Russia's Snap Referendums In Ukraine Begin

Politics, Geopolitics & Conflict

Luhansk, Donetsk, Kherson, and Zaporizhzhya regions - four territories in Ukraine occupied by Russian forces - started holding snap referendums on Friday on joining Russia. The referendum vote will run until Sept 27. The vote on annexation will be used by Putin in an attempt to demonstrate that these territories desire to be part of Russia and are indeed "Russian", which will justify greater use of force following Russia's defeat in Kharkiv at the hands of Ukrainian forces.

Violent clashes that started on Sept 14 on the border of Tajikistan and Kyrgyzstan left more than 100 people dead before a ceasefire was signed earlier this week for what is still considered a shaky truce or the demarcation line.

Protests in Iran over the death of a young Iranian Kurdish woman under unclear circumstances after being arrested by "morality police" for a headscarf violation have so far led to the deaths of 12 people (those who can be accounted for by the Kurdistan Human Rights network). The group has also been able to verify 530 arrests, of which 150 are injured. Information is difficult to verify as Iran has cut off the internet as protests spread nationwide, after starting in the Iranian Kurdistan area in the northwest. The protests remain most intense in that area.

Iraq's new state-run oil marketing company, SOMO, has informed international companies that legal action will be taken against anyone buying crude directly from the Kurdistan Regional Government. This comes after the Iraq Federal Supreme Court ruled earlier this year that all contracts for crude extraction and export with the KRG are now invalid.

Energy Crisis in Europe

Germany has moved to nationalize troubled utility and largest gas importer, Uniper. Finland, however, said last week that it would not accept such a move from Germany without compensation. The move to nationalize the company is part of Germany's efforts to stave off an energy shortage this winter. Germany has decided to take a 99% stake in Uniper and 8% of its Finnish parent, Fortum. Uniper has struggled to keep its head above water all summer as gas prices skyrocketed and Russia cut its deliveries.

Germany has also announced that it was seizing control of three Russian-owned oil refineries, two of which belong to Rosneft. Rosneft's subsidiaries hold 12% of Germany's total refining capacity. The companies are being put under the administration of the national network regulator for an initial period of six months.

Bulgaria has launched three tenders to purchase LNG to increase its stockpiles ahead of winter. Russia supplied the majority of Bulgaria's gas prior to cutting its deliveries in August when the country boldly refused to meet Gazprom's terms for payment. Bulgaria is in talks with Azerbaijan for additional gas and is considering purchasing gas from Turkey as well, stressing that they were "not closing the door to anyone"--not even Russia. Bulgaria said it would push Gazprom to make good on its contracts for gas supplies, which were made at much cheaper rates than spot market prices. Bulgaria consumes 3 bcm of gas per year.

Deals, Mergers & Acquisitions

Privately held U.S. GoM producer QuaterNorth Energy is mulling a sale that could fetch $2 billion, including debt, and is soliciting bids from potential buyers. QuarterNorth's EBITDA is expected to be around $850 million this year.

Chevron is putting its non-operating minority stakes in more than 2,000 of its wells in Alaska up for sale, reminiscent of its Alaska exit in the early '90s, only to come roaring back there with its massive Unocal purchase. The stakes cover three oilfields, including the Endicott field, in which Chevron holds a 10% stake, the Kuparuk field (5%), and Prudhoe Bay (1.2%). Bids are due in September. Chevron values the proved and developed portion of the assets at $655 million, although it is unlikely to fetch that amount at current prices.

Origin Energy is selling its interests in the Beetaloo basin, a basin likened to the Marcellus shale play. The buyer, Tamboran, has agreed to pay $40.3 million for the assets. Tamboran is a JV between Tamboran Resources and Bryan Sheffield. The play has been a thorn in the side of Origin Energy given its capital intensity and emissions concerns, not to mention it is still in the exploration and appraisal phase. Origin will still be entitled to a 5% royalty from any future production and has secured a gas supply agreement as part of its exit.

More reports this week that Qatar and Germany's Uniper are still working through a potential LNG deal. Rumors this week are that a long-term deal-something that Germany has been opposed to before staring down the barrel of a potentially disastrous winter, energy-wise-is now near. With the flow of gas from Russia to Germany severely limited, the urgency to sign a deal has intensified-especially a long-term deal that could derail climate goals. The gas, which will come from Qatar's North Field Expansion project, isn't expected to come online until 2026, and therefore certainly won't be of any help this winter or next. Longer term, however, they would offer Germany an increased level of energy security.

Pieridae Energy has asked the federal government to ensure TC Energy will be able to get permits for a pipeline expansion that would aid Pieridae in its LNG gas terminal project located on Canada's east coast.

Iraq's state-run oil marketing company sold another batch of contaminated fuel oil. Between 600,000 and 700,000 barrels of fuel oil were contaminated with a cleaning agent and sent to term customers.

Hurricane Watch

While this year's hurricane season has until recently been extremely mild, Fiona, now a Cat 4 storm, has the potential to affect North American oil and gas infrastructure. For now, it's looking like Atlantic Canada, home to Irving Oil's 300,000 bpd refinery in New Brunswick, is most likely to find itself in Fiona's path.