Friday, May 17, 2019

Insurer says Iran's Guards likely to have organized tanker attacks

The Norwegian oil tanker Andrea Victory was damaged in an alleged 'sabotage attacks' in the Gulf [Emirati National Media Council/AFP]

LONDON/OSLO (Reuters) - Iran’s elite Revolutionary Guards (IRGC) are “highly likely” to have facilitated attacks last Sunday on four tankers including two Saudi ships off Fujairah in the United Arab Emirates, according to a Norwegian insurers’ report seen by Reuters.

The UAE, Saudi Arabia and Norway are investigating the attacks, which also hit a UAE- and a Norwegian-flagged vessel. 

A confidential assessment issued this week by the Norwegian Shipowners’ Mutual War Risks Insurance Association (DNK) concluded that the attack was likely to have been carried out by a surface vessel operating close by that despatched underwater drones carrying 30-50 kg (65-110 lb) of high-grade explosives to detonate on impact. 

The attacks took place against a backdrop of U.S.-Iranian tension following Washington’s decision this month to try to cut Tehran’s oil exports to zero and beef up its military presence in the Gulf in response to what it called Iranian threats.

The DNK based its assessment that the IRGC was likely to have orchestrated the attacks on a number of factors, including: 

- A high likelihood that the IRGC had previously supplied its allies, the Houthi militia fighting a Saudi-backed government in Yemen, with explosive-laden surface drone boats capable of homing in on GPS navigational positions for accuracy. 

- The similarity of shrapnel found on the Norwegian tanker to shrapnel from drone boats used off Yemen by Houthis, even though the craft previously used by the Houthis were surface boats rather than the underwater drones likely to have been deployed in Fujairah. 

- The fact that Iran and particularly the IRGC had recently threatened to use military force and that, against a militarily stronger foe, they were highly likely to choose “asymmetric measures with plausible deniability”. DNK noted that the Fujairah attack had caused “relatively limited damage” and had been carried out at a time when U.S. Navy ships were still en route to the Gulf.

Both the Saudi-flagged crude oil tanker Amjad and the UAE-flagged bunker vessel A.Michel sustained damage in the area of their engine rooms, while the Saudi tanker Al Marzoqah was damaged in the aft section and the Norwegian tanker Andrea Victory suffered extensive damage to the stern, DNK said. 

The DNK report said the attacks had been carried out between six and 10 nautical miles off Fujairah, which lies close to the Strait of Hormuz.


Iran has in the past threatened to block all exports through the Strait of Hormuz, through which an estimated fifth of the world’s oil passes.
According to DNK, it was highly likely that the attacks had been intended to send a message to the United States and its allies that Iran did not need to block the Strait to disrupt freedom of navigation in the region.

DNK said Iran was also likely to continue similar low-scale attacks on merchant vessels in the coming period. 

Iranian officials and the Revolutionary Guards’ (IRGC) spokesman were not available for comment. 

Tehran had already rejected allegations of involvement and Iranian Foreign Minister Mohammad Javad Zarif had said that “extremist individuals” in the U.S. government were pursuing dangerous policies. No one claimed responsibility for the attacks. 

DNK’s managing director Svein Ringbakken declined to comment, except to say that “this is an internal and confidential report produced to inform shipowner members of the DNK about the incidents in Fujairah and the most likely explanation”.
The UAE has not blamed anyone for the attack.

Two U.S. government sources said this week that U.S. officials believed Iran had encouraged Houthi militants or Iraq-based Shi’ite militias to carry out the attack. 

In a joint letter seen by Reuters and sent to the U.N. Security Council on Wednesday, the UAE, Saudi Arabia and Norway said the attacks had been deliberate and could have resulted in casualties, spillages of oil or harmful chemicals. 

“The attacks damaged the hulls of at least three of the vessels, threatened the safety and lives of those on board, and could have led to an environmental disaster,” the letter said. 

Last month, the United States designated the entire IRGC as a terrorist organization. Washington had previously designated entities and individuals connected with the IRGC, which controls vast segments of Iran’s economy. 

Tehran responded by designating the regional United States Central Command (CENTCOM) as a terrorist organization. 

Additional reporting by Alexander Cornwell and Parisa Hafezi in Dubai, Michelle Nichols in New York; Editing by Kevin Liffey

Thursday, May 16, 2019

OPEC+ Grapples With Iran Crisis as Ministers Meet in Jeddah
  • Iran’s oil exports, sanctions set to dominate discussions
  • Persian Gulf tensions rise after Saudi oil pipeline attack
When OPEC and its allies gather in the Saudi Arabian city of Jeddah this weekend, their conversation will be dominated by a member of the group that isn’t there: Iran.
As U.S. President Donald Trump squeezes oil exports from the Islamic Republic with sanctions, the discussions among other producers such as Saudi Arabia and Russia will likely focus on whether they need to fill a resulting supply gap. Their talks take place amid flaring political tensions in the Middle East, where Riyadh says its oil tankers and pipeline network were attacked this week.

“It’s a critical issue,” said Ed Morse, head of commodities research at Citigroup Inc. in New York. “This is a very tight physical market which is confronting significant losses of supply, and seeing signs of potential disruption in the Persian Gulf.”

Oil prices, holding near $72 a barrel in London, could easily climb this summer as global supplies are strained by Trump’s crackdown on Iran and simmering geopolitical tensions from Venezuela to Libya. But as opening the taps too soon could instead send prices crashing, Riyadh and Moscow face a dilemma over their next move.

“They should keep supply on a leash for now,” said Derek Brower, a director at consultant RS Energy Group Inc. “The market wants OPEC to recognize that balances will weaken later this year, and also next year.”

The two oil giants are spearheading a coalition known as OPEC+, made up of producers from the Organization of Petroleum Exporting Countries and beyond, which has been restraining output this year to keep world markets balanced. A committee including all major members except Iran will review market conditions on Sunday before the full group meets next month.

As the White House tightens its crackdown on Iran’s oil sales, Saudi Arabia is under pressure to compensate by raising its crude production. Trump tweeted on April 26 that he’d secured the kingdom’s pledge of co-operation.

Iran’s oil output has tumbled more than 30% since last May, data complied by Bloomberg show, when Trump abandoned an agreement on the country’s nuclear program and announced that financial sanctions would be re-imposed. Production could plunge further this month, to the lowest since the Iran-Iraq war in the 1980s, the International Energy Agency predicts.

Nonetheless, a decision by the Saudis and Russia to shift from restraining supply to boosting it isn’t straightforward.

There’s still no clarity on whether Iran’s biggest customer, China, will flout the U.S. ban and thus how far output will ultimately fall. Saudi Arabia is reluctant to repeat its experience of last year, according to Citigroup’s Morse, when it ramped up production in anticipation of a shortage that never arrived.

Record Levels

Riyadh bolstered output to record levels last autumn as U.S. officials promised to completely choke off Iranian supplies, only to see prices crash 35% in the fourth quarter as the Trump administration allowed some flows to continue. Saudi Arabian Energy Minister Khalid Al-Falih said late last month that while the kingdom will ultimately accommodate Iran’s customers, it’s not going to rush.

“The Saudis have been very conservative when it comes to adding barrels to the market,” said Mohammad Darwazah, a director at Medley Global Advisers in New York. “Saudi policy makers will certainly have a difficult needle to thread as they balance U.S. pressure to replace Iranian barrels with their own fiscal needs.”

A Saudi move to increase production substantially, and in the process take away Iran’s customers, could also be a severe test of OPEC’s unity.

OPEC+ nations are currently bound by limits on their output which run until the end of June, when the agreement could either expire or be renewed. Saudi Arabia is entitled to raise production by about 500,000 barrels day from last month’s levels, or about 5%, and still remain within its agreed restrictions.

But losses in Iran stand to be much larger, potentially spiraling to 900,000 barrels a day according to Goldman Sachs Group Inc., and could require a bigger and more contentious surge from the kingdom.

Such a move is unlikely to be formally ratified when OPEC+ convenes in late June, as the group’s agreements require unanimous approval and Iran would withhold its support.

Saudi Arabia, Russia and others with idle production capacity could proceed regardless, but risk straining already tense relations in the group to breaking point. Iranian Oil Minister Bijan Namdar Zanganeh warned on May 2 that OPEC is headed for a collapse.

‘Pretty Clear’

“It is pretty clear that Iran will not sign on for any OPEC output increase beyond current quotas,” said Helima Croft, chief commodities strategist at RBC Capital Markets LLC. “In the current context, Saudi plans to backfill the Iranian barrels may be viewed as acts of economic warfare.”
If this weekend’s deliberations could be difficult, OPEC’s ministerial meeting next month, when Iran will be present, is set to be much tougher.

While the cartel has weathered a range of internal conflicts over its six-decade history, recent tensions have been particularly acute. Friction between Riyadh and Tehran pushed talks at two meetings to near-breakdown last year, and in December Qatar quit the organization after 57 years of membership amid a dispute with the Saudis.

“I can imagine the June meeting being postponed” or “not having a consensus vote -- not even having a consensus trying to be reached,” said Citigroup’s Morse.

Wednesday, May 15, 2019

BREAKING: Two Saudi Arabian Oil Pumping Stations Attacked By Iran Backed...

Chevron taps out in Anadarko Petroleum battle, will get $1B termination fee

Chevron said on Friday, April 12, 2019, that it will buy Anadarko Petroleum for $33 billion in the biggest industry megadeal in years. Photo: Associated Press / James Nielsen

Chevron will not provide a counteroffer for Anadarko Petroleum Corp., paving the way for Occidental Petroleum to acquire the oil and gas driller after a rare, public fight between the two firms.

Chevron had until Friday to submit a counterproposal for Anadarko after the Texas-based firm earlier this week determined a revised offer from Occidental was superior. Chevron announced on Thursday, however, that it will not move forward with a new bid.

"Winning in any environment doesn't mean winning at any cost. Cost and capital discipline always matter, and we will not dilute our returns or erode value for our shareholders for the sake of doing a deal," CEO Michael Wirth said in a statement. "We are well positioned to deliver superior value creation for our shareholders."

Under the terms of the initial agreement between Chevron and Anadarko, the San Ramon, California-based company is entitled to a $1 billion termination fee.

Analysts largely applauded Chevron's decision and said the oil giant has no need to pursue a megamerger the size of the Anadarko transaction in the future.

"Chevron simply does not need to expand its upstream asset base through large-scale M&A. There is much to like about the existing assets, and there are plenty of growth opportunities for the future," Raymond James' Pavel Molchanov said in a note.

To win the feud, Occidental sweetened its $38 billion offer to include more cash. The Houston-based firm also got backing from Warren Buffett's Berkshire Hathaway, which said it would make a $10 billion preferred stock investment contingent on the deal closing. Total S.A. also agreed to buy Anadarko's African assets for $8.8 billion in a hasty transaction arranged by Occidental CEO Vicki Hollub.
Given the higher cash included in the offer, Occidental's bid does not require a shareholder vote.

The merger is poised to create an oil and gas powerhouse with extensive operations in the lucrative U.S. shale basin, including the Permian Basin, one that stretches from Texas to New Mexico and is considered the hotbed of shale production in the country.

Occidental will also control Anadarko's assets in the Gulf of Mexico and South America. The firm reportedly pursued the merger over fears that it would be unable to adequately compete in the future against giant Chevron and Exxon Mobil Corp.

Monday, May 13, 2019

Saudi oil tankers among those attacked off UAE amid Iran tensions

Venezuelans Are In A Power Struggle — For Their Own U.S. Embassy (HBO)

Friday, May 10, 2019

VLCC markets surplus impacts rate levels

First VLCC with scrubbers built

Another lacklustre week in the VLCC market, as ships piled up in Fujairah and Galle. 
Owners are currently facing returns well below OPEX for most cargo combinations, with rates trading in the high W30s from both MEG and West Africa/eastbound for modern ships and at a 2.5-5 point discount for older units, Fearnleys reported.

Suezmaxes experienced a slow start after the holiday period as charterers took advantage of the steady accumulation of tonnage. Rates softened accordingly.

However, owners resistance started to build in West Africa with some preferring to sit and wait for the right voyages. This has had a knock on effect with WS80 having been paid for West Africa/East - up a handful of points but purely sentiment driven.

Elsewhere, the Med and Black sea seen low fixing volume with TD6 steady at WS 80. Not too much is expected to change for the balance of this week.

As for Aframaxes, those trading in the North Sea and Baltic saw healthy activity levels this week, as owners continuously pushed to keep this positive momentum going.

With TD7 currently trading around WS115 levels, we expect a firm sentiment in the natural fixing window in the North.

Owners are finally seeing alternatives in other markets, which have picked up, such as the Mediterranean and Black Sea, where a firm upward trend in freight levels was seen.

Returns for a TD19 voyage have picked up over the week, from around $1,000 per day at the middle of last week to $12,000 per day at time of writing (Wednesday). TD19 currently stands at WS100.

Fresh cargoes have been coming into the market keeping activity levels firm. At present, owners are finding this an attractive market and we are expecting them to maintain their stand in the week to come in order to ensure a further uptick in freight rates, Fearnleys concluded.

Brokers reported that the 2019-built VLCC ‘Landbridge Glory’ has been fixed to Trafigura for three years at $36,500 per day, including options.

Trafigura also reportedly took the Aframax ‘Sea Panther’ for six months at $22,500 per day.

In the MR segment, ST Shipping was said to have fixed the 2007-built ‘Vinalines Galaxy’ for six months at $12,400, while Trafigura was believed to have taken the 2009-built MR ‘Pyxis Malou’ for six to eight months trading at $14,000 per day.

In the S&P sector, brokers reported that NGM Shipping has sold the 2003-built  VLCC ‘Vida’ to undisclosed buyers for $26 mill. She was sold to NGM Shipping as ‘DS Vida’ last October for $22.8 mill.

Navios Maritime has sold two LR1s and three MRs to Avic Leasing for $103.2 mill en bloc.

The newbuilding scrubber fitted Suezmax ‘Nordic Glaze’ was reportedly sold to Frontline for $66 mill. She is due for delivery next year. 

A few more newbuildings came to light, including two, option two Aframaxes at Daehan for Minerva for a reported $50 mill each. They are due for delivery in 2021.

Chartworld was also thought to have booked two, option two Aframaxes at New Times for $46.5 mill each, also for 2021 deliveries.

On the back of a long term Shell charter, EShips was said to have ordered six IMO II MRs at Hyundai Mipo for $38 mill. They are due for delivery in 2020/2021. 

Meiji was said to firmed up options for another two scrubber fitted MRs at HMD for $38 mill each.

Tuesday, May 7, 2019

Anadarko Says It Now Favors Occidental Bid Over Chevron

Whichever suitor emerges victorious, the sale of Anadarko will be the largest deal in the global oil industry in three years.CreditCreditLoren Elliott/Reuters

HOUSTON — In an escalating bidding war, Anadarko Petroleum said on Monday that it intended to reject its first suitor in a takeover bid, Chevron, after Occidental Petroleum came forward with a better offer.

The announcement by Anadarko’s board, a day after Occidental sweetened its bid with more cash, is far from a final decision. Chevron will now have four days to improve its offer, after which Occidental would have several days to revise its bid.

Bidding wars for big oil companies have been rare in recent years, and the Occidental-Chevron standoff has already seized the investment world’s attention. Occidental’s chief executive, Vicki Hollub, has emerged as one of the nation’s most prominent oil executives by challenging Chevron, a giant four times the size of her company.

“Known for her love of Alabama football, Oxy C.E.O. Vicki Hollub is ripping up the playbook and running an all-out offense on the Anadarko board,” Paul Sankey, an oil and gas analyst with Mizuho Financial Group, wrote in a research note to clients on Monday morning.

Whichever suitor emerges victorious, the sale of Anadarko will be the largest deal in the global oil industry in three years and establish a dominant producer in the Permian Basin of Texas and New Mexico, the most productive oil field in the world.

In a statement on Monday evening, Anadarko said it “intends to terminate the Chevron merger agreement in order to enter into a definitive merger agreement with Occidental in connection with the revised Occidental proposal.”

Occidental has made four offers for Anadarko in the last two years, but the bidding war began in earnest two weeks ago when Occidental proposed a $38 billion takeover, several billion dollars more than Chevron’s bid. A spokesman for Chevron said on Monday that the company had no comment on Anadarko’s decision.

Over the last week, Occidental won a $10 billion investment from Warren E. Buffett’s Berkshire Hathaway to help finance the acquisition. Then on Sunday, Occidental said it had lined up a sale of Anadarko’s assets in Algeria, Ghana, Mozambique and South Africa to Total, the French oil company, for $8.8 billion.

In a twist on Sunday night, Occidental raised the cash portion of its proposed acquisition of Anadarko to 78 percent, from 50 percent, further increasing the pressure on Anadarko and Chevron. Anadarko’s board said it still preferred a deal with Chevron but kept the door open to further negotiations.

The takeover battle has made meaningful waves beyond the three oil companies directly involved. If Occidental wins, Total stands to become a dominant producer of liquefied natural gas in Africa. Mr. Buffett is making a big bet on oil just a few years after Berkshire Hathaway sold its shares in Exxon Mobil.

The primary prize in the bidding war is Anadarko’s 600,000 acres of shale-oil holdings in the Permian Basin. Industry experts say those parcels are among the most lucrative in the United States. The company has identified 10,000 drilling locations, which is near the operations of Chevron and Occidental.

The Permian produces four million barrels of oil a day, slightly more than the Ghawar field in Saudi Arabia, previously the most productive in the world. The basin accounts for one-third of American oil supplies and exceeds the output of every member of the Organization of the Petroleum Exporting Countries except Saudi Arabia and Iraq.

The takeover of Anadarko would add to the concentration of Permian assets in the hands of the biggest oil companies. Chevron, Exxon Mobil, Royal Dutch Shell and BP have all made big purchases in the basin over the last four years.

Some Wall Street analysts say the increased cash in Occidental’s offer made a big difference, in part because the company’s shareholders would no longer have to approve the deal since it is offering less than 20 percent of its shares. T. Rowe Price Group, a major holder of Occidental shares, had earlier indicated that it opposed the deal because it would weaken the company’s balance sheet.

But other analysts remain skeptical that Occidental can beat Chevron, which has much deeper pockets and could more easily integrate Anadarko’s natural-gas operation in Mozambique and its large offshore rigs in the Gulf of Mexico. Also, Anadarko would be obliged to pay a $1 billion breakup fee under the terms of its deal with Chevron.

“We do not believe Chevron would have to fully match Oxy to get this deal across the finish line,” analysts at Morgan Stanley said in a research note on Monday.

Occidental on Monday night welcomed Anadarko’s decision. In a statement, it said, “We have long been convinced that a strategic combination with Anadarko represents a compelling opportunity for shareholders of both Occidental and Anadarko.”

T. Rowe Price, Occidental’s sixth largest shareholder, reacted strongly against the deal on Monday by saying it would vote against the company’s board of directors at its annual meeting on Friday. The firm, which also holds shares in Anadarko and Chevron, said such a complex deal should have first earned the support of investors.

Ms. Hollub said raising the cash component of her offer was not intended to avoid a shareholder vote, only to be more competitive with Chevron.

A version of this article appears in print on , on Page B1 of the New York edition with the headline: Anadarko Shifts Its Favor As Occidental Sweetens Bid. Order Reprints | Today’s Paper | Subscribe

Monday, May 6, 2019

ExxonMobil Earns $2.4 billion in First Quarter 2019

Photos of Exxon Chemical Company on Tuesday, March 20, 2018, in Baytown.
See the best jobs for 2018. >>> Photo: Elizabeth Conley /Houston Chronicle / © 2018 Houston Chronicle
ExxonMobil has announced estimated first quarter 2019 earnings of $2.4 billion, compared with $4.7 billion a year earlier. Cash flow from operations and asset sales was $8.4 billion, including proceeds associated with asset sales of $107 million.
Capital and exploration expenditures were $6.9 billion, up 42 percent from the prior year, reflecting key investments in the U.S. Permian Basin. 
ExxonMobil and partner Qatar Petroleum made a final investment decision (FID) in the first quarter to proceed with development of the Golden Pass LNG export project located in Sabine Pass, Texas. The facility is expected to start up in 2024. The project will have capacity to produce approximately 16 million tonnes of LNG per year and provide an increased, reliable, long-term supply of LNG to global gas markets.

Additionally, ExxonMobil reached an FID and started construction on a new unit at its Beaumont, Texas refinery that will increase crude refining capacity by more than 65 percent, or 250,000 barrels per day. The third crude unit within the facility’s existing footprint will expand light crude oil refining and be supported by increased crude oil production in the Permian Basin.

It also reached an FID on construction of a new polypropylene production unit in Baton Rouge, Louisiana that will expand production capacity along the Gulf Coast by up to 450,000 metric tonnes per year. Construction will begin in 2019 and startup is anticipated by 2021.

Solid operating performance in the first quarter helped mitigate the impact of challenging Downstream and Chemical margin environments. In addition, we continued to benefit from our integrated business model,” said Darren W. Woods, Chairman and CEO. “We are making strong progress on our growth plans and expect to deliver sustained value for our shareholders. The change in Canadian crude differentials, as well as heavy scheduled maintenance, similar to the fourth quarter of 2018, affected our quarterly results.

Oil-equivalent production was four million barrels per day, up two percent from the first quarter of 2018. Excluding entitlement effects and divestments, oil-equivalent production was up three percent from the first quarter of 2018. Upstream liquids production grew by five percent compared with the first quarter of 2018, driven by Permian unconventional growth of nearly 140 percent.

USS Lincoln strike group deployed to send Iran 'clear and unmistakable' message, Bolton says

Aircraft parked on the flight deck of the USS Abraham Lincoln in this 2012 photo.
Aircraft parked on the flight deck of the USS Abraham Lincoln in this 2012 photo. AP FILE

The U.S. is sending the USS Abraham Lincoln Carrier Strike Group and a bomber task force to the Middle East in order "to send a clear and unmistakable message to the Iranian regime," National Security Adviser John Bolton announced Sunday night.

Bolton said the deployment was in response to "a number of troubling and escalatory indications and warnings" on the part of Tehran, but did not elaborate. Such deployments are rarely announced in advance.

"[A]ny attack on United States interests or on those of our allies will be met with unrelenting force," Bolton said. "The United States is not seeking war with the Iranian regime, but we are fully prepared to respond to any attack, whether by proxy, the Islamic Revolutionary Guard Corps, or regular Iranian forces."

The strike group, which includes the aircraft carrier USS Abraham Lincoln, the guided missile cruiser USS Leyte Gulf and destroyers from Destroyer Squadron 2, departed Naval Station Norfolk on April 1 for what the Navy described as a "regularly scheduled deployment." The strike force is under the command of Rear Adm. John Wade.

The USS John Stennis aircraft carrier strike group was in the Persian Gulf as recently as late March. The Stennis and USS Abraham Lincoln joined forces in the Mediterranean Sea in recent days.

The deployment comes less than a month after the Trump administration designated Iran's elite Islamic Revolutionary Guard Corps (IRGC) a terrorist organization. In late March, the Air Force pulled its bombers from Qatar, one of the rare times since 2001 no bombers were deployed to the Middle East.

Last month, the Air Force deployed a task force of F-35 stealth fighter jets for the first time to the Middle East.  Last week, some of the advanced jets carried out their first air strikes against ISIS, the Air Force said.

Earlier Sunday, Axios reported that the Trump administration was preparing to announce a new set of sanctions against Iran on Wednesday, one year after the U.S. pulled out from the 2015 Iran nuclear deal. The Wall Street Journal reported last week that the White House was considering sanctions targeting petrochemical and consumer goods sales by Iran, but Axios reported Sunday that the sanctions to be announced this week would target a different sector of the rogue nation's economy.

The U.S. Navy says there have been zero cases of “unsafe” interactions between its warships and aircraft and Iranian forces this year as well as last year.

The deployment also comes amid the bloodiest fighting in five years between Israel and Palestinian militants in the Gaza Strip.

Last Friday, two Israeli soldiers were wounded by snipers from the Iran-backed militant group Islamic Jihad. Late Saturday, the Israeli military announced that an airstrike had killed Hamas commander Hamed al-Khoudary, a money changer whom Israel said was a key player in transferring Iranian funds to the militant group.

Fox News' Lucas Tomlinson, Kelly Phares and The Associated Press contributed to this report.

Saturday, May 4, 2019

Two Force Majeures in Nigeria

Nigeria saw a couple force majeures declared, the first coming from Shell. The firm declared a force majeure on exports of Nigeria’s Bonny Light crude following the closure of the Nembe Creel trunk line, one of two export pipelines, following a fire.

Bonny Light exports had been planned at 222,000 bpd in June and 184,000 bpd in May, but traders are awaiting new loading plans.

Two Shell oil workers in the country were kidnapped last week, prompting police to step up security operations.

Total is the second company to declare a force majeure. The French firm’s Amenam trunk line also reportedly is under force majeure following oil well shutdowns that cut production, which typically totals about 100,000 bpd.

Friday, May 3, 2019

Canadian Oil Driller Abruptly Shuts Down, Abandons 4,700 Wells

Alberta IWCP non-compliant wells by Risk Class.

A junior Canadian gas E&P company has shut down abruptly, leaving as many as 4,700 wells behind, CBC reports, quoting the Alberta Energy Regulator, which said it had sent Trident Exploration Corp. an order to manage its wells, to which the company did not respond.

Trident closed two days ago and announced it would not be returning any money to shareholders or holders of unsecured bonds, adding it had well abandonment and reclamation liabilities of US$244.78 million (C$329 million) to deal with.

According to the Alberta Energy Regulator, these 4,700 wells add to more than 3,000 abandoned wells in Canada’s oil heartland that are currently awaiting remediation. The regulator also said it had been working with the company to smooth its exit from the industry and had ordered it to decommission the wells or transfer them to another company. Trident failed to comply with the order, the AER said.

"Trident does not have the funds to operate its infrastructure or enter into creditor protection. As a result, they have decided to walk away, leaving more than 4,400 licensed sites, many of them active, without an operator," the watchdog told CBC.

Data from the Alberta Energy Regulator says there are some 170,000 abandoned wells in the province, most of these sealed and taken out of service or reclaimed. The number represents more than a third of the total well count in Alberta, with the watchdog noting in its overview on the topic that even their abandonment, the wells remain the responsibility of the company that owns them.

Two years ago, think tank C. D. Howe warned Alberta was facing a well cleanup and reclamation bill of US$5.95 billion (C$8 billion) and needed to change the way it made companies take financial charge of the abandonment and reclamation of their wells. Since then, this figure has grown.

By Irina Slav for

Warren Buffett was willing to invest $20 billion in Occidental bid for Anadarko: Sources

CNBC: Warren Buffett SB 180507-003
  • Warren Buffett was willing to offer double what he eventually committed to help Occidental Petroleum acquire Anadarko Petroleum, sources told CNBC’s David Faber.
  • Buffett is also receiving a $50 million signing fee as part of Berkshire Hathaway’s $10 billion investment in Occidental.
Warren Buffett was willing to invest $20 billion to help Occidental Petroleum acquire Anadarko Petroleum, double the investment the Oracle of Omaha eventually committed to the Houston-based driller, sources told CNBC’s David Faber.

The Berkshire Hathaway chairman and CEO is also receiving a $50 million signing fee as part of his company’s $10 billion investment in Occidental, sources said.

Occidental revealed on Tuesday that Berkshire has committed to invest $10 billion in the company to help fund its proposed acquisition of Anadarko. Berkshire would make the investment by purchasing 100,000 shares of preferred stock, which pays out an 8% annual dividend.

Buffett’s investment is contingent on Occidental striking a deal to buy Anadarko, which has an agreement in place to be bought by Chevron. Berkshire will pocket the signing fee whether or not the deal goes through, sources told Faber.

In a CNBC interview that aired Friday, Buffett revealed that the deal with Occidental came together in a matter of days, Buffett told CNBC’s Becky Quick he received a request to meet with Occidental through Bank of America CEO Brian Moynihan last Friday, met with the driller’s CEO Vicki Hollub on Sunday morning, and signed the deal within about an hour.

Trump’s sanction waivers and the tanker market

Related image

On 22nd April, the US announced that it would not extend the Iran sanctions waivers on certain countries, which were due to expire on 2nd May.
The Trump administration’s objective is to force Iranian crude oil and condensate exports down to zero.
Iran is not only an exporter of crude oil but also a significant source of condensates, especially for Asian buyers.
Last November, when the sanctions were due to go into effect, the US unexpectedly granted waivers to eight Iranian crude and condensate importers until May, 2019, Poten & Partners explained in a comment piece.
As other oil producers had already raised production in anticipation of Iranian exports cut-off, the crude market became over-supplied and Brent prices dropped from the mid-$70’s per barrel at the end of October, 2018 to around $60 in January.
Due to the price decline, last December, OPEC decided to cut production again by 1.2 mill barrels per day to support prices. These production cuts quickly translated to lower shipping rates as Middle East exports fell.
The question now is - what impact will the stricter Iran export sanctions have on the tanker market?
Based on AIS data on tanker loadings, it is estimated that Iran loaded about 1.6 mill barrels per day in March, a significant increase from December, when only 0.6 mill barrels per day was loaded, Poten said.
It is unclear as yet how the main importers of Iranian crude will react. South European buyers with waivers had already cut imports but China, South Korea, Turkey, India and Japan were still importing Iranian crude this year.
Japan will likely stop lifting cargoes and it is generally expected that South Korea will follow, however, they have to find suitable alternative sources of crude oil and condensates.
Turkey and China’s reaction is less clear. Both countries reportedly voiced opposition to the sanctions. India, which has reduced shipments since the sanctions were introduced will probably cut volumes further, but it may seek further waivers.
It is possible that India will continue to import some Iranian crude, especially since the US has also imposed sanctions on Venezuela, another one of India’s key crude oil suppliers.
Despite Turkish opposition to the US sanctions, it is generally expected that the country’s refiners will comply. Saudi Arabia and UAE have announced that they will ensure that the oil market remains well supplied. However, this might mean that they must exceed their quota under the OPEC production cut agreement.
The Trump administration is trying to balance rising oil prices, which hurt US consumers, with the object of affecting policy changes in Iran and Venezuela. Rising instability in Libya could also impact oil supply, reduce spare capacity and put upward pressure on prices.
Due to the sanctions, it is difficult for most regular shipowners to carry Iranian crude or to load in Iran. Generally, insurance companies won’t allow owners to carry such cargoes, as that could result in exposure to sanctions from the US. Therefore, the vast majority of Iranian crude is moved on Iranian controlled tonnage. These vessels will most likely be used for storage when not used for exports, as they cannot be used for regular international trading.
Iran owns 37 VLCCs, of which 10 are currently used for storage, nine Suezmaxes and six Aframaxes.
If Iranian crude is replaced by Saudi Arabian and the UAE crude, the tonne/mile demand impact will be limited. However, if the Iranian fleet is not able to operate, this would result in an effective reduction of the VLCC fleet by about 3.5%, which will be positive for the tanker market, Poten concluded.

American Refiners Clean Up Their Act as OPEC Shipments Dry Up
  • Cartel’s crude deliveries into U.S. ports drop to 33-year low
  • Production accord, sanctions shifting composition of supplies
Oil refiners in the U.S. are using more light crude to fill the gap from the sludgy, sulfurous stuff they used to get from OPEC.

Crude shipments from the 14-member cartel to American ports dipped to a 33-year low in February in part because of the pact between OPEC and allied producers to curb output and forestall a global glut. Chronic issues with Venezuelan output and U.S. sanctions barring most purchases have further strained availability of the heaviest types of oil.

Starved of OPEC supplies, American refiners in February processed the least-dense crude in data going back to 1985. The so-called oil slate refined that month was just 1.25 percent sulfur -- the cleanest in more than 20 years.

U.S. refiners aren’t likely to see OPEC cargoes returning soon. Saudi Arabia, the de facto leader of the Organization of Petroleum Exporting Countries, has indicated they’re eyeing an extension of the cuts for the rest of 2019. That comes just days before the last U.S. exemptions allowing purchases of Iranian crude will expire, which will mean stiffer competition for barrels of heavy crude.

Thursday, May 2, 2019

US military prepping for Guaidó takeover in Venezuela

Juan Guaidó Rally in Maracay

The commander of U.S. forces in Latin America told Congress Wednesday that the military is developing plans to be immediately ready for any contingency if Venezuelan opposition leader Juan Guaidó ousts dictator Nicolás Maduro from power. 

Adm. Craig Faller, head of U.S. Southern Command, told the House Armed Services Committee he believes it is only a matter of time before Guaidó, president of the country's National Assembly, takes control. Guaidó encouraged Venezuelans to take to the streets starting Tuesday, saying that the final phase of "Operation Freedom" had begun. 

"[T]here is going to be a day when the legitimate government takes over, and it's going to come when we least expect it," said Faller. "And it could be right now, so we are calling it 'day now' planning."

committee that repairing Venezuela's dilapidated economic and energy infrastructure after years of corruption and mismanagement won't be a sample task. "[T]he magnitude of the misery is going to require every element of international unity that currently exists," he said. 

Rep. Seth Moulton, D-Mass., asked Faller if military planning includes contingencies involving the aftermath of a U.S. intervention in the country. Faller said the military is preparing for anything the president has said is on the table, adding that "we are on the balls of our feet." He said he would prefer to disclose the details in a closed session of Congress. 

Trump has kept military options on the table since Venezuela's political crisis began. In January, the United States and dozens of other Western nations recognized Guaidó as the country's interim president. 

"The president has been crystal clear and incredibly consistent. Military action is possible. If that’s what’s required, that’s what the United States will do," U.S. Secretary of State Mike Pompeo said today in an interview on Fox Business Network. 

Venezuela's political turmoil has been exacerbated by mass food shortages. The average Venezuelan has lost 20 pounds in the last year, Faller said, with 90 percent of people suffering from malnutrition. 

Responsibility for the continuing crisis "squarely rests on Cuba, Russia, and to some extent China," the admiral told the committee. The Pentagon has estimated as many as 20,000 Cuban forces are supporting the Maduro regime. An unknown number of Russian military personnel and mercenaries are also believed to be in Venezuela, with 100 special advisers flying in recently.
"It's significant, and it's contributing to the devastation," said Faller. 

Trump threatened an embargo against Cuba yesterday. "If Cuban Troops and Militia do not immediately CEASE military and other operations for the purpose of causing death and destruction to the Constitution of Venezuela, a full and complete ... embargo, together with highest-level sanctions, will be placed on the island of Cuba," the president said in a pair of tweets. 

Government officials and experts have warned that the conflict in Venezuela could create an immigration crisis larger than that caused by the Syrian civil war. The United Nations estimates that about 3.5 million Venezuelans have fled the country, with 1.8 million leaving in 2018 alone.

Tuesday, April 30, 2019

Warren Buffett is taking sides in the bidding war for the energy giant Anadarko (BRK.A, APC, OXY)

Warren Buffett
  • Warren Buffett's Berkshire Hathaway is joining Occidental Petroleum's bid for Anadarko by offering $10 billion in financing.
  • Occidental's $38 billion bid topped a $33 billion takeover proposal by the oil major Chevron.
  • Occidental's shares dropped 4% early Tuesday.
  • Watch Anadarko Petroleum trade live.

Berkshire Hathaway, the investment conglomerate controlled by Warren Buffett, has committed to provide $10 billion in financing for Occidental Petroleum's $38 billion bid for Anadarko Petroleum. The investment is contingent on the completion of the acquisition, according to a press release from Occidental.

Occidental previously announced a hostile bid to purchase Anadarko, which explores and develops petroleum and natural-gas assets, topping a bid from Chevron. Occidental made a proposal on April 24 to acquire Anadarko for $76 a share, financed by a mixture of cash and stock.

On Monday, Anadarko announced that its board planned to pursue Occidental's bid, shunning Chevron. Chevron has not responded with a counteroffer.

The terms of Berkshire's contingent financing are as follows:
  • Berkshire Hathaway will provide $10 billion worth of preferred shares to Anadarko, with dividends of 8% per annum. Should the company not pay dividends in a particular year, the owed dividends will accrue at 9% per annum.
  • In addition, Berkshire will receive warrants to purchase 80 million shares of Occidental common stock at an exercise price of $62.50, a 4% premium to Monday's closing price.
  • The preferred shares can be redeemed after 10 years for a 5% premium, including any unpaid dividends.
Occidental's shares dropped over 4% in early trading Tuesday. Anadarko 's stock was flat on the news of Buffett's involvement.

Anadarko shares are up 65% this year.

Clashes Flare After Venezuela Opposition Leader Calls For Military Uprising

Image result for juan guaido military coup

Anti-government protesters and law enforcement officers clashed in Caracas on Tuesday after Venezuelan opposition leader Juan Guaidó appeared alongside soldiers at a military base and called for the population to rise up against the president.

“Today, brave soldiers, brave patriots, brave men attached to the Constitution have followed our call,” Mr. Guaidó said in a video posted on social media, speaking from Generalissimo Francisco de Miranda Air Base, a military airport in Caracas known as La Carlota, in a direct challenge to the government.

He has called before for the military to rise up against the government of President Nicolás Maduro, but doing so flanked by men in uniform, at a base in the heart of the capital, was a new step. With few exceptions, the military has so far protected Mr. Maduro.

Mr. Guaidó claimed that “the definitive end of the usurpation starts today,” but it was not clear how many civilians or soldiers would heed him.

“We are counting on the people of Venezuela today,” he said in the video. “The armed forces are clearly on the side of the people.”

Jorge Rodríguez, the government’s information minister, said on Twitter that government was “confronting and deactivating a small group of military traitors” that he said had taken over the base “to promote a coup.” He blamed the “coup-mongering ultraright,” which he said had pushed for a violent agenda for months in Venezuela.

Behind Mr. Guaidó, who has described himself since January as the country’s interim president, stood Leopoldo López, a member of his party who received a nearly 14-year sentence after staging protests in 2014 and has been held by the government under house arrest. Mr. López did not speak in the video but issued messages on Twitter saying that he had been released by soldiers.

“I was released by the military on the order of the Constitution and President Guaidó,” he wrote in his first Twitter posts since 2017. “Everyone mobilize. It’s time to conquer for freedom.”

Speaking to reporters near the airstrip, Mr. Guaidó said that a wide swath of the military now backed him, including top commanders, but he declined to release their names.

“There are generals, there are lieutenant colonels, there are majors, there are colonels — it’s a reflection of the country,” he said.

Mr. Guaidó said he had had no communication with Mr. Maduro.

The government and supporters of Mr. Guaidó appeared to be bracing for further confrontation. Pro-government armed groups and protesters had encircled Mr. Maduro’s presidential palace by midmorning.

In other parts of the city, national guard soldiers and policemen fought against anti-government protesters who were beginning to assemble for a protest in response to Mr. Guaidó’s call. Witnesses said tear gas canisters could be seen detonating near the military base.

Videos posted on social media showed a crowd of protesters approaching the air base, waving Venezuelan flags.

“I believe this is very important, but I see apathy and fear in people,” said one of the protesters, Mary Galaviz, 69. “We should not be afraid. In war there is death, but goals are achieved.”

Miriam Segovia, 52, another protester near the base, said she hoped that the armed forces would “put themselves on the side of the Constitution, so we can escape this misery, this hunger and lack of medication.”

Battered by mismanagement, American sanctions and corruption, the Venezuelan economy has been in steep decline since 2014. Millions of people have emigrated, and the roughly 30 million who remain are plagued by hyperinflation and shortages of medicines, food, electricity and jobs.

Mr. Maduro, who has been in office since 2013, won re-election last year in a contest that was widely seen as fraudulent. In January, the National Assembly, controlled by the opposition and led by Mr. Guaidó, declared the election and the government illegitimate, leading Mr. Guaidó to claim to be the rightful, transitional leader.

More than 50 countries, including the United States and most of its close allies, recognized him as Venezuela’s legitimate leader.

On Tuesday morning, Vice President Mike Pence reiterated American support for the opposition, posting a message of encouragement on Twitter: “To @jgauido, the National Assembly and all the freedom-loving people of Venezuela who are taking to the streets today in #operacionlibertad — Estamos con ustedes! We are with you! America will stand with you until freedom & democracy are restored. Vayan con dios!”

The appearance of Mr. Guaidó and Mr. López on Tuesday, with the apparent support of some national guardsmen, prompted immediate rumors in Caracas that the armed forces could be shifting loyalties.

A central pillar of Mr. Guaidó’s strategy has been luring the military to his side, and a number of officers have defected. But that has never amounted to enough for a full-scale uprising against Mr. Maduro.

In January, shortly before Mr. Guaidó declared himself president, members of the national guard pledged allegiance to him at a base in Caracas. The government stormed the base and arrested some of the soldiers.

One of the soldiers later appeared in a Colombian border city seeking asylum, where he joined several thousands of rank-and-file soldiers who had defected.

Please check back for updates.

Friday, April 26, 2019

Markets - VLCCs barely covering OPEX

The VLCC resurgence in recent weeks turned out to be short lived. 
After last week’s chartering frenzy, with rates improving by the fixture, the market took a turn for the worse again this week.

Oil company relets were also marketed en masse, adding to an already populated position list, Fearnleys reported.

On Tuesday, MEG/China was logged at WS42.5, yielding a daily return in the low teens, and barely covering OPEX. A further downward risk is evident short term.

The Atlantic market fared slightly better, as owner were reluctant to commit to longer employment at current levels.

Suezmax owners managed to keep some momentum going in a firmer market leading into the Easter holidays, as charterers rushed to cover stems before the impending prolonged break,

TD20 briefly saw returns close to $18,000 per day. However, inevitably tonnage again built as the market stopped for a few days, thus the early part of this week saw rates eroding again.

We are around the corner from a predicted impending market recovery at the back end of June and surely this is the last chance for charterers to gain control in a downward direction for a while, the shipbroker said.

Elsewhere, Aframaxes trading in the North Sea and Baltic enjoyed a pre-Easter fixing rush.
On the back of this activity, coupled with some injection stems ex Baltic, rates improved by about WS10 points overall.

After the Easter break, the market turned quiet again.

In the short term, rates will at best move sideways. However, we expect activity to pick up again moving into the next fixing window and we could see a firmer market.

The Mediterranean and Black Sea market moved sideways during the past week, as several offices were closed for the Easter holidays.

TD19 (Cross-Med) hovered around WS77.5 to WS80 levels.

Charterers’ activity peaked at the beginning of this week, but although cargoes were entering the market, owners’ optimism was short lived, as there were still enough prompts ships around to take the steam out of the situation.

Charterers will still enjoy the luxury of seeing several prompt ships available for cross Med voyages in the week to come and we expect rate levels to remain stable, Fearnleys concluded. 

In other news, Klaveness Combination Carriers has reportedly signed a Contract of Affreightment (COA) for its new combination carriers - CLEANBUs.

The deal was said to have been signed between the Klaveness subsidiary and an undisclosed Australian importer and distributor of clean petroleum products (CPP). The COA covers multiple cargoes over a period of up to 12 months with commencement in the second quarter 2019.

Klaveness took delivery of the first of six CLEANBUs, the 83,600 dwt ’Baru’, from New Yangzi Shipyard in China in January, 2019. The remaining vessels are all due to delivered by October, 2020.

Brokers reported that the 2002-built Suezmax ‘Triathlon’ had been fixed to BP for 12 months at $20,000 per day, while several MRs were reported fixed for varying periods of between six months and two years at rates of between $13,000 and $15,750 per day. 

In the newbuilding sector, Mitsui OSK Lines (MOL) took delivery of the VLCC ‘Phoenix Jamnagar’ on 24th April.

Built by Japan Marine United Corp (JMU), the 311,798 dwt vessel will be managed by MOL’s Singapore-based subsidiary, Phoenix Tankers.

The JMU designed MalaccaMax tanker will be primarily employed to ship crude to India under a long-term contract between Phoenix and Reliance Industries.

Brokers also reported that Sun Enterprises had ordered two MRs at Hyundai Mipo for $37.5 mill each for delivery next year.

In the S&P market, NGM Energy was active, reportedly taking the 2006-built VLCC ’Nerissa’ for $31 mill and the two 2001-built Suezmaxes ‘DS Melody’ and ‘DS Symphony’ at an undisclosed level.

Finally, the 2004-built Aframax ‘Camelia’ was said to have been bought by Soechi for $14.3 mill.