Guyana May be the Next Big Beast in Global Oil

(The National, Robin Mills, 8.Oct.2018) — One of the few major new conventional oil provinces discovered this century could see the country emerge as the top per capita producer.

Who will be the world’s largest oil producing country per person in the 2020s?

Kuwait perhaps, with 3 million barrels per day and a population just over 4 million? Saudi Arabia or, looking further afield, Brunei or Norway? No, that honour will belong to the South American nation of Guyana, which could well be sharing output of 700,000 barrels per day among just 770,000 people.

Although adjacent to Venezuela, Guyana has been better known for sugarcane, and cricketers such as Clive Lloyd, Lance Gibbs and Shivnarine Chanderpaul, than oil. But after first striking oil at Liza in 2015, ExxonMobil and partners Hess and China National Offshore Oil Corporation have made seven major discoveries in deep offshore waters, with production due to start in 2020.

Other companies, including Spain’s Repsol and African-focused explorer Tullow, are also looking. And the trend may extend into the former Dutch colony of Suriname to the east. Beyond Suriname is the overseas French department of French Guiana, where Tullow found oil in 2011 although follow-up exploration has been disappointing.

Guyana is one of the few major new conventional oil provinces discovered this century, along with the Kurdistan region of Iraq (which has subsequently disappointed) and India’s Rajasthan in 2004, Brazil’s “pre-salt” and Uganda in 2006, Ghana in 2007 and perhaps Senegal in 2014. After just four years of exploration drilling, Guyana is already set to be the biggest of these after Brazil. Estimated production costs of $46 per barrel are well below current oil prices, and competitive with shale or other leading deep-water areas.

Unlike the US’ mostly very light shale oil, Guyana’s is a medium-light crude closer to major Middle East grades. Likely to be rich in diesel when refined, it helps fill a hole in the world’s crude diet.

Finding new conventional oil is important for the global industry. Companies such as Shell, Total and Eni have increasingly shifted to gas, which has proved much easier to discover in quantity, while BP and their American peers, ExxonMobil, Chevron and ConocoPhillips, have focused on US shale. Both the International Energy Agency and Opec warn of under-investment and a coming oil crunch, but the major oil reserves in Opec countries and Russia are mostly closed off to international firms by government policy, insecurity and sanctions.

If the discoveries are significant for the world, they will be transformational for Guyana. Gross oil revenues of some $13 billion annually by the mid-2020s, or about $17,000 per inhabitant, contrast to its 2016 GDP of just $3.4bn. Only some 14 per cent of this will come to the government for the first two to three years while costs are paid off, but this is still an enormous bonanza.

But, like other new oil states, Guyana has to manage the perils of a sudden influx of wealth. It has good advice, as a member of the New Producers Group, an initiative of UK think tank Chatham House, the Natural Resource Governance Institute, and the Commonwealth, which brings together experts, politicians, government and civil society from a number of newly-established oil- and gas-producing countries.

These problems are well known but not so easy to solve. Government faces the risks of corruption, nepotism and patronage; a weakening of democracy; over-spending and vulnerability to falls in oil prices; and a lack of capability to manage oil operations and tax collection. The economy is threatened by conflicts over fiscal terms with the oil companies; the temptation to introduce wasteful energy subsidies; inflation and currency over-appreciation; and a loss of competitiveness from the non-oil sector. And the local population confronts unrealistic expectations of sudden wealth; an influx of outsiders; and environmental damage.

These issues are particularly salient for Guyana, a relatively small and poor country with quite high levels of corruption. It also neighbours troubled Venezuela, which has claimed two-thirds of its territory. Some Guyanese worry that the valuable work of oil services and contracting, a way to develop the domestic economy and skills, will be mostly supplied by next-door Trinidad and Tobago, which has a long-standing petroleum industry. The large gas resources found along with the oil also have to be used responsibly.

Much has been learned about potential solutions over the past two decades, though they come with their own conundrums. A sovereign wealth fund, like the Abu Dhabi Investment Authority or Norway’s oil fund, avoids a too-sudden influx of money; stabilises the government budget against oil price volatility; and saves for future generations. A robust political process and rules are needed to ensure the fund is not raided or diverted for pet projects.

A national oil company (NOC) helps build skills and strengthen the management of the sector. But it should not become a vehicle for handing out jobs to cronies or politicised meddling in the industry. Experienced lawyers, accountants, geologists and others are needed to staff a NOC and a petroleum regulator, and cannot be spread too thinly.

It is essential to educate the government machinery, media and civil society, so they understand how much money is coming in, and have a voice in how it is used. Bodies such as the Extractive Industries Transparency Initiative (EITI) report on oil revenues and their allocation.

Guyanese are fortunate to have contrasting examples next door in Venezuela of how a mismanaged oil sector can ruin a country; and Trinidad, where petroleum has generally been positive for the country.

International help and goodwill will hopefully ensure their oil is a bonus not just for the world economy but for the people.

Robin M. Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis

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Methane Fears Cloud Argentina’s Shale Oil And Gas Future

(Financial Times, Benedict Mander, 23.Sep.2018) — Green energy groups say huge shale oil and gas reserve is leaking greenhouse gases.

Jorge Daniel Taillant used a $100,000 infrared camera this year to investigate whether oil and gas installations in Vaca Muerta were leaking toxic gases. The grainy black-and-white thermal images that the ecology activist took confirmed what he suspected.

Although invisible to the naked eye, gases were detected seeping into the atmosphere from every one of the sites he visited. Particularly significant was methane, a potent greenhouse gas.

“Methane is leaking everywhere,” says Mr Taillant, executive director of the Center for Human Rights and Environment, a non-governmental organisation founded in Argentina and now based in the US. He says at least 5 per cent of Vaca Muerta gas produced is lost, often leaked intentionally when pressure needs to be released.

“There is a history of abuse as no one is controlling the sector,” says Mr Taillant. “And that’s not going to change any time soon — there is no credible environmental authority.”

Argentina’s ambitions to develop Vaca Muerta are ringing alarm bells among environmentalists, since it is considered to be one of the few remaining significant but mostly undeveloped energy reserves left on the planet.

As such, some experts say the development of Vaca Muerta and other comparable resources in Venezuela and Russia could jeopardise the UN 2016 Paris Agreement on climate change.

“If Argentina is to fully develop Vaca Muerta, it would blow a hole in the carbon budget,” argues Guy Edwards, co-director of Brown University’s climate and development lab in the US.

“It is one of the key reserves that, according to climate science, should stay underground if there is a chance of achieving the Paris goals,” he adds.

Most recognise it is unrealistic to expect Argentina to leave Vaca Muerta untouched. Its development is considered a national priority across the political spectrum, given its potential as an engine for economic growth. Javier Iguacel, the energy secretary, ridiculed the idea that Argentina might simply stop exploiting its hydrocarbons. “ Norway is not going to stop producing oil, and nor are we,” he says.

Argentina’s energy-related emissions are projected to increase 45 per cent between 2010 and 2030, according to the Berlin-based non-profit institute Climate Analytics, largely because of Vaca Muerta. Few expect Buenos Aires to meet its commitment to the Paris Agreement. Like every other country, its goals were not very ambitious to begin with, says Mr Edwards.

Instead, activists are pushing to mitigate the problems that can be controlled, with methane being “far and above the biggest issue from a climate perspective”, says Jonathan Banks, senior policy adviser at the Clean Air Task Force, a green energy advocate.

Although carbon dioxide stays in the atmosphere for as long as 1,000 years, methane begins to disappear after 20, during which time it is more than 80 times more potent than carbon dioxide in warming the climate, Mr Banks says.

Fortunately, he adds, methane is also one of the easiest and cheapest climate problems to deal with. That is why many countries and regions such as Canada, Mexico and California have focused on methane emissions when finding ways to meet Paris targets.

“Good maintenance, better equipment and installations, and just good practices can dramatically reduce emissions from these developments,” Mr Banks adds. “As far as climate change goes, it’s cheap stuff. It’s not a nuclear power plant, it’s tightening bolts.”

A study by the International Energy Agency found it is possible to reduce global methane emissions from the oil and gas industry by up to half at no net cost. That would be equivalent to shutting down every coal plant active in China today, the report says.

Yet even if Argentina succeeds in reducing methane emissions, there is the broader question of whether developing Vaca Muerta makes strategic sense, given how environmental concerns and technological advances are shaking up the energy sector.

The Inter-American Development Bank recently highlighted the danger of “stranded assets”, given that renewable energy is becoming increasingly competitive, warning that countries could be stuck with fossil fuel infrastructure that may become obsolete faster than expected. Others, such as Brown University’s Mr Edwards, say backing fossil fuels risks curtailing interest in renewable energy.

Argentina’s plan is to supply its own market with renewable energy and the gas from Vaca Muerta, which officials say is cleaner than other options. This is despite concerns from environmental lobbyists that leaking methane could be just as bad as the pollution from coal-fired power stations. If Argentina manages to fulfil its goal of becoming a net exporter of gas, this could even help China rely less on its dirty coal-fired power stations, indirectly aiding the environment, Mr Iguacel says.

“What’s the timeframe?” Mr Edwards asks. “If most countries are on some kind of path to decarbonising their energy sectors, do you really want to be pumping billions into an industry that is looking like it is on the way out in the coming decades?”

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President Moise Wants Full Transparency in PetroCaribe Probe

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Bail out Petrotrin

(Trinidad and Tobago Newsday, Vashtee Achibar, 5.Sep.2018) — Industrial relations consultant Gerard Pinard wants to know whether Government considered every available option before it took the decision to close down the state-owned Petrotrin refinery. He said the decision was not a good one and will hurt the economy and the society because of the important role Petrotrin plays in the country.

Speaking with Business Day, Pinard a former chemical engineer with Trintoc, the predecessor of Petrotrin, said more information should have been made available for such an important development. He cited the announcement by the majority trade union in Petrotrin, Oilfields Workers Trade Union (OWTU) that it had taken them by surprise.

He said while everyone expected something to happen, no one expected it would be as drastic as sending home 2,500 people. He recalled OWTU leader Ancel Roget referring to a memorandum of agreement signed with the Government prior to the last general election, and a joint committee being set up to look into ways and means to make the company viable.

The IR consultant said Petrotrin is duty-bound to consult with the recognised trade unions and must engage them in matters that involve their future. He said the decision to close the refinery cannot be done unilaterally, and if this was the case then the employer (Petrotrin) could be found guilty of an industrial relations offence in the Industrial Court.

“I do not have the information. The union is saying that it came like a thief in the night. If that is so, then it was badly handled. If in fact there were discussions that it was going to happen the union is entitled to put forward alternative options and asked for continued discussions,” he said.

Continuing to press the point that the closure was not handled well, Pinard said it is not only about the workers who are to be sent home.

“There are over 6,000 retirees, over 5,000 contract employees, over 20,000 people who rely on the medical services mostly retirees and former employees and their families. The company runs a hospital and they provide medical benefits at subsidised rates for all these people. We do not know what is going to happen now to them. Will it continue? We don’t know.”

Apart from people directly connected to Petrotrin, Pinard said people in fence line communities of Petrotrin will feel the full impact of the closure.

“Tens of thousands of people from the southern communities, the whole of San Fernando, Pointe-a-Pierre, Marabella, Point Fortin, Santa Flora and Fyzabad depend directly or indirectly on Petrotrin for their livelihood. I don’t know how much thought has gone into that. You have to have job losses but we don’t have the information to say whether this was really the only alternative or the best alternative.”

Pinard said he was puzzled why a bailout, as was done in the case of Clico, was not used. “So my question really is whether TT, as an oil and gas based economy, did not think that our oil industry was strategically important enough to find some ways to save it.” He said Government could have considered writing off part of the debt or taking over part of the debt temporarily as was done in the case of CL Financial.

Pinard said he is not in agreement with Petrotrin chairman Wilfred Espinet that there must be a higher level of oil production to keep the refinery running.

“For the chairman to be talking about we only have 45,000 bpd production and saying the refinery needs 160,000 bpd and therefore you cannot run a refinery profitably, there are countries which have no oil at all and who have refineries operating because they have to import everything to process and refine. So that by itself could never be a reasonable conclusion. We are located right next to the country with the largest oil reserves in the world. Have they considered importing crude from Venezuela?”

He called on Government to explore every available option before taking such a drastic decision to send home workers. He said retrenchment and laying off should always be the last resort.

In an address to the nation on Sunday, Prime Minister Dr Keith Rowley Government had little choice but to close the refinery, stating Petrotrin would need a $25 billion cash bailout to stay alive. Petrotrin loses $2 billion a year, on a recurring debt of $11 billion.

He said the refining assets of would be placed in a new company for potential buyers, including the OWTU, while Petrotrin will focus on extraction and exportation of oil. The Prime Minister is due to meet trade unions, led by the OWTU, today, mostly likely to discuss the state of Petrotrin and the movement’s call for all workers to engage in a day of rest and reflection tomorrow in protest of Government’s economic policies.

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Four Cos. to Invest $727 Mln in Ecuador

(Energy Analytics Institute, Jared Yamin, 18.Aug.2018) – Ecuador announced four companies would invest $727.85 million to boost production in a number of fields.

The companies – Triboilgas Cía. Ltda, Vinccler C.A, Arotekh C.A. and Avanzia – plan the investments in the Cuyabeno/Sansahuari, Oso, Yuralpa and Blanca/Vinita fields located in provinces of Orellana, Sucumbíos and Napo, reported the daily newspaper El Universo.

The process for the participation of companies began last March. It is anticipated that by September contracts will be signed with the companies, which are from the Latin American countries of Ecuador, Venezuela and Mexico, reported the daily.

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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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ShaleWolf Capital Sees Oil Prices Above $110 by 2019

(ShaleWolf Capital, 9.Aug.2018) – On June 22nd, 2018 President Donald Trump asked OPEC to increase its daily oil output by 1 million barrels. Industry experts would agree that OPEC is at or near its full production capacity. OPEC can’t just increase production. As demand continues to grow the world is set to outpace oil production by more than 500,000 barrels by 2020. When you consider the current situation in several oil contributing countries like Venezuela, Africa and Iran it becomes a perfect storm for oil prices potentially above $110 per barrel. Based on the data, its not a matter of if we see $110 prices but when. ShaleWolf Capital analysts believe that now is a perfect opportunity to acquire oil and gas assets as part of its overall strategy.

ShaleWolf Capital agrees to partner with NCE on the developmental drilling of its Cotton Valley reserves located in Harrison County, Texas. This formation is considered a long term income asset by the likes of British Petroleum (BP), Samson, Chesapeake Energy and XTO Energy. Based on 3rd party reserve evaluations the upside potential could equal over 684,000 BOE and 55BCFG in oil and natural gas reserves. There is also a strong potential of condensate reserves being on target with oil reserve estimates. In this area it would not be outrageous to potentially see condensate prices match current WTI oil prices. SWC has carefully reviewed surrounding fields in conjunction with Cotton Valley reserves and production. In more than 76 wells drilled into the Cotton Valley Sands in this area there are ZERO dry holes. This is prolific and could prove to be similar to formations like those found in the Permian Basin, Eagleford Shale, Austin Chalk and other blanket formations.

ShaleWolf Capital executives also anticipate acquiring 3-4 additional acreage positions in areas that include the Permian Basin, Austin Chalk, Bone Springs and Eagleford Shale oil and gas reserves in 2018. No capital contributions will be required from current partners to complete said acquisitions. This purchase is anticipated to close in Q3 or Q4 of 2018 utilizing cash reserves on hand. Due to strong demand driven by current potential partners ShaleWolf Capital has elected to restrict new partners from acreage participation in the foreseeable future.

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Ecopetrol Names New Corporate VP of Finance

Jaime Caballero Uribe. Source: Ecopetrol

(Ecopetrol, 8.Aug.2018) – Ecopetrol S.A. announced appointment of Jaime Caballero Uribe as the new Corporate Vice President of Finance (Chief Financial Officer).

The appointment is effective as of August 7, 2018.

Mr. Caballero has more than 20 years of experience with companies in the oil and gas sector, both in Colombia and abroad. He has served as Ecopetrol’s CFO for the Downstream Segment since July 2017. During this period he has also represented Ecopetrol at the Board of Directors of Propilco and Gases del Caribe, among other companies.

His experience prior to Ecopetrol includes 17 years at BP plc, where he held leadership positions in Colombia, North America, Africa and Europe, most recently as CFO for the Brazil region (encompassing Brazil, Uruguay, Colombia and Venezuela).

Mr. Caballero is an attorney with a degree from the Universidad de los Andes (Colombia). He has an MBA in Energy Business from the Fundação Getulio Vargas (Brazil), and has carried out executive studies in advanced financial management at Duke University and Wharton School of Business (University of Pennsylvania).

Mr. Caballero will be the compliance agent for financial reporting to the Colombian Finance Superintendency and the international markets.

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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.

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EIA Beta Interactive Data Analysis

(Energy Analytics Institute, Ian Silverman, 26.Jul.2018) – Beta data from the EIA provide users with an interactive way to analyze multiple petroleum data.

According to the most recent beta crude oil reserve data provided by the US-based Energy Information Administration, two countries in the Latin American region make the list and rank among the top 15 countries worldwide in terms of these reserves. To no surprise, Venezuela tops the list and Brazil ranks 15th, according to the data.

In terms of natural gas reserves, again Venezuela tops the list among the top 15 countries worldwide, but this time the South American country ranks 8th, according to the data.

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Could Guyana’s Oil Fortunes Curse Country?

(Energy Analytics Institute, Pietro D. Pitts, 8.Jul.2018) – Recent success in Guyana’s oil sector could be a wolf in sheep’s clothing.

Guyana doesn’t yet produce oil but in coming years its oil output is expected to surpass that of Peru and Trinidad and Tobago and could approach that of Ecuador, one of two lone OPEC producing countries in South America.

Having the world’s largest oil reserves, the first LNG export terminal in the Americas, or large gas reserves doesn’t mean all a country’s political, economic and social problems will be solved. Just ask Venezuela, Trinidad and Tobago, and Bolivia, respectively. Case studies of these three countries have shown that not just countries in Africa, such as Nigeria, are vulnerable to the Dutch Disease even in the 21st Century.

A look just at Guyana’s poor Corruption Perceptions Index ranking from Transparency International, much lower than the average for the Americas indicates the government is failing in efforts to tackle corruption.

It is hardly likely that Guyana’s faith will change by 2020 when the oil starts flowing and revenues start to climb. What will happen then is almost predictable unless a miracle happens between now and then.

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Stuart Young Leads Venezuelan Energy Talks

(LoopTT, 27.Jun.2018) – Minister in the Office of the Prime Minister, Minister in the Ministry of the Attorney General and Legal Affairs and Minister of Communications Stuart Young led a Trinidad and Tobago delegation in Venezuela on Wednesday.

The team comprised of the President of the National Gas Company of Trinidad and Tobago Limited (NGC), Mark Loquan, former PS Selwyn Lashley and other members of NGC to Caracas, Venezuela to continue negotiations with respect to the Venezuelan Dragon across the border gas field.

The Venezuelan delegation was led by Minister Manuel Quevedo, People’s Minister of Petroleum and President of PDVSA, Vice Minister Douglas Sosa and executives of PDVSA and the Venezuelan Ministry of Petroleum.

Executives of Shell were also in attendance led by Derek Hudson, Country Chair of Shell Trinidad’s operations.

The parties spent hours negotiating, bringing the possibility of the cross-border gas deal closer.

There remains a number of areas where further work is required and Minister Young agreed to return to Caracas, Venezuela in two weeks for the two Ministers to attempt to settle the terms of the agreement.

Minister Young extended an invitation for Minister Quevedo to come to Trinidad to visit the LNG and other downstream Petro-chem operations.

All parties involved remain committed to the Dragon Gas Project becoming a reality.

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Oil Prices Expected to Rise

(FinancialBuzz.com, 19.Jun.2018) – Despite the recent downturn in oil prices, Goldman Sachs remains optimistic.

According to Reuters, Goldman Sachs forecast a tighter oil market for a longer duration due to strong demand growth and the probability that rising supply disruptions could counter any increase in OPEC production.

“Our updated global supply-demand balance continues to point to further declines in inventories and higher oil prices in 2H18,” the bank said. Goldman also repeated its Brent price forecast for a peak of $82.50 per barrel throughout the summer and a year-end approximation of $75.

The avalanche of political and economic developments around the world that influence oil prices are making it difficult to determine what the relationship between demand and supply will be. Goldman Sachs explained in the report that they expect OPEC and Russia production to increase by 1 million barrels per day by the end of 2018 and by another half a million barrels per day in the first half of 2019. While a production increase would decrease oil prices, the supply numbers are expected to be offset by increased political and economic disruptions in Venezuela and Iran.

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PDVSA Says Curacao Refinery Fire Out

(Energy Analytics Institute, Ian Silverman, 21.May.2017) – PDVSA announced that it has completely controlled a fire that occurred at its Isla de Curacao refinery.

The incident occurred at the distillation unit of the refinery, reported PDVSA in an official statement. PDVSA has assigned an investigation committee to determine the causes of the incident.

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Trump Nationalism Scares LAC Exporters

(Energy Analytics Institute, Pietro D. Pitts, 27.Jan.2017) – Taiwan’s president got the call, Mexico’s president will get a wall. At least, that’s what U.S. President Donald Trump is proclaiming.

From all accounts, Mexico’s President Enrique Peña Nieto has not been shown the same courtesy as Taiwan’s President Tsai Ing-wen. Witnessing the manner in which Trump has treated trade partner Mexico over the U.S.-Mexico border wall, it is safe to assume that other partners could be in for worse or harsher treatment less they offer something that is first in Americas’ interest. The visit by United Kingdom’s Primer Minister Theresa Mary May to Washington is a case in point regarding the latter.

Trump may be a successful and wealth businessman but much talent is missing and desired in his role as a statesman. The ruthless manner in which he is dealing with Mexico, a key trading partner under the North American Free Trade Agreement (NAFTA), in the name of nationalism, is alarming at most.

As a result, countries in the Latin American and Caribbean (LAC) region — and worldwide for that matter — that export products and services to the U.S. better brace themselves for what U.S. Speaker of the House of Representatives Paul Ryan recently called ‘an unconventional’ presidency.

LAC region countries that should be worried — if not already, they should and better be — about the ongoing bout between Trump vs. Peña Nieto include but are not limited to: Argentina (some exports to the U.S.: aluminum, wines), Brazil (mineral fuels, aircraft, iron, steel), Chile (copper, fish, seafood, wine), Colombia (mineral fuels, coffee, cut flowers), Ecuador (mineral fuels, seafood), Peru (precious metals, mineral fuels), and Nicolas Maduro’s Venezuela (crude oil). The list goes on.

Most of my concern is for the latter country since crude oil exports constitute 96 percent of its foreign export revenues, and due to the fact that this OPEC-member country is the lone one in the LAC region with basically one export product. Additionally, should Trump view the asset expropriations in the oil sector under late Venezuelan President Hugo Chávez as unfair (remember U.S.-based oil giants ConocoPhillips and ExxonMobil were pushed out or kicked out, depending on your view of what happened and how), the government of Maduro & Company could be in for a big surprise. Trump’s revival of the Keystone XL Pipeline project could easily displace some if not all of the crude oil that Venezuela currently exports to the U.S. Gulf Coast.

TOP OIL

On the flip side, Trump’s ‘America First’ nationalist message could someday be a good thing for importreliant Venezuela seeing that the country – which imports basically everything, is practically a war zone with homicide rates constantly around 30,000 each year, and which cannot devalue its already worthless currency to export itself out of its crisis – will need to rebuild nearly all its industries once the regime change occurs. How and when are the lingering questions regarding said change.

If there were ever a time to push for strengthening regional integration among the LAC region countries, it’s now. Existing initiatives that come to mind including Mercosur, Alba, and Celac, among others, should be revisited and improved. If Mexican products are indeed slapped with a 20 percent tax into the U.S., many will need to be redirected to other countries around the world. Why shouldn’t some of these products be redirected to LAC region countries?

Back to Venezuela. Since Maduro is unlikely to visit Washington and Trump less likely to visit Caracas, we’ll all have to wait for their political bout to play out on Twitter. It would be wise if LAC region officials started to have these regional trade discussions now and take a proactive, not reactive approach to Trumpism.

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Ecuador Considers Venezuela as Partner in Refinery

(Energy Analytics Institute, 30.Mar.2016, Clifford Fingers III) – While Ecuador continues to seek financing from foreign investors looking to invest in the estimated $13 billion Pacific Refinery project, the country continues to reserve an interest for Venezuela.

“Venezuela is part of the project and is a strategic partner that will have an approximate 30 percent interest in the project,” reported the daily newspaper El Universo, citing Strategic Sector Coordinating Minister Rafael Poveda.

“To-date, Venezuela has made the necessary contributions as required,” said Poveda. In the future when the project advances to the construction phase it is expected that Venezuela will continue to contribute its allocated contributions to the project, he said.

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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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PBF to Close Chalmette Deal by YE:15

(PBF Energy, 30.Jul.2015) – On 18.Jun.2015, PBF announced that its subsidiary signed a definitive agreement to purchase Chalmette Refining, LLC, consisting of the 189 Mb/d Chalmette Refinery and related logistics assets, from ExxonMobil and PDV Chalmette, LLC.

The purchase price for the assets is $322 mln, plus working capital including inventory to be determined at closing. The transaction is expected to close prior to YE:15, subject to customary closing conditions and regulatory approvals.

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Guyana Pursues Diplomatic Option with Venezuela

(GINA, 9.Jul.2015) – Guyana’s President David Granger reiterated that diplomacy will remain as his country’s first option as it stands resolute against all forms of aggression.

“We have never, as an independent state, provoked or used aggression against any other nation, we have never used our political clout to veto development projects in another country,” said Granger, speaking during an address to the country’s National Assembly about the territorial claims made by Venezuela.

Granger said, Guyana has never discouraged investors willing to invest in another country, never stymied development of another nation state and as such “does not expect and will we condone, any country attempting to do the same to us.”

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Harvest Announces $32.2 Mln Funding

(Harvest Natural Resources, Inc., 19.Jun.2015) – Harvest Natural Resources, Inc. announced that CT Energy Holding SRL, a Venezuelan-Italian consortium, has agreed to purchase from Harvest senior secured notes, convertible notes and warrants.

“CT Energy Holding’s funding addresses our liquidity requirements for the near and medium term and will enable us to reinvest in our business, particularly in our Venezuelan operations and in the success of Petrodelta,” said Harvest CEO James A. Edmiston.

Harvest will immediately receive proceeds of $32.2 million from the sale of the senior secured notes and convertible notes. Harvest could realize up to $42.5 million in additional proceeds from the full exercise of the warrants, which is subject to stockholder approval. Harvest will use proceeds from CT Energy Holding SRL to repay its existing long-term debt and to reposition Harvest for long-term growth, both in Venezuela and Gabon.

Harvest also announced that it has entered into a strategic partnership with CT Energy Holding SRL and CT Energia Holding, Ltd., an international energy trading firm, designed to maximize the long-term success and value of Harvest’s Venezuelan operations and its 20.4% investment in Petrodelta S.A.

Under the terms of this strategic partnership:

— Harvest has entered into a term sheet with Petróleos de Venezuela, S.A. (PDVSA), Harvest’s partner in Petrodelta, for the repositioning and growth of Petrodelta’s business;

— Two directors designated by CT Energy Holding SRL and a third, independent director, will join Harvest’s board of directors, effective immediately;

— Harvest has agreed to appoint two of CT Energy Holding SRL’s designees as Harvest’s representatives on the Petrodelta board of directors;

— CT Energia has entered into a management contract to oversee the day-to-day operations of Harvest’s Venezuelan business and to assist with the development of a plan for the business operations and financing for Petrodelta and the negotiation of definitive documents to implement such plan; and

— During the term of the management contract, Alessandro Bazzoni, the CEO of CT Energia who has over 15 years of experience in the oil and gas industry, will be appointed Director and General Manager – Venezuelan Operations for Harvest.

“Our strategic partnership with CT Energy Holding represents an important step forward in creating and implementing a new model for the operations and financing for Petrodelta, which will benefit all stakeholders. The additional capital will allow us to continue our exploration and development work in our exciting Dussafu Block in Gabon,” said Edmiston.

Harvest’s Chairman of the Board, Stephen D. Chesebro’, stated: “We are also delighted to welcome Oswaldo Cisneros, Francisco D’Agostino and Edgard Leal, well-known senior executives with deep knowledge of Venezuela, to our board. We look forward to working with them, as well as Mr. Bazzoni, on repositioning Harvest’s Venezuelan operations for growth. I also wish to express, on behalf of Harvest, my deepest appreciation for the past service and contributions of Dr. Igor Effimoff, H. H. Hardee and J. Michael Stinson, who are stepping down from our board today.”

“We are excited to partner with Harvest and its management team in the next phase of Harvest’s long-term strategy,” said Mr. Bazzoni, Chief Executive Officer of CT Energia. “We are confident that with this new liquidity and opportunity to reposition its Venezuelan operations, Harvest is well positioned to drive exceptional value for its shareholders as well as the other equityholders of Petrodelta. We see Harvest offering tremendous upside potential and promise, and I look forward to working on a day-today basis with Harvest’s employees in Venezuela.”

Terms of the transaction include:

— CT Energy Holding SRL is acquiring a $25.225 million, five year, 15.00% senior secured nonconvertible note and a $6.975 million, five year, 9.00% senior secured convertible note. The convertible note is immediately convertible into 8,506,097 shares of Harvest common stock, or approximately 19.9% of Harvest’s currently outstanding common stock. Harvest is also issuing to CT Energy Holding SRL 69.75 shares of a newly created series of preferred stock that will entitle the holder to vote on an “as-if” converted basis.

— CT Energy Holding SRL will also acquire a warrant to purchase up to 34,070,820 shares of Harvest’s common stock at an exercise price of $1.25/share. The warrant will become exercisable only after the 30-day volume weighted average price of Harvest’s common stock equals or exceeds $2.50/share and Harvest’s stockholders approve the transaction with CT Energy Holding SRL by a majority of votes cast, as required by the New York Stock Exchange (NYSE) shareholder approval rules.

The warrant is cash-exercisable, but CT Energy Holding SRL may surrender the non-convertible note to pay for a portion of the aggregate exercise price.

— At its upcoming annual shareholder meeting, which is expected to occur in Aug.2015, Harvest stockholders will be asked to approve the transaction under NYSE shareholder approval requirements and to approve an amendment to Harvest’s charter to authorize new shares of common stock in an amount sufficient for future needs, including the full conversion of the convertible note and full exercise of the warrant issued in the transaction.

— If stockholder approval is not obtained, CT Energy Holding SRL may elect to accelerate full repayment of the non-convertible and convertible note upon 60days’ notice. Upon acceleration of the notes, Harvest would be required to seek alternative financing for the liquidity and the strategic partnership would be terminated.

— Pro forma for the transaction, CT Energy Holding SRL would own 16.5% of Harvest’s common stock outstanding prior to the shareholder approval and 49.9% of common stock outstanding following the shareholder approval and exercise of the warrants.

Norton Rose Fulbright US LLP acted as legal counsel to Harvest. D’Agostino & Co. served as financial advisor and Wachtell, Lipton, Rosen & Katz acted as legal counsel to CT Energy Holding SRL.

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Harvest Enters Relationship with CT Energy

(Harvest Natural Resources, Inc., 19.Jun.2015) – On 19.Jun.2015, Harvest Natural Resources, Inc. entered into a strategic relationship with CT Energy and CT Energia Holding, Ltd., an international energy trading firm, designed to maximize the long-term success and value of Harvest’s Venezuelan operations and its 20.4% investment in Petrodelta.

Under the terms of this strategic relationship, the company entered into a term sheet with PDVSA for the repositioning and growth of Petrodelta’s business. The company agreed to appoint two of CT Energy’s designees as the company’s representatives on the Petrodelta board of directors.

CT Energia has entered into a management contract with the Company to oversee Harvest’s Venezuelan day-to-day operations and to assist in the development of a plan for the business operations and financing for Petrodelta and the negotiation of definitive documents to implement such plan.

Terms of the transaction with CT Energy include:

— The company sold CT Energy a $25.2 mln, 5year, 15% non-convertible senior secured promissory note (“15% Note”) and a $7 mln, 5-year, 9% convertible senior secured note (“9% Note”). The 9% Note is immediately convertible into 8,506,097 shares of Harvest common stock at an initial conversion price of $0.82. Harvest also issued to CT Energy 69.75 shares of a newly-created series of preferred stock that carry voting rights equivalent to the shares of common stock underlying the unconverted portion of the 9% Note.

— Harvest issued CT Energy a warrant to purchase up to 34,070,820 shares of Harvest’s common stock at an initial exercise price of $1.25/share (“CT warrant”). The CT warrant will become exercisable only after the 30-day volume weighted average price of Harvest’s common stock equals or exceeds $2.50/share (“Stock Appreciation Date”) and Harvest’s stockholders approve certain proposals related to the transaction with CT Energy by a majority of votes cast, as required by the New York Stock Exchange (NYSE) shareholder approval rules. The CT warrant is cash-exercisable, but CT Energy may surrender the 15% Note to pay for a portion of the aggregate exercise price.

— The company sold CT Energy a five-year 15% non-convertible senior secured note (“additional draw note”), under which CT Energy may elect to provide $2 mln of additional funds to the company per month for up to 6-months following the 1-year anniversary of the closing date of the transaction (up to $12 mln in aggregate). If funds are loaned under the additional draw note, interest will be compounded quarterly at a rate of 15% per annum and will be payable quarterly on the first business day of each Jan., Apr., Jul. and Oct., commencing 1.Oct.2016. If by 19.Jun.2016 (“Claim Date”), the volume weighted average price of the company’s common stock over any consecutive 30-day period has not equaled or exceeded $2.50/share, the maturity date of the additional draw note will be extended by two years and the interest rates on the additional draw note will adjust to 8%. During an event of default, the outstanding principal amount will bear additional interest at a rate of 2% per annum higher than the rate otherwise applicable.

— Harvest issued to CT Energy 69.75 shares of the company’s newly created Series C preferred stock, par value $0.01/share. The primary purpose of the Series C preferred stock is to provide the holder of the 9% Note with voting rights equivalent to the common stock underlying the unconverted portion of the 9% Note. Shares of the Series C preferred stock are entitled to vote on certain matters submitted to a vote of the stockholders on an “as converted” basis.

— At our upcoming annual shareholder meeting on 9.Sep.2015, Harvest stockholders will be asked to approve certain proposals related to the transaction under NYSE shareholder approval requirements and to approve an amendment to Harvest’s charter to authorize new shares of common stock in an amount sufficient for future needs, including the full conversion of the 9% Note and full exercise of the CT warrant issued in the transaction.

— If stockholder approval is not obtained, CT Energy has the right to accelerate full repayment of the 9% and 15% notes upon 60-days’ notice. Upon acceleration of the notes, Harvest would be required to seek alternative financing for liquidity and the strategic relationship with CT Energia would be terminated.

— CT Energy appointed three members to the company’s board of directors, including one appointee serving as an independent director under the NYSE and Securities and Exchange Commission (SEC) rules.

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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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USA Downplays Reducing Venezuela Oil Imports

(Energy Analytics Institute, Jared Yamin, 13.Mar.2015) – The United States is not contemplating applying any measures against Venezuela’s petroleum sector, according to the daily newspaper El Universal, citing an U.S. official who requested anonymity.

“The sanctions against the military officials does not have an impact on the Venezuelan economy nor the petroleum sector. With respect to energy, it’s the U.S. energy companies that buy the oil and they are the ones that will decide whether or not to buy it,” said the U.S. official.

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Venezuela Financial Scheme for Uruguayan Oil

(Energy Analytics Institute, Jared Yamin, 3.Mar.2015) – Venezuela announced a financing scheme for oil shipments to Uruguay, according to a decree revealed on March 2, 2015 in Venezuela’s Official Gazette newspaper.

Over the short-term 90 days, the payments for the shipments generate interest at a flat 2 percent. Over the long-term, up to 15 years, because of the amortization of capital, there will be a two-year grace period and an annual interest rate of 2 percent.

The financed amounts will be determined by the following (see Table 1):

TABLE 1:

Avg Price⁄bbl —- Determination factor

>- 15 ———- 5%

>- 20 ——— 10%

>- 22 ——— 15%

>- 24 ——— 20%

>- 30 ——— 25%

Source: 1) Avg Annual Sales Price⁄bbl (FOB-Venezuela), 2) Determination factor for financial resources (%). Venezuela Official Gazette

Of the long-term financed portion, at least 50 percent (equivalent to 12.5 percent when the oil sales price is equal to or greater than $30/barrel) can be classified under the Compensation Fund which allows for the exchange of goods and/or services by the government of Uruguay.

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Guyana Suggest Venezuela Desist Actions

(Guyana Foreign Affairs Ministry, 28.Feb.2015) – Guyana’s Ministry of Foreign Affairs wishes to inform that consequent upon a communication being sent from the Venezuelan Foreign Minister to the Country Manager of Esso Exploration and Production Guyana Limited objecting to the despatch of a rig to proceed with the exploration of an oil well in the concession granted by the Government of Guyana, the Government of Guyana has despatched a Note Verbale to the Venezuelan Foreign Ministry.

The Ministry of Foreign Affairs has requested that the Government of the Bolivarian Republic of Venezuela desist from taking any actions that could only result in the stymying of the development of Guyana and its people and that would be in contravention of international law.

The Ministry has also informed CARICOM, UNASUR, the OAS, the Commonwealth as well as the United Nations Secretary General about this recent action by Venezuela.

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Harvest Receives Listing Notice from NYSE

(Harvest Natural Resources, Inc., 18.Feb.2015) – Harvest Natural Resources, Inc. announced that on February 13, 2015, the company received notification from the New York Stock Exchange (NYSE) that it had fallen below the NYSE’s continued listing standard, which requires a minimum average closing price of $1 per share over 30 consecutive trading days.

Under the NYSE’s rules, Harvest has a period of six months from the date of the NYSE notice to bring its share price and 30 trading-day average share price back above $1. During this period, Harvest’s common stock will continue to be traded on the NYSE, subject to the company’s compliance with other NYSE continued listing requirements. As required by the NYSE, in order to maintain its listing, Harvest will notify the NYSE that it intends to cure the price deficiency.

The company’s business operations, securities reporting requirements and debt obligations are unaffected by this notification.

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Q&A with Arthur Little’s Rodolfo Guzman

(Energy Analytics Institute, Pietro D. Pitts, 24.Sep.2013) – Arthur D. Little Partner Rodolfo Guzman spoke with Energy Analytics Institute in a brief interview from Houston, Texas. What follows are excerpts from the brief interview.

Regarding PDVSA’s potential departure from Abreu e Lima refinery project in Pernambuco, Brazil:

EAI: It appears PDVSA is close to leaving the Abreu e Lima refinery project in Brazil, is that a surprise to you: Why or why not?

Guzman: I wouldn’t be surprised if they leave the project. One reason is that PDVSA is financially not in a strong position to invest internationally; second, the execution capabilities of the company are limited.

The Abreu e Lima project was originally planned to receive heavy oil from Venezuela and Brazil. Now with all the pre-salt developments and future supply in Brazil, the dependence on Venezuela crudes for the refinery is lower. So, again, I am surprised that they may withdraw from the project.

PDVSA has a lot of priorities in Venezuela and the company’s refinery projects in the domestic market are moving forward very slowly. So why would the company commit to an international venture when they cannot progress with their own projects in Venezuela?

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Honduras Awaits Initial PetroCaribe Shipments

(Energy Analytics Institute, Ian Silverman, 13.Sep.2013) – Honduras does not expect to receive its first shipment of oil from Venezuela under PetroCaribe until Dec.2013, reported El Universal, citing Honduras’ Vice Minister of Commerce Melvin Redondo.

Venezuela will not be ready to ship the oil as originally planned due to the technical problems at its refineries, the newspaper said.

Under the PetroCaribe Initiative, Honduras will pay 60% of the petroleum bill in cash and finance the remaining 40% over 25 years at interest rates not to exceed 2%.

PetroCaribe is comprised of Antigua y Barbuda, Bahamas, Belize, Cuba, Dominica, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Nicaragua, Dominican Republic, Saint Cristobal and Nieves, Saint Vicente and Las Grenadines, Saint Lucia, Suriname and Venezuela.

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Citgo’s Garay Comments on PDVSA Imports

(Energy Analytics Institute, Piero Stewart, 17.Jun.2013) – The Public Affairs Manager with Houston-based Citgo Petroleum, Fernando Garay, comments via phone regarding declining imports of Venezuelan crude oil in the U.S.

“We are not worried about the prospect of declining oil supplies from our Caracas-based parent company PDVSA and have no problem looking to other markets for supply.”

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Citgo’s Garay Comments on PDVSA Imports

(Energy Analytics Institute, Piero Stewart, 17.Jun.2013) – The Public Affairs Manager with Houston-based Citgo Petroleum, Fernando Garay, comments via phone regarding declining imports of Venezuelan crude oil in the U.S.

“We are not worried about the prospect of declining oil supplies from our Caracas-based parent company PDVSA and have no problem looking to other markets for supply.”

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Bolivia’s Nationalization of Oil and Gas

(Council on Foreign Relations, Carin Zissis, 12.May.2006) — In a region seen as turning leftward, forging alliances would seem a natural course of events. But Bolivian President Evo Morales’ decision to nationalize the oil and gas industry is exposing tensions, causing experts to say there is more diffusion than alliance-building in Latin America.

Introduction

On his hundredth day in office, Bolivian President Evo Morales moved to nationalize his nation’s oil and gas reserves, ordering the military to occupy Bolivia’s gas fields and giving foreign investors a six-month deadline to comply with demands or leave. The May 1 directive set off tensions in the region and beyond, particularly for foreign investors in Brazil, Spain, and Argentina. Morales’ nationalization agenda has been described as another chapter in Latin America’s turn to the left, and fears are rising that the Bolivian leader has fallen into the fold of Venezuela’s Hugo Chávez and Cuba’s Fidel Castro. But some experts emphasize there may be more infighting than cohesion overall in the region.

Why did Morales nationalize Bolivia’s hydrocarbon industry?

Morales, a former coca farmer and union leader, won a resounding victory in the December 2005 elections. As the Movement to Socialism (MAS) candidate, he campaigned in favor of nationalizing, among other sectors of the economy, the gas and oil industries with the cooperation of foreign investors. Experts say that, given such promises, the nationalization was no surprise. But Peter DeShazo, director of the Center for Strategic and International Studies’ Americas Program, says the move to occupy the gas fields with military forces lent a dramatic effect. “The confrontational nature of his move was certainly intended to get people’s attention,” he says, adding that Morales may be looking to garner votes in July elections for a constituent assembly that will redraft Bolivia’s constitution.

Nouriel Roubini, a professor of economics and international business at New York University, says one explanation for nationalization is ill will over encroachment on Bolivia’s territory by its neighbors. Since gaining independence in 1825, the Andean nation lost ocean access to Chile, as well as land to Brazil, Paraguay, and Peru. “There is this kind of historical resentment,” Roubini says, adding that Bolivians “are giving a slap in the face to Brazilians and Spaniards.” Morales echoed this sentiment at a May 11 summit of Latin American and European leaders, where he reaffirmed his energy-nationalization plans and signaled his government would seize large land holdings. Experts say this could also affect Brazil, whose farmers have major land holdings in Bolivia.

In spite of having the region’s second largest natural-gas reserves after Venezuela, Bolivia is among Latin America’s poorest nations. The landlocked country has also been marked by political instability; six presidents have held office in as many years, and one of them, Gonzalo “Goni” Sánchez de Lozada, was forced to resign in 2003 after protests against plans to export Bolivian gas turned violent. Among the free trader’s opponents was Morales, who said foreign investors received too much in gas-sale profits based on the hydrocarbons law in place at the time.

How will the nationalization plan work?

Morales’ May 1 decree states that foreign companies, which have invested almost $4 billion since Bolivia opened up its energy sector in the late 1990s, must hand majority control over to state-owned Yacimientos Petrolíferos Fiscales Bolivianos (YPFB). Firms have 180 days to renegotiate energy contracts with the Bolivian state, which experts say will likely lead to price increases. During that time, the companies which own the two largest oil fields will absorb a 32 percent hike (82 percent total) in royalties and taxes. Bolivia, which has 55 trillion cubic feet of natural gas, is expected to see a jump from $320 million to $780 million in annual oil-related revenues, and has installed new directors representing YPFB on the boards of foreign firms’ local subsidiaries. While negotiations occur, Bolivia will conduct an audit of the foreign companies. Morales recently warned foreign companies they will not be compensated if they have recovered their original investments.

Who stands to lose from the nationalization policy?

The firms with the largest holdings in Bolivia’s energy industry are the Spanish-Argentine venture Repsol YPF and Brazil’s Petrólio Brasileiro (Petrobras). Britain’s British Petroleum (BP) and France’s Total also have large investments. Repsol YPF has invested some $1.2 billion in Bolivia’s energy industry, and Argentina’s President Nestor Kirchner, whose country faces double-digit inflation rates, is concerned about rising gas prices jeopardizing Argentina’s economic recovery. But Brazil is under the greatest pressure if prices go up, as Bolivia provides it with about half of its gas. In the populous economic center of Sao Paolo that figure is closer to 75 percent. Petrobras has invested $1 billion in Bolivia’s natural-gas industry. Morales’ move has put Brazilian President Luiz Inácio Lula da Silva in a vulnerable position in the months leading up to his October reelection bid.

What are the reactions to Morales’ plan?

While foreign companies said they hope for cooperation, Repsol YPF has said it will act to protect its investments and take legal action if necessary. Petrobras has made similar threats and frozen investments. Experts say Bolivia needs investors such as Petrobras, which accounts for roughly 20 percent of the country’s gross domestic product (GDP) and 24 percent of its tax revenue. John Williamson, senior fellow at the Institute for International Economics, says Bolivia may see short-term gains but in the long term, it’s going to lead to less foreign investment. He also cautions that Morales’ move could cause divisions in the region.

Is Bolivia’s nationalization testing regional alliances?

Yes, say some experts. CFR Senior Fellow Julia Sweig says that Lula has been more silent in coming out against the nationalization than Spain’s President José Luis Rodríguez Zapatero because Lula—a former trade union leader like his Bolivian counterpart—is “sympathetic” to Morales’ intentions. Diego von Vacano, assistant professor of political science at Texas A&M University and a Bolivian national, says, “Lula wants to prevent a sort of face-off with Morales” because he “doesn’t want to destabilize the region.”

Yet, not all Latin American leaders who are leaning to the left are the same, experts say. “On one side, you have a number of administrations that are committed to moderate economic reform,” says Roubini. “On the other, you’ve had something of a backlash against the Washington Consensus [a set of liberal economic policies that Washington-based institutions urged Latin American countries to follow, including privatization, trade liberalization and fiscal discipline] and some emergence of populist leaders.” Among the latter group is Venezuela’s Chávez, an outspoken opponent of the Bush administration; DeShazo of CSIS calls Chávez Latin America’s “high priest” of economic nationalism.

What is Morales’ relationship with Chávez?

Just before the May 1 decree, Morales met with Chávez and Castro in Havana to sign a socialist trade agreement that made Morales a member of the Bolivarian Alternative for the Americas. The three are now calling it the “Axis of Good,” a pact originally signed by Chávez and Castro last year. Morales and Chávez threatened to pull out of the Andean Community if Colombia, Peru, and Ecuador sign free trade agreements with the United States. Castro and Chávez also said they would become Bolivia’s primary soybean importers. This plan may affect Brazil, because Morales has set a May 31 deadline for land redistribution in the Santa Cruz region, where Brazilian farmers grow more than a third of Bolivia’s soybeans and have invested heavily in land and agriculture.

But experts caution that it is not yet clear where Morales’ alliance falls. Sweig says “the embrace he’s getting from Chavez is getting harder and harder to resist,” but he also “understands that he has to function in a global context and not just an Andean one.” Sweig adds, “Bolivia is going to tack one way one day and one way the other.” There are also signs of infighting rather than a growth in alliances in the region. The Andean Community is not the only trading bloc with members threatening to bow out; in April, Uruguay warned it may leave Mercosur, the Southern Cone trading bloc, and suggested Paraguay is a partner on this. Williamson says the region “is more divided than I’ve ever seen it.” Sweig echoed this, saying, “I just don’t see the kind of diplomatic skill and institutional capacity to do alliance building. It’s not like the EU.”

What is the U.S. role in Bolivia and in the region?

Experts say the United States has paid less attention to Latin America after September 11, 2001, particularly as events have heated up in the Middle East. Meanwhile, Roubini says the situation in the region is “developing in such a way that is actually dangerous to U.S. interests.” According to Von Vacano, this period of crisis diplomacy between countries in the region would be a good time to become more engaged, and that the United States is “missing a chance to be a kind of broker, to get involved in South America without being heavy-handed.” Williamson says the United States should maintain an open hand to negotiate free trade agreements but “any U.S. influence is resented so much that it is counterproductive.” Sweig says the United States should tread carefully because intentions to influence outcomes can backfire. She points to Bolivia’s 2002 election, when the U.S. Ambassador Manuel Rocha urged Bolivians not to vote for Morales, who then surged in the polls and almost defeated Sánchez. The problem, Sweig says, “is when we say ’democracy,’ Latin Americans hear ’imperialism.’”

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