Tuesday, May 21, 2019

3 Things To Know About The U.S. Oil And Natural Gas Industry

Oil Pump Acrylic Print featuring the photograph Oil Pump Jack And American Flag Waving by Imagery by CharlyThe U.S. is now easily the world’s largest oil and gas producer, yielding 20% more oil and 25% more gas than Russia. The U.S. could also become the largest global seller of these essential fuels within five years. Obviously, there’s a lot more than just three, but let me hit on the triad of pillars.

1) Producing at All-Time Records

The U.S. shale revolution that started in 2008 has not just transformed our domestic energy outlook but also energy markets around the world. Over this time, U.S. crude oil production has surged 140% to 12.2 million b/d, while gas output is up 55% to 88 Bcf/d. The U.S. is now easily the world’s largest oil and gas producer, yielding 20% more oil and 25% more gas than Russia.

As it turns out, contrary to wide assertions, U.S. crude production didn’t peak in 1970, and U.S. gas production didn’t peak in 2005. The American shale boom itself is a testament to the non-stop evolution of oil and gas operational efficiencies and technologies.

The U.S. oil and gas industry is stronger today than it’s ever been. The price collapse from 2014 to 2017 forced the industry to cut costs to survive. And with some 100 E&P firms going bankrupt during that time, those left standing are mean, lean oil and gas producing machines – and more consolidation will allow them to persist during challenging times of low prices.

This is why IHS Markit says that 1.9 million new jobs in oil and gas will open up from 2016 to 2035.

2) Will Still Supply the Bulk of Our Energy

Today, oil and gas are our two most important sources of energy, meeting 65% of total U.S. energy demand. We lean on oil for 97% of our transportation needs, and increasingly, natural gas leads by generating 35% of all U.S. electricity.

And there’s so much more to come.

Quietly, the U.S. Department of Energy recently projected that gas will easily add the most amount of power capacity through 2050, at 235,000 megawatts. This will be a cornerstone of meeting our climate change and environmental goals: “Thanks to Natural Gas, US CO2 Emissions Lowest Since 1985.

Gas will also remain integral to heating, manufacturing, and in the underappreciated business of “peaking plants,” flexible gas units that backup intermittent wind and solar power. And at 19-20 million b/d, U.S. oil demand remains “buoyantly very high.” Oil (transport) and wind and solar (power) compete in different sectors of the U.S. economy.

And U.S. car sales in 2018 were 17.3 million units. Just 2% of them run on electricity. “Electric vehicle revolution will come from China, not U.S.” Indeed, the U.S. Department of Energy predicts that oil and gas will still supply over 60% of our energy needs for as far out as it currently models (2050).

All of this mandates that we must produce more oil and gas along with the infrastructure required for their expansion. If not, we will expensively and dangerously be forcing ourselves to rely more on the global supply chains, largely now in the hands of more “politically risky” producers like OPEC and Russia.

California and the New England states illustrate exactly what happens when you pass laws that block the domestic production of fuels that you still vitally need: Saudi Arabia for oil and Russia for gas.

3) Going Global

Not just being the largest oil and gas producer, The U.S. could also become the largest global seller of these essential fuels within five years. The American oil export boom started in December 2015 with a law change to ship crude beyond just neighbor Canada.

And gas followed suit in February 2016 when our first LNG export facility in the contiguous U.S. (Cheniere Energy’s Sabine Pass) shipped its first cargo from Louisiana.

At over 2.5 million b/d, U.S. crude oil exports were 35% higher last month than they were in April 2018, made even more impressive given the trade war with China. Oil product exports were double that. Much more is coming.

There are at least eight proposals for new deepwater oil ports along the Gulf, augmented by expansions of existing terminals. And these new projects aim to fully load VLCCs (Very Large Crude Carriers) within a single day.

By early next year, U.S. Gulf crude export capacity should be around 8.5 million b/d. For natural gas, with three operational today, three more LNG export facilities will be online by the end of this year.

Our total LNG export capacity stands to reach nearly 8 Bcf/d, or nearly 20% of the total global demand market. Although unlikely to all come online, proposed projects are five or six times that amount.

Our gas prices are low and transparent, and our LNG contracts are far more flexible. Today at 4-5 Bcf/d and reaching some 30 nations, we are slated to become the leading LNG exporter before 2025.

Let’s hope that we don’t get in our own way: “China to increase tariffs on US LNG to 25%.” We better get this right, fast: “Russia Could Take Hold Of China’s Entire Gas Market.

Those opposing U.S. LNG development plans are handing this critical and soaring market to Vladimir Putin: “Russia’s wants to raise its share of the global LNG market to as much as 20 percent by 2035, after having doubled its share to 8 percent last year.“

Indeed, just like getting the required pipelines built, especially from the booming Permian Basin in West Texas, the infrastructure build-out to ship oil and gas around the world from the Gulf will be bumpier than it should be.

But, the world is depending on us.

The U.S. will be responsible for over 70% of new global oil supply over the next five to seven years at least, so prices will be that much higher if we don’t produce as called upon.

In addition, U.S. natural gas will also help others cut dependence on riskier suppliers (‘Freedom gas’: US opens LNG floodgates to Europe), while also lowering their greenhouse gas emissions by lessening their overreliance on coal and backing up wind and solar power.

Blue state politicans take note: dire warnings from the International Energy Agency on oil and gas have to do with not enough investment in producing them. That tells you all you need to know about how robust global demand for these essential commodities really is.

Monday, May 20, 2019

Factbox: Strait of Hormuz - The World's Most Important Oil Artery

Saudi Arabia said on Monday that two Saudi oil tankers were among vessels targeted in a “sabotage attack” off the coast of the United Arab Emirates, condemning it as an attempt to undermine the security of global crude supplies.

The UAE said on Sunday that four commercial vessels were sabotaged near Fujairah emirate, one of the world’s largest bunkering hubs lying just outside the Strait of Hormuz. It did not say who was
behind the operation, which took place amid heightened tensions between the United States and Iran.
Iran’s foreign ministry called the incidents “worrisome and dreadful” and asked for an investigation.
The Strait of Hormuz, a vital shipping route linking Middle East oil producers to markets in Asia, Europe, North America and beyond, has been at the heart of regional tensions for decades.

What Is the Strait of Hormuz?

The waterway separates Iran and Oman, linking the Gulf to the Gulf of Oman and Arabian Sea. The Strait is 21 miles (33 km) wide at its narrowest point, but the shipping lane is just two miles (three km) wide in either direction.

Why Does It Matter?

The U.S. Energy Information Administration estimated that 18.5 million barrels per day (bpd) of seaborne oil passed through the waterway in 2016. That was about 30 percent of crude and other oil liquids traded by sea in 2016.

About 17.2 million bpd of crude and condensates were estimated to have been shipped through the Strait in 2017 and about 17.4 million bpd in the first half of 2018, according to oil analytics firm Vortexa.

With global oil consumption standing at about 100 million bpd, that means almost a fifth passes through the Strait.

Most crude exported from Saudi Arabia, Iran, the UAE, Kuwait and Iraq — all members of the Organization of the Petroleum Exporting Countries — is shipped through the waterway.

It is also the route used for nearly all the liquefied natural gas (LNG) produced by the world’s biggest LNG exporter, Qatar.

During the 1980-1988 Iran-Iraq war, the two sides sought to disrupt each other’s oil exports in what was known as the Tanker War.

The U.S. Fifth Fleet, based in Bahrain, is tasked with protecting the commercial ships in the area.

While the presence of the U.S. Fifth Fleet should ensure that the critical waterway remains open, provocative Iranian military maneuvers are likely in the immediate offing as is a nuclear restart”, analysts at bank RBC wrote on April 22.

Iran agreed to rein in its nuclear program in return for an easing of sanctions under a 2015 deal with the United States and five other global powers. Washington pulled out of the pact in 2018. Western powers fear Iran wants to make nuclear weapons. Tehran denies this.

All of these geopolitical stories could present a cruel summer scenario for President (Donald) Trump as he seeks to keep oil prices in check,” the RBC analysts wrote.

Are There Alternative Routes for Gulf Oil?

The UAE and Saudi Arabia have sought to find other routes to bypass the Strait, including building more oil pipelines.

Have There Been Incidents in the Strait Before?

In July 1988, the U.S. warship Vincennes shot down an Iranian airliner, killing all 290 aboard, in what Washington said was an accident after crew mistook the plane for a fighter. Tehran said it was a deliberate attack. The United States said the Vincennes was in the area to protect neutral vessels against Iranian navy attacks.

In early 2008, the United States said Iranian boats threatened its warships after they approached three U.S. naval ships in the Strait.

In June 2008, the then Revolutionary Guards commander-in-chief, Mohammad Ali Jafari, said Iran would impose controls on shipping in the Strait if it was attacked.

In July 2010, Japanese oil tanker M Star was attacked in the Strait. A militant group called Abdullah Azzam Brigades, which is linked to al Qaeda, claimed responsibility.

n January 2012, Iran threatened to block the Strait in retaliation for U.S. and European sanctions that targeted its oil revenues in an attempt to stop Tehran’s nuclear program.

In May 2015, Iranian ships fired shots at a Singapore-flagged tanker which it said damaged an Iranian oil platform, causing the vessel to flee. It also seized a container ship in the Strait.

In July 2018, President Hassan Rouhani hinted Iran could disrupt oil flows through the Strait in response to U.S. calls to reduce Iran’s oil exports to zero. A Revolutionary Guards commander also said Iran would block all exports through the Strait if Iranian exports were stopped.

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 Oilprice.com

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.