooms re-stocked, family-friendly safe spaces were set up that provided psychosocial support, and a cash assistance programme was set up for families in need.

Now, with the new hurricane season underway, the continuity of programmes that began during the emergency response last year remains crucial as efforts are made to reinforce the preparedness and social protection systems; to minimize the possible consequences of future catastrophes and the effects of climate vulnerabilities; and to promote resilience in the region.

As part of its response to build resilience amongst children and communities:

— In the Eastern Caribbean countries of Anguilla, Barbuda, British Virgin Islands, Dominica and the Turks and Caicos Islands, UNICEF will continue to support the implementation of the Caribbean Safe Schools Programme, and work with governments to strengthen social protection systems. Under this programme 25,000 children in five countries will be part of disaster risk reduction plans, which are aimed at making the region’s education sector more resilient to hurricanes and other natural disasters.

— In Haiti, where 126,000 children were affected, UNICEF has invested in cholera prevention initiatives in the most affected areas and will continue to support the sustainability of prevention and protection systems.

— In Cuba, where 176,000 children were affected, UNICEF is providing critical items to support the re-establishment of a protective learning environment for 53,261 girls and 54,879 boys in 14 prioritized municipalities. In addition, in support of efforts to rehabilitate education infrastructure, UNICEF procured 56,000 m2 of waterproof covers for 69 schools and kindergartens. UNICEF also reached a total of 560,315 people (274,554 women and girls) in the 14 prioritized municipalities with safe water treatment and storage.

About UNICEF

UNICEF has saved more children’s lives than any other humanitarian organization. We work tirelessly to help children and their families, doing whatever it takes to ensure children survive. We provide children with healthcare and immunization, clean water, nutrition and food security, education, emergency relief and more.

UNICEF is supported entirely by voluntary donations and helps children regardless of race, religion or politics. As part of the UN, we are active in over 190 countries – more than any other organization. Our determination and our reach are unparalleled. Because nowhere is too far to go to help a child survive. For more information about UNICEF, please visit www.unicef.ca. For updates, follow us on Twitter and Facebook or visit unicef.ca.

IEnova, BP Sign Contract For Liquid Fuels Terminal In Baja California, Mexico

(Sempra Energy, 11.Sep.2018) — Sempra Energy announced its Mexican subsidiary, Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) signed a long-term contract with British Petroleum (BP) for the remaining 50 percent of the initial capacity of the proposed Baja Refinados liquid fuels marine terminal in Baja California, Mexico.

Under the agreement, BP will have storage capacity of 500,000 barrels of liquid fuels to supply its growing network of service stations in northern Mexico. In addition, subject to the execution of certain agreements, BP will have the option to acquire up to 25 percent of the terminal’s equity after commercial operations begin in the second half of 2020.

In April, IEnova announced it signed a long-term contract with Chevron Combustibles de México S. de R.L. de C.V for approximately 50 percent of the facility’s initial storage capacity to supply Chevron service stations and other commercial and industrial consumers.

“The Baja Refinados project is an important part of our growth strategy,” said Carlos Ruiz Sacristán, chairman and CEO of the Sempra North American Infrastructure group and chairman of IEnova. “This new terminal will increase Baja California’s energy reliability and will foster competitive prices for gasoline and other refined products on the West Coast of Mexico.”

IEnova will be responsible for the development of the liquid fuels terminal project, including financing, obtaining permits, engineering, procurement and construction, as well as maintenance and operations. The project will be located at the La Jovita Energy Hub in Ensenada and have an initial capacity of 1 million barrels of liquid fuels, with the potential for future expansion.

IEnova develops, builds and operates energy infrastructure in Mexico. As of the end of 2017, the company had invested more than $7.6 billion in operating assets and projects under construction in Mexico, making it one of the largest private energy companies in the country. IEnova was the first energy infrastructure company to be listed on the Mexican Stock Exchange.

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Mexico Oil Production to Reach 2.6 MMb/d by 2025: Lopez Obrador

(S&P Global Platts, Daniel Rodriguez, 11.Sep.2018) — Mexico’s President-elect Andres Manuel Lopez Obrador said Sunday he plans to focus on developing and exploring onshore and shallow water areas under the control of state oil company Pemex to boost the country’s oil production.

“We have a projection, and our plan is to have production of at least 2.6 million b/d by the end of the presidential term; additional production of 800,000 b/d,” Lopez Obrador said in webcast press conference.

Lopez Obrador was speaking to journalists after a meeting with Mexican drilling and oil service companies at Villahermosa in Tabasco.

Mexico’s production averaged 1.8 million b/d in July, down from an historical high of 3.4 million b/d in 2004, latest data from Mexico’s National Hydrocarbon Commission showed.

Lopez Obrador said the incoming administration plans to tender drilling contracts in December when his six-year term begins to develop Pemex’s shallow water and inland areas to boost oil production. “We are inviting all companies to participate in these tenders. However, we will have a preference over domestic contractors,” he added.

He said he planned to add Peso 75 billion ($3.9 billion) to Pemex’s exploration and production budget to boost drilling and thus raise output. The tenders will help Mexico reverse its production downtrend by the end of 2019, he added.

Mexico’s oil industry is at a crisis as a result of low public investment in the sector. Pemex in 2017 had an E&P capital expenditure budget of Peso 81.5 billion, down from Peso 222 billion in 2014, the company’s annual financial statements show. The cut in Pemex’s budget resulted in a significant decrease in drilling activity; it drilled 83 wells in 2017, compared with 705 in 2013.

Lopez Obrador blamed the previous administration for Pemex’s lower capital expenditure, claiming it was done on purpose amid expectations the private sector would offset lower activity from the state company. “It has been a complete failure, this wrongly named energy reform,” Lopez Obrador said

The president-elect has historically been an opponent of private participation in Mexico’s energy sector. His critics note Pemex’s spending cuts reflect lower global oil prices after 2014.

The president-elect neither mentioned the long-term nature of the energy sector nor the advances made by Eni at Amoca, PanAmerica with Hotchi and Talos with Zama, where peak production across the three fields could be above 250,000 b/d.

Analysts also point out that Lopez Obrador does not acknowledge that it has been a challenge for Mexico to replace production from the aging Cantarell super field, which produced 2.1 million b/d in 2003 and but 160,000 b/d in July.

Mexico won’t call for new hydrocarbon auction rounds until all 107 contracts awarded to date under the energy reform are reviewed for corruption, Lopez Obrador said.

“The majority aren’t working, there is no investment, but those 107 contracts don’t include all the oil regions in the country, just a fraction of Mexico’s hydrocarbon potential,” he added.

The president-elect did not indicate when this contract review process could conclude. Currently, Mexico’s National Hydrocarbon Commission is organizing two gas-rich auction rounds, which are expected to be awarded in February.

The commission postponed both auctions as well as a Pemex’s auction to farm out seven onshore clusters in southern Mexico from this summer until the coming year, citing a request from the industry for more time to analyze the areas as well as the opportunity to involve the incoming administration in the process.

Lopez Obrador said the state owns all of Mexico’s oil resources, and has greater control over areas that have not yet been assigned. “The greater majority of our oil potential is still under the control of Pemex,” he added.

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Ecopetrol Gets Approval for Contingent Credit Line for $665 Million

(Ecopetrol S.A., 10.Sep.2018) — Ecopetrol S.A. announced that as part of its integral debt management strategy, it will sign a contingent line of credit for $665 million with Scotiabank ($430 million) and Mizuho Bank ($235 million).

Under this type of facility, known as a committed line of credit, Scotiabank and Mizuho Bank agree to disburse funds as and when Ecopetrol requires them, under terms and conditions previously agreed between the parties. This facility would increase the Company’s indebtedness only when the disbursements are made.

The contingent line will have a two (2) year availability period for disbursements, subject to the following conditions: (i) principal amortizable upon maturity after a five-year term as from the signing date of the agreement, and (ii) an interest rate of 6-month LIBOR + 125 basis points and an annual fee of 30 basis points on principal not disbursed during the availability period.

Resources to be deployed under this contingent line may be used for general corporate purposes, among them to strengthen Ecopetrol’s liquidity position in the face of eventual growth opportunities, to mitigate risks associated to unexpected fluctuations in crude prices, as well as to reduce refinancing specific needs in the coming years, with flexibility and low financing costs.

To obtain the committed line of credit, the Company complied with all required internal and external procedures and approvals, including the corresponding Authorization Resolution by the Ministry of Finance and Public Credit

**.

The conditions obtained confirm the local international financial sector’s confidence in the Company.

** This administrative act can be subject to clarifications or changes, ex officio or at request of a party, in accordance with the legal mechanism that are applicable to the effect.

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Excelerate Energy, TGS Sign Deal to Study Liquefaction Project in Bahía Blanca

(Excelerate Energy L.P., 10.Sep.2018) — Excelerate Energy L.P. and Transportadora de Gas del Sur S.A. announced the execution of a Memorandum of Understanding to jointly collaborate on the assessment of a liquefaction project in the city of Bahía Blanca, Argentina. Argentina currently imports liquefied natural gas (LNG) through two floating import terminals, particularly during the country’s peak winter consumption. The successful development of Argentina’s shale gas reserves resulted in a potential excess of natural gas during the summer months. The project aims at studying the technical and commercial viability of liquefying and exporting natural gas during the summer season, allowing a more sustainable development of shale gas resources and reducing Argentina’s annual natural gas net import needs. The study is expected to be completed by the end of 2018, at which time Excelerate and TGS will share the results with government and industry officials and decide on further actions towards the implementation of the Project.

“Given the high seasonality of Argentina’s natural gas consumption, LNG has played a critical role in meeting the country’s energy demands,” stated Excelerate’s Chief Commercial Officer Daniel Bustos. “This Project will significantly enhance Argentina’s capacity to maximize the use of local resources by allowing a more predictable development of shale gas production while reducing the overall costs of importing LNG.”

TGS is carrying out an important midstream project aimed at the transportation and conditioning of the natural gas production derived from the Vaca Muerta Basin, located in the province of Neuquén, Argentina. This Project represents an essential contribution to the development of shale gas reserves, promoted by the National and Provincial Governments, as it will ensure the infrastructure required to inject incremental gas production to the main transportation systems.

“Carrying out LNG production through the Project will be key to promote the development of unconventional gas, since it will allow to expand the scale of the gas market, increasing export opportunities, after having met domestic market needs in Argentina,” stated TGS’ Chief Commercial Officer Néstor Martín.

Both Excelerate and TGS have been critical players in the growth of the Argentine energy industry. Currently, one hundred percent of LNG imported and regasified into the country is through Excelerate’s two floating storage and regasification units (FSRUs). Excelerate developed South America’s first LNG import terminal in 2008 in Bahía Blanca, following with the second terminal in 2011 in Escobar, Argentina. TGS is the leading natural gas transportation company in Argentina and owns and operates South America’s largest pipeline network. The project underscores both party’s commitment to seeing Argentina’s energy sector become more sustainable for the long term.

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International Tribunal Rules for Chevron in Ongoing Ecuador Case

(OGJ, Nick Snow, 10.Sep.2018) — An international tribunal administered by the Permanent Court of Arbitration in The Hague found that a $9.5-billion judgment that Ecuador’s government lodged against Chevron Corp. in 2011 violated international treaties, investment agreements, and international law.

Ecuador breached its obligations under a 1995 settlement agreement that released Chevron subsidiary Texaco Petroleum Co. (TexPet) and its affiliates from the same public environmental claims on which the $9.5-billion Ecuadorian judgment was exclusively based, the Sept. 9 decision said.

In a ruling nearly 5 years earlier, the same tribunal said agreements Ecuador’s government signed in 1995 and 1998 released TexPet from environmental liability for land on which it once produced oil (OGJ Online, Sept. 18, 2013). That ruling upheld an important claim Chevron made in its years-long defense against a lawsuit claiming billions of dollars for environmental damage.

In its latest decision, the tribunal found that TexPet “spent approximately $40 million in environmental remediation and community development under the 1995 settlement agreement” carried out by a “well-known engineering firm specializing in environmental remediation” and that Ecuador in 1998 executed a final release agreement “certifying that TexPet had performed all of its obligations under the 1995 settlement agreement.”

The tribunal found “no cogent evidence” supporting Ecuador’s claim that TexPet failed to comply with the terms of the remediation plan approved by the government. To the contrary, the award recites sworn testimony of Ecuadorian officials that TexPet’s “technical work and environmental work was done well,” while Ecuador’s national oil company “during more than 3 decades, had done absolutely nothing” to address its own environmental remediation obligations in the area, even though Ecuador and its national oil company received 97.3% of the project’s oil production revenues.

“An esteemed international tribunal, including an arbitrator appointed by Ecuador, has unanimously confirmed that, following completion of an agreed environmental remediation program, Chevron was released by the Republic of Ecuador from the environmental claims that the fraudulent Ecuadorian judgment purports to address,” R. Hewitt Pate, Chevron vice-president and general counsel, said on Sept. 9.

“Following years of litigation, including visits to the former area of operations by the tribunal, the tribunal found that Ecuador violated the final release agreement that had certified the successful completion of TexPet’s remediation,” he said.

The tribunal also reached the same conclusion as US courts regarding the issue of judicial fraud, Pate said. “The tribunal found extensive evidence of fraud and corruption by members of the Ecuadorian judiciary acting in collusion with American and Ecuadorian lawyers,” he said.

“This award is consistent with rulings by courts in the US, Argentina, Brazil, Canada, and Gibraltar confirming that the Ecuadorian judgment is unenforceable in any country that respects the rule of law,” Pate said. “Indeed, the tribunal explicitly found that it would be contrary to international law for the courts of any other [nation] to recognize or enforce the fraudulent Ecuadorian judgment.”

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Peru-Petro President Says Proposed Hydrocarbon Law “Favorable”

(Energy Analytics Institute, Piero Stewart, 10.Sep.2018) — The proposed Law for the Promotion of the Hydrocarbons Industry, which will be debated shortly by Congress, is “favorable” for the country’s oil sector, announced Peru-Petro President Seferino Yesquén.

The official, speaking during an interview with Andina, said the law is “favorable” because it will “modernizes the sector and allow for faster investments.”

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Chevron Wins Ecuador Rainforest ‘Oil Dumping’ Case

(BBC, 8.Sep.2018) — An international tribunal in The Hague has ruled in favour of the US oil company, Chevron, in an environmental dispute with the government of Ecuador.

Chevron had been ordered to pay $9.5bn (£7.4bn) compensation to thousands of residents in Ecuador’s Amazon region.

They accused the company of dumping toxic waste in local lakes and rivers of the Lago Agrio region for decades.

The court said that the 2011 Ecuador Supreme Court ruling had been obtained through fraud, bribery and corruption.

The oil giant now stands to be awarded hundreds of millions of dollars in costs by The Hague’s Permanent Court of Arbitration.

Chevron maintained that it never owned any assets in Ecuador.

The alleged environmental damage was done by Texaco between 1964 and 1992. Texaco was later acquired by Chevron.

Chevron has argued that Texaco spent $40m ($31m) cleaning up the area during the 1990s, and signed an agreement with Ecuador in 1998 absolving it of any further responsibility.

Birth defects

Some 30,000 local residents, including five different Amazonian tribes, began the lawsuit against Texaco in 1993.

The plaintiffs say that the oil company knowingly dumped 18bn gallons (68bn litres) of toxic waste water and spilled 17m gallons of crude oil into the rainforest during its operations in north-east Ecuador.

They say the affected area covers 4,400 sq km (1,700 sq miles) on the border with Colombia.

Local residents believe the pollution has led to health problems such as cancer and birth defects.

In 2011, an Ecuadorean judge ordered Chevron to pay $18.2bn (£14.1bn) for “extensively polluting” the Lago Agrio region.

Ecuador’s highest court last year upheld the verdict against Chevron a year later, but reduced the amount of compensation to $9.5bn.

‘Unpunished forever’

Chevron argued that it only lost the case because the legal team representing the villagers paid nearly $300,000 (£232,000) in bribes in Ecuador.

In 2014, US district judge Lewis Kaplan in New York ruled that “corrupt means” were used by Ecuador’s legal team to win the 2011 case.

After the latest ruling in the Hague, a lawyer for the indigenous communities criticised the Ecuadorean government for accepting taking the case to an arbitration court.

“That is playing Chevron’s game and leaving the crime unpunished forever,” said Pablo Fajardo.

He said he was considering all legal avenues.

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Stena Bulk, Petrobras, Ink Two-Year Contract

(Energy Analytics Institute, Jared Yamin, 8.Sep.2018) — Stena Bulk signed a deal to charter two MR tankers to Petrobras.

Under the deal, Stena Bulk will charter its MR product tankers Stena Conqueror (47,000 dwt, built in 2003) and Stena Conquest (47,000 dwt, built in 2004) to Brazil’s state-owned oil company.

“We have a long-standing, highly-valued relationship with Petrobras when it comes to both Suezmax and MR tankers and we are committed to continue to provide them with safe and efficient deliveries,” said Stena Bulk CEO and President Erik Hånell in an official company statement.

The contract is for a term of two years and includes the option to extend the charters for another 11 months. The vessels will carry refined products along the Brazilian coast.

“We continue to cater for Petrobras’ shipping requirements as a preferred customer and logistical partner of Stena Bulk,” said Stena Bulk Products & Chemicals USA General Manager Claes Leschly Bang.

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Venezuela Wants To Overhaul State Oil Firm PDVSA

(Oilprice.com, Tsvetana Paraskova, 7.Sep.2018) — Venezuela has set up a commission that will be working to reshuffle and reorganize its state oil firm PDVSA in the next few months, according to the country’s Official Gazette on Thursday, in what would be the latest Venezuelan attempt to show that it is trying to revitalize its dying oil industry.

According to OPEC’s secondary sources, Venezuela’s oil production in July dropped to below the 1.3-million-bpd mark—at 1.278 million bpd, plunging 47,700 bpd from June. This compares with an average of 2.154 million bpd in 2016, and an average of 1.911 million bpd in 2017.

Some analysts expect Venezuela’s production to fall to below 1 million bpd by the end of this year.

Venezuela has been claiming lately that it plans to raise its oil production.

Last week, PDVSA said that it signed a US$430 million joint service agreement with seven companies that would help it increase its crude oil production by 641,000 barrels per day.

On top of the incessant production slump, PDVSA has seen difficulties in exporting its oil cargoes after a partial closure at the Jose port at the end of August delayed shipments.

A week before that, ConocoPhillips reached a settlement with PDVSA to recover the full US$2-billion amount that an international court awarded it earlier this year for the expropriation of its oil assets in Venezuela a decade ago. PDVSA agreed to settle the dispute with Conoco and possibly save some assets in the Caribbean from seizures, as the U.S. oil firm said that it would be suspending the legal actions to enforce the award.

PDVSA has 90 days from August 20 to make the first US$500 million payment of the award to Conoco. On September 5, Conoco’s chief executive Ryan Lance said that the U.S. company was still awaiting the payment, but expected Venezuela to honor the settlement agreement. If payments aren’t made, however, ConocoPhillips would resume its legal enforcement actions, Lance noted.

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Frontera Receives Global Compact Awards from UN

(Frontera Energy Corporation, 7.Sep.2018) — Frontera Energy Corporation has been named a Canadian Sustainable Development Goals award winner for the second consecutive year by the Global Compact Network Canada, the Canadian network of the United Nations Global Compact.

Frontera was awarded the SDG Leadership Award in the large organizations category, through public voting, for its outstanding efforts in adopting and implementing the United Nations Sustainable Development Goals in its engagement with indigenous communities in Colombia and Peru.

The public also voted Frontera as the winner of the ‘Partnership Award’ for its excellent work in engaging stakeholders through ongoing partnership and advancement towards the Sustainable Development Goals.

“We are proud of our commitments and continuing a legacy of sustainable growth for our stakeholders. We congratulate the United Nations Global Compact Network Canada on their five-year anniversary and the large impact they have made on promoting Sustainable Development Goals in Canada,” said Frontera Chief Executive Officer Richard Herbert.

These awards intend to encourage all Canadian organizations to embed the 17 Sustainable Development Goals within their organizations and highlights the progress that both private and public sectors have made towards solving pressing environmental, social and economic challenges. Since its inception in 2013, the Canadian Chapter of the United Nations Global Compact has been dedicated to assisting over 150 Canadian organizations with the advancement of the United Nations Global Compact’s 10 Principles and 17 Sustainable Development Goals.

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Guyana’s Jan Mangal Warns of Cash Payouts

(Stabroek News, 7.Sep.2018) — Former presidential advisor Jan Mangal has warned that while cash payouts from oil revenue may have an important role to play in the future, at this point it could be a distraction from the larger goal of clawing back wealth.

His reference in a Facebook post today to  clawing back of wealth will be seen as a reference to the widely criticised terms of the Production Sharing Agreement between Guyana and ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited.

Potential cash payouts have taken centre stage following a recent proposal by Professor Clive Thomas at a forum in Buxton.

Mangal, who has become a vocal critic of aspects of the Exxon deal and the handling of the oil and gas sector here warned that oil companies have various stages in how to make countries forfeit their wealth.

He said:

“1. The oil company and their agents will first influence the politicians. They do this very well. They do it all the time all around the world (in the rich countries as well). This has already happened in Guyana.

“2. Then they will influence the private sector by giving them some contracts. This has already happened in Guyana, judging by the words/ actions of the private sector, judging by how some prominent Guyanese have suddenly gone quiet or changed their tune (lawyers, business people, board members, etc). CSR, grants and donations also are used by the oil companies to influence people and institutions. Please take the money, but it will not help Guyana if we take the money then go quiet and stop visibly speaking out for our country.

“3. Then the most challenging is the influence of the people. But this is doable in Guyana due to its small population, its divisions, its corruption, and its flawed “winner takes all” system of governance. One way to influence the people is by direct cash disbursements to the people. Give people a couple hundred US dollars a year and they may no longer care if the royalty is 2% or 15%. Hence, we have to be careful. Direct cash disbursements have an important role to play in the future (as some have been discussing recently), but not now as an election variable, and not now as a distraction for the people. We need to focus on the more important prize, which is clawing back more of our wealth for ourselves, and also securing that wealth. The wealth will come for everyone if we work hard, do not be intimidated, and do not repeat the mistakes from other countries.

“The odds are stacked against Guyana, but Guyana can succeed”.

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YPF Board Names María Luján Bianchi As Chief Compliance Officer

(YPF, 7.Sep.2018) — The Board of Directors YPF S.A. announced, at its meeting held on September 6, 2018, approval of appointment of María Luján Bianchi as Chief Compliance Officer. Luján will report to the Audit Committee.

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