Monday, November 18, 2019

Saudi Aramco gives nine banks top roles on world's biggest IPO: sources

GP: Jamie Dimon, chairman, president and chief executive officer of JPMorgan Chase & Co WEF
Jamie Dimon, chief executive officer of JPMorgan Chase & Co.
Jason Alden | Bloomberg | Getty Images


DUBAI (Reuters) - Saudi Aramco has hired nine banks as joint global coordinators to lead its planned initial public offering (IPO), slated to be the world’s largest, two sources familiar with the matter told Reuters on Wednesday. 

The mandates have been heavily sought by the world’s biggest investment banks for a transaction which, according to Saudi Crown Prince Mohammed bin Salman’s initial plans, could generate around $100 billion for Saudi Arabia’s state coffers. 

The kingdom plans to list 1% of the state oil giant - the world’s largest oil company - on the Riyadh stock exchange before the end of this year and another 1% in 2020, sources told Reuters this week, as initial steps ahead of a public sale of around 5% of Aramco. 

Aramco has selected JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N) and Saudi Arabia’s National Commercial Bank (1180.SE), which were previously working on the share sale before it was paused last year, the sources said, declining to be identified due to commercial sensitivities. 

It has also chosen Bank of America Merrill Lynch (BAC.N), Goldman Sachs Group Inc (GS.N), Credit Suisse Group AG (CSGN.S), Citigroup Inc (C.N), HSBC Holdings PLC (HSBA.L) and Saudi Arabia’s Samba Financial Group (1090.SE), they added. 

To secure the lead role on the IPO, JPMorgan’s efforts were led by senior bankers in New York, London and Saudi Arabia who had long-standing relationships in Saudi Arabia, rather than Chief Executive Jamie Dimon, according to a person familiar with the matter. 

Aramco, JPMorgan, Bank of America, Citi, Credit Suisse, Goldman Sachs and HSBC declined to comment. The remaining banks did not immediately respond to requests for comment. 

The IPO plan has rapidly gained momentum in recent days with the appointment of the head of the kingdom’s PIF sovereign wealth fund, Yasser al-Rumayyan, as Aramco’s new chairman. 

Rumayyan, a close ally of Prince Mohammed, took over from former energy minister Khalid al-Falih in a move to separate Aramco from the ministry, a step Saudi officials have said was important to pave the way for the IPO. 

Bankers have been courting Saudi Arabia to secure roles in the transaction, which has faced repeated delays, but which officials have said will happen by 2020-2021. 

Aramco’s chief executive, Amin Nasser, said this week that the domestic IPO would be the “primary” listing but that the company was also ready for an international share sale. He said the final decision on venue and timing rested with the government. 

The flotation is crucial for Prince Mohammed’s plans to diversify the Saudi economy in an era of low oil prices. 

Based on the indicated $2 trillion valuation that Saudi Aramco had hoped to achieve, a 1% float would be worth $20 billion, a huge milestone for the local stock market. 

FILE PHOTO: Logo of Saudi Aramco is seen at the 20th Middle East Oil & Gas Show and Conference (MOES 2017) in Manama, Bahrain, March 7, 2017. REUTERS/Hamad I Mohammed/File Photo
 
Analysts and bankers, however, have said $1.5 trillion is a more achievable valuation for Aramco.
Aramco raised $12 billion this year in its first international bond, gaining more than $100 billion in demand, in a deal that many saw as a pre-IPO relationship-building exercise with international investors. 

Reporting by Hadeel Al Sayegh and Davide Barbuscia; Additional reporting by Joshua Franklin in New York; Editing by Ghaida Ghantous and Marguerita Choy

Morgan Stanley Values Saudi Aramco at $1trn


https://images.law.com/contrib/content/uploads/sites/378/2019/11/Saudi-Aramco-Article-201911111043.jpg

Saudi Aramco has been given a $1trn valuation by Morgan Stanley, as Wall Street is still divided on how much the world’s biggest oil company is actually worth.

Aramco has been given a valuation range spanning hundreds of billions of dollars, according to research from two Wall Street banks that underlines the dilemma facing lenders working on what is expected to be the world’s largest initial public offering.

In a presentation for investors, Morgan Stanley bankers ran through several valuation models that gave a spread of about $1trn between the most bearish and bullish scenarios. For example, based on a dividend discount model the spread ran from $1.06trn up to $2trn.

The base case was $1.52trn, according to the presentation seen by Aramco faces a delicate balance as it seeks to push its IPO valuation as close as possible to Crown Prince Mohammed Bin Salman’s $2trn — a figure that’s been met with skepticism from many professional investors — while making sure it’s attractive to potential Saudi buyers.

Among 16 banks that offered a valuation, the range in estimates ran from $1.1trn at the bottom right up to $2.5trn, a nuber that even the crown prince might find optimistic. The midpoint was $1.75trn, according to people who’ve reviewed all the research.

Friday, November 15, 2019

Safety in Polar waters addressed

Arctic Aframax Tanker is a joint development by Deltamarin and Aker Arctic Technology. Image courtesy of Aker Arctic.


New joint guidelines for Polar waters operation have been released by the ICS and OCIMF. 
 
Maritime trade between Arctic destinations and the rest of the world is expected to expand and an increasing number of ships are now undertaking voyages in Polar waters.
 
Technical developments in ship design and equipment continue to facilitate more and more ship operations in remote Polar areas, despite challenging and unpredictable sea and weather conditions.
 
The Polar Code, adopted by the IMO, requires shipping companies intending to operate in Polar waters to develop a Polar Water Operational Manual (PWOM) in order for their ships to be issued with a Polar Ship Certificate.
 
New joint guidelines from the International Chamber of Shipping (ICS) and the Oil Companies International Marine Forum (OCIMF) were aimed at supporting shipping companies by providing advice on how to develop a PWOM that best suits their needs.
 
Appendix II of the IMO Polar Code already provides a model PWOM. However, the ICS and OCIMF recognised that additional guidance is necessary to help shipping companies to develop a quality PWOM that is truly fit for purpose.
 
The new Guidelines purpose is to provide the means for shipping companies and Masters to develop a comprehensive PWOM tailored to the needs of their individual ships, taking into account the environmental hazards and the nature of their operations.
 
’Guidelines for the Development of a Polar Water Operational Manual’ has been prepared by expert contributors with in-depth experience of operating ships in Polar waters, as well as knowledge of the challenges faced by seafarers on board.
 
Topics addressed include: identifying hazards; understanding operational limitations; updating procedures; upgrading equipment and systems; understanding relevant legislation and ensuring that the results of assessments are fully addressed in the PWOM.

Wednesday, November 13, 2019

Aramco’s Breakeven Costs Are The Lowest In The World

Aramco


Aramco has the lowest production costs for oil projects in the world, the company said in its newly released IPO prospectus, adding that partner producers such as Russia, Venezuela, and Nigeria had much higher production costs.

The Saudi state company said its after-tax breakeven costs for producing fields were below $10 per barrel, compared with just over $20 per barrel for the UAE, more than $40 per barrel for Russia, and almost $50 per barrel for Nigeria.
Low production costs are one of the main reasons Aramco is considered an attractive investment opportunity for energy investors, along with its massive reserves.

However, there have been several factors that may discourage international investors from betting on the Saudi giant, including the intensifying climate change fight that many worry will affect oil demand negatively as well as the risk of outages after the September attacks on Saudi oil infrastructure that took off the market some 5.7 million bpd in production capacity.

Aramco released its IPO prospectus earlier this week but the 658-page document did not address some important questions such as the exact day of the float, the number of stock to be offered—though it said it will constitute 0.5 percent of Aramco’s total shares—and the price per share. 
 

There is also the issue with supervolatile oil prices that have some wondering how close Riyadh could get to its desired $2-trillion valuation for the company. Now, some analysts are also warning investors to consider the overwhelming influence of the Saudi royal family over the business of Aramco.
“The biggest issue with Aramco is that everything about this company is controlled by the Saudi royal family — shareholder opinions, your board votes, none of that makes any difference,” Pavel Molchanov from Raymond James told CNBC.

“There’s a lot to think about when buying Aramco,” State Street senior global multi-asset strategist Daniel Gerard said, adding the focus should be on “how much political influence would there be over the investment decisions.”

By Irina Slav for Oilprice.com

Tuesday, November 12, 2019

Oxy to Sell Permian Campus After Anadarko Acquisition


https://www.rigzone.com/news/wire/oxy_to_sell_permian_campus_after_anadarko_acquisition-11-nov-2019-160295-article/

(Bloomberg) -- Occidental Petroleum Corp. plans to sell a four-story office building in the heart of the Permian Basin and move employees into a nearby one owned by Anadarko Petroleum Corp., the oil producer it bought for $37 billion three months ago.

The 213,000 square-foot complex will be vacated by April 2020 and is a “compelling” investment opportunity, according to a marketing document from CBRE Group Inc., the real-estate broker handling the sale alongside Midland-based Moriah Real Estate Co.

The property was built in 2014 and is located in Westridge Park on the west side of Midland, near the airport. It’s also close to Anadarko’s campus and directly opposite Chevron, which Occidental outbid to acquire Anadarko. EOG Resources Inc. also has an office nearby.

“We have told our employees in Midland that they will be moving into the state-of-the-art building that Anadarko began constructing prior to the acquisition,” Melissa Schoeb, a spokeswoman for Occidental, said by email. “The building is large enough to house our combined workforce and we will begin the move when it’s ready for occupancy.”

Occidental is under pressure to sell assets and pay down debt after the acquisition, which has been criticized by investors including billionaire activist Carl Icahn. The stock plunged this week after Chief Executive Officer Vicki Hollub slashed 2020 capital spending by 40%, raising concern that the company won’t pump enough oil to cover dividend payouts and debt service.

To contact the reporter on this story:
Kevin Crowley in Houston at kcrowley1@bloomberg.net
To contact the editors responsible for this story:
Simon Casey at scasey4@bloomberg.net
Mike Jeffers

Repsol Looks to Alberta to Replace Mexican and Venezuelan Oil


https://finance.yahoo.com/news/repsol-looks-alberta-replace-mexican-110000684.html

(Bloomberg) -- Repsol SA is looking as far away as Western Canada for oil for its European refineries amid dwindling supplies from Mexico and Venezuela.

The Spanish oil company is considering using rail to transport as much as half-a-million barrels of heavy crude a month 1,911 miles (3,075 kilometers) from Alberta to Montreal before loading it onto tankers bound for Europe, according to people familiar with the situation. The company has also considered shipping the crude to New Jersey for shipment to Europe.

The European company has typically sourced heavy crude supplies from Latin America, particularly Mexico and Venezuela. But U.S. sanctions, as well as civil strife, have crippled Venezuela’s oil production, which has fallen to less than 700,000 barrels a day from more than 2 million four years ago. Mexico’s oil production has fallen for 14 straight years to 1.83 million barrels a day in 2018. That’s left Repsol looking for alternatives.

Repsol declined to comment in an email.

Repsol’s European refineries hold about 25% of the continent’s coking capacity, according to the company. Coking units allow refineries to process heavier crude, which is typically cheaper than lighter oil, into high-value fuels such as gasoline and diesel.

Alberta’s landlocked status means it ships nearly all of its crude oil to the U.S. by pipeline or rail. The Trans Mountain pipeline to the Pacific Coast allows a tiny fraction to be shipped to Asia. The long distance to market has kept Canadian heavy crude selling for less than West Texas Intermediate futures. The discount was more than $20 a barrel on Monday.

Shipments of oil sands crude to Europe are rare. Repsol occasionally gets heavy Canadian crude via U.S. Gulf ports, where Canadian oil competes with U.S. crude for sea berths and space on pipelines.

About 400,000 barrels of Alberta crude were sent to the U.K. last year, the first significant shipment to Europe since 2014, when a tanker of Alberta crude left a terminal near Montreal for shipment to Italy, according to the Canadian International Merchandise Trade database.

Repsol produces conventional heavy crude in west-central Alberta at its Chauvin field.

To contact the reporters on this story: Robert Tuttle in Calgary at rtuttle@bloomberg.net;Lucia Kassai in Houston at lkassai@bloomberg.net;Rodrigo Orihuela in Madrid at rorihuela@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Mike Jeffers, Kevin Orland

For more articles like this, please visit us at bloomberg.com

Monday, November 11, 2019

Venezuela's mass migration poses a danger to the Western Hemisphere

Venezuela's mass migration poses a danger to the Western Hemisphere


Latin America is erupting in one political crisis after the other. The chaos follows ongoing protests and instability in Haiti, Ecuador, Peru, Argentina, Honduras and, lately, Chile, a stable country that generally tops the rankings in economic freedom. After a trip to Pyongyang to expand ties with North Korea, one of Venezuela’s most powerful men, Diosdado Cabello, sanctioned by the U.S. government for narco-trafficking, recently said: “What is happening in Peru, Chile, Ecuador, Argentina [and] Honduras is a gentle Bolivarian breeze, and a hurricane is coming,” when referring to the role of the Bolivarian revolution in the recent conflicts and its ability to undermine the region’s stability.
The regional chaos is exacerbated by Venezuela’s mass migration, which beyond a humanitarian crisis poses a dangerous threat to the Western Hemisphere because it’s weaponized by the Maduro regime.
The majority of the 4.3 million Venezuelans who have fled their country — driven by hyperinflation, crime and food and medicine shortages, which all stem from the Bolivarian revolution — have stayed within the region. An estimated 1.4 million Venezuelans have settled in Colombia; nearly 860,000 in Peru; 288,000 in Chile; 330,000 in Ecuador; 130,000 in Argentina; and 178,000 in Brazil. About 300,000 Venezuelans are in the United States and more than 255,000 in Spain, according to the U.N. International Organization on Migration.
A small percentage of these Venezuelan migrants appear to be undercover subversive agents embedded by the Maduro regime and his regional and extra-regional allies. Ecuadorian President Lenin Moreno has blamed Venezuela directly over the protests in the country last month. Furthermore, Defense Minister Oswaldo Jarrin said “criminal elements” were using the marches as cover to loot, destroy property and commit acts of “terrorism” aimed at weakening the country. Julio Borges, commissioner for Foreign Relations of Venezuelan Interim President Juan Guaidó, recently stated that 41 of the 57 foreigners arrested in Ecuador’s protests last month were Venezuelan nationals.  

Kelly M. Greenhill, a researcher at Harvard University, focuses on “new security challenges,” including civil wars and the use of forced migration as a weapon, and argues that “strategic engineered migration refers to in- or out-migration that is deliberately induced or manipulated by state or non-state actors.” This description aptly fits the crisis in Venezuela, which goes beyond the result of an incompetent government or grave socio-economic conditions. The Venezuelan refugee crisis is the product of a wicked revolution built on a political-military strategy that converges armed groups and criminal elements in Venezuela and beyond.

In 1999, Hugo Chavez, a former lieutenant colonel who led a failed coup d’état, took power and started the Bolivarian revolution. Chavez’s lust for power used an insurgency-style, revolutionary model with external support to implement profound changes within Venezuelan society and its institutions. This turned a once prosperous country into a brutal tyranny. In 2013, after Chavez’s death, Nicolas Maduro rose to power and doubled down on this strategy — not only to disrupt anti-regime protests through intimidation and violent repression in Venezuela but to converge criminal and terrorist networks.

The two most prominent crime-terror groups in Venezuela are the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN). According to the Colombian Foreign Ministry, the ELN has a presence in at least 12 states within Venezuela, and FARC leaders who abandoned the peace accord, such as Iván Márquez and Jesús Santrich, appeared in August in a video inside Venezuela announcing a return to the armed struggle.

This is combined with at least eight major armed criminal groups in Venezuela that engage in various forms of illicit activity under the protection of the Venezuelan Armed Forces. Pro-government militias (“Colectivos”), paramilitaries such as the “Rastrojos,” criminal gangs such as the “Pranes,” and even Islamist terrorists, namely Hezbollah, use the Maduro regime as a protective shield, which cedes the monopoly on violence.

In short, Venezuela has become what some have called a “Mafia state” with organized crime and terrorist groups controlling vast swaths of Venezuelan territory through transnational illicit networks involved in drug trafficking, money laundering, illegal mining, kidnapping, etc. that spills across borders. The Center for a Secure Free Society, a national security think tank based in Washington, has gone a step further and labeled Venezuela a “parallel state” that combines a “criminalized state” with a revolutionary framework that draws its source of support from external state actors: Russia, Iran and China, or the VRIC.

“We are fulfilling the plan, you understand me,” Maduro recently said, hinting at the well-orchestrated plan behind the Bolivarian revolution, which functions less as a hierarchy and more as a regional network. It is a network that grows stronger as it gains territory; therefore, the goal of the revolution is to expand its territory by destabilizing all of Latin America. Mass migration and increasing refugee outflows from Venezuela is the method.

According to the Organization of American States, the man-made humanitarian crisis in Venezuela could push refugee outflows to as high as 8.2 million next year.

The math is simple. The more refugees that flow out of Venezuela, the easier it is for these transnational and transregional threat networks to spread north, south, east and west. The only way to prevent the Bolivarian “hurricane” from destroying the Western Hemisphere is to stop the Bolivarian revolution that gave life to this threat network and has figured out how to weaponize mass migration.
José Gustavo Arocha is a research fellow for the Center for a Secure Free Society. He is a retired lieutenant colonel from the Venezuelan Army and former political prisoner (2014-2015). Follow him on Twitter @ArochaJG.

God Bless Our Military

God bless our military happy Veterans Day

Thursday, November 7, 2019

Feds order Keystone pipeline to remain shut down in North Dakota

 
Keystone Pipeline Breach

https://www.gowatertown.net/2019/11/07/feds-order-keystone-pipeline-to-remain-shut-down-in-north-dakota/

BISMARCK, N.D. (AP) – Federal regulators have ordered the Keystone pipeline to remain shut down until its Canadian owner takes corrective action aimed at determining the cause of a breach that leaked an estimated 383,000 gallons of oil in northeastern North Dakota.

The Pipeline and Hazardous Materials Safety Administration issued the order Tuesday to TC Energy. The action comes one week after the pipeline leak was discovered and affected about 22,500 square feet of land near Edinburg, North Dakota.

The order requires the company to send the affected portion of the pipe to an independent laboratory for testing.

TC Energy says it has about 200 people are at the site “focused on clean-up and remediation activities.”

Regulators say about 252,000 gallons of crude oil has been recovered.

Tuesday, November 5, 2019

Oxy slashes spending, reports nearly $1B loss after Anadarko deal

 Vicki Hollub, chief executive officer of Occidental Petroleum Corp, is pictured.
NEXT: See recent earnings from area energy companies. Photo: Kyle Grillot, Bloomberg / Bloomberg / © 2019 Bloomberg Finance LP

https://www.chron.com/business/energy/article/Occidental-vows-to-slash-spending-after-Anadarko-14810018.php

Occidental Petroleum said it would dramatically slash its spending by nearly 40 percent next year after reporting a nearly $1 billion quarterly loss in the aftermath of its $38 billion acquisition of Anadarko Petroleum.

Houston-based Oxy said it estimates $5.4 billion in capital spending next year after the combined Oxy-Anadarko will spend an estimated $8.6 billion this year. The megadeal to absorb The Woodlands-based Anadarko and its crown jewel Permian Basin acreage closed in the middle of the third quarter on Aug. 8.

Oxy on its own had planned to spend just less than $5 billion this year before the Anadarko deal, but the cutbacks are still much larger than anticipated. The biggest cost-cutting is coming in the Permian as Oxy combines their operations in West Texas. But Oxy will remain the Permian's largest producer and arguably the second-most-active driller after Exxon Mobil.

Oxy's estimated oil and gas production in 2020 is still projected to rise 2 percent from both Oxy and Anadarko this year, Chief Executive Vicki Hollub, but that's a smaller growth projection than previously anticipated. Oxy plans to resume faster growth in 2021 with a 5 percent leap in production volumes.

Oxy's $912 million loss in the third quarter is almost entirely from the Anadarko deal as Oxy reported $969 million in merger-related transaction costs and fees from debt financing. Oxy also recorded $325 million in quarterly write downs, primarily on the loss of value in unproven acreage where Oxy no longer plans to explore.

Oxy's stock is down 37 percent since the bidding war against Chevron to buy Anadarko went public in April, including another 4 percent dip on Tuesday.

Hollub said the company is making good progress on the Anadarko integration.

“We’re as excited today as we have anytime in the last two years about the opportunities in front of us,” Hollub said. “Now that we’ve had a chance to work together - the two teams - we’re coming up with more synergies.”

She described Oxy's Permian acreage in New Mexico as its "1A" top production area and she said the Anadarko Permian acreage in West Texas is "1B."

Oxy is focusing heavily on cost cutting and debt reduction in part so it can maintain healthy dividend payouts to skeptical investors, many of whom feared the company bit off more than it could chew with the hefty Anadarko deal. Oxy is still facing an ongoing proxy war and litigation from shareholder and famed corporate raider Carl Icahn. Hollub said Oxy is going to be much more attentive to shareholders' concerns moving forward, including lowering the bar for investors calling special board meetings as shareholders voted on earlier this year.

Already, at the end of September, Oxy closed on the $3.9 billion sale of Anadarko's Mozambique liquefied natural gas export project to the French energy major Total. Oxy is selling all of Anadarko's Africa assets to Total for a combined $8.8 billion, but the sales of the remaining Africa transactions in Algeria, Ghana and South Africa are yet to close.

“We are very focused, very intense on getting the asset sales done," Hollub said, including additional sales.

“We are approaching asset sales very aggressively and intently,” she said, while refusing to compromise on the values of the assets.

Hollub reiterated her interest in selling a stake in Anadarko's pipeline business, Western Midstream. But she refused to speculate on other potential asset sales.

“There will be some creativity," she said. "There will be some things you might not expect."

Monday, November 4, 2019

Venezuela's Maduro pledges funds for Argentine shipyard to finish PDVSA tankers

With President of Venezuela Nicolas Maduro.
With President of Venezuela Nicolas Madur

https://www.reuters.com/article/us-venezuela-pdvsa-argentina/venezuelas-maduro-pledges-funds-for-argentine-shipyard-to-finish-pdvsa-tankers-idUSKBN1XE02B

(Reuters) - Venezuelan President Nicolas Maduro on Sunday pledged funds for a state-owned Argentine shipyard to finish building two long- overdue tankers for state oil company Petroleos de Venezuela[PDVSA.UL], which is struggling with a diminished tanker fleet.

Maduro, a socialist who has overseen a drastic economic collapse in the once-prosperous OPEC nation and stands accused of corruption and human rights violations, did not say how much money Venezuela would provide or when it would be disbursed. 

But the statement suggests he sees left-leaning Alberto Fernandez’ victory in last month’s Argentine presidential election as an opening to revive the construction. He accused current President Mauricio Macri, an outspoken Maduro critic, of “sabotage” to delay the tankers’ completion, without evidence.
“Macri, who hates us and fears us at the same time, stopped everything,” Maduro told a gathering of leftist organizations in Cuba. “There’s a new president. I’ll tell you: Venezuela has the resources and is ready to invest and finish those two ships.”

Maduro added that he had not been aware of the situation until union leaders from the Rio Santiago shipyard building the tankers - who also attended the Havana summit - approached him in a restaurant this weekend. 

Representatives for Macri and Fernandez did not immediately respond to requests for comment. Maria Eugenia Vidal, a close Macri ally and outgoing governor of Buenos Aires province, which owns the shipyard, has said she would rather spend money on schools than subsidize it. 

Fernandez is set to be inaugurated next month. 

Delivery of the ships was delayed long before Macri took office in late 2015. Maduro’s late predecessor Hugo Chavez and late Argentine President Nestor Kirchner first signed a pact to build them in 2005. 

One tanker, the medium-sized Eva Peron Aframax, was officially launched in 2012, but construction delays and a lack of funds have meant neither has yet been delivered. 

PDVSA, hit by a freefall in its crude output and U.S. sanctions intended to force out Maduro, is in desperate need of new tankers, after losing control of part of its fleet due to mounting unpaid bills to operators. 

Many shipping firms are no longer calling at Venezuela’s ports or carrying its oil due to sanctions, say maritime sources, leading to a scarcity of tankers for exports and a consequent accumulation of unsold oil stocks, which has forced PDVSA to further cut back output. 

Reporting by Luc Cohen; additional reporting by Hugh Bronstein and Maximilian Heath in Buenos Aires; editing by Richard Pullin

Friday, November 1, 2019

Planeloads of Cash From Russia Have Been Shipped to Venezuela

An airplane with the Russian flag is seen at Simon Bolivar International Airport in Caracas,
Russian military planes land near Caracas

  • About $315 million of euros and greenbacks were transferred
  • Bills allow Venezuela to use hard currency to skirt sanctions
Hundreds of millions of dollars in cash has been shipped from Russia to Venezuela, providing a lifeline to the South American country as U.S. sanctions limit its access to the global financial system.

A total of $315 million of U.S. dollar and euro notes were sent in six separate shipments from Moscow to Caracas from May 2018 to April 2019, according to data reviewed by Bloomberg from ImportGenius, which compiled Russian customs records it obtains through private sources. The cash came from lenders run by the countries’ governments and went to Venezuela’s development bank, the records show.
President Nicolas Maduro Holds Press Conference
Nicolas Maduro
Photographer: Carolina Cabral Fernandez/Bloomberg
While the money could be for any number of things -- like Venezuela repatriating cash held overseas or dividends from a stake in a Moscow-based bank or revenue from sales of crude or gold -- the complex logistical feat shows one of the ways President Nicolas Maduro’s administration has sought to skirt aggressive U.S. financial sanctions. As a consequence of the scrutiny, the central bank is conducting more transactions in cash, sometimes offering local clients access to euro bills.

ImportGenius’s data goes through April this year. That month, about $97 million in notes were sent in two loads from Moscow-based bank Evrofinance Mosnarbank to Venezuela’s Banco de Desarrollo Economico y Social de Venezuela, or Bandes. Evrofinance is a joint venture between Bandes and Russia’s state property management agency.

Why Venezuela Has Two Presidents, One Thorny Standoff: QuickTake

In January, $113 million worth of 100-euro bills were sent from state-controlled lender Gazprombank, which at the time had a stake in Evrofinance. The same entity shipped $50 million in U.S. dollar bills just two days earlier, and two separate shipments of unspecified currency totaling $55 million were made in May and July of last year.

Press officials for Evrofinance didn’t respond to requests for comment. Requests made to Bandes through Venezuela’s Finance Ministry were redirected to the Information Ministry, which didn’t respond.

A Venezuelan government official, who asked not to be identified discussing sensitive matters, confirmed the country had received cash shipments tied to Evrofinance but declined further comment.

Gazprombank spokesman Anton Trifonov declined to comment on any cash shipments but noted that “the correspondent account of Bandes with Gazprombank, as well as any cooperation between the banks, was totally terminated in March 2019.”

The Venezuelan regime has gone to great lengths to maintain access to hard currency as the U.S. crackdown leaves it isolated from conventional financial systems, with major banks mostly refusing to do business with Maduro. Among other ventures, the regime has used secret gold sales to raise funds, while also studying the possibility of using cryptocurrencies or a Russia-run global payment system to send money.

Bandes was sanctioned in March by the U.S., which alleged Maduro uses the bank’s accounts to keep a substantial amount of money abroad, mostly in Europe. The officials said the Venezuelan government had started moving funds away from the central bank, shifting them to Bandes.

Last year, Evrofinance was selected by the Maduro government to handle some payments to its suppliers, which were urged to channel international transactions through the Moscow bank. Later that year, Venezuela appointed a former Evrofinance board member as a top official in the nation’s banking system.

ake Rudnitsky, and Ben Bartenstein

Thursday, October 31, 2019

Democrats Just Accidentally Sparked A Federal Fracking Boom

Democrats Fracking

https://oilprice.com/Energy/Energy-General/Democrats-Just-Accidentally-Sparked-A-Federal-Fracking-Boom.html

Eyeing more restrictions on drilling following the 2020 presidential election, some U.S. oil and gas companies may accelerate fracking on public lands over the next year.

Concho Resources said that in order to mitigate risk from a potential ban on fracking in 2021, the company is running rigs on its federal acreage now.
The comment comes in light of the relatively strong rise of Massachusetts Senator Elizabeth Warren, who is arguably the front runner, or at least in the top tier. Vermont Senator Bernie Sanders has trailed a bit, although a new poll from New Hampshire has him in first place there. Former Vice President Joe Biden, who offers up a more industry-friendly approach to energy and climate change, has slid in the polls. He is still considered among the top tier, but his fundraising has been anemic, his performance halting and unconvincing, and his momentum heading in the wrong direction.

Senators Bernie Sanders and Elizabeth Warren have both promised to ban hydraulic fracturing. As president, neither would be able to outright ban the practice entirely, as it would require an act of Congress. But their ability to disrupt the use of fracking on federal lands would be much greater.
  

“‘If Sen. Warren were to win…’ was getting a lot of airtime in our meetings,” Jake Roberts, an exploration-and-production analyst at Houston’s Tudor, Pickering, Holt & Co., told the Wall Street Journal recently. “We were surprised to see people taking it so seriously.”

Tudor Pickering said that if fracking were banned, oil and natural gas prices would spike and many oilfield services companies would be forced out of business. A mid-October analysis from RBC Capital Markets found that Talos Energy was most exposed to a regulatory crackdown, largely the result of a hypothetical ban on offshore drilling in federal waters.
A Cowen Inc. analyst told the WSJ that some companies that have a relatively heavy reliance on federal lands have underperformed lately, “coincidentally, or not.” Those include, Devon Energy, Concho Resources, and Occidental Petroleum. Meanwhile, companies like Kosmos Energy, Hess Corp., and Apache Corp. would lose little, Sanford C. Bernstein analysts said in early October.

Ironically, some of the oil majors might stand to benefit, since higher prices would boost revenues from their oil and gas sales elsewhere, offsetting their losses in the Permian and other shale basins. Canadian oil producers would also benefit as some of their shale competitors are knocked on their backs, although Canadian pipelines traveling to the U.S. would likely be on the chopping block as well.

Federal lands play a particularly prominent role in New Mexico, and to a lesser degree in Colorado, Wyoming and North Dakota. New Mexico has rapidly become one of the fastest growing sources of new oil and gas production. Permian drillers have increasingly migrated from West Texas into New Mexico, targeting land that has yet to be developed. Even as some counties in Texas have lost rigs over the past year, nearby counties in New Mexico have seen an increase.  


But the comments from Concho Resources are the most concrete example to date of the industry acting in advance of potential regulatory restrictions. Concho’s Chairman and CEO Tim Leach went out of his way to briefly touch on the company’s risk from regulatory action in his prepared marks on an earnings call on Wednesday. “Today, sentiment toward the sector is low and amplified by campaign promises to severely limit or regulate away oil and gas operations,” Leach said. “Since we don't know how the politics will resolve, I'll clarify that our exposure to federal acreage is about 20% of our total gross and net acreage position. And our capital allocation toward that acreage is roughly the same.”

When an analyst followed up and asked him how the company plans on mitigating the risk of a federal ban, Leach said: “the things that we are doing to mitigate that are, we have quite a bit of activity on them right now,” before adding that the company could pivot back to the comfort and safety of private land in Texas. “We've always run a program where we have properties right across the state line where you can move rigs back and forth.”

He added: “We have a great deal of flexibility if we need to reallocate that capital.”

By Nick Cunningham of Oilprice.com

Monday, October 28, 2019

Crude Inventories Take a Surprising Dip as Oil Exports Spike

Cushing

The nation’s stockpiles of commercial crude oil fell by 1.7 million barrels last week, surprising industry observers who’d projected a sizable increase yet again.

The dip in crude supplies was buoyed by the U.S. nearly breaking its weekly record in crude oil exports, shipping out 3.7 million barrels a day, primarily from the Texas Gulf Coast, according to new estimates from the U.S. Energy Department.

The drop in crude inventories was part of an even bigger overall decline in petroleum stocks as supplies of gasoline, jet fuel and distillate fuel oil – used to make diesel and heating oils – all fell as well. Total commercial petroleum stocks fell by 9 million barrels last week, the Energy Department said.

The decline jumps to 10 million when counting another sale from the nation’s Strategic Petroleum Reserve, which is now down more than 2 percent in the last 12 months.

For the third week in a row, the U.S. was actually a net exporter of petroleum and products by a slim margin. This is the first time that’s ever happened multiple weeks in a row. In fact, it’s only happened a handful of times on a weekly basis.

The U.S. is still producing a record high of 12.6 million barrels of crude oil per day, the federal government estimates.

Thursday, October 24, 2019

OPEC, allies to mull deeper oil cut amid worries over demand growth

Opec
The Opec flag on a desk ahead of a news conference at the 175th Organisation Of Petroleum Exporting Countries (Opec) meeting in Vienna, Austria, on December 6, 2018. Image Credit: Bloomberg

https://www.reuters.com/article/us-oil-opec/opec-allies-to-mull-deeper-oil-cut-amid-worries-over-demand-growth-idUSKBN1X11TT

DUBAI/MOSCOW/LONDON (Reuters) - OPEC and its allies will consider whether to deepen cuts to crude supply when they next meet in December due to worries about weak demand growth in 2020, sources from the oil-producing club said.

Saudi Arabia, OPEC’s de facto leader, wants to focus first on boosting adherence to the group’s production-reduction pact with Russia and other non-members, an alliance known as OPEC+, before committing to more cuts, the sources said. 

OPEC members Iraq and Nigeria are among the countries that have failed to comply properly with pledged output reductions. 

Saudi Arabia and other Gulf producers in the Organization of the Petroleum Exporting Countries have been delivering more than their share of promised cuts to stabilize the market and prevent prices from falling. 

Riyadh has been pumping some 300,000 barrels per day (bpd) below its output target, taking the lion’s share of the curbs. 

“The Saudis want to prevent oil prices from falling. But now they want to make sure that countries like Nigeria and Iraq reach 100% compliance first as they have promised,” one OPEC source said. 

“In December we will consider whether we need more cuts for next year. But it is early now, things will be clearer in November.” 

A second OPEC source said: “Of course deeper cuts are an option, but some things should happen before that. The rest of the OPEC+ countries will not cut deeply if Iraq and Nigeria don’t comply 100%.” 

Two sources from OPEC and non-OPEC producers said that next month the JTC committee, which monitors compliance with the pact, could start considering scenarios for deeper cuts and make its recommendations to the OPEC+ meeting for debate in December.

“Lower seasonal demand in winter... may affect prices, going down. To reassure the (oil) market it would be better to deepen the cuts,” a source familiar with Russian thinking said. 

Riyadh is worried about the oil demand outlook for 2020 amid trade tensions between the United States and China and their impact on crude prices, two sources familiar with Saudi thinking said. 

But Iraq is struggling with anti-government protests and Nigeria was granted a higher oil output target in July as the African country plans to expand its oil industry. 

OPEC+ has since January implemented a deal to cut oil output by 1.2 million bpd to support the market. The pact runs to March 2020 and the producers meet to review policy on Dec. 5-6. 

Brent crude LCOc1 on Tuesday was trading around $59 a barrel, down from a 2019 high near $75 in April. Concern about weaker economies and demand due to uncertainties such as Brexit and the U.S.-China trade dispute have overshadowed lower supply. 

“The Saudis would like to see oil prices higher than now. They are asking the other countries to comply first before they commit to another cut to boost prices,” a third OPEC source said. 

“They are making it clear that prices are up because of their overcompliance.” 

OPEC also sees slowing demand and a rise in supply from non-member producers next year, that source added. 

OPEC’s own numbers also show a drop in demand for the exporting group’s crude next year and higher supply from rivals such as the United States.

Global demand for OPEC crude will average 29.6 million bpd, OPEC said in its latest monthly oil market report, a drop of 1.2 million bpd from 2019. 

This could press the case for further supply restraint in 2020, another source said. 

“But it is not just about the numbers. Any decision to cut is also a political one,” that source said.
Editing by Dale Hudson

Tuesday, October 22, 2019

China issues more crude oil import quotas for 2019

Tugboats dock an oil tanker on a crude oil quay at a port in Zhoushan, eastern China's Zhejiang province, Nov. 11, 2016.
Tugboats dock an oil tanker on a crude oil quay at a port in Zhoushan, eastern China's Zhejiang province, Nov. 11, 2016.

https://www.reuters.com/article/us-china-oil-imports/china-issues-more-crude-oil-import-quotas-for-2019-idUSKBN1X10QF

SINGAPORE (Reuters) - China has lifted its crude oil import quotas to allow mostly private refiners to bring in a further 12.9 million tonnes this year, a document seen by Reuters showed on Tuesday, feeding a new generation of huge refineries.

The third batch of quotas was allocated to 19 companies, including private refiner Zhejiang Petroleum & Chemical Co (ZPC), which was awarded 3.5 million tonnes, the document showed. 

Prior to this, China had issued a crude import quota of 153.1 million tonnes, according to Huatai Futures Co, bringing total allowed imports so far this year to 166 million tonnes, a Reuters calculation showed. 

“Import quotas have increased overall this year as new refineries are being launched,” said Xiang Pan, head of oil research at Huatai Futures Co. 

“The new increase in import quotas is mainly for the newly launched mega-refineries.”

Privately-owned Hengli Petrochemical Ltd (600346.SS) ramped up its 400,000 barrel-per-day (bpd) oil refinery to full rate in late May, while ZPC aims to bring online a second 200,000 bpd crude distillation unit (CDU) in the coming months. 

China imported 369 million tonnes of crude oil in the first nine months of 2019, up nearly 10% from the same period last year, customs data showed, boosted by the startup of new refineries as well as strong fuel demand in the country. 

In addition to independent oil processors - known as ‘teapots’ - mostly based in the eastern province of Shandong, provincial government-backed Shaanxi Yanchang Petroleum Group was also granted another 900,000 tonnes in the latest batch of quotas. 

That brought its total allocation this year to 3.6 million tonnes. 

China’s Ministry of Commerce did not respond to a request for comment.

“Some crude import quotas will be left unused, the same as previous years. Some teapots will not be able to finish their quotas, either because they have credit problems or because they prefer domestic trades,” Huatai’s Pan said. 

“This year in the first half margin was poor, especially for gasoline. Although margins recovered in the second half, it is still worse than previous years as the market is competitive and refined oil products are in oversupply.” 

Reporting by Florence Tan and Shu Zhang in Singapore, and Muyu Xu in Beijing; Editing by Clarence Fernandez, Susan Fenton and Jan Harvey

Monday, October 21, 2019

Russia Is Buying Venezuela’s Oil—Imagine If Exxon Had Bought It

Russian President Vladimir Putin receives Chinese President Xi Jinping at the KremlinRussian President Vladimir Putin looks on at Rosneft President Igor Sechin. Venezuelan media is reporting the sale of its state-owned oil company to Rosneft. 
Mikhail Svetlov/Getty Images

https://www.forbes.com/sites/kenrapoza/2019/10/21/russia-is-buying-venezuelas-oil-imagine-if-exxon-had-bought-it/#45c1ac348cbf

Russia looks set to be buying Venezuela’s oil. Like, all of it.

According to rumors in the market and one confirmed recently by Venezuelan daily El Nacional, Russia’s state-owned oil giant Rosneft is going to take control of PdVSA, the bankrupt Venezuelan oil company that explores for and produces most of the country’s oil. 

Rosneft is a big lender to PdVSA, and PdVSA is broke so Rosneft wants to be paid. So it makes sense that the Venezuelan government would sell something. Rosneft owns a large stake in Citgo, essentially a PdVSA subsidiary and a well-known gasoline station brand here in the States.

Imagine if you will the raucous sound of hysteria you would get from many newsrooms if, say, Exxon, was buying PdVSA instead of the Russians.

Let me give you a hint of the headlines and then the following hot takes that would flow on social media by the Hands Off Venezuela activists and their sympathizers.

Headline: Exxon Buys Venezuelan Oil Giant PdVSA. 

Subhead: As Washington Crushes Country With Sanctions, Socialists United Unable To Pay Its Bills, Must Sell Prized Possession.

American Twitter: Another regime change for oil. This is pure theft of the resources of the Venezuelan people by greedy corporations backed by Washington! #HandsOffVenezuela

Latin America Twitter: Imperialistas! Yankees go home! Trump es $%@! #VenezuelaLibre!

Friday, October 18, 2019

Iranian Suezmax attack - insurance implications

Iranian state television reported the alleged attack resulted in an oil leak, which they say was later plugged. (SHANA via AP)
Iranian state television reported the alleged attack resulted in an oil leak, which they say was later plugged. (SHANA via AP)

http://www.tankeroperator.com/ViewNews.aspx?NewsID=11205

Amidst heightened tensions in the Middle East, an Iranian Suezmax was damaged by an alleged rocket attack later last week in the Red Sea. 
 
The explosion caused an oil spill, which was brought under control, according to Iranian news agency, IRNA and the crew was reported to be safe.

Jonathan Moss, DWF Head of Marine & Trade, outlined the potential cost to the insurance market.

He said: "Marine insurance, Cargo and Hull & Machinery cover incorporating War Risks, is uncontrollably linked with geopolitical conflict. This latest incident will drive insurers to raise further War Risk insurance rates for vessels operating in the region, over and above the tenfold increase to rates since the attacks on tankers in May. 

“Shipping companies operating in the region will be forced to absorb these added costs with affordable insurance in this high risk zone becoming harder to find. This could lead to cost-cutting measures in other areas of maritime trade.

"The events leading to the attack in the Red Sea, off the coast of Saudi Arabia, are uncertain. There were reports that missiles struck the tanker and an accusation that Saudi Arabia had committed an act of terrorism while the vessel was carrying oil to Syria.

“Whether this was an act of terrorism or indeed a breach of international sanctions is of crucial significance in determining  whether and how cover might respond, if at all.

“What is certain, however, is that the continued instability and unpredictability in the region will have an adverse effect on sea trade, will reinforce the argument that the UK has too few naval assets to protect its interests in the area, and will add to the growing trend of increasing marine insurance premiums," he warned.

Thursday, October 17, 2019

Oil price holds firm despite massive stockpile increase

Cushing, Oklahoma storage tanks

https://247wallst.com/energy-economy/2019/10/17/oil-price-holds-firm-despite-massive-stockpile-increase/

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Thursday morning, showing that U.S. commercial crude inventories soared by 9.3 million barrels last week, maintaining a total U.S. commercial crude inventory of 434.9 million barrels. The commercial crude inventory is about 2% above the five-year average for this time of year. Over the past four weeks, the U.S. crude stockpile has added nearly 17 million barrels.

Wednesday evening, the American Petroleum Institute (API) reported that crude inventories increased by 4.13 barrels in the week ending October 10. For the same period, analysts expected crude inventories to rise by about 2.9 million barrels. Gasoline and diesel fuel inventories both fell, by 934,000 and 2.86 million barrels, respectively, according to the API. The EIA reported that gasoline inventories dropped by 2.6 million barrels last week and distillate inventories dropped by 3.8 million barrels.

West Texas Intermediate (WTI) crude traded at a high of $62.90 a barrel following the drone attack on Saudi oil processing facilities in mid-September. Crude had not traded at that level since late May.

WTI traded at around $53.20 Thursday morning, while May 2020 futures traded at $52.53. In May of this year, the difference between the spot price and the six-month forward price was about $3 a barrel. That market position, known as backwardation, is slowly giving way to the more usual position where future prices are higher than current spot prices (called contango).

However, concerns about a continuing trade war and an accompanying global economic slowdown have stifled any optimism for rising crude oil prices. Hedge funds cut their long positions in Brent crude by 10% last week and, until there’s some good news on trade relations between the United States and China, oil prices will continue to trade in a narrow band around $53 a barrel, barring further black-swan events like the drone attack. Even those, however, will generate primarily modest and short-lived price spikes.

Wednesday, October 16, 2019

Billion-Dollar Acquisitions Are Taking The Permian By Storm

Permian


Whiting Petroleum is talking acquisition with Abraxas Petroleum Corp., a Texas-based company with operations in the Permian, unnamed sources told Reuters.

According to one of the sources, the mostly likely scenario was for an all-stock acquisition. According to another, the tie-up would boost Whiting’s acreage in the Permian and also help it spread its overhead costs over greater oil production, Reuters noted.

Neither of the companies confirmed or denied the report, and the Reuters sources said that reaching a deal is far from guaranteed.

Consolidation among U.S. oil independents has been a topic of discussion for analysts for a while now, with many of the opinion that both independents and Big Oil would be willing to exit other shale plays in the U.S. to focus on the already crowded Permian where production is rising the fastest.

Earlier this year, Bloomberg reported that a wave of M&A was coming to the Permian as the larger players sought to expand their presence there. Indeed, Big Oil majors have been selling their operations in Europe to focus on the Permian at home. Yet if the Reuters report is confirmed, it would highlight that it’s not just Big Oil that is doubling down on the Permian. Independents are growing bigger, too.

Related: Iraq's Return To Oil's Top Table

Yesterday, Parsley Energy announced that it would buy rival Jagged Peak Energy for $1.62 billion in an all-stock deal. The acquisition would boost Parsley’s Permian acreage.

Shareholders don’t seem like they are too happy about this consolidation drive. Reuters reported on Monday that Parsley shares fell by as much as 11 percent following the deal announcement. On the other hand, consolidations usually cut costs, which should sit well with investors that have yet to see the higher returns they have been insisting on.

Besides the Permian, Abraxas Petroleum also has assets in the Rocky Mountains and in the Powder River Basin in Wyoming.

By Irina Slav for Oilprice.com