Coca Codo Sinclair Hydroelectric Plant Operating With 5 of 8 Turbines

(Energy Analytics Institute, Ian Silverman, 10.Oct.2018) — The dispatch of energy from the Coca Codo Sinclair hydroelectric plant, located between Napo and Orellana, was carried out Oct. 9 “with restrictions for security reasons.”

As of mid-day Oct. 9, the plant was only operating with five of its eight turbines, reported Ecuador’s daily newspaper El Universo.

Authorities continue to investigate problems at the turbines. It’s unclear when the other turbines will be back online.

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Energy Analytics Institute (EAI): #LatAmNRG

Costa Rica Crime Groups Diversifying Oil Theft Techniques

(InSight Crime, Parker Asmann, 10.Oct.2018) — The ways in which gangs of fuel thieves in Costa Rica are tapping oil pipelines in order to steal and later resell the good are growing increasingly sophisticated, providing further evidence of the growing strength of criminal groups in the Central American nation.

What were previously rustic oil taps are now becoming more sophisticated as groups of fuel thieves in Costa Rica are paying experts as much as 3 million colons (around $5,000) to perform professionally made illegal oil taps on pipelines, CRHoy reported.

Since 2015, the Costa Rican Petroleum Refinery (Refinadora Costarricense de Petróleo – RECOPE) — the country’s state-owned oil company — has seen an increase in the number of illegal oil taps, causing millions of dollars in losses, according to Costa Rica’s Judicial Investigation Agency (Organismo de Investigación Judicial – OIJ) and intelligence agency (Dirección de Inteligencia y Seguridad – DIS).

In May of this year, authorities arrested six suspected members of an oil theft network operating in the city of Heredia just north of the capital San José that allegedly stole at least $2 million from the state oil refinery, La Nación reported.

Just weeks later, authorities arrested 14 other suspected members of a different oil theft network operating in the city of Limón on the country’s Caribbean coast that allegedly stole more than $2.1 million in oil, EFE reported. Authorities also seized an AK-47 rifle, ammunition, trucks with specific storage tanks for oil, as well as bulletproof vests, among other things.

InSight Crime Analysis

The increased effort crime groups in Costa Rica are reportedly putting into their oil theft operations suggests that they are growing stronger and diversifying their criminal portfolios as a result.

A rise in coca production in Colombia since 2013 and the revitalization of Central America as one of the main corridors for cocaine being trafficked to US markets has transformed Costa Rica’s role as a key transshipment point in the drug trade. This has, in turn, provided increased revenues for local crime groups, which have diversified their portfolios and expanded into other illegal activities like oil theft and illegal gold mining.

Oil theft is big business in Latin America, and the industry is largely considered to be a relatively low-risk, high-reward revenue stream for crime groups. In Mexico, for example, it is a billion dollar industry that may prove more profitable than the drug trade, according to a recent report from Rolling Stone.

As crime groups grow stronger, it makes sense that they would venture into other, more profitable criminal activities like oil theft. However, it remains to be seen if Costa Rica will face the same deadly consequences that the lucrative industry has created in Mexico. Authorities in Costa Rica are already confronting rising violence due to increased fighting between criminal groups for control of local drug markets.

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Venezuela Sets New Wages For Oil Workers As Protests Simmer

(Reuters, Alexandra Ulmer, 10.Oct.2018) — Venezuela on Wednesday increased wages for workers at state energy company PDVSA after employees staged small protests to decry meager salaries amid the OPEC nation’s economic meltdown.

Socialist President Nicolas Maduro in August unexpectedly ordered a 60-fold increase in the minimum wage to compensate for around 500,000 percent annual inflation and a 96 percent devaluation of the bolivar currency.

But workers at PDVSA said their wages had not been bumped up accordingly, and that the cash-starved company had instead been paying one-off bonuses.

Vice-President Delcy Rodriguez, flanked by pro-government union leaders, on Wednesday announced new wages but did not provide specific figures, instead praising PDVSA’s attitude in the face of U.S. sanctions.

“To the PDVSA workers, our gratitude, because they have been a fundamental pillar in the defense of the oil industry against attacks from imperialist centers of power,” said Rodriguez, a key Maduro ally.

A PDVSA worker and two former employees said the new wages remained inadequate and would not halt a brain drain that has the company desperate for engineers and chemists just as its production sinks to its lowest in decades.

According to an unofficial summary of the new salaries circulated by PDVSA workers, the lowest monthly salary is now 1,800 bolivars – the official minimum wage – or just $13.70 a month. The highest salary, for executives, was put at 6,400 bolivars, a whisker above $49 a month.

PDVSA did not respond to a request for information about the salaries.

Thousands of oil workers are fleeing the state-run firm under the watch of its new military management, which has quickly alienated the firm’s embattled upper echelon and its rank-and-file, sources have told Reuters.

Those who remain are increasingly unmotivated, irate over low wages, and fearful of work accidents as PDVSA’s installations deteriorate due to years of underinvestment and mismanagement.

“There is a lot of anger, and at the same time motivation, because workers have woken up and are not putting up with this anymore,” one refinery worker said this week.

Still, fears of dismissal and heavy military presence at PDVSA have kept protests in check in Venezuela, home to the world’s biggest crude reserves.

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Energy Analytics Institute (EAI): #LatAmNRG

Añelo: The Two Realities of this Small Town in the Heart of Neuquen

(Energy Analytics Institute, Jared Yamin, 10.Oct.2018) — Añelo is a small oil town located in the heart of Neuquen and the Vaca Muerta shale revolution. This small town with a population of almost 8,000 is expected to swell to tremendously in coming years as the shale boom picks up speed, says Jorge Lanata of Argentina’s El Trece TV during his tour of Añelo back in 2014.

https://youtu.be/L05if9Rs2wM

 

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IFC, Related Funds Exercise Rights Under the Pacific Midstream Limited Agreement

(Frontera Energy, 10.Oct.2018) — Frontera Energy Corporation announced the International Finance Corporation (IFC) and related funds have provided notice to the Company that they have exercised their right under the Pacific Midstream Limited (PML) shareholders agreement to receive without further payment additional shares in PML, as a result of certain historical milestones on the Petroeléctrica de los Llanos transmission line not being met. Upon issuance of the additional PML shares to IFC, Frontera will be a 59.93% shareholder in PML (previously 63.64%), with the IFC holding the remaining 40.07% interest (previously 36.36%).

In addition, on September 11, 2018 the IFC provided a form of notice exercising PML’s Bicentenario Put Option which requires Frontera to purchase from PML its ownership interest in the Bicentenario pipeline. This option is exercisable by the IFC pursuant to the PML shareholders agreement solely in the event that the Bicentenario pipeline is non-operational for six consecutive months, and as a result, the Bicentenario ship or pay contracts with the Company’s affiliates are terminated. The notice from IFC refers to the actions Frontera took to terminate those ship or pay contracts in July. The purchase price is determined by a formula and is currently approximately US$85 million. Frontera is reviewing the form of notice and the transaction would be subject to documentation and prior approval of the Toronto Stock Exchange. If the transaction is completed it would increase Frontera’s aggregate indirect ownership interest in the Bicentenario Pipeline to 43.03% (currently 26.39%) at a net cash cost expected to be approximately US$34 million after the proceeds of the put transaction are distributed by PML to its shareholders (Frontera’s share of those proceeds is expected to be approximately US$51 million).

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Frontera Energy Announces Exploration Discovery in Colombia

(Frontera Energy, 10.Oct.2018) — Frontera Energy Corporation announced a light oil discovery from its Acorazado-1 exploration well on the 100% owned and operated Llanos-25 block in Colombia. Frontera also provided an operational update highlighting current production, major project activities and details regarding the fourth quarter drilling campaign.

Richard Herbert, Chief Executive Officer of Frontera, commented:

“The Acorazado-1 exploration well is the fourth exploration discovery in Colombia so far in 2018, adding to the discoveries at Alligator and Coralillo on the Guatiquia block, and Jaspe in the Quifa area. This maintains our 100% track record of discoveries in Colombia in 2018.

The Acorazado-1 well encountered a number of potential hydrocarbon zones in the target Mirador Formation reservoir and two drill-stem tests were conducted. As a result, I am pleased that we have made a light oil discovery in our first deep well in the Llanos foothills trend. Data collected during testing show the Acorazado reservoir pressure to be lower than that expected in an undrained reservoir, indicating a probable hydraulic connection with the adjacent Cusiana structure to the north. While the lowered reservoir pressure impacts potential flow rates, the well has identified a part of the structure which contains resources which have never been previously drilled and developed. We plan to put the Acorazado-1 well on long-term test in the near future.

Operationally, current production has returned to planned levels above 65,000 boe/d, with Block 192 production in Peru averaging over 10,000 bbl/d since the block was restarted in September. We expect to add to production during the fourth quarter as the water handling expansion project at Quifa SW is brought on-stream. Frontera’s strong production profile is well-timed with the upcoming expiration of our oil hedges at the end of October which will increase our exposure to Brent oil prices by nearly $25 per barrel based on recent prices.

Additionally, we will be drilling some exciting exploration and appraisal wells during the fourth quarter including Coralillo-3 and Cocodrilo-1 on the Guatiquia block and additional Jaspe appraisal wells in the Quifa North area. Frontera will be presenting its 2019 operating plan and guidance in the second week of December, targeting production growth for the first time since restructuring in late 2016.”

Exploration Discovery in Colombia

The Acorazado-1 exploration well was drilled to a total measured depth of 15,470 feet (15,197 feet true vertical depth) and encountered 356 feet of gross thickness in the Mirador formation sandstone reservoir. Open-hole wireline logging operations identified five separate, potentially hydrocarbon-bearing sections of the Mirador formation (Mirador I, II, III, IV and VI) with an estimated total net thickness of 82 feet. A drill-stem test (DST) program with a tubing conveyed perforating system (TCP) was designed to evaluate the potential hydrocarbon bearing sections in two separate tests, the first testing the Mirador VI section and the second testing the Mirador I, II, III and IV sections, commingled.

The Mirador VI reservoir, was tested from 20 feet of perforations, using a DST-TCP tool with an average 2,360 psi drawdown for 52 hours during the main flow test prior to a pressure buildup test at an average rate of 455 barrels of fluids per day at natural flow. The average oil rate was 427 bbl/d of 36.9-degree API crude with an average natural gas rate of 896 mcf/d during the test. In total there were 1,003 bbls of oil and 2.1 Mmcf of natural gas produced during the Mirador-VI main flow test period, with oil gravity varying from 35.2 to 37.6-degree API. The maximum average flow rate over a 24-hour period at a choke size of 36/64th of an inch was 606 barrels of fluid per day, with a maximum average rate of 570 barrels of oil per day and average gas rate of 1.06 Mmcf/d.

The main flow test period was followed by a pressure buildup test which ended with a short flow period at restricted flow rates to collect bottomhole and separator fluid samples for lab analyses. The Company will now proceed with completing the Mirador VI reservoir in the coming months and is in the process of applying to the Agencia Nacional de Hidrocarburos (ANH) for a long-term testing license which will allow the Company to produce the well for six months with the potential for a further six-month extension while production facilities are placed at the well site.

The Mirador I to IV commingled reservoir was tested from 79 feet of total perforations, using a DST-TCP tool with an average 940 psi drawdown for 16 hours at an average rate of 370 barrels of fluids per day with a small volume of oil and natural gas.

Based on an evaluation of the results from both tests the Company believes that the intervals tested may have incurred formation damage from drilling and production testing operations which has limited the flow potential of the reservoir. Therefore, the Company will conduct an evaluation to identify potential methods to stimulate the Mirador I to IV and Mirador VI intervals to improve flow rates in the near-future. Any future development activities will be planned according to the results of the long-term test and further evaluation of the Mirador I to IV and Mirador VI intervals.

Operational Update

Current production after royalties is above 65,000 boe/d and is expected to increase throughout the fourth quarter. As part of the Company’s measures to sustain production from its core Quifa SW field, the first stage of the water handling expansion project is expected to start up by the end of October with full implementation by the end of the year, providing an additional 3,000 to 4,000 bbl/d of net oil production. The Company remains on track to deliver annual production at or close to the low end of the guidance range of 65,000 to 70,000 boe/d, despite three months of downtime related to pipeline issues in Peru (over 2,000 bbl/d impact on 2018 average production), a blockade in the first quarter at Cubiro in Colombia (approximately 500 bbl/d impact on 2018 average production) and higher than planned high price royalty payment volumes at Quifa (over 2,000 bbl/d impact on 2018 average production).

Fourth Quarter and 2019 Drilling Update

During the fourth quarter of 2018, the Company expects to drill 34 wells, with 18 development wells at Quifa SW, seven water injection wells, two development wells at Candelilla on the Guatiquia block, two development wells at Zopilote Sur on the Cravo Viejo block and five exploration and appraisal wells including;

Coralillo-3 (Guatiquia block): follow up appraisal well to the Coralillo-1 exploration well which tested over 1,000 bbl/d from the Lower Sand-1 formation and 800 bbl/d from the Guadalupe formation. The well was spud on October 8, and is expected to take 30 days to drill and 15 days to test.

Cocodrilo-1 (Guatiquia block): the third exploration target on the Guatiquia block in 2018, is targeted to spud in mid-November with drilling and testing operations complete by year end.

Jaspe-7D and Jaspe-8D (Quifa North area): two appraisal wells following up on the Jaspe-6D well drilled in January which tested at 187 bbl/d for 11 days. Jaspe 7D is expected to spud in the second half of December. With success, these appraisal wells will open up another large field development area in North Quifa adjacent to the Cajua field.

In 2019, the Company is planning to drill up to 10 exploration wells that will appraise recent new discoveries or target new prospects. New exploration projects include two exploration prospects on the Guama block, two exploration prospects on the Mapache block and two exploration prospects on the Sabanero block. The Company is considering participation in the Intracampos Bid Round in Ecuador, and any license round activities from the ANH in Colombia.

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