Hardliners Are Gaining Influence Within Russia

Politics, Geopolitics & Conflict

Investors are still running for the hills in Brazil, where Lula's first day in office (and his return to the presidency for a third term) resulted in a market rout and sent shares of Petrobras tumbling further. Analysts predict lots of market intervention ahead, and the new incoming CEO of Petrobras (Lula ally Senator Prates) has suggested he is taking the company toward renewables in a big way.

Cracks are showing in the Libyan stalemate/powder keg, with Italian sources saying they have intel that General Haftar is holding secret talks with the Government of National Unity (GNU) led by interim prime minister Dbeibah. In doing so, Haftar is betraying Fatih Bashagha, the rival prime minister from the east appointed earlier last year who has failed to take Tripoli from Dbeibah. We have earlier suggested that some sort of deal was being discussed between Haftar and Dbeibah, when the latter managed to oust the head of the National Oil Company and replace them with loyalists.

Syria is re-emerging as a flashpoint as Turkey wages its war on Syrian Kurds and opens the door for more ISIS activity in a self-fulfilling prophecy. Last week, an attack in eastern Syria killed at least 10 oil field workers, and Syrian Kurdish-led forces are again on the offensive on two fronts-against ISIS and Turkey. Turkey's allies in the region are Sunni opposition forces, whose leaders have long been luxuriating in Turkey's finest hotels. However, Turkey appears to be changing tactics and these Sunni allies have reason to be alarmed as Erdogan meets with Assad to cut some sort of deal that would mean cutting ties with his allies and betraying them in order to take out the Kurds.

Ukraine this week launched a deadly attack on a Russian military barracks in the occupied Donetsk region. The Kremlin said 63 soldiers were killed in the attack, while Ukrainian officials claimed hundreds were killed. The attack is drawing particular attention in the Russian media because the casualties were conscripts who gave away their location by use of mobile phones. Putin has now called a ceasefire for Orthodox Christmas, from Jan 6-7. Fears now, spread by Ukraine's Defense Ministry, are that the Kremlin is preparing for a new wave of mobilization this year, which Kyiv says indicates Moscow is in this war for the long haul. We are also now seeing internal political fighting in Russia, which is highly unusual, and in this case, very dangerous. Hardliners who make Putin look soft are publicly airing their grievances and gaining significant influence in the process. Those figures include Chechen strongman Ramzan Kadyrov (who has felt emboldened to critique the failures of the war on Ukraine for months) and billionaire Yevgeny Prigozhin. Prigozhin, a former convict who now controls a huge media force along with a massive mercenary force (Wagner) is taking too much control in Ukraine, and he's also publicly taking on another elite figure in the process (again, this does not happen in Russia): St. Petersburg Governor Alexander Beglov. While the Prigozhin-Beglov public feud does not necessarily mean anything directly for Ukraine, it does mean that hardliners have become more powerful in Putin's Russia, and this is a threat to the regime-and the world. As for Kadyrov, he is also playing a significant role on the ground in Ukraine.

Discovery & Development

Talos Energy has discovered commercial quantities of oil and gas from its two deepwater wells in the GoM: Lime Rock and Venice. Talos holds a 60% interest in the discoveries, located near its Ram Powell platform. Expected combined gross production rates are in-line with pre-drill estimates, at 15,000- 20,000 boe-with 40%-60% liquids. The two discoveries will help Talos return production from Ram Powell to levels last seen 15 years ago.

Australia-based Invictus Energy said it would not go forward with its Mukuyu-1 and ST1 prospects citing unsuitable and not feasible conditions. The development would have been Zimbabwe's first oil find. Equipment and staff have been demobilized. Invictus has, however, renewed a rig contract for Mukuyu-2 or Baobab-1 drilling later this year.

TGS and CGG announced the second phase of the Foz do Amazonas 3D multi-client survey offshore Brazil. The survey will cover 11,425 km2.

Var Energi and partner Aker BP have successfully proven a new gas field north of the Goliat production complex in the Arctic Barents Sea. The Lupa prospect well is the first well on the PL 229 E license. Early analysis estimates are between 57 MMboe and 132 MMboe. Var Energi is looking at options to tie back to Goliat.

Turkey's Caycuma-1 probe hit a (58 bcm) 2 Tcf gas discovery in the Black Sea that has helped increase its gas reserves in the play to more than 25 Tcf when combined with the upgrades to the Sakarya complex.

Bahrain has announced two nat gas discoveries in the Al-Joubah and Al-Jawef reservoirs located under onshore fields Al-Khuf and Al-Onaiza, with a plan expected within 6 months. The finds have been described as "significant" but were not quantified.

Deals, Mergers & Acquisitions

Zenith Netherlands (a subsidiary of Zenith Energy Ltd), has agreed to acquire OMV's energy assets in Yemen in a deal worth $22 million. The deal is pending approval of the Yemeni and Austrian authorities. OMV holds shares in the al-Uqlah oilfield, but it is controlled by the internationally controlled government in Yemen. The field produced 6,000 bpd last January-down from 15,000 bpd before the country's civil war due to a lack of drilling activity. Two of OMV's smaller fields in Yemen are also part of the deal, which hold 571 billion cubic feet of recoverable gas. As the largest international oil player left in Yemen, OMV said in June it would exit the country as it backs away from the oil side of the business.

A video meeting between Pakistani and Russian officials on buying crude and crude products from Russia was rumored to be held this week. Pakistan claimed in December that Russia would sell oil to Pakistan at a reduced price.

Chinese President Xi Jinping said it was open to talks on oil exploration with the Philippines, with China vowing renewed focus on its relations with Manila. Exploration, specifically in the contentious South China Sea, was not mentioned.