Argentina Awaits Hydrocarbon Investments Of Nearly $13 Billion in 2019

(Energy Analytics Institute, Aaron Simonsky, 8.Nov.2018) — Argentine hydrocarbon investments are projected to increase in 2019 compared to 2018, announced the country’s Energy Secretary Javier Iguacel.

“This year they invested $9 billion in oil and gas. Next year we expect investments of $13 billion and double the amount of equipment that is drilling,” Argentina’s Treasury reported in an official statement, citing comments made by Iguacel during his participation at the meeting ‘Energy in Argentina,’ which was organized by the Ministry of Foreign Affairs and held at Palace San Martín.

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Argentina Aims To Cover 20% Of Energy Demand in 2025 With Renewables

(Energy Analytics Institute, Aaron Simonsky, 8.Nov.2018) — Argentina’s shale boom taking place in the Vaca Muerta formation in Neuquen will not stop the country from pursuing goals related to renewable energies.

“We set out to promote renewable energies and assume a very specific commitment,” Argentina’s Treasury reported in an official statement, citing Argentine President Mauricio Macri during a visit on Nov. 7 to a plant run by Newsan.

“By 2025 [our aim is that] 20% of electricity demand will be covered by renewable energies,” said Macri.

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Chevron Stayed In Venezuela Long After Rivals Quit

(Wall Street Journal, Kejal Vyas and Bradley Olson, 8.Nov.2018) — For nearly a century, Chevron Corp. has weathered dictatorships, coups and nationalization drives to keep pumping oil in Venezuela.

But recently, executives at the last U.S. oil major in the country have debated whether it may be time to get out, according to people familiar with their deliberations.

For now, Chevron hopes to hang on and outlast President Nicolás Maduro, as it did with his late mentor Hugo Chávez and other rulers.

“We’re committed to our position in Venezuela,” Clay Neff, Chevron’s president of exploration and production in Africa and Latin America, said in an interview Thursday following initial online publication of this story.

Chevron’s dilemma is both moral and commercial. The California-based giant long enjoyed close relations with the socialist regime that controls the world’s largest oil reserves, and has earned big money in Venezuela—about $2.8 billion between 2004 and 2014, according to cash-flow estimates by analytics firmGlobalData .

The company is aware a pullout could trigger a collapse of the government’s finances, because a significant chunk of its scarce hard currency comes from joint operations with Chevron.

Yet by staying in the country as its economic and humanitarian crises deepen, the company risks damage to its reputation by being seen as supporting an authoritarian regime sanctioned by the U.S. government. It also isn’t making much money here anymore.

Chevron has had to put up with many provocations in Venezuela, including late payments, requests for employees to attend political rallies and bickering over loans Venezuela sought because it couldn’t afford oil-field maintenance. Chevron’s joint ventures with the state oil company are regularly subjected to what Venezuelan prosecutors have labeled corrupt overcharging by vendors. Graft and the risk it will worsen have weighed on executives as they consider Chevron’s position in the country.

It has become harder to stomach since the big money disappeared from the Venezuela operations, say people familiar with the company. Chevron operations in Venezuela lost money from 2015 to 2017, according to GlobalData, then eked out a modest profit this year thanks to higher oil prices. Oil fields are aging, and unless more reserves are opened up, Chevron’s work in Venezuela will run out of steam in less than five years, GlobalData estimates.

A turning point for foreign companies operating in Venezuela came in 2006, when Mr. Chávez began nationalizing oil fields managed by foreign operators and sharply raising taxes.

Rewritten contracts made Petroleos de Venezuela SA, known as PdVSA, the operator and majority owner of most projects. Chevron’s top U.S. competitors, Exxon Mobil Corp. and ConocoPhillips ,balked at the changes, left, and filed suit. Exxon has yet to recover the full value of the billions in equipment and other assets it left behind. ConocoPhillips recently reached a $2 billion settlement.

Some European oil companies, such as Total SA and Equinor AS A (then called Statoil), remained but reduced their holdings.

Chevron decided to stay, and—led by a charismatic Iranian-American executive named Ali Moshiri—formed an array of partnerships with PdVSA. Mr. Moshiri, who was head of Chevron’s business in Latin America and Africa, sometimes appeared in public with Mr. Chávez, who called him a “dear friend” on one occasion.

Joint ventures Mr. Moshiri pioneered became a model for foreign companies doing business in Venezuela. A venture called Petropiar between Chevron and PdVSA is one of four so-called upgrader ventures between the state oil company and foreign operators to blend Venezuela’s tar-like heavy crude with lighter oil or other substances and make it transportable.

Though Chevron’s bet paid off financially for years, an oil-price crash beginning in late 2014 triggered a vicious cycle in which government revenue fell and then oil production did, too, as the country placed priority on debt payments over the heavy reinvestment oil fields need to stay healthy.

Since the end of 2017, Venezuela has defaulted on more than $6 billion in debt payments, according to Fitch Ratings, while its crude-oil industry has been reduced close to ruins by neglect and the departure of experienced engineers.

Oil production has fallen to 1.2 million barrels a day from 3.2 million daily in 2006, according to the Organization of the Petroleum Exporting Countries. A country with vast reserves now produces roughly as much oil as the U.S. state of North Dakota. As output has declined, and thus revenue, the country’s economic crisis has worsened.

With supermarket shelves nearly bare and prices soaring, two-thirds of Venezuelans reported losing 25 pounds of weight in 2017, according to a survey. Violence is rampant, including atrocities by police and soldiers. Hospitals lack medicine and clean water, yet the government rejects most humanitarian aid as a Trojan horse for foreign intervention. More than three million Venezuelans have fled, leaving those who remain to face crushing rates of murder, malnutrition and hyperinflation.

Venezuela’s energy enterprises are under pressure from expanding corruption probes in the U.S. and Europe. A U.S. investigation, centering on allegations that PdVSA officials solicited vendors for bribes, has netted 15 guilty pleas, including from a number of PdVSA honchos.

An investigation in the tiny European nation of Andorra has led to money-laundering charges against 28 people, including former Venezuelan deputy ministers, who allegedly took $2 billion through kickbacks-for-contracts schemes from 2007 through 2012.

Zair Mundaray, a former Venezuelan prosecutor now in exile, said his team uncovered an alleged scheme at the Petropiar joint venture in which PdVSA executives skipped formal contract bidding and handpicked the vendors of a wide range of supplies, from oil equipment to cafeteria coffee, at exorbitant prices. The profits were distributed among certain Petropiar managers, PdVSA higher-ups and the suppliers, the charging documents said.

PdVSA and Venezuela’s Information Ministry didn’t respond to calls and detailed emails seeking comment.

Venezuelan charging documents and purchasing invoices reviewed by The Wall Street Journal allege that contractors pilfered more than $200 million in two years from the joint venture through markups such as $156,000 for printer/copiers and $9,000 for ink-jet cartridges.

Among the accused was Manuel Sosa, a former soap-opera actor who once dated a daughter of Mr. Chávez, whose company supplied the costly printer/copiers. Mr. Sosa pleaded guilty in December and was sentenced to four years’ house arrest in return for his cooperation. He couldn’t be reached for comment.

“Where were the checks? Where was the accounting?” asked Mr. Mundaray. “There’s absolutely no way that [Chevron] did not know what was happening.” He said he has given the evidence he collected to the U.S. Justice Department, which declined to comment.

Pedro Burelli, a former PdVSA board member and a Maduro critic, said Chevron “turned a blind eye to what was going on.”

“When you’ve agreed to work with a majority partner that is derelict, you’re just setting yourself up for a huge risk. You get deeper and deeper, when you should be hitting the red button, to get yourself out,” said Mr. Burelli.

Chevron said it complies with all applicable laws wherever it operates and expects its partners to do so as well. It said it doesn’t control the procurement process in the joint venture, in which Chevron has a 30% nonoperating stake. In oil and gas joint ventures, the operator typically has primary authority over costs, though minority partners are generally consulted and sign off on certain expenses. Chevron said nothing in documents it was shown suggested any wrongdoing by the U.S. company.

Oversight of the investigation changed hands just as it was picking up steam. Mr. Mundaray and his team left Venezuela in August 2017 after their boss, former Attorney General Luisa Ortega, criticized Mr. Maduro for alleged human-rights abuses. The president called the prosecutors traitors.

A new attorney general, Tarek William Saab, provided a list of people accused that lacked some names on Mr. Mundaray’s list.

One missing name was that of former Petropiar chief Francisco Velasquez, who the former prosecutors said splurged on a pink Ferrari and a villa at the exclusive Casa de Campo resort in the Dominican Republic while the oil project suffered backlogs and delays. He couldn’t be reached for comment. Mr. Saab didn’t respond to comment requests.

In April, two Chevron employees working at the Petropiar joint venture were jailed by Venezuelan military intelligence when they refused to sign a contract for oil-processing equipment priced at what they considered well above market value. The employees were released after six weeks of tense negotiations, but not before a thinly veiled threat from Chevron: free them or we will leave, people familiar with the confrontation say.

Chevron confirmed two employees were arrested in April and released in June but said, “We have no further information to share on this matter.”

A dwindling number of foreign companies are still doing business with the Maduro administration, which is facing threats of tougher sanctions by Washington. The U.S. has sanctioned dozens of Venezuelans, including Mr. Maduro, for allegations varying from corruption to human-rights abuses to drug trafficking. The sanctions bar American citizens and companies from doing business with them.

Mr. Maduro has said he wants foreign oil partners to use a cryptocurrency called the petro his government designed to evade U.S. sanctions on Venezuelan debt. The U.S. in March barred Americans from using the petro.

By staying in Venezuela, Chevron risks exposing itself to legal penalties under U.S. anti-corruption laws, some analysts say. Chevron said it “abides by a strict code of business ethics under which the company complies with all applicable international, U.S. and Venezuelan laws.”

Its managers’ meetings with government and PdVSA officials “comply with all applicable laws and regulations, including the U.S. sanctions directed towards Venezuela,” Chevron said.

About 700,000 daily barrels of the country’s oil production comes from joint ventures between PdVSA and foreign companies, consultants say. That includes about 200,000 to 250,000 barrels a day from Chevron ventures.

Joint-venture output has generated far more cash for the government in recent years than oil pumped by PdVSA alone, because the state company’s production has gone to repay debts to allies such as China and Russia or to be processed into gasoline the government provides almost free. That means a Chevron withdrawal would take a big bite out of government’s revenue.

Another foreign company, Royal Dutch Shell PLC, is weighing an exit from most of its remaining operations in Venezuela through a sale of its stake in a joint venture, according to people familiar with its plans. A spokeswoman for Shell said such a deal wouldn’t amount to a total exit, as the company is working to develop Venezuelan gas assets offshore that would supply nearby Trinidad and Tobago.

Some analysts believe other Western companies operating in Venezuela, such as France’s Total or Norway’s Equinor, might feel pressure to follow a departure or partial exit by either Shell or Chevron. At the same time, according to GlobalData, those that stay might be able to gain access to new fields or renegotiate contracts for better terms. Chinese or Russian companies such as PAO Rosneftcould be beneficiaries of any such departures in the long run, analysts say.

Total, Equinor and Rosneft officials either declined to comment or didn’t respond to questions.

Signs of a troubled relationship between Chevron and the Venezuelan government emerged a year ago when Mr. Moshiri’s successor as head of Chevron’s Latin American and African operations, Mr. Neff, sat down for a meeting with Mr. Maduro and other Venezuelan officials.

Venezuelan officials snapped a photo without Chevron’s consent and publicized it. At Chevron headquarters in San Ramon, Calif., concerns grew that the company was being duped into making an appearance in Venezuelan propaganda, people familiar with the matter said.

While such photo ops had occurred before, the country’s worsening economic collapse, plus U.S. sanctions, are making them harder to tolerate, the people said. Chevron declined to discuss the Caracas meeting.

The company’s closeness with the government is generating rancor among PdVSA’s workers, who have been quitting in droves amid hyperinflation that has pummeled their salaries to the equivalent of less than $10 a month.

Jose Bodas, a union leader in eastern Venezuela where Petropiar is located, said photos of sports cars and European vacations posted on social media by managers angers workers who sometimes lack boots and hardhats.

“I’m not opposed to people having Ferraris and mansions, but this is all corruption,” Mr. Bodas said. “I don’t mind saying it—if you’re a multinational working with this government, you’re an accomplice to what’s going on.”

—Ginette Gonzalez and Samuel Rubenfeld contributed to this article.

Write to Kejal Vyas at kejal.vyas@wsj.com and Bradley Olson at Bradley.Olson@wsj.com

Appeared in the November 9, 2018, print edition as ‘Venezuela Tests Chevron Staying Power.’

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Oceaneering Resumes Subsea Load-Outs At Panama City Facility

(Oceaneering, 8.Nov.2018) — Oceaneering International, Inc. provided an operations update on its manufacturing facility in Panama City, Florida and its recovery from Hurricane Michael.

“Exceeding our own expectations, production activities at our Panama City facility have resumed. Subsea hardware load-outs are in progress, and umbilical deliveries are scheduled to begin this week,” said Oceaneering’s President and Chief Executive Officer Roderick A. Larson. “Our production equipment has undergone extensive testing and is mostly operational. We do, however, expect repair work to continue through the end of December. We continue to believe that, on balance, we fared well relative to the severity of the storm.”

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New Attack On Colombia’s Caño Limón-Coveñas Pipeline

(Energy Analytics Institute, Aaron Simonsky, 8.Nov.2018) — Colombia’s state oil company Ecopetrol revealed video coverage of the most recent attack on the company’s Caño Limón-Coveñas oil pipeline located in Boyacá.

No further details are available yet, but the company has initiated a contingency plan, announced Ecopetrol official Mauricio Tellez in a twitter posts. To-date in 2018, there have been 77 attacks on the pipeline, Tellez said in his twitter post.

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Argentina Biodiesel Chamber: U.S. Review Of Tariffs Could Revive Exports

(Reuters, Maximilian Heath, 8.Nov.2018) — The U.S. decision to review its tariffs on Argentine biodiesel could mean a reversal of fortune for exporters whose shipments from the South American country have been practically nil, the biodiesel chamber of Argentina said on Thursday.

The U.S. Department of Commerce announced on Wednesday there was “just cause” to review the taxes it applied at the end of 2017 to Argentine biodiesel, which cut off access to the main market for Argentina’s product at the time.

“This is a necessary and important first step,” Victor Castro, executive director of the Argentine Chamber of Biofuels (CARBIO), whose members include biodiesel exporters Cargill Inc and Bunge Ltd, told Reuters.

“We are convinced that tariffs are a totally unfair measure and it is very important to be able to export to that market,” he said, adding that due to limited international commercial activity, the production level in Argentine biodiesel plants has been very low.

Argentina is one of the world’s top producers of biodiesel fuel, exporting 1.65 million tons worth $1.224 billion in 2017.

This year, biodiesel producers in Argentina exported almost 1.1 million tons of the fuel between January and August, of which 85 percent went to the EU, according to official data from Argentina state statistics agency INDEC. However, in September and October the volume of biodiesel shipped abroad was zero.

The halt in exports coincided with the EU’s expected decision on whether to sanction Argentina’s biodiesel industry over suspicions of receiving subsidies. The EU postponed its ruling in late September, saying it would continue its investigation.

The announcement by the United States that it will review the tariffs comes a few months after Argentina increased duties on biodiesel exports and cut tariffs on grains and soybean oil shipments, a key ingredient for biodiesel production in Argentina.

Writing by Cassandra Garrison

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Mexico Should Fix Pemex Finances Before New Refining Investments: IMF

(Reuters, 8.Nov.2018) — The International Monetary Fund (IMF) on Thursday called for an improvement in Mexican state oil company Pemex’s financial position before it invests in building new refineries.

Mexico’s incoming leftist government has vowed to build what could be the country’s largest oil refinery, with construction set to begin as soon as next year. It says investment could be financed by Pemex.

“A strengthening of Pemex’s financial situation was a prerequisite to contemplating new investments in refining,” the IMF said in a statement.

Pemex held total financial debt of $106 billion as of Sept. 30, with nearly 86 percent of the debt denominated in currencies other than the Mexican peso, mainly in U.S. dollars, according to the firm’s quarterly results report.

On Oct. 31, credit agency Fitch revised Mexico’s rating outlook to negative, citing “growing risks for contingent liabilities” for Mexico from Pemex.

“Proposals that Pemex invest in new refining capacity to substitute for gasoline imports would entail higher borrowing and larger contingent liabilities to the government,” Fitch said at the time.

Fitch revised its outlook two days after President-elect Andres Manuel Lopez Obrador, who takes office on Dec. 1, said he would cancel a partly built new Mexico City airport in which billions of dollars have already been invested, pummeling the peso currency.

The IMF also called for “a continuation of the energy sector reform and private participation in the oil and gas sector to bring in necessary investment and boost production and growth.”

Lopez Obrador opposed a constitutional change pushed through by Mexican President Enrique Pena Nieto that opened production and exploration in the energy sector to private capital.

Mexico has already awarded more than 100 oil exploration and production contracts to private companies, which Lopez Obrador has said he would respect as long as a review does not find evidence of corruption.

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Pemex Promotes Actions To Reduce Risks Caused By Fuel Theft

(Pemex, 8.Nov.2018) — Pemex and the Government of the state of Puebla have agreed to promote civil defense actions to mitigate the risks that arise from fuel theft in this state.

Pemex CEO, Carlos Treviño, and the Governor of the state of Puebla Tony Gali, agreed to refine the plans set in place to prevent any incidents that may be caused by LP gas leaks or fuel leaks from criminal activity attacking Pemex infrastructure.

The Governor-elect of the state of Puebla, Marta Erika Alonso, the Secretary of Internal Affairs for the state of Puebla Diódoro Carrasco, and the General Director of Civil Defense for the Secretariat of Internal Affairs Luis Felipe Puente attended the meeting, which was held at Pemex Executive Tower in Mexico City.

Carlos Treviño stated that the state-owned productive company will reinforce all of its prevention measures to continue collaborating with the three branches of government in its fight against this crime, and will do everything in its power to promote effective and timely civil defense strategies.

Those present agreed on the importance of creating a joint civil defense plan, with the sole purpose of safeguarding the integrity of the civilian population that might be affected by an accident caused by fuel and hydrocarbon theft, especially in the state of Puebla.

On September 12, an illegal tap placed on one of the pipes going through the neighborhood of Villa Frontera, a densely populated area north of the capital of Puebla, caused an LP gas leak that could have turned into a tragedy due to the sheer amount of LP gas released deliberately into the atmosphere.

Pemex CEO, Governor Gali, and Governor-elect Alonso – who will take office on December 14 – all underscored the importance of scheduled meetings to keep all civil defense measures updated because the most important thing is to safeguard the lives of Puebla’s inhabitants.

The company, which is the patrimony of all Mexicans, once again appeals to the general public to report all criminal activities that damage its infrastructure, as this threatens the safety and integrity of any nearby communities. To file a report, call the toll-free number 01-800 228 96 60 or email vigilante@pemex.com where you can anonymously report any activities related to fuel theft, illegal fuel storage and sale of stolen fuel.

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