(Energy Analytics Institute, 15.Nov.2018) — Premier Oil plans to acquire 3D seismic across Block 30, which contains the high impact Wahoo prospect, and reprocess existing 3D seismic over Blocks 11 and 13 in the Burgos basin in 2019, the company announced in an official statement.
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Premier Oil To Spud Zama Appraisal Well in late-November 2018
(McDermott, 15.Nov.2018) — McDermott International, Inc. announced the details at an event hosted at their world-class fabrication yard in Altamira, Tamaulipas, Mexico. The event celebrates the sail away and another project milestone of the PEMEX Exploración y Producción PB-Abkatun-A2 oil and gas production platform. Representatives from PEMEX, government officials, including Governor of Tamulipas, Francisco Garcia Cabeza de Vaca, McDermott and regional news outlets participated in the event.
The PB-Abkatun-A2 platform is McDermott’s largest project in size and total value to date for PEMEX. The $454 million engineering, procurement, construction and installation and commissioning (EPCIC) project was awarded to the company in June 2016. McDermott’s scope of the work spanned from the basic engineering design to tie-in and commissioning of the jacket, deck, four tripod jackets, and four bridges about 100 meters each. Two tripods were designed to be used as part of the flare system while the other two tripods support the two bridges to interconnect PB-Abkatun-A2 with the existing PEMEX production complex. The giant three-level topside is the largest ever fabricated at McDermott’s world-class fabrication yard in Altamira.
“Abkatun is an impressive and substantial project for PEMEX and Mexico,” said Richard Heo, Senior Vice President for North, Central and South America. “Since the beginning, Abkatun has been on an aggressive project schedule. But our One McDermott Way operating model, leveraging the vertical integration of our in-house engineering resources and our world-class fabrication facility in Altamira, enabled us to bring efficiency and transparency to the project. The result is we are safely delivering Abkatun – our largest project to date, in size and total value, for PEMEX.”
Governor Garcia Cabeza De Vaca spoke at the event and said, “Congratulations to McDermott for this important achievement. You are making history. And we want you to keep building, but mainly writing a new history in the area of hydrocarbons in Tamaulipas and in our country. This is the first one of many more platforms to be built in Altamira. And this has not been possible without the ability, dedication and mainly the talent of each and every one of you.”
Installation of Abkatun is scheduled for November 2018 in Mexico’s Bay of Campeche utilizing McDermott’s Amazon, DB50 and Intermac 650 vessels. Commissioning will follow the installation of the 16,534 U.S. ton (15,000 metric ton) platform in 124 feet (38 meters) of water, which will provide replacement and expansion capabilities to the existing Abkatun Pol Chuc facilities. Following commissioning, this high-capacity production platform is rated to produce 220,000 barrels of oil per day and 150 million of standard cubic feet of gas per day for PEMEX.
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(McDermott, 15.Nov.2018) — McDermott International, Inc. announced a contract award for concept and engineering services for Talos Energy Inc. for the Zama field development project – the first offshore Mexico block awarded to a private operator. The contract award is for engineering services, including concept selection and follow-on pre-FEED.
McDermott will execute this contract award with io oil & gas consulting, a joint venture between McDermott and Baker Hughes, a GE company (BHGE). McDermott will manage all phases of the engineering services process and will workshare engineers and designers in Mexico City and will receive continuous support from io and input from the customer. Based on the final concept solution identified by io, McDermott will provide the follow-on pre-FEED services for the Zama development. Work on the concept selection has begun with expected completion in the third quarter 2019.
“The Zama discovery is a significant and historic project for Mexico, and our customer, Talos Energy,” said Richard Heo, Senior Vice President for North, Central and South America. “Early engagement during the conceptual and pre-FEED phases is a strategy that is proving beneficial to our customers. With high estimated oil production, designing an efficient concept solution, in combination with the integrated pre-FEED studies, allows us to help Talos maximize the value of this important greenfield project.”
The Zama field is located in Block 7 of the Sureste Basin offshore Mexico in the Gulf of Mexico and has a water depth of approximately 540 feet (165 meters). The field was discovered in July 2017, and Zama-1 was the first exploration well drilled offshore Mexico by a private sector operator. Talos estimates the field has 400-800 million recoverable barrels of oil equivalent (MBOE), with an estimated peak production of approximately 150 MBOE/day. Appraisal activities are planned for late 2018 with two additional wells and first oil is expected by 2022.
The Zama field development project has shared participating interest among Talos Energy (35%), Sierra Oil and Gas (40%) and Premier Oil (25%).
The contract award will be reflected in McDermott’s fourth quarter 2018 backlog.
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(OilPrice.com, Tsvetana Paraskova, 15.Nov.2018) — OPEC’s member Venezuela—which is sitting on the world’s largest crude oil reserves but which is suffering the worst loss of oil production in history outside of war-induced outages—is getting ready to share macroeconomic data with the International Monetary Fund to avoid penalties including possible exclusion from the IMF.
The central bank of Venezuela is preparing to hand over crucial economic statistics to the IMF to meet a November 30 deadline to provide the information or risk exclusion, two people with direct knowledge of the issue told Bloomberg on Thursday.
Venezuela hasn’t provided economic data to the IMF since 2016, when its crisis started to become severe. The IMF issued a declaration of censure against Venezuela in May this year because Venezuela failed to provide adequate data and implement remedial measures. In May, IMF’s Executive Board said that it would meet again within six months to consider Venezuela’s progress in providing data.
Just like its economy, oil production in the world’s largest holder of crude reserves is also in free fall. In October, Venezuela’s crude oil production plunged by another 40,000 bpd compared to September, to stand at just 1.171 million bpd, as per OPEC’s secondary sources. To compare, Venezuela’s oil production averaged 2.154 million bpd for 2016 and 1.911 million bpd for 2017.
Venezuela’s crude production could soon sink to below 1 million bpd, Fatih Birol, Executive Director of the International Energy Agency (IEA), warned last week, and it looks like it would be sooner rather than later.
The economic collapse adds to years of mismanagement and under-investment in the oil industry to further complicate attempts in Venezuela, one of OPEC’s five founding members, to stop the steep decline of its oil production. Venezuelan people are fleeing the country en masse amid an aggravating humanitarian crisis and an extreme poverty rate of 40 percent.
According to the IMF, Venezuela’s economy will collapse by 18 percent this year, while inflation is expected to be at 1,370,000 percent.
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(Premier Oil, 15.Nov.2018) — In September, the Mexican authorities approved the Zama pre-unitisation agreement between Pemex and the Block 7 partners as well as the Block 7 Zama appraisal programme.
The first Zama appraisal well is on track to spud at the end of November and will be drilled to the north of the Zama discovery well to confirm the oil water contact.
The well will be deepened to test the Marte prospect and also side tracked, with the side track being flow tested. The second appraisal well will evaluate the southern part of the Zama oil field and will complete the Block 7 appraisal programme during Q3 2019. It is anticipated that Pemex will spud the Asab-1 well in Q1 2019 to test the extension of the Zama structure onto their block.
“We look forward to the appraisal of our world class Zama discovery, starting later this month, and the commencement of construction activities for our high value Tolmount gas project in December,” said Premier Oil Chief Executive Tony Durrant.
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(Echo Energy plc, 15.Nov.2018) — Echo Energy provided an update on its planned operational programme and the continued development of its regional portfolio.
During 2018, Echo drilled four wells across the company’s onshore licences in Argentina (Fracción C licence). The first (ELM 1004) and third (EMS-1001) of these wells were initially successful with the company announcing on 21 June 2018 that the third well in the sequence was considered potentially material following interpretation from the wireline logs.
Echo announced that the equipment required for the stimulation of these two wells is expected to be available for the beginning of December and that a stimulation programme for each of the two wells will therefore commence within 3 to 4 weeks.
In 2018, the company also successfully completed four well interventions (CSo-96, CSo-104, CSo-21, and CSo-80) in the Cañadon Salto Field, onshore Argentina (Fracción D licence). On 22 October 2018, the company announced that these wells had achieved stable production levels. Production from these wells has contributed to a total company average net production in the year to 12 November, of 876 barrels of oil equivalent per day.
Following the success of these workovers and the associated production uplift, the company has identified a number of additional candidates for well interventions and currently expects these operations to commence in Q1 2019.
Echo is also evaluating the potential for gas development projects within the Fracción D licence, with a view to monetising existing undeveloped 2C resources.
Echo’s primary objective in acquiring its Argentinean business earlier this year was to secure access to the high impact Tapi Aike exploration acreage.
The company intends to commence an exploration drilling programme on the licence in the second half of 2019, after completing the 1,200 km2 3D seismic programme which will start mobilisation in December.
The company believes that the Tapi Aike licence offers a compelling proposition with a likely 4 well drilling programme targeting multi Tcf potential with each well estimated to cost between $2M and $5M net to Echo.
Echo continues to actively evaluate a range of potential opportunities for the development of its portfolio in the region.
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(Trinidad Express, 15.Nov.2018) — Venezuela’s minister of energy, Manuel Quevedo, said yesterday that his country’s state-owned oil giant PDVSA expects to start sending natural gas to Trinidad from the Dragon field, off this country’s north-west coast, within two years.
Speaking at a news conference following the 20th ministerial meeting of the Gas Exporting Countries Forum (GECF), which was held at the Hyatt yesterday, Quevedo described the Dragon agreements as an important example of cooperation between neighbouring countries.
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(S&P Global Platts, 15.Nov.2018) — Pan American Energy, the second-biggest oil producer and third for gas in Argentina, is working with BP on potentially exporting LNG out of Chile, a project that could prove faster to get Vaca Muerta shale gas to market than building a liquefaction facility in Argentina.
The project is in the conceptual design phase and would involve delivering supplies over an existing Argentina-Chile pipeline to the Quintero LNG regasification terminal in Chile, said Alejandro Lopez Angriman, vice president of reserves development at Pan American.
The Quintero terminal “can be turned around so it can liquefy to export,” he said on the sidelines of an energy conference in Mendoza, Argentina.
The pipeline has 10 million cu m/d of capacity for moving supplies from Vaca Muerta to Chile, but is mostly running empty. It has been used over the past few June-to-August winters to bring regasified LNG to Argentina from Chile.
To deliver supplies to Chile, the pipeline would have to be modified with a loop, Lopez Angriman said.
BP — which owns 50% of Pan American alongside Bridas, itself 50% owned by China’s CNOOC — is helping on the conceptual engineering for the project, he added.
The project could cost around $300 million if it goes forward, he added, with the first train exporting 25 million cu m/d.
The research into the project comes as gas production surges in Argentina, led by Vaca Muerta, one of the world’s largest shale plays.
The country’s overall gas production rose 14% to 130 million cu m/d this year from a 16-year low of 113.7 million cu m/d in 2014, allowing the country to restart exports by pipeline to Chile after an 11-year suspension.
The Energy Secretariat estimates that with enough investment Vaca Muerta could double the country’s gas production over the next five years to 238 million cu m/d, allowing exports to surge to 100 million cu m/d in 2023 from less than 1 million cu m/d this year.
In the late 1990s and early 2000s, Argentina exported 20 million cu m/d to Brazil, Chile and Uruguay, and the pipelines are still in place. The country halted exports in the mid-2000s as production plunged, bringing shortages and a surge in imports of Bolivian gas and LNG. Imports have averaged 30 million cu m/d since 2012, but started declining this year, according to Energy Secretariat data.
Pan American got a permit this year to export gas to Chile, and it likely will start to make deliveries during the upcoming December to February summer for consumption in that market, Lopez Angriman said.
But he said that won’t be enough to sustain a larger development of Vaca Muerta, where he estimates one field could easily supply the LNG export terminal.
“The field could produce 25, 50, or even 100 million cu m/d,” Lopez Angriman said. “It’s incredible the number of wells that you can do in Vaca Muerta for gas.”
Frackers, he added, have de-risked the gas potential in Vaca Muerta, and the next step is to find the capital to put it into full-scale production. But to attract investors, more pipelines are needed to get the gas out and additional markets must be found to increase sales so production can be sustained year-round, not slowed during the summer with the closing of wells. State-run YPF, the country’s biggest gas producer, had to close gas wells in the third quarter of this year, in part because warming temperatures and a contracting economy reduced demand.
Argentina has sharp fluctuations in gas demand, from 115 million cu m/d in the summer and peaks at 180 million cu m/d in the winter, according to data from Enargas, the national gas regulator.
“It is not a good thing to convince investors to invest in shale gas when production has to be halted during the summer,” Lopez Angriman said.
While gas exports can be increased to neighboring countries, these markets suffer the same predicament as Argentina: their demand for gas plunges in the summer. That means LNG must be pursued if output from Vaca Muerta is to be expanded, he said.
But to do that, a big challenge is to bring down development costs in the play so the gas can be competitive against Australia, Qatar, the US and other suppliers in sales to Southeast Asia, where demand is expected to grow, Lopez Angriman said.
He estimates that at around $3/MMBtu, sales can be competitive. But to get there, Vaca Muerta development costs must come down 30%, and the focus is on easing the strain of frack sand, which accounts for 30% of the well completion cost, he said.
Frackers have shaved the cost of sand to $190/mt from $250/mt over the past few years, but it is still higher than the $60/mt figure in the US.
“If we are going to compete with the US or Canada, one way or another we have to reduce the cost of sand,” he said.
Help is to come from moving more sand by boat and train to Vaca Muerta, located in the southwest. Most of the sand is currently being trucked 1,000 km (621 miles) from Entre Rios, a central province, with transport accounting for 50% of the total cost of sand.
There is a government-led plan to extend a cargo railway to Vaca Muerta, but it is not likely to start for three to four years. Once it is in operation, the cost will come down because it is cheaper to move the sand from Entre Rios by river and ocean to Bahia Blanca, an Atlantic port where it can be loaded onto the train for delivery to the well sites.
Pan American also is looking at the option of building liquefaction capacity in Argentina, as are other companies.
On Monday, YPF said it plans to install a floating liquefaction barge in Bahia Blanca to export up to 2.5 million cu m/d of LNG from 2019, and then work on building a larger export terminal.
The government, meanwhile, is studying a project for exporting LNG from a six-train onshore terminal in Bahia Blanca, likely starting in 2023 with shipments of 40 million cu m/d, increasing to 120 million cu m/d in 2025.
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(NGI, Ronald Buchanan, 15.Nov.2018) — One of main energizers of Mexico’s nascent energy reform, Juan Carlos Zepeda, has resigned as president of the upstream regulator, the Comisión Nacional de Hidrocarburos (CNH), with only five months to go before the end of his second five-year term.
As the head of the independent, although not totally autonomous regulator, Zepeda has been considered a bright star as the head of an institution that has provided transparency in what were the first upstream auctions in Mexico for more than a century.
Yet with a new Mexican administration waiting in the wings for a Dec. 1 inauguration of President-elect Andrés Manuel López Obrador, the resignation has come at a critical juncture, said George Baker, who is president of Mexico Energy Intelligence.
Baker emphasized that the incoming administration is full of critics and former opponents of the energy reform, even though López Obrador has promised to keep things status quo — for now.
“Everything is so fragile at the moment,” Baker said. “Because of that, the timing of the resignation doesn’t seem to make sense, particularly because Zepeda is a very loyal public servant in the best of the Mexican tradition.”
However, consultant Luis Miguel Labardini, a partner in Mexico City-based Marcos y Associates, told NGI’s Mexico GPI, that he has a different view.
“It is evident,” he said, “that Zepeda is one of the main characters in the reform, and that the new administration has a different view of the oil and gas sector, that does not necessarily match the philosophy of the reform as it was originally conceived.
“Therefore, the new administration will place someone who is more in tone with their views on what the sector should do from now on.”
That, in a nutshell, is what Zepeda himself has said. Recent columns in Mexico newspapers claim that incoming Energy Secretary Rocío Nahle had ordered Zepeda to resign. Columnists also have claimed that Guillermo Garcia Alcocer, president downstream regulator, the Comision Reguladora de Energia (CRE), was also told to resign. As of Thursday, he remained at his post.
In any case, Zepeda said in a radio interview that he was under no pressure to step down.
Like many other Mexican officials as the change in government looms, he said he is planning to move into the private sector and work for a capital fund that specializes in energy and infrastructure, “though nothing that has anything to do with what the CNH is responsible for.”
Zepeda also added that Nahle, rather than order him to resign, had invited him to be a part-time external adviser to the ministry. Like Labardini, he conceded that there will be a “new look” to the reform under the future administration.
Zepeda may, in fact, not be the last regulator to step down. “There’s going to be a hemorrhage of competent technocrats because their salaries are going to be at least 40% lower,” The Baker Institute for Public Policy’s Tony Payan said Tuesday at the US-Mexico Natural Gas Forum in San Antonio, TX, shortly before rumors of Zepeda’s impending departure began circulating on Twitter.
“And many people are already retiring, by the way,” Payan, who directs the institute’s Mexico Center, said. “I know quite a few people” at Petroleos Mexicanos (Pemex) “who are already retiring before Nov. 30, so that they can retire at the current salary.”
In many ways, Zepeda has been one of the most prominent figures to emerge from the energy reform.
The reform’s architect, current President Enrique Pena Nieto, has seen the energy reform lose its sparkle in recent years under a swamp of media accusations of corruption and rampant crime, which were reflected in July’s overwhelming victory in July by his sworn political enemy, López Obrador.
Pena Nieto is due to hand over power in December, but he has effectively abdicated, in a way that is without precedent in Mexico. In all but name, López Obrador to many has been the nation’s president since his election.
Current Energy Secretary Pedro Joaquin Coldwell is a worthy veteran of Mexico’s political scene, but Zepeda rapidly stole the reform show with his innovation and verve. As others sought excuses for the disappointing results in 2015 of the first upstream auctions for the best part of a century in Mexico, he got down to business.
What he explained then was that Mexico had to ask the companies what they wanted from the auctions, not the other way around. Where the approach had been “take it or leave it,” the companies were invited to make clear their preferences for auctions. The result has been more than 100 contracts that are valued, by official calculations, at $180 billion total.
Unlike many public servants who have worked on the reform, Zepeda has appeared to never regard the reform’s terms and conditions as though engraved on a tombstone. In triumphant tones, several officials and their acolytes proclaimed that the energy reform was irreversible, a word that they often pronounced with considerable emphasis.
What is happening now in Mexico, with the reform under fire from several sides in a polarized nation, gives the lie to those claims, said Baker.
Pemex, 100% state-controlled like Saudi Aramco and Venezuela’s PDVSA, Baker pointed out. Others such as Colombia’s Ecopetrol, Norway’s Equinor ASA, have mixed capital, in which the public can buy and sell shares. “That is a democratic system. It breaches no return to a state monopoly unless the state itself becomes a monopoly,” said Baker.
Even before the reform was enacted, many analysts urged a “big bang” public offering of Pemex to herald it. None was ever attempted, and the most recent indications are that one would now take about five years to organize.
Nobody else within the government appeared to give more than a hint in order to break the impasse. Nobody, that is, except Zepeda, who has proposed within several forums to preserve the virginity of Pemex as a state enterprise while, as in China, private investment is drawn in to it by a state capital fund that operates in international markets.
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(Airbus, 14.Nov.2018) — Pontificia Universidad Católica de Chile’s SaviaLab recognised for innovative use of technology to increase diversity in engineering education.
The SaviaLab diversity initiative from Pontificia Universidad Católica de Chile has been selected as the winner of the 2018 Airbus GEDC Diversity Award for innovative use of technology to increase diversity in engineering education.
The SaviaLab initiative seeks to bridge the gap of opportunity by offering science, technology, engineering and mathematics (STEM) outreach education to indigenous minorities and young people in rural areas across Chile.
Since 2014, the initiative has introduced over 3,300 students from 7 regions to potential STEM career paths. This educational ‘pre-engineering’ programme empowers others with concrete technology and innovation tools. The impact goes beyond the rural minorities to the university’s own students that represent minorities themselves.
The three finalist projects – NASA Swarmathon from the University of New Mexico, USA, SaviaLab from Pontificia Universidad Católica de Chile, and iSTEAM Underwater Robot Competition from Hong Kong University of Science and Technology – presented their diversity initiative to a Jury* of industry experts and distinguished guests at the WEEF-GEDC 2018 conference – the largest engineering education gathering in the world – in Albuquerque, New Mexico, USA.
This global award is administered by Airbus, the Global Engineering Deans Council (GEDC) and the United Nations Educational, Scientific and Cultural Organization (UNESCO).
Since Airbus launched the award in 2012, 198 entries representing 140 institutions from 37 countries have been submitted. For the 2018 edition, 39 entries were received from 19 countries. From the 18 finalist projects recognised in the first six years of the award alone, over 125,000 students who otherwise may not have chosen engineering have been directly impacted.
Increasing diversity amongst the global population of engineers is a well-documented challenge that Airbus, the GEDC and UNESCO are committed to addressing. As in the past, this year’s finalist projects were selected for their potential to be scaled up or replicated elsewhere. Airbus are proud to announce today the launch of an e-book dedicated to the Diversity Award’s most successful initiatives, to share the valuable insights which will inspire others to take action.
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(Financial Times, Jude Webber, 14.Nov.2018) — A deputy governor of the Bank of Mexico and head of the country’s oil regulator have both stepped down early from their posts, a fortnight before Andrés Mañuel López Obrador is sworn in as president.
Roberto del Cueto Legaspi, the oldest member of Banxico’s five-strong board, will step down from November 30 for health reasons, the central bank said. His term had run until December 2022.
He will still be in his post for Thursday’s rate decision — when a 25 basis points rise to 8 per cent is widely expected — and for the next quarterly inflation report on November 25.
Mr López Obrador, a leftist nationalist who takes office on December 1, has already named Jonathan Heath, an independent economist, to replace Manuel Ramos Francia, another board member, whose term ends on December 31.
It was not immediately clear who would be named to replace Mr del Cueto Legaspi but the bank’s statutes allow it to function with four board members.
Also tendering his resignation was Juan Carlos Zepeda, president of the National Hydrocarbons Commission (CNH).
He said in a statement he was leaving his post as of December. His departure — after two terms — had been widely expected although his term had been due to end in May.
The incoming government has been critical of Mexico’s energy reform, which ended the eight decades-old monopoly of state oil company Pemex.
Mr Zepeda, widely praised for running a series of transparent oil auctions, said he left the sector with 74 oil companies from 20 countries operating, including 36 new Mexican firms, and said 23 wells were due to be drilled in 2019, a 65 per cent increase in offshore oil exploration compared with the 2010-13 period, before the oil price crash.
Mr Zepeda said he would join a fund focused on infrastructure and energy next year. He could not immediately be reached for comment on reports that his departure came after pressure from incoming Energy Secretary Rocío Nahle, but he said in the statement he would remain an external adviser to the ministry, at Ms Nahle’s request.
Already weak in the wake of Mr López Obrador’s decision to scrap a partially built new airport and confusion over a bill tabled by his Morena party to axe “usurious” bank fees, the peso currency fell sharply on the surprise Banxico resignation, and growing expectations that the USMCA free-trade deal may not have an easy ride in the new US Congress.
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(Loop News, 14.Nov.2018) — Minister of Energy and Energy Industries and President of the Gas Exporting Countries Forum, Franklin Khan, said the natural gas industry is forecast to grow within the coming year, a good indicator for Trinidad and Tobago.
Speaking at a media briefing after the second session of the 20th Gas Exporting Countries Forum (GECF) which was held in Trinidad and Tobago from November 13-14, 2018, Khan said gas producing countries stand to benefit from these aligned interests and growing markets.
One of these is China, which is aiming to cut its coal consumption to around 55 percent by 2020.
“The Chinese market has grown phenomenally. China still produces 70 to 74 percent of its power from coal. China has made the decision that it needs to move away from coal.”
“If China drops its coal usage from 75 to 40 percent or 50 percent, this would be a whole new market which would have opened up. There is always a robust market in Asia, it is just how we work together as producers and exporters. The common bond of the GECF is assisting in extracting the best economic wealth for various countries based on their natural resources,” he said.
However, Khan acknowledged that two of the world’s major LNG producers, the US and Australia, are not members of the GCEF, which he said is their choice.
“There are two major gas players who, for reasons best known to them, have not attempted to join the group – the USA and Australia. In fact, Australia is on a massive gas expansion as we speak.”
During the Forum, members discussed current and future energy trends and the role of gas as outlined in the 2018 GECF Global Gas Outlook 2040 and the Annual Statistical Bulletin both scheduled to be released in December 2018.
Khan said there is also a focus on Africa and its emerging markets, such as Angola and Mozambique.
“Natural gas is the only fossil fuel that is planned for growth in terms of production and utilisation for the next decade,” he said.
Also present at the media briefing was HE Yury Sentyurin, Secretary General of the GECF, Energy Minister of Equatorial Guinea, Gabriel Lima, and Manuel Quevedo, Energy Minister of Venezuela.
The GCEF includes among its members Peru, Oman, Norway, the Netherlands, Kazakhstan, Azerbaijan, Iraq, Venezuela, the United Arab Emirates (UAE), Russia, Qatar, Nigeria, Libya, Iran, Equatorial Guinea, Egypt, Bolivia and Algeria.
The GCEF controls about 67 percent of the world proven natural gas reserves, 65 percent of the LNG trade and 63 percent of pipeline trade of natural gas.
The next session of the GECF will be held in Equatorial Guinea.
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(Stabroek News, 14.Nov.2018) — The Department of Energy (DoE) has to date received no credible reports of any form of corruption as it relates contractors and deals in the nascent oil and gas sector.
“To be quite blunt, no,” Head of the DoE Dr. Mark Bynoe said in response to questions from Stabroek News.
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(Energy Analytics Institute, Aaron Simonsky, 13.Nov.2018) — Argentina’s Energy Secretary Javier Iguacel participated in the annual Independent Petroleum Association of America (IPPA) meeting held in New Orleans, Louisiana.
“We have a great opportunity to give Argentine citizens plenty of energy and at affordable prices. We are very happy because today we see there are many North American companies wanting to invest in Argentina with local companies,” reported Argentina’s Treasury in a statement on its website, citing Iguacel. “This will not only allow us to accelerate development of Vaca Muerta, but it will generate a lot of work and progress for many Argentine citizens.”
The meeting was attended by 35 Argentine companies and more than 50 North American companies interested in developing Argentina’s conventional and unconventional hydrocarbon potential and its value chain.
Companies in attendance included but were not limited to the following: Perez Companc Group, SICA Metalúrgica Argentina, SIDECO, MEDANITO-FLARGENT, CUDD, Ardyne, Nine Energy Service and Evcam, among others.
Also participating in the meeting was Argentina’s Ambassador to the U.S. Fernando Oris de Roa; Office of International Affairs of the U.S. Department of Energy Advisor Kennet Stevens; and Overseas Private Investment Corporation (OPIC) Advisor Deaver Alexander.
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(President Energy, 13.Nov.2018) — President Energy announced that production results from its first new Argentine well were ahead of expectations, while results from the second new well were very encouraging.
Highlights from the Puesto Flores/Estancia Vieja Concession, Rio Negro Province (90% President and operator and 10% EDHIPSA, the Provincial energy company) follow:
— First new well PFO 1001 successfully completed and tested, flowing from the Pre Cuyo (a deeper and sandy secondary target formation) at over 200 bopd which is ahead of expectations for the whole well
— The primary target, some 200 metres higher up in the well with 15 metres of net pay and excellent porosity of 25% will be brought into production at a later date
— In due course this successful well is likely to result in an increase in President’s proven oil reserves
— Second new well PFE 1001 drilled to target depth on time and budget with oil and gas shows in mud logs in all three-target formations
— Acquisition of the two new Concessions in Rio Negro, Puesto Prado and Las Bases expected to be completed by early December
— Oil prices and peso/dollar rate stable, net backs at Puesto Flores now some US$40 per barrel
— Year-end 2018 Group exit net production target rate confirmed as in excess of 3,000 boepd
PFO 1001 is a vertical well which has now been successfully completed and tested from only the secondary deepest and sandy target Pre Cuyo interval; during the test, production was over 200 bopd with only 2% water, which is in excess of production expectations from the well as a whole. The well has now been placed on production with an electrical submersible pump.
The main target, the shallower Punta Rosado formation 200 metres higher up the well, was observed to have a net pay of 15 metres and excellent porosity of 25%. It has however been decided that at the present time it would not be prudent to test and co-mingle that zone as President would first like to observe how the deeper Pre Cuyo intervals performs to gain a greater understanding of reservoir capability prior to bringing the main target on production.
In due course this successful well is likely to result in an increase in President’s proven oil reserves.
This directional well has now been successfully drilled on plan, time and budget to the target depth of 2,550 metres.
Live oil has been seen on the surface, with good oil shows and full chromatography C1-C5 gas readings in the mud logs from both the primary Punta Rosado (predicted by President) and the secondary Pre Cuyo secondary targets as well as a shallower interval. The mud logs from the Pre Cuyo formation are particularly encouraging as this is the first time that such an interval has been penetrated in the Eastern part of the Puesto Flores Concession. President has at present no material oil reserves booked for this interval in such eastern part.
Electric logs are now being run and, following completion of these logs, the well will be cased after which the drilling rig will be transported to the next well to be drilled being PFO 1005, which is expected to spud at or around the end of November.
The workover rig, which is being released from the PFO 1001 will then be brought on to complete this well and, subject to successful testing, the well should be brought on stream in early December.
It is expected that the acquisition of these two new Concessions will be completed by early December. With the kind permission of the authorities of the Rio Negro Province of Argentina, President is making preparations to promptly commence production from these Concessions through opening up certain currently shut-in wells. A further announcement in respect of the Concessions is expected to be made in December.
As with President’s other concessions, President is very pleased to be able to continue its partnership with EDHIPSA, the Rio Negro Provincial energy company which will have a 10% participation interest in the Concessions.
Whilst President has noted the recent decline in international oil prices, the US dollar price being obtained by President in Argentina for oil sales has been stable.
The oil price expected to be received in November for President’s oil produced from its main centre of operations in the Neuquen basin is approximately $66 per barrel; at this level, net backs there are now in excess of $40 after all operating costs, royalties and taxes but before G&A. President is not anticipated to pay any corporate taxes in Argentina before 2020.
The peso dollar exchange rate has likewise stabilised in the recent past as a result of successful government action and a perceived growing confidence in the markets. There are no current signs of the previous significant volatility and as far as President is concerned, it’s very much business as normal.
President confirms that its targeted Group net exit production for the year-end 2018 is in excess of 3,000 boepd representing an increase of more than 50% year on year.
“We are energised by the progress we are making as we continue with the second new well in our drilling programme with our motivated, focused and impressive Argentine team. We view the prospectivity and greater potential of our Puesto Flores field with increasing confidence and continue to be grateful for the support given to us by the Rio Negro Provincial authorities and our partner there EDHIPSA,” said President Energy Chairman and Chief Executive Peter Levine.
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(Reuters, 13.Nov.2018) — Trinidad and Tobago’s Prime Minister Keith Rowley on Tuesday called on the Gas Exporting Countries Forum (GECF) to develop and implement a gas pricing index to ensure members receive adequate returns on the sale of the hydrocarbon.
As gas supplies become increasingly available for consuming countries through Liquefied Natural Gas (LNG) imports, producers aim to secure revenue from exports by encouraging what they consider to be fair pricing.
In a meeting in Bolivia last year, members of the GECF including prominent producer Qatar called for greater competition in the gas market and held talks with producing company chief executives to discuss pricing methodologies.
“Now more than ever, the need for such a global reference price is evident, in order to protect both producers and consumers alike,” Rowley said at the opening of GECF’s 20th Ministerial Meeting in Port of Spain.
Natural gas consumption grew 3 percent to 3.67 trillion cubic meters last year, pushed by bigger demand in Europe, the Middle East, Africa and Asia-Pacific, according to BP’s Statistical Review of World Energy.
But production increased at a higher rate, underlining a buyers’ market that continues stopping prices indexed to the U.S. Henry Hub from growing to levels acceptable to producers.
Prices at the Henry Hub have recently recovered from levels below $3 per million British Thermal Unit (BTU) in the last four years to surpass $4 per million BTU in November. But the U.S. Energy Information Administration last week forecast downward pressure on prices to an average of $2.98 per million BTU in 2019.
Trinidad and Tobago, where gas production has declined since 2010 to nearly 34 billion cubic meters last year, has been suffering “leakage of value” of its gas exports as traders take advantage of relatively low price benchmarks, Rowley said.
“Very little of the returns from high global LNG prices makes its way back to Trinidad and Tobago. This cannot be allowed to continue and as such. The current system must be reviewed,” Rowley added.
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(Oil & Gas Technoloy, Mark Venables, 13.Nov.2018) — New, deep-water production is underway at Lula Extreme South in the Brazilian Santos Basin. Royal Dutch Shell plc, through its subsidiary Shell Brasil Petróleo and consortium partners, announces that the FPSO P-69 is now producing.
The FPSO P-69 is a standardized production vessel offshore Brazil with a capacity for 150,000 barrels of oil and 6 million cubic meters of natural gas a day.
Operated by Petrobras, P-69 is a standardized vessel that can process up to 150,000 barrels of oil and 6 million cubic meters of natural gas daily. It will ramp up production through eight producing and seven injection wells.
“The Brazilian pre-salt fields are some of the best deep-water provinces in the world,” said Andy Brown, Upstream Director for Shell. “With significant flow rates, deep-water Brazil projects are breaking even under $40 per barrel. We commend Petrobras on this production milestone, and we look forward to progressing additional development plans with our consortium partners as well as for our recently-acquired, deep-water Brazil blocks.”
Following Lula Extreme South, the next FPSO is P-67 for Lula North. The Libra product sharing agreement continues to progress with an extended well test as well as the Mero 1 FPSO, and additional FPSOs are planned. Shell also has development drilling planned for its operated, Gato do Mato South field in 2019.
Shell has a 25 percent stake in the Lula consortium, operated by Petrobras (65 percent). Galp, through its subsidiary Petrogal Brasil, holds the remaining 10 percent interest.
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(Energy Analytics Institute, Piero Stewart, 13.Nov.2018) — EP Petroecuador will open envelopes today related to the import of 3,120,000 barrels (plus or minus 2%) of No. 2 Diesel Oil No.
Approximately 36 companies qualified for the tender through registration via EP Petroecuador’ Suppliers Registry of the International Trade Management, the online media El Universo reported.
The companies were invited to submit their proposals on October 30, 2018.
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(Reuters, Tibisay Romero, Deisy Buitrago, 13.Nov.2018) — With chronic shortages of basic goods afflicting her native Venezuela, Veronica Perez used to drive from supermarket to supermarket in her grey Chevrolet Aveo searching for food.
But the 54-year-old engineer has abandoned the practice because of shortages of something that should be abundant in a country with the world’s largest oil reserves: gasoline.
“I only do what is absolutely necessary, nothing else,” said Perez, who lives in the industrial city of Valencia. She said she had stopped going to Venezuela’s Caribbean coast, just 20 miles (32 km) away.
Snaking, hours-long lines and gas station closures have long afflicted Venezuela’s border regions. Fuel smuggling to neighboring countries is common, the result of generous subsidies from state-run oil company PDVSA that allow Venezuelans to fill their tank 20,000 times for the price of one kilo (2.2 pounds) of cheese.
But in late October and early November, cities in the populous central region of the country like Valencia and the capital Caracas were hit by a rare wave of shortages, due to plunging crude production and a dramatic drop in refineries’ fuel output as the socialist-run economy suffers its fifth year of recession.
Venezuela produced more than 2 million barrels per day (bpd) of crude last year but by September output had fallen to just 1.4 million bpd. So far in 2018, Venezuela produced an average of 1.53 million bpd, the lowest in nearly seven decades, according to figures reported to OPEC.
Bottlenecks for transporting fuel from refineries, distribution centers and ports to gas stations have also worsened, exacerbating the shortages.
PDVSA did not respond to a request for comment. Neither did Venezuela’s oil and communications ministries.
Relatively normal supply has since been restored in Caracas and Valencia after unusually long outages but the episode has forced Venezuelans to alter their daily habits.
That could hit an economy seen shrinking by double digits in 2018. For Venezuelans coping with a lack of food and medicine, blackouts and hyperinflation, the gasoline shortages could also increase frustration with already-unpopular President Nicolas Maduro.
“My new headache is fearing I might run out of gasoline,” said Elena Bustamante, a 34-year-old English teacher in Valencia. “It has changed my life enormously.”
Venezuela’s economy has shrunk by more than half since Maduro took office in 2013. The contraction has been driven by a collapse in the price of crude and falling oil sales, which account for more than 90 percent of Venezuelan exports.
Three million Venezuelans have emigrated – or around one-tenth of the population – mostly in the past three years, according to the United Nations.
Despite a sharp drop in domestic demand due to the recession, Venezuela’s collapsing oil industry is struggling to produce enough gasoline.
Fuel demand was expected to fall to 325,000 bpd in October, half the volume of a decade ago, but PDVSA expected to be able to supply only 270,000 bpd, according to a company planning document seen by Reuters.
A gasoline price hike – promised by Maduro in August under a reform package – could further reduce demand but it has yet to take effect.
Venezuela’s declining oil production has its roots in years of underinvestment. U.S. sanctions have complicated financing.
The refining sector, designed to produce 1.3 million bpd of fuel, is severely hobbled. It is operating at just one-third of capacity, according to experts and union sources.
Its largest refinery, Amuay, is delivering just 70,000 bpd of gasoline despite having the capacity to produce 645,000 bpd of fuel, according to union leader Ivan Freites and another person close to PDVSA who spoke on the condition of anonymity.
PDVSA has tried to make up for this by boosting fuel imports, buying about half of the gasoline the country needs, according to internal company figures.
In the first eight months of 2018, Venezuela imported an average of 125,000 bpd from the United States, up 76 percent from the same period a year earlier, data from the U.S. Energy Information Administration show.
But delays in unloading fuel cargoes have contributed to shortages, since Venezuelan oil ports are more oriented toward exports than imports, according to traders, shippers, PDVSA sources and Refinitiv Eikon data.
One tanker bringing imported gasoline mixed with ethanol was contaminated with high levels of water, forcing PDVSA to withdraw the product from distribution centers, a company source said, directly contributing to the shortages in Caracas.
The incident was the result of PDVSA seeking fuel from “unreliable suppliers,” in part because the U.S. sanctions have left many companies unwilling to do business with Venezuela, said the source, who spoke on the condition of anonymity.
The shortages last week prevented Andres Merida, a 29-year-old freelance publicist in Valencia, from attending client meetings.
“I had someone who used to take me from place to place but in light of the gasoline issue he would not give me a lift even when I offered to pay him,” he said. “He said he would prefer to save the gasoline and guarantee it for himself.”
(Additional reporting by Anggy Polanco in San Cristobal, Mircely Guanipa in Punto Fijo, Vivian Sequera in Carcas and Marianna Parraga in Mexico City; Writing by Luc Cohen; Editing by Daniel Flynn and Chris Reese)
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(S&P Global Platts, Bernardo Fallas, 13.Nov.2018) — Argentina-based energy company Pampa Energia is cutting polystyrene and styrene butadiene rubber production amid lackluster demand in Argentina and barriers to export, two company sources said Monday on the sidelines of the 38th Latin American Petrochemical Association meetings in Cancun.
Pampa expects to shut its 65,000-mt/year PS plant December 1 through mid-January because of economic reasons, the company sources said. Production of SBR at the company’s San Martin complex also has been cut, as has production of ethylene at the company’s 19,000-mt/year cracker in San Lorenzo.
Argentina is weathering a financial crisis highlighted by high inflation and sharp devaluation of its currency, which in recent months prompted the government to turn to the International Monetary Fund for a $57.4 billion bailout.
Demand for PS will close the year approximately 12% lower from 2017 levels, one of the sources said. Argentina’s recent implementation of temporary export taxes has hurt the company’s ability to place volumes overseas, given PS’s already-thin margins.
Pampa has also reduced production of aromatics such as benzene, toluene and mixed xylenes as it aims to reduce feedstock naphtha imports.
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(Energy Analytics Institute, Piero Stewart, 12.Nov.2018) — Construction of the Talara refinery in Perú continues.
Modernization work at the refinery — which is comprised of 16 processing units and 5 auxiliary units — is 70.94% complete, PetroPerú reported in an official statement on its website. Work completion will increase the refinery’s production capacity to 95,000 barrels per day from 65,000 barrels per day.
Additionally, work on the refinery will improve technology standards and improve its competitiveness and allow for production of the cleanest fuels in the region, of a quality dubbed ‘Euro VI,’ according to PetroPerú.
The refinery is expected to come online in December 2020.
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(Energy Analytics Institute, Aaron Simonsky, 12.Nov.2018) — YPF announced that combined equivalent production fell 4.3% in the third quarter of 2018.
Total production fell to 529.1 Mboe/d in 3Q:18 compared to 553.2 Mboe/d in 3Q:17, and driven mainly by a decline in NGL production and natural gas demand restrictions, the company announced during its quarterly call with investors and analyst.
Year-over-year, production of NGLs was down 44.6%, natural gas production was down 1%, while crude oil production was up a slight 0.1%, the company said.
Looking forward, YPF announced its year-end 2018 production guidance has been revised to negative 3-4% compared to negative 2% earlier.
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(Pampa Energía, 12.Nov.2018) — Pampa Energía S.A. announced it will hold a conference call to discuss its 3Q:18 results on Tuesday November 13, 2018 at 10:00 a.m. Eastern Standard Time / 12:00 p.m. Buenos Aires Time.
The host will be Lida Wang, Investor Relations Manager at Pampa.
For those interested in participating, please dial 0-800-444-2930 in Argentina, +1 (844) 854-4411 in the United States or +1 (412) 317-5481 from any other country. Participants of the conference call should use the identification password ‘Pampa Energía’ and dial in five minutes before the scheduled time.
Please download the Q3 18 Conference Call Presentation from our IR website. There will also be a live audio webcast and presentation of the conference at http://bit.ly/PampaQ318Call.
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Pampa Energía Announces Results For The Nine-Month Period And Quarter Ended On September 30, 2018
(Pampa Energía, 12.Nov.2018) — Pampa Energía S.A. announces results for the nine-month period and quarter ended on September 30, 2018. All figures are stated in Argentine Pesos and have been prepared in accordance with International Financial Reporting Standards except the application of IAS 29.
In order to reflect the financial performance, as from 2018 and for the comparative periods, financial results, selling and administrative expenses, which used to be assigned to holding and others, will be redistributed among power generation, oil and gas and petrochemicals.
Consolidated net revenues of AR$66,028 million (2), 82% higher than the AR$36,216 million for the same period of 2017 (‘9M17’), explained by increases of 110% in power generation, 98% in electricity distribution, 51% in oil and gas, 38% in petrochemicals and 162% in holding and others, partially offset by 21% of higher eliminations due to intersegment sales.
— Power Generation of 11,520 GWh from 12 power plants
— Electricity sales of 16,520 GWh to 3 million end-users
— Production of 45.6 thousand barrels per day of hydrocarbons
— Sales of 267 thousand tons of petrochemical products
Consolidated adjusted EBITDA (3) for continuing operations of AR$23,961 million, compared to AR$10,689 million for 9M17, mainly due to increases of AR$5,046 million in power generation, AR$4,524 million in electricity distribution, AR$1,159 million in oil and gas, AR$100 million in refining and distribution, AR$2,488 million in holding and others and lower intersegment eliminations of AR$8 million, partially offset by higher losses of AR$53 million in petrochemicals.
Consolidated loss attributable to the owners of the Company of AR$6,783 million, lower than the AR$3,094 million gain in 9M17, mainly explained by the AR$31,210 million loss accrued due to 121% of AR$ depreciation against US$ in 9M18, currency in which most of the Company’s financial liabilities are denominated, whereas the FS reports in AR$, without inflation adjustment.
Consolidated net revenues of AR$26,310 million, 96% higher than the AR$13,415 million for the third quarter 2017 (‘Q3 17’), explained by increases of 107% in power generation, 108% in electricity distribution, 80% in oil and gas, 52% in petrochemicals and 246% in holding and others, partially offset by 41% of higher eliminations due to intersegment sales.
— Power Generation of 3,572 GWh from 12 power plants
— Electricity sales of 5,626 GWh to 3 million end-users
— Production of 45 thousand barrels per day of hydrocarbons
— Sales of 85 thousand tons of petrochemical products
Consolidated adjusted EBITDA for continuing operations of AR$9,078 million, compared to AR$4,355 million for Q3 17, mainly due to increases of AR$2,101 million in power generation, AR$1,033 million in electricity distribution, AR$567 million in oil and gas, AR$94 million in refining and distribution, AR$1,056 million in holding and others, and lower intersegment eliminations of AR$47 million, partially offset by losses of AR$175 million in petrochemicals.
Consolidated loss attributable to the owners of the Company of AR$7,135 million, lower than the AR$1,284 million gain recorded in Q3 17, mainly explained by the accrual of AR$17,438 million loss due to 43% AR$ depreciation against US$ in Q3 18.
(For the nine-month period and quarter ended on September 30, 2018 and 2017, in millions of Argentine Pesos)
Notes:
(1) The financial information presented in this document are based on financial statements (FS) prepared according to the International Financial Reporting Standards (IFRS), except application of IAS 29 (please refer to section 1.7 of the Earnings Release). Consequently, the FS discriminates the continuing operations from the assets agreed for sale, which are reported as discontinued operations.
(2) Under the IFRS, Greenwind, OldelVal, Refinor, Transener and TGS are not consolidated in Pampa’s FS, being its equity income shown as ‘Results for participation in associates/joint businesses’.
(3) Consolidated adjusted EBITDA represents the results before net financial results, income tax and minimum notional income tax, depreciations and amortizations, non-recurring and non-cash income and expense, equity income and other adjustments from the IFRS implementation, and includes affiliates’ EBITDA at ownership. For more information, see section 3 of the Earnings Release.
(4) The financial information presented in this document for the quarters ended on September 30, 2018 and of 2017 are based on unaudited FS prepared according to the IFRS accounting standards in force in Argentina, except application of IAS 29 (please refer to section 1.7 of the Earnings Release) corresponding to the nine-month period of 2018 and 2017, and the six-month periods ended on June 30, 2018 and 2017, respectively.
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(CMC, 12.Nov.2018) — Finance Minister Winston Jordan has given an insight into the campaign for the 2020 general elections in Guyana telling voters that the oil sector will feature prominently in the race for the leadership of the Caribbean Community (CARICOM) country.
Addressing a political meeting ahead of Monday’s Local Government Elections (LGE) on Sunday, Jordan said that Guyana’s new found oil and gas industry would most likely be pivotal to the success of political parties contesting the general and presidential election in two years’ time.
“The next election is the mother of all elections ever in this country. You know why? Because the oil would be coming on stream and they all want their hands on the oil. We have to keep those thieves away from the oil resources,” he said at the meeting held at the Stabroek Market Square in the capital.
Jordan warned supporters of the People’s National Congress Reform (PNCR) -dominated A Partnership for National unity (APNU) that would be robbed of the oil wealth if they “allow that other government” to return to office, a clear reference to the main opposition People’s Progressive Party Civic (PPP/C) that was sept out of office in 2015.
“If they get their hands on those oil resources, cat will eat your dinner,” Jordan said, urging the supporters to think about the political implications of the massive oil revenues expected after the country begins commercial production of oil and gas.
Jordan said even without the oil “they (former government ministers) built big mansions on our forefathers lands, on the sweat and blood of our forefathers and they did not even access to the oil resources”.
While no one has yet been charged in connection with the allegations, the Special Organised Crime Unit (SOCU) of the Guyana Police Force (GPF) has been questioning several people, including former president Bharrat Jagdeo in the ongoing two-year probe.
Jordan noted that the integrity of President David Granger as an “honest, God-fearing person who has the interest of this country at heart and with him leading us again in 2020, you can be assured that the oil resources will be invested in your interest.
“I am passionate that this government must be given at least another term to put in place the policies that we are now setting. I am passionate that the coalition is the only government who can manage those massive oil resources that are coming,” he said.
Guyana is early 2020 expected to begin oil production at 120,000 barrels per day which would earn US$300 million in that year. Oil production is estimated to be about 750,000 barrels per day by 2025 and earning from profit oil and royalty could be more than one billion US dollars annually.
Guyanese are voting Monday in the Local Government Elections that the PPPC said should be viewed as a referendum on the performance of the APNU coalition.
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(Energy Analytics Institute, Aaron Simonsky, 12.Nov.2018) — Officials from Argentina initiated a road show today in the U.S. aimed at attracting investments in the Vaca Muerta formation in Neuquen.
Argentina’s Energy Secretary Javier Iguacel, along with officials and representatives from more than 30 oil companies, plan to participate in the investor road show that will take them to several cities in the U.S., reported online media Vaca Muerta News.
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(Guyana Department of Public Information, 12.Nov.2018) — Prime Minister Hon. Moses V. Nagamootoo held discussions with a high-level, five-member team from the World Bank, which is visiting Guyana at the invitation of Finance Minister Winston Jordan.
The hour-long meeting, at which Finance Minister Winston Jordan was present, took place on Friday, November 9 at the Prime Minister’s Office.
Led by Mexican-born Mr. Jorge Familiar, Regional Vice-President for Latin America and the Caribbean region, the World Bank assured support to Guyana in capacity building as the country prepares for first oil.
The visit is part of an on-going engagement with Guyana, simultaneously in several sectors.
Others on the team include regional director, Mrs. Tahseen Sayed; country manager for Guyana and Jamaica, Mrs. Galina Sotirova; regional programme leader, Mrs Abha Prasad; and operations officer, Mr. Federico Baechili.
Mr. Familiar shared the recent dismal experiences of a few regional states that depended on oil wealth, and stressed that Guyana would need solid governance systems to avoid pitfalls, and to protect and beneficially spend anticipated revenues.
In welcoming the team to Guyana, Prime Minister Nagamootoo emphasised the efforts of the Coalition Government in promoting open, democratic, multi-party governance in Guyana, and the mechanisms in place to combat sleaze by public officials and accountability for public property.
He explained the many innovations in the democratic architecture of Guyana over the past three years, and invited the World Bank to partner with the Government to strengthen these institutions and to build human capital to manage the new economy.
The Guyanese Prime Minister, who was performing the functions of the President, referred to the Green Paper for a Natural Resources Fund, which was tabled in the National Assembly; and the crafting of a Green State Development Strategy, to provide a generational vision for the future oil-producing Guyana. He noted that the Fund policy is underlined by stringent fiscal rules to guide the use of petroleum resources.
Mrs. Tahseen Sayed, remarked that towards this end, the World Bank has approved a US$35 million development policy credit to better prepare the country to benefit from its oil and gas reserves, and to support Guyana’s effort to strengthen financial sector development and fiscal management.
The World Bank team is expected to meet other key government officials and other stakeholders.
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(Frontera Energy Corporation, 12.Nov.2018) — Frontera Energy Corporation intends to commence a consent solicitation to amend the indenture governing its outstanding 9.7% Senior Unsecured Notes due 2023.
The company is proposing to amend certain restrictions relating to “Limitations on Restricted Payments” in the Indenture to, among other changes, replace an existing basket permitting Restricted Payments (as such term is defined in the Indenture), of up to $40 million with a new basket permitting payments of up to $100 million per year, on a cumulative basis, subject to meeting certain financial ratio tests and add a new basket permitting Restricted Payments in respect of certain proceeds from the sale of Unrestricted Subsidiaries (as such term is defined in the Indenture), subject to meeting certain financial ratio tests. These proposed amendments would be in addition to other existing provisions in the Indenture permitting the Company to make additional Restricted Payments in various circumstances, including a provision related to its Consolidated Net Income (as such term is defined in the Indenture).
The company is seeking these amendments to give the company flexibility to use existing cash resources and expected future cash resources to implement measures expected to enhance shareholder value. These measures may include accelerating or increasing share buyback programs, dividend payments and Investments (as such term is defined in the Indenture). No decision has been made by the company to make any such payments at this time, other than its existing share buy-back program.
Additional details about the consent solicitation will be provided in the Consent Solicitation Statement which will be sent to noteholders at the time of launch.
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(Oilprice.com, Viktor Katona, 12.Nov.2018) — I know what you think – such a headline is quite reckless given that Guyana has not produced any oil so far and it is not until 2020 that we can actually start talking about a Guyanese oil miracle. Still, Guyana is one of the hottest exploration regions globally, in just three years ExxonMobil has managed to realize nine impressive finds, totaling around 4 billion barrels in reserve. And this is just the beginning – further exploration will inevitably elevate Guyana into the ranks of South American leaders. Now where does this leave Senegal and the Gambia? Well, if one is to accept my somewhat precipitated assumption, many similarities are to be discovered between Senegal and Guyana, pointing to the direction of big discoveries coming very soon.
The Senegal Basin and the Guyanese Basin are by-products of the same tectonic developments in what used to be West-Gondwana, where intra-continental rifts developed in Cretaceous sedimentary basins. As a result, both sides of the Atlantic Margin are structurally and compositionally similar. Yet Guyana has always ranked somewhat higher than the Senegal Basin – the vicinity of oil-prolific Venezuela has always jangled the nerves of ambitious oilmen, whilst Senegal was largely overlooked. To illustrate the point – when the USGS conducted an assessment of the Senegal Basin reserves in 2003, the discovered oil reserves at that point stood at a mere 10MM barrels of oil, whilst gas resources amounted to 49BCf. That, of course, has changed after the largest oil and gas find of 2017, which, having been under the radar of leading news outlets, was the Yakaar field in offshore Senegal.
The deepwater Yakaar field was discovered last May, confirming Kosmos Energy’s expectations that it would contain 15 TCf of reserves. Yakaar, together with the development of the Greater Tortue Complex offshore Mauretania with some parts crossing into Senegalese waters, provide a solid foundation for creating two relatively low-cost LNG clusters in the area. The results attained heretofore several important questions – what do relevant countries (Mauretania, Senegal, Gambia, Guinea Bissau and Guinea) expect from their hydrocarbon endowment? Would they prefer gas reserves instead of oil? Any answer would most likely be vacillatory because the Senegal Basin has so far mostly unfolded gas fields, with only partial success in drilling for oil. The truth is that all Senegal Basin nations would love to set their sights on oil (easier to monetize and use), Senegal is a fitting example of how it could use it.
Senegal’s oil product consumption grows by an annualized rate of roughly 4%, making the task of upgrading the energy sector increasingly time-sensitive. For this, it would need not only oil, but also downstream infrastructure, which currently is sparse and unsophisticated. However, the only refinery in the country, the 25 kbpd Mbao refinery built in 1963, will not be able to cater for Senegal’s needs – in a highly dieselized country, it is expected that product demand would more than double in the next 20 years from the current 47kbpd to 115kbpd. It would also place Senegal in a more comfortable position as the government could renounce on buying Bonny Light and Erha from Nigeria, albeit at discounted prices, and could fully rely on its own production.
Amid several large gas finds, so far there has been only one noteworthy oil discovery – the first deepwater well in Senegalese waters in 2014 found the SNE field in Albian sandstones at a depth of 1.4km. The SNE field contains, according to the operator Cairn Energy, 3C reserves of 998MMbbl which could allow it to reach a plateau production late 2020s of 140kbpd – the start of the field is expected to take place in 2022-2023. Oil from SNE would be fed into a FPSO with subsea tie-backs. Some 20km to the north of SNE, another discovery, FAN, is showing some potential, too, with estimated reserves ranging from 250-900MMbbl. The hydrocarbon column which the drillers found was more than 500 meters long, with the net oil column being 29 meters.
The Gambia tries to keep abreast with regional developments, having drilled the first offshore well, Samo-1, in late October after almost 40 years of idleness. The Samo-1 well is located in Gambia’s Block 2, to the south of Senegal’s SNE fields – meaning that most likely it shares its geological structure, meaning Maastrichtian sandstones that most likely contain light oil with a 32-33° API density. A positive result (the operator FAR expects that it will find around 825MMbbl of) would extend the oil-bearing play across the Senegalese-Gambian border and hype up the resource potential of the Senegal Basin. Yet as opposed to Senegal, which has fought long-standing battles with its own populace and interest groups on how to deal with its hydrocarbon resources, the Gambia fully lacks the institutional framework to manage its oil and gas.
Source: API.
Now back to the Senegal-Guyana comparison. One of the most interesting trends across the Atlantic is that companies which have serious positions in either Guyana or Senegal are currently trying to establish themselves on the other side of the Atlantic. ExxonMobil, which has by far played the most important part in developing offshore Guyana, clinched 3 deepwater blocks in offshore Mauretania (i.e. the part of the Senegal Basin which is most likely to contain oil) and seeks to use its profound Guyana-relevant knowledge to appraise the stratigraphic traps along the African shore. It works the other way round, too – Total, the most powerful major present in Senegal, built on the intense Franco-Senegalese ties, has entered Guyana this year, acquiring interests in the Canje, Kanuku and Orinduik Blocks.
Thus, do not be surprised if in five years’ time Senegal or Mauretania becomes one of the hottest locations for oil majors – after several decades of torpor, partially thanks to the efforts of some risk-taking independent companies, the Senegal Basin has emerged as a genuinely attractive play with some top-quality fields (e.g.: the SNE field’s breakeven oil price hovers around 40 USD per barrel). The plays are similar to Guyana’s – something which majors familiar with the structure of the Atlantic Margin have already noticed, with Total and ExxonMobil placing their bets on both sides of the ocean. Senegal’s similarities with Guyana, however, do not end with the characteristics of the fields and plays in question. Institutionally, it might still not be ready for the administration of the burgeoning oil sector.
Senegal’s national oil company Petrosen has issued a call for expressions of interest on deepwater offshore blocks to the south of Gambia’s A4 and A5 blocks, which it deems might contain up to 1.5 billion barrels of oil equivalent. It counts on the participation of oil majors – Total is sure to play a very active role in any licensing round that takes place, as well as Petronas (the operator of Gambia’s Samo-1 well). Yet for this, Senegal first ought to clarify how would the new petroleum code look like – will PSAs be a preferred variant or will it apply concessionary agreements, too; will it introduce a petroleum export tax and if so, to what extent would it do harm; how strict would local content requirements be? It is only after all these questions are clarified that international majors will rush to the new hydrocarbon-rich region.
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(Reuters, 11.Nov.2018) — Venezuela is hoping to steeply raise oil output next year but will respect any new deal if OPEC agrees to reduce output from December, Oil Minister Manuel Quevedo said on Sunday.
The south American OPEC nation’s current oil output is 1.5 million barrels per day and it aims to increase that by 1 million bpd “soon”, he told reporters in Abu Dhabi.
Quevedo was speaking in Abu Dhabi where an oil market monitoring committee was held on Sunday, attended by top exporters Saudi Arabia and Russia.
A majority of OPEC and allied oil exporters support a cut in the global supply of crude, Oman Oil Minister Mohammed bin Hamad al-Rumhi said earlier in the Emirati capital.
“Many of us share this view,” the minister said when asked about the need for a cut. Asked if it could amount to 500,000 or one million barrels per day, he replied: “I think it is unfair for me to throw numbers now.”
Saudi Arabia is discussing a proposal to cut oil output by up to 1 million barrels per day by OPEC and its allies, two sources close to the discussions told Reuters on Sunday.
Venezuela will comply with its debt obligations and considers itself a partner with Chevron Corp. and other companies, Quevedo said, adding the problem is with the American government.
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(Energy Analytics Institute, Piero Stewart, 11.Nov.2018) — Ecopetrol announced it has activated contingency plans after a new attack on the Caño Limón-Coveñas pipeline located in the Cedeño district, in the municipality of Toledo, Norte de Santander.
“At Ecopetrol, we reiterate our rejection to any type of activity that endangers the lives of people in any of the surrounding communities and threatens the environment and natural resources,” the state oil company announced in a twitter post on Nov. 11.
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(Energy Analytics Institute, Piero Stewart, 11.Nov.2018) — Ecuador announced it will utilize a $58.29 per barrel oil price to calculate projected oil export revenues in 2019, reported online media El Universo.
Ecuador, along with Venezuela, are the lone countries from Latin America to be members of OPEC.
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(Energy Analytics Institute, Aaron Simonsky, 11.Nov.2018) — Uruguay is studying possibilities with hydrogen.
“ANCAP is interested in the hydrogen option, because it is an ideal energy for transport, and which can be managed with an infrastructure similar to that of other liquid fuels,” reported online media LaRed21, citing ANCAP President Marta Jara.
Hydrogen as a fuel is currently being analyzed by certain countries worldwide due to its “zero emissions,” which reap benefits for the planet.
Hydrogen can be physically stored as either a gas or a liquid. Storage as a gas typically requires high-pressure tanks (5000–10,000 psi tank pressure). Storage of hydrogen as a liquid requires cryogenic temperatures since the boiling point of hydrogen at one atmosphere pressure is -252.8°C, according to data posted to the website of the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy or EERE.
“Not all the renewable energy generated in [Uruguay] is used; therefore, the hydrogen option would allow for storage,” concluded Jara.
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(Jamaica Gleaner,11.Nov.2018) — The Jamaica Public Service Company (JPS) is promising a more reliable power supply with an improved and more reliable grid in which it has invested $116 million this year.
In a release, JPS said a major part of the improvement will come from the construction of an energy storage facility at Hunts Bay, St Andrew at a cost of $17.3 million. It said this will help to improve reliability through the creation of a more flexible grid, that can accommodate more renewables.
When complete in 2019, the system will act as a battery back-up when fluctuations in power supply occur, due to the intermittency of renewables and other factors, JPS explained..
The energy company said it has spent some $1.5 million to install distribution automatic switches, including trip savers and fault circuit indicators.
These devices are expected to further modernise the country’s electricity grid as they will detect faults, minimise their impact, and restore power automatically to customers.
“Several customers across the island are already beginning to reap the benefit of these investments, evidenced by fewer outages,” JPS said.
Also, the country’s sole electricity distributor said it has spent about $2.6 million on a voltage standardisation project in St Andrew and St Ann. This is expected to result in better power quality and improved reliability in the power supply to customers in these areas when completed.
The resort town of Ocho Rios, in particular, is expected to have “a more robust grid and improved power supply.”
The light and power utility said it was committed to undertaking further improvements to the grid with the use of advance technologies.
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(Jamaica Observer, 11. Nov.2018) — Sheree Martin, JPS’ senior vice-president (SVP) for business development, has announced her resignation from the energy company, effective November 27, 2018.
“JPS has been nothing short of a tremendous experience for growth and learning, in both a professional and personal capacity. I am grateful for what I was exposed to, what I was able to contribute and achieve, as well for the people that I have met and worked with while here. Based on my personal goals, I’m ready to take on another challenge while continuing to support Jamaica’s development,” Martin said via news release.
In the almost five years since joining JPS, Martin has had executive oversight for a range of portfolio areas, spanning almost every aspect of the company’s operations, according to the release.
Martin joined the company in 2014 as SVP of customer and corporate services, with responsibility for the key areas impacting stakeholder relations: customer services, human resources, corporate communications, marketing, and government and regulatory affairs. In 2016, she was appointed to the position of SVP energy delivery, with responsibility for the power company’s transmission, distribution and supply operations.
Martin’s most recent undertaking at JPS was that of SVP of business development, which took effect in November 2017. In this capacity, she led JPS’ new business division and expanded the company’s role as a 360-degree service provider, the release said, with the development and implementation of unique solutions for customers – both on and off grid.
Through the energy solutions arm of JPS, Martin spearheaded a number of joint venture partnerships, and led the implementation of several renewable solutions and combined heat and power (CHP) projects.
Prior to JPS Martin worked for several years at National Commercial Bank in roles that included general manager, customer experience and innovation and as general manager, marketing and service delivery. From 2006 to 2012 Martin was also the CEO for the NCB Foundation, according to her LinkedIn profile.
Martin holds an MBA specialising in banking and finance and a BA in language and literature, both from The University of the West Indies. She has also received executive education from two top-ranked global business schools – Harvard Business School in the United States and INSEAD in France.
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(Energy Analytics Institute, Piero Stewart, 10.Nov.2018) — An explosion that occurred along a segment of the Northeast Gas Pipeline José Francisco Bermúdez, and which caused interruptions in electricity service in Nueva Esparta state, was an act of terrorism and sabotage, announced Venezuela’s Electricity Minister Luis Motta Domínguez.
“The interruption of electric services late this week was an act of terrorism carried out against a segment of PDVSA’s natural gas pipeline. Due to the gas leakage, the state oil company was forced to close the valves along the pipeline,” said Domínguez in a telephone call from Margarita Island, broadcast by Venezolana de Televisión (VTV).
Domínguez didn’t present any reliable or believable evidence related to the claim.
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(Reuters, 10.Nov.2018) — Colombia’s state-run oil company Ecopetrol said on Saturday it was mounting another cleanup operation after a bomb attack on the Cano Limon pipeline.
The attack is the 78th this year on the 485-mile (780-km) pipeline, which has been out of service for much of 2018 because of bombings and illegal taps.
The pipeline, which can transport up to 210,000 barrels per day, was not functioning at the time of the attack. It was also bombed on Thursday.
The latest bombing took place in Toledo municipality in Norte de Santander province, Ecopetrol said on Twitter.
The company did not say who it held responsible, but military sources have blamed previous attacks on the pipeline on fighters from the National Liberation Army (ELN) rebel group.
The ELN, considered a terrorist group by the United States and the European Union, has about 1,500 combatants and opposes multinational companies that its leaders accuse of seizing natural resources without benefiting Colombians.
Colombian President Ivan Duque has demanded the group free all its hostages and cease criminal activities before he will consider restarting peace talks that began last year under his predecessor, Juan Manuel Santos.
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“Uruguay’s energy matrix is one of the most outstanding in the world due to the variety of renewable energies” — ANCAP President Marta Jara.
(Energy Analytics Institute, Piero Stewart, 10.Nov.2018) — Ecuador’s Minister of Energy and Non-Renewable Natural Resources Carlos Pérez García has requested that the Comptroller of the country carry out a special examination of Contract 2016063 signed between EP Petroecuador and the private company Gasvesubio Export (owned by the Eljuri group), on January 28, 2016.
The formal request was made on August 21, 2018 and the Comptroller responded on September 18, 2018 stating the request had been sent to the National Directorate of Natural Resources Audit, reported online media El Universo.
The audit request comes after Petroamazonas EP Manager Álex Galárraga announced Ecuador’s plans to import gas from Peru due to the lack of reserves at the Amistad field to cover demand for at least three potential customers: TermoMachala (63 million cubic feet of natural gas), Bajo Alto (12 million) and Gasvesubio (14 million).
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(Petrobras, 9.Nov.2018) — Petrobras announced, according to the CVM and B3 rules to Level 2 of corporate governance listed companies, calling of General Extraordinary Meeting on Dec. 11, 2018, observed 30 days in advance, to deliberate on the following matters:
1. Proposal to amend Petrobras’ Bylaws to adjust Articles 23, 28 and 30, and consequent consolidation of the Bylaws, which deal with compensatory remuneration in the quarantine period and the indemnity agreement of senior management;
2. Proposal for the incorporation of PDET Offshore S.A. by Petrobras.
The Call Notice and the Handbook for Shareholder Participation can be accessed through the internet on the CVM website (www.cvm.gov.br) or the company’s website (http://www.petrobras.com.br/ri).
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(Reuters, Rodrigo Viga Gaier, Marta Nogueira, 9.Nov.2018) — Brazil’s Vice-President-elect Hamilton Mourão said on Twitter he was “very much impressed” after meeting on Friday with top executives at state-run oil company Petroleo Brasileiro SA , in the midst of uncertainty over the company’s future leadership.
The meeting came as President-elect Jair Bolsonaro is still making decisions over who will take up key posts in his future government. Petrobras Chief Executive Ivan Monteiro said this week that he has not talked with Bolsonaro about whether or not he will stay in the job, but he would be willing to discuss staying on if he were invited to do so.
Investors are closely watching to see if heavily indebted Petrobras will build on a turnaround that is already underway, as Bolsonaro sends conflicting messages promoting both free-market policies and a nationalist economic vision.
Continuity with Petrobras’ top brass could soothe investor concerns about excessive government interference in the company.
“This morning, I had the pleasure of visiting Petrobras and hearing, alongside CEO Ivan Monteiro, a presentation by the management about the situation of the company,” Mourao wrote. “I came out very much impressed.”
On Wednesday, Brazilian television channel GloboNews said Bolsonaro had decided to keep Monteiro as the CEO of the world’s most indebted listed oil company. But Bolsonaro said later on Wednesday that his future economy minister, Paulo Guedes, will make that decision.
In October, Bolsonaro’s transition team informally sounded out Roberto Castello Branco, a former Petrobras board member and ex-chairman of iron ore miner Vale SA, about his interest in the post, Reuters reported, citing sources.
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(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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(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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(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, 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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(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.
Nuevo #atentado al oleoducto Caño Limón-Coveñas en Boyacá. @ECOPETROL_SA despliega plan de contingencia. Imágenes muestran el daño al medio ambiente. Van 77 en 2018 a ese tubo. Unidos en rechazo a estos actos contra #MedioAmbiente y comunidades vecinas. pic.twitter.com/x2QUSI2z75
— Mauricio Téllez (@Mauriciotellez) November 8, 2018
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(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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(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, 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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(Weatherford International, 7.Nov.2018) — Weatherford International announced it has been awarded a four-year contract with a one-year optional extension to provide drillpipe riser (DPR) intervention systems and services for Petróleo Brasileiro S.A. in Brazil.
This contract is expected to yield approximately $80 million in revenue during the initial four-year period. It will replace a current five-system contract that began in May 2009.
Weatherford commenced its DPR operations in Brazil in 2003 by closely cooperating with Petrobras to develop a system that runs completions and land trees in deep water. As a prominent provider of subsea intervention and commissioning services with significant operational infrastructure and execution capability today, Weatherford has secured premium market share in the country with 16 working DPR systems operating under three separate contracts exclusively with Petrobras in the Santos and Campos Basins.
“We are very pleased that Petrobras has once again selected Weatherford for our expertise in subsea intervention services to extend the productive life of their assets. Winning this contract is a testament to the operational and safety performance of our Brazilian operations,” said Mark A. McCollum, President and Chief Executive Officer of Weatherford. “We are encouraged by the improving outlook in the deepwater market, particularly in Brazil, and look forward to continuing our longstanding partnership with Petrobras.”
The Company’s industry-leading DPR subsea services and intervention services offer comprehensive solutions through riser-based and open-water modes. The primary applications include landing subsea completion equipment and performing well intervention. To position customers for success, the DPR services leverage an experienced Brazilian workforce of approximately 700 employees and a state-of-the-art tubular inspection and maintenance center in Macaé.
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(Frontera Energy, 7.Nov.2018) — Frontera Energy Corporation released its Interim Condensed Consolidated Financial Statements for the third quarter of 2018, together with its Management, Discussion and Analysis (MD&A).
These documents will be posted on the Company’s website at www.fronteraenergy.ca and SEDAR at www.sedar.com. All values in this news release and the Company’s financial disclosures are in United States dollars unless otherwise stated.
— Cash provided by operating activities of $189.4 million in the third quarter generated $65.4 million of cash in excess of capital expenditures of $124.0 million and contributed to a total cash position of $786.5 million at quarter end. Cash and cash equivalents, unrestricted, increased 6% quarter-over-quarter to $586.6 million. Long term debt and obligations under finance lease were $352.3 million at quarter end.
— The Company has a significant cash position as well the opportunity to generate additional excess cash going forward. In addition to the existing normal course issuer bid (the “NCIB”) implemented by the Company during the third quarter, the Company will evaluate additional strategic initiatives designed to enhance shareholder returns.
— Oil and gas sales and other revenue in the quarter of $382.2 million were up 38% from the prior year period and down 9% from the prior quarter. Net sales of $300.0 million increased 12% compared to the prior year period and were 8% lower than the second quarter of 2018.
— Net income of $45.1 million ($0.45/share) compared with a net loss of $141.1 million ($1.41/share) in the prior year period, and a net loss of $184.4 million ($1.84/share) in the prior quarter. Operating EBITDA of $93.5 million was down 12% from prior year period and 25% from the prior quarter. Operating Netback of $23.81/boe was 12% lower than the second quarter of 2018 and 2% higher than the third quarter of 2017.
— Net production averaged 58,558 boe/d during the third quarter, down 18% and 9% from prior year period and prior quarter, respectively, reflecting a three-month suspension of production from Block 192 in Peru due to a force majeure event on the NorPeruano pipeline. This impacted quarterly production by approximately 5,700 bbl/d.
— Current net production is over 65,000 boe/d and is expected to grow throughout the fourth quarter. Production from Block 192, which restarted in early September, has consistently produced over 9,500 bbl/d since coming back on stream, reflecting the benefits of a work-over and well service program undertaken during the downtime. Production in Colombia is expected to increase in the fourth quarter, with the startup of the first phase of the water handling expansion project at Quifa SW on October 30, 2018, and the full 450,000 bbl/d increase in water handling capacity expected to be on stream by year end adding between 2,000 and 3,000 bbl/d of oil net to Frontera.
— The Company’s 2018 oil hedges, which capped the benefit of higher Brent oil prices through October 2018 (realized price after risk management contracts of $58.00/boe versus an average Brent oil benchmark price of $75.84/bbl during the third quarter), have now expired. The expiry of these hedge contracts is expected to have a positive impact on operating EBITDA and cash flow in the fourth quarter.
— General and administrative expenses of $23.0 million in the third quarter were 12% lower than the second quarter of 2018 and 14% lower than the third quarter of 2017 as the Company implements efficiency change projects throughout the organization.
— Substantial progress was achieved in managing long-term transportation costs during the quarter, with the termination of agreements representing a reduction in future commitments.
— The Company has maintained 2018 Operating EBITDA and transportation cost guidance while updating daily net production, capital expenditure, general and administrative expense and production cost guidance to reflect year to date results and expected results for the balance of the year.
“Frontera performed well in the third quarter, generating significant cash flow and further strengthening our balance sheet, in spite of production interruptions. We also made good progress toward our 2018 and long-term goals for growth, efficiency and value creation. Going into the fourth quarter, I am encouraged by the resumption of production at Block 192 in Peru at higher levels, as a result of the service work we were able to accomplish during the pipeline suspension, and by growing production in Colombia from our drilling program as we ramp up activity and bring additional water handling capacity on-line.
We are also making progress securing Frontera’s growth with the discovery at Acorazado-1, our fourth exploration success in Colombia this year. Plans are well advanced to initiate a long-term test in the well before year-end. We have continued to accelerate our drilling activities within our existing portfolio. During the fourth quarter we expect to drill 36 wells, with 22 development wells at Quifa SW, seven water injection wells, two light and medium oil development wells on the Guatiquia block, two development wells at Zopilote Sur on the Cravo Viejo block and three exploration and appraisal wells.
We are excited by the opportunity of capturing higher oil prices after the expiration of our hedging contracts at the end of October. While a necessary risk management strategy during the Company’s restructuring in 2016, they have limited our ability to benefit from rising oil prices this year. Without a cap on our realized prices for the last two months of this year, we expect our exposure to Brent oil prices to increase by nearly $12 per barrel, based on recent prices, directly benefiting Frontera’s earnings and cash flow.
We are well positioned for 2019 with our strong cash position and balance sheet which will provide further opportunities for disciplined capital allocation into strategic growth projects and to enhance shareholder returns going forward.”
“The Frontera Board believes there are multiple opportunities to increase shareholder value. First, through a disciplined exploration and development investment plan together with initiatives to improve performance in order to support Frontera’s long-term free cash flow. Second, with Frontera trading at a significant discount to its asset value and relative to its peers, we are taking steps to close the valuation gap, including by enhancing trading liquidity. Last, we are actively evaluating additional strategic initiatives designed to enhance shareholder returns.”
The Company is announcing a number of changes to the composition of its Board of Directors. One of the Company’s Board members, Camilo Marulanda, has elected to resign from the Board as a result of increased demands since being named President of ISAGEN S.A. in Colombia. Mr. Marulanda will be replaced by Orlando Cabrales Segovia, a leader in the public and private energy sector in Colombia with over 30 years experience, including as Vice Minister of Energy of the Ministry of Mines and Energy in Colombia between 2013 and 2014 and as the President of the Agencia Nacional de Hidrocarburos (ANH) from 2011 to 2013. Mr. Cabrales held senior roles at BP in Latin America and has been on the Boards of numerous companies in Colombia including; ISAGEN S.A., Tuscany Drilling, Cenit Transporte y Logistica de Hidrocarburos S.A. (CENIT), and ISA. Mr. Cabrales earned an undergraduate degree in Law from Pontifical Javeriana University and a Masters degree in Philosophy from Boston College.
The Company is also pleased to announce the appointment of Veronique Giry to the Board of the Directors. With this appointment, the Company’s Board is back to seven members, all of whom are independent. Ms. Giry has an impressive track record in the global oil and gas industry and currently serves as Vice President and Chief Operating Officer of ISH Energy Limited in Calgary, Alberta, Canada. Ms. Giry’s 29 year career has included senior management roles at the Alberta Energy Regulator and Total Exploration & Production where she has held roles in Latin America, Canada, Asia, Europe and the UK. Ms. Giry earned a Masters in Engineering degree from Ecole Centrale de Paris, France, with a major in Mechanics and sits as a volunteer on the Board of Alliance Francaise of Calgary.
Mr. de Alba continued: “Frontera is excited to add Orlando’s and Veronique’s best-in-class regulatory and technical expertise to our Board of Directors. Their diverse operational knowledge and experience within the global upstream industry will be a significant benefit to the Company as we position for growth and cash flow generation. They will complement the skills of the other Board members. We would like to thank Camilo Marulanda for his valuable contribution to the Board over the past two years as we repositioned Frontera to be the leading publicly traded upstream oil and gas company in Latin America.”
The average Brent oil benchmark price increased by $0.87/bbl, or 1%, in the third quarter of 2018 to an average of $75.84/bbl, compared to $74.97/bbl in the second quarter of 2018. Brent oil benchmark price averaged $52.17/bbl in the third quarter of 2017. The Company’s realized oil price of $70.87/bbl in the third quarter of 2018 excludes the impact of $10.02/bbl of realized losses on risk management contracts. The Company had hedges in place for October 2018 on 1.2 million barrels of oil at an average Brent price of $59.22/bbl. The Company is unhedged in November and December 2018.
During the third quarter of 2018, net income attributable to equity holders of the Company was $45.1 million or $0.45/share, compared with a net loss of $184.4 million or $1.84/share, in the second quarter of 2018. Higher net income was mainly attributable to a reduction in fees paid on suspended pipeline capacity, a reversal of provision of high price clause, a reduction in depletion, depreciation and amortization, a reduction in general and administrative expenses, and the recognition of a deferred tax asset offset by an increase in oil and gas operating costs and impairments on assets and investments in associates.
For the third quarter of 2018, net sales of $300.0 million were 8% lower than $326.6 million in the second quarter of 2018 and 12% higher than $267.0 million the third quarter of 2017.
Cash provided by operating activities of $189.4 million for the third quarter was 75% higher than in the second quarter of 2018 as a result of strong operating netbacks combined with timing benefits within the cash management process. The Company generated $65.4 million of excess cash in the quarter as cash provided by operating activities of $189.4 million exceeded capital expenditures of $124.0 million.
Operating EBITDA of $93.5 million in the third quarter of 2018 was 25% lower in comparison with $124.7 million achieved in the second quarter of 2018, and 12% lower than $105.9 million in the third quarter of 2017, as a result of lower oil and gas sales volumes and higher oil and gas operating costs in the current period, partially driven by inflation linked to higher oil prices.
Frontera continues to focus on improving its cost structure and recently completed a project to increase organizational efficiency and reduce costs. This focus on cost helped the Company deliver lower general and administrative expenses of $23.0 million in the third quarter of 2018, a decrease of 12% from the second quarter of 2018, and a decrease of 14% from the third quarter of 2017. Going forward, the Company will look to further improve operational efficiency to drive additional cost savings.
The Company continued to build cash during the quarter, with a total cash position of $786.5 million, as of September 30, 2018, an increase of 8% and 31% from the end of the second quarter of 2018 and of the third quarter of 2017, respectively. Unrestricted cash increased to $586.6 million as at September 30, 2018, from $550.8 million as at June 30, 2018. The increase in unrestricted cash during the third quarter of 2018 was due to cash flow from operations in excess of capital expenditures, offset by an increase in restricted cash and share repurchases. In October 2018, $45 million of restricted cash became unrestricted following the satisfaction of terms relating to the sale of Petroelectrica de los Llanos.
Working capital, or current assets less current liabilities, increased 4% to $331.2 million during the third quarter of 2018, compared to $317.4 million at June 30, 2018.
The Company has hedged 1.9 million barrels of production between January 2019 and September 2019 using a Brent put price of $55/bbl, which protects the Company from lower oil prices while retaining the upside from potentially higher oil prices.
On October 4, 2018, S&P Global Ratings reaffirmed its ‘BB-’ global scale long-term issuer credit rating on the Company and its ‘BB-’ issue-level rating on the Company’s $350 million senior unsecured notes due 2023.
During the third quarter of 2018 the Toronto Stock Exchange (TSX) accepted the Company’s notice of intention to initiate a NCIB for its common shares. The notice provides that Frontera may purchase, during the twelve-month period commencing July 18, 2018 and ending July 17, 2019, up to 3,543,270 Common Shares, representing approximately 3.5% of the Company’s 100,011,664 issued and outstanding Common Shares as at July 9, 2018. Under the Company’s NCIB 315,512 shares were repurchased for cancellation at a cost of $4.5 million (C$18.68 per share) during the third quarter of 2018. Subsequent to September 30, 2018, a further 165,049 shares were repurchased at a cost of $2.2 million (C$17.49 per share).
The NCIB, in addition to the two for one stock split undertaken earlier in 2018 has helped improve the average daily trading volume in the Company’s equity by over three times compared to what it was at the beginning of 2018.
On July 13, 2018 the Company announced the successful settlement of the Ocensa transportation arbitration concerning the P-135 Project. As a result, the Company has reduced future transportation commitments in the Ocensa pipeline by over $178.3 million during the life of the contracts (June 2017 through June 2025). The Company also announced that it had terminated its contractual commitment with CENIT to transport oil through the Caño Limón-Coveñas pipeline (CLC) and its contractual commitment with Oleoducto Bicentenario de Colombia S.A.S. to transport oil through the Bicentenario pipeline (“BIC”). As a consequence of these terminations, the Company is no longer contractually committed to payments of ship-or-pay fees on these pipelines; these terminated contracts represented $1.36 billion in future transportation commitments through to October 2028.
During the third quarter of 2018, the Company realized $5.6 million of fees paid on suspended pipeline capacity, for the period between July 1 and July 12, 2018 before the contracts were terminated. These costs are excluded from the Company’s transportation costs, consistent with their historical reporting. A further third quarter charge of $15.6 million was taken for prepayments and standby letters of credit (“SBLCs”) on the BIC pipeline, representing (i) $5.3 million of SBLCs which were drawn by Bicentenario and (ii) a further $10.3 million of prepayments to Bicentenario and accounts receivables by the Company related to the Bicentenario transportation contracts. Under the Company’s unsecured letter of credit facility, a total of $64.4 million of SBLCs were issued relating to the Company’s transportation contract with Bicentenario. The remaining $59.1 million were drawn after the end of the third quarter and will be recognized as an expense in the fourth quarter of 2018. The Company has reimbursed issuing banks the full amount drawn under the Bicentenario SBLCs. The Company is of the view that the drawdown of the SBLCs was wrongful and is evaluating its remedies with respect thereto.
The Company has alternative transportation agreements in place which provide sufficient capacity for the evacuation and sale of its oil production in Colombia.
Current net production is over 65,000 boe/d and is expected to continue to increase during the fourth quarter as the Quifa SW water handling expansion project comes on stream. Net production in the third quarter of 2018 averaged 58,558 boe/d, a decrease of 9% compared with the second quarter of 2018. The decrease in quarterly net production was a result of a suspension of production from Block 192 in Peru due to the declaration of force majeure by Petroperu S.A. on the NorPeruano pipeline which transports crude oil from Block 192 to the export terminal at Bayovar. The pipeline was out of service between June 4, 2018 and August 30, 2018 when it was restarted. Since the pipeline was restarted, average net production has been approximately 9,500 bbl/d or 12% higher than before the force majeure event, reflecting benefits from work-over and other maintenance activities which were undertaken while production was suspended.
Production from Colombia decreased 4% during the third quarter of 2018 compared with the previous quarter, as a result of temporary water injection restrictions encountered on the Casimena block, and natural production declines in the Company’s natural gas assets in the country.
Sales volumes for the three months ended September 30, 2018, were lower than the comparable prior year period primarily due to lower production in Colombia and higher inventory in Peru, resulting in lower volumes available for sale. During the third quarter of 2018, the Company sold more barrels than it produced in Colombia, resulting in an overlift liability position of 809 Mbbl at the end of the quarter.
During the third quarter of 2018, total capital expenditures were $124.0 million, 43% higher than $86.8 million in the previous quarter and 155% higher in comparison with $48.6 million in the third quarter of 2017. The increase during the third quarter relates to drilling operations for the Acorazado-1 exploration well on the Llanos 25 block in Colombia, the drilling of the Delfin Sur-1 well offshore Peru on block Z-1, and the start up of construction of additional water handling facilities in the Quifa area. Increased facilities spending in the quarter also connected the Alligator discoveries in the Guatiquia block to the main crude oil and water processing facilities on the block.
A total of 39 wells were drilled in the third quarter of 2018, in line with 40 wells planned. Thirty-one heavy oil development wells and two water injection wells were drilled in the Quifa SW area in connection with the increased fluid handling capacity that is expected to come on stream in the fourth quarter. Three light oil development wells were drilled on the Guatiquia block, two at Avispa and one at Alligator. A second Alligator well, Alligator-5, encountered the edge of the field and was uneconomic. The Company also completed the drilling of two exploration wells, the Acorazado-1 well on the Llanos 25 block onshore Colombia and the Delfin Sur-1 well on block Z-1 offshore Peru, the results of which have been previously disclosed.
During the fourth quarter of 2018, the Company plans to drill 36 wells including 22 development wells in the Quifa SW area, four development wells in its light and medium oil areas, three exploration wells, five water injection wells at Orito and Neiva, and two water injection wells in the Quifa SW area. The Company will keep 10 rigs active throughout the fourth quarter.
On October 30, 2018 the Company started the commissioning of the water handling expansion project at the Quifa SW block. The project is expected to add approximately 450,000 bbl/d of new water handling capacity or a 40% increase to the current capacity. The Company plans to start the project in phases throughout the fourth quarter with full capacity on stream by the end of the year. The increased water handling capacity is expected to be able to deliver between 2,000 and 3,000 bbl/d of incremental net production by year end.
During the fourth quarter of 2018, the Company plans to drill three exploration wells compared to the prior plan of five wells: the Coralillo-3 well on the Guatiquia block which follows on from the successful Coralillo-1 well drilled and completed earlier in the year; the Chaman-2D commitment well on the Sabanero block; and the Jaspe-7D well in the Jaspe field within the Quifa area, a follow up to the successful Jaspe-6D well drilled in January 2018. The Cocodrillo-1 and Jaspe-8D wells will now be drilled in the first half of 2019 as a result of permitting delays.
The Company will commence the expansion of the waterflood pressure maintenance project in the Neiva field by drilling six water injector wells in the fourth quarter. Upon completion of the drilling of the injector wells it is expected that pressure response and increased production will be encountered in the following six to twelve months. The expansion of the Neiva waterflood project will be the second pressure maintenance project to be implemented at Frontera post restructuring, following the pressure maintenance project at the Company’s Copa field in the Cubiro block.
The Company continues to drill additional development wells in various blocks identified by ongoing technical reviews of its assets. In June 2018, the ANH granted an extension of acreage to the Cravo Viejo block allowing the Company to capture additional acreage containing a mapped extension to the Zopilote field. This additional acreage has allowed the Company to commence the drilling of Zopilote Sur-1, to be followed by Zopilote Sur-2 subject to ANH approval. Additionally, the Company will drill two development wells on the Candelilla field in the Guatiquia block following the identification of separate Lower Sand-1 and Guadalupe formation opportunities which were previously thought not to be present. The Company was also recently successful in drilling a well in the Alligator field to more than 12,000 feet using only two casing strings. This new well design will now be used in certain future development wells, thereby contributing to a reduction in overall drilling costs.
The Company has received approval from its partner Ecopetrol to commence the long-term testing of the Jaspe-6D exploration well in the Quifa area that was initially drilled and tested in January 2018. The results of the test will provide the information required to evaluate the declaration of commerciality in 2019. The Company has secured approval from Ecopetrol to commence a cost cutting pilot drilling program in the Quifa field, which if successful will permit the drilling of the future horizontal development wells in a more cost-effective manner.
The Company is in advanced discussions with Ecopetrol in the Quifa SW block to implement a pilot multi-lateral horizontal development well program for 2019, with the expectation that, if successful, drilling costs will be lower with resulting increased production and recovery rates.
The Company is affirming 2018 Operating EBITDA guidance of $400 to $450 million, and transportation costs per boe, while updating its annual guidance for net production, capital expenditures and production costs to reflect year-to-date results. The midpoint of average annual daily net production guidance is lowered by 5% to 64,000 boe/d (from 67,500 boe/d) with a corresponding 5% decrease to the midpoint of capital expenditures guidance to $450 million (from $475 million). Production cost guidance is increased to a midpoint value of $14.25/boe (from $13.00/boe), to reflect lower daily production volumes and inflationary pressures due to higher oil prices. General and administrative cost guidance for the year was decreased by 5% to a midpoint of $100 million (from $105 million), to reflect the benefit of recent cost savings initiatives. The guidance reflects an assumed average annual oil price of $73/bbl Brent (4% increase) and a realized oil price differential of $5 bbl (5% decrease).
As previously disclosed, a conference call for investors and analysts is scheduled for Thursday, November 8, 2018 at 8:00 a.m. (MST) and 10:00 a.m. (EST,GMT-5). Participants will include Gabriel de Alba, Chairman of the Board of Directors, Richard Herbert, Chief Executive Officer, David Dyck, Chief Financial Officer and select members of the senior management team.
A presentation and webcast link will be available on the Company’s website prior to the call, which can be accessed at www.fronteraenergy.ca.
Analysts and interested investors are invited to participate using the following dial-in numbers:
| Participant Number (International/Local): | (647) 427-7450 |
| Participant Number (Toll free Colombia): | 01-800-518-0661 |
| Participant Number (Toll free North America): | (888) 231-8191 |
| Conference ID: | 4789788 |
| Webcast: | www.fronteraenergy.ca |
A replay of the conference call will be available until 11:59 p.m. (EST, GMT-5), Thursday, November 22, 2018 and can be accessed using the following dial-in numbers:
| Encore Toll Free Dial-in Number: | 1-855-859-2056 |
| Local Dial-in-Number: | (416)-849-0833 |
| Encore ID: | 4789788 |
The following table provides a complete reconciliation of net income (loss) to operating EBITDA:
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(Trinidad Express, Sandhya Santoo, 7.Nov.2018) — Is super gasoline burning faster?
This is the claim by some motorists who are insisting that the fuel is burning faster, leading to lower mileage per litre and higher costs.
And many taxi drivers say that the Super gasoline is causing economic hardship. Some want the State to subsidize taxi drivers.
At the pumps, car owners would pay $4.97 for super gas, $5.75 for premium gas, and 3.41 for diesel fuel.
Vice president of the St Croix/ Barrackpore Taxi Drivers Association Narine Lochan said the fuel seems to be burning faster.
He said given the higher cost of super gas and premium, using regular fuel has become a preferred choice, despite the car manual recommendation that a certain octane of fuel be used.
“Super is burning out like water and we have to mix using regular gas because the cost is too much. We can’t get the distance we cover with the super now. What we need is for the government to subsidise taxi drivers. The gas is causing havoc to the taxi industry,” he said.
Lochan said the poor road conditions was adding to the woes.
He said many drivers have fewer passengers and attributed this to an increase in unemployment.
He said: “We seeing less people travelling because they are losing their jobs. Where we could get a lot of passengers during peak times, we seeing less and it’s not because there are new taxi drivers or “ph” drivers but it is because they are not travelling like they used to.”
Lochan said the use of Compressed Natural Gas (CNG) is not suitable for taxi drivers of the association given that there are limited CNG fuelling stations in south Trinidad.
“ By the time we go to fill our tanks with CNG and run a trip, we have to keep coming back to fill the tanks. You cannot keep running to the gas station three or four times a day. There isn’t enough stations that is even close for us to use and so you will not see many taxi drivers for our route using CNG,” he said.
The fuel being used at the pump was imported by State-owned oil refinery, Petrotrin, which received its first shipment of refiner fuel on October 27.
Sixteen shipments will be delivered over the next four months under an agreement with BP’s Latin America Integrated Sales and Trading Group.
Petrotrin Chairman Wilfred Espinet in a television interview this week said, “we do know for a fact that the fuels we imported are consistent in terms of the specifications of what we were producing in Trinidad and Tobago so there should be no effect”.
Espinet said the fuel brought in was a shipment of diesel.
Espinet said the fuel goes into an inventory and “although we may be transferring from tanks, there are times you are going to get residual in tanks that are going to mix with each other.”
President of the Petroleum Dealers Association Robin Naraynsingh said the statements being made are done so with limited and uninformed knowledge.
He said drivers must be cognizant of the size of the gas tanks, the millage and ensure that there is proper maintence of vehicles.
“They are saying things they don’t know. Every manufacture of a vehicle will tell you how much miles per gallon of fuel you get. They have to know what is the fuel consumption of their vehicles. If you say its burning out faster, are you doing city driving or highway driving? This thing is science, it’s not something you can just ‘feel’. Its burning faster, but faster to what?
People who are saying this have to be cognizant of what they are saying. What is their fuel consumption? How long you burn the engine for, the mileage.
Do proper maintenance, read the manual to car and learn about the fuel consumption of your vehicle.
The consuming public have to be more aware. Check vehicles if they are working properly, know that you are using the right octane level. If you buy regular you are using more,” he said.
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(Braskem, 7.Nov.2018) Braskem has defined a series of global initiatives to boost the Circular Economy in the production chain of manufactured plastic goods.
“We are firmly committed to the goal of helping to transform the linear economy into a Circular Economy, effectively demonstrating our commitment to sustainable development,” said Fernando Musa, Braskem’s CEO. “By establishing a series of global initiatives, engaging in voluntary commitments and expressing publicly its global positioning for the Circular Economy, Braskem is inviting clients, its partners in the value chain, its Team Members and society in general to intensify their joint quest for innovative and sustainable solutions using plastic.”
Entitled “Braskem’s Positioning for the Circular Economy,” the document establishes initiatives for forging partnerships with clients to conceive new products that will extend and facilitate the recycling and reuse of plastic packaging, especially single-use packaging. It also establishes higher investments in new resins derived from renewable resources, such as Green Plastic made from sugar cane, and support for new technologies, business models and systems for collecting, picking, recycling and recovering materials.
The initiatives also include encouraging consumers to get involved in recycling programs through educational actions on conscientious consumerism, the use of life cycle assessment tools and support for actions that improve solid waste management to prevent the disposal of debris in the oceans.
In addition to these initiatives, Braskem also has undertaken a voluntary commitment to adopt best practices for further reducing the loss of pellets (the raw material used to make plastic packaging) in its industrial processes by 2020, and has joined industry commitments to work towards having all plastic packaging reused, recycled or recovered by 2040.
Braskem also undertakes to report on the progress made in these initiatives in its annual report.
“Plastic plays a critical role in sustainable development because it prevents waste and increases efficiency in various sectors of the economy, such as agriculture and the auto industry. It is a material that contributes to food safety and hospital hygiene and that is part of people’s daily lives through its many different applications,” said Fernando Musa. “When incorporated into the circular economy, its potential for generating benefits with lower impact is further expanded.”
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(Petrobras, 6.Nov.2018) — Petrobras will disclose its 2018 Third Quarter Results on Tuesday, November 6, 2018, before the opening of the market.
The company would like to invite investors and analysts for the conference call/webcast, with broadcast in Portuguese and simultaneous translation to English, as follow:
November 6, 2018 (Tuesday)
2:00 pm (Brasília)
11:00 am (New York)
4:00 pm (Londres)
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(Petrobras, 6.Nov.2018) — Petrobras announced its Board of Directors approved in a meeting held yesterday distribution of early remuneration to shareholders as Interest on Capital (IOC), as defined in art. 9, sole paragraph of its bylaws and in article 9 of Law 9.249/95.
The value to be distributed, in the amount of R$1.3 billion, corresponds to a gross amount of R$0.10/share, to be paid on December 3, 2018 proportional to each shareholder’s stake and to be provisioned in the 4Q:18 financial statements, based on shareholding positions as of November 21, 2018.
Starting from the first business day after the cut-off date (Nov. 22, 2018), shares will be traded ex-interest on capital at B3 and other stock exchanges where the company is listed.
This IOC advance will be imputed to the mandatory minimum dividend (article 53, paragraph 4, of the Bylaws) including for the purpose of payment of priority minimum dividends of preferred shares.
The amount of R$0.10/common share or preferred share related to the IOC will be subject to income tax, by applying the applicable tax rate. Income tax withholdings will not be applied to shareholders whose registered data proves to be immune or exempt, or shareholders domiciled in countries or jurisdictions for which the law establishes different treatment.
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(Petrobras, 6.Nov.2018) — Petrobras reported net income of R$ 23,677 million in 9M-2018, the best result since 2011 and a growth of 371% compared to the 9M-2017, determined by:
– Higher margins in the sales of oil products in Brazil and in exports, both driven by the increase in Brent and the depreciation of the Brazilian Real;
– Increase in diesel sales with expansion of market share;
– Lower general and administrative expenses, keeping the cost control discipline; and
– Reduction of interest expenses due to the decrease in indebtedness.
In September, agreements with DOJ and SEC were signed to close the investigation of the US authorities, totaling R$ 3.5 billion and reducing the risk for the company. Excluding these agreements, as well as the Class Action Agreement effects, the net profit would be R$ 10,269 million in the quarter and R$ 28,012 million in the accumulated of the year.
Adjusted EBITDA* was R$ 85,691 million, 35% higher than in 9M-2017, due to the increase in the sales margins of oil products in Brazil and exports. Adjusted EBITDA margin was 33%
Free Cash Flow * remained positive for the fourteenth consecutive quarter, reaching R$ 37,481 million in 9M-2018, same level as in the previous year, due to the increase in operating cash generation, despite the payments related to the Class Action agreement, and higher investments.
Considering the accumulated profit, the reduction of uncertainties with the Class Action agreements and with the DOJ / SEC and the financial leverage target, a higher anticipation of Interest on Shareholder’s Equity was approved, totaling R$ 0.10 per share, to preferred and common shares, adding to R$ 1,304.4 million. As a result, the anticipation totaled R $ 2,608.8 million.
TRI: After a significant reduction since 2015, the TRI (total recordable injuries per million man-hours) remained at 1.06, same level as in the previous quarter. The company works for the continuous improvement of culture and safety conditions and adopts the alert limit of 1.0
Financial Leverage: Gross debt reached US$ 88,115 million, while Net debt reached US$ 72,888 million, a reduction of 19% and 14%, respectively, compared to December 2017. The liability management led to the increase in the weighted average maturity to 9 years, with average interest rate of 6.2%. The Net Debt/LTM Adjusted EBITDA* ratio decreased to 2.96 in September 2018, compared to 3.67 in 2017. Leverage* decreased to 50% in this period. Excluding the Class Action agreement, the company would present the ratio of 2.66, on a converging path to the target of 2.5.
– Started production through the FPSOs Cidade Campos dos Goytacazes in the field of Tartaruga Verde,P-74 in the field of Búzios and P-69 in the field of Lula (October)
– Acquisition of the Block of Sudoeste de Tartaruga Verde, in the 5th bidding round of Production Sharing Agreement promoted by the ANP
– Celebration of partnerships with Equinor for business in the offshore wind energy segment in Brazil, with Total in the renewable energy segment, with CNPC in the Comperj project and Marlim cluster and with Murphy in the Gulf of Mexico
– The company maintained its position as a net exporter, with a balance of 272 thousand bpd in 9M-2018
– Received a total of R$1.6 billion related to the second phase of the diesel subsidy program
– Adopted the complementary hedge mechanism for gasoline, allowing for less frequent price readjustments
– The company received R$1.7 billion recovered by the ”CarWash” operation
– Signed an Integrity Pact to improve transparency and corruption prevention measures
– Adopted the new Employee Carrer and Compensation Plan, to improve mobility and meritocracy
– Resumed the operation of the Paulínia refinery (Replan) with 50% of its capacity, following an accident without victims.*
Access the information about our Quarterly Results
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(Energy Analytics Institute, Aaron Simonsky, 6.Nov.2018) — Argentina’s Energy Secretariat announced a tender for exploration activities offshore the Argentine continental shelf.
The activities will expand Argentina’s exploration and exploitation potential and potentially increase hydrocarbon production in an effort to ensure domestic supply.
Exploration permits cover around 200,000 square kilometers, and represent a total of 38 blocks in the Austral Marina, West Falklands and North Argentina basins, announced Argentina’s Treasury in an official statement on its website.
Details of the tender were published in the Official Gazette through the Resolution 65/201: Offshore International Public Competition No. 1.
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(Scania, 6.Nov.2018) — In its largest gas bus delivery ever, Scania will supply 481 Euro 6 gas buses – the cleanest and most silent buses on the market – for the renewal of Bogotá’s TransMilenio Bus Rapid Transit system.
Bogotá is replacing its earlier Euro 2 and Euro 3 buses with the latest in low-emission technology. Scania’s Euro 6 gas buses represent a huge leap in cleaner technology compared with these older-generation buses but also in relation to the more recent Euro 5 emissions standards. In operations with the new Scania gas buses, carbon emissions will be up to 20 percent lower while emissions of particulate matter will be two to three times lower. Emissions of nitrogen oxide are four to five times lower than Euro 5.
“We are very pleased with the outcome because this translates into significantly less pollution in Bogotá,” says Juan Carlos Ocampo, Scania Colombia’s Managing Director. “The reduced emissions of particulate matter, nitrogen oxide and noise will contribute to a higher quality of life for Bogotá’s residents.”
The bus network, originally established in the early 1990s, encompasses 12 lines totalling 112 kilometres, with 1.7 million passenger journeys every day. The public tender for the renewal programme has focused on six of the 12 lines and following the tendering process, the operator SI18 will now provide services for the three lines Suba, Calle 80 and Norte with 481 Scania buses. They will go into operation during the first half of 2019.
The 179 articulated Scania K320 IA 6x/2, (320 hp engines), buses have a capacity for 160 passengers and the 302 bi-articulated Scania F340 HA 8×2 (340 hp engines) have a capacity for 250 passengers. All buses will be bodybuilt by Busscar.
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(Reuters, 6.Nov.2018) — Rosneft was owed $3.1 billion by Venezuela as of September 30, down from $3.6 billion on June 30, Russia’s largest oil producer said on Tuesday.
It also said it owes $26.8 billion to traders under prepayment deals for its oil as of Sept. 30, down from $29.3 billion as of June 30.
(Reporting by Vladimir Soldatkin; editing by Jason Neely)
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(NGI, Andrew Baker, 6.Nov.2018) — Fitch Ratings late last month revised its outlook for Mexico, citing, among other things, potential energy policies to be implemented by incoming President-Elect Andrés Manuel López Obrador.
Fitch credit analysts retained their investment grade BBB+ rating on Mexico’s sovereign debt, but lowered their long-term, foreign currency issuer default rating (IDR) outlook to negative from stable.
Fitch cited uncertainty over the future of energy policy for Petroleos Mexicanos (Pemex) by under the incoming administration, as well as cancellation of a $13 billion airport as factors that drove the decision.
“Proposals for large capital investments by state-owned oil company Pemex, whose balance sheet and standalone creditworthiness have been under pressure (resulting in Fitch revising the outlook on the company’s rating to Negative), add to the growing risk related to contingent liabilities for the sovereign,” analysts said.
López Obrador, who takes office Dec. 1, has pledged multibillion-dollar investments to upgrade existing oil refineries and to build another one, in order to ensure energy security.
Critics have argued that Pemex, the most indebted oil company in the world, is in no condition to take on a project of this magnitude and that it should instead focus on reversing a 15-year oil and gas output slide through partnerships with the private sector.
López Obrador has set a goal of boosting oil output to 2.5 million b/d in 2024 from 1.8 million b/d currently, but he has objected to bid rounds that award operating stakes in upstream acreage to international oil companies.
The president-elect said recently that he will suspend upstream bid rounds until they begin to “show results.” The next tenders are scheduled for February.
Investors were further spooked by a bill introduced in the lower congressional house by a member of López Obrador’s party to bring independent energy regulators Comisión Nacional de Hidrocarburos (CNH) and Comisión Reguladora de Energía (CRE) under the control of the executive branch. The move, some analysts said, would give an unfair advantage to Pemex and scare away private capital from Mexico’s newly liberalized energy sector.
The most cataclysmic measure taken by the president-elect so far, however, was late last month, when he affirmed plans to cancel the construction already underway of Mexico City’s international airport, in which $100 million to date has been invested.
“The decision to cancel the construction of a new airport for Mexico City sends a negative signal to investors,” Fitch analysts said.
Canceling the project has stoked fears that a similar fate could await the 107 oil and gas contracts awarded through bid rounds since the 2013 energy reform.
López Obrador has argued that the key to restoring oil and gas output is to give Pemex a bigger budget and more autonomy. Proponents of the reform, meanwhile, have countered that Pemex should take advantage of bid rounds and public-private joint-ventures to share risk and technological know-how with the private sector, particularly in areas such as unconventional and deepwater exploration and production (E&P), in which Pemex lacks experience.
Although Pemex swung to a profit of 27 billion pesos ($133 million) in the third quarter from a year-ago loss of 102 billion pesos, production continued to slide.
Local think tank Pulso Energético highlighted in a recent note that Pemex net debt stands at $14/bbl of proven reserves, up from $9.20 in 2015.
“Oil production, dominated by state-owned Pemex continued to decline in 2018, bucking expectations that it would stabilize,” Fitch analysts said. The transition team for López Obrador “has been reviewing contracts signed with private oil companies and has sent mixed signals on the energy reform, which allows private oil companies a bigger role in the industry in return for higher investment and production.”
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(Renewables Now, 6.Nov.2018) — Argentina’s Ministry of Energy and Mines announced on Monday that on November 2, the country switched on a 70-MW wind park in Chubut province.
Argentine thermal and renewable energy group Genneia SA was the developer behind the Parque Eolico Puerto Madryn I (PEM I), as it is named. The company invested USD 122 million (EUR 106.93m) in the project.
Spread in an area of 2,000 hectares, PEM I broke ground in August 2017. It is comprised of 20 V126 wind turbines supplied by Denmark’s Vestas Wind Systems A/S (CPH:VWS).
The farm should be able to generate 300,000 MWh per year, capable of meeting the annual demand of 100,000 local homes. Currently, there are 91 renewable energy projects in commercial operation or under construction that represent 3,334 MW, with an estimated investment of USD 4.75 billion, the ministry’s Undersecretariat for Renewable Energy noted.
(USD 1 = EUR 0.88)
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(Reuters, 6.Nov.2018) — Five groups are considering whether to partner with Brazil’s state-controlled Eletronuclear to resume construction of nuclear power plant Angra III, already partially built by the government, newspaper Valor Econômico reported on Tuesday, citing unidentified sources.
The foreign companies’ interest in the venture grew after a government agency raised the price of the energy produced at the plant to 480 reais per megawatts per hour from 250 reais, Valor reported.
The interested groups are China’s National Nuclear Corporation and State Power Investment Corporation, South Korea’s Kepco Engineering and Construction, Russia’s State Atomic Energy Corporation, known as Rosatom, and a consortium comprised of France’s Electricité de France and Japan’s Mitsubishi Heavy Industries , the paper said.
Current Brazilian President Michel Temer’s government is organizing the process, but contracts would probably be signed under the administration of President-elect Jair Bolsonaro, who will take office in January.
Eletronuclear has said it wants to resume construction in 2020, so the official rules for the choice of a partner should be published early next year, according to the paper, citing a source with knowledge of the matter.
The companies said to be interested in the venture did not immediately reply to requests for comment.
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(Oilprice.com, Tsvetana Paraskova, 6.Nov.2018) — Brazilian state-run oil firm Petrobras reported on Tuesday a net income for Q3 surging more than 20 times compared to the profit for the same quarter last year on the back of higher oil prices.
Petrobras reported a consolidated net income of US$1.77 billion (6.644 billion Brazilian reais) for Q3 2018, up from just US$70 million (266 million reais) for Q3 2017. Compared to the second quarter of 2018, Petrobras’s net income dropped by 34 percent, due to higher net financial expenses and increased income tax expenses, the company said in its earnings release. In the second quarter of 2018, Petrobras had reported an even stronger surge in earnings, as net income jumped thirty-fold on the year, benefiting from the rising oil prices.
The third quarter this year was the third consecutive quarter in which Petrobras has booked a profit, it said.
Petrobras’s domestic crude oil and natural gas liquids (NGLs) production, however, dropped in the third quarter—at 1.937 million bpd, it was 6 percent lower compared to Q2 2018 and lower than the 2.134 million bpd production in Q3 2017.
The company attributed the lower production of oil, NGLs, and natural gas mostly to maintenance and the sale of a 25 percent stake in the Roncador field, partially offset by the start of production of the FPSO Cidade dos Campos dos Goytacazes in the Tartaruga Verde Field.
For the nine months January to September, Petrobras’s crude oil and NGL production in Brazil declined by 6 percent to 2.028 million bpd.
For the nine months to September, Petrobras reported a net income of US$6.3 billion (23.677 billion reais), the best result since 2011 and a 371-percent surge compared to the same period of 2017, thanks to higher oil prices, the depreciation of the Brazilian currency, higher diesel sales, and lower general and administrative expenses.
Petrobras, considered the most indebted oil company in the world, said that its net debt was US$72.888 billion at end-September, down by 14 percent compared to end-2017, and down from the US$73.662 billion net debt at end-June 2018.
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(Energy Analytics Institute, Aaron Simonsky, 6.Nov.2018) — The incident involved an estimated 0.6 cubic meters of water, gas and mud, and occurred on Friday November 2, 2018 during conditioning activities at a work-over well in Loma La Lata.
The incident was immediately controlled, reported online media AdnSur.
YPF didn’t respond to emails for comments or clarification regarding the incident.
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(Talos Energy Inc., 5.Nov.2018) — Talos Energy Inc. and its partners in Block 7 offshore Mexico signed a Pre-Unitization Agreement (PUA) with Pemex that enables information sharing related to the Zama discovery and its potential extension into Pemex’s neighboring block.
The agreement also establishes a clear path for the signing of a Unit Agreement and Unit Operating Agreement in the event a shared reservoir is confirmed, with a defined process based on international practices to determine the resulting participation of each party in the potential overall development.
The PUA was previously approved by the Ministry of Energy (SENER) in Mexico.
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(Energy Analytics Institute, Aaron Simonsky, 5.Nov.2018) — Colombia’s state oil company Ecopetrol installed a series of barriers in a rural area of the Tibú municipality (Norte de Santander) in an effort to contain an oil spill in the Tibú River.
The spill originated over the weekend when stolen crude oil that was being stored in a pool overflowed into the river, reported the daily newspaper El Tiempo. Armed groups in the area often illegally store stolen oil in pools, which they later used to process cocaine, according to the daily.
Ecopetrol personnel conducted a fly over of the affected area and verified the spill occurred near the village of Campo Seis, and to confirm the spill didn’t correspond to an criminal act directed against its infrastructure.
The environmental emergency was reported on Saturday Nov. 3 by communities officials from the Catatumbo region, according to the daily.
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Ecopetrol Cleans Spill After Bomb Attack On Cano Limon Pipeline
(Energy Analytics Institute, Jared Yamin, 5.Nov.2018) — Commercialization of Bolivia’s new ‘Super Ethanol 92’ gasoline reached nearly 200,000 liters in the first four days after it was introduced in the department of Santa Cruz, reported the daily newspaper La Razón, citing National Hydrocarbons Agency (ANH) Director Gary Medrano.
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Bolivia To Kick Off Sale Of Super Ethanol 92 On Nov. 1
(Argus, 5.Nov.2018) — Global energy and commodity price reporting agency Argus has launched a series of daily jet fuel prices for the aviation fuel market in Brazil.
Local and international airlines continue to invest in the growing Brazilian aviation market, driving the need for an independent reference for delivered jet fuel costs in the country.
Key trading and aviation activity centres on Brazil’s four largest, most liquid hubs — Itaqui, Suape, Rio de Janeiro and Santos. While liquidity is still gathering pace in these locations, Argus has developed a series of constructed daily prices showing the cost of delivering jet fuel from the US Gulf coast to these hubs, which supply Brazil’s largest, busiest airports.
The new delivered prices take into account jet fuel assessments at the US Gulf coast, freight rates, insurance, losses, demurrage costs, port waiting times and maritime tax to applicable ports.
“Argus is pleased to be the first global price reporting organisation to publish a Brazil jet fuel price, bringing transparency to the rapidly growing Latin American aviation markets,” Argus Media chairman and chief executive Adrian Binks said.
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(FMC Corporation, 5.Nov.2018) — FMC delivered another very strong quarter.
“In Ag Solutions, we executed our commercial strategy particularly well in Brazil, where we implemented significant price increases to largely offset FX headwinds,” said FMC CEO and chairman Pierre Brondeau.
FMC Agricultural Solutions reported third quarter revenue of approximately $924 million, an increase of 67 percent year-over-year due to the strength of the DuPont acquisition. On a pro forma basis, revenue increased 5 percent, with particularly strong demand and higher prices in Brazil. Segment earnings before interest, tax, depreciation and amortization (EBITDA) of $216 million increased 57 percent year-over-year and were $11 million above the midpoint of the prior guidance range. In the important Brazil market, higher prices and hedging were able to offset 100 percent of the FX impact on earnings in the quarter.
Full-year 2018 revenue for Agricultural Solutions is still forecasted to be in the range of $4.2 billion to $4.26 billion. At the midpoint, this implies 10 percent year-over-year growth on a pro forma basis. Full-year segment EBITDA is expected to be in the range of $1.195 billion to $1.215 billion, which is an increase of $5 million at the midpoint versus prior guidance. In the fourth quarter, the company is expecting 12 percent year-over-year growth on a pro forma basis, driven by Brazil and Europe; segment revenue is forecasted to be in the range of $1.015 billion to $1.075 billion, and segment EBITDA is expected to be in the range of $280 million to $300 million.
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(Talos Energy Inc., 5.Nov.2018) — Talos Energy Inc. entered into a transaction with, Hokchi Energy, S.A. de C.V., a subsidiary of Pan American Energy, to cross-assign its Participating Interest (PI) in Block 2 and Pan American’s PI in Block 31, both in the Sureste Basin offshore Mexico.
Under the agreed conditions for the swap, Talos will assign a 25% PI in Block 2 to Pan American in exchange for a 25% PI in Block 31, which is immediately to the south of Block 2.
On October 30th, CNH approved the PI transfer of Block 2 to Pan American. Approval of the transfer of the Block 31 PI to Talos and the transfer of operatorship of Block 2 to Pan American are expected in the coming weeks. Once that occurs and the transaction is closed, Pan American will be the operator of both blocks and Talos will own a 25% PI on Block 2 and a 25% PI on Block 31. The goal of this transaction is to better aggregate each party’s inventory into one potential development program to increase scale in terms of total resources and total combined production. The contract areas are located in water depths between 100 and 150 feet (25 and 35 meters).
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(Talos Energy Inc., 5.Nov.2018) — The National Hydrocarbons Commission (CNH), the Mexican oil & gas regulator, has approved the appraisal plan for the Zama discovery.
The approval by the CNH was a key approval required to commence the appraisal of the Zama discovery. CNH has also approved the consortium drilling permits, which are required to commence drilling operations. Talos estimates it will spud the first appraisal well, Zama-2, in late November of 2018 and that the appraisal program will be completed by mid-2019.
The appraisal plan includes three new reservoir penetrations. The first well in the program, Zama-2, will be deepened by approximately 500 meters to test an exploration prospect called Marte. The estimated cost to deepen the Zama-2 wellbore for the Marte test is approximately $10 million gross, with Talos’s share expected to be approximately $3.5 million. Talos expects its net share of the costs to be approximately $75.0 million to $80.0 million for the entire appraisal campaign.
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(Pattern Energy Group, 5.Nov.2018) — Pattern Energy Group Inc. announced its financial results for the 2018 third quarter.
Highlights
(Comparisons made between fiscal Q3 2018 and fiscal Q3 2017 results, unless otherwise noted)
— Proportional gigawatt hours (“GWh”) sold of 1,623 GWh, up 7%
— Net cash provided by operating activities of $106.9 million
— Cash available for distribution (CAFD) of $31.7 million, up 235% and on track to meet full year guidance(1)
— Net loss of $31.5 million
— Adjusted EBITDA of $79.5 million, up 45%
— Revenue of $118.4 million, up 29%
— Declared a fourth quarter dividend of $0.4220 per Class A common share or $1.688 on an annualized basis, subsequent to the end of the period, unchanged from the previous quarter’s dividend
— Committed to a plan to repower the 283 MW Gulf Wind project starting in 2019
— Acquired a 51% owned interest in the 143 MW Mont Sainte-Marguerite project in Québec, for a purchase price of $37.7 million, representing a 10x multiple of the five-year average CAFD(1) of the project
— Completed the sale of the Company’s operations in Chile, which principally consist of its 81 MW owned interest in the 115 MW El Arrayán project for which Pattern Energy received cash proceeds of $70.4 million
“It was another solid quarter with CAFD up more than three times the same period last year, which puts us in a great position to achieve our targeted CAFD(1) for the year,” said Mike Garland, President of Pattern Energy. “We continue to take proactive measures to increase our CAFD without issuing common equity including, asset recycling, repowering Gulf Wind and the implementation of cost savings. During the quarter we sold El Arrayán at a premium to the multiple at which we trade and we are in the final stages of a second sale. This asset recycling provides us additional flexibility to make new investments in accretive opportunities, like the Mont Sainte-Marguerite acquisition or the Gulf Wind repowering, which increase CAFD. As the opportunity set at Pattern Energy Group 2 LP (“Pattern Development 2.0”) continues to mature and grow, especially in exciting markets like Japan, our material ownership interest in the development business is a clear differentiator to other players in the market.”
(1) The forward looking measures of 2018 full year cash available for distribution (CAFD) and the five-year average annual purchase price multiple are non-GAAP measures that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Metrics, of Pattern Energy’s 2018 Quarterly Report on Form 10-Q for the period ended September 30, 2018.
Financial and Operating Results
Pattern Energy sold 1,622,991 megawatt hours (“MWh”) of electricity on a proportional basis in the third quarter of 2018 compared to 1,513,997 MWh sold in the same period last year. Pattern Energy sold 6,021,515 MWh of electricity on a proportional basis for the nine months ended September 30, 2018 (“YTD 2018”) compared to 5,663,782 MWh sold in the same period last year. The 7% increase in the quarterly period was primarily due to volume increases as a result of acquisitions in 2017 and 2018, favorable wind and increased availability compared to last year. Production for the quarter was 8% below the long-term average forecast for the period with strength in Canada, Japan and Puerto Rico offset by weakness in the Eastern U.S.
Net cash provided by operating activities was $106.9 million for the third quarter of 2018 compared to $2.1 million for the same period last year. Net cash provided by operating activities was $230.5 million for YTD 2018 as compared to $159.3 million for the same period last year. The increase in the quarterly period of $104.8 million was primarily due to a $24.3 million increase in revenue (excluding unrealized loss on energy derivative and amortization included in electricity sales), a $33.8 million increase in advanced lease revenue, decreased payments of $26.7 million in payable, accrued and current liabilities, due primarily to the timing of payments, a $13.6 million increase in other current assets primarily due to a $7.7 million increase in sales tax receivable and a $7.3 million increase in related party receivable, a $6.5 million decrease in interest payments, and a $1.7 million decrease in transmission costs. The increase to net cash provided by operating activities was partially offset by a decrease of $1.6 million in distributions from unconsolidated investments.
Cash available for distribution increased 235% to $31.7 million for the third quarter of 2018, compared to $9.5 million for the same period last year. Cash available for distribution increased 28% to $133.4 million for YTD 2018 compared to $103.8 million for the same period in the prior year. The $22.2 million increase in the quarterly period was primarily due to a $24.3 million increase in revenues (excluding the unrealized loss on the energy derivative and amortization included in electricity sales) due to acquisitions in 2017 and 2018, a $5.9 million decrease in principal payments of project-level debt, a $1.7 million decrease in transmission costs and a $0.8 million increase in the release of restricted cash. These increases were partially offset by a $3.0 million increase in distributions to noncontrolling interests, a $4.0 million decrease in distributions from unconsolidated investments and $1.4 million of costs related to the sale of El Arrayán.
Net loss was $31.5 million in the third quarter of 2018, compared to a net loss of $48.4 million for the same period last year. Net loss was $45.9 million for YTD 2018 compared to a net loss of $60.5 million in the same period last year. The improvement of $16.8 million in the quarterly period was primarily attributable to a $26.4 million increase in revenue due to 2017 and 2018 acquisitions and a $5.1 million decrease in other expense primarily due to gains on derivatives. These increases were partially offset by a $4.5 million increase in cost of revenue related to 2017 and 2018 acquisitions, a $3.3 million increase in operating expenses related to an impairment expense on the El Arrayán sale and a $6.9 million increase in tax provisions.
Adjusted EBITDA increased 45% to $79.5 million for the third quarter of 2018 compared to $54.7 million for the same period last year. Adjusted EBITDA increased 19% to $292.2 million for YTD 2018 compared to $244.8 million for the same period last year. The $24.8 million increase in the quarterly period was primarily due to a $24.3 million increase in revenue (excluding unrealized loss on energy derivative and amortization included in electricity sales) primarily attributable to volume increases as a result of 2017 and 2018 acquisitions, favorable wind and increased availability compared to last year. Adjusted EBITDA for the third quarter also reflects a charge to earnings of approximately $4.3 million for the equity pick-up in the financial results of Pattern Development 2.0.
Pattern Energy is re-confirming its targeted annual cash available for distribution(2) for 2018 within a range of $151 million to $181 million, representing an increase of 14% compared to cash available for distribution in 2017.
(2) The forward looking measure of 2018 full year cash available for distribution (CAFD) is a non-GAAP measure that cannot be reconciled to net cash provided by operating activities as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking changes in working capital balances which are added to earnings to arrive at cash provided by operations and subtracted therefrom to arrive at CAFD. A description of the adjustments to determine CAFD can be found within Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Key Metrics, of Pattern Energy’s 2018 Quarterly Report on Form 10-Q for the period ended September 30, 2018.
Pattern Energy declared a dividend for the fourth quarter 2018, payable on January 31, 2019, to holders of record on December 31, 2018 in the amount of $0.4220 per Class A common share, which represents $1.688 on an annualized basis. The amount of the fourth quarter 2018 dividend is unchanged from the third quarter 2018 dividend.
Pattern Energy Group LP (Pattern Development 1.0) and Pattern Development 2.0 (together, the Pattern Development Companies) have a pipeline of development projects totaling more than 10 GW. Pattern Energy has a ROFO on the pipeline of acquisition opportunities from the Pattern Development Companies. The identified ROFO list stands at 743 MW of potential owned capacity and represents a portion of the pipeline of development projects of the Pattern Development Companies, which are subject to Pattern Energy’s ROFO. Since its IPO, Pattern Energy has purchased, or agreed to purchase, 1,564 MW from Pattern Development 1.0 and in aggregate grown the identified ROFO list from 746 MW to more than 2 GW.
Below is a summary of the identified ROFO projects that Pattern Energy has the right to purchase from the Pattern Development Companies in connection with its respective purchase rights:
The following tables reconcile non-GAAP net cash provided by operating activities to cash available for distribution and net loss to Adjusted EBITDA, respectively, for the periods presented (in thousands):
Pattern Energy will host a conference call and webcast to discuss these results at 10:30 a.m. Eastern Time on Monday, November 5, 2018. Mike Garland, President and CEO, and Mike Lyon, CFO, will co-chair the call. Participants should call (888) 231-8191 or (647) 427-7450 and ask an operator for the Pattern Energy earnings call. Please dial in 10 minutes prior to the call to secure a line. A replay will be available shortly after the call. To access the replay, please dial (855) 859-2056 or (416) 849-0833 and enter access code 4369558. The replay recording will be available until 11:59 p.m. Eastern Time, November 28, 2018.
A live webcast of the conference call will be also available on the events page in the investor section of Pattern Energy’s website at www.patternenergy.com. An archived webcast will be available for one year.
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(PV Magazine, Emiliano Bellini, 5.Nov.2018) — Colombia’s national mining and energy planning unit UPME has announced in a circular it will postpone the final bidding rules for the country’s first auction for large-scale renewable energy projects.
The authority said that it will provide an updated schedule of the auction in an upcoming circular, without providing further details. Meanwhile, local newspaper La República has reported that UPME’s director, Ricardo Ramírez, and the vice-minister of energy and mines, Diego Mesa, said during a conference that the auction will not be held on January 2, as initially planned, and that it may be held at a later date in the first quarter of 2019.
According to them, the postponement of the auction was made at request of all interested investors and developers, after a meeting they held with the Colombian government.
Through the technology-neutral auction, which is expected to assign between 1 GW and 1.5 GW of renewable energy capacity, the Colombian authorities will select solar, wind and biomass projects with a capacity of over 10 MW. Selected developers will be awarded 10-year PPAs.
Colombia is currently turning to solar and renewables in order to diversify its electricity mix, which is largely dependent on hydropower. In March, the government published the Decreto 348 del 1 de marzo de 2017, a new legislation to support the installation of small and medium-sized renewable energy and solar power generators across the country.
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(Energy Analytics Institute, Aaron Simonsky, 4.Nov.2018) — Argentina’s government has allocated $500 million for a special fund to be used to subsidize loans for the purchase of solar systems that allow users to generate their own electricity.
“There will be a credit subsidy so repayment of the investment is in no more than 7 years,” reported the daily newspaper Clarín, citing Argentina’s Energy Secretary Javier Iguacel. “The idea is to add 1,000 megawatts of this type of energy generation through 2030.”
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(Bloomberg, Sabrina Valle, 4.Nov.2018) — Jair Bolsonaro’s energy team is keen to push for the sale of prized Brazilian crude deposits in an auction that could give Big Oil access to more black gold than all of Mexico’s proved reserves.
The plan would be to take bids in mid-2019 to help raise billions of dollars needed to reduce the South American country’s ballooning budget deficit, said Luciano de Castro, an adviser to the president-elect who’s leaving the faculty of the University of Iowa to join Bolsonaro’s transition team. The current administration estimates the sale could raise as much as 100 billion reais ($27 billion).
“The auction would bring valuable resources to Brazil and to the government, and help on the fiscal deficit,” Castro said by phone from Iowa City, where he taught as an associate economics professor until last week.
The plan further confirms that Bolsonaro will seek energy asset sales to raise cash as he enlists pro-market hawks for his team — a stark contrast to his past views in favor of state control before running for president. Bolsonaro was elected on Oct. 28 promising to welcome foreign producers, but his closeness to nationalist military leaders cast some doubt over those pledges.
A bill authorizing the sale, which had stalled in congress because of Brazil’s unpredictable presidential race, is expected to be voted by the Senate this week.
Unlike other Brazilian oil auctions offering exploration rights to high-risk areas with no guarantee of commercial reserves, this sale would be for an area where state-run Petroleo Brasileiro SA has already made major discoveries. The so-called transfer-of-rights area is part of Brazil’s giant pre-salt reserves in the Atlantic Ocean.
The government transferred 5 billion barrels of those deposits to Petrobras in 2010, but the country’s oil regulator later found they hold more crude than initially estimated. The surplus that would be offered to oil majors could amount to as much as 15 billion barrels. If such volumes turn out to be commercially recoverable, it would represent about twice the proved reserves of Mexico or Norway.
The bill authorizing the sale also aims to remove the obligation for Petrobras to develop the offshore region by itself, a legacy of the leftist Workers’ Party that governed Brazil for 13 years through 2016. The party, which tried a comeback but finished second in the elections, viewed oil as a strategic industry where foreign control should be limited.
Castro said he’s having daily talks with Paulo Guedes, appointed to be Bolsonaro’s finance minister, and with a group of generals gathered in Brasilia to set up the government’s agenda.
This week, he starts working with Bolsonaro’s transition team as they prepare to take office on Jan. 1. Castro, a former Brazilian Air Force lieutenant turned academic, says he will be focused on the new government’s energy program full-time, but that no official invitation for a position in the new administration has been made.
Among the energy team’s top priorities for the next weeks, Castro said, is finding a solution to keep a steady power supply for consumers in northern states served by state-controlled utility holding company Centrais Eletricas Brasileiras SA.
Eletrobras, as the holding company is known, recently sold four regional power providers buried in debt, in an attempt to improve its balance sheet. But it failed to sell power distributors Ceal and Amazonas Distribuidora, which run the risk of being shut.
“There is a chance we have a huge problem. There is a lot of concern about what will happen with these distributors,” Castro said.
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(Energy Analytics Institute, Piero Stewart, 4.Nov.2018) — EOG Resources, Inc. (EOG) reported a 20% collapse in natural gas production in Trinidad in the third quarter of 2018 (3Q:18). Looking forward to the next quarter, the scenario doesn’t look promising.
Gas production in Trinidad was 260 million cubic feet per day (MMcf/d) in 3Q:18, down 63 MMcf/d or 20% compared to 3Q:17, while crude oil production remained flat at 0.8 thousand barrels per day (Mb/d), the company reported in an official statement. On an equivalent basis, total gas and oil production in Trinidad was 44.1 thousand barrels of oil equivalents per day (Mboe/d) in 3Q:18, down 10.5 Mboe/d or 19% compared to 54.6 Mboe/d in 3Q:17.
In terms of prices, gas averaged $2.88 per thousand cubic feet (Mcf) and oil averaged $61.71 per barrel ($/bbl) in 3Q:18, up $0.84/Mcf and $22.29/bbl, or 41% and 57%, respectively.
Looking forward to 4Q:18, EOG expects gas and oil production to average between 220-250 MMcf/d and 0.5-0.7 Mb/d, respectively. On an equivalent basis, gas and oil production is expected to average between 37.2-42.4 Mboe/d, the company reported.
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(Energy Analytics Institute, Jared Yamin, 4.Nov.2018) — YPF expects to make investments of $5 billion per year during the 2019-2023 period as part of its initiative to be a leader in the production of energy in Argentina.
As a result, YPF’s hydrocarbon production is expected to grow between 5% and 7% per year, the company announced in an official statement on its website.
“YPF plans to focus on cost improvement and operational excellence, while seeking to efficiently manage the decline of conventional deposits and accelerate the development of the unconventional,” the company announced.
YPF has already begun to apply conventional technologies related to secondary and tertiary recovery at mature reservoirs with good results in pilot projects in the Neuquén basin and the San Jorge Gulf, the statement said.
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(Energy Analytics Institute, Jared Yamin, 2.Nov.2018) — BP has extended its contract with the Joe Douglas in Trinidad by one well with an expected duration of 76 days. The extension includes one additional two-well option at then market rates, Rowan Companies plc announced in an official statement.
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(Energy Analytics Institute, Jared Yamin, 2.Nov.2018) — Royal Dutch Shell provided an update related to portfolio developments in Brazil and Argentina during the third quarter 2018.
Upstream
During the quarter, Shell and its partner Chevron won a 35-year production-sharing contract for the Saturno pre-salt block located off the coast of Brazil in the Santos Basin (Shell interest 50%).
In October, Shell and its partners announced first production at the Lula Extreme South deep-water development in the Brazilian pre-salt Santos Basin (Shell pre-unitisation interest 25%).
Downstream
In October, Shell completed the sale of its Downstream business in Argentina to Raízen. The business acquired by Raízen will continue the relationship with Shell through various commercial agreements, including long-term brand licence agreements as well as products supply and offtake contracts.
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(Canacol Energy Ltd., 2.Nov.2018) — Canacol Energy Ltd. will announce its third quarter 2018 financial results after the market close on Tuesday, November 13, 2018. Senior Management will hold a conference call to discuss results on Wednesday, November 14 at 8:00am MST / 10:00am ET.
The conference call may be accessed by dial in or via webcast:
Pre-register here: http://dpregister.com/10125537
Webcast link: https://services.choruscall.com/links/cne181114.html
All remarks made during the conference call will be current at the time of the call and may not be updated to reflect subsequent material developments.
Third quarter 2018 financial results will be available through the Investor Relations section of the company’s website. A replay of the webcast will be available on our website until November 21. The transcript of the webcast will be posted on the website within five days after the call is completed.
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(AP, 2.Nov.2018) The former finance chief of Venezuela’s state oil company pleaded guilty on Wednesday to participating in an alleged US$1.2-billion embezzlement scheme, a major breakthrough for US prosecutors targeting corruption by people close to President Nicolas Maduro, including his stepsons.
Appearing in a Miami federal court, Abraham Ortega promised to fully cooperate with prosecutors, making him the highest-ranking Venezuelan official ever to do so.
As part of his plea, Ortega admitted that in his position with PDVSA, he accepted US$5 million in bribes to give priority loan status to a French company and a Russian bank, which were both minority shareholders in joint ventures with the oil company.
He also said he accepted US$12 million in bribes for his role in an embezzlement scheme that involved cooking up fake loans to PDVSA and repaying them at a preferential, government-set exchange rate, turning huge profits for alleged co-conspirators among the “boliburgues” elites that amassed fortunes under the Bolivarian Revolution started by the late Hugo Chávez.
Ortega’s guilty plea came just two days after a former Swiss banker, also involved in the conspiracy, was sentenced to 10 years in prison.
A third man, Colombian national Gustavo Hernandez, has been detained in Italy pending extradition. Ortega said Hernandez helped him launder his cut through a sophisticated network of brokerage firms, banks and real estate investment firms in the United States and elsewhere.
Ortega, 51, arrived at court looking calm, telling Judge Kathleen Williams that he drank a beer at lunch.
“Guilty” he said in Spanish with a strong voice, upon entering his plea to one count of conspiracy to commit money laundering.
He also agreed to forfeit US$12 million held in banks in New Jersey, The Bahamas and Switzerland. Sentencing was scheduled for January 9.
Ortega held a number of senior finance roles at PDVSA between 2004 and 2016, including the last two years as the company’s chief financial officer.
His lawyer, Lilly Ann Sanchez, said he had been living outside Venezuela the past year, but decided to come to the United States and voluntarily cooperate with authorities once charges against him and others were announced over the summer.
“The US government has amassed a tremendous amount of evidence and witnesses wherein Mr Ortega really had no choice but to come and face those charges,” Sanchez said.
Two US officials familiar with the probe have said the Swiss banker sentenced earlier this week, Matthias Krull, told prosecutors that the money-laundering plot included Maduro’s three stepsons – identified in court papers as “The Kids” – and the owner of Venezuela’s largest private TV network, businessman Raul Gorrin.
The two officials agreed to give those details only if granted anonymity, because they were not authorised to discuss the case publicly.
None of them have been charged and they are not named in the complaint. A 10-page factual statement, entered as part of the plea, also refers to the same men but does not provide additional details about their alleged involvement in the conspiracy.
The US Justice Department said authorities in Italy, Spain, Britain and Malta assisted in the investigation.
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(Energy Analytics Institute, Aaron Simonsky, 2.Nov.2018) — Argentina’s YPF announced it will make an investment of nearly $4 million in Aerolíneas Argentinas destined to renovate 9 supply units and for other work related to process optimization at the Jorge Newbery Airport.
The announcement was jointly made by Grupo Aerolíneas President Luis Malvido and YPF President Miguel Gutiérrez on November 2, 2018 at a ceremony held at the air park facilities of the Jorge Newbery Airport, the state oil company announced in an official statement.
“The search for synergies and procedures that optimize our activities is a feature that distinguishes both Aerolineas Argentinas and YPF,” said Luis Malvido.
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(Reuters, Alexandra Ulmer, 2.Nov.2018) — Russian bank Gazprombank on Friday said it had no role in a Venezuelan corruption case at state energy company PDVSA.
Abraham Ortega, a former financial executive at PDVSA, accepted $5 million in bribes to favor a French oil company and a Russian bank, U.S. prosecutors in Florida said on Wednesday in a statement, which did not name either company.
A source with knowledge of the matter on Thursday told Reuters that French oil company Perenco and Gazprombank were the two companies.
“Gazprombank denies information of any connection between the bank and/or any of the bank’s group of companies to alleged $1.2 billion money laundering, as well as alleged corruption cases at PDVSA. Gazprombank did not receive any official requests or notifications from U.S. justice authorities,” the company said in a statement.
Prosecutors said that in exchange for the bribes, Ortega helped companies gain “priority status” to loan money to oil joint ventures in which they were partners with PDVSA.
Gazprombank said it had structured a loan financing of capital investments and operational costs of its Petrozamora joint venture with PDVSA in 2013, “on the market conditions, without any preferences from Venezuelan side.”
“Such financing structure does not differ from usual financing practice by foreign investors,” Gazprombank said in a statement.
PDVSA in 2013 said it signed a deal with Gazprombank for $1 billion in financing for the Petrozamora joint venture.
Perenco on Thursday declined to comment. PDVSA has not responded to requests for comment.
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(Energy Analytics Institute, Aaron Simonsky and Ian Silverman, 2.Nov.2018) — YPFB made its initial shipment of nitrogen fertilizer from Puerto Quijarro, in late October, to Baurú, a city located in the state of Sao Paulo in Brazil.
“The importance of this milestone lies in the speed with which YPFB’s urea was placed in new markets,” announced Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) President Óscar Barriga in an official company statement.
“New Brazilian states beyond Mato Grosso and Mato Grosso do Sul, where the YPFB urea was initially marketed, are also demanding Bolivian urea,” added Barriga.
In addition to Sao Paulo, the states in Brazil where Bolivia’s granulated urea is being commercialized include: Mato Groso, Mato Grosso do Sul, Sao Paulo, Minas Gerais, Rondonopolis, Goias and Paraná.
To date in 2018, Bolivia has exported a total of 177,000 tons of granulated urea, equivalent to more than $50 million in revenues. Markets that currently consume Bolivian urea include: Brazil (65% of the 177,000 tons exported), Argentina (26%), Paraguay (8%) and Uruguay (1%), according to the YPFB statement.
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(Echo Energy, 2.Nov.2018) — Echo Energy announced appointment of Dr. Gavin Graham as an Independent Non-Executive Director of the company with immediate effect.
Dr. Graham has nearly 40 years’ experience in the oil & gas industry, with 29 of those years at Shell. Commencing his career in 1980 as a development geologist in Oman, Dr. Graham subsequently spent 17 years in exploration before moving into a range of field development, governance and leadership roles, culminating in his appointment in 2004 as Vice President New Business & Commercial, Middle East, Caspian & South Asia. His career with Shell was followed by 6 years’ experience with Petrofac, an oil-field services company, as Executive Vice President Business Development & Technical Services, working in Malaysia, Mexico and the UKCS. In 2017 Gavin joined the Polish state company, Grupa LOTOS, co-ordinating the start-up of a new company, LOTOS Upstream, where he is currently Chief Executive Officer. LOTOS Upstream is focused on its producing assets in the North Sea, Poland and Lithuania.
“We are delighted to welcome Gavin, with his considerable experience and skills, to the Board. I look forward to working with him as we approach the drilling of the multi Tcf potential at Tapi Aike,” said Echo Energy Chairman James Parsons.
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(Houston Chronicle, James Osborne, 2.Nov.2018) — Almost 4,000 feet beneath the surface of the Atlantic Ocean, off the northern coastline of South America, Exxon Mobil is drilling one of the biggest oil discoveries of the last decade, the so-called Stabroek Block with an estimated 4 billion barrels of crude.
It stands to buoy the oil giant’s fortunes at a time the company’s oil and gas production is flagging. But the discovery has come at a price.
The massive find, located in the waters of the tiny country of Guyana, has reignited a century old territory dispute with its powerful and volatile neighbor Venezuela, flaming geopolitical tension in a region where the United States, China and Russia are increasingly competing for influence.
With Venezuela claiming a portion of Exxon’s field, Guyana has taken the case to the International Court of Justice, the United Nation’s court system in the Netherlands, as U.S. diplomatic and military officials in Washington watch adversaries in Beijing and Moscow warily.
“When we look at the controversy around the territory claims [by Venezuela] it gets pretty complicated pretty quickly,” said Ret. Vice Admiral Kevin Green, who oversaw U.S. naval operations in the Caribbean, Central and South America. “The United States is engaged globally in what is becoming more and more a great power competition. Both Russia and China see opportunities for themselves in that region, to quite frankly frustrate the United States.”
Trouble began even before Exxon, which declined to comment, realized how much oil was in Guyana.
In 2013, the Venezuelan Navy seized a ship contracted by The Woodlands exploration and production company Anadarko to survey the ocean’s bottom for oil. While the boat was in waters recognized internationally as Guyana’s, Venezuela claimed crew members had violated its territory and held them and the ship for a week before releasing them as part of a diplomatic deal.
Then Exxon announced in 2015 it had successfully drilled a test well in Stabroek. Within weeks, Guyana was tossed out of Petrocaribe, the Venezuelan food for oil program, in which countries across Central and South America and the Caribbean provide Venezuela’s 32 million inhabitants with food in exchange for subsidized crude.
Then Venezuela issued a statement asserting its ownership of two-thirds of Guyana’s land and waters claimed not only by Guyana, but also Trinidad and Tobago and Barbados.
The claim dates back to the late 1800s when Venezuela and Great Britain, which then controlled Guyana, could not agree on the border between their countries. An international tribunal intervened, and the dispute fell dormant until 1949 when a memo, written by one of attorneys that represented Venezuela in the tribunal, surfaced with the claim that judges had colluded with Britain.
Ever since, the border has been a rallying cry in Venezuelan politics. Guyana’s Ambassador to the United States Riyad Insanally said for years Venezuela had pressured oil companies not to explore in Guyana, using the threat of cutting companies off from Venezuelan oil fields – among the world’s largest.
But relations between Caracas and the international oil companies began to break down during the rule of the late Hugo Chavez, who nationalized a number of oil fields, including some held by Exxon.
“It was a bit like a Robert Ludlum novel,” Insanally said of the attorney’s memo. “No one likes being bullied and we feel we’ve been bullied for far too long. But we don’t have any military might, and we don’t have any economic clout. All we can is do is rely on the resourcefulness of our people and international diplomacy.”
The Venezuelan embassy in Washington did not return a call for comment.
The presence of Russia and China in a region long dominated by the United States has escalated what might have been a disagreement among neighbors. The U.S. rivals have again and again provided financial lifelines to Venezuela, devastated by an economic crisis, in exchange for increasing claims on their energy supplies. And they are increasingly investing in Guyana.
China recently loaned Guyana $130 million to expand its airport to allow 747s to land. Earlier this year, the nation of less than 1 million people signed onto China’s Belt and Road pact, through which the Asian superpower is investing in developing countries around the globe.
Rusal, the Russian aluminum giant owned by the oligarch Oleg Deripaska, a close associate of President Vladimir Putin, has operated bauxite mines in Guyana for more than a decade.
“Nobody wants to see Russian warships sailing around the Caribbean, and they do that occasionally,” said Thomas A. Shannon, Jr., an attorney and former under secretary of state for political affairs. “The region has largely been ours since we chased out the Germans and the French. We don’t need the presence of adversities or potential adversaries. But the way we do this it by taking care of our friends.”
The hope among U.S. officials is that the discovery of oil in Guyana’s waters will not only bring prosperity to a long impoverished nation, but also bring it deeper into the American fold.
So far, that seems to be proving out. U.S., British and Norwegian officials already are advising Guyana on how to manage its newfound wealth when oil is scheduled to start flowing in 2020. The aim is to avoid the so-called resource curse through which corruption and mismanagement become endemic upon the discovery of oil.
“The U.S. is still our major trading partner. Our links with the U.S. are much stronger than Russia and China. But we enjoy good relations with all three because that is the reality of being a small country,” Insanally said.
The presence of iconic American company like Exxon Mobil is only expected to increase Guyana’s bond with the United States. And so far, the oil giant has shown no signs of wavering in its commitment to drilling there, despite rising tensions around its operations.
It’s a calculated risk. Exxon’s oil and gas production has fallen for eight of the last nine quarters. Were Guyana to develop as Exxon has forecast, the additional production could potentially raise the oil giant’s global production by close to 8 percent, said Pavel Molchanov, an energy analyst at Raymond James.
“Exxon’s legacy production has been so weak in recent years, the company can use all the help it can get,” he said. “Guyana is in some ways the exception that proves the rule. It’s one of the few exploration success stories of this entire decade.”
But developing all of Exxon’s prospects in Guyana will not be quick. And that leaves plenty of time for what is now a legal argument expected to be decided by the courts to potentially escalate into a military conflict.
Brazilian President Michel Temer has already pledged to send in troops should Venezuela invade the disputed area inside Guyana.
“There’s some reports and analysis suggesting Venezuela will start some kind of military action against Guyana,” said Lisa Viscidi, an energy analyst at the Washington think tank Inter-American Dialogue. “It’s still really unlikely they would do that.”
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(Proman and CEL, 2.Nov.2018) — Consolidated Energy Limited (CEL) and OCI N.V. announced that their subsidiary Natgasoline LLC, the largest methanol production facility in the United States and one of the largest globally, has priced around $900 million of new senior secured debt financing, including a $565 million Term Loan B facility and $336 million of bonds in the US tax-exempt market to be issued by the Mission Economic Development Corporation, the proceeds of which will be loaned to the company. As part of the revised financing structure, Natgasoline has also secured a $60 million revolving credit facility that will not be drawn at closing.
Proceeds will be used to refinance the existing $252 million of tax-exempt bonds issued in 2016 and existing shareholder and contingency loans, as well as funding working capital and financing costs. The Term Loan B is priced at LIBOR+350 bps with maturity in 2025, a material saving compared to the 9% and 10% shareholder and contingency PIK notes it will replace. The coupon for the tax exempt bond was priced at 4.625%, with maturity in 2031 and a final yield of 4.72%, compared to a coupon of 5.75% for the bonds being refinanced.
The completion of the refinancing will therefore result in significant interest savings and a move to a long-term capital structure that is reflective of the expected strong cash generation and profitability profile of Natgasoline, which has been consistently running above nameplate capacity in recent months. It also provides a financing structure that allows for more flexibility in Natgasoline’s distributions to the joint venture sponsors.
CEL, a global leader in methanol, is a subsidiary of Proman Holding AG and Helm AG.
Proman is an integrated industrial group and global leader in natural gas derived products and services. Headquartered in Switzerland, with assets in the United States, Trinidad and Oman, and ongoing expansion into Mexico, Proman is the world’s second largest methanol producer and one of the ten leading fertilizer companies via, in part, its controlling stake in CEL.
David Cassidy, Chief Executive of Proman and Chairman of CEL and Natgasoline said, “Having made our initial investment in Natgasoline in early 2016, we are very pleased to have completed construction of the plant, delivered ramp-up to nameplate production, and established stable methanol production and sales in recent months. The Natgasoline team has done an outstanding job in delivering the successful start-up of what is now the United States’ largest methanol production facility. The strong support received for the asset from investors through this $900 million refinancing echoes our own belief in the operational and the financial strength of this world class methanol plant, which we believe will continue to be demonstrated over the coming decades, and in the importance for Consolidated Energy to have onshore US based production as part of our production base.”
“We are pleased to have received strong interest in these offerings from the capital markets,” said Nassef Sawiris, Chief Executive Officer of OCI N.V. “Optimizing our capital structure through lowering our cost of debt and extending maturities has been a primary objective for OCI in 2018 and these two transactions at Natgasoline fit well in this strategy. Securing the lower cost of capital further strengthens Natgasoline’s industry-leading low-cost profile, which will position the company well for generating strong free cash flows throughout methanol cycles.”
The closing of the Term Loan B Facility and the tax exempt bonds is expected to occur on 14 November 2018 and is subject to customary closing conditions. The commitments with respect to the Term Loan B Facility and the terms and conditions thereof (including the applicable interest rates) remain subject to the execution of the definitive documentation.
The tax exempt bond and Term Loan B have received a preliminarily project finance rating of BB- by Standard & Poor’s and the Term Loan B is rated Ba3 by Moody’s.
The tax exempt transaction was underwritten by Citigroup Global Markets and Morgan Stanley. Citigroup served as the bookrunner. J.P. Morgan served as Left Lead Arranger and Bookrunner on the Term Loan B; Goldman Sachs served as Joint Lead Arranger and Bookrunner.
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(Energy Analytics Institute, Aaron Simonsky, 2.Nov.2018) — Ecuador’s Joint Task Force Armed Forces discovered 38 tanks filled with 55 gallons of fuel in an operation carried out on October 31, 2018. The tanks were being stored in a house in El Caucal, in the parish of Ancon de Sardinas in San Lorenzo, located along Ecuador’s border with Colombia, reported the daily newspaper El Comercio.
The 2,090 gallons of fuel were to be destined for smuggling and to supply cocaine processing laboratories that operate in Colombia, the daily reported citing task force investigations.
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(Reuters, 1.Nov.2018) — Colombian state-run oil company Ecopetrol will likely invest between $3 billion and $3.5 billion in 2019, the same figure as forecast for this year, its chief executive officer said on Thursday.
The spending is the backbone of an ambitious plan to boost production and explore for more oil to replenish dwindling reserves. The company has said it will drill 620 wells and double the number of rigs in operation this year.
Ecopetrol still plans to reach $3 billion to $3.5 billion in investments this year, though it had spent just $1.79 billion through the third quarter, executives said on an investor call after the company released third-quarter results on Wednesday.
“We need to keep doing more work internally, but the idea is that we will be in that range of $3 to $3.5 billion for this year. It’s the range with which we’ll possibly enter next year and which in some way denotes stability in operations,” CEO Felipe Bayon said.
Ecopetrol’s board is still in the process of approving that investment for 2019, a spokesman said.
The company is working to lessen the effects of social protests, which temporarily shuttered three fields in February and kept the first-quarter investment to just over $400 million, Chief Financial Officer Jaime Caballero said on the call.
“We are implementing initiatives to quickly execute projects and to mitigate the impact of the social and environmental contingencies that materialized in the first half of the year,” Caballero said.
The company had cut its investment forecast for 2018 from $3.5 billion to $4 billion in August because of the protests and other spending delays.
Net profit jumped 177 percent to more than $866 million in the third quarter, while consolidated oil and gas production climbed to 724,000 barrels per day (bpd), just under the company’s 725,000-bpd goal for the year.
Output has so far not been affected by nearly continuous attacks on the Cano Limon-Covenas pipeline from leftist guerrilla group the National Liberation Army.
The pipeline, which can transport up to 210,000 bpd, has been offline for much of this year because of bombings and illegal taps.
Production from the Cano Limon field, operated by Occidental Petroleum Corp, has been routed through a second pipeline.
Ecopetrol has reserves equivalent to about seven years of production, well below the average of nearly 12 years for the world’s top oil and gas companies.
(Reporting by Julia Symmes Cobb and Nelson Bocanegra; Editing by Helen Murphy and Jeffrey Benkoe)
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(Energy Analytics Institute, Jared Yamin, 1.Nov.2018) — A new gas leak along a pipeline in Bolivia was reported in Villa Montes in the department of Tarija. The leak occurred at 1:50 am on Nov.1 in the Puesto Uno sector of Villa Montes.
“Personnel from YPFB [Transporte] arrived on the scene almost simultaneously and closed the valves that were necessary to prevent the gas from flowing through that pipeline,” reported the daily newspaper La Razón, citing Villa Montes Search and Rescue Group Manager Enrique Sánchez.
No injuries were reported nor any material damages.
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(Reuters, Marianna Parraga, Ana Isabel Martinez, 1.Nov.2018) — Mexico’s state-run Pemex is expected to start operating in April the largest offshore oil platform built in the country in a decade, which was constructed by McDermott International, an executive of the engineering firm said on Thursday.
Pemex is trying to reverse a 14-year crude output decline by boosting its offshore operations, especially in shallow waters along the southern Gulf of Mexico. Pemex has long been focused on the area, which is expected to see more activity from private producers that have won development rights there since 2015.
The new platform will replace a similar one that was damaged by a large fire in 2016 that killed three workers.
“McDermott is 100-percent vertically integrated. We were in charge of engineering here in Mexico, purchases, construction, transportation and installation. We will deliver the platform ready for operation,” Alfredo Carvallo, director of McDermott’s Mexico unit, told Reuters in a interview.
The Abkatun-A2 platform required an investment of $454 million, 180 Mexican engineers, 2,600 direct workers and over two years to be completed, Carvallo added.
The facility can handle up to 220,000 barrels per day (bpd) of crude output and 352 million cubic feet per day of natural gas. It is expected to serve Pemex’s most prolific shallow-water oilfields, including Ku-Maloob-Zaap, located in the Campeche Bay.
The 15,000-tonne platform, built near the port of Altamira in northeastern Tamaulipas state, is the first one fully assembled in Mexico. Transportation to its final location is expected to be completed in November, followed by installation and testing in the following months.
McDermott has built 10 platforms in the last decade for Pemex and is working on two additional infrastructure projects for the state-run firm. The company has been using its Altamira hub to build platforms for oil companies across the Americas, including Trinidad & Tobago in the Caribbean.
McDermott earlier this week said it was awarded a contract by Brazil’s state-run Petrobras to design and build a pipeline associated with a gas export system in the Santos basin’s pre-salt area.
McDermott also announced it plans to divest its global storage tank business and pipeline construction in the United States, which had combined revenues of about $1.5 billion last year.
Pemex’s crude output slightly increased to 1.825 million bpd in September, but its accumulated annual average of 1.863 million bpd is 4 percent below last year’s production, the company said on Thursday.
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(Reuters, Alexandra Ulmer, 1.Nov.2018) — Anglo-French oil company Perenco and Russian financial firm Gazprombank have been identified in testimony by a former Venezuelan state oil company official who said he received millions of dollars in bribes in return for giving them preferential treatment, a source with knowledge of the matter said on Thursday.
Abraham Ortega, a former financial executive at state oil company PDVSA, accepted $5 million in bribes to favor a French oil company and from a Russian bank, U.S. prosecutors in Florida said on Wednesday in a statement, which did not name either company. Ortega received $3 million to help the French company and $2 million to favor the Russian one, according to the Department of Justice announcement.
Prosecutors said that in exchange, Ortega helped the companies gain “priority status” to loan money to oil joint ventures in which they were partners with PDVSA.
The high-profile case is one of a slew of U.S. probes into corruption in Venezuela, which is reeling from hyperinflation, empty shelves and mass emigration, but the case is one of the first to link corruption in the oil sector to prominent foreign firms.
Perenco declined to comment. Gazprombank and PDVSA did not immediately respond to requests for comment.
The case stemmed from cash-strapped PDVSA’s chronic delays in paying dividends to foreign firms, a second source said.
Perenco was desperate to receive those funds and get the money out of Venezuela, according to the source. Perenco agreed to loan money to the Petrowarao joint venture it ran with PDVSA, but as part of the deal had to be paid its late dividend payments beforehand.
The company received those payments in late 2013, the source said. Former oil minister Rafael Ramirez, who is now on the run from leftist President Nicolas Maduro’s government, announced in 2014 that Perenco was loaning $420 million to Petrowarao to quintuple its oil production to 24,000 barrels per day.
However, the source said that Perenco ended up loaning a small fraction of the promised amount.
In total, Ortega said he accepted $17 million in bribes as part of a broad embezzlement scheme. The money was hidden in the United States, Switzerland and the Bahamas, according to the U.S. prosecutors.
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(Energy Analytics Institute, Piero Stewart, 1.Nov.2018) — Colombia’s state oil company Ecopetrol is boasting a 67% exploration success rate based on six completed wells thus far in 2018.
Of the six wells, two were abandoned and 4 were successful, reported the company in its third quarter results update. Three other wells are still under evaluation.
Ecopetrol aims to drill a 12 exploratory wells in 2018.
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(Citgo Petroleum, 1.Nov.2018) — CITGO Petroleum Corporation recently participated in Houston’s largest free family festival, Energy Day. The event brought together families, students, energy professionals and other members of the community for a day of science, technology, engineering, and mathematics (STEM) programs, exhibits and activities. With more than 25,000 attendees filling Sam Houston Park on Saturday, Oct. 20, Energy Day was, once again, an impressive display of education and community.
The popular event was presented by the Consumer Energy Alliance (CEA) and the Consumer Energy Education Foundation (CEEF).
“Energy Day is a shining example of this city’s prospering energy industry and its dedication to giving back,” said Rafael Gomez, Vice President Strategic Shareholder Relations and Government & Public Affairs.
CITGO was a sponsor of the event and organized a station where visitors participated in hands on activities that demonstrated how petroleum is used in every day products. As an active corporate citizen of Houston, CITGO prides itself in demonstrating the benefits of a STEM education and careers in the energy industry.
“Inspiring students to be excited about STEM education is a pillar of our corporate social responsibility efforts,” said Gomez. “Energy Day is great way to achieve that goal outside the classroom setting. Giving children the chance to experience dozens of hands-on exhibits in a single day keeps them entertained and engaged.”
The five-hour event offered 61 exhibits, including bike riding to generate electricity, creating LED bracelets, learning about the physics behind sports, and studying out how infrared images, robotics and virtual reality are used in STEM industries. To cap off the day, more than 180 students and teachers were awarded nearly $2,300 as part of the Energy Day Academic Program.
“Teaching children about the incredible opportunities STEM offers in a layout that’s welcoming and accommodating was our goal, and we’ve been able to provide that for the last eight years thanks to the support of local schools, energy experts and sponsors, said CEEF’s Energy Day Director, Kathleen van Keppel.”
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(Petrobras, 31.Oct.2018) — Petrobras, following up on the release disclosed on 3/8/2018, announces that its subsidiary Petrobras International Braspetro B.V. (PIBBV) signed a Sale and Purchase Agreement (SPA), related to the full sale of its 50% interest in Petrobras Oil & Gas B.V. (PO&GBV) to Petrovida Holding B.V., a company formed by the partners Vitol Investment Partnership II Ltd, Africa Oil Corp and Delonex Energy Ltd.
PO&GBV is a joint venture in the Netherlands formed by PIBBV (50%) and BTG Pactual E&P B.V. (50%), with assets located in Nigeria. It has an 8% stake in the OML 127 block, where the Agbami producing field is located, and a 16% stake in the OML 130 block, with the Akpo producing field and the Egina field, in final stage of development, without the operatorship of any field. The current production of the PO&GBV assets is about 21 thousand boe/day (Petrobras share).
The transaction will involve a total amount of up to $1.530 billion, with a cash payment of $1.407 billion, subject to adjustments until the closing of the transaction, and a deferred payment of up to $123 million, to be settled as soon as the Agbami field redetermination process is implemented.
The closing of the transaction is subject to the fulfillment of usual precedent conditions, such as obtaining approvals by relevant Nigerian government bodies.
The sale of PO&GBV was the result of a competitive process and is part of the Petrobras Partnership and Divestment Program, in line with the 2018-2022 Business and Management Plan and its ongoing portfolio management, with focus on pre-salt investments in Brazil.
This disclosure is in line with Petrobras’ disinvestment methodology.
Vitol has a 50% interest in Petrovida. Vitol is a Dutch energy and commodities company and its primary business is the trading and distribution of energy products globally – it trades over seven million barrels per day of crude oil and products and, at any time, has 250 ships transporting its cargoes. Vitol’s clients include national and international companies from the sector, including the world’s largest airlines. It is also invested in energy assets globally including storage, refining capacity and service stations.
Africa Oil has a 25% interest in Petrovida. Africa Oil is a Canadian publicly traded oil and gas exploration and development company, primarily focused in Africa. The company’s assets include a twenty-five percent working interest in the South Lokichar oil development project (Kenya) and a portfolio of interest in Africa, focused on oil and gas exploration companies.
Delonex, also with a 25% interest in Petrovida, is a leading sub-Saharan oil and gas company focused on exploration, development and production with operations in Chad, Kenya and Ethiopia.
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(Petrobras, 31.Oct.2018) — Petrobras, following up on the release disclosed on Mar. 28, 2018, informs that it postponed until Jan. 31, 2019 the mothballing of the fertilizer plants located in Sergipe (Fafen-SE) and Bahia (Fafen-BA).
The company continues to evaluate alternatives to the mothballing with government representatives and industry federations of the states of Sergipe and Bahia and other participants, so this additional time is necessary to complete the analysis of the alternatives to the mothballing, provided that the minimum levels of profitability of Petrobras are maintained. Among these alternatives, leasing the plants to third parties is being considered.
Future steps in the analyses development will be communicated to the market.
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(Petrobras, 31.Oct.2018) — Petrobras prepaid a debt with Banco Santander in the amount of $1 billion, due 2023. Simultaneously, it signed with the same institution a new line of credit worth $750 million, due October 2028 and with more competitive financial costs.
These transactions are in line with the company’s liability management strategy, which aims to improve the amortization profile and the cost of debt, taking into account the deleveraging target set forth in its 2018-2022 Business and Management Plan.
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(Ecopetrol S.A., 31.Oct.2018) — Ecopetrol S.A. announced the Business Group’s financial results for the third quarter and year-to-date 2018, prepared in accordance with International Financial Reporting Standards applicable in Colombia.
The figures included in this report are not audited. Financial information is expressed in billions of Colombian pesos (COP) or US dollars (USD), or thousands of barrels of oil equivalent per day (mboed) or tons, and is so indicated where applicable. For presentation purposes, certain figures in this report were rounded to the nearest decimal place. Further information on the Business Group’s financial figures may be consulted in Ecopetrol’s Consolidated Financial Statements, published on our website.
“For the first nine months of the year, Ecopetrol is reporting the best financial results of the past four years. Net income attributable to owners of Ecopetrol rose to 8.9 trillion pesos, EBITDA totaled 23.8 trillion pesos and EBITDA margin was at 48%. These solid financial results were achieved due to the good operating performance of all segments, which brought about an increase in crude oil and gas production, lower crude oil imports for the Downstream segment as well as of refined products to supply the local market. In summary, we were able to capture the profit coming from the higher international oil prices.
The flexibility of the Group’s commercial strategy allowed us to take advantage from the higher demand for crude oil from refiners in Asia to create more value. In the third quarter of 2018, sales to Asia accounted for a 45% share of total crude exports, versus 25% during the same quarter in 2017. Thanks to this initiative, the discount price of the crude basket versus Brent remained at approximately 11%.
In the third quarter of 2018, Ecopetrol Group’s average production totaled 724,000 barrels of oil equivalent per day, the highest in the last 10 quarters. Year-to-date average production was 716,000 barrels of oil equivalent per day. The increased production for the quarter is in line with the target set for 2018 and it was possible due to the positive results from our drilling campaign and the greater demand for natural gas in the thermal power and industrial sectors. At the end of the quarter, we had drilled 421 development wells and had 41 rigs in operation.
This increase in activity is reflected in larger investments during the quarter, totaling 789 million dollars and representing 80% of what was invested in the first half of the year and more than 50% over the investment in the third quarter of 2017.
In the exploration segment Ecopetrol entered into one of the highest-potential oil basins in the world. The Pau-Brasil block, located in the central region of the Santos basin, in the Brazilian pre-salt, was awarded to the joint venture between BP Energy (50% – Operator), Ecopetrol (20%) and CNOOC Petroleum (30%). This milestone is consistent with our long-term growth strategy and demonstrates Ecopetrol’s ability to develop strategic alliances with leading companies in world-class industry opportunities.
During the third quarter, we drilled five exploratory wells, for a total of nine during the course of the year, and had an exploratory success rate of 44%. These results are in line with the goal of drilling 12 wells in 2018, and materialize our strategy of building a solid base of assets for the company’s future sustainability.
In the Midstream segment, we saw increased volumes of crude oil and refined products transported, primarily due to the optimization of certain systems, such as Galán – Bucaramanga and Coveñas – Cartagena and the beginning of operation of San Fernando-Apiay-Monterrey system along with the expansion of Ocensa P135. Moreover, it is important to highlight the transportation tests carried out at a higher viscosity of 700 centistokes (cSt — a measure of viscosity) with positive operating results, which are now under economic evaluation.
During the third quarter, the oil pipeline network continued to suffer from third-party disruptions, especially on the Caño Limón- Coveñas system; nevertheless, the Bicentenario oil pipeline was able to mitigate those impacts, resulting in five reversion cycles during the quarter. Year to date, 35 reversion cycles have been carried out on the Bicentenario oil pipeline. This flexible operation has prevented deferred production from Caño Limón field.
In the Downstream segment, the two refineries jointly achieved a new historic maximum of 380,000 barrels of stable throughput per day. The third quarter was the best of the year in terms of throughput and gross refining margin for each of our refineries.
In line with the optimization process, the Cartagena refinery continued to generate value by achieving an average throughput of 158,000 barrels per day for the quarter, with a throughput composition of 80% domestic and 20% imported crude. This result contributed significantly to the reduction of the Group’s cost of sales. In August, a record was attained at the refinery by using 100% local crudes during nine days, getting an average throughput of 164,000 barrels per day. Gross refining margin for the quarter was 12.1 dollars per barrel which represents a 17.5% increase vis-à-vis the third quarter of 2017.
Additionally, the Barrancabermeja refinery showed an 11% increase in throughput versus the third quarter of 2017. This outcome was primarily due to the stable operation of its units and the segregation of light and intermediate crudes. The average refining margin for the quarter was 13.9 dollars per barrel, largely impacted by the increase in the prices of the crude basket vs. Brent.
Ecopetrol continues to work on fuel quality. In line with this commitment, we have taken advantage of the greater synergies between the Cartagena and Barrancabermeja refineries, as well as operational adjustments in the transport and logistics systems, to produce cleaner fuels.
In September, diesel distributed in Colombia had an average sulfur content between 15 and 20 parts per million (ppm), below the maximum of 50 ppm of sulfur permitted by local regulation. Specifically, we delivered diesel with an average sulfur content between 12 and 14 ppm to the city of Medellin that complies with international reference markets standards as those in the United States (10 to 15 ppm sulfur content).
Our reducing cost strategy through efficiency measures allowed us to account for 1.8 trillion pesos of higher efficiencies across the Group during the first nine months of 2018, up 26% versus those reported during the same period of 2017. We remain committed with cost efficiency and capital discipline, which are now embedded in our corporate culture.
These accomplishments had enhanced the financial position of the Group. At the end of the third quarter, we increased our cash position from 15 trillion at the end of the second quarter, to 18 trillion pesos, despite the payment of the second installment of dividends to the Government for 1.6 trillion pesos and the prepayments of debt for a total amount of 637 million dollars. This financial strength is essential to support the profitable growth plans of the Group and secure long-term sustainability through crude oil price cycles.
In September, Ecopetrol completed the negotiation of a new Collective Bargaining Agreement that will apply for four and a half years and cover aspects such as education, health, food, loans and transport services, among other worker benefits. The New Collective Bargaining Agreement is aligned with the business strategy that seeks to maintain efficiency, capital discipline and collective labor in the new phase of Ecopetrol’s growth. We believe it will contribute positively to the workers wellbeing and the country’s development.
Talking about our ESG initiatives, year-to-date efforts have been focused on activities such as the recycling of 63.3 million cubic meters of water used in our operations. This amount represents an additional saving of 20% compared with the same period last year, enabling us to optimize the water requirement. On another front, we have advanced towards the incorporation of non-conventional renewable energy into the matrix of energy resources, with the announcement of the construction of a solar farm that will supply part of the energy consumption of Castilla field. This is in addition to the existing renewable energy supply from biomass.
Ecopetrol remains committed to generating value, and caring for environment, safe operations, ethics and transparency. Maintaining positive results and growing profitably will remain our focus as we continue to operate as a sustainable company that generates value for its shareholders.”
To review the full report please visit the following link:
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(El Nuevo Herald, Jay Weaver And Antonio Maria Delgado, 31.Oct.2018) — A former top official of Venezuela’s state-owned oil company pleaded guilty Wednesday in Miami federal court to playing a pivotal role in a $1.2 billion money-laundering racket that U.S. authorities say was run by some of the country’s wealthiest people with close ties to the Venezuelan president.
Abraham Edgardo Ortega, the former executive director of financial planning at Petroleos de Venezuela, S.A. (PDVSA), admitted he accepted millions of dollars in bribes that were secretly wired to U.S. and other financial institutions, according to court records.
In exchange, Ortega allowed the ring’s members to embezzle hundreds of millions of dollars from the national oil company through loan- and currency-exchange schemes that ended up in European, Caribbean and U.S. banks as well as luxury South Florida real estate and other investments. Ortega, who worked at PDVSA for more than a decade, admitted he used his official role to give “priority” status to Venezuelan companies that did business with the government so they could tap into its vast oil income to make overnight fortunes.
Ortega, who surrendered to U.S. authorities in September after being charged this summer with eight other defendants, remains free on a $1 million bond as he assists the U.S. attorney’s office in the complex money-laundering case. He faces up to 10 years in prison at his sentencing Jan. 9 before U.S. District Judge Kathleen Williams and must forfeit at least $12 million stolen from the Venezuelan government’s oil company that was laundered to the U.S. and elsewhere.
His defense attorneys, Lilly Ann Sanchez and Luis Delgado, said they are hopeful that Ortega receives a substantial reduction in his sentence based on his assistance providing valuable information about the other defendants and suspects in the sprawling Homeland Security Investigations case.
Ortega, who served as PDVSA’s top financial officer from 2014 to 2016, admitted in a statement filed with his plea agreement that he conspired with the leader of the money-laundering ring, Venezuelan billionaire Francisco Convit Guruceaga, who has not been arrested, and a Miami-based investment broker, Gustavo Adolfo Hernandez Frieri, who was detained in Italy and awaits extradition to the United States. Others also collaborated with Ortega, including a money manager who operated between South America and Miami and who became a confidential source for Homeland Security agents two years ago.
Ortega’s guilty plea to the conspiracy charge follows Monday’s sentencing of Swiss banker Matthias Krull to 10 years in prison for the same offense. Krull was based in Panama and provided private banking services to Venezuela’s elite, including his most prominent client, media mogul Raul Gorrín. Gorrín has not been charged in the Miami federal case, but multiple sources have confirmed he is one of numerous unnamed co-conspirators in a criminal affidavit filed by Homeland Security Investigations.
Krull, who was arrested in July and became the first defendant to cooperate with the U.S. Attorney’s Office, remains free on a $5 million bond and is staying in a Brickell area condo. He pleaded guilty in August in a deal struck between his defense attorney, Oscar S. Rodriguez, and prosecutor Michael Nadler.
As required in his plea agreement, Krull started providing evidence about the Venezuela-based money laundering network — including inside information about Gorrín, owner of the Globovisión network in Caracas, according to multiple sources familiar with the investigation.
Gorrín is suspected of steering $600 million from the country’s state-owned oil company to a European bank to enrich himself, the three stepsons of President Nicolás Maduro and other members of Venezuela’s politically connected elite, according to court records and multiple sources.
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(Energy Analytics Institute, Aaron Simonsky, 31.Oct.2018) — YPF announced it will continue with electric power generation projects through its affiliate YPF LUZ as part of its transformation as an energy company.
“By 2023, 20% of the electric power generated by YPF will come from renewable sources,” YPF announced in an official statement on its website.
“Our company is also analyzing various low carbon emission business opportunities, such as bio-fuels, use of LNG in cargo transport and electric mobility,” the company said.
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