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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