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.

Thursday, April 25, 2019

Venezuela Imports Crude for the First Time in Five Years

Oil pipes connect the oil tanker. Photographer: Luke MacGregor/Bloomberg
Oil pipes connect the oil tanker. Photographer: Luke MacGregor/Bloomberg

  • PDVSA buys light, sweet Nigerian oil as domestic output falls
  • Oil production sank to 16-year low after sanctions, outages
Oil production in Venezuela has dipped so low that the owner of the world’s largest reserves is importing crude for the first time in five years.

The nation’s output fell below 1 million barrels a day to a 16-year low in March, amid rolling blackouts and U.S. sanctions. As the power disruption shut oil fields, pipelines and ports, bringing oil infrastructure to a halt, state-owned Petroleos de Venezuela SA bought a cargo of crude from fellow OPEC member Nigeria, marking the first oil import since 2014.

Almost 1 million barrels of light, sweet Agbami crude is discharging Tuesday, after loading in early April, and may help to offset falling domestic production. PDVSA can also use the lighter oil as a diluent to thin Venezuela’s sludgy crude so it can be more easily extracted from underground reservoirs.

The streams that are blended with light oil are marketed as Merey 16, the country’s top exported oil and a grade used to calculate the OPEC oil basket price. The cargo of Agbami will likely be used to make Merey as the production of domestic of light oils has been falling over the years. According to the latest official data available, production fell by half between 2006 and 2016 to 313,000 barrels daily.

The last time Venezuela imported crude, in 2014, it purchased Algerian crude to mix with extra-heavy oil for a grade that became known as Blend 16. PDVSA discontinued the blend amid disagreements with Algeria’s state oil company Sonatrach and complaints from U.S. refiners, then the company’s biggest buyers.

Wednesday, April 24, 2019

Occidental Petroleum bids $76 a share for Anadarko, trumping Chevron offer for the driller

  • Occidental Petroleum bids $76 a share for Anadarko Petroleum in a half-cash, half-stock offer that values the oil and gas driller at $57 billion.
  • Chevron announced an agreement on April 12 to buy Anadarko for $65 a share in a 75% stock and 25% cash transaction.
  • Anadarko shares jump 10% in Wednesday’s premarket trading to above $70.
Occidental Petroleum bid $76 a share for Anadarko Petroleum on Wednesday, higher than a previous offer by Chevron for the oil and gas driller.

The new Occidental offer, which was sent via a letter to Anadarko’s board on Wednesday, is half cash and half stock, specifically $38 in cash and 0.6094 Occidental shares. It values Anadarko at $57 billion, including debt.

Chevron announced an agreement on April 12 to buy Anadarko for $33 billion in cash and stock, valuing the company at $65 a share. CNBC later reported there was another bidder for Anadarko, Occidental, which was offering mid-$70s per share before Chevron stepped in with its offer.

After the new Occidental bid, Anadarko shares surged 10% in Wednesday’s premarket trading, to above $70.

The Chevron offer is a 75% stock and 25% cash transaction. The breakup fee for the Chevron-Anadarko deal is said to be 3% of the deal, sources said.

“Anadarko has great assets,” Occidental CEO Vicki Hollub said in a interview on CNBC’s “Squawk Box ” on Wednesday. “We are the right acquirer ... because we can get the most out of the shale.”

Hollub said she considers this a friendly offer, even though Anadarko may not see it that way. The offer is 20% above where Anadarko was trading on Tuesday.

Occidental shares fell more than 7 percent in Wednesday’s premarket. Chevron, whose stock was flat, did not immediately return a call for comment.

— With reporting by Tom DiChristopher

This is a developing story. Check back for updates.

Tuesday, April 23, 2019

After U.S. sanctions, Venezuela seeks to collect some oil payments via Rosneft



MEXICO CITY (Reuters) - (This April 18 story corrects to make clear Reuters could not determine payments were made under the proposed arrangement, removes reference to Evrofinance Mosnarbank and clarifies that experts see no violation of sanctions)

Venezuelan state oil company PDVSA has asked at least two of its clients to make payments for Venezuelan oil via Russian state energy giant Rosneft, as it comes under pressure from U.S. sanctions, according to a PDVSA source and documents reviewed by Reuters. 

The proposed payment mechanism is the latest sign of the growing proximity of Venezuela’s cash-strapped government to Russia as the United States tightens a financial noose around Venezuelan President Nicolas Maduro, who it describes as a dictator. 

Russia has publicly said the U.S. sanctions are illegal and it would work with Venezuela to weather them. 

In response to Reuters’ story, Rosneft has denied it has acted as an intermediary for payments to PDVSA. 

Under the new approach described to Reuters, Venezuelan state oil company PDVSA has at least twice asked its clients to make payments to Rosneft for Venezuelan oil, according to the documents. 

The PDVSA source said the company was proposing the new arrangements – known as ‘factoring’ – to allow PDVSA clients to receive oil without making direct payments to the Venezuelan state oil company in the wake of January’s sanctions. 

The arrangement would also allow the cash-strapped Venezuelan state company to receive faster payment, sometimes avoiding the usual 30-to-90 day timeframe for completing oil transactions. Rosneft would also make a profit by receiving an intermediation fee, the source and an internal PDVSA document said.

Rosneft, which has heavily invested in Venezuela under President Vladimir Putin, did not respond to a request for a comment before Reuters published its story on Thursday. After the Reuters story ran, Rosneft strongly denied the report, describing it as a ‘blatant lie’ and ‘a provocation against Rosneft’.

Venezuela’s oil ministry, its information ministry - which handles media for the government - and PDVSA did not respond to questions. 

In one transaction, an executive from Rosneft’s Geneva trading unit said PDVSA had given its approval for Rosneft to collect payment from trading firm BB Energy for the purchase of 525,000 barrels of fuel oil loaded on Jan. 3, according to an offer letter. 

The offer letter, seen by Reuters with its date redacted, said that Rosneft had agreed with PDVSA to pay BB Energy’s $26 million debt to the Venezuelan state oil company and then to seek payment from BB Energy via a bank transfer or an equivalent oil cargo. 

The PDVSA source said that Rosneft credited PDVSA the amount, minus an undisclosed fee, and then started talks with BB Energy to recover the sum it advanced PDVSA. Reuters could not independently verify that Rosneft ever made the advance payment to PDVSA. 

Asked about Rosneft’s offer and the fuel cargo payment, a spokesman for BB Energy said the company had not completed the transaction, under guidance from legal counsel. 

“The money is in our account and as yet we have not paid anyone,” said the spokesman. He declined to provide further details. 

According to an undated internal PDVSA document, India’s Reliance Industries Ltd - PDVSA’s largest cash-paying client – was also asked by PDVSA to pay Rosneft directly in April for oil sales under a long-term supply contract with the Venezuelan company.

Reliance has said that in September 2012 it signed a 15-year deal to purchase up to 400,000 barrels a day of heavy crude from PDVSA. 

The internal PDVSA document reviewed by Reuters showed the Venezuelan state oil firm asked Reliance to pay for oil sales under the long-term contract via Rosneft Trading SA, the Geneva-based trading unit of the Russian oil giant. 

The document also said that the payment by Reliance to Rosneft would also allow PDVSA to meet unspecified “contractual obligations” to Rosneft. 

The internal PDVSA document said the sales “would allow the partial completion of the financial scheme of advanced payments” between PDVSA and Rosneft. 

The document showed that PDVSA and Reliance would pay Rosneft a ‘marketing fee’ equivalent to around 3 percent of the sale price, split between them. 

The PDVSA source said the agreement had received the consent of all three parties and was being executed. However, Reuters was unable to independently verify if the agreement was implemented and remains in force. 

Responding to Reuters’ story, Reliance strongly denied making any payments via third parties to PDVSA. It said it had purchased Venezuelan oil from Rosneft that was provided by PDVSA to the Russian company in repayment of past loans, so no money was flowing back to Maduro’s government.


Regardless of whether payments flowed directly to PDVSA or remained in Russia to pay down debt, the proposed approach appears to present no violation of sanctions by any of the entities because no U.S. citizens, currency, companies or financial institutions seem to be involved, according to four sanctions experts consulted by Reuters.

Three of the four experts said the U.S. Treasury had the latitude to act against companies or governments it deemed to be providing ‘material support’ to a sanctioned entity, like PDVSA. Still, the Office of Foreign Assets Control (OFAC), which enforces sanctions, has given no indications it would take that route. 

The U.S. Treasury Department declined to respond to a request for comment. A State Department spokeswoman said: “We encourage companies, banks, and other institutions to refrain from providing services that support (Maduro’s) repressive practices.” 

With its economy reeling from years of recession and a sharp decline in oil production, Venezuela was already struggling to finance imports and government spending before Washington imposed tough restrictions on PDVSA in January. 

Oil accounts for more than 90 percent of exports from the OPEC nation and the lion’s share of government revenues. Maduro has accused U.S. President Donald Trump of waging economic war against Venezuela. 

Russia has loaned Venezuela almost $16 billion since 2006, which is being repaid in oil shipments, and has also taken significant stakes in petroleum projects, meaning it already controls a large slice of the South American country’s production. 

PDVSA’s contemplated payment agreement with Rosneft is part of a series of methods used by Maduro’s government to gain access to cash, including selling Central Bank gold reserves. 

The methods have frustrated Washington officials, who have in recent days questioned why sanctions have not had a more dramatic impact on Venezuela’s finances.


Following the publication of Reuters’ report on Thursday, Reliance said in its statement that it had purchased Venezuelan crude oil from Rosneft long before the imposition of U.S. sanctions on PDVSA in January, as the Russian company received oil in return for a reduction in Venezuela’s debt.

“Since sanctions were imposed, Reliance has made such purchases with the full knowledge and approval of the U.S. Department of State (USDOS),” Reliance said. “Such transactions do not lead to any consequent payment to PDVSA and do not violate U.S. sanctions or policies.” 

After the report was published, Reliance did not respond to further questions from Reuters about why the PDVSA internal document proposed Reliance pay Rosneft a marketing fee related to the supply of crude under the Indian firm’s long-term supply contract with PDVSA. 

Reliance said in its statement its purchases of Venezuelan oil from Rosneft “do not lead to” any payments to PDVSA. The Venezuelan company’s shipping schedules showed that Reliance was loading a cargo from PDVSA as recently as April 20. 

Reporting by Marianna Parraga in Mexico City; Additional reporting by Luc Cohen in Caracas, Nidhi Verma in New Delhi, Julia Payne in London; Editing by Daniel Flynn, Simon Webb,David Gaffen and Marguerita Choy

Monday, April 22, 2019

Oil market is up as US announces Iranian oil sanctions

U.S. to impose sanctions on allies in drive to push Iranian oil sales to zero

Secretary of State Mike Pompeo speaks during a news conference on April 22 at the State Department in Washington. (Sait Serkan Gurbuz/AP)


“This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue,” a statement from the White House said. It said the United States, Saudi Arabia and the United Arab Emirates would ensure global demand is met.

Pompeo said Iran had been taking in $50 billion a year in oil revenue before the sanctions were reimposed. He estimated that U.S. sanctions have cost the Islamic republic $10 billion so far.

“This decision is intended to bring Iran’s oil exports to zero, denying the regime its principal source of revenue,” a statement from the White House said. It said the United States, Saudi Arabia and the United Arab Emirates would ensure global demand is met.

Pompeo said Iran had been taking in $50 billion a year in oil revenue before the sanctions were reimposed. He estimated that U.S. sanctions have cost the Islamic republic $10 billion so far.

“The regime would have used that money to support terror groups like Hamas and Hezbollah and continue with its missile development in defiance of U.N. Security Council Resolution 2231,” he told reporters. “And it would have perpetuated a humanitarian crisis in Yemen.”

Last November, the administration reimposed sanctions that had been lifted with the 2015 nuclear agreement. President Trump granted waivers to eight of Iran’s biggest customers, allowing them a six-month grace period to wind down their purchases. The big buyers are China, India, Japan, South Korea, Italy, Greece, Turkey and Taiwan.

The waivers expire May 2, one year after the United States withdrew from the Iran nuclear deal. Initially, countries were given six months to wean themselves from oil, but seven countries and Taiwan could not meet the target and were given another six months.

Some of them expected another extension, but none will be granted, Pompeo said.

“We’re going to zero,” Pompeo said. “We're going to zero across the board. We will continue to enforce sanctions and monitor compliance. Any nation or entity interacting with Iran should do its diligence and err on the side of caution. The risks are simply not going to be worth the benefits.”

Friday, April 19, 2019

U.S. refiners planning major plant overhauls in second quarter


HOUSTON (Reuters) - U.S. oil refiners are planning a heavy slate of plant overhauls in the second quarter, with total production this month off 8.5 percent compared with the start of the year, according to data from the U.S. Energy Information Administration.

Early spring and winter traditionally are heavy periods for U.S. refinery maintenance. But refiners are planning more upgrades than usual in the first half of 2019 to avoid fall and winter shutdowns as they prepare to meet coming low-sulfur standards. 

This year’s maintenance schedule and higher crude prices helped push U.S. gasoline prices to a national average of $2.83 a gallon last week, up 26 percent since the start of the year, according to data from the American Automobile Association. U.S. crude futures rose 32 percent in the first quarter. 

International Maritime Organization (IMO) 2020 is a standard for maritime diesel that takes effect on Jan. 1 and is designed to reduce air pollution. Refiners have been revamping their plants to make IMO 2020 compliant fuel. 

“They will push (winter) turnarounds later into 2020 to take advantage of that margin bump from the switch to IMO 2020,” said Susan Bell, a senior associate at energy consultancy IHS Markit.

Most U.S. refiners typically ramp up production of motor fuel during the second quarter to build inventories for the summer driving season. But Bell said an average of 1 million barrels per day (bpd) of crude oil refining capacity could be offline through the second quarter. 

Work on refiners’ crude distillation units (CDUs) and catalytic crackers helped send volumes down to 15.85 million bpd in the last week of March, from 17.5 million bpd in the first week of January, the EIA said. CDUs generate feedstocks for fuel processing units such as catalytic crackers. 

Among the refiners scheduling major maintenance this month are Valero Energy Corp and BP Plc. Valero’s Memphis, Tennessee, refinery will shut its 65,000 bpd gasoline producing fluidic catalytic cracking unit for a 60-day overhaul the last week of April. 

BP is shutting one of two small CDUs at its 413,500 bpd Whiting, Indiana, refinery on Monday for 30 days of work. The Whiting refinery is BP’s largest in North America. 

Work also is continuing this month on a planned overhaul of the 112,000 bpd gasoline-producing residual catalytic cracking unit at Royal Dutch Shell Plc’s 218,200 bpd Norco, Louisiana, refinery. That unit is expected to restart in the first full week of May.

Two other major overhauls finished during the switchover between the quarters. 

Exxon Mobil Corp recently finished CDU overhauls at two plants: its 560,500 bpd Baytown, Texas, refinery wrapped up work on its largest CDU in late March and the company’s 502,500 bpd Baton Rouge, Louisiana, refinery restarted its second-largest crude unit on Monday.

Thursday, April 18, 2019

PB Tankers takes issue with US blacklisting

Italian-based PB Tankers has expressed concern at being included on the US Office of Foreign Assets Control (FAC) blacklist for allegedly trading with Venezuela.
FAC recently issued its latest list of tanker companies and vessels to be blacklisted for trading with Venezuela.
The following companies were added to the list - Jennifer Navigation Ltd, Large Range Ltd, Lima Shipping Corp, and PB Tankers.
As for the ships involved, they were named as ‘Alba Marina’, a floating storage tanker claimed to be attached to PB Tankers; ‘Gold Point’, ‘Ice Point’,’Indian Point’, ‘Iron Point’ and ‘Silver Point’, all attached to PB Tankers; ‘Nedas’ attached to Jennifer Navigation; ‘New Hellas’ attached to Lima Shipping and S-Trotter, attached to Large Range.
In response, PB Tankers said it was shocked and concerned by the action taken by OFAC in adding the company and a number of the its vessels to the current SDN (Specially Designated Nationals) list in relation to trade with Venezuela.
This was done without any notification or contact with the company, who only became aware through the media. As a consequence, we will be taking immediate steps to ensure that both are de-listed as a matter of urgency, the company said.
PB Tankers, also said that as an Italian shipping company with more than 100 years of service to the international community, has been taking regular advice from both its UK and US lawyers and has been diligent in taking all possible steps to ensure compliance with current US sanctions including, but not limited to, possible restriction of trade under a single timecharter contract, which pre-dates the current sanctions regime.
The company further claimed that it does not have any ships in Venezuela, nor will be trading into or out of Venezuela.
PB Tankers will continue to meet its obligations as a matter of international law, the company stressed.

Wednesday, April 17, 2019

Red Hot Permian Set To Jolt U.S. Shale Output To New Record

Permian Basin.jpg


Crude oil production from the seven key shale regions in the United States is expected to increase by 80,000 bpd from April to hit a record 8.46 million bpd in May, with the Permian accounting for half of the monthly growth, the EIA said in its latest Drilling Productivity Report.

Crude oil production from the seven major shale producing regions is set to increase from 8.38 million bpd this month to 8.46 million bpd next month. The fastest-growing region, the Permian, is expected to see its crude oil production jump by 42,000 bpd from April to hit a record high of 4.136     million bpd in May, according to the EIA estimates—a figure that would place the US hotspot as OPEC’s third-largest producer behind only Saudi Arabia (9.79 bpd) and Iraq (4.52 bpd).
In the report forecasting production in May, the EIA sees the Niobrara region adding 22,000 bpd to reach oil production of 764,000 bpd in May—this would be the second-largest growth after the one in the Permian. The Bakken, the Eagle Ford, and Appalachia regions are also expected to see higher production in May compared to April, while Anadarko region’s crude oil production is forecast to drop slightly next month.

After oil prices collapsed by some 40 percent in the fourth quarter of 2018, U.S. shale drillers put some brakes on drilling activities. U.S. oil production growth has slowed, with average daily U.S. crude oil production slipping in January from the previous month for the first time in nearly six months, according to the EIA’s report from end-March.

In terms of total U.S. crude oil production, the EIA estimated in its April Short-Term Energy Outlook last week that U.S. crude oil production averaged 12.1 million bpd in March, up by 300,000 bpd from the February average. EIA now expects U.S. crude oil production to average 12.4 million bpd this year and 13.1 million bpd next year, chiefly driven by the Permian production growth. 

By Tsvetana Paraskova for Oilprice.com

Tuesday, April 16, 2019

Citgo's future at stake as creditor seeks $1.4B from PDVSA in lawsuit

Flags fly outside Citgo Petroleum Corp. headquarters stands in Houston, Texas, U.S., on Thursday, Feb. 14, 2019.

NEXT: See the world's largest oil refineries. Photo: Loren Elliot, Bloomberg


The future of Houston's Citgo Petroleum is taking center stage in a federal appeals court this week as creditors for its parent company, Venezuela state-owned PDVSA, continue attempt to recoup billions of dollars in debt owed by the Venezuelan government.

Oral arguments were heard Monday afternoon in the U.S. Third Circuit Court of Appeals in Philadelphia the case involving one of PDVSA's creditors, Crystallex International Corp. a defunct Canadian gold mining company seeking to collect on $1.4 billion award owed by Venezuela.

Crystallex has targeted the Houston refiner Citgo Petroleum Corp. because it is the biggest U.S. asset of the crisis-ridden, cash-strapped Venezuelan government. In August 2018, a federal judge agreed that PDVSA's assets in the United States., namely Citgo, could be used to satisfy Venezuela's debts owed to Crystallex and now that decision is under appeal.It could take weeks for the panel of three judges to make a decision on the appeal.

Last month, the court approved Venezuela's opposition government, led by interim president Juan Guaidó,to intervene in the case. Guaidó is trying to stop Crystallex and other creditors from carving up the country's foreign assets. His administration is arguing Citgo's loss could harm the country's chances of political and economic recovery.

Venezuela already has paid Crystallex $500 million  and attorneys for Guaidó's administration argued in court documents that Crystallex's additional attempts "ignore the economic reality of the Republic's humanitarian and economic crisis." They also said it could upset U.S. foreign policy.

Guaidó, who is recognized by the United States as Venezuela's legitimate leader, is trying to consolidate control over the country's assets abroad as he seeks to setup  his government-in-waiting for rebuilding the country once it wrestles control away from Nicolas Maduro's regime. In February, Guaidó successfully replaced Citgo Petroleum's board of directors with new leaders in Houston.

For the past few years creditors have  circled Citgo, which is valued at up to $8 billion by some analysts, as they seek to recoup billions owed to them by PDVSA and the Venezuelan government. Venezuela previously has settled similar debt-collecting lawsuits with Houston company ConocoPhillips and Rusoro Mining Ltd. Similar to Crystallex, these companies sought to enforce arbitration awards after a nationalization campaign expropriated their Venezuelan investments.

But the Trump administration wants to keep Citgo intact to help the new government rebuild the country ravaged by economic and political turmoil, hyperinflation and shortages in food, water and electricity. The Trump administration has granted Citgo certain exemptions from U.S. oil sanctions against Venezuela and PDVSA to allow  Citgo to continue operating and preserve at least 3,400 jobs in the U.S., including about 800 in the Houston area.

Citgo has distanced itself from the Maduro regime and recently secured a $1.2 billion loan help fund its daily operations.

Separately, Citgo is also under threat in a 2020 bond PDVSA took out with Citgo as collateral. PDVSA has an April 27 deadline to pay $71.6 million for a 2020 bond; it default bondholders could exercise a lien to sell 50.1 percent of Citgo Holding to recover their losses, according to the international investment bank and consulting firm Caracas Capital Markets.

Monday, April 15, 2019

Sinopec continued to lead the world’s biggest oil and gas companies in 2018, enjoying a double-digit revenue growth when compared to 2017.

The majority of the ten biggest witnessed a similar double-digit growth, which was as high as 31.4% for Rosneft. Offshore-technology.com profiles the ten biggest oil and gas companies by 2018 revenues, excluding the state-owned Saudi Aramco.
Index of this series of articles covering the top 10 Oil & Gas companies:
  • 10. Phillips 66
  • 9. Lukoil
  • 8. Rosneft
  • 7. Chevron
  • 6. Total
  • 5. ExxonMobil
  • 4. BP
  • 3. China National Petroleum Corp (CNPC)
  • 2. Royal Dutch Shell
  • 1. China Petroleum & Chemical Corporation (Sinopec)

Series: The Biggest Oil & Gas Companies in 2018

Read the 1st piece of this series of articles; which shows the revenue of Phillips 66, Lukoil and Rosneft.

Read the 2nd piece of this series of articles; which shows the revenue of Total, Chevron and ExxonMobi

4. BP Plc – $298.75bn

British multinational oil and gas company BP registered a 24.37% year-on-year revenue growth in 2018, earning $298.75bn. Revenues from its downstream business increased by 23.88% to $270.11bn, whereas the upstream segment’s revenues witnessed a 30.92% growth to reach $27.83bn.

The company’s upstream production increased by 8.2% to an average of 3.7 million barrels of oil-equivalent a day (Mboed) in 2018. Crude oil sales contributed $65.27bn of revenue, whereas oil products contributed $195.466bn and natural gas, LNG, and natural gas liquids (NGLs) contributed $21.74bn to the revenue.

BP established six major upstream projects in 2018, namely Clair Ridge, Western Flank B, Thunder Horse Northwest Expansion, Shah Deniz Stage Two, Taas-Yuryakh Expansion, and Atoll Phase One.

3. China National Petroleum Corp (CNPC) – $346bn

State-owned China National Petroleum Corp (CNPC) reported a 25% year-on-year growth to achieve $346bn operating revenue in 2027, out of which CNPC’s listed unit PetroChina contributed $298bn.

The biggest oil and gas producer of the country, PetroChina produced 1.1 billion barrels of oil and gas-equivalent in the first three quarters of 2018, which was a 2.2% increase compared with the same period in 2017. The company’s marketable gas output increased by 4.8% to 2.66 trillion cubic feet (tcf) during the same period.

CNPC operates 26 refineries with a combined crude processing capacity of 152 million tonnes per year (Mtpa) and an oil and gas pipeline infrastructure spanning 85,582km. Its overseas exploration and production activities are also spread across 38 countries in Africa, Central Asia, Russia, South America, the Middle East, and Asia-Pacific.

2. Royal Dutch Shell – $388.37bn

British-Dutch oil and gas company Royal Dutch Shell’s operating revenue was up by 27.26% to reach $388.37bn in 2018. The company’s downstream business registered a 26.42% year-over-year growth to reach $334.68bn and accounted for 86.17% of the total revenue.

The company’s integrated gas business, which includes liquid natural gas (LNG) marketing and trading, as well as gas-to-liquids projects grew by 25.34% to $43.764bn and accounted for 11.27% of the total operating revenue.

Shell’s upstream earnings increased by 1.99% to $9.89bn because of the higher realised oil and gas prices during the year, despite the 2% reduction in its upstream production.

1. China Petroleum & Chemical Corporation (Sinopec) – $426bn

China Petroleum & Chemical Corporation, also known as Sinopec Group, registered a 22.09% year-over-year growth to achieve RMB2.8tn ($426bn) of operating revenue in 2018. The company’s refinery and distribution segment accounted for approximately 60% of the revenue. Its refinery throughput during the year increased by 2.31% to 244 million tonnes (Mt). The total domestic sales volume of refined oil products increased by 1.4% to 180.24Mt.

The other business segments of the company include oil and gas exploration and production, petroleum engineering, chemical marketing, petrochemical refining and refined products marketing, engineering and construction, and international trade.

Sinopec’s crude oil production decreased by 1.75% to 288.51 million barrels, while natural gas production increased by 7.08% to 977bcf during the year. Sinopec is an integrated energy and chemical company incorporated in the People’s Republic of China.


Saturday, April 13, 2019

Exxon and Others Say U.S. Government Sold Toxic Crude Oil

Oil pipelines at the Bryan Mound Strategic Petroleum Reserve in Freeport, Texas. Oil pipelines at the Bryan Mound Strategic Petroleum Reserve in Freeport, Texas.Photographer: Luke Sharrett/Bloomberg
  • Energy Department paid $1 million to clean one oil cargo
  • Exxon, Shell, Macquarie and Petrochina all complained to DOE
(Bloomberg) -- Exxon Mobil Corp. is the latest company to raise concerns that a stockpile of U.S. government crude is tainted with poisonous gas.

The American energy giant said some of the oil it purchased last year from the Energy Department’s Strategic Petroleum Reserve, or SPR, contained "extremely high levels" of hydrogen sulfide, according to emails obtained by Bloomberg under the Freedom of Information Act. In some cases, the gas level was 250 times higher than government safety standards allow.

"The Department of Energy takes safety, security and environmental impacts involving SPR activities very seriously," agency spokeswoman Jess Szymanski said. "Last fall, an SPR cargo received by Exxon Mobil was found to contain higher-than-expected levels of hydrogen sulfide. Since then, the Department has worked with Exxon to resolve this concern, and find alternate options for the cargo’s delivery."

Spurious Claims?

Analysts have pointed to the stockpile as a safeguard against tightening crude supplies after U.S. sanctions on Iran and Venezuela curbed their oil exports. But Exxon’s discovery, which follows complaints by Royal Dutch Shell Plc, Macquarie Group Ltd and PetroChina Co., suggest that the reserve may not offer refiners as much insurance against diminishing volumes of higher sulfur, or sour, crude as previously thought.

The Energy Department disputed claims that it repeatedly sold tainted crude, saying that some companies’ high hydrogen sulfide readings were "spurious" or the result of contamination during shipping. In PetroChina’s case, however, the agency acknowledged spending around $1 million to clean up a contaminated cargo.

The prospect of tainted crude in the reserve complicates future sales of U.S. oil, a key tool for funding government programs. A 5 million-barrel sale is planned for 2019, and 221 million barrels of oil are planned for sale from 2020 to 2027.

Safety Risks

While hydrogen sulfide occurs naturally in crude, producers often take pains to remove it because it can put workers at risk and corrode pipelines and refineries. Many pipelines have capped the permitted amount of hydrogen sulfide, or H2S, at 10 parts per million (ppm).

"Refineries don’t want high H2S in their plants for safety reasons, especially with personnel having to access storage tanks where the oil is stored,” said John Auers, executive vice president at energy consultant Turner Mason & Co.

Exxon’s Discovery

Exxon was one of five companies that purchased oil in an Energy Department sale in August. Exxon took 1.5 million barrels of Bryan Mound sour crude -- a high sulfur oil that’s recently become more expensive as global supply shrink -- by pipeline to Texas City. There, the company discovered hydrogen sulfide levels that were at 5,000 ppm, according to emails sent to the department in November by Mattias Bruno, a lead oil trader at Exxon Mobil.

The exposure limit set by the Occupational Safety and Health Administration is 20 ppm. Exposure at 500-700 ppm could cause a person to collapse in five minutes and die within an hour. After discovering high levels of the gas, Exxon launched an investigation, according to the emails.

The Energy Department in a statement suggested that Exxon’s readings were possibly erroneous, noting that the facility where the contamination was discovered was not "H2S qualified." Oil was delivered through other facilities without incident, the agency said.

An Exxon spokesman declined to comment.

Other Complaints

Shell, Macquarie and PetroChina have also complained about hydrogen sulfide levels in government crude. In those cases, the oil was pumped from Bryan Mound to the Freeport, Texas, terminal owned by Seaway Crude Pipeline LLC -- a joint venture between Enterprise Products Partners LP, the operator, and Enbridge Inc. -- before being loaded onto vessels.

In a statement to Bloomberg, the Energy Department dismissed Shell’s complaint as spurious and attributed the Macquarie incident to a paperwork error. No payment was made to either company.

However, the agency verified PetroChina’s concerns and paid to clean up the contaminated oil at a cost of around $1 million.

Macquarie declined comment. Representatives from Shell and PetroChina did not respond to requests for comment. Enterprise did not immediately respond to a request for comment.

If the stockpiles are contaminated, the elevated levels of hydrogen sulfide could be the result of a high-sulfur oil put into the reserve years ago that’s blended with newer oil, according to chemical engineers and testing experts. It could also be the result of a naturally occurring bacteria that reduces sulfur to hydrogen sulfide, which could have grown in the caverns over decades.
Price Questions

So far, the quality concerns raised by companies haven’t affected bid prices for SPR oil, according to the Energy Department. But if crude quality issues persist, that could have implications for the future sales of oil from the SPR, which is about 60 percent sour crude.

“The Congressional Budget Office might conceivably set a lower price deck for future sales to account for discounts associated with crude quality,” said Kevin Book, managing director of ClearView Energy Partners LLC.

(Updates to include all firms owning the Freeport terminal in 13th paragraph.)
--With assistance from Dave Merrill.

To contact the reporter on this story: Catherine Ngai in New York at cngai16@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick, Joe Ryan

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

Friday, April 12, 2019

Chevron to Acquire Anadarko in Mega Billion Transaction

In one of the most high-profile acquisitions in recent years, Chevron Corp. announced today that it has entered into a definitive agreement with Anadarko Petroleum Corporation to acquire all of the outstanding shares of Anadarko in a stock and cash transaction valued at $33 billion, or $65 per share. Based on Chevron’s closing price on April 11, 2019 and under the terms of the agreement, Anadarko shareholders will receive 0.3869 shares of Chevron and $16.25 in cash for each Anadarko share. The total enterprise value of the transaction is $50 billion.

The acquisition of Anadarko will significantly enhance Chevron’s already advantaged Upstream portfolio and further strengthen its leading positions in large, attractive shale, deepwater and natural gas resource basins. Furthermore, Western Midstream Partners, LP (NYSE: WES) is a successful midstream company whose assets are well aligned with the combined companies’ upstream positions, which should further enhance their economics and execution capabilities.

“This transaction builds strength on strength for Chevron,” said Chevron’s Chairman and CEO Michael Wirth. “The combination of Anadarko’s premier, high-quality assets with our advantaged portfolio strengthens our leading position in the Permian, builds on our deepwater Gulf of Mexico capabilities and will grow our LNG business. It creates attractive growth opportunities in areas that play to Chevron’s operational strengths and underscores our commitment to short-cycle, higher-return investments.”

“This transaction will unlock significant value for shareholders, generating anticipated annual run-rate synergies of approximately $2 billion, and will be accretive to free cash flow and earnings one year after close,” Wirth concluded.

“The strategic combination of Chevron and Anadarko will form a stronger and better company with world-class assets, people and opportunities,” said Anadarko Chairman and CEO Al Walker. “I have tremendous respect for Mike and his leadership team and believe Chevron’s strategy, scale and operational capabilities will further accelerate the value of Anadarko’s assets.”

Transaction Benefits
  • Strong Strategic Fit: Anadarko’s assets will enhance Chevron’s portfolio across a diverse set of asset classes, including:
    • Shale & Tight – The combination of the two companies will create a 75-mile-wide corridor across the most attractive acreage in the Delaware basin, extending Chevron’s leading position as a producer in the Permian.
    • Deepwater – The combination will enhance Chevron’s existing high-margin position in the deepwater Gulf of Mexico(GOM), where it is already a leading producer, and extend its deepwater infrastructure network.
    • LNG –Chevron will gain another world-class resource base in Mozambique to support growing LNG demand. Area 1 is a very cost-competitive and well-prepared greenfield project close to major markets.

  • Significant Operating and Capital Synergies: The transaction is expected to achieve run-rate cost synergies of $1 billionbefore tax and capital spending reductions of $1 billion within a year of closing.
  • Accretive to Free Cash Flow and EPS: Chevron expects the transaction to be accretive to free cash flow and earnings per share one year after closing, at $60 Brent.
  • Opportunity to High-Grade Portfolio: Chevron plans to divest $15 to $20 billion of assets between 2020 and 2022. The proceeds will be used to further reduce debt and return additional cash to shareholders.
  • Increased Shareholder Returns: As a result of higher expected free cash flow, Chevron plans to increase its share repurchase rate from $4 billion to $5 billion per year upon closing the transaction.
Transaction Details

The acquisition consideration is structured as 75 percent stock and 25 percent cash, providing an overall value of $65 per share based on the closing price of Chevron stock on April 11, 2019. In aggregate, upon closing of the transaction, Chevron will issue approximately 200 million shares of stock and pay approximately $8 billion in cash. Chevron will also assume estimated net debt of $15 billion. Total enterprise value of $50 billion includes the assumption of net debt and book value of non-controlling interest.

The transaction has been approved by the Boards of Directors of both companies and is expected to close in the second half of the year. The acquisition is subject to Anadarko shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.

Upon closing, the Company will continue be led by Michael Wirth as Chairman and CEO. Chevron will remain headquartered in San Ramon, California.

Thursday, April 11, 2019

Venezuela reports collapse in oil supply, tightening global market: OPEC

FILE PHOTO: An oil pumpjack painted with the colors of the Venezuelan flag is seen in Lagunillas, Venezuela January 29, 2019. REUTERS/Isaac Urrutia/File Photo


LONDON (Reuters) - Venezuela’s oil output sank to a new long-term low last month due to U.S. sanctions and blackouts, the country told OPEC, deepening the impact of a global production curb and further tightening supplies.

Supply cuts by OPEC and partners led by Russia, plus involuntary reductions in Venezuela and Iran, have helped drive a 32 percent rally in crude prices this year, prompting pressure from U.S. President Donald Trump for the group to ease its market-supporting efforts. 

In a monthly report released on Wednesday, the Organization of the Petroleum Exporting Countries said Venezuela told the group that it pumped 960,000 barrels per day (bpd) in March, a drop of almost 500,000 bpd from February. 

The figures could add to a debate within the so-called OPEC+ group of producers on whether to maintain oil supply cuts beyond June. A Russian official indicated this week Moscow wanted to pump more, although OPEC has been saying the curbs must remain. 

OPEC, Russia and other non-member producers are reducing output by 1.2 million bpd from Jan. 1 for six months. The producers are due to meet on June 25-26 to decide whether to extend the pact. 

One of the key Russian officials to foster the pact with OPEC, Kirill Dmitriev, signaled on Monday that Russia wanted to raise output when it meets OPEC in June because of improving market conditions and falling stockpiles.

OPEC+ returned to supply cuts in 2019 out of concern that slowing economic growth and demand would lead to a new supply glut. OPEC’s report said the economic backdrop was weakening and lowered its estimate of global growth in demand by 30,000 bpd to 1.21 million bpd. 

“Newly available data has confirmed the recently observed downward trend in global economic activities,” the report said. 

In a development that will ease OPEC concern about a new glut, the report also said inventories in developed economies fell in February, after rising in January. 

Stocks in February exceeded the five-year average - a yardstick OPEC watches closely - by 7.5 million barrels, less than in January. 

The report suggests that if OPEC kept pumping at March’s rate it would slightly undersupply the world market in 2019, even with the lower demand outlook.


Venezuela’s production figure brings its numbers closer to outside estimates, which have been saying the country’s economic collapse has taken a bigger toll on its oil industry. 

Output in Venezuela, once a top-three OPEC producer, has been declining for years due to economic collapse. In March, supply dropped due to U.S. sanctions on state oil company PDVSA designed to oust President Nicolas Maduro, and power blackouts. 

Venezuela, plus Iran and Libya, were exempted from making voluntary curbs under the OPEC+ deal, on the basis that their output would probably fall anyway. 

OPEC’s share of the cut is 800,000 bpd from in most cases October 2018 levels, and other figures in the report showed producers were removing far more than agreed. 

The group uses two sets of figures to monitor its output — figures provided by each country and by secondary sources that include industry media. This is a legacy of old disputes over how much countries were really pumping. 

Overall OPEC output fell by a further 534,000 bpd to 30.022 million bpd, according to the secondary-source figures. This was led not by Venezuela but by Saudi Arabia, which has voluntarily cut supply by more than it agreed to support the market.

As a result, the 11 OPEC members required to cut output achieved 155 percent compliance in March with pledged curbs, according to a Reuters calculation, up from February. 

OPEC estimates that it needs to provide an average of 30.30 million bpd in 2019 to balance the market, a figure lowered by 160,000 bpd month-on-month partly due to weaker demand. 

Even so, the report indicates there will be a small 2019 deficit if OPEC keeps pumping at March’s rate of just over 30 million bpd and other things remain equal. Last month’s report had indicated a small surplus. 

Editing by Dale Hudson and Frances Kerry

Wednesday, April 10, 2019

This Oil Spill Has Been Leaking Into The Gulf For 14 Years

The National Oceanic and Atmospheric Administration and the Bureau of Safety and Environmental Enforcement are using Ian MacDonald's data to estimate the amount of oil being spilled at the Taylor Energy site.
Tegan Wendland/WWNO


Ten miles out in the Gulf of Mexico, off the tip of Louisiana, the fumes become overwhelming. "See how it's all rainbow sheen there? So that's oil," says Ian MacDonald, who's guiding us in a tiny fishing boat that's being tossed around by 6-foot waves.

MacDonald is a scientist at Florida State University where he studies oil spills. This one is not a black, sticky slick, but it stretches on for miles. And here, where the murky Mississippi River dumps into the Gulf, it's been leaking for more than 14 years. 

The Coast Guard has just begun to intervene to try and clean up this spill. But it faces challenges. And MacDonald sees the spill as a warning for regulators, just as the Trump administration pushes to expand offshore oil drilling in the Atlantic
A hurricane, an oil rig, an underwater mudslide

The spill began in 2004, when Hurricane Ivan toppled an oil rig into the Gulf. The rig was owned by Taylor Energy, a New Orleans-based company, which managed to plug some of the 25 broken pipes, but the leak continued.

Jonathan Henderson runs an environmental nonprofit called Vanishing Earth and worries about the impact on marine life. "Everything that lives and breathes in the Gulf of Mexico travels back and forth through that zone," he says. "Fish, seabirds, turtles, dolphins."

The government is studying the impact on marine life, but even they can't figure out exactly how much oil is leaking. Neither can the company. 

Henderson has been trying to monitor it himself by doing regular flyovers and reporting what he sees. He's frustrated at the government's response. "If we can put a man on the moon, we can figure out how to, like, grab oil that's coming up from the seafloor and 400 feet of water," he says. 

The Department of the Interior and the Coast Guard have been working with the company to try to stop the leak for years, but it poses a major engineering challenge. The wells were buried under hundreds of feet of mud in an underwater mudslide, which are common in the area, where the mouth of the Mississippi has built up hundreds of feet of silt on the bottom of the ocean floor. 

"This is a well-known, high-risk area," says Ed Richards, a law professor at Louisiana State University. He says it raises questions about offshore development. "Should they have built the rig the way they built it? Should it have been permitted that way?"

Taylor Energy has spent about $500 million to try to stop the spill, and it's paying for pilots to fly over and monitor it. The company has reported less than a barrel of oil a day on the surface, but estimates vary widely. 

Contractors hired by the Coast Guard survey the Taylor Energy leak in March 2019.
Courtesy of Jonathan Henderson/Vanishing Earth 
Hundreds of barrels each day

Ian MacDonald visits the site of the Taylor Energy oil spill regularly. He's helping measure the size of the spill for the government. He estimates that about 100 barrels of oil are spilling into the Gulf each day, what he calls a sobering finding, "and neither the government nor the responsible parties have been able to stop it, or even acknowledge that it really existed until now." 

MacDonald says the situation should serve as a warning to regulators as they attempt to expand oil and gas drilling in the Atlantic, where underwater canyons pose a threat to underwater infrastructure.
"The idea that we would be building in deep water, and making pipelines going back to land in an area that's susceptible to those kinds of accidents," he says, "is something that we should take into account as we do our planning." 

But he worries that's not happening. The Trump administration has rolled back offshore safety rules, even as it works to open up more areas to drilling.

A giant containment dome

Earlier this year, the Coast Guard began hiring contractors to try to stop the spill by dropping a giant metal containment dome over the wells in order to collect the leaking oil. Taylor Energy says this could make the leak worse, so it has sued the Coast Guard. 

Neither the government nor the company agreed to go on record, saying litigation is ongoing.
Back on the boat in the Gulf, MacDonald remains hopeful. 

"I'm really glad to be out here and to see this operation," he says, " because it's been a long time coming, and there's a lot riding on it."

But he says it might be that no one is able to stop the oil from bubbling up into the Gulf. If that's the case, according to government estimates, the leak could go on for 100 more years.