Consortium to Pay Rosneft $230mn to Settle Row
Russia’s Sakhalin-1 consortium, led by ExxonMobil, has agreed to pay Russian energy giant Rosneft $230 million in an out-of-court settlement of an oil production dispute, an executive of an Indian consortium partner said.
Rosneft had filed a $1.4 billion lawsuit in the Sakhalin district arbitration court in Russia’s far east, accusing the consortium of unjust enrichment, an allegation the consortium denied.
The dispute centred around how oil should be shared between the Sakhalin-1 concession and an adjacent Rosneft field.
“Rosneft was demanding that it should be paid $1.4 billion ... We have agreed for an out-of-court settlement and will be paying $230 million as Rosneft entered the other area in 2011,” N.K. Verma, managing director of India’s ONGC Videsh, a partner in the Sakhalin-1 consortium, told Reuters.
Rosneft, which also has a stake in the Sakhalin-1 consortium, declined to comment. ExxonMobil in Moscow declined immediate comment.
“We don’t have anything we can share,” said Suann Guthrie, an ExxonMobil spokeswoman in the United States.
P.K. Rao, director for operations at ONGC Videsh, said the out-of-court settlement was reached about 10 days ago.
The row was over oil “cross-flows” from Northern Chayvo oilfield, controlled by Rosneft.
Sakhalin-1, off Russia’s Pacific Ocean coast, is operated by Exxon Neftegaz Ltd, through which ExxonMobil owns 30 percent in the project. Rosneft and ONGC control 20 percent each. Japanese consortium Sodeco owns 30 percent.
ONGC’s Verma said production at Sakhalin-1 reached 250,000 barrels per day (bpd), up from some 200,000 bpd, as Russia had lifted output restrictions as part of a global deal with OPEC.
Russia’s total oil production hit a post-Soviet high of 11.347 million barrels per day.
The dispute between Rosneft and the Sakhalin-1 consortium unfolded against the background of a wider rift between Russia and the United States over what Washington called Moscow’s meddling in a 2016 presidential election.
Exxon had to quit some joint projects with Rosneft, including developing Arctic oil and gas, over sanctions imposed on Russia by the United States. Participation in Sakhalin-1 is not punishable by sanctions.
4---Mexico President to Honor Existing Oil Contracts
Mexico’s president-elect, Andres Manuel Lopez Obrador, assured private energy executives in a closed-door meeting their contracts will not be canceled if they meet existing terms, the head of the country’s main oil producers’ association said.
Lopez Obrador, who has often expressed skepticism of private sector involvement in Mexico’s oil industry, met for the first time with oil and gas executives, striking what was described as a diplomatic tone with them.
“The president-elect told us on various occasions that they will respect contracts so long as we obviously comply with all of the contracts’ commitments,” said Alberto de la Fuente, president of Mexico’s AMEXHI producers’ group, following the meeting with Lopez Obrador.
“We left feeling at ease that our contracts will be honored,” added De la Fuente, who also is head of Anglo-Dutch oil major Royal Dutch Shell in Mexico.
Set to become Mexico’s first leftist president in modern history when he takes office in December, Lopez Obrador did not speak to reporters following the closed-door event.
But his designated energy minister, Rocio Nahle, confirmed the incoming administration’s support for the contracts.
“We will respect the rule of law and the agreements that have been made with the outgoing government,” Nahle said.
She said the Lopez Obrador administration also will help companies deal with any regulatory delays they face.
“We made a commitment that we will talk to the regulators, or more to the point that we will review the regulators because there is a constant complaint that they take too much time,” said Nahle.
Lopez Obrador earlier pledged to review for possible corruption the more than 100 exploration and production contracts that have been awarded under a sweeping oil opening finalized in 2014.
The pledge to address regulatory bottlenecks could cheer companies starting exploration and production ventures, some of which have criticized the slow pace of approvals.
“The whole regulatory process is difficult and you have to have a lot of patience,” said Alfredo Bejos Checa, chief executive of Grupo Diavaz, at a conference in Acapulco.
Grupo Diavaz is a longtime service provider to Pemex and now operates fields on its own.
At the same conference, Maria Moraeus Hanssen, CEO of Germany’s DEA Deutsche Erodoel AG, singled out oil safety regulator ASEA as slow moving.
“Sometimes, we get the impression that things are not completely coordinated (among government agencies),” she said. “Processes before ASEA have been time-consuming.”
5----Wintershall, DEA to Create Oil/Gas Business
Chemicals group BASF and LetterOne signed a merger agreement to combine their respective oil and gas businesses Wintershall and DEA to create an independent European oil and gas company, the companies said.
The new company called Wintershall DEA will be headquartered in Kassel and Hamburg and will seek to list itself through an initial public offering, BASF said.
Under the deal, LetterOne will put all its shares in a vehicle of Russian billionaire Mikhail Fridman’s DEA into Wintershall Holding GmbH against the issuance of new shares of the company to LetterOne.
BASF will initially hold 67 percent and LetterOne 33 percent of Wintershall DEA’s ordinary shares.
The Joint Venture will aim for daily production of 750,000 to 800,000 BOE between 2021 and 2023 and is expecting synergies of at least 200 million euros ($232.80 million) per year are expected as of the third year following the closing of the transaction.
The new independent company will be led by the chief executive of Wintershall, Mario Mehran, and Maria Moraeus Hanssen, CEO of DEA, will be the deputy CEO and chief operating Officer of the joint venture.
6---Shell to Handle Contract US Refinery Talks
Royal Dutch Shell Plc said it looks forward to handling industry negotiations on a national contract covering 30,000 U.S. refinery and chemical plant workers represented by the United Steelworkers union (USW).
The talks begin formally in January and Shell, which has represented its peers since 1997, is lead negotiator on behalf of companies including BP, Chevron Corp, Exxon Mobil Corp and others.
The refining industry this year has enjoyed strong profits, near-full utilization rates and record product exports. In the June quarter, the margin on turning crude to gasoline, diesel and other products was the highest since 2015.
“Our goal in the bargaining process will be to reach an agreement with the USW which ensures that our employees continue to receive competitive pay and benefits while keeping the industry competitive in the global marketplace,” Shell spokesman Ray Fisher said in a statement.
Shell’s statement was similar to that made by the head of the USW’s oil bargaining program. The union is aiming for a three-year contract with wage increases of about 6 percent per year.
“Our goal is a mutually beneficial agreement for our members and the companies they work for,” Kim Nibarger, chairman of the union’s national oil bargaining program, said in an interview.
Union members with four years’ experience currently earn about $40 an hour, Nibarger said.
The current contract expires on Feb. 1. The one to be negotiated between Shell and United Steelworkers will set the pattern for contracts between local unions and refineries, chemical plants and pipeline operators.
7---Croatia Extends Deadline LNG Terminal Project
Croatia has again extended a deadline for submitting binding bids for the use of a planned floating liquefied natural gas (LNG) terminal in the northern Adriatic.
“The deadline has been moved from Sept. 28 to Dec. 20 this year,” state-owned LNG Croatia said in a statement on its website.
The decision was taken after a request from potential bidders, it added.
The first time the deadline was extended in early August was for the same reason.
The terminal on the northern Adriatic island of Krk is planned as part of the European Union’s efforts to diversify from Russian energy imports. The targeted markets are countries in central and southeastern Europe.
The value of the terminal is seen at 250 million euros ($291.63 million) with the European Union financing just over 120 million euros.
The capacity of the terminal, which has a tentative date for operation from early 2020, will eventually depend on demand.
Local media reported earlier this year that initial demand for the terminal had been rather low, causing a delay in the final investment decision originally planned for last June. LNG Croatia refused to comment on the bidding procedure.
8=====Saudi Aramco to Produce More in Q4
State oil giant Saudi Aramco will bring new crude output capacity of some 550,000 barrels per day (bpd) online in the fourth quarter from two fields - Khurais and Manifa - giving it the ability to boost production if there is demand, a source said.
The expansion of crude output capacity from Khurais field, which produces light sour crude, will add around 250,000-300,000 barrels per day boosting the field potential to 1.5 million bpd, one source familiar with the matter said.
The resumption of production from the giant Manifa field, which pumps heavy sour oil, after resolving some maintenance issues will add another 300,000 bpd to Aramco’s crude output capacity, the source said.
Saudi Arabia, the world’s largest oil exporter, is the only major producer with oil output capacity of about 12 million bpd. The additional output increase will not raise Aramco’s capacity above the current 12 million bpd.
But that would give the company more flexibility to boost supplies and reach higher production levels sooner than before.
Saudi Arabia currently pumps around 10.5 million bpd and will quietly add extra oil to the market over the next couple of months to offset a drop in Iranian production.
Saudi Energy Minister Khalid al-Falih said production from Manifa would return to 900,000 bpd soon after a pipeline issue has been resolved which has caused output decline from the field over the past months.
The Khurais expansion project is crucial to help Saudi Arabia sustain its spare capacity and help reduce pressure on ageing fields, long seen by the market as a crucial cushion that can balance the market during times of oversupply or shortage.
Spare capacity is the kingdom’s tool to allow it to raise output quick enough in case of any sudden supply outage or to keep oil prices in check.
9----Malaysia Oil Firm to Double Production
Malaysian oil and gas exploration and production company Hibiscus Petroleum is aiming to double its oil output in the United Kingdom and Malaysia to 20,000 barrels per day (bpd) by 2021, a senior company executive said.
It needs an additional $50 million by 2020 to boost production from about 10,000 bpd now, Kenneth Pereira, managing director of the company, told reporters.
“That’s our maximum negative cashflow for projects already identified and that’s based on a $60 per barrel oil scenario,” he said.
“So at $70 per barrel oil, it will be something like $40 million.”
The company, which develops small oil and gas fields in Asia, has two major producing assets.
One is the Anasuria Cluster in the North Sea in the United Kingdom. The other is in Malaysia, the 2011 North Sabah production sharing contract (PSC), which includes the Labuan crude oil terminal.
It also owns a discovery in Australia that has not produced first oil yet, Pereira said.
Hibiscus has a 10-year marketing and offtake agreement with BP Oil International to sell crude from the North Sea, and a three-year agreement to sell crude from the Malaysian oil field to commodity trader Trafigura.
Malaysia’s largest asset management firm, Permodalan Nasional Bhd (PNB), expects talks to acquire commercial assets within London’s Battersea Power Station to complete in the fourth quarter of this year, its CEO said.
The ongoing talks are “positive” and the fund may seek another extension to continue the discussions, PNB CEO Abdul Rahman Ahmad said.
The government-linked fund, alongside state pension fund Employees Provident Fund (EPF), had in January proposed to buy the Power Station building within phase two of the development for a total of 1.608 billion pounds ($2.11 billion). The asset consists mainly of retail and office spaces.
Both funds first agreed to extend the period for talks until Sept. 30.
“We are still in the process of finalising the transaction, we are nearly completing our due diligence exercise. We would probably have better clarity in the fourth quarter,” Abdul Rahman told reporters at a briefing.
10----Total Sees Output Boost From Deepwater Projects
Oil and gas major Total said it expected deepwater oil and gas operations to make a strong contribution to its output and cash flow thanks to major developments in the West Africa’s Gulf of Guinea region, Brazil and U.S. Gulf area.
Production from deepwater projects is expected to reach 500,000 barrels of oil equivalent per day (Kboe/d) by 2020, contributing to its 6 to 7 percent output growth target per year from 2017 to 2020.
“Deepwater is today for us a growing and very profitable part of the portfolio,” Total’s President for Exploration and Production Arnaud Breuillac, told investors in New York.
Deepwater production will increase to more than half a million barrels of oil per day by 2020 with cash flow from operations at over $30 per barrel at an oil price of $60 per barrel, Breuillac said.
“Deepwater is approximately 15 percent of the group’s production but it will contribute to more than 35 percent of cash flow from operations in the coming years,” he said during a presentation.
Total’s deepwater projects on the West African coast includes Moho Nord in Congo, Kaombo North in Angola which began production in July. Production is expected to start at its Nigeria’s Egina field by the end of the year, and at Kaombo South by the summer of 2019.
Breuillac said the French company had a number of significant projects in pipeline in Brazil’s “pre-salt” or deep offshore projects, including Lapa, Libra and Lara projects which could add around 100 kboe/d by 2022.
In the Gulf of Mexico, the Ballymore giant discovery is being appraised, while production and more developments were ongoing at its Jack and Tahiti operations.
Total is also exploring in several new deep water areas in Guyana, Mauritania and Senegal, and in South African and Namibia.
“We have a strong deepwater exploration portfolio with numerous drill targets in large areas, targeting significant areas to be drilled in the next two to three years,” B