Friday, August 31, 2018

OPEC August oil output hits 2018 high despite Iran losses: Reuters survey

A gas flare on an oil production platform is seen alongside an Iranian flag in the Gulf July 25, 2005.
A gas flare on an oil production platform is seen alongside an Iranian flag in the Gulf July 25, 2005. | Photo: Reuters

LONDON (Reuters) - OPEC oil output has risen this month to a 2018 high as Libyan production recovered and Iraq’s southern exports hit a record, a Reuters survey found, although a cut in Iranian shipments due to U.S. sanctions limited the increase.

The 15-member Organization of the Petroleum Exporting Countries has pumped 32.79 million barrels per day in August, the survey on Friday found, up 220,000 bpd from July’s revised level and the highest this year. 

OPEC and allies agreed in June to boost supply as U.S. President Donald Trump urged producers to offset losses caused by the renewed sanctions on Iran and to dampen prices, which this year hit $80 a barrel for the first time since 2014. 

In June, OPEC, Russia and other non-members agreed to return to 100 percent compliance with oil output cuts that began in January 2017, after months of underproduction in Venezuela and elsewhere pushed adherence above 160 percent. 

Top exporter Saudi Arabia, which promised a “measurable” boost in its own output, said the decision would translate into an output rise of about 1 million bpd. 

Even so, OPEC’s adherence with supply targets has actually risen to 120 percent in August from a revised 117 percent in July, the survey found, because extra barrels from Saudi and others did not fully offset losses in Iran and declining output in Venezuela and Angola.


The biggest increase in supplies this month has come from Libya, whose output remains volatile due to unrest. 

Production at the Sharara oilfield, the country’s largest, increased after the restart of a control station that had been closed due to the kidnapping of two workers, and other fields also pumped more. 

The second-largest increase came from Iraq, where southern exports reached a record high. Shipments also increased from the north, leaving Iraq as OPEC’s least compliant member in August according to the survey. 

Saudi Arabia, after a big increase in June output, apparently backtracked on plans for a further boost in July and cut supply last month to 10.40 million bpd. Supply has edged up to 10.48 million bpd in August, the survey found, still lower than June’s 10.60 million bpd. 

Supply in Nigeria, which like Libya is exempt from the OPEC supply cut pact because its output is often curbed by unplanned outages due to unrest and conflict, rose by 30,000 bpd.

Kuwait and the United Arab Emirates, after raising output in July following the OPEC deal, kept supply steady in August, the survey found. 

Among countries with lower output, the biggest drop of 150,000 bpd was in Iran. Exports fell as returning U.S. sanctions discouraged companies from buying the country’s oil. 

Production also slipped in Venezuela, where the oil industry is starved of funds because of economic crisis, and in Angola due to natural decline at oilfields. 

Despite these decreases, OPEC output in August has risen to the highest since September 2017 according to Reuters surveys. This partly reflects the addition of Congo Republic to OPEC in June, not just increases by existing members. 

Before Congo joined, OPEC had an implied production target for 2018 of 32.78 million bpd, based on cutbacks detailed in late 2016 and Nigeria and Libya’s expectations of 2018 output. 

According to the survey, OPEC excluding Congo pumped about 310,000 bpd below this implied target in August. 

The survey aims to track supply to market and is based on shipping data provided by external sources, Thomson Reuters flows data and information provided by sources at oil companies, OPEC and consulting firms. 

Additional reporting by Rania El Gamal; editing by David Evans and Jason Neely

Thursday, August 30, 2018

OPEC to discuss compensating for Iranian supply drop after U.S. sanctions: Iraqi official

The logo of the of the Organization of the Petroleum Exporting Countries (OPEC) is displayed.
Joe Klamar | AFP | Getty Images
The logo of the of the Organization of the Petroleum Exporting Countries (OPEC) is displayed.

BAGHDAD (Reuters) - OPEC will discuss in December whether producers can compensate for a sudden drop in Iranian oil supply after U.S sanctions against Tehran start in November, the head of Iraq’s state-oil marketer SOMO, Alaa al-Yasiri, told Reuters on Wednesday. 

Yasiri said a sudden drop in Iran oil exports will have a negative impact on prices and market fundamentals. 

“A sudden drop in Iranian crude shipments from the market will cause big shortages and a negative impact on oil prices,” he said, referring to a possible increase in prices. 

“It’s very difficult to predict what’s going to happen in next OPEC meeting but producers must find ways to make up for Iranian crude that the market will lose.” 

“The major issue during next OPEC meeting will be are producers really ready to pump more oil to compensate Iran’s share,” he added. 

Iraq has resumed crude shipments to Iran from its Kirkuk oil fields following a few days stoppage due to logistical issues, he said, adding that so far Iraq had only shipped 500,000 barrels and hopes to ship a total of 1 million before the November U.S. sanctions against Iran kick in. 

SOMO is studying a request from Jordan to resume crude supplies of 10,000 to 15,000 barrels per day via trucks, Yasiri said, and the Jordanian energy minister is expected to visit Baghdad to finalize the deal. 

Iraq’s August crude oil exports are nearing 3.595 million barrels per day, the SOMO chief said. 

Reporting by Ahmed Rasheed; Writing by Ahmed Aboulenein; Editing by Kirsten Donovan and Jane Merriman

Wednesday, August 29, 2018

Crude Oil Imports At China’s Independent Refiners Rebound

Shandong's teapot refinery hubs and capacities

Following four consecutive months of declining oil imports, China’s independent refiners boosted crude oil imports in August by 40 percent from July, as many returned from maintenance to prepare for winter fuel demand amid recovering refining margins, according to data by Thomson Reuters Oil Research and Forecasts.

Crude oil imports for Chinese independent refiners—the so-called teapots—have averaged 1.4 million bpd so far in August, up by 40 percent compared to July and up by 10 percent from August last year, Thomson Reuters Oil Research reported.

For now, this rebound in imports could ease concerns that slumping teapot imports, which represent around one-fifth of China’s total crude oil imports—could affect oil demand in the world’s biggest oil-importing country.

Under the stricter tax regulations and reporting mechanisms effective March 1, the teapots can no longer avoid paying consumption taxes on refined oil product sales—as they have over the past three years. In other words, their profit bonanza is coming to an end.

Despite ample government-approved crude import quotas, independent refiners have started losing money on refining, prompting a cut in utilization rates and closures for maintenance in order to reduce exposure to unfavorable market conditions.

With higher oil prices this year and the taxes, the teapots are expected to reduce their imports, threatening China’s oil demand growth, and ultimately, global oil demand growth.

Now many teapots are back from maintenance, and during the extended period of shutdowns the Chinese diesel and gasoline glut was erased, boosting fuel prices and improving refining margins.

The higher oil product prices encouraged more independent refiners to come back from maintenance, a manager at a Dongying-based teapot refiner told Reuters, noting that the refiner he works with finally managed to book a small profit in August.

Analysts who spoke to Reuters expect crude oil demand next month to further firm up, as the teapots will be preparing to boost fuel production in Q4.

However, executives warn that teapot profits--if any--are still looking slim this year, and some smaller, poorly-managed independent refiners might go out of business, while the larger players are expected to survive.

By Tsvetana Paraskova for

Trinidad to close oil refinery

Logo of United Petrotrin

The Trinidad Government has decided to shut down the refinery of State oil company Petrotrin.

The country can no longer afford to continue to refine oil and lose billions of dollars in this process, a senior Cabinet source told the Express yesterday.

The company will instead be expanding its operations in oil exploration and production, the source said.

The source said Oilfields Workers’ Trade Union (OWTU) president general Ancel Roget was told “in no uncertain terms that the major restructuring at Petrotrin will be that Trinidad and Tobago would be moving out of the refinery business because it does not have oil to refine”.

Tuesday, August 28, 2018

Meet The 38 Year-Old Entrepreneur Who Built A $1 Billion Oil Company In Ghana

Kevin Okyere

Even in the bloated-budget world of oil exploration, $70 million is a lot of money. And yet that’s how much Kevin Okyere, one of Ghana’s savviest yet understated entrepreneurs, has personally expended in developing the highly promising West Cape Three Points Block 2 offshore Ghana (WCTP2). Springfield Group, the energy conglomerate he founded and controls, owns an 82% interest and operatorship in the block which covers 673 square kilometers in the Gulf of Guinea's Tano Basin. It’s the first time a homegrown Ghanaian company is exploring for oil, and the stakes are high.

“We can’t afford to fail,” Kevin Okyere quips while nibbling on squid karaage at a swanky Japanese restaurant in downtown Accra, and ignoring the gently buzzing phone on the table. “I mean, we’re the first Ghanaian company to venture into oil exploration. We are in a unique position to set a precedent for indigenous companies looking to participate in the upstream sector. If we succeed, then we’d have sent a strong message – that Ghanaians are just as capable. That’s really important to me.”

He is breaking bread with a couple of team members on this chilly August evening. Garbed in an untucked official shirt, khaki pants and black sneakers, Okyere looks more like the CEO of a Silicon Valley startup than the head of one of West Africa’s most successful energy conglomerates. His look may be modest; his ambitions are anything but. In just 12 years, Kevin Okyere, only 38, has built his company, Springfield Group, into a $1 billion (annual revenues) multi- faceted Ghanaian energy behemoth. Springfield Group is involved in trading and transporting hydrocarbons, terminalling and storage, gas stations, and recently, oil exploration. The company employs hundreds of people in Ghana and Nigeria.

Kevin Okyere was born in 1980 to an affluent family in Ghana’s gold-rich Ashanti region. His father had built a substantial fortune in construction, steel manufacturing and large-scale cocoa farming, before he was enstooled as a traditional chief. Okyere displayed entrepreneurial promise at a very young age. By the time he was 11, he was already selling iced water to football supporters in the Kumasi Sports Stadium to make extra pocket money. During his family’s annual summer vacation trips to London, he would take on jobs with textile companies in the U.K.

“Our family house was not too far from the stadium. I would often put water in our chest freezers at home, and then sell the iced water to the supporters watching the games in the Stadium. Everyone used to call me ‘Eddie Murphy’ in reference to the movie, ‘Coming To America’. The movie was quite recent in Ghana at the time. They used to wonder why I was working when my father was wealthy,” he recalls.

After completing his High School education in Ghana, he proceeded to the United States where he studied Accounting at the George Mason University in Virginia. While studying, Okyere worked several jobs at varying points – caring for mentally challenged patients at their homes, working as a security guard, and at one point working in the mail room at AOL. “Anything legitimate that could earn me money, I took it,” he says.

At the later stages of his Accounting degree, he was able to secure more prestigious jobs. He was one of the earliest employees of XM Satellite radio now (Sirius XM Holdings) where he worked as a radio programmer. He also had a stint at Sprint where he worked in the customer service department. By the time he had completed his degree, he had gotten a job offer from one of the leading commercial banks in the U.S. The job was to pay him $72,000 a year. As tempting as the offer was, Okyere decided to return home to Ghana.

“Unlike the U.S, Ghana was virgin territory for a lot of businesses. There were too many opportunities to explore in Ghana and I knew I could be more successful home than abroad. I knew I wanted to run my own business, but I wasn’t even sure of what I was going to do. My two previous jobs in the U.S had been in telecom so I was more inclined towards launching a business telecom sector,” he says.

Okyere moved backed to Ghana in 2004 and joined his elder sister in her business in order to understand how the country worked. A year after working for his sister, he put together a small team of investors and established Westland Alliance Ltd, a telecoms company that provided international call routing services for AT&T and several international calling card companies. Westland Alliance and its subsidiaries eventually diversified into cell towers and value-added services (VAS) for mobile phone companies. The company was extremely successful, but it wasn’t long before he got tired of the telecoms business and decided to opt out.

“The company was doing very well, but there was a lot of uncertainty with our core business – the call routing business. My contracts with our clients were revisited every year and I realized that my destiny was in the hand of the telecom companies who reserved the right to terminate my contract at any time. I also couldn’t own a mobile telecom company because the license alone cost hundreds of millions of dollars – which was clearly out of my reach. I started planning my exit and looking for the next big opportunity,” he recalls.

In 2006, while still running Westland Alliance, Okyere started working with a business acquaintance who supplied crude oil and condensates to the Tema refinery. As Okyere interacted frequently with this associate, he learned that there was a shortfall of storage facilities for petroleum products in Tema. Flush with cash from his telecom adventures, he acquired land and began building a storage tank farm in Tema, close to the refinery. When he invited officials from Ghana’s National Petroleum Authority to inspect his construction project, they were so surprised that someone so young – he was 26 at the time – was undertaking such a capital-intensive project, and employing scores of indigenous Ghanaians. The officials were so impressed with what he was building, so much that they asked him to apply for a Petroleum Product import license.

That marked the genesis of Springfield Energy’s flagship trading business. Eversince 2008, Springfield Energy has imported refined petroleum products such as gasoline, dual-purpose kerosene, gasoil, naphtha and jet fuel to Ghana. The company is now the dominant importer of fuel products into Ghana with revenues of more than $1 billion in its trading business alone. In those days, only locally owned trading companies were permitted to import fuel products. International oil companies who were looking to do business in Ghana had to partner with locally owned companies. When BP PLC came to Ghana in 2010 and was looking for a trading company they could partner with, the British multinational partnered with Springfield – a partnership that still exists today. Springfield Group has consistently ploughed its profits from its core trading business into building and acquiring other businesses within the energy value train and now co-owns gas stations in Ghana, storage facilities, an oilfield services subsidiary and a haulage company.

In 2011, looking to expand their business beyond Ghana, Okyere and his partner, Geena Malkani, decided to visit neighboring Nigeria to explore opportunities in the downstream space. They formed a new company, Springfield Ashburton, and applied to the state-owned oil corporation, the Nigerian National Petroleum Corporation (NNPC), to be included among the international companies to be awarded the lucrative crude oil lifting contracts. For two years – in 2012 and 2013, Springfield Ashburton tried without success make the cut. In 2014 - three years after Springfield Ashburton had been registered in Nigeria – and after partnering with BP PLC, they were enlisted for the 2014/2015 Crude Oil Term Contract. It was the first time a Ghanaian company – an unknown trading house in Nigerian circles, was awarded the highly coveted long-term oil contract. Nigerian media questioned the selection of a Ghanaian company for the contracts and insinuated that Okyere was a close business associate of Nigeria’s former powerful Petroleum minister, Diezani Alison-Madueke. Okyere is quick to deny any association with her and notes that the newspapers that wrote the stories linking him to the former minister retracted their stories after Springfield successfully sued them in court. Okyere also won financial judgments as well.

“I was not the minister’s associate or acquaintance and we did not have any sort of relationship. Springfield Ashburton was awarded the contract strictly on merit, and because of our sheer persistence. For 3 years since 2011 we had been visiting the NNPC offices every week, liaising with officials of the Crude Oil Marketing department, demonstrating our capacity. They saw our track record in Ghana; we had a turnover of more than $800 million in 2012 even before we won the Nigerian contracts and the records are there. We had the financial capacity and a strategic partnership with BP that gave us an edge to win after our first two attempts. Those media stories were sponsored by our competitors who were unhappy with us,” he says.

Springfield Ashburton still does business in Nigeria and in 2015 was shortlisted by the NNPC for the Offshore Processing Agreements (OPA) – a contract whereby oil traders or refining companies lift crude, refine it abroad and deliver the resulting products back to the NNPC. NNPC subsequently discontinued the entire Offshore Processing Agreements discontinued the Offshore Processing Arrangement, adopting direct trading of Nigeria’s oil instead.

In 2012 Okyere applied for an oil block in Ghana, setting his sights on WCTP2, an oil block with proven reserves on it. Kosmos Energy, a Dallas, Texas-based Oil Company and Tullow Oil, which are currently producing oil from the Jubilee oil field, had just relinquished WCTP2 which was carved out of the West Cape Three Points block, following the delineation of the Jubilee unitization area. The Ghanaian government, worried that Okyere could simply flip the block for a profit, compelled him to set up a full-fledged E&P unit before they could award the block to Springfield Group. The government also required Okyere to commit at least $100 million over a 7-year period in developing the block. Okyere set up Springfield E&P in 2012, but it wasn’t until 2016 – four years later, that the government awarded Springfield the rights to explore for oil on WCTP2 and it was ratified by parliament. Okyere subsequently hired oil veteran Bernard Vigneaux, a former executive of Total and Perenco, to lead exploration efforts.

The block, WCTP2, is located in an enviable position, with Tullow Oil/ Kosmos Energy’s prolific Jubilee field immediately to the west, Hess’ Greater Pecan project to the south and Eni’s Sankofa-Gye Nyame field to the east. The previous operator of the block, Kosmos Energy, drilled five exploration wells in WCTP2 including the Odum and Banda oil discoveries which are substantial. Based on vintage seismic 3D data inherited from Kosmos Energy, Springfield has been able to identify a number of large Campanian-age leads and prospects on the block. The company is currently evaluating about 800-square kilometers of fresh 3D broadband seismic data that PGS’ Ramform Titan vessel acquired on the deep-water block earlier this year, whilst simultaneously conducting exploration activities for new leads and prospects. It’s a ridiculously expensive venture, and so far, Okyere has pumped in $70 million of his own funds into the project. According to him, the entire block is sitting on 3.5 billion barrels of oil and 5 trillion cubic feet of gas. Springfield E&P is set to drill a debut well in January 2019.

“For me, the most important reason we are pursuing this is to prove that Ghanaians can do it. We have a trading business that is doing well, and I could easily take the safe route to making more money by investing in real estate or something less tedious. But we look at ourselves as the indigenous pacesetters in this industry. If we are successful – and we will be, new local players will come up, and that’s very important for the ecosystem,” he says.

When he is not building Springfield Group into Ghana’s dominant energy company, Okyere devotes his time to philanthropy. His Kevin Okyere Foundation in partnership with the Springfield Group supports programmes in education and health across Ghana. The Foundation has a standing agreement with the largest government-owned hospital in the country whereby the foundation funds the hospital bills of poor patients who cannot afford to foot their bills. The foundation pays the school fees of hundreds of Primary school children in Ghana, and he sends some of the country’s brightest students to Universities in North America and Europe.

“I’ve been fortunate in business and in life, and giving back is the least I can do. In the end, I don’t think I want to be remembered as one of the wealthiest Ghanaians; I’d like to be remembered as one of the biggest givers.”

Drop me a line at mfon.nsehe @ Follow me on Twitter @MfonobongNsehe

Aramco to lose "Forever-Right" to Saudi oil resources


In what could be a power struggle between Saudi Aramco and the Saudi government, the Kingdom has altered the concession contract with the oil giant to 40 years with an option for renewal from a previous deal for oil and gas rights ‘in perpetuity’, the Financial Times reported on Monday, quoting three people briefed on the issue.

The changes were reportedly made as Saudi Arabia was making procedural, tax, and governance changes in preparation of the initial public offering (IPO) of Saudi Aramco, which now, it seems, is indefinitely postponed, or even called off.

Last Wednesday, reports emerged that Saudi Arabia had called off its highly anticipated, US$100-billion IPO, Reuters sources said, with even plans to list the state-run oil company on its domestic bourse, Tadawul, being scrapped. The listing was expected to be the world’s largest IPO, and the Saudis pegged a large part of the Vision 2030 economic agenda on proceeds from the IPO.

Saudi Arabia immediately denied the reports that the listing was canceled, with Energy Minister Khalid al-Falih saying in a statement carried by the Saudi Press Agency:

“The Government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum. This timing will depend on multiple factors, including favorable market conditions, and a downstream acquisition which the Company will pursue in the next few months, as directed by its Board of Directors.”

In that same statement, al-Falih said that in order to prepare for Aramco’s listing, the Saudi government had taken several steps in that direction, including “reissuing a long-term exclusive concession,” without specifying details.

According to FT’s sources, cutting the concession period from ‘forever’ to 40 years—but still well over the typical 20-year concession contracts that international oil companies have with other countries—is now pointless with the IPO stalled, and has only served to exert control over the oil giant that has tried to keep its ‘in perpetuity’ concession.

The government has sought to have a shorter concession period, closer to the 20-year concessions that Big Oil have, but this would have meant changes in what Aramco could count as oil reserves, and would have had impact on its valuation, according to FT.

By Tsvetana Paraskova for

Monday, August 27, 2018

U.S. judge lets Canadian company pursue assets from Venezuela’s Citgo

TORONTO - A U.S. judge has granted a Canadian company the right to go after prized U.S. assets belonging to Venezuela, in a bid to get paid on an $1.4 billion award tied to the 2008 nationalization of its gold mining operations by the now cash-strapped South American country.

U.S. District Judge Leonard Stark in Delaware on Thursday granted a so-called writ of attachment to Crystallex International Corp in shares of Citgo Holding, which owns a U.S.-based oil refiner controlled by state-owned Petroleos de Venezuela SA (PDVSA).

Stark also imposed a temporary stay on Crystallex enforcing the writ to give other parties a chance to weigh in.

The judge ruled on Aug. 9 that Citgo Holding assets were subject to attachment. PDVSA said it would appeal.

Other companies may also lay claims on the assets, and the writ does not mean Crystallex will take over Citgo and run its refineries.

On Wednesday, lawyers for Rosneft Trading SA, a unit of Russia’s largest oil company, which had been pledged about half the Citgo Holding shares, in a letter urged a hearing on how to “structure a robust appraisal and sale process” for the shares.

Holders of PDVSA bonds maturing in 2020 were pledged the other half, the Rosneft lawyers said.

Crystallex has been seeking to recoup losses from a decade ago, when Venezuela nationalized its gold mining operations under then-President Hugo Chavez.

The $1.4 billion amount comprised roughly $1.2 billion plus $200 million of interest awarded by a World Bank arbitration tribunal in 2016.

OPEC member Venezuela has few offshore assets, which has encouraged creditors such as Crystallex to pursue Houston-based Citgo, its most valuable asset outside the country.

Venezuela last week devalued its currency by an effective 96 percent, as part of an economic overhaul to combat a myriad of problems including U.S. sanctions, debt defaults, hyperinflation, emigration and food shortages.

Stark said PDVSA should file a motion and post a bond if it wants to stop Crystallex from enforcing the writ, but can still appeal if it loses the motion or cannot post the bond.

The case is Crystallex International Corp v Bolivarian Republic of Venezuela, U.S. District Court, District of Delaware, No. 17-mc-00151.

Venezuela Agrees to Pay $2 Billion Over Seizure of Oil Projects

An oil-field worker for Petróleos de Venezuela. Nearly bankrupt, the company agreed to pay a $2 billion judgment to compensate ConocoPhillips over the 2007 seizure of properties in Venezuela.CreditCreditCarlos Garcia Rawlins/Reuters

HOUSTON — More than a decade ago, Venezuela seized several oil projects from the American oil company ConocoPhillips without compensation. Now, under pressure after ConocoPhillips carried out its own seizures, the Venezuelans are going to make amends.

ConocoPhillips announced on Monday that the state oil company, Petróleos de Venezuela, or Pdvsa, had agreed to a $2 billion judgment handed down by an International Chamber of Commerce tribunal that arbitrated the dispute. Pdvsa will be allowed to pay over nearly five years, but as it is nearly bankrupt, even those terms may be hard to meet.

After winning the arbitration ruling in April, ConocoPhillips seized Pdvsa oil inventories, cargoes and terminals on several Dutch Caribbean islands. The move seriously hampered Venezuela’s efforts to export oil to the United States and Asia, and emboldened other creditors to seek financial retribution.

“What they did was choke the exports and made it clear to Pdvsa that the cost of not coming to an agreement would be higher than actually settling on a payment schedule,” said Francisco J. Monaldi, a Venezuelan oil expert at Rice University.

Mr. Monaldi said Pdvsa would be forced to pay ConocoPhillips with money it would have paid other creditors and would probably delay some oil shipments to China it owes in separate loan agreements. He added that “there is not a negligible probability” that at some point it will discontinue payments for lack of money.

Mr. Monaldi said Pdvsa would be forced to pay ConocoPhillips with money it would have paid other creditors and would probably delay some oil shipments to China it owes in separate loan agreements. He added that “there is not a negligible probability” that at some point it will discontinue payments for lack of money.

Hyperinflation, corruption and growing starvation have crippled the Venezuelan economy, as the socialist government is forced to choose between buying food and medicine and satisfying the demands of creditors. Over the last few days, the government has scrambled to deal with its economic crisis by sharply devaluing its currency, raising wages and promising to shave energy subsidies.

Venezuela has the largest oil reserves in the world. Its crisis has tightened global oil markets at a time when threatened United States oil sanctions against Iran could drive up prices.

The settlement with ConocoPhillips over the 2007 seizure resolves a drawn-out legal struggle, at least for the time being.

“As a result of the settlement, ConocoPhillips has agreed to suspend its legal enforcement actions of the I.C.C. award, including in the Dutch Caribbean,” ConocoPhillips said in a statement.

Pdvsa, which did not comment on the agreement, is to pay the first $500 million within 90 days.

ConocoPhillips is pursuing a separate arbitration case over the same seizure against the government of Venezuela before the World Bank’s International Center for Settlement of Investment Disputes, which could result in another large settlement award, perhaps as high as $6 billion.

That amount would probably be unpayable, experts say, but it could put ConocoPhillips in a strong position to obtain access to Venezuelan oil fields in the future if the current government eventually falls.

Pdvsa’s problems with creditors are far-reaching, putting its American Citgo assets, including three large refineries and a pipeline network, in jeopardy. A federal judge in Delaware recently ruled that Crystallex, a Canadian gold mining company, could seize over $1 billion in shares of Citgo as compensation for a 2008 nationalization of a mining operation in Venezuela.

Citgo is appealing. If it loses, that may open the way for more claims on Citgo assets by companies whose investments have been expropriated in Venezuela, including Exxon Mobil.

PDVSA to Resume Use of Caribbean Oil Terminal Under NuStar Deal


NuStar had suspended PDVSA several times since 2017 from using its St. Eustatius facility over millions of dollars in missed payments.

The terminal played a role in a legal dispute between PDVSA and ConocoPhillips, which earlier this year tried to enforce a $2 billion arbitration award by seizing some of the Venezuelan firm’s assets in the Caribbean.
“We can confirm that we have signed an agreement with PDVSA, which brings their account current,” NuStar spokesman Chris Cho said in an email. “This agreement improves the earnings outlook for our St Eustatius terminal for the remainder of 2018.”

NuStar and PDVSA also signed a new contract that reduces the storage available to PDVSA at the facility, while securing fees for about one year’s worth of storage, he added.
In May, when Conoco started legal actions to seize PDVSA’s assets on several islands where it rents or owns terminals and refineries, over 4 million barrels of Venezuelan heavy crude stored at Statia were temporarily retained under a court order.

Conoco tried to seize the inventory, but the dispute for missing storage fees between PDVSA and NuStar added complications to the case.

In 2017, a similar legal fight between PDVSA and the conglomerate of shipping companies Sovcomflot led to an auction in which an inventory of Venezuelan crude stored in Statia was sold to a trading firm for satisfying a portion of the Russian firm’s claim.

Friday, August 24, 2018

If you’ve got a driver’s license and a pulse, you could be making $100,000 a year in the West Texas oil boom

Peterbilt demonstrates its “advanced driver assist systems,” the truck navigating a road course with no help from the driver at the Texas Motor Speedway. Photo: Deborah Lockridge

The U.S. is on track to become the world’s biggest oil producer by next year, and in West Texas, home to the most active oilfield in the world, the oil boom has resulted in a modern-day gold rush. 

The Permian Basin is set to overtake Iran in output in just a few months as oil prices pick up from 2015’s rock bottom. To keep up with production, thousands of workers from every part of the country are heading to the scorching Texas desert, where entry-level oilfield jobs regularly pay over $100,000 a year.

They all want a piece of what people in Midland, the Permian Basin’s major town, are hailing as a new gold rush. 

“All the major oil companies and exploration companies are moving out here. They're selling their assets everywhere else,” said Josh Garcia, an operations manager at a company that supplies chemicals for drilling. “At this point, it’s just a matter of numbers: Companies need to fill those spots, and they’ll train you. You can rewrite your story out here if you want to.” 

That's exactly what 22-year-old Mike “Snowflake” Smith is counting on. In Austin, he was a high-school dropout. But in the oilfield, he’s a welder-in-training working 14 hours a day in 110-degree heat — for a hefty paycheck. And he has the goods to prove it: new truck, Apple watch, almost-new RV, ostrich-leather work boots, and some very expensive tattoos. 

Snowflake’s so in demand that he can pick and choose between jobs. The day we met, he’d just quit over a late overtime request. 

“I hire in with another company in the morning. In my phone right now there are 30 or 40 people I can call and get a job in ten minutes,” said Snowflake. 

He’s not alone. By some estimates, Midland currently has 20,000 unfilled positions, and the town is in need of as many as 40,000 additional homes to accomodate the influx of people. 

In the meantime, thousands of oilfield workers sleep and eat in “man camps” — rows of converted containers or trailers that extend over as much as 40 acres of rocky land that’s useless for drilling or grazing. 

The geologists, engineers and executives, on the other hand, have found themselves locked in bidding wars that have caused escalating prices on Midland’s housing market, which was just named the hottest in the country. 

Oil is a rollercoaster economy, notorious for its ups and downs, but even so, = things haven’t been this good for a very long time. 

In the early 2000s, following a long, slow decline in oil production that began after the last record-breaking years of the late 1960s, analysts started writing obituaries for American oil. In the Permian, where wells had been gushing crude for almost 100 years, the flow was looking more like a trickle. Big companies sold leases and moved on. 

Then fracking changed everything. 

The technology, which was already over 50 years old when it became commercially viable in the last decade, suddenly meant vast deposits of oil trapped between layers and pores of underground rock were open for business. In April of this year, 22 percent of all the drilling rigs in the world could be found punching holes in the Permian. 

Texans, who’ve seen a century of booms and their fair share of busts, hope the good times are here to stay.

Josh Garcia, who remembers the last bust, is cautiously excited. “You would see these guys with $80,000 trucks and sports cars, being sold for half price before they got repossessed. But I'm not worried about the bust. It's just too good right now,” he said.

Thursday, August 23, 2018

Sankofa Delivers Gas to Domestic Market

The OCTP integrated oil & gas development is made up of the Sankofa Main, Sankofa East and Gye-Nyame fields, which are located about 60 km off Ghana’s western coast. The fields have about 770 MMboe in place, of which 500 MMbbl of oil and 270,000 boe of non-associated gas (about 40 Bcm).

Vitol reported that the Sankofa field on Ghana’s Offshore Cape Three Points (OCTP) block started delivery of natural gas, marking the beginning of stable supplies of cost effective and environmentally friendly domestic fuel for Ghana’s power sector.

In addition, Ghana will benefit significantly from GNPC’s carried and participating interest in the project, Ghana’s royalty share of oil and gas production and taxes being paid by Vitol and ENI.

The estimated net cost of gas to Ghana will be less than $4.5/MMBtu, greatly reducing Ghana’s fuel costs compared to liquid fuels or imported gas.

The project will provide approximately 180 Mmscf/d for at least 15 years, sufficient to supply half of Ghana’s power generation requirements. It is the only deep offshore non-associated gas development in sub-Saharan Africa entirely destined for domestic consumption and will guarantee stable, reliable, affordable gas supplies to Ghana with estimated energy cost savings of up to 40% per year for the State.

Gas is flowing from two of the four deep water subsea wells and gas volumes will increase gradually as the country’s downstream gas infrastructure undergoes further commissioning.

OCTP Integrated Oil and Gas Project is made up of ENI 44.44% and operator, Vitol with 35.56%, and GNPC 20%.

First oil was achieved in May 2017, three months ahead of schedule. With the completion of the OCTP gas facilities. OCTP’s overall oil and gas production can reach up to 85,000 boepd once the gas and condensate production has been fully ramped up.

Wednesday, August 22, 2018

French energy giant Total officially pulls out of Iran

Total headquarters in Paris (picture-alliance/dpa)

France's Total had signed up last year to a $4.8 billion Iranian gas field project. However, it was forced to backtrack after the US threatened to impose penalties on any business found still doing business with Iran.

US President Donald Trump signs an EO on Iran sanctions (Shealah Craighead )
US sanctions against Iran are back in effect / Sanctions signed off

US President Trump signed an executive order on August 5 aimed at piling financial pressure on Tehran to force a "comprehensive and lasting solution" to Iranian threats, including its development of missiles and regional "malign" activities. Trump warned that those who don't wind down their economic ties to Iran "risk severe consequences."

Total, France's largest energy company, announced on Monday it was pulling out of a $4.8 billion (€4.1 billion) Iranian gas field project, after admitting it was extremely vulnerable to the threat of US penalties against those doing business with Iran.

The French group was one of three major energy companies set to help supply the state-of-the-art technology needed to tap into South Pars, the world's largest natural gas field shared by Iran and Qatar.

However, after abandoning the 2015 Iran nuclear accord in May this year, the United States has said it will reimpose sanctions on Iran in two phases, in August and November. The second round of sanctions will target the country's vital oil and gas sector. Any firm found doing business with Iran could risk facing serious US penalties.

"Total has notified the Iranian authorities of its withdrawal from the contract following the 60-day deadline for obtaining a potential waiver from the US authorities," the oil and gas giant said in a statement. "Despite the backing of the French and European authorities such a waiver could not have been obtained," it said.

The French energy giant had been due to invest an initial $1 billion into the 20-year gas field project, which it signed up to in July 2017 along with the state-owned China National Petroleum Corporation (CNPC) and Iran's Petropars. Total first announced in May that it was halting investment in the project, adding that it had spent less than €40 million to date, amid increasing uncertainty over US actions in the region.

Total also admitted it would be extremely vulnerable to US penalties; it has some $10 billion of capital employed in its US assets, while American banks are involved in 90 percent of its financing operations.

Europe's exodus from Iran

While US has threatened stiff sanctions on Western companies operating in Iran, the nuclear agreement's other parties  — Britain, France, Germany, China and Russia — have vowed to stay true to the deal and urged businesses to follow their lead.

However, European firms have, understandably, opted to withdraw from Iran's weak economy rather than draw the ire of Washington and risk losing access to operations that require U.S. dollars. 

Automakers PSA, Renault and Daimler have all announced plans to either suspend or drop investment in Iran, as have Germany's Deutsche Bahn and Deutsche Telekom.

US President Donald Trump's decision to walk away from the nuclear accord and reimpose sanctions has exacerbated Iran's economic woes. Its rial currency has lost almost half its value since April, leading to financing difficulties at local banks and heavy demand for US dollars among the population.

Trump has told Tehran that its only chance of avoiding sanctions would be to accept his offer to renegotiate a tougher nuclear deal. Iranian officials have repeatedly rebuffed that offer.
dm/jm (AFP, Reuters, AP)

Monday, August 20, 2018

China shifts to Iranian tankers to keep oil flowing amid U.S. sanctions

BEIJING/SINGAPORE (Reuters) - Chinese buyers of Iranian oil are starting to shift their cargoes to vessels owned by National Iranian Tanker Co (NITC) for nearly all of their imports to keep supply flowing amid the re-imposition of economic sanctions by the United States.

The shift demonstrates that China, Iran’s biggest oil customer, wants to keep buying Iranian crude despite the sanctions, which were put back after the United States withdrew in May from a 2015 agreement to halt Iran’s nuclear program. 

The United States is trying to halt Iranian oil exports to force the country to negotiate a new nuclear agreement and to curb its influence in the Middle East. China has said it is opposed to any unilateral sanctions and has defended its commercial ties with Iran. 

The first round of sanctions, which included rules cutting off Iran and any businesses that trade with the country from the U.S. financial system, went into effect on Aug. 7. A ban on Iranian oil purchases will start in November. Insurers, which are mainly U.S. or European based, have already begun winding down their Iranian business to comply with the sanctions. 

To safeguard their supplies, state oil trader Zhuhai Zhenrong Corp and Sinopec Group, Asia’s biggest refiner, have activated a clause in its long-term supply agreements with National Iranian Oil Corp (NIOC) that allows them to use NITC-operated tankers, according to four sources with direct knowledge of the matter. 

They spoke on condition of anonymity as they were not allowed to speak publicly about commercial deals. 

The price for the oil under the long-term deals has been changed to a delivered ex-ship basis from the previous free-on-board terms, meaning that Iran will cover all the costs and risks of delivering the crude as well as handling the insurance, the sources said. 

“The shift started very recently, and it was almost a simultaneous call from both sides,” said one of the sources, a senior Beijing-based oil executive. 

In July, all 17 tankers chartered to carry oil from Iran to China are operated by NITC, according to shipping data on Thomson Reuters Eikon. In June, eight of 19 vessels chartered were Chinese operated. 

Last month, those tankers loaded about 23.8 million barrels of crude oil and condensate destined for China, or about 767,000 barrels per day (bpd). In June, the loadings were 19.8 million barrels, or 660,000 bpd. 

In 2017, China imported an average of 623,000 bpd, according to customs data. 

Sinopec declined to comment on the change in tankers. A spokesperson with Nam Kwong Group, the parent of Zhenrong, declined to comment. 

NIOC did not respond to an email seeking comment. An NITC spokesman said it would forward a request from Reuters for a comment to the country’s Ministry of Culture and Islamic Guidance. 

For a graphic on Iran's oil production, click


Iran used a similar system between 2012 and 2016 to circumvent Western-led sanctions which were effective in curtailing exports because of a lack of insurance for the shipments. 

It was not immediately clear how Iran would provide insurance for the Chinese oil purchases, worth some $1.5 billion a month. Insurance usually includes cover for the oil cargoes, third-party liability and pollution. 

“This is not the first time companies exercised the option... Whenever there is a need the buyers can use that,” said another of the sources, also a senior Beijing-based oil executive. 

Term buyers of Iranian submitted their plans to NIOC earlier this month of how much crude they will lift in September, said two trade sources. 

It typically takes about a month for Iranian crude to reach China. 

With the new shipping arrangement, Iranian oil cargoes to China are expected to stay at recent levels through October, said the four sources with knowledge of the tanker changes. 

Reporting by Chen Aizhu in Beijing and Florence Tan in Singapore; additional reporting by Parisa Hafezi in Ankara; Editing by Henning Gloystein and Christian Schmollinger

Friday, August 17, 2018

Good results from U.S. offshore auction, but expectations low

 Industry experts said the results of a lease sale in the U.S. waters were indicative of recovery, though expectations were low. File Photo by A.J. Sisco/UPI | License Photo

Potential drillers showed a willingness to invest in the U.S. waters of the Gulf of Mexico, though a key industry voice said the auction was no "barn burner."

Results from a U.S. auction for drilling rights in the Gulf of Mexico showed companies are willing to spend again, but expectations were low, experts said.

An auction Wednesday for rights to drill into the U.S. waters of the Gulf of Mexico secured $178.1 million in high bids from 29 different companies. That's an increase of 43 percent from the last lease sale in March.

William Turner, a research analyst at consultant group Wood Mackenzie, said less acreage was on the auction block and the industry didn't get an incentive from lower royalty rates like they wanted so expectations were low.

"However, with an increase in competitive bids and dollar amount from the last round, companies demonstrated their continued confidence in the region," he said in a research note emailed to UPI.

U.S. Interior Secretary Ryan Zinke in April went against policy recommendations by standing pat on royalty rates, arguing pro-industry moves by President Donald Trump would support the industry on momentum alone. Industry groups, however, said it would be tough to stay competitive without incentives like an adjustment to royalty rates.

Randall Luthi, the president of trade group National Ocean Industries Association, said higher oil prices, deregulation efforts by the Trump administration and lower day rates from rig companies all added up to a slow recovery for the offshore segment of the U.S. energy sector.

"While not a barn burner, Lease Sale 251 tops the previous Gulf sale in terms of increased participation, increased competition for offerings, and bid amounts," he said in a statement.

The government estimates the entire region holds about 48 billion barrels of undiscovered and technically recoverable oil and 141 trillion cubic feet in natural gas.

Among the winners were Norwegian energy company Equinor and U.S. supermajor Exxon Mobil, which placed big bets on remote acreage in the Gulf of Mexico. Hess Corp., meanwhile, put down $24.9 million for a site close to one of BP's existing platforms, though that block is near an exploration area that's so far been dry.

Elsewhere, an article in Politico published Wednesday suggests energy sector representatives are lobbying aggressively to Florida lawmakers to get them to open up their coast to drillers. U.S. Sen. Bill Nelson, D-Fla., a long-time opponent of more offshore drilling, said that, with space and military programs centered on Florida's waters, better federal oversight was expected.

In a statement emailed to UPI, Nelson, who is fighting for his senate seat, said the industry is moving to upset years of precedent in Florida's waters.

"We've been trying to get answers and find out what's on the table," he said. "Now we're reading about what might be under the table."

Thursday, August 16, 2018

Saudi cuts oil output as OPEC points to 2019 surplus

OPEC on Monday forecast lower demand for its crude next year as rivals pump more and said top oil exporter Saudi Arabia, eager to avoid a return of oversupply, had cut production.

In a monthly report, the Organization of the Petroleum Exporting Countries said the world will need 32.05 million barrels per day (bpd) of crude from its 15 members in 2019, down 130,000 bpd from last month’s forecast. 

The drop in demand for OPEC crude means there will be less strain on other producers in making up for supply losses in Venezuela and Libya, and potentially in Iran as renewed U.S. sanctions kick in. 

Crude LCOc1 edged lower after the OPEC report was released, trading below $73 a barrel. Prices have slipped since topping $80 this year for the first time since 2014 on expectations of more supply after OPEC agreed to relax a supply-cutting deal and economic worries. 

OPEC in the report said concern about global trade tensions had weighed on crude prices in July, although it expected support for the market from refined products. 

“Healthy global economic developments and increased industrial activity should support the demand for distillate fuels in the coming months, leading to a further drawdown in diesel inventories,” it said. 

OPEC and a group of non-OPEC countries agreed on June 22-23 to return to 100 percent compliance with oil output cuts that began in January 2017, after months of underproduction by Venezuela and others pushed adherence above 160 percent.

In the report, OPEC said its oil output in July rose to 32.32 million bpd. Although higher than the 2019 demand forecast, this is up a mere 41,000 bpd from June as the Saudi cut offset increases elsewhere. 

In June, Saudi Arabia had pumped more as it heeded calls from the United States and other consumers to make up for shortfalls elsewhere and cool prices, and sources had said July output would be even higher. 

But the kingdom said last month it did not want an oversupplied market and it would not try to push oil into the market beyond customers’ needs.


Rapid oil demand that helped OPEC balance the market is expected to moderate next year. OPEC expects world oil demand to grow by 1.43 million bpd, 20,000 bpd less than forecast last month, and a slowdown from 1.64 million bpd in 2018. 

In July, Saudi Arabia told OPEC it cut production by 200,000 bpd to 10.288 million bpd. Figures OPEC collects from secondary sources published in the report also showed a Saudi cut, which offset increases in other nations such as Kuwait and Nigeria. 

This means compliance with the original supply-cutting deal has slipped to 126 percent, according to a Reuters calculation, meaning members are still cutting more than promised. The original figure for June was 130 percent. 

OPEC’s July output is 270,000 bpd more than OPEC expects the demand for its oil to average next year, suggesting a small surplus in the market should OPEC keep pumping the same amount and other things remain equal. 

And the higher prices that have followed the OPEC-led deal have prompted growth in rival supply and a surge of U.S. shale. OPEC expects non-OPEC supply to expand by 2.13 million bpd next year, 30,000 bpd more than forecast last month.

Wednesday, August 15, 2018

Mega oil and gas projects are back

Fracking for shale gas has transformed the US energy landscape  
 Fracking for shale gas has transformed the US energy landscape
(Image: PA/AP/Brennan Linsley)

Investors are about to find out whether the world's largest oil companies have learned their lesson from $80 billion of cost blowouts in major projects during the era of $100 crude.

From liquefied natural gas in Mozambique to deep-oil in Guyana, the world's biggest energy companies are gearing up to sanction the first slate of mega-projects since the price crash in 2014, Wood Mackenzie Ltd. analysts including Angus Rodger said in a report. Firms will approve about $300 billion in spending on such ventures in 2019 and 2020, more than in the three years from 2015 to 2017 combined.

That spree will provide the first real test to the capital discipline that energy companies have vowed they adopted after oil's collapse, when they downsized their ambitions and began to complete projects on time and below budget. Before the crash, the 15 biggest oil and gas projects combined went $80 billion over budget, eating away at investor returns, Rodger said.

"Oil companies have improved their delivery in small projects, but can they do it with bigger ones?" Rodger said in a phone interview from Singapore. "There's massive upside on the table if they can show sustained success with capital discipline as oil prices rise. They could deliver the best returns in a decade."

Cost Overshoot

Several years of oil prices in the $100s at the start of this decade emboldened companies to take on massive, complicated projects to extract as much of the valuable oil and gas as they could, Rodger said. That spurred developments like Chevron Corp.'s Gorgon LNG project on the remote Barrow Island in western Australia, where costs ballooned from an initial expected $37 billion to $54 billion.

Cost overruns on projects sanctioned from 2008 to 2014 diluted returns to 12 percent on average, compared with an expected 19 percent at the time of investment, according to Wood Mackenzie.

"Oil companies already had a history of bad project management, and then adding $100 oil to that was like pouring gasoline on a fire," Rodger said. "Costs got out of control."

Those weak returns and plummeting oil prices that began in 2014 forced energy companies to rethink the way they spend. They started targeting smaller fields or expansions of existing projects that were cheaper and could be finished quicker. Fields sanctioned since 2014 have on average been delivered ahead of schedule and under budget, Wood Mackenzie said.

Scaling Up

While the dearth of mega projects has helped energy prices recover, with oil and LNG returning to the highest levels since 2014 earlier this year, large investments are again needed, Rodger said. What's uncertain is whether the cost discipline energy companies enforced on smaller projects could be replicated on a much bigger scale.

For example, oilfield service providers like Halliburton Co. and Schlumberger Ltd. shrunk their workforce during the downturn, leaving only the best roughnecks to work on projects. It remains to be seen if such companies will be able to deliver as efficiently as they scale up to handle new projects, Rodger said.

Oil companies will also have to avoid the temptation from rising oil and gas prices to expand the scope of projects in order to maximize production, Rodger said. Benchmark crude Brent was trading up 0.7 percent at $73.13 a barrel as of 9:09 a.m. London on Tuesday, about 44 percent higher than a year ago.

"Will they live with a lean approach and leave value in the ground, or as prices rise will they want to return to big projects," he said. "If they feel the latter way, we could see the same mistakes again."

Tuesday, August 14, 2018

Saudi Arabia And Iran Reignite The Oil Price War

The rivalry between Saudi Arabia and Iran is becoming increasingly evident in the oil pricing policies of the two large Middle Eastern producers. The two countries are currently reigniting the market share and pricing war ahead of the returning U.S. sanctions on Iranian oil.

Saudi Arabia, OPEC’s largest producer, has been boosting oil production to offset supply disruptions elsewhere, including the anticipated loss of Iranian oil supply after U.S. sanctions on Tehran return in early November. The Saudis are also cutting their prices to the prized Asian market to lure more customers as they increase supply.

Iran, OPEC’s third-largest producer, is trying to convince its oil customers to continue buying Iranian oil despite stringent U.S. efforts to curb Iranian production.

Iran has slashed its official selling prices (OSPs) for all grades to all markets for September, looking to monetize what could be its last oil sales to some markets in Asia before the U.S. sanctions kick in. Tehran cut the prices for its flagship oil grades to more than a decade low compared to similar varieties of the Saudi crude grades, according to data compiled by Bloomberg.

Last week, the National Iranian Oil Company (NIOC) slashed the OSP for the Iranian Light crude grade to Asia by US$0.80 to US$1.20 a barrel above the Dubai/Oman average, used for pricing oil to Asia. The September prices for Iranian Light to Asia are at a 14-year-low compared to the similar Saudi grade sold to the world’s fastest-growing oil market, Bloomberg has estimated.

Earlier this month, the Saudis also slashed the September prices to Asia for their flagship grade, Arab Light, by US$0.70 to US$1.20 a barrel premium over the Dubai/Oman average. The reduction was slightly deeper than expected and the second consecutive monthly cut in pricing. The Saudis cut the prices for all their grades to all markets except for the United States.

Now Iran is also slashing prices for all grades to all markets, with the prices for Iranian Light, Iranian Heavy, Forozan, and Soroush grades to Asia, Northwest Europe, and the Mediterranean all cut by between US$0.50 and US$1.45, depending on the market and grades.  

The OSPs for Iranian Heavy and Forozan to Asia were slashed against the similar Saudi grades to their lowest levels since at least 2000, the year in which Bloomberg started compiling the data.

Iranian Light and the Saudi Arab Light for Asia for September are now priced at the same level—US$1.20 a barrel above the Dubai/Oman average.

For the Saudis, the cut is aimed at enticing more buyers in order to take advantage of the refiners in Asia that are looking to cut Iranian oil intake for fear of running afoul of the U.S. sanctions. For Tehran, the cut in prices is an attempt to keep refiners buying by offering yet another incentive for them on top of the extended credit periods and nearly free shipping.

It has also been reported that Iran has started to offer India—its second-biggest oil customer after China—cargo insurance and tankers operated by Iranian companies as some Indian insurers have backed out of covering oil cargoes from Iran in the face of the returning U.S. sanctions on Tehran.

India’s imports from Iran could start to slow from August as some big Indian refiners worry that their access to the U.S. financial system could be cut off if they continue to import Iranian oil, prompting them to reduce oil purchases from Tehran. 

The U.S. hasn’t been able to persuade Iran’s biggest oil customer China to reduce oil purchases, but Beijing has reportedly agreed not to increase its oil imports from Iran.

Other relatively large Asian buyers of Iranian oil—South Korea and Japan—are looking for U.S. guidance and (possibly) waivers before deciding how to proceed, but they are currently very cautious and on the lookout for alternative supplies.

Analysts, and reportedly the U.S. Administration itself, currently expect the sanctions to remove around 1 million bpd from the oil market.

Considering the intensity of efforts by the U.S. to cut off as much Iranian oil exports as possible, it is unlikely that even Iran’s significant discounts to Asian customers will save the country’s oil exports.
By Tsvetana Paraskova for

Monday, August 13, 2018

Venezuela's Citgo Refineries At Risk Of Seizure

In 2007, following Venezuela's expropriation of billions of dollars of assets from U.S. companies like ExxonMobil and ConocoPhillips, I suggested a potential remedy.

Since Venezuela's state-owned oil company, PDVSA (Petróleos de Venezuela, S.A.) owns the Citgo refineries in the U.S., the companies that had lost billions of dollars of assets should target these refineries for seizure as compensation.

These refineries have the same vulnerabilities as the U.S. assets in Venezuela that were seized. They represent infrastructure on the ground that can't be removed from the country.

Citgo has three major refining complexes in the U.S. with a total refining capacity of 750,000 barrels per day. Recognizing the vulnerability from asset seizure, PDVSA tried to sell these assets in 2014, and valued them at $10 billion. That value may be grossly overstated, considering that Venezuela subsequently pledged 49.9% of Citgo to Russian oil giant Rosneft as collateral for a $1.5 billion loan.
In recent years, PDVSA has lost a series of arbitration awards related to expropriations, and companies have been looking for opportunities to collect. In May, ConocoPhillips seized some PDVSA assets in the Caribbean to partially enforce a $2 billion arbitration award for Venezuela's 2007 expropriation.

ConocoPhillips had sought up to $22 billion -- the largest claim against PDVSA -- for the broken contracts from its Hamaca and Petrozuata oil projects. The company is pursuing a separate arbitration case against Venezuela before the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). The ICSID has already declared Venezuela's takeover unlawful, opening the way for another multi-billion dollar settlement award that may happen before year-end.
Last week, a court ruling has opened the door for Citgo assets to be seized to pay for these judgments.
Defunct Canadian gold miner Crystallex had been awarded a $1.4 billion judgment over Venezuela’s 2008 nationalization of a Crystallex gold mining operation in the country. A U.S. federal judge ruled that a creditor could seize Citgo's assets to enforce this award.

This ruling is sure to set off a feeding frenzy among those that have won arbitration rulings against Venezuela. Until the legal rulings are settled, it's hard to say which companies will end up with Citgo's assets. But it's looking far more likely it won't be PDVSA.

Robert Rapier has over 20 years of experience in the energy industry as an engineer and an investor. Follow him on Twitter @rrapier or at Investing Daily.