(Energy Analytics Institute, Aaron Simonsky, 13.Nov.2018) — Argentina’s Energy Secretary Javier Iguacel participated in the annual Independent Petroleum Association of America (IPPA) meeting held in New Orleans, Louisiana.
“We have a great opportunity to give Argentine citizens plenty of energy and at affordable prices. We are very happy because today we see there are many North American companies wanting to invest in Argentina with local companies,” reported Argentina’s Treasury in a statement on its website, citing Iguacel. “This will not only allow us to accelerate development of Vaca Muerta, but it will generate a lot of work and progress for many Argentine citizens.”
The meeting was attended by 35 Argentine companies and more than 50 North American companies interested in developing Argentina’s conventional and unconventional hydrocarbon potential and its value chain.
Companies in attendance included but were not limited to the following: Perez Companc Group, SICA Metalúrgica Argentina, SIDECO, MEDANITO-FLARGENT, CUDD, Ardyne, Nine Energy Service and Evcam, among others.
Also participating in the meeting was Argentina’s Ambassador to the U.S. Fernando Oris de Roa; Office of International Affairs of the U.S. Department of Energy Advisor Kennet Stevens; and Overseas Private Investment Corporation (OPIC) Advisor Deaver Alexander.
(Energy Analytics Institute, Aaron Simonsky, 12.Nov.2018) — Officials from Argentina initiated a road show today in the U.S. aimed at attracting investments in the Vaca Muerta formation in Neuquen.
Argentina’s Energy Secretary Javier Iguacel, along with officials and representatives from more than 30 oil companies, plan to participate in the investor road show that will take them to several cities in the U.S., reported online media Vaca Muerta News.
(Wall Street Journal, Kejal Vyas and Bradley Olson, 8.Nov.2018) — For nearly a century, Chevron Corp. has weathered dictatorships, coups and nationalization drives to keep pumping oil in Venezuela.
But recently, executives at the last U.S. oil major in the country have debated whether it may be time to get out, according to people familiar with their deliberations.
For now, Chevron hopes to hang on and outlast President Nicolás Maduro, as it did with his late mentor Hugo Chávez and other rulers.
“We’re committed to our position in Venezuela,” Clay Neff, Chevron’s president of exploration and production in Africa and Latin America, said in an interview Thursday following initial online publication of this story.
Chevron’s dilemma is both moral and commercial. The California-based giant long enjoyed close relations with the socialist regime that controls the world’s largest oil reserves, and has earned big money in Venezuela—about $2.8 billion between 2004 and 2014, according to cash-flow estimates by analytics firmGlobalData .
The company is aware a pullout could trigger a collapse of the government’s finances, because a significant chunk of its scarce hard currency comes from joint operations with Chevron.
Chevron has had to put up with many provocations in Venezuela, including late payments, requests for employees to attend political rallies and bickering over loans Venezuela sought because it couldn’t afford oil-field maintenance. Chevron’s joint ventures with the state oil company are regularly subjected to what Venezuelan prosecutors have labeled corrupt overcharging by vendors. Graft and the risk it will worsen have weighed on executives as they consider Chevron’s position in the country.
It has become harder to stomach since the big money disappeared from the Venezuela operations, say people familiar with the company. Chevron operations in Venezuela lost money from 2015 to 2017, according to GlobalData, then eked out a modest profit this year thanks to higher oil prices. Oil fields are aging, and unless more reserves are opened up, Chevron’s work in Venezuela will run out of steam in less than five years, GlobalData estimates.
A turning point for foreign companies operating in Venezuela came in 2006, when Mr. Chávez began nationalizing oil fields managed by foreign operators and sharply raising taxes.
Rewritten contracts made Petroleos de Venezuela SA, known as PdVSA, the operator and majority owner of most projects. Chevron’s top U.S. competitors, Exxon Mobil Corp. and ConocoPhillips ,balked at the changes, left, and filed suit. Exxon has yet to recover the full value of the billions in equipment and other assets it left behind. ConocoPhillips recently reached a $2 billion settlement.
Some European oil companies, such as Total SA and Equinor AS A (then called Statoil), remained but reduced their holdings.
Chevron decided to stay, and—led by a charismatic Iranian-American executive named Ali Moshiri—formed an array of partnerships with PdVSA. Mr. Moshiri, who was head of Chevron’s business in Latin America and Africa, sometimes appeared in public with Mr. Chávez, who called him a “dear friend” on one occasion.
Joint ventures Mr. Moshiri pioneered became a model for foreign companies doing business in Venezuela. A venture called Petropiar between Chevron and PdVSA is one of four so-called upgrader ventures between the state oil company and foreign operators to blend Venezuela’s tar-like heavy crude with lighter oil or other substances and make it transportable.
Though Chevron’s bet paid off financially for years, an oil-price crash beginning in late 2014 triggered a vicious cycle in which government revenue fell and then oil production did, too, as the country placed priority on debt payments over the heavy reinvestment oil fields need to stay healthy.
Since the end of 2017, Venezuela has defaulted on more than $6 billion in debt payments, according to Fitch Ratings, while its crude-oil industry has been reduced close to ruins by neglect and the departure of experienced engineers.
Oil production has fallen to 1.2 million barrels a day from 3.2 million daily in 2006, according to the Organization of the Petroleum Exporting Countries. A country with vast reserves now produces roughly as much oil as the U.S. state of North Dakota. As output has declined, and thus revenue, the country’s economic crisis has worsened.
An investigation in the tiny European nation of Andorra has led to money-laundering charges against 28 people, including former Venezuelan deputy ministers, who allegedly took $2 billion through kickbacks-for-contracts schemes from 2007 through 2012.
Zair Mundaray, a former Venezuelan prosecutor now in exile, said his team uncovered an alleged scheme at the Petropiar joint venture in which PdVSA executives skipped formal contract bidding and handpicked the vendors of a wide range of supplies, from oil equipment to cafeteria coffee, at exorbitant prices. The profits were distributed among certain Petropiar managers, PdVSA higher-ups and the suppliers, the charging documents said.
PdVSA and Venezuela’s Information Ministry didn’t respond to calls and detailed emails seeking comment.
Venezuelan charging documents and purchasing invoices reviewed by The Wall Street Journal allege that contractors pilfered more than $200 million in two years from the joint venture through markups such as $156,000 for printer/copiers and $9,000 for ink-jet cartridges.
Among the accused was Manuel Sosa, a former soap-opera actor who once dated a daughter of Mr. Chávez, whose company supplied the costly printer/copiers. Mr. Sosa pleaded guilty in December and was sentenced to four years’ house arrest in return for his cooperation. He couldn’t be reached for comment.
“Where were the checks? Where was the accounting?” asked Mr. Mundaray. “There’s absolutely no way that [Chevron] did not know what was happening.” He said he has given the evidence he collected to the U.S. Justice Department, which declined to comment.
Pedro Burelli, a former PdVSA board member and a Maduro critic, said Chevron “turned a blind eye to what was going on.”
“When you’ve agreed to work with a majority partner that is derelict, you’re just setting yourself up for a huge risk. You get deeper and deeper, when you should be hitting the red button, to get yourself out,” said Mr. Burelli.
Chevron said it complies with all applicable laws wherever it operates and expects its partners to do so as well. It said it doesn’t control the procurement process in the joint venture, in which Chevron has a 30% nonoperating stake. In oil and gas joint ventures, the operator typically has primary authority over costs, though minority partners are generally consulted and sign off on certain expenses. Chevron said nothing in documents it was shown suggested any wrongdoing by the U.S. company.
Oversight of the investigation changed hands just as it was picking up steam. Mr. Mundaray and his team left Venezuela in August 2017 after their boss, former Attorney General Luisa Ortega, criticized Mr. Maduro for alleged human-rights abuses. The president called the prosecutors traitors.
A new attorney general, Tarek William Saab, provided a list of people accused that lacked some names on Mr. Mundaray’s list.
One missing name was that of former Petropiar chief Francisco Velasquez, who the former prosecutors said splurged on a pink Ferrari and a villa at the exclusive Casa de Campo resort in the Dominican Republic while the oil project suffered backlogs and delays. He couldn’t be reached for comment. Mr. Saab didn’t respond to comment requests.
In April, two Chevron employees working at the Petropiar joint venture were jailed by Venezuelan military intelligence when they refused to sign a contract for oil-processing equipment priced at what they considered well above market value. The employees were released after six weeks of tense negotiations, but not before a thinly veiled threat from Chevron: free them or we will leave, people familiar with the confrontation say.
Chevron confirmed two employees were arrested in April and released in June but said, “We have no further information to share on this matter.”
A dwindling number of foreign companies are still doing business with the Maduro administration, which is facing threats of tougher sanctions by Washington. The U.S. has sanctioned dozens of Venezuelans, including Mr. Maduro, for allegations varying from corruption to human-rights abuses to drug trafficking. The sanctions bar American citizens and companies from doing business with them.
Mr. Maduro has said he wants foreign oil partners to use a cryptocurrency called the petro his government designed to evade U.S. sanctions on Venezuelan debt. The U.S. in March barred Americans from using the petro.
By staying in Venezuela, Chevron risks exposing itself to legal penalties under U.S. anti-corruption laws, some analysts say. Chevron said it “abides by a strict code of business ethics under which the company complies with all applicable international, U.S. and Venezuelan laws.”
Its managers’ meetings with government and PdVSA officials “comply with all applicable laws and regulations, including the U.S. sanctions directed towards Venezuela,” Chevron said.
About 700,000 daily barrels of the country’s oil production comes from joint ventures between PdVSA and foreign companies, consultants say. That includes about 200,000 to 250,000 barrels a day from Chevron ventures.
Joint-venture output has generated far more cash for the government in recent years than oil pumped by PdVSA alone, because the state company’s production has gone to repay debts to allies such as China and Russia or to be processed into gasoline the government provides almost free. That means a Chevron withdrawal would take a big bite out of government’s revenue.
Another foreign company, Royal Dutch Shell PLC, is weighing an exit from most of its remaining operations in Venezuela through a sale of its stake in a joint venture, according to people familiar with its plans. A spokeswoman for Shell said such a deal wouldn’t amount to a total exit, as the company is working to develop Venezuelan gas assets offshore that would supply nearby Trinidad and Tobago.
Some analysts believe other Western companies operating in Venezuela, such as France’s Total or Norway’s Equinor, might feel pressure to follow a departure or partial exit by either Shell or Chevron. At the same time, according to GlobalData, those that stay might be able to gain access to new fields or renegotiate contracts for better terms. Chinese or Russian companies such as PAO Rosneftcould be beneficiaries of any such departures in the long run, analysts say.
Total, Equinor and Rosneft officials either declined to comment or didn’t respond to questions.
Signs of a troubled relationship between Chevron and the Venezuelan government emerged a year ago when Mr. Moshiri’s successor as head of Chevron’s Latin American and African operations, Mr. Neff, sat down for a meeting with Mr. Maduro and other Venezuelan officials.
Venezuelan officials snapped a photo without Chevron’s consent and publicized it. At Chevron headquarters in San Ramon, Calif., concerns grew that the company was being duped into making an appearance in Venezuelan propaganda, people familiar with the matter said.
While such photo ops had occurred before, the country’s worsening economic collapse, plus U.S. sanctions, are making them harder to tolerate, the people said. Chevron declined to discuss the Caracas meeting.
The company’s closeness with the government is generating rancor among PdVSA’s workers, who have been quitting in droves amid hyperinflation that has pummeled their salaries to the equivalent of less than $10 a month.
Jose Bodas, a union leader in eastern Venezuela where Petropiar is located, said photos of sports cars and European vacations posted on social media by managers angers workers who sometimes lack boots and hardhats.
“I’m not opposed to people having Ferraris and mansions, but this is all corruption,” Mr. Bodas said. “I don’t mind saying it—if you’re a multinational working with this government, you’re an accomplice to what’s going on.”
—Ginette Gonzalez and Samuel Rubenfeld contributed to this article.
(Reuters, Maximilian Heath, 8.Nov.2018) — The U.S. decision to review its tariffs on Argentine biodiesel could mean a reversal of fortune for exporters whose shipments from the South American country have been practically nil, the biodiesel chamber of Argentina said on Thursday.
The U.S. Department of Commerce announced on Wednesday there was “just cause” to review the taxes it applied at the end of 2017 to Argentine biodiesel, which cut off access to the main market for Argentina’s product at the time.
“This is a necessary and important first step,” Victor Castro, executive director of the Argentine Chamber of Biofuels (CARBIO), whose members include biodiesel exporters Cargill Inc and Bunge Ltd, told Reuters.
“We are convinced that tariffs are a totally unfair measure and it is very important to be able to export to that market,” he said, adding that due to limited international commercial activity, the production level in Argentine biodiesel plants has been very low.
Argentina is one of the world’s top producers of biodiesel fuel, exporting 1.65 million tons worth $1.224 billion in 2017.
This year, biodiesel producers in Argentina exported almost 1.1 million tons of the fuel between January and August, of which 85 percent went to the EU, according to official data from Argentina state statistics agency INDEC. However, in September and October the volume of biodiesel shipped abroad was zero.
The halt in exports coincided with the EU’s expected decision on whether to sanction Argentina’s biodiesel industry over suspicions of receiving subsidies. The EU postponed its ruling in late September, saying it would continue its investigation.
The announcement by the United States that it will review the tariffs comes a few months after Argentina increased duties on biodiesel exports and cut tariffs on grains and soybean oil shipments, a key ingredient for biodiesel production in Argentina.
(Citgo Petroleum, 1.Nov.2018) — CITGO Petroleum Corporation recently participated in Houston’s largest free family festival, Energy Day. The event brought together families, students, energy professionals and other members of the community for a day of science, technology, engineering, and mathematics (STEM) programs, exhibits and activities. With more than 25,000 attendees filling Sam Houston Park on Saturday, Oct. 20, Energy Day was, once again, an impressive display of education and community.
The popular event was presented by the Consumer Energy Alliance (CEA) and the Consumer Energy Education Foundation (CEEF).
“Energy Day is a shining example of this city’s prospering energy industry and its dedication to giving back,” said Rafael Gomez, Vice President Strategic Shareholder Relations and Government & Public Affairs.
CITGO was a sponsor of the event and organized a station where visitors participated in hands on activities that demonstrated how petroleum is used in every day products. As an active corporate citizen of Houston, CITGO prides itself in demonstrating the benefits of a STEM education and careers in the energy industry.
“Inspiring students to be excited about STEM education is a pillar of our corporate social responsibility efforts,” said Gomez. “Energy Day is great way to achieve that goal outside the classroom setting. Giving children the chance to experience dozens of hands-on exhibits in a single day keeps them entertained and engaged.”
The five-hour event offered 61 exhibits, including bike riding to generate electricity, creating LED bracelets, learning about the physics behind sports, and studying out how infrared images, robotics and virtual reality are used in STEM industries. To cap off the day, more than 180 students and teachers were awarded nearly $2,300 as part of the Energy Day Academic Program.
“Teaching children about the incredible opportunities STEM offers in a layout that’s welcoming and accommodating was our goal, and we’ve been able to provide that for the last eight years thanks to the support of local schools, energy experts and sponsors, said CEEF’s Energy Day Director, Kathleen van Keppel.”
(El Nuevo Herald, Jay Weaver And Antonio Maria Delgado, 31.Oct.2018) — A former top official of Venezuela’s state-owned oil company pleaded guilty Wednesday in Miami federal court to playing a pivotal role in a $1.2 billion money-laundering racket that U.S. authorities say was run by some of the country’s wealthiest people with close ties to the Venezuelan president.
Abraham Edgardo Ortega, the former executive director of financial planning at Petroleos de Venezuela, S.A. (PDVSA), admitted he accepted millions of dollars in bribes that were secretly wired to U.S. and other financial institutions, according to court records.
In exchange, Ortega allowed the ring’s members to embezzle hundreds of millions of dollars from the national oil company through loan- and currency-exchange schemes that ended up in European, Caribbean and U.S. banks as well as luxury South Florida real estate and other investments. Ortega, who worked at PDVSA for more than a decade, admitted he used his official role to give “priority” status to Venezuelan companies that did business with the government so they could tap into its vast oil income to make overnight fortunes.
Ortega, who surrendered to U.S. authorities in September after being charged this summer with eight other defendants, remains free on a $1 million bond as he assists the U.S. attorney’s office in the complex money-laundering case. He faces up to 10 years in prison at his sentencing Jan. 9 before U.S. District Judge Kathleen Williams and must forfeit at least $12 million stolen from the Venezuelan government’s oil company that was laundered to the U.S. and elsewhere.
His defense attorneys, Lilly Ann Sanchez and Luis Delgado, said they are hopeful that Ortega receives a substantial reduction in his sentence based on his assistance providing valuable information about the other defendants and suspects in the sprawling Homeland Security Investigations case.
Ortega, who served as PDVSA’s top financial officer from 2014 to 2016, admitted in a statement filed with his plea agreement that he conspired with the leader of the money-laundering ring, Venezuelan billionaire Francisco Convit Guruceaga, who has not been arrested, and a Miami-based investment broker, Gustavo Adolfo Hernandez Frieri, who was detained in Italy and awaits extradition to the United States. Others also collaborated with Ortega, including a money manager who operated between South America and Miami and who became a confidential source for Homeland Security agents two years ago.
Ortega’s guilty plea to the conspiracy charge follows Monday’s sentencing of Swiss banker Matthias Krull to 10 years in prison for the same offense. Krull was based in Panama and provided private banking services to Venezuela’s elite, including his most prominent client, media mogul Raul Gorrín. Gorrín has not been charged in the Miami federal case, but multiple sources have confirmed he is one of numerous unnamed co-conspirators in a criminal affidavit filed by Homeland Security Investigations.
Krull, who was arrested in July and became the first defendant to cooperate with the U.S. Attorney’s Office, remains free on a $5 million bond and is staying in a Brickell area condo. He pleaded guilty in August in a deal struck between his defense attorney, Oscar S. Rodriguez, and prosecutor Michael Nadler.
As required in his plea agreement, Krull started providing evidence about the Venezuela-based money laundering network — including inside information about Gorrín, owner of the Globovisión network in Caracas, according to multiple sources familiar with the investigation.
Gorrín is suspected of steering $600 million from the country’s state-owned oil company to a European bank to enrich himself, the three stepsons of President Nicolás Maduro and other members of Venezuela’s politically connected elite, according to court records and multiple sources.
(The Wall Street Journal, Samuel Rubenfeld, 30.Oct.2018) — U.S. prosecutors said they secured another guilty plea in their ongoing corruption probe of Venezuela’s state-run oil company, Petroleos de Venezuela SA, or PdVSA.
Ivan Alexis Guedez, a former PdVSA procurement officer from Katy, Texas, pleaded guilty to a money-laundering conspiracy charge. He is scheduled to be sentenced Feb. 20, 2019. Mr. Guedez agreed to forfeit the proceeds of his activity, prosecutors said.
“Ivan is a good man. He looks forward to putting this matter behind him,” said Matt Hennessy, an attorney for Mr. Guedez.
Mr. Guedez agreed with other PdVSA officials and businessmen employed by a Miami-based PdVSA supplier that, in exchange for bribe payments, they would direct PdVSA business toward the supplier, prosecutors said.
The payments were concealed, prosecutors said, through communications involving fictitious email addresses, the creation of false invoices to justify the payments and directing the bribes to a Swiss account in the name of a shell company before their disbursement.
Write to Samuel Rubenfeld at Samuel.Rubenfeld@wsj.com.
(Reuters, Marianna Parraga, Collin Eaton, 26.Oct.2018) — Cash-strapped state-run oil companies in Mexico and Venezuela have begun diverting crude historically processed for domestic use and sending it to U.S. refiners now facing transportation constraints to secure similar grades from Canada, data shows.
The situation reflects an unusual set of events, including urgent needs by Venezuela and Mexico for cash for debt payments and investment, and demand for heavy crude in the United States due to less availability of Canadian oil, said traders and analysts.
The United States imported 1.675 million barrels per day (bpd) of Latin American crude in August, the highest level since May 2017, according to Refinitiv Eikon data.
That gain occurred even though the preferred Latin American grade, Mexican Maya, fetches an about $50 a barrel premium to Western Canadian Select (WCS), because of transportation costs. Moving a barrel of Maya via tanker to the U.S. Gulf Coast costs about $1.50, compared to $35 for WCS via pipeline and rail.
“Those who are arriving late to the (Canadian oil) party will have to pay more for a Latin American heavy crude or Iraqi Basrah Heavy,” said a trader who regularly buys Canadian and Latin American grades.
CASH NEEDS RISE
Latin America’s recent export drive has come mostly from Mexico, Brazil and Venezuela, despite a long-standing regional oil output drop. In the last decade, suppliers with the exception of Brazil have reduced crude shipments overall, especially to the United States.
In the case of Venezuela, state-run PDVSA “needs cash both for paying holders of the 2020 bond this month and for paying (an arbitration award to) ConocoPhillips,” said Robert Campbell, oil products research chief at consultancy Energy Aspects, referring to two huge bills due in coming days.
Petroleos Mexicanos is raising cash mainly for refinancing its heavy corporate debt. Selling more of its coveted Maya crude could help refurbish refineries working at historically low rates.
Pemex and PDVSA did not respond to requests for comments.
Before the shale boom, many U.S. Gulf Coast refiners configured their plants to run Latin American and Middle Eastern crudes, with Venezuela and Mexico as top suppliers. As those shipments dwindled, refiners turned to shale and Canadian oil.
But pipeline constraints in Canada are shifting imports again, at least in the short term.
U.S. refiners want more Canadian crude “because it’s cheap,” one trader said, but “unless someone builds a new pipeline,” it will be difficult boost imports further.
U.S. imports of Canadian crude by pipeline rose to 3.6 million bpd in the week ending Oct. 12, hitting 98 percent of capacity. Crude-by-rail shipments also are up, to a record 284,000 bpd in the week ended Oct. 12 from 85,000 bpd in October 2017, according to data provider Genscape.
“These pipelines are absolutely full,” said Dylan White, an oil markets analyst at Genscape. “There’s no room for growth.”
The strategy of boosting crude exports while importing more fuel could backfire for Latin sellers. Pemex would have to boost fuel purchases if its refineries do not restart in coming months after outages and unplanned maintenance work, and PDVSA has few options to stop imports from growing.
Latin America has increased U.S. fuel purchases by 7 percent to 2.87 million bpd so far in 2018, lifted by purchases by Mexico, Venezuela, Chile and Peru, according to the U.S. Energy Information Administration.
“Mexico has chosen to import more gasoline. It makes a lot of sense, but it could go out of control,” Campbell said, referring to relatively cheap gasoline prices compared to Latin American heavy crudes.
(CITGO, 25.Oct.2018) — CITGO Petroleum Company announced the West Oso Independent School District has approved the launch of a CITGO Innovation Academy in Corpus Christi, Texas. This is the fourth CITGO Innovation Academy established in the Corpus Christi region and the seventh Innovation Academy established in the CITGO operational footprint.
The CITGO Innovation Academy at West Oso school district programming will introduce and encourage students to explore career paths in Science, Technology, Engineering and Math (STEM). By inspiring and nurturing creative, ethical and scientific minds that advance the world through questioning, collaboration, personalized learning and use of technology and outreach, participants will be well-prepared for STEM college or technical programs.
The school district will utilize the Project Lead The Way Pre-K-12 Engineering and Computer Science curricula. Project Lead the Way (PLTW) provides the most comprehensive and rigorous Engineering and Computer Science programming for schools. PLTW curriculum will be used in Pre-Kindergarten through Fifth grade classrooms for the 2018-2019 academic school year. On line PLTW training will be provided for junior high teachers. The program will also include after school robotics clubs for K-12.
A donation from CITGO will also fund STEM-oriented training for two junior high school teachers and an expanded robotics program for students.
“I am excited that the CITGO Innovation Academy will spark the curiosity of our talented students, generating dynamic, positive and enriching experiences that go beyond the classroom,” added West Oso ISD Superintendent of Schools Conrado Garcia.
The first CITGO Innovation Academy was launched in 2013 at Foy H. Moody High School in Corpus Christi, Texas, which serves as the flagship campus. Since then, three more Innovation Academies have been implemented at Cunningham Middle School and Garcia Elementary School, both in Corpus Christi, and E.K. Key Elementary School in Sulphur, Louisiana. Another two were recently approved in Lemont, Illinois and Houston, Texas.
Through the CITGO STEM Talent Pipeline, the company actively supports the academic exploration of STEM education in the schools nearby its refineries in Corpus Christi, Texas; Lake Charles, Louisiana; and Lemont, Illinois. Since the initiative’s inception, CITGO has awarded more than $1.5 million toward programs that promote the importance of STEM education and provide educators with the resources they need.
(Miami Herald, Andres Oppenheimer, 17.Oct.2018) — There is a major inconsistency in President Trump’s stand on Venezuela: He talks tough — and even makes veiled threats of a military intervention in that country. But at the same time, he steadfastly refuses to cut U.S. imports of Venezuelan oil, which are the main source of income of Venezuela’s dictatorship.
In fact, the United States has been increasing purchases of Venezuelan oil recently. While U.S. oil imports from Venezuela had decreased in recent years, they have been rising since February and increased by 28 percent in September, according to the Refinitiv Eikon data firm.
What the United States buys accounts for up to 80 percent of Venezuela’s oil income. If the Trump administration drastically cut its oil imports, President Nicolas Maduro’s dictatorship —which already faces a 1 million percent annual inflation rate and widespread food and medicine shortages —would have a hard time surviving, some critics of the Maduro regime say.
So why doesn’t Trump reduce Venezuelan oil imports?
First, because U.S. refiners in the Gulf Coast oppose it, saying that it would drive up domestic gas prices and affect pro-Trump constituencies in Louisiana, Texas, Alabama and Mississippi. Trump would lose more votes in those states than he would gain among Venezuelan Americans in Florida, some advisers are telling him.
Second, Trump’s National Security Adviser John Bolton and Secretary of State Mike Pompeo are focused on crippling Iran’s oil exports. Many in the White House think that causing a simultaneous collapse of both Iranian and Venezuelan oil exports would drive up world oil prices and hurt U.S. consumers, oil experts say.
Third, and perhaps most interesting, while Trump likes to talk tough on Venezuela to gain votes in Florida, he may fear producing a worse humanitarian crisis that would almost commit him to a military intervention there.
“If you break it, you buy it,” George David Banks, a former international energy and environment adviser to Trump, told the S&P Global Platts website. “The White House doesn’t want to own this crisis.”
Trump has stepped up Obama administration’s individual sanctions against top officials of the Maduro regime, and imposed sanctions on purchases of Venezuela’s debt. But “the Trump administration is more hesitant than ever” to impose oil sanctions, says the Platts report.
Supporters of reducing U.S. imports of Venezuelan oil reject the idea that such a move would aggravate the country’s humanitarian crisis without necessarily bringing down the Maduro regime. Accelerating the country’s collapse to force a regime change is the best option available, they argue.
And a cutback of Venezuelan oil imports would not necessarily give Maduro a propaganda victory by allowing him to play the victim of U.S. “imperialism.” Trump could simply reduce Venezuelan oil purchases, without declaring an oil embargo or saying a word about it, they say.
But perhaps the strongest argument for a gradual U.S. cutback of oil purchases is that it would lead other countries to take the Trump administration seriously when it asks for international sanctions against Venezuela.
Many foreign officials ask: How can the Trump administration ask others to impose economic sanctions when the United States is Venezuela’s biggest trading partner, in effect, bankrolling the Maduro regime?
When I asked Argentina’s President Mauricio Macri in an interview last year what the international community should do to help restore democracy in Venezuela, he responded that the first step should be taken by the United States.
“If the United States really took a measure such as suspending oil purchases from Venezuela, the Maduro regime would have a serious financing problem,” Macri told me. He added that by cutting Venezuelan oil imports, “The United States could change things (in Venezuela) definitively.”
I’m not sure that drastically cutting U.S. oil purchases from Venezuela would be the best idea; it likely would come at a huge humanitarian cost. But this much is clear: If Trump wants other countries to step up sanctions against Venezuela, he, himself, should consider a gradual slowdown in U.S. purchases of Venezuelan oil, instead of sending more cash to the Maduro regime.
(S&P Global Platts, 11.Oct.2018) — Brazilian state-led oil company Petrobras and Murphy Oil will combine production assets in the US Gulf of Mexico in a joint venture that will produce about 75,000 barrels of oil equivalent/day in the fourth quarter of 2018.
“The joint venture will be formed by the combination of all of both companies’ production assets in the Gulf of Mexico, with Murphy the operator with 80% participation and Petrobras America Inc. 20%,” Petrobras said in a filing with the Brazilian stock regulator after markets closed Wednesday.
The deal continued recent trends for both companies, with Petrobras retreating from international projects to focus on the subsalt at home and Murphy expanding its presence in US Gulf plays where the company sees cheap growth opportunities. Petrobras has also focused on the sale of international assets under its $21 billion divestment plan for 2017-2018 after facing legal hurdles to the sale of refineries, oil fields and other assets in Brazil.
Petrobras previously sold off its stake in Petrobras Argentina, exploration and production assets in Colombia and distribution assets in Chile and Paraguay. The company is currently trying to sell off its stakes in exploration and production assets in Africa.
The deepwater fields that will form the production foundation for the JV include Cascade, Chinook, St. Malo, Lucius, Hadrian North, Hadrian South, Cottonwood, Dalmatian, Front Runner, Clipper, Habanero, Kodiak, Medusa and Thunder Hawk, Petrobras said. In addition, the shallow-water fields South Marsh Island 280, Garden Banks 200/201 and Tahoe were also part of the portfolio of combined assets, Petrobras said.
Petrobras will receive a total of $1.1 billion as part of the deal because of the higher value of its production contributions, including $900 million in cash, the company said. A $150 million contingency payment is also on tap for 2025 as well as $50 million worth of development costs at the St. Malo Field that will be paid for by Murphy on behalf of Petrobras, should several enhanced oil-recovery projects currently being studied for the field move forward, the company said.
The cash will be used to pay down debt and fund Petrobras’ investments, which are currently expected to be about $16 billion in 2019 under the company’s 2018-2022 investment plan. Most of Petrobras’ investment cash is earmarked for subsalt fields, where the company holds a dominant position in the deepwater frontier and operates about 1.5 million b/d of output.
Murphy, meanwhile, is part of a shift in the US Gulf after several large independents such as Apache, Devon Energy and ConocoPhillips left the play. Murphy is part of a series of relative newcomers including Talos Energy and Kosmos Energy to snap up opportunities in a region that operators say delivers high margins even at oil prices at or below $40/b.
The company seeks out mature fields with opportunities to tie back fresh wells to existing production facilities. A tieback project will cost about $660 million and take 18 months to complete, but break even at about $32/boe, according to Murphy.
The deal with Petrobras also represents an expansion of Murphy’s ties to Brazil, where the El Dorado, Arkansas-based company purchased stakes in several blocks at recent licensing sales. The biggest opportunity is in the Sergipe-Alagoas Basin, where the company teamed up with ExxonMobil and Brazil’s QGEP Participacoes on several blocks next to a region where Petrobras made 12 separate deepwater discoveries.
Petrobras expects to start a long-term well test in the area in the fourth quarter of 2018.
Brazil also needs companies with Murphy’s expertise in mature field revitalization, which could create additional opportunities for the US company off the coast of South America. The Campos Basin, where many shallow-water and early deepwater developments are approaching the end of their working lives, needs fresh investment aimed at boosting recovery rates to the industry standard of 30%-35% from the current 24%.
Petrobras currently has more than 100 onshore and offshore mature fields in Brazil up for sale under its divestment program. Brazil’s National Petroleum Agency (ANP) is pushing Petrobras to determine which of the fields the company wants to extend concession contracts for and to return the rest to the regulator for resale.
The ANP recently implemented a program aimed at boosting investment in mature fields by reducing royalty rates on incremental production increases to 5% from the current 10% in exchange for investment that extends the assets’ working lives, boosts recovery rates and increases production. The program covers more than 200 of Brazil’s 241 offshore fields, according to ANP officials.
(The Motley Fool, Matthew DiLallo, 11.Oct.2018) — The oil company made a needle-moving deal.
Shares of Murphy Oil Corporation took off on Thursday, rising more than 12% by 10:30 a.m. EDT after the company agreed to form a strategic joint venture (JV) with Petrobras in the Gulf of Mexico.
Under the terms of the deal, both companies will contribute all their currently producing assets in the Gulf of Mexico. Murphy Oil will own 80% of the JV and will pay Petrobras $900 million to offset the difference in value. In addition to that, Petrobras could earn as much as $150 million in additional consideration if the JV meets certain conditions. Further, Murphy Oil will pay $50 million of Petrobras’ costs if the companies approve a new project at the St. Malo Field.
The transaction will add about 41,000 barrels of oil equivalent per day to Murphy’s total output. Further, given the oil-weighted nature of this production, it will increase the company’s margins, especially since the oil fetches higher Gulf Coast pricing. Because of those high margins, the company expects the JV to generate meaningful free cash flow, some of which Murphy plans to allocate toward boosting its output from the Eagle Ford Shale.
This transaction is a needle mover for Murphy Oil because it will increase the company’s oil production and cash flow. While that certainly makes it a more appealing option for investors, these oil stocks look like better buys right now.
(Reuters, Marianna Parraga, 4.Oct.2018) — Venezuela’s September crude sales to the United States rose to their highest in over a year, boosted by purchases by Citgo Petroleum, the U.S. refining arm of Venezuela’s state-run PDVSA, and Valero Energy, according to Refinitiv Eikon trade flows data.
A collision in August at a dock of Venezuela’s main oil port of Jose has limited exports in large vessels to Asia, spurring loading of more medium-size tankers including those typically covering routes to the United States.
Venezuela’s overall crude exports fell 14 percent in September to 1.105 million bpd due to declining oil output and dock woes at Jose terminal. The OPEC-member country’s crude production fell for third time in a row to 1.448 million bpd in August, according to official figures.
The United States imported 601,505 barrels per day (bpd) of Venezuelan crude last month, a 28-percent increase versus August and the highest monthly average since August 2017, according to the Refinitiv Eikon data.
Valero and Citgo bought over 250,000 bpd each of Venezuelan crude last month compared with an average of 170,000 bpd earlier this year, according to the data.
A total of 38 cargoes were purchased by U.S. customers from PDVSA and its joint ventures in September. At least three of those shipments were co-loaded in different Venezuelan ports to avoid problems at Jose, where repairs are expected to take at least one more month to be completed.
PDVSA’s exports last month included more light and medium crudes, generally produced at very low levels in Venezuela and leaving less of these grades for PDVSA’s domestic refineries to produce fuels.
In September, PDVSA sold Citgo and Valero some 84,000 bpd of Santa Barbara, Mesa and Leona crudes, which are typically processed at Venezuelan refineries.
PDVSA regularly imports gasoline, diesel, liquefied petroleum gas and refining feedstock to offset low production at its refineries.
(Reporting by Marianna Parraga; Editing by Cynthia Osterman)
(Reuters, 21.Sep.2018) — Bondholders in Brazilian state-run oil firm Petroleo Brasileiro SA have accepted the exchange of about $8.9 billion of unregistered notes for identical paper registered with the U.S. Securities and Exchange Commission, the company said in a Friday securities filing.
Of $3.76 billion in 5.299 percent notes maturing in 2025, investors switched $3.51 billion into SEC-registered paper, and of $5.84 billion in 5.999 percent notes maturing in 2028, investors switched $5.4 billion into SEC paper, the firm said.
Petrobras, as the company is known, said the operation will not impact its debt profile. (Reporting by Gram Slattery Editing by Chizu Nomiyama)
(YPF, 18.Sep.2018) — YPF S.A. announced settlement of the previously announced tender offer to purchase for cash any and all of its outstanding 8.875% Senior Notes due 2018.
The Tender Offer expired at 5:00 p.m., New York City time, on September 17, 2018. At the Expiration Date, valid tenders had been received with respect to U.S.$176,245,000 of the U.S.$452,198,000 aggregate principal amount of the outstanding Securities.
YPF has accepted for payment all Securities validly tendered prior to the Expiration Date. On September 18, 2018, such tendering holders will receive the purchase price in the amount of U.S.$1,005 for each U.S.$1,000 principal amount of Securities tendered, plus accrued and unpaid interest to, but not including, the date hereof.
Itau BBA USA Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as the dealer managers for the Tender Offer. The information agent and depositary is D.F. King & Co., Inc. Copies of the Offer to Purchase, Letter of Transmittal and Notice of Guaranteed Delivery, with respect to the Tender Offer, and related offering materials are available by contacting D.F. King at (800) 628-8509 (toll-free), (212) 269-5550 (banks and brokers) or www.dfking.com/ypf.
Questions regarding the Tender Offer should be directed to Itau BBA USA Securities Inc.
by telephone at +1 (888) 770-4828 (U.S. toll free) or + 1 (212) 710-6749 (collect) or Merrill Lynch, Pierce, Fenner & Smith Incorporated by telephone at +1 (888) 292-0070 (U.S. toll free) or +1 (646) 855-8988 (collect).
(Mining.com, Valentina Ruiz Leotaud, 29.Aug.2018) — State-owned Petróleos de Venezuela SA or PDVSA announced on Twitter that it filed an appeal requesting that a Delaware court vacate a decision made public on August 23 granting Canadian miner Crystallex the right to seize its U.S. assets.
In its statement, the oil company said it had filed a petition on Friday, August 24, 2018, to the 3rd U.S. Circuit Court of Appeals. The petition is to direct the Delaware District Court to acknowledge it had been “divested of jurisdiction with respect to PDVSA and its property.”
The petition refers to a decision made on August 9, 2018, by U.S. District Judge Leonard Stark in the eastern U.S. state. Stark approved a request by Crystallex to attach shares in PDV Holdings, a U.S. subsidiary of PDVSA that indirectly controls refiner Citgo.
Citgo owns three refineries in Louisiana, Texas and Illinois, as well as other assets that have been valued between $8 billion and $10 billion.
With this move, Crystallex is aiming at collecting a $1.4-billion-award in compensation following a decade-long dispute over Venezuela’s 2008 nationalization of its gold mine in the southern Bolívar state. The amount is comprised of $1.2 billion plus $200 million of interest awarded by a World Bank arbitration tribunal in 2016.
If PDVSA’s appeal does not proceed, the Nicolás Maduro government could be forced to comply to Crystallex’s demands.
The Canadian firm has accused the Nicolás Maduro government of performing “fraudulent transfers” to avoid paying what it owes. Among those transactions, Crystallex has cited the payment of dividends from PDV Holding to PDVSA for $2.2 billion and the issuance of 49.9% of Citgo’s shares to secure a $1.5 billion loan granted by Russian giant Rosneft in 2016.
A lawsuit introduced by the miner against such asset transfers by Citgo was initially dismissed in January 2018, but the Toronto-based company requested a new hearing.
Nevertheless, PDVSA’s lawyers have argued that Crystallex cannot seize the holding company’s shares because it doesn’t have proper grounds for suing in the U.S. and because it couldn’t show the unit was the Venezuelan company’s “alter ego.”
In November 2017, Crystallex and Venezuela agreed to settle the dispute before Ontario Superior Court Justice Glenn Hainey. However, the deal did not resolve the fight over the $1.2 billion award because the cash-strapped South American country did not honour its payments.
(Citgo, 29.Aug.2018) — Through the CITGO Caring for Our Coast initiative, a program designed to boost ecological conservation, restoration and education, The Conservation Foundation (TCF) has been awarded a grant to continue its restoration work in the Heritage Quarries Recreation Area (HQRA) in Lemont.
In partnership with TCF and the Village of Lemont, the CITGO Lemont Refinery has been funding semiannual projects and working alongside local volunteers in the HQRA since the fall of 2014, removing invasive plant species and brush, and harvesting native species’ seeds for replanting.
Located half a mile east of downtown Lemont, the HQRA is situated among thousands of acres of forest preserves, which includes more than 65 miles of hiking and biking trails, as well as access to fishing and boating along the I & M Canal and the Consumers, Great Lakes and Icebox Quarries.
According to Scott LaMorte, senior advancement officer at TCF, the transformation of the HQRA, in just four years, has been remarkable.
“During a community workday last year, my group was assigned to clear a section near the picnic grove. After cutting out some of the weedy shrubs, we uncovered a pond that hadn’t been seen in decades! The ‘before’ and ‘after’ photos are just incredible,” said LaMorte.
Dennis Willig, Vice President and General Manager of the CITGO Lemont Refinery, describes the HQRA project as neighbors-serving-neighbors.
“We are proud to partner with the local community, because not only are natural resources being preserved, but residents will be able to enjoy the benefits of this outdoor recreational space for years to come,” said Willig.
(Reuters, 28.Aug.2018) — Mexican president-elect Andres Manuel Lopez Obrador welcomed a deal between Mexico and the U.S. to overhaul the North American Free Trade Agreement (NAFTA) that he said preserved Mexican “sovereignty” in the energy sector.
The U.S.-Mexico deal was announced by U.S. President Donald Trump on Aug. 27, putting pressure on Canada to agree to new terms and details that were only starting to emerge. Lopez Obrador said it was important that Canada be part of the deal.
Lopez Obrador, who is scheduled to take office on Dec. 1, said Trump “understood our position” and accepted his incoming administration’s proposals on the energy sector. The text of the new agreement has not yet been made public.
“We put the emphasis on defending national sovereignty on the energy issue and it was achieved,” Lopez Obrador told reporters after arriving in the southern state of Chiapas.
“We are satisfied because our sovereignty was saved. Mexico reserves the right to reform its constitution, its energy laws, and it was established that Mexico’s oil and natural resources belong to our nation,” he said.
Lopez Obrador opposed a constitutional change pushed through by Mexican President Enrique Pena Nieto that opened production and exploration in the energy sector to private capital.
Mexico has already awarded more than 100 oil exploration and production contracts to private companies.
Lopez Obrador has said he would pour resources into state oil company Pemex while still respecting private sector contracts, as long as a review does not find evidence of corruption.
He is expected to slow down or stall the process of offering more contracts to private players.
Jesus Seade, Lopez Obrador’s designated chief NAFTA negotiator, participated in the latest talks between the current Mexican administration and the U.S. Trade Representative to strike the new NAFTA agreement.
Seade said on Aug. 27 that both Pena Nieto’s team and the U.S. had agreed to change language in a draft proposal of the NAFTA overhaul on energy that had previously been a “cut and paste” from the text of Mexico’s energy reform.
The new language still preserved the same ideas and was consistent with Pena Nieto’s reform, Seade said, adding that Lopez Obrador was not seeking to change the legal framework for private energy projects in Mexico.
While the new administration planned to increase production at Pemex, Seade told a news conference in Washington “there will be areas where cooperation with the private sector is needed.”
(AP) — As the United States plans new defences against the more powerful storms and higher tides expected from climate change, one project stands out: an ambitious proposal to build a nearly 60-mile ‘spine’ of concrete seawalls, earthen barriers, floating gates and steel levees on the Texas Gulf Coast.
Like other oceanfront projects, this one would protect homes, delicate ecosystems and vital infrastructure, but it also has another priority – to shield some of the crown jewels of the petroleum industry, which is blamed for contributing to global warming and now wants the federal government to build safeguards against the consequences of it.
The plan is focused on a stretch of coastline that runs from the Louisiana border to industrial enclaves south of Houston that are home to one of the world’s largest concentrations of petrochemical facilities, including most of Texas’ 30 refineries, which represent 30 per cent of the nation’s refining capacity.
Texas is seeking at least US$12 billion for the full coastal spine, with nearly all of it coming from public funds. Last month, the government fast-tracked an initial US$3.9 billion for three separate, smaller storm barrier projects that would specifically protect oil facilities.
That followed Hurricane Harvey, which roared ashore a year ago, last August 25, and swamped Houston and parts of the coast, temporarily knocking out a quarter of the area’s oil refining capacity and causing average gasolene prices to jump 28 US cents a gallon nationwide. Many Republicans argue that the Texas oil projects belong at the top of Washington’s spending list.
“Our overall economy, not only in Texas, but in the entire country, is so much at risk from a high storm surge,” said Matt Sebesta, a Republican who as Brazoria County judge oversees a swathe of Gulf Coast.
But the idea of taxpayers around the country paying to protect refineries worth billions, and in a state where top politicians still dispute climate change’s validity, doesn’t sit well with some.
“The oil and gas industry is getting a free ride,” said Brandt Mannchen, a member of the Sierra Club’s executive committee in Houston. “You don’t hear the industry making a peep about paying for any of this and why should they? There’s all this push like, ‘Please, Senator Cornyn; Please, Senator Cruz, we need money for this and that’.”
Normally outspoken critics of federal spending, Texas Senators John Cornyn and Ted Cruz both backed using taxpayer funds to fortify the oil facilities’ protections and the Texas coast. Cruz called it “a tremendous step forward”.
Federal, state and local money is also bolstering defences elsewhere, including on New York’s Staten Island, around Atlantic City, New Jersey, and in other communities hammered by superstorm Sandy in 2012.
Construction in Texas could begin in several months on the three sections of storm barrier. While plans are still being finalised, some dirt levees will be raised to about 17 feet high, and six miles of 19-foot-tall floodwalls would be built or strengthened around Port Arthur, a Texas-Louisiana border locale of pungent chemical smells and towering knots of steel pipes.
The town of 55,000 includes the Saudi-controlled Motiva oil refinery, the nation’s largest, as well as refineries owned by oil giants Valero Energy Corp and Total SA. There are also almost a dozen petrochemical facilities.
“You’re looking at a lot of people, a lot of homes, but really a lot of industry,” said Steve Sherrill, an Army Corps of Engineers resident engineer in Port Arthur, as he peered over a Gulf tributary lined with chunks of granite and metal gates, much of which is set to be reinforced.
The second barrier project features around 25 miles of new levees and seawalls in nearby Orange County, where Chevron, DuPont and other companies have facilities. The third would extend and heighten seawalls around Freeport, home to a Phillips 66 export terminal for liquefied natural gas and nearby refinery, as well as several chemical facilities.
The proposals approved for funding originally called for building more protections along larger swathes of the Texas coast, but they were scaled back and now deliberately focus on refineries.
“That was one of the main reasons we looked at some of those areas,” said Tony Williams, environmental review coordinator for the Texas Land Commissioner’s Office.
Oil and chemical companies also pushed for more protection for surrounding communities to shield their workforces, but “not every property can be protected,” said Sheri Willey, deputy chief of project management for the Army Corps of Engineers’ upper Texas district.
“Our regulations tell us what benefits we need to include, and they have to be national economic benefits,” Willey said.
Once work is complete on the three sections, they could eventually be integrated into a larger coastal spine system. In some places along Texas’ 370-mile Gulf Coast, 18 feet is lost annually to erosion, threatening to suck more wetlands, roads and buildings into rising seas.
Protecting a wide expanse will be expensive. After Harvey, a special Texas commission prepared a report seeking US$61 billion from Congress to “future proof” the state against such natural disasters, without mentioning climate change, which scientists say will cause heavier rains and stronger storms.
Texas has not tapped its own rainy day fund of around US$11 billion. According to federal rules, 35 per cent of funds spent by the Army Corps of Engineers must be matched by local jurisdictions, and the GOP-controlled state legislature could help cover such costs. But such spending may be tough for many conservatives to swallow.
Texas “should be funding things like this itself,” said Chris Edwards, an economist at the libertarian Cato Institute. “Texans are proud of their conservatism, but, unfortunately, when decisions get made in Washington, that frugality goes out the door.”
State officials counter that protecting the oil facilities is a matter of national security.
“The effects of the next devastating storm could be felt nationwide,” said Representative Randy Weber, a fiercely conservative Republican from suburban Houston, who has nonetheless authored legislation backing the coastal spine.
Major oil companies did not respond to messages seeking comment on funding for the projects. But Suzanne Lemieux, midstream group manager for the American Petroleum Institute, said the industry already pays into programmes such as the federal Harbor Maintenance Trust Fund and the Waterways Trust Fund, only to see Congress divert that money elsewhere.
“Do we want to pay again when we’ve already paid a tax without it getting used? I’d say the answer is no,” she said.
Phillips 66 and other energy firms spent money last year lobbying Congress on storm-related funding post-Harvey, campaign finance records show, and Houston’s Lyondell Chemical Company PAC lobbied for building a coastal spine.
“The coastal spine benefits more than just our industry,” Bob Patel, CEO of LyondellBasell, one of the world’s largest plastics, chemicals and refining companies, said in March. “It really needs to be a regional effort.”
(Houston Chronicle, Katherine Blunt, 24.Aug.2018) — For years, U.S. producers have counted on Mexico to buy enormous quantities of natural gas from the prolific shale fields in West Texas and elsewhere. The fracking boom has given rise to massive pipeline projects to carry that gas across the border, where energy production has plummeted.
Later this year, four long-awaited pipelines to distribute U.S. natural gas throughout Mexico are expected to start up to supply the nation’s power generation and industrial sectors, potentially helping to ease bottlenecks in the crowded Permian Basin.
The question is whether those exports will continue — at least at the same rate. That depends on two political variables: The inauguration of Mexico’s president-elect and the ongoing renegotiation of the North American Free Trade Agreement.
U.S. natural gas exports to Mexico ramped up in earnest after 2013 and 2014, when Mexico opened its energy market to foreign investment and pushed to expand its pipeline network to buy cheap natural gas from its northern neighbor. The country imported roughly 1.5 trillion cubic feet of U.S. natural gas via pipeline last year, more than double 2013 levels.
U.S. producers are banking on that export demand. Natural gas shipments to Mexico by pipeline exceeded 5 billion cubic feet per day for the first time last month, up from an average of 4.2 million cubic feet per day in 2017.
The July election of Andrés Manuel López Obrador, however, has spelled uncertainty for the energy sector. Among other things, he has pledged to boost domestic oil and gas production and decrease the country’s reliance on imports by investing billions of dollars in Petróleos Mexicanos, or Pemex, the country’s state-owned energy company.
Meanwhile, President Donald Trump and Mexican President Enrique Peña Nieto are aiming to nail down a NAFTA deal before Lopez Obrador assumes the presidency in December. NAFTA, long criticized as unfair by the Trump administration, makes it easier for Texas oil and gas producers to pipe or otherwise exports their products across the border.
The pipelines nearing completion, which include Enbridge’s Nueces-Brownsville project in the Rio Grande Valley and three projects in Mexico, depend in large part on that ease of access. They’re expected to start up in October and November, and several other major projects are under construction.
Complicating the equation: López Obrador built his support in part with a vow to oppose Trump. That could further undermine trade relations between the two countries when he takes office. Already, we’ve seena heated back-and-forth over Trump administration’s tariffs on steel and aluminum imports.
If relations continue to sour — either because of Obrador’s policies or Trump’s rebuke of NAFTA — natural gas exports would likely take a hit. For Texas, which supplies the majority of Mexico’s natural gas imports, that could mean less demand — and fewer projects.
(AP, 22.Aug.2018) — A former Swiss bank executive has pleaded guilty to his role in a $1.2 billion money-laundering scheme involving Venezuela’s state-run oil and natural gas company.
Federal court records show that 44-year-old Matthias Krull pleaded guilty in Miami federal court on Wednesday to conspiracy to commit money laundering. The German national and Panamanian resident is scheduled to be sentenced Oct. 29.
Authorities say the scheme began in 2014 with bribery and fraud at the state-run PDVSA oil and gas enterprise and grew over time. A criminal complaint contends the scheme involved members of the Venezuelan elite, money managers, brokerage firms, banks and real estate investment firms.
Krull acknowledged joining the conspiracy in 2016. Officials say Krull and others used Miami real estate and sophisticated false-investment schemes to conceal the embezzled money.
(Citgo, 21.Aug.2018) — As officially reported by Petróleos de Venezuela, S.A. (PDVSA) and ConocoPhillips, the two companies recently reached a settlement agreement resulting from the nationalization of the Hamaca and Petrozuata projects in 2007.
As background, ConocoPhillips initiated arbitration before the International Chamber of Commerce (ICC), demanding that PDVSA pay approximately $20 billion in return for its assets. This amount was based on the theory that PDVSA should have unlimited liability for the actions of the country. However, on April 24, 2018 the ICC ruled that PDVSA should pay only $1.87 billion, an amount based on the previous association agreements between the two companies.
As a result of the settlement, ConocoPhillips has agreed to suspend its legal enforcement actions of the ICC award, including in the Dutch Caribbean. At the same time, PDVSA will pay approximately 25 percent of the award in the short term and the remaining balance in quarterly installments over the next 4.5 years.
PDVSA confirmed in a statement that it will continue serving both the international and domestic markets. Furthermore, the company affirmed that this agreement reached with ConocoPhillips demonstrates, once again, the firm will of PDVSA to reach commercial solutions with its creditors while continuing to strengthen itself and its commercial operations.
CITGO also continues serving its customers in the United States, and the resolution of this matter helps to ensure the stability in the overall CITGO commercial supply chain. As a leading refining and marketing company, with strong financial and operational performance, CITGO will continue producing and selling quality products and is well positioned for the future.
(The New York Times, Clifford Krauss, 20.Aug.2018) – More than a decade ago, Venezuela seized several oil projects from the American oil company ConocoPhillips without compensation. Now, under pressure after ConocoPhillips carried out its own seizures, the Venezuelans are going to make amends.
ConocoPhillips announced on Monday that the state oil company, Petróleos de Venezuela, or Pdvsa, had agreed to a $2 billion judgment handed down by an International Chamber of Commerce tribunal that arbitrated the dispute. Pdvsa will be allowed to pay over nearly five years, but as it is nearly bankrupt, even those terms may be hard to meet.
After winning the arbitration ruling in April, ConocoPhillips seized Pdvsa oil inventories, cargoes and terminals on several Dutch Caribbean islands. The move seriously hampered Venezuela’s efforts to export oil to the United States and Asia, and emboldened other creditors to seek financial retribution.
“What they did was choke the exports and made it clear to Pdvsa that the cost of not coming to an agreement would be higher than actually settling on a payment schedule,” said Francisco J. Monaldi, a Venezuelan oil expert at Rice University.
As its oil production has plummeted to the lowest levels in decades, Venezuela has fallen behind on more than $6 billion in bond payments. Pdvsa has already defaulted on more than $2 billion in bonds after failing to make interest payments over the last year, and owes billions of dollars more to service companies.
Adding to Venezuela’s woes, the Trump administration has imposed sanctions that prohibit the purchase and sale of Venezuelan government debt, including bonds issued by the state oil company.
Mr. Monaldi said Pdvsa would be forced to pay ConocoPhillips with money it would have paid other creditors and would probably delay some oil shipments to China it owes in separate loan agreements. He added that “there is not a negligible probability” that at some point it will discontinue payments for lack of money.
Hyperinflation, corruption and growing starvation have crippled the Venezuelan economy, as the socialist government is forced to choose between buying food and medicine and satisfying the demands of creditors. Over the last few days, the government has scrambled to deal with its economic crisis by sharply devaluing its currency, raising wages and promising to shave energy subsidies.
Venezuela has the largest oil reserves in the world. Its crisis has tightened global oil markets at a time when threatened United States oil sanctions against Iran could drive up prices.
The settlement with ConocoPhillips over the 2007 seizure resolves a drawn-out legal struggle, at least for the time being.
“As a result of the settlement, ConocoPhillips has agreed to suspend its legal enforcement actions of the I.C.C. award, including in the Dutch Caribbean,” ConocoPhillips said in a statement.
Pdvsa, which did not comment on the agreement, is to pay the first $500 million within 90 days.
ConocoPhillips is pursuing a separate arbitration case over the same seizure against the government of Venezuela before the World Bank’s International Center for Settlement of Investment Disputes, which could result in another large settlement award, perhaps as high as $6 billion.
That amount would probably be unpayable, experts say, but it could put ConocoPhillips in a strong position to obtain access to Venezuelan oil fields in the future if the current government eventually falls.
Pdvsa’s problems with creditors are far-reaching, putting its American Citgo assets, including three large refineries and a pipeline network, in jeopardy. A federal judge in Delaware recently ruled that Crystallex, a Canadian gold mining company, could seize over $1 billion in shares of Citgo as compensation for a 2008 nationalization of a mining operation in Venezuela.
Citgo is appealing. If it loses, that may open the way for more claims on Citgo assets by companies whose investments have been expropriated in Venezuela, including Exxon Mobil.
(Reuters, David Alire Garcia, 16.Aug.2018) – U.S. Energy Secretary Rick Perry praised the goal set out by Mexico’s incoming president to end massive gasoline and diesel imports, nearly all of which come from the United States, as a measure that will boost prosperity in its southern neighbor.
During a visit on Wednesday to the Mexican capital in which he met with both current officials as well as key advisers to President-elect Andres Manuel Lopez Obrador, Perry brushed off concerns that U.S. refiners stand to lose their biggest foreign market.
“It’s a good goal for Mexico. I tip my hat to the president-elect for having that as a goal,” said Perry, a former governor of Texas, the most prominent energy producing and refining U.S. state. “I hope they’re successful with that transition.”
So far this year, Mexico has imported an average of 1.19 million barrels per day (bpd) of fuel including gasoline and diesel, according to the U.S. Energy Information Administration.
Fuel imports now represent 60 percent of the country’s total consumption, as crude processing at Mexico’s domestic refineries has steadily declined.
Lopez Obrador won a landslide victory last month and in December will take office as Mexico’s first leftist president in decades.
He has repeatedly promised to end foreign gasoline imports within three years and grow domestic production of value-added fuels at home, pledging to revive the six existing state-owned refineries operated by national oil company Pemex, as well as build a new one.
“That’s not going to happen overnight. He knows that, we know that,” Perry told a group of reporters on Wednesday afternoon after meeting with Lopez Obrador’s designated chief of staff, Alfonso Romo, and his future energy minister Rocio Nahle.
He said Romo also met with David Malpass, the U.S. Treasury Department’s under secretary for international affairs.
“What I heard today was a bit of realism from both Nahle and Romo,” he added, without going into further detail.
The American Fuel and Petrochemical Manufacturers (AFPM), which represents U.S. refiners, did not immediately respond to a request for comment on Perry’s statement.
Perry pointed to growing South American markets as potential new buyers of U.S. refined products, noting that Venezuela’s oil output has plummeted amid a major economic crisis.
“We’re going to have more markets, most likely, than we’re going to have product,” he said.
Additional reporting by Marianna Parraga; Editing by Marguerita Choy
(Energy Analytics Institute, Piero Stewart, 15.Aug.2018) – If all goes off as planned, by 2025, Guyana will be the 5th largest oil producer in the Latin American and Caribbean region.
That’s according to an analysis of data posted by Trading Economics, and extrapolation of estimates of Guyana’s future oil production, as announced by Kevin Ramnarine, the former Energy Minister of Trinidad and Tobago.
Considering initial production of 120,000 barrels per day in 2020, Guyana will first occupy the spot as the 7th largest oil producer in the LAC region, assuming no drastic changes in the other countries’ production profiles over the next couple of years.
However, in the process, by the time peak production is reached five years latter, Guyana will have surpassed OPEC producer Ecuador, assuming production in that country, as well as others, doesn’t experience a drastic decline, as has been the case in Venezuela in recent years.
(Energy Analytics Institute, Pietro D. Pitts, 14.Aug.2018) – The ability to use hydraulic fracturing to tap shale formations, to remotely monitor and manage assets, and use advanced technology to heat reservoirs, are a few of the many new innovations used in the capital intense hydrocarbon sector.
Faced with rising competition worldwide for conventional crude oil and natural gas reserves, both of which are limited and depleting resource bases, the global hydrocarbon sector has in general gravitated towards a common goal, maximizing oil and gas reserve recoveries, while at the same time maintaining or preferable reducing operating costs.
While advanced oil-field technologies such as three-dimensional (3D) and four-dimensional (4D) seismic have been used globally for many years, the varying complexities of today’s hydrocarbon sector require ever more sophisticated technologies with capabilities to process data in real-time, among other advances, and that help international oil companies (IOCs) and national oil companies (NOCs) to make rapid and most importantly, accurate decisions.
Still, the global hydrocarbon sector has been slow to embrace the use of Information Technology (IT) to assist in the collection, processing, analysis and distribution of data in real-time. But, this case has been especially true in the Latin American and Caribbean (LAC) region.
Regional NOCs have slowly taken to incorporate IT into their operations as they have come to realize the advantages outweigh the proposed disadvantages, which include but are not limited to giving access to sensitive information to third-party companies from countries that often do not share the same political or economic ideologies.
Today’s advanced and innovative technologies, including but not limited to: sensors, automated valves, and remote satellites, now help IOCs, and increasingly more regional NOCs, monitor producing fields and wells and any number of assets from remote centralized control centers in cities such as Mexico City, Sao Paulo, Caracas or Buenos Aires.
In essence, these technologies help the companies streamline their processes with the ultimate aim to increase oil and gas recovery factors and production, monitor assets for potential accidents or thefts, while helping to reduce time needed to gather information on their assets while also reducing personnel excesses. The bottom line is that the incorporation of certain technologies has assisted companies to reduce operating costs.
The ability to use hydraulic fracturing to tap shale formations, to remotely monitor and manage assets, and use advanced technology to heat reservoirs, are a few of the many new innovations in use in today’s hydrocarbon sector.
(Texas Tribune, Juan Luis García Hernández, 14.Aug.2018) – After a dramatic spike in gasoline prices incited widespread protests in Mexico last year, then-presidential candidate Andrés Manuel López Obrador made a promise that caught the attention of Texas officials and the state’s oil and gas industry: The veteran left-wing politician vowed, if elected, to halt the import of gasoline and diesel from the United States and other countries by 2021.
The promise — which López Obrador had previously mentioned and which he reiterated one week after winning in a historic landslide last month — was a key component of his national development platform in his third run for the presidency.
Mexican President-elect Andrés Manuel López Obrador has vowed to halt the import of gasoline and diesel from the United States and other countries by 2021.
“Refineries will be built, gas extraction will be promoted, and the electric industry will be strengthened,” López Obrador said in November 2016, more than a year and a half before the July 1 election. “All this to stop buying gasoline and other fuels abroad.”
Such a policy could have enormous implications for the Texas economy. The state’s refineries produce much of the gasoline and diesel imported to Mexico, where about three out of every five liters of gasoline consumed comes from the United States.
But Texas’ energy regulators, industry groups and experts downplay the potential impacts, casting doubt on López Obrador’s ability to keep his promise — at least immediately.
They say Mexico has a long way to go to wean itself off foreign fuel imports. And they also don’t see Mexico severing ties with a top trading partner.
There’s a sense that López Obrador’s promise was more political than practical, said Steve Everley, managing director of FTI Consulting. Ultimately, he said, economics — and a strong and established trade relationship — will win out.
“That doesn’t mean you don’t take it seriously,” Everley added. “You don’t look at something that’s threatening $14 billion of economic activity and just sort of whistle on past it. But I think we also need to be realistic about the interrelationship between Texas and Mexico and how valuable that is both for them and for us.”
López Obrador’s plan calls for the construction of a refinery in his home state of Tabasco in southeastern Mexico and the rehabilitation of six existing refineries to increase the amount of fuel they can produce. That would cost a combined $11.3 billion.
“It’s very optimistic,” said Texas Tech University economics professor Michael D. Noel. “I will say that in terms of Texas refineries the impact in the short term is likely to be very, very low, and the reason is that you can’t build a refinery overnight. Those things take a long time.”
Noel said Texas refineries could stand to benefit from increased Mexican energy production if it outpaces refinery construction, which may require the country to export fossil fuels to the United States for processing.
Mexico currently only meets one-third of its fuel demand domestically, said Texas Railroad Commissioner Ryan Sitton. Last year, the Mexican market consumed 797,100 barrels of gasoline per day and 365,500 barrels per day of diesel, according to data from Pemex, Mexico’s state-run oil company. Only 35 percent of that came from Mexican refineries.
The U.S. Energy Information Administration doesn’t keep track of how much of U.S. fuel exports to Mexico come from Texas refineries. However, Sitton — one of three elected officials who regulate the state’s oil and gas industry — said Texas refineries sell about 800,000 barrels of gasoline and diesel a day to Mexico, which would mean Texas provides Mexico with an overwhelming majority of its fuel.
“It’s a pretty big shot,” said Sitton. “That’s gasoline production from four or five large refineries.”
Asked a few days after the July 1 election about his ambitious three-year deadline to build a new refinery, López Obrador, who takes office Dec. 1, pointed out that India achieved a similar goal.
That country’s Jamnagar complex was able to nearly double its capacity to 1.2 million barrels per day between 2005 and 2008 by building a second refinery at a cost of $6 billion.
Experts say refinery repairs could prove to be the fastest way for López Obrador to achieve his goal.
“[Building] a refinery takes eight years to do well. A rehabilitation takes between 6 months and a year, costs much less and maybe can reach 60 percent capacity,” said Duncan Wood, director of the Mexico Institute at the Wilson Center in Washington, D.C.
Jorge Canavati, co-president of the International Affairs Committee at the San Antonio Hispanic Chamber of Commerce, said even if Mexico increases its production, market prices will ultimately dictate how much fuel it imports. “When Pemex was aggressively producing, Pemex also imported [gasoline],” he recalled.
Last year started for Mexicans with a rise in gasoline prices of 20 percent, a situation that sparked a series of protests in January.
Experts also say three years would be enough time for Texas refineries to find a new market for their products. With the lifting of a ban on most crude oil exports in 2015 and the enactment of various policies to boost natural gas exports, the United States is poised to become a top fossil fuel exporter to Asia and Europe.
Susan Grissom, chief industry analyst at American Fuel and Petrochemical Manufacturers, scoffed at the idea that the loss of the Mexican market would have a big impact on the United States.
“You know, the world adjusts,” she said.
But it would be a major hole to fill. More than half of the gasoline the United States exported in 2017 went to Mexico, according to the Energy Information Administration. And Mexico has been increasing its imports in recent years due to refining problems. Pemex, which also oversees refining in Mexico, decreased its capacity to make gasoline in the first quarter of 2018 to 220,000 barrels per day. That’s compared to 421,000 barrels per day in 2014.
Energy experts say domestic fuel production has dropped because Mexico has failed to invest in repairs to its aging refineries. Its last one was built more than 40 years ago. There are six refineries in total.
Everley said no fuel export market more sense for the United States — and Texas — than Mexico.
“The question is not whether products refined in Texas can find a market,” Everley said. “The question here is: Do we want to upset a strong trading relationship between Texas and Mexico?”
(SeaOne Caribbean, 13.Aug.2018) – SeaOne Caribbean, LLC, which is developing the Caribbean and Central American Fuels Supply Project for natural gas and natural gas liquid (NGLs) delivery, announced that CG/LA Infrastructure has recognized SeaOne’s project as the region’s Top Strategic Infrastructure Project for 2018. The award was handed out at the recently-concluded CG/LA 16th Latin American & Caribbean Infrastructure Leadership Forum in Miami, Florida.
In determining SeaOne’s eligibility for this premier recognition, CG/LA examined the project’s, “long term benefits, the measurable opportunities that each project creates for the health, mobility, education and quality of life for citizens in their communities, their states and their countries.” CG/LA Infrastructure Inc. is the leading global consultancy offering strategic advisory and development services to the private and public infrastructure community.
Forrest Hoglund, SeaOne’s Chairman and CEO, stated, “The prosperity of many Caribbean, Central and South American countries is stymied by challenges related to expenditures on fuel and power generation that far outweigh other developed parts of the world. SeaOne’s technology and know-how solves this challenge through the use of the company’s patented technology that allows, for the first time, the importation of low-cost U.S. natural gas and NGLs in a single liquid cargo to regional customers who — for economic, environmental and regulatory reasons – are compelled to reduce their dependence on oil. We are pleased in the strong customer interest from key Caribbean and Central American countries to date, and are especially gratified that CG/LA has recognized SeaOne as the top regional infrastructure project for 2018.”
As a part of SeaOne’s Fuels Supply Project, SeaOne plans to build a Compressed Gas Liquid (“CGL”™) production and export terminal in Gulfport, MS, to deliver CGL to Caribbean and Central, and Latin American markets. SeaOne’s patented CGL process includes the manufacture of a solvated solution by chilling, pressurizing, and combining natural gas and NGLs. The final solvated CGL product includes methane, ethane, propane, butane, isobutene, and pentane. CGL presents an alternative to the high-cost and non-environmentally friendly fuel oil products the region currently uses for power generation and other fuel needs. SeaOne’s project will play a key role in assisting the countries of this region with achieving a sustainable energy economy.
Key, defining characteristics of SeaOne’s Caribbean and Central American Fuels Supply Project include the following assets:
— CGL Production and Export Facility to be located at the existing Port of Gulfport, Mississippi;
— Compressed Gas Liquid Carriers (“CGLCs”) for the marine transportation and delivery of the CGL cargo to markets;
— CGL Receiving Terminals located at markets in the Caribbean, Central and South America. The Dominican Republic is to serve as a Central Caribbean Hub and Colombia to serve as a Southern Caribbean Hub.
(Forbes, Robert Rapie, 12.Aug.2018) – In 2007, following Venezuela’s expropriation of billions of dollars of assets from U.S. companies like ExxonMobil and ConocoPhillips, I suggested a potential remedy.
Since Venezuela’s state-owned oil company, PDVSA (Petróleos de Venezuela, S.A.) owns the Citgo refineries in the U.S., I felt the companies that had lost billions of dollars of assets could target these refineries for seizure as compensation.
These refineries have the same vulnerabilities as the U.S. assets in Venezuela that were seized. They represent infrastructure on the ground that can’t be removed from the country.
Citgo has three major refining complexes in the U.S. with a total refining capacity of 750,000 barrels per day. Recognizing the vulnerability from asset seizure, PDVSA tried to sell these assets in 2014, and valued them at $10 billion. But that value have been grossly overstated, considering that Venezuela subsequently pledged 49.9% of Citgo to Russian oil giant Rosneft as collateral for a $1.5 billion loan.
In recent years, PDVSA has lost a series of arbitration awards related to expropriations, and companies have been looking for opportunities to collect. In May, ConocoPhillips seized some PDVSA assets in the Caribbean to partially enforce a $2 billion arbitration award for Venezuela’s 2007 expropriation.
ConocoPhillips had sought up to $22 billion — the largest claim against PDVSA — for the broken contracts from its Hamaca and Petrozuata oil projects. The company is pursuing a separate arbitration case against Venezuela before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). The ICSID has already declared Venezuela’s takeover unlawful, opening the way for another multi-billion dollar settlement award that may happen before year-end.
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Last week, a court ruling opened the door for Citgo assets to be seized to pay for these judgments.
This ruling is sure to set off a feeding frenzy among those that have won arbitration rulings against Venezuela. Until the legal rulings are settled, it’s hard to say which companies will end up with Citgo’s assets. But it’s looking far more likely it won’t be PDVSA.
(Energy Analytics Institute, Aaron Simonsky, 11.Aug2018) – Houston-based Citgo Petroleum Corporation is the refining arm of Venezuela’s Petróleos de Venezuela, S.A. (PDVSA). What follows is a brief company profile.
Citgo, a Delaware corporation with headquarters in Houston, refines, markets, and transports gasoline, diesel fuel, jet fuel, lubricants, petrochemicals, and other petroleum-based industrial products. Citgo has 3,500 employees and is owned by Citgo Holding, Inc., an indirect, wholly owned subsidiary of PDVSA, the national oil company of the Bolivarian Republic of Venezuela, according to data posted to the company’s website.
Citgo owns and operates three highly complex crude oil refineries located in the following cities:
— Lake Charles, LA (425,000 barrels-per-day [b/d]),
— Lemont, IL (167,000-b/d), and
— Corpus Christi, TX (157,000-b/d).
These refineries process approximately 200,000 b/d of Venezuelan crudes, including supplies from Orinoco Oil Belt upgraders. The combined aggregate crude oil refining capacity of 749,000-b/d, positions Citgo as one of the largest refiners in the nation. The company owns and/or operates 48 petroleum product terminals, one of the largest networks in the country.
In 2016, Citgo sold approximately 13.6 billion gallons of refined products, including exports. The company markets quality motor fuels to independent marketers who consistently rate Citgo as one of the best-branded supplier companies in the industry. Citgo branded marketers sell motor fuels through more than 5,200 independently owned, branded retail outlets.
Citgo markets jet fuel directly to airlines and produces a variety of agricultural, automotive, industrial and private label lubricants which are sold to independent distributors, mass marketers and industrial customers as well as other clients. In addition, the company sells petrochemicals and industrial products directly to various manufacturers and industrial companies throughout the United States.
From the gasoline that helps your family take vacations to the advanced medical equipment at your community hospital, Citgo is fueling good, the company reported on its website.
It’s amazing the difference petroleum-based products make in our everyday lives. Based in Houston, Texas, Citgo is a refiner and marketer of transportation fuels, lubricants, petrochemicals and other industrial products. In addition to these products, there’s probably a Citgo in your neighborhood, a convenient place to fill up with gas and grab a quick snack.
The story of Citgo Petroleum Corporation as an enduring American success story began back in 1910 when pioneer oilman, Henry L. Doherty, created the Cities Service Company.
When Cities Service determined that it needed to change its marketing brand, it introduced the name CITGO in 1965, retaining the first syllable of its long-standing name and ending with “GO” to imply power, energy and progressiveness. The now familiar and enduring Citgo “trimark” logo was born.
Occidental Petroleum bought Cities Service in 1982, and Citgo was incorporated as a wholly owned refining, marketing and transportation subsidiary in the spring of the following year. Then, in August, 1983, Citgo was sold to The Southland Corporation to provide an assured supply of gasoline to Southland’s 7-Eleven convenience store chain.
In September, 1986, Southland sold a 50 percent interest in Citgo to Petróleos de Venezuela, S.A., (PDVSA), the national oil company of the Bolivarian Republic of Venezuela. PDVSA acquired the remaining half of Citgo in January, 1990 and the company is owned by Citgo Holding, Inc., an indirect, wholly owned subsidiary. With a secure and ample supply of crude oil, Citgo quickly became a major force in the energy arena.
Since 1985, Citgo has sold its various products through independent marketers. Our relationship with these individuals is really what makes CITGO different from other petroleum companies.
(Energy Analytics Institute, Jared Yamin, 12.Aug2018) – The World Bank expects the price of oil to average $65 per barrel in 2019.
“Oil prices are expected to average $65 per barrel in 2019. While projections indicate that prices will fall from their April 2018 level, they should be supported by a continuing restriction of production by member producer countries and non-members of the Organization of Petroleum Exporting Countries (OPEC) and firm demand,” reported the daily El Diario, citing Shantayanan Devarajan, director of Development Economics and interim chief economist at the World Bank.
“The acceleration of global growth and the increase in demand are important factors that explain the widespread increases in the price of most commodities and the forecasts of higher increases in the price of these products in the future,” announced Devarajan.
(Energy Analytics Institute, Jared Yamin, 11.Aug.2018) – Crystallex seems to have cut in line while there are many others already in line for CITGO assets and value.
What follows are comments published by Venezuelan oil analyst Francisco Monaldi in a series of tweets related to the legal battle over CITGO:
1) The value of CITGO is much higher than the claim by Crystallex, which by the way was an outrageously high amount for that expropriation,
2) This is the beginning of a shark fest of claims and lawsuits. There are many others in line for CITGO assets and value, CITGO bond holders, CITGO creditors, PDVSA 2020 bondholders, Rosneft, Conoco, other PDVSA and Venezuela creditors and ICSID claimants. It seems to me that Crystallex should not be ahead in this line,
3) In the short term this would be a blow for PDVSA making it harder to get diluents from the US and to earn cash from its heavy exports, but it is just the last in a long list of troubles including default and sanctions,
4) In the long term it would be a big blow to Venezuela, losing a strategic asset to access the USGC market in competition with Canadian heavy, particularly after Keystone is completed,
5) Outside of CITGO, Venezuela has only a few much less valuable assets, what claimants will try is to seize or disrupt PDVSA’s flows of oil and receivables, and force them to negotiate something, and
6) This is a tragic story of recklessness and incompetence by the chavismo, increasing the debt without investment, expropriating and destroying value, in the middle of an oil boom. The consequences, collapsed oil production and now the final reckoning with their claimants…
(Energy Analytics Institute, Ian Silverman, 11.Aug.2018) – To-date, two oil companies are working to export fuels from the U.S.A. to neighboring Mexico, through the Port of Brownsville.
“Our main client is P.M.I. Comercio Internacional, a subsidiary of Pemex, that’s dedicated to the import and export of hydrocarbons,” reported the daily newspaper El Financiero, citing Port of Brownsville General Director Eduardo Campirano. “But, with the new energy reform, opportunities were opened up.”
Campirano didn’t reveal the identity of the companies, but explained they would receive gasoline and diesel by ship in the Port of Brownsville, and then move the fuels either by truck, rail or pipeline, depending on the final destination of the product in Mexico.
Located in South Texas, the Port of Brownsville is the only deep water port connected directly with Mexico along the southern U.S. border. The port serves as the main marine transport route for steel exported to the northern region of ‘the Aztec nation’.
Sergio Lopez, commission secretary with the Port of Brownsville, said the entity has all the necessary equipment to provide services to private energy companies importing fuels into Mexico.
Together with Canada, Mexico currently consumes almost 90 percent of the steel material exported from the U.S., reported the daily. The Port of Brownsville plays a vital role as a main port in terms of steel shipments to the Latin American country.
(OilPrice.com, Irina Slav, 10.Aug.2018) – Canadian gold miner Crystallex was ruled the winner in a long-running case against Venezuela, which it has sued for the forced nationalization of its assets by the Hugo Chavez government. A U.S. federal judge this week awarded the miner the right to approach Venezuela’s U.S. oil unit, Citgo, to seek its compensation of US$1.4 billion.
The Associated Press notes the ruling by Chief Judge Leonard P. Stark is unique: government assets such as Citgo’s parent, PDVSA, are as a rule protected from lawsuits targeting a state. Yet in Stark’s ruling, the judge said that Venezuela had blurred the lines between the government and the state oil firm, with a military official at the helm of PDVSA.
There is no reason to believe Crystallex will not seek to enforce the ruling as soon as possible after a decade-old legal battle. Should this happen, PDVSA, according to AP, might have to liquidate Citgo to get funds for the settlement. The company is worth a lot more than US$1.4 billion—it is valued at around US$8 billion—but cash-strapped Caracas does not have a lot of funding sources at the moment.
The judge has delayed the enforcing of the ruling for a week, possibly to give Crystallex and Caracas time to try and reach a payment agreement.
What could make matters worse for Venezuela is the fact that Crystallex is by far not the only company seeking compensation for the nationalization of its business in the country, and now more of those rulings could follow. ConocoPhillips is another one: the company earlier this year won a court order allowing it to seize PDVSA assets in the Caribbean as a way of getting US$2.04 billion in compensation for the nationalization of two projects by the Chavez government.
AP also quoted a broker from Caracas Capital Markets as saying bondholders could follow suit demanding their money, too. Bondholders are owed US$65 billion in bonds that Caracas stopped servicing a year ago.
“This was the most vulnerable low hanging fruit for debtholders to go after. It looks like Crystallex is the lucky lottery winner because they got there first,” Russ Dallen said.
(AFP, 10.Aug.2018) – Venezuela’s state oil company PDVSA on Friday appealed a US court ruling that would allow a Canadian mining company to seize shares of PDVSA’s US-subsidiary Citgo in payment of a $1.2 billion debt.
The case dates from 2011, when the Venezuelan government seized a mine Crystallex had been awarded and despite a settlement through an arbitration panel Caracas failed to repay the company.
US District Court Judge Leonard Stark ruled Thursday the mining firm could seize Citgo shares from PDVSA, although the order will not be issued until final details are worked out.
He rejected PDVSA’s argument that it is separate from the government in Caracas and should not be held liable, favoring the assertion that the company is an “alter ego” of the government.
It is another blow to the embattled government of President Nicolas Maduro, who has overseen the collapse of the nation’s once-thriving oil-based economy, which is now in default.
Thousands of Venezuelans flee the country daily, malnutrition is rife and the International Monetary Fund said inflation could reach one million percent this year.
PDVSA, once the jewel in the crown of the nation’s economy, has been hamstrung by debt and lack of investment that has shrunk output.
Losing Citgo would dry up one of the last remaining sources of foreign revenue. And even that is already at risk since a nearly 50 percent stake in Citgo was used as collateral for a $1.5 billion loan from Russia’s Rosneft.
PDVSA’s bonds represent 30 percent of Venezuela’s external debt — estimated to be around $150 billion.
(Houston Chronicle, Jordan Blum, 10.Aug.2018) – Financially crippled Venezuela likely will lose control of its Houston refining arm Citgo Petroleum once a slew of lawsuits eventually are resolved, and it’s just a matter of when and to whom, finance and energy analysts said Friday.
A federal judge ruled late Thursday that a defunct Canadian mining firm can go after Citgo’s assets to collect $1.4 billion it allegedly lost from Venezuela when the government seized mining and energy assets more than a decade ago under the late socialist leader Hugo Chávez.
While the Canadian firm, Crystallex International, is unlikely to take control of Citgo’s refining and retail gasoline assets throughout the U.S., the ruling is expected to kick off an array of new legal claims against Venezuela and its state oil company – from Houston-based ConocoPhillips to other oil and gas firms – with the goal of winning Citgo as the prize, legal and finance experts said. After all, Venezuela owes a lot of money to a lot of different companies.
Whichever company eventually wins out could sell to refiners that might be interested, including San Antonio’s Valero Energy, Houston’s Phillips 66, Ohio-based Marathon Petroleum and New Jersey’s PBF Energy, said Jennifer Rowland, and energy analyst with Edward Jones in St. Louis.
“It’s not every day that a suite of refineries becomes available, especially along the Gulf Coast,” Rowland said. “Those assets would definitely fit in some companies’ portfolios.”
Citgo, which declined comment Friday, owns oil refineries in Corpus Christi, Lake Charles, La., and Illinois. The company employs about 4,000 people in the U.S., including 800 in Houston. Citgo has roughly 160 branded gas stations in the Houston area, and about 5,500 nationwide. The company is valued at nearly $8 billion.
Citgo is a U.S. company with a more than 100-year history. It was acquired by Venezuela’s state-run oil company three decades ago. The state oil company, Petroleos de Venezuela SA, is known as PDVSA.
The Citgo assets are seen as the crown jewel for companies targeting PDVSA legally because they’re the most accessible assets outside of Venezuela, said Craig Pirrong, a University of Houston finance professor specializing in energy markets. Thursday’s court ruling opened the door for many more claims made against Citgo by those owed money by Venezuela, he said, because the judge allowed Venezuela’s debts to extend to its U.S. refining assets as an “alter ego” of the government.
“It’s going to be like a feeding frenzy going after Citgo,” Pirrong said.
And now a series of complex legal battles will ensue, possibly dragging out into next year, said Franciso Monaldi, a fellow in Latin American Energy Policy at Rice University’s Baker Institute for Public Policy.
“I don’t expect PDVSA to immediately lose control of Citgo, but I think eventually it will happen,” Monaldi said. “It’s really just a matter of who will get it.”
Venezuela has suffered a financial and geopolitical freefall under Chavez’ socialist successor and current president, Nicolas Maduro. Many thousands of people have fled the country, fearing starvation and violence, including some PDVSA workers, as the country’s oil production has plummeted.
As he’s consolidated power in the destabilized nation, Maduro jailed an opposition lawmaker this week after a failed assassination plot that involved two flying drones with explosives.
Citgo has faced increasing uncertainty since November, when its acting president and five other Houston-based executives with dual citizenship were arrested in Venezuela on corruption charges.
Maduro installed Chávez’s cousin, Asdrúbal Chávez, as the new Citgo president. Although he remains in charge, the new Citgo leader was ordered in July by the U.S. State Department to surrender his U.S. visa amid an ongoing probe into PDVSA. Citgo said Chávez would continue in his role remotely for now.
The future of Citgo is further complicated because 49.9 percent of Citgo is pledged to Russian oil giant Rosneft as collateral for a $1.5 billion loan. The U.S. government would fight losing control of Citgo to Russian interests, analysts said.
As for Crystallex, Thursday’s ruling doesn’t actually hand Citgo over to the defunct firm. But it does position Crystallex to force a large settlement from Venezuela, Monaldi said.
He added that ConocoPhillips could make a stronger claim for Citgo because it’s already won a $2 billion ruling against PDVSA, and not just Venezuela as a whole. In the spring, ConocoPhillips won court orders to seize PDVSA assets on Caribbean islands, quickly taking action against refining and oil storage assets in the Caribbean islands of Curacao, Bonaire and Sint Eustatius.
But ConocoPhillips said it is still a good ways off from recouping the full $2 billion. ConocoPhillips also argued PDVSA has transferred some petroleum products to Citgo to prevent their seizure.
“It’s looking bleak for Venezuela,” Pirrong added.
(The Wall Street Journal, Andrew Scurria and Julie Wernau, 9.Aug.2018) – A U.S. federal judge authorized the seizure of Citgo Petroleum Corp. to satisfy a Venezuelan government debt, a ruling that could set off a scramble among Venezuela’s many unpaid creditors to wrest control of its only obviously seizable U.S. asset.
Judge Leonard P. Stark of the U.S. District Court in Wilmington, Del., issued the ruling Thursday. However, his full opinion, which could include conditions or impose further legal hurdles, was sealed. A redacted version is expected to be available at a later date.
The court order raises the likelihood that Venezuela’s state oil company, Petróleos de Venezuela SA, will lose control of a valuable external asset amid the country’s deepening economic and political crisis. The decision could still be appealed to a higher, federal court.
Attorneys for PdVSA weren’t available for comment. Citgo declined to comment.
Crystallex International Corp., a defunct Canadian gold miner that filed the legal action, is trying to collect on a judgment over lost mining rights involving Venezuela’s government. It has targeted Citgo, an oil refiner, because this is the largest U.S. asset of the cash-strapped and crisis-riven country.
Many other creditors of Venezuela are also circling Citgo, but Crystallex is the first to win a judgment authorizing its seizure. Crystallex had argued that Citgo was ultimately owned by PdVSA, which is an “alter ego” of Venezuela that is liable for the South American country’s debts. The judge’s decision in favor of Crystallex allows it to take control of shares of Citgo’s U.S.-based parent company, the first step toward a sale of the company.
Venezuela and its various state-controlled entities together have $62 billion of unsecured bonds outstanding, with approximately $5 billion so far in unpaid interest and principal. Analysts estimate that the government has approximately $150 billion total in debt outstanding to creditors around the world.
Venezuela and its state-controlled entities including PdVSA began missing bond payments last year and have since spiraled into a widespread default. U.S. sanctions bar creditors from engaging the Venezuelan government in any kind of restructuring or buying new debt.
For Venezuela, losing control of Citgo could jeopardize one of its only remaining sources of oil revenue, the U.S. At the same time, investors in Venezuela’s defaulted debt—as well at least 43 companies pursuing legal claims against the government—risk losing one of the few obvious assets in the U.S. that can be seized for repayment.
The only payment made this year by Venezuela was $107 million on its PdVSA bonds, due 2020, for which Citgo is pledged as collateral. That was a clear move by Caracas to protect that asset, analysts have said.
Without ownership of Citgo, investors worry PdVSA would have little incentive to continue to pay on the debt
Any sale of Citgo stock would require U.S. Treasury Department approval, and Crystallex needs to clear other legal hurdles before the shares could be sold.
In trying to lay claim to Citgo, creditors are following a familiar playbook. Hedge funds led by Elliott Management Corp. did something similar when they went after Argentine assets following that country’s 2001 default, the largest sovereign default at the time, on more than $80 billion in sovereign debt.
When Argentina refused to pay settlements arising from the default, the hedge funds sought out Argentine assets to seize and argued that everything from the assets of its central bank to its state-controlled oil company were an “alter ego” of the state.
Elliott in 2012 persuaded a Ghanaian court to impound a training vessel of the Argentine Navy, and in 2014 asked a California court to block Argentina from launching satellites into space. Argentina settled with the hedge funds in 2016, delivering gains of as much as 900% on some of their original principal investments.
(Associated Press, 9.Aug.2018) – A Canadian gold mining company on Thursday won the right to go after Venezuela’s prized U.S.-based oil refineries and collect $1.4 billion it lost in a decade-old take-over by the late socialist President Hugo Chavez.
Chief Judge Leonard P. Stark of the U.S. Federal District Court in Delaware made the ruling in favor of Crystallex, striking a blow to crisis-wracked Venezuela, which stands to lose its most valuable asset outside of the country – Citgo.
Chavez took over the gold mining firm and many other international companies as part of his Bolivarian revolution that’s left the country spiraling into deepening economic and political turmoil.
Venezuelans struggle to afford scarce food and medicine as masses flee across the border. In a sign of rising political tensions, current President Nicolas Maduro threw an opposition lawmaker in jail this week, charged in a failed assassination plot using two drones loaded with explosives.
The latest order by the U.S. judge could set off a scramble by a long list of creditors owed $65 billion from bonds that cash-strapped Venezuela has stopped paying within the last year, said Russ Dallen, a Miami-based partner at the brokerage firm Caracas Capital Markets.
“This was the most vulnerable low hanging fruit for debtholders to go after,” Dallen said. “It looks like Crystallex is the lucky lottery winner because they got there first.”
Chavez in early 2009 announced Venezuela’s take-over of the Canadian mining operations in Bolivar state, a mineral rich region with one of the continent’s largest gold deposits. He accused mining companies of damaging the environment and violating workers’ rights.
Crystallex spent years trying to negotiate a deal with Venezuela before making its case in 2011 to a World Bank arbitration panel, which sided with the Canadian firm, despite Venezuela’s vigorous fight.
U.S.-based Citgo, part of the state-run oil company PDVSA, has three refineries in Louisiana, Texas and Illinois in addition to a network of pipelines. If the order is carried out, Crystallex won’t get all of Citgo – valued at $8 billion – but Venezuela could be forced to liquidate it to make good on the court order.
Today, the gold mining region once operated by Crystallex is largely lawless and dangerous, run by rogue miners who blast the earth with water and mercury to expose gold nuggets and sell them to government forces, often leading to deadly conflicts.
The judge’s ruling is unique, because government assets, like PDVSA, are normally protected from lawsuits against a sovereign nation. But the judge found that Crystallex can attach Citgo’s parent because Venezuela has erased the lines between the government and its oil firm, now run by a military general.
Upon issuing the order, the judge delayed enforcing it for a week, which Dallen said could be a move to give Crystallex and Venezuela time to reach an agreement, such as returning to payment terms of an earlier resolution, Dallen said.
“This gives Venezuela the chance to honor its settlement agreement,” Dallen said. “Or they’ll lose Citgo.”
(ShaleWolf Capital, 9.Aug.2018) – On June 22nd, 2018 President Donald Trump asked OPEC to increase its daily oil output by 1 million barrels. Industry experts would agree that OPEC is at or near its full production capacity. OPEC can’t just increase production. As demand continues to grow the world is set to outpace oil production by more than 500,000 barrels by 2020. When you consider the current situation in several oil contributing countries like Venezuela, Africa and Iran it becomes a perfect storm for oil prices potentially above $110 per barrel. Based on the data, its not a matter of if we see $110 prices but when. ShaleWolf Capital analysts believe that now is a perfect opportunity to acquire oil and gas assets as part of its overall strategy.
ShaleWolf Capital agrees to partner with NCE on the developmental drilling of its Cotton Valley reserves located in Harrison County, Texas. This formation is considered a long term income asset by the likes of British Petroleum (BP), Samson, Chesapeake Energy and XTO Energy. Based on 3rd party reserve evaluations the upside potential could equal over 684,000 BOE and 55BCFG in oil and natural gas reserves. There is also a strong potential of condensate reserves being on target with oil reserve estimates. In this area it would not be outrageous to potentially see condensate prices match current WTI oil prices. SWC has carefully reviewed surrounding fields in conjunction with Cotton Valley reserves and production. In more than 76 wells drilled into the Cotton Valley Sands in this area there are ZERO dry holes. This is prolific and could prove to be similar to formations like those found in the Permian Basin, Eagleford Shale, Austin Chalk and other blanket formations.
ShaleWolf Capital executives also anticipate acquiring 3-4 additional acreage positions in areas that include the Permian Basin, Austin Chalk, Bone Springs and Eagleford Shale oil and gas reserves in 2018. No capital contributions will be required from current partners to complete said acquisitions. This purchase is anticipated to close in Q3 or Q4 of 2018 utilizing cash reserves on hand. Due to strong demand driven by current potential partners ShaleWolf Capital has elected to restrict new partners from acreage participation in the foreseeable future.
(Sempra Energy, 8.Aug.2018) – Sempra Energy formed a new operating group for its North American infrastructure businesses and named Carlos Ruiz Sacristán chairman and CEO of the group, Sempra North American Infrastructure. Ruiz has served as chairman and CEO of Sempra Energy’s Mexican operating subsidiary, Infraestructura Energética Nova, S.A.B. de C.V. (IEnova) (BMV: IENOVA) since 2012.
Ruiz and the new Sempra North American Infrastructure group will report to Joseph A. Householder, president and chief operating officer of Sempra Energy. The group will encompass Sempra Energy’s Mexican operations contained within IEnova, Sempra LNG & Midstream’s existing operations, including Cameron LNG and all other liquefied natural gas (LNG) development and marketing activities.
As part of his new role, Ruiz will continue to serve as executive chairman of the board of directors of IEnova.
“Carlos Ruiz has overseen exceptional growth at IEnova, including its successful initial public offering in Mexico in 2013,” said Jeffrey W. Martin, CEO of Sempra Energy. “This new streamlined organizational structure will better align our non-utility operations to serve our global customers, and develop and execute projects even more effectively.”
“I’m honored and excited to serve in this new role at Sempra Energy and to continue my close involvement with IEnova,” said Ruiz. “We’ve built a strong and deep leadership team at IEnova and I will be devoting my full attention to growing Sempra Energy’s North American infrastructure business.”
Previously, Ruiz was a member of Sempra Energy’s board of directors from 2007 to 2012, when he became chairman and CEO of IEnova. Ruiz served as Mexico’s Secretary of Communications and Transportation during the administration of Dr. Ernesto Zedillo Ponce de León from 1994 to 2000. Previously he served in various positions at the Central Bank (Banco de Mexico) from 1974 to 1988, the Ministry of Finance from 1988 to 1992, and Petróleos Mexicanos in 1994. He currently is a member of the board of directors of Southern Copper Corp, Banco Ve por Más, S.A de C.V., Grupo Creatica, S.A. de C.V., member of the Technical Committee of Diego Rivera and Frida Kahlo Museum and a member of the Technical Committee Trust of Museo Nacional de Energía y Tecnología.
Ruiz, 68, holds a bachelor’s degree in business administration from Anahuac University in Mexico City and a master’s degree in business administration from Northwestern University in Chicago.
Tania Ortiz Mena, 48, will succeed Ruiz as CEO of IEnova, effective Sept. 1. Ortiz will report to Ruiz and will be nominated to serve on IEnova’s board of directors. Ortiz has served as IEnova’s chief development officer since 2014 and has held a range of leadership positions with IEnova since joining the company in 2000, including vice president for business development and external affairs, vice president of external affairs and director for government and regulatory affairs. Previously, Ortiz worked for PMI, Pemex’s international trading subsidiary.
Ortiz is a board member of Oncor Electric Delivery Co. and the Mexican Natural Gas Association, as well as vice president of the board for the World Energy Council – Mexico Chapter, member of the Energy Regulatory Commission Advisory Board and member of the Mexican Council for International Relations.
Octávio M. Simões, 59, currently president of Sempra LNG & Midstream, has been promoted to president and CEO of that company, reporting to Ruiz. Simões and his team will focus on maximizing the value of the company’s LNG opportunities. Simões also will continue in his role as chairman of Cameron LNG, LLC., the joint venture of which Sempra owns 50 percent. He has served as president of Sempra LNG & Midstream since 2012. Previously he was vice president of commercial development for Sempra LNG, where he was responsible for marketing the capacity of LNG receipt terminals, developing LNG facilities, securing LNG supply, securing shipping and acquiring equity positions in liquefaction plants. Prior to that, Simões served as vice president of asset management and vice president of planning and analysis for Sempra Generation, and in senior positions with Earth Tech and NEERI.
Justin C. Bird, 47, currently vice president of gas infrastructure and special counsel for Sempra Energy, has been named chief development officer for the Sempra North American Infrastructure group. In his new role reporting to Ruiz, Bird will be responsible for activities related to project development for all current and future LNG and midstream projects.
Amy Chiu, 52, vice president of asset management for Sempra LNG & Midstream, has been named chief asset management officer for the Sempra North American Infrastructure group. In her new role, Chiu will oversee Cameron LNG joint-venture management, Energía Costa Azul joint-venture management and LNG operations.
Kathryn J. Collier, 50, vice president and treasurer for Sempra Energy, has been appointed chief financial officer and chief administrative officer for the Sempra North American Infrastructure group. In her new role, she will oversee accounting, economic and financial modeling, human resources, information technology and procurement for the new operating group.
All of the organizational changes described above are effective Aug. 25, unless noted otherwise.
(Energy Analytics Institute, Ian Silverman, 8.Aug.2018) – Chief Judge Stark of the US Federal District Court in Delaware immediately agreed with our arguments calling out the abuse of sealing by Crystallex, Venezuela and PDVSA, writes Caracas Capital Markets Managing Partner Russ Dallen in an emailed note to clients.
He entered our letter into the Docket and Ordered everything unsealed if Counsel cannot justify (“specifically”) the sealing by 3pm tomorrow:
ORAL ORDER: With reference to the letter received today from the Latin American Herald Tribune, IT IS HEREBY ORDERED that, no later than tomorrow, August 9, at 3:00 p.m. local time, any party (including the intervenor) who wishes for any portion of the record or any filing to remain under seal file a request to that effect and SHOW CAUSE to support the request. Any such request must be specific as to the type of information for which continued sealing is requested and shall provide for filing of redacted versions of any materials that currently remain unredacted as soon as possible. In the absence of cause being shown, the Court will unseal the entirety of the record in this case, including all filings. ORDERED by Judge Leonard P. Stark on 8/8/18. (ntl) (Entered: 08/08/2018)
We have a voracious and insatiable appetite for truth — which is probably what makes us the best at covering Venezuela as well as other issues for our clients, writes Dallen.
“As a result, this morning we spoke with U.S. Federal District Court for Delaware Chief Judge Stark’s chambers and filed this Intervenor Letter (our 2nd in this Crystallex case) calling for the unsealing of documents that Crystallex, PDVSA and hedge fund Tenor Capital were abusively sealing,” concluded Dallen.
(OilPrice.com, Viktor Katona, 6.Aug.2018) – Rosneft has been rocking the Russian oil sector for quite some time already – first it acquired several domestic assets, in some cases bordering on hostile takeover, then it took on a couple of international commitments in Iraqi Kurdistan and Venezuela and secured hefty tax concessions. This has led to a sense of satiation, fortified by CEO Igor Sechin opining recently that the oil giant will focus on organic growth from now on. In a somewhat dubious manifestation of Rosneft’s new policy, it is now suing its partners in the Sakhalin-I project for an unprecedented 89 billion roubles ($1.4 billion). The reason, coded with great deliberation in legal gobbledygook, seems remarkably humdrum at first sight, yet there is more to it.
Rosneft claims that the Sakhalin-I shareholders have gained 81.7 billion roubles by means of unjust enrichment, whilst another 7.3 billion roubles are to be paid back as interest gained having used third party funds between 2015 and 2018. The basis of the unjust enrichment claim is Rosneft’s allegation that the exploitation of Sakhalin-I has led to oil crossing over from its Northern Chayvo field to the consortium’s Chayvo deposits. Oil migration is a regular feature of any upstream specialist’s life and so far there were only few examples of taking similar issues to court, especially to such a noteworthy sum required. Further complicating matters, two Rosneft subsidiaries, Rosneft-Astra and Sakhalinmorneftegaz-Shelf, are also present in the Sakhalin-I shareholder structure (20 percent) and Rosneft is claiming money from them, too (17.5 billion roubles in total).
Before we start looking at the political underpinning of Rosneft’s claim, it would be expedient to compare the two projects as they are incomparable in size, importance and scale. Sakhalin-I consists of three oil fields that were deemed commercially attractive in 2000 – Chayvo, Odoptu and Arkutun-Dagi – production at which has started in 2005. The three field’s reserves boast an aggregate of 310 million tons of oil and 485 BCm of natural gas (17 TCf), making it Russia’s biggest project in the Pacific Ocean. By comparison, the Northern Tip of the Chayvo field (also called Chayvo North Dome) contains a “mere” 15 million tons of oil and 13 BCm of gas. It also started production significantly later than Sakhalin-I, with the first producing well of the presumed five having been drilled in September 2014.
What the two projects do have in common, however, is their relatively swift peaking out – Sakhalin-I peaked in 2007, roughly one and a half year after production started (11.2 mtpa or 225 kbpd) and has failed to regain that level ever since, even though two additional fields were brought online in 2010 and 2015 – Odoptu and Arkutun-Dagi, respectively. Currently the Sakhalin-I oil output stands at So did the Northern Tip of the Chayvo field – having reached a 50 kbpd peak in 2016, it fell by some 60 percent in the past two years since. From Rosneft’s standpoint, this is mostly due to oil migrating from the northern dome to the southern and central parts of the field.
With the abovementioned facts in mind, one gets a clear picture of why Sakhalin-I is more important from a federal point of view – moreover, interestingly enough, it is the last project on Russian soil to be operated by a foreign company (ExxonMobil, holding the largest stake of 30 percent). Rosneft is demanding payment of 26.7 billion roubles from both ExxonMobil and the Japanese consortium SODECO (consisting of Marubeni, Japan Petroleum Exploration, ITOCHU, INPEX and JOGMEC), whilst the Indian ONGC Videsh should pay 17.8 billion roubles and its subsidiaries 17.5 billion roubles. The amounts in question are indubitably far-fetched – even though oil migration has been an issue for Rosneft for several years already, the required sum is equivalent to 18-19 million barrels of oil under current circumstances, almost a quarter of Sakhalin-I’s total annual production and 17-18 percent of Northern Chayvo’s reserves.
Herein lies the main tenet of the claim – it is less to establish truth and compensate for real losses, rather to exert pressure on shareholders. Rosneft’s ultimate goal is unclear as the Russian state has so far refrained from any sanctions against oil majors operating in the country, be it in an operator or non-operator status, and any deterioration would be deemed inopportune now that the post-World Cup period has brought in a semblance of a thaw. It is clear, however, that the once very powerful Rosneft-Exxon Mobil link is getting weaker following the departure of Rex Tillerson (whose good personal relationship with Igor Sechin helped to forge effective deals) – even though Exxon’s recent abandonment of upstream ventures with Rosneft did not allegedly close the door for any future cooperation, the contours of anything similar happening in the future are increasingly dim.
More than ten years ago, Gazprom has managed to push out then-operator Shell out of the Sakhalin-II venture, using environmental violations as a pretext. Although environmental breaches have been brought up once again this month – a significant herring die off off the Sakhalin coast aroused suspicion that it might have been caused by oil production – it is highly unlikely that Rosneft would follow the same path. Rumours are circulating that the state-owned oil giant is seeking an out-of-court settlement and does not want to take the issue all the way through the Paris arbitration, from the point of view of placating fears about another takeover it would be politic to state that Rosneft does not intend to reshuffle the ownership structure. Yet so far, Rosneft has been highly reluctant to show its cards.
(Citgo Petroleum Corporation, 31.Jul.2018) – The Muscular Dystrophy Association (MDA) depends on partnerships to fulfill their mission, and as their largest corporate sponsor, Citgo Petroleum Corporation hosts the annual MDA Driving for a Cure golf outing for employees and contractors from the Citgo Lemont Refinery.
This year, on June 26, 2018, more than 450 golfers raised a record-breaking $755,542 for the MDA. Held at the Cog Hill Golf and Country Club in Lemont, Illinois, the event included 18 holes of golf and a special dinner reception where an MDA family is traditionally asked to share their story and talk about the role the MDA plays in their fight against the effects of muscle-debilitating diseases.
“The Driving for a Cure Golf Outing is truly a special event because of the MDA family represented. They are what this is all about and it’s an honor and a privilege for Citgo to contribute to the cause for a cure through this fundraiser,” said Jim Cristman, Citgo Vice President, Refining.
One important and unique characteristic of the MDA is its policy requiring all locally-raised dollars be spent locally. As a result, life-saving research programs at Lurie Children’s Hospital, Northwestern University and the University of Illinois will benefit. One example of the impact of this policy is former MDA Goodwill Ambassador for Illinois Lizzie Chamberlain who annually kicks off the golf outing by singing the national anthem.
“This was the first year that Liz was not able to attend and sing at the outing because she is receiving a new treatment that the FDA recently approved for her form of muscular dystrophy. It was the MDA that helped fund the beginning stages of the research that brought this treatment to fruition,” said Amanda Konopka, MDA Director of Distinguished Events.
About the Citgo Lemont Refinery
For more than 90 years, Citgo Lemont Refinery has employed more than 750 Chicago area residents on a full-time and contract basis in support of the local economy. In addition to producing high quality fuels for a large portion of the network of more than 5,200 locally-owned Citgo stations across the country, Lemont Refinery employees also make a major positive impact on the community. Each year, more than 2,500 volunteer hours and thousands of dollars are given in support of community programs such as Muscular Dystrophy Association, United Way and a variety of environmental and preservation programs. Operations at the Lemont Refinery began in 1925 with a major expansion, doubling the facility, in 1933. Over the years, new units were added to meet the demand for a better quality of gas for automobiles, aviation fuel for WWII, and the production of asphalt. Petróleos de Venezuela,S.A., PDVSA, acquired 100% ownership of the refinery in 1997 and began operations as Citgo Lemont Refinery. For more information, visit www.citgorefining.com/Lemont
(InSight Crime, 30.Jul.2018) – US authorities are charging a network of Venezuelan elites and international financial actors with laundering over a billion dollars stolen from the state-owned oil company, illustrating once again how corruption has ransacked the South American country, and why it can be considered a mafia state.
Businessmen who have been given the moniker “boliburgués” along with several Venezuelan officials allegedly embezzled more than $1.2 billion from Venezuela’s state-owned oil company Petróleos de Venezuela S.A. (PdVSA) between 2014 and 2015, and later attempted to launder the funds through US and European banks, according to a July 23 criminal complaint filed in a federal court in Florida.
The PdVSA officials and businesspeople involved allegedly exploited Venezuela’s foreign currency exchange system to increase the value of company funds obtained from the oil company through bribery and fraud. Because of differences between the actual exchange rate and a government-set rate, connected individuals in Venezuela could steal huge amounts of money from the PdVSA.
“Essentially, in two transactions, [a] person could buy 100 million U.S. Dollars for 10 million U.S. Dollars,” the complaint states.
This is all possible thanks to the inconsistencies and complexities of Venezuela’s currency exchange system.
After allegedly obtaining $1.2 billion from PdVSA, the defendants laundered the money through a series of sophisticated schemes, including the purchase of real estate in Florida, fake bonds and false investment funds, in order to pay kickbacks to Venezuelan officials and elites.
Most of the defendants named in the complaint remain at large, and a number of them are presumably in Venezuela where there is little chance the government will cooperate with the US prosecution. However, the US Justice Department announced in a statement that two arrests had been made in connection with the case.
One was Matthias Krull, a Panama-based German national living in Venezuela who worked for a Swiss bank managing the accounts of Venezuelan elites. He allegedly conspired to launder part of the money embezzled from PdVSA, and was arrested in Miami on July 24.
Gustavo Adolfo Hernández Frieri, a Colombian national and naturalized US citizen who allegedly laundered part of the embezzled funds with false mutual fund investments, was arrested in Italy on July 25.
Venezuelan elite Francisco Convit Guruceaga, former legal counsel for Venezuela’s mining ministry Carmelo Urdaneta Aqui, Venezuelan “professional money launderer” José Vicente Amparan Croquer, former PdVSA finance director Abraham Eduardo Ortega, Portuguese banker Hugo Andre Ramalho Gois and Uruguayan banker Marcelo Federico Gutierrez Acosta y Lara have also been charged in the case.
In the criminal complaint, US authorities also describe several unnamed conspirators who are part of a Venezuelan elite class known as the “bolichicos” or “boliburgués”, a name Venezuelans have given to the social class that has rapidly grown rich due to its political ties or the business it does with the Chavista government.
The list also includes a television network owner who could be Raúl Gorrín of Globovisión according to the Miami Herald, and the stepsons of an important Venezuelan official, who according to the same source could be President Nicolás Maduro himself and the children of his wife Cilia Flores. Members of the boliburgués have been implicated in a wide range of other corruption schemes throughout government institutions.
InSight Crime Analysis
The billion-dollar scheme to embezzle funds from Venezuela’s state-owned oil company and launder them through a sophisticated series of false investments abroad is the latest example of the pervasive corruption that has pillaged not only PdVSA, but much of the Venezuelan government’s coffers in recent years.
“It happens because this economic model was created precisely so that organized crime would have control of Venezuela,” Venezuelan lawyer and organized crime expert Alejandro Rebolledo told InSight Crime.
In Rebolledo’s opinion, the economic model led to certain people having the control to give authorization for the currency to leave the coffers of the PdVSA and the nation in general, justified by alleged purchases and payments to suppliers. This explains the sudden “enrichment” of the Boliburgueses to the tune of $600 million or more.
Interestingly, the PdVSA negotiations that led to the US investigations into alleged money laundering began on December 23, 2014, just seven days before President Nicolás Maduro appointed former Treasurer of the Nation Carlos Erick Malpica Flores as vice president of finance for PdVSA. Malpica is also first lady Cilia Flores’ nephew. The Bolichicos’ transactions with the oil company continued into 2015, when Malpica ran the office where the transactions were made.
But the recently revealed money laundering case is not the first time PdVSA officials have been accused of involvement in billion-dollar kickback schemes. In 2015, US federal prosecutors brought a case against two US businessmen who allegedly paid bribes to PdVSA officials in exchange for help winning contracts from the oil company. That case was expanded in 2017 when prosecutors charged several former Venezuelan government officials with soliciting tens of millions of dollars in bribe payments in exchange for prioritizing payments from the failing oil company to certain contractors.
Moreover, PdVSA is not the only government institution in Venezuela subject to rampant corruption. As InSight Crime revealed in a recent investigation, virtually any potential avenue for graft is being exploited while the government of President Nicolás Maduro turns a blind eye to secure the loyalty of those around him. Cases include members of the armed forces, members of the first family and possibly even the president, who according to the Miami Herald may have participated in the PdVSA money laundering operation, although he is not mentioned by name in the US investigation report.
Rebolledo, author of the book How Money Is Laundered in Venezuela (“Así se lava el dinero en Venezuela”), told InSight Crime that “these money laundering operations are only possible if someone in an important position of power allows them to happen. That is what leads to a network like the one identified by US authorities being formed.”
(Energy Analytics Institute, Ian Silverman, 26.Jul.2018) – Beta data from the EIA provide users with an interactive way to analyze multiple petroleum data.
According to the most recent beta crude oil reserve data provided by the US-based Energy Information Administration, two countries in the Latin American region make the list and rank among the top 15 countries worldwide in terms of these reserves. To no surprise, Venezuela tops the list and Brazil ranks 15th, according to the data.
In terms of natural gas reserves, again Venezuela tops the list among the top 15 countries worldwide, but this time the South American country ranks 8th, according to the data.
(Energy Analytics Institute, Piero Stewart, 23.Jul.2018) – It has been 11 years and the 7,000 direct and indirect Venezuelan workers of US oil company Exxon Mobil still haven’t received their social benefits or other liquidations.
Those payment were assumed by the government of late Venezuelan President Hugo Chávez when his administration nationalized Exxon Mobil’s Cerro Negro heavy oil project located in the Hugh Chavez Orinoco Heavy Oil Belt, also known as the Faja.
“Several coworkers have died during this long time waiting while others have left the country, but we continue to demand our rights,” reported the daily newspaper El Nacional, citing Luis Vega, spokesman for those affected. In 2007, labor liabilities reached $5.2 billion, a figure that has increased due to accumulated interest, he said.
Many of the workers are from the Venezuelan states of Monagas, Sucre, Anzoátegui, Bolívar, Guárico and Delta Amacuro, said Vega.
About a month ago, Venezuela’s President Nicolás Maduro instructed PDVSA President Manuel Quevedo to solve the problem.
“PDVSA recognizes the debt, but doesn’t want to pay us alleging that [former PDVSA President] Rafael Ramírez stole the money,” added Vega.
(Bloomberg, Lucia Kassai and Fabiola Zerpa, 18.Jul.2018) – Being a blood relative of Hugo Chavez used to open doors. Now Asdrubal Chavez, cousin of the late Venezuelan socialist leader, is finding out it can close some as well.
In the most recent blow against Venezuela, the U.S. revoked the visa of Chavez, chief executive officer of Petroleos de Venezuela SA’s U.S. refining unit Citgo Petroleum Corp. and a former oil minister. He will be burdened with the task of commanding from outside the U.S. three refineries with a combined capacity to process 749,000 barrels of oil daily and an army of 3,500 employees.
Venezuela, home to the world’s largest oil reserves, has seen its production slide by more than one-third since late 2015, according to data compiled by Bloomberg. Its output may sink from 1.34 million barrels a day in June to just over 1 million, Torino Capital chief economist Francisco Rodriguez wrote in a note. U.S. sanctions have accelerated the decline, as have lawsuits by ConocoPhillips to claim assets as payment for an arbitration award.
The U.S. has sanctioned at least 48 Venezuelan nationals associated with economic mismanagement and corruption, including President Nicolas Maduro, and has provisionally revoked tens of thousands of visas in the aftermath of President Donald Trump’s travel ban. Still, kicking out a C-suite executive of the country is rare.
The revocation “does not change anything at Citgo in terms of its management and operations,” the company said in an emailed statement.
The State Department declined to comment on individual visa cases.
It’s unclear to where Chavez, who used to work from Citgo’s headquarters in Houston, will move. One of the possibilities would be for him to be based out of Aruba, where Citgo is seeking to refurbish a refinery and convert it into an oil upgrader that will transform extra-heavy Venezuelan oil into refinery-ready synthetic grades.
(AP, 16.Jul.2018) – A former official at a state-run electric company in Caracas, Venezuela, pleaded guilty to money laundering conspiracy relating to an alleged multibillion-dollar graft scheme in the Venezuelan oil industry.
Luis Carlos de Leon-Perez, a 42-year-old dual citizen of the United States and Venezuela, admitted his role in the scheme to bribe officials of Venezuela’s state-owned-and-controlled oil company, Petroleos de Venezuela, or PDVSA, the U.S. Attorney’s Office in Houston announced. He also pleaded guilty to conspiracy to violate the U.S. Foreign Corrupt Practices Act. He is scheduled to be sentenced Sept. 24.
De Leon admitted seeking bribes from owners of energy companies in the United States and elsewhere and directing some of the bribes to PDVSA officials.
In 2016, Venezuela’s opposition-led National Assembly said $11 billion went missing at PDVSA in 2004-2014, when Rafael Ramirez was in charge of the company. In 2015, the U.S. Treasury Department accused a bank in Andorra of laundering some $2 billion stolen from PDVSA.
Ramirez was one of Venezuela’s most powerful officials until he resigned as Venezuela’s ambassador to the United Nations in December. He was not charged in the indictment and has denied any wrongdoing, dismissing the U.S. probe into PDVSA as a politically motivated attempt to undermine President Nicolas Maduro’s socialist government.
De Leon was arrested in Spain last October and extradited to the United States after a federal grand jury in Houston returned a 20-count indictment against him, Nervis Gerardo Villalobos Cardenas, 51; Cesar David Rincon Godoy, 51: Alejandro Isturiz Chiesa, 33; and Rafael Ernesto Reiter Munoz, 39.
Cesar Rincon has already pleaded guilty to money laundering conspiracy. Roberto Enrique Rincon Fernandez, 57, of The Woodlands, Texas; and Abraham Jose Shiera Bastidas, 55, of Coral Gables, Florida, have pleaded guilty to violating the Foreign Corrupt Practices Act and await sentencing. Prosecutors say they paid bribes in exchange for contracts to build electricity generators for PDVSA at a time Venezuela was suffering widespread power outages.
In all, 12 suspects have entered guilty pleas relating to the investigation, the Justice Department said.
Villalobos, Ramirez’s former deputy at PDVSA; Reiter, PDVSA’s former corporate security chief, and Isturiz all await trial on charges of money laundering and money laundering conspiracy. Villalobos also is charged with conspiring to violate the Foreign Corrupt Practices Act. He and Reiter remain in Spain awaiting extradition, while Isturiz still has not been arrested.
(AP, 15.Jul.2018) – The United States has nosed ahead of Saudi Arabia and is on pace to surpass Russia to become the world’s biggest oil producer for the first time in more than four decades.
The latest forecast from the US Energy Information Administration predicts that US output will grow next year to 11.8 million barrels a day.
“If the forecast holds, that would make the US the world’s leading producer of crude,” says Linda Capuano, who heads the agency, a part of the US Energy Department.
Saudi Arabia and Russia could upend that forecast by boosting their own production. In the face of rising global oil prices, members of the Organization of the Petroleum Exporting Countries cartel and a few non-members, including Russia, agreed last month to ease production caps that had contributed to the run-up in prices.
President Donald Trump has urged the Saudis to pump more oil to contain rising prices. He tweeted on June 30 that King Salman agreed to boost production “maybe up to 2,000,000 barrels”. The White House later clarified that the king said his country has a reserve of 2 million barrels a day that could be tapped “if and when necessary”.
The idea that the US could ever again become the world’s top oil producer once seemed preposterous.
“A decade ago, the only question was how fast US production would go down,” said Daniel Yergin, author of several books about the oil industry, including a history, The Prize. The rebound of US output “has made a huge difference. If this had not happened, we would have had a severe shortage of world oil,” he said.
The United States led the world in oil production for much of the 20th century, but the Soviet Union surpassed America in 1974, and Saudi Arabia did the same in 1976, according to Energy Department figures.
By the end of the 1970s, the USSR was producing one-third more oil than the US; by the end of the 1980s, Soviet output was nearly double that of the US.
The last decade or so has seen a revolution in American energy production, however, led by techniques including hydraulic fracturing, or fracking, and horizontal drilling.
Those innovations – and the break-up of the Soviet Union – helped the US narrow the gap. Last year, Russia produced more than 10.3 million barrels a day, Saudi Arabia pumped just under 10 million, and the US came in under 9.4 million barrels a day, according to US government figures.
The US has been pumping more than 10 million barrels a day on average since February and probably pumped about 10.9 million barrels a day in June, up from 10.8 million in May, the energy agency said Tuesday in its latest short-term outlook.
According to the Energy Department, the US edged ahead of Saudi Arabia in February and stayed there in March; both trailed Russia.
Capuano’s agency forecast that US crude output will average 10.8 million barrels a day for all of 2018 and 11.8 million barrels a day in 2019. The current US record for a full year is 9.6 million barrels a day in 1970.
The trend of rising US output prompted Fatih Birol, executive director of the International Energy Agency, to predict this spring that the US would leapfrog Russia and become the world’s largest producer by next year – if not sooner.
One potential obstacle for US drillers is a bottleneck of pipeline capacity to ship oil from the Permian Basin of Texas and New Mexico to ports and refineries.
“They are growing the production, but they can’t get it out of the area fast enough because of pipeline constraints,” said Jim Rittersbusch, a consultant to oil traders.
Some analysts believe that Permian production could decline, or at least grow more slowly, in 2019 or 2020 as energy companies move from their best acreage to more marginal areas.
(Wood Mackenzie, 12.Jul.2018) – Italian major Eni won its third consecutive Most-Admired Explorer title, an accolade awarded in conjunction with Wood Mackenzie’s industry-leading annual Exploration Survey.
Eni’s chief exploration officer, Luca Bertelli, accepted the award – which Eni has won for three years in a row – at the inaugural Wood Mackenzie Exploration Awards ceremony, held in conjunction with the subsurface and consultancy business’ annual Exploration Summit on 20 June, 2018.
Dr Andrew Latham, Vice President, Global Exploration Research, at Wood Mackenzie, said: “For the past 10 years, Wood Mackenzie has named the industry’s Most-Admired Explorer after collating the results of our industry-leading annual exploration survey. The survey canvasses views across the sector, marrying Wood Mackenzie’s understanding of the sector with industry opinion.
“We ask respondents to name the explorer they most admire. The award typically recognises big discoveries, ideally as operator and in new frontiers. With this year’s award, Italy’s Eni seals a hat-trick, having won in 2016 and 2017.”
Wood Mackenzie’s Exploration Awards build on our Exploration Survey. This year we broadened our approach, naming the outstanding companies in the sector, recognising the challenges and successes of the past year, and celebrating their success at a gala dinner.
Four other awards were announced at the event:
— Discovery of the Year (2017)
— New Venturer of the Year
— Best Explorer of Unconventional Plays
— Best E&P Explorer
Wood Mackenzie also honoured Bobby Ryan, who recently retired from Chevron, with a Lifetime Achievement Award for his contribution to global exploration.
While 2017 was a good year for exciting new discoveries, Talos Energy’s Zama find, offshore Mexico, stood out, earning them Discovery of the Year. Talos’ partners are Premier Oil and Sierra Oil & Gas. Zama is a big find in a new play and looks set to be a company-maker. It is also one of the first foreign-operated discoveries in Mexico since international oil companies returned to the country after an absence of over 70 years. This award was made based on our survey of exploration industry opinion, which saw more than 200 senior business leaders and experts vote for the discovery they consider to be the most exciting of the year.
The New Venturer of the Year award reflects the need for explorers to continually renew their portfolio. Wood Mackenzie has long argued that the capture of good acreage is the key differentiator in exploration performance. This award was based on Wood Mackenzie’s survey results and our analysis of licensing and farm-in deals over the year. Both our research and wider industry opinion reached the same conclusion. Our winner is ExxonMobil, a company prepared to place big bets on high-impact opportunities in both proven, emerging and frontier plays.
With the phenomenal growth of US shale plays, onshore exploration has become a key area of interest. For the Best Explorer of Unconventional Plays award, we looked at company efforts at opening and extending unconventional plays. When we compare our research with our survey results, where we asked which unconventionals explorer was most admired, EOG Resources was the clear winner. EOG has grown its output to over 650,000 barrels of oil equivalent per day, due in large part to its exploration and development of US unconventional resources.
The Best E&P Explorer award reflects the tremendous contribution the smaller and mid-sized companies make to the sector. The award is again based on a mix of our research and our survey. Once more, both industry and Wood Mackenzie’s analysis reached the same conclusion. Our winner, Kosmos Energy, achieved the largest net resources found last year of any company and received the most votes in our survey.
Bobby Ryan, who recently announced his retirement from Chevron after a long and distinguished career at the helm of its global exploration business, received a Lifetime Achievement Award. Mr Ryan led Chevron’s global exploration business following its merger with Texaco in October 2000.
Dr Latham told guests at the gala dinner: “The list of discoveries made during his long tenure is impressive. Among the operated finds made during his watch were Wheatstone in Australia, Usan in Nigeria, Tahiti in the Gulf of Mexico and Rosebank in the UK.
“The Gulf of Mexico proved a particularly rich seam with St Malo, Big Foot, Jack, Blind Faith and Chevron’s latest discovery, Ballymore. Wood Mackenzie estimates that the total gross oil and gas reserves in discoveries made on Bobby’s watch is close to 30 billion barrels.”
He added: “We are pretty sure that his subsequent tenure lasting over 17 years sets the record for length of service at any major. Bobby is a worthy recipient of the award.”
(San Diego Union Tribune, Rob Nikolewski, 9.Jul.2018) – Continuing its aggressive corporate strategy, IEnova – the Mexican subsidiary of San Diego-based Sempra Energy – added another asset to its energy portfolio Monday by announcing it will spend $150 million to build and operate a liquid fuels marine terminal in the northwest state of Sinaloa.
The federal port authority in the town of Topolobampo, located on the Gulf of California, awarded a 20-year contract to IEnova to construct the terminal that in its first phase will have a storage capacity of 1 million barrels of fuel, mainly gasoline and diesel.
IEnova officials said the company has “achieved significant commercial progress with potential customers” to have the terminal fully contracted and said additional phases of the project could expand to include storage of other products such as petrochemicals.
“IEnova’s success in developing new energy infrastructure is contributing to Mexico’s economic growth, creating jobs and diversifying energy supply while benefiting millions of Mexican energy consumers,” said Joseph Householder, Sempra’s chief operating officer, in a statement.
Monday’s announcement comes just three months after IEnova announced a $130 million investment in a liquid fuels terminal near Ensenada, Mexico, to serve customers in the northern border state of Baja, California. The company signed a long-term contract with the local unit of Chevron as part of the deal.
IEnova has invested about $7.6 billion in energy projects in Mexico, ranging from wind farms to solar power plants to natural gas pipelines and facilities, capitalizing on the country’s energy reform measures that are aimed at attracting private investors to help upgrade Mexico’s energy infrastructure.
On June 28, Sempra CEO Jeff Martin announced the company will sell all of its solar and wind holdings in the U.S., as well as gas storage facilities in the Deep South, but did not mention making any changes in regards to IEnova or other subsidiaries.
(Stabroek News, 3.Jun.2018) – U.S. Virgin Islands Governor Kenneth E. Mapp announced yesterday an agreement which would reopen one of the world’s largest refineries, create hundreds of jobs in the territory and buttress the solvency of the Government Employees Retirement System (GERS).
According to a release from his office, Mapp said the US$1.4 billion pact was between the Government of the Virgin Islands and ArcLight Capital Partners, LLC, the owners of what had been one of the largest oil refineries in the world when it was shut down on the USVI island of St Croix in 2012. The release said that the deal includes reopening the refinery portion of the operation, which when restarted, will funnel hundreds of millions of dollars into the local economy.
The release said that under the agreement with ArcLight Capital, the owners of what is now called Limetree Bay Terminals, the company will invest approximately US$1.4 billion to upgrade the existing refinery located in St. Croix. Over the next 18 months, this will create more than 1,200 local construction jobs.
Once refinery operations begin at the end of 2019, as many as 700 permanent jobs will be created. The new jobs will be in addition to the over 750 jobs now at the terminal storage facility. The initial refining operations provide for the processing of around 200,000 barrels of crude oil feedstock per day.
“This agreement is great news for the people of the Virgin Islands as we continue to grow and expand our economy,” said Mapp, who added it is tremendous news for the ‘big island,’ which felt the full brunt of the shutdown of refining operations in 2012. He added that the capital investment will not only benefit St. Croix since the monies from the agreement will boost the solvency of GERS and will also help fund a new 110-room, “upscale lifestyle” hotel, flagged by a major four-star brand on the sister island of St. Thomas.
Upon the closing of the transaction, ArcLight Capital will make a US$70 million closing payment to the Government of the Virgin Islands. The payment includes US$30 million for the purchase from the government of approximately 225 acres of land and 122 homes. The release said this property was acquired as part of the government’s settlement of certain claims against HOVIC, PDVSA of Venezuela, Hovensa and Hess Oil Corporation.
Once refinery operations begin and after crediting the US$40 million of prepaid taxes, Limetree will make annual payments to the government in lieu of taxes at a base rate of US$22.5 million a year. With market adjustments based on the refinery’s performance, this could increase to as much as US$70 million per year, but will not fall below US$14 million a year, the release said.
The release said that according to industry experts and consultants Gaffney, Cline & Associates, the government expects to receive more than US$600 million over the first 10 years of the restart of the refining operations. This income is in addition to the US$11.5 million currently flowing to the government from the oil storage terminal each year.
“For comparison sake, in the over 30 years that Hess Oil operated the refinery on the island of St. Croix, the company paid approximately US$330 million in corporate taxes to the government. As you may recall, in 2015 Hess Oil filed suit for the return of (those tax payments),” Mapp pointed out in the release. Hess Oil is one of the partners of ExxonMobil’s subsidiary, Esso in the Stabroek Block in Guyana’s waters.
Mapp said: “This landmark agreement did not happen overnight. It is the result of much hard work by the owners of ArcLight Capital and my Administration over the past two years. It is the product of complex negotiations with major players in the global oil industry. It required tremendous work with the Trump Administration and the President’s Council of Environmental Quality, the EPA (United States Environmental Protection Agency) and the U.S. Department of Justice. More work remains to be done, but this agreement allows the Virgin Islands to accelerate its recovery, grow its economy, create jobs for its people, propel new startup businesses, as well as support existing businesses and ultimately provide revenues for our government and our retirement system,” he said.
The release added that qualified Virgin Islands residents will be given preference in all hiring. ArcLight Capital will be obligated, and the local government will assist, to advertise and publicize all job opportunities for local residents. Residents of St. Thomas and St. John, who may be interested in working during the reconstruction of the refinery, will be offered a place to live while working on St. Croix without charge, the release added.
(Natural Gas Intelligence, 28.Jun.2018) – Citing a “profound opportunity in Latin America,” Department of Energy (DOE) Secretary Rick Perry said the U.S. government would partner with the Overseas Private Investment Corporation (OPIC) and invest $1 billion in Mexico’s energy sector over the next three years.
The joint initiative, officially the “Partnership to Power the Americas,” was announced Thursday on the sidelines of the World Gas Conference in Washington, DC. Both Perry and OPIC CEO Ray Washburne said the initiative would help American energy companies working throughout the Western Hemisphere.
Specifically, OPIC, a self-sustaining agency of the federal government, would provide financing and insurance when it is unavailable in the private sector. Perry said the initiative would “fund some projects that maybe wouldn’t otherwise get done.
“Our goal here is to create solutions that utilize the expertise, goods and services of our businesses in order to increase energy access, strengthen energy security and ultimately affect prosperity and opportunity in this Western Hemispheric region. We’re in a great position right now to do that, thanks to our U.S. energy abundance and the technical ingenuity that resides in the U.S. There is an enormous potential in Latin America.”
Washburne added that the partnership “will help establish a seamless process for bringing the best of U.S. energy technology and expertise to places in Latin America where it is needed most.”
Perry said recoverable shale and tight gas in the entire Western Hemisphere, which includes the United States and Canada, could potentially make up approximately 40% of the world’s reserves. “Yet the private sector incentives are needed to foster the development of infrastructure that we’re going to be needing for those greater business opportunities,” he said.
“OPIC is going to be prioritizing assistance to those companies seeking to expand in Latin America when private resources are unavailable or insufficient. In turn, we at DOE will be providing the connections, the expertise. We’ll help identify technology areas and sectors where U.S.-based companies have the potential to excel in these markets but lack the capital to do so.”
‘Complete Confidence’ In Mexico’s Next President
Perry said that whomever wins Sunday’s presidential election in Mexico, he had “complete confidence” that the winner would ultimately work closely with the United States to develop that nation’s energy infrastructure. Andres Manuel Lopez Obrador, a frequent critic of energy reforms enacted under President Enrique Pena Nieto, is expected to prevail.
“Regardless of your political leanings, you’re going to need resources to address the needs of your country and your citizens,” Perry said. “The most powerful and expeditious way to address resources coming into the country is through the energy sector. I think Mexico is going to be very willing to work with private sector partners, with the United States.”
The DOE-OPIC joint initiative will “most likely” assist American companies working to develop oil and natural gas pipelines and associated infrastructure throughout Mexico.
“We see Mexico continuing as a good neighbor,” Perry said. “We see Mexico as an economic partner. To help build their foundational economy, energy will play a very important role. We look forward to meeting with the new administration, whoever that individual may be, and finding ways that we can help the citizens of both the United States and Mexico together.”
(Reuters, 28.Jun.2018) – Citgo Petroleum, the U.S. refining arm of Venezuela’s state-run oil company PDVSA, said it appointed two senior executives to new positions as it works to refurbish an idled Aruba refinery.
Luis Marquez was named vice president and general manager at the refinery, a 235,000-barrel-per-day plant in San Nicholas that has been awaiting an overhaul. Edward Oduber also was appointed interim on-site project manager for the refurbishment of the refinery, during Phase II of the project, the company said.
Citgo in 2016 signed an up to 25-year lease with the government of Aruba to refurbish and operate the plant as part of a $685 million project. Earlier this year, it had slowed work on the overhaul due to a lack of credit.
Marquez, who replaced interim general manager Raymond Buckley, began his career in 1981 at the Amuay Refinery in Venezuela and has held positions at PDVSA International Refining, PDVSA Argentina, PDVSA Ecuador, and Petrocedeño, the company said.
Edward began at the San Nicolas refinery in Aruba in 1990, and held positions with Citgo Aruba, Valero Aruba, and Coastal Aruba.
Citgo said that Joe Crawford Jr will continue as general manager maintenance and operations overseeing the operating portions of the facility along with the loading facilities, terminal and distribution network. (Reporting by Gary McWilliams; Editing by Amrutha Gayathri)
(Natural Gas Intelligence, Carolyn Davis, 27.Jun.2018) – The mantra for a San Antonio, TX-based midstream operator, whose portfolio is increasingly weighted to southern destinations, could well be what’s good for Texas is good for Mexico.
Howard Midstream Energy Partners LLC, aka Howard Energy Partners (HEP), is making inroads in the Lone Star State and across the border as it builds out its multiple systems to carry natural gas and liquids to serve a growing customer base in northern Mexico, i.e. the Monterrey Energy Corridor.
Monterrey, the largest city and capital of the state of Nuevo León, has become an industrialized mecca for projects, something not lost on HEP executives, said President Brandon Seale. He discussed the myriad opportunities with an industry audience at the 4th Mexico Gas Summit held earlier this month in San Antonio.
HEP’s processing and pipeline assets extend from the Permian Basin to South Texas, and east of Houston in Port Arthur, all strategically sited to serve the “end goal,” said Seale, northern Mexico’s “growing appetite for hydrocarbons.”
Because of where HEP’s assets are in South Texas, the operator was “always going to be at the tail-end of the value chain,” he said. “We were trying to push product back to Houston or to other markets, but we wanted to be at the front-end of the value chain. So we stepped into Mexico with a very simple strategy,” to diversify and bring aboard strategic partners.
HEP about seven years ago bought the Maverick Dimmit and Zavala Gathering System, about 344 miles of pipeline in the South Texas counties of Maverick, Dimmit, Zavala and Frio.
Designed for rich and lean gas service, the system gathers for production from the Eagle Ford and Pearsall formations, and interconnects with several big pipelines that move gas in all directions, including south.
“From Day 1, we were selling gas to Mexico,” Seale said. “Mexico was always on our radar. And the funny thing is, if you don’t live and work close to the border, sometimes you look at infrastructure maps and you forget Mexico is there…It just looks like a big white space on the map. But of course, the resources don’t stop at the border and infrastructure doesn’t really stop either…The magnitude of the opportunity was always present in our minds.”
For example, Texas has an estimated 300,000 wellheads. In Mexico, there’s about 8,000. Texas has nearly 250,000 miles of gathering transportation pipelines. In Mexico, there’s around 75,000 miles.
“There’s a huge, huge opportunity there,” Seale said. “The resource is there…with some of the biggest wells ever drilled in the history of the world…Staggering, staggering numbers.”
Around the time the Maverick purchase was made, Mexico was becoming a net hydrocarbon importing country.
“The situation was quite acute on the natural gas side,” Seales noted. The country was suffering from critical power alerts and brownouts, and state-owned Petroleos Mexicanos at times would cut off service to customers with no notice. It was “exceedingly distractive,” he said.
Mexico had to turn to the Pacific markets to buy liquefied natural gas at “exorbitant” prices, when West Texas operators “would have given their left arm to sell gas at $2.50/Mcf. It didn’t make sense…”
HEP got acquisitive again, and a year after the Maverick purchase, it acquired the Eagle Ford Escondido and Cuervo Creek gathering systems to the south in Webb County, primarily 12- 16-inch diameter high-pressure gas pipelines that gave it another 83 miles of pipeline, a 102-mile lean gas gathering system, two leased amine treating plants and multiple intrastate pipeline outlets.
A 30-inch diameter pipeline was installed in 2013 to provide a direct connect to a Kinder Morgan Inc. system, which moves gas from Katy, near Houston, southwest to Laredo.
Three years ago HEP installed a direct connection with the NET Midstream system, whose affiliate NET Mexico Pipeline Partners LLC‘s 120-mile, 42- and 48-inch diameter Texas pipeline moves gas from the Agua Dulce hub in South Texas to Mexico.
“Our markets were all getting to Mexico,” but they were getting there indirectly, Seales said. “At this point too, our system was basically full…packed to the gills. So we had to find new markets.” Those opportunities led to the the genesis of Nueva Era Pipeline LLC, a cross-border system that ramped up in May.
Nueva Era, a 30-inch diameter system that is designed to carry at least 600 MMcf/d and up to 1 Bcf/d, is a joint venture between HEP and Mexico’s Grupo Clisa to supply Monterrey.
“There was a huge market” for natural gas in the Monterrey area that “was basically tapped out” around 2013, with no new sources of supply on the horizon. HEP executives also had a theory about suppressed demand for natural gas in the region.
“Basically, if you just looked at the charts, it looked like Mexico’s gas demand was flat,” Seale said. “But if you considered the external factors…the fact that historically, there were all these subsidies” for fuel oil and liquefied petroleum gas and other alternative fuels. “And if you consider that pricing on natural gas had never really been that transparent in Mexico, there were a lot of disincentives for people to use natural gas as a feedstock.
“As the experience in the U.S. in the last 30 years has taught us, if you deregulate the product, if you make it plentiful and if you make it transparent in price and you make it liquid, people will find a lot of ways to use it.”
The United States uses 80-90 Bcf/d of gas, while Mexico uses 8-9 Bcf/d, he said. “Somewhere in there is opportunity.”
Mexico’s state power company, Comision Federal de Electricidad, is the anchor shipper on Nueva Era with 504 MMcf/d of capacity. Another 496 Bcf/d is still available.
“The pipeline is mechanically complete,” Seales said. In mid-June the partnership was “awaiting final regulatory approvals,” to go into full service by the end of the month.
While trucks and rail are adequate to transport oil and liquids, a “pipeline is really the end goal” to transport all energy products, Seale said. With its cross-border system, North America’s energy markets are becoming “truly integrated…
By connecting Monterrey via a pipeline in South Texas, there’s energy integration across “the entire North American network,” allowing a trader to “swap a barrel from New Jersey to Monterrey…That’s pretty remarkable…And we feel like we’re in a unique position because of our experience with cross-border transactions” from working with U.S., Texas and Mexico’s diverse regulatory regimes.”
For HEP, the Texas coastal community of Corpus Christi, which is near Agua Dulce, is an important piece of the puzzle. The port city, already a manufacturing hub for the Gulf of Mexico energy industry, is quickly becoming the go-to destination for oil and petrochemical exports.
In addition, Cheniere Energy Inc. is building a liquefied natural gas export project in Corpus, and newbuild petrochemical facilities, including one led by ExxonMobil Corp., are on the drawing board.
And that’s not including the pipelines destined for the region from the Permian Basin and Eagle Ford Shale.
“The importance of Corpus is obvious in the market,” Seale said. “The number of pipeline projects to link West Texas to Corpus Christi are almost too big to count…” and “almost every midstream in the space is looking at their own project” to potentially add on capacity.
“What that signals is that the same thing that’s happening in natural gas that makes Agua Dulce…the natural gas hub, the natural liquid point, is happening now with crude and other refined products,” Seale said.
“If we do our job right, Corpus Christi should become the northernmost delivery point into northern Mexico,” he said. A plethora of investments are earmarked to support energy product transport south of the border.
Mexico is no longer the “blank spot on the map…the infrastructure map is now fully connected and day by day becomes only more integrated across the border.
Consider the Nueva Era system, he said. “With our Nueva Era pipeline, we can connect to Waha with these other pipelines coming down…In a few months in theory, a Waha-Monterrey route, which HEP is calling the “WahaRey” route “is going to be a viable option for any gas shipper in West Texas.
By the same token, the Agua Dulce-to-Monterrey route, aka “AguaRey” is already available. Already there’s 500 MMcf/d going into Monterrey,” with pipeline capacity “almost tapped out,” Seale said, as the region grows and commerce builds.
“Imagine what a 20-inch diameter presidential permit pipeline across the border could do for liquids products?” he asked the audience. “It would be something very, very similar.”
HEP is creating a path, he said, “connecting the most efficient and largest points of product in South Texas with Monterrey, the most industrialized market in Latin America, the gateway to all of Latin America…
“What’s good for Texas is good for Mexico, and what’s good for Mexico is good for Texas,” Seale said, borrowing a line from an HEP executive. “I really think that the integration of these energy markets is one of the finest results of that.”
(OilPrice.com, Tsvetana Paraskova, 24.Jun.2018) – While the U.S. shale production in the Permian has been grabbing most of the market and media attention over the past two years, the Gulf of Mexico has been quietly staging a comeback.
Big Oil firms, the main operators in the Gulf of Mexico, have been cutting costs and simplifying designs to make offshore projects viable in the lower-for-longer oil price world.
Chevron, Shell, and BP continue with their deepwater developments offshore Louisiana and Texas and have brought down breakeven costs to $40 a barrel or less—comparable with the breakevens at some shale formations onshore. Now operators are vying for new exploration acreage close to existing production platforms that would bring development and production costs down even further.
While the market and media have focused on the record Permian production, the Gulf of Mexico’s production is also expected to hit a record high this year.
But there’s one huge difference between onshore and offshore in terms of resource development—for shale wells, production peaks in several months, while vast deepwater resources can pump oil for decades.
Big Oil continues to bet on resources and projects that will last for decades, but companies have drastically changed their approach to development. Gone are the days in which the race was to have ‘the biggest, the most complex and most expensive’ bespoke project the industry has seen. It may have worked at oil prices at $100, but at half that price of oil, the focus is on leaner projects and more collaborative work to bring costs down.
Top executives at the largest operators in the Gulf of Mexico admit that project costs before 2014 were unsustainable.
“We knew there was incredible waste, but 2014 was the trigger,” Harry Brekelmans, Shell Projects and Technology Director, tells Bloomberg.
“We knew there was no way we could put forward a project in the same way again.”
In April this year, Shell announced the final investment decision for Vito, a deepwater development in the Gulf of Mexico with a forward-looking, breakeven price estimated at less than $35 a barrel. After the oil prices started crashing, Shell began in 2015 to redesign the Vito project, reducing cost estimates by more than 70 percent from the original concept, the oil major said in late April.
Shell “collaborated internally and externally to optimize the supply chain, to drill standardized wells and to build tried-and-tested designs more efficiently,” Brekelmans said at the Offshore Technology Conference in Houston a week later.
Last month, Shell started early production at the Kaikias deepwater subsea development in the Gulf of Mexico a year ahead of schedule and at a forward-looking, break-even price of less than $30 per barrel of oil. Shell’s Brekelmans said earlier this year that the supermajor was targeting its deepwater projects to break even at $40 or preferably below that threshold.
Another oil major, BP, has cut project costs for its Mad Dog 2 project in the Gulf by 60 percent to US$9 billion, working with co-owners and contractors to simplify and standardize the platform’s design.
Chevron says that offshore crude oil extraction, including deepwater, is closing in on shale in terms of cost thanks to new production technologies.
“In the past, a lot of the cost of development has been new technology,” Jeff Shellebarger, president of Chevron’s North American division, told Bloomberg. “With the types of reservoirs we’re drilling today, most of that learning curve is behind us. Now we can keep those costs pretty competitive.”
According to Wood Mackenzie, oil and gas production in deepwater Gulf of Mexico is expected to reach an all-time record high this year at 1.935 million boepd, of which 80 percent is oil—beating the previous record from 2009 by nearly 10 percent and representing 13-percent growth year over year.
U.S. crude oil production in the Federal Gulf of Mexico increased slightly in 2017 to reach 1.65 million bpd, the highest annual level on record, the EIA said in April, adding that production is expected to continue growing this year and next, accounting for 16 percent of total U.S. crude oil production. According to the EIA, a total of 10 deepwater Gulf of Mexico field starts are expected in 2018 and 2019.
Exploration investment, however, is still flat, and operators are in a ‘wait and see’ mode, Wood Mackenzie said in March in a comment on the latest ‘lackluster’ U.S. lease sale in the Gulf. Bidding was focused on the Mississippi Canyon—an area with established infrastructure and lowest cost developments.
“Operators are keen to keep the utilization up on the infrastructure and every new barrel produced through these facilities, further realizes value from the original investment,” William Turner, senior research analyst at Wood Mackenzie, said.
“Meanwhile some patient but dedicated operators are on the brink of cracking the code on ultra-high-pressure developments. Once the industry sees some proven developments in fields like Anchor, others will follow suit and we will begin to see the return of significant volumes being discovered and developed in the region.”
(Natural Gas Intelligence, Carolyn Davis, 22.Jun.2018) – The Permian Basin’s growing natural gas volumes may provide the perfect aperitif to quench Mexico’s thirst, according to Kinder Morgan Inc.
The Houston-based pipeline and midstream giant’s natural gas segment makes up about 90% of $900 million worth of projects that were added to backlog in the first quarter. Mexico is a likely another avenue for future expansion, said Vice President Gregory Ruben, who oversees business development.
Speaking at the 4th Mexico Gas Summit in San Antonio, TX, Ruben said some of Kinder’s future growth is based on Permian projections, where oil is surging, which in turn produces more associated gas. And the basin’s proximity to Mexico provides “connectivity opportunities,” he told the audience.
“We’re continuing to look for opportunities to expand our footprint into the marketplace.” Mexico’s energy reform has opened the door to opportunities, and the company now is looking for the “best connection at this point in time.”
From a footprint perspective, Kinder has holdings in many of the key U.S. gas basins, including in Appalachia, which “gives us quite a bit of opportunity to take advantage of the markets and the supply basins as they do develop over time.”
The interconnectivity with Mexico is a natural, Ruben said, as “we have been in partnership as far as delivering volumes into Mexico for quite some time” through legacy El Paso Natural Gas Pipeline Co., i.e. EPNG.
The company’s Mier-Monterrey gas pipeline during March was the second largest importer into Mexico at 490 MMcf/d. Kinder is considering an expansion of the pipeline, which now in “proposed status.”
The company today has “roughly 5.4 Bcf/d of interconnect capability and growing, across the border into Mexico,” Ruben said. And a “near-term” expansion is underway to add up to 200 MMcf/d to the 300 MMcf/d Border Pipeline.
Other projects also are in the works to move more gas south. During 1Q2018, contracts were secured to carry from the Permian about 1.2 Bcf of capacity via EPNG, with some supply destined for south of the border, Ruben said.
In addition, remaining capacity was taken for the proposed 2 Bcf/d Gulf Coast Express Pipeline (GCX) that also is designed to move gas supply from the Permian to South Texas — and beyond.
GCX is to date the only confirmed new pipeline in the works for Permian gas supply. Potential connectivity for GCX is seen at the Agua Dulce gas hub near Corpus Christi, where more volumes could be moved to Mexico and via liquefied natural gas exports.
Kinder’s Sierrita Gas Pipeline, with 200 MMcf/d, has been serving Mexico markets since 2014. Sierrita is being expanded by about 323 MMcf/d to move more to Sonora, where the Puerto Libertad Pipeline would transport supply to the Gulf of California. The expansion is set to be in service by 2020 and include a 15,900 hp compressor station.
“We’ve got quite a bit happening, and we’re continuing to work with market participants to grow that connectivity at the border with Mexico,” Ruben said.
Many of the future gas supply opportunities lead back to the Permian, as “we’re continuing to see upward adjustments in projections” by producers for wellhead supply.
Ruben offered Kinder scenarios for future Permian gas production. In the base case, it expects volumes to reach 16 Bcf/d in two years or so.
“That’s a huge amount of gas that’s got to try and find a home and try to find a place to go,” he said. “From an upside perspective, we could see 20 Bcf/d of wellhead production in the basin. So when you think about those numbers and you think about all the capacity that’s been built out, it does create some challenges…”
To get an idea of how well the Permian may handle future gas flows, the company’s team stacked up all of the expected demand from the western markets in Arizona and California, as well as Mexican consumption trends, to determine the “economic capacity” for future projects.
Kinder’s experts determined that moving gas north from the Permian was a nonstarter economically, as supply would run head on into gas-on-gas competition from Rockies Express Pipeline, which is carrying supple Appalachian gas west, along with growing volumes from Oklahoma’s stacked reservoirs in the Anadarko Basin and beyond.
Some unused capacity was seen in the analysis in western flows, and there was some unused capacity to the Mexican border.
‘When you blend that in with capacity, it does create some compelling thoughts as far as what needs to happen to achieve balance within the basin,” Ruben said. “It’s a very compelling story.” GCX should begin transporting gas south in 2019, “and that gets us back into relative balance, but…based on how we see this growth should be moving forward from the basin,” more projects likely are needed to keep Permian gas in balance beyond 2020, he said.
“The good news is, if you are net buyer at Waha, there’s expected to be a lot of activity…”
(EIA, 21.Jun.2018) – Venezuela holds the largest oil reserves in the world, in large part because of the heavy oil reserves in the Orinoco Oil Basin. In addition to oil reserves, Venezuela has sizeable natural gas reserves, although the development of natural gas lags significantly behind that of oil, reported the US-based Energy Information Administration (EIA) in its updated Venezuela country report posted online. However, in the wake of political and economic instability in the country, crude oil production has dramatically decreased, reaching a multi-decades low in mid-2018.
(FinancialBuzz.com, 19.Jun.2018) – Despite the recent downturn in oil prices, Goldman Sachs remains optimistic.
According to Reuters, Goldman Sachs forecast a tighter oil market for a longer duration due to strong demand growth and the probability that rising supply disruptions could counter any increase in OPEC production.
“Our updated global supply-demand balance continues to point to further declines in inventories and higher oil prices in 2H18,” the bank said. Goldman also repeated its Brent price forecast for a peak of $82.50 per barrel throughout the summer and a year-end approximation of $75.
The avalanche of political and economic developments around the world that influence oil prices are making it difficult to determine what the relationship between demand and supply will be. Goldman Sachs explained in the report that they expect OPEC and Russia production to increase by 1 million barrels per day by the end of 2018 and by another half a million barrels per day in the first half of 2019. While a production increase would decrease oil prices, the supply numbers are expected to be offset by increased political and economic disruptions in Venezuela and Iran.
(Reuters, 13.Jun.2018) – Canadian energy company Enbridge Inc. said it started construction of the offshore border crossing section of its US$1.6-billion Valley Crossing natural gas pipeline between Texas and Mexico, according to a federal filing made available on Wednesday.
The company said in an e-mail the pipeline remains on track to enter service in October.
The latest filing pertains to a 1000-foot (305-meter) section of offshore pipe that extends to the U.S.-Mexico border. The remaining 165 miles of onshore and offshore pipe has been completed and commissioning activities will commence in the near future, Enbridge spokesman Devin Hotzel said in an e-mail.
The Valley Crossing project is designed to carry up to 2.6 billion cubic feet per day (bcfd) of gas from Texas to help Mexico meet its growing power needs as generators there shift away from fuel oil and imported liquefied natural gas.
One billion cubic feet is enough to fuel about five million U.S. homes for a day.
The Valley Crossing project has been under construction since April, 2017, according to the Enbridge website. In May, Enbridge said it had “substantially completed” the onshore part of the pipe and was working on the offshore part to meet a fourth-quarter 2018 in-service date.
Valley Crossing will connect in the Gulf of Mexico to the Sur de Texas-Tuxpan pipeline under construction by a joint venture between units of TransCanada Corp. and Sempra Energy. Once complete, it will be the biggest gas pipe between the two countries.
There are already about 20 pipelines that can move gas from the United States to Mexico with a total capacity of around 10.9 bcfd, according to U.S. energy data. That includes Howard Energy’s 0.6-bcfd Impulsora pipeline, which is expected to enter service this month.
Analysts have said, however, that constraints on the Mexican side of the border have so far limited a big increase in U.S. pipeline exports.
Since the start of the year, U.S. exports to Mexico have averaged 4.0 bcfd, up just a bit from the 3.9-bcfd average during the same period in 2017, according to Thomson Reuters data.
While the pipeline constraints remain, Mexican energy companies have been buying more U.S. liquefied natural gas (LNG) than any other country since February, 2016, when the first U.S. LNG export terminal opened in the lower 48 states at Cheniere Energy Inc.’s Sabine Pass in Louisiana.
Mexico bought 50 cargoes of LNG totalling 167.8 billion cubic feet of gas from the United States, 18.8 per cent of total U.S. LNG exports between February, 2016, through the end of 2017.
(Denis Chabrol, DemeraraWaves, 12.Jun.2018) – ExxonMobil on Tuesday reconfirmed that Guyana will pump up its first barrel of oil in March 2020, even as the Guyana government continued to fend off criticisms of the 2016 production sharing agreement.
Vice President of ExxonMobil Development Company, Lisa Walters said work was well advanced by several companies in Singapore, Brazil and the United States Gulf Coast to ensure that commercial oil production begins in less than two years. “We are on track for first oil in March of 2020,” she said. “In just a little over a year and a half, the Liza Destiny will deliver its first oil to its first tanker offshore,” she added.
ExxonMobil estimates that oil discoveries at Liza, Payara, Snoek and Turbot offshore Guyana total 3.2 billion barrels and would eventually lead to daily production of 500,000 barrels. ExxonMobil estimates that Liza Phase 1 will generate over US$7 billion in royalty and profit oil revenues for Guyana over the life of the project.
Walters said the drill-ship, Noble Bob Douglas, recently started drilling the production wells located at Liza more than 125 miles off the Demerara Coast. She said “all of the design work on the project is nearing completion” and “construction is well-underway worldwide” for the Floating Storage, Production, Storage and Offloading (FPSO) vessel named “Liza Destiny”. SBM Offshore has won the contract to construct that vessel, while TechnicFMC, and Saipem have been hired for sub-sea construction of the umbilical cords and flow-lines. Guyana Shorebase Inc was awarded the contract in June, 2017 for shore-base services and in August, 2017 the Noble Bob Douglas was hired for drilling services.
ExxonMobil’s Country Manager, Rod Henson also used the opportunity of the official start of the Liza Phase 1 Development Programme to show off that in the first quarter of 2018, over US$14 million were spent with Guyanese suppliers; together with its contractors ExxonMobil utilized 262 Guyanese registered suppliers, 227 of which are Guyanese owned.
Minister of Natural Resources, Raphael Trotman reiterated that the revised ExxonMobil Production Sharing Agreement has “the same or very similar contractual terms” as those Guyana has signed with other companies such as Anadarko Petroleum, Ratio, CGX, REPSOL, Ratio, Eco-Atlantic and Mid Atlantic.
“In that regard, they will enjoy the same rights and obligations as every other company that has been contracted by the government to explore and develop our hydrocarbons.
That they were the first to find a large deposit should no redefine their contractual terms or place them in any position less than that enjoyed prior to discovery. For government to do otherwise is not how responsible or how well-organised and governed States function,” she said.
The Minister of Natural Resources said the proceeds of Guyana’s oil production would be fairly shared among all Guyanese without discrimination as part of a process that would eventually lead to the removal of negative labels such as Third World, backwards, underdeveloped and developing from Guyana. “With the blessings that have been revealed, and are within our grasp, we purpose to develop a modern, peaceful and cohesive State-one in which every man, woman and child, without exception, reservation, and/or discrimination of any kind, is able to enjoy the full and equal benefits of the bounty we are about to be bestowed,” he said.
(Tsvetana Paraskova, OilPrice.com, 6.Jun.2018) — Venezuela’s President Nicolas Maduro has accused the United States of infiltrating senior positions at the Venezuelan oil industry.
“There was a process of penetration and infiltration in key positions of the petroleum industry, to control strategic information,” Maduro was quoted as saying at a meeting with workers at the struggling state oil firm PDVSA on Tuesday.
The embattled president, who has just won a presidential election deemed illegitimate by other nations, also called for an “economic counteroffensive” against what he described as a U.S. economic war on Venezuela.
“Now we will continue with an economic counteroffensive, the most difficult thing… we are going to win this battle for economic peace, for stability, for prosperity, and we are going to go the length in the fight against the criminal economy,” Maduro was quoted as saying.
Maduro’s claims against the U.S. come just as the Organization of American States (OAS) said in a resolution on Tuesday that it decided to “declare that the electoral process as implemented in Venezuela, which concluded on May 20, 2018, lacks legitimacy, for not complying with international standards, for not having met the participation of all Venezuelan political actors, and for being carried out without the necessary guarantees for a free, fair, transparent and democratic process.”
Earlier this week, U.S. Secretary of State Mike Pompeo asked the OAS to suspend Venezuela from the organization.
While attacking the U.S. for infiltrating the oil industry, Maduro told PDVSA workers to start a production “revolution” at the state oil company.
PDVSA’s oil production has been plummeting and it is currently around 1.4 million bpd, according to estimates.
PDVSA has recently told eight foreign clients that it would be unable to supply the contracted volumes of crude oil, a company employee told S&P Platts earlier this week. The affected clients due to the low availability of crude oil to export include Nynas, Tipco, Chevron, CNPC, Reliance, Conoco, Valero, and Lukoil, which will partially receive the volumes established by the contracts, according to the PDVSA official.
(Brookings, Carlos Pascual, David G. Victor, and Rafael Fernandez de Castro, 5.Jun.2018) – On July 1, Mexicans head to the polls to select their next president. While it has become fashionable to wall Mexican matters away from American politics, in reality the Mexican election could transform the North American community. At the epicenter of that future is a quiet, steady effort to reform Mexico’s energy markets and roll back the monopolies of Mexico’s state-owned energy companies. These reforms have already triggered contracts that could yield $200 billion in investments in the coming years.
The Mexican election could transform the North American community, write Carlos Pascual, David G. Victor and Rafael Fernandez de Castro Medina. At the epicenter of that future is a quiet, steady effort to reform Mexico’s energy markets and roll back the monopolies of Mexico’s state-owned energy companies. This piece originally appeared in the Houston Chronicle.
Until now, nobody has really known what Mexican voters think about all this change, but the answers matter because the contending candidates for the presidency have outlined starkly different visions for the future. In April, we ran—in tandem with the Brookings Institution, the University of California at San Diego, the global consultancy IHS Markit and a leading Mexican newspaper, El Financiero—the the first systematic poll of Mexican voter attitudes. What we found is disturbing and important as North Americans watch the upcoming elections.
On the surface, the picture is positive. Most strikingly, a modest majority of the public supports continuing the energy reforms (48 percent, versus 37 percent opposed) even if they feel they are not producing good results (61 percent versus 27 percent), or that they were not necessary (47 percent versus 41 percent). Mexicans feel that returning to the past isn’t a solution. For decades, Mexicans saw Pemex, whose nationalization in 1938 is still a national holiday, as the country’s crown jewel. Those days are gone. In our poll, Mexicans opined that Pemex has not acted to the benefit of the country (61 percent versus 30 percent). Mexico is at a crossroads—none of the old models works, but none of the new models are yet formed.
Digging deeper into the polling reveals disturbing insights. Mexicans, like Americans, actually know very little about the problems and opportunities in the energy sector. Sixty-three percent believed that Mexico’s oil production either increased or stayed the same in the 10 years prior to the constitutional changes in 2013. In reality, Mexico’s oil production peaked in 2004 at 3.5 million barrels per day, and by 2013 a persisting lack of investment had driven production down to 2.4 million barrels per day. It is not surprising that Mexicans are confused about the solutions—most don’t realize that production had collapsed.
Almost everything that is important in the energy sector takes a long time to bear fruit—that’s because investment cycles are long, and longer still when investors aren’t sure whether new policies will hold. It takes 3 to 5 years for investment to translate into production and, optimistically, two years before that to pass the laws and regulations needed to execute a bid round. Thus, when Mexico changed its constitution in 2013 to open oil production to outside investors, it was going to take at least 5 to 7 years before oil production might increase. By that standard, the reforms are exactly on schedule: Today, more than 100 fields have been awarded for investment, there have been significant initial commercial finds and production is set to rise around 2020. No country in the world has managed such a complete transformation of its energy sector faster than Mexico.
For the public, reforms may still seem like unfulfilled promises. North of the border, these results really matter because it is American companies—with American jobs and investors—that are perhaps best poised to benefit from Mexico’s continued opening.
As much as Mexico has evolved as a competitive global economy, accumulating an impressive number of free trade agreements that open the country to international commerce and investment, the public fears that private investment in oil would not benefit the Mexican people (51 percent versus 34 percent). Mexicans are also suspicious of depending on foreigners. Almost two-thirds of the respondents believed that it is a significant risk for Mexico to import more than 50 percent of its gasoline and natural gas from the United States. That’s bad news for Americans who have become the number one exporter of natural gas and refined oil products like gasoline.
Just as Mexicans are becoming impatient to see tangible benefits from reform, many other oil producers are in intense competition to attract private investors—from Saudi Arabia to Russia and Brazil. Traditionally, big oil producers could afford to be inefficient because the money kept sloshing in. Those days are gone, and the whole world’s oil industry is in an arms race to reform and get better.
For the last two years, the United States has been making loud noises about cutting off Mexico. Now it is Mexico’s turn, and the big losers could be American companies that want to do business south of the border. Fixing this problem won’t be easy, but it starts with talking openly—with the public, not just elites—about how reform actually works. And why openness and competition are good news all around.
(Energy Analytics Institute, Special from Pietro D. Pitts, 28.May.2018) — Venezuela’s upstream, downstream and midstream sectors remain attractive, yet unattractive to investors.
Why the contradiction?
The three sectors remain highly attractive due to the fact that Venezuela — the country with the world’s largest crude oil reserve base and the eighth largest natural gas reserve base — is arguably one of the most attractive geological locations in the world. Petroleum reservoirs here contain light and medium oil deposits, while the Hugo Chavez Orinoco Heavy Oil Belt, also known as the Faja, contains the largest accumulation of heavy and extra-heavy crude oil (EHCO) in the world. From the prolific Lake Maracaibo in the west to the massive Faja in the east, the opportunity set is second to none. And that’s excluding other natural resources from iron ore to gold that makes this place that much more attractive.
However, above surface issues continue to ruin the energy party due to continued political, economic and financial turmoil as well as an ongoing humanitarian crisis. A look at just some of the micro issues of these crises, in no specific order, including corruption, price and currency controls, five-digit inflation, homicide rates among the highest in the world, kidnappings of foreigners and embassy employees, worthless currency, the Petro, a brain-drain of talent, a FDI drought, Nicolas Maduro, ongoing nationalization threats, gas deficits, black and brown outages, refinery output trending towards nothing, oil production in steady decline, service providers payment backlog, political appointees at PDVSA, drug trafficking, and mismanagement of resources, continue to prove Venezuela is not for the light of heart investors.
Taking these issues, among others, coupled with recent detentions of executives from companies from Houston-based Citgo Petroleum to PDVSA to California-based Chevron Corporation only serve as evidence to the still complicated operating environment that exists in this OPEC nation of around 30 million citizens.
Nowadays, political issues above ground continue to dictate what goes on below ground, even if indirectly. When has that ever been otherwise in Venezuela? There’s no doubt Venezuela — or if you prefer, Cuba with petroleum and the Russians (in contrast or comparison to Cuba and the Soviets in the past) — will remain a country to watch for petroleum investors for many years to come.
(AP, 27.May.2018) – Venezuela’s former oil czar said crude production in the OPEC nation will continue to plummet in the aftermath of President Nicolas Maduro’s re-election, as the embattled socialist leader takes the country down an increasingly authoritarian path that scares off private investment and leads to more international sanctions against his Government.
In a rare interview, Rafael Ramirez on Friday blasted Maduro, saying that in the wake of his recent victory he has showed no signs of reversing policies blamed for hyperinflation and widespread shortages.
“The demons have been unleashed,” Ramirez, who went into exile after a bitter split last year with Maduro, said in a phone interview from an undisclosed location. “Maduro keeps insisting on the same rhetoric, taking no responsibility for his own actions.”
Maduro coasted to another six-year term in an election last Sunday that was boycotted by the biggest opposition parties and condemned as rigged in his favour by several foreign governments. The Trump Administration responded by tightening sanctions on the Government, making it tougher for State-run oil giant PDVSA to raise badly-needed cash to pay off creditors and jumpstart production.
Ramirez, who headed the oil industry for a decade until 2014, said a purge that started last year and has led to the arrest of more than 80 PDVSA managers, including its president, as well as the arrest last month of two managers at Chevron, has paralysed oil production.
Since Ramirez was removed from his dual post as energy minister and PDVSA boss in 2014, production has tumbled almost 40 per cent, to 1.4 million barrels of oil per day, the lowest level in seven decades. He predicts that unless Maduro changes course, it could fall soon to 900,000 barrels per day, the bulk of which is already sold at a huge loss domestically or used to pay off debts to China and Russia.
He also pointed to a recent decree signed by Maduro giving PDVSA’s newly installed president, Major General Manuel Quevedo, special powers to rewrite the terms of PDVSA’s joint ventures with foreign oil companies, circumventing the constitutionally-mandated oversight of the Opposition-controlled National Assembly.
“There’s a climate of terror inside the oil industry and everyone is afraid to make decisions,” he said.
PDVSA and Venezuela’s Information Ministry didn’t respond to requests seeking comment.
Ramirez, who was close to the late Hugo Chavez, quit as the country’s ambassador to the United Nations in December amid a public feud with Maduro over the direction of economic policy. Ramirez had been arguing for a more pragmatic course that included unifying Venezuela’s multi-tiered exchange rates while Maduro doubled down on policies to attack criminal “mafias” and going after opposition groups he blamed for waging an “economic war” with the backing of the US.
In January, chief prosecutor Tarek William Saab announced he would seek Ramirez’s arrest for allegedly profiting from illegal oil sales. Several close associates including his nephew have already been arrested in Venezuela and two former deputies were picked up in Spain last year on a US warrant as part of a separate probe led by prosecutors in Houston into corruption at PDVSA under Ramirez’s watch.
Ramirez rejects the accusations and said that his conscience is clear. Since leaving the US last year, he said he’s moved among cities around the world and avoided returning to Venezuela for fear of arrest.
“It hurts me because in the name of pursuing corruption Maduro has destroyed the industry so he can take control of PDVSA,” he said.
He said that none of the people running PDVSA today have experience in the oil industry, and coupled with the departure of thousands of oil engineers, the company that is the source of almost all of Venezuela’s export earnings is on the verge of collapse. A recent display of what he considers the current management’s incompetence was its failure to outmanoeuvre Houston-based ConocoPhillips’ attempts to collect on a US$2 billion arbitration award, which forced PDVSA to scramble and divert oil tankers from its facilities in the Dutch Caribbean for fear of seizure.
Ramirez said that he headed off a similar legal action years ago by Exxon Mobil in the United Kingdom.
“What’s surprising, and concerning, is that PDVSA didn’t anticipate this,” he said. “If the actions of a single company have jeopardised the entire country, imagine what will happen if the US imposes sanctions.”
(Energy Analytics Institute, Aaron Simonsky, 24.May.2018) – Energy Analytics Institute, formerly LatinPetroleum Inc., continues to promote its “Energy Education Initiative” in the Americas, also known as “NRG ED.”
NRG ED is structured to work with K-12 schools, community colleges, four-year colleges and universities, workforce training programs, communities and businesses, and aims to promote reduction of non-renewable energy usage in favor of renewable energies. However, the core of the initiative is education, without which the NRG ED initiative would not be.
“At its core the initiative is really focused on education,” said Chad Archey, Editor-in-Chief at Energy Analytics Institute from Atlanta, Georgia.
EAI views basic education as most important in the overall learning process and also promotes educational initiatives and research from grade school to the professional level related to the energy sector. EAI aims to foment constructive dialogue regarding energy usage as well as ways to reduce the carbon footprint left by non-renewable energy resources through the following: 1) educational consultancy, 2) development and distribution of educational and training materials, and 3) promotion of debate and discussion regarding renewable energy alternatives.
Energy Analytics Institute (EAI), formerly LatinPetroleum Inc. (dba LatinPetroleum.com), is a Houston-based independent company focused on producing non-biased news, updates and special reports for investors interested in the Latin America and Caribbean petroleum sectors.
(Platts, 18.May.2018) — Ahead of Sunday’s presidential election in Venezuela, Risa Grais-Targow, director-Latin America, at the Eurasia Group, spoke to S&P Global Platts about the expected US response, the impact of rising oil prices on sanctions and the ongoing collapse of the country’s oil sector.
The interview has been edited for brevity and clarity.
PLATTS: What do you expect the US response will be to Sunday’s election?
GRAIS-TARGOW: I think the US has already been pretty clear that they view these elections as fraudulent. So I think, at a minimum, they will reject the results and refuse to recognize them. There could be some additional sanctions in response as well.
PLATTS: What will those sanctions look like?
GRAIS-TARGOW: The signaling from the [Trump] administration in more recent weeks has been less in the direction of aggressive sanctions right off the bat. I think especially with [exit from] the Iran deal they seem to be a bit more concerned about international oil prices and higher domestic gasoline prices. Obviously, their Iran policy contributes to that and it seems like, even though we have a more hawkish foreign policy team, there may be a bit more reluctance to add Venezuela to those pressures as well. I think that it would be, maybe, milder sanctions to begin with, something more like a ban on the sale of diluents and lighter crudes to Venezuela or potentially an insurance-related ban that would affect their oil cargoes. But it seems like the import ban that was being discussed a few months ago more actively is now looking like something that would only happen over a longer time frame.
PLATTS: What would need to occur for an import ban to go forward?
GRAIS-TARGOW: In general, the preference here has been to escalate sanctions. The fact that we haven’t had those initial, targeted sanctions for the oil sector happening before the vote means that you start with them after the vote. To the extent that it doesn’t change the Maduro administration’s behavior then we could still escalate towards an import ban. But it seems like we would probably start with milder actions and escalate towards that, using the threat of more aggressive actions as a potential deterrent.
PLATTS: Is there an outcome Sunday in Venezuela that wouldn’t draw a US response?
GRAIS-TARGOW: I think the only scenario in which we don’t is if [Venezuelan presidential candidate Henri]Falcon somehow manages to win, which, in my view, is pretty unlikely at this point.
PLATTS: What impact have existing sanctions had on Venezuela’s oil sector?
GRAIS-TARGOW: Some of the sanctioned individuals had been executives at PDVSA, so what we saw last year was some reluctance to enter into deals with PDVSA. The existing sanctions, the financial sanctions that were imposed in August, those have had a much more severe impact on the oil sector. They don’t allow the government to issue promissory notes to service providers and so that’s really hurt their ability to maintain these relationships with service providers and it’s one of the reasons that we’ve seen such aggressive production declines over the past six months or so.
PLATTS: How much are oil prices at the moment impacting what the US response to Venezuela could be?
GRAIS-TARGOW: It’s certainly a factor. We had Trump tweeting out a few weeks ago this attack on OPEC over oil prices. It does seem to be something that he’s concerned about. If you look at historic trends, higher domestic gasoline prices tend to really change domestic economic sentiment and generally tend to hurt the administration. That’s something the government obviously wants to avoid with November mid-terms. Especially since we’re entering into peak summer driving season, that’s become more of a consideration as they think about the policy response to Venezuela.
PLATTS: Where is rock bottom for Venezuela’s oil sector? Are we already there?
GRAIS-TARGOW: I think we’ve all been shocked at the acceleration of production declines. I’ve generally seen a floor owing to the joint ventures, which are much more functional than PDVSA’s solely operated production. That range is 900,000 b/d to 1.1 million b/d that are being operated as joint ventures. That, to me, has always been the floor. The challenge now is that the government has been more aggressive with its joint venture partners and so now we’re in a new era where we could see the joint venture partners starting to reduce their presence or suspend operations. If we see some of the western companies starting to pull out owing to safety concerns or some of these issues and concerns about their human capital then I think that floor starts to sink further.
(Energy Analytics Institute, Aaron Simonsky, 18.May.2018) – Venezuela’s oil production continues to fall, and further declines are anticipated due to a number of problems at state oil company PDVSA, according to a report by Caracas Capital Markets.
“Venezuela’s oil production has now fallen from 3.5 million barrels per day when Hugo Chavez was elected in 1998 to 1.436 bpd last month. Instead of going up to 6-8mm bpd where Venezuela’s oil production should have been by 2008, Venezuela’s oil production has returned to the level it first achieved in 1949,” wrote Russ Dallen, Managing Director at Caracas Capital Markets, in a report last week to clients.
Dallen, a bond trader, further said: “We haven’t yet fallen back to 1948 levels, but we anticipate that we will return to 1948 this month, when Venezuela was producing 1.339 million bpd. By 1950, Caracas was producing 1.497 million bpd — even more than it is currently producing.”
The U.S. is now exporting over 1.6 million barrels of crude oil per day – more than all of Venezuela’s total production, according to Dallen who wanted to “put Venezuela’s disastrous fall in oil production to 1.436 million bpd in perspective.”
Further declines in Venezuela’s oil production are expected due to a number of problems that continue to stymie PDVSA, wrote Dallen.
(Energy Analytics Institute, Jared Yamin, 14.May.2018) – Venezuela’s state oil company Petróleos de Venezuela, S.A. (PDVSA) is bankrupt, at least that what its former president Luis Giusti thinks.
“If you look at the signs … they all point to a company that is bankrupt,” said Giusti during a televised interview on the Bayly show on 27 April 2018 with host Jamie Bayly.
Giusti initiated his career at Shell Corporation in Venezuela. He later worked at Maraven, S.A., a PDVSA operating affiliate. In 1994, Giusti was named chairman and CEO of PDVSA, positions he maintained until March of 1999, according to data posted to the website of the Center for Strategy & International Studies (CSIS), an organization where Giusti served as a senior advisor directly after departing PDVSA in 1999.
At the helm of PDVSA, Giusti oversaw major reforms to the Venezuelan petroleum sector including opening the sector to private participation, which attracted foreign direct investments (FDI) between 1995-2004 estimated at around $30 billion.
An engineer by profession, Giusti graduated from the University of Zulia in 1966, and received a M.S. in petroleum engineering from the University of Tulsa in 1971.
What follows are short extracts from the interview:
BAYLY: Why has Venezuela sent so much oil to the U.S. over the years?
GIUSTI: A lot of Venezuela barrels always went to the U.S. for a reason that is clear and precise, and that is due to the decisions made by many refineries along the Gulf Coast to invest in deep conversion capacity and to buy cheaper raw material.
Of the seven refineries in Venezuela only one is operating and the reason is simple and much more than efficiency losses and installation deteriorations. They’re simply not operating because there is no petroleum in Venezuela to process. (See Note 1)
BAYLY: If the US asked you what it could do to assist Venezuela such as to cease imports of Venezuelan crude oil or cease exports of U.S. gasoline to Venezuela, what would you recommend?
GIUSTI: It’s a bit difficult because you need to surmise the crises the citizens are living right now and take into consideration whether such a measure could turn everything around to achieve a change in a reasonable time in Venezuela. I would say that is the main concern.
BAYLY: How much money has been stolen from PDVSA?
GIUSTI: Venezuela and PDVSA are in the situation they are now due to a mismanagement of funds, without even talking about corruption.
After ten years of discretional uses of resources under the mandate of Chavez, we know that much of the funds went to personal accounts. Over a good 10-year period of Chavismo the amount that has been stolen could easily surpass $100 billion.
BAYLY: Is PDVSA bankrupt?
GIUSTI: Since PDVSA is a company of the state, it will never declare in bankruptcy. But, if you look at signs such as: not being able to pay bond returns, the Chinese’s unwillingness to lend more money, declining production levels, and salaries around $5 per month, among others signs, they all point to a company that is bankrupt.
BAYLY: What about the fact that is now run by military personnel?
GIUSTI: Military personnel who could be good or bad in their profession run PDVSA, but they are military personnel that don’t know anything about the petroleum sector.
BAYLY: How does Venezuela exit this disaster?
GIUSTI: It’s a hard question to answer but we are in the presence of a binary decision. There will not be talks about our understandings, or that we will team up. The scenario comes down to the persons in power leaving or there’s no way to resolve this.
Editor’s Note 1: The PDVSA refineries located in Venezuela include: Amuay (645 Mb/d), Cardon (310 Mb/d), Puerto La Cruz (187 Mb/d), El Palito (140 Mb/d), Bajo Grande (16 Mb/d) and San Roque (5 Mb/d), according to PDVSA data.
(Reuters, 13.May.2018) – A Curacao court has authorized ConocoPhillips to seize about $636 million in assets belonging to Venezuela’s state oil company PDVSA due to the 2007 nationalization of the U.S. oil major’s projects in Venezuela.
The legal action was the latest in the Caribbean to enforce a $2 billion arbitration award by the International Chamber of Commerce (ICC) over the nationalization.
The court decision, first reported by Caribbean media outlet Antilliaans Dagblad on Saturday, says Curacao can attach “oil or oil products on ships and on bank deposits.”
Conoco and PDVSA did not immediately respond to requests for comment on the decision, which was seen by Reuters and dated May 4.
Conoco earlier this month moved to temporarily seize PDVSA’s assets on Aruba, Bonaire, Curacao and St. Eustatius. That threw Venezuela’s oil export chain into a tailspin just as Venezuela’s crude production has crumbled to a more than 30-year low due to underinvestment, theft, a brain drain and mismanagement.
Reuters reported on Friday that PDVSA was preparing to shut down the 335,000 barrel-per-day Isla refinery it operates in Curacao amid threats by Conoco to seize cargoes sent to resupply the facility.
PDVSA is also seeking ways to sidestep legal orders to hand over assets. The Venezuelan firm has transferred custody over the fuel produced at the Isla refinery to the Curacao government, the owner of the facility, according to two sources with knowledge of the matter.
PDVSA transferred ownership of crude to be refined at Isla to its U.S. unit, Citgo Petroleum, one of the sources said.
For the time being, PDVSA has suspended all oil storage and shipping from its Caribbean facilities and concentrated most shipping in its main crude terminal of Jose, which is suffering from a backlog.
(Tsvetana Paraskova, OilPrice.com, 28.Mar.2018) – If crisis-hit Venezuela was hoping to pay off its US$3.15-billion debt to Russia with its new cryptocurrency, those hopes have been shattered as the Russian Finance Ministry announces that it won’t be accepting digital coin.
Venezuela will not be paying any part of its debt to Russia with its cryptocurrency, the head of the Russian Finance Ministry’s state debt department, Konstantin Vyshkovsky, has said.
In November last year, Russia threw a life-line to Venezuela after the two countries signed a deal to restructure US$3.15 billion worth of Venezuelan debt owed to Moscow. Under the terms of the deal, Venezuela will be repaying the debt over the next ten years, of which the first six years include “minimal payments”.
The following month, Venezuelan President Nicolas Maduro announced that his country would be issuing an oil-backed cryptocurrency, which it did, in February this year.
Maduro’s propaganda machine is touting the digital coin as a ‘ground-breaking’ first-ever national crypto currency, the El Petro–backed by 5 billion barrels of oil reserves in Venezuela’s Orinoco Belt.
But most observers see this crypto issuance as a desperate attempt to skirt U.S. financial sanctions.
Earlier this month, U.S. President Donald Trump banned U.S. purchases, transactions, and dealings of any digital coin or token issued for or by the government of Venezuela.
Last week, Time magazine reported that Russia secretly helped Venezuela in creating the Petro, with the purpose of undermining the power of U.S. sanctions, the magazine reported, citing sources familiar with the effort.
Russia slammed the Time report as “fake news”, with Deputy Director of the Information and Press Department of the Russian Foreign Ministry, Artyom Kozhin, saying that Russia and Venezuela had never worked together on the development of the Venezuelan cryptocurrency.
Russia and China are the last holdouts that still finance Venezuela, which is digging deeper into the downward spiral of economic crisis, hyperinflation, and crumbling oil production. However, China is reportedly thinking of cutting off Venezuela from new loans. This would leave Russia as the only financial supporter of the Maduro regime, and if all it’s got is a crypto coin that no one really believes in to pay off debt, loans are likely to be plentiful.
(Reuters, David Alire Garcia & Marianna Parraga, 27.Mar.2018) — Mexico awarded just under half of the 35 shallow-water blocks it tendered on Tuesday, in an auction muddied by the promises of the presidential frontrunner to review contracts awarded under a historic energy opening if he wins the July 1 election.
The country’s oil regulator awarded 16 blocks in the Gulf of Mexico to firms including Spain’s Repsol, France’s Total, Italy’s Eni, Britain’s Premier Oil and Mexico’s state-run Pemex, which was the biggest winner overall.
A final, competitive round of bidding in the Southeast Basins improved what started as a patchy showing, with little interest in fields believed to contain high amounts of natural gas.
About $8.6 billion in investment is expected from the projects to be developed in the awarded blocks, Mexico’s Energy Minister Pedro Joaquin Coldwell said, with early production starting in 2022 and a production potential of 280,000 barrels per day (bpd).
Andres Manuel Lopez Obrador, who has a comfortable lead in most polls, said that if he wins the July vote, he would review more than 90 contracts signed since Mexico passed legislation in 2013 ending Pemex’s 75-year monopoly, looking for signs of corruption.
Running for office for a third time, Lopez Obrador has also said he would hold a referendum on the future of the reform, and ask President Enrique Pena Nieto to cancel two auctions planned for the second half of the year.
Mexico’s next president takes office in December.
Despite the political uncertainty, Tim Davis, the group exploration manager for Premier Oil, said he was bullish about the future of the oil and gas opening.
“I think you could see a slowdown (if Lopez Obrador wins). But … I think they will see the benefits,” of the investment that’s coming in and the invigoration of new ideas and new companies arriving.
Repsol and Premier Oil individually claimed two areas each in the shallow-water fields offered in the Burgos basin, where less than a third of blocks were awarded. Premier won another block in a consortium with DEA Deutsche Erdoel and Sapura Energy.
Consortia made up of state-run Pemex, Mexico’s Citla Energy, Spain’s Cepsa, Britain’s Capricorn Energy and Germany’s DEA Deutsche Erdoel posted winning bids for four blocks in the Tampico-Misantla-Veracruz basin further south along the Gulf. There, around a third of blocks were awarded.
In the final Southeast Basins tender, competition was higher, and the oil regulator awarded all eight of the shallow-water blocks it tendered to consortia including Total, Eni, Royal Dutch Shell and Pemex.
“This is very high percentage (of awarded blocks),” said Coldwell.
Mexico’s government collected $124 million in cash payments from the auction, below the $525 million collected in a January deepwater auction.
The Southeast Basins areas are located in a portion of the Gulf where many of the companies that won blocks on Tuesday had already secured areas in earlier shallow and deepwater bidding rounds.
By securing neighboring blocks in the Gulf, companies are able to build clusters in order to reduce infrastructure costs.
Mexico’s Deputy Secretary for Hydrocarbons Aldo Flores blamed the weaker early interest on the quantity of natural gas areas in the auction, saying companies were more interested in finding crude.
“This will continue to be a challenge for us given the abundance of natural gas in Texas at very low prices,” Flores told Reuters on the sidelines of the auction in Mexico City.
Mexico is also competing for private companies’ interest with Brazil, which is holding its own auction this week, with another scheduled in June.
Brazil holds its own election in October, with the most likely leftist contender in the presidential race, Ciro Ferreira Gomes, warning he would expropriate energy assets bought by investors if he wins.
(Reporting by David Alire Garcia, Adriana Barrera and Marianna Parraga; Writing by Gabriel Stargardter Editing by Frank Jack Daniel, Susan Thomas and Diane Craft)
(Exxon Mobil, 28.Feb.2018) – Exxon Mobil Corporation announced its seventh oil discovery offshore Guyana, following drilling at the Pacora-1 exploration well.
ExxonMobil encountered approximately 65 feet (20 meters) of high-quality, oil-bearing sandstone reservoir. The well was safely drilled to 18,363 feet (5,597 meters) depth in 6,781 feet (2,067 meters) of water. Drilling commenced on Jan. 29, 2018.
“This latest discovery further increases our confidence in developing this key area of the Stabroek Block,” said Steve Greenlee, president of ExxonMobil Exploration Company. “Pacora will be developed in conjunction with the giant Payara field, and along with other phases, will help bring Guyana production to more than 500,000 barrels per day.”
The Pacora-1 well is located approximately four miles west of the Payara-1 well, and follows previous discoveries on the Stabroek Block at Liza, Payara, Liza Deep, Snoek, Turbot and Ranger.
Following completion of the Pacora-1 well, the Stena Carron drillship will move to the Liza field to drill the Liza-5 well and complete a well test, which will be used to assess concepts for the Payara development. ExxonMobil announced project sanctioning for the Liza phase one development in June 2017. Following Liza-5, the Stena Carron will conduct additional exploration and appraisal drilling on the block.
The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
(Exxon Mobil, 5.Jan.2018) – Exxon Mobil Corporation announced positive results from its Ranger-1 exploration well, marking ExxonMobil’s sixth oil discovery offshore Guyana since 2015.
The Ranger-1 well discovery adds to previous world-class discoveries at Liza, Payara, Snoek, Liza Deep and Turbot, which are estimated to total more than 3.2 billion recoverable oil-equivalent barrels.
ExxonMobil affiliate Esso Exploration and Production Guyana Ltd. began drilling the Ranger-1 well on Nov. 5, 2017 and encountered approximately 230 feet (70 meters) of high-quality, oil-bearing carbonate reservoir. The well was safely drilled to 21,161 feet (6,450 meters) depth in 8,973 feet (2,735 meters) of water.
“This latest success operating in Guyana’s significant water depths illustrates our ultra deepwater and carbonate exploration capabilities,” said Steve Greenlee, president of ExxonMobil Exploration Company. “This discovery proves a new play concept for the 6.6 million acre Stabroek Block, and adds further value to our growing Guyana portfolio.”
Following completion of the Ranger-1 well, the Stena Carron drillship will move to the Pacora prospect, 4 miles from the Payara discovery. Additional exploration drilling is planned on the Stabroek Block for 2018, including potential appraisal drilling at the Ranger discovery.
The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
(Exxon Mobil, 5.Oct.2017) – Exxon Mobil Corporation announced it made a fifth new oil discovery after drilling the Turbot-1 well offshore Guyana.
Turbot is ExxonMobil’s latest discovery to date in the country, adding to previous discoveries at Liza, Payara, Snoek and Liza Deep. Following completion of the Turbot-1 well, the Stena Carron drillship will move to the Ranger prospect. An additional well on the Turbot discovery is being planned for 2018.
ExxonMobil affiliate Esso Exploration and Production Guyana Ltd. began drilling the Turbot-1 well on Aug. 14, 2017 and encountered a reservoir of 75 feet (23 meters) of high-quality, oil-bearing sandstone in the primary objective. The well was safely drilled to 18,445 feet (5,622 meters) in 5,912 feet (1,802 meters) of water on Sept. 29, 2017. The Turbot-1 well is located in the southeastern portion of the Stabroek Block, approximately 30 miles (50 kilometers) to the southeast of the Liza phase one project.
“The results from this latest well further illustrate the tremendous potential we see from our exploration activities offshore Guyana,” said Steve Greenlee, president of ExxonMobil Exploration Company. “ExxonMobil, along with its partners, will continue to further evaluate opportunities on the Stabroek Block.”
The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
(Exxon Mobil, 25.Jul.2017) – Exxon Mobil Corporation announced it has discovered additional oil in the Payara reservoir offshore Guyana, increasing the total Payara discovery to approximately 500 million oil-equivalent barrels.
These positive well results increase the estimated gross recoverable resource for the Stabroek Block to between 2.25 billion oil-equivalent barrels and 2.75 billion oil-equivalent barrels.
The well was successfully drilled by ExxonMobil affiliate Esso Exploration and Production Guyana Limited and encountered 59 feet (18 meters) of high-quality, oil-bearing sandstone in the Payara field.
It was safely drilled to 19,068 feet (5,812 meters) in approximately 7,000 feet (2,135 meters) of water. The well is only 12 miles (20 kilometers) northwest of the recently funded Liza phase 1 project on the Stabroek Block, which is approximately 130 miles offshore Guyana.
“Payara-2 confirms the second giant field discovered in Guyana,” said Steve Greenlee, president of ExxonMobil Exploration Company. “Payara, Liza and the adjacent satellite discoveries at Snoek and Liza Deep will provide the foundation for world class oil developments and deliver substantial benefits to Guyana. We are committed to continue to evaluate the full potential of the Stabroek Block.”
The Stabroek Block is 6.6 million acres (26,800 square kilometers). Esso Exploration and Production Guyana Limited is operator and holds 45 percent interest in the Stabroek Block. Hess Guyana Exploration Ltd. holds 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent interest.
(Exxon Mobil, 13.Jul.2017) – Exxon Mobil Corporation announced that its subsidiary ExxonMobil Exploration and Production Suriname B.V., along with co-venturers Hess and Statoil, signed a production sharing contract for Block 59 with Staatsolie Maatschappij Suriname N.V., the national oil company of Suriname. The block adds significant acreage to ExxonMobil’s operated portfolio in the Guyana-Suriname Basin.
Deepwater Block 59 is in water depths ranging from nearly 2,000 meters to 3,600 meters, located approximately 190 miles (305 kilometers) offshore Suriname’s capital city, Paramaribo. The block is 2.8 million acres, or 4,430 square miles, and shares a maritime border with Guyana, where ExxonMobil is the operator of three offshore blocks, including the world-class Liza field discovered by ExxonMobil in 2015.
“We look forward to working with Staatsolie and our co-venturers to evaluate the potential of this new acreage,” said Steve Greenlee, president of ExxonMobil Exploration Company. “Adding this block enhances our leading global deepwater portfolio.”
Suriname represents a new country for ExxonMobil’s upstream business. The company has investments throughout South America. Following contract signing, the co-venturers are preparing to begin exploration activities, including acquisition and analysis of seismic data.
ExxonMobil and consortium partners Hess and Statoil each hold a third of the interest in the block. ExxonMobil is the operator.
(Exxon Mobil, 16.Jun.2017) – Exxon Mobil Corporation said it has made a final investment decision to proceed with the first phase of development for the Liza field, one of the largest oil discoveries of the past decade, located offshore Guyana.
The company also announced positive results from the Liza-4 well, which encountered more than 197 feet (60 meters) of high-quality, oil-bearing sandstone reservoirs, which will underpin a potential Liza Phase 2 development. Gross recoverable resources for the Stabroek block are now estimated at 2 billion to 2.5 billion oil-equivalent barrels, which includes Liza and other successful exploration wells on Liza Deep, Payara and Snoek.
The Liza Phase 1 development includes a subsea production system and a floating production, storage and offloading (FPSO) vessel designed to produce up to 120,000 barrels of oil per day. Production is expected to begin by 2020, less than five years after discovery of the field. Phase 1 is expected to cost just over $4.4 billion, which includes a lease capitalization cost of approximately $1.2 billion for the FPSO facility, and will develop approximately 450 million barrels of oil.
“We’re excited about the tremendous potential of the Liza field and accelerating first production through a phased development in this lower cost environment,” said Liam Mallon, president, ExxonMobil Development Company. “We will work closely with the government, our co-venturers and the Guyanese people in developing this world-class resource that will have long-term and meaningful benefits for the country and its citizens.”
The Liza Phase 1 development can provide significant benefits to Guyana, including jobs during installation and operations, workforce training, local supplier development and government revenues to fund infrastructure, social programs and services.
The development received regulatory approval from the government of Guyana.
The Liza field is approximately 190 kilometers offshore in water depths of 1,500 to 1,900 meters. Four drill centers are envisioned with a total of 17 wells, including eight production wells, six water injection wells and three gas injection wells.
The Liza field is part of the Stabroek Block, which measures 6.6 million acres, or 26,800 square kilometers. Esso Exploration and Production Guyana Limited is operator and holds a 45 percent interest in the block.
Hess Guyana Exploration Ltd. holds a 30 percent interest and CNOOC Nexen Petroleum Guyana Limited holds 25 percent.
Esso Exploration and Production Guyana Limited is continuing exploration activities and operates three blocks offshore Guyana – Stabroek, Canje and Kaieteur. Drilling of the Payara-2 well on the Stabroek block is expected to commence in late June and will also test a deeper prospect underlying the Payara oil discovery.
(Energy Analytics Institute, Pietro D. Pitts, 27.Jan.2017) – Taiwan’s president got the call, Mexico’s president will get a wall. At least, that’s what U.S. President Donald Trump is proclaiming.
From all accounts, Mexico’s President Enrique Peña Nieto has not been shown the same courtesy as Taiwan’s President Tsai Ing-wen. Witnessing the manner in which Trump has treated trade partner Mexico over the U.S.-Mexico border wall, it is safe to assume that other partners could be in for worse or harsher treatment less they offer something that is first in Americas’ interest. The visit by United Kingdom’s Primer Minister Theresa Mary May to Washington is a case in point regarding the latter.
Trump may be a successful and wealth businessman but much talent is missing and desired in his role as a statesman. The ruthless manner in which he is dealing with Mexico, a key trading partner under the North American Free Trade Agreement (NAFTA), in the name of nationalism, is alarming at most.
As a result, countries in the Latin American and Caribbean (LAC) region — and worldwide for that matter — that export products and services to the U.S. better brace themselves for what U.S. Speaker of the House of Representatives Paul Ryan recently called ‘an unconventional’ presidency.
LAC region countries that should be worried — if not already, they should and better be — about the ongoing bout between Trump vs. Peña Nieto include but are not limited to: Argentina (some exports to the U.S.: aluminum, wines), Brazil (mineral fuels, aircraft, iron, steel), Chile (copper, fish, seafood, wine), Colombia (mineral fuels, coffee, cut flowers), Ecuador (mineral fuels, seafood), Peru (precious metals, mineral fuels), and Nicolas Maduro’s Venezuela (crude oil). The list goes on.
Most of my concern is for the latter country since crude oil exports constitute 96 percent of its foreign export revenues, and due to the fact that this OPEC-member country is the lone one in the LAC region with basically one export product. Additionally, should Trump view the asset expropriations in the oil sector under late Venezuelan President Hugo Chávez as unfair (remember U.S.-based oil giants ConocoPhillips and ExxonMobil were pushed out or kicked out, depending on your view of what happened and how), the government of Maduro & Company could be in for a big surprise. Trump’s revival of the Keystone XL Pipeline project could easily displace some if not all of the crude oil that Venezuela currently exports to the U.S. Gulf Coast.
On the flip side, Trump’s ‘America First’ nationalist message could someday be a good thing for importreliant Venezuela seeing that the country – which imports basically everything, is practically a war zone with homicide rates constantly around 30,000 each year, and which cannot devalue its already worthless currency to export itself out of its crisis – will need to rebuild nearly all its industries once the regime change occurs. How and when are the lingering questions regarding said change.
If there were ever a time to push for strengthening regional integration among the LAC region countries, it’s now. Existing initiatives that come to mind including Mercosur, Alba, and Celac, among others, should be revisited and improved. If Mexican products are indeed slapped with a 20 percent tax into the U.S., many will need to be redirected to other countries around the world. Why shouldn’t some of these products be redirected to LAC region countries?
Back to Venezuela. Since Maduro is unlikely to visit Washington and Trump less likely to visit Caracas, we’ll all have to wait for their political bout to play out on Twitter. It would be wise if LAC region officials started to have these regional trade discussions now and take a proactive, not reactive approach to Trumpism.
(Energy Analytics Institute, Pietro D. Pitts, 14.Sep.2016) – On a brief taxi ride from Punto Fijo’s Josefa Camejo International Airport to the main highway that crosses this city and connects to one of the many refining complex entrances here, a scrawny dog with mange can be seen emerging from an endless pile of discarded trash.
In this small refining town broken beer bottles, dirty diapers, and discarded personal items cling to trees and bushes as far as the eye can see in either direction along the short stretch of highway that separates the two massive refineries here: Amuay and Cardón. The refineries comprise the lion’s share of the processing capacity at PDVSA’s 971,000 barrel-a-day Paraguana Refining Complex, also commonly known as the CRP by its Spanish acronym. The CRP refineries combined with three others spread across this country have produced cumulative financial losses of $53 billion in the last eight years. Definitely not chump change.
Venezuela is home to a wealth of natural resources from gold to iron ore and holds the world’s eighth-largest natural gas reserves and the largest crude oil reserves, according to BP’s Statistical Review of World Energy. Yet, images of the immediate surroundings of the CRP paint a different financial storyboard about the well-being of Venezuela’s all important oil sector – which generates 96 percent of the country’s foreign export earnings.
Despite Venezuela’s claim to fame in terms of the size of its oil reserves, the South American country has been reduced to importing refined products because its refineries can’t meet local demand. The country’s refining sector is in a virtual state of emergency due to low processing rates, numerous unplanned plant stoppages, as well as accidents and injuries that state oil company Petróleos de Venezuela S.A. prefers to not report, according to oil union officials here. All summed up, PDVSA’s refining sector – especially within Venezuela – is a financial drain on the company as operating losses continue to mount year after year.
Venezuela – a founding member of the Organization of Petroleum Exporting Countries or OPEC — is engulfed in an economic crisis that started way before oil prices began their long downward trend. Political uncertainty, an ongoing threat of asset expropriations as well as currency and price controls have only helped to starve the capital-intense oil sector here of necessary foreign investments. PDVSA, as the Caracas-based company is known, continues to lack the necessary cash to properly revive the country’s oil sector in its majority partnership role, while local Venezuelan oil companies are few and in between and often lack the financial firepower of many of their international peers.
Many Venezuelan-based economists from Datanálisis President Luis Vicente León to Ecoanalitica Director Asdrubal Oliveros blame part of the economic crisis on the failure by former populist Venezuelan President Hugo Chávez to divert financial resources to the country’s private sector importers and the all-important upstream, midstream and downstream sectors during his tenure from 1999-2013 amid robust oil prices. In general, PDVSA’s problems mirror Venezuela’s economic crisis. The country’s economy has not fared any better under the presidential tenure of Nicolas Maduro, the man hand-picked by Chávez to succeed him prior to his untimely death in 2013. By most people’s accounts, considering the scarcities here of everything from milk to basic medicines, widespread looting, and runaway crime, things are much worst.
Oil-dependent Venezuela continues to rely heavily on its exploration and production or upstream sector to generate the bulk of its petroleum sector revenues. However, Venezuela’s oil output appears to be on an unstoppable decline, reaching 2,095,000 barrels per day in July of 2016 compared to 2,361,000 barrels per day in 2014, according to Organization of Petroleum Exporting Country’s Monthly Oil Market Report, citing secondary sources. Data from direct communications is just slightly more optimistic. Nevertheless, the downward continues.
Oil workers in red work overalls can be seen everywhere in the streets of Punto Fijo, either hailing taxis or waiting in the shade of trees for public transportation. Due to the ongoing economic crisis that has also affected Venezuela’s transportation industry – like countless other industries here – many cars and taxis in these parts and others in this resource-rich country don’t have air conditioning and/or visually lack some part or another such as a rearview or side mirror, working locks, a speedometer or a functioning trunk. The market for used tires, or anything used, is booming in Venezuela as new tire imports have come to a virtual halt.
Inside the CRP complex – physically off limits to visitors without permission from PDVSA but very visible through the wired fences — the scene within is arguably not much better, as years of under-investment on maintenance, upgrades and safety protocols by the state oil company have unfortunately left the refineries and the grounds similarly forsaken. Against a backdrop of a country in the midst of an ongoing political crisis, many refinery workers here say a combination of 12-16 hours work days, a lack of employee benefits and arguably the lowest salaries for refinery workers anywhere in the world (in dollar terms) has also taken a toll on them as well as their colleagues.
Whether the refineries or the workers are in worst condition, is a judgment call, but at first glance they both appear to be on their last legs.
In the last eight years, PDVSA’s refining, trade and supply division accumulated net losses in each of the consecutive years since 2008, which was the last time the division reported a positive gain from its combined operations in Venezuela. All tallied, the division accumulated losses of $53 billion during 2008-2015, according to data compiled from PDVSA’s financial reports.
“With a cash crunch they have focused all efforts in the upstream where you make the money,” said Francisco J. Monaldi, Ph.D. and Fellow in Latin American Energy Policy & Lecturer in Energy Economics at Rice University’s Baker Institute for Public Policy in an e-mailed response to questions. “The lack of human resources adds to the lack of investment to generate the operational difficulties.”
Refining sector stoppages and costly repairs are generating large production and economic losses for PDVSA, said oil union representative Larry López during a late afternoon sit down chat at a run-down restaurant just two blocks from the Amuay refinery.
Venezuela doesn’t need refineries to be a major exporting country, former PDVSA President Rafael Ramírez told me in 2014 during a company-sponsored media trip to visit the CRP on the anniversary of the deadly explosion at Amuay that left at least 48 people dead. To this day, it is unclear if those comments justify the lack of attention that has been given to the country’s refining sector even now under the leadership of Stanford-trained Eulogio Del Pino.
Venezuela’s Information Ministry, the clearing house for questions for all of the country’s ministries, and media officials with PDVSA and the Venezuelan Oil Ministry did not reply to emails seeking comment on the company’s refining sector strategy or general comments for this article. Venezuela’s newly elected Petroleum Chamber President was also unavailable to comment on this article.
“Our refineries have always produced products to cover demand in the domestic market as well as the Caribbean. To export to the US and Europe we really don’t need to have refineries,” said Carlos Rossi, president of Caracas-based consulting firm EnergyNomics and formerly an economist with the Venezuelan Hydrocarbons Association or AVHI, in an interview in Caracas.
“Because the refineries have been seen as a low priority, PDVSA has focused more attention on the Faja,” said Rossi referring to the Hugo Chávez Oil Belt, formerly known as the Orinoco Heavy Oil Belt, home to one of the largest non-conventional oil deposits in the world.
PDVSA’s total hydrocarbon workforce mushroomed during 2000-2015 as the company stressed more importance on political affiliation and less on university or technical experience, said Eddie Ramírez, the director of Gente del Petróleo and a former PDVSA employee, in a phone interview from Caracas. At year-end 2015, PDVSA employed 114,259 direct hydrocarbon sector workers, up from just 42,267 when Chávez rose to power in 1999, according to PDVSA data.
PDVSA’s refining sector, which employed 9,391 workers in 2015, represented just 8.2 percent of the company’s total workforce in that year. In 2010, just 3,584 workers were employed in the refining sector, which represented a mere 3.8 percent of PDVSA’s total workforce.
Given PDVSA’s cash problems and its inability to generate positive free cash flow, the company’s plans to build six new multi-billion dollar upgraders, boost oil production and refining capacity to 6,000,000 barrels per day and 1,800,000 barrels per day respectively by 2019 seem to be optimistic and represent a major challenge for the state oil company.
PDVSA owns six refineries in Venezuela, which the company reports are strategically located to supply refined products to its major consumers. The refineries – which had a total combined processing capacity of 1,303,000 barrels per day, as of year-end 2015 – produce a product slate including but limited to: 91 and 95 grade gasolines, jet and diesel fuel, light naphtha, liquefied petroleum gas, solvents and residuals.
Due to a combination of problems, the six refineries were just processing a combined 616,000 barrels per day in August 2016, translating into an average utilization for PDVSA’s domestic refineries of 47.3 percent, said Ivan Freites, an oil union official with the United Federation of Venezuelan Oil Workers or FUTPV, which represents a large portion of PDVSA’s workers, during an interview in Punto Fijo.
Two refineries are located in Venezuela’s western Falcon state including: Amuay, with a 645,000 barrel-a-day processing capacity; Cardón, with a 310,000 barrel-a-day capacity; while the smaller Bajo Grande is located in Zulia state, with a 16,000 barrel-a-day capacity. Together, the three refineries make up the CRP, according to PDVSA’s annual report for 2015, with a product slate destined 55 percent for the domestic market and 45 percent for the export market.
More centrally located is the El Palito refinery in Carabobo state with a 140,000 barrel-a-day capacity while the remaining two refineries located in Venezuela’s eastern Anzoátegui state include Puerto La Cruz, with an 187,000 barrel-a-day capacity and the smaller San Roque, with a 5,000 barrel-a-day capacity.
In 2015, Venezuela’s domestic refining sector reported average utilization rates of 66.2 percent, according to PDVSA’s operational and financial data from last year. This compares to an average utilization rate of 70.6 percent in 2014 and an average utilization rate of 72.8 percent during 2011-2014.
The CRP has suffered much more deterioration and lower utilization rates than the other refineries. Average utilization rates at the complex reached just 60.5 percent in 2015, down compared to 72 percent in 2011 and an average 67.7 percent during 2011-2014, according to PDVSA data, which differs to what oil union officials report.
“Average utilization rates at the CRP were just 53 percent in 2015,” said Freites, a stocky, long-time oil union official. “The complex is damaged to the point that it almost makes better sense to build new refineries than to fix the incalculable problems that exist.”
In contrast, average utilization rates at El Palito reached 71.4 percent in 2015, down from 90.7 percent in 2011 and an average 89.5 percent during 2011-2014 while at Puerto La Cruz rates reached 93.2 percent in 2015, up from 88 percent in 2011 and an average 88.6 percent during 2011-2014, according to PDVSA.
Figures reported by PDVSA are always overly positive and extremely optimistic, said Freites, 53, during an early happy hour brunch which included Venezuelan ‘tequeños’, a special mix here of fried cornmeal with cheese on the inside accompanied with another popular import here: whisky.
From oil towns in Midland, Texas to Maracaibo to Monagas and Punto Fijo in Venezuela, oil men have at least one thing in common: their love for food and the typical companions Grants, Chivas, and the rest of the supporting cast. However, the economic crisis here has forced many oilmen to settle for whatever is available at the kitchen table. With bottled water sometimes unavailable, Johnnie Walker becomes a name to trust.
PDVSA data differs significantly from that provided by oil union officials here and other international agencies due to the opaque operating and reporting nature of the state oil company. A quick comparison of Venezuela’s production figures as reported by PDVSA and Venezuela’s Oil Ministry as compared to figures reported by OPEC in its monthly reports or even BP in its yearly statistical review serve to prove the point.
Cash-strapped PDVSA recently reiterated plans to boost its domestic refining capacity to 1,800,000 barrels per day by 2019 but has not detailed plans for its existing refineries – which continue to process at less than optimal levels – and has been quiet about plans to build new refining capacity. Only the Puerto La Cruz refinery is known to be undergoing a deep conversion process aimed at boosting its ability to process heavier Venezuelan crudes, according to PDVSA.
Recent agreements signed by PDVSA with authorities from the governments of Aruba, Venezuela and Citgo Aruba related to the restart of a 209,000 barrel-per-day refinery located in San Nicolas, Aruba point to potential issues PDVSA may have building new refineries or even six planned new upgraders, a special type of refinery, due to financial constraints whereby at first glance it appears easier to buy refining capacity than build it from scratch.
It is not a priority to build refineries since it is much better to invest in upstream activities to maximize your limited resources, said Monaldi, also the founding director and a professor at the Center for Energy and the Environment at IESA in Venezuela. New refineries are not great moneymakers and require low capital cost to make any money, he said.
Just a handful of streets separate the Amuay refinery from the Las Piedras fishing neighborhood. Not far away, rusted out American gas-guzzlers like the Ford Maverick and even the Ford F-1, seemly pulled straight off the set of the 1970’s U.S. television show Sanford and Son, can be seen littering the narrow streets here as well as the ones behind Cardón refinery in the neighborhood that bears its name, Punta Cardón. Residents of the latter neighborhood, basically live under the constant flare of gas and whatever else might come from the refinery that is practically in their backyards.
All of PDVSA’s Venezuelan refineries seem to suffer from some type of operational deficiency. At any given time and sometimes at the same various units from different refineries are down for unplanned repairs ranging from the Amuay flexicoker, alkylation, and catalytic units; the Cardón distillation units; the three Puerto La Cruz atmospheric distillation units to the El Palito FCC unit, thus, drastically reducing domestic processing capacity and output, said Frietes. On a number of occasions in the past two years complete operations at PDVSA’s principal refineries have been halted due to operational issues.
Reduced utilization rates at the CRP have created shortages of oil derivatives including unfinished oils, lubricants, finished motor gasoline and special naphthas. As a result, Venezuela is importing more derivatives such as products for gasoline as well as light oils from the U.S. and even far off countries such as Russia and Algeria to mix with its heavy and extra-heavy crude oils produced in the Faja, even as it continues to offer oil to regional neighbors ranging from Cuba to Nicaragua under attractive financing terms.
Despite the need to import oil and products, Venezuelan oil exports continued to member countries belonging to regional initiatives ranging from the Cuba-Venezuela Cooperation Agreement (CIC) to PetroCaribe but declined 6.6 percent to 185,000 barrels per day in 2015 compared to 198,000 barrels per day in 2014, according to PDVSA data. The volumes in 2015 were down 27.3 percent compared to 255,000 barrels per day supplied to member countries in 2009.
“PDVSA continues to give away oil while in Venezuela inventories of gasoline, gasoil, diesel, LPG and lubricants are insufficient to cover domestic demand,” said Freites, a stern critic of PDVSA.
Operating deficiencies in Venezuela have created export opportunities for refiners along the North American Gulf Coast. U.S. net imports of oil and refined products from Venezuela ranging from distillate fuel oil to MTBE (oxygenate) averaged 751,000 barrels a day in the 12-month period ended June 2016 compared to 711,000 barrels a day in the same year-ago period, according to data posted to the U.S.-based Energy Information Administration’s website. However, U.S. net imports of the same products from Venezuela averaged 1,590,000 barrels-a-day in the 12-month period ended June 2001 in the early years of the Chávez government.
Productivity at the CRP is down due to the increase in workers and the decline in output, said a former PDVSA refinery safety manager who worked for 29-years at the company. He didn’t want to reveal his name since he still does contract work for PDVSA in Punto Fijo and feared retaliation from the company. Oil workers must be oil workers and not politically divided like today as it is affecting the productivity of the employees and the company, he said during an interview at a small building in downtown Punto Fijo which serves as the local office of the FUTPV.
“It is still politically hard to justify massive Imports. But the economics are very clear. In the long run, if you can sustain international market prices in the domestic market you may be able to open the downstream to private investment,” said Monaldi.
Grade school kids and university students blend into the scenery of an oil town gone bust. Many will never reach PDVSA’s professional ranks unless they have connections within the company and/or support the socialist ideas, or at least those expressed by Maduro and his government. More than anything, PDVSA refinery workers in faded red work overalls dominate the landscape in Punto Fijo and the surrounding towns seemingly unaffected by hot weather, strong wind gusts and refineries constantly emitting gas and other substances into the air. What has affected them is the continued economic crisis and low wages, many say here.
Under the sweltering sun, improvisations are the order of the day at the CRP for many refining workers frequently forced to scramble to solve recurring small problems turned into major ones due to the lack of basic replacement parts. The practice of using emergency stapling techniques to fix routine vapor leaks at processing units, or product leaks along pipelines, is commonplace nowadays, says Freites, who is the spokesperson for many refining and oil union workers not willing to go on record due to fear of retaliation or work dismissal from PDVSA.
Similar scenes are said to resonate at the Puerto La Cruz and El Palito refineries, said José Bodas, another oil union official, in a telephone interview from Carabobo state.
PDVSA is using stapling methods to fix pipeline and unit leaks instead of properly fixing or repairing them due to a lack of funds to procure the necessary replacement parts, said the former PDVSA safety manager. PDVSA is more reactive than preventative and is conducting more corrective maintenance than preventative maintenance due to the lack of financial resources. It’s not necessarily a money thing but just the way PDVSA works today, he said.
Lackluster security measures to protect the PDVSA refineries and workers have allowed crime incidents to edge up within the complexes’ gates. Stolen work bags and purses, missing clothing and other personal items and car break-ins are daily work hazards beyond those related to working in a domestic refining sector where accidents, sadly enough, are more the norm than in many other countries with refining operations. In the country with the highest murder rate in the world, according to the website WorldAtlas.com, not even the confines of the refinery complex are safe enough to shield workers from the realities on the streets in Punto Fijo, Ciudad Ojeda, Anaco and other major oil and gas towns across Venezuela.
Safety is no longer a priority for PDVSA as funds are being spent haphazardly on non-necessary projects, said the former PDVSA safety manager with his salt-and-pepper mustache and Italian surname. He says many current PDVSA bosses only respond to accidents when they are officially reported by the media.
On its part, PDVSA claims there were just 154 total injuries at the CRP, El Palito and Puerto La Cruz refineries in 2015. This compares to 173 in 2014, 276 in 2012, and 298 in 2010, according to PDVSA data in its social and environmental statements on its website. Still, union officials here say the numbers don’t reflect the real case scenario since a lot of accidents and injuries go undocumented.
As the sun falls over the horizon, workers use their mobile phones in some areas of the CRP seemly unaware of the work hazards. Thieves that regularly enter the complex via the various gate openings to rob copper, bronze, nickel as well as other materials and equipment, also rob workers of their mobile phones whenever possible. The resale market for mobile phone parts is big in Venezuela amid an economic crisis that has impacted not just food importers, but the telecommunications and airline industries as well, among others.
The multiplier effect on this town and surrounding communities can visibly be seen in the fishing regions of Punto Fijo from Las Piedras to Los Taques where white and blue collar oil workers in the good ole days would be seen almost everywhere eating and taking in the sun with family and coworkers or clients. That’s not the scene here anymore. Local mayors have for years promised money to fishing communities and fishermen in the region but many, like other family members, remain unemployed. Many have turned to crime to rob and steal things they can resell to get basics like food or medicines for their families.
“Whatever was taken over from the transnational companies doesn’t work here,” said Jaime Antonio Diaz, 44, during an interview at a lightless restaurant in Los Taques. “If the Fourth Republic was bad, then the Fifth Republic is the worst,” he said as a stray cat entered the premise through an entrance door kept open to let in fresh air and natural light.
Diaz’s comments refer to the two most recent republics in Venezuela. The Fourth Republic was the period in Venezuelan history marked by the Punto Fijo Pact in 1958 for the acceptance of democratic elections in that year. Nationalization of Venezuela’s oil industry was a point frequently criticized by Chávez as a one of many failures of the Fourth Republic. The Fifth Republic Movement (MVR by its Spanish acronym) was a leftist political party founded in the late 1990s by then-presidential candidate Chávez. It was later dissolved in 2007 to give way to Chávez’s new political party the United Socialist Party of Venezuela (PSUV).
From refinery workers fleeing low pay and increased worksite accidents to unemployed fishermen and engineers driving taxis, Punto Fijo is going through what many say is one of its worst periods in decades.
Within visible distance of the dirt roads of Los Taques nearly 30 or more towering wind power turbines can be seen off the immediate horizon on the return trip from Los Taques to Punto Fijo. Despite the strong winds here, the turbines are not operational and have yet to generate power for commercial or domestic usage, according to Freites, owing to corrupt deals between Venezuelan government officials and the company that supplied the towers. Venezuela – which has long suffered from a natural gas deficit in its industrialized western Zulia state – has plans to use non-associated natural gas production from the Cardón IV offshore project as well as power generated by these turbines to reduce the need to import costly diesel fuel. From the look of things here, it is quite obvious the latter is not something PDVSA officials want to openly talk or brag about. However, it’s safe to assume somebody made a killing on the turbine deal.
While the wind turbine project – like others envisioned in this small country with a population close to 31 million – looks good on paper in the boardroom, the corruption here more often than not turns the project into a financial bonus for some individuals at the costs of local jobs and wasted resources for a country teetering on the brink of financial default.
One thing continues to thrive here: the contraband of fuels. Contraband of cheap Venezuelan gasoline continues to nearby Colombia, Guyana, Trinidad and Tobago and Aruba despite efforts to deter it and a decision by this government to boost gasoline prices in February of 2016 to 6 bolivars a liter from 9.7 centavos. While demand for gasoline has declined in Venezuela due to economic crisis and a higher cost for gasoline, its elevated price is still quite low compared to nearby markets; thus, making it still very attractive for trade internationally.
Large fishing boats – refitted by the Venezuelan military and now under the control of military officers that pose as fishermen – continue to leave the pier near Las Piedras with domestic fuel. These so-called ‘gasoil mafias’ continue to exchange Venezuelan refined products on the high seas in international waters in seemingly another way the military is kept happy and loyal by Maduro and company, according to Rossi, author of the book ‘The Completion of the Oil Era: The Economic Impact (Energy Policies, Politics and Prices).’
Barefoot grade school kids with just shorts on, play baseball on the dirt roads and side streets in numerous poor communities in and around Punto Fijo. Using broomsticks and makeshift baseballs, they can be seen enjoying their game despite the extreme poverty they live in and not having gloves. Despite being a Latin American country, baseball, not soccer is the sport of choice here and seen here as the way to rise out of poverty, at least for many males. On the other side, females here dream of being Ms. Venezuela or Ms. World.
“This government only saves itself by changing the model,” said León, referring to what the Maduro government needs to do to stay in power.
Whether the model change comes tomorrow, next year or in 2019, Venezuela’s hydrocarbon sector is in need of drastic changes. However drastic and radical these changes may have to be, investors will continue to keep Venezuela on their radar screens, hoping for a chance to invest in the country with one of the largest resource bases on the planet. However, from the looks of things, with foreign diplomats and oil men continuing to get kidnapped here, Venezuela is not yet ready for the massive return of foreign companies or better yet the foreign companies aren’t ready to return under the existing circumstances.
The recently announced departure of Schlumberger, the world’s largest oilfield services company, should serve as a reminder to potential investors about the condition of the oil sector here which still contends with a massive brain drain of national and international talent from companies from Halliburton to Total, Chevron, Statoil and a host of smaller companies lacking the deep pockets to survive without quarterly or sometimes monthly cash flow.
“The low wages continue to produce brain drain and that makes worse the operational problems,” said Monaldi.
Top Venezuelan officials and PDVSA executives blame the economic and petroleum sector crisis here on an economic war waged they say by opposition leaders with the backing of persons and institutions from Bogotá, Miami, Washington and even Madrid. The open denial of internal problems created by widespread mismanagement, errored financial and economic decisions as well as a number of actions including asset expropriations have handcuffed the country’s private sector and brought the all-important petroleum sector to a near halt. That hasn’t stopped other countries from stepping in to fill the void when and where it is possible. Case in point: Algeria just started to supply oil to Cuba amid mounting issues at PDVSA.
The Amuay explosion on August 25, 2012, as regrettable as it was, was an early wake-up call about what PDVSA had (and has) become after more than a decade of so-called socialism. Amid continued corruption at PDVSA and a hydrocarbon sector where funds mysteriously disappear, the financial and economic dreams of a handful or more have smashed the hopes of many in Punto Fijo and all across this major oil producing South American country.
“A lot of people here are changing sides due to the mismanagement of resources by the Chávez and now the Maduro government,” said Ali, a 50-year old taxi driver of an old Toyota Corolla, who requested his last name not be used in this article for fear of retaliation from PDVSA or government officials.
Ali’s sentiment resonates across all parts of this country from many petroleum engineers and other professionals that have left the industry to drive a taxi, wait tables or do anything where the wages are better.
“The sad part of all this is that we could have another August 25th,” said Freites.
(Editing by Peter Wilson)
(Energy Analytics Institute, Piero Stewart, 2.Jul.2016) – Venezuela’s President Nicolas Maduro held a meeting with Citizens Energy Corporation founder Joseph Kennedy in Caracas to discuss matters related to the U.S.-based non-profit organization, reported Venezuela’s new agency AVN.
Citizens Energy is a non-profit company that receives and distributes Venezuela heating oil to U.S. citizens in need across various states in the U.S.A.
(Energy Analytics Institute, Jared Yamin, 25.Jun.2016) – U.S. President Barack Obama insists the Venezuelan government respect the democratic process regarding calls for a recall referendum against Venezuelan President Nicolas Maduro, reported the daily El Universal.
“Political prisoners should be freed,” said Obama during a speech in Ottawa, Canada.
(Exxon Mobil, 18.Jun.2016) – Exxon Mobil Corporation has reached an agreement with PBF Energy Inc. for the sale and purchase of its 50 percent interest in Chalmette Refining, LLC in Chalmette, Louisiana.
PBF Energy will purchase 100 percent of Chalmette Refining, LLC, which is a joint venture between affiliates of Petróleos de Venezuela, S.A. (PDVSA) and ExxonMobil.
The agreement includes the Chalmette refinery and chemical production facilities near New Orleans, La. and the company’s 100 percent interests in MOEM Pipeline, LLC and 80 percent interest in each of Collins Pipeline Company and T&M Terminal Company. ExxonMobil operates Chalmette Refining, LLC and Mobil Pipeline Company, an ExxonMobil affiliate, operates the logistics infrastructure.
“This decision is the result of a strategic assessment of the site and how it fits with our large US Gulf Coast Refining portfolio,” said Jerry Wascom, president of ExxonMobil Refining & Supply Company.
“We regularly adjust our portfolio of assets through investment, restructuring, or divestment consistent with our overall global and regional business strategies,” said Wascom. “ExxonMobil remains committed to doing business in Louisiana through ongoing operations at the Baton Rouge refinery and chemical plants, the development and production of oil and natural gas resources, and sales of fuels and lubricants. All of these businesses are unaffected by this agreement.”
Subject to regulatory approval, change-in-control is anticipated to take place by the end of 2015. Details of the commercial agreements are proprietary.
(Petrobras, 15.Jun.2016) – Petrobras informed the United States Court of Appeals for the Second Circuit issued an order granting Petrobras’s petition to permit an appeal from the order of the District Court in which the District Court certified classes in the securities litigation.
The District Court’s order was disclosed in a Petrobras press release dated February 3, 2016.
The Court of Appeals is expected to review whether it was appropriate for the District Court to certify classes of securities purchasers. The Court of Appeals did not provide any indication of the date by which it will render a decision on the appeal.
(Ecopetrol S.A. 10.Jun.2016) – Ecopetrol S.A. reports that, on June 8, 2016, based on the authorization granted by the Ministry of Finance and Public Credit (Resolution 1657 of June 7, 2016) to subscribe, issue and place External Public Debt Bonds in the international capital markets, it reopened its 2023 Bond for $500 million.
The offering had an order book of $1.7 billion or 3.4 times the amount offered and participation of more than 130 institutional investors from the U.S.A., Europe, Asia and Latin America. This transaction ratifies investors’ confidence in the decisions that have been made to face the pricing environment and Ecopetrol’s future.
The resources obtained will be used for general corporate purposes, including the company’s investment plan for the current year. With this operation, the company has achieved financing for 2016 in an amount totaling approximately $1.27 billion, covers most of the company’s projected financing needs for 2016.
This offering was made pursuant to a shelf registration statement on Form F-3 that was filed with and declared effective by the Securities and Exchange Commission (SEC).
(Harvest Natural Resources, Inc., 17.May.2016) — Harvest Natural Resources, Inc. announced 2016 first quarter earnings and provided an operational update.
Harvest reported a first quarter net loss of approximately $14.1 million, or $0.27 per diluted share, compared with a net loss of $5.6 million, or $0.13 per diluted share, for the same period last year. The first quarter results include exploration charges of $0.7 million, or $0.01 pre-tax per diluted share, and non-recurring items related to a loss on the change in fair value of warrant liabilities of $4.1 million, or $.08 pre-tax per diluted share and $5.2 million to fully reserve a note receivable from a related party, or $0.10 pre-tax per diluted share. Adjusted for exploration charges and the non-recurring items Harvest would have posted a first quarter net loss of approximately $4.1 million, or $0.08 per diluted share, before any adjustment for income taxes.
During the three months ended March 31, 2016, Petrodelta sold approximately 3.96 MMbbls for a daily average of 43,507 b/d, an increase of nine percent over the same period in 2015 and 3 percent lower than the previous quarter. Petrodelta sold 0.57 billion cubic feet (Bcf) of natural gas for a daily average of 6.2 million cubic feet per day (MMcf/d), decreasing 41 percent over the same period in 2015, and decreasing 31 percent over the previous quarter. Petrodelta’s current production rate is approximately 41,445 b/d.
During the first quarter of 2016, Petrodelta drilled and completed six development wells, five in the El Salto field and one in the Temblador field. Currently, Petrodelta is operating four drilling rigs and one workover rig and is continuing with infrastructure enhancement projects in the El Salto and Temblador fields.
Petrodelta’s production target for 2016 is projected to be approximately 42,965 b/d. The 2016 Petrodelta capital expenditures are expected to be approximately $242.8 million. Petrodelta expects to drill 19 oil wells during 2016.
On January 4, 2016, HNR Finance provided a loan to CT Energia in the amount of $5.2 million under an 11.0 percent promissory note due 2019 (the CT Energia Note). The purpose of the loan is to provide CT Energia with collateral to obtain funds for one or more loans to Petrodelta that is 40 percent owned by HNR Finance and through which Harvest’s Venezuelan oil and natural gas interests are held. The loans to Petrodelta are to assist Petrodelta in satisfying its working capital needs and discharging its obligations. Interest on the CT Energia Note is due and payable on the first of each January and July, commencing July 1, 2016. The full amount outstanding, including any unpaid accrued interest, is due on January 4, 2019; however, HNR Finance’s sole recourse for payment of the principal amount of the loan is the payments of principal and interest from loans that CT Energia has made to Petrodelta. If and when CT Energia receives payments of principal or interest from loans it has made to Petrodelta, then those proceeds must be used to pay unpaid interest and principal under the CT Energia Note. All payments made by CT Energia to HNR Finance under the CT Energia Note must be made in U.S. Dollars.
The source of funds for HNR Finance’s $5.2 million loan to CT Energia was a capital contribution from Harvest Holding, which, in return, received the same aggregate amount of capital contributions from its shareholders, pro rata according to their equity interests in Harvest Holding. Of that aggregate amount of capital contributions, HNR Energia contributed $2.6 million, which was a capital contribution from Harvest. The management agreement the Company entered into with CT Energia also makes CT Energia a related party. During the three months ended March 31, 2016 we incurred $5.2 million to fully reserve the note receivable from CT Energia due to concerns related to the continuing deteriorating economic conditions in Venezuela.
On and effective April 1, 2016, the company and CT Energy executed a Second Amendment to the 15 percent Note. The second amendment eliminates the $1 million interest payment that would have been due and payable on April 1, 2016, and converts such amount, less applicable withholding tax, into additional principal, such that the new principal amount of the 15 percent Note was $27.0 million as of April 1, 2016.
On May 3, 2016, the company and CT Energy Holding executed and delivered a Third Amendment to the 15 percent Note. The Third Amendment increased the principal amount of the 15 percent Note to $30 million to reflect an additional loan of $3 million by CT Energy Holding to Harvest. Additionally, the Third Amendment converts the $1.1 million interest payment that would have been due and payable on July 1, 2016 less applicable withholding tax, into additional principal, such that the new principal amount of the 15 percent Note will be $31 million effective as of July 1, 2016.
(Harvest Natural Resources, Inc., 29.Apr.2016) — Harvest Natural Resources, Inc. announced that, on April 25, 2016, the New York Stock Exchange (NYSE) notified the company that it had fallen below the NYSE’s continued listing standards, which provide that an NYSE-listed company is not in compliance if its average global market capitalization over a consecutive 30 trading-day period is less than $50 million and, at the same time, its stockholders’ equity is less than $50 million.
As required by NYSE rules, the company has notified the NYSE that, within 45 days of receipt of the NYSE’s notice, the company will submit a business plan that demonstrates its ability to regain compliance within 18 months. The NYSE will either accept the business plan, at which time the company will be subject to quarterly monitoring for compliance with the plan, or will not accept the plan. If the company fails to comply with the business plan or the NYSE does not accept the plan, the NYSE may commence suspension and delisting procedures.
The company’s business operations, securities reporting requirements and debt obligations are unaffected by the NYSE’s notice.
(Pemex, 19.Apr.2016) – The Minister of Finance and Public Credit, Luis Videgaray, and the Pemex CEO José Antonio González Anaya, met in New York with investors, analysts, and executives of financial institutions to emphasize the economic prospects of the company and investment opportunities that resulted from the implementation of the Energy Reform.
During his two day visit, González Anaya also held meetings with executives of Standard and Poor’s, Moody’s and Fitch rating agencies, as well as financial institutions Goldman Sachs and JP Morgan, where he stressed the relevance of Pemex for the country’s economic development.
Additionally, he shared that alongside the attained budget announcement, Pemex works in the design and implementation of a broad strategy of alliances and associations that will increase the profitability of the company in view of the fall of crude oil prices worldwide.
During the second day of the visit, Pemex’s CEO and Minister Videgaray held two meetings with investors focused on Latin America, during which they reassured the financial support of the Federal Government to Pemex through the injection of liquidity to the company for a total amount of 73.5 billion pesos, and a reduction of its fiscal burden by up to 50 billion pesos for 2016.
During the meetings, investors displayed interest in the measures taken to address the current environment of the oil industry and the possibilities of alliance with the State Productive Company.
González Anaya highlighted that these encounters are a reflection of the high level of interest and trust that the financial community has in Mexico and Pemex.
(Energy Analytics Institute, Piero Stewart, 8.Oct.2015) – Rumors have it that Venezuela’s Finance Minister Rodolfo Marco Torres had to be corrected on a number of occasions while talking about the country’s financial situation.
(EIA, 25.Sep.2015) – The amount of unproved technically recoverable shale natural gas around the world has reached 7,576 Tcf, higher than previously estimated, according to a survey by the U.S.-based Energy Information Administration (EIA).
New names were added to the list of countries with shale reserves. The U.S. holds 622.5 Tcf of recoverable shale gas that is sufficient in meeting domestic demand for about 27 years, lower than the previously projected 37 years, the survey found.
(PBF Energy, 30.Jul.2015) – On 18.Jun.2015, PBF announced that its subsidiary signed a definitive agreement to purchase Chalmette Refining, LLC, consisting of the 189 Mb/d Chalmette Refinery and related logistics assets, from ExxonMobil and PDV Chalmette, LLC.
The purchase price for the assets is $322 mln, plus working capital including inventory to be determined at closing. The transaction is expected to close prior to YE:15, subject to customary closing conditions and regulatory approvals.
(Petrobras, 25.Jun.2015) – Petrobras announced that on 25.Jun.2015, a hearing was held before the federal court in New York regarding the motion to dismiss presented by Petrobras in the class action lawsuit in which the company is a defendant. The purpose of the motion to dismiss is for the federal court to determine if, from a legal point of view, the allegations are sufficient to proceed to the evidentiary stage of the case (discovery).
After hearing the oral arguments, the judge informed that he will enter his decision on the motion to dismiss in due course.
(Moody’s, 22.Jun.2015) – Moody’s Investors Service changed PBF Holding Company LLC’s rating outlook to positive from stable. Moody’s also affirmed PBF’s Ba3 Corporate Family Rating (CFR), Ba3-PD Probability of Default Rating, and Ba3 senior secured notes ratings following its announced acquisition of the Chalmette refinery.
“PBF’s positive rating outlook reflects the expected increase in refining scale and geographic diversification, and the potential for better crude sourcing and product distribution ability if the Chalmette refinery acquisition closes as anticipated in 2015,” said Arvinder Saluja, Moody’s VP. “This acquisition builds on PBF’s four year track record of operating its existing three refineries.”
On 19.Jun.2015, PBF’s parent, PBF Energy Inc., announced that it has signed an agreement to purchase the Chalmette refinery with 189,000 b/d throughput capacity from subsidiaries of ExxonMobil (Aaa stable) and Petroleos de Venezuela, S.A. (Caa3 stable). The $322 million purchase price plus an estimated $300 million – $500 million of working capital will be funded using a combination of cash and debt. The transaction is subject to customary closing conditions and regulatory approvals, and is expected to close in the 4Q:15.
(Harvest Natural Resources, Inc., 19.Jun.2015) – On 19.Jun.2015, Harvest Natural Resources, Inc. entered into a strategic relationship with CT Energy and CT Energia Holding, Ltd., an international energy trading firm, designed to maximize the long-term success and value of Harvest’s Venezuelan operations and its 20.4% investment in Petrodelta.
Under the terms of this strategic relationship, the company entered into a term sheet with PDVSA for the repositioning and growth of Petrodelta’s business. The company agreed to appoint two of CT Energy’s designees as the company’s representatives on the Petrodelta board of directors.
CT Energia has entered into a management contract with the Company to oversee Harvest’s Venezuelan day-to-day operations and to assist in the development of a plan for the business operations and financing for Petrodelta and the negotiation of definitive documents to implement such plan.
Terms of the transaction with CT Energy include:
— The company sold CT Energy a $25.2 mln, 5year, 15% non-convertible senior secured promissory note (“15% Note”) and a $7 mln, 5-year, 9% convertible senior secured note (“9% Note”). The 9% Note is immediately convertible into 8,506,097 shares of Harvest common stock at an initial conversion price of $0.82. Harvest also issued to CT Energy 69.75 shares of a newly-created series of preferred stock that carry voting rights equivalent to the shares of common stock underlying the unconverted portion of the 9% Note.
— Harvest issued CT Energy a warrant to purchase up to 34,070,820 shares of Harvest’s common stock at an initial exercise price of $1.25/share (“CT warrant”). The CT warrant will become exercisable only after the 30-day volume weighted average price of Harvest’s common stock equals or exceeds $2.50/share (“Stock Appreciation Date”) and Harvest’s stockholders approve certain proposals related to the transaction with CT Energy by a majority of votes cast, as required by the New York Stock Exchange (NYSE) shareholder approval rules. The CT warrant is cash-exercisable, but CT Energy may surrender the 15% Note to pay for a portion of the aggregate exercise price.
— The company sold CT Energy a five-year 15% non-convertible senior secured note (“additional draw note”), under which CT Energy may elect to provide $2 mln of additional funds to the company per month for up to 6-months following the 1-year anniversary of the closing date of the transaction (up to $12 mln in aggregate). If funds are loaned under the additional draw note, interest will be compounded quarterly at a rate of 15% per annum and will be payable quarterly on the first business day of each Jan., Apr., Jul. and Oct., commencing 1.Oct.2016. If by 19.Jun.2016 (“Claim Date”), the volume weighted average price of the company’s common stock over any consecutive 30-day period has not equaled or exceeded $2.50/share, the maturity date of the additional draw note will be extended by two years and the interest rates on the additional draw note will adjust to 8%. During an event of default, the outstanding principal amount will bear additional interest at a rate of 2% per annum higher than the rate otherwise applicable.
— Harvest issued to CT Energy 69.75 shares of the company’s newly created Series C preferred stock, par value $0.01/share. The primary purpose of the Series C preferred stock is to provide the holder of the 9% Note with voting rights equivalent to the common stock underlying the unconverted portion of the 9% Note. Shares of the Series C preferred stock are entitled to vote on certain matters submitted to a vote of the stockholders on an “as converted” basis.
— At our upcoming annual shareholder meeting on 9.Sep.2015, Harvest stockholders will be asked to approve certain proposals related to the transaction under NYSE shareholder approval requirements and to approve an amendment to Harvest’s charter to authorize new shares of common stock in an amount sufficient for future needs, including the full conversion of the 9% Note and full exercise of the CT warrant issued in the transaction.
— If stockholder approval is not obtained, CT Energy has the right to accelerate full repayment of the 9% and 15% notes upon 60-days’ notice. Upon acceleration of the notes, Harvest would be required to seek alternative financing for liquidity and the strategic relationship with CT Energia would be terminated.
— CT Energy appointed three members to the company’s board of directors, including one appointee serving as an independent director under the NYSE and Securities and Exchange Commission (SEC) rules.
(Exxon Mobil Corporation, 18.Jun.2015) – ExxonMobil reached an agreement with PBF Energy Inc. for the sale and purchase of its 50% interest in Chalmette Refining, LLC in Chalmette, Louisiana.
“This decision is the result of a strategic assessment of the site and how it fits with our large US Gulf Coast Refining portfolio,” said Jerry Wascom, president of ExxonMobil Refining & Supply Company.
PBF will purchase 100% of Chalmette Refining, LLC, which is a JV between affiliates of Petróleos de Venezuela, S.A. (PDVSA) and ExxonMobil.
The agreement includes the Chalmette refinery and chemical production facilities near New Orleans, Louisiana and the company’s 100% interests in MOEM Pipeline, LLC and 80% interest in each of Collins Pipeline Company and T&M Terminal Company. ExxonMobil operates Chalmette Refining, LLC and Mobil Pipeline Company, an ExxonMobil affiliate, operates the logistics infrastructure.
We regularly adjust our portfolio of assets through investment, restructuring, or divestment consistent with our overall global and regional business strategies, said Wascom.
“ExxonMobil remains committed to doing business in Louisiana through ongoing operations at the Baton Rouge refinery and chemical plants, the development and production of oil and natural gas resources, and sales of fuels and lubricants. All of these businesses are unaffected by this agreement,” said Wascom.
Subject to regulatory approval, change-in-control is anticipated to take place by YE:15. Details of the commercial agreements are proprietary.