PETROL & ENERGY 02.11.2015

Big U.S. oil companies are starting to think small.

A stubborn 16-month crude rout with no end in sight is driving the largest U.S. oil producers away from costly, high-risk megaprojects long touted as the industry’s future and toward safer shale operations that generate the cash needed to satisfy anxious investors.

Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., ConocoPhillips and Hess Corp. have all either delayed or abandoned projects that range from the deep seas of the Gulf of Mexico to Canada’s oil sands and the U.S. Arctic. At the same time, Exxon and Chevron both announced plans to substantially increase U.S. crude production, largely as a result of their shale operations.

“What makes more sense in this environment: drill a $100 million well in the deepwater Gulf that might come up empty, or poke lots of holes in west Texas where you already know there’s oil for a few million apiece?” said Michael Webber, deputy director of the University of Texas Energy Institute.

Explorers are expected to slash spending on deepwater wells by 20 percent to 25 percent next year, compared with a 3 percent to 8 percent overall reduction on all types of fields, according to Barclays Plc analysts including J. David Anderson. The type of giant reservoirs that require megaproject treatment are now found in only the roughest, deepest and coldest parts of the world.

One example: An equipment failure forced Chevron to put its $5.1 billion Big Foot development, a deepwater Gulf of Mexico project that was supposed to begin pumping crude this year, on hold until at least 2018. The San Ramon, California-based company hasn’t said whether the delay will bloat the price tag, which already had risen 28 percent from a 2010 estimate of $4 billion. 



Africa: Tullow Oil's Vice President Tim O'Hanlon's speech on Tuesday at the Africa Oil Week in Cape Town delivered a message of hope to a hall full of oil industry executives that are faced by the same problem: declining oil prices. Mr. O'Hanlon told delegates that just like it has been in the past, this prevailing cycle of low crude prices would also come to pass. "A diamond is but a lump of coal that did not quit under pressure," he said. "Surviving at sub-fifty dollars (a barrel) in this oil business is tough, but we must." The industry has been hit hard by low oil prices, forcing many of them-majors and minors alike, to take extreme austerity measures just to stay afloat. 

Morocco: PetroMaroc Corporation plc (PMA) (the "Company" or "PetroMaroc") is pleased to announce it intends to complete a secured, non-convertible debenture financing (the "Financing") of Cdn $1.0 million (the "Debenture") with an arms' length investor, the proceeds of which will be used for general working capital purposes. It is expected that the Debenture will mature on April 10, 2016 (the "Maturity Date") and will bear interest at a rate of 15% per annum, calculated and payable in arrears, in cash, on the Maturity Date. The Financing is subject to approval by the TSX Venture Exchange (the "TSXV"). No warrants will be issued, and no commission and/or finders' fee will be payable in connection with the Financing. The Debenture will be subject to a four-month hold period under Canadian securities laws from the date of issuance.

Mozambique: Sasol's efforts to take advantage of Mozambique's significant oil and gas resources have paid off as the company is set to explore wells after two of its three applications in Mozambique's fifth Licensing Round were successful. Sasol (70%, operator) and Empresa Nacional de Hidrocarbonetos (ENH) the state oil company, (30% carried interest) were awarded the onshore Area PT5-C, which is 3 012 square kilometres, adjacent to the Pande and Temane fields. Sasol's other successful bid was for Area A5-A, which is 5 145 square kilometres, situated in the offshore Angoche Basin. In this block, Italian oil company Eni will act as operator (34%), with Sasol and Statoil of Norway holding 25.5% each and ENH holding a 15% carried stake. 

Nigeria: Nigeria looks set to unbundle a long-awaited oil law to speed up its passage through parliament, potentially unlocking billions of dollars in frozen investments. The Petroleum Industry Bill (PIB) has been gathering dust since 2008 because of disagreements between the government and global oil majors over its terms. The new head of the Nigerian National Petroleum Corporation (NNPC) Emmanuel Kachikwu, who is likely to become junior oil minister, said recently the delay was hurting the economy. "The average source of volumes in investments that we are losing on an annual basis because of the lack of PIB is in excess of $15 billion (13.7 billion euros)," he told senators. 

Nigeria: The perennial problems of pipeline vandalism and crude oil theft, which continue unabated in and around the oil-rich Niger Delta of Nigeria, resulted in economic losses for the country amounting to $14 billion in 2014 alone according to data obtained by Abuja City Business from Stakeholder Democracy Network (SDN). 

South Africa:  The retail price of petrol in South Africa will decrease by 1.75 percent from Nov. 4, while wholesale diesel will decrease 0.8 percent, the energy department said on Saturday. In a statement, the department said petrol would cost 12.39 rand ($0.9) per litre in the commercial hub of Gauteng province, while diesel would be 10.84 rand. The government adjusts the price of fuel every month, factoring in global oil prices and the rand exchange rate. 

Uganda: The European Union (EU) has requested Uganda to maximise opportunities and mitigate the negative impact of the oil and gas industry. A delegation of ambassadors from European countries visited Hoima District on Monday and Tuesday where they interfaced with oil company officials, Bunyoro Kitara Kingdom officials, local communities and district officials. "As EU, we are sorry for what happened to you. This is an example of what should not have happened," EU head of delegation to Uganda Kristian Schmidt said on Tuesday while addressing more than 200 families that were in August 2014 evicted from a chunk of land in Rwamutonga village where a US firm wanted to set up an oil waste treatment facility. 


Middle East

Iraq: Iraq's oil exports dropped sharply in October to an average of 2.7 million barrels per day (bpd), from 3.052 million bpd the previous month, the oil ministry said on Sunday, citing shipment delays caused by poor weather. All of the exports were from Iraq's southern ports, according to an oil ministry spokesman. He said shipments from Iraq's north via Ceyhan in Turkey stopped completely in October after dropping to an average of just 20,000 bpd the previous month. Revenues from the country's October sales totalled $3.32 billion, with the oil sold at around $39.56 per barrel, the spokesman added.

Israel: Israeli Prime Minister Benjamin Netanyahu will take control of the Economy Ministry to fast-track a plan to develop huge offshore natural gas deposits after a minister who had been holding up the plan stepped down. Economy Minister Aryeh Deri, who had opposed waiving normal antitrust laws to give rapid approval to a framework deal to develop the gas fields off Israel's Mediterranean coast, said he had offered his resignation. His decision allows Netanyahu to take the helm of the Economy Ministry and give final approval to a framework deal he reached in August with Texas-based Noble Energy and Israel's Delek Group.

Oman: There has been a 5.5 per cent uptick in the sultanate's production of super (95) petrol during the first three quarters of 2015 with output rising to 17.03mn barrels from 16.15mn barrels a year earlier, according to National Centre for Statistics and Information (NCSI) data. Regular (90) petrol output during the period, however, declined 40.8 per cent 1.63mn barrels from 2.75mn barrels. The same period recorded a 2.1 per cent output growth for the entire range of petroleum products including petrol, jet fuel, gas and fuel oils, LPG, naphtha, propylene, long residual and other fuels. 

OPEC: OPEC oil output has fallen in October from the previous month, a Reuters survey found on Friday, as declines in top producers Saudi Arabia and Iraq outweighed higher supply from African members. The drops are not indicative of deliberate supply cuts to prop up prices, sources in the survey said, and the Organization of the Petroleum Exporting Countries is still pumping close to a record high as major producers focus on defending market share. OPEC supply has fallen in October to 31.64 million barrels per day (bpd) from a revised 31.76 million in September, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants. With one day left in October, the final figures could be revised.

Saudi Arabia: Saudi Arabia's Sadara Basic Services, fully owned by Sadara Chemical Co, has signed agreements covering storage facilities and port services, it said on Sunday as the firm prepares to start producing petrochemicals by the end of this year. Sadara Chemical is a $20 billion petrochemical joint venture between national oil giant Saudi Aramco and U.S. firm Dow Chemical. The partners have said the venture will go ahead on schedule despite slumping global oil and petrochemical prices. Sadara will sell some tank storage facilities to Jubail Chemical and Storage Services Co (JCSSC) at cost for around 1.76 billion riyals ($470 million), it said in a Saudi bourse statement. 

Rest of the World

Ecuador: Ecuador is in talks with Occidental Petroleum Corp to seek an agreement over a roughly $1.77 billion award the Andean country was ordered to pay for seizing the U.S.-based company's assets in 2006, President Rafael Correa said on Saturday. The World Bank's International Center for Settlement of Investment Disputes (ICSID) in 2012 ordered Ecuador to pay the damages to Occidental, an award that the OPEC member has demanded be annulled. Correa said he expects a decision on the request on Monday. 

France: Total reported a 23% YoY fall in Q3-2015 net profit to $2.8 billion. Income from Upstream segment fell 60% YoY to $1.1 billion, while income from refining and chemicals segment was up 82% YoY to $1.4 billion. Marketing and Services segment income grew 13% YoY to $423 million. Net production was up 10% YoY to 2.3 MMBOE/d, aided by the start up and ramp up of projects including CLOV, West Franklin Phase, Eldfisk II and Termokarstovoye, and also the addition of ADCO concession in UAE. 

Mexico: Lukoil, Russia's No.2 oil firm, plans to take part in a tender to explore for oil and gas in the Gulf of Mexico, Vagit Alekperov, chief executive with Lukoil, was quoted as saying by TASS news agency on Friday. "Now there will be a third round, offshore... We plan to take part in it," Alekperov said. 

Russia: The Yamal Liquefied Natural Gas project in Russia's far north has a high chance of attracting financing by the end of this year, Russian Energy Minister Alexander Novak said on Saturday, RIA agency reported. Novak said the financing would include $12 billion that has been offered by Chinese banks, RIA reported. "Decisions by the banks have already been taken. Now all that is left is to conclude contracts," it quoted Novak as saying. 

United Kingdom / Netherlands: More than $19 billion in oil and gas writedowns have been reported in a single week as producers acknowledge what investors already knew. Royal Dutch Shell Plc leads the pack in recognizing that drilling prospects are worth a lot less than they used to. The producer announced its worst loss in 16 years on Thursday, including $8.2 billion in impairments. Southwestern Energy Co., Whiting Petroleum Corp. and Anadarko Petroleum Corp. have likewise written off acreage value. For investors, those charges aren’t much of a surprise after oil tumbled 44 percent in the past year, dragging stock prices along with it. Shell has declined 15 percent in the past 12 months, Whiting is down 73 percent and Anadarko fell 26 percent. 

United Kingdom: The Oil and Gas Authority announced Friday that the data acquisition stage of a UK government-funded seismic campaign has been successfully completed on time and without incident. The £20 million ($30.79 million) program in underexplored areas of the United Kingdom Continental Shelf (UKCS), which acquired more than 12,000 miles of new 2D seismic lines over a 77,000 square mile area, will “significantly improve” the previously sparse seismic coverage in the Rockall Trough and Mid-North Sea High regions, according to an OGA statement. Data from the seismic campaign will be used for the 29th Offshore Licensing Round, which will be announced in 2016. 

United Kingdom: BG Group Plc raised it’s output forecast in a boost for Royal Dutch Shell Plc, which agreed to buy the U.K.’s third-biggest oil and gas company in a deal scheduled to be completed early next year. The company increased its oil and natural gas production target to 680,000 to 700,000 barrels a day this year from an earlier estimate of as much as 690,000. Third-quarter adjusted net income fell 63 percent to $280 million from $759 million a year earlier, Reading, England-based BG said Friday in a statement. That beat the $200.5 million average estimate of 11 analysts surveyed by Bloomberg as output rose 26 percent. 

USA: Chevron Corporation has announced successful results from Anchor-2 sidetrack-1 well, located in deep-water GoM. The Anchor-2 discovery well is located in 5,180 ft of water in Green Canyon Block 807, offshore Louisiana. The appraisal well encountered 694 ft of net oil pay, a hydrocarbon column of at least 1,800 ft in the Lower Tertiary Wilcox reservoirs and indicated the reservoirs are well developed. Ownership of Anchor: Chevron (55%, operator), Cobalt International Energy LP (20%), Venari (12.5%) and Samson Offshore Anchor LLC (12.5%). 

Energy Prices

Crude Oil ($/BBL)

Brent: $ 49.63 +2.12%
WTI: $ 46.41 +1.35%
OPEC Basket: $ 44.34 +2.64%

Natural Gas ($/MMBTU)
Henry Hub: $ 2.25 +0.45%

Steel ($/MT)
Steel Billet: $ 185.00
(LME Official – 3 months Buyer)

€ 1 = $ 1.1032 +0.44%


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