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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