Politics, Geopolitics & Conflict
• The two-day Syria peace talks in the Kazakh capital of Astana yielded no firm agreement on how stakeholders in the conflict and their backers will proceed from now on, but they did send a signal that all parties seem to be willing to reach an agreement. The talks were attended by representatives of the elected Syrian government, rebel groups, and Russia, Iran, and Turkey--the latter three brokering the agreement. Both Syrian sides in the conflict, according to media reports, expressed reservations to the agreement on the grounds that it had not been brokered by the Syrians themselves. The geopolitical implications of this latest development seem to be that Russia and Iran are expanding their influence in the Middle East and Turkey is not against it: Syria’s southern neighbor has pledged to make sure it only supports non-terrorist anti-Assad groups. The Astana talks are no replacement from the Geneva peace process, which is led by the UN and the U.S. No specific details on the peace process were given after the talks, aside from an announcement that Russia, Iran, and Turkey will set up a mechanism to ensure the ceasefire agreed in December is enforced.
• President Trump has approved two highly controversial pipeline projects – Keystone XL and Dakota Access – that were suspended by the previous administration due to a public outcry against the potential of an adverse impact on the environment. The move demonstrates Trump is…
Politics, Geopolitics & Conflict
• The two-day Syria peace talks in the Kazakh capital of Astana yielded no firm agreement on how stakeholders in the conflict and their backers will proceed from now on, but they did send a signal that all parties seem to be willing to reach an agreement. The talks were attended by representatives of the elected Syrian government, rebel groups, and Russia, Iran, and Turkey--the latter three brokering the agreement. Both Syrian sides in the conflict, according to media reports, expressed reservations to the agreement on the grounds that it had not been brokered by the Syrians themselves. The geopolitical implications of this latest development seem to be that Russia and Iran are expanding their influence in the Middle East and Turkey is not against it: Syria’s southern neighbor has pledged to make sure it only supports non-terrorist anti-Assad groups. The Astana talks are no replacement from the Geneva peace process, which is led by the UN and the U.S. No specific details on the peace process were given after the talks, aside from an announcement that Russia, Iran, and Turkey will set up a mechanism to ensure the ceasefire agreed in December is enforced.
• President Trump has approved two highly controversial pipeline projects – Keystone XL and Dakota Access – that were suspended by the previous administration due to a public outcry against the potential of an adverse impact on the environment. The move demonstrates Trump is staying true to his word to revive the energy industry but it raises questions about how long he will be able to keep it up as opposition is unlikely to subside, especially now that there are arguments neither of the projects will create the promised large numbers of new jobs.
• Angolan banks have sounded the alarm bell, asking the government for a bailout to avoid an all-out banking crisis. Angolan lenders have suffered from the substantial drop in oil export revenues, which constitute the majority of Angola’s foreign exchange income. The chairman of the Association of Angolan Banks said that local lenders have a liquidity problem that, if left unaddressed, could compromise the credibility of the country’s entire banking system. The news comes on top of continuing controversy at state-owned oil company Sonangol, stemming from the appointment of President Duarte’s daughter Isabella as CEO. The appointment has been challenged by a group of local lawyers, alleging it is a demonstration of nepotism and a violation of the law. Angola overtook Nigeria last year as Africa’s top oil exporter—a status that is no being challenged again by Nigeria now that militant attacks on oil installations have subsided and Angola is obliged to cut in line with the OPEC agreement.
• We’re closely watching China’s apparently latest chess move as the new U.S. government gets rolling, and the underlying pre-approved aim is to drive a wedge between China and Russia. China—if military deployment rumors are true—may have just made this strategy more difficult by deploying the DF-41 in Heilongjiang province, from where it could reach the U.S. It is on Russia’s border, but Moscow isn’t concerned largely because China has always had this capability with Russia, Heilongjiang province or no. This is a direct message from China to the US, and it could start a new nuclear arms race.
Deals, Mergers & Acquisitions
• Shell has sealed a deal for the sale of its interest in a joint venture with Saudi Basic Industries Corp. The Saudi firm (Sabic) will pay $820 million for the stake. The deal, which is part of Shell’s divestment plan aimed at reducing its debt after the acquisition of BG Group, should close by the end of the year. Sabic and Shell will at the same time boost their cooperation on other investment opportunities in Saudi Arabia and abroad.
• BP has agreed to buy two stakes in Kosmos Energy assets in Mauritania and Senegal. BP will buy a 62% working interest in the Mauritania project and a 32.5% interest in the Senegal operations. The combined acreage of the two offshore projects is 33,000 sq km of gas-rich shelf. BP will invest up to $1 billion in the development of the fields instead of payment to Kosmos.
• Noble Energy has bought Clayton Williams, a Permian-focused family-owned energy firm. The deal, valued at US$2.7 billion, will significantly expand Noble’s footprint in the star performer of the U.S. shale oil patch, including in the Wolfcamp basin that was recently estimated by the USGS to contain as much as 20 billion barrels of crude.
• Targa Resources has acquired $1.5 billion worth of midstream assets in the Permian from local field operator Outrigger Energy. The initial payment would be $565 million, which could be raised to $1.5 billion depending on the performance of the assets.
Tenders, Auctions & Contracts
• Rosneft has started shipping crude to Slovakia and Hungary, following Glencore’s acquisition of a 19.5% stake in the company. The two central European states are new markets for Russia’s top oil producer. According to sources close to the company, total deliveries, to be made via the Druzhba pipeline, will reach 500,000 tons of crude in the first quarter of the year.
• Brazil is preparing for three oil tenders this year, expected to bring in some $1.5 billion in upfront revenues, from the bonuses the tender winners will pay the state for the exploration rights they will receive. These tenders will be the first since 2015, when the last exploration licensing round failed to attract much attention, with just 14% of the blocks put up for sale finding a buyer.
Company News
• The Kurdistan Regional Government may soon restart the monthly payments to international oil companies operating in the autonomous region. The KRG suspended payments to the three energy firms – Genel, Gulf Keystone Petroleum, and DNO – seven weeks ago, pressured by the low oil prices. Now, however, as prices have risen, Kurdistan’s coffers have started filling up again and it will soon be in a position to resume monthly payments for oil exports made in recent months.
• Low oil prices plunged Oman into a budget deficit that for the period January-November 2016 reached $12.7 billion, up by 21.4% over the 11-month period and 60% more than estimated in the 2016 budget. The government identified two factors that played a role in this development: one, that its estimates for average oil prices in the period missed reality by a long shot and two, that expenditures were higher than stipulated in the budget.
Discovery & Development
• BP has launched an expansion project at its Thunder Horse field in the Gulf of Mexico almost a year ahead of schedule. The $1-billion project was also $150 million below budget. This is one of the very few new projects in the Gulf after the 2010 disaster on the BP-operated Deepwater Horizon platform that caused the biggest environmental catastrophe in the history of the oil industry there.
• Total is preparing to start drilling off the Cyprus shore, after being awarded a license by the local government last month. The plot where the French company will drill is adjacent to Egypt’s giant Zohr gas field, where Italian Eni is operator.
• Pakistani-UAE joint venture Parco has announced plans to build a deep conversion refinery with a daily capacity of 300,000 barrels of crude at the port of Khalifa. The money necessary to fund the project is estimated at $5 billion, which will be provided by the UAE. Parco will now conduct a feasibility study and should its results turn out positive, go ahead with the project.
• Gazprom Neft has added two more production wells at its Prirazlomnoye field – Russia’s only offshore Arctic oil field operating to date. With a total of six wells after the additions, Prirazlomnoye is projected to yield some 19 million barrels of crude oil this year, up from 15.4 million barrels in 2016.
• Renaissance Oil and Lukoil will develop the Amatitlan block in Mexico jointly, the companies said. Amatitlan spans 56,800 acres and is estimated to hold 59 billion barrels of crude oil equivalent. It is a producing field, with peak output at 650,000 bpd but most of its reserves are considered still untapped.
• Woodside Petroleum reported a 5.5% drop in oil output for the fourth quarter of 2016 but higher sales, at 2%. The Australian company said this year production will fall further, to 84-90 million barrels of oil equivalent, from 94.9 million boe in 2016.
• Genel Energy expects its crude oil output in Kurdistan to fall by as much as 34% this year because the company lacks sufficient funds to invest in expanding production. This means that average daily oil output in 2017 will be between 35,000-43,000 bpd, from 53,300 bpd last year.
Regulatory Updates
• Environmental groups are staging protests against the Bayou Bridge oil pipeline, proposed to be built in Louisiana. Protests began at the first hearing for a U.S. Army Corps permit and are expected to continue during the second hearing, scheduled for early February. According to the organizations behind the protest, the companies behind Bayou Bridge are the same as the ones behind Dakota Access and the project will have a harmful effect on the Louisiana environment.
