Weatherford Reports Higher Activity Levels In Argentina and Mexico

(Energy Analytics Institute, Ian Silverman, 29.Oct.2018) — Weatherford International plc reported Western Hemisphere 3Q:18 revenues of $762 million were down $7 million, or 1%, sequentially, and down $5 million, or 1%, year-over-year, the company reported in an official statement.

Compared to the second quarter of 2018, revenues in Canada improved seasonally as the rig count increased following the spring breakup, but were offset by lower results in the United States and negative foreign exchange impacts in Latin America.

Year-over-year revenue increases from integrated service projects in Latin America were offset by lower activity levels in Canada as crude differentials expanded, which reduced demand for Completions and Production services and products.

Third quarter segment operating income of $78 million was up $28 million sequentially and up $75 million year-over-year. The sequential increase benefited from lower expenses and improved operating efficiencies mainly associated with the transformation. The year-over-year improvements were driven by a combination of higher activity levels in Argentina and Mexico and the positive impacts from our transformation efforts, which overcame lower operating results in Canada and foreign exchange effects in Latin America, the company said.

Operational highlights in Latin America during the quarter include:

— In Mexico, Weatherford replaced an incumbent’s system with the Magnus RSS, which ran onshore alongside the RipTide® drilling reamer to drill and enlarge a directional well with a 42° profile.

— Weatherford displaced an incumbent in Brazil by signing a new tubular running contract with Petrobras. The contract awards Weatherford work on 14 deepwater rigs, which represents significant market share.

— Working in collaboration with a customer, Weatherford devised an integrated solution that included logging, pressure pumping services, and the FracAdvisor® workflow to execute the first documented multistage frac job in the Jurassic Superior Pimienta Shale in Mexico. The large-scale solution complied with new government regulations and overcame significant logistical issues to fracture 17 stages in less time than allotted.

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#LatAmNRG

Venezuela To Make $949M Bond Payment To Keep Citgo Assets

(OilPrice.com. Tsvetana Paraskova, 26.Oct.2018) — Although Venezuela is regularly delaying or avoiding bond payments and is behind on billions of U.S. dollars in such payments, it is preparing to make a rare US$949-million payment on one bond, because that bond is backed by a stake in its key U.S. asset, Citgo, Bloomberg reports, quoting a person with direct knowledge of the plans.

Venezuela’s state oil firm PDVSA is getting ready to pay the coupon and partial principal repayment due on October 29 on 2020 notes, which are backed by a stake in Citgo.

Analysts say that Venezuela continues to consider Citgo as a very important asset and doesn’t want to open the door to investors who would lay claims on it if it doesn’t make the bond payment.

Although it’s not clear how much longer PDVSA will be able to continue servicing the payments on this particular bond, analysts at JP Morgan, Torino Capital, and Eurasia Group told Bloomberg that the government of Nicolas Maduro would make the payment due at the end of this month because it will want to hang onto this key asset as long as possible.
“The government’s strategy with regards to various creditor obligations seems to be to avoid or delay paying wherever possible but pay or settle when valuable external assets are in jeopardy,” Bloomberg quoted a note by Risa Grais-Targow, a senior analyst at Eurasia Group, as saying this week. The analyst, however, notes that this strategy of Venezuela has its limits. The Maduro government faces declining export revenues from its only cash cow, the oil industry, where production continues to plunge.

But even if Venezuela makes the upcoming bond payment next week, it has to service other debts to keep control of its strategic U.S. asset, Bloomberg notes. Citgo itself has debts of US$3 billion, and some of it may have to be repaid. Earlier this year, Canadian gold miner Crystallex won the right to tap Citgo for compensation of US$1.4 billion for the forced nationalization of its assets by the Hugo Chavez government. Russia’s largest producer Rosneft could also claim Citgo shares, if PDVSA, which had pledged 49.9 percent in Citgo as collateral for loans from Rosneft in 2016, defaults on those loans.

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#LatAmNRG

Bondholders Raise Hopes Venezuela Will Pay Up On Due Debt

(Ft.com, Gideon Long, 25.Oct.2018) — In a month in which emerging market government bonds have been hammered by the prospect of US rate increases, geopolitical risk and fears of a US-China trade spat, one bond — in crisis-racked Venezuela of all places — has rallied to record highs.

The 2020 bond issued by the state oil company PDVSA has rallied 14 per cent in six weeks to trade at over 91 cents, up from a year low of 80 cents in early September. By contrast, most PDVSA bonds trade at around 20 cents.

The reason for this unusual outperformance is that investors are increasingly convinced that the cash-strapped oil company will come up with an $842m principal payment due this weekend to avoid default and potentially lose a key asset, US-based refiner Citgo.

“I believe that they [Venezuela and PDVSA] are willing to pay,” said Siobhan Morden, head of Latin America fixed income strategy at Nomura. “Their track record suggests willingness to pay to protect strategic assets.”

Payment in itself would be remarkable: Venezuela and PDVSA have defaulted on all their other commitments to bondholders over the past year and are now $7bn in arrears on their combined traded debt of about $60bn.

But this bond is different. If PDVSA fails to service it, the company risks losing its prized US asset Citgo, a Houston-based group with three refineries in the Gulf of Mexico and the Midwest that process about a third of Venezuela’s oil exports to the US.

PDVSA has pledged half of Citgo as collateral on the $2.5bn 2020 bond, and the other half as security on a loan from the Russian oil company Rosneft. If it fails to pay, bondholders could in theory go after their half. There is no grace period on the amortisation payment, although the company has an additional 30 days to make an interest payment of $107m, also due this weekend.

Even so, 2020 bondholders would have a fight on their hands because everyone, it seems, wants a bit of Citgo. Having largely given up on ever being paid by Venezuela or PDVSA, creditors are increasingly going after their assets abroad, Citgo being the jewel in the crown.

The Canadian mining company Crystallex is trying to seize Citgo to compensate it for $1.4bn owed by the Venezuelan state. The US oil company ConocoPhillips is in a similar position, seeking payback for money owed by PDVSA. It has previously seized assets in the Caribbean, where PDVSA processes much of its oil exports.

As for bondholders, in what has become a complex multi-directional legal battle, the world’s largest asset manager BlackRock and New York-based Contrarian Capital Management have waded in on behalf of US and UK investment managers who hold some 60 per cent of the 2020 bonds.

For now, Rosneft is watching from the sidelines but if PDVSA were to default on its separate loan from the Russian company, it too would be eligible to claim almost half of Citgo. In theory, that could leave the Russians in the novel position of having a major holding in a US refiner, something US President Donald Trump would want to avoid.

Even if PDVSA makes this payment, Venezuela faces a daunting debt mountain. The sovereign must pay a final $1bn on its 2018 bonds in December, and alongside PDVSA must find $9.3bn for bondholders in 2019 and more than $10bn in 2020, although no one expects it to do so.

Faced with these desultory figures, Venezuela is rumoured to be considering a complete overhaul of PDVSA. This week the specialist energy reporting agency Argus said Caracas was thinking of replacing PDVSA with a new national energy company that would inherit PDVSA’S physical assets, including Citgo, but not its debts. That could pave the way for PDVSA to be formally declared bankrupt.

In addition to its traded debt, Venezuela owes billions of dollars to China and Russia. Meanwhile, oil production has plummeted to its lowest level since the 1940s, the economy has halved in size in five years and inflation is running at almost 500,000 per cent. Central bank reserves stand at $8.8bn, close to their lowest level for 30 years.

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#LatAmNRG

PDVSA Prepares To Make $949 Mln Payment On Citgo-Backed Bond

(Bloomberg, 24.Oct.2018) — Petroleos de Venezuela SA’s plan to make a $949 million bond payment would mark a rare exception for Nicolas Maduro’s regime as it tries to hold on to the crown jewel of its U.S. assets.

Venezuela’s state-run oil company is preparing to make the coupon and partial principal repayment that’s due Oct. 29 on the 2020 notes, according to a person with direct knowledge of the matter. The socialist state is behind on almost $7 billion in debt payments owed to investors, but this bond is backed by a majority stake in Citgo Holding Inc., meaning a non-payment would allow holders to lay claim to that asset.

The payment has been anticipated by investors. The $2.5 billion of notes traded as high as 92.75 cents on the dollar this week, far above most Venezuelan bonds, which hover near 25 cents. Analysts from JPMorgan Chase & Co (NYSE:JPM)., Torino Capital and Eurasia Group have also said the Maduro government would pay because of its desire to hold on to Citgo, although there are doubts about how much longer PDVSA can service the debt.

“The government’s strategy with regards to various creditor obligations seems to be to avoid or delay paying wherever possible but pay or settle when valuable external assets are in jeopardy,” Risa Grais-Targow, a senior analyst at Eurasia Group, wrote in a note Monday. “There are limits to this strategy, as the government still faces meaningful cashflow constraints owing to declining cash-generating oil exports.”

Calls and emails seeking comment from PDVSA’s vice president of finance, Iris Medina Fernandez, weren’t returned. A representative for Venezuela’s oil ministry declined to comment. The person with knowledge of the situation asked not to be named because the matter is private.

Even with the payment, Citgo’s fate remains in flux. The 2020 notes fell by the most in nearly two months on Wednesday amid a broader sell-off across risky assets. Here are some of the other hurdles that Venezuela needs to navigate to maintain ownership of the company:

— Citgo Petroleum and its parent Citgo Holding have more than $3 billion of their own debt outstanding. At least some of that might need to be repaid if the company changes ownership through a foreclosure or a sale.

— PDVSA pledged a 49.9 percent stake in Citgo Holding as collateral for loans it received from Rosneft in 2016. If it defaults on those loans, the Russian state-controlled oil company could seek to seize the shares.

— A small Canadian mining company, Crystallex International Corp., was awarded the right to collect on an arbitration award by taking shares of PDV Holding (the U.S. parent of Citgo Holding), a verdict Venezuela is appealing.

— PDVSA is due to pay $500 million to ConocoPhillips (NYSE:COP) in November as the first installment of a $2 billion settlement the two companies reached this summer. If it misses the payment, Conoco could seek to attach PDVSA assets, including Citgo.

— Separately, an $8 billion bondholder group advised by Guggenheim Securities has said it’s “exploring options” to ensure that the nation’s overseas assets are available to satisfy its claims.

So far, PDVSA has shown it is determined to hold on to Citgo, even as U.S. sanctions prevent the refiner from distributing dividends back to Venezuela. Citgo plays a key role in facilitating the export of Venezuelan crude — the country’s main source of foreign exchange — and also provides Venezuela with much-needed refined products.

“It is not about the value of the equity, which may not be much,” said Richard Cooper, a partner at law firm Cleary Gottlieb Steen & Hamilton LLC, who has advised holders of Venezuela’s debt. “Citgo remains an incredibly important asset for PDVSA.”

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#LatAmNRG

President-elect Lopez Obrador Slams Pemex For Crude Import Plan

(Reuters, 23.Oct.2018) — Mexico’s president-elect Andres Manuel Lopez Obrador on Tuesday criticized state-run Pemex’s plan to import U.S. light crude from refiner Phillips 66, calling it a sign of the country’s failed economic policies.

Pemex is set to begin crude imports in November, for the first time in over a decade. It needs them to feed Mexico’s main refinery, which is working below capacity due to a lack of light oil.

The purchase of 1.4 million barrels of U.S. Bakken crude will follow a tender awarded earlier this week to Phillips 66. Up to 100,000 barrels per day (bpd) of crude imports are planned for the last quarter of 2018.

“This announcement … is another example of the great failure of neo-liberal economic policies in the last 30 years,” Lopez Obrador said on Twitter.

Once he takes power in December, Lopez Obrador could force Pemex to halt the imports, which would likely impact domestic refining and boost the need for other kinds of imported fuel.

The issue has divided opinion among his allies.

One of his economic advisers, Abel Hibert, said earlier this month that crude imports could continue as a way to increase processing levels at Mexico’s refineries, even after Lopez Obrador takes office.

“I think Pemex has good reason to do it due to current market conditions,” he told local media.

Mexico’s light crude output has declined faster than expected this year, hit by operational problems at the Xanab oilfield.

Pemex chief executive Carlos Trevino has said the company’s goal of producing 1.95 million bpd of crude this year will not be met, and that the 2019 target is also likely to be missed.

If Pemex does not start crude imports for its refining network, purchases of finished fuel, especially gasoline, would grow again to satisfy Mexico’s consumption of about 1.5 million bpd, analysts have said.

Lopez Obrador’s main plan for the oil industry involves building a new mid-size refinery to boost fuel production while reducing crude exports with the final goal of halting them.

He has criticized his predecessor’s opening of the oil and gas industry to foreign investment, but has not given details of how he would reverse the country’s dwindling crude production.

Rating agencies Moody’s and Fitch earlier this month said cutting oil exports would imply a significant cash flow sacrifice for Pemex, whose main source of revenue is crude exports. Fitch changed Pemex’s outlook to negative from stable.

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#LatAmNRG

Phillips 66 Wins Tender To Sell U.S. Bakken Crude To Pemex -Traders

(Reuters, 22.Oct.2018) — Refining firm Phillips 66 was awarded a tender to supply Mexico’s Pemex with at least four 350,000-barrel cargoes of U.S. Bakken crude for delivery from November through December, traders with knowledge of the offer’s results said on Monday.

The purchase will mark the state-run company’s first crude import in more than a decade.

(Reporting by Marianna Parraga Editing by Dave Graham)

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#LatAmNRG

Venezuelan Oil Port Repairs Delayed, Crude Exports Fall: Sources

(Reuters, Marianna Parraga, 2.Oct.2018) — Repairs to a dock at Venezuela’s main oil export port will take at least another month to complete following a tanker collision more than a month ago, further restraining the OPEC member nation’s crude exports, according to sources and shipping data.

A minor incident in late August forced state-run oil company PDVSA to shut the Jose port’s South dock, one of three used to ship heavy and upgraded oil to customers including Russia’s Rosneft and U.S.-based Chevron Corp, and to receive diluents needed for the exports.

Jose port typically handles about 70 percent of Venezuela’s total crude exports, which in September declined 14 percent compared with the previous month to 1.105 million barrels per day (bpd), according to Refinitiv Eikon data.

Oil exports are the financial backbone of Venezuela’s economy, which is struggling to overcome hyperinflation, a long-standing recession and scarcity of basic goods.

PDVSA had estimated the berth would reopen by the end of September, but needed parts have not been obtained as PDVSA continues facing problems to pay foreign providers due to financial sanctions imposed by the United States, sources close to its operations said.

PDVSA’s crews completed the removal of the damaged fences last week, but replacements have not arrived in the country.

“The fences were bought, but funds to pay the provider were retained due to the U.S. sanctions. A new deal to buy them through a third party will take at least another month,” one of the people familiar with the matter said.

PDVSA was not immediately available for comment.

U.S. President Donald Trump’s administration last year imposed financial sanctions on Venezuela and PDVSA, affecting their ability to make transfers in dollars and complete payments through the U.S. banking system.

PDVSA has neither resumed shipments from most of its Caribbean terminals, which remain frozen after U.S. producer ConocoPhillips’ legal actions earlier this year to satisfy a $2 billion arbitration award, according to the data.

Conoco and PDVSA in August struck a payment agreement, but the Venezuelan oil firm has yet to complete a $500 million installment due by the end of November to unlock its Caribbean operations.

Venezuela’s crude output fell again in August to 1.448 million bpd according to official figures, putting its annual average at 1.544 million bpd, the lowest in over six decades.

Economic measures recently announced by President Nicolas Maduro’s government, including a steep salary increase, have fallen short for Venezuela to regain access to sufficient foreign credit and reverse the downturn.

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Pemex to Import U.S. LLS Crude for Oct Delivery

(Reuters, 1.Oct.2018) — Mexico’s state-run Pemex has launched a tender to buy 350,000 barrels of U.S. Light Louisiana Sweet (LLS) crude for October delivery, according to a document seen by Reuters on Monday, a deal that marks the first crude imports in over two decades.

Pemex, which plans to use the foreign crude to supplement its dwindling domestic fuel output, would mostly process the oil at its largest refinery, the 330,000-barrel-per-day Salina Cruz, the company’s chief executive said last week.

Since 2015, Pemex has been considering a crude swap with the United States so it can import lighter oil while exporting its flagship heavy Maya crude. The company finally opted for importing the U.S. light oil on the open market at least until the current administration finishes its term at the end of November.

“(The) Light Louisiana Sweet shall be obtained from conventional fields without being blended, processed chemically or being added with naphtha or condensates,” according to the document detailing the tender’s terms.

Pemex is requesting the cargo be delivered between Oct. 20-22 at its Pajaritos terminal in the Gulf coast state of Veracruz.

Payment will be made 45 days after delivery. Bids will be received until Oct. 3, and must be indexed to West Texas Intermediate crude prices, according to the document.

LLS is a very light crude grade with 38.5 API degrees of density and about 0.4 percent of sulfur content. Tests for choosing the crude to be purchased were completed several days ago, Pemex said.

Pemex’s fuel imports increased 17 percent in 2017 as Mexico’s refining network worked far below capacity. So far this year, fuel purchases have remained almost unchanged at 961,100 bpd as input of light grades to its domestic refineries has been limited. Independent retailers have started importing their own gasoline and diesel on top of that volume.

Apart from a limited oil exchange with the U.S. Strategic Petroleum Reserve in the late 1990s, Mexico has not recently swapped or otherwise imported U.S. crude.

Some U.S. crude exporters have this year sought new customers amid trade tensions between China and the United States affecting the bilateral oil trade.

U.S. crude exports have grown this year. In July, they averaged 2.139 million bpd versus 956,000 bpd in the same month last year, according to the Energy Information Administration.

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Pemex Plans up to 100,000 b/d of Light Crude Imports, Says CEO

(Reuters, David Alire Garcia, Marianna Parraga, 26.Sep.2018) — Mexican state-run oil company Pemex expects to begin importing up to 100,000 barrels per day of light crude oil, likely from the United States, from late October and at least until the end of November, its chief executive said on Wednesday.

“A hundred thousand barrels (per day) more or less is what we’re going to import to process and incorporate into our refineries, mostly at Salina Cruz,” Pemex CEO Carlos Trevino said in an interview with Reuters on the sidelines of the Mexican Petroleum Congress in Acapulco.

The imports, planned to run through at least the end of President Enrique Pena Nieto’s tenure in office on Nov. 30, mark a stark shift for historically major crude exporter Mexico, where decades of oil self-sufficiency are a badge of pride.

Years of under investment and declining crude output have severely hampered Mexico’s refineries and helped necessitate the move.

Salina Cruz, like Pemex’s other five refineries, has recently been producing far below capacity due to accidents and operational problems, as well as Pemex’s focus on maximizing the value of its oil even if that means refining less domestically.

“We’re going to mix it with Mexican crude, with some of our mix to be able to process at the levels we want to get back to in refining. We should be around 800,000 barrels (per day of refining in the country’s entire system) by the end of the year,” he added.

Mexico’s refining network can process up to 1.6 million bpd of crude. It has been working this year at around 40 percent.

Trevino said he expects auctions of oil exploration and production blocks scheduled for February, which include the selection of key partners for Pemex, will take place as planned.

“I think there is total certainty” that Mexico’s oil regulator, the National Hydrocarbons Commission (CNH), will carry out the auctions.

Mexican President-elect Andres Manuel Lopez Obrador has said that oil auctions are suspended until contracts already awarded over the past few years have been reviewed, but he has not specifically weighed in on the February tenders.

Pemex, whose oil production and refining volumes have continued declining this year amid the depletion of some of its main oilfields, will not meet its crude output target of 1.95 million barrels per day in 2018.

“We’re going to be considerably below that,” Trevino told reporters at the conference later in the evening, declining to provide a specific volume.

He expects another year of production decline in 2019, even though Pemex had originally planned to stabilize output by then.

Lopez Obrador, who takes office on Dec. 1, handily won Mexico’s presidential election in part by promising sweeping changes to Mexico’s energy industry. His energy team has signaled they want Pemex to select its own partners instead of having them chosen in auctions run by the CNH.

Trevino said the new process would be “easier,” underscoring that the current selection process “costs us time.”

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Chevron Wins Ecuador Rainforest ‘Oil Dumping’ Case

(BBC, 8.Sep.2018) — An international tribunal in The Hague has ruled in favour of the US oil company, Chevron, in an environmental dispute with the government of Ecuador.

Chevron had been ordered to pay $9.5bn (£7.4bn) compensation to thousands of residents in Ecuador’s Amazon region.

They accused the company of dumping toxic waste in local lakes and rivers of the Lago Agrio region for decades.

The court said that the 2011 Ecuador Supreme Court ruling had been obtained through fraud, bribery and corruption.

The oil giant now stands to be awarded hundreds of millions of dollars in costs by The Hague’s Permanent Court of Arbitration.

Chevron maintained that it never owned any assets in Ecuador.

The alleged environmental damage was done by Texaco between 1964 and 1992. Texaco was later acquired by Chevron.

Chevron has argued that Texaco spent $40m ($31m) cleaning up the area during the 1990s, and signed an agreement with Ecuador in 1998 absolving it of any further responsibility.

Birth defects

Some 30,000 local residents, including five different Amazonian tribes, began the lawsuit against Texaco in 1993.

The plaintiffs say that the oil company knowingly dumped 18bn gallons (68bn litres) of toxic waste water and spilled 17m gallons of crude oil into the rainforest during its operations in north-east Ecuador.

They say the affected area covers 4,400 sq km (1,700 sq miles) on the border with Colombia.

Local residents believe the pollution has led to health problems such as cancer and birth defects.

In 2011, an Ecuadorean judge ordered Chevron to pay $18.2bn (£14.1bn) for “extensively polluting” the Lago Agrio region.

Ecuador’s highest court last year upheld the verdict against Chevron a year later, but reduced the amount of compensation to $9.5bn.

‘Unpunished forever’

Chevron argued that it only lost the case because the legal team representing the villagers paid nearly $300,000 (£232,000) in bribes in Ecuador.

In 2014, US district judge Lewis Kaplan in New York ruled that “corrupt means” were used by Ecuador’s legal team to win the 2011 case.

After the latest ruling in the Hague, a lawyer for the indigenous communities criticised the Ecuadorean government for accepting taking the case to an arbitration court.

“That is playing Chevron’s game and leaving the crime unpunished forever,” said Pablo Fajardo.

He said he was considering all legal avenues.

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#LatAmNRG

U.S. Co. Wins Contract for Mexico LNG Project

(Natural Gas Intelligence, Peter de Montmollin, 22.Aug.2018) — A U.S. company has secured a long-term contract to build a liquefied natural gas (LNG) import project on the southern tip of Mexico’s Baja California peninsula, a region isolated from the country’s main energy transmission systems.

New Fortress Energy (NFE) won a tender to develop, build and operate the facility in the port of Pichilingue in the state of Baja California Sur, the company said Wednesday. The port’s administrator, Administracion Portuaria Integral de Baja California Sur, awarded the contract in July.

The project sponsors offered few details, but said the facility would entail a 3.5 billion-peso investment ($184 million) and could start up in 2020. Pichilingue is located just north of La Paz, the state capital.

The terminal could introduce a natural gas supply to Baja California Sur for the first time, allowing power plants in the region to use the molecule in lieu of fuel oil. The state, which encompasses the lower half of the peninsula, now lacks gas infrastructure.

The Baja California Sur power systems are also isolated from the national power grid on the mainland, as well as the Baja California system on the northern half of the peninsula, which is interconnected with San Diego Gas and Electric Co.’s network in Southern California.

Mexican state power utility Comision Federal de Electricidad (CFE) last year announced plans to tender an 810-mile transmission line, including a subsea section through the Sea of Cortez, which would connect Baja California Sur to the national grid. The Mexican Energy Ministry (Sener) expects that project to come in-service by 2023.

At an event to announce the Pichilingue contract, state governor Carlos Mendoza Davis reportedly highlighted the earlier start date for the LNG project versus the interconnection planned by CFE.

“This is a project that will expand the horizons for our development” as a state, the governor said.

Baja California Sur consumed 2,622 GWh in 2017, according to the Sener. The state’s installed capacity was 1,019 MW by the end of last year. Sener forecasts Baja California Sur to add 316 MW of capacity by 2032, with most of those additions occurring between 2021 and 2023.

Because of its isolation and lack of fuel alternatives, Baja California Sur has some of the highest electricity prices in Mexico. In the wholesale power market, day-ahead prices at the state’s La Paz node averaged 3,588 pesos/MWh in July, versus 1,933 pesos/MWh at the Queretaro node in central Mexico and 1,777 pesos/MWh at the Reynosa node on the northeast border with Texas, according to calculations by NGI’s Mexico GPI.

Most of the state’s generation plants are thermoelectric. It is also home to one of Mexico’s first utility-scale solar park, the 39 MW Aura Solar 1 plant near La Paz, a project whose development was spurred in part by the region’s elevated power prices.

Two separate power grids serve Baja California Sur. The smaller Mulege system cuts through the northern half of the state, while the main BCS system is on the peninsula’s southern tip.

The Pichilingue LNG project is adjacent to the BCS grid. The facility would also be sited about 650 miles south of the idle 1 Bcf/d Energia Costa Azul import terminal in the port of Ensenada, near the border with California.

Costa Azul has not injected any gas into Mexico systems since mid-2016 in part because of  the natural gas production boom in the United States and growing LNG demand in Asia. The facility’s owner, the Mexico unit of Sempra Energy, is looking to convert Costa Azul into a liquefaction facility to send gas exports to Pacific markets.

Mexico’s two active LNG terminals are the 700 MMcf/d Altamira on the Gulf Coast and the 500 MMcf/d Manzanillo on the Pacific. Altamira injected 309 MMcf/d in May, while Manzanillo supplied 500 MMcf/d.

Pichilingue would thus be Mexico’s fourth LNG import facility. Authorities have also announced plans to install a floating storage regasification unit (FSRU) in the port of Pajaritos in the southeast, along the Gulf Coast, although the project lost one of its two anchor customers earlier this year.

The new LNG projects at Pichilingue and Pajaritos would both serve areas with limited or no gas supply. Overall, Mexican demand for LNG is expected to diminish as pipeline infrastructure connected to the Permian Basin in Texas and other U.S. basins comes in-service later this year

Outside of Mexico, New Fortress has developed an LNG project in Jamaica to supply the 120 MW Bogue power station, via an FSRU charted from Golar LNG Ltd. It has also signed a contract with the Caribbean country’s power utility for another LNG project to fuel the planned 190 MW Old Harbour combined-cycle plant.

NEF is controlled by New York-based investment management firm Fortress Investments Group LLC.

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Webinar Panelist Discuss All Things Guyana

(Energy Analytics Institute, Piero Stewart, 15.Aug.2018) – The three promised to return to discuss all things Guyana again in six months as the small South American country eyes first oil in 2020.

A three person panel — comprised of Guyana’s Minister of Finance, the Honourable Winston Jordan, Trinidad and Tobago’s Former Energy Minister Kevin Ramnarine, and hosted by Caribbean Economist Marla Dukharan — discussed issues related to Guyana included but not limited to oil, economics, finance, supply issues, infrastructure, and migration, among others (watch the full video below).

What follows are brief highlights as posted during the webinar under the Twitter hashtag #LatAmNRG:

From Kevin Ramnarine …

— “In Guyana, we have moved from 1 to 8 discoveries,” Ramnarine says. He continued: “With an 80% success rate, only 2 wells have been dry.”

— “The whole world is talking about Guyana,” Ramnarine says.

— “Oil production in Guyana is expected to come online at 120,000 barrels per day d in 2020 and peak at 750,000 barrels per day by 2025, according to Exxon,” Ramnarine says.

— “In the early years, Exxon will likely recover Capex. Then, by 2025 we could see an exponential rise in revenues [in Guyana],” Ramnarine says.

— “An infrastructure deficit in Guyana has slowed development in the interior of the country,” Ramnarine says.

— “You want a competitive oil and gas sector that supports that sector,” Ramnarine says.

— “The private sector should take the lead to develop [Guyana’s] infrastructure,” Ramnarine says.

From Winston Jordan …

— “ExxonMobil has put Guyana on the map,” Jordan says.

— “We see ourselves as the Dubai of the Caribbean,” Jordan says.

— “Guyana has infrastructure and human capital resources deficits,” Jordan says.

— “The Guyana tax system is expected to become more efficient in the future,” Jordan says.

— “We have a lot of challenges, but none are insurmountable,” Jordan says.

— “Guyana is putting together a migration policy to give certain benefits to those wanting to return home,” Jordan says.

— “Guyana will seek a loan with the World Bank to assist in the migration process,” Jordan says.

— “There is no definite word yet about a future refinery in Guyana,” Jordan says.

(With special assistance from Melissa Marchand, who moderated the Q&A session).

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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.

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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…

***

Helmerich & Payne Wins Right to Sue Venezuela

(Energy Analytics Institute, Piero Stewart, 8.Aug2018) – U.S. drilling company Helmerich & Payne won a judgment from the U.S. Court of Appeal to sue Venezuela for the expropriation of the company’s investments in Venezuela.

This was only a preliminary jurisdictional issue, not a money judgment, mind you — just the right to sue Venezuela after almost 7 years of litigation! H&P has not even gotten to present the heart of the case yet, writes Caracas Capital Markets Managing Partner Russ Dallen in an emailed note to clients.

Unless Venezuela asks for an en banc hearing before the whole Court of Appeals (the Court of Appeals denied an en banc hearing on the case’s first trip through in 2015) and/or appeals it to the Supreme Court, the case will now return to the U.S. District Court for the more substantial hearings.

This all began when Venezuela stopped paying H&P and finally on June 30, 2010, when Helmerich and Payne’s Venezuelan subsidiary and all its property and equipment (including 11 drills) were seized by the Venezuelan government, concluded Dallen, also the Editor-in-Chief of Latin America Herald Tribune.

***

Venezuela’s Oil Production Turning a Corner?

(FoxBusinss, Leia Klingel, 7.Aug.2018) – Oil production by Venezuela’s PDVSA may have started to improve, with the state-owned oil and gas producer reporting that production in the country is averaging 1.5 million barrels per day, as reported by Reuters.

As reported by OilPrice.com, according to OPEC secondary sources, Venezuela’s oil output fell to 1.34 million barrels per day in June, which, excluding a strike in 2002-2003, put production at its lowest point in almost seven decades.

As previously reported by FOX Business, the crisis in Venezuela can be attributed to the country’s socialist leaders overspending for years. Then, when oil prices collapsed, the drop in revenue made it impossible to keep the house of cards standing.

Now, oil prices have recovered and the country’s economic collapse has left it unable to capitalize.

Further, PDVSA President Manuel Quevedo confirmed to Reuters on Tuesday that it is in talks with ConocoPhillips following its efforts to seize some PDVSA assets in the Caribbean.

Conoco won court orders allowing it to seize certain PDVSA assets in in the Caribbean to collect on a $2 billion arbitral award linked to Hugo Chavez’s 2007 nationalization of Conoco assets. Lack of investment in Venezuela’s oil industry is also being attributed to the production collapse.

If Conoco were to seize the assets, it could disrupt Venezuela’s oil export chain.

According to data from the U.S. Energy Information Administration, Venezuela’s oil production has been on a steady decline since 1997 and the pace of the decline has recently accelerated. In 1997, Venezuela was producing about 3.2 million barrels of oil per day. Production hovered around 2.5 million barrels per day from 2002 to 2015, and then slumped, hitting 1.6 million barrels per day in January 2017.

Even if Venezuela’s oil production is starting to see signs of life, it will take a lot to rescue. The International Monetary Fund in late July said that as the country’s economic crisis worsens, inflation in the nation could swell to 1 million percent by the end of 2018.

***

US Abandons Sanctions to Avoid Owning Venezuela Collapse

(S&P Global Platts, Brian Shield, 7.Aug.2018) – Just more than a year ago, it was not a question of ‘if’, but ‘when.’

As Venezuela’s leftist leader Nicolas Maduro consolidated power in an election derided as a fraud by the international community, the Trump administration readied exacting sanctions on the South American nation’s oil sector.

“All options are on the table,” said a senior administration official during a July 2017 briefing with reporters, adding that sanctions could be imposed in a matter of days. “All options are being discussed and debated.”

Analysts widely expected sanctions on diluent the US was exporting to Venezuelan refineries first, followed by a prohibition, perhaps phased in over a matter of months, on imports of Venezuelan crude into the US. It was unclear if US refiners, who had long imported Venezuelan crude, would be allowed to continue under an interim “grandfathered” arrangement, but analysts mostly agreed that sanctions were coming.

At the time, the US was importing about 800,000 b/d of Venezuelan crude and the administration was mostly concerned about the impact an import embargo would have on US Gulf Coast refineries, which would need to look for new sources of heavy crude.

Oil sector sanctions from the US seemed so likely that then-US Secretary of State Rex Tillerson told reporters that the administration was looking at ways to soften the impact of the sanctions once they were imposed.

“We’re going to undertake a very quick study to see: Are there some things that the US could easily do with our rich energy endowment, with the infrastructure that we already have available – what could we do to perhaps soften any impact of that?” Tillerson, the former CEO of ExxonMobil, said.

A year later, the US is importing less crude from Venezuela (about 530,300 b/d in July, according to preliminary US Customs data), but Gulf Coast refiners, particularly Valero, continue to rely on these imports.

In fact, US refiners may be importing even more, if Venezuela’s oil sector was not seemingly in a death spiral. Roughly one if every five barrels of oil imported by US Gulf Coast refiners comes from Venezuela.

The EIA forecasts Venezuelan oil production to fall below 1 million b/d by the end of this year, down from 2.3 million b/d in January 2016 as joint ventures fall apart and PDVSA, the state-owned oil company, struggles to feed, let alone pay, its workers. PDVSA has notified international customers than it cannot fully meet crude supply commitments and the country’s active rig count has fallen below 30, according to Baker Hughes International Rig Counts.

By the end of 2019, Venezuelan crude oil output is expected to plummet to 700,000 b/d, making it likely that it will produce less than the US state of New Mexico.

“We’ve never seen an industry or a country collapse this fast and this hard,” said EIA analyst Lejla Villar in a recent interview with the S&P Global Platts Capitol Crude podcast. “We’ve never seen anything like this.”

Industry collapse

The downfall of Venezuela’s chief industry, coupled with International Monetary Fund predictions that inflation in the country will skyrocket to 1 million percent by the end of this year, have created an unusual scenario, in which Maduro may even welcome US sanctions on its oil sector. As Venezuela’s economy continues to unravel, leading to surging prices and rampant hunger, Maduro could try to pin the blame on sanctions.

“If you break it, you buy it,” said George David Banks, a former international energy and environment adviser to President Trump. “The White House doesn’t want to own this crisis.”

The US has sanctioned individuals in Venezuela, including Maduro; prohibited the purchase and sale of any Venezuelan government debt, including any bonds issued by PDVSA; and banned the use of the Venezuela-issued digital currency known as the petro. But oil sector sanctions are viewed as the most powerful penalty remaining and one the Trump administration is more hesitant than ever to use.

“There’s already a humanitarian crisis, but we don’t own that, the Maduro government owns that,” Banks said. “We don’t want to lose the people of Venezuela and you don’t want to pursue a policy that jeopardizes that.”

David Goldwyn, president of Goldwyn Global Strategies and a former special envoy and coordinator for international energy affairs at the US State Department, speculated that it would take extreme action, such as a military assault on a civilian rebellion, for the US to now impose oil sector sanctions. “The system is collapsing and this administration does not want to own the collapse,” Goldwyn said.

The path ahead for Venezuela’s oil sector has, likely, never been less certain. And it remains to be seen what a full collapse of an economy looks like. It is clear, however, that the US wants to avoid blame for accelerating that collapse and has abandoned, at least for now, consideration of oil sanctions.

When Venezuela’s oil sector hits rock bottom, the US does not want to be accused of dragging it there.

***

CNH Says Mexico Must Reduce Oil Dependence

(Energy Analytics Institute, Ian Silverman, 13.Jul.2018) – Mexico must reduce its dependence on the United States in regards energy issues.

The country can achieve this goal by increasing its refining capacity, reported the daily newspaper La Jornada, citing National Hydrocarbons Commission (CNH by its Spanish acronym) President Juan Carlos Zepeda. The official added that the next administration has a good possibility to fulfill the objective of assisting Mexico gain greater energy autonomy.

Zepada agreed that construction of a new refinery to assist reduce gasoline imports – which currently represent 75% of demand in Mexico and come entirely from the U.S. – would assist Mexico in terms of gaining energy autonomy.

The official also said strategies should be sought to stop importing 85% of the natural gas used by Mexico, and which at the moment also comes in great part from the U.S.

***

Indigenous Groups Await Chevron Payments

(Energy Analytics Institute, Ian Silverman, 12.Jul.2018) – Indigenous groups in Ecuador that were affected by activities of San Roman, California-based Chevron in the country continue to await payment from the oil giant.

Ermel Chávez, from the Amazon Defense Front, recently spoke about the issue during a press conference in Ecuador.

***

Venezuela’s Declining Crude Exports Squeeze India’s Refiners

(Reuters, Marianna Parraga, 3.Jul.2018) – Venezuela’s crude shipments to India, its third largest export market, fell 21 percent in the first half of the year, according to internal documents from state-run PDVSA, adding to supply troubles for Indian refiners as they are increasingly pressed to diversify oil imports.

Venezuela’s production decline to a 30-year low and export woes stemming from mismanagement, lack of investment and payment delays are affecting almost all of the OPEC-nation’s customers.

But the impact on India is notable and comes as its refiners are now preparing for a “drastic reduction to zero” of oil imports from U.S.-sanctioned Iran.

Last week, PDVSA officials met with executives from India’s Reliance Industries and Russia’s Rosneft, which owns a majority stake in India-based Nayara Energy, to discuss trade issues, the state-run company said.

The talks focused on how to remedy export delays, according to a person familiar with the matter.

Venezuela sent almost 280,000 barrels per day (bpd) of heavy crude to India in the first half of the year, a 21 percent drop versus the 355,500 bpd shipped in the same period of 2017, according to PDVSA trade documents.

The decline is the second steepest after the United States, which has suffered a drop of about 30 percent in crude imports from Venezuela this year, the documents seen by Reuters show.

If crude supplies from Iran and Venezuela, two of India’s top five oil suppliers, cannot be secured in coming months, some of the nation’s refiners would have to rely almost entirely on sourcing the heavy barrels they need from Iraq, according to analysts.

“Indian refiners are very worried about supply from Iran, but also from Venezuela,” said Robert Campbell from consultancy Energy Aspects.

Saudi Arabia is expected to boost supply to India in the short term, but those barrels would not match the quality of the missing Venezuelan crude, he added. “The lack of heavy barrels is not a problem only in the Atlantic Basin but in Asia as well,” he added.

PDVSA and Nayara did not reply to requests for comment. India’s Reliance declined to comment.

India is the world’s fourth largest refiner after the United States, China and Russia. While Chinese and Russian firms resell a large portion of the Venezuelan crude and fuel they receive to monetize oil-for-loan agreements, Indian refiners need the barrels they get through crude supply contracts with PDVSA.

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Venezuela’s crude output is declining faster than expected amid insufficient investment, attempts to seize its overseas assets over payment disputes and skilled workers leaving its oil industry due to low salaries and an extended corruption probe within PDVSA.

The country’s oil production averaged 1.58 million bpd in the first five months of 2018, according to figures reported to OPEC, its lowest annual level since 1985. The fall, which is putting pressure on global supply and contributing to growing oil prices, has also taken a toll on exports.

PDVSA last month requested customers not send tankers to its main port of Jose to alleviate congestion. But vessels have continued arriving mainly for Chinese, Indian and U.S. clients, according to Thomson Reuters vessel tracking data.

The tanker bottleneck has worsened since May, when ConocoPhillips started legal actions to seize PDVSA’s assets to satisfy a $2-billion arbitration award, blocking the state-run firm from using its Caribbean terminals.

In June, PDVSA shipped to India 268,300 bpd after servicing some vessels that had waited for up to a month to load. The Venezuelan firm plans to deliver some 240,000 bpd in July, according to Reuters and PDVSA data.

The unstable crude supply from Venezuela to India in recent months has mainly benefited Iraq, India’s largest crude source, and United Arab Emirates, which in May replaced Venezuela as India’s fourth biggest crude supplier.

Reporting by Marianna Parraga in Houston, additional reporting by Promit Mukherjee in Mumbai; Editing by Tom Brown and Marguerita Choy

***

PetroPiar Ends Preventative Maintenance

Workers at PetroPiar JV in Venezuela. Source: PDVSA

(Energy Analytics Institute, Piero Stewart, 3.Jul.2018) – Work on the upgrader concluded four days ahead of schedule, according to Caracas-based PDVSA.

Operational activities at the upgrader included substitutions in the naphtha and light vacuum gas oil (LVGO) lines, maintenance of interchangers, internal drum replacements (Demister), and replacements related to the value 48 sealing system (Metax System), as well as the repair of atmospheric furnace tubes, announced PDVSA in an official statement.

The PetroPiar mixed company enterprise partners PDVSA, as the Venezuelan state oil company is known, and US-based Chevron Corporation.

***

Mexico’s Presidential Elections and U.S. Energy Cos

(MarketPlace.org, Lorne Matalon, 22.Jun.2018) – Antonio Godinez Vera makes his living turning golden kernels of Mexican corn into a mash that becomes tortillas. People like Godinez, a small business owner with four employees, are part of a wave that could power Andrés Manuel López Obrador to the Mexican presidency when voters elect a new head of state on July 1.

The campaign is being closely watched by U.S. energy companies that have operated in Mexico since the country’s 2014 energy reform. That reform was an opening that allowed foreign energy companies to bid on offshore blocks in the Gulf of Mexico, onshore oil and gas development, wind and solar production and distribution and electricity generation contracts.

At a rally in suburban Mexico City, presidential front-runner López Obrador told the standing-room only crowd of 10,000 plus people that changes in Mexican energy policy haven’t produced lower prices for gasoline and electricity. López Obrador has called for a return to more state regulation of the energy industry, a prospect that could jeopardize billions of dollars in current and projected foreign investment in the sector.

“The country hasn’t gained a thing,” Godinez said as he described what he sees as the current failings of Mexico’s energy reform. Though reformers promised to narrow the gap between energy costs in the U.S. and Mexico, energy data suggest Godinez pays approximately 20 percent more for his electricity than a business does in the United States. The energy reform’s proponents are confident the benefits will be realized eventually.

In addition to studies showing voter dissatisfaction with the energy reform, high levels of violence and accusations of corruption against the current government mean Godinez will be backing López Obrador “to escape our misery.”

López Obrador has leveraged frustration over the cost of energy to highlight other campaign issues. López Obrador has stated that all that has grown since the current government assumed power in 2012 is inequality, insecurity and violence.

Violence isn’t just a campaign issue in the Mexican presidential race, it has also plagued the presidential campaign itself. A recent headline read, “11 Politicians Killed In Eight Days.” More than 100 candidates have been murdered since September 2017.

While the violence continues, voters are focused on local issues. In the southern Mexican state of Veracruz, López Obrador’s call to end privatization in the energy sector has hit a nerve. Veracruz is where much of the energy in Mexico is either produced or refined.

Ignacio Quesada is on the board of International Frontier Resources, one of the first foreign energy companies to be awarded a drilling contract after Mexico opened the doors to its energy sector four years ago.

“If they start reviewing everything, we are going to slow down, put more regulation, put more roadblocks. Things will get done but at a much slower pace,” Quesada explained. That’s the wrong direction in terms of simplifying the process.”

Much of the drilling expertise that Mexico said it needed to attract when it introduced its energy reform was perfected in the oil and gas-rich Permian Basin of Texas. Kirk Edwards, CEO of Latigo Petroleum in Odessa, Texas said some American energy companies considering Mexico are now sitting out the current election cycle before they commit millions of dollars on projects that typically take years to realize a return on investment.

“Nobody’s going start doing something like that today without the certainty of what may happen in the future,” Edwards said.

Another element is the role played by President Donald Trump.

“President Trump is a central character in the Mexican election,” explained Tony Payan, who directs the Mexico Center at Rice University in Houston. He said Trump’s anti-Mexico rhetoric has lifted López Obrador ardently nationalist campaign. Payan suggested that U.S. energy companies need be ready if López Obrador wins. “The rules of the game are definitely going to change,” he said.

The Mexican government has said foreign energy companies would ultimately contribute $200 billion to the country’s economy. However López Obrador says so far it is only those businesses, and not the people, who are seeing the benefits of that investment.
***

Venezuela: U.S. Sanctions “An Attack On The Oil Market”

(OilPrice.com, Tsvetana Paraskova, 22.Jun.2018 – The U.S. sanctions against Venezuela are affecting consumers worldwide and are an attack on the oil market, Venezuelan Oil Minister Manuel Quevedo said on Thursday.

The minister, speaking at an OPEC International Seminar today—a day before OPEC ministers meet to discuss how much production to bring back to the market to ‘ease consumer and market anxiety’—Venezuela’s Quevedo said, as carried by Platts:

“These sanctions are very strong, the sanctions are practically immobilizing PDVSA.”

“They are trying to asphyxiate PDVSA,” the minister added.

“It affects not just the Venezuelan oil sector but the consumers worldwide,” Quevedo said, referring to the sanctions.

“It’s an attack on the oil market. Oil is an instrument for development, not an instrument for a political attack.”

The U.S. has been stepping up sanctions against Venezuela, after cutting off all access of PDVSA and its sovereign to U.S. banks, and cutting off all refinancing of new debt.

Amid plummeting production, PDVSA fails to honor its supply obligations, and has started to refine imported crude oil.

Venezuela’s production plunged again in May, by 42,500 bpd from April to below 1.4 million bpd—1.392 million bpd, according to OPEC’s secondary sources. Some analysts think that the plunge to 1 million bpd production is imminent.

Quevedo, however, claims that PDVSA has been complying with its contractual and financial obligations, never missing paying “even one dollar.”

According to internal PDVSA reports seen by Reuters, the company’s oil exports plunged 32 percent in the first half of June compared to May.

Amid the desperate state of its oil industry, Venezuela blames the U.S. for its hardships and is siding with Iran in opposing the Saudi-Russia-led proposal for a production boost, aimed at plugging shortfalls in supply from Iran and Venezuela.

“Venezuela’s situation should not be ignored. Venezuela could be any of your countries,” Reuters quoted Quevedo as telling his fellow OPEC ministers today.
***

North America’s Energy Future on Trial in Mexico

(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.

Editor’s Note:

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.

***

Citgo Says No to Heating Oil Program

(Energy Analytics Institute, 26.Mar.2017) – Houston-based Citgo Petroleum Corporation, the U.S.-based refinery arm of PDVSA, had to skip out on sending heating oil to citizens in the U.S. northeast under a program dubbed “Joe-4-Oil” amid a continued economic crisis in the oil-rich nation, reported the news agency AP.

***

Venezuela Holds World’s 8th Largest Gas Reserves

(Energy Analytics Institute, Piero Stewart, 11.Mar.2017) – Venezuela, the country with the world’s largest crude oil reserves, also continues to hold the world’s eighth largest accumulation of natural gas reserves (see table below), according to BP’s Statistical Review of World Energy.

Top Ten Holders of Natural Gas Reserves Worldwide

Rank —- Country ———————- Natural Gas Reserves (Tcf)

1 ——— Iran ————————– 1,201.4

2 ——— Russia ———————– 1,139.6

3 ——— Qatar ———————— 866.2

4 ——— Turkmenistan ————– 617.3

5 ——— USA ————————- 368.7

6 ——— Saudi Arabia ————— 294.0

7 ——— United Arab Emirates —- 215.1

8 ——— Venezuela * ————— 198.4

9 ——— Nigeria ——————— 180.5

10 ——- Algeria ———————- 159.1

Source: BP

Note: PDVSA reported that Venezuela’s natural gas reserves were 201.349 trillion cubic feet (Tcf) at year-end 2015, the last time the company reported annual auditing operational data. Of this total, 64.916 Tcf corresponded to associated gas in the Hugo Chávez Heavy Oil Belt, and 36.452 Tcf corresponded to associated gas related to extra heavy oil in Venezuela’s Eastern Basin, according to PDVSA data.

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Citgo Without CEO After Martinez Leaves

(Energy Analytics Institute, Piero Stewart, 17.Feb.2017) – Citgo Petroleum Corporation has yet to the report on a possible replacement to head the company after its CEO and President Nelson Martinez was appointed as Venezuela’s Oil Minister by the country’s President Nicolas Maduro.

The appointment leaves Citgo, the Houston-based refining arm of PDVSA, leaderless amid approval of the Keystone XL Pipeline which intends to send more Canadian oil to the U.S. Gulf Coast where Citgo has a large presence.

***

Ecopetrol Successfully Prices Int’l Bond for $500 Mln

(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).

***

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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Petrobras Issues $6.75 Billion in Global Notes

(Petrobras, 17.May.2016) – Petrobras issued $6.75 billion of 5 and 10 year Global Notes through its wholly-owned subsidiary Petrobras Global Finance B.V. (PGF). The transaction was priced on May 17, 2016 and the terms of the notes issued are as follows:

Source: LatinPetroleum eMagazine

The order book was 2.75x and 3.0x oversubscribed in the 5-year and 10 year tranches respectively, with 629 investors from the United States, Europe, Asia and Latin America participating.

Petrobras intends to use the net proceeds from the sale of the notes to repurchase notes validly tendered, as previously announced, and for general corporate purposes.

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Petro San Félix Cos Study Swapping Coke

(Energy Analytics Institute, Piero Stewart, 16.May.2016) — A number of international and national coke processing companies visited the Petro San Félix solids terminal located in the José Antonio Anzoátegui Industrial Complex (CIJAA by its Spanish acronym) with the intention to study the potential to swap green coke for calcined coke.

Via the swapping, PDVSA aims to fulfill the second and commercial phase of the project utilizing Venezuelan coke.

Companies visiting the terminal included representatives from Japan’s Mitsubishi, China’s Chalieco and Printemps Limited, USA’s Aminco Resources Inc. and Premier Trading Supply Llc, Switzerland’s ICARE, as well as Venezuela’s Alcasa and PDVSA Intevep, reported PDVSA in an official statement on its website.

The visit allowed for the interchange of information and potentially formation of sustainable projects in the future in accordance with desires by the Venezuelan government to provide solutions that permit the development of investment plans in the country, said ICARE representative Andrew Loken.

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Venezuela Oil Sector Viable with $40/bbl

(Energy Analytics Institute, Piero Stewart, 15.Sep.2015) – “A $40 per barrel oil price is not a low price for Venezuela,” says Ramon Espinasa, oil economist at the Inter-American Development Bank (IDB), from Washington during an interview broadcast by Venezuelan radio station 99.9 FM.

Venezuela’s oil sector is able to maintain operations with an oil price lower than $40/bbl, but better efficiency is required, says Espinasa.

“Venezuela first four major heavy oil upgrading projects developed in with oil prices much lower than $40 per barrel,” he concluded.

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PDVSA Output to Likely Fall in Default Scenario

(Energy Analytics Institute, Piero Stewart, 14.Sep.2015) – In terms of a much talked about default, PDVSA would continue to function but the levels of output will likely decline due to a lack of investment and could see an increase in accidents at the company, said EnergyNomics President Carlos Rossi in an interview in Houston, Texas.

New projects will never advance while companies will make minimal necessary investments in producing projects and suppliers will likely move to a cash-basis ‘cascade scheme’, said Rossi.

Venezuela has already defaulted internally and not exterally yet. With oil prices at $50/bbl or below the country could theoretically have inflation somewhere between 140-150%, while with oil prices at $50/bbl or above the country could theoretically have inflation somewhere between 80-100% inflation, concluded Rossi.

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ExxonMobil Sells Share of Chalmette Refinery in Louisiana

(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.

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Petrobras Reports Output for April 2015

(Petrobras, 19.May.2015) – Petrobras’ foreign oil and natural gas production in April 2015 was 2.785 (Mmboe/d), in Brazil and abroad, up 0.8% on March 2015, which was 2.764 Mmboe/d.

Among this total, 2.596 Mmboe/d were produced in Brazil and 189 Mboe/d abroad. The production of 2.785 Mmboe/d is up 8.8% on the volume produced in Apr.2014, which represented 2.560 Mmboe.d.

Oil and Gas Production in Brazil

In Apr.2015, Petrobras total oil and natural gas production in Brazil was 2.596 Mmboe/d, up 0.8% on the volume registered in the previous month (2.574 Mmboe/d).

Petrobras’ total oil and natural gas production in Brazil – which includes a portion produced to partner companies – was 2.886 Mmboe/d, up 1.8% on Mar.2015 (2.834 Mmboe/d).     In Apr.2015, Petrobras’ exclusive oil production in Brazil was 2 million 134 thousand boed, up 1.2% on March, which was 2 million 108 thousand boed.

Such increase is mainly due to the production growth of FPSOs Cidade de Manguaratiba, located in the Sapinhoá Norte field, and Cidade de Ilhabela, in Iracema do Sul – both on the Santos Basin pre-salt cluster – besides the smallest quantity of platforms scheduled maintenance shutdowns.

The oil production operated in the country was 2/346 MMb/d. 2.1% above the previous month (2.297 MMb/d).

The own production of natural gas in Brazil, excluding the liquefied volume, was 73 million m³/d in Apr.2015, keeping the same level of the previous month.

The natural gas production without liquefied operated by Petrobras in Brazil, including the portion to partner companies, was 86 million m³/d.

The usage of produced gas reached 96.1% in Apr.2015.

New pre-salt records

In 11.Apr.2015, Petrobras reaches its own daily production record at the “pre-salt” layer of Santos and Campos basins, with 590 Mb/d. Furthermore, the production operated by the company at the “presalt” reached a peak of 802 Mb/d in the same day.

Other Apr.2015 highlights were the monthly presalt production record of 503 thousand bpd and operated production of 715 Mb/d.

Foreign production

In Apr.2015, 189.5 Mboe/d were produced abroad, down 0.2% (189.8 Mboe/d) on the previous month.

In Apr.2015, the average oil production was 102.2 Mb/d, 0.2% up 101.9 Mb/d on the previous month. This increase was mainly due to production ramp-up of new production wells in Saint Malo and Lucius basins in the US and higher production in the Nigerian Akpo field. The sale of basins in the Southern Basin, Argentina, compensated such production growth.

Foreign natural gas production was 14.8 million m³/d, down 0.6% (14.9 million m³/d) on the previous month. The sale of basins in the Southern Basin, in Argentina, compensated the startup production of the Hadrian South basin, in the U.S.A.

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Venezuela to Continue Supply USA With Oil

(Energy Analytics Institute, Piero Stewart, 20.Mar.2015) – Venezuela will continue to supply the USA with its oil.

This despite a decree recently signed by US President Barrack Obama against seven military officials, reported Venezuelan state news agency AVN, citing Venezuela’s Oil Minister Asdrúbal Chávez.

“We are prepared to confront whatever decision that is taken by the USA,” said Chávez.

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Bolivia Wants to Build Relations with the USA

(Energy Analytics Institute, Ian Silverman, 15.Mar.2015) – We want to build relations with the United States based on respect, announced Bolivia’s Vice President Alvaro García Linera.

“When we got into to power, we had open relations with the United States which were friendly and based on confidence. We would like to return to this relationship. In the last 10 years Bolivia has increased commercial relations with the United States, but we have not seen such activity with diplomats. Until the United States shows us respect, we will continue to maintain a hard line with them,” reported the daily newspaper El Pais, citing the official.

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Chevron Reaches Settlement in Ecuador

(Chevron, 6.Feb.2015) – Chevron Corporation reached a settlement agreement with James Russell DeLeon, the principal funder of the fraudulent lawsuit against Chevron in Ecuador. Chevron brought claims against DeLeon in Gibraltar, where DeLeon maintains a residence, for his role in funding and advancing the fraudulent lawsuit. In the settlement, DeLeon has resolved those claims by withdrawing financial support from the Ecuador litigation and assigning his interests in the litigation to Chevron. Chevron, in turn, has agreed to release all claims against DeLeon.

In filings with the Gibraltar court, DeLeon previously disclosed having invested approximately $23 million in the case in exchange for an approximate 7 percent stake in the $9.5 billion Ecuadorian judgment against Chevron. DeLeon’s funding entity, Torvia Limited, and his associate, Julian Jarvis, are also parties to the settlement.

“We are pleased that yet another long-time supporter has ended his association with this scheme,” said R. Hewitt Pate, Chevron’s vice president and general counsel. “Chevron will continue to hold accountable those who associate themselves with this fraudulent litigation.”

On March 4, 2014, Judge Lewis Kaplan of the U.S. District Court for the Southern District of New York ruled that the $9.5 billion judgment against Chevron in Ecuador was the product of fraud and racketeering activity, finding it unenforceable in the United States and holding Steven Donziger, the lead lawyer behind the lawsuit, liable for RICO violations. The judgment also discussed DeLeon’s involvement, which included providing the main source of funding for the propaganda film Crude, contributing approximately 60 percent of the film’s total funding. As part of the settlement, DeLeon has agreed to assign to Chevron all of his financial interests in Crude.

DeLeon stated in a public statement that “commencing in March 2007, I provided funding to support the litigation in Ecuador against Chevron Corporation, in the good faith belief that I was supporting a worthy cause. However, I have since reviewed the March 4, 2014 opinion by Judge Kaplan of the United States District Court for the Southern District of New York setting out the Court’s findings and I have also considered the evidence presented during the trial. As a result, I have concluded that representatives of the Lago Agrio plaintiffs, including Steven Donziger, misled me about important facts. If I had known these facts, I would not have funded the litigation.I no longer seek or wish to receive any financial benefit from this matter and I have therefore decided to relinquish my entire interest in the litigation to Chevron.”

In settling this matter, DeLeon is the latest party, among many others, to disassociate himself from Donziger and the Lago Agrio Plaintiffs. During the seven-week federal racketeering trial against Donziger, more than a dozen former insiders and allies testified against him, including his former cocounsel, environmental consultants, funders, employees and his Ecuadorian collaborators.

Chevron still has cases pending in Gibraltar against U.K.-based Woodsford Litigation Funding Ltd. for its role in funding the lawsuit; Amazonia Recovery Ltd., a Gibraltar-based company set up by Donziger and his associates to receive and distribute funds resulting from the Ecuadorian judgment against Chevron; and Pablo Fajardo, Luis Yanza and Ermel Chavez, who are all directors of Amazonia Recovery Ltd.

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Venezuela Seizes Helmerich & Payne Rigs

(TulsaWorld, Rod Walton, 2.Jul.2010) – The action comes amid a payment dispute in which the company left the equipment idle.

Helmerich & Payne’s 52-year business relationship with Venezuela came to at least a temporary end Thursday as President Hugo Chavez’s government seized 11 rigs owned by the Tulsa contract drilling company.

The conventional drilling rigs have been idle since last year because Petroleos de Venezuela SA, the national oil company, has not paid Helmerich & Payne Inc. for work, H&P has said.

The company says PDVSA owes it about $43 million. The amount owed once exceeded $100 million.

Venezuela had threatened to seize the rigs since last week, saying that “forced acquisition” was necessary because Helmerich & Payne would not put the equipment back to work.

H&P’s “long-lived” assets in Venezuela are valued at about $67 million, the company’s spokesman Mike Drickamer said in an e-mailed response to the Tulsa World.

The seized rigs make up all of H&P’s equipment in Venezuela.

CEO Hans Helmerich and other company executives initially downplayed the impasse, saying they simply wanted to be paid for past work. Venezuela’s National Assembly and Chavez followed through with the threat by issuing an official decree earlier this week.

Venezuela has been a financial thorn in the side of several companies in recent years.

Williams Cos. Inc. of Tulsa, a natural gas producer, lost two joint-venture compression plants to seizure last year and also was forced to take a $241 million write-down on its books because of nonpayment.

ConocoPhillips, the integrated oil giant with significant offices in Bartlesville, lost multibillion-dollar joint venture projects to seizure by PDVSA. The Houston company later sought international arbitration over the compensation offered by Venezuela.

Citgo, a Houston marketing and retail company once based in Tulsa, is the U.S. wing of the Venezuelan state oil industry.

Helmerich & Payne had no further comment.

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