Petrobras Inks Deal to Divest Of Petrobras Oil & Gas B.V.

(Petrobras, 31.Oct.2018) — Petrobras, following up on the release disclosed on 3/8/2018, announces that its subsidiary Petrobras International Braspetro B.V. (PIBBV) signed a Sale and Purchase Agreement (SPA), related to the full sale of its 50% interest in Petrobras Oil & Gas B.V. (PO&GBV) to Petrovida Holding B.V., a company formed by the partners Vitol Investment Partnership II Ltd, Africa Oil Corp and Delonex Energy Ltd.

PO&GBV is a joint venture in the Netherlands formed by PIBBV (50%) and BTG Pactual E&P B.V. (50%), with assets located in Nigeria. It has an 8% stake in the OML 127 block, where the Agbami producing field is located, and a 16% stake in the OML 130 block, with the Akpo producing field and the Egina field, in final stage of development, without the operatorship of any field. The current production of the PO&GBV assets is about 21 thousand boe/day (Petrobras share).

The transaction will involve a total amount of up to $1.530 billion, with a cash payment of $1.407 billion, subject to adjustments until the closing of the transaction, and a deferred payment of up to $123 million, to be settled as soon as the Agbami field redetermination process is implemented.

The closing of the transaction is subject to the fulfillment of usual precedent conditions, such as obtaining approvals by relevant Nigerian government bodies.

The sale of PO&GBV was the result of a competitive process and is part of the Petrobras Partnership and Divestment Program, in line with the 2018-2022 Business and Management Plan and its ongoing portfolio management, with focus on pre-salt investments in Brazil.

This disclosure is in line with Petrobras’ disinvestment methodology.

Petrovida Partners

Vitol has a 50% interest in Petrovida. Vitol is a Dutch energy and commodities company and its primary business is the trading and distribution of energy products globally – it trades over seven million barrels per day of crude oil and products and, at any time, has 250 ships transporting its cargoes. Vitol’s clients include national and international companies from the sector, including the world’s largest airlines. It is also invested in energy assets globally including storage, refining capacity and service stations.

Africa Oil has a 25% interest in Petrovida. Africa Oil is a Canadian publicly traded oil and gas exploration and development company, primarily focused in Africa. The company’s assets include a twenty-five percent working interest in the South Lokichar oil development project (Kenya) and a portfolio of interest in Africa, focused on oil and gas exploration companies.

Delonex, also with a 25% interest in Petrovida, is a leading sub-Saharan oil and gas company focused on exploration, development and production with operations in Chad, Kenya and Ethiopia.

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Petrobras Postpones Mothballing Of Sergipe And Bahia Fertilizer Plants

(Petrobras, 31.Oct.2018) — Petrobras, following up on the release disclosed on Mar. 28, 2018, informs that it postponed until Jan. 31, 2019 the mothballing of the fertilizer plants located in Sergipe (Fafen-SE) and Bahia (Fafen-BA).

The company continues to evaluate alternatives to the mothballing with government representatives and industry federations of the states of Sergipe and Bahia and other participants, so this additional time is necessary to complete the analysis of the alternatives to the mothballing, provided that the minimum levels of profitability of Petrobras are maintained. Among these alternatives, leasing the plants to third parties is being considered.

Future steps in the analyses development will be communicated to the market.

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Petrobras Updates On Debt Pre-Payment With Banco Santander

(Petrobras, 31.Oct.2018) — Petrobras prepaid a debt with Banco Santander in the amount of $1 billion, due 2023. Simultaneously, it signed with the same institution a new line of credit worth $750 million, due October 2028 and with more competitive financial costs.

These transactions are in line with the company’s liability management strategy, which aims to improve the amortization profile and the cost of debt, taking into account the deleveraging target set forth in its 2018-2022 Business and Management Plan.

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Ecopetrol Business Group Reports 3Q:18, Year-To-Date 2018 Results

(Ecopetrol S.A., 31.Oct.2018) — Ecopetrol S.A. announced the Business Group’s financial results for the third quarter and year-to-date 2018, prepared in accordance with International Financial Reporting Standards applicable in Colombia.

The figures included in this report are not audited. Financial information is expressed in billions of Colombian pesos (COP) or US dollars (USD), or thousands of barrels of oil equivalent per day (mboed) or tons, and is so indicated where applicable. For presentation purposes, certain figures in this report were rounded to the nearest decimal place. Further information on the Business Group’s financial figures may be consulted in Ecopetrol’s Consolidated Financial Statements, published on our website.

In words of Felipe Bayón Pardo, CEO of Ecopetrol:

“For the first nine months of the year, Ecopetrol is reporting the best financial results of the past four years. Net income attributable to owners of Ecopetrol rose to 8.9 trillion pesos, EBITDA totaled 23.8 trillion pesos and EBITDA margin was at 48%. These solid financial results were achieved due to the good operating performance of all segments, which brought about an increase in crude oil and gas production, lower crude oil imports for the Downstream segment as well as of refined products to supply the local market. In summary, we were able to capture the profit coming from the higher international oil prices.

The flexibility of the Group’s commercial strategy allowed us to take advantage from the higher demand for crude oil from refiners in Asia to create more value. In the third quarter of 2018, sales to Asia accounted for a 45% share of total crude exports, versus 25% during the same quarter in 2017. Thanks to this initiative, the discount price of the crude basket versus Brent remained at approximately 11%.

In the third quarter of 2018, Ecopetrol Group’s average production totaled 724,000 barrels of oil equivalent per day, the highest in the last 10 quarters. Year-to-date average production was 716,000 barrels of oil equivalent per day. The increased production for the quarter is in line with the target set for 2018 and it was possible due to the positive results from our drilling campaign and the greater demand for natural gas in the thermal power and industrial sectors. At the end of the quarter, we had drilled 421 development wells and had 41 rigs in operation.

This increase in activity is reflected in larger investments during the quarter, totaling 789 million dollars and representing 80% of what was invested in the first half of the year and more than 50% over the investment in the third quarter of 2017.

In the exploration segment Ecopetrol entered into one of the highest-potential oil basins in the world. The Pau-Brasil block, located in the central region of the Santos basin, in the Brazilian pre-salt, was awarded to the joint venture between BP Energy (50% – Operator), Ecopetrol (20%) and CNOOC Petroleum (30%). This milestone is consistent with our long-term growth strategy and demonstrates Ecopetrol’s ability to develop strategic alliances with leading companies in world-class industry opportunities.

During the third quarter, we drilled five exploratory wells, for a total of nine during the course of the year, and had an exploratory success rate of 44%. These results are in line with the goal of drilling 12 wells in 2018, and materialize our strategy of building a solid base of assets for the company’s future sustainability.

In the Midstream segment, we saw increased volumes of crude oil and refined products transported, primarily due to the optimization of certain systems, such as Galán – Bucaramanga and Coveñas – Cartagena and the beginning of operation of San Fernando-Apiay-Monterrey system along with the expansion of Ocensa P135. Moreover, it is important to highlight the transportation tests carried out at a higher viscosity of 700 centistokes (cSt — a measure of viscosity) with positive operating results, which are now under economic evaluation.

During the third quarter, the oil pipeline network continued to suffer from third-party disruptions, especially on the Caño Limón- Coveñas system; nevertheless, the Bicentenario oil pipeline was able to mitigate those impacts, resulting in five reversion cycles during the quarter. Year to date, 35 reversion cycles have been carried out on the Bicentenario oil pipeline. This flexible operation has prevented deferred production from Caño Limón field.

In the Downstream segment, the two refineries jointly achieved a new historic maximum of 380,000 barrels of stable throughput per day. The third quarter was the best of the year in terms of throughput and gross refining margin for each of our refineries.

In line with the optimization process, the Cartagena refinery continued to generate value by achieving an average throughput of 158,000 barrels per day for the quarter, with a throughput composition of 80% domestic and 20% imported crude. This result contributed significantly to the reduction of the Group’s cost of sales. In August, a record was attained at the refinery by using 100% local crudes during nine days, getting an average throughput of 164,000 barrels per day. Gross refining margin for the quarter was 12.1 dollars per barrel which represents a 17.5% increase vis-à-vis the third quarter of 2017.

Additionally, the Barrancabermeja refinery showed an 11% increase in throughput versus the third quarter of 2017. This outcome was primarily due to the stable operation of its units and the segregation of light and intermediate crudes. The average refining margin for the quarter was 13.9 dollars per barrel, largely impacted by the increase in the prices of the crude basket vs. Brent.

Ecopetrol continues to work on fuel quality. In line with this commitment, we have taken advantage of the greater synergies between the Cartagena and Barrancabermeja refineries, as well as operational adjustments in the transport and logistics systems, to produce cleaner fuels.

In September, diesel distributed in Colombia had an average sulfur content between 15 and 20 parts per million (ppm), below the maximum of 50 ppm of sulfur permitted by local regulation. Specifically, we delivered diesel with an average sulfur content between 12 and 14 ppm to the city of Medellin that complies with international reference markets standards as those in the United States (10 to 15 ppm sulfur content).

Our reducing cost strategy through efficiency measures allowed us to account for 1.8 trillion pesos of higher efficiencies across the Group during the first nine months of 2018, up 26% versus those reported during the same period of 2017. We remain committed with cost efficiency and capital discipline, which are now embedded in our corporate culture.

These accomplishments had enhanced the financial position of the Group. At the end of the third quarter, we increased our cash position from 15 trillion at the end of the second quarter, to 18 trillion pesos, despite the payment of the second installment of dividends to the Government for 1.6 trillion pesos and the prepayments of debt for a total amount of 637 million dollars. This financial strength is essential to support the profitable growth plans of the Group and secure long-term sustainability through crude oil price cycles.

In September, Ecopetrol completed the negotiation of a new Collective Bargaining Agreement that will apply for four and a half years and cover aspects such as education, health, food, loans and transport services, among other worker benefits. The New Collective Bargaining Agreement is aligned with the business strategy that seeks to maintain efficiency, capital discipline and collective labor in the new phase of Ecopetrol’s growth. We believe it will contribute positively to the workers wellbeing and the country’s development.

Talking about our ESG initiatives, year-to-date efforts have been focused on activities such as the recycling of 63.3 million cubic meters of water used in our operations. This amount represents an additional saving of 20% compared with the same period last year, enabling us to optimize the water requirement. On another front, we have advanced towards the incorporation of non-conventional renewable energy into the matrix of energy resources, with the announcement of the construction of a solar farm that will supply part of the energy consumption of Castilla field. This is in addition to the existing renewable energy supply from biomass.

Ecopetrol remains committed to generating value, and caring for environment, safe operations, ethics and transparency. Maintaining positive results and growing profitably will remain our focus as we continue to operate as a sustainable company that generates value for its shareholders.”

To review the full report please visit the following link:

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Ex-Venezuelan Oil Exec Admits Bribes In $1.2 Bln Money-Laundering Scheme

(El Nuevo Herald, Jay Weaver And Antonio Maria Delgado, 31.Oct.2018) — A former top official of Venezuela’s state-owned oil company pleaded guilty Wednesday in Miami federal court to playing a pivotal role in a $1.2 billion money-laundering racket that U.S. authorities say was run by some of the country’s wealthiest people with close ties to the Venezuelan president.

Abraham Edgardo Ortega, the former executive director of financial planning at Petroleos de Venezuela, S.A. (PDVSA), admitted he accepted millions of dollars in bribes that were secretly wired to U.S. and other financial institutions, according to court records.

In exchange, Ortega allowed the ring’s members to embezzle hundreds of millions of dollars from the national oil company through loan- and currency-exchange schemes that ended up in European, Caribbean and U.S. banks as well as luxury South Florida real estate and other investments. Ortega, who worked at PDVSA for more than a decade, admitted he used his official role to give “priority” status to Venezuelan companies that did business with the government so they could tap into its vast oil income to make overnight fortunes.

Ortega, who surrendered to U.S. authorities in September after being charged this summer with eight other defendants, remains free on a $1 million bond as he assists the U.S. attorney’s office in the complex money-laundering case. He faces up to 10 years in prison at his sentencing Jan. 9 before U.S. District Judge Kathleen Williams and must forfeit at least $12 million stolen from the Venezuelan government’s oil company that was laundered to the U.S. and elsewhere.

His defense attorneys, Lilly Ann Sanchez and Luis Delgado, said they are hopeful that Ortega receives a substantial reduction in his sentence based on his assistance providing valuable information about the other defendants and suspects in the sprawling Homeland Security Investigations case.

Ortega, who served as PDVSA’s top financial officer from 2014 to 2016, admitted in a statement filed with his plea agreement that he conspired with the leader of the money-laundering ring, Venezuelan billionaire Francisco Convit Guruceaga, who has not been arrested, and a Miami-based investment broker, Gustavo Adolfo Hernandez Frieri, who was detained in Italy and awaits extradition to the United States. Others also collaborated with Ortega, including a money manager who operated between South America and Miami and who became a confidential source for Homeland Security agents two years ago.

Ortega’s guilty plea to the conspiracy charge follows Monday’s sentencing of Swiss banker Matthias Krull to 10 years in prison for the same offense. Krull was based in Panama and provided private banking services to Venezuela’s elite, including his most prominent client, media mogul Raul Gorrín. Gorrín has not been charged in the Miami federal case, but multiple sources have confirmed he is one of numerous unnamed co-conspirators in a criminal affidavit filed by Homeland Security Investigations.

Krull, who was arrested in July and became the first defendant to cooperate with the U.S. Attorney’s Office, remains free on a $5 million bond and is staying in a Brickell area condo. He pleaded guilty in August in a deal struck between his defense attorney, Oscar S. Rodriguez, and prosecutor Michael Nadler.

As required in his plea agreement, Krull started providing evidence about the Venezuela-based money laundering network — including inside information about Gorrín, owner of the Globovisión network in Caracas, according to multiple sources familiar with the investigation.

Gorrín is suspected of steering $600 million from the country’s state-owned oil company to a European bank to enrich himself, the three stepsons of President Nicolás Maduro and other members of Venezuela’s politically connected elite, according to court records and multiple sources.

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YPF Seeks To Generate 20% Of Energy from Renewable Sources By 2023

(Energy Analytics Institute, Aaron Simonsky, 31.Oct.2018) — YPF announced it will continue with electric power generation projects through its affiliate YPF LUZ as part of its transformation as an energy company.

“By 2023, 20% of the electric power generated by YPF will come from renewable sources,” YPF announced in an official statement on its website.

“Our company is also analyzing various low carbon emission business opportunities, such as bio-fuels, use of LNG in cargo transport and electric mobility,” the company said.

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Guyanese Could Get Increased Salaries, Other Improvements In 2020

(DemeraraWaves, 31.Oct.2018) — Finance Minister, Winston Jordan on Wednesday hinted that government workers would receive salary increases when in 2020 when Guyana begins producing oil estimated to rake in about US$300 million in that year.

“I foresee improvements in the social and economic status of Guyana. I foresee progressive improvements in the human, cultural and every other developmental aspect of the country,” he told a news conference.

Asked specifically whether the planned improvements to the social, human and economic development of Guyanese would include increased wages and salaries. “…including everything but we have to take everything in context. We don’t want a situation where I give you two dollars and you lose three so one of the big things that has to happen is that production has to be pulled up, we have to diversify,” he said.

He explained that all of the US$300 million (GYD$60 billion) from Liza Phase One production of 120,000 barrels per day would be deposited into the Sovereign Wealth Fund and some withdrawn for economic development in keeping with the fiscal rules that would govern the fund.

That would be 50 percent of profit oil plus two percent royalty, but the actual earnings could be more if the world price moves up to about US$70 per barrel.

Cash set aside from economic development, he said would be withdrawn and deposited into the Consolidated Fund after converting American dollars into Guyanese dollars through the Bank of Guyana. “At no point will 300 million be available to the government for spending and the way how the 300 million become offline and it will go offline so it doesn’t create disturbances to the economy; so much money flooding the economy, few goods are around, large imports it suddenly attracts,” he said.

The Finance Minister cautioned against pumping too much money into an economy when production is low which could result in depreciation of the Guyana dollar and inflation.

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Hess, Exxon Mobil Prep For More Exploration Offshore Guyana

(Hart Energy, Velda Addison, Senior Editor, 31.Oct.2018) — Partners Exxon Mobil, Hess Corp. and CNOOC Nexen Petroleum are making progress toward development of the hydrocarbon bounty discovered offshore Guyana.

“This month a second exploration vessel, the Noble Tom Madden, arrived to accelerate exploration and appraisal activities on the block starting with the Pluma prospect located 17 miles south of Turbot where we expect to spud in early November,” Hess Corp. CEO John Hess said on the company’s third-quarter earnings call Oct. 31.

The well will target Upper Cretaceous reservoirs, the company said.

So far, the Exxon Mobil-led exploration effort has led to nine discoveries. The latest was announced in August after Exxon Mobil affiliate Esso Exploration and Production Guyana Ltd.’s Hammerhead-1 struck oil, opening a new play type and adding to the prospectivity of the Stabroek Block.

The discoveries, which are expected to lead to a gross production of more than 750,000 barrels of oil per day by 2025, have been among the exploration bright spots for the industry which saw oil and gas companies’ exploration budgets drastically slashed during the market downturn. The success offshore Guyana has also spurred interest from other companies looking to hit oil in the region.

Greg Hill, COO for Hess, said a successful flow test was recently completed at Hammerhead and additional appraisal activities are planned. Plans are for the Stena Carron rig that drilled the well to go to the Canary Islands in Spain for recertification before returning to the block in late December to spud a well on the Upper Cretaceous Amara prospect, which is about 24 miles southeast of the Turbot discovery.

Meanwhile, development of Liza Phase 1—sanctioned in June 2017—is moving ahead. First oil is expected by early 2020 with a nameplate capacity of 120,000 bbl/d of oil, Hill said.

The larger Phase 2 development, with a capacity of 220,000 bbl/d, is also on track for startup by mid-2022, he said, adding “Phase 3 is currently in FEED with first oil expected in 2023.”

Hess called the company’s position offshore Guyana “truly world class in every respect and transformational for our company.” Discovered recoverable resources for the Stabroek Block, in which Hess has a 30% stake, are estimated at more than 4 billion barrels of oil equivalent.

Guyana is one of Hess’ two main growth engines. The other is the Bakken where net production grew to 118,000 boe/d during the third quarter, up from 103,000 boe/d a year earlier.

“We forecast Bakken net production will increase to approximately 125,000 net barrels of oil equivalent per day and we expect to drill approximately 35 wells and bring 31 wells online bringing the total for full year 2018 to 120 wells drilled and 100 new wells brought online,” Hill said.

Hess also continues to test limited entry plug-and-perf completions and higher proppant loadings.

“Initial results are encouraging,” Hess said. The company added a sixth rig in the Bakken in September, and expects to generate annual capital production growth of between 15% to 20% through 2021, he said.

For the quarter, the New York-headquartered company reported net income rose to $52 million, compared with a net loss of $624 million a year earlier. The company also grew oil and gas production to a net average 279,000 boe/d, excluding Libya. The amount exceeded guidance and came as E&P capital and exploratory expenditures fell slightly to $542 million, down from $558 million a year earlier.

“We delivered another strong quarter of execution. With higher production and guidance and lower unit costs and guidance while keeping capital on exploratory expenditures flat with guidance for the year and generating a profit for the quarter,” Hess said. “We continue to execute our strategy to deliver capital efficient growth in our resources and production investing in the highest return projects to move down the cost curve and be profitable in a lower price environment with increasing cash generation and returns to shareholders.”

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Ecopetrol Profit Nearly Triples On Oil Price Boost

(Reuters, Julia Symmes Cobb, 31.Oct.2018) — Ecopetrol, Colombia’s state-run oil company, said on Wednesday its third-quarter net profit rose to 2.77 trillion pesos ($866.5 million), up 177 percent from the same period last year, thanks to higher global crude prices and increased output.

The company plans to invest between $3 billion and $3.5 billion during 2018 to boost production and explore for more oil to replenish dwindling reserves, drilling 620 wells and doubling the number of rigs in operation from last year.

Consolidated oil and gas production in the third quarter rose to 724,000 barrels per day (bpd), Ecopetrol said in a regulatory filing. That is the highest figure of the last ten quarters.

Protests in the first quarter closed three fields and lowered production to 701,000 bpd, before it rebounded to 721,000 bpd in the second.

Ecopetrol is targeting output of 725,000 bpd of crude and gas equivalent by the end of 2018, up from 715,000 bpd last year.

Strong performance across the company “has allowed an increase in the production of crude and gas, a reduction in crude imports for our refinery sector and in products for the local market and additionally, allowed us to enjoy the benefits of higher international prices,” Chief Executive Felipe Bayon said in the statement.

The company spent $789 million in investment in the third quarter, the statement said, concentrating on exploration and production, where spending was up 57 percent over the same period in 2017.

It has spent $1.79 billion through September, meaning investment during the fourth quarter will need to be substantive to meet the predicted total spending for the year.

Colombia has struggled to attract investment and maintain oil output as bombings and protests have frequently interrupted operations.

Ecopetrol’s Cano Limon-Covenas pipeline, which can transport up to 210,000 bpd, has been off-line for much of this year because of bombings and illegal taps.

The company has reserves equivalent to about seven years of production, well below the average of nearly 12 years for the world’s top oil and gas companies.

Earnings before interest, taxes, depreciation and amortization for July to September increased by 36.7 percent compared with the same quarter in 2017, to 7.99 trillion pesos, Ecopetrol said.

Total sales in the third quarter were up 34.2 percent compared with the same period last year, to 17.87 trillion pesos. ($1 = 3,202.44 Colombian pesos)

(Reporting by Julia Symmes Cobb; editing by Helen Murphy and Rosalba O’Brien)

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Colombia Plans Mexico-Style Oil Hedge After Recent Volatility

(Bloomberg, Matthew Bristow, 31.Oct.2018) — Colombia is planning to hedge its oil exports to protect the government from the violent swings in revenue it suffered in recent years.

The financing bill to be presented to Congress Wednesday proposes the creation of a fund that can buy derivatives from “foreign entities specialized in operations of this type,” according to a copy of the bill seen by Bloomberg. The bill needs to be passed by Congress to become law, and would take effect on Jan. 1.

Oil is Colombia’s largest export accounting for about a third of the total. The crash in prices in 2014 and 2015 forced the government to raise value added tax to cover the hole in its fiscal accounts, and led in 2017 to the nation’s first rating downgrade in 15 years. Colombia produces about 860,000 bopd.

The fund can’t issue debt, and the nature of hedging operations means that losses are possible, according to the bill.

Mexico buys options which gives it the right to sell oil at a certain price, protecting the country from a sudden price drop. In 2015, Mexico pocketed a record payout of $6.4 billion after crude prices crashed. For next year, the country has already spent $1.2 billion on hedging.

The government of President Ivan Duque, which took office in August, has a strong alliance to get laws through Congress. At the same time, it’s not clear that lawmakers will grasp the benefits of a stabilization fund, said Camilo Perez, chief economist of Banco de Bogota.

In the past, Colombian governments have been deterred from operations of this kind for fear of being accused of causing losses to the nation, Perez said. Other measures in the bill, such as the extension of value added tax to food staples, are likely to face opposition.

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AMLO’s Bad Start: Fitch Revises Mexico Outlook To Negative

(Forbes, Kenneth Rapoza, 31.Oct.2018) — Prognosis negative for Mexico. So says Fitch Ratings.

After a no vote on a new airport was reached yesterday in a referendum that president-elect Andrés Manuel López Obrador (aka AMLO) put on a special ballot, investors turned a bit sour. Elected this summer, AMLO takes over the presidency in December.

Mexico’s sovereign credit rating is still investment grade, but the outlook has slipped from stable to negative, the rating agency said on Wednesday. The stalled Mexico City airport project, one AMLO says is mired in dirty money, is just part of the problem.

There are risks that the follow-through on previously approved reforms, for example in the energy sector, could also stall and that other policy proposals will result in lower investment and growth than currently expected. His sole decision to cancel the construction of a new airport for Mexico City and potentially build one elsewhere—a failing bid—sent a negative signal to investors.

MSCI Mexico is down around 8% in the last five days.

Also, new proposals for large investments by state-owned oil company Pemex, whose creditworthiness have been under pressure due to debt burdens, are adding to the growing risk related to state liabilities, say Fitch analysts led by Charles Seville in New York.

AMLO’s election landslide was a strong mandate to tackle corruption, something that is also reverberating in other major Latin American countries like Brazil. AMLO also promised a significant shift in policy priorities and a different style of governing. His Morena party won a majority in both houses of Congress, which started work in September, enhancing his ability to push through his agenda once he starts the job on December 1.

A new budget is expected shortly after, together with a medium-term growth plan for Mexico. Similar to the existing government of Enrique Peña Nieto, the AMLO budget will likely see public sector borrowing requirements of 2.5% of GDP. So more bonds to be issued to Wall Street.

The incoming administration has pledged not to raise taxes for the first three years of the administration, a plus for pro-growth equity in Mexico. The current fiscal responsibility law limits growth in current spending, but AMLO can change that and put it to social use.

“After a lackluster second quarter which saw an outright contraction in activity, growth in Mexico is normalizing and moving back toward trend,” says Arthur Carvalho, an economist with Morgan Stanley. “Consumers appear to be in good shape.”

Continued export demand from the U.S. also keeps Mexican manufacturers happy, and services associated with external trade are doing well with room to move if the U.S. continues on its current trajectory.

As much as the recent growth normalization is welcome news, the more relevant debate is around the long-term prospects for Mexico—a country that has succeeded in delivering broad macro stability over a long period, but as an emerging market tied to the biggest consumer economy in the world, Mexico could be doing much better.

Expectations for Mexico’s interest rates went from no hikes to more hikes once the airport deal lost at the polls. The referendum sent the peso to its biggest decline in two years, pushing it back over 20 to 1.

JPMorgan Chase and Itau of Brazil say interest rates will go up on November 15 after the central bank policy meeting there in order to contain fallout from the peso. They previously forecasted no change. JPMorgan analysts think Banxico won’t stop there and will hike again in December, a negative for Mexico ETF investors.

If the transition period is any indication, AMLO’s road to “national redemption” will be a long and tricky one, Slate magazine wrote on Tuesday. AMLO has already made a number of “uncharacteristically ham-fisted choices,” wrote Leon Krauze, a news anchor for Univision in Los Angeles, in Slate.

Three weeks after his July 1 election, AMLO picked Manuel Bartlett from Peña Nieto’s party, a man he once accused of fraud, to be Mexico’s electric power commissioner.  That same day, he named Octavio Romero, an agricultural engineer, and his close personal friend, to run … an oil company, Pemex. Either this proves Mexico has very few of the best and brightest to pick from in government, or AMLO is confusing corn oil for crude. Either one could be right.

Meanwhile, some promises contained in the transition team, like increasing social welfare and government pensions, may be difficult to pull off within the budget framework. AMLO has said in the past that cutting government waste and graft would give him the money to transfer some wealth down-market.

This will surely take time and is not something Mexicans, or AMLO, should count on in year one of his presidency. The cost in doing so could exceed the amount of savings that have been proposed so far, savings such as restrictions to federal fund transfers to the states and cutting inefficient social programs.

Proposals that Pemex invest in new refining capacity to substitute for gasoline imports would entail higher borrowing and larger contingent liabilities to the government. AMLO said he would honor plans to open Mexican deepwater oil to foreign investors.

It was the airport deal that surprised markets yesterday and may have pushed credit watchdogs over the edge.

It should not have come as too much of a surprise, however. AMLO always said he was against the project due to corruption and overspending, and promised to put a new project up for a vote. He also said that investors such as debtholders and contractors in the now abandoned Mexico City airport project will be protected.

AMLO was once viewed as Mexico’s anti-Trump and compared by some to Brazil’s Luiz Inacio Lula da Silva. AMLO has reached out to Trump to help him stop a central American caravan of mostly men looking for jobs in the U.S., and eked out a better deal for Mexican autoworkers in the new NAFTA. For AMLO, comparisons to Lula are best forgotten. Lula is serving a 12-year prison sentence for his role in Operation Car Wash, Brazil’s largest ever bribery scandal, affiliated with state-run oil firm Petrobras.

I’ve spent 20 years as a reporter for the best in the business, including as a Brazil-based staffer for WSJ. Since 2011, I focus on business and investing in the big emerging markets exclusively for Forbes. My work has appeared in The Boston Globe, The Nation, Salon and U…

For media or event bookings related to Brazil, Russia, India or China, contact Forbes directly or find me on Twitter at @BRICBreaker

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Petrobras Announces $1.4bn Sale Of African Oil Business

(Ft.com, Andres Schipani, Neil Hume, 31.Oct.2018) — Brazil’s state-controlled oil company Petrobras agreed to sell its 50 per cent stake in an African enterprise to a consortium led by trader Vitol, the world’s biggest independent energy trader.

Vitol and its partners, Africa Oil Corp and Delonex Energy, will pay $1.4bn for the Brazilian company’s 50 per cent holding in Petrobras Oil and Gas BV (POGBV).

“Vitol has a long history of investing in Nigeria’s energy sector. We are pleased and proud to add this significant upstream asset to our infrastructure and downstream Nigerian investments,” said Vitol chief executive Russell Hardy in a statement. “POGBV has a strong non-operated portfolio, managed by Chevron and Total, and which represents circa 20 per cent of Nigerian production.”

The Brazilian national oil company owns 50 per cent of the Netherlands-based Petrobras Oil & Gas B.V, while BTG Pactual SA and the UK-based Helios Investment Partners hold the remaining stake in the venture.

The sale is part of the Brazilian company’s plan to offload $21bn assets by the end of this year to help cut one of the oil industries highest debt piles. Petrobras’s net debt stood at $73.66bn by the end of June 2018, down 13 per cent from $84.87bn at the end of last year. For Vitol, the deal marks a rare investment in the upstream oil sector.

POGBV has a participation in deepwater oil exploration blocks offshore in Nigeria — that include two producing fields, Agbami and Akpo -, that provide an average production of around 21,000 barrels of oil per day to the Brazilian giant. It also contains the Engina field, the largest ongoing oil development in the west African country, as well as the Preowei discovery.

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PDVSA Bewilders Bond Analysts By Making $949 Million Payment

(Bloomberg, Davide Scigliuzzo, 31.Oct.2018) — Venezuela just forked over almost $1 billion to stay current on a bond backed by shares of its U.S. refiner Citgo.

The question is why.

Yes, the payment ensures that Venezuela’s state-run oil company PDVSA gets to hold onto Citgo Holding Inc. for now, but many analysts think it’s just a matter of time before it has to forfeit the company.

“It is hard to visualize a scenario in which Venezuela does not sooner or later lose Citgo to one of its defaulted creditors,” Francisco Rodriguez, chief economist at brokerage Torino Capital, wrote in a note on Monday.

With the country starved for cash and already in default on many of its foreign bonds, the line of creditors that could lay their hands on Citgo is very, very long: Russia (from collateral for loans from state-run Rosneft); Canadian miner Crystallex International Corp. and U.S. oil giant ConocoPhillips (both of which won international arbitration cases against Venezuela); Citgo’s own bondholders (from collateral on debt); and the PDVSA bondholders who were paid Monday.

Given this backdrop, most analysts have struggled to come up with a clear-cut explanation for why the payment was made. Here are a handful of the most plausible theories that they put forward:

— Citgo’s strategic value for the Venezuelan government is so great that the payment may be worth it even if the company will be lost to creditors in coming months. Citgo is a reliable buyer of PDVSA crude abroad and also provides the company with additives that make Venezuela’s heavy crude easier to export.

— Venezuela is appealing a U.S. ruling that awarded Crystallex the right to collect on an arbitration award by taking shares of PDV Holding, the Delaware corporation through which PDVSA controls Citgo. By staying current on the collateralized PDVSA bonds, Venezuela can buy time as it awaits a verdict. Attempts by PDVSA to stop a sale of Citgo have so far failed. A key hearing is scheduled for Dec. 20.

— A default on the collateralized PDVSA bonds could complicate Venezuela’s relations with Russia. If holders of the bonds foreclose on the 50.1 stake in Citgo that represents their collateral and force a sale of the company, Rosneft, that has a claim to the remaining 49.9 percent, could be sidelined in that process.

— Citgo may have achieved symbolic value for President Nicolas Maduro even if the socialist regime has considered getting rid of the unit in the past. Losing Venezuela’s most valuable asset abroad could be seen as a defeat for a government that is already deeply unpopular at home and has made of standing up to hostile foreign powers a key part of its rhetoric.

— For now the 2020 bond is trading over 91 cents on the dollar with investors eyeing the next payment in April.

— With assistance by Patricia Laya, Fabiola Zerpa, Ben Bartenstein, and Jose Enrique Arrioja

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PDVSA Ships $35 Million Oil Cargo To Pay Dividends To ONGC – Sources

(Reuters, Alexandra Ulmer, Nidhi Verma, 31.Oct.2018) — Venezuela’s state-run PDVSA has shipped a crude cargo valued at $35 million as partial payment to Indian oil company ONGC Videsh Ltd for overdue dividends from a joint venture, according to two people familiar with the matter.

The payment is based on an agreement signed in 2016 by PDVSA and ONGC Videsh, the overseas investment arm of India’s Oil and Natural Gas Corp (ONGC.NS), to repatriate about $530 million in dividends due from their San Cristobal oil project in Venezuela.

But Caracas-based PDVSA had not transferred any money to ONGC Videsh in over a year, the sources said, due to Venezuela’s economic meltdown and sanctions that complicate payments through U.S. banks that had made it difficult to pay in cash.

That changed when some 500,000 barrels of Venezuelan crude left Venezuela’s main oil port of Jose earlier in October, according to one of the sources.

“ONGC Videsh confirms that in October 2018 PDVSA has allocated Merey 16 crude oil parcel of 500,000 barrels to ONGC Videsh towards payment of outstanding dividend,” ONGC Videsh said in an email reply to Reuters.

It was not immediately clear which tanker was carrying the crude. Very large crude carriers (VLCCs) Iwatesan and Kassab set sail from Jose several weeks ago with India’s Sikka port as their destination, according to Refinitiv Eikon vessel tracking data.

PDVSA, which faces U.S. and international court actions over pending debts, recently has begun paying some creditors, mostly in oil, to avoid further asset seizures. The company is also seeking to stimulate investment in Venezuela’s unraveling oil industry, where annual production is at its lowest in almost seven decades, by trying to meet some of its obligations to foreign partners.

The payment to ONGC was arranged through India’s Reliance Industries (RELI.NS), operator of the world’s biggest refining complex.

Reliance will receive the Venezuelan crude and will ultimately pay the $35 million to ONGC, according to one of the sources.

Venezuela depends on oil for almost all its export revenue. The combination of falling crude production and exports from a lack of investment, U.S. sanctions and hyperinflation have pushed the OPEC-member country’s economy to near-collapse.

ONGC had previously received $89 million from PDVSA as part of the 2016 payment agreement, reducing the outstanding debt to about $440 million, but no other transfers had been received in more than a year. These payments were made by Russia’s state-run Gazprombank in January 2017 and by Reliance in April 2017.

ONGC Videsh Managing Director N. K. Verma said in May that PDVSA had halted all payments to the firm for more than six months.

“Since the (payment) process has again started, we hope to receive more such parcels in India to clear outstanding dues,” one of the sources said.

Reliance and PDVSA did not respond to Reuters’ request for comment.

The Venezuelan state-run firm this week started transferring payments to holders of its 2020 bonds, which are backed by collateral in its Citgo Petroleum [PDVSAC.UL] refining arm, after shifting its export logistics during the third quarter to raise more cash. [nL2N1XA0ZE] [nL2N1X41HJ]

Since late August, PDVSA also made partial payments in cash and crude to U.S. producer ConocoPhillips (COP.N) to honor a $2-billion arbitration award.

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Guyanese Dies Aboard Guyana-Registered Oil Tanker In Grenada

(DemeraraWaves, 31.Oct.2018) — Police in Grenada have confirmed that a Guyanese man died aboard the MV Ocean Trader – a Guyanese registered ship- that was docked in Grenada last weekend.

Dead is 41-year old Permanand “Short Man” Permaul.

The vessel departed that Caribbean island Tuesday evening following the completion of an investigation by Grenadian law enforcement agents

An official from the Grenada Port Authority explained that whenever there is a fatality onboard any ship in its waters, the nation where the ship is registered must be notified. “We have already done this and cannot share further details about the cause of the fatality,” said the official who is in a management position.

Guyana’s Maritime Administration (MARAD) has confirmed that the vessel is indeed registered there and was informed about the fatality. The official said the owner of the vessel, Mr. F. Amin, would be contacted and he is expected to take full responsibility for the body.

The boat, which was docked at the St George’s Cargo Port, was visited by officers from the Criminal Investigations Department and applied the required protocol following the report. “On arrival, they observed the motionless body of Permanand Permaul alias “Short Man”, 41-year-old citizen of Guyana lying on his back on the deck,” said an official report to authorities.

“The officers met and spoke with Yuvraj Persaud, 36 yrs. old Captain Master a citizen of Guyana who stated that on October 27th about 22:30 hrs, he was inside his cabin sleeping when one of the workers informed him that Permanand who was cleaning inside one of the tanks got knock out. As a result, he made checks and saw him lying on the floor,” the report said.

The report said that the captain sought assistance and gave the deceased Cardio-Pulmonary Resuscitation (CPR) but that did not revive him. A doctor was then called to the scene and declared Permaul dead.

An undertaker took possession of body which is expected to be flown out of Grenada to Guyana on Thursday. Police have not shared the autopsy results with the media.

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ENAP Places 11-Year Bonds In NYC For $680 Million

(Energy Analytics Institute, Aaron Simonsky, 30.Oct.2018) — ENAP finalized an international bond placement in New York for $680 million. The placement was at 5.261% with a spread of 215 basis points over the benchmark 10-year U.S. Treasury Bond, while coverage was 5.25%. Capital amortizations are in years 9, 10 and 11, the company announced in an official statement on its website.

Bank of America Merrill Lynch, Citigroup and Scotiabank acted as placement agents.

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Pioneer Energy Services Reports 3Q:18 Results, Updates On Colombia

(Pioneer Energy Services, 30.Oct.2018) — Pioneer Energy Services reported financial and operating results for the quarter ended September 30, 2018. Third quarter and recent notable items include:

— Domestic drilling fleet was fully utilized during the third quarter, and generated an average margin per day of $10,237, up 7% from the prior quarter.

— In Colombia, we expect to execute a contract with a new, multi-national client to begin operations later in the fourth quarter.

— Steady improvement in well servicing activity as the outlook for completion-related services in our operating areas continues to strengthen.

Consolidated Financial Results

Revenues for the third quarter of 2018 were $149.3 million, down 4% from revenues of $154.8 million in the second quarter of 2018 and up 27% from revenues of $117.3 million in the third quarter of 2017 (“the year-earlier quarter”). The decrease from the prior quarter is primarily attributable to weaker activity levels in wireline, which was partially offset by increased revenues in all other segments.

Net loss for the third quarter of 2018 was $5.2 million, or $0.07 per share, compared with net loss of $18.2 million, or $0.23 per share, in the prior quarter and net loss of $17.2 million, or $0.22 per share, in the year-earlier quarter. Adjusted net loss(1) for the third quarter was $5.6 million, and adjusted EPS(2) was a loss of $0.07 per share as compared to adjusted net loss of $14.8 million, and an adjusted EPS loss of $0.19 per share in the prior quarter, and adjusted net loss of $11.3 million, and an adjusted EPS loss of $0.15 per share in the year-earlier quarter.

Third quarter adjusted EBITDA(3) was $28.6 million, up from $16.9 million in the prior quarter and up from $14.0 million in the year-earlier quarter. The increase from the prior quarter was primarily due to a $9.7 million decrease in phantom stock compensation expense associated with the decrease in the fair value of the awards. Phantom stock compensation benefit during the third quarter was $3.7 million, while expense during the prior quarter was $6.1 million. The increase in adjusted EBITDA from the prior quarter was also due to improved margin per day in domestic drilling, and improved gross margin in both coiled tubing and well servicing. The increase from the year-earlier quarter was due to higher demand and pricing for all of our service offerings.

Operating Results

Production Services Business

Revenue from our production services business was $89.6 million in the third quarter, down 8% from the prior quarter and up 20% from the year-earlier quarter. Gross margin as a percentage of revenue from our production services business was 24% in the third quarter, up from 23% in the prior quarter and up from 22% in the year-earlier quarter. Despite the sequential decrease in revenue, which was attributable to softer wireline services activity and exacerbated by weather conditions in Texas, gross margin improved due to increased utilization in our coiled tubing segment and slightly improved utilization and pricing in our well servicing segment. During the third quarter, demand for our large-diameter coiled tubing services increased. Our well servicing segment also saw modest increases in completion-related services.

The decrease in production services revenues from the prior quarter was attributable to certain wireline customers that delayed completion activities in various regions in which we operate as well as a reduction in activity from weather-related events in the Gulf Coast region. This decline in wireline revenues was partially offset by increased demand for our coiled tubing and well servicing operations, both of which also experienced revenue growth sequentially. As compared to the year-earlier quarter, revenue rates have improved for all of our production services business segments, resulting in revenue growth of 20%.

Well servicing average revenue per hour was $552 in the third quarter, up from $540 in the prior quarter and up from $529 in the year-earlier quarter. Well servicing rig utilization was 51% in the third quarter, up from 49% in the prior quarter, and up from 43% in the year-earlier quarter. Coiled tubing revenue days totaled 362 in the third quarter, as compared to 350 in the prior quarter and 368 in the year-earlier quarter. The number of wireline jobs completed in the third quarter decreased 11% sequentially and decreased 3% as compared to the year-earlier quarter.

Drilling Services Business

Revenue from our drilling services business was $59.7 million in the third quarter, reflecting a 4% increase from the prior quarter and a 40% increase from the year-earlier quarter.

Our domestic drilling fleet was fully utilized during the current, prior and year-earlier quarters. Domestic drilling average revenues per day were $25,076 in the third quarter, up from $24,508 in the prior quarter and up from $23,873 in the year-earlier quarter. Domestic drilling average margin per day was $10,237 in the third quarter, up from $9,550 in the prior quarter and up from $9,084 in the year-earlier quarter. Revenue per day increased as compared to the prior and year-earlier quarters primarily due to certain contracts that re-priced at higher dayrates. Margin per day increased primarily from improvement in supplies, repair and maintenance costs that returned to normalized levels, as well as improvement in average dayrates from several rigs which repriced higher between $2,000 per day and $5,000 per day, offset by two rigs which re-priced lower by approximately $5,000 per day in August and September.

International drilling rig utilization was 76% for the third quarter, down from 85% in the prior quarter and up from 38% in the year-earlier quarter. International drilling average revenues per day were $41,158, up from $35,061 in the prior quarter and up from $26,155 in the year-earlier quarter, while average margin per day for the third quarter was $7,327, down from $7,583 in the prior quarter and up from $2,773 in the year-earlier quarter. Utilization and margin per day in the third quarter were down sequentially as one rig was released in early September as a client made adjustments to its drilling program, and another rig incurred non-revenue days as it changed operators in August. The increase in revenue per day was primarily due to the recognition of demobilization revenues during the third quarter. Utilization is based on daywork days and mobilization days between wells, but does not include initial mobilization days on new contracts or demobilization days when contracts end, which impacted our utilization for the third quarter.

Currently, all 16 of our domestic drilling rigs are earning revenues, 14 of which are under term contracts, and five of our eight rigs in Colombia are earning revenue under daywork contracts, and one is earning revenue during demobilization. We expect to execute a contract for the one rig in Colombia that was idle for most of September, and it is expected to begin mobilizing in mid-November and begin drilling in early- to mid-December. A second rig was released in late October and is currently demobilizing; however, we are finalizing a new contract, and the rig is also expected to begin mobilizing in mid-November with an anticipated start date in early- to mid-December. In our domestic drilling operations, we continue to expect our contracted new-build drilling rig to be deployed to West Texas and begin operations in the first quarter of 2019.

“Our third quarter results were driven by steady improvement in our domestic drilling operations, which are benefiting from strong demand and upward trending dayrates,” said Wm. Stacy Locke, President and Chief Executive Officer. “Our fleet of top performing drilling rigs is securing new contracts at higher rates and staying fully utilized. The last remaining legacy new-build contract will reprice downward approximately $5,000 in the fourth quarter, but will be offset by three rigs repricing at higher dayrates between $2,000 per day and $5,000 per day. Our new-build rig is expected to mobilize to the Permian in the first quarter of 2019 to begin a three-year term contract with an existing client. Similar to our most recent new-builds, this rig can walk 150 feet, pass over wellheads 21 feet high, contains two 2,000 horsepower mud pumps, a 7,500 psi mud system, a 500-ton high torque topdrive and can rack approximately 25,000 feet of five inch drill pipe. We believe it will be one of the highest margin and top performing rigs in the U.S. The outlook for domestic drilling operations remains very bright.

“In Colombia, we had one rig idle for the month of September but we expect to execute a contract with a multi-national client to begin mobilizing the rig in mid-November and to commence drilling operations in early- to mid-December. This new opportunity reflects our efforts in expanding our client base in Colombia and our growing reputation as a provider of excellent service and safety. In late October, we experienced another round of dayrate adjustments where several rigs re-priced upward between $1,000 per day and $3,000 per day. We are seeing improvement in rig utilization and dayrates in Colombia across the industry, and we remain optimistic that our international drilling operations will experience stronger pricing and demand trends in 2019.”

“In our production services business, our high-spec well servicing rig fleet activity is gradually improving with modest increases in 24-hour work which includes drill-out completion work. We will be slowly adding the ancillary equipment necessary to provide operators with a complete drill-out solutions package and, as we add, we expect margins will improve. We see drill-out opportunity in a number of geographic areas. Similarly, coiled tubing activity and margins are improving as we adjust our fleet mix to more large-diameter coiled tubing units. Our new 2-3/8” unit delivered in July performed well during the quarter and, in December, we expect to deploy an additional new 2-3/8” coiled tubing unit that we anticipate will immediately begin contributing. Once this unit is delivered, five of our nine actively marketed units will be large-diameter pipe serving two good markets.”

“Although we anticipate the normal seasonal slowdown in the fourth quarter and some impact from operators’ exhausted capital budgets, we expect overall activity to remain healthy and improve as we enter into 2019.”

Fourth Quarter 2018 Guidance

In the fourth quarter of 2018, revenue from our production services business segments is estimated to be flat to down 4% as compared to the third quarter of 2018. Margin from our production services business is estimated to be 20% to 23% of revenue. Domestic drilling services rig utilization is expected to be 100% and generate average margins per day of approximately $9,700 to $10,200. International drilling services rig utilization is estimated to average 67% to 72%, which is impacted by initial mobilization and demobilization days, and generate average margins per day of approximately $8,000 to $9,000. We expect to have seven rigs operating on daywork rates in Colombia by the end of the fourth quarter.

We expect general and administrative expense to be $19 million to $20 million in the fourth quarter of 2018, which as it relates to phantom stock compensation expense, is based on the closing price of our common stock at September 30, 2018, which was $2.95.

Liquidity

Working capital at September 30, 2018 was $120.1 million, down from $130.6 million at December 31, 2017. Cash and cash equivalents, including restricted cash, were $53.5 million, down from $75.6 million at year-end 2017. During the nine months ended September 30, 2018, we used $48.8 million of cash for the purchase of property and equipment, and our cash provided by operations was $21.5 million.

Capital Expenditures

Cash capital expenditures during the nine months ended September 30, 2018 were $48.8 million, including capitalized interest. We estimate total cash capital expenditures for 2018 to be approximately $70 million, which includes $23 million for two large-diameter coiled tubing units, one of which was delivered in early July, three wireline units, two of which were delivered in January, high-pressure pump packages for completion operations, and the construction of the new-build drilling rig expected to be completed in 2019.

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Colombia’s Ecopetrol Advances With Fracking Plans, Seeks License

(Energy Analytics Institute, Piero Stewart, 30.Oct.2018) — Colombia’s state oil company Ecopetrol has requested an environmental license over an area where it plans to begin a pilot project to explore crude oil in unconventional deposits with the hydraulic stimulation technique known as fracking.

If a permit from Colombia’s National Environmental Licenses Authority (Anla by its Spanish acronym) is approved, the pilot project would be carried out in coming months in the Magdalena Medio region where the La Luna and Tablazo geological formations converge, and which holds shale potential estimated between 2,000 and 7,000 million barrels of original oil in site, reported the daily newspaper El Tiempo, citing Ecopetrol President Felipe Bayón.

Colombia currently has oil reserves that total 1,782 million barrels of crude oil, the daily reported.

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Argentina Restarts Natural Gas Exports To Chile

(Reuters, Dave Sherwood, 30.Oct.2018) —  Argentina has begun exporting natural gas to Chile after a 12 year interlude, Chilean President Sebastian Pinera said on Tuesday, as the two South American neighbors seek to increasingly integrate their energy supply and electricity grids.

The unconventional gas is being piped from Argentina’s oil- and gas-rich Vaca Muerta shale field in the Neuquen basin, then sent over the Andes mountain range to Chile’s southern province of Biobio.

“We are working enthusiastically with (Argentine) President Mauricio Macri to integrate our energy supply,” Pinera said in a speech.

The exports mark a turning point in energy trade in the region. Argentina, which sits atop the world’s No. 2 shale gas reserves, was once a major supplier of natural gas to Chile, but triggered a diplomatic crisis in the mid-2000s by cutting off shipments when its own supplies ran low.

The move sent Chile, a global mining powerhouse that has few hydrocarbons of its own, scrambling to find new sources of supply. The spat also helped foster a move towards alternative energy sources like wind and solar in Chile.

Pinera said the two countries had very different, but often complementary, energy needs, and that depending on the time of year and circumstance, could either export or import fuel and electricity across their shared border.

“This will permit us to back one another up without having to spend excess money to do so,” he said.

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Bolivia To Kick Off Sale Of Super Ethanol 92 On Nov. 1

(Energy Analytics Institute, Jared Yamin, 30.Oct.2018) — Bolivia announced it expects to initiate sale of its new Super Ethanol 92 fuel on November 1, 2018. Santa Cruz will initiate the sales process from its 30 service stations.

By year end 2018, an estimated 300 service stations across Bolivia will sell the new fuel. By year end 2019, it is estimated that approximately 700 service stations will be geared up to sell the new fuel, reported the daily newspaper La Razón.

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Texas Man Pleads Guilty In Ongoing Venezuela Bribery Probe

(The Wall Street Journal, Samuel Rubenfeld, 30.Oct.2018) — U.S. prosecutors said they secured another guilty plea in their ongoing corruption probe of Venezuela’s state-run oil company, Petroleos de Venezuela SA, or PdVSA.

Ivan Alexis Guedez, a former PdVSA procurement officer from Katy, Texas, pleaded guilty to a money-laundering conspiracy charge. He is scheduled to be sentenced Feb. 20, 2019. Mr. Guedez agreed to forfeit the proceeds of his activity, prosecutors said.

“Ivan is a good man. He looks forward to putting this matter behind him,” said Matt Hennessy, an attorney for Mr. Guedez.

Including Mr. Guedez, at least 15 people have pleaded guilty in connection with the larger, ongoing probe into bribery at PdVSA, prosecutors said Tuesday in a statement.

Mr. Guedez agreed with other PdVSA officials and businessmen employed by a Miami-based PdVSA supplier that, in exchange for bribe payments, they would direct PdVSA business toward the supplier, prosecutors said.

The payments were concealed, prosecutors said, through communications involving fictitious email addresses, the creation of false invoices to justify the payments and directing the bribes to a Swiss account in the name of a shell company before their disbursement.

Write to Samuel Rubenfeld at Samuel.Rubenfeld@wsj.com.

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Mexico Spends $1.2 Billion To Lock In Crude Rally For 2019

(Bloomberg, Eric Martin, 30.Oct.2018) — Mexico spent about 23.5 billion pesos ($1.2 billion) through the third quarter from its budget stabilization fund, which historically has been used almost exclusively to hedge forward oil prices, according to a quarterly report.

The hedges, often known as Wall Street’s largest oil trade, are kept private to prevent hedge funds and trading houses from front-running the Mexican government’s orders. The document doesn’t detail how much crude was hedged. The government may be close to finished with purchasing the hedges to cover next year’s exports, assuming costs remained about the same as last year, when it spent 24.1 billion pesos.

The report suggests that most of the hedging so far for 2019 was done from April through June; a previous report showed Mexico spent 13.8 billion pesos for the same purpose during the first half of the year, meaning that it spent 9.6 billion pesos on puts in the third quarter. While that may have allowed Mexico to lock in prices as the nation’s oil mix rallied 22 percent in the second quarter, the government might have been better off waiting, given that prices climbed another 13 percent to an almost four-year high of $77.73 a barrel earlier this month.

The government can typically hedge at a lower cost when oil prices are higher, given that higher prices can make the banks it works with feel more comfortable that the market will continue to rise and the nation will be less likely to collect on the puts, which act like a kind of insurance against a drop in prices. Mexico has received handsome payouts from the program, earning a record $6.4 billion in 2015 after the Organization of Petroleum Exporting Countries embarked on a war for market share that sent prices tumbling. The country made $5 billion in 2009, after the global financial crisis, and another $2.7 billion in 2016.

Bloomberg News reported in May that Mexico had been asking counter-parties for quotes to hedge crude exports.

The team of incoming President Andres Manuel Lopez Obrador has said the oil hedging program by the Finance Ministry and the state-owned oil company known as Pemex, will continue during his administration.

— With assistance by Carlos M Rodriguez

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Venezuela Poses Clear Threat – Comments Could Refuel Trump Military Action Talks

(Express, Ciaran McGrath, 30.Oct.2018) — Venezuela represents a “clear threat to regional stability” and a “direct challenge” to the United States, a senior US Government official has said, as the possibility of Donald Trump taking military action resurfaced after widespread speculation in the summer.

The oil-rich South American country’s economy has sunk into crisis under President Nicolas Maduro, as many as 1.9 million Venezuelans have emigrated since 2015, according to the United Nations.

Some 90 percent of recent departures, the United Nations says, remain in South America.

Latin American governments including those of Argentina, Brazil, Chile, Colombia, Mexico and Peru are due to meet tomorrow to coordinate their response.

Speaking prior to the talks, Marshall Billingslea, assistant secretary for terrorist financing at the Treasury Department, told an audience in Washington: “Venezuela poses a clear threat to regional stability and security.

“This is a hemispheric issue and the implosion of the regime there is a direct challenge for us.”

Mr Trump, who would like to see Mr Maduro removed from power, broached the idea of military action last summer, saying: “We’re all over the world and we have troops all over the world in places that are very, very far away.”

“Venezuela is not very far away and the people are suffering and dying.
“We have many options for Venezuela, including a possible military option, if necessary.”

US Secretary of State Rex Tillerson and national security adviser HR McMaster, both of whom have since left Mr Trump’s administration, are believed to have been instrumental in persuading him of the folly of the idea, according to reports in July.

A senior administration official relayed details of the conversation, suggesting aides including Mr Tillerson and Mr McMaster had take turns explaining the risks to Mr Trump.

In September, on the sidelines of the United Nations General Assembly, Mr Trump returned to the subject during a private dinner with leaders from four Latin American allies.

The US official said Mr Trump did so despite being advised not to raise the matter.

He reported Mr Trump as having said: “My staff told me not to say this” before asking each of the leaders present if they were sure they did not want a military solution.

All of them assured him they were.

At least 6,000 Venezuelans were lined up at Peru’s northern border on Tuesday in hopes of entering the country before a deadline for acquiring residency.

Another 4,000 were due to arrive in the next two days, Peru’s ombudsman’s office said.

Peru was one of the first countries to offer temporary residency cards for Venezuelans who have been fleeing their homeland and crossing Colombia and Ecuador to reach Peru.

As the number of Venezuelans in Peru has surged to nearly half a million, the government moved the deadline from the end of the year to the end of October.

The exodus has stressed social services and sparked concerns about crime and jobs in host countries, and many migrants are facing restrictive immigration laws and discrimination.

Peruvian President Martin Vizcarra said Monday that Peru could not give residency to Venezuelans indefinitely.

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Investors Begin Receiving Payment PDVSA 2020 Bond: Sources

(Reuters) — Investors have started to receive payment of interest and principal on Venezuelan state oil company PDVSA’s 2020 bond, two bondholders said on Tuesday.

(Reporting by Corina Pons, writing by Brian Ellsworth Editing by Chizu Nomiyama)

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Petrobras Stops Chevron Plan To Drill In Brazil Offshore Block: Sources

(Reuters, Alexandra Alper, Marta Nogueira, 30.Oct.2018) — A decision by Petrobras not to invest in drilling new wells has derailed Chevron Corp’s plan to resume exploration in a Brazilian offshore field, people familiar with the matter said.

Chevron, which operates the field with a 52 percent stake, approved the drilling plan but Petrobras, which holds a 30 percent stake nixed the move, according to two people close to the talks.

Brazil’s state-controlled oil company, officially known as Petroleo Brasileiro, is prioritizing development of pre-salt offshore resources where billions of barrels of oil lie under a thick layer of salt below the ocean floor, the two people said. The Frade field is post salt and has less oil than pre-salt fields.

Petrobras and Schlumberger NV, which planned to drill six wells for some $20 million, could not immediately be reached for comment. Chevron declined to comment.

Brazilian energy company Petro Rio SA said on Monday it bought the remaining 12 percent from Frade Japao. Petro Rio SA CEO Nelson Queiroz told Reuters in an interview on Tuesday the company would be interested in buying Petrobras’ stake.

“We see extending the life of the field as a positive, drilling new wells,” he said.

Chevron and Petrobras halted exploration in the Frade field after a 2011 spill that led to criminal charges and a civil lawsuit.

Petrobras, one of the world’s most indebted oil companies, has slashed outlays and focused its shrunken capital expenditure budget on developing stakes in the world class pre-salt play in Latin America’s top producer. Other oil majors are also spending top dollar to lock in stakes to the area to replenish shrunken reserves amid rising oil prices.

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Petrobras Updates On Diesel Price Subvention Program

(Petrobras, 29.Oct.2018) — Petrobras, following up on the release disclosed on Sep. 28, 2018, informs that, due to the methodology determined in the National Petroleum Agency (ANP) Resolution nº 743, of Aug. 27, 2018, the average price of diesel established by the company in its refineries and terminals will be R$2.1228/liter from Oct. 30, 2018 to Nov. 28, 2018, which represents a reduction of 10.1% compared to the current average price.

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

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Ecopetrol Seeks License To Start Fracking Tests In Colombia

(Reuters, Luis Jaime Acosta, 29.Oct.2018) — Colombia’s state oil company Ecopetrol has requested an environmental license to launch a pilot plan to explore for crude oil from unconventional deposits using fracking technology, its chief executive said.

Felipe Bayon told Reuters late on Friday the plan, which could triple Colombia’s proven reserves, would be supervised by local communities and environmentalists to ensure it meets safety standards.

Colombia does not currently carry out oil exploration or exploitation activities with fracking, but President Ivan Duque favors the technique, used to extract oil and gas from unconventional deposits in rock formations that do not allow the movement of fluid.

Hydraulic fracturing, or fracking, technology fractures rock formations with pressurized liquid. Its use is credited for booming oil and gas production in the United States, but environmental activist have blamed it for water pollution. Local communities and environmentalists in Colombia have opposed the technology.

If the permit is granted the pilot would begin in the coming months in Magdalena Medio, an area where the La Luna and Tablazo geological formations converge and which could have between 2 billion to 7 billion barrels of oil, Bayon said during a visit to the Barrancabermeja refinery in central Colombia.

This would triple the nation’s reserves. Colombia has 1.78 billion barrels of proven reserves of crude.

“The Magdalena Medio zone has a potential to be determined, but it could continue to help the country’s energy security and self-supply,” he said.

Bayon declined to say how much money would be invested in the pilot.

Colombia, which produced 854,121 barrels of oil per day in 2017, was hurt in recent years by the drop in international oil prices, hitting hard at the economy.

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Related stories:

Colombia’s Ecopetrol Advances With Fracking Plans, Seeks License

Weatherford Reports Higher Activity Levels In Argentina and Mexico

(Energy Analytics Institute, Ian Silverman, 29.Oct.2018) — Weatherford International plc reported Western Hemisphere 3Q:18 revenues of $762 million were down $7 million, or 1%, sequentially, and down $5 million, or 1%, year-over-year, the company reported in an official statement.

Compared to the second quarter of 2018, revenues in Canada improved seasonally as the rig count increased following the spring breakup, but were offset by lower results in the United States and negative foreign exchange impacts in Latin America.

Year-over-year revenue increases from integrated service projects in Latin America were offset by lower activity levels in Canada as crude differentials expanded, which reduced demand for Completions and Production services and products.

Third quarter segment operating income of $78 million was up $28 million sequentially and up $75 million year-over-year. The sequential increase benefited from lower expenses and improved operating efficiencies mainly associated with the transformation. The year-over-year improvements were driven by a combination of higher activity levels in Argentina and Mexico and the positive impacts from our transformation efforts, which overcame lower operating results in Canada and foreign exchange effects in Latin America, the company said.

Operational highlights in Latin America during the quarter include:

— In Mexico, Weatherford replaced an incumbent’s system with the Magnus RSS, which ran onshore alongside the RipTide® drilling reamer to drill and enlarge a directional well with a 42° profile.

— Weatherford displaced an incumbent in Brazil by signing a new tubular running contract with Petrobras. The contract awards Weatherford work on 14 deepwater rigs, which represents significant market share.

— Working in collaboration with a customer, Weatherford devised an integrated solution that included logging, pressure pumping services, and the FracAdvisor® workflow to execute the first documented multistage frac job in the Jurassic Superior Pimienta Shale in Mexico. The large-scale solution complied with new government regulations and overcame significant logistical issues to fracture 17 stages in less time than allotted.

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Bolsonaro Gets Brazilian Oil Windfall With Output Poised To Soar

(Bloomberg, Sabrina Valle, 29.Oct.2018) — Brazil’s President-elect Jair Bolsonaro is staring at an oil windfall.

After a decade of stagnant production, Brazil’s offshore mega-projects are about to deliver a double whammy with exports set to surge and Brent prices comfortably above $70 a barrel. This means more revenue for a country beset with fiscal deficits, and more activity in a key industry, said Decio Oddone, the head of Brazil’s National Petroleum Agency.

The oil turnaround gives the government more than just cash — it promises to revive the fortunes of Petrobras, the much-maligned state-controlled state oil company that’s a source of pride for many Brazilians but which has spent the past few years mired in scandal.

Brazil Swings Right With Jair Bolsonaro’s Commanding Victory

It takes years to get a deep-water project flowing in Brazil, and Bolsonaro is likely to get all the credit from investment decisions made in the past.

“A lot of Brazilians may see it as the effect of a policy or stance that he implemented and not necessarily the continuation of existing policies,” said Roberta Braga, an associate director who focuses on Latin America for the Atlantic Council, a Washington-based think tank. “If this pays off, his image would be improved significantly.”

Petrobras Chief Executive Officer Ivan Monteiro has said production will increase “spectacularly” in 2019 and that the company is re-opening an office in Singapore to help market the boost in exports.

Petrobras’s production is expected to rise 9 percent in 2019, from 2 million barrels a day to 2.4 million, according to UBS Group AG. Morgan Stanley expects and even greater increase of 12 percent. While Petrobras hasn’t announced an official target for 2019 yet, a record eight production vessels have started to be installed this year and will gradually ramp up throughout next year. Together, the floating platforms have the potential to nearly double Petrobras’s oil output capacity.

The increase is thanks to large deposits of oil found a decade ago in deep waters of the Atlantic. The so-called pre-salt – reserves trapped under a thick layer of salt – is now responsible for more than half of the country’s production and is attracting growing investments by oil majors.

This region the main source of value for Petroleo Brasileiro SA, as the company is formally known, with unparalleled productivity and low-risk exploration, Morgan Stanley analysts Bruno Montanari and Guilherme Levy said in an Oct. 23. report.

Even though production has been flat in 2018, the combination of higher oil prices and a stronger real are already delivering a windfall. Petrobras paid 28 percent more in taxes and royalties in the first half of 2018, or 75 billion reais, compared with the year-earlier period. Petrobras publishes third-quarter earnings on Nov. 6.

Petrobras also resumed paying dividends and the second quarter was its most profitable since 2011. This contrasts sharply with the multi-billion dollar writedowns it posted in during Brazil’s biggest graft scandal, known as Carwash, a pay-to-play scheme where a group of company executives colluded with suppliers to inflate contracts.

One source of uncertainty is who will lead Petrobras under Bolsonaro, who takes office on Jan. 1. He hasn’t named his energy team, which includes the energy minister, or possible recommendations for the board and top management at Petrobras.

“With elections behind us, eyes now turn to the transition government and the selection of the names for the next cabinet,” Bradesco analyst Fernando Barbosa said in a note to clients on Monday.

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Petrotrin Moves Against Land Grabbers

(Trinidad and Tobago Newsday, Azard Ali, 29.Oct.2018) — Starting today, Petrotrin will employ measures to stop people from grabbing its lands.

The state-owned refinery is expcted to cease operations on November 30, and transfer its assets into new companies being set up.

Even as it does so, it now faces an onslaught from people attempting to illegally occupy its lands.

Newsday understands that patrols are expected to begin today, and illegal structures will be demolished.

Tomorrow, Petrotrin officials will go out with the company’s police to erect eviction signs.

Expected to be evicted is the Church of God of Prophecy, at Mussarapp Trace, Barrackpore. Also expected to receive an eviction notices are a Hindu temple at Mussarapp Trace and the million-dollar Point Fortin Early Learning Centre (ELC).

Both buildings are on the company’s lands and are close to oil wells.

Petrotrin recently served demolition notices to the pastor of Church of God of Prophecy, who was asked to stop holding prayer services at the church.

The church building is within 100 feet of an oil well and poses a serious safety risk.

Attorneys for the church and oil company have been engaged in a legal battle over rights to the land. The church’s pastor is contending they had been in occupation of the lands for more than 17 years.

Tomorrow’s demolition notice will be the final legal step to demolish the structure which will take place 14 days after.

Petrotrin also wrote to a woman, named Leion Howard, about the erection of the ELC at Bryce Road, Point Fortin.

In the letter, Petrotrin’s manager of Lands and Service, Gerard Lewis, accused Howard of unlawfully entering the lands at Bryce Road, east of oil well FW257 and west of oil well FW 191.

The letter alleges Howard cleared the land and began construction on it.

The building, constructed of steal beams and concrete blocks, has cost about $1.5 million so far.

Petrotrin’s letter also informed Howard that she refused to obey previous notices to cease construction.

The letter said a safety risk existed because of the proximity to its active wells. I

“Petrotrin hereby gives you notice to immediately deconstruct and remove the aforementioned concrete structure from upon the lands. Please further be advised that failure to acede to this request will leave us with no alternative but to vigorously seek to protect our interest in the lands,” the letter said.

Howard was also told to demolish the building within 21 days.

Contacted in Barbados yesterday, Petrotrin’s chairman Wilfred Espinet said people’s need for housing must not be at the expense of putting their lives at risk by constructing churches and schools near oil wells.

He said the company has embarked on a hectic campaign against invasion of its lands.

“We appreciate people need for housing, but we must strive to become a rule-based society in which each and everyone must not do things to suit themselves. It is unfortunate, but we have to do the right thing because you cannot put people lives at stake.”

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Venezuela’s Hydrocarbon Sector Incurring Weekly Accidents

(Energy Analytics Institute, Piero Stewart, 28.Oct.2018) — Petroleum sector accidents and oil spills in Venezuela have become an almost regular occurrence.

Between two and three accidents are happening each per week in PDVSA operational areas as well as a similar number of oil spills, reported the daily newspaper El Nacional, citing comments from Federation of Oil Workers of Venezuela (FUTPV) union official José Bodas.

“Accidents are becoming more frequent at oil industry facilities because preventive maintenance is not done,” said Bodas. “And, PDVSA doesn’t report accidents to the corresponding authorities as stipulated by the Organic Law related to work environment accidents.”

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Related stories:

Mange Infested Dog Roams PDVSA’s Paraguana Refining Complex

Venezuela’s Refining Capacity Impresses But Utilization Tells Story

Venezuela: Oil Producer’s Slump Reflects Nation’s Decline

(Ft.com, Gideon Long, John Paul Rathbone, 28.Oct.2018) — Gideon Long in Caracas and John Paul Rathbone in Washington October 28, 2018 Print this page 95 In the lobby of the building where Iván Freites works, a photograph of an oil rig covers one wall. Emblazoned across it is the Venezuelan flag and a quote from former president Hugo Chávez. “We want Venezuelan oil to bring peace and love,” it reads.

Mr Freites, a union leader at PDVSA, the state oil company, would like that too. But having seen the Chávez government and subsequent regime of Nicolás Maduro plunder the oil producer, strip it of investment, sack experienced managers and replace them with military officers, he no longer thinks that outcome is possible, at least not for now.

“I’ve worked at PDVSA for 35 years and I’ve never seen anything like this,” he says. “What we need above all is to get our democracy back.”

The parlous state of PDVSA, which oversees the world’s largest energy reserves according to the US Energy Information Administration, helps to explain the depth of Venezuela’s collapse and why it finds itself in the eye of a political storm.

Corruption and mismanagement have seen Venezuelan oil output, which accounts for 90 per cent of legal export revenues, plummet to its lowest level in three quarters of a century. The economy has halved in five years, a contraction worse than those in the Great Depression or Spanish civil war. Rates of hyperinflation, meanwhile, are similar to those in Germany in 1923.

The brutal recession has sparked an exodus comparable with the flight of Syrian refugees. More than 2m of Venezuela’s 30m population have fled since 2015. With the UN estimating 5,000 departures each day, another 2m could have left by the end of 2019.

It has turned the country into a major source of regional instability. Latin American neighbours, especially Colombia, are struggling to cope. As the oil industry implodes and exacerbates the plight of Venezuelans, the international community increasingly believes something must be done. The burning question is: what?

From the start of his presidency, Donald Trump made Venezuela a US foreign policy priority, alongside North Korea and Iran. “President Trump started on day one — literally on day one — asking about Venezuela,” says Fernando Cutz, a former Trump White House adviser, at a recent seminar at the Wilson Center in Washington. “It was a priority of his from the very start.”

The US, alongside Canada and Europe, has since levied sanctions on officials accused of corruption and human rights abuses. Last month, Mr Trump hinted again at the possibility of invasion. “All options are on the table,” he said. “The strong ones, and the less than strong ones. Every option — and you know what I mean by strong.”

Regional leaders and diplomats are usually the last to support such belligerence. But Luis Almagro, head of the Organisation of American States, believes no option should be discarded. “The entire premise of ideas such as ‘responsibility to protect’ is that we must act before we are counting the dead,” he has said.

Amnesty International has called Venezuela’s human rights crisis “unprecedented” and five Latin American countries, alongside Canada and France, have asked the International Criminal Court to investigate Mr Maduro for crimes against humanity.

All the while, Mr Maduro repeats his mantra that the US is subjecting Venezuela to “economic war”, and wants to get its hands on the nation’s oil. Few believe him. And given PDVSA’S shrinkage, there is currently not much of an oil industry to seize.

“Leave Maduro be for the next year and you’ll see where that level of production goes to. The US really doesn’t have to do much,” says Raul Gallegos, a Venezuela analyst at Control Risks.

Ever since it was discovered in Lake Maracaibo in the 1920s, oil — or “the devil’s shit” as one energy minister called it — has dominated the country’s economy. Venezuela was a founding member of Opec and when President Carlos Andrés Pérez nationalised the industry and founded PDVSA in 1976, it pumped over 3m barrels a day.

Today, the figures speak for themselves. Production has halved in six years and dropped by a third in the past year alone. Rig counts, an indicator of future production, are at historic lows, pointing to further declines. In September, Venezuela pumped just 1.2m b/d, its lowest output since the 1940s. Although most analysts consider 1m b/d to be a floor given its joint ventures with foreign producers, some believe output could drop as low as 700,000 b/d by the end of 2019.

“It is one of the worst collapses in history,” says Francisco Monaldi, a fellow in Latin American energy policy at the Baker Institute.

PDVSA’s demise has rippled through the country. The biggest refinery, Amuay, is running at 20 per cent capacity, Mr Freites says. The smaller Cardón, El Palito and Puerto La Cruz refineries barely function as PDVSA struggles to deliver mixing chemicals and crude to these sites.

With less oil being refined, blackouts are common. “There are towns and villages that go five or six days without electricity,” Mr Freites says. Gasoline is also in short supply. “I’ve just been to fill up my car and I waited in line for an hour,” he says. “That’s quite normal.”

PDVSA itself is on the brink of financial collapse. It has defaulted on all its bonds except a 2020 issue because, if it fails to pay that, PDVSA risks losing Citgo, its US refining asset, which has been pledged as collateral.

The scale of the theft and mismanagement that lie behind PDVSA’s collapse has been prodigious.

In 2015, Jorge Giordani, a former planning minister, estimated that of the $1tn that Venezuela received from the windfall of the commodities boom, two-thirds was spent on social programmes. The rest, around $300bn, was stolen or misappropriated.

In one recent case, a judge in Andorra charged 29 people, including two Venezuelan former deputy energy ministers, with a scheme to launder $2.3bn allegedly stolen as kickbacks from company contracts with PDVSA.

This August, US investigators revealed another scheme to launder $1.2bn of PDVSA funds. According to court documents seen by the FT, the plan involved companies in Spain and Malta, money launderers from Portugal and Uruguay, a German financier, unnamed US and British banks, fake mutual funds, Miami real estate, Russia’s state-owned Gazprombank and a shell company in Hong Kong.

Some elements of the swindle, recorded by a whistleblower wearing a wiretap, read like a Quentin Tarantino movie. On one occasion, a Venezuelan businessman opened proceedings in Caracas by placing his handgun on the table and pointing to a German Shepherd dog at his feet with an electronic “shock collar” around its neck. The businessman held the remote control.

The effects on the broader economy of such thuggery have been disastrous. As oil exports have collapsed, imports have crashed 80 per cent in six years to $11.1bn from $66bn in 2012, levels not seen since the 1940s. Scarcities of basic goods have prompted anger, spontaneous demonstrations and flows of refugees in ever greater numbers.

On the face of it, the situation cannot continue. Economic reforms announced by Mr Maduro in August have done nothing to tame hyperinflation, still running at nearly 500,000 per cent a year. The International Monetary Fund forecasts that gross domestic product will shrink by 18 per cent this year, 5 per cent next, and continue to shrink steadily after that.

Allies such as China, which has loaned Venezuela $60bn in return for oil over the past decade, seem reluctant to lend more. When Mr Maduro travelled to Beijing in September, his finance minister claimed China had agreed to lend a further $5bn. But Beijing has never mentioned the loan.

Nonetheless Mr Maduro, who survived an assassination attempt in August, faces no immediate political crisis at home. With the help of Cuban advisers, he appears to control the military and is set to win what will certainly be rigged municipal elections in December. The following month he will formally begin another presidential term — the consequence of a sham election victory in May.

There is increasing talk in Europe and around the Americas that any eventual solution to Venezuela’s quagmire lies with Havana — long the main counsel to Caracas. But diplomatic attempts to pry Cuba away from Venezuela have failed so far. Spain has also suggested re-opening dialogue between the government and the opposition. But the prospect of fresh talks having any success are dim.

That puts more drastic options on the table.

One US plan involves ending its purchases of Venezuelan oil. Such a ban would push up US pump prices — something Mr Trump will want to avoid before midterm elections on November 6, although Mr Cutz says the White House estimates it would add just 5-7 cents to the gallon.

Yet the impact on Venezuela would be devastating. That is because after it has sent oil to China and Russia to pay debts, shipped oil to Cuba and fed its domestic fuel market, the country earns cash on only about 450,000 b/d of its exports, a third of production. As much of 80 per cent of those sales are to the US.

PDVSA’s collapse has since made such action moot. “The guy who’s doing the best job at sanctioning himself is Maduro. He’s essentially destroyed the oil sector,” says Mr Gallegos.

That leaves the even more extreme idea of invasion. As Francisco Rodríguez, a Venezuelan economist at New York-based Torino Capital, says: “The idea of a military intervention has gained support . . . evolving from its previous status as a fringe position.”

But China and Russia would oppose any attempt by the UN Security Council to authorise intervention. Nor does the idea cut much ice in the region, which has opposed it.

Moreover, Venezuela is not Panama, which the US invaded in 1989 aided by US troops stationed in a local army base. Venezuela is twice the size of Iraq and has 100,000 civilians organised into heavily-armed local pro-government militias. The Pentagon opposes the idea.

“Intervention faces legal challenges in the UN and elsewhere, but more importantly it is unrealistic given the scope and scale that would be necessary,” says Shannon O’Neil, a senior fellow at the Council on Foreign Relations.

The key question in Venezuela comes back to: what can be done now to pre-empt an even worse situation later?

Diplomacy is not entirely dead. Bob Corker, chairman of the US Senate Foreign Relations Committee, met Mr Maduro in Caracas in October. “One option is to keep doing exactly what we’re doing,” he suggested on his return. “And there maybe is another option or two,” he added, without elaborating.

But the diplomatic track requires patience. In the interim, hopelessness leads more Venezuelans to flee, and more still to indulge the fantasy of a Trump-led invasion.

“The world has plenty of time to wait for a peaceful and democratic solution,” says Ramón Muchacho, an exiled opposition leader. “The people who do not have that time are Venezuelans . . . especially those who are dying.”

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This Venezuelan Energy Policy Will Kill The Investment We Need

Source: AFR

(The Australian Financial Review, Craig Emerson, 28.Oct.2018) — On November 22, 2017, a nation’s government legislated price controls in response to voter dissatisfaction with the rising cost of essential items. On October 23, 2018, the government of another nation announced it would require electricity suppliers to reduce their prices by the end of the year in response to voter dissatisfaction with the rising cost of electricity. The first country was Venezuela; the second was Australia.

Prime Minister Scott Morrison repeatedly told Parliament, swinging his arms as if holding a baseball bat, that if electricity retailers failed to cut their prices he would hit them with a “big stick”.

Morrison has become the Don Corleone of Australian politics. He has made retailers an offer they can’t refuse – cut your prices or else. The “or else” isn’t a horse’s head in the beds of the electricity retailers’ CEOs but it is something for them to fear. Asked at the media conference what the “big stick” might be, Morrison replied: “It’s everything from enforceable undertakings through the courts through to divestment powers of their assets.”

Last month, Morrison said he was open to setting up a royal commission into the energy sector. Consider the politics of the “big stick” of an energy royal commission. In 2013, the Liberals, in opposition, promised that, if elected, they would axe the Gillard government’s horrific carbon tax and cut electricity prices by $550 per household. Now, after five years of government, the Liberals, having presided over ongoing electricity price rises, would be promising to establish a royal commission. It would be the most spectacular admission of failure, that the Liberals had not only broken their solemn promise to slash electricity prices but also remained clueless as to what to do next.

As to the “big stick” of forced divestiture, the Liberals would be legislating to break up companies if they failed to reduce their prices ahead of an election. If forced divestiture is good for the electricity industry surely it will be judged good enough for every other business.

Consider the enormity of this threat: do as we say or we will break you up. Former deputy prime minister and aspirant, Barnaby Joyce, has already called for forced divestiture to be extended to all industries through a general amendment to the Competition and Consumer Act.

Labor in opposition and in government has consistently resisted populism and opposed forced divestiture. It is the allegedly anti-business Labor Party that is standing up for good policy. CSIRO and Energy Networks Australia have estimated Australia will need more than $200 billion in energy-sector investment by 2050. As a small, open economy, most of that investment will need to be funded from abroad. The “big stick” of forced divestiture would guarantee that funding never arrives.

Thin end of the wedge

Yet the Morrison government will not hesitate in seeking to jam Labor into supporting forced divestiture by putting up a bill that includes both a default price for electricity retailers and forced divestiture.

Labor would likely move an amendment to split the bill, voting for the default price but against forced divestiture. But the Morrison government would use its numbers – supported by several independents – to ram through the original bill.

Then the bill would go to the Senate where a coalition of the Liberals, Nationals, Greens and independents would pass it into law. Forced divestiture would become a permanent feature of Australia’s competition laws; Labor would never have a majority in the Senate to repeal it.

If that isn’t worrying enough, contemplate the precedent set by a Liberal government requiring an industry to drop its prices ahead of a federal election. What’s next? Petrol prices, gas prices, grocery prices, bank interest rates.

The Business Council of Australia’s muted response – relegating forced divestiture to the 10th paragraph of its mostly positive media release – suggests it has concluded only a few of its members would be affected. That would be a fatal misjudgment.

Imagine if Labor had announced mandating that businesses must cut their prices ahead of elections. Shrieks of “socialists!” would ring out of Australia’s boardrooms, and multimillion-dollar advertising campaigns would be hastily organised. Business organisations would rightly use every available platform to argue that perceptions of sovereign risk would be elevated to the point where foreign investors judged Australia to be off limits.

Yet under Morrison’s Liberals, aided by deferential Business Council of Australia, it’s full steam ahead. Venezuela here we come!

Craig Emerson is CEO of the Craig Emerson Economics and adjunct professor at Victoria University’s College Business. He is a former competition policy minister and has advised various energy companies.

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Bolivia Discusses Methods to Calculate Hydrocarbon Royalties

(Energy Analytics Institute, Jared Yamin, 27.Oct.2018) — Bolivia’s Hydrocarbon Ministry held discussions October 24-26, 2018 to analyze a methodology for calculating hydrocarbon royalties in the departments of Cochabamba, Chuquisaca, Santa Cruz and Tarija, reported the daily newspaper La Razón, citing Exploration and Exploitation Hydrocarbons Vice Minister Carlos Torrico.

No further details were revealed by the daily.

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Caño Limón-Coveñas Has Suffered 1,470 Attacks In Ten-Plus Years

(Energy Analytics Institute, Piero Stewart, 27.Oct.2018) — Throughout its history, the Caño Limón-Coveñas pipeline in Colombia has suffered an estimated 1,470 attacks and has been out of operation the equivalent of more than 10 years, according to figures from Colombia’s state oil company Ecopetrol.

Attacks against the oil infrastructure have hurt the country in two ways through the following: 1) destruction of the environment and 2) undermining the country’s finances to the tune of about $277.5 million, reported the daily El Espectador.

Colombian terrorist groups such as ELN continue to use dynamite attacks along the country’s main oil pipeline as a manner to pressure dialogue between them and government leaders, the daily reported.

To date in 2018, Caño Limón-Coveñas has suffered 76 attacks, some 13 less than in the same year ago period.

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Related stories:

Ecopetrol Cleans Spill After Bomb Attack On Cano Limon Pipeline

Cano Limon-Covenas Pipeline Restarts After 180 Days

Argentina Makes Small $2 Million Payment For Bolivian Gas

(Energy Analytics Institute, Aaron Simonsky, 27.Oct.2018) — Bolivia’s Central Bank (BCB by its Spanish acronym) announced Argentina made a “small payment” of $2 million related to a debt with Bolivia for the purchase of natural gas.

The debt accumulated with Bolivia by Argentine’s state oil company Integración Energética Argentina SA (IEASA), formerly known as Energía Argentina SA (Enarsa), prior to the payment was $454.63 million and comprised of the following: $265 million for gas imports for July and August, $132 million for an invoice from October, $50.16 million for interest related to late payments during 2008-2017, and another $5.47 million for the same concept, but corresponding to 2018, reported the daily newspaper La Razón.

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CNOOC Says Guyana Success ‘Laid Foundation For Future Development’

(Energy Analytics Institute, Jared Yamin, 27.Oct.2018) — China’s CNOOC Limited announced that success in Guyana has laid the foundation for future development.

“Successful drilling of Longtail Structure and Hammerhead Structure at the Stabroek block in Guyana further enhanced the asset value and laid a high-quality resource foundation for future development,” the company reported in its operational statistics report for the third quarter of 2018.

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Petrobras Reports Oil And Gas Out For Sep. 2018

(Petrobras, 26.Oct.2018) — Petróleo Brasileiro S.A. (Petrobras) announced that in September its total production of oil and gas, including natural gas liquids (NGL), was 2.47 million barrels of oil equivalent per day (boed), 2.35 million boed produced in Brazil and 125 thousand boed abroad.

The total operated production of the company (Petrobras and partners’ share) was 3.18 million boed, with 3.02 million boed in Brazil.

Total oil and gas production remained stable compared to the previous month, with a reduction in the oil production mainly due to the maintenance stoppage of the P-57 platform, located in the Jubarte field, and P-52, located in the Roncador field, both located in the Campos Basin, which was compensated with an increase in gas production mainly due to the production normalization of the Mexilhão platform.

It should be noted that the company achieved the monthly record of utilization of the gas produced of 97.1%.

The tables below detail the production values.

Petrobras maintains its commitment to the production target disclosed in the 2018-2022 Business and Management Plan, considering the ramp-up production of the platforms that have already started operations this year (P-74, in the Búzios field, FPSO Cidade de Campos, in the Tartaruga Verde field and P-69, in Lula field) and the beginning of the production of new systems expected until the end of 2018.

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Frontera Sets Date For 3Q:18 Financial and Ops Update, Conference Call

(Frontera Energy, 26.Oct.2018) — Frontera Energy Corporation announces that its third quarter 2018 results will be released after market on Wednesday, November 7, 2018 followed by a conference call and webcast for investors and analysts on Thursday, November 8, 2018 at 8:00 a.m. (MST), 10:00 a.m. (EST, GMT-5).

Participants will include Gabriel de Alba, Chairman of the Board of Directors, Richard Herbert, Chief Executive Officer, David Dyck, Chief Financial Officer and select members of the senior management team.

A presentation will be available on the company’s website prior to the call, which can be accessed at www.fronteraenergy.ca.

Analysts and investors are invited to participate using the following dial-in numbers:

Participant Number (International/Local): (647) 427-7450
Participant Number (Toll free Colombia): 01-800-518-0661
Participant Number (Toll free North America): (888) 231-8191
Conference ID: 4789788
Webcast: www.fronteraenergy.ca

A replay of the conference call will be available until 11:59 p.m. (EST, GMT-5) Thursday, November 22, 2018 and can be accessed using the following dial-in numbers:

Encore Toll Free Dial-in Number: 1-855-859-2056
Local Dial-in Number: (416) 849-0833
Encore ID: 4789788

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YPF To Spend Billions To Boost Oil And Gas Output

(Reuters, Eliana Raszewski, Hugh Bronstein, 26.Oct.2018) — Argentina’s state-controlled oil company, YPF, will significantly boost oil and gas production, investing between $4 billion and $5 billion per year through 2022, Chief Executive Daniel Gonzalez told Reuters on Friday.

It plans to raise production by between 5 percent and 7 percent per year, with the largest increase in the Vaca Muerta formation, one of the world’s largest reserves of shale oil and gas.

The company intends to invest $3.6 billion on infrastructure in Vaca Muerta over the next five years, Gonzalez said, adding that the company is looking to speed up shale oil and gas extraction, with 1,700 wells drilled by 2023.

YPF shares jumped 4.3 percent to 562.35 pesos ($15.20) per unit in afternoon trade, after having traded down 2.5 percent earlier in the day.

“Crude oil is going to grow, I would say twice as fast as natural gas for us in the next five years,” Gonzalez said.

“Having said that, crude oil production will be seven times what it is today and shale gas will be four times what it is today in five years. So there will be a significant growth in unconventional (shale) production,” he said.

The company also plans to begin exporting gas to Chile, and investing in offshore exploration in the Argentina’s Gulf of San Jorge, on the southern Atlantic coast.

Gonzalez said the plans would allow YPF to double its dividends every year over the next three years.

“We are going to do that in a very disciplined way, reducing our debt significantly, increasing our dividends and more importantly generating cash that we can invest in new ventures. All of this growth can be financed organically by the company, by markets and our cash generation,” Gonzalez said.

YPF said it will also double its electricity generation capacity, and that 20 percent of that electricity would come from renewable sources by 2023.

While YPF is the leading investor in Vaca Muerta, the Argentine government has tried to spur investment in the region with a labor agreement to incentivize competition among oil and gas drillers, construction companies and mid-stream service providers.

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Pemex Swings To Profit, Output Targets Reduced

(Reuters, 26.Oct.2018) — Mexico’s state oil company Pemex said on Friday it swung to profit in the third quarter, with higher oil prices and a foreign exchange gain boosting revenues almost a third from a year earlier.

But the firm also reduced its oil production targets for 2018 and 2019 mainly due to problems at one of its largest oilfields, Xanab, postponing the date when its output is expected to stabilize.

“For 2019, we’ll have an average of around 1.822 million barrels per day (bpd),” David Ruelas, Pemex’s chief financial officer, said during the company’s earnings call.

Pemex’s crude production, which has been declining since 2004, fell 3 percent to 1.8 million bpd in the third quarter and it is expected to finish the year around 1.83 million bpd. The original goal for 2018 was 1.95 million bpd.

Pemex, whose 75-year production monopoly over the oil and gas sector ended in 2013, reported 26.8 billion pesos ($1.43 billion) of net profit in the third quarter, compared with a 101.8 billion peso loss in the same period last year.

Revenue was 439.1 billion pesos, up from 333.5 billion pesos in the same period in 2017, thanks to higher export sales that resulted from higher crude prices, the company said.

Mexico’s peso strengthened about 5 percent against the dollar in the quarter, helping the company post an exchange rate gain of 94.7 billion pesos, Pemex said.

($1=18.7175 pesos at end-September)

(Reporting by Dave Graham and Marianna Parraga; Editing by Daina Beth Solomon and David Gregorio)

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Argentina Buys An Average 16.2 MMcm/d From Bolivia in Sep.

(Energy Analytics Institute, Aaron Simonsky, 26.Oct.2018) — Argentina purchased an average 16.2 million cubic meters per day (MMcm/d) of natural gas from Bolivia in September 2018.

However, the volumes are nearly 5 MMcm/d below contractual agreements, reported the daily newspaper La Razón.

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Venezuela, Mexico Divert Crude To U.S. As Canadian Barrels Get Stuck

(Reuters, Marianna Parraga, Collin Eaton, 26.Oct.2018) — Cash-strapped state-run oil companies in Mexico and Venezuela have begun diverting crude historically processed for domestic use and sending it to U.S. refiners now facing transportation constraints to secure similar grades from Canada, data shows.

The situation reflects an unusual set of events, including urgent needs by Venezuela and Mexico for cash for debt payments and investment, and demand for heavy crude in the United States due to less availability of Canadian oil, said traders and analysts.

The United States imported 1.675 million barrels per day (bpd) of Latin American crude in August, the highest level since May 2017, according to Refinitiv Eikon data.

That gain occurred even though the preferred Latin American grade, Mexican Maya, fetches an about $50 a barrel premium to Western Canadian Select (WCS), because of transportation costs. Moving a barrel of Maya via tanker to the U.S. Gulf Coast costs about $1.50, compared to $35 for WCS via pipeline and rail.

“Those who are arriving late to the (Canadian oil) party will have to pay more for a Latin American heavy crude or Iraqi Basrah Heavy,” said a trader who regularly buys Canadian and Latin American grades.

CASH NEEDS RISE

Latin America’s recent export drive has come mostly from Mexico, Brazil and Venezuela, despite a long-standing regional oil output drop. In the last decade, suppliers with the exception of Brazil have reduced crude shipments overall, especially to the United States.

In the case of Venezuela, state-run PDVSA “needs cash both for paying holders of the 2020 bond this month and for paying (an arbitration award to) ConocoPhillips,” said Robert Campbell, oil products research chief at consultancy Energy Aspects, referring to two huge bills due in coming days.

Petroleos Mexicanos is raising cash mainly for refinancing its heavy corporate debt. Selling more of its coveted Maya crude could help refurbish refineries working at historically low rates.

Pemex and PDVSA did not respond to requests for comments.

Before the shale boom, many U.S. Gulf Coast refiners configured their plants to run Latin American and Middle Eastern crudes, with Venezuela and Mexico as top suppliers. As those shipments dwindled, refiners turned to shale and Canadian oil.

But pipeline constraints in Canada are shifting imports again, at least in the short term.

U.S. refiners want more Canadian crude “because it’s cheap,” one trader said, but “unless someone builds a new pipeline,” it will be difficult boost imports further.

U.S. imports of Canadian crude by pipeline rose to 3.6 million bpd in the week ending Oct. 12, hitting 98 percent of capacity. Crude-by-rail shipments also are up, to a record 284,000 bpd in the week ended Oct. 12 from 85,000 bpd in October 2017, according to data provider Genscape.

“These pipelines are absolutely full,” said Dylan White, an oil markets analyst at Genscape. “There’s no room for growth.”

IMBALANCES

The strategy of boosting crude exports while importing more fuel could backfire for Latin sellers. Pemex would have to boost fuel purchases if its refineries do not restart in coming months after outages and unplanned maintenance work, and PDVSA has few options to stop imports from growing.

Latin America has increased U.S. fuel purchases by 7 percent to 2.87 million bpd so far in 2018, lifted by purchases by Mexico, Venezuela, Chile and Peru, according to the U.S. Energy Information Administration.

“Mexico has chosen to import more gasoline. It makes a lot of sense, but it could go out of control,” Campbell said, referring to relatively cheap gasoline prices compared to Latin American heavy crudes.

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No Minister Assigned To Oil And Gas Sector- Official Gazette

(Demerara Waves, Denis Chabro, 26.Oct.2018) — Two days after Minister of State, Joseph Harmon rebuffed a Demerara Waves Online News report on responsibilities for Guyana’s oil and gas, the Official Gazette has been changed to now show clearly that only the President and no minister is in charge of that sector.

In an October 19. 2018 notice of the Official Gazette, Harmon is no longer responsible for matters and groups of matters related to Oil and Gas, and the Ministry of the Presidency’s Department of Energy.

The gazette says the oil and gas sector is now “unassigned to any minister”.

“This publication highlights the change made to the assignment of responsibilities within the Department of Energy, Ministry of the Presidency showing the reversion of the assignmemt of responsibility for the matters and groups of matters relating to Petroleum (Oil and Gas) and the Department of Energy, to the President,” states the amendment to notice signed by Harmon. That notice was published in the October 27, 2018 edition of the Official Gazette.

With this latest development, it is now unclear whether Minister Harmon will still be responsible for reporting on the sector to the National Assembly or public stakeholder engagements. The President had informed oil companies that the Minister of State in the Ministry of the Presidency is responsible only for such matters as I delegate to him with respect to reports to the National Assembly and public sector and stakeholder engagements.”

Minister of Business, Dominic Gaskin has been seen publicly representing the Guyana government in oil and gas matters.

President David Granger in early October 2018 had written to several oil companies informing them that he (Granger) was now responsible for the sector in keeping with the Petroleum Act.

“I am directly and solely responsible for approving exploration and production licences, work plans and local content plans; decommissioning and monitoring and adjudicating, where appropriate, compliance with the laws and regulations, inter alia, of the Cooperative Republic of Guyana,” Granger said in a letter seen by Demerara Waves Online News.

In August, when oil and gas sectoral responsibilities had been officially shifted from Minister of Natural Resources, Raphael Trotman to the Department of Energy, Harmon had been listed as the gazetted minister.

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Venezuela To Make $949M Bond Payment To Keep Citgo Assets

(OilPrice.com. Tsvetana Paraskova, 26.Oct.2018) — Although Venezuela is regularly delaying or avoiding bond payments and is behind on billions of U.S. dollars in such payments, it is preparing to make a rare US$949-million payment on one bond, because that bond is backed by a stake in its key U.S. asset, Citgo, Bloomberg reports, quoting a person with direct knowledge of the plans.

Venezuela’s state oil firm PDVSA is getting ready to pay the coupon and partial principal repayment due on October 29 on 2020 notes, which are backed by a stake in Citgo.

Analysts say that Venezuela continues to consider Citgo as a very important asset and doesn’t want to open the door to investors who would lay claims on it if it doesn’t make the bond payment.

Although it’s not clear how much longer PDVSA will be able to continue servicing the payments on this particular bond, analysts at JP Morgan, Torino Capital, and Eurasia Group told Bloomberg that the government of Nicolas Maduro would make the payment due at the end of this month because it will want to hang onto this key asset as long as possible.
“The government’s strategy with regards to various creditor obligations seems to be to avoid or delay paying wherever possible but pay or settle when valuable external assets are in jeopardy,” Bloomberg quoted a note by Risa Grais-Targow, a senior analyst at Eurasia Group, as saying this week. The analyst, however, notes that this strategy of Venezuela has its limits. The Maduro government faces declining export revenues from its only cash cow, the oil industry, where production continues to plunge.

But even if Venezuela makes the upcoming bond payment next week, it has to service other debts to keep control of its strategic U.S. asset, Bloomberg notes. Citgo itself has debts of US$3 billion, and some of it may have to be repaid. Earlier this year, Canadian gold miner Crystallex won the right to tap Citgo for compensation of US$1.4 billion for the forced nationalization of its assets by the Hugo Chavez government. Russia’s largest producer Rosneft could also claim Citgo shares, if PDVSA, which had pledged 49.9 percent in Citgo as collateral for loans from Rosneft in 2016, defaults on those loans.

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Eco (Atlantic) Seeks New Partner In Namibia As Tullow Focuses On Guyana

(ProactiveInvestor, 26.Oct.2018) — Eco (Atlantic) Oil & Gas Ltd has started to look for a new partner for the Cooper Block in Namibia after Tullow Oil pulled out.

Tullow will now transfer its 25% working interest in Cooper to Eco, which own 57.5% stake as a result.

“With more than three and a half years still to drill on the Cooper Block under the terms of the licence, and with a drill ready target (The Osprey Prospect), the company has already started discussions with potential farm-in partners to replace Tullow and to jointly drill the Osprey Prospect,” said its statement.

Eco’s other major partner in the Cooper Block, Azinam (32.5%) has said already it wants to continue exploration, including the drilling of an exploration well.

Tullow, meanwhile, has decided to focus on Orinduik, offshore Guyana, where it is the operator with a 60% stake.

Eco also has a 15% stake in Orinduik, where discussions are underway with both Tullow and Total over speeding up the development plan, which in cludes the possibility of an additional well in 2019.

Gil Holzman, Eco’s chief executive, said:”We understand Tullow’s drilling budget prioritisation.

“This reflects a shift in both Tullow’s and Eco’s priorities towards Guyana.

“Guyana clearly remains the focus for both partners.

“The opportunity the companies share on the Orinduik Block in Guyana is outstanding, with much lower near-term risk.”

Colin Kinley, Eco’s chief operating officer, added it was already discussing Cooper with other partners.

The block has P50 Prospective oil of over 800mln barrels and prior to drilling the intention is to farm down part of the 57.5% interest.

“Tullow remains a fantastic partner for Eco in Guyana,” he added.

Broker Mirabaud said that there still remains over three and a half years left on the licence and Eco maintains that the undrilled Osprey prospect is prospective.

Accordingly, Eco has re-opened a data room with a view to finding a replacement for Tullow.

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Petrobras Updates On Reduction Of Relevant Shareholding Interest

(Petrobras, 25.Oct.2018) — Petrobras, in compliance with article 12 of CVM Instruction Nº358 of January 3, 2002 and Circular Letter CVM/SEP/Nº002/2018, informs that it was notified by Caixa de Previdência dos Funcionários do Banco do Brasil (PREVI) that PREVI sold preferred shares issued by Petrobras, so that the institution manages shareholding interest lower than 5% of the preferred shares issued by Petrobras,  as per the information below.

I. PREVI, on Oct. 8, 2018, changed its preferred shareholding position to 277,709,475, reducing its share participation from 5.04% to 4.96% of the total preferred shares issued by Petrobras;

II. The participation reduction is not related to any specific objective;

III. PREVI did not celebrate any contracts or agreements governing the exercise of voting rights or the purchase and sale of securities issued by Petrobras;

IV. PREVI, a closed supplementary pension entity, enrolled with CNPJ under Nº 33.754.482/0001-24, has registered headquarters at Praia de Botafogo, 501, 3rd and 4th floors in the city of Rio de Janeiro, State of Rio de Janeiro.

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Ecopetrol Announces Timing Of 3Q:18 Earnings Report, Conference Call

(Ecopetrol, 25.Oct.2018) — Ecopetrol S.A. announces that on October 31st, 2018 after market close, it will release its financial and operating results for the third quarter of 2018.

On Thursday, November 01st, Ecopetrol’s senior management will host two conference calls to review the results. Please find below the timing, dial-in and links to access the conferences:

Spanish Conference Call English Conference Call
08:00 a.m. Col Time (09:00 a.m. NYC) 09:30 a.m. Col Time (10:30 a.m. NYC)
   
US Dial-in #: 1 (847) 585-4405 US Dial-in #: 1 (847) 585-4405
US Dial-in # (Toll Free): 1 (888) 771-4371 US Dial-in # (Toll Free): 1 (888) 771-4371
Local Colombia Dial-in #: 57 1 380 8041 Local Colombia Dial-in #: : 57 1 380 8041
Local Colombia Dial-in #

(Free Toll):  01 800 9 156 924

Local Colombia Dial-in #

(Free Toll):  01 800 9 156 924

Passcode: 47752172 Passcode: 47752183

Participants from different countries may look for different international numbers to the ones mentioned above by consulting the following link: http://web.meetme.net/r.aspx?p=12&a=UDWttmnRSqdRpg

The earnings release, slide presentation and live webcast of the conference calls will be available on Ecopetrol’s website: www.ecopetrol.com.co and at the following links:

http://event.onlineseminarsolutions.com/wcc/r/1860357-1/DC064C359529BAB504745883599DDE54 (Spanish)

http://event.onlineseminarsolutions.com/wcc/r/1860384-1/9677D33EF14DF374F0373FF46368B3AE (English)

Please verify in advance proper operation of the webcast in your browser. We recommend the usage of the latest versions of Internet Explorer, Google Chrome y Mozilla Firefox.

The replay of the calls will be available on Ecopetrol’s website (www.ecopetrol.com.co).

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Ecopetrol Cleans Spill After Bomb Attack On Cano Limon Pipeline

(Reuters, 25.Oct.2018) — Colombia’s state-run oil company Ecopetrol is carrying out a clean-up operation after a bomb attack on the Cano Limon pipeline spilled crude into a waterway, the company said in a statement on Thursday.

The attack on Wednesday, the seventy-sixth on the pipeline this year, had no immediate effect on exports or production at the Cano Limon field, operated by Occidental Petroleum, Ecopetrol said.

Though the pipeline was not functioning at the time of the attack, some oil spilled into a creek in the La Blanquita area of Boyaca province, the company said.

The 485-mile (780-km) pipeline, which can transport up to 210,000 barrels per day, has been off-line for much of this year because of bombings and illegal taps.

The company did not name the group responsible for the bombing, but the pipeline is a frequent target of National Liberation Army (ELN) rebels.

The ELN, considered a terrorist group by the United States and the European Union, has about 1,500 combatants and opposes multinational companies, claiming they seize natural resources without benefiting Colombians.

The ELN and the administration of former President Juan Manuel Santos began peace talks in February 2017, but current right-wing President Ivan Duque has said he will not continue dialogue until the group frees all its hostages and ceases criminal activities.

(Reporting by Julia Symmes Cobb; Editing by Helen Murphy and Bernadette Baum)

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PDVSA Distillation Units At Cardón Refinery Halted

(Energy Analytics Institute, Piero Stewart, 25.Oct.2018) — Four distillations units at PDVSA’s Cardón refinery, located in Falcón state, are said halted due to a lack of oil and power failures, reported the daily newspaper El Nacional.

Cardón refinery has a processing capacity of 310,000 barrels per day.

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Bondholders Raise Hopes Venezuela Will Pay Up On Due Debt

(Ft.com, Gideon Long, 25.Oct.2018) — In a month in which emerging market government bonds have been hammered by the prospect of US rate increases, geopolitical risk and fears of a US-China trade spat, one bond — in crisis-racked Venezuela of all places — has rallied to record highs.

The 2020 bond issued by the state oil company PDVSA has rallied 14 per cent in six weeks to trade at over 91 cents, up from a year low of 80 cents in early September. By contrast, most PDVSA bonds trade at around 20 cents.

The reason for this unusual outperformance is that investors are increasingly convinced that the cash-strapped oil company will come up with an $842m principal payment due this weekend to avoid default and potentially lose a key asset, US-based refiner Citgo.

“I believe that they [Venezuela and PDVSA] are willing to pay,” said Siobhan Morden, head of Latin America fixed income strategy at Nomura. “Their track record suggests willingness to pay to protect strategic assets.”

Payment in itself would be remarkable: Venezuela and PDVSA have defaulted on all their other commitments to bondholders over the past year and are now $7bn in arrears on their combined traded debt of about $60bn.

But this bond is different. If PDVSA fails to service it, the company risks losing its prized US asset Citgo, a Houston-based group with three refineries in the Gulf of Mexico and the Midwest that process about a third of Venezuela’s oil exports to the US.

PDVSA has pledged half of Citgo as collateral on the $2.5bn 2020 bond, and the other half as security on a loan from the Russian oil company Rosneft. If it fails to pay, bondholders could in theory go after their half. There is no grace period on the amortisation payment, although the company has an additional 30 days to make an interest payment of $107m, also due this weekend.

Even so, 2020 bondholders would have a fight on their hands because everyone, it seems, wants a bit of Citgo. Having largely given up on ever being paid by Venezuela or PDVSA, creditors are increasingly going after their assets abroad, Citgo being the jewel in the crown.

The Canadian mining company Crystallex is trying to seize Citgo to compensate it for $1.4bn owed by the Venezuelan state. The US oil company ConocoPhillips is in a similar position, seeking payback for money owed by PDVSA. It has previously seized assets in the Caribbean, where PDVSA processes much of its oil exports.

As for bondholders, in what has become a complex multi-directional legal battle, the world’s largest asset manager BlackRock and New York-based Contrarian Capital Management have waded in on behalf of US and UK investment managers who hold some 60 per cent of the 2020 bonds.

For now, Rosneft is watching from the sidelines but if PDVSA were to default on its separate loan from the Russian company, it too would be eligible to claim almost half of Citgo. In theory, that could leave the Russians in the novel position of having a major holding in a US refiner, something US President Donald Trump would want to avoid.

Even if PDVSA makes this payment, Venezuela faces a daunting debt mountain. The sovereign must pay a final $1bn on its 2018 bonds in December, and alongside PDVSA must find $9.3bn for bondholders in 2019 and more than $10bn in 2020, although no one expects it to do so.

Faced with these desultory figures, Venezuela is rumoured to be considering a complete overhaul of PDVSA. This week the specialist energy reporting agency Argus said Caracas was thinking of replacing PDVSA with a new national energy company that would inherit PDVSA’S physical assets, including Citgo, but not its debts. That could pave the way for PDVSA to be formally declared bankrupt.

In addition to its traded debt, Venezuela owes billions of dollars to China and Russia. Meanwhile, oil production has plummeted to its lowest level since the 1940s, the economy has halved in size in five years and inflation is running at almost 500,000 per cent. Central bank reserves stand at $8.8bn, close to their lowest level for 30 years.

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Conoco Is Collecting $2 Billion From Venezuela—One Barrel of Oil at a Time

(Bloomberg, Alex Nussbaum, 25.Oct.2018) — ConocoPhillips’ decade-old legal war with Venezuela began paying off this week as the embattled Latin American country started making good on a $2 billion arbitration settlement one barrel of crude at a time.

Venezuela’s state-run oil company has made an initial $345 million payment in “cash and commodities,” Houston-based Conoco said Thursday. The remittance helped allay fears the cash-strapped nation wouldn’t be able to pay off the award in a long-running dispute over asset seizures.

The deal announced in August requires Petroleos de Venezuela SA to make an initial $500 million payment this year. That will include the sale of about $300 million in crude seized in legal actions earlier in 2018, Conoco Chief Financial Officer Don Wallette told analysts on a conference call. PDVSA has also made one $100 million cash payment, with another due in November.

“We have provisions if they miss payments to go back after some of the assets,” Chief Executive Officer Ryan Lance added on the call.

People with knowledge of the matter told Bloomberg News on Wednesday that the company has loaded about 1.5 million barrels of PDVSA crude from terminals in the Caribbean. Conoco resold the cargoes to refineries in the U.S. and Asia, the people said.

The remainder of the $2 billion is to be paid out over 4 1/2 years.

The PDVSA payment helped Conoco trounce profit expectations for the quarter. The company’s performance also was boosted by higher commodity prices and production from U.S. shale fields that grew 48 percent year-over-year. The company remains focused on fiscal discipline and shareholder returns, according to Lance.

“This is what the market can expect from us again in 2019,” the CEO said.

— With assistance by Lucia Kassai

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CITGO Expands Innovation Academy Presence In Texas

(CITGO, 25.Oct.2018) — CITGO Petroleum Company announced the West Oso Independent School District has approved the launch of a CITGO Innovation Academy in Corpus Christi, Texas. This is the fourth CITGO Innovation Academy established in the Corpus Christi region and the seventh Innovation Academy established in the CITGO operational footprint.

The CITGO Innovation Academy at West Oso school district programming will introduce and encourage students to explore career paths in Science, Technology, Engineering and Math (STEM). By inspiring and nurturing creative, ethical and scientific minds that advance the world through questioning, collaboration, personalized learning and use of technology and outreach, participants will be well-prepared for STEM college or technical programs.

The school district will utilize the Project Lead The Way Pre-K-12 Engineering and Computer Science curricula. Project Lead the Way (PLTW) provides the most comprehensive and rigorous Engineering and Computer Science programming for schools. PLTW curriculum will be used in Pre-Kindergarten through Fifth grade classrooms for the 2018-2019 academic school year. On line PLTW training will be provided for junior high teachers. The program will also include after school robotics clubs for K-12.

A donation from CITGO will also fund STEM-oriented training for two junior high school teachers and an expanded robotics program for students.

“I am excited that the CITGO Innovation Academy will spark the curiosity of our talented students, generating dynamic, positive and enriching experiences that go beyond the classroom,” added West Oso ISD Superintendent of Schools Conrado Garcia.

The first CITGO Innovation Academy was launched in 2013 at Foy H. Moody High School in Corpus Christi, Texas, which serves as the flagship campus. Since then, three more Innovation Academies have been implemented at Cunningham Middle School and Garcia Elementary School, both in Corpus Christi, and E.K. Key Elementary School in Sulphur, Louisiana. Another two were recently approved in Lemont, Illinois and Houston, Texas.

Through the CITGO STEM Talent Pipeline, the company actively supports the academic exploration of STEM education in the schools nearby its refineries in Corpus Christi, Texas; Lake Charles, Louisiana; and Lemont, Illinois. Since the initiative’s inception, CITGO has awarded more than $1.5 million toward programs that promote the importance of STEM education and provide educators with the resources they need.

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Burns & McDonnell Says Eduardo Andrade Joins Firm As Mexico Ops Director

(Burns & McDonnell, 25.Sep.2018) — Eduardo Andrade, a longtime executive in the Mexico energy industry, has joined Burns & McDonnell as its general director in Mexico for Burns & McDonnell Services S.A. de C.V. In that role, he will oversee the company’s pursuit of power generation and electrical transmission projects as Mexico moves quickly to upgrade its energy infrastructure. Over the past 30 years, Andrade has served in a variety of executive roles for large companies in Mexico with significant operations in the energy sector.

“Mexico is quickly becoming a first-world economy thanks to investments in the power and energy sectors and Eduardo has been a key influencer in that process due to his professional and civic roles over the past several years,” says Mike Brown, President of Burns & McDonnell International. “We’re thrilled to have him on our team and ready to get to work helping Mexico achieve its potential on the global stage.”

“I have spent my entire career advocating for investments and improvements to Mexico’s power and energy sectors because I believe strongly this is the best way forward to improve the lives of my fellow countrymen,” says Andrade. “This opportunity to lead Burns & McDonnell, the number one power firm in America, to bring their skills and expertise to my home country of Mexico is a dream come true.”

Prior to joining Burns & McDonnell Andrade was Executive President for Mexico for Sacyr, where he was responsible for a number of business initiatives related to recently enacted constitutional reforms in Mexico. Sacyr is a multi-national corporation with engineering and construction projects in 29 countries across five continents. In addition, Andrade has held executive positions with Iberdrola, a Spanish energy company with global operations, and Techint, the world’s second largest steel producer with additional businesses in construction and oil and gas production.

Andrade is a founder of the Mexico Energy Association and the Energy Chapter with the Canadian Mexico partnership. He is a past president of the World Energy Council, Mexico Chapter, and currently serves on the Mexico Energy Regulatory Commission’s External Advisory Board for electricity. He holds a civil engineering degree, with concentration in project management, from Universidad de Mexico and a graduate degree in corporate finance from ITESM (Instituto Tecnológico de Estudios Superiores de Monterrey).

In 2016, Burns & McDonnell established an office in Mexico City to pursue engineering/procure/construct (EPC) project opportunities in the power and energy sectors.

Earlier this year, the company was certified by the Centro Nacional de Control De Energía (CENACE), enabling the company to gain access to critical data on grid performance and other system performance measures as a means to offer engineering consulting services to clients and the system operator. The certification has enabled Burns & McDonnell to develop master plans on a number of improvements that are necessary to improve system reliability and resilience. Formed in 2013 in the wake of a reform of Mexico’s energy industry, CENACE is Mexico’s independent system operator for the country’s electrical grid.

Burns & McDonnell has had a presence in Mexico for more than 100 years, beginning in 1908 when company founders Clinton Burns and Robert McDonnell won a bid to develop a hydroelectric project for El Tigre Mining. Over the following decades, the company has engineered and built a number of projects, including a massive new wastewater treatment facility in Monterrey that was the largest treatment facility in Mexico when completed in 1997.

Mexico implemented far-reaching reforms of its power and energy industries in 2014 after decades of monopoly control by state-run enterprises PEMEX and Comisión Federal de Electricidad (CFE). Both sectors are now open to private investment by both U.S. and international businesses. Solar, wind and gas-fired generating facilities are being added to the Mexico grid while other projects are being planned to upgrade its power transmission and distribution system.

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P-69 Starts Operation In Lula Field, Pre-salt Of Santos Basin

(Petrobras, 24.Oct.2018) — Petrobras, with its partners in the BM-S-11 Consortium, started production of oil and natural gas in the Lula Extremo Sul area, in the pre-salt of Santos Basin, by means of platform P-69, eighth unit installed in the Lula field.

The FPSO (floating production, storage, and offloading unit of oil and gas) is located approximately 290 km off the coast of the state of Rio de Janeiro, in water depth of 2,150 meters. With a daily capacity to process up to 150 thousand barrels of oil and compress up to 6 million cubic meters of natural gas, P-69 will produce through eight producing wells, also using seven injection wells.

The hull construction was completed at the Cosco shipyard in China and the integration of the modules and the final commissioning of the unit were carried out at the Brasfels shipyard in Brazil.

P-69 will contribute to the increase of Petrobras’ production in the horizon of the 2018-2022 Business and Management Plan.

Lula Field

Discovered in 2006, Lula is the largest producing field in the country, responsible for 30% of the national production. Relief vessels are used to offload the oil, while gas is drained through the pre-salt pipeline routes.

Lula field is located in the BM-S-11 concession operated by Petrobras (65%), in partnership with Shell Brasil Petróleo Ltda. (25%) and Petrogal Brasil S.A. (10%)

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Petrobras Fires Up New Platform In Offshore Lula Field

(Reuters, 24.Oct.2018) — State-controlled oil company Petroleo Brasileiro said on Wednesday it had started production on its eighth platform in the offshore Lula field, Brazil’s most productive, as it ramps up output from the Santos basin in the coveted pre-salt oil play.

Platform 69 will be able to produce up to 150,000 barrels of oil per day and 6 million cubic meters of gas from the field, which already accounts for 30 percent of production in Brazil, now Latin America’s top producer.

The platform features eight production wells and seven injection wells to extract oil and gas from the field, which was discovered in 2006 and where production began four years later.

Petrobras operates the field and owns a 65 percent stake. Royal Dutch Shell and Galp have 25 and 10 percent stakes respectively.

In the pre-salt offshore area, billions of barrels of oil are trapped beneath a thick layer of salt under the ocean floor. The Santos basin already accounts for over half of production in Brazil.

A Shell executive told Reuters last month that Lula should hit peak production in 2020 or 2021, after reaching 1 million barrels of oil and gas per day next year.

(Reporting by Marta Nogueira and Jose Roberto Gomes, Writing by Alexandra Alper Editing by Marguerita Choy)

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PDVSA Prepares To Make $949 Mln Payment On Citgo-Backed Bond

(Bloomberg, 24.Oct.2018) — Petroleos de Venezuela SA’s plan to make a $949 million bond payment would mark a rare exception for Nicolas Maduro’s regime as it tries to hold on to the crown jewel of its U.S. assets.

Venezuela’s state-run oil company is preparing to make the coupon and partial principal repayment that’s due Oct. 29 on the 2020 notes, according to a person with direct knowledge of the matter. The socialist state is behind on almost $7 billion in debt payments owed to investors, but this bond is backed by a majority stake in Citgo Holding Inc., meaning a non-payment would allow holders to lay claim to that asset.

The payment has been anticipated by investors. The $2.5 billion of notes traded as high as 92.75 cents on the dollar this week, far above most Venezuelan bonds, which hover near 25 cents. Analysts from JPMorgan Chase & Co (NYSE:JPM)., Torino Capital and Eurasia Group have also said the Maduro government would pay because of its desire to hold on to Citgo, although there are doubts about how much longer PDVSA can service the debt.

“The government’s strategy with regards to various creditor obligations seems to be to avoid or delay paying wherever possible but pay or settle when valuable external assets are in jeopardy,” Risa Grais-Targow, a senior analyst at Eurasia Group, wrote in a note Monday. “There are limits to this strategy, as the government still faces meaningful cashflow constraints owing to declining cash-generating oil exports.”

Calls and emails seeking comment from PDVSA’s vice president of finance, Iris Medina Fernandez, weren’t returned. A representative for Venezuela’s oil ministry declined to comment. The person with knowledge of the situation asked not to be named because the matter is private.

Even with the payment, Citgo’s fate remains in flux. The 2020 notes fell by the most in nearly two months on Wednesday amid a broader sell-off across risky assets. Here are some of the other hurdles that Venezuela needs to navigate to maintain ownership of the company:

— Citgo Petroleum and its parent Citgo Holding have more than $3 billion of their own debt outstanding. At least some of that might need to be repaid if the company changes ownership through a foreclosure or a sale.

— PDVSA pledged a 49.9 percent stake in Citgo Holding as collateral for loans it received from Rosneft in 2016. If it defaults on those loans, the Russian state-controlled oil company could seek to seize the shares.

— A small Canadian mining company, Crystallex International Corp., was awarded the right to collect on an arbitration award by taking shares of PDV Holding (the U.S. parent of Citgo Holding), a verdict Venezuela is appealing.

— PDVSA is due to pay $500 million to ConocoPhillips (NYSE:COP) in November as the first installment of a $2 billion settlement the two companies reached this summer. If it misses the payment, Conoco could seek to attach PDVSA assets, including Citgo.

— Separately, an $8 billion bondholder group advised by Guggenheim Securities has said it’s “exploring options” to ensure that the nation’s overseas assets are available to satisfy its claims.

So far, PDVSA has shown it is determined to hold on to Citgo, even as U.S. sanctions prevent the refiner from distributing dividends back to Venezuela. Citgo plays a key role in facilitating the export of Venezuelan crude — the country’s main source of foreign exchange — and also provides Venezuela with much-needed refined products.

“It is not about the value of the equity, which may not be much,” said Richard Cooper, a partner at law firm Cleary Gottlieb Steen & Hamilton LLC, who has advised holders of Venezuela’s debt. “Citgo remains an incredibly important asset for PDVSA.”

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Private Investment To Drive Mexico’s Oil Production Growth

(Chron.com, Rye Druzin, 24.Oct.2018) — Mexico’s national oil company is expected to only produce 1.9 million barrels a day by 2031.

Mexico’s oil production could rebound to 3.5 million barrels a day, boosted by a wave of recent private investment in the country’s vast oil and gas reserves.

Private oil production, which in 2018 is expected to be just 37,000 barrels a day, could balloon to 1.4 million barrels a day by 2031, according to data from a professor from the Universidad Autonoma de Coahuila in Mexico, presented at an Eagle Ford Shale event Wednesday in Laredo.

Mexico liberalized its oil and gas industry in 2013 after decades of a monopoly for the national oil company, Petroleos Mexicanos or Pemex. The market reforms allows private companies to come in and develop oil and gas resources in Mexico.

Javier Lopez, a San Antonio attorney specializing in energy issues, addressed concerns about Mexico’s President-elect Andrés Manuel López Obrador, who has said he wants more state control over Mexican oil and gas resources and has discussed changes to the country’s framework to sign contracts with private energy companies.

The new government may not like the liberalization, but is legally not allowed to do anything to existing contracts, Lopez said.

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President-elect Lopez Obrador Slams Pemex For Crude Import Plan

(Reuters, 23.Oct.2018) — Mexico’s president-elect Andres Manuel Lopez Obrador on Tuesday criticized state-run Pemex’s plan to import U.S. light crude from refiner Phillips 66, calling it a sign of the country’s failed economic policies.

Pemex is set to begin crude imports in November, for the first time in over a decade. It needs them to feed Mexico’s main refinery, which is working below capacity due to a lack of light oil.

The purchase of 1.4 million barrels of U.S. Bakken crude will follow a tender awarded earlier this week to Phillips 66. Up to 100,000 barrels per day (bpd) of crude imports are planned for the last quarter of 2018.

“This announcement … is another example of the great failure of neo-liberal economic policies in the last 30 years,” Lopez Obrador said on Twitter.

Once he takes power in December, Lopez Obrador could force Pemex to halt the imports, which would likely impact domestic refining and boost the need for other kinds of imported fuel.

The issue has divided opinion among his allies.

One of his economic advisers, Abel Hibert, said earlier this month that crude imports could continue as a way to increase processing levels at Mexico’s refineries, even after Lopez Obrador takes office.

“I think Pemex has good reason to do it due to current market conditions,” he told local media.

Mexico’s light crude output has declined faster than expected this year, hit by operational problems at the Xanab oilfield.

Pemex chief executive Carlos Trevino has said the company’s goal of producing 1.95 million bpd of crude this year will not be met, and that the 2019 target is also likely to be missed.

If Pemex does not start crude imports for its refining network, purchases of finished fuel, especially gasoline, would grow again to satisfy Mexico’s consumption of about 1.5 million bpd, analysts have said.

Lopez Obrador’s main plan for the oil industry involves building a new mid-size refinery to boost fuel production while reducing crude exports with the final goal of halting them.

He has criticized his predecessor’s opening of the oil and gas industry to foreign investment, but has not given details of how he would reverse the country’s dwindling crude production.

Rating agencies Moody’s and Fitch earlier this month said cutting oil exports would imply a significant cash flow sacrifice for Pemex, whose main source of revenue is crude exports. Fitch changed Pemex’s outlook to negative from stable.

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Justice Department Demands Details From Glencore On Intermediary Firms

(Reuters, Dmitry Zhdannikov, Julia Payne, 23.Oct.2018) — The U.S. Department of Justice is seeking documents from Glencore (GLEN.L) about intermediary companies that the commodities firm has worked with in the Democratic Republic of Congo, Venezuela and Nigeria, sources familiar with the matter said.

The investigation is not directed at Glencore’s own activities or its senior executives, two sources told Reuters, giving no further detail about the type of information sought.

“The investigation focuses on intermediaries,” one source familiar with the probe said. A banker working with Glencore also said the focus was on three intermediary firms.

In mining and other extractive industries, intermediaries are firms or individuals paid a fee by producers, buyers or both for services such as brokering deals.

Glencore said on July 3 it had been subpoenaed for documents relating to its business in the three countries since 2007, sending its shares down 13 percent and leaving investors guessing about the direction of the investigation.

The Switzerland-based firm had said the subpoena related to compliance with the U.S. Foreign Corrupt Practices Act and money-laundering statutes but did not indicate the Department of Justice was focused on intermediaries or give further details.

Glencore, which said on July 11 it would cooperate with the U.S. authorities after receiving the subpoena, declined to offer additional comment for this article. The Department of Justice declined to comment.

A third source, who was familiar with the Nigerian element of the probe but not other areas, said the Department of Justice wanted Glencore to hand over documents related to associates of former Nigerian oil minister Diezani Alison-Madueke, namely the owners of Nigeria-based Atlantic Energy Holdings.

The U.S. authorities are investigating alleged bribery of the former minister and alleged money-laundering by her associates, who include Olajide Omokore and Kolawole Aluko, according to U.S. court documents seen by Reuters.

Glencore was a buyer of oil from Atlantic Energy Brass Development, a subsidiary of Atlantic Energy Holdings, which was owned by Omokore and Aluko.

Glencore declined to comment on its oil dealings with Atlantic Energy. A lawyer representing both Atlantic Energy and Omokore also declined to comment.

A lawyer for Alison-Madueke requested Reuters send questions by email, but did not respond when that email was sent.

A lawyer for Aluko could not be identified, as court documents did not name a representative and other lawyers involved in the case could not offer guidance.

Nigeria’s government referred requests for comment to the justice minister, who is also attorney general. He did not respond to requests for comment.

For Congo, the U.S. authorities were seeking documents from Glencore relating to Israeli billionaire Dan Gertler, while for Venezuela they wanted documents from Glencore relating to Miami-based trading firm Helsinge Inc, the first source and the banker said.

The sources declined to disclose any more information about the probe into these two intermediaries.

Gertler, who was a partner in Glencore’s cobalt and copper mines in Congo until 2017, could not be reached for comment. His spokesman in London declined to comment.

Congolese government spokesman Lambert Mende said Gertler had business in Congo and that any investigation into his activities had nothing to do with the government.

For Venezuela, Helsinge acted as an intermediary for Glencore’s fuel sales to state energy firm PDVSA, according to PDVSA’s internal trade documents seen by Reuters.

Helsinge did not respond to telephone or email requests for comment about the Department of Justice probe.

A spokesman for PDVSA did not immediately respond to a request for comment.

Additional reporting by Giulia Paravicini in Kinshasa, Marianna Parraga in Houston, Sarah N. Lynch in Washington and Alexis Akwagyiram in Lagos; Editing by Dale Hudson and Edmund Blair

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Pemex Taking Preventative Measures Ahead of Hurricane Willa

(Pemex, 23.Oct.2018) — Pemex implemented the Hurricane Emergency Response Plan (PREH initials in Spanish) to safeguard and protect workers’ safety and its facilities in the states of Jalisco, Nayarit, Colima, Sonora, and Sinaloa.

Because of the geographical region where the hurricane is expected to make landfall, it will not impact directly into the company’s facilities.

The Storage and Distribution Port Terminals (TAD initials in Spanish) of the Pacific Regional Logistics Management, which are located in the states of Sinaloa and Nayarit, are currently operating with preventative measures due to extreme weather conditions. Currently reporting no setbacks.

The TAD in Mazatlán is the only facility that had shut down since 15:00 hours onwards, in accordance to the instructions with the government of the city of Mazatlán and the state of Sinaloa’s Civil Defense Agency, to stay sheltered in place and roads clear for emergency vehicle transit only.

Furthermore, taking into account that heavy rain and strong winds are expected, the system shutdown was performed, and operating areas were turned off as additional preventative measure.

This Tuesday morning, the supply of Pemex products was prioritized for the areas that could be affected by the hurricane. It is important to note that the company has sufficient products on hand to cover fuel demand over the coming days.

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Pemex Confirms No Natural Gas Shortages In The Southeast Of Mexico

(Pemex, 23.Oct.2018) — Petróleos Mexicanos through its subsidiary Pemex Transformación Industrial (acronym in Spanish, TRI), confirms delivery of almost 100 MMcf/d of natural gas for customers in the Mexican Southeast using a first hand sales scheme.

This measure guarantees there will be no natural gas shortages in the southeast region.

Pemex wishes to remind customers that they have various commercial options to acquire natural gas to meet their requirements.

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Petrobras Stock Upgraded: What You Need to Know

(The Motley Fool, Rich Smith, 23.Oct.2018) — Does Brazilian oil major Petroleo Brasileiro make for a good investment?

There are a lot of reasons to answer, “No.” From 2014 to 2017, Petrobras stock lost money for its shareholders. This $100 billion company carries a $96 billion debt load (admittedly offset somewhat by nearly $19 billion in cash, according to data from S&P Global Market Intelligence). Unusual for an oil major, Petrobras doesn’t even pay much of a dividend to its shareholders — a mere 0.8%, or less than half the average dividend yield on the S&P 500.

And yet, despite losing money as GAAP defines the idea of profitability, Petroleo Brasileiro is now entering its fourth straight year of positive free cash flow production — and as it turns out, free cash flow is a key reason why one banker is making a big bet on Petrobras stock.

Here’s what you need to know.

With elections looming, Morgan Stanley has Brazil — and Petrobras stock — on its mind today.

Upgrading Petrobras

Analysts at investment bank Morgan Stanley announced they’upgrading shares of Petrobras to overweight and hiking their price target to $21.50, as reported by StreetInsider.com this morning. That’s nearly a 60% bump from Morgan Stanley’s previous $13.50 price target. It promises as much as a 37% profit to new investors buying in at today’s share price of just $15 and change.

As many reasons as there may be to be skeptical of Petrobras stock as an investment, Morgan Stanley sees opportunities for investors to profit from it. For example, Petrobras boasts proven reserves of 8.4 billion barrels of oil, and a further 7.9 trillion cubic feet of proven natural gas reserves, an “oil equivalent. With Brent crude prices around $76 a barrel today, and WTI crude north of $66, Morgan Stanley believes that Petrobras’ “asset base is undervalued.”

Defusing concerns

Granted, there’s still the debt load to worry about, but even that doesn’t concern Morgan Stanley overmuch. Pointing to Petrobras’ recent history of strong free cash flow generation — $3.9 billion in cash profits thrown off in 2014, growing to $12.4 billion in 2015, $12.9 billion in 2016, and holding pretty steady at $12.6 billion over the past 12 months — Morgan Stanley argues that the high price of oil is “taking care of the balance sheet” at Petrobras, and that the company’s strong FCF “will lead to rapid deleveraging,” enabling Petrobras to pay down its debt in short order.

Helping with that mission, the analyst notes (as summarized by TheFly.com) that Petrobras’ refining business is “no longer destroying value.” There’s even the potential for Petrobras to raise even more cash, potentially accelerating the process of paying down debt by selling off assets — which should fetch higher prices in the current expensive oil environment.

What it means for investors

Of course, $96 billion in debt won’t vanish in a day. This is a process that will take time — probably a lot of time. Even if Petrobras were to devote every penny of free cash flow that it generates to paying down debt — $12.6 billion in annual cash generation, for example — it would require more than 7.5 years to pay off the company’s debt in full. (Becoming net debt-free — with cash levels equaling indebtedness — could be accomplished in a little over six years, and asset sales could accelerate the process even further.)

Looking at Petrobras as it stands today, though, is the stock a buy? Here’s how I look at it.

With $100 billion in market cap, $19 billion in cash, and $96 billion in debt, Petrobras carries an enterprise value of roughly $177 billion. Against that valuation, the company is generating $12.6 billion in free cash flow, resulting in an EV-to-FCF ratio of 14. Analysts who follow the stock expect profits to grow rapidly at the company as oil prices remain high — as much as 20% annually over the next five years.

If they’re right, then paying 14 times FCF for 20% growth seems like a fair price to me. And as Morgan Stanley points out, investors are likely to “shift back” to valuing Brazilian stocks such as Petrobras based on their “fundamentals” after the country has successfully picked a new president next week. Once that happens, I’d expect to see Petrobras shareholders richly rewarded.

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Guyana: The World’s Next Offshore Oil Hotspot

(Oilprice.com, Tsvetana Paraskova, 23.Oct.2018) — With population of fewer than 750,000 people, Guyana—a neighbor of Venezuela—has always depended on commodities. Sugar, gold, shrimp, timber, bauxite, and rice account for nearly 60 percent of this South American country’s gross domestic product (GDP). Now, Guyana is set to add another valuable commodity to that list.

In 2015, ExxonMobil—whose market capitalization is roughly 100 times Guyana’s GDP—made its first oil discovery offshore Guyana, adding another very precious commodity to the tiny nation’s potential product slate.

Three years and dozens of new oil discoveries later, Guyana is set to produce its own oil for the first time ever, in 2020.

Over the past couple of years, the success rate of discoveries has been phenomenal, analysts say, and some expect that Guyana could be on the road to joining the few non-OPEC nations in the world capable of producing more than 1 million bpd of oil.

Analysts warn that potential development challenges—considering that the area has never produced oil and lacks infrastructure—and the resource curse may spoil the Guyana offshore oil party.

But as things stand now, there are more optimists than pessimists that Venezuela’s small neighbor to the east could become an oil producer capable of plugging part of the conventional oil supply gap next decade. Attractive fiscal terms, scale of resource, and reservoir quality are all there in the Liza complex operated by Exxon, according to Wood Mackenzie analysts, who estimate that the complex has accounted for 15 percent of all conventional crude oil found globally since 2015.

Two months ago, Exxon announced a ninth oil discovery offshore Guyana, which adds to already estimated resource of more than 4 billion oil-equivalent barrels discovered to date.

Exxon expects Liza Phase 1 to start producing oil by early 2020, via a floating production storage and offloading (FPSO) vessel—up to 120,000 bpd.
The Guyana discoveries have the potential for up to five FPSO vessels producing more than 750,000 bpd by 2025, Exxon says.

“Guyana has hit the jackpot,” Maria Cortez, Latin America upstream senior research manager with Wood Mackenzie, said in August, commenting on Exxon’s ninth discovery.

“If this small South American nation with, a population of about 750,000, can properly manage the billions of dollars of revenue about to come its way, it may become the richest corner of the continent.”

In Orinduik Block, another block offshore Guyana, Eco (Atlantic) Oil & Gas, which is partnering with operator Tullow Oil, announced last month that an independent analysis found that there are at least ten exploration leads with close to 3 billion barrels of recoverable oil potential in the Orinduik Block. Tullow Oil and Eco plan to drill their first well in the block in early Q3 2019.
“Guyana is the jewel in the crown, the mother of dragons. That is the hottest exploration area in the world. It’s no longer frontier, it’s a sub-mature basin,” Eco’s chief executive Gil Holzman told S&P Global Platts in an interview this month.

Guyana is a “paradise” for exploring because of the enormous resource of pure, sweet, light oil that is much easier to refine than the heavy crude of its neighbor Venezuela, Holzman said.

The exploration success rate for commercial discoveries in the Stabroek block, where Exxon has been striking more and more oil in recent years, is an “astronomical” 82 percent, compared to global industry average of below 20 percent, according to WoodMac.

The size of reserves and reservoir quality underpin the economics in the block, with project break-even of below US$40 a barrel, the energy consultancy says.

Few oil producing countries pump more than 1 million bpd—there are just ten such producers outside OPEC—the U.S., Canada, Mexico, the UK, Norway, China, Brazil, Oman, Russia, and Kazakhstan.

“New admissions to the group don’t happen very often,” Simon Flowers,Chairman and Chief Analyst at Wood Mackenzie, wrote last month.

“Guyana, with no upstream oil industry four years ago, has a very good chance of joining this elite group,” Flowers noted.

The basin as a whole may hold another 8-10 billion barrels of oil equivalent of reserves, WoodMac has estimated, but warned that extrapolating success rate can be pretty unreliable.

Guyana has the resource potential, the reservoir quality, and the favorable fiscal regime to unlock its oil potential. Rystad Energy estimates that under the current tax regime, the government will have 60 percent of the profit from various projects—more favorable than many other large offshore producers, with the government take for all offshore projects around 75 percent on average.

Rystad Energy expects Guyana’s total oil production to exceed 600,000 bpd by the end of the next decade, generating annual revenue of US$15 billion from the oil and gas industry and some US$10 billion of profit that could be split between the companies and the government.

While oil companies flock to explore promising offshore Guyana waters, the country faces a difficult task going forward—will it escape the resource curse?

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Phillips 66 Wins Tender To Sell U.S. Bakken Crude To Pemex -Traders

(Reuters, 22.Oct.2018) — Refining firm Phillips 66 was awarded a tender to supply Mexico’s Pemex with at least four 350,000-barrel cargoes of U.S. Bakken crude for delivery from November through December, traders with knowledge of the offer’s results said on Monday.

The purchase will mark the state-run company’s first crude import in more than a decade.

(Reporting by Marianna Parraga Editing by Dave Graham)

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Pemex Designates Four Shipments to Import Light Crude Oil

(Pemex, 22.Oct.2018) — Petróleos Mexicanos evaluated several proposals for shipments to supply light crude oil, in accordance to the parameters established by Pemex Transformación Industrial (Pemex Industrial Transformation).

As a result, PMI assigned four shipments of 350,000 barrels each for the import of Bakken light crude oil, which will be delivered during the month of November.

Currently, the contracts are in the process of being signed and the details of the assignment will be published once this process is completed.

This decision is in line with the strategy to improve the quality of the crude oil used in the National Refining System, which will result in higher value distilled products, such as gasoline and diesel fuel.

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Echo Energy Updates on Well Result In Argentine Production Uplift

(Echo Energy, 22.Oct.2018) — Echo Energy announced plans to boost production at the Cañadon Salto Field in the Fracción D licence in Argentina, where it has now achieved 115 barrels per day (from 5 barrels per day) following four successful pilot well interventions.

Work has now been completed on four wells in the Cañadon Salto Field using the Quintana-1 rig as part of the previously announced plan to boost production. All four targeted wells (CSo-96, CSo-104, CSo-21, and CSo-80) have now been successfully commissioned, with production, pumps and offtake being optimised.

This initial phase has already produced very encouraging results with the combined oil production from the four wells currently totalling in the order of 115 barrels per day, with these rates increasing as the wells ‘oil-in’ and the pumps and associated facilities are optimised. The CSo-96 well which was the first well to be commissioned has seen a material increase from its initial production of 12 barrels per day rising to the current level of 60 barrels per day and is an indicator of potential capacity of these wells.

Prior to the interventions the total gross production from the Cañadon Salto Field area was less than 5 barrels per day out of the total gross oil production across the CDL licences (Fracción C, Fracción D and Laguna De Los Capones) of around 500 barrels per day (number excluding gas production). This increased production post interventions represents a more than 20 fold increase for the Cañadon Salto field.

The results of the pilot project well performance will now be monitored, with a view to considering next steps for the field. A full-scale remediation project across the field could potentially see production levels of over 400 barrels oil per day achieved with a commensurate increase in contingent resources.

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Bolivian, Argentine Officials to Discuss Gas Issues in La Paz

(Energy Analytics Institute, Jared Yamin, 21.Oct.2018) — Officials from Argentina and Bolivia will meet in La Paz on Oct. 22 to discuss issues related to the purchase and sale of natural gas and overdue payments.

A mission of authorities from Integración Energética Argentina S.A. (IEASA, formerly ENARSA) will meet with their Bolivian counterparts to explore solutions to accumulated unpaid debts related to the purchase of Bolivian natural gas, reported the daily newspaper La Razón.

Argentina owed an estimated $265 million to Bolivia for the purchase of natural gas from its neighbor. This figure is expected to rise to $398.5 million, including last month’s purchases of $133.5 million, reported the daily.

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Añelo Population Growth Part Of Region’s Shale Boom

(Energy Analytics Institute, Ian Silverman, 20.Oct.2018) — Añelo’s population is expected to reach 25,000 by 2023 compared to nearly 8,000 today and just 2,000 in 2011, reported the media outlet Río Negro.

“80% of the city has basic services such as water, electricity, gas and sewage,” reported the daily, citing Deliberative Council President Milton Morales.

In October 2018, the city will inaugurate its first level 3 hospital with assistance from the YPF Foundation and Chevron’s Baylor Foundation.

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Argentina To Reduce Bolivian Gas Imports To Minimum

(Energy Analytics Institute, Jared Yamin, 20.Oct.2018) — Argentina will likely reduce its demand for Bolivian natural gas imports to a minimum, says an oil analyst.

Argentina, which continues to boost production of its unconventional shale gas resources located in the Vaca Muerta formation in the Neuquen region, will likely reduce its demand for natural gas imports from Bolivia to a minimum 23.5 million cubic meters per day (MMcm/d), reported the daily newspaper El Diario, citing Jubilee Foundation Oil Analyst Raul Velásquez.

The analyst made the comments after declarations from Argentina’s Energy Secretary Javier Iguacel that revealed that in two years the country would no longer need to import gas from Bolivia.

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Camisea Consortium Resumes Operations at Malvinas Gas Plant

(Energy Analytics Institute, Ian Silverman, 20.Oct.2018) — The Camisea Consortium confirmed conditions at the Malvinas Gas Plant “are normal and present no risk to the safety of people, operations or the environment,” reported the daily newspaper El Comercio.

Today, starting at 5 p.m., normalization of plant operations will begin, with expectation of reaching total production capacity of natural gas and natural gas liquids to supply the domestic market and exports by 8 am on October 20, the consortium announced after completion of preventive evaluation of the site.

On October 16, at noon, during a routine inspection, a “potential atypical condition” was detected at one of the facilities at the processing plant, reported the daily.

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YPFB Reports Explosion Along Santa Cruz-Yacuiba Gas Pipeline

(Energy Analytics Institute, Jared Yamin, 19.Oct.2018) — An explosion along a portion of a pipeline that transports natural gas to Argentina injured a total of five people.

Bolivia’s state oil entity Yacimientos Petrolíferos Fiscales (YPFB) has initiated an investigation to establish the causes and origin of the incident, reported the daily La Razón.

“This event has been sudden and unexpected. We don’t know the causes … however it is being investigated,” reported the daily, citing YPFB National Vice President of Operations Gonzalo Saavedra in an interview with Cadena A.

At noon on October 19, an explosion occurred along a portion of GSCY (Santa Cruz – Yacuiba) gas pipeline in the city of Villa Montes, in the department of Tarija. The explosion was controlled in a couple of hours.

All the injured were transferred by helicopter from Villa Montes to a medical center in Santa Cruz de la Sierra due to the severity of the burns. Among the victims there are two children, the daily reported.

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Bolivian Refineries Cover 71.4% Of Domestic Demand for Special Gasoline

(Energy Analytics Institute, Jared Yamin, 19.Oct.2018) — Production of special gasolines from Bolivia’s three existing refineries isn’t sufficient to cover the country’s demand.

Domestic supply only covers 71.4% of domestic market demand, down 2% compared to 2017, and down 5% between January and May of the current year, reported the daily El Diario.

In May 2018, the Jubilee Foundation reported the Gualberto Villarroel, Guillermo Elder Bell and Río Negro refineries produced a combined 3,570,000 liters per day of gasoline versus demand of 5,000,000.

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Brazil Reserves And Production Update, H1 2018

(Seeking Alpha, George Kaplan, 19.Oct.2018) — Brazil and Petrobras show something in common with US LTO: even with a lot of debt and desire, and a strong resource base, it is difficult to raise production in the face of high decline rates. It may also be a lesson for the world as oil prices rise and activity picks up; it is by far the most active conventional oil region with many major projects at various stages of completion, but facing delays and schedule crowding so oil production has continued a slow decline, contrary to expectations from last year. In July, new production again did not quite match overall decline, mostly because of delays in start-ups of FPSOs planned for this year, and at 2575 kbpd was down 14 kbpd or 0.5% m-o-m and 48 kbpd or 1.8% y-o-y (data from ANP).

Two FPSOs were started in 2017: Lula Extension Sul (P-66) at 150 kbpd nameplate and Pioneiro de Libra, an extended well test project on the Mero field, at 50 kbpd. Both are now about at design throughput. Two other FPSOs completed ramp-up in 2017. In 2018, three FPSOs have started up: Atlanta a small early production system at 20 kbpd, Bezios-1 (P-74) in the Santos basin at 150 kbpd and FPSO Cidade de Campos dos Goytacazes on the Tartaruga Verde field in Campos, also at 150 kbpd. There were three other FPSOs due for the Buzios field (P-75, 76 and 77) but at least one is delayed till next year. There are now four planned FPSOs remaining to be started up this year, all in the fourth quarter: P-75 and P-76 plus P-67 (Lula Norte) and P-69 (Lula Extremo Sul) in the Lula field (each 150 kbpd nameplate). Even for a company the size of Petrobras that seems a very tight schedule for commissioning large, complex plant, so one or two may slip to next year and all may be so late as to make little difference to this year’s numbers.

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Mexico’s Peso Falls To Lowest Level In 5 Weeks On Pemex Outlook

(Reuters, 19.Oct.2018) — Mexico’s peso currency reversed gains on Friday to fall 1 percent, hitting its lowest level in five weeks after a report by ratings agency Fitch on national oil company Pemex.

Following the decision by Fitch to revise the company’s outlook rating to negative from stable, the peso currency weakened to 19.34 pesos per dollar. (Reporting by Miguel Angel Gutierrez)

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Petrobras Announces Resignation Of Board Member Christian Alejandro Queipo

(Petrobras, 19.Oct.2018) — Petrobras announced Mr. Christian Alejandro Queipo presented his resignation from the position as member of the company’s Board of Directors, for personal reasons.

As a member representing the company’s employees, his succession will follow the procedures established in paragraph 2 of article 25 of Petrobras’ Bylaws, observing the previous analysis by the Nominating, Compensation and Succession Committee.

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Petrobras Reveals Release Date For 3Q:18 Results

(Petrobras, 19.Oct.2018) — Petrobras will release its 2018 third quarter results on November 6, 2018, before the market opens.

Therefore, between Oct. 22, 2018 and Nov. 6, 2018, the company will be in quiet period, during which it is not able to comment or provide clarifications related to its results and perspectives.

This initiative aims at meeting the best Corporate Governance practices, thus ensuring fair disclosure of information with its stakeholders.

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Environmental Emergency: 720,000 Lt. Oil Spill in Chile

(TeleSur, 19.Oct.2018) — The spill is the largest ever registered in the region of Tierra del Fuego.

In the southernmost region of Tierra del Fuego in Chile, an oil spill has unleashed an environmental emergency affecting at least 6,000 square meters, according to the National Emergency Office.

This is the largest spill registered in the Magallanes region. On Wednesday an oil leak from a plant owned by Chile’s National Oil Company (ENAP) and operated by YPF, Argentina’s Fiscal Oil Fields, reached the narrow river Chorrillo Paraguaya carrying the leak and affecting more land and water surface.

Chile’s regional secretariat for the Environment Ministry said, “the spill was contained in Rio Cullen, so it is affecting this river and several unnamed lakes.” Authorities don’t expect the spill to reach the Strait of Magellan or the Atlantic Ocean.

Authorities have yet to determine what caused the leak while YPF confirmed they have recovered 60 percent of the leaked oil.

“We will take all the measures to understand why these situations occur … and to determine what measures the companies will take to ensure these accidents do not take place because they generate gigantic environmental damage that we cannot accept,” Chile’s Environment Minister and businesswoman Carolina Schmidt said Thursday.

Senators Guido Girardi and Aysen Ordenes of the Environmental Commission announced legal actions against those responsible for the spill. “We cannot be complacent. The minister has said that everything is under control — that’s a lie, everything is not under control, this cannot be controlled. It takes a long time to control and we are going to present a criminal suit for environmental reparation…” Girardi said.

Greenpeace Chile has also expressed their concern over the spill and announced they will monitor the situation to ensure “an effective and transparent response by the authorities to minimize the effects in the area.”

Environmental Scandal Rocks Chile

A toxic cloud above Quintero in Chile is affecting hundreds of people in the coastal town.

Posted by teleSUR English on Thursday, September 13, 2018

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Related Stories:

Vaca Muerta Megaproject – A Fracking Carbon Bomb In Patagonia

YPF Personnel Try To Mitigate Gas Leak In Bandurria

(Energy Analytics Institute, Ian Silverman, 19.Oct.2018) — YPF personnel conducted operations today to mitigate a gas leak located at the Bandurria deposit in Neuquén.

No injuries were reported, and the location was evacuated for security reasons to initial contingency work, reported the media outlet Río Negro.

YPF didn’t reveal details about the incident.

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Petrofac Completes Sale Of 49% Interest In Mexican Operations

(Petrofac Limited, 19.Oct.2018) — Petrofac Limited announces that it has completed the sale of 49% of the company’s operations in Mexico to Perenco (Oil & Gas) International Limited, following approval from the Federal Competition Commission of Mexico (COFECE).

Related Stories

Petrofac Introduces Partner In Mexico

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Foreign Oil And Gas Firms Look To Play Crucial Role In Venezuela

(Energy Global, David Bizley, 19.Oct.2018) — The majority of foreign companies are not making any profit or losing money in their partnerships with PDVSA to develop and produce hydrocarbons due to inadequate investment, shattered infrastructure and US sanctions.

However, in the long term, having access to the vast hydrocarbon reserves of Venezuela compensates the current country risks and current negative cash flows in joint ventures (JVs), says GlobalData.

In this way, foreign companies have formally or informally also gained operatorship in key upstream fields located mainly in the Orinoco Belt. Indeed, Rosneft gained operatorship in the Mejillones and Patao blocks and exporting rights for 30 years with an in-kind 20% royalty rate.

Chinese and Russian companies have invested the most in the Venezuelan oil and gas sector during recent years. China, through its Development Bank, has provided more than US$60 billion in loans to Venezuela. In 2018, it has given an additional US$5 billion loan to support oil developments in the country, on top of the US$6.3 billion in loans since 2014 from Rosneft.

David Bautista, Oil and Gas Analyst at GlobalData, comments: “In other important basins such as Maracaibo or East Venezuela, most companies have recovered their initial investments. Thus foreign participants will likely be able to improve their JV terms and conditions in exchange for capital injection in the sector if the critical situation ends when PDVSA is finally able to boost production.”

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Petrobras and CNPC Define Business Model For COMPERJ, Marlim Partnership

(Hydrocarbon Engineering, Alex Hithersay, 18.Oct.2018) — Petrobras has announced that it has signed an integrated project business model agreement (IPBMA) with China National Oil and Gas Exploration and Development Co. (CNODC), a subsidiary of CNPC, advancing towards their strategic partnership, as disclosed to the market on July 4, 2018.

The IPBMA details the steps of a feasibility study to evaluate COMPERJ refinery’s current technical status, its investment case and the remaining scope to conclude the refinery and the business valuation. A joint team composed by CNPC and Petrobras specialists and external consultants will conduct the studies.

Once the full benefits and costs of this project are quantified, the next step is to create a joint venture (JV) between Petrobras (80%) and CNPC (20%) to conclude and operate the refinery.

The integrated project also includes 20% participation of CNPC in Marlim cluster, which is composed by Marlim, Voador, Marlim Sul and Marlim Leste fields. Petrobras will have 80% and will keep the operatorship of all these fields.

Marlim crude oil production perfectly fits the design crude slate to be processed in COMPERJ refinery, a high conversion heavy oil refinery.

The JV’s effective implementation depends on the successful results of COMPERJ feasibility study with the respective investment decision by the parties, as well as the negotiation of final agreements.

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YPFB To Build Five Satellite Regasification Stations

(Energy Analytics Institute, Jared Yamin, 18.Oct.2018) — Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) plans to build five satellite regasification stations (ESR) that will benefit 12 populations of La Paz, Potosí, Chuquisaca and Santa Cruz.

YPFB will move forward with the five ESR projects, which will benefit 12 communities located in La Paz, Potosí, Chuquisaca and Santa Cruz, announced Bolivia’s state oil entity in an official statement on its website.

These projects are in addition to 27 ESRs that already operate across the country, YPFB said, citing Executive President Oscar Barriga Arteaga.

A YPFB LNG Plant, the first of its kind in Bolivia, is located in Rio Grande, Santa Cruz and distributes gas to ESRs through cryogenic tanks. The plant’s production capacity is 210 metric tons per day (TMD) of liquefied natural gas. The ESRs receive natural gas supply for domestic, industrial, commercial and vehicular natural gas consumption, YPFB said.

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Gas Shortages In Southern Mexico To Reach Critical Levels In November

(S&P Global Platts, 18.Oct.2018) — Gas shortages in southern Mexico will reach a critical point in November as Pemex natural gas production continues declining and users lack access to LNG terminals, industrial users in southern Mexico told S&P Global Platts on Thursday.

Pemex is not nominating gas for several industrial users in southern Mexico as a result of decreasing production, Cleantho de Paiva Leite, director for new businesses with Braskem Idesa, told Platts on the sidelines of the Mexican National Petrochemical Forum.

“The situation could lead to a complete stoppage of the industrial activity in southern Mexico,” said de Paiva Leite, whose company operates the most polyethylene capacity in Mexico.

Pemex is allocating its diminishing gas output to fulfill the needs of its subsidiaries and power generators, a second petrochemical company in southern Mexico told Platts at the forum.

PIPELINE CONSTRAINTS

Gas shortages in southern Mexico have become more acute due to infrastructure constraints on gas flows into Coatzacoalcos, Veracruz, one of Mexico’s largest petchem and industrial hubs, Paiva said.

This situation will be eased once the Mexican government completes the reconfiguration of the Cempoala compressor station in the state of Veracruz, which is expected to be completed in Q1 2019, according to Mexico’s Energy Secretariat (SENER).

The only options for users in this situation is to shut down operations or consume gas without a nomination being sent to Pemex, which would result in steep penalties, Miguel Benedetto, general director of the Mexican Association of the Petrochemical Industry (ANIQ), told Platts on the sidelines of the forum.

However, consuming gas under or above the nominated level leads to natural gas imbalances in the network that is addressed by system operator Cenagas via LNG injections, Benedetto said.

A large steelmaker in northern Mexico told Platts that some industrials with access to declining Pemex gas fields in northern Mexico also are resorting to taking gas from the system without nominations and incurring imbalance penalties.

Earlier this month, Mexico’s business coordinating council, or CCE, told Platts that Pemex also is not delivering all the gas that is being nominated.

“It isn’t a good signal. We are having gas supply problems,” Roger Gonzalez, president of CCE’s energy commission, told Platts. “The reduction has been limited, but this is decreasing system pressure and affecting industrial users’ operations.”

LNG PENALTIES

Cenagas charges for LNG at spot prices with a 50% penalty, which is hugely uncompetitive, he added. “So, choose how you want to die: by shutting down operations or paying $21/MMBtu gas,” Benedetto said. LNG prices in Mexico are three to four times more expensive than continental gas imports.

Pemex, Braskem Idesa and INAQ told Platts that to address the current gas shortage the Mexican government must stop targeted LNG penalties to shippers and end-users and reverse deregulation to a situation in which all users share LNG costs.

Benedetto said the government needs to intervene because the imbalances on the system are a result of gas shortages due to declining Pemex production.

“Before when unbalances happened, LNG expenses were shared by everyone in Mexico, pushing gas prices to $4-$5/MMBtu. Now, we in the south pay gas at $20/MMBtu due to the new balancing regulation,” Paiva said.

Recent data from SENER shows the gas demand in the petchem sector has been in free fall, reaching 214 MMcf/d in 2016 from 697 MMcf/d in 2013.

Pemex didn’t immediately respond to requests for more information on the southern supply shortages. However, Carlos Trevino, Pemex’s CEO, previously told Platts the country is facing irregularities in its gas supply. “Without a doubt, there is not enough gas to supply all the market demand including Pemex and its subsidiaries,” Trevino said in an interview at the Mexican Petroleum Congress in Acapulco at the end of September.

REVERSING LIBERALIZATION

Benedetto said ANIQ wants Mexico’s Energy Regulatory Commission (CRE) to reverse the liberalization of wholesale gas prices, known as first-hand gas sales or VPM.

CRE previously set the maximum price for gas to be sold by Pemex using a formula based on US prices. VPM prices were regulated under this formula at two hubs, Reynosa on the Mexico-Texas border and Ciudad Pemex in southern Mexico. The switch to free-market conditions was expected to provide Pemex and other independent producers the revenue to reverse the country’s production declines.

Pemex’s gas production has declined from more than 6 Bcf/d at the beginning of the decade to an average of 3.9 Bcf/d in 2018, SENER’s data shows.

Benedetto said no open-market conditions exist today in southern Mexico, adding that lack of infrastructure to move gas south prevents new shippers from servicing users in this region, leaving a captive market under Pemex.

Pemex also isn’t reacting to market incentives to boost production in southern Mexico although industrial users are being curtailed or are having to pay LNG gas prices, he added. The regulations anticipated a “competitive market that doesn’t exist,” Benedetto said.

Braskem Idesa’s Paiva said that Mexico can’t change overnight from a state monopoly to a free market without ensuring there is enough infrastructure and interconnections in the system. “This has to be an organized transition with the coordination of CRE, Cenagas, Pemex, and SENER,” he added.

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Moody’s: Mexican Government’s Plan To End Oil Exports Raises Risks

(Kallanish Energy, 18.Oct.2018) — The incoming Mexican government’s announcement to end oil exports is credit negative to both Petroleos Mexicanos (Pemex) and to the government’s credit quality, says Moody’s investors Service, in a new report.

The oil company’s operating cash flow would decline and become more volatile under the new refining-focused business model, Moody’s believes.

“Pemex would be exposed to greater foreign exchange volatility, since its income from fuel sales would be in Mexican pesos, while 87% of its $104 billion debt as of June 2018 is in U.S. dollars or other hard currencies.” said Moody’s senior vice president Nymia Almeida.

“The new plan could also force Pemex to import crude, which would add to its cash-flow and foreign-exchange risk.”

The oil company’s credit quality would weaken depending on how much crude it needs to import to feed its refining capacity, Kallanish Energy understands.

Moody’s believes the risk of Pemex posting lower operating cash flow within the next three years is even greater considering the upward momentum on crude prices, and the new government’s stated intention to not increase domestic fuel prices.

Although the federal government has decreased its reliance on oil revenue since its 2013 tax reform, the loss of oil revenue from a loss-generating Pemex could substantially widen Mexico’s fiscal deficit.

Plans to halt oil exports would deprive the government of nearly 2% of GDP (Gross Domestic Product) in revenue, forcing it to raise taxes or abandon its pledge of fiscal discipline.

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Petrobras Updates On Beginning Of Binding Phase Of Ceará Cluster

(Petrobras, 18.Oct.2018) — Petrobras, following up on the release disclosed on Oct. 4, 2017, informs the beginning of the binding phase regarding the sale of its entire stake in the Ceará cluster, located in shallow waters in the Ceará basin.

At this stage of the project, process letters are issued to qualified interested parties with detailed instructions about the divestment process, in addition to guidelines to conduct due diligence and submit binding proposals.

This disclosure to the market is in compliance with Petrobras’ divestment methodology and aligned with the provisions of the special procedure for the sale of the rights to exploration, development and production of oil, natural gas and other fluid hydrocarbons, provided for in Decree 9.355/2018.

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Petrobras LSFO Offer Sparks Fears Of Length In Europe

(S&P Global Platts, 18.Oct.2018) — Brazil’s Petrobras is offering 50,000 mt of 0.6% cracked low sulfur fuel oil from Brazil for delivery into Europe during the first decade of November, fuel oil traders said Thursday.

The cargo from Petrobras, Brazil’s biggest refiner, is not good news for European LSFO after a period of steady demand in the Mediterranean, as this additional cargo will add length in Europe.

“This is the last thing we want in Europe,” a fuel oil trader said.

The LSFO market tightened through September and early October as the Mediterranean continued to demand 1% fuel oil for utilities, but traders expect this to soften in the coming weeks as the extended summer air-conditioning demand dips.

“The market seems oversupplied now, all the key refineries are coming back from maintenance, the summer demand is gone,” a second fuel oil trader said.

The 0.6% sulfur Petrobras cargo will likely go into the blending pool, and a possible destination could be the Algeciras blending hub, a source said.

Last winter, the European LSFO market benefited from some additional non-EU demand from Brazil’s Petrobras to fulfill a shortfall in requirements due to a drought. This combined with maintenance at a key LNG import facility necessitated oil imports for power generation as Brazil’s 70% of electricity is hydropower.

Petrobras could not be reached for comment to confirm the cargo or the purpose of the export.

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Trinidad Government Announces New Company For Refinery Assets

(Trinidad and Tobago Newsday, Carla Bridglal, 18.Oct.2018) The government has announced a new state company, Guaracara Refining Company, into which the assets of the Pointe-a-Pierre refinery will be placed.

The refinery is scheduled to be shuttered by next month, and after the assets have been transferred to Guaracara, the company will advertise a “very broad” request for proposals (RFP), where any interested party can pitch their plan on how the refinery can be utilised.

“Everything will be open for discussion. At the end of the day, we feel we will get a proposal that is acceptable where we will no longer have this albatross around our neck called the refinery, but the assets can still be used in a productive way for the benefit of TT,” Energy Minster Franklin Khan said yesterday at the post-Cabinet media briefing.

Guaracara is one of five new companies created as part of the restructuring of state oil company Petrotrin, including Heritage Petroleum Company Ltd and Paria Fuel Trading Company, which will handle exploration and production and trading and marketing, respectively. Petrotrin as an entity will remain as a company to deal with legacy matters, and these will all be placed into one, Trinidad Petroleum Holdings Ltd.

Heritage and Paria were incorporated on October 5, but according to the Companies Registry, Guaracara is not yet listed.

Khan said a vesting order was being prepared to transfer Petrotrin’s exploration and production assets to Heritage and the terminal, port and pier assets to Paria. There will also be an assignment of exploration and production licences under the name of Petrotrin at the Ministry of Energy to Heritage.

“The transformation process is well on its way and going smoothly,” Khan said. The government hopes to have the new companies operationalized by the end of this year, he said. “All things being equal, 2019 will be a brand new year for the energy sector in TT,” he said. As it stands, all operations are still continuing under the name of Petrotrin. Khan added that all timelines are on schedule for the import and export of fuel and crude oil. The first shipment of fuel is expected around October 22-24 and the first crude export will be October 30-November 1. Neither Khan nor his Cabinet colleague Communications Minister Stuart Young could verify if Petrotrin had indeed retained a supplier for fuel. Khan said the company was “very close if not there already” when asked by reporters for the status, while Young said, given the information provided “I’m sure they have a supplier by now.”

Regardless, Khan said there would be a “seamless transition for the supply” of liquid fuel, liquid petroleum gas (LPG or cooking gas) and bitumen, and the country has a 20-day buffer supply should there be any lapse in delivery time.

Young also said that the price Petrotrin’s crude oil was fetching on the international market was well above the West Texas Intermediate price, the international benchmark price at which the TT budget is pegged. “We thought it would have been less than WTI. It’s even higher than we thought the crude was worth,” Young said.

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Tarija Department Has Accumulated Losses of $100 Mln Since 2012

(Energy Analytics Institute, Jared Yamin, 18.Oct.2018) — Bolivia’s Tarija department has lost about $100 million in the last eight years.

The figure corresponds to revenues the department has lost between 2012 and October 2018 from not distributing resources from the Margarita-Huacaya field, which the region shares with Chuquisaca, reported the daily newspaper La Razón, citing United to Renew (Unite by its Spanish acronym) Councilman Alfonso Lema.

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Pemex Has Registered 40,000 Illicit Connections Since 2012

Pemex’s Carlos Treviño. Source: Pemex

(Energy Analytics Institute, Piero Stewart, 17.Oct.2018) — Petróleos Mexicanos (Pemex) has registered 40,000 clandestine pipeline connections in the last six years, announced company General Director Carlos Treviño during a speech to the Chamber of Deputies.

“Pemex is most concerned about this problem as it damages a company of Mexican citizens,” reported the daily El Financiero, citing Treviño.

Illicit pipeline connections continue to rise due to increased participation of organized groups mainly in states such as Puebla, Hidalgo, Guanajuato, Veracruz and Jalisco, reported the daily, citing data from 2008.

The municipalities most affected include: San Martin Texmelucan, Atlacomulco de Zuniga Jalisco, Cuautepec de Hinojosa, Gonzalez Tamaulipas and Tula de Allende, said the official.

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Pemex Sells $2 Bln Bonds To Fund Investment And Refinance Debt

(Offshore Technology, 17.Oct.2018) — Mexican state-owned petroleum company Pemex has reportedly sold $2bn of its bonds.

The sale of the ten-year Pemex bonds is said to have generated about 6.5% in a move, which is aimed at funding the company’s investment, as well as refinance debt.

A Pemex spokesperson said in a statement: “With this deal, our cash level for the end of 2018 has been strengthened and we guarantee the company’s liquidity for the start of 2019.”

Starting on 1 December, President-elect Andrés Manuel López Obrador will manage the company. Octavio Romero will serve as the head of the company.

HSBC, JPMorgan Chase, Scotiabank, and UBS handled the issue, which was oversubscribed 5.9 times, and involved the participation of investors from the US, Europe, the Middle East, Asia, and Mexico.

According to the Financial Times, an undisclosed Pemex investor said that the sale of Pemex bonds is required to pre-fund needs for next year.

The investor did not reveal details on whether tenders of oil assets will continue or not.

Pemex, which is struggling with a production fall for 14 years, announced discoveries of seven reservoirs in two new wells in Mexico’s Southeast Basin, last week.

With the new wells Manik-101A and Mulach-1, the company will be able to incorporate more than 180 million barrels of oil equivalent of 3P reserves.

Pemex said that the new shallow water discoveries will become part of its portfolio of fields that are under development and have been discovered in recent years.

The company is currently evaluating and developing six fields, which are expected to have combined peak production of up to 210,000 barrels of oil per day and 350 million cubic feet per day of natural gas.

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Mexico’s Next Government Faces Bind In Pemex Ethane Deal

(Reuters, Diego Oré, 17.Oct.2018) — Mexico’s incoming government will soon inherit a costly dilemma over an ethane supply contract between national oil company Pemex and a consortium led by a unit of Brazilian builder Odebrecht.

Under the contract’s terms, Pemex has had to supply ethane well below current market prices.

A hydrocarbon that comes from natural gas, ethane is used to make ethylene, which in turn is used to make the common plastic polyethylene at the Braskem-Idesa plant near the Gulf coast port of Coatzacoalcos.

The plant is operated by the consortium in which Odebrecht’s unit Braskem has a 70 percent stake and Mexico’s Grupo Idesa holds the remainder.

Energy aides to President-elect Andres Manuel Lopez, who takes office Dec. 1, have said the contract is problematic, but have not yet said what the new government will do about it.

“The contract with Braskem is very damaging to Mexico’s interests,” Sen. Armando Guadiana, of Lopez Obrador’s Morena party and heads the Senate energy commission, told Reuters last week. Pemex is fully owned by the government.

The Braskem-Idesa consortium told Reuters last week it has no plans to void the contract.

If President-elect Lopez Obrador were to direct Pemex to cancel the contract, it would be forced to purchase from the consortium the sprawling Etileno XXI petrochemical facility currently valued at $1.26 billion (£956.43 million), according to a contract annex seen by Reuters.

Neither Pemex or Braskem responded to questions about the valuation.

Conversely, if the new government opted to stick to the deal, it could only hope for more favourable ethane prices that might reduce its losses.

MUTUALLY BENEFICIAL?

Under the terms of the 20-year-long contract, Pemex committed to selling ethane to Braskem-Idesa for 16 cents per gallon. When the contract was signed in 2010 market prices for ethane were three times that, at 50 cents per gallon.

Current ethane prices hover around 40 cents per gallon.

A Pemex spokesman said the contract, which took effect in 2016, “responded to the market conditions of that time.”

Before the facility began operations in 2016, Pemex produced more ethane than it needed, forcing it to inject excess supply back into its natural gas pipelines.

Pemex’s production of ethane this year averages 88,000 bpd, but this is now insufficient to supply its own Morelos and Cangrejera petrochemical facilities that require a combined 66,900 bpd, plus the Baskem-Idesa contract obligation of 66,000 bpd.

As a result Pemex was forced to turn to ethane imports this year for the first time as domestic oil and gas production continues to fall, costing Pemex some $50 million during the first half of 2018, according to Reuters calculations, due to the cost of imported ethane at market rates compared to the cheaper fixed price in the contract with the Braskem-Idesa consortium.

If Pemex is left without enough ethane, it would have to shut down the so-called cracking plants at its two petrochemical facilities, and the cost of re-starting them after being idled one week would be some $2.6 million, according to comments from the head of Pemex’s ethylene unit, Alejandro Cruz, at a board meeting in December.

In June, pricing agency Platts reported that Pemex entered into a $237.6 million contract with Swiss commodities trader Vitol to supply 720,000 tonnes of ethane to Pemex through 2020.

Both Pemex and Vitol declined to confirm the deal.

In 2016, Mexico’s federal auditor determined that Pemex ethane exports during a 10-month stretch of that year could have yielded the company more than $100 million had it not been for the Braskem-Idesa contract.

Using official data, Reuters calculated a similar $100 million opportunity cost in 2017.

Both Pemex and Braskem declined to comment on the calculations.

Braskem said the contract was mutually beneficial, arguing that it helps cut Mexico’s reliance on foreign plastics.

“We are not planning on undoing a positive contractual relationship that we’ve been building with Pemex and that brings benefits to all,” said Sergio Plata, head of institutional relations for the Braskem-Idesa consortium.

Rocio Nahle, Lopez Obrador’s pick to be Mexico’s new energy minister, has said the incoming government will review the Braskem-Idesa contract for possible signs of corruption, part of a broader energy contract review.

The consortium’s Plata said he was confident the contract will not be modified.

According to a transcript of a recent session of the board of directors of Pemex’s ethane unit, acting director Rodulfo Figueroa, admitted that supplying the gas is “the most serious problem” it faces.

Lopez Obrador’s incoming transportation minister, Javier Jimenez Espriu, is an alternate member of the Grupo Idesa board of directors but told Reuters the contract was reviewed by the separate board of the Braskem-Idesa joint venture.

Luis Miguel Labardini, a Mexico City-based energy consultant, said an even bigger problem for Pemex lies with whoever agreed to the contract’s terms in the first place.

“We should give the benefit of the doubt to whoever negotiated this contract that they didn’t act in bad faith,” he said. “But they were negligent.”

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Mexico’s Salina Cruz Refinery Normal After Electrical Accident: Pemex

(Reuters, 17.Oct.2018) — Mexico’s Salina Cruz oil refinery is operating normally after three people were injured in an electrical accident, a spokesman for state oil company Pemex said on Wednesday.

The 330,000 barrel-per-day capacity facility, Pemex’s largest, had a short-circuit on Tuesday evening that sparked flames, the spokesman said.

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Argentina Plans To Close LNG Importing Facility

(Bloomberg, Jonathan Gilbert, 17.Oct.2018) — Argentina plans to close a facility for importing liquefied natural gas (LNG), according to people with direct knowledge of the matter, after booming production from shale deposits in the Vaca Muerta region turned the country into a seasonal exporter.

A contract with Excelerate Energy, which has a regasification ship moored at the Atlantic port of Bahia Blanca, won’t be renewed when it expires at the end of the month, said the people, who asked not to be named because the decision isn’t yet public. Argentina will continue to import LNG at another facility in Escobar, on the River Plate estuary, the people said.

YPF SA, the state-run oil company that manages the contract, declined to comment on the decision. A spokeswoman for Excelerate didn’t immediately comment.

The decision not to renew the decade-old contract comes as output from Vaca Muerta, the nation’s answer to the Permian basin, has created an oversupply of gas during the summer. Shale gas production soared to 205 million cubic meters a day in August, more than triple the level seen a year earlier. The government has negotiated exports to Chile to help solve the problem. It has also initiated talks to receive less gas from neighboring Bolivia, with which it has a contract through 2026.

Three Cheniere Energy tankers were set to unload at Bahia Blanca this year through May, according to the latest official import schedule.

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YPF Inaugurates Phase I Of 99-MW Wind Park In Argentina

(Renewables Now, 17.Oct.2018) — Argentine state-run oil company YPF inaugurated on Wednesday a portion of a 99-MW wind park in Chubut province that will produce clean power for its deposits and refineries.

The first 50-MW phase of Manantiales Behr, as the park is named, has been switched on. The whole wind farm is comprised of 30 wind turbines in total, spread over an area of 2,000 hectares (4,942 acres), with 25 installed and five nearing completion.

Through YPF Luz, the oil company invested some USD 200 million (EUR 173.82m) in Manantiales Behr. Once fully operation it will be producing as much power as Comodoro Rivadavia city consumer, offsetting 241,600 tonnes of carbon dioxide (CO2) per year.

Currently, YPF Luz has 1,800 MW of operational assets in its portfolio, and it plans to double its capacity in the upcoming years. It also has 800 MW of green projects under evaluation or construction, it noted.

(USD 1 = EUR 0.87)

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Trump Talks Tough On Venezuela, But Imports Ever More Venezuelan Oil

(Miami Herald, Andres Oppenheimer, 17.Oct.2018) — There is a major inconsistency in President Trump’s stand on Venezuela: He talks tough — and even makes veiled threats of a military intervention in that country. But at the same time, he steadfastly refuses to cut U.S. imports of Venezuelan oil, which are the main source of income of Venezuela’s dictatorship.

In fact, the United States has been increasing purchases of Venezuelan oil recently. While U.S. oil imports from Venezuela had decreased in recent years, they have been rising since February and increased by 28 percent in September, according to the Refinitiv Eikon data firm.

What the United States buys accounts for up to 80 percent of Venezuela’s oil income. If the Trump administration drastically cut its oil imports, President Nicolas Maduro’s dictatorship —which already faces a 1 million percent annual inflation rate and widespread food and medicine shortages —would have a hard time surviving, some critics of the Maduro regime say.

So why doesn’t Trump reduce Venezuelan oil imports?

First, because U.S. refiners in the Gulf Coast oppose it, saying that it would drive up domestic gas prices and affect pro-Trump constituencies in Louisiana, Texas, Alabama and Mississippi. Trump would lose more votes in those states than he would gain among Venezuelan Americans in Florida, some advisers are telling him.

Second, Trump’s National Security Adviser John Bolton and Secretary of State Mike Pompeo are focused on crippling Iran’s oil exports. Many in the White House think that causing a simultaneous collapse of both Iranian and Venezuelan oil exports would drive up world oil prices and hurt U.S. consumers, oil experts say.

Third, and perhaps most interesting, while Trump likes to talk tough on Venezuela to gain votes in Florida, he may fear producing a worse humanitarian crisis that would almost commit him to a military intervention there.

“If you break it, you buy it,” George David Banks, a former international energy and environment adviser to Trump, told the S&P Global Platts website. “The White House doesn’t want to own this crisis.”

Trump has stepped up Obama administration’s individual sanctions against top officials of the Maduro regime, and imposed sanctions on purchases of Venezuela’s debt. But “the Trump administration is more hesitant than ever” to impose oil sanctions, says the Platts report.

Supporters of reducing U.S. imports of Venezuelan oil reject the idea that such a move would aggravate the country’s humanitarian crisis without necessarily bringing down the Maduro regime. Accelerating the country’s collapse to force a regime change is the best option available, they argue.

And a cutback of Venezuelan oil imports would not necessarily give Maduro a propaganda victory by allowing him to play the victim of U.S. “imperialism.” Trump could simply reduce Venezuelan oil purchases, without declaring an oil embargo or saying a word about it, they say.

But perhaps the strongest argument for a gradual U.S. cutback of oil purchases is that it would lead other countries to take the Trump administration seriously when it asks for international sanctions against Venezuela.

Many foreign officials ask: How can the Trump administration ask others to impose economic sanctions when the United States is Venezuela’s biggest trading partner, in effect, bankrolling the Maduro regime?

When I asked Argentina’s President Mauricio Macri in an interview last year what the international community should do to help restore democracy in Venezuela, he responded that the first step should be taken by the United States.

“If the United States really took a measure such as suspending oil purchases from Venezuela, the Maduro regime would have a serious financing problem,” Macri told me. He added that by cutting Venezuelan oil imports, “The United States could change things (in Venezuela) definitively.”

I’m not sure that drastically cutting U.S. oil purchases from Venezuela would be the best idea; it likely would come at a huge humanitarian cost. But this much is clear: If Trump wants other countries to step up sanctions against Venezuela, he, himself, should consider a gradual slowdown in U.S. purchases of Venezuelan oil, instead of sending more cash to the Maduro regime.

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U.S. Eyes More Venezuelan Sanctions, But Oil On Backburner: U.S. Official

(Reuters, Roberta Rampton, 17.Oct.2018) — The United States plans to turn up sanctions pressure on Venezuela but sees less need to immediately target its energy sector, given sagging production from the OPEC member’s state-run oil company, a senior U.S. administration official said on Wednesday.

The U.S. government has imposed several rounds of sanctions on Venezuelan military and political figures close to socialist President Nicolas Maduro, who it blames for trampling on human rights and triggering the country’s economic collapse.

Earlier this year, the Trump administration had weighed escalating sanctions by targeting a Venezuelan military-run oil services company or restricting insurance coverage for oil shipments.

The actions would have built upon last year’s ban for U.S. banks from any new debt deals with Venezuelan authorities or state-run oil giant PDVSA.

Asked by reporters whether the U.S. government had slowed down on its push for sectoral sanctions, the senior official described them as some of the many “tools” it is keeping in reserve. “With regards to Venezuela, all options are on the table,” said the official, who spoke on condition of anonymity.

“The fact is that the greatest sanction on Venezuelan oil and oil production is called Nicolas Maduro, and PDVSA’s inefficiencies,” the official said.

Venezuela’s crude oil production hit a 28-year low in 2017, a slump blamed on poor management and corruption.

“At the end of the day, Nicolas Maduro has taken care of really running PDVSA to the ground, and essentially more and more making it a non-factor,” he said.

Almost 2 million Venezuelans have fled since 2015, driven out by food and medicine shortages, hyperinflation, and violent crime. The exodus has overwhelmed neighboring countries.

Maduro, who denies limiting political freedoms, has said he is the victim of an “economic war” led by U.S.-backed adversaries.

The Trump administration also plans to ramp up economic pressure on Cuba’s military and intelligence services, the official said.

In his speech last month to the United Nations, President Donald Trump linked Venezuela’s crises to “its Cuban sponsors.”

“That is a message that we will continue to put out, but frankly its a message that the region needs to talk about,” the official said, noting John Bolton, Trump’s national security adviser, is expected to elaborate on the issue publicly soon.

“The issue of Cuban involvement in Venezuela is a fact. It’s not a theory, it’s not a story,” the official said.

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Pemex Seeks Up To 2.1 MMbbls Of U.S. Bakken Crude -Traders

(Reuters, 17.Oct.2018) — Mexico’s state-run oil company Pemex received bids this week for up to six 350,000-barrel cargoes of U.S. Bakken crude it wants to import from November through December, according to traders with knowledge of the tender.

This is Pemex’s second attempt to import U.S. light oil mostly for its Salina Cruz refinery. A previous tender launched earlier this month to buy U.S. Light Louisiana Sweet (LLS) crude was not awarded due to lack of bids.

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PDVSA, Pequiven Retirees Protest Lack Of Pension Payments

(Energy Analytics Institute, Piero Stewart, 17.Oct.2018) — Retired workers with PDVSA and Pequiven spoke out in the streets in a protest aimed at calling attention to pensions unpaid by the Venezuelan government.

Unfortunately, a number of retired company workers have died waiting for pension payments, reported Venezuelan media El Carabobeño, citing José Castillo, director of the Association of Retirees and Pensioners at PDVSA and Pequiven.

In the past four years we have tried and done everything to get PDVSA to pay the pensions, but to-date these efforts have been in vain, said Castillo.

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Merrill Lynch Interested In Guyana’s Proposed Sovereign Wealth Fund

(Stabroek News, 17.Oct.2018) — Representatives of Merrill Lynch Wealth Management have met with the Governor of the Central Bank of Guyana after recently indicating an interest in engaging in discussions with those charged with the responsibility of setting up Guyana’s Sovereign Wealth Fund says Minister of Foreign Affairs Carl Greenidge.

They are interested in Guyana’s proposed sovereign wealth fund, Greenidge said noting that they have a variety of expertise in the setting up of such funds, and providing options for collaboration that they can offer.

Merrill Lynch, the investment arm of the Bank of America Corporation, Greenidge told the media yesterday at a press conference held at the Ministry of Foreign Affairs, Takuba Lodge, Georgetown, asked the Guyana delegation for a meeting on the sidelines of the recently- concluded United Nations General Assembly in New York, USA.

“They wanted to be briefed on what we are doing in relation to oil and petroleum and how they might help,” he said.

Merrill Lynch, he said, was interested in speaking to those who are responsible for setting up and organising the fund. “So we channeled them to the Central Bank and the Minister of Finance (Winston Jordan).”

At the New York meeting, Greenidge said, the ministry’s function was to listen to Merrill Lynch’s officials.

“We listened to them and explained what we are doing in a variety of areas and facilitated a meeting between themselves and the Ministry of Finance. I believe the Minister of Finance was not able to see them but the Governor of the Central Bank did.”

The investment arm, he said, has capacity and extensive experience in the management of the equivalent of sovereign wealth funds. They did not discuss with them their interests, but explained, what is currently in place in relation to dealing with the fledging oil sector.

Merrill Lynch is not a stranger to Guyana, Greenidge said. When he was the minister of finance in a previous government, he said, the investment division facilitated the Bank of Guyana and the Bank of America working together. “They are not new to Guyana.”

Meanwhile, at the same UNGA meeting, the Guyana delegation to the UNGA also met with the Business Council for International Understanding (BCIU), a US-based organisation of a large number of international corporations that facilitates mutually beneficial, person-to-person relationships between business and government leaders worldwide. “I make mention of this,” Greenidge said, “so that you can understand that as a result of both the diplomatic initiative and of the development of petroleum resources, a number of these international multilateral agencies have taken an interest and would like more extensive cooperation with us.”

Interestingly, he said, the meeting was chaired by Jamaican-born Ginelle Baugh, BCIU’s Vice President of Finance.

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