Shell Seeks To Sell Venezuela JV Stake

(Reuters, 12.Oct.2018) — Royal Dutch Shell Plc is negotiating the sale of its stake in a Venezuelan oil joint venture to Paris-based Maurel & Prom , three sources said this week, a move to scale down its crude business in the ailing OPEC-member country to focus on gas. The Anglo-Dutch company is seeking to sell its 40 percent stake in Petroregional del Lago, a joint venture with Venezuela’s state-run oil company PDVSA in the western state of Zulia near Colombia.

The area has been plagued by frequent theft of equipment and near-daily power cuts as Venezuela remains mired in deep recession, hyperinflation and chronic shortages of food and medicine. Foreign companies also have complained in private that joint ventures with PDVSA are stymied by convoluted bureaucracy, dodgy contracts, and lack of resources, according to dozens of sources in the industry.

At Petroregional, Shell has grown frustrated by delays in receiving dividends from PDVSA and a ban on minority partners independently exporting production, one of the sources said. That has deprived Petroregional, which in 2016 produced about 33,000 barrels per day (bpd) of crude, of much-needed income and dented profitability, the source added. In the last few weeks a disagreement with Venezuela has emerged over a fee called an entrance bonus that Maurel & Prom would have to pay to the government, as required by Venezuelan law, to gain access to the field’s reserves, two of the sources said. Negotiations are currently on hold, they added.

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Bolivia’s Gas Lower than LNG, Vaca Muerta Shale: Sánchez Says

(Energy Analytics Institute, Jared Yamin, 12.Oct.2018) — Bolivian natural gas is more competitive than liquefied natural gas (LNG) and gas from Argentina’s Vaca Muerta shale formation, announced Bolivia’s Hydrocarbon Minister Luis Alberto Sánchez.

The minister stressed that Bolivian gas, priced at $7/MMbtu, was much cheaper than Argentine gas.

Argentina’s LNG imports cost around $10.50/MMbtu, while the production cost in Vaca Muerta is around $7.50/MMbtu, so “the most competitive gas for the Argentine market is undoubtedly Bolivian gas,” reported the daily newspaper El Diario, citing Sánchez.

Sánchez warned that if Argentina decides to pay a lower price (reduces the price), it must pay the Take or Pay (contract modality), which establishes a fine be paid for any energy not withdrawn, plus interest.

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Guyana’s Oil And Gas Capacity Building Project

(Guyana’s Ministry of Natural Resources, 12.Oct.2018) — The Guyana Oil and Gas Capacity Building Project (the ‘Project’) is supported by the World Bank and aims to enhance the Government’s capacity to achieve its management goals for the petroleum sector through interventions focused on enhancing legal and institutional frameworks and strengthening the capacity of key institutions to manage the oil and gas sector in Guyana, Guyana’s Ministry of Natural Resources reported on its website.

As Guyana moves into a new chapter of history as an emerging petroleum producing nation, sustainable development lies at the core of the Government of Guyana’s goals for the sector. Being keenly aware that petroleum is a non-renewable resource, considerations related to its extraction and conversion into financial capital highlight the requirement and responsibility to ensure that the resource is prudently managed, from the time petroleum ‘appears’ at the wellhead, for the long lasting benefit of Guyana. In developing the policies, legal framework, institutions and systems to oversee and manage the sector, the Government of Guyana is committed to ensuring that this framework allows both present and future generations to reap the benefits.

Guyana’s petroleum sector is progressing swiftly with first oil expected in 2020. This planned petroleum development, coupled with ongoing assessment of new discoveries, has led the Government of Guyana to focus on ramping up preparations to oversee the upstream sector (exploration, development and production); to develop policy and legislation, to build up internal capacity building, to promote governance and transparency, and to undertake financial and economic planning.

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Analysis: Brazil Presidential Frontrunner’s Advisers Clash Over Petrobras

(Reuters, Alexandra Alper, Tatiana Bautzer, Rodrigo Viga Gaier, 12.Oct.2018) — Nationalistic and free market advisers to Brazil’s right-wing presidential frontrunner are deeply split about the future of state-run oil company Petroleo Brasileiro, foreshadowing a showdown over divestments and fuel subsidies.

University of Chicago-educated banker Paulo Guedes, economic adviser to frontrunner Jair Bolsonaro, has said he favors full privatization of Petrobras. Failing that, investors hope he can promote a business-friendly agenda such as asset sales to reduce the company’s $74 billion net debt.

Federal prosecutors in Brazil said on Wednesday that Guedes was being investigated over accusations of fraud tied to the pension funds of state-run companies, and Bolsonaro has rejected one of his policy recommendations.

Meanwhile, an increasingly vocal cadre of military generals stressing the importance of maintaining Petrobras as a strategic asset have shown growing influence.

Bolsonaro himself was an early supporter of a truckers’ strike this year over rising diesel prices. The government ultimately ended the strike by meddling in Petrobras’ ability to set prices at the pump, another policy that investors would like to see the government end.

Petrobras shares spiked 10 percent on Monday as investors bet a Bolsonaro administration would mostly give the company free rein in terms of selling off units to cut debt or setting fuel prices according to market forces.

The former army captain’s surge in the polls, topped by his win in the first round of voting, sparked a rally that has added $18 billion to the state oil company’s market value this month. But tensions between the two wings of Bolsonaro’s campaign threaten to cut the euphoria short.

One senior member of Bolsonaro’s entourage, who declined to be identified because of the sensitivity of the issues, said he had called for Petrobras to be broken into four companies and for three to be sold off.

“Now the final word on all this will rest with Bolsonaro,” he said. “I don’t think he really wants to.”

Bolsonaro voted as a legislator to preserve the state oil company’s monopoly on exploration and production and as a candidate he has taken a wide range of stances. Mirroring the views of some of the generals close to him, he has described Petrobras as a strategic asset.

“I believe we need to keep the core of Petrobras,” he said in an interview with TV station Band on Wednesday night. “The question of refining, refineries, I think that you can move gradually toward privatizations.”

In another recent interview he said he opposed privatizing Petrobras but still could reluctantly move to end the oil company’s “monopoly” in Brazil that he said gave it excessive pricing power.

Some 49.6 percent of Petrobras’ stock is traded on the stock exchange.

A key adviser on infrastructure and energy issues, General Oswaldo de Jesus Ferreira, has described the company as a strategic asset that must stay in state hands.

“Given Jair Bolsonaro’s history of voting in his nearly 30-years in congress, his connection with statist military sectors and the contradictory statements of his campaign leaders on the subject, it is hard to believe that he will include Petrobras in a program of privatizations,” said Ricardo Lacerda, chief executive at investment bank BR Partners. “The market seems overly optimistic about this issue.”

Fuel subsidies are another flashpoint. In May, Bolsonaro reacted to the strike by truckers angry about rising diesel prices. He enthusiastically backed the strike, tweeting that the movement showed “how the people are robbed for the benefit of a political caste, which for decades has enslaved everyone.”

The strike brought Brazil’s economy to a standstill. To mollify the truckers, President Michel Temer’s government dismantled a free-market fuel pricing policy and reintroduced fuel subsidies. This prompted Petrobras’ market friendly CEO Pedro Parente to quit, and its share price tumbled.

Oil prices have risen further since May, but subsidies are due to expire in December. Whether to maintain the subsidies could present the first test of Bolsonaro’s free market inclinations, if he wins the election and is inaugurated on Jan. 1.

Bolsonaro’s platform, written by Guedes, among others, states that Petrobras should be able to follow international pricing but ease short-term volatility with hedges. Yet the candidate has declined to say definitively whether he would extend the diesel subsidy.

It is hard to know how a potential Bolsonaro government would handle issues like the truckers strike, said Edmar Almeida, an energy professor at the Federal University of Rio de Janeiro. “Lots of contradictions still exist between Paulo Guedes’ neo-liberal vision and the military’s nationalist vision.”

DEEP DIVIDES

Investors may be more realistic to hope for sales of Petrobras assets to relieve its hefty debt load, which Moody’s Investors Service has said represents one-third of all Latin America’s rated corporate debt.

Bolsonaro’s party platform says the company should be able to sell substantial stakes in refining, wholesale, transport and other areas where it has market power.

Currently, a Supreme Court injunction triggered by a union lawsuit has halted sales of subsidiaries like its $7 billion TAG pipeline.

Some observers fear Guedes’ influence is on the wane. His uneasy alliance with Bolsonaro appeared to fray last month when Guedes proposed reviving an unpopular financial transactions tax known as the CPMF to raise government revenue. That idea was swiftly shot down by Bolsonaro and the once loquacious Guedes has barely been heard from since.

Still, Bolsonaro confirmed on Thursday that he would name Guedes to oversee a “super ministry” combining the current finance, planning and development portfolios.

Despite the tug of war between his advisers, Bolsonaro’s energy policies are more investor friendly than those of Workers Party standard-bearer Fernando Haddad, who will take him on in the second round on Oct. 28.

Haddad’s oil policy guru is former Petrobras CEO Sergio Gabrielli, whom many see as having presided over an era of corruption and mismanagement at the company.

“For now, what Petrobras’ share price reflects is simply a company which could remain free of the kind of intervention which the PT once promoted,” said Marcio Correia, who manages 14 billion reais in equities at JGP Asset Management in Rio de Janeiro.

“But Petrobras shares could still appreciate more depending on what a potential Bolsonaro government does.”

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Maurel & Prom Confirms Discussions With Shell Over Urdaneta West Field In Venezuela

(Maurel & Prom, 12.Oct.2018) — Etablissements Maurel & Prom notes recent press articles and confirms it is working on the acquisition of Shell Exploration and Production Investments B.V.’s 40% interest as “Shareholder B” in Petroregional del Lago Mixed Company, which operates the Urdaneta West field in Lake Maracaibo, Venezuela.

Maurel & Prom Venezuela, subsidiary of Maurel & Prom, has signed a Share Sale and Purchase Agreement (the “SSPA”) with Shell. Under the SSPA terms, the consideration for the acquisition of Shell’s shares in the mixed company is c.€70 million, funded from Maurel & Prom’s existing cash resources.

Petróleos de Venezuela S.A. (PDVSA), wholly owned subsidiaries Corporación Venezolana del Petróleo (CVP) and PDVSA Social (PDVSAS) collectively referred to as “Shareholder A”, jointly own the remaining 60% stake of the mixed company.

The field is currently producing around 16,000 barrels of oil per day on a 100% basis (6,400 barrels of oil per day net to Shareholder B’s 40% interest). The asset offers significant optionality through the development of additional reserves, and the possible extension of the licence duration beyond 2026 (the current licence limit).

The closing of this acquisition remains subject to a number of conditions, amongst others the obtaining of the required governmental approvals, and the finalisation of the negotiations with PDVSA and its subsidiaries (CVP and PDVSAS) on the implementation and the funding of a redevelopment plan to increase the production of the Field, which should be partly funded by operating cash flow, and partly with Maurel & Prom Venezuela’s funds up to an amount of c.€350 million over the period 2018-2023. Maurel & Prom Venezuela’s commitment to provide the project funding is subject to the fulfilment of several conditions, including the progressive reimbursement to Maurel & Prom Venezuela of the portions of project funding attributable to Shareholder A.

Maurel & Prom takes all the necessary steps and actively works on meeting all condition precedents in order to close the acquisition. A further announcement will be made in due course.

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Mexico Plans To Enforce Odebrecht Fines Via Seizure -Official

(Reuters, 12.Oct.2018) — Mexico plans to enforce fines imposed on Odebrecht over corruption allegations by confiscating some $30 million owed by state oil company Pemex to the Brazilian firm, a top official at the public administration ministry said.

Christian Ramirez, coordinator-general of the public administration ministry (SFP), told Reuters on Tuesday that he expected Mexico’s tax authority to seize the $30 million “in the coming months.”

Brazilian construction firm Odebrecht has spent the past few years at the center of one of the largest corruption scandals in Latin America, and has admitted paying bribes from Peru to Panama.

In Mexico, the SFP imposed fines worth some $56.8 million in total on two Odebrecht subsidiaries in April. Since the end of 2017, it has punished several Odebrecht businesses in Mexico, barring them from signing contracts with public bodies for up to four years.

Mexico’s government did not detail the reasons for the fines, but officials said they related to probes into suspected corruption between Odebrecht and Pemex.

Ramirez on Tuesday said the Brazilian firm had “practically left” Mexico and that tax officials who recently visited an Odebrecht subsidiary only found “two computers and a desk.”

Neither Odebrecht in Mexico nor in Brazil responded to requests for comment. In April, the company said it planned to fight the fines.

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