Bolivia’s Incahuasi Field Producing 8 MMcm/d of Natural Gas

(Energy Analytics Institute, Ian Silverman, 21.Sep.2018) — Bolivia’s President Evo Morales says natural gas production at the Incahuasi field, discovered in 2004, is currently eight million cubic meters per day (MMcm/d).

Production at the field is expected to increase to 11 MMcm/d over the short-term with additional investments and then to 20 MMcm/d with further investments over the medium-to-long-term, reported the Bolivian daily newspaper La Razón, citing the official.

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Bolivia’s Morales Says $165 Mln In Investments Planned for Incahuasi Field

(Energy Analytics Institute, Ian Silverman, 21.Sep.2018) — Bolivia’s President Evo Morales announced details of investments destined to boost natural gas production at the Incahuasi field, located in the municipality of Lagunillas, south of Santa Cruz.

The investments include the following:

$29.5 million for expansion of plant capacity;

$25.6 million for interconnection of well ICS3;

$62.5 million to drilling the ICS5 well; and

$47.4 million in other investments, reported the daily Bolivian newspaper La Razón.

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Pemex, Consortium Sign First Ever Pre-Unitization Agreement in Mexico

(Pemex, 20.Sep.2018) — Pemex and the Block 7 consortium signed the first ever pre-unitization agreement in Mexico.

Petróleos Mexicanos (Pemex) and Talos Energy, as operator of the Block 7 Consortium, announced that Pemex and the international Block 7 Consortium (Talos Energy, Sierra Oil and Gas, and Premier Oil) signed a Pre-Unitization Agreement (PUA) related to certain tracts within the Amoca-Yaxche-03 allocation (assigned to Pemex as part of Round 0) and the contiguous Block 7 production sharing contract (assigned to the consortium by the National Hydrocarbons Commission as part of the first tender of Round 1). Both areas are situated in the offshore portion of Mexico’s prolific Southeast Basin.

This is the first Pre-Unitization Agreement ever to be signed in Mexico. Under the country’s recently revamped legal and regulatory framework, this two-year agreement enables information sharing related to the recently announced Zama discovery and its potential extension into Pemex’s neighboring block. It also sets a clear path for the signing of a Unit Agreement and Unit Operating Agreement in the event a shared reservoir is confirmed, as it establishes a defined process based on international practices to determine the resulting participation of each party in the potential overall development.

As a result of the agreement, both parties will immediately form a Working Group, with the objectives of maximizing operational and informational efficiencies, defining activities on each tract that optimize the collection of data in the area, and reducing any potential hazards, all to maximize the benefits for México. The Working Group will be comprised by legal and technical representatives from the member companies.

The PUA has previously been approved by the Ministry of Energy (SENER).

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Venezuela Doubles Down on Chinese Money to Reverse Crisis

(AP, 20.Sep.2018) — Venezuelan President Nicolas Maduro said Tuesday that new investments from China will help his country dramatically boost its oil production, doubling down on financing from the Asian nation to turn around its crashing economy.

Already a major economic partner, China has agreed to invest US$5 billion more in Venezuela, Maduro said following a recent trip to Beijing, adding that the money would help it nearly double its oil exports to China.

“We are taking the first steps into a new economic era,” he said. “We are on track to have a new economy, and the agreements with China will strengthen it.”

A once-wealthy oil nation, Venezuela is gripped by a historic crisis deeper than the Great Depression in the United States. Venezuelans struggle to afford scarce food and medicine, many going abroad in search of a better life.

Venezuela’s inflation this year could top one million per cent, economists predict.

After two decades of socialist rule and mismanagement, Venezuela’s oil production of 1.2 million barrels a day is a third of what it was two decades ago before the late President Hugo Chavez launched the socialist revolution.

Maduro says that under the deal, Venezuela will increase production and the daily export of oil to China to one million barrels a day.

However, China is taking a strong role in its new agreements. Over the last decade, China has given Venezuela US$65 billion in loans, cash and investment. Venezuela owes more than US$20 billion.

FINALISING OIL PLANS

The head of the National Petroleum Corporation of China will soon travel to Venezuela to finalise plans on increasing oil exports.

Russ Dallen, a Miami-based partner at brokerage Caracas Capital Markets, said the influx of money appears to be investments China will control.

“The Chinese are reluctant to throw good money after bad,” Dallen said. “They do want to get paid back. The only way they can get paid back is to get Venezuela’s production back up.”

Venezuela also agreed to sell 9.9 per cent of shares of the joint venture Sinovensa, giving a Chinese oil company a 49 per cent stake. The sale will expand exploitation of gas in Venezuela, the president said.

Maduro also recently launched sweeping economic reforms aimed at rescuing the economy that include a creating new currency, boosting the minimum wage more than 3,000 per cent, and raising taxes.

Economist Asdrubal Oliveros of Caracas-based firm Econalitica said he doubts that Venezuela can reach the aggressive goal to boost oil exports to China to one million barrels a day, given problems faced by the state corporation PDVSA.

“Increased production I see as quite limited,” Oliveros said. “The Chinese companies alone have neither the muscle nor the size to prop up production.”

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Petrotrin Loses Board Member

(Trinidad and Tobago Newsday, Yvonne Webb, 20.Sep.2018) — Days before Petrotrin’s refining operation ceases and workers are retrenched, a member of the board who would have participated in the restructuring exercise, has become the first casualty of the plan.

An internal circular from the company to all employees confirmed board member Randhir Rampersad has ceased to be a member of the board of directors. No reason was given for his departure, causing speculation among some workers.

The memo, signed by Sharon Morris-Cummings, advised employees to amend the director listing on the company’s letterheads to only reflect the remaining members – chairman Wilfred Espinet, deputy Reynold Ajodhasingh, Anthony Chan Tack, Nigel Edwards, Joel Harding, Selwyn Lashley, Eustace Nancis and Linda Rajpaul.

The Oilfield Workers Trade Union (OWTU), which also received a copy of the memo yesterday, said this warrants a probe. A spokesman said it is unusual at this point in the process of restructuring, for a Board member to leave without a reason. The trade union said it raises a lot of questions as to whether Rampersad was fired or if he resigned; and why.

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OPEC’s Decade of Turmoil Leaves Cartel Seeking a New Way Forward

(Bloomberg, Christopher Sell, 20.Sep.2018) — A global recession, both $140 and $30 oil, the U.S. shale revolution, a market-share war, and output cuts. OPEC’s 60-year history has rarely confronted a more challenging period than the past decade.

Now, instead of enjoying the higher prices resulting from 18 months of joint production cuts with a coalition of other major producers, the cartel faces new problems. A tweet-happy American president is ramping up geopolitical risk, renewed sanctions are hammering Iran’s exports, Venezuelan production is tanking as its economy collapses, and a political attack from Washington in the form of the NOPEC bill.

The alliance of exporters, spearheaded by Saudi Arabia and Russia, meets on Sunday in Algeria to consider its response to these challenges, while also taking the next steps to cement their alliance into 2019 and beyond. The Organization of Petroleum Exporting Countries response to crises over the past decade offer clues to the path it might take forward.

Global Crisis

Ten years ago, a banking crisis triggered a global economic downturn and a crash in oil prices as demand was obliterated. After peaking at a record $147.50 a barrel in July 2008, Brent crude fell as low $36.20 by year-end. Facing catastrophe, OPEC members put aside internal squabbles and agreed production cuts that were historic in their speed and scale — output fell 16 percent in just eight months. It worked, and prices began to recover in 2009 even as the world was mired in recession. After Chinese consumption came roaring back in 2010, the group was able to open its taps again as the cost of crude surged back toward $100.

Shale Boom

From 2011 onward, OPEC enjoyed years of riches and relative stability as oil traded near $100 a barrel, but a threat was emerging. A new generation of wildcatters from North Dakota to Texas was deploying innovative fracking technology to tap previously inaccessible shale oil deposits. OPEC was blind to the danger at first, then downplayed the risk even as some members raised the alarm — reasoning that shale was an expensive business and the cartel simply had to bide its time. By mid-2014, U.S. production had jumped more than 50 percent, crude prices were teetering on the brink and it was clear this new industry was reshaping the global market as OPEC stood by and watched.

Price War

By late 2014, there was a global oil glut, prices were collapsing and U.S. shale was showing no sign of slowing. Pressure increased on OPEC to respond as it had done in 2008 and cut output, but Saudi Arabia had a different plan. Driven by a combination of hubris and grievance — the kingdom thought it could easily vanquish high-cost shale and was sick of shouldering the burden of stabilizing prices alone — energy minister Ali Al-Naimi rejected requests from fellow members and opened the taps in a war for market share. At first it seemed to work — the price slump worsened and put immense financial pressure on OPEC, but also triggered a collapse in U.S. drilling and forced producers to close the taps.

Alliance with Russia

By mid-2016, Al-Naimi’s gambit looked like a failure. Crude still languished near $40 a barrel, putting some OPEC members on the brink of economic collapse. However, U.S. production was rising again after drillers made huge cost cuts and bloated crude stockpiles threatened to depress prices for years to come. A new Saudi minister, Khalid Al-Falih, was appointed and set about engineering a historic agreement including major producers from outside the group. By late 2016, he had secured the cooperation of 10 other nations, most importantly Russia, who agreed to remove 1.8 million barrels a day of supply from the market. Thanks to this deal, crude has staged a spectacular recovery from its bruising slump. In April, OPEC and its allies concluded they had achieved their goal of re-balancing the market and even higher prices beckoned.

U-Turn

If only it was that simple. OPEC’s moment of celebration faded fast as U.S. President Donald Trump threw a spanner in the oil market. Accusations on Twitter that the cartel was artificially inflating prices were followed by his renewal of sanctions on Iran’s exports and additional penalties that worsened the decline of Venezuela. Within a month, Saudi Arabia and Russia were signaling their intention to roll back the cuts, and in June they successfully pressured the rest of the group to agree. After 18 months of fairly harmonious supply restraint, some OPEC members were hastily reopening the taps, while others howled in protest from the sidelines.

What Next?

Where does OPEC turn now? Lessons from the group’s history point eastwards, toward a permanent partnership with Russia, said Harry Tchilinguirian, head of commodity strategy at BNP Paribas SA. It’s the most effective counterbalance to the shale revolution, which continues to reshape the market, he said.

“U.S. shale oil will be reaching the Atlantic Basin, and Asian markets alike, more regularly and in greater volumes as pipeline connections to the Gulf Coast and oil terminals are built or expanded,” Tchilinguirian said. This competitive challenge, along with demand dynamics that accompany the transition to cleaner energy, give OPEC an incentive to establish a permanent relationship with Russia and a growing number of non-members, he said.

Whether such an alliance would actually prove effective at managing the market in the long term is another matter, said Bob McNally, president of Rapidan Energy Group.

“The jury remains out as to whether this new Saudi-Russia led entity will succeed longer term at preventing future booms and busts or, like a number of other temporary ad-hoc cartels since oil’s earliest days, it will succumb to greed and indiscipline,” McNally said.

To contact the reporter on this story: Christopher Sell in London at csell1@bloomberg.net To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Rakteem Katakey

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Pemex CEO Launches Management System at Cangrejera Petrochemical Complex

(Pemex, 19.Sep.2018) — The CEO of Petróleos Mexicanos, Carlos Treviño Medina, launched the Management Assessment System at the Cangrejera Petrochemical Complex, located in the state of Veracruz that will help increase the production value of oil products processed in this center, through the identification of critical inventory items, oversight the plant´s operation, inputs and consumables for production, maintenance and financial performance.

Following up on the visits he has made to strategic Pemex facilities around the country, on Sept. 20 Treviño Medina toured the Cangrejera Complex and the “Lázaro Cárdenas” Refinery in Minatitlán, to oversee operations and get a first-hand account of the concerns and needs of the oil workers stationed in these work centers.

Regarding the Control Center and the Management Assessment System of Pemex Etileno (Pemex Ethylene), the CEO of the state-owned productive company pointed out that launching this system will allow the company to anticipate and manage changes promptly, solve problems and make better decisions using a single system that allows for real-time monitoring of all processes simultaneously from a single location.

He explained that the automated management system is based on information technologies that promote the coordination of efforts through the periodical exchange and analysis of electronic data providing the characteristics of various different analysis and decision-making systems in a single application. “With this system, we integrate key operating, logistics and financial information for online and prompt decision-making,” he said.

In recent weeks, Treviño Medina has kept up an intense schedule of visits to various strategic facilities to oversee their operation. During July and August, he visited the Storage and Dispatch Terminal (TAD) in the state of Querétaro and the Tanker Vessel Calakmul, which is docked at the facilities of the Integrated Port Management of Puerto Progreso, in the state of Yucatán.

He awarded acknowledgments to both facilities for their outstanding compliance with the Order and Cleanliness Campaign.

He also toured the Antonio M. Amor Refinery, located in Salamanca, in the state of Guanajuato, as well as the Dos Bocas Maritime Terminal in the state of Tabasco, where he learned of the progress made on the Command and Control Center that will safeguard this strategic facility.

He was recently at the “Antonio Dovalí Jaime” Refinery in Salina Cruz, in the state of Oaxaca, where he oversaw the progress of the ongoing reconstruction efforts of several facilities that were damaged during the earthquakes that occurred on September 2017.

During his visits, Treviño Medina has expressed his deepest recognition tothe oil workers, who, with their daily effort, commitment and capabilities, have turned Pemex into the largest company in Mexico and one of the most valued Latin American brand names.

“A time of great change is coming, but what we have sown here will endure forever, because Pemex is one of the foundations of Mexico thanks to the strength you have given this great company, which is a source of pride and wealth for the country,” he affirmed.

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Pemex Performs Earthquake Drill at 140 Facilities Across Mexico

(Pemex, 19.Sep.2018) — At 13:16 hours, on September 19th a massive, country-wide earthquake drill started and 140 Petróleos Mexicanos facilities participated simultaneously. This country-wide drill is held in Mexico each year to commemorate the National Civil Defense Day and as a day to honor the victims of the devastating 1985 and 2017 earthquakes.

At the Petróleos Mexicanos Management Center (Acronym in Spanish: CAP) in Mexico City, over 12,000 employees were evacuated, 30 percent of whom work in the executive tower. Prior to the drill, a minute of silence was held to honor the victims of both earthquakes.

The drill was supervised directly by Pemex CEO Carlos Treviño Medina and the Corporate Director of Management and Services, Marco Antonio Murillo, from the Emergency Command Center of the company, which is located on the ground floor at CAP building B.

As part of promoting a culture of civil defense and disaster preparedness within the company, which is aimed to promote workers’ safety, the drill allowed for the assessment of current protocols and safety programs in Pemex facilities and test alarm systems, safety and firefighters´ equipment.

After three short bells, members of the safety brigade began to evacuate personnel using established routes to the emergency gathering points, using the slogan: “No running, no yelling, no pushing.”

Additionally, Fire and Rescue personnel from CAP performed a rescue drill for three “victims”, who were taken to the Medical Unit of the Management Center.

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Mexico’s New President Should Postpone Oil Auctions: Former Pemex Official

(Reuters, Collin Eaton, 19.Sep.2018) — A former Petroleos Mexicanos board member said on Wednesday Mexican President-elect Andres Manuel Lopez Obrador has enough political support to change the nation’s energy law and should postpone planned competitive oil auctions until the law is revised.

Fluvio Ruiz Alarcon said, following an address at the Baker Institute of Public Policy, the new administration would have the clout in congress to roll back portions of the nation’s landmark energy reforms that opened its oil fields to foreign investment.

Lopez Obrador, who takes office on Dec. 1, handily won Mexico’s presidential election in part by promising sweeping changes to Mexico’s energy industry. One of his aims is to have the state-owned oil company, known as Pemex, select partners instead of having them chosen in auctions run by Mexico’s National Hydrocarbons Commission (CNH).

“Pemex should choose its own allies,” said Ruiz. “The hydrocarbon law says that it is CNH that makes the bidding for the alliance of Pemex. They say, ‘Who wants to marry Pemex?’ They say, ‘Who offers more?’ We want Pemex to choose.”

He also said Mexico should postpone the competitive tenders for Pemex joint ventures scheduled for February until the law is changed.

The Feb. 14 oil auctions are the only ones scheduled and cover 46 onshore blocks in northern Nuevo Leon and Tamaulipas states, including the first shale areas.

The February tender would also feature seven opportunities to tie up with Pemex on onshore projects in the southern states of Veracruz, Tabasco and Chiapas.

The auctions were originally scheduled this year in the waning months of President Enrique Pena Nieto’s term, but were postponed by the National Hydrocarbons Commission (CNH), Mexico’s independent oil regulator which runs auctions and supervises the contracts.

When it announced the later date, CNH officials said they wanted to give interested oil companies more time to evaluate the projects. They also expressed a desire to work with the incoming administration of President Andres Manuel Lopez Obrador.

To date, 17 companies have begun the process of pre-qualifying for the auctions while another eight have done so for the Pemex joint ventures.

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More Than TT$1 Billion in Compensation for Petrotrin Workers

(CMC, 19.Sep.2018) — The Trinidad and Tobago g overnment Monday said the compensation package for workers being laid off by the closure of the oil refinery of the s tate-owned company, Petrotrin could be more than TT$1 billion (one TT dollar=US$0.16 cents).

But energy minister, speaking in the Senate, said while he would not want to provide an accurate figure, the workers’ representatives, the Oilfields Workers Trade Union and the Petrotrin board of directors will meet on Tuesday to discuss termination packages for the affected workers.

“I personally said the packages will cost upward of one billion dollars and if you take the collective agreement and you do some basic calculations, it is obviously more than one billion.

“But the government and the board of Petrotrin are willing to sit down with the union and go through all the numbers and possibly offer some enhancement to that package,” he told legislators.

Last month, the government announced that it would be closing down the oil refinery after indicating that it was losing an estimated two billion dollars annually.

The Keith Rowley administration said that more than 2,500 workers would be laid off as a result and Khan told the Senate that the figure was 4,700.

“The termination packages and the benefits therein are currently being negotiated by the board of Petrotrin and the Oilfield Workers Trade Union, and a meeting is carded for tomorrow. So, in a sense, I wouldn’t want to pre-empt or prejudge what package they will come up with.

“As to the number of employees that will be impacted, the total number of permanent employees that will be impacted from the Petrotrin restructuring is approximately 3,500 permanent workers and approximately 1200 non-permanent workers,” he told the Senate.

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President Moise Wants Full Transparency in PetroCaribe Probe

(CMC, 19.Sep.2018) — President Jovenel Moise has called on newly installed Prime Minister Jean-Henry Céant to ensure that there’s total transparency in the investigation regarding the use of funds under the PetroCaribe initiative.

“As I explained in my message of Prime Minister Jean Henry- Céant (and) to the nation, and included in the statement of the general policy statement presented to Parliament, Prime Minister Céant must allow the nation to see clearly what has happened in the use of PetroCaribe funds,” Moise said during the inauguration of the new prime minister and his cabinet on Monday.

“The people are asking for explanations on the use of this money. The competent services of the State, notably the Central Financial Intelligence Unit, the Anti-Corruption Unit, the General Inspectorate of Finance will be mobilised on the PetroCaribe file.

“Besides the work of the Court of Auditors and Administrative Litigation, it is up to these technical services of the State to provide answers to the request for explanation of the population,” Moise said.

He said institutionally, the State must provide answers to the PetroCaribe file, adding “I ask people to remain calm and wait for the results of the work of the relevant institutions.

“We must avoid making amalgams so that honest citizens are not victims or unjustly indexed in the PetroCaribe file. The State is there to guarantee everyone the right to life and honour. This is why, at the institutional level, the State must treat the PetroCaribe dossier with the necessary rigour and give explanations to the citizens,” Moise said.

Concerns as to how the PetroCaribe funds have been used by previous governments have resulted in Haitians taking to the streets in protest at the billions of US dollars that have been allegedly squandered from the Venezuela oil programme.

Haitians have launched the “#petrocaribechallenge” campaign that has already resulted in the removal of the previous government headed by Jack Guy Lafontant.

Following Haiti’s 2010 earthquake, Caracas forgave US$295 million in debt that Port-au-Prince had accumulated since joining the PetroCaribe programme in 2006. However, since the quake the debt has ballooned.

PetroCaribe is an oil alliance of many Caribbean states with Venezuela to purchase oil on conditions of preferential payment. The alliance was launched in 2005 and in 2013 Petrocaribe agreed to links with the Bolivarian Alliance for the Americas, to go beyond oil and promote economic cooperation.

A Haitian Senate Commission investigative report last year alleges a significant amount of money had been embezzled under the programme.

In his address, Moise said that in search of a better being, the Haitian people demand more justice.

“More social justice, more economic justice, more transparency and rigour in the management of public funds. The Haitian youth wants to recover faith, confidence in the future. Accountability must now be a principle that cannot suffer from any derogation. There can be no excuses, no extenuating circumstances for those who have mismanaged state resources.”

He warned that no development is possible without justice, and that the greatness of a nation depends on the quality of justice.

“Justice must act independently. I ask your government to facilitate a fair and equitable distribution of justice.”

Moise said that Haiti “has everything it needs to live up to the glorious history forged by the heroes of 1804” and that by taking the right steps, “we can sustainably and positively change the living conditions of the population”.

He told the new government it must succeed in a number of areas including signing a pact with the private sector to promote jobs and growth, a sustainable solution to the minimum wage issue, as well as enabling the country to have universal and compulsory medical insurance.

Moise said there was also need to accelerate ongoing work in the field of infrastructure as well as to find the appropriate financial mechanism for the construction of the missing classrooms, so that all school-aged children attend school in good conditions and remain there.

He also called on the new government to supervise and continue the work undertaken in the framework of the reform of the State and strictly apply the decree on the reduction of the lifestyle of the State, take appropriate measures to resolve social crises in neighbourhoods and improve the working conditions of the security forces and ensure that the new army under construction is mobilized in the vast site of environmental rehabilitation.

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Aker Solutions Wins Major Services Contract in Brazil

(Aker Solutions, 18.Sep.2018) — The Campos Basin extends approximately 100,000 square kilometers. The three-year contract is valued at more than BRL 250 million and includes an option for a two-year extension.

Aker Solutions will be renovating, repairing and upgrading offshore production units for Petrobras’ Campos Basin Operational Unit (UO-BC). The contract will also allow Aker Solutions to demonstrate its value as a full-service provider, and manage the yard where replacement parts and other equipment will be fabricated.

“We are pleased to expand our business in Brazil, a key international market,” said Luis Araujo, chief executive officer of Aker Solutions. “This is the second big contract we have signed after entering the maintenance and modification market in Brazil, reinforcing the importance of having a complete portfolio and being able to provide an integrated solution from concept to decommissioning.”

The company will execute the work from its C.S.E. Mecânica e Instrumentação Ltda (C.S.E.) services base in Macaé, Rio de Janeiro. Aker Solutions acquired a majority stake in C.S.E. in December 2016. Earlier this year Petrobras named C.S.E. the best supplier for onshore and offshore maintenance and HSSE, highlighting its focus on customers and excellence. The company competed against 5,000 suppliers and won 4 of 21 awards.

The work starts in October 2018, with final deliveries scheduled for 2021.

The contract will be booked in the third quarter 2018.

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Nicolas Maduro Says Venezuela to Double Oil Production

Venezuela’s President Nicolas Maduro. Source: PDVSA

(Energy Analytics Institute, Piero Stewart, 18.Sep.2018) — Venezuela, the struggling OPEC producer, is now planning to double its production of crude oil, according to statements from the country’s president.

“With revolutionary spirit we will double the productive capacity of PDVSA,” announced Venezuela’s President Nicolas Maduro during a press conference in Caracas broadcast on national television.

Venezuela – reeling in political, economic and humanitarian crises and suffering from the world’s highest inflation – continues to struggle to stop further declines in its oil production amid a near complete collapse in oil sector investments.

According to data in OPEC’s Monthly Oil Market Report, published on September 12 and citing data based on secondary sources, the South American country’s oil production fell 2.9 percent to 1,235 thousand barrels per day (Mb/d) in August 2018 compared to 1,272 Mb/d in July 2018.

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Venezuela’s Maduro Says Relationship With China ‘Win-Win’

(Energy Analytics Institute, Piero Stewart, 18.Sep.2018) — In terms of bilateral cooperation, Venezuela and China are seeking a ‘win-win’ scenarios.

“Relations with China are very clear and have been framed around mutual respect and under the premise of win-win, which has allowed for the reactivation of financial funds, and revival of sustained development,” announced Venezuela’s President Nicolas Maduro during a press conference in Caracas broadcast on national television.

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Expert Says Closure of Petrotrin Refinery Will Decimate Trinidad

(Trinidad Express, 17.Sep.2018) — Former Director of Energy Industries at Industrial, Jim Catterson, says closure of the Petrotrin refinery makes no economic sense. He said the closure would decimate south Trinidad.

Catterson said unemployment would rise and poverty would spread across the nation.

Speaking at a press conference at the Oilfield Workers Trade Union (OWTU) headquarters in San Fernando, Catterson said the Government must consider the proposal presented by the OWTU last week.

“Tens of thousands of people would be unemployed. These people would no longer contribute to the national economy through taxes. They would no longer contribute to the national economy. There would be a downward spiral of the economy into poverty,” he said.

Catterson said it was important that the government have further discussion with the OWTU and Petrotrin management.

“Get around the table and discuss the future of this industry and economy. It is the only way to resolve this situation. Find a way for the country to survive,” he said.

Catterson questioned why a government wanted to close the refinery and import petroleum products.

“Where would you get the foreign exchange to buy the things you need? And when you can produce these products yourself,” he said.

Catterson said oil workers were highly skilled, educated and knowledgeable and should be paid accordingly.

But he dismissed reports by Energy Minister Franklin Khan that salary and wages totalled 52 per cent of Petrotrin’s operating cost.

He said, “Salary and wages is under 10 per cent of the company’s operating cost. Oil workers are highly skilled, educated and handles equipment worth millions and potentially dangerous. So they should be highly paid.”

IndustriALL Global Union is a global union federation representing more than 50 million working people in more than 140 countries, working across the supply chains in mining, energy and manufacturing sectors at the global level.

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Petrobras to Boost Oil Output in 2019, Cut Debt $10 Billion – CFO

(Reuters, Devika Krishna Kumar, Simon Webb, 17.Sep.2018) — Brazil’s state-run oil giant Petróleo Brasileiro SA aims to raise output as much as 10 percent to around 2.3 million barrels per day (bpd) in 2019 and cut net debt by $10 billion (7.62 billion pounds), Chief Financial Officer Rafael Grisolia told Reuters.

The world’s most indebted oil company is on course to reduce debt to $69 billion by the end of this year despite falling short of its $21 billion asset sales target, Grisolia told Reuters in an interview in New York late Friday.

The firm has significantly reduced its net debt from the $106 billion it had accumulated in 2014 to finance development of massive deepwater Atlantic oil fields. Then, Petrobras lost investor confidence as oil prices fell, a corruption scandal engulfed the company and losses from government fuel subsidies mounted.

Petrobras aims to cut net debt by a further $10 billion in 2019 to reach a ratio of 2 times net debt-to-EBITDA, he said. The firm will continue cutting debt until the ratio hits 1-1.5 times, he said, which would put it in line with global oil majors.

“If you look at our direct competitors and peers like Chevron, Exxon and BP, we need to look for a more light capital structure,” Grisolia said.

The firm should reach a ratio of 1.5 in 2020 as part of its next five-year business plan, he said, although that would depend on international oil prices and other variables such as foreign exchange rates.

Over the next 5-6 years, once the firm had achieved debt restructuring targets, Petrobras may consider foreign investments to facilitate exports of rising output from the development of the prolific deepwater pre-salt fields, he said.

The firm may invest in terminals abroad to receive liquefied natural gas (LNG), he said. That would help Brazil export more gas, he added.

Exxon Mobil, BP and Royal Dutch Shell RDSA.L are among firms that plan to invest billions of dollars in developing deepwater Brazilian energy reserves in coming years. Brazil is expected to account for a large share of the rise in global oil and gas output from non-OPEC countries.

OIL PRICES HELP

Oil production is expected to rise by about 8-10 percent next year from about 2.1 million barrels per day (bpd) in 2018, Grisolia said. That should contribute to increased revenue, he added.

Crude prices rallied to three-and-a-half year highs this summer as global supplies tightened, leading to higher fuel prices.

Higher oil prices than the company estimated in its 2018 budget have raised revenue and allowed Petrobras to hit its debt reduction target, he said. That compensated for the $7 billion from asset sales that Petrobras expected to receive this year, he added.

The company has already received $5 billion from sales and will receiving another $2 billion before the end of the year, he said.

“All the divestment and cash from divestment will help, but we don’t necessarily need them to achieve the target of $69 billion by the end of the year,” he said.

FUEL SUBSIDIES

Earlier this year, a nationwide truckers’ protest over rising diesel prices paralysed Latin America’s largest economy and forced the government to lower diesel prices through tax cuts and subsidies.

That hurt Petrobras’ share price as investors worried the firm would again lose cash to subsidize fuel sales.

The firm expected to receive 2 billion reais to 2.5 billion reais from the country’s oil regulator within two weeks to compensate for subsidies, Grisolia said.

Subsidies have made it less profitable for the private sector to import diesel, he said, but some imports continued and he did not foresee any fuel shortages.

“Although the volume of imports to Brazil is lower, they are not zero, they are happening.” he added. “We do recognise that margins are tighter.”

Petrobras is running refineries close to maximum capacity and importing some fuel, he said.

Petrobras has a gasoline hedge in place to cushion the impact of fuel price volatility and is considering a diesel hedge. The cost of the hedge was marginal, Grisolia said.

Banks that Petrobras typically works with for currency operations were executing the fuel hedge, he said, such as Goldman Sachs, Bank of America, Bank of Brazil and Citibank.

Petrobras has hosted meetings with economic advisors to presidential candidates ahead of wide-open elections next month. Grisolia said talks had been positive, but declined to say which teams he had met or comment on their strategies.

Candidates have different plans for the company and the role of the private sector in energy, bringing some uncertainty to investors.

***

Bolivia’s Morales Says Electricity Rates Will Not Rise

(Energy Analytics Institute, Ian Silverman, 15.Sep.2018) — Read my lips. Well, it wasn’t exactly like that.

However, Bolivia’s President Evo Morales clarified that electricity tariffs in the small land-locked South American county would not rise.

Domestic consumption is around 1,500 megawatts, while supply is around 2,100 megawatts, reported the daily La Razón, citing Morales.

No further details were revealed by the daily.

****

Barbados Hunting New Suppliers Following Closure of Petrotrin Refinery

(Jamaica Gleaner, 14.Sep.2018) — Barbados says it is holding discussions with a number of suppliers to replace the energy arrangements it had with oil refinery Petrotrin.

The refinery, based in Trinidad & Tobago, is locking down operations, a measure it blamed on increasing financial losses. The closure has led to the retrenchment of more than 1,700 employees.

In a statement on Wednesday, the Barbados National Oil Company Limited, BNOCL, said it currently imports gasolene from and sells its crude oil to Petrotrin, while diesel and fuel oil are sourced extra-regionally. It said kerosene is imported by the oil companies Sol and Rubis.

BNOCL said that at the time of the Petrotrin announcement regarding the closure of the refinery, it was exporting 260,000 barrels of crude oil annually to the Trinidad refinery and importing 60,000 barrels of gasolene on a monthly basis.

It said the annual contract with Petrotrin entailed the exchange of the crude oil for gasolene, which aided in the reduction of the foreign exchange cost, as the value of the crude offset the outlay for the gasolene.

BNOCL said its storage capacity for gasolene is 80,000 barrels. However, as of Wednesday, September 12, its gasolene stock was at 53,582 barrels, “which is enough inventory for 25 days”.

The inventory is expected to rise to 38 days’ supply, when Petrotrin delivers another 30,000 barrels of gasolene on Saturday, September 15.

BNOCL expects to receive its final shipment from Petron over the period September 24-28 of around 30,000 to 35,000 barrels.

Altogether, assuming the shipments arrive as scheduled, the oil company expects to have enough inventory to supply local needs to November 5, assuming a “usage rate of 2,000 barrels a day.”

The Ministry of Energy and Water Resources said that through BNOCL, it has been in discussion with a number of suppliers with a view to employing a similar arrangement to that with Petrotrin.

“The goal is to ensure that this country has a consistent supply of gasolene at an affordable price, while securing a market for Barbados’ crude oil. BNOCL has never had a stock-out of petroleum products and always has adequate inventory to service Barbados, and is ever mindful of the need to do so, particularly during the hurricane season,” the ministry said.

The Mia Mottley-led government also sought to assure Barbadians that “despite the closure of the Petrotrin refinery, there will be no shortage of gasolene in Barbados,” saying it was keeping on top of the situation.

***

Argentina Owes Bolivia $250 Million for Natural Gas Sales

(Energy Analytics Institute, Ian Silverman, 14.Sep.2018) — Argentina owes Bolivia $250 million, which corresponds to two-months of natural gas sales.

“Hopefully they can honor the debt,” reported the daily newspaper La Razón, citing Bolivia’s Hydrocarbons Minister Luis Alberto Sánchez.

***

PetroTal Announces Grant of Performance Share Units, Deferred Share Units

(PetroTal, 14.Sep.2018) — PetroTal Corp. granted performance share units (PSUs) and deferred share units (DSUs) to certain officers and directors of the company.

PetroTal granted an aggregate of 3,901,666 PSUs to certain officers of the company in accordance of the provisions of the company’s PSU plan. The PSUs will vest annually over three years and each PSU will entitle the holder to acquire between zero and two common shares of the company (Common Shares), subject to the achievement of performance conditions relating to the company’s total shareholder return, net asset value and certain production and operational milestones.

PetroTal also issued an aggregate of 650,000 DSUs pursuant to the company’s DSU plan to the independent directors of the company. The DSUs vest immediately and may only be redeemed upon a holder ceasing to be a director of PetroTal. No Common Shares will be issued under the DSU plan; all DSUs granted are settled in cash.

Further details regarding the PSU plan and the DSU plan are set out in the management information circular of the company dated April 30, 2018, which is available on SEDAR at www.sedar.com.

***

Ecopetrol: Fracking Likely In Colombia, Business Prospects Are Positive

(Seeking Alpha, Dylan Quintilone, 14.Sep.2018) — Ecopetrol SA is a Colombian oil and gas company with headquarters in Bogotá, Colombia. The company is listed by Forbes as the 300th largest enterprise by profits and is the second oil company in South America behind Petrobras from Brazil.

Ecopetrol’s operations are divided between exploration and production; Refining, Petrochemical & Biofuels, Oil Transportation and Logistics. The company has around 8,500 kilometers of transportation pipelines which commercializes crude oil and all kinds of derivatives such as fuel oil, aviation gasoline, cracked naphtha, virgin naphtha, polypropylene resin, and masterbatches. The company offers refined and petrochemical products to multiple markets and has a large presence in Colombia.

The company has almost ten thousand employees and is experiencing a rising period of revenues due to the increase in oil prices in the first half of 2018. Ecopetrol has increased production in recent years and the company produces roughly 730 million barrels per year, which is an 83% production increase over 2010 levels. The company expects to surpass the billion barrel mark within the coming years because of additional discovery of oil reserves of the northern coast of Colombia and new exploration/extraction methods.

Fracking in Colombia? Most likely

Fracking in Colombia has been a big debate since the recently inaugurated president Ivan Duque was proposing the possibility during his election campaign. Upon securing the presidency, his fracking project is moving forward with a majority of the senators in the Colombian Congress who are collaborating with him for the proposal. The fracking issue has long been debated and now with the government reaching a consensus and backing the fracking industry, the approval for the controversial extraction method is likely.

***

Snapshot: Kosmos Energy Explores New Basin Potential in Suriname

(Energy Analytics Institute, Aaron Simonsky, 14.Sep.2018) — Kosmos Energy continues to explore new basin potential outside of Africa.

In December 2011, Kosmos secured a position offshore Suriname, marking the company’s first portfolio expansion beyond Africa.

In Suriname, located in the north-eastern portion of South America, Kosmos participates in two blocks: Block 42 and Block 45

“The extension of the emerging oil petroleum system recently opened in Guyana, provides up to five independent plays and multi-billion barrel potential,” announced Kosmos in an investor presentation on its website.

Drilling was to have commenced in the second quarter of 2018, according to the company.

***

PetroTal Seeks Exploration Partner for the Osheki Prospect in Peru

(Energy Analytics Institute, Aaron Simonsky, 13.Sep.2018) — PetroTal Corp. is seeking joint venture partners to drill the first exploration well by the fourth quarter 2019 or early 2020.

“We are currently engaging potential joint venture partners to drill the exploration prospect and expect the full data room to be open as soon as September 15, 2018,” reported PetroTal in an official statement, citing its Vice President of Asset Development Chuck Fetzner.

The announcement from the company comes after it reported an independent evaluation of the prospective resources with respect to the Osheki prospect in Block 107, located in the Ucayali Basin of eastern Peru. Drilling permits for the prospect have already been approved.

Calgary-based PetroTal id focused on developing and exploiting the Bretaña oil field, as well as evaluating the Osheki prospect in Block 107, which could provide significant growth for the company.

Osheki Resource Upgrade

Based on an independent assessment completed by Netherland Sewell & Associates, Inc. (NSAI), with an effective date of June 30, the Osheki prospect is estimated to have 534 million barrels (MMbbls) of mean prospective recoverable resources. This estimate is based on a recovery factor of 30 percent of the estimated 1.78 billion barrels of mean prospective original oil in place (OOIP), using maps generated from seismic acquired in 2007 and 2014. The mean risked prospective resources figure for the Osheki prospect is 85 MMbbls.

“Today’s increase in prospective resources at Osheki is a milestone in the development of our asset portfolio in Peru. It firmly endorses the quality of the Osheki prospect, which also contains further potential material upside from additional leads in Block 107,” said PetroTal President and Chief Executive Officer Manolo Zuniga in the company statement.

 

He continued: “This important development follows the Bretaña oil field successfully coming online ahead of schedule in June, with the remaining long-term testing equipment installation on schedule to allow us to increase production from the current ~1,000 bopd to over 2,000 bopd by the end of October. Bretaña has a clear path to increasing production to above 10,000 barrels of oil per day by 2020.”

The prospect was de-risked with a new 3D geologic model supporting Cretaceous age reservoirs with high quality Permian source rocks. Block 107 has four additional leads that, with Osheki, could contain a total of 4.58 billion barrels of recoverable resource in the high estimate case.

“In a report commissioned prior to PetroTal taking on the assets, it was estimated there was 313 MMbbls of mean recoverable prospective resource for the Osheki prospect. In NSAI’s June 30, 2018 report, the estimate has increased by more than 60 percent. When we combined the two seismic programs we were able to see closure in as many as three different horizons. The Osheki prospect is a sub-thrust play similar to the Cusiana complex in the Llanos Foothills of Colombia,” concluded Fetzner.

***

IEA Warns of Higher Oil Prices as Iran and Venezuela Losses Deepen

(Bloomberg, Grant Smith. 13.Sep.2018) — The International Energy Agency warned that oil prices could break out above $80 a barrel unless other producers act to offset deepening supply losses in Iran and Venezuela.

Iranian crude exports have fallen significantly before U.S. sanctions even take effect, the IEA said in a monthly report. The Middle Eastern nation will face further pressure in coming months and the economic crisis in Venezuela is pushing output there to the lowest in decades. It’s uncertain whether Saudi Arabia and other producers will fill any shortfall, or how far they’re able to, the agency said.

“Things are tightening up,” said the Paris-based IEA, which advises most major economies on energy policy. “If Venezuelan and Iranian exports do continue to fall, markets could tighten and oil prices could rise” unless there are offsetting production increases elsewhere, it said.

Oil climbed to a three-month high above $80 a barrel in London on Wednesday as fears of a supply crunch eclipsed concern about the risks to demand such as the U.S.-China trade dispute. While the Organization of Petroleum Exporting Countries and allies including Russia pledged to boost supply, the IEA said it remains to be seen how much will be delivered.

Saudi Arabia lifted output by 70,000 barrels a day to 10.42 million last month, but that remains “some distance from the 11 million barrels a day level that Saudi officials initially suggested was on the way,” the IEA said.

While the agency warned that “there is a risk to the 2019 outlook” for demand from challenges in emerging markets such as currency depreciation and trade disputes, it kept forecasts for consumption unchanged.

In the meantime, supply risks dominate. Oil inventories in developed economies are already below-average and will decline further in the fourth quarter, the IEA predicted.

Venezuela, which is pumping at just half the rate it managed in early 2016, could see its output slump another 19 percent to 1 million barrels a day this year as infrastructure deteriorates and workers flee, the agency predicted.

Iranian production has already fallen to the lowest since July 2016, at 3.63 million barrels a day, as buyers retreat ahead of U.S. sanctions that come into force on Nov. 4.

Although Russia, Saudi Arabia and other Gulf members of OPEC promised to bolster production by about 1 million barrels a day, the IEA remained cautious on whether the full amount would be delivered. It’s unclear how quickly OPEC’s spare capacity, which stands at about 2.7 million barrels a day, can be activated, it said.

“We are entering a very crucial period for the oil market,” which could push prices out of the $70-to-$80 a barrel range seen in the past few months, the IEA said.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net. To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Rachel Graham.

***

U.S. Company Manager Pleads Guilty in PDVSA Bribery Scheme

(Reuters, 13.Sep.2018) — A former manager of a U.S.-based logistics company pleaded guilty on Thursday to paying bribes to secure contracts from Venezuela’s state oil company PDVSA, and the guilty plea of the official who was bribed was also unsealed, the U.S. Justice Department said.

Juan Carlos Castillo Rincon, 55, pleaded guilty in federal court in Houston to conspiring to violate the Foreign Corrupt Practices Act, the Justice Department said in a statement.

Judge Nancy K. Johnson also unsealed the guilty plea of Petróleos de Venezuela, S.A. (PDVSA) official Jose Orlando Camacho, 46, whom Castillo had bribed, it said.

Camacho had pleaded under seal to conspiracy to commit money laundering in July 2017, the statement said. It referred to Camacho as a “foreign official” but did not specify the position he held in the company, Petroleos de Venezuela.

Fourteen people have now pleaded guilty as part of an investigation by the Justice Department into bribery at PDVSA that became public with the arrest of two Venezuelan businessmen in December 2015.

Castillo, of Conroe, Texas, was arrested in Miami in April after he was indicted by a grand jury, the statement said.

A manager at a Houston-based logistics and freight forwarding company, Castillo admitted to conspiring with others to bribe Camacho from 2011 through at least 2013 in exchange for help in obtaining contracts and inside information about the company’s bidding process.

The Justice Department said that Camacho, of Miami, admitted as part of his plea deal to accepting bribes from Castillo and the company he worked for, as well as conspiring with him to launder proceeds of the scheme.

Castillo and Camacho have agreed to forfeit the proceeds from their criminal activity, and both are scheduled to be sentenced on Feb. 21, the Justice Department said.

***

France’s Total Enters Orinduik Block Offshore Guyana

(OffshoreEnergyToday, 13.Sep.2018) — French oil major Total has exercised its option to acquire a 25 percent working interest in the Orinduik block offshore Guyana after a competent persons report identified potential for almost three billion barrels of oil equivalent.

Eco Atlantic, a partner in the Tullow-operated Orinduik block, said on Thursday that Total E&P Activités Pétrolières, a wholly-owned subsidiary of Total, exercised its option to acquire a 25% working interest in the block from Eco Atlantic.

Total decided to exercise the option following a competent persons report (CPR) announced on Tuesday. According to the CPR, the Orinduik block could potentially hold 2,9 billion barrels of oil equivalent of P50 (best estimate) reserves identified across a total of 10 leads.

Eco added that the option was exercised before delivery of the final 3D seismic data due to be delivered to Total, which would have triggered a 120-day exercise window for the option.

The option does not effect Tullow which will remain the operator and hold down its 60 percent of working interest. Following the option exercise and the receipt of all requisite regulatory approvals, Total will hold 25 percent while Eco’s interest will decrease from 40 to 15 percent.

In accordance with the terms of the option, Total will pay a fee of $12.5m to the company on receipt of all requisite approvals for the transfer of the 25 percent interest. Eco added that the payment would provide adequate funding to meet Eco’s share of the costs to drill at least two wells on the block as well as recover the costs of the completed 3D seismic survey.

Gil Holzman, CEO of Eco, said: “We are absolutely delighted that Total, one of the world’s largest oil companies, has so quickly chosen to exercise its option to acquire a 25 percent stake in our Orinduik Block to gain further exposure to offshore Guyana, currently one of the most exciting exploration areas globally.

“With Tullow as operator and the technical contribution that both Total and Eco now bring to the project, we look forward to working with these two world-class players in further progressing the exciting exploration of the Orinduik Block.”

Colin Kinley, COO of Eco, added: “Total entering the blocks four months earlier than anticipated is welcomed as they add significant technical horsepower to the interpretation and now bring them into the planning for drilling. Tullow announced last week drilling is anticipated early the third quarter of 2019.”

***

NP CEO Says No Fallout On Refinery Closure

(Trinidad and Tobago Newsday, Sasha Harrinanan, 12.Sep.2018) — Most everyone knows about the 1,700 workers who will be out of a job once Petrotrin closes its oil refinery in Pointe-a-Pierre. What fewer people know is that when confirmation of this came on August 28, some National Petroleum Marketing Co Ltd (NP) workers feared they too would lose their jobs.

This was revealed by Bernard Mitchell, CEO of NP during an interview with Business Day at St Christopher’s gas station, Wrightson Road, Port of Spain on September 5.

“There was some anxiety because when the story broke, there wasn’t clarity about what the implications would have been for NP. So there was a bit of anxiety but what we’ve done is engage our employees – indicate there’s no need to be concerned – at a staff meeting last week.”

Seated in a conference room on the first floor of the popular NP-branded gas station, Mitchell said NP’s customers too can rest assured the refinery’s closure will not affect their fuel supply.

“Whether it’s using the seabridge to Tobago, your car or your travel internationally, nothing has changed in terms of the delivery of fuel. Based on what Petrotrin has indicated, it’s their intention to purchase fuel and sell to us, (so) nothing really changes. If, however, we do have to purchase fuel ourselves, we might want to use a larger vessel to deliver more fuel to our sufferance wharf, rather than making more frequent trips on a smaller vessel.”

NP’s sufferance wharf – a licensed private wharf where dutiable goods may be kept until the duty is paid – is behind its head office in Sea Lots, Port of Spain.

Petrotrin will begin transitioning out of the refining business on October 1, but it has not said when the refinery is expected to cease operating. This is one of the questions Mitchell will ask Anthony Chan Tack – interim oversight team member and director in charge of refining and marketing at Petrotrin – when the two meet.

“We are one of their primary stakeholders, so Petrotrin would be meeting with us soon to determine whether there’ll be any changes and if we need to do things differently. Mr Chan Tack is my point of interface there because he’s the one overseeing the refinery side, so the delivery of fuel is through his area.”

Mitchell and Chan Tack held an initial conversation shortly after the August 28 meeting between Petrotrin and the Oilfields Workers Trade Union (OWTU) at the company’s corporate headquarters, Southern Main Road, Pointe-a-Pierre.

Chester Beeput – general manager of aviation and marine fuels at NP – joined the interview via speaker phone at one point to answer Business Day’s questions about possible upgrades to the sufferance wharf.

“We use an ocean-going vessel to transport refined fuels from Petrotrin to Sea Lots. It brings in roughly 25,000 barrels of product and (the wharf’s) draft is five metres. Dredging the channel down to seven metres allows you to go from 25,000 to between 30,000 and 35,000 barrels, depending on the vessel. The other element to consider is, if we dredge down to seven metres, we would now be restricted by the length. The current length of our vessel is roughly 100 metres. We can go up to a maximum of 120 metres,” Beeput said.

Mitchell added to this, explaining that if dredging is required, it would fall under the purview of the National Infrastructure Development Co Ltd (NIDCO).

“We have been in contact with NIDCO and they are in the process of looking at the issue…It’s only if the opportunity arises for us to purchase fuel internationally, that there would be some urgency in doing that (dredging). Remember, the model is for Petrotrin to continue supplying us with refined fuel, so there’s no need to dredge at this time.”

The supply of aviation fuel to state-owned Caribbean Airlines Ltd (CAL) and all other airlines which refuel in TT was also discussed.

Beeput said after the announcement, several airlines expressed concern about the possible impact on jet fuel supplies.

“They asked if we anticipated any disruptions. I explained that for all intents and purposes – based on the information we have – there would be no disruption because whether Petrotrin provides fuel via refining or via importation, the net effect on the airlines would be zero.”

Petrotrin sells jet fuel to NP, then NP sells that to airlines from its tanks at Piarco International Airport, Piarco and ANR Robinson International Airport, Crown Point.

Beeput said CAL pays NP in TT dollars while foreign-based airlines/aircraft pay in US dollars.

During his September 2 televised address to the nation, the Prime Minister said the OWTU “will be given the first option to own and operate (the refinery) on the most favourable terms.” Dr Keith Rowley’s offer was rejected the following day by OWTU president general Ancel Roget, who accused the PM of already having a potential buyer for the refinery.

Asked if NP was considering entering into a partnership with another entity to purchase the refinery, Mitchell immediately replied, “No, no, no.”

He later said this was “an unlikely scenario, at this point in time, because we have absolutely no information on that refinery. To make such a decision would involve detailed, in-depth analysis. Also, it’s not part of our core business.”

“We don’t have the expertise, we don’t have the background information and we don’t see what that’s going to do to add value if we change our business model to include (refining),” Mitchell told Business Day.

***

Venezuela’s Aug. 2018 Oil Output Continues Decline: OPEC MOMR

(Energy Analytics Institute, Jared Yamin, 12.Sep.2018) — Venezuela’s oil production seems on an unstoppable downward trend.

The OPEC country’s production of crude oil fell 2.9 percent to 1,235 thousand barrels per day (Mb/d) in August 2018 compared to 1,272 Mb/d in July 2018, according to data published in OPEC’s Monthly Oil Market Report, published on September 12 and citing data based on secondary sources.

Ecuador

Ecuador’s oil production rose slightly to 529 Mb/d in August 2018 compared to 525 Mb/d in July 2018, according to OPEC’s secondary sources data.

***

Jamaica’s Economy Gets $5 Bln From PetroCaribe Over 13 Years

(CMC, 12.Sep.2018) — Jamaica says it has benefitted from projects estimated at US$5 billion under the Venezuela-led PetroCaribe initiative over the past 13 years.

CEO of the Petro-Caribe Development Fund Dr Wesley Hughes said the contributions of the fund to Jamaica have been “meaningful and significant”.

Speaking earlier this week at a ceremony marking the 203rd anniversary of the Jamaica Letter written by Venezuela’s liberator Simón Bolívar in 1815, Hughes said the PetroCaribe Development Fund, which has a mandate to strengthen national capacity in the areas of human capital, culture, infrastructure and the environment, had established the Simón Bolívar Cultural Centre as an important vehicle in strengthening the friendship between the two countries.

Hughes said the Jamaica Letter has had a “long-lasting impact on Venezuela and on all of Latin America, and I dare say the Caribbean”.

He said the letter demonstrated that Simón Bolívar understood that social and political organisations had to be based on national foundations and must be inclusive of all classes of the people who lived in those societies.

“Today, 203 years later, we stand here, a few metres from where Simón grappled with the ideas of nationhood, independence and national identity, and how leaders should relate to their citizens,” he added.

PetroCaribe is an oil alliance of many Caribbean states with Venezuela to purchase oil on conditions of preferential payment. The alliance was launched on 29 June 2005 in Puerto La Cruz, Venezuela. In 2013 Petrocaribe agreed for links with the Bolivarian Alliance for the Americas (ALBA) to go beyond oil and promote economic cooperation.

***

Venezuela Constituent Assembly Seeks to Woo Private Oil Investment

(Reuters, Mayela Armas, 12.Sep.2018) — An overhaul of Venezuela’s constitution being prepared by the pro-government Constituent Assembly will likely include changes intended to attract private investment in the country’s oil fields, according to two assembly members.

Production by the OPEC nation’s oil industry is at a 60-year low, leaving President Nicolas Maduro’s government strapped for cash as it grapples with hyperinflation and a fifth year of economic contraction.

The Constituent Assembly, whose powers supersede those of the country’s Congress, would reword some articles of the constitution to reduce emphasis on state control of oil and ease the way for private investment, the assembly members said.

“We must take into account the economic situation of the country. You need investments to recover production,” said Assemblyman David Paravisini.

Assembly colleague Hermann Escarra echoed Paravisini.

***

PDVSA to Reopen Damaged Port Dock by Month’s End -Documents

(Reuters, Marianna Parraga, 12.Sep.2018) — PDVSA expects to reopen the south dock of Venezuela’s main oil port Jose by the end of September, easing strains on crude exports delayed due to a tanker collision last month, according to internal trade documents from the state-run oil firm seen by Reuters.

Last week, PDVSA began diverting tankers to Puerto la Cruz for loading, but the South American country’s crude exports have remained slow in recent weeks as few customers have accepted the 500,000-barrel-per-cargo maximum neighboring terminals can handle.

Besides Puerto la Cruz, tankers waiting to load a total 2.65 million barrels of Venezuelan upgraded and diluted crudes also plan to be serviced this month by two monobuoys at Jose, including cargoes scheduled for U.S.-based Chevron Corp and Russia’s Rosneft, the documents showed.

But a 1-million-barrel cargo of diluted crude oil (DCO) scheduled to be lifted by Rosneft at Jose between late September and early October was cancelled, according to the documents.

Rosneft and PDVSA in April agreed to a “remediation plan” to refinance an oil-for-loan agreement after delays to deliver cargoes of Venezuelan crude on time. DCO shipments scheduled since then belong to that plan.

PDVSA did not immediately reply to a request for comment.

At least three other 500,000-barrel cargoes for Valero Energy and PDVSA’s U.S. refining unit Citgo Petroleum plan to be loaded at Jose’s available docks and monobuoys in the coming days, after delays.

Valero also would pick up two additional 600,000-barrel cargoes of Morichal crude after a maintenance project that would halt the 150,000-barrel-per-day Petromonagas crude upgrader in August was again postponed, allowing more production.

PDVSA and its joint ventures exported 1.292 million barrels per day (bpd) of crude last month, a 7.7 percent decline versus July, according to Thomson Reuters trade flows data.

The country’s oil output fell again in August to 1.448 million bpd, according to numbers reported by OPEC on Wednesday. Venezuela’s accumulated annual production this year is 1.544 million bpd, the lowest since 1950. (Reporting by Marianna Parraga in Mexico City Editing by Marguerita Choy)

***

Maduro Looks to China to Bolster Venezuela’s Collapsing Economy

(Afp, 12.Sep.2018) — Venezuela’s President Nicolas Maduro departed Wednesday for China in search of agreements to bolster the oil-exporting country’s collapsing economy.

Maduro said the trip was “very necessary, very opportune and full of great expectations.”

“We are leaving under better conditions, having activated a program of economic recovery, growth and prosperity. We are going to improve, broaden and deepen relations with this great world power,” he said in a televised address.

Maduro’s government has massively devalued the national currency as part of a raft of measures intended to halt the economy’s free-fall into hyperinflation.

The International Monetary Fund projects Venezuela’s inflation rate will reach 1,000,000 percent by the end of the year.

Hundreds of thousands of Venezuelans have fled the country, most of them into neighboring Latin American countries.

The trip to China is Maduro’s first outside the country since he was allegedly targeted by exploding drones at a military parade in Caracas August 4.

***

Jamaica: Gas Prices Down $0.72, Diesel Down $0.35

(Jamaica Gleaner, 12.Sep.2018) — Gas prices are to go down by $0.72 tomorrow Thursday, September 13

The state-owned oil refinery, Petrojam, says E-10 87 will sell for $137.82 per litre and a litre of E-10 90 will sell for $140.65.

Automotive diesel oil will go down by $0.35 per litre to sell for $140.50.

The price of Kerosene will move down by $0.28 with that fuel to sell for $123.22.

In the meantime, propane cooking gas will go down by $0.35 to sell for $58.73, while butane will go down by $0.62 to sell for $64.75 per litre.

Retailers will add their mark-ups to the announced prices.

***

Ecuador Holds Open Licensing Round for Eight Onshore Blocks

(World Oil, 12.Sep.2018) — Carlos Pérez Garcia, Minister of Energy and Non-renewable Resources in Ecuador has announced an open licensing round for eight blocks onshore Ecuador, in Sucumbíos Province.

These comprise: Araza Este, Changue, Iguana, Perico, Espejo, Pañayacu Norte, Charapa and Sahino. The blocks offered are all onshore, conventional opportunities, most with prospective sandstone reservoirs (one with a carbonate reservoir). All are low-risk exploratory blocks and are located close to established fields.

Ecuador is an under-explored country with high oil potential. Existing infrastructure and well-developed oil services industry presents an attractive opportunity to take hydrocarbons to market. The Ministry is offering a Participation Contract, that is equitable and competitive and allows companies to share production and book reserves.

The Intracampos round is an exciting new opportunity to increase investment in the country, as Ecuador offers opportunities for short medium and long-term investment, with future rounds planned.

The licensing round will be launched in Quito at the JW Marriott to invited parties only, on Sept. 11, and the latest date for submission of proposals will be January 2019.

Presentations and data rooms will also take place in Houston on Sept. 25-27, at the St Regis Hotel, Houston.

Data available for viewing includes 3D and 2D seismic, correlation wells (LAS, ASCII or Images) and production data from analog fields.

On the morning of Sept. 25, there will be an opportunity to hear presentations on the exploration opportunities, the contractual and fiscal terms, and the legal framework for upstream petroleum activities in Ecuador. Private data or meeting rooms will be available for two further days, with slots available to book.

***

Venezuela Oil Production Continues to Collapse

(Energy Analytics Institute, Jared Yamin, 12.Sep.2018) — The decline is consistent and constant as well as consistently and constantly bad, writes Caracas Capital Market in a research note emailed to clients.

Summary details from the research note follow:

OPEC released the production counts for its member states today and while overall OPEC production was up 278,000 barrels per day (bpd) during the month, Venezuela’s production continued to collapse.

According to OPEC’s August calculations, Venezuela production fell another 36,000 barrels per day (bpd) to 1.235 million bpd. (Venezuela production actually fell 43,000 bpd from the original OPEC July count of 1.278, but OPEC revises their numbers as new data comes in later in the month and moved Venezuela’s July production count down to 1.272 million bpd from the original 1.278 bpd), according to the research note.

“The decline is consistent and constant.”

OPEC calculated that July’s Venezuelan production fall was 42,000 bpd and that June’s fall was 48,000 bpd. In May, Venezuela production fell 43,000; in April, -42,000 bpd; in March, -55,000 bpd; in February -52,000 bpd; in January, -47,000 bpd. Consistently and constantly bad.

In the one year period from August 2017 — when PDVSA was producing 1.918 million bpd — Venezuela has lost 683,000 bpd of production. At the current year average price, that is lost income of $47 million a day and $17.5 billion in a year.

Making this situation worse is that Venezuela’s current 1.235 million bpd production is just a shade more than a third of what the country was producing 20 years ago before Chavez came to power. Hundreds of billions of dollars lost through communism, corruption and incompetence in a country that can ill afford it.

“By the way, we are seeing just one example of how that corruption works in a case playing out before the U.S. Federal District Court in Miami that sucked $1.2 billion from PDVSA in what I label a ‘perpetual money machine for bad guys’ in today’s Miami Herald and El Nuevo Herald, writes Caracas Capital Markets Managing Partner Russ Dallen. “The cast of characters reaches all the way to the top and includes the Derwick boys (especially Francisco Convit), the Boligarch Raul Gorrin (who bought Globovision), the Maduro family (especially the stepsons ‘los chamos’ but also mentions mother Celia Flores and Nicholas Maduro), and a Swiss banker who has copped a deal to tell all (but still had to put up a $5 million bond yesterday).”

Drilling Rigs Fall

Meanwhile, Venezuela’s drilling rig count dropped by one in August, continues the Caracas Capital Market report.

Baker Hughes reports that the number of active drills operating in Venezuela fell to 27 last month, after popping up 2 in July off June’s thirty year low of 26. One of the two drills that was added in July was drilling for gas – the first in over a year. It was still deployed in August.

Having failed to capitalize on its natural gas (much less build the Mariscal Sucre LNG plant) for decades, Venezuela signed a deal last week to link into an already existing gas pipeline at a Shell platform in bordering Trinidad waters and through that pipeline pump gas to Trinidad’s Atlantic LNG plant where it will be converted into LNG for export.

Long time readers will also recall that Rosneft was given a 30 year totally wide-open lease on a gas field in that area last year.

Maduro Goes to China

Finally, as we predicted in our “China Promises Venezuela More Money” Report yesterday and correctly forecast in a Report and Wall Street Journal column in July, Venezuela seems to be making headway in getting help from the Chinese, writes Dallen.

“No one else seems to have been able to accurately uncover and read these Chinese tea leaves, so I am especially proud of our Caracas Capital team. We continue to knock the ball out of the park for our clients,” writes Dallen.

Maduro has just announced that he is going to China to sign some big new deals.

Minister of Oil and PDVSA head Manuel Quevedo is also in Beijing meeting with CNPC and is offering to expand natural gas agreements as well. Yesterday, Venezuela’s oil ministry released a statement touting that the Sinovensa joint venture had increased oil production from 70,000 bpd to 110,000 bpd.

Aside from oil, gas and drilling, we are anticipating some other upcoming ventures in gold mining, coltan and diamond mining, concludes the Caracas Capital Market note.

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UNICEF Works on Developing Resilience in Caribbean Islands Affected by Hurricanes

A year after two category 5 hurricanes caused destruction across parts of the Caribbean, most children in the affected countries are now back in school and have access to the services they need, thanks to the efforts of UNICEF and partners. In Anguilla, children draw as part of their Return to Happiness session. © UNICEF/UN0180293/Ward (CNW Group/UNICEF Canada)

(UNICEF Canada, 12.Sep.2018) — A year after two category 5 hurricanes caused destruction across parts of the Caribbean, most children in the affected countries are now back in school and have access to the services they need, thanks to the efforts of UNICEF and partners.

In September 2017, hurricanes Irma and María caused catastrophic damage and severely impaired facilities and services, including schools, water systems and more, across several countries in the Eastern Caribbean, Cuba and Haiti, leaving at least 1.4 million people, including 357,000 children, in dire need of assistance. A year later, most of the affected children have returned to school, and resumed their access to services—including water and sanitation.

“Despite the fact that rebuilding and recovery are almost complete, vulnerable children in these countries remain our priority, responsibility and mandate,” stated Maria Cristina Perceval, UNICEF Regional Director for Latin America and the Caribbean. “In a region impacted by hurricanes and climate vulnerabilities, building resilience is not just an option, but a need, especially for vulnerable communities and even more so, children,” she added.

The extent of the hurricanes’ impact on several islands had initially made it extremely challenging for UNICEF and partners to reach children and families most in need.

However, thanks to the generous support of donors and partners, $11.6 million was raised in the aftermath of the hurricanes last year, which helped alleviate the impact on affected children and young people. Water and sanitation services were restored, children could go back to school as buildings were rebuilt and classrooms re-stocked, family-friendly safe spaces were set up that provided psychosocial support, and a cash assistance programme was set up for families in need.

Now, with the new hurricane season underway, the continuity of programmes that began during the emergency response last year remains crucial as efforts are made to reinforce the preparedness and social protection systems; to minimize the possible consequences of future catastrophes and the effects of climate vulnerabilities; and to promote resilience in the region.

As part of its response to build resilience amongst children and communities:

— In the Eastern Caribbean countries of Anguilla, Barbuda, British Virgin Islands, Dominica and the Turks and Caicos Islands, UNICEF will continue to support the implementation of the Caribbean Safe Schools Programme, and work with governments to strengthen social protection systems. Under this programme 25,000 children in five countries will be part of disaster risk reduction plans, which are aimed at making the region’s education sector more resilient to hurricanes and other natural disasters.

— In Haiti, where 126,000 children were affected, UNICEF has invested in cholera prevention initiatives in the most affected areas and will continue to support the sustainability of prevention and protection systems.

— In Cuba, where 176,000 children were affected, UNICEF is providing critical items to support the re-establishment of a protective learning environment for 53,261 girls and 54,879 boys in 14 prioritized municipalities. In addition, in support of efforts to rehabilitate education infrastructure, UNICEF procured 56,000 m2 of waterproof covers for 69 schools and kindergartens. UNICEF also reached a total of 560,315 people (274,554 women and girls) in the 14 prioritized municipalities with safe water treatment and storage.

About UNICEF

UNICEF has saved more children’s lives than any other humanitarian organization. We work tirelessly to help children and their families, doing whatever it takes to ensure children survive. We provide children with healthcare and immunization, clean water, nutrition and food security, education, emergency relief and more.

UNICEF is supported entirely by voluntary donations and helps children regardless of race, religion or politics. As part of the UN, we are active in over 190 countries – more than any other organization. Our determination and our reach are unparalleled. Because nowhere is too far to go to help a child survive. For more information about UNICEF, please visit www.unicef.ca. For updates, follow us on Twitter and Facebook or visit unicef.ca.

IEnova, BP Sign Contract For Liquid Fuels Terminal In Baja California, Mexico

(Sempra Energy, 11.Sep.2018) — Sempra Energy announced its Mexican subsidiary, Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) signed a long-term contract with British Petroleum (BP) for the remaining 50 percent of the initial capacity of the proposed Baja Refinados liquid fuels marine terminal in Baja California, Mexico.

Under the agreement, BP will have storage capacity of 500,000 barrels of liquid fuels to supply its growing network of service stations in northern Mexico. In addition, subject to the execution of certain agreements, BP will have the option to acquire up to 25 percent of the terminal’s equity after commercial operations begin in the second half of 2020.

In April, IEnova announced it signed a long-term contract with Chevron Combustibles de México S. de R.L. de C.V for approximately 50 percent of the facility’s initial storage capacity to supply Chevron service stations and other commercial and industrial consumers.

“The Baja Refinados project is an important part of our growth strategy,” said Carlos Ruiz Sacristán, chairman and CEO of the Sempra North American Infrastructure group and chairman of IEnova. “This new terminal will increase Baja California’s energy reliability and will foster competitive prices for gasoline and other refined products on the West Coast of Mexico.”

IEnova will be responsible for the development of the liquid fuels terminal project, including financing, obtaining permits, engineering, procurement and construction, as well as maintenance and operations. The project will be located at the La Jovita Energy Hub in Ensenada and have an initial capacity of 1 million barrels of liquid fuels, with the potential for future expansion.

IEnova develops, builds and operates energy infrastructure in Mexico. As of the end of 2017, the company had invested more than $7.6 billion in operating assets and projects under construction in Mexico, making it one of the largest private energy companies in the country. IEnova was the first energy infrastructure company to be listed on the Mexican Stock Exchange.

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Mexico Oil Production to Reach 2.6 MMb/d by 2025: Lopez Obrador

(S&P Global Platts, Daniel Rodriguez, 11.Sep.2018) — Mexico’s President-elect Andres Manuel Lopez Obrador said Sunday he plans to focus on developing and exploring onshore and shallow water areas under the control of state oil company Pemex to boost the country’s oil production.

“We have a projection, and our plan is to have production of at least 2.6 million b/d by the end of the presidential term; additional production of 800,000 b/d,” Lopez Obrador said in webcast press conference.

Lopez Obrador was speaking to journalists after a meeting with Mexican drilling and oil service companies at Villahermosa in Tabasco.

Mexico’s production averaged 1.8 million b/d in July, down from an historical high of 3.4 million b/d in 2004, latest data from Mexico’s National Hydrocarbon Commission showed.

Lopez Obrador said the incoming administration plans to tender drilling contracts in December when his six-year term begins to develop Pemex’s shallow water and inland areas to boost oil production. “We are inviting all companies to participate in these tenders. However, we will have a preference over domestic contractors,” he added.

He said he planned to add Peso 75 billion ($3.9 billion) to Pemex’s exploration and production budget to boost drilling and thus raise output. The tenders will help Mexico reverse its production downtrend by the end of 2019, he added.

Mexico’s oil industry is at a crisis as a result of low public investment in the sector. Pemex in 2017 had an E&P capital expenditure budget of Peso 81.5 billion, down from Peso 222 billion in 2014, the company’s annual financial statements show. The cut in Pemex’s budget resulted in a significant decrease in drilling activity; it drilled 83 wells in 2017, compared with 705 in 2013.

Lopez Obrador blamed the previous administration for Pemex’s lower capital expenditure, claiming it was done on purpose amid expectations the private sector would offset lower activity from the state company. “It has been a complete failure, this wrongly named energy reform,” Lopez Obrador said

The president-elect has historically been an opponent of private participation in Mexico’s energy sector. His critics note Pemex’s spending cuts reflect lower global oil prices after 2014.

The president-elect neither mentioned the long-term nature of the energy sector nor the advances made by Eni at Amoca, PanAmerica with Hotchi and Talos with Zama, where peak production across the three fields could be above 250,000 b/d.

Analysts also point out that Lopez Obrador does not acknowledge that it has been a challenge for Mexico to replace production from the aging Cantarell super field, which produced 2.1 million b/d in 2003 and but 160,000 b/d in July.

Mexico won’t call for new hydrocarbon auction rounds until all 107 contracts awarded to date under the energy reform are reviewed for corruption, Lopez Obrador said.

“The majority aren’t working, there is no investment, but those 107 contracts don’t include all the oil regions in the country, just a fraction of Mexico’s hydrocarbon potential,” he added.

The president-elect did not indicate when this contract review process could conclude. Currently, Mexico’s National Hydrocarbon Commission is organizing two gas-rich auction rounds, which are expected to be awarded in February.

The commission postponed both auctions as well as a Pemex’s auction to farm out seven onshore clusters in southern Mexico from this summer until the coming year, citing a request from the industry for more time to analyze the areas as well as the opportunity to involve the incoming administration in the process.

Lopez Obrador said the state owns all of Mexico’s oil resources, and has greater control over areas that have not yet been assigned. “The greater majority of our oil potential is still under the control of Pemex,” he added.

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Ecopetrol Gets Approval for Contingent Credit Line for $665 Million

(Ecopetrol S.A., 10.Sep.2018) — Ecopetrol S.A. announced that as part of its integral debt management strategy, it will sign a contingent line of credit for $665 million with Scotiabank ($430 million) and Mizuho Bank ($235 million).

Under this type of facility, known as a committed line of credit, Scotiabank and Mizuho Bank agree to disburse funds as and when Ecopetrol requires them, under terms and conditions previously agreed between the parties. This facility would increase the Company’s indebtedness only when the disbursements are made.

The contingent line will have a two (2) year availability period for disbursements, subject to the following conditions: (i) principal amortizable upon maturity after a five-year term as from the signing date of the agreement, and (ii) an interest rate of 6-month LIBOR + 125 basis points and an annual fee of 30 basis points on principal not disbursed during the availability period.

Resources to be deployed under this contingent line may be used for general corporate purposes, among them to strengthen Ecopetrol’s liquidity position in the face of eventual growth opportunities, to mitigate risks associated to unexpected fluctuations in crude prices, as well as to reduce refinancing specific needs in the coming years, with flexibility and low financing costs.

To obtain the committed line of credit, the Company complied with all required internal and external procedures and approvals, including the corresponding Authorization Resolution by the Ministry of Finance and Public Credit

**.

The conditions obtained confirm the local international financial sector’s confidence in the Company.

** This administrative act can be subject to clarifications or changes, ex officio or at request of a party, in accordance with the legal mechanism that are applicable to the effect.

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Excelerate Energy, TGS Sign Deal to Study Liquefaction Project in Bahía Blanca

(Excelerate Energy L.P., 10.Sep.2018) — Excelerate Energy L.P. and Transportadora de Gas del Sur S.A. announced the execution of a Memorandum of Understanding to jointly collaborate on the assessment of a liquefaction project in the city of Bahía Blanca, Argentina. Argentina currently imports liquefied natural gas (LNG) through two floating import terminals, particularly during the country’s peak winter consumption. The successful development of Argentina’s shale gas reserves resulted in a potential excess of natural gas during the summer months. The project aims at studying the technical and commercial viability of liquefying and exporting natural gas during the summer season, allowing a more sustainable development of shale gas resources and reducing Argentina’s annual natural gas net import needs. The study is expected to be completed by the end of 2018, at which time Excelerate and TGS will share the results with government and industry officials and decide on further actions towards the implementation of the Project.

“Given the high seasonality of Argentina’s natural gas consumption, LNG has played a critical role in meeting the country’s energy demands,” stated Excelerate’s Chief Commercial Officer Daniel Bustos. “This Project will significantly enhance Argentina’s capacity to maximize the use of local resources by allowing a more predictable development of shale gas production while reducing the overall costs of importing LNG.”

TGS is carrying out an important midstream project aimed at the transportation and conditioning of the natural gas production derived from the Vaca Muerta Basin, located in the province of Neuquén, Argentina. This Project represents an essential contribution to the development of shale gas reserves, promoted by the National and Provincial Governments, as it will ensure the infrastructure required to inject incremental gas production to the main transportation systems.

“Carrying out LNG production through the Project will be key to promote the development of unconventional gas, since it will allow to expand the scale of the gas market, increasing export opportunities, after having met domestic market needs in Argentina,” stated TGS’ Chief Commercial Officer Néstor Martín.

Both Excelerate and TGS have been critical players in the growth of the Argentine energy industry. Currently, one hundred percent of LNG imported and regasified into the country is through Excelerate’s two floating storage and regasification units (FSRUs). Excelerate developed South America’s first LNG import terminal in 2008 in Bahía Blanca, following with the second terminal in 2011 in Escobar, Argentina. TGS is the leading natural gas transportation company in Argentina and owns and operates South America’s largest pipeline network. The project underscores both party’s commitment to seeing Argentina’s energy sector become more sustainable for the long term.

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International Tribunal Rules for Chevron in Ongoing Ecuador Case

(OGJ, Nick Snow, 10.Sep.2018) — An international tribunal administered by the Permanent Court of Arbitration in The Hague found that a $9.5-billion judgment that Ecuador’s government lodged against Chevron Corp. in 2011 violated international treaties, investment agreements, and international law.

Ecuador breached its obligations under a 1995 settlement agreement that released Chevron subsidiary Texaco Petroleum Co. (TexPet) and its affiliates from the same public environmental claims on which the $9.5-billion Ecuadorian judgment was exclusively based, the Sept. 9 decision said.

In a ruling nearly 5 years earlier, the same tribunal said agreements Ecuador’s government signed in 1995 and 1998 released TexPet from environmental liability for land on which it once produced oil (OGJ Online, Sept. 18, 2013). That ruling upheld an important claim Chevron made in its years-long defense against a lawsuit claiming billions of dollars for environmental damage.

In its latest decision, the tribunal found that TexPet “spent approximately $40 million in environmental remediation and community development under the 1995 settlement agreement” carried out by a “well-known engineering firm specializing in environmental remediation” and that Ecuador in 1998 executed a final release agreement “certifying that TexPet had performed all of its obligations under the 1995 settlement agreement.”

The tribunal found “no cogent evidence” supporting Ecuador’s claim that TexPet failed to comply with the terms of the remediation plan approved by the government. To the contrary, the award recites sworn testimony of Ecuadorian officials that TexPet’s “technical work and environmental work was done well,” while Ecuador’s national oil company “during more than 3 decades, had done absolutely nothing” to address its own environmental remediation obligations in the area, even though Ecuador and its national oil company received 97.3% of the project’s oil production revenues.

“An esteemed international tribunal, including an arbitrator appointed by Ecuador, has unanimously confirmed that, following completion of an agreed environmental remediation program, Chevron was released by the Republic of Ecuador from the environmental claims that the fraudulent Ecuadorian judgment purports to address,” R. Hewitt Pate, Chevron vice-president and general counsel, said on Sept. 9.

“Following years of litigation, including visits to the former area of operations by the tribunal, the tribunal found that Ecuador violated the final release agreement that had certified the successful completion of TexPet’s remediation,” he said.

The tribunal also reached the same conclusion as US courts regarding the issue of judicial fraud, Pate said. “The tribunal found extensive evidence of fraud and corruption by members of the Ecuadorian judiciary acting in collusion with American and Ecuadorian lawyers,” he said.

“This award is consistent with rulings by courts in the US, Argentina, Brazil, Canada, and Gibraltar confirming that the Ecuadorian judgment is unenforceable in any country that respects the rule of law,” Pate said. “Indeed, the tribunal explicitly found that it would be contrary to international law for the courts of any other [nation] to recognize or enforce the fraudulent Ecuadorian judgment.”

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Peru-Petro President Says Proposed Hydrocarbon Law “Favorable”

(Energy Analytics Institute, Piero Stewart, 10.Sep.2018) — The proposed Law for the Promotion of the Hydrocarbons Industry, which will be debated shortly by Congress, is “favorable” for the country’s oil sector, announced Peru-Petro President Seferino Yesquén.

The official, speaking during an interview with Andina, said the law is “favorable” because it will “modernizes the sector and allow for faster investments.”

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Stena Bulk, Petrobras, Ink Two-Year Contract

(Energy Analytics Institute, Jared Yamin, 8.Sep.2018) — Stena Bulk signed a deal to charter two MR tankers to Petrobras.

Under the deal, Stena Bulk will charter its MR product tankers Stena Conqueror (47,000 dwt, built in 2003) and Stena Conquest (47,000 dwt, built in 2004) to Brazil’s state-owned oil company.

“We have a long-standing, highly-valued relationship with Petrobras when it comes to both Suezmax and MR tankers and we are committed to continue to provide them with safe and efficient deliveries,” said Stena Bulk CEO and President Erik Hånell in an official company statement.

The contract is for a term of two years and includes the option to extend the charters for another 11 months. The vessels will carry refined products along the Brazilian coast.

“We continue to cater for Petrobras’ shipping requirements as a preferred customer and logistical partner of Stena Bulk,” said Stena Bulk Products & Chemicals USA General Manager Claes Leschly Bang.

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Venezuela Wants To Overhaul State Oil Firm PDVSA

(Oilprice.com, Tsvetana Paraskova, 7.Sep.2018) — Venezuela has set up a commission that will be working to reshuffle and reorganize its state oil firm PDVSA in the next few months, according to the country’s Official Gazette on Thursday, in what would be the latest Venezuelan attempt to show that it is trying to revitalize its dying oil industry.

According to OPEC’s secondary sources, Venezuela’s oil production in July dropped to below the 1.3-million-bpd mark—at 1.278 million bpd, plunging 47,700 bpd from June. This compares with an average of 2.154 million bpd in 2016, and an average of 1.911 million bpd in 2017.

Some analysts expect Venezuela’s production to fall to below 1 million bpd by the end of this year.

Venezuela has been claiming lately that it plans to raise its oil production.

Last week, PDVSA said that it signed a US$430 million joint service agreement with seven companies that would help it increase its crude oil production by 641,000 barrels per day.

On top of the incessant production slump, PDVSA has seen difficulties in exporting its oil cargoes after a partial closure at the Jose port at the end of August delayed shipments.

A week before that, ConocoPhillips reached a settlement with PDVSA to recover the full US$2-billion amount that an international court awarded it earlier this year for the expropriation of its oil assets in Venezuela a decade ago. PDVSA agreed to settle the dispute with Conoco and possibly save some assets in the Caribbean from seizures, as the U.S. oil firm said that it would be suspending the legal actions to enforce the award.

PDVSA has 90 days from August 20 to make the first US$500 million payment of the award to Conoco. On September 5, Conoco’s chief executive Ryan Lance said that the U.S. company was still awaiting the payment, but expected Venezuela to honor the settlement agreement. If payments aren’t made, however, ConocoPhillips would resume its legal enforcement actions, Lance noted.

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Frontera Receives Global Compact Awards from UN

(Frontera Energy Corporation, 7.Sep.2018) — Frontera Energy Corporation has been named a Canadian Sustainable Development Goals award winner for the second consecutive year by the Global Compact Network Canada, the Canadian network of the United Nations Global Compact.

Frontera was awarded the SDG Leadership Award in the large organizations category, through public voting, for its outstanding efforts in adopting and implementing the United Nations Sustainable Development Goals in its engagement with indigenous communities in Colombia and Peru.

The public also voted Frontera as the winner of the ‘Partnership Award’ for its excellent work in engaging stakeholders through ongoing partnership and advancement towards the Sustainable Development Goals.

“We are proud of our commitments and continuing a legacy of sustainable growth for our stakeholders. We congratulate the United Nations Global Compact Network Canada on their five-year anniversary and the large impact they have made on promoting Sustainable Development Goals in Canada,” said Frontera Chief Executive Officer Richard Herbert.

These awards intend to encourage all Canadian organizations to embed the 17 Sustainable Development Goals within their organizations and highlights the progress that both private and public sectors have made towards solving pressing environmental, social and economic challenges. Since its inception in 2013, the Canadian Chapter of the United Nations Global Compact has been dedicated to assisting over 150 Canadian organizations with the advancement of the United Nations Global Compact’s 10 Principles and 17 Sustainable Development Goals.

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Guyana’s Jan Mangal Warns of Cash Payouts

(Stabroek News, 7.Sep.2018) — Former presidential advisor Jan Mangal has warned that while cash payouts from oil revenue may have an important role to play in the future, at this point it could be a distraction from the larger goal of clawing back wealth.

His reference in a Facebook post today to  clawing back of wealth will be seen as a reference to the widely criticised terms of the Production Sharing Agreement between Guyana and ExxonMobil subsidiary, Esso Exploration and Production Guyana Limited.

Potential cash payouts have taken centre stage following a recent proposal by Professor Clive Thomas at a forum in Buxton.

Mangal, who has become a vocal critic of aspects of the Exxon deal and the handling of the oil and gas sector here warned that oil companies have various stages in how to make countries forfeit their wealth.

He said:

“1. The oil company and their agents will first influence the politicians. They do this very well. They do it all the time all around the world (in the rich countries as well). This has already happened in Guyana.

“2. Then they will influence the private sector by giving them some contracts. This has already happened in Guyana, judging by the words/ actions of the private sector, judging by how some prominent Guyanese have suddenly gone quiet or changed their tune (lawyers, business people, board members, etc). CSR, grants and donations also are used by the oil companies to influence people and institutions. Please take the money, but it will not help Guyana if we take the money then go quiet and stop visibly speaking out for our country.

“3. Then the most challenging is the influence of the people. But this is doable in Guyana due to its small population, its divisions, its corruption, and its flawed “winner takes all” system of governance. One way to influence the people is by direct cash disbursements to the people. Give people a couple hundred US dollars a year and they may no longer care if the royalty is 2% or 15%. Hence, we have to be careful. Direct cash disbursements have an important role to play in the future (as some have been discussing recently), but not now as an election variable, and not now as a distraction for the people. We need to focus on the more important prize, which is clawing back more of our wealth for ourselves, and also securing that wealth. The wealth will come for everyone if we work hard, do not be intimidated, and do not repeat the mistakes from other countries.

“The odds are stacked against Guyana, but Guyana can succeed”.

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Petrobras Unveils Gasoline Hedge in Bid to Weather Volatility

(Reuters, 6.Sep.2018) — Brazil’s state-run oil company Petroleo Brasileiro SA on Thursday unveiled a hedging program for gasoline prices in a bid to boost pricing flexibility and protect its financial results during times of high volatility.

Petrobras, as the company is known, said in a securities filing the program would allow it to change the frequency of pricing adjustments in the domestic market, keeping them stable for up to 15 days at a time.

The logo of Brazil’s state-run Petrobras oil company is seen on a tank in at Petrobras Paulinia refinery in Paulinia, Brazil July 1, 2017. Reuters/Paulo Whitaker

Petrobras will buy gasoline futures in U.S. markets as part of the program, said Chief Financial Officer Rafael Salvador Grisolia at a news conference. He said the policy would go into effect immediately.

The company would only keep prices on hold for two weeks at a time during times of volatility in international markets and would keep daily pricing adjustments as an option, he said.

Preferred shares in Petrobras were down 0.4 percent in mid-morning trading in Sao Paulo, at 18.59 reais, whereas the benchmark Bovespa index was up 0.2 percent.

Itau BBA analysts said there is uncertainty around “how the strategy will be employed”, as the structure of hedge positions while prices are frozen is unknown. Gabriel Francisco, analyst at XP Investimentos, said the hedging policy is negative, as “it may be interpreted as a setback to a market-based pricing policy”.

The move comes after a truckers’ strike over rising diesel prices paralyzed Latin America’s largest economy in May and forced unpopular President Michel Temer to cut diesel costs through a mix of tax breaks and subsidies.

The tumult prompted Petrobras’s chief executive officer to resign and raised fears of government meddling in pricing, which has cost Petrobras billions of dollars in the past. Petrobras has not yet been compensated for the subsidies that took effect in June.

In the meanwhile, there has been speculation over whether the company will face pressure to lower gasoline prices, which have climbed internationally as oil prices have gained ground.

Petrobras said on Thursday it was still committed to allowing gasoline prices to fluctuate in line with international markets and the exchange rate.

It also promised to uphold a policy, in effect since October 2016, of not pricing the fuel below international parity.

Reporting by Marta Nogueira, Alexandra Alper and Paula Laier; Editing by Bernadette Baum and Alistair Bell

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Argentina to Seek Bids on Renewable Energy Projects

(Efe, 6.Sep.2018) — The government of Argentina announced Thursday that it will launch a third round of tenders for bids on renewable energy projects in October.

The announcement was made by the undersecretary of Renewable Energy, Sebastian Kind, during the Argentina Wind Power 2018 conference, organized by the Global Wind Energy Council.

The third round of the RenovAr program will seek to take advantage of the existing medium-voltage networks.

Kind explained that, while Argentina works on expanding its high-voltage networks, the government seeks to promote diverse renewable energy projects throughout the country that will use the existing medium-voltage networks.

“We seek to bring in capital from non-traditional actors to develop renewable energy projects and take advantage of the existing medium-voltage networks to promote regional development,” Kind said.

The undersecretary said that the projects will be presented next March, and that the contracts are expected to be signed in July 2019.

“We have taken the decision to make the announcement beforehand (…) to provide more time for the projects to be designed,” he said.

The Argentine government has already developed two stages of its RenovAr program, the first having begun in 2016, when 17 renewable energy projects for 1,109 MW were assigned.

RenovAr 2, for its part, was launched last year, when 22 projects for 634.3 MW were allotted.

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Output from Main Pre-Salt Field to Peak in 2019

(Efe, 6.Sep.2018) — Output from Brazil’s most prolific pre-salt field will climb to a peak of 1 million barrels of oil per day in 2019, according to the executive manager for deep-water exploration and production at state oil company Petrobras.

The Lula field, located in the Santos Basin, will achieve that level after two Floating Production Storage and Offloading (FPSO) units are put into operation this year, Joelson Falcao Mendes said.

“The P69 will start production in October and the P67, which is currently in Guanabara Bay (in southeast Brazil), in December or January,” he added.

Seven FPSO units are currently in operation at the Lula field, each with the daily capacity to process 150,000 barrels of oil and compress 6 million cubic meters (211.5 million cubic feet) of natural gas.

Brazil achieved output of 1.5 million barrels of pre-salt oil per day in 2018, a milestone that comes 10 years after the start of hydrocarbon production in that ultra-deep frontier.

At present, average production at the Lula field amounts to around 850,000 barrels of oil per day.

Petrobras says output at the pre-salt fields is expected to grow steadily through 2022 with the entry into operation of an additional 13 FPSO units and investment outlays totaling $35 billion.

Pre-salt fields are located in ultra-deep water some 300 kilometers off the coast and underneath a layer of salt up to 2 kilometers (1.2 miles) thick.

The Lula field is located in the BM-S-11 block, in which Petrobras has a 65 percent stake and the BG Group and Portugal’s Galp Energia have 25 percent and 10 percent stakes, respectively.

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Guyana Gov’t to Proceed with Energy MoU

(Stabroek News, 6.Sep.2018) — The signing of the Memorandum of Understanding (MoU) on Energy Sector Cooperation between the governments of Guyana and Trinidad and Tobago, paving the way for cooperation in oil and gas between the two states, will proceed as planned next week, despite a call by the city chamber of commerce for it to be put on hold.

Meanwhile, the Guyana Oil and Gas Energy Chamber President Manniram Prashad has said that even though it has not seen the MoU, it will support it if it is in the interest of Guyanese businesses and the Guyanese people.

On Wednesday, Prashad’s colleague, President of the Georgetown Chamber of Commerce and Industry (GCCI) Deodat Indar called for government to hold off on the signing until the group has a clear idea of what the MoU entails.

Read the complete story here.

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