CITGO Awards Grant, Continues Restoration Work

(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.

***

PDVSA, Citgo Evaluating Aruba Gas Plan

(Energy Analytics Institute, Piero Stewart, 25.Aug.2018) — Venezuela is evaluating a plan to implement a natural gas project with Aruba.

Officials from Venezuela’s state oil company PDVSA, and its refining arm Citgo Petroleum Corporation continue to evaluate the potential of such a project that would imply a gas interconnection between Venezuela and Aruba, reported PDVSA in an official statement.

No further details about the plan were revealed by PDVSA.

***

Venezuelan Oil Assets to be Seized by Creditors

(Express, Simon Osborne, 16.Aug.2018) – Venezuela’s oil assets are being targeted by angry creditors after a US court granted a Canadian mining company permission to send in the bailiffs.

Firms owed billions by the beleaguered South American country and its state-owned oil firm PDVSA are now lining up to make sure they get a pay-out.

The Venezuelan economy is crippled by hyperinflation and the discredited regime of President Nicolás Maduro faces trade sanctions from the US, EU, Canada and Latin America’s biggest countries.

The country is essentially bankrupt and creditors see its oil assets as their best bet with the biggest target being Citgo, a Texas-based oil refiner that processes Venezuelan crude oil and is estimated to be worth roughly £3.15bn.

Oil tankers could also be targeted as US hedge fund Elliott Management did with an Argentine ship in 2012 after it won a US court ruling to collect on unpaid debts.

Venezuela, which is overdue on about £4.5bn in debt payments, is reportedly transferring oil cargoes to safe harbours including Cuba to avoid such risks.

Canadian mining company Crystallex won a key battle in its attempts to force Venezuela to pay £1.1bn in compensation for expropriation of a mining project when a US judge accepted its argument that PDVSA was an “alter ego” of the Venezuelan state and gave it the right to seize PDVSA assets in the US.

Francisco Rodriguez, chief economist of Torino Capital said the ruling could serve as a precedent.

He said: “This judgment is unambiguously negative for Venezuela, given its loss of an asset of significant value. In all likelihood the ruling will spur creditors to attempt to pursue PDVSA assets.”

ConocoPhillips has already won a £1.57bn arbitration award against PDVSA from the International Chamber of Commerce, the US oil major seized the company’s assets in the Caribbean.

The seizures left PDVSA without access to facilities that process almost a quarter of Venezuela’s oil exports.

To avoid the risk of other assets being taken, PDVSA asked its customers to load oil from its anchored vessels acting as floating storage units.

Citgo’s complicated ownership – half the company is security against more than £2.36bn of PDVSA bonds and half is collateral for a £1.18bn loan from Russian oil giant Rosneft – means any immediate plundering of its assets is extremely unlikely.

Robert Kahn, a professor at the American University and a former International Monetary Fund official, said: “The ruling is a win for Crystallex, no doubt. But I’m not convinced that it immediately marks a tipping point.”

Richard Cooper, senior partner at New York law firm Cleary Gottlieb Steen & Hamilton, said: “The Crystallex ruling doesn’t mean that every Republic of Venezuela bondholder can automatically assume that PDVSA assets are available to them.”

Venezuela also owes tens of billions of dollars to China and Russia but its sole foreign-exchange generating industry is in steep decline with oil output dropping below the 1947 levels of 1.3m barrels per day.

***

Mexico’s Fuel Plan Won’t Immediately Impact Texas

(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.

During the race, he vowed to reverse policies pursued by his predecessor, Enrique Peña Nieto, that made the country more reliant on the international gasoline market prices. He told supporters it would result in cheaper and more dependable fuel.

“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?”

***

Venezuela’s Citgo Refineries At Risk Of Seizure

BOSTON, MA: People walk through the rain in front of the Citgo sign in Kenmore Square, Boston, July 18, 2016. (Photo by Timothy Tai for The Boston Globe via Getty Images)

(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.

MORE FROM FORBES

Last week, a court ruling opened the door for Citgo assets to be seized to pay for these judgments.

Defunct Canadian gold miner Crystallex had been awarded a $1.4 billion judgment over Venezuela’s 2008 nationalization of a Crystallex gold mining operation in the country. A U.S. federal judge ruled that a creditor could seize Citgo’s assets to enforce this award.

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.

***

Crystallex Cuts Others In Line for Citgo Assets

(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…

***

Two Companies to Ship Fuels from US to Mexico

(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.

***

The Weirdest Oil Lawsuit Of 2018

(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.

***

Once Oil Wealthy, Maracaibo Struggles to Keep Lights On

(Reuters, Mayela Armas, 31.Jul.2018) – Across Maracaibo, the capital of Venezuela’s largest state, residents unplug refrigerators to guard against power surges. Many only buy food they will consume the same day. Others regularly sleep outside.

The rolling power blackouts in the state of Zulia pile more misery on Venezuelans living under a fifth year of an economic crisis that has sparked malnutrition, hyperinflation and mass emigration. OPEC member Venezuela’s once-thriving socialist economy has collapsed since the 2014 fall of oil prices.

“I never thought I would have to go through this,” said bakery worker Cindy Morales, 36, her eyes welling with tears. “I don’t have food, I don’t have power, I don’t have money.”

Electrical posts and power lines are seen at sunset during a blackout in Maracaibo, Venezuela July 26, 2018. Reuters/Marco Bello

Zulia, the historic heart of Venezuela’s energy industry that was for decades known for opulent oil wealth, has been plunged into darkness for several hours a day since March, sometimes leaving its 3.7 million residents with no electricity for up to 24 hours.

In the past, Zulians considered themselves living in a “Venezuelan Texas”, rich from oil and with an identity proudly distinct from the rest of the country. Oil workers could often be seen driving new cars and flew by private jet to the Dutch Caribbean territory of Curacao to gamble their earnings in casinos.

Once famous for its all-night parties, now Maracaibo is often a sea of darkness at night due to blackouts.

The six state-owned power stations throughout Zulia have plenty of oil to generate electricity but a lack of maintenance and spare parts causes frequent breakdowns, leaving the plants running at 20 percent capacity, said Angel Navas, the president of the national Federation of Electrical Workers.

Energy Minister Luis Motta said this month that power cuts of up to eight hours a day would be the norm in Zulia while authorities developed a “stabilization” plan. He did not provide additional details and the Information Ministry did not respond to a request for comment.

The Zulia state government did not respond to a request to comment.

Although Caracas has fared far better than Maracaibo, a major outage hit the capital city on Tuesday morning for around two hours due to a fault at a substation. The energy minister said “heavy rains” had been reported near the substation.

Venezuelans were forced to walk or cram into buses as much of the subway was shut. Long lines formed in front of banks and stores in the hopes power would flick back on. The fault also affected some phone lines and the main Maiquetia airport just outside the capital.

“This is terrible. I feel helpless because I want to go to work but I am in this queue instead,” said domestic worker Nassari Parra, 50, as she waited in a line of 20 people in front of a closed bank.

MARACAIBO “GHOST TOWN”

Retiree Judith Palmar, 56, took advantage of having power to cook one afternoon last week in Maracaibo.

When the lights do go out, Palmar wheels her paralyzed mother outside because the house becomes intolerably hot. One power cut damaged an air conditioning unit, which Palmar cannot afford to replace on her pension of about $1.50 a month due to inflation, estimated by the opposition-run Congress in June at 46,000 percent a year.

Outages are taking a toll on businesses in Zulia.

Zulia used to produce 70 percent of Venezuela’s milk and meat but without power to milk cows and keep meat from spoiling, the state’s production has fallen nearly in half, according to Venezuela’s National Federation of Ranchers.

Zulia’s proportion of Venezuela’s total oil production has also slipped over the past 10 years from 38 percent to 25 percent, figures from state oil company PDVSA show.

Maracaibo, Venezuela’s second largest city, seems like a “ghost town,” said Fergus Walshe, head of a local business organization. He said businesses had shortened their operating hours due to the lack of power.

“Before, business activity here was booming,” he said.

Small businesses are also affected. In an industrial park in Maracaibo’s outskirts, 80 percent of the 1,000 companies based there are affected by the power cuts, according to another business association in Zulia.

Sales at Americo Fernandez’ spare parts store are down 50 percent because card readers, which are crucial because even the cheapest goods require unwieldy piles of banknotes, cannot be used during power cuts.

“I have had to improvise to stay afloat. I connect the car battery to the store so that the card readers can work,” Fernandez said during a power outage at his home, surrounded by candles.

Reporting by Mayela Armas in Maracaibo, additional reporting by Andreina Aponte and Shaylim Castro in Caracas; Writing by Alexandra Ulmer; Editing by Lisa Shumaker and Alistair Bell

***

Guyana: Will its Oil Boom Benefit the People?

(Al Jazeera English, 30.Jul.2018) – Oil companies have identified massive offshore reserves in Guyana, one of South America’s poorest nations. New estimates last week report that more than 4 billion barrels of oil could be extracted from a region known as the Stabroek block, where ExxonMobil expects to start pumping crude from in 2020. The country is poised to become a major energy supplier, but not everyone is optimistic about the potential for oil revenue to benefit Guyanese citizens. So what can Guyana do to avoid becoming another poor, yet resource-rich nation?

On this episode of The Stream, we speak with:

— Christopher Ram

Lawyer and newspaper columnist

chrisram.net

— Jan Mangal

Former petroleum advisor, President David A. Granger

linkedin.com

— Lisa Sachs @CCSI_Columbia

Director, Columbia Center on Sustainable Investment

ccsi.columbia.edu

— Imran Khan @imrankhangy

Press Secretary, Prime Minister Moses Nagamootoo

dpi.gov.gy

***

U.S. Revokes Visa of Citgo CEO

Asdrubal Chavez Source: Bloomberg

(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.

— With assistance by Nick Wadhams
***

Stock to Watch: ExxonMobil in Guyana

(OilPrice.com, Meredith Taylor, 10.Jul.2018) – American energy dominance is on the rise.

In March 2018, the U.S. beat its all-time record and pumped more than 10.4 million barrels per day (bpd). Energy stocks are way up on strong forecasts of future demand. Mentioned in today’s commentary includes: Exxon-Mobil Corp. (NYSE:XOM), Chevron Corp. (NYSE:CVX), Pioneer Natural Resources (NYSE:PXD), Marathon Oil (NYSE:MRO), PDC Energy, Inc (NASDAQ:PDCE).

A tight market is looming, regardless of OPEC’s plans to pump more: outages are expected in multiple areas, offering up opportunities for American energy producers to swoop in. The last few years have seen the U.S. emerge as an energy powerhouse. And this is just the beginning.

Here is the best stock with (Guyana exposure) to watch in the space:

Exxon-Mobil Corp.

The biggest of the American super-majors is going back to its roots. Exxon-Mobil, an industry giant with a market cap of $351.8 billion, has its hands in upstream, midstream and downstream. It’s truly international, with operations and investments all over the world.

But increasingly, it’s looking to the U.S. to cover its bottom-line. Both NGL and crude production from Exxon’s U.S. properties have increased since 2013. In January, the company announced it would invest $35 billion in the U.S., in response to the generous tax cuts it received.

As other supermajors diversify and turn towards renewables and natural gas, Exxon is determined to remain a crude player-even if that has caused it to lose its market lead over Shell, narrowing the gap between the two firms to a mere $55 billion, according to Bloomberg. And even as it looks to the U.S., particularly the Permian Basin where it holds 6 billion barrels of oil equivalent (BOE), Exxon’s international posture has grown more sturdy-it’s adding to an already-impressive find off the coast of Guyana.

Exxon stock has risen steadily since the doldrums of February 2018, and the news from Guyana (as well as positive news from the OPEC conference in Vienna) should send it even higher. It always pays to bet on the biggest players. And they don’t come any bigger than this.

***

Linking Permian, Eagle Ford to Monterrey

(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.

Suppressed Demand

“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.”

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Rick Perry Wants Argentina be More Like Texas

(Bloomberg, 17.Jun.2018) – The U.S. government is getting in on a shale boom 5,000 mi (8,000 km) from home.

Energy Secretary Rick Perry will help Argentina connect with U.S. companies that have shale oil and gas expertise as President Mauricio Macri — facing a natural gas trade deficit — hurries to replicate the success of the Permian basin, in Perry’s home state of Texas.

Fostering energy production from a regional ally will bolster the geopolitical influence of the U.S., Perry told reporters in Bariloche, Argentina.

“One of the things that I offered Juan Jose is U.S. technology partnerships, to make the introductions with the private sector,” Perry said, referring to Juan Jose Aranguren, Macri’s energy minister. “The technology that has allowed for the shale gas revolution in America we want to make available to Argentina.”

Perry was meeting Aranguren and other G20 counterparts in snow-covered Bariloche to discuss a global transition to cleaner energy — especially gas. Argentina is ramping up production of the fuel in Vaca Muerta, the Patagonian shale play where Chevron Corp. and DowDuPont Inc. were among the first to get drilling going.

Argentina’s state-run YPF SA, the biggest operator in Vaca Muerta, sees the next phase of shale development driven by mid-cap independent companies lured from the Permian. Their arrival will increase competition and, in turn, slash costs, Aranguren told reporters in Bariloche.

Now, Perry wants to add to that, bringing in U.S. pipeline developers to expand the play’s infrastructure and petrochemical companies to process the hydrocarbons once they’ve been moved out of the isolated shale fields.

Boosting output in Vaca Muerta, one of the world’s largest shale plays that remains largely untapped, will help the U.S. to direct geopolitics amid fractious relationships with major oil producers Russia and Venezuela, Perry said.

“Being able to not be held hostage by countries who don’t share our values is really important,” Perry said. “President Macri’s policies are right in line with U.S. values.”

Perry will advise Argentina — already facing transportation bottlenecks as YPF and billionaire Paolo Rocca’s Tecpetrol SA spur gas production — on avoiding pipeline capacity issues that have begun to plague the Permian, he said.

Transportadora de Gas del Sur SA recently announced it will build a $300-million gas pipeline in Vaca Muerta.

Perry will visit Vaca Muerta in the near future, Aranguren said.
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Will Money from Guyana’s Oil Boom Get to the People

(CaribNation TV, 16.Mar.2018) – Guyana is poised to become the next big oil producer in the Western Hemisphere, attracting the attention and investment dollars of some of the biggest oil companies in the world.

Exxon Mobil and Hess announced the successful drilling of a deep water exploration well that may soon confirm that the seafloor beneath Guyana’s coastal waters contains one of the richest oil and natural gas discoveries in decades. Experts now estimate that one of its offshore fields alone, known as Liza, could contain 1.4 billion barrels of oil mixed with natural gas, comparable to some of the larger fields drilled in South America.

The question now is, will the money gained from Guyana’s oil boom get to the people of Guyana?

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ExxonMobil Success in Guyana Continues

(Energy Analytics Institute, Piero Stewart, 16.Jan.2017) – ExxonMobil’s successful drilling streak continues in Guyana as the Irving, Texas-based company announced positive results from its second offshore well Payara-1, also located on the Stabroek Block.

The well, located just 16 kilometers from the earlier game-changing Liza discovery, encountered over 29 meters of high-quality, oil-bearing sandstone reservoirs.

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Executive Profile: YPF New CEO Ricardo Darré

(Energy Analytics Institute, Jared Yamin, 6.Jun.2016) – Ricardo Darré will assume the position of CEO at YPF on July 1, 2016, taking over the helm from the interim CEO.

Darré graduated from the Buenos Aires Technology Institute (ITBA by its Spanish acronym) with a specialization in mechanical and industrial engineering, reported the daily newspaper La Nacion.

After finishing university he worked for Schlumberger in Angola, Zaire in the Neuquén basin.

In 1987, he began work with Total, where he has worked until now. With Total he worked in Tierra del Fuego, France and Thailand in various roles related to offshore exploration.

From 1998, he started to assume roles related to operations in Norway, Russia, the United Kingdom, France and the United States.

Currently, he continues to work as managing director of Exploration and Production with Total in Houston, Texas.

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EMAS AMC Wins Contract for Angostura Project

(Ezra Holdings Ltd., 8.Sep.2015) – Singapore’s Ezra Holdings Limited (Ezra or the Group), a leading contractor and provider of integrated offshore solutions to the oil and gas industry, announced its subsea services division, EMAS AMC, finalized a contract with BHP Billiton for the Angostura phase 3 development offshore Trinidad and Tobago in the eastern Trinidadian sector of the Venezuela basin.

The total scope of work includes the project management, fabrication, construction and installation of 12-inch flowline along with a complete subsea package comprised of control umbilicals and detailed engineering, construction and installation of the pipeline end manifold (PLEM) and inline sled (ILS) for the Angostura phase 3 field development located approximately 22 miles (35 kms) northeast of Trinidad and Tobago.

“This award is especially rewarding for EMAS AMC as it draws on our ability to provide the best overall solution through our full spectrum of one-stop-shop capabilities, including project management, detailed engineering, pipelay, subsea installation, fabrication, survey and commissioning,” said Lionel Lee, Ezra group CEO and managing director.

Engineering and procurement are currently under way from EMAS AMC’s Houston office with fabrication of the subsea structures and stalking and spooling of flowlines to be carried out at EMAS Marine Base facility in Ingleside, Texas. Offshore execution is scheduled for mid-2016, utilizing the Lewek Express subsea construction and reel lay vessel.

Ezra has also recently announced that they have signed a binding Memorandum of Understanding for Chiyoda Corporation to invest in Ezra’s Subsea Services business, EMAS AMC, to form EMAS CHIYODA Subsea – a 50:50 JV.

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Q&A with Tudor Pickering’s David Pursell

(Energy Analytics Institute, Pietro D. Pitts, 18.Sep.2013) – Tudor Pickering Holt & Co. LLC Managing Director David Pursell spoke with Energy Analytics Institute in a brief interview from Dallas, Texas.

What follows are excerpts from the brief interview.

EAI: Are PDVSA’s CITGO assets along the US Gulf Coast strategic?

Pursell: They are strategic because they’re high complexity refineries that can handle the heavy Venezuelan crude grade. Plus, the products they make are going into the U.S., which is the most important refined product market in the world.

EAI: Could PDVSA’s CITGO assets be used as compensation if PDVSA were ordered to pay large lawsuit damages?

Pursell: You could probably take those assets in lieu of payment if ultimately there is a large damage award and the Venezuelans say they’re not going to pay you. The question is who’s going to buy those? If you buy cheap from Venezuela and a court later says we’re going to take them from you. Does this scare away a buyer?

EAI: Will Canadian crudes compete with Venezuelan crudes if the Keystone Pipeline is eventually built?

Pursell: Canadian crude will definitely compete with Venezuelan crude, as both are going to U.S. Gulf Coast.

EAI: How do you view PDVSA today?

Pursell: Venezuela before Chavez had three operating companies that were very good, they were clearly top quartile, Chavez came in, meshed them together and gutted technical expertise for political reasons and now PDVSA is a terrible company. He basically took PDVSA and made it Pemex, inept and not very good.

Editor’s Note:

Pursell holds a Masters in Petroleum Engineering. He has worked on a number of technical petroleum engineering consulting projects in Venezuela.

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Q&A with Oil Outlook President Carl Larry

(Energy Analytics Institute, Pietro D. Pitts, 9.Aug.2013) – Oil Outlook President Carl Larry spoke with Energy Analytics Institute in a brief interview from Houston, Texas.

What follows are excerpts from the brief interview.

EAI: Are US refiners benefiting from PDVSA’s refinery problems in Venezuela?

Larry: We have seen production in the US in the last year picking up and we are seeing a lot of refinery runs, which have lifted exports which are at a record high.

Because of gasoline usage that we have seen in Venezuela, it has created an opportunity for US Gulf Coast refineries to pick up the slack to really push out more exports.

Additionally, we see a lot of the US Gulf Coast refineries bringing in a lot of heavy and medium crudes from either Venezuela or Saudi Arabia. The focus has shifted from bringing in lighter sweets, which we have done historically, to bringing in more medium to heavy grades (heavier sour grades). Further, we are seeing more being pulled out of Cushing and down into now the Gulf Coast.

There is an abundance of light sweet because of the shale programs, whether Eagle Ford in Texas or Bakken, and we are seeing a lot of that get pushed to the East Coast and the Mid-West.

We have seen a desperate need for sours and heavies ever since 2004-2005 when the refineries in the Gulf Coast were switching their slates to a heavier grade because of the cost differences.

Now we are experiencing a situation where it is cheaper to bring in light sweet in but the refineries are now geared up to bring in medium to heavy. We are seeing a lot more production but because of that we are seeing more pressure on the heavier sour grades.

Exports are key here. The longer we can keep those refineries up and running, it’s a good thing for the US refining system but at end of the day it is all about global demand and not so much US demand.

EAI: Could PDVSA be at a point whereby it is ready to divest of its CITGO Corp. refining operations in the US?

Larry: Venezuela is facing the same issues as a refiner as Saudi Arabia. There is not this demand in the US for product anymore and definitely not crude, so like Saudi Arabia there is race to get to Asia and especially China and get in front of them and sign longer term deals. So, the longer Venezuela deals with the US and the up and down demand here, the more time they are losing with bigger customers.

I can see why they would want to strengthen those ties before someone else stepped in. I could see PDVSA wanting to exit the US since there is not

really a big need here anymore for refineries or crude for that matter.

The focus for PDVSA and Venezuela should be the up and coming countries that will be demanding more oil, probably China and maybe Japan as well.

EAI: What companies would you put on a short list as being interested in the CITGO refineries?

Larry: I think ExxonMobil is a name that will come to the forefront, but Chevron Corp. might be another one that might be looking to expand. With significant exposure in Latin America, the refineries could be a natural fit for Chevron if there is an opportunity to expand.

EAI: Do you see a market for PDVSA’s Caribbean refineries?

Larry: It all depends on global demand. The Caribbean refineries are looking for a lot more global demand to make their margins profitable. The US is no longer relying on the Caribbean to give it the product, the demand is now going in the opposite direction. So, PDVSA’s refineries and others in the Caribbean become more global macro-sensitive than they have been in the past.

Editor’s Note:

PDVSA’s 100% controlled US subsidiary CITGO Corp. owns outright three refineries with combined processing capacity of 749,000 b/d. PDVSA also has a 50% interest in two additional refineries with a combined processing capacity of 679,000 b/d, according to PDVSA’s 2012 annual report.

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